Arrow QUArTErLY Bullseye

3rd QUArTEr 2016

Upside downside . . . . . . . .1

New: Arrow ManagedFutures Strategy . . . . . . . . .3

dorsey wrightCommentary . . . . . . . . . . . .4

Arrow dwA BalancedFund Statistics . . . . . . . . . . .5

Arrow dwA TacticalFund Statistics . . . . . . . . . . .5

Alternative Solutionsoverview . . . . . . . . . . . . . . .6

Arrow AlternativeSolutions Fund Statistics . .7

Commodity & FuturesCommentary . . . . . . . . . . . .8

Arrow Managed FuturesStrategy Fund Statistics . . .9

Arrow CommodityStrategy Fund Statistics . .10

Fund Symbols . . . . . . . . . .11

Notes & disclosure . . . . . .12

In This Issue:

Continued on page 2TARGETING PORTFOLIO SOLUTIONSTArGETING PorTFoLIo SoLUTIoNS

upside DownsideInvestors rarely define risk by how much an investment goes up . To see the

difference between the effect on investments of positive and negative market periods, it may be prudent to focus on an investment’s upside/downside capture ratios . The upside capture ratio simply illustrates the percentage of gain an investment makes when a benchmark, such as the S&P 500, goes up . downside capture is the opposite, measuring the percentage of loss associated with a market decline .

For example, if the S&P 500’s positive monthly returns averaged 10% and a different investment averaged 8% during the same periods, the investment’s upside capture would be 80% (8 divided by 10 = 80%) . If the S&P 500’s average negative monthly returns showed a loss of -10%, and the other investment went down -6%, the downside capture would be 60% (-6 divided by -10 = 60%) . In this scenario, the investment didn’t keep pace with the market on the upside, but actually provided proportionally greater downside protection .

The graph below illustrates the upside/downside capture percentages of various asset classes relative to the performance of the S&P 500 Index . Everything shown in the green section delivered more upside capture than downside capture . Everything in the lower white section captured more downside than upside .

Ups

ide

Cap

ture

%

10 Years of Upside/Downside Capture %Relative to the S&P 500 (as of 9/30/2016)

10 Years of Upside/Downside Capture %Relative to the S&P 500 (as of 9/30/2016)

Downside Capture %

-50%

0%

50%

100%

150%

-50% 0% 50% 100% 150%

U.S. Stocks (S&P 500)

Smart Beta EmergingMarkets

Commodities

Global YieldREITs

InternationalStocks

T-billsManaged Futures

Bonds

Provided More Upside

Capture Than Downside

Past performance does not guarantee future results. Index returns assume reinvestment of dividends, but do not reflect any management fees, transaction costs or expenses. Indexes are generally unmanaged and are not available for direct investment. Source and asset class proxies: FactSet data - S&P 500 Index, T-bills (Barclays T-Bill Index), Bonds (Barclays U.S. Aggregate Bond Index), International Stock (MSCI EAFE), Emerging Markets (MSCI Emerging Market Index), Commodities (Bloomberg Commodity Index), Managed Futures (Barclay Top 50 Index), Smart Beta (A.I. Quality Value Momentum Index), Global Yield (Dow Jones Global Composite Yield Index).

2

Upside downside Continued from page 1

Past performance is not indicative of future returns. Images shown are for illustration purposes only and should not be used as a predictive measure for the future return expectations of any investment. The information is subject to change (based on market fluctuation and other conditions) and should not be construed as a recommendation of any specific security or investment product, and was prepared without regard for specific circumstances and objectives of any individual investor. Traditional, nontraditional and alternative investments involve risks, including the potential for loss of principal. Nontraditional and alternative investments may involve additional risks, including, but not limited to, shorting risks, the use of leverage, the use of derivatives, futures market speculation and regulatory changes. Before investing in any financial product, always read the prospectus and/or offering memorandum for product-specific risks.

It is important to note that risk characteristics such as upside/downside, Sharpe and Sortino ratios should not be the only determining factors when deciding to add investments to a portfolio—but they do help to provide some insight into the potential diversification effect from a volatility perspective . The elements of risk are always a consideration for most investments, but in the end, total return also matters . For example, in the table above, ultra short-term investments like Treasury bills (T-bills) delivered predominantly upside performance capture with relatively little downside . However, over the long-term, T-bills have also delivered less total return compared to many other investments . This presents an illustration of the classic risk/reward trade-off and the dilemma of pain versus gain . How might an investor compare various assets with different risk and return characteristics? The answer ultimately lies with the investment objective, risk tolerance and time horizon of each individual investor .

