Capital Markets: Observations and Insights Autumn 2019

Autumn 2019

Capital Markets: Observations and Insights Capital Markets: Observations and Insights Loving to Lend or Opting to Own?

Loving to Lend or Opting to Own?

“I would much rather own many common stocks than bonds.” – Warren Buffett*

The combination of interest rates declining to near historic lows and the never-ending news cycle attempting to guess what the Federal Reserve will do seems to have investors focused on short-term speculation. Such behavior appears to manifest itself in fund flows gushing into bonds and out of equities. However, U.S. equities have rarely been this cheap relative to bonds, as we detail in the following pages. Interest rates may have further to fall if the U.S. follows Europe and Japan, but we believe the upside is likely limited and the lower rates go, the more bonds are likely to underperform stocks over the long term. In this environment, we believe the choice between stocks and bonds is straightforward. In our view, equity portfolios comprised of companies with significant free cash flow yields and the potential for strong long-term growth are more attractive than Treasury bonds with miniscule yields and the prospect of no cash flow growth. While the herd of investors clamors to pay to lend trillions of dollars, therefore chasing bonds higher and yields lower, count us as contrarians and passionate equity investors who see the potential reward in high quality growth companies over the long term. We prefer owning to lending.

Daniel C. Chung, CFA Chief Executive Officer Chief Investment Officer

Brad Neuman, CFA Senior Vice President Director of Market Strategy

Page 1

Key Observations and Themes

Lending vs. Owning With interest rates so low, stocks look attractive relative to bonds. We believe equities will outperform fixed income over the long term. Accelerating Innovation Innovation is speeding up and changing the way the economy behaves, increasingly driving stock performance. Style Wars Powerful structural forces have caused Growth to diverge from Value. Investors looking for a reversion to the mean may be disappointed. Reframing Risk Traditionally accepted metrics are part of an imperfect shorthand intended to capture fundamental risk; focus on fundamental durability. Economic Good, Bad & Ugly Structurally, we believe the U.S. economy is sound but policy tailwinds are confronting weak confidence and slowing international growth.

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Additional Insights A framework for handicapping the U.S. presidential election and more.

Page 27

Page 2

Paying to Lend ​ Lending vs. Owning

LENDING vs. OWNING

• Weakening global economic activity, due in part to the trade war along with secularly low inflation, has weighed on interest rates

Falling Global Rates

Worldwide Negative Yielding Debt

Germany

U.S.

Japan U.K.

$16

3%

$12

2%

$8

1%

Trillions

$4

0%

$0

-1%

Jun-14

Jun-17

Jul-17

Jul-18

Jul-19

Mar-15

Mar-18

Dec-15

Dec-18

Sep-16

Sep-19

Apr-17

Oct-17

Apr-18

Oct-18

Apr-19

Jan-17

Jan-18

Jan-19

Source: FactSet and Bloomberg as of September 2019. Global rates are 10-year government bond yields.

Page 3

Chasing Yield and Pursuing Safety ​ Lending vs. Owning

LENDING vs. OWNING

• Despite very low interest rates, investors have been allocating away from equities and into bonds as well as cash

Investors Have Plowed Money into Bonds

…And into Cash

1,600

Stocks

Bonds

1,400

1,000

1,200

800

1,000

600

800

400

600

200

($ billions)

($ billions)

400

0

200

Cumulative Fund Flow

-200

Retail Money Market Funds

0

Jun-17

Jun-18

Jun-19

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Mar-17

Mar-18

Mar-19

Dec-16

Dec-17

Dec-18

Sep-16

Sep-17

Sep-18

Sep-19

Source: Morningstar, Investment Company Institute, Alger. Bond flows include taxable and municipals and stock flows include U.S. equity, international equity and sector funds —all include passive and ETF flows.

Page 4

Putting More Cash in Your Pocket ​ Lending vs. Owning

LENDING vs. OWNING

• Equity dividend yields are now greater than 10-year Treasury yields, and stocks are likely to distribute more cash to investors over time ‒ Over 10-year periods in the past half century, the S&P 500 dividend has grown an average of nearly 6% annually or over 70%, while a Treasury bond coupon does not grow

…But Stock Dividends Can Grow!

Similar Yields…

S&P 500 Div Yield 10-Yr Treasury Yield

S&P 500 Dividend Treasury Bond Coupon

10% 12% 14% 16%

10%

8%

6%

0% 2% 4% 6% 8%

4%

2%

0%

-2%

Rolling 10-Yr Annual Growth

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

2015

2018

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

2015

2018

Source: FactSet, Robert Shiller, Alger.

