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 811-22312
ACAP Strategic Fund | ||
(Exact name of registrant as specified in charter) | ||
350 Madison Avenue, 9th Floor | ||
New York, New York 10017 | ||
(Address of principal executive offices) (Zip code) | ||
SilverBay Capital Management LLC | ||
350 Madison Avenue, 9th Floor | ||
New York, New York 10017 | ||
(Name and address of agent for service) |
Registrant’s telephone number, including area code: 212-389-8713
Date of fiscal year end: September 30
Date of reporting period: March 31, 2013
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. | Reports to Stockholders. |
The Report to Shareholders is attached herewith.
ACAP STRATEGIC FUND
350 Madison Avenue, 9th Floor
New York, New York 10017
May 28, 2013
Re: ACAP Strategic Fund (the “Fund”) – Semi-Annual Report to Shareholders
Dear Investor:
Please find enclosed the Fund’s Semi-Annual Report to Shareholders.
Please note that a copy of the Fund’s prospectus may be obtained by contacting your financial advisor.
We appreciate your continued investment and look forward to a long, mutually beneficial relationship.
Very truly yours,
ACAP STRATEGIC FUND
ACAP Strategic Fund Financial Statements For the Five Months Ended March 31, 2013
(Unaudited)
ACAP Strategic Fund Financial Statements For the Five Months Ended March 31, 2013 Contents 1 2 7 11 19 20 21
(Unaudited)
ACAP STRATEGIC FUND March 31, 2013 Assets Investments in securities, at fair value (cost $917,267,138) $ 1,031,056,635 Cash and cash equivalents (including Euros of $733,795 with a cost of $752,489, Hong Kong Dollars of $9,808,168, with a cost of $9,816,383, British Pounds Sterling of $293, with a cost of $305 and Japanese Yen of $155,456, with a cost of $156,287) 171,909,720 Due to/from broker (including British Pounds Sterling of $1,771,207, with a cost of $1,868,317, Hong Kong Dollars of $10,292,022, with a cost of $10,301,197, Singapore Dollars of $1,718,999, with a cost of $1,657,796, Swedish Krona of $2,656, with a cost of $2,570, and Japanese Yen of $2,497,536, with a cost of $2,476,883) 16,106,550 Receivable for investment securities sold 29,422,707 Net unrealized appreciation on total return swaps 1,748,993 Dividends receivable 619,970 Interest receivable 26,550 Other assets 56,105 Total assets 1,250,947,230 Liabilities Securities sold, not yet purchased, at fair value (proceeds $259,381,112) 268,145,729 Payable for investment securities purchased 48,065,651 Withdrawals payable 34,651,718 Accrued incentive fees 3,169,657 Management fees payable 1,576,609 Dividends payable on securities sold, not yet purchased 1,273,332 Stock loan fee payable 716,066 Shareholders servicing fees payable 197,002 Administration fees payable 123,165 Professional fees payable 62,915 Custody fees payable 11,409 Accrued expenses 848,120 Total liabilities 358,841,373 Net Assets $ 892,105,857 Net assets Represented by: Shares of beneficial interest—$0.001 par value; unlimited shares authorized; 77,615,552 shares issued and outstanding $ 843,333,801 Accumulated net investment gain/(loss) (56,591,631 ) Accumulated net realized gain/(loss) of investment transactions, foreign currency transactions and total return swaps (1,348,415 ) Net unrealized gain/(loss) of investments, foreign currency and total return swaps 106,712,102 Net Assets $ 892,105,857 Net asset value per share $ 11.49 1
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
ACAP STRATEGIC FUND Shares March 31, 2013 Investments in Securities—115.58% Common Stocks—115.58% China—5.79% E-Commerce / Products—0.23% 487,200 E-Commerce China Dangdang Inc ADR * $ 2,021,880 Internet Content–Entertainment—1.89% 308,100 NetEase Inc ADR (a) 16,874,637 Real Estate Operations / Development—0.83% 4,500,000 Longfor Properties Co Ltd 7,443,334 Retail–Hypermarkets—0.54% 3,467,000 Sun Art Retail Group Ltd 4,823,559 Retail–Regional Department Stores—0.81% 3,996,000 Golden Eagle Retail Group Ltd 7,206,817 Web Portals / ISP—1.49% 104,200 Baidu Inc ADR * (a) 9,138,340 84,300 Sohu.com Inc * 4,182,123 13,320,463 Total China (cost $50,966,767) $ 51,690,690 Hong Kong—8.03% Agricultural Operations—0.14% 365,572 Le Gaga Holdings Ltd ADR * (a) 1,283,158 Alternative Waste Technology—1.93% 23,951,000 China Everbright International Ltd 17,185,764 Casino Hotels—3.86% 8,241,000 Galaxy Entertainment Group Ltd * 34,396,553 Country Fund–China—1.77% 11,754,600 iShares FTSE A50 China Index ETF 15,778,495 Retail–Apparel / Shoes—0.33% 5,798,000 Trinity Ltd 2,965,232 Total Hong Kong (cost $60,657,427) $ 71,609,202 Singapore—0.98% Real Estate Operations / Development—0.98% 4,120,000 Global Logistic Properties Ltd 8,700,951 Total Singapore (cost $8,795,700) $ 8,700,951 United Kingdom—0.01% Apparel Manufacturers—0.01% 2,408 Burberry Group PLC 48,594 Total United Kingdom (cost $47,871) $ 48,594 United States—100.77% Apparel Manufacturers—4.49% 343,400 Carter’s Inc * (a) 19,666,518 120,300 Ralph Lauren Corp (a) 20,367,993 40,034,511 2
SCHEDULE OF INVESTMENTS (Unaudited)
Fair Value
ACAP STRATEGIC FUND Shares March 31, 2013 Common Stocks (continued) United States (continued) Applications Software—5.77% 195,800 Imperva Inc * $ 7,538,300 525,400 Red Hat Inc * (a) 26,564,224 34,500 Salesforce.com Inc * (a) 6,169,635 311,170 ServiceNow Inc * 11,264,354 51,536,513 Casino Hotels—1.92% 137,040 Wynn Resorts Ltd (a) 17,151,926 Commercial Services–Finance—1.77% 29,200 Mastercard Inc, Class A (a) 15,800,996 Computer Aided Design—2.65% 731,100 Aspen Technology Inc * (a) 23,607,219 Computer Data Security—0.24% 170,311 Qualys Inc * 2,101,638 Computer Software—0.92% 231,550 Akamai Technologies Inc * (a) 8,171,399 Computers—3.07% 61,840 Apple Inc (a) 27,372,239 Computers–Integrated Systems—1.08% 165,460 Teradata Corp * 9,681,065 Computers–Memory Devices—6.84% 914,940 EMC Corp * (a) 21,857,917 711,550 SanDisk Corp * (a) 39,135,250 60,993,167 Consulting Services—3.74% 542,000 Verisk Analytics Inc, Class A * (a) 33,403,460 Consumer Products–Miscellaneous—1.31% 558,216 Tumi Holdings Inc * (a) 11,689,043 Diversified Manufacturing Operations—1.75% 251,250 Danaher Corp 15,615,188 E-Commerce / Products—7.84% 94,350 Amazon.com Inc * (a) 25,143,331 826,910 eBay Inc * (a) 44,835,060 69,978,391 E-Commerce / Services—2.29% 389,110 TripAdvisor Inc * 20,436,057 Electronic Components–Miscellaneous—1.00% 656,050 Vishay Intertechnology Inc * 8,928,841 3
SCHEDULE OF INVESTMENTS (Unaudited) (continued)
Fair Value
ACAP STRATEGIC FUND Shares March 31, 2013 Common Stocks (continued) United States (continued) Electronic Components—Semiconductors—7.18% 128,400 Broadcom Corp, Class A (a) $ 4,451,628 97,100 Omnivision Technologies Inc * (a) 1,338,038 396,180 Silicon Laboratories Inc * 16,386,005 861,940 Xilinx Inc (a) 32,900,250 630,780 Fairchild Semiconductor International Inc * 8,919,229 63,995,150 Electronic Design Automation—7.73% 1,570,980 Cadence Design Systems Inc * (a) 21,883,751 1,311,670 Synopsys Inc * (a) 47,062,720 68,946,471 Enterprise Software / Services—2.65% 248,600 Guidewire Software Inc * 9,556,184 409,500 Informatica Corp * 14,115,465 23,671,649 Finance–Credit Card—2.78% 146,300 Visa Inc, Class A (a) 24,847,592 Internet Infrastructure Software—1.55% 684,440 TIBCO Software Inc * (a) 13,839,377 Medical–Biomedical / Genetics—1.03% 48,870 Alexion Pharmaceuticals Inc * 4,502,882 96,320 Gilead Sciences Inc * 4,712,938 9,215,820 Medical–Wholesale Drug Distribution—1.97% 340,900 AmerisourceBergen Corp 17,539,305 Multimedia—5.37% 567,700 News Corp, Class B 17,462,452 528,420 Time Warner Inc 30,447,560 47,910,012 Networking Products—2.93% 1,250,500 Cisco Systems Inc (a) 26,147,955 Retail–Discount—4.19% 235,200 Costco Wholesale Corp (a) 24,957,072 255,600 Dollar Tree Inc * (a) 12,378,708 37,335,780 Retail–Gardening Products—0.47% 39,900 Tractor Supply Co 4,154,787 Retail–Restaurants—3.69% 48,920 Chipotle Mexican Grill Inc * 15,941,560 212,400 Dunkin’ Brands Group Inc 7,833,312 54,900 Panera Bread Co, Class A * 9,071,676 32,846,548 4
SCHEDULE OF INVESTMENTS (Unaudited) (continued)
Fair Value
ACAP STRATEGIC FUND Shares March 31, 2013 Common Stocks (continued) United States (continued) Retail–Sporting Goods—1.80% 264,840 Cabela’s Inc * $ 16,096,975 Semiconductor Components–Integrated Circuits—3.76% 626,100 Analog Devices Inc (a) 29,107,389 646,200 Atmel Corp * 4,497,552 33,604,941 Semiconductor Equipment—2.83% 1,556,540 Teradyne Inc * 25,247,079 Television—3.44% 657,760 CBS Corp, Class B (a) 30,710,814 Wireless Equipment—0.72% 258,500 Aruba Networks Inc * (a) 6,395,290 Total United States (cost $796,799,373) $ 899,007,198 Total Common Stock (cost $917,267,138) $ 1,031,056,635 Total Investment Securities (cost $917,267,138)—115.58% $ 1,031,056,635 Other Liabilities in Excess of Assets—(15.58%) ** $ (138,950,778 ) Net Assets—100.00% $ 892,105,857 (a) Partially or wholly held in a pledged account by the Custodian as collateral for securities sold, not yet purchased. * Non-income producing security. ** Includes $171,909,720 invested in a BNY Mellon Money Market Account, which is 19.27% of net assets and foreign currency with a U.S. Dollar value of $10,697,712, which is 1.20% of net assets. ADR American Depository Receipt 5
SCHEDULE OF INVESTMENTS (Unaudited) (continued)
Fair Value
ACAP STRATEGIC FUND Investments in Securities – By Industry March 31, 2013 Agricultural Operations 0.14 Alternative Waste Technology 1.93 Apparel Manufacturers 4.50 Applications Software 5.77 Casino Hotels 5.78 Commercial Services – Finance 1.77 Computer Aided Design 2.65 Computer Data Security 0.24 Computer Software 0.92 Computers 3.07 Computers – Integrated Systems 1.08 Computers – Memory Devices 6.84 Consulting Services 3.74 Consumer Products – Miscellaneous 1.31 Country Fund – China 1.77 Diversified Manufacturing Operations 1.75 E-Commerce / Products 8.07 E-Commerce / Services 2.29 Electronic Components – Miscellaneous 1.00 Electronic Components – Semiconductors 7.18 Electronic Design Automation 7.73 Enterprise Software / Services 2.65 Finance – Credit Card 2.78 Internet Content – Entertainment 1.89 Internet Infrastructure Software 1.55 Medical – Biomedical / Genetics 1.03 Medical – Wholesale Drug Distribution 1.97 Multimedia 5.37 Networking Products 2.93 Real Estate Operations / Development 1.81 Retail – Apparel / Shoes 0.33 Retail – Discount 4.19 Retail – Gardening Products 0.47 Retail – Hypermarkets 0.54 Retail – Regional Department Stores 0.81 Retail – Restaurants 3.69 Retail – Sporting Goods 1.80 Semiconductor Components – Integrated Circuits 3.76 Semiconductor Equipment 2.83 Television 3.44 Web Portals / ISP 1.49 Wireless Equipment 0.72 Total Investments in Securities 115.58 % 6
