UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-22312
ACAP Strategic Fund | ||
(Exact name of registrant as specified in charter) |
350 Madison Avenue, 9th Floor | ||
New York, New York 10017 | ||
(Address of principal executive offices) (Zip code) |
SilverBay Capital Management LLC
350 Madison Avenue, 9th Floor
New York, New York 10017 | ||
(Name and address of agent for service) |
Registrant’s telephone number, including area code: 212-389-8713
Date of fiscal year end: September 30
Date of reporting period: September 30, 2013
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
ACAP STRATEGIC FUND
350 Madison Avenue, 9th Floor
New York, New York 10017
November 27, 2013
Re: ACAP Strategic Fund (the Fund) Annual Report to Shareholders
Dear Investor:
Please find enclosed the Funds Annual Report to Shareholders. We also enclose copies of the Privacy Policy for the Fund and its investment adviser.
Please note that a copy of the Funds prospectus may be obtained by contacting your financial advisor.
We appreciate your continued investment and look forward to a long mutually beneficial relationship.
Very truly yours,
ACAP STRATEGIC FUND
Annual Report of ACAP Strategic Fund Financial Statements For the Eleven Months Ended September 30, 2013
with Report of Independent Registered Public Accounting Firm
ACAP Strategic Fund Financial Statements For the Eleven Months Ended September 30, 2013 Contents
1
2
3
9
14
22
23
24
(Fiscal year end changed from October 31)
Grant Thornton LLP REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Trustees and Shareholders We have audited the accompanying statement of assets and liabilities of ACAP Strategic Fund (a Delaware statutory trust) (the Fund), including the schedules of investments, securities sold, not yet purchased and swap contracts, as of September 30, 2013, and the related statement of operations for the period
November 1, 2012 through September 30, 2013, the statement of changes in net assets for the period November 1, 2012 through September 30, 2013 and the year ended October 31, 2012, and the financial highlights (included in Note 14) for the periods indicated therein. These financial statements are the
responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material
misstatement. The Fund is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Funds internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of investments as of September 30, 2013, by correspondence with the custodian and broker. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of ACAP Strategic Fund as of September 30, 2013, and the results of its operations for the period November 1, 2012 through September 30, 2013, the changes in its net assets
for the period November 1, 2012 through September 30, 2013 and the year ended October 31, 2012, and the financial highlights for the period indicated therein, in conformity with accounting principles generally accepted in the United States of America.
New York, New York Grant Thornton LLP
60 Broad Street, 24th Floor
New York, NY 10004-2306
T 212.422.1000
F 212.422.0144
www.GrantThornton.com
ACAP Strategic Fund
November 26, 2013
U.S. member firm of Grant Thornton International Ltd
ACAP STRATEGIC FUND
September 30, 2013 Assets Investments in securities, at fair value (cost $1,119,822,965)
$
1,382,382,487 Cash and cash equivalents (including Euros of $773,539, with a cost of $752,489, Hong Kong Dollars of $13,939,929, with a cost of $13,939,980, Singapore Dollars of $3,909,988, with a cost of $3,904,813, British Pounds Sterling of $57,443, with a cost of $53,640, and Japanese Yen of
$2,397,209, with a cost of $2,437,428)
