Table of Contents
As filed with the Securities and Exchange Commission on December 22, 2015
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21597
PRIMECAP Odyssey Funds
(Exact name of registrant as specified in charter)
225 South Lake Avenue, Suite 400
Pasadena, CA 91101
(Address of principal executive offices) (Zip code)
Michael J. Ricks
PRIMECAP Management Company
225 South Lake Avenue, Suite 400
Pasadena, CA 91101
(Name and address of agent for service)
(626) 304-9222
Registrant’s telephone number, including area code
Date of fiscal year end: October 31
Date of reporting period: October 31, 2015
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Item 1. Reports to Stockholders.
Table of Contents
Item 1. Reports to Stockholders.
ANNUAL REPORT
For the Year Ended October 31, 2015
PRIMECAP ODYSSEY STOCK (POSKX)
PRIMECAP ODYSSEY GROWTH (POGRX)
PRIMECAP ODYSSEY AGGRESSIVE GROWTH (POAGX)
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PRIMECAP Odyssey Funds |
Dear Fellow Shareholders,
For the fiscal year ended October 31, 2015, the PRIMECAP Odyssey Stock Fund, PRIMECAP Odyssey Growth Fund, and PRIMECAP Odyssey Aggressive Growth Fund produced total returns of +6.64%, +6.96%, and +5.13%, respectively. The PRIMECAP Odyssey Stock Fund and the PRIMECAP Odyssey Growth Fund exceeded the +5.20% total return of the unmanaged S&P 500 index, while the PRIMECAP Odyssey Aggressive Growth Fund lagged the S&P 500 over the period.
Each of the PRIMECAP Odyssey Funds will distribute capital gains in December 2015. The sizeable gains in the PRIMECAP Aggressive Growth Fund are primarily long-term and mainly due to the acquisitions of Pharmacyclics and Polypore at substantial premiums to the fund’s cost basis. In addition, each of the funds has realized capital gains from the sale of stocks. We remain mindful of the tax consequences of our investment decisions. As long-term investors, we typically hold stocks for years, not months, which helps minimize capital gains distributions.
The U.S. economy continued to grow during the fiscal year, albeit at a modest pace. Real GDP grew 0.6%, 3.9%, and 1.5% in the first, second, and third calendar quarters of 2015, respectively. The unemployment rate declined to 5.0% at the end of October, the lowest level since early 2008. The relative strength of the U.S. economy drove a sharp appreciation in the dollar against most major currencies.
The price of West Texas Intermediate crude oil, a common benchmark for oil prices, declined over 40% during the fiscal year. According to the U.S. Energy Information Agency, domestic oil production in August reached its highest level since 1972. Certain segments of the economy, such as airlines, cruise lines, and consumers, have generally benefited from lower fuel costs. Other segments, such as most oil companies and some industrial companies, have suffered from lower prices and lower demand from oil-related customers, respectively.
Monetary policy remained highly accommodative, as the Federal Open Market Committee (FOMC) maintained its 0 to 1/4 percent target for the federal funds rate. Many investors believe that the FOMC will raise the federal funds target for the first time since 2006 at its December 2015 meeting.
Concerns surrounding the health of the Chinese economy intensified as the year progressed. During the summer, the Shanghai Stock Exchange Composite Index experienced significant volatility, which reverberated across the global financial markets. The CBOE Volatility Index reached post-crisis highs, and credit spreads widened. The S&P 500 declined sharply as investors debated the impact China’s slowdown might have on the U.S. economy.
Despite a volatile summer, the S&P 500 rebounded and ended the fiscal year less than 2.5% below its record close. Small capitalization stocks, as measured by the Russell 2000 Index, significantly underperformed large capitalization stocks during the fiscal year. Energy was the worst-performing sector in the S&P 500 over the period, driven primarily by the aforementioned decline in oil prices.
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Letter to Shareholders
PRIMECAP Odyssey Funds
continued
Each of the PRIMECAP Odyssey Funds continues to be overweight in the health care and information technology sectors, and underweight in the financials, energy, consumer staples, utilities, and telecommunication services sectors.
A more detailed discussion of the results of each PRIMECAP Odyssey Fund follows.
PRIMECAP Odyssey Stock Fund
From November 1, 2014 to October 31, 2015, the Stock Fund’s total return of +6.64% exceeded the S&P 500’s total return of +5.20%.
Sector allocations, including an underweight position in the underperforming energy sector and overweight positions in the outperforming information technology and health care sectors, were the main drivers of the fund’s relative outperformance in the period. Stock selection was neutral. Unfavorable stock selection in the information technology, health care, and energy sectors was offset by positive stock selection in the industrials and financials sectors. The largest detractors from the fund’s results were Transocean (-42%), Tribune Media (-27%), and Tribune Publishing (-48%). The largest contributors to the fund’s results were Southwest Airlines (+35%), Eli Lilly (+26%), and Carnival (+38%).
The top 10 holdings, which collectively represented 26.9% of the portfolio at the period end, are listed below:
PRIMECAP Odyssey Stock Fund Top 10 Holdings as of 10/31/15 | Ending % of Total Portfolio* | |||
Eli Lilly & Co. | 4.2 | |||
J.P. Morgan Chase & Co. | 3.2 | |||
Southwest Airlines Co. | 3.1 | |||
Carnival Corp. | 2.8 | |||
Amgen Inc. | 2.7 | |||
NetApp Inc. | 2.4 | |||
Roche Holding Ltd. | 2.3 | |||
Wells Fargo & Co. | 2.2 | |||
Charles Schwab Corp. | 2.0 | |||
L Brands, Inc. | 2.0 | |||
Total % of Portfolio | 26.9 |
* | The percentage is calculated by using the ending market value of the security divided by the ending market value of the total investments of the Fund. |
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Letter to Shareholders
PRIMECAP Odyssey Funds
continued
PRIMECAP Odyssey Growth Fund
From November 1, 2014 to October 31, 2015, the Growth Fund’s total return was +6.96%, exceeding the S&P 500’s total return of +5.20% but trailing the Russell 1000 Growth Index’s total return of +9.18%.
Favorable sector allocations more than offset adverse stock selection to drive the fund’s outperformance relative to the S&P 500. The largest contributors to favorable sector allocations were the fund’s underweight position in the underperforming energy sector and its overweight positions in the outperforming information technology and health care sectors. Adverse stock selection was most notable in information technology but also occurred in energy, health care, and materials. This adverse selection was partially offset by favorable stock selection in industrials, consumer discretionary, and financials. ABIOMED (+125%) was the largest contributor to the fund’s performance. L Brands (+39%), the fund’s airline holdings (Southwest Airlines +35%, JetBlue Airlines +115%, Delta Air Lines +28%, United Continental +14%, American Airlines +13%, and Virgin America +28%), and Eli Lilly (+26%) were also significant contributors. Stratasys (-79%) and BlackBerry (-31%) were the largest drivers of negative stock selection in information technology and the largest detractors from the portfolio’s overall performance.
The top 10 holdings, which collectively represented 27.3% of the portfolio at the period end, are listed below:
PRIMECAP Odyssey Growth Fund Top 10 Holdings as of 10/31/15 | Ending % of Total Portfolio* | |||
Eli Lilly & Co. | 4.2 | |||
Amgen Inc. | 3.5 | |||
Seattle Genetics, Inc. | 3.4 | |||
Alphabet Inc. – Class A and C (parent of Google) | 2.7 | |||
Roche Holding AG | 2.5 | |||
L Brands, Inc. | 2.4 | |||
ABIOMED, Inc. | 2.3 | |||
Southwest Airlines Co. | 2.2 | |||
Adobe Systems Inc. | 2.1 | |||
Biogen Inc. | 2.0 | |||
Total % of Portfolio | 27.3 |
* | The percentage is calculated by using the ending market value of the security divided by the ending market value of the total investments of the Fund. |
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Letter to Shareholders
PRIMECAP Odyssey Funds
continued
PRIMECAP Odyssey Aggressive Growth Fund
From November 1, 2014 to October 31, 2015, the Aggressive Growth Fund’s total return of +5.13% trailed the S&P 500’s total return of +5.20%, but exceeded the Russell Midcap Growth Index’s total return of +4.94%.
Relative to the S&P 500, favorable sector allocations were more than offset by negative stock selection. An underweight position in the underperforming energy sector and overweight positions in the outperforming information technology and health care sectors were the primary drivers of the fund’s positive sector allocations. Negative stock selection in information technology, consumer discretionary, and energy more than offset positive stock selection in industrials, health care, materials, and financials. The largest detractor in the information technology sector and in the overall portfolio was Micron (-50%). Tuesday Morning (-73%) was the biggest detractor in the consumer discretionary sector. Solazyme (-57%) negatively impacted the fund’s energy sector performance. Favorable industrials sector stock selection was primarily driven by the fund’s airline holdings. Pharmacyclics (+100%), which was acquired by AbbVie, Dyax (+123%), and ABIOMED (+125%) were the largest contributors to positive stock selection in health care and to the portfolio’s overall performance.
The top 10 holdings, which collectively represented 28.1% of the portfolio at the period end, are listed below:
PRIMECAP Odyssey Aggressive Growth Fund Top 10 Holdings as of 10/31/15 | Ending % of Total Portfolio* | |||
Dyax Corp. | 3.2 | |||
Sony Corp. | 3.2 | |||
Ellie Mae, Inc. | 3.1 | |||
United Continental Holdings, Inc. | 3.0 | |||
ABIOMED, Inc. | 3.0 | |||
Delta Air Lines, Inc. | 2.7 | |||
Jet Blue Airways Corp. | 2.5 | |||
Seattle Genetics, Inc. | 2.5 | |||
BlackBerry Ltd. | 2.5 | |||
Royal Caribbean Cruises Ltd. | 2.4 | |||
Total % of Portfolio | 28.1 |
* | The percentage is calculated by using the ending market value of the security divided by the ending market value of the total investments of the Fund. |
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Letter to Shareholders
PRIMECAP Odyssey Funds
continued
Outlook
Looking ahead, we are less constructive on the outlook for U.S. equities than we have been in recent years. As of October 31, 2015, the S&P 500 was trading at approximately 16.5 times forward 12-month consensus earnings per share of $127, a modest premium to its average multiple over the last 15 years. Profit margins, however, are near record levels and the index appears more expensive on a price-to-sales basis. We continue to believe that many individual stocks are attractively valued, and we believe that equities represent a more compelling long-term investment than bonds at current prices.
The funds remain overweight in the health care sector. Despite the sector’s relatively strong performance during the fiscal year, many health care stocks experienced significant share price volatility, driven by concerns regarding drug pricing and reimbursement. In the first half of the fiscal year, pharmacy benefit managers were successful in extracting higher-than-expected price concessions from AbbVie and Gilead as the two firms competed for share in a new class of Hepatitis-C therapy. Later in the fiscal year, potential U.S. presidential candidate Hillary Clinton announced a plan to rein in pharmaceutical spending that included government-negotiated or mandated drug pricing. In addition, the aggressive pricing practices of a small number of pharmaceutical firms increased scrutiny on the entire industry.
While we are mindful of these risks, we remain comfortable with our overweight position in the health care sector. We believe industry fundamentals remain robust. Increasing demand for health care products will be driven by demographic trends as well as the industry’s ability to develop new and more effective therapies. The industry’s pipeline includes potentially groundbreaking new treatments for cancer, Alzheimer’s, and autoimmune diseases. With respect to pricing and reimbursement risks, we believe that companies with novel drug treatments which provide significant benefits over existing therapies will continue to receive favorable reimbursement from payors. With the recent pullback in health care stocks, valuations of large-cap biotech and pharmaceutical companies appear attractive, with some trading at a discount to the S&P 500 price-to-earnings multiple in spite of their superior growth profiles. In addition, we continue to find appealing investment opportunities in mid- and small-cap biotech companies, many of which also experienced sizable share price declines late in the fiscal year.
The funds remain underweight in the energy sector. We have found few compelling investments within the sector, as the valuations of many companies require a rebound in oil prices to be attractive. While such a scenario is possible, we do not want to invest with a thesis predicated on higher oil prices.
In conclusion, we remain focused on investing in individual stocks that we believe will outperform the S&P 500 over time, typically three to five years. This “bottom-up” approach often results in portfolios that bear little resemblance to market indices; therefore, our results can deviate substantially from such indices. Furthermore, our long-term investment horizon results in low portfolio turnover, which creates the possibility for extended periods of underperformance
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Letter to Shareholders
PRIMECAP Odyssey Funds
continued
when the stocks in our portfolio fall out of favor. We nonetheless believe that this approach can generate superior results for shareholders over the long term.
Sincerely,
PRIMECAP Management Company
November 16, 2015
Past performance is not a guarantee of future results.
The funds invest in smaller companies, which involve additional risks such as limited liquidity and greater volatility. All funds may invest in foreign securities, which involve: 1) greater volatility; 2) political, economic, and currency risks; and 3) differences in accounting methods. Mutual fund investing involves risk, and loss of principal is possible. Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales.
Please refer to the Schedule of Investments for details of fund holdings. Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
The S&P 500 is a market capitalization-weighted index of 500 large-capitalization stocks commonly used to represent the U.S. equity market. The Russell 1000 Growth Index is an index that measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values (the Russell 1000 Index measures the performance of the large cap segment of the U.S. equity universe). The Russell Midcap Growth Index measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Shanghai Stock Exchange Composite Index is a capitalization-weighted index that tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. The CBOE Volatility Index, often referred to as VIX, is a popular measure of the implied volatility of S&P 500 index options calculated by the Chicago Board Options Exchange (CBOE). You cannot invest directly in an index.
Price-to-earnings ratio is calculated by dividing the current share price of a stock by its earnings per share.
Earnings per share is calculated by taking the total earnings divided by the number of shares outstanding.
Earnings growth is not a prediction of a fund’s future performance.
The information provided herein represents the opinions of PRIMECAP Management Company and is not intended to be a forecast of future events, a guarantee of future results, or investment advice.
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The following chart compares the value of a hypothetical $10,000 investment in the PRIMECAP Odyssey Stock Fund from October 31, 2005 to October 31, 2015, compared to the S&P 500. This chart illustrates the performance of a hypothetical $10,000 investment made October 31, 2005 and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends.
Total Return Period Ended October 31, 2015 | ||||||||||||||||
1 Year | Annualized 5 Year | Annualized 10 Year | Annualized Since Inception^ | |||||||||||||
Stock Fund | 6.64% | 14.44% | 9.11% | 9.62% | ||||||||||||
S&P 500* | 5.20% | 14.33% | 7.85% | 7.93% |
Performance data quoted represents past performance and does not guarantee future results. The 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 their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-729-2307.
* | The S&P 500 is a market capitalization-weighted index of 500 large-capitalization stocks commonly used to represent the U.S. equity market. |
^ | November 1, 2004 |
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Performance Graphs |
The following chart compares the value of a hypothetical $10,000 investment in the PRIMECAP Odyssey Growth Fund from October 31, 2005 to October 31, 2015, compared to the S&P 500. This chart illustrates the performance of a hypothetical $10,000 investment made October 31, 2005 and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends.
Total Return Period Ended October 31, 2015 | ||||||||||||||||
1 Year | Annualized 5 Year | Annualized 10 Year | Annualized Since Inception^ | |||||||||||||
Growth Fund | 6.96% | 14.58% | 9.84% | 10.41% | ||||||||||||
S&P 500* | 5.20% | 14.33% | 7.85% | 7.93% |
Performance data quoted represents past performance and does not guarantee future results. The 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 their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-729-2307.
