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 811-22818
Westchester Capital Funds
(Exact name of registrant as specified in charter)
100 Summit Lake Drive
Valhalla, New York 10595
(Address of principal executive offices) (Zip code)
Roy Behren and Michael T. Shannon
100 Summit Lake Drive
Valhalla, New York 10595
(Name and address of agent for service)
1-800-343-8959
Registrant's telephone number, including area code
Date of fiscal year end: December 31
Date of reporting period: June 30, 2015
Item 1. Reports to Stockholders.
June 30, 2015
Semi-Annual Report |
THE MERGER FUND
WCM ALTERNATIVES:
EVENT-DRIVEN FUND
GLOBAL MERGER ACTIVITY
Quarterly volume of announced global mergers
and acquisitions January 2005 – June 2015 (Unaudited)
Source: Bloomberg, Global Financial Advisory Mergers & Acquisitions Rankings First Six-Months 2015
DEAL COMPOSITION
The Merger Fund (Unaudited)
Type of Buyer | Deal Terms* | |||
Strategic | 99.6% | Cash | 36.2% | |
Financial | 0.4% | Stock and Stub1 | 25.9% | |
Cash & Stock | 16.9% | |||
By Deal Type | Undetermined2 | 8.5% | ||
Friendly | 97.5% | Stock with Flexible | ||
Hostile | 2.5% | Exchange Ratio (Collar) | 6.4% | |
Stock with Fixed Exchange Ratio | 6.1% |
* | Data expressed as a percentage of long common stock, corporate bonds and swap contract positions as of June 30, 2015. |
1 | “Stub” includes assets other than cash and stock (e.g., escrow notes). |
2 | The compensation is undetermined because the compensation to be received (e.g., stock, cash, escrow notes, other) will be determined at a later date, potentially at the option of the Fund’s investment adviser. |
2
PORTFOLIO COMPOSITION
The Merger Fund (Unaudited)
By Sector
By Region
* | Data expressed as a percentage of long common stock, corporate bonds and swap contract positions as of June 30, 2015. |
3
PORTFOLIO COMPOSITION
WCM Alternatives: Event-Driven Fund (Unaudited)
By Sector
By Region
* | Data expressed as a percentage of long common stock, corporate bonds and swap contract positions as of June 30, 2015. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
4
The Merger Fund and WCM Alternatives: Event-Driven Fund
EXPENSE EXAMPLE
June 30, 2015 (Unaudited)
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, distribution and/or service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the period 1/1/15 — 6/30/15.
Actual Expenses
The first line of the table for each share class provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The example below includes, among other fees, management fees, fund accounting, custody and transfer agent fees. However, the example below does not include portfolio trading commissions and related expenses, and extraordinary expenses as determined under generally accepted accounting principles.
Hypothetical Example for Comparison Purposes
The second line of the table for each share class provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in each Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
5
The Merger Fund and WCM Alternatives: Event-Driven Fund
EXPENSE EXAMPLE
June 30, 2015 (Unaudited)
Expenses | ||||
Paid | ||||
Beginning | Ending | During | ||
Account | Account | Annualized | Period | |
Value | Value | Expense | 1/1/15 — | |
1/1/15 | 6/30/15 | Ratio | 6/30/15* | |
The Merger Fund | ||||
Investor Class | ||||
Actual+(1) | $1,000.00 | $1,007.00 | 1.72% | $8.56 |
Hypothetical+(2) | $1,000.00 | $1,016.27 | 1.72% | $8.60 |
Institutional Class | ||||
Actual++(3) | $1,000.00 | $1,008.30 | 1.40% | $6.97 |
Hypothetical++(2) | $1,000.00 | $1,017.85 | 1.40% | $7.00 |
WCM Alternatives: Event-Driven Fund | ||||
Institutional Class | ||||
Actual+++(4) | $1,000.00 | $1,007.90 | 2.07% | $10.31 |
Hypothetical+++(2) | $1,000.00 | $1,014.53 | 2.07% | $10.34 |
* | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
+ | Excluding dividends and borrowing expense on securities sold short, your actual cost of investment in and your hypothetical cost of investment in The Merger Fund Investor Class would have been $6.57 and $6.61, respectively. |
++ | Excluding dividends and borrowing expense on securities sold short, your actual cost of investment in and your hypothetical cost of investment in The Merger Fund Institutional Class would have been $4.98 and $5.01, respectively. |
+++ | Excluding dividends and borrowing expense on securities sold short, your actual cost of investment in and your hypothetical cost of investment in the WCM Alternatives: Event-Driven Fund Institutional Class would have been $8.66 and $8.70, respectively. |
(1) | Ending account values and expenses paid during the period based on a 0.70% return. This actual return is net of expenses. |
(2) | Ending account values and expenses paid during period based on a hypothetical 5.00% annual return before expenses. |
(3) | Ending account values and expenses paid during the period based on a 0.83% return. This actual return is net of expenses. |
(4) | Ending account values and expenses paid during the period based on a 0.79% return. This actual return is net of expenses. |
6
The Merger Fund
SCHEDULE OF INVESTMENTS
June 30, 2015 (Unaudited)
Shares | Value | ||||||
COMMON STOCKS — 90.64% | |||||||
APPAREL RETAIL — 1.52% | |||||||
1,640,585 | ANN, Inc. (a)(e) | $ | 79,223,850 | ||||
APPLICATION SOFTWARE — 1.34% | |||||||
1,102,168 | Advent Software, Inc. | 48,726,847 | |||||
442,782 | Informatica Corporation (a) | 21,461,644 | |||||
70,188,491 | |||||||
AUTOMOBILE MANUFACTURERS — 1.98% | |||||||
3,099,400 | General Motors Company (f) | 103,303,002 | |||||
BROADCASTING — 1.24% | |||||||
1,162,337 | CBS Corporation Class B (f) | 64,509,703 | |||||
CABLE & SATELLITE TV — 10.12% | |||||||
2,191,806 | DIRECTV (a)(e) | 203,377,679 | |||||
1,557,782 | DISH Network Corporation Class A (a)(f) | 105,477,419 | |||||
531,148 | Liberty Global plc Series C (a)(b) | 26,892,023 | |||||
12,659,437 | Sirius XM Holdings, Inc. (a) | 47,219,700 | |||||
816,637 | Time Warner Cable, Inc. (f) | 145,500,214 | |||||
528,467,035 | |||||||
CASINOS & GAMING — 0.06% | |||||||
171,231 | International Game Technology plc (a)(b) | 3,041,063 | |||||
CONSTRUCTION & FARM MACHINERY | |||||||
& HEAVY TRUCKS — 1.27% | |||||||
3,372,700 | The Manitowoc Company, Inc. (f) | 66,104,920 | |||||
DATA PROCESSING & OUTSOURCED SERVICES — 1.33% | |||||||
1,060,400 | Computer Sciences Corporation (f) | 69,604,656 | |||||
DIVERSIFIED BANKS — 0.24% | |||||||
451,964 | Square 1 Financial, Inc. Class A (a) | 12,361,215 | |||||
DIVERSIFIED CHEMICALS — 5.51% | |||||||
2,294,100 | The Dow Chemical Company (f) | 117,389,097 | |||||
934,100 | E.I. Du Pont de Nemours & Company (f) | 59,735,695 | |||||
5,014,793 | Huntsman Corporation (f) | 110,676,482 | |||||
287,801,274 | |||||||
DIVERSIFIED METALS & MINING — 0.15% | |||||||
241,080 | RTI International Metals, Inc. (a) | 7,598,842 | |||||
ELECTRICAL COMPONENTS & EQUIPMENT — 1.89% | |||||||
1,644,515 | Polypore International, Inc. (a) | 98,473,558 | |||||
GENERAL MERCHANDISE STORES — 3.05% | |||||||
2,018,406 | Family Dollar Stores, Inc. | 159,070,577 |
The accompanying notes are an integral part of these financial statements.
7
The Merger Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Shares | Value | ||||||
HEALTH CARE SERVICES — 1.93% | |||||||
1,071,817 | Omnicare, Inc. | $ | 101,018,752 | ||||
HEALTH CARE TECHNOLOGY — 4.04% | |||||||
3,452,053 | Catamaran Corporation (a)(b)(e) | 210,851,397 | |||||
HOUSEHOLD PRODUCTS — 1.87% | |||||||
508,400 | Energizer Holdings, Inc. (f) | 66,880,020 | |||||
392,200 | The Procter & Gamble Company | 30,685,728 | |||||
97,565,748 | |||||||
INDUSTRIAL CONGLOMERATES — 0.39% | |||||||
772,100 | General Electric Company | 20,514,697 | |||||
INDUSTRIAL MACHINERY — 3.06% | |||||||
1,122,900 | Pall Corporation | 139,744,905 | |||||
151,300 | SPX Corporation | 10,952,607 | |||||
249,500 | The Timken Company | 9,124,215 | |||||
159,821,727 | |||||||
INTEGRATED OIL & GAS — 1.01% | |||||||
699,780 | BG Group plc — ADR (h) | 11,742,308 | |||||
26,400 | BP plc — ADR | 1,054,944 | |||||
515,041 | Occidental Petroleum Corporation | 40,054,739 | |||||
52,851,991 | |||||||
INTERNET RETAIL — 0.91% | |||||||
4,147,068 | Orbitz Worldwide, Inc. (a)(f) | 47,359,517 | |||||
INTERNET SOFTWARE & SERVICES — 3.94% | |||||||
1,423,200 | eBay, Inc. (a)(f) | 85,733,568 | |||||
3,056,094 | Yahoo!, Inc. (a)(f) | 120,073,933 | |||||
205,807,501 | |||||||
MANAGED HEALTH CARE — 1.66% | |||||||
310,200 | Cigna Corporation (f) | 50,252,400 | |||||
189,600 | Humana, Inc. | 36,266,688 | |||||
86,519,088 | |||||||
MOVIES & ENTERTAINMENT — 0.02% | |||||||
273,282 | SFX Entertainment, Inc. (a) | 1,227,036 | |||||
MULTI-LINE INSURANCE — 4.33% | |||||||
2,967,687 | American International Group, Inc. (f) | 183,462,410 | |||||
553,579 | HCC Insurance Holdings, Inc. | 42,537,011 | |||||
225,999,421 | |||||||
OIL & GAS EQUIPMENT & SERVICES — 1.36% | |||||||
1,147,923 | Baker Hughes, Inc. | 70,826,849 |
The accompanying notes are an integral part of these financial statements.
8
The Merger Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Shares | Value | ||||||
OIL & GAS EXPLORATION & PRODUCTION — 2.05% | |||||||
1,137,800 | Anadarko Petroleum Corporation (f) | $ | 88,816,668 | ||||
787,690 | Rosetta Resources, Inc. (a) | 18,227,147 | |||||
107,043,815 | |||||||
OIL & GAS STORAGE & TRANSPORTATION — 2.78% | |||||||
1,008,669 | The Williams Companies, Inc. (f) | 57,887,514 | |||||
1,803,816 | Williams Partners LP (f) | 87,358,809 | |||||
145,246,323 | |||||||
PACKAGED FOODS & MEATS — 0.83% | |||||||
508,000 | Kraft Foods Group, Inc. (f) | 43,251,120 | |||||
PAPER PACKAGING — 1.32% | |||||||
1,314,993 | MeadWestvaco Corporation | 62,054,520 | |||||
112,000 | Packaging Corporation of America | 6,998,880 | |||||
69,053,400 | |||||||
PAPER PRODUCTS — 1.92% | |||||||
2,111,100 | International Paper Company (f) | 100,467,249 | |||||
PHARMACEUTICALS — 5.99% | |||||||
1,979,459 | Hospira, Inc. (a)(e) | 175,597,808 | |||||
195,300 | Perrigo Company plc (b) | 36,097,299 | |||||
2,421,169 | Pfizer, Inc. (f) | 81,181,797 | |||||
415,300 | Zoetis, Inc. | 20,025,766 | |||||
312,902,670 | |||||||
REINSURANCE — 0.89% | |||||||
363,409 | PartnerRe Ltd. (b)(f) | 46,698,056 | |||||
REITS — 5.32% | |||||||
2,108,349 | Equity Commonwealth (a) | 54,121,319 | |||||
1,192,585 | Excel Trust, Inc. | 18,807,065 | |||||
358,540 | Home Properties, Inc. | 26,191,347 | |||||
4,816,400 | NorthStar Realty Finance Corporation | 76,580,760 | |||||
2,029,110 | Starwood Property Trust, Inc. | 43,767,903 | |||||
288,499 | Starwood Waypoint Residential Trust | 6,854,736 | |||||
828,800 | Ventas, Inc. (f) | 51,460,192 | |||||
277,783,322 | |||||||
RESTAURANTS — 0.79% | |||||||
436,800 | McDonald’s Corporation | 41,526,576 | |||||
SEMICONDUCTORS — 4.95% | |||||||
2,419,792 | Altera Corporation | 123,893,350 | |||||
2,220,500 | Broadcom Corporation Class A | 114,333,545 | |||||
385,440 | Freescale Semiconductor Ltd. (a)(b)(g) | 15,406,037 |
The accompanying notes are an integral part of these financial statements.
9
The Merger Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Shares | Value | ||||||
357,712 | Micrel, Inc. | $ | 4,972,197 | ||||
258,605,129 | |||||||
SPECIALTY CHEMICALS — 3.62% | |||||||
824,252 | Sigma-Aldrich Corporation | 114,859,516 | |||||
740,400 | W.R. Grace & Company (a) | 74,262,120 | |||||
189,121,636 | |||||||
THRIFTS & MORTGAGE FINANCE — 1.84% | |||||||
9,751,749 | Hudson City Bancorp, Inc. | 96,347,280 | |||||
TRUCKING — 1.59% | |||||||
4,593,568 | Hertz Global Holdings, Inc. (a)(f) | 83,235,452 | |||||
WIRELESS TELECOMMUNICATION SERVICES — 2.53% | |||||||
1,122,700 | America Movil SAB de C.V. Class L — ADR | 23,924,737 | |||||
2,501,300 | T-Mobile U.S., Inc. (a)(f) | 96,975,401 | |||||
306,925 | Vodafone Group plc — ADR | 11,187,416 | |||||
132,087,554 | |||||||
TOTAL COMMON STOCKS (Cost $4,671,765,155) | 4,733,481,492 | ||||||
CONTINGENT VALUE RIGHTS — 0.03% | |||||||
1,713,496 | Casa Ley, S.A. de C.V. (a)(d)(l) | 813,910 | |||||
77,699 | Leap Wireless International, Inc. (a)(d)(l) | 320,508 | |||||
1,713,496 | Property Development Centers LLC (a)(d)(l) | 85,675 | |||||
TOTAL CONTINGENT VALUE RIGHTS (Cost $0) | 1,220,093 | ||||||
Principal Amount | |||||||
CORPORATE BONDS — 1.94% | |||||||
Dresser-Rand Group, Inc. | |||||||
$ | 945,000 | 6.500%, 5/1/2021 | 1,021,545 | ||||
Energy Future Intermediate Holding Company LLC | |||||||
11,394,393 | 11.750%, 3/1/2022 (i)(j) | 13,003,851 | |||||
Freescale Semiconductor, Inc. | |||||||
16,617,000 | 10.750%, 8/1/2020 | 17,614,020 | |||||
The Manitowoc Company, Inc. | |||||||
26,148,000 | 5.875%, 10/15/2022 | 28,305,210 | |||||
Pinnacle Entertainment, Inc. | |||||||
38,907,000 | 7.500%, 4/15/2021 | 41,387,322 | |||||
TOTAL CORPORATE BONDS (Cost $101,017,837) | 101,331,948 |
The accompanying notes are an integral part of these financial statements.
10
The Merger Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
PURCHASED CALL OPTIONS — 0.01% | |||||||
Avago Technologies Ltd. | |||||||
868 | Expiration: January 2016, Exercise Price: $175.00 | $ | 234,360 | ||||
PURCHASED PUT OPTIONS — 1.06% | |||||||
America Movil SAB de C.V. Class L — ADR | |||||||
3,027 | Expiration: August 2015, Exercise Price: $18.00 | 22,702 | |||||
6,455 | Expiration: August 2015, Exercise Price: $19.00 | 112,963 | |||||
American International Group, Inc. | |||||||
21,798 | Expiration: August 2015, Exercise Price: $52.50 | 425,061 | |||||
Anadarko Petroleum Corporation | |||||||
5,120 | Expiration: August 2015, Exercise Price: $75.00 | 957,440 | |||||
4,551 | Expiration: August 2015, Exercise Price: $80.00 | 1,893,216 | |||||
Bayer AG | |||||||
287 | Expiration: July 2015, Exercise Price: EUR 115.00 (k) | 31,996 | |||||
2,646 | Expiration: September 2015, | ||||||
Exercise Price: EUR 120.00 (k) | 1,507,397 | ||||||
BP plc — ADR | |||||||
2,317 | Expiration: July 2015, Exercise Price: $34.00 | 3,475 | |||||
189 | Expiration: July 2015, Exercise Price: $35.00 | 567 | |||||
CBS Corporation Class B | |||||||
13,199 | Expiration: September 2015, Exercise Price: $50.00 | 1,036,121 | |||||
Charter Communications, Inc. Class A | |||||||
896 | Expiration: January 2016, Exercise Price: $210.00 | 3,839,360 | |||||
Cigna Corporation | |||||||
1,022 | Expiration: August 2015, Exercise Price: $140.00 | 178,850 | |||||
692 | Expiration: August 2015, Exercise Price: $145.00 | 138,400 | |||||
Computer Sciences Corporation | |||||||
6,789 | Expiration: September 2015, Exercise Price: $60.00 | 797,707 | |||||
DISH Network Corporation Class A | |||||||
9,941 | Expiration: September 2015, Exercise Price: $60.00 | 944,395 | |||||
2,834 | Expiration: September 2015, Exercise Price: $62.50 | 425,100 | |||||
The Dow Chemical Company | |||||||
7,344 | Expiration: September 2015, Exercise Price: $43.00 | 205,632 | |||||
3,660 | Expiration: September 2015, Exercise Price: $44.00 | 139,080 | |||||
4,929 | Expiration: September 2015, Exercise Price: $45.00 | 224,270 | |||||
E.I. Du Pont de Nemours & Company | |||||||
1,023 | Expiration: July 2015, Exercise Price: $62.50 | 71,098 | |||||
7,297 | Expiration: July 2015, Exercise Price: $65.00 | 1,302,515 | |||||
eBay, Inc. | |||||||
8,512 | Expiration: July 2015, Exercise Price: $50.00 | 42,560 | |||||
2,167 | Expiration: July 2015, Exercise Price: $52.50 | 21,670 | |||||
1,319 | Expiration: October 2015, Exercise Price: $50.00 | 56,058 |
The accompanying notes are an integral part of these financial statements.
11
The Merger Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
Energizer Holdings, Inc. | |||||||
2,343 | Expiration: August 2015, Exercise Price: $115.00 | $ | 257,730 | ||||
1,646 | Expiration: August 2015, Exercise Price: $120.00 | 283,935 | |||||
General Electric Company | |||||||
3,956 | Expiration: July 2015, Exercise Price: $25.00 | 35,604 | |||||
General Motors Company | |||||||
18,290 | Expiration: September 2015, Exercise Price: $32.00 | 1,792,420 | |||||
Hertz Global Holdings, Inc. | |||||||
10,317 | Expiration: September 2015, Exercise Price: $16.00 | 619,020 | |||||
24,780 | Expiration: September 2015, Exercise Price: $19.00 | 4,770,150 | |||||
Humana, Inc. | |||||||
505 | Expiration: August 2015, Exercise Price: $175.00 | 282,800 | |||||
1,001 | Expiration: August 2015, Exercise Price: $185.00 | 915,915 | |||||
Huntsman Corporation | |||||||
35,640 | Expiration: August 2015, Exercise Price: $18.00 | 267,300 | |||||
11,139 | Expiration: August 2015, Exercise Price: $19.00 | 167,085 | |||||
International Paper Company | |||||||
8,967 | Expiration: July 2015, Exercise Price: $45.00 | 188,307 | |||||
8,442 | Expiration: July 2015, Exercise Price: $50.00 | 2,118,942 | |||||
The Manitowoc Company, Inc. | |||||||
11,448 | Expiration: September 2015, Exercise Price: $17.00 | 400,680 | |||||
12,829 | Expiration: September 2015, Exercise Price: $18.00 | 705,595 | |||||
McDonald’s Corporation | |||||||
2,816 | Expiration: July 2015, Exercise Price: $85.00 | 8,448 | |||||
938 | Expiration: July 2015, Exercise Price: $90.00 | 18,760 | |||||
NorthStar Realty Finance Corporation | |||||||
18,403 | Expiration: August 2015, Exercise Price: $16.00 | 1,472,240 | |||||
20,128 | Expiration: September 2015, Exercise Price: $16.00 | 1,811,520 | |||||
Occidental Petroleum Corporation | |||||||
4,120 | Expiration: August 2015, Exercise Price: $67.50 | 144,200 | |||||
Packaging Corporation of America | |||||||
352 | Expiration: July 2015, Exercise Price: $60.00 | 14,080 | |||||
455 | Expiration: July 2015, Exercise Price: $65.00 | 127,855 | |||||
Perrigo Company plc | |||||||
370 | Expiration: August 2015, Exercise Price: $155.00 | 63,825 | |||||
331 | Expiration: August 2015, Exercise Price: $160.00 | 92,680 | |||||
325 | Expiration: August 2015, Exercise Price: $165.00 | 118,300 | |||||
The Procter & Gamble Company | |||||||
2,310 | Expiration: July 2015, Exercise Price: $75.00 | 39,270 | |||||
1,084 | Expiration: August 2015, Exercise Price: $70.00 | 26,016 |
The accompanying notes are an integral part of these financial statements.
