-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gk1RtteA21cRXjXk/ESsGoTgbjzrJ2PGqoR7Z+zT7Qd7jDi1LjdhQk/27QcoJ8D0 HMR4kJavBYu4hEWkFCkxAA== 0001116679-04-001531.txt : 20040701 0001116679-04-001531.hdr.sgml : 20040701 20040701143541 ACCESSION NUMBER: 0001116679-04-001531 CONFORMED SUBMISSION TYPE: N-1A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20040701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMECAP Odyssey Funds CENTRAL INDEX KEY: 0001293967 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-1A SEC ACT: 1933 Act SEC FILE NUMBER: 333-117063 FILM NUMBER: 04894571 BUSINESS ADDRESS: STREET 1: 225 SOUTH LAKE AVENUE, SUITE 400 CITY: PASADENA STATE: CA ZIP: 91101-3005 BUSINESS PHONE: 626-304-9222 MAIL ADDRESS: STREET 1: 225 SOUTH LAKE AVENUE, SUITE 400 CITY: PASADENA STATE: CA ZIP: 91101-3005 FORMER COMPANY: FORMER CONFORMED NAME: PRIMECAP Funds DATE OF NAME CHANGE: 20040616 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMECAP Odyssey Funds CENTRAL INDEX KEY: 0001293967 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-1A SEC ACT: 1940 Act SEC FILE NUMBER: 811-21597 FILM NUMBER: 04894572 BUSINESS ADDRESS: STREET 1: 225 SOUTH LAKE AVENUE, SUITE 400 CITY: PASADENA STATE: CA ZIP: 91101-3005 BUSINESS PHONE: 626-304-9222 MAIL ADDRESS: STREET 1: 225 SOUTH LAKE AVENUE, SUITE 400 CITY: PASADENA STATE: CA ZIP: 91101-3005 FORMER COMPANY: FORMER CONFORMED NAME: PRIMECAP Funds DATE OF NAME CHANGE: 20040616 N-1A 1 n1a.htm


As filed with the Securities and Exchange Commission on July 1, 2004
                                                              File Nos. 333-___
                                                                        811-___

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM N-1A

            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                                      and

        REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

                            PRIMECAP Odyssey Funds
            (Exact Name of Registrant as Specified in its Charter)

           225 South Lake Avenue, Suite 400, Pasadena, CA 91101-3005
                    (Address of Principal Executive Office)

                                (626) 304-9222
             (Registrant's Telephone Number, Including Area Code)

                         Mitchell J. Milias, President
           225 South Lake Avenue, Suite 400, Pasadena, CA 91101-3005
                    (Name and Address of Agent for Service)

                                   Copy to:
                                Michael Glazer
                    Paul, Hastings, Janofsky & Walker, LLP
            515 South Flower Street, Los Angeles, California 90071
                           _________________________

      The Registrant hereby amends this Registration Statement under the
      Securities Act of 1933 on such date or dates as may be necessary to
      delay its effective date until the Registrant shall file a further
      amendment which specifically states that this Registration Statement
      shall thereafter become effective in accordance with the provisions of
      Section 8(a) of the Securities Act of 1933 or until the Registration
      Statement shall become effective on such date as the Commission, acting
      pursuant to said Section 8(a), may determine.

      Approximate Date of Public Offering:  As soon as practicable following
      effective date

      It is proposed that this filing will become effective:
      ______    immediately upon filing pursuant to Rule 485(b)
      ______    on ___________ pursuant to Rule 485(b)
      ______    60 days after filing pursuant to Rule 485(a)(1)
      ______    75 days after filing pursuant to Rule 485(a)(2)
      ______    on ___________ pursuant to Rule 485(a)(1)

PRIMECAP Odyssey Funds

PRIMECAP Odyssey Growth Fund
PRIMECAP Odyssey Aggressive Growth Fund
PRIMECAP Odyssey Stock Fund

Table of Contents
Prospectus	Risk/Return Summary and Fund Expenses of:
[_______ __], 2004	PRIMECAP Odyssey Growth Fund	1
	PRIMECAP Odyssey Aggressive Growth Fund	3
	PRIMECAP Odyssey Stock Fund	5
	Investment Objectives, Strategies and Risks	7
	Fund Management	9
	Pricing of Shares	11
	Purchasing and Adding to Your Shares	11
	Selling Your Shares	13
	Dividends, Distributions and Taxes	15
	Other Information	15

The Securities and Exchange Commission has not approved or disapproved of these securities. Further, it has not determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

Risk/Return Summary
and Fund Expenses

PRIMECAP Odyssey Growth Fund

Investment Objective

The Fund seeks to provide long-term capital appreciation.

Primary Investment Strategies

The Fund invests mainly in U.S. stocks, emphasizing companies with above average earnings growth potential that is not reflected in their current market prices. These stocks typically provide little current income. The Fund’s portfolio consists predominantly of mid- and large-cap stocks. Through its research, the Fund’s adviser identifies stocks that it believes will outperform the market over a three to five year time frame.

Primary Risks

You may lose money by investing in the Fund. The likelihood of loss is greater if you invest for a shorter period of time. You should expect the Fund’s share price and total return to fluctuate within a wide range, like the fluctuations of the overall stock market. The Fund’s performance could be hurt by:

Stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.

Investment style risk, which is the chance that returns from mid- and large-cap stocks will trail returns from the overall stock market. Historically, mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the overall stock market, and they often perform quite differently. Additionally, from time to time, growth stocks may be more volatile than the overall stock market.

Manager risk, which is the chance that as a result of poor security selection by the Fund’s adviser the Fund may underperform other funds with a similar investment objective.

Your investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency, entity or person.

Risk/Return Summary
and Fund Expenses

PRIMECAP Odyssey Growth Fund

Fees and Expenses of the Fund

These tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder Fees (Paid Directly From Your Investment)		Annual Fund Operating Expenses (Deducted From Fund Assets)
Sales charge on purchases or reinvested dividends	None	Management fees	0.60%
Redemption or exchange fees (as a percentage of amount redeemed or exchanged)*	2.00	Other expenses (est.) Total annual Fund operating expenses	0.65 1.25

A redemption/exchange fee of 2.0% may be charged for any shares redeemed or exchanged within 60 days after the date they were acquired. The fee does not apply to shares purchased through reinvested dividends or capital gains. For a more detailed description of the Fund’s policy on redemption fees, see “Redemption Fees” later in this prospectus.

The Fund’s adviser has agreed to limit the Fund’s annual operating expenses, including repayment of previous waivers, to 1.25% of the Fund’s average daily net assets through December 31, 2007. Without this waiver, the operating expenses are estimated to be [__]%.

Example

The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. It assumes that you invest $10,000 in the Fund for the time periods indicated, that your investment has a 5% return each year, that you reinvest all dividends and capital gain distributions, and that the Fund’s operating expenses remain the same as shown above. The example does not reflect the effect of any taxable gain or loss at the time of the redemption.

Although your actual costs may be higher or lower, based on these assumptions, your cumulative estimated expenses would be:

1 YEAR	3 YEARS
$[_____]	$[_____]

Risk/Return Summary
and Fund Expenses

PRIMECAP Odyssey Agressive Growth Fund

Investment Objective

The Fund seeks to provide long-term capital appreciation.

Primary Investment Strategies

The Fund invests mainly in U.S. stocks, emphasizing companies with prospects for rapid earnings growth. These stocks typically provide little current income. The Fund’s portfolio consists predominantly of small- and mid-cap stocks. Through its research and its evaluation of the relationship between growth prospects and valuation, the Fund’s adviser identifies stocks that it believes will outperform the market over a three to five year time frame.

Primary Risks

Stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.

Investment style risk, which is the chance that returns from small- and mid-cap stocks will trail returns from the overall stock market. Historically, these stocks have been more volatile in price than the large-cap stocks that dominate the overall market, and they often perform quite differently. Additionally, from time to time, growth stocks may be more volatile than the overall stock market.

Manager risk, which is the chance that as a result of poor security selection by the Fund’s adviser the Fund may underperform other funds with a similar investment objective.

Your investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency, entity or person.

Risk/Return Summary
and Fund Expenses

PRIMECAP Odyssey Agressive Growth Fund

Fees and Expenses of the Fund

These tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder Fees (Paid Directly From Your Investment)		Annual Fund Operating Expenses (Deducted From Fund Assets)
Sales charge on purchases or reinvested dividends	None	Management fees	0.60%
Redemption or exchange fees (as a percentage of amount redeemed or exchanged)*	2.00	Other expenses (est.) Total annual Fund operating expenses	0.65 1.25

Example

Although your actual costs may be higher or lower, based on these assumptions, your cumulative estimated expenses would be:

1 YEAR	3 YEARS
$[_____]	$[_____]

Risk/Return Summary
and Fund Expenses

PRIMECAP Odyssey Stock Fund

Investment Objective

The Fund seeks to provide long-term capital appreciation.

Primary Investment Strategies

The Fund invests mainly in U.S. stocks, emphasizing companies with financial results which the Fund’s adviser believes will evolve materially better than consensus expectations. Through its research, the Fund’s adviser identifies companies that it believes will outperform the market over a three to five year time frame. The Fund’s adviser looks for companies that will grow faster and/or will be more profitable than their current market valuations suggest, and for companies with asset values that are not adequately reflected in their stock prices. The Fund may invest in publicly traded companies of any size.

Primary Risks

Stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.

Investment style risk, which is the chance that returns from the mix of small-, mid- and large-cap stocks in the Fund’s portfolio will trail returns from the overall stock market. Historically, small- and mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the overall market, and they often perform quite differently. Additionally, from time to time the Fund will invest in growth stocks, which may be more volatile than the overall stock market.

Manager risk, which is the chance that as a result of poor security selection by the Fund’s adviser the Fund may underperform other funds with a similar investment objective.

Your investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency, entity or person.

Risk/Return Summary
and Fund Expenses

PRIMECAP Odyssey Stock Fund

Fees and Expenses of the Fund

These tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder Fees (Paid Directly From Your Investment)		Annual Fund Operating Expenses (Deducted From Fund Assets)
Sales charge on purchases or reinvested dividends	None	Management fees	0.60%
Redemption or exchange fees (as a percentage of amount redeemed or exchanged)*	2.00	Other expenses (est.) Total annual Fund operating expenses	0.65 1.25

Example

Although your actual costs may be higher or lower, based on these assumptions, your cumulative estimated expenses would be:

1 YEAR	3 YEARS
$[_____]	$[_____]

Investment Objectives, Strategies and Risks

Each Fund’s fundamental investment objective is long term capital appreciation. The following sections further explain the primary investment strategies that PRIMECAP Management Company, the Funds’ adviser, uses in pursuit of each Fund’s objective and the major risks to which investment in the Funds is subject. PRIMECAP Odyssey Funds’ Board of Trustees, which oversees management of the Funds, may change investment strategies or policies in the interest of shareholders without a shareholder vote, unless those strategies or policies are designated as fundamental.

Strategies

Stocks of publicly traded companies are often classified according to the total market value of the companies’ outstanding stock, or “market capitalization” – as small-cap, mid-cap, and large-cap stocks. Market capitalization ranges change over time, interpretations of size vary, and there are no “official” definitions of small-, mid-, and large-cap. The Funds’ adviser currently defines small-cap stocks as stocks of companies with market capitalizations less than $1 billion, mid-cap stocks as stocks of companies with market capitalizations ranging from $1 billion to $15 billion, and large-cap stocks as stocks of companies with market capitalizations above $15 billion.

The adviser selects common stocks that it believes will have future financial results that are not reflected in the current market prices. Stocks selected for a Fund generally are issued by companies that have strong positions within their industries, improving returns on equity, good long-term prospects for well-above-average growth in sales or earnings, and capable management teams.

Through careful analysis, the adviser attempts to quantify a company’s “fundamental value.” The adviser compares the fundamental value with the market price of the company’s stock. The adviser then decides whether to purchase the stock mainly on the basis of how attractive this comparison is in relation to the comparison for other potential investments. Because a Fund’s selections are determined by an analysis of each individual stock, a Fund’s makeup may differ substantially from the overall market’s characteristics. For example, the proportion of a Fund’s assets invested in a particular industry may be significantly greater or less than that industry’s proportion of the overall stock market. The adviser does not try to make investment decisions based on short-term trends in the stock market. If attractively priced stocks cannot be found, a Fund’s cash levels will increase.

Although each Fund invests with a long-term horizon of three to five years, the adviser may sell a stock if its market price appears to have risen above its fundamental value, if other securities appear to be more favorably priced, or if the reasons for which the stock was purchased no longer hold true. The Funds are generally managed without regard to tax ramifications.

Although the Funds invest mainly in U.S. stocks, each may invest substantial assets in foreign securities traded on U.S. or foreign markets.

Any Fund may temporarily depart from its normal investment policies – for instance, by allocating substantial assets to cash investments – in response to extraordinary market, economic, political, or other conditions. In doing so, the Fund may succeed in avoiding losses, but may otherwise fail to achieve its investment objective.

Risks

In general, the higher the risk of losing money, the higher the potential reward. The reverse also is generally true: the lower the risk, the lower the potential reward. As you consider an investment in any of the Funds, you should take into account your personal tolerance for daily fluctuations in the price of your

Investment Objectives, Strategies and Risks

Fund shares. In addition to the risks described above under “Risk/Return Summary and Fund Expenses,” the Funds are subject to the following risks.

Risks of Individual Companies (All Funds). The prices of each of the stocks held by a Fund may decline in response to certain events, including those directly involving the companies issuing the securities owned by the Fund; conditions affecting the general economy; local, regional or global political, social or economic instability; and currency and interest rate fluctuations.

Risks of Growth Stocks (All Funds). Growth stocks are likely to be more volatile in price than the stock market as a whole. Historically, growth funds have tended to outperform the market as a whole in bull markets and underperform the market as a whole in declining markets. Of course, there is no guarantee that this pattern will continue in the future.

Risks of Mid-Cap Stocks (All Funds). Stocks of mid-sized companies may present greater opportunities than larger and more established companies for capital appreciation because of high potential earnings growth. But they also involve greater risk. Their stocks may trade less frequently or in limited volume, may fluctuate in value more than those of larger, more established companies and, as a group, may suffer more severe price declines during periods of generally declining stock prices.

Risks of Small-Cap Stocks (Aggressive Growth and Stock Funds). Stocks of smaller and newer companies may present greater opportunities than larger and more established companies for capital appreciation because of high potential earnings growth. But they also involve greater risk. Such companies may have limited product lines, markets or financial resources, or may depend on a small group of key managers. Their stocks may trade less frequently or in limited volume, or only in the over-the-counter market or on a regional stock exchange. As a result, these stocks may fluctuate in value more than mid-cap stocks and stocks of larger, more established companies and, as a group, may suffer more severe price declines during periods of generally declining stock prices.

Risks of Foreign Stocks (All Funds). To the extent that it owns foreign stocks, a Fund is subject to the following additional risks: country risk, which is the chance that domestic events – such as political upheaval, financial troubles, or natural disasters – will weaken a country’s securities markets; and currency risk, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates.

Fund Management

The Funds are series of PRIMECAP Odyssey Funds, a Delaware statutory trust (the “Trust”). The Board of Trustees of the Trust decides matters of general policy and reviews the activities of the Funds’ adviser, distributor and administrator. The Trust’s officers conduct and supervise its daily business operations.

The Adviser

PRIMECAP Management Company, 225 South Lake Avenue, Pasadena, California 91101, adviser to all three Funds, is an investment advisory firm founded in 1983. The adviser also provides investment advisory services to other mutual funds, endowment funds, employee benefit plans, and foundations. As of [_________], 2004, the adviser managed about $[__] billion in assets. For the services to the Funds, the adviser receives a fee paid monthly at the annual rate of 0.60% of the first $100 million of each Fund’s average net assets and 0.55% of the Fund’s average daily assets in excess of $100 million.

The adviser is authorized to choose broker-dealers to handle the purchase and sale of each Fund’s securities, and seeks to obtain the best available price and most favorable execution for all transactions. In obtaining better execution of a transaction, the adviser may at times choose brokers which charge higher commissions. If more than one broker can obtain the best available price and most favorable execution, the adviser is authorized to choose a broker which will provide research services to the adviser.

The managers primarily responsible for overseeing the Funds’ investments are:

Howard B. Schow, Chairman and Co-Founder of PRIMECAP Management Company. He has worked in investment management since 1956, has managed assets since 1961, has been with PRIMECAP Management Company since 1983, and has managed assets of the PRIMECAP Odyssey Funds since their inception. Education: B.A., Williams College; M.B.A., Harvard Business School.

Theo A. Kolokotrones, President and Co-Founder of PRIMECAP Management Company. He has worked in investment management since 1970, has managed assets since 1979, has been with PRIMECAP Management Company since 1983, and has managed assets of the PRIMECAP Odyssey Funds since their inception. Education: B.A., University of Chicago; M.B.A., Harvard Business School.

Joel P. Fried, Executive Vice President of PRIMECAP Management Company. He has worked in investment management since 1985, has managed assets for PRIMECAP Management Company since 1986, and has managed assets of the PRIMECAP Odyssey Funds since their inception. Education: B.S., University of California, Los Angeles; M.B.A., Anderson Graduate School of Business, University of California, Los Angeles.

Mitchell J. Milias, Vice Chairman and Co-Founder of PRIMECAP Management Company. He has worked in investment management since 1964, has managed assets since 1967, has been with PRIMECAP Management Company since 1983, and has managed assets of the PRIMECAP Odyssey Funds since their inception. Education: B.S., Stanford University; M.B.A., Harvard Business School.

Alfred W. Mordecai, Senior Vice President of PRIMECAP Management Company. He has worked in investment management since 1997, has managed assets for PRIMECAP Management Company since 1999, and has managed assets of the PRIMECAP Odyssey Funds since their inception. Education: B.S.E., Duke University; M.E.A., Virginia Polytechnic Institute and State University; M.B.A., Harvard Business School.

Fund Management

Each of these five individuals manages his portion of each Fund autonomously; there is no decision-making by committee. A small portion of each Fund’s assets is managed by individuals in the adviser’s research department.

PRIMECAP Management Company and its managers have received numerous awards and recognitions, including the following:

Morningstar awarded Messrs. Schow, Kolokotrones and Fried with its Domestic Equity Fund Manager of the Year Award in 2003.

Morningstar named Messrs. Schow, Kolokotrones and Fried as runners-up to its Fund Manager of the Year Award in 2000, 1999, and 1997.

Mutual Funds Magazine named Messrs. Schow and Kolokotrones as Domestic Managers of the Year for 1997.

Lipper awarded its 2003 Performance Achievement Certificate for Number One Multi-Cap Core Fund for the Five-Year Period Ending December 31, 2003 to a mutual fund for which PRIMECAP Management Company serves as the portfolio manager.

Lipper awarded its 2000 Performance Achievement Award for #1 Performing Multi-Cap Core Fund for Ten and Fifteen Years to a mutual fund for which PRIMECAP Management Company serves as the portfolio manager.

Lipper awarded its 1999 Performance Achievement Certificate for Number One Multi-Cap Core Fund for the Fifteen-Year Period Ending December 31, 1999 to a mutual fund for which PRIMECAP Management Company serves as the portfolio manager.

Mutual funds managed by PRIMECAP Management Company were named to the Money 100 for 2003, 2002, and 2001 based on Money Magazine’s evaluation of the mutual funds’ performance, expenses, and other factors.

Other Service Providers

[_____________________] (the “Administrator”) is the Funds’ administrator. Its address is [_____________________________]. [_____________________] (the “Distributor”), an affiliate of the Administrator, is the Funds’ distributor. Its address is [____________________________]. [_________________], an affiliate of the Administrator, is the Funds’ Transfer and Dividend Disbursing Agent. Its address is [_____________________________].

[_____________________] is the custodian of the Funds’ assets and employs foreign sub-custodians to provide custody of the Funds’ foreign assets.

The Statement of Additional Information has more information about the adviser and the Funds’ other service providers.

Shareholder Information

Pricing of Shares

The price of a Fund’s shares is based on its per share net asset value (“NAV”). The NAV is calculated by adding the total value of the Fund’s investments and other assets, subtracting its liabilities, and dividing the result by the number of outstanding shares of the Fund. Each Fund calculates its NAV once daily at the close of public trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time) on days that the Exchange is open for trading.

Each Fund values its investments at their market value. Securities and other assets for which market prices are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Trustees.

Purchasing and Adding to Your Shares

Price of Shares

Each Fund sells shares without a sales charge at the NAV which is next computed (1) after your selected dealer or other authorized intermediary receives the order which is promptly transmitted to the Fund, or (2) after the Fund’s transfer agent receives your order directly in proper form (which generally means a completed application form together with a negotiable check in U.S. dollars or a wire transfer of funds). You may pay a fee if you buy Fund shares through a broker or agent.

Minimum Initial Investment

The minimum initial investment in the Fund is $2,000; subsequent investments must be at least $[____]. The Funds’ distributor may waive the minimum investment for institutions making continuing investments in a Fund and from time to time for other investors, including retirement plans and employees of the adviser.

Exchanges of Shares

Generally, you may exchange your shares of one Fund into shares of any other Fund. However, each Fund may assess a 2.00% redemption fee based on the total value of shares that are redeemed from, or exchanged out of, that Fund if you have held those shares for fewer than 60 days. See the discussion of “Redemption Fees” below.

Purchases through a Securities Dealer

You may purchase shares of a Fund through a securities dealer which has an agreement with the Funds’ distributor (a “selected dealer”). Selected dealers are authorized to designate other intermediaries to accept purchase and redemption orders on a Fund’s behalf. The Fund will price your order at the Fund’s net asset value next computed after it is accepted by an authorized dealer or the dealer’s authorized designee. The Fund and the Distributor reserve the right to cancel an order for which payment is not received from a selected dealer by the third business day following the order. A selected dealer may impose postage and handling charges on your order.

Purchases through the Transfer Agent

To purchase shares of a Fund directly from the Funds’ transfer agent, complete the account application (available from the Funds’ transfer agent, a selected dealer or the Funds’ website at www.[______].com) and deliver it to the transfer agent as required by the application. You may pay by a check with the

Shareholder Information

application, or by a wire transfer of funds as described below. You can make additional investments by wire or by mailing a check, together with the investment form from a recent account statement.

Payment by Wire

To pay for an initial investment in a Fund by wire, call the Funds’ transfer agent at [___________] between the hours of 9:00 a.m. and 4:00 p.m. Eastern time on a day when the New York Stock Exchange is open for trading for an account number or see the instructions on the Funds’ website at www.[______].com. The transfer agent will want to know your name, address, tax identification number, amount being wired and wiring bank. You can then instruct the wiring bank to transfer funds by wire to:

[Name of transfer agent]
ABA #[_____________],
DDA #[_____________],
for credit to [___________________],
or further credit to [your name and account number].

Make sure that the wiring bank includes the name of the Fund and the account number with the wire. If the Funds’ transfer agent receives your funds before the Fund’s net asset value is calculated, your funds will be invested on that day at the net asset value next calculated; otherwise, they will be invested on the next business day at the net asset value next calculated.

To make an additional purchase by wire, see the instructions on the Funds’ website or call the Funds’ transfer agent at [____________] before the wire is sent. Otherwise, your purchase may be delayed indefinitely. Wire funds to the transfer agent, care of [_____________________], as described above, including the name of the Fund and your account number with the wire.

Retirement Plan Participants

Individual participants in qualified retirement plans should purchase shares of a Fund through their plan sponsor or administrator, which is responsible for transmitting orders. The procedures for investing in the Fund depend on the provisions of the plan and any arrangements that the plan sponsor may have made for special processing services.

Automatic Reinvestment

Each Fund reinvests dividends and capital gain distributions on your shares without any sales charge in additional shares unless you indicate otherwise on the account application. You may elect to have dividends or capital gain distributions paid in cash on your application or by written request to the Funds’ transfer agent.

Anti-Money Laundering

In compliance with the USA PATRIOT Act of 2001, the Funds’ transfer agent will verify certain information on your account application as part of the Funds’ anti-money laundering program. As requested on the application, you should supply your full name, date of birth, social security number and permanent street address. Mailing addresses containing a P.O. Box will not be accepted. Please contact the Funds’ transfer agent at [______________] if you need additional assistance when completing your application.

Shareholder Information

If a Fund does not have a reasonable belief of the identity of a shareholder, the account will be rejected or you will not be allowed to perform a transaction in the account until such information is received. Each Fund also reserves the right to close the account within 5 business days if clarifying information/documentation is not received.

Other

The Funds’ transfer agent credits shares to your account and does not issue stock certificates. The Funds and their distributor each reserve the right to reject any purchase order or suspend or modify the offering of a Fund’s shares.

A Fund and the transfer agent may reject any purchase order for any reason and without prior notice. Excessive or short-term trading (such as market timing) in Fund shares may harm performance by compromising portfolio management strategies and increasing Fund expenses. A Fund or the transfer agent may reject a purchase order and may terminate or restrict the exchange privilege of any investor or group of investors, or person acting on behalf of any investor or investors, whose pattern of trading or transaction history involves, in the opinion of the adviser or the transfer agent, actual or potential harm to the Fund. A Fund or the transfer agent may notify the investor that a purchase order or an exchange has been rejected after the day the order is placed or after acceptance by an intermediary. In some cases, where shares are held in omnibus or retirement plan accounts, it may not be practicable for the Fund to monitor such activity.

Selling Your Shares

How to Redeem Shares

Your shares may be redeemed only by instructions from the registered owner of your shareholder account. If you are a participant in a retirement or other plan, direct your redemption requests to the plan sponsor or administrator, which may have special procedures for processing such requests and is responsible for forwarding requests to the Funds’ transfer agent.

You may redeem shares by contacting your selected dealer or authorized intermediary. The selected dealer can arrange for the repurchase of the shares through the Funds’ distributor at the net asset value next determined after the selected dealer receives your instructions. The dealer may charge you for this service. If your shares are held in a dealer’s “street name,” you must redeem them through the dealer.

You may also redeem shares by mailing instructions to the Funds’ transfer agent, [________________________________________], or by delivering instructions to the transfer agent at [______________________________________]. The instructions must specify the name of the Fund, the number of shares or dollar amount to be redeemed and your name and account number. A corporation, partnership, trust or fiduciary redeeming shares must submit written evidence of authority acceptable to the transfer agent and the signature must be medallion guaranteed. The price you will receive for the shares redeemed is the next determined net asset value for the shares after the transfer agent has received a completed redemption request.