SCHEDULE OF INVESTMENTS (Unaudited) (concluded)
Percentage of
Net Assets (%)
ACAP STRATEGIC FUND Shares March 31, 2013 Securities Sold, Not Yet Purchased—30.06% Common Stock—30.06% Canada—0.84% 123,000 Ritchie Bros Auctioneers Inc $ 2,669,100 Enterprise Software / Services—0.54% 81,500 Open Text Corp 4,810,945 Total Canada (proceeds $6,684,375) $ 7,480,045 China—2.59% Computers—0.47% 4,226,000 Lenovo Group Ltd 4,197,337 Electric–Generation—0.53% 3,584,000 Datang International Power Generation Co Ltd, Class H 1,583,624 2,968,000 Huaneng Power International Inc, Class H 3,165,806 4,749,430 Food–Miscellaneous / Diversified—0.10% 1,276,000 China Yurun Food Group Ltd 874,485 Machinery–Construction & Mining—0.64% 7,875,000 Lonking Holdings Ltd 1,795,618 3,219,200 Zoomlion Heavy Industry Science and Technology Co Ltd, Class H 3,885,774 5,681,392 Metal–Aluminum—0.05% 49,900 Aluminum Corp of China Ltd ADR 485,527 Metal Processors & Fabrication—0.17% 4,484,000 China Zhongwang Holdings Ltd 1,513,411 Real Estate Operations / Development—0.51% 2,719,200 Guangzhou R&F Properties Co Ltd, Class H 4,560,812 Semiconductor Components–Integrated Circuits—0.01% 18,300 Semiconductor Manufacturing International Corp ADR 53,436 Telecommunication Equipment—0.11% 575,800 ZTE Corp, Class H 993,954 Total China (proceeds $23,706,681) $ 23,109,784 Germany—0.04% Power Conversion / Supply Equipment—0.04% 15,555 SMA Solar Technology AG 372,918 Total Germany (proceeds $1,754,994) $ 372,918 Hong Kong—2.90% Audio / Video Products—0.03% 415,946 Skyworth Digital Holdings Ltd 279,167 Distribution / Wholesale—1.39% 8,992,000 Li & Fung Ltd 12,394,530 Electric–Integrated—0.70% 710,500 CLP Holdings Ltd 6,223,906 Paper & Related Products—0.11% 1,089,000 Nine Dragons Paper Holdings Ltd 1,022,693 Retail–Miscellaneous / Diversified—0.67% 2,006,000 China Resources Enterprise Ltd 5,943,589 Total Hong Kong (proceeds $27,548,974) $ 25,863,885 7
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (Unaudited)
Fair Value
Auction House / Art Dealer—0.30%
ACAP STRATEGIC FUND Shares March 31, 2013 Common Stock (continued) India—0.85% Computer Services—0.85% 140,400 Infosys Ltd ADR $ 7,568,964 Total India (proceeds $6,658,985) $ 7,568,964 Japan—3.41% Audio / Video Products—1.57% 1,864,200 Panasonic Corp 13,958,698 Office Automation & Equipment—1.06% 257,500 Canon Inc 9,448,787 Photo Equipment & Supplies—0.36% 163,600 FUJIFILM Holdings Corp 3,226,063 Printing–Commercial—0.42% 391,000 Dai Nippon Printing Co Ltd 3,722,027 Total Japan (proceeds $31,265,538) $ 30,355,575 Singapore—0.44% Airlines—0.44% 449,000 Singapore Airlines Ltd 3,934,088 Total Singapore (proceeds $3,921,855) $ 3,934,088 South Korea—0.99% Electronic Components–Miscellaneous—0.99% 602,900 LG Display Co Ltd ADR 8,796,311 Total South Korea (proceeds $8,645,581) $ 8,796,311 Switzerland—0.31% Computers–Peripheral Equipment—0.31% 397,800 Logitech International SA 2,772,666 Total Switzerland (proceeds $5,078,515) $ 2,772,666 Taiwan—1.00% Electronic Components–Miscellaneous—0.36% 758,800 AU Optronics Corp ADR 3,262,840 Semiconductor Components–Integrated Circuits—0.64% 418,100 Siliconware Precision Industries Co ADR 2,433,342 1,830,500 United Microelectronics Corp ADR 3,294,900 5,728,242 Total Taiwan (proceeds $9,875,137) $ 8,991,082 United States—16.69% Apparel Manufacturers—0.55% 97,740 Coach Inc 4,886,023 Building–Mobile Home / Manufactured Housing—0.53% 127,900 Thor Industries Inc 4,705,441 Casino Hotels—0.41% 448,000 Boyd Gaming Corp 3,704,960 Commercial Services–Finance—0.73% 430,800 Western Union Co 6,479,232 Computer Services—0.17% 39,200 j2 Global Inc 1,537,032 Computers—0.24% 89,900 Hewlett-Packard Co 2,143,216 8
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (Unaudited) (continued)
Fair Value
ACAP STRATEGIC FUND Shares March 31, 2013 Common Stock (continued) United States (continued) Cruise Lines—1.38% 358,750 Carnival Corp $ 12,305,125 Electronic Components–Semiconductors—3.39% 150,610 Cree Inc 8,239,873 47,900 Diodes Inc 1,004,942 351,000 Freescale Semiconductor Ltd 5,226,390 382,100 Intel Corp 8,348,885 157,800 Texas Instruments Inc 5,598,744 81,600 Skyworks Solutions Inc 1,797,648 30,216,482 Enterprise Software / Services—1.13% 313,000 Oracle Corp 10,122,420 Food–Retail—0.80% 144,460 Kroger Co 4,787,404 90,300 Safeway Inc 2,379,405 7,166,809 Human Resources—0.49% 295,800 Monster Worldwide Inc 1,499,706 75,870 Robert Half International Inc 2,847,401 4,347,107 Internet Content–Information / Network—0.24% 211,500 Dice Holdings Inc 2,142,495 Networking Products—0.21% 96,250 LogMeIn Inc 1,849,925 Office Automation & Equipment—0.38% 392,300 Xerox Corp 3,373,780 Printing–Commercial—0.73% 217,200 Valassis Communications Inc 6,487,764 Recreational Centers—0.82% 171,400 Life Time Fitness Inc 7,332,492 Rental Auto / Equipment—0.27% 65,200 Rent-A-Center Inc 2,408,488 Retail–Apparel / Shoes—0.68% 100,500 Jos A Bank Clothiers Inc 4,009,950 44,800 Buckle Inc 2,089,920 6,099,870 Retail–Computer Equipment—0.90% 286,600 GameStop Corp, Class A 8,016,202 Semiconductor Equipment—0.28% 72,100 Cabot Microelectronics Corp 2,505,475 Telecommunication Equipment—0.83% 167,960 Plantronics Inc 7,422,152 Telecommunication Equipment–Fiber Optics—1.53% 1,023,850 Corning Inc 13,647,921 Total United States (proceeds $134,240,477) $ 148,900,411 Total Common Stock (proceeds $259,381,112) $ 268,145,729 Total Securities Sold, Not Yet Purchased (proceeds $259,381,112) $ 268,145,729 9
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (Unaudited) (continued)
Fair Value
ACAP STRATEGIC FUND Securities Sold, March 31, 2013 Airlines 0.44 Apparel Manufacturers 0.55 Auction House / Art Dealer 0.30 Audio / Video Products 1.60 Building – Mobile Home / Manufactured Housing 0.53 Casino Hotels 0.41 Commercial Services – Finance 0.73 Computer Services 1.02 Computers 0.71 Computers – Peripheral Equipment 0.31 Cruise Lines. 1.38 Distribution / Wholesale 1.39 Electric – Generation 0.53 Electric – Integrated 0.70 Electronic Components – Miscellaneous 1.35 Electronic Components – Semiconductors 3.39 Enterprise Software / Services 1.67 Food – Miscellaneous / Diversified 0.10 Food – Retail 0.80 Human Resources 0.49 Internet Content – Information / Network 0.24 Machinery – Construction & Mining 0.64 Metal – Aluminum 0.05 Metal Processors & Fabrication 0.17 Networking Products 0.21 Office Automation & Equipment 1.44 Paper & Related Products 0.11 Photo Equiptment & Supplies. 0.36 Power Conversion / Supply Equipment 0.04 Printing – Commercial 1.15 Real Estate Operations / Development 0.51 Recreational Centers 0.82 Rental Auto / Equipment 0.27 Retail – Apparel / Shoes 0.68 Retail – Computer Equipment 0.90 Retail – Miscellaneous / Diversified. 0.67 Semiconductor Components – Integrated Circuits 0.65 Semiconductor Equipment 0.28 Telecommunication Equipment 0.94 Telecommunication Equipment – Fiber Optics 1.53 Total Securities Sold, Not Yet Purchased 30.06 % 10
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (Unaudited) (concluded)
Not Yet Purchased – By Industry
Percentage of
Net Assets (%)
ACAP STRATEGIC FUND Notional Maturity March 31, 2013 Swap Contracts—0.20% Total Return Swap Contracts—0.20% Airlines—0.00% $ (557,815 ) 3/6/2014 China Airlines Limited $ 15,198 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of China Airlines Limited in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 7.59%. Audio / Video Products—0.04% (4,763,745 ) 3/6/2014 Sharp Corp 356,938 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Sharp Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 15.00%. Building Products–Doors & Windows—(0.01)% (12,654,985 ) 3/6/2014 Asahi Glass Co Ltd (71,435 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Asahi Glass Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. Capacitors—0.00% (10,578,089 ) 3/6/2014 Taiyo Yuden Co Ltd (1,798 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Taiyo Yuden Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 1.80%. Chemicals–Diversified—0.02% (1,325,448 ) 3/6/2014 Hitachi Chemical Company Ltd 21,395 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Hitachi Chemical Company Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. (4,191,594 ) 3/6/2014 Kuraray Co Ltd 157,612 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Kuraray Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. 179,007 Circuit Boards—0.00% (1,065,703 ) 3/6/2014 Unimicron Technology Corp (15,380 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Unimicron Technology Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 6.50%. 11
SCHEDULE OF SWAP CONTRACTS (Unaudited)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND Notional Maturity March 31, 2013 Total Return Swap Contracts (continued) Computers—0.00% $ (5,701,943 ) 3/6/2014 Asustek Computer Inc $ (28,380 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Asustek Computer Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 4.25%. (2,578,027 ) 3/6/2014 Compal Electronics Inc (6,894 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Compal Electronics Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 2.25%. (1,610,322 ) 3/6/2014 Wistron Corporation 69,340 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Wistron Corporation in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 8.46%. 34,066 Computers–Peripheral Equipment—0.01% (1,144,105 ) 3/6/2014 Chicony Electronics Co Ltd 12,381 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Chicony Electronics Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 4.75%. (4,158,903 ) 3/6/2014 Innolux Display Corp 64,325 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Innolux Display Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 4.50%. 76,706 E-Commerce / Products—0.11% 28,558,601 3/6/2014 Rakuten Inc 981,774 Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of Rakuten Inc in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.60%. Electric Products–Miscellaneous—0.04% (3,551,658 ) 3/6/2014 Brother Industries Ltd 82,512 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Brother Industries Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.44%. 12
