THE ALGER AMERICAN FUND - FASCore, LLC

16 Pages·2009·0.12 MB·English

Merrill Corp - Alger American Fund Midcap Growth Portfolio Class O Prospectus [Funds] 05-01-2009 ED [AUX] | mflesla | 03-Apr-09 11:10 | 09-7332-7.aa |
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Alger American MidCap Growth Portfolio
THE ALGER AMERICAN FUND
Class O Shares
A pooled funding vehicle for:
• variable annuity contracts
• variable life insurance policies
• qualified pension plans
• qualified retirement plans
PROSPECTUS
May 1, 2009
As with all mutual funds, the Securities and Exchange Commission has not determined if the information in
this Prospectus is accurate or complete, nor has it approved or disapproved these securities. It is a criminal
offense to represent otherwise.
An investment in the Portfolio is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
JOB: 09-7332-7 CYCLE#;BL#: 3; 0 TRIM: 8.25" x 10.75" COMPOSITE
COLORS: Black, ~note-color 2 GRAPHICS: alger_k_logo.eps V1.5
Merrill Corp - Merrill Corporation ED True Blanks 8.25x10.75 Prospectus [Funds] Style Only | gcurry | 13-Nov-07 14:54 | 07-28247-6.tb3 | Sequence: 1
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TABLE OF CONTENTS
2 Risk/Return Summary: Investments, Risks& Performance
The Alger
2 Investments
2 Risks
3 Performance
3 Fees and Expenses
American Fund
3 HypotheticalExpense Information
4 Additional Information about the Portfolio’s Investments
5 Management and Organization
6 Shareholder Information
Class O Shares
Distributor 6
Transfer Agent 6
Net Asset Value 6
Dividends and Distributions 6
Classes of Shares 7
Purchasing and Redeeming Shares 7
Limitations on Excessive Trading 7
Disclosure of Portfolio Holdings 7
Other Information 8
9 Financial Highlights
Back Cover: For Information
PROSPECTUS
May 1, 2009
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Alger American MidCap Growth Portfolio (“MidCap
Risk/Return Summary:
Growth Portfolio”)
Investments, Risks & Performance
INVESTMENT OBJECTIVE: The Portfolio seeks long-term
INVESTMENTS: capital appreciation.
THE ALGER AMERICAN FUND
PRINCIPAL STRATEGY: The Portfolio focuses on mid-sized
companies that the Manager believes demonstrate promising
The investmentobjective, principal strategy and primary risks
growth potential. Under normal circumstances, the Portfolio
ofthe Portfolio are discussedbelow.Alger American MidCap
invests at least 80% of its net assets in equity securities of
Growth Portfoliohas adopted a policy to invest at least 80%
companies that, at the time of purchase of the securities, have
of its assetsin specified securities appropriate to its name and
total market capitalization within the range of companies
to provide shareholders with at least 60 days’ prior notice of
included in the Russell Midcap Growth Index or the S&P
any change with respect to this policy.
MidCap 400 Index, as reported by the indexes as of the
The Portfolio invests primarily in equity securities, such as most recent quarter-end. Both indexes are designed to
common or preferred stocks, which are listed on U.S. track the performance of medium-capitalization stocks. At
exchanges or in the over-the-counter market.The Portfolio’s December31, 2008, the market capitalization of the compa-
equity investments are primarily in “growth” stocks. The nies in these indexes ranged from $45 million to $15 billion.
Portfolio’s manager, Fred Alger Management, Inc. (“Alger
RISKS: In addition to the risks described below, the follow-
Management” or the “Manager”), believes that these compa-
ing risks apply:
nies tend to fall into one of two categories:
• HIGH UNIT VOLUME GROWTH • the possibility of greater risk by investing in medium-
capitalization companies rather than larger, more established
Vital, creative companies which offer goods or services companies due to such factors as inexperienced management
to a rapidly-expanding marketplace. They include both and limited product lines or financial resources.
established and emerging firms, exercising market dom-
• the possibility that it may be difficult to liquidate a secu-
inance, offering new or improved products, or simply
rity position at a time and price acceptable to the Portfo-
fulfilling an increased demand for an existing product
lio because of the potentially less frequent trading of
line.
stocks of medium market capitalization.
