As filed with the Securities and Exchange Commission on Jan 6, 2010.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-21597
PRIMECAP ODYSSEY FUNDS
(Exact name of registrant as specified in charter)
225 SOUTH LAKE AVENUE, SUITE 400
PASADENA, CA 91101
(Address of principal executive offices) (Zip code)
DAVID H. VAN SLOOTEN
225 SOUTH LAKE AVENUE, SUITE 400
PASADENA, CA 91101
(Name and address of agent for service)
(626) 304-9222
Registrant's telephone number, including area code
Date of fiscal year end: OCTOBER 31
Date of reporting period: OCTOBER 31, 2010
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT
OCTOBER 31, 2010
PRIMECAP(R)
ODYSSEY FUNDS
PRIMECAP ODYSSEY STOCK FUND
PRIMECAP ODYSSEY GROWTH FUND
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
TABLE OF CONTENTS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
Letter to Shareholders ....................................... 2
Performance Graphs ........................................... 10
Expense Example .............................................. 13
Sector Breakdown ............................................. 15
Schedule of Investments ...................................... 17
PRIMECAP Odyssey Stock Fund .......................... 17
PRIMECAP Odyssey Growth Fund ......................... 21
PRIMECAP Odyssey Aggressive Growth Fund .............. 25
Statements of Assets and Liabilities ......................... 29
Statements of Operations ..................................... 30
Statement of Changes in Net Assets ........................... 31
PRIMECAP Odyssey Stock Fund .......................... 31
PRIMECAP Odyssey Growth Fund ......................... 32
PRIMECAP Odyssey Aggressive Growth Fund .............. 33
Financial Highlights ......................................... 34
PRIMECAP Odyssey Stock Fund .......................... 34
PRIMECAP Odyssey Growth Fund ......................... 35
PRIMECAP Odyssey Aggressive Growth Fund .............. 36
Notes to Financial Statements ................................ 37
Report of Independent Registered Public Accounting Firm ...... 45
Additional Information ....................................... 46
Management ................................................... 50
1
LETTER TO SHAREHOLDERS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
DEAR FELLOW SHAREHOLDERS,
The PRIMECAP Odyssey Stock Fund, PRIMECAP Odyssey Growth Fund, and PRIMECAP
Odyssey Aggressive Growth Fund posted total returns of +16.14%, +20.96%, and
+31.14%, respectively, for the fiscal year ended October 31, 2010. By
comparison, the unmanaged S&P 500 Index produced a total return of +16.52%.
While we strive for the funds to outperform the S&P 500 every year, the goal of
all three funds is to generate higher returns than the S&P 500 over longer
periods of time. Over the past five years and since inception, returns for all
three PRIMECAP Odyssey Funds are well ahead of that of the S&P 500. Returns for
the PRIMECAP Odyssey Growth Fund and the PRIMECAP Odyssey Aggressive Growth Fund
are also ahead of the returns of their secondary indices, the Russell 1000
Growth Index and the Russell Midcap Growth Index, respectively.
- --------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURNS AS OF 10/31/10
- --------------------------------------------------------------------------------
SINCE
INCEPTION
1-YEAR 5-YEAR (11/1/04)
- --------------------------------------------------------------------------------
PRIMECAP Odyssey Stock Fund(1) 16.14% 4.03% 5.75%
- --------------------------------------------------------------------------------
PRIMECAP Odyssey Growth Fund(1) 20.96% 5.30% 7.05%
- --------------------------------------------------------------------------------
PRIMECAP Odyssey Aggressive
Growth Fund(1) 31.14% 7.98% 8.71%
- --------------------------------------------------------------------------------
S&P 500 16.52% 1.73% 2.86%
- --------------------------------------------------------------------------------
Russell 1000 Growth 19.65% 3.22% 4.15%
- --------------------------------------------------------------------------------
Russell Midcap Growth 28.03% 4.28% 6.15%
- --------------------------------------------------------------------------------
(1) Total expense ratio as reported in Prospectus dated 2/26/10: PRIMECAP
Odyssey Stock Fund: 0.81%; PRIMECAP Odyssey Growth Fund: 0.73%; PRIMECAP
Odyssey Aggressive Growth Fund: 0.79%.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE; PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE OF A FUND MAY
BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END MAY BE OBTAINED BY CALLING 1-800-729-2307. THE FUNDS
CHARGE A REDEMPTION/EXCHANGE FEE OF 2.00% THAT MAY BE CHARGED FOR ANY SHARES
REDEEMED OR EXCHANGED WITHIN 60 DAYS AFTER THE DATE THEY WERE ACQUIRED.
Before we begin a discussion of the investment environment and the funds'
results, we would like to take a moment to address the issue of capital gains
distributions. While we measure the long-term results of the funds by pre-tax
total return, we are aware of the tax consequences of our investment decisions.
As long-term investors, we hold most of our positions for years, not months.
2
LETTER TO SHAREHOLDERS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
CONTINUED
This year, however, several of our portfolio companies were acquired at
considerable premiums, resulting in capital gains. While most of these gains
were offset by loss carryovers from previous years, the PRIMECAP Odyssey
Aggressive Growth Fund has plans to distribute a long-term capital gain in
December 2010.
As mentioned above, the S&P 500 posted solid positive returns for the fiscal
year, led by the consumer discretionary and industrials sectors. However, it was
a volatile period marked by several significant rallies and declines in the
market. The S&P 500 climbed over 15% in the first half of the fiscal year,
declined into negative territory by early July, and then finished the fiscal
year with a strong rally the last two months. The economy has continued to grow
at a modest pace as it recovers from the recession that began in late 2007.
While corporate earnings have rebounded strongly and the financial markets
appear to have stabilized, there are still troubling economic indicators, such
as high unemployment and a weak housing market.
All three PRIMECAP Odyssey Funds are overweight in the health care and
information technology sectors and underweight in the financials, consumer
staples, and energy sectors. The health care sector, which lagged the overall
S&P 500 over the past fiscal year, has been plagued by a barrage of unfavorable
news. The Patient Protection and Affordable Care Act passed in March will lead
to various forms of pricing pressure for companies in the sector. The weak
economy and high unemployment has reduced the number of visits to physicians'
offices and the overall demand for health care, particularly those elective
treatments and procedures which can be postponed. Despite these challenges, we
remain optimistic about our health care holdings. The pricing concerns raised by
health care reform legislation should be partially offset by the 30 million
currently uninsured people who will gain coverage as a result. We believe that
the pharmaceutical, biotechnology, and medical device products currently in
development represent a more efficient way to treat diseases such as
Alzheimer's, diabetes, and cancer than the current standard of care. The aging
demographics in the United States, Europe, and Japan, along with rising
standards of living in developing markets such as China and India, should lead
to greater increases in the demand for health care products.
The information technology sector, which posted higher returns than the overall
S&P 500 over the past 12 months, remains attractive for several reasons. First,
internet usage has continued to grow, driven by social networking, e-commerce,
and the growth of devices such as smartphones and tablet computers. Second,
demand for semiconductors, computer hardware, and storage has remained robust as
consumers generate increasing amounts of data, photos, and videos. Third,
emerging middle-class consumers in developing economies represent a vast new
potential audience for technology products and services. Finally, many companies
in the information technology sector have strong balance sheets with cash at
record levels.
A more detailed discussion of the results of each PRIMECAP Odyssey Fund follows.
3
LETTER TO SHAREHOLDERS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
CONTINUED
PRIMECAP ODYSSEY STOCK FUND
From November 1, 2009 to October 31, 2010, the Stock Fund's total return of
+16.14% slightly trailed the S&P 500's total return of +16.52%, mainly due to
its overweight position and poor stock selection in the health care sector. The
fund's results were also hurt by its average cash position of nearly 10% during
the fiscal year and by poor stock selection in the consumer discretionary
sector. Positive stock selection and an overweight position in the industrials
sector, along with underweight positions in the financials and energy sectors,
benefited the fund.
Two health care companies were among the largest detractors from fund results.
Roche Holding AG (-5.6%), a Swiss pharmaceutical and biotechnology firm which is
the fund's largest holding, struggled due to concerns regarding the efficacy and
high cost of its cancer drug, Avastin. Looking forward, Roche faces fewer
challenges from patent expirations than its pharmaceutical competitors, and we
are optimistic about its pipeline for new drugs. Medical device manufacturer
Boston Scientific's (-21.3%) earnings declined following a 30-day recall of its
implantable cardiac defibril-lators. Holdings in other sectors that hurt the
fund's results included Vulcan Materials (-18.9%) and Symantec (-7.9%).
On the positive side, three industrial companies were among the top contributors
to fund results: Southwest Airlines, Boeing, and Rockwell Automation. Earnings
at Southwest Airlines (+64.1%) have rebounded as air travel volumes recovered.
We believe the company's recently announced acquisition of AirTran will likely
prove to be a good strategic decision. Boeing (+51.9%) appears well-positioned
to benefit from the expected growth in global air travel, particularly in the
emerging markets. Rockwell Automation (+56.0%), a provider of industrial
automation control and information solutions, has benefited from the recovery in
industrial production. Other top contributors included Biogen Idec (+48.8%),
Texas Instruments (+28.5%), and Altera (+35.9%).
4
LETTER TO SHAREHOLDERS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
CONTINUED
The top 10 holdings, which collectively represent 29.8% of the portfolio at the
period end, are listed below:
PRIMECAP ODYSSEY STOCK FUND ENDING % OF
TOP 10 HOLDINGS AS OF 10/31/10 TOTAL PORTFOLIO*
- --------------------------------------------------------------------------------
Roche Holding AG 4.4
- --------------------------------------------------------------------------------
Amgen Inc. 4.2
- --------------------------------------------------------------------------------
Texas Instruments Inc. 3.5
- --------------------------------------------------------------------------------
Eli Lilly & Co. 3.1
- --------------------------------------------------------------------------------
Marsh & McLennan Cos. 3.1
- --------------------------------------------------------------------------------
Novartis AG (ADS) 2.6
- --------------------------------------------------------------------------------
Medtronic Inc. 2.5
- --------------------------------------------------------------------------------
Microsoft Corp. 2.4
- --------------------------------------------------------------------------------
GlaxoSmithKline PLC ADS 2.1
- --------------------------------------------------------------------------------
Schweitzer-Mauduit Intl. Inc. 1.9
- --------------------------------------------------------------------------------
TOTAL % OF PORTFOLIO 29.8%
- --------------------------------------------------------------------------------
* The percentage is calculated by using the ending market value of the
security divided by the total investments of the fund.
PRIMECAP ODYSSEY GROWTH FUND
From November 1, 2009 to October 31, 2010, the Growth Fund's total return was
+20.96% compared with the S&P 500's total return of +16.52% and the Russell 1000
Growth Index's total return of +19.65%. Positive stock selection in the health
care and information technology sectors was a major contributor to fund results
relative to the S&P 500. The fund also benefited from its underweight position
in the financials and energy sectors, further helped by favorable stock
selection in both sectors.
Two of the top contributors to the fund's results were health care stocks:
Crucell N.V. (+62.0%) and Cepheid (+58.6%). The stock price of Crucell, a maker
of vaccines based in the Netherlands, surged when Johnson & Johnson announced an
agreement to acquire the shares of Crucell that it did not already own at a
substantial premium. Cepheid, a manufacturer of medical diagnostic tools,
experienced rapid sales growth of its tests that detect bacteria responsible for
serious hospital-related infections. Altera (+59.3%), Stratasys (+98.5%), and
Southwest Airlines (+64.1%) were among the holdings in other sectors that helped
the fund's returns.
5
LETTER TO SHAREHOLDERS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
CONTINUED
Although our selections in the health care sector made a positive contribution
to returns for the fiscal year, several health care stocks were among the
largest detractors from the fund's results, including two of the fund's largest
holdings: Conceptus (-19.0%) and Roche Holding AG (-5.6%). As an alternative to
tubal ligation for women, Conceptus manufactures a minimally invasive birth
control device for women. The company has experienced a slower than expected
increase in sales. Over time, we believe that the advantages of the company's
product and procedure will establish it as the standard of care for physicians
and their patients. Holdings in other sectors that hurt the fund's returns
included FormFactor (-42.7%) and Electronic Arts (-13.2%).
The top 10 holdings, which collectively represent 28.4% of the portfolio at the
period end, are listed below:
PRIMECAP ODYSSEY GROWTH FUND ENDING % OF
TOP 10 HOLDINGS AS OF 10/31/10 TOTAL PORTFOLIO*
- --------------------------------------------------------------------------------
Crucell N.V. ADR 4.6
- --------------------------------------------------------------------------------
Amgen Inc. 3.5
- --------------------------------------------------------------------------------
Roche Holding AG 3.4
- --------------------------------------------------------------------------------
Immunogen Inc. 3.2
- --------------------------------------------------------------------------------
Google Inc. (Cl A) 2.5
- --------------------------------------------------------------------------------
Seattle Genetics Inc. 2.5
- --------------------------------------------------------------------------------
Altera Corp. 2.2
- --------------------------------------------------------------------------------
Eli Lilly & Co. 2.2
- --------------------------------------------------------------------------------
Conceptus Inc. 2.2
- --------------------------------------------------------------------------------
Research in Motion Ltd. 2.1
- --------------------------------------------------------------------------------
TOTAL % OF PORTFOLIO 28.4%
- --------------------------------------------------------------------------------
* The percentage is calculated by using the ending market value of the
security divided by the total investments of the fund.
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
From November 1, 2009 to October 31, 2010, the Aggressive Growth Fund's total
return was +31.14%. This compares favorably to the S&P 500's total return of
+16.52% and the Russell Midcap Growth Index's total return of +28.03%. The
largest single contributor to the fund's results relative to the S&P 500 was the
fund's largest position, American Italian Pasta (+95.6%), which was acquired in
July at a substantial premium by Ralcorp Holdings. Positive stock selection and
the fund's overweight position in the information technology sector along with
positive stock
6
LETTER TO SHAREHOLDERS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
CONTINUED
selection in the health care sector were major contributors to the fund's
relative return, which was further helped by its underweight position in the
financials sector.
With corporations holding unprecedented levels of cash and earning virtually no
return on that cash, we believe we have entered an unusual period that will be
characterized by heightened acquisition activity and consolidation. In addition
to American Italian Pasta, two other holdings benefited from acquisition offers
at significant premiums. Vaccine manufacturer Crucell N.V. (+62.0%) agreed to be
acquired by Johnson & Johnson, and storage solution provider 3Par Inc. (+202.0%)
was acquired by Hewlett-Packard (HP). Biotechnology firm Pharmacyclics (+213.8%)
announced positive results for its drug to treat various types of lymphomas.
Stratasys Inc. (+98.5%), manufacturer of 3-D printers, signed a collaboration
agreement with HP that will enable it to take advantage of HP's broader sales
and distribution capabilities.
On the negative side, InterMune Inc. (-71.1%), FormFactor Inc. (-42.7%), and
Conceptus Inc. (-19.0%) were among the biggest detractors from the fund's
returns. FormFactor, a leading provider of testing equipment used by
semiconductor manufacturers, suffered from operational miscues. Following the
hiring of a new management team and significant restructuring, we expect the
company to recapture technological leadership and gain market share.
The top 10 holdings, which collectively represent 30.7% of the portfolio at the
period end, are listed below:
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND ENDING % OF
TOP 10 HOLDINGS AS OF 10/31/10 TOTAL PORTFOLIO*
- --------------------------------------------------------------------------------
Crucell N.V. ADR 4.3
- --------------------------------------------------------------------------------
Roche Holding AG 3.8
- --------------------------------------------------------------------------------
Immunogen Inc. 3.4
- --------------------------------------------------------------------------------
Seattle Genetics Inc. 3.2
- --------------------------------------------------------------------------------
Cepheid 3.0
- --------------------------------------------------------------------------------
Research in Motion Ltd. 2.8
- --------------------------------------------------------------------------------
Conceptus Inc. 2.6
- --------------------------------------------------------------------------------
Dendreon Corp. 2.6
- --------------------------------------------------------------------------------
Google Inc. (Cl A) 2.5
- --------------------------------------------------------------------------------
Stratasys Inc. 2.5
- --------------------------------------------------------------------------------
TOTAL % OF PORTFOLIO 30.7%
- --------------------------------------------------------------------------------
* The percentage is calculated by using the ending market value of the
security divided by the total investments of the fund.