SCHEDULE OF SWAP CONTRACTS (Unaudited) (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND Notional Maturity March 31, 2013 Total Return Swap Contracts (continued) Electric Products—Miscellaneous (continued) $ (7,780,095 ) 3/6/2014 LG Electronics Inc $ 163,789 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of LG Electronics Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 4.00%. (5,648,113 ) 3/6/2014 LG Innotek Co Ltd 109,133 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of LG Innotek Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 4.86%. 355,434 Electronic Components–Miscellaneous—0.04% (2,257,619 ) 3/6/2014 AU Optronics Corp 30,414 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of AU Optronics Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 3.50%. (5,714,041 ) 3/6/2014 Hon Hai Precision Industry 66,573 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Hon Hai Precision Industry in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. (3,051,107 ) 3/6/2014 NEC Corporation 33,132 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of NEC Corporation in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. (11,337,713 ) 3/6/2014 Nippon Electric Glass Co 226,471 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Nippon Electric Glass Co in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. (775,747 ) 3/6/2014 Pegatron Corp (6,923 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Pegatron Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 5.77%. 13
SCHEDULE OF SWAP CONTRACTS (Unaudited) (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND Notional Maturity March 31, 2013 Total Return Swap Contracts (continued) Electronic Components—Miscellaneous (continued) $ (253,600 ) 3/6/2014 Silitech Technology Corp $ 3,266 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Silitech Technology Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 6.35%. (10,755,191 ) 3/6/2014 Toshiba Corp (33,535 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Toshiba Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. (2,970,422 ) 3/6/2014 TPK Holding Co Ltd 35,851 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of TPK Holding Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 12.00%. 355,249 Electronic Components–Semiconductors—(0.01)% (455,261 ) 3/6/2014 Epistar Corp 15,820 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Epistar Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 11.50%. (641,974 ) 3/6/2014 Everlight Electronics Co Ltd (6,785 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Everlight Electronics Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 6.58%. (10,938,337 ) 3/6/2014 MediaTek Inc 22,862 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of MediaTek Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 4.00%. (1,545,365 ) 3/6/2014 Nippon Chemi-Con Corp (65,484 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Nippon Chemi-Con Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.54%. (3,320,937 ) 3/6/2014 Rohm Company Ltd 66,630 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Rohm Company Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. 14
SCHEDULE OF SWAP CONTRACTS (Unaudited) (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND Notional Maturity March 31, 2013 Total Return Swap Contracts (continued) Electronic Components—Semiconductors (continued) $ 55,409,860 3/6/2014 Samsung Electronics Co Ltd $ (197,007 ) Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of Samsung Electronics Co Ltd in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.90%. (8,173,601 ) 3/6/2014 SK Hynix Inc 103,430 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of SK Hynix Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.78%. (60,534 ) Finance–Investment Banker / Broker—0.00% (971,116 ) 3/6/2014 Bolsas y Mercados Espanoles SA 2,851 Agreement with Morgan Stanley, dated 03/01/2012 to deliver the total return of the shares of Bolsas y Mercados Espanoles SA in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 6.11%. Finance–Other Services—0.01% 2,108,343 3/6/2014 Japan Exchange Group Inc 64,423 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Japan Exchange Group Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate plus 0.60%. Food–Retail—(0.01)% (4,695,891 ) 3/6/2014 Delhaize Group (63,076 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Delhaize Group in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. (5,420,917 ) 3/6/2014 Koninklijke Ahold NV 31,695 Agreement with Morgan Stanley, dated 01/01/2012 to deliver the total return of the shares of Koninklijke Ahold NV in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. (5,398,500 ) 12/11/2014 WM Morrison Supermarkets PLC (16,085 ) Agreement with Morgan Stanley, dated 12/08/2012 to deliver the total return of the shares of WM Morrison Supermarkets PLC in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. (47,466 ) 15
SCHEDULE OF SWAP CONTRACTS (Unaudited) (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND Notional Maturity March 31, 2013 Total Return Swap Contracts (continued) Metal Processors & Fabrication—(0.01)% $ (4,083,763 ) 3/6/2014 Catcher Technology Co Ltd $ (133,075 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Catcher Technology Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 8.50%. Office Automation & Equipment—0.01% (7,351,049 ) 3/6/2014 Ricoh Co Ltd 64,153 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Ricoh Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 1.88%. (4,947,853 ) 3/6/2014 Seiko Epson Corp 5,862 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Seiko Epson Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 7.50%. 70,015 Photo Equipment & Supplies—0.02% (7,929,335 ) 3/6/2014 Konica Minolta Inc 213,796 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Konica Minolta Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. (4,174,866 ) 3/6/2014 Largan Precision Co Ltd (50,868 ) Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Largan Precision Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 8.50%. 162,928 Retail–Jewelry—0.00% (991,486 ) 3/6/2014 Swatch Group AG (18,722 ) Agreement with Morgan Stanley, dated 03/01/2012 to deliver the total return of the shares of Swatch Group AG in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. Retail–Restaurants—(0.02)% 5,135,664 3/6/2014 Gourmet Master Co Ltd (217,504 ) Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of Gourmet Master Co Ltd in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 1.12%. 16
SCHEDULE OF SWAP CONTRACTS (Unaudited) (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND Notional Maturity March 31, 2013 Total Return Swap Contracts (continued) Semiconductor Components–Integrated Circuits—0.05% $ (5,864,024 ) 3/6/2014 Powertech Technology Inc $ 58,606 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Powertech Technology Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 5.04%. 74,640,382 3/6/2014 QUALCOMM Inc 369,729 Agreement with Morgan Stanley, dated 03/01/2012 to receive the total return of the shares of QUALCOMM Inc in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.45%. (862,608 ) 3/6/2014 Realtek Semiconductor Corp 1,803 Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Realtek Semiconductor Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 7.62%. 430,138 Web Portals / ISP—(0.09)% 8,102,215 3/6/2014 GMO Internet Inc (18,999 ) Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of GMO Internet Inc in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.60%. 56,276,333 3/6/2014 Google Inc, Class A (1,273,875 ) Agreement with Morgan Stanley, dated 03/01/2012 to receive the total return of the shares of Google Inc, Class A in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.45%. 30,212,201 3/6/2014 NHN Corp 41,978 Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of NHN Corp in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.90%. 10,517,267 3/6/2014 Yahoo Japan Corp 481,076 Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of Yahoo Japan Corp in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.60%. (769,820 ) Total Swap Contracts $ 1,748,993 17
SCHEDULE OF SWAP CONTRACTS (Unaudited) (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND Swap Contracts – By Industry March 31, 2013 Airlines 0.00 % Audio / Video Products 0.04 % Building Products – Doors & Windows (0.01 %) Capacitors 0.00 % Chemicals – Diversified 0.02 % Circuit Boards 0.00 % Computers 0.00 % Computers – Peripheral Equipment 0.01 % E-Commerce / Products 0.11 % Electric Products – Miscellaneous 0.04 % Electronic Components – Miscellaneous 0.04 % Electronic Components – Semiconductors (0.01 %) Finance – Investment Banker / Broker 0.00 % Finance – Other Services 0.01 % Food – Retail (0.01 %) Metal Processors & Fabrication (0.01 %) Office Automation & Equipment 0.01 % Photo Equipment & Supplies 0.02 % Retail – Jewelry 0.00 % Retail – Restaurants (0.02 %) Semiconductor Components – Integrated Circuits 0.05 % Web Portals / ISP (0.09 %) Total Swap Contracts 0.20 % 18
SCHEDULE OF SWAP CONTRACTS (Unaudited) (concluded)
Percentage of
Net Assets (%)
