UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-09815
THE ARBITRAGE FUNDS
(exact name of registrant as specified in charter)
41 Madison Avenue, 42nd Floor, New York, NY 10010
(Address of principal executive offices) (Zip code)
John S. Orrico
Water Island Capital, LLC
41 Madison Avenue
42nd Floor
New York, NY 10010
(Name and address of agent for service)
Registrant’s telephone number, including area code: 212-259-2655
Date of fiscal year end: May 31
Date of reporting period: June 1, 2014 – November 30, 2014
Item 1. | Reports to Stockholders. |
TABLE OF CONTENTS
The Arbitrage Fund | |
Portfolio Information | 1 |
Portfolio of Investments | 3 |
The Arbitrage Event-Driven Fund | |
Portfolio Information | 19 |
Portfolio of Investments | 21 |
The Arbitrage Credit Opportunities Fund | |
Portfolio Information | 49 |
Portfolio of Investments | 51 |
Statement of Assets and Liabilities | |
The Arbitrage Fund | 63 |
The Arbitrage Event-Driven Fund | 65 |
The Arbitrage Credit Opportunities Fund | 67 |
Statement of Operations | |
The Arbitrage Fund | 69 |
The Arbitrage Event-Driven Fund | 70 |
The Arbitrage Credit Opportunities Fund | 72 |
Statements of Changes in Net Assets | |
The Arbitrage Fund | 73 |
The Arbitrage Event-Driven Fund | 75 |
The Arbitrage Credit Opportunities Fund | 77 |
Financial Highlights | |
The Arbitrage Fund - Class R | 80 |
The Arbitrage Fund - Class I | 82 |
The Arbitrage Fund - Class C | 84 |
The Arbitrage Fund - Class A | 86 |
The Arbitrage Event-Driven Fund - Class R | 88 |
The Arbitrage Event-Driven Fund - Class I | 90 |
The Arbitrage Event-Driven Fund - Class C | 92 |
The Arbitrage Event-Driven Fund - Class A | 94 |
The Arbitrage Credit Opportunities Fund - Class R | 96 |
The Arbitrage Credit Opportunities Fund - Class I | 98 |
The Arbitrage Credit Opportunities Fund - Class C | 100 |
The Arbitrage Credit Opportunities Fund - Class A | 102 |
Notes to Financial Statements | 103 |
Disclosure of Fund Expenses | 128 |
Additional Information | 131 |
The Arbitrage Fund | Portfolio Information |
November 30, 2014 (Unaudited) |
Performance (annualized returns as of November 30, 2014)
One Year | Five Year | Ten Year | Since Inception* | |
Arbitrage Fund, Class R | 0.77% | 1.67% | 3.15% | 4.45% |
Arbitrage Fund, Class I | 1.15% | 1.93% | 3.39% | 3.15% |
Arbitrage Fund, Class C** | -0.94% | N/A | N/A | 0.14% |
Arbitrage Fund, Class A*** | -1.64% | N/A | N/A | -0.48% |
HFRI Event Driven: Merger Arbitrage Index | 2.26% | 3.23% | 4.89% | 4.61% |
S&P 500® Index | 16.86% | 15.96% | 8.06% | 4.57% |
Barclays Capital U.S. Aggregate Bond Index | 5.27% | 4.10% | 4.79% | 5.56% |
Current performance may be higher or lower than performance quoted above. Any performance data quoted represents past performance and the investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Returns do not reflect a 2% redemption fee for shares that are redeemed from the fund within 30 days of purchase, which, if reflected, would reduce the performance quoted. Returns shown above include the reinvestment of all dividends and capital gains. Contractual fee waivers are currently in effect. Without such fee waivers, performance numbers would be reduced. You can obtain performance data current to the most recent month end by calling 1-800-295-4485 or going to www.arbitragefunds.com.
* | Class R inception: 9/17/00; Class I inception: 10/17/03; Class C inception: 6/1/12; Class Ainception: 6/1/13. |
** | Class C shares are subject to a 1.00% contingent deferred sales charge on all purchases redeemed in 12 months of purchase. |
*** | Class A shares are subject to a maximum front-end sales load of 2.50% on purchases up to $250,000. The shares are also subject to a deferred sales charge of up to 0.50% on purchases of $250,000 or more purchased without a front-end sales load and redeemed within 12 months of purchase. |
The Total Annual Fund Operating Expenses for Class R, Class I, Class C and Class A are 2.17%, 1.92%, 2.92% and 2.17%, respectively.
The HFRI Event Driven: Merger Arbitrage Index is an index consisting of merger arbitrage strategies which employ an investment process primarily focused on opportunities in equity and equity related instruments of companies which are currently engaged in a corporate transaction. Merger Arbitrage involves primarily announced transactions, typically with limited or no exposure to situations which pre-, post-date or situations in which no formal announcement is expected to occur. Opportunities are frequently presented in cross border, collared and international transactions which incorporate multiple geographic regulatory institutions, with typically involve minimal exposure to corporate credits.
The S&P 500® Index is an unmanaged index consisting of 500 stocks.
The Barclays Capital U.S. Aggregate Bond Index is a market value-weighted index of investment grade fixed-rated debt issues, including government, corporate, asset-backed and mortgage-backed securities with a maturity of one year or more.
An investor may not invest directly in an index.
Semi-Annual Report | November 30, 2014 | 1 |
The Arbitrage Fund | Portfolio Information (continued) |
November 30, 2014 (Unaudited) |
Growth of $10,000 Investment
The chart represents historical performance of a hypothetical investment of $10,000 in the Class R shares of the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Sector Weighting
The following chart shows the sector weightings of the Arbitrage Fund’s investments in common stock and limited partnerships as of the report date.
2 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | Portfolio of Investments |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
COMMON STOCKS - 100.68% | ||||||||
Aerospace & Defense - 0.00% (a) | ||||||||
Allied Defense Group, Inc.(b)(c)(d) | 398,319 | $ | 21,708 | |||||
Auto Parts & Equipment - 3.07% | ||||||||
TRW Automotive Holdings Corp.(b)(e) | 717,722 | 74,212,455 | ||||||
Banks - 1.97% | ||||||||
Bank of Kentucky Financial Corp. | 232,095 | 10,817,948 | ||||||
Hudson Valley Holding Corp. | 361,039 | 9,033,196 | ||||||
OmniAmerican Bancorp, Inc. | 542,683 | 14,581,892 | ||||||
Susquehanna Bancshares, Inc. | 998,527 | 13,150,601 | ||||||
47,583,637 | ||||||||
Biotechnology - 0.11% | ||||||||
Prosensa Holding N.V.(b) | 132,434 | 2,618,220 | ||||||
Building Materials - 0.57% | ||||||||
Sanitec OYJ | 664,942 | 8,560,853 | ||||||
Vicwest, Inc. | 463,790 | 5,122,578 | ||||||
13,683,431 | ||||||||
Chemicals - 6.46% | ||||||||
Penford Corp.(b) | 382,416 | 7,242,959 | ||||||
Rockwood Holdings, Inc.(f) | 818,443 | 63,797,632 | ||||||
Sigma-Aldrich Corp.(e) | 352,273 | 48,120,492 | ||||||
Taminco Corp.(b) | 1,417,900 | 36,737,789 | ||||||
155,898,872 | ||||||||
Diversified Financial Services - 0.22% | ||||||||
Carfinco Financial Group, Inc. | 532,123 | 5,197,913 | ||||||
Electric - 2.93% | ||||||||
Cleco Corp. | 124,919 | 6,711,898 | ||||||
Pepco Holdings, Inc.(f) | 2,194,304 | 60,343,360 | ||||||
Pike Corp.(b) | 307,113 | 3,673,071 | ||||||
70,728,329 | ||||||||
Entertainment - 0.52% | ||||||||
Multimedia Games Holding Co., Inc(b) | 347,623 | 12,615,239 | ||||||
Food - 6.22% | ||||||||
Nutreco N.V. | 422,523 | 24,160,008 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 3 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
COMMON STOCKS - 100.68% (Continued) | ||||||||
Food - 6.22% (Continued) | ||||||||
Safeway, Inc.(e)(f) | 3,612,789 | $ | 125,869,569 | |||||
150,029,577 | ||||||||
Hand & Machine Tools - 1.00% | ||||||||
Vacon OYJ(c)(d) | 572,896 | 24,220,619 | ||||||
Healthcare - Products - 10.10% | ||||||||
CareFusion Corp.(b) | 854,740 | 50,574,966 | ||||||
Covidien Plc(e)(f) | 1,471,768 | 148,648,568 | ||||||
Nobel Biocare Holding AG | 2,438,343 | 43,152,047 | ||||||
Synergy Health Plc | 44,059 | 1,390,178 | ||||||
243,765,759 | ||||||||
Healthcare - Services - 4.10% | ||||||||
Covance, Inc.(b) | 764,860 | 78,489,933 | ||||||
Gentiva Health Services, Inc.(b) | 1,049,693 | 20,374,541 | ||||||
98,864,474 | ||||||||
Insurance - 6.05% | ||||||||
Platinum Underwriters Holdings Ltd. | 161,221 | 11,957,762 | ||||||
Protective Life Corp.(e) | 1,922,161 | 133,993,843 | ||||||
145,951,605 | ||||||||
Internet - 8.88% | ||||||||
Conversant, Inc.(b)(e)(f) | 2,162,072 | 75,715,761 | ||||||
Sapient Corp.(b) | 2,106,968 | 52,042,110 | ||||||
TIBCO Software, Inc.(b)(e) | 3,606,540 | 86,665,156 | ||||||
214,423,027 | ||||||||
Media - 7.05% | ||||||||
Comcast Corp., Class A | 381,630 | 21,768,175 | ||||||
DIRECTV(b)(e) | 1,666,810 | 146,195,905 | ||||||
Liberty Global, Inc., Plc, Series C(b) | 44,963 | 2,244,553 | ||||||
170,208,633 | ||||||||
Mining - 0.21% | ||||||||
Cayden Resources, Inc.(b) | 1,878,761 | 3,943,180 | ||||||
Lundin Mining Corp.(b) | 95,391 | 454,640 | ||||||
Yancoal Australia Ltd.(b) | 5,752,299 | 636,300 | ||||||
5,034,120 | ||||||||
Oil & Gas Services - 2.91% | ||||||||
Amec Foster Wheeler Plc, Sponsored ADR | 23,345 | 337,796 |
See Notes to Financial Statements. | |
4 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
COMMON STOCKS - 100.68% (Continued) | ||||||||
Oil & Gas Services - 2.91% (Continued) | ||||||||
Baker Hughes, Inc. | 211,433 | $ | 12,051,681 | |||||
Dresser-Rand Group, Inc.(b)(e) | 714,227 | 57,930,952 | ||||||
70,320,429 | ||||||||
Pharmaceuticals - 5.41% | ||||||||
Allergan, Inc.(e) | 562,132 | 120,234,414 | ||||||
Shire Plc, ADR(e)(f) | 48,262 | 10,308,763 | ||||||
130,543,177 | ||||||||
Real Estate Investment Trusts - 7.05% | ||||||||
American Realty Capital Healthcare Trust, Inc.(f) | 10,696,310 | 121,189,192 | ||||||
AmREIT, Inc. | 751,958 | 20,024,642 | ||||||
Corio N.V. | 203,517 | 10,295,929 | ||||||
Glimcher Realty Trust(e) | 1,355,292 | 18,648,818 | ||||||
170,158,581 | ||||||||
Retail - 5.65% | ||||||||
Family Dollar Stores, Inc. | 1,395,358 | 110,303,050 | ||||||
Spirit Pub Co., Plc | 808,729 | 1,329,565 | ||||||
Starbucks Coffee Japan Ltd. | 449,221 | 5,532,250 | ||||||
Tim Hortons, Inc. | 230,335 | 19,198,276 | ||||||
136,363,141 | ||||||||
Semiconductors - 11.05% | ||||||||
International Rectifier Corp.(b)(e) | 1,972,028 | 78,644,477 | ||||||
Tokyo Electron Ltd., Unsponsored ADR(f) | 4,678,131 | 82,007,636 | ||||||
TriQuint Semiconductor, Inc.(b)(f) | 4,348,332 | 105,968,851 | ||||||
266,620,964 | ||||||||
Software - 6.82% | ||||||||
Advanced Computer Software Group Plc | 2,285,978 | 4,981,161 | ||||||
Compuware Corp. | 4,674,015 | 48,235,835 | ||||||
Concur Technologies, Inc.(b)(e) | 795,937 | 102,524,645 | ||||||
Exact Holding N.V. | 224,610 | 8,856,372 | ||||||
164,598,013 | ||||||||
Telecommunications - 2.08% | ||||||||
Jazztel Plc(b) | 1,979,669 | 31,508,889 | ||||||
Oplink Communications, Inc. | 774,760 | 18,725,949 | ||||||
50,234,838 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 5 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
COMMON STOCKS - 100.68% (Continued) | ||||||||
Telephones & Telecommunications - 0.06% | ||||||||
Level 3 Communications, Inc.(b) | 29,348 | $ | 1,467,400 | |||||
Transportation - 0.19% | ||||||||
Hurtigruten ASA(b) | 4,724,738 | 4,653,720 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $2,331,727,142) | 2,430,017,881 | |||||||
LIMITED PARTNERSHIPS - 0.72% | ||||||||
Media - 0.72% | ||||||||
LIN Media LLC, Class A(b) | 723,467 | 17,457,258 | ||||||
TOTAL LIMITED PARTNERSHIPS | ||||||||
(Cost $17,820,953) | 17,457,258 | |||||||
RIGHTS - 2.16% | ||||||||
ArthroCare Corp., CVR(b)(c)(d) | 3,215,721 | 1,102,349 | ||||||
BMC Software, Inc., CVR(b)(c)(d) | 4,637,757 | 456,819 | ||||||
Chelsea Therapeutics, CVR(b)(c)(d) | 2,389,273 | 185,407 | ||||||
Cubist Pharmaceuticals, Inc., CPR(b)(c)(d) | 119,343 | 46,198 | ||||||
Cubist Pharmaceuticals, Inc., CVR(b) | 2,200,925 | 68,229 | ||||||
Leap Wireless International, CVR(b)(c)(d) | 2,231,034 | 5,756,068 | ||||||
Manulife Financial Corp.(b) | 2,227,130 | 44,367,312 | ||||||
Trius Therapeutics, CVR(b)(c)(d) | 1,034,403 | 167,470 | ||||||
TOTAL RIGHTS | ||||||||
(Cost $55,637,934) | 52,149,852 |
Expiration Date | Exercise Price | Contracts | Value | |||||||||||||
PURCHASED OPTIONS(b)- 0.24% | ||||||||||||||||
Call Options Purchased - 0.13% | ||||||||||||||||
Actavis Plc: | ||||||||||||||||
01/2015 | $ | 275.00 | 107 | 108,070 | ||||||||||||
01/2015 | 285.00 | 72 | 48,600 | |||||||||||||
02/2015 | 285.00 | 72 | 73,080 | |||||||||||||
Allergan, Inc.: | ||||||||||||||||
01/2015 | 175.00 | 143 | 574,860 | |||||||||||||
01/2015 | 180.00 | 476 | 1,670,760 |
See Notes to Financial Statements. | |
6 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Expiration Date | Exercise Price | Contracts | Value | |||||||||||||
PURCHASED OPTIONS(b)- 0.24% (Continued) | ||||||||||||||||
Call Options Purchased - 0.13% (Continued) | ||||||||||||||||
Bally Technologies, Inc. | 01/2015 | $ | 80.00 | 523 | $ | 172,590 | ||||||||||
TRW Automotive Holdings Corp. | 04/2015 | 100.00 | 801 | 324,405 | ||||||||||||
Valeant Pharmaceuticals International, Inc. | 01/2015 | 130.00 | 143 | 250,250 | ||||||||||||
TOTAL CALL OPTIONS PURCHASED | ||||||||||||||||
(Cost $1,627,338) | 3,222,615 | |||||||||||||||
Put Options Purchased - 0.11% | ||||||||||||||||
AbbVie, Inc. | 01/2015 | 52.50 | 110 | 1,100 | ||||||||||||
Actavis Plc | 12/2014 | 220.00 | 956 | 35,850 | ||||||||||||
Allergan, Inc. | 01/2015 | 200.00 | 1,560 | 374,400 | ||||||||||||
Alliance Data Systems Corp. | 12/2014 | 230.00 | 1,456 | 25,480 | ||||||||||||
AT&T, Inc. | 01/2015 | 35.00 | 16,529 | 1,231,411 | ||||||||||||
Bally Technologies, Inc.: | ||||||||||||||||
01/2015 | 75.00 | 592 | 0 | |||||||||||||
04/2015 | 75.00 | 309 | 0 | |||||||||||||
Burger King Worldwide, Inc. | 01/2015 | 35.00 | 1,857 | 287,835 | ||||||||||||
Concur Technologies, Inc. | 02/2015 | 105.00 | 894 | 6,705 | ||||||||||||
Covidien Plc: | ||||||||||||||||
01/2015 | 75.00 | 6,500 | 243,750 | |||||||||||||
01/2015 | 77.50 | 1,462 | 87,720 | |||||||||||||
01/2015 | 80.00 | 381 | 30,480 | |||||||||||||
DIRECTV | 01/2015 | 80.00 | 163 | 9,780 | ||||||||||||
Glimcher Realty Trust | 12/2014 | 12.50 | 350 | 84,000 | ||||||||||||
International Rectifier Corp.: | ||||||||||||||||
12/2014 | 35.00 | 391 | 977 | |||||||||||||
03/2015 | 35.00 | 1,175 | 5,875 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 7 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Expiration Date | Exercise Price | Contracts | Value | |||||||||||||
PURCHASED OPTIONS(b)- 0.24% (Continued) | ||||||||||||||||
Put Options Purchased - 0.11% (Continued) | ||||||||||||||||
Protective Life Corp. | 04/2015 | $ | 55.00 | 172 | $ | 430 | ||||||||||
Safeway, Inc. | 12/2014 | 33.00 | 709 | 7,090 | ||||||||||||
Shire Plc, ADR | 12/2014 | 185.00 | 483 | 9,660 | ||||||||||||
TIBCO Software, Inc. | 01/2015 | 20.00 | 4,050 | 10,125 | ||||||||||||
Time Warner Cable, Inc. | 01/2015 | 140.00 | 400 | 122,000 | ||||||||||||
tw telecom, Inc. | 01/2015 | 40.00 | 411 | 10,275 | ||||||||||||
TOTAL PUT OPTIONS PURCHASED | ||||||||||||||||
(Cost $9,859,867) | 2,584,943 | |||||||||||||||
TOTAL PURCHASED OPTIONS | ||||||||||||||||
(Cost $11,487,205) | 5,807,558 | |||||||||||||||
Yield | Shares | Value | ||||||||||||||
SHORT-TERM INVESTMENTS - 0.01% | ||||||||||||||||
Time Deposits | ||||||||||||||||
Euro Time Deposit | 0.010 | % | 82,789 | 82,789 | ||||||||||||
TOTAL SHORT-TERM INVESTMENTS | ||||||||||||||||
(Cost $82,789) | 82,789 | |||||||||||||||
Total Investments - 103.81% (Cost $2,416,756,023) | 2,505,515,338 | |||||||||||||||
Liabilities in Excess of Other Assets - (3.81%) | (91,857,706 | ) | ||||||||||||||
NET ASSETS - 100.00% | $ | 2,413,657,632 |
(a) | Less than 0.005% of Net Assets. |
(b) | Non-income-producing security. |
(c) | Security considered illiquid. On November 30, 2014, the total market value of these securities was $31,956,638, representing 1.32% of net assets. |
(d) | Security fair valued using methods determined in good faith by the Pricing Committee. As of November 30, 2014, the total market value of these securities was $31,956,638, representing 1.32% of net assets. |
(e) | Underlying security for a written/purchased call/put option. |
(f) | Security, or a portion of security, is being held as collateral for short sales or written option contracts. At period end, the aggregate market value of those securities was $226,930,000, representing 9.40% of net assets. |
See Notes to Financial Statements. | |
8 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Securities are determined to be illiquid under the procedures approved by the Funds Board of Trustees. Information related to the illiquid securities is as follows:
Date(s) of Purchase | Security | Cost | Market Value | % of Net Assets | |||||||||
05/20/2010-12/28/2010 | Allied Defense Group, Inc. | $ | 20,354 | $ | 21,708 | 0.00 | % | ||||||
05/30/2014 | ArthroCare Corp., CVR | 1,125,502 | 1,102,349 | 0.04 | |||||||||
09/10/2013 | BMC Software, Inc., CVR | 0 | 456,819 | 0.02 | |||||||||
06/24/2014 | Chelsea Therapeutics, CVR | 0 | 185,407 | 0.01 | |||||||||
12/12/2011 | Cubist Pharmaceuticals, Inc., CPR | 0 | 46,198 | 0.00 | |||||||||
03/14/2014 | Leap Wireless International, CVR | 5,756,068 | 5,756,068 | 0.24 | |||||||||
09/12/2013 | Trius Therapeutics, CVR | 0 | 167,470 | 0.01 | |||||||||
09/12/2014-11/14/2014 | Vacon OYJ | 24,629,586 | 24,220,619 | 1.00 | |||||||||
$ | 31,956,638 | 1.32 | % |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 9 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF SECURITIES SOLD SHORT | Shares | Value | ||||||
COMMON STOCKS - (28.09%) | ||||||||
Advertising - (0.66%) | ||||||||
Alliance Data Systems Corp. | (55,547 | ) | $ | (15,879,221 | ) | |||
Banks - (0.98%) | ||||||||
BB&T Corp. | (421,374 | ) | (15,839,449 | ) | ||||
Southside Bancshares, Inc. | (242,048 | ) | (7,825,412 | ) | ||||
(23,664,861 | ) | |||||||
Chemicals - (0.96%) | ||||||||
Albemarle Corp. | (393,098 | ) | (23,208,506 | ) | ||||
Healthcare - Products - (4.74%) | ||||||||
Becton Dickinson and Co. | (66,416 | ) | (9,320,157 | ) | ||||
Medtronic, Inc. | (1,407,010 | ) | (103,935,829 | ) | ||||
STERIS Corp. | (18,981 | ) | (1,210,039 | ) | ||||
(114,466,025 | ) | |||||||
Healthcare - Services - (1.11%) | ||||||||
Kindred Healthcare, Inc. | (269,515 | ) | (5,360,653 | ) | ||||
Laboratory Corp. of America Holdings | (205,329 | ) | (21,485,627 | ) | ||||
(26,846,280 | ) | |||||||
Insurance - (2.03%) | ||||||||
Manulife Financial Corp. | (2,227,127 | ) | (44,347,776 | ) | ||||
RenaissanceRe Holdings Ltd. | (47,683 | ) | (4,669,119 | ) | ||||
(49,016,895 | ) | |||||||
Media - (1.25%) | ||||||||
Liberty Global, Inc., Plc, Class A | (4 | ) | (208 | ) | ||||
Liberty Global, Inc., Plc, Series C | (44,969 | ) | (2,244,853 | ) | ||||
Media General, Inc. | (533,267 | ) | (8,164,318 | ) | ||||
Time Warner Cable, Inc. | (132,744 | ) | (19,816,024 | ) | ||||
(30,225,403 | ) | |||||||
Mining - (0.18%) | ||||||||
Agnico Eagle Mines Ltd. | (169,049 | ) | (3,944,230 | ) | ||||
Lundin Mining Corp. | (95,391 | ) | (454,640 | ) | ||||
(4,398,870 | ) | |||||||
Oil & Gas Services - (0.39%) | ||||||||
Halliburton Co. | (222,525 | ) | (9,390,555 | ) |
See Notes to Financial Statements. | |
10 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF SECURITIES SOLD SHORT | Shares | Value | ||||||
COMMON STOCKS - (28.09%)(Continued) | ||||||||
Pharmaceuticals - (0.62%) | ||||||||
Actavis Plc | (55,424 | ) | $ | (14,998,289 | ) | |||
Real Estate Investment Trusts - (5.44%) | ||||||||
Klepierre | (231,487 | ) | (10,388,289 | ) | ||||
Ventas, Inc. | (1,624,713 | ) | (116,248,215 | ) | ||||
Washington Prime Group, Inc. | (262,741 | ) | (4,527,028 | ) | ||||
(131,163,532 | ) | |||||||
Retail - (0.05%) | ||||||||
Greene King Plc | (106,919 | ) | (1,286,802 | ) | ||||
Savings & Loans - (0.39%) | ||||||||
Sterling Bancorp | (693,093 | ) | (9,273,584 | ) | ||||
Semiconductors - (3.79%) | ||||||||
Applied Materials, Inc. | (3,798,807 | ) | (91,361,308 | ) | ||||
Telecommunications - (5.50%) | ||||||||
AT&T, Inc. | (748,171 | ) | (26,470,290 | ) | ||||
RF Micro Devices, Inc. | (7,274,473 | ) | (106,280,050 | ) | ||||
(132,750,340 | ) | |||||||
TOTAL COMMON STOCKS | ||||||||
(Proceeds $619,152,171) | (677,930,471 | ) | ||||||
RIGHTS - 0.00% | ||||||||
Chelsea Therapeutics, CVR | (1,100 | ) | (85 | ) | ||||
TOTAL RIGHTS | ||||||||
(Proceeds $0) | (85 | ) | ||||||
TOTAL SECURITIES SOLD SHORT | ||||||||
(Proceeds $619,152,171) | $ | (677,930,556 | ) |
SCHEDULE OF WRITTEN OPTIONS | Expiration Date | Exercise Price | Contracts | Value | ||||||||||||
Written Call Options | ||||||||||||||||
Actavis Plc | 12/2014 | $ | 270.00 | (956 | ) | $ | (697,880 | ) | ||||||||
Allergan, Inc. | 01/2015 | 190.00 | (619 | ) | (1,569,165 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 11 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF WRITTEN OPTIONS | Expiration Date | Exercise Price | Contracts | Value | ||||||||||||
Written Call Options (Continued) | ||||||||||||||||
Alliance Data Systems Corp.: | ||||||||||||||||
12/2014 | $ | 270.00 | (51 | ) | $ | (85,425 | ) | |||||||||
12/2014 | 280.00 | (636 | ) | (585,120 | ) | |||||||||||
12/2014 | 290.00 | (142 | ) | (51,830 | ) | |||||||||||
Bally Technologies, Inc. | 01/2015 | 85.00 | (523 | ) | 0 | |||||||||||
BB&T Corp.: | ||||||||||||||||
12/2014 | 36.00 | (330 | ) | (58,905 | ) | |||||||||||
12/2014 | 37.00 | (330 | ) | (30,360 | ) | |||||||||||
Concur Technologies, Inc. | 02/2015 | 130.00 | (808 | ) | (2,020 | ) | ||||||||||
Conversant, Inc. | 12/2014 | 35.00 | (476 | ) | (13,090 | ) | ||||||||||
DIRECTV: | ||||||||||||||||
12/2014 | 85.00 | (1,050 | ) | (295,575 | ) | |||||||||||
12/2014 | 86.00 | (370 | ) | (73,445 | ) | |||||||||||
12/2014 | 87.50 | (2,173 | ) | (166,234 | ) | |||||||||||
01/2015 | 85.00 | (163 | ) | (61,125 | ) | |||||||||||
Dresser-Rand Group, Inc. | 12/2014 | 80.00 | (2 | ) | (320 | ) | ||||||||||
Halliburton Co.: | ||||||||||||||||
12/2014 | 47.50 | (119 | ) | (3,094 | ) | |||||||||||
12/2014 | 50.00 | (24 | ) | (288 | ) | |||||||||||
International Rectifier Corp. | 03/2015 | 40.00 | (1,175 | ) | (8,813 | ) | ||||||||||
Shire Plc, ADR: | ||||||||||||||||
12/2014 | 210.00 | (242 | ) | (186,340 | ) | |||||||||||
12/2014 | 215.00 | (79 | ) | (41,475 | ) | |||||||||||
Sigma-Aldrich Corp. | 12/2014 | 135.00 | (83 | ) | (20,335 | ) | ||||||||||
TIBCO Software, Inc.: | ||||||||||||||||
01/2015 | 24.00 | (4,857 | ) | (36,427 | ) | |||||||||||
01/2015 | 25.00 | (130 | ) | (325 | ) | |||||||||||
TRW Automotive Holdings Corp.: | ||||||||||||||||
01/2015 | 105.00 | (802 | ) | (4,010 | ) | |||||||||||
04/2015 | 105.00 | (801 | ) | (38,048 | ) | |||||||||||
tw telecom, Inc. | 01/2015 | 45.00 | (411 | ) | (53,430 | ) | ||||||||||
Valeant Pharmaceuticals International, Inc. | 01/2015 | 150.00 | (143 | ) | (67,210 | ) | ||||||||||
TOTAL WRITTEN CALL OPTIONS | ||||||||||||||||
(Premiums received $2,131,835) | (4,150,289 | ) | ||||||||||||||
Written Put Options | ||||||||||||||||
Actavis Plc: | ||||||||||||||||
12/2014 | 250.00 | (252 | ) | (26,460 | ) | |||||||||||
12/2014 | 255.00 | (145 | ) | (25,738 | ) |
See Notes to Financial Statements. | |
12 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF WRITTEN OPTIONS | Expiration Date | Exercise Price | Contracts | Value | ||||||||||||
Written Put Options (Continued) | ||||||||||||||||
Allergan, Inc.: | ||||||||||||||||
01/2015 | $ | 165.00 | (381 | ) | $ | (20,955 | ) | |||||||||
01/2015 | 170.00 | (238 | ) | (20,230 | ) | |||||||||||
Alliance Data Systems Corp. | 12/2014 | 200.00 | (9 | ) | (45 | ) | ||||||||||
Covidien Plc: | ||||||||||||||||
01/2015 | 57.50 | (2,121 | ) | (10,605 | ) | |||||||||||
01/2015 | 62.50 | (961 | ) | (2,402 | ) | |||||||||||
DIRECTV | 12/2014 | 85.00 | (660 | ) | (17,490 | ) | ||||||||||
Dresser-Rand Group, Inc. | 12/2014 | 80.00 | (2 | ) | (90 | ) | ||||||||||
Time Warner Cable, Inc. | 12/2014 | 140.00 | (160 | ) | (18,400 | ) | ||||||||||
TOTAL WRITTEN PUT OPTIONS | ||||||||||||||||
(Premiums received $775,896) | (142,415 | ) | ||||||||||||||
TOTAL WRITTEN OPTIONS | ||||||||||||||||
(Premiums received $2,907,731) | $ | (4,292,704 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 13 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
OUTSTANDING FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contract Description | Contracts to Deliver/Receive | Purchase/ Sale Contract | Expiration Date | Current Value | Unrealized Appreciation | |||||||||
AUD | 2,675,413 | Sale | 12/15/2014 | 2,273,717 | $ | 127,481 | ||||||||
CAD | 87,030,316 | Sale | 12/15/2014 | 76,077,424 | 2,041,919 | |||||||||
CHF | 64,246,200 | Sale | 12/15/2014 | 66,508,188 | 1,418,012 | |||||||||
EUR | 110,030,398 | Sale | 12/15/2014 | 136,830,527 | 3,203,172 | |||||||||
GBP | 55,674,800 | Sale | 12/15/2014 | 86,956,232 | 3,110,940 | |||||||||
JPY | 653,290,400 | Sale | 12/15/2014 | 5,504,924 | 132,786 | |||||||||
NOK | 56,792,500 | Sale | 12/15/2014 | 8,090,321 | 532,442 | |||||||||
SEK | 64,499,400 | Sale | 12/15/2014 | 8,650,394 | 201,002 | |||||||||
$ | 10,767,754 |
Contract Description | Contracts to Deliver/Receive | Purchase/ Sale Contract | Expiration Date | Current Value | Unrealized Depreciation | |||||||||
AUD | 1,811,300 | Purchase | 12/15/2014 | 1,539,345 | $ | (53,724 | ) | |||||||
CAD | 54,303,400 | Purchase | 12/15/2014 | 47,469,238 | (790,137 | ) | ||||||||
CHF | 22,550,500 | Purchase | 12/15/2014 | 23,344,461 | (467,205 | ) | ||||||||
EUR | 38,870,400 | Purchase | 12/15/2014 | 48,338,072 | (350,635 | ) | ||||||||
GBP | 52,279,700 | Purchase | 12/15/2014 | 81,653,562 | (2,745,209 | ) | ||||||||
NOK | 23,719,300 | Purchase | 12/15/2014 | 3,378,910 | (134,693 | ) | ||||||||
$ | (4,541,603 | ) |
See Notes to Financial Statements. | |
14 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Country | % of Net Assets(a) | |||
Japan | 3.63 | % | ||
Canada | 3.24 | % | ||
Great Britain | 2.07 | % | ||
Switzerland | 1.79 | % | ||
Netherlands | 1.79 | % | ||
Brazil | 1.52 | % | ||
Finland | 1.36 | % | ||
Bermuda | 0.50 | % | ||
Norway | 0.19 | % | ||
Australia | 0.03 | % | ||
United States | 87.69 | % | ||
Liabilities in Excess of Other Assets | (3.81 | )% | ||
100.00 | % |
(a) | These percentages represent long positions only and are not net of short positions. |
Abbreviations: |
ADR - American Depositary Receipt |
AG - Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e., owned by shareholders |
ASA - Allmennaksjeselskap is the Norwegian term for public limited company |
AUD - Australian Dollar |
CAD - Canadian Dollar |
CHF - Swiss Franc |
CPR - Conditional Prepayment Rate |
CVR - Contingent Value Rights |
EUR - Euro |
GBP - British Pound |
JPY - Japanese Yen |
LLC - Limited Liability Company |
Ltd. - Limited |
NOK - Norwegian Kronor |
N.V. - Naamloze Vennootschap is the Dutch term for a public limited liability corporation |
OYJ - Osakeyhtio is the Finnish equivalent of a public limited company |
Plc - Public Limited Company |
SEK - Swedish Kronor |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 15 |
The Arbitrage Fund | |
November 30, 2014 (Unaudited) |
The following is a summary of the inputs used as of November 30, 2014, in valuing the Arbitrage Fund’s investments carried at value:
Investments in Securities at Value | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Common Stocks | ||||||||||||||||
Aerospace & Defense | $ | – | $ | – | $ | 21,708 | $ | 21,708 | ||||||||
Auto Parts & Equipment | 74,212,455 | – | – | 74,212,455 | ||||||||||||
Banks | 47,583,637 | – | – | 47,583,637 | ||||||||||||
Biotechnology | 2,618,220 | – | – | 2,618,220 | ||||||||||||
Building Materials | 13,683,431 | – | – | 13,683,431 | ||||||||||||
Chemicals | 155,898,872 | – | – | 155,898,872 | ||||||||||||
Diversified Financial Services | 5,197,913 | – | – | 5,197,913 | ||||||||||||
Electric | 70,728,329 | – | – | 70,728,329 | ||||||||||||
Entertainment | 12,615,239 | – | – | 12,615,239 | ||||||||||||
Food | 150,029,577 | – | – | 150,029,577 | ||||||||||||
Hand & Machine Tools | – | 24,220,619 | – | 24,220,619 | ||||||||||||
Healthcare - Products | 243,765,759 | – | – | 243,765,759 | ||||||||||||
Healthcare - Services | 98,864,474 | – | – | 98,864,474 | ||||||||||||
Insurance | 145,951,605 | – | – | 145,951,605 | ||||||||||||
Internet | 214,423,027 | – | – | 214,423,027 | ||||||||||||
Media | 170,208,633 | – | – | 170,208,633 | ||||||||||||
Mining | 5,034,120 | – | – | 5,034,120 | ||||||||||||
Oil & Gas Services | 70,320,429 | – | – | 70,320,429 | ||||||||||||
Pharmaceuticals | 130,543,177 | – | – | 130,543,177 | ||||||||||||
Real Estate Investment Trusts | 170,158,581 | – | – | 170,158,581 | ||||||||||||
Retail | 136,363,141 | – | – | 136,363,141 | ||||||||||||
Semiconductors | 266,620,964 | – | – | 266,620,964 | ||||||||||||
Software | 164,598,013 | – | – | 164,598,013 | ||||||||||||
Telecommunications | 50,234,838 | – | – | 50,234,838 | ||||||||||||
Telephones & Telecommunications | 1,467,400 | – | – | 1,467,400 | ||||||||||||
Transportation | 4,653,720 | – | – | 4,653,720 | ||||||||||||
Limited Partnerships | 17,457,258 | – | – | 17,457,258 | ||||||||||||
Rights | 44,435,541 | – | 7,714,311 | 52,149,852 | ||||||||||||
Purchased Options | 5,634,968 | 172,590 | – | 5,807,558 | ||||||||||||
Short-Term Investments | 82,789 | – | – | 82,789 | ||||||||||||
TOTAL | $ | 2,473,386,110 | $ | 24,393,209 | $ | 7,736,019 | $ | 2,505,515,338 | ||||||||
Other Financial Instruments* | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $ | – | $ | 10,767,754 | $ | – | $ | 10,767,754 |
See Notes to Financial Statements. | |
16 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | |
November 30, 2014 (Unaudited) |
Investments in Securities at Value (Continued) | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities | ||||||||||||||||
Common Stocks** | $ | (677,930,471 | ) | $ | – | $ | – | $ | (677,930,471 | ) | ||||||
Rights | – | – | (85 | ) | (85 | ) | ||||||||||
Written Options | (4,292,704 | ) | 0 | – | (4,292,704 | ) | ||||||||||
Forward Foreign Currency Exchange Contracts | – | (4,541,603 | ) | – | (4,541,603 | ) | ||||||||||
TOTAL | $ | (682,223,175 | ) | $ | 6,226,151 | $ | (85 | ) | $ | (675,997,109 | ) |
* | Other financial instruments are instruments such as written options, securities sold short and forward foreign currency exchange contracts. |
** | Refer to Portfolio of Investments for sector information. |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 17 |
The Arbitrage Fund | |
November 30, 2014 (Unaudited) |
The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund’s assets and liabilities during the year ended November 30, 2014:
Investments in Securities | Balance as of May 31, 2014 | Realized Gain | Change in Unrealized Appreciation/ (Depreciation) | Purchases | Sales Proceeds | Transfer into Level 3 | Transfer out of Level 3 | Balance as of November 30, 2014 | Net change in unrealized appreciation/ (depreciation) included in the Statements of Operations attributable to Level 3 investments held at November 30, 2014 | |||||||||||||||||||||||||||
Common Stocks | $ | 21,230 | $ | – | $ | 478 | $ | – | $ | – | $ | – | $ | – | $ | 21,708 | $ | 478 | ||||||||||||||||||
Rights | 7,414,115 | – | 300,196 | 0 | – | – | – | 7,714,311 | 300,196 | |||||||||||||||||||||||||||
Total | $ | 7,435,345 | $ | – | $ | 300,674 | $ | – | $ | – | $ | – | $ | – | $ | 7,736,019 | $ | 300,674 | ||||||||||||||||||
Other Financial Instruments | Balance as of May 31, 2014 | Realized Gain | Change in Unrealized Depreciation | Purchases | Sales Proceeds | Transfer into Level 3 | Transfer out of Level 3 | Balance as of November 30, 2014 | Net change in unrealized depreciation included in the Statements of Operations attributable to Level 3 investments held at November 30, 2014 | |||||||||||||||||||||||||||
Rights | $ | – | $ | – | $ | (85 | ) | $ | 0 | $ | – | $ | – | $ | – | $ | (85 | ) | $ | (85 | ) | |||||||||||||||
Total | $ | – | $ | – | $ | (85 | ) | $ | 0 | $ | – | $ | – | $ | – | $ | (85 | ) | $ | (85 | ) |
See Notes to Financial Statements. | |
18 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio Information |
November 30, 2014 (Unaudited) |
Performance (annualized returns as of November 30, 2014)
One Year | Since Inception* | |
Arbitrage Event-Driven Fund, Class R | -0.67% | 2.64% |
Arbitrage Event-Driven Fund, Class I | -0.38% | 2.89% |
Arbitrage Event-Driven Fund, Class C** | -2.35% | 1.67% |
Arbitrage Event-Driven Fund, Class A*** | -3.80% | -0.19% |
HFRI Event Driven Index | 3.25% | 5.85% |
Barclays Capital US Aggregate Bond Index | 5.27% | 3.42% |
Current performance may be higher or lower than performance quoted above. Any performance data quoted represents past performance, and the investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Returns do not reflect a 2% redemption fee for shares that are redeemed from the fund within 30 days of purchase, which, if reflected, would reduce the performance quoted. Returns shown above include the reinvestment of all dividends and capital gains. Contractual fee waivers are currently in effect. Without such fee waivers, performance numbers would be reduced. You can obtain performance data current to the most recent month end by calling 1-800-295-4485 or going to www.arbitragefunds.com.
