(PUB) Investing 2015

4

Morningstar Analyst Rating 04-16-15 „ Data through April 30, 2015 Merger Investor

Ticker

Status Yield Total Assets

Mstar Category Market Neutral Investment Style Equity Stock %

MERFX Open

2.5% $5,250 mil

Historical Profile Return Risk Rating Above Avg Below Avg Above Avg

47% 39% 46% 53% 52% 48% 50% 57%

Manager Change Partial Manager Change

12.0 14.0 16.0

Morningstar Pillars Process Performance

Growth of $10,000

Positive Positive Positive Positive Positive

Investment Values of Fund Investment Values of BC Agg Bnd

People Parent Price

10.0

NAV Total Return % +/-BC Agg Bnd +/-3Mth T-Bill Income Return % Capital Return % Capital Gains $ Expense Ratio % Income Ratio % Turnover Rate % Net Assets $mil Total Rtn % Rank Cat Income $ Performance Quartile (within Category) History

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 04-15

Morningstar Analyst Rating Morningstar evaluates mutual funds based on five key pillars, which its analysts believe lead to funds that are more likely to outperform over the long term on a risk-adjusted basis. Analyst Rating Spectrum Œ „ ´ˇ ¨

15.42 2.71 -1.63 1.28

14.67 0.81 -1.62 -2.53

15.62 10.98 6.65 5.92

15.02 2.96 -4.01 -1.81

14.32 -2.26 -7.50 -3.77 2.01 -4.27 0.30 0.06 1.47 -0.09 58

15.54 8.52 2.59 8.36

15.78 3.41 -3.13 3.27

15.59 1.66 -6.18 1.60

15.83 3.61 -0.60 3.52

16.01 3.61 5.63 3.55

15.63 1.43 -4.54 2.47 -1.04

15.85 1.41 0.17

-19.59 1.40

0.01 2.70

0.06 0.75

0.76

2.37 0.59 0.37 0.69 1.40 0.83 335 41

0.00 8.52

0.00 3.41

0.53 1.13

1.66 1.95

1.96 1.65 0.31 0.08 1.26 0.22 194 40

0.00 1.41 0.00 0.00 32

10.22

62

52

4

22

6

37

19

43

Pillar Spectrum Positive

0.00 0.20 1.37 -0.68

0.01 0.87 1.36 -0.35

0.11 0.55 1.37 0.43 369

0.00 0.00 1.54 -2.49

0.00 0.29 1.41 -1.28

0.08 0.37 1.34 -1.13

0.26 0.06 1.27 -0.34

0.40 0.21 1.23 2.06 137

§ Negative

¶ Neutral

. . .

Performance 04-30-15 1st Qtr 2nd Qtr

3rd Qtr

4th Qtr

Total 1.66 3.61 3.61 1.43

257

312

300

318

192

48

240

2011 2012 2013 2014 2015

2.41 0.50 1.09 0.06 0.25 0.06 0.50 2.36

-4.00 2.90 1.08 1.34 1.89 1.37 -0.85 -0.56

1,651

1,260

1,526

1,606

1,277

2,262

3,913

5,024

4,420

4,836

4,067

4,011

Portfolio Analysis 12-31-14 Share change since 09-14 Total Stocks:110 Sector

Rating and Risk Time Load-Adj

1.41

PE Tot Ret% % Assets

Morningstar

Morningstar Risk vs Cat

Morningstar Risk-Adj Rating

. . . .

Period Return % Rtn vs Cat

Fidelityfi Instl MM Fds G Invesco Short Term Inv L Time Warner Cable Inc

. . . . . . Comm Svs 22.0 3.26 4.35 5.51 5.51

1 Yr 3 Yr 5 Yr

1.90 2.88 2.76 3.66 6.57

Trailing

Total

+/- BC +/- 3Mth %Rank Growth of

Return% Agg Bnd 1.73 2.57

T-Bill -8.39

Cat

$10,000

+Avg +Avg +Avg

-Avg -Avg -Avg

3 Mo 6 Mo 1 Yr

20 10,173 23 10,209 34 10,190 22 10,889 24 11,458 23 14,326 62 17,146

Covidien PLC Allergan Inc

Hlth care Hlth care

4.09 3.99

. . . .

2.09 0.03 -20.63 1.90 -2.56 -40.58

10 Yr Incept

TRW Automotive Holdings Goldman Sachs FS Money M American International G Vivendi Sa Swap (Jpm)

Cnsmr Cyc 42.4 2.15 3.01 . . . Finan Svs 10.7 0.72 2.66 2.77 . . . Comm Svs 16.8 4.62 2.62 2.65 Cnsmr Def 38.3 -1.35 2.15 Basic Mat 20.5 1.73 2.05 Cnsmr Cyc 44.8 12.86 1.85 Technology 21.7 -28.46 1.81 Basic Mat 33.3 1.37 1.79 Cnsmr Cyc 16.3 1.29 1.70 . . . Comm Svs 87.0 26.35 1.67 1.69 Energy 14.0 4.51 1.95 Real Est 21.8 9.32 2.28