93,635,650 Due to/from broker (including British Pounds Sterling of $1,668,081, with a cost of $1,649,851, Euros of $1, with a cost of $1, Hong Kong Dollars of $10,933,872, with a cost of $10,934,179, Singapore Dollars of $(60,833), with a cost of $(60,131), Swedish Krona of $2,689, with a cost of
$2,570, and Japanese Yen of $8,515,931, with a cost of $8,460,550)
111,481,459 Receivable for investment securities sold
61,975,948 Net unrealized appreciation on total return swaps
2,139,274 Dividends receivable
730,632 Interest receivable
203,922 Other assets
38,236 Total assets
1,652,587,608 Liabilities Securities sold, not yet purchased, at fair value (proceeds $398,892,397)
411,605,616 Payable for investment securities purchased
48,563,366 Accrued incentive fees
36,781,256 Withdrawals payable
14,536,263 Management fees payable
1,841,140 Stock loan fee payable
768,769 Dividends payable on securities sold, not yet purchased
562,053 Shareholders servicing fees payable
230,075 Administration fees payable
142,933 Professional fees payable
58,484 Accrued expenses
149,021 Total liabilities
515,238,976 Net Assets
$
1,137,348,632 Net assets Represented by: Shares of beneficial interest - $0.001 par value; unlimited shares authorized; 87,074,958 shares issued and outstanding
$
952,913,807 Accumulated net investment gain/(loss)
(105,400,651
) Accumulated net realized gain/(loss) of investment transactions, foreign currency transactions and total return swaps
37,795,017 Net unrealized gain/(loss) of investments, foreign currency and total return swaps
252,040,459 Net Assets
$
1,137,348,632 Net asset value per share
$
13.06 The accompanying notes are an integral part of these financial statements. 2
STATEMENT OF ASSETS AND LIABILITIES
ACAP STRATEGIC FUND
Shares
September 30, 2013
Investments in Securities121.54% Common Stocks121.54%
Canada0.48% RetailApparel / Shoes0.48%
74,800 Lululemon Athletica Inc *
$
5,467,132 Total Canada (cost $5,415,489)
$
5,467,132
China9.12% E-Commerce / Products0.45%
487,200 E-Commerce China Dangdang Inc, Class A ADR *
5,105,856 E-Commerce / Services2.04%
397,500 Ctrip.com International Ltd ADR *
23,225,925 Internet ContentEntertainment1.58%
657,000 Youku Tudou Inc ADR *
18,001,800 RetailRegional Department Stores0.55%
3,996,000 Golden Eagle Retail Group Ltd
6,234,773 Web Portals / ISP4.50%
329,800 Baidu Inc ADR * (a)
51,178,364 Total China (cost $79,267,185)
$
103,746,718
Hong Kong4.28% Agricultural Operations0.03%
88,991 Le Gaga Holdings Ltd ADR * (a)
317,698 Alternative Waste Technology1.67%
21,504,000 China Everbright International Ltd
18,994,139 Casino Hotels2.52%
4,078,000 Galaxy Entertainment Group Ltd *
28,605,920 RetailApparel / Shoes0.06%
2,382,000 Trinity Ltd
801,663 Total Hong Kong (cost $23,010,473)
$
48,719,420
Japan12.67% Audio / Video Products1.57%
831,500 Sony Corp ADR
17,893,880 Cosmetics & Toiletries0.97%
615,234 Shiseido Co Ltd
11,060,105 Electronic ComponentsMiscellaneous0.47%
657,300 Alps Electric Co Ltd
5,298,592 E-Services / Consulting1.46%
528,302 Digital Garage Inc
16,636,466 FinanceLeasing Company0.27%
192,020 ORIX Corp
3,121,242 The accompanying notes are an integral part of these financial statements. 3
SCHEDULE OF INVESTMENTS
Fair Value
ACAP STRATEGIC FUND
Shares
September 30, 2013
Common Stocks (continued) Japan (continued)
FinanceOther Services3.45%
1,770,920 Japan Exchange Group Inc
$
39,217,418
Internet ContentInformation / Network1.25%
611,440 Kakaku.com Inc
14,263,298
Resorts / Theme Parks1.05%
71,771 Oriental Land Co Ltd/Japan
11,863,701
RetailApparel / Shoes0.65%
172,887 United Arrows Ltd
7,276,671
TransportTruck1.00%
505,169 Yamato Holdings Co Ltd
11,387,861
Web Portals / ISP0.53%
467,900 GMO internet Inc
6,084,488
Total Japan (cost $126,818,058)
$
144,103,722 United States94.99%
Apparel Manufacturers4.02%
389,950 Carters Inc (a)
29,593,306
98,090 Ralph Lauren Corp (a)