Asset Class Risk/Return Statistics - 10 Years (as of 9/30/2016)

Asset ClassAnnualized Return %

Standard Deviation

SharpeRatio

SortinoRatio

Upside %vs. S&P 500

Downside %vs. S&P 500

T-Bills 0.96 0.51 0.23 2.75 0.56 -5.13Bonds 4.79 3.19 1.24 2.36 3.18 -25.80International Stocks 1.82 18.56 0.05 0.07 81.88 106.41Emerging Markets 3.95 23.47 0.13 0.19 114.87 107.93Commodities -5.33 18.09 -0.34 -0.43 12.01 90.21Real Estate (REITs) 5.25 21.43 0.21 0.29 74.20 98.15Managed Futures 3.05 6.49 0.34 0.54 2.26 -12.37Global Yield 7.88 17.79 0.40 0.59 85.45 95.01Smart Beta 9.50 16.63 0.52 0.79 117.89 98.66U.S. Stocks - S&P 500 7.24 15.19 0.42 0.60 100.00 100.00

The Sharpe ratio became a popular statistical measurement used to identify the balance between risk and return . It identifies the amount of return per unit of risk for an investment—the higher the Sharpe ratio, the better the relative historical risk/return . Unfortunately, the Sharpe ratio relies on standard deviation as the measure of volatility, both up and down . In essence, the Sharpe ratio considers all forms of volatility to be risk, including upward performance . Some investors prefer to use the Sortino ratio that considers only the downside volatility as the risk metric . The higher the Sortino ratio, the greater the investment has performed historically from a downside risk exposure perspective .

It is also reasonable to compare a specific investment to its own asset benchmark for peer comparison purposes . For example, bond mutual funds could all be compared to a bond index (e .g ., Barclays U .S . Aggregate Bond Index) to illustrate the upside/downside attributes relative to the movements in the bond market . The table below shows the 10-year risk and return statistical data for the asset classes displayed in the graph on the previous page (see: 10 Years of Upside/downside Capture %) . As before, the S&P 500 is used as the benchmark for the upside/downside capture data for a comparison of the historical impact of movements in the stock market .

Past performance does not guarantee future results. Index returns assume reinvestment of dividends, but do not reflect any management fees, transaction costs or expenses. Indexes are generally unmanaged and are not available for direct investment. Source and asset class proxies: FactSet data - S&P 500 Index, T-Bills (Barclays T-Bill Index), Bonds (Barclays U.S. Aggregate Bond Index), International Stock (MSCI EAFE), Emerging Markets (MSCI Emerging Market Index), Commodities (Bloomberg Commodity Index), Managed Futures (Barclay Top 50 Index), Smart Beta (A.I. Quality Value Momentum Index), Global Yield (Dow Jones Global Composite Yield Index).

Featuring

ARROW MANAGED FUTURESSTRATEGY FUND

TARGETING TRENDS IN THE GLOBAL FUTURES MARKETS

(877) 277-6933, opt. 1 www.ArrowFunds.comBefore investing, please read the fund’s prospectus and shareholder reports to learn about its investment strategy and potential risks. Mutual fund investing involves risk including loss of principal. An investor should consider the fund’s investment objective, charges, expenses and risks carefully before investing. This and other information about the fund is contained in the fund’s prospectus, which can be obtained by calling 1-877-277-6933. Please read the prospectus carefully before investing. Arrow Funds are distributed by an affiliate, Archer Distributors, LLC (member FINRA). Arrow Funds and DUNN Capital are unaffiliated entities.

The Arrow Managed Futures Strategy Fund may not be suitable for all investors. The fund may invest in commodity-related securities, which may be subject to greater volatility than investments in traditional securities . The use of derivatives such as futures, options, structured notes, repurchase agreements and swap agreements may expose the fund to additional risks than investing directly in the underlying securities . Investing in leveraged instruments will magnify any gains or losses on those instruments . Fixed income securities are subject to risks including interest rate, credit, inflation and counterparty risks . The fund may allocate assets to an offshore subsidiary which is not subject to the Investment Company Act of 1940, meaning that changes in laws could result in the inability to operate as described in the prospectus . The fund’s use of short selling and investment in currency-related securities involves increased risk and additional costs .

Founded in 1974, dUNN Capital Management, LLC is a Commodity Trading Advisor (CTA) with a long, rich history of experience and performance . dUNN uses a fully quantitative and systematic approach to extract profits from up or down markets . dUNN’s flagship World Monetary & Agriculture (WMA) Program has a track record that spans over 30 years, which serves at the core of the mutual fund’s investment strategy . The program’s goal is to seek greater return potential by managing the portfolio at a higher volatility range than many other CTAs, while still delivering low correlation to other assets, such as stocks, bonds, real estate, or hedge funds .The dUNN wMA program primarily follows a systematic, trend following strategy encompassing a portfolio of more than 50 components across financial and commodity futures (see page 9) .

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4

Arrow DWA Balanced Fundstyle: There were a few changes to the style component of the dwA Balanced Fund during the previous quarter . The fund removed exposure to the large-cap value component and added exposure to small cap growth . The fund also continues to hold a position in small cap value .

sector: The fund is allocated across the top quintile of sub groups in the S&P 500 . The largest sub group components continue to come from the consumer discretionary, information technology, and consumer staples sectors . The remainder of the allocations continue to be geared towards subgroups from the following sectors: industrials, materials, real estate, financials, and healthcare .