7
LETTER TO SHAREHOLDERS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
CONTINUED
OUTLOOK
Looking ahead to fiscal year 2011, we are generally encouraged by the prospects
for equity returns, especially when compared to most other asset classes. With
10-year Treasury bonds yielding less than 3% and money market funds yielding
virtually nothing, we believe stocks, with a prospective earnings yield of over
7.5% and the potential for capital appreciation, represent an attractive
alternative.
However, there are several macro-level concerns that temper our optimism. The
current fiscal and monetary policies in the United States may ultimately lead to
a rise in inflation and a weaker U.S. dollar - which recently touched a 15-year
low against the Japanese yen and has weakened against the euro. Longer term, we
believe it will be difficult for the United States to sustain current fiscal
policies in an environment where spending needs and future obligations are
increasing faster than tax revenues. As the recent problems in Greece, Ireland,
and other European countries demonstrate, it is difficult to increase government
spending more rapidly than the growth rate of the broader economy for an
extended period. Increased regulations and other government intervention into
the private sector are even more troubling, as they distort economic incentives
and introduce uncertainty about the future environment for businesses and
consumers. We believe that market forces result in a more efficient allocation
of resources than government programs.
Despite these concerns, we have a generally positive outlook for U.S. equities.
We believe valuations for many companies are attractive relative to their
prospects for revenue and earnings growth and the strength and quality of their
balance sheets. We would highlight three factors. First, many U.S. companies
appear well-positioned to benefit from the long-term impact of globalization and
the continued development of emerging markets. While growth in the domestic
economy may be moderate at best, many U.S. corporations generate an increasing
portion of their revenues and earningsfrom abroad . Second,we are enthusiastic
about the potential for innovation by U .S. companies. We expect that
substantial investment in research and development will lead to the development
of new products and services that improve productivity for businesses and
quality of life for consumers. This should result in revenue and earnings growth
opportunities that are not reflected in current expectations. In particular, we
remain committed to our sizeable holdings in the health care and information
technology sectors. These two sectors also represent areas where the United
States has a strong competitive advantage relative to the rest of the world.
Third, the balance sheets of U.S. corporations are as strong and liquid as they
have ever been. Many companies are holding considerable cash balances, which
represent an under-utilized asset in the current low interest rate environment
but could be a source of higher returns in the future. We will continue to look
for opportunities to invest in companies with strong balance sheets that we
believe are well-positioned to benefit from innovation and globalization.
Sincerely,
PRIMECAP Management Company
November 12, 2010
Please see the following page for important information.
8
LETTER TO SHAREHOLDERS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
CONTINUED
THE FUNDS INVEST IN SMALLER COMPANIES, WHICH INVOLVE ADDITIONAL RISKS SUCH AS
LIMITED LIQUIDITY AND GREATER VOLATILITY. ALL FUNDS MAY INVEST IN FOREIGN
SECURITIES WHICH INVOLVES GREATER VOLATILITY AND POLITICAL, ECONOMIC AND
CURRENCY RISKS AND DIFFERENCES IN ACCOUNTING METHODS. MUTUAL FUND INVESTING
INVOLVES RISK, AND LOSS OF PRINCIPAL IS POSSIBLE. GROWTH STOCKS TYPICALLY ARE
MORE VOLATILE THAN VALUE STOCKS; HOWEVER, VALUE STOCKS HAVE A LOWER EXPECTED
GROWTH RATE IN EARNINGS AND SALES.
Please refer to the Schedule of Investments for details of fund holdings. Fund
holdings and sector allocations are subject to change at anytime and are not
recommendations to buy or sell any security. Current and future portfolio
holdings are subject to risk.
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX is a broad based index of
500 stocks, which is widely recognized as representative of the market in
general. THE RUSSELL 1000 GROWTH INDEX is an index that measures the performance
of those Russell 1000 companies with higher price-to-book ratios and higher
forecasted growth values. THE RUSSELL MID CAP GROWTH INDEX measures the
performance of those Russell Mid Cap companies with higher price-to-book ratios
and higher forecasted growth values. These indices do not incur expenses and are
not available for investment.
Earnings growth is an indicator for measuring a company's success and can be the
driving force behind stock price appreciation.
The information provided herein represents the opinions of PRIMECAP Management
Company and are not intended to be a forecast of future events, a guarantee of
future results, nor investment advice.
9
PERFORMANCE GRAPHS
PRIMECAP ODYSSEY STOCK FUND
- --------------------------------------------------------------------------------
The following chart compares the value of a hypothetical $10,000 investment in
the PRIMECAP Odyssey Stock Fund from November 1, 2004 (inception) to October 31,
2010, compared to the S&P 500 Index. This chart illustrates the performance of a
hypothetical $10,000 investment made on the fund's inception date and is not
intended to imply any future performance. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares. The chart assumes reinvestment of capital gains and
dividends.
(The following table was represented as a line chart in the printed material.)
PRIMECAP Odyssey Stock Fund
As Of 10/31/10
PRIMECAP Odyssey S&P 500
Stock Fund Index
----- ---- -----
11/1/2004 $ 10,000 $ 10,000
1/31/2005 $ 10,610 $ 10,493
4/30/2005 $ 10,490 $ 10,324
7/31/2005 $ 11,530 $ 11,064
10/31/2005 $ 11,480 $ 10,868
1/31/2006 $ 12,767 $ 11,581
4/30/2006 $ 13,047 $ 11,914
7/31/2006 $ 12,496 $ 11,658
10/31/2006 $ 13,487 $ 12,643
1/31/2007 $ 14,158 $ 13,261
1/31/2007 $ 14,632 $ 13,729
7/31/2007 $ 14,673 $ 13,539
10/31/2007 $ 15,359 $ 14,483
1/31/2008 $ 13,769 $ 12,955
4/30/2008 $ 13,799 $ 13,088
7/31/2008 $ 13,544 $ 12,038
10/31/2008 $ 10,332 $ 9,256
1/31/2009 $ 9,116 $ 7,950
4/30/2009 $ 10,095 $ 8,465
7/31/2009 $ 11,496 $ 9,633
10/31/2009 $ 12,042 $ 10,161
1/31/2010 $ 12,793 $ 10,583
4/30/2010 $ 14,110 $ 11,752
7/31/2010 $ 13,010 $ 10,966
10/31/2010 $ 13,986 $ 11,839
TOTAL RETURN
PERIOD ENDED OCTOBER 31, 2010
--------------------------------------
ANNUALIZED
SINCE INCEPTION
1 YEAR 5 YEAR (11/01/04)
------ ------ ---------------
PRIMECAP Odyssey Stock Fund 16.14% 4.03% 5.75%
S&P 500 Index* 16.52% 1.73% 2.86%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE OF THE FUND MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH
END MAY BE OBTAINED BY CALLING 1-800-729-2307. THE FUNDS IMPOSE A 2% REDEMPTION
FEE ON SHARES HELD LESS THAN 60 DAYS. PERFORMANCE FIGURES REFLECT THE FEE WAIVER
IN EFFECT AND, IN THE ABSENCE OF FEE WAIVERS, TOTAL RETURNS WOULD BE LOWER.
SHORT-TERM PERFORMANCE, IN PARTICULAR, IS NOT A GOOD INDICATION OF A FUND'S
FUTURE PERFORMANCE, AND AN INVESTMENT SHOULD NOT BE MADE BASED SOLELY ON PAST
RETURNS.
- --------
* The S&P 500 Index is an unmanaged index composed of 500 common stocks
weighted by market value; its total return includes reinvestment of
dividends and is considered representative of the stock market return as a
whole.
10
PERFORMANCE GRAPHS
PRIMECAP ODYSSEY GROWTH FUND
- --------------------------------------------------------------------------------
CONTINUED
The following chart compares the value of a hypothetical $10,000 investment in
the PRIMECAP Odyssey Growth Fund from November 1, 2004 (inception) to October
31, 2010, compared to the S&P 500 Index. This chart illustrates the performance
of a hypothetical $10,000 investment made on the fund's inception date and is
not intended to imply any future performance. The returns shown do not reflect
the deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares. The chart assumes reinvestment of capital gains and
dividends.
(The following table was represented as a line chart in the printed material.)
PRIMECAP Odyssey Growth Fund
As Of 10/31/10
PRIMECAP Odyssey S&P 500
Growth Fund Index
------ ---- -----
11/1/2004 $ 10,000 $ 10,000
1/31/2005 $ 10,550 $ 10,493
4/30/2005 $ 10,450 $ 10,324
7/31/2005 $ 11,540 $ 11,064
10/31/2005 $ 11,620 $ 10,868
1/31/2006 $ 12,908 $ 11,581
4/30/2006 $ 13,208 $ 11,914
7/31/2006 $ 12,688 $ 11,658
10/31/2006 $ 13,769 $ 12,643
1/31/2007 $ 14,420 $ 13,261
4/30/2007 $ 14,845 $ 13,729
7/31/2007 $ 14,764 $ 13,539
10/31/2007 $ 15,898 $ 14,483
1/31/2008 $ 13,807 $ 12,955
4/30/2008 $ 13,919 $ 13,088
7/31/2008 $ 13,359 $ 12,038
10/31/2008 $ 10,246 $ 9,256
1/31/2009 $ 9,200 $ 7,950
4/30/2009 $ 10,262 $ 8,465
7/31/2009 $ 12,039 $ 9,633
10/31/2009 $ 12,437 $ 10,161
1/31/2010 $ 13,274 $ 10,583
4/30/2010 $ 14,901 $ 11,752
7/31/2010 $ 13,662 $ 10,966
10/31/2010 $ 15,044 $ 11,839
TOTAL RETURN
PERIOD ENDED OCTOBER 31, 2010
-----------------------------------------
ANNUALIZED
SINCE INCEPTION
1 YEAR 5 YEAR (11/01/04)
-------- -------- ----------------
PRIMECAP Odyssey Growth Fund 20.96% 5.30% 7.05%
S&P 500 Index* 16.52% 1.73% 2.86%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE OF THE FUND MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH
END MAY BE OBTAINED BY CALLING 1-800-729-2307. THE FUNDS IMPOSE A 2% REDEMPTION
FEE ON SHARES HELD LESS THAN 60 DAYS. PERFORMANCE FIGURES REFLECT THE FEE WAIVER
IN EFFECT AND, IN THE ABSENCE OF FEE WAIVERS, TOTAL RETURNS WOULD BE LOWER.
SHORT-TERM PERFORMANCE, IN PARTICULAR, IS NOT A GOOD INDICATION OF A FUND'S
FUTURE PERFORMANCE, AND AN INVESTMENT SHOULD NOT BE MADE BASED SOLELY ON PAST
RETURNS.
- --------
* The S&P 500 Index is an unmanaged index composed of 500 common stocks
weighted by market value; its total return includes reinvestment of
dividends and is considered representative of the stock market return as a
whole.
11
PERFORMANCE GRAPHS
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
CONTINUED
The following chart compares the value of a hypothetical $10,000 investment in
the PRIMECAP Odyssey Aggressive Growth Fund from November 1, 2004 (inception) to
October 31, 2010, compared to the S&P 500 Index. This chart illustrates the
performance of a hypothetical $10,000 investment made on the fund's inception
date and is not intended to imply any future performance. The returns shown do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The chart assumes reinvestment
of capital gains and dividends.
(The following table was represented as a line chart in the printed material.)
PRIMECAP Odyssey Aggressive Growth Fund
As Of 10/31/10
PRIMECAP Odyssey
Aggressive S&P 500
Growth Fund Index
------ ---- -----
11/1/2004 $ 10,000 $ 10,493
4/30/2005 $ 9,890 $ 10,324
7/31/2005 $ 11,220 $ 11,064
10/31/2005 $ 11,240 $ 10,868
1/31/2006 $ 12,790 $ 11,581
4/30/2006 $ 13,110 $ 11,914
7/31/2006 $ 12,310 $ 11,658
10/31/2006 $ 13,920 $ 12,643
1/31/2007 $ 14,915 $ 13,261
4/30/2007 $ 15,280 $ 13,729
7/31/2007 $ 14,915 $ 13,539
10/31/2007 $ 16,253 $ 14,483
1/31/2008 $ 13,205 $ 12,955
4/30/2008 $ 13,134 $ 13,088
7/31/2008 $ 12,685 $ 12,038
10/31/2008 $ 9,654 $ 9,256
1/31/2009 $ 9,174 $ 7,950
4/30/2009 $ 10,113 $ 8,465
7/31/2009 $ 12,276 $ 9,633
10/31/2009 $ 12,583 $ 10,161
1/31/2010 $ 13,838 $ 10,583
4/30/2010 $ 16,185 $ 11,752
7/31/2010 $ 14,726 $ 10,966
10/31/2010 $ 16,501 $ 11,839
TOTAL RETURN
PERIOD ENDED OCTOBER 31, 2010
-----------------------------------
ANNUALIZED
SINCE INCEPTION
1 YEAR 5 YEAR (11/01/04)
------ ------- ---------------
PRIMECAP Odyssey Aggressive Growth Fund 31.14% 7.98% 8.71%
S&P 500 Index* 16.52% 1.73% 2.86%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE OF THE FUND MAY BE LOWER OR HIGHER
THAN THE PERFORMANCE QUOTED. PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH
END MAY BE OBTAINED BY CALLING 1-800-729-2307. THE FUNDS IMPOSE A 2% REDEMPTION
FEE ON SHARES HELD LESS THAN 60 DAYS. PERFORMANCE FIGURES REFLECT THE FEE WAIVER
IN EFFECT AND, IN THE ABSENCE OF FEE WAIVERS, TOTAL RETURNS WOULD BE LOWER.
SHORT-TERM PERFORMANCE, IN PARTICULAR, IS NOT A GOOD INDICATION OF A FUND'S
FUTURE PERFORMANCE, AND AN INVESTMENT SHOULD NOT BE MADE BASED SOLELY ON PAST
RETURNS.
- --------
* The S&P 500 Index is an unmanaged index composed of 500 common stocks
weighted by market value; its total return includes reinvestment of
dividends and is considered representative of the stock market return as a
whole.
12
EXPENSE EXAMPLE
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
(UNAUDITED)
As a shareholder of one or more of the funds, you incur ongoing costs, including
management fees and other fund expenses. This expense example is intended to
help you understand your ongoing costs (in dollars) of investing in the funds
and to compare these costs with the ongoing costs of investing in other mutual
funds.
The expense example is based on an investment of $1,000 invested for a six month
period beginning April 30, 2010 and held through October 31, 2010.
ACTUAL EXPENSES
The information in the table adjacent to the heading "Actual Performance"
provides actual account values and actual expenses. You may use the information
in these columns, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the column entitled "Expenses Paid during
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table adjacent to the heading "Hypothetical Performance
(5% return before expenses)" provides hypothetical account values and
hypothetical expenses based on the funds' actual expense ratios and an assumed
rate of return of 5% per year before expenses, which are not the funds' actual
returns. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
funds and other mutual funds. To do so, compare these 5% hypothetical examples
with the 5% hypothetical examples that appear in the shareholder reports of the
other mutual funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the information adjacent to the heading
"Hypothetical Performance (5% return before expenses)" is useful in comparing
ongoing costs only and will not help you determine the relative total costs of
owning different mutual funds. In addition, if transactional costs were
included, your costs would have been higher.
