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Arbitrage Funds

Filed: 5 Feb 21, 10:42am

 

 

 

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, 2020

 

 

 

 

 

Item 1.    Reports to Stockholders.

 

 

 

 

Semi-Annual Report

November 30, 2020

Arbitrage Fund

Water Island Event-Driven Fund

Water Island Credit Opportunities Fund

Water Island Long/Short Fund



TABLE OF CONTENTS

Arbitrage Fund

 

Portfolio Information

  

1

  

Portfolio of Investments

  

3

  

Water Island Event-Driven Fund

 

Portfolio Information

  

16

  

Portfolio of Investments

  

18

  

Water Island Credit Opportunities Fund

 

Portfolio Information

  

33

  

Portfolio of Investments

  

35

  

Water Island Long/Short Fund

 

Portfolio Information

  

45

  

Portfolio of Investments

  

47

  

Statements of Assets and Liabilities

  

56

  

Statements of Operations

  

60

  

Statements of Changes in Net Assets

  

64

  

Financial Highlights

 

Arbitrage Fund - Class R

  

68

  

Arbitrage Fund - Class I

  

70

  

Arbitrage Fund - Class C

  

72

  

Arbitrage Fund - Class A

  

74

  

Water Island Event-Driven Fund - Class R

  

76

  

Water Island Event-Driven Fund - Class I

  

78

  

Water Island Event-Driven Fund - Class C

  

80

  

Water Island Event-Driven Fund - Class A

  

82

  

Water Island Credit Opportunities Fund - Class R

  

84

  

Water Island Credit Opportunities Fund - Class I

  

86

  

Water Island Credit Opportunities Fund - Class C

  

88

  

Water Island Credit Opportunities Fund - Class A

  

90

  

Water Island Long/Short Fund - Class R

  

92

  

Water Island Long/Short Fund - Class I

  

94

  

Notes to Financial Statements

  

96

  

Disclosure of Fund Expenses

  

122

  

Additional Information

  

125

  


Arbitrage Fund  Portfolio Information

November 30, 2020 (Unaudited)

Performance (annualized returns as of November 30, 2020)

 One
Year
 Five
Year
 Ten
Year
 Since
Inception*
 

Arbitrage Fund, Class R

  

4.45

%

  

3.24

%

  

2.31

%

  

3.98

%

 

Arbitrage Fund, Class I

  

4.76

%

  

3.50

%

  

2.56

%

  

3.13

%

 

Arbitrage Fund, Class C**

  

3.62

%

  

2.46

%

  

N/A

   

1.51

%

 

Arbitrage Fund, Class A***

  

4.46

%

  

3.23

%

  

N/A

   

2.52

%

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

0.80

%

  

1.20

%

  

0.64

%

  

1.58

%

 

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 2.75% 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 1.71%, 1.46%, 2.46% and 1.71%, 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.

An investor may not invest directly in an index.

Semi-Annual Report | November 30, 2020
1



Arbitrage Fund  Portfolio Information (continued)

November 30, 2020 (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.

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



Arbitrage Fund  Portfolio of Investments

November 30, 2020 (unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 84.15%

 

Auto Manufacturers - 2.46%

 

Fiat Chrysler Automobiles N.V.(a)

  

873,683

  

$

13,617,035

  

Navistar International Corp.(a)

  

484,031

   

21,423,212

  
   

35,040,247

  

Auto Parts & Equipment - 0.19%

 

Velodyne Lidar, Inc.(a)

  

170,402

   

2,712,800

  

Banks - 0.97%

 

CIT Group, Inc.(b)

  

412,973

   

13,830,466

  

Beverages - 0.50%

 

Coca-Cola Amatil Ltd.

  

765,099

   

7,104,505

  

Commercial Services - 1.04%

 

Cpl Resources Plc

  

98,001

   

1,309,286

  

Devoteam SA(a)

  

71,221

   

8,308,697

  

Horizon Discovery Group Plc(a)

  

639,674

   

1,616,021

  

IHS Markit Ltd.

  

35,934

   

3,573,996

  

Worldline SA(a)(c)

  

1

   

55

  
  ��

14,808,055

  

Computers & Computer Services - 4.39%

 

58.COM, Inc., Class A(a)(d)

  

1,487,130

   

41,639,640

  

Virtusa Corp.(a)

  

418,282

   

20,947,562

  
   

62,587,202

  

Construction Materials - 0.30%

 

Norbord, Inc.

  

114,505

   

4,292,946

  

Distribution/Wholesale - 2.99%

 

HD Supply Holdings, Inc.(a)

  

762,341

   

42,523,381

  

Diversified Financial Services - 6.03%

 

Eaton Vance Corp.(b)

  

1,121,375

   

75,109,698

  

Genworth MI Canada, Inc.

  

320,425

   

10,762,253

  
   

85,871,951

  

Electric - 3.68%

 

PNM Resources, Inc.

  

1,066,192

   

52,360,689

  

Entertainment - 0.82%

 

William Hill Plc

  

3,281,677

   

11,733,665

  

Forest Products & Paper - 0.36%

 

Ahlstrom-Munksjo Oyj

  

236,395

   

5,075,710

  

Hand/Machine Tools - 0.33%

 

IMA Industria Macchine Automatiche SpA(a)

  

57,332

   

4,643,580

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
3



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 84.15% (Continued)

 

Healthcare - Products - 3.81%

 

Varian Medical Systems, Inc.(a)

  

311,860

  

$

54,257,403

  

Household Products - 0.91%

 

Unilever Plc, ADR

  

212,814

   

12,994,423

  

Insurance - 9.81%

 

National General Holdings Corp.

  

1,741,195

   

59,339,925

  

TOWER Ltd.(a)

  

9,485,696

   

4,024,078

  

Watford Holdings Ltd.(a)(b)

  

564,785

   

19,609,335

  

Willis Towers Watson Plc(b)

  

272,278

   

56,685,557

  
   

139,658,895

  

Internet - 2.58%

 

Endurance International Group Holdings, Inc.(a)(b)

  

937,764

   

8,890,003

  

Grubhub, Inc.(a)(b)

  

396,544

   

27,892,905

  
   

36,782,908

  

Oil & Gas - 2.90%

 

Concho Resources, Inc.(b)

  

511,676

   

29,411,136

  

Parsley Energy, Inc., Class A(b)

  

493,326

   

6,181,375

  

WPX Energy, Inc.(a)(b)

  

799,113

   

5,689,685

  
   

41,282,196

  

Pharmaceuticals - 0.77%

 

BioSpecifics Technologies Corp.(a)

  

123,794

   

10,943,390

  

Real Estate - 0.41%

 

McCarthy & Stone Plc(a)(c)

  

3,743,581

   

5,839,184

  

Real Estate Investment Trusts - 3.31%

 

Front Yard Residential Corp.(b)

  

1,161,935

   

18,962,779

  

Taubman Centers, Inc.(b)

  

661,145

   

28,244,114

  
   

47,206,893

  

Retail - 9.53%

 

BMC Stock Holdings, Inc.(a)

  

410,238

   

20,077,048

  

Dunkin' Brands Group, Inc.

  

466,907

   

49,650,890

  

Foundation Building Materials, Inc.(a)

  

469,012

   

9,023,791

  

Tiffany & Co.

  

432,793

   

56,903,624

  
   

135,655,353

  

Semiconductors - 6.94%

 

AVX Corp.(a)(d)

  

1,022,500

   

6,390,625

  

Maxim Integrated Products, Inc.(b)

  

672,510

   

55,845,231

  

Xilinx, Inc.(b)

  

251,855

   

36,657,495

  
   

98,893,351

  

See Notes to Financial Statements.

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



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 84.15% (Continued)

 

Software - 3.44%

 

Codemasters Group Holdings Plc(a)

  

584,609

  

$

3,928,033

  

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

  

843,793

   

30,798,444

  

MobileIron, Inc.(a)

  

2,035,789

   

14,331,955

  

Onemarket Ltd.(a)(d)

  

111,800

   

  
   

49,058,432

  

Special Purpose Acquisition Companies - 0.23%

 

Fast Acquisition Corp.(a)

  

148,872

   

1,540,825

  

Fusion Acquisition Corp.(a)

  

162,368

   

1,704,864

  
   

3,245,689

  

Telecommunications - 15.45%

 

Acacia Communications, Inc.(a)(b)

  

956,172

   

66,626,065

  

Altice Europe N.V.(a)

  

293,688

   

1,547,740

  

Cincinnati Bell, Inc.(a)(b)

  

1,380,047

   

20,990,515

  

GCI Liberty, Inc., Class A(a)(b)

  

660,966

   

60,227,222

  

Gilat Satellite Networks Ltd.

  

250,950

   

1,520,757

  

LogMeIn, Inc.(a)(d)

  

778,758

   

69,044,684

  
   

219,956,983

  
TOTAL COMMON STOCKS
(Cost $1,133,332,581)
  

1,198,360,297

  

RIGHTS - 0.11%

 

Bristol-Myers Squibb Co.(a)

  

408,177

   

481,649

  

Contra Pfenex, Inc.(d)

  

1,108,177

   

844,431

  

Elanco Animal Health, Inc. CVR(d)

  

1,124,589

   

  

Media General, Inc. CVR(d)

  

613,589

   

  

NewStar Financial, Inc. CVR(d)

  

1,514,945

   

  

Stemline Therapeutics, Inc. CVR(d)

  

693,435

   

239,373

  
TOTAL RIGHTS
(Cost $1,429,232)
  

1,565,453

  

 

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

CORPORATE BONDS - 0.37%

 

Entertainment - 0.37%

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

07/15/2026

  

7.000

%

 

$

4,949,000

  

$

5,233,568

  
TOTAL CORPORATE BONDS
(Cost $5,236,584)
  

5,233,568

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
5



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (unaudited)

  

Shares

 

Value

 

MUTUAL FUNDS - 4.95%

 

Water Island Event-Driven Fund, Class I(e)

  

6,589,384

  

$

70,506,411

  
TOTAL MUTUAL FUNDS
(Cost $60,459,409)
    

70,506,411

  

PRIVATE INVESTMENTS(d)(f) - 0.07%

 

Fast Capital LLC(a)

  

290,700

   

290,700

  

Fuse LLC(a)

  

725,800

   

659,818

  

Fuse Sponsor Capital, Z2 Shares(a)

  

72,580

   

65,982

  
TOTAL PRIVATE INVESTMENTS
(Cost $1,033,484)
    

1,016,500

  

 

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(a) - 0.06%

 

Call Options Purchased - 0.05%

 

Devon Energy Corp.

 

01/2021

 

$

13.74

  

$

4,935,672

   

3,528

  

$

458,640

  

S&P Global, Inc.

 

01/2021

  

350.00

   

2,743,884

   

78

   

115,440

  

Taubman Centers, Inc.

 
  

01/2021

  

40.00

   

2,114,640

   

495

   

148,500

  
  

01/2021

  

45.00

   

8,526,912

   

1,996

   

0

  
TOTAL CALL OPTIONS PURCHASED
(Cost $619,848)
  

722,580

  

Put Options Purchased - 0.01%

 
iShares iBoxx $ Investment
Grade Corporate
Bond ETF
 

01/2021

  

130.00

   

20,051,904

   

1,448

   

32,580

  

iShares Russell 2000 ETF

 
  

01/2021

  

142.00

   

2,896,320

   

160

   

7,200

  
  

01/2021

  

145.00

   

2,842,014

   

157

   

8,792

  
TOTAL PUT OPTIONS PURCHASED
(Cost $501,138)
  

48,572

  
TOTAL PURCHASED OPTIONS
(Cost $1,120,986)
  

771,152

  

See Notes to Financial Statements.

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



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (unaudited)

  

Yield

 

Shares

 

Value

 

SHORT-TERM INVESTMENTS - 7.70%

 

Money Market Funds

 
Morgan Stanley Institutional Liquidity
Fund Government Portfolio,
Institutional Class
  

0.020

%(g)

  

54,814,881

  

$

54,814,881

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

0.132

%(g)

  

54,814,882

   

54,814,882

  
    

  

109,629,763

  
TOTAL SHORT-TERM INVESTMENTS
(Cost $109,629,763)
  

109,629,763

  
Total Investments - 97.41%
(Cost $1,312,242,039)
  

1,387,083,144

  

Other Assets in Excess of Liabilities - 2.59%(h)

  

36,950,960

  

NET ASSETS - 100.00%

 

$

1,424,034,104

  

Portfolio Footnotes

(a)  Non-income-producing security.

(b)  Security, or a portion of security, is being held as collateral for short sales or forward foreign currency exchange contracts. At November 30, 2020, the aggregate fair market value of those securities was $278,072,980, representing 19.53% 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, 2020, these securities had a total value of $11,072,807 or 0.78% of net assets.

(d)  Security fair valued using significant unobservable inputs and classified as a Level 3 security. As of November 30, 2020, the total fair market value of these securities was $149,973,697, representing 10.53% of net assets.

(e)  Affiliated investment.

(f)  Represents a holding that is a direct investment into a private company and is not a listed or publicly traded entity.

(g)  Rate shown is the 7-day effective yield as of November 30, 2020.

(h)  Includes cash held as collateral for short sales.

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (19.92%)

 

Auto Manufacturers - (0.83%)

 

Peugeot SA

  

(501,540

)

 

$

(11,824,653

)

 

Banks - (1.13%)

 

First Citizens BancShares, Inc., Class A

  

(25,605

)

  

(13,534,547

)

 

Morgan Stanley

  

(41,020

)

  

(2,536,267

)

 
   

(16,070,814

)

 

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
7



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (unaudited)

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

Commercial Services - (0.25%)

 

S&P Global, Inc.

  

(10,198

)

 

$

(3,587,452

)

 

Construction Materials - (1.42%)

 

Builders FirstSource, Inc.

  

(538,511

)

  

(20,145,697

)

 

Food - (1.98%)

 

Just Eat Takeaway.com N.V.

  

(266,079

)

  

(28,260,626

)

 

Forest Products & Paper - (0.30%)

 

West Fraser Timber Co. Ltd.

  

(77,366

)

  

(4,283,814

)

 

Media - (4.23%)

 

Liberty Broadband Corp.

  

(383,121

)

  

(60,284,089

)

 

Oil & Gas - (2.92%)

 

ConocoPhillips

  

(747,047

)

  

(29,553,179

)

 

Devon Energy Corp.

  

(412,655

)

  

(5,773,043

)

 

Pioneer Natural Resources Co.

  

(61,765

)

  

(6,212,324

)

 
   

(41,538,546

)

 

Semiconductors - (6.65%)

 

Advanced Micro Devices, Inc.

  

(434,047

)

  

(40,218,795

)

 

Analog Devices, Inc.

  

(391,982

)

  

(54,516,857

)

 
   

(94,735,652

)

 

Software - (0.21%)

 

Take-Two Interactive Software, Inc.

  

(16,567

)

  

(2,990,509

)

 
TOTAL COMMON STOCKS
(Proceeds $249,087,538)
  

(283,721,852

)

 

EXCHANGE-TRADED FUNDS - (0.54%)

 

Equity Funds - (0.54%)

 

Health Care Select Sector SPDR® Fund

  

(15,687

)

  

(1,721,491

)

 

iShares MSCI Australia ETF

  

(149,874

)

  

(3,405,137

)

 

iShares Russell 2000 Growth ETF

  

(6,806

)

  

(1,787,188

)

 

iShares Russell 2000 Value ETF

  

(5,920

)

  

(725,911

)

 
   

(7,639,727

)

 
TOTAL EXCHANGE-TRADED FUNDS
(Proceeds $6,930,245)
  

(7,639,727

)

 
TOTAL SECURITIES SOLD SHORT
(Proceeds $256,017,783)
 

$

(291,361,579

)

 

See Notes to Financial Statements.

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



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (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
 
 
 Unilever
Plc
 
 
 
 
 Received
1 Month
SONIA
Minus
35 bps
(-0.054%)
 

06/16/2021

 

$

  

$

  

$

  



GBP
1,013,985
 

$

  
Goldman
Sachs &
Co./
Monthly
 
 
 Unilever
Plc
 
 
 
 
 Received
1 Week
GBP LIBOR
Minus
40 bps
(-0.036%)
 

06/17/2021

  

   

   

  



GBP
8,713,743
  

  
Morgan
Stanley &
Co./
Monthly
 
 
 
 Analog
Devices,
Inc.
 
 
 
 
 Received
1 Month-
Federal
Rate
Minus
40 bps
(-0.320%)
 

08/12/2021

  

   

   

  




USD
4,406,889
  

  
Morgan
Stanley &
Co./
Monthly
 
 
 
 Aon Plc
 
 
 
 
 
 
 Received
1 Month-
Federal
Rate
Minus
40 bps
(-0.320%)
 

08/12/2021

  

   

   

  




USD
60,249,749
  

  
Goldman
Sachs &
Co./
Monthly
 
 
 William
Hill Plc
 
 
 
 
 Paid
1 Month
GBP LIBOR
Plus
45 bps
(0.440%)
 

10/19/2021

  

   

   

  



GBP
9,538,528
  

  
Goldman
Sachs &
Co./
Monthly
 
 
 Morgan
Stanley
 
 
 
 
 Received
1 Month
LIBOR
Minus
40 bps
(-0.260%)
 

10/28/2021

  

   

   

  



USD
37,906,551
  

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
9



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (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
 
Goldman
Sachs &
Co./
Monthly
 
 
 
 Kaz
Minerals Plc
 
 
 
 
 
 Paid
1 Month
GBP
LIBOR
Plus
45 bps
(0.639%)
 





11/01/2021
 

$

  

$

  

$

  




GBP
2,208,146
 

$

  
Goldman
Sachs &
Co./
Monthly
 
 
 
 Alternative
Credit
Investments
 
 
 
 
 Paid
1 Month
GBP
LIBOR
Plus
70 bps
(0.743%)
 





11/05/2021
  

   

   

  




GBP
1,951,045
  

  
Goldman
Sachs &
Co./
Monthly
 
 
 Cpl
Resources
Plc
 
 
 
 Paid
1 Month
EURIBOR
Plus
90 bps
(0.350%)
 




11/08/2021
  

   

   

  



EUR
1,914,662
  

  
Goldman
Sachs &
Co./
Monthly
 
 
 
 Urban &
Civic Plc
 
 
 
 
 
 Paid
1 Month
GBP
LIBOR
Plus
60 bps
(1.000%)
 





11/10/2021
  

   

   

  




GBP
6,693,134
  

  
Morgan
Stanley &
Co./
Monthly
 
 
 RSA
Insurance
Group Plc
 
 
 
 Paid
1 Month
LIBOR
Plus
50 bps
(0.554%)
 




08/05/2022
  

   

   

  



GBP
6,421,030
  

  
  

 

 

 

 

 

 

 

 

 

 

$

  

 

 

$

  

See Notes to Financial Statements.