ACAP STRATEGIC FUND For the Five Months Ended Investment Income Dividends $ 4,004,185 Interest 579,960 Total investment income 4,584,145 Expenses Management fees 6,857,546 Stock loan fees 3,743,372 Incentive Fee 3,169,657 Dividends on securities sold, not yet purchased 1,612,917 Shareholder servicing fees 853,578 Administration fees 287,442 Transfer agent fees 134,089 Professional fees 120,841 Custody fees 92,104 Registration fees 54,355 Insurance expense 30,642 Trustees’ fees 17,916 Interest expense 3,945 Miscellaneous expense 303,131 Total expenses 17,281,535 Net investment loss (12,697,390 ) Realized and unrealized gain/(loss) from investment activities, foreign Realized gain/(loss) from investment activities, foreign currency transactions and total return swaps Investment securities 11,642,977 Securities sold, not yet purchased (11,585,946 ) Foreign currency transactions (656,826 ) Total return swaps. (11,774,591 ) Net realized gain/(loss) from investment activities, foreign currency (12,374,386 ) Net change in unrealized gain/(loss) from investment activities and 34,867,258 Net change in unrealized gain/(loss) of total return swaps 2,867,013 Net change in unrealized gain/(loss) from investment activities, 37,734,271 Net realized and unrealized gain/(loss) from investment activities, foreign currency transactions and total return swaps 25,359,885 Net increase in net assets resulting from operations $ 12,662,495 19
STATEMENT OF OPERATIONS (Unaudited)
March 31, 2013
currency transactions and total return swaps
transactions and total return swaps
foreign currency transactions
foreign currency transactions, and total return swaps
ACAP STRATEGIC FUND For the Five Months Ended For the Year Ended From operations: Net investment loss $ (12,697,390 ) $ (23,731,346 ) Net realized gain/(loss) from investment activities, foreign currency transactions and total return swaps. (12,374,386 ) 4,652,342 Net change in unrealized gain/(loss) from investment 37,734,271 32,431,414 Net increase/(decrease) in net assets resulting from operations 12,662,495 13,352,410 Distributions to shareholders: From net realized gain ($0.0584 per share) — (1,957,432 ) Net decrease in net assets resulting from distributions to shareholders — (1,957,432 ) From transactions in shares: Net proceeds from sale of shares 226,948,025 389,272,122 Reinvestment of distributions — 1,498,250 Cost of shares repurchased (42,085,879 ) (32,855,664 ) Net increase in net assets from transactions in shares 184,862,146 357,914,708 Net increase in net assets 197,524,641 369,309,686 Net assets at beginning of period 694,581,216 325,271,530 Net assets at end of period $ 892,105,857 $ 694,581,216 Accumulated Undistributed Net Investment Loss $ (56,591,631 ) $ (43,894,241 ) 20
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
March 31, 2013
October 31, 2012
activities, foreign currency transactions and total return swaps
ACAP STRATEGIC FUND 1. Organization ACAP Strategic Fund (the “Fund”) was organized as a Delaware statutory trust in June 2009. The Fund commenced operations on March 1, 2010. The Fund is registered under the Investment Company Act of 1940 (the “1940 Act”) as a non-diversified, closed-end management investment company. The Fund operates as an interval fund under Rule 23c-3 of the 1940 Act and, as such, offers to repurchase between 5% – 25% of its outstanding Shares at their net asset value as of or prior to the end of each fiscal quarter. SilverBay Capital Management LLC serves as the investment adviser of the Fund (the “Adviser”). The Adviser is controlled by its managing member, Alkeon Capital Management, LLC (“Alkeon”). Each of the Adviser and Alkeon is registered with the SEC as an investment adviser. The Fund’s investment objective is to achieve maximum capital appreciation. The Fund pursues this objective by investing its assets primarily in equity securities of U.S. and foreign companies that the Adviser believes are well positioned to benefit from demand for their products or services, including companies that can innovate or grow rapidly relative to their peers in their markets. The Fund also pursues its objective by effecting short sales of securities when the Adviser believes that the market price of a security is above its estimated intrinsic or fundamental value. The Fund may also borrow money for investment purposes, i.e., leverage its assets. The use of short sales and leverage are speculative investment practices and involve a high degree of risk. The Fund is authorized to issue an unlimited number of Shares of beneficial interest (“Shares”), $0.001 par value. The minimum initial investment in the Fund by an investor is $100,000, subject to reduction at the discretion of an investor’s broker, dealer or other financial intermediary, but not below $50,000. Minimum subsequent investments must be at least $10,000 (in each case, including a sales load if applicable). Investors may be charged a sales load up to a maximum of 3% on the amount they invest. The specific amount of the sales load is not fixed and will be determined by the investor and its broker, dealer or other financial intermediary. Shares may only be purchased through, and with funds drawn on, an investor’s brokerage account with Mainsail Group, L.L.C. (the “Underwriter”) or with brokers or dealers retained by the Underwriter to act as selling agents to assist in the distribution of Shares (“Selling Agents”). Shares of the Fund may be purchased only by investors who certify to the Fund or its agents that they have a net worth of more than $2,000,000 (excluding the value of the primary residence of such person and any debt secured by such property up to its current market value). As an interval fund, the Fund has adopted a fundamental policy to offer to repurchase at least 5% of its outstanding Shares at their net asset value at regular intervals. Currently, the Fund intends to offer to repurchase 25% of its outstanding Shares as of or prior to the end of each fiscal quarter. However, repurchase offers in excess of 5% of the Fund’s outstanding Shares for any particular fiscal quarter are entirely within the discretion of the Board of Trustees of the Fund (the “Board”) and, as a result, there can be no assurance that the Fund will make repurchase offers for amounts in excess of 5% of the outstanding Shares for any particular fiscal quarter. The Board has overall responsibility for the management and supervision of the operations of the Fund. The Board has delegated responsibility for management of the Fund’s day-to-day operations to the Adviser. The Board exercises the same powers, authority and responsibilities on behalf of the Fund as are customarily exercised by the board of directors of a registered investment company organized as a corporation. The persons comprising the Board (the “Trustees”) are not required to invest in the Fund or to own Shares. A majority of the Trustees are persons who are not “interested persons” (as defined in the 1940 Act) of the Fund (the “Independent Trustees”). The Independent Trustees perform the same functions for the Fund as are customarily exercised by the non-interested directors of a registered investment company organized as a corporation. On September 20, 2012, the Board approved a change in the fiscal year-end from October 31 to September 30. The change was effective as of October 31, 2012. Our current fiscal year covers the eleven-month period beginning November 1, 2012 and ending September 30, 2013. Our next fiscal year will cover the period from October 1, 2013 through September 30, 2014. 21
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited)
ACAP STRATEGIC FUND 2. Significant Accounting Policies The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires (hereafter referred to as “authoritative guidance”) the Adviser to make estimates and assumptions in determining 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. The Adviser believes that the estimates utilized in preparing the Fund’s financial statements are reasonable and prudent; however, actual results could differ from these estimates. The following is a summary of the significant accounting policies of the Fund: a. Revenue Recognition Securities transactions, including related revenue and expenses, are recorded on a trade date basis. Dividends are recorded on the ex-dividend date, net of foreign withholding tax. Interest income and expense are recorded on the accrual basis. The Fund amortizes premium and accretes discount on bonds using the effective yield method. b. Portfolio Valuation The value of the net assets of the Fund is determined on each business day as of the close of regular business of the NYSE in accordance with the procedures set forth below or as may be determined from time to time pursuant to policies established by the Board. Domestic exchange traded equity securities (other than options) other than those that trade on NASDAQ are valued at their last reported composite sale prices as reported on such exchanges or, in the absence of any reported sale on a particular day, at their composite bid prices (for securities held long) or their composite ask prices (for securities sold short), as reported by such exchanges. Securities traded on NASDAQ are valued: (i) at the NASDAQ Official Closing Price (“NOCP”) (which is the last trade price at or before 4:00 p.m. (EST) adjusted up to NASDAQ’s best offer price if the last trade is below such bid and down to NASDAQ’s best offer price if the last trade is above such offer price); (ii) if no NOCP is available, at the last sale price on NASDAQ prior to the calculation of the Fund’s net asset value; (iii) if no sale is shown on NASDAQ, at the bid price; or (iv) if no sale is shown and no bid price is available for a period of seven business days, the price will be deemed “stale” and the value will be determined at fair value. Securities traded on a foreign securities exchange are valued at their last sale prices on the exchange where the securities are primarily traded, or in the absence of a reported sale on a particular day, at their bid prices (in the case of securities held long) or ask prices (in the case of securities sold short) as reported by that exchange. Total return swaps on equity securities are generally valued based upon the price for the reference asset, as determined in the manner specified above. Other securities for which market quotations are readily available are valued at their bid prices (or ask prices in the case of securities sold short) as obtained from one or more dealers making markets for those securities. If market quotations are not readily available, securities and other assets will be valued at fair value as determined in good faith by the Adviser under the supervision of the Board in accordance with authoritative guidance. Debt securities (other than convertible securities) are valued in accordance with the procedures described above, which with respect to these securities may include the use of valuations furnished by a pricing service which employs a matrix to determine valuations for normal institutional size trading units. The Adviser monitors the reasonableness of valuations provided by the pricing service. 22