16,158,366
45,751,672
Applications Software0.85%
49,360 Imperva Inc *
2,074,107
146,020 ServiceNow Inc *
7,585,739
9,659,846
Broadcasting Services / Programming1.45%
210,460 Scripps Networks Interactive Inc, Class A
16,439,031
Commercial ServicesFinance2.90%
49,030 Mastercard Inc, Class A (a)
32,986,403
Computer Aided Design1.88%
617,910 Aspen Technology Inc * (a)
21,348,791
Computer Data Security0.32%
170,311 Qualys Inc *
3,642,952
Computer Software1.79%
392,900 Akamai Technologies Inc (a) *
20,312,930
Computers2.36%
56,190 Apple Inc (a)
26,788,583
ComputersMemory Devices0.94%
179,600 SanDisk Corp (a)
10,687,996
Consulting Services2.91%
510,130 Verisk Analytics Inc, Class A * (a)
33,138,045
Consumer ProductsMiscellaneous0.76%
429,746 Tumi Holdings Inc * (a)
8,659,382 The accompanying notes are an integral part of these financial statements. 4
SCHEDULE OF INVESTMENTS (continued)
Fair Value
ACAP STRATEGIC FUND
Shares
September 30, 2013
Common Stocks (continued) United States (continued)
E-Commerce / Products6.16%
93,260 Amazon.com Inc * (a)
$
29,156,806
629,500 eBay Inc (a) *
35,119,805
102,750 Shutterfly Inc *
5,741,670
70,018,281 E-Commerce / Services5.28%
3,969,070 Groupon Inc *
44,493,275
205,830 TripAdvisor Inc *
15,610,147
60,103,422 Electronic ComponentsMiscellaneous0.43%
377,970 Vishay Intertechnology Inc *
4,872,033 Electronic ComponentsSemiconductors4.22%
97,100 OmniVision Technologies Inc * (a)
1,486,601
248,900 Silicon Laboratories Inc *
10,630,519
765,940 Xilinx Inc (a)
35,891,948
48,009,068
Electronic Design Automation4.40%
942,610 Cadence Design Systems Inc * (a)
12,725,235
988,740 Synopsys Inc * (a)
37,275,498
50,000,733
Enterprise Software / Services2.17%
71,029 Benefitfocus Inc *
3,491,786
173,610 Guidewire Software Inc *
8,178,767
333,320 Informatica Corp *
12,989,480
24,660,033 FinanceCredit Card1.93%
114,810 Visa Inc, Class A (a)
21,940,191 FinanceOther Services1.37%
85,910 IntercontinentalExchange Inc *
15,585,792 Internet Application Software0.50%
1,537,780 Zynga Inc, Class A *
5,659,029 Internet ContentInformation / Network2.79%
89,730 LinkedIn Corp, Class A *
22,078,964
145,720 Yelp Inc *
9,643,750
31,722,714 Internet Infrastructure Software1.15%
509,250 TIBCO Software Inc * (a)
13,031,708 Internet Security0.80%
218,690 FireEye Inc *
9,082,196 The accompanying notes are an integral part of these financial statements. 5
SCHEDULE OF INVESTMENTS (continued)
Fair Value
ACAP STRATEGIC FUND
Shares
September 30, 2013
Common Stocks (continued) United States (continued)
Medical Products0.25%
250,820 Rockwell Medical Inc *
$
2,861,856
MedicalBiomedical / Genetics5.37%
168,130 Alexion Pharmaceuticals Inc * (a)
19,529,980
144,900 Celgene Corp *
22,304,457
306,090 Gilead Sciences Inc *
19,234,696
61,069,133 MedicalDrugs1.48%
429,510 ACADIA Pharmaceuticals Inc *
11,798,640
128,010 ViroPharma Inc *
5,030,793
16,829,433 MedicalOutpatient / Home Medical3.04%
1,089,924 Premier Inc, Class A *
34,550,591 MedicalWholesale Drug Distribution2.74%
509,560 AmerisourceBergen Corp (a)
31,134,116 Multimedia4.99%
335,900 Time Warner Inc
22,105,579
1,037,440 Twenty-First Century Fox Inc, Class B
34,650,496
56,756,075 PublishingNewspapers2.14%
1,483,905 News Corp, Class B *
24,380,559 Resorts / Theme Parks0.84%
286,030 Six Flags Entertainment Corp
9,664,954 RetailApparel / Shoes1.07%
332,480 Urban Outfitters Inc *
12,225,290 RetailDiscount4.08%
243,220 Costco Wholesale Corp (a)
27,999,486
322,140 Dollar Tree Inc * (a)
18,413,522
46,413,008 RetailHome Furnishings0.71%
126,750 Restoration Hardware Holdings Inc *
8,029,613 RetailMajor Department Stores0.51%
102,410 Nordstrom Inc
5,755,442 RetailRestaurants1.35%
339,660 Dunkin Brands Group Inc
15,373,012 RetailSporting Goods1.26%
227,900 Cabelas Inc * (a)