* | The S&P 500 is a market capitalization-weighted index of 500 large-capitalization stocks commonly used to represent the U.S. equity market. |
^ | November 1, 2004 |
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Performance Graphs |
The following chart compares the value of a hypothetical $10,000 investment in the PRIMECAP Odyssey Aggressive Growth Fund from October 31, 2005 to October 31, 2015, compared to the S&P 500. This chart illustrates the performance of a hypothetical $10,000 investment made October 31, 2005 and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends.
Total Return Period Ended October 31, 2015 | ||||||||||||||||
1 Year | Annualized 5 Year | Annualized 10 Year | Annualized Since Inception^ | |||||||||||||
Aggressive Growth Fund | 5.13% | 18.28% | 13.01% | 12.96% | ||||||||||||
S&P 500* | 5.20% | 14.33% | 7.85% | 7.93% |
Performance data quoted represents past performance and does not guarantee future results. The 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 their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-729-2307.
* | The S&P 500 is a market capitalization-weighted index of 500 large-capitalization stocks commonly used to represent the U.S. equity market. |
^ | November 1, 2004 |
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PRIMECAP Odyssey Funds |
PRIMECAP Odyssey Stock Fund
Consumer Discretionary | 13.1% | |||
Consumer Staples | 1.5% | |||
Energy | 1.1% | |||
Financials | 10.8% | |||
Health Care | 20.6% | |||
Industrials | 12.6% | |||
Information Technology | 28.7% | |||
Materials | 1.8% | |||
Telecommunication Services | 0.0% | |||
Utilities | 0.3% | |||
Short-Term Investments and Other Assets | 9.5% | |||
Total | 100.0% |
PRIMECAP Odyssey Growth Fund
Consumer Discretionary | 12.6% | |||
Consumer Staples | 0.7% | |||
Energy | 0.7% | |||
Financials | 5.7% | |||
Health Care | 31.7% | |||
Industrials | 10.7% | |||
Information Technology | 30.8% | |||
Materials | 0.8% | |||
Telecommunication Services | 0.0% | |||
Short-Term Investments, net of Other Liabilities | 6.3% | |||
Total | 100.0% |
The tables above list sector allocations as a percentage of each fund’s total net assets as of October 31, 2015. The management report may make reference to average allocations during the period. As a result, the sector allocations above may differ from those discussed in the management report.
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Sector Breakdown
PRIMECAP Odyssey Funds
continued
PRIMECAP Odyssey Aggressive Growth Fund
Consumer Discretionary | 15.6% | |||
Consumer Staples | 0.6% | |||
Energy | 1.1% | |||
Financials | 2.2% | |||
Health Care | 30.0% | |||
Industrials | 15.0% | |||
Information Technology | 29.7% | |||
Materials | 0.5% | |||
Telecommunication Services | 1.4% | |||
Short-Term Investments, net of Other Liabilities | 3.9% | |||
Total | 100.0% |
The table above lists sector allocations as a percentage of the fund’s total net assets as of October 31, 2015. The management report may make reference to average allocations during the period. As a result, the sector allocations above may differ from those discussed in the management report.
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October 31, 2015 |
Shares | Value | |||||||
| COMMON STOCKS – 90.5% | |||||||
Consumer Discretionary – 13.1% | ||||||||
4,100,000 | Ascena Retail Group, Inc. (a) | $ | 54,612,000 | |||||
73,200 | Bed Bath & Beyond, Inc. (a) | 4,364,916 | ||||||
246,600 | CarMax, Inc. (a) | 14,551,866 | ||||||
2,624,600 | Carnival Corp. | 141,938,368 | ||||||
71,000 | Comcast Corp. – Class A | 4,446,020 | ||||||
307,000 | Garmin Ltd. | 10,889,290 | ||||||
1,043,437 | L Brands, Inc. | 100,149,083 | ||||||
469,382 | Las Vegas Sands Corp. | 23,239,103 | ||||||
60,000 | Newell Rubbermaid, Inc. | 2,545,800 | ||||||
1,322,000 | Ross Stores, Inc. | 66,866,760 | ||||||
140,000 | Royal Caribbean Cruises Ltd. | 13,769,000 | ||||||
3,475,000 | Sony Corp. – ADR | 98,690,000 | ||||||
193,400 | TJX Cos., Inc. | 14,154,946 | ||||||
1,287,200 | Tribune Media Co. – Class A | 51,912,776 | ||||||
1,816,600 | Tribune Publishing Co. (b) | 17,148,704 | ||||||
624,806 | Urban Outfitters, Inc. (a) | 17,869,452 | ||||||
125,000 | V.F. Corp. | 8,440,000 | ||||||
225,000 | Walt Disney Co. (The) | 25,591,500 | ||||||
22,100 | Whirlpool Corp. | 3,539,094 | ||||||
|
| |||||||
674,718,678 | ||||||||
|
| |||||||
Consumer Staples – 1.5% | ||||||||
249,600 | CVS Health Corp. | 24,655,488 | ||||||
70,000 | Kellogg Co. | 4,936,400 | ||||||
150,000 | PepsiCo, Inc. | 15,328,500 | ||||||
695,000 | Tyson Foods, Inc. – Class A | 30,830,200 | ||||||
|
| |||||||
75,750,588 | ||||||||
|
| |||||||
Energy – 1.1% | ||||||||
175,000 | Cameron International Corp. (a) | 11,901,750 | ||||||
20,000 | EOG Resources, Inc. | 1,717,000 | ||||||
95,000 | Exxon Mobil Corp. | 7,860,300 | ||||||
45,000 | National Oilwell Varco, Inc. | 1,693,800 | ||||||
60,000 | Range Resources Corp. | 1,826,400 | ||||||
141,534 | Schlumberger Ltd. | 11,062,297 | ||||||
625,000 | Southwestern Energy Co. (a) | 6,900,000 | ||||||
817,800 | Transocean Ltd. | 12,945,774 | ||||||
|
| |||||||
55,907,321 | ||||||||
|
| |||||||
Financials – 10.8% | ||||||||
75,000 | American Express Co. | 5,494,500 | ||||||
3,309,900 | Charles Schwab Corp. (The) | 101,018,148 |
The accompanying notes are an integral part of these financial statements.
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Schedule of Investments
PRIMECAP Odyssey Stock Fund
October 31, 2015 – continued
Shares | Value | |||||||
Financials (continued) | ||||||||
36,375 | Chubb Corp. (The) | $ | 4,705,106 | |||||
382,963 | CME Group, Inc. | 36,178,515 | ||||||
359,000 | Discover Financial Services | 20,182,980 | ||||||
2,523,400 | JPMorgan Chase & Co. | 162,128,450 | ||||||
676,668 | Marsh & McLennan Cos., Inc. | 37,717,474 | ||||||
281,600 | Mercury General Corp. | 15,209,216 | ||||||
1,200,600 | Progressive Corp. (The) | 39,775,878 | ||||||
2,112,908 | Wells Fargo & Co. | 114,392,839 | ||||||
348,200 | Willis Group Holdings PLC | 15,533,202 | ||||||
|
| |||||||
552,336,308 | ||||||||
|
| |||||||
Health Care – 20.6% | ||||||||
1,025,900 | Abbott Laboratories | 45,960,320 | ||||||
590,200 | AbbVie, Inc. | 35,146,410 | ||||||
75,000 | Affymetrix, Inc. (a) | 690,000 | ||||||
1,257,000 | Agilent Technologies, Inc. | 47,464,320 | ||||||
888,500 | Amgen, Inc. | 140,542,930 | ||||||
151,600 | Biogen, Inc. (a) | 44,041,316 | ||||||
117,900 | Boston Scientific Corp. (a) | 2,155,212 | ||||||
2,639,000 | Eli Lilly & Co. | 215,263,230 | ||||||
266,735 | GlaxoSmithKline PLC – ADR | 11,485,609 | ||||||
828,400 | Johnson & Johnson | 83,693,252 | ||||||
569,600 | Medtronic PLC | 42,104,832 | ||||||
1,650,000 | Merck & Co., Inc. | 90,189,000 | ||||||
518,350 | Novartis AG – ADR | 46,874,391 | ||||||
1,013,391 | PerkinElmer, Inc. | 52,331,511 | ||||||
435,044 | Roche Holding AG – CHF | 118,086,201 | ||||||
480,000 | Sanofi – ADR | 24,163,200 | ||||||
429,000 | Thermo Fisher Scientific, Inc. | 56,104,620 | ||||||
|
| |||||||
1,056,296,354 | ||||||||
|
| |||||||
Industrials – 12.6% | ||||||||
500,000 | AECOM (a) | 14,735,000 | ||||||
1,388,500 | Airbus Group SE – EUR | 96,742,132 | ||||||
95,200 | Alaska Air Group, Inc. | 7,259,000 | ||||||
1,057,200 | American Airlines Group, Inc. | 48,863,784 | ||||||
186,800 | Boeing Co. (The) | 27,659,476 | ||||||
154,000 | C.H. Robinson Worldwide, Inc. | 10,684,520 | ||||||
260,000 | Caterpillar, Inc. | 18,977,400 | ||||||
245,000 | CSX Corp. | 6,612,550 | ||||||
165,000 | Curtiss-Wright Corp. | 11,477,400 | ||||||
641,719 | Deere & Co. | 50,054,082 | ||||||
201,900 | FedEx Corp. | 31,506,495 | ||||||
212,650 | Honeywell International, Inc. | 21,962,492 | ||||||
466,400 | Jacobs Engineering Group, Inc. (a) | 18,721,296 |
The accompanying notes are an integral part of these financial statements.
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Schedule of Investments
PRIMECAP Odyssey Stock Fund
October 31, 2015 – continued
Shares | Value | |||||||
Industrials (continued) | ||||||||
199,761 | Matson, Inc. | $ | 9,155,046 | |||||
307,000 | Norfolk Southern Corp. | 24,569,210 | ||||||
280,000 | Pentair PLC | 15,657,600 | ||||||
100,000 | Republic Services, Inc. | 4,374,000 | ||||||
644,700 | Ritchie Bros. Auctioneers, Inc. | 16,742,859 | ||||||
91,000 | Rockwell Automation, Inc. | 9,933,560 | ||||||
157,600 | Safran S.A. – EUR | 11,977,101 | ||||||
3,458,500 | Southwest Airlines Co. | 160,093,965 | ||||||
100,000 | Tyco International PLC | 3,644,000 | ||||||
181,700 | United Parcel Service, Inc. – Class B | 18,718,734 | ||||||
56,000 | United Technologies Corp. | 5,510,960 | ||||||
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| |||||||
645,632,662 | ||||||||
|
| |||||||
Information Technology – 28.7% | ||||||||
1,040,000 | Activision Blizzard, Inc. | 36,150,400 | ||||||
509,600 | Adobe Systems, Inc. (a) | 45,181,136 | ||||||
35,000 | Alphabet, Inc. – Class A (a) | 25,808,650 | ||||||
35,000 | Alphabet, Inc. – Class C (a) | 24,878,350 | ||||||
1,110,830 | Altera Corp. | 58,374,116 | ||||||
611,800 | Analog Devices, Inc. | 36,781,416 | ||||||
1,675,000 | Applied Materials, Inc. | 28,089,750 | ||||||
440,000 | Broadcom Corp. – Class A | 22,616,000 | ||||||
3,217,200 | Cisco Systems, Inc. | 92,816,220 | ||||||
750,000 | Corning, Inc. | 13,950,000 | ||||||
485,000 | Diebold, Inc. | 17,881,950 | ||||||
2,810,000 | eBay, Inc. (a) | 78,399,000 | ||||||
668,700 | EMC Corp. | 17,533,314 | ||||||
2,711,500 | Hewlett-Packard Co. | 73,102,040 | ||||||
525,000 | HP, Inc. (c) | 6,368,250 | ||||||
1,464,600 | Intel Corp. | 49,591,356 | ||||||
2,141,800 | Keysight Technologies, Inc. (a) | 70,850,744 | ||||||
754,500 | KLA-Tencor Corp. | 50,642,040 | ||||||
8,438,200 | L.M. Ericsson Telephone Co. – ADR | 82,188,068 | ||||||
49,000 | MasterCard, Inc. – Class A | 4,850,510 | ||||||
1,833,100 | Microsoft Corp. | 96,494,384 | ||||||
3,676,775 | NetApp, Inc. | 125,010,350 | ||||||
1,534,924 | NeuStar, Inc. – Class A (a) | 41,734,584 | ||||||
545,000 | NVIDIA Corp. | 15,461,650 | ||||||
1,760,000 | PayPal Holdings, Inc. (a) | 63,377,600 | ||||||
775,905 | QUALCOMM, Inc. | 46,104,275 | ||||||
509,400 | SanDisk Corp. | 39,223,800 | ||||||
48,100 | Symantec Corp. | 990,860 | ||||||
390,000 | Teradyne, Inc. | 7,612,800 | ||||||
1,632,800 | Texas Instruments, Inc. | 92,612,416 |
The accompanying notes are an integral part of these financial statements.
15
Table of Contents
Schedule of Investments
PRIMECAP Odyssey Stock Fund
October 31, 2015 – continued
Shares | Value | |||||||
Information Technology (continued) | ||||||||
200,000 | Thomson Reuters Corp. | $ | 8,204,000 | |||||
396,400 | Visa, Inc. – Class A | 30,752,712 | ||||||
1,850,000 | Yahoo!, Inc. (a) | 65,897,000 | ||||||
|
| |||||||
1,469,529,741 | ||||||||
|
| |||||||
Materials – 1.8% | ||||||||
340,000 | Celanese Corp. – Series A | 24,157,000 | ||||||
31,560 | Chemours Co. (The) | 218,711 | ||||||
429,700 | Dow Chemical Co. (The) | 22,202,599 | ||||||
157,800 | E.I. du Pont de Nemours & Co. | 10,004,520 | ||||||
65,000 | Greif, Inc. – Class A | 2,130,700 | ||||||
25,000 | Lyondellbasell Industries N.V. – Class A | 2,322,750 | ||||||
135,900 | Monsanto Co. | 12,668,598 | ||||||
86,900 | Potash Corp. of Saskatchewan, Inc. | 1,757,987 | ||||||
431,200 | Schweitzer-Mauduit International, Inc. | 16,739,184 | ||||||
20,000 | Sensient Technologies Corp. | 1,305,400 | ||||||
|
| |||||||
93,507,449 | ||||||||
|
| |||||||
Telecommunication Services – 0.0% | ||||||||
1,270 | AT&T, Inc. | 42,558 | ||||||
|
| |||||||
Utilities – 0.3% | ||||||||
372,379 | Public Service Enterprise Group, Inc. | 15,375,529 | ||||||
|
| |||||||
| TOTAL COMMON STOCKS | $ | 4,639,097,188 | |||||
|
| |||||||
SHORT-TERM INVESTMENTS – 9.3% | ||||||||
477,205,868 | Dreyfus Treasury Prime Cash Management Fund | 477,205,868 | ||||||
|
| |||||||
| TOTAL SHORT-TERM INVESTMENTS | 477,205,868 | ||||||
|
| |||||||
| TOTAL INVESTMENTS | 5,116,303,056 | ||||||
| Other Assets in Excess of Liabilities – 0.2% | 9,709,697 | ||||||
|
| |||||||
| TOTAL NET ASSETS – 100.0% | $ | 5,126,012,753 | |||||
|
|
ADR | American Depository Receipt |
CHF | Swiss Francs |
EUR | Euros |
(a) | Non-Income Producing |
(b) | Considered an affiliated company of the fund as the fund owns 5% or more of the outstanding voting securities of such company. |
(c) | A when-issued security is purchased with a settlement period greater than the standard trade date plus three trading days because, while authorized by the company, the shares have not yet been issued. When-issued transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the purchase price. |
The Global Industry Classification Standard (GICS®) was developed by and is the exclusive property of MSCI Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by fund’s administrator.