* | Class R and Class I inception: 10/1/10; Class C inception: 6/1/12; Class A inception: 6/1/13. |
** | Class C shares are subject to a 1.00% contingent deferred sales charge on all purchases redeemed in 12 months of purchase. |
*** | Class A shares are subject to a maximum front-end sales load of 3.25% on purchases up to $500,000. The shares are also subject to a deferred sales charge of up to 1.00% on purchases of $500,000 or more purchased without a front-end sales load and redeemed within 18 months of purchase. |
The Total Annual Fund Operating Expenses for Class R, Class I, Class C and Class A are 2.36%, 2.11%, 3.11% and 2.36%, respectively. The Advisor has agreed to waive fees in excess of 1.69%, 1.44%, 2.44% and 1.69% for Class R, Class I, Class C and Class A, respectively, until at least August 31, 2016.
The HFRI Event Driven Index is an index of companies currently or prospectively involved in corporate transactions of a wide variety including but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments. Security types can range from most senior in the capital structure to most junior or subordinated and frequently involve additional derivative securities. Event-Driven exposure includes a combination of sensitivities to equity markets, credit markets and idiosyncratic, company-specific developments.
The Barclays Capital U.S. Aggregate Bond Index is a market value-weighted index of investment-grade fixed-rated debt issues, including government, corporate, asset-backed and mortgage-backed securities with a maturity of one year or more.
An investor may not invest directly in an index.
Semi-Annual Report | November 30, 2014 | 19 |
The Arbitrage Event-Driven Fund | Portfolio Information (continued) |
November 30, 2014 (Unaudited) |
Growth of $10,000 Investment
The chart represents historical performance of a hypothetical investment of $10,000 in the Class R shares of the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Sector Weighting
The following chart shows the sector weightings of the Arbitrage Event-Driven Fund’s investments in common stock, corporate bonds, convertible corporate bonds and exchange-traded funds as of the report date.
20 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
COMMON STOCKS - 60.33% | ||||||||
Aerospace & Defense - 1.92% | ||||||||
Allied Defense Group, Inc.(a)(b)(c) | 5,000 | $ | 272 | |||||
B/E Aerospace, Inc.(a)(d)(e) | 167,479 | 13,041,590 | ||||||
13,041,862 | ||||||||
Apparel - 0.14% | ||||||||
Perry Ellis International, Inc.(a)(e) | 34,483 | 910,006 | ||||||
Auto Manufacturers - 0.11% | ||||||||
General Motors Co.(d)(e) | 21,943 | 733,555 | ||||||
Auto Parts & Equipment - 1.26% | ||||||||
TRW Automotive Holdings Corp.(a)(e) | 82,700 | 8,551,180 | ||||||
Banks - 0.38% | ||||||||
Hudson Valley Holding Corp. | 41,711 | 1,043,609 | ||||||
Susquehanna Bancshares, Inc. | 114,948 | 1,513,865 | ||||||
2,557,474 | ||||||||
Beverages - 0.35% | ||||||||
Molson Coors Brewing Co., Class B(e) | 30,791 | 2,381,684 | ||||||
Biotechnology - 0.11% | ||||||||
Prosensa Holding N.V.(a) | 38,365 | 758,476 | ||||||
Building Materials - 0.24% | ||||||||
Sanitec OYJ | 77,543 | 998,334 | ||||||
Vicwest, Inc. | 53,667 | 592,754 | ||||||
1,591,088 | ||||||||
Chemicals - 2.97% | ||||||||
Methanex Corp.(e) | 53,839 | 2,781,323 | ||||||
Rockwood Holdings, Inc.(d) | 94,555 | 7,370,562 | ||||||
Sigma-Aldrich Corp.(e) | 41,070 | 5,610,162 | ||||||
Taminco Corp.(a) | 168,890 | 4,375,940 | ||||||
20,137,987 | ||||||||
Coal - 0.60% | ||||||||
CONSOL Energy, Inc.(d) | 35,710 | 1,397,332 | ||||||
Peabody Energy Corp.(d) | 264,742 | 2,676,542 | ||||||
4,073,874 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 21 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
COMMON STOCKS - 60.33% (Continued) | ||||||||
Commercial Services - 0.32% | ||||||||
Civeo Corp.(e)(f) | 230,544 | $ | 2,171,725 | |||||
Computers - 1.05% | ||||||||
EMC Corp.(e) | 156,216 | 4,741,155 | ||||||
Riverbed Technology, Inc.(a)(e) | 114,939 | 2,376,364 | ||||||
7,117,519 | ||||||||
Diversified Financial Services - 0.19% | ||||||||
Carfinco Financial Group, Inc. | 61,369 | 599,468 | ||||||
Outerwall, Inc.(a)(e) | 10,119 | 711,163 | ||||||
1,310,631 | ||||||||
Electric - 1.18% | ||||||||
Cleco Corp. | 14,531 | 780,751 | ||||||
Pepco Holdings, Inc. | 261,370 | 7,187,675 | ||||||
7,968,426 | ||||||||
Electrical Components & Equipment - 0.65% | ||||||||
Energizer Holdings, Inc.(e) | 22,952 | 2,984,219 | ||||||
Hubbell, Inc., Class B(e) | 13,548 | 1,446,927 | ||||||
4,431,146 | ||||||||
Entertainment - 0.55% | ||||||||
Multimedia Games Holding Co., Inc(a) | 103,368 | 3,751,225 | ||||||
Food - 2.83% | ||||||||
Nutreco N.V. | 48,686 | 2,783,882 | ||||||
Safeway, Inc.(d)(e) | 417,976 | 14,562,284 | ||||||
Tyson Foods, Inc., Class A(e) | 43,673 | 1,849,115 | ||||||
19,195,281 | ||||||||
Hand & Machine Tools - 0.41% | ||||||||
Vacon OYJ(b)(c) | 65,950 | 2,788,202 | ||||||
Healthcare - Products - 4.37% | ||||||||
CareFusion Corp.(a) | 98,396 | 5,822,091 | ||||||
CONMED Corp. | 5,466 | 231,922 | ||||||
Covidien Plc(d)(e) | 175,606 | 17,736,206 | ||||||
Haemonetics Corp.(a) | 6,187 | 228,486 | ||||||
Nobel Biocare Holding AG | 280,554 | 4,965,044 | ||||||
STERIS Corp. | 3,635 | 231,731 | ||||||
Stryker Corp. | 2,608 | 242,309 |
See Notes to Financial Statements. | |
22 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
COMMON STOCKS - 60.33% (Continued) | ||||||||
Healthcare - Products - 4.37% (Continued) | ||||||||
Synergy Health Plc | 5,082 | $ | 160,351 | |||||
29,618,140 | ||||||||
Healthcare - Services - 2.14% | ||||||||
Covance, Inc.(a) | 91,105 | 9,349,195 | ||||||
Gentiva Health Services, Inc.(a) | 143,433 | 2,784,035 | ||||||
Kindred Healthcare, Inc.(e) | 119,309 | 2,373,056 | ||||||
14,506,286 | ||||||||
Holding Companies - Diversified - 0.22% | ||||||||
Liberty TripAdvisor Holdings, Inc., Class A(a) | 55,308 | 1,449,623 | ||||||
Insurance - 2.49% | ||||||||
Platinum Underwriters Holdings Ltd. | 18,801 | 1,394,470 | ||||||
Protective Life Corp.(e) | 221,941 | 15,471,507 | ||||||
16,865,977 | ||||||||
Internet - 3.70% | ||||||||
Conversant, Inc.(a)(d)(e) | 249,745 | 8,746,070 | ||||||
Sapient Corp.(a) | 242,549 | 5,990,960 | ||||||
Shutterfly, Inc.(a)(e) | 344 | 14,710 | ||||||
TIBCO Software, Inc.(a)(d)(e) | 430,102 | 10,335,351 | ||||||
25,087,091 | ||||||||
Machinery - Diversified - 0.27% | ||||||||
Manitowoc Co., Inc.(d)(e) | 91,940 | 1,851,672 | ||||||
Media - 3.49% | ||||||||
Comcast Corp., Class A | 43,973 | 2,508,220 | ||||||
DIRECTV(a)(e) | 192,040 | 16,843,828 | ||||||
Liberty Global, Inc., Plc, Series C(a) | 11,465 | 572,333 | ||||||
Media General, Inc.(a)(e) | 69,353 | 1,061,794 | ||||||
Viacom, Inc., Class B(e) | 35,571 | 2,690,235 | ||||||
23,676,410 | ||||||||
Mining - 0.26% | ||||||||
Cayden Resources, Inc.(a) | 219,026 | 459,696 | ||||||
Nevada Copper Corp.(a) | 6,725 | 7,645 | ||||||
Osisko Gold Royalties Ltd. | 104,352 | 1,244,741 | ||||||
Yancoal Australia Ltd.(a) | 533,139 | 58,974 | ||||||
1,771,056 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 23 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
COMMON STOCKS - 60.33% (Continued) | ||||||||
Oil & Gas - 0.18% | ||||||||
Ithaca Energy, Inc., CAD(a) | 363,255 | $ | 352,613 | |||||
Talisman Energy, Inc. | 185,416 | 873,309 | ||||||
1,225,922 | ||||||||
Oil & Gas Services - 5.53% | ||||||||
Amec Foster Wheeler Plc, Sponsored ADR | 2,804 | 40,574 | ||||||
Baker Hughes, Inc.(e) | 160,902 | 9,171,414 | ||||||
Dresser-Rand Group, Inc.(a) | 85,074 | 6,900,352 | ||||||
Exterran Holdings, Inc.(e) | 112,459 | 3,767,377 | ||||||
Halliburton Co.(e) | 108,690 | 4,586,718 | ||||||
NOW, Inc.(a)(e) | 206,721 | 5,535,988 | ||||||
Weatherford International Plc(a)(e) | 573,104 | 7,507,662 | ||||||
37,510,085 | ||||||||
Packaging & Containers - 0.59% | ||||||||
Berry Plastics Group, Inc.(a)(e) | 112,687 | 3,261,162 | ||||||
Rock-Tenn Co., Class A(e) | 13,044 | 741,029 | ||||||
4,002,191 | ||||||||
Pharmaceuticals - 3.00% | ||||||||
Actavis Plc(a)(e) | 494 | 133,681 | ||||||
Allergan, Inc.(e) | 76,609 | 16,385,899 | ||||||
Cardinal Health, Inc. | 2,857 | 234,817 | ||||||
Endo International Plc(a)(e) | 30,347 | 2,220,490 | ||||||
Shire Plc, ADR(e) | 6,197 | 1,323,679 | ||||||
20,298,566 | ||||||||
Real Estate Investment Trusts - 2.76% | ||||||||
American Realty Capital Healthcare Trust, Inc.(d) | 1,241,569 | 14,066,977 | ||||||
AmREIT, Inc. | 89,568 | 2,385,196 | ||||||
Glimcher Realty Trust(e) | 161,709 | 2,225,116 | ||||||
18,677,289 | ||||||||
Retail - 2.98% | ||||||||
Express, Inc.(a)(e) | 18,025 | 269,474 | ||||||
Family Dollar Stores, Inc. | 161,206 | 12,743,334 | ||||||
Spirit Pub Co., Plc | 93,433 | 153,605 | ||||||
Starbucks Coffee Japan Ltd. | 51,899 | 639,147 | ||||||
Tim Hortons, Inc. | 25,617 | 2,135,161 | ||||||
Yum! Brands, Inc.(e) | 55,488 | 4,286,448 | ||||||
20,227,169 |
See Notes to Financial Statements. | |
24 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
COMMON STOCKS - 60.33% (Continued) | ||||||||
Semiconductors - 7.28% | ||||||||
International Rectifier Corp.(a)(e) | 234,894 | $ | 9,367,573 | |||||
Tokyo Electron Ltd., Unsponsored ADR | 1,078,650 | 18,908,734 | ||||||
TriQuint Semiconductor, Inc.(a)(d) | 863,238 | 21,037,110 | ||||||
49,313,417 | ||||||||
Software - 2.91% | ||||||||
AVG Technologies N.V.(a)(e) | 59,637 | 1,171,271 | ||||||
Compuware Corp. | 556,736 | 5,745,516 | ||||||
Concur Technologies, Inc.(a)(e) | 91,626 | 11,802,345 | ||||||
Exact Holding N.V. | 26,133 | 1,030,424 | ||||||
19,749,556 | ||||||||
Telecommunications - 2.80% | ||||||||
Globalstar, Inc.(a) | 210,547 | 593,743 | ||||||
HC2 Holdings, Inc.(a) | 219,448 | 1,755,584 | ||||||
Jazztel Plc(a) | 227,779 | 3,625,385 | ||||||
Juniper Networks, Inc.(d)(e) | 150,844 | 3,342,703 | ||||||
Oplink Communications, Inc. | 89,288 | 2,158,091 | ||||||
T-Mobile US, Inc.(a)(d)(e) | 165,769 | 4,838,797 | ||||||
Windstream Holdings, Inc.(e) | 266,302 | 2,692,313 | ||||||
19,006,616 | ||||||||
Telephones & Telecommunications - 0.02% | ||||||||
Level 3 Communications, Inc.(a) | 2,697 | 134,850 | ||||||
Transportation - 0.08% | ||||||||
Hurtigruten ASA(a) | 545,851 | 537,646 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $398,280,595) | 408,980,903 | |||||||
EXCHANGE-TRADED NOTES - 0.12% | ||||||||
Debt Funds - 0.12% | ||||||||
iPath® S&P 500® VIX Short-Term Futures™ ETN(a) | 30,295 | 829,780 | ||||||
TOTAL EXCHANGE-TRADED NOTES | ||||||||
(Cost $894,885) | 829,780 | |||||||
RIGHTS - 0.81% | ||||||||
ArthroCare Corp., CVR(a)(b)(c) | 157,791 | 54,091 | ||||||
BMC Software, Inc., CVR(a)(b)(c) | 49,764 | 4,902 | ||||||
Chelsea Therapeutics, CVR(a)(b)(c) | 434,520 | 33,719 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 25 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
RIGHTS - 0.81% (Continued) | ||||||||
Cubist Pharmaceuticals, Inc., CPR(a)(b)(c) | 34,500 | $ | 13,355 | |||||
Cubist Pharmaceuticals, Inc., CVR(a) | 121,458 | 3,765 | ||||||
Leap Wireless International, CVR(a)(b)(c) | 81,078 | 209,181 | ||||||
Manulife Financial Corp.(a) | 258,937 | 5,158,360 | ||||||
Trius Therapeutics, CVR(a)(b)(c) | 103,378 | 16,737 | ||||||
TOTAL RIGHTS | ||||||||
(Cost $5,627,328) | 5,494,110 |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
BANK LOANS - 2.66% | |||||||||||||
Cengage Learning Acquisitions, Inc.(g) | 03/06/2020 | 7.000 | % | $ | 4,726,250 | 4,740,641 | |||||||
FairPoint Communications, Inc.(g) | 02/14/2019 | 7.500 | % | 2,672,864 | 2,696,265 | ||||||||
OSG Bulk Ships, Inc.(g) | 07/22/2019 | 5.250 | % | 5,336,625 | 5,346,658 | ||||||||
Station Casinos(g) | 03/01/2020 | 4.250 | % | 2,492,387 | 2,478,156 | ||||||||
Zayo Bandwidth LLC(g) | 06/14/2019 | 4.000 | % | 2,742,076 | 2,740,705 | ||||||||
TOTAL BANK LOANS | |||||||||||||
(Cost $18,133,299) | 18,002,425 | ||||||||||||
CORPORATE BONDS - 26.18% | |||||||||||||
Aerospace & Defense - 2.87% | |||||||||||||
Alliant Techsystems, Inc. | 09/15/2020 | 6.875 | % | 8,595,000 | 9,175,163 | ||||||||
B/E Aerospace, Inc. | 04/01/2022 | 5.250 | % | 9,283,000 | 10,304,130 | ||||||||
19,479,293 | |||||||||||||
Auto Parts & Equipment - 0.81% | |||||||||||||
TRW Automotive, Inc.(h) | 03/01/2021 | 4.500 | % | 5,488,000 | 5,515,440 | ||||||||
Banks - 1.09% | |||||||||||||
PNC Preferred Funding Trust II(h)(i) | Perpetual Maturity | 1.457 | % | 4,712,000 | 4,502,929 | ||||||||
Wells Fargo Capital X | 12/15/2036 | 5.950 | % | 2,867,000 | 2,917,172 | ||||||||
7,420,101 | |||||||||||||
Chemicals - 0.98% | |||||||||||||
Taminco Global Chemical Corp.(h) | 03/31/2020 | 9.750 | % | 6,032,000 | 6,612,580 |
See Notes to Financial Statements. | |
26 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CORPORATE BONDS - 26.18% (Continued) | |||||||||||||
Diversified Financial Services - 1.21% | |||||||||||||
Prospect Holding Co., LLC / Prospect Holding Finance Co.(h) | 10/01/2018 | 10.250 | % | $ | 5,321,000 | $ | 4,469,640 | ||||||
ROC Finance LLC(h) | 09/01/2018 | 12.125 | % | 3,530,000 | 3,697,675 | ||||||||
8,167,315 | |||||||||||||
Electronics - 1.14% | |||||||||||||
Viasystems, Inc.(h) | 05/01/2019 | 7.875 | % | 7,317,000 | 7,719,435 | ||||||||
Energy - Alternate Sources - 0.90% | |||||||||||||
First Wind Capital LLC(h) | 06/01/2018 | 10.250 | % | 5,662,000 | 6,114,960 | ||||||||
Food - 1.28% | |||||||||||||
US Foods, Inc. | 06/30/2019 | 8.500 | % | 8,172,000 | 8,682,750 | ||||||||
Healthcare - Products - 1.19% | |||||||||||||
Biomet, Inc. | 10/01/2020 | 6.500 | % | 7,645,000 | 8,096,055 | ||||||||
Healthcare - Services - 1.61% | |||||||||||||
Gentiva Health Services, Inc. | 09/01/2018 | 11.500 | % | 4,422,000 | 4,720,485 | ||||||||
MedImpact Holdings, Inc.(h) | 02/01/2018 | 10.500 | % | 5,837,000 | 6,201,813 | ||||||||
10,922,298 | |||||||||||||
Household Products & Wares - 0.90% | |||||||||||||
American Achievement Corp.(h) | 04/15/2016 | 10.875 | % | 6,216,000 | 6,083,910 | ||||||||
Insurance - 1.32% | |||||||||||||
Ambac Assurance Corp.(d)(h) | 06/07/2020 | 5.100 | % | 3,911,627 | 4,542,376 | ||||||||
Ambac Assurance Corp.(h) | 08/28/2039 | 5.100 | % | 1,598,000 | 1,310,360 | ||||||||
Syncora Holdings Ltd.(i) | |||||||||||||
Perpetual Maturity | 5.000 | % | 989,868 | 814,518 | |||||||||
Perpetual Maturity | 6.000 | % | 2,724,000 | 2,264,325 | |||||||||
8,931,579 | |||||||||||||
Iron & Steel - 0.16% | |||||||||||||
1839688 Alberta ULC, PIK | 02/13/2020 | 14.000 | % | 1,321,203 | 1,089,993 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 27 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CORPORATE BONDS - 26.18% (Continued) | |||||||||||||
Media - 2.13% | |||||||||||||
CCO Holdings LLC / CCO Holdings Capital Corp. | 01/15/2019 | 7.000 | % | $ | 4,897,000 | $ | 5,099,001 | ||||||
LIN Television Corp. | 04/15/2018 | 8.375 | % | 5,547,000 | 5,768,880 | ||||||||
Univision Communications, Inc.(h) | 05/15/2021 | 8.500 | % | 3,290,000 | 3,536,750 | ||||||||
14,404,631 | |||||||||||||
Mining - 0.83% | |||||||||||||
Prince Mineral Holding Corp.(h) | 12/15/2019 | 11.750 | % | 5,179,000 | 5,645,110 | ||||||||
Oil & Gas - 2.57% | |||||||||||||
Forest Oil Corp. | 06/15/2019 | 7.250 | % | 978,000 | 965,775 | ||||||||
QR Energy LP / QRE Finance Corp., LLC(b)(c) | 08/01/2020 | 9.250 | % | 9,139,000 | 10,500,163 | ||||||||
Sabine Oil & Gas LLC / Sabine Oil & Gas Finance Corp. | 02/15/2017 | 9.750 | % | 5,261,000 | 4,919,035 | ||||||||
Southern Pacific Resource Corp.(h) | 01/25/2018 | 8.750 | % | 4,828,000 | 1,055,531 | ||||||||
17,440,504 | |||||||||||||
Retail - 2.37% | |||||||||||||
Burger King Corp. | 10/15/2018 | 9.875 | % | 4,577,000 | 4,805,850 | ||||||||
Cash America International, Inc. | 05/15/2018 | 5.750 | % | 4,580,000 | 4,763,200 | ||||||||
PC Nextco Holdings LLC / PC Nextco Finance, Inc. | 08/15/2019 | 8.750 | % | 6,418,000 | 6,514,270 | ||||||||
16,083,320 | |||||||||||||
Semiconductors - 0.61% | |||||||||||||
Freescale Semiconductor, Inc. | 08/01/2020 | 10.750 | % | 3,729,000 | 4,101,900 |
See Notes to Financial Statements. | |
28 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CORPORATE BONDS - 26.18% (Continued) | |||||||||||||
Telecommunications - 2.21% | |||||||||||||
T-Mobile USA, Inc. | 04/28/2019 | 6.464 | % | $ | 4,211,000 | $ | 4,368,912 | ||||||
tw telecom holdings, Inc.(b)(c) | 09/01/2023 | 6.375 | % | 5,827,000 | 6,702,798 | ||||||||
Windstream Corp. | 09/01/2018 | 8.125 | % | 3,765,000 | 3,929,719 | ||||||||
15,001,429 | |||||||||||||
TOTAL CORPORATE BONDS | |||||||||||||
(Cost $180,950,163) | 177,512,603 | ||||||||||||
CONVERTIBLE CORPORATE BONDS - 3.43% | |||||||||||||
Engineering & Construction - 0.29% | |||||||||||||
Aecon Group, Inc. | 10/31/2015 | 6.250 | % | 2,210,000 | 1,978,080 | ||||||||
Mining - 0.74% | |||||||||||||
Primero Mining Corp. | 03/31/2016 | 6.500 | % | 4,993,000 | 4,993,000 | ||||||||
Oil & Gas - 0.35% | |||||||||||||
BPZ Resources, Inc. | 10/01/2017 | 8.500 | % | 3,662,000 | 2,375,723 | ||||||||
Oil & Gas Services - 0.18% | |||||||||||||
Cal Dive International, Inc. | 07/15/2017 | 5.000 | % | 5,128,000 | 1,240,335 | ||||||||
Packaging & Containers - 1.02% | |||||||||||||
Owens-Brockway Glass Container, Inc.(h) | 06/01/2015 | 3.000 | % | 6,777,000 | 6,878,655 | ||||||||
Real Estate Investment Trusts - 0.69% | |||||||||||||
Annaly Capital Management, Inc. | 02/15/2015 | 4.000 | % | 4,553,000 | 4,706,664 | ||||||||
Telecommunications - 0.16% | |||||||||||||
Globalstar, Inc., PIK (2.25% PIK) | 04/01/2028 | 8.000 | % | 229,320 | 1,065,621 | ||||||||
TOTAL CONVERTIBLE CORPORATE BONDS | |||||||||||||
(Cost $26,293,001) | 23,238,078 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 29 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Expiration Date | Exercise Price | Contracts | Value | |||||||||||||
PURCHASED OPTIONS(a)- 0.52% | ||||||||||||||||
Call Options Purchased - 0.02% | ||||||||||||||||
Actavis Plc: | ||||||||||||||||
01/2015 | $ | 275.00 | 42 | $ | 42,420 | |||||||||||
01/2015 | 285.00 | 28 | 18,900 | |||||||||||||
02/2015 | 285.00 | 28 | 28,420 | |||||||||||||
Cliffs Natural Resources, Inc. | 12/2014 | 12.00 | 830 | 8,300 | ||||||||||||
Express, Inc. | 12/2014 | 17.50 | 551 | 15,152 | ||||||||||||
TRW Automotive Holdings Corp. | 04/2015 | 100.00 | 91 | 36,855 | ||||||||||||
TOTAL CALL OPTIONS PURCHASED | ||||||||||||||||
(Cost $175,685) | 150,047 | |||||||||||||||
Put Options Purchased - 0.50% | ||||||||||||||||
AbbVie, Inc. | 01/2015 | 52.50 | 11 | 110 | ||||||||||||
Actavis Plc | 12/2014 | 220.00 | 280 | 10,500 | ||||||||||||
AECOM Technology Corp. | 12/2014 | 22.50 | 581 | 4,358 | ||||||||||||
Agilent Technologies, Inc. | 12/2014 | 35.00 | 555 | 2,775 | ||||||||||||
Allergan, Inc. | 01/2015 | 200.00 | 180 | 43,200 | ||||||||||||
Alliance Data Systems Corp. | 12/2014 | 230.00 | 168 | 2,940 | ||||||||||||
AT&T, Inc. | 01/2015 | 35.00 | 1,913 | 142,519 | ||||||||||||
AVG Technologies N.V.: | ||||||||||||||||
12/2014 | 17.50 | 592 | 13,320 | |||||||||||||
01/2015 | 17.50 | 585 | 24,862 | |||||||||||||
B/E Aerospace, Inc.: | ||||||||||||||||
12/2014 | 65.00 | 1,110 | 58,275 | |||||||||||||
12/2014 | 70.00 | 942 | 73,005 | |||||||||||||
Baker Hughes, Inc. | 12/2014 | 57.50 | 551 | 123,975 | ||||||||||||
Becton Dickinson and Co. | 12/2014 | 110.00 | 418 | 7,315 | ||||||||||||
Berry Plastics Group, Inc.: | ||||||||||||||||
12/2014 | 22.50 | 835 | 10,437 | |||||||||||||
01/2015 | 22.50 | 567 | 7,088 | |||||||||||||
01/2015 | 25.00 | 567 | 14,175 | |||||||||||||
Burger King Worldwide, Inc. | 01/2015 | 35.00 | 219 | 33,945 | ||||||||||||
Civeo Corp. | 12/2014 | 10.00 | 1,382 | 120,925 | ||||||||||||
Concur Technologies, Inc. | 02/2015 | 105.00 | 102 | 765 | ||||||||||||
Covidien Plc: | ||||||||||||||||
01/2015 | 75.00 | 749 | 28,087 | |||||||||||||
01/2015 | 77.50 | 169 | 10,140 | |||||||||||||
01/2015 | 80.00 | 47 | 3,760 |
See Notes to Financial Statements. | |
30 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Expiration Date | Exercise Price | Contracts | Value | |||||||||||||
PURCHASED OPTIONS(a)- 0.52% (Continued) | ||||||||||||||||
Put Options Purchased - 0.50% (Continued) | ||||||||||||||||
DIRECTV | 01/2015 | $ | 80.00 | 18 | $ | 1,080 | ||||||||||
DISH Network Corp. | 12/2014 | 57.50 | 1,114 | 8,355 | ||||||||||||
EMC Corp.: | ||||||||||||||||
12/2014 | 25.00 | 1,673 | 10,874 | |||||||||||||
12/2014 | 27.00 | 1,162 | 9,877 | |||||||||||||
01/2015 | 27.00 | 554 | 8,310 | |||||||||||||
Endo International Plc | 12/2014 | 55.00 | 580 | 8,700 | ||||||||||||
Energizer Holdings, Inc. | 12/2014 | 110.00 | 336 | 4,200 | ||||||||||||
Express, Inc. | 12/2014 | 12.50 | 968 | 12,100 | ||||||||||||
Exterran Holdings, Inc.: | ||||||||||||||||
12/2014 | 20.00 | 36 | 900 | |||||||||||||
12/2014 | 30.00 | 549 | 28,822 | |||||||||||||
01/2015 | 25.00 | 469 | 26,968 | |||||||||||||
General Motors Co. | 12/2014 | 28.00 | 2,503 | 6,258 | ||||||||||||
Genworth Financial, Inc.: | ||||||||||||||||
12/2014 | 8.00 | 277 | 2,909 | |||||||||||||
12/2014 | 9.00 | 193 | 7,334 | |||||||||||||
12/2014 | 8.50 | 111 | 2,608 | |||||||||||||
Glimcher Realty Trust | 12/2014 | 12.50 | 39 | 9,360 | ||||||||||||
Halliburton Co.: | ||||||||||||||||
12/2014 | 45.00 | 826 | 307,685 | |||||||||||||
01/2015 | 42.00 | 2,751 | 680,872 | |||||||||||||
Hubbell, Inc., Class B | 01/2015 | 90.00 | 283 | 70,750 | ||||||||||||
Imperial Tobacco Group | 12/2014 | 2,400.00 | 164 | 12,809 | ||||||||||||
International Paper Co. | 12/2014 | 45.00 | 167 | 1,670 | ||||||||||||
International Rectifier Corp.: | ||||||||||||||||
12/2014 | 35.00 | 44 | 110 | |||||||||||||
03/2015 | 35.00 | 136 | 680 | |||||||||||||
iShares® 7-10 Year Treasury Bond ETF | 12/2014 | 101.00 | 140 | 1,750 | ||||||||||||
iShares® Russell 2000 Growth ETF | 12/2014 | 130.00 | 555 | 40,238 | ||||||||||||
ITV Plc | 12/2014 | 190.00 | 279 | 10,895 | ||||||||||||
Juniper Networks, Inc.: | ||||||||||||||||
12/2014 | 17.00 | 3,335 | 6,670 | |||||||||||||
01/2015 | 19.00 | 1,668 | 17,514 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 31 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Expiration Date | Exercise Price | Contracts | Value | |||||||||||||
PURCHASED OPTIONS(a)- 0.52% (Continued) | ||||||||||||||||
Put Options Purchased - 0.50% (Continued) | ||||||||||||||||
Keysight Technologies, Inc. | 12/2014 | $ | 25.00 | 449 | $ | 8,980 | ||||||||||
Kindred Healthcare, Inc. | 12/2014 | 17.50 | 1,114 | 25,065 | ||||||||||||
Media General, Inc. | 12/2014 | 12.50 | 971 | 9,710 | ||||||||||||
Methanex Corp. | 12/2014 | 50.00 | 558 | 78,120 | ||||||||||||
Molson Coors Brewing Co., Class B: | ||||||||||||||||
12/2014 | 65.00 | 140 | 1,400 | |||||||||||||
01/2015 | 65.00 | 140 | 5,250 | |||||||||||||
Mylan, Inc.: | ||||||||||||||||
12/2014 | 49.00 | 1,339 | 6,695 | |||||||||||||
01/2015 | 40.00 | 276 | 1,656 | |||||||||||||
NOW, Inc. | 12/2014 | 25.00 | 2,797 | 160,828 | ||||||||||||
Outerwall, Inc.: | ||||||||||||||||
12/2014 | 55.00 | 1,108 | 22,160 | |||||||||||||
01/2015 | 55.00 | 277 | 9,695 | |||||||||||||
Packaging Corp. of America | 12/2014 | 60.00 | 167 | 2,087 | ||||||||||||
Perry Ellis International, Inc.: | ||||||||||||||||
12/2014 | 17.50 | 1,035 | 18,113 | |||||||||||||
01/2015 | 17.50 | 754 | 18,850 | |||||||||||||
PetSmart, Inc. | 12/2014 | 62.50 | 360 | 1,800 | ||||||||||||
Protective Life Corp. | 04/2015 | 55.00 | 18 | 45 | ||||||||||||
Riverbed Technology, Inc.: | ||||||||||||||||
12/2014 | 15.00 | 1,141 | 28,525 | |||||||||||||
01/2015 | 17.00 | 553 | 16,037 | |||||||||||||
Rock-Tenn Co., Class A | 12/2014 | 45.00 | 167 | 2,088 | ||||||||||||
Safeway, Inc. | 12/2014 | 33.00 | 115 | 1,150 | ||||||||||||
Shire Plc, ADR | 12/2014 | 185.00 | 62 | 1,240 | ||||||||||||
Shutterfly, Inc.: | ||||||||||||||||
12/2014 | 35.00 | 1,378 | 37,895 | |||||||||||||
12/2014 | 37.50 | 276 | 5,520 | |||||||||||||
SPDR® S&P 500® ETF Trust: | ||||||||||||||||
12/2014 | 160.00 | 602 | 1,505 | |||||||||||||
12/2014 | 184.00 | 557 | 8,077 |
See Notes to Financial Statements. | |
32 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Expiration Date | Exercise Price | Contracts | Value | |||||||||||||
PURCHASED OPTIONS(a)- 0.52% (Continued) | ||||||||||||||||
Put Options Purchased - 0.50% (Continued) | ||||||||||||||||
TIBCO Software, Inc. | 01/2015 | $ | 20.00 | 471 | $ | 1,177 | ||||||||||
Time Warner Cable, Inc. | 01/2015 | 140.00 | 46 | 14,030 | ||||||||||||
T-Mobile US, Inc. | 12/2014 | 26.00 | 1,658 | 22,383 | ||||||||||||
tw telecom, Inc. | 01/2015 | 40.00 | 38 | 950 | ||||||||||||
Tyson Foods, Inc., Class A | 12/2014 | 36.00 | 558 | 4,185 | ||||||||||||
Viacom, Inc., Class B | 12/2014 | 67.50 | 666 | 9,990 | ||||||||||||
Weatherford International Plc | 12/2014 | 15.00 | 3,903 | 802,066 | ||||||||||||
Windstream Holdings, Inc.: | ||||||||||||||||
12/2014 | 9.00 | 2,025 | 15,188 | |||||||||||||
01/2015 | 9.00 | 1,387 | 22,885 | |||||||||||||
Yum! Brands, Inc.: | ||||||||||||||||
12/2014 | 65.00 | 832 | 3,328 | |||||||||||||
12/2014 | 70.00 | 139 | 1,876 | |||||||||||||
TOTAL PUT OPTIONS PURCHASED | ||||||||||||||||
(Cost $5,722,849) | 3,407,323 | |||||||||||||||
TOTAL PURCHASED OPTIONS | ||||||||||||||||
(Cost $5,898,534) | 3,557,370 | |||||||||||||||
Yield | Shares | Value | ||||||||||||||
SHORT-TERM INVESTMENTS - 4.66% | ||||||||||||||||
Time Deposits | ||||||||||||||||
Euro Time Deposit | 0.010 | % | 31,598,503 | 31,598,503 | ||||||||||||
TOTAL SHORT-TERM INVESTMENTS | ||||||||||||||||
(Cost $31,598,503) | 31,598,503 | |||||||||||||||
Total Investments - 98.71% (Cost $667,676,308) | 669,213,772 | |||||||||||||||
Other Assets in Excess of Liabilities - 1.29% | 8,722,290 | |||||||||||||||
NET ASSETS - 100.00% | $ | 677,936,062 |
(a) | Non-income-producing security. |
(b) | Security considered illiquid. On November 30, 2014, the total market value of these securities was $20,323,420, representing 3.00% of net assets. |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 33 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
(c) | Security fair valued using methods determined in good faith by the Pricing Committee. As of November 30, 2014, the total market value of these securities was $20,323,420, representing 3.00% of net assets. |
(d) | Security, or a portion of security, is being held as collateral for short sales or written option contracts. At period end, the aggregate market value of those securities was $51,310,505, representing 7.57% of net assets. |
(e) | Underlying security for a written/purchased call/put option. |