14,364,537 Semiconductor ComponentsIntegrated Circuits2.60%
520,880 Analog Devices Inc (a)
24,507,404
687,430 Atmel Corp *
5,114,479
29,621,883 The accompanying notes are an integral part of these financial statements. 6
SCHEDULE OF INVESTMENTS (continued)
Fair Value
ACAP STRATEGIC FUND
Shares
September 30, 2013
Common Stocks (continued) United States (continued)
Semiconductor Equipment4.93%
1,821,530 Applied Materials Inc (a)
$
31,949,636
1,461,790 Teradyne Inc *
24,148,770
56,098,406
Television3.06%
630,800 CBS Corp, Class B (a)
34,794,928
Therapeutics1.35%
111,130 Pharmacyclics Inc *
15,382,614
Web Portals / ISP1.84%
631,460 Yahoo! Inc *
20,939,214
Total United States (cost $885,311,760)
$
1,080,345,495 Total Common Stock (cost $1,119,822,965)
$
1,382,382,487
Total Investments in Securities (cost $1,119,822,965)
$
1,382,382,487 Other Liabilities in Excess of Assets(21.54%) **
$
(245,033,855
)
Net Assets100.00%
$
1,137,348,632
(a)
Partially or wholly held in a pledged account by the Custodian as collateral for securities sold, not yet purchased. * Non-income producing security. ** Includes $93,635,650 invested in a BNY Mellon Money Market Account, which is 8.23% of net assets and foreign currency with a U.S. Dollar value of $21,078,108 which is 1.85% of net assets. ADR American Depository Receipt Aggregate cost for federal income tax purposes is $1,130,109,497. The aggregate gross unrealized gain/(loss) for federal income tax purposes for all portfolio investments is as follows: Excess of value of cost
$
272,975,972 Excess of cost of value
(20,702,982
)
$
252,272,990 The accompanying notes are an integral part of these financial statements. 7
SCHEDULE OF INVESTMENTS (continued)
Fair Value
ACAP STRATEGIC FUND Investments in Securities By Industry
September 30, 2013 Agricultural Operations
0.03 Alternative Waste Technology
1.67 Apparel Manufacturers
4.02 Applications Software
0.85 Audio / Video Products
1.57 Broadcasting Services / Programming
1.45 Casino Hotels
2.52 Commercial Services Finance
2.90 Computer Aided Design
1.88 Computer Data Security
0.32 Computer Software
1.79 Computers
2.36 Computers Memory Devices
0.94 Consulting Services
2.91 Consumer Products Miscellaneous
0.76 Cosmetics & Toiletries
0.97 E-Commerce / Products
6.61 E-Commerce / Services
7.32 E-Services / Consulting
1.46 Electronic Components Miscellaneous
0.90 Electronic Components Semiconductors
4.22 Electronic Design Automation
4.40 Enterprise Software / Services
2.17 Finance Credit Card
1.93 Finance Leasing Company
0.27 Finance Other Services
4.82 Internet Application Software
0.50 Internet Content Entertainment
1.58 Internet Content Information / Network
4.04 Internet Infrastructure Software
1.15 Internet Security
0.80 Medical Products
0.25 Medical Biomedical / Genetics
5.37 Medical Drugs
1.48 Medical Outpatient / Home Medical
3.04 Medical Wholesale Drug Distribution
2.74 Multimedia
4.99 Publishing Newspapers
2.14 Resorts / Theme Parks
1.89 Retail Apparel / Shoes
2.26 Retail Discount
4.08 Retail Home Furnishings
0.71 Retail Major Department Stores
0.51 Retail Regional Department Stores
0.55 Retail Restaurants
1.35 Retail Sporting Goods
1.26 Semiconductor Components Integrated Circuits
2.60 Semiconductor Equipment
4.93 Transport Truck
1.00 Television
3.06 Therapeutics
1.35 Web Portals / ISP
6.87 Total Investments in Securities
121.54
% The accompanying notes are an integral part of these financial statements. 8
SCHEDULE OF INVESTMENTS (concluded)
Percentage of
Net Assets (%)
ACAP STRATEGIC FUND
Shares
September 30, 2013
Securities Sold, Not Yet Purchased36.19% Common Stock36.19%
Canada0.53% Enterprise Software / Services0.53%
81,500 Open Text Corp
$
6,083,975 Total Canada (proceeds $4,257,144)
$
6,083,975