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



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (unaudited)

OUTSTANDING FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Appreciation
 

AUD

107,100

  

USD

77,958

  

Morgan Stanley & Co.

 

12/15/2020

 

$

670

  

CAD

371,700

  

USD

285,293

  

Morgan Stanley & Co.

 

12/15/2020

  

941

  

USD

175,418

  

CAD

227,500

  

Morgan Stanley & Co.

 

12/15/2020

  

228

  

CHF

18,922,100

  

USD

20,763,022

  

Morgan Stanley & Co.

 

12/15/2020

  

69,271

  

USD

557,829

  

CHF

505,400

  

Morgan Stanley & Co.

 

12/15/2020

  

1,409

  

EUR

31,143,800

  

USD

36,673,029

  

Morgan Stanley & Co.

 

12/15/2020

  

491,261

  

GBP

6,120,042

  

USD

8,035,696

  

Morgan Stanley & Co.

 

12/15/2020

  

124,679

  

USD

1,682,374

  

GBP

1,258,900

  

Morgan Stanley & Co.

 

12/15/2020

  

3,775

  

NZD

16,402,800

  

USD

10,939,967

  

Morgan Stanley & Co.

 

12/15/2020

  

561,984

  

USD

99,847

  

NZD

142,200

  

Morgan Stanley & Co.

 

12/15/2020

  

134

  

SEK

39,783,300

  

USD

4,534,919

  

Morgan Stanley & Co.

 

12/15/2020

  

104,744

  
  

$

1,359,096

  
Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Depreciation
 

USD

7,066,364

  

AUD

9,724,400

  

Morgan Stanley & Co.

 

12/15/2020

 

$

(72,834

)

 

USD

10,704,804

  

CAD

14,117,900

  

Morgan Stanley & Co.

 

12/15/2020

  

(166,917

)

 

CHF

252,700

  

USD

279,171

  

Morgan Stanley & Co.

 

12/15/2020

  

(961

)

 

USD

20,471,393

  

CHF

18,669,400

  

Morgan Stanley & Co.

 

12/15/2020

  

(82,691

)

 

EUR

173,000

  

USD

206,910

  

Morgan Stanley & Co.

 

12/15/2020

  

(467

)

 

USD

47,582,707

  

EUR

40,238,000

  

Morgan Stanley & Co.

 

12/15/2020

  

(433,805

)

 

USD

38,363,176

  

GBP

29,164,973

  

Morgan Stanley & Co.

 

12/15/2020

  

(524,980

)

 

NZD

237,100

  

USD

166,335

  

Morgan Stanley & Co.

 

12/15/2020

  

(76

)

 

USD

14,951,712

  

NZD

22,236,500

  

Morgan Stanley & Co.

 

12/15/2020

  

(640,939

)

 

PLN

54,095,200

  

USD

14,478,257

  

Morgan Stanley & Co.

 

12/15/2020

  

(64,481

)

 

USD

13,992,910

  

PLN

54,095,200

  

Morgan Stanley & Co.

 

12/15/2020

  

(420,866

)

 

USD

4,554,148

  

SEK

39,783,300

  

Morgan Stanley & Co.

 

12/15/2020

  

(85,513

)

 
  

$

(2,494,530

)

 

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
11



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (unaudited)

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

Country

 

% of Net Assets(a)

 

United Kingdom

  

7.71

%

 

Cayman Islands

  

2.92

%

 

Bermuda

  

1.38

%

 

United States Virgin Islands

  

1.33

%

 

Canada

  

1.06

%

 

France

  

0.59

%

 

Australia

  

0.50

%

 

Netherlands

  

0.48

%

 

Finland

  

0.36

%

 

Italy

  

0.33

%

 

New Zealand

  

0.28

%

 

Israel

  

0.11

%

 

Ireland

  

0.09

%

 

United States

  

80.27

%

 

Other Assets in Excess of Liabilities

  

2.59

%

 
   

100.00

%

 

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

Abbreviations:

ADR - American Depositary Receipt

AUD - Australian dollar

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

B.V. - Besloten Vennootschap is the Dutch term for private limited liability company.

CAD - Canadian dollar

CHF - Swiss franc

CVR - Contingent Value Rights

ETF - Exchange-Traded Fund

EUR - Euro

EURIBOR - Euro Interbank Offered Rate

GBP - British pound

GBP LIBOR - London Interbank Offered Rate denominated in British Pounds

LIBOR - London Interbank Offered Rate

LLC - Limited Liability Company

Ltd. - Limited

MSCI - Morgan Stanley Capital International

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

NZD - New Zealand dollar

Oyj - Osakeyhtio is the Finnish equivalent of a public limited company.

Plc - Public Limited Company

PLN - Polish zloty

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

SEK - Swedish krona

See Notes to Financial Statements.

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



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (unaudited)

SONIA - Sterling OverNight Index Average

S&P - Standard & Poor's

SpA - Societa per Azione

SPDR - Standard & Poor's Depositary Receipt

USD - United States Dollar

The following table summarizes the Arbitrage Fund's investments and derivative financial instruments categorized in the fair value hierarchy as of November 30, 2020:

Investments in Securities at Value*

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

Common Stocks

 

Auto Manufacturers

 

$

35,040,247

  

$

  

$

  

$

35,040,247

  

Auto Parts & Equipment

  

2,712,800

   

   

   

2,712,800

  

Banks

  

13,830,466

   

   

   

13,830,466

  

Beverages

  

7,104,505

   

   

   

7,104,505

  

Commercial Services

  

14,808,055

   

   

   

14,808,055

  
Computers & Computer
Services
  

20,947,562

   

   

41,639,640

   

62,587,202

  

Construction Materials

  

4,292,946

   

   

   

4,292,946

  

Distribution/Wholesale

  

42,523,381

   

   

   

42,523,381

  

Diversified Financial Services

  

85,871,951

   

   

   

85,871,951

  

Electric

  

52,360,689

   

   

   

52,360,689

  

Entertainment

  

11,733,665

   

   

   

11,733,665

  

Forest Products & Paper

  

5,075,710

   

   

   

5,075,710

  

Hand/Machine Tools

  

4,643,580

   

   

   

4,643,580

  

Healthcare - Products

  

54,257,403

   

   

   

54,257,403

  

Household Products

  

12,994,423

   

   

   

12,994,423

  

Insurance

  

139,658,895

   

   

   

139,658,895

  

Internet

  

36,782,908

   

   

   

36,782,908

  

Oil & Gas

  

41,282,196

   

   

   

41,282,196

  

Pharmaceuticals

  

10,943,390

   

   

   

10,943,390

  

Real Estate

  

5,839,184

   

   

   

5,839,184

  

Real Estate Investment Trusts

  

47,206,893

   

   

   

47,206,893

  

Retail

  

135,655,353

   

   

   

135,655,353

  

Semiconductors

  

92,502,726

   

   

6,390,625

   

98,893,351

  

Software

  

18,259,988

   

   

30,798,444

   

49,058,432

  
Special Purpose Acquisition
Companies
  

3,245,689

   

   

   

3,245,689

  

Telecommunications

  

150,912,299

   

   

69,044,684

   

219,956,983

  

Rights

  

481,649

   

   

1,083,804

   

1,565,453

  

Corporate Bonds**

  

   

5,233,568

   

   

5,233,568

  

Mutual Funds

  

70,506,411

   

   

   

70,506,411

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
13



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (unaudited)

Investments in Securities at Value*

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Private Investments

 

$

  

$

  

$

1,016,500

  

$

1,016,500

  

Purchased Options

  

771,152

   

   

   

771,152

  

Short-Term Investments

  

109,629,763

   

   

   

109,629,763

  

TOTAL

 

$

1,231,875,879

  

$

5,233,568

  

$

149,973,697

  

$

1,387,083,144

  

Other Financial Instruments***

 

Assets

 
Forward Foreign Currency
Exchange Contracts
 

$

  

$

1,359,096

  

$

  

$

1,359,096

  

Equity Swaps

  

0

   

   

   

0

  

Liabilities

 

Common Stocks**

  

(283,721,852

)

  

   

   

(283,721,852

)

 

Exchange-Traded Funds

  

(7,639,727

)

  

   

   

(7,639,727

)

 
Forward Foreign Currency
Exchange Contracts
  

   

(2,494,530

)

  

   

(2,494,530

)

 

TOTAL

 

$

(291,361,579

)

 

$

(1,135,434

)

 

$

  

$

(292,497,013

)

 

*  Refer to footnote 2 where leveling hierarchy is defined.

**  Refer to Portfolio of Investments for sector information.

***  Other financial instruments are instruments such as 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, 2020:

Investments
in Securities
 Balance as of
May 31, 2020
 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,
2020
 Net change in
Unrealized
Appreciation
(Depreciation)
from
investments
still held
as of
November 30,
2020
 
Common
Stocks
 

$

65,345,698

  

$

676,691

  

$

3,733,066

  

$

70,906,111

  

$

(72,154,391

)

 

$

79,366,218

  

$

  

$

147,873,393

  

$

4,063,781

  

Rights

  

840,340

   

567,862

   

(450,718

)

  

1,059,966

   

(933,646

)

  

   

   

1,083,804

   

(450,718

)

 
Private
Investments
  

0

   

   

(16,984

)

  

1,033,484

   

   

   

   

1,016,500

   

(16,984

)

 

Total

 

$

66,186,038

  

$

1,244,553

  

$

3,265,364

  

$

72,999,561

  

$

(73,088,037

)

 

$

79,366,218

  

$

  

$

149,973,697

  

$

3,596,079

  

See Notes to Financial Statements.

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



Arbitrage Fund  Portfolio of Investments (continued)

November 30, 2020 (unaudited)

The following table summarizes the quantitative inputs used for investments categorized as Level 3 of the fair value hierarchy as of November 30, 2020:

Investments in
Securities
 Fair Value at
November 30,
2020
 Valuation
Technique
 Unobservable
Input
 Range of
Values
 Weighted
Average
 
Common Stocks
 
 
 
 
 
 

$

147,873,393




 Deal Value,
Liquidation
Value
 
 
 
 Final
determination
on Dissent,
Final
Liquidation
Value
 $6.25-$88.66, 0 AUD
 
 
 
 
 
 $35.7858, 0
 
 
 
 
 
 
Rights
 
 
 
 

$

1,083,804


 Discounted,
probability
adjusted
value
 Discount
Rate,
Probability
 
 10%, 38.28%-42.25%
 
 
 
 $0.6016
 
 
 
 
Private
Investments
 

$

1,016,500
 Cost
 
 Cost
 
 $.091-$1
 
 $0.933
 
 

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
15



Water Island Event-Driven Fund  Portfolio Information

November 30, 2020 (Unaudited)

Performance (annualized returns as of November 30, 2020)

 One
Year
 Five
Year
 Ten
Year
 Since
Inception*
 

Water Island Event-Driven Fund Class R

  

10.40

%

  

4.42

%

  

2.19

%

  

2.31

%

 

Water Island Event-Driven Fund Class I

  

10.82

%

  

4.69

%

  

2.45

%

  

2.56

%

 

Water Island Event-Driven Fund, Class C**

  

9.68

%

  

3.66

%

  

N/A

   

1.43

%

 

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

  

10.54

%

  

4.45

%

  

N/A

   

2.07

%

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

0.80

%

  

1.20

%

  

0.64

%

  

0.63

%

 

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 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 2.06%, 1.81%, 2.81% and 2.06%, 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, 2021. 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.

An investor may not invest directly in an index.

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



Water Island Event-Driven Fund  Portfolio Information (continued)

November 30, 2020 (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 Event-Driven Fund's investments (including short sales and excluding derivatives) as of the report date.

Semi-Annual Report | November 30, 2020
17



Water Island Event-Driven Fund  Portfolio of Investments

November 30, 2020 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 87.27%

 

Auto Manufacturers - 2.42%

 

Fiat Chrysler Automobiles N.V.(a)

  

66,757

  

$

1,040,460

  

Navistar International Corp.(a)

  

36,915

   

1,633,858

  
   

2,674,318

  

Auto Parts & Equipment - 0.62%

 

Telenav, Inc.(a)

  

56,293

   

267,392

  

Velodyne Lidar, Inc.(a)

  

26,577

   

423,106

  
   

690,498

  

Banks - 0.94%

 

CIT Group, Inc.(b)

  

31,038

   

1,039,463

  

Beverages - 0.69%

 

Coca-Cola Amatil Ltd.

  

82,035

   

761,755

  

Commercial Services - 0.60%

 

CoreLogic, Inc.(b)

  

4,941

   

382,928

  

IHS Markit Ltd.

  

2,787

   

277,195

  
   

660,123

  

Computers & Computer Services - 6.71%

 

58.COM, Inc., Class A(a)(c)

  

194,588

   

5,448,464

  

Perspecta, Inc.(b)

  

18,997

   

425,913

  

Virtusa Corp.(a)

  

31,071

   

1,556,035

  
   

7,430,412

  

Distribution/Wholesale - 2.94%

 

HD Supply Holdings, Inc.(a)

  

58,308

   

3,252,420

  

Diversified Financial Services - 6.21%

 

Eaton Vance Corp.(b)

  

86,955

   

5,824,246

  

GCM Grosvenor, Inc., Class A(a)

  

24,177

   

229,681

  

Genworth MI Canada, Inc.

  

24,321

   

816,880

  
   

6,870,807

  

Electric - 3.60%

 

PNM Resources, Inc.

  

81,038

   

3,979,776

  

Energy - Alternate Sources - 0.23%

 

Championx Corp.(a)

  

21,541

   

255,907

  

Engineering & Construction - 0.61%

 

AECOM(a)

  

12,995

   

674,311

  

See Notes to Financial Statements.

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



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

November 30, 2020 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 87.27% (Continued)

 

Entertainment - 0.76%

 

Cineplex, Inc.

  

23,327

  

$

186,803

  

William Hill Plc(a)

  

182,835

   

653,728

  
   

840,531

  

Food - 0.31%

 

Whole Earth Brands, Inc.(a)

  

41,352

   

342,808

  

Forest Products & Paper - 0.34%

 

Ahlstrom-Munksjo Oyj

  

17,569

   

377,229

  

Healthcare - Products - 0.37%

 

Oxford Immunotec Global Plc(a)

  

28,742

   

410,148

  

Healthcare - Services - 0.46%

 

Cellular Biomedicine Group, Inc.(a)

  

27,757

   

510,451

  

Insurance - 9.16%

 

National General Holdings Corp.

  

133,565

   

4,551,895

  

Watford Holdings Ltd.(a)(b)

  

38,089

   

1,322,450

  

Willis Towers Watson Plc(b)

  

20,486

   

4,264,981

  
   

10,139,326

  

Internet - 3.49%

 

Endurance International Group Holdings, Inc.(a)

  

69,910

   

662,747

  

Grubhub, Inc.(a)(b)

  

45,490

   

3,199,766

  
   

3,862,513

  

Leisure Time - 0.17%

 

Callaway Golf Co.(b)

  

8,734

   

185,598

  

Media - 0.31%

 

TEGNA, Inc.(b)

  

24,165

   

348,218

  

Oil & Gas - 2.81%

 

Concho Resources, Inc.(b)

  

38,243

   

2,198,208

  

Parsley Energy, Inc., Class A(b)

  

37,451

   

469,261

  

WPX Energy, Inc.(a)(b)

  

61,966

   

441,198

  
   

3,108,667

  

Pharmaceuticals - 0.93%

 

BioSpecifics Technologies Corp.(a)

  

9,496

   

839,446

  

Paratek Pharmaceuticals, Inc.(a)

  

31,231

   

193,320

  
   

1,032,766

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
19



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

November 30, 2020 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 87.27% (Continued)

 

Real Estate - 0.72%

 

Entra ASA(d)

  

17,422

  

$

348,209

  

McCarthy & Stone Plc(a)(d)

  

284,539

   

443,820

  
   

792,029

  

Real Estate Investment Trusts - 3.29%

 

Front Yard Residential Corp.(b)

  

89,596

   

1,462,207

  

Taubman Centers, Inc.

  

50,878

   

2,173,508

  
   

3,635,715

  

Retail - 8.00%

 

Dunkin' Brands Group, Inc.

