Dear Unitholders,

The Pender Alternative Arbitrage Fund and the Pender Alternative Arbitrage Plus Fund were down -0.5% and -0.6% respectively¹ in November 2025 while the HFRI ED: Merger Arbitrage Index (USD) returned 0.3%².

Portfolio Update

November was another active month for the Fund, reflecting the continued momentum in the M&A market and a steady cadence of deal closings. During the month, the Fund initiated positions in 12 new merger deals while 25 deals held within the Fund successfully closed, allowing capital to be efficiently recycled into new opportunities. Deal flow in the Fund remained heavily skewed toward small-cap transactions, consistent with our focus on shorter-duration deals with lower regulatory complexity and more attractive risk-adjusted returns. At the end of November 2025, the Fund held 42 active investments in small-cap deals under $2 billion, 29 of which were valued at under $1 billion, underscoring the depth of opportunity within our core universe. The persistent valuation dislocation between small-cap and large-cap companies continues to create a favorable setup for M&A activity, particularly as smaller businesses trade at meaningful discounts despite stable fundamentals and increasingly strategic importance to potential acquirers. Our emphasis on small-cap merger deals we believe provides shorter durations, reduced regulatory risk, and a greater likelihood of mispricing driven by limited sell-side coverage, lower liquidity, and less crowded arbitrage participation. With historically high levels of deal flow, abundant opportunities to recycle capital and a diversified portfolio of active transactions, the Fund remains well positioned to benefit from the ongoing strength in both merger and SPAC arbitrage as the year draws to a close.

M&A Market Update

Global M&A activity continued with its momentum into the final months of the year with a total of nearly $4 trillion of deals announced through the first eleven months of 2025, a 42% increase versus the same period in 2024.³ The strength of dealmaking year-to-date positions 2025 to become the second most active year on record for global M&A by total announced value, driven in large part by a pronounced resurgence in mega-cap transactions. Deals exceeding $10 billion have been a defining feature of the current cycle, with 63 mega-mergers announced through the end of November, an all-time high. These transactions total more than $1.25 trillion in aggregate value and account for nearly one-third of all global M&A activity so far this year, underscoring the willingness of large strategic acquirers and sponsors to pursue transformational combinations. Technology remained the leading sector globally by both deal count and announced value, with transactions totaling $772 billion during the first eleven months of the year, representing approximately 19% of total global M&A activity. Industrials and Financials round out the top three sectors in 2025, reflecting continued consolidation driven by scale, efficiency gains, and balance-sheet repositioning across economically sensitive industries.

The broader economic and policy backdrop continues to provide a constructive foundation for M&A activity. While growth has moderated in parts of the global economy, conditions remain supportive for dealmaking, with corporate balance sheets in strong shape, financing markets open, and greater visibility around the future path of interest rates reducing uncertainty for acquirers. At the same time, the regulatory environment has arguably become the most transaction-friendly in decades, enabling larger and more complex deals to proceed even in highly consolidated industries that would have faced significant scrutiny in prior cycles. This shift has emboldened both strategic buyers and financial sponsors to pursue scale-driven and transformational transactions. Importantly, a persistent valuation disconnect between large-cap and small-cap companies continues to create fertile ground for consolidation, particularly as smaller businesses trade at meaningful discounts despite solid fundamentals and domestic operating profiles. Combined with ongoing pressure on management teams to deploy excess capital, achieve cost synergies, and enhance competitive positioning, these factors reinforce our view that the current M&A cycle is underpinned by durable tailwinds and remains well positioned to support further deal activity into the coming quarters.

SPAC Market Update

There were 10 SPAC IPOs in November raising over $1.8 billion of capital with no closing or liquidation activity during the month⁴. At the end of November there were 271 active SPACs in the market with a total value of $35.8 billion, with 165 SPACs actively searching for deals. At the end of the month, SPACs searching for targets were trading at a discount-to-trust value, which provided a yield-to-maturity of 3.83%⁵. The ongoing wave of SPAC IPOs, coupled with the ongoing liquidation of mature SPACs, has reshaped the market toward a newer cohort of issues. Consequently, yield-to-maturity metrics have become a less meaningful gauge of forward returns. The true source of opportunity in today’s SPAC landscape instead lies in the inherent optionality embedded across common shares, warrants, and rights typically bundled within a SPAC unit. With downside risk firmly supported by the cash held in trust, SPACs continue to present an attractive mix of capital preservation and upside potential, positioning them as a structurally appealing investment in the current market environment.

Outlook

The current market environment remains constructive for M&A activity and supportive of non-correlated, event-driven investment strategies, as broader markets grapple with an increasingly complex macro backdrop. While inflation has moderated and short-term policy rates have declined, uncertainty around the path of interest rates persists, particularly at the long end of the yield curve. Long-term rates remain sensitive to fiscal dynamics, supply-demand imbalances, and shifting expectations around growth and inflation, creating episodic volatility across equity and fixed income markets. Against this backdrop, M&A has continued to demonstrate resilience, supported by strong corporate balance sheets, readily available financing, and a regulatory environment that has become increasingly accommodative for both strategic acquirers and financial sponsors.

Equity market valuations remain an area of focus, particularly given the elevated concentration of returns within a narrow cohort of mega-cap technology and AI-related stocks. The dominance of the “MAG-7” has driven index-level performance while masking more muted returns across the broader market, leaving valuations vulnerable to shifts in sentiment, earnings expectations, or policy surprises. This concentration risk reinforces the appeal of alternative strategies that are less reliant on sustained equity market momentum and more dependent on idiosyncratic, deal-specific outcomes. In contrast to public equity markets, the valuation disconnect between large-cap and small- and mid-cap companies continues to in our view support consolidation activity, creating a fertile opportunity set for M&A while also underpinning attractive merger arbitrage spreads.

We continue to see favorable tailwinds for both merger arbitrage and SPAC arbitrage. The steady cadence of deal announcements, improved regulatory visibility, and shorter approval timelines support tighter spreads and faster capital recycling across merger positions. At the same time, renewed momentum in the SPAC market has expanded the opportunity set for SPAC arbitrage, offering a compelling combination of downside protection and optionality in an environment where traditional asset classes face heightened uncertainty. With correlations across equities and fixed income remaining elevated and market leadership increasingly concentrated, arbitrage strategies offer an attractive source of non-correlated, absolute returns. We remain constructive on the outlook for the strategy into year-end and beyond, supported by a deep pipeline of actionable deals and a market environment that continues to reward disciplined, risk-controlled, event-driven investing.

Amar Pandya, CFA
December 22, 2025

¹ All Pender performance data points are for Class F of the funds. Other classes are available. Fees and performance may differ in those other classes. Standard performance information for the funds can be found here: https://penderfund.com/fund/pender-alternative-arbitrage-fund/

² The benchmark for both funds is the HFRI ED: Merger Arbitrage Index (Hedged to CAD).

³ LSEG: Deal Intelligence – M&A Monthly Snapshot

⁴ SPAC Research

⁵ https://www.spacinsider.com/