ANNUAL REPORT October 31, PRIMECAP Odyssey Stock Fund PRIMECAP Odyssey Growth Fund PRIMECAP Odyssey Aggressive Growth Fund

Transcription

1 ANNUAL REPORT October 31, 2010 PRIMECAP Odyssey Stock Fund PRIMECAP Odyssey Growth Fund PRIMECAP Odyssey Aggressive Growth Fund

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3 Table of Contents Letter to Shareholders Performance Graphs Expense Example Sector Breakdown Schedule of Investments PRIMECAP Odyssey Stock Fund PRIMECAP Odyssey Growth Fund PRIMECAP Odyssey Aggressive Growth Fund Statements of Assets and Liabilities Statements of Operations Statement of Changes in Net Assets PRIMECAP Odyssey Stock Fund PRIMECAP Odyssey Growth Fund PRIMECAP Odyssey Aggressive Growth Fund Financial Highlights PRIMECAP Odyssey Stock Fund PRIMECAP Odyssey Growth Fund PRIMECAP Odyssey Aggressive Growth Fund Notes to Financial Statements Report of Independent Registered Public Accounting Firm Additional Information Management

4 Letter to Shareholders Dear Fellow Shareholders, The PRIMECAP Odyssey Stock Fund, PRIMECAP Odyssey Growth Fund, and PRIMECAP Odyssey Aggressive Growth Fund posted total returns of %, %, and %, respectively, for the fiscal year ended October 31, By comparison, the unmanaged S&P 500 Index produced a total return of %. 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 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. 2 Annualized Total Returns as of 10/31/10 1-Year 5-Year Since Inception (11/1/04) PRIMECAP Odyssey Stock Fund % 4.03% 5.75% PRIMECAP Odyssey Growth Fund % 5.30% 7.05% PRIMECAP Odyssey Aggressive Growth Fund % 7.98% 8.71% S&P % 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 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.

5 Letter to Shareholders 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 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 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 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

6 Letter to Shareholders continued PRIMECAP Odyssey Stock Fund From November 1, 2009 to October 31, 2010, the Stock Fund s total return of % slightly trailed the S&P 500 s total return of %, 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 defibrillators. 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

7 Letter to Shareholders continued The top 10 holdings, which collectively represent 29.8% of the portfolio at the period end, are listed below: PRIMECAP Odyssey Stock Fund Top 10 Holdings as of 10/31/10 Ending % of 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 % compared with the S&P 500 s total return of % and the Russell 1000 Growth Index s total return of %. 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 hospitalrelated 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

8 Letter to Shareholders 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 Top 10 Holdings as of 10/31/10 Ending % of 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 %. This compares favorably to the S&P 500 s total return of % and the Russell Midcap Growth Index s total return of %. 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

9 Letter to Shareholders 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 Top 10 Holdings as of 10/31/10 Ending % of 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

10 Letter to Shareholders 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 earnings from 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

11 Letter to Shareholders 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

12 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. $17,000 $16,000 $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7, Nov Jan Apr Jul Oct Jan Apr-06 PRIMECAP Odyssey Stock Fund 31-Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct-09 S&P 500 Index 31-Jan Apr Jul Oct-10 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% $13,986 $11,839 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 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

13 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. $ 17,000 $16,000 $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7, Nov Jan Apr Jul Oct Jan Apr-06 PRIMECAP Odyssey Growth Fund 31-Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct-09 S&P 500 Index 31-Jan Apr Jul Oct-10 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% $15,044 $11,839 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 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

14 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. 12 $17,000 $16,000 $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7, Nov Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan-10 PRIMECAP Odyssey Aggressive Growth Fund 30-Apr Jul Oct-10 S&P 500 Index 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% $16,501 $11,839 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 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.

15 Expense Example (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, 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

16 Expense Example (Unaudited) continued PRIMECAP Odyssey Stock Fund 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) Actual Performance $1, $ $ % Hypothetical Performance (5% return before expenses) $1, $ 1, $ % PRIMECAP Odyssey Growth Fund Actual Performance $1, $ 1, $ % Hypothetical Performance (5% return before expenses) $1, $ 1, $ % PRIMECAP Odyssey Aggressive Growth Fund Actual Performance $1, $ 1, $ % Hypothetical Performance (5% return before expenses) $1, $1, $ % * Expenses are equal to a fund s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year period (184), then divided by the number of days in the fiscal year (365) to reflect the one-half year period. 14