The accompanying notes are an integral part of these financial statements.
16
Table of Contents
Schedule of Investments October 31, 2015 |
Shares | Value | |||||||
COMMON STOCKS – 93.7% | ||||||||
Consumer Discretionary – 12.6% | ||||||||
2,145,000 | Ascena Retail Group, Inc. (a) | $ | 28,571,400 | |||||
154,200 | Bed Bath & Beyond, Inc. (a) | 9,194,946 | ||||||
965,915 | CarMax, Inc. (a) | 56,998,644 | ||||||
1,975,746 | Carnival Corp. | 106,848,344 | ||||||
2,850,000 | DreamWorks Animation SKG, Inc. – Class A (a) | 57,684,000 | ||||||
586,000 | Gildan Activewear, Inc. | 16,835,780 | ||||||
1,581,198 | L Brands, Inc. | 151,763,384 | ||||||
357,099 | Las Vegas Sands Corp. | 17,679,972 | ||||||
1,694,600 | Norwegian Cruise Line Holdings Ltd. (a) | 107,810,452 | ||||||
136,000 | Ross Stores, Inc. | 6,878,880 | ||||||
390,000 | Royal Caribbean Cruises Ltd. | 38,356,500 | ||||||
1,658,127 | Shutterfly, Inc. (a) | 69,160,477 | ||||||
3,764,000 | Sony Corp. – ADR | 106,897,600 | ||||||
126,000 | TJX Cos., Inc. | 9,221,940 | ||||||
129,685 | Urban Outfitters, Inc. (a) | 3,708,991 | ||||||
|
| |||||||
787,611,310 | ||||||||
|
| |||||||
Consumer Staples – 0.7% | ||||||||
153,700 | Blue Buffalo Pet Products, Inc. (a) | 2,757,378 | ||||||
3,088,411 | Boulder Brands, Inc. (a) (b) | 27,363,321 | ||||||
152,000 | CVS Health Corp. | 15,014,560 | ||||||
|
| |||||||
45,135,259 | ||||||||
|
| |||||||
Energy – 0.7% | ||||||||
85,000 | EOG Resources, Inc. | 7,297,250 | ||||||
70,000 | Frank’s International N.V. | 1,201,200 | ||||||
70,000 | National Oilwell Varco, Inc. | 2,634,800 | ||||||
70,000 | Range Resources Corp. | 2,130,800 | ||||||
104,300 | Schlumberger Ltd. | 8,152,088 | ||||||
550,000 | Southwestern Energy Co. (a) | 6,072,000 | ||||||
953,400 | Transocean Ltd. | 15,092,322 | ||||||
|
| |||||||
42,580,460 | ||||||||
|
| |||||||
Financials – 5.7% | ||||||||
3,595,223 | Charles Schwab Corp. (The) | 109,726,206 | ||||||
100,000 | CME Group, Inc. | 9,447,000 | ||||||
205,000 | Discover Financial Services | 11,525,100 | ||||||
3,208,600 | E*TRADE Financial Corp. (a) | 91,477,186 | ||||||
955,000 | JPMorgan Chase & Co. | 61,358,750 | ||||||
510,350 | Marsh & McLennan Cos., Inc. | 28,446,909 | ||||||
550,000 | Progressive Corp. (The) | 18,221,500 | ||||||
550,000 | Wells Fargo & Co. | 29,777,000 | ||||||
|
| |||||||
359,979,651 | ||||||||
|
|
The accompanying notes are an integral part of these financial statements.
17
Table of Contents
Schedule of Investments
PRIMECAP Odyssey Growth Fund
October 31, 2015 – continued
Shares | Value | |||||||
Health Care – 31.7% | ||||||||
852,018 | Abbott Laboratories | $ | 38,170,406 | |||||
1,934,800 | ABIOMED, Inc. (a) | 142,517,368 | ||||||
3,731,600 | Accuray, Inc. (a) | 25,001,720 | ||||||
950,000 | Affymetrix, Inc. (a) | 8,740,000 | ||||||
311,300 | Agilent Technologies, Inc. | 11,754,688 | ||||||
1,369,100 | Amgen, Inc. | 216,564,238 | ||||||
440,200 | Biogen, Inc. (a) | 127,882,502 | ||||||
370,200 | BioMarin Pharmaceutical, Inc. (a) | 43,328,208 | ||||||
1,058,800 | Boston Scientific Corp. (a) | 19,354,864 | ||||||
1,030,100 | Cepheid, Inc. (a) | 34,405,340 | ||||||
118,700 | Charles River Laboratories International, Inc. (a) | 7,743,988 | ||||||
30,000 | Dyax Corp. (a) | 825,900 | ||||||
3,202,151 | Eli Lilly & Co. | 261,199,457 | ||||||
2,050,743 | Epizyme, Inc. (a) | 26,844,226 | ||||||
463,400 | Illumina, Inc. (a) | 66,395,952 | ||||||
6,741,054 | ImmunoGen, Inc. (a) (b) | 78,870,332 | ||||||
2,722,221 | Insulet Corp. (a) | 81,394,408 | ||||||
583,537 | Johnson & Johnson | 58,954,743 | ||||||
494,150 | Medtronic PLC | 36,527,568 | ||||||
680,000 | Merck & Co., Inc. | 37,168,800 | ||||||
552,700 | Momenta Pharmaceuticals, Inc. (a) | 9,069,807 | ||||||
5,791,656 | Nektar Therapeutics (a) | 68,746,957 | ||||||
516,750 | Novartis AG – ADR | 46,729,702 | ||||||
220,000 | NuVasive, Inc. (a) | 10,375,200 | ||||||
363,000 | OraSure Technologies, Inc. (a) | 1,887,600 | ||||||
276,300 | PerkinElmer, Inc. | 14,268,132 | ||||||
3,343,614 | QIAGEN N.V. (a) | 80,815,150 | ||||||
586,500 | Roche Holding AG – CHF | 159,196,672 | ||||||
5,104,900 | Seattle Genetics, Inc. (a) | 211,802,301 | ||||||
311,400 | Thermo Fisher Scientific, Inc. | 40,724,892 | ||||||
105,000 | Waters Corp. (a) | 13,419,000 | ||||||
|
| |||||||
1,980,680,121 | ||||||||
|
| |||||||
Industrials – 10.7% | ||||||||
960,000 | AECOM (a) | 28,291,200 | ||||||
737,700 | Airbus Group SE – EUR | 51,398,395 | ||||||
1,728,000 | American Airlines Group, Inc. | 79,868,160 | ||||||
305,000 | Avis Budget Group, Inc. (a) | 15,231,700 | ||||||
140,000 | C.H. Robinson Worldwide, Inc. | 9,713,200 | ||||||
138,000 | Caterpillar, Inc. | 10,072,620 | ||||||
146,000 | CIRCOR International, Inc. | 6,704,320 | ||||||
259,000 | Curtiss-Wright Corp. | 18,016,040 | ||||||
1,200,000 | Delta Air Lines, Inc. | 61,008,000 | ||||||
170,000 | Expeditors International of Washington, Inc. | 8,464,300 |
The accompanying notes are an integral part of these financial statements.
18
Table of Contents
Schedule of Investments
PRIMECAP Odyssey Growth Fund
October 31, 2015 – continued
Shares | Value | |||||||
Industrials (continued) | ||||||||
40,900 | FedEx Corp. | $ | 6,382,445 | |||||
179,000 | IDEX Corp. | 13,740,040 | ||||||
1,075,794 | Jacobs Engineering Group, Inc. (a) | 43,182,371 | ||||||
1,227,550 | JetBlue Airways Corp. (a) | 30,492,342 | ||||||
489,000 | Ritchie Bros. Auctioneers, Inc. | 12,699,330 | ||||||
33,100 | Rockwell Automation, Inc. | 3,613,196 | ||||||
2,997,700 | Southwest Airlines Co. | 138,763,533 | ||||||
1,526,300 | United Continental Holdings, Inc. (a) | 92,051,153 | ||||||
86,000 | United Parcel Service, Inc. – Class B | 8,859,720 | ||||||
854,900 | Virgin America, Inc. (a) | 30,442,989 | ||||||
|
| |||||||
668,995,054 | ||||||||
|
| |||||||
Information Technology – 30.8% | ||||||||
1,491,500 | Adobe Systems, Inc. (a) | 132,236,390 | ||||||
1,443,000 | Alibaba Group Holding Ltd. – ADR (a) | 120,966,690 | ||||||
114,667 | Alphabet, Inc. – Class A (a) | 84,554,299 | ||||||
115,530 | Alphabet, Inc. – Class C (a) | 82,119,879 | ||||||
1,115,170 | Altera Corp. | 58,602,184 | ||||||
137,000 | Analog Devices, Inc. | 8,236,440 | ||||||
51,700 | Applied Materials, Inc. | 867,009 | ||||||
272,517 | ASML Holding N.V. | 25,286,852 | ||||||
12,279,650 | BlackBerry Ltd. (a) | 89,518,649 | ||||||
220,000 | Broadcom Corp. – Class A | 11,308,000 | ||||||
704,000 | Cisco Systems, Inc. | 20,310,400 | ||||||
350,000 | Corning, Inc. | 6,510,000 | ||||||
1,320,100 | Cree, Inc. (a) | 33,253,319 | ||||||
34,300 | eBay, Inc. (a) | 956,970 | ||||||
265,000 | Electronic Arts, Inc. (a) | 19,098,550 | ||||||
767,000 | Ellie Mae, Inc. (a) | 55,975,660 | ||||||
1,698,700 | EMC Corp. | 44,539,914 | ||||||
114,000 | F5 Networks, Inc. (a) | 12,562,800 | ||||||
4,358,700 | Flextronics International Ltd. (a) | 49,645,593 | ||||||
658,418 | FormFactor, Inc. (a) | 5,425,364 | ||||||
2,044,000 | Hewlett-Packard Co. | 55,106,240 | ||||||
130,000 | HP, Inc. (c) | 1,576,900 | ||||||
1,521,200 | Intel Corp. | 51,507,832 | ||||||
105,000 | Intuit, Inc. | 10,230,150 | ||||||
625,000 | Jabil Circuit, Inc. | 14,362,500 | ||||||
763,150 | Keysight Technologies, Inc. (a) | 25,245,002 | ||||||
470,000 | KLA-Tencor Corp. | 31,546,400 | ||||||
7,117,800 | L.M. Ericsson Telephone Co. – ADR | 69,327,372 | ||||||
1,950,000 | Micron Technology, Inc. (a) | 32,292,000 | ||||||
2,427,100 | Microsoft Corp. | 127,762,544 | ||||||
3,243,811 | NetApp, Inc. | 110,289,574 |
The accompanying notes are an integral part of these financial statements.
19
Table of Contents
Schedule of Investments
PRIMECAP Odyssey Growth Fund
October 31, 2015 – continued
Shares | Value | |||||||
Information Technology (continued) | ||||||||
1,653,100 | NeuStar, Inc. – Class A (a) | $ | 44,947,789 | |||||
2,030,000 | Nuance Communications, Inc. (a) | 34,449,100 | ||||||
678,000 | NVIDIA Corp. | 19,234,860 | ||||||
34,300 | PayPal Holdings, Inc. (a) | 1,235,143 | ||||||
843,250 | QUALCOMM, Inc. | 50,105,915 | ||||||
160,000 | Rambus, Inc. (a) | 1,651,200 | ||||||
1,430,200 | SanDisk Corp. | 110,125,400 | ||||||
1,250,000 | Stratasys Ltd. (a) | 31,875,000 | ||||||
33,180 | Symantec Corp. | 683,508 | ||||||
1,793,895 | Texas Instruments, Inc. | 101,749,724 | ||||||
957,900 | Trimble Navigation Ltd. (a) | 21,792,225 | ||||||
1,050,000 | Visa, Inc. – Class A | 81,459,000 | ||||||
314,150 | VMware, Inc. – Class A (a) | 18,896,123 | ||||||
490,000 | Yahoo, Inc. (a) | 17,453,800 | ||||||
|
| |||||||
1,926,880,263 | ||||||||
|
| |||||||
Materials – 0.8% | ||||||||
394,500 | Monsanto Co. | 36,775,290 | ||||||
100,000 | Praxair, Inc. | 11,109,000 | ||||||
|
| |||||||
47,884,290 | ||||||||
|
| |||||||
Telecommunication Services – 0.0% | ||||||||
66,725 | AT&T, Inc. | 2,235,955 | ||||||
|
| |||||||
| TOTAL COMMON STOCKS | $ | 5,861,982,363 | |||||
|
| |||||||
SHORT-TERM INVESTMENTS – 6.5% | ||||||||
405,036,971 | Dreyfus Treasury Prime Cash Management Fund | 405,036,971 | ||||||
|
| |||||||
| TOTAL SHORT-TERM INVESTMENTS | 405,036,971 | ||||||
|
| |||||||
| TOTAL INVESTMENTS | 6,267,019,334 | ||||||
| Liabilities in Excess of Other Assets – (0.2)% | (12,454,515 | ) | |||||
|
| |||||||
| TOTAL NET ASSETS – 100.0% | $ | 6,254,564,819 | |||||
|
|
ADR | American Depository Receipt |
CHF | Swiss Francs |
EUR | Euros |
(a) | Non-Income Producing |
(b) | Considered an affiliated company of the fund as the fund owns 5% or more of the outstanding voting securities of such company. |
(c) | A when-issued security is purchased with a settlement period greater than the standard trade date plus three trading days because, while authorized by the company, the shares have not yet been issued. When-issued transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the purchase price. |
The Global Industry Classification Standard (GICS®) was developed by and is the exclusive property of MSCI Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by fund’s administrator.
The accompanying notes are an integral part of these financial statements.
20
Table of Contents
Schedule of Investments PRIMECAP Odyssey Aggressive Growth Fund October 31, 2015 |
Shares | Value | |||||||
COMMON STOCKS – 96.1% | ||||||||
Consumer Discretionary – 15.6% | ||||||||
8,000 | Aaron’s, Inc. | $ | 197,360 | |||||
2,248,000 | Ascena Retail Group, Inc. (a) | 29,943,360 | ||||||
1,368,500 | Boot Barn Holdings, Inc. (a) (b) | 20,527,500 | ||||||
1,283,400 | CarMax, Inc. (a) | 75,733,434 | ||||||
8,586,500 | Chegg, Inc. (a) (b) | 59,246,850 | ||||||
5,706,700 | DreamWorks Animation SKG, Inc. – Class A (a) (b) | 115,503,608 | ||||||
10,200 | Francesca’s Holdings, Corp. (a) | 144,942 | ||||||
522,600 | Gildan Activewear, Inc. | 15,014,298 | ||||||
300,000 | Norwegian Cruise Line Holdings, Ltd. (a) | 19,086,000 | ||||||
37,800 | Ollie’s Bargain Outlet Holdings, Inc. (a) | 599,130 | ||||||
1,587,201 | Royal Caribbean Cruises Ltd. | 156,101,218 | ||||||
3,056,100 | Shutterfly, Inc. (a) (b) | 127,469,931 | ||||||
7,441,000 | Sony Corp. – ADR | 211,324,400 | ||||||
254,990 | Tesla Motors, Inc. (a) | 52,765,081 | ||||||
2,036,500 | Tribune Media Co. – Class A | 82,132,045 | ||||||
1,566,151 | Tribune Publishing Co. (b) | 14,784,466 | ||||||
3,678,386 | Tuesday Morning Corp. (a) (b) | 19,900,068 | ||||||
539,900 | Urban Outfitters, Inc. (a) | 15,441,140 | ||||||
|
| |||||||
1,015,914,831 | ||||||||
|
| |||||||
Consumer Staples – 0.6% | ||||||||
4,610,189 | Boulder Brands, Inc. (a) (b) | 40,846,274 | ||||||
12,000 | Post Holdings, Inc. (a) | 771,240 | ||||||
|
| |||||||
41,617,514 | ||||||||
|
| |||||||
Energy – 1.1% | ||||||||
545,400 | Cabot Oil & Gas Corp. | 11,840,634 | ||||||
5,400 | Cameron International Corp. (a) | 367,254 | ||||||
40,000 | EOG Resources, Inc. | 3,434,000 | ||||||
85,800 | National Oilwell Varco, Inc. | 3,229,512 | ||||||
7,000 | Range Resources Corp. | 213,080 | ||||||
2,700,000 | Rex Energy Corp. (a) | 6,102,000 | ||||||
7,597,813 | Solazyme, Inc. (a) (b) | 24,920,827 | ||||||
1,125,382 | Transocean Ltd. | 17,814,797 | ||||||
|
| |||||||
67,922,104 | ||||||||
|
| |||||||
Financials – 2.2% | ||||||||
238,000 | CME Group, Inc. | 22,483,860 | ||||||
127,500 | Discover Financial Services | 7,168,050 | ||||||
576,500 | E*TRADE Financial Corp. (a) | 16,436,015 |
The accompanying notes are an integral part of these financial statements.