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
ACAP STRATEGIC FUND 2. Significant Accounting Policies (continued) b. Portfolio Valuation (continued) If in the view of the Adviser, the bid price of a listed option or debt security (or ask price in the case of any such security sold short) does not fairly reflect the market value of the security, the security may be valued at fair value in good faith pursuant to procedures adopted by the Board. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars using foreign exchange rates provided by a pricing service compiled as of 4:00 p.m. London time. Trading in foreign securities generally is completed, and the values of foreign securities are determined prior to the close of securities markets in the U.S. Foreign exchange rates are also determined prior to such close. On occasion, the values of foreign securities and exchange rates may be materially affected by events occurring before the Fund calculates its net asset value but after the close of the primary markets or exchanges on which foreign securities are traded. These intervening events might be country-specific (e.g., natural disaster, economic or political developments, interest-rate change), issuer-specific (e.g., earnings report, merger announcement), or U.S. market specific (e.g., a significant movement in the U.S. markets that is deemed to affect the value of foreign securities). When such an event materially affects the values of securities held by the Fund or its liabilities (including foreign securities for which there is a readily available market price), such securities and liabilities may be valued at fair value, taking into account the aforementioned factors, in good faith pursuant to procedures adopted by the Board. The Fund follows authoritative guidance for fair value measurement. The guidance establishes a framework for measuring fair value and a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The guidance establishes three levels of inputs that may be used to measure fair value. Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below. Level 1—observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The Fund recognizes transfers into and out of levels indicated above at the end of the reporting period. There were no such transfers during the five months ended March 31, 2013. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. Additional information on the investments can be found in the Schedule of Investments, the Schedule of Securities Sold, Not Yet Purchased and the Schedule of Swap Contracts. 23
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
ACAP STRATEGIC FUND 2. Significant Accounting Policies (continued) b. Portfolio Valuation (continued) The Financial Accounting Standards Board (“FASB”) issued Codification Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Active Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04). ASU 2011-04 expands the qualitative and quantitative fair value disclosure requirements for fair value measurements categorized in Level 3 of the fair value hierarchy and requires a description of the valuation processes in place and a description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs if a change in those inputs would result in a significantly different fair value measurement. The adoption of ASU 2011-04 did not have a material impact on the Fund’s financial statements. The following is a summary of the inputs used, as of March 31, 2013 in valuing the Fund’s investments at fair value. Level 1 Level 2 Level 3 Balance Assets Common Stock $ 1,031,056,635 $ — $ — $ 1,031,056,635 Total Return Swaps — 1,748,993 — 1,748,993 Total Assets $ 1,031,056,635 $ 1,748,993 $ — $ 1,032,805,628 Liabilities Common Stock $ 268,145,729 $ — $ — $ 268,145,729 c. Cash and Cash Equivalents The Fund considers all financial instruments that mature within three months of the date of purchase as cash equivalents. At March 31, 2013, $171,909,720 in cash equivalents were held in a BNY Mellon Money Market Account, including foreign currency with a U.S. Dollar value of $10,697,712. Amounts may at times exceed federally insured limits. d. Dividends and Distributions Dividends and distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with authoritative guidance. To the extent these differences are permanent, such amounts are reclassified within the capital account based on their federal tax basis treatment; temporary differences do not require such reclassification. e. Income Taxes Each year the Fund intends to operate in a manner to qualify as, and has elected to be treated as, a regulated investment company under Subchapter M of the Internal Revenue Code of 1986 (the “Code”), as amended. To qualify as a regulated investment company, the Fund must comply with certain requirements relating to, among other things, the sources of its income and diversification of its assets. If the Fund so qualifies and distributes each year to its shareholders at least 90% of its investment company taxable income (generally including ordinary income and net short-term capital gain, but not net capital gain, which is the excess of net long-term capital gain over net short-term capital loss) and meets certain other requirements, it will not be required to pay federal income taxes 24
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
March 31,
2013
ACAP STRATEGIC FUND 2. Significant Accounting Policies (continued) e. Income Taxes (continued) on any income it distributes to shareholders. The Fund intends to distribute at least the minimum amount necessary to satisfy the 90% distribution requirement. The Fund will not be subject to federal income tax on any net capital gain distributed to shareholders. Foreign securities held by the Fund may be subject to foreign taxation on dividend income received. The Fund may be subject to a tax imposed on net realized gains on securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities in an amount that would be payable if the securities were disposed of on the valuation date. At March 31, 2013, the Fund had no deferred tax liability. It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. f. Due to/from Broker Due to/from broker consists of U.S. dollar cash balances held at the Fund’s prime broker (Morgan Stanley & Co., Inc.). The Fund is charged interest on cash it borrows at agreed upon rates with its prime broker. The amount due from broker primarily represents receivables for funds held by the broker which result from proceeds of short sales and cash proceeds from the unwind of swap positions. It is the Fund’s policy to monitor the credit standing of the broker and other financial institutions with which it conducts business. 3. Management Fee In consideration of management services provided by the Adviser and for services provided by the Adviser or an affiliate for certain administrative services, the Fund pays the Adviser a monthly management fee computed at the annual rate of 2.00% of the Fund’s average daily net assets (the “Management Fee”), which is due and payable in arrears within five business days after the end of each month. This fee is accrued daily as an expense to be paid out of the Fund’s assets and has the effect of reducing the net asset value of the Fund. During the five months ended March 31, 2013, Management Fees totaled $6,857,546, of which $1,576,609 remained payable to the Adviser at the end of the reporting period and is included on the Statement of Assets and Liabilities. 4. Incentive Fee The Fund also pays the Adviser a performance-based incentive fee (the “Incentive Fee”). The Incentive Fee is determined as of the end of the fiscal year in an amount equal to 20% of the amount by which the Fund’s net profits for all Fiscal Periods (defined below) exceed the balance of the loss carryforward account (described below), without duplication for any Incentive Fees paid during such fiscal year. The Fund also pays the Adviser the Incentive Fee in the event a Fiscal Period is triggered in connection with a Share repurchase offer by the Fund. For purposes of calculating the Incentive Fee, net profits means the amount by which: (a) the net assets of the Fund as of the end of a Fiscal Period, increased by the dollar amount of Shares repurchased during the Fiscal Period (excluding Shares to be repurchased as of the last day of the Fiscal Period after determination of the Incentive Fee) and by the amount of dividends and other distributions paid to shareholders during the Fiscal period and not reinvested in additional Shares (excluding any dividends and other distributions to be paid as of the last day of the Fiscal Period), exceeds (b) the net assets of the Fund as of the beginning of the Fiscal Period, increased by the dollar amount of Shares issued 25
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