International: There were a number of changes to the international portion of the portfolio during Q3 . The fund removed exposure to Austria, Netherlands, and Belgium . The fund gained allocation to Canada, India, and Taiwan . The remainder of the fund is allocated towards equities in Brazil and South Korea .

Alternative: The alternative portion of the portfolio saw no trade activity during the third quarter . The fund continues to hold exposure towards gold and real estate .

Fixed Income: There were no changes to the fixed income component last quarter . The fund continues to hold exposure towards short-term and medium-term Treasuries .

Arrow DWA Tactical Fundequities: U .S . equities continue to make up the majority of the Arrow dwA Tactical Fund . during Q3, there were a number of additional changes to the equity portion of the portfolio . The fund removed its allocation towards equities with exposure to the quality factor . The fund also removed exposure to stocks with a low volatility component, as well as the utility and consumer staple sectors . The fund gained exposure to the Latin American region, small-cap value, and technology . The remainder of the equity exposure is geared towards high-dividend-paying stocks .

Fixed Income: There was one change to the fixed income sleeve of the Arrow dwA Tactical Fund . The fund removed exposure to the middle portion of the Treasury curve and no longer has allocation to fixed income .

Alternatives: There were a few additional changes to the alternatives component during Q3 . The fund continues to gain additional exposure to real estate, and also gained an exposure to silver futures . The fund also continues to hold exposure to gold .

Dorsey Wright Commentary 3rd Quarter 2016

For most of the summer, the stock market moved sideways in a tight trading range . International equity markets were a bright spot, developed and emerging international markets generally outperforming domestic equity markets . Bonds

were generally flat for the quarter, but commodities were a weak spot after strong gains in the first six months of the year .

we continue to see rotation below the surface in a number of different asset classes, which is somewhat common . In the U .S . equity markets, there has been a momentum shift out of areas such as high dividend and low volatility stocks . The relentless reach for yield drove many investors to stocks instead of bonds, and drove valuations to historically high levels . The same valuation issues cropped up in low volatility stocks . These are not the areas that usually lead a robust bull market . As a result, there was a lot of hand wringing about the strength of the market with that kind of leadership . It is possible that it was more a result of investors’ preference for yield (and a lack of fixed income choices), rather than an indictment on the overall market .

The new leadership that appears to be emerging is traditionally considered positive for a strong bull market . Small-capitalization stocks and technology dramatically outperformed what could be considered the old leadership (utilities, consumer staples, and low volatility) over the summer . Emerging markets had a fantastic third quarter, with Latin America as the biggest driver of that performance so far this year . The relative improvement in these higher volatility areas shows investors may actually be gaining more confidence in the market . Confidence is an incredibly important piece of the puzzle for momentum strategies, so we are looking at this new development in a favorable light .

As we head in to the final three months of the year, it is impossible not to think about the upcoming election . we encourage investors not to get caught up in the short-term headlines . It is incredibly difficult to forecast how politics will affect the markets and most “so called experts” often get it all wrong .

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Past performance does not guarantee future results. For periods less than one year, performance is not annualized. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-877-277-6933. The maximum sales charge for Class A is 5.75% and may be eligible for a reduction in sales charges. The fund charges a fee of 1.00% on redemptions of shares held less than 30 days. Total fund expenses are Class A 1.81%, Class C 2.56% and Class I 1.56%. Net operating expenses are Class A 1.51%, Class C 2.26% and Class I 1.26%, plus acquired fund fees and expenses of 0.30% for each. *Inception date for Class A and Class C (and index data) is 8/7/06. Class I is 3/21/12. see pages 11 and 12 for definitions and additional disclosure.

Past performance does not guarantee future results. For periods less than one year, performance is not annualized. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-877-277-6933. The maximum sales charge for Class A is 5.75% and may be eligible for a reduction in sales charges. The fund charges a fee of 1.00% on redemptions of shares held less than 30 days. Total fund expenses are Class A 1.79%, Class C 2.54% and Class I 1.54%. Net annual operating expense is Class A 1.54%, Class C 2.29%, Class I 1.29%, plus acquired fund fees and expenses of 0.25% for each. *Inception date for Class A and Class C (and index data) is 5/30/08; Class I 3/21/12. see pages 11 and 12 for definitions and additional disclosure.

strategyPerformanceAttribution

Analysis

Arrow DWA Tactical Fund

Arrow DWA Balanced Fund Portfolio Statistics as of 9/30/2016

Portfolio Statistics as of 9/30/2016

*The fund may use futures to provide exposure to these strategies.