21
Table of Contents
Schedule of Investments
PRIMECAP Odyssey Aggressive Growth Fund
October 31, 2015 – continued
Shares | Value | |||||||
Financials (continued) | ||||||||
905,820 | MarketAxess Holdings, Inc. | $ | 91,768,624 | |||||
65,000 | Progressive Corp. (The) | 2,153,450 | ||||||
|
| |||||||
140,009,999 | ||||||||
|
| |||||||
Health Care – 30.0% | ||||||||
2,143,000 | Abaxis, Inc. (b) | 107,600,030 | ||||||
1,503,300 | Abbott Laboratories | 67,347,840 | ||||||
2,640,373 | ABIOMED, Inc. (a) (b) | 194,489,875 | ||||||
3,666,900 | Accuray, Inc. (a) | 24,568,230 | ||||||
5,007,000 | Affymetrix, Inc. (a) (b) | 46,064,400 | ||||||
2,838,000 | Arbutus Biopharma Corp. (a) (b) | 15,609,000 | ||||||
365,400 | Avalanche Biotechnologies, Inc. (a) | 3,080,322 | ||||||
346,400 | Axovant Sciences Ltd. (a) | 4,222,616 | ||||||
204,100 | Biogen, Inc. (a) | 59,293,091 | ||||||
602,300 | BioMarin Pharmaceutical, Inc. (a) | 70,493,192 | ||||||
99,000 | Boston Scientific Corp. (a) | 1,809,720 | ||||||
5,315,500 | Cardica, Inc. (a) (b) | 1,072,668 | ||||||
1,015,700 | Cepheid, Inc. (a) | 33,924,380 | ||||||
7,500,000 | Cerus Corp. (a) (b) | 35,775,000 | ||||||
496,660 | Charles River Laboratories International, Inc. (a) | 32,402,099 | ||||||
7,689,720 | Dyax Corp. (a) (b) | 211,697,992 | ||||||
1,106,500 | Eli Lilly & Co. | 90,257,205 | ||||||
2,732,706 | Epizyme, Inc. (a) (b) | 35,771,122 | ||||||
2,555,000 | Exact Sciences Corp. (a) | 21,283,150 | ||||||
162,200 | Flex Pharma, Inc. (a) | 1,837,726 | ||||||
2,871,132 | Fluidigm Corp. (a) (b) | 31,036,937 | ||||||
113,000 | Illumina, Inc. (a) | 16,190,640 | ||||||
3,857,750 | ImmunoGen, Inc. (a) | 45,135,675 | ||||||
2,067,956 | Insulet Corp. (a) | 61,831,884 | ||||||
169,025 | KaloBios Pharmaceuticals, Inc. (a) | 326,218 | ||||||
1,781,183 | Momenta Pharmaceuticals, Inc. (a) | 29,229,213 | ||||||
11,667,830 | Nektar Therapeutics (a) (b) | 138,497,142 | ||||||
4,964,082 | Novadaq Technologies, Inc. (a) (b) | 64,781,270 | ||||||
505,000 | NuVasive, Inc. (a) | 23,815,800 | ||||||
144,100 | OncoMed Pharmaceuticals, Inc. (a) | 2,883,441 | ||||||
1,523,900 | OraSure Technologies, Inc. (a) | 7,924,280 | ||||||
17,800 | Penumbra, Inc. (a) | 659,134 | ||||||
2,298,000 | Pfenex, Inc. (a) (b) | 41,547,840 | ||||||
5,241,114 | QIAGEN N.V. (a) | 126,677,725 | ||||||
426,400 | Roche Holding AG – CHF | 115,739,916 |
The accompanying notes are an integral part of these financial statements.
22
Table of Contents
Schedule of Investments
PRIMECAP Odyssey Aggressive Growth Fund
October 31, 2015 – continued
Shares | Value | |||||||
Health Care (continued) | ||||||||
3,916,900 | Seattle Genetics, Inc. (a) | $ | 162,512,181 | |||||
1,980,900 | Xencor, Inc. (a) | 21,453,147 | ||||||
74,000 | XenoPort, Inc. (a) | 452,140 | ||||||
|
| |||||||
1,949,294,241 | ||||||||
|
| |||||||
Industrials – 15.0% | ||||||||
455,600 | AECOM (a) | 13,426,532 | ||||||
772,400 | Alaska Air Group, Inc. | 58,895,500 | ||||||
3,500 | Allegiant Travel Co. | 691,075 | ||||||
3,275,700 | American Airlines Group, Inc. | 151,402,854 | ||||||
197,000 | CIRCOR International, Inc. | 9,046,240 | ||||||
16,000 | Controladora Vuela Compania de Aviacion, S.A.B. de C.V. – ADR (a) | 271,840 | ||||||
171,400 | Curtiss-Wright Corp. | 11,922,584 | ||||||
3,410,900 | Delta Air Lines, Inc. | 173,410,156 | ||||||
56,700 | Esterline Technologies Corp. (a) | 4,368,735 | ||||||
615,000 | Hawaiian Holdings, Inc. (a) | 21,340,500 | ||||||
704,500 | Hertz Global Holdings, Inc. (a) | 13,737,750 | ||||||
952,600 | Jacobs Engineering Group, Inc. (a) | 38,237,364 | ||||||
6,630,925 | JetBlue Airways Corp. (a) | 164,712,177 | ||||||
525,000 | NCI Building Systems, Inc. (a) | 5,491,500 | ||||||
645,100 | NN, Inc. | 8,902,380 | ||||||
575,372 | Ritchie Bros. Auctioneers, Inc. | 14,942,411 | ||||||
907,000 | Southwest Airlines Co. | 41,985,030 | ||||||
470,500 | Spirit Airlines, Inc. (a) | 17,464,960 | ||||||
2,400 | TransDigm Group, Inc. (a) | 527,640 | ||||||
152,900 | Trex Co., Inc. (a) | 5,973,803 | ||||||
3,232,500 | United Continental Holdings, Inc. (a) | 194,952,075 | ||||||
3,224,000 | UTi Worldwide, Inc. | 22,987,120 | ||||||
|
| |||||||
974,690,226 | ||||||||
|
| |||||||
Information Technology – 29.7% | ||||||||
35,000 | A10 Networks, Inc. (a) | 251,300 | ||||||
1,062,100 | Adobe Systems, Inc. (a) | 94,165,786 | ||||||
550,000 | Alibaba Group Holding Ltd. – ADR (a) | 46,106,500 | ||||||
103,370 | Alphabet, Inc. – Class A (a) | 76,224,004 | ||||||
103,653 | Alphabet, Inc. – Class C (a) | 73,677,589 | ||||||
820,200 | Altera Corp. | 43,101,510 | ||||||
15,000 | Applied Materials, Inc. | 251,550 | ||||||
4,300 | Arista Networks, Inc. (a) | 277,393 | ||||||
150,000 | ASML Holding N.V. | 13,918,500 |
The accompanying notes are an integral part of these financial statements.
23
Table of Contents
Schedule of Investments
PRIMECAP Odyssey Aggressive Growth Fund
October 31, 2015 – continued
Shares | Value | |||||||
Information Technology (continued) | ||||||||
11,300,000 | Axcelis Technologies, Inc. (a) (b) | $ | 31,640,000 | |||||
465,000 | Barracuda Networks, Inc. (a) | 8,918,700 | ||||||
22,027,495 | BlackBerry Ltd. (a) | 160,580,439 | ||||||
20,000 | Broadcom Corp. – Class A | 1,028,000 | ||||||
3,193,660 | comScore, Inc. (a) (b) | 136,624,775 | ||||||
945,000 | Cray, Inc. (a) | 28,000,350 | ||||||
1,675,300 | �� | Cree, Inc. (a) | 42,200,807 | |||||
266,000 | Digimarc Corp. (a) | 5,974,360 | ||||||
16,900 | eBay, Inc. (a) | 471,510 | ||||||
135,000 | Electronic Arts, Inc. (a) | 9,729,450 | ||||||
2,779,200 | Ellie Mae, Inc. (a) (b) | 202,826,016 | ||||||
1,780,000 | EMC Corp. | 46,671,600 | ||||||
300,000 | F5 Networks, Inc. (a) | 33,060,000 | ||||||
1,496,322 | FARO Technologies, Inc. (a) (b) | 50,560,720 | ||||||
377,000 | FEI Co. | 27,215,630 | ||||||
300 | FireEye, Inc. (a) | 7,845 | ||||||
7,701,900 | Flextronics International Ltd. (a) | 87,724,641 | ||||||
1,138,300 | FormFactor, Inc. (a) | 9,379,592 | ||||||
2,867,515 | Guidance Software, Inc. (a) (b) | 16,172,785 | ||||||
235,000 | Hewlett-Packard Co. | 6,335,600 | ||||||
224,500 | Intuit, Inc. | 21,873,035 | ||||||
740,000 | Jabil Circuit, Inc. | 17,005,200 | ||||||
91,000 | Keysight Technologies, Inc. (a) | 3,010,280 | ||||||
606,400 | KLA-Tencor Corp. | 40,701,568 | ||||||
91,115 | Knowles Corp. (a) | 1,517,976 | ||||||
4,564,700 | Micron Technology, Inc. (a) | 75,591,432 | ||||||
46,419 | Mobileye N.V. (a) | 2,112,993 | ||||||
2,014,387 | NetApp, Inc. | 68,489,158 | ||||||
1,414,086 | NeuStar, Inc. – Class A (a) | 38,448,998 | ||||||
202,000 | Nimble Storage, Inc. (a) | 4,565,200 | ||||||
2,972,406 | Nuance Communications, Inc. (a) | 50,441,730 | ||||||
2,697,455 | NVIDIA Corp. | 76,526,798 | ||||||
16,900 | PayPal Holdings, Inc. (a) | 608,569 | ||||||
676,300 | QUALCOMM, Inc. | 40,185,746 | ||||||
172,200 | Rambus, Inc. (a) | 1,777,104 | ||||||
1,852,100 | Rubicon Project, Inc. (The) (a) | 28,077,836 | ||||||
1,090,800 | SanDisk Corp. | 83,991,600 | ||||||
8,488,500 | ServiceSource International, Inc. (a) (b) | 36,245,895 | ||||||
200,000 | SMART Technologies, Inc. – Class A (a) | 92,200 |
The accompanying notes are an integral part of these financial statements.
24
Table of Contents
Schedule of Investments
PRIMECAP Odyssey Aggressive Growth Fund
October 31, 2015 – continued
Shares | Value | |||||||
Information Technology (continued) | ||||||||
1,340,000 | Stratasys Ltd. (a) | $ | 34,170,000 | |||||
732,000 | Trimble Navigation Ltd. (a) | 16,653,000 | ||||||
11,400 | Twitter, Inc. (a) | 324,444 | ||||||
455,000 | Universal Display Corp. (a) | 15,611,050 | ||||||
230,000 | VMware, Inc. – Class A (a) | 13,834,500 | ||||||
252,900 | Xoom Corp. (a) | 6,307,326 | ||||||
34,000 | Yahoo!, Inc. (a) | 1,211,080 | ||||||
|
| |||||||
1,932,471,670 | ||||||||
|
| |||||||
Materials – 0.5% | ||||||||
2,325,000 | Marrone Bio Innovations, Inc. (a) (b) | 5,766,000 | ||||||
284,300 | Monsanto Co. | 26,502,446 | ||||||
94,100 | Potash Corp. of Saskatchewan, Inc. | 1,903,643 | ||||||
|
| |||||||
34,172,089 | ||||||||
|
| |||||||
Telecom Services – 1.4% | ||||||||
232 | AT&T, Inc. | 7,774 | ||||||
19,330,000 | Sprint Corp. (a) | 91,430,900 | ||||||
|
| |||||||
91,438,674 | ||||||||
|
| |||||||
| TOTAL COMMON STOCKS | $ | 6,247,531,348 | |||||
|
| |||||||
SHORT-TERM INVESTMENTS – 4.1% | ||||||||
269,327,487 | Dreyfus Treasury Prime Cash Management Fund | 269,327,487 | ||||||
|
| |||||||
| TOTAL SHORT-TERM INVESTMENTS | 269,327,487 | ||||||
|
| |||||||
| TOTAL INVESTMENTS | 6,516,858,835 | ||||||
| Liabilities in Excess of Other Assets – (0.2)% | (14,064,058 | ) | |||||
|
| |||||||
| TOTAL NET ASSETS – 100.0% | $ | 6,502,794,777 | |||||
|
|
ADR | American Depository Receipt |
CHF | Swiss Francs |
(a) | Non-Income Producing |
(b) | Considered an affiliated company of the fund as the fund owns 5% or more of the outstanding voting securities of such company. |
The Global Industry Classification Standard (GICS®) was developed by and is the exclusive property of MSCI Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by the fund’s administrator.
The accompanying notes are an integral part of these financial statements.