13
EXPENSE EXAMPLE
PRIMECAP ODYSSEY FUNDS
- -------------------------------------------------------------------------------------
(UNAUDITED) - CONTINUED
BEGINNING ENDING EXPENSES PAID EXPENSE RATIO
ACCOUNT ACCOUNT DURING PERIOD* DURING PERIOD*
VALUE VALUE (04/30/10 TO (04/30/10 TO
(04/30/10) (10/31/10) 10/31/10) 10/31/10)
- -------------------------------------------------------------------------------------
PRIMECAP ODYSSEY STOCK FUND
Actual Performance $1,000.00 $ 991.20 $3.55 0.71%
Hypothetical Performance
(5% return before expenses) $1,000.00 $1,021.64 $3.60 0.71%
PRIMECAP ODYSSEY GROWTH FUND
Actual Performance $1,000.00 $1,009.60 $3.46 0.68%
Hypothetical Performance
(5% return before expenses) $1,000.00 $1,021.77 $3.48 0.68%
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
Actual Performance $1,000.00 $1,019.50 $3.63 0.71%
Hypothetical Performance
(5% return before expenses) $1,000.00 $1,021.61 $3.63 0.71%
- -------------------------------------------------------------------------------------
- --------
* Expenses are equal to a fund's annualized expense ratio as indicated,
multiplied by the average account value over the period, multiplied by the
number of days in the most recent fiscal half-year period (184), then
divided by the number of days in the fiscal year (365) to reflect the
one-half year period.
14
SECTOR BREAKDOWN
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
PRIMECAP ODYSSEY STOCK FUND
- --------------------------------------------------------------------------------
Consumer Discretionary 7.7%
Consumer Staples 1.9%
Energy 7.2%
Financials 5.8%
Health Care 25.2%
Industrials 13.1%
Information Technology 21.4%
Materials 7.6%
Telecommunication Services 0.1%
Utilities 1.3%
Short Term Investments and Other Net Assets 8.7%
- --------------------------------------------------------------------------------
TOTAL 100.0%
- --------------------------------------------------------------------------------
PRIMECAP ODYSSEY GROWTH FUND
- --------------------------------------------------------------------------------
Consumer Discretionary 7.1%
Consumer Staples 0.4%
Energy 4.9%
Financials 3.2%
Health Care 38.6%
Industrials 9.3%
Information Technology 28.7%
Materials 3.2%
Telecommunication Services 0.1%
Short Term Investments and Other Net Assets 4.5%
- --------------------------------------------------------------------------------
TOTAL 100.0%
- --------------------------------------------------------------------------------
The tables above list sector allocations as a percentage of each fund's total
net assets as of October 31, 2010. The management report makes reference to
average allocations during the period. As a result, the sector allocations above
may differ from those discussed in the management report.
15
SECTOR BREAKDOWN
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
CONTINUED
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Consumer Discretionary 5.0%
Consumer Staples 1.4%
Energy 3.5%
Financials 1.4%
Health Care 38.5%
Industrials 8.9%
Information Technology 32.3%
Materials 3.1%
Telecommunication Services 0.1%
Short Term Investments and Other Net Assets 5.8%
- --------------------------------------------------------------------------------
TOTAL 100.0%
- --------------------------------------------------------------------------------
The table above lists sector allocations as a percentage of the fund's total net
assets as of October 31, 2010. The management report makes reference to average
allocations during the period. As a result, the sector allocations above may
differ from those discussed in the management report.
16
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY STOCK FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 91.3%
CONSUMER DISCRETIONARY: 7.7%
30,500 Amazon.com, Inc. (a) . . . . . . . . . . . . . . . . . $ 5,036,770
113,000 Bed Bath & Beyond, Inc. (a) . . . . . . . . . . . . . . 4,960,700
200,900 CarMax, Inc. (a). . . . . . . . . . . . . . . . . . . . 6,225,891
180,000 Collective Brands, Inc. (a) . . . . . . . . . . . . . . 2,759,400
64,500 DIRECTV Group, Inc. (The) (a). . . . . . . . . . . . . 2,803,170
199,300 Dress Barn, Inc. (a) . . . . . . . . . . . . . . . . . 4,571,942
32,200 Kohl's Corp. (a) . . . . . . . . . . . . . . . . . . . 1,648,640
100,000 Mattel, Inc.. . . . . . . . . . . . . . . . . . . . . . 2,333,000
8,100 Men's Wearhouse, Inc. . . . . . . . . . . . . . . . . . 197,964
59,900 Sony Corp. - ADR. . . . . . . . . . . . . . . . . . . . 2,027,016
81,700 TJX Cos, Inc. . . . . . . . . . . . . . . . . . . . . . 3,749,213
105,000 Walt Disney Co. (The). . . . . . . . . . . . . . . . . 3,791,550
88,000 Whirlpool Corp.. . . . . . . . . . . . . . . . . . . . 6,673,040
------------
46,778,296
------------
CONSUMER STAPLES: 1.9%
100,000 Kellogg Co. . . . . . . . . . . . . . . . . . . . . . . 5,026,000
50,000 PepsiCo, Inc. . . . . . . . . . . . . . . . . . . . . . 3,265,000
50,000 Procter & Gamble Co. . . . . . . . . . . . . . . . . . 3,178,500
------------
11,469,500
------------
ENERGY: 7.2%
124,900 Cameco Corp. . . . . . . . . . . . . . . . . . . . . . 3,866,904
80,000 Cameron International Corp. (a) . . . . . . . . . . . . 3,500,000
100,000 Cenovus Energy, Inc. . . . . . . . . . . . . . . . . . 2,782,000
46,000 EnCana Corp. . . . . . . . . . . . . . . . . . . . . . 1,298,120
70,000 EOG Resources, Inc. . . . . . . . . . . . . . . . . . . 6,700,400
100,000 National Oilwell Varco, Inc. . . . . . . . . . . . . . 5,376,000
30,000 Noble Energy, Inc. . . . . . . . . . . . . . . . . . . 2,444,400
209,999 Range Resources Corp. . . . . . . . . . . . . . . . . . 7,851,863
94,834 Schlumberger Ltd. . . . . . . . . . . . . . . . . . . . 6,627,948
56,000 Transocean Ltd. (a) . . . . . . . . . . . . . . . . . . 3,548,160
------------
43,995,795
------------
FINANCIALS: 5.8%
48,000 Berkshire Hathaway, Inc. - Class B (a) . . . . . . . . 3,818,880
60,000 Chubb Corp. . . . . . . . . . . . . . . . . . . . . . . 3,481,200
111,100 Discover Financial Services. . . . . . . . . . . . . . 1,960,915
755,350 Marsh & McLennan Cos, Inc. . . . . . . . . . . . . . . 18,868,643
160,000 Mercury General Corp. . . . . . . . . . . . . . . . . . 6,796,800
------------
34,926,438
------------
The accompanying notes are an integral part of these financial statements.
17
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY STOCK FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010 - CONTINUED
Shares Value
- --------------------------------------------------------------------------------
HEALTH CARE: 25.2%
75,000 Affymetrix, Inc. (a). . . . . . . . . . . . . . . . . .$ 336,000
445,500 Amgen, Inc. (a) . . . . . . . . . . . . . . . . . . . . 25,478,145
154,900 Biogen Idec, Inc. (a). . . . . . . . . . . . . . . . . 9,713,779
467,900 Boston Scientific Corp. (a) . . . . . . . . . . . . . . 2,985,202
265,000 Crucell N.V. - ADR (a) . . . . . . . . . . . . . . . . 8,588,650
547,600 Eli Lilly & Co. . . . . . . . . . . . . . . . . . . . . 19,275,520
331,600 GlaxoSmithKline PLC - ADR . . . . . . . . . . . . . . . 12,945,664
120,000 Johnson & Johnson . . . . . . . . . . . . . . . . . . . 7,640,400
439,300 Medtronic, Inc. . . . . . . . . . . . . . . . . . . . . 15,467,753
271,450 Novartis AG - ADR. . . . . . . . . . . . . . . . . . . 15,730,527
181,616 Roche Holding AG - CHF . . . . . . . . . . . . . . . . 26,668,881
16,500 Sanofi Aventis - ADR . . . . . . . . . . . . . . . . . 579,315
104,600 Waters Corp. (a). . . . . . . . . . . . . . . . . . . . 7,753,998
------------
153,163,834
------------
INDUSTRIALS: 13.1%
23,800 Alaska Air Group, Inc. (a) . . . . . . . . . . . . . . 1,256,640
60,000 Alexander & Baldwin, Inc. . . . . . . . . . . . . . . . 2,065,800
261,000 AMR Corp. . . . . . . . . . . . . . . . . . . . . . . . 2,056,680
45,000 Arkansas Best Corp.. . . . . . . . . . . . . . . . . . 1,139,850
240,000 Babcock & Wilcox Co. (a) . . . . . . . . . . . . . . . 5,476,800
159,400 Boeing Co. . . . . . . . . . . . . . . . . . . . . . . 11,260,016
23,500 Caterpillar, Inc. . . . . . . . . . . . . . . . . . . . 1,847,100
10,000 Deere & Co.. . . . . . . . . . . . . . . . . . . . . . 768,000
26,200 FedEx Corp. . . . . . . . . . . . . . . . . . . . . . . 2,298,264
218,900 Honeywell International, Inc.. . . . . . . . . . . . . 10,312,379
23,500 JetBlue Airways Corp. (a). . . . . . . . . . . . . . . 164,030
320,000 McDermott International, Inc. (a) . . . . . . . . . . . 4,937,600
50,000 Norfolk Southern Corp.. . . . . . . . . . . . . . . . . 3,074,500
74,300 Pall Corp. . . . . . . . . . . . . . . . . . . . . . . 3,170,381
149,800 Ritchie Bros. Auctioneers, Inc. . . . . . . . . . . . . 3,172,764
79,500 Rockwell Automation, Inc.. . . . . . . . . . . . . . . 4,958,415
795,700 Southwest Airlines Co. . . . . . . . . . . . . . . . . 10,948,832
1,900 Thomas & Betts Corp. (a) . . . . . . . . . . . . . . . 82,745
36,000 Union Pacific Corp. . . . . . . . . . . . . . . . . . . 3,156,480
112,500 United Parcel Service, Inc. . . . . . . . . . . . . . . 7,575,750
------------
79,723,026
------------
The accompanying notes are an integral part of these financial statements.
18
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY STOCK FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010 - CONTINUED
Shares Value
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY: 21.4%
45,650 Accenture Ltd. - Class A . . . . . . . . . . . . . . . $ 2,041,012
290,000 Altera Corp. . . . . .. . . . . . . . . . . . . . . . . 9,050,900
201,900 Applied Materials, Inc. . . . . . . . . . . . . . . . 2,495,484
40,321 ASML Holding N.V. - ADR . . . . . . . . . . . . . . . . 1,338,254
100,000 Corning, Inc. . . . . . . . . . . . . . . . . . . . . . 1,828,000
319,500 Electronic Arts, Inc. (a) . . . . . . . . . . . . . . . 5,064,075
300,100 EMC Corp. (a). . . . .. . . . . . . . . . . . . . . . . 6,305,101
3,000 Google, Inc. - Class A(a) . . . . . . . . . . . . . . . 1,838,970
46,000 Hewlett-Packard Co. . . . . . . . . . . . . . . . . . . 1,934,760
180,000 Intel Corp. . . . . . . . . . . . . . . . . . . . . . . 3,612,600
49,400 Intersil Corp. . . . .. . . . . . . . . . . . . . . . . 646,646
100,000 Intuit, Inc. (a). . . . . . . . . . . . . . . . . . . . 4,800,000
301,400 KLA-Tencor Corp.. . . . . . . . . . . . . . . . . . . . 10,766,008
876,700 L.M. Ericsson Telephone Co. - ADR . . . . . . . . . . . 9,634,933
550,000 Microsoft Corp. . . . . . . . . . . . . . . . . . . . . 14,652,000
112,900 Motorola, Inc. (a). . . . . . . . . . . . . . . . . . . 920,135
81,400 NeuStar, Inc. - Class A (a). . . . . . . . . . . . . . 2,100,934
300,000 NVIDIA Corp. (a) . . .. . . . . . . . . . . . . . . . . 3,609,000
88,500 Oracle Corp.. . . . . . . . . . . . . . . . . . . . . . 2,601,900
45,900 QUALCOMM, Inc.. . . . . . . . . . . . . . . . . . . 2,071,467
183,900 Research In Motion Ltd. (a). . . . . . . . . . . . . . 10,473,105
225,800 Symantec Corp. (a). . . . . . . . . . . . . . . . . . . 3,653,444
730,000 Texas Instruments, Inc. . . . . . . . . . . . . . . . . 21,586,100
233,100 Xilinx, Inc. . . . . .. . . . . . . . . . . . . . . . . 6,249,411
24,800 Yahoo!, Inc. (a). . . . . . . . . . . . . . . . . . . . 409,448
------------
129,683,687
------------
MATERIALS: 7.6%
9,725 Domtar Corp. . . . . .. . . . . . . . . . . . . . . . . 771,776
36,000 Freeport-McMoRan Copper & Gold, Inc. . . . . . . . . . 3,408,480
116,900 Monsanto Co. . . . . .. . . . . . . . . . . . . . . . . 6,946,198
58,000 Newmont Mining Corp. . . . . . . . . . . . . . . . . . 3,530,460
40,200 Potash Corp. of Saskatchewan, Inc. . . . . . . . . . . 5,832,618
186,000 Schweitzer-Mauduit International, Inc. . . . . . . . . 11,937,480
284,093 Vulcan Materials Co. .. . . . . . . . . . . . . . . . . 10,372,235
200,000 Weyerhaeuser Co.. . . . . . . . . . . . . . . . . . . . 3,244,000
------------
46,043,247
------------
The accompanying notes are an integral part of these financial statements.
19
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY STOCK FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010 - CONTINUED
Shares Value
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES: 0.1%
115,750 Sprint Nextel Corp. (a). . . . . . . . . . . . . . . . $ 476,890
------------
UTILITIES: 1.3%
70,000 Edison International. . . . . . . . . . . . . . . . . . 2,583,000
50,000 NextEra Energy, Inc. . . . . . . . . . . . . . . . . . 2,752,000
80,000 Public Service Enterprise Group, Inc.. . . . . . . . . 2,588,000
------------
7,923,000
------------
TOTAL COMMON STOCKS
(Cost $500,840,811). . . . . . . . . . . . . . . . . . . . . . . .$554,183,713
------------
Principal
Amount
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS: 9.6%
$58,019,559 Dreyfus Treasury Prime Cash Management . . . . . . . . $ 58,019,559
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $58,019,559). . . . . . . . . . . . . . . . . . . . . . . . 58,019,559
------------
TOTAL INVESTMENTS
(Cost $558,860,370): 100.9%. . . . . . . . . . . . . . . . . . . . 612,203,272
Liabilities in Excess of Other Assets: (0.9)% . . . . . . . . . . . (5,143,716)
------------
TOTAL NET ASSETS: 100.0% . . . . . . . . . . . . . . . . . . . . . .$607,059,556
============
- --------
Percentages are stated as a percent of net assets.
ADR - American Depository Receipt.
CHF - Swiss Security.
(a) Non Income Producing.
The accompanying notes are an integral part of these financial statements.