You may establish telephone, fax and Internet redemption privileges by checking the appropriate boxes and supplying the necessary information on the account application. You can then redeem shares by telephoning the transfer agent at [_____________], between the hours of 9:00 a.m. and 4:00 p.m. Eastern time on a day when the New York Stock Exchange is open for trading or by visiting www.[______].com. It may be difficult to reach the Funds by telephone, fax or the Internet during periods of unusual market activity. If this happens, you may purchase or redeem shares by mail as described above. If the transfer

Shareholder Information

agent receives your redemption request before 4:00 p.m. Eastern time on a day when the New York Stock Exchange is open for trading, it will process your request that day; otherwise, it will process your request on the next business day. Institutional investors may also make special arrangements with the transfer agent for designating personnel who are authorized to place telephone, fax or Internet redemption requests.

The Funds will use procedures, such as assigned personal identification numbers, designed to provide reasonable verification of the identity of a person making a telephone, fax or Internet redemption request. The Funds reserve the right to refuse a telephone, fax or Internet redemption request if they believe that the person making the request is neither the record owner of the shares being redeemed nor otherwise authorized by the shareholder to request the redemption. You will be promptly notified of any refused request for a telephone, fax or Internet redemption. If these normal identification procedures are not followed, the Funds or their agents could be liable for any loss, liability or cost which results from acting upon telephone, fax or Internet redemption instructions of a person believed to be a shareholder.

Redemption Payments

Redemption payments will be made within seven days after receipt by the Funds’ transfer agent of the written, telephone, fax or Internet redemption request and, if required, a signature guarantee and any other necessary documents, except as indicated below. Payment may be postponed or the right of redemption suspended at times when the New York Stock Exchange is closed for other than customary weekends and holidays, when trading on such Exchange is restricted, when an emergency exists as a result of which disposal by the Fund of securities owned by the Fund is not reasonably practicable or it is not reasonably practicable for the Fund fairly to determine the value of the Fund’s net assets, or during any other period when the SEC so permits.

Redemption proceeds are generally paid by check. However, at your request, the transfer agent will wire redemption proceeds of $[___] or more to your bank account. Requests for redemption by wire should include the name, location and ABA or bank routing number (if known) of the designated bank and your bank account number.

Minimum Account Size and Redemption of Small Accounts

Each Fund deducts a $12 fee in December of each year from each nonretirement account with a balance at that time below $2,000. If your account balance falls below [$________] because of redemptions, the Fund may notify you and, if your investment value remains below [$_________] for a continuous 60-day period, the Fund may redeem your shares. However, the Fund will not redeem shares based solely upon changes in the market that reduce the net asset value of your shares. The minimum account size requirements do not apply to shares held by officers or employees of the adviser or its affiliates or Trustees of the Funds. The Funds reserve the right to modify or terminate these involuntary redemption features at any time upon 60 days’ notice.

Redemption Fees

Each Fund may assess a redemption fee of 2.00% of the total redemption amount if you sell your shares after holding them for fewer than 60 days. The redemption fee is paid directly to the Fund and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether the redemption fee applies, the shares that were held the longest will be redeemed first. Although the Funds have a goal of applying this redemption fee to most such redemptions, the redemption fee may not apply in certain circumstances where it is not currently practicable for the Fund to impose the fee, such as redemptions of shares held in certain

Shareholder Information

omnibus accounts or retirement plans that cannot implement the redemption fee or redemptions of small numbers of shares. Further, the Funds may not apply the redemption fee to certain types of redemptions that do not indicate market timing strategies, such as redemptions of shares through portfolio rebalancing programs of institutional investment managers or systematic withdrawal plans, redemptions requested within 30 days following the death or disability of the shareholder (or, if a trust, its beneficiary), or redemptions initiated by the Funds. The fee does not apply to shares purchased through reinvested dividends or capital gains.

Dividends, Distributions and Taxes

Each Fund expects to pay income dividends annually, and to make distributions of net capital gains (if any) at least annually. The Board of Trustees may decide to pay dividends and distributions more frequently.

Each Fund automatically reinvests dividends and capital gain distributions in additional shares of the Fund at the net asset value per share on the reinvestment date unless you have previously requested cash payment in writing to the Funds’ transfer agent.

Any dividend or distribution paid by a Fund has the effect of reducing the net asset value per share on the reinvestment date by the amount of the dividend or distribution. If you purchase shares shortly before the record date of a dividend or distribution, the shares will be subject to income taxes as discussed below even though the dividend or distribution represents, in substance, a partial return of your capital.

Distributions made by a Fund will be taxable to shareholders whether received in shares (through dividend reinvestment) or in cash. Distributions derived from net investment income, including net short-term capital gains, are taxable to shareholders as ordinary income. Distributions designated as capital gains dividends are taxable as long-term capital gains regardless of the length of time shares of the Fund have been held. Although distributions are generally taxable when received, certain distributions made in January are taxable as if received in the prior December. The Funds will inform you annually of the amount and nature of their distributions.

Dividends and interest earned by a Fund may be subject to withholding and other taxes imposed by foreign countries, at rates from 10% to 40%. However, under certain circumstances you may be able to claim credits against your U.S. taxes for such foreign taxes. The Funds will also notify you each year of the amounts available as credits.

The Statement of Additional Information contains further information about taxes. Consult your own advisers about federal, state and local taxation of distributions from the Fund.

Other Information

For transfer agent services		[Transfer Agent]
For retirement plan services		Call your employer or plan administrator
For dealer services		[Distributor]

Telephone conversations may be recorded or monitored for verification, recordkeeping and quality-assurance purposes.

Annual/Semi-annual report to shareholders. The Trust’s shareholder reports contain additional information about the Funds, including financial statements, investment results, portfolio holdings, a statement from management discussing market conditions and the Funds’ investment strategies, and the independent accountants’ report (in the annual report).

Statement of additional information (“SAI”). The SAI contains more detailed information on all aspects of the Funds, including the Funds’ financial statements, and is incorporated by reference into this prospectus.

The SAI has been filed with the Securities and Exchange Commission (“SEC”). The SAI and other related materials about the Funds are available for review or to be copied at the SEC’s Public Reference Room in Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC’s website at www.sec.gov or, after payment of a duplicating fee, via e-mail request to publicinfo@sec.gov or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-0102.

Household mailings. Each year you are automatically sent an updated prospectus and annual and semi-annual reports for the Funds. You may also occasionally receive proxy statements for the Funds. In order to reduce the volume of mail you receive, when possible only one copy of these documents will be sent to shareholders who are part of the same family and share the same address.

If you would like to receive a free copy of the SAI or annual/semi-annual reports to shareholders, please call [__________________] at [______________] or write to the Secretary of the Trust at [_______________________________].

Investment Company File No. 811-[___]






                            PRIMECAP ODYSSEY FUNDS
                            Telephone: [__________]

                      STATEMENT OF ADDITIONAL INFORMATION
                             DATED [_______], 2004

                         PRIMECAP ODYSSEY GROWTH FUND
                    PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND
                          PRIMECAP ODYSSEY STOCK FUND

PRIMECAP Odyssey Funds (the "Trust") is a professionally managed, open-end,
management investment company with multiple funds available for investment. This
Statement of Additional Information ("SAI") contains information about the
shares of all three of the Trust's investment portfolios (each, a "Fund," and
collectively, the "Funds").

This SAI is not a prospectus. You should read this SAI in conjunction with the
Prospectus dated [_______], 2004. All terms defined in the Prospectus have the
same meanings in this SAI. You can order copies of the Prospectus without charge
by writing to [______________________] or calling the Transfer Agent at the
telephone number indicated above.

                               TABLE OF CONTENTS

INVESTMENT RESTRICTIONS........................................................2
ADDITIONAL INFORMATION ON FUND INVESTMENTS AND RISKS...........................3
MANAGEMENT....................................................................16
DETERMINATION OF NET ASSET VALUE..............................................21
PURCHASE AND REDEMPTION OF SHARES.............................................22
PORTFOLIO TRANSACTIONS........................................................22
FEDERAL TAX INFORMATION.......................................................23
CALCULATION OF TOTAL RETURN...................................................26
GENERAL INFORMATION...........................................................27
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS............................30





                            INVESTMENT RESTRICTIONS


Each Fund's investment objective is a fundamental policy and may not be changed
without approval by a vote of the holders of a majority of the Fund's
outstanding voting securities, as described under "General Information - Shares
of the Funds." The investment restrictions described below also apply to the
Funds. The restrictions designated as fundamental policies may not be changed
without approval by the holders of a majority of the relevant Fund's outstanding
shares. If the Trust's Board of Trustees determines, however, that a Fund's
investment objective can best be achieved by a substantive change in a
non-fundamental investment policy or strategy, the Trust's Board may make such
change without shareholder approval and will disclose any such material change
in the then-current prospectus. Any policy that is not specified in the Funds'
Prospectus or in the SAI as being fundamental is non-fundamental.

If a percentage limitation described below is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of a Fund's portfolio securities or resulting from
reorganizations, consolidations, payments out of assets of the Fund or
redemptions of shares will not constitute a violation of such limitation, except
for investment restriction (2) below.

Fundamental Investment Restrictions

As a matter of fundamental policy, each Fund is diversified. This means that at
least 75% of the value of the Fund's total assets must be represented by cash
and cash items (including receivables), U.S. Government securities, securities
of other investment companies, and securities of issuers each of which
represents no more than 5% of the value of the Portfolio's total assets and no
more than 10% of the issuer's outstanding voting securities. Further, as a
matter of fundamental policy, no Fund may do any of the following:

(1) Purchase the securities of issuers conducting their principal business
activities in the same industry if, immediately after the purchase and as a
result thereof, the value of the Fund's investments in that industry would be
25% or more of the current value of the Fund's total assets, provided that there
is no limitation with respect to investments in U.S. Government obligations and
repurchase agreements secured by such obligations.

(2) Borrow money or issue senior securities as defined in the Investment Company
Act of 1940, as amended (the "1940 Act" or "Investment Company Act"), except (a)
with regard to senior securities, as permitted pursuant to an order or a rule
issued by the Securities and Exchange Commission (the "Commission"), (b) that
each Fund may borrow from banks up to 15% of the current value of its net assets
for temporary purposes only in order to meet redemptions, and these borrowings
may be secured by the pledge of up to 15% of the current value of its net assets
(but investments may not be purchased while any such outstanding borrowing in
excess of 5% of its net assets exists), and (c) a Fund may make short sales of
securities.

(3) Purchase or sell real estate (other than securities issued by companies that
invest in real estate or interests therein).

(4) Purchase commodities or commodity contracts, except that each Fund may enter
into forward currency exchange transactions and futures contracts, and may write
call options and purchase call and put options on futures contracts, in
accordance with its investment objective and policies.

(5) Purchase securities on margin (except for short-term credits necessary for
the clearance of transactions and except for margin payments in connection with
options, futures and options on futures).


                                                                               2



(6) Underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer or from an
underwriter for an issuer and the later disposition of such securities in
accordance with a Fund's investment program may be deemed to be an underwriting.

(7) Make investments for the purpose of exercising control or management.
Investments by a Fund in wholly-owned investment entities created under the laws
of certain countries will not be deemed the making of investments for the
purpose of exercising control or management.

(8) Lend money or portfolio securities, except that each Fund may lend portfolio
securities to or enter into repurchase agreements with certain brokers, dealers
and financial institutions aggregating up to 33 1/3% of the current value of the
lending Fund's total assets.

(9) Pledge, mortgage, or hypothecate more than 15% of its net assets.


              ADDITIONAL INFORMATION ON FUND INVESTMENTS AND RISKS


Common Stock

Each Fund mainly invests in common stock. Common stock represents an equity or
ownership interest in an issuer. Common stock typically entitles the owner to
vote on the election of directors and other important matters as well as to
receive dividends on such stock. If an issuer is liquidated or declares
bankruptcy, the claims of owners of bonds, other debt holders, and owners of
preferred stock take precedence over the claims of those who own common stock.
Common stock is subject to the market and other risks described in the
Prospectus.

Preferred Stock

Each Fund may invest in preferred stock, which is a class of capital stock that
pays dividends at a specified rate and that has preference over common stock in
the payment of dividends and the liquidation of assets. Dividends on some
preferred stock may be "cumulative" (requiring all or a portion of prior unpaid
dividends to be paid before dividends are paid on the issuer's common stock),
non-cumulative, participating, or auction rate. If interest rates rise, the
fixed dividend on preferred stock may be less attractive, causing the price of
the preferred stock to decline. Preferred stock may have mandatory sinking fund
provisions, as well as call/redemption provisions prior to maturity, a negative
feature when interest rates decline. Preferred stock does not ordinarily carry
voting rights. The rights of preferred stock on the distribution of a
corporation's assets in the event of a liquidation are generally subordinate to
the rights associated with the corporation's debt securities.

Warrants and Convertible Securities

Each Fund may invest in warrants. A warrant gives the holder the right to
subscribe by a specified date to a stated number of shares of stock of the
issuer at a fixed price. A warrant tends to be more volatile than the underlying
stock, and if at a warrant's expiration date the stock is trading at a price
below the price set in the warrant, the warrant will expire worthless.
Conversely, if at the expiration date the stock is trading at a price higher
than the price set in the warrant, the holder can acquire the stock at a price
below its market value. The prices of warrants do not necessarily correlate with
the prices of the underlying securities. A Fund may only purchase warrants on
securities in which the Fund may invest directly.

Each Fund may invest in convertible securities.  A convertible security may
be a fixed income debt security or preferred stock, and may be converted at a
stated price within a specified period of time into a certain quantity of the
common stock of the same or another issuer.  A convertible security, while
usually


                                                                               3



subordinated to nonconvertible debt securities of the same issuer, is senior to
common stock in an issuer's capital structure. Convertible securities may offer
more flexibility by providing the investor with a steady income stream
(generally yielding a lower amount than nonconvertible securities of the same
issuer and a higher amount than common stocks) as well as the opportunity to
take advantage of increases in the price of the issuer's common stock through
the conversion feature. Convertible security prices tend to be influenced by
changes in the market value of the issuer's common stock as well as changes in
interest rates. Convertible securities are purchased by the Funds primarily for
their equity characteristics and are not subject to rating criteria.

Foreign Securities

Each Fund may invest in foreign securities directly or in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") or other Depositary Receipts (which, together with
ADRs, GDRs and EDRs, are hereinafter collectively referred to as "Depositary
Receipts") to the extent such Depositary Receipts become available.

Depositary Receipts. ADRs are publicly traded on exchanges or over-the-counter
("OTC") in the United States. GDRs, EDRs and other types of Depositary Receipts
are typically issued by foreign depositaries, although they may also be issued
by U.S. depositaries, and evidence ownership interests in a security or pool of
securities issued by either a U.S. or foreign corporation. Depositary Receipts
may be "sponsored" or "unsponsored." In a sponsored arrangement, the foreign
issuer assumes the obligation to pay some or all of the depositary's transaction
fees. In an unsponsored arrangement, the foreign issuer assumes no obligation
and the depositary's transaction fees are paid by the holders of the Depositary
Receipts. Foreign issuers in respect of whose securities unsponsored Depositary
Receipts have been issued are not necessarily obligated to disclose material
information in the markets in which the unsponsored Depositary Receipts are
traded, and the market value of the Depositary Receipts may not be correlated
with such information.

General Risks of Investing in Foreign Securities. Investing on an international
basis involves certain risks not involved in domestic investments, including
fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. In addition, with respect to certain foreign
countries there is the possibility of expropriation of assets, confiscatory
taxation, political or social instability or diplomatic developments which could
affect investments in those countries. Moreover, individual foreign economies
may differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rates of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position. Certain foreign
investments may also be subject to foreign withholding taxes.

Lack of Information. Some of the foreign securities held by the Funds may not be
registered with the Commission, nor will the issuers thereof be subject to the
Commission's reporting requirements. Accordingly, there may be less publicly
available information about a foreign company than about a U.S. company, and
such foreign companies may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those to which U.S. companies
are subject. As a result, traditional investment measurements, such as
price/earnings ratios, as used in the United States may not be applicable to
certain smaller capital markets. Foreign companies are not generally subject to
uniform accounting, auditing and financial reporting standards or to practices
and requirements comparable to those applicable to domestic companies.

Foreign Stock Markets. Foreign markets have different settlement and clearance
procedures than U.S. markets, and in certain foreign markets settlements have at
times failed to keep pace with the volumes of


                                                                               4



securities transactions, making it difficult to conduct such transactions. For
example, delays in settlement could result in temporary periods when assets of a
Fund are uninvested and no return is earned thereon. The inability of a Fund to
make intended security purchases due to settlement problems could cause the Fund
to miss attractive investment opportunities. The inability to dispose of a
portfolio security due to settlement problems could result either in losses to a
Fund due to subsequent declines in the value of such portfolio security or, if
the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser.

Brokerage commissions and other transaction costs on foreign securities
exchanges are generally higher than in the United States. There is generally
less government supervision and regulation of exchanges, brokers and issuers in
foreign countries than in the United States. The foregoing risks are often
heightened for investments in smaller capital markets and developing countries.

Foreign Currencies. Each Fund may invest in securities denominated or quoted in
currencies other than the U.S. dollar. Accordingly, changes in foreign currency
exchange rates will affect the values of securities in a Fund's portfolio and
the unrealized appreciation or depreciation of investments insofar as U.S.
investors are concerned. A Fund may also hold foreign currency in connection
with the purchase and sale of foreign securities. To the extent the foreign
currency is so held, there may be a risk due to foreign currency exchange rate
fluctuations. Such foreign currency will be held with the Funds' custodian bank
or by an approved foreign subcustodian.

Investing in Countries with Smaller Capital Markets. Each Fund may invest in
securities of companies located in developing countries. The securities markets
of developing countries are not as large as the U.S. securities markets and have
substantially less trading volume, resulting in a lack of liquidity and high
price volatility. Certain markets, such as those of China, are in only the
earliest stages of development. There may also be a high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries, as well as a high concentration of investors and
financial intermediaries. Many such markets also may be affected by developments
with respect to more established markets in their region, such as in Japan.
Developing country brokers typically are fewer in number and less capitalized
than brokers in the United States.

Political and social uncertainties exist for some developing countries. In
addition, the governments of many such countries have heavy roles in regulating
and supervising their respective economies. Another risk common to most such
countries is that the economies are heavily export oriented and, accordingly,
dependent upon international trade. The existence of overburdened infrastructure
and obsolete financial systems also presents risks in certain countries, as do
environmental problems. Certain economies also depend to a significant degree
upon exports of primary commodities and, therefore, are vulnerable to changes in
commodity prices which, in turn, may be affected by a variety of factors.

Archaic legal systems in certain developing countries also may have an adverse
impact on a Fund investing in developing countries. For example, while the
potential liability of a shareholder in a U.S. corporation with respect to the
acts of the corporation is generally limited to the amount of the shareholder's
investment, the notion of limited liability is less clear in certain developing
countries. Similarly, the rights of investors in developing countries may be
more limited than those of shareholders of U.S. corporations.

Some of the currencies of developing countries have experienced devaluations
relative to the U.S. dollar, and major adjustments have been made periodically
in certain of such currencies.

Some developing countries prohibit or impose substantial restrictions on
investments in their capital markets, particularly their equity markets, by
foreign entities such as the Funds. For example, certain


                                                                               5



countries may require governmental approval prior to investments by foreign
persons, limit the amount of investment by foreign persons in a particular
company, or limit investment by foreign persons to only a specific class of
securities of a company which may have less advantageous terms (including price)
than securities of the company available for purchase by nationals. Certain
countries may restrict investment opportunities in issuers or industries deemed
important to national interests.

The manner in which foreign investors may invest in companies in certain
developing countries, as well as limitations on such investments, also may have
an adverse impact on the operations of each Fund. For example, a Fund may be
required in certain of such countries to invest initially through a local broker
or other entity and then have the shares that were purchased reregistered in the
name of the Fund. Re-registration may in some instances not be able to occur on
a timely basis, resulting in a delay during which the Fund may be denied certain
of its rights as an investor, including rights as to dividends or to be made
aware of certain corporate actions. There also may be instances where a Fund
places a purchase order but is subsequently informed, at the time of
re-registration, that the permissible allocation of the investment to foreign
investors has been filled, depriving the Fund of the ability to make its desired
investment at that time.

Substantial limitations may exist in certain countries with respect to a Fund's
ability to repatriate investment income, capital or the proceeds of sales of
securities by foreign investors. The Fund could be adversely affected by delays
in, or a refusal to grant, any required governmental approval for repatriation
of capital, as well as by the application to the Fund of any restrictions on
investments. In addition, even where there is no outright restriction on
repatriation of capital, the mechanics of repatriation may affect certain
aspects of the operations of the Fund. For example, funds may be withdrawn from
China only in U.S. or Hong Kong dollars and only at an exchange rate established
by the government once each week.

A number of publicly traded closed-end investment companies have been organized
to facilitate indirect foreign investment in developing countries, and certain
of such countries have specifically authorized such funds. There also are
investment opportunities in certain of such countries in pooled vehicles that
resemble open-end investment companies. A Fund's investment in these companies
will be subject to certain percentage limitations of the 1940 Act. Shares of
certain investment companies may at times be acquired only at market prices
representing premiums to their net asset values.

In certain countries, banks or other financial institutions may be among the
leading companies to have actively traded securities. The 1940 Act restricts
each Fund's investments in any equity securities of an issuer which, in its most
recent fiscal year, derived more than 15% of its revenues from
"securities-related activities," as defined by the rules thereunder. These
provisions may restrict the Fund's investments in certain foreign banks and
other financial institutions.

Inflation accounting rules in some developing countries require a company that
keeps tax and accounting records in the local currency to restate certain assets
and liabilities on the company's balance sheet in order to express items in
terms of currency of constant purchasing power. This inflation accounting may
indirectly generate losses or profits for certain companies in developing
countries.

Satisfactory custodial services for investment securities may not be available
in some developing countries, which may result in a Fund incurring additional
costs and delays in providing transportation and custody services for such
securities outside such countries.

Options, Futures and Other Derivatives

Each Fund may use a variety of derivative financial instruments to hedge their
investments and to enhance their income or manage their cash flow
("Derivatives"). A derivative financial instrument is


                                                                               6



generally defined as an instrument whose value is derived from, or based upon,
some underlying index, reference rate (such as an interest rate or currency
exchange rate), security, commodity, or other asset. In addition to the
Derivatives briefly described below, PRIMECAP Management Company (the "Adviser"
or "PRIMECAP Management") may discover additional opportunities in connection
with options, future contracts, foreign currency forward contracts and other
hedging techniques. These new opportunities may become available as PRIMECAP
Management develops new techniques, as regulatory authorities broaden the range
of permitted transactions and as new options, futures contracts, foreign
currency forward contracts or other techniques are developed. PRIMECAP
Management may utilize these opportunities with any of the Funds to the extent
that they are consistent with the Fund's investment objectives and permitted by
the Fund's investment limitations and applicable regulatory authorities. The
Prospectus and this Statement of Additional Information will be supplemented to
the extent that new products or techniques involve materially different risks
than those described below or in the Prospectus.

Options on Equity Securities. A call option is a short-term contract pursuant to
which the purchaser of the option, in return for a premium, has the right to buy
the security underlying the option at a specified price at any time during the
term of the option. The writer of the call option, who receives the premium, has
the obligation, upon exercise of the option during the option term, to deliver
the underlying security against payment of the exercise price. A put option is a
similar contract that gives its purchaser, in return for a premium, the right to
sell the underlying security at a specified price during the option term. The
writer of the put option, who receives the premium, has the obligation, upon
exercise of the option during the option term, to buy the underlying security at
the exercise price.

Options on Securities Indexes. A securities index assigns relative values to the
securities included in the index and fluctuates with changes in the market
values of those securities. A securities index option operates in the same way
as a stock option, except that exercise of a securities index option is effected
with cash payment and does not involve delivery of securities. Thus, upon
exercise of a securities index option, the purchaser will realize, and the
writer will pay, an amount based on the difference between the exercise price
and the closing price of the securities index.

Foreign Currency Options. A put or call option on a foreign currency gives the
purchaser of the option the right to sell or purchase a foreign currency at the
exercise price until the option expires. Each Fund may use foreign currency
options separately or in combination to control currency volatility. Among the
strategies that may be employed to control currency volatility is an option
collar. An option collar involves the purchase of a put option and the
simultaneous sale of call option on the same currency with the same expiration
date but with different exercise (or "strike") prices. Generally the put option
will have an out-of-the-money strike price, while the call option will have
either an at-the-money strike price or an in-the-money strike price.

Futures Contracts. Each Fund may enter into futures contracts. In general,
futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time at a specified price.

Stock Index Futures Contracts. A stock index futures contract is a bilateral
agreement pursuant to which one party agrees to accept, and the other party
agrees to make, delivery of an amount of cash equal to a specified dollar amount
times the difference between the stock index value at the close of trading of
the contract and the price at which the futures contract is originally struck.
No physical delivery of the stocks comprising the index is made. Generally,
contracts are closed out prior to the expiration date of the contract.


                                                                               7



Options on Future Contracts. Put and call options on futures contracts give the
purchaser the right (but not the obligation), for a specified price, to sell or
to purchase the underlying futures contract, respectively, upon exercise of the
option, at any time during the option period.

Forward Contracts on Foreign Currencies. A forward contract on a foreign
currency is an obligation to purchase or sell a specific currency at a future
date, which may be any number of days agreed upon by the parties from the date
of the contract at a price set on the date of the contract.

Hedging Strategies. Hedging strategies can be broadly categorized as short
hedges and long hedges. A short hedge is a purchase or sale of a Derivative
intended partially or fully to offset potential declines in the value of one or
more investments held by a Fund. Thus, in a short hedge a Fund takes a position
in a Derivative whose price is expected to move in the opposite direction of the
price of the investment being hedged. For example, a Fund might purchase a put
option on a security to hedge against a potential decline in the value of that
security. If the price of the security declines below the exercise price of the
put, the Fund could exercise the put and thus limit its loss below the exercise
price to the premium paid plus transaction costs. Alternatively, because the
value of the put option can be expected to increase as the value of the
underlying security declines, the Fund might be able to close out the put option
and realize a gain to offset the decline in the value of the security.

Conversely, a long hedge is a purchase or sale of a Derivative intended
partially or fully to offset potential increases in the acquisition cost of one
or more investments that a Fund intends to acquire. Thus, in a long hedge a Fund
takes a position in a Derivative whose price is expected to move in the same
direction as the price of the prospective investment being hedged. For example,
a Fund might purchase a call option on a security it intends to purchase in
order to hedge against an increase in the cost of the security. If the price of
the security increases above the exercise price of the call, the Fund could
exercise the call and thus limit its acquisition cost to the exercise price plus
the premium paid and transaction costs. Alternatively, the Fund might be able to
offset the price increase by closing out an appreciated call option and
realizing a gain.