• POSITIVE LIFE CYCLE CHANGE
RISKS
Companies experiencing a major change which is
expected to produce advantageous results. These
As with any fund that invests in stocks, your investment will
changes may be as varied as new management, prod-
fluctuate in value, and the loss of your investment is a risk
ucts or technologies; restructuring or reorganization;
of investing. The Portfolio’s price per share will fluctuate
regulatory change, or merger and acquisition.
due to changes in the market prices of its investments. Also,
The Portfolio must take into account a company’s market thePortfolio’s investments may not grow as fast as the rate
capitalization when considering it for investment. The mar- of inflation and stocks tend to be more volatile than some
ket capitalization of a company is its price per share multi- other investments you could make, such as bonds.
plied by its number of outstanding shares.
Prices of growth stocks tend to be higher in relation to their
The Portfolio’s portfolio manager may sell a stock when it companies’ earnings and may be more sensitive to market,
reaches a target price, it fails to perform as expected, or political and economic developments than other stocks, mak-
other opportunities appear more attractive. As a result of ing their prices more volatile. Based onthePortfolio’s invest-
this disciplined investment process,the Portfolio may engage ment style and objective, an investment inthePortfolio may
in active trading of portfolio securities. Ifthe Portfolio does be better suited to investors who seek long-term capital
trade in this way, it may incur increased transaction costs, growth and can tolerate fluctuations in their investments’
which can lower the actual return on an investment. values.
ThePortfolio may, but is not required to, purchase put and If the Manager incorrectly predicts the price movement of a
call options and sell (write) covered put and call options on security, index or market, an option held by the Portfolio
securities and securities indexes to seek to increase gain or to may expire unexercised and the Portfolio will lose the pre-
hedge against the risk of unfavorable price movements. mium it paid for the option, or thePortfolio as the writer of
an option may be required to purchase or sell the optioned
ThePortfolio may invest up to 20% of the value of its total
security at a disadvantageous price or settle an index option
assets in foreign securities.
at a loss. Also, an imperfect correlation between a hedge
ThePortfolio’s investment objective may be changed by the and the securities hedged may render the hedge partially
Board of Trustees without shareholder approval. ineffective.
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There may be additional risks applicable to the Portfolio
FEES AND EXPENSES
because of its investment approach.
To the extent that the Portfolio invests in securities other Investors incur certain fees and expenses in connection with an
than those that are its primary focus, the investment risks investment inthePortfolio. The following table shows the fees
associated with such other investments are described in this and expenses that you may incur if you buy and hold ClassO
Prospectus and the Statement of Additional Information. shares ofthePortfolio.The numbers below are based onthe
You should also read that information carefully. Portfolio’s expenses during its fiscal year ended December31,
2008. The Portfolio does not charge any redemption fees or
PERFORMANCE sales loads in connection with an investment in the Portfolio.
The fees and expenses information below does not reflect
The following bar chart and the table beneath it give you
charges and deductions which are, or may be, imposed under
some indication of the risks of investing in the Portfolioby
variable annuity contracts, variable life insurance policies, or
showing changes inthe Portfolio’s performance from year to
pension or retirement plans. Such charges and deductions are
year and by showing how the Portfolio’s average annual
described in theProspectus for the contract or policy accom-
returns for the indicated periods compare with those of an panying thisProspectus or in the plan documents.
appropriate benchmark of market performance. They
MidCap
assume reinvestment of dividends and distributions. In the
Growth Portfolio
bar chart, the annual returns forthe Portfolioare for ClassO
Annual Fund Operating Expenses
shares. In the table below the bar chart, average annual
(expenses that are deducted from Portfolio assets)
returns for the Portfolio assume redemption at the end of
Advisory Fees .76%
each period shown.