(f) | When-issued security. A conditional transaction in a security authorized for issuance, but not yet issued. |
(g) | Interest rate will change at a future date. Interest rate shown reflects the rate in effect at November 30, 2014. |
(h) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of November 30, 2014, these securities had a total value of $73,887,164 or 10.90% of net assets. |
(i) | This security has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. |
Securities are determined to be illiquid under the procedures approved by the Funds Board of Trustees. Information related to the illiquid securities is as follows:
Date(s) of Purchase | Security | Cost | Market Value | % of Net Assets | |||||||||
12/31/2010-01/05/2011 | Allied Defense Group, Inc. | $ | 256 | $ | 272 | 0.00 | % | ||||||
05/30/2014 | ArthroCare Corp., CVR | 55,227 | 54,091 | 0.01 | |||||||||
09/10/2013 | BMC Software, Inc., CVR | 0 | 4,902 | 0.00 | |||||||||
06/24/2014 | Chelsea Therapeutics, CVR | 0 | 33,719 | 0.01 | |||||||||
12/12/2011 | Cubist Pharmaceuticals, Inc., CPR | 0 | 13,355 | 0.00 | |||||||||
03/17/2014 | Leap Wireless International, CVR | 209,181 | 209,181 | 0.03 | |||||||||
07/24/2014-10/22/2014 | QR Energy LP / QRE Finance Corp., LLC | 10,395,395 | 10,500,163 | 1.55 | |||||||||
09/12/2013 | Trius Therapeutics, CVR | 0 | 16,737 | 0.00 | |||||||||
08/04/2014-10/24/2014 | tw telecom holdings, Inc., 6.375% | 6,568,254 | 6,702,798 | 0.99 | |||||||||
9/12/2014-11/14/2014 | Vacon OYJ | 2,835,012 | 2,788,202 | 0.41 | |||||||||
$ | 20,323,420 | 3.00 | % |
See Notes to Financial Statements. | |
34 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF SECURITIES SOLD SHORT | Shares | Value | ||||||
COMMON STOCKS - (20.52%) | ||||||||
Advertising - (0.27%) | ||||||||
Alliance Data Systems Corp. | (6,477 | ) | $ | (1,851,580 | ) | |||
Aerospace & Defense - (0.72%) | ||||||||
Boeing Co. | (16,299 | ) | (2,189,934 | ) | ||||
General Dynamics Corp. | (18,579 | ) | (2,700,643 | ) | ||||
(4,890,577 | ) | |||||||
Auto Manufacturers - (0.02%) | ||||||||
Ford Motor Co. | (6,904 | ) | (108,600 | ) | ||||
Banks - (0.12%) | ||||||||
BB&T Corp. | (21,469 | ) | (807,020 | ) | ||||
Beverages - (0.07%) | ||||||||
Anheuser-Busch InBev N.V., Sponsored ADR | (2,365 | ) | (276,681 | ) | ||||
Boston Beer Co., Inc., Class A | (664 | ) | (174,612 | ) | ||||
(451,293 | ) | |||||||
Chemicals - (0.83%) | ||||||||
Albemarle Corp. | (45,415 | ) | (2,681,301 | ) | ||||
Celanese Corp., Series A | (18,311 | ) | (1,099,942 | ) | ||||
Olin Corp. | (38,827 | ) | (976,887 | ) | ||||
Westlake Chemical Corp. | (13,336 | ) | (848,170 | ) | ||||
(5,606,300 | ) | |||||||
Commercial Services - (0.01%) | ||||||||
Black Diamond Group Ltd. | (3,651 | ) | (57,599 | ) | ||||
Distributors & Wholesalers - (0.98%) | ||||||||
Fastenal Co. | (51,400 | ) | (2,323,280 | ) | ||||
HD Supply Holdings, Inc. | (51,270 | ) | (1,490,931 | ) | ||||
WESCO International, Inc. | (17,820 | ) | (1,468,190 | ) | ||||
WW Grainger, Inc. | (5,644 | ) | (1,386,618 | ) | ||||
(6,669,019 | ) | |||||||
Engineering & Construction - (0.03%) | ||||||||
Aecon Group, Inc. | (17,422 | ) | (182,981 | ) | ||||
Healthcare - Products - (2.33%) | ||||||||
Becton Dickinson and Co. | (7,647 | ) | (1,073,103 | ) | ||||
Halyard Health, Inc. | (55,489 | ) | (2,175,724 | ) | ||||
Medtronic, Inc. | (167,880 | ) | (12,401,296 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 35 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF SECURITIES SOLD SHORT | Shares | Value | ||||||
COMMON STOCKS - (20.52%)(Continued) | ||||||||
Healthcare - Products - (2.33%) (Continued) | ||||||||
STERIS Corp. | (2,189 | ) | $ | (139,549 | ) | |||
(15,789,672 | ) | |||||||
Healthcare - Services - (0.59%) | ||||||||
Chemed Corp. | (1,405 | ) | (154,705 | ) | ||||
HealthSouth Corp. | (7,214 | ) | (296,712 | ) | ||||
Kindred Healthcare, Inc. | (36,861 | ) | (733,165 | ) | ||||
Laboratory Corp. of America Holdings | (24,457 | ) | (2,559,181 | ) | ||||
Select Medical Holdings Corp. | (19,359 | ) | (279,350 | ) | ||||
(4,023,113 | ) | |||||||
Insurance - (0.85%) | ||||||||
Genworth Financial, Inc., Class A | (7,190 | ) | (65,357 | ) | ||||
Manulife Financial Corp. | (258,938 | ) | (5,156,116 | ) | ||||
RenaissanceRe Holdings Ltd. | (5,561 | ) | (544,533 | ) | ||||
(5,766,006 | ) | |||||||
Internet - (0.25%) | ||||||||
TripAdvisor, Inc. | (23,118 | ) | (1,702,641 | ) | ||||
Iron & Steel - (0.07%) | ||||||||
Cliffs Natural Resources, Inc. | (55,289 | ) | (504,236 | ) | ||||
Media - (0.51%) | ||||||||
Gannett Co., Inc | (6,125 | ) | (199,369 | ) | ||||
Liberty Global, Inc., Plc, Class A | (2 | ) | (104 | ) | ||||
Liberty Global, Inc., Plc, Series C | (11,467 | ) | (572,433 | ) | ||||
Nexstar Broadcasting Group, Inc., Class A | (4,496 | ) | (230,690 | ) | ||||
Sinclair Broadcast Group, Inc., Class A | (5,272 | ) | (153,731 | ) | ||||
Time Warner Cable, Inc. | (15,296 | ) | (2,283,387 | ) | ||||
(3,439,714 | ) | |||||||
Metal Fabricate & Hardware - (0.28%) | ||||||||
Precision Castparts Corp. | (7,920 | ) | (1,884,168 | ) | ||||
Mining - (0.07%) | ||||||||
Agnico Eagle Mines Ltd. | (19,758 | ) | (460,991 | ) | ||||
Nevada Copper Corp. | (6,725 | ) | (7,646 | ) | ||||
(468,637 | ) |
See Notes to Financial Statements. | |
36 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF SECURITIES SOLD SHORT | Shares | Value | ||||||
COMMON STOCKS - (20.52%)(Continued) | ||||||||
Miscellaneous Manufacturing - (0.13%) | ||||||||
AptarGroup, Inc. | (13,274 | ) | $ | (866,128 | ) | |||
Oil & Gas - (0.03%) | ||||||||
BPZ Resources, Inc. | (383,874 | ) | (230,324 | ) | ||||
Oil & Gas Services - (1.68%) | ||||||||
Frank's International N.V. | (28,287 | ) | (508,600 | ) | ||||
Halliburton Co. | (47,935 | ) | (2,022,857 | ) | ||||
RPC, Inc. | (76,096 | ) | (1,011,316 | ) | ||||
Schlumberger Ltd. | (77,660 | ) | (6,674,877 | ) | ||||
Superior Energy Services, Inc. | (61,283 | ) | (1,183,375 | ) | ||||
(11,401,025 | ) | |||||||
Packaging & Containers - (0.26%) | ||||||||
Ball Corp. | (5,801 | ) | (389,073 | ) | ||||
Bemis Co., Inc. | (3,217 | ) | (128,487 | ) | ||||
Crown Holdings, Inc. | (8,259 | ) | (408,821 | ) | ||||
Silgan Holdings, Inc. | (16,911 | ) | (853,329 | ) | ||||
(1,779,710 | ) | |||||||
Pharmaceuticals - (0.99%) | ||||||||
Actavis Plc | (24,738 | ) | (6,694,350 | ) | ||||
Real Estate Investment Trusts - (2.25%) | ||||||||
Annaly Capital Management, Inc. | (107,180 | ) | (1,234,713 | ) | ||||
Ventas, Inc. | (188,649 | ) | (13,497,836 | ) | ||||
Washington Prime Group, Inc. | (31,391 | ) | (540,867 | ) | ||||
(15,273,416 | ) | |||||||
Retail - (0.33%) | ||||||||
American Eagle Outfitters, Inc. | (829 | ) | (11,689 | ) | ||||
Domino's Pizza, Inc. | (7,274 | ) | (682,665 | ) | ||||
Dunkin' Brands Group, Inc. | (14,044 | ) | (679,027 | ) | ||||
Greene King Plc | (12,353 | ) | (148,672 | ) | ||||
Guess?, Inc | (493 | ) | (11,176 | ) | ||||
Jack in the Box, Inc. | (3,052 | ) | (227,374 | ) | ||||
Sonic Corp. | (8,551 | ) | (232,502 | ) | ||||
Wendy's Co. | (26,928 | ) | (234,812 | ) | ||||
(2,227,917 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 37 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF SECURITIES SOLD SHORT | Shares | Value | ||||||
COMMON STOCKS - (20.52%)(Continued) | ||||||||
Savings & Loans - (0.16%) | ||||||||
Sterling Bancorp | (80,119 | ) | $ | (1,071,992 | ) | |||
Semiconductors - (3.11%) | ||||||||
Applied Materials, Inc. | (876,070 | ) | (21,069,483 | ) | ||||
Telecommunications - (3.57%) | ||||||||
ADTRAN, Inc. | (2,426 | ) | (50,679 | ) | ||||
AT&T, Inc. | (73,310 | ) | (2,593,708 | ) | ||||
Calix, Inc. | (7,611 | ) | (80,676 | ) | ||||
Ciena Corp. | (5,156 | ) | (85,229 | ) | ||||
Globalstar, Inc. | (57,015 | ) | (160,782 | ) | ||||
RF Micro Devices, Inc. | (1,445,283 | ) | (21,115,585 | ) | ||||
Sonus Networks, Inc. | (38,449 | ) | (142,261 | ) | ||||
(24,228,920 | ) | |||||||
Transportation - (0.01%) | ||||||||
Horizon North Logistics, Inc. | (16,021 | ) | (42,312 | ) | ||||
TOTAL COMMON STOCKS | ||||||||
(Proceeds $131,149,850) | (139,088,733 | ) | ||||||
EXCHANGE-TRADED FUNDS - (2.90%) | ||||||||
Debt Funds - (0.25%) | ||||||||
iShares® 7-10 Year Treasury Bond ETF | (7,435 | ) | (789,523 | ) | ||||
SPDR® Barclays High Yield Bond ETF Trust | (22,417 | ) | (887,265 | ) | ||||
(1,676,788 | ) | |||||||
Equity Funds - (2.65%) | ||||||||
Consumer Staples Select Sector SPDR® Fund | (31,737 | ) | (1,564,634 | ) | ||||
Industrial Select Sector SPDR® Fund | (25,309 | ) | (1,440,335 | ) | ||||
iShares® MSCI China ETF | (40,001 | ) | (1,991,250 | ) | ||||
iShares® Nasdaq Biotechnology ETF | (2,364 | ) | (718,419 | ) | ||||
iShares® Russell 1000 Value ETF | (20,558 | ) | (2,147,283 | ) | ||||
iShares® Russell 2000 Growth ETF | (35,626 | ) | (4,940,257 | ) | ||||
Powershares QQQ™ Trust, Series 1 | (3,686 | ) | (390,753 | ) | ||||
SPDR® S&P 500® ETF Trust | (20,928 | ) | (4,336,282 | ) | ||||
Technology Select Sector SPDR® Fund | (10,475 | ) | (445,083 | ) | ||||
(17,974,296 | ) | |||||||
TOTAL EXCHANGE-TRADED FUNDS | ||||||||
(Proceeds $18,967,241) | (19,651,084 | ) |
See Notes to Financial Statements. | |
38 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF SECURITIES SOLD SHORT | Shares | Value | ||||||
RIGHTS - 0.00% | ||||||||
Chelsea Therapeutics, CVR | (200 | ) | $ | (15 | ) | |||
TOTAL RIGHTS | ||||||||
(Proceeds $0) | (15 | ) |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CORPORATE BONDS - (0.76%) | |||||||||||||
Healthcare - Services - (0.16%) | |||||||||||||
Kindred Healthcare, Inc. | 04/15/2022 | 6.375 | % | $ | (1,108,000 | ) | (1,069,220 | ) | |||||
Pipelines - (0.04%) | |||||||||||||
Kinder Morgan Energy Partners LP | 09/01/2022 | 3.950 | % | (297,000 | ) | (299,053 | ) | ||||||
Telecommunications - (0.56%) | |||||||||||||
T-Mobile USA, Inc. | 04/01/2023 | 6.625 | % | (3,639,000 | ) | (3,775,463 | ) | ||||||
TOTAL CORPORATE BONDS | |||||||||||||
(Proceeds $5,262,749) | (5,143,736 | ) | |||||||||||
CONVERTIBLE CORPORATE BONDS - (0.04%) | |||||||||||||
Oil & Gas - (0.04%) | |||||||||||||
BPZ Resources, Inc. | 03/01/2015 | 6.500 | % | (340,000 | ) | (310,887 | ) | ||||||
TOTAL CONVERTIBLE CORPORATE BONDS | |||||||||||||
(Proceeds $337,609) | (310,887 | ) | |||||||||||
TOTAL SECURITIES SOLD SHORT | |||||||||||||
(Proceeds $155,717,449) | $ | (164,194,455 | ) | ||||||||||
SCHEDULE OF WRITTEN OPTIONS | Expiration Date | Exercise Price | Contracts | Value | |||||||||
Written Call Options | |||||||||||||
Alliance Data Systems Corp.: | |||||||||||||
12/2014 | $ | 270.00 | (6 | ) | $ | (10,050 | ) | ||||||
12/2014 | 280.00 | (74 | ) | (68,080 | ) | ||||||||
12/2014 | 290.00 | (15 | ) | (5,475 | ) | ||||||||
BB&T Corp.: | |||||||||||||
12/2014 | 36.00 | (38 | ) | (6,783 | ) | ||||||||
12/2014 | 37.00 | (38 | ) | (3,496 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 39 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF WRITTEN OPTIONS | Expiration Date | Exercise Price | Contracts | Value | ||||||||||||
Written Call Options (Continued) | ||||||||||||||||
Concur Technologies, Inc. | 02/2015 | $ | 130.00 | (92 | ) | $ | (230 | ) | ||||||||
Conversant, Inc. | 12/2014 | 35.00 | (58 | ) | (1,595 | ) | ||||||||||
DIRECTV: | ||||||||||||||||
12/2014 | 85.00 | (77 | ) | (21,675 | ) | |||||||||||
12/2014 | 86.00 | (42 | ) | (8,337 | ) | |||||||||||
12/2014 | 87.50 | (10 | ) | (765 | ) | |||||||||||
01/2015 | 85.00 | (18 | ) | (6,750 | ) | |||||||||||
Halliburton Co. | 12/2014 | 57.50 | (275 | ) | (412 | ) | ||||||||||
International Rectifier Corp. | 03/2015 | 40.00 | (136 | ) | (1,020 | ) | ||||||||||
Manitowoc Co., Inc.: | ||||||||||||||||
12/2014 | 21.00 | (136 | ) | (5,100 | ) | |||||||||||
12/2014 | 22.00 | (136 | ) | (2,040 | ) | |||||||||||
Shire Plc, ADR: | ||||||||||||||||
12/2014 | 210.00 | (31 | ) | (23,870 | ) | |||||||||||
12/2014 | 215.00 | (10 | ) | (5,250 | ) | |||||||||||
Sigma-Aldrich Corp. | 12/2014 | 135.00 | (8 | ) | (1,960 | ) | ||||||||||
TIBCO Software, Inc.: | ||||||||||||||||
01/2015 | 24.00 | (563 | ) | (4,223 | ) | |||||||||||
01/2015 | 25.00 | (15 | ) | (37 | ) | |||||||||||
TRW Automotive Holdings Corp.: | ||||||||||||||||
01/2015 | 105.00 | (90 | ) | (450 | ) | |||||||||||
04/2015 | 105.00 | (91 | ) | (4,323 | ) | |||||||||||
tw telecom, Inc. | 01/2015 | 45.00 | (38 | ) | (4,940 | ) | ||||||||||
TOTAL WRITTEN CALL OPTIONS | ||||||||||||||||
(Premiums received $192,238) | (186,861 | ) | ||||||||||||||
Written Put Options | ||||||||||||||||
Actavis Plc: | ||||||||||||||||
12/2014 | 250.00 | (98 | ) | (10,290 | ) | |||||||||||
12/2014 | 255.00 | (56 | ) | (9,940 | ) | |||||||||||
Alliance Data Systems Corp. | 12/2014 | 200.00 | (1 | ) | (5 | ) | ||||||||||
Cliffs Natural Resources, Inc. | 12/2014 | 7.00 | (277 | ) | (5,263 | ) | ||||||||||
Covidien Plc: | ||||||||||||||||
01/2015 | 57.50 | (245 | ) | (1,225 | ) | |||||||||||
01/2015 | 62.50 | (113 | ) | (283 | ) | |||||||||||
DIRECTV | 12/2014 | 85.00 | (31 | ) | (821 | ) |
See Notes to Financial Statements. | |
40 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF WRITTEN OPTIONS | Expiration Date | Exercise Price | Contracts | Value | ||||||||||||
Written Put Options (Continued) | ||||||||||||||||
Halliburton Co.: | ||||||||||||||||
12/2014 | $ | 42.50 | (1,376 | ) | $ | (280,016 | ) | |||||||||
12/2014 | 50.00 | (275 | ) | (226,188 | ) | |||||||||||
Time Warner Cable, Inc. | 12/2014 | 140.00 | (18 | ) | (2,070 | ) | ||||||||||
TOTAL WRITTEN PUT OPTIONS | ||||||||||||||||
(Premiums received $198,064) | (536,101 | ) | ||||||||||||||
TOTAL WRITTEN OPTIONS | ||||||||||||||||
(Premiums received $390,302) | $ | (722,962 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 41 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
EQUITY SWAP CONTRACTS
Swap Counterparty | Reference Obligation | Rate Paid/Received by the Fund | Termination Dates | Notional Amount | Unrealized Appreciation | ||||||
Goldman, Sachs & Co. | ITV Plc | 1 Month-LIBOR plus 0.35 bps | 07/30/2015 | $ | 831,764 | $ | 77,444 | ||||
Goldman, Sachs & Co. | Premier Oil Plc | 1 Month-LIBOR plus 0.40 bps | 10/07/2015 | (129,666 | ) | 46,937 | |||||
Morgan Stanley | EnQuest Plc | 1 Day-SONIA minus 0.35 bps | 11/28/2016 | (23,631 | ) | 228 | |||||
Morgan Stanley | iShares® STOXX® Europe 600 Oil & Gas UCITS ETF | 1 Day-EONIA minus 0.45 bps | 10/31/2016 | (331,209 | ) | 24,184 | |||||
$ | 347,258 | $ | 148,793 |
Swap Counterparty | Reference Obligation | Rate Paid/Received by the Fund | Termination Dates | Notional Amount | Unrealized Depreciation | ||||||
Morgan Stanley | iShares® STOXX® Europe 600 Media UCITS ETF | 1 Day-EONIA minus 0.45 bps | 10/31/2016 | $ | (233,673 | ) | $ | (16,514 | ) | ||
Morgan Stanley | ProSiebenSat.1 Media AG | 1 Day-EONIA minus 0.40 bps | 10/31/2016 | (50,300 | ) | (3,526 | ) | ||||
Morgan Stanley | RTL Group SA | 1 Day-EONIA minus 0.50 bps | 10/31/2016 | (99,515 | ) | (4,995 | ) | ||||
Morgan Stanley | Societe Television Francaise 1 | 1 Day-EONIA minus 0.40 bps | 10/31/2016 | (103,505 | ) | (10,213 | ) | ||||
$ | (486,993 | ) | $ | (35,248 | ) |
See Notes to Financial Statements. | |
42 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
OUTSTANDING FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contract Description | Contracts to Deliver/Receive | Purchase/ Sale Contract | Expiration Date | Current Value | Unrealized Appreciation | |||||||||
AUD | 177,800 | Sale | 12/15/2014 | 151,105 | $ | 8,085 | ||||||||
CAD | 16,323,700 | Sale | 12/15/2014 | 14,269,339 | 406,258 | |||||||||
CHF | 7,165,600 | Sale | 12/15/2014 | 7,417,887 | 158,038 | |||||||||
EUR | 12,858,800 | Sale | 12/15/2014 | 15,990,821 | 404,939 | |||||||||
GBP | 11,016,300 | Sale | 12/15/2014 | 17,205,916 | 672,841 | |||||||||
JPY | 76,032,000 | Sale | 12/15/2014 | 640,680 | 15,348 | |||||||||
NOK | 18,688,200 | Sale | 12/15/2014 | 2,662,210 | 185,130 | |||||||||
SEK | 7,521,700 | Sale | 12/15/2014 | 1,008,779 | 23,201 | |||||||||
$ | 1,873,840 |
Contract Description | Contracts to Deliver/Receive | Purchase/ Sale Contract | Expiration Date | Current Value | Unrealized Depreciation | |||||||||
AUD | 107,200 | Purchase | 12/15/2014 | 91,105 | $ | (2,400 | ) | |||||||
CAD | 6,725,800 | Purchase | 12/15/2014 | 5,879,348 | (90,235 | ) | ||||||||
CHF | 2,305,100 | Purchase | 12/15/2014 | 2,386,258 | (47,605 | ) | ||||||||
EUR | 4,652,600 | Purchase | 12/15/2014 | 5,785,835 | (22,897 | ) | ||||||||
GBP | 10,979,880 | Purchase | 12/15/2014 | 17,149,033 | (616,174 | ) | ||||||||
NOK | 14,867,200 | Purchase | 12/15/2014 | 2,117,893 | (150,765 | ) | ||||||||
$ | (930,076 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 43 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Country | % of Net Assets(a) | |||
Canada | 3.03 | % | ||
Japan | 2.88 | % | ||
Great Britain | 0.79 | % | ||
Switzerland | 0.73 | % | ||
Netherlands | 0.73 | % | ||
Brazil | 0.64 | % | ||
Finland | 0.56 | % | ||
Bermuda | 0.21 | % | ||
Norway | 0.08 | % | ||
Australia | 0.01 | % | ||
United States | 89.05 | % | ||
Other Assets in Excess of Liabilities | 1.29 | % | ||
100.00 | % |
(a) | These percentages represent long positions only and are not net of short positions. |
Abbreviations: |
ADR - American Depositary Receipt |
AG - Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e., owned by shareholders |
ASA - Allmennaksjeselskap is the Norwegian term for public limited company |
AUD - Australian Dollar |
bps - Basis Points |
CAD - Canadian Dollar |
CHF - Swiss Franc |
CPR - Conditional Prepayment Rate |
CVR - Contingent Value Rights |
EONIA - Euro OverNight Index Average |
ETF - Exchange-Traded Fund |
ETN - Exchange-Traded Note |
EUR - Euro |
GBP - British Pound |
JPY - Japanese Yen |
LIBOR - London Interbank Offered Rate |
LLC - Limited Liability Company |
LP - Limited Partnership |
Ltd. - Limited |
MSCI - Morgan Stanley Capital International |
NOK - Norwegian Kronor |
N.V. - Naamloze Vennootschap is the Dutch term for a public limited liability corporation |
OYJ - Osakeyhtio is the Finnish equivalent of a public limited company |
PIK - Payment-in-kind |
Plc - Public Limited Company |
SA - Generally designates corporations in various countries, mostly those employing civil law. This translates literally in all languages mentioned as anonymous company |
SEK - Swedish Kronor |
See Notes to Financial Statements. | |
44 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SONIA - Sterling OverNight Index Average |
S&P - Standard & Poor's |
SPDR - Standard & Poor's Depositary Receipt |
UCITS - Undertakings for the Collective Investment of Transferable Securities |
ULC - Unlimited Liability Company |
VIX - Chicago Board Options Exchange Market Volatility Index |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 45 |
The Arbitrage Event-Driven Fund | |
November 30, 2014 (Unaudited) |
The following is a summary of the inputs used as of November 30, 2014, in valuing the Arbitrage Event-Driven Fund’s investments carried at value:
Investments in Securities at Value | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Common Stocks | ||||||||||||||||
Aerospace & Defense | $ | 13,041,590 | $ | – | $ | 272 | $ | 13,041,862 | ||||||||
Apparel | 910,006 | – | – | 910,006 | ||||||||||||
Auto Manufacturers | 733,555 | – | – | 733,555 | ||||||||||||
Auto Parts & Equipment | 8,551,180 | – | – | 8,551,180 | ||||||||||||
Banks | 2,557,474 | – | – | 2,557,474 | ||||||||||||
Beverages | 2,381,684 | – | – | 2,381,684 | ||||||||||||
Biotechnology | 758,476 | – | – | 758,476 | ||||||||||||
Building Materials | 1,591,088 | – | – | 1,591,088 | ||||||||||||
Chemicals | 20,137,987 | – | – | 20,137,987 | ||||||||||||
Coal | 4,073,874 | – | – | 4,073,874 | ||||||||||||
Commercial Services | 2,171,725 | – | – | 2,171,725 | ||||||||||||
Computers | 7,117,519 | – | – | 7,117,519 | ||||||||||||
Diversified Financial Services | 1,310,631 | – | – | 1,310,631 | ||||||||||||
Electric | 7,968,426 | – | – | 7,968,426 | ||||||||||||
Electrical Components & Equipment | 4,431,146 | – | – | 4,431,146 | ||||||||||||
Entertainment | 3,751,225 | – | – | 3,751,225 | ||||||||||||
Food | 19,195,281 | – | – | 19,195,281 | ||||||||||||
Hand & Machine Tools | – | 2,788,202 | – | 2,788,202 | ||||||||||||
Healthcare - Products | 29,618,140 | – | – | 29,618,140 | ||||||||||||
Healthcare - Services | 14,506,286 | – | – | 14,506,286 | ||||||||||||
Holding Companies - Diversified | 1,449,623 | – | – | 1,449,623 | ||||||||||||
Insurance | 16,865,977 | – | – | 16,865,977 | ||||||||||||
Internet | 25,087,091 | – | – | 25,087,091 | ||||||||||||
Machinery - Diversified | 1,851,672 | – | – | 1,851,672 | ||||||||||||
Media | 23,676,410 | – | – | 23,676,410 | ||||||||||||
Mining | 1,771,056 | – | – | 1,771,056 | ||||||||||||
Oil & Gas | 1,225,922 | – | – | 1,225,922 | ||||||||||||
Oil & Gas Services | 37,510,085 | – | – | 37,510,085 | ||||||||||||
Packaging & Containers | 4,002,191 | – | – | 4,002,191 | ||||||||||||
Pharmaceuticals | 20,298,566 | – | – | 20,298,566 | ||||||||||||
Real Estate Investment Trusts | 18,677,289 | – | – | 18,677,289 | ||||||||||||
Retail | 20,227,169 | – | – | 20,227,169 | ||||||||||||
Semiconductors | 49,313,417 | – | – | 49,313,417 | ||||||||||||
Software | 19,749,556 | – | – | 19,749,556 | ||||||||||||
Telecommunications | 19,006,616 | – | – | 19,006,616 | ||||||||||||
Telephones & Telecommunications | 134,850 | – | – | 134,850 |
See Notes to Financial Statements. | |
46 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | |
November 30, 2014 (Unaudited) |
Investments in Securities at Value (Continued) | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Transportation | $ | 537,646 | $ | – | $ | – | $ | 537,646 | ||||||||
Exchange-Traded Notes | 829,780 | – | – | 829,780 | ||||||||||||
Rights | 5,162,125 | – | 331,985 | 5,494,110 | ||||||||||||
Bank Loans | – | 18,002,425 | – | 18,002,425 | ||||||||||||
Corporate Bonds | – | 177,512,603 | – | 177,512,603 | ||||||||||||
Convertible Corporate Bonds | – | 23,238,078 | – | 23,238,078 | ||||||||||||
Purchased Options | 3,557,370 | – | – | 3,557,370 | ||||||||||||
Short-Term Investments | 31,598,503 | – | – | 31,598,503 | ||||||||||||
TOTAL | $ | 447,340,207 | $ | 221,541,308 | $ | 332,257 | $ | 669,213,772 | ||||||||
Other Financial Instruments* | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $ | – | $ | 1,873,840 | $ | – | $ | 1,873,840 | ||||||||
Equity Swaps | 148,793 | – | – | 148,793 | ||||||||||||
Liabilities | ||||||||||||||||
Common Stocks** | (139,088,733 | ) | – | – | (139,088,733 | ) | ||||||||||
Exchange-Traded Funds | (19,651,084 | ) | – | – | (19,651,084 | ) | ||||||||||
Rights | – | – | (15 | ) | (15 | ) | ||||||||||
Corporate Bonds | – | (5,143,736 | ) | – | (5,143,736 | ) | ||||||||||
Convertible Corporate Bonds | – | (310,887 | ) | – | (310,887 | ) | ||||||||||
Written Options | (722,962 | ) | – | – | (722,962 | ) | ||||||||||
Forward Foreign Currency Exchange Contracts | – | (930,076 | ) | – | (930,076 | ) | ||||||||||
Equity Swaps | (35,248 | ) | – | – | (35,248 | ) | ||||||||||
TOTAL | $ | (159,349,234 | ) | $ | (4,510,859 | ) | $ | (15 | ) | $ | (163,860,108 | ) |
* | Other financial instruments are instruments such as written options, securities sold short, equity swaps and forward foreign currency exchange contracts. |
** | Refer to Portfolio of Investments for sector information. |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 47 |
The Arbitrage Event-Driven Fund | |
November 30, 2014 (Unaudited) |
The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund’s assets and liabilities during the year ended November 30, 2014:
Investments in Securities | Balance as of May 31, 2014 | Accrued Premium | Return of Capital | Realized Gain | Change in Unrealized Appreciation/ (Depreciation) | Purchases | Sales Proceeds | Transfer into Level 3 | Transfer out of Level 3 | Balance as of November 30, 2014 | Net change in unrealized appreciation/ (depreciation) included in the Statements of Operations attributable to Level 3 investments held at November 30, 2014 | |||||||||||||||||||||||||||||||||
Common Stocks | $ | 266 | $ | – | $ | – | $ | – | $ | 6 | $ | – | $ | – | $ | – | $ | – | $ | 272 | $ | (46,804 | ) | |||||||||||||||||||||
Rights | 293,855 | – | – | – | 38,130 | 0 | – | – | – | 331,985 | 38,130 | |||||||||||||||||||||||||||||||||
Corporate Bonds | 135,575 | – | (33,695 | ) | – | 7,720 | – | (109,600 | ) | – | – | – | – | |||||||||||||||||||||||||||||||
Total | $ | 429,696 | $ | – | $ | (33,695 | ) | $ | – | $ | 45,856 | $ | 0 | $ | (109,600 | ) | $ | – | $ | – | $ | 332,257 | $ | (8,674 | ) | |||||||||||||||||||
Other Financial Instruments | Balance as of May 31, 2014 | Accrued Discount/ Premium | Return of Capital | Realized Gain | Change in Unrealized Depreciation | Purchases | Sales Proceeds | Transfer into Level 3 | Transfer out of Level 3 | Balance as of November 30, 2014 | Net change in unrealized depreciation included in the Statements of Operations attributable to Level 3 investments held at November 30, 2014 | |||||||||||||||||||||||||||||||||
Rights | $ | – | $ | – | $ | – | $ | – | $ | (15 | ) | $ | 0 | $ | – | $ | – | $ | – | $ | (15 | ) | $ | (15 | ) | |||||||||||||||||||
Total | $ | – | $ | – | $ | – | $ | – | $ | (15 | ) | $ | 0 | $ | – | $ | – | $ | – | $ | (15 | ) | $ | (15 | ) |
See Notes to Financial Statements. | |
48 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Credit Opportunities Fund | Portfolio Information |
November 30, 2014 (Unaudited) |
Performance (annualized returns as of November 30, 2014)
One Year | Since Inception* | |
Arbitrage Credit Opportunities Fund, Class R | 1.70% | 3.42% |
Arbitrage Credit Opportunities Fund, Class I | 1.94% | 3.61% |
Arbitrage Credit Opportunities Fund, Class C** | -0.07% | 2.71% |
Arbitrage Credit Opportunities Fund, Class A*** | -1.57% | 1.11% |
Barclays Capital U.S. Aggregate Bond Index | 5.27% | 1.77% |
Current performance may be higher or lower than performance quoted above. Any performance data quoted represents past performance and the investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Returns do not reflect a 2% redemption fee for shares that are redeemed from the fund within 60 days of purchase, which, if reflected, would reduce the performance quoted. Returns shown above include the reinvestment of all dividends and capital gains. Contractual fee waivers are currently in effect. Without such fee waivers, performance numbers would be reduced. You can obtain performance data current to the most recent month end by calling 1-800-295-4485 or going to www.arbitragefunds.com.