12
The Merger Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
Rock-Tenn Company Class A | |||||||
1,991 | Expiration: August 2015, Exercise Price: $55.00 | $ | 164,257 | ||||
1,291 | Expiration: October 2015, Exercise Price: $55.00 | 196,878 | |||||
SPDR S&P 500 ETF Trust | |||||||
2,239 | Expiration: August 2015, Exercise Price: $198.00 | 577,662 | |||||
9,401 | Expiration: August 2015, Exercise Price: $208.00 | 5,236,357 | |||||
7,421 | Expiration: August 2015, Exercise Price: $210.00 | 4,845,913 | |||||
2,239 | Expiration: August 2015, Exercise Price: $211.00 | 1,578,495 | |||||
6,268 | Expiration: September 2015, Exercise Price: $189.00 | 1,582,670 | |||||
7,163 | Expiration: September 2015, Exercise Price: $207.00 | 5,107,219 | |||||
SPX Corporation | |||||||
756 | Expiration: September 2015, Exercise Price: $60.00 | 52,920 | |||||
T-Mobile U.S., Inc. | |||||||
8,675 | Expiration: August 2015, Exercise Price: $25.00 | 121,450 | |||||
5,926 | Expiration: August 2015, Exercise Price: $26.00 | 85,927 | |||||
8,132 | Expiration: August 2015, Exercise Price: $34.00 | 459,458 | |||||
Ventas, Inc. | |||||||
1,872 | Expiration: August 2015, Exercise Price: $55.00 | 46,800 | |||||
5,948 | Expiration: August 2015, Exercise Price: $60.00 | 594,800 | |||||
W.R. Grace & Company | |||||||
5,554 | Expiration: September 2015, Exercise Price: $92.50 | 666,480 | |||||
Yahoo!, Inc. | |||||||
1,756 | Expiration: July 2015, Exercise Price: $37.00 | 36,876 | |||||
8,790 | Expiration: July 2015, Exercise Price: $41.00 | 1,722,840 | |||||
1,794 | Expiration: July 2015, Exercise Price: $42.00 | 511,290 | |||||
1,285 | Expiration: August 2015, Exercise Price: $37.00 | 117,578 | |||||
3,410 | Expiration: October 2015, Exercise Price: $37.00 | 501,270 | |||||
Zoetis, Inc. | |||||||
969 | Expiration: July 2015, Exercise Price: $39.00 | 12,112 | |||||
1,425 | Expiration: July 2015, Exercise Price: $40.00 | 17,813 | |||||
985 | Expiration: July 2015, Exercise Price: $41.00 | 12,313 | |||||
55,369,688 | |||||||
TOTAL PURCHASED OPTIONS (Cost $44,803,490) | 55,604,048 | ||||||
Principal Amount | |||||||
ESCROW NOTES — 0.03% | |||||||
$ | 1,243,406 | AMR Corporation (a)(d)(l) | 1,709,683 | ||||
TOTAL ESCROW NOTES (Cost $679,555) | 1,709,683 |
The accompanying notes are an integral part of these financial statements.
13
The Merger Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Shares | Value | ||||||
SHORT-TERM INVESTMENTS — 9.20% | |||||||
304,000,000 | Fidelity Institutional Government Portfolio, | ||||||
Institutional Share Class, 0.01% (c)(f) | $ | 304,000,000 | |||||
176,654,078 | The Liquid Asset Portfolio, | ||||||
Institutional Share Class, 0.10% (c) | 176,654,078 | ||||||
TOTAL SHORT-TERM INVESTMENTS | |||||||
(Cost $480,654,078) | 480,654,078 | ||||||
TOTAL INVESTMENTS | |||||||
(Cost $5,298,920,115) — 102.91% | $ | 5,374,001,342 |
ADR – American Depository Receipt
ETF – Exchange-Traded Fund
EUR – Euro
plc – Public Limited Company
REITS – Real Estate Investment Trusts
(a) | Non-income producing security. |
(b) | Foreign security. |
(c) | The rate quoted is the annualized seven-day yield as of June 30, 2015. |
(d) | Security fair valued by the Valuation Group in good faith in accordance with the policies adopted by the Board of Trustees. |
(e) | All or a portion of the shares have been committed as collateral for open securities sold short. |
(f) | All or a portion of the shares have been committed as collateral for written option contracts. |
(g) | All or a portion of the shares have been committed as collateral for swap contracts. |
(h) | All or a portion of the shares have been committed as collateral for forward currency exchange contracts. |
(i) | 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 June 30, 2015, these securities represented 0.25% of total net assets. |
(j) | Default or other conditions exist and the security is not presently accruing income. |
(k) | Level 2 Security. Please see Note 2 on the Notes to the Financial Statements. |
(l) | Level 3 Security. Please see Note 2 on the Notes to the Financial Statements. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
14
WCM Alternatives: Event-Driven Fund
SCHEDULE OF INVESTMENTS
June 30, 2015 (Unaudited)
Shares | Value | ||||||
COMMON STOCKS — 84.29% | |||||||
APPAREL RETAIL — 0.74% | |||||||
11,055 | ANN, Inc. (a) | $ | 533,846 | ||||
APPLICATION SOFTWARE — 0.99% | |||||||
15,753 | Advent Software, Inc. | 696,440 | |||||
297 | Informatica Corporation (a) | 14,396 | |||||
710,836 | |||||||
AUTO PARTS & EQUIPMENT — 0.81% | |||||||
11,800 | Johnson Controls, Inc. (f) | 584,454 | |||||
AUTOMOBILE MANUFACTURERS — 2.44% | |||||||
52,600 | General Motors Company (f) | 1,753,158 | |||||
BROADCASTING — 0.68% | |||||||
8,800 | CBS Corporation Class B (f) | 488,400 | |||||
CABLE & SATELLITE TV — 3.58% | |||||||
6,030 | DIRECTV (a) | 559,524 | |||||
21,478 | DISH Network Corporation Class A (a)(f) | 1,454,275 | |||||
780 | Liberty Global plc Series C (a)(b) | 39,491 | |||||
138,987 | Sirius XM Holdings, Inc. (a)(f) | 518,422 | |||||
2,571,712 | |||||||
CASINOS & GAMING — 0.01% | |||||||
295 | International Game Technology plc (a)(b) | 5,239 | |||||
CONSTRUCTION & FARM MACHINERY | |||||||
& HEAVY TRUCKS — 1.35% | |||||||
49,400 | The Manitowoc Company, Inc. (f) | 968,240 | |||||
DATA PROCESSING & OUTSOURCED SERVICES — 1.88% | |||||||
20,600 | Computer Sciences Corporation (f) | 1,352,184 | |||||
DIVERSIFIED CHEMICALS — 4.88% | |||||||
33,200 | The Dow Chemical Company (f) | 1,698,844 | |||||
10,700 | E.I. Du Pont de Nemours & Company (f) | 684,265 | |||||
49,145 | Huntsman Corporation (f) | 1,084,630 | |||||
1,300 | Olin Corporation | 35,035 | |||||
3,502,774 | |||||||
DIVERSIFIED METALS & MINING — 0.03% | |||||||
583 | RTI International Metals, Inc. (a) | 18,376 | |||||
ELECTRICAL COMPONENTS & EQUIPMENT — 0.37% | |||||||
4,477 | Polypore International, Inc. (a) | 268,083 | |||||
GENERAL MERCHANDISE STORES — 2.69% | |||||||
24,542 | Family Dollar Stores, Inc. | 1,934,155 |
The accompanying notes are an integral part of these financial statements.
15
WCM Alternatives: Event-Driven Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Shares | Value | ||||||
HEALTH CARE EQUIPMENT — 0.85% | |||||||
8,700 | Baxter International, Inc. (f) | $ | 608,391 | ||||
HEALTH CARE TECHNOLOGY — 1.70% | |||||||
20,010 | Catamaran Corporation (a)(b) | 1,222,211 | |||||
HOUSEHOLD PRODUCTS — 2.35% | |||||||
8,200 | Energizer Holdings, Inc. (f) | 1,078,710 | |||||
7,800 | The Procter & Gamble Company (f) | 610,272 | |||||
1,688,982 | |||||||
INDUSTRIAL CONGLOMERATES — 1.33% | |||||||
55 | CK Hutchison Holdings Ltd. (b) | 808 | |||||
35,900 | General Electric Company (f) | 953,863 | |||||
954,671 | |||||||
INDUSTRIAL MACHINERY — 0.75% | |||||||
7,200 | SPX Corporation (f) | 521,208 | |||||
500 | The Timken Company | 18,285 | |||||
539,493 | |||||||
INTEGRATED OIL & GAS — 1.63% | |||||||
1,917 | BG Group plc — ADR | 32,167 | |||||
12,200 | BP plc — ADR (f) | 487,512 | |||||
5,100 | Hess Corporation (f) | 341,088 | |||||
4,000 | Occidental Petroleum Corporation | 311,080 | |||||
1,171,847 | |||||||
INTERNET RETAIL — 1.23% | |||||||
77,149 | Orbitz Worldwide, Inc. (a)(f) | 881,042 | |||||
INTERNET SOFTWARE & SERVICES — 5.45% | |||||||
25,200 | eBay, Inc. (a)(f) | 1,518,048 | |||||
60,986 | Yahoo!, Inc. (a)(f) | 2,396,140 | |||||
3,914,188 | |||||||
MANAGED HEALTH CARE — 2.86% | |||||||
5,500 | Cigna Corporation (f) | 891,000 | |||||
6,100 | Humana, Inc. (f) | 1,166,808 | |||||
2,057,808 | |||||||
MOVIES & ENTERTAINMENT — 0.99% | |||||||
158,432 | SFX Entertainment, Inc. (a) | 711,360 | |||||
MULTI-LINE INSURANCE — 4.34% | |||||||
50,400 | American International Group, Inc. (f) | 3,115,728 | |||||
OIL & GAS EQUIPMENT & SERVICES — 1.71% | |||||||
16,989 | Baker Hughes, Inc. | 1,048,221 | |||||
2,150 | Dresser-Rand Group, Inc. (a) | 183,137 | |||||
1,231,358 |
The accompanying notes are an integral part of these financial statements.
16
WCM Alternatives: Event-Driven Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Shares | Value | ||||||
OIL & GAS EXPLORATION & PRODUCTION — 1.48% | |||||||
9,800 | Anadarko Petroleum Corporation (f) | $ | 764,988 | ||||
12,964 | Rosetta Resources, Inc. (a) | 299,987 | |||||
1,064,975 | |||||||
OIL & GAS STORAGE & TRANSPORTATION — 3.27% | |||||||
14,800 | The Williams Companies, Inc. | 849,372 | |||||
30,992 | Williams Partners LP (f) | 1,500,943 | |||||
2,350,315 | |||||||
OTHER DIVERSIFIED FINANCIAL SERVICES — 1.48% | |||||||
19,200 | Citigroup, Inc. (f) | 1,060,608 | |||||
PACKAGED FOODS & MEATS — 1.13% | |||||||
9,500 | Kraft Foods Group, Inc. (f) | 808,830 | |||||
PAPER PACKAGING — 1.33% | |||||||
15,982 | MeadWestvaco Corporation | 754,191 | |||||
3,200 | Packaging Corporation of America | 199,968 | |||||
954,159 | |||||||
PAPER PRODUCTS — 1.76% | |||||||
26,500 | International Paper Company (f) | 1,261,135 | |||||
PHARMACEUTICALS — 4.76% | |||||||
4,154 | Hospira, Inc. (a) | 368,501 | |||||
14,100 | Mylan NV (a)(b)(f) | 956,826 | |||||
4,158 | Perrigo Company plc (b)(f) | 768,523 | |||||
29,800 | Pfizer, Inc. (f) | 999,194 | |||||
6,700 | Zoetis, Inc. (f) | 323,074 | |||||
3,416,118 | |||||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 0.00% | |||||||
55 | Cheung Kong Property Holdings Ltd. (a)(b) | 456 | |||||
REINSURANCE — 1.05% | |||||||
5,891 | PartnerRe Ltd. (b)(f) | 756,994 | |||||
REITS — 7.37% | |||||||
123 | Blackstone Mortgage Trust, Inc. Class A | 3,422 | |||||
36,362 | CYS Investments, Inc. | 281,078 | |||||
5,596 | Equity Commonwealth (a) | 143,649 | |||||
7,372 | Home Properties, Inc. (g) | 538,525 | |||||
96,873 | NorthStar Realty Finance Corporation (e) | 1,540,281 | |||||
63,081 | Starwood Property Trust, Inc. (e) | 1,360,657 | |||||
448 | Starwood Waypoint Residential Trust | 10,644 | |||||
16,000 | Ventas, Inc. (f) | 993,440 | |||||
37,578 | Wheeler Real Estate Investment Trust, Inc. | 76,283 | |||||
22,671 | Winthrop Realty Trust | 343,466 | |||||
5,291,445 |
The accompanying notes are an integral part of these financial statements.
17
WCM Alternatives: Event-Driven Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Shares | Value | ||||||
RESTAURANTS — 0.91% | |||||||
6,900 | McDonald’s Corporation (f) | $ | 655,983 | ||||
SEMICONDUCTORS — 5.85% | |||||||
41,368 | Altera Corporation | 2,118,041 | |||||
35,975 | Broadcom Corporation Class A (e) | 1,852,353 | |||||
16,861 | Micrel, Inc. | 234,368 | |||||
4,204,762 | |||||||
SPECIALTY CHEMICALS — 1.80% | |||||||
12,900 | W.R. Grace & Company (a)(f) | 1,293,870 | |||||
SYSTEMS SOFTWARE — 1.95% | |||||||
31,800 | Microsoft Corporation (f) | 1,403,970 | |||||
THRIFTS & MORTGAGE FINANCE — 0.89% | |||||||
64,386 | Hudson City Bancorp, Inc. | 636,134 | |||||
TRUCKING — 1.56% | |||||||
62,053 | Hertz Global Holdings, Inc. (a)(f) | 1,124,400 | |||||
WIRELESS TELECOMMUNICATION SERVICES — 2.06% | |||||||
14,800 | America Movil SAB de C.V. Class L — ADR | 315,388 | |||||
30,000 | T-Mobile U.S., Inc. (a)(f) | 1,163,100 | |||||
11 | Vodafone Group plc — ADR | 401 | |||||
1,478,889 | |||||||
TOTAL COMMON STOCKS (Cost $62,297,574) | 60,551,579 | ||||||
CLOSED-END FUNDS — 1.15% | |||||||
55,988 | Eaton Vance Floating-Rate Income Trust | 771,515 | |||||
149 | First Trust MLP and Energy Income Fund | 2,749 | |||||
2,772 | First Trust Senior Floating Rate Income Fund II | 36,480 | |||||
1,050 | Nuveen Energy MLP Total Return Fund | 17,293 | |||||
TOTAL CLOSED-END FUNDS (Cost $867,366) | 828,037 | ||||||
PREFERRED STOCKS — 1.67% | |||||||
37,580 | Equity Commonwealth, 7.250%, Series E (e) | 958,666 | |||||
6,025 | NorthStar Realty Finance Corporation, 8.750%, Series E | 151,890 | |||||
2,018 | Regions Financial Corporation, 6.375%, Series B | 51,883 | |||||
717 | SLM Corporation, 6.970%, Series A | 35,671 | |||||
TOTAL PREFERRED STOCKS (Cost $1,199,148) | 1,198,110 | ||||||
CONTINGENT VALUE RIGHTS — 0.00% | |||||||
5,338 | Casa Ley, S.A. de C.V. (a)(d)(m) | 2,535 | |||||
5,338 | Property Development Centers LLC (a)(d)(m) | 267 | |||||
TOTAL CONTINGENT VALUE RIGHTS (Cost $0) | 2,802 |
The accompanying notes are an integral part of these financial statements.
18
WCM Alternatives: Event-Driven Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Principal Amount | Value | ||||||
BANK LOANS — 0.06% | |||||||
Energy Future Intermediate Holding Company LLC | |||||||
$ | 40,905 | 4.250%, 6/19/2016 (k) | $ | 41,033 | |||
TOTAL BANK LOANS (Cost $41,246) | 41,033 | ||||||
CORPORATE BONDS — 2.54% | |||||||
Energy Future Intermediate Holding Company LLC | |||||||
614,905 | 11.750%, 3/1/2022 (i)(j) | 701,760 | |||||
The Manitowoc Company, Inc. | |||||||
174,000 | 5.875%, 10/15/2022 | 188,355 | |||||
NCR Corporation | |||||||
714,000 | 5.000%, 7/15/2022 | 726,495 | |||||
Pinnacle Entertainment, Inc. (h) | |||||||
83,000 | 7.500%, 4/15/2021 | 88,291 | |||||
US Foods, Inc. | |||||||
113,000 | 8.500%, 6/30/2019 | 117,847 | |||||
TOTAL CORPORATE BONDS (Cost $1,795,356) | 1,822,748 | ||||||
Contracts (100 shares per contract) | |||||||
PURCHASED CALL OPTIONS — 0.01% | |||||||
Avago Technologies Ltd. | |||||||
11 | Expiration: January 2016, Exercise Price: $175.00 | 2,970 | |||||
PURCHASED PUT OPTIONS — 1.21% | |||||||
America Movil SAB de C.V. Class L — ADR | |||||||
28 | Expiration: August 2015, Exercise Price: $18.00 | 210 | |||||
101 | Expiration: August 2015, Exercise Price: $19.00 | 1,767 | |||||
American International Group, Inc. | |||||||
442 | Expiration: August 2015, Exercise Price: $52.50 | 8,619 | |||||
Anadarko Petroleum Corporation | |||||||
88 | Expiration: August 2015, Exercise Price: $75.00 | 16,456 | |||||
14 | Expiration: August 2015, Exercise Price: $77.50 | 3,990 | |||||
23 | Expiration: August 2015, Exercise Price: $80.00 | 9,568 | |||||
Baxter International, Inc. | |||||||
29 | Expiration: July 2015, Exercise Price: $60.00 | 217 | |||||
23 | Expiration: August 2015, Exercise Price: $60.00 | 219 | |||||
29 | Expiration: August 2015, Exercise Price: $65.00 | 986 | |||||
Bayer AG | |||||||
3 | Expiration: July 2015, Exercise Price: EUR 115.00 (l) | 335 | |||||
6 | Expiration: September 2015, | ||||||
Exercise Price: EUR 100.00 (l) | 702 |
The accompanying notes are an integral part of these financial statements.
19
WCM Alternatives: Event-Driven Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
Bayer AG (continued) | |||||||
22 | Expiration: September 2015, | ||||||
Exercise Price: EUR 120.00 (l) | $ | 12,533 | |||||
BP plc — ADR | |||||||
16 | Expiration: July 2015, Exercise Price: $34.00 | 24 | |||||
31 | Expiration: July 2015, Exercise Price: $39.00 | 1,209 | |||||
CBS Corporation Class B | |||||||
98 | Expiration: September 2015, Exercise Price: $50.00 | 7,693 | |||||
Charter Communications, Inc. Class A | |||||||
11 | Expiration: January 2016, Exercise Price: $210.00 | 47,135 | |||||
Cigna Corporation | |||||||
7 | Expiration: August 2015, Exercise Price: $140.00 | 1,225 | |||||
19 | Expiration: August 2015, Exercise Price: $145.00 | 3,800 | |||||
Citigroup, Inc. | |||||||
58 | Expiration: July 2015, Exercise Price: $52.50 | 2,030 | |||||
84 | Expiration: September 2015, Exercise Price: $49.00 | 3,864 | |||||
Computer Sciences Corporation | �� | ||||||
138 | Expiration: September 2015, Exercise Price: $60.00 | 16,215 | |||||
DISH Network Corporation Class A | |||||||
137 | Expiration: September 2015, Exercise Price: $60.00 | 13,015 | |||||
38 | Expiration: September 2015, Exercise Price: $62.50 | 5,700 | |||||
The Dow Chemical Company | |||||||
17 | Expiration: September 2015, Exercise Price: $43.00 | 476 | |||||
8 | Expiration: September 2015, Exercise Price: $44.00 | 304 | |||||
46 | Expiration: September 2015, Exercise Price: $45.00 | 2,093 | |||||
195 | Expiration: September 2015, Exercise Price: $48.00 | 18,817 | |||||
E.I. Du Pont de Nemours & Company | |||||||
18 | Expiration: July 2015, Exercise Price: $62.50 | 1,251 | |||||
78 | Expiration: July 2015, Exercise Price: $65.00 | 13,923 | |||||
eBay, Inc. | |||||||
28 | Expiration: July 2015, Exercise Price: $50.00 | 140 | |||||
82 | Expiration: July 2015, Exercise Price: $52.50 | 820 | |||||
89 | Expiration: October 2015, Exercise Price: $50.00 | 3,782 | |||||
Energizer Holdings, Inc. | |||||||
43 | Expiration: August 2015, Exercise Price: $115.00 | 4,730 | |||||
20 | Expiration: August 2015, Exercise Price: $120.00 | 3,450 | |||||
General Electric Company | |||||||
190 | Expiration: July 2015, Exercise Price: $25.00 | 1,710 | |||||
General Motors Company | |||||||
69 | Expiration: September 2015, Exercise Price: $31.00 | 4,485 | |||||
365 | Expiration: September 2015, Exercise Price: $32.00 | 35,770 |
The accompanying notes are an integral part of these financial statements.