20
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY GROWTH FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 95.5%
CONSUMER DISCRETIONARY: 7.1%
250,000 99 Cents Only Stores (a) . . . .. . . . . . . . . . . .$ 3,855,000
77,900 Amazon.com, Inc. (a) . . . . . .. . . . . . . . . . . . 12,864,406
275,600 Bed Bath & Beyond, Inc. (a) . . . . . . . . . . . . . . 12,098,840
717,000 CarMax, Inc. (a). . . . . . . . . . . . . . . . . . . . 22,219,830
60,000 Carnival Corp. . . . . . . . . .. . . . . . . . . . . . 2,590,200
166,200 DIRECTV Group, Inc. (The) (a). .. . . . . . . . . . . . 7,223,052
270,000 DreamWorks Animation SKG, Inc. (a) . . . . . . . . . . 9,531,000
357,900 Dress Barn, Inc. (a) . . . . . .. . . . . . . . . . . . 8,210,226
228,500 Gentex Corp. . . . . . . . . . .. . . . . . . . . . . . 4,565,430
55,850 Kohl's Corp. (a) . . . . . . . .. . . . . . . . . . . . 2,859,520
200,000 Mattel, Inc.. . . . . . . . . . . . . . . . . . . . . . 4,666,000
343,800 Quiksilver, Inc. (a) . . . . . .. . . . . . . . . . . . 1,433,646
252,100 Sony Corp. - ADR. . . . . . . . . . . . . . . . . . . . 8,531,064
63,000 TJX Cos, Inc. . . . . . . . . . . . . . . . . . . . . . 2,891,070
------------
103,539,284
------------
CONSUMER STAPLES: 0.4%
100,000 Procter & Gamble Co. . . . . . .. . . . . . . . . . . . 6,357,000
------------
ENERGY: 4.9%
120,000 Cenovus Energy, Inc. . . . . . .. . . . . . . . . . . . 3,338,400
120,000 EnCana Corp. . . . . . . . . . .. . . . . . . . . . . . 3,386,400
115,400 EOG Resources, Inc. . . . . . . . . . . . . . . . . . . 11,046,088
100,000 Hess Corp. . . . . . . . . . . .. . . . . . . . . . . . 6,303,000
180,000 National Oilwell Varco, Inc. . .. . . . . . . . . . . . 9,676,800
60,000 Noble Energy, Inc. . . . . . . .. . . . . . . . . . . . 4,888,800
170,000 Oceaneering International, Inc. (a) . . . . . . . . . . 10,517,900
280,000 Range Resources Corp. . . . . . . . . . . . . . . . . . 10,469,200
158,100 Schlumberger Ltd. . . . . . . . . . . . . . . . . . . . 11,049,609
------------
70,676,197
------------
FINANCIALS: 3.2%
29,000 Bank of New York Mellon Corp. (The) . . . . . . . . . . . 726,740
88,950 Berkshire Hathaway, Inc. - Class B (a) . . . . . . . . . .7,076,862
180,000 Chubb Corp. . . . . . . . . . . . . . . . . . . . . . . 10,443,600
1,000,000 Marsh & McLennan Cos, Inc. . . .. . . . . . . . . . . . 24,980,000
140,000 Progressive Corp. (The) . . . . . . . . . . . . . . . . 2,962,400
------------
46,189,602
------------
The accompanying notes are an integral part of these financial statements.
21
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY GROWTH FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010 -- CONTINUED
Shares Value
- --------------------------------------------------------------------------------
HEALTH CARE: 38.6%
810,000 Abiomed, Inc. (a) . .. . . . . . . . . . . . . . . . . .$ 8,351,100
1,915,000 Accuray, Inc. (a) . .. . . . . . . . . . . . . . . . . . 12,600,700
281,000 Affymetrix, Inc. (a).. . . . . . . . . . . . . . . . . . 1,258,880
895,000 Amgen, Inc. (a) . . .. . . . . . . . . . . . . . . . . . 51,185,050
391,500 Biogen Idec, Inc. (a) . . . . . . . . . . . . . . . . 24,550,965
298,200 BioMarin Pharmaceutical, Inc. (a) . . . . . . . . . . . 7,800,912
672,500 Boston Scientific Corp. (a) .. . . . . . . . . . . . . . 4,290,550
1,340,100 Cepheid, Inc. (a) . .. . . . . . . . . . . . . . . . . . 28,195,704
80,000 Cerner Corp. (a). . .. . . . . . . . . . . . . . . . . . 7,026,400
2,213,728 Conceptus, Inc. (a)(b) . . . . . . . . . . . . . . . . . 31,457,075
2,066,200 Crucell N.V. - ADR (a) . . . . . . . . . . . . . . . . . 66,965,542
705,000 Dendreon Corp. (a) . . . . . . . . . . . . . . . . . . . 25,732,500
902,200 Eli Lilly & Co. . . .. . . . . . . . . . . . . . . . . . 31,757,440
88,800 GlaxoSmithKline PLC - ADR . . . . . . . . . . . . . . 3,466,752
270,000 Illumina, Inc. (a) . . . . . . . . . . . . . . . . . . . 14,663,700
5,620,000 Immunogen, Inc. (a)(b) . . . . . . . . . . . . . . . . . 46,196,400
120,000 Johnson & Johnson . . . . . . . . . . . . . . . . . . . 7,640,400
200,000 Kinetic Concepts, Inc. (a). .. . . . . . . . . . . . . . 7,606,000
120,000 Life Technologies Corp. (a) .. . . . . . . . . . . . . . 6,021,600
569,100 Medtronic, Inc. . . .. . . . . . . . . . . . . . . . . . 20,038,011
2,029,300 Nektar Therapeutics (a) . . .. . . . . . . . . . . . . . 29,566,901
260,800 Novartis AG - ADR . . . . . . . . . . . . . . . . . . 15,113,360
120,000 NuVasive, Inc. (a) . . . . . . . . . . . . . . . . . . . 3,144,000
260,000 OraSure Technologies, Inc. (a). . . . . . . . . . . . . 1,058,200
337,432 Roche Holding AG - CHF . . . . . . . . . . . . . . . . 49,549,234
2,213,300 Seattle Genetics, Inc. (a). .. . . . . . . . . . . . . . 36,275,987
136,200 SurModics, Inc. (a). . . . . . . . . . . . . . . . . . . 1,628,952
168,500 Waters Corp. (a). . .. . . . . . . . . . . . . . . . . . 12,490,905
300,000 Wright Medical Group, Inc. (a) . . . . . . . . . . . . . 4,002,000
------------
559,635,220
------------
INDUSTRIALS: 9.3%
60,000 Aecom Technology Corp. (a) . . . . . . . . . . . . . . . 1,589,400
2,317,300 AMR Corp. . . . . . .. . . . . . . . . . . . . . . . . . 18,260,324
340,000 Babcock & Wilcox Co. (a) . . . . . . . . . . . . . . . . 7,758,800
280,000 C. H. Robinson Worldwide, Inc. . . . . . . . . . . . . . 19,734,400
133,600 Caterpillar, Inc. . .. . . . . . . . . . . . . . . . . . 10,500,960
187,565 Colfax Corp. (a) . . . . . . . . . . . . . . . . . . . . 3,014,170
260,000 Expeditors International Washington, Inc. . . . . . . . 12,833,600
The accompanying notes are an integral part of these financial statements.
22
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY GROWTH FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010 -- CONTINUED
Shares Value
- --------------------------------------------------------------------------------
INDUSTRIALS (CONTINUED)
50,600 FedEx Corp. . . . . . . . . . . . . . . . . . . . . . . $ 4,438,632
284,550 JetBlue Airways Corp. (a). . . . . . . . . . . . . . . . 1,986,159
300,000 McDermott International, Inc. (a) . . . . . . . . . . . 4,629,000
107,800 Pall Corp. . . . . . . . . . . . . . . . . . . . . . . . 4,599,826
389,000 Ritchie Bros. Auctioneers, Inc. . . . . . . . . . . . . 8,239,020
50,000 Rockwell Automation, Inc.. . . . . . . . . . . . . . . . 3,118,500
1,851,900 Southwest Airlines Co. . . . . . . . . . . . . . . . . . 25,482,144
132,100 United Parcel Service, Inc. . . . . . . . . . . . . . . 8,895,614
------------
135,080,549
------------
INFORMATION TECHNOLOGY: 28.7%
57,850 Accenture Ltd. - Class A . . . . . . . . . . . . . . . . 2,586,474
607,500 Adobe Systems, Inc. (a) . . . . . . . . . . . . . . . . 17,101,125
200,000 Akamai Technologies, Inc. (a) . . . . . . . . . . . . . 10,334,000
1,040,000 Altera Corp. . . . . . . . . . . . . . . . . . . . . . . 32,458,400
389,300 Applied Materials, Inc. . . . . . . . . . . . . . . . . 4,811,748
167,944 ASML Holding N.V. - ADR . . . . . . . . . . . . . . . . 5,574,061
138,000 Avid Technology, Inc. (a). . . . . . . . . . . . . . . . 1,741,560
30,000 Cisco Systems, Inc. (a) . . . . . . . . . . . . . . . . 684,900
198,800 Corning, Inc. . . . . . . . . . . . . . . . . . . . . . 3,634,064
194,700 Cree, Inc. (a) . . . . . . . . . . . . . . . . . . . . . 9,986,163
37,000 Cymer, Inc. (a). . . . . . . . . . . . . . . . . . . . . 1,367,150
1,728,700 Electronic Arts, Inc. (a) . . . . . . . . . . . . . . . 27,399,895
783,700 EMC Corp. (a). . . . . . . . . . . . . . . . . . . . . . 16,465,537
1,760,000 Flextronics International Ltd. (a) . . . . . . . . . . . 12,601,600
833,450 FormFactor, Inc. (a) . . . . . . . . . . . . . . . . . . 8,109,469
60,080 Google, Inc. - Class A (a). . . . . . . . . . . . . . . 36,828,439
90,000 Hewlett-Packard Co. . . . . . . . . . . . . . . . . . . 3,785,400
185,500 Intel Corp. . . . . . . . . . . . . . . . . . . . . . . 3,722,985
78,000 Intersil Corp. - Class A . . . . . . . . . . . . . . . . 1,021,020
390,400 Intuit, Inc. (a). . . . . . . . . . . . . . . . . . . . 18,739,200
331,300 KLA-Tencor Corp.. . . . . . . . . . . . . . . . . . . . 11,834,036
1,315,000 L.M. Ericsson Telephone Co. - ADR . . . . . . . . . . . 14,451,850
49,000 McAfee, Inc. (a) . . . . . . . . . . . . . . . . . . . . 2,317,700
325,000 Micron Technology, Inc. (a) . . . . . . . . . . . . . . 2,687,750
443,900 Microsoft Corp. . . . . . . . . . . . . . . . . . . . . 11,825,496
245,900 Motorola, Inc. (a). . . . . . . . . . . . . . . . . . . 2,004,085
195,900 NeuStar, Inc. - Class A (a). . . . . . . . . . . . . . . 5,056,179
1,200,000 Nuance Communications, Inc. (a) . . . . . . . . . . . . 18,852,000
540,000 NVIDIA Corp. (a) . . . . . . . . . . . . . . . . . . . . 6,496,200
The accompanying notes are an integral part of these financial statements.
23
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY GROWTH FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010 -- CONTINUED
Shares Value
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (CONTINUED)
231,100 Oracle Corp.. . . . . . . . . . . . . . . . . . . . . .$ 6,794,340
90,000 QUALCOMM, Inc.. . . . . . . . . . . . . . . . . . . . . 4,061,700
409,800 Rambus, Inc. (a). . . . . . . . . . . . . . . . . . . . 8,101,746
530,150 Research In Motion Ltd. (a). . . . . . . . . . . . . . 30,192,042
151,800 SanDisk Corp. (a). . . . . . . . . . . . . . . . . . . 5,704,644
680,000 Stratasys, Inc. (a) . . . . . . . . . . . . . . . . . . 21,297,600
536,400 Symantec Corp. (a). . . . . . . . . . . . . . . . . . . 8,678,952
794,000 Texas Instruments, Inc. . . . . . . . . . . . . . . . . 23,478,580
200,000 Trimble Navigation Ltd. (a) . . . . . . . . . . . . . . 7,168,000
220,000 Xilinx, Inc. (a) . . . . . . . . . . . . . . . . . . . 5,898,200
------------
415,854,290
------------
MATERIALS: 3.2%
470,900 Monsanto Co. . . . . . . . . . . . . . . . . . . . . . 27,980,878
39,200 Potash Corp. of Saskatchewan, Inc. . . . . . . . . . . 5,687,528
17,250 Praxair, Inc. . . . . . . . . . . . . . . . . . . . . . 1,575,615
328,200 Vulcan Materials Co. . . . . . . . . . . . . . . . . . 11,982,582
------------
47,226,603
------------
TELECOMMUNICATION SERVICES: 0.1%
292,450 Sprint Nextel Corp. (a). . . . . . . . . . . . . . . . 1,204,894
------------
TOTAL COMMON STOCKS
(Cost $1,228,131,492) . . . . . . . . . . . . . . . . . . . . . $1,385,763,639
--------------
Principal
Amount
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS: 4.5%
$64,962,131 Dreyfus Treasury Prime Cash Management . . . . . . . . $ 64,962,131
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $64,962,131). . . . . . . . . . . . . . . . . . . . . . . . 64,962,131
------------
TOTAL INVESTMENTS
(Cost $1,293,093,623): 100.0% . . . . . . . . . . . . . . . . . .1,450,725,770
Other Assets in Excess of Liabilities: (0.0)% . . . . . . . . . . . 440,136
--------------
TOTAL NET ASSETS: 100.0% . . . . . . . . . . . . . . . . . . . . .$1,451,165,906
==============
Percentages are stated as a percent of net assets.
ADR - American Depository Receipt.
CHF - Swiss Security.
(a) Non Income Producing.
(b) Considered an affiliated company of the fund as the fund owns more
than 5% of the outstanding voting securities of such company.
The accompanying notes are an integral part of these financial statements.
24
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 94.2%
CONSUMER DISCRETIONARY: 5.0%
63,000 Amazon.com, Inc. (a) . . . . . . . . . . . . . . . . . $ 10,403,820
2,000 Bravo Brio Restaurant Group, Inc. (a) . . . . . . . . 36,000
333,400 CarMax, Inc. (a). . . . . . . . . . . . . . . . . . . 10,332,066
74,700 DIRECTV Group, Inc. (The) (a). . . . . . . . . . . . . 3,246,462
361,100 DreamWorks Animation SKG, Inc. (a) . . . . . . . . . . 12,746,830
140,000 Gentex Corp. . . . . . . . . . . . . . . . . . . . . . 2,797,200
229,000 Quiksilver, Inc. (a) . . . . . . . . . . . . . . . . . 954,930
-------------
40,517,308
-------------
CONSUMER STAPLES: 1.4%
3,211,705 Smart Balance, Inc. (a)(b). . . . . . . . . . . . . . . 11,433,670
-------------
ENERGY: 3.5%
140,000 Cabot Oil & Gas Corp. . . . . . . . . . . . . . . . . . 4,057,200
32,000 EOG Resources, Inc. . . . . . . . . . . . . . . . . . . 3,063,040
100,000 National Oilwell Varco, Inc. . . . . . . . . . . . . . 5,376,000
84,000 Oceaneering International, Inc. (a). . . . . . . . . . 5,197,080
200,000 Range Resources Corp. . . . . . . . . . . . . . . . . . 7,478,000
260,000 Rex Energy Corp. (a) . . . . . . . . . . . . . . . . . 3,203,200
-------------
28,374,520
-------------
FINANCIALS: 1.4%
605,820 MarketAxess Holdings, Inc. . . . . . . . . . . . . . . 11,007,749
-------------
HEALTH CARE: 38.5%
1,260,773 Abiomed, Inc. (a) . . . . . . . . . . . . . . . . . . . 12,998,570
1,250,000 Accuray, Inc. (a) . . . . . . . . . . . . . . . . . . . 8,225,000
222,000 Affymetrix, Inc. (a). . . . . . . . . . . . . . . . . . 994,560
205,000 Biogen Idec, Inc. (a). . . . . . . . . . . . . . . . . 12,855,550
510,300 BioMarin Pharmaceutical, Inc. (a) . . . . . . . . . . . 13,349,448
791,700 Boston Scientific Corp. (a) . . . . . . . . . . . . . . 5,051,046
591,600 Cardica, Inc. (a) . . . . . . . . . . . . . . . . . . . 1,348,848
1,172,800 Cepheid, Inc. (a) . . . . . . . . . . . . . . . . . . . 24,675,712
1,504,750 Conceptus, Inc. (a). . . . . . . . . . . . . . . . . . 21,382,497
1,087,000 Crucell N.V. - ADR (a) . . . . . . . . . . . . . . . . 35,229,670
568,800 Dendreon Corp. (a) . . . . . . . . . . . . . . . . . . 20,761,200
4,657,115 Dyax Corp. (a) . . . . . . . . . . . . . . . . . . . . 11,223,647
3,330,250 Immunogen, Inc. (a) . . . . . . . . . . . . . . . . . . 27,374,655
152,000 InterMune, Inc. (a). . . . . . . . . . . . . . . . . . 1,997,280
198,500 Kinetic Concepts, Inc. (a). . . . . . . . . . . . . . . 7,548,955
The accompanying notes are an integral part of these financial statements.