* | Class R, Class I and Class C inception: 10/1/12; Class A inception: 6/1/13. |
** | Class C shares are subject to a 1.00% contingent deferred sales charge on all purchases redeemed in 12 months of purchase. |
*** | Class A shares are subject to a maximum front-end sales load of 3.25% on purchases up to $500,000. The shares are also subject to a deferred sales charge of up to 1.00% on purchases of $500,000 or more purchased without a front-end sales load and redeemed within 18 months of purchase. |
The Total Annual Fund Operating Expenses for Class R, Class I, Class C and Class A are 2.62%, 2.37%, 3.37% and 2.62%, respectively. The Advisor has agreed to waive fees in excess of 1.50%, 1.25%, 2.25% and 1.50% for Class R, Class I, Class C and Class A, respectively, until at least August 31, 2016.
The Barclays Capital U.S. Aggregate Bond Index is a market value-weighted index of investment grade fixed-rated debt issues, including government, corporate, asset-backed and mortgage-backed securities with a maturity of one year or more.
An investor may not invest directly in an index.
Semi-Annual Report | November 30, 2014 | 49 |
The Arbitrage Credit Opportunities Fund | Portfolio Information (continued) |
November 30, 2014 (Unaudited) |
Growth of $10,000 Investment
The chart represents historical performance of a hypothetical investment of $10,000 in the Class R shares of the Fund since inception. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Sector Weighting
The following chart shows the sector weightings of the Arbitrage Credit Opportunities Fund’s investments in common stock, corporate bonds, convertible corporate bonds and exchange-traded funds as of the report date.
50 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments |
November 30, 2014 (Unaudited) |
Shares | Value | |||||||
COMMON STOCKS - 0.85% | ||||||||
Biotechnology - 0.27% | ||||||||
Illumina, Inc.(a) | 600 | $ | 114,534 | |||||
Software - 0.58% | ||||||||
salesforce.com, Inc.(a) | 4,200 | 251,454 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $334,949) | 365,988 | |||||||
EXCHANGE-TRADED NOTES - 0.26% | ||||||||
Debt Funds - 0.26% | ||||||||
iPath® S&P 500® VIX Short-Term Futures™ ETN(a) | 4,079 | 111,724 | ||||||
TOTAL EXCHANGE-TRADED NOTES | ||||||||
(Cost $120,457) | 111,724 |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
BANK LOANS - 5.87% | |||||||||||||
Cengage Learning Acquisitions, Inc.(b) | 03/06/2020 | 7.000 | % | $ | 497,500 | $ | 499,015 | ||||||
FairPoint Communications, Inc.(b) | 02/14/2019 | 7.500 | % | 296,985 | 299,585 | ||||||||
OSG Bulk Ships, Inc.(b) | 07/22/2019 | 5.250 | % | 648,375 | 649,594 | ||||||||
Station Casinos(b) | 03/01/2020 | 4.250 | % | 383,444 | 381,255 | ||||||||
Zayo Bandwidth LLC(b) | 06/14/2019 | 4.000 | % | 703,696 | 703,344 | ||||||||
TOTAL BANK LOANS | |||||||||||||
(Cost $2,547,534) | 2,532,793 | ||||||||||||
CORPORATE BONDS - 70.69% | |||||||||||||
Aerospace & Defense - 5.44% | |||||||||||||
Alliant Techsystems, Inc. | 09/15/2020 | 6.875 | % | 1,016,000 | 1,084,580 | ||||||||
B/E Aerospace, Inc. | 04/01/2022 | 5.250 | % | 1,137,000 | 1,262,070 | ||||||||
2,346,650 | |||||||||||||
Auto Parts & Equipment - 1.61% | |||||||||||||
TRW Automotive, Inc.(c) | 03/01/2021 | 4.500 | % | 692,000 | 695,460 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 51 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CORPORATE BONDS - 70.69% (Continued) | |||||||||||||
Banks - 1.99% | |||||||||||||
PNC Preferred Funding Trust II(c)(d) | Perpetual Maturity | 1.457 | % | $ | 323,000 | $ | 308,668 | ||||||
Popular North America Capital Trust I | 09/15/2034 | 6.564 | % | 367,000 | 311,032 | ||||||||
Wells Fargo Capital X | 12/15/2036 | 5.950 | % | 233,000 | 237,078 | ||||||||
856,778 | |||||||||||||
Building Materials - 1.22% | |||||||||||||
USG Corp.(c) | 10/15/2018 | 8.375 | % | 500,000 | 523,750 | ||||||||
Chemicals - 1.94% | |||||||||||||
Taminco Global Chemical Corp.(c) | 03/31/2020 | 9.750 | % | 764,000 | 837,535 | ||||||||
Computers - 1.23% | |||||||||||||
SunGard Data Systems, Inc.(e) | 11/15/2020 | 7.625 | % | 497,000 | 529,305 | ||||||||
Diversified Financial Services - 2.84% | |||||||||||||
GFI Group, Inc. | 07/19/2018 | 10.375 | % | 443,000 | 522,740 | ||||||||
Prospect Holding Co., LLC / Prospect Holding Finance Co.(c) | 10/01/2018 | 10.250 | % | 475,000 | 399,000 | ||||||||
ROC Finance LLC(c) | 09/01/2018 | 12.125 | % | 289,000 | 302,728 | ||||||||
1,224,468 | |||||||||||||
Electronics - 2.62% | |||||||||||||
Agilent Technologies, Inc. | 11/01/2017 | 6.500 | % | 143,000 | 160,111 | ||||||||
Viasystems, Inc.(c)(e) | 05/01/2019 | 7.875 | % | 919,000 | 969,545 | ||||||||
1,129,656 | |||||||||||||
Energy - Alternate Sources - 1.79% | |||||||||||||
First Wind Capital LLC(c) | 06/01/2018 | 10.250 | % | 716,000 | 773,280 | ||||||||
Entertainment - 2.36% | |||||||||||||
Mohegan Tribal Gaming Authority(c) | 09/15/2018 | 11.000 | % | 500,000 | 492,500 | ||||||||
Peninsula Gaming LLC / Peninsula Gaming Corp.(c) | 02/15/2018 | 8.375 | % | 500,000 | 523,750 | ||||||||
1,016,250 | |||||||||||||
Financial Services - 1.64% | |||||||||||||
Marina District Finance Co., Inc. | 08/15/2018 | 9.875 | % | 675,000 | 708,885 |
See Notes to Financial Statements. | |
52 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CORPORATE BONDS - 70.69% (Continued) | |||||||||||||
Food - 2.54% | |||||||||||||
US Foods, Inc. | 06/30/2019 | 8.500 | % | $ | 1,031,000 | $ | 1,095,438 | ||||||
Healthcare - Products - 4.19% | |||||||||||||
Alere, Inc. | 10/01/2018 | 8.625 | % | 1,000,000 | 1,037,500 | ||||||||
Biomet, Inc. | 10/01/2020 | 6.500 | % | 726,000 | 768,834 | ||||||||
1,806,334 | |||||||||||||
Healthcare - Services - 1.80% | |||||||||||||
Gentiva Health Services, Inc. | 09/01/2018 | 11.500 | % | 419,000 | 447,282 | ||||||||
MedImpact Holdings, Inc.(c) | 02/01/2018 | 10.500 | % | 309,000 | 328,313 | ||||||||
775,595 | |||||||||||||
Household Products & Wares - 0.74% | |||||||||||||
American Achievement Corp.(c) | 04/15/2016 | 10.875 | % | 327,000 | 320,051 | ||||||||
Insurance - 1.77% | |||||||||||||
Ambac Assurance Corp.(c)(e) | 06/07/2020 | 5.100 | % | 356,340 | 413,800 | ||||||||
Ambac Assurance Corp.(c) | 08/28/2039 | 5.100 | % | 146,000 | 119,720 | ||||||||
Syncora Holdings Ltd.(d) | |||||||||||||
Perpetual Maturity | 5.000 | % | 66,155 | 54,436 | |||||||||
Perpetual Maturity | 6.000 | % | 208,000 | 172,900 | |||||||||
760,856 | |||||||||||||
Iron & Steel - 0.20% | |||||||||||||
1839688 Alberta ULC, PIK | 02/13/2020 | 14.000 | % | 102,235 | 84,344 | ||||||||
Media - 7.79% | |||||||||||||
CCO Holdings LLC / CCO Holdings Capital Corp.(e) | 01/15/2019 | 7.000 | % | 924,000 | 962,115 | ||||||||
Entercom Radio LLC(e) | 12/01/2019 | 10.500 | % | 380,000 | 419,425 | ||||||||
LIN Television Corp. | 04/15/2018 | 8.375 | % | 591,000 | 614,640 | ||||||||
Nara Cable Funding Ltd.(c) | 12/01/2018 | 8.875 | % | 600,000 | 626,628 | ||||||||
Univision Communications, Inc.(c) | 05/15/2021 | 8.500 | % | 684,000 | 735,300 | ||||||||
3,358,108 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 53 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CORPORATE BONDS - 70.69% (Continued) | |||||||||||||
Mining - 1.55% | |||||||||||||
FMG Resources (August 2006) Pty Ltd.(c) | 11/01/2019 | 8.250 | % | $ | 300,000 | $ | 277,500 | ||||||
Prince Mineral Holding Corp.(c) | 12/15/2019 | 11.750 | % | 360,000 | 392,400 | ||||||||
669,900 |
Oil & Gas - 5.45% | |||||||||||||
Athlon Holdings LP / Athlon Finance Corp.(f)(g) | 04/15/2021 | 7.375 | % | 750,000 | 838,875 | ||||||||
Forest Oil Corp. | 06/15/2019 | 7.250 | % | 62,000 | 61,225 | ||||||||
QR Energy LP / QRE Finance Corp., LLC(f)(g) | 08/01/2020 | 9.250 | % | 835,000 | 959,365 | ||||||||
Sabine Oil & Gas LLC / Sabine Oil & Gas Finance Corp. | 02/15/2017 | 9.750 | % | 441,000 | 412,335 | ||||||||
Southern Pacific Resource Corp.(c) | 01/25/2018 | 8.750 | % | 356,000 | 77,831 | ||||||||
2,349,631 | |||||||||||||
Packaging & Containers - 2.59% | |||||||||||||
Ardagh Finance Holdings SA, PIK(c) | 06/15/2019 | 8.625 | % | 500,000 | 494,755 | ||||||||
Packaging Dynamics Corp.(c) | 02/01/2016 | 8.750 | % | 614,000 | 620,140 | ||||||||
1,114,895 | |||||||||||||
Real Estate Investment Trusts - 0.24% | |||||||||||||
Iron Mountain, Inc. | 08/15/2021 | 8.375 | % | 100,000 | 104,000 | ||||||||
Retail - 6.39% | |||||||||||||
Brown Shoe Co., Inc. | 05/15/2019 | 7.125 | % | 755,000 | 788,975 | ||||||||
Burger King Corp. | 10/15/2018 | 9.875 | % | 719,000 | 754,950 | ||||||||
Cash America International, Inc. | 05/15/2018 | 5.750 | % | 370,000 | 384,800 | ||||||||
PC Nextco Holdings LLC / PC Nextco Finance, Inc. | 08/15/2019 | 8.750 | % | 812,000 | 824,180 | ||||||||
2,752,905 | |||||||||||||
Semiconductors - 0.89% | |||||||||||||
Freescale Semiconductor, Inc. | 08/01/2020 | 10.750 | % | 349,000 | 383,900 | ||||||||
Software - 1.66% | |||||||||||||
Eagle Midco, Inc.(c) | 06/15/2018 | 9.000 | % | 700,000 | 714,000 |
See Notes to Financial Statements. | |
54 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CORPORATE BONDS - 70.69% (Continued) | |||||||||||||
Telecommunications - 8.21% | |||||||||||||
Cincinnati Bell, Inc. | 03/15/2018 | 8.750 | % | $ | 1,021,000 | $ | 1,056,735 | ||||||
Level 3 Financing, Inc. | 07/01/2019 | 8.125 | % | 480,000 | 511,200 | ||||||||
T-Mobile USA, Inc. | 04/28/2019 | 6.464 | % | 403,000 | 418,112 | ||||||||
tw telecom holdings, Inc.(f)(g) | |||||||||||||
10/01/2022 | 5.375 | % | 90,000 | 99,621 | |||||||||
09/01/2023 | 6.375 | % | 536,000 | 616,561 | |||||||||
Windstream Corp. | 09/01/2018 | 8.125 | % | 801,000 | 836,044 | ||||||||
3,538,273 | |||||||||||||
TOTAL CORPORATE BONDS | |||||||||||||
(Cost $30,790,864) | 30,470,247 | ||||||||||||
CONVERTIBLE CORPORATE BONDS - 6.22% | |||||||||||||
Engineering & Construction - 0.49% | |||||||||||||
Aecon Group, Inc. | 10/31/2015 | 6.250 | % | 235,000 | 210,339 | ||||||||
Mining - 0.84% | |||||||||||||
Primero Mining Corp. | 03/31/2016 | 6.500 | % | 364,000 | 364,000 | ||||||||
Oil & Gas - 0.53% | |||||||||||||
BPZ Resources, Inc.(e) | 10/01/2017 | 8.500 | % | 352,000 | 228,360 | ||||||||
Oil & Gas Services - 0.18% | |||||||||||||
Cal Dive International, Inc. | 07/15/2017 | 5.000 | % | 314,000 | 75,949 | ||||||||
Packaging & Containers - 1.49% | |||||||||||||
Owens-Brockway Glass Container, Inc.(c) | 06/01/2015 | 3.000 | % | 633,000 | 642,495 | ||||||||
Real Estate Investment Trusts - 0.86% | |||||||||||||
Annaly Capital Management, Inc. | 02/15/2015 | 4.000 | % | 358,000 | 370,082 | ||||||||
Software - 1.53% | |||||||||||||
Concur Technologies, Inc. | 06/15/2018 | 0.500 | % | 500,000 | 660,625 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 55 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CONVERTIBLE CORPORATE BONDS - 6.22% (Continued) | |||||||||||||
Telecommunications - 0.30% | |||||||||||||
Globalstar, Inc., PIK (2.25% PIK) | 04/01/2028 | 8.000 | % | $ | 27,458 | $ | 127,594 | ||||||
TOTAL CONVERTIBLE CORPORATE BONDS | |||||||||||||
(Cost $2,854,939) | 2,679,444 |
Expiration Date | Exercise Price | Contracts | Value | |||||||||||||
PURCHASED OPTIONS(a)- 0.00%(h) | ||||||||||||||||
Put Options Purchased - 0.00%(h) | ||||||||||||||||
iShares® 7-10 Year Treasury Bond ETF | 12/2014 | $ | 101.00 | 15 | $ | 187 | ||||||||||
SPDR® S&P 500® ETF Trust | 12/2014 | 160.00 | 81 | 203 | ||||||||||||
TOTAL PUT OPTIONS PURCHASED | ||||||||||||||||
(Cost $8,350) | 390 | |||||||||||||||
TOTAL PURCHASED OPTIONS | ||||||||||||||||
(Cost $8,350) | 390 | |||||||||||||||
Yield | Shares | Value | ||||||||||||||
SHORT-TERM INVESTMENTS - 14.73% | ||||||||||||||||
Time Deposits | ||||||||||||||||
Euro Time Deposit | 0.010 | % | 6,347,144 | 6,347,144 | ||||||||||||
TOTAL SHORT-TERM INVESTMENTS | ||||||||||||||||
(Cost $6,347,144) | 6,347,144 | |||||||||||||||
Total Investments - 98.62% (Cost $43,004,237) | 42,507,730 | |||||||||||||||
Other Assets in Excess of Liabilities - 1.38% | 595,519 | |||||||||||||||
NET ASSETS - 100.00% | $ | 43,103,249 |
(a) | Non-income-producing security. |
(b) | Interest rate will change at a future date. Interest rate shown reflects the rate in effect at November 30, 2014. |
See Notes to Financial Statements. | |
56 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
(c) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of November 30, 2014, these securities had a total value of $11,589,149 or 26.89% of net assets. |
(d) | This security has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. |
(e) | Security, or a portion of security, is being held as collateral for short sales or written option contracts. At period end, the aggregate market value of those securities was $1,656,279, representing 3.84% of net assets. |
(f) | Security considered illiquid. On November 30, 2014, the total market value of these securities was $2,514,422, representing 5.83% of net assets. |
(g) | Security fair valued using methods determined in good faith by the Pricing Committee. As of November 30, 2014, the total market value of these securities was $2,514,422, representing 5.83% of net assets. |
(h) | Less than 0.005% of Net Assets. |
Securities are determined to be illiquid under the procedures approved by the Funds Board of Trustees. Information related to the illiquid securities is as follows:
Date(s) of Purchase | Security | Cost | Market Value | % of Net Assets | |||||||||
10/28/2014 | Athlon Holdings LP / Athlon Finance Corp. | $ | 819,530 | $ | 838,875 | 1.95 | % | ||||||
07/24/2014-10/22/2014 | QR Energy LP / QRE Finance Corp., LLC | 949,043 | 959,365 | 2.22 | |||||||||
10/21/2014 | tw telecom holdings, Inc., 5.375% | 98,009 | 99,621 | 0.23 | |||||||||
08/04/2014-10/24/2014 | tw telecom holdings, Inc., 6.375% | 603,732 | 616,561 | 1.43 | |||||||||
$ | 2,514,422 | 5.83 | % |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 57 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
SCHEDULE OF SECURITIES SOLD SHORT | Shares | Value | |||||||||||
COMMON STOCKS - (0.37%) | |||||||||||||
Engineering & Construction - (0.05%) | |||||||||||||
Aecon Group, Inc. | (1,853 | ) | $ | (19,462 | ) | ||||||||
Oil & Gas - (0.05%) | |||||||||||||
BPZ Resources, Inc. | (36,899 | ) | (22,139 | ) | |||||||||
Real Estate Investment Trusts - (0.23%) | |||||||||||||
Annaly Capital Management, Inc. | (8,427 | ) | (97,079 | ) | |||||||||
Telecommunications - (0.04%) | |||||||||||||
Globalstar, Inc. | (6,827 | ) | (19,252 | ) | |||||||||
TOTAL COMMON STOCKS | |||||||||||||
(Proceeds $246,118) | (157,932 | ) | |||||||||||
EXCHANGE-TRADED FUNDS - (0.59%) | |||||||||||||
Debt Funds - (0.59%) | |||||||||||||
iShares® 7-10 Year Treasury Bond ETF | (806 | ) | (85,589 | ) | |||||||||
SPDR® Barclays High Yield Bond ETF Trust | (4,221 | ) | (167,067 | ) | |||||||||
(252,656 | ) | ||||||||||||
TOTAL EXCHANGE-TRADED FUNDS | |||||||||||||
(Proceeds $250,794) | (252,656 | ) | |||||||||||
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CORPORATE BONDS - (2.63%) | |||||||||||||
Healthcare - Services - (0.22%) | |||||||||||||
Kindred Healthcare, Inc. | 04/15/2022 | 6.375 | % | $ | (100,000 | ) | $ | (96,500 | ) | ||||
Mining - (0.62%) | |||||||||||||
FMG Resources (August 2006) Pty Ltd. | 04/01/2022 | 6.875 | % | (300,000 | ) | (268,500 | ) | ||||||
Pharmaceuticals - (0.86%) | |||||||||||||
Allergan, Inc. | 03/15/2023 | 2.800 | % | (400,000 | ) | (370,365 | ) | ||||||
Pipelines - (0.09%) | |||||||||||||
Kinder Morgan Energy Partners LP | 09/01/2022 | 3.950 | % | (38,000 | ) | (38,263 | ) |
See Notes to Financial Statements. | |
58 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Maturity Date | Rate | Principal Amount | Value | ||||||||||
CORPORATE BONDS - (2.63%)(Continued) | |||||||||||||
Telecommunications - (0.84%) | |||||||||||||
T-Mobile USA, Inc. | 04/01/2023 | 6.625 | % | $ | (348,000 | ) | $ | (361,050 | ) | ||||
TOTAL CORPORATE BONDS | |||||||||||||
(Proceeds $1,181,530) | (1,134,678 | ) | |||||||||||
CONVERTIBLE CORPORATE BONDS - (2.06%) | |||||||||||||
Biotechnology - (0.67%) | |||||||||||||
Illumina, Inc. | 06/15/2021 | 0.500 | % | (250,000 | ) | (287,031 | ) | ||||||
Oil & Gas - (0.07%) | |||||||||||||
BPZ Resources, Inc. | 03/01/2015 | 6.500 | % | (33,000 | ) | (30,174 | ) | ||||||
Software - (1.32%) | |||||||||||||
salesforce.com, Inc. | 04/01/2018 | 0.250 | % | (500,000 | ) | (570,938 | ) | ||||||
TOTAL CONVERTIBLE CORPORATE BONDS | |||||||||||||
(Proceeds $850,698) | (888,143 | ) | |||||||||||
TOTAL SECURITIES SOLD SHORT | |||||||||||||
(Proceeds $2,529,140) | $ | (2,433,409 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 59 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
OUTSTANDING FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contract Description | Contracts to Deliver/Receive | Purchase/ Sale Contract | Expiration Date | Current Value | Unrealized Appreciation | |||||||||
CAD | 1,407,600 | Sale | 12/15/2014 | 1,230,452 | $ | 39,816 | ||||||||
$ | 39,816 |
Contract Description | Contracts to Deliver/Receive | Purchase/ Sale Contract | Expiration Date | Current Value | Unrealized Depreciation | |||||||||
CAD | 1,093,000 | Purchase | 12/15/2014 | 955,444 | $ | (13,475 | ) | |||||||
$ | (13,475 | ) |
See Notes to Financial Statements. | |
60 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Credit Opportunities Fund | Portfolio of Investments (continued) |
November 30, 2014 (Unaudited) |
Country | % of Net Assets(a) | |||
Canada | 1.71 | % | ||
Ireland | 1.45 | % | ||
Luxembourg | 1.15 | % | ||
Austria | 0.64 | % | ||
United States | 93.67 | % | ||
Other Assets in Excess of Liabilities | 1.38 | % | ||
100.00 | % |
(a) | These percentages represent long positions only and are not net of short positions. |
Abbreviations: |
CAD - Canadian Dollar |
ETF - Exchange-Traded Fund |
ETN - Exchange-Traded Note |
LLC - Limited Liability Company |
LP - Limited Partnership |
Ltd. - Limited |
PIK - Payment-in-kind |
Pty - Proprietary |
SA - Generally designates corporations in various countries, mostly those employing civil law. This translates literally in all languages mentioned as anonymous company |
S&P - Standard & Poor's |
SPDR - Standard & Poor's Depositary Receipt |
ULC - Unlimited Liability Company |
VIX - Chicago Board Options Exchange Market Volatility Index |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 61 |
The Arbitrage Credit Opportunities Fund | |
November 30, 2014 (Unaudited) |
The following is a summary of the inputs used as of November 30, 2014, in valuing the Arbitrage Credit Opportunities Fund’s investments carried at value:
Investments in Securities at Value | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Common Stocks** | $ | 365,988 | $ | – | $ | – | $ | 365,988 | ||||||||
Exchange-Traded Notes | 111,724 | – | – | 111,724 | ||||||||||||
Bank Loans | – | 2,532,793 | – | 2,532,793 | ||||||||||||
Corporate Bonds | – | 30,470,247 | – | 30,470,247 | ||||||||||||
Convertible Corporate Bonds | – | 2,679,444 | – | 2,679,444 | ||||||||||||
Purchased Options | 390 | – | – | 390 | ||||||||||||
Short-Term Investments | 6,347,144 | – | – | 6,347,144 | ||||||||||||
TOTAL | $ | 6,825,246 | $ | 35,682,484 | $ | – | $ | 42,507,730 | ||||||||
Other Financial Instruments* | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Exchange Contracts | $ | – | $ | 39,816 | $ | – | $ | 39,816 | ||||||||
Liabilities | ||||||||||||||||
Common Stocks** | (157,932 | ) | – | – | (157,932 | ) | ||||||||||
Exchange-Traded Funds | (252,656 | ) | – | – | (252,656 | ) | ||||||||||
Corporate Bonds | – | (1,134,678 | ) | – | (1,134,678 | ) | ||||||||||
Convertible Corporate Bonds | – | (888,143 | ) | – | (888,143 | ) | ||||||||||
Forward Foreign Currency Exchange Contracts | – | (13,475 | ) | – | (13,475 | ) | ||||||||||
TOTAL | $ | (410,588 | ) | $ | (1,996,480 | ) | $ | – | $ | (2,407,068 | ) |
* | Other financial instruments are instruments such as securities sold short and forward foreign currency exchange contracts. |
** | Refer to Portfolio of Investments for sector information. |
See Notes to Financial Statements. | |
62 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | Statement of Assets and Liabilities |
November 30, 2014 (Unaudited) |
ASSETS | ||||
Investments: | ||||
At cost | $ | 2,416,756,023 | ||
At value (Note 2) | $ | 2,505,515,338 | ||
Cash | 66,472 | |||
Cash denominated in foreign currency (Cost $3,178,249) | 3,144,593 | |||
Deposits with brokers for securities sold short (Note 2) | 738,318,806 | |||
Segregated cash for swaps (Note 2) | 75,584 | |||
Receivable for investment securities sold | 127,572,600 | |||
Receivable for capital shares sold | 5,100,206 | |||
Unrealized appreciation on forward foreign currency exchange contracts (Note 8) | 10,767,754 | |||
Dividends and interest receivable | 1,397,938 | |||
Prepaid expenses and other assets | 176,260 | |||
Total Assets | 3,392,135,551 | |||
LIABILITIES | ||||
Securities sold short, at value (Note 2) (proceeds $619,152,171) | 677,930,556 | |||
Written options, at value (Note 2) (premiums received $2,907,731) | 4,292,704 | |||
Loan Payable (Note 4) | 113,200,000 | |||
Payable to custodian | 33,694 | |||
Payable for investment securities purchased | 171,818,554 | |||
Unrealized depreciation on forward foreign currency exchange contracts (Note 8) | 4,541,603 | |||
Payable for capital shares redeemed | 2,153,515 | |||
Payable to Advisor (Note 6) | 2,108,109 | |||
Dividends payable on securities sold short (Note 2) | 1,164,912 | |||
Payable to Distributor (Note 6) | 140,533 | |||
Payable to Administrator (Note 6) | 346,119 | |||
Interest expense payable | 470,087 | |||
Payable to Trustees | 41,278 | |||
Payable to Chief Compliance Officer (Note 6) | 54,245 | |||
Other accrued expenses and liabilities | 182,010 | |||
Total Liabilities | 978,477,919 | |||
NET ASSETS | $ | 2,413,657,632 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 2,425,276,612 | ||
Accumulated net investment loss | (25,214,067 | ) | ||
Accumulated net realized loss on investments, equity swap contracts, securities sold short, written option contracts and foreign currencies | (21,783,084 | ) | ||
Net unrealized appreciation on investments, equity swap contracts, securities sold short, written option contracts and translation of assets and liabilities denominated in foreign currencies | 35,378,171 | |||
NET ASSETS | $ | 2,413,657,632 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 63 |
The Arbitrage Fund | Statement of Assets and Liabilities |
November 30, 2014 (Unaudited) |
PRICING OF SHARES: | ||||
CLASS R SHARES: | ||||
Net assets applicable to Class R shares | $ | 530,266,818 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 41,874,961 | |||
Net asset value and offering price per share(a) | $ | 12.66 | ||
CLASS I SHARES: | ||||
Net assets applicable to Class I shares | $ | 1,841,505,982 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 142,142,706 | |||
Net asset value and offering price per share(a) | $ | 12.96 | ||
CLASS C SHARES: | ||||
Net assets applicable to Class C shares | $ | 32,413,119 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 2,613,416 | |||
Net asset value and offering price per share(a) | $ | 12.40 | ||
CLASS A SHARES: | ||||
Net assets applicable to Class A shares | $ | 9,471,713 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 747,531 | |||
Net asset value and offering price per share(a) | $ | 12.67 | ||
Maximum offering price per share (NAV/0.9750, based on maximum sales charge of 2.50% of the offering price) | $ | 13.00 |
(a) | Redemption price varies based on length of time held (Note 1). |
See Notes to Financial Statements. | |
64 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Statement of Assets and Liabilities |
November 30, 2014 (Unaudited) |
ASSETS | ||||
Investments: | ||||
At cost | $ | 667,676,308 | ||
At value (Note 2) | $ | 669,213,772 | ||
Cash | 15,634 | |||
Cash denominated in foreign currency (Cost $67,904) | 67,030 | |||
Deposits with brokers for securities sold short (Note 2) | 195,699,739 | |||
Segregated cash for swaps (Note 2) | 690,000 | |||
Receivable for investment securities sold | 44,695,517 | |||
Receivable for capital shares sold | 1,284,563 | |||
Unrealized appreciation on forward foreign currency exchange contracts (Note 8) | 1,873,840 | |||
Unrealized appreciation on equity swap contracts | 148,793 | |||
Dividends and interest receivable | 4,754,681 | |||
Prepaid expenses and other assets | 131,785 | |||
Total Assets | 918,575,354 | |||
LIABILITIES | ||||
Securities sold short, at value (Note 2) (proceeds $155,717,449) | 164,194,455 | |||
Written options, at value (Note 2) (premiums received $390,302) | 722,962 | |||
Payable to custodian | 3,698 | |||
Payable for investment securities purchased | 70,158,643 | |||
Payable for swap contract payments | 969 | |||
Unrealized depreciation on forward foreign currency exchange contracts (Note 8) | 930,076 | |||
Unrealized depreciation on equity swap contracts | 35,248 | |||
Payable for capital shares redeemed | 3,555,919 | |||
Payable to Advisor (Note 6) | 603,464 | |||
Dividends payable on securities sold short (Note 2) | 235,336 | |||
Payable to Distributor (Note 6) | 51,748 | |||
Payable to Administrator (Note 6) | 12,270 | |||
Interest expense payable | 80,393 | |||
Payable to Trustees | 6,254 | |||
Payable to Chief Compliance Officer (Note 6) | 8,240 | |||
Other accrued expenses and liabilities | 39,617 | |||
Total Liabilities | 240,639,292 | |||
NET ASSETS | $ | 677,936,062 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 687,852,776 | ||
Accumulated net investment income | 4,304,822 | |||
Accumulated net realized loss on investments, equity swap contracts, securities sold short, written option contracts and foreign currencies | (8,067,248 | ) | ||
Net unrealized depreciation on investments, equity swap contracts, securities sold short, written option contracts and translation of assets and liabilities denominated in foreign currencies | (6,154,288 | ) | ||
NET ASSETS | $ | 677,936,062 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 65 |
The Arbitrage Event-Driven Fund | Statement of Assets and Liabilities |
November 30, 2014 (Unaudited) |
PRICING OF SHARES: | ||||
CLASS R SHARES: | ||||
Net assets applicable to Class R shares | $ | 226,551,099 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 22,602,843 | |||
Net asset value and offering price per share(a) | $ | 10.02 | ||
CLASS I SHARES: | ||||