China2.42% Commercial BanksNon U.S.0.44%
9,688,000 China CITIC Bank Corp Ltd, Class H
5,021,922 Computers0.83%
8,996,000 Lenovo Group Ltd
9,407,627 ElectricGeneration0.50%
4,582,000 Datang International Power Generation Co Ltd, Class H
2,020,650
3,722,000 Huaneng Power International Inc, Class H
3,714,729
5,735,379 Electronic ComponentsMiscellaneous0.31%
779,678 AAC Technologies Holdings Inc
3,543,922 MedicalWholesale Drug Distribution0.18%
811,591 Sinopharm Group Co Ltd Class H
2,036,526 Metal Processors & Fabrication0.12%
4,484,000 China Zhongwang Holdings Ltd
1,358,762 MetalAluminum0.04%
49,900 Aluminum Corp of China Ltd ADR
459,579 Total China (proceeds $25,803,509)
$
27,563,717
Germany1.01% Enterprise Software / Services1.01%
155,800 SAP AG ADR
11,516,736 Total Germany (proceeds $11,760,926)
$
11,516,736
Hong Kong2.57% Audio / Video Products0.06%
1,365,946 Skyworth Digital Holdings Ltd
651,696 Distribution / Wholesale1.25%
9,778,000 Li & Fung Ltd
14,222,270 ElectricIntegrated0.68%
943,000 CLP Holdings Ltd
7,678,826 Paper & Related Products0.22%
3,579,000 Nine Dragons Paper Holdings Ltd
2,524,404 RetailMiscellaneous / Diversified0.36%
1,304,000 China Resources Enterprise Ltd
4,144,807 Total Hong Kong (proceeds $30,985,745)
$
29,222,003
India0.76% Computer Services0.76%
178,600 Infosys Ltd ADR
8,592,446 Total India (proceeds $8,278,671)
$
8,592,446 The accompanying notes are an integral part of these financial statements. 9
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED
Fair Value
ACAP STRATEGIC FUND
Shares
September 30, 2013
Common Stocks (continued) Japan5.66%
Audio / Video Products0.92%
1,077,300 Panasonic Corp
$
10,407,953
Chemicals1.80%
290,472 Kuraray Co Ltd
3,478,263
260,800 Nitto Denko Corp
16,983,562
20,461,825
Office Automation & Equipment1.61%
574,800 Canon Inc
18,335,022
Photo Equipment & Supplies0.90%
587,200 Nikon Corp
10,250,941
PrintingCommercial0.43%
464,000 Dai Nippon Printing Co Ltd
4,908,352
Total Japan (proceeds $65,698,996)
$
64,364,093 Singapore0.33%
Airlines0.33%
449,000 Singapore Airlines Ltd
3,735,852
Total Singapore (proceeds $3,921,855)
$
3,735,852 South Korea0.59%
Electronic ComponentsMiscellaneous0.59%
562,400 LG Display Co Ltd ADR
6,709,432
Total South Korea (proceeds $7,744,797)
$
6,709,432 Switzerland0.31%
ComputersPeripheral Equipment0.31%
397,800 Logitech International SA
3,520,530
Total Switzerland (proceeds $5,078,515)
$
3,520,530 Taiwan0.83%
Electronic ComponentsMiscellaneous0.29%
896,100 AU Optronics Corp ADR
3,270,765
Semiconductor Components Integrated Circuits0.54%
418,100 Siliconware Precision Industries Co ADR
2,416,618
1,830,500 United Microelectronics Corp ADR
3,770,830
6,187,448
Total Taiwan (proceeds $10,416,815)
$
9,458,213 United States21.18%
BuildingMobile Home / Manufactured Housing0.49%
95,200 Thor Industries Inc
5,525,408
Casino Hotels0.37%
294,620 Boyd Gaming Corp
4,168,873
Commercial ServicesFinance0.57%
345,080 Western Union Co
6,439,193
Commercial Services0.32%
97,250 Weight Watchers International Inc
3,634,233 The accompanying notes are an integral part of these financial statements. 10
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (continued)
Fair Value
ACAP STRATEGIC FUND
Shares
September 30, 2013
Common Stocks (continued) United States (continued)
Communications Software0.62%
202,070 SolarWinds Inc
$
7,084,574
Computer Services1.23%
75,430 International Business Machines Corp
13,968,127
Country FundJapan0.95%
909,280 iShares MSCI Japan ETF
10,829,525
Cruise Lines0.91%
318,210 Carnival Corp
10,386,374
ElectricIntegrated0.47%
176,820 PPL Corp
5,371,792
Electronic ComponentsSemiconductors2.05%
103,270 Cree Inc
6,215,821
312,640 Freescale Semiconductor Ltd
5,205,456
517,210 Intel Corp
11,854,453
23,275,730 Enterprise Software / Services1.05%