Derivatives on securities generally are used to hedge against price movements in
one or more particular securities positions that a Fund owns or intends to
acquire. Derivatives on stock indices, in contrast, generally are used to hedge
against price movements in broad equity market sectors in which a Fund has
invested or expects to invest. Derivatives on debt securities may be used to
hedge either individual securities or broad fixed income market sectors.

The use of Derivatives is subject to applicable regulations of the Commission,
the several options and futures exchanges upon which they are traded and the
Commodity Futures Trading Commission ("CFTC"). In addition, a Fund's ability to
use Derivatives will be limited by tax considerations. See "Federal Tax
Information."

Special Risks of Hedging Strategies. The use of Derivatives involves special
considerations and risks, including those described below.

Successful use of most Derivatives depends upon the Adviser's ability to predict
movements of the overall securities, currency and interest rate markets, which
requires different skills than predicting changes in the price of individual
securities. There can be no assurance that any particular hedging strategy
adopted will succeed.

There might be imperfect correlation, or even no correlation, between price
movements of a Derivative and price movements of the investments being hedged.
For example, if the value of a Derivative used in a short hedge increased by
less than the decline in value of the hedged investment, the hedge would not be


                                                                               8




fully successful. Such a lack of correlation might occur due to factors
unrelated to the value of the investments being hedged, such as speculative or
other pressures on the markets in which Derivatives are traded. The
effectiveness of hedges using Derivatives on indices will depend on the degree
of correlation between price movements in the index and price movements in the
securities being hedged.

Hedging strategies, if successful, can reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements in the
investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund entered into a short
hedge because the Adviser projected a decline in the price of a security held by
the Fund, and the price of that security increased instead, the gain from that
increase might be wholly or partially offset by a decline in the price of the
Derivative. Moreover, if the price of the Derivative declined by more than the
increase in the price of the security, the Fund could suffer a loss. In either
such case, the Fund would have been in a better position had it not hedged at
all.

Transactions using Derivatives, other than purchased options, expose a Fund to
an obligation to another party. A Fund will not enter into any such transactions
unless, to the extent required by law, it (1) owns an offsetting covered
position in securities or other options or futures contracts or (2) segregates
liquid assets with a value sufficient at all times to cover its potential
obligations to the extent not covered as provided in (1) above. Each Fund will
comply with Commission guidelines regarding cover for hedging transactions.

Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Derivative is open, unless they are replaced with
similar assets. As a result, the commitment of a large portion of a Fund's
assets to cover or to segregated accounts could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.

Furthermore, if a Fund were unable to close out its positions in such
Derivatives, it might be required to continue to maintain such assets or
accounts or make margin payments until the position expired or matured. These
requirements might impair the Fund's ability to sell a portfolio security or
make an investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time. A
Fund's ability to close out a position in a Derivative prior to expiration or
maturity depends on the existence of a liquid secondary market or, in the
absence of such a market, the ability and willingness of a contra party to enter
into a transaction closing out the position. Therefore, there is no assurance
that any hedging position can be closed out at a time and price that is
favorable to the Fund.

Foreign Currency Transactions

Foreign Currency Hedging Strategies - Special Considerations. Each Fund may use
options and futures on foreign currencies, and foreign currency forward
contracts as described below, to hedge against movements in the values of the
foreign currencies in which the Fund's securities are denominated. Such currency
hedges can protect against price movements in a security that a Fund owns or
intends to acquire that are attributable to changes in the value of the currency
in which it is denominated. Such hedges do not, however, protect against price
movements in the securities that are attributable to other causes.

A Fund might seek to hedge against changes in the value of a particular currency
when no Derivatives on that currency are available or such Derivatives are more
expensive than certain other Derivatives. In such cases, the Fund may hedge
against price movements in that currency by entering into transactions using
Derivatives on other currencies, the values of which PRIMECAP Management
believes will have a high


                                                                               9




degree of positive correlation to the value of the currency being hedged. The
risk that movements in the price of the Derivative will not correlate perfectly
with movements in the price of the currency being hedged is magnified when this
strategy is used.

The values of Derivatives on foreign currencies depend on the values of the
underlying currencies relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such Derivatives, a Fund could
be disadvantaged by having to deal in the odd lot market (generally consisting
of transactions of less than $1 million) for the underlying foreign currencies
at prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global, round the
clock market. To the extent the U.S. options or futures markets are closed while
the markets for the underlying currencies remain open, significant price and
rate movements might take place in the underlying markets that cannot be
reflected in the markets for the Derivatives until they reopen.

Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
a Fund might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay fees, taxes and charges associated with such delivery assessed
in the issuing country.

Foreign Currency Forward Contracts. Each Fund may enter into foreign currency
forward contracts to purchase or sell foreign currencies for a fixed amount of
U.S. dollars or another foreign currency. Each Fund also may use foreign
currency forward contracts for cross hedging. Under this strategy, a Fund would
increase its exposure to foreign currencies that the Adviser believes might rise
in value relative to the U.S. dollar, or shift its exposure to foreign currency
fluctuations from one country to another. For example, if a Fund owned
securities denominated in a foreign currency and the Adviser believed that
currency would decline relative to another currency, it might enter into a
forward contract to sell an appropriate amount of the first foreign currency,
with payment to be made in the second foreign currency.

The cost to a Fund from engaging in foreign currency forward contracts varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because foreign currency forward
contracts are usually entered into on a principal basis, no fees or commissions
are involved. When a Fund enters into a foreign currency forward contract, it
relies on the other party to the transaction to make or take delivery of the
underlying currency at the maturity of the contract. Failure by the other party
to do so would result in the loss of any expected benefit of the transaction.

As is the case with futures contracts, holders and writers of foreign currency
forward contracts can enter into offsetting closing transactions, similar to
closing transactions on futures, by selling or purchasing, respectively, an
instrument identical to the instrument held or written. Secondary markets
generally do not exist for foreign currency forward contracts, with the result
that closing transactions generally can be made for foreign currency forward
contracts only by negotiating directly with the other party. Thus, there can be
no assurance that a Fund will in fact be able to close out a foreign currency
forward contract at a favorable price prior to maturity. In addition, in the
event of insolvency of the other party, a Fund might be unable to close out a
foreign currency forward contract at any time prior to maturity. In either
event,


                                                                             10




the Fund would continue to be subject to market risk with respect to the
position, and would continue to be required to maintain a position in securities
denominated in the foreign currency or to maintain cash or securities in a
segregated account.

The precise matching of foreign currency forward contract amounts and the value
of the securities involved generally will not be possible because the value of
such securities, measured in the foreign currency, will change after the foreign
currency forward contract has been established. Thus, a Fund might need to
purchase or sell foreign currencies in the spot (cash) market to the extent such
foreign currencies are not covered by forward contracts. The projection of short
term currency market movements is extremely difficult, and the successful
execution of a short term hedging strategy is highly uncertain.

Limitations on the Use of Foreign Currency Forward Contracts. A Fund may enter
into foreign currency forward contracts or maintain a net exposure to such
contracts only if (1) completion of the contracts would not obligate the Fund to
deliver an amount of foreign currency in excess of the value of its portfolio
securities or other assets denominated in that currency or (2) the Fund
maintains cash, U.S. Government securities or liquid debt or equity securities
in a segregated account in an amount not less than the value of its total assets
committed to the consummation of the contract and not covered as provided in (1)
above, as marked to market daily. Under normal circumstances, consideration of
currency fluctuations will be incorporated into the longer term investment
decisions made with regard to over all diversification strategies. However, the
Adviser believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of a Fund will be
served.

Other Investment Companies

In connection with the management of its daily cash position, each Fund may also
invest in securities issued by other investment companies, including (to the
extent permitted by the 1940 Act) other investment companies managed by PRIMECAP
Management. A Fund may also invest in securities issued by other investment
companies by purchasing the securities of certain foreign investment funds or
trusts called passive foreign investment companies.

A Fund's investment in other investment companies may include shares of exchange
traded funds (collectively, "ETFs"). ETFs are not actively managed. Rather, an
ETF's objective is to track the performance of a specified index. Therefore,
securities may be purchased, retained and sold by ETFs at times when an actively
managed trust would not do so. As a result, there is a greater risk of loss (and
a correspondingly greater prospect of gain) from changes in the value of the
securities that are heavily weighted in the index than would be the case if the
ETF were not fully invested in such securities. Because of this, an ETF's price
can be volatile, and a Fund may sustain sudden, and sometimes substantial,
fluctuations in the value of its investment in such ETF. In addition, the
results of an ETF will not match the performance of the specified index due to
reductions in the ETF's performance attributable to transaction and other
expenses, including fees paid by the ETF to service providers.

Securities of other investment companies will be acquired by a Fund within the
limits prescribed by the 1940 Act. Each Fund intends to limit its investments so
that, as determined immediately after a securities purchase is made, not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Fund.

As a shareholder of another investment company, a Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. Accordingly, in addition to bearing their
proportionate share of the relevant Fund's expenses (i.e., management fees and


                                                                             11




operating expenses), shareholders will also indirectly bear similar expenses of
such other investment companies or trusts.

Repurchase Agreements

Each Fund may enter into repurchase agreements. Pursuant to a repurchase
agreement, the seller of a security to the Fund agrees to repurchase that
security from the Fund at a mutually agreed upon time and price. The period of
maturity is usually quite short, often overnight or a few days, although it may
extend over a number of months. A Fund may enter into repurchase agreements only
with respect to obligations that could otherwise be purchased by the Fund. All
repurchase agreements will be fully collateralized based on values that are
marked to market daily. If the seller defaults and the value of the underlying
securities has declined, the Fund may incur a loss. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security, the Fund's
disposition of the security may be delayed or limited.

Illiquid Securities

Each Fund may invest in illiquid securities. However, no Fund will purchase
illiquid securities, including time deposits and repurchase agreements maturing
in more than seven days, if, as a result of the purchase, more than 15% of the
Fund's net assets valued at the time of the transaction are invested in such
securities. If otherwise consistent with its investment objective and policies,
any of the Funds may purchase securities which are not registered under the 1933
Act but which can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the 1933 Act. Any such security will not be considered illiquid
so long as PRIMECAP Management, acting under guidelines and procedures that are
developed, established and monitored by the Board of Trustees, determines that
an adequate trading market exists for that security. This investment practice
could have the effect of increasing the level of illiquidity in a Fund during
any period that qualified institutional buyers become uninterested in purchasing
these restricted securities.

The staff of the Commission has taken the position that OTC options that are
purchased and the assets used as cover for written OTC options should generally
be treated as illiquid securities. However, if a dealer recognized by the
Federal Reserve Bank as a primary dealer in U.S. Government securities is the
other party to an option contract written by a Fund and the Fund has the
absolute right to repurchase the option from the dealer at a formula price
established in a contract with the dealer, the Commission staff has agreed that
the Fund needs to treat as illiquid only that amount of the cover assets equal
to the formula price less the amount by which the market value of the security
subject to the option exceeds the exercise price of the option (the amounts by
which the option is in-the-money). Although PRIMECAP Management does not believe
that OTC options are generally illiquid, pending resolution of this issue, each
Fund will conduct its operations in conformity with the views of the Commission
staff.

Borrowings

Each Fund may borrow from banks up to 15% of the current value of its net assets
for temporary purposes only in order to meet redemptions, and these borrowings
may be secured by the pledge of up to 5% of the current value of its net assets
(but investments may not be purchased while such outstanding borrowings in
excess of 5% of its net assets exist). If the Fund's asset coverage for
borrowings falls below 300%, the Fund will take prompt action to reduce its
borrowings. If the 300% asset coverage should decline as a result of market
fluctuations or other reasons, the Fund may be required to sell portfolio
securities to reduce the debt and restore the 300% asset coverage, even though
it may be disadvantageous from an investment standpoint to sell securities at
that time.


                                                                              12





Borrowing for investment purposes is generally known as "leveraging." Leveraging
may exaggerate the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. Money borrowed for leveraging will be
subject to interest costs which may or may not be recovered by appreciation of
the securities purchased. In addition, a Fund may be required to maintain
minimum average balances in connection with such borrowing or pay a commitment
fee to maintain a line of credit, which would increase the cost of borrowing
over the stated interest rate.

Each Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements which are considered to be borrowings under the 1940 Act.
At the time a Fund enters into a reverse repurchase agreement (an agreement
under which the Fund sells portfolio securities and agrees to repurchase them at
an agreed-upon date and price), it will place in a segregated custodial account
cash or liquid assets having a value equal to or greater than the repurchase
price (including accrued interest) and will subsequently monitor the account so
that such value is maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price of the securities it is obligated to repurchase. The Funds would pay
interest on amounts obtained pursuant to a reverse repurchase agreement.

Loans of Portfolio Securities

Each Fund may lend securities from its portfolio to brokers, dealers and
financial institutions (but not individuals) if liquid assets equal to the
current market value of the securities loaned (including accrued interest
thereon) plus the interest payable to the Fund with respect to the loan are
maintained with the Fund. In determining whether to lend a security to a
particular broker, dealer or financial institution, the Adviser will consider
all relevant facts and circumstances, including the creditworthiness of the
broker, dealer or financial institution. While no Fund currently lends its
portfolio securities, or has any present intention to lend portfolio securities
having an aggregate value in excess of 10% of the current value of the Fund's
total assets, each Fund reserves the right to lend portfolio securities having
an aggregate value of up to 33 1/3% of the current value of the Fund's total
assets. Any loans of portfolio securities will be fully collateralized based on
values that are marked to market daily. Any securities that a Fund may receive
as collateral will not become part of the Fund's portfolio at the time of the
loan and, in the event of a default by the borrower, the Fund will, if permitted
by law, dispose of such collateral except for such part thereof that is a
security in which such Fund may invest. During the time securities are on loan,
the borrower will pay the Fund any accrued income on those securities, and the
Fund may invest the cash collateral and earn additional income or receive an
agreed-upon fee from a borrower that had delivered cash-equivalent collateral.
Loans of securities by a Fund will be subject to termination at the Fund's or
the borrower's option. The Funds may pay reasonable administrative and custodial
fees in connection with a securities loan and may pay a negotiated portion of
the interest or fee earned with respect to the collateral to the borrower or the
placing broker. Borrowers and placing brokers may not be affiliated, directly or
indirectly, with the Funds or the Adviser.

Short Sales

Each Fund may engage in "short sales against the box." This technique involves
selling either a security that a Fund owns, or a security equivalent in kind and
amount to the security sold short that the Fund has the right to obtain, for
delivery at a specified date in the future. A Fund may enter into a short sale
against the box to hedge against anticipated declines in the market price of
portfolio securities. If the value of the securities sold short increases prior
to the scheduled delivery date, the Fund loses the opportunity to participate in
the gain.


                                                                              13



Swap Agreements

Each Fund may enter into equity, index, currency rate, total return and other
types of swap agreements. The transactions are entered into in an attempt to
obtain a particular return without the need to actually purchase the reference
asset. Swap agreements can be individually negotiated and structured to include
exposure to a variety of different types of investments or market factors.
Depending on their structure, swap agreements may increase or decrease the
Fund's exposure to foreign currency values or other factors such as security
prices, baskets of securities, or inflation rates.

Swap agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than a year. In a
standard swap transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments, which may be adjusted for an interest factor. The
gross returns to be exchanged or "swapped" between the parties are generally
calculated with respect to a "notional amount," e.g., the return on or increase
in value of a particular dollar amount invested at a particular interest rate,
in a particular foreign currency, or in a "basket" of securities representing a
particular index.

Swap agreements will tend to shift investment exposure from one type of
investment to another. For example, if a Fund agrees to exchange payments in
dollars for payments in foreign currency, the swap agreement would tend to
decrease the Fund's exposure to U.S. interest rates and increase its exposure to
foreign currency and interest rates. Depending on how they are used, swap
agreements may increase or decrease the overall volatility of a Fund's
portfolio.

Most swap agreements entered into by a Fund would require the calculation of the
obligations of the parties to the agreements on a "net basis." Consequently, the
Fund's current obligations (or rights) under a swap agreement generally will be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount'). The risk of loss with respect to swaps is limited to the net
amount of interest payments that the Fund is contractually obligated to make. If
the other party to a swap defaults, the Fund's risk of loss consists of the net
amount of payments that the Fund contractually is entitled to receive. If a swap
agreement calls for payments by the Fund, it must be prepared to make such
payments when due. In addition, if the counterparty's creditworthiness were to
decline, the value of a swap agreement would be likely to decline, potentially
resulting in losses to the Fund.

Temporary Investments

Each Fund may take temporary defensive measures that are inconsistent with the
Fund's normal fundamental or non fundamental investment policies and strategies
in response to adverse market, economic, political, or other conditions as
determined by the Adviser. Such measures could include, but are not limited to,
investments in (1) highly liquid short-term fixed income securities issued by or
on behalf of municipal or corporate issuers, obligations of the U.S. Government
and its agencies, commercial paper, and bank certificates of deposit; (2) shares
of other investment companies which have investment objectives consistent with
those of the Fund; (3) repurchase agreements involving any such securities; and
(4) other money market instruments. There is no limit on the extent to which a
Fund may take temporary defensive measures. In taking such measures, a Fund may
fail to achieve its investment objective.

When Issued Securities and Forward Commitments

Each Fund may purchase securities on a "when issued" basis and may also purchase
or sell securities on a "forward commitment" basis. These transactions, which
involve a commitment by a Fund to purchase


                                                                             14



or sell particular securities with payment and delivery taking place at a future
date (perhaps one or two months later), permit a Fund to lock in a price or
yield on a security it owns or intends to purchase, regardless of future changes
in interest rates. When issued and forward commitment transactions involve the
risk, however, that the price obtained in a transaction may be less favorable
than the price available in the market when the securities delivery takes place.
No Fund intends to engage in when issued purchases and forward commitments for
speculative purposes.

No Fund will start earning interest or dividends on when issued securities until
they are received. The value of the securities underlying a when issued purchase
or a forward commitment to purchase securities, and any subsequent fluctuations
in their value, is taken into account when determining the net asset value of a
Fund starting on the date such Fund agrees to purchase the securities. Each Fund
will segregate liquid assets in an amount at least equal in value to such Fund's
commitment to purchase securities on a when issued or forward commitment basis.
If the value of these assets declines, the Fund will segregate additional liquid
assets in the account on a daily basis so that the value of the assets in the
account is equal to the amount of such commitments.


                                                                              15



                                   MANAGEMENT


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 officers, who administer the Funds' daily operations,
are appointed by the Board of Trustees.

Trustees and Officers

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 in          Other
                                Position(s)     Office; Term          Principal              Fund Complex      Directorships
Name, Address                   Held with         Served in          Occupation(s)            Overseen by         Held by
 and Age                         Trust             Office        During Past 5 Years           Trustee            Trustee
- ------------------------------------------------------------------------------------------------------------------------------
Mitchell J. Milias*             President       Indefinite;        Vice-Chairman and                3            None
                                and Trustee     since 06/04        Director, Portfolio
225 South Lake Avenue,                                             Manager, Chief
Suite 400,                                                         Administrative Officer
Pasadena, CA 91101-3005                                            and Principal,
                                                                   PRIMECAP
                                                                   Management Company

Age: 62

- ------------------------------------------------------------------------------------------------------------------------------
Howard B.                       Trustee         Indefinite;        Chairman and                     3            None
Schow*                                          since 06/04        Director, Portfolio
                                                                   Manager, Chief
225 South Lake Avenue,                                             Investment Officer and
Suite 400,                                                         Principal, PRIMECAP
Pasadena, CA 91101-3005                                            Management Company

Age: 77

- -------------------------------------------------------------------------------------------------------------------------------

* Messrs. Milias and Schow are "interested persons" of the Trust, as defined by
the 1940 Act, because of their employment with PRIMECAP Management Company, the
investment adviser to the Trust.

"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 in          Other
                                 Position(s)     Office; Term          Principal              Fund Complex      Directorships
Name, Address                    Held with         Served in          Occupation(s)            Overseen by         Held by
 and Age                          Trust             Office        During Past 5 Years           Trustee            Trustee
- -------------------------------------------------------------------------------------------------------------------------------
                                 Trustee
- -------------------------------------------------------------------------------------------------------------------------------



                                                                              16



Executive Officers. The table below sets forth certain information about each of
the Trust's other executive officers.


- -------------------------------------------------------------------------------------------------------------------------------
                                                                  Term of
Name, Address                           Position(s) Held      Office; Length   Principal Occupation(s)
 and Age                                with Trust            of Time Served    During Past 5 Years
- -------------------------------------------------------------------------------------------------------------------------------
David H. Van Slooten                    Chief Financial       Since 06/04      Vice President, Financial Analyst and Principal,
                                        Officer and Security                   PRIMECAP Management Company
225 South Lake Avenue,
Suite 400,
Pasadena, CA 91101-3005

Age: 40
- -----------------------------------------------------------------------------------------------------------------------------

Trustee Compensation. Trustees of the Trust who are not officers or employees of
the Trust or PRIMECAP Management Company are entitled to receive from the Trust
a quarterly retainer of $[____] and a $[____] fee for each Board of Trustees or
committee meeting attended. All Trustees are reimbursed for all reasonable
out-of-pocket expenses relating to attendance at meetings.

Audit Committee. The Board of Trustees has an Audit Committee which oversees the
Trust's accounting and financial reporting policies and practices and its
internal controls, and the quality and objectivity of the Trust's financial
statements and the audit thereof. The Committee also acts as the Trust's
"qualified legal compliance committee." The Audit Committee currently consists
of each of the Independent Trustees.

Nominating Committee. The Board of Trustees has a Nominating Committee which is
responsible for seeking and reviewing candidates for consideration as nominees
for Trustees as is considered necessary from time to time. The Nominating
Committee is comprised of all of the Independent Trustees. The Committee does
not consider any nominees recommended by shareholders.

Trustee Ownership of Securities. The table below sets forth the extent of each
Trustee's beneficial interest in shares of the Funds as of [___________], 2004.
For purposes of this table, beneficial interest includes any direct or indirect
pecuniary interest in securities issued by the Trust and includes shares of any
of the Funds held by members of a Trustee's immediate family.


- ------------------------------------------------------------------------------------------------------
                                                       Michell J.                  Howard B.
                                                       Milias                      Schow
- ------------------------------------------------------------------------------------------------------
PRIMECAP Odyssey Growth Fund
- ------------------------------------------------------------------------------------------------------
PRIMECAP Odyssey Aggressive Growth Fund
- ------------------------------------------------------------------------------------------------------
PRIMECAP Odyssey Stock Fund
- ------------------------------------------------------------------------------------------------------
Note: a=None     b=$1 - $10,000      c=$10,001 - $50,000      d=$50,001 - $100,000     e=Over $100,000


As of [________], 2004, Trustees and officers of the Trust as a group
beneficially owned less than 1% of the outstanding shares of each Fund, except
for [_________], who owned [___________________].


                                                                             17



Investment Adviser

Pursuant to an Investment Advisory Agreement (the "Advisory Agreement"), each
Fund is advised by PRIMECAP Management, located at 225 South Lake Avenue, Suite
400, Pasadena, California 91101, an investment adviser registered with the
Commission. PRIMECAP Management is primarily owned by Messrs. Schow,
Kolokotrones, and Milias, who also serve as its directors. Mr. Schow serves as
PRIMECAP Management's Chairman, Mr. Milias as its Vice-Chairman and Treasurer
and Mr. Kolokotrones as its President.

Subject to the supervision of the Board of Trustees, PRIMECAP Management
provides a continuous investment program for the Funds, including investment
research and management with respect to all securities and investments and cash
equivalents in the Funds. PRIMECAP Management provides services under the
Advisory Agreement in accordance with each Fund's investment objectives,
policies, and restrictions.

For its services under the Advisory Agreement, PRIMECAP Management receives
compensation from each Fund based on a percentage of the Fund's average daily
net assets. The rate of advisory fees payable by each Fund to PRIMECAP
Management is set forth in the Prospectus.

The Advisory Agreement provides that PRIMECAP Management will not be liable for
any error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of the Advisory Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard of its obligations and duties under the Advisory Agreement.

The Advisory Agreement will continue in effect with respect to each Fund
provided the continuance is approved annually (1) by the holders of a majority
of the Fund's outstanding voting securities or by the Trust's Board of Trustees
and (2) by a majority of the Trustees of the Trust who are not parties to the
Advisory Agreement or "interested persons" (as defined in the 1940 Act) of any
such party. The Advisory Agreement may be terminated with respect to any Fund on
60 days' written notice by either party and will terminate automatically if
assigned (as defined in the 1940 Act).

Board Determinations. In arriving at their decision to approve the Advisory
Agreement, the Trustees met with representatives of PRIMECAP Management and
reviewed information prepared by PRIMECAP Management and materials provided by
Fund counsel.

As part of their review, the Trustees noted that PRIMECAP Management had
significant experience in providing investment management services. The Trustees
were provided with information on: the investment philosophy and research and
decision-making processes of PRIMECAP Management; the performance record of
PRIMECAP Management in managing similar accounts; and the investment management
fees charged by advisers of certain other mutual funds investing in strategies
similar to the Funds. Based on the foregoing, the Trustees concluded that
PRIMECAP Management's investment process, research capabilities and philosophy
were well suited to the Funds given the Funds' investment objectives and
policies.

The Trustees also reviewed the projected total expenses of the Funds and noted
the commitment of PRIMECAP Management to limit total expenses of each Fund to
1.25% of the Fund's average daily net assets through December 31, 2007. The
Trustees further evaluated potential benefits of the advisory relationship to
PRIMECAP Management, including the direct and indirect benefits that PRIMECAP
Management may receive from its relationship with the Funds.


                                                                              18



In arriving at a decision to approve the Advisory Agreement, the Trustees,
including the Independent Trustees, did not identify any single matter as
all-important or controlling, and the foregoing summary does not detail all the
matters considered. The Trustees judged the terms and conditions of the Advisory
Agreement, including the investment advisory fees, in light of all of the
surrounding circumstances. Based upon their review, the Trustees, including all
of the independent Trustees, determined, in the exercise of their business
judgment, that approval of the Advisory Agreement was in the best interest of
the Funds and their respective shareholders.

Administrator and Distributor

Under its Administration Agreement with the Trust, [___________________]
("Administrator") furnishes the Trust with office facilities, together with
those ordinary clerical and bookkeeping services that are not being furnished by
PRIMECAP Management. For expenses assumed and services provided as administrator
pursuant to the Administration Agreement, the Administrator is entitled to
receive a fee from each Fund, computed daily and paid monthly, at an annual rate
equal to [___]% of the average daily net assets of the Fund.