Periods of one year or more are annualized.

eQuITIes 61.3% FIXeD INCOMe 0.0% AlTeRNATIVes 38.4%31 .22% Global dividend N/A U .S . Treasury rotation 19 .71% Global rEIT10 .26% U .S . Sector rotation N/A Global Income 18 .77% Commodity rotation*10 .19% U .S . Style rotation N/A Global Inflation N/A Currency rotation*

9 .78% Global EquityN/A Global AlphaN/A Global Inverse*

11 .49% PowErSHArES H/Y EQ dIV

10 .24% TECHNoLoGY SELECT SECT SPdr

10 .16% VANGUArd SMALL-CAP VALUE

10 .07% ISHArES dJ SELECT dIVIdENd

9 .76% ISHArES S&P LATIN AMErICA 40

9 .59% SPdr S&P dIVIdENd ETF

17 .04% GoLd FUTUrES (dec 16)

10 .44% ISHArES CoHEN & STEErS rEALTY

9 .23% ISHArES dJ US rEAL ESTATE

1 .69% SILVEr FUTUrES (dec 16)

0 .29% FIdELITY GoVT INST MM

style 15.7%7 .90% VANGUArd SMALL-CAP VALUE

7 .78% VANGUArd SMALL-CAP GrowTH

sector 24.1% 24 .05% SECTor EXPoSUrE, EQUALLY

wEIGHTEd ACroSS 27 SUB-INdUSTrIES

International 12.4% 2 .87% ISHArES MSCI BrAZIL

2 .56% ISHArES MSCI SoUTH KorEA

2 .40% ISHArES MSCI TAIwAN

2 .30% ISHArES MSCI CANAdA

2 .29% ISHArES MSCI INdIA

Alternative 19.3%9 .66% GoLd FUTUrES (dec 16)

9 .64% ISHArES CoHEN & STEErS rEALTY

Fixed Income 28.6%13 .98% ISHArES 1-3 Yr TrEASUrY

13 .79% ISHArES 7-10 Yr TrEASUrY

0 .78% CASH

rotation Strategy

Three Month

one Year

Inception 8/7/06

Style 4 .69% 13 .57% 6 .41%Sector 3 .09% 12 .75% 6 .32%International 7 .35% 8 .11% 2 .90%Alternative -1 .90% 3 .65% 6 .91%Fixed Income -0 .23% 3 .81% 3 .95%

Share Class YTDThree

MonthOne Year

Three Year

Five Year

Ten Year

Since Inception*

StandardDeviation

Correlation (vs S&P 500)

Class A (NAV) 3 .59% 1 .52% 5 .56% 3 .18% 6 .24% 4 .65% 4 .67% 12 .84% 0 .88

w/ Load -2 .38% -4 .29% -0 .54% 1 .17% 5 .00% 4 .06% 4 .06% N/A N/A

Class C 2 .99% 1 .35% 4 .79% 2 .40% 5 .46% 3 .87% 3 .89% 12 .85% 0 .88

Class I 3 .81% 1 .58% 5 .85% 3 .45% -- -- 4 .74% 9 .09% 0 .95

Share Class YTDThree

MonthOne Year

Three Year

Five Year

Since Inception*

StandardDeviation

Correlation (vs S&P 500)

Class A (NAV) 3 .91% -1 .66% 7 .27% 4 .50% 7 .17% 2 .02% 14 .71% 0 .84

w/ Load -2 .04% -7 .34% 1 .11% 2 .45% 5 .90% 1 .30% N/A N/A

Class C 3 .35% -1 .85% 6 .41% 3 .71% 6 .34% 1 .25% 14 .77% 0 .84

Class I 4 .10% -1 .55% 7 .57% 4 .77% -- 7 .05% 12 .13% 0 .93

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Alternative Solutions Overview 3rd Quarter 2016

Arrow Alternative Solutions Fund is a mutual fund that delivers unique risk and return characteristics . Alternative strategies have historically exhibited relatively low correlation to traditional investments, such as equities & bonds .

The fund uses a systematic methodology that follows research from ProfitScore Alternative Income Index (PSAI) . The index is comprised of three alternative fixed income strategies: Tactical High yield, Dynamic Credit Default and Dynamic Government Bond.

The fund optimizes the exposure to each of the underlying directional strategies on a volatility-weighted basis to provide ongoing portfolio diversification . The fund seeks to provide a balance of managing risk and seeking absolute returns . Below is a description of each strategy:

strategy exposure

Tactical High yield Seeks to provide long or flat (cash) exposure to global corporate high yield markets .

Dynamic Credit Default Seeks to provide long, short, or flat exposure to highly liquid credit default markets .

Dynamic Government Bond Seeks to provide long, short or flat exposure to long-term U .S . Treasury bond markets .

The directional long, short or flat positions are based on a series of proprietary indicators that are customized for each specific market segment . The long/short/flat nature of the fund provides the ability for each of the strategies to act independently from one another, providing an additional layer of potential diversification and the ability to respond to changing market and interest rate environments .