20
WCM Alternatives: Event-Driven Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
Hertz Global Holdings, Inc. | |||||||
293 | Expiration: September 2015, Exercise Price: $16.00 | $ | 17,580 | ||||
202 | Expiration: September 2015, Exercise Price: $19.00 | 38,885 | |||||
Hess Corporation | |||||||
38 | Expiration: August 2015, Exercise Price: $57.50 | 1,520 | |||||
Humana, Inc. | |||||||
10 | Expiration: July 2015, Exercise Price: $195.00 | 11,300 | |||||
13 | Expiration: August 2015, Exercise Price: $175.00 | 7,280 | |||||
21 | Expiration: August 2015, Exercise Price: $185.00 | 19,215 | |||||
7 | Expiration: August 2015, Exercise Price: $190.00 | 7,770 | |||||
Huntsman Corporation | |||||||
368 | Expiration: August 2015, Exercise Price: $18.00 | 2,760 | |||||
213 | Expiration: August 2015, Exercise Price: $19.00 | 3,195 | |||||
International Paper Company | |||||||
134 | Expiration: July 2015, Exercise Price: $45.00 | 2,814 | |||||
84 | Expiration: July 2015, Exercise Price: $50.00 | 21,084 | |||||
Johnson Controls, Inc. | |||||||
78 | Expiration: October 2015, Exercise Price: $48.00 | 14,625 | |||||
The Manitowoc Company, Inc. | |||||||
111 | Expiration: September 2015, Exercise Price: $17.00 | 3,885 | |||||
251 | Expiration: September 2015, Exercise Price: $18.00 | 13,805 | |||||
McDonald’s Corporation | |||||||
60 | Expiration: July 2015, Exercise Price: $85.00 | 180 | |||||
Microsoft Corporation | |||||||
45 | Expiration: July 2015, Exercise Price: $36.00 | 45 | |||||
130 | Expiration: July 2015, Exercise Price: $41.00 | 1,040 | |||||
78 | Expiration: July 2015, Exercise Price: $42.00 | 1,170 | |||||
37 | Expiration: October 2015, Exercise Price: $41.00 | 3,552 | |||||
Mylan NV | |||||||
57 | Expiration: July 2015, Exercise Price: $67.50 | 10,203 | |||||
15 | Expiration: July 2015, Exercise Price: $70.00 | 5,670 | |||||
35 | Expiration: October 2015, Exercise Price: $65.00 | 13,562 | |||||
NorthStar Realty Finance Corporation | |||||||
139 | Expiration: August 2015, Exercise Price: $16.00 | 11,120 | |||||
636 | Expiration: September 2015, Exercise Price: $16.00 | 57,240 | |||||
Occidental Petroleum Corporation | |||||||
41 | Expiration: August 2015, Exercise Price: $67.50 | 1,435 | |||||
Olin Corporation | |||||||
10 | Expiration: August 2015, Exercise Price: $25.00 | 475 | |||||
Packaging Corporation of America | |||||||
9 | Expiration: July 2015, Exercise Price: $60.00 | 360 | |||||
14 | Expiration: July 2015, Exercise Price: $65.00 | 3,934 |
The accompanying notes are an integral part of these financial statements.
21
WCM Alternatives: Event-Driven Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
PartnerRe Ltd. | |||||||
6 | Expiration: August 2015, Exercise Price: $120.00 | $ | 1,020 | ||||
Perrigo Company plc | |||||||
5 | Expiration: August 2015, Exercise Price: $155.00 | 863 | |||||
10 | Expiration: August 2015, Exercise Price: $160.00 | 2,800 | |||||
8 | Expiration: August 2015, Exercise Price: $165.00 | 2,912 | |||||
The Procter & Gamble Company | |||||||
37 | Expiration: July 2015, Exercise Price: $75.00 | 629 | |||||
28 | Expiration: August 2015, Exercise Price: $70.00 | 672 | |||||
Rock-Tenn Company Class A | |||||||
28 | Expiration: August 2015, Exercise Price: $55.00 | 2,310 | |||||
15 | Expiration: October 2015, Exercise Price: $55.00 | 2,288 | |||||
SPDR S&P 500 ETF Trust | |||||||
30 | Expiration: August 2015, Exercise Price: $198.00 | 7,740 | |||||
126 | Expiration: August 2015, Exercise Price: $208.00 | 70,182 | |||||
108 | Expiration: August 2015, Exercise Price: $210.00 | 70,524 | |||||
30 | Expiration: August 2015, Exercise Price: $211.00 | 21,150 | |||||
84 | Expiration: September 2015, Exercise Price: $189.00 | 21,210 | |||||
96 | Expiration: September 2015, Exercise Price: $207.00 | 68,448 | |||||
SPX Corporation | |||||||
35 | Expiration: September 2015, Exercise Price: $60.00 | 2,450 | |||||
T-Mobile U.S., Inc. | |||||||
19 | Expiration: August 2015, Exercise Price: $25.00 | 266 | |||||
17 | Expiration: August 2015, Exercise Price: $26.00 | 247 | |||||
210 | Expiration: August 2015, Exercise Price: $34.00 | 11,865 | |||||
Ventas, Inc. | |||||||
19 | Expiration: August 2015, Exercise Price: $55.00 | 475 | |||||
121 | Expiration: August 2015, Exercise Price: $60.00 | 12,100 | |||||
W.R. Grace & Company | |||||||
97 | Expiration: September 2015, Exercise Price: $92.50 | 11,640 | |||||
Yahoo!, Inc. | |||||||
14 | Expiration: July 2015, Exercise Price: $37.00 | 294 | |||||
93 | Expiration: July 2015, Exercise Price: $41.00 | 18,228 | |||||
16 | Expiration: July 2015, Exercise Price: $42.00 | 4,560 | |||||
35 | Expiration: August 2015, Exercise Price: $37.00 | 3,203 | |||||
63 | Expiration: October 2015, Exercise Price: $36.00 | 7,119 | |||||
30 | Expiration: October 2015, Exercise Price: $37.00 | 4,410 | |||||
Zoetis, Inc. | |||||||
7 | Expiration: July 2015, Exercise Price: $40.00 | 87 | |||||
51 | Expiration: July 2015, Exercise Price: $41.00 | 638 | |||||
875,297 | |||||||
TOTAL PURCHASED OPTIONS (Cost $708,094) | 878,267 |
The accompanying notes are an integral part of these financial statements.
22
WCM Alternatives: Event-Driven Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2015 (Unaudited)
Shares | Value | ||||||
SHORT-TERM INVESTMENTS — 6.39% | |||||||
4,155,000 | Fidelity Institutional Government Portfolio, | ||||||
Institutional Share Class, 0.01% (c)(f) | $ | 4,155,000 | |||||
437,728 | The Liquid Asset Portfolio, | ||||||
Institutional Share Class, 0.10% (c) | 437,728 | ||||||
TOTAL SHORT-TERM INVESTMENTS | |||||||
(Cost $4,592,728) | 4,592,728 | ||||||
TOTAL INVESTMENTS | |||||||
(Cost $71,501,512) — 97.32% | $ | 69,915,304 |
ADR – American Depository Receipt
ETF – Exchange-Traded Fund
EUR – Euro
MLP – Master Limited Partnership
plc – Public Limited Company
REITS – Real Estate Investment Trusts
(a) | Non-income producing security. |
(b) | Foreign security. |
(c) | The rate quoted is the annualized seven-day yield as of June 30, 2015. |
(d) | Security fair valued by the Valuation Group in good faith in accordance with the policies adopted by the Board of Trustees. |
(e) | All or a portion of the shares have been committed as collateral for open securities sold short. |
(f) | All or a portion of the shares have been committed as collateral for written option contracts. |
(g) | All or a portion of the shares have been committed as collateral for swap contracts. |
(h) | All or a portion of the shares have been committed as collateral for forward currency exchange contracts. |
(i) | 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 June 30, 2015, these securities represented 0.98% of total net assets. |
(j) | Default or other conditions exist and the security is not presently accruing income. |
(k) | Variable rate. |
(l) | Level 2 Security. Please see Note 2 on the Notes to the Financial Statements. |
(m) | Level 3 Security. Please see Note 2 on the Notes to the Financial Statements. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
23
The Merger Fund
SCHEDULE OF SECURITIES SOLD SHORT
June 30, 2015 (Unaudited)
Shares | Value | ||||||
COMMON STOCKS | |||||||
682,619 | Alcoa, Inc. | $ | 7,611,202 | ||||
2 | Alexion Pharmaceuticals, Inc. | 361 | |||||
396,586 | Alibaba Group Holding Ltd. — ADR | 32,627,130 | |||||
65,211 | American Airlines Group, Inc. | 2,604,201 | |||||
106,887 | ARRIS Group, Inc. (b)(c) | 3,248,296 | |||||
1,115,598 | Ascena Retail Group, Inc. | 18,580,285 | |||||
4,753,759 | AT&T, Inc. | 168,853,520 | |||||
436,591 | Avago Technologies Ltd. | 58,036,042 | |||||
318,139 | Charter Communications, Inc. Class A | 54,481,304 | |||||
582 | Cheung Kong Property Holdings Ltd. (a) | 4,828 | |||||
582 | CK Hutchison Holdings Ltd. (a) | 8,552 | |||||
476,643 | Dollar Tree, Inc. | 37,650,030 | |||||
40,614 | Equinix, Inc. (b)(c) | 10,275,342 | |||||
1,198,984 | Halliburton Company | 51,640,241 | |||||
1 | Harris Corporation | 77 | |||||
529,841 | Liberty Global plc Class A (a) | 28,648,503 | |||||
819,630 | M&T Bank Corporation | 102,396,376 | |||||
135,708 | NXP Semiconductors NV (a) | 13,326,525 | |||||
271,063 | PacWest Bancorp | 12,674,906 | |||||
155,841 | Royal Dutch Shell plc Class B — ADR | 8,937,481 | |||||
333,206 | XL Group plc (a) | 12,395,263 | |||||
TOTAL SECURITIES SOLD SHORT | |||||||
(Proceeds $598,790,107) | $ | 624,000,465 |
ADR – American Depository Receipt
plc – Public Limited Company
(a) | Foreign security. |
(b) | Security fair valued by the Valuation Group in good faith in accordance with the policies adopted by the Board of Trustees. |
(c) | Level 2 Security. Please see Note 2 on the Notes to the Financial Statements. |
The accompanying notes are an integral part of these financial statements.
24
WCM Alternatives: Event-Driven Fund
SCHEDULE OF SECURITIES SOLD SHORT
June 30, 2015 (Unaudited)
Shares | Value | ||||||
COMMON STOCKS | |||||||
1,648 | Alcoa, Inc. | $ | 18,375 | ||||
1 | Alexion Pharmaceuticals, Inc. | 181 | |||||
12,387 | Alibaba Group Holding Ltd. — ADR | 1,019,079 | |||||
1,354 | ARRIS Group, Inc. (b)(c) | 41,148 | |||||
7,516 | Ascena Retail Group, Inc. | 125,179 | |||||
10,808 | AT&T, Inc. | 383,900 | |||||
7,022 | Avago Technologies Ltd. | 933,435 | |||||
5,294 | Charter Communications, Inc. Class A | 906,598 | |||||
5,664 | Dollar Tree, Inc. | 447,399 | |||||
853 | Equinix, Inc. (b)(c) | 215,809 | |||||
7,717 | Halliburton Company | 332,371 | |||||
2 | Harris Corporation | 154 | |||||
859 | Liberty Global plc Class A (a) | 46,446 | |||||
5,409 | M&T Bank Corporation | 675,746 | |||||
427 | Royal Dutch Shell plc Class B — ADR | 24,488 | |||||
800 | Time Warner Cable, Inc. | 142,536 | |||||
1,223 | XL Group plc (a) | 45,496 | |||||
TOTAL SECURITIES SOLD SHORT | |||||||
(Proceeds $5,391,513) | $ | 5,358,340 |
ADR – American Depository Receipt
plc – Public Limited Company
(a) | Foreign security. |
(b) | Security fair valued by the Valuation Group in good faith in accordance with the policies adopted by the Board of Trustees. |
(c) | Level 2 Security. Please see Note 2 on the Notes to the Financial Statements. |
The accompanying notes are an integral part of these financial statements.
25
The Merger Fund
SCHEDULE OF OPTIONS WRITTEN
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
CALL OPTIONS WRITTEN | |||||||
America Movil SAB de C.V. Class L — ADR | |||||||
3,784 | Expiration: August 2015, Exercise Price: $20.00 | $ | 548,680 | ||||
7,443 | Expiration: August 2015, Exercise Price: $21.00 | 595,440 | |||||
American International Group, Inc. | |||||||
924 | Expiration: August 2015, Exercise Price: $55.00 | 669,900 | |||||
27,935 | Expiration: August 2015, Exercise Price: $57.50 | 14,107,175 | |||||
Anadarko Petroleum Corporation | |||||||
5,689 | Expiration: August 2015, Exercise Price: $85.00 | 512,010 | |||||
5,689 | Expiration: August 2015, Exercise Price: $90.00 | 193,426 | |||||
AT&T, Inc. | |||||||
1,358 | Expiration: July 2015, Exercise Price: $34.00 | 222,712 | |||||
Bayer AG | |||||||
2,940 | Expiration: September 2015, | ||||||
Exercise Price: EUR 130.00 (b) | 1,779,773 | ||||||
BP plc — ADR | |||||||
26 | Expiration: July 2015, Exercise Price: $39.00 | 3,497 | |||||
237 | Expiration: July 2015, Exercise Price: $40.00 | 17,301 | |||||
CBS Corporation Class B | |||||||
8,249 | Expiration: September 2015, Exercise Price: $55.00 | 2,400,459 | |||||
8,250 | Expiration: September 2015, Exercise Price: $57.50 | 1,419,000 | |||||
Charter Communications, Inc. Class A | |||||||
896 | Expiration: January 2016, Exercise Price: $210.00 | 112,000 | |||||
Cigna Corporation | |||||||
1,278 | Expiration: August 2015, Exercise Price: $155.00 | 1,744,470 | |||||
1,824 | Expiration: August 2015, Exercise Price: $160.00 | 1,851,360 | |||||
Computer Sciences Corporation | |||||||
8,991 | Expiration: September 2015, Exercise Price: $65.00 | 3,056,940 | |||||
1,613 | Expiration: September 2015, Exercise Price: $67.50 | 415,348 | |||||
DISH Network Corporation Class A | |||||||
8,830 | Expiration: September 2015, Exercise Price: $67.50 | 3,443,700 | |||||
6,747 | Expiration: September 2015, Exercise Price: $70.00 | 1,902,654 | |||||
The Dow Chemical Company | |||||||
15,891 | Expiration: September 2015, Exercise Price: $49.00 | 5,482,395 | |||||
7,050 | Expiration: September 2015, Exercise Price: $50.00 | 1,959,900 | |||||
E.I. Du Pont de Nemours & Company | |||||||
1,233 | Expiration: July 2015, Exercise Price: $70.00 | 12,330 | |||||
4,945 | Expiration: July 2015, Exercise Price: $72.50 | 9,890 | |||||
eBay, Inc. | |||||||
7,930 | Expiration: July 2015, Exercise Price: $55.00 | 4,401,150 | |||||
4,543 | Expiration: July 2015, Exercise Price: $57.50 | 1,540,077 | |||||
1,759 | Expiration: October 2015, Exercise Price: $57.50 | 879,500 |
The accompanying notes are an integral part of these financial statements.
26
The Merger Fund
SCHEDULE OF OPTIONS WRITTEN (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
Energizer Holdings, Inc. | |||||||
798 | Expiration: August 2015, Exercise Price: $125.00 | $ | 770,070 | ||||
4,286 | Expiration: August 2015, Exercise Price: $130.00 | 2,914,480 | |||||
Equinix, Inc. | |||||||
415 | Expiration: September 2015, | ||||||
Exercise Price: $250.00 (a)(b) | 506,300 | ||||||
General Electric Company | |||||||
7,721 | Expiration: July 2015, Exercise Price: $27.00 | 239,351 | |||||
General Motors Company | |||||||
22,863 | Expiration: September 2015, Exercise Price: $36.00 | 994,540 | |||||
Halliburton Company | |||||||
867 | Expiration: July 2015, Exercise Price: $42.50 | 117,045 | |||||
Hertz Global Holdings, Inc. | |||||||
12,896 | Expiration: September 2015, Exercise Price: $19.00 | 1,547,520 | |||||
33,039 | Expiration: September 2015, Exercise Price: $21.00 | 1,651,950 | |||||
Humana, Inc. | |||||||
561 | Expiration: August 2015, Exercise Price: $185.00 | 914,991 | |||||
1,335 | Expiration: August 2015, Exercise Price: $195.00 | 1,361,700 | |||||
Huntsman Corporation | |||||||
46,960 | Expiration: August 2015, Exercise Price: $22.00 | 4,696,000 | |||||
1,057 | Expiration: August 2015, Exercise Price: $23.00 | 58,135 | |||||
International Paper Company | |||||||
10,557 | Expiration: July 2015, Exercise Price: $52.50 | 10,557 | |||||
10,554 | Expiration: July 2015, Exercise Price: $55.00 | 21,108 | |||||
Kraft Foods Group, Inc. | |||||||
2,515 | Expiration: September 2015, Exercise Price: $82.50 | 1,081,450 | |||||
2,565 | Expiration: September 2015, Exercise Price: $85.00 | 692,550 | |||||
The Manitowoc Company, Inc. | |||||||
16,622 | Expiration: September 2015, Exercise Price: $19.00 | 2,576,410 | |||||
17,105 | Expiration: September 2015, Exercise Price: $20.00 | 1,753,262 | |||||
McDonald’s Corporation | |||||||
4,368 | Expiration: July 2015, Exercise Price: $95.00 | 679,224 | |||||
Noble Energy, Inc. | |||||||
4,269 | Expiration: August 2015, Exercise Price: $40.00 | 1,494,150 | |||||
Occidental Petroleum Corporation | |||||||
5,150 | Expiration: August 2015, Exercise Price: $75.00 | 2,214,500 | |||||
Orbitz Worldwide, Inc. | |||||||
3,514 | Expiration: August 2015, Exercise Price: $12.00 | 3,514 | |||||
Packaging Corporation of America | |||||||
440 | Expiration: July 2015, Exercise Price: $67.50 | 8,800 | |||||
680 | Expiration: July 2015, Exercise Price: $75.00 | 3,400 |
The accompanying notes are an integral part of these financial statements.
27
The Merger Fund
SCHEDULE OF OPTIONS WRITTEN (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
PartnerRe Ltd. | |||||||
434 | Expiration: August 2015, Exercise Price: $140.00 | $ | 104,160 | ||||
Perrigo Company plc | |||||||
1,132 | Expiration: August 2015, Exercise Price: $170.00 | 2,320,600 | |||||
414 | Expiration: August 2015, Exercise Price: $180.00 | 587,880 | |||||
407 | Expiration: August 2015, Exercise Price: $185.00 | 476,190 | |||||
Pfizer, Inc. | |||||||
11,245 | Expiration: August 2015, Exercise Price: $34.00 | 612,853 | |||||
12,966 | Expiration: September 2015, Exercise Price: $34.00 | 907,620 | |||||
The Procter & Gamble Company | |||||||
2,568 | Expiration: July 2015, Exercise Price: $82.50 | 7,704 | |||||
1,354 | Expiration: August 2015, Exercise Price: $77.50 | 259,291 | |||||
Rock-Tenn Company Class A | |||||||
4,356 | Expiration: July 2015, Exercise Price: $60.00 | 642,510 | |||||
3,176 | Expiration: August 2015, Exercise Price: $60.00 | 801,940 | |||||
1,614 | Expiration: October 2015, Exercise Price: $65.00 | 205,785 | |||||
Royal Dutch Shell plc Class B | |||||||
67 | Expiration: July 2015, Exercise Price: GBP 19.50 (b) | 1,579 | |||||
Sirius XM Holdings, Inc. | |||||||
18,434 | Expiration: July 2015, Exercise Price: $4.00 | 18,434 | |||||
66,925 | Expiration: September 2015, Exercise Price: $4.00 | 401,550 | |||||
SPX Corporation | |||||||
1,513 | Expiration: September 2015, Exercise Price: $65.00 | 1,323,875 | |||||
Time Warner Cable, Inc. | |||||||
593 | Expiration: October 2015, Exercise Price: $175.00 | 486,260 | |||||
T-Mobile U.S., Inc. | |||||||
11,852 | Expiration: August 2015, Exercise Price: $32.00 | 8,444,550 | |||||
5,422 | Expiration: August 2015, Exercise Price: $37.00 | 1,669,976 | |||||
5,421 | Expiration: August 2015, Exercise Price: $38.00 | 1,330,856 | |||||
Ventas, Inc. | |||||||
2,340 | Expiration: August 2015, Exercise Price: $65.00 | 169,650 | |||||
5,948 | Expiration: August 2015, Exercise Price: $70.00 | 104,090 | |||||
Vivendi SA | |||||||
4,108 | Expiration: August 2015, Exercise Price: EUR 22.00 (b) | 540,420 | |||||
Vodafone Group plc — ADR | |||||||
3 | Expiration: July 2015, Exercise Price: $34.00 | 771 | |||||
3,066 | Expiration: July 2015, Exercise Price: $36.00 | 324,996 | |||||
W.R. Grace & Company | |||||||
7,404 | Expiration: September 2015, Exercise Price: $100.00 | 2,961,600 | |||||
The Williams Companies, Inc. | |||||||
3,146 | Expiration: August 2015, Exercise Price: $46.00 | 3,759,470 | |||||
6,662 | Expiration: August 2015, Exercise Price: $48.00 | 6,645,345 | |||||
5,052 | Expiration: August 2015, Exercise Price: $50.00 | 4,092,120 |
The accompanying notes are an integral part of these financial statements.