Distribution and/or Service (12b-1) Fees None
Remember thatthe Portfolio’s past performance is not nec- Other Expenses .16%
essarily an indication of how it will perform in the future. Total Annual Fund Operating Expenses .92%
Fee Waiver and/or Expense Reimbursement N/A
The index used in the table is a broad index designed to
Net Expenses N/A
track a particular market or market segment. No expenses,
fees or taxes are reflected in the returns for the index, which EXAMPLE
is unmanaged. All returns for the indexassume reinvestment
The following example, which reflects the fees and operat-
of dividends and interest of the underlying securities that
ing expenses listed in the preceding table, is intended to help
make up theindex.
you compare the cost of investing in the Portfolio with the
• Russell Midcap Growth Index: An index of common stocks cost of investing in other mutual funds.
designed to track performance of medium-capitalization
The example assumes that you invest $10,000 in Class O
companies with greater than average growth orientation.
shares of the Portfolio for the time periods indicated. The
example also assumes that your investment has a 5% return
each year and that thePortfolio’s operating expenses remain
MIDCAP GROWTH PORTFOLIO
the same as in the prior table. The figures shown would be
the same whether or not you sold your shares at the end of
ANNUAL TOTAL RETURN as of December 31 (%)
each period. Although your actual costs may be higher or
FOR CLASS O SHARES
lower, based on these assumptions your costs would be:
47.79
1 YEAR 3 YEARS 5 YEARS 10 YEARS
31.85 31.56
MidCap Growth $94 $293 $509 $1,131
9.18 13.04 9.82 10.14 Portfolio
-6.52 -29.54 -58.36
The exampleabove does not reflect charges and deductions
which are, or may be, imposed under variable annuity con-
tracts, variable life insurance policies, or pension or retire-
99 00 01 02 03 04 05 06 07 08 ment plans. Such charges and deductions are described in the
Best Quarter: 25.60% Q4 1999 Prospectus for the contract or policy accompanying this
Worst Quarter: -32.70% Q3 2008 Prospectus or in the plan documents.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2008
HYPOTHETICAL EXPENSE INFORMATION
SINCE
INCEPTION
CLASS O 1 YEAR 5 YEARS 10 YEARS (5/3/93)
MidCap Growth Portfolio -58.36% -5.61% 0.49% 8.27% The chart below is intended to reflect the annual and cumu-
Russell Midcap Growth Index -44.32% -2.33% -0.19% 6.01% lative effect of the Portfolio’s expenses, including investment
advisory fees and other portfolio costs, on the Portfolio’s
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total return over a 10-year period. The example reflects shown. To the extent that the Manager and any of its affili-
thefollowing: ates make any fee waivers and/or expense reimbursements
pursuant to a voluntary or other contractual arrangement,
• You invest $10,000 in the Portfolio and hold it for the
your actual expenses may be less. This is only a hypotheti-
entire 10-year period; and
cal presentation made to illustrate what expenses would be
• Your investment has a 5% return before expenses each year. under the above scenarios. Your actual expenses are likely to
differ (higher or lower) from those shown below.
There is no assurance that the annual expense ratio will be
the expense ratio for the Portfolio class for any of the years
MidCap Growth
Portfolio ClassO Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Expense Ratio 0.92% 0.92% 0.92% 0.92% 0.92% 0.92% 0.92% 0.92% 0.92% 0.92%
Cumulative Gross Return 5.00% 10.25% 15.76% 21.55% 27.63% 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Net Return 4.08% 8.33% 12.75% 17.35% 22.13% 27.12% 32.30% 37.70% 43.32% 49.17%
End Investment Balance $10,408 $10,833 $11,275 $11,735 $12,213 $12,712 $13,230 $13,770 $14,332 $14,917
Annual Expense $ 94 $ 98 $ 102 $ 106 $ 110 $ 115 $ 119 $ 124 $ 129 $ 135
increase in the securities’ value above that price. When a put
ADDITIONAL INFORMATION ABOUT THE
option written by the Portfolio is exercised, the Portfolio
PORTFOLIO’S INVESTMENTS
will be required to purchase the underlying securities at a
price in excess of their market value.
Options
Use of options on securities indexes entails the risk that
A call option on a security gives the purchaser of the option trading in the options may be interrupted if trading in cer-
the right, in return for a premium paid, to buy from the writer tain securities included in the index is interrupted. Price
(seller) of the call option the security underlying the option at movements in the Portfolio’s portfolio securities may not
a specified exercise priceduring the term of the option. The correlate precisely with movements in the level of an index
writer is obligated upon exercise of the option to deliver the and, therefore, the use of options on indexes cannot serve as
underlying security upon payment of the exercise price. A a complete hedge and would depend in part on the ability of
put option on a security gives the holder of the option, in the Manager to predict correctly movements in the direc-
return for the premium paid, the right to sell the underlying tion of a particular market or of the stock market generally.