25
Table of Contents
Statements of Assets and Liabilities PRIMECAP Odyssey Funds October 31, 2015 |
PRIMECAP Odyssey Stock Fund | PRIMECAP Odyssey Growth Fund | PRIMECAP Odyssey Aggressive Growth Fund | ||||||||||
ASSETS | ||||||||||||
Investments, at cost | $ | 4,028,064,507 | $ | 4,410,361,846 | $ | 4,736,421,613 | ||||||
|
|
|
|
|
| |||||||
Investments, at value (unaffiliated) | $ | 5,099,154,352 | $ | 6,160,785,681 | $ | 4,689,879,844 | ||||||
Investments, at value (affiliated) | 17,148,704 | 106,233,653 | 1,826,978,991 | |||||||||
Cash | — | — | 127,594 | |||||||||
Receivable for investment sold | 2,612,825 | 3,789,872 | 4,045,992 | |||||||||
Receivable for dividends and interest | 6,469,142 | 4,112,165 | 2,338,696 | |||||||||
Receivable for fund shares sold | 17,552,124 | 9,965,073 | 4,454,091 | |||||||||
Prepaid expenses and other assets | 39,482 | 42,600 | 24,148 | |||||||||
|
|
|
|
|
| |||||||
Total assets | 5,142,976,629 | 6,284,929,044 | 6,527,849,356 | |||||||||
|
|
|
|
|
| |||||||
LIABILITIES | ||||||||||||
Payable for investments purchased | 7,641,467 | 18,142,502 | 11,782,533 | |||||||||
Payable for fund shares repurchased | 1,808,800 | 2,641,719 | 3,112,367 | |||||||||
Payable to the advisor (Note 6) | 6,552,807 | 8,363,724 | 9,109,965 | |||||||||
Other accrued expenses and liabilities | 960,802 | 1,216,280 | 1,049,714 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities | 16,963,876 | 30,364,225 | 25,054,579 | |||||||||
|
|
|
|
|
| |||||||
NET ASSETS | $ | 5,126,012,753 | $ | 6,254,564,819 | $ | 6,502,794,777 | ||||||
|
|
|
|
|
| |||||||
Number of shares issued and outstanding (unlimited shares authorized, $0.01 par value) | 209,619,621 | 230,904,817 | 195,429,065 | |||||||||
|
|
|
|
|
| |||||||
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE | $ | 24.45 | $ | 27.09 | $ | 33.27 | ||||||
|
|
|
|
|
| |||||||
COMPONENTS OF NET ASSETS | ||||||||||||
Paid-in capital | $ | 3,955,662,281 | $ | 4,323,229,991 | $ | 4,333,504,066 | ||||||
Undistributed net investment income | 40,851,074 | 19,279,640 | 503,498 | |||||||||
Accumulated net realized gain | 41,399,533 | 55,527,751 | 388,444,541 | |||||||||
Net unrealized appreciation | 1,088,099,865 | 1,856,527,437 | 1,780,342,672 | |||||||||
|
|
|
|
|
| |||||||
Net assets | $ | 5,126,012,753 | $ | 6,254,564,819 | $ | 6,502,794,777 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
26
Table of Contents
PRIMECAP Odyssey Funds For the Year Ended October 31, 2015 |
PRIMECAP Odyssey Stock Fund | PRIMECAP Odyssey Growth Fund | PRIMECAP Odyssey Aggressive Growth Fund | ||||||||||
INVESTMENT INCOME | ||||||||||||
Income | ||||||||||||
Dividends(1) | $ | 87,698,558 | $ | 65,801,587 | $ | 52,146,884 | ||||||
Interest income | 352 | 131 | 76 | |||||||||
|
|
|
|
|
| |||||||
Total income | 87,698,910 | 65,801,718 | 52,146,960 | |||||||||
|
|
|
|
|
| |||||||
Expenses | ||||||||||||
Advisory fees | 23,780,037 | 30,899,053 | 36,557,514 | |||||||||
Shareholder servicing | 2,581,731 | 3,010,022 | 2,424,874 | |||||||||
Custody | 251,639 | 290,572 | 288,014 | |||||||||
Trustee fees | 78,936 | 78,937 | 78,937 | |||||||||
Other | 1,311,389 | 1,517,805 | 1,583,369 | |||||||||
|
|
|
|
|
| |||||||
Total expenses | 28,003,732 | 35,796,389 | 40,932,708 | |||||||||
|
|
|
|
|
| |||||||
Net investment income | 59,695,178 | 30,005,329 | 11,214,252 | |||||||||
|
|
|
|
|
| |||||||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY | ||||||||||||
Net realized gain (loss) on: | ||||||||||||
Investments(2) | 51,744,429 | 66,044,493 | 425,573,920 | |||||||||
Foreign currency transactions | (71,444 | ) | (138,322 | ) | (103,874 | ) | ||||||
Change in unrealized appreciation/depreciation on: | ||||||||||||
Investments | 155,442,989 | 245,975,541 | (136,132,060 | ) | ||||||||
Foreign currency translations | (59,275 | ) | 1,335 | (3,239 | ) | |||||||
|
|
|
|
|
| |||||||
Net realized and unrealized gain on investments and foreign currency | 207,056,699 | 311,883,047 | 289,334,747 | |||||||||
|
|
|
|
|
| |||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 266,751,877 | $ | 341,888,376 | $ | 300,548,999 | ||||||
|
|
|
|
|
|
(1) | Net of foreign taxes withheld of $1,702,369, $1,522,086, and $700,339, respectively. |
(2) | Includes net realized loss on sales of affiliated companies of $0, $0, and $68,821,026. |
The accompanying notes are an integral part of these financial statements.
27
Table of Contents
Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 59,695,178 | $ | 35,275,392 | ||||
Net realized gain (loss) on: | ||||||||
Investments | 51,744,429 | 60,873,459 | ||||||
Foreign currency transactions | (71,444 | ) | 18,456 | |||||
Change in unrealized appreciation/depreciation on: | ||||||||
Investments | 155,442,989 | 312,188,980 | ||||||
Foreign currency translations | (59,275 | ) | (109,276 | ) | ||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 266,751,877 | 408,247,011 | ||||||
|
|
|
| |||||
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||
Net investment income | (48,367,226 | ) | (25,544,000 | ) | ||||
Net realized gain on investments | (55,247,855 | ) | (7,013,392 | ) | ||||
|
|
|
| |||||
Net decrease in net assets resulting from distributions paid | (103,615,081 | ) | (32,557,392 | ) | ||||
|
|
|
| |||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 2,004,472,389 | 1,379,398,107 | ||||||
Proceeds from reinvestment of distributions | 64,917,038 | 19,473,550 | ||||||
Cost of shares repurchased | (639,033,439 | ) | (376,708,561 | ) | ||||
|
|
|
| |||||
Net increase from capital share transactions | 1,430,355,988 | 1,022,163,096 | ||||||
|
|
|
| |||||
Total increase in net assets | 1,593,492,784 | 1,397,852,715 | ||||||
|
|
|
| |||||
NET ASSETS | ||||||||
Beginning of year | 3,532,519,969 | 2,134,667,254 | ||||||
|
|
|
| |||||
End of year (includes undistributed net investment income of $40,851,074 and $29,594,566, respectively) | $ | 5,126,012,753 | $ | 3,532,519,969 | ||||
|
|
|
| |||||
CHANGE IN CAPITAL SHARES | ||||||||
Shares outstanding, beginning of year | 149,772,161 | 103,820,982 | ||||||
|
|
|
| |||||
Shares sold | 83,731,435 | 62,248,954 | ||||||
Shares issued on reinvestment of distributions | 2,822,480 | 943,029 | ||||||
Shares repurchased | (26,706,455 | ) | (17,240,804 | ) | ||||
|
|
|
| |||||
Increase in capital shares | 59,847,460 | 45,951,179 | ||||||
|
|
|
| |||||
Shares outstanding, end of year | 209,619,621 | 149,772,161 | ||||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
28
Table of Contents
Statements of Changes in Net Assets |
Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 30,005,329 | $ | 22,842,718 | ||||
Net realized gain (loss) on: | ||||||||
Investments | 66,044,493 | 128,037,118 | ||||||
Foreign currency transactions | (138,322 | ) | 28,407 | |||||
Change in unrealized appreciation/depreciation on: | ||||||||
Investments | 245,975,541 | 457,447,081 | ||||||
Foreign currency translations | 1,335 | (180,298 | ) | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 341,888,376 | 608,175,026 | ||||||
|
|
|
| |||||
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||
Net investment income | (30,191,718 | ) | (12,772,829 | ) | ||||
Net realized gain on investments | (118,727,114 | ) | (73,025,511 | ) | ||||
|
|
|
| |||||
Net decrease in net assets resulting from distributions paid | (148,918,832 | ) | (85,798,340 | ) | ||||
|
|
|
| |||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 2,075,669,127 | 1,300,616,020 | ||||||
Proceeds from reinvestment of distributions | 139,731,443 | 81,199,742 | ||||||
Cost of shares repurchased | (850,015,666 | ) | (869,158,941 | ) | ||||
|
|
|
| |||||
Net increase from capital share transactions | 1,365,384,904 | 512,656,821 | ||||||
|
|
|
| |||||
Total increase in net assets | 1,558,354,448 | 1,035,033,507 | ||||||
|
|
|
| |||||
NET ASSETS | ||||||||
Beginning of year | 4,696,210,371 | 3,661,176,864 | ||||||
|
|
|
| |||||
End of year (includes undistributed net investment income of $19,279,640 and $19,604,351, respectively) | $ | 6,254,564,819 | $ | 4,696,210,371 | ||||
|
|
|
| |||||
CHANGE IN CAPITAL SHARES | ||||||||
Shares outstanding, beginning of year | 179,647,788 | 158,564,375 | ||||||
|
|
|
| |||||
Shares sold | 77,643,893 | 53,188,883 | ||||||
Shares issued on reinvestment of distributions | 5,542,699 | 3,512,100 | ||||||
Shares repurchased | (31,929,563 | ) | (35,617,570 | ) | ||||
|
|
|
| |||||
Increase in capital shares | 51,257,029 | 21,083,413 | ||||||
|
|
|
| |||||
Shares outstanding, end of year | 230,904,817 | 179,647,788 | ||||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
29
Table of Contents
Statements of Changes in Net Assets |
Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM: | ||||||||
OPERATIONS | ||||||||
Net investment income (loss) | $ | 11,214,252 | $ | (4,723,431 | ) | |||
Net realized gain (loss) on: | ||||||||
Investments | 425,573,920 | 286,679,248 | ||||||
Foreign currency transactions | (103,874 | ) | 20,598 | |||||
Change in unrealized appreciation/depreciation on: | ||||||||
Investments | (136,132,060 | ) | 566,323,190 | |||||
Foreign currency translations | (3,239 | ) | (125,377 | ) | ||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 300,548,999 | 848,174,228 | ||||||
|
|
|
| |||||
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||||
Net investment income | (10,605,768 | ) | — | |||||
Net realized gain on investments | (273,260,143 | ) | (82,866,081 | ) | ||||
|
|
|
| |||||
Net decrease in net assets resulting from distributions paid | (283,865,911 | ) | (82,866,081 | ) | ||||
|
|
|
| |||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 1,305,237,495 | 1,984,230,161 | ||||||
Proceeds from reinvestment of distributions | 266,806,818 | 78,132,373 | ||||||
Cost of shares repurchased | (1,048,464,115 | ) | (1,308,262,342 | ) | ||||
|
|
|
| |||||
Net increase from capital share transactions | 523,580,198 | 754,100,192 | ||||||
|
|
|
| |||||
Total increase in net assets | 540,263,286 | 1,519,408,339 | ||||||
|
|
|
| |||||
NET ASSETS | ||||||||
Beginning of year | 5,962,531,491 | 4,443,123,152 | ||||||
|
|
|
| |||||
End of year (includes undistributed net investment income of $503,498 and $0, respectively) | $ | 6,502,794,777 | $ | 5,962,531,491 | ||||
|
|
|
| |||||
CHANGE IN CAPITAL SHARES | ||||||||
Shares outstanding, beginning of year | 179,545,427 | 154,739,429 | ||||||
|
|
|
| |||||
Shares sold | 38,356,506 | 65,025,913 | ||||||
Shares issued on reinvestment of distributions | 8,581,757 | 2,702,289 | ||||||
Shares repurchased | (31,054,625 | ) | (42,922,204 | ) | ||||
|
|
|
| |||||
Increase in capital shares | 15,883,638 | 24,805,998 | ||||||
|
|
|
| |||||
Shares outstanding, end of year | 195,429,065 | 179,545,427 | ||||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
30
Table of Contents
For a capital share outstanding throughout each year. |
Year Ended Oct. 31, 2015 | Year Ended Oct. 31, 2014 | Year Ended Oct. 31, 2013 | Year Ended Oct. 31, 2012 | Year Ended Oct. 31, 2011 | ||||||||||||||||
Net asset value, beginning of the year | $ | 23.59 | $ | 20.56 | $ | 15.75 | $ | 14.32 | $ | 13.48 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.31 | 0.25 | 0.27 | 0.21 | 0.16 | |||||||||||||||
Net realized and unrealized gain on | ||||||||||||||||||||
investments and foreign currency | 1.21 | 3.09 | 4.79 | 1.40 | 0.79 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.52 | 3.34 | 5.06 | 1.61 | 0.95 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: | ||||||||||||||||||||
Dividends from net investment income | (0.31 | ) | (0.24 | ) | (0.25 | ) | (0.18 | ) | (0.11 | ) | ||||||||||
Distributions from net realized gain | (0.35 | ) | (0.07 | ) | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions | (0.66 | ) | (0.31 | ) | (0.25 | ) | (0.18 | ) | (0.11 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of year | $ | 24.45 | $ | 23.59 | $ | 20.56 | $ | 15.75 | $ | 14.32 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return | 6.64 | % | 16.45 | % | 32.55 | % | 11.39 | % | 7.05 | % | ||||||||||
Ratios/supplemental data: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 5,126.0 | $ | 3,532.5 | $ | 2,134.7 | $ | 1,522.2 | $ | 904.3 | ||||||||||
Ratio of expenses to average net assets | 0.65 | % | 0.62 | % | 0.63 | % | 0.66 | % | 0.66 | % | ||||||||||
Ratio of net investment income to average net assets | 1.38 | % | 1.34 | % | 1.65 | % | 1.57 | % | 1.25 | % | ||||||||||
Portfolio turnover rate | 7 | % | 8 | % | 15 | % | 11 | % | 24 | % |
The accompanying notes are an integral part of these financial statements.
31
Table of Contents
Financial Highlights For a capital share outstanding throughout each year. |
Year Ended Oct. 31, 2015 | Year Ended Oct. 31, 2014 | Year Ended Oct. 31, 2013 | Year Ended Oct. 31, 2012 | Year Ended Oct. 31, 2011 | ||||||||||||||||
Net asset value, beginning of the year | $ | 26.14 | $ | 23.09 | $ | 16.83 | $ | 15.44 | $ | 14.70 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.14 | 0.13 | 0.10 | 0.09 | 0.04 | |||||||||||||||
Net realized and unrealized gain on | ||||||||||||||||||||
investments and foreign currency | 1.62 | 3.45 | 6.26 | 1.42 | 0.71 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.76 | 3.58 | 6.36 | 1.51 | 0.75 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: | ||||||||||||||||||||
Dividends from net investment income | (0.16 | ) | (0.08 | ) | (0.10 | ) | (0.06 | ) | (0.01 | ) | ||||||||||
Distributions from net realized gain | (0.65 | ) | (0.45 | ) | — | (0.06 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions | (0.81 | ) | (0.53 | ) | (0.10 | ) | (0.12 | ) | (0.01 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of year | $ | 27.09 | $ | 26.14 | $ | 23.09 | $ | 16.83 | $ | 15.44 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return | 6.96 | % | 15.82 | % | 38.02 | % | 9.86 | % | 5.13 | % | ||||||||||
Ratios/supplemental data: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 6,254.6 | $ | 4,696.2 | $ | 3,661.2 | $ | 2,201.9 | $ | 1,821.9 | ||||||||||
Ratio of expenses to average net assets | 0.64 | % | 0.63 | % | 0.65 | % | 0.67 | % | 0.66 | % | ||||||||||
Ratio of net investment income to average net assets | 0.53 | % | 0.54 | % | 0.51 | % | 0.55 | % | 0.26 | % | ||||||||||
Portfolio turnover rate | 5 | % | 10 | % | 10 | % | 12 | % | 13 | % |
The accompanying notes are an integral part of these financial statements.