The Administration Agreement contains provisions limiting the liability of
Administrator similar to those in the Advisory Agreement and requires the Trust
to indemnify the Administrator against any loss suffered by the Administrator in
connection with the performance of the Administration Agreement, except for a
loss resulting from willful misfeasance, bad faith or gross negligence on the
Administrator's part in the performance of its duties or from reckless disregard
of its obligations and duties under the Administration Agreement. The
Administration Agreement will continue in effect until [_______, 200_], and from
year to year thereafter, unless terminated at any time by either party for cause
(as defined in the Agreement), or at the end of any such period, on 60 days'
written notice.

The Trust has also retained the Administrator to provide the Trust with certain
fund accounting services pursuant to a Fund Accounting Agreement. For services
provided under the Agreement, the Administrator is entitled to receive an annual
fee of $[_________] from each Fund which fees are payable in monthly increments.
The term of the Agreement, and its provisions regarding termination, limitation
of liability, and indemnification, are similar to those of the Trust's
Administration Agreement with the Administrator.

[____________________________] ("Distributor") has entered into a Distribution
Agreement with the Trust pursuant to which it engages in a continuous
distribution of shares of the Funds.

Transfer Agent

[_________________] serves as Transfer Agent for each Fund, for which it
receives customary fees.

Codes of Ethics

The Board of Trustees of the Trust has adopted a Code of Ethics under Rule 17j-1
of the Investment Company Act (the "Code of Ethics"). The Code of Ethics
restricts the investing activities of certain Fund officers, Trustees and
advisory persons and, as described below, imposes certain restrictions on Fund
investment personnel.

All persons covered by the Code of Ethics are required to preclear any personal
securities investment (with limited exceptions, such as investment in government
securities) and must comply with ongoing requirements concerning recordkeeping
and disclosure of personal securities investments. The preclearance requirement
and associated procedures are designed to identify any prohibition or limitation


                                                                              19



applicable to a proposed investment. In addition, all persons covered by the
Code of Ethics are prohibited from purchasing or selling any security which, to
such person's knowledge, is being purchased or sold (as the case maybe), or is
being considered for purchase or sale, by a Fund. Investment personnel are
subject to additional restrictions such as a ban on acquiring securities in an
initial public offering, "blackout periods" which prohibit trading by investment
personnel of a Fund within periods of trading by the Fund in the same security,
and a ban on short-term trading in securities.

In addition, each of the Adviser and the Distributor has adopted a code of
ethics as required by Rule 17j-1 of the Investment Company Act, which is
designed to prevent affiliated persons of the Adviser and Distributor,
respectively, from engaging in deceptive, manipulative or fraudulent activities
in connection with securities held or to be acquired by the Funds.

The Trust has adopted a Supplemental Code of Ethics for Principal Officers and
Senior Financial Officers ("Supplemental Code"). The Supplemental Code is
intended to deter wrongdoing and promote: (1) honest and ethical conduct,
including the ethical handling of actual or apparent conflicts of interest
between personal and professional relationships, (2) full, fair, accurate,
timely and understandable disclosure in reports and documents filed with the
Commission and in other public communications by the Trust, (3) compliance with
applicable laws, (4) prompt internal reporting of violations of the Supplemental
Code and (5) accountability for adherence to the Supplemental Code.

Proxy Voting

The Trust's Board of Trustees has adopted policies and procedures with respect
to voting proxies relating to portfolio securities held by the Funds, pursuant
to which the Board has delegated the responsibility for voting such proxies to
the Adviser as a part of the Adviser's general management of the Funds, subject
to the Board's continuing oversight.

A conflict of interest may be deemed to occur when the Adviser or one of its
affiliated persons has a financial interest in a matter presented by a proxy to
be voted on behalf of a Fund, which may compromise the Adviser's independence of
judgment and action in judging the proxy. If such a conflict occurs, the Adviser
is required to submit a report to the Board of Trustees indicating the nature of
the conflict of interest and how it was resolved.

The Adviser's proxy voting policies and procedures (the "Proxy Policies")
require the Adviser to vote proxies received in a manner consistent with the
best interests of its clients, including the Funds.

The Proxy Policies also require the Adviser to vote proxies in a prudent and
diligent manner intended to enhance the economic value of the assets of the
Funds. However, the Proxy Policies permit the Adviser to abstain from voting
proxies in the event that a Fund's economic interest in the matter being voted
upon is limited relative to the Fund's overall portfolio or the impact of the
Fund's vote will not have an effect on its outcome or on the Fund's economic
interests.

Certain of the voting guidelines set forth in the Proxy Policies are summarized
below:

(1) The Adviser generally votes for: uncontested director nominees recommended
by management; the election of auditors recommended by management, unless a
dispute exists over policies; limiting directors' liability; eliminating
preemptive rights; approving employee stock purchase plans; and establishing
employee benefit plans.

(2) The Adviser generally votes against: entrenching the board or adopt
anti-takeover measures; adopting cumulative voting rights; and adopting or
endorsing social issues.


                                                                              20



Although many proxy proposals can be voted in accordance with these proxy voting
guidelines, some proposals will require special consideration, and the Adviser
will make a decision on a case-by-case basis in these situations, including
proposals to: eliminate director mandatory retirement policies; rotate annual
meeting locations and dates; grant options and stock to management and
directors; and indemnify directors and/or officers.

Information on how the Funds voted proxies relating to portfolio securities
during the 12-month period ended June 30, 2005 will be available on or before
August 31, 2005 (1) without charge, upon request, by calling 1-800-258-9232,
and (2) on the Securities and Exchange Commission's website at
http://www.sec.gov.


                       DETERMINATION OF NET ASSET VALUE

Net asset value per share of the shares for each Fund is determined on each
day that the New York Stock Exchange (the "Exchange") is open for trading and
any other day (other than a day on which no shares of that Fund are tendered
for redemption and no order to purchase shares is received) during which
there is sufficient trading in the Fund's portfolio securities that the
Fund's net asset value per share might be materially affected. The Exchange is
closed on the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, Christmas Day and Good Friday.

Securities for which market quotations are readily available are valued at
latest reported prices. Securities for which the primary market is a national
securities exchange are valued at last reported sale prices. Securities traded
on the National Association of Securities Dealers Automated Quotations National
Market System are valued at the NASDAQ Official Closing Price. In the absence of
any sale of such securities on the valuation date and in the case of other
securities, including U.S. Government securities (other than money market
instruments maturing in 60 days or less), the valuations are based on the mean
between the bid and asked prices. Money market instruments and other debt
securities maturing in 60 days or less are valued at amortized cost. Futures
contracts and options listed on a national exchange are valued at the last sale
price on the exchange on which they are traded at the close of the Exchange or,
in the absence of any sale on the valuation date, at the mean between the bid
and asked prices. Options not listed on a national exchange are valued at the
mean between the bid and asked prices. Quotations of foreign securities in a
foreign currency are converted to U.S. dollar equivalents at the current rate
obtained from a recognized bank or dealer. Foreign currency exchange contracts
are valued at the current cost of covering or offsetting such contracts.

All other securities and other assets of the Funds for which current market
quotations are not readily available are valued at fair value as determined in
good faith by PRIMECAP Management in accordance with procedures adopted by the
Trustees. These procedures delegate such determinations to a Pricing Committee
comprised of officers of PRIMECAP Management and other officers of the Trust,
subject to ratification by the Board of Trustees at their next regular meeting
(or more frequently if there is a significant valuation issue). The procedures
require PRIMECAP Management to determine an appropriate methodology for
determining the fair value of such a security, subject to approval and regular
monitoring by the Committee. Such methodologies may include, among other things,
the cost of the security to a Fund; traditional valuation methods such as
earnings multiples and discounts of similar freely tradable securities; and
assessments of matters such as the issuer's fundamental condition, market
conditions, valuations of companies in the same or similar industries, values
used by other holders and analysts, size of the Fund's position, recent trades
of the same type or class of the issuer's securities, outstanding offers to
purchase the securities, and prospects for registration of restricted
securities.


                                                                              21



                       PURCHASE AND REDEMPTION OF SHARES

Reference is made to "Purchasing and Adding to Your Shares" in the Prospectus
for certain information as to the purchase of Fund shares.

Each Fund may, at the sole discretion of the Adviser, accept securities in
exchange for shares of the Fund. Securities which may be accepted in exchange
for shares of any Fund must: (1) meet the investment objectives and policies of
the Fund; (2) be acquired for investment and not for resale; (3) be liquid
securities which are not restricted as to transfer either by law or liquidity of
market, as determined by reference to the liquidity and pricing policies
established by the Board of Trustees; and (4) have a value which is readily
ascertainable as evidenced by, for example, a listing on a recognized stock
exchange, or market quotations by third party broker-dealers.

The Trust intends to pay in cash for all shares of a Fund redeemed, but reserves
the right to make payment wholly or partly in shares of readily marketable
investment securities. In such cases, a shareholder may incur brokerage costs in
converting such securities to cash.


                            PORTFOLIO TRANSACTIONS


The Trust has no obligation to deal with any broker-dealer or group of
broker-dealers to execute transactions in its portfolio securities. In
connection with its duties to arrange for the purchase and sale of each Fund's
portfolio securities, PRIMECAP Management selects such broker-dealers
("Broker-Dealers") as will, in its judgment, implement the policy of the Trust
to achieve quality execution at favorable prices through responsible
Broker-Dealers, and in the case of agency transactions, at competitive
commission rates. PRIMECAP Management may also deal directly with the selling or
purchasing principal or market maker. In most cases, in dealing with a broker
acting as principal or agent, PRIMECAP Management pays a commission.

In allocating transactions to Broker-Dealers, PRIMECAP Management is authorized
to consider, in determining whether a particular Broker-Dealer will provide best
execution, the Broker-Dealer's reliability, integrity, financial condition and
risk in positioning the securities involved, as well as the difficulty of the
transaction in question, and thus need not pay the lowest spread or commission
where it is believed that another Broker-Dealer would offer greater reliability
or provide a better price or execution. In addition, although a higher
commission is generally not paid to brokers who supply brokerage and research
services, PRIMECAP Management has adopted a brokerage allocation policy in
reliance on Section 28(e) of the Securities and Exchange Act of 1934, permitting
it to cause a Fund to pay commission rates in excess of those another
Broker-Dealer would have charged if PRIMECAP Management determines in good faith
that the amount of commission is reasonable in relation to the value of the
brokerage and research services provided by the Broker-Dealer, viewed either in
terms of the particular transaction or PRIMECAP Management's overall
responsibilities as to the accounts over which it exercises investment
discretion.

Research may be in written form or through direct contact with individuals and
may include quotations on portfolio securities and information on particular
issuers and industries, as well as on market, economic or institutional
activities. Such research services may be provided by broker-dealers by way of
access to various computer generated data, computer hardware and software,
support and backup systems and related maintenance costs for such
computer-generated data, computer hardware and software. In addition, services
and equipment which facilitate the execution and monitoring of securities
transactions may be provided by broker dealers by providing rapid communications
with financial markets and broker-dealers, or by providing real-time tracking of
orders, settlements, investment positions and relevant investment criteria and
restrictions applicable to the execution of securities transactions. In


                                                                              22



some cases, brokerage and research services are generated by third parties but
are provided to PRIMECAP Management by or through broker-dealers.

PRIMECAP Management has a fiduciary duty to achieve best execution for every
trade. In order to determine best execution, the SEC has stated that "a money
manager should consider the full range and quality of a Broker's services in
placing brokerage including, among other things, the value of research provided
as well as execution capability, commission rate, financial responsibility and
responsiveness to the money manager." PRIMECAP Management has adopted best
execution policies and procedures designed to ensure it is achieving the most
favorable execution terms reasonably available given the specific circumstances
of each trade.

Brokerage and research services provided by Broker-Dealers may be used to
service any or all of the clients of PRIMECAP Management and/or may be used in
connection with accounts other than those that pay commissions to the
Broker-Dealer providing the brokerage and research services.

Purchases and sales of equity securities on a securities exchange are effected
through brokers who charge a negotiated commission for their services.
Securities are often traded with dealers acting as principal for their own
accounts, with a stated commission. The price of the security may also include a
profit to the dealer. The Funds use dealers to trade such securities on an
agency basis. In underwritten offerings, securities are purchased at a fixed
price that includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. Purchases and sales of
debt securities are usually principal transactions.

Although PRIMECAP Management makes investment decisions for the Trust
independently from those of their other accounts, investments of the kind made
by the Funds may often also be made by such other accounts. When PRIMECAP
Management buys or sells the same security at substantially the same time on
behalf of a Fund and one or more other accounts managed by PRIMECAP Management,
PRIMECAP Management allocates available investments by such means as, in its
judgment, result in fair treatment. PRIMECAP Management aggregates orders for
purchases and sales of securities of the same issuer on the same day among the
Funds and its other managed accounts, and the price paid to or received by the
Funds and those accounts is the average obtained in those orders. In some cases,
such aggregation and allocation procedures may affect adversely the price paid
or received by the Funds or the size of the position purchased or sold by the
Funds.

As a result of its investment policies, each Fund may engage in a substantial
number of portfolio transactions. Accordingly, while each Fund anticipates that
its annual portfolio turnover rate should not normally exceed 50%, it is
impossible to accurately predict portfolio turnover rates. A high turnover rate
for a Fund's portfolio involves correspondingly greater transaction costs in the
form of brokerage commissions and dealer spreads, which are borne directly by
the Fund. The portfolio turnover rate will not be a limiting factor when
PRIMECAP Management deems portfolio changes appropriate.


                            FEDERAL TAX INFORMATION


The Prospectus describes generally the federal tax treatment of distributions by
the Funds. This section of the SAI includes certain additional information
concerning federal income taxes.

Federal Income Tax Consequences

Qualification by a Fund as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code") generally requires, among other
things, that (1) at least 90% of the Fund's


                                                                              23



annual gross income be derived from interest, payments with respect to
securities loans, dividends, gains from the sale or other disposition of
securities or options thereon, and certain related income; and (2) the Fund
diversifies its holdings so that, at the end of each quarter of the taxable
year, (a) at least 50% of the market value of the Fund's assets is represented
by cash, U.S. Government securities, securities of other regulated investment
companies and other securities limited in respect of any one issuer to an amount
not greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
securities and the securities of other regulated investment companies), or of
two or more issuers which the Fund controls (i.e., owns, directly or indirectly,
20% of the voting stock) and which are determined to be engaged in the same or
similar trades or businesses or related trades or businesses. As regulated
investment companies, the Funds will not be subject to federal income tax on
their net investment income and net capital gains distributed to their
shareholders, provided that they distribute to their shareholders at least 90%
of their net investment income and tax-exempt income earned in each year.

A 4% nondeductible excise tax will be imposed on a Fund to the extent it does
not meet certain minimum distribution requirements on a calendar year basis. For
this purpose, any income or gain retained by a Fund that is subject to tax will
be considered to have been distributed by year-end. In addition, dividends and
distributions declared payable as of a date in October, November or December of
any calendar year are deemed under the Code to have been received by the
shareholders on December 31 of that calendar year (and also will be taxable to
shareholders in such year) if the dividend is actually paid in the following
January. Each Fund intends to distribute substantially all of its net investment
income and net capital gains, and thus expects not to be subject to the excise
tax.

Income and dividends received by any of the Funds from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Shareholders may be able to claim U.S. foreign
tax credits with respect to such taxes, subject to certain conditions and
limitations contained in the Code. For example, certain retirement accounts
cannot claim foreign tax credits on investments in foreign securities held in
the Funds. Because each Fund is expected to limit its investment in foreign
securities, the Fund will not be eligible to elect to "pass through" foreign tax
credits to shareholders.

Gains or losses on sales of portfolio securities by a Fund will be long-term
capital gains or losses if the securities have been held by it for more than one
year, except in certain cases where a Fund acquires a put or writes a call
thereon or otherwise engages in a transaction that "tolls" the Fund's holding
period. Other gains or losses on the sale of securities will be short-term
capital gains or losses. The amount of tax payable by an individual or
corporation will be affected by a combination of tax laws covering, for example,
deductions, credits, deferrals, exemptions, sources of income and other matters.

A capital gains distribution or dividend will be a return of invested capital to
the extent the net asset value of an investor's shares is thereby reduced below
his or her cost, even though the distribution would be taxable to the
shareholder. A redemption of shares by a shareholder under these circumstances
could result in a capital loss for federal income tax purposes.

Any loss realized on a redemption or exchange of shares of a Fund will be
disallowed to the extent shares are reacquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.

If an option written by a Fund lapses or is terminated through a closing
transaction, such as a repurchase by the Fund of the option from its holder, the
Fund will realize a short-term capital gain or loss,


                                                                             24



depending on whether the premium income is greater or less than the amount paid
by the Fund in the closing transaction.

If securities are sold by a Fund pursuant to the exercise of a call option
written by it, the Fund will add the premium received to the sale price of the
securities delivered in determining the amount of gain or loss on the sale. If
securities are purchased by a Fund pursuant to the exercise of a put option
written by it, the Fund will subtract the premium received from its cost basis
in the securities purchased.

The amount of any gain or loss realized by a Fund on closing out a futures
contract will generally result in a realized capital gain or loss for tax
purposes. Regulated futures contracts held at the end of each fiscal year will
be required to be "marked to market" for federal income tax purposes. In this
regard, they will be deemed to have been sold at market value. Sixty percent of
any net gain or loss recognized on these deemed sales, and 60% of any net
realized gain or loss from any actual sales, will be treated as long-term
capital gain or loss, and the remainder will be treated as short-term capital
gain or loss. Transactions that qualify as designated hedges are excepted from
the marked to market rule and the "60%/40%" rule. Code Section 1259 requires the
recognition of gain (but not loss) if a Fund makes a "constructive sale" of an
appreciated financial position (e.g., debt instruments and stock). A Fund
generally will be considered to make a constructive sale of an appreciated
financial position if it sells the same or substantially identical property
short, enters into a futures or forward contract to deliver the same or
substantially identical property, or enters into certain other similar
transactions.

Currency transactions may be subject to Section 988 of the Code, under which
foreign currency gains or losses would generally be computed separately and
treated as ordinary income or losses. The Funds will attempt to monitor Section
988 transactions to avoid an adverse tax impact.

Foreign Shareholders

Under the Code, distributions of net investment income (including distributions
of short-term capital gains) by a Fund to a nonresident alien individual,
nonresident alien fiduciary of a trust or estate, foreign corporation, or
foreign partnership (a "foreign shareholder") will be subject to U.S.
withholding tax (at the rate of 30% or a lower treaty rate). Withholding will
not apply if a dividend paid by a Fund to a foreign shareholder is "effectively
connected" with a U.S. trade or business, in which case the reporting and
withholding requirements applicable to U.S. citizens or domestic corporations
will apply. Distributions of net capital gains derived by non-resident aliens or
foreign entities that are not effectively connected with a U.S. trade or
business are not subject to tax withholding, but in the case of a foreign
shareholder who is a nonresident alien individual, such distributions ordinarily
will be subject to U.S. income tax if the individual is physically present in
the U.S. for more than 182 days during the taxable year (in which case the
individual may be treated as a U.S. resident in any event).

Other Matters

Investors should be aware that the investments to be made by the Funds may
involve sophisticated tax rules such as the original issue discount and marked
to market rules that would result in income or gain recognition by the Funds
without corresponding current cash receipts. Although the Funds will seek to
avoid significant noncash income, such noncash income could be recognized by the
Funds, in which case a Fund may distribute cash derived from other sources in
order to meet the minimum distribution requirements described above.


                                                                              25



                          CALCULATION OF TOTAL RETURN


Average Annual Total Return

Average annual total return quotations used in the Funds' advertising and
promotional materials are calculated according to the following formula:

        P(1 + T)(n) = ERV

        Where: "P" represents a hypothetical initial investment of $1,000; "T"
        represents average annual total return; "n" represents the number of
        years; and "ERV" represents the ending redeemable value at the end of
        the period of a hypothetical $1,000 payment made at the beginning of
        the period.  Dividends and other distributions are assumed to be
        in shares at the prices in effect on the reinvestment dates.  ERV will
        be adjusted to reflect the effect of any absorption of Fund expenses by
        the Adviser.

Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent month
prior to submission of the advertising for publication. Average annual total
return, or "T" in the above formula, is computed by finding the average annual
compounded rates of return over the period that would equate the initial amount
invested to the ending redeemable value. Average annual total return assumes the
reinvestment of all dividends and distributions.

Average Annual Total Return (after taxes on distributions)

The Funds' quotations of average annual total returns (after taxes on
distributions) reflect the average annual compounded rate of return on an
assumed investment of $1,000 that equates the initial amount invested to the
value of the investment after taxes on distributions according to the following
formula:

        P(1 + T)(n) = ATV(D)

        Where: "P" represents a hypothetical initial investment of $1,000; "T"
        represents average annual total return (after taxes on distributions);
        "n" represents the number of years; and "ATV(D)" represents the ending
        value of the hypothetical initial investment after taxes on
        distributions, not after taxes on redemption. Dividends and other
        distributions are assumed to be reinvested in shares at the prices in
        effect on the reinvestment dates. ATV(D) will be adjusted to reflect
        the effect of any absorption of Fund expenses by the Adviser.

Average Annual Total Return (after taxes on distributions and redemption)

The Funds' quotations of average annual total returns (after taxes on
distributions and redemption) reflect the average annual compounded rate of
return on an assumed investment of $1,000 that equates the initial amount
invested to the ending redeemable value after taxes on distributions and
redemptions according to the following formula:

        P (1 + T)(n) = ATV(DR)

        Where: "P" represents a hypothetical initial investment of $1,000; "T"
        represents average annual total return (after taxes on distributions
        and redemption); "n" represents the number of years; and "ATV(DR)"
        represents the ending redeemable value of the hypothetical initial
        investment after taxes on distributions and redemption. Dividends and
        other distributions are


                                                                             26



        assumed to be reinvested in shares at the prices in effect on the
        reinvestment dates. ATV(DR) will be adjusted to reflect the effect of
        any absorption of Fund expenses by the Adviser.

Other information

Performance data of the Funds quoted in advertising and other
promotionalmaterials represents past performance and are not intended to predict
or indicate future results. The return and principal value of an investment in
aFund will fluctuate, and an investor's redemption proceeds may be more or less
than the original investment amount. In advertising and promotional materials,
the Funds may compare their performance with data published by Lipper, Inc., CDA
Investment Technologies, Inc., Morningstar, Inc. and others. The Funds also may
refer in such materials to mutual fund performance rankings and other data, such
as comparative asset, expense and fee levels, published by Lipper, CDA,
Morningstar, and others. Advertising and promotional materials also may refer to
discussions of the Funds and comparative mutual fund data and ratings reported
in independent periodicals including, but not limited to, The Wall Street
Journal, Money Magazine, Forbes, Business Week, Financial World and Barron's.

                              GENERAL INFORMATION

The Trust was organized as a statutory trust under the laws of Delaware on
June 8, 2004 and may issue an unlimited number of shares of beneficial
interest or classes of shares in one or more separate series. The Trust is an
open-end management investment company registered under the 1940 Act.  The
Trust currently offers shares of beneficial interest in various series.
Currently, the Trust offers shares of the three series described in this
SAI.  The Board may authorize the issuance of shares of additional series or
classes of shares of beneficial interest if it deems it desirable.

Each Trustee serves until the next meeting of shareholders, if any, called
for the purpose of electing trustees and until the election and qualification
of his or her successor or until death, resignation, declaration of
bankruptcy or incompetence by a court of competent jurisdiction, or removal
by a majority vote of the shares entitled to vote (as described below) or of
a majority of the Trustees.  In accordance with the 1940 Act (1) the Trust
will hold a shareholder meeting for the election of trustees when less than a
majority of the trustees have been elected by shareholders, and (2) if, as a
result of a vacancy in the Board, less than two-thirds of the trustees have
been elected by the shareholders, that vacancy will be filled only by a vote
of the shareholders.

Shares of the Funds

Each share of a class of a Fund represents an equal proportional interest in
that Fund with each other share of the same class and is entitled to such
dividends and distributions out of the income earned on the assets belonging
to that Fund as are declared in the discretion of the Trustees. In the event
of the liquidation or dissolution of a Fund or the Trust, shareholders of the
Fund are entitled to receive the assets attributable to that Fund that are
available for distribution, and a distribution of any general assets not
attributable to a particular Fund that are available for distribution, in
such manner and on such basis as the Trustees in their sole discretion may
determine.  Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Trust.

The Trust is generally not required to hold shareholder meetings.  However,
as provided in the Agreement and Declaration of Trust of the Trust (the
"Declaration") and the Bylaws of the Trust, shareholder meetings may be called
by the Trustees for the purpose as may be prescribed by law, the Declaration
or the Bylaws, or for the purpose of taking action upon any other matter
deemed by the Trustees to be necessary or desirable, including changing
fundamental policies, electing or removing Trustees, and approving or


                                                                              27



amending an investment advisory agreement. In addition, a Trustee may be removed
by shareholders at a special meeting called upon written request of shareholders
owning in the aggregate at least 10% of the outstanding shares of the Trust.

The Declaration provides that one-third of the shares entitled to vote shall be
a quorum for the transaction of business at a shareholders' meeting, except when
a larger quorum is required by applicable law, by the Bylaws or by the
Declaration. Any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held within a reasonable time after the
date set for the original meeting without the necessity of further notice. The
Declaration specifically authorizes the Board to terminate the Trust (or any of
its series) by notice to the shareholders without shareholder approval.

When certain matters affect one series or class but not another, the
shareholders will vote as a series or class regarding such matters. Subject to
the foregoing, on any matter submitted to a vote of shareholders, all shares
then entitled to vote will be voted separately by Fund unless otherwise required
by the 1940 Act, in which case all shares will be voted in the aggregate. For
example, a change in a Fund's fundamental investment policies would be voted
upon only by shareholders of the Fund involved. Additionally, approval of the
advisory agreement is a matter to be determined separately by Fund. Approval by
the shareholders of one Fund is effective as to that Fund whether or not
sufficient votes are received from the shareholders of the other Funds to
approve the proposal as to those Funds.

As used in the Prospectus and in this Statement of Additional Information, the
term "majority," when referring to approvals to be obtained from shareholders of
a Fund, means the vote of the lesser of (a) 67% of the shares of the Fund
represented at a meeting if the holders of more than 50% of the outstanding
shares of the Fund are present in person or by proxy, or (b) more than 50% of
the outstanding shares of the Fund. The term "majority," when referring to the
approvals to be obtained from shareholders of the Trust as a whole means the
vote of the lesser of (x) 67% of the Trust's shares represented at a meeting if
the holders of more than 50% of the Trust's outstanding shares are present in
person or by proxy, or (y) more than 50% of the Trust's outstanding shares.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held.

