Loading...
Docoh

Arbitrage Funds

Filed: 5 Feb 20, 9:15am

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number

811-09815

 

THE ARBITRAGE FUNDS

(Exact name of registrant as specified in charter)

 

41 Madison Avenue, 42nd Floor, New York,

 

NY 10010

(Address of principal executive offices)

 

(Zip code)

 

John S. Orrico

Water Island Capital, LLC

41 Madison Avenue

42nd Floor

New York, NY 10010

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

800-295-4485

 

 

Date of fiscal year end:

May 31

 

 

Date of reporting period:

November 30, 2019

 

 


 

Item 1.   Reports to Stockholders.

 


Semi-Annual Report

November 30, 2019

Arbitrage Fund

Water Island Diversified Event-Driven Fund

Water Island Credit Opportunities Fund

Water Island Long/Short Fund

Paper copies of The Arbitrage Funds' shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from The Arbitrage Funds or from your financial intermediary, such as a broker — dealer or bank. Instead, the reports will be made available on a website (https://artbitragefunds.com/restricted/content/downloads.html) and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you have already elected to receive your shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from The Arbitrage Funds electronically by sending a request in writing to: Arbitrage Funds, PO Box 219842, Kansas City MO 64121-9842 or by calling 1-800-295-4485.

You may also elect to receive all future reports in paper free of charge. You can inform The Arbitrage Funds [or your financial intermediary] that you wish to continue receiving paper copies of your shareholder reports by sending a request in writing to: Arbitrage Funds, PO Box 219842, Kansas City MO 64121-9842 or by calling 1-800-295-4485. Your election to receive reports in paper will apply to all Arbitrage Funds you hold directly in an account with The Arbitrage Funds. You must provide separate instructions to each of your financial intermediaries.



TABLE OF CONTENTS

Arbitrage Fund

 

Portfolio Information

  

1

  

Portfolio of Investments

  

3

  

Water Island Diversified Event-Driven Fund

   

Portfolio Information

  

14

  

Portfolio of Investments

  

16

  

Water Island Credit Opportunities Fund

 

Portfolio Information

  

27

  

Portfolio of Investments

  

29

  

Water Island Long/Short Fund

 

Portfolio Information

  

36

  

Portfolio of Investments

  

38

  

Statements of Assets and Liabilities

  

46

  

Statements of Operations

  

50

  

Statements of Changes in Net Assets

  

54

  

Financial Highlights

 

Arbitrage Fund - Class R

  

58

  

Arbitrage Fund - Class I

  

60

  

Arbitrage Fund - Class C

  

62

  

Arbitrage Fund - Class A

  

64

  

Water Island Diversified Event-Driven Fund - Class R

  

66

  

Water Island Diversified Event-Driven Fund - Class I

  

68

  

Water Island Diversified Event-Driven Fund - Class C

  

70

  

Water Island Diversified Event-Driven Fund - Class A

  

72

  

Water Island Credit Opportunities Fund - Class R

  

74

  

Water Island Credit Opportunities Fund - Class I

  

76

  

Water Island Credit Opportunities Fund - Class C

  

78

  

Water Island Credit Opportunities Fund - Class A

  

80

  

Water Island Long/Short Fund - Class R

  

82

  

Water Island Long/Short Fund - Class I

  

84

  

Notes to Financial Statements

  

86

  

Disclosure of Fund Expenses

  

113

  

Additional Information

  

116

  


Arbitrage Fund  Portfolio Information

November 30, 2019 (Unaudited)

Performance (annualized returns as of November 30, 2019)

  One
Year
 Five
Year
 Ten
Year
 Since
Inception*
 

Arbitrage Fund, Class R

  

3.77

%

  

2.56

%

  

2.11

%

  

3.95

%

 

Arbitrage Fund, Class I

  

4.01

%

  

2.78

%

  

2.36

%

  

3.03

%

 

Arbitrage Fund, Class C**

  

3.00

%

  

1.78

%

  

N/A

   

1.23

%

 

Arbitrage Fund, Class A***

  

3.74

%

  

2.53

%

  

N/A

   

2.22

%

 
ICE BofA Merrill Lynch U.S. 3-Month Treasury
Bill Index****
  

2.32

%

  

1.05

%

  

0.57

%

  

1.62

%

 

S&P 500® Index

  

16.11

%

  

10.98

%

  

13.44

%

  

6.12

%

 

Current performance may be higher or lower than performance quoted above. Any performance data quoted represents past performance and the investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Returns shown above include the reinvestment of all dividends and capital gains. Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from the amount reported in the Financial Highlights. You can obtain performance data current to the most recent month end by calling 1-800-295-4485 or going to www.arbitragefunds.com.

* Class R inception: 9/18/00; Class I inception: 10/17/03; Class C inception: 6/1/12; Class A inception: 6/1/13. The "Since Inception" returns for securities indices are for the inception date of Class R shares.

** Class C shares are subject to a 1.00% contingent deferred sales charge on all purchases redeemed within 12 months of purchase.

*** Class A shares are subject to a maximum front-end sales load of 2.50% on purchases up to $250,000. The shares are also subject to a deferred sales charge of up to 1.00% on purchases of $250,000 or more purchased without a front-end sales charge and redeemed within 18 months of purchase.

**** Merger arbitrage and event-driven investing are market neutral investment strategies, which typically exhibit low betas and low correlations to broad equity and credit market indices. As such, the adviser has determined that a more appropriate benchmark for Arbitrage Fund is a measure of the risk-free rate, in this case the ICE Bank of America (BofA) Merrill Lynch U.S. 3-Month Treasury Bill Index.

The Total Annual Fund Operating Expenses for Class R, Class I, Class C and Class A are 1.99%, 1.74%, 2.74% and 1.99%, respectively. These expense ratios are as stated in the current prospectus and may differ from the expense ratios disclosed in the financial highlights in this report.

The ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index tracks the performance of the U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market with a remaining term to final maturity of less than 3 months.

The S&P 500® Index is an unmanaged index consisting of 500 stocks.

An investor may not invest directly in an index.

Semi-Annual Report | November 30, 2019
1



Arbitrage Fund  Portfolio Information (continued)

November 30, 2019 (Unaudited)

Growth of $10,000 Investment

The chart represents historical performance of a hypothetical investment of $10,000 in the Class R shares of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

  

Sector Weighting

The following chart shows the sector weightings of the Arbitrage Fund's investments (including short sales and excluding derivatives) as of the report date.

* Concentration Risk: The Fund may invest a large proportion of the Fund's assets in securities of issuers in a single sector over a given time. During such a period of concentration, the Fund may be subject to greater volatility with respect to its portfolio securities than a fund that is more broadly diversified.

www.arbitragefunds.com | 1-800-295-4485
2



Arbitrage Fund  Portfolio of Investments

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 83.60%

 

Aerospace & Defense - 1.21%

 

Cobham Plc

  

9,810,885

  

$

20,073,849

  

Apparel - 0.11%

 

Perry Ellis International, Inc.(a)(b)

  

828,485

   

1,781,243

  

Auto Parts & Equipment - 3.09%

 

WABCO Holdings, Inc.(a)(c)

  

381,948

   

51,467,493

  

Banks - 8.67%

 

IBERIABANK Corp.(c)

  

22,733

   

1,659,282

  

SunTrust Banks, Inc.

  

1,883,538

   

133,429,832

  

WesBanco, Inc.

  

253,055

   

9,231,428

  
   

144,320,542

  

Biotechnology - 2.71%

 

Cambrex Corp.(a)(c)

  

174,764

   

10,480,597

  

Medicines Co.(a)

  

246,201

   

20,730,124

  

Pacific Biosciences of California, Inc.(a)(c)

  

2,709,726

   

13,927,992

  
   

45,138,713

  

Chemicals - 0.49%

 

Innophos Holdings, Inc.(c)

  

256,177

   

8,172,046

  

Commercial Services - 1.05%

 

Cramo Oyj

  

163,874

   

2,412,015

  

Nord Anglia Education, Inc.(a)(b)

  

200,078

   

960,374

  

Sotheby's(a)(b)

  

247,097

   

14,084,529

  
   

17,456,918

  

Computers & Computer Services - 2.34%

 

Carbonite, Inc.(a)(c)

  

927,022

   

21,321,506

  

Presidio, Inc.

  

347,107

   

5,730,737

  

Sophos Group Plc(d)

  

1,624,124

   

11,868,167

  
   

38,920,410

  

Construction Materials - 0.71%

 

Continental Building Products, Inc.(a)(c)

  

322,390

   

11,860,728

  

Distribution/Wholesale - 0.73%

 

Anixter International, Inc.(a)(c)

  

140,802

   

12,086,444

  

Diversified Financial Services - 1.28%

 

Aircastle Ltd.(c)

  

615,276

   

19,682,679

  

Bolsas y Mercados Espanoles SHMSF SA

  

42,709

   

1,671,305

  
   

21,353,984

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
3



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 83.60% (Continued)

 

Electronics - 1.26%

 

Fitbit, Inc., Class A(a)(c)

  

670,508

  

$

4,666,736

  

Tech Data Corp.(a)(c)

  

112,613

   

16,316,497

  
   

20,983,233

  

Energy - Alternate Sources - 0.61%

 

Pattern Energy Group, Inc., Class A(c)

  

370,681

   

10,201,141

  

Engineering & Construction - 0.74%

 

Altran Technologies SA

  

368,120

   

5,746,755

  

Koninklijke Volkerwessels NV

  

273,026

   

6,602,401

  
   

12,349,156

  

Entertainment - 4.64%

 

Entertainment One Ltd.

  

4,707,306

   

33,850,356

  

International Speedway Corp., Class A(a)(b)

  

792,042

   

35,641,893

  

Stars Group, Inc.(a)(c)

  

321,096

   

7,799,422

  
   

77,291,671

  

Environmental Control - 5.25%

 

Advanced Disposal Services, Inc.(a)(c)

  

2,653,628

   

87,437,043

  

Food - 1.57%

 

Pioneer Foods Group Ltd.

  

3,557,869

   

26,153,663

  

Gas - 0.48%

 

AltaGas Canada, Inc.

  

316,774

   

7,977,182

  

Healthcare - Products - 1.15%

 

Consort Medical Plc

  

123,325

   

1,666,800

  

Wright Medical Group NV(a)(c)

  

586,147

   

17,449,596

  
   

19,116,396

  

Healthcare - Services - 10.23%

 

WellCare Health Plans, Inc.(a)(c)

  

528,636

   

170,257,797

  

Home Builders - 0.40%

 

William Lyon Homes, Class A(a)(c)

  

315,274

   

6,582,921

  

Insurance - 0.28%

 

TOWER Ltd.(a)

  

9,485,696

   

4,626,818

  

Internet - 2.36%

 

Shutterfly, Inc.(a)(b)

  

769,876

   

39,263,676

  

Lodging - 1.05%

 

Caesars Entertainment Corp.(a)(c)

  

1,344,156

   

17,527,794

  

Media - 2.63%

 

Axel Springer SE(a)

  

637,092

   

43,867,772

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
4



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 83.60% (Continued)

 

Miscellaneous Manufacturing - 0.52%

 

Hillenbrand, Inc.

  

272,603

  

$

8,619,694

  

Oil & Gas - 0.41%

 

Eland Oil & Gas Plc

  

3,247,050

   

6,878,898

  

Pharmaceuticals - 5.33%

 

Allergan Plc(c)

  

279,886

   

51,762,117

  

Bristol-Myers Squibb Co.

  

650,993

   

37,067,541

  
   

88,829,658

  

Pipelines - 1.23%

 

SemGroup Corp., Class A

  

1,334,452

   

20,510,527

  

Real Estate - 0.26%

 

Hembla AB, Class B(a)

  

193,067

   

4,323,682

  

Real Estate Investment Trusts - 2.17%

 

Liberty Property Trust(c)

  

585,383

   

36,071,300

  

Retail - 2.99%

 

EI Group Plc(a)

  

3,910,019

   

14,250,689

  

GrandVision NV(d)

  

167,972

   

5,089,006

  

Tiffany & Co.

  

206,354

   

27,610,165

  

Vitamin Shoppe, Inc.(a)

  

441,328

   

2,859,806

  
   

49,809,666

  

Semiconductors - 3.30%

 

Mellanox Technologies Ltd.(a)(c)(e)

  

478,777

   

55,011,477

  

Software - 3.63%

 

Cision Ltd.(a)(c)

  

1,052,610

   

10,462,943

  

InterXion Holding NV(a)(c)

  

110,469

   

9,394,284

  

MINDBODY, Inc., Class A(a)(b)

  

843,793

   

30,798,445

  

Onemarket Ltd.(a)

  

111,800

   

73,353

  

Pivotal Software, Inc., Class A(a)(c)

  

644,502

   

9,680,420

  
   

60,409,445

  

Telecommunications - 4.95%

 

Inmarsat Plc

  

1,305,059

   

9,168,661

  

Zayo Group Holdings, Inc.(a)(c)(e)

  

2,140,520

   

73,291,405

  
   

82,460,066

  

Transportation - 3.77%

 

Genesee & Wyoming, Inc., Class A(a)

  

563,758

   

62,830,829

  
TOTAL COMMON STOCKS
(Cost $1,346,075,624)
  

1,392,023,875

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
5



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

LIMITED PARTNERSHIPS - 0.02%

 

Pipelines - 0.02%

 

Energy Transfer Equity LP

  

30,829

  

$

364,090

  
TOTAL LIMITED PARTNERSHIPS
(Cost $364,016)
  

364,090

  

RIGHTS - 0.15%

 

A Schulman, Inc. CVR(b)

  

173,468

   

164,309

  

Bristol-Myers Squibb Co.

  

650,993

   

1,399,635

  

Corium International, Inc. CVR(b)

  

920,694

   

182,390

  

Elanco Animal Health, Inc. CVR(b)

  

1,124,589

   

  

Media General, Inc. CVR(b)

  

613,589

   

  

NewStar Financial, Inc. CVR(b)

  

1,514,945

   

801,254

  
TOTAL RIGHTS
(Cost $2,021,549)
  

2,547,588

  

 

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

CORPORATE BONDS - 0.78%

 

Pipelines - 0.78%

 
SemGroup Corp. / Rose Rock
Finance Corp.
 

11/15/2023

  

5.625

%

 

$

12,713,000

  

$

13,030,825

  
TOTAL CORPORATE BONDS
(Cost $13,088,530)
  

13,030,825

  

 

  

Shares

 

Value

 

MUTUAL FUNDS - 1.55%

 

Water Island Diversified Event-Driven Fund, Class I(f)

  

2,657,765

  

$

25,780,318

  
TOTAL MUTUAL FUNDS
(Cost $25,340,129)
  

25,780,318

  

 

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(a) - 0.00%(g)

 

Put Options Purchased - 0.00%(g)

 
Mellanox
Technologies,
Ltd.
 

12/2019

 

$

100.00

  

$

18,475,920

   

1,608

  

$

36,180

  
  

12/2019

  

105.00

   

8,422,170

   

733

   

16,493

  
Zayo Group
Holdings, Inc.
 

12/2019

  

32.50

   

3,516,448

   

1,027

   

5,135

  
TOTAL PUT OPTIONS PURCHASED
(Cost $729,129)
  

57,808

  
TOTAL PURCHASED OPTIONS
(Cost $729,129)
  

57,808

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
6



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  

Yield

 

Shares

 

Value

 

SHORT-TERM INVESTMENTS - 13.35%

 

Money Market Funds

 
Morgan Stanley Institutional Liquidity
Fund Government Portfolio,
Institutional Class
  

1.550

%(h)

  

111,092,620

  

$

111,092,620

  
State Street Institutional U.S. Government
Money Market Fund, Premium Class
  

1.590

%(h)

  

111,092,620

   

111,092,620

  
       

222,185,240

  
TOTAL SHORT-TERM INVESTMENTS
(Cost $222,185,240)
  

222,185,240

  
Total Investments - 99.45%
(Cost $1,609,804,217)
  

1,655,989,744

  

Other Assets in Excess of Liabilities - 0.55%(i)

  

9,092,450

  

NET ASSETS - 100.00%

 

$

1,665,082,194

  

Portfolio Footnotes

(a)  Non-income-producing security.

(b)  Security fair valued using significant unobservable inputs and classified as a Level 3 security. As of November 30, 2019, the total fair market value of these securities was $123,678,113, representing 7.43% of net assets.

(c)  Security, or a portion of security, is being held as collateral for short sales, written option contracts or forward foreign currency exchange contracts. At November 30, 2019, the aggregate fair market value of those securities was $507,411,362, representing 30.47% of net assets.

(d)  Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of November 30, 2019, these securities had a total value of $16,957,173 or 1.02% of net assets.

(e)  Underlying security for a written/purchased call/put option.

(f)  Affiliated investment.

(g)  Less than 0.005% of net assets.

(h)  Rate shown is the 7-day effective yield as of November 30, 2019.

(i)  Includes cash held as collateral for short sales and written option contracts.

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (20.97%)

 

Banks - (8.10%)

 

First Horizon National Corp.

  

(103,964

)

 

$

(1,671,741

)

 

Truist Financial Corp.

  

(2,435,391

)

  

(133,264,596

)

 
   

(134,936,337

)

 

Distribution/Wholesale - (0.08%)

 

WESCO International, Inc.

  

(24,151

)

  

(1,270,826

)

 

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
7



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - (20.97%) (Continued)

 

Entertainment - (0.39%)

 

Eldorado Resorts, Inc.

  

(120,840

)

 

$

(6,466,148

)

 

Healthcare - Services - (6.49%)

 

Centene Corp.

  

(1,786,919

)

  

(108,054,992

)

 

Home Builders - (0.35%)

 

Taylor Morrison Home Corp., Class A

  

(251,891

)

  

(5,848,909

)

 

Miscellaneous Manufacturing - (0.52%)

 

Hillenbrand, Inc.

  

(273,457

)

  

(8,646,710

)

 

Pharmaceuticals - (2.26%)

 

AbbVie, Inc.

  

(7,222

)

  

(633,586

)

 

Bristol-Myers Squibb Co.

  

(650,966

)

  

(37,066,004

)

 
   

(37,699,590

)

 

Pipelines - (0.04%)

 

SemGroup Corp., Class A

  

(42,377

)

  

(651,334

)

 

Real Estate Investment Trusts - (2.74%)

 

Digital Realty Trust, Inc.

  

(78,065

)

  

(9,441,962

)

 

Prologis, Inc.

  

(395,127

)

  

(36,173,877

)

 
   

(45,615,839

)

 
TOTAL COMMON STOCKS
(Proceeds $327,318,198)
  

(349,190,685

)

 

LIMITED PARTNERSHIPS - (0.04%)

 

Pipelines - (0.04%)

 

Energy Transfer Equity LP

  

(54,758

)

  

(646,692

)

 
TOTAL LIMITED PARTNERSHIPS
(Proceeds $654,262)
  

(646,692

)

 

RIGHTS - (0.08%)

 

Pharmaceuticals - (0.08%)

 

Bristol-Myers Squibb Co.

  

(650,993

)

  

(1,399,637

)

 
TOTAL RIGHTS
(Proceeds $1,431,604)
  

(1,399,637

)

 
TOTAL SECURITIES SOLD SHORT
(Proceeds $329,404,064)
 

$

(351,237,014

)

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
8



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

WRITTEN OPTIONS

 Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

Written Call Options

 
Anixter International,
Inc.
 