358,430 Oracle Corp
11,889,123 FoodRetail0.47%
167,340 Safeway Inc
5,353,207 Human Resources0.33%
295,800 Monster Worldwide Inc
1,307,436
63,240 Robert Half International Inc
2,468,257
3,775,693 Internet ContentInformation / Network0.16%
211,500 Dice Holdings Inc
1,799,865 Internet Infrastructure Software0.19%
24,700 F5 Networks Inc
2,118,272 Medical Products0.58%
101,030 Baxter International Inc
6,636,661 Networking Products0.26%
96,250 LogMeIn Inc
2,988,563 PrintingCommercial0.63%
247,230 Valassis Communications Inc
7,140,002 Recreational Centers0.77%
170,730 Life Time Fitness Inc
8,787,473 REITSOffice Property0.76%
190,380 Mack-Cali Realty Corp
4,176,937
256,020 Piedmont Office Realty Trust Inc, Class A
4,444,507
8,621,444 Rental Auto / Equipment0.69%
101,030 Aarons Inc
2,798,531
133,740 Rent-A-Center Inc
5,095,494
7,894,025 The accompanying notes are an integral part of these financial statements. 11
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (continued)
Fair Value
ACAP STRATEGIC FUND
Shares
September 30, 2013
Common Stocks (continued) United States (continued)
RetailApparel / Shoes0.35%
73,140 Buckle Inc
$
3,953,217
RetailComputer Equipment0.34%
78,420 GameStop Corp, Class A
3,893,553
Sector FundReal Estate1.59%
284,010 iShares US Real Estate ETF
18,108,478
Sector FundUtility2.27%
691,240 Utilities Select Sector SPDR Fund ETF
25,817,814
Security Services0.61%
169,940 ADT Corp
6,909,760
Telecommunication EquipmentFiber Optics1.08%
844,390 Corning Inc
12,319,650
Web Hosting / Design1.07%
230,250 Rackspace Hosting Inc
12,147,990
Total United States (proceeds $224,945,424)
$
240,838,619 Total Common Stock (proceeds $398,892,397)
$
411,605,616
Total Securities Sold, Not Yet Purchased (proceeds $398,892,397)
$
411,605,616 ETF Exchange Traded Fund The accompanying notes are an integral part of these financial statements. 12
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (continued)
Fair Value
ACAP STRATEGIC FUND Securities Sold,
September 30, 2013 Airlines
0.33 Audio / Video Products
0.98 Building Mobile Home / Manufactured Housing.
0.49 Casino Hotels.
0.37 Chemicals
1.80 Commercial Banks Non US
0.44 Commercial Services Finance.
0.57 Commercial Services.
0.32 Communications Software
0.62 Computers.
0.83 Computers Peripheral Equipment.
0.31 Computer Services
1.99 Country Fund Japan
0.95 Cruise Lines
0.91 Distribution / Wholesale.
1.25 Electric Generation
0.50 Electric Integrated
1.15 Electronic Components Miscellaneous
1.19 Electronic Components Semiconductors
2.05 Enterprise Software / Services.
2.59 Food Retail
0.47 Human Resources
0.33 Internet Content Information / Network
0.16 Internet Infrastructure Software
0.19 Medical Products
0.58 Medical Wholesale Drug Distribution
0.18 Metal Processors & Fabrication
0.12 Metal Aluminum
0.04 Networking Products.
0.26 Office Automation & Equipment
1.61 Paper & Related Products.
0.22 Photo Equipment & Supplies
0.90 Printing Commercial
1.06 Recreational Centers
0.77 REITS Office Property.
0.76 Rental Auto / Equipment
0.69 Retail Apparel / Shoes.
0.35 Retail Computer Equipment.
0.34 Retail Miscellaneous / Diversified
0.36 Sector Fund Real Estate
1.59 Sector Fund Utility
2.27 Security Services
0.61 Semiconductor Components Integrated Circuits
0.54 Telecommunication Equipment Fiber Optics
1.08 Web Hosting / Design
1.07 Total Securities Sold, Not Yet Purchased
36.19
% The accompanying notes are an integral part of these financial statements. 13
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (concluded)
Not Yet Purchased By Industry
Percentage of
Net Assets (%)
ACAP STRATEGIC FUND
Notional
Maturity
September 30, 2013
Swap Contracts0.19%
Total Return Swap Contracts0.19%
Audio / Video Products(0.01%)
$
(5,605,562
) 3/6/2014
Sharp Corp.