The Arrow Alternative Solutions Fund’s returns are derived from three core portfolio strategies across distinct market segments: high yield, credit default, and long-term bonds . As illustrated below, each of the three market segments presents different investment characteristics from year to year . Also shown is a long-only blend of all three market segments, using index proxies, based on the fund’s strategy portfolio weights . The potential benefit of using a blend of all three may provide the opportunity for improved risk/return characteristics over time: versus traditional bonds (U .S . Aggregate Bond Index):

Performance displayed represents past performance, which is no guarantee of future results. Index performance assumes reinvestment of dividends, but does not include fees. Indexes are not available for direct investment. Index data is shown for illustrative purposes and is not intended to reflect fund performance. Index proxies: High Yield (IBOXX Liquid HY Index), Credit Default (Markit CDX Index), LT Bond (Barclays UST 20+Yr Index). Blended index portfolio (“Blend”) is based on year-end portfolio target weights of the fund (50% IBOXX Liquid HY, 28% CDX, 22% UST 20+Yr), rebalanced monthly. Standard Deviation (a measure of volatility) is based on five year averages through 12/31/2015. Source: Bloomberg/FactSet, calculated by Arrow.

2011 2012 2013 2014 20155-year

AverageStandard

Deviation (5 yr.)

LT Bond33 .84%

High Yield14 .15%

Credit def .15 .91%

LT Bond27 .48%

U .S . Agg .0 .55%

LT Bond8 .37%

U .S . Agg .2 .68%

Blend 8.85%

Credit def .11 .24%

High Yield5 .93%

Blend7.16%

Credit def .0 .54%

Blend5.59%

Blend5.16%

U .S . Agg .7 .84%

Blend 11.12%

Blend3.91%

U .S . Agg .5 .97%

LT Bond-1 .59%

Credit def .4 .58%

High Yield6 .91%

High Yield5 .94%

U .S . Agg .4 .21%

U .S . Agg .-2 .02%

High Yield2 .13%

Blend-2.55%

High Yield4 .44%

Credit def .7 .39%

Credit def .-4 .98%

LT Bond3 .36%

LT Bond -13 .88%

Credit def .1 .55%

High Yield-5 .03%

U .S . Agg .3 .25%

LT Bond13 .01%

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Annualized Since Inception1

Arrow Alternative Solutions Fund Portfolio Statistics as of 9/30/2016

Fund Performance

Share Class YTdThree

MonthoneYear

Three Year

Five Year

SinceInception1

StandardDeviation

Correlation (vs S&P 500)

Class A (NAV) 8 .56% 3 .58% 9 .21% 4 .85% 2 .49% -0 .35% 5 .69% 0 .49w/ Load 2 .34% -2 .33% 2 .92% 2 .78% 1 .29% -1 .01% N/A N/AClass C 7 .90% 3 .44% 8 .30% 4 .08% 1 .72% -1 .08% 5 .67% 0 .49 Class I 8 .73% 3 .73% 9 .51% 5 .11% -- 2 .38% 4 .74% 0 .35

2

Past performance does not guarantee future results. For periods less than one year, performance is not annualized. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-877-277-6933. The maximum sales charge for Class A is 5.75% and may be eligible for a reduction in sales charges. Arrow Alternative Solutions Fund’s total expenses are capped by a contractual fee waiver at 1.65% for Class A, 2.40% for Class C and 1.40% for Class I, effective until at leastNovember 30, 2016. With acquired fund fees and expenses of 0.14%, the fund’s total expenses are 1.79%, 2.54% and 1.54%, respectively.

1Inception date for Class A and Class C is 10/31/07; Class I is 3/21/12.

2The fund began actively following the ProfitScore Alternative Income Index (PSAI) research and portfolio target weights effective 3/31/2014. PSAI is a quantitative, multi-strategy, alternative fixed income index. see pages 11 and 12 for definitions and additional disclosure.

strategy exposure

Dynamic Credit Default

25.0%

Dynamic Government

Bond25.0%

Tactical High Yield

50.0%

Tactical High yield

Long or flat exposure to global corporate high yield markets .

Dynamic Credit

Default

Long, short, or flat exposure to highly liquid U .S . credit default markets .

Dynamic Government

Bond

Long, short or flat exposure to U .S . Treasury 30-year bonds .

Based on rebalance target weights, subject to change .*

*Strategy exposure is provided for informational purposes only and subject to change due to market volatility and portfolio allocations.

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Broad basket commodities performed very well during the first half of 2016 with most commodity indexes outpacing the S&P 500 by almost 10% . Q3 2016 was a pullback and digestion of those gains with most commodity indexes down between 4% and 8% for the quarter . Year-to-date, broad basket commodity indexes have performed generally in line with the U .S . equity markets . The LEX Index is up 10 .27%, the S&P GSCI Index is up 5 .30% and the Bloomberg Commodity Index is up 8 .87% while the S&P 500 is up 7 .84% . In general, managed futures have not fared as well as long-only commodities, with the BToP50 down -2 .05% . due to vast differences in structure and approach, there is wide variance in returns depending on the strategy, as might be expected .