25
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010 - CONTINUED
Shares Value
- --------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
476,300 Luminex Corp. (a) . . . . . . . . . . . . . . . . . . .$ 8,578,163
1,160,200 Nektar Therapeutics (a) . . . . . . . . . . . . . . . . 16,904,114
115,000 NuVasive, Inc. (a) . . . . . . . . . . . . . . . . . . 3,013,000
1,742,600 OraSure Technologies, Inc. (a). . . . . . . . . . . . . 7,092,382
1,768,339 Pharmacyclics, Inc. (a) . . . . . . . . . . . . . . . . 10,822,235
207,700 Roche Holding AG - CHF . . . . . . . . . . . . . . . . 30,499,111
1,561,500 Seattle Genetics, Inc. (a). . . . . . . . . . . . . . . 25,592,985
116,000 SurModics, Inc. (a). . . . . . . . . . . . . . . . . . 1,387,360
240,000 Wright Medical Group, Inc. (a) . . . . . . . . . . . . 3,201,600
-------------
312,107,588
-------------
INDUSTRIALS: 8.9%
116,900 Aecom Technology Corp. (a) . . . . . . . . . . . . . . 3,096,681
195,000 Alaska Air Group, Inc. (a) . . . . . . . . . . . . . . 10,296,000
2,000,000 AMR Corp. . . . . . . . . . . . . . . . . . . . . . . . 15,760,000
116,000 C. H. Robinson Worldwide, Inc. . . . . . . . . . . . . 8,175,680
441,210 Colfax Corp. (a) . . . . . . . . . . . . . . . . . . . 7,090,245
845,425 JetBlue Airways Corp. (a). . . . . . . . . . . . . . . 5,901,066
82,600 Pall Corp. . . . . . . . . . . . . . . . . . . . . . . 3,524,542
271,700 Ritchie Bros. Auctioneers, Inc. . . . . . . . . . . . . 5,754,606
320,600 Southwest Airlines Co. . . . . . . . . . . . . . . . . 4,411,456
234,000 US Airways Group, Inc. (a) . . . . . . . . . . . . . . 2,758,860
45,000 USA Truck, Inc. (a) . . . . . . . . . . . . . . . . . . 617,400
400,000 Vitran Corp, Inc. (a) . . . . . . . . . . . . . . . . . 4,476,000
-------------
71,862,536
-------------
INFORMATION TECHNOLOGY: 32.3%
515,000 Adobe Systems, Inc. (a) . . . . . . . . . . . . . . . . 14,497,250
180,000 Akamai Technologies, Inc. (a) . . . . . . . . . . . . . 9,300,600
550,000 Altera Corp. . . . . . . . . . . . . . . . . . . . . . 17,165,500
284,588 ASML Holding N.V. - ADR . . . . . . . . . . . . . . . . 9,445,476
115,000 Avid Technology, Inc. (a). . . . . . . . . . . . . . . 1,451,300
159,600 Cree, Inc. (a) . . . . . . . . . . . . . . . . . . . . 8,185,884
96,500 Cymer, Inc. (a). . . . . . . . . . . . . . . . . . . . 3,565,675
1,009,800 Electronic Arts, Inc. (a) . . . . . . . . . . . . . . . 16,005,330
200,000 EMC Corp. (a). . . . . . . . . . . . . . . . . . . . . 4,202,000
270,000 FARO Technologies, Inc. (a) . . . . . . . . . . . . . . 6,517,800
716,300 FormFactor, Inc. (a) . . . . . . . . . . . . . . . . . 6,969,599
33,400 Google, Inc. - Class A (a). . . . . . . . . . . . . . . 20,473,866
752,100 Guidance Software, Inc. (a) . . . . . . . . . . . . . . 4,858,566
The accompanying notes are an integral part of these financial statements.
26
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010 - CONTINUED
Shares Value
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (CONTINUED)
20,000 Intermec, Inc. (a) . . . . . . . . . . . . . . . . . .$ 233,000
80,000 Internet Brands, Inc. (a) . . . . . . . . . . . . . . 1,059,200
275,000 Intuit, Inc. (a). . . . . . . . . . . . . . . . . . . 13,200,000
320,300 KLA-Tencor Corp.. . . . . . . . . . . . . . . . . . . 11,441,116
57,500 McAfee, Inc. (a) . . . . . . . . . . . . . . . . . . . 2,719,750
700,000 Micron Technology, Inc. (a) . . . . . . . . . . . . . 5,789,000
420,000 Monster Worldwide, Inc. (a) . . . . . . . . . . . . . 7,585,200
149,200 NeuStar, Inc. - Class A (a). . . . . . . . . . . . . . 3,850,852
440,000 Nuance Communications, Inc. (a) . . . . . . . . . . . 6,912,400
326,550 NVIDIA Corp. (a) . . . . . . . . . . . . . . . . . . . 3,928,396
311,800 Rambus, Inc. (a). . . . . . . . . . . . . . . . . . . 6,164,286
394,900 Research In Motion Ltd. (a). . . . . . . . . . . . . . 22,489,555
200,000 RightNow Technologies, Inc. (a) . . . . . . . . . . . 5,224,000
83,100 SanDisk Corp. (a). . . . . . . . . . . . . . . . . . . 3,122,898
52,100 Smart Technologies, Inc. (a). . . . . . . . . . . . . 676,779
637,700 Stratasys, Inc. (a) . . . . . . . . . . . . . . . . . 19,972,764
230,100 Symantec Corp. (a). . . . . . . . . . . . . . . . . . 3,723,018
120,000 Trimble Navigation Ltd. (a) . . . . . . . . . . . . . 4,300,800
789,600 Websense, Inc. (a) . . . . . . . . . . . . . . . . . . 15,886,752
60,000 Yahoo!, Inc. (a). . . . . . . . . . . . . . . . . . . 990,600
-------------
261,909,212
-------------
MATERIALS: 3.1%
286,800 Monsanto Co. . . . . . . . . . . . . . . . . . . . . . 17,041,656
54,400 Potash Corp. of Saskatchewan, Inc. . . . . . . . . . . 7,892,896
-------------
24,934,552
-------------
TELECOMMUNICATION SERVICES: 0.1%
296,700 Sprint Nextel Corp. (a). . . . . . . . . . . . . . . . 1,222,404
-------------
TOTAL COMMON STOCKS
(Cost $674,986,954). . . . . . . . . . . . . . . . . . . . . . . $ 763,369,539
-------------
The accompanying notes are an integral part of these financial statements.
27
SCHEDULE OF INVESTMENTS
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
OCTOBER 31, 2010 - CONTINUED
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS: 5.9%
$ 47,491,670 Dreyfus Treasury Prime Cash Management . . . . . . . .$ 47,491,670
-------------
TOTAL SHORT TERM INVESTMENTS
(Cost $47,491,670). . . . . . . . . . . . . . . . . . . . . . . . 47,491,670
-------------
TOTAL INVESTMENTS
(Cost $722,478,624) - 100.1% . . . . . . . . . . . . . . . . . . 810,861,209
Liabilities in Excess of Other Assets - (0.1)% . . . . . . . . . . (912,834)
-------------
TOTAL NET ASSETS: 100.0% . . . . . . . . . . . . . . . . . . . . . $ 809,948,375
=============
Percentages are stated as a percent of net assets.
ADR - American Depository Receipt.
CHF - Swiss Security.
(a) Non Income Producing.
(b) Considered an affiliated company of the fund as the fund owns more than 5%
of the outstanding voting securities of such company.
The accompanying notes are an integral part of these financial statements.
28
STATEMENTS OF ASSETS AND LIABILITIES
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
OCTOBER 31, 2010
PRIMECAP PRIMECAP PRIMECAP
ODYSSEY ODYSSEY ODYSSEY AGGRESSIVE
STOCK FUND GROWTH FUND GROWTH FUND
------------ -------------- ------------
ASSETS
Investments, at cost ............... $558,860,370 $1,293,093,623 $722,478,624
============ ============== ============
Investments, at value .............. $612,203,272 $1,450,725,770 $810,861,209
Receivables:
Securities sold ................... -- 432,983 --
Dividends and interest ............ 622,474 760,507 241,585
Fund shares sold .................. 948,387 2,369,886 5,693,597
Prepaid expenses and other assets 7,773 18,762 19,220
------------ -------------- ------------
Total assets ...................... 613,781,906 1,454,307,908 816,815,611
------------ -------------- ------------
LIABILITIES
Payable for securities purchased ... 5,785,501 579,924 5,344,107
Payable for fund shares repurchased 82,934 459,465 351,610
Payable to advisor (Note 6) ........ 706,383 1,816,060 975,563
Other accrued expenses & liabilities 147,532 286,553 195,956
------------ -------------- ------------
Total liabilities ................. 6,722,350 3,142,002 6,867,236
------------ -------------- ------------
NET ASSETS ........................... $607,059,556 $1,451,165,906 $809,948,375
============ ============== ============
Number of shares issued and
outstanding (unlimited shares
authorized, $0.01 par value) ....... 45,027,268 98,706,971 50,097,938
============ ============== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE ......... $ 13.48 $ 14.70 $ 16.17
============ ============== ============
COMPONENTS OF NET ASSETS
Paid-in capital .................... $582,350,790 $1,306,903,317 $693,734,043
Undistributed net investment
income ............................ 4,150,713 1,066,130 --
Accumulated net realized gain (loss)
on investments .................... (32,799,173) (14,468,743) 27,804,430
Accumulated net unrealized
appreciation on investments ....... 53,357,226 157,665,202 88,409,902
------------ -------------- ------------
Net assets ....................... $607,059,556 $1,451,165,906 $809,948,375
============ ============== ============
The accompanying notes are an integral part of these financial statements.
29
STATEMENTS OF OPERATIONS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2010
PRIMECAP PRIMECAP PRIMECAP
ODYSSEY ODYSSEY ODYSSEY AGGRESSIVE
STOCK FUND GROWTH FUND GROWTH FUND
----------- ------------ ------------
INVESTMENT INCOME
Income
Dividends (net of foreign taxes
withheld of $138,409, $313,446,
and $103,618, respectively) ..... $ 6,981,430(1) $ 8,877,499 $ 1,492,296
Interest income .................. 139 519 197
----------- ------------ ------------
Total income .................... 6,981,569 8,878,018 1,492,493
----------- ------------ ------------
Expenses
Advisory fees ..................... 1,892,370 5,919,638 3,168,933
Fund administration and
accounting costs ................ 155,340 512,197 272,566
Professional fees ................. 58,895 62,425 60,159
Shareholder servicing fees
and expenses .................... 123,807 416,817 288,278
Federal and state registration fees 32,808 47,419 45,040
Custody fees ...................... 33,752 100,526 64,164
Trustee fees and expenses ......... 28,167 29,485 28,585
Printing and mailing .............. 15,573 59,460 57,287
Other expenses .................... 44,169 96,298 51,088
----------- ------------ ------------
Total expenses .................... 2,384,881 7,244,265 4,036,100
----------- ------------ ------------
NET INVESTMENT INCOME (LOSS) ........ 4,596,688 1,633,753 (2,543,607)
----------- ------------ ------------
REALIZED AND CHANGE IN
UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investments 1,276,438 999,154 41,684,298
----------- ------------ ------------
Net change in unrealized
appreciation on investments ...... 52,908,147 189,779,096 102,743,903
----------- ------------ ------------
Net realized and unrealized gain
on investments ................... 54,184,585 190,778,250 144,428,201
----------- ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........... $58,781,273 $192,412,003 $141,884,594
=========== ============ ============
- --------
(1) Dividend income includes $2,117,073 relating to a special dividend.
The accompanying notes are an integral part of these financial statements.
30
STATEMENT OF CHANGES IN NET ASSETS
PRIMECAP ODYSSEY STOCK FUND
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2010 OCTOBER 31, 2009
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income ............................. $ 4,596,688 $ 1,659,313
Net realized gain (loss) on investments ........... 1,276,438 (28,008,473)
Net unrealized appreciation on investments ........ 52,908,147 47,825,757
------------ -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ....................... 58,781,273 21,476,597
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ............................. (1,831,079) (1,193,169)
Realized gain on investments ...................... -- --
------------ -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS .............. (1,831,079) (1,193,169)
------------ -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ......................... 403,570,379 100,416,214
Proceeds from reinvestment of distribution ........ 1,822,043 1,191,178
Cost of shares redeemed ........................... (34,962,948) (129,262,401)
Redemption fee proceeds ........................... 7,738 72,580
------------ -------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE ....... 370,437,212 (27,582,429)
------------ -------------
TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS ......... 427,387,406 (7,299,001)
NET ASSETS
Beginning of year ................................. 179,672,150 186,971,151
------------ -------------
End of year (including undistributed net investment
income of $4,150,713 and $1,385,823, respectively) $607,059,556 $ 179,672,150
============ =============
CHANGE IN CAPITAL SHARES
Shares Outstanding, beginning of year ............. 15,370,380 18,503,767
------------ -------------
Shares sold ...................................... 32,259,418 10,460,306
Shares issued on reinvestment of distributions ... 144,721 129,476
Shares repurchased ............................... (2,747,251) (13,723,169)
------------ -------------
Net increase (decrease) in capital shares ......... 29,656,888 (3,133,387)
------------ -------------
Shares Outstanding, end of year .................. 45,027,268 15,370,380
============ =============
The accompanying notes are an integral part of these financial statements.
31
STATEMENT OF CHANGES IN NET ASSETS
PRIMECAP ODYSSEY GROWTH FUND
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2010 OCTOBER 31, 2009
---------------- ----------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income ................................ $ 1,633,753 $ 1,697,113
Net realized gain (loss) on .......................... 999,154 (13,802,550)
investments
Net unrealized appreciation on investments ........... 189,779,096 114,126,729
-------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 192,412,003 102,021,292
-------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ................................ (1,825,837) (1,291,445)
Realized gain on investments ......................... -- --
-------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................. (1,825,837) (1,291,445)
-------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................ 745,167,382 371,086,180
Proceeds from reinvestment of distribution ........... 1,740,542 1,224,200
Cost of shares redeemed .............................. (192,905,219) (178,976,597)
Redemption fee proceeds .............................. 87,258 46,291
-------------- -------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS ........ 554,089,963 193,380,074
-------------- -------------
TOTAL INCREASE IN NET ASSETS ........................ 744,676,129 294,109,921
NET ASSETS
Beginning of year .................................... 706,489,777 412,379,856
-------------- -------------
End of year (including undistributed net investment
income of $1,066,130 and $1,256,012, respectively) $1,451,165,906 $ 706,489,777
============== =============
CHANGE IN CAPITAL SHARES
Shares Outstanding, beginning of year ................ 57,986,448 40,960,083
-------------- -------------
Shares sold .......................................... 54,837,387 35,350,990
Shares issued on reinvestment of distributions ....... 132,764 132,203
Shares repurchased ................................... (14,249,628) (18,456,828)
-------------- -------------
Net increase in capital shares ...................... 40,720,523 17,026,365
-------------- -------------
Shares Outstanding, end of year ...................... 98,706,971 57,986,448
============== =============
The accompanying notes are an integral part of these financial statements.