security to the writer (seller) at a specified price during the Because options on indexes require settlement in cash, the
term of the option. The writer, who receives the premium, is Portfolio might be forced to liquidate portfolio securities to
obligated upon exercise of the option to buy the underlying meet settlement obligations.
security at the exercise price. An option on a stock index
Foreign Securities
gives the holder the right to receive a cash settlement during
the term of the option based on the amount, if any, by which Investing in foreign securities involves risks related to the
the exercise price exceeds (if the option is a put) or is political, social and economic conditions of foreign coun-
exceeded by (if the option is a call) the current value of the tries, particularly emerging market countries. These risks
index, which is itself a function of the market values of the may include political instability, exchange control regula-
securities included in the index. The writer of the option is tions, expropriation, lack of comprehensive information,
obligated, in return for the premium received, to make deliv- national policies restricting foreign investment, currency
ery of this amount. fluctuations, less liquidity, undiversified and immature eco-
nomic structures, inflation and rapid fluctuations in infla-
ThePortfolio may purchase a put option on a portfolio secu-
tion, withholding or other taxes, and operational risks.
rity to seek to protect against a decline in the market value
of the security, or, if the Portfolio contemplates purchasing Illiquid and Restricted Securities
a security in the future, purchase a call option on the secu-
ThePortfolio may invest in restricted securities (i.e., securities
rity in anticipation of an increase in the security’s market
which are subject to legal or contractual restrictions on their
value. When the Portfolio writes an option, if the market
resale), including restricted securities governed by Rule144A
value of the underlying security does not move to a level
under the Securities Act of 1933, as amended.The Portfolio
that would make exercise of the option profitable to its
may not invest more than 15% of its net assets in “illiquid”
holder, the option generally will expire unexercised and the
securities, which include certain restricted securities, securities
Portfolio will realize as profit the premium it received. When
for which there is no readily available market and repurchase
a call option written by thePortfolio is exercised, thePort-
agreements with maturities of greater than seven days; how-
folio will be required to sell the underlying securities to the
ever, restricted securities that are determined by the Board of
holder at the exercise price and will not participate in any
Trustees to be liquid are not subject to this limitation.
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Securities Lending Fund (the “Fund”). A discussion of the Trustees’ basis for
the approval of the investment advisory agreement between
ThePortfolio may lend portfolio securities to brokers, deal-
the Fund, on behalf of the Portfolio, and the Manager is
ers and other financial organizations. Loans of securities by
available in the Fund’s annual report to shareholders for the
the Portfolio, if and when made, may not exceed 33-1/3% of
fiscal year ended December 31, 2008. The Portfolio pays
the Portfolio’s total assets including all collateral on such
the Manager an advisory feeat theannual rateof 0.76%of
loans, less liabilities exclusive of the obligation to return
average daily net assets.
such collateral, and will be collateralized by cash, letters of
credit or U.S. Government securities that are maintained at Portfolio ManagerPrimarily Responsible for Day-to-Day
all times in an amount equal to at least 100% of the current Management of Portfolio Investments
market value of the loaned securities.The Portfolio will not
lend securities to Alger Management or its affiliates. Portfolio Portfolio Manager Since
U.S. Government Securities MidCap Growth Portfolio Dan C. Chung September2001
U.S. Government Obligations are bills, notes, bonds and other
fixed-income securities issued by the U.S. Treasury; they are The Statement of Additional Information provides addi-
direct obligations of the U.S. Government and differ mainly in tional information about the portfolio manager’scompensa-
the length of their maturities. U.S. Government Agency Secu- tion, other accounts thathemanages, andhisownership of
rities are issued or guaranteed by U.S. Government-sponsored securities of the Portfolio(s)thathemanages.
enterprises and federal agencies. Some of these securities are
• Mr. Chung has been employed by the Manager since
supported by the full faith and credit of the U.S. Treasury; the
1994 and currently serves as Chief Executive Officer,
remainder are supported only by the credit of the instrumen-
Chief Investment Officer and portfolio manager.