12/2019

 

$

85.00

  

$

(1,639,544

)

  

(191

)

 

$

(33,903

)

 
TOTAL WRITTEN CALL OPTIONS
(Premiums received $44,248)
  

(33,903

)

 
TOTAL WRITTEN OPTIONS
(Premiums received $44,248)
 

$

(33,903

)

 

EQUITY SWAP CONTRACTS

Swap
Counterparty/
Payment
Frequency

 

Reference
Obligation

 

Rate
Paid/
Received
by the
Fund

 

Termination
Date

 

Upfront
Payments
Paid

 

Upfront
Payments
Received

 

Market
Value

 

Notional
Amount

 

Unrealized
Appreciation

 

Morgan
Stanley &
Co./
Monthly
 
 
 

 

AbbVie,
Inc.
 
 
 
 
 

 

Received
1 Month-
Federal
Rate
Minus
40 bps
(1.150%)

 







08/12/2021

 

$

  

$

  

$

  

$

20,630,587

  

$

  

Morgan
Stanley &
Co./
Monthly
 
 
 

 

Energy
Transfer
LP
 
 
 
 

 

Received
1 Month-
Federal
Rate
Minus
40 bps
(1.150%)

 







08/12/2021

  

   

   

   

10,809,776

   

  

Morgan
Stanley &
Co./
Monthly
 
 
 

 

WesBanco,
Inc.
 
 
 
 

 

Received
1 Month-
Federal
Rate
Minus
40 bps
(1.150%)

 







08/12/2021

  

   

   

   

9,231,410

   

  

Morgan
Stanley &
Co./
Monthly
 
 

 

Cobham
Plc
 
 
 
 

 

Paid
1 Month-
SONIA
plus
90 bps
(1.609%)

 






10/01/2021

  

   

   

  





GBP
(7,145,095)

  

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
9



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

Swap
Counterparty/
Payment
Frequency

 

Reference
Obligation

 

Rate
Paid/
Received
by the
Fund

 

Termination
Date

 

Upfront
Payments
Paid

 

Upfront
Payments
Received

 

Market
Value

 

Notional
Amount

 

Unrealized
Appreciation

 

Morgan
Stanley &
Co./
Monthly
 
 

 

Flutter
Entertain-
ment
Plc
 
 

 

Received
1 Month-
LIBOR
Minus
87.5 bps
(1.590%)

 






10/01/2021

 

$

  

$

  

$

  

GBP
$6,366,184

 

$

  

Morgan
Stanley &
Co./
Monthly
 
 

 

Just Eat
Plc
 
 
 
 

 

Paid
1 Month
SONIA
plus
90 bps
(1.609%)

 






10/01/2021

 

$

486

  

$

  

$

21,096

  

GBP
$(8,260,942)

 

$

21,582

  

         

 

 

 

 

 

 

 

 

 

 

 

$

21,096

  

 

 

$

21,582

  

OUTSTANDING FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Appreciation
 

AUD

3,500

  

USD

2,361

  

Goldman Sachs & Co.

 

12/16/2019

 

$

7

  

USD

87,360

  

AUD

127,300

  

Goldman Sachs & Co.

 

12/16/2019

  

1,224

  

CAD

12,531,100

  

USD

9,416,180

  

Goldman Sachs & Co.

 

12/16/2019

  

18,802

  

USD

28,893,810

  

CAD

38,052,200

  

Goldman Sachs & Co.

 

12/16/2019

  

243,343

  

EUR

3,612,800

  

USD

3,977,275

  

Goldman Sachs & Co.

 

12/16/2019

  

6,683

  

USD

84,598,009

  

EUR

76,403,000

  

Goldman Sachs & Co.

 

12/16/2019

  

345,804

  

GBP

72,202,300

  

USD

92,522,734

  

Goldman Sachs & Co.

 

12/16/2019

  

906,464

  

USD

12,238,882

  

GBP

9,418,600

  

Goldman Sachs & Co.

 

12/16/2019

  

51,290

  

NZD

1,862,300

  

USD

1,179,832

  

Goldman Sachs & Co.

 

12/16/2019

  

15,658

  

USD

4,366,244

  

NZD

6,789,900

  

Goldman Sachs & Co.

 

12/16/2019

  

7,518

  

USD

259,892

  

ZAR

3,804,000

  

Goldman Sachs & Co.

 

12/13/2019

  

739

  
  

$

1,597,532

  
Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Depreciation
 

AUD

19,900

  

USD

13,630

  

Goldman Sachs & Co.

 

12/16/2019

 

$

(160

)

 

USD

806

  

AUD

1,200

  

Goldman Sachs & Co.

 

12/16/2019

  

(6

)

 

CAD

15,037,000

  

USD

11,360,059

  

Goldman Sachs & Co.

 

12/16/2019

  

(38,321

)

 

USD

117,643

  

CAD

156,300

  

Goldman Sachs & Co.

 

12/16/2019

  

(40

)

 

EUR

22,419,100

  

USD

24,894,075

  

Goldman Sachs & Co.

 

12/16/2019

  

(171,765

)

 

USD

9,352,746

  

EUR

8,491,100

  

Goldman Sachs & Co.

 

12/16/2019

  

(10,681

)

 

USD

160,421,766

  

GBP

128,353,300

  

Goldman Sachs & Co.

 

12/16/2019

  

(5,666,378

)

 

NZD

544,000

  

USD

349,618

  

Goldman Sachs & Co.

 

12/16/2019

  

(401

)

 

USD

1,634,267

  

NZD

2,588,400

  

Goldman Sachs & Co.

 

12/16/2019

  

(27,336

)

 

USD

4,312,599

  

SEK

41,509,400

  

Goldman Sachs & Co.

 

12/16/2019

  

(24,770

)

 

USD

26,376,124

  

ZAR

394,122,100

  

Goldman Sachs & Co.

 

12/13/2019

  

(473,982

)

 
  

$

(6,413,840

)

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
10



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

The following is a summary of investments classified by country exposure:

Country

 

% of Net Assets(a)

 

United Kingdom

  

3.84

%

 

Israel

  

3.30

%

 

Canada

  

2.98

%

 

Germany

  

2.63

%

 

Netherlands

  

2.31

%

 

South Africa

  

1.57

%

 

France

  

0.34

%

 

New Zealand

  

0.28

%

 

Sweden

  

0.26

%

 

Finland

  

0.14

%

 

Spain

  

0.10

%

 

Hong Kong

  

0.06

%

 

Australia

  

0.01

%

 

United States

  

81.63

%

 

Other Assets in Excess of Liabilities

  

0.55

%

 
   

100.00

%

 

(a)  These percentages represent long positions only and are not net of short positions.

Abbreviations:

AB - Aktiebolag is the Swedish term for a limited company.

AUD - Australian dollar

bps - Basis Points. 100 Basis Points is equal to 1 percentage point.

CAD - Canadian dollar

CVR - Contingent Value Rights

EUR - Euro

GBP - British pound

LIBOR - London Interbank Offered Rate

LP - Limited Partnership

Ltd. - Limited

N.V. - Naamloze Vennootschap is the Dutch term for a public limited liability corporation.

NZD - New Zealand dollar

Plc - Public Limited Company

SA - Generally designates corporations in various countries, mostly those employing civil law. This translates literally in all languages mentioned as anonymous company.

SE - SE Regulation. A European Company which can operate on a Europe-wide basis and be governed by Community law directly applicable in all Member States

SEK - Swedish krona

SONIA - Sterling OverNight Index Average

USD - United States Dollar

ZAR - South African rand

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
11



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

The following table summarizes Arbitrage Fund's investments and derivative financial instruments categorized in the disclosure hierarchy as of November 30, 2019:

Investments in Securities at Value*

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

Common Stocks

 

Aerospace & Defense

 

$

20,073,849

  

$

  

$

  

$

20,073,849

  

Apparel

  

   

   

1,781,243

   

1,781,243

  

Auto Parts & Equipment

  

51,467,493

   

   

   

51,467,493

  

Banks

  

144,320,542

   

   

   

144,320,542

  

Biotechnology

  

45,138,713

   

   

   

45,138,713

  

Chemicals

  

8,172,046

   

   

   

8,172,046

  

Commercial Services

  

2,412,015

   

   

15,044,903

   

17,456,918

  
Computers & Computer
Services
  

38,920,410

   

   

   

38,920,410

  

Construction Materials

  

11,860,728

   

   

   

11,860,728

  

Distribution/Wholesale

  

12,086,444

   

   

   

12,086,444

  

Diversified Financial Services

  

21,353,984

   

   

   

21,353,984

  

Electronics

  

20,983,233

   

   

   

20,983,233

  

Energy - Alternate Sources

  

10,201,141

   

   

   

10,201,141

  

Engineering & Construction

  

12,349,156

   

   

   

12,349,156

  

Entertainment

  

41,649,778

   

   

35,641,893

   

77,291,671

  

Environmental Control

  

87,437,043

   

   

   

87,437,043

  

Food

  

26,153,663

   

   

   

26,153,663

  

Gas

  

7,977,182

   

   

   

7,977,182

  

Healthcare - Products

  

19,116,396

   

   

   

19,116,396

  

Healthcare - Services

  

170,257,797

   

   

   

170,257,797

  

Home Builders

  

6,582,921

   

   

   

6,582,921

  

Insurance

  

4,626,818

   

   

   

4,626,818

  

Internet

  

   

   

39,263,676

   

39,263,676

  

Lodging

  

17,527,794

   

   

   

17,527,794

  

Media

  

43,867,772

   

   

   

43,867,772

  

Miscellaneous Manufacturing

  

8,619,694

   

   

   

8,619,694

  

Oil & Gas

  

6,878,898

   

   

   

6,878,898

  

Pharmaceuticals

  

88,829,658

   

   

   

88,829,658

  

Pipelines

  

20,510,527

   

   

   

20,510,527

  

Real Estate

  

4,323,682

   

   

   

4,323,682

  

Real Estate Investment Trusts

  

36,071,300

   

   

   

36,071,300

  

Retail

  

49,809,666

   

   

   

49,809,666

  

Semiconductors

  

55,011,477

   

   

   

55,011,477

  

Software

  

29,611,000

   

   

30,798,445

   

60,409,445

  

Telecommunications

  

82,460,066

   

   

   

82,460,066

  

Transportation

  

62,830,829

   

   

   

62,830,829

  

Limited Partnerships

  

364,090

   

   

   

364,090

  

Rights

  

1,399,635

   

   

1,147,953

   

2,547,588

  

Corporate Bonds**

  

   

13,030,825

   

   

13,030,825

  

Mutual Funds

  

25,780,318

   

   

   

25,780,318

  

Purchased Options

  

57,808

   

   

   

57,808

  

Short-Term Investments

  

222,185,240

   

   

   

222,185,240

  

TOTAL

 

$

1,519,280,806

  

$

13,030,825

  

$

123,678,113

  

$

1,655,989,744

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
12



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

Other Financial Instruments***

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 
Forward Foreign Currency
Exchange Contracts
 

$

  

$

1,597,532

  

$

  

$

1,597,532

  

Equity Swaps

  

21,096

   

   

   

21,096

  

Liabilities

 

Common Stocks**

  

(349,190,685

)

  

   

   

(349,190,685

)

 

Limited Partnerships

  

(646,692

)

  

   

   

(646,692

)

 

Rights

  

(1,399,637

)

  

   

   

(1,399,637

)

 

Written Options

  

(33,903

)

  

   

   

(33,903

)

 
Forward Foreign Currency
Exchange Contracts
  

   

(6,413,840

)

  

   

(6,413,840

)

 

TOTAL

 

$

(351,249,821

)

 

$

(4,816,308

)

 

$

  

$

(356,066,129

)

 

*  Refer to footnote 2 where leveling hierarchy is defined.

**  Refer to Portfolio of Investments for sector information.

***  Other financial instruments are instruments such as written options, securities sold short, equity swaps and forward foreign currency exchange contracts.

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund's assets and liabilities during the period ended November 30, 2019:

Investments
in Securities
 Balance as of
May 31, 2019
 Realized
Gain
(Loss)
 Change in
Unrealized
Appreciation
(Depreciation)
 

Purchases

 Sales
Proceeds
 Transfers
into
Level 3
 Transfers
out of
Level 3
 Balance as of
November 30,
2019
 Net change in
Unrealized
(Depreciation)
included in the
Statement of
Operations
attributable to
Level 3
investments
held at
November 30,
2019
 
Common
Stocks
 

$

33,540,061

  

$

174,028

  

$

582,078

  

$

86,928,539

  

$

(16,434,325

)

 

$

17,739,780

  

$

  

$

122,530,160

  

$

582,078

  

Rights

  

1,125,511

   

   

21,549

   

28,314

   

(27,421

)

  

   

   

1,147,953

   

21,549

  

Total

 

$

34,665,572

  

$

174,028

  

$

603,626

  

$

86,956,853

  

$

(16,461,745

)

 

$

17,739,780

  

$

  

$

123,678,113

  

$

603,626

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
13



Water Island Diversified Event-Driven Fund  Portfolio Information

November 30, 2019 (Unaudited)

Performance (annualized returns as of November 30, 2019)

  One
Year
 Five
Year
 Ten
Year
 Since
Inception*
 

Water Island Diversified Event-Driven Fund, Class R

  

3.10

%

  

0.49

%

  

N/A

   

1.46

%

 

Water Island Diversified Event-Driven Fund, Class I

  

3.26

%

  

0.71

%

  

N/A

   

1.70

%

 

Water Island Diversified Event-Driven Fund, Class C**

  

2.33

%

  

-0.27

%

  

N/A

   

0.37

%

 

Water Island Diversified Event-Driven Fund, Class A***

  

3.06

%

  

0.47

%

  

N/A

   

0.83

%

 

ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index****

  

2.32

%

  

1.05

%

  

N/A

   

0.61

%

 

Bloomberg Barclays U.S. Aggregate Bond Index

  

10.79

%

  

3.08

%

  

N/A

   

3.24

%

 

Current performance may be higher or lower than performance quoted above. Any performance data quoted represents past performance, and the investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Returns shown above include the reinvestment of all dividends and capital gains. Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from the amount reported in the Financial Highlights. Contractual fee waivers are currently in effect. Without such fee waivers, performance numbers would be reduced. You can obtain performance data current to the most recent month end by calling 1-800-295-4485 or going to www.arbitragefunds.com.

* Class R and Class I inception: 10/1/10; Class C inception: 6/1/12; Class A inception: 6/1/13. The "Since Inception" returns for securities indices are for the inception date of Class R and Class I shares.

** Class C shares are subject to a 1.00% contingent deferred sales charge on all purchases redeemed within 12 months of purchase.

*** Class A shares are subject to a maximum front-end sales load of 3.25% of the offering price and are also subject to a 1.00% contingent deferred sales load on purchases at or above $250,000 purchased without a front-end sales charge and redeemed within 18 months of purchase.

**** Merger arbitrage and event-driven investing are market neutral investment strategies, which typically exhibit low betas and low correlations to broad equity and credit market indices. As such, the adviser has determined that a more appropriate benchmark for Water Island Diversified Event-Driven Fund is a measure of the risk-free rate, in this case the ICE Bank of America (BofA) Merrill Lynch U.S. 3-Month Treasury Bill Index.

The Total Annual Fund Operating Expenses for Class R, Class I, Class C and Class A are 2.62%, 2.37%, 3.37% and 2.62%, respectively. The Adviser has agreed to waive fees (not including the effects of interest, dividends on short positions, brokerage commissions, acquired fund fees and expenses, taxes, or other extraordinary expenses) in excess of 1.69%, 1.44%, 2.44% and 1.69% for Class R, Class I, Class C and Class A, respectively, until at least September 30, 2020. These expense ratios are as stated in the current prospectus and may differ from the expense ratios disclosed in the financial highlights in this report.

The ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index tracks the performance of the U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market with a remaining term to final maturity of less than 3 months.

The Bloomberg Barclays U.S. Aggregate Bond Index is a market value-weighted index of investment-grade fixed-rated debt issues, including government, corporate, asset-backed and mortgage-backed securities with a maturity of one year or more.

An investor may not invest directly in an index.

www.arbitragefunds.com | 1-800-295-4485
14



Water Island Diversified Event-Driven Fund  Portfolio Information (continued)

November 30, 2019 (Unaudited)

Growth of $10,000 Investment

The chart represents historical performance of a hypothetical investment of $10,000 in the Class R shares of the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

  

Sector Weighting

The following chart shows the sector weightings of the Water Island Diversified Event-Driven Fund's investments (including short sales and excluding derivatives) as of the report date.

* Concentration Risk: The Fund may invest a large proportion of the Fund's assets in securities of issuers in a single sector over a given time. During such a period of concentration, the Fund may be subject to greater volatility with respect to its portfolio securities than a fund that is more broadly diversified.

Semi-Annual Report | November 30, 2019
15



Water Island Diversified Event-Driven Fund  Portfolio of Investments

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 84.28%

 

Aerospace & Defense - 2.47%

 

Cobham Plc

  

1,578,942

  

$

3,230,641

  

Auto Parts & Equipment - 3.08%

 

WABCO Holdings, Inc.(a)(b)

  

29,912

   

4,030,642

  

Banks - 6.27%

 

SunTrust Banks, Inc.

  

115,830

   

8,205,397

  

Biotechnology - 5.42%

 

Cambrex Corp.(a)

  

27,413

   

1,643,957

  

Medicines Co.(a)

  

38,765

   

3,264,013

  

Pacific Biosciences of California, Inc.(a)(b)

  

424,869

   

2,183,827

  
   

7,091,797

  

Chemicals - 0.27%

 

Axalta Coating Systems Ltd.(a)

  

12,405

   

353,170

  

Commercial Services - 1.80%

 

Herc Holdings, Inc.(a)

  

3,572

   

167,027

  

Sotheby's(a)(c)

  

38,478

   

2,193,246

  
   

2,360,273

  

Computers & Computer Services - 1.28%

 

HP, Inc.

  

27,874

   

559,710

  

Presidio, Inc.

  

26,796

   

442,402

  

Sophos Group Plc(d)

  

91,504

   

668,659

  
   

1,670,771

  

Construction Materials - 0.49%

 

Masco Corp.(b)

  

13,663

   

636,013

  

Distribution/Wholesale - 0.99%

 

Anixter International, Inc.(a)(b)

  

11,084

   

951,451

  

HD Supply Holdings, Inc.(a)(b)

  

8,671

   

345,279

  
   

1,296,730

  

Energy - Alternate Sources - 0.61%

 

Pattern Energy Group, Inc., Class A(b)

  

29,013

   

798,438

  

Engineering & Construction - 0.50%

 

Altran Technologies SA

  

42,401

   

661,926

  

Entertainment - 2.36%

 

Entertainment One Ltd.

  

46,225

   

332,405

  

International Speedway Corp., Class A(a)(c)

  

61,256

   

2,756,520

  
   

3,088,925

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
16



Water Island Diversified Event-Driven Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 84.28% (Continued)

 

Environmental Control - 4.35%

 

Advanced Disposal Services, Inc.(a)

  

172,691

  

$

5,690,168

  

Food - 0.91%

 

Pioneer Foods Group Ltd.