32
Table of Contents
Financial Highlights PRIMECAP Odyssey Aggressive Growth Fund For a capital share outstanding throughout each year. |
Year Ended Oct. 31, 2015 | Year Ended Oct. 31, 2014 | Year Ended Oct. 31, 2013 | Year Ended Oct. 31, 2012 | Year Ended Oct. 31, 2011 | ||||||||||||||||
Net asset value, beginning of the year | $ | 33.21 | $ | 28.71 | $ | 18.86 | $ | 16.99 | $ | 16.17 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.06 | (0.03 | ) | (0.04 | ) | (0.05 | ) | (0.05 | ) | |||||||||||
Net realized and unrealized gain | ||||||||||||||||||||
on investments and foreign currency | 1.54 | 5.04 | 9.89 | 2.24 | 1.40 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.60 | 5.01 | 9.85 | 2.19 | 1.35 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less: | ||||||||||||||||||||
Dividends from net investment income | (0.06 | ) | — | — | — | — | ||||||||||||||
Distributions from net realized gain | (1.48 | ) | (0.51 | ) | — | (0.32 | ) | (0.53 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions | (1.54 | ) | (0.51 | ) | — | (0.32 | ) | (0.53 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of year | $ | 33.27 | $ | 33.21 | $ | 28.71 | $ | 18.86 | $ | 16.99 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return | 5.13 | % | 17.71 | % | 52.23 | % | 13.25 | % | 8.50 | % | ||||||||||
Ratios/supplemental data: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 6,502.8 | $ | 5,962.5 | $ | 4,443.1 | $ | 1,541.5 | $ | 1,134.5 | ||||||||||
Ratio of expenses to average net assets | 0.62 | % | 0.62 | % | 0.64 | % | 0.68 | % | 0.68 | % | ||||||||||
Ratio of net investment income (loss) to average net assets | 0.17 | % | (0.09 | %) | (0.23 | %) | (0.32 | %) | (0.33 | %) | ||||||||||
Portfolio turnover rate | 15 | % | 13 | % | 11 | % | 14 | % | 11 | % |
The accompanying notes are an integral part of these financial statements.
33
Table of Contents
PRIMECAP Odyssey Funds For the Year Ended October 31, 2015 |
(1) Organization
PRIMECAP Odyssey Funds (the “Trust”) was organized on June 8, 2004 as a Delaware statutory trust and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust is comprised of three series: PRIMECAP Odyssey Stock Fund, PRIMECAP Odyssey Growth Fund, and PRIMECAP Odyssey Aggressive Growth Fund (the “Funds”), each of which is diversified within the meaning of the 1940 Act. PRIMECAP Management Company (the “Investment Advisor”) serves as investment advisor to the Funds. Each Fund commenced operations on November 1, 2004.
Each Fund’s investment objective is to achieve long-term capital appreciation. Each Fund is authorized to issue unlimited shares of beneficial interest. All shares of each Fund have equal rights with respect to voting. The PRIMECAP Odyssey Aggressive Growth Fund is closed to most new investors.
(2) Significant Accounting Policies
The Funds consistently follow the accounting policies set forth below which are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Funds are considered investment companies under U.S. GAAP and follow the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Auditing Standards Codification Topic 946.
A. | Security Valuation |
Securities traded on a national securities exchange are valued at the last reported sales price at the close of regular trading on each day the exchanges are open for trading. Securities traded on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) are valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. Non-U.S. traded stocks are valued at the last sale price or official closing price in the primary local market where the stock is traded. Securities traded on an exchange for which there have been no sales are valued at the mean between the bid and ask price. Because trading on most non-U.S. exchanges is normally completed before the close of the New York Stock Exchange, the value of securities traded on foreign exchanges can change by the time a Fund calculates its net asset value per share (“NAV”). To address these changes, the Funds may utilize adjustment factors provided by an independent pricing service to systematically value foreign securities at fair value. These adjustment factors are based on statistical analyses of subsequent movement in securities indices, specific security prices, and exchange rates in foreign markets.
Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by a valuation committee of the Investment Advisor in accordance with procedures approved by the Trust’s Board of Trustees. In determining fair value, the Funds take into account all relevant factors and available information. Consequently, the price of a security used by a Fund to calculate its NAV may differ from quoted or published prices for the same security. Fair value pricing involves
34
Table of Contents
Notes to Financial Statements
PRIMECAP Odyssey Funds
For the Year Ended October 31, 2015 – continued
subjective judgments, and there is no single standard for determining a security’s fair value. As a result, different mutual funds could reasonably arrive at a different fair value for the same security. It is possible that the fair value determined for a security is materially different from the value that could be realized upon the sale of that security or from the values that other mutual funds may determine.
Investments in other funds are valued at their respective net asset values as determined by those funds, in accordance with the 1940 Act. In May, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-07 (“ASU 2015-07”), “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent).” ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using net asset value per share as a practical expedient. For public business entities, ASU 2015-07 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Funds are considering the impact of this guidance.
B. | Share Valuation |
The NAV of a Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash or other assets, minus all liabilities (including estimated accrued expenses), by the total number of shares outstanding of the Fund. The result is rounded to the nearest cent. The Funds’ shares will not be priced on the days on which the NYSE is closed for trading.
C. | Foreign Currency |
Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates as of 4 p.m. Eastern time on the valuation date. Purchases and sales of investments and dividend and interest income are converted into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such translations. Realized foreign exchange gains or losses arise from 1) 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 recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. Foreign securities and currency transactions may involve risks not associated with U.S. securities and currency.
D. | Federal Income Taxes |
Each Fund has elected to be treated as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986 (the “IRC”). Each Fund intends to distribute substantially all of its taxable income and any accumulated net realized capital gains. Accordingly, no provision for Federal income taxes has been made in the financial statements.
35
Table of Contents
Notes to Financial Statements
PRIMECAP Odyssey Funds
For the Year Ended October 31, 2015 – continued
The Funds may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be reclaimed. The Funds will accrue such taxes and reclaims as applicable based upon their current interpretations of the tax rules and regulations that exist in the markets in which they invest.
Each Fund has adopted accounting standards regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year ended October 31, 2015, the Funds did not incur any interest or penalties. As of October 31, 2015, open tax years include the tax years ended October 31, 2012 through October 31, 2015. No Fund is aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months.
E. | Allocation of Expenses |
Each Fund is charged for those expenses directly attributable to it. Expenses that are not directly attributable to a Fund are allocated among the Funds by an appropriate method based on the nature of the expense.
F. | Security Transactions, Investment Income, and Distributions |
Security transactions are accounted for on the trade date. Dividend income and distributions to shareholders are recorded on the ex-dividend date, and interest income is recognized on the accrual basis. Realized gains and losses are evaluated on the basis of identified costs. Premiums and discounts on the purchase of securities are amortized/accreted using the effective interest method. U.S. GAAP requires that permanent financial reporting and tax differences be reclassified in the capital accounts.
G. | Use of Estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates, and such differences could be material.
H. | Indemnification Obligations |
Under the Trust’s organizational documents, its current and former officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties that 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. Based on experience, the Funds would expect the risk of loss to be minimal.
36
Table of Contents
Notes to Financial Statements
PRIMECAP Odyssey Funds
For the Year Ended October 31, 2015 – continued
(3) Investment Transactions
The cost of purchases and the proceeds from sales of securities, excluding short-term investments, for the year ended October 31, 2015 were as follows:
Fund | Purchases | Sales | ||||||
PRIMECAP Odyssey Stock Fund | $ | 1,605,501,667 | $ | 279,420,821 | ||||
PRIMECAP Odyssey Growth Fund | $ | 1,397,831,225 | $ | 261,570,055 | ||||
PRIMECAP Odyssey Aggressive Growth Fund | $ | 1,092,040,365 | $ | 946,494,512 |
(4) Valuation Measurements
The Funds have adopted fair valuation accounting standards which establish an authoritative definition of fair value and set forth a hierarchy for measuring fair value. These standards require additional disclosure about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used to value the asset or liability. These standards state that “observable inputs” reflect the assumptions that market participants would use in valuing an asset or liability based on market data obtained from independent sources. “Unobservable inputs” reflect the Funds’ own assumptions about the inputs market participants would use to value the asset or liability.
Various inputs are used in determining the value of each Fund’s investments, and the lowest level for any significant input determines leveling. These inputs are summarized in the three broad levels below:
Level 1 – | Unadjusted quoted prices in active markets for identical securities to which the Trust has access at the date of measurement. |
Level 2 – | Other significant observable inputs (including quoted prices for similar or related securities in both active and inactive markets, interest rates, foreign exchange rates, and fair value estimates for foreign securities indices). |
Level 3 – | Significant unobservable inputs to the extent observable inputs are unavailable (including the Funds’ own assumptions in determining fair value of investments based on the best available information). |
37
Table of Contents
Notes to Financial Statements
PRIMECAP Odyssey Funds
For the Year Ended October 31, 2015 – continued
The following table provides the fair value measurements of applicable Fund assets by level within the fair value hierarchy for each Fund as of October 31, 2015. There were no transfers into or out of Level 1, Level 2, or Level 3 during the reporting period. These assets are measured on a recurring basis.
Fund | Description | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | |||||||||||||
PRIMECAP Odyssey Stock Fund | Common Stock(1) | $ | 4,639,097,188 | $ | — | $ | — | $ | 4,639,097,188 | |||||||||
Short-Term Investments | 477,205,868 | — | — | 477,205,868 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Total Investments in Securities | $ | 5,116,303,056 | $ | — | $ | — | $ | 5,116,303,056 | ||||||||||
|
|
|
|
|
|
|
| |||||||||||
PRIMECAP Odyssey Growth Fund | Common Stock(1) | $ | 5,861,982,363 | $ | — | $ | — | $ | 5,861,982,363 | |||||||||
Short-Term Investments | 405,036,971 | — | — | 405,036,971 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Total Investments in Securities | $ | 6,267,019,334 | $ | — | $ | — | $ | 6,267,019,334 | ||||||||||
|
|
|
|
|
|
|
| |||||||||||
PRIMECAP Odyssey Aggressive Growth Fund | Common Stock(1) | $ | 6,247,531,348 | $ | — | $ | — | $ | 6,247,531,348 | |||||||||
Short-Term Investments | 269,327,487 | — | — | 269,327,487 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Total Investments in Securities | $ | 6,516,858,835 | $ | — | $ | — | $ | 6,516,858,835 | ||||||||||
|
|
|
|
|
|
|
|
(1) | Refer to each Fund’s respective Schedule of Investments for the breakdown of major categories. |
38
Table of Contents
Notes to Financial Statements
PRIMECAP Odyssey Funds
For the Year Ended October 31, 2015 – continued
(5) Distribution to Shareholders
Net investment income and net realized gains differ for financial statement and tax purposes due to differing treatments of deferred wash sale losses.
As of October 31, 2015, the components of capital on a tax basis were as follows:
PRIMECAP Odyssey Stock Fund | PRIMECAP Odyssey Growth Fund | PRIMECAP Odyssey Aggressive Growth Fund | ||||||||||
Cost of investments for tax purposes(1) | $ | 4,031,297,153 | $ | 4,414,338,793 | $ | 4,745,210,517 | ||||||
|
|
|
|
|
| |||||||
Gross tax unrealized appreciation | 1,247,179,388 | 2,112,230,741 | 2,336,460,292 | |||||||||
Gross tax unrealized depreciation | (162,173,485 | ) | (259,550,200 | ) | (564,811,974 | ) | ||||||
|
|
|
|
|
| |||||||
Net tax unrealized appreciation | 1,085,005,903 | 1,852,680,541 | 1,771,648,318 | |||||||||
|
|
|
|
|
| |||||||
Undistributed ordinary income | 43,603,068 | 19,664,988 | 503,498 | |||||||||
Undistributed long-term capital gain | 41,880,185 | 59,119,350 | 397,233,445 | |||||||||
|
|
|
|
|
| |||||||
Total distributable earnings | 85,483,253 | 78,784,338 | 397,736,943 | |||||||||
|
|
|
|
|
| |||||||
Other accumulated gain (loss) | (138,684 | ) | (130,051 | ) | (94,550 | ) | ||||||
|
|
|
|
|
| |||||||
Total accumulated gain | $ | 1,170,350,472 | $ | 1,931,334,828 | $ | 2,169,290,711 | ||||||
|
|
|
|
|
|
(1) | At October 31, 2015 the differences in the basis for federal income tax purposes and financial reporting purposes are due to the tax deferral of losses on wash sales. |
U.S. GAAP requires that permanent book-to-tax differences be reclassified among the components of net assets. These reclassifications have no effect on net assets or NAV. For the fiscal year ended October 31, 2015, the following reclassifications were made:
Undistributed Net Investment Loss | Accumulated Net Realized Loss | Paid In Capital | ||||||||||
PRIMECAP Odyssey | $ | (71,444) | $ | (6,411,938) | $ | 6,483,382 | ||||||
PRIMECAP Odyssey | $ | (138,322) | $ | (6,016,846) | $ | 6,155,168 | ||||||
PRIMECAP Odyssey | $ | (104,986) | $ | (28,171,888) | $ | 28,276,874 |
The Funds used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from net realized capital gains. The PRIMECAP Odyssey Stock Fund, PRIMECAP Odyssey Growth Fund, and PRIMECAP Odyssey Aggressive Growth Fund reclassified $6,483,382, $6,155,168, and $28,276,874, respectively, from Accumulated Net Realized Gain to Paid In Capital. Other permanent book-to-tax differences that required reclassification among the Funds’ capital accounts related to foreign currency adjustments and net operating losses.
39
Table of Contents
Notes to Financial Statements
PRIMECAP Odyssey Funds
For the Year Ended October 31, 2015 – continued
Tax components of dividends paid during the fiscal years ended October 31, 2015 and October 31, 2014 were as follows:
October 31, 2015 | October 31, 2014 | |||||||||||||||
Ordinary Income Distributions | Long-Term Capital Gain Distributions | Ordinary Income Distributions | Long-Term Capital Gain Distributions | |||||||||||||
Stock Fund | $ | 53,436,424 | $ | 50,178,657 | $ | 25,544,000 | $ | 7,013,392 | ||||||||
Growth Fund | $ | 47,607,189 | $ | 101,311,643 | $ | 12,772,829 | $ | 73,025,511 | ||||||||
Aggressive Growth Fund | $ | 54,284,835 | $ | 229,581,076 | $ | 17,599,428 | $ | 65,266,653 |
The Funds designated as long-term capital gain dividends, pursuant to IRC Section 852 (b) (3), the amounts necessary to reduce the earnings and profits of the Funds related to net capital gains to zero for the tax year ended October 31, 2015.
(6) Investment Advisory and Other Agreements
The Trust has entered into an investment management agreement with the Investment Advisor on behalf of each Fund. For its services to the Funds, the Investment Advisor receives a fee paid quarterly at the annual rate of 0.60% of the first $100 million of each Fund’s average daily net assets and 0.55% of each Fund’s average daily net assets in excess of $100 million. For the year ended October 31, 2015, each Fund paid the Investment Advisor at an effective annual rate of 0.55% of its respective average net assets.
The Bank of New York Mellon serves as the Funds’ custodian. U.S. Bancorp Fund Services, LLC (“USBFS”) serves as the administrator, fund accountant, and transfer agent to the Funds. Quasar Distributors, LLC, an affiliate of USBFS, serves as the Funds’ distributor.