  

35,675

   

3,793,679

  

Foundation Building Materials, Inc.(a)

  

36,369

   

699,740

  

Tiffany & Co.(b)

  

33,139

   

4,357,116

  
   

8,850,535

  

Semiconductors - 5.78%

 

Maxim Integrated Products, Inc.(b)

  

25,686

   

2,132,966

  

Xilinx, Inc.(b)

  

29,295

   

4,263,887

  
   

6,396,853

  

Software - 3.31%

 

Cloudera, Inc.(a)(b)

  

11,456

   

133,806

  

Codemasters Group Holdings Plc(a)

  

44,669

   

300,134

  

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

  

48,463

   

1,768,900

  

MobileIron, Inc.(a)

  

152,209

   

1,071,551

  

Slack Technologies, Inc., Class A(a)

  

8,942

   

383,433

  
   

3,657,824

  

Special Purpose Acquisition Companies - 7.14%

 

Alpha Healthcare Acquisition Corp.(a)

  

20,250

   

201,893

  

Artius Acquisition, Inc., Class A(a)

  

16,206

   

161,250

  

Bull Horn Holdings Corp.(a)

  

40,295

   

402,950

  

CC Neuberger Principal Holdings I, Class A(a)

  

46,017

   

475,356

  

CC Neuberger Principal Holdings II, Class A(a)

  

16,172

   

161,720

  

Churchill Capital Corp. IV, Class A(a)

  

26,955

   

266,315

  

DPCM Capital, Inc.(a)

  

33,703

   

342,085

  

Fast Acquisition Corp.(a)

  

22,409

   

231,933

  

Flying Eagle Acquisition Corp., Class A(a)

  

18,648

   

289,044

  

Foley Trasimene Acquisition Corp., Class A(a)

  

21,186

   

216,097

  

Fusion Acquisition Corp.(a)

  

21,193

   

222,527

  

Hennessy Capital Acquisition Corp. IV, Class A(a)

  

9,426

   

122,538

  

Hudson Executive Investment Corp., Class A(a)

  

26,482

   

262,966

  

Kingswood Acquisition Corp.(a)

  

33,750

   

340,538

  

Lefteris Acquisition Corp.(a)

  

27,053

   

270,259

  

See Notes to Financial Statements.

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



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

November 30, 2020 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 87.27% (Continued)

 

Special Purpose Acquisition Companies - 7.14% (Continued)

 

LF Capital Acquisition Corp., Class A(a)

  

26,916

  

$

285,310

  

Live Oak Acquisition Corp., Class A(a)

  

27,745

   

346,813

  

Longview Acquisition Corp., Class A(a)

  

13,787

   

217,145

  

Oaktree Acquisition Corp. II(a)

  

26,432

   

269,342

  

Omnichannel Acquisition Corp.(a)

  

27,132

   

272,677

  

Pivotal Investment Corp. II, Class A(a)

  

9,410

   

132,116

  

Reinvent Technology Partners(a)

  

26,432

   

309,254

  

Roman DBDR Tech Acquisition Corp.(a)

  

26,980

   

276,545

  

Seaport Global Acquisition Corp.(a)

  

43,285

   

432,850

  

Spartacus Acquisition Corp.(a)

  

26,962

   

277,574

  

Sustainable Opportunities Acquisition Corp., Class A(a)

  

13,337

   

138,972

  

Trebia Acquisition Corp., Class A(a)

  

21,186

   

212,707

  

Trine Acquisition Corp., Class A(a)

  

37,638

   

484,777

  

Vy Global Growth(a)

  

26,962

   

280,944

  
   

7,904,497

  

Telecommunications - 14.35%

 

Acacia Communications, Inc.(a)(b)

  

78,051

   

5,438,594

  

Altice Europe N.V.(a)

  

21,818

   

114,981

  

Cincinnati Bell, Inc.(a)(b)

  

109,283

   

1,662,194

  

Gilat Satellite Networks Ltd.

  

60,181

   

364,697

  

LogMeIn, Inc.(a)(c)

  

93,555

   

8,294,586

  
   

15,875,052

  
TOTAL COMMON STOCKS
(Cost $91,491,626)
  

96,560,550

  

RIGHTS - 0.05%

 

Bristol-Myers Squibb Co.

  

15,737

   

18,570

  

Stemline Therapeutics, Inc. CVR(c)

  

121,306

   

41,875

  
TOTAL RIGHTS
(Cost $53,176)
  

60,445

  

 

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

CORPORATE BONDS - 5.20%

 

Commercial Services - 0.93%

 
Nielsen Co. Luxembourg SARL
(The)(d)
 

10/01/2021

  

5.500

%

 

$

386,000

  

$

384,070

  

Refinitiv US Holdings, Inc.(d)

 

05/15/2026

  

6.250

%

  

608,000

   

649,040

  
         

1,033,110

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
21



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

November 30, 2020 (Unaudited)

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

CORPORATE BONDS - 5.20% (Continued)

 

Entertainment - 1.52%

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

07/15/2026

  

7.000

%

 

$

1,585,000

  

$

1,676,137

  

Internet - 1.25%

 

EIG Investors Corp.

 

02/01/2024

  

10.875

%

  

1,333,000

   

1,386,987

  

Oil & Gas - 0.28%

 
Northern Oil and Gas, Inc.,
(8.50% Cash + 1.00% PIK)
 

05/15/2023

  

8.500

%

  

366,000

   

308,355

  

Telecommunications - 1.22%

 

Cincinnati Bell, Inc.(d)

 

07/15/2024

  

7.000

%

  

1,305,000

   

1,349,070

  
TOTAL CORPORATE BONDS
(Cost $5,805,902)
  

5,753,659

  

CONVERTIBLE CORPORATE BONDS - 1.62%

 

Entertainment - 0.31%

 

Cineplex, Inc.(d)

 

09/30/2025

  

5.750

%

  

392,000

   

347,116

  

Pharmaceuticals - 1.31%

 

Dermira, Inc.

 

05/15/2022

  

3.000

%

  

1,430,000

   

1,444,300

  
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $1,729,690)
  

1,791,416

  

 

  

Shares

 

Value

 

WARRANTS - 0.28%

 

Special Purpose Acquisition Companies - 0.26%

 
Artius Acquisition, Inc., Class A, Exercise Price $11.50,
Expires 07/13/2026(a)
  

5,402

  

$

7,671

  
CC Neuberger Principal Holdings I, Class A,
Exercise Price $11.50, Expires 12/31/2025(a)
  

15,339

   

25,309

  
CC Neuberger Principal Holdings II, Class A,
Exercise Price $11.50, Expires 07/29/2025(a)
  

4,043

   

4,932

  
Churchill Capital Corp. IV, Class A, Exercise Price $11.50,
Expires 09/18/2025(a)
  

5,391

   

6,254

  
Foley Trasimene Acquisition Corp., Class A,
Exercise Price $11.50, Expires 07/17/2025(a)
  

7,062

   

11,793

  
Hudson Executive Investment Corp.,Class A,
Exercise Price $11.50, Expires 06/21/2025(a)
  

13,241

   

13,506

  
Live Oak Acquisition Corp., Class A, Exercise Price $11.50,
Expires 05/08/2027(a)
  

53,988

   

173,841

  
Sustainable Opportunities Acquisition Corp.,Class A,
Exercise Price $11.50, Expires 06/26/2025(a)
  

20,245

   

31,801

  

See Notes to Financial Statements.

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



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

November 30, 2020 (Unaudited)

  

Shares

 

Value

 

WARRANTS - 0.28% (Continued)

 

Special Purpose Acquisition Companies - 0.26% (Continued)

 
Trebia Acquisition Corp., Class A, Exercise Price $11.50,
Expires 12/31/2025(a)
  

7,062

  

$

9,887

  
   

284,994

  

Telecommunications - 0.02%

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

5,548

   

21,776

  
TOTAL WARRANTS
(Cost $147,928)
  

306,770

  

PREFERRED STOCKS - 0.08%

 

Insurance - 0.08%

 

National General Holdings Corp., Series B, 7.500%

  

3,430

   

87,191

  
TOTAL PREFERRED STOCKS
(Cost $86,474)
  

87,191

  

PRIVATE INVESTMENTS (c)(e) - 0.07%

 

Fast Capital LLC(a)

  

22,800

   

22,800

  

Fuse LLC(a)

  

56,600

   

51,455

  

Fuse Sponsor Capital, Z2 Shares(a)

  

5,660

   

5,145

  
TOTAL PRIVATE INVESTMENTS
(Cost $80,728)
  

79,400

  

 

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(a) - 0.07%

 

Call Options Purchased - 0.06%

 

Devon Energy Corp.

 

01/2021

 

$

13.74

  

$

383,326

   

274

  

$

35,620

  
Maxeon Solar
Technologies Ltd.
 

12/2020

  

30.00

   

297,924

   

122

   

8,540

  

S&P Global, Inc.

 

01/2021

  

350.00

   

211,068

   

6

   

8,880

  

Taubman Centers, Inc.

 
  

01/2021

  

40.00

   

162,336

   

38

   

11,400

  
  

01/2021

  

45.00

   

657,888

   

154

   

0

  
TOTAL CALL OPTIONS PURCHASED
(Cost $60,477)
  

64,440

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
23



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

November 30, 2020 (Unaudited)

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(a) - 0.07% (Continued)

 

Put Options Purchased - 0.01%

 
iShares iBoxx $
Investment
Grade Corporate
Bond ETF
 

01/2021

 

$

130.00

  

$

3,018,864

   

218

  

$

4,905

  

iShares Russell 2000 ETF

 
  

01/2021

  

142.00

   

434,448

   

24

   

1,080

  
  

01/2021

  

145.00

   

434,448

   

24

   

1,344

  
TOTAL PUT OPTIONS PURCHASED
(Cost $74,935)
  

7,329

  
TOTAL PURCHASED OPTIONS
(Cost $135,412)
  

71,769

  

 

  

Yield

 

Shares

 

Value

 

SHORT-TERM INVESTMENTS - 4.48%

 

Money Market Funds

 
Morgan Stanley Institutional Liquidity Fund
Government Portfolio, Institutional Class
  

0.020

%(f)

  

2,479,945

  

$

2,479,945

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

0.132

%(f)

  

2,479,945

   

2,479,945

  
       

4,959,890

  
TOTAL SHORT-TERM INVESTMENTS
(Cost $4,959,890)
  

4,959,890

  
Total Investments - 99.12%
(Cost $104,490,826)
      

109,671,090

  

Other Assets in Excess of Liabilities - 0.88%(g)

      

977,086

  

NET ASSETS - 100.00%

 

$

110,648,176

  

Portfolio Footnotes

(a)  Non-income-producing security.

(b)  Security, or a portion of security, is being held as collateral for short sales or forward foreign currency exchange contracts. At November 30, 2020, the aggregate fair market value of those securities was $30,737,696, representing 27.78% of net assets.

(c)  Security fair valued using significant unobservable inputs and classified as a Level 3 security. As of November 30, 2020, the total fair market value of these securities was $15,633,225, representing 14.13% 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, 2020, these securities had a total value of $5,197,462 or 4.70% of net assets.

See Notes to Financial Statements.

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



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

November 30, 2020 (Unaudited)

(e)  Represents a holding that is a direct investment into a private company and is not a listed or publicly traded entity.

(f)  Rate shown is the 7-day effective yield as of November 30, 2020.

(g)  Includes cash held as collateral for short sales.

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (15.62%)

 

Auto Manufacturers - (0.82%)

 

Peugeot SA

  

(38,322

)

 

$

(903,506

)

 

Banks - (1.21%)

 

First Citizens BancShares, Inc., Class A

  

(1,924

)

  

(1,017,007

)

 

Morgan Stanley

  

(5,180

)

  

(320,280

)

 
   

(1,337,287

)

 

Commercial Services - (0.33%)

 

Booz Allen Hamilton Holding Corp., Class A

  

(994

)

  

(86,269

)

 

S&P Global, Inc.

  

(791

)

  

(278,258

)

 
   

(364,527

)

 

Computers & Computer Services - (0.13%)

 

CACI International, Inc., Class A

  

(283

)

  

(67,153

)

 

Science Applications International Corp.

  

(824

)

  

(76,253

)

 
   

(143,406

)

 

Energy - Alternate Sources - (0.23%)

 

Maxeon Solar Technologies Ltd.

  

(10,278

)

  

(250,989

)

 

Engineering & Construction - (0.42%)

 

Jacobs Engineering Group, Inc.

  

(1,547

)

  

(166,829

)

 

Stantec, Inc.

  

(4,885

)

  

(147,185

)

 

WSP Global, Inc.

  

(2,030

)

  

(150,761

)

 
   

(464,775

)

 

Environmental Control - (0.18%)

 

Tetra Tech, Inc.

  

(1,638

)

  

(195,331

)

 

Food - (2.93%)

 

Just Eat Takeaway.com N.V.

  

(30,524

)

  

(3,241,997

)

 

Leisure Time - (0.07%)

 

Acushnet Holdings Corp.

  

(2,135

)

  

(80,489

)

 

Media - (0.17%)

 

Nexstar Media Group, Inc., Class A

  

(1,793

)

  

(188,713

)

 

Oil & Gas - (2.83%)

 

ConocoPhillips

  

(55,835

)

  

(2,208,832

)

 

Devon Energy Corp.

  

(31,999

)

  

(447,666

)

 

Pioneer Natural Resources Co.

  

(4,689

)

  

(471,620

)

 
   

(3,128,118

)

 

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
25



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

November 30, 2020 (Unaudited)

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (15.62%) (Continued)

 

Pharmaceuticals - (0.11%)

 

Viatris, Inc.

  

(7,478

)

 

$

(125,780

)

 

Semiconductors - (5.64%)

 

Advanced Micro Devices, Inc.

  

(50,487

)

  

(4,678,125

)

 

Analog Devices, Inc.

  

(11,211

)

  

(1,559,226

)

 
   

(6,237,351

)

 

Software - (0.39%)

 

salesforce.com, Inc.

  

(845

)

  

(207,701

)

 

Take-Two Interactive Software, Inc.

  

(1,266

)

  

(228,526

)

 
   

(436,227

)

 

Telecommunications - (0.16%)

 

Cincinnati Bell, Inc.

  

(12,017

)

  

(182,779

)

 
TOTAL COMMON STOCKS
(Proceeds $15,481,474)
  

(17,281,275

)

 

EXCHANGE-TRADED FUNDS - (0.42%)

 

Equity Funds - (0.42%)

 

iShares Russell 2000 Growth ETF

  

(722

)

  

(189,590

)

 

iShares Russell 2000 Value ETF

  

(454

)

  

(55,669

)

 

VanEck Vectors Oil Services ETF

  

(1,574

)

  

(217,055

)

 
   

(462,314

)

 
TOTAL EXCHANGE-TRADED FUNDS
(Proceeds $412,825)
  

(462,314

)

 
TOTAL SECURITIES SOLD SHORT
(Proceeds $15,894,299)
 

$

(17,743,589

)

 

See Notes to Financial Statements.

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



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

November 30, 2020 (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
 
 
 
 Analog
Devices,
Inc.
 
 
 
 
 Received
1 Month-
Federal
Rate
Minus
40 bps
(-0.320%)
 





08/19/2021
 

$

  

$

  

$

  

USD

691,923

  

$

  
Morgan
Stanley &
Co./
Monthly
 
 
 
 Aon Plc
 
 
 
 
 
 
 Received
1 Month-
Federal
Rate
Minus
40 bps
(-0.320%)
 





08/19/2021
  

   

   

  

USD

4,533,191

   

  
Goldman
Sachs &
Co./
Monthly
 
 
 
 William
Hill Plc
 
 
 
 
 
 Paid
1 Month
GBP
LIBOR
Plus
45 bps
(0.440%)
 





10/19/2021
  

   

   

  

GBP

736,998

   

  
Goldman
Sachs &
Co./
Monthly
 
 
 Morgan
Stanley
 
 
 
 
 Received
1 Month
LIBOR
Minus
40 bps
(-0.260%)
 




10/28/2021
  

   

   

  

USD

2,815,800

   

  
Goldman
Sachs &
Co./
Monthly
 
 
 
 Kaz
Minerals
Plc
 
 
 
 
 Paid
1 Month
GBP
LIBOR
Plus
45 bps
(0.639%)
 





11/01/2021
  

   

   

  

GBP

167,197

   

  
Goldman
Sachs &
Co./
Monthly
 
 
 
 Alternative
Credit
Investments
 
 
 
 
 Paid
1 Month
GBP
LIBOR
Plus
70 bps
(0.743%)
 





11/05/2021
  

   

   

  

GBP

147,728

   

  
            

$

      

$

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
27



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

November 30, 2020 (Unaudited)

OUTSTANDING FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Appreciation
 

CAD

2,703,500

  

USD

2,059,457

  

Morgan Stanley & Co.

 

12/15/2020

 

$

22,416

  

USD

56,134

  

CAD

72,800

  

Morgan Stanley & Co.

 

12/15/2020

  

73

  

CHF

1,414,300

  

USD

1,551,897

  

Morgan Stanley & Co.

 

12/15/2020

  

5,178

  

USD

36,424

  

CHF

33,000

  

Morgan Stanley & Co.

 

12/15/2020

  

92

  

EUR

2,155,800

  

USD

2,539,626

  

Morgan Stanley & Co.

 

12/15/2020

  

32,916

  

USD

7,290

  

EUR

6,100

  

Morgan Stanley & Co.

 

12/15/2020

  

11

  

GBP

190,558

  

USD

252,792

  

Morgan Stanley & Co.

 

12/15/2020

  

1,295

  

USD

348,694

  

NOK

3,090,700

  

Morgan Stanley & Co.

 

12/15/2020

  

1,242

  

NZD

1,269,100

  

USD

846,286

  

Morgan Stanley & Co.

 

12/15/2020

  

43,630

  

SEK

3,210,400

  

USD

366,116

  

Morgan Stanley & Co.

 

12/15/2020

  

8,292

  
  

$

115,145

  
Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Depreciation
 

USD

726,218

  

AUD

1,033,600

  

Morgan Stanley & Co.

 

12/15/2020

 

$

(32,603

)

 

CAD

55,600

  

USD

42,857

  

Morgan Stanley & Co.

 

12/15/2020

  

(41

)

 

USD

3,276,084

  

CAD

4,295,500

  

Morgan Stanley & Co.

 

12/15/2020

  

(31,736

)

 

CHF

16,500

  

USD

18,229

  

Morgan Stanley & Co.

 

12/15/2020

  

(63

)

 

USD

1,532,772

  

CHF

1,397,800

  

Morgan Stanley & Co.

 

12/15/2020

  

(6,137

)

 

EUR

13,200

  

USD

15,788

  

Morgan Stanley & Co.

 

12/15/2020

  

(36

)

 

USD

2,272,800

  

EUR

1,923,800

  

Morgan Stanley & Co.

 

12/15/2020

  

(22,894

)

 

USD

1,392,285

  

GBP

1,068,661

  

Morgan Stanley & Co.

 

12/15/2020

  

(32,651

)

 

USD

853,094

  

NZD

1,269,100

  

Morgan Stanley & Co.