28
The Merger Fund
SCHEDULE OF OPTIONS WRITTEN (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
Williams Partners LP | |||||||
1,038 | Expiration: August 2015, Exercise Price: $50.00 | $ | 166,080 | ||||
4,035 | Expiration: September 2015, Exercise Price: $50.00 | 706,125 | |||||
Yahoo!, Inc. | |||||||
2,509 | Expiration: July 2015, Exercise Price: $41.00 | 75,270 | |||||
8,409 | Expiration: July 2015, Exercise Price: $45.00 | 25,227 | |||||
2,243 | Expiration: July 2015, Exercise Price: $46.00 | 4,486 | |||||
1,285 | Expiration: August 2015, Exercise Price: $40.00 | 200,460 | |||||
4,263 | Expiration: October 2015, Exercise Price: $41.00 | 788,655 | |||||
Zoetis, Inc. | |||||||
2,411 | Expiration: July 2015, Exercise Price: $44.00 | 1,048,785 | |||||
1,163 | Expiration: July 2015, Exercise Price: $45.00 | 412,865 | |||||
579 | Expiration: July 2015, Exercise Price: $46.00 | 165,015 | |||||
118,387,137 | |||||||
PUT OPTIONS WRITTEN | |||||||
SPDR S&P 500 ETF Trust | |||||||
9,401 | Expiration: August 2015, Exercise Price: $202.00 | 3,295,051 | |||||
11,898 | Expiration: August 2015, Exercise Price: $204.00 | 4,854,384 | |||||
13,431 | Expiration: September 2015, Exercise Price: $198.00 | 5,694,744 | |||||
Vivendi SA | |||||||
2,069 | Expiration: July 2015, Exercise Price: EUR 21.50 (b) | 46,132 | |||||
Vodafone Group plc — ADR | |||||||
3,030 | Expiration: July 2015, Exercise Price: $33.00 | 37,875 | |||||
13,928,186 | |||||||
TOTAL OPTIONS WRITTEN | |||||||
(Premiums received $161,023,744) | $ | 132,315,323 | |||||
ADR – American Depository Receipt
ETF – Exchange-Traded Fund
EUR – Euro
GBP – British Pound
plc – Public Limited Company
(a) | Security fair valued by the Valuation Group in good faith in accordance with the policies adopted by the Board of Trustees. |
(b) | Level 2 Security. Please see Note 2 on the Notes to the Financial Statements. |
The accompanying notes are an integral part of these financial statements.
29
WCM Alternatives: Event-Driven Fund
SCHEDULE OF OPTIONS WRITTEN
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
CALL OPTIONS WRITTEN | |||||||
America Movil SAB de C.V. Class L — ADR | |||||||
35 | Expiration: August 2015, Exercise Price: $20.00 | $ | 5,075 | ||||
113 | Expiration: August 2015, Exercise Price: $21.00 | 9,040 | |||||
American International Group, Inc. | |||||||
8 | Expiration: August 2015, Exercise Price: $55.00 | 5,800 | |||||
566 | Expiration: August 2015, Exercise Price: $57.50 | 285,830 | |||||
Anadarko Petroleum Corporation | |||||||
98 | Expiration: August 2015, Exercise Price: $82.50 | 14,798 | |||||
16 | Expiration: August 2015, Exercise Price: $85.00 | 1,440 | |||||
27 | Expiration: August 2015, Exercise Price: $90.00 | 918 | |||||
AT&T, Inc. | |||||||
18 | Expiration: July 2015, Exercise Price: $34.00 | 2,952 | |||||
Baxter International, Inc. | |||||||
85 | Expiration: August 2015, Exercise Price: $70.00 | 14,025 | |||||
Bayer AG | |||||||
7 | Expiration: September 2015, | ||||||
Exercise Price: EUR 120.00 (b) | 8,334 | ||||||
24 | Expiration: September 2015, | ||||||
Exercise Price: EUR 130.00 (b) | 14,529 | ||||||
BP plc — ADR | |||||||
83 | Expiration: July 2015, Exercise Price: $40.00 | 6,059 | |||||
39 | Expiration: July 2015, Exercise Price: $42.00 | 429 | |||||
CBS Corporation Class B | |||||||
61 | Expiration: September 2015, Exercise Price: $55.00 | 17,751 | |||||
61 | Expiration: September 2015, Exercise Price: $57.50 | 10,492 | |||||
Charter Communications, Inc. Class A | |||||||
11 | Expiration: January 2016, Exercise Price: $210.00 | 1,375 | |||||
Cigna Corporation | |||||||
9 | Expiration: August 2015, Exercise Price: $155.00 | 12,285 | |||||
46 | Expiration: August 2015, Exercise Price: $160.00 | 46,690 | |||||
Citigroup, Inc. | |||||||
64 | Expiration: July 2015, Exercise Price: $55.00 | 8,384 | |||||
127 | Expiration: September 2015, Exercise Price: $55.00 | 28,956 | |||||
Computer Sciences Corporation | |||||||
171 | Expiration: September 2015, Exercise Price: $65.00 | 58,140 | |||||
35 | Expiration: September 2015, Exercise Price: $67.50 | 9,012 | |||||
DISH Network Corporation Class A | |||||||
123 | Expiration: September 2015, Exercise Price: $67.50 | 47,970 | |||||
91 | Expiration: September 2015, Exercise Price: $70.00 | 25,662 |
The accompanying notes are an integral part of these financial statements.
30
WCM Alternatives: Event-Driven Fund
SCHEDULE OF OPTIONS WRITTEN (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
The Dow Chemical Company | |||||||
35 | Expiration: September 2015, Exercise Price: $49.00 | $ | 12,075 | ||||
67 | Expiration: September 2015, Exercise Price: $50.00 | 18,626 | |||||
230 | Expiration: September 2015, Exercise Price: $52.50 | 34,040 | |||||
E.I. Du Pont de Nemours & Company | |||||||
19 | Expiration: July 2015, Exercise Price: $70.00 | 190 | |||||
54 | Expiration: July 2015, Exercise Price: $72.50 | 108 | |||||
eBay, Inc. | |||||||
26 | Expiration: July 2015, Exercise Price: $55.00 | 14,430 | |||||
108 | Expiration: July 2015, Exercise Price: $57.50 | 36,612 | |||||
118 | Expiration: October 2015, Exercise Price: $57.50 | 59,000 | |||||
Energizer Holdings, Inc. | |||||||
11 | Expiration: August 2015, Exercise Price: $125.00 | 10,615 | |||||
71 | Expiration: August 2015, Exercise Price: $130.00 | 48,280 | |||||
Equinix, Inc. | |||||||
9 | Expiration: September 2015, | ||||||
Exercise Price: $250.00 (a)(b) | 10,980 | ||||||
General Electric Company | |||||||
359 | Expiration: July 2015, Exercise Price: $27.00 | 11,129 | |||||
General Motors Company | |||||||
86 | Expiration: September 2015, Exercise Price: $33.00 | 13,330 | |||||
457 | Expiration: September 2015, Exercise Price: $36.00 | 19,879 | |||||
Halliburton Company | |||||||
113 | Expiration: July 2015, Exercise Price: $42.50 | 15,255 | |||||
Hertz Global Holdings, Inc. | |||||||
352 | Expiration: September 2015, Exercise Price: $19.00 | 42,240 | |||||
269 | Expiration: September 2015, Exercise Price: $21.00 | 13,450 | |||||
Hess Corporation | |||||||
51 | Expiration: August 2015, Exercise Price: $65.00 | 20,017 | |||||
Humana, Inc. | |||||||
10 | Expiration: July 2015, Exercise Price: $210.00 | 1,850 | |||||
15 | Expiration: August 2015, Exercise Price: $185.00 | 24,465 | |||||
9 | Expiration: August 2015, Exercise Price: $195.00 | 9,180 | |||||
27 | Expiration: August 2015, Exercise Price: $200.00 | 20,790 | |||||
Huntsman Corporation | |||||||
598 | Expiration: August 2015, Exercise Price: $22.00 | 59,800 | |||||
7 | Expiration: August 2015, Exercise Price: $23.00 | 385 | |||||
International Paper Company | |||||||
161 | Expiration: July 2015, Exercise Price: $52.50 | 161 | |||||
105 | Expiration: July 2015, Exercise Price: $55.00 | 210 | |||||
Johnson Controls, Inc. | |||||||
118 | Expiration: October 2015, Exercise Price: $52.50 | 14,750 |
The accompanying notes are an integral part of these financial statements.
31
WCM Alternatives: Event-Driven Fund
SCHEDULE OF OPTIONS WRITTEN (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
Kraft Foods Group, Inc. | |||||||
33 | Expiration: September 2015, Exercise Price: $82.50 | $ | 14,190 | ||||
62 | Expiration: September 2015, Exercise Price: $85.00 | 16,740 | |||||
The Manitowoc Company, Inc. | |||||||
160 | Expiration: September 2015, Exercise Price: $19.00 | 24,800 | |||||
334 | Expiration: September 2015, Exercise Price: $20.00 | 34,235 | |||||
McDonald’s Corporation | |||||||
69 | Expiration: July 2015, Exercise Price: $95.00 | 10,730 | |||||
Microsoft Corporation | |||||||
175 | Expiration: July 2015, Exercise Price: $45.00 | 7,175 | |||||
97 | Expiration: July 2015, Exercise Price: $47.00 | 776 | |||||
46 | Expiration: October 2015, Exercise Price: $45.00 | 7,544 | |||||
Mylan NV | |||||||
44 | Expiration: July 2015, Exercise Price: $70.00 | 6,116 | |||||
58 | Expiration: July 2015, Exercise Price: $72.00 | 5,580 | |||||
39 | Expiration: October 2015, Exercise Price: $72.50 | 13,943 | |||||
Noble Energy, Inc. | |||||||
70 | Expiration: August 2015, Exercise Price: $40.00 | 24,500 | |||||
Occidental Petroleum Corporation | |||||||
51 | Expiration: August 2015, Exercise Price: $75.00 | 21,930 | |||||
Olin Corporation | |||||||
13 | Expiration: August 2015, Exercise Price: $30.00 | 390 | |||||
Orbitz Worldwide, Inc. | |||||||
55 | Expiration: August 2015, Exercise Price: $12.00 | 55 | |||||
Packaging Corporation of America | |||||||
11 | Expiration: July 2015, Exercise Price: $67.50 | 220 | |||||
21 | Expiration: July 2015, Exercise Price: $75.00 | 105 | |||||
PartnerRe Ltd. | |||||||
8 | Expiration: August 2015, Exercise Price: $130.00 | 2,660 | |||||
6 | Expiration: August 2015, Exercise Price: $140.00 | 1,440 | |||||
Perrigo Company plc | |||||||
19 | Expiration: August 2015, Exercise Price: $170.00 | 38,950 | |||||
5 | Expiration: August 2015, Exercise Price: $180.00 | 7,100 | |||||
17 | Expiration: August 2015, Exercise Price: $185.00 | 19,890 | |||||
Pfizer, Inc. | |||||||
35 | Expiration: August 2015, Exercise Price: $34.00 | 1,908 | |||||
298 | Expiration: September 2015, Exercise Price: $34.00 | 20,860 | |||||
The Procter & Gamble Company | |||||||
42 | Expiration: July 2015, Exercise Price: $82.50 | 126 | |||||
35 | Expiration: August 2015, Exercise Price: $77.50 | 6,703 |
The accompanying notes are an integral part of these financial statements.
32
WCM Alternatives: Event-Driven Fund
SCHEDULE OF OPTIONS WRITTEN (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
Rock-Tenn Company Class A | |||||||
28 | Expiration: July 2015, Exercise Price: $60.00 | $ | 4,130 | ||||
71 | Expiration: August 2015, Exercise Price: $60.00 | 17,928 | |||||
18 | Expiration: October 2015, Exercise Price: $65.00 | 2,295 | |||||
Royal Dutch Shell plc Class B | |||||||
1 | Expiration: July 2015, Exercise Price: GBP 19.50 (b) | 23 | |||||
Sirius XM Holdings, Inc. | |||||||
44 | Expiration: July 2015, Exercise Price: $4.00 | 44 | |||||
164 | Expiration: September 2015, Exercise Price: $4.00 | 984 | |||||
SPX Corporation | |||||||
72 | Expiration: September 2015, Exercise Price: $65.00 | 63,000 | |||||
Time Warner Cable, Inc. | |||||||
7 | Expiration: October 2015, Exercise Price: $175.00 | 5,740 | |||||
T-Mobile U.S., Inc. | |||||||
33 | Expiration: August 2015, Exercise Price: $32.00 | 23,513 | |||||
104 | Expiration: August 2015, Exercise Price: $37.00 | 32,032 | |||||
158 | Expiration: August 2015, Exercise Price: $38.00 | 38,789 | |||||
Ventas, Inc. | |||||||
67 | Expiration: August 2015, Exercise Price: $65.00 | 4,857 | |||||
93 | Expiration: August 2015, Exercise Price: $70.00 | 1,628 | |||||
Vivendi SA | |||||||
113 | Expiration: August 2015, Exercise Price: EUR 22.00 (b) | 14,865 | |||||
W.R. Grace & Company | |||||||
129 | Expiration: September 2015, Exercise Price: $100.00 | 51,600 | |||||
The Williams Companies, Inc. | |||||||
56 | Expiration: August 2015, Exercise Price: $46.00 | 66,920 | |||||
83 | Expiration: August 2015, Exercise Price: $48.00 | 82,793 | |||||
81 | Expiration: August 2015, Exercise Price: $50.00 | 65,610 | |||||
Williams Partners LP | |||||||
14 | Expiration: August 2015, Exercise Price: $50.00 | 2,240 | |||||
62 | Expiration: September 2015, Exercise Price: $50.00 | 10,850 | |||||
Yahoo!, Inc. | |||||||
19 | Expiration: July 2015, Exercise Price: $41.00 | 570 | |||||
10 | Expiration: July 2015, Exercise Price: $44.00 | 40 | |||||
88 | Expiration: July 2015, Exercise Price: $45.00 | 264 | |||||
19 | Expiration: July 2015, Exercise Price: $46.00 | 38 | |||||
35 | Expiration: August 2015, Exercise Price: $40.00 | 5,460 | |||||
70 | Expiration: October 2015, Exercise Price: $40.00 | 15,610 | |||||
37 | Expiration: October 2015, Exercise Price: $41.00 | 6,845 | |||||
Zoetis, Inc. | |||||||
37 | Expiration: July 2015, Exercise Price: $45.00 | 13,135 | |||||
30 | Expiration: July 2015, Exercise Price: $46.00 | 8,550 | |||||
1,976,812 |
The accompanying notes are an integral part of these financial statements.
33
WCM Alternatives: Event-Driven Fund
SCHEDULE OF OPTIONS WRITTEN (continued)
June 30, 2015 (Unaudited)
Contracts (100 shares per contract) | Value | ||||||
PUT OPTIONS WRITTEN | |||||||
SPDR S&P 500 ETF Trust | |||||||
126 | Expiration: August 2015, Exercise Price: $202.00 | $ | 44,163 | ||||
168 | Expiration: August 2015, Exercise Price: $204.00 | 68,544 | |||||
180 | Expiration: September 2015, Exercise Price: $198.00 | 76,320 | |||||
Vivendi SA | |||||||
271 | Expiration: July 2015, Exercise Price: EUR 21.50 (b) | 6,042 | |||||
Vodafone Group plc — ADR | |||||||
87 | Expiration: July 2015, Exercise Price: $33.00 | 1,088 | |||||
196,157 | |||||||
TOTAL OPTIONS WRITTEN | |||||||
(Premiums received $2,705,798) | $ | 2,172,969 |
ADR – American Depository Receipt
ETF – Exchange-Traded Fund
EUR – Euro
GBP – British Pound
plc – Public Limited Company
(a) | Security fair valued by the Valuation Group in good faith in accordance with the policies adopted by the Board of Trustees. |
(b) | Level 2 Security. Please see Note 2 on the Notes to the Financial Statements. |
The accompanying notes are an integral part of these financial statements.
34
The Merger Fund
SCHEDULE OF FORWARD CURRENCY EXCHANGE CONTRACTS*
June 30, 2015 (Unaudited)
USD | USD | |||||||||||||||||||||
Value at | Value at | Unrealized | ||||||||||||||||||||
Settlement | Currency to | June 30, | Currency to | June 30, | Appreciation | |||||||||||||||||
Date | be Delivered | 2015 | be Received | 2015 | (Depreciation)** | |||||||||||||||||
7/22/15 | 23,196,065 | AUD | $ | 17,873,416 | 17,656,136 | USD | $ | 17,656,136 | $ | (217,280 | ) | |||||||||||
7/22/15 | 17,839,262 | USD | 17,839,262 | 23,196,065 | AUD | 17,873,416 | 34,154 | |||||||||||||||
8/26/15 | 3,427,097 | AUD | 2,635,708 | 2,678,105 | USD | 2,678,105 | 42,397 | |||||||||||||||
10/21/15 | 12,528,999 | AUD | 9,607,015 | 9,604,710 | USD | 9,604,710 | (2,305 | ) | ||||||||||||||
12/22/15 | 2,627,932 | AUD | 2,008,405 | 2,047,159 | USD | 2,047,159 | 38,754 | |||||||||||||||
7/8/15 | 10,076,415 | EUR | 11,234,932 | 11,257,082 | USD | 11,257,082 | 22,150 | |||||||||||||||
7/8/15 | 302 | USD | 302 | 266 | EUR | 297 | (5 | ) | ||||||||||||||
7/10/15 | 62,471,000 | EUR | 69,655,411 | 67,793,925 | USD | 67,793,925 | (1,861,486 | ) | ||||||||||||||
7/10/15 | 26,328,597 | USD | 26,328,597 | 24,134,000 | EUR | 26,909,505 | 580,908 | |||||||||||||||
8/17/15 | 76,252,982 | EUR | 85,068,361 | 81,097,334 | USD | 81,097,334 | (3,971,027 | ) | ||||||||||||||
8/25/15 | 4,421,952 | EUR | 4,933,741 | 4,851,987 | USD | 4,851,987 | (81,754 | ) | ||||||||||||||
1/20/16 | 4,953,366 | EUR | 5,542,446 | 5,354,942 | USD | 5,354,942 | (187,504 | ) | ||||||||||||||
7/15/15 | 801,759 | GBP | 1,259,631 | 1,227,366 | USD | 1,227,366 | (32,265 | ) | ||||||||||||||
7/15/15 | 1,224,043 | USD | 1,224,043 | 801,759 | GBP | 1,259,631 | 35,588 | |||||||||||||||
7/22/15 | 9,944,909 | GBP | 15,623,464 | 15,199,707 | USD | 15,199,707 | (423,757 | ) | ||||||||||||||
7/22/15 | 15,655,773 | USD | 15,655,773 | 9,944,909 | GBP | 15,623,464 | (32,309 | ) | ||||||||||||||
10/22/15 | 28,305,459 | GBP | 44,438,990 | 43,886,765 | USD | 43,886,765 | (552,225 | ) | ||||||||||||||
12/4/15 | 4,296,636 | GBP | 6,743,809 | 6,590,765 | USD | 6,590,765 | (153,044 | ) | ||||||||||||||
3/23/16 | 22,946,107 | GBP | 35,997,841 | 34,616,618 | USD | 34,616,618 | (1,381,223 | ) | ||||||||||||||
4/21/16 | 14,396,286 | GBP | 22,582,346 | 22,317,813 | USD | 22,317,813 | (264,533 | ) | ||||||||||||||
$ | 396,253,493 | $ | 387,846,727 | $ | (8,406,766 | ) |
AUD – Australian Dollar
EUR – Euro
GBP – British Pound
USD – U.S. Dollar
* | JPMorgan Chase & Co. Inc. is the counterparty for all open forward currency exchange contracts held by the Fund as of June 30, 2015. |
** | Unrealized appreciation is a receivable and unrealized depreciation is a payable on the Statement of Assets and Liabilities. |
The accompanying notes are an integral part of these financial statements.