Page 5

Searching for Yield ​ Lending vs. Owning

LENDING vs. OWNING

• Stocks’ total “yield,” which accounts for all of the cash that companies “return” to investors and comprises dividends plus share repurchases, is attractive relative to bonds and particularly compelling relative to history

Total Equity “Yield”

S&P 500 Total “Yield” Less BAA Bond Yield

Repurchases Dividend

4%

5.4%

2%

1.9%

0%

-2%

-4%

-6%

3.5%

-8%

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

S&P 500

Source: FactSet and Alger through August 2019.

Page 6

An Easy Choice? ​ Lending vs. Owning

LENDING vs. OWNING

• Investors are paying a big premium for the safety of Treasuries relative to equities but how risky are stock fundamentals over the long term? ‒ Over 10-year periods in the past half century, S&P 500 EPS has grown an average of nearly 7% annually, or almost 90%, while a Treasury bond coupon does not grow

Stock P/E Is Attractive Relative to Treasuries…

…And Equity EPS Can Grow!

S&P 500 P/E 10-Yr Treasury "P/E"

S&P 500 EPS Treasury Bond Coupon

70x

-2% 0% 2% 4% 6% 8% 10% 12%

60x

50x

40x

30x

20x

10x

0x

Rolling 10-Yr Annual Growth

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

Source: FactSet, Robert Shiller, Alger. Notes: periods used were annual. Treasury “P/E” is inverse of yield to maturity. Earnings per share (EPS) is the portion of a company's earnings or profit allocated to each share of common stock.

Page 7

Cheaper Than You Think? ​ Lending vs. Owning

LENDING vs. OWNING

• Calculating investors’ required rate of return above the prevailing risk-free interest rate is a good way of measuring the attractiveness of stocks relative to Treasury bonds ‒ Using the so-called Equity Risk Premium shows global stocks are about as cheap as they have been in the past couple of decades

High Equity Risk Premiums Show Stocks Are Cheap

US World

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

Cheaper

More Expensive

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Estimated Equity Risk Premium

Source: Goldman Sachs. Note: The market implied equity risk premium (ERP) is the rate that at each point in time makes the theoretical value from GS Dividend Discount Model equal to the observed market price. U.S. equities are represented by the S&P 500. World equities are represented by a weighted average of MSCI Asia Pac ex-Japan (20%), TOPIX (10%), Stoxx 600 (30%), and S&P 500 (40%).

Page 8

Many Happy Returns? ​ Lending vs. Owning

LENDING vs. OWNING

• There is a strong relationship between starting valuation and ensuing 10-year returns for both stocks and bonds

‒ Current valuations suggest equities should outperform bonds over the coming decade

Treasury Bond Yield vs. U.S. Aggregate Bond 10-Year Returns

= month

S&P 500 P/E vs. 10-Year Returns

= current

25%

12%

R² = 0.90

R² = 0.84

20%

10%

15%

8%

10%

6%

5%

4%

0%

2%

-5%

0% 10-Year Annualized Return

5x

10x

15x

20x

25x

30x

1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

S&P 500 10-Year Annualized Return

S&P 500 Price/Earnings

Bloomberg Barclays U.S. Aggregate Bond

10-Year Treasury Bond Yield

Source: FactSet. Each dot represents the P/E during that month and the returns generated over the subsequent 10 years. The starting P/E ratio is the price divided by the next 12- month earnings per share estimate at the start of each 10-year period measured. Monthly data through September 2019 and beginning in January 1986. R-squared is a statistical measure used to analyze how differences in one variable can be explained by the difference in a second variable. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.

Page 9

Accelerating Innovation

INNOVATION

Stepping on the Gas

• Data has indicated that innovation is accelerating across many areas of the economy

• As a result, new products and services are diffusing through society faster, disrupting businesses at a greater pace

Years from Market Entry to 50% Penetration

Years to Reach 1 Billion Users

Source: Asymco, Visual Capitalist, company disclosures.

Page 10

​ Accelerating Innovation

INNOVATION

A New Era Emerges

• Research has shown that technological revolutions occur continuously about every half century and consist of five phases ‒ We believe we are in the irruptive phase of a new revolution, the Age of Connected Intelligence, when intelligent computing will be ubiquitous and pervasive

The Lifecycle of Technological Revolutions

Source: Carlota Perez, “Technological Revolutions and Financial Capital,” Edward Elgar Publishing, 2002; Alger.