17 Sector Breakdown 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, 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

18 Sector Breakdown 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, 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

19 Shares Schedule of Investments PRIMECAP Odyssey Stock Fund October 31, 2010 COMMON STOCKS: 91.3% Value Consumer Discretionary: 7.7% 30,500 Amazon.com, Inc. (a) $ 5,036, ,000 Bed Bath & Beyond, Inc. (a) ,960, ,900 CarMax, Inc. (a) ,225, ,000 Collective Brands, Inc. (a) ,759,400 64,500 DIRECTV Group, Inc. (The) (a) ,803, ,300 Dress Barn, Inc. (a) ,571,942 32,200 Kohl s Corp. (a) ,648, ,000 Mattel, Inc ,333,000 8,100 Men s Wearhouse, Inc ,964 59,900 Sony Corp. ADR ,027,016 81,700 TJX Cos, Inc ,749, ,000 Walt Disney Co. (The) ,791,550 88,000 Whirlpool Corp ,673,040 46,778,296 Consumer Staples: 1.9% 100,000 Kellogg Co ,026,000 50,000 PepsiCo, Inc ,265,000 50,000 Procter & Gamble Co ,178,500 11,469,500 Energy: 7.2% 124,900 Cameco Corp ,866,904 80,000 Cameron International Corp. (a) ,500, ,000 Cenovus Energy, Inc ,782,000 46,000 EnCana Corp ,298,120 70,000 EOG Resources, Inc ,700, ,000 National Oilwell Varco, Inc ,376,000 30,000 Noble Energy, Inc ,444, ,999 Range Resources Corp ,851,863 94,834 Schlumberger Ltd ,627,948 56,000 Transocean Ltd. (a) ,548,160 43,995,795 Financials: 5.8% 48,000 Berkshire Hathaway, Inc. Class B (a) ,818,880 60,000 Chubb Corp ,481, ,100 Discover Financial Services ,960, ,350 Marsh & McLennan Cos, Inc ,868, ,000 Mercury General Corp ,796,800 34,926,438 The accompanying notes are an integral part of these financial statements. 17

20 Schedule of Investments PRIMECAP Odyssey Stock Fund October 31, 2010 continued Shares Value Health Care: 25.2% 75,000 Affymetrix, Inc. (a) $ 336, ,500 Amgen, Inc. (a) ,478, ,900 Biogen Idec, Inc. (a) ,713, ,900 Boston Scientific Corp. (a) ,985, ,000 Crucell N.V. ADR (a) ,588, ,600 Eli Lilly & Co ,275, ,600 GlaxoSmithKline PLC ADR ,945, ,000 Johnson & Johnson ,640, ,300 Medtronic, Inc ,467, ,450 Novartis AG ADR ,730, ,616 Roche Holding AG CHF ,668,881 16,500 Sanofi Aventis ADR , ,600 Waters Corp. (a) ,753, ,163,834 Industrials: 13.1% 23,800 Alaska Air Group, Inc. (a) ,256,640 60,000 Alexander & Baldwin, Inc ,065, ,000 AMR Corp ,056,680 45,000 Arkansas Best Corp ,139, ,000 Babcock & Wilcox Co. (a) ,476, ,400 Boeing Co ,260,016 23,500 Caterpillar, Inc ,847,100 10,000 Deere & Co ,000 26,200 FedEx Corp ,298, ,900 Honeywell International, Inc ,312,379 23,500 JetBlue Airways Corp. (a) , ,000 McDermott International, Inc. (a) ,937,600 50,000 Norfolk Southern Corp ,074,500 74,300 Pall Corp ,170, ,800 Ritchie Bros. Auctioneers, Inc ,172,764 79,500 Rockwell Automation, Inc ,958, ,700 Southwest Airlines Co ,948,832 1,900 Thomas & Betts Corp. (a) ,745 36,000 Union Pacific Corp ,156, ,500 United Parcel Service, Inc ,575,750 79,723,026 The accompanying notes are an integral part of these financial statements. 18

