The views expressed are those of the portfolio manager and Litman Gregory Asset Management, LLC as of the date indicated, are subject to change, and may differ from the views of other portfolio managers or the firm as a whole. These opinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice. References to specific securities are not intended and should not be relied upon as the basis for anyone to buy, sell, or hold any security. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.

Annualized performance through 12/31/2013 for ARBFX: 0.85% (one year); 3.36% (five years); 2.92% (ten years); for ARBNX: 1.15% (one year); 3.59% (five years); and 3.15% (ten years).

The y axis of the graph on page 1 represents the ratio of cumulative performance since inception to 10/31/12 relative to the index. The source of the graph is from a proprietary database produced by Litman Gregory, with the original data sources being Morningstar for fund returns and Credit Suisse for index returns. The Arbitrage Fund Top 10 Deals listed on page 2 represent a snapshot of the top deals in the portfolio as of 12/31/12.

The performance data quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original costs. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (800) 295-4485.  The Fund assesses a 2% redemption fee on shares redeemed within 30 days of purchase.  Contractual fee waivers are currently in effect.  Without such waivers, performance numbers may have been reduced.  The Total Annual Operating expense for ARBFX is 1.99%; Total Annual Fund Operating Expenses Excluding the Effect of Dividend and Interest Expense on Short Positions for ARBFX is 1.45%. The Total Annual Operating expense for ARBNX is 1.74%; Total Annual Fund Operating Expenses Excluding the Effect of Dividend and Interest Expense on Short Positions for ARBFX is 1.20%.

An investor should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. The current prospectus contains this and other information about the Fund. You may obtain a copy of the Fund's prospectus at http://arbitragefunds.com or by calling (800) 295-4485. Please read the prospectus carefully before investing.

RISKS: In addition to the normal risks associated with investing, the Fund may realize losses if the proposed reorganizations in which the Fund invests are renegotiated or terminated. The Fund uses investment techniques that are different from the risks ordinarily associated with equity investments. Such techniques and strategies include merger arbitrage risks, high portfolio turnover risks, options risks, borrowing risks, short sale risks, and foreign investment risks, which may increase volatility and may increase costs and lower performance.

The Arbitrage Fund is distributed by ALPS Distributors, Inc., which is not affiliated with Water Island Capital, LLC or Litman Gregory Asset Management, LLC.

The Dow Jones Credit Suisse Risk Arbitrage Index measures the performance of risk arbitrage funds. Risk arbitrage funds typically invest in mergers and acquisitions involving public companies, attempting to capture the underlying spreads. The HFRI (Hedge Fund Research, Inc.) Merger Arbitrage Index includes funds 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. One cannot invest directly in an index. Annualized performance through 12/31/2013 for the Dow Jones Credit Suisse Risk Arbitrage Index is: 4.89% (one year); 4.67% (five years); and 4.51% (ten years).

Standard Deviation measures the degree of variation of returns around the average return. In finance, it is commonly used as a representation of the risk associated with price-fluctuations of a given asset. Basis points are commonly used to refer to changes in financial instruments. One basis point is equal to 1/100th of 1%. Options represent the right to buy or sell a specified measure of an asset at an agreed upon price for a fixed cost before a stated expiration date. A call option represents the right to buy, and a put option represents the right to sell.

Top 10 holdings as of 12/31/13 (47.53% of portfolio): Life Technologies, Lender Processing Services Inc, Harris Teeter Supermarkets Inc, Santarus Inc, Shoppers Drug Mark Corp, Invensys PLC, CapitalSouce Inc, Paladin Labs Inc, ViroPharma Inc, Hudson City Bancorp Inc. Holdings are subject to change. Current and future holdings are subject to risk.

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