Page 11

​ Accelerating Innovation

INNOVATION

A More Powerful Driver of Disruption

• Moore’s Law, the doubling of transistors on a microchip every two years, has been the driving force of the global digital revolution • Now a new exponential law for artificial intelligence (AI) is set to usher in even larger, more powerful changes in technology and living standards

Exponential Growth in the Training of Artificial Intelligence Programs

AI program training doubling every 3 to 5 months

Source: OpenAI.

Page 12

Innovation as Wealth Creator ​ Accelerating Innovation

INNOVATION

• Studies have shown and our research demonstrates that the most innovative companies grow their sales, earnings, and stock prices faster*

Innovation Drives Excess Performance 10 Years

Most Innovative +4% per year

60%

40%

20%

0%

-20%

Least Innovative -4% per year

-40%

Cumulative Excess Return

-60%

Source: FactSet. Most/least innovative stock excess performance is derived from highest and lowest S&P 1500 quintiles based on R&D as % of sales, normalized for market value, using one month returns for 10 years ending 7/31/19. * Baruch Lev and Suresh Radhakrishnan, “The Stock Market Valuation of R&D Leaders.” The performance data quoted represents past performance, which is not an indication or a guarantee of future results.

Page 13

​ Style Divergence

STYLE WARS

Structural Issues Driving Growth vs. Value

• Despite a blip of a reversal in September, Growth stocks have dramatically outperformed Value stocks over the past decade (>35%) • The driver has been the very weak performance of the Price-to-Book valuation metric, which is used heavily in index classifications of Growth vs. Value stocks • As accounting fails to keep up with the changing economy, book value may no longer be as relevant (e.g., R&D is not capitalized in book value)

120

Style classification too dependent upon outdated book value

100

Low P/B

80

Russell 1000 Value / Growth

60

40

20

Total Return Index

0

2009

2011

2013

2015

2017

2019

Source: FactSet as of 9/30/19. Low price-to-book returns are based on the B/P Northfield factor for the Northfield broad U.S. market database. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.

Page 14

​ Style Divergence

STYLE WARS

The Growth Advantage

• Three variables drive P/E multiples: growth, return on capital, and risk

• The Russell 1000 Growth Index has higher expected EPS growth, higher return on equity, and lower risk in the form of better balance sheets as compared to the Russell 1000 Value Index

Higher Returns

Stronger Growth

Lower Risk

Return on Equity

Net Debt/EBITDA

Long-Term EPS Growth

2.7x

32.0%

14.4%

0.9x

12.1%

7.8%

Russell 1000 Growth

Russell 1000 Value

Russell 1000 Growth

Russell 1000 Value

Russell 1000 Growth

Russell 1000 Value

Source: FactSet as of 9/30/19. Growth represents consensus long-term analyst estimates and actual future EPS growth rates might be materially different than the forecasts shown.

Page 15

​ Style Divergence

STYLE WARS

Growth and Value Near Equilibrium

• Despite their outperformance over the past several years, Growth stocks are not very expensive compared to their Value equity counterparts relative to expected growth rates or history

Russell 1000 Growth vs. Russell 1000 Value PEG Ratio (P/E Divided by Long-Term Growth Rate)

Russell 1000 Growth Relative to Russell 1000 Value P/E

225%

200%

1.8x

175%

150%

Growth stocks are cheaper relative to long-term growth

125%

1.5x

100%

Value is Attractive

Median: 40%

75%

51%

50%

25%

Growth is Attractive

0%

Russell 1000 Value

Russell 1000 Growth

1979 1984 1989 1994 1999 2004 2009 2014 2019

Source: FactSet, Bank of America as of 9/30/19. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.

Page 16

Beyond Beta ​ Reframing Risk

RISK

• Beta is thought to be a good measure of risk but in practice it is backward looking in nature, making it a poor measure of potential losses ‒ At the tech bubble peak, the beta of technology stocks was less than one; the same was true of financials in early 2008 prior to the Global Financial Crisis

Below Market Risk at Height of Tech Bubble?

Below Market Risk Preceding the Mortgage Meltdown?

S&P 500 Technology Sector

S&P 500 Financial Sector

120%

40%

2.5

3.0

90%

20%

1.0

2.0

60%

0%

Beta

Beta

-0.5

1.0

30%

-20%

-2.0

0.0

0%

-40%

Relative Return

Relative Return

-30%

-60%

-3.5

-1.0

Source: FactSet. Beta calculated relative to S&P 500 on 12-month trailing basis. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.