  

161,717

   

1,188,771

  

Healthcare - Products - 1.05%

 

Wright Medical Group NV(a)(b)

  

46,122

   

1,373,052

  

Healthcare - Services - 10.20%

 

WellCare Health Plans, Inc.(a)(b)

  

41,484

   

13,360,752

  

Internet - 3.69%

 

NortonLifeLock, Inc.(b)(e)

  

25,755

   

641,299

  

Shutterfly, Inc.(a)(c)

  

82,270

   

4,195,770

  
   

4,837,069

  

Media - 1.95%

 

Discovery, Inc., Class C(a)(b)

  

9,765

   

298,028

  

Axel Springer SE(a)

  

32,666

   

2,249,258

  
   

2,547,286

  

Pharmaceuticals - 9.77%

 

Allergan Plc(b)

  

47,041

   

8,699,763

  

Bristol-Myers Squibb Co.

  

69,054

   

3,931,935

  

Paratek Pharmaceuticals, Inc.(a)(f)

  

52,781

   

154,648

  
   

12,786,346

  

Pipelines - 2.45%

 

SemGroup Corp., Class A

  

208,891

   

3,210,655

  

Retail - 3.62%

 

GrandVision NV(d)

  

13,220

   

400,523

  

Tiffany & Co.(b)(e)

  

32,475

   

4,345,155

  
   

4,745,678

  

Semiconductors - 5.41%

 

Mellanox Technologies Ltd.(a)(b)(e)

  

61,658

   

7,084,504

  

Software - 1.93%

 

MINDBODY, Inc., Class A(a)(c)

  

48,463

   

1,768,899

  

Pivotal Software, Inc., Class A(a)(b)

  

50,745

   

762,190

  
   

2,531,089

  

Telecommunications - 9.17%

 

Inmarsat Plc

  

102,738

   

721,784

  

Zayo Group Holdings, Inc.(a)(b)

  

329,518

   

11,282,696

  
   

12,004,480

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
17



Water Island Diversified Event-Driven Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 84.28% (Continued)

 

Transportation - 4.24%

 

Genesee & Wyoming, Inc., Class A(a)

  

49,809

  

$

5,551,213

  
TOTAL COMMON STOCKS
(Cost $107,944,468)
  

110,335,786

  

LIMITED PARTNERSHIPS - 0.03%

 

Pipelines - 0.03%

 

Energy Transfer Equity LP

  

2,998

   

35,406

  
TOTAL LIMITED PARTNERSHIPS
(Cost $36,159)
  

35,406

  

RIGHTS - 0.11%

 

Bristol-Myers Squibb Co.(a)

  

69,054

   

148,466

  
TOTAL RIGHTS
(Cost $147,085)
  

148,466

  

 

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

CORPORATE BONDS - 9.82%

 

Commercial Services - 1.65%

 
Nielsen Co. Luxembourg SARL
(The)(b)(d)
 

10/01/2021

  

5.500

%

 

$

2,158,000

  

$

2,160,697

  

Entertainment - 1.31%

 
Stars Group Holdings B.V. /
Stars Group US
Co-Borrower LLC(d)
 

07/15/2026

  

7.000

%

  

1,585,000

   

1,711,800

  

Household Products - 0.71%

 
Avon International Operations,
Inc.(d)
 

08/15/2022

  

7.875

%

  

892,000

   

928,795

  

Internet - 1.67%

 
Zayo Group LLC / Zayo Capital,
Inc.
 

04/01/2023

  

6.000

%

  

1,339,000

   

1,372,505

  
Zayo Group LLC / Zayo Capital,
Inc.(d)
 

01/15/2027

  

5.750

%

  

791,000

   

806,820

  
         

2,179,325

  

Lodging - 1.81%

 
Jack Ohio Finance LLC / Jack
Ohio Finance 1 Corp.(d)
 

11/15/2021

  

6.750

%

  

2,329,000

   

2,375,580

  

Machinery - Construction & Mining - 0.65%

 

Vertiv Group Corp.(d)

 

10/15/2024

  

9.250

%

  

872,000

   

856,740

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
18



Water Island Diversified Event-Driven Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

CORPORATE BONDS - 9.82% (Continued)

 

Pipelines - 0.98%

 
SemGroup Corp. / Rose Rock
Finance Corp.
 
  

07/15/2022

  

5.625

%

 

$

437,000

  

$

440,551

  
  

11/15/2023

  

5.625

%

  

817,000

   

837,425

  
         

1,277,976

  

Toys/Games/Hobbies - 1.04%

 

Mattel, Inc.

 

08/15/2021

  

2.350

%

  

1,353,000

   

1,363,148

  
TOTAL CORPORATE BONDS
(Cost $12,870,207)
  

12,854,061

  
      

Shares

 

Value

 

WARRANTS - 0.01%

 

Telecommunications - 0.01%

 
Avaya Holdings Corp., Exercise
Price $25.55, Expires 12/15/2022(a)(g)
      

5,548

  

$

8,489

  
TOTAL WARRANTS
(Cost $0)
  

8,489

  

 

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(a) - 0.04%

 

Call Options Purchased - 0.03%

 

Emerson Electric Co.

 

01/2020

 

$

70.00

  

$

81,246

   

11

  

$

5,445

  

Stars Group, Inc.

 

02/2020

  

22.50

   

97,160

   

40

   

8,900

  
Xerox Holdings
Corp.
 

01/2020

  

40.00

   

1,039,431

   

267

   

31,506

  
TOTAL CALL OPTIONS PURCHASED
(Cost $42,977)
  

45,851

  

Put Options Purchased - 0.01%

 
Avaya Holdings
Corp.
 

12/2019

  

10.00

   

936,041

   

733

   

1,833

  
iShares Russell 2000
ETF
 
  

12/2019

  

145.00

   

550,018

   

34

   

340

  
  

12/2019

  

147.00

   

550,018

   

34

   

459

  
  

12/2019

  

149.00

   

582,372

   

36

   

666

  
Lowe's Companies,
Inc.
 

01/2020

  

100.00

   

434,047

   

37

   

1,018

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
19



Water Island Diversified Event-Driven Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(a) - 0.04% (Continued)

 

Put Options Purchased - 0.01% (Continued)

 
Mellanox Technologies,
Ltd.
 
  

12/2019

 

$

100.00

  

$

1,574,130

   

137

  

$

3,082

  
  

12/2019

  

105.00

   

1,309,860

   

114

   

2,565

  
NortonLifeLock,
Inc.
 

01/2020

  

20.00

   

126,990

   

51

   

306

  

Tiffany & Co.

 

02/2020

  

110.00

   

294,360

   

22

   

4,961

  
TOTAL PUT OPTIONS PURCHASED
(Cost $208,076)
  

15,230

  
TOTAL PURCHASED OPTIONS
(Cost $251,053)
  

61,081

  

 

  

Yield

 

Shares

 

Value

 

SHORT-TERM INVESTMENTS - 0.02%

 

Money Market Fund

 
State Street Institutional U.S. Government
Money Market Fund, Premier Class(h)
  

1.590

%(i)

  

24,313

  

$

24,313

  
TOTAL SHORT-TERM INVESTMENTS
(Cost $24,313)
  

24,313

  
Total Investments - 94.31%
(Cost $121,273,285)
      

123,467,602

  

Other Assets in Excess of Liabilities - 5.69%(j)

      

7,452,015

  

NET ASSETS - 100.00%

 

$

130,919,617

  

Portfolio Footnotes

(a)  Non-income-producing security.

(b)  Security, or a portion of security, is being held as collateral for short sales, written option contracts or forward foreign currency exchange contracts. At November 30, 2019, the aggregate fair market value of those securities was $44,062,072, representing 33.66% of net assets.

(c)  Security fair valued using significant unobservable inputs and classified as a Level 3 security. As of November 30, 2019, the total fair market value of these securities was $10,914,435, representing 8.34% of net assets.

(d)  Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of November 30, 2019, these securities had a total value of $9,909,614 or 7.57% of net assets.

(e)  Underlying security for a written/purchased call/put option.

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
20



Water Island Diversified Event-Driven Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

(f)  All or a portion of this security is out on loan.

(g)  Security in default on interest payments.

(h)  Represents an investment of securities lending cash collateral.

(i)  Rate shown is the 7-day effective yield as of November 30, 2019.

(j)  Includes cash held as collateral for short sales and written option contracts.

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (17.45%)

 

Banks - (6.27%)

 

Truist Financial Corp.

  

(149,958

)

 

$

(8,205,702

)

 

Chemicals - (0.25%)

 

PPG Industries, Inc.

  

(1,354

)

  

(174,449

)

 

RPM International, Inc.

  

(1,005

)

  

(74,099

)

 

Sherwin-Williams Co. (The)

  

(136

)

  

(79,306

)

 
   

(327,854

)

 

Commercial Services - (0.11%)

 

Nielsen Holdings Plc

  

(4,117

)

  

(80,487

)

 

United Rentals, Inc.

  

(396

)

  

(60,608

)

 
   

(141,095

)

 

Construction Materials - (0.14%)

 

Builders FirstSource, Inc.

  

(568

)

  

(14,433

)

 

Fortune Brands Home & Security, Inc.

  

(988

)

  

(62,501

)

 

JELD-WEN Holding, Inc.

  

(2,135

)

  

(48,571

)

 

Masonite International Corp.

  

(818

)

  

(58,732

)

 
   

(184,237

)

 

Distribution/Wholesale - (0.20%)

 

Fastenal Co.

  

(1,349

)

  

(47,917

)

 

Watsco, Inc.

  

(269

)

  

(47,874

)

 

WESCO International, Inc.

  

(2,199

)

  

(115,711

)

 

WW Grainger, Inc.

  

(155

)

  

(49,127

)

 
   

(260,629

)

 

Electrical Components & Equipment - (0.06%)

 

Emerson Electric Co.

  

(1,100

)

  

(81,246

)

 

Entertainment - (0.07%)

 

Stars Group, Inc. (The)

  

(3,993

)

  

(96,990

)

 

Healthcare - Services - (6.48%)

 

Centene Corp.

  

(140,222

)

  

(8,479,224

)

 

Household Products - (0.04%)

 

Avon Products, Inc.

  

(12,250

)

  

(56,227

)

 

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
21



Water Island Diversified Event-Driven Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (17.45%) (Continued)

 

Media - (0.23%)

 

Discovery, Inc., Class A

  

(8,981

)

 

$

(295,834

)

 

Office/Business Equip - (0.11%)

 

Xerox Holdings Corp.

  

(3,819

)

  

(148,674

)

 

Pharmaceuticals - (3.28%)

 

AbbVie, Inc.

  

(4,072

)

  

(357,237

)

 

Bristol-Myers Squibb Co.

  

(69,051

)

  

(3,931,764

)

 
   

(4,289,001

)

 

Pipelines - (0.04%)

 

SemGroup Corp., Class A

  

(3,641

)

  

(55,962

)

 

Retail - (0.02%)

 

Beacon Roofing Supply, Inc.

  

(296

)

  

(8,776

)

 

MSC Industrial Direct Co., Inc., Class A

  

(167

)

  

(12,260

)

 
   

(21,036

)

 

Telecommunications - (0.15%)

 

Zayo Group Holdings, Inc.

  

(5,720

)

  

(195,853

)

 
TOTAL COMMON STOCKS
(Proceeds $21,508,629)
  

(22,839,564

)

 

LIMITED PARTNERSHIPS - (0.08%)

 

Pipelines - (0.08%)

 

Energy Transfer Equity LP

  

(8,638

)

  

(102,015

)

 
TOTAL LIMITED PARTNERSHIPS
(Proceeds $103,375)
  

(102,015

)

 

RIGHTS - (0.11%)

 

Pharmaceuticals - (0.11%)

 

Bristol-Myers Squibb Co.

  

(69,054

)

  

(148,466

)

 
TOTAL RIGHTS
(Proceeds $154,836)
  

(148,466

)

 
TOTAL SECURITIES SOLD SHORT
(Proceeds $21,766,840)
 

$

(23,090,045

)

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
22



Water Island Diversified Event-Driven Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

WRITTEN OPTIONS

 Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

Written Put Options

 

iShares Russell 2000 ETF

 
  

12/2019

 

$

135.00

  

$

(550,018

)

  

(34

)

 

$

(102

)

 
  

12/2019

  

137.00

   

(550,018

)

  

(34

)

  

(119

)

 
  

12/2019

  

139.00

   

(582,372

)

  

(36

)

  

(162

)

 
TOTAL WRITTEN PUT OPTIONS
(Premiums received $29,209)
  

(383

)

 
TOTAL WRITTEN OPTIONS
(Premiums received $29,209)
 

$

(383

)

 

EQUITY SWAP CONTRACTS

Swap
Counterparty/
Payment
Frequency
 Reference
Obligation
 Rate
Paid/
Received
by the
Fund
 Termination
Date
 Upfront
Payments
Paid
 Upfront
Payments
Received
 Market
Value
 Notional
Amount
 Unrealized
Appreciation
 
Morgan
Stanley &
Co./
Monthly
 AbbVie,
Inc.
 Received
1 Month-
Federal
Rate
Minus
40 bps
(1.150%)
 

08/19/2021

 

$

  

$

  

$

  

$

3,216,708

  

$

  
Morgan
Stanley &
Co./
Monthly
 Energy
Transfer
LP
 Received
1 Month-
Federal
Rate
Minus
40 bps
(1.150%)
 

08/19/2021

  

   

   

   

1,691,345

   

  
Morgan
Stanley &
Co./
Monthly
 Cobham
Plc
 Paid
1 Month-
SONIA
plus
90 bps
(1.609%)
 

10/21/2021

  

   

   

  

GBP

(1,076,019

)

  

  
Morgan
Stanley &
Co./
Monthly
 Just Eat
Plc
 Paid
1 Month
SONIA
plus
90 bps
(1.609%)
 

10/21/2021

  

   

   

1,660

  

GBP

(649,460

)

  

1,660

  
      

     

$

1,660

      

$

1,660

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
23



Water Island Diversified Event-Driven Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

OUTSTANDING FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Appreciation
 

EUR

238,800

  

USD

262,964

  

Goldman Sachs & Co.

 

12/16/2019

 

$

368

  

USD

4,434,334

  

EUR

4,004,300

  

Goldman Sachs & Co.

 

12/16/2019

  

18,656

  

GBP

1,373,500

  

USD

1,772,857

  

Goldman Sachs & Co.

 

12/16/2019

  

4,441

  

USD

258,912

  

GBP

199,200

  

Goldman Sachs & Co.

 

12/16/2019

  

1,149

  
  

$

24,614

  
Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Depreciation
 

EUR

774,100

  

USD

862,042

  

Goldman Sachs & Co.

 

12/16/2019

 

$

(8,416

)

 

USD

33,666

  

EUR

30,600

  

Goldman Sachs & Co.

 

12/16/2019

  

(77

)

 

USD

5,028,641

  

GBP

4,032,100

  

Goldman Sachs & Co.

 

12/16/2019

  

(188,864

)

 

USD

1,208,214

  

ZAR

18,089,900

  

Goldman Sachs & Co.

 

12/13/2019

  

(24,185

)

 
  

$

(221,542

)

 

The following is a summary of investments classified by country exposure:

Country

 

% of Net Assets(a)

 

Israel

  

5.41

%

 

United Kingdom

  

3.53

%

 

Netherlands

  

2.66

%

 

Germany

  

1.72

%

 

Luxembourg

  

1.65

%

 

South Africa

  

0.91

%

 

France

  

0.50

%

 

Canada

  

0.25

%

 

United States

  

77.68

%

 

Other Assets in Excess of Liabilities

  

5.69

%

 
   

100.00

%

 

(a)  These percentages represent long positions only and are not net of short positions.

Abbreviations:

bps - Basis Points. 100 Basis Points is equal to 1 percentage point.

ETF - Exchange-Traded Fund

EUR - Euro

GBP - British pound

LLC - Limited Liability Company

LP - Limited Partnership

Ltd. - Limited

N.V. - Naamloze Vennootschap is the Dutch term for a public limited liability corporation.

Plc - Public Limited Company

SARL - Société Anonyme à Responsabilité Limitée is the French term for limited liability company.

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
24



Water Island Diversified Event-Driven Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

SE - SE Regulation. A European Company which can operate on a Europe-wide basis and be governed by Community law directly applicable in all Member States

SONIA - Sterling OverNight Index Average

USD - United States Dollar

ZAR - South African rand

The following table summarizes Water Island Diversified Event-Driven Fund's investments and derivative financial instruments categorized in the disclosure hierarchy as of November 30, 2019:

Investments in Securities at Value*

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

Common Stocks

 

Aerospace & Defense

 

$

3,230,641

  

$

  

$

  

$

3,230,641

  

Auto Parts & Equipment

  

4,030,642

   

   

   

4,030,642

  

Banks

  

8,205,397

   

   

   

8,205,397

  

Biotechnology

  

7,091,797

   

   

   

7,091,797

  

Chemicals

  

353,170

   

   

   

353,170

  

Commercial Services

  

167,027

   

   

2,193,246

   

2,360,273

  

Computers & Computer Services

  

1,670,771

   

   

   

1,670,771

  

Construction Materials

  

636,013

   

   

   

636,013

  

Distribution/Wholesale

  

1,296,730

   

   

   

1,296,730

  

Energy - Alternate Sources

  

798,438

   

   

   

798,438

  

Engineering & Construction

  

661,926

   

   

   

661,926

  

Entertainment

  

332,405

   

   

2,756,520

   

3,088,925

  

Environmental Control

  

5,690,168

   

   

   

5,690,168

  

Food

  

1,188,771

   

   

   

1,188,771

  

Healthcare - Products

  

1,373,052

   

   

   

1,373,052

  

Healthcare - Services

  

13,360,752

   

   

   

13,360,752

  

Internet

  

641,299

   

   

4,195,770

   

4,837,069

  

Media

  

2,547,286

   

   

   

2,547,286

  

Pharmaceuticals

  

12,786,346

   

   

   

12,786,346

  

Pipelines

  

3,210,655

   

   

   

3,210,655

  

Retail

  

4,745,678

   

   

   

4,745,678

  

Semiconductors

  

7,084,504

   

   

   

7,084,504

  

Software

  

762,190

   

   

1,768,899

   

2,531,089

  

Telecommunications

  

12,004,480

   

   

   

12,004,480

  

Transportation

  

5,551,213

   

   

   

5,551,213

  

Limited Partnerships

  

35,406

   

   

   

35,406

  

Rights

  

148,466

   

   

   

148,466

  

Corporate Bonds**

  

   

12,854,061

   

   

12,854,061

  

Warrants

  

   

8,489

   

   

8,489

  

Purchased Options

  

61,081

   

   

   

61,081

  

Short-Term Investments

  

24,313

   

   

   

24,313

  

TOTAL

 

$

99,690,617

  

$

12,862,550

  

$

10,914,435

  

$

123,467,602

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
25



Water Island Diversified Event-Driven Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

Other Financial Instruments***

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 
Forward Foreign Currency
Exchange Contracts
 

$

  

$

24,614

  

$

  

$

24,614

  

Equity Swaps

  

1,660

   

   

   

1,660

  

Liabilities

 

Common Stocks**

  

(22,839,564

)

  

   

   

(22,839,564

)

 

Limited Partnerships

  

(102,015

)

  

   

   

(102,015

)

 

Rights

  

(148,466

)

  

   

   

(148,466

)

 

Written Options

  

(383

)

  

   

   

(383

)

 
Forward Foreign Currency
Exchange Contracts
  

   

(221,542

)

  

   

(221,542

)

 

TOTAL

 

$

(23,088,768

)

 

$

(196,928

)

 

$

  

$

(23,285,696

)

 

*  Refer to footnote 2 where leveling hierarchy is defined.