 

12/15/2020

  

(36,823

)

 

PLN

4,070,100

  

USD

1,089,338

  

Morgan Stanley & Co.

 

12/15/2020

  

(4,852

)

 

USD

1,052,760

  

PLN

4,070,100

  

Morgan Stanley & Co.

 

12/15/2020

  

(31,725

)

 

USD

367,595

  

SEK

3,210,400

  

Morgan Stanley & Co.

 

12/15/2020

  

(6,811

)

 
  

$

(206,372

)

 

See Notes to Financial Statements.

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



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

November 30, 2020 (Unaudited)

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

Country

 

% of Net Assets(a)

 

United Kingdom

  

6.67

%

 

Cayman Islands

  

5.17

%

 

Netherlands

  

1.62

%

 

United States Virgin Islands

  

1.32

%

 

Canada

  

1.22

%

 

Bermuda

  

1.20

%

 

Australia

  

0.69

%

 

Luxembourg

  

0.35

%

 

Finland

  

0.34

%

 

Israel

  

0.33

%

 

Norway

  

0.32

%

 

United States

  

79.89

%

 

Other Assets in Excess of Liabilities

  

0.88

%

 
   

100.00

%

 

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

Abbreviations:

ASA - Allmennaksjeselskap is the Norwegian term for public limited company.

AUD - Australian dollar

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

B.V. - Besloten Vennootschap is the Dutch term for private limited liability company.

CAD - Canadian dollar

CHF - Swiss franc

CVR - Contingent Value Rights

ETF - Exchange-Traded Fund

EUR - Euro

GBP - British pound

GBP LIBOR - London Interbank Offered Rate denominated in British Pounds

LIBOR - London Interbank Offered Rate

LLC - Limited Liability Company

Ltd. - Limited

NOK - Norwegian krone

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

NZD - New Zealand dollar

Oyj - Osakeyhtio is the Finnish equivalent of a public limited company.

PIK - Payment-in-kind

Plc - Public Limited Company

PLN - Polish zloty

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

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

SEK - Swedish krona

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
29



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

November 30, 2020 (Unaudited)

S&P - Standard & Poor's

USD - United States Dollar

The following table summarizes the Water Island Diversified Event-Driven Fund's investments and derivative financial instruments categorized in the fair value hierarchy as of November 30, 2020:

Investments in Securities at Value*

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

Common Stocks

 

Auto Manufacturers

 

$

2,674,318

  

$

  

$

  

$

2,674,318

  

Auto Parts & Equipment

  

690,498

   

   

   

690,498

  

Banks

  

1,039,463

   

   

   

1,039,463

  

Beverages

  

761,755

   

   

   

761,755

  

Commercial Services

  

660,123

   

   

   

660,123

  

Computers & Computer Services

  

1,981,948

   

   

5,448,464

   

7,430,412

  

Distribution/Wholesale

  

3,252,420

   

   

   

3,252,420

  

Diversified Financial Services

  

6,870,807

   

   

   

6,870,807

  

Electric

  

3,979,776

   

   

   

3,979,776

  

Energy - Alternate Sources

  

255,907

   

   

   

255,907

  

Engineering & Construction

  

674,311

   

   

   

674,311

  

Entertainment

  

840,531

   

   

   

840,531

  

Food

  

342,808

   

   

   

342,808

  

Forest Products & Paper

  

377,229

   

   

   

377,229

  

Healthcare - Products

  

410,148

   

   

   

410,148

  

Healthcare - Services

  

510,451

   

   

   

510,451

  

Insurance

  

10,139,326

   

   

   

10,139,326

  

Internet

  

3,862,513

   

   

   

3,862,513

  

Leisure Time

  

185,598

   

   

   

185,598

  

Media

  

348,218

   

   

   

348,218

  

Oil & Gas

  

3,108,667

   

   

   

3,108,667

  

Pharmaceuticals

  

1,032,766

   

   

   

1,032,766

  

Real Estate

  

792,029

   

   

   

792,029

  

Real Estate Investment Trusts

  

3,635,715

   

   

   

3,635,715

  

Retail

  

8,850,535

   

   

   

8,850,535

  

Semiconductors

  

6,396,853

   

   

   

6,396,853

  

Software

  

1,888,924

   

   

1,768,900

   

3,657,824

  
Special Purpose Acquisition
Companies
  

7,904,497

   

   

   

7,904,497

  

Telecommunications

  

7,580,466

   

   

8,294,586

   

15,875,052

  

Rights

  

18,570

   

   

41,875

   

60,445

  

Corporate Bonds**

  

   

5,753,659

   

   

5,753,659

  

Convertible Corporate Bonds**

  

   

1,791,416

   

   

1,791,416

  

Warrants

  

284,994

   

21,776

   

   

306,770

  

Preferred Stocks**

  

87,191

   

   

   

87,191

  

See Notes to Financial Statements.

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



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

November 30, 2020 (Unaudited)

Investments in Securities at Value*

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Private Investments

 

$

  

$

  

$

79,400

  

$

79,400

  

Purchased Options

  

71,769

   

   

   

71,769

  

Short-Term Investments

  

4,959,890

   

   

   

4,959,890

  

TOTAL

 

$

86,471,014

  

$

7,566,851

  

$

15,633,225

  

$

109,671,090

  

Other Financial Instruments***

 

Assets

 
Forward Foreign Currency
Exchange Contracts
 

$

  

$

115,145

  

$

  

$

115,145

  

Equity Swaps

  

0

   

   

   

0

  

Liabilities

 

Common Stocks**

  

(17,281,275

)

  

   

   

(17,281,275

)

 

Exchange-Traded Funds

  

(462,314

)

  

   

   

(462,314

)

 
Forward Foreign Currency
Exchange Contracts
  

   

(206,372

)

  

   

(206,372

)

 

TOTAL

 

$

(17,743,589

)

 

$

(91,227

)

 

$

  

$

(17,834,816

)

 

*  Refer to footnote 2 where leveling hierarchy is defined.

**  Refer to Portfolio of Investments for sector information.

***  Other financial instruments are instruments such as 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, 2020:

Investments
in Securities
 Balance as of
May 31, 2020
 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,
2020
 Net change in
Unrealized
Appreciation
(Depreciation)
from
investments
still held
as of
November 30,
2020
 
Common
Stock
 

$

2,731,749

  

$

33,758

  

$

430,685

  

$

5,429,345

  

$

(1,690,949

)

 

$

8,577,362

  

$

  

$

15,511,950

  

$

448,217

  
Private
Investments
  

   

   

(1,328

)

  

80,728

   

   

   

   

79,400

   

(1,328

)

 

Rights

  

   

   

1,844

   

40,031

   

   

   

   

41,875

   

1,844

  

Total

 

$

2,731,749

  

$

33,758

  

$

431,201

  

$

5,550,104

  

$

(1,690,949

)

 

$

8,577,362

  

$

  

$

15,633,225

  

$

448,733

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
31



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

November 30, 2020 (Unaudited)

The following table summarizes the quantitative inputs used for investments categorized as Level 3 of the fair value hierarchy as of November 30, 2020:

Investments in
Securities
 Fair Value at
November 30, 2020
 Valuation
Technique
 Unobservable
Input
 Range of
Values
 Weighted
Average
 
Common Stock
 
 
 

$

15,511,950

 Deal Value
 
 
 Final
Determination
on Dissent
 $28-$88.66
 
 
 $46.08
 
 
 
Private
Investments
 

$

79,400

  

Cost

 

Cost

  

$0.91-$1

   

$0.97

  
Rights
 
 
 

$

41,875

 Discounted,
probability
adjusted value
 Discount Rate,
Probability
 
 10%, 42.25%
 
 
 $0.35
 
 
 

See Notes to Financial Statements.

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



Water Island Credit Opportunities Fund  Portfolio Information

November 30, 2020 (Unaudited)

Performance (annualized returns as of November 30, 2020)

 One
Year
 Five
Year
 Ten
Year
 Since
Inception*
 

Water Island Credit Opportunities Fund, Class R

  

6.43

%

  

3.66

%

  

N/A

   

2.90

%

 

Water Island Credit Opportunities Fund, Class I

  

6.72

%

  

3.90

%

  

N/A

   

3.13

%

 

Water Island Credit Opportunities Fund, Class C**

  

5.66

%

  

2.87

%

  

N/A

   

2.16

%

 

Water Island Credit Opportunities Fund, Class A***

  

6.57

%

  

3.65

%

  

N/A

   

2.83

%

 

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

  

0.80

%

  

1.20

%

  

N/A

   

0.76

%

 

Bloomberg Barclays Capital U.S. Aggregate Bond Index

  

7.28

%

  

4.34

%

  

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, 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 1.97%, 1.72%, 2.72% and 1.97%, 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, 2021. 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 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.

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.

An investor may not invest directly in an index.

Semi-Annual Report | November 30, 2020
33



Water Island Credit Opportunities Fund  Portfolio Information (continued)

November 30, 2020 (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
34



Water Island Credit Opportunities Fund  Portfolio of Investments

November 30, 2020 (Unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 0.43%

 

Commercial Services - 0.43%

 

Nielsen Holdings Plc

  

18,000

  

$

291,060

  
TOTAL COMMON STOCKS
(Cost $308,030)
  

291,060

  

 

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

BANK LOAN - 1.45%

 

Commercial Services - 1.45%

 
Refinitiv US Holdings, Inc.,
2018 USD Term Loan B,
Variable Rate, (1 mo. USD
LIBOR plus 3.250%)
 

12/31/2020

  

3.396

%

 

$

989,924

  

$

984,975

  
TOTAL BANK LOANS
(Cost $995,043)
  

984,975

  

CORPORATE BONDS - 67.89%

 

Aerospace & Defense - 4.72%

 

Boeing Co. (The)

 

05/01/2050

  

5.805

%

  

1,250,000

   

1,651,355

  

Triumph Group, Inc.

 

06/01/2022

  

5.250

%

  

1,687,000

   

1,552,040

  
   

3,203,395

  

Auto Manufacturers - 4.37%

 

Navistar International Corp.(a)(b)

 

05/01/2025

  

9.500

%

  

750,000

   

839,063

  

Navistar International Corp.(a)

 

11/01/2025

  

6.625

%

  

2,032,000

   

2,126,894

  
   

2,965,957

  

Auto Parts & Equipment - 2.73%

 

BorgWarner, Inc.(a)

 

10/01/2025

  

5.000

%

  

1,581,000

   

1,853,215

  

Banks - 1.46%

 

CIT Group, Inc.

 

08/01/2023

  

5.000

%

  

50,000

   

54,312

  
Truist Bank, Variable Rate,
(3 mo. USD LIBOR
plus 0.65%)(b)
 

03/15/2028

  

0.900

%

  

1,000,000

   

938,440

  
   

992,752

  

Commercial Services - 5.42%

 

APX Group, Inc.

 

12/01/2022

  

7.875

%

  

1,030,000

   

1,031,288

  
Nielsen Co. Luxembourg
SARL (The)(a)
 

10/01/2021

  

5.500

%

  

443,000

   

440,785

  

Refinitiv US Holdings, Inc.(a)

 

05/15/2026

  

6.250

%

  

2,069,000

   

2,208,657

  
   

3,680,730

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
35



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2020 (Unaudited)

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

CORPORATE BONDS - 67.89% (Continued)

 

Computers & Computer Services - 1.72%

 
Dell International LLC /
EMC Corp.(a)(b)
 

10/01/2026

  

4.900

%

 

$

1,000,000

  

$

1,167,857

  

Construction Materials - 3.03%

 

BMC East LLC(a)(b)

 

10/01/2024

  

5.500

%

  

2,000,000

   

2,058,000

  

Distribution/Wholesale - 1.56%

 

HD Supply, Inc.(a)

 

10/15/2026

  

5.375

%

  

1,000,000

   

1,060,000

  

Electrical Components & Equipment - 1.83%

 

WESCO Distribution, Inc.

 

12/15/2021

  

5.375

%

  

1,238,000

   

1,241,268

  

Entertainment - 6.66%

 
Scientific Games
International, Inc.(a)
 

10/15/2025

  

5.000

%

  

1,500,000

   

1,543,125

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

07/15/2026

  

7.000

%

  

2,820,000

   

2,982,150

  
   

4,525,275

  

Insurance - 1.70%

 
Fidelity & Guaranty
Life Holdings, Inc.(a)
 

05/01/2025

  

5.500

%

  

1,000,000

   

1,155,860

  

Internet - 4.24%

 

EIG Investors Corp.

 

02/01/2024

  

10.875

%

  

2,770,000

   

2,882,185

  

Media - 0.76%

 

Walt Disney Co. (The)(b)

 

09/01/2049

  

2.750

%

  

500,000

   

515,234

  

Office/Business Equip - 0.68%

 

Xerox Corp.(b)

 

05/15/2021

  

4.500

%

  

457,000

   

462,918

  

Oil & Gas - 6.76%

 

Noble Energy, Inc.

 

11/15/2043

  

5.250

%

  

520,000

   

719,844

  
Northern Oil and Gas, Inc.,
(8.50% Cash + 1.00% PIK)
 

05/15/2023

  

8.500

%

  

1,709,238

   

1,440,033

  
Parsley Energy LLC /
Parsley Finance Corp.(a)
 

01/15/2025

  

5.375

%

  

1,416,000

   

1,458,480

  

WPX Energy, Inc.

 

10/15/2027

  

5.250

%

  

130,000

   

137,150

  

WPX Energy, Inc.(b)

 

06/15/2028

  

5.875

%

  

775,000

   

835,062

  
   

4,590,569

  

Pipelines - 2.26%

 
Midwest Connector
Capital Co. LLC(a)
 

04/01/2024

  

3.900

%

  

500,000

   

507,437

  

NuStar Logistics LP(b)

 

02/01/2021

  

6.750

%

  

1,025,000

   

1,026,538

  
   

1,533,975

  

See Notes to Financial Statements.

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



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2020 (Unaudited)

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

CORPORATE BONDS - 67.89% (Continued)

 

Semiconductors - 0.37%

 

Microchip Technology, Inc.(b)

 

06/01/2021

  

3.922

%

 

$

250,000

  

$

254,086

  

Software - 0.54%

 
Rackspace Technology
Global, Inc.(a)
 

11/15/2024

  

8.625

%

  

350,000

   

365,330

  

Telecommunications - 17.08%

 

Cincinnati Bell, Inc.(a)

 

07/15/2024

  

7.000

%

  

2,300,000

   

2,377,671

  
  

10/15/2025

  

8.000

%

  

2,000,000

   

2,141,400

  
Hughes Satellite Systems
Corp.(b)
 

06/15/2021

  

7.625

%

  

1,000,000

   

1,030,000

  

ORBCOMM, Inc.(a)

 

04/01/2024

  

8.000

%

  

3,000,000

   

3,120,000

  

T-Mobile USA, Inc.(b)

 

03/01/2023

  

6.000

%

  

2,930,000

   

2,935,655

  
   

11,604,726

  
TOTAL CORPORATE BONDS
(Cost $45,126,974)
  

46,113,332

  

CONVERTIBLE CORPORATE BONDS - 22.27%

 

Computers & Computer Services - 2.23%

 

Pure Storage, Inc.

 

04/15/2023

  

0.125

%

  

1,500,000

   

1,517,333

  

Entertainment - 0.74%

 

Cineplex, Inc.(a)

 

09/30/2025

  

5.750

%

  

567,000

   

502,079

  

Internet - 2.49%

 

Twitter, Inc.

 

06/15/2024

  

0.250

%

  

1,500,000

   

1,689,788

  

Pharmaceuticals - 5.09%

 

Dermira, Inc.

 

05/15/2022

  

3.000

%

  

1,938,000

   

1,957,380

  

Jazz Investments I Ltd.

 

08/15/2021

  

1.875

%

  

1,500,000

   

1,502,663

  
   

3,460,043

  

Semiconductors - 2.69%

 

Synaptics, Inc.(b)

 

06/15/2022

  

0.500

%

  

1,500,000

   

1,830,000

  

Software - 9.03%

 

Nuance Communications, Inc.(b)

 

12/15/2035

  

1.000

%

  

1,000,000

   

1,827,101

  

Verint Systems, Inc.

 

06/01/2021

  

1.500

%

  

2,000,000

   

2,071,344

  

Slack Technologies, Inc.(a)

 

04/15/2025

  

0.500

%

  

1,500,000

   

2,232,004

  
   

6,130,449

  
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $13,545,829)
  

15,129,692

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
37



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2020 (Unaudited)

  

Shares

 

Value

 

WARRANTS - 0.02%

 

Telecommunications - 0.02%

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

3,017

  

$

11,842

  
TOTAL WARRANTS
(Cost $0)
    

11,842

  

PREFERRED STOCKS - 2.30%

 

Insurance - 0.20%

 

National General Holdings Corp., Series B, 7.500%(b)

  

5,536

   

140,725

  

National General Holdings Corp., Series C, 7.500%

  

10

   

262

  
   

140,987

  

Real Estate Investment Trusts - 2.10%

 

Taubman Centers, Inc., Series J, 6.500%

  

56,471

   

1,425,334

  
TOTAL PREFERRED STOCKS
(Cost $1,415,612)
    

1,566,321

  

 

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(c) - 0.48%

 

Call Options Purchased - 0.48%

 

Devon Energy Corp.

 

01/2021

 

$

12.74

  

$

760,500

   

500

  

$

94,250

  

Scientific Games Corp.

 
  

12/2020

  

32.00

   

37,280

   

10

   

5,650

  
  

12/2020

  

37.00

   

372,800

   

100

   

24,750

  

Triumph Group, Inc.

 

01/2021

  

12.50

   

1,317,000

   

1,000

   

202,500

  
TOTAL CALL OPTIONS PURCHASED
(Cost $255,628)
   

327,150

 
TOTAL PURCHASED OPTIONS
(Cost $255,628)
   

327,150

 

See Notes to Financial Statements.