35
WCM Alternatives: Event-Driven Fund
SCHEDULE OF FORWARD CURRENCY EXCHANGE CONTRACTS*
June 30, 2015 (Unaudited)
USD | USD | |||||||||||||||||||||
Value at | Value at | Unrealized | ||||||||||||||||||||
Settlement | Currency to | June 30, | Currency to | June 30, | Appreciation | |||||||||||||||||
Date | be Delivered | 2015 | be Received | 2015 | (Depreciation)** | |||||||||||||||||
7/22/15 | 722,697 | AUD | $ | 556,864 | 557,133 | USD | $ | 557,133 | $ | 269 | ||||||||||||
7/22/15 | 555,905 | USD | 555,905 | 722,697 | AUD | 556,864 | 959 | |||||||||||||||
8/26/15 | 21,102 | AUD | 16,229 | 16,490 | USD | 16,490 | 261 | |||||||||||||||
10/21/15 | 299,125 | AUD | 229,364 | 234,190 | USD | 234,190 | 4,826 | |||||||||||||||
7/8/15 | 266,010 | EUR | 296,594 | 298,304 | USD | 298,304 | 1,710 | |||||||||||||||
7/8/15 | 554 | USD | 554 | 488 | EUR | 544 | (10 | ) | ||||||||||||||
7/10/15 | 637,500 | EUR | 710,815 | 695,560 | USD | 695,560 | (15,255 | ) | ||||||||||||||
7/10/15 | 192,738 | USD | 192,738 | 176,500 | EUR | 196,798 | 4,060 | |||||||||||||||
8/17/15 | 782,457 | EUR | 872,915 | 845,642 | USD | 845,642 | (27,273 | ) | ||||||||||||||
8/25/15 | 18,320 | EUR | 20,440 | 20,101 | USD | 20,101 | (339 | ) | ||||||||||||||
1/20/16 | 27,928 | EUR | 31,249 | 30,192 | USD | 30,192 | (1,057 | ) | ||||||||||||||
7/15/15 | 19,900 | GBP | 31,265 | 30,464 | USD | 30,464 | (801 | ) | ||||||||||||||
7/15/15 | 30,381 | USD | 30,381 | 19,900 | GBP | 31,264 | 883 | |||||||||||||||
7/22/15 | 36,456 | GBP | 57,272 | 55,451 | USD | 55,451 | (1,821 | ) | ||||||||||||||
7/22/15 | 57,391 | USD | 57,391 | 36,456 | GBP | 57,272 | (119 | ) | ||||||||||||||
10/22/15 | 457,290 | GBP | 717,936 | 709,015 | USD | 709,015 | (8,921 | ) | ||||||||||||||
12/4/15 | 81,417 | GBP | 127,788 | 124,787 | USD | 124,787 | (3,001 | ) | ||||||||||||||
3/23/16 | 320,656 | GBP | 503,045 | 490,047 | USD | 490,047 | (12,998 | ) | ||||||||||||||
4/21/16 | 260,503 | GBP | 408,631 | 402,564 | USD | 402,564 | (6,067 | ) | ||||||||||||||
$ | 5,417,376 | $ | 5,352,682 | $ | (64,694 | ) |
AUD – Australian Dollar
EUR – Euro
GBP – British Pound
USD – U.S. Dollar
* | JPMorgan Chase & Co. Inc. is the counterparty for all open forward currency exchange contracts held by the Fund as of June 30, 2015. |
** | Unrealized appreciation is a receivable and unrealized depreciation is a payable on the Statement of Assets and Liabilities. |
The accompanying notes are an integral part of these financial statements.
36
The Merger Fund
SCHEDULE OF SWAP CONTRACTS
June 30, 2015 (Unaudited)
Unrealized | ||||||||||||||||
Termination | Appreciation | Counter- | ||||||||||||||
Date | Security | Shares | Notional | (Depreciation)* | party | |||||||||||
LONG TOTAL RETURN SWAP CONTRACTS | ||||||||||||||||
12/16/15 | Bayer AG | 294,900 | $ | 41,421,061 | $ | (1,592,756 | ) | JPM | ||||||||
4/8/16 | BG Group plc | 5,274,756 | 87,810,393 | (4,626,172 | ) | JPM | ||||||||||
10/1/15 | CBS Corporation Class B | 487,662 | 27,065,241 | 1,160,464 | BAML | |||||||||||
10/16/15 | CSR plc | 3,145,051 | 43,189,853 | 1,648,298 | JPM | |||||||||||
10/6/15 | DIRECTV | 1,446,334 | 134,205,332 | 7,016,624 | JPM | |||||||||||
10/2/15 | Dresser-Rand Group, Inc. | 266,436 | 22,695,019 | 1,177,439 | JPM | |||||||||||
12/16/15 | E.ON SE | 276,372 | 3,697,368 | (959,697 | ) | JPM | ||||||||||
9/29/15 | Hillgrove Resources Ltd. | 1,642,462 | 285,132 | (721,011 | ) | JPM | ||||||||||
5/28/16 | iiNET Ltd. | 464,398 | 3,411,082 | (112,530 | ) | JPM | ||||||||||
6/3/16 | iiNET Ltd. | 847,539 | 6,225,317 | (44,845 | ) | BAML | ||||||||||
10/16/15 | Jazztel plc | 5,865,614 | 85,010,813 | (2,080,102 | ) | JPM | ||||||||||
4/24/16 | Pace plc | 2,282,772 | 13,353,600 | (1,467,939 | ) | JPM | ||||||||||
5/19/16 | Pace plc | 959,972 | 5,615,574 | (587,129 | ) | BAML | ||||||||||
4/15/16 | Pirelli & C. S.p.A. | 322,275 | 5,439,635 | 113,982 | JPM | |||||||||||
12/31/15 | SAI Global Ltd. | 760,521 | 2,446,878 | (1,166,112 | ) | JPM | ||||||||||
6/2/16 | Telecity Group plc | 2,514,635 | 40,617,258 | (1,312,682 | ) | BAML | ||||||||||
4/17/16 | Time Warner Cable, Inc. | 4,743 | 845,060 | 131,161 | JPM | |||||||||||
6/29/16 | Vivendi SA | 410,800 | 10,361,825 | (209,620 | ) | JPM | ||||||||||
5/15/16 | XL Group plc | 333,206 | 12,395,263 | 12,395,263 | JPM | |||||||||||
SHORT TOTAL RETURN SWAP CONTRACTS | ||||||||||||||||
4/24/16 | ARRIS Group, Inc. (a) | (239,602 | ) | (7,281,505 | ) | 1,102,157 | JPM | |||||||||
5/19/16 | ARRIS Group, Inc. (a) | (125,338 | ) | (3,809,022 | ) | 397,369 | BAML | |||||||||
1/16/16 | AT&T, Inc. | (183,680 | ) | (6,524,314 | ) | (388,969 | ) | JPM | ||||||||
3/12/16 | Holcim Ltd. | (688 | ) | (50,775 | ) | 240 | JPM | |||||||||
4/7/16 | International Game | |||||||||||||||
Technology plc | (26,423 | ) | (469,272 | ) | 121,743 | JPM | ||||||||||
4/7/16 | International Game | |||||||||||||||
Technology plc | (143,980 | ) | (2,557,085 | ) | 950,536 | BAML | ||||||||||
4/8/16 | Royal Dutch Shell plc | |||||||||||||||
Class B | (2,281,687 | ) | (64,782,365 | ) | 5,093,511 | JPM | ||||||||||
$ | 16,039,223 |
BAML – Bank of America Merrill Lynch & Co., Inc.
JPM – JPMorgan Chase & Co., Inc.
plc – Public Limited Company
* | Based on the net swap contract value held at each counterparty, unrealized appreciation is a receivable and unrealized depreciation is a payable on the Statement of Assets and Liabilities. |
(a) | Security fair valued by the Valuation Group in good faith in accordance with the policies adopted by the Board of Trustees. |
The accompanying notes are an integral part of these financial statements.
37
WCM Alternatives: Event-Driven Fund
SCHEDULE OF SWAP CONTRACTS
June 30, 2015 (Unaudited)
Unrealized | ||||||||||||||||
Termination | Appreciation | Counter- | ||||||||||||||
Date | Security | Shares | Notional | (Depreciation)* | party | |||||||||||
LONG TOTAL RETURN SWAP CONTRACTS | ||||||||||||||||
9/17/15 | American International | |||||||||||||||
Group, Inc. | 7,212 | $ | 445,846 | $ | 41,634 | JPM | ||||||||||
8/27/15 | Anadarko Petroleum | |||||||||||||||
Corporation | 4,300 | 335,658 | (122,260 | ) | JPM | |||||||||||
1/10/16 | Apollo Residential | |||||||||||||||
Mortgage, Inc. | 2,996 | 44,011 | (3,492 | ) | JPM | |||||||||||
4/22/16 | Bayer AG | 3,643 | 511,689 | (19,760 | ) | JPM | ||||||||||
4/8/16 | BG Group plc | 56,690 | 943,735 | (41,522 | ) | JPM | ||||||||||
4/16/16 | BG Group plc — ADR | 25,069 | 420,658 | (30,449 | ) | JPM | ||||||||||
4/17/16 | Catamaran Corporation | 27,863 | 1,701,872 | 41,089 | JPM | |||||||||||
10/1/15 | CBS Corporation Class B | 3,390 | 188,145 | (6,752 | ) | BAML | ||||||||||
10/16/15 | CSR plc | 50,810 | 697,755 | 20,846 | JPM | |||||||||||
4/20/16 | DIRECTV | 41,133 | 3,816,731 | 174,664 | JPM | |||||||||||
12/16/15 | E.ON SE | 1,145 | 15,318 | (3,975 | ) | JPM | ||||||||||
12/2/15 | Equinix, Inc. | 307 | 77,671 | 9,907 | JPM | |||||||||||
4/17/16 | Equity Commonwealth | 22,674 | 582,042 | (9,390 | ) | BAML | ||||||||||
9/29/15 | General Motors Company | 11,500 | 383,295 | (1,737 | ) | BAML | ||||||||||
6/10/16 | HCC Insurance Holdings, Inc. | 4,281 | 328,952 | (1,047 | ) | JPM | ||||||||||
4/17/16 | Hospira, Inc. | 22,176 | 1,967,233 | 21,129 | JPM | |||||||||||
9/24/15 | Huntsman Corporation | 8,400 | 185,388 | (43,450 | ) | JPM | ||||||||||
6/11/16 | Huntsman Corporation | 4,612 | 101,787 | (3,720 | ) | BAML | ||||||||||
5/20/16 | iiNET Ltd. | 31,322 | 230,065 | (11,466 | ) | JPM | ||||||||||
9/23/15 | Jazztel plc | 60,189 | 872,324 | 18,996 | JPM | |||||||||||
12/1/15 | Occidental Petroleum | |||||||||||||||
Corporation | 1,184 | 92,080 | (24,403 | ) | JPM | |||||||||||
6/30/16 | Omnicare, Inc. | 10,073 | 949,380 | 111 | BAML | |||||||||||
4/24/16 | Pace plc | 50,145 | 293,335 | (31,347 | ) | JPM | ||||||||||
5/19/16 | Pace plc | 11,303 | 66,120 | (6,823 | ) | BAML | ||||||||||
6/30/16 | Pall Corporation | 13,849 | 1,723,508 | (486 | ) | BAML | ||||||||||
3/24/16 | Pfizer, Inc. | 3,600 | 120,708 | (3,749 | ) | JPM | ||||||||||
4/15/16 | Pirelli & C. S.p.A. | 1,817 | 30,669 | 644 | JPM | |||||||||||
4/21/16 | Polypore International, Inc. | 17,287 | 1,035,146 | 21,055 | JPM | |||||||||||
12/18/15 | QEP Midstream Partners LP | 7,697 | 134,928 | 13,420 | JPM | |||||||||||
8/5/15 | SAI Global Ltd. | 4,683 | 15,067 | (5,628 | ) | JPM | ||||||||||
4/17/16 | Sigma-Aldrich Corporation | 11,381 | 1,585,942 | 10,025 | JPM | |||||||||||
6/2/16 | Telecity Group plc | 45,503 | 734,980 | (24,667 | ) | BAML | ||||||||||
8/12/15 | Time Warner Cable, Inc. | 2,036 | 362,754 | 50,765 | BAML | |||||||||||
4/17/16 | Time Warner Cable, Inc. | 9,152 | 1,630,612 | 174,415 | JPM | |||||||||||
6/29/16 | Vivendi SA | 11,300 | 285,026 | (5,766 | ) | JPM | ||||||||||
5/15/16 | XL Group plc | 1,221 | 45,421 | 45,421 | JPM |
The accompanying notes are an integral part of these financial statements.
38
WCM Alternatives: Event-Driven Fund
SCHEDULE OF SWAP CONTRACTS (continued)
June 30, 2015 (Unaudited)
Unrealized | ||||||||||||||||
Termination | Appreciation | Counter- | ||||||||||||||
Date | Security | Shares | Notional | (Depreciation)* | party | |||||||||||
SHORT TOTAL RETURN SWAP CONTRACTS | ||||||||||||||||
4/24/16 | ARRIS Group, Inc. (a) | (6,132 | ) | (186,351 | ) | $ | 26,764 | JPM | ||||||||
5/19/16 | ARRIS Group, Inc. (a) | (1,453 | ) | (44,157 | ) | 4,589 | BAML | |||||||||
4/17/16 | AT&T, Inc. | (53,159 | ) | (1,888,208 | ) | (133,897 | ) | JPM | ||||||||
6/30/16 | Charter Communications, Inc. | |||||||||||||||
Class A | (235 | ) | (40,244 | ) | (57 | ) | BAML | |||||||||
3/12/16 | Holcim Ltd. | (2 | ) | (148 | ) | 1 | JPM | |||||||||
4/7/16 | International Game | |||||||||||||||
Technology plc | (65 | ) | (1,154 | ) | 301 | JPM | ||||||||||
4/7/16 | International Game | |||||||||||||||
Technology plc | (230 | ) | (4,085 | ) | 1,395 | BAML | ||||||||||
4/8/16 | Royal Dutch Shell plc Class B | (24,519 | ) | (696,151 | ) | 42,171 | JPM | |||||||||
4/16/16 | Royal Dutch Shell plc | |||||||||||||||
Class B — ADR | (5,582 | ) | (320,128 | ) | 40,544 | JPM | ||||||||||
12/18/15 | Tesoro Logistics LP | (2,190 | ) | (125,093 | ) | 1,232 | JPM | |||||||||
$ | 225,275 |
ADR – American Depository Receipt
BAML – Bank of America Merrill Lynch & Co., Inc.
JPM – JPMorgan Chase & Co., Inc.
plc – Public Limited Company
* | Based on the net swap contract value held at each counterparty, unrealized appreciation is a receivable and unrealized depreciation is a payable on the Statement of Assets and Liabilities. |
(a) | Security fair valued by the Valuation Group in good faith in accordance with the policies adopted by the Board of Trustees. |
The accompanying notes are an integral part of these financial statements.
39
The Merger Fund and WCM Alternatives: Event-Driven Fund
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2015 (Unaudited)
WCM Alternatives: | ||||||||
The Merger Fund | Event-Driven Fund | |||||||
ASSETS: | ||||||||
Investments, at value (Cost $5,298,920,115 and | ||||||||
$71,501,512, respectively) | $ | 5,374,001,342 | $ | 69,915,304 | ||||
Cash held in foreign currency (Cost $92 and | ||||||||
$2,380, respectively) | 90 | 2,374 | ||||||
Receivable from brokers | 598,790,107 | 5,391,513 | ||||||
Deposits at brokers | 141,336,739 | 5,569,459 | ||||||
Receivable for investments sold | 60,724,642 | 3,575,401 | ||||||
Receivable for forward | ||||||||
currency exchange contracts | 753,951 | 12,968 | ||||||
Receivable for swap contracts | 16,039,223 | 225,275 | ||||||
Receivable for fund shares issued | 10,568,689 | 303,702 | ||||||
Dividends and interest receivable | 6,000,593 | 97,519 | ||||||
Swap dividends receivable | 3,546,941 | 35,077 | ||||||
Receivable for closed swap contracts | — | 9,971 | ||||||
Prepaid expenses and other receivables | 205,760 | 19,190 | ||||||
Total Assets | 6,211,968,077 | 85,157,753 | ||||||
LIABILITIES: | ||||||||
Securities sold short, at value (proceeds of | ||||||||
$598,790,107 and $5,391,513, respectively) | 624,000,465 | 5,358,340 | ||||||
Written option contracts, at value | ||||||||
(premiums received $161,023,744 and | ||||||||
$2,705,798, respectively) | 132,315,323 | 2,172,969 | ||||||
Payable to the investment adviser | 3,742,164 | 27,088 | ||||||
Distribution fees payable | 1,823,187 | — | ||||||
Payable to independent trustees | 4,984 | 40 | ||||||
Payable for forward currency exchange contracts | 9,160,717 | 77,662 | ||||||
Payable for investments purchased | 209,588,318 | 5,573,420 | ||||||
Payable for fund shares redeemed | 5,966,072 | — | ||||||
Dividends and interest payable | 1,110,783 | 11,035 | ||||||
Swap dividends payable | 53,313 | — | ||||||
Accrued expenses and other liabilities | 2,108,942 | 97,145 | ||||||
Total Liabilities | 989,874,268 | 13,317,699 | ||||||
NET ASSETS | $ | 5,222,093,809 | $ | 71,840,054 |
The accompanying notes are an integral part of these financial statements.
40
The Merger Fund and WCM Alternatives: Event-Driven Fund
STATEMENTS OF ASSETS AND LIABILITIES (continued)
June 30, 2015 (Unaudited)
WCM Alternatives: | ||||||||
The Merger Fund | Event-Driven Fund | |||||||
NET ASSETS CONSISTS OF: | ||||||||
Accumulated undistributed | ||||||||
net investment income (loss) | $ | (31,598,397 | ) | $ | 85,639 | |||
Accumulated net realized loss on | ||||||||
investments, securities sold short, written option | ||||||||
contracts expired or closed, swap contracts, | ||||||||
foreign currency translation and forward | ||||||||
currency exchange contracts | (150,547,228 | ) | (102,070 | ) | ||||
Net unrealized appreciation (depreciation) on: | ||||||||
Investments | 75,081,227 | (1,586,208 | ) | |||||
Securities sold short | (25,210,358 | ) | 33,173 | |||||
Written option contracts | 28,708,421 | 532,829 | ||||||
Swap contracts | 16,039,223 | 225,275 | ||||||
Foreign currency translation | (2 | ) | (6 | ) | ||||
Forward currency exchange contracts | (8,406,766 | ) | (64,694 | ) | ||||
Net unrealized appreciation (depreciation) | 86,211,745 | (859,631 | ) | |||||
Paid-in capital | 5,318,027,689 | 72,716,116 | ||||||
Total Net Assets | $ | 5,222,093,809 | $ | 71,840,054 | ||||
Investor Class | ||||||||
Net assets | $ | 3,958,348,740 | ||||||
Shares outstanding | 251,550,752 | |||||||
Net asset value and offering price per share* | $ | 15.74 | ||||||
Institutional Class | ||||||||
Net assets | $ | 1,263,745,069 | $ | 71,840,054 | ||||
Shares outstanding | 80,465,503 | 7,030,153 | ||||||
Net asset value and offering price per share* | $ | 15.71 | $ | 10.22 |
* | The redemption price per share may vary based on the length of time a shareholder holds Fund shares. |
The accompanying notes are an integral part of these financial statements.
41
The Merger Fund and WCM Alternatives: Event-Driven Fund
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2015 (Unaudited)
WCM Alternatives: | ||||||||
The Merger Fund | Event-Driven Fund | |||||||
INVESTMENT INCOME: | ||||||||
Interest | $ | 5,332,540 | $ | 49,819 | ||||
Dividend income on long positions (net of | ||||||||
foreign withholding taxes of $217,972 | ||||||||
and $639, respectively) | 14,439,945 | 183,348 | ||||||
Total investment income | 19,772,485 | 233,167 | ||||||
EXPENSES: | ||||||||
Investment advisory fees | 26,305,454 | 199,724 | ||||||
Distribution fees (Investor Class) | 4,586,364 | — | ||||||
Sub transfer agent fees (Investor Class) | 2,591,192 | — | ||||||
Sub transfer agent fees (Institutional Class) | 245,794 | 15,312 | ||||||
Administration fees | 801,485 | 9,113 | ||||||
Transfer agent and shareholder | ||||||||
servicing agent fees | 372,372 | 9,782 | ||||||
Professional fees | 371,817 | 72,290 | ||||||
Reports to shareholders | 298,925 | 11,615 | ||||||
Fund accounting expense | 216,815 | 12,639 | ||||||
Custody fees | 198,933 | 15,902 | ||||||
Miscellaneous expenses | 128,311 | 4,250 | ||||||
Federal and state registration fees | 118,092 | 20,688 | ||||||
Trustees’ fees and expenses | 114,776 | 7,580 | ||||||
Borrowing expense on securities sold short | 1,455,370 | 10,879 | ||||||
Dividends on securities sold short | 8,922,589 | 41,147 | ||||||
Total expenses before | ||||||||
expense waiver by Adviser | 46,728,289 | 430,921 | ||||||
Less: Expense reimbursed by Adviser | (3,601,021 | ) | (100,879 | ) | ||||
Net expenses | 43,127,268 | 330,042 | ||||||
NET INVESTMENT LOSS | (23,354,783 | ) | (96,875 | ) |
The accompanying notes are an integral part of these financial statements.
42
The Merger Fund and WCM Alternatives: Event-Driven Fund
STATEMENTS OF OPERATIONS (continued)
For the Six Months Ended June 30, 2015 (Unaudited)
WCM Alternatives: | ||||||||
The Merger Fund | Event-Driven Fund | |||||||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||
ON INVESTMENTS: | ||||||||
Realized gain (loss) on: | ||||||||
Investments | $ | (51,795 | ) | $ | (401,949 | ) | ||
Securities sold short | (61,961,680 | ) | (46,238 | ) | ||||
Written option contracts expired or closed | 38,108,162 | 84,869 | ||||||
Swap contracts | (46,601,064 | ) | 30,675 | |||||
Foreign currency translation | (3,902,089 | ) | (10,928 | ) | ||||
Forward currency exchange contracts | 52,282,354 | 125,152 | ||||||
Net realized loss | (22,126,112 | ) | (218,419 | ) | ||||
Change in unrealized | ||||||||
appreciation (depreciation) on: | ||||||||
Investments | (41,507,841 | ) | (1,557,784 | ) | ||||
Securities sold short | 85,669,665 | 234,036 | ||||||
Written option contracts | 38,743,194 | 562,770 | ||||||
Swap contracts | 24,348,398 | 419,421 | ||||||
Foreign currency translation | (316,326 | ) | (750 | ) | ||||
Forward currency exchange contracts | (23,912,242 | ) | (106,563 | ) | ||||
Net unrealized appreciation (depreciation) | 83,024,848 | (448,870 | ) | |||||
NET REALIZED AND UNREALIZED | ||||||||
GAIN (LOSS) ON INVESTMENTS | 60,898,736 | (667,289 | ) | |||||
NET INCREASE (DECREASE) IN NET ASSETS | ||||||||
RESULTING FROM OPERATIONS | $ | 37,543,953 | $ | (764,164 | ) | |||
The accompanying notes are an integral part of these financial statements.