**  Refer to Portfolio of Investments for sector information.

***  Other financial instruments are instruments such as written options, securities sold short, equity swaps and forward foreign currency exchange contracts.

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund's assets and liabilities during the period ended November 30, 2019:

Investments
in Securities
 Balance as of
May 31, 2019
 Realized
Gain
(Loss)
 Change in
Unrealized
Appreciation
(Depreciation)
 

Purchases

 Sales
Proceeds
 Transfers
into
Level 3
 Transfers
out of
Level 3
 Balance as of
November 30,
2019
 Net change in
Unrealized
(Depreciation)
included in the
Statement of
Operations
attributable to
Level 3
investments
held at
November 30,
2019
 
Corporate
Bonds
 

$

0

  

$

7

  

$

  

$

  

$

7

  

$

  

$

  

$

0

  

$

  
Common
Stock
  

1,768,900

   

27,719

   

43,060

   

10,204,146

   

2,399,007

   

1,269,617

   

   

10,914,435

   

43,060

  

Total

 

$

1,768,900

  

$

27,726

  

$

43,060

  

$

10,204,146

  

$

2,399,014

  

$

1,269,617

  

$

  

$

10,914,435

  

$

43,060

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
26



Water Island Credit Opportunities Fund  Portfolio Information

November 30, 2019 (Unaudited)

Performance (annualized returns as of November 30, 2019)

  One
Year
 Five
Year
 Ten
Year
 Since
Inception*
 

Water Island Credit Opportunities Fund, Class R

  

4.16

%

  

1.99

%

  

N/A

   

2.42

%

 

Water Island Credit Opportunities Fund, Class I

  

4.31

%

  

2.23

%

  

N/A

   

2.64

%

 

Water Island Credit Opportunities Fund, Class C**

  

3.28

%

  

1.23

%

  

N/A

   

1.68

%

 

Water Island Credit Opportunities Fund, Class A***

  

4.05

%

  

1.95

%

  

N/A

   

2.27

%

 

Bloomberg Barclays Capital U.S. Aggregate Bond Index

  

10.79

%

  

3.08

%

  

N/A

   

2.69

%

 

ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index

  

2.32

%

  

1.05

%

  

N/A

   

0.75

%

 

Current performance may be higher or lower than performance quoted above. Any performance data quoted represents past performance and the investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Returns shown above include the reinvestment of all dividends and capital gains. Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from the amount reported in the Financial Highlights. Contractual fee waivers are currently in effect. Without such fee waivers, performance numbers would be reduced. You can obtain performance data current to the most recent month end by calling 1-800-295-4485 or going to www.arbitragefunds.com.

* Class R, Class I and Class C inception: 10/1/12; Class A inception: 6/1/13. The "Since Inception" returns for securities indices are for the inception date of Class R, Class I and Class C shares.

** Class C shares are subject to a 1.00% contingent deferred sales charge on all purchases redeemed in 12 months of purchase.

*** Class A shares are subject to a maximum front-end sales load of 3.25% of the offering price and are also subject to a 1.00% contingent deferred sales load on purchases at or above $250,000 purchased without a front-end sales charge and redeemed within 18 months of purchase.

The Total Annual Fund Operating Expenses for Class R, Class I, Class C and Class A are 2.11%, 1.86%, 2.86% and 2.11%, respectively. The Adviser has agreed to waive fees (not including the effects of interest, dividends on short positions, brokerage commissions, acquired fund fees and expenses, taxes, or other extraordinary expenses) in excess of 1.23%, 0.98%, 1.98% and 1.23% for Class R, Class I, Class C and Class A, respectively, until at least September 30, 2020. These expense ratios are as stated in the current prospectus and may differ from the expense ratios disclosed in the financial highlights in this report.

The Bloomberg Barclays Capital U.S. Aggregate Bond Index is a market value-weighted index of investment grade fixed-rated debt issues, including government, corporate, asset-backed and mortgage-backed securities with a maturity of one year or more.

The ICE Bank of America (BofA) Merrill Lynch U.S. 3-Month Treasury Bill Index tracks the performance of the U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market with a remaining term to final maturity of less than 3 months.

An investor may not invest directly in an index.

Semi-Annual Report | November 30, 2019
27



Water Island Credit Opportunities Fund  Portfolio Information (continued)

November 30, 2019 (Unaudited)

Growth of $10,000 Investment

The chart represents historical performance of a hypothetical investment of $10,000 in the Class R shares of the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

  

Sector Weighting

The following chart shows the sector weightings of the Water Island Credit Opportunities Fund investments (including short sales and excluding derivatives) as of the report date.

www.arbitragefunds.com | 1-800-295-4485
28



Water Island Credit Opportunities Fund  Portfolio of Investments

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 0.04%

 

Entertainment - 0.04%

 

Eldorado Resorts, Inc.(a)

  

405

  

$

21,671

  
TOTAL COMMON STOCKS
(Cost $16,341)
  

21,671

  

LIMITED PARTNERSHIPS - 0.29%

 

Pipelines - 0.29%

 

Energy Transfer Equity LP

  

14,774

   

174,481

  
TOTAL LIMITED PARTNERSHIPS
(Cost $196,774)
  

174,481

  

 

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

BANK LOAN - 1.71%

 

Commercial Services - 1.71%

 
Refinitiv US Holdings, Inc., 2018 USD
Term Loan B, Variable Rate
(1 mo. USD LIBOR plus 3.750%)
 

10/01/2025

  

5.452

%

 

$

1,000,000

  

$

1,007,360

  
TOTAL BANK LOANS
(Cost $1,006,243)
  

1,007,360

  

CORPORATE BONDS - 81.10%

 

Aerospace & Defense - 6.84%

 

Arconic, Inc.(b)

 

08/15/2020

  

6.150

%

  

1,298,000

   

1,331,617

  
Pioneer Holdings LLC / Pioneer
Finance Corp.(c)
 

11/01/2022

  

9.000

%

  

1,500,000

   

1,560,000

  

Triumph Group, Inc.

 

06/01/2022

  

5.250

%

  

1,135,000

   

1,135,000

  
   

4,026,617

  

Banks - 1.60%

 

SunTrust Capital III

 

03/15/2028

  

2.769

%

  

1,000,000

   

942,500

  

Commercial Services - 5.50%

 
Nielsen Co. Luxembourg SARL
(The)(b)(c)
 

10/01/2021

  

5.500

%

  

1,844,000

   

1,846,305

  
Prime Security Services Borrower LLC /
Prime Finance, Inc.(b)(c)
 

05/15/2023

  

9.250

%

  

804,000

   

845,205

  

Refinitiv US Holdings, Inc.(c)

 

05/15/2026

  

6.250

%

  

500,000

   

545,000

  
   

3,236,510

  

Computers & Computer Services - 3.70%

 

Everi Payments, Inc.(c)

 

12/15/2025

  

7.500

%

  

263,000

   

277,465

  

NCR Corp.

 

07/15/2022

  

5.000

%

  

1,882,000

   

1,900,349

  
   

2,177,814

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
29



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

CORPORATE BONDS - 81.10% (Continued)

 

Electronics - 1.25%

 

APX Group, Inc.

 

12/01/2020

  

8.750

%

 

$

750,000

  

$

734,063

  

Entertainment - 14.01%

 

Eldorado Resorts, Inc.(b)

 
  

08/01/2023

  

7.000

%

  

1,329,000

   

1,388,805

  
  

04/01/2025

  

6.000

%

  

1,180,000

   

1,241,950

  

Scientific Games International, Inc.

 

12/01/2022

  

10.000

%

  

3,039,000

   

3,119,533

  
Stars Group Holdings B.V. / Stars Group
US Co-Borrower LLC(c)
 

07/15/2026

  

7.000

%

  

2,316,000

   

2,501,280

  
   

8,251,568

  

Environmental Control - 1.77%

 

Advanced Disposal Services, Inc.(c)

 

11/15/2024

  

5.625

%

  

1,000,000

   

1,043,750

  

Food - 2.17%

 

TreeHouse Foods, Inc.(b)

 

03/15/2022

  

4.875

%

  

1,270,000

   

1,276,350

  

Food Service - 2.88%

 

Aramark Services, Inc.(b)

 

01/15/2024

  

5.125

%

  

1,650,000

   

1,697,438

  

Household Products - 4.82%

 

Avon International Operations, Inc.(b)(c)

 

08/15/2022

  

7.875

%

  

1,249,000

   

1,300,521

  

Edgewell Personal Care Co.

 

05/19/2021

  

4.700

%

  

1,500,000

   

1,535,250

  
   

2,835,771

  

Internet - 4.24%

 

Zayo Group LLC / Zayo Capital, Inc.(b)

 

04/01/2023

  

6.000

%

  

1,500,000

   

1,537,534

  

Zayo Group LLC / Zayo Capital, Inc.(c)

 

01/15/2027

  

5.750

%

  

941,000

   

959,820

  
   

2,497,354

  

Lodging - 2.81%

 
Jack Ohio Finance LLC / Jack Ohio
Finance 1 Corp.(c)
 

11/15/2021

  

6.750

%

  

1,623,000

   

1,655,460

  

Machinery - Construction & Mining - 1.78%

 

Vertiv Group Corp.(c)

 

10/15/2024

  

9.250

%

  

1,067,000

   

1,048,328

  

Media - 1.37%

 

TEGNA, Inc.

 

07/15/2020

  

5.125

%

  

802,000

   

804,005

  

Mining - 3.38%

 

Aleris International, Inc.(b)(c)

 

07/15/2023

  

10.750

%

  

1,901,000

   

1,988,921

  

Oil & Gas - 3.40%

 

QEP Resources, Inc.

 

03/01/2021

  

6.875

%

  

1,975,000

   

2,003,045

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
30



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

CORPORATE BONDS - 81.10% (Continued)

 

Pharmaceuticals - 2.61%

 

Bausch Health Companies, Inc.(c)

 

03/15/2022

  

6.500

%

 

$

1,500,000

  

$

1,539,375

  

Pipelines - 5.97%

 

NuStar Logistics LP

 

09/01/2020

  

4.800

%

  

1,492,000

   

1,502,724

  
SemGroup Corp. / Rose Rock Finance
Corp.
 
  

07/15/2022

  

5.625

%

  

1,000,000

   

1,008,126

  
  

11/15/2023

  

5.625

%

  

979,000

   

1,003,475

  
   

3,514,325

  

Software - 3.51%

 

TIBCO Software, Inc.(c)

 

12/01/2021

  

11.375

%

  

2,000,000

   

2,065,000

  

Telecommunications - 4.44%

 

T-Mobile USA, Inc.

 

03/01/2023

  

6.000

%

  

2,568,000

   

2,612,683

  

Toys/Games/Hobbies - 3.05%

 

Mattel, Inc.

 

08/15/2021

  

2.350

%

  

1,785,000

   

1,798,387

  
TOTAL CORPORATE BONDS
(Cost $47,720,171)
  

47,749,264

  

CONVERTIBLE CORPORATE BONDS - 11.57%

 

Biotechnology - 2.93%

 

Medicines Co.

 

07/15/2023

  

2.750

%

  

1,000,000

   

1,727,535

  

Pharmaceuticals - 2.62%

 

Jazz Investments I Ltd.

 

08/15/2021

  

1.875

%

  

1,500,000

   

1,540,343

  

Semiconductors - 4.33%

 

Rovi Corp.(b)

 

03/01/2020

  

0.500

%

  

1,000,000

   

993,243

  

Synaptics, Inc.(b)

 

06/15/2022

  

0.500

%

  

1,500,000

   

1,558,332

  
   

2,551,575

  

Software - 1.69%

 

Nuance Communications, Inc.(b)

 

12/15/2035

  

1.000

%

  

1,000,000

   

992,781

  
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $6,659,737)
  

6,812,234

  
      

Shares

 

Value

 

WARRANTS - 0.01%

 

Telecommunications - 0.01%

 

Avaya Holdings Corp., Exercise Price $25.55, Expires 12/15/2022(a)(d)

      

3,017

  

$

4,616

  
TOTAL WARRANTS
(Cost $0)
  

4,616

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
31



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(a) - 0.13%

 

Call Options Purchased - 0.13%

 

Aramark

 

12/2019

 

$

45.00

  

$

344,756

   

79

  

$

2,765

  

Edgewell Personal Care Co.

 

02/2020

  

35.00

   

74,784

   

24

   

2,280

  

Emerson Electric Co.

 

01/2020

  

70.00

   

96,018

   

13

   

6,435

  

Everi Holdings, Inc.

 

03/2020

  

12.50

   

44,451

   

33

   

5,610

  

NCR Corp.

 

01/2020

  

30.00

   

160,867

   

49

   

16,415

  

Northern Oil and Gas, Inc.

 

01/2020

  

2.00

   

106,800

   

600

   

4,500

  

Paratek Pharmaceuticals, Inc.

 

12/2019

  

5.00

   

14,650

   

50

   

375

  

QEP Resources, Inc.

 

01/2020

  

4.00

   

101,370

   

310

   

3,875

  

Stars Group, Inc.

 

02/2020

  

22.50

   

140,882

   

58

   

12,905

  

Triumph Group, Inc.

 

12/2019

  

25.00

   

207,825

   

75

   

23,063

  
TOTAL CALL OPTIONS PURCHASED
(Cost $84,028)
  

78,223

  
TOTAL PURCHASED OPTIONS
(Cost $84,028)
  

78,223

  
Total Investments - 94.85%
(Cost $55,683,294)
  

55,847,849

  

Other Assets in Excess of Liabilities - 5.15%(e)

  

3,031,467

  

NET ASSETS - 100.00%

 

$

58,879,316

  

Portfolio Footnotes

(a)  Non-income-producing security.

(b)  Security, or a portion of security, is being held as collateral for short sales, written option contracts or forward foreign currency exchange contracts. At November 30, 2019, the aggregate fair market value of those securities was $16,453,254, representing 27.94% of net assets.

(c)  Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of November 30, 2019, these securities had a total value of $19,176,430 or 32.57% of net assets.

(d)  Security in default on interest payments.

(e)  Includes cash held as collateral for short sales and written option contracts.

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (6.75%)

 

Aerospace & Defense - (0.35%)

 

Triumph Group, Inc.

  

(7,475

)

 

$

(207,132

)

 

Biotechnology - (2.19%)

 

Medicines Co.

  

(15,300

)

  

(1,288,260

)

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
32



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (6.75%) (Continued)

 

Computers & Computer Services - (0.27%)

 

NCR Corp.

  

(4,900

)

 

$

(160,867

)

 

Electrical Components & Equipment - (0.16%)

 

Emerson Electric Co.

  

(1,300

)

  

(96,018

)

 

Entertainment - (0.32%)

 

Everi Holdings, Inc.

  

(3,300

)

  

(44,451

)

 

Stars Group, Inc. (The)

  

(5,836

)

  

(141,757

)

 
   

(186,208

)

 

Environmental Control - (0.09%)

 

Advanced Disposal Services, Inc.

  

(1,634

)

  

(53,840

)

 

Food Service - (0.43%)

 

Aramark

  

(5,850

)

  

(255,294

)

 

Household Products - (0.24%)

 

Avon Products, Inc.

  

(17,152

)

  

(78,728

)

 

Edgewell Personal Care Co.

  

(1,900

)

  

(59,204

)

 
   

(137,932

)

 

Lodging - (0.10%)

 

Caesars Entertainment Corp.

  

(4,500

)

  

(58,680

)

 

Oil & Gas - (0.26%)

 

Northern Oil and Gas, Inc.

  

(40,000

)

  

(71,200

)

 

QEP Resources, Inc.

  

(25,000

)

  

(81,750

)

 
   

(152,950

)

 

Pharmaceuticals - (0.46%)

 

Jazz Pharmaceuticals Plc

  

(1,800

)

  

(272,016

)

 

Pipelines - (0.14%)

 

SemGroup Corp., Class A

  

(5,463

)

  

(83,966

)

 

Semiconductors - (0.85%)

 

Synaptics, Inc.

  

(8,700

)

  

(497,292

)

 

Software - (0.50%)

 

Nuance Communications, Inc.

  

(16,500

)

  

(295,845

)

 

Telecommunications - (0.39%)

 

Zayo Group Holdings, Inc.

  

(6,607

)

  

(226,224

)

 
TOTAL COMMON STOCKS
(Proceeds $3,809,280)
  

(3,972,524

)

 
TOTAL SECURITIES SOLD SHORT
(Proceeds $3,809,280)
 

$

(3,972,524

)

 

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
33



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

EQUITY SWAP CONTRACTS

Swap
Counterparty/
Payment
Frequency
 Reference
Obligation
 Rate
Paid/
Received
by the
Fund
 Termination
Date
 Upfront
Payments
Paid
 Upfront
Payments
Received
 Market
Value
 Notional
Amount
 Unrealized
Appreciation
 
Morgan
Stanley &
Co./
Monthly
 
 
 
 SPDR
Bloomberg
Barclays
High Yield
Bond ETF
 
 
 Received
1 Month-
Federal
Rate
Minus
113 Bps
(1.150%)
 

08/19/2021

 

$

  

$

  

$

  

$

2,347,294

  

$

  
Morgan
Stanley &
Co./
Monthly
 
 
 
 SemGroup
Corp.,
Class A
 
 
 
 
 Received
1 Month-
Federal
Rate
Minus
40 Bps
(1.150%)
 

08/19/2021

  

   

   

   

138,330

   

  
            

$

  

$

2,485,624

  

$

  

The following is a summary of investments classified by country exposure:

Country

 

% of Net Assets(a)

 

Netherlands

  

4.24

%

 

Luxembourg

  

3.14

%

 

Ireland

  

2.62

%

 

United States

  

84.85

%

 

Other Assets in Excess of Liabilities

  

5.15

%

 
   

100.00

%

 

(a)  These percentages represent long positions only and are not net of short positions.

Abbreviations:

bps - Basis Points. 100 Basis Points is equal to 1 percentage point.

ETF - Exchange-Traded Fund

LIBOR - London Interbank Offered Rate

LLC - Limited Liability Company

LP - Limited Partnership

Ltd. - Limited

Plc - Public Limited Company

SARL - Société Anonyme à Responsabilité Limitée is the French term for limited liability company.

SPDR - Standard & Poor's Depositary Receipt

USD - United States Dollar

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
34



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

The following table summarizes Water Island Credit Opportunities Fund's investments and derivative financial instruments categorized in the disclosure hierarchy as of November 30, 2019:

Investments in Securities at Value*

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

Common Stocks**

 

$

21,671

  

$

  

$

  

$

21,671

  

Limited Partnerships

  

174,481

   

   

   

174,481

  

Bank Loans

  

   

1,007,360

   

   

1,007,360

  

Corporate Bonds**

  

   

47,749,264

   

   

47,749,264

  

Convertible Corporate Bonds**

  

   

6,812,234

   

   

6,812,234

  

Warrants

  

   

4,616

   

   

4,616

  

Purchased Options

  

78,223

   

   

   

78,223

  

TOTAL

 

$

274,375

  

$

55,573,474

  

$

  

$

55,847,849

  

Other Financial Instruments***

 

Liabilities

 

Common Stocks**

  

(3,972,524

)

  

   

   

(3,972,524

)

 

TOTAL

 

$

(3,972,524

)

 

$

  

$

  

$

(3,972,524

)

 

*  Refer to footnote 2 where leveling hierarchy is defined.