As we head into Q4, the equity markets are beginning to lose steam on weak corporate earnings, Fed rate hike expectations and a hotly contested presidential election . Commodity prices, having come off multi-year lows, are again holding relatively better than equities . As we have mentioned in previous updates, we continue to expect broad basket commodities to outperform equities over the coming year to two-year time frame .

Commodities seem to have found their footing so far in 2016:

• The energy sector was up 5 .94% for the quarter on gasoline’s move up . Crude oil was down -3 .56%, heating oil was down -0 .33%, gasoline was up 5 .07% and natural gas was down -5 .80% .

• The metals sector was up 2 .27% in Q3 with gold down -0 .78%, silver up 2 .78%, and copper up 0 .27% .

• Grains were down -9 .03% for the quarter with corn down -9 .29%, wheat down -13 .64% and soybeans down -16 .46% .

• For the quarter, Softs were up 3 .78%, with coffee up 2 .19%, cocoa down -5 .95%, sugar up 12 .58% and cotton up 6 .09% .

• Livestock was down -10 .12% for the quarter, with live cattle down -12 .90% and lean hogs down -31 .5% .

Commodity & Futures Commentary 3rd Quarter 2016

CommoditiesThe Arrow Commodity Strategy Fund (Class I) was down -3 .65% for the quarter . Comparatively, the Bloomberg Commodity Index (BCoM, formerly named the dJ/UBS Commodity Index) was also down for the quarter, dropping -3 .86% . For the one-year period, the Fund has returned 0 .54%, better than the BCoM which was down -2 .58% for the same time period . Commodities have shown significant strength through the first three quarters of 2016 . The difference with the fund YTd and for the one year period seems to be due to its diversified allocation across sectors and the long-dated approach to futures contracts leading to fewer contract rolls .For more information, see page 10 and disclosure on page 11.

Managed Futuresduring Q3 2016, the Arrow Managed Futures Strategy Fund (Class I) was down -1 .56% . Comparatively, the Barclay Top 50 Index (BToP50) was down -2 .51% . For the one-year period, the fund was up 3 .85% where the BToP50 was down -1 .99% . Many managed futures strategies struggled during the quarter because of volatility and downward pressure of declining commodity prices . The difference between the fund and the BToP50 is likely due to fund strategy’s methodology and Value at risk (Var) weighting which helped to improve returns for the quarter . Keep in mind that the fund fully implemented the dUNN wMA strategy at the end of october 2015, so the full impact of the new approach will be seen in greater detail over longer periods of time .For more information, see page 9 and disclosure on page 11.

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Fund Performance

Portfolio Statistics as of 9/30/2016Arrow Managed Futures Strategy Fund

Annualized Since Inception1

Share Class YTdThree

Monthone Year

Three Year

Five Year

SinceInception1

Standarddeviation

Correlation(vs S&P 500)

Class A (NAV) 8 .60% -1 .56% 3 .85% 4 .79% -0 .66% -0 .31% 10 .18% (0 .10)

w/ Load 2 .38% -7 .25% -2 .09% 2 .73% -1 .84% -1 .23% N/A N/A

Class C 8 .18% -1 .72% 3 .30% 4 .05% -1 .37% -1 .02% 10 .20% (0 .10)

Class I 8 .75% -1 .54% 4 .19% 5 .08% -- 1 .32% 11 .22% (0 .14)

Weights and Directional exposure Based on dUNN Capital wMA Program Exposure (Value at risk as a % of Portfolio)

Portfolio exposure subject to change with market fluctuation and components may vary based on manager discretion. Value at Risk (VaR) is based on individual managed futures contracts, risk-weighted as a percentage of the total portfolio, not including cash and fixed income. Source DUNN Capital Management.

Past performance does not guarantee future results. For periods less than one year, performance is not annualized. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-877-277-6933. The maximum sales charge for Class A is 5.75% and may be eligible for a reduction in sales charges. The fund charges a fee of 1.00% on redemptions of shares held less than 30 days. Arrow Managed Futures Strategy Fund’s total expenses are capped by a contractual fee waiver at Class A 1.65%, Class C 2.40% and Class I 1.40%, effective until at least November 30, 2016. With acquired fund fees and expenses of 0.09%, before reimbursement, the fund’s total expenses are Class A 2.61%, Class C 3.36% and Class I 2.36%.

1Inception dates: Class A and Class C is 4/30/10; Class I is 3/21/12. The fund’s investment strategy changed effective 10/1/15. Performance prior to the change is based on the fund’s previous investment strategy. see pages 11 and 12 for definitions and additional disclosure.