43
The Merger Fund
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended | Year Ended | |||||||
June 30, 2015 | December 31, 2014 | |||||||
(Unaudited) | ||||||||
Net investment income (loss) | $ | (23,354,783 | ) | $ | 112,981,998 | |||
Net realized gain (loss) on investments, | ||||||||
securities sold short, written option contracts | ||||||||
expired or closed, swap contracts, foreign | ||||||||
currency translation and forward | ||||||||
currency exchange contracts | (22,126,112 | ) | 120,234,533 | |||||
Change in unrealized appreciation (depreciation) | ||||||||
on investments, securities sold short, written | ||||||||
option contracts, swap contracts, foreign | ||||||||
currency translation and forward | ||||||||
currency exchange contracts | 83,024,848 | (161,043,838 | ) | |||||
Net increase in net assets | ||||||||
resulting from operations | 37,543,953 | 72,172,693 | ||||||
Investor Class — | ||||||||
Distributions to shareholders from: (Note 5) | ||||||||
Net investment income | — | (100,172,106 | ) | |||||
Net realized gains | — | (53,847,251 | ) | |||||
Total dividends and distributions — | ||||||||
Investor Class | — | (154,019,357 | ) | |||||
Institutional Class — | ||||||||
Distributions to shareholders from: (Note 5) | ||||||||
Net investment income | — | (38,051,350 | ) | |||||
Net realized gains | — | (18,089,631 | ) | |||||
Total dividends and distributions — | ||||||||
Institutional Class | — | (56,140,981 | ) | |||||
Net increase (decrease) in net assets from | ||||||||
capital share transactions (Note 4) | (217,022,065 | ) | 524,390,262 | |||||
Net increase (decrease) in net assets | (179,478,112 | ) | 386,402,617 | |||||
NET ASSETS: | ||||||||
Beginning of period | 5,401,571,921 | 5,015,169,304 | ||||||
End of period (including accumulated | ||||||||
undistributed net investment loss of | ||||||||
$(31,598,397) and $(8,243,614), respectively) | $ | 5,222,093,809 | $ | 5,401,571,921 | ||||
The accompanying notes are an integral part of these financial statements.
44
WCM Alternatives: Event-Driven Fund
STATEMENTS OF CHANGES IN NET ASSETS
For the Period from | ||||||||
January 2, 2014^ | ||||||||
Six Months Ended | through | |||||||
June 30, 2015 | December 31, 2014 | |||||||
(Unaudited) | ||||||||
Net investment income (loss) | $ | (96,875 | ) | $ | 42,259 | |||
Net realized gain (loss) on investments, securities | ||||||||
sold short, written option contracts expired or | ||||||||
closed, swap contracts, foreign currency | ||||||||
translation and forward currency | ||||||||
exchange contracts | (218,419 | ) | 582,734 | |||||
Change in unrealized depreciation on | ||||||||
investments, securities sold short, written option | ||||||||
contracts, swap contracts, foreign currency | ||||||||
translation and forward currency | ||||||||
exchange contracts | (448,870 | ) | (410,761 | ) | ||||
Net increase (decrease) in net assets | ||||||||
resulting from operations | (764,164 | ) | 214,232 | |||||
Institutional Class — | ||||||||
Distributions to shareholders from: (Note 5) | ||||||||
Net realized gains | — | (294,148 | ) | |||||
Total dividends and distributions — | ||||||||
Institutional Class | — | (294,148 | ) | |||||
Net increase in net assets from | ||||||||
capital share transactions (Note 4) | 60,518,863 | 12,165,271 | ||||||
Net increase in net assets | 59,754,699 | 12,085,355 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 12,085,355 | — | ||||||
End of period (including accumulated | ||||||||
undistributed net investment income of | ||||||||
$85,639 and $182,514, respectively) | $ | 71,840,054 | $ | 12,085,355 |
^ | Commencement of operations January 2, 2014. |
The accompanying notes are an integral part of these financial statements.
45
The Merger Fund
FINANCIAL HIGHLIGHTS
Selected per share data is based on a share of beneficial interest outstanding throughout each period.
Institutional Class
For the Period from | ||||||||||||
Six Months | Year Ended | August 1, 2013* | ||||||||||
Ended | December 31, | through | ||||||||||
June 30, 2015 | 2014^ | December 31, 2013 | ||||||||||
(Unaudited) | ||||||||||||
Per Share Data: | ||||||||||||
Net Asset Value, | ||||||||||||
beginning of period | $ | 15.58 | $ | 15.97 | $ | 16.06 | ||||||
Income from | ||||||||||||
investment operations: | ||||||||||||
Net investment income (loss)(1)(2) | (0.05 | ) | 0.37 | 0.03 | ||||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | 0.18 | (0.10 | ) | 0.31 | ||||||||
Total from investment operations | 0.13 | 0.27 | 0.34 | |||||||||
Less distributions: | ||||||||||||
Distributions from net | ||||||||||||
investment income | — | (0.45 | ) | (0.35 | ) | |||||||
Distributions from | ||||||||||||
net realized gains | — | (0.21 | ) | (0.08 | ) | |||||||
Total dividends and distributions | — | (0.66 | ) | (0.43 | ) | |||||||
Net Asset Value, end of period | $ | 15.71 | $ | 15.58 | $ | 15.97 | ||||||
Total Return | 0.83 | %(3) | 1.63 | % | 2.20 | %(3) |
The accompanying notes are an integral part of these financial statements.
46
The Merger Fund
FINANCIAL HIGHLIGHTS (continued)
Institutional Class
For the Period from | ||||||||||||
Six Months | Year Ended | August 1, 2013* | ||||||||||
Ended | December 31, | through | ||||||||||
June 30, 2015 | 2014 | December 31, 2013 | ||||||||||
(Unaudited) | ||||||||||||
Supplemental data and ratios: | ||||||||||||
Net assets, end of period (000’s) | $ | 1,263,745 | $ | 1,332,078 | $ | 172,247 | ||||||
Ratio of gross expenses | ||||||||||||
to average net assets: | ||||||||||||
Before expense waiver | 1.53 | %(4) | 1.44 | % | 1.32 | %(4) | ||||||
After expense waiver | 1.40 | %(4) | 1.28 | % | 1.19 | %(4) | ||||||
Ratio of dividends and borrowing | ||||||||||||
expense on securities sold short | ||||||||||||
to average net assets | 0.40 | %(4) | 0.29 | % | 0.19 | %(4) | ||||||
Ratio of operating expense to | ||||||||||||
average net assets excluding | ||||||||||||
dividends and borrowing expense | ||||||||||||
on securities sold short | 1.00 | %(4) | 0.99 | % | 1.00 | %(4) | ||||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets: | ||||||||||||
Before expense waiver | (0.78 | )(4) | 2.14 | % | 0.29 | %(4) | ||||||
After expense waiver | (0.65 | )(4) | 2.30 | % | 0.42 | %(4) | ||||||
Portfolio turnover rate(5) | 66 | %(3) | 137 | % | 194 | %(3) |
(1) | Net investment income before dividends and borrowing expense on securities sold short for the six months ended June 30, 2015, the year ended December 31, 2014, and for the period ended December 31, 2013 was $(0.02), $0.42 and $0.04, respectively. |
(2) | Net investment income (loss) per share has been calculated based on average shares outstanding during the period. |
(3) | Not annualized. |
(4) | Annualized. |
(5) | The numerator for the portfolio turnover rate includes the lesser of purchases or sales (excluding short positions). The denominator includes the average long positions throughout the period. |
* | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
47
The Merger Fund
FINANCIAL HIGHLIGHTS
Selected per share data is based on a share of beneficial interest outstanding throughout each period.
Investor Class
Per Share Data: |
Net Asset Value, beginning of period |
Income from investment operations: |
Net investment income (loss)(2) |
Net realized and unrealized gain (loss) on investments |
Total from investment operations |
Redemption fees |
Less distributions: |
Distributions from net investment income |
Distributions from net realized gains |
Total dividends and distributions |
Net Asset Value, end of period |
Total Return |
Supplemental data and ratios: |
Net assets, end of period (in millions) |
Ratio of gross expenses to average net assets: |
Before expense waiver |
After expense waiver |
Ratio of dividends and borrowing expense on securities sold short |
to average net assets |
Ratio of operating expense to average net assets excluding dividends |
and borrowing expense on securities sold short |
Ratio of net investment income (loss) to average net assets: |
Before expense waiver |
After expense waiver |
Portfolio turnover rate(8) |
The accompanying notes are an integral part of these financial statements.
48
The Merger Fund
SCHEDULE OF INVESTMENTS
June 30, 2015 (Unaudited)
Investor Class
Six Months | Three Months | |||||||||||||||||||||||||
Ended | Year Ended | Ended | Year Ended | |||||||||||||||||||||||
June 30, | December 31, | December 31, | September 30, | |||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011* | 2011 | 2010(1) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||
$ | 15.63 | $ | 16.01 | $ | 15.83 | $ | 15.59 | $ | 15.59 | $ | 15.93 | $ | 15.26 | |||||||||||||
(0.08 | )(3) | 0.33 | (3) | 0.04 | (3) | (0.05 | )(3) | (0.02 | )(3) | (0.18 | )(3) | (0.02 | )(4) | |||||||||||||
0.19 | (0.10 | ) | 0.53 | 0.61 | 0.47 | 0.13 | 0.69 | |||||||||||||||||||
0.11 | 0.23 | 0.57 | 0.56 | 0.45 | (0.05 | ) | 0.67 | |||||||||||||||||||
— | — | — | 0.00 | (5) | 0.00 | (5) | 0.00 | (5) | 0.00 | (5) | ||||||||||||||||
— | (0.40 | ) | (0.31 | ) | (0.26 | ) | (0.08 | ) | — | (0.00 | )(5) | |||||||||||||||
— | (0.21 | ) | (0.08 | ) | (0.06 | ) | (0.37 | ) | (0.29 | ) | — | |||||||||||||||
— | (0.61 | ) | (0.39 | ) | (0.32 | ) | (0.45 | ) | (0.29 | ) | (0.00 | )(5) | ||||||||||||||
$ | 15.74 | $ | 15.63 | $ | 16.01 | $ | 15.83 | $ | 15.59 | $ | 15.59 | $ | 15.93 | |||||||||||||
0.70 | %(6) | 1.43 | % | 3.61 | % | 3.61 | % | 2.90 | %(6) | (0.34 | )% | 4.39 | % | |||||||||||||
$ | 3,958 | $ | 4,069 | $ | 4,843 | $ | 4,416 | $ | 5,027 | $ | 4,914 | $ | 3,574 | |||||||||||||
1.85 | %(7) | 1.68 | % | 1.61 | % | 1.82 | % | 1.77 | %(7) | 2.08 | % | 2.64 | % | |||||||||||||
1.72 | %(7) | 1.52 | % | 1.48 | % | 1.69 | % | 1.64 | %(7) | 1.96 | % | 2.57 | % | |||||||||||||
0.40 | %(7) | 0.29 | % | 0.22 | % | 0.42 | % | 0.31 | %(7) | 0.62 | % | 1.16 | % | |||||||||||||
1.32 | %(7) | 1.23 | % | 1.26 | % | 1.27 | % | 1.33 | %(7) | 1.34 | % | 1.41 | % | |||||||||||||
(1.10 | )%(7) | 1.90 | % | 0.09 | % | (0.47 | )% | (0.72 | )%(7) | (1.25 | )% | (1.35 | )% | |||||||||||||
(0.97 | )%(7) | 2.06 | % | 0.22 | % | (0.34 | )% | (0.59 | )%(7) | (1.13 | )% | (1.28 | )% | |||||||||||||
66 | %(6) | 137 | % | 194 | % | 240 | % | 48 | %(6) | 293 | % | 192 | % |
Footnotes To Financial Highlights On Following Page
The accompanying notes are an integral part of these financial statements.
49
The Merger Fund
FINANCIAL HIGHLIGHTS (continued)
Investor Class
(1) | Performance data included for periods prior to 2011 reflect that of Westchester Capital Management, Inc., the Fund’s prior investment adviser. See Note 1 for additional information. |
(2) | Net investment income (loss) before dividends and borrowing expense on securities sold short for the six months ended June 30, 2015, the years ended December 31, 2014, 2013, 2012, three months ended December 31, 2011 and the years ended September 30, 2011 and 2010 was $(0.05), $0.38, $0.07, $0.01, $(0.01), $(0.08), and $0.12, respectively. |
(3) | Net investment income (loss) per share has been calculated based on average shares outstanding during the period. |
(4) | Net investment loss per share is calculated using ending balance after consideration of adjustments for permanent book and tax differences. |
(5) | Amount less than $0.005 per share. |
(6) | Not annualized. |
(7) | Annualized. |
(8) | The numerator for the portfolio turnover rate includes the lesser of purchases or sales (excluding short positions). The denominator includes the average long positions throughout the period. |
* | Stub period from October 1, 2011 through December 31, 2011. |
The accompanying notes are an integral part of these financial statements.
50
WCM Alternatives: Event-Driven Fund
FINANCIAL HIGHLIGHTS
Selected per share data is based on a share of beneficial interest outstanding throughout each period.
Institutional Class
For the Period from | ||||||||
Six Months | January 2, 2014^ | |||||||
Ended | through | |||||||
June 30, 2015 | December 31, 2014 | |||||||
(Unaudited) | ||||||||
Per Share Data: | ||||||||
Net Asset Value, beginning of period | $ | 10.14 | $ | 10.00 | ||||
Income from investment operations: | ||||||||
Net investment income (loss)(1)(2) | (0.03 | ) | 0.05 | |||||
Net realized and unrealized gain on investments | 0.11 | 0.34 | ||||||
Total from investment operations | 0.08 | 0.39 | ||||||
Less distributions: | ||||||||
Distributions from net realized gains | — | (0.25 | ) | |||||
Total dividends and distributions | — | (0.25 | ) | |||||
Net Asset Value, end of period | $ | 10.22 | $ | 10.14 | ||||
Total Return | 0.79 | %(3) | 3.87 | %(3) | ||||
Supplemental data and ratios: | ||||||||
Net assets, end of period (000’s) | $ | 71,840 | $ | 12,085 | ||||
Ratio of gross expenses to average net assets: | ||||||||
Before expense waiver | 2.70 | %(4) | 7.95 | %(4) | ||||
After expense waiver | 2.07 | %(4) | 2.39 | %(4) | ||||
Ratio of dividends and borrowing expense | ||||||||
on securities sold short to average net assets | 0.33 | %(4) | 0.65 | %(4) | ||||
Ratio of operating expenses to average net assets | ||||||||
excluding dividends and borrowing expense on | ||||||||
securities sold short | 1.74 | %(4) | 1.74 | %(4) | ||||
Ratio of net investment income (loss) | ||||||||
to average net assets: | ||||||||
Before expense waiver | (1.24 | )%(4) | (5.04 | )%(4) | ||||
After expense waiver | (0.61 | )%(4) | 0.52 | %(4) | ||||
Portfolio turnover rate(5) | 68 | %(3) | 212 | %(3) |
(1) | Net investment income before dividends and borrowing expense on securities sold short for the six months ended June 30, 2015 and the year ended December 31, 2014 was $(0.01) and $0.12, respectively. |
(2) | Net investment income (loss) per share has been calculated based on average shares outstanding during the period. |
(3) | Not annualized. |
(4) | Annualized. |
(5) | The numerator for the portfolio turnover rate includes the lesser of purchases or sales (excluding short positions). The denominator includes the average long positions throughout the period. |
The accompanying notes are an integral part of these financial statements.
51
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2015 (Unaudited)
Note 1 — ORGANIZATION
The Merger Fund (“TMF”) is a no-load, open-end, diversified investment company organized as a trust under the laws of the Commonwealth of Massachusetts on April 12, 1982, and registered under the Investment Company Act of 1940, as amended (the “1940 Act”). TMF was formerly known as the Risk Portfolio of The Ayco Fund. In January of 1989, TMF’s fundamental investment policies were amended to permit TMF to engage in merger arbitrage. At the same time, Westchester Capital Management, Inc. became TMF’s investment adviser, and TMF began to do business as The Merger Fund. In a transaction that closed on December 31, 2010, Westchester Capital Management, Inc. transferred substantially all of its business and assets to Westchester Capital Management, LLC (the “Adviser”), which became TMF’s investment adviser. Therefore, the performance information included herein for periods prior to 2011 reflects the performance of Westchester Capital Management, Inc. Roy Behren and Michael Shannon, TMF’s current portfolio managers, have served as co-portfolio managers of TMF since January 2007. The Investor Class inception date was January 31, 1989, and the Institutional Class inception date was August 1, 2013. The investment objective of TMF is to seek to achieve capital growth by engaging in merger arbitrage. Merger arbitrage is a highly specialized investment approach generally designed to profit from the successful completion of publicly announced mergers, takeovers, tender offers, leveraged buyouts, spin-offs, liquidations and other corporate reorganizations.
Westchester Capital Funds (“WCF”) is an open-end series management investment company organized under the laws of the Commonwealth of Massachusetts on March 20, 2013, and registered under the 1940 Act. WCM Alternatives: Event-Driven Fund (“EDF”), a series of WCF, is a no-load, open-end, non-diversified investment company with two classes of shares, Investor Class shares and Institutional Class shares. The Institutional Class inception date was January 2, 2014. Investor Class shares have not yet commenced operations. The investment objective of EDF is to seek to provide attractive risk-adjusted returns with low relative volatility in virtually all market environments. Risk-adjusted return is a concept that considers not only an investment’s return, but also the amount of potential risk involved in producing that return.
Each class of shares of TMF and EDF (each a “Fund” and together, the “Funds”) has different eligibility and minimum investment requirements. The underlying assets attributable to a class of a Fund are charged with the expenses attributable to that class of the Fund and with a share of the general expenses of the Fund. Any general expenses of a Fund that are
52
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 1 — ORGANIZATION (continued)
not readily identifiable as belonging to a particular class of the Fund are allocated by or under the direction of the Boards of Trustees of the Funds (the “Board of Trustees” or “Trustees”) in such manner as the Trustees determine. Shares of classes may have different voting rights, such as (i) when required by the 1940 Act, or (ii) when the Trustees determine that such a matter affects only the interests of a particular class. Shares have no preemptive or subscription rights. The Institutional Class shares do not have a distribution fee. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments of a Fund are allocated to each class of a Fund based on its relative net assets.
Note 2 — SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. These policies are in conformity with U.S. generally accepted accounting principles (“GAAP”). The Funds are investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 – Investment Companies. The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.
A. | Investment Valuation |
The following is a summary of the Funds’ pricing procedures. It is intended to be a general discussion and may not necessarily reflect all pricing procedures followed by the Funds.
Equity securities that trade on an exchange will typically be valued based on the last reported sale price. Securities listed on NASDAQ are typically valued using the NASDAQ Official Closing Price. The securities valued using quoted prices in active markets are classified as Level 1 investments. If, on a particular day, an exchange-listed security does not trade, then the mean between the closing bid and asked prices will typically be used to value the security. These securities are classified as Level 2 investments. Fixed income securities having a maturity of greater than 60 days are typically valued based on evaluations provided by a pricing vendor approved by the Board. These are classified as Level 2 investments.
53
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
Exchange-traded options are typically valued at the higher of the intrinsic value of the option (i.e., what a Fund would pay or can receive upon the option being exercised) or the last reported composite sale price when such sale falls between the bid and asked prices. When the last sale of an exchange-traded option is outside the bid and asked prices, a Fund will typically value the option at the higher of intrinsic value of the option or the mean between the last reported bid and asked prices. Options for which there is an active market are classified as Level 1 investments, but options not listed on an exchange are classified as Level 2 investments. Investments in United States government securities (other than short-term securities) are valued at the mean between the 4:00 PM bid and asked prices supplied by a third party vendor. Investments in registered open-end investment companies are typically valued at their reported NAV per share. Short-term fixed-income securities having a maturity of less than 60 days are valued at market quotations or based on valuations supplied by a third party pricing service. If a reliable price from a third party pricing service is unavailable, amortized cost may be used if it is determined that the instrument’s amortized cost value represents approximately the fair value of the security. Forward currency contracts are valued daily at the prevailing forward exchange rate. These securities are generally classified as Level 2. Total return swap prices are determined using the same methods as would be used to price the underlying security. These securities are generally classified as Level 2.
The Funds typically fair value securities and assets for which (a) market quotations are not readily available or (b) market quotations are believed to be unrepresentative of market value. For example, a Fund may fair value a security that primarily trades on an exchange that closes before the NYSE if a significant event occurs after the close of the exchange on which the security primarily trades but before the NYSE closes. Fair valuations are determined in good faith by the Valuation Group (the “Valuation Group”), a committee comprised of persons who are officers of the Fund or representatives of the Adviser, acting pursuant to procedures adopted by the Board. When fair-value pricing is employed, the prices of securities used by the Funds to calculate their NAV may differ from quoted or published prices for the same securities. In addition, due to the subjective nature of fair-value pricing, it is possible that the value determined for a particular asset may be materially different from the value realized upon such asset’s sale. These securities are generally classified as Level 2 or 3 depending on the inputs as described below. At June 30, 2015, securities fair valued in good faith based on the absolute
54
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
value of long and short investments, written option contracts, and unrealized appreciation of swap contracts represented 0.35% of net assets for TMF and 0.42% of net assets for EDF.