**  Refer to Portfolio of Investments for sector information.

***  Other financial instruments are instruments such as written options, securities sold short and equity swaps.

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund's assets and liabilities during the period ended November 30, 2019:

Investments
in Securities
 Balance as of
May 31, 2019
 Change in
Unrealized
(Depreciation)
 

Purchases

 Sales
Proceeds
 Amortization
Premium/
Discount
 Transfers
into
Level 3
 Transfers
out of
Level 3
 Balance as of
November 30,
2019
 Net change in
Unrealized
(Depreciation)
included in the
Statement of
Operations
attributable to
Level 3
investments
held at
November 30,
2019
 
Corporate
Bonds
 

$

0

  

$

4

  

$

  

$

4

  

$

  

$

  

$

  

$

  

$

  

Total

 

$

0

  

$

4

  

$

  

$

4

  

$

  

$

  

$

  

$

  

$

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
35



Water Island Long/Short Fund  Portfolio Information

November 30, 2019 (Unaudited)

Performance (annualized returns as of November 30, 2019)

  One
Year
 Five
Year
 Ten
Year
 Since
Inception*
 

Water Island Long/Short Fund, Class R

  

4.74

%

  

N/A

   

N/A

   

0.75

%

 

Water Island Long/Short Fund, Class I

  

4.74

%

  

N/A

   

N/A

   

0.75

%

 

S&P 500® Index

  

16.11

%

  

N/A

   

N/A

   

10.99

%

 

ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index

  

2.32

%

  

N/A

   

N/A

   

1.06

%

 

Current performance may be higher or lower than performance quoted above. Any performance data quoted represents past performance and the investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Returns shown above include the reinvestment of all dividends and capital gains. Performance results do not include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from the amount reported in the Financial Highlights. Contractual fee waivers are currently in effect. Without such fee waivers, performance numbers would be reduced. You can obtain performance data current to the most recent month end by calling 1-800-295-4485 or going to www.arbitragefunds.com.

* Class R and Class I inception: 12/31/14. The "Since Inception" returns for securities indices are for the inception date of Class R and Class I shares.

The Total Annual Fund Operating Expenses for Class R and Class I are 11.80%, 11.55%, respectively. The Adviser has agreed to waive fees (not including the effects of interest, dividends on short positions, brokerage commissions, acquired fund fees and expenses, taxes, or other extraordinary expenses) in excess of 1.69%, 1.44%, for Class R and Class I, respectively, until at least September 30, 2020. These expense ratios are as stated in the current prospectus and may differ from the expense ratios disclosed in the financial highlights in this report.

The S&P 500® Index is an unmanaged index consisting of 500 stocks.

The ICE Bank of America (BofA) Merrill Lynch U.S. 3-Month Treasury Bill Index tracks the performance of the U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market with a remaining term to final maturity of less than 3 months.

An investor may not invest directly in an index.

www.arbitragefunds.com | 1-800-295-4485
36



Water Island Long/Short Fund  Portfolio Information (continued)

November 30, 2019 (Unaudited)

Growth of $10,000 Investment

The chart represents historical performance of a hypothetical investment of $10,000 in the Class R shares of the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

  

Sector Weighting

The following chart shows the sector weightings of the Water Island Long/Short Fund's investments (including short sales and excluding derivatives) as of the report date.

* Concentration Risk: The Fund may invest a large proportion of the Fund's assets in securities of issuers in a single sector over a given time. During such a period of concentration, the Fund may be subject to greater volatility with respect to its portfolio securities than a fund that is more broadly diversified.

Semi-Annual Report | November 30, 2019
37



Water Island Long/Short Fund  Portfolio of Investments

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 65.41%

 

Chemicals - 2.53%

 

Axalta Coating Systems Ltd.(a)(b)

  

698

  

$

19,872

  

Ferro Corp.(a)

  

1,911

   

27,557

  
   

47,429

  

Commercial Services - 1.26%

 

Global Payments, Inc.(b)

  

67

   

12,134

  

Herc Holdings, Inc.(a)(b)

  

244

   

11,409

  
   

23,543

  

Computers & Computer Services - 1.34%

 

HP, Inc.(b)

  

1,249

   

25,080

  

Construction Materials - 3.13%

 

Masco Corp.(b)

  

1,257

   

58,513

  

Distribution/Wholesale - 5.13%

 

Anixter International, Inc.(a)(b)

  

789

   

67,728

  

HD Supply Holdings, Inc.(a)(b)

  

713

   

28,391

  
   

96,119

  

Diversified Financial Services - 3.42%

 

Aircastle Ltd.(b)

  

2,000

   

63,980

  

Electronics - 3.06%

 

Tech Data Corp.(a)(c)

  

395

   

57,231

  

Energy - Alternate Sources - 1.94%

 

Pattern Energy Group, Inc., Class A(b)

  

1,323

   

36,409

  

Insurance - 3.49%

 

American Equity Investment Life Holding Co.(b)

  

2,200

   

65,384

  

Internet - 4.23%

 

NortonLifeLock, Inc.(b)(c)

  

3,181

   

79,207

  

Lodging - 3.95%

 

Hilton Grand Vacations, Inc.(a)(b)

  

800

   

27,704

  

Wyndham Hotels & Resorts, Inc.(b)

  

800

   

46,344

  
   

74,048

  

Media - 10.87%

 

Discovery, Inc., Class C(a)(b)

  

1,379

   

42,087

  

Kabel Deutschland Holding AG(b)

  

553

   

62,752

  

Liberty Broadband Corp., Class A(a)

  

835

   

98,789

  
   

203,628

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
38



Water Island Long/Short Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 65.41% (Continued)

 

Miscellaneous Manufacturing - 1.31%

 

Ingersoll-Rand Plc(b)

  

187

  

$

24,518

  

Oil & Gas - 2.91%

 

Marathon Petroleum Corp.(b)(c)

  

900

   

54,576

  

Pharmaceuticals - 5.97%

 

McKesson Europe AG(b)

  

2,223

   

64,166

  

Paratek Pharmaceuticals, Inc.(b)

  

1,575

   

4,615

  

Recro Pharma, Inc.(a)(b)

  

2,600

   

43,004

  
   

111,785

  

Retail - 8.29%

 

Tiffany & Co.(c)

  

1,160

   

155,208

  

Telecommunications - 2.58%

 

LogMeIn, Inc.(c)

  

620

   

48,348

  
TOTAL COMMON STOCKS
(Cost $1,172,730)
  

1,225,006

  

WARRANTS - 0.51%

 

Leisure Time - 0.51%

 
OneSpaWorld Holdings Ltd., Exercise Price $11.50,
Expires 03/19/2024(a)(b)
  

1,750

   

9,607

  
TOTAL WARRANTS
(Cost $7,884)
  

9,607

  

 

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(a) - 0.55%

 

Call Options Purchased - 0.46%

 
ServiceMaster Global
Holdings, Inc.
 

05/2020

 

$

40.00

  

$

70,542

   

18

  

$

7,110

  

Xerox Holdings Corp.

 

01/2020

  

40.00

   

46,716

   

12

   

1,416

  
TOTAL CALL OPTIONS PURCHASED
(Cost $5,854)
          

8,526

  

Put Options Purchased - 0.09%

 

Avaya Holdings Corp.

 

12/2019

  

10.00

   

51,080

   

40

   

100

  

DXC Technology Co.

 

12/2019

  

27.50

   

55,995

   

15

   

75

  

Everi Holdings, Inc.

 

12/2019

  

7.50

   

70,044

   

52

   

260

  

iShares Russell 2000 ETF

 

12/2019

  

140.00

   

404,425

   

25

   

125

  

LogMeIn, Inc.

 

12/2019

  

70.00

   

62,384

   

8

   

460

  

Lowe's Companies, Inc.

 

01/2020

  

100.00

   

35,193

   

3

   

83

  

Marathon Petroleum Corp.

 

12/2019

  

59.00

   

18,192

   

3

   

342

  

NortonLifeLock, Inc.

 

01/2020

  

20.00

   

17,430

   

7

   

42

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
39



Water Island Long/Short Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(a) - 0.55% (Continued)

 

Put Options Purchased - 0.09% (Continued)

 

Tech Data Corp.

 

12/2019

 

$

110.00

  

$

43,467

   

3

  

$

8

  

Tiffany & Co.

 

02/2020

  

110.00

   

13,380

   

1

   

225

  
TOTAL PUT OPTIONS PURCHASED
(Cost $22,012)
          

1,720

  
TOTAL PURCHASED OPTIONS
(Cost $27,866)
          

10,246

  

 

  

Yield

 

Shares

 

Value

 

SHORT-TERM INVESTMENTS - 35.70%

 

Money Market Funds

 
Morgan Stanley Institutional Liquidity
Fund Government Portfolio, Institutional Class
  

1.570

%(d)

  

334,266

  

$

334,266

  
State Street Institutional U.S. Government Money
Market Fund, Premium Class
  

1.590

%(d)

  

334,266

   

334,266

  
  

668,532

  
TOTAL SHORT-TERM INVESTMENTS
(Cost $668,532)
  

668,532

  
Total Investments - 102.17%
(Cost $1,877,012)
  

1,913,391

  

Liabilities in Excess of Other Assets - (2.17)%(e)

  

(40,646

)

 

NET ASSETS - 100.00%

 

$

1,872,745

  

Portfolio Footnotes

(a)  Non-income-producing security.

(b)  Security, or a portion of security, is being held as collateral for short sales, written option contracts or forward foreign currency exchange contracts. At November 30, 2019, the aggregate fair market value of those securities was $677,376, representing 36.17% of net assets.

(c)  Underlying security for a written/purchased call/put option.

(d)  Rate shown is the 7-day effective yield as of November 30, 2019.

(e)  Includes cash held as collateral for short sales and written option contracts.

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (18.15%)

 

Chemicals - (1.19%)

 

PPG Industries, Inc.

  

(104

)

 

$

(13,399

)

 

RPM International, Inc.

  

(57

)

  

(4,203

)

 

Sherwin-Williams Co. (The)

  

(8

)

  

(4,665

)

 
   

(22,267

)

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
40



Water Island Long/Short Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - (18.15%) (Continued)

 

Commercial Services - (0.22%)

 

United Rentals, Inc.

  

(27

)

 

$

(4,132

)

 

Construction Materials - (0.90%)

 

Builders FirstSource, Inc.

  

(47

)

  

(1,194

)

 

Fortune Brands Home & Security, Inc.

  

(91

)

  

(5,757

)

 

JELD-WEN Holding, Inc.

  

(196

)

  

(4,459

)

 

Masonite International Corp.(a)

  

(75

)

  

(5,385

)

 
   

(16,795

)

 

Distribution/Wholesale - (1.08%)

 

Fastenal Co.

  

(111

)

  

(3,943

)

 

Watsco, Inc.

  

(22

)

  

(3,915

)

 

WESCO International, Inc.

  

(156

)

  

(8,209

)

 

WW Grainger, Inc.

  

(13

)

  

(4,120

)

 
   

(20,187

)

 

Food Service - (0.46%)

 

Aramark

  

(198

)

  

(8,641

)

 

Healthcare - Services - (1.06%)

 

Pennant Group, Inc.

  

(850

)

  

(19,907

)

 

Insurance - (2.40%)

 

Athene Holding Ltd., Class A

  

(255

)

  

(11,480

)

 

Lincoln National Corp.

  

(178

)

  

(10,511

)

 

Manulife Financial Corp.

  

(594

)

  

(11,690

)

 

Unum Group

  

(366

)

  

(11,251

)

 
   

(44,932

)

 

Leisure Time - (0.55%)

 

OneSpaWorld Holdings Ltd.

  

(629

)

  

(10,272

)

 

Machinery - Diversified - (1.16%)

 

Gardner Denver Holdings, Inc.

  

(644

)

  

(21,812

)

 

Media - (6.95%)

 

Charter Communications, Inc., Class A

  

(188

)

  

(88,362

)

 

Discovery, Inc., Class A

  

(1,270

)

  

(41,802

)

 
   

(130,164

)

 

Office/Business Equip - (0.36%)

 

Xerox Holdings Corp.

  

(171

)

  

(6,657

)

 

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
41



Water Island Long/Short Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - (18.15%) (Continued)

 

Oil & Gas - (1.28%)

 

HollyFrontier Corp.

  

(170

)

 

$

(8,763

)

 

Murphy USA, Inc.

  

(43

)

  

(5,054

)

 

Valero Energy Corp.

  

(106

)

  

(10,122

)

 
   

(23,939

)

 

Real Estate Investment Trusts - (0.45%)

 

Uniti Group, Inc.

  

(1,250

)

  

(8,400

)

 

Retail - (0.09%)

 

Beacon Roofing Supply, Inc.

  

(24

)

  

(711

)

 

MSC Industrial Direct Co., Inc., Class A

  

(14

)

  

(1,028

)

 
   

(1,739

)

 
TOTAL COMMON STOCKS
(Proceeds $329,410)
  

(339,844

)

 
TOTAL SECURITIES SOLD SHORT
(Proceeds $329,410)
 

$

(339,844

)

 

 

WRITTEN OPTIONS

 Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

Written Call Options

 

Marathon Petroleum Corp.

 

12/2019

 

$

65.00

  

$

(18,192

)

  

(3

)

 

$

(119

)

 
TOTAL WRITTEN CALL OPTIONS
(Premiums received $223)
          

(119

)

 

Written Put Options

 

Envista Holdings Corp.

 

12/2019

  

35.00

   

(42,180

)

  

(15

)

  

(11,100

)

 

iShares Russell 2000 ETF

 

12/2019

  

130.00

   

(404,425

)

  

(25

)

  

(50

)

 
TOTAL WRITTEN PUT OPTIONS
(Premiums received $18,679)
          

(11,150

)

 
TOTAL WRITTEN OPTIONS
(Premiums received $18,902)
         

$

(11,269

)

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
42



Water Island Long/Short Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

EQUITY SWAP CONTRACTS

Swap
Counterparty/
Payment
Frequency
 Reference
Obligation
 Rate
Paid/
Received
by the
Fund
 Termination
Date
 Upfront
Payments
Paid
 Upfront
Payments
Received
 Market
Value
 Notional
Amount
 Unrealized
Appreciation
 
Morgan
Stanley &
Co./Monthly
 
 
 
 MPLX LP
 
 
 
 
 
 Received
1- Month
FED
minus
40 bps
(1.150%)
 




10/28/2021
 

$

  

$

  

$

  

$

13,433

  

$

  

OUTSTANDING FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Appreciation
 

USD

132,941

  

EUR

120,070

  

Goldman Sachs & Co.

 

12/16/2019

 

$

536

  
Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Depreciation
 

EUR

4,320

  

USD

4,764

  

Goldman Sachs & Co.

 

12/16/2019

 

$

(1

)

 

The following is a summary of investments classified by country exposure:

Country

 

% of Net Assets(a)

 

Germany

  

6.77

%

 

Bahamas

  

0.51

%

 

United States

  

94.89

%

 

Liabilities in Excess of Other Assets

  

(2.17

)%

 
   

100.00

%

 

(a)  These percentages represent long positions only and are not net of short positions.

Abbreviations:

AG - Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e., owned by shareholders.

bps - Basis Points. 100 Basis Points is equal to 1 percentage point.

ETF - Exchange-Traded Fund

EUR - Euro

LP - Limited Partnership

Ltd. - Limited

Plc - Public Limited Company

USD - United States Dollar

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
43



Water Island Long/Short Fund  Portfolio of Investments (continued)

November 30, 2019 (Unaudited)

The following table summarizes Water Island Long/Short Fund's investments and derivative financial instruments categorized in the disclosure hierarchy as of November 30, 2019:

Investments in Securities at Value*

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

Common Stocks**

 

$

1,225,006

  

$

  

$

  

$

1,225,006

  

Warrants

  

9,607

   

   

   

9,607

  

Purchased Options

  

10,246

   

   

   

10,246

  

Short-Term Investments

  

668,532

   

   

   

668,532

  

TOTAL

 

$

1,913,391

  

$

  

$

  

$

1,913,391

  

Other Financial Instruments***

 

Assets

 

Forward Foreign Currency Exchange Contracts

 

$

  

$

536

  

$

  

$

536

  

Liabilities

 

Common Stocks**

  

(339,844

)

  

   

   

(339,844

)

 

Written Options

  

(11,269

)

  

   

   

(11,269

)

 

Forward Foreign Currency Exchange Contracts

  

   

(1

)

  

   

(1

)

 

TOTAL

 

$

(351,113

)

 

$

535

  

$

  

$

(350,578

)

 

*  Refer to footnote 2 where leveling hierarchy is defined.

**  Refer to Portfolio of Investments for sector information.

***  Other financial instruments are instruments such as written options, securities sold short and forward foreign currency exchange contracts.