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



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2020 (Unaudited)

  

Yield

 

Shares

 

Value

 

SHORT-TERM INVESTMENTS - 2.25%

 

Money Market Funds

 
Morgan Stanley Institutional Liquidity Fund
Government Portfolio, Institutional Class
  

0.020

%(d)

  

763,918

  

$

763,918

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

0.132

%(d)

  

763,919

   

763,919

  
   

1,527,837

  
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,527,837)
  

1,527,837

  
Total Investments - 97.09%
(Cost $63,174,953)
  

65,952,209

  

Other Assets in Excess of Liabilities - 2.91%(e)

  

1,973,539

  

NET ASSETS - 100.00%

 

$

67,925,748

  

Portfolio Footnotes

(a)  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, 2020, these securities had a total value of $30,140,007 or 44.37% of net assets.

(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, 2020, the aggregate fair market value of those securities was $12,249,290, representing 18.03% of net assets.

(c)  Non-income-producing security.

(d)  Rate shown is the 7-day effective yield as of November 30, 2020.

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

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
39



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2020 (Unaudited)

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (12.65%)

 

Aerospace & Defense - (0.97%)

 

Triumph Group, Inc.

  

(50,100

)

 

$

(659,817

)

 

Auto Manufacturers - (0.33%)

 

Navistar International Corp.

  

(5,000

)

  

(221,300

)

 

Commercial Services - (0.43%)

 

Nielsen Holdings Plc

  

(18,000

)

  

(291,060

)

 

Computers & Computer Services - (0.61%)

 

Pure Storage, Inc., Class A

  

(22,800

)

  

(416,556

)

 

Entertainment - (0.82%)

 

Cineplex, Inc.

  

(32,500

)

  

(260,260

)

 

Scientific Games Corp., Class A

  

(7,900

)

  

(294,512

)

 
   

(554,772

)

 

Internet - (1.16%)

 

Endurance International Group Holdings, Inc.

  

(7,500

)

  

(71,100

)

 

Twitter, Inc.

  

(15,400

)

  

(716,254

)

 
   

(787,354

)

 

Oil & Gas - (0.62%)

 

Devon Energy Corp.

  

(30,000

)

  

(419,700

)

 

Pharmaceuticals - (0.31%)

 

Jazz Pharmaceuticals Plc

  

(1,500

)

  

(211,065

)

 

Semiconductors - (1.29%)

 

Synaptics, Inc.

  

(11,300

)

  

(878,801

)

 

Software - (5.02%)

 

Nuance Communications, Inc.

  

(37,200

)

  

(1,604,436

)

 

Slack Technologies, Inc., Class A

  

(33,900

)

  

(1,453,632

)

 

Verint Systems, Inc.

  

(6,200

)

  

(353,152

)

 
   

(3,411,220

)

 

Telecommunications - (1.09%)

 

Cincinnati Bell, Inc.

  

(43,400

)

  

(660,114

)

 

EchoStar Corp., Class A

  

(3,500

)

  

(83,195

)

 
   

(743,309

)

 
TOTAL COMMON STOCKS
(Proceeds $7,174,201)
  

(8,594,954

)

 

See Notes to Financial Statements.

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



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2020 (Unaudited)

  Maturity
Date
 

Rate

 Principal
Amount
 

Value

 

U.S. TREASURY & GOVERNMENT AGENCIES - (4.34%)

 

Sovereign - (4.34%)

 

U.S. Treasury Bond

 

11/15/2049

  

2.375

%

 

$

(268,000

)

 

$

(319,203

)

 

U.S. Treasury Bond

 

02/15/2050

  

2.000

%

  

(1,240,000

)

  

(1,366,373

)

 

U.S. Treasury Note

 

02/28/2022

  

1.125

%

  

(140,000

)

  

(141,772

)

 

U.S. Treasury Note

 

02/28/2025

  

1.125

%

  

(1,080,000

)

  

(1,117,547

)

 
   

(2,944,895

)

 
TOTAL U.S. TREASURY & GOVERNMENT AGENCIES
(Proceeds $3,025,856)
  

(2,944,895

)

 
TOTAL SECURITIES SOLD SHORT
(Proceeds $10,200,057)
 

$

(11,539,849

)

 

 

WRITTEN OPTIONS

 Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

Written Put Options

 
Jazz Pharmaceuticals
Plc
 

12/2020

  

140.00

  

$

(140,710

)

  

(10

)

 

$

(5,050

)

 

Twitter, Inc.

 

12/2020

  

45.00

   

(46,510

)

  

(10

)

  

(1,065

)

 
TOTAL WRITTEN PUT OPTIONS
(Premiums received $7,627)
  

(6,115

)

 
TOTAL WRITTEN OPTIONS
(Premiums received $7,627)
 

$

(6,115

)

 

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
41



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2020 (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
40 Bps
(-0.320%)
 





08/19/2021
 

$

  

$

  

$

  

USD

1,494,667

  

$

  
Morgan
Stanley &
Co./
Monthly
 
 
 
 iShares
iBoxx $
Investment
Grade
Corporate
Bond ETF
 
 Paid
1 Month-
Federal
Rate
Minus
40 Bps
(-0.320%)
 





08/19/2021
  

   

   

  

USD

1,190,928

   

  
Morgan
Stanley &
Co./
Monthly
 
 
 
 NuStar
Energy LP
 
 
 
 
 
 Paid
1 Month-
Federal
Rate
Minus
40 Bps
(-0.320%)
 





08/19/2021
  

   

   

  

USD

93,030

   

  
            

$

      

$

  

OUTSTANDING FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Appreciation
 

CAD

562,000

  

USD

427,611

  

Morgan Stanley & Co.

 

12/15/2020

 

$

5,166

  

USD

31,834

  

CAD

41,300

  

Morgan Stanley & Co.

 

12/15/2020

  

31

  
  

$

5,197

  
Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Depreciation
 

USD

656,823

  

CAD

860,000

  

Morgan Stanley & Co.

 

12/15/2020

 

$

(5,435

)

 

See Notes to Financial Statements.

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



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2020 (Unaudited)

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

Country

 

% of Net Assets(a)

 

Netherlands

  

4.39

%

 

Ireland

  

2.21

%

 

Canada

  

0.74

%

 

Luxembourg

  

0.65

%

 

United States

  

89.10

%

 

Other Assets in Excess of Liabilities

  

2.91

%

 
   

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.

CAD - Canadian dollar

ETF - Exchange-Traded Fund

LIBOR - London Interbank Offered Rate

LLC - Limited Liability Company

LP - Limited Partnership

Ltd. - Limited

PIK - Payment-in-kind

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.

Semi-Annual Report | November 30, 2020
43



Water Island Credit Opportunities Fund  Portfolio of Investments (continued)

November 30, 2020 (Unaudited)

The following table summarizes the Water Island Credit Opportunities Fund's investments and derivative financial instruments categorized in the fair value hierarchy as of November 30, 2020:

Investments in Securities at Value*

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

Common Stocks**

 

$

291,060

  

$

  

$

  

$

291,060

  

Bank Loans

  

   

984,975

   

   

984,975

  

Corporate Bonds**

  

   

46,113,332

   

   

46,113,332

  

Convertible Corporate Bonds**

  

   

15,129,692

   

   

15,129,692

  

Warrants

  

   

11,842

   

   

11,842

  

Preferred Stocks**

  

1,566,321

   

   

   

1,566,321

  

Purchased Options

  

327,150

   

   

   

327,150

  

Short-Term Investments

  

1,527,837

   

   

   

1,527,837

  

TOTAL

 

$

3,712,368

  

$

62,239,841

  

$

  

$

65,952,209

  

Other Financial Instruments***

 

Assets

 
Forward Foreign Currency Exchange
Contracts
 

$

  

$

5,197

  

$

  

$

5,197

  

Equity Swaps

  

0

   

   

   

0

  

Liabilities

 

Common Stocks**

  

(8,594,954

)

  

   

   

(8,594,954

)

 

U.S. Treasury & Government Agencies

  

   

(2,944,895

)

  

   

(2,944,895

)

 

Written Options

  

(6,115

)

  

   

   

(6,115

)

 
Forward Foreign Currency Exchange
Contracts
  

   

(5,435

)

  

   

(5,435

)

 

TOTAL

 

$

(8,601,069

)

 

$

(2,945,133

)

 

$

  

$

(11,546,202

)

 

*  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.

See Notes to Financial Statements.

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



Water Island Long/Short Fund  Portfolio Information

November 30, 2020 (Unaudited)

Performance (annualized returns as of November 30, 2020)

 One
Year
 Five
Year
 Ten
Year
 Since
Inception*
 

Water Island Long/Short Fund Class R

  

23.25

%

  

6.62

%

  

N/A

   

4.24

%

 

Water Island Long/Short Fund Class I

  

23.55

%

  

6.67

%

  

N/A

   

4.28

%

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

0.80

%

  

1.20

%

  

N/A

   

1.02

%

 

S&P 500® Index

  

17.46

%

  

13.99

%

  

N/A

   

12.06

%

 

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 12.84% and 12.85%, 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% and 1.44% for Class R and Class I, respectively, until at least September 30, 2021. 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 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.

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, 2020
45



Water Island Long/Short Fund  Portfolio Information (continued)

November 30, 2020 (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: If a large percentage of mergers or event-driven investment opportunities taking place within the U.S. are within one industry over a given period of time, the Fund may invest a large portion of its assets in securities of issuers in a single industry for that period of 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
46



Water Island Long/Short Fund  Portfolio of Investments

November 30, 2020 (unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 83.98%

 

Auto Parts & Equipment - 2.04%

 

Velodyne Lidar, Inc.(a)

  

3,013

  

$

47,967

  

Commercial Services - 1.57%

 

CoreLogic, Inc.(b)

  

477

   

36,967

  

Computers & Computer Services - 2.91%

 

Perspecta, Inc.(b)

  

3,047

   

68,314

  

Diversified Financial Services - 0.73%

 

GCM Grosvenor, Inc., Class A(a)

  

1,813

   

17,224

  

Energy - Alternate Sources - 1.31%

 

Championx Corp.(a)(b)

  

2,595

   

30,829

  

Engineering & Construction - 5.26%

 

AECOM(a)(b)

  

1,420

   

73,684

  

frontdoor, Inc.(a)(b)

  

1,055

   

49,943

  
   

123,627

  

Food - 2.71%

 

Whole Earth Brands, Inc.(a)

  

7,685

   

63,709

  

Healthcare - Products - 1.42%

 

Oxford Immunotec Global Plc(a)

  

2,344

   

33,449

  

Insurance - 2.27%

 

Watford Holdings Ltd.(a)

  

1,536

   

53,330

  

Internet - 5.09%

 

Grubhub, Inc.(a)(b)

  

923

   

64,924

  

NortonLifeLock, Inc.(b)

  

3,000

   

54,690

  
   

119,614

  

Leisure Time - 0.80%

 

Callaway Golf Co.(b)

  

889

   

18,891

  

Media - 10.60%

 

Kabel Deutschland Holding AG

  

553

   

71,242

  

TEGNA, Inc.(b)

  

3,258

   

46,948

  

Liberty Broadband Corp., Class A(a)(b)

  

835

   

130,903

  
   

249,093

  

Miscellaneous Manufacturing - 1.40%

 

Trane Technologies Plc(b)

  

225

   

32,904

  

Pharmaceuticals - 3.17%

 

McKesson Europe AG

  

2,223

   

68,679

  

Paratek Pharmaceuticals, Inc.(a)(b)

  

933

   

5,775

  
   

74,454

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
47



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

November 30, 2020 (unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 83.98% (Continued)

 

Real Estate Investment Trusts - 4.36%

 

Front Yard Residential Corp.(b)

  

6,285

  

$

102,571

  

Retail - 2.89%

 

Dunkin' Brands Group, Inc.

  

374

   

39,771

  

Shift Technologies, Inc.(a)

  

3,000

   

28,170

  
   

67,941

  

Software - 2.14%

 

Cloudera, Inc.(a)(b)

  

2,214

   

25,859

  

Slack Technologies, Inc., Class A(a)

  

568

   

24,356

  
   

50,215

  

Special Purpose Acquisition Companies - 28.04%

 

Alpha Healthcare Acquisition Corp.(a)

  

1,349

   

13,449

  

Artius Acquisition, Inc., Class A(a)

  

1,023

   

10,179

  

Bull Horn Holdings Corp.(a)

  

2,645

   

26,450

  

CC Neuberger Principal Holdings I, Class A(a)

  

3,981

   

41,124

  

CC Neuberger Principal Holdings II, Class A(a)

  

1,012

   

10,120

  

Churchill Capital Corp. IV, Class A(a)

  

1,685

   

16,648

  

DPCM Capital, Inc.(a)

  

2,240

   

22,736

  

Fast Acquisition Corp.(a)

  

1,495

   

15,473

  

Flying Eagle Acquisition Corp., Class A(a)

  

2,369

   

36,719

  

Foley Trasimene Acquisition Corp., Class A(a)

  

1,968

   

20,074

  

Fusion Acquisition Corp.(a)

  

2,336

   

24,528

  

Hennessy Capital Acquisition Corp. IV, Class A(a)

  

791

   

10,283

  

Hudson Executive Investment Corp., Class A(a)

  

2,462

   

24,448

  

Kingswood Acquisition Corp.(a)

  

2,245

   

22,652

  

Lefteris Acquisition Corp.(a)

  

1,885

   

18,831

  

LF Capital Acquisition Corp., Class A(a)

  

2,177

   

23,076

  

Live Oak Acquisition Corp., Class A(a)

  

4,067

   

50,837

  

Longview Acquisition Corp., Class A(a)

  

2,839

   

44,714

  

Oaktree Acquisition Corp. II(a)

  

1,779

   

18,128

  

Omnichannel Acquisition Corp.(a)

  

1,812

   

18,211

  

Pivotal Investment Corp. II, Class A(a)

  

796

   

11,176

  

Reinvent Technology Partners(a)

  

1,779

   

20,814

  

Roman DBDR Tech Acquisition Corp.(a)

  

1,792

   

18,368

  

Seaport Global Acquisition Corp.(a)

  

3,015

   

30,150

  

Spartacus Acquisition Corp.(a)

  

1,792

   

18,449

  

Sustainable Opportunities Acquisition Corp., Class A(a)

  

1,281

   

13,348

  

Trebia Acquisition Corp., Class A(a)

  

1,968

   

19,759

  

Trine Acquisition Corp., Class A(a)

  

3,079

   

39,657

  

Vy Global Growth(a)

  

1,792

   

18,673

  
   

659,074

  

See Notes to Financial Statements.

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



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

November 30, 2020 (unaudited)

  

Shares

 

Value

 

COMMON STOCKS - 83.98% (Continued)

 

Telecommunications - 5.27%

 

Gilat Satellite Networks Ltd.

  

4,900

  

$

29,694

  

LogMeIn, Inc.(a)(c)

  

1,063

   

94,246

  
   

123,940

  
TOTAL COMMON STOCKS
(Cost $1,749,439)
  

1,974,113

  

WARRANTS - 1.36%

 

Special Purpose Acquisition Companies - 1.36%

 
Artius Acquisition, Inc., Class A, Exercise Price $11.50,
Expires 07/13/2026(a)
  

341

   

484

  
CC Neuberger Principal Holdings I, Class A, Exercise Price $11.50,
Expires 12/31/2025(a)
  

1,327

   

2,190

  
CC Neuberger Principal Holdings II, Class A, Exercise Price $11.50,
Expires 07/29/2025(a)
  

253

   

309

  
Churchill Capital Corp. IV, Class A, Exercise Price $11.50,
Expires 09/18/2025(a)
  

337

   

391

  
Foley Trasimene Acquisition Corp., Class A, Exercise Price $11.50,
Expires 07/17/2025(a)
  

656

   

1,095

  
Hudson Executive Investment Corp.,Class A, Exercise Price $11.50,
Expires 06/21/2025(a)
  

1,231

   

1,256

  
Live Oak Acquisition Corp., Class A, Exercise Price $11.50,
Expires 05/08/2027(a)
  

6,984

   

22,488

  
Sustainable Opportunities Acquisition Corp.,Class A,
Exercise Price $11.50, Expires 06/26/2025(a)
  

1,745

   

2,741

  
Trebia Acquisition Corp., Class A, Exercise Price $11.50,
Expires 12/31/2025(a)
  

656

   

918

  
   

31,872

  
TOTAL WARRANTS
(Cost $16,320)
  

31,872

  

PREFERRED STOCKS - 2.38%

 

Real Estate Investment Trusts - 2.38%

 

Taubman Centers, Inc., Series J, 6.500%

  

2,219

   

56,008

  
TOTAL PREFERRED STOCKS
(Cost $50,192)
  

56,008

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
49



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

November 30, 2020 (unaudited)

  

Shares

 

Value

 

PRIVATE INVESTMENTS(c)(d) - 0.06%

 

Fast Capital LLC(a)

  

400

  

$

400

  

Fuse LLC(a)

  

1,100

   

1,000

  

Fuse Sponsor Capital, Z2 Shares(a)

  

110

   

100

  
TOTAL PRIVATE INVESTMENTS
(Cost $1,525)
  

1,500

  

 

  Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

PURCHASED OPTIONS(a) - 0.06%

 

Call Option Purchased - 0.02%

 
Maxeon Solar
Technologies Ltd.
 

12/2020

 

$

30.00

  

$

19,536

   

8

  

$

560

  
TOTAL CALL OPTIONS PURCHASED
(Cost $823)
  

560

  

Put Options Purchased - 0.04%

 

iShares Russell 2000 ETF

           
  

12/2020

  

120.00

   

271,530

   

15

   

0

  
  

12/2020

  

135.00

   

271,530

   

15

   

53

  
  

01/2021

  

135.00

   

615,468

   

34

   

935

  
TOTAL PUT OPTIONS PURCHASED
(Cost $38,542)
  

988

  
TOTAL PURCHASED OPTIONS
(Cost $39,365)
  

1,548

  

 

  

Yield

 

Shares

 

Value

 

SHORT-TERM INVESTMENTS - 12.83%

 

Money Market Funds

 
Morgan Stanley Institutional Liquidity Fund
Government Portfolio, Institutional Class
  

0.020

%(e)

  

150,778

  

$

150,778

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

0.132

%(e)

  

150,778

   

150,778

  
   

301,556

  
TOTAL SHORT-TERM INVESTMENTS
(Cost $301,556)
  

301,556

  
Total Investments - 100.67%
(Cost $2,158,397)
  

2,366,597

  

Liabilities in Excess of Other Assets - (0.67)%(f)

  

(15,827

)

 

NET ASSETS - 100.00%

 

$

2,350,770

  

See Notes to Financial Statements.