Principal Shareholders

As of [______], 2004, the persons set forth below were known by the Trust to own
of record or beneficially 5% or more of the shares, as applicable, of the
indicated Funds:

[_____________________________]

Custodian

[_________________] (the "Custodian") has been retained as custodian for the
Funds. With regard to each Fund, the Custodian, among other things: maintains a
custody account or accounts in the name of the Fund; receives and delivers all
assets for the Fund upon purchase and upon sale or maturity; collects and
receives all income and other payments and distributions on account of the
assets of the Fund; and pays all expenses of the Fund. For its services, the
Custodian receives a customary fee.

Independent Auditors and Counsel

[______________] LLP serves as the independent auditors for the Trust.
[__________] LLP provides audit services, tax return preparation and assistance
and consultation in connection with certain Commission filings. Its office is
located at [_______________________________].


                                                                              28



Paul, Hastings, Janofsky & Walker LLP serves as legal counsel for the Trust and
PRIMECAP Management Company. Its office is located at 515 South Flower Street,
Los Angeles, California 90071.

[________________________] serves as legal counsel for the independent trustees
of the Trust. Its office is located at [_____________________________________].

Registration Statement

The Registration Statement, including the Prospectus, the Statement of
Additional Information and the exhibits filed therewith, may be examined at the
office of the Commission in Washington, D.C. Statements contained in the
Prospectus or the Statement of Additional Information as to the contents of any
contract or other document referred to herein or in the Prospectus are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement.


                                                                              29



              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

[To be filed by amendment].






                                                                              30




     _____________________________________________________________________

                                    PART C

                               Other Information

     _____________________________________________________________________






Item 23.   Exhibits

(a)   Agreement and Declaration of Trust

(b)   By-Laws

(c)   Instruments Defining Rights of Security Holder - not applicable

(d)   Form of Investment Advisory Agreement

(e)   Form of Distribution Agreement (A)

(f)   Bonus or Profit Sharing Contracts - not applicable

(g)   Form of Custody Agreement (A)

(h)   Other Material Contracts

      (1)  Form of Administrative Services Agreement (A)

      (2)  Form of Transfer Agent Agreement (A)

      (3)  License Agreement between PRIMECAP Odyssey Funds and PRIMECAP
           Management Company

(i)   Legal Opinion and Consent (A)

(j)   Other Opinions - Independent Auditors' Consent (A)

(k)   Omitted Financial Statements - not applicable

(l)   Initial Capital Agreement (A)

(m)   Distribution Plans - not applicable

(n)   Rule 18f-3 Plan - not applicable

(o)   Reserved

(p)   Code of Ethics - PRIMECAP Odyssey Funds (A)

- ---------------------------------------------------
(A)   To Be Filed by Amendment

Item 24.  Persons Controlled by or Under Common Control with the Funds

Not applicable.

Item 25.  Indemnification

Article 6 of the Registrant's By-Laws, filed as an Exhibit to this
Registration Statement, states as follows:

      6.1  Indemnification.  The Trust shall promptly indemnify and hold
      harmless each of its trustees and officers, and may indemnify and hold
      harmless any of its employees and agents, against any liabilities or
      expenses (collectively, "Liability") actually and






      reasonably incurred by such person in any proceeding arising out of or in
      connection with his or her service to the Trust, to the fullest extent
      permitted by the Declaration of Trust and the laws of the State of
      Delaware, the Securities Act of 1933, and the 1940 Act, as now or
      hereafter in effect, subject to the provisions of paragraphs (a) and (b)
      of this Section 6.1. The Board of Trustees may take such action as is
      necessary to carry out these indemnification provisions and is expressly
      empowered to adopt, approve and amend from time to time these By-laws,
      resolutions or contracts implementing such provisions or such further
      indemnification arrangements as may be permitted by law. No amendment of
      these By-laws shall limit or eliminate the right to indemnification
      provided hereunder with respect to acts or omissions occurring prior to
      such amendment or repeal.

      (a)  Special Condition.  With respect to Liability to the Trust or its
      Holders, and subject to applicable state and federal law, a trustee or
      officer shall be indemnified and held harmless pursuant to this Section
      6.1 against any Liability to the Trust or its Holders unless such
      Liability arises by reason of his or her willful misfeasance, bad faith,
      gross negligence, or reckless disregard of the duties involved in the
      conduct of his or her office as defined in Section 17(h) of the 1940 Act
      ("disabling conduct").

      (b)  Special Process Condition.  With respect to Liability to the Trust
      or its Holders, no indemnification shall be made unless a determination
      has been made by reasonable and fair means that the trustee or officer
      has not engaged in disabling conduct.  In making such a determination,
      the Board of Trustees shall act in conformity with then applicable law
      and administrative interpretations, and shall afford a trustee
      requesting indemnification who is not an "interested person" of the
      Trust, as defined in Section 2(a)(19) of the 1940 Act, a rebuttable
      presumption that such trustee did not engage in disabling conduct while
      acting in his or her capacity as a trustee.

      6.2  Advancement of Expenses.  The Trust shall promptly advance funds to
      its trustees and officers, and may advance funds to its employees and
      agents, to cover expenses they incur with respect to any proceeding
      arising out of or in connection with their service to the Trust, to the
      fullest extent permitted by the Declaration of Trust and the laws of the
      State of Delaware, the Securities Act of 1933, and the 1940 Act, as now
      or hereafter in effect.

      (a)  Affirmation of Conduct.  A request by a trustee or officer for
      advancement of funds pursuant to this Section 6.2 shall be accompanied
      by the trustee's or officer's written affirmation of his or her good
      faith belief that he or she met the standard of conduct necessary for
      indemnification, and such other statements, documents or undertakings as
      may be required under applicable law.

      (b)  Special Conditions to Advancement.  With respect to Liability to
      the Trust or its Holders, and subject to applicable state and federal
      law, a trustee or officer shall be entitled to advancements of expenses
      pursuant to this Section 6.2 against any Liability to the Trust or its
      Holders if (1) the Trust has obtained assurances required under
      applicable law, such as by obtaining insurance or receiving collateral
      provided by the trustee or officer, that the advance will be repaid if
      the trustee or officer is found to have engaged in disabling conduct, or
      (2) the Board has a reasonable belief that the trustee or officer has
      not engaged in disabling conduct and ultimately will be entitled to
      indemnification.  In forming such a reasonable belief, the Board of
      Trustees shall act in conformity with then applicable law and
      administrative interpretations, and shall afford a trustee requesting an
      advance who is not an "interested person" of the Trust, as defined in
      Section 2(a)(19) of the 1940 Act, a rebuttable presumption that such
      trustee did not engage in disabling conduct while acting in his or her
      capacity as a trustee.





      6.3  Insurance.  The Trust shall purchase and maintain in effect one or
      more policies of insurance on behalf of its trustees and officers in
      such amounts and with such coverage as shall be determined from time to
      time by the Board of Trustees, and may purchase and maintain such
      insurance for any of its employees and agents, issued by a reputable
      insurer or insurers, against any expenses actually and reasonably
      incurred by such person in any proceeding arising out of or in
      connection with his or her service to the Trust, with customary
      limitations and exceptions, whether or not the Trust would have the
      power to indemnify such person against such expenses pursuant to this
      Article 6.

      6.4  General Provisions.

      (a)  Non-Exclusive Rights.  The provisions for indemnification of, and
      advancement of expenses to, trustees and officers of the Trust set forth
      in this Article 6 shall not be deemed exclusive of any other contractual
      or legal rights to which a trustee or officer may otherwise be entitled.

      (b)  Continuation of Provisions.  The provisions of this Article 6 shall
      continue as to a person who has ceased to provide service to the Trust
      and shall inure to the benefit of his or her spouses, heirs, assigns,
      devisees, executors, administrators and legal representatives.  No
      amendment of the Declaration of Trust or By-Laws of the Trust shall
      limit or eliminate the right of a person to indemnification, advancement
      of expenses and insurance set forth in this Article 6 with respect to
      his or her acts, omissions or service to the Trust occurring prior to
      such amendment.

      6.5  Definitions.  For purposes of this Article 6, the following terms
      shall have the following meanings:

      (a) "Expenses" shall include without limitation all judgments, penalties,
      fines, amounts paid or to be paid in settlement, ERISA excise taxes,
      liabilities, losses, interest, expenses of investigation, attorneys' fees,
      retainers, court costs, transcript costs, fees of experts and witnesses,
      expenses of preparing for and attending depositions and other proceedings,
      travel expenses, duplicating costs, printing and binding costs, telephone
      charges, postage, delivery service fees, and all other costs,
      disbursements or expenses of the type customarily incurred in connection
      with prosecuting, defending, preparing to prosecute or defend,
      investigating, or acting as a witness in a proceeding.

      (b) The term "proceeding" shall include without limitation any threatened,
      pending or completed claim, demand, threat, discovery request, request for
      testimony or information, action, suit, arbitration, alternative dispute
      mechanism, investigation, hearing, or other proceeding, including any
      appeal from any of the foregoing, whether civil, criminal, administrative
      or investigative.

      (c) A person's "service to the Trust" shall include without limitation his
      or her service as a trustee, officer, employee, agent or representative of
      the Trust, and his or her service at the request of the Trust as a
      trustee, officer, employee, agent or representative of another trust,
      partnership, joint venture, trust, employee benefit plan or other
      enterprise.

Pursuant to Rule 484 under the Securities Act of 1933, as amended, the
Registrant furnishes the following undertaking:

      Insofar as indemnification for liabilities arising under the Securities
      Act of 1933 may be permitted to trustees, officers and controlling persons
      of the Registrant pursuant to the foregoing provisions, or otherwise, the
      Registrant has been advised that in the opinion of the Securities and
      Exchange Commission such indemnification is against public policy as





      expressed in the Act and is, therefore, unenforceable. In the event that a
      claim for indemnification against such liabilities (other than the payment
      by the Registrant of expenses incurred or paid by a trustee, officer, or
      controlling person of the Registrant in the successful defense of any
      action, suit or proceeding) is asserted by such trustee, officer, or
      controlling person in connection with the securities being registered, the
      Registrant will, unless in the opinion of its counsel the matter has been
      settled by controlling precedent, submit to a court of appropriate
      jurisdiction the question whether such indemnification by it is against
      public policy as expressed in the Act and will be governed by the final
      adjudication of such issue.


Item 26.  Business and Other Connections of the Investment Adviser

To the knowledge of Registrant none of the directors or officers of the
Investment Manager is or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or employment of a
substantial nature.

Item 27.   Principal Underwriter

(a)   Registrant's distributor, [___________________] (the "Distributor") acts
as distributor for [______________________] pursuant to distribution
agreements dated [______________].

(b)   The following are the directors and officers of the Distributor.  Unless
otherwise noted, the business address of each director or officer is
[________________________].

- --------------------------------------------------------------------------------
Name            Position and Offices with            Position and Offices with
                Distributor                          Registrant
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

Item 28.   Location of Accounts and Records

The accounts, books, or other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940, as amended (the "Investment Company
Act") will be kept by the Registrant at 225 South Lake Avenue, Suite 400,
Pasadena, CA 91101-3005.

Item 29.   Management Services

There are no management-related service contracts not discussed in Parts A and
B.

Item 30.   Undertakings

Not applicable.





                                  SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pasadena, the State of
California, on this 28th day of June, 2004.

                               PRIMECAP ODYSSEY FUNDS

                               By:  /s/ Mitchell J. Milias
                                    ----------------------
                                    Mitchell J. Milias
                                    President

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
and on the dates indicated.


/s/ Mitchell J. Milias                                   June 28, 2004
- ---------------------------
Mitchell J. Milias         President, Trustee


/s/ Howard B. Schow                                      June 28, 2004
- ---------------------------
Howard B. Schow            Trustee


/s/ David H. Van Slooten                                 June 28, 2004
- ---------------------------
David H. Van Slooten       Chief Financial Officer and Secretary