40
Table of Contents
Notes to Financial Statements
PRIMECAP Odyssey Funds
For the Year Ended October 31, 2015 – continued
(7) Other Affiliates
Certain of the Funds’ investments are in companies that are considered to be affiliated companies of a Fund because the Fund owns 5% or more of the outstanding voting securities of the company. Transactions during the period in securities of these companies were as follows:
PRIMECAP Odyssey Stock Fund
Current Period Transactions | ||||||||||||||||||||||||
Common Stock | Market Value at October 31, 2014 | Purchases at Cost | Proceeds from Securities Sold | Dividend Income | Realized Gain (Loss) | Market Value at October 31, 2015 | ||||||||||||||||||
Tribune Publishing Co. | $ | 33,395,026 | $ | 1,188,129 | $ | — | $ | 1,260,333 | $ | — | $ | 17,148,704 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 33,395,026 | $ | 1,188,129 | $ | — | $ | 1,260,333 | $ | — | $ | 17,148,704 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
PRIMECAP Odyssey Growth Fund
Current Period Transactions | ||||||||||||||||||||||||
Common Stock | Market Value at October 31, 2014 | Purchases at Cost | Proceeds from Securities Sold | Dividend Income | Realized Gain (Loss) | Market Value at October 31, 2015 | ||||||||||||||||||
Boulder Brands, Inc.(1) | $ | — | $ | 26,644,617 | $ | — | $ | — | $ | — | $ | 27,363,321 | ||||||||||||
ImmunoGen, Inc. | 54,218,226 | 7,131,549 | — | — | — | 78,870,332 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 54,218,226 | $ | 33,776,166 | $ | — | $ | — | $ | — | $ | 106,233,653 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
PRIMECAP Odyssey Aggressive Growth Fund
Current Period Transactions | ||||||||||||||||||||||||
Common Stock | Market Value at October 31, 2014 | Purchases at Cost | Proceeds from Securities Sold | Dividend Income | Realized Gain (Loss) | Market Value at October 31, 2015 | ||||||||||||||||||
Abaxis, Inc. | $ | 96,203,817 | $ | 17,046,129 | $ | — | $ | 824,618 | $ | — | $ | 107,600,030 | ||||||||||||
ABIOMED, Inc. | 86,308,953 | 478,621 | — | — | — | 194,489,875 | ||||||||||||||||||
Affymetrix, Inc. | 43,698,500 | 1,446,328 | — | — | — | 46,064,400 | ||||||||||||||||||
Arbutus Biopharma Corp.(1)(2) | — | 39,772,861 | — | — | — | 15,609,000 | ||||||||||||||||||
Audience, Inc.(3)(4) | 8,396,316 | — | 10,984,321 | — | (14,519,036 | ) | N/A |
(1) | As of October 31, 2014, the company was not an affiliate. |
(2) | During the year, Tekmira Pharmaceuticals Corp. changed its name to Arbutus Biopharma Corp. |
(3) | No longer an affiliate as of October 31, 2015. |
(4) | During the year ended October 31, 2015, Audience, Inc. was acquired by Knowles Corp. in a cash and stock transaction that was deemed to be taxable. In the transaction, the Aggressive Growth Fund received total proceeds of $8,840,175 ($4,513,289 in cash and $4,326,886 in shares of Knowles Corp.) resulting in a loss of $10,578,509. Prior to the transaction, the Aggressive Growth Fund sold shares of Audience, Inc. for proceeds of $2,144,146 resulting in a loss of $3,940,527. Total proceeds on disposition of shares of Audience, Inc. were $10,984,321. Net realized loss on the disposition of shares of Audience, Inc. was $14,519,036. |
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Notes to Financial Statements
PRIMECAP Odyssey Funds
For the Year Ended October 31, 2015 – continued
PRIMECAP Odyssey Aggressive Growth Fund – continued
Current Period Transactions | ||||||||||||||||||||||||
Common Stock | Market Value at October 31, 2014 | Purchases at Cost | Proceeds from Securities Sold | Dividend Income | Realized Gain (Loss) | Market Value at October 31, 2015 | ||||||||||||||||||
Axcelis Technologies, Inc. | $ | 23,370,472 | $ | 1,362,699 | $ | — | $ | — | $ | — | $ | 31,640,000 | ||||||||||||
Boot Barn Holdings, Inc.(1) | — | 25,456,020 | — | — | — | 20,527,500 | ||||||||||||||||||
Boulder Brands, Inc.(1) | — | 12,986,901 | — | — | — | 40,846,274 | ||||||||||||||||||
Cardica, Inc. | 5,095,797 | 130,805 | — | — | — | 1,072,668 | ||||||||||||||||||
Cerus Corp(1) | — | 38,396,905 | — | — | — | 35,775,000 | ||||||||||||||||||
Chegg, Inc.(1) | — | 61,174,792 | — | — | — | 59,246,850 | ||||||||||||||||||
comScore, Inc. | 148,769,370 | — | 17,773,195 | — | 7,151,466 | 136,624,775 | ||||||||||||||||||
DreamWorks Animation | 122,689,276 | 4,933,581 | — | — | — | 115,503,608 | ||||||||||||||||||
Dyax, Corp. | 95,791,053 | 12,202 | 1,532,808 | — | 1,168,957 | 211,697,992 | ||||||||||||||||||
Ellie Mae, Inc. | 107,110,904 | — | 832,225 | — | 460,429 | 202,826,016 | ||||||||||||||||||
Epizyme, Inc.(1) | — | 46,985,728 | 9,259,660 | — | (11,964,209 | ) | 35,771,122 | |||||||||||||||||
FARO Technologies, Inc. | 77,852,432 | 3,839,798 | — | — | — | 50,560,720 | ||||||||||||||||||
Fluidigm Corp. | 81,070,428 | 1,980,636 | — | — | — | 31,036,937 | ||||||||||||||||||
Guidance Software, Inc. | 13,720,619 | 5,273,025 | — | — | — | 16,172,785 | ||||||||||||||||||
Marrone Bio Innovations, | 6,091,500 | — | — | — | — | 5,766,000 | ||||||||||||||||||
Nektar Therapeutics | 158,062,773 | 2,657,399 | — | — | — | 138,497,142 | ||||||||||||||||||
Novadaq Technologies, Inc.(1) | — | 53,305,349 | — | — | — | 64,781,270 | ||||||||||||||||||
Peregrine Semiconductor Corp.(3)(5) | 40,815,048 | — | 40,829,428 | — | 10,002,393 | N/A | ||||||||||||||||||
Pfenex, Inc.(1) | — | 35,251,193 | — | — | — | 41,547,840 | ||||||||||||||||||
Polypore International, | 152,362,872 | 222,069 | 209,780,097 | — | 82,768,162 | N/A | ||||||||||||||||||
ServiceSource International, | 31,725,864 | 726,634 | — | — | — | 36,245,895 | ||||||||||||||||||
Shutterfly, Inc. | 97,838,822 | 29,616,489 | — | — | — | 127,469,931 | ||||||||||||||||||
Solazyme, Inc. | 48,246,701 | 4,020,459 | — | — | — | 24,920,827 | ||||||||||||||||||
Tribune Publishing Co. | 29,204,704 | 596,631 | — | 1,090,373 | — | 14,784,466 | ||||||||||||||||||
Tuesday Morning Corp. | 88,818,840 | 763,681 | 4,300,171 | — | (6,247,136 | ) | 19,900,068 | |||||||||||||||||
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Total | $ | 1,563,245,061 | $ | 388,436,935 | $ | 295,291,905 | $ | 1,914,991 | $ | 68,821,026 | $ | 1,826,978,991 | ||||||||||||
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(1) | As of October 31, 2014, the company was not an affiliate. |
(3) | No longer an affiliate as of October 31, 2015. |
(5) | Included in “Proceeds from Securities Sold” are proceeds received when Peregrine Semiconductor Corp. was acquired in an all cash transaction. |
(6) | Included in “Proceeds from Securities Sold” are proceeds received when Polypore International, Inc. was acquired in two all cash transactions. |
(8) Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
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Report of Independent Registered Public Accounting Firm |
To the Board of Trustees and Shareholders
of the PRIMECAP Odyssey Funds
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of PRIMECAP Odyssey Stock Fund, PRIMECAP Odyssey Growth Fund and PRIMECAP Odyssey Aggressive Growth Fund (the “Funds”) at October 31, 2015, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
December 15, 2015
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PRIMECAP Odyssey Funds (Unaudited) |
As a shareholder of one or more of the Funds, you incur ongoing costs including management fees and other Fund expenses. This expense example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The expense example is based on an investment of $1,000 invested for a six-month period beginning May 1, 2015 through October 31, 2015.
Actual Expenses
The information in the table adjacent to the heading “Actual Performance” provides actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the column entitled “Expenses Paid during Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table adjacent to the heading “Hypothetical Performance (5% return before expenses)” provides hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which are not the Funds’ actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other mutual funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the information adjacent to the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different mutual funds. In addition, if transactional costs were included, your costs would have been higher.
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Expense Example
PRIMECAP Odyssey Funds
(Unaudited) – continued
Beginning Account Value (5/1/15) | Ending Account Value (10/31/15) | Expenses Paid During Period(1) (5/1/15 to 10/31/15) | Expense Ratio During Period(1) (5/1/15 to 10/31/15) | |||||||||||||
PRIMECAP Odyssey Stock Fund |
| |||||||||||||||
Actual Performance | $ | 1,000.00 | $ | 1,007.00 | $ | 3.26 | 0.64% | |||||||||
Hypothetical Performance | $ | 1,000.00 | $ | 1,021.96 | $ | 3.28 | 0.64% | |||||||||
PRIMECAP Odyssey Growth Fund |
| |||||||||||||||
Actual Performance | $ | 1,000.00 | $ | 1,017.30 | $ | 3.27 | 0.64% | |||||||||
Hypothetical Performance | $ | 1,000.00 | $ | 1,021.97 | $ | 3.27 | 0.64% | |||||||||
PRIMECAP Odyssey Aggressive Growth Fund |
| |||||||||||||||
Actual Performance | $ | 1,000.00 | $ | 963.00 | $ | 3.06 | 0.62% | |||||||||
Hypothetical Performance | $ | 1,000.00 | $ | 1,022.09 | $ | 3.15 | 0.62% |
(1) | Expenses are equal to a Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year period (184), then divided by the number of days in the fiscal year (365) to reflect the one-half year period. |
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PRIMECAP Odyssey Funds (Unaudited) |
Additional Tax Information
PRIMECAP Odyssey Stock Fund, PRIMECAP Odyssey Growth Fund, and PRIMECAP Odyssey Aggressive Growth Fund designate 100%, 100%, and 69.82%, respectively, of ordinary income distributions paid during the fiscal year ended October 31, 2015 as qualified dividend income.
PRIMECAP Odyssey Stock Fund, PRIMECAP Odyssey Growth Fund, and PRIMECAP Odyssey Aggressive Growth Fund designate 100%, 100%, and 48.94%, respectively, of ordinary income distributions paid during the fiscal year ended October 31, 2015 as dividends qualifying for the dividends received deduction available for corporate shareholders.
PRIMECAP Odyssey Stock Fund, PRIMECAP Odyssey Growth Fund, and PRIMECAP Odyssey Aggressive Growth Fund designate 9.49%, 36.58%, and 80.46%, respectively, of ordinary income distributions paid during the fiscal year ended October 31, 2015 as short-term capital gain under Internal Revenue Code 871(k)(2)(C).
Proxy Voting Procedures
The Investment Advisor votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust’s Board of Trustees. You may obtain a description of these procedures, free of charge, by calling toll-free 1-800-729-2307. This information is also available through the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
Proxy Voting Record
Information regarding how the Funds voted proxies relating to the portfolio securities during the most recent 12-month period ended June 30 is available, without charge, by calling toll-free 1-800-729-2307. This information is also available through the SEC’s website at www.sec.gov.
Form N-Q Disclosure
The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This information is available, without charge, by calling toll-free 1-800-729-2307. The Funds’ Forms N-Q are also available on the SEC’s website at www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Board Approval of the Renewal of the Investment Advisory Agreement
The Board of Trustees (the “Board”) of PRIMECAP Odyssey Funds (the “Trust”) is comprised of five Trustees, four of whom are not “interested persons” of the Trust as defined by the Investment Company Act of 1940, as amended (the “Independent Trustees”). In October 2015, the Board of Trustees, including the Independent Trustees, approved a one-year renewal of the Trust’s investment advisory agreement with PRIMECAP Management Company (the “Advisor”) with respect to the series of the Trust (the “Funds”).
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Additional Information
PRIMECAP Odyssey Funds
(Unaudited) – continued
General Information
As part of the annual contract review process, the Independent Trustees, through Trust counsel, requested and received extensive materials, including information related to the nature, extent, and quality of the services provided to the Funds by the Advisor; the short- and long-term performance of each Fund relative to the performance of market indices and other funds in its category as selected by Morningstar, Inc. (“Morningstar”); the advisory fees paid to the Advisor and the total expense ratio of each Fund compared to the advisory fees and the total expense ratios of other funds in the Fund’s Morningstar category; financial information for the Advisor and information related to the profitability to the Advisor of the investment advisory agreement with the Trust; the extent to which the Advisor expects to achieve economies of scale in connection with the services it provides to each Fund; any ancillary or “fall out” benefits that the Advisor may derive from its relationship with the Funds; and the personnel of the Advisor providing services to the Funds. The Independent Trustees also requested and received information regarding the Advisor’s risk controls, risk evaluation processes, compliance program (including brokerage and trading processes), business continuity plans, and other matters.
The Trust engaged Morningstar to prepare an independent expense and performance analysis for each Fund compared to similar funds managed by other advisors identified by Morningstar. The Board reviewed the Morningstar materials, which included comparisons of the performance and risk profile of each Fund to those of relevant market indices and of other funds in the relevant Morningstar institutional and retail categories and in a smaller group of funds selected by Morningstar (each a “peer group”). The Morningstar materials also included for each Fund comparisons of advisory fees and total expenses to those of other funds in the relevant Morningstar category and peer group.
With respect to investment performance, the Trustees noted that the Advisor had made quarterly presentations to the Board regarding the Funds’ portfolio construction, investment strategies, and results. The Trustees also noted that in addition to meeting with the Funds’ portfolio managers on a quarterly basis, they also received presentations from different analysts throughout the year on specific investment sectors and each Fund’s investments in those sectors. In considering the renewal of the agreement, the Board also took into account other information it had received at past Board and committee meetings with respect to various matters.
The Independent Trustees reviewed information from Trust counsel regarding their responsibilities in considering whether to renew the investment advisory agreement for an additional one-year period. In connection with their deliberations, the Board considered such information and factors that they believed to be relevant. The Board considered renewal of the investment advisory agreement separately for each Fund, although the Board took into account the common interests of all the Funds in its review. In considering these matters, the Board discussed the renewal of the investment advisory agreement with management, and the Independent Trustees met in a private session with Trust counsel at which no employees of the Advisor were present.
In deciding to approve the renewal of the investment advisory agreement, the Board and the Independent Trustees did not identify a single factor that was controlling. The Board and the Independent Trustees concluded that each of the various factors referred to below favored such
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Additional Information
PRIMECAP Odyssey Funds
(Unaudited) – continued
approval. The following summary describes the key factors considered by the Independent Trustees and their conclusions that formed the basis for approving the renewal of the investment advisory agreement in light of the legal advice furnished by counsel and their own business judgment. This summary is not inclusive of all of the factors considered, and each Board member did not necessarily attribute the same weight to each factor.
Nature, Extent, and Quality of Services
The Board considered the services provided by the Advisor to the Funds under the investment advisory agreement, including the background, education, and experience of the Advisor’s key portfolio management, compliance, and operational personnel; its overall financial strength and stability; its resources and efforts to retain, attract, and motivate capable personnel to serve the Funds; and the overall general quality and depth of its organization. The Board also took into account the experience, capability, and integrity of the Advisor’s senior management, the time that senior management commits to the Funds, and the Advisor’s demonstrated commitment to the Funds; its investment philosophy and processes, including its brokerage and trading practices; its disaster recovery and contingency planning; its oversight of the Funds’ internal control environment with regard to compliance with applicable laws and regulations; and the significant investment by each portfolio manager in the Funds that he manages, aligning his interests with those of Fund shareholders. The Board and the Independent Trustees concluded that the nature, extent, and quality of services provided under the investment advisory agreement were of a high level and satisfactory.