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



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

November 30, 2020 (unaudited)

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, 2020, the aggregate fair market value of those securities was $676,459, representing 28.78% of net assets.

(c)  Security fair valued using significant unobservable inputs and classified as a Level 3 security. As of November 30, 2020, the total fair market value of these securities was $95,746, representing 4.07% of net assets.

(d)  Represents a holding that is a direct investment into a private company and is not a listed or publicly traded entity.

(e)  Rate shown is the 7-day effective yield as of November 30, 2020.

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

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (18.36%)

 

Commercial Services - (0.59%)

 

Booz Allen Hamilton Holding Corp., Class A

  

(159

)

 

$

(13,800

)

 

Computers & Computer Services - (0.98%)

 

CACI International, Inc., Class A

  

(46

)

  

(10,916

)

 

Science Applications International Corp.

  

(132

)

  

(12,215

)

 
   

(23,131

)

 

Construction Materials - (1.10%)

 

Johnson Controls International Plc

  

(273

)

  

(12,569

)

 

Lennox International, Inc.

  

(46

)

  

(13,240

)

 
   

(25,809

)

 

Energy - Alternate Sources - (0.75%)

 

Maxeon Solar Technologies Ltd.

  

(725

)

  

(17,704

)

 

Engineering & Construction - (2.62%)

 

Jacobs Engineering Group, Inc.

  

(169

)

  

(18,225

)

 

Stantec, Inc.

  

(534

)

  

(16,089

)

 

WillScot Mobile Mini Holdings Corp.

  

(500

)

  

(10,755

)

 

WSP Global, Inc.

  

(222

)

  

(16,487

)

 
   

(61,556

)

 

Environmental Control - (0.91%)

 

Tetra Tech, Inc.

  

(179

)

  

(21,346

)

 

Food - (2.79%)

 

Just Eat Takeaway.com N.V.

  

(619

)

  

(65,745

)

 

Food Service - (1.19%)

 

Aramark

  

(800

)

  

(28,000

)

 

Leisure Time - (0.35%)

 

Acushnet Holdings Corp.

  

(217

)

  

(8,181

)

 

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
51



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

November 30, 2020 (unaudited)

SCHEDULE OF SECURITIES SOLD SHORT

 

Shares

 

Value

 

COMMON STOCKS - (18.36%) (Continued)

 

Media - (6.30%)

 

Charter Communications, Inc., Class A

  

(188

)

 

$

(122,574

)

 

Nexstar Media Group, Inc., Class A

  

(242

)

  

(25,471

)

 
   

(148,045

)

 

Pharmaceuticals - (0.22%)

 

Viatris, Inc.

  

(303

)

  

(5,096

)

 

Software - (0.56%)

 

salesforce.com, Inc.

  

(54

)

  

(13,273

)

 
TOTAL COMMON STOCKS
(Proceeds $364,342)
  

(431,686

)

 

EXCHANGE-TRADED FUNDS - (1.37%)

 

Equity Funds - (1.37%)

 

iShares Russell 2000 Growth ETF

  

(23

)

  

(6,040

)

 

VanEck Vectors Oil Services ETF

  

(189

)

  

(26,063

)

 
   

(32,103

)

 
TOTAL EXCHANGE-TRADED FUNDS
(Proceeds $29,063)
  

(32,103

)

 
TOTAL SECURITIES SOLD SHORT
(Proceeds $393,405)
 

$

(463,789

)

 

 

WRITTEN OPTIONS

 Expiration
Date
 Exercise
Price
 Notional
Amount
 

Contracts

 

Value

 

Written Put Options

 

iShares Russell 2000 ETF

 
  

12/2020

 

$

110.00

  

$

(271,530

)

  

(15

)

 

$

0

  
  

12/2020

  

115.00

   

(271,530

)

  

(15

)

  

0

  
  

01/2021

  

125.00

   

(615,468

)

  

(34

)

  

(493

)

 
TOTAL WRITTEN PUT OPTIONS
(Premiums received $26,265)
    

(493

)

 
TOTAL WRITTEN OPTIONS
(Premiums received $26,265)
   

$

(493

)

 

See Notes to Financial Statements.

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



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

November 30, 2020 (unaudited)

OUTSTANDING FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Appreciation
 

CAD

35,590

  

USD

27,135

  

Morgan Stanley & Co.

 

12/15/2020

 

$

271

  

EUR

1,770

  

USD

2,082

  

Morgan Stanley & Co.

 

12/15/2020

  

31

  

GBP

10,000

  

USD

13,105

  

Morgan Stanley & Co.

 

12/15/2020

  

226

  
  

$

528

  
Currency
Purchased
 

Currency Sold

 

Counterparty

 Settlement
Date
 Unrealized
Depreciation
 

USD

10,978

  

CAD

14,420

  

Morgan Stanley & Co.

 

12/15/2020

 

$

(126

)

 

USD

142,418

  

EUR

120,180

  

Morgan Stanley & Co.

 

12/15/2020

  

(994

)

 

USD

13,068

  

GBP

9,900

  

Morgan Stanley & Co.

 

12/15/2020

  

(132

)

 
  

$

(1,252

)

 

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

Country

 

% of Net Assets(a)

 

Germany

  

5.95

%

 

United States Virgin Islands

  

4.36

%

 

Bermuda

  

2.27

%

 

United Kingdom

  

1.42

%

 

Ireland

  

1.40

%

 

Israel

  

1.26

%

 

Cayman Islands

  

0.79

%

 

United States

  

83.22

%

 

Liabilities in Excess of Other Assets

  

(0.67

)%

 
   

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.

CAD - Canadian dollar

ETF - Exchange-Traded Fund

EUR - Euro

GBP - British pound

LLC - Limited Liability Company

Ltd. - Limited

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

Plc - Public Limited Company

USD - United States Dollar

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
53



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

November 30, 2020 (unaudited)

The following table summarizes the Water Island Long/Short Fund's investments and derivative financial instruments categorized in the fair value hierarchy as of November 30, 2020:

Investments in Securities at Value*

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

Common Stocks

 

Auto Parts & Equipment

 

$

47,967

  

$

  

$

  

$

47,967

  

Commercial Services

  

36,967

   

   

   

36,967

  

Computers & Computer Services

  

68,314

   

   

   

68,314

  

Diversified Financial Services

  

17,224

   

   

   

17,224

  

Energy - Alternate Sources

  

30,829

   

   

   

30,829

  

Engineering & Construction

  

123,627

   

   

   

123,627

  

Food

  

63,709

   

   

   

63,709

  

Healthcare - Products

  

33,449

   

   

   

33,449

  

Insurance

  

53,330

   

   

   

53,330

  

Internet

  

119,614

   

   

   

119,614

  

Leisure Time

  

18,891

   

   

   

18,891

  

Media

  

249,093

   

   

   

249,093

  

Miscellaneous Manufacturing

  

32,904

   

   

   

32,904

  

Pharmaceuticals

  

74,454

   

   

   

74,454

  

Real Estate Investment Trusts

  

102,571

   

   

   

102,571

  

Retail

  

67,941

   

   

   

67,941

  

Software

  

50,215

   

   

   

50,215

  
Special Purpose Acquisition
Companies
  

659,074

   

   

   

659,074

  

Telecommunications

  

29,694

   

   

94,246

   

123,940

  

Warrants

  

31,872

   

   

   

31,872

  

Preferred Stocks**

  

56,008

   

   

   

56,008

  

Private Investments

  

   

   

1,500

   

1,500

  

Purchased Options

  

1,548

   

   

   

1,548

  

Short-Term Investments

  

301,556

   

   

   

301,556

  

TOTAL

 

$

2,270,851

  

$

  

$

95,746

  

$

2,366,597

  

Other Financial Instruments***

 

Assets

 
Forward Foreign Currency
Exchange Contracts
 

$

  

$

528

  

$

  

$

528

  

Liabilities

 

Common Stocks**

  

(431,686

)

  

   

   

(431,686

)

 

Exchange-Traded Funds

  

(32,103

)

  

   

   

(32,103

)

 

Written Options

  

(493

)

  

   

   

(493

)

 
Forward Foreign Currency
Exchange Contracts
  

   

(1,252

)

  

   

(1,252

)

 

TOTAL

 

$

(464,282

)

 

$

(724

)

 

$

  

$

(465,006

)

 

See Notes to Financial Statements.

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



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

November 30, 2020 (unaudited)

*  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.

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, 2020:

Investments
in Securities
 Balance as of
May 31, 2020
 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,
2020
 Net change in
Unrealized
Appreciation
(Depreciation)
from
investments
still held as of
November 30,
2020
 
Common
Stock
 

$

44,492

  

$

2,383

  

$

2,511

  

$

  

$

(58,633

)

 

$

103,493

  

$

  

$

94,246

  

$

3,822

  
Private
Investments
  

   

   

(25

)

  

1,525

   

   

   

   

1,500

   

(25

)

 

Total

 

$

44,492

  

$

2,383

  

$

2,486

  

$

1,525

  

$

(58,633

)

 

$

103,493

  

$

  

$

95,746

  

$

3,797

  

The following table summarizes the quantitative inputs used for investments categorized as Level 3 of the fair value hierarchy as of November 30, 2020:

Investments in
Securities
 Fair Value at
November 30, 2020
 Valuation
Technique
 Unobservable
Input
 Range of
Values
 Weighted
Average
 
Common Stock
 
 
 

$

94,246
 
 
 Deal Value
 
 
 Final
Determination
on Dissent
 

$

88.66
 
 
 

$

88.66
 
 
 
Private Investments  

1,500

  

Cost

 

Cost

 

$

.091-$1

  

$

0.93

  

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
55



The Arbitrage Funds

  Arbitrage
Fund
 Water Island
Event-Driven
Fund
 

ASSETS

 

Investments:

 

At cost of unaffiliated investments

 

$

1,251,782,630

  

$

104,490,826

  

At cost of affiliated investments

 

$

60,459,409

  

$

  

At fair value of unaffiliated investments (Note 2)

 

$

1,316,576,733

  

$

109,671,090

  

At fair value of affiliated investments (Note 2)

 

$

70,506,411

  

$

  

Cash

  

1,828,015

   

18,237

  

Cash denominated in foreign currency (Cost $14,549,778, $1,094,810, $0 and $781)

  

14,525,560

   

1,092,982

  

Deposits with brokers for securities sold short (Note 2)

  

286,417,665

   

15,564,419

  

Segregated cash for collateral (Note 2)

  

46,164,860

   

3,751,550

  

Receivable for investment securities sold

  

13,709,463

   

3,407,188

  

Receivable for capital shares sold

  

1,644,652

   

50,401

  

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

  

1,359,096

   

115,145

  

Dividends and interest receivable

  

800,761

   

211,080

  

Prepaid expenses

  

42,845

   

37,235

  

Total Assets

  

1,753,576,061

   

133,919,327

  

LIABILITIES

 
Securities sold short, at value (Note 2) (proceeds $256,017,783, $15,894,299, $10,200,057 and
$393,405)
  

291,361,579

   

17,743,589

  

Written options, at value (Note 2) (premiums received $0, $0, $7,627 and $26,265)

  

   

  

Line of credit payable (Note 4)

  

   

500,000

  

Payable for investment securities purchased

  

32,446,336

   

4,611,734

  

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

  

2,494,530

   

206,372

  

Payable for capital shares redeemed

  

1,393,182

   

17,989

  

Payable to Adviser (Note 5)

  

1,171,479

   

100,979

  

Dividends payable on securities sold short

  

   

587

  

Payable to Distributor (Note 5)

  

37,466

   

1,908

  

Payable to Administrator (Note 5)

  

60,998

   

10,215

  

Payable to Transfer Agent (Note 5)

  

188,670

   

22,560

  

Payable to Custodian

  

53,592

   

8,087

  

Income distribution payable

  

   

  

Interest expense payable

  

74,698

   

5,956

  

Payable for swap reset

  

30,894

   

2,083

  

Audit and legal fees payable

  

69,099

   

18,215

  

Payable to Trustees

  

46,265

   

4,702

  

Chief Compliance Officer Fees payable (Note 5)

  

62,022

   

4,779

  

Chief Financial Officer Fees payable (Note 5)

  

5,650

   

979

  

Other accrued expenses and liabilities

  

45,497

   

10,417

  

Total Liabilities

  

329,541,957

   

23,271,151

  

NET ASSETS

 

$

1,424,034,104

  

$

110,648,176

  

NET ASSETS CONSIST OF:

 

Paid-in capital

 

$

1,328,759,489

  

$

157,183,947

  

Distributable earnings (Accumulated loss)

  

95,274,615

   

(46,535,771

)

 

NET ASSETS

 

$

1,424,034,104

  

$

110,648,176

  

See Notes to Financial Statements.

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



  Statement of Assets and Liabilities

November 30, 2020 (Unaudited)

  Water
Island Credit
Opportunities Fund
 Water Island
Long/Short
Fund
 

ASSETS

 

Investments:

 

At cost of unaffiliated investments

 

$

63,174,953

  

$

2,158,397

  

At cost of affiliated investments

 

$

  

$

  

At fair value of unaffiliated investments (Note 2)

 

$

65,952,209

  

$

2,366,597

  

At fair value of affiliated investments (Note 2)

 

$

  

$

  

Cash

  

23,931

   

25,023

  

Cash denominated in foreign currency (Cost $14,549,778, $1,094,810, $0 and $781)

  

   

782

  

Deposits with brokers for securities sold short (Note 2)

  

11,639,438

   

450,952

  

Segregated cash for collateral (Note 2)

  

1,420,283

   

838

  

Receivable for investment securities sold

  

   

56,460

  

Receivable for capital shares sold

  

73,662

   

  

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

  

5,197

   

528

  

Dividends and interest receivable

  

741,395

   

2,744

  

Prepaid expenses

  

36,670

   

20,454

  

Total Assets

  

79,892,785

   

2,924,378

  

LIABILITIES

 
Securities sold short, at value (Note 2) (proceeds $256,017,783, $15,894,299, $10,200,057 and
$393,405)
  

11,539,849

   

463,789

  

Written options, at value (Note 2) (premiums received $0, $0, $7,627 and $26,265)

  

6,115

   

493

  

Line of credit payable (Note 4)

  

   

  

Payable for investment securities purchased

  

146,812

   

54,430

  

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

  

5,435

   

1,252

  

Payable for capital shares redeemed

  

140,791

   

  

Payable to Adviser (Note 5)

  

54,816

   

23,326

  

Dividends payable on securities sold short

  

1,230

   

168

  

Payable to Distributor (Note 5)

  

938

   

3

  

Payable to Administrator (Note 5)

  

13,543

   

3,709

  

Payable to Transfer Agent (Note 5)

  

9,835

   

308

  

Payable to Custodian

  

3,888

   

5,748

  

Income distribution payable

  

146

   

  

Interest expense payable

  

14,245

   

167

  

Payable for swap reset

  

718

   

  

Audit and legal fees payable

  

16,094

   

13,799

  

Payable to Trustees

  

3,340

   

1,318

  

Chief Compliance Officer Fees payable (Note 5)

  

3,352

   

98

  

Chief Financial Officer Fees payable (Note 5)

  

736

   

598

  

Other accrued expenses and liabilities

  

5,154

   

4,402

  

Total Liabilities

  

11,967,037

   

573,608

  

NET ASSETS

 

$

67,925,748

  

$

2,350,770

  

NET ASSETS CONSIST OF:

 

Paid-in capital

 

$

68,690,374

  

$

1,954,886

  

Distributable earnings (Accumulated loss)

  

(764,626

)

  

395,884

  

NET ASSETS

 

$

67,925,748

  

$

2,350,770

  

Semi-Annual Report | November 30, 2020
57



The Arbitrage Funds

  Arbitrage
Fund
 Water Island
Event-Driven
Fund
 

PRICING OF SHARES:

 

CLASS R SHARES:

 

Net assets applicable to Class R shares

 

$

90,056,018

  

$

7,898,241

  

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

  

6,692,763

   

744,986

  

Net asset value and offering price per share

 

$

13.46

  

$

10.60

  

CLASS I SHARES:

 

Net assets applicable to Class I shares

 

$

1,290,998,239

  

$

102,064,903

  

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

  

92,770,048

   

9,536,556

  

Net asset value and offering price per share

 

$

13.92

  

$

10.70

  

CLASS C SHARES:

 

Net assets applicable to Class C shares

 

$

16,566,096

  

$

360,846

  

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

  

1,305,714

   

35,006

  

Net asset value and offering price per share(a)

 

$

12.69

  

$

10.31

  

CLASS A SHARES:

 

Net assets applicable to Class A shares

 

$

26,413,751

  

$

324,186

  

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

  

1,966,894

   

30,585

  

Net asset value and offering price per share(a)

 

$

13.43

  

$

10.60

  

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

 

$

13.81

  

$

10.96

  

Maximum sales charge

  

2.75

%

  

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
58



  Statement of Assets and Liabilities

November 30, 2020 (Unaudited)

  Water
Island Credit
Opportunities Fund
 Water Island
Long/Short
Fund
 

PRICING OF SHARES:

 

CLASS R SHARES:

 

Net assets applicable to Class R shares

 

$

1,784,263

  

$

12,779

  

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

  

177,754

   

1,049

  

Net asset value and offering price per share

 

$

10.04

  

$

12.18

  

CLASS I SHARES:

 

Net assets applicable to Class I shares

 

$

65,368,221

  

$

2,337,991

  

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

  

6,542,902

   

191,884

  

Net asset value and offering price per share

 