tality, which may or may not include the right of the issuer to
borrow from the Treasury. Administrator
Temporary Defensive and Interim Investments Pursuant to a separate administration agreement, the Man-
ager also provides administrative services to the Portfolio,
In times of adverse or unstable market, economic or politi-
including, but not limited to: providing office space,
cal conditions, the Portfolio may invest up to 100% of its
telephone, office equipment and supplies; authorizing expen-
assets in cash, high-grade bonds, or cash equivalents (such as
ditures and approving bills for payment on behalf of the
commercial paper or money market instruments) for tempo-
Portfolio; supervising preparation of periodic shareholder
rary defensive reasons. This is to attempt to protect thePort-
reports, notices and other shareholder communications;
folio’s assets from a temporary unacceptable risk of loss,
supervising the daily pricing of the Portfolio’s investment
rather than directly to promote the Portfolio’s investment
portfolios and the publication of the net asset value of the
objective. The Portfolio may also hold these types of
Portfolio’s shares, earnings reports and other financial data;
securities pending the investment of proceeds from the sale
monitoring relationships with organizations providing serv-
of portfolio securities to meet anticipated redemptions of
ices to the Fund, including the Portfolio’s custodian, trans-
Portfolio shares. ThePortfolio may not achieve its objective
fer agent and printers; providing trading desk facilities for
while in a temporary defensive or interim position.
the Portfolio; and supervising compliance by the Portfolio
Other securities thePortfoliomay invest in, along with cer- with recordkeeping and periodic reporting requirements
tain risks, are discussed in thePortfolio’s Statement of Addi- under the Investment Company Act of 1940, as amended
tional Information (see back cover of this Prospectus). (the “1940 Act”).The Portfolio pays the Manager an admin-
istrative fee at the annual rate of 0.0275% of the Portfolio’s
average daily net assets.
MANAGEMENT AND ORGANIZATION
Legal Proceedings
The Manager has responded to inquiries, document requests
Manager
and/or subpoenas from various regulatory authorities in con-
Fred Alger Management, Inc. nection with their investigations of practices in the mutual
funds industry identified as “market timing” and “late trad-
111 Fifth Avenue
ing.” On October11, 2006, the Manager, Fred Alger & Com-
New York, NY 10003
pany, Inc. (the “Distributor”) and Alger Shareholder Services,
The Manager has been an investment adviser since 1964, and Inc. executed an Assurance of Discontinuance with the Office
manages investments totaling (at 12/31/08) approximately of the New York State Attorney General (“NYAG”). On Jan-
$6.1 billion in mutual fund assets as well as $2.2 billion in uary18, 2007, the Securities and Exchange Commission (the
other assets. The Manager makes investment decisions for “SEC”) approved a settlement with the Manager and the Dis-
the Portfolio and continuously reviews its investment pro- tributor. As part of the settlements with the NYAG and the
SEC, without admitting or denying liability, the firms con-
grams. These management responsibilities are subject to the
sented to the payment of $30 million to reimburse fund
supervision of the Board of Trustees of The Alger American
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shar-holders; a fine of $10 million; and certain other remedial by the Manager under procedures adopted by the Board of
measures including a reduction in management fees of $1 mil- Trustees. Short-term money market instruments held by a
lion per year for five years. The$40 millionwas paid into an Portfolio are valued on the basis of amortized cost.
SEC Fair Fund fordistribution to investors.
In determining whether market quotations are reliable and
On August 31, 2005, the West Virginia Securities Commis- readily available, the Manager monitors information it rou-
sioner (the “WVSC”), in an ex parte Summary Order to Cease tinely receives for significant events it believes will affect mar-
and Desist and Notice of Right to Hearing, concluded that the ket prices of portfolio instruments held by the Portfolio.
Manager and the Distributor had violated the West Virginia Significant events may affect a particular company (for exam-
Uniform Securities Act (the “WVUSA”), and ordered the ple, a trading halt in the company’s securities on an exchange
Manager and the Distributor to cease and desist from further during the day) or may affect securities markets (for example,
violations of the WVUSA by engaging in the market-timing- a natural disaster that causes a market to close). If the Manager
related conduct described in the order. The ex parte order is aware of a significant event that has occurred after the close
provided notice of their right to a hearing with respect to the of the market where a portfolio instrument is primarily traded,
violations of law asserted by the WVSC. Other firms unaffil- but before the close of the NYSE, and the Manager believes
iated with the Manager were served with similar orders. The that such event has affected or is likely to affect the price of the
Manager and the Distributor intend to request a hearing for instrument, the Manager will use its best judgment to deter-
the purpose of seeking to vacate or modify the order. mine a fair value for that portfolio instrument under proce-
dures adopted by the Board of Trustees.