CommoditiesBrent Crude Short 0 .74%

Cocoa Short 2 .83%Coffee Long 2 .37%

Copper Short 0 .89%Corn Short 3 .23%

Cotton Long 1 .69%Crude oil Short 0 .74%

Gas oil Short 0 .69%Gold Long 2 .47%

Heating oil Short 0 .84%Lean Hogs Short 3 .13%Live Cattle Short 2 .40%

Natural Gas Short 0 .30%Silver Long 2 .65%

Soybean Meal Long 0 .69%Soybean oil Long 2 .39%

Soybeans Long 0 .66%Sugar Long 3 .67%

Unleaded Gas Long 0 .03%wheat (CBoT) Short 5 .18%

wheat (KC) Short 1 .50%

% Long +62 .71%

% Short -37 .29%

Net Position +25 .42%

CurrenciesAustralian dollar Long 3 .59%

British Pound Short 4 .05%Canadian dollar Long 0 .65%

Euro Short 0 .22%Japanese Yen Long 2 .30%Mexican Peso Short 1 .99%Swiss Franc Short 1 .15%

Equity FuturesASX SPI 200 Long 2 .63%

CAC 40 Short 0 .81%dow Jones Long 2 .32%

Euro SToXX Short 1 .12%FT-SE 100 Long 3 .10%

German dAX Short 0 .59%Hang Seng Long 1 .47%NASdAQ Long 2 .06%

osaka Nikkei Short 0 .87%S&P 500 Long 2 .29%ToPIX Short 1 .23%

VIX Short 2 .30%

debt FuturesAustralian 3 Year Long 1 .24%

Australian 10 Year Long 2 .11%BoBL Long 2 .61%

Euro dollars Long 1 .57%German Bund Long 3 .94%Liffe Euribor Long 0 .69%

Long Gilt Long 3 .09%Schatz Long 0 .79%

Short Sterling Long 1 .35%TSE JGB Long 1 .34%

U .S . 2 Year Long 1 .07%U .S . 5 Year Long 1 .98%

U .S . 10 Year Long 2 .15%U .S . Bonds Long 1 .75%

10

Arrow Commodity Strategy Fund Portfolio Statistics as of 9/30/2016

Past performance does not guarantee future results. For periods less than one year, performance is not annualized. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-877-277-6933. Index returns assume reinvestment of dividends, but do not reflect management fees or other expenses. Indexes are unmanaged and are not available for direct investment. The maximum sales charge for Class A is 5.75% and may be eligible for a reduction in sales charges. The fund charges a fee of 1.00% on redemptions of shares held less than 30 days. Arrow Commodity Strategy Fund’s total expenses are capped by a contractual fee waiver at Class A 2.00%, Class C 2.75% and Class I 1.75%, effective until at least November 30, 2015. Before reimbursement, the fund’s fees are Class A 2.94%, Class C 3.69% and Class I 2.69%. With acquired fund fees and expenses of 0.08%, the fund’s total expenses are 2.08%, 2.83%, and 1.83% after reimbursement, respectively.

1Inception date for Class A and Class C (and index data) is 12/31/10; Class I is 3/21/12. see pages 11 and 12 for definitions and additional disclosure.

longview extended Commodity Index (leX): A broad-based index for measuring the performance of the commodity markets . The LEX is a market-weighted index representative of exposure to one futures contract in each of the 16 underlying components . Therefore, the index weights are dynamic and will constantly vary depending on the price movement of the underlying components . LEX’s live date is 1/1/2006, with initial base date starting 12/30/1999 .

sector and Component Weights Based on LEX index data, subject to change

Fund Performance Annualized Since Inception1

Share Class YTdThree

Monthone Year

Three Year

Five Year

SinceInception1

Standarddeviation

Correlation(vs S&P 500)