Investment Performance
The Board assessed the performance of each Fund compared with the performance of its benchmark, the S&P 500 Index, and other funds in the Fund’s Morningstar retail category and peer group for the one-year, three-year, five-year and ten-year periods ended July 31, 2015. The Board made the following observations in reviewing the Funds’ performance:
• | The annualized total returns of the PRIMECAP Odyssey Stock Fund were higher than the returns of the S&P 500 Index for each period reviewed except the five-year period (when the Fund’s return was slightly below the Index return by 0.06%). The Fund’s performance was above the median of funds in the Morningstar Large Cap Blend category for all time periods. |
• | The annualized total returns of the PRIMECAP Odyssey Growth Fund were above the S&P 500 Index returns and the median returns of the Morningstar Large Cap Growth category for all periods. |
• | The annualized total returns of the PRIMECAP Odyssey Aggressive Growth Fund were above the returns of the S&P 500 Index and the median returns of the Morningstar Mid Cap Growth category for all time periods. |
Based on the information provided to them and in consideration of the specific investment objectives and risk profiles of each Fund, the Board and the Independent Trustees concluded that the performance of each Fund was satisfactory.
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Additional Information
PRIMECAP Odyssey Funds
(Unaudited) – continued
Advisory Fees and Fund Expenses
The Board reviewed the advisory fees and expenses paid by each Fund compared to those of other funds in the same Morningstar retail category (for the Stock Fund – Large Blend funds; for the Growth Fund – Large Growth funds; and for the Aggressive Growth Fund – Mid-Cap Growth funds), and of other funds in the Fund’s expense peer group, which was selected by Morningstar and was comprised of funds comparable to the Fund with fee structures and characteristics similar to those of the Funds (e.g., no distribution or shareholder servicing fees, and excluding load funds, index and enhanced index funds, funds of funds, and multi-manager funds). The Independent Trustees observed that the advisory fee of each Fund was below the median fees of the funds in the relevant Morningstar retail category and the Fund’s peer group. With respect to the Funds’ total expense ratios, in each case the total expense ratio of the Fund was in the lowest quartile of funds in both the Fund’s peer group and the Morningstar retail category.
The Board also reviewed the fees charged by the Advisor to other clients, including other mutual funds for which it provides sub-advisory services. The Board noted that although those fees were lower than those charged by the Advisor to the Funds, the differences appropriately reflected the investment, operational, and regulatory differences between advising other clients and the Funds, which are subject to certain requirements under the 1940 Act that do not apply to those other clients. The Board and the Independent Trustees determined that the advisory fees and expenses charged to the Funds were reasonable in consideration of the services provided.
Costs and Profits of the Advisor
The Board reviewed information regarding the Advisor’s financial position and concluded that the Advisor would be able to continue to provide advisory services to the Funds. The Board also reviewed information relating to the Advisor’s profitability with respect to the investment advisory agreement and concluded that the profit levels were reasonable in light of the nature, extent, and quality of the services provided by the Advisor to the Funds. The Board noted that the Advisor had closed the Aggressive Growth Fund in January 2014 to most new investors, limiting the growth of the Fund and consequently future profits to the Advisor as it relates to the Aggressive Growth Fund. In considering the Advisor’s profitability, the Independent Trustees recognized the importance of the profitability of the Advisor, not only in maintaining its own financial condition, but also in maintaining an environment in which it is able to attract and retain talented investment professionals.
Economies of Scale and Other Benefits to the Investment Advisor
The Board and the Independent Trustees noted that the investment advisory agreement provides for a fee breakpoint at $100 million in assets for each Fund and concluded that the Funds had benefitted from economies of scale achieved by the Advisor through the breakpoints and advisory fees that are generally low relative to other actively managed funds with similar investment objectives. The Board also considered the benefits received by the Advisor as a result of its relationship with the Funds other than investment advisory fees, including any research received by broker-dealers providing execution services to the Funds, and the intangible benefits of the
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Additional Information
PRIMECAP Odyssey Funds
(Unaudited) – continued
Advisor’s association with the Funds generally and any favorable publicity arising in connection with the Funds’ performance.
Conclusions
Based on their review, including their consideration of each of the factors referred to above, the Board and the Independent Trustees concluded that the compensation payable to the Advisor pursuant to the investment advisory agreement with respect to each Fund is fair and reasonable in light of the services being provided by the Advisor to the Fund and its shareholders, and that renewal of the investment advisory agreement with respect to each Fund was in the best interest of the Fund and its shareholders.
50
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PRIMECAP Odyssey Funds (Unaudited) |
Portfolio Managers
PRIMECAP Management Company has five portfolio managers who together have more than 115 years of investment experience. The portfolio managers primarily responsible for overseeing the Funds’ investments are:
Name | Years of Experience | |||
Theo A. Kolokotrones | 45 | |||
Joel P. Fried | 30 | |||
Alfred W. Mordecai | 18 | |||
M. Mohsin Ansari | 15 | |||
James Marchetti | 10 |
Each of these five individuals manages a portion of the PRIMECAP Odyssey Stock Fund, the PRIMECAP Odyssey Growth Fund, and the PRIMECAP Odyssey Aggressive Growth Fund. A portion of each Fund’s assets may be managed by individuals in the Investment Advisor’s research department.
Officers and Trustees
The Trust’s officers, who oversee the Funds’ daily operations, are appointed by the Board of Trustees. The trustees are responsible for the overall management of the Trust, including establishing the Funds’ policies and general supervision and review of their investment activities. The Statement of Additional Information includes additional information about the trustees and is available, without charge, by calling 1-800-729-2307 or at the Funds’ website at www.odysseyfunds.com.
Executive Officers. The table below sets forth certain information about each of the Trust’s executive officers. The address for each officer is 225 South Lake Avenue, Suite 400, Pasadena, CA 91101.
Name (Year of Birth) | Position(s) Held with Trust | Term of Office; Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Theo A. Kolokotrones (1946) | Co-Chief Executive Officer | Indefinite; Since 09/04 | Chairman, Director, Portfolio Manager, and Principal PRIMECAP Management Company | |||
Joel P. Fried (1962) | Co-Chief Executive Officer and Trustee | Indefinite; Since 09/04 | President, Director, Portfolio Manager, and Principal PRIMECAP Management Company |
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Management
PRIMECAP Odyssey Funds
(Unaudited) – continued
Name (Year of Birth) | Position(s) Held with Trust | Term of Office; Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
Alfred W. Mordecai (1967) | Co-Chief Executive Officer | Indefinite; Since 10/12 | Executive Vice President, Director, Portfolio Manager, and Principal PRIMECAP Management Company | |||
Michael J. Ricks (1977) | Chief Financial Officer, Chief Administrative Officer, and Secretary | Indefinite; Since 03/11 | Director of Fund Administration PRIMECAP Management Company (since 2011); Vice President, Fund Administration and Compliance, U.S. Bancorp Fund Services, LLC (2001-2011) | |||
Karen Chen (1973) | Vice President of Compliance, Chief Compliance Officer, and AML Officer | Indefinite; Since 10/04 | Chief Compliance Officer, Director of Compliance and Reporting PRIMECAP Management Company |
“Independent” Trustees. The table below sets forth certain information about each of the trustees of the Trust who is not an “interested person” of the Trust as defined in the 1940 Act (“Independent Trustees”). The address for each independent trustee is 225 South Lake Avenue, Suite 400, Pasadena, CA 91101.
Name (Year of Birth) | Position(s) Held with Trust | Term of Office; Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee(1) | Other Director- ships Held by Trustee | |||||
Benjamin F. Hammon (1935) | Chairman of the Board and Trustee | Indefinite; Since 09/04 | Retired; Private investor | 3 | None | |||||
Wayne H. Smith (1941) | Chairman of the Audit Committee and Trustee | Indefinite; Since 09/04 | Retired; Private investor | 3 | None | |||||
Joseph G. Uzelac (1944) | Trustee | Indefinite; Since 10/07 | Retired; Private investor | 3 | None | |||||
Elizabeth D. Obershaw (1960) | Trustee | Indefinite; Since 06/08 | Managing Director, Horsley Bridge Partners, an investment advisor (2007-present) | 3 | None |
(1) | Fund Complex includes any funds, series of funds, or trusts that share the same advisor or that hold themselves out to investors as related companies. |
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Management
PRIMECAP Odyssey Funds
(Unaudited) – continued
“Interested” Trustees. The table below sets forth certain information about each of the trustees of the Trust who is an “interested person” of the Trust as defined by the 1940 Act. The address for each interested trustee is 225 South Lake Avenue, Suite 400, Pasadena, CA 91101.
Name (Year of Birth) | Position(s) Held with Trust | Term of Office; Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee(1) | Other Director- ships Held by Trustee | |||||
Joel P. Fried(2) (1962) | Co-Chief Executive Officer and Trustee | Indefinite; Since 09/04 | President, Director, Portfolio Manager, and Principal PRIMECAP Management Company | 3 | None |
(1) | Fund Complex includes any funds, series of funds, or trusts that share the same advisor or that hold themselves out to investors as related companies. |
(2) | Mr. Fried is an “interested person” of the Trust, as defined by the 1940 Act, because of his employ- ment with PRIMECAP Management Company, the investment advisor to the Trust. |
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PRIMECAP Odyssey Funds |
PRIMECAP Management Company
Maintaining the confidentiality of client personal financial information is very important to PRIMECAP Odyssey Funds (the “Trust”) and PRIMECAP Management Company (the “Advisor”). The Advisor and the Trust may collect several types of nonpublic personal information about investors, including:
• | Information from forms that investors may fill out and send to the Advisor or the Trust in connection with an account (such as name, address, and social security number). |
• | Information an investor may give the Advisor or the Trust orally. |
• | Information about the amount investors have invested in an account. |
• | Information about any bank account investors may use for transfers between a bank account and a shareholder account. |
The Advisor and the Trust will not sell or disclose client personal information to anyone except as permitted or required by law. For example, information collected may be shared with the independent auditors in the course of the annual audit of the Advisor or the Trust. The Advisor or the Trust may also share this information with the Advisor’s or the Trust’s legal counsel, as deemed appropriate, and with regulators. Finally, the Advisor or the Trust may disclose information about clients or investors at the client’s or investor’s request (for example, by sending duplicate account statements to someone designated by the client or investor), or as otherwise permitted or required by law.
Within the Advisor and the Trust, access to information about clients and investors is restricted to those employees or service providers who need to know the information to service client accounts. The Advisor’s employees are trained to follow its procedures to protect client privacy and are instructed to access information about clients only when they have a business reason to obtain it.
The Advisor and the Trust reserve the right to change this privacy policy in the future, but we will not disclose investor nonpublic personal information except as required or permitted by law without giving the investor an opportunity to instruct us not to do so.
Table of Contents
Investment Advisor
PRIMECAP MANAGEMENT COMPANY
225 South Lake Avenue, Suite 400
Pasadena, California 91101
•
Distributor
QUASAR DISTRIBUTORS, LLC
615 East Michigan Street, 4th Floor
Milwaukee, Wisconsin 53202
•
Custodian
THE BANK OF NEW YORK MELLON
One Wall Street
New York, New York 10286
•
Transfer Agent
U.S. BANCORP FUND SERVICES, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, Wisconsin 53202
•
Administrator
U.S. BANCORP FUND SERVICES, LLC
2020 East Financial Way, Suite 100
Glendora, California 91741
•
Legal Counsel
MORGAN, LEWIS & BOCKIUS LLP
300 South Grand Avenue, Twenty-Second Floor
Los Angeles, California 90071
•
Independent Registered Public Accounting Firm
PRICEWATERHOUSECOOPERS LLP
Three Embarcadero Center
San Francisco, California 94111
This report is intended for the shareholders of the PRIMECAP Odyssey Funds and may not be used as sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a representation of future performance. Share price and returns will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are dated and are subject to change.
PRIMECAP, PRIMECAP Odyssey, and the PRIMECAP Odyssey logo are trademarks of PRIMECAP Management Company.
Table of Contents
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officers and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
The registrant undertakes to provide to any person without charge, upon request, a copy of its code of ethics by mail when such person calls the registrant at 1-800-729-2307.
Item 3. Audit Committee Financial Expert.
The registrant’s Board of Trustees has determined that there is at least one audit committee financial expert serving on its audit committee. Wayne Smith is the registrant’s “audit committee financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant, PricewaterhouseCoopers LLP, to perform audit services, audit-related services, and tax services during the past two fiscal years. “Audit services” refer to performing an audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning and specifically relate to the accountant’s review of the registrant’s federal and state tax returns. There were no other services provided by the principal accountant to the registrant during the past two fiscal years. The following table details the aggregate fees billed or expected to be billed to the registrant for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
FYE 10/31/2015 | FYE 10/31/2014 | |||||||
Audit Fees | $ | 114,500 | $ | 110,000 | ||||
Audit-Related Fees | $ | 0 | $ | 0 | ||||
Tax Fees | $ | 14,655 | $ | 13,950 | ||||
All Other Fees | $ | 0 | $ | 0 |
The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.
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The percentages of fees billed to the registrant by its principal accountant applicable to non-audit services that were pre-approved by the audit committee were as follows:
FYE 10/31/2015 | FYE 10/31/2014 | |||||||
Audit-Related Fees | 100 | % | 100 | % | ||||
Tax Fees | 100 | % | 100 | % | ||||
All Other Fees | 100 | % | 100 | % |
All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant.
The following table indicates the aggregate non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (and any other entity, controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant), for the last two fiscal years.
Non-Audit Related Fees | FYE 10/31/2015 | FYE 10/31/2014 | ||||||
Registrant | $ | 14,655 | $ | 13,950 | ||||
Registrant’s Investment Adviser | $ | 0 | $ | 0 |
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
The registrant’s Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
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Item 11. Controls and Procedures.
(a) | The registrant’s Co-Chief Executive Officers and Chief Financial Officer have reviewed the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that such disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by other officers of the registrant and by the registrant’s service providers. |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred 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) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Incorporated by reference to the Registrant’s Form N-CSR filed January 6, 2006. |
(2) A separate certification for each principal executive and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
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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.
PRIMECAP Odyssey Funds | ||||
By | /s/ Joel P. Fried | |||
Joel P. Fried, Co-Chief Executive Officer | ||||
Date | 12/22/2015 | |||
By | /s/ Theo A. Kolokotrones | |||
Theo A. Kolokotrones, Co-Chief Executive Officer | ||||
Date | 12/22/2015 | |||
By | /s/ Alfred W. Mordecai | |||
Alfred W. Mordecai, Co-Chief Executive Officer | ||||
Date | 12/22/2015 |
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/ Joel P. Fried | |||
Joel P. Fried, Co-Chief Executive Officer | ||||
Date | 12/22/2015 | |||
By | /s/ Theo A. Kolokotrones | |||
Theo A. Kolokotrones, Co-Chief Executive Officer | ||||
Date | 12/22/2015 | |||
By | /s/ Alfred W. Mordecai | |||
Alfred W. Mordecai, Co-Chief Executive Officer | ||||
Date | 12/22/2015 | |||
By | /s/ Michael J. Ricks | |||
Michael J. Ricks, Chief Financial Officer | ||||
Date | 12/22/2015 |