Net assets applicable to Class I shares | $ | 439,537,627 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 43,469,335 | |||
Net asset value and offering price per share(a) | $ | 10.11 | ||
CLASS C SHARES: | ||||
Net assets applicable to Class C shares | $ | 6,577,236 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 663,474 | |||
Net asset value and offering price per share(a) | $ | 9.91 | ||
CLASS A SHARES: | ||||
Net assets applicable to Class A shares | $ | 5,270,100 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 525,571 | |||
Net asset value and offering price per share(a) | $ | 10.03 | ||
Maximum offering price per share (NAV/0.9675, based on maximum sales charge of 3.25% of the offering price) | $ | 10.37 |
(a) | Redemption price varies based on length of time held (Note 1). |
See Notes to Financial Statements. | |
66 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Credit Opportunities Fund | Statement of Assets and Liabilities |
November 30, 2014 (Unaudited) |
ASSETS | ||||
Investments: | ||||
At cost | $ | 43,004,237 | ||
At value (Note 2) | $ | 42,507,730 | ||
Cash | 881 | |||
Cash denominated in foreign currency (Cost $548,113) | 542,143 | |||
Deposits with brokers for securities sold short (Note 2) | 2,432,173 | |||
Receivable for capital shares sold | 32,120 | |||
Unrealized appreciation on forward foreign currency exchange contracts (Note 8) | 39,816 | |||
Dividends and interest receivable | 688,061 | |||
Prepaid expenses and other assets | 34,574 | |||
Total Assets | 46,277,498 | |||
LIABILITIES | ||||
Securities sold short, at value (Note 2) (proceeds $2,529,140) | 2,433,409 | |||
Payable to custodian | 3,066 | |||
Payable for investment securities purchased | 664,182 | |||
Unrealized depreciation on forward foreign currency exchange contracts (Note 8) | 13,475 | |||
Payable to Advisor (Note 6) | 23,074 | |||
Payable to Distributor (Note 6) | 2,524 | |||
Payable to Administrator (Note 6) | 6,088 | |||
Interest expense payable | 3,673 | |||
Audit and legal fees payable | 19,120 | |||
Payable to Trustees | 347 | |||
Payable to Chief Compliance Officer (Note 6) | 402 | |||
Other accrued expenses and liabilities | 4,889 | |||
Total Liabilities | 3,174,249 | |||
NET ASSETS | $ | 43,103,249 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 43,345,570 | ||
Accumulated net investment income | 375,304 | |||
Accumulated net realized loss on investments, securities sold short and foreign currencies | (236,915 | ) | ||
Net unrealized depreciation on investments, securities sold short, written option contracts and translation of assets and liabilities denominated in foreign currencies | (380,710 | ) | ||
NET ASSETS | $ | 43,103,249 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 67 |
The Arbitrage Credit Opportunities Fund | Statement of Assets and Liabilities |
November 30, 2014 (Unaudited) |
PRICING OF SHARES: | ||||
CLASS R SHARES: | ||||
Net assets applicable to Class R shares | $ | 5,158,637 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 510,863 | |||
Net asset value and offering price per share(a) | $ | 10.10 | ||
CLASS I SHARES: | ||||
Net assets applicable to Class I shares | $ | 35,703,815 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 3,543,247 | |||
Net asset value and offering price per share(a) | $ | 10.08 | ||
CLASS C SHARES: | ||||
Net assets applicable to Class C shares | $ | 1,811,575 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 180,556 | |||
Net asset value and offering price per share(a) | $ | 10.03 | ||
CLASS A SHARES: | ||||
Net assets applicable to Class A shares | $ | 429,222 | ||
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 42,600 | |||
Net asset value and offering price per share(a) | $ | 10.08 | ||
Maximum offering price per share (NAV/0.9675, based on maximum sales charge of 3.25% of the offering price) | $ | 10.41 |
(a) | Redemption price varies based on length of time held (Note 1). |
See Notes to Financial Statements. | |
68 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | Statement of Operations |
For the Six Months Ended November 30, 2014 (Unaudited) |
INVESTMENT INCOME | ||||
Dividends | $ | 14,099,756 | ||
Foreign taxes withheld | (142,662 | ) | ||
Interest income | 6,238 | |||
Total Income | 13,963,332 | |||
EXPENSES | ||||
Investment advisory fees (Note 6) | 13,159,729 | |||
Distribution and service fees (Note 6) | ||||
Class R | 793,398 | |||
Class C | 168,803 | |||
Class A | 10,013 | |||
Administrative fees (Note 6) | 243,166 | |||
Chief Compliance Officer fees (Note 6) | 162,937 | |||
Trustees' fees | 104,099 | |||
Dividend expense | 6,492,950 | |||
Interest rebate expense | 2,851,157 | |||
Transfer agent fees (Note 6) | 934,139 | |||
Custodian and bank service fees | 83,860 | |||
Registration and filing fees | 54,680 | |||
Printing of shareholder reports | 138,430 | |||
Professional fees | 153,497 | |||
Line of credit interest expense (Note 4) | 206,917 | |||
Insurance expense | 59,791 | |||
Principal Financial Officer fees (Note 6) | 4,073 | |||
Other expenses | 70,577 | |||
Total Expenses | 25,692,216 | |||
NET INVESTMENT LOSS | (11,728,884 | ) | ||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND FOREIGN CURRENCIES | ||||
Net realized gains (losses) from: | ||||
Investments | 101,275,013 | |||
Equity swap contracts | 655,969 | |||
Securities sold short | (96,007,761 | ) | ||
Written option contracts | 9,327,755 | |||
Foreign currency transactions (Note 8) | (8,283,677 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 29,571,804 | |||
Equity swap contracts | (277,767 | ) | ||
Securities sold short | (16,392,491 | ) | ||
Written option contracts | (1,773,820 | ) | ||
Foreign currency transactions (Note 8) | 11,100,777 | |||
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS AND FOREIGN CURRENCIES | 29,195,802 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 17,466,918 |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 69 |
The Arbitrage Event-Driven Fund | Statement of Operations |
For the Six Months Ended November 30, 2014 (Unaudited) |
INVESTMENT INCOME | ||||
Dividends | $ | 2,233,702 | ||
Foreign taxes withheld | (39,713 | ) | ||
Interest income | 7,388,120 | |||
Total Income | 9,582,109 | |||
EXPENSES | ||||
Investment advisory fees (Note 6) | 4,042,314 | |||
Distribution and service fees (Note 6) | ||||
Class R | 264,103 | |||
Class C | 29,549 | |||
Class A | 6,507 | |||
Administrative fees (Note 6) | 68,624 | |||
Chief Compliance Officer fees (Note 6) | 35,732 | |||
Trustees' fees | 23,063 | |||
Dividend expense | 1,382,893 | |||
Interest rebate expense | 625,181 | |||
Transfer agent fees (Note 6) | 169,607 | |||
Custodian and bank service fees | 30,548 | |||
Registration and filing fees | 71,251 | |||
Printing of shareholder reports | 42,778 | |||
Professional fees | 61,793 | |||
Line of credit interest expense (Note 4) | 16,326 | |||
Insurance expense | 2,532 | |||
Principal Financial Officer fees (Note 6) | 892 | |||
Recoupment of past fees waived by Advisor (Note 6) | ||||
Class R | 28,656 | |||
Class I | 45,641 | |||
Class C | 539 | |||
Class A | 669 | |||
Other expenses | 16,220 | |||
Total Expenses | 6,965,418 | |||
NET INVESTMENT INCOME | 2,616,691 |
See Notes to Financial Statements. | |
70 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Statement of Operations |
For the Six Months Ended November 30, 2014 (Unaudited) |
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND FOREIGN CURRENCIES | ||||
Net realized gains (losses) from: | ||||
Investments | 554,454 | |||
Equity swap contracts | 652,513 | |||
Securities sold short | (12,264,176 | ) | ||
Written option contracts | 2,003,441 | |||
Foreign currency transactions (Note 8) | (558,644 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (9,226,452 | ) | ||
Equity swap contracts | 114,564 | |||
Securities sold short | (4,138,960 | ) | ||
Written option contracts | (372,882 | ) | ||
Foreign currency transactions (Note 8) | 1,568,296 | |||
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS AND FOREIGN CURRENCIES | (21,667,846 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (19,051,155 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 71 |
The Arbitrage Credit Opportunities Fund | Statement of Operations |
For the Six Months Ended November 30, 2014 (Unaudited) |
INVESTMENT INCOME | ||||
Dividends | $ | 61 | ||
Interest income | 1,022,399 | |||
Total Income | 1,022,460 | |||
EXPENSES | ||||
Investment advisory fees (Note 6) | 186,981 | |||
Distribution and service fees (Note 6) | ||||
Class R | 7,487 | |||
Class C | 7,055 | |||
Class A | 415 | |||
Administrative fees (Note 6) | 7,122 | |||
Chief Compliance Officer fees (Note 6) | 2,021 | |||
Trustees' fees | 1,273 | |||
Dividend expense | 12,536 | |||
Interest rebate expense | 38,747 | |||
Transfer agent fees (Note 6) | 35,617 | |||
Custodian and bank service fees | 6,935 | |||
Registration and filing fees | 27,752 | |||
Printing of shareholder reports | 620 | |||
Professional fees | 17,668 | |||
Line of credit interest expense (Note 4) | 927 | |||
Insurance expense | 333 | |||
Principal Financial Officer fees (Note 6) | 50 | |||
Other expenses | 9,711 | |||
Total Expenses | 363,250 | |||
Fees waived by the Advisor, Class R (Note 6) | (10,193 | ) | ||
Fees waived by the Advisor, Class I (Note 6) | (50,103 | ) | ||
Fees waived by the Advisor, Class C (Note 6) | (2,427 | ) | ||
Fees waived by the Advisor, Class A (Note 6) | (560 | ) | ||
Net Expenses | 299,967 | |||
NET INVESTMENT INCOME | 722,493 | |||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND FOREIGN CURRENCIES | ||||
Net realized gains (losses) from: | ||||
Investments | (216,625 | ) | ||
Securities sold short | 43,682 | |||
Foreign currency transactions (Note 8) | (43,795 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (665,294 | ) | ||
Securities sold short | 164,153 | |||
Written option contracts | (1,085 | ) | ||
Foreign currency transactions (Note 8) | 39,523 | |||
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS AND FOREIGN CURRENCIES | (679,441 | ) | ||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 43,052 |
See Notes to Financial Statements. | |
72 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Fund | Statements of Changes in Net Assets |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | |||||||
FROM OPERATIONS: | ||||||||
Net investment loss | $ | (11,728,884 | ) | $ | (14,255,109 | ) | ||
Net realized gains (losses) from: | ||||||||
Investments and equity swap contracts | 101,930,982 | 169,894,832 | ||||||
Securities sold short | (96,007,761 | ) | (161,504,776 | ) | ||||
Written option contracts | 9,327,755 | 7,982,820 | ||||||
Foreign currency transactions | (8,283,677 | ) | (11,922,084 | ) | ||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Investments and equity swap contracts | 29,294,037 | 46,733,313 | ||||||
Securities sold short | (16,392,491 | ) | 5,706,869 | |||||
Written option contracts | (1,773,820 | ) | 4,001,952 | |||||
Foreign currency transactions | 11,100,777 | (11,101,045 | ) | |||||
Net increase in net assets resulting from operations | 17,466,918 | 35,536,772 | ||||||
FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
NET REALIZED GAINS | ||||||||
Distributions from net realized gains, Class R | – | (4,128,037 | ) | |||||
Distributions from net realized gains, Class I | – | (8,030,095 | ) | |||||
Distributions from net realized gains, Class C | – | (148,724 | ) | |||||
Distributions from net realized gains, Class A | – | (12,942 | ) | |||||
Decrease in net assets from distributions to shareholders | – | (12,319,798 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 73 |
The Arbitrage Fund | Statements of Changes in Net Assets |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | |||||||
FROM CAPITAL SHARE TRANSACTIONS (NOTE 7): | ||||||||
CLASS R | ||||||||
Proceeds from shares sold | 84,798,110 | 363,576,930 | ||||||
Shares issued in reinvestment of distributions | – | 4,086,744 | ||||||
Proceeds from redemption fees collected (Note 2) | 10,627 | 46,167 | ||||||
Payments for shares redeemed | (320,927,317 | ) | (529,535,717 | ) | ||||
Net decrease in net assets from Class R share transactions | (236,118,580 | ) | (161,825,876 | ) | ||||
CLASS I | ||||||||
Proceeds from shares sold | 507,232,526 | 725,650,546 | ||||||
Shares issued in reinvestment of distributions | – | 4,762,186 | ||||||
Proceeds from redemption fees collected (Note 2) | 3,711 | 26,523 | ||||||
Payments for shares redeemed | (389,554,849 | ) | (973,253,859 | ) | ||||
Net increase/(decrease) in net assets from Class I share transactions | 117,681,388 | (242,814,604 | ) | |||||
CLASS C | ||||||||
Proceeds from shares sold | 4,312,633 | 22,491,991 | ||||||
Shares issued in reinvestment of distributions | – | 87,489 | ||||||
Payments for shares redeemed | (5,576,375 | ) | (7,628,851 | ) | ||||
Net increase/(decrease) in net assets from Class C share transactions | (1,263,742 | ) | 14,950,629 | |||||
CLASS A | ||||||||
Proceeds from shares sold | 2,943,669 | 8,035,832 | ||||||
Shares issued in reinvestment of distributions | – | 10,028 | ||||||
Proceeds from redemption fees collected (Note 2) | – | 1 | ||||||
Payments for shares redeemed | (166,116 | ) | (1,390,984 | ) | ||||
Net increase in net assets from Class A share transactions | 2,777,553 | 6,654,877 | ||||||
TOTAL DECREASE IN NET ASSETS | (99,456,463 | ) | (359,818,000 | ) | ||||
NET ASSETS: | ||||||||
Beginning of period | 2,513,114,095 | 2,872,932,095 | ||||||
End of period * | $ | 2,413,657,632 | $ | 2,513,114,095 | ||||
*Including accumulated net investment loss of: | $ | (25,214,067 | ) | $ | (13,485,183 | ) |
See Notes to Financial Statements. | |
74 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Event-Driven Fund | Statements of Changes in Net Assets |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | |||||||
FROM OPERATIONS: | ||||||||
Net investment income | $ | 2,616,691 | $ | 2,368,784 | ||||
Net realized gains (losses) from: | ||||||||
Investments and equity swap contracts | 1,206,967 | 8,825,548 | ||||||
Securities sold short | (12,264,176 | ) | (7,485,992 | ) | ||||
Written option contracts | 2,003,441 | 1,120,840 | ||||||
Foreign currency transactions | (558,644 | ) | (35,564 | ) | ||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Investments and equity swap contracts | (9,111,888 | ) | 10,371,833 | |||||
Securities sold short | (4,138,960 | ) | (3,833,021 | ) | ||||
Written option contracts | (372,882 | ) | 81,261 | |||||
Foreign currency transactions | 1,568,296 | (682,178 | ) | |||||
Net increase/(decrease) in net assets resulting from operations | (19,051,155 | ) | 10,731,511 | |||||
FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
NET INVESTMENT INCOME | ||||||||
Distributions from net investment income, Class R | – | (183,416 | ) | |||||
Distributions from net investment income, Class I | – | (679,917 | ) | |||||
Distributions from net investment income, Class C | – | (5,736 | ) | |||||
Distributions from net investment income, Class A | – | (6,382 | ) | |||||
NET REALIZED GAINS | ||||||||
Distributions from net realized gains, Class R | – | (24,853 | ) | |||||
Distributions from net realized gains, Class I | – | (80,307 | ) | |||||
Distributions from net realized gains, Class C | – | (1,126 | ) | |||||
Distributions from net realized gains, Class A | – | (879 | ) | |||||
Decrease in net assets from distributions to shareholders | – | (982,616 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 75 |
The Arbitrage Event-Driven Fund | Statements of Changes in Net Assets |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | |||||||
FROM CAPITAL SHARE TRANSACTIONS (NOTE 7): | ||||||||
CLASS R | ||||||||
Proceeds from shares sold | 80,209,017 | 208,070,695 | ||||||
Shares issued in reinvestment of distributions | – | 201,589 | ||||||
Proceeds from redemption fees collected (Note 2) | 1,492 | 11,178 | ||||||
Payments for shares redeemed | (52,082,265 | ) | (17,865,980 | ) | ||||
Net increase in net assets from Class R share transactions | 28,128,244 | 190,417,482 | ||||||
CLASS I | ||||||||
Proceeds from shares sold | 229,837,311 | 275,888,988 | ||||||
Shares issued in reinvestment of distributions | – | 321,032 | ||||||
Proceeds from redemption fees collected (Note 2) | 8,430 | 20,288 | ||||||
Payments for shares redeemed | (68,264,445 | ) | (32,791,940 | ) | ||||
Net increase in net assets from Class I share transactions | 161,581,296 | 243,438,368 | ||||||
CLASS C | ||||||||
Proceeds from shares sold | 2,828,652 | 3,849,767 | ||||||
Shares issued in reinvestment of distributions | – | 6,761 | ||||||
Payments for shares redeemed | (273,547 | ) | (22,570 | ) | ||||
Net increase in net assets from Class C share transactions | 2,555,105 | 3,833,958 | ||||||
CLASS A | ||||||||
Proceeds from shares sold | 2,238,666 | 3,916,984 | ||||||
Shares issued in reinvestment of distributions | – | 7,260 | ||||||
Proceeds from redemption fees collected (Note 2) | – | 466 | ||||||
Payments for shares redeemed | (631,741 | ) | (162,556 | ) | ||||
Net increase in net assets from Class A share transactions | 1,606,925 | 3,762,154 | ||||||
TOTAL INCREASE IN NET ASSETS | 174,820,415 | 451,200,857 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 503,115,647 | 51,914,790 | ||||||
End of period * | $ | 677,936,062 | $ | 503,115,647 | ||||
*Including accumulated net investment income of: | $ | 4,304,822 | $ | 1,688,131 |
See Notes to Financial Statements. | |
76 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Credit Opportunities Fund | |
Statements of Changes in Net Assets |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | |||||||
FROM OPERATIONS: | ||||||||
Net investment income | $ | 722,493 | $ | 644,074 | ||||
Net realized gains (losses) from: | ||||||||
Investments | (216,625 | ) | 5,433 | |||||
Securities sold short | 43,682 | (18,728 | ) | |||||
Written option contracts | – | 3,477 | ||||||
Foreign currency transactions | (43,795 | ) | 21,902 | |||||
Long-term capital gains from other investment companies | – | 1,068 | ||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Investments | (665,294 | ) | 126,399 | |||||
Securities sold short | 164,153 | (69,806 | ) | |||||
Written option contracts | (1,085 | ) | 1,085 | |||||
Foreign currency transactions | 39,523 | (22,330 | ) | |||||
Net increase in net assets resulting from operations | 43,052 | 692,574 | ||||||
FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
NET INVESTMENT INCOME | ||||||||
Distributions from net investment income, Class R | (114,342 | ) | (108,553 | ) | ||||
Distributions from net investment income, Class I | (511,422 | ) | (328,945 | ) | ||||
Distributions from net investment income, Class C | (19,809 | ) | (2,418 | ) | ||||
Distributions from net investment income, Class A | (3,742 | ) | (610 | ) | ||||
Decrease in net assets from distributions to shareholders | (649,315 | ) | (440,526 | ) |
See Notes to Financial Statements. | |
Semi-Annual Report | November 30, 2014 | 77 |
The Arbitrage Credit Opportunities Fund | |
Statements of Changes in Net Assets |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | |||||||
FROM CAPITAL SHARE TRANSACTIONS (NOTE 6): | ||||||||
CLASS R | ||||||||
Proceeds from shares sold | 2,272,898 | 7,376,673 | ||||||
Shares issued in reinvestment of distributions | 114,170 | 108,551 | ||||||
Proceeds from redemption fees collected (Note 2) | 172 | 4,056 | ||||||
Payments for shares redeemed | (3,520,823 | ) | (2,819,415 | ) | ||||
Net increase/(decrease) in net assets from Class R share transactions | (1,133,583 | ) | 4,669,865 | |||||
CLASS I | ||||||||
Proceeds from shares sold | 15,916,155 | 22,971,820 | ||||||
Shares issued in reinvestment of distributions | 504,488 | 328,535 | ||||||
Proceeds from redemption fees collected (Note 2) | – | 301 | ||||||
Payments for shares redeemed | (3,280,634 | ) | (3,921,140 | ) | ||||
Net increase in net assets from Class I share transactions | 13,140,009 | 19,379,516 | ||||||
CLASS C | ||||||||
Proceeds from shares sold | 1,192,392 | 720,475 | ||||||
Shares issued in reinvestment of distributions | 19,808 | 2,416 | ||||||
Payments for shares redeemed | (89,965 | ) | (34,971 | ) | ||||
Net increase in net assets from Class C share transactions | 1,122,235 | 687,920 | ||||||
CLASS A | ||||||||
Proceeds from shares sold | 405,699 | 27,607 | ||||||
Shares issued in reinvestment of distributions | 3,460 | 412 | ||||||
Payments for shares redeemed | (3,813 | ) | – | |||||
Net increase in net assets from Class A share transactions | 405,346 | 28,019 | ||||||
TOTAL INCREASE IN NET ASSETS | 12,927,744 | 25,017,368 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 30,175,505 | 5,158,137 | ||||||
End of period * | $ | 43,103,249 | $ | 30,175,505 | ||||
*Including accumulated net investment income of : | $ | 375,304 | $ | 302,126 |
See Notes to Financial Statements. | |
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Page Intentionally Left Blank
The Arbitrage Fund – Class R |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: |
Net asset value, beginning of period |
Income (loss) from investment operations |
Net investment loss(a) |
Net realized and unrealized gains on investments and foreign currencies |
Total from investment operations |
Less distributions |
From net investment income |
From net realized gains |
Total distributions |
Proceeds from redemption fees collected |
Net asset value, end of period |
Total return(c) |
Net assets, end of period (in 000s) |
RATIOS TO AVERAGE NET ASSETS: |
Expenses including interest and dividend expense |
Expenses excluding interest and dividend expense(f)(g) |
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(f)(g) |
Net investment loss |
Portfolio turnover rate |
(a) | Per share amounts were calculated using average shares for the period. |
(b) | Amount rounds to less than $0.01 per share. |
(c) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(d) | Not Annualized. |
(e) | Annualized. |
(f) | Dividend expense totaled 0.50% (annualized), 0.60%, 0.42%, 0.58%, 0.51% and 0.88%, of average net assets for the six months ended November 30, 2014 and the years ended May 31, 2014, 2013, 2012, 2011 and 2010, respectively. |
(g) | Interest rebate expense and line of credit interest expense totaled 0.24% (annualized), 0.12%, 0.10%, 0.20%, 0.13% and 0.29%, of average net assets for the six months ended November 30, 2014 and the years ended May 31, 2014, 2013, 2012, 2011 and 2010, respectively. |
See Notes to Financial Statements. | |
80 | www.arbitragefunds.com | 1-800-295-4485 |
Financial Highlights |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | Year Ended May 31, 2013 | Year Ended May 31, 2012 | Year Ended May 31, 2011 | Year Ended May 31, 2010 | |||||||||||||||||
$ | 12.58 | $ | 12.50 | $ | 12.80 | $ | 12.77 | $ | 12.50 | $ | 12.43 | |||||||||||
(0.07 | ) | (0.09 | ) | (0.10 | ) | (0.11 | ) | (0.12 | ) | (0.14 | ) | |||||||||||
0.15 | 0.23 | 0.15 | 0.44 | 0.66 | 0.52 | |||||||||||||||||
0.08 | 0.14 | 0.05 | 0.33 | 0.54 | 0.38 | |||||||||||||||||
– | – | (0.09 | ) | – | – | (0.05 | ) | |||||||||||||||
– | (0.06 | ) | (0.26 | ) | (0.30 | ) | (0.27 | ) | (0.26 | ) | ||||||||||||
– | (0.06 | ) | (0.35 | ) | (0.30 | ) | (0.27 | ) | (0.31 | ) | ||||||||||||
0.00 | (b) | 0.00 | (b) | 0.00 | (b) | 0.00 | (b) | 0.00 | (b) | 0.00 | (b) | |||||||||||
$ | 12.66 | $ | 12.58 | $ | 12.50 | $ | 12.80 | $ | 12.77 | $ | 12.50 | |||||||||||
0.64 | %(d) | 1.10 | % | 0.42 | % | 2.54 | % | 4.37 | % | 3.08 | % | |||||||||||
$ | 530,267 | $ | 760,750 | $ | 916,677 | $ | 1,003,646 | $ | 866,885 | $ | 759,235 | |||||||||||
2.19 | %(e) | 2.17 | % | 1.97 | % | 2.23 | % | 2.16 | % | 2.80 | % | |||||||||||
1.45 | %(e) | 1.45 | % | 1.45 | % | 1.45 | % | 1.52 | % | 1.63 | % | |||||||||||
1.45 | %(e) | 1.45 | % | 1.45 | % | 1.44 | % | 1.52 | % | 1.63 | % | |||||||||||
(1.06 | )%(e) | (0.70 | )% | (0.78 | )% | (0.83 | )% | (0.93 | )% | (1.12 | )% | |||||||||||
228 | %(d) | 462 | % | 459 | % | 563 | % | 389 | % | 371 | % |
Semi-Annual Report | November 30, 2014 | 81 |
The Arbitrage Fund – Class I |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: |
Net asset value, beginning of period |
Income (loss) from investment operations |
Net investment loss(a) |
Net realized and unrealized gains on investments and foreign currencies |
Total from investment operations |
Less distributions |
From net investment income |
From net realized gains |
Total distributions |
Proceeds from redemption fees collected |
Net asset value, end of period |
Total return(c) |
Net assets, end of period (in 000s) |
RATIOS TO AVERAGE NET ASSETS: |
Expenses including interest and dividend expense |
Expenses excluding interest and dividend expense(f)(g) |
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(f)(g) |
Net investment loss |
Portfolio turnover rate |
(a) | Per share amounts were calculated using average shares for the period. |
(b) | Amount rounds to less than $0.01 per share. |
(c) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(d) | Not Annualized. |
(e) | Annualized. |
(f) | Dividend expense totaled 0.50% (annualized), 0.60%, 0.42%, 0.58%, 0.51% and 0.88%, of average net assets for the six months ended November 30, 2014 and the years ended May 31, 2014, 2013, 2012, 2011 and 2010, respectively. |
(g) | Interest rebate expense and line of credit interest expense totaled 0.24% (annualized), 0.12%, 0.10%, 0.20%, 0.13% and 0.29%, of average net assets for the six months ended November 30, 2014 and the years ended May 31, 2014, 2013, 2012, 2011 and 2010, respectively. |
See Notes to Financial Statements. | |
82 | www.arbitragefunds.com | 1-800-295-4485 |
Financial Highlights |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | Year Ended May 31, 2013 | Year Ended May 31, 2012 | Year Ended May 31, 2011 | Year Ended May 31, 2010 | |||||||||||||||||
$ | 12.86 | $ | 12.74 | $ | 13.04 | $ | 12.98 | $ | 12.68 | $ | 12.60 | |||||||||||
(0.06 | ) | (0.05 | ) | (0.07 | ) | (0.07 | ) | (0.08 | ) | (0.11 | ) | |||||||||||
0.16 | 0.23 | 0.16 | 0.43 | 0.67 | 0.52 | |||||||||||||||||
0.10 | 0.18 | 0.09 | 0.36 | 0.59 | 0.41 | |||||||||||||||||
– | – | (0.13 | ) | – | (0.02 | ) | (0.07 | ) | ||||||||||||||
– | (0.06 | ) | (0.26 | ) | (0.30 | ) | (0.27 | ) | (0.26 | ) | ||||||||||||
– | (0.06 | ) | (0.39 | ) | (0.30 | ) | (0.29 | ) | (0.33 | ) | ||||||||||||
0.00 | (b) | 0.00 | (b) | 0.00 | (b) | 0.00 | (b) | 0.00 | (b) | 0.00 | (b) | |||||||||||