EX-99.A 2 ex99a.txt EXHIBIT 99.A DECLARATION OF TRUST OF PRIMECAP ODYSSEY FUNDS This DECLARATION OF TRUST of PRIMECAP ODYSSEY FUNDS is made as of June 25, 2004 by the parties signatory hereto, as trustees. WHEREAS, the Trustees desire to form a statutory trust under the law of Delaware for the investment and reinvestment of its assets; and WHEREAS, it is proposed that the Trust assets be composed of cash, securities and other assets contributed to the Trust by the holders of interests in the Trust entitled to ownership rights in the Trust; NOW, THEREFORE, the Trustees hereby declare that the Trustees will hold in trust all cash, securities and other assets which they may from time to time acquire in any manner as Trustees hereunder, and manage and dispose of the same for the benefit of the holders of interests in the Trust and subject to the following terms and conditions. ARTICLE 1 THE TRUST 1.1 Name. The name of the trust created hereby (the "Trust") shall be "PRIMECAP Odyssey Funds," and so far as may be practicable the Trustees shall conduct the Trust's activities, execute all documents and sue or be sued under that name, which name (and the word "Trust" wherever hereinafter used) shall not refer to the Trustees in their individual capacities or to the officers, agents, employees or holders of interest in the Trust. However, should the Trustees determine that the use of the name of the Trust is not advisable, they may select such other name for the Trust as they deem proper and the Trust may hold its property and conduct its activities under such other name. Any name change shall become effective upon the execution by a majority of the then Trustees of an instrument setting forth the new name and the filing of a certificate of amendment pursuant to Section 3810(b) of the DSTA. Any such instrument shall not require the approval of the holders of interests in the Trust, but shall have the status of an amendment to this Declaration. 1.2 Trust Purpose. The purpose of the Trust is to conduct, operate and carry on the business of an open-end management investment company registered under the 1940 Act. In furtherance of the foregoing, it shall be the purpose of the Trust to do everything necessary, suitable, convenient or proper for the conduct, promotion and attainment of any businesses and purposes which at any time may be incidental or may appear conducive or expedient for the accomplishment of the business of an open-end management investment company registered under the 1940 Act and which may be engaged in or carried on by a trust organized under the DSTA, and in connection therewith the Trust shall have and may exercise all of the powers conferred by the laws of the State of Delaware upon a Delaware statutory trust. 1.3 Definitions. As used in this Declaration, the following terms shall have the following meanings: 1 (a) "1940 Act shall mean the Investment Company Act of 1940, as amended from time to time, and the rules and regulations thereunder, as adopted or amended from time to time. (b) "Affiliated Person," "Assignment" and "Interested Person" shall have the meanings given such terms in the 1940 Act. (c) "Administrator" shall mean any party furnishing services to the Trust pursuant to any administrative services contract described in Section 4.1 hereof. (d) "By-Laws" shall mean the By-Laws of the Trust as amended from time to time. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations thereunder, as adopted or amended from time to time. (f) "Commission" shall mean the Securities and Exchange Commission. (g) "Declaration" shall mean this Declaration of Trust as amended from time to time. References in this Declaration to "Declaration," "hereof," "herein" and "hereunder" shall be deemed to refer to the Declaration rather than the article or section in which such words appear. This Declaration shall, together with the By-Laws, constitute the governing instrument of the Trust under the DSTA. (h) "DSTA" shall mean the Delaware Statutory Trust Act, Delaware Code Annotated title 12, Sections 3801 et seq., as amended from time to time. (i) "Fiscal Year" shall mean an annual period as determined by the Trustees unless otherwise provided by the Code or applicable regulations. (j) "Holders" shall mean as of any particular time any or all holders of record of Interests in the Trust or in Trust Property, as the case may be, at such time. (k) "Interest" shall mean a Holder's units of interest into which the beneficial interest in the Trust and each series and class of the Trust shall be divided from time to time. (l) "Investment Adviser" shall mean any party furnishing services to the Trust pursuant to any investment advisory contract described in Section 4.1 hereof. (m) "Majority Interests Vote" shall mean the vote, at a meeting of the Holders of Interests, of the lesser of (A) 67% or more of the Interests present or represented at such meeting, provided the Holders of more than 50% of the Interests are present or represented by proxy or (B) more than 50% of the Interests. (n) "Person" shall mean and include an individual, corporation, partnership, trust, association, joint venture and other entity, whether or not a legal entity, and a government and agencies and political subdivisions thereof. 2 (o) "Registration Statement' as of any particular time shall mean the Registration Statement of the Trust which is effective at such time under the 1940 Act. (p) "Trust Property" shall mean as of any particular time any and all property, real or personal, tangible or intangible, which at such time is owned or held by or for the account of the Trust or the Trustees or any series of the Trust established in accordance with Section 6.2. (q) "Trustees" shall mean such persons who are identified as trustees of the Trust on the signature page of this Declaration, so long as they shall continue in office in accordance with the terms of this Declaration of Trust, and all other persons who at the time in question have been duly elected or appointed as trustees in accordance with the provisions of this Declaration of Trust and are then in office, in their capacity as trustees hereunder. ARTICLE 2 TRUSTEES 2.1 Number and Qualification. The number of Trustees shall initially be one and shall thereafter be fixed from time to time by written instrument signed by majority of the Trustees so fixed then in office. A Trustee shall be an individual at least 21 years of age who is not under legal disability. (a) Any vacancy created by an increase in Trustees shall be filled by the appointment or election of an individual having the qualifications described in this Article as provided in Section 2.4. Any such appointment shall not become effective, however, until the individual appointed or elected shall have accepted in writing such appointment or election and agreed in writing to be bound by the terms of the Declaration. No reduction in the number of Trustees shall have the effect of removing any Trustee from office. (b) Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided in Section 2.4 hereof, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration. 2.2 Term and Election. Each Trustee named herein, or elected or appointed prior to the first meeting of the Holders, shall (except in the event of resignations or removals or vacancies pursuant to Section 2.3 or 2.4 hereof) hold office until his or her successor has been elected at such meeting and has qualified to serve as Trustee. Beginning with the Trustees elected at the first meeting of Holders, each Trustee shall hold office during the lifetime of this Trust and until its termination as hereinafter provided unless such Trustee resigns or is removed as provided in Section 2.3 below or his or her term expires pursuant to Section 2.4 hereof. 2.3 Resignation and Removal. Any Trustee may resign (without need for prior or subsequent accounting) by an instrument in writing signed by him or her and delivered or mailed to the Chairman, if any, the President or the Secretary and such resignation shall be effective upon such delivery, or at a later date according to the terms of the instrument. 3 (a) Any of the Trustees may be removed with or without cause by the affirmative vote of the Holders of two-thirds (2/3) of the Interests or with cause, by the action of two-thirds (2/3) of the remaining Trustees. Removal with cause shall include, but not be limited to, the removal of a Trustee due to physical or mental incapacity. (b) Upon the resignation or removal of a Trustee, or his or her otherwise ceasing to be a Trustee, he or she shall execute and deliver such documents as the remaining Trustees shall require for the purpose of conveying to the Trust or the remaining Trustees any Trust Property held in the name of the resigning or removed Trustee. Upon the death of any Trustee or upon removal or resignation due to any Trustee's incapacity to serve as trustee, his or her legal representative shall execute and deliver on his or her behalf such documents as the remaining Trustees shall require as provided in the preceding sentence. 2.4 Vacancies. The term of office of a Trustee shall terminate and a vacancy shall occur in the event of the earliest to occur of the following: the Trustee's death, resignation, adjudicated incompetence or other incapacity to perform the duties of the office, or removal, of the Trustee. A vacancy shall also occur in the event of an increase in the number of trustees as provided in Section 2.1. No such vacancy shall operate to annul this Declaration or to revoke any existing trust created pursuant to the terms of this Declaration. In the case of a vacancy, the Holders of a plurality of the Interests entitled to vote, acting at any meeting of the Holders held in accordance with Article 8 hereof, or, to the extent permitted by the 1940 Act, a majority vote of the Trustees continuing in office acting by written instrument or instruments, may fill such vacancy, and any Trustee so elected by the Trustees or the Holders shall hold office as provided in this Declaration. There shall be no cumulative voting by the Holders in the election of Trustees. 2.5 Meetings. Meetings of the Trustees shall be held from time to time within or without the State of Delaware upon the call of the Chairman, if any, the President, the Secretary or any two Trustees (except at such time as there is only one Trustee). (a) Regular meetings of the Trustees may be held without call or notice at a time and place fixed by the By-Laws or by resolution of the Trustees. Notice of any other meeting shall be given not later than 72 hours preceding the meeting by United States overnight mail, by recognized overnight delivery service, or by electronic transmission to each Trustee at his or her business address as set forth in the records of the Trust or otherwise given personally not less than 24 hours before the meeting but may be waived in writing by any Trustee either before or after such meeting. The attendance of a Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Trustee attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been lawfully called or convened. (b) A quorum for all meetings of the Trustees shall be one-third of the total number of Trustees, but (except at such time as there is only one Trustee) no less than two Trustees. Unless provided otherwise in this Declaration, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present) or without a meeting by written consent of a majority of the Trustees, which written consent shall be filed with the minutes of proceedings of the Trustees or any such committee. If there be less than a 4 quorum present at any meeting of the Trustees, a majority of those present may adjourn the meeting until a quorum shall have been obtained. (c) Any committee of the Trustees, including an executive committee, if any, may act with or without a meeting. A quorum for all meetings of any such committee shall be two or more of the members thereof (except at such time as the committee has only one member), unless the Board shall provide otherwise. Unless provided otherwise in this Declaration, any action of any such committee may be taken at a meeting by vote of a majority of the members present (a quorum being present) or without a meeting by written consent of a majority of the members, which written consent shall be filed with the minutes of proceedings of the Trustees or any such committee. (d) With respect to actions of the Trustees and any committee of the Trustees, Trustees who are Interested Persons of the Trust or are otherwise interested in any action to be taken may be counted for quorum purposes under this Section 2.5 and shall be entitled to vote to the extent permitted by the 1940 Act. (e) All or any one or more Trustees may participate in a meeting of the Trustees or any committee thereof by a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to such communications system shall constitute presence in person at such meeting, unless the 1940 Act specifically requires the Trustees to act "in person," in which case such term shall be construed consistent with Commission or staff releases or interpretations. 2.6 Officers; Chairman of the Board. The Trustees shall, from time to time, elect officers of the Trust, including a President, a Secretary and a Chief Financial Officer. The Trustees shall also elect or appoint a Trustee to act as Chairman of the Board, who shall not be deemed an officer of the Trust solely as a result of such appointment, who shall preside at all meetings of the Trustees and carry out such other duties as the Trustees shall designate. The Trustees may elect or appoint or authorize the President to appoint such other officers or agents with such powers as the Trustees may deem to be advisable. The President, Secretary and Chief Financial Officer may, but need not, be a Trustee. Except as set forth above, the Chairman of the Board and such officers of the Trust shall serve in such capacity for such time and with such authority as the Trustees may, in their discretion, so designate or as provided by in the By-Laws. 2.7 By-Laws. The Trustees may adopt and, from time to time, amend or repeal the By-Laws for the conduct of the business of the Trust not inconsistent with this Declaration and such By-Laws are hereby incorporated in this Declaration by reference thereto. ARTICLE 3 POWERS OF TRUSTEES 3.1 General. The Trustees shall have exclusive and absolute control over management of the business and affairs of the Trust, but with such powers of delegation as may be permitted by this Declaration and the DSTA. The Trustees may perform such acts as in their sole discretion are proper for conducting the business and affairs of the Trust. The enumeration 5 of any specific power herein shall not be construed as limiting the aforesaid power. Such powers of the Trustee may be exercised without order of or recourse to any court. 3.2 Investments. The Trustees shall have power to: (a) conduct, operate and carry on the business of an investment company; (b) subscribe for, invest in, reinvest in, purchase or otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise deal in or dispose of United States and foreign currencies and related instruments including forward contracts, and securities, including common and preferred stock, warrants, bonds, debentures, time notes and all other evidences of indebtedness, negotiable or non-negotiable instruments, obligations, certificates of deposit or indebtedness, commercial paper, repurchase agreements, reverse repurchase agreements, convertible securities, forward contracts, options, futures contracts, and other securities, including, without limitation, those issued, guaranteed or sponsored by any state, territory or possession of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, or by the United States Government, any foreign government, or any agency, instrumentality or political subdivision of the United States Government or any foreign government, or international instrumentalities, or by any bank, savings institution, corporation or other business entity organized under the laws of the United States or under foreign laws; and to exercise any and all rights, powers and privileges of ownership or interest in respect of any and all such investments of every kind and description, including, without limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more persons, firms, associations, or corporations to exercise any of said rights, powers and privileges in respect of any of said instruments; and the Trustees shall be deemed to have the foregoing powers with respect to any additional securities in which the Trustees may determine to invest. The Trustees shall not be limited to investing in obligations maturing before the possible termination of the Trust, nor shall the Trustees be limited by any law limiting the investments which may be made by fiduciaries. 3.3 Legal Title. Legal title to all the Trust Property shall be vested in the Trust as a separate legal entity under the DSTA, except that the Trustees shall have the power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees or in the name of any other Person on behalf of the Trust on such terms as the Trustees may determine. In the event that title to any part of the Trust Property is vested in one or more Trustees, the right, title and interest of the Trustees in the Trust Property shall vest automatically in each person who may hereafter become a Trustee upon his or her due election and qualification. Upon the resignation, removal or death of a Trustee he or she shall automatically cease to have any right, title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. To the extent permitted by law, such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. 6 3.4 Sale of Interests. Subject to the more detailed provisions set forth in Article 8, the Trustees shall have the power to permit persons to purchase Interests and to add or reduce, in whole or in part, their Interest in the Trust. 3.5 Borrow Money. The Trustees shall have power to borrow money or otherwise obtain credit and to secure the same by mortgaging, pledging or otherwise subjecting as security the assets of the Trust, including the lending of portfolio securities, and to endorse, guarantee or undertake the performance of any obligation, contract or engagement of any other person, firm, association or corporation. 3.6 Delegation. The Trustees shall have the power, consistent with their continuing exclusive authority over the management of the Trust and the Trust Property, to delegate from time to time to such of their number or to officers, employees or agents of the Trust the doing of such things and the execution of such instruments, either in the name of the Trust or the names of the Trustees or otherwise, as the Trustees may deem expedient. 3.7 Collection and Payment. The Trustees shall have power to collect all property due to the Trust; to pay all claims, including taxes, against the Trust Property; to prosecute, defend, compromise or abandon any claims relating to the Trust Property; to foreclose any security interest securing any obligations, by virtue of which any property is owned to the Trust; and to enter into releases, agreements and other instruments. 3.8 Expenses. The Trustees shall have the power to incur and pay any expenses which in the opinion of the Trustees are necessary or incidental to carry out any of the purposes of this Declaration, and to pay reasonable compensation from the funds of the Trust to themselves as Trustees. The Trustees shall fix the compensation of all officers, employees and Trustees. The Trustees may pay themselves such compensation for special services, including legal and brokerage services, as they in good faith may deem reasonable (subject to any limitations in the 1940 Act), and reimbursement for expenses reasonably incurred by themselves on behalf of the Trust. 3.9 Miscellaneous Powers. The Trustees shall have the power to: (a) employ or contract with such Persons as the Trustees may deem desirable for the transaction of the business of the Trust and terminate such employees or contractual relationships as they consider appropriate; (b) enter into joint ventures, partnerships and any other combinations or associations; (c) purchase, and pay for out of Trust Property, insurance policies (including, but not limited to, fidelity bonding and errors and omission policies) insuring the Investment Adviser, Administrator, distributor, Holders, Trustees, officers, employees, agents, or independent contractors of the Trust against all claims arising by reason of holding any such position or by reason of any action taken or omitted by any such person in such capacity, whether or not the Trust would have the power to indemnify such Person against liability; (d) establish pension, profit-sharing and other retirement, incentive and benefit plans for any Trustees, officers, employees and agents of the Trust; (e) to the extent permitted by law, indemnify any Person with whom the Trust has dealings, including the Investment Adviser, Administrator, distributor, Holders, Trustees, officers, employees, agents or independent contractors of the Trust, to such extent as the Trustees shall determine; (f) guarantee indebtedness or contractual obligations of others; (g) determine and change the Fiscal Year of the 7 Trust and the method by which its accounts shall be kept; and (h) adopt a seal for the Trust, but the absence of such seal shall not impair the validity of any instrument executed on behalf of the Trust. 3.10 Further Powers. The Trustees shall have power to conduct the business of the Trust and carry on its operations in any and all of its branches and maintain offices, whether within or without the State of Delaware, in any and all states of the United States of America, in the District of Columbia, in any foreign countries, and in any and all commonwealths, territories, dependencies, colonies, possessions, agencies or instrumentalities of the United States of America and of foreign countries, and to do all such other things and execute all such instruments as they deem necessary, proper or desirable in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive and shall be binding upon the Trust and the Holders, past, present and future. In construing the provisions of this Declaration, the presumption shall be in favor of a grant of power to the Trustees. The Trustees shall not be required to obtain any court order to deal with Trust Property. ARTICLE 4 INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES AND PLACEMENT AGENT ARRANGEMENTS 4.1 Investment Advisory and Other Arrangements. The Trustees may in their discretion, from time to time, enter into contracts or agreements for investment advisory services, administrative services (including transfer and dividend disbursing agency services), distribution services, fiduciary (including custodian) services, placement agent services, Holder servicing, or other services, whereby the other party to such contract or agreement shall undertake to furnish the Trust such services as the Trustees shall, from time to time, consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine. Notwithstanding any other provisions of this Declaration to the contrary, the Trustees may authorize any Investment Adviser (subject to such general or specific instructions as the Trustees may, from time to time, adopt) to effect purchases, sales, loans or exchanges of Trust Property on behalf of the Trustees or may authorize any officer, employee or Trustee to effect such purchases, sales, loans or exchanges pursuant to recommendations of any such Investment Adviser (all without further action by the Trustees). Any such purchases, sales, loans and exchanges shall be binding upon the Trust. 4.2 Parties to Contract. Any contract or agreement of the character described in Section 4.1 of this Article IV or in the By-Laws of the Trust may be entered into with any Person, although one or more of the Trustees or officers of the Trust or any Holder may be an officer, director, trustee, shareholder, or member of such other party to the contract or agreement, and no such contract or agreement shall be invalidated or rendered voidable by reason of the existence of any such relationship, nor shall any person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of such contract or agreement or accountable for any profit realized directly or indirectly therefrom, provided that the contract or agreement when entered into was reasonable and fair and not inconsistent with the provisions of this Article 4, the By-Laws or the 1940 Act. Any Trustee or officer of the Trust or any Holder may be the other party to contracts or agreements entered into 8 pursuant to Section 4.1 hereof or the By-Laws of the Trust, and any Trustee or officer of the Trust or any Holder may be financially interested or otherwise affiliated with Persons who are parties to any or all of the contracts or agreements mentioned in this Section 4.2. ARTICLE 5 Limitations of Liability 5.1 No Personal Liability of Trustees, Officers and Employees. No Trustee, officer or employee of the Trust when acting in such capacity shall be subject to any personal liability whatsoever, in his or her individual capacity, to any Person, other than the Trust or its Holders, in connection with Trust Property or the affairs of the Trust; and all such Persons shall look solely to the Trust Property for satisfaction of claims of any nature against a Trustee, officer or employee of the Trust arising in connection with the affairs of the Trust. No Trustee, officer or employee of the Trust shall be liable to the Trust, Holders of Interests therein, or to any Trustee, officer or employee thereof for any action or failure to act (including, without limitation, the failure to compel in any way any former or acting Trustee to redress any breach of trust) except for his or her own bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties. 5.2 Indemnification of Trustees, Officers, Employees and Agents. The Trust shall indemnify each of its Trustees and may indemnify each of its officers, employees and agents (including Persons who serve at its request as directors, officers or trustees of another organization in which it has any interest, as a shareholder, creditor or otherwise), against all liabilities and expenses (including amounts paid in satisfaction of judgments, in compromise, as fines and penalties, and as counsel fees) reasonably incurred by him or her in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which he or she may be involved or with which he or she may be threatened, while in office or thereafter, by reason of his or her being or having been such a Trustee, officer, employee or agent, except with respect to any matter as to which he or she shall have been adjudicated to have acted in bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties, to the fullest extent permitted by law The Trustees shall make advance payments in connection with any indemnification under this Section 5.2 to the fullest extent permitted by law. 5.3 Liability of Holders; Indemnification. The Trust shall indemnify and hold each Holder harmless from and against any claim or liability to which such Holder may become subject solely by reason of his or her being or having been a Holder and not because of such Holder's acts or omissions or for some other reason, and shall reimburse such Holder for all legal and other expenses reasonably incurred by him or her in connection with any such claim or liability (upon proper and timely request by the Holder); provided, however, that no Holder shall be entitled to indemnification by any series established in accordance with Section 6.2 unless such Holder is a Holder of Interests of such series. The rights accruing to a Holder under this Section 5.3 shall not exclude any other right to which such Holder may be lawfully entitled, nor shall anything herein contained restrict the right of the Trust to indemnify or reimburse a Holder in any appropriate situation even though not specifically provided herein. 5.4 No Bond Required of Trustees. No Trustee shall, as such, be obligated to give any bond or surety or other security for the performance of any of his or her duties hereunder. 9 5.5 No Duty of Investigation; Notice in Trust Instruments, Etc. No purchaser, lender, or other Person dealing with the Trustees or any officer or employee of the Trust shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by said officer or employee or be liable for the application of money or property paid, loaned, or delivered to or on the order of the Trustees or of said officer or employee. Every obligation, contract, instrument, certificate or other interest or undertaking of the Trust, and every other act or thing whatsoever executed in connection with the Trust, shall be conclusively taken to have been executed or done by the executors thereof only in their capacity as Trustees, officers or employees of the Trust. Every written obligation, contract, instrument, certificate or other interest or undertaking of the Trust made by the Trustees or by any officer or employee of the Trust, in his or her capacity as such, shall contain an appropriate recital to the effect that the Trustee, officer or employee of the Trust shall not personally be bound by or liable thereunder, nor shall resort be had to their private property or the private property of the Holders for the satisfaction of any obligation or claim thereunder, and appropriate references shall be made therein to the Declaration, and may contain any further recital which they may deem appropriate, but the omission of such recital shall not operate to impose personal liability on any of the Trustees, officers or employees of the Trust. The Trustees may maintain insurance for the protection of the Trust Property, Holders, Trustees, officers and employees in such amount as the Trustees shall deem advisable. 5.6 Reliance on Experts, Etc. Each Trustee and officer or employee of the Trust shall, in the performance of his or her duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any of its officers or employees or by any Investment Adviser, Administrator, accountant, appraiser or other experts or consultants selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or expert may also be a Trustee. 5.7 Assent To Declaration. Every Holder, by virtue of having become a Holder in accordance with the terms of this Declaration, shall be held to have expressly assented and agreed to the terms hereof and to have become a party hereto. ARTICLE 6 INTERESTS IN THE TRUST 6.1 General Characteristics. (a) The Trustees shall have the power and authority, without Holder approval, to issue Interests in one or more series from time to time as they deem necessary or desirable. Each series shall be separate from all other series in respect of the assets and liabilities allocated to that series and shall represent a separate investment portfolio of the Trust. The Trustees shall have exclusive power, without Holder approval, to establish and designate such separate and distinct series, as set forth in Section 6.2, and to fix and determine the relative rights and preferences as between the Interests of the separate series as to right of redemption, special and relative rights as to dividends and other distributions and on liquidation, conversion rights, and conditions under which the series shall have separate voting rights or no voting rights. 10 (b) The Trustees may, without Holder approval, divide Interests of any series into two or more classes, Interests of each such class having such preferences and special or relative rights and privileges (including conversion rights, if any) as the Trustees may determine as provided in Section 6.3. The fact that a series shall have been initially established and designated without any specific establishment or designation of classes shall not limit the authority of the Trustees to divide a series and establish and designate separate classes thereof. (c) The number of Interests authorized shall be unlimited, and the Interests so authorized may be represented in part by fractional Interests. From time to time, the Trustees may divide or combine the Interests of any series or class into a greater or lesser number without thereby changing the proportionate beneficial interests in the series or class. The Trustees may issue Interests of any series or class thereof for such consideration and on such terms as they may determine (or for no consideration if pursuant to an Interest dividend or split-up), all without action or approval of the Holders. All Interests when so issued on the terms determined by the Trustees shall be fully paid and non-assessable. The Trustees may classify or reclassify any unissued Interests or any Interests previously issued and reacquired of any series or class thereof into one or more series or classes thereof that may be established and designated from time to time. The Trustees may hold as treasury Interests, reissue for such consideration and on such terms as they may determine, or cancel, at their discretion from time to time, any Interests of any series or class thereof reacquired by the Trust. 6.2 Establishment and Termination of Series of Interests. The establishment and designation of any series of Interests shall be effective upon the execution by a majority of the then Trustees of an instrument setting forth such establishment and designation and the relative rights and preferences of such series, or as otherwise provided in such instrument. The Trustees may at any time by an instrument executed by a majority of their number abolish any particular series previously established and designated and the establishment and designation thereof. Each instrument referred to in this paragraph shall have the status of an amendment to this Declaration. 6.3 Establishment and Termination of Classes. The division of any series into two or more classes and the establishment and designation of such classes, other than as set forth above, shall be effective upon the execution by a majority of the then Trustees of an Instrument setting forth such division, and the establishment, designation, and relative rights and preferences of such classes, or as otherwise provided in such instrument. The relative rights and preferences of the classes of any series may differ in such respects as the Trustees may determine to be appropriate, provided that such differences are set forth in the aforementioned instrument. The Trustees may at any time by an instrument executed by a majority of their number abolish any particular class previously established and designated and the establishment and designation thereof. Each instrument referred to in this paragraph shall have the status of an amendment to this Declaration. 6.4 Assets of Series. All consideration received by the Trust for the issue or sale of Interests of a particular series together with all Trust Property in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, 11 shall irrevocably belong to that series for all purposes, subject only to the rights of creditors of such series and except as may otherwise be required by applicable tax laws, and shall be so recorded upon the books of account of the Trust. Separate and distinct records shall be maintained for each series and the assets associated with a series shall be held and accounted for separately from the other assets of the Trust or any other series. In the event that there is any Trust Property, or any income, earnings, profits, and proceeds thereof, funds, or payments which are not readily identifiable as belonging to any particular series, the Trustees shall allocate them among any one or more of the series established and designated from time to time in such manner and on such basis as they, in their sole discretion, deem fair and equitable. Each such allocation by the Trustees shall be conclusive and binding upon the Holders of all Interests for all purposes. 6.5 Liabilities of Series. (a) The Trust Property belonging to each particular series shall be charged with the liabilities of the Trust in respect of that series and all expenses, costs, charges and reserves attributable to that series, and any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular series shall be allocated and charged by the Trustees to and among any one or more of the series established and designated from time to time in such manner and on such basis as the Trustees in their sole discretion deem fair and equitable. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the Holders of all Interests for all purposes. The Trustees shall have full discretion, to the extent not inconsistent with the 1940 Act, to determine which items shall be treated as income and which items as capital, and each such determination and allocation shall be conclusive and binding upon the Holders. (b) Without limitation of the foregoing provisions of this Section, but subject to the right of the Trustees in their discretion to allocate general liabilities, expenses, costs, charges or reserves as herein provided, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable against the assets of such series only, and not against the assets of any other series. Notice of this limitation on interseries liabilities shall be set forth in the certificate of trust of the Trust (whether originally or by amendment) as filed or to be filed in the Office of the Secretary of State of the State of Delaware pursuant to the DSTA, and upon the giving of such notice in the certificate of trust, the statutory provisions of Section 3804 of the DSTA relating to limitations on interseries liabilities (and the statutory effect under Section 3804 of setting forth such notice in the certificate of trust) shall become applicable to the Trust and each series. Every note, bond, contract or other undertaking issued by or on behalf of a particular series shall include a recitation limiting the obligation represented thereby to that series and its assets. 6.6 Dividends and Distributions. (a) Dividends and distributions on Interests of a particular series or any class thereof may be paid with such frequency as the Trustees may determine, which may be daily or otherwise, pursuant to a standing resolution or resolution adopted only once or with such frequency as the Trustees may determine, to the Holders of Interests in that series or class, from such of the income and capital gains, accrued or realized, of the Trust Property belonging to that series, or in the case of a class, belonging to that series and allocable to that class, as the Trustees may determine, after providing for actual and accrued liabilities belonging to that series. All dividends and distributions on Interests in a particular 12 series or class thereof shall be distributed pro rata to the Holders of Interests in that series or class in proportion to the total outstanding Interests in that series or class held by such Holders at the date and time of record established for the payment of such dividends or distributions, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any series or class. Such dividends and distributions may be made in cash or Interests of that series or class or a combination thereof as determined by the Trustees or pursuant to any program that the Trustees may have in effect at the time for the election by each Holder of the mode of the making of such dividend or distribution to that Holder. Any such dividend or distribution paid in Interests will be paid at the net asset value thereof as determined in accordance with Section 7.4. (b) The Interests in a series or a class of the Trust shall represent beneficial interests in the Trust Property belonging to such series or in the case of a class, belonging to such series and allocable to such class. Each Holder of Interests in a series or a class shall be entitled to receive his or her pro rata share of distributions of income and capital gains made with respect to such series or such class. Upon reduction or withdrawal of its Interests or indemnification for liabilities incurred by reason of being or having been a Holder of Interests in a series or a class, such Holder shall be paid solely out of the funds and property of such series or in the case of a class, the funds and property of such series and allocable to such class, of the Trust. Upon liquidation or termination of a series or class of the Trust, Holders of Interests in such series or class shall be entitled to receive a pro rata share of the Trust Property belonging to such series or in the case of a class, belong to such series and allocable to such class. 6.7 Voting Rights. Notwithstanding any other provision hereof, on each matter submitted to a vote of the Holders, each Holder shall be entitled to one vote for each whole Interest standing in his or her name on the books of the Trust, and each fractional Interest shall be entitled to a proportionate fractional vote, irrespective of the series thereof or class thereof and all Interests of all series and classes thereof shall vote together as a single class; provided, however, that as to any matter (i) with respect to which a separate vote of one or more series or classes thereof is permitted or required by the 1940 Act or the provisions of the instrument establishing and designating the series or class, such requirements as to a separate vote by such series or class thereof shall apply in lieu of all Interests of all series and classes thereof voting together; and (ii) as to any matter which affects only the interests of one or more particular series or classes thereof, only the Holders of the one or more affected series or class shall be entitled to vote, and each such series or class shall vote as a separate class. 6.8 Record Dates. The Trustees may from time to time close the transfer books or establish record dates and times for the purposes of determining the Holders entitled to be treated as such, to the extent provided or referred to in Section 8.6. 6.9 Transfer. All Interests of each particular series or class thereof shall be transferable, but transfers of Interests of a particular series or class thereof shall be recorded on the Interest transfer records of the Trust applicable to that series or class only at such times as Holders shall have the right to require the Trust to redeem Interests of that series or class and at such other times as may be permitted by the Trustees. 13 6.10 Equality. Except as provided herein or in the instrument designating and establishing any class or series, all Interests of each particular series or class thereof shall represent an equal proportionate interest in the assets belonging to that series, or in the case of a class, belonging to that series and allocable to that class, subject to the liabilities belonging to that series, and each Interest of any particular series or classes shall be equal to each other Interest of that series or class; but the provisions of this sentence shall not restrict any distinctions permissible under Section 6.6 that may exist with respect to dividends and distributions on Interests of the same series or class. The Trustees may from time to time divide or combine the Interests of any particular series or class into a greater or lesser number of Interests of that series or class without thereby changing the proportionate beneficial interest in the assets belonging to that series or class or in any way affecting the rights or Interests of any other series or class. 6.11 Fractions. Any fractional Interest of any series or class, if any such fractional Interest is outstanding, shall carry proportionately all the rights and obligations of a whole Interest of that series or class, including rights and obligations with respect to voting, receipt of dividends and distributions, redemption of Interests, and liquidation of the Trust. 6.12 Class Differences. Subject to Section 6.3, the relative rights and preferences of the classes of any series may differ in such other respects as the Trustees may determine to be appropriate in their sole discretion, provided that such differences are set forth in the instrument establishing and designating such classes and executed by a majority of the Trustees. 6.13 Conversion of Interests. Subject to compliance with the requirements of the 1940 Act, the Trustees shall have the authority to provide that Holders of Interests of any series shall have the right to convert said Interests into one or more other series in accordance with such requirements and procedures as may be established by the Trustees. The Trustees shall also have the authority to provide that Holders of Interests of any class of a particular series shall have the right to convert said Interests into one or more other classes of that particular series or any other series in accordance with such requirements and procedures as may be established by the Trustees. 6.14 Investments in the Trust. The Trustees may accept investments in the Trust from such persons and on such terms and for such consideration, not inconsistent with the provisions of the 1940 Act, as they from time to time authorize. The Trustees may authorize any distributor, principal underwriter, custodian, transfer agent or other person to accept orders for the purchase of Interests that conform to such authorized terms and to reject any purchase orders for Interests whether or not conforming to such authorized terms. 6.15 Trustees, Officers and Employees as Holders. Any Trustee, officer, employee or other agent of the Trust, and any organization in which any such person is interested, may acquire, own, hold and dispose of Interests of the Trust to the same extent as if such person were not a Trustee, officer, employee or other agent of the Trust; and the Trust may issue and sell or cause to be issued and sold and may purchase Interests from any such person or any such organization subject only to the general limitations, restrictions or other provisions applicable to the sale or purchase of Interests generally. 14 6.16 No Pre-emptive Rights; Derivative Suits. Holders shall have no pre-emptive or other right to subscribe to any additional Interests or other securities issued by the Trust. No action may be brought by a Holder of any series or class of the Trust on behalf of the Trust unless Holders owning no less than 10% of the then outstanding Interests, or series or class thereof, join in the bringing of such action. A Holder of Interests in a particular series or a particular class of the Trust shall not be entitled to participate in a derivative or class action lawsuit on behalf of any other series or any other class or on behalf of the Holders of Interests in any other series or any other class of the Trust. 6.17 No Appraisal Rights. Holders shall have no right to demand payment for their Interests or to any other rights of dissenting Holders in the event the Trust participates in any transaction which would give rise to appraisal or dissenters' rights by a stockholder of a corporation organized under the General Corporation Law of Delaware, or otherwise. 6.18 Status of Interests and Limitation of Personal Liability. Interests shall be deemed to be personal property giving only the rights provided in this Declaration. Every Holder by virtue of acquiring Interests shall be held to have expressly assented and agreed to the terms hereof and to be bound hereby. The death, incapacity, dissolution, termination or bankruptcy of a Holder during the continuance of the Trust shall not operate to dissolve or terminate the Trust or any series thereof nor entitle the representative of such Holder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but shall entitle the representative of such Holder only to the rights of such Holder under this Trust. Ownership of Interests shall not entitle the Holder to any title in or to the whole or any part of the Trust Property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Interests constitute the Holders partners. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust, shall have any power to bind personally any Holder, nor except as specifically provided herein to call upon any Holder for the payment of any sum of money or assessment whatsoever other than such as the Holder may at any time personally agree to pay. ARTICLE 7 PURCHASES AND REDEMPTIONS 7.1 Purchases. The Trustees, in their discretion, may, from time to time, without a vote of the Holders, permit the purchase of Interests by such party or parties (or increase in the Interests of a Holder) and for such type of consideration, including, without limitation, cash or property, at such time or times (including, without limitation, each business day), and on such terms as the Trustees may deem best, and may in such manner acquire other assets (including, without limitation, the acquisition of assets subject to, and in connection with the assumption of, liabilities) and businesses. 7.2 Redemption by Holder. (a) Each Holder of Interests of the Trust or any series or class thereof, shall have the right at such times as may be permitted by the Trust to require the Trust to redeem all or any part of his or her Interests of the Trust, or series or class thereof, at a redemption price equal to the net asset value per Interest of the Trust or series or class thereof, next determined in accordance with Section 7.4 hereof after the Interests are properly tendered for redemption, subject to any contingent deferred sales charge or redemption charge in effect at 15 the time of redemption. Payment of the redemption price shall be in cash; provided, however, that if the Trustees determine, which determination shall be conclusive, that conditions exist which make payment wholly in cash unwise or undesirable, the Trust may, subject to the requirements of the 1940 Act, make payment wholly or partly in securities or other assets belonging to the Trust or series or class thereof of which the Interests being redeemed are part at the value of such securities or assets used in such determination of net asset value. (b) Notwithstanding the foregoing, the Trust may postpone payment of the redemption price and may suspend the right of the Holders of Interests of the Trust, or series or class thereof, to require the Trust to redeem Interests of the Trust, or of any series or class thereof, during any period or at any time when and to the extent permissible under the 1940 Act. 7.3 Redemption by Trust. Each Interest of the Trust, or series or class thereof, that has been established and designated is subject to redemption by the Trust at the redemption price which would be applicable if such Interest was then being redeemed by the Holder pursuant to Section 7.2 hereof: (a) at any time, if the Trustees determine in their sole discretion and by majority vote that it is in the best interests of the Trust, or any series or class thereof, to abolish any series or class of the Trust, or (b) upon such other conditions as may from time to time be determined by the Trustees and set forth in the then current Prospectus of the Trust with respect to maintenance of Holder accounts of a minimum amount. Upon such redemption the Holders of the Interests so redeemed shall have no further right with respect thereto other than to receive payment of such redemption price. 7.4 Net Asset Value. (a) The net asset value per Interest of any series shall be (i) in the case of a series whose Interests are not divided into classes, the quotient obtained by dividing the value of the net assets of that series (being the value of the assets belonging to that series less the liabilities belonging to that series) by the total number of Interests of that series outstanding, and (ii) in the case of a class of Interests of a series whose Interests are divided into classes, the quotient obtained by dividing the value of the net assets of that series allocable to such class (being the value of the assets belonging to that series allocable to such class less the liabilities allocable to such class) by the total number of Interests of such class outstanding; all determined in accordance with the methods and procedures, including without limitation those with respect to rounding, established by the Trustees from time to time. (b) The Trustees may determine to maintain the net asset value per Interest of any series or any class at a designated constant dollar amount and in connection therewith may adopt procedures consistent with the 1940 Act for continuing declarations of income attributable to that series or that class as dividends payable in additional Interests of that series at the designated constant dollar amount and for the handling of any losses attributable to that series or that class. Such procedures may provide that in the event of any loss each Holder shall be deemed to have contributed to the capital of the Trust attributable to that series his or her pro rata portion of the total number of Interests required to be cancelled in order to permit the net asset value per Interest of that series or class to be maintained, after reflecting such loss, at the designated constant dollar amount. Each Holder of the Trust shall be deemed to have agreed, by his or her investment in any series or class with respect to which the Trustees shall have adopted any such procedure, to make the contribution referred to in the preceding sentence in the event of any such loss. 16 ARTICLE 8 HOLDERS 8.1 Rights of Holders. The right to conduct any business hereinbefore described is vested exclusively in the Trustees, and the Holders shall have no rights under this Declaration or with respect to the Trust Property other than the beneficial interest conferred by their Interests and the voting rights accorded to them under this Declaration. 8.2 Register of Interests. A register shall be kept by the Trust under the direction of the Trustees which shall contain the names and addresses of the Holders and Interests held by each Holder. Each such register shall be conclusive as to the identity of the Holders of the Trust and the Persons who shall be entitled to payments of distributions or otherwise to exercise or enjoy the rights of Holders. No Holder shall be entitled to receive payment of any distribution, nor to have notice given to it as herein provided, until he or she has given his or her address to such officer or agent of the Trustees as shall keep the said register for entry thereon. No certificates certifying the ownership of interests need be issued except as the Trustees may otherwise determine from time to time. 8.3 Notices. Any and all notices to which any Holder hereunder may be entitled and any and all communications shall be deemed duly served or given if presented personally to a Holder, left at his or her residence or usual place of business or sent via United States mail or by electronic transmission to a Holder at his or her address as it is registered with the Trust, as provided in Section 8.2. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the Holder at his or her address as it is registered with the Trust, as provided in Section 8.2, with postage thereon prepaid. 8.4 Meetings of Holders. Meetings of the Holders of the Trust, or any series or class of the Trust, may be called at any time by a majority of the Trustees and shall be called by any Trustee upon written request of Holders holding, in the aggregate, not less than 10% of the Interests (or series or class thereof), such request specifying the purpose or purposes for which such meeting is to be called. Any such meeting shall be held within or without the State of Delaware on such day and at such time as the Trustees shall designate. Holders of one-third of the Interests in the Trust (or series or class of the Trust), present in person or by proxy, shall constitute a quorum for the transaction of any business, except as may otherwise be required by the 1940 Act or other applicable law or by this Declaration or the By-Laws of the Trust. If a quorum is present at a meeting, an affirmative vote by the Holders present, in person or by proxy, holding more than 50% of the total Interests (or series or class thereof) of the Holders present, either in person or by proxy, at such meeting constitutes the action of the Holders, unless the 1940 Act, other applicable law, this Declaration or the By-Laws of the Trust requires a greater number of affirmative votes. Notwithstanding the foregoing, the affirmative vote by the of a majority of the Holders present, in person or by proxy at such meeting shall be sufficient for adjournments. Any meeting of Holders, whether or not a quorum is present, may be adjourned for any lawful purpose provided that no meeting shall be adjourned for more than six months beyond the originally scheduled meeting date. 8.5 Notice of Meetings. Written or printed notice of all meetings of the Holders, stating the time, place and purposes of the meeting, shall be given as provided in Section 8.3 for 17 the giving of notices. At any such meeting, any business properly before the meeting may be considered whether or not stated in the notice of the meeting. Any adjourned meeting held as provided in Section 8.4 shall not require the giving of additional notice. 8.6 Record Date. For the purpose of determining the Holders who are entitled to notice of any meeting and to vote at any meeting, or to participate in any distribution, or for the purpose of any other action, the Trustees may from time to time fix a date, not more than 90 calendar days prior to the date of any meeting of the Holders or payment of distributions or other action, as the case may be, as a record date for the determination of the persons to be treated as Holders of record for such purposes, and any Holder who was a Holder at the date and time so fixed shall be entitled to vote at such meeting or to be treated as a Holder of record for purposes of such other action, even though he or she has since that date and time disposed of his or her Interests, and no Holder becoming such after that date and time shall be so entitled to vote at such meeting or to be treated as a Holder of record for purposes of such other action. If the Trustees shall divide the Interests into two or more series in accordance with Section 6.2 herein, nothing in this Section shall be construed as precluding the Trustees from setting different record dates for different series and if the Trustees shall divide any series into two or more classes in accordance with Section 6.3 herein, nothing in this Section 8.6 shall be construed as precluding the Trustees from setting different record dates for different classes. 8.7 Proxies, Etc. At any meeting of Holders, any Holder entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote shall be taken. (a) Pursuant to a resolution of a majority of the Trustees, proxies may be solicited in the name of one or more Trustees or one or more of the officers of the Trust. Only Holders of record shall be entitled to vote. Each Holder shall be entitled to a vote proportionate to his or her Interest in the Trust. (b) When Interests are held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Interest, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Interest. (c) A proxy purporting to be executed by or on behalf of a Holder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. If the Holder is a minor or a person of unsound mind, and subject to guardianship or to the legal control of any other person regarding the charge or management of its Interest, he or she may vote by his or her guardian or such other person appointed or having such control, and such vote may be given in person or by proxy. 8.8 Reports. The Trustees shall cause to be prepared, at least annually, a report of operations containing a balance sheet and statement of income and undistributed income of the Trust prepared in conformity with generally accepted accounting principles and an opinion of an independent public accountant on such financial statements. The Trustees shall, in addition, 18 furnish to the Holders at least semi-annually interim reports containing an unaudited balance sheet as of the end of such period and an unaudited statement of income and surplus for the period from the beginning of the current Fiscal Year to the end of such period. 8.9 Inspection of Records. The records of the Trust shall be open to inspection by a Holder during normal business hours for any purpose reasonably related to the Holder's interests as a shareholder. 8.10 Voting Powers. (a) The Holders shall have power to vote only (i) for the election of Trustees as contemplated by Section 2.2 hereof, (ii) with respect to any investment advisory contract as contemplated by Section 4.1 hereof, (iii) with respect to termination of the Trust as provided in Section 9.2 hereof, (iv) with respect to amendments to the Declaration as provided in Section 9.3 hereof, (v) with respect to any merger, consolidation or sale of assets as provided in Section 9.4 hereof, (vi) with respect to incorporation of the Trust to the extent and as provided in Section 9.5 hereof, (vii) with respect to such additional matters relating to the Trust as may be required by the 1940 Act, DSTA, or any other applicable law, the Declaration, the By-Laws or any registration of the Trust with the Commission (or any successor agency) or any state, or as and when the Trustees may consider necessary or desirable. (b) Each Holder shall be entitled to vote based on the ratio his or her Interest bears to the Interests of all Holders entitled to vote. Until Interests are issued, the Trustees may exercise all rights of Holders and may take any action required by law, the Declaration or the By-Laws to be taken by Holders. The By-Laws may include further provisions for Holders' votes and meetings and related matters not inconsistent with this Declaration. 8.11 Holder Action by Written Consent. Any action which may be taken by Holders may be taken without notice and without a meeting if Holders holding more than 50% of the total Interests entitled to vote (or such larger proportion thereof as shall be required by any express provision of this Declaration) shall consent to the action in writing and the written consents shall be filed with the records of the meetings of Holders. Such consents shall be treated for all purposes as votes taken at a meeting of Holders. 