32
STATEMENT OF CHANGES IN NET ASSETS
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
YEAR ENDED YEAR ENDED
OCTOBER 31, 2010 OCTOBER 31, 2009
---------------- ----------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment loss ....................... $ (2,543,607) $ (1,419,736)
Net realized gain (loss) on investments ... 41,684,298 (10,430,012)
Net unrealized appreciation on investments 102,743,903 85,726,892
------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS. ........................ 141,884,594 73,877,144
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................. 402,604,235 125,071,901
Cost of shares redeemed ................... (98,500,526) (60,586,982)
Redemption fee proceeds ................... 129,280 40,419
------------ ------------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS ...................... 304,232,989 64,525,338
------------ ------------
TOTAL INCREASE IN NET ASSETS ............. 446,117,583 138,402,482
NET ASSETS
Beginning of year ......................... 363,830,792 225,428,310
------------ ------------
End of year ............................... $809,948,375 $363,830,792
============ ============
CHANGE IN CAPITAL SHARES
Shares Outstanding, beginning of year ..... 29,505,941 23,820,611
------------ ------------
Shares sold ............................... 27,379,055 12,038,983
Shares repurchased ........................ (6,787,058) (6,353,653)
------------ ------------
Net increase in capital shares ........... 20,591,997 5,685,330
------------ ------------
Shares Outstanding, end of year ........... 50,097,938 29,505,941
============ ============
The accompanying notes are an integral part of these financial statements.
33
FINANCIAL HIGHLIGHTS
PRIMECAP ODYSSEY STOCK FUND
- --------------------------------------------------------------------------------
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS ANNUAL REPORT.
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
OCT. 31, OCT. 31, OCT. 31, OCT. 31, OCT. 31,
2010 2009 2008 2007 2006
------ ------ ------ ------ ------
Net asset value, beginning of year .... $11.69 $10.10 $15.22 $13.48 $11.48
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............... 0.09(2) 0.10 0.06 0.07 0.03
Net realized and unrealized
gain (loss) on investments ......... 1.79 1.55 (4.99) 1.79 1.97
------ ------ ------ ------ ------
Total from investment operations ...... 1.88 1.65 (4.93) 1.86 2.00
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.09) (0.06) (0.07) (0.04) 0.00(1)
Distributions from realized gain .... 0.00 0.00 (0.12) (0.08) 0.00(1)
------ ------ ------ ------ ------
Total distributions ................... (0.09) (0.06) (0.19) (0.12) 0.00
------ ------ ------ ------ ------
Redemption fee proceeds ............... 0.00(1) 0.00(1) 0.00(1) 0.00(1) 0.00(1)
------ ------ ------ ------ ------
Net asset value, end of year .......... $13.48 $11.69 $10.10 $15.22 $13.48
====== ====== ====== ====== ======
Total return .......................... 16.14% 16.55% (32.73%) 13.88% 17.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions) $607.1 $179.7 $187.0 $216.4 $ 88.4
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.71% 0.80% 0.79% 0.81% 0.99%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS ............... 1.37%2 0.96% 0.51% 0.59% 0.41%
Portfolio turnover rate ............... 3.35% 33.55% 9.66% 5.87% 4.09%
- --------
(1) Amount represents less than $0.01 per share.
(2) Investment income per share reflects a special dividend of $0.05. Excluding
the special dividend, the ratio of net investment income to average net
assets would have been 0.74%.
The accompanying notes are an integral part of these financial statements.
34
FINANCIAL HIGHLIGHTS
PRIMECAP ODYSSEY GROWTH FUND
- --------------------------------------------------------------------------------
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS ANNUAL REPORT.
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
OCT. 31, OCT. 31, OCT. 31, OCT. 31, OCT. 31,
2010 2009 2008 2007 2006
-------- ------ ------ ------ ------
Net asset value, beginning of year .... $ 12.18 $10.07 $15.71 $13.76 $11.62
-------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............... 0.02 0.03 0.03 0.04 0.01
Net realized and unrealized
gain (loss) on investments ......... 2.53 2.11 (5.59) 2.07 2.14
-------- ------ ------ ------ ------
Total from investment operations ...... 2.55 2.14 (5.56) 2.11 2.15
-------- ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.03) (0.03) (0.04) (0.02) 0.001
Distributions from realized gain .... 0.00 0.00 (0.04) (0.14) (0.01)
-------- ------ ------ ------ ------
Total distributions ................... (0.03) (0.03) (0.08) (0.16) (0.01)
-------- ------ ------ ------ ------
Redemption fee proceeds ............... 0.00(1) 0.00(1) 0.00(1) 0.00(1) 0.00(1)
-------- ------ ------ ------ ------
Net asset value, end of year .......... $ 14.70 $12.18 $10.07 $15.71 $13.76
======== ====== ====== ====== =======
Total return .......................... 20.96% 21.39% (35.55%) 15.46% 18.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions) $1,451.2 $706.5 $412.4 $512.0 $202.2
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.68% 0.71% 0.71% 0.75% 0.89%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS ............... 0.15% 0.35% 0.26% 0.30% 0.19%
Portfolio turnover rate ............... 4.93% 12.49% 12.72% 4.83% 6.87%
- --------
(1) Amount represents less than $0.01 per share.
The accompanying notes are an integral part of these financial statements.
35
FINANCIAL HIGHLIGHTS
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS ANNUAL REPORT.
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
OCT. 31, OCT. 31, OCT. 31, OCT. 31, OCT. 31,
2010 2009 2008 2007 2006
------ ------ ------ ------ ------
Net asset value, beginning of year .... $12.33 $ 9.46 $16.03 $13.92 $11.24
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ................. (0.05) (0.05) (0.06) (0.03) (0.02)
Net realized and unrealized
gain (loss) on investments ......... 3.89 2.92 (6.42) 2.34 2.70
------ ------ ------ ------ ------
Total from investment operations ...... 3.84 2.87 (6.48) 2.31 2.68
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Distributions from realized gain .... 0.00 0.00 (0.09) (0.20) 0.00
------ ------ ------ ------ ------
Redemption fee proceeds ............... 0.00(1) 0.00(1) 0.00(1) 0.00(1) 0.00(1)
------ ------ ------ ------ ------
Net asset value, end of year .......... $16.17 $12.33 $ 9.46 $16.03 $13.92
====== ======= ====== ====== ======
Total return .......................... 31.14% 30.34% (40.60%) 16.76% 23.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions) .... $809.9 $363.8 $225.4 $375.2 $119.9
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.71% 0.77% 0.78% 0.78% 0.99%
RATIO OF NET INVESTMENT LOSS
TO AVERAGE NET ASSETS ............... (0.45%) (0.54%) (0.46%) (0.25%) (0.33%)
Portfolio turnover rate ............... 15.34% 19.70% 24.32% 6.02% 12.30%
- -------
(1) Amount represents less than $0.01 per share.
The accompanying notes are an integral part of these financial statements.
36
NOTES TO FINANCIAL STATEMENTS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2010
(1) ORGANIZATION
PRIMECAP Odyssey Funds (the "Trust") was organized on June 8, 2004 as a Delaware
statutory trust and is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust
is comprised of three series: PRIMECAP Odyssey Stock Fund, PRIMECAP Odyssey
Growth Fund, and PRIMECAP Odyssey Aggressive Growth Fund (the "Funds"), each of
which is diversified within the meaning of the 1940 Act. PRIMECAP Management
Company (the "Investment Advisor") serves as investment advisor to the Funds.
The Funds commenced operations on November 1, 2004.
Each Fund's investment objective is to provide long-term capital appreciation.
Each Fund is authorized to issue unlimited shares of beneficial interest. All
shares within each Fund have equal rights with respect to voting.
(2) SIGNIFICANT ACCOUNTING POLICIES
The Funds consistently follow the accounting policies set forth below which are
in conformity with accounting principles generally accepted in the United States
of America.
A. SECURITY VALUATION.
Securities traded on a national securities exchange are valued at the
last reported sales price at the close of regular trading on each day
the exchanges are open for trading. Securities listed on the NASDAQ
Global Market, the NASDAQ Global Select Market, and the NASDAQ Capital
Market are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. Quotations of foreign
securities in a foreign currency are valued daily in U.S. dollars on
the basis of the foreign currency exchange rates prevailing at the
time such valuation is determined. Foreign currency exchange rates
generally are determined prior to the close of the New York Stock
Exchange (the "NYSE"). Securities traded on an exchange for which
there have been no sales are valued at the mean between the bid and
asked price. Securities for which quotations are not readily available
are stated at their respective fair values as determined in good faith
by a valuation committee of the Investment Advisor in accordance with
procedures approved by the Trust's board of trustees. In determining
fair value, the Funds take into account all relevant factors and
available information. Consequently, the price of a security used by a
Fund to calculate its net asset value per share ("NAV") may differ
from quoted or published prices for the same security. Fair value
pricing involves subjective judgments, and there is no single standard
for determining a security's fair value. As a result, different mutual
funds could reasonably arrive at a different fair value for the same
security. It is possible that the fair value determined for a security
is materially different from the value that could be realized upon the
sale of that security or from the values that other mutual funds may
determine.
Investments in other funds are valued at their respective net asset
values as determined by those funds, in accordance with the 1940 Act.
37
NOTES TO FINANCIAL STATEMENTS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2010 - CONTINUED
Foreign securities are recorded in the financial statements after
translation to U.S. dollars based on the applicable exchange rate at
the end of the period. The Funds do not isolate that portion of the
results of operations arising as a result of changes in the currency
exchange rate from the fluctuations arising as a result of changes in
the market prices of investments during the period.
B. SHARE VALUATION.
The net asset value per share ("NAV") of a Fund is calculated by
dividing the sum of the value of the securities held by the Fund, plus
cash or other assets, minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding of the
Fund. The result is rounded to the nearest cent. The Funds' shares
will not be priced on the days on which the NYSE is closed for
trading.
C. FOREIGN CURRENCY.
Values of investments denominated in foreign currencies are converted
into U.S. dollars using the spot market rate of exchange at the time
of valuation. Purchases and sales of investments and dividend and
interest income are translated into U.S. dollars using the spot market
rate of exchange prevailing on the respective dates of such
translations. The gain or loss resulting from changes in foreign
exchange rates is included with net realized and unrealized gain or
loss from investments, as appropriate. Foreign securities and currency
transactions may involve certain considerations and risks not
typically associated with those of domestic origin.
D. FEDERAL INCOME TAXES.
Each Fund has elected to be treated as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. The Funds
intend to distribute substantially all of their taxable income and any
capital gains in excess of applicable capital loss carryforwards.
Accordingly, no provision for Federal income taxes has been made in
the accompanying financial statements.
The Funds may be subject to foreign taxes on income, gains on
investments, or currency repatriation, a portion of which may be
recoverable. The Funds will accrue such taxes and recoveries as
applicable based upon their current interpretations of the tax rules
and regulations that exist in the markets in which they invest.
There is no tax liability resulting from unrecognized tax benefits
relating to uncertain income tax positions taken or expected to be
taken on the tax return for the fiscal year-end October 31, 2010, or
for any other tax years which are open for exam. As of October 31,
2010, open tax years include the tax years ended October 31, 2007
through 2010. The Funds are also not aware of any tax positions for
which it is reasonably possible that the total amounts of unrecognized
tax benefits will significantly change in the next six months. The
Funds recognize interest and penalties, if any, related to
unrecognized tax benefits as income tax expense in the Statement of
Operations. During the period, the Funds did not incur any interest or
penalties.
38
NOTES TO FINANCIAL STATEMENTS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2010 - CONTINUED
E. ALLOCATION OF EXPENSES.
Each Fund is charged for those expenses directly attributable to it.
Expenses that are not directly attributable to a Fund are allocated
among the Funds in proportion to their respective assets or another
appropriate method.
F. SECURITY TRANSACTIONS, INVESTMENT INCOME, AND DISTRIBUTIONS. Security
transactions are accounted for on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend date,
and interest income is recognized on the accrual basis. Realized gains
and losses are evaluated on the basis of identified costs. Premiums
and discounts on the purchase of securities are amortized/ accreted
using the effective interest method. Accounting principles generally
accepted in the United States of America require that permanent
financial reporting and tax differences be reclassified in the capital
accounts.
G. USE OF ESTIMATES.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
H. INDEMNIFICATION OBLIGATIONS.
Under the Trust's organizational documents, its current and former
officers and trustees are indemnified against certain liabilities
arising out of the performance of their duties to the Funds. In
addition, in the normal course of business, the Funds enter into
contracts that contain a variety of representations and warranties
that provide general indemnifications. The Funds' maximum exposure
under these arrangements is unknown as this would involve future
claims that may be made against the Funds that have not yet occurred.
Based on experience, the Funds would expect the risk of loss to be
remote.
(3) INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, excluding
short-term investments, for the year ended October 31, 2010 were as follows:
FUND PURCHASES SALES
- ---- --------- -----
PRIMECAP Odyssey Stock Fund ............... $343,180,369 $10,243,036
PRIMECAP Odyssey Growth Fund .............. $588,365,944 $48,448,013
PRIMECAP Odyssey Aggressive Growth Fund ... $363,755,688 $79,661,206
39
NOTES TO FINANCIAL STATEMENTS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2010 - CONTINUED
(4) FAIR VALUE OF THE FINANCIAL INSTRUMENTS
On January 21, 2010, the FASB issued ASU 2010-06, Improving Disclosures about
Fair Value Measurements. ASU 2010-06 amends ASC 820, Fair Value Measurements and
Disclosures (formerly FASB Statement No. 157), to require additional disclosures
regarding fair measurements. Specifically, the amendment requires reporting
entities to disclose i) the inputs and valuation techniques used to measure fair
value for both recurring and nonrecurring fair value measurements for Level 2
and Level 3 positions; ii) transfers between all levels including Level 1 and
Level 2 as well as the reason(s) for all transfers; and with respect to Level 3
positions, transfers out separately from transfers in; and iii) purchases,
sales, issuances, and settlements on a gross basis in the Level 3 roll forward
rather than as one net number. Examples of inputs that may be used in valuing
Level 2 securities are current yields, current discount rates, credit quality,
yields for comparable securities, and trading volume.
The effective date of this guidance is for interim and annual periods beginning
after December 15, 2009; however, the requirements to provide the Level 3
activity for purchases, sales, issuances, and settlements on a gross basis will
be effective for interim and annual periods beginning after December 15, 2010.
The Funds follow a fair value hierarchy that distinguishes between market data
obtained from independent sources (observable inputs) and the Funds' own market
assumptions (unobservable inputs). These inputs are used in determining the
value of each Fund's investments and are summarized in the following fair value
hierarchy:
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Other significant observable inputs (including quoted prices for
similar securities, interest rates, foreign exchange rates, and
fair value estimates for foreign securities indices).
Level 3 - Significant unobservable inputs (including the Funds' own
assumptions in determining fair value of investments).