$ | 12.96 | $ | 12.86 | $ | 12.74 | $ | 13.04 | $ | 12.98 | $ | 12.68 | |||||||||||
0.78 | %(d) | 1.39 | % | 0.67 | % | 2.74 | % | 4.74 | % | 3.28 | % | |||||||||||
$ | 1,841,506 | $ | 1,712,120 | $ | 1,937,514 | $ | 2,084,530 | $ | 1,346,801 | $ | 582,460 | |||||||||||
1.95 | %(e) | 1.92 | % | 1.72 | % | 1.98 | % | 1.91 | % | 2.55 | % | |||||||||||
1.21 | %(e) | 1.20 | % | 1.20 | % | 1.20 | % | 1.27 | % | 1.38 | % | |||||||||||
1.21 | %(e) | 1.20 | % | 1.20 | % | 1.20 | % | 1.27 | % | 1.38 | % | |||||||||||
(0.86 | )%(e) | (0.42 | )% | (0.51 | )% | (0.56 | )% | (0.62 | )% | (0.85 | )% | |||||||||||
228 | %(d) | 462 | % | 459 | % | 563 | % | 389 | % | 371 | % |
Semi-Annual Report | November 30, 2014 | 83 |
The Arbitrage Fund – Class C |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: |
Net asset value, beginning of period |
Income (loss) from investment operations |
Net investment loss(b) |
Net realized and unrealized gains on investments and foreign currencies |
Total from investment operations |
Less distributions |
From net investment income |
From net realized gains |
Total distributions |
Proceeds from redemption fees collected |
Net asset value, end of period |
Total return(d) |
Net assets, end of period (in 000s) |
RATIOS TO AVERAGE NET ASSETS: |
Expenses including interest and dividend expense |
Expenses excluding interest and dividend expense(g)(h) |
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(g)(h) |
Net investment loss |
Portfolio turnover rate |
(a) | Commenced operations on June 1, 2012. |
(b) | Per share amounts were calculated using average shares for the period. |
(c) | Amount rounds to less than $0.01 per share. |
(d) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(e) | Not Annualized. |
(f) | Annualized. |
(g) | Dividend expense totaled 0.50% (annualized), 0.60% and 0.42% of average net assets for the six months ended November 30, 2014 and the years ended May 31, 2014 and 2013, respectively. |
(h) | Interest rebate expense and line of credit interest expense totaled 0.24% (annualized), 0.12% and 0.11% of average net assets for the six months ended November 30, 2014 and the years ended May 31, 2014 and 2013, respectively. |
See Notes to Financial Statements. | |
84 | www.arbitragefunds.com | 1-800-295-4485 |
Financial Highlights |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | Year Ended May 31, 2013(a) | ||||||||||
$ | 12.37 | $ | 12.38 | $ | 12.80 | |||||||
(0.12 | ) | (0.18 | ) | (0.23 | ) | |||||||
0.15 | 0.23 | 0.20 | ||||||||||
0.03 | 0.05 | (0.03 | ) | |||||||||
– | – | (0.13 | ) | |||||||||
– | (0.06 | ) | (0.26 | ) | ||||||||
– | (0.06 | ) | (0.39 | ) | ||||||||
– | – | 0.00 | (c) | |||||||||
$ | 12.40 | $ | 12.37 | $ | 12.38 | |||||||
0.24 | %(e) | 0.38 | % | (0.27 | %) | |||||||
$ | 32,413 | $ | 33,589 | $ | 18,741 | |||||||
2.95 | %(f) | 2.92 | % | 2.75 | % | |||||||
2.21 | %(f) | 2.20 | % | 2.20 | % | |||||||
2.21 | %(f) | 2.20 | % | 2.20 | % | |||||||
(1.85 | )%(f) | (1.45 | )% | (1.84 | )% | |||||||
228 | %(e) | 462 | % | 459 | % |
Semi-Annual Report | November 30, 2014 | 85 |
The Arbitrage Fund – Class A |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: | ||||||||
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014(a) | |||||||
Net asset value, beginning of period | $ | 12.59 | $ | 12.50 | ||||
Income (loss) from investment operations | ||||||||
Net investment loss(b) | (0.07 | ) | (0.09 | ) | ||||
Net realized and unrealized gains on investments and foreign currencies | 0.15 | 0.24 | ||||||
Total from investment operations | 0.08 | 0.15 | ||||||
Less distributions | ||||||||
From net realized gains | – | (0.06 | ) | |||||
Total distributions | – | (0.06 | ) | |||||
Proceeds from redemption fees collected | – | 0.00 | (c) | |||||
Net asset value, end of period | $ | 12.67 | $ | 12.59 | ||||
Total return(d) | 0.64 | %(e) | 1.18 | % | ||||
Net assets, end of period (in 000s) | $ | 9,472 | $ | 6,655 | ||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||
Expenses including interest and dividend expense | 2.20 | %(f) | 2.18 | % | ||||
Expenses excluding interest and dividend expense(g)(h) | 1.46 | %(f) | 1.46 | % | ||||
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(g)(h) | 1.46 | %(f) | 1.46 | % | ||||
Net investment loss | (1.14 | )%(f) | (0.69 | )% | ||||
Portfolio turnover rate | 228 | %(e) | 462 | % |
(a) | Commenced operations on June 1, 2013. |
(b) | Per share amounts were calculated using average shares for the period. |
(c) | Amount rounds to less than $0.01 per share. |
(d) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(e) | Not Annualized. |
(f) | Annualized. |
(g) | Dividend expense totaled 0.50% (annualized) and 0.60% of average net assets for the six months ended November 30, 2014 and the year ended May 31, 2014, respectively. |
(h) | Interest rebate expense and line of credit interest expense totaled 0.24% (annualized) and 0.12% of average net assets for the six months ended November 30, 2014 and the year ended May 31, 2014, respectively. |
See Notes to Financial Statements. | |
86 | www.arbitragefunds.com | 1-800-295-4485 |
Page Intentionally Left Blank
The Arbitrage Event-Driven Fund – Class R |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: |
Net asset value, beginning of period |
Income (loss) from investment operations |
Net investment income (loss)(b) |
Net realized and unrealized gains (losses) on investments and foreign currencies |
Total from investment operations |
Less distributions |
From net investment income |
From net realized gains |
Total distributions |
Proceeds from redemption fees collected |
Net asset value, end of period |
Total return(d) |
Net assets, end of period (in 000s) |
RATIOS TO AVERAGE NET ASSETS: |
Expenses including interest and dividend expense |
Expenses excluding interest and dividend expense(g)(h) |
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(g)(h) |
Net investment income (loss) |
Portfolio turnover rate |
(a) | Commenced operations on October 1, 2010. |
(b) | Per share amounts were calculated using average shares for the period. |
(c) | Amount rounds to less than $0.01 per share. |
(d) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(e) | Not Annualized. |
(f) | Annualized. |
(g) | Dividend expense totaled 0.42% (annualized), 0.49%, 0.36%, 0.27% and 0.28% (annualized) of average net assets for the six months ended November 30, 2014 and the years ended May 31, 2014, 2013, 2012 and the period ended May 31, 2011, respectively. |
(h) | Interest rebate expense and line of credit interest expense totaled 0.20% (annualized), 0.13%, 0.13%, 0.21% and 0.21% (annualized) of average net assets for the six months ended November 30, 2014 and the and the years ended May 31, 2014, 2013, 2012 and the period ended May 31, 2011, respectively. |
See Notes to Financial Statements. | |
88 | www.arbitragefunds.com | 1-800-295-4485 |
Financial Highlights |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | Year Ended May 31, 2013 | Year Ended May 31, 2012 | Period Ended May 31, 2011(a) | ||||||||||||||
$ | 10.29 | $ | 9.80 | $ | 9.79 | $ | 10.23 | $ | 10.00 | |||||||||
0.03 | 0.10 | 0.15 | 0.10 | (0.02 | ) | |||||||||||||
(0.30 | ) | 0.46 | 0.11 | 0.09 | 0.36 | |||||||||||||
(0.27 | ) | 0.56 | 0.26 | 0.19 | 0.34 | |||||||||||||
– | (0.06 | ) | (0.10 | ) | (0.15 | ) | (0.01 | ) | ||||||||||
– | (0.01 | ) | (0.15 | ) | (0.48 | ) | (0.10 | ) | ||||||||||
– | (0.07 | ) | (0.25 | ) | (0.63 | ) | (0.11 | ) | ||||||||||
0.00 | (c) | 0.00 | (c) | 0.00 | (c) | 0.00 | (c) | 0.00 | (c) | |||||||||
$ | 10.02 | $ | 10.29 | $ | 9.80 | $ | 9.79 | $ | 10.23 | |||||||||
(2.62 | %)(e) | 5.75 | % | 2.72 | % | 1.88 | % | 3.43 | %(e) | |||||||||
$ | 226,551 | $ | 204,055 | $ | 10,080 | $ | 8,976 | $ | 4,867 | |||||||||
2.31 | %(f) | 2.33 | % | 2.55 | % | 2.67 | % | 4.33 | %(f) | |||||||||
1.69 | %(f) | 1.71 | % | 2.06 | % | 2.19 | % | 3.84 | %(f) | |||||||||
1.69 | %(f) | 1.69 | % | 1.69 | % | 1.69 | % | 1.69 | %(f) | |||||||||
0.66 | %(f) | 1.04 | % | 1.58 | % | 1.02 | % | (0.26 | )%(f) | |||||||||
189 | %(e) | 340 | % | 336 | % | 490 | % | 298 | %(e) |
Semi-Annual Report | November 30, 2014 | 89 |
The Arbitrage Event-Driven Fund – Class I |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: |
Net asset value, beginning of period |
Income (loss) from investment operations |
Net investment income(b) |
Net realized and unrealized gains (losses) on investments and foreign currencies |
Total from investment operations |
Less distributions |
From net investment income |
From net realized gains |
Total distributions |
Proceeds from redemption fees collected |
Net asset value, end of period |
Total return(d) |
Net assets, end of period (in 000s) |
RATIOS TO AVERAGE NET ASSETS: |
Expenses including interest and dividend expense |
Expenses excluding interest and dividend expense(g)(h) |
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(g)(h) |
Net investment income |
Portfolio turnover rate |
(a) | Commenced operations on October 1, 2010. |
(b) | Per share amounts were calculated using average shares for the period. |
(c) | Amount rounds to less than $0.01 per share. |
(d) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(e) | Not Annualized. |
(f) | Annualized. |
(g) | Dividend expense totaled 0.42% (annualized), 0.49%, 0.36%, 0.27% and 0.28% (annualized) of average net assets for the six months ended November 30, 2014 and the years ended May 31, 2014, 2013, 2012 and the period ended May 31, 2011, respectively. |
(h) | Interest rebate expense and line of credit interest expense totaled 0.20% (annualized), 0.13%, 0.13%, 0.21% and 0.21% (annualized) of average net assets for the six months ended November 30, 2014 and the and the years ended May 31, 2014, 2013, 2012 and the period ended May 31, 2011, respectively. |
See Notes to Financial Statements. | |
90 | www.arbitragefunds.com | 1-800-295-4485 |
Financial Highlights |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | Year Ended May 31, 2013 | Year Ended May 31, 2012 | Period Ended May 31, 2011(a) | ||||||||||||||
$ | 10.37 | $ | 9.86 | $ | 9.82 | $ | 10.24 | $ | 10.00 | |||||||||
0.05 | 0.13 | 0.16 | 0.12 | 0.01 | ||||||||||||||
(0.31 | ) | 0.46 | 0.13 | 0.09 | 0.35 | |||||||||||||
(0.26 | ) | 0.59 | 0.29 | 0.21 | 0.36 | |||||||||||||
– | (0.07 | ) | (0.10 | ) | (0.15 | ) | (0.02 | ) | ||||||||||
– | (0.01 | ) | (0.15 | ) | (0.48 | ) | (0.10 | ) | ||||||||||
– | (0.08 | ) | (0.25 | ) | (0.63 | ) | (0.12 | ) | ||||||||||
0.00 | (c) | 0.00 | (c) | 0.00 | (c) | 0.00 | (c) | 0.00 | (c) | |||||||||
$ | 10.11 | $ | 10.37 | $ | 9.86 | $ | 9.82 | $ | 10.24 | |||||||||
(2.51 | %)(e) | 6.02 | % | 3.04 | % | 2.09 | % | 3.57 | %(e) | |||||||||
$ | 439,538 | $ | 290,999 | $ | 41,493 | $ | 21,389 | $ | 11,701 | |||||||||
2.06 | %(f) | 2.11 | % | 2.31 | % | 2.42 | % | 4.73 | %(f) | |||||||||
1.44 | %(f) | 1.49 | % | 1.82 | % | 1.94 | % | 4.24 | %(f) | |||||||||
1.44 | %(f) | 1.44 | % | 1.44 | % | 1.44 | % | 1.44 | %(f) | |||||||||
0.90 | %(f) | 1.31 | % | 1.68 | % | 1.25 | % | 0.12 | %(f) | |||||||||
189 | %(e) | 340 | % | 336 | % | 490 | % | 298 | %(e) |
Semi-Annual Report | November 30, 2014 | 91 |
The Arbitrage Event-Driven Fund – Class C |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: |
Net asset value, beginning of period |
Income (loss) from investment operations |
Net investment income (loss)(b) |
Net realized and unrealized gains (losses) on investments and foreign currencies |
Total from investment operations |
Less distributions |
From net investment income |
From net realized gains |
Total distributions |
Net asset value, end of period |
Total return(d) |
Net assets, end of period (in 000s) |
RATIOS TO AVERAGE NET ASSETS: |
Expenses including interest and dividend expense |
Expenses excluding interest and dividend expense(g)(h) |
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(g)(h) |
Net investment income (loss) |
Portfolio turnover rate |
(a) | Commenced operations on June 1, 2012. |
(b) | Per share amounts were calculated using average shares for the period. |
(c) | Amount rounds to less than ($0.01) per share. |
(d) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(e) | Not Annualized. |
(f) | Annualized. |
(g) | Dividend expense totaled 0.42% (annualized), 0.49% and 0.36% of average net assets for the six months ended November 30, 2014 and the years ended May 31, 2014 and 2013, respectively. |
(h) | Interest rebate expense and line of credit interest expense totaled 0.20% (annualized), 0.13% and 0.13% of average net assets for the six months ended November 30, 2014 and the years ended May 31, 2014 and 2013, respectively. |
(i) | The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to timing of sales and redemptions of Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund. |
See Notes to Financial Statements. | |
92 | www.arbitragefunds.com | 1-800-295-4485 |
Financial Highlights |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | Year Ended May 31, 2013(a) | ||||||||||
$ | 10.22 | $ | 9.78 | $ | 9.79 | |||||||
(0.00 | )(c) | 0.03 | 0.09 | |||||||||
(0.31 | ) | 0.46 | 0.13 | |||||||||
(0.31 | ) | 0.49 | 0.22 | |||||||||
– | (0.04 | ) | (0.08 | ) | ||||||||
– | (0.01 | ) | (0.15 | ) | ||||||||
– | (0.05 | ) | (0.23 | ) | ||||||||
$ | 9.91 | $ | 10.22 | $ | 9.78 | |||||||
(3.03 | %)(e) | 5.05 | % | 2.33 | % | |||||||
$ | 6,577 | $ | 4,232 | $ | 342 | |||||||
3.06 | %(f) | 3.12 | % | 3.31 | % | |||||||
2.44 | %(f) | 2.50 | % | 2.82 | % | |||||||
2.44 | %(f) | 2.44 | % | 2.44 | % | |||||||
(0.09 | )%(f)(i) | 0.32 | % | 0.95 | % | |||||||
189 | %(e) | 340 | % | 336 | % |
Semi-Annual Report | November 30, 2014 | 93 |
The Arbitrage Event-Driven Fund – Class A |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: | ||||||||
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014(a) | |||||||
Net asset value, beginning of period | $ | 10.30 | $ | 9.80 | ||||
Income (loss) from investment operations | ||||||||
Net investment income(b) | 0.03 | 0.10 | ||||||
Net realized and unrealized gains (losses) on investments and foreign currencies | (0.30 | ) | 0.47 | |||||
Total from investment operations | (0.27 | ) | 0.57 | |||||
Less distributions | ||||||||
From net investment income | – | (0.06 | ) | |||||
From net realized gains | – | (0.01 | ) | |||||
Total distributions | – | (0.07 | ) | |||||
Proceeds from redemption fees collected | – | 0.00 | (c) | |||||
Net asset value, end of period | $ | 10.03 | $ | 10.30 | ||||
Total return(d) | (2.62 | %)(e) | 5.85 | % | ||||
Net assets, end of period (in 000s) | $ | 5,270 | $ | 3,830 | ||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||
Expenses including interest and dividend expense | 2.31 | %(f) | 2.36 | % | ||||
Expenses excluding interest and dividend expense(g)(h) | 1.69 | %(f) | 1.74 | % | ||||
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(g)(h) | 1.69 | %(f) | 1.69 | % | ||||
Net investment income | 0.64 | %(f) | 0.98 | % | ||||
Portfolio turnover rate | 189 | %(e) | 340 | % |
(a) | Commenced operations on June 1, 2013. |
(b) | Per share amounts were calculated using average shares for the period. |
(c) | Amount rounds to less than $0.01 per share. |
(d) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(e) | Not Annualized. |
(f) | Annualized. |
(g) | Dividend expense totaled 0.42% (annualized) and 0.49% of average net assets for the six months ended November 30, 2014 and the year ended May 31, 2014, respectively. |
(h) | Interest rebate expense and line of credit interest expense totaled 0.20% (annualized) and 0.13% of average net assets for the six months ended November 30, 2014 and the year ended May 31, 2014, respectively. |
See Notes to Financial Statements. | |
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Page Intentionally Left Blank
The Arbitrage Credit Opportunities Fund – Class R |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: |
Net asset value, beginning of period |
Income (loss) from investment operations |
Net investment income(b) |
Net realized and unrealized gains (losses) on investments and foreign currencies |
Total from investment operations |
Less distributions |
From net investment income |
Total distributions |
Proceeds from redemption fees collected |
Net asset value, end of period |
Total return(d) |
Net assets, end of period (in 000s) |
RATIOS TO AVERAGE NET ASSETS: |
Expenses including interest and dividend expense |
Expenses excluding interest and dividend expense(g)(h) |
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(g)(h) |
Net investment income |
Portfolio turnover rate |
(a) | Commenced operations on October 1, 2012. |
(b) | Per share amounts were calculated using average shares for the period. |
(c) | Amount rounds to less than $0.01 per share. |
(d) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(e) | Not Annualized. |
(f) | Annualized. |
(g) | Dividend expense totaled 0.07% (annualized), 0.10% and 0.03% (annualized) of average net assets for the six months ended November 30, 2014, the year ended May 31, 2014 and the period ended May 31, 2013, respectively. |
(h) | Interest rebate expense and line of credit interest expense totaled 0.20% (annualized), 0.07% and 0.02% (annualized) of average net assets for the six months ended November 30, 2014, the year ended May 31, 2014 and the period ended May, 31 2013, respectively. |
See Notes to Financial Statements. | |
96 | www.arbitragefunds.com | 1-800-295-4485 |
Financial Highlights |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | Period Ended May 31, 2013(a) | ||||||||||
$ | 10.28 | $ | 10.18 | $ | 10.00 | |||||||
0.18 | 0.40 | 0.17 | ||||||||||
(0.17 | ) | 0.08 | 0.06 | |||||||||
0.01 | 0.48 | 0.23 | ||||||||||
(0.19 | ) | (0.39 | ) | (0.05 | ) | |||||||
(0.19 | ) | (0.39 | ) | (0.05 | ) | |||||||
0.00 | (c) | 0.01 | 0.00 | (c) | ||||||||
$ | 10.10 | $ | 10.28 | $ | 10.18 | |||||||
0.10 | %(e) | 4.99 | % | 2.33 | %(e) | |||||||
$ | 5,159 | $ | 6,393 | $ | 1,671 | |||||||
2.11 | %(f) | 2.71 | % | 3.79 | %(f) | |||||||
1.84 | %(f) | 2.54 | % | 3.74 | %(f) | |||||||
1.50 | %(f) | 1.50 | % | 1.50 | %(f) | |||||||
3.61 | %(f) | 3.97 | % | 2.49 | %(f) | |||||||
79 | %(e) | 181 | % | 92 | %(e) |
Semi-Annual Report | November 30, 2014 | 97 |
The Arbitrage Credit Opportunities Fund – Class I |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: |
Net asset value, beginning of period |
Income (loss) from investment operations |
Net investment income(b) |
Net realized and unrealized gains (losses) on investments and foreign currencies |
Total from investment operations |
Less distributions |
From net investment income |
Total distributions |
Proceeds from redemption fees collected |
Net asset value, end of period |
Total return(d) |
Net assets, end of period (in 000s) |
RATIOS TO AVERAGE NET ASSETS: |
Expenses including interest and dividend expense |
Expenses excluding interest and dividend expense(g)(h) |
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(g)(h) |
Net investment income |
Portfolio turnover rate |
(a) | Commenced operations on October 1, 2012. |
(b) | Per share amounts were calculated using average shares for the period. |
(c) | Amount rounds to less than $0.01 per share. |
(d) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(e) | Not Annualized. |
(f) | Annualized. |
(g) | Dividend expense totaled 0.07% (annualized), 0.10% and 0.03% (annualized) of average net assets for the six months ended November 30, 2014, the year ended May 31, 2014 and the period ended May 31, 2013, respectively. |
(h) | Interest rebate expense and line of credit interest expense totaled 0.20% (annualized), 0.07% and 0.01% (annualized) of average net assets for the six months ended November 30, 2014, the year ended May 31, 2014 and the period ended May, 31 2013, respectively. |
See Notes to Financial Statements. | |
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Financial Highlights |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | Period Ended May 31, 2013(a) | ||||||||||
$ | 10.25 | $ | 10.16 | $ | 10.00 | |||||||
0.20 | 0.42 | 0.17 | ||||||||||
(0.17 | ) | 0.08 | 0.08 | |||||||||
0.03 | 0.50 | 0.25 | ||||||||||
(0.20 | ) | (0.41 | ) | (0.09 | ) | |||||||
(0.20 | ) | (0.41 | ) | (0.09 | ) | |||||||
– | 0.00 | (c) | – | |||||||||
$ | 10.08 | $ | 10.25 | $ | 10.16 | |||||||
0.26 | %(e) | 5.08 | % | 2.49 | %(e) | |||||||
$ | 35,704 | $ | 23,039 | $ | 3,462 | |||||||
1.86 | %(f) | 2.37 | % | 3.64 | %(f) | |||||||
1.59 | %(f) | 2.20 | % | 3.60 | %(f) | |||||||
1.25 | %(f) | 1.25 | % | 1.25 | %(f) | |||||||
3.96 | %(f) | 4.16 | % | 2.62 | %(f) | |||||||
79 | %(e) | 181 | % | 92 | %(e) |
Semi-Annual Report | November 30, 2014 | 99 |
The Arbitrage Credit Opportunities Fund – Class C |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: |
Net asset value, beginning of period |
Income (loss) from investment operations |
Net investment income(b) |
Net realized and unrealized gains (losses) on investments and foreign currencies |
Total from investment operations |
Less distributions |
From net investment income |
Total distributions |
Net asset value, end of period |
Total return(c) |
Net assets, end of period (in 000s) |
RATIOS TO AVERAGE NET ASSETS: |
Expenses including interest and dividend expense |
Expenses excluding interest and dividend expense(f)(g) |
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(f)(g) |
Net investment income |
Portfolio turnover rate |
(a) | Commenced operations on October 1, 2012. |
(b) | Per share amounts were calculated using average shares for the period. |
(c) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(d) | Not Annualized. |
(e) | Annualized. |
(f) | Dividend expense totaled 0.07% (annualized), 0.10% and 0.03% (annualized) of average net assets for the six months ended November 30, 2014, the year ended May 31, 2014 and the period ended May 31, 2013, respectively. |
(g) | Interest rebate expense and line of credit interest expense totaled 0.20% (annualized), 0.07% and 0.01% (annualized) of average net assets for the six months ended November 30, 2014, the year ended May 31, 2014 and the period ended May, 31 2013, respectively. |
See Notes to Financial Statements. | |
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Financial Highlights |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | Period Ended May 31, 2013(a) | ||||||||||
$ | 10.23 | $ | 10.17 | $ | 10.00 | |||||||
0.15 | 0.34 | 0.11 | ||||||||||
(0.18 | ) | 0.07 | 0.09 | |||||||||
(0.03 | ) | 0.41 | 0.20 | |||||||||
(0.17 | ) | (0.35 | ) | (0.03 | ) | |||||||
(0.17 | ) | (0.35 | ) | (0.03 | ) | |||||||
$ | 10.03 | $ | 10.23 | $ | 10.17 | |||||||
(0.29 | %)(d) | 4.17 | % | 2.01 | %(d) | |||||||
$ | 1,812 | $ | 716 | $ | 26 | |||||||
2.86 | %(e) | 3.37 | % | 4.69 | %(e) | |||||||
2.59 | %(e) | 3.20 | % | 4.64 | %(e) | |||||||
2.25 | %(e) | 2.25 | % | 2.25 | %(e) | |||||||
2.97 | %(e) | 3.37 | % | 1.58 | %(e) | |||||||
79 | %(d) | 181 | % | 92 | %(d) |
Semi-Annual Report | November 30, 2014 | 101 |
The Arbitrage Credit Opportunities Fund – Class A |
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Periods Presented: | ||||||||
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014(a) | |||||||
Net asset value, beginning of period | $ | 10.25 | $ | 10.18 | ||||
Income (loss) from investment operations | ||||||||
Net investment income(b) | 0.19 | 0.39 | ||||||
Net realized and unrealized gains (losses) on investments and foreign currencies | (0.17 | ) | 0.09 | |||||
Total from investment operations | 0.02 | 0.48 | ||||||
Less distributions | ||||||||
From net investment income | (0.19 | ) | (0.41 | ) | ||||
Total distributions | (0.19 | ) | (0.41 | ) | ||||
Net asset value, end of period | $ | 10.08 | $ | 10.25 | ||||
Total return(c) | 0.19 | %(d) | 4.86 | % | ||||
Net assets, end of period (in 000s) | $ | 429 | $ | 28 | ||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||
Expenses including interest and dividend expense | 2.11 | %(e) | 2.77 | % | ||||
Expenses excluding interest and dividend expense(f)(g) | 1.84 | %(e) | 2.60 | % | ||||
Expenses after advisory fees waived and expenses reimbursed excluding interest and dividend expense(f)(g) | 1.50 | %(e) | 1.50 | % | ||||
Net investment income | 3.68 | %(e) | 3.89 | % | ||||
Portfolio turnover rate | 79 | %(d) | 181 | % |
(a) | Commenced operations on June 1, 2013. |
(b) | Per share amounts were calculated using average shares for the period. |
(c) | Total return is a measure of the change in the value of an investment in the Fund over the years covered, which assumes any dividends or capital gains distributions are reinvested in shares of the Fund. Returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. |
(d) | Not Annualized. |
(e) | Annualized. |
(f) | Dividend expense totaled 0.07% (annualized) and 0.10% of average net assets for the six months ended November 30, 2014 and the year ended May 31, 2014, respectively. |
(g) | Interest rebate expense and line of credit interest expense totaled 0.20% (annualized) and 0.07% of average net assets for the six months ended November 30, 2014 and the year ended May 31, 2014, respectively. |
See Notes to Financial Statements. | |
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The Arbitrage Funds | Notes to Financial Statements |
November 30, 2014 (Unaudited) |
1. ORGANIZATION
The Arbitrage Funds (the “Trust”) was organized as a Delaware business trust on December 22, 1999, and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company issuing its shares in series, each series representing a distinct portfolio with its own investment objective and policies. The three series presently authorized are The Arbitrage Fund (the “Arbitrage Fund”), The Arbitrage Event-Driven Fund (the “Event-Driven Fund”) and The Arbitrage Credit Opportunities Fund (“Credit Opportunities Fund”) (each a “Fund” and collectively the “Funds”) each a diversified investment portfolio, which offers four classes of shares. Class R shares, Class I shares, Class C shares and Class A shares of the Arbitrage Fund commenced operations on September 18, 2000, October 17, 2003, June 1, 2012 and June 1, 2013, respectively. Class R shares, Class I shares, Class C shares, and Class A shares of the Event-Driven Fund commenced operations on October 1, 2010, October 1, 2010, June 1, 2012 and June 1, 2013, respectively. Class R shares, Class I and Class C shares of the Credit Opportunities Fund commenced operations on October 1, 2012 and Class A shares commenced operations on June 1, 2013.