In addition, in 2003 and 2004 several purported class
actions and shareholder derivative suits were filed against
NAV (net asset value) of a class of shares is
various parties in the mutual fund industry, including the
computed by adding together the value allocable to
Manager, certain mutual funds managed by the Manager,
the class of thePortfolio’s investments plus cash and
including the Fund (the “Alger Mutual Funds”), and certain
other assets, subtracting the applicable liabilities
current and former Alger Mutual Fund trustees and officers,
alleging wrongful conduct related to market-timing and late- and then dividing the result by the number of
trading by mutual fund shareholders. These cases were trans- outstanding shares of the class.
ferred to the U.S.District Court of Maryland by the Judicial
Panel on Multidistrict Litigation for consolidated pre-trial Dividends and Distributions
proceedings under the caption number 1:04-MD-15863
ThePortfolio declares and pays dividends and distributions
(JFM). After a number of the claims were dismissed by the
annually.The Portfolio expects that these annual payments
court, the class and derivative suits were settled in principle,
but such settlement remains subject to court approval. to shareholders will consist of both capital gains and net
investment income.
SHAREHOLDER INFORMATION Federal income taxation of separate accounts of insurance
companies, variable annuity contracts and variable life insur-
Distributor
ance contracts is discussed in the prospectuses of participat-
Fred Alger& Company, Incorporated ing insurance companies. Generally, distributions by the
111 Fifth Avenue Portfolio will not be taxable to holders of variable annuity
New York, NY 10003 contracts or variable life insurance policies if the insurance
company separate accounts to which those distributions are
Transfer Agent
made meet certain requirements, including certain diversifi-
State Street Bank and Trust Company cation requirements that the Portfolio has undertaken to
c/o Boston Financial Data Services, Inc. meet, under the Internal Revenue Code. Participants in qual-
Attn: The Alger American Fund ified pension and retirement plans ordinarily will not be sub-
P.O.Box 8480 ject to taxation on dividends from net investment income
Boston, MA 02266-8480 and distributions from net realized capital gains until they
receive a distribution from their plan accounts. Generally,
Net Asset Value
distributions from plan accounts are taxable as ordinary
The value of one share is its “net asset value,” or NAV. The income at the rate applicable to each participant at the time
NAV forthePortfolio is calculated as of the close of business of distribution. In certain cases, distributions made to a par-
(normally 4:00p.m. Eastern time) every day the New York ticipant prior to the participant’s reaching age 591⁄ are sub-
2
Stock Exchange (“NYSE”) is open. Generally, the NYSE is ject to a penalty tax equivalent to 10% of the distributed
closed on weekends and national holidays listed in the State- amount, in addition to the ordinary income tax payable on
ment of Additional Information. It may close on other days such amount.
from time to time.
Because everyone’s tax situation is unique, see a tax advisor
ThePortfolio generally values its assets on the basis of mar-
about federal, state and local tax consequences of investing
ket quotations or, where market quotations are not reliable
inthe Portfolio.
or readily available, on the basis of fair value as determined
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Classes of Shares shares of other funds sponsored by the Manager that is detri-
mental to thePortfolio involved.