The following table provides the fair value measurements of applicable Fund
assets by level within the fair value hierarchy for each Fund as of October 31,
2010. These assets are measured on a recurring basis.
40
NOTES TO FINANCIAL STATEMENTS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2010 - CONTINUED
QUOTED PRICES
IN ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
FUND DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
- ---- ----------- --------- --------- --------- -----
PRIMECAP Equity
ODYSSEY STOCK Common Stock $ 554,183,713 $ -- $ -- $ 554,183,713
FUND ------------- ------ ------ --------------
Total Equity $ 554,183,713 $ -- $ -- $ 554,183,713
------------- ------ ------ --------------
Short-Term $ 58,019,559 $ -- $ -- $ 58,019,559
------------- ------ ------ --------------
Investments
Total Investments
in Securities $ 612,203,272 $ -- $ -- $ 612,203,272
============= ====== ====== ==============
PRIMECAP Equity
ODYSSEY GROWTH Common Stock $1,385,763,63 $ -- $ -- $1,385,763,639
FUND ------------- ------ ------ --------------
Total Equity $1,385,763,63 $ -- $ -- $1,385,763,639
------------- ------ ------ --------------
Short-Term $ 64,962,131 $ -- $ -- $ 64,962,131
------------- ------ ------ --------------
Investments
Total Investments
in Securities $1,450,725,77 $ -- $ -- $1,450,725,770
============= ====== ====== ==============
PRIMECAP Equity
ODYSSEY Common Stock $ 763,369,539 $ -- $ -- $ 763,369,539
AGGRESSIVE ------------- ------ ------ --------------
GROWTH FUND Total Equity $ 763,369,539 $ -- $ -- $ 763,369,539
------------- ------ ------ --------------
Short-Term $ 47,491,670 $ -- $ -- $ 47,491,670
------------- ------ ------ --------------
Investments
Total Investments
in Securities $ 810,861,209 $ -- $ -- $ 810,861,209
============= ====== ====== ==============
- ------
Refer to each Fund's respective Schedule of Investments for the breakdown of
major categories.
(5) DISTRIBUTION TO SHAREHOLDERS
Net investment income and net realized gains differ for financial statement and
tax purposes due to differing treatments of deferred wash sale losses.
41
NOTES TO FINANCIAL STATEMENTS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2010 - CONTINUED
As of October 31, 2010, the components of capital on a tax basis were as
follows:
PRIMECAP PRIMECAP PRIMECAP
ODYSSEY
ODYSSEY ODYSSEY AGGRESSIVE
STOCK FUND GROWTH FUND GROWTH FUND
---------- ----------- -----------
Cost of investments
for tax purposes(1) .......... $ 562,380,581 $1,297,133,832 $722,523,447
============= ============== ============
Gross tax unrealized
appreciation ................. 79,683,082 260,985,245 164,880,361
Gross tax unrealized
depreciation ................. (29,846,067) (107,360,252) (76,515,282)
------------- -------------- ------------
Net tax unrealized appreciation. $ 49,837,015 $ 153,624,993 $ 88,365,079
============= ============== ============
Undistributed ordinary income. $ 4,150,713 $ 1,066,130 $ --
Undistributed long-term
capital gain ................. -- -- 27,849,253
------------- -------------- ------------
Total distributable earnings ... $ 4,150,713 $ 1,066,130 $ 27,849,253
------------- -------------- ------------
Other accumulated loss ......... $ (29,278,962) $ (10,428,534) $ --
------------- -------------- ------------
Total accumulated gain ......... $ 24,708,766 $ 144,262,589 $116,214,332
============= ============== ============
- --------
(1) At October 31, 2010, the basis of investments for federal income tax
purposes differs from the cost for financial reporting purposes due to the
tax deferral of losses on wash sales.
U.S. Generally Accepted Accounting Principles (GAAP) require that certain
components of net assets relating to permanent differences be reclassified
between financial and tax reporting. These reclassifications have no effect on
net assets or net asset value per share. During the fiscal year ended October
31, 2010 the reclassifications were as follows:
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME LOSS PAID IN CAPITAL
------ ---- ---------------
PRIMECAP Odyssey
Stock Fund ................ (719) 1,246,263 (1,245,544)
PRIMECAP Odyssey
Growth Fund ............... 2,202 (2,202) --
PRIMECAP Odyssey
Aggressive Growth Fund .... 2,543,607 (3,185) (2,540,422)
The permanent differences relate to net operating losses, foreign currency
adjustments, and in-kind transfers of securities with differing book and tax
methods of accounting.
42
NOTES TO FINANCIAL STATEMENTS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2010 - CONTINUED
At October 31, 2010, the PRIMECAP Odyssey Stock Fund and PRIMECAP Odyssey Growth
Fund had capital loss carryovers of $29,278,962 and $10,428,534, respectively,
of which $3,593,931 and $689,857 expire on October 31, 2016, and $25,685,031 and
$9,738,677 expire on October 31, 2017, respectively.
Tax components of dividends paid during the year ended October 31, 2010 and the
year ended October 31, 2009 were as follows:
OCTOBER 31, 2010
-------------------------------
ORDINARY LONG-TERM
INCOME CAPITAL GAIN
DISTRIBUTIONS DISTRIBUTIONS
------------- -------------
PRIMECAP Odyssey Stock Fund ............... $1,831,079 $ --
PRIMECAP Odyssey Growth Fund .............. $1,825,837 $ --
PRIMECAP Odyssey Aggressive Growth Fund ... $ -- $ --
OCTOBER 31, 2009
------------------------------
ORDINARY LONG-TERM
INCOME CAPITAL GAIN
DISTRIBUTIONS DISTRIBUTIONS
------------- -------------
PRIMECAP Odyssey Stock Fund ............... $1,193,169 $ --
PRIMECAP Odyssey Growth Fund .............. $1,291,445 $ --
PRIMECAP Odyssey Aggressive Growth Fund ... $ -- $ --
The Funds designated as long-term capital gain dividends, pursuant to Internal
Revenue Code Section 852(b)(3), the amounts necessary to reduce the earnings and
profits of the Funds related to net capital gains to zero for the tax year ended
October 31, 2010.
(6) INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Trust has entered into an investment management agreement with the
Investment Advisor on behalf of each Fund. Under the terms of the agreement,
each of the Funds will pay a fee equal to the following annual percentages of
average net assets:
ASSETS IN
FOR THE FIRST EXCESS OF
$100,000,000 $100,000,000
PER FUND PER FUND
-------- --------
PRIMECAP Odyssey Stock Fund .................... 0.60% 0.55%
PRIMECAP Odyssey Growth Fund ................... 0.60% 0.55%
PRIMECAP Odyssey Aggressive Growth Fund ........ 0.60% 0.55%
The Bank of New York Mellon Corporation serves as the Funds' custodian. U.S.
Bancorp Fund Services, LLC ("USBFS") serves as the administrator, fund
accountant, and transfer agent to the Funds. Quasar Distributors, LLC, an
affiliate of USBFS, serves as the Funds' distributor.
43
NOTES TO FINANCIAL STATEMENTS
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 2010 - CONTINUED
(7) OTHER AFFILIATES
Certain of the Funds' investments are in companies that are considered to be
affiliated companies of a Fund because the Fund owns more than 5% of the
outstanding voting securities of the company. Transactions during the period in
securities of these companies were as follows:
PRIMECAP ODYSSEY GROWTH FUND
CURRENT PERIOD TRANSACTIONS
---------------------------------------
MARKET PROCEEDS MARKET
VALUE AS OF FROM VALUE AT
COMMON OCTOBER 31, PURCHASES SECURITIES DIVIDEND REALIZED OCTOBER 31,
STOCK 2009 AT COST SOLD INCOME GAIN(LOSS) 2010
- -------------------------------------------------------------------------------
Conceptus, NA(1) 17,786,450 -- -- -- 31,457,075
Inc.
Immunogen, -- 44,277,050 -- -- -- 46,196,400
Inc.
--------- ------------ ------ ------ ------ -----------
Total $-- $62,063,500 -- -- -- $77,653,475
========= ============ ====== ====== ====== ===========
PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
CURRENT PERIOD TRANSACTIONS
---------------------------------------
MARKET PROCEEDS MARKET
VALUE AS OF FROM VALUE AT
COMMON OCTOBER 31, PURCHASES SECURITIES DIVIDEND REALIZED OCTOBER 31,
STOCK 2009 AT COST SOLD INCOME GAIN(LOSS) 2010
- -------------------------------------------------------------------------------
Smart -- 13,836,944 -- -- -- 11,433,670
Balance,
Inc.
------ ----------- ------ ------ ------ ------------
Total $ -- $13,836,944 -- -- -- $ 11,433,670
====== =========== ====== ====== ====== ============
- ------
1 Not Applicable - At October 31, 2009, the security was held, but the issuer
was not an affiliated company of the Fund.
(8) SUBSEQUENT EVENTS
The funds have evaluated subsequent events through the issuance of the financial
statements and determined that no events have occurred that require disclosure.
44
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders
of PRIMECAP Odyssey Funds:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of PRIMECAP Odyssey Stock Fund,
PRIMECAP Odyssey Growth Fund and PRIMECAP Odyssey Aggressive Growth Fund (the
"Funds") at October 31, 2010, the results of each of their operations for the
year then ended, the changes in each of their net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods presented, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2010 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS, LLP
San Francisco, California
December 17, 2010
45
ADDITIONAL INFORMATION
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
(UNAUDITED)
ADDITIONAL TAX INFORMATION
The PRIMECAP Odyssey Stock Fund and PRIMECAP Odyssey Growth Fund designate 100%
and 100%, respectively, of ordinary income distributions paid during the fiscal
year ended October 31, 2010 as qualified dividend income.
The PRIMECAP Odyssey Stock Fund and PRIMECAP Odyssey Growth Fund designate 100%
and 100%, respectively, of ordinary income distributions paid during the fiscal
year ended October 31, 2010 as dividends qualifying for the dividends received
deduction available for corporate shareholders.
TAX NOTICE
Additional information for foreign shareholders only:
The PRIMECAP Odyssey Stock Fund and PRIMECAP Odyssey Growth Fund designate 1%
and 1%, respectively, of ordinary income distributions paid during the fiscal
year ended October 31, 2010 as interest related dividends under the Internal
Revenue Code Section 871 (k)(1)(c).
PROXY VOTING PROCEDURES
The Investment Advisor votes proxies relating to portfolio securities in
accordance with procedures that have been approved by the Trust's board of
trustees. You may obtain a description of these procedures, free of charge, by
calling toll-free 1-800-729-2307. This information is also available through the
Securities and Exchange Commission's ("SEC") website at http://www.sec.gov.
PROXY VOTING RECORD
Information regarding how the Funds voted proxies relating to the portfolio
securities during the most recent 12-month period ended June 30 is available
without charge, upon request, by calling toll-free 1-800-729-2307. This
information is also available through the SEC's website at http://www.sec.gov.
FORM N-Q DISCLOSURE
The Trust files its complete schedules of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The Trust's Form
N-Q is available on the SEC's website at http://www.sec.gov. The Trust's Form
N-Q may be reviewed and copied at the Commission's Public Reference Room in
Washington, DC, and information on the operation of the Public Reference Room
may be obtained by calling 1-800-SEC-0330. This information is also available,
without charge, by calling toll-free 1-800-729-2307.
46
ADDITIONAL INFORMATION
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
(UNAUDITED) - CONTINUED
BOARD APPROVAL OF THE RENEWAL OF THE INVESTMENT ADVISORY AGREEMENT
The Board of Trustees of PRIMECAP Odyssey Funds (the "Trust") is comprised of
five Trustees, four of whom are not "interested persons" of the Trust within the
meaning of the Investment Company Act of 1940, as amended (the "Independent
Trustees"). In September 2010, the Board of Trustees, including the Independent
Trustees, approved a one-year renewal of the Trust's investment advisory
agreement (the "Investment Advisory Agreement") with PRIMECAP Management Company
(the "Investment Advisor").
GENERAL INFORMATION
The following information summarizes the Board's considerations associated with
its review of the Investment Advisory Agreement. In connection with their
deliberations, the Board considered such information and factors as they
believed, in light of the legal advice furnished to them and their own business
judgment, to be relevant. The Investment Advisory Agreement was considered
separately for each Fund, although the Board took into account the common
interests of all the Funds in its review. In considering these matters, the
Board discussed the renewal of the Investment Advisory Agreement with
management, and the Independent Trustees met in private sessions with counsel at
which no employees of the Investment Advisor were present.
The Board reviewed extensive materials regarding the investment results of the
Funds, advisory fee and expense comparisons, financial and profitability
information with respect to the Investment Advisor, descriptions of various
functions such as compliance monitoring and portfolio trading practices, and
information about the personnel of the Investment Advisor providing services to
the Funds. They also took into account information they received at past Board
meetings with respect to these matters.
In deciding to approve the renewal of the Investment Advisory Agreement, the
Board and the Independent Trustees did not identify a single factor as
controlling, and this summary does not describe all of the matters considered.
However, the Board and the Independent Trustees concluded that each of the
various factors referred to below favored such approval.
NATURE, EXTENT, AND QUALITY OF SERVICES
The Board discussed the services provided by the Investment Advisor to the Funds
under the Investment Advisory Agreement, including the background, education,
and experience of its key portfolio management and operational personnel; its
overall financial strength and stability; its resources and efforts to retain,
attract, and motivate capable personnel to serve the Funds; and the overall
general quality and depth of its organization. The Board also took into account
the experience, capability, and integrity of the Investment Advisor's senior
management; its investment philosophy and processes, including its brokerage and
trading practices; its disaster recovery and contingency planning; and its
commitment and systems in place with regard to compliance with applicable laws
and regulations. The Board and the Independent Trustees concluded that the
nature, extent, and quality of services provided under the Investment Advisory
Agreement were satisfactory.
47
ADDITIONAL INFORMATION
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
(UNAUDITED) - CONTINUED
INVESTMENT PERFORMANCE
The Board assessed the performance of each Fund compared with its benchmark and
the average of a peer group of funds (each a "peer group") selected by
Morningstar, Inc. ("Morningstar") for theyear-to-date and one-year, three-year,
and five-year andsince-inception periods ended July 31, 2010. The Board made the
following observations in reviewing the Funds' performance:
o The PRIMECAP Odyssey Stock Fund outperformed the median return of the
funds in the Morningstar Large Cap Growth fund peer group and the S&P
500 Index for the three- and five-year periods ended July 31, 2010.
The Fund continued to significantly outperform its benchmark in the
period from the Fund's inception through July 31, 2010. The Fund had
lagged the S&P 500 during the year ended July 31, 2010 but performed
in line with its peer group.
o The total return of the PRIMECAP Odyssey Growth Fund exceeded the
median return of the funds in the Morningstar Large Cap Growth fund
peer group, the S&P 500 Index, and the Russell 1000 Growth Index for
all periods ended July 31, 2010, except for the S&P 500 Index and the
Russell 1000 Growth Index for the one-year period. The return from the
Fund's inception through July 31, 2010 was also better than those of
the S&P 500 and the Russell 1000 Growth Index.
o The performance of the PRIMECAP Odyssey Aggressive Growth Fund
exceeded that of the median return of the funds in the Morningstar
Mid-Cap Growth fund peer group and the S&P 500 Index for the
year-to-date, three-year and five-year periods ended July 31, 2010.
The Fund also outperformed the S&P 500 Index and the Russell MidCap
Growth Index from the Fund's inception through July 31, 2010. The
Fund's performance over the 12 months ended July 31, 2010 was slightly
lower than that of the Russell MidCap Growth Index but significantly
higher than that of the S&P 500.
Based on the information provided to them, the Board and the Independent
Trustees concluded that the performance of each Fund was satisfactory.
ADVISORY FEES AND FUND EXPENSES
The Board reviewed the fees and expenses paid by each Fund to the Investment
Advisor and an analysis of Morningstar data with respect to the fees and
expenses paid by comparable funds, noting in particular that:
o The PRIMECAP Odyssey Stock Fund had the lowest advisory fee and the
third-lowest total expense ratio in its Morningstar peer group.
o The PRIMECAP Odyssey Growth Fund's advisory fees and total expense
ratio were in the lowest quartiles of its Morningstar peer group.
o The advisory fee charged to the PRIMECAP Odyssey Aggressive Growth
Fund was the lowest in the Morningstar peer group, and the Fund's
total expenses were in the lowest quartile of the peer group.