The investment objective of the Arbitrage Fund is to achieve capital growth by engaging in merger arbitrage. The investment objective of the Event-Driven Fund is to achieve capital growth by investing in companies that are impacted by corporate events such as mergers, acquisitions, restructurings, recapitalizations, refinancings, reorganizations and other special situations. The investment objective of the Credit Opportunities Fund is to provide current income and capital growth by investing in debt securities impacted by events such as reorganizations, restructurings, recapitalizations, debt maturities, refinancings, mergers, acquisitions, regulatory changes and other special situations.
The Funds’ four classes of shares, Class R, Class I, Class C and Class A represent interests in the same portfolio of investments with respect to a Fund and have the same rights, but differ primarily in the expenses to which they are subject and the investment eligibility requirements. Class R shares, Class C shares and Class A shares are subject to an annual distribution fee of up to 0.25%, 1.00% and 0.25% respectively, of each Fund’s average daily net assets attributable to Class R shares, Class C shares and Class A shares, respectively, whereas Class I shares are not subject to any distribution fees. Class C shares are also subject to a 1.00% contingent deferred sales charge on all purchases redeemed in 12 months of purchase. Class A shares of the Arbitrage Fund are sold subject to a maximum front-end sales load equal to 2.50% of the offering price and are also subject to a 0.50% contingent deferred sales load on purchases at or above $250,000, purchased without a front-end sales charge and redeemed within 12 months of purchase. Class A shares of the Event-Driven Fund and the Credit Opportunities Fund are sold subject to a maximum front-end sales load equal to 3.25% of the offering price and are also subject to a 1.00% contingent deferred sales load on purchases at or above $500,000, purchased without a front-end sales charge and redeemed within 18 months of purchase.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the Funds. These policies are in conformity with U.S. generally accepted accounting principles (“GAAP”). The Funds are considered investment companies for financial reporting purposes under GAAP.
Semi-Annual Report | November 30, 2014 | 103 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Use of Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Valuation of Investments — The Funds’ portfolio securities are valued as of the close of trading of the New York Stock Exchange (“NYSE”) (normally 4:00 p.m., Eastern time). Common stocks and other securities, including open short positions that are traded on a securities exchange, are valued at the last quoted sales price at the close of regular trading on the day the valuation is made. Securities which are quoted by NASDAQ are valued at the NASDAQ Official Closing Price. Price information on listed stocks is taken from the exchange where the security is primarily traded. Securities which are listed on an exchange but which are not traded on the valuation date are valued at the mean of the most recent bid and asked prices. Put and call options and securities traded in the over-the-counter market are valued at the mean of the most recent bid and asked prices. When there is no bid price available, put and call options will be valued using the average of the last ask price and zero. Foreign currency forward contracts are valued at the current day’s interpolated foreign exchange rate, as calculated using the current day’s spot rate, and the thirty, sixty, ninety and one-hundred eighty day forward rates provided by an independent source. Bank loans are valued at the composite mid-price which is calculated using the simple average of the dealer marks. If available, debt securities are priced based upon an evaluated bid provided by independent, third-party pricing agents. The third-party pricing agents may also value debt securities at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, or other methodologies designed to identify the market value for such securities. Unlisted securities for which market quotations are readily available are valued at the latest quoted bid price. Swap contracts that are listed or traded on a national securities exchange, commodities exchange, contract market or comparable over-the-counter market, and that are freely transferable, are valued at their closing settlement price on the exchange on which they are primarily traded or based upon the current settlement price for a like instrument acquired on the day on which the instrument is being valued. Over-the-counter swap contracts for which market quotations are readily available are valued based on quotes received from independent pricing services or one or more dealers that make markets in such securities. Other assets and securities for which no quotations are readily available are valued at fair value as determined in good faith under the supervision of the Board of Trustees of the Trust. Some of the more common reasons that may necessitate that a security be valued at fair value include: the security’s trading has been halted or suspended; the security has been delisted from a national exchange; the security’s primary trading market is temporarily closed at a time when under normal conditions it would be open; or the security’s primary pricing source is not able or willing to provide a price. Such methods of fair valuation may include, but are not limited to: multiple of earnings, multiple of book value, discount from market of a similar freely traded security, purchase price of a security, subsequent private transactions in the security or related securities, or a combination of these and other factors. Foreign securities are translated from the local currency into U.S. dollars using currency exchange rates supplied by a quotation service (see Note 8).
Fair Value Measurements — In accordance with the authoritative guidance on fair value measurements under GAAP, the Funds disclose fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The guidance establishes three levels of the fair value hierarchy as follows:
104 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Level 1 — | Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date; |
Level 2 — | Observable inputs other than quoted prices included in Level 1 that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 — | Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing each Fund’s own assumption about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
Investments are classified within the level of the lowest significant input considered in determining fair value. Investments classified within Level 3, whose fair value measurement considers several inputs, may include Level 1 or Level 2 inputs as components of the overall fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The Funds recognize transfers between levels as of the beginning of the annual period in which the transfer occurred.
For the six months ended November 30, 2014, there were no significant changes to the Funds’ fair value methodologies. Additionally, during the six months ended November 30, 2014, there were no transfers between level 1 and 2 securities. Transfers for level 3 securities, if any, are shown as part of the leveling table in the Portfolio of Investments.
Share Valuation and Redemption Fees — The net asset value per share of each class of shares of the Funds is calculated daily by dividing the total value of a Fund’s assets attributable to that class, less liabilities attributable to that class, by the number of shares of that class outstanding. The offering price and redemption price per share of each class of each Fund is equal to the net asset value per share, except that, shares of Class R, Class I and Class A are subject to a redemption fee of 2% if redeemed within 30 days for the Arbitrage Fund and Event-Driven Fund and 60 days for the Credit Opportunities Fund from the date of purchase. The Class A redemption fee does not apply for purchases over $250,000 in the Arbitrage Fund and purchases over $500,000 in the Event-Driven Fund and Credit Opportunities Fund, as these purchases are subject to a contingent deferred sales charge. Class C shares are not subject to a redemption fee. For the six months ended November 30, 2014, proceeds from redemption fees in the Arbitrage Fund were $10,627 in Class R, $3,711 in Class I and $0 in Class A. For the six months ended November 30, 2014, proceeds from redemption fees in the Event-Driven Fund were $1,492 in Class R, $8,430 in Class I and $0 in Class A. For the six months ended November 30, 2014, proceeds from redemption fees in the Credit Opportunities Fund were $172 in Class R, $0 in Class I and $0 in Class A. The redemption fee is paid directly to each Fund rather than the Adviser and is allocated pro-rata to the shareholders based on net assets attributed to the class.
Security Transactions — Security transactions are accounted for on trade date. Gains and losses on securities sold are determined on a specific identification basis.
Semi-Annual Report | November 30, 2014 | 105 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Short Positions — The Funds may sell securities short for economic hedging purposes. Subsequent fluctuations in the market prices of securities sold short may require purchasing the securities at prices which may differ from the market value reflected on the Portfolio of Investments. The Funds are liable for any dividends and interest payable on securities while those securities are in a short position. As collateral for their short positions, the Funds are required under the 1940 Act to maintain assets consisting of cash, cash equivalents or liquid securities. The amount of the collateral is required to be adjusted daily to reflect changes in the value of the securities sold short. The Funds are charged an interest rebate expense by the prime broker on securities sold short. The interest rebate expense is charged for the duration of time that a security is sold short and is shown on the Statements of Operations.
Derivative Instruments and Hedging Activities — The following discloses the Funds’ use of derivative instruments and hedging activities.
The Funds’ investment objectives not only permit the Funds to purchase investment securities, but they also allow certain Funds to enter into various types of derivative contracts, including, but not limited to swap contracts, forward foreign currency exchange contracts, and purchased and written options. In doing so, the Funds will employ strategies in differing combinations to permit them to increase, decrease, or change the level or types of exposure to market factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity or debt securities: they require little or no initial cash investment; they can focus exposure on only certain selected risk factors; and they may not require the ultimate receipt or delivery of the underlying security (or securities) to satisfy the contract. This may allow the Funds to pursue their objectives more quickly and efficiently than if they were to make direct purchases or sales of securities capable of effecting a similar response to market factors.
Market Risk Factors: In pursuit of their investment objectives, the Funds may seek to use derivatives to increase or decrease their exposure to the following market risk factors:
Equity Risk: Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Interest Rate Risk: Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of fixed income investments, and a decline in general interest rates will tend to increase the value of such investments. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Foreign Exchange Rate Risk: Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the value of the foreign currency denominated security will increase as the dollar depreciates against the currency.
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The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Risk of Investing in Derivatives: The Funds’ use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. In instances where the Funds are using derivatives to decrease or hedge exposures to market risk factors for securities held by the Funds, there are also risks that those derivatives may not perform as expected, resulting in losses for the combined or hedged positions.
Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows the Funds to increase their market value exposure relative to their net assets and can substantially increase the volatility of the Funds’ performance.
Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative instruments and the Funds. Typically, the associated risks are not the risks that the Funds are attempting to increase or decrease exposure to, per their investment objectives, but are the additional risks from investing in derivatives.
Examples of these associated risks are liquidity risk, which is the risk that the Funds will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty to a transaction will not fulfill its obligation to the Funds. Associated risks can be different for each type of derivative and are discussed by derivative type in the notes that follow.
Option Writing/Purchasing: Certain Funds may write or purchase option contracts to adjust risk and return of their overall investment positions. When a Fund writes or purchases an option, an amount equal to the premium received or paid by the Fund is recorded as a liability or an asset and is subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options that expire unexercised are treated by the Fund on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or proceeds from the sale in determining whether the Fund has realized a gain or loss on investment transactions. Risks from entering into option transactions arise from the potential inability of counterparties to meet the terms of the contracts, the potential inability to enter into closing transactions because of an illiquid secondary market and from unexpected movements in security values.
Semi-Annual Report | November 30, 2014 | 107 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
A summary of put and call option contracts written in the Arbitrage Fund during the six months ended November 30, 2014, is as follows:
Put Contracts | Put Premiums | Call Contracts | Call Premiums | |||||||||||||
Options outstanding at beginning of period | 1,097 | $ | 108,251 | 21,722 | $ | 1,569,952 | ||||||||||
Options written | 49,627 | 5,231,964 | 95,557 | 13,485,016 | ||||||||||||
Options closed | (14,893 | ) | (3,220,035 | ) | (38,802 | ) | (3,080,334 | ) | ||||||||
Options exercised | (2,864 | ) | (428,291 | ) | (34,078 | ) | (5,391,724 | ) | ||||||||
Options expired | (28,038 | ) | (915,993 | ) | (26,904 | ) | (4,451,075 | ) | ||||||||
Options outstanding at end of period | 4,929 | $ | 775,896 | 17,495 | $ | 2,131,835 |
A summary of put and call option contracts written in the Event-Driven Fund during the six months ended November 30, 2014, is as follows:
Put Contracts | Put Premiums | Call Contracts | Call Premiums | |||||||||||||
Options outstanding at beginning of period | 215 | $ | 11,153 | 3,533 | $ | 203,576 | ||||||||||
Options written | 14,003 | 1,268,456 | 58,593 | 3,973,005 | ||||||||||||
Options closed | (2,582 | ) | (514,867 | ) | (9,582 | ) | (714,706 | ) | ||||||||
Options exercised | (4,405 | ) | (331,058 | ) | (24,267 | ) | (1,902,178 | ) | ||||||||
Options expired | (4,741 | ) | (235,620 | ) | (26,280 | ) | (1,367,459 | ) | ||||||||
Options outstanding at end of period | 2,490 | $ | 198,064 | 1,997 | $ | 192,238 |
A summary of put and call option contracts written in the Credit Opportunities Fund during the six months ended November 30, 2014, is as follows:
Put Contracts | Put Premiums | Call Contracts | Call Premiums | |||||||||||||
Options outstanding at beginning of period | – | $ | – | 22 | $ | 2,185 | ||||||||||
Options closed | – | – | (22 | ) | (2,185 | ) | ||||||||||
Options outstanding at end of period | – | $ | – | – | $ | – |
Foreign Currency Exchange Contracts: The Funds may enter into forward foreign currency exchange contracts as a way of managing foreign exchange rate risk. The Funds may enter into these contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific transactions or portfolio positions. The objective of the Funds’ foreign currency hedging transactions is to reduce risk that the U.S. dollar value of the Funds’ securities denominated in foreign currency will decline in value due to changes in foreign currency exchange rates.
Warrants and Rights: The Funds may invest in warrants. A Fund may purchase warrants issued by domestic and foreign companies to purchase newly created equity securities consisting of common and preferred stock. Warrants are securities that give the holder the right, but not the obligation to purchase equity issues of the company issuing the warrants, or a related company, at a fixed price either on a date certain or during a set period. The equity security underlying a warrant is authorized at the time the warrant is issued or is issued together with the warrant.
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The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Investing in warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security, and thus can be a speculative investment. At the time of issue, the cost of a warrant is substantially less than the cost of the underlying security itself, and price movements in the underlying security are generally magnified in the price movements of the warrant. This leveraging effect enables the investor to gain exposure to the underlying security with a relatively low capital investment. This leveraging increases an investor’s risk, however, and in the event of a decline in the value of the underlying security, a complete loss of the amount invested in the warrant may result. In addition, the price of a warrant tends to be more volatile than, and may not correlate exactly to, the price of the underlying security. If the market price of the underlying security is below the exercise price of the warrant on its expiration date, the warrant will generally expire without value. The value of a warrant may decline because of a decline in the value of the underlying security, the passage of time, changes in interest rates or in the dividend or other policies of the company whose equity underlies the warrant or a change in the perception as to the future price of the underlying security, or any combination thereof. Warrants generally pay no dividends and confer no voting or other rights other than to purchase the underlying security.
Equity Swap Contracts: The Funds may invest in swaps for the purpose of managing exposure to interest rate, credit or market risk. Additionally, the Funds may enter into equity swap agreements for the purpose of attempting to obtain a desired return on, or exposure to, certain equity securities or equity indices in an expedited manner or at a lower cost to the Funds than if the Funds had invested directly in such securities. An 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. Fluctuations in the value of an open contract are recorded daily as a net unrealized gain or loss. The Funds will realize a gain or loss upon termination or reset of the contract. Either party, under certain conditions, may terminate the contract prior to the contract’s expiration date. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the Funds’ custodian and/or the counterparty’s broker. Risks may exceed amounts recognized on the Statements of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts’ terms and the possible lack of liquidity with respect to the swap agreements.
Whether a Fund’s use of swap agreements will be successful in furthering its investment objective will depend on Management’s ability to correctly predict whether certain types of investments are likely to produce greater returns than other investments. Because they are two-party contracts and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid investments. Moreover, a Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. A Fund will enter into swap agreements only with counterparties that meet certain standards for creditworthiness (generally, such counterparties would have to be eligible counterparties under the terms of the Fund’s repurchase agreement guidelines).
Semi-Annual Report | November 30, 2014 | 109 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) govern over-the-counter financial derivative transactions entered into by a Fund and those counterparties. The ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Pursuant to the Funds’ derivative ISDA Master Agreements, the Funds are required to maintain sufficient collateral or maintain a predetermined level of net assets. Any election to terminate early could be material to the financial statements. The values of all derivative instruments with credit risk-related contingent features that are in a net liability position at November 30, 2014, in the tables below exclude the effects of cash collateral received or posted pursuant to these derivative contracts and, therefore, are not representative of the Funds’ net exposure.
Fair Value of Derivative Instruments — Fair values of derivatives presented in the financial statements are not netted with the fair value of other derivatives or with any collateral amounts posted by the Funds or any counterparty. The fair value of derivative instruments for the Funds as of November 30, 2014, was as follows:
Derivatives Not Accounted For As Hedging Instruments | Asset Derivatives Statement of Assets and Liabilities Location | Fair Value | Liability Derivatives Statement of Assets and Liabilities Location | Fair Value | ||||||
Arbitrage Fund | ||||||||||
Foreign Currency Contracts | Unrealized appreciation on forward foreign currency exchange contracts | $ | 10,767,754 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 4,541,603 | ||||
Equity Contracts (rights) | Investments: At value | 52,149,852 | Investments: At value | 85 | ||||||
Equity Contracts (purchased option contracts) | Investments: At value | 5,807,558 | ||||||||
Equity Contracts (written option contracts) | Written options, at value | 4,292,704 | ||||||||
$ | 68,725,164 | $ | 8,834,307 |
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The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Derivatives Not Accounted For As Hedging Instruments | Asset Derivatives Statement of Assets and Liabilities Location | Fair Value | Liability Derivatives Statement of Assets and Liabilities Location | Fair Value | ||||||
Event-Driven Fund | ||||||||||
Foreign Currency Contracts | Unrealized appreciation on forward foreign currency exchange contracts | $ | 1,873,840 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 930,076 | ||||
Equity Contracts (swap contracts) | Unrealized appreciation on equity swap contracts | 148,793 | Unrealized depreciation on equity swap contracts | 35,248 | ||||||
Equity Contracts (rights) | Investments: At value | 5,494,110 | Investments: At value | 15 | ||||||
Equity Contracts (purchased option contracts) | Investments: At value | 3,557,370 | ||||||||
Equity Contracts (written option contracts) | Written options, at value | 722,962 | ||||||||
$ | 11,074,113 | $ | 1,688,301 |
Derivatives Not Accounted For As Hedging Instruments | Asset Derivatives Statement of Assets and Liabilities Location | Fair Value | Liability Derivatives Statement of Assets and Liabilities Location | Fair Value | ||||||
Credit Opportunities Fund | ||||||||||
Foreign Currency Contracts | Unrealized appreciation on forward foreign currency exchange contracts | $ | 39,816 | Unrealized depreciation on forward foreign currency exchange contracts | $ | 13,475 | ||||
Equity Contracts (purchased option contracts) | Investments: At value | 390 | ||||||||
$ | 40,206 | $ | 13,475 |
Semi-Annual Report | November 30, 2014 | 111 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
The effect of derivative instruments on the Funds’ Statement of Operations for the six months ended November 30, 2014, was as follows:
Derivatives Not Accounted For As Hedging Instruments | Location Of Gains/(Loss) On Derivatives Recognized In Income | Realized Gain/(Loss) On Derivatives Recognized In Income | Changed In Unrealized Gain/(Loss) On Derivatives Recognized In Income | ||||||
Arbitrage Fund | |||||||||
Foreign Currency Contracts | Net realized gains (losses) from: Foreign currency transactions / Net change in unrealized appreciation (depreciation) on: Foreign currency transactions | $ | (1,002,751 | ) | $ | 10,614,968 | |||
Equity Contracts (swap contracts) | Net realized gains (losses) from: Equity swap contracts / Net change in unrealized appreciation (depreciation) on: Equity swap contracts | 655,969 | (277,767 | ) | |||||
Equity Contracts Long (rights) | Net realized gains (losses) from: Investments / Net change in unrealized appreciation (depreciation) on: Investments | – | 507,776 | ||||||
Equity Contracts Short (rights) | Net realized gains (losses) from: Investments / Net change in unrealized appreciation (depreciation) on: Investments | – | (85 | ) | |||||
Equity Contracts (purchased option contracts) | Net realized gains (losses) from: Investments / Net change in unrealized appreciation (depreciation) on: Investments | (13,075,018 | ) | (4,865,487 | ) | ||||
Equity Contracts (written option contracts) | Net realized gains (losses) from: Written option contracts / Net change in unrealized appreciation (depreciation) on: Written option contracts | 9,327,755 | (1,773,820 | ) | |||||
$ | (4,094,045 | ) | $ | 4,205,585 |
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The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Derivatives Not Accounted For As Hedging Instruments | Location Of Gains/(Loss) On Derivatives Recognized In Income | Realized Gain/(Loss) On Derivatives Recognized In Income | Changed In Unrealized Gain/(Loss) On Derivatives Recognized In Income | ||||||
Event-Driven Fund | |||||||||
Foreign Currency Contracts | Net realized gains (losses) from: Foreign currency transactions / Net change in unrealized appreciation (depreciation) on: Foreign currency transactions | $ | 314,207 | $ | 1,513,178 | ||||
Equity Contracts (swap contracts) | Net realized gains (losses) from: Equity swap contracts / Net change in unrealized appreciation (depreciation) on: Equity swap contracts | 652,513 | 114,564 | ||||||
Equity Contracts Long (rights) | Net realized gains (losses) from: Investments / Net change in unrealized appreciation (depreciation) on: Investments | – | 85,790 | ||||||
Equity Contracts Short (rights) | Net realized gains (losses) from: Investments / Net change in unrealized appreciation (depreciation) on: Investments | – | (15 | ) | |||||
Equity Contracts (purchased option contracts) | Net realized gains (losses) from: Investments / Net change in unrealized appreciation (depreciation) on: Investments | (5,415,568 | ) | (1,432,678 | ) | ||||
Equity Contracts (written option contracts) | Net realized gains (losses) from: Written option contracts / Net change in unrealized appreciation (depreciation) on: Written option contracts | 2,003,441 | (372,882 | ) | |||||
$ | (2,445,407 | ) | $ | (92,043 | ) |
Semi-Annual Report | November 30, 2014 | 113 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Derivatives Not Accounted For As Hedging Instruments | Location Of Gains/(Loss) On Derivatives Recognized In Income | Realized Gain/(Loss) On Derivatives Recognized In Income | Changed In Unrealized Gain/(Loss) On Derivatives Recognized In Income | ||||||
Credit Opportunities Fund | |||||||||
Foreign Currency Contracts | Net realized gains (losses) from: Foreign currency transactions / Net change in unrealized appreciation (depreciation) on: Foreign currency transactions | $ | (151 | ) | $ | 45,168 | |||
Equity Contracts (purchased option contracts) | Net realized gains (losses) from: Investments / Net change in unrealized appreciation (depreciation) on: Investments | (9,184 | ) | (27,743 | ) | ||||
Equity Contracts (written option contracts) | Net realized gains (losses) from: Written option contracts / Net change in unrealized appreciation (depreciation) on: Written option contracts | – | (1,085 | ) | |||||
$ | (9,335 | ) | $ | 16,340 |
Volume of Derivative Instruments for the Funds during the six months ended November 30, 2014, was as follows:
Derivative Type | Unit of Measurement | Monthly Average | |||
Arbitrage Fund | |||||
Equity Swap Contracts | Notional Quantity | 461,409 | |||
Forward Foreign Currency Exchange Contracts | Net Contracts to Deliver/Receive | (283,204,160 | ) | ||
Purchased Option Contracts | Contracts | 57,620 | |||
Rights | Shares | 17,163,885 | |||
Rights – Short | Shares | (1,100 | ) | ||
Written Option Contracts | Contracts | (37,722 | ) |
Derivative Type | Unit of Measurement | Monthly Average | |||
Event-Driven Fund | |||||
Equity Swap Contracts | Notional Quantity | 333,395 | |||
Forward Foreign Currency Exchange Contracts | Net Contracts to Deliver/Receive | (39,988,067 | ) | ||
Purchased Option Contracts | Contracts | 39,936 | |||
Rights | Shares | 1,110,255 | |||
Rights – Short | Shares | (200 | ) | ||
Written Option Contracts | Contracts | (7,886 | ) |
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The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Derivative Type | Unit of Measurement | Monthly Average | |||
Credit Opportunities Fund | |||||
Forward Foreign Currency Exchange Contracts | Net Contracts to Deliver/Receive | (1,007,433 | ) | ||
Purchased Option Contracts | Contracts | 51 |
Certain derivative contracts are executed under either standardized netting agreements or, for exchange-traded derivatives, the relevant contracts for a particular exchange which contain enforceable netting provisions. A derivative netting arrangement creates an enforceable right of set-off that becomes effective, and affects the realization of settlement on individual assets, liabilities and collateral amounts, only following a specified event of default or early termination. Default events may include the failure to make payments or deliver securities timely, material adverse changes in financial condition or insolvency, the breach of minimum regulatory capital requirements, or loss of license, charter or other legal authorization necessary to perform under the contract.
The following table presents financial instruments that are subject to enforceable netting arrangements or other similar agreements as of November 30, 2014:
Offsetting of Financial Assets and Derivative Assets:
Event-Driven Fund | ||||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Assets and Liabilities | ||||||||||||||||||||||||
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts Presented in the Statement of Assets and Liabilities | Financial Instruments (a) | Cash Collateral Received(a) | Net Amount | ||||||||||||||||||
Equity Swap Contracts | $ | 148,793 | $ | – | $ | 148,793 | $ | – | $ | – | $ | 148,793 | ||||||||||||
Total | $ | 148,793 | $ | – | $ | 148,793 | $ | – | $ | – | $ | 148,793 |
Semi-Annual Report | November 30, 2014 | 115 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Offsetting of Financial Liabilities and Derivative Liabilities:
Event-Driven Fund | ||||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Assets and Liabilities | ||||||||||||||||||||||||
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts Presented in the Statement of Assets and Liabilities | Financial Instruments (a) | Cash Collateral Pledged(a) | Net Amount | ||||||||||||||||||
Equity Swap Contracts | $ | 35,248 | $ | – | $ | 35,248 | $ | – | $ | (35,248 | ) | $ | – | |||||||||||
Total | $ | 35,248 | $ | – | $ | 35,248 | $ | – | $ | (35,248 | ) | $ | – |
(a) | These amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged. |
Investment Income — Interest income and interest rebate expense is accrued as earned. Dividend income and expense are recorded on the ex-dividend date, net of any non-reclaimable tax withholdings.