Page 17

The Downside of Downside Capture ​ Reframing Risk

RISK

• Low downside capture is thought to reduce risk, but over reasonably long periods, strong secular growth can provide superior returns, even in down markets

Low Downside Capture Can Underperform Secular Growth in Both Bull and Bear Markets

Downside Capture

Annual Return

Performance During Bear Market (3 years ended 12/31/2009)

Performance During Bull Market (3 years ended 9/30/2019)

30%

-20% 0% 20% 40% 60% 80% 100% 120% 140%

120%

0% 1% 2% 3% 4% 5% 6%

100%

Downside Capture

Downside Capture

80%

20%

60%

40%

10%

20%

Annual Return

Annual Return

0%

-2% -1%

0%

-20%

Electric Utilities Internet Retail

Telecom Software

Source: Morningstar. The figures presented are provided for illustrative purposes. They include examples of the performance of two industries with downside captures above and below 100%, respectively. Examples of such performance during a bull market and bear market are provided. Please note that using different industries or different time periods might have materially different results than those shown above. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.

Page 18

Passive Problems? ​ Reframing Risk

RISK

• The vast majority of passive investing allows relative performance to drive relative weighting changes, irrespective of fundamentals ‒ This can exacerbate problems such as in Tech in the late 1990s or in Financials prior to the Global Financial Crisis

Passive Proves Problematic at Points

40%

300

30%

250

Peak Weighting, Wrong Time

Peak Weighting, Wrong Time

Relative Performance

S&P 500 Financial Relative Performance

30%

S&P 500 Tech

200

20%

150

20%

100

10%

50

10%

S&P 500 Tech Weight

0%

-

0%

-50

S&P 500 Financial Weight

1995

1997

1999

2001

2003

2005

2000

2002

2004

2006

2008

2010

2012

Source: FactSet. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.

Page 19

Not All Fundamentals Are Created Equally ​ Reframing Risk

RISK

• Understanding the downside to sales, earnings, and cash flows in a difficult economic environment is key to understanding risk in portfolios ‒ Value stocks have often acted like sailboats that depend on the wind of economic activity, while Growth stocks enjoy a secular motor to help protect against volatility

Look for Stocks Where Fundamentals May Prove Resilient

S&P 500 Growth

S&P 500 Value

S&P 500 Growth

S&P 500 Value

20%

20%

0%

0%

-20%

-20%

-40%

-40%

Change in EPS

Change in EPS

-60%

-60%

0 1 2 3 4 5 6 7 8 9 10 11 12

0 1 2 3 4 5 6 7 8 9 10 11 12

Months After Beginning of 2001 Recession

Months After Beginning of 2008 Recession

Source: FactSet.

Page 20

Beating Economic Volatility? ​ Reframing Risk

RISK

• Innovation can triumph over economic volatility

‒ History shows that there are areas of innovation and growth throughout recessions, depressions, and panics over the past 150 years*

‒ This may be why Growth stock fundamentals have held up better in recessions

U.S. Internet Ad Revenue

U.S. E-Commerce

U.S. Total Retail Sales

140

130

120

+30% Growth

110

100

90

80

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Source: Bureau of Economic Analysis, PwC, Census Bureau. *See Alger’s white paper “The Enduring Force of Innovation.”

Page 21

​ The Good, the Bad, and the Ugly

ECONOMY

The Good – Global Easing

• Countries around the world are loosening monetary policy

‒ This stimulus, which began only in the past few months, should make its way into the economy over the next year

Global Monetary Policy Tracker

10

8

Tightening

6

4

2

Global tightening has given way to global easing

0

-2

-4

(Easing) Index

-6

Easing

-8

Net Global Tightening /

-10

Jul-15

Jul-16

Jul-17

Jul-18

Jul-19

Apr-15

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

Apr-18

Oct-18

Apr-19

Oct-19

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Source: Council on Foreign Relations. Global Monetary Policy Tracker compiles data from 54 countries to highlight significant global trends in monetary policy. The index ranges from -10, which indicates that all countries are easing, to 10, which indicates that all are tightening. Index weighted by share of global foreign exchange reserves .