ThePortfolio offers two classes of shares: ClassO shares and
Class S shares. Only Class O shares are offered in this In order to detect significant market timing, the Manager
Prospectus. Both classes are offered only to separate will, among other things, monitor overall subscription,
accounts of insurance companies for the purpose of funding redemption and exchange activity; isolate significant daily
variable annuity contracts and variable life insurance policies activity, and significant activity relative to existing account
and to qualified pension and retirement plans. The classes sizes to determine if there appears to be market timing activ-
differ only in that ClassS shares are subject to a distribution ity in an individualPortfolio. While thePortfoliomight not
and shareholder servicing fee, while ClassO shares are not. be able to detect frequent or short-term trading conducted by
the underlying owners of shares held in omnibus accounts
Purchasing and Redeeming Shares
or through insurance company separate accounts or
Because the Portfolio is an investment vehicle for variable placed through market intermediaries other than on a
annuity contracts and variable life insurance policies offered fully-disclosed basis, and therefore might not be able to
by the separate accounts of life insurance companies, as well effectively prevent frequent or short-term trading in those
as qualified pension and retirement plans, an individual can- accounts, the Manager attempts to monitor these activities
not invest in the Portfolio directly, but may do so only in omnibus accounts and will contract with entities that hold
through one of these sources. ThePortfolio’s shares are held omnibus accounts withthePortfolioto seek to discourage,
in the names of the separate accounts and plans. detect and prevent market timing and active trading. There
is no guarantee that the Portfolio’s efforts to identify
Shares of the Portfolio can be purchased or redeemed on
investors who engage in excessive trading activity or to cur-
any day the New York Stock Exchange is open. They will be
tail that activity will be successful.
processed at the NAV next calculated after the purchase or
redemption request is received in good order by thePortfo- Disclosure of Portfolio Holdings
lio or its designated agent. All orders for purchase of shares
The Board of Trustees has adopted policies and procedures
are subject to acceptance by the Portfolio or its Transfer
relating to disclosure of the Portfolio’s securities holdings.
Agent. The Transfer Agent pays for redemptions within
These policies and procedures recognize that there may be
seven days after it accepts a redemption request. legitimate business reasons for holdings to be disclosed and
seek to balance those interests to protect the proprietary
Limitations on Excessive Trading
nature of the trading strategies and implementation thereof
The Portfolio invests predominantly in U.S.-traded, highly by thePortfolio. Generally, the policies prohibit the release
liquid securities for which current New York market-closing of information concerning portfolio holdings which have
prices are readily available on a daily basis at the time as of not previously been made public to individual investors,
which thePortfolio prices its portfolio securities and deter- institutional investors, intermediaries that distribute the
mines NAV per share. As a result, the Manager believes that Portfolio’s shares and other parties which are not employed
there is little incentive for investors to engage in frequent by the Manager or its affiliates except when the legitimate
business purposes for selective disclosure and other condi-
and/or short-term trading (often referred to as market-
tions (designed to protect thePortfolio) are acceptable.
timing) to benefit from “stale” pricing. Nonetheless, the
Portfoliorecognizes thatin certain circumstances active in- The Portfolio’s full holdings are made available semi-
and-out trading byPortfolio shareholders, for whatever rea- annually in shareholder reports filed on Form N-CSR and
son implemented (including the perception that portfolios after the first and third fiscal quarters in regulatory filings on
that invest primarily in securities of smallcapitalization and Form N-Q. These shareholder reports and regulatory filings
medium capitalization issuers may provide greater arbitrage are filed with the SEC, as required by federal securities laws,
opportunities because they are less liquid than securities of and are generally available within sixty (60)days of the end
of thePortfolio’s fiscal quarter.
larger capitalization issuers), may be attempted and may, if
carried out on a large scale, impose burdens on the Portfo- In addition, thePortfoliomakes publicly availableits month-
lio’s portfolio manager(s), interfere with the efficient man- end top 10 holdings with a 15 day lag andits month-end full
agement of thePortfolio, increase thePortfolio’s transaction portfolio with a 60 day lag on its website www.alger.com
costs, administrative costs or tax liability or otherwise be and through other marketing communications (including
detrimental to the interests of the Portfolio and its other printed advertising/sales literature and/or shareholder tele-
shareholders. The Portfolio therefore discourages market phone customer service centers).
timing, and to the extent possible monitors for market tim-
In accordance with the foregoing, the Portfolio provides
ing patterns inthePortfolio.
portfolio holdings information to service providers who pro-
vide necessary or beneficial services when such service
The Board of Trustees has determined thatthe Portfolio may
providers need access to this information in the perform-
reject purchase orders, on a temporary or permanent basis,
ance of their services and are subject to duties of confiden-
from investors that the Manager is able to determine, in its
tiality (1)imposed by law, including a duty not to trade on
reasonable business judgment, are exhibiting a pattern of
non-public information, and/or (2) pursuant to an agree-
frequent or short-term trading in shares of the Portfolio or
ment that confidential information is not to be disclosed or
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JOB: 09-7332-7 CYCLE#;BL#: 3; 0 TRIM: 8.25" x 10.75" COMPOSITE
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Merrill Corp - Alger American Fund Midcap Growth Portfolio Class O Prospectus [Funds] 05-01-2009 ED [AUX] | mflesla | 03-Apr-09 11:10 | 09-7332-7.ba |
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used (including trading on such information) other than as may apply limitations of its own on participant transactions.