Dividends and Distributions to Shareholders — Dividends arising from net investment income and net capital gain distributions, if any, are declared and paid at least annually to shareholders of the Arbitrage Fund and Event-Driven Fund. Dividends arising from net investment income, if any, are declared and paid quarterly, and net capital gain distributions, if any, are declared and paid at least annually to shareholders of the Credit Opportunities Fund.
Allocation Between Classes — Investment income earned, realized capital gains and losses, and unrealized appreciation and depreciation are allocated daily to each class of shares based upon the proportionate shares of total net assets of each Fund. Class-specific expenses are charged directly to the class incurring the expense. Common expenses which are not attributable to a specific class are allocated daily to each class of shares based upon the proportionate share of total net assets of each Fund.
Federal Income Tax — It is the Funds’ policy to continue to comply with the special provisions of Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. As provided therein, in any fiscal year in which a fund so qualifies and distributes at least 90% of its taxable net income, a fund (but not the shareholders) will be relieved of Federal income tax on the income distributed. Accordingly, no provision for income taxes has been made.
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The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
As of and during the six months ended November 30, 2014, the Funds did not have a liability for any unrecognized tax benefits. The Funds file U.S. federal, state, and local tax returns as required. The Funds’ tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
3. INVESTMENT TRANSACTIONS
During the six months ended November 30, 2014 for the Arbitrage Fund, the Event-Driven Fund, and the Credit Opportunities Fund, cost of purchases and proceeds from sales and maturities of investment securities, other than short-term investments, U.S. government securities, equity swap contracts, purchased and written option contracts and securities sold short, were as follows:
Arbitrage Fund | Event-Driven Fund | Credit Opportunities Fund | ||||||||||
Purchases | $ | 5,525,626,900 | $ | 1,295,692,145 | $ | 38,279,887 | ||||||
Sales and Maturities | 5,398,281,671 | 1,113,756,417 | 24,930,112 |
4. LINE OF CREDIT
The Trust, on behalf of the Funds, entered into an agreement which enables the Funds to participate in a $300,000,000 unsecured committed revolving line of credit with State Street Bank and Trust Company (the “Custodian”). Borrowings will be made solely to temporarily finance the purchase or sale of securities or to finance the redemption of the shares of an investor of the Funds. Interest is charged to the Funds based on their borrowings at a rate per annum of the higher of the LIBOR rate plus 1.25% and the overnight federal funds rate plus 1.25%. In addition, a commitment fee of 0.125% per annum is payable at the end of each calendar quarter. The Trust accrues, on behalf of each of the Funds, the commitment fee on the unused portion of the line of credit. Such fees are included in custodian and bank service fees on the Statements of Operations.
The Arbitrage Fund had outstanding borrowings of $113,200,000 at November 30, 2014. For the six months ended November 30, 2014, the Arbitrage Fund had average borrowings of $73,022,727 over a period of 22 days at a weighted average interest rate of 1.35%. Interest expense on the line of credit for the Arbitrage Fund during the six months ended November 30, 2014, is shown as line of credit interest expense on the Arbitrage Fund’s Statement of Operations.
The Event-Driven Fund did not have outstanding borrowings at November 30, 2014. For the six months ended November 30, 2014, the Event-Driven Fund had average borrowings of $3,833,333 over a period of 3 days at a weighted average interest rate of 1.35%. Interest expense on the line of credit for the Event-Driven Fund during the six months ended November 30, 2014, is shown as line of credit interest expense on the Event-Driven Fund’s Statement of Operations.
For the six months ended November 30, 2014, the Credit Opportunities Fund had no borrowings.
Semi-Annual Report | November 30, 2014 | 117 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
5. LOAN PARTICIPATIONS AND ASSIGNMENTS
The Funds may invest in direct debt instruments which are interests in amounts owed to lenders or lending syndicates by corporate, governmental, or other borrowers. The Funds’ investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution (the “lender”) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. The Funds may invest in multiple series or tranches of a loan, which may have varying terms and carry different associated risks. The Funds generally have no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Funds may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When the Funds purchase assignments from lenders they acquire direct rights against the borrower of the loan. The Funds may enter into unfunded loan commitments, which are contractual obligations for future funding. Unfunded loan commitments represent a future obligation in full, even though a percentage of the notional loan amounts may not be utilized by the borrower. When investing in a loan participation, the Funds have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan agreement and only upon receipt of payments by the lender from the borrower. The Funds may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a floating rate loan. In certain circumstances, the Funds may receive a penalty fee upon the prepayment of a floating rate loan by a borrower. Fees earned or paid are recorded as a component of interest income or interest expense, respectively, on the Statement of Operations. At November 30, 2014, the Arbitrage Fund, Event-Driven Fund and Credit Opportunities Fund had $0, $18,002,425 and $2,532,793, respectively, in outstanding loan commitments.
6. ADVISORY FEES, ADMINISTRATION FEES AND OTHER AGREEMENTS
Investment Advisory Agreement
The Funds’ investments are managed by Water Island Capital, LLC (the “Adviser”) under the terms of Investment Advisory Agreements. Under the Investment Advisory Agreement between the Adviser and the Arbitrage Fund, as amended and restated on October 1, 2007, the Arbitrage Fund pays the Adviser an annual fee, which is computed and accrued daily and paid monthly, of 1.25% on the first $250 million, 1.20% on the next $50 million, 1.15% on the next $50 million, 1.10% on the next $75 million, 1.05% on the next $75 million and 1.00% for amounts over $500 million, based on the Arbitrage Fund’s average daily net assets. Under the Investment Advisory Agreement between the Adviser and the Event-Driven Fund dated September 27, 2010, the Event-Driven Fund pays the Adviser an annual fee, which is computed and accrued daily and paid monthly, of 1.25% based on the Event-Driven Fund’s average daily net assets. Under the Investment Advisory Agreement between the Adviser and the Credit Opportunities Fund dated October 1, 2012, the Credit Opportunities Fund pays the Adviser an annual fee, which is computed and accrued daily and paid monthly, of 1.00% based on the Credit Opportunities Fund’s average daily net assets.
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The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
The Adviser has contractually agreed, at least until August 31, 2016, to waive its advisory fee and/or reimburse the Funds’ other expenses to the extent that total operating expenses (exclusive of interest, taxes, dividends on short positions, brokerage commissions, acquired fund fees and expenses and other costs incurred in connection with the purchase or sale of portfolio securities) exceed the annual rate of the Funds’ average daily net assets attributable to each share class as shown in the table below:
Arbitrage Fund | Event-Driven Fund | Credit Opportunities Fund | |
Class R | 1.69% | 1.69% | 1.50% |
Class I | 1.44% | 1.44% | 1.25% |
Class C | 2.44% | 2.44% | 2.25% |
Class A | 1.69% | 1.69% | 1.50% |
For the six months ended November 30, 2014, the aggregate net fee paid to the Adviser as a percentage of average net assets for the Arbitrage Fund, Event-Driven Fund and Credit Opportunities Fund was 1.04%, 1.27% and 0.66%, respectively.
The Adviser is permitted to recapture fees waived and expenses reimbursed to the extent actual fees and expenses for a period are less than the expense limitation of each class, provided, however, that the Adviser shall only be entitled to recapture such amounts for a period of three years from the end of the fiscal year during which such amount was waived or reimbursed. The Adviser can recapture any fees it has waived within three fiscal years of the year in which fees were waived period subject to the applicable annual rate of: 1.69% for Class R shares, 1.44% for Class I shares, 2.44% for Class C shares and 1.69% for Class A shares for Event-Driven Fund and 1.50% for Class R shares, 1.25% for Class I shares, 2.25% for Class C shares and 1.50% for Class A shares for Credit Opportunities Fund, respectively.
As of May 31, 2014, the balances of future recapture for each Fund were as follows:
Expiring May 31, 2015 | Expiring May 31, 2016 | Expiring May 31, 2017 | Total | |||||||||||||
Event-Driven Fund | ||||||||||||||||
Class R | $ | 37,027 | $ | 30,441 | $ | 16,826 | $ | 84,294 | ||||||||
Class I | $ | 78,860 | $ | 127,460 | $ | 67,294 | $ | 273,614 | ||||||||
Class C | N/A | $ | 620 | $ | 854 | $ | 1,474 | |||||||||
Class A | N/A | N/A | $ | 756 | $ | 756 | ||||||||||
Credit Opportunities Fund | ||||||||||||||||
Class R | N/A | $ | 22,353 | $ | 36,515 | $ | 58,868 | |||||||||
Class I | N/A | $ | 51,089 | $ | 113,965 | $ | 165,054 | |||||||||
Class C | N/A | $ | 399 | $ | 1,393 | $ | 1,792 | |||||||||
Class A | N/A | N/A | $ | 214 | $ | 214 |
There were no amounts recaptured during the period ended November 30, 2014, for Arbitrage Fund and Credit Opportunities Fund. During the period ended November 30, 2014, $75,505 in fees was recaptured in Event-Driven Fund.
Certain officers of the Trust are also officers of the Adviser. The Chief Compliance Officer (“CCO”) of the Trust also serves as the CCO of the Adviser. The Funds pay the Adviser 95% of the CCO’s salary for providing CCO services.
Semi-Annual Report | November 30, 2014 | 119 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Administration Agreement
ALPS Fund Services, Inc. (“ALPS” and the “Administrator”) serves as the Trust’s administrator pursuant to an Administration, Bookkeeping and Pricing Services Agreement (“Administration Agreement”) with the Trust. As compensation for its services to the Trust, ALPS receives an annual administration fee based on the annual minimum fee of $370,000. The Administrator is also reimbursed by the Trust for certain out-of-pocket expenses. Certain officers of the Trust are also officers of the Administrator.
Distribution Agreement
ALPS Distributors, Inc. (the “Distributor”) serves as the Funds’ distributors. The Distributor acts as an agent for the Funds and the distributor of their shares.
The Funds have adopted, with respect to their Class R, Class C shares and Class A shares, a plan of distribution pursuant to Rule 12b-1 under the 1940 Act which permits each Fund to pay for expenses incurred in the distribution and promotion of the Funds’ Class R shares, Class C shares and Class A shares and for services provided to shareholders. The Plan is a “reimbursement” plan. This means that a Fund’s Class R shares, Class C shares and Class A shares only pay a particular 12b-1 fee to the extent that the Adviser, the Distributor or others have incurred expenses in the promotion and distribution of the shares, including but not limited to, the printing of prospectuses and reports used for sales purposes, expenses of preparation of sales literature and related expenses, advertisements, and other distribution-related expenses, as well as any distribution fees paid to securities dealers or others. Under the distribution plan, a Fund may pay compensation to any broker-dealer with whom the Distributor or the Funds has entered into a contract to distribute Class R shares, Class C shares or Class A shares, or to any other qualified financial services firm, for distribution and/or shareholder-related services with respect to shares held or purchased by their respective customers or in connection with the purchase of shares attributable to their efforts. The amount of payments under the Plan in any year shall not exceed 0.25% for Class R shares, 0.75% for Class C shares and 0.25% for Class A shares, respectively, of the average daily net assets allocable to a Fund’s Class R shares, Class C shares and Class A shares, respectively. In addition, the Plan permits each Fund to make payments at an annual rate of up to 0.25% of the Fund’s Class C shares for expenses incurred in connection with the provision of shareholder support or administrative services for the Fund’s Class C shares. During the six months ended November 30, 2014, The Arbitrage Fund’s Class R shares incurred $793,398, Class C shares incurred $168,803 and Class A shares incurred $10,013, respectively, in distribution expenses for Class R shares and Class A shares and distribution and shareholder support expenses for Class C shares, all of which was used to compensate broker-dealers. With respect to the Event-Driven Fund, during the six months ended November 30, 2014, the Event-Driven Fund’s Class R shares incurred $264,103, Class C shares incurred $29,549 and Class A shares incurred $6,507, respectively, in distribution expenses for Class R shares and Class A shares and distribution and shareholder support expenses for Class C shares, all of which was used to compensate broker-dealers. With respect to the Credit Opportunities Fund, during the six months ended November 30, 2014, the Credit Opportunities Fund’s Class R shares incurred $7,487, Class C shares incurred $7,055 and Class A shares incurred $415, respectively, in distribution expenses for Class R shares and Class A shares and distribution and shareholder support expenses for Class C shares, all of which was used to compensate broker-dealers.
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The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Principal Financial Officer
ALPS receives an annual fee of $10,000 for providing Principal Financial Officer (“PFO”) services to the Trust. ALPS is compensated by the trust under a PFO Services Agreement.
Transfer Agent And Shareholder Services Agreement
DST Systems, Inc. (“DST”) maintains the records of each shareholder’s account, answers shareholders’ inquiries concerning their accounts, processes purchases and redemptions of the Funds shares, acts as dividend and distribution disbursing agent and performs other shareholder service functions.
Under the terms of the amended Transfer Agent and Shareholder Services Agreement between the Trust and DST, DST receives from the Funds a monthly complex minimum fee, including three CUSIPS (i.e., first CUSIP in a Fund), at an annual rate of $90,000 per year. For each CUSIP thereafter, an additional fee is applied at a minimum fee of $10,000 per CUSIP per year. There were no additional CUSIPS added during the six months ended November 30, 2014. In addition, the Funds pay out‐of‐pocket expenses, including but not limited to, postage, envelopes, checks, drafts, forms, reports, telephone services, record storage and communication lines. These out‐of‐pocket expenses are included in transfer agent fees on the Funds Statement of Operations.
Semi-Annual Report | November 30, 2014 | 121 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
7. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares as shown in the Statements of Changes in Net Assets are the result of the following capital share transactions for the periods shown:
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | |||||||
Arbitrage Fund - Class R | ||||||||
Shares sold | 6,699,199 | 28,923,212 | ||||||
Shares issued in reinvestment of dividends | – | 324,860 | ||||||
Shares redeemed | (25,284,263 | ) | (42,117,648 | ) | ||||
Net decrease in shares outstanding | (18,585,064 | ) | (12,869,576 | ) | ||||
Shares outstanding at beginning of period | 60,460,025 | 73,329,601 | ||||||
Shares outstanding at end of period | 41,874,961 | 60,460,025 | ||||||
Arbitrage Fund - Class I | ||||||||
Shares sold | 39,079,260 | 56,548,797 | ||||||
Shares issued in reinvestment of dividends | – | 370,899 | ||||||
Shares redeemed | (30,104,530 | ) | (75,823,038 | ) | ||||
Net increase/(decrease) in shares outstanding | 8,974,730 | (18,903,342 | ) | |||||
Shares outstanding at beginning of period | 133,167,976 | 152,071,318 | ||||||
Shares outstanding at end of period | 142,142,706 | 133,167,976 | ||||||
Arbitrage Fund - Class C | ||||||||
Shares sold | 346,696 | 1,810,652 | ||||||
Shares issued in reinvestment of dividends | – | 7,056 | ||||||
Shares redeemed | (448,804 | ) | (615,921 | ) | ||||
Net increase/(decrease) in shares outstanding | (102,108 | ) | 1,201,787 | |||||
Shares outstanding at beginning of period | 2,715,524 | 1,513,737 | ||||||
Shares outstanding at end of period | 2,613,416 | 2,715,524 | ||||||
Arbitrage Fund - Class A | ||||||||
Shares sold | 232,060 | 638,242 | ||||||
Shares issued in reinvestment of dividends | – | 797 | ||||||
Shares redeemed | (13,172 | ) | (110,396 | ) | ||||
Net increase in shares outstanding | 218,888 | 528,643 | ||||||
Shares outstanding at beginning of period | 528,643 | – | ||||||
Shares outstanding at end of period | 747,531 | 528,643 |
122 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | |||||||
Event-Driven Fund - Class R | ||||||||
Shares sold | 7,842,696 | 20,533,072 | ||||||
Shares issued in reinvestment of dividends | – | 19,940 | ||||||
Shares redeemed | (5,061,315 | ) | (1,760,311 | ) | ||||
Net increase in shares outstanding | 2,781,381 | 18,792,701 | ||||||
Shares outstanding at beginning of period | 19,821,462 | 1,028,761 | ||||||
Shares outstanding at end of period | 22,602,843 | 19,821,462 | ||||||
Event-Driven Fund - Class I | ||||||||
Shares sold | 22,117,989 | 27,051,554 | ||||||
Shares issued in reinvestment of dividends | – | 31,536 | ||||||
Shares redeemed | (6,704,394 | ) | (3,236,214 | ) | ||||
Net increase in shares outstanding | 15,413,595 | 23,846,876 | ||||||
Shares outstanding at beginning of period | 28,055,740 | 4,208,864 | ||||||
Shares outstanding at end of period | 43,469,335 | 28,055,740 | ||||||
Event-Driven Fund - Class C | ||||||||
Shares sold | 276,557 | 380,682 | ||||||
Shares issued in reinvestment of dividends | – | 672 | ||||||
Shares redeemed | (27,146 | ) | (2,230 | ) | ||||
Net increase in shares outstanding | 249,411 | 379,124 | ||||||
Shares outstanding at beginning of period | 414,063 | 34,939 | ||||||
Shares outstanding at end of period | 663,474 | 414,063 | ||||||
Event-Driven Fund - Class A | ||||||||
Shares sold | 216,587 | 387,229 | ||||||
Shares issued in reinvestment of dividends | – | 718 | ||||||
Shares redeemed | (62,930 | ) | (16,033 | ) | ||||
Net increase in shares outstanding | 153,657 | 371,914 | ||||||
Shares outstanding at beginning of period | 371,914 | – | ||||||
Shares outstanding at end of period | 525,571 | 371,914 |
Semi-Annual Report | November 30, 2014 | 123 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
Six Months Ended November 30, 2014 (Unaudited) | Year Ended May 31, 2014 | |||||||
Credit Opportunities Fund - Class R | ||||||||
Shares sold | 222,433 | 723,248 | ||||||
Shares issued in reinvestment of dividends | 11,227 | 10,735 | ||||||
Shares redeemed | (344,757 | ) | (276,188 | ) | ||||
Net increase/(decrease) in shares outstanding | (111,097 | ) | 457,795 | |||||
Shares outstanding at beginning of period | 621,960 | 164,165 | ||||||
Shares outstanding at end of period | 510,863 | 621,960 | ||||||
Credit Opportunities Fund - Class I | ||||||||
Shares sold | 1,569,880 | 2,259,583 | ||||||
Shares issued in reinvestment of dividends | 49,768 | 32,519 | ||||||
Shares redeemed | (324,360 | ) | (384,972 | ) | ||||
Net increase in shares outstanding | 1,295,288 | 1,907,130 | ||||||
Shares outstanding at beginning of period | 2,247,959 | 340,829 | ||||||
Shares outstanding at end of period | 3,543,247 | 2,247,959 | ||||||
Credit Opportunities Fund - Class C | ||||||||
Shares sold | 117,620 | 70,670 | ||||||
Shares issued in reinvestment of dividends | 1,958 | 239 | ||||||
Shares redeemed | (8,987 | ) | (3,462 | ) | ||||
Net increase in shares outstanding | 110,591 | 67,447 | ||||||
Shares outstanding at beginning of period | 69,965 | 2,518 | ||||||
Shares outstanding at end of period | 180,556 | 69,965 | ||||||
Credit Opportunities Fund - Class A | ||||||||
Shares sold | 39,879 | 2,713 | ||||||
Shares issued in reinvestment of dividends | 342 | 41 | ||||||
Shares redeemed | (375 | ) | – | |||||
Net increase in shares outstanding | 39,846 | 2,754 | ||||||
Shares outstanding at beginning of period | 2,754 | – | ||||||
Shares outstanding at end of period | 42,600 | 2,754 |
8. FOREIGN CURRENCY TRANSLATION
Amounts denominated in or expected to settle in foreign currencies are translated to U.S. dollars based on exchange rates on the following basis:
A. The market values of investment securities and other assets and liabilities are translated at the closing rate of exchange each day.
B. Purchases and sales of investment securities and income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions.
C. The Funds do not isolate that portion of the results of operations caused by changes in foreign exchange rates on investments from those caused by changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses on investments. Reported net realized foreign exchange gains or losses arise from 1) purchases and sales of foreign currencies; 2) currency gains or losses realized between the trade and settlement dates on securities transactions; and 3) the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds’ books, and the U.S. dollar equivalent of the amounts actually received or paid. Reported net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, other than investment securities, resulting from changes in exchange rates.
124 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
9. CONTINGENCIES AND COMMITMENTS
The Funds indemnify the Trust’s officers and trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. 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. However, based on experience, the Funds expect the risk of loss to be remote.
10. SECURITIES LENDING
In order to generate additional income, the Funds may, from time to time, lend portfolio securities to broker-dealers, banks or institutional borrowers of securities. The Funds must receive 100% collateral in the form of cash or U.S. government securities. This collateral must be valued daily and, should the market value of the loaned securities increase, the borrower must furnish additional collateral to the Funds. During the time portfolio securities are on loan, the borrower pays the Funds any dividends or interest paid on such securities.
Loans are subject to termination by the Funds or the borrower at any time. While the Funds do not have the right to vote securities on loan, they have the right to terminate the loan and regain the right to vote if that is considered important with respect to the investment. In the event the borrower defaults in its obligation to the Funds, the Funds bear the risk of delay in the recovery of portfolio securities and the risk of loss of rights in the collateral. There were no securities on loan in the Funds during the six months ended May 31, 2014.
11. FEDERAL TAX INFORMATION
In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also the Funds’ intention to declare as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts from prior years.
The amount of distributions from net investment income and net realized gains, if any, are determined in accordance with Federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. These “book/tax” differences are either temporary or permanent in nature and permanent differences are charged or credited to undistributed net investment income (loss), accumulated net realized gain (loss) or paid-in capital as appropriate in the period that the differences arise.
Permanent differences between the Funds’ financial statement and income tax reporting requirements are primarily attributable to gains and losses on certain foreign currency related transactions, short sale related dividend expense, investments in passive foreign investment companies, and investments in swaps. These have no effect on the Funds’ net assets or net asset value per share.
Semi-Annual Report | November 30, 2014 | 125 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
The tax character of dividends and distributions declared during the year ended May 31, 2014 was as follows: |
Fund | Year Ended | Ordinary Income | Long-Term Capital Gains* | Total Distributions | |||||||||
The Arbitrage Fund | 5/31/2014 | $ | – | $ | 12,319,798 | $ | 12,319,798 | ||||||
The Arbitrage Event-Driven Fund | 5/31/2014 | 982,616 | – | 982,616 | |||||||||
The Arbitrage Credit Opportunities Fund | 5/31/2014 | 440,526 | – | 440,526 |
* | The Funds designate these distributions as long-term capital gains dividends per IRC code section 852(b)(3)(C). |
The following information is computed on a tax basis for each item as of November 30, 2014: |
Fund | Gross Appreciation (excess of value over tax cost) | Gross Depreciation (excess of tax cost over value) | Net Depreciation of Foreign Currency and Derivatives | Net Unrealized Appreciation | Cost of Investments for Income Tax Purposes | |||||||||||||||
The Arbitrage Fund | $ | 90,109,984 | $ | (24,787,360 | ) | $ | – | $ | 65,322,624 | $ | 2,440,192,714 | |||||||||
The Arbitrage Event-Driven Fund | 16,545,153 | (21,612,253 | ) | – | (5,067,100 | ) | 674,280,872 | |||||||||||||
The Arbitrage Credit Opportunities Fund | 368,821 | (868,658 | ) | – | (499,837 | ) | 43,007,567 |
The differences between book–basis and tax–basis net unrealized appreciation/(depreciation) for the Arbitrage Fund, the Event-Driven Fund and the Credit Opportunities Fund are attributable to constructive sales, dividends related to short securities, investments in passive foreign investment companies, and wash sales.
Post-Enactment Capital Losses:
Under the recently enacted Regulated Investment Company Modernization Act of 2010, Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. Post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital.
The Arbitrage Fund has elected to defer Long Term capital losses in the amount of $11,516,700 to the next tax year.
126 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Funds | Notes to Financial Statements (continued) |
November 30, 2014 (Unaudited) |
The Arbitrage Credit Opportunities Fund has elected to defer Short Term capital losses in the amount of $7,187 to the next tax year.
Late Year Losses:
The Arbitrage Credit Opportunities Fund elects to defer to the period ending May 31, 2015, capital losses recognized during the period November 1, 2013 to May 31, 2014 in the amount of $10,992.
The Arbitrage Fund elects to defer to the period ending May 31, 2015, late year ordinary losses in the amount of $17,479,638.
12. INFORMATION REGARDING LEGAL PROCEEDINGS
In December 2007, the Arbitrage Fund as a shareholder of Lyondell Chemical Company (“Lyondell”), participated in a cash out merger of Lyondell in which the Arbitrage Fund received cash in exchange for its ownership in Lyondell. Subsequent to this, Lyondell filed for bankruptcy and the entities which emerged through the plan of reorganization have initiated lawsuits seeking to recover, or claw back, proceeds received by shareholders in December 2007. The proceedings are ongoing and the amount of potential loss, if any, is not able to be determined.
13. SUBSEQUENT EVENTS
The Investment Advisor has evaluated the need for disclosures and/or adjustments resulting from subsequent events relating to the Funds. There were no such events or transactions requiring adjustments to or disclosure in the Funds’ financial statements. However, Class R Shares, Class I Shares, Class C Shares and Class A Shares of the Arbitrage Tactical Equity Fund were launched.
The inception date of all classes was December 31, 2014 and operations commenced on January 2, 2015.
Semi-Annual Report | November 30, 2014 | 127 |
The Arbitrage Funds | Disclosure of Fund Expenses |
November 30, 2014 (Unaudited) |
All mutual funds have operating expenses. As a shareholder of a mutual fund, your investment is affected by these ongoing costs, which include (among others) costs for portfolio management, administrative services, distribution (12b-1) expenses, redemption fees and shareholder reports like this one. It is important for you to understand the impact of these costs on your
investment returns.
Operating expenses such as these are deducted from a mutual fund’s gross income and directly reduce its final investment return. These expenses are expressed as a percentage of a mutual fund’s average net assets; this percentage is known as a mutual fund’s expense ratio.
The following examples use the expense ratio and are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The table on the following page illustrates your Fund’s costs in two ways.
Actual Fund Return. This section helps you to estimate the actual expenses after fee waivers that your Fund incurred over the period. The “Expenses Paid During Period” column shows the actual dollar expense cost incurred by a $1,000 investment in the Fund, and the “Ending Account Value” number is derived from deducting that expense cost from the Fund’s gross investment return.
You can use this information, together with the actual amount you invested in the Fund, to estimate the expenses you paid over that period. Simply divide your actual account value by $1,000 to arrive at a ratio (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply that ratio by the number shown for your Fund under “Expenses Paid During Period.”
Hypothetical 5% Return. This section helps you compare your Fund’s costs with those of other mutual funds. It assumes that the Fund had an annual 5% return before expenses during the period, but that the expense ratio (Column 3) for the period is unchanged. This example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to make this 5% calculation. You can assess your Fund’s comparative cost by comparing the hypothetical result for your Fund in the “Expenses Paid During Period” column with those that appear in the same charts in the shareholder reports for other mutual funds.
Note: Because the return is set at 5% for comparison purposes — NOT your Fund’s actual return — the account values shown may not apply to your specific investment.
128 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Funds | Disclosure of Fund Expenses (continued) |
November 30, 2014 (Unaudited) |
Beginning Account Value 06/01/2014 | Ending Account Value 11/30/2014 | Expense Ratio(a) | Expenses Paid During Period(b) | |||||||||||||
The Arbitrage Fund | ||||||||||||||||
Class R | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,006.40 | 2.19 | % | $ | 11.02 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,014.09 | 2.19 | % | $ | 11.06 | ||||||||
Class I | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,007.80 | 1.95 | % | $ | 9.81 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,015.29 | 1.95 | % | $ | 9.85 | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,002.40 | 2.95 | % | $ | 14.81 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,010.28 | 2.95 | % | $ | 14.87 | ||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,006.40 | 2.20 | % | $ | 11.07 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,014.04 | 2.20 | % | $ | 11.11 | ||||||||
The Arbitrage Event-Driven Fund | ||||||||||||||||
Class R | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 973.80 | 2.31 | % | $ | 11.43 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,013.49 | 2.31 | % | $ | 11.66 | ||||||||
Class I | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 974.90 | 2.06 | % | $ | 10.20 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,014.74 | 2.06 | % | $ | 10.40 | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 969.70 | 3.06 | % | $ | 15.11 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,009.73 | 3.06 | % | $ | 15.42 | ||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 973.80 | 2.31 | % | $ | 11.43 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,013.49 | 2.31 | % | $ | 11.66 |
Semi-Annual Report | November 30, 2014 | 129 |
The Arbitrage Funds | Disclosure of Fund Expenses (continued) |
November 30, 2014 (Unaudited) |
Beginning Account Value 06/01/2014 | Ending Account Value 11/30/2014 | Expense Ratio(a) | Expenses Paid During Period(b) | |||||||||||||
The Arbitrage Credit Opportunities Fund | ||||||||||||||||
Class R | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,001.00 | 1.77 | % | $ | 8.88 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,016.19 | 1.77 | % | $ | 8.95 | ||||||||
Class I | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,002.60 | 1.52 | % | $ | 7.63 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,017.45 | 1.52 | % | $ | 7.69 | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 997.10 | 2.52 | % | $ | 12.62 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,012.43 | 2.52 | % | $ | 12.71 | ||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,001.90 | 1.77 | % | $ | 8.88 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,016.19 | 1.77 | % | $ | 8.95 |
(a) | Annualized, based on the Fund's most recent fiscal half-year expenses. |
(b) | Expenses are equal to the Fund's annualized ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), divided by 365. |
130 | www.arbitragefunds.com | 1-800-295-4485 |
The Arbitrage Funds | Additional Information |
November 30, 2014 (Unaudited) |
1. PROXY VOTING POLICIES AND VOTING RECORD
A description of the policies and procedures that the Funds use to vote proxies relating to portfolio securities is available without charge upon request by calling toll-free 1-800-295-4485, or on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent fiscal year ending June 30th will be available without charge upon request by calling toll-free 1-800-295-4485, or on the SEC’s website at http://www.sec.gov.
2. QUARTERLY PORTFOLIO HOLDINGS
The Funds file a complete listing of their portfolio holdings with the SEC as of the first and third quarters of each fiscal year on Form N-Q. The filings are available upon request by calling 1-800-295-4485. Furthermore, you may obtain a copy of the filing on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Semi-Annual Report | November 30, 2014 | 131 |
Item 2. | Code of Ethics. |
Not applicable to semi-annual report. |
Item 3. | Audit Committee Financial Expert. |
Not applicable to semi-annual report. |
Item 4. | Principal Accountant Fees and Services. |
Not applicable to semi-annual report. |
Item 5. | Audit Committee of Listed Registrants. |
Not applicable. |
Item 6. | Schedule of Investments. |
Not applicable. |
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable |
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable. |
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable. |
Item 10. | Submission of Matters to Vote of Security Holders. |
None. |
Item 11. | Controls and Procedures. |
(a) | The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date. |
(b) | There was no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) 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) | Not applicable to semi-annual report. |
(a)(2) | A separate certification for the principal executive officer and the principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are attached hereto as exhibit EX-99.CERT. |
(a)(3) | Not applicable. |
(b) | The certifications by the registrant’s Principal Executive Officer and Principal Financial Officer, as required by Rule 30a-2(b) of the Investment Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Ex99.906CERT. |
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.
THE ARBITRAGE FUNDS
By: | /s/ John S. Orrico |
John S. Orrico | |
President | |
Date: | February 4, 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: | /s/ John S. Orrico |
John S. Orrico | |
President | |
Date: | February 4, 2015 |
By: | /s/ Kim Storms |
Kim Storms | |
Chief Financial Officer | |
Date: | February 4, 2015 |