Page 22

​ The Good, the Bad, and the Ugly

ECONOMY

The Good – Data Improving

• Economic data points have begun to improve with lower interest rates boosting housing measures like home sales and refinancings while bank lending and money supply have also accelerated

‒ The result is economic data is coming in better relative to expectations

Bloomberg Economic Surprise Index

0.3

Positive Surprises

0.2

0.1

Economic data has begun to surprise to the upside

0.0

-0.1

-0.2

-0.3

Negative Surprises

-0.4

-0.5

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19

Source: Bloomberg as of September 2019. The Bloomberg Economic Surprise Index shows the degree to which economic analysts under- or over-estimate the trends in the business cycle. The surprise element is defined as the percentage (or percentage point) difference between analyst forecasts and the published value of economic data releases.

Page 23

​ The Good, the Bad, and the Ugly

ECONOMY

The Bad – Confidence Waning

• Economic policy uncertainty is extremely high and is weighing on business confidence

• As a result, capital expenditure growth has moderated significantly

…Weighing on Capital Expenditures

Uncertainty Is High…

350

140

15%

300

120

10%

100

250

5%

Capex YoY

80

200

0%

60

-5%

150

40

-10%

100

20

50 Global Economic Policy Uncertainty Index

-15%

0

-20 CEO Economic Outlook

-20%

0

2002

2004

2006

2008

2010

2012

2014

2016

2018

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: Baker, Bloom & Davis, Business Roundtable, Bureau of Economic Analysis, and FactSet. Capex growth is U.S. real nonresidential gross private domestic investment. The Global Economic Policy Uncertainty index is a GDP-weighted average of national economic policy uncertainty indices for 20 countries, which is derived from own-country newspaper articles that discuss economic policy uncertainty in that month. The Business Roundtable CEO Economic Outlook Index is based on a quarterly survey of member CEOs’ plans for hiring and capital spending, and their expectations for sales, over the next six months. Taking these factors together, the survey signals the direction of the U.S. economy.

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​ The Good, the Bad, and the Ugly

ECONOMY

The Bad – Dragged Down?

• Weakness outside of the U.S. combined with significant trade issues are weighing on U.S. exports, threatening to drag down overall U.S. growth

Moderating International Industrial Production…

…and Trade Issues Driving Weak U.S. Exports

70

10%

8%

>50 Growing

60

6%

4%

China

50

2%

0%

Japan

40

-2%

<50 Declining

Europe

-4%

U.S. New Export Orders

30

Year-Over-Year Growth

-6%

Jul-18

Jul-19

Jan-18

Jan-19

Mar-18

Mar-19

Nov-18

Sep-18

Sep-19

May-18

May-19

Source: FactSet and Institute for Supply Management.

Page 25

​ The Good, the Bad, and the Ugly

ECONOMY

The Ugly – Thinking About the Next Recession

• When the next recession eventually comes, will the Federal Reserve have enough ammunition to stimulate the economy? ‒ Experience in Japan and Europe has shown that it is difficult to stimulate economies with interest rates around the zero bound

Cut in Federal Funds Rate Around U.S. Recessions

8%

7%

Does the Fed have enough firepower?

6%

5%

4%

3%

2%

1%

0%

1989-1992 2001-2003 2007-2008

??

Source: FactSet and Alger.

Page 26

​ Additional Insights

INSIGHTS

Smaller Capitalization Stocks Poised to Outperform

• Stronger fundamentals : Small caps are expected to grow much faster than large caps

• Compelling valuation : Small cap P/E multiple premium is low relative to history

• More levered to domestic economy : U.S. small caps have less exposure to international economies

Price-to-Earnings Russell 2000 / Russell 1000

Estimated Earnings Per Share Growth (Next 12-Months Estimate)

0% 10% 20% 30% 40% 50% 60% 70% 80%

23%

8%

Median

Russell 2000

Russell 1000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: FactSet. EPS are consensus estimates and actual earnings per share might be materially different than shown.

Page 27

​ Additional Insights

INSIGHTS

Election by the Numbers

• Over the past half century in presidential elections involving incumbents, a strong correlation has existed between disposable income growth and percentage of votes won • Historically, real per capita disposable income growth of nearly 2% or more has been needed for reelection, which is currently where it is running

U.S. Reelection Campaigns

70%

Johnson

Nixon

60%

Reagan

Winning Campaigns

Clinton

Current

GW Bush

Obama

50%

% of Two-Party Vote

GH Bush

Losing Campaigns

Carter

40%

0% 1% 2% 3% 4% 5% 6% 7%

Real Per Capita Disposable Income Growth

Source: Strategas and Alger. Historical income growth is December to October of election year, annualized, while current data point is YoY growth for August 2019.