8.12 Holder Communications. (a) Whenever ten or more Holders who have been such for at least six months preceding the date of application, and who hold in the aggregate at least 1% of the total Interests, shall apply to the Trustees in writing, stating that they wish to communicate with other Holders with a view to obtaining signatures to a request for a meeting of Holders and accompanied by a form of communication and request which they wish to transmit, the Trustees shall within five business days after receipt of such application either (i) afford to such applicants access to a list of the names and addresses of all Holders as recorded on the books of the Trust; or (ii) inform such applicants as to the approximate number of Holders, and the approximate cost of transmitting to them the proposed communication and form of request. (b) If the Trustees elect to follow the course specified in clause (ii) above, the Trustees, upon the written request of such applicants, accompanied by a tender of the material to be transmitted and of the reasonable expenses of transmission, shall, with reasonable promptness, transmit, by United States mail or by electronic transmission, such material to all Holders at their addresses as recorded on the books, unless within five business days after such 19 tender the Trustees shall transmit, by United States mail or by electronic transmission, to such applicants and file with the Commission, together with a copy of the material to be transmitted, a written statement signed by at least a majority of the Trustees to the effect that in their opinion either such material contains untrue statements of fact or omits to state facts necessary to make the statements contained therein not misleading, or would be in violation of applicable law, and specifying the basis of such opinion. The Trustees shall thereafter comply with any order entered by the Commission and the requirements of the 1940 Act and the Securities Exchange Act of 1934. ARTICLE 9 DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS: ETC. 9.1 Duration. Subject to possible termination in accordance with the provisions of Section 9.2, the Trust created hereby shall continue perpetually pursuant to Section 3808 of the DSTA. 9.2 Termination of Trust. (a) The Trust may be terminated (i) by the affirmative vote of the Holders of not less than two-thirds of the Interests in the Trust at any meeting of the Holders, or (ii) by an instrument in writing, without a meeting, signed by a majority of the Trustees and consented to by the Holders of not less than two-thirds of such Interests, or (iii) by the Trustees by written notice to the Holders. (b) Upon any termination under paragraph (a) above, (i) The Trust shall carry on no business except for the purpose of winding up its affairs. (ii) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under this Declaration shall continue until the affairs of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, or otherwise dispose of all or all or any part of the remaining Trust Property to one or more Persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business; provided that any sale, conveyance, assignment, exchange, or other disposition of all or substantially all of the Trust Property shall require approval of the principal terms of the transaction and the nature and amount of the consideration by the Holders by a Majority Interests Vote. (iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements, as they deem necessary for their protection, the Trustees may distribute the remaining Trust Property, in cash or in kind or partly each, among the Holders according to their respective rights. 20 (c) Upon termination of the Trust and distribution to the Holders as herein provided, a majority of the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of such termination and file a certificate of cancellation in accordance with Section 3810 of the DSTA. Upon termination of the Trust, the Trustees shall thereon be discharged from all further liabilities and duties hereunder, and the rights and interests of all Holders shall thereupon cease. 9.3 Amendment Procedure. (a) All rights granted to the Holders under this Declaration of Trust are granted subject to the reservation of the right of the Trustees to amend this Declaration of Trust as herein provided, except as set forth herein to the contrary. Subject to the foregoing, the provisions of this Declaration of Trust (whether or not related to the rights of Holders) may be amended at any time, so long as such amendment is not in contravention of applicable law, including the 1940 Act, by an instrument in writing signed by a majority of the then Trustees (or by an officer of the Trust pursuant to the vote of a majority of such Trustees). Any such amendment shall be effective as provided in the instrument containing the terms of such amendment or, if there is no provision therein with respect to effectiveness, upon the execution of such instrument and of a certificate (which may be a part of such instrument) executed by a Trustee or officer of the Trust to the effect that such amendment has been duly adopted. (b) No amendment may be made, under Section 9.3(a) above, which would change any rights with respect to any Interest in the Trust by reducing the amount payable thereon upon liquidation of the Trust, by repealing the limitations on personal liability of any Holder or Trustee, or by diminishing or eliminating any voting rights pertaining thereto, except with a Majority Interests Vote. (c) A certification signed by a majority of the Trustees setting forth an amendment and reciting that it was duly adopted by the Holders or by the Trustees as aforesaid or a copy of the Declaration, as amended, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust. (d) Notwithstanding any other provision hereof, until such time as Interests are first sold, this Declaration may be terminated or amended in any respect by the affirmative vote of a majority of the Trustees or by an instrument signed by a majority of the Trustees. 9.4 Merger, Consolidation and Sale of Assets. The Trust may merge or consolidate with any other corporation, association, trust or other organization or may sell, lease or exchange all or substantially all of its property, including its good will, upon such terms and conditions and for such consideration when and as authorized by no less than a majority of the Trustees and by a Majority Interests Vote of the Trust or by an instrument or instruments in writing without a meeting, consented to by the Holders of not less than 50% of the total Interests of the Trust and any such merger, consolidation, sale, lease or exchange shall be deemed for all purposes to have been accomplished under and pursuant to the statutes of the State of Delaware. In accordance with Section 3815(f) of the DSTA, an agreement of merger or consolidation may effect any amendment to the Declaration or By-Laws or effect the adoption of a new declaration of trust or 21 by-laws of the Trust if the Trust is the surviving or resulting statutory trust. A certificate of merger or consolidation of the Trust shall be signed by a majority of the Trustees. 9.5 Incorporation. Upon a Majority Interests Vote, the Trustees may cause to be organized or assist in organizing a corporation or corporations under the laws of any jurisdiction or any other trust, partnership, association or other organization to take over all of the Trust Property, or series thereof, or to carry on any business in which the Trust shall directly or indirectly have any interest, and to sell, convey and transfer the Trust Property, or series thereof, to any such corporation, trust, association or organization in exchange for the equity interests thereof or otherwise, and to lend money to, subscribe for the equity interests of, and enter into any contracts with any such corporation, trust, partnership, association or organization, or any corporation, partnership, trust, association or organization in which the Trust holds or is about to acquire equity interests. The Trustees may also cause a merger or consolidation between the Trust or any successor thereto and any such corporation, trust, partnership, association or other organization if and to the extent permitted by law, as provided under the law then in effect. Nothing contained herein shall be construed as requiring approval of the Holders for the Trustees to organize or assist in organizing one or more corporations, trusts, partnerships, associations or other organizations and selling, conveying or transferring a portion of the Trust Property to such organizations or entities. ARTICLE 10 MISCELLANEOUS 10.1 Certificate of Designation; Agent for Service of Process. The Trust shall file, in accordance with Section 3812 of the DSTA, in the office of the Secretary of State of Delaware, a certificate of trust, in the form and with such information required by Section 3810 of the DSTA and executed in the manner specified in Section 3811 of the DSTA. In the event the Trust does not have at least one Trustee qualified under Section 3807(a) of the DSTA, then the Trust shall comply with Section 3807(b) of the DSTA by having and maintaining a registered office in Delaware and by designating a registered agent for service of process on the Trust, which agent shall have the same business office as the Trust's registered office. The failure to file any such certificate, to maintain a registered office, to designate a registered agent for service of process, or to include such other information shall not affect the validity of the establishment of the Trust, the Declaration, the By-Laws or any action taken by the Trustees, the Trust officers or any other Person with respect to the Trust except insofar as a provision of the DSTA would have governed, in which case the Delaware common law governs. 10.2 Governing Law. This Declaration is executed by all of the Trustees and delivered with reference to DSTA and the laws of the State of Delaware, and the rights of all parties and the validity and construction of every provision hereof shall be subject to and construed according to DSTA and the laws of the State of Delaware (unless and to the extent otherwise provided for and/or preempted by the 1940 Act or other applicable federal securities laws); provided, however, that there shall not be applicable to the Trust, the Trustees or this Declaration (a) the provisions of Section 3540 of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or common) of the State of Delaware (other than the DSTA) pertaining to trusts which are inconsistent with the rights, duties, powers, limitations or liabilities of the Trustees set forth or referenced in this Declaration. 22 10.3 Counterparts. This Declaration may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts, together, shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart. 10.4 Reliance by Third Parties. Any certificate executed by an individual who, according to the records of the Trust or of any recording office in which this Declaration may be recorded, appears to be a Trustee hereunder, certifying to (a) the number or identity of Trustees or Holders, (b) the due authorization of the execution of any instrument or writing, (c) the form of any vote passed at a meeting of Trustees or Holders, (d) the fact that the number of Trustees or Holders present at any meeting or executing any written instrument satisfies the requirements of this Declaration, (e) the form of any By-Laws adopted by or the identity of any officers elected by the Trustees, or (f) the existence of any fact or facts which in any manner relate to the affairs of the Trust, shall be conclusive evidence as to the matters so certified in favor of any person dealing with the Trustees and their successors. 10.5 Provisions in Conflict With Law or Regulations. (a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the DSTA, or with other applicable laws and regulations, the conflicting provisions shall be deemed never to have constituted a part of this Declaration; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination. (b) If any provision of this Declaration shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration in any jurisdiction. 10.6 Trust Only. It is the intention of the Trustees to create only a statutory trust under DSTA with the relationship of Trustee and beneficiary between the Trustees and each Holder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment, or any form of legal relationship other than a Delaware statutory trust except to the extent such trust is deemed to constitute a corporation under the Code and applicable state tax laws. Nothing in this Declaration of Trust shall be construed to make the Holders, either by themselves or with the Trustees, partners or members of a joint stock association. 10.7 Withholding. Should any Holder be subject to withholding pursuant to the Code or any other provision of law, the Trust shall withhold all amounts otherwise distributable to such Holder as shall be required by law and any amounts so withheld shall be deemed to have been distributed to such Holder under this Declaration of Trust. If any sums are withheld pursuant to this provision, the Trust shall remit the sums so withheld to and file the required forms with the Internal Revenue Service, or other applicable government agency. 23 10.8 Headings and Construction. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. Whenever the singular number is used herein, the same shall include the plural; and the neuter, masculine and feminine genders shall include each other, as applicable. IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. /s/ Mitchell J. Milias - ------------------------------------ Mitchell J. Milias Trustee /s/ Howard B. Schow - ------------------------------------ Howard B. Schow Trustee 24 EX-99.B 3 ex99b.txt EXHIBIT 99.B PRIMECAP ODYSSEY FUNDS BY-LAWS These By-Laws are made as of the 25th day of June, 2004 and adopted pursuant to Section 2.7 of the Declaration of Trust establishing PRIMECAP ODYSSEY FUNDS, a Delaware statutory trust, dated as of June 25, 2004, as from time to time amended (hereinafter called the "Declaration"). All words and terms capitalized in these By-Laws shall have the meaning or meanings set forth for such words or terms in the Declaration. ARTICLE 1 MEETINGS OF HOLDERS 1.1 Annual Meeting. An annual meeting of the Holders of Interests in the Trust, which may be held on such date and at such hour as may from time to time be designated by the Board of Trustees and stated in the notice of such meeting, is not required to be held unless certain actions must be taken by the Holders as set forth in Section 8.4 of the Declaration, or except when the Trustees consider it necessary or desirable. 1.2 Chairman. The President shall act as chairman at all meetings of the Holders and, in the absence of the President, the Trustee or Trustees present at the meeting may elect a temporary chairman for the meeting, who may be one of themselves or an officer of the Trust. 1.3 Proxies; Voting. Every person entitled to vote for Trustees or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the Secretary of the Trust. Unless the Trustees declare otherwise, proxies may be given by any electronic or telecommunications device, including telefax, telephone or through the Internet. A proxy shall be deemed signed if the shareholder's name or personal identifying number (as determined by the Trustees) is placed on the vote (whether by manual signature or any electronic or telecommunications device) by the shareholder or the shareholder's attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (a) revoked by the person executing it before the vote pursuant to that proxy by a writing delivered to the Trust stating that the proxy is revoked or by a subsequent proxy executed by, or attendance at the meeting and voting in person by the person executing that proxy; or (b) written notice of the death or incapacity of the maker of that proxy is received by the Trust before the vote pursuant to that proxy is counted; provided however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy unless otherwise provided in the proxy. 1.4 Fixing Record Dates. For the purpose of determining the Holders who are entitled to notice of or to vote or act at a meeting, including any adjournment thereof, or who are entitled to participate in any distributions, or for any other proper purpose, the Trustees may from time to time fix a record date in the manner provided in Section 8.3 of the Declaration. If the Trustees do not, prior to any meeting of the Holders, so fix a record date, then the date of mailing notice of the meeting shall be the record date. 1 1.5 Inspectors of Election. In advance of any meeting of the Holders, the Trustees may appoint Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the chairman of any meeting of the Holders may, and on the request of any Holder or his or her proxy shall, appoint Inspectors of Election of the meeting. The number of Inspectors shall be either one or three. If appointed at the meeting on the request of one or more Holders or proxies, a Majority Interests Vote shall determine whether one or three Inspectors are to be appointed, but failure to allow such determination by the Holders shall not affect the validity of the appointment of Inspectors of Election. In case any person appointed as Inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Trustees in advance of the convening of the meeting or at the meeting by the person acting as chairman. The Inspectors of Election shall determine the Interests owned by Holders, the Interests represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; shall receive votes, ballots or consents; shall hear and determine all challenges and questions in any way arising in connection with the right to vote; shall count and tabulate all votes or consents and determine the results; and shall do such other acts as may be proper to conduct the election or vote with fairness to all Holders. If there are three Inspectors of Election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. On request of the chairman, if any, of the meeting, or of any Holder or his or her proxy, the Inspectors of Election shall make a report in writing of any challenge or question or matter determined by them and shall execute a certificate of any facts found by them. 1.6 Records of Meetings of Holders. At each meeting of the Holders there shall be open for inspection the minutes of the last previous meeting of Holders of the Trust and a list of the Holders of the Trust, certified to be true and correct by the Secretary or other proper agent of the Trust, as of the record date of the meeting. Such list of Holders shall contain the name of each Holder in alphabetical order, the Holder's address and Interests owned by such Holder. Holders shall have the right to inspect books and records of the Trust during normal business hours for any purpose not harmful to the Trust. ARTICLE 2 TRUSTEES 2.1 Annual and Regular Meetings. The Trustees shall hold an Annual Meeting of the Trustees for the election of officers and the transaction of other business which may come before such meeting. Regular meetings of the Trustees may be held without call or notice at such place or places and times as the Trustees may by resolution provide from time to time. 2.2 Special Meetings. Special Meetings of the Trustees shall be held upon the call of the Chairman, the President, the Secretary, or any two Trustees, at such time, on such day and at such place, as shall be designated in the notice of the meeting. 2.3 Notice. Notice of a meeting shall be given by mail (which term shall include overnight mail) or by telegram (which term shall include a cablegram or telefacsimile) or delivered personally (which term shall include notice by telephone). If notice is given by mail, it shall be mailed not later than 72 hours preceding the meeting and if given by telegram or personally, such notice shall be delivered not later than 24 hours preceding the meeting. Notice 2 of a meeting of Trustees may be waived before or after any meeting by signed written waiver. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Trustees need be stated in the notice or waiver of notice of such meeting, and no notice need be given of action proposed to be taken by written consent. The attendance of a Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Trustee attends a meeting for the express purpose of objecting, at the commencement of such meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. 2.4 Chairman; Records. The Trustees shall appoint a Chairman of the Board from among their number. Such Chairman of the Board shall act as chairman at all meetings of the Trustees; in his or her absence the President shall act as chairman; and, in the absence of all of them, the Trustees present shall elect one of their number to act as temporary chairman. The results of all actions taken at a meeting of the Trustees, or by written consent of the Trustees, shall be recorded by the Secretary or any Assistant Secretary. 2.5 Audit Committee. The Board of Trustees may, by the affirmative vote of a majority of the entire Board, appoint from its members an Audit Committee composed of two or more Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust, as the Board may from time to time determine. The Audit Committee shall have such powers as the Board may from time to time determine. 2.6 Nominating Committee of Trustees. The Board of Trustees may, by the affirmative vote of a majority of the entire Board, appoint from its members a Trustee Nominating Committee composed of two or more Trustees. The Trustee Nominating Committee shall recommend to the Board a slate of persons to be nominated for election as Trustees by the Holders at a meeting of the Holders and a person to be elected to fill any vacancy occurring for any reason in the Board. Notwithstanding anything in this Section to the contrary, the selection and nomination of those Trustees who are not "interested persons" of the Trust (as defined in the 1940 Act) shall be committed to the discretion of such disinterested Trustees. 2.7 Executive Committee. The Board of Trustees may appoint from its members an Executive Committee composed of those Trustees as the Board may from time to time determine, of which committee the Chairman of the Board shall be a member. In the intervals between meetings of the Board, the Executive Committee shall have the power of the Board to (a) determine the value of securities and assets owned by the Trust, (b) elect or appoint officers of the Trust to serve until the next meeting of the Board, and (c) take such action as may be necessary to manage the business of the Trust. All action by the Executive Committee shall be recorded and reported to the Board at its meeting next succeeding such action. 2.8 Other Committees. The Board of Trustees may appoint from among its members other committees composed of two or more of its Trustees which shall have such powers as may be delegated or authorized by the resolution appointing them. 2.9 Committee Procedures. The Board of Trustees may at any time change the members of any committee, fill vacancies or discharge any committee. In the absence of any member of any committee, the member or members thereof present at any meeting, whether or not they constitute a quorum, may unanimously appoint to act in the place of such absent 3 member a member of the Board who, except in the case of the Executive Committee, is not an "interested person" of the Trust as the Board may from time to time determine. Each committee may fix its own rules of procedure and may meet as and when provided by those rules. Copies of the minutes of all meetings of committees shall be distributed to the Board unless the Board shall otherwise provide. ARTICLE 3 OFFICERS 3.1 Officers of the Trust; Compensation. The officers of the Trust shall consist of a President, a Secretary, a Chief Financial Officer and such other officers or assistant officers, including Vice Presidents, as may be elected by the Trustees. Any two or more of the offices may be held by the same person. The Trustees may designate a Vice President as an Executive Vice President and may designate the order in which the other Vice Presidents may act. No officer of the Trust need be a Trustee. The Board of Trustees may determine what, if any, compensation shall be paid to officers of the Trust. 3.2 Election and Tenure. At the initial organization meeting and thereafter at each annual meeting of the Trustees, the Trustees shall elect the President, Secretary, Chief Financial Officer and such other officers as the Trustees shall deem necessary or appropriate in order to carry out the business of the Trust. Such officers shall hold office until the next annual meeting of the Trustees and until their successors have been duly elected and qualified. The Trustees may fill any vacancy in office or add any additional officers at any time. 3.3 Removal of Officers. Any officer may be removed at any time, with or without cause, by action of a majority of the Trustees. This provision shall not prevent the making of a contract of employment for a definite term with any officer and shall have no effect upon any cause of action which any officer may have as a result of removal in breach of a contract of employment. Any officer may resign at any time by notice in writing signed by such officer and delivered or mailed to the President or Secretary, and such resignation shall take effect immediately, or at a later date according to the terms of such notice in writing. 3.4 Bonds and Surety. Any officer may be required by the Trustees to be bonded for the faithful performance of his or her duties in such amount and with such sureties as the Trustees may determine. 3.5 President and Vice-Presidents. The President shall be the chief executive officer of the Trust and, subject to the control of the Trustees, shall have general supervision, direction and control of the business of the Trust and of its employees and shall exercise such general powers of management as are usually vested in the office of president of a corporation. The President shall preside at all meetings of the Holders and, in the absence of the Chairman of the Board, the President shall preside at all meetings of the Trustees. The President shall be, ex officio, a member of all standing committees. Subject to direction of the Trustees, the President shall have the power, in the name and on behalf of the Trust, to execute any and all loan documents, contracts, agreements, deeds, mortgages, and other instruments in writing, and to employ and discharge employees and agents of the Trust. Unless otherwise directed by the Trustees, the President shall have full authority and power, on behalf of all of the Trustees, to 4 attend and to act and to vote, on behalf of the Trust at any meetings of business organizations in which the Trust holds an interest, or to confer such powers upon any other persons, by executing any proxies duly authorizing such persons. The President shall have such further authorities and duties as the Trustees shall from time to time determine. In the absence or disability of the President, the Vice Presidents in order of their rank or the Vice President designated by the Trustees, shall perform all of the duties of President, and when so acting shall have all the powers of and be subject to all of the restrictions upon the President. Subject to the direction of the President, the Chief Financial Officer and each Vice President shall have the power in the name and on behalf of the Trust to execute any and all loan documents, contracts, agreements, deeds, mortgages and other instruments in writing, and, in addition, shall have such other duties and powers as shall be designated from time to time by the Trustees, the Chairman, or the President. 3.6 Secretary. The Secretary shall keep the minutes of all meetings of, and record all votes of, Holders, Trustees and any committees of Trustees, provided that, in the absence or disability of the Secretary, the Holders or Trustees or committee may appoint any other person to keep the minutes of a meeting and record votes. The Secretary shall attest the signature or signatures of the officer or officers executing any instrument on behalf of the Trust. The Secretary shall also perform any other duties commonly incident to such office in a Delaware statutory trust and shall have such other authorities and duties as the Trustees shall from time to time determine. 3.7 Chief Financial Officer. Except as otherwise directed by the Trustees, the Chief Financial Officer shall have the general supervision of the monies, funds, securities, notes receivable and other valuable papers and documents of the Trust, and shall have and exercise under the supervision of the Trustees and of the Chairman and the President all powers and duties normally incident to his or her office. He or she may endorse for deposit or collection all notes, checks and other instruments payable to the Trust or to its order. He or she shall deposit all funds of the Trust as may be ordered by the Trustees, the Chairman or the President. He or she shall keep accurate account of the books of the Trust's transactions which shall be the property of the Trust and which, together with all other property of the Trust in his or her possession, shall be subject at all times to the inspection and control of the Trustees. Unless the Trustees shall otherwise determine, the Chief Financial Officer shall be the principal accounting officer of the Trust and shall also be the principal financial officer of the Trust. He or she shall have such other duties and authorities as the Trustees shall from time to time determine. Notwithstanding anything to the contrary herein contained, the Trustees may authorize any adviser or administrator to maintain bank accounts and deposit and disburse funds on behalf of the Trust. 3.8 Other Officers and Duties. The Trustees may elect such other officers and assistant officers as they shall from time to time determine to be necessary or desirable in order to conduct the business of the Trust. Assistant officers shall act generally in the absence of the officer whom they assist and shall assist that officer in the duties of his or her office. Each officer, employee and agent of the Trust shall have such other duties and authority as may be conferred upon him or her by the Trustees or delegated to him or her by the President. 5 ARTICLE 4 CUSTODIAN 4.1 Appointment and Duties. The Trustees shall at all times employ a custodian or custodians with authority as its agent, but subject to such restrictions, limitations and other requirements, if any, as may be contained in these By-Laws: (a) to hold the securities owned by the Trust and deliver the same upon written order; (b) to receive and receipt for any moneys due to the Trust and deposit the same in its own banking department or elsewhere as the Trustees may direct; (c) to disburse such funds upon orders or vouchers; all upon such basis of compensation as may be agreed upon between the Trustees and the custodian. The Trustees may also authorize the custodian to employ one or more sub-custodians, from time to time, to perform such of the acts and services of the custodian and upon such terms and conditions as may be agreed upon between the custodian and such sub-custodian and approved by the Trustees. 4.2 Central Certificate System. Subject to such rules, regulations and orders as the Commission may adopt, the Trustees may direct the custodian to deposit all or any part of the securities owned by the Trust in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Commission under the Securities Exchange Act of 1934 and any such other person or entity with which the Trustees may authorize deposit in accordance with the 1940 Act, pursuant to which system all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities. ARTICLE 5 MISCELLANEOUS 5.1 Depositories. In accordance with Article 4 of these By-Laws, the funds of the Trust shall be deposited in such depositories as the Trustees shall designate and shall be drawn out on checks, drafts or other orders signed by such officer, officers, agent or agents (including any adviser or administrator), as the Trustees may from time to time authorize. 5.2 Signatures. All contracts and other instruments shall be executed on behalf of the Trust by such officer, officers, agent or agents as provided in these By-Laws or as the Trustees may from time to time by resolution or authorization provide. 5.3 Fiscal Year. The fiscal year of the Trust shall end on December 31 of each year, subject, however, to change from time to time by the Board of Trustees. 6 ARTICLE 6 INDEMNIFICATION AND INSURANCE 6.1 Indemnification. The Trust shall promptly indemnify and hold harmless each of its trustees and officers, and may indemnify and hold harmless any of its employees and agents, against any liabilities or expenses (collectively, "Liability") actually and reasonably incurred by such person in any proceeding arising out of or in connection with his or her service to the Trust, to the fullest extent permitted by the Declaration of Trust and the laws of the State of Delaware, the Securities Act of 1933, and the 1940 Act, as now or hereafter in effect, subject to the provisions of paragraphs (a) and (b) of this Section 6.1. The Board of Trustees may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time these By-laws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. No amendment of these By-laws shall limit or eliminate the right to indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal. (a) Special Condition. With respect to Liability to the Trust or its Holders, and subject to applicable state and federal law, a trustee or officer shall be indemnified and held harmless pursuant to this Section 6.1 against any Liability to the Trust or its Holders unless such Liability arises by reason of his or her willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office as defined in Section 17(h) of the 1940 Act ("disabling conduct"). (b) Special Process Condition. With respect to Liability to the Trust or its Holders, no indemnification shall be made unless a determination has been made by reasonable and fair means that the trustee or officer has not engaged in disabling conduct. In making such a determination, the Board of Trustees shall act in conformity with then applicable law and administrative interpretations, and shall afford a trustee requesting indemnification who is not an "interested person" of the Trust, as defined in Section 2(a)(19) of the 1940 Act, a rebuttable presumption that such trustee did not engage in disabling conduct while acting in his or her capacity as a trustee. 6.2 Advancement of Expenses. The Trust shall promptly advance funds to its trustees and officers, and may advance funds to its employees and agents, to cover expenses they incur with respect to any proceeding arising out of or in connection with their service to the Trust, to the fullest extent permitted by the Declaration of Trust and the laws of the State of Delaware, the Securities Act of 1933, and the 1940 Act, as now or hereafter in effect. (a) Affirmation of Conduct. A request by a trustee or officer for advancement of funds pursuant to this Section 6.2 shall be accompanied by the trustee's or officer's written affirmation of his or her good faith belief that he or she met the standard of conduct necessary for indemnification, and such other statements, documents or undertakings as may be required under applicable law. (b) Special Conditions to Advancement. With respect to Liability to the Trust or its Holders, and subject to applicable state and federal law, a trustee or officer shall be 7 entitled to advancements of expenses pursuant to this Section 6.2 against any Liability to the Trust or its Holders if (1) the Trust has obtained assurances required under applicable law, such as by obtaining insurance or receiving collateral provided by the trustee or officer, that the advance will be repaid if the trustee or officer is found to have engaged in disabling conduct, or (2) the Board has a reasonable belief that the trustee or officer has not engaged in disabling conduct and ultimately will be entitled to indemnification. In forming such a reasonable belief, the Board of Trustees shall act in conformity with then applicable law and administrative interpretations, and shall afford a trustee requesting an advance who is not an "interested person" of the Trust, as defined in Section 2(a)(19) of the 1940 Act, a rebuttable presumption that such trustee did not engage in disabling conduct while acting in his or her capacity as a trustee. 6.3 Insurance. The Trust shall purchase and maintain in effect one or more policies of insurance on behalf of its trustees and officers in such amounts and with such coverage as shall be determined from time to time by the Board of Trustees, and may purchase and maintain such insurance for any of its employees and agents, issued by a reputable insurer or insurers, against any expenses actually and reasonably incurred by such person in any proceeding arising out of or in connection with his or her service to the Trust, with customary limitations and exceptions, whether or not the Trust would have the power to indemnify such person against such expenses pursuant to this Article 6. 6.4 General Provisions. (a) Non-Exclusive Rights. The provisions for indemnification of, and advancement of expenses to, trustees and officers of the Trust set forth in this Article 6 shall not be deemed exclusive of any other contractual or legal rights to which a trustee or officer may otherwise be entitled. (b) Continuation of Provisions. The provisions of this Article 6 shall continue as to a person who has ceased to provide service to the Trust and shall inure to the benefit of his or her spouses, heirs, assigns, devisees, executors, administrators and legal representatives. No amendment of the Declaration of Trust or By-Laws of the Trust shall limit or eliminate the right of a person to indemnification, advancement of expenses and insurance set forth in this Article 6 with respect to his or her acts, omissions or service to the Trust occurring prior to such amendment. 6.5 Definitions. For purposes of this Article 6, the following terms shall have the following meanings: (a) "Expenses" shall include without limitation all judgments, penalties, fines, amounts paid or to be paid in settlement, ERISA excise taxes, liabilities, losses, interest, expenses of investigation, attorneys' fees, retainers, court costs, transcript costs, fees of experts and witnesses, expenses of preparing for and attending depositions and other proceedings, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other costs, disbursements or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or acting as a witness in a proceeding. 6 (b) The term "proceeding" shall include without limitation any threatened, pending or completed claim, demand, threat, discovery request, request for testimony or information, action, suit, arbitration, alternative dispute mechanism, investigation, hearing, or other proceeding, including any appeal from any of the foregoing, whether civil, criminal, administrative or investigative. (c) A person's "service to the Trust" shall include without limitation his or her service as a trustee, officer, employee, agent or representative of the Trust, and his or her service at the request of the Trust as a trustee, officer, employee, agent or representative of another trust, partnership, joint venture, trust, employee benefit plan or other enterprise. ARTICLE 7 INTERESTS 7.1 Interests. Except as otherwise provided by law, the Trust shall be entitled to recognize the exclusive right of a person in whose name Interests stand on the record of Holders as the owners of such Interests for all purposes, including, without limitation, the rights to receive distributions and to vote as such owner, and the Trust shall not be bound to recognize any equitable or legal claim to or interest in any such Interests on the part of any other person. 7.2 Regulations. The Trustees may make such additional rules and regulations, not inconsistent with these By-Laws, as they may deem expedient concerning the sale and purchase of Interests of the Trust. 7.3 Distribution Disbursing Agents and the Like. The Trustees shall have the power to employ and compensate such distribution disbursing agents, warrant agents and agents for the reinvestment of distributions as they shall deem necessary or desirable. Any of such agents shall have such power and authority as is delegated to any of them by the Trustees. ARTICLE 8 AMENDMENT OF BY-LAWS 8.1 Amendment and Repeal of By-Laws. In accordance with Section 2.7 of the Declaration, the Trustees shall have the power to alter, amend or repeal the By-Laws or adopt new By-Laws at any time. The Trustees shall in no event adopt By-Laws which are in conflict with the Declaration, DBTA, the 1940 Act or applicable federal securities laws. 8.2 No Personal Liability. The Declaration establishing the Trust provides that the name "PRIMECAP Odyssey Funds" does not refer to the Trustees as individuals or personally; and no Trustee, officer, employee or agent of, or Holder of Interests in, the Trust shall be held to any personal liability, nor shall resort be had to their private property for the satisfaction of any obligation or claim or otherwise in connection with the affairs of the Trust (except to the extent of a Holder's Interest in the Trust). 9 EX-99.D 4 ex99d.txt EXHIBIT 99.D INVESTMENT ADVISORY AGREEMENT This INVESTMENT ADVISORY AGREEMENT (this "Agreement") is made as of the ____ day of _________, 2004, by and between PRIMECAP Odyssey Funds, a Delaware statutory trust (the "Trust"), and PRIMECAP Management Company, a California corporation (the "Manager"). WHEREAS, the Trust is registered as a open-end management investment company under the Investment Company Act of 1940, as amended ("1940 Act"); and WHEREAS, the Trust wishes to retain the Manager to provide certain investment advisory; and WHEREAS, the Manager is willing to furnish such services on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, it is agreed as follows: 1. The Trust hereby appoints the Manager to serve as investment adviser to each of the separate series of the Trust (each, a "Fund") for the period and on the terms set forth in this Agreement. The Manager accepts such appointment and agrees to render the services herein set forth for the compensation herein provided. 2. The Trust shall at all times keep the Manager fully informed with regard to the securities and other property owned by it, its funds available (or to become available) for investment, and generally as to the condition of its affairs. It shall furnish the Manager with such other documents and information with regard to its affairs as the Manager may from time to time reasonably request. 3. (a) Subject to the supervision of the Trust's Board of Trustees (the "Trustees"), the Manager shall regularly provide the Trust with investment research, advice, management and supervision and shall furnish a continuous investment program for each Fund consistent with such Fund's investment objectives, policies and restrictions. The Manager shall determine from time to time what securities or other property will be purchased, retained or sold by each Fund, and shall implement those decisions, all subject to the provisions of the Trust's Agreement and Declaration of Trust and By-Laws, the 1940 Act, the applicable rules and regulations of the Securities and Exchange Commission, and other applicable federal and state law, as well as the investment objectives, policies and restrictions of such Fund, as each of the foregoing may be amended from time to time. (b) The Manager shall place orders pursuant to its investment determinations for the Trust either directly with the issuer or with any broker, dealer or futures commission merchant (collectively, a "broker"). In the selection of brokers and the placing of orders for the purchase and sale of portfolio investments for the Funds, the Manager shall seek to obtain the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Trust's the most favorable price and execution available, the 1 Manager, bearing in mind the Trust's best interests at all times, shall consider all factors it deems relevant, including, by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker involved and the quality of service rendered by the broker in other transactions. Subject to such policies as the Trustees may determine, the Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of its having caused a Fund to pay a broker that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker, viewed in terms of either that particular transaction or the Manager's overall responsibilities with respect to the Trust and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager shall also provide advice and recommendations with respect to other aspects of the business and affairs of the Trust, and shall perform such other functions of management and supervision, as may be directed by the Trustees. 4. (a) The Manager, at its expense, shall supply the Board of Trustees and officers of the Trust with statistical information and reports reasonably requested by them and reasonably available to the Manager. The Manager shall oversee the maintenance of all books and records with respect to the Trust's portfolio transactions in accordance with all applicable federal and state laws and regulations and shall perform such other administrative, bookkeeping or clerical duties as may be agreed upon by the parties. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Manager hereby agrees that any records which it maintains for the Trust are the property of the Trust, and further agrees to surrender promptly to the Trust or its agents any of such records upon the Trust's request. The Manager further agrees to arrange for the preservation of the records required to be maintained by Rule 31a-1 under the 1940 Act for the periods prescribed by Rule 31a-2 under the 1940 Act. The Manager shall authorize and permit any of its directors, officers and employees who may be elected as Trustees or officers of the Trust to serve in the capacities in which they are elected. The Manager may enter into a contract with one or more other parties in which the Manager delegates to such party or parties any or all of the duties specified in this Paragraph 5(a). (b) Other than as herein specifically indicated, the Manager shall not be responsible for the expenses of the Trust. Specifically (but without limitation), the Manager shall not be responsible for any of the following expenses of the Trust, which expenses shall be borne by the Trust: advisory fees; distribution fees; interest; taxes; governmental fees; fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; the cost (including brokerage commissions or charges, if any) of securities or other property purchased or sold by the Trust and any losses in connection therewith; fees of custodians, transfer agents, registrars, administrators or other agents; legal expenses; expenses of preparing share certificates; expenses relating to the redemption or repurchase of the Trust's shares; expenses of registering and qualifying shares of the Trust for sale under applicable federal and state law; expenses of preparing, setting in print, printing and distributing prospectuses, reports, notices and dividends to Trust shareholders; costs of stationery; costs of shareholders' and other meetings of the Trust; Trustees' fees; audit fees; travel expenses of 2 officers, Trustees and employees of the Trust, if any; and the Trust's pro rata portion of premiums on any fidelity bond and other insurance covering the Trust and its officers and Trustees. 5. No Trustee, officer or employee of the Trust shall receive from the Trust any salary or other compensation as such Trustee, officer or employee while he or she is at the same time a director, officer, or employee of the Manager or any affiliated company of the Manager. This Paragraph 5 shall not apply to Trustees, executive committee members, consultants and other persons who are not regular members of the Manager's or any affiliated company's staff. 6. As compensation for the services performed and expenses assumed by the Manager with respect to each Fund, including the services of any consultants, investment advisers or other parties retained by the Manager, the Fund shall pay the Manager an annual fee, payable on a monthly basis, at the annual rate of 0.60% on the first $100,000,000 of the Fund's average daily assets and 0.55% on the portion of the Fund's average daily assets in excess of $100,000,000. The payment of the foregoing fee shall be made within thirty (30) days of the end of each month. For any period less than a month during which this Agreement is in effect, the fee shall be prorated according to the proportion which such period bears to the number of days in such month. For purposes of this Agreement and except as otherwise provided herein, the average daily assets of the Funds shall be calculated pursuant to procedures adopted by the Trustees of the Trust for calculating the value of the Funds' assets or delegating such calculations to third parties. In the event that the expenses of a Fund exceed any expense limitation which the Manager may, by written notice to the Trust, voluntarily declare to be effective with respect to the Fund, subject to such terms and conditions as the Manager may prescribe in such notice, the compensation due the Manager shall be reduced, and, if necessary, the Manager shall bear the Fund's expenses to the extent required by such expense limitation. 7. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Trust or any Fund or to any shareholder of the Trust or any Fund, for any act or omission in the course of, or connected with, rendering services hereunder other than a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services. 8. Nothing in this Agreement shall limit or restrict the right of any director, officer, or employee of the Manager who may also be a Trustee, officer, or employee of the Trust to engage in any other business or to devote his or her time and attention to the management or other aspects of any other business, whether of a similar nature or a dissimilar nature, or limit or restrict the right of the Manager to engage in any other business or to render services of any kind, including investment advisory and management services, to any other trust, firm, individual or association. 9. As used in this Agreement, the terms "assignment," "interested person," and "majority of the outstanding voting securities" shall have the meanings given to them by Section 2(a) of the 1940 Act, subject to such exemptions as may be granted, issued or adopted by the Securities and Exchange Commission or its staff by any rule, regulation, or order; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 3 Act and the rules and regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. 10. This Agreement shall become effective upon its execution, and shall remain in full force and effect with respect to each Fund continuously thereafter (unless terminated automatically as set forth in Paragraph 11 below) until terminated as follows: (a) Either party hereto may at any time terminate this Agreement with respect to any Fund by not more than sixty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or (b) If (i) the Trustees or the shareholders of a Fund by the vote of a majority of the outstanding voting securities of a Fund, and (ii) a majority of the Trustees who are not interested persons of the Trust or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Agreement with respect to a Fund, then this Agreement shall automatically terminate with respect to such Fund at the close of business on the second anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later; provided, however, that if the continuance of this Agreement is submitted to the shareholders of a Fund for their approval and such shareholders fail to approve such continuance of this Agreement as provided herein, the Manager may continue to serve hereunder in a manner consistent with the 1940 Act and the rules and regulations thereunder. Action by the Trust under paragraph (a) of this Paragraph 10 with respect to a Fund may be taken either (i) by vote of a majority of the Trustees, or (ii) by the vote of a majority of the outstanding voting securities of the Fund. 11. Except as otherwise provided herein, this Agreement shall terminate automatically in the event of its assignment by the Manager and shall not be assignable by the Trust without the consent of the Manager. Any termination of this Agreement pursuant to Paragraph 10 shall be without the payment of any penalty. This Agreement shall not be amended with respect to a Fund unless such amendment is approved by the vote of a majority of the outstanding voting securities of such Fund (provided that such shareholder approval is required by the 1940 Act and the rules and regulations thereunder, giving effect to any interpretations of the Securities and Exchange Commission and its staff), and by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees who are not interested persons of the Trust or of the Manager. 12. (a) In the event this Agreement is terminated by either party or upon written notice from the Manager at any time with respect to all the Funds, the Trust hereby agrees that it will eliminate from its trust name and the names of all Funds any reference to the names "PRIMECAP" or "PRIMECAP Odyssey." (b) In the event this Agreement is terminated by either party or upon written notice from the Manager at any time with respect to a particular Fund, the Trust hereby agrees 4 that it will eliminate from the Fund's name any reference to the names "PRIMECAP" or "PRIMECAP Odyssey." 13. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof. Should any part of this Agreement be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding and shall inure to the benefit of the parties hereto and their respective successors. 14. This Agreement shall be governed by the internal laws, and the law of conflicts of laws, of the State of Delaware; provided that nothing herein will be construed in a manner inconsistent with the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or any rule or regulation of the Securities and Exchange Commission thereunder. 15. Notice is hereby given that this Agreement has been executed on behalf of the Trust by an officer of the Trust as an officer and not individually. The obligations of or arising out of this Agreement are not binding upon any of the Trustees, officers or shareholders of the Trust individually but are binding only upon the assets and property of the Trust and all persons dealing with any Fund must look solely to the assets of the Trust belonging to such Fund for the enforcement of any claims against the Trust.. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers thereunto duly authorized. PRIMECAP Odyssey Funds, a Delaware statutory trust, on behalf of each of its series of shares - ------------------------------------------ Mitchell J. Milias President PRIMECAP Management Company, a California corporation - ------------------------------------------ [Name] [Title] 5 EX-99.H 5 ex99h3.txt EX. 99.H 3 EXHIBIT 99.H 3 LICENSE AGREEMENT This License Agreement (this "Agreement") is entered into as of the 25th day of June, 2004, by and between PRIMECAP Management Company, a California corporation ("PMC"), and PRIMECAP Odyssey Funds, a Delaware statutory trust (the "Trust"). WHEREAS, PMC was organized under the laws of the State of California and commenced doing business under a name including the word "PRIMECAP" in 1983, and has used such name at all times thereafter; and WHEREAS, PMC is the owner of service mark registration applications for the service mark "PRIMECAP" (Serial No. 78/416,745) and the service mark "PRIMECAP Odyssey"; and WHEREAS, the Trust was organized under the laws of the State of Delaware on June 8, 2004; and WHEREAS, the Trust has requested PMC's consent to the use of the phrase "PRIMECAP Odyssey" (the "Service Mark") in the name of the Trust and/or one or more of the series of shares of beneficial interest of the Trust (collectively "Series"), and PMC wishes to permit such use; and WHEREAS, the parties wish to enter into a written agreement to confirm the terms of such use by the Trust and the Series; NOW, THEREFORE, in consideration of the premises and of the covenants hereinafter contained, PMC and the Trust hereby agree as follows: 1. The Trust hereby acknowledges and agrees that the name "PRIMECAP" and, by extension, the Service Mark, are valuable proprietary rights of PMC and that the Trust has no rights to use such name or Service Mark in the name of the Trust or that of any of its Series except as are provided to the Trust by PMC pursuant to this License Agreement. The Trust shall not in any manner represent that it has any rights of ownership or use with respect to the name "PRIMECAP" or the Service Mark except as set forth herein, and acknowledges that all uses of such name and Service Mark by it shall inure to the benefit of PMC. 2. PMC hereby grants the Trust a non-exclusive, personal, indivisible, nontransferable and royalty-free license to use the Service Mark in the names of the Trust and/or any one or more of its Series, so long as such Service Mark is used in conjunction with other descriptive words such as "Fund" or "Funds" or phrases describing the investment objectives or purposes of a Series (such as "Aggressive Growth"). PMC hereby consents to the qualification of the Trust to do business under the laws of any state of the United States with the name "PRIMECAP Odyssey" in its name or that of any of its Series and agrees to execute such formal consents as may be necessary in connection with such qualifications. 3. PMC reserves and retains the right to grant to any other person, including without limitation any other investment company, the right to use the name "PRIMECAP" and the Service Mark or variations thereof in its name and no consent or permission of the Trust shall be necessary for such use; provided, however, that if required by the applicable law of any state, the 1 Trust shall forthwith grant all requisite consents. The Trust shall take such actions as PMC may reasonably require to protect the rights of PMC to such name and Service Mark. 4. The Trust shall reproduce and include trademark and/or service mark symbols and legends, or other proprietary markings as required by PMC, whenever the Service Mark is used for any purpose. In addition, the Trust shall not use any other trademark, service mark, trade name or logotype in combination with the Service Mark without the prior express written approval of PMC. The Trust agrees it will not alter, modify, dilute or otherwise misuse the Service Mark. The Trust agrees that it shall not, without the express prior written consent of PMC, apply for registration, seek to obtain ownership, or contest or challenge PMC's exclusive ownership of the Service Mark or any similar, related or derivative right, in any state or nation. The provisions of this Section 4 shall survive the expiration or termination of this Agreement, irrespective of the reasons therefor. The Trust acknowledges and agrees that the quality of the services provided by the Trust under the Service Mark shall conform to applicable industry standards for the applicable services and shall be subject to a once a year independent third party inspection, upon reasonable notice to the Trust, of such materials upon which the Service Mark appears. During the term of this Agreement, the Trust shall furnish at the Trust's expense samples of advertising brochures and other materials bearing the Service Mark for inspection and analysis as PMC may reasonably request. 5. To the fullest extent permitted by law, the Trust shall indemnify, protect, defend and hold harmless PMC from and against any and all losses, costs, expenses (including without limitation reasonable attorneys' fees), damages, injuries, liabilities, claims, demands, penalties or causes of action arising out of or relating to (a) any breach by the Trust of this Agreement, or (b) the exercise or use by the Trust of the rights granted by this Agreement. 6. The Trust shall promptly notify PMC of the assertion of any claim that the Service Mark or the Trust's use thereof infringes on the trademark, trade name, service mark, service name, copyright or other proprietary right of any other party, and shall cooperate with and otherwise assist PMC in the investigation and resolution of any such claim at PMC's expense. In addition, the Trust shall promptly notify PMC of any known or suspected use of the Service Mark by others not duly authorized by PMC. Notification of such infringement shall include all details known by the Trust that would enable PMC to investigate such infringement. Nothing in this Section 6 shall require PMC to bring suit for the infringement of the Service Mark. The Trust shall have no right to initiate an action of its own against an alleged infringer without first obtaining the prior express written approval of PMC. The Trust agrees to fully cooperate with PMC in prosecution of any action against an infringer, including without limitation the provision of evidence and testimony in such action. In the event that PMC should attempt to pursue any infringer and obtain a recovery from such infringer, whether by adjudication or settlement, PMC shall be entitled to retain the entirety of any such recovery to the exclusion of the Trust. 7. The Trust shall have no right to grant to any other person a sublicense to use a name containing the Service Mark. The Trust shall have no right to assign its interest in this Agreement or any part thereof to any other person without the prior written consent of PMC. 2 8. The license provided to the Trust hereunder shall terminate and be of no further force or effect at such time as PMC no longer provides investment advisory services to the Trust or any of its Series. The license provided to the Trust for use by any Series hereunder shall terminate with respect to such Series and be of no further force or effect at such time as PMC no longer provides investment advisory services to such Series. In either such event, the Trust shall as promptly as practicable take such actions as may be necessary to change its name and/or the names of the Series to names that do not include the names "PRIMECAP" or "PRIMECAP Odyssey." 9. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and may not be amended at any time except by a writing signed by the parties hereto. 10. All of the terms of this Agreement shall be binding upon, and except as set forth herein shall inure to the benefit of, the successors and assigns of the parties. 11. PMC acknowledges that it has received a copy of the Declaration of Trust of the Trust dated June 25, 2004. PMC further acknowledges and agrees that the obligations of the Trust under this Agreement are not binding on any officers, trustees or shareholders of the Trust individually, but are binding only upon the assets and properties of the Trust. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. PRIMECAP MANAGEMENT COMPANY /s/ Howard B. Schow ------------------------------------ Howard B. Schow, its Chairman PRIMECAP ODYSSEY FUNDS /s/ Mitchell J. Milias ------------------------------------ Mitchell J. Milias, its President 3 -----END PRIVACY-ENHANCED MESSAGE-----