21 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, ,000 Altera Corp ,050, ,900 Applied Materials, Inc ,495,484 40,321 ASML Holding N.V. ADR ,338, ,000 Corning, Inc ,828, ,500 Electronic Arts, Inc. (a) ,064, ,100 EMC Corp. (a) ,305,101 3,000 Google, Inc. Class A (a) ,838,970 46,000 Hewlett-Packard Co ,934, ,000 Intel Corp ,612,600 49,400 Intersil Corp , ,000 Intuit, Inc. (a) ,800, ,400 KLA-Tencor Corp ,766, ,700 L.M. Ericsson Telephone Co. ADR ,634, ,000 Microsoft Corp ,652, ,900 Motorola, Inc. (a) ,135 81,400 NeuStar, Inc. Class A (a) ,100, ,000 NVIDIA Corp. (a) ,609,000 88,500 Oracle Corp ,601,900 45,900 QUALCOMM, Inc ,071, ,900 Research In Motion Ltd. (a) ,473, ,800 Symantec Corp. (a) ,653, ,000 Texas Instruments, Inc ,586, ,100 Xilinx, Inc ,249,411 24,800 Yahoo!, Inc. (a) , ,683,687 Materials: 7.6% 9,725 Domtar Corp ,776 36,000 Freeport-McMoRan Copper & Gold, Inc ,408, ,900 Monsanto Co ,946,198 58,000 Newmont Mining Corp ,530,460 40,200 Potash Corp. of Saskatchewan, Inc ,832, ,000 Schweitzer-Mauduit International, Inc ,937, ,093 Vulcan Materials Co ,372, ,000 Weyerhaeuser Co ,244,000 46,043,247 The accompanying notes are an integral part of these financial statements. 19

22 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 ,583,000 50,000 NextEra Energy, Inc ,752,000 80,000 Public Service Enterprise Group, Inc ,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) ,019,559 TOTAL INVESTMENTS (Cost $558,860,370): 100.9% ,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

23 Shares Schedule of Investments PRIMECAP Odyssey Growth Fund October 31, 2010 COMMON STOCKS: 95.5% Value Consumer Discretionary: 7.1% 250, Cents Only Stores (a) $ 3,855,000 77,900 Amazon.com, Inc. (a) ,864, ,600 Bed Bath & Beyond, Inc. (a) ,098, ,000 CarMax, Inc. (a) ,219,830 60,000 Carnival Corp ,590, ,200 DIRECTV Group, Inc. (The) (a) ,223, ,000 DreamWorks Animation SKG, Inc. (a) ,531, ,900 Dress Barn, Inc. (a) ,210, ,500 Gentex Corp ,565,430 55,850 Kohl s Corp. (a) ,859, ,000 Mattel, Inc ,666, ,800 Quiksilver, Inc. (a) ,433, ,100 Sony Corp. ADR ,531,064 63,000 TJX Cos, Inc ,891, ,539,284 Consumer Staples: 0.4% 100,000 Procter & Gamble Co ,357,000 Energy: 4.9% 120,000 Cenovus Energy, Inc ,338, ,000 EnCana Corp ,386, ,400 EOG Resources, Inc ,046, ,000 Hess Corp ,303, ,000 National Oilwell Varco, Inc ,676,800 60,000 Noble Energy, Inc ,888, ,000 Oceaneering International, Inc. (a) ,517, ,000 Range Resources Corp ,469, ,100 Schlumberger Ltd ,049,609 70,676,197 Financials: 3.2% 29,000 Bank of New York Mellon Corp. (The) ,740 88,950 Berkshire Hathaway, Inc. Class B (a) ,076, ,000 Chubb Corp ,443,600 1,000,000 Marsh & McLennan Cos, Inc ,980, ,000 Progressive Corp. (The) ,962,400 46,189,602 The accompanying notes are an integral part of these financial statements. 21