Page 28

Disclosure ​The views expressed are the views of Fred Alger Management, LLC (“FAM”) and Alger Management Ltd. (together with their affiliated entities “Alger”) as of October 2019. Alger has used sources of information which it believes to be reliable; however, this publication is not intended to be and does not constitute investment advice. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security, or any funds managed by Alger. ​ Risk Disclosures : Investing in the stock market involves certain risks, and may not be suitable for all investors. Growth stocks tend to be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Past performance is not indicative of future performance . Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. ​ Important Information for UK Investors: The distribution of this material in the United Kingdom is restricted by law. Accordingly, this material is provided only for and is directed only at persons in the United Kingdom reasonably believed to be of a kind to whom such promotions may be communicated by an unauthorized person pursuant to an exemption under the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “FPO”). Such persons include: (a) persons having professional experience in matters relating to investments and (b) high net worth bodies corporate, partnerships, unincorporated associations, trusts, etc. falling within Article 49 of the FPO. Most of the rules made under the FSMA for the protection of retail clients do not apply, and compensation under the United Kingdom Financial Services Compensation Scheme will not be available. ​ Important Information for UK and EU Investors: This material is directed at investment professionals and qualified investors (as defined by MiFID/FCA regulations). It is for information purposes only and has been prepared and is made available for the benefit investors. This material does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorised or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this material and should be satisfied in doing so that there is no breach of local legislation or regulation. ​ Important Information for US Investors: This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund shares. Fred Alger & Company, LLC serves as distributor of the Alger mutual funds.

​Certain products may be subject to restrictions with regard to certain persons or in certain countries under national regulations applicable to such persons or countries.

​Alger Management, Ltd. (company house number 8634056, domiciled at 78 Brook Street, London W1K 5EF, UK) is authorised and regulated by the Financial Conduct Authority, for the distribution of regulated financial products and services. FAM and/or Weatherbie Capital, LLC, U.S. registered investment advisors, serve as sub-portfolio manager to financial products distributed by Alger Management, Ltd. ​ ​Alger Group Holdings, LLC (parent company of FAM) and Fred Alger & Company, LLC are not an authorized persons for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (“FSMA”) and this material has not been approved by an authorized person for the purposes of Section 21(2)(b) of the FSMA. Fred Alger Management, LLC • 360 Park Avenue South, New York, NY 10010 • 800.992.3863 • www.alger.com

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Disclosure

​The S&P 500 Index is an unmanaged index generally representative of the U.S. stock market without regard to company size. The S&P Growth and S&P Value indices measure stocks using three factors: sales growth, the ratio of earnings change to price, and momentum. S&P Style Indices divide the complete market capitalization of the S&P 500 into growth and value segments. The S&P Composite 1500 is an unmanaged index that covers approximately 90% of the U.S. market capitalization. The Russell 1000® Growth Index is an unmanaged index designed to measure the performance of the largest 1000 companies in the Russell 3000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Growth Index is an unmanaged index generally representative of common stocks designed to track performance of small-capitalization companies with greater than average growth orientation. The Russell 2000 Value Index is an unmanaged index generally representative of the small-cap value segment of the U.S. equity universe and measures the performance of Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000 Index is a stock market index that tracks the highest-ranking 1,000 stocks in the Russell 3000 Index, which represent about 90% of the total market capitalization of that index. The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. The MSCI AC Asia Pacific ex Japan Index captures large and mid cap representation across 4 of 5 Developed Markets countries (excluding Japan) and 9 Emerging Markets countries in the Asia Pacific region. TOPIX (Tokyo Stock Price Index) is a free-float adjusted market capitalization-weighted index that is calculated based on all the domestic common stocks listed on the Tokyo Stock Exchange First Section. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index. The STOXX Europe 600 Index represents large, mid and small capitalization companies across 17 countries of the European region. The STOXX Europe Total Market Index represents the Western Europe region as a whole. It covers approximately 95 percent of the free float market capitalization across 17 European countries. The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. ​The indices presented are provided for illustrative purposes, reflect the reinvestment of dividends and do not assess fees and expenses that would have the effect of reducing returns. Investors cannot invest directly in any index. The index performance does not represent the returns of any portfolio advised by Fred Alger Management, Inc. and actual client results might differ materially than the indices shown. Note that past performance is no guarantee of future results. Comparison to a different index might have materially different results than those shown. ​Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell ® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication.

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Fred Alger Management, LLC • 360 Park Avenue South, New York, NY 10010 • 800.992.3863 • www.alger.com

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