$
(152,132
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Sharp Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 3.00%. Building ProductsDoors & Windows0.00%
(10,754,325
) 3/6/2014
Asahi Glass Co Ltd.
(26,423
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Asahi Glass Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%.
Capacitors(0.02)%
(10,071,662
) 3/6/2014
Taiyo Yuden Co Ltd.
(201,728
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Taiyo Yuden Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.97%. Computers0.01%
(9,212,383
) 3/6/2014
Asustek Computer Inc.
98,110
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Asustek Computer Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 3.15%.
(3,233,760
) 3/6/2014
Compal Electronics Inc.
(99,547
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Compal Electronics Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 2.18%.
(4,503,014
) 3/6/2014
Quanta Computer Inc.
7,838
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Quanta Computer Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 2.75%.
(2,084,526
) 3/6/2014
Wistron Corporation.
93,805
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Wistron Corporation in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 4.72%.
100,206 The accompanying notes are an integral part of these financial statements. 14
SCHEDULE OF SWAP CONTRACTS
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND
Notional
Maturity
September 30, 2013
Total Return Swap Contracts (continued) ComputersPeripheral Equipment0.01%
$
(7,854,296
) 3/6/2014
Innolux Display Corp
$
164,686
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Innolux Display Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 1.50%.
E-Commerce / Products0.15%
55,356,364 3/6/2014
Rakuten Inc..
1,691,854
Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of Rakuten Inc in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.60%. Electric ProductsMiscellaneous0.00%
(12,861,403
) 3/6/2014
LG Electronics Inc.
129,236
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of LG Electronics Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 1.45%.
(7,396,126
) 3/6/2014
LG Innotek Co Ltd.
(152,010
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of LG Innotek Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 4.75%.
(22,774
) Electronic ComponentsMiscellaneous0.00%
(5,322,258
) 3/6/2014
AU Optronics Corp.
118,704
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of AU Optronics Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 1.50%.
(9,790,018
) 3/6/2014
Hon Hai Precision Industry Co Ltd.
(54,413
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Hon Hai Precision Industry Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%.
(4,244,180
) 3/6/2014
NEC Corporation.
110,066
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of NEC Corporation in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%.
(12,294,331
) 3/6/2014
Nippon Electric Glass Co.
133,632
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Nippon Electric Glass Co in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%. The accompanying notes are an integral part of these financial statements. 15
SCHEDULE OF SWAP CONTRACTS (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND
Notional
Maturity
September 30, 2013
Total Return Swap Contracts (continued) Electric ComponentsMiscellaneous (continued)
$
(7,244,233
) 3/6/2014
Samsung Electro-Mechanics Co Ltd.
$
(269,706
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Samsung Electro-Mechanics Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.41%.
(6,318,041
) 3/6/2014
Toshiba Corp.
(156,684
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Toshiba Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%.
(1,442,051
) 3/6/2014
TPK Holding Co Ltd.
99,322
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of TPK Holding Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 10.00%.
(135,517
) 3/6/2014
Wintek Corp.
2,150
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Wintek Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 8.00%.
(16,929
) Electronic ComponentsSemiconductors(0.01%)
(10,043,258
) 3/6/2014
MediaTek Inc.
162,938
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of MediaTek Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 4.00%.
(2,824,288
) 3/6/2014
Nippon Chemi-Con Corp.
(152,493
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Nippon Chemi-Con Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.54%.
(2,633,809
) 3/6/2014
Rohm Company Ltd.
(82,211
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Rohm Company Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%.
19,638,206 3/6/2014
Samsung Electronics Co Ltd.
87,826
Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of Samsung Electronics Co Ltd in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.90%. The accompanying notes are an integral part of these financial statements. 16
SCHEDULE OF SWAP CONTRACTS (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND
Notional
Maturity
September 30, 2013
Total Return Swap Contracts (continued) Electronic ComponentsSemiconductors (continued)
$
(4,989,173
) 3/6/2014
SK Hynix Inc.