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
44



This Page Intentionally Left Blank



The Arbitrage Funds

  

Arbitrage Fund

 Water Island Diversified
Event-Driven Fund
 

ASSETS

 

Investments:

 

At cost of unaffiliated investments

 

$

1,584,464,088

  

$

121,273,285

  

At cost of affiliated investments

 

$

25,340,129

  

$

  

At fair value of unaffiliated investments (Note 2)(a)

 

$

1,630,209,426

  

$

123,467,602

  

At fair value of affiliated investments (Note 2)

 

$

25,780,318

  

$

  

Cash

  

   

6,465,852

  

Cash denominated in foreign currency (Cost $592, $8,964, $0 and $0)

  

592

   

8,964

  

Deposits with brokers for securities sold short (Note 2)

  

352,551,159

   

22,900,279

  

Segregated cash for swaps (Note 2)

  

24,480,000

   

4,310,000

  

Receivable for investment securities sold

  

3,959,279

   

562,583

  

Receivable for capital shares sold

  

963,490

   

46,804

  

Unrealized appreciation on forward foreign currency exchange contracts (Note 8)

  

1,597,532

   

24,614

  

Unrealized appreciation on swap contracts

  

21,582

   

1,660

  

Receivable for swap contract payments

  

19,923,554

   

  

Dividends and interest receivable

  

1,129,165

   

217,087

  

Receivable due from Adviser (Note 5)

  

   

  

Prepaid expenses and other assets

  

882,184

   

57,022

  

Total Assets

  

2,061,498,281

   

158,062,467

  

LIABILITIES

 
Securities sold short, at value (Note 2) (proceeds $329,404,064, $21,766,840, $3,809,280 and
$329,410)
  

351,237,014

   

23,090,045

  

Due to bank

  

88,113

   

  

Written options, at value (Note 2) (premiums received $44,248, $29,209, $0 and $18,902)

  

33,903

   

383

  

Line of credit payable (Note 4)

  

   

500,000

  

Collateral for securities loaned

  

   

24,313

  

Payable for investment securities purchased

  

14,551,510

   

2,982,402

  

Unrealized depreciation on forward foreign currency exchange contracts (Note 8)

  

6,413,840

   

221,542

  

Payable for capital shares redeemed

  

1,264,164

   

48,855

  

Payable to Adviser (Note 5)

  

1,417,959

   

93,451

  

Dividends payable on securities sold short

  

   

2,082

  

Payable to Distributor (Note 5)

  

50,211

   

7,084

  

Payable to Administrator (Note 5)

  

93,161

   

16,906

  

Payable to Transfer Agent (Note 5)

  

134,038

   

38,897

  

Payable to Custodian

  

69,538

   

23,110

  

Income distribution payable

  

   

  

Interest expense payable

  

   

  

Interest payable on swap contracts

  

18,185

   

2,523

  

Dividend payable on swap contracts

  

20,895,540

   

47,131

  

Audit and legal fees payable

  

55,220

   

17,190

  

Payable to Trustees

  

23,634

   

14,658

  

Chief Compliance Officer Fees payable (Note 5)

  

50,837

   

3,487

  

Chief Financial Officer Fees payable (Note 5)

  

5,308

   

984

  

Other accrued expenses and liabilities

  

13,912

   

7,807

  

Total Liabilities

  

396,416,087

   

27,142,850

  

NET ASSETS

 

$

1,665,082,194

  

$

130,919,617

  

NET ASSETS CONSIST OF:

 

Paid-in capital

 

$

1,594,217,638

  

$

187,564,635

  

Distributable earnings (Accumulated loss)

  

70,864,556

   

(56,645,018

)

 

NET ASSETS

 

$

1,665,082,194

  

$

130,919,617

  

(a) Includes market value of securities on loan:

 

$

  

$

21,919

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
46



  Statement of Assets and Liabilities

November 30, 2019 (Unaudited)

  Water Island Credit
Opportunities Fund
 Water Island
Long/Short Fund
 

ASSETS

 

Investments:

 

At cost of unaffiliated investments

 

$

55,683,294

  

$

1,877,012

  

At cost of affiliated investments

 

$

  

$

  

At fair value of unaffiliated investments (Note 2)(a)

 

$

55,847,849

  

$

1,913,391

  

At fair value of affiliated investments (Note 2)

 

$

  

$

  

Cash

  

963,850

   

  

Cash denominated in foreign currency (Cost $592, $8,964, $0 and $0)

  

   

  

Deposits with brokers for securities sold short (Note 2)

  

3,980,076

   

342,811

  

Segregated cash for swaps (Note 2)

  

1,240,000

   

  

Receivable for investment securities sold

  

490,421

   

1,545

  

Receivable for capital shares sold

  

44,547

   

  

Unrealized appreciation on forward foreign currency exchange contracts (Note 8)

  

   

536

  

Unrealized appreciation on swap contracts

  

   

  

Receivable for swap contract payments

  

   

  

Dividends and interest receivable

  

947,723

   

3,197

  

Receivable due from Adviser (Note 5)

  

   

20,517

  

Prepaid expenses and other assets

  

38,906

   

27,134

  

Total Assets

  

63,553,372

   

2,309,131

  

LIABILITIES

 
Securities sold short, at value (Note 2) (proceeds $329,404,064, $21,766,840, $3,809,280 and
$329,410)
  

3,972,524

   

339,844

  

Due to bank

  

   

  

Written options, at value (Note 2) (premiums received $44,248, $29,209, $0 and $18,902)

  

   

11,269

  

Line of credit payable (Note 4)

  

500,000

   

  

Collateral for securities loaned

  

   

  

Payable for investment securities purchased

  

28,441

   

34,498

  

Unrealized depreciation on forward foreign currency exchange contracts (Note 8)

  

   

1

  

Payable for capital shares redeemed

  

95,223

   

  

Payable to Adviser (Note 5)

  

17,642

   

  

Dividends payable on securities sold short

  

2,213

   

420

  

Payable to Distributor (Note 5)

  

2,047

   

2

  

Payable to Administrator (Note 5)

  

11,141

   

6,842

  

Payable to Transfer Agent (Note 5)

  

4,880

   

385

  

Payable to Custodian

  

3,761

   

8,356

  

Income distribution payable

  

1,217

   

  

Interest expense payable

  

404

   

  

Interest payable on swap contracts

  

   

  

Dividend payable on swap contracts

  

   

  

Audit and legal fees payable

  

15,024

   

13,801

  

Payable to Trustees

  

14,223

   

13,919

  

Chief Compliance Officer Fees payable (Note 5)

  

1,881

   

67

  

Chief Financial Officer Fees payable (Note 5)

  

716

   

590

  

Other accrued expenses and liabilities

  

2,719

   

6,392

  

Total Liabilities

  

4,674,056

   

436,386

  

NET ASSETS

 

$

58,879,316

  

$

1,872,745

  

NET ASSETS CONSIST OF:

 

Paid-in capital

 

$

61,840,040

  

$

1,871,041

  

Distributable earnings (Accumulated loss)

  

(2,960,724

)

  

1,704

  

NET ASSETS

 

$

58,879,316

  

$

1,872,745

  

(a) Includes market value of securities on loan:

 

$

  

$

  

Semi-Annual Report | November 30, 2019
47



The Arbitrage Funds

  

Arbitrage Fund

 Water Island Diversified
Event-Driven Fund
 

PRICING OF SHARES:

 

CLASS R SHARES:

 

Net assets applicable to Class R shares

 

$

146,026,614

  

$

30,933,114

  

Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)

  

11,097,447

   

3,216,547

  

Net asset value and offering price per share

 

$

13.16

  

$

9.62

  

CLASS I SHARES:

 

Net assets applicable to Class I shares

 

$

1,481,059,492

  

$

98,491,780

  

Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)

  

109,104,435

   

10,149,759

  

Net asset value and offering price per share

 

$

13.57

  

$

9.70

  

CLASS C SHARES:

 

Net assets applicable to Class C shares

 

$

19,939,024

  

$

689,262

  

Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)

  

1,593,040

   

73,344

  

Net asset value and offering price per share(a)

 

$

12.52

  

$

9.40

  

CLASS A SHARES:

 

Net assets applicable to Class A shares

 

$

18,057,064

  

$

805,461

  

Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)

  

1,374,664

   

83,793

  

Net asset value and offering price per share(a)

 

$

13.14

  

$

9.61

  

Maximum offering price per share (NAV/(100% — maximum sales charge))

 

$

13.48

  

$

9.93

  

Maximum sales charge

  

2.50

%

  

3.25

%

 

(a)  Redemption price varies based on length of time held (Note 1).

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
48



  Statement of Assets and Liabilities

November 30, 2019 (Unaudited)

  Water Island Credit
Opportunities Fund
 Water Island
Long/Short Fund
 

PRICING OF SHARES:

 

CLASS R SHARES:

 

Net assets applicable to Class R shares

 

$

8,440,831

  

$

10,372

  

Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)

  

869,566

   

1,031

  

Net asset value and offering price per share

 

$

9.71

  

$

10.06

  

CLASS I SHARES:

 

Net assets applicable to Class I shares

 

$

49,676,922

  

$

1,862,373

  

Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)

  

5,141,504

   

185,139

  

Net asset value and offering price per share

 

$

9.66

  

$

10.06

  

CLASS C SHARES:

 

Net assets applicable to Class C shares

 

$

355,990

  

$

  

Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)

  

36,807

   

  

Net asset value and offering price per share(a)

 

$

9.67

  

$

  

CLASS A SHARES:

 

Net assets applicable to Class A shares

 

$

405,573

  

$

  

Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)

  

41,991

   

  

Net asset value and offering price per share(a)

 

$

9.66

  

$

  

Maximum offering price per share (NAV/(100% — maximum sales charge))

 

$

9.98

  

$

  

Maximum sales charge

  

3.25

%

  

  

Semi-Annual Report | November 30, 2019
49



The Arbitrage Funds

  

Arbitrage Fund

 Water Island
Diversified
Event-Driven
Fund
 

INVESTMENT INCOME

 

Dividend income

 

$

10,277,418

  

$

597,713

  

Foreign taxes withheld on dividends

  

(67,421

)

  

(3,898

)

 

Interest income

  

3,650,129

   

546,266

  

Securities lending income

  

   

299

  

Total Investment Income

  

13,860,126

   

1,140,380

  

EXPENSES

 

Investment advisory fees (Note 5)

  

9,047,947

   

806,291

  

Distribution and service fees (Note 5)

 

Class R

  

192,073

   

38,629

  

Class C

  

96,636

   

4,131

  

Class A

  

23,114

   

993

  

Administrative fees (Note 5)

  

187,292

   

31,353

  

Chief Compliance Officer fees (Note 5)

  

89,852

   

7,137

  

Trustees' fees

  

57,439

   

41,649

  

Dividend expense

  

2,433,047

   

149,688

  

Interest rebate expense

  

11,711

   

3,395

  

Transfer agent fees (Note 5)

  

662,941

   

177,706

  

Custodian and bank service fees

  

190,400

   

43,066

  

Registration and filing fees

  

49,254

   

30,443

  

Printing of shareholder reports

  

78,762

   

16,003

  

Professional fees

  

122,925

   

17,139

  

Line of credit interest expense (Note 4)

  

97,046

   

3,103

  

Insurance expense

  

36,046

   

2,880

  

Chief Financial Officer fees (Note 5)

  

31,257

   

5,656

  

Other expenses

  

42,274

   

9,262

  

Total Expenses

  

13,450,016

   

1,388,524

  

Fees waived by the Adviser, Class R (Note 5)

  

(13,326

)

  

(56,627

)

 

Fees waived by the Adviser, Class I (Note 5)

  

(132,869

)

  

(181,587

)

 

Fees waived by the Adviser, Class C (Note 5)

  

(1,688

)

  

(1,514

)

 

Fees waived by the Adviser, Class A (Note 5)

  

(1,612

)

  

(1,455

)

 

Net Expenses

  

13,300,521

   

1,147,341

  

NET INVESTMENT INCOME (LOSS)

  

559,605

   

(6,961

)

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
50



  Statement of Operations

For the Six Months Ended November 30, 2019 (Unaudited)

  Water Island
Credit
Opportunities
Fund
 Water Island
Long/Short
Fund
 

INVESTMENT INCOME

 

Dividend income

 

$

76,149

  

$

25,530

  

Foreign taxes withheld on dividends

  

   

(310

)

 

Interest income

  

1,071,129

   

5,256

  

Securities lending income

  

   

  

Total Investment Income

  

1,147,278

   

30,476

  

EXPENSES

 

Investment advisory fees (Note 5)

  

276,288

   

13,310

  

Distribution and service fees (Note 5)

 

Class R

  

10,278

   

13

  

Class C

  

1,971

   

17

  

Class A

  

172

   

4

  

Administrative fees (Note 5)

  

22,990

   

14,408

  

Chief Compliance Officer fees (Note 5)

  

2,938

   

111

  

Trustees' fees

  

40,883

   

40,334

  

Dividend expense

  

40,945

   

2,467

  

Interest rebate expense

  

1,314

   

233

  

Transfer agent fees (Note 5)

  

30,013

   

3,935

  

Custodian and bank service fees

  

11,487

   

16,784

  

Registration and filing fees

  

31,112

   

20,439

  

Printing of shareholder reports

  

3,956

   

2,535

  

Professional fees

  

12,067

   

8,420

  

Line of credit interest expense (Note 4)

  

1,315

   

  

Insurance expense

  

1,144

   

44

  

Chief Financial Officer fees (Note 5)

  

4,410

   

3,535

  

Other expenses

  

7,887

   

5,736

  

Total Expenses

  

501,170

   

132,325

  

Fees waived by the Adviser, Class R (Note 5)

  

(22,641

)

  

(548

)

 

Fees waived by the Adviser, Class I (Note 5)

  

(136,059

)

  

(113,407

)

 

Fees waived by the Adviser, Class C (Note 5)

  

(1,085

)

  

(152

)

 

Fees waived by the Adviser, Class A (Note 5)

  

(378

)

  

(152

)

 

Net Expenses

  

341,007

   

18,066

  

NET INVESTMENT INCOME (LOSS)

  

806,271

   

12,410

  

Semi-Annual Report | November 30, 2019
51



The Arbitrage Funds

  

Arbitrage Fund

 Water Island
Diversified
Event-Driven
Fund
 

REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND FOREIGN CURRENCIES

 

Net realized gains (losses) from:

 

Unaffiliated investments

 

$

101,507,616

  

$

5,751,893

  

Purchased option contracts

  

(4,203,681

)

  

(382,615

)

 

Swap contracts

  

(32,066,848

)

  

(1,520,938

)

 

Securities sold short

  

(52,569,928

)

  

(2,284,979

)

 

Written option contracts

  

265,283

   

152,246

  

Forward currency contracts

  

6,426,654

   

287,886

  

Foreign currency transactions (Note 8)

  

3,150,164

   

(34,257

)

 

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated investment

  

32,637,919

   

2,427,860

  

Affiliated investments

  

404,321

   

  

Purchased option contracts

  

(418,655

)

  

(170,620

)

 

Swap contracts

  

21,582

   

1,660

  

Securities sold short

  

(13,041,105

)

  

(1,688,793

)

 

Written option contracts

  

(15,256

)

  

23,870

  

Forward currency contracts

  

(9,926,891

)

  

(367,960

)

 

Foreign currency transactions (Note 8)

  

(1,837

)

  

3,366

  

NET REALIZED AND UNREALIZED GAIN/(LSS)

  

32,169,338

   

2,198,619

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

32,728,943

  

$

2,191,658

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
52



  Statement of Operations

For the Six Months Ended November 30, 2019 (Unaudited)

  Water Island
Credit
Opportunities
Fund
 Water Island
Long/Short
Fund
 

REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND FOREIGN CURRENCIES

 

Net realized gains (losses) from:

 

Unaffiliated investments

 

$

309,622

  

$

(6,393

)

 

Purchased option contracts

  

(50,063

)

  

(12,117

)

 

Swap contracts

  

(125,291

)

  

2,236

  

Securities sold short

  

19,984

   

(3,529

)

 

Written option contracts

  

10,087

   

7,471

  

Forward currency contracts

  

   

4,828

  

Foreign currency transactions (Note 8)

  

   

(68

)

 

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated investment

  

518,002

   

90,661

  

Affiliated investments

  

   

  

Purchased option contracts

  

(24,880

)

  

(27,347

)

 

Swap contracts

  

   

  

Securities sold short

  

(406,058

)

  

(41,613

)

 

Written option contracts

  

(1,180

)

  

9,174

  

Forward currency contracts

  

   

(565

)

 

Foreign currency transactions (Note 8)

  

   

(5

)

 

NET REALIZED AND UNREALIZED GAIN/(LSS)

  

250,223

   

22,733

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

1,056,494

  

$

35,143

  

Semi-Annual Report | November 30, 2019
53



The Arbitrage Funds

  

Arbitrage Fund

 
  Six Months
Ended
November 30,
2019
(Unaudited)
 Year Ended
May 31, 2019
 

FROM OPERATIONS:

 

Net investment income (loss)

 

$

559,605

  

$

273,818

  

Net realized gains (losses) from:

 

Unaffiliated Investments

  

101,507,616

   

18,263,290

  

Purchased option contracts

  

(4,203,681

)

  

(9,906,367

)

 

Swap contracts

  

(32,066,848

)

  

6,330,396

  

Securities sold short

  

(52,569,928

)

  

54,909,157

  

Written option contracts

  

265,283

   

7,785,695

  

Forward currency contracts

  

6,426,654

   

20,593,887

  

Foreign currency transactions

  

3,150,164

   

836,947

  

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated Investments

  

32,637,919

   

(11,301,841

)

 

Affiliated investments

  

404,321

   

4,775

  

Purchased option contracts

  

(418,655

)

  

(869,661

)

 

Swap contracts

  

21,582

   

(19,040

)

 

Securities sold short

  

(13,041,105

)

  

(3,373,640

)

 

Written option contracts

  

(15,256

)

  

(21,922

)

 

Forward currency contracts

  

(9,926,891

)

  

(12,510,293

)

 

Foreign currency transactions

  

(1,837

)

  

(353,986

)

 

Net increase (decrease) in net assets resulting from operations

  

32,728,943

   

70,641,215

  

FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

 

Distributions, Class R

  

   

(3,337,705

)

 

Distributions, Class I

  

   

(28,493,325

)

 

Distributions, Class C

  

   

(258,793

)

 

Distributions, Class A

  

   

(312,255

)

 

Decrease in net assets from distributions to shareholders

  

   

(32,402,078

)

 

FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):

 

Proceeds from shares sold

  

144,146,101

   

573,691,155

  

Shares issued in reinvestment of distributions

  

   

25,056,881

  

Payments for shares redeemed

  

(259,074,072

)

  

(662,269,228

)

 

Net increase (decrease) in net assets from capital share transactions

  

(114,927,971

)

  

(63,521,192

)

 

TOTAL INCREASE (DECREASE) IN NET ASSETS

  

(82,199,028

)

  

(25,282,055

)

 

NET ASSETS:

 

Beginning of period

  

1,747,281,222

   

1,772,563,277

  

End of period

 

$

1,665,082,194

  

$

1,747,281,222

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
54



  Statement of Changes in Net Assets

  Water Island Diversified
Event-Driven Fund
 
  Six Months
Ended
November 30,
2019
(Unaudited)
 Year Ended
May 31, 2019
 

FROM OPERATIONS:

 

Net investment income (loss)

 

$

(6,961

)

 

$

1,185,159

  

Net realized gains (losses) from:

 

Unaffiliated Investments

  

5,751,893

   

2,456,816

  

Purchased option contracts

  

(382,615

)

  

(1,475,621

)

 

Swap contracts

  

(1,520,938

)

  

347,357

  

Securities sold short

  

(2,284,979

)

  

(413,048

)

 

Written option contracts

  

152,246

   

872,256

  

Forward currency contracts

  

287,886

   

918,981

  

Foreign currency transactions

  

(34,257

)

  

37,222

  

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated Investments

  

2,427,860

   

(1,942,929

)

 

Affiliated investments

  

   

  

Purchased option contracts

  

(170,620

)

  

19,748

  

Swap contracts

  

1,660

   

  

Securities sold short

  

(1,688,793

)

  

963,822

  

Written option contracts

  

23,870

   

(107,896

)

 

Forward currency contracts

  

(367,960

)

  

(556,649

)

 

Foreign currency transactions

  

3,366

   

(302

)

 

Net increase (decrease) in net assets resulting from operations

  

2,191,658

   

2,304,916

  

FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

 

Distributions, Class R

  

   

(546,554

)

 

Distributions, Class I

  

   

(1,734,805

)

 

Distributions, Class C

  

   

(5,311

)

 

Distributions, Class A

  

   

(13,015

)

 

Decrease in net assets from distributions to shareholders

  

   

(2,299,685

)

 

FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):

 

Proceeds from shares sold

  

17,219,433

   

18,462,931

  

Shares issued in reinvestment of distributions

  

   

1,993,650

  

Payments for shares redeemed

  

(13,217,916

)

  

(45,994,464

)

 

Net increase (decrease) in net assets from capital share transactions

  

4,001,517

   

(25,537,883

)

 

TOTAL INCREASE (DECREASE) IN NET ASSETS

  

6,193,175

   

(25,532,652

)

 

NET ASSETS:

 

Beginning of period

  

124,726,442

   

150,259,094

  

End of period

 

$

130,919,617

  

$

124,726,442

  

Semi-Annual Report | November 30, 2019
55



The Arbitrage Funds

  Water Island Credit
Opportunities Fund
 
  Six Months
Ended
November 30,
2019
(Unaudited)
 Year Ended
May 31, 2019
 

FROM OPERATIONS:

 

Net investment income (loss)

 

$

806,271

  

$

1,857,606

  

Net realized gains (losses) from:

 

Unaffiliated Investments

  

309,622

   

(136,053

)

 

Purchased option contracts

  

(50,063

)

  

(2,246

)

 

Swap contracts

  

(125,291

)

  

  

Securities sold short

  

19,984

   