The Funds have performed analyses of all existing investments to determine the significance and character of all inputs to their fair value determination. Various inputs are used in determining the value of the Funds’ investments. These inputs are summarized in the three broad levels listed below:
Level 1 — | Quoted prices in active markets for identical securities. | |
Level 2 — | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). | |
Level 3 — | Significant unobservable inputs are those inputs that reflect the applicable Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information. |
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following tables provide the fair value measurements of applicable Fund assets and liabilities by level within the fair value hierarchy for the Fund as of June 30, 2015. These assets and liabilities are measured on a recurring basis.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
The Merger Fund | ||||||||||||||||
Assets | ||||||||||||||||
Common Stocks* | $ | 4,733,481,492 | $ | — | $ | — | $ | 4,733,481,492 | ||||||||
Contingent Value Rights | — | — | 1,220,093 | 1,220,093 | ||||||||||||
Corporate Bonds | — | 101,331,948 | — | 101,331,948 | ||||||||||||
Purchased Option Contracts | 54,064,655 | 1,539,393 | — | 55,604,048 | ||||||||||||
Escrow Notes | — | — | 1,709,683 | 1,709,683 | ||||||||||||
Short-Term Investments | 480,654,078 | — | — | 480,654,078 | ||||||||||||
Forward Currency | ||||||||||||||||
Exchange Contracts** | — | 753,951 | — | 753,951 | ||||||||||||
Swap Contracts** | — | 16,039,223 | — | 16,039,223 | ||||||||||||
Liabilities | ||||||||||||||||
Common Stocks Sold Short | $ | 610,476,827 | $ | 13,523,638 | $ | — | $ | 624,000,465 | ||||||||
Written Option Contracts | 129,441,119 | 2,874,204 | — | 132,315,323 | ||||||||||||
Forward Currency | ||||||||||||||||
Exchange Contracts** | — | 9,160,717 | — | 9,160,717 |
55
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
WCM Alternatives: Event-Driven Fund | ||||||||||||||||
Assets | ||||||||||||||||
Common Stocks* | $ | 60,551,579 | $ | — | $ | — | $ | 60,551,579 | ||||||||
Closed-End Funds | 828,037 | — | — | 828,037 | ||||||||||||
Preferred Stocks | 1,198,110 | — | — | 1,198,110 | ||||||||||||
Contingent Value Rights | — | — | 2,802 | 2,802 | ||||||||||||
Bank Loans | — | 41,033 | — | 41,033 | ||||||||||||
Corporate Bonds | — | 1,822,748 | — | 1,822,748 | ||||||||||||
Purchased Option Contracts | 864,697 | 13,570 | — | 878,267 | ||||||||||||
Short-Term Investments | 4,592,728 | — | — | 4,592,728 | ||||||||||||
Forward Currency Exchange Contracts** | — | 12,968 | — | 12,968 | ||||||||||||
Swap Contracts** | — | 225,275 | — | 225,275 | ||||||||||||
Liabilities | ||||||||||||||||
Common Stocks Sold Short | $ | 5,101,383 | $ | 256,957 | $ | — | $ | 5,358,340 | ||||||||
Written Option Contracts | 2,118,196 | 54,773 | — | 2,172,969 | ||||||||||||
Forward Currency | ||||||||||||||||
Exchange Contracts** | — | 77,662 | — | 77,662 |
* | Please refer to the Schedules of Investments to view common stocks segregated by industry type. |
** | Swap contracts and forward currency exchange contracts are valued at the net unrealized appreciation (depreciation) on the instrument. |
The Level 2 securities are priced using inputs such as current yields, discount rates, credit quality, yields on comparable securities, trading volume, maturity date, market bid and ask prices, prices on comparable securities and other significant inputs. Level 3 securities are valued by broker quotes. At June 30, 2015, the values of the broker quoted securities held by TMF and EDF were approximately $2,929,776 and $2,802, respectively. The inputs for those securities are not readily available or cannot be reasonably estimated and are generally those inputs as described in Note 2A. Investment Valuation. The appropriateness of fair values for these securities is monitored on an ongoing basis by the Valuation Group.
The Funds did not have transfers into or out of Level 1, 2 or 3 securities during the period. Transfers are recorded at the end of the reporting period.
Level 3 Reconciliation Disclosure
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
The Merger Fund
Description | Investments | |||
Balance as of December 31, 2014 | $ | 2,822,876 | ||
Change in unrealized appreciation | 106,900 | |||
Balance as of June 30, 2015 | $ | 2,929,776 |
56
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
WCM Alternatives: Event-Driven Fund
Description | Investments | |||
Balance as of December 31, 2014 | $ | — | ||
Change in unrealized appreciation | 2,802 | |||
Balance as of June 30, 2015 | $ | 2,802 |
The realized and unrealized gains and losses from Level 3 transactions are included with the net realized gain (loss) on investments and net change in unrealized appreciation (depreciation) on investments on the Statements of Operations. The net change in unrealized appreciation (depreciation) on investments related to Level 3 securities held by TMF and EDF at June 30, 2015 totals $106,900 and $2,802, respectively.
B. | Securities Sold Short |
The Funds sell securities or currencies short for economic hedging purposes or any other investment purpose. For financial statement purposes, an amount equal to the settlement amount is initially included in the Statement of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently priced to reflect the current value of the short position. Subsequent fluctuations in the market prices of securities or currencies sold, but not yet purchased, may require purchasing the securities or currencies at prices which may differ from the market value reflected on the Statement of Assets and Liabilities. Short sale transactions result in off balance sheet risk because the ultimate obligation may exceed the related amounts shown in the Statement of Assets and Liabilities. The Funds will incur losses if the price of the security increases between the date of the short sale and the date on which the Funds purchase the securities to replace the borrowed securities. The Funds’ losses on short sales are potentially unlimited because there is no upward limit on the price a borrowed security could attain.
The Funds are liable for any dividends payable on securities while those securities are sold short. Until the security is replaced, the Funds are required to pay to the lender any income earned, which is recorded as an expense by the Funds. The Funds segregate liquid assets in an amount equal to the market value of securities sold short, which is reflected in the Schedules of Investments. These assets are required to be adjusted daily to reflect changes in the value of the securities or currencies sold short.
C. | Transactions with Brokers |
The Funds’ receivables from brokers for proceeds on securities sold short and deposits at brokers for securities sold short are with two securities dealers. The Funds do not require the brokers to maintain
57
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
collateral in support of the receivable from the brokers for proceeds on securities sold short. The Funds are required by the brokers to maintain collateral at the brokers for securities sold short. The receivable from brokers on the Statement of Assets and Liabilities represents the collateral for securities sold short. The Funds maintain cash deposits at brokers beyond the receivable for short sales.
The Funds’ equity swap contracts’ and forward currency exchange contracts’ cash deposits are monitored daily by the Adviser and counterparty. Cash deposits by the Funds are presented as deposits at brokers on the Statements of Assets and Liabilities. These transactions may involve market risk in excess of the amount of receivable or payable reflected on the Statements of Assets and Liabilities.
D. | Federal Income Taxes |
No provision for federal income taxes has been made since the Funds have complied to date with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and intends to continue to so comply in future years and to distribute investment company net taxable income and net capital gains to shareholders. Additionally, the Funds intend to make all required distributions to avoid federal excise tax.
The Funds have reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Funds’ net assets and there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on a tax return. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. As of June 30, 2015, TMF’s open Federal and New York tax years include the tax years ended December 31, 2011 through December 31, 2014. The Funds have no tax examination in progress.
E. | Written Option Contracts |
The Funds are subject to equity price risk in the normal course of pursuing their investment objectives. The Funds write (sell) call options, including to hedge portfolio investments. Uncovered put options can also be written by the Funds as part of a merger arbitrage strategy involving a pending corporate reorganization or for other investment purposes. When a Fund writes (sells) an option, an amount equal to the premium received by the Fund is included in the Statement of Assets and Liabilities as an asset and an equivalent liability. The amount of the liability is subsequently
58
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
priced daily to reflect the current value of the option written. Refer to Note 2 A. for a pricing description. By writing an option, a Fund may become obligated during the term of the option to deliver or purchase the securities underlying the option at the exercise price if the option is exercised. When an option expires on its stipulated expiration date or the Funds enter into a closing purchase transaction, the Funds realize gains or losses if the cost of the closing purchase transaction differs from the premium received when the option was sold without regard to any unrealized appreciation or depreciation on the underlying security, and the liability related to such option is eliminated. When an option is exercised, the premium originally received decreases the cost basis of the security (or increases the proceeds on a sale of the security), and the Funds realize gains or losses from the sale of the underlying security. Written option contracts sold on an exchange typically involve less credit risk than over-the-counter options. These contracts may involve market risk in excess of the amount of receivable or payable reflected on the Statement of Assets and Liabilities. Refer to Note 2 Q. for further derivative disclosures.
F. | Purchased Option Contracts |
The Funds are subject to equity price risk in the normal course of pursuing their investment objectives. The Funds purchase put or call options for hedging purposes, volatility management purposes, or otherwise to gain, or reduce, long or short exposure to one or more asset classes or issuers. When the Funds purchase an option contract, an amount equal to the premiums paid is included in the Statements of Assets and Liabilities as an investment, and is subsequently priced daily to reflect the value of the purchased option. Refer to Note 2 A. for a pricing description. When option contracts expire or are closed, realized gains or losses are recognized without regard to any unrealized appreciation or depreciation on the underlying securities that may be held by the Funds. Purchased options sold on an exchange typically include less credit risk than over-the-counter options. Refer to Note 2 Q. for further derivative disclosures.
G. | Forward Currency Exchange Contracts |
The Funds are subject to foreign currency exchange rate risk in the normal course of pursuing their investment objectives. The Funds may use forward currency exchange contracts to hedge against changes in the value of foreign currencies. The Funds may enter into forward currency exchange contracts obligating the Funds to deliver and receive a currency at a specified future date. Forward contracts are valued daily, and unrealized appreciation or depreciation is recorded daily as the difference between the contract exchange rate and the closing forward rate applied
59
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
to the face amount of the contract. A realized gain or loss is recorded at the time the forward contract expires. Credit risk may arise as a result of the failure of the counterparty to comply with the terms of the contract. Refer to Note 2 O. for further counterparty risk disclosure.
The use of forward currency exchange contracts does not eliminate fluctuations in the underlying prices of the Funds’ investment securities. The use of forward currency exchange contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward currency exchange contract would limit the risk of loss due to a decline in the value of a particular currency; however it would also limit any potential gain that might result should the value of the currency increase instead of decrease. These contracts may involve market risk in excess of the amounts receivable or payable reflected on the Statement of Assets and Liabilities. Refer to Note 2 Q. for further derivative disclosures.
H. | Equity Swap Contracts |
The Funds are subject to equity price risk and interest rate risk in the normal course of pursuing their investment objectives. The Funds may enter into both long and short equity swap contracts with multiple broker-dealers. A long equity swap contract entitles the Funds to receive from the counterparty any appreciation and dividends paid on an individual security, while obligating the Funds to pay the counterparty any depreciation on the security as well as interest on the notional amount of the contract at a rate equal to LIBOR plus an agreed upon spread (generally between 25 to 100 basis points). A short equity swap contract obligates the Funds to pay the counterparty any appreciation and dividends paid on an individual security, while entitling the Funds to receive from the counterparty any depreciation on the security, and to pay to or receive from the counterparty interest on the notional value of the contract at a rate equal to LIBOR less an agreed upon spread (generally between 25 to 100 basis points).
The Funds may also enter into equity swap contracts whose value may be determined by the spread between a long equity position and a short equity position. This type of swap contract obligates the Funds to pay the counterparty an amount tied to any increase in the spread between the two securities over the term of the contract. The Funds are also obligated to pay the counterparty any dividends paid on the short equity holding as well as any net financing costs. This type of swap contract entitles the Funds to receive from the counterparty any gains based on a decrease in the spread as well as any dividends paid on the long equity holding and any net interest income.
60
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
Fluctuations in the value of an open contract are recorded daily as net unrealized appreciation or depreciation. The Funds will realize gains or losses upon termination or reset of the contract. Either party, under certain conditions, may terminate the contract prior to the contract’s expiration date. Equity swap contracts are typically valued based on market quotations or pricing service evaluations for the underlying reference asset. The Valuation Group monitors the credit quality of the Funds’ counterparties and may adjust the valuation of a swap in the Valuation Group’s discretion due to, among other things, changes in a counterparty’s credit quality.
Credit risk may arise as a result of the failure of the counterparty to comply with the terms of the contract. Refer to Note 2 O. for further counterparty risk disclosure. Additionally, risk may arise from unanticipated movements in interest rates or in the value of the underlying securities. These contracts may involve market risk in excess of the amount of receivable or payable reflected on the Statement of Assets and Liabilities. Refer to Note 2 Q. for further derivative disclosures.
I. | Distributions to Shareholders |
Dividends from net investment income and net realized capital gains, if any, are declared and paid at least annually. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from GAAP. These differences are due primarily to wash sale-loss deferrals, constructive sales, straddle-loss deferrals, adjustments on swap contracts, and unrealized gains or losses on Section 1256 contracts, which were realized, for tax purposes, at the end of the Fund’s fiscal year.
J. | Foreign Securities |
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. government. These risks include fluctuations in currency exchange rates and adverse political, cultural, regulatory, legal, tax, and economic developments as well as different custody and/or settlement practices or delayed settlements in some foreign markets. Moreover, securities of many foreign companies and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government.
K. | Foreign Currency Translations |
The books and records of the Funds are maintained in U.S. dollars. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and
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The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. For financial reporting purposes, the Funds do not isolate changes in the exchange rate of investment securities from the fluctuations arising from changes in the market prices of securities. However, for federal income tax purposes, the Funds do isolate and treat as ordinary income the effect of changes in foreign exchange rates on realized gain or loss from the sale of investment securities and payables and receivables arising from trade-date and settlement-date differences. Foreign currency held as cash by the Funds’ custodian is reported separately on the Statements of Assets and Liabilities and on the Statements of Operations.
L. | Cash and Cash Equivalents |
The Funds consider highly liquid short-term fixed income investments purchased with an original maturity of less than three months to be cash equivalents. Cash equivalents are included in short-term investments on the Schedule of Investments as well as in investments on the Statement of Assets and Liabilities. Temporary cash overdrafts are reported as payable to custodian.
M. | Guarantees and Indemnifications |
In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. The Funds have not historically incurred material expenses in respect of those provisions.
N. | Security Transactions, Investment Income and Expenses |
Transactions are recorded for financial statement purposes on the trade date. Realized gains and losses from security transactions are recorded on the identified cost basis. Distributions to shareholders are recorded on the ex-dividend date. Dividend income is recorded on the ex-dividend date, except for certain dividends on foreign securities, which are recorded as soon as the Fund is informed after the ex-dividend date. Interest is accounted for on the accrual basis and includes amortization of premiums and discounts on the effective interest method. Expenses include $1,455,370 and $10,879 of borrowing expense on securities sold short for TMF and EDF, respectively.
62
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
O. | Counterparty Risk |
The Funds help manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations. The Adviser considers the creditworthiness of each counterparty to a contract in evaluating potential credit risk. The counterparty risk for forward currency exchange contracts to the Funds includes the amount of any net unrealized appreciation on the contract. The counterparty risk for equity swaps contracts to the Funds includes the risk of loss of the full amount of any net unrealized appreciation on the contract, along with dividends receivable on long equity contracts and interest receivable on short equity contracts.
P. | The Right to Offset |
Financial assets and liabilities as well as cash collateral received by the Funds’ counterparties and posted are offset by the counterparty, and the net amount is reported in the Statement of Assets and Liabilities when the Funds believe there exists a legally enforceable right to offset the recognized amounts.
Q. | Derivatives |
The Funds may utilize derivative instruments such as options, swaps, futures, forward contracts and other instruments with similar characteristics to the extent that they are consistent with the Funds’ investment objective and limitations. The use of these instruments may involve additional investment risks, including the possibility of illiquid markets or imperfect correlation between the value of the instruments and the underlying securities. Derivatives also may create leverage which will amplify the effect of their performance on the Funds and may produce significant losses.
The Funds have adopted authoritative standards regarding disclosure about derivatives and hedging activities and how they affect the Funds’ Statement of Assets and Liabilities and Statement of Operations. With respect to TMF, for the six months ended June 30, 2015: long option contracts (1,073,865 contracts) were purchased and $126,048,449 in premiums were paid, written option contracts (1,882,284 contracts) were opened and $413,859,543 in premiums were received, equity swap contracts were opened with a notional value of $638,344,046 and closed with a notional value of $821,223,517 and an average of 12 forward currency exchange contract positions were open. With respect to EDF, for the six months ended June 30, 2015: long option contracts (12,017 contracts) were purchased and $1,093,614 in premiums were paid, written
63
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
option contracts (19,154 contracts) were opened and $4,446,447 in premiums were received, equity swap contracts were opened with a notional value of $30,938,787 and closed with a notional value of $17,018,664 and an average of 12 forward currency exchange contract positions were open.
Statement of Assets and Liabilities
Fair values of derivative instruments as of June 30, 2015:
Asset Derivatives | |||||
Statement of Assets | |||||
Derivatives | and Liabilities Location | Fair Value | |||
The Merger Fund | |||||
Equity Contracts: | |||||
Purchased Option Contracts | Investments | $ | 55,604,048 | ||
Swap Contracts | Receivables | 16,039,223 | |||
Foreign Exchange Contracts: | |||||
Forward Currency Exchange Contracts | Receivables | 753,951 | |||
Total | $ | 72,397,222 | |||
WCM Alternatives: Event-Driven Fund | |||||
Equity Contracts: | |||||
Purchased Option Contracts | Investments | $ | 878,267 | ||
Swap Contracts | Receivables | 225,275 | |||
Foreign Exchange Contracts: | |||||
Forward Currency Exchange Contracts | Receivables | 12,968 | |||
Total | $ | 1,116,510 | |||
Liability Derivatives | |||||
Statement of Assets | |||||
Derivatives | and Liabilities Location | Fair Value | |||
The Merger Fund | |||||
Equity Contracts: | |||||
Written Option Contracts | Written Option Contracts | $ | 132,315,323 | ||
Foreign Exchange Contracts: | |||||
Forward Currency Exchange Contracts | Payables | 9,160,717 | |||
Total | $ | 141,476,040 | |||
WCM Alternatives: Event-Driven Fund | |||||
Equity Contracts: | |||||
Written Option Contracts | Written Option Contracts | $ | 2,172,969 | ||
Foreign Exchange Contracts: | |||||
Forward Currency Exchange Contracts | Payables | 77,662 | |||
Total | $ | 2,250,631 |
64
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)
Statement of Operations
The effect of derivative instruments on the Statement of Operations for the six month period ended June 30, 2015:
Amount of Realized Gain (Loss) on Derivatives
Forward | ||||||||||||||||||||
Purchased | Written | Currency | ||||||||||||||||||
Option | Option | Exchange | Swap | |||||||||||||||||
Derivatives | Contracts | Contracts | Contracts | Contracts | Total | |||||||||||||||
The Merger Fund | ||||||||||||||||||||
Equity Contracts | $ | (92,730,307 | ) | $ | 38,108,162 | $ | — | $ | (46,601,064 | ) | $ | (101,223,209 | ) | |||||||
Foreign Exchange | ||||||||||||||||||||
Contracts | — | — | 52,282,354 | — | 52,282,354 | |||||||||||||||
Total | $ | (92,730,307 | ) | $ | 38,108,162 | $ | 52,282,354 | $ | (46,610,064 | ) | $ | (48,940,855 | ) | |||||||
WCM Alternatives: | ||||||||||||||||||||
Event-Driven Fund | ||||||||||||||||||||
Equity Contracts | $ | (361,568 | ) | $ | 84,869 | $ | — | $ | 30,675 | $ | (246,024 | ) | ||||||||
Foreign Exchange | ||||||||||||||||||||
Contracts | — | — | 125,152 | — | 125,152 | |||||||||||||||
Total | $ | (361,568 | ) | $ | 84,869 | $ | 125,152 | $ | 30,675 | $ | (120,872 | ) |
Change in Unrealized Appreciation (Depreciation) on Derivatives
Forward | ||||||||||||||||||||
Purchased | Written | Currency | ||||||||||||||||||
Option | Option | Exchange | Swap | |||||||||||||||||
Derivatives | Contracts | Contracts | Contracts | Contracts | Total | |||||||||||||||
The Merger Fund | ||||||||||||||||||||
Equity Contracts | $ | 30,483,159 | $ | 38,743,194 | $ | — | $ | 24,348,398 | $ | 93,574,751 | ||||||||||
Foreign Exchange | ||||||||||||||||||||
Contracts | — | — | (23,912,242 | ) | — | (23,912,242 | ) | |||||||||||||
Total | $ | 30,483,159 | $ | 38,743,194 | $ | (23,912,242 | ) | $ | 24,348,398 | $ | 69,662,509 | |||||||||
WCM Alternatives: | ||||||||||||||||||||
Event-Driven Fund | ||||||||||||||||||||
Equity Contracts | $ | 227,639 | $ | 562,770 | $ | — | $ | 419,421 | $ | 1,209,830 | ||||||||||
Foreign Exchange | ||||||||||||||||||||
Contracts | — | — | (106,563 | ) | — | (106,563 | ) | |||||||||||||
Total | $ | 227,639 | $ | 562,770 | $ | (106,563 | ) | $ | 419,421 | $ | 1,103,267 |
Note 3 — AGREEMENTS
The Funds’ investment adviser is Westchester Capital Management, LLC pursuant to an investment advisory agreement between TMF and the Adviser dated as of January 1, 2011 (the “TMF Advisory Agreement”) and pursuant to an investment advisory agreement between WCF, with respect to EDF, and the Adviser dated as of July 30, 2013 (the “EDF
65
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 3 — AGREEMENTS (continued)
Advisory Agreement” and together with the TMF Advisory Agreement, the “Advisory Agreements”).