3 Yr Avg 5 Yr Avg 10 Yr Avg 15 Yr Avg

2.88 0.28 2.76 -1.36 3.66 -1.09 3.66 -1.99

-9.95 -5.73 -5.99 -0.01

Other Measures

Standard Index

Best Fit Index

BC Agg Bnd

Alpha

2.8

1.6

Directv

Beta

0.00

0.13

Lamar Advertising Co Cla Family Dollar Stores Inc

R-Squared

0

45

Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat 3 Yr (estimated) 5 Yr (estimated) 10 Yr (estimated) 1.72 24 1.12 86 1.74 24 0.99 84 2.46 23 1.15 88 Potential Capital Gain Exposure: -1% of assets Morningstar’s Take by A.J. D’Asaro 04-16-15 The Merger Fund continues to excel despite a significant increase in assets. Thanks to its successful track record, this merger-arbitrage fund tripled in size since the 2008 financial crisis, from $1.6 billion in mid-2009 up to a whopping $5.0 billion by late 2011, where it has remained fairly stable. The asset growth, combined with sluggish postcrisis deal flow, induced managers Roy Behren and Michael Shannon to make gradual changes in its strategy, such as increasing the fund’s average number of holdings from 50 to 80 deals. Even with its growth, the fund is the top performer of the market-neutral category’s four merger-arbitrage medalists over the past three years, earning 2.99% annualized with a 2.5% standard deviation (as of March 2015). Its results also far exceed the category’s 1.46% returns and 3.6% standard deviation. Behren and Shannon became co-portfolio managers in 2007, after working on the investment team for more than 10 years. Over the years, they have spearheaded Merger’s effort to evolve its strategy to accommodate

Standard Deviation

2.48 2.88 1.14

Huntsman Corp

Hess Corp

Mean

Sirius XM Holdings Inc Tokyo Electron Ltd ADR Sigma-Aldrich Corp General Motors Co Directv Swap (Jpm)

Sharpe Ratio

a larger asset base. The current process is more systematic, to enable real-time analysis of an increased number of deals. The fund also hired senior event-driven analyst Steven Tan (2012) and options portfolio manager Mike Corigliano (2014) to bolster its ranks. Management also retains outside legal counsel and industry consultants to help understand the most complex mergers. In addition, the fund has expanded beyond plain-vanilla merger arbitrage to other corporate reorganizations in about 15% of the portfolio, a move that has expanded the fund’s opportunity set but leaves the fund’s market-neutral risk profile unchanged. Because of size, it is sensitive to available deal flow in the marketplace. From 2011 to 2013, it remained 80%-90% invested, but if deal flow dropped precipitously, it might hold cash. In 2014, however, deal flow reached levels not seen since 2007, which bodes well for the fund’s capacity in the near term. With the investor share class priced at 1.23%, this fund is one of the best in the market-neutral category.

T-Mobile US Inc

Current Investment Style

Sector Weightings

% of Stocks

Rel BC Agg Bnd High

3 Year Low

Market Cap % Giant 7.9 Large 51.2 Mid 36.5 Small 4.3 Micro 0.1 Avg $mil: 20,004

Value Blnd Growth

Large Mid Small

Cyclical 39.62 BasicMat 9.44 CnsmrCyc16.67 FinanSvs 7.27 Real Est 6.24 Sensitive 40.81 CommSrvs15.55 Energy 14.09 Technlgy 6.49 Defensive19.56 CnsmrDef 4.42 Hlthcare 15.14 Utilities 0.00 Industrl 4.68

.

h r t y u j i o p a k s d f

. 12 1 . 20 1 . 16 3

6 0

. .

. 18 6 . 23 8 . 20 2 . 21 4

Value Measures Price/Earnings Price/Book Price/Sales Price/Cash Flow Dividend Yield % Long-Term Erngs Book Value Sales Cash Flow Historical Erngs Growth Measures

Rel Category

19.45 1.85 1.18 7.46 1.43 10.65 7.17 -2.66 7.99 -2.67

1.28 0.99 1.15 1.12 0.79 1.00 1.99 NMF 1.64 NMF

.

. 15 1 . 20 8

% Rel Category

5 0

.

Composition - Net

Cash 34.1 Stocks 59.0 Bonds 1.6 Other 5.3 Foreign 11.5

Address:

Merger Fund Valhalla, NY 10595 800-343-8959 www.mergerfund.com

Minimum Purchase: Min Auto Inv Plan:

$2000 $2000

Add: $0 IRA: $2000

Add: $100

Profitability

% Rel Category

Sales Fees:

No-load, 1.00% 3Yr:$522 Annually

Return on Equity Return on Assets Net Margin

16.22 5.70 10.34

1.00 0.90 0.93

Web Address: Inception: Advisor: Subadvisor: NTF Plans:

Management Fee:

(% of Stock)

01-31-89

Actual Fees:

Mgt:1.00% Dist:0.18%

Westchester Capital Management LLC

Expense Projections: Income Distribution:

5Yr:$910 10Yr:$1997

None

Fidelity Retail-NTF, CommonWealth NTF

Mutual Funds ß ®

© 2015Morningstar, Inc.All rights reserved.The informationherein is not represented orwarranted tobeaccurate, correct, complete or timely. Pastperformance is no guarantee of future results.Accessupdated reportsat To order reprints, call 312-696-6100. mfb.morningstar.com.

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