$
(95,903
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of SK Hynix Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%.
(79,843
) FinanceInvestment Banker / Broker0.00%
(1,210,532
) 3/6/2014
Bolsas y Mercados Espanoles SA
(39,732
)
Agreement with Morgan Stanley, dated 03/01/2012 to deliver the total return of the shares of Bolsas y Mercados Espanoles SA in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 7.50%.
FoodRetail0.02%
(6,731,377
) 3/6/2014
Delhaize Group.
130,149
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Delhaize Group in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%
(6,166,035
) 3/6/2014
Koninklijke Ahold NV.
80,830
Agreement with Morgan Stanley, dated 01/01/2012 to deliver the total return of the shares of Koninklijke Ahold NV in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%
(8,054,269
) 12/11/2014
Tesco PLC
(22,346
)
Agreement with Morgan Stanley, dated 12/08/2012 to deliver the total return of the shares of Tesco PLC in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%
(7,861,962
) 12/11/2014
WM Morrison Supermarkets PLC
75,996
Agreement with Morgan Stanley, dated 12/08/2012 to deliver the total return of the shares of WM Morrison Supermarkets PLC in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%.
264,629
Hotels & Motels0.02%
12,080,292 12/11/2014
Whitbread PLC.
207,822
Agreement with Morgan Stanley, dated 12/08/2012 to receive the total return of the shares of Whitbread PLC in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.65%. The accompanying notes are an integral part of these financial statements. 17
SCHEDULE OF SWAP CONTRACTS (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND
Notional
Maturity
September 30, 2013
Total Return Swap Contracts (continued) Internet ContentEntertainment0.00%
$
(3,921,917
) 3/6/2014
Gree Inc.
$
(49,138
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Gree Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 6.27%.
3,818,405 3/6/2014
NHN Entertainment Corp.
91,502
Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of NHN Entertainment Corp in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.90%.
42,364 Metal Processors & Fabrication0.00%
(4,034,901
) 3/6/2014
Catcher Technology Co Ltd.
(48,900
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Catcher Technology Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 7.00%.
Office Automation & Equipment0.04%
(9,408,951
) 3/6/2014
Ricoh Co Ltd.
136,267
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Ricoh Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%.
(5,051,556
) 3/6/2014
Seiko Epson Corp.
303,170
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Seiko Epson Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%.
439,437
Photo Equipment & Supplies0.02%
(5,713,861
) 3/6/2014
Konica Minolta Inc.
136,465
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Konica Minolta Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 0.40%.
(4,579,777
) 3/6/2014
Largan Precision Co Ltd.
88,852
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Largan Precision Co Ltd in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 8.50%.
225,317 The accompanying notes are an integral part of these financial statements. 18
SCHEDULE OF SWAP CONTRACTS (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND
Notional
Maturity
September 30, 2013
Total Return Swap Contracts (continued) RetailDrug Stores0.00%
$
1,965,955 5/28/2015
RAIA Drogasil SA.
$
6,763
Agreement with Morgan Stanley, dated 05/28/2013 to receive the total return of the shares of RAIA Drogasil SA in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.65%.
RetailRestaurants0.00%
6,276,019 3/6/2014
Gourmet Master Co Ltd.
56,503
Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of Gourmet Master Co Ltd in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 1.25%. Semiconductor ComponentsIntegrated Circuits(0.11%)
(6,548,330
) 3/6/2014
Novatek Microelectronics Corp.
182,391
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Novatek Microelectronics Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 3.91%.
(6,471,594
) 3/6/2014
Powertech Technology Inc.
(46,094
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Powertech Technology Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 3.50%.
67,362,625 3/6/2014
QUALCOMM Inc.
(1,364,944
)
Agreement with Morgan Stanley, dated 03/01/2012 to receive the total return of the shares of QUALCOMM Inc in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.45%.
(2,223,514
) 3/6/2014
Realtek Semiconductor Corp.
(70,212
)
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of Realtek Semiconductor Corp in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 3.32%.
(1,123,458
) 3/6/2014
United Microelectronics Corp.
26,357
Agreement with Morgan Stanley, dated 03/01/2010 to deliver the total return of the shares of United Microelectronics Inc in exchange for an amount to be received monthly equal to the