ACAP STRATEGIC FUND 4. Incentive Fee (continued) during the Fiscal Period (excluding any Shares issued in connection with the reinvestment of dividends and other distributions paid by the Fund). Net assets means the total value of all assets of the Fund, less an amount equal to all accrued debts, liabilities and obligations of the Fund, determined in accordance with the valuation and accounting policies and procedures of the Fund. Fiscal Period means each period ending on the Fund’s fiscal year-end, provided that whenever the Fund conducts a Share repurchase offer, the period of time from the last Fiscal Period-end through the effective date of the repurchase offer also constitutes a Fiscal Period. The Incentive Fee is payable for a Fiscal Period only if there is no positive balance in the Fund’s loss carryforward account. The loss carryforward account is an account that is credited as of the end of each Fiscal Period with the amount of any net loss of the Fund for that Fiscal Period and will be debited (but not below zero) with the amount of any net profits of the Fund for that Fiscal Period. This is sometimes known as a “high water mark.” The loss carryforward account is also reduced by: (i) the payment by the Fund of any dividend or other distribution to Shareholders (unless the full amount thereof is reinvested in Shares of the Fund); and (ii) any repurchase by the Fund of its Shares. During the five months ended March 31, 2013, accrued incentive amounted to $3,169,657, all of which remained payable at the end of the reporting period and is included in the accompanying Statement of Assets and Liabilities. 5. Shareholder Servicing Fee Under the terms of the distribution agreement with the Fund, the Fund pays ongoing shareholder servicing fees to the Underwriter to compensate it for providing, or arranging for the provision of, ongoing investor services and account maintenance services to investors in the Fund. The Underwriter may retain all or a portion of these payments. These fees are accrued daily and paid monthly in an amount not to exceed, in the aggregate, 0.25% (on an annualized basis) of the net asset value of the Fund. During the five months ended March 31, 2013, Shareholder Servicing Fees amounted to $853,578. At March 31, 2013, $197,002 remained payable and is included in the accompanying Statement of Assets and Liabilities. 6. Administration Fee, Related Party and Other BNY Mellon Investment Servicing (US) Inc. (“BNY Mellon”) serves as the Fund’s administrator and provides various administration, fund accounting, investor accounting and taxation services to the Fund. BNY Mellon also provides transfer agency services to the Fund. In consideration of the administration and accounting services, the Fund pays BNY Mellon a monthly asset-based fee which is not anticipated to exceed .08% of the Fund’s average net assets. The Fund also reimburses BNY Mellon for certain out-of-pocket expenses. The Bank of New York Mellon serves as the primary custodian of the Fund’s assets, and may maintain custody of the Fund’s assets with domestic and foreign sub-custodians (which may be banks, trust companies, securities depositories and clearing agencies), approved by the Board in accordance with the requirements set forth in Section 17(f) of the 1940 Act and the rules adopted thereunder. Assets of the Fund are not held by the Adviser or commingled with the assets of other accounts other than to the extent that securities are held in the name of a custodian in a securities depository, clearing agency or omnibus customer account of a custodian. 26
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
ACAP STRATEGIC FUND 6. Administration Fee, Related Party and Other (continued) Mainsail Group, L.L.C. (previously defined as the “Underwriter”), an underwriter under the federal securities laws, serves as underwriter of the Fund’s Shares on a best efforts basis. Pursuant to the terms of the underwriter’s distribution agreement with the Fund, the Underwriter may retain unaffiliated brokers or dealers (i.e. “Selling Agents”) to assist in the distribution of Shares. For the five months ended March 31, 2013, the Underwriter did not receive compensation from the Fund. Each Independent Trustee receives an annual retainer of $15,000 plus reimbursement of reasonable out of pocket expenses. Trustees who are “interested persons” do not receive any annual or other fee from the Fund. Trustees who are “interested persons” are reimbursed by the Fund for all reasonable out-of- pocket expenses incurred in performing their duties. The Officers of the Fund serve without compensation. 7. Indemnifications and Financial Guarantees The Fund has entered into several contracts that contain routine indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The Fund has had no claims or payments pursuant to these or prior agreements, and the Fund believes the likelihood of a claim being made is remote. 8. Securities Transactions Aggregate purchases and sales of investment securities for the five months ended March 31, 2013, amounted to $705,840,866 and $479,261,255, respectively. Aggregate proceeds received and paid for securities sold, not yet purchased for the five months ended March 31, 2013, amounted to $131,898,092 and $174,721,561, respectively. 9. Borrowings The Fund is authorized to borrow money for investment purposes, to meet repurchase requests and for liquidity purposes. Borrowings by the Fund (which do not include securities sold, not yet purchased and derivative transactions), subject to limitations of the 1940 Act, will not exceed 331/3 percent of the Fund’s total assets. Purchasing equity securities on margin involves an initial cash requirement representing at least 50% of the underlying security’s value with respect to transactions in U.S. markets and varying (typically lower) percentages with respect to transactions in foreign markets. Borrowings to purchase equity securities typically will be secured by the pledge of those securities. Borrowing for investment purposes (a practice known as “leverage”) is a speculative investment practice and involves certain risks. Although leverage can increase investment returns if the Fund earns a greater return on the investments purchased with borrowed funds than it pays for the use of those funds, the use of leverage will decrease investment returns if the Fund fails to earn as much on investments purchased with borrowed funds as it pays for the use of those funds. The use of leverage will therefore magnify the impact of changes in the value of investments held by the Fund on the Fund’s net asset value and thus can increase the volatility of the Fund’s net asset value per Share. The Adviser expects that the Fund’s investment program will make frequent use of leverage. For the five months ended March 31, 2013, the average daily amount of such borrowings was $3,945 and the daily weighted average annualized interest rate was 0.63%. 27
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
ACAP STRATEGIC FUND 10. Transactions in Shares Transactions in Shares were as follows: For the Five Months Ended Shares at the beginning of the period 61,302,489 Shares sold 19,999,927 Shares reinvested — Shares repurchased (3,686,164 ) Net increase (decrease) 16,313,763 Shares at the end of the period 77,615,552 As of March 31, 2013, the Investment Adviser and its affiliates own 10,058.657 shares of the Fund. 11. Principal and Non-Principal Fund Investment Practices and Their Risks Although the Fund’s principal investment strategy is to invest primarily in equity securities of U.S. and foreign companies, the Fund may invest its assets in other types of securities and in other asset classes when, in the judgment of the Adviser (subject to any policies established by the Board), such investments present opportunities for the Fund to achieve maximum capital appreciation, taking into account the availability of equity investment opportunities, market conditions, the relative risk/reward analysis of other investments compared to equity securities, and such other considerations as the Adviser deems appropriate. Authoritative guidance on disclosures about derivative instruments and hedging activities requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. The realized gain/(loss) on swap contracts and foreign currency transactions is reflected on the Statement of Operations within these financial statements. The net change in unrealized appreciation/(depreciation) on swap contracts is reflected on the Statement of Operations and Schedule of Swap Contracts within these financial statements. The net change in unrealized appreciation/(depreciation) on foreign currency transactions is reflected on the Statement of Operations within these financial statements as a component of the net change in unrealized appreciation/(depreciation) from investment activities and foreign currency transactions. Option contracts serve as components of the Fund’s investment strategies and are utilized to structure investments to enhance the performance of the Fund. a. Bonds and Other Fixed-Income Securities The Fund may invest without limit in high quality fixed-income securities for temporary defensive purposes and to maintain liquidity. For these purposes, “fixed-income securities” are bonds, notes and debentures issued by corporations; debt securities issued or guaranteed by the U.S. Government or one of its agencies or instrumentalities (“U.S. Government Securities”) or by a foreign government; municipal securities; and mortgage-backed and asset-backed securities. These securities may pay fixed, variable or floating rates of interest, and may include zero coupon obligations. Fixed-income securities are subject to the risk of the issuer’s inability to meet principal and interest payments on its obligations (i.e., credit risk) and are subject to price volatility due to such factors as interest rate sensitivity, market perception of the credit worthiness of the issuer and general market liquidity (i.e., market risk). The Fund may also invest in both investment grade and non-investment grade debt securities. Investment grade debt securities are securities that have received a rating from at least one nationally recognized statistical rating organization (“NRSRO”) in one of the four highest rating categories or, if not rated by any NRSRO, have been determined by the Adviser to be of comparable quality. 28
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
March 31, 2013 Shares