$

9.99

  

$

12.18

  

CLASS C SHARES:

 

Net assets applicable to Class C shares

 

$

691,039

  

$

  

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

  

69,099

   

  

Net asset value and offering price per share(a)

 

$

10.00

  

$

  

CLASS A SHARES:

 

Net assets applicable to Class A shares

 

$

82,225

  

$

  

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

  

8,226

   

  

Net asset value and offering price per share(a)

 

$

10.00

  

$

  

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

 

$

10.34

  

$

  

Maximum sales charge

  

3.25

%

  

  

Semi-Annual Report | November 30, 2020
59



The Arbitrage Funds

  Arbitrage
Fund
 Water Island
Event-Driven
Fund
 

INVESTMENT INCOME

 

Dividend income

 

$

4,945,300

  

$

377,474

  

Foreign taxes withheld on dividends

  

(114,480

)

  

(10,553

)

 

Interest income

  

117,755

   

168,588

  

Total Investment Income

  

4,948,575

   

535,509

  

EXPENSES

 

Investment advisory fees (Note 5)

  

7,470,045

   

591,572

  

Distribution and service fees (Note 5)

 

Class R

  

113,265

   

9,395

  

Class C

  

88,541

   

1,802

  

Class A

  

28,290

   

435

  

Administrative fees (Note 5)

  

184,109

   

29,381

  

Chief Compliance Officer fees (Note 5)

  

95,064

   

7,271

  

Trustees' fees

  

136,965

   

12,873

  

Dividend expense

  

17,160

   

10,038

  

Interest rebate expense

  

480,409

   

61,906

  

Transfer agent fees (Note 5)

  

618,879

   

82,262

  

Custodian and bank service fees

  

117,230

   

24,922

  

Registration and filing fees

  

40,893

   

31,871

  

Printing of shareholder reports

  

67,588

   

9,248

  

Professional fees

  

106,989

   

31,597

  

Line of credit interest expense (Note 4)

  

   

3,963

  

Insurance expense

  

36,439

   

2,857

  

Chief Financial Officer fees (Note 5)

  

30,806

   

5,604

  

Other expenses

  

44,135

   

10,750

  

Total Expenses

  

9,676,807

   

927,747

  

Fees waived and/or reimbursed by the Adviser, Class R (Note 5)

  

(27,465

)

  

(4,597

)

 

Fees waived and/or reimbursed by the Adviser, Class I (Note 5)

  

(385,800

)

  

(60,757

)

 

Fees waived and/or reimbursed by the Adviser, Class C (Note 5)

  

(5,364

)

  

(220

)

 

Fees waived and/or reimbursed by the Adviser, Class A (Note 5)

  

(6,882

)

  

(213

)

 

Net Expenses

  

9,251,296

   

861,960

  

NET INVESTMENT INCOME (LOSS)

  

(4,302,721

)

  

(326,451

)

 

See Notes to Financial Statements.

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60



  Statement of Operations

For the Period Ended November 30, 2020 (Unaudited)

  Water
Island Credit
Opportunities Fund
 Water Island
Long/Short
Fund
 

INVESTMENT INCOME

 

Dividend income

 

$

54,120

  

$

10,033

  

Foreign taxes withheld on dividends

  

   

(771

)

 

Interest income

  

1,256,341

   

  

Total Investment Income

  

1,310,461

   

9,262

  

EXPENSES

 

Investment advisory fees (Note 5)

  

309,334

   

13,185

  

Distribution and service fees (Note 5)

 

Class R

  

2,403

   

15

  

Class C

  

3,400

   

  

Class A

  

105

   

  

Administrative fees (Note 5)

  

41,281

   

12,032

  

Chief Compliance Officer fees (Note 5)

  

4,072

   

134

  

Trustees' fees

  

8,712

   

2,701

  

Dividend expense

  

3,498

   

1,665

  

Interest rebate expense

  

21,390

   

2,606

  

Transfer agent fees (Note 5)

  

38,079

   

1,440

  

Custodian and bank service fees

  

13,271

   

12,070

  

Registration and filing fees

  

30,347

   

19,783

  

Printing of shareholder reports

  

3,461

   

624

  

Professional fees

  

12,304

   

8,064

  

Line of credit interest expense (Note 4)

  

2,395

   

  

Insurance expense

  

1,252

   

42

  

Chief Financial Officer fees (Note 5)

  

4,673

   

3,547

  

Other expenses

  

9,565

   

6,377

  

Total Expenses

  

509,542

   

84,285

  

Fees waived and/or reimbursed by the Adviser, Class R (Note 5)

  

(4,646

)

  

(364

)

 

Fees waived and/or reimbursed by the Adviser, Class I (Note 5)

  

(150,756

)

  

(64,448

)

 

Fees waived and/or reimbursed by the Adviser, Class C (Note 5)

  

(1,643

)

  

  

Fees waived and/or reimbursed by the Adviser, Class A (Note 5)

  

(202

)

  

  

Net Expenses

  

352,295

   

19,473

  

NET INVESTMENT INCOME (LOSS)

  

958,166

   

(10,211

)

 

Semi-Annual Report | November 30, 2020
61



The Arbitrage Funds

  Arbitrage
Fund
 Water Island
Event-Driven
Fund
 

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

 

Net realized gains (losses) from:

 

Unaffiliated investments

 

$

70,191,781

  

$

8,466,798

  

Purchased option contracts

  

3,310,364

   

249,565

  

Swap contracts

  

(16,129,509

)

  

(427,043

)

 

Securities sold short

  

(54,558,523

)

  

(5,331,307

)

 

Written option contracts

  

   

  

Forward currency contracts

  

(1,708,660

)

  

(84,842

)

 

Foreign currency transactions (Note 8)

  

(713,744

)

  

8,306

  

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated investments

  

77,240,513

   

5,017,608

  

Affiliated investments

  

4,283,100

   

  

Securities sold short

  

(27,481,733

)

  

(513,014

)

 

Foreign currency transactions (Note 8)

  

(21,818

)

  

(1,210

)

 

Purchased option contracts

  

(349,834

)

  

(70,378

)

 

Written option contracts

  

   

  

Forward currency contracts

  

(4,021,113

)

  

(232,773

)

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

50,040,824

   

7,081,710

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

45,738,103

  

$

6,755,259

  

See Notes to Financial Statements.

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62



  Statement of Operations

For the Period Ended November 30, 2020 (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

 

$

1,740,849

  

$

312,381

  

Purchased option contracts

  

56,951

   

(19,630

)

 

Swap contracts

  

(67,522

)

  

(1,365

)

 

Securities sold short

  

(1,394,131

)

  

(61,760

)

 

Written option contracts

  

84,001

   

5,662

  

Forward currency contracts

  

(32,685

)

  

(6,847

)

 

Foreign currency transactions (Note 8)

  

14,388

   

282

  

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated investments

  

3,151,973

   

164,527

  

Affiliated investments

  

   

  

Securities sold short

  

(709,526

)

  

(37,297

)

 

Foreign currency transactions (Note 8)

  

54

   

25

  

Purchased option contracts

  

(191,377

)

  

(39,040

)

 

Written option contracts

  

9,479

   

19,221

  

Forward currency contracts

  

(238

)

  

(2,008

)

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

2,662,216

   

334,151

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

3,620,382

  

$

323,940

  

Semi-Annual Report | November 30, 2020
63



The Arbitrage Funds

  

Arbitrage Fund

 
  Six Months
Ended
November 30,
2020
(Unaudited)
 Year Ended
May 31, 2020
 

FROM OPERATIONS

 

Net investment income (loss)

 

$

(4,302,721

)

 

$

(2,736,933

)

 

Net realized gains (losses) from:

 

Unaffiliated investments

  

70,191,781

   

93,070,280

  

Purchased option contracts

  

3,310,364

   

(5,039,302

)

 

Swap contracts

  

(16,129,509

)

  

(12,721,184

)

 

Securities sold short

  

(54,558,523

)

  

(11,978,565

)

 

Written option contracts

  

   

317,902

  

Forward currency contracts

  

(1,708,660

)

  

3,988,837

  

Foreign currency transactions

  

(713,744

)

  

2,309,502

  

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated investments

  

77,240,513

   

(25,875,315

)

 

Affiliated investments

  

4,283,100

   

5,728,034

  

Securities sold short

  

(27,481,733

)

  

929,782

  

Foreign currency transactions

  

(21,818

)

  

389

  

Purchased option contracts

  

(349,834

)

  

252,665

  

Written option contracts

  

   

(25,601

)

 

Forward currency contracts

  

(4,021,113

)

  

(2,224,904

)

 

Net increase in net assets resulting from operations

  

45,738,103

   

45,995,587

  

FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

 

Distributions, Class R

  

   

(3,028,417

)

 

Distributions, Class I

  

   

(30,760,287

)

 

Distributions, Class C

  

   

(441,292

)

 

Distributions, Class A

  

   

(377,484

)

 

Decrease in net assets from distributions to shareholders

  

   

(34,607,480

)

 

FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):

 

Proceeds from shares sold

  

210,785,984

   

388,612,998

  

Shares issued in reinvestment of distributions

  

   

27,514,664

  

Payments for shares redeemed

  

(212,665,681

)

  

(794,621,293

)

 

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

  

(1,879,697

)

  

(378,493,631

)

 

TOTAL INCREASE (DECREASE) IN NET ASSETS

  

43,858,406

   

(367,105,524

)

 

NET ASSETS

 

Beginning of period

  

1,380,175,698

   

1,747,281,222

  

End of period

 

$

1,424,034,104

  

$

1,380,175,698

  

See Notes to Financial Statements.

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64



  Statement of Changes in Net Assets

  

Water Island Event-Driven Fund

 
  Six Months
Ended
November 30,
2020
(Unaudited)
 Year Ended
May 31, 2020
 

FROM OPERATIONS

 

Net investment income (loss)

 

$

(326,451

)

 

$

212,973

  

Net realized gains (losses) from:

 

Unaffiliated investments

  

8,466,798

   

8,182,595

  

Purchased option contracts

  

249,565

   

(621,405

)

 

Swap contracts

  

(427,043

)

  

1,324,551

  

Securities sold short

  

(5,331,307

)

  

(2,345,694

)

 

Written option contracts

  

   

181,455

  

Forward currency contracts

  

(84,842

)

  

86,167

  

Foreign currency transactions

  

8,306

   

19,249

  

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated investments

  

5,017,608

   

269,869

  

Affiliated investments

  

   

  

Securities sold short

  

(513,014

)

  

(1,701,864

)

 

Foreign currency transactions

  

(1,210

)

  

26

  

Purchased option contracts

  

(70,378

)

  

26,088

  

Written option contracts

  

   

(4,956

)

 

Forward currency contracts

  

(232,773

)

  

(29,486

)

 

Net increase in net assets resulting from operations

  

6,755,259

   

5,599,568

  

FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

 

Distributions, Class R

  

   

(57,935

)

 

Distributions, Class I

  

   

(460,278

)

 

Distributions, Class C

  

   

  

Distributions, Class A

  

   

(1,743

)

 

Decrease in net assets from distributions to shareholders

  

   

(519,956

)

 

FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):

 

Proceeds from shares sold

  

4,523,842

   

58,223,304

  

Shares issued in reinvestment of distributions

  

   

469,438

  

Payments for shares redeemed

  

(8,110,334

)

  

(81,019,387

)

 

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

  

(3,586,492

)

  

(22,326,645

)

 

TOTAL INCREASE (DECREASE) IN NET ASSETS

  

3,168,767

   

(17,247,033

)

 

NET ASSETS

 

Beginning of period

  

107,479,409

   

124,726,442

  

End of period

 

$

110,648,176

  

$

107,479,409

  

Semi-Annual Report | November 30, 2020
65



The Arbitrage Funds

  Water Island Credit
Opportunities Fund
 
  Six Months
Ended
November 30,
2020
(Unaudited)
 Year Ended
May 31, 2020
 

FROM OPERATIONS

 

Net investment income (loss)

 

$

958,166

  

$

1,562,938

  

Net realized gains (losses) from:

 

Unaffiliated investments

  

1,740,849

   

175,502

  

Purchased option contracts

  

56,951

   

130,754

  

Swap contracts

  

(67,522

)

  

(113,022

)

 

Securities sold short

  

(1,394,131

)

  

511,864

  

Written option contracts

  

84,001

   

21,926

  

Forward currency contracts

  

(32,685

)

  

  

Foreign currency transactions

  

14,388

   

(106

)

 

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated investments

  

3,151,973

   

(98,597

)

 

Securities sold short

  

(709,526

)

  

(873,080

)

 

Foreign currency transactions

  

54

   

  

Purchased option contracts

  

(191,377

)

  

243,824

  

Written option contracts

  

9,479

   

(9,147

)

 

Forward currency contracts

  

(238

)

  

  

Net increase in net assets resulting from operations

  

3,620,382

   

1,552,856

  

FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

 

Distributions, Class R

  

(28,864

)

  

(233,649

)

 

Distributions, Class I

  

(989,477

)

  

(1,648,549

)

 

Distributions, Class C

  

(7,436

)

  

(10,320

)

 

Distributions, Class A

  

(1,229

)

  

(7,297

)

 

Decrease in net assets from distributions to shareholders

  

(1,027,006

)

  

(1,899,815

)

 

FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):

 

Proceeds from shares sold

  

17,621,344

   

25,851,224

  

Shares issued in reinvestment of distributions

  

1,025,567

   

1,887,360

  

Payments for shares redeemed

  

(14,602,815

)

  

(24,332,391

)

 

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

  

4,044,096

   

3,406,193

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

  

6,637,472

   

3,059,234

  

NET ASSETS

 

Beginning of period

  

61,288,276

   

58,229,042

  

End of period

 

$

67,925,748

  

$

61,288,276

  

See Notes to Financial Statements.

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66



  Statement of Changes in Net Assets

  

Water Island Long/Short Fund

 
  Six Months
Ended
November 30,
2020
(Unaudited)
 Year Ended
May 31, 2020
 

FROM OPERATIONS

 

Net investment income (loss)

 

$

(10,211

)

 

$

59,555

  

Net realized gains (losses) from:

 

Unaffiliated investments

  

312,381

   

20,869

  

Purchased option contracts

  

(19,630

)

  

(51,982

)

 

Swap contracts

  

(1,365

)

  

(5,921

)

 

Securities sold short

  

(61,760

)

  

48,669

  

Written option contracts

  

5,662

   

14,261

  

Forward currency contracts

  

(6,847

)

  

2,966

  

Foreign currency transactions

  

282

   

(331

)

 

Net change in unrealized appreciation (depreciation) on:

 

Unaffiliated investments

  

164,527

   

118,152

  

Securities sold short

  

(37,297

)

  

(64,266

)

 

Foreign currency transactions

  

25

   

1

  

Purchased option contracts

  

(39,040

)

  

(8,504

)

 

Written option contracts

  

19,221

   

8,092

  

Forward currency contracts

  

(2,008

)

  

184

  

Net increase in net assets resulting from operations

  

323,940

   

141,745

  

FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

 

Distributions, Class R

  

   

(176

)

 

Distributions, Class I

  

   

(36,186

)

 

Distributions, Class C

  

   

  

Distributions, Class A

  

   

  

Decrease in net assets from distributions to shareholders

  

   

(36,362

)

 

FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):

 

Proceeds from shares sold

  

106,461

   

70,694

  

Shares issued in reinvestment of distributions

  

   

36,362

  

Payments for shares redeemed

  

   

(666,226

)

 

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

  

106,461

   

(559,170

)

 

TOTAL INCREASE (DECREASE) IN NET ASSETS

  

430,401

   

(453,787

)

 

NET ASSETS

 

Beginning of period

  

1,920,369

   

2,374,156

  

End of period

 

$

2,350,770

  

$

1,920,369

  

Semi-Annual Report | November 30, 2020
67



Arbitrage Fund – Class R  

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

  Six Months
Ended
November 30,
2020
 

Year Ended May 31,

 
  

(Unaudited)

 

2020

 

2019

 

2018

 

2017

 

2016

 
Net asset value,
beginning of period
 

$

13.04

  

$

12.92

  

$

12.65

  

$

13.06

  

$

12.78

  

$

12.97

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

(0.05

)

  

(0.05

)

  

(0.03

)(c)

  

0.05

   

(0.13

)(b)

  

(0.06

)

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

0.47

   

0.44

   

0.52

   

(0.01

)(c)

  

0.53

(d)

  

0.17

  
Total from investment
operations
  

0.42

   

0.39

   

0.49

   

0.04

   

0.40

   

0.11

  

Less distributions

 
From net
investment
income
  

   

   

(0.06

)

  

(0.09

)

  

   

  
From net
realized gains
  

   

(0.27

)

  

(0.16

)

  

(0.36

)

  

(0.12

)

  

(0.30

)

 

Total distributions

  

   

(0.27

)

  

(0.22

)

  

(0.45

)

  

(0.12

)

  

(0.30

)

 
Proceeds from
redemption fees
collected
  

   

   

   

0.00

(e)

  

0.00

(e)

  

0.00

(e)

 
Net asset value,
end of period
 

$

13.46

  

$

13.04

  

$

12.92

  

$

12.65

  

$

13.06

  

$

12.78

  

Total return(f)

  

3.22

%(g)

  

3.07

%

  

3.89

%

  

0.31

%

  

3.17

%

  

0.87

%

 
Net assets, end of
period (in 000s)
 

$

90,056

  

$

98,715

  

$

163,349

  

$

222,309

  

$

340,353

  

$

433,936

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(h)

  

1.60

%(i)

  

1.66

%

  

1.94

%

  

1.91

%

  

1.87

%(b)

  

1.88

%

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

1.54

%(i)

  

1.63

%

  

1.93

%

  

1.90

%

  

1.87

%(b)

  

1.88

%

 
Net investment
income (loss)
  

(0.82

%)(i)

  

(0.36

%)

  

(0.20

%)(c)

  

0.41

%

  

(1.00

%)(b)

  

(0.51

%)

 
Portfolio turnover
rate
  

141

%(g)

  

273

%

  

419

%

  

362

%

  

363

%

  

321

%

 

See Notes to Financial Statements.