Under the terms of the TMF Advisory Agreement, the Adviser is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 1.00% of TMF’s average daily net assets. The Adviser has agreed until April 30, 2016 to reduce its advisory fee so that the advisory fee will be: (i) 1.0% on an annualized basis of the average daily net assets of TMF on net assets below $1.5 billion; (ii) 0.9% on an annualized basis of the average daily net assets of TMF on net assets between $1.5 billion and $2.0 billion; (iii) 0.8% on an annualized basis of the average daily net assets of TMF on net assets between $2.0 billion and $5.0 billion and (iv) 0.75% on an annualized basis of the average daily net assets of TMF on net assets over $5.0 billion (the “TMF Fee Waiver Agreement”). Investment advisory fees waived by the Adviser on behalf of TMF for the six months ended June 30, 2015 were $3,601,021.
Under the terms of the EDF Advisory Agreement, the Adviser is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 1.25% of EDF’s average daily net assets. The Adviser has contractually agreed until April 30, 2016 to waive its investment advisory fee and to reimburse EDF for other ordinary operating expenses to the extent necessary to limit ordinary operating expenses to an amount not to exceed 1.74% for Institutional Class shares and 1.99% for Investor Class shares (the “EDF Expense Limitation Agreement”). Ordinary operating expenses exclude taxes, commissions, mark-ups, litigation expenses, indemnification expenses, interest expenses, borrowing expenses, including on securities sold short, dividend expenses on securities sold short, trading or investment expenses, acquired fund fees and expenses, and any extraordinary expenses. To the extent that the Adviser waives its investment advisory fee for EDF and/or reimburses EDF for other ordinary operating expenses, it may seek reimbursement of a portion or all of such amounts at any time within three fiscal years after the fiscal year in which such amounts were waived or reimbursed, subject to the expense limitation in place at the time such amounts were waived or reimbursed. For the six months ended June 30, 2015, the Adviser waived $100,879 of advisory fees to EDF.
Investment advisory fees waived and expenses reimbursed on behalf of EDF that are subject to potential recovery by the Adviser are shown in the following table by year of expiration.
66
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 3 — AGREEMENTS (continued)
Year of Expiration | Potential Recovery |
12/31/2017 | $(451,849) |
12/31/2018 | $(100,879) |
Each of the TMF Fee Waiver Agreement and the EDF Expense Limitation Agreement may be terminated at any time by such Fund’s Board of Trustees. Certain officers of the Funds are also officers of the Adviser. Each Advisory Agreement was approved for an initial term of two years and thereafter will remain in effect from year to year provided that such continuance is specifically approved at least annually by the vote of a majority of the relevant Fund’s Trustees who are not interested persons of the Adviser or such Fund or by a vote of a majority of the outstanding voting securities of such Fund.
U.S. Bancorp Fund Services, LLC, a subsidiary of U.S. Bancorp, a publicly held bank holding company, serves as transfer agent, administrator, accountant, dividend paying agent and shareholder servicing agent for the Funds. U.S. Bank, N.A. serves as custodian for the Funds.
Distribution services are performed pursuant to distribution contracts with broker-dealers and other qualified institutions.
Note 4 — SHARES OF BENEFICIAL INTEREST
The Board of Trustees of each Fund has the authority to issue an unlimited amount of shares of beneficial interest without par value.
Changes in shares of beneficial interest were as follows:
Six Months Ended | Year Ended | |||||||||||||||
The Merger Fund | June 30, 2015 | December 31, 2014 | ||||||||||||||
Investor Class | Shares | Amount | Shares | Amount | ||||||||||||
Issued | 36,694,983 | $ | 580,227,808 | 112,329,963 | $ | 1,820,604,986 | ||||||||||
Issued as reinvestment | ||||||||||||||||
of dividends | — | — | 9,346,043 | 146,265,568 | ||||||||||||
Redeemed | (45,473,862 | ) | (718,402,262 | ) | (163,799,886 | ) | (2,672,660,067 | ) | ||||||||
Net decrease | (8,778,879 | ) | $ | (138,174,454 | ) | (42,123,880 | ) | $ | (705,789,513 | ) | ||||||
Six Months Ended | Year Ended | |||||||||||||||
June 30, 2015 | December 31, 2014 | |||||||||||||||
Institutional Class | Shares | Amount | Shares | Amount | ||||||||||||
Issued | 14,927,800 | $ | 235,491,347 | 80,724,530 | $ | 1,327,392,190 | ||||||||||
Issued as reinvestment | ||||||||||||||||
of dividends | — | — | 1,555,895 | 18,031,956 | ||||||||||||
Redeemed | (19,975,352 | ) | (314,338,958 | ) | (7,149,741 | ) | (115,244,371 | ) | ||||||||
Net increase (decrease) | (5,047,552 | ) | $ | (78,847,611 | ) | 74,730,684 | $ | 1,230,179,775 |
67
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 4 — SHARES OF BENEFICIAL INTEREST (continued)
Six Months Ended | Period Ended | |||||||||||||||
Event-Driven Fund | June 30, 2015 | December 31, 2014 | ||||||||||||||
Institutional Class | Shares | Amount | Shares | Amount | ||||||||||||
Issued | 6,004,700 | $ | 62,231,615 | 1,300,522 | $ | 13,282,670 | ||||||||||
Issued as reinvestment | ||||||||||||||||
of dividends | — | — | 28,980 | 294,148 | ||||||||||||
Redeemed | (166,408 | ) | (1,712,752 | ) | (137,641 | ) | (1,411,547 | ) | ||||||||
Net increase | 5,838,292 | $ | 60,518,863 | 1,191,861 | $ | 12,165,271 |
Note 5 — INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
TMF’s purchases and sales of securities for the six months ended June 30, 2015 (excluding short-term investments, short-term options, forward currency contracts, swap contracts and short positions) in the aggregate were $3,808,022,629 and $2,850,322,013, respectively. EDF’s purchases and sales of securities for the six months ended June 30, 2015 (excluding short-term investments, short-term options, forward currency contracts, swap contracts and short positions) in the aggregate were $78,502,134 and $18,195,580, respectively. There were no purchases or sales of U.S. Government securities for the Funds.
At December 31, 2014, the components of accumulated earnings (losses) on a tax basis were as follows:
WCM Alternatives: | ||||||||
The Merger Fund | Event-Driven Fund | |||||||
Cost of investments | $ | 5,149,994,627 | $ | 10,666,453 | ||||
Gross unrealized appreciation | 461,516,467 | 371,966 | ||||||
Gross unrealized depreciation | (358,343,293 | ) | (415,389 | ) | ||||
Net unrealized appreciation (depreciation) | $ | 103,173,174 | $ | (43,423 | ) | |||
Undistributed ordinary income | — | 245,569 | ||||||
Undistributed long-term capital gain | — | — | ||||||
Total distributable earnings | $ | — | $ | 245,569 | ||||
Other accumulated losses | (236,651,007 | ) | (314,044 | ) | ||||
Total accumulated losses | $ | (133,477,833 | ) | $ | (111,898 | ) |
68
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 5 — INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (continued)
The tax components of dividends paid during the six months ended June 30, 2015 and the fiscal year ended December 31, 2014 were as follows:
WCM Alternatives: | ||||||||||||||||
The Merger Fund | Event-Driven Fund | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Investor Class | ||||||||||||||||
Ordinary Income | $ | — | $ | 154,019,357 | N/A | N/A | ||||||||||
Long-Term Capital Gains | — | — | N/A | N/A | ||||||||||||
Total Distributions Paid | $ | — | $ | 154,019,357 | N/A | N/A | ||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Institutional Class | ||||||||||||||||
Ordinary Income | $ | — | $ | 56,140,981 | $ | — | $ | 294,148 | ||||||||
Long-Term Capital Gains | — | — | — | — | ||||||||||||
Total Distributions Paid | $ | — | $ | 56,140,981 | $ | — | $ | 294,148 |
TMF designated as long-term capital gain dividend, pursuant to Internal Revenue Case Section 852(b)(3), the amount necessary to reduce the earnings and profits of the Fund related to net capital gain to zero for the tax year ended December 31, 2014.
As of December 31, 2014, TMF and EDF did not have any post-October ordinary losses deferred, on a tax basis. As of December 31, 2014, TMF and EDF did not have post-October capital losses or a capital loss carryforwards.
Note 6 — WRITTEN OPTION CONTRACTS
The premium amount and the number of written option contracts during the six months ended June 30, 2015 were as follows:
WCM Alternatives: | ||||||||||||||||
The Merger Fund | Event-Driven Fund | |||||||||||||||
Number of | Premium | Number of | Premium | |||||||||||||
Contracts | Amount | Contracts | Amount | |||||||||||||
Options outstanding at December 31, 2014 | 691,075 | $ | 100,349,065 | 1,713 | $ | 249,755 | ||||||||||
Options written | 1,882,284 | 413,859,543 | 19,154 | 4,446,447 | ||||||||||||
Options closed | (1,336,977 | ) | (283,816,231 | ) | (7,470 | ) | (1,589,034 | ) | ||||||||
Options exercised | (345,626 | ) | (51,615,266 | ) | (1,518 | ) | (296,106 | ) | ||||||||
Options expired | (278,179 | ) | (17,753,367 | ) | (2,098 | ) | (105,264 | ) | ||||||||
Options outstanding at June 30, 2015 | 612,577 | $ | 161,023,744 | 9,781 | $ | 2,705,798 |
69
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 7 — DISTRIBUTION PLAN
TMF has adopted an Amended and Restated Plan of Distribution (the “TMF Plan”) dated July 30, 2013, pursuant to Rule 12b-1 under the 1940 Act that applies to TMF’s Investor Class shares. EDF has adopted a Plan of Distribution (the “EDF Plan” and together with the TMF Plan, the “Plans”) dated July 30, 2013, pursuant to Rule 12b-1 under the 1940 Act that applies to EDF’s Investor Class shares. Under each Plan, the respective Fund will compensate broker dealers or other qualified institutions with whom the Fund has entered into a contract to distribute the Fund’s Investor Class shares. Under each Plan, the amount of such compensation paid in any one year shall not exceed 0.25% annually of the average daily net assets attributable to the respective Fund’s Investor Class shares, which may be payable as a distribution fee or a service fee for providing permitted recordkeeping, subaccounting, subtransfer agency and/or shareholder liaison services. For the six months ended June 30, 2015, TMF incurred $4,586,364 pursuant to the TMF Plan in respect of TMF’s Investor Class shares. As of June 30, 2015, EDF had no outstanding Investor Class shares. Each Plan will remain in effect from year to year provided such continuance is approved at least annually by a vote either of a majority of the relevant Fund’s Trustees, including a majority of the non-interested Trustees, or a majority of the relevant Fund’s outstanding Investor Class shares.
Note 8 — OFFSETTING ASSETS AND LIABILITIES
Each Fund is subject to various Master Netting Arrangements, which govern the terms of certain transactions with select counterparties. The Master Netting Arrangements allow each Fund to close out and net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty. The Master Netting Arrangements also specify collateral posting arrangements at pre-arranged exposure levels. Under the Master Netting Arrangements, collateral is routinely transferred if the total net exposure to certain transactions (net of existing collateral already in place) governed under the relevant Master Netting Arrangement with a counterparty in a given account exceeds a specified threshold depending on the counterparty and the type of Master Netting Arrangement.
70
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 8 — OFFSETTING ASSETS AND LIABILITIES (continued)
The Merger Fund
Gross | Net | |||||||||||||||||||||||
Amounts | Amounts | |||||||||||||||||||||||
Offset | Presented | Gross Amounts not | ||||||||||||||||||||||
Gross | in the | in the | offset in the Statement | |||||||||||||||||||||
Amounts of | Statement | Statement | of Assets and Liabilities | |||||||||||||||||||||
Recognized | of Assets | of Assets | Collateral | |||||||||||||||||||||
Assets/ | and | and | Financial | Received/ | Net | |||||||||||||||||||
Liabilities | Liabilities | Liabilities | Instruments | Pledged | Amount | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Description | ||||||||||||||||||||||||
Forward | ||||||||||||||||||||||||
Currency | ||||||||||||||||||||||||
Exchange | ||||||||||||||||||||||||
Contracts | $ | 753,951 | $ | — | $ | 753,951 | $ | 753,951 | $ | — | $ | — | ||||||||||||
Swap | ||||||||||||||||||||||||
Contracts — | ||||||||||||||||||||||||
JPMorgan | ||||||||||||||||||||||||
Chase & | ||||||||||||||||||||||||
Co., Inc. | 28,800,418 | 13,324,908 | 15,475,510 | — | — | 15,475,510 | ||||||||||||||||||
Swap | ||||||||||||||||||||||||
Contracts — | ||||||||||||||||||||||||
Bank of America | ||||||||||||||||||||||||
Merrill Lynch | ||||||||||||||||||||||||
& Co. Inc. | 2,508,369 | 1,944,656 | 563,713 | — | — | 563,713 | ||||||||||||||||||
$ | 32,062,738 | $ | 15,269,564 | $ | 16,793,174 | $ | 753,951 | $ | — | $ | 16,039,223 |
71
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 8 — OFFSETTING ASSETS AND LIABILITIES (continued)
The Merger Fund
Gross | Net | |||||||||||||||||||||||
Amounts | Amounts | |||||||||||||||||||||||
Offset | Presented | Gross Amounts not | ||||||||||||||||||||||
Gross | in the | in the | offset in the Statement | |||||||||||||||||||||
Amounts of | Statement | Statement | of Assets and Liabilities | |||||||||||||||||||||
Recognized | of Assets | of Assets | Collateral | |||||||||||||||||||||
Assets/ | and | and | Financial | Received/ | Net | |||||||||||||||||||
Liabilities | Liabilities | Liabilities | Instruments | Pledged | Amount | |||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Description | ||||||||||||||||||||||||
Forward | ||||||||||||||||||||||||
Currency | ||||||||||||||||||||||||
Exchange | ||||||||||||||||||||||||
Contracts | $ | 9,160,717 | $ | — | $ | 9,160,717 | $ | 753,951 | $ | 8,406,766 | $ | — | ||||||||||||
Swap | ||||||||||||||||||||||||
Contracts — | ||||||||||||||||||||||||
JPMorgan | ||||||||||||||||||||||||
Chase & | ||||||||||||||||||||||||
Co., Inc. | 13,324,908 | 13,324,908 | — | — | — | — | ||||||||||||||||||
Swap | ||||||||||||||||||||||||
Contracts — | ||||||||||||||||||||||||
Bank of America | ||||||||||||||||||||||||
Merrill Lynch | ||||||||||||||||||||||||
& Co. Inc. | 1,944,656 | 1,944,656 | — | — | — | — | ||||||||||||||||||
Written | ||||||||||||||||||||||||
Option | ||||||||||||||||||||||||
Contracts | 132,315,323 | — | 132,315,323 | — | 132,315,323 | — | ||||||||||||||||||
$ | 156,745,604 | $ | 15,269,564 | $ | 141,476,040 | $ | 753,951 | $ | 140,722,089 | $ | — |
72
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 8 — OFFSETTING ASSETS AND LIABILITIES (continued)
WCM Alternatives: Event-Driven Fund
Gross | Net | |||||||||||||||||||||||
Amounts | Amounts | |||||||||||||||||||||||
Offset | Presented | Gross Amounts not | ||||||||||||||||||||||
Gross | in the | in the | offset in the Statement | |||||||||||||||||||||
Amounts of | Statement | Statement | of Assets and Liabilities | |||||||||||||||||||||
Recognized | of Assets | of Assets | Collateral | |||||||||||||||||||||
Assets/ | and | and | Financial | Received/ | Net | |||||||||||||||||||
Liabilities | Liabilities | Liabilities | Instruments | Pledged | Amount | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Description | ||||||||||||||||||||||||
Forward | ||||||||||||||||||||||||
Currency | ||||||||||||||||||||||||
Exchange | ||||||||||||||||||||||||
Contracts | $ | 12,968 | $ | — | $ | 12,968 | $ | 12,968 | $ | — | $ | — | ||||||||||||
Swap | ||||||||||||||||||||||||
Contracts — | ||||||||||||||||||||||||
JPMorgan | ||||||||||||||||||||||||
Chase & | ||||||||||||||||||||||||
Co., Inc. | 704,258 | 482,211 | 222,047 | — | — | 222,047 | ||||||||||||||||||
Swap | ||||||||||||||||||||||||
Contracts — | ||||||||||||||||||||||||
Bank of America | ||||||||||||||||||||||||
Merrill Lynch | ||||||||||||||||||||||||
& Co. Inc. | 56,860 | 53,632 | 3,228 | — | — | 3,228 | ||||||||||||||||||
$ | 774,086 | $ | 535,843 | $ | 238,243 | $ | 12,968 | $ | — | $ | 225,275 | |||||||||||||
Liabilities: | ||||||||||||||||||||||||
Description | ||||||||||||||||||||||||
Forward | ||||||||||||||||||||||||
Currency | ||||||||||||||||||||||||
Exchange | ||||||||||||||||||||||||
Contracts | $ | 77,662 | $ | — | $ | 77,662 | $ | 12,968 | $ | 64,694 | $ | — | ||||||||||||
Swap | ||||||||||||||||||||||||
Contracts — | ||||||||||||||||||||||||
JPMorgan | ||||||||||||||||||||||||
Chase & Co., Inc. | 482,211 | 482,211 | — | — | — | — | ||||||||||||||||||
Swap | ||||||||||||||||||||||||
Contracts — | ||||||||||||||||||||||||
Bank of America | ||||||||||||||||||||||||
Merrill Lynch | ||||||||||||||||||||||||
& Co. Inc. | 53,632 | 53,632 | — | — | — | — | ||||||||||||||||||
Written | ||||||||||||||||||||||||
Option | ||||||||||||||||||||||||
Contracts | 2,172,969 | — | 2,172,969 | — | 2,172,969 | — | ||||||||||||||||||
$ | 2,786,474 | $ | 535,843 | $ | 2,250,631 | $ | 12,968 | $ | 2,237,663 | $ | — |
73
The Merger Fund and WCM Alternatives: Event-Driven Fund
NOTES TO THE FINANCIAL STATEMENTS (continued)
June 30, 2015 (Unaudited)
Note 9 — SUBSEQUENT EVENTS
Management has evaluated events and transactions occurring after June 30, 2015 through the date that the financial statements were issued, and has determined that no additional disclosure in the financial statements is required.
74
ADDITIONAL INFORMATION (Unaudited)
For the fiscal year ended December 31, 2014, certain dividends paid by TMF may be subject to a maximum tax rate of 15% as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income for the fiscal year ended December 31, 2014 was 31.59% for TMF and 52.76% for EDF.
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends-received deduction for the fiscal year ended December 31, 2014 was 31.54% for TMF and 52.47% for EDF.
The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Code Section 871(k)(2)(c) for the fiscal year ended December 31, 2014 was 34.23% for TMF and 100% for EDF.
AVAILABILITY OF PROXY VOTING INFORMATION
Information regarding how the Funds generally votes proxies relating to portfolio securities may be obtained without charge by calling the Funds’ Transfer Agent at 1-800-343-8959 or by visiting the SEC’s website at www.sec.gov. Information regarding how the Funds voted proxies during the most recent 12-month period ended June 30 is available on the SEC’s website or by calling the toll-free number listed above.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
75
Investment Adviser
Westchester Capital Management, LLC
100 Summit Lake Drive
Valhalla, NY 10595
(914) 741-5600
www.westchestercapitalfunds.com
Administrator, Transfer Agent, Accountant,
Dividend Paying Agent and Shareholder Servicing Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
P.O. Box 701
Milwaukee, WI 53201-0701
(800) 343-8959
Custodian
U.S. Bank, N.A.
1555 North Rivercenter Drive, Suite 302
Milwaukee, WI 53212
(800) 343-8959
Distributor
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, WI 53202
Trustees
Roy Behren
Michael T. Shannon
Barry Hamerling
Richard V. Silver
Christianna Wood
Executive Officers
Roy Behren, Co-President and Treasurer
Michael T. Shannon, Co-President
Bruce Rubin, Vice President and
Chief Compliance Officer
Abraham R. Cary, Secretary
Counsel
Ropes & Gray LLP
1211 Avenue of the Americas
New York, NY 10036
Independent Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Item 6. Investments.
(a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) | The Registrant’s Co-Presidents/Chief Executive Officers and Treasurer/Chief Financial Officer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not Applicable. |
(2) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Westchester Capital Funds
By (Signature and Title)* /s/Michael T. Shannon
Michael T. Shannon, Co-President
Date September 2, 2015
By (Signature and Title)* /s/Roy Behren
Roy Behren, Co-President and Treasurer
Date September 2, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/Michael T. Shannon
Michael T. Shannon, Co-President
Date September 2, 2015
By (Signature and Title)* /s/Roy Behren
Roy Behren, Co-President and Treasurer
Date September 2, 2015
* Print the name and title of each signing officer under his or her signature.