ACAP STRATEGIC FUND 11. Principal and Non-Principal Fund Investment Practices and Their Risks (continued) a. Bonds and Other Fixed-Income Securities (continued) Non-investment grade debt securities (typically called “junk bonds”) are securities that have received a rating from an NRSRO of below investment grade or have been given no rating, and are considered by the NRSRO to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. Non-investment grade debt securities in the lowest rating categories may involve a substantial risk of default or may be in default. Adverse changes in economic conditions or developments regarding the individual issuer are more likely to cause price volatility and weaken the capacity of the issuers of non- investment grade debt securities to make principal and interest payments than is the case for higher grade debt securities. An economic downturn affecting an issuer of non-investment grade debt securities may result in an increased incidence of default. In addition, the market for lower grade debt securities may be thinner and less active than for higher grade debt securities. The Fund does not expect to invest more than 15% of its net assets in non-convertible debt securities. The Fund’s investments in non-investment grade debt securities, if any, are not expected to exceed 5% of its net assets. There was no activity of bonds and other fixed-income securities in the Fund during the five months ended March 31, 2013. b. Exchange Traded Funds and Other Similar Instruments The Fund may purchase retail Shares of exchange-traded funds that are registered under the 1940 Act (“ETFs”) and retail Shares of similar investment vehicles that are not registered under the 1940 Act (together with the ETFs, “Traded Funds”) and effect short sales of these Shares. Transactions in Traded Funds may be used in seeking maximum capital appreciation or for hedging purposes. Typically, a Traded Fund holds a portfolio of common stocks designed to track the performance of a particular index or a “basket” of stocks of companies within a particular industry sector or group. Traded Funds sell and redeem their Shares at net asset value in large blocks (typically 50,000 Shares) called “creation units.” Shares representing fractional interests in these creation units are listed for trading on national securities exchange and can be purchased and sold in the secondary market in lots of any size at any time during the trading day (i.e., retail Shares). Investments in Traded Funds involve certain inherent risks generally associated with investments in a broadly-based portfolio of stocks including risks that the general level of stock prices may decline, thereby adversely affecting the value of each unit of the Traded Funds. In addition, a Traded Fund may not fully replicate the performance of its benchmark index because of the temporary unavailability of certain index securities in the secondary market or discrepancies between the Traded Fund and the index with respect to the weighting of securities or number of stocks held. Because Traded Funds bear various fees and expenses, the Fund’s investment in these instruments will involve certain indirect costs, as well as transaction costs, such as brokerage commissions. The Adviser considers the expenses associated with an investment in determining whether to invest in a Traded Fund. There was no activity of Exchange Traded Funds in the Fund during the five months ended March 31, 2013. c. Temporary Investments; U.S. Government Securities Risk During periods of adverse market conditions in the equity securities markets, the Fund may deviate from its investment objective and invest all or a portion of its assets in high quality debt securities, money market instruments, or hold its assets in cash. Securities will be deemed to be of high quality if they are rated in the top four categories by an NRSRO or, if unrated, are determined to be of comparable quality by the Adviser. Money market instruments are high quality, short-term debt 29
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
ACAP STRATEGIC FUND 11. Principal and Non-Principal Fund Investment Practices and Their Risks (continued) c. Temporary Investments; U.S. Government Securities Risk (continued) obligations (which generally have remaining maturities of one year or less), and may include: U.S. Government Securities; commercial paper; certificates of deposit and banker’s acceptances issued by domestic branches of United States banks that are members of the Federal Deposit Insurance Corporation (“FDIC”); and repurchase agreements for U.S. Government Securities. In lieu of purchasing money market instruments, the Fund may purchase Shares of money market mutual funds that invest primarily in U.S. Government Securities and repurchase agreements involving those securities, subject to certain limitations imposed by the 1940 Act. The Fund may also invest in money market instruments or purchase Shares of money market mutual funds pending investment of its assets in equity securities or non-money market debt securities, or to maintain such liquidity as may be necessary to effect repurchases of Shares from shareholders or for other purposes. It is possible that the U.S. Government would not provide financial support to its agencies or instrumentalities if it were not required to do so by law. If a U.S. Government agency or instrumentality in which the Fund invests defaults and the U.S. Government does not stand behind the obligation, the Fund’s Share price or yield could fall. The U.S. Government’s guarantee of ultimate payment of principal and timely payment of interest of the U.S. Government Securities owned by the Fund does not imply that the Fund’s Shares are guaranteed by the FDIC or any other government agency, or that the price of the Fund’s Shares will not continue to fluctuate. There was no activity of the above-mentioned investments in the Fund during the five months ended March 31, 2013. d. Total Return Swaps The Adviser may use total return swaps to pursue the Fund’s investment objective of maximum capital appreciation. The Adviser may also use these swaps for hedging purposes. A swap is a contract under which two parties agree to make periodic payments to each other based on specified interest rates, an index or the value of some other instrument, applied to a stated, or “notional,” amount. Swaps generally can be classified as interest rate swaps, currency swaps, commodity swaps, total return swaps or equity swaps, depending on the type of index or instrument used to calculate the payments. Such swaps would increase or decrease the Fund’s investment exposure to the particular interest rate, currency, commodity or equity involved. Total return swaps are where one party exchanges a cash flow indexed (on a long or short basis) to a non-money market asset (e.g., an equity security). Most swap agreements entered into by the Fund require the calculation of the obligations of the parties to the agreements on a “net basis.” Consequently, current obligations (or rights) under a swap agreement generally will be equal to only the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net amount”). The Fund is subject to the market risk associated with changes in the value of the underlying investment or instrument, as well as exposure to credit risk associated with counterparty non-performance on swap contracts. The risk of loss with respect to swaps is limited to the net amount of payments that the Fund is contractually obligated to make. If the other party to a swap defaults, the Fund’s risk of loss consists of the net amount of payments that the Fund contractually is entitled to receive, which may be different than the amounts recorded on the Statement of Assets and Liabilities. The average notional amounts of swap contracts was $315,081,951 during the five months ended March 31, 2013, which is indicative of the volume of activity of swap contracts during the period. e. Call and Put Options on Individual Securities The Fund may purchase call and put options in respect of specific securities, and may write and sell covered or uncovered call and put options for hedging purposes and non-hedging purposes to pursue its 30
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
ACAP STRATEGIC FUND 11. Principal and Non-Principal Fund Investment Practices and Their Risks (continued) e. Call and Put Options on Individual Securities (continued) investment objective. A put option gives the purchaser of the option the right to sell, and obligates the writer to buy, the underlying security at a stated exercise price at any time prior to the expiration of the option. Similarly, a call option gives the purchaser of the option the right to buy, and obligates the writer to sell, the underlying security at a stated exercise price at any time prior to the expiration of the option. A covered call option written by the Fund is a call option with respect to which the Fund owns the underlying security. A covered put option written by the Fund is a put option with respect to which cash or liquid securities have been placed in a segregated account on the Fund’s books or with the Fund’s custodian to fulfill the obligation undertaken. The Fund may close out a position when writing options by purchasing an option on the same security with the same exercise price and expiration date as the option that it has previously written on the security. The Fund will realize a profit or loss if the amount paid to purchase an option is less or more, as the case may be, than the amount received from the sale thereof. To close out a position as a purchaser of an option, the Fund would ordinarily make a similar “closing sale transaction,” which involves liquidating the Fund’s position by selling the option previously purchased, although the Fund would be entitled to exercise the option should it deem it advantageous to do so. The Fund may also invest in so-called “synthetic” options or other derivative instruments written by broker-dealers. Options transactions may be effected on securities exchanges or in the over-the-counter market. Over-the-counter options purchased and sold by the Fund may also include options on baskets of specific securities. There was no activity of the above-mentioned investments in the Fund during the five months ended March 31, 2013. f. Foreign Currency Transactions Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board. The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in the net change in unrealized appreciation/(depreciation) from investment activities and foreign currency transactions on the Statement of Operations. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and 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. 12. Federal Income Tax Information At October 31, 2012, the aggregate cost and proceeds for Federal income tax purposes of portfolio investments and securities sold, not yet purchased was $684,715,277, and $266,930,486, respectively. For Federal income tax purposes, at October 31, 2012, accumulated net unrealized gain on portfolio investments was $38,615,957, consisting of $64,966,709 gross unrealized gain and $26,350,752 gross 31