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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 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 0.00% (annualized), 0.15%, 0.46%, 0.42%, 0.36% and 0.34% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively. Interest rebate expense and line of credit interest expense totaled 0.07% (annualized), 0.01%, 0.00%, 0.01%, 0.03% and 0.07% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, 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%, 1.47%, 1.48% and 1.47% of average net assets for the the six months ended November 30, 2020 and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
69



Arbitrage Fund – Class I  

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

  Six Months
Ended
November 30,
2020
 

Year Ended May 31,

 
  

(Unaudited)

 

2020

 

2019

 

2018

 

2017

 

2016

 
Net asset value,
beginning of
period
 

$

13.47

  

$

13.32

  

$

13.03

  

$

13.46

  

$

13.13

  

$

13.28

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

(0.04

)

  

(0.02

)

  

0.01

   

0.05

   

(0.10

)(b)

  

(0.03

)

 
Net realized and
unrealized gains
on investments
and foreign
currencies
  

0.49

   

0.45

   

0.54

   

0.01

   

0.55

(c)

  

0.18

  
Total from
investment
operations
  

0.45

   

0.43

   

0.55

   

0.06

   

0.45

   

0.15

  

Less distributions

 
From net
investment
income
  

   

(0.01

)

  

(0.10

)

  

(0.13

)

  

   

  
From net
realized gains
  

   

(0.27

)

  

(0.16

)

  

(0.36

)

  

(0.12

)

  

(0.30

)

 

Total distributions

  

   

(0.28

)

  

(0.26

)

  

(0.49

)

  

(0.12

)

  

(0.30

)

 
Proceeds from
redemption fees
collected
  

   

   

   

0.00

(d)

  

0.00

(d)

  

0.00

(d)

 
Net asset value,
end of period
 

$

13.92

  

$

13.47

  

$

13.32

  

$

13.03

  

$

13.46

  

$

13.13

  

Total return(e)

  

3.34

%(f)

  

3.27

%

  

4.21

%

  

0.50

%

  

3.47

%

  

1.16

%

 
Net assets, end of
period (in 000s)
 

$

1,290,998

  

$

1,243,838

  

$

1,546,542

  

$

1,510,598

  

$

1,492,094

  

$

1,395,178

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(g)

  

1.35

%(h)

  

1.41

%

  

1.69

%

  

1.66

%

  

1.62

%(b)

  

1.63

%

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

1.29

%(h)

  

1.38

%

  

1.68

%

  

1.65

%

  

1.62

%(b)

  

1.63

%

 
Net investment
income (loss)
  

(0.58

%)(h)

  

(0.13

%)

  

0.06

%

  

0.35

%

  

(0.76

%)(b)

  

(0.24

%)

 
Portfolio turnover
rate
  

141

%(f)

  

273

%

  

419

%

  

362

%

  

363

%

  

321

%

 

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)  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 0.00% (annualized), 0.15%, 0.46%, 0.42%, 0.36% and 0.34% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively. Interest rebate expense and line of credit interest expense totaled 0.07% (annualized), 0.01%, 0.00%, 0.01%, 0.03% and 0.07% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, 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%, 1.22%, 1.23% and 1.22% of average net assets for the six months ended November 30, 2020 and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
71



Arbitrage Fund – Class C  

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

  Six Months
Ended
November 30,
2020
 

Year Ended May 31,

 
  

(Unaudited)

 

2020

 

2019

 

2018

 

2017

 

2016

 
Net asset value,
beginning of period
 

$

12.34

  

$

12.34

  

$

12.12

  

$

12.54

  

$

12.37

  

$

12.65

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

(0.10

)

  

(0.14

)

  

(0.12

)(b)

  

(0.07

)(b)

  

(0.22

)(c)

  

(0.16

)

 
Net realized and
unrealized gains
on investments
and foreign
currencies
  

0.45

   

0.41

   

0.50

   

0.01

   

0.51

(d)

  

0.18

  
Total from investment
operations
  

0.35

   

0.27

   

0.38

   

(0.06

)

  

0.29

   

0.02

  

Less distributions

 
From net
investment
income
  

   

   

   

(0.00

)(e)

  

   

  
From net
realized gains
  

   

(0.27

)

  

(0.16

)

  

(0.36

)

  

(0.12

)

  

(0.30

)

 

Total distributions

  

   

(0.27

)

  

(0.16

)

  

(0.36

)

  

(0.12

)

  

(0.30

)

 
Proceeds from
redemption fees
collected
  

   

   

   

   

   

  
Net asset value,
end of period
 

$

12.69

  

$

12.34

  

$

12.34

  

$

12.12

  

$

12.54

  

$

12.37

  

Total return(f)(g)

  

2.84

%(h)

  

2.24

%

  

3.11

%

  

(0.45

)%

  

2.38

%

  

0.18

%

 
Net assets, end of
period (in 000s)
 

$

16,566

  

$

19,860

  

$

19,050

  

$

22,917

  

$

26,900

  

$

30,814

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(i)

  

2.35

%(j)

  

2.41

%

  

2.69

%

  

2.66

%

  

2.62

%(c)

  

2.63

%

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

2.29

%(j)

  

2.38

%

  

2.68

%

  

2.65

%

  

2.62

%(c)

  

2.63

%

 
Net investment
loss
  

(1.59

%)(j)

  

(1.16

%)

  

(0.94

%)(b)

  

(0.56

%)

  

(1.76

%)(c)

  

(1.28

%)

 
Portfolio turnover
rate
  

141

%(h)

  

273

%

  

419

%

  

362

%

  

363

%

  

321

%

 

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

(h)  Not annualized.

(i)  Dividend expense totaled 0.00% (annualized), 0.15%, 0.46%, 0.42%, 0.36% and 0.34% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively. Interest rebate expense and line of credit interest expense totaled 0.07% (annualized), 0.01%, 0.00%, 0.01%, 0.03% and 0.07% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, 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%, 2.22%, 2.23% and 2.22% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
73



Arbitrage Fund – Class A  

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

  Six Months
Ended
November 30,
2020
 

Year Ended May 31,

 
  

(Unaudited)

 

2020

 

2019

 

2018

 

2017

 

2016

 
Net asset value,
beginning of period
 

$

13.01

  

$

12.90

  

$

12.63

  

$

13.07

  

$

12.79

  

$

12.97

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

(0.05

)

  

(0.05

)

  

(0.02

)(d)

  

(b)

  

(0.13

)(c)

  

(0.07

)

 
Net realized and
unrealized gains
on investments
and foreign
currencies
  

0.47

   

0.43

   

0.52

   

0.02

   

0.53

(e)

  

0.19

  
Total from investment
operations
  

0.42

   

0.38

   

0.50

   

0.02

   

0.40

   

0.12

  

Less distributions

 
From net
investment
income
  

   

   

(0.07

)

  

(0.10

)

  

   

  
From net
realized gains
  

   

(0.27

)

  

(0.16

)

  

(0.36

)

  

(0.12

)

  

(0.30

)

 

Total distributions

  

   

(0.27

)

  

(0.23

)

  

(0.46

)

  

(0.12

)

  

(0.30

)

 
Proceeds from
redemption fees
collected
  

   

   

   

   

   

  
Net asset value,
end of period
 

$

13.43

  

$

13.01

  

$

12.90

  

$

12.63

  

$

13.07

  

$

12.79

  

Total return(f)(g)

  

3.23

%(h)

  

3.00

%

  

3.94

%

  

0.21

%

  

3.17

%

  

0.95

%

 
Net assets, end of
period (in 000s)
 

$

26,414

  

$

17,762

  

$

18,341

  

$

16,740

  

$

10,012

  

$

8,421

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(i)

  

1.60

%(j)

  

1.66

%

  

1.94

%

  

1.91

%

  

1.87

%(c)

  

1.87

%

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

1.54

%(j)

  

1.63

%

  

1.93

%

  

1.90

%

  

1.87

%(c)

  

1.87

%

 
Net investment
loss
  

(0.82

%)(j)

  

(0.40

%)

  

(0.19

%)(d)

  

(0.01

%)

  

(1.02

%)(c)

  

(0.56

%)

 
Portfolio turnover
rate
  

141

%(h)

  

273

%

  

419

%

  

362

%

  

363

%

  

321

%

 

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

(h)  Not annualized.

(i)  Dividend expense totaled 0.00% (annualized), 0.15%, 0.46%, 0.42%, 0.36% and 0.33% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively. Interest rebate expense and line of credit interest expense totaled 0.07% (annualized), 0.01%, 0.00%, 0.01%, 0.03% and 0.07% of average net assets for the six months ended November 30, 2020 and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, 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%, 1.47%, 1.48% and 1.47% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
75



Water Island Event-Driven Fund – Class R  

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

  Six Months
Ended
November 30,
2020
 

Year Ended May 31,

 
  

(Unaudited)

 

2020

 

2019

 

2018

 

2017

 

2016

 
Net asset value,
beginning of period
 

$

9.97

  

$

9.47

  

$

9.46

  

$

9.34

  

$

8.98

  

$

9.73

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

(0.04

)

  

0.01

   

0.07

   

0.06

   

(0.04

)(b)

  

(0.02

)

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

0.67

   

0.51

   

0.08

   

0.09

   

0.40

(c)

  

(0.53

)

 
Total from investment
operations
  

0.63

   

0.52

   

0.15

   

0.15

   

0.36

   

(0.55

)

 

Less distributions

 
From net
investment
income
  

   

(0.02

)

  

(0.14

)

  

(0.03

)

  

   

(0.20

)

 
From net
realized gains
  

   

   

   

   

   

(0.00

)(d)

 

Total distributions

  

   

(0.02

)

  

(0.14

)

  

(0.03

)

  

   

(0.20

)

 
Proceeds from
redemption fees
collected
  

   

   

   

0.00

(d)

  

0.00

(d)

  

0.00

(d)

 
Net asset value,
end of period
 

$

10.60

  

$

9.97

  

$

9.47

  

$

9.46

  

$

9.34

  

$

8.98

  

Total return(e)

  

6.32

%(f)

  

5.49

%

  

1.60

%

  

1.56

%

  

4.01

%

  

(5.55

%)

 
Net assets, end of
period (in 000s)
 

$

7,898

  

$

7,694

  

$

30,423

  

$

45,383

  

$

70,277

  

$

80,114

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(g)

  

1.95

%(h)

  

2.11

%

  

2.58

%

  

2.59

%

  

2.56

%(b)

  

2.62

%

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

1.83

%(h)

  

1.83

%

  

2.18

%

  

2.16

%

  

2.26

%

  

2.46

%

 
Net investment
income (loss)
  

(0.84

%)(h)

  

0.09

%

  

0.70

%

  

0.58

%

  

(0.45

%)(b)

  

(0.27

%)

 
Portfolio turnover
rate
  

154

%(f)

  

397

%

  

504

%

  

421

%

  

409

%

  

350

%

 

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 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 0.02% (annualized), 0.13%, 0.46%, 0.44%, 0.53% and 0.58% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively. Interest rebate expense and line of credit interest expense totaled 0.12% (annualized), 0.01%, 0.03%, 0.03%, 0.04% and 0.19% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, 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 the six months ended November 30, 2020 and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
77



Water Island Event-Driven Fund – Class I  

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

  Six Months
Ended
November 30,
2020
 

Year Ended May 31,

 
  

(Unaudited)

 

2020

 

2019

 

2018

 

2017

 

2016

 
Net asset value,
beginning of period
 

$

10.05

  

$

9.54

  

$

9.53

  

$

9.43

  

$

9.04

  

$

9.81

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

(0.03

)

  

0.02

   

0.09

   

0.04

   

(0.02

)(b)

  

(0.02

)

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

0.68

   

0.53

   

0.09

   

0.12

   

0.41

(c)

  

(0.51

)

 
Total from investment
operations
  

0.65

   

0.55

   

0.18

   

0.16

   

0.39

   

(0.53

)

 

Less distributions

 
From net
investment
income
  

   

(0.04

)

  

(0.17

)

  

(0.06

)

  

   

(0.24

)

 
From net
realized gains
  

   

   

   

   

   

(0.00

)(d)

 

Total distributions

  

   

(0.04

)

  

(0.17

)

  

(0.06

)

  

   

(0.24

)

 
Proceeds from
redemption fees
collected
  

   

   

   

0.00

(d)

  

0.00

(d)

  

0.00

(d)

 
Net asset value,
end of period
 

$

10.70

  

$

10.05

  

$

9.54

  

$

9.53

  

$

9.43

  

$

9.04

  

Total return(e)

  

6.47

%(f)

  

5.83

%

  

1.88

%

  

1.69

%

  

4.31

%

  

(5.27

%)

 
Net assets, end of
period (in 000s)
 

$

102,065

  

$

99,069

  

$

92,710

  

$

103,001

  

$

68,272

  

$

95,155

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(g)

  

1.70

%(h)

  

1.86

%

  

2.33

%

  

2.34

%

  

2.31

%(b)

  

2.37

%

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

1.58

%(h)

  

1.58

%

  

1.93

%

  

1.91

%

  

2.01

%

  

2.21

%

 
Net investment
income (loss)
  

(0.59

%)(h)

  

0.20

%

  

0.92

%

  

0.46

%

  

(0.22

%)(b)

  

(0.26

%)

 
Portfolio turnover
rate
  

154

%(f)

  

397

%

  

504

%

  

421

%

  

409

%

  

350

%

 

See Notes to Financial Statements.

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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 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 0.02% (annualized), 0.13%, 0.46%, 0.44%, 0.53% and 0.58% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively. Interest rebate expense and line of credit interest expense totaled 0.12% (annualized), 0.01%, 0.03%, 0.03%, 0.04% and 0.19% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, 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, 2020 and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
79



Water Island Event-Driven Fund – Class C  

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

  Six Months
Ended
November 30,
2020
 

Year Ended May 31,

 
  

(Unaudited)

 

2020

 

2019

 

2018

 

2017

 

2016

 
Net asset value,
beginning of period
 

$

9.73

  

$

9.29

  

$

9.26

  

$

9.19

  

$

8.91

  

$

9.62

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

(0.08

)

  

(0.08

)(d)

  

(0.01

)

  

(0.03

)(b)

  

(0.11

)(c)

  

(0.09

)

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

0.66

   

0.52

   

0.09

   

0.10

   

0.39

(e)

  

(0.50

)

 
Total from investment
operations
  

0.58

   

0.44

   

0.08

   

0.07

   

0.28

   

(0.59

)

 

Less distributions

 
From net
investment
income
  

   

   

(0.05

)

  

   

   

(0.12

)

 
From net
realized gains
  

   

   

   

   

   

(0.00

)(f)

 

Total distributions

  

   

   

(0.05

)

  

   

   

(0.12

)

 
Net asset value,
end of period
 

$

10.31

  

$

9.73

  

$

9.29

  

$

9.26

  

$

9.19

  

$

8.91

  

Total return(g)(h)

  

5.96

%(i)

  

4.74

%

  

0.91

%

  

0.76

%

  

3.14

%

  

(6.14

%)

 
Net assets, end of
period (in 000s)
 

$

361

  

$

369

  

$

794

  

$

1,175

  

$

1,567

  

$

2,538

  
RATIOS TO AVERAGE
NET ASSETS:
 

Gross expenses(j)

  

2.70

%(k)

  

2.86

%

  

3.33

%

  

3.34

%

  

3.31

%(c)

  

3.37

%

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

2.58

%(k)

  

2.58

%

  

2.93

%

  

2.91

%

  

3.01

%

  

3.21

%

 
Net investment
loss
  

(1.59

%)(k)

  

(0.89

)%

  

(0.06

)%

  

(0.34

)%

  

(1.26

%)(c)

  

(0.95

%)

 
Portfolio turnover
rate
  

154

%(i)

  

397

%

  

504

%

  

421

%

  

409

%

  

350

%

 

See Notes to Financial Statements.

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80



  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)  The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to class specific expenses.

(e)  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.

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

(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.

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

(i)  Not annualized.

(j)  Dividend expense totaled 0.02% (annualized), 0.13%, 0.46%, 0.44%, 0.53% and 0.59% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively. Interest rebate expense and line of credit interest expense totaled 0.12% (annualized), 0.01%, 0.03%, 0.03%, 0.04% and 0.18% of average net assets for the six months ended November 30, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively.

(k)  Annualized.

(l)  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, 2020, and the years ended May 31, 2020, 2019, 2018, 2017 and 2016, respectively.

See Notes to Financial Statements.

Semi-Annual Report | November 30, 2020
81



Water Island Event-Driven Fund – Class A  

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

  Six Months
Ended
November 30,
2020
 

Year Ended May 31,

 
  

(Unaudited)

 

2020

 

2019

 

2018

 

2017

 

2016

 
Net asset value,
beginning of period
 

$

9.97

  

$

9.46

  

$

9.46

  

$

9.35

  

$

8.98

  

$

9.73

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

(0.04

)

  

(0.00

)(c)

  

0.06

   

0.04

   

(0.05

)(b)

  

(0.03

)

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

0.67

   

0.53

   

0.08

   

0.10

   

0.42

(d)

  

(0.52

)

 
Total from investment
operations
  

0.63

   

0.53

   

0.14

   

0.14

   

0.37

   

(0.55

)

 

Less distributions

 
From net
investment
income
  

   

(0.02

)

  

(0.14

)

  

(0.03

)

  

   

(0.20

)

 
From net
realized gains
  

   

   

   

   

   

(0.00

)(c)

 

Total distributions

  

   

(0.02

)

  

(0.14

)

  

(0.03

)

  

   

(0.20

)

 
Proceeds from
redemption fees
collected
  

   

   

   

   

   

  
Net asset value,
end of period
 

$

10.60

  

$

9.97

  

$

9.46

  

$

9.46

  

$

9.35

  

$

8.98

  

Total return(e)(f)

  

6.32

%(g)

  

5.62

%

  

1.56

%

  

1.49

%

  

4.12

%