required by law. From time to time, thePortfolio will com- These limitations may be more or less restrictive than the
municate with these service providers to confirm that they limitations imposed by the Portfolio. Consult with your
understand thePortfolio’s policies and procedures regarding administrator to determine what purchase and redemption
such disclosure. This agreement must be approved by the limitations may be applicable to your transactions in portfo-
Portfolio’s Chief Compliance Officer. No compensation or lio shares through your retirement plan.
other consideration is received for the non-public disclosure
From time to time the Distributor, at its expense from its own
of portfolio holdings information.
resources, may compensate brokers, dealers, investment advis-
The Board of Trustees periodically reviews a report disclos- ers or others (“financial intermediaries”) who are instrumen-
ing the third parties to whomthe Portfolio’s holdings infor- tal in effecting investments by their clients or customers inthe
mation has been disclosed and the purpose for such Portfolio, in an amount up to 1% of the value of those invest-
disclosure, and it considers whether or not the release of ments. The Distributor may also from time to time, at its
information to such third parties is in the best interest of expense from its own resources, make payments to financial
thePortfolio and its shareholders. intermediaries that provide shareholder servicing, or
transaction processing, with such payments structured as a
In addition to material the Portfolio routinely provides to
percentage of gross sales, a percentage of net assets, and/or as
shareholders, the Manager may, upon request, make
a fixed dollar amount (the latter as a per account fee or as
additional statistical information available regarding the
reimbursement for transactions processing and transmission
Portfolio. Such information will include, but not be limited
charges). Payments under these other arrangements may vary
to, relative weightings and characteristics of Portfolioversus
but generally will not exceed 0.50% annually of Portfolio
its index and security specific impact on overall perform-
assets or 0.50% annually of Portfolio sales attributable to
ance. Please contact the Portfolio at [phone] to
that financial intermediary. The Distributor determines
obtain such information.
whether to make any additional cash payments and the
Other Information amount of any such payments in response to requests from
financial intermediaries, based on factors the Distributor
The Portfolio may redeem some of your shares “in kind,”
deems relevant. Factors considered by the Distributor gener-
which means that some of the proceeds will be paid with
ally include the financial intermediary’s reputation, ability to
securities the Portfolio owns instead of cash. If you receive
attract and retain assets for thePortfolio, expertise in distrib-
securities, you should expect to incur brokerage or other
uting a particular class of shares of the Portfolio, entry into
charges in converting the securities to cash.
target markets, and/or quality of service. In addition, the Dis-
Shares may be worth more or less when you redeem them tributor may make payments to dealer firms in the form of
than they were at the time you bought them. payments for marketing support, seminar support, training
meetings, or comparable expenses in the discretion of the Dis-
The Portfolio and Transfer Agent have reasonable proce-
tributor. Please contact your financial intermediary for details
dures in place to determine that instructions submitted by
about revenue sharing payments it may receive. Any payments
telephone are genuine. They include requesting personal
described above will not change the price paid by investors for
identification and recording calls. If the Portfolio and the
the purchase of shares ofthe Portfolio or the amount of pro-
Transfer Agent follow these procedures, they are not liable
ceeds received bythe Portfolio on the sale of shares.
for acting in good faith on telephone instructions.
ThePortfolio and its agents reserve the right at any time to:
If you are a participant in a retirement plan, such as a
401(k)plan, and you purchase shares inthe Portfolio through Reject or cancel all or any part of any purchase or exchange
an administrator or trustee that maintains a master or order;
“omnibus” account with thePortfolio for trading on behalf
Suspend, change or withdraw all or any part of the offering
of retirement plans and their participants, the administrator
made by this Prospectus.
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JOB: 09-7332-7 CYCLE#;BL#: 3; 0 TRIM: 8.25" x 10.75" COMPOSITE
COLORS: Black, ~note-color 2 GRAPHICS: none V1.5