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
ACAP STRATEGIC FUND 12. Federal Income Tax Information (continued) unrealized loss. The accumulated net unrealized gain on securities sold, not yet purchased, was $23,688,150, consisting of $34,122,236 gross unrealized gain and $10,434,086 gross unrealized loss. The difference between book basis and tax basis unrealized gain on portfolio investments and unrealized gain on securities sold, not yet purchased is attributable primarily to cumulative loss deferrals on wash sales and loss deferrals on unsettled short positions, respectively. During the year ended October 31, 2012, taxable gain differs from net increase in net assets resulting from operations primarily due to: (1) unrealized gain/(loss) from investment activities and foreign currency transactions, as investment gains and losses are not included in taxable income until they are realized; (2) deferred wash sales losses, and (3) recognition of unrealized gain/(loss) of swap contracts currently in taxable income. Listed below is a reconciliation of net increase in net assets resulting from operations to taxable gain for the fiscal year ended October 31, 2012. Net increase in net assets resulting from operations $ 13,352,410 Net change in unrealized gain/(loss) from investment activities and foreign currency transactions (35,001,778 ) Book/tax difference due to deferred wash sales losses 3,414,151 Book/tax difference due to short sales (230,723 ) Capital losses carried forward 17,706,128 Other book-tax differences 2,717,244 Taxable Gain(1) $ 1,957,432 (1) The Fund’s taxable gain is an estimate and will not be finally determined until the Fund files its tax return for the year ended October 31, 2012. Therefore, the final taxable income may be different than the estimate. As of October 31, 2012, the components of net assets on a tax basis were as follows:
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
Accumulated undistributed net investment loss
$
(1,599,224
)
Accumulated net realized losses on investments
(25,419,413
)
Accumulated unrealized gain from investment activities and foreign currency transactions
68,977,831
Paid-in capital
652,622,022
Total Net Assets
$
694,581,216
ASC 740 Accounting for Uncertainty in Income Taxes (“ASC 740”) provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the Fund’s Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current year. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more-likely-than-not” to be sustained assuming examination by tax authorities. In accordance with authoritative guidance, management has analyzed the Fund’s tax positions for the open tax years ended October 31, 2011 and October 31, 2012, and has concluded that no provision for income tax is required in the Fund’s financial statements. During the period, the Fund did not record any interest or penalties. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010. The Act makes changes to several tax rules including the unlimited carryover of future capital
32
ACAP STRATEGIC FUND 12. Federal Income Tax Information (continued) losses. In general, the provisions of the Act became effective for the Fund’s fiscal year beginning after October 31, 2011. During the year ended October 31, 2012, the tax character of the dividends paid by the Fund was $1,957,432 ordinary income. As of October 31, 2012, the capital loss carryforward of the Fund is $17,706,128, of which $14,125,295 is short-term and $3,580,833 is long-term, and neither is subject to expiration. 13. Financial Highlights For the For the For the For the Period Net asset value per Share, beginning of period $ 11.33 $ 11.13 $ 10.57 $ 10.00 Income from investment operations (a): Net investment loss (0.17 ) (0.59 ) (0.74 ) (0.66 ) Net realized and unrealized gain/(loss) from investment activities, foreign currency transactions and total return swaps 0.33 0.85 1.30 1.23 Total income/(loss) from investment operations 0.16 0.26 0.56 0.57 Distributions to shareholders: Realized capital gains — (0.06 ) — — Total distributions to shareholders — (0.06 ) — — Net asset value per Share, end of period $ 11.49 $ 11.33 $ 11.13 $ 10.57 Total return—gross (b) (c) (e) 1.77 % 2.93 % 6.55 % 7.32 % Total return—net (b) (c) (e) 1.41 % 2.38 % 5.30 % 5.70 % Ratios/supplemental data: Net assets (dollars in thousands), end of period 892,106 694,581 325,272 152,052 Average net assets (dollars in thousands), end of period 828,745 519,202 269,839 65,890 Ratio of expenses to average net assets (d) (e) 4.50 % 5.68 % 6.81 % 9.81 % Ratio of expenses without incentive fee to average net assets (d) (e) 4.12 % 5.03 % 5.38 % 6.27 % Ratio of incentive fee to average net assets (c) (e) 0.38 % 0.65 % 1.43 % 3.54 % Ratio of expenses without incentive 2.54 % 2.58 % 2.86 % 3.58 % Ratio of dividend and interest expense 0.47 % 0.98 % 1.09 % 1.17 % Ratio of security trading related 1.11 % �� 1.46 % 1.43 % 1.52 % Ratio of net investment loss to average net assets (d) (e) (3.16 %) (4.57 %) (5.75 %) (8.62 %) Portfolio turnover on investments in securities (c) 55 % 97 % 108 % 148 % Average debt ratio (d) 0.38 % 0.03 % 0.12 % 0.37 %
NOTES TO FINANCIAL STATEMENTS—MARCH 31, 2013 (Unaudited) (continued)
Five Months
Ended
March 31, 2013
Year Ended
October 31, 2012
Year Ended
October 31, 2011
March 1, 2010
(commencement
of operations)
through
October 31, 2010
fee, dividend & interest expense and
security trading related expenses to average net assets (d) (e)
to average net assets (d) (e)
expenses to average net assets (d) (e)
| ||||||||||||||||||||
(a) |
|
| Per Share amounts presented are based on monthly Shares outstanding throughout the period indicated. |
33
ACAP STRATEGIC FUND 13. Financial Highlights (continued)
NOTES TO FINANCIAL STATEMENTS—OCTOBER 31, 2012 (concluded)(b)
Total return gross/net of incentive fee is calculated assuming an investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund Shares.
|
(c) |
Non-annualized for periods less than one year.
(d)
Annualized for periods of less than one year.
(e)
The computation of such ratios for an individual shareholder may vary from these ratios due to timing of capital activity.
14. Subsequent Events
Subsequent to March 31, 2013, and through May 23, 2013, the Fund had capital subscriptions of $66,867,903.
The Fund has evaluated the possibility of subsequent events existing in the Fund’s financial statements, and has determined that there are no material events that would require disclosure in the Fund’s financial statements.
34
ACAP STRATEGIC FUND Disclosure of Portfolio Holdings: The Fund files a Form N-Q with the Securities and Exchange Commission (the “SEC”) no more than sixty days after the Fund’s first and third fiscal quarters of each fiscal year. For the Fund, this would be for the fiscal quarters ending December 31 and June 30. Form N-Q includes a complete schedule of the Fund’s portfolio holdings as of the end of those fiscal quarters. The Fund’s N-Q filings can be found free of charge on the SEC’s website at http://www.sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (call 800-SEC-0330 for information on the operation of the Public Reference Room). Voting Proxies on Fund Portfolio Securities: A description of the policies and procedures that the Adviser uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 are available without charge, upon request, by calling your financial advisor, or calling collect (212) 389-8713, or on the SEC’s website at http://www.sec.gov. 35
Supplemental Information
(Unaudited)
Not applicable. Not applicable. Not applicable. Not applicable. Not applicable. There has been no change, as of the date of this filing, in any of the portfolio managers identified in response to paragraph (a)(1) of this Item in the registrant’s most recently filed annual report on Form N-CSR. Not applicable. There have been no material changes to the procedures by which the shareholders may recommend nominees to the Board, where those changes were implemented after the Registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item. 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. 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. * Print the name and title of each signing officer under his or her signature.Item 2. Code of Ethics. Item 3. Audit Committee Financial Expert. Item 4. Principal Accountant Fees and Services. Item 5. Audit Committee of Listed registrants. Item 6. Investments. (a) Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. (b) Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Item 10. Submission of Matters to a Vote of Security Holders. Item 11. Controls and Procedures. (a) The Registrant’s principal executive and principal financial officers have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the Registrant’s 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) Not applicable. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto. (Registrant) ACAP Strategic Fund By (Signature and Title)* /s/ Gregory D. Jakubowsky Gregory D. Jakubowsky, President and Principal Executive Officer (principal executive officer) Date 6/3/2013 By (Signature and Title)* /s/ Gregory D. Jakubowsky Gregory D. Jakubowsky, President and Principal Executive Officer (principal executive officer) Date 6/3/2013 By (Signature and Title)* /s/ George D. Mykoniatis George D. Mykoniatis, Treasurer and Principal Financial Officer (principal financial officer) Date 6/3/2013