Class A (NAV) 7 .16% -3 .65% 0 .54% -11 .80% -8 .91% -8 .65% 14 .85% 0 .46

w/ Load 0 .91% -9 .18% -5 .30% -13 .51% -9 .99% -9 .59% N/A N/A

Class C 6 .60% -3 .79% -0 .19% -12 .49% -9 .60% -9 .32% 14 .83% 0 .46

Class I 7 .54% -3 .47% 0 .91% -11 .58% -- -10 .78% 12 .21% 0 .32

LEX 10 .27% -2 .58% 4 .35% -9 .26% -6 .65% -6 .28% 14 .81% 0 .46

Sector weight Component weight

Energy 25 .67%

Heating oil 8 .07%Unlead Gas 7 .25%Crude oil 6 .04%

Natural Gas 4 .31%

Grains 10 .83%Soybean 6 .20%wheat 2 .55%Corn 2 .07%

Precious Metals 29 .54%Gold 17 .24%Silver 12 .30%

Industrial Metals 6 .83% High Grade Copper 6 .83%

Softs 18 .40%

Coffee 7 .25%Cotton 4 .31%Cocoa 3 .81%Sugar 3 .03%

Livestock 8 .73%Live Cattle 5 .70%Lean Hogs 3 .03%

11

Share Class & Symbol Information

Arrow DWA Balanced Fund and Arrow DWA Tactical Fund may not be suitable for all investors . The funds may invest in commodity-related securities which may be subject to greater volatility than investments in traditional securities . The funds may invest in international and emerging market securities which may be subject to special risks including fluctuations in currency, government regulation, differences in accounting standards and liquidity . The funds may invest in small cap securities which may have special risks associated including wider variations in earnings and business prospects than larger, more established companies . The funds may invest in real estate-related securities which may be subject to mortgage-related risks and real estate market fluctuations . The funds may invest in fixed income securities which are subject to risks including interest rate, credit and inflation risk . Arrow DWA Tactical Fund’s potential use of short selling involves increased risks and additional costs . Arrow Alternative solutions Fund may not be suitable for all investors . The fund’s use of derivatives such as futures, options and swap agreements may expose the fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives . Investing in leveraged instruments will magnify any gains or losses on those instruments . The fund may invest in fixed income securities which are subject to risks including interest rate, credit and inflation risk . The fund’s use of short selling involves increased risks and additional costs .

Arrow Commodity strategy Fund and Arrow Managed Futures strategy Fund may not be suitable for all investors . The funds may invest in commodity-related securities, which may be subject to greater volatility than investments in traditional securities . The funds seek to achieve their objective by investing in a combination of securities, including index-linked notes and other derivatives which are expected to produce returns that closely track the respective benchmarks . The use of derivatives such as futures, options and swap agreements may expose the funds to additional risks that they would not be subject to if they invested directly in the underlying securities . Arrow Commodity strategy Fund may not replicate the exact performance of the fund’s benchmark because of fees, expenses, transaction costs and portfolio tracking error of the underlying investments . Arrow Managed Futures strategy Fund’s potential use of short selling involves increased risks and additional costs . The fund may invest in fixed income securities, which are subject to risks including interest rate, credit, inflation and counterparty risks . The fund may invest in currency-related securities, which may be subject to greater volatility than investments in traditional securities . The funds may invest in international and emerging market securities which may be subject to special risks including currency fluctuation, government regulation, differences in accounting standards and liquidity . Investing in leveraged instruments will magnify any gains or losses on those instruments .

Fund Name share Class symbol CusIP

Arrow Alternative solutions FundClass A ASFFX 042765107Class C ASFTX 042765206Class I ASFNX 042765305

Arrow Commodity strategy FundClass A CSFFX 042765842Class C CSFTX 042765834Class I CSFNX 042765826

Arrow DWA Balanced FundClass A dwAFX 042765404Class C dwATX 042765503Class I dwANX 042765602

Arrow DWA Tactical FundClass A dwTFX 042765701Class C dwTTX 042765800Class I dwTNX 042765883

Arrow Managed Futures strategy FundClass A MFTFX 042765875Class C MFTTX 042765867Class I MFTNX 042765859

AD-111116

Performance displayed represents past performance, which is no guarantee of future results. Before investing, please read the fund’s prospectus and shareholder reports to learn about its investment strategy and potential risks. Mutual fund investing involves risk including loss of principal. An investor should also consider the Fund’s investment objective, charges, expenses, and risk carefully before investing. This and other information about the funds are contained in the prospectus, which can be obtained by calling 1-877-277-6933. Please read the prospectus carefully before investing. Arrow Funds are distributed by an affiliate, Archer Distributors, LLC (member FINRA).

ADDITIONAl NOTes:

standard Deviation (risk) is a statistical measurement of volatility risk based on historical returns .

Correlation measures how closely two securities’ movements are associated, ranging from 1 .0 (highly correlated) to -1 .0 (inversely correlated) .

Beta is a measure of an investment’s volatility relative to a benchmark, often the S&P 500 . A Beta of 1 .0 is considered to be identical to the benchmark . Indexes are generally unmanaged, do not include fees and are not available for direct investment .

About Dorsey Wright & Associates (DWA): dwA is a registered investment advisory firm whose business includes two areas: Professional management of equity portfolios for investors, and investment research services for numerous broker-dealers and large institutions around the world . dwA provides research and analysis for the Arrow dwA Balanced Fund and the Arrow dwA Tactical Fund . Profitscore Alternative Income Index (PsAI): A quantitatively based, multi-strategy, multi-asset investment index . Multiple uncorrelated strategies are combined to managed fixed income assets across the full spectrum of the yield curve . Fixed income strategies involve long/short U .S . Treasuries, long/short credit default (CdX), and tactically managed long/flat high yield corporate bonds . For more information, visit www .profitscoreindex .com .

longview extended Commodity Index (leX): A fundamentally constructed index for measuring the performance of the commodity markets .

For more information, visit www.arrowfunds.com