154,774

  

Written option contracts

  

10,087

   

65,984

  

Forward currency contracts

  

   

73,267

  

Foreign currency transactions

  

   

(2,445

)

 

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated Investments

  

518,002

   

(653,777

)

 

Purchased option contracts

  

(24,880

)

  

19,075

  

Securities sold short

  

(406,058

)

  

163,621

  

Written option contracts

  

(1,180

)

  

(26,152

)

 

Forward currency contracts

  

   

(55,745

)

 

Foreign currency transactions

  

   

384

  

Net increase (decrease) in net assets resulting from operations

  

1,056,494

   

1,458,293

  

FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

 

Distributions, Class R

  

(133,696

)

  

(223,168

)

 

Distributions, Class I

  

(864,425

)

  

(1,623,472

)

 

Distributions, Class C

  

(4,910

)

  

(12,522

)

 

Distributions, Class A

  

(2,225

)

  

(4,639

)

 

Decrease in net assets from distributions to shareholders

  

(1,005,256

)

  

(1,863,801

)

 

FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):

 

Proceeds from shares sold

  

8,637,576

   

31,563,229

  

Shares issued in reinvestment of distributions

  

998,439

   

1,841,724

  

Payments for shares redeemed

  

(9,036,979

)

  

(21,303,781

)

 

Net increase (decrease) in net assets from capital share transactions

  

599,036

   

12,101,172

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

  

650,274

   

11,695,664

  

NET ASSETS:

 

Beginning of period

  

58,229,042

   

46,533,378

  

End of period

 

$

58,879,316

  

$

58,229,042

  

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
56



  Statement of Changes in Net Assets

  

Water Island Long/Short Fund

 
  Six Months
Ended
November 30,
2019
(Unaudited)
 Year Ended
May 31, 2019
 

FROM OPERATIONS:

 

Net investment income (loss)

 

$

12,410

  

$

2,601

  

Net realized gains (losses) from:

 

Unaffiliated Investments

  

(6,393

)

  

200,171

  

Purchased option contracts

  

(12,117

)

  

(60,947

)

 

Swap contracts

  

2,236

   

(11,587

)

 

Securities sold short

  

(3,529

)

  

(132,947

)

 

Written option contracts

  

7,471

   

17,583

  

Forward currency contracts

  

4,828

   

11,557

  

Foreign currency transactions

  

(68

)

  

(193

)

 

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated Investments

  

90,661

   

(86,799

)

 

Purchased option contracts

  

(27,347

)

  

11,438

  

Securities sold short

  

(41,613

)

  

45,404

  

Written option contracts

  

9,174

   

(1,628

)

 

Forward currency contracts

  

(565

)

  

(5,741

)

 

Foreign currency transactions

  

(5

)

  

(1

)

 

Net increase (decrease) in net assets resulting from operations

  

35,143

   

(11,089

)

 

FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

 

Distributions, Class R

  

   

(206

)

 

Distributions, Class I

  

   

(43,718

)

 

Distributions, Class C

  

   

(206

)

 

Distributions, Class A

  

   

(206

)

 

Decrease in net assets from distributions to shareholders

  

   

(44,336

)

 

FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):

 

Proceeds from shares sold

  

39,224

   

366,929

  

Shares issued in reinvestment of distributions

  

   

44,336

  

Payments for shares redeemed

  

(575,778

)

  

(189,524

)

 

Net increase (decrease) in net assets from capital share transactions

  

(536,554

)

  

221,741

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

  

(501,411

)

  

166,316

  

NET ASSETS:

 

Beginning of period

  

2,374,156

   

2,207,840

  

End of period

 

$

1,872,745

  

$

2,374,156

  

Semi-Annual Report | November 30, 2019
57



Arbitrage Fund – Class R

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

12.92

  

$

12.65

  

$

13.06

  

$

12.78

  

$

12.97

  

$

12.58

  
Income (loss) from
investment
operations
 
Net investment
income (loss)(a)
  

(0.01

)(c)

  

(0.03

)(c)

  

0.05

   

(0.13

)(b)

  

(0.06

)

  

(0.11

)

 
Net realized and
unrealized gains
(losses) on
investments and
foreign currencies
  

0.25

   

0.52

   

(0.01

)(c)

  

0.53

(d)

  

0.17

   

0.53

  
Total from investment
operations
  

0.24

   

0.49

   

0.04

   

0.40

   

0.11

   

0.42

  

Less distributions

 
From net
investment
income
  

   

(0.06

)

  

(0.09

)

  

   

   

  
From net
realized gains
  

   

(0.16

)

  

(0.36

)

  

(0.12

)

  

(0.30

)

  

(0.03

)

 

Total distributions

  

   

(0.22

)

  

(0.45

)

  

(0.12

)

  

(0.30

)

  

(0.03

)

 
Proceeds from
redemption fees
collected
  

   

   

0.00

(e)

  

0.00

(e)

  

0.00

(e)

  

0.00

(e)

 
Net asset value,
end of period
 

$

13.16

  

$

12.92

  

$

12.65

  

$

13.06

  

$

12.78

  

$

12.97

  

Total return(f)

  

1.86

%(g)

  

3.89

%

  

0.31

%

  

3.17

%

  

0.87

%

  

3.35

%

 
Net assets, end of
period (in 000s)
 

$

146,027

  

$

163,349

  

$

222,309

  

$

340,353

  

$

433,936

  

$

500,440

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(h)

  

1.78

%(i)

  

1.94

%

  

1.91

%

  

1.87

%(b)

  

1.88

%

  

2.31

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(h)(j)
  

1.76

%(i)

  

1.93

%

  

1.90

%

  

1.87

%(b)

  

1.88

%

  

2.31

%

 
Net investment
income (loss)
  

(0.14

%)(c)(i)

  

(0.20

%)(c)

  

0.41

%

  

(1.00

%)(b)

  

(0.51

%)

  

(0.87

%)

 
Portfolio turnover
rate
  

121

%(g)

  

419

%

  

362

%

  

363

%

  

321

%

  

514

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
58



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and is less than 0.005% of average net assets.

(c)  The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to timing of sales and redemptions of Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

(d)  Includes estimated proceeds from the Fund's participation in a class action lawsuit. This represents a non-recurring gain in the amount of $0.01 per share.

(e)  Amount rounds to less than $0.01 per share.

(f)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares.

(g)  Not annualized.

(h)  Dividend expense totaled 0.28% (annualized), 0.46%, 0.42%, 0.36%, 0.34% and 0.68% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.00%, 0.01%, 0.03%, 0.07% and 0.18% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(i)  Annualized.

(j)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 1.47% (annualized), 1.47%, 1.47%, 1.48%, 1.47% and 1.45% of average net assets for the six months ended November 30, 2019 and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
59



Arbitrage Fund – Class I

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of
period
 

$

13.32

  

$

13.03

  

$

13.46

  

$

13.13

  

$

13.28

  

$

12.86

  
Income (loss)
from investment
operations
 
Net investment
income (loss)(a)
  

0.01

   

0.01

   

0.05

   

(0.10

)(b)

  

(0.03

)

  

(0.09

)

 
Net realized and
unrealized gains
on investments
and foreign
currencies
  

0.24

   

0.54

   

0.01

   

0.55

(c)

  

0.18

   

0.54

  
Total from
investment
operations
  

0.25

   

0.55

   

0.06

   

0.45

   

0.15

   

0.45

  

Less distributions

 
From net
investment
income
  

   

(0.10

)

  

(0.13

)

  

   

   

  
From net
realized gains
  

   

(0.16

)

  

(0.36

)

  

(0.12

)

  

(0.30

)

  

(0.03

)

 

Total distributions

  

   

(0.26

)

  

(0.49

)

  

(0.12

)

  

(0.30

)

  

(0.03

)

 
Proceeds from
redemption fees
collected
  

   

   

0.00

(d)

  

0.00

(d)

  

0.00

(d)

  

0.00

(d)

 
Net asset value,
end of period
 

$

13.57

  

$

13.32

  

$

13.03

  

$

13.46

  

$

13.13

  

$

13.28

  

Total return(e)

  

1.95

%(f)

  

4.21

%

  

0.50

%

  

3.47

%

  

1.16

%

  

3.51

%

 
Net assets, end of
period (in 000s)
 

$

1,481,059

  

$

1,546,542

  

$

1,510,598

  

$

1,492,094

  

$

1,395,178

  

$

1,514,685

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(g)

  

1.53

%(h)

  

1.69

%

  

1.66

%

  

1.62

%(b)

  

1.63

%

  

2.06

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(g)(i)
  

1.51

%(h)

  

1.68

%

  

1.65

%

  

1.62

%(b)

  

1.63

%

  

2.06

%

 
Net investment
income (loss)
  

0.10

%(h)

  

0.06

%

  

0.35

%

  

(0.76

%)(b)

  

(0.24

%)

  

(0.65

%)

 
Portfolio turnover
rate
  

121

%(f)

  

419

%

  

362

%

  

363

%

  

321

%

  

514

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
60



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and is less than 0.005% of average net assets.

(c)  Includes estimated proceeds from the Fund's participation in a class action lawsuit. This represents a non-recurring gain in the amount of $0.01 per share.

(d)  Amount rounds to less than $0.01 per share.

(e)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares.

(f)  Not annualized.

(g)  Dividend expense totaled 0.28% (annualized), 0.46%, 0.42%, 0.36%, 0.34% and 0.68% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.00%, 0.01%, 0.03%, 0.07% and 0.18% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(h)  Annualized.

(i)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 1.22% (annualized), 1.22%, 1.22%, 1.23%, 1.22% and 1.20% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
61



Arbitrage Fund – Class C

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

12.34

  

$

12.12

  

$

12.54

  

$

12.37

  

$

12.65

  

$

12.37

  
Income (loss) from
investment
operations
 
Net investment
loss(a)
  

(0.06

)(b)

  

(0.12

)(b)

  

(0.07

)(b)

  

(0.22

)(c)

  

(0.16

)

  

(0.20

)

 
Net realized and
unrealized gains
on investments
and foreign
currencies
  

0.24

   

0.50

   

0.01

   

0.51

(d)

  

0.18

   

0.51

  
Total from investment
operations
  

0.18

   

0.38

   

(0.06

)

  

0.29

   

0.02

   

0.31

  

Less distributions

 
From net
investment
income
  

   

   

(0.00

)(e)

  

   

   

  
From net
realized gains
  

   

(0.16

)

  

(0.36

)

  

(0.12

)

  

(0.30

)

  

(0.03

)

 

Total distributions

  

   

(0.16

)

  

(0.36

)

  

(0.12

)

  

(0.30

)

  

(0.03

)

 
Proceeds from
redemption fees
collected
  

   

   

   

   

   

  
Net asset value,
end of period
 

$

12.52

  

$

12.34

  

$

12.12

  

$

12.54

  

$

12.37

  

$

12.65

  

Total return(f)(h)

  

1.46

%(g)

  

3.11

%

  

(0.45

%)

  

2.38

%

  

0.18

%

  

2.52

%

 
Net assets, end of
period (in 000s)
 

$

19,939

  

$

19,050

  

$

22,917

  

$

26,900

  

$

30,814

  

$

32,958

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(i)

  

2.53

%(j)

  

2.69

%

  

2.66

%

  

2.62

%(c)

  

2.63

%

  

3.06

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(i)(k)
  

2.51

%(j)

  

2.68

%

  

2.65

%

  

2.62

%(c)

  

2.63

%

  

3.06

%

 
Net investment
loss
  

(0.91

%)(b)(j)

  

(0.94

%)(b)

  

(0.56

%)

  

(1.76

%)(c)

  

(1.28

%)

  

(1.60

%)

 
Portfolio turnover
rate
  

121

%(g)

  

419

%

  

362

%

  

363

%

  

321

%

  

514

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
62



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to timing of sales and redemptions of Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

(c)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and is less than 0.005% of average net assets.

(d)  Includes estimated proceeds from the Fund's participation in a class action lawsuit. This represents a non-recurring gain in the amount of $0.01 per share.

(e)  Amount rounds to less than $0.01 per share.

(f)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares.

(g)  Not annualized.

(h)  Total return excludes sales charges, if any, and would be lower for the period presented if it reflected these charges.

(i)  Dividend expense totaled 0.28% (annualized), 0.46%, 0.42%, 0.36%, 0.34% and 0.68% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.00%, 0.01%, 0.03%, 0.07% and 0.18% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(j)  Annualized.

(k)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 2.22% (annualized), 2.22%, 2.22%, 2.23%, 2.22% and 2.20% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
63



Arbitrage Fund – Class A

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

12.90

  

$

12.63

  

$

13.07

  

$

12.79

  

$

12.97

  

$

12.59

  
Income (loss) from
investment
operations
 
Net investment
income (loss)(a)
  

(0.01

)(d)

  

(0.02

)(d)

  

(b)

  

(0.13

)(c)

  

(0.07

)

  

(0.09

)

 
Net realized and
unrealized gains
on investments
and foreign
currencies
  

0.25

   

0.52

   

0.02

   

0.53

(e)

  

0.19

   

0.50

  
Total from investment
operations
  

0.24

   

0.50

   

0.02

   

0.40

   

0.12

   

0.41

  

Less distributions

 
From net
investment
income
  

   

(0.07

)

  

(0.10

)

  

   

   

  
From net
realized gains
  

   

(0.16

)

  

(0.36

)

  

(0.12

)

  

(0.30

)

  

(0.03

)

 

Total distributions

  

   

(0.23

)

  

(0.46

)

  

(0.12

)

  

(0.30

)

  

(0.03

)

 
Proceeds from
redemption fees
collected
  

   

   

   

   

   

  
Net asset value,
end of period
 

$

13.14

  

$

12.90

  

$

12.63

  

$

13.07

  

$

12.79

  

$

12.97

  

Total return(f)(h)

  

1.78

%(g)

  

3.94

%

  

0.21

%

  

3.17

%

  

0.95

%

  

3.27

%

 
Net assets, end of
period (in 000s)
 

$

18,057

  

$

18,341

  

$

16,740

  

$

10,012

  

$

8,421

  

$

17,458

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(i)

  

1.78

%(j)

  

1.94

%

  

1.91

%

  

1.87

%(c)

  

1.87

%

  

2.31

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(i)(k)
  

1.76

%(j)

  

1.93

%

  

1.90

%

  

1.87

%(c)

  

1.87

%

  

2.31

%

 
Net investment
loss
  

(0.16

%)(d)(j)

  

(0.19

%)(d)

  

(0.01

%)

  

(1.02

%)(c)

  

(0.56

%)

  

(0.70

%)

 
Portfolio turnover
rate
  

121

%(g)

  

419

%

  

362

%

  

363

%

  

321

%

  

514

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
64



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  Amount rounds to less than $0.01 per share.

(c)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and is less than 0.005% of average net assets.

(d)  The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to timing of sales and redemptions of Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

(e)  Includes estimated proceeds from the Fund's participation in a class action lawsuit. This represents a non-recurring gain in the amount of $0.01 per share.

(f)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares.

(g)  Not annualized.

(h)  Total return excludes sales charges, if any, and would be lower for the period presented if it reflected these charges.

(i)  Dividend expense totaled 0.28% (annualized), 0.46%, 0.42%, 0.36%, 0.33% and 0.68% of average net assets for six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.00%, 0.01%, 0.03%, 0.07% and 0.18% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(j)  Annualized.

(k)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 1.47% (annualized), 1.47%, 1.47%, 1.48%, 1.47% and 1.45% of average net assets for the six months ended November 30, 2019, the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
65



Water Island Diversified Event-Driven Fund – Class R

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

9.47

  

$

9.46

  

$

9.34

  

$

8.98

  

$

9.73

  

$

10.29

  
Income (loss) from
investment
operations
 
Net investment
income (loss)(a)
  

(0.01

)

  

0.07

   

0.06

   

(0.04

)(b)

  

(0.02

)

  

0.04

  
Net realized and
unrealized gains
(losses) on
investments and
foreign currencies
  

0.16

   

0.08

   

0.09

   

0.40

(c)

  

(0.53

)

  

(0.36

)

 
Total from investment
operations
  

0.15

   

0.15

   

0.15

   

0.36

   

(0.55

)

  

(0.32

)

 

Less distributions

 
From net
investment
income
  

   

(0.14

)

  

(0.03

)

  

   

(0.20

)

  

(0.08

)

 
From net
realized gains
  

   

   

   

   

(0.00

)(d)

  

(0.16

)

 

Total distributions

  

   

(0.14

)

  

(0.03

)

  

   

(0.20

)

  

(0.24

)

 
Proceeds from
redemption fees
collected
  

   

   

0.00

(d)

  

0.00

(d)

  

0.00

(d)

  

0.00

(d)

 
Net asset value,
end of period
 

$

9.62

  

$

9.47

  

$

9.46

  

$

9.34

  

$

8.98

  

$

9.73

  

Total return(e)

  

1.58

%(f)

  

1.60

%

  

1.56

%

  

4.01

%

  

(5.55

%)

  

(3.12

%)

 
Net assets, end of
period (in 000s)
 

$

30,933

  

$

30,423

  

$

45,383

  

$

70,277

  

$

80,114

  

$

195,014

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(g)

  

2.30

%(h)

  

2.58

%

  

2.59

%

  

2.56

%(b)

  

2.62

%

  

2.52

%

 
Net expenses after
advisory fees
waived and
expenses reimbursed(g)(i)
  

1.93

%(h)

  

2.18

%

  

2.16

%

  

2.26

%

  

2.46

%

  

2.50

%

 
Net investment
income (loss)
  

(0.19

%)(h)

  

0.70

%

  

0.58

%

  

(0.45

%)(b)

  

(0.27

%)

  

0.37

%

 
Portfolio turnover
rate
  

175

%(f)

  

504

%

  

421

%

  

409

%

  

350

%

  

451

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
66



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and 0.01% of average net assets.

(c)  Includes estimated proceeds from the Fund's participation in a class action lawsuit. This represents a non-recurring gain in the amount of less than $0.005 per share.

(d)  Amount rounds to less than $0.01 per share.

(e)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares.

(f)  Not annualized.

(g)  Dividend expense totaled 0.23% (annualized), 0.46%, 0.44%, 0.53%, 0.58% and 0.55% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.03%, 0.03%, 0.04%, 0.19% and 0.26% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(h)  Annualized.