PRIMECAP Odyssey Funds

PRIMECAP Odyssey Growth FundPRIMECAP Odyssey Aggressive Growth FundPRIMECAP Odyssey Stock Fund

Investment Objective

Primary Investment Strategies

Primary Risks

Fees and Expenses of the Fund

Example

Investment Objective

Primary Investment Strategies

Primary Risks

Fees and Expenses of the Fund

Example

Investment Objective

Primary Investment Strategies

Primary Risks

Fees and Expenses of the Fund

Example

Investment Objectives, Strategies and Risks

Strategies

Risks

Investment Objectives, Strategies and Risks

Fund Management

The Adviser

Fund Management

Other Service Providers

Shareholder Information

Pricing of Shares

Purchasing and Adding to Your Shares

Price of Shares

Minimum Initial Investment

Exchanges of Shares

Purchases through a Securities Dealer

Purchases through the Transfer Agent

Shareholder Information

Retirement Plan Participants

Automatic Reinvestment

Anti-Money Laundering

Shareholder Information

Other

Selling Your Shares

How to Redeem Shares

Shareholder Information

Redemption Payments

Minimum Account Size and Redemption of Small Accounts

Redemption Fees

Shareholder Information

Dividends, Distributions and Taxes

Other Information

PRIMECAP Odyssey Growth Fund
PRIMECAP Odyssey Aggressive Growth Fund
PRIMECAP Odyssey Stock Fund