48
ADDITIONAL INFORMATION
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
(UNAUDITED) - CONTINUED
The Board also reviewed the fees charged by the Investment Advisor to other
clients, including other funds for which it serves as sub-adviser. The Board
noted that, although such fees were lower than those charged to the Funds, the
Investment Advisor provided additional services to the Funds that it did not
provide to other clients. The Board and the Independent Trustees determined that
the advisory fees and expenses charged to the Funds were reasonable in
consideration of the services provided.
COSTS AND PROFITS OF THE INVESTMENT ADVISOR
The Board reviewed information relating to the costs of the Investment Advisor
in providing services under the Investment Advisory Agreement and the Investment
Advisor's profitability under that Agreement. The Board noted that, at the
Funds' current asset levels, the Investment Advisory Agreement was less
profitable to the Investment Advisor than its other advisory relationships. The
Board and the Independent Trustees determined that the Investment Advisor's
profitability under the Investment Advisory Agreement was reasonable in light of
the nature, extent, and quality of the services provided to the Funds.
ECONOMIES OF SCALE AND OTHER BENEFITS TO THE INVESTMENT ADVISOR
The Board reviewed whether the Funds had achieved economies of scale, noting
that the Funds' asset levels had fluctuated significantly during the past 12
months. The Board and the Independent Trustees noted that the current asset
levels of the Funds were not so substantial as to lead to economies of scale
that would necessitate including additional breakpoints in the advisory fee
schedule. The Board also considered the benefits received by the Investment
Advisor as a result of its relationship with the Funds, including investment
advisory fees and the intangible benefits of any favorable publicity arising in
connection with the Funds' performance.
CONCLUSIONS
Based on their review, including their consideration of each of the factors
referred to above, the Board and the Independent Trustees concluded that the
compensation payable to the Investment Advisor pursuant to the Investment
Advisory Agreement is fair and reasonable in light of the services being
provided by the Investment Advisor to the Funds and their shareholders, and that
renewal of the Investment Advisory Agreement was in the best interest of the
Funds and their shareholders.
49
MANAGEMENT
PRIMECAP ODYSSEY FUNDS
- --------------------------------------------------------------------------------
(UNAUDITED)
PORTFOLIO MANAGERS
PRIMECAP Management Company has five portfolio managers who together have more
than 175 years of investment experience. Each of these five individuals manages
a portion of the PRIMECAP Odyssey Stock Fund and the PRIMECAP Odyssey Growth
Fund. The PRIMECAP Odyssey Aggressive Growth Fund is primarily managed by
Messrs. Schow, Kolokotrones, Fried, and Mordecai. A small portion of each Fund's
assets may be managed by individuals in the Investment Advisor's research
department. The portfolio managers primarily responsible for overseeing the
Funds' investments are:
NAME YEARS OF EXPERIENCE
-----------------------------------------
Howard B. Schow 54
Mitchell J. Milias 46
Theo A. Kolokotrones 40
Joel P. Fried 25
Alfred W. Mordecai 13
-----------------------------------------
OFFICERS AND TRUSTEES
The Trust's officers, who administer the Funds' daily operations, are appointed
by the board of trustees. The trustees are responsible for the overall
management of the Trust, including establishing the Funds' policies and general
supervision and review of their investment activities. The Statement of
Additional Information includes additional information about the Trust's
trustees and is available, without charge, by calling 1-800-729-2307 or at the
Funds' web site at http://www.odysseyfunds.com.
EXECUTIVE OFFICERS. The table below sets forth certain information about each of
the Trust's executive officers.
POSITION(S) TERM OF OFFICE;
NAME, ADDRESS HELD LENGTH OF PRINCIPAL OCCUPATION(S)
(YEAR OF BIRTH) WITH TRUST TIME SERVED DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------
Howard B. Schow Co-Chief Indefinite; Chairman and Director, Portfolio Manager,
225 South Lake Ave., Executive Since 09/04 Chief Investment Officer, and Principal
Suite 400, Pasadena, CA Officer PRIMECAP Management Company
91101-3005
(1927)
- ------------------------------------------------------------------------------------------------
Theo A. Kolokotrones Co-Chief Indefinite; President, Director, Portfolio
225 South Lake Ave., Executive Since 09/04 Manager, and Principal
Suite 400, Pasadena, CA Officer PRIMECAP Management Company
91101-3005
(1946)
- ------------------------------------------------------------------------------------------------
50
MANAGEMENT
PRIMECAP ODYSSEY FUNDS
- ------------------------------------------------------------------------------------------------
(UNAUDITED) - CONTINUED
POSITION(S) TERM OF OFFICE;
NAME, ADDRESS HELD LENGTH OF PRINCIPAL OCCUPATION(S)
(YEAR OF BIRTH) WITH TRUST TIME SERVED DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------
Joel P. Fried Co-Chief Indefinite; Executive Vice President, Director,
225 South Lake Ave., Executive Since 09/04 Portfolio Manager, and Principal
Officer PRIMECAP Management Company
Suite 400, Pasadena, CA and Trustee
91101-3005
(1962)
- ------------------------------------------------------------------------------------------------
David H. Van Slooten Chief FinancialIndefinite; Executive Vice President, Portfolio
225 South Lake Ave., Officer and Since 06/04 Manager, Financial Analyst, and Principal
Suite 400, Pasadena, CA Secretary PRIMECAP Management Company
91101-3005 Chief Indefinite;
(1963) Administrative Since 02/09
Officer
- ------------------------------------------------------------------------------------------------
Karen Chen Vice President Indefinite; Chief Compliance Officer, Director of
225 South Lake Ave., of Compliance Since 10/04 Compliance and Reporting, PRIMECAP
Suite 400, Pasadena, CA and Chief Management Company
91101-3005 Compliance
(1973) Officer and
AML Officer
- ------------------------------------------------------------------------------------------------
"INDEPENDENT" TRUSTEES. The table below sets forth certain information about
each of the trustees of the Trust who is not an "interested person" of the Trust
as defined in the 1940 Act ("Independent Trustees").
NUMBER OF
TERM OF PORTFOLIOS OTHER
POSITION(S) OFFICE; PRINCIPAL IN FUND DIRECTOR-
NAME, ADDRESS HELD LENGTH OF OCCUPATION(S) COMPLEX BY SHIPS HELD
(YEAR OF BIRTH) WITH TRUST TIME SERVED DURING PAST 5 YEARS TRUSTEE(1) BY TRUSTEE
- -------------------------------------------------------------------------------------------------
Benjamin F. Hammon Chairman Indefinite; Retired; Director, 3 None
225 South Lake Ave., of the Since 09/04 Institutional Equity
Suite 400, Pasadena, CA Board and Sales, Salomon Smith
91101-3005 Trustee Barney Inc.
(1935) (1963-1998)
- -------------------------------------------------------------------------------------------------
Wayne H. Smith Chairman Indefinite; Retired; President, 3 None
225 South Lake Ave., of the Since 09/04 Wayne H. Smith
Suite 400, Pasadena, CA Audit Consulting, Inc.
91101-3005 Committee (2002-
(1941) and 2007); Vice
Trustee President,
Financial Services,
Avery
Dennison Corporation
(2001-2002); Vice
President, Financial
Services, and
Treasurer,
Avery Dennison
Corporation (1999-
2001)
- -------------------------------------------------------------------------------------------------
51
MANAGEMENT
PRIMECAP ODYSSEY FUNDS
- -------------------------------------------------------------------------------------------------
(UNAUDITED) - CONTINUED
NUMBER OF
TERM OF PORTFOLIOS OTHER
POSITION(S) OFFICE; PRINCIPAL IN FUND DIRECTOR-
NAME, ADDRESS HELD LENGTH OF OCCUPATION(S) COMPLEX BY SHIPS HELD
(YEAR OF BIRTH) WITH TRUST TIME SERVED DURING PAST 5 YEARS TRUSTEE(1) BY TRUSTEE
- -------------------------------------------------------------------------------------------------
Joseph G. Uzelac Trustee Indefinite; Retired; Managing 3 None
225 South Lake Ave., Since 10/07 Director, Lehman
Suite 400, Pasadena, CA Brothers Global
91101-3005 Investment Bank
(1944) (1988-2007)
- -------------------------------------------------------------------------------------------------
Elizabeth D. Obershaw Trustee Indefinite; Managing Director, 3 None
225 South Lake Ave., Since 06/08 Horsley Bridge
Suite 400, Pasadena, CA Partners, a
91101-3005 California-
(1960) based investment
advisor
(2007-present);
Vice
President and
Chief Investment
Officer,
Hewlett-Packard
Company
(1991-2007);
Hewlett-Packard
Company (1983-1991)
- -------------------------------------------------------------------------------------------------
(1) Fund Complex includes any funds, series of funds, or trusts that share the
same advisor or that hold themselves out to investors as related companies.
"INTERESTED" TRUSTEES. The table below sets forth certain information about each
of the trustees of the Trust who is an "interested person" of the Trust as
defined by the 1940 Act.
NUMBER OF
TERM OF PORTFOLIOS OTHER
POSITION(S) OFFICE; PRINCIPAL IN FUND DIRECTOR-
NAME, ADDRESS HELD LENGTH OF OCCUPATION(S) COMPLEX BY SHIPS HELD
(YEAR OF BIRTH) WITH TRUST TIME SERVED DURING PAST 5 YEARS TRUSTEE(1) BY TRUSTEE
- -------------------------------------------------------------------------------------------------
Joel P. Fried1 Co-Chief Indefinite; Executive Vice 3 None
225 South Lake Ave., Executive Since 09/04 President, Director,
Suite 400, Pasadena, Officer and Portfolio Manager, and
CA 91101-3005 Trustee Principal
(1962) PRIMECAP
Management Company
(1) Mr. Fried is an "interested person" of the Trust, as defined by the 1940
Act, because of his employ- ment with PRIMECAP Management Company, the
investment advisor to the Trust.
(2) Fund Complex includes any funds, series of funds, or trusts that share the
same advisor or that hold themselves out to investors as related companies.
52
Investment Advisor
PRIMECAP MANAGEMENT COMPANY
225 South Lake Avenue, Suite 400
Pasadena, California 91101
o
Distributor
QUASAR DISTRIBUTORS, LLC
615 East Michigan Street, 4th Floor
Milwaukee, Wisconsin 53202
o
Custodian
THE BANK OF NEW YORK MELLON CORPORATION
One Wall Street
New York, New York 10286
o
Transfer Agent
U.S. BANCORP FUND SERVICES, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, Wisconsin 53202
o
Administrator
U.S. BANCORP FUND SERVICES, LLC
2020 East Financial Way, Suite 100
Glendora, California 91741
o
Legal Counsel
BINGHAM McCUTCHEN LLP
355 South Grand Avenue, Suite 4400
Los Angeles, California 90071
o
Independent Registered Public Accounting Firm
PRICEWATERHOUSECOOPERS LLP
Three Embarcadero Center
San Francisco, California 94111
This report is intended for the shareholders of the PRIMECAP Odyssey Funds and
may not be used as sales literature unless preceded or accompanied by a current
prospectus.
PAST PERFORMANCE RESULTS SHOWN IN THIS REPORT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE PERFORMANCE. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
PRIMECAP, PRIMECAP Odyssey, and the PRIMECAP Odyssey logo are trademarks of
PRIMECAP Management Company.
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer and principal financial officer. The registrant has
not made any amendments to its code of ethics during the period covered by this
report. The registrant has not granted any waivers from any provisions of the
code of ethics during the period covered by this report.
The registrant undertakes to provide to any person without charge, upon request,
a copy of its code of ethics by mail when they call the registrant at
1-800-729-2307.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that there is at least one
audit committee financial expert serving on its audit committee. Wayne Smith is
the "audit committee financial expert" and is considered to be "independent" as
each term is defined in Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The registrant has engaged its principal accountant to perform audit services,
audit-related services, tax services and other services during the past two
fiscal years. "Audit services" refer to performing an audit of the registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years. "Audit-related services" refer to the assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit. "Tax services" refer to professional services rendered
by the principal accountant for tax compliance, tax advice, and tax planning.
There were no "Other services" provided by the principal accountant. The
following table details the aggregate fees billed or expected to be billed for
each of the last two fiscal years for audit fees, audit-related fees, tax fees
and other fees by the principal accountant.
- ---------------------------- ---------------------- ----------------------
FYE 10/31/2010 FYE 10/31/2009
- ---------------------------- ---------------------- ----------------------
Audit Fees $77,250 $75,000
Audit-Related Fees $0 $0
Tax Fees $17,250 $16,800
All Other Fees $0 $0
- ---------------------------- ---------------------- ----------------------
The audit committee has adopted pre-approval policies and procedures that
require the audit committee to pre-approve all audit and non-audit services of
the registrant, including services provided to any entity affiliated with the
registrant.
The percentage of fees billed by PricewaterhouseCoopers LLP applicable to
non-audit services pursuant to waiver of pre-approval requirement were as
follows:
- ---------------------------- ---------------------- ----------------------
FYE 10/31/20010 FYE 10/31/2010
- ---------------------------- ---------------------- ----------------------
Audit-Related Fees 0% 0%
Tax Fees 0% 0%
All Other Fees 0% 0%
- ---------------------------- ---------------------- ----------------------
All of the principal accountant's hours spent on auditing the registrant's
financial statements were attributed to work performed by full-time permanent
employees of the principal accountant.
The following table indicates the non-audit fees billed or expected to be billed
by the registrant's accountant for services to the registrant and to the
registrant's investment adviser (and any other entity, controlling, controlled
by, or under common control with the adviser that provides ongoing services to
the registrant for the last two fiscal years.
- ---------------------------------- ----------------- -----------------
Non-Audit Related Fees FYE 10/31/2010 FYE 10/31/2009
- ---------------------------------- ----------------- -----------------
Registrant $17,250 $16,800
Registrant's Investment Adviser $0 $0
- ---------------------------------- ----------------- -----------------
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ----------------------------------------------
Not applicable to registrants who are not listed issuers (as defined in Rule
10A-3 under the Securities Exchange Act of 1934).
ITEM 6. INVESTMENTS.
Schedule of Investments is included as part of the report to shareholders filed
under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to open-end investment companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors/trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's Co-Chief Executive Officers and Chief Financial Officer
have reviewed the Registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the
"Act")) as of a date within 90 days of the filing of this report, as
required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b)
under the Securities Exchange Act of 1934. Based on their review, such
officers have concluded that the disclosure controls and procedures are
effective in ensuring that information required to be disclosed in this
report is appropriately recorded, processed, summarized and reported and
made known to them by others within the Registrant and by the Registrant's
service provider.
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Any code of ethics or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy Item 2 requirements through filing an exhibit. Incorporated by
reference to the Registrant's Form N-CSR filed January 5, 2006
(2) A separate certification for each principal executive and principal
financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the
Act sent or given during the period covered by the report by or on behalf
of the registrant to 10 or more persons. Not applicable to open-end
investment companies.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
PRIMECAP Odyssey Funds
By /s/ Joel P. Fried
-------------------------------------------
Joel P. Fried, Co-Chief Executive Officer
Date January 3, 2011
By /s/ Howard B. Schow
-------------------------------------------
Howard B. Schow, Co-Chief Executive Officer
Date January 3, 2011
By /s/ Theo A. Kolokotrones
-------------------------------------------
Theo A. Kolokotrones, Co-Chief Executive Officer
Date January 3, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Joel P. Fried
-------------------------------------------
Joel P. Fried, Co-Chief Executive Officer
Date January 3, 2011
By /s/ Howard B. Schow
-------------------------------------------
Howard B. Schow, Co-Chief Executive Officer
Date December 28, 2010
By /s/ Theo A. Kolokotrones
-------------------------------------------
Theo A. Kolokotrones, Co-Chief Executive Officer
Date January 3, 2011
By /s/ David H. Van Slooten
-------------------------------------------
David H. Van Slooten, Chief Financial Officer
Date January 3, 2011
Print the name and title of each signing officer under his or her signature.
-4-