(i)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 1.69% (annualized), 1.69%, 1.69%, 1.69%, 1.69% and 1.69% of average net assets for the six months ended November 30, 2019 and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
67



Water Island Diversified Event-Driven Fund – Class I

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

9.54

  

$

9.53

  

$

9.43

  

$

9.04

  

$

9.81

  

$

10.37

  
Income (loss) from
investment
operations
 
Net investment
income (loss)(a)
  

0.00

(d)

  

0.09

   

0.04

   

(0.02

)(b)

  

(0.02

)

  

0.06

  
Net realized and
unrealized gains
(losses) on
investments and
foreign currencies
  

0.16

   

0.09

   

0.12

   

0.41

(c)

  

(0.51

)

  

(0.37

)

 
Total from investment
operations
  

0.16

   

0.18

   

0.16

   

0.39

   

(0.53

)

  

(0.31

)

 

Less distributions

 
From net
investment
income
  

   

(0.17

)

  

(0.06

)

  

   

(0.24

)

  

(0.09

)

 
From net
realized gains
  

   

   

   

   

(0.00

)(d)

  

(0.16

)

 

Total distributions

  

   

(0.17

)

  

(0.06

)

  

   

(0.24

)

  

(0.25

)

 
Proceeds from
redemption fees
collected
  

   

   

0.00

(d)

  

0.00

(d)

  

0.00

(d)

  

0.00

(d)

 
Net asset value,
end of period
 

$

9.70

  

$

9.54

  

$

9.53

  

$

9.43

  

$

9.04

  

$

9.81

  

Total return(e)

  

1.68

%(f)

  

1.88

%

  

1.69

%

  

4.31

%

  

(5.27

%)

  

(2.96

%)

 
Net assets, end of
period (in 000s)
 

$

98,492

  

$

92,710

  

$

103,001

  

$

68,272

  

$

95,155

  

$

390,102

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(g)

  

2.05

%(h)

  

2.33

%

  

2.34

%

  

2.31

%(b)

  

2.37

%

  

2.27

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(g)(i)
  

1.68

%(h)

  

1.93

%

  

1.91

%

  

2.01

%

  

2.21

%

  

2.25

%

 
Net investment
income (loss)
  

0.06

%(h)

  

0.92

%

  

0.46

%

  

(0.22

%)(b)

  

(0.26

%)

  

0.62

%

 
Portfolio turnover
rate
  

175

%(f)

  

504

%

  

421

%

  

409

%

  

350

%

  

451

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
68



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and 0.01% of average net assets.

(c)  Includes estimated proceeds from the Fund's participation in a class action lawsuit. This represents a non-recurring gain in the amount of less than $0.005 per share.

(d)  Amount rounds to less than $0.01 per share.

(e)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares.

(f)  Not annualized.

(g)  Dividend expense totaled 0.23% (annualized), 0.46%, 0.44%, 0.53%, 0.58% and 0.55% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.03%, 0.03%, 0.04%, 0.19% and 0.26% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(h)  Annualized.

(i)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 1.44% (annualized), 1.44%, 1.44%, 1.44%, 1.44% and 1.44% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
69



Water Island Diversified Event-Driven Fund – Class C

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

9.29

  

$

9.26

  

$

9.19

  

$

8.91

  

$

9.62

  

$

10.22

  
Income (loss) from
investment
operations
 
Net investment
loss(a)
  

(0.04

)

  

(0.01

)

  

(0.03

)(b)

  

(0.11

)(c)

  

(0.09

)

  

(0.04

)

 
Net realized and
unrealized gains
(losses) on
investments and
foreign currencies
  

0.15

   

0.09

   

0.10

   

0.39

(d)

  

(0.50

)

  

(0.36

)

 
Total from investment
operations
  

0.11

   

0.08

   

0.07

   

0.28

   

(0.59

)

  

(0.40

)

 

Less distributions

 
From net
investment
income
  

   

(0.05

)

  

   

   

(0.12

)

  

(0.04

)

 
From net
realized gains
  

   

   

   

   

(0.00

)(e)

  

(0.16

)

 

Total distributions

  

   

(0.05

)

  

   

   

(0.12

)

  

(0.20

)

 
Net asset value,
end of period
 

$

9.40

  

$

9.29

  

$

9.26

  

$

9.19

  

$

8.91

  

$

9.62

  

Total return(f)(h)

  

1.18

%(g)

  

0.91

%

  

0.76

%

  

3.14

%

  

(6.14

%)

  

(3.95

%)

 
Net assets, end of
period (in 000s)
 

$

689

  

$

794

  

$

1,175

  

$

1,567

  

$

2,538

  

$

5,020

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(j)

  

3.05

%(i)

  

3.33

%

  

3.34

%

  

3.31

%(c)

  

3.37

%

  

3.27

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(j)(k)
  

2.68

%(i)

  

2.93

%

  

2.91

%

  

3.01

%

  

3.21

%

  

3.25

%

 
Net investment
loss
  

(0.95

%)(i)

  

(0.06

%)

  

(0.34

%)

  

(1.26

%)(c)

  

(0.95

%)

  

(0.37

%)

 
Portfolio turnover
rate
  

175

%(g)

  

504

%

  

421

%

  

409

%

  

350

%

  

451

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
70



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to timing of sales and redemptions of Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.

(c)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and 0.01% of average net assets.

(d)  Includes estimated proceeds from the Fund's participation in a class action lawsuit. This represents a non-recurring gain in the amount of less than $0.005 per share.

(e)  Amount rounds to less than $0.01 per share.

(f)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares.

(g)  Not annualized.

(h)  Total return excludes sales charges, if any, and would be lower for the period presented if it reflected these charges.

(i)  Annualized.

(j)  Dividend expense totaled 0.23% (annualized), 0.46%, 0.44%, 0.53%, 0.59% and 0.55% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.03%, 0.03%, 0.04%, 0.18% and 0.26% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(k)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 2.44% (annualized), 2.44%, 2.44%, 2.44%, 2.44% and 2.44% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
71



Water Island Diversified Event-Driven Fund – Class A

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

9.46

  

$

9.46

  

$

9.35

  

$

8.98

  

$

9.73

  

$

10.30

  
Income (loss) from
investment
operations
 
Net investment
income (loss)(a)
  

(0.01

)

  

0.06

   

0.04

   

(0.05

)(b)

  

(0.03

)

  

0.03

  
Net realized and
unrealized gains
(losses) on
investments and
foreign currencies
  

0.16

   

0.08

   

0.10

   

0.42

(c)

  

(0.52

)

  

(0.36

)

 
Total from investment
operations
  

0.15

   

0.14

   

0.14

   

0.37

   

(0.55

)

  

(0.33

)

 

Less distributions

 
From net
investment
income
  

   

(0.14

)

  

(0.03

)

  

   

(0.20

)

  

(0.08

)

 
From net
realized gains
  

   

   

   

   

(0.00

)(d)

  

(0.16

)

 

Total distributions

  

   

(0.14

)

  

(0.03

)

  

   

(0.20

)

  

(0.24

)

 
Proceeds from
redemption fees
collected
  

   

   

   

   

   

  
Net asset value,
end of period
 

$

9.61

  

$

9.46

  

$

9.46

  

$

9.35

  

$

8.98

  

$

9.73

  

Total return(e)(g)

  

1.59

%(f)

  

1.56

%

  

1.49

%

  

4.12

%

  

(5.54

%)

  

(3.22

%)

 
Net assets, end of
period (in 000s)
 

$

805

  

$

799

  

$

701

  

$

810

  

$

2,062

  

$

5,341

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(h)

  

2.30

%(i)

  

2.58

%

  

2.59

%

  

2.56

%(b)

  

2.63

%

  

2.52

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(h)(j)
  

1.93

%(i)

  

2.18

%

  

2.16

%

  

2.26

%

  

2.47

%

  

2.50

%

 
Net investment
income (loss)
  

(0.20

%)(i)

  

0.65

%

  

0.41

%

  

(0.53

%)(b)

  

(0.28

%)

  

0.35

%

 
Portfolio turnover
rate
  

175

%(f)

  

504

%

  

421

%

  

409

%

  

350

%

  

451

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
72



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and 0.01% of average net assets.

(c)  Includes estimated proceeds from the Fund's participation in a class action lawsuit. This represents a non-recurring gain in the amount of less than $0.005 per share.

(d)  Amount rounds to less than $0.01 per share.

(e)  Total return excludes sales charges, if any, and would be lower for the period presented if it reflected these charges.

(f)  Not annualized.

(g)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares or the imposition of any sales load.

(h)  Dividend expense totaled 0.23% (annualized), 0.46%, 0.44%, 0.53%, 0.59% and 0.55% of average net assets for six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.03%, 0.03%, 0.04%, 0.19% and 0.26% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(i)  Annualized.

(j)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 1.69% (annualized), 1.69%, 1.69%, 1.69%, 1.69% and 1.69% of average net assets for the six months ended November 30, 2019, the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
73



Water Island Credit Opportunities Fund – Class R

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

9.70

  

$

9.77

  

$

9.67

  

$

9.69

  

$

9.95

  

$

10.28

  
Income (loss) from
investment
operations
 
Net investment
income(a)
  

0.12

   

0.31

   

0.20

   

0.23

(b)

  

0.25

   

0.28

  
Net realized and
unrealized gains
(losses) on
investments and
foreign currencies
  

0.05

   

(0.07

)

  

0.12

   

0.01

   

(0.24

)

  

(0.29

)

 
Total from investment
operations
  

0.17

   

0.24

   

0.32

   

0.24

   

0.01

   

(0.01

)

 

Less distributions

 
From net
investment
income
  

(0.16

)

  

(0.31

)

  

(0.22

)

  

(0.26

)

  

(0.27

)

  

(0.32

)

 

Total distributions

  

(0.16

)

  

(0.31

)

  

(0.22

)

  

(0.26

)

  

(0.27

)

  

(0.32

)

 
Proceeds from
redemption fees
collected
  

   

   

   

0.00

(c)

  

   

0.00

(c)

 
Net asset value,
end of period
 

$

9.71

  

$

9.70

  

$

9.77

  

$

9.67

  

$

9.69

  

$

9.95

  

Total return(d)

  

1.74

%(e)

  

2.55

%

  

3.21

%

  

2.58

%

  

0.10

%

  

(0.10

%)

 
Net assets, end of
period (in 000s)
 

$

8,441

  

$

7,845

  

$

9,533

  

$

11,935

  

$

12,426

  

$

22,728

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(f)

  

1.93

%(g)

  

2.10

%(h)

  

2.27

%

  

1.96

%(b)

  

1.92

%

  

2.27

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(f)(i)
  

1.38

%(g)

  

1.59

%(h)

  

1.95

%

  

1.66

%

  

1.67

%

  

2.03

%

 
Net investment
income
  

2.57

%(g)

  

3.18

%(h)

  

2.09

%

  

2.34

%(b)

  

2.62

%

  

2.84

%

 
Portfolio turnover
rate
  

96

%(e)

  

221

%

  

314

%

  

211

%

  

181

%

  

191

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
74



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and is less than 0.005% of average net assets.

(c)  Amount rounds to less than $0.01 per share.

(d)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares.

(e)  Not annualized.

(f)  Dividend expense totaled 0.14% (annualized), 0.29%, 0.42%, 0.16%, 0.03% and 0.06% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.01%, 0.03% , 0.00%, 0.14% and 0.47% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(g)  Annualized.

(h)  Effective August 6, 2018, the investment adviser reduced the advisory fee paid by the Fund and agreed to increase the expense reimbursements it provides to the Fund by contractually limiting the Fund's total expenses (other than certain expenses noted in the Notes to Financial Statements) to 1.23% for Class R shares. Prior to August 6, 2018, the expense limitation had been 1.50%

(i)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 1.23% (annualized), 1.29%, 1.50%, 1.50%, 1.50% and 1.50% of average net assets for the six months ended November 30, 2019 and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
75



Water Island Credit Opportunities Fund – Class I

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

9.65

  

$

9.73

  

$

9.65

  

$

9.67

  

$

9.93

  

$

10.25

  
Income (loss) from
investment
operations
 
Net investment
income(a)
  

0.14

   

0.34

   

0.23

   

0.25

(b)

  

0.27

   

0.33

  
Net realized and
unrealized gains
(losses) on
investments and
foreign currencies
  

0.04

   

(0.08

)

  

0.11

   

0.02

   

(0.24

)

  

(0.31

)

 
Total from investment
operations
  

0.18

   

0.26

   

0.34

   

0.27

   

0.03

   

0.02

  

Less distributions

 
From net
investment
income
  

(0.17

)

  

(0.34

)

  

(0.26

)

  

(0.29

)

  

(0.29

)

  

(0.34

)

 

Total distributions

  

(0.17

)

  

(0.34

)

  

(0.26

)

  

(0.29

)

  

(0.29

)

  

(0.34

)

 
Proceeds from
redemption fees
collected
  

   

   

   

   

   

0.00

(c)

 
Net asset value,
end of period
 

$

9.66

  

$

9.65

  

$

9.73

  

$

9.65

  

$

9.67

  

$

9.93

  

Total return(d)

  

1.87

%(e)

  

2.70

%

  

3.61

%

  

2.78

%

  

0.30

%

  

0.16

%

 
Net assets, end of
period (in 000s)
 

$

49,677

  

$

49,795

  

$

36,207

  

$

44,159

  

$

41,992

  

$

46,118

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(f)

  

1.68

%(g)

  

1.85

%(h)

  

2.02

%

  

1.71

%(b)

  

1.68

%

  

2.04

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(f)(i)
  

1.13

%(g)

  

1.32

%(h)

  

1.70

%

  

1.41

%

  

1.43

%

  

1.78

%

 
Net investment
income
  

2.81

%(g)

  

3.51

%(h)

  

2.34

%

  

2.62

%(b)

  

2.84

%

  

3.28

%

 
Portfolio turnover
rate
  

96

%(e)

  

221

%

  

314

%

  

211

%

  

181

%

  

191

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
76



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and is less than 0.005% of average net assets.

(c)  Amount rounds to less than $0.01 per share.

(d)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares.

(e)  Not annualized.

(f)  Dividend expense totaled 0.14% (annualized), 0.29%, 0.42% 0.16%, 0.04% and 0.06% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.01%, 0.03%, 0.00%, 0.14% and 0.47% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(g)  Annualized.

(h)  Effective August 6, 2018, the investment adviser reduced the advisory fee paid by the Fund and agreed to increase the expense reimbursements it provides to the Fund by contractually limiting the Fund's total expenses (other than certain expenses noted in the Notes to Financial Statements) to 0.98% for Class I shares. Prior to August 6, 2018, the expense limitation had been 1.25%

(i)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 0.98% (annualized), 1.02%, 1.25%, 1.25%, 1.25%and 1.25% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
77



Water Island Credit Opportunities Fund – Class C

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

9.67

  

$

9.74

  

$

9.62

  

$

9.61

  

$

9.89

  

$

10.23

  
Income (loss) from
investment
operations
 
Net investment
income(a)
  

0.09

   

0.24

   

0.13

   

0.16

(b)

  

0.18

   

0.22

  
Net realized and
unrealized gains
(losses) on
investments and
foreign currencies
  

0.03

   

(0.07

)

  

0.11

   

0.02

   

(0.25

)

  

(0.30

)

 
Total from investment
operations
  

0.12

   

0.17

   

0.24

   

0.18

   

(0.07

)

  

(0.08

)

 

Less distributions

 
From net
investment
income
  

(0.12

)

  

(0.24

)

  

(0.12

)

  

(0.17

)

  

(0.21

)

  

(0.26

)

 

Total distributions

  

(0.12

)

  

(0.24

)

  

(0.12

)

  

(0.17

)

  

(0.21

)

  

(0.26

)

 
Net asset value,
end of period
 

$

9.67

  

$

9.67

  

$

9.74

  

$

9.62

  

$

9.61

  

$

9.89

  

Total return(c)(e)

  

1.26

%(d)

  

1.79

%

  

2.53

%

  

1.83

%

  

(0.72

%)

  

(0.76

%)

 
Net assets, end of
period (in 000s)
 

$

356

  

$

468

  

$

640

  

$

1,053

  

$

1,220

  

$

2,020

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(f)

  

2.68

%(g)

  

2.86

%(h)

  

3.02

%

  

2.71

%(b)

  

2.68

%

  

3.05

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(f)(i)
  

2.13

%(g)

  

2.34

%(h)

  

2.70

%

  

2.41

%

  

2.43

%

  

2.78

%

 
Net investment
income
  

1.81

%(g)

  

2.46

%(h)

  

1.38

%

  

1.69

%(b)

  

1.92

%

  

2.24

%

 
Portfolio turnover
rate
  

96

%(d)

  

221

%

  

314

%

  

211

%

  

181

%

  

191

%

 

See Notes to Financial Statements.

www.arbitragefunds.com | 1-800-295-4485
78



  Financial Highlights

(a)  Per share amounts were calculated using average shares outstanding for the period.

(b)  Includes a non-recurring refund by the custodian for overbilling of prior years' out-of-pocket fees. This amounted to less than $0.01 per share and is less than 0.005% of average net assets.

(c)  Total return is a measure of the change in the value of an investment in the Fund over the periods covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares.

(d)  Not annualized.

(e)  Total return excludes sales charges, if any, and would be lower for the period presented if it reflected these charges.

(f)  Dividend expense totaled 0.14% (annualized), 0.29%, 0.42%, 0.16%, 0.04% and 0.06% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively. Interest rebate expense and line of credit interest expense totaled 0.01% (annualized), 0.01%, 0.03%, 0.00%, 0.14% and 0.47% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(g)  Annualized.

(h)  Effective August 6, 2018, the investment adviser reduced the advisory fee paid by the Fund and agreed to increase the expense reimbursements it provides to the Fund by contractually limiting the Fund's total expenses (other than certain expenses noted in the Notes to Financial Statements) to 1.98% for Class C shares. Prior to August 6, 2018, the expense limitation had been 2.25%.

(i)  Excluding dividend and interest expenses, the Fund's net expenses after advisory fees waived and expenses reimbursed would have been 1.98% (annualized), 2.04%, 2.25%, 2.25%, 2.25% and 2.25% of average net assets for the six months ended November 30, 2019, and the years ended May 31, 2019, 2018, 2017, 2016 and 2015, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2019
79



Water Island Credit Opportunities Fund – Class A

Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented:

  Six Months
Ended
November 30,
2019
 

Year Ended May 31,

 
  

(Unaudited)

 

2019

 

2018

 

2017

 

2016

 

2015

 
Net asset value,
beginning of period
 

$

9.65

  

$

9.73

  

$

9.66

  

$

9.67

  

$

9.93

  

$

10.25

  
Income (loss) from
investment
operations
 
Net investment
income(a)
  

0.12

   

0.31

   

0.17

   

0.23

(b)

  

0.25

   

0.29

  
Net realized and
unrealized gains
(losses) on
investments and
foreign currencies
  

0.05

   

(0.08

)

  

0.14

   

0.02

   

(0.25

)

  

(0.29

)

 
Total from investment
operations
  

0.17

   

0.23

   

0.31

   

0.25

   

   

  

Less distributions

 
From net
investment
income
  

(0.16

)

  

(0.31

)

  

(0.24

)

  

(0.26

)

  

(0.26

)

  

(0.32

)

 

Total distributions

  

(0.16

)

  

(0.31

)

  

(0.24

)

  

(0.26

)

  

(0.26

)

  

(0.32

)

 
Net asset value,
end of period
 

$

9.66

  

$

9.65

  

$

9.73

  

$

9.66

  

$

9.67

  

$

9.93

  

Total return(c)(d)

  

1.74

%(e)

  

2.45

%

  

3.10

%

  

2.58

%

  

0.02

%

  

(0.01

%)

 
Net assets, end of
period (in 000s)
 

$

406

  

$

121

  

$

153

  

$

107

  

$

104

  

$

630

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(f)

  

1.93

%(g)

  

2.10

%(h)

  

2.27

%

  

1.96

%(b)

  

1.91

%

  

2.29

%

 
Net expenses after
advisory fees
waived and
expenses
reimbursed(f)(i)
  

1.38

%(g)

  

1.58

%(h)

  

1.95

%

  

1.66

%

  

1.66

%

  

2.03

%

 
Net investment
income
  

2.55

%(g)

  

3.24

%(h)

  

1.81

%

  

2.35

%(b)

  

2.62

%

  

2.95

%

 
Portfolio turnover
rate
  

96

%(e)