24 Schedule of Investments PRIMECAP Odyssey Growth Fund October 31, 2010 continued Shares The accompanying notes are an integral part of these financial statements. 22 Value Health Care: 38.6% 810,000 Abiomed, Inc. (a) $ 8,351,100 1,915,000 Accuray, Inc. (a) ,600, ,000 Affymetrix, Inc. (a) ,258, ,000 Amgen, Inc. (a) ,185, ,500 Biogen Idec, Inc. (a) ,550, ,200 BioMarin Pharmaceutical, Inc. (a) ,800, ,500 Boston Scientific Corp. (a) ,290,550 1,340,100 Cepheid, Inc. (a) ,195,704 80,000 Cerner Corp. (a) ,026,400 2,213,728 Conceptus, Inc. (a)(b) ,457,075 2,066,200 Crucell N.V. ADR (a) ,965, ,000 Dendreon Corp. (a) ,732, ,200 Eli Lilly & Co ,757,440 88,800 GlaxoSmithKline PLC ADR ,466, ,000 Illumina, Inc. (a) ,663,700 5,620,000 Immunogen, Inc. (a)(b) ,196, ,000 Johnson & Johnson ,640, ,000 Kinetic Concepts, Inc. (a) ,606, ,000 Life Technologies Corp. (a) ,021, ,100 Medtronic, Inc ,038,011 2,029,300 Nektar Therapeutics (a) ,566, ,800 Novartis AG ADR ,113, ,000 NuVasive, Inc. (a) ,144, ,000 OraSure Technologies, Inc. (a) ,058, ,432 Roche Holding AG CHF ,549,234 2,213,300 Seattle Genetics, Inc. (a) ,275, ,200 SurModics, Inc. (a) ,628, ,500 Waters Corp. (a) ,490, ,000 Wright Medical Group, Inc. (a) ,002, ,635,220 Industrials: 9.3% 60,000 Aecom Technology Corp. (a) ,589,400 2,317,300 AMR Corp ,260, ,000 Babcock & Wilcox Co. (a) ,758, ,000 C. H. Robinson Worldwide, Inc ,734, ,600 Caterpillar, Inc ,500, ,565 Colfax Corp. (a) ,014, ,000 Expeditors International Washington, Inc ,833,600

25 Schedule of Investments PRIMECAP Odyssey Growth Fund October 31, 2010 continued Shares Value Industrials (continued) 50,600 FedEx Corp $ 4,438, ,550 JetBlue Airways Corp. (a) ,986, ,000 McDermott International, Inc. (a) ,629, ,800 Pall Corp ,599, ,000 Ritchie Bros. Auctioneers, Inc ,239,020 50,000 Rockwell Automation, Inc ,118,500 1,851,900 Southwest Airlines Co ,482, ,100 United Parcel Service, Inc ,895, ,080,549 Information Technology: 28.7% 57,850 Accenture Ltd. Class A ,586, ,500 Adobe Systems, Inc. (a) ,101, ,000 Akamai Technologies, Inc. (a) ,334,000 1,040,000 Altera Corp ,458, ,300 Applied Materials, Inc ,811, ,944 ASML Holding N.V. ADR ,574, ,000 Avid Technology, Inc. (a) ,741,560 30,000 Cisco Systems, Inc. (a) , ,800 Corning, Inc ,634, ,700 Cree, Inc. (a) ,986,163 37,000 Cymer, Inc. (a) ,367,150 1,728,700 Electronic Arts, Inc. (a) ,399, ,700 EMC Corp. (a) ,465,537 1,760,000 Flextronics International Ltd. (a) ,601, ,450 FormFactor, Inc. (a) ,109,469 60,080 Google, Inc. Class A (a) ,828,439 90,000 Hewlett-Packard Co ,785, ,500 Intel Corp ,722,985 78,000 Intersil Corp. Class A ,021, ,400 Intuit, Inc. (a) ,739, ,300 KLA-Tencor Corp ,834,036 1,315,000 L.M. Ericsson Telephone Co. ADR ,451,850 49,000 McAfee, Inc. (a) ,317, ,000 Micron Technology, Inc. (a) ,687, ,900 Microsoft Corp ,825, ,900 Motorola, Inc. (a) ,004, ,900 NeuStar, Inc. Class A (a) ,056,179 1,200,000 Nuance Communications, Inc. (a) ,852, ,000 NVIDIA Corp. (a) ,496,200 The accompanying notes are an integral part of these financial statements. 23

26 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 ,061, ,800 Rambus, Inc. (a) ,101, ,150 Research In Motion Ltd. (a) ,192, ,800 SanDisk Corp. (a) ,704, ,000 Stratasys, Inc. (a) ,297, ,400 Symantec Corp. (a) ,678, ,000 Texas Instruments, Inc ,478, ,000 Trimble Navigation Ltd. (a) ,168, ,000 Xilinx, Inc. (a) ,898, ,854,290 Materials: 3.2% 470,900 Monsanto Co ,980,878 39,200 Potash Corp. of Saskatchewan, Inc ,687,528 17,250 Praxair, Inc ,575, ,200 Vulcan Materials Co ,982,582 47,226,603 Telecommunication Services: 0.1% 292,450 Sprint Nextel Corp. (a) ,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) ,962,131 TOTAL INVESTMENTS (Cost $1,293,093,623): 100.0% ,450,725,770 Other Assets in Excess of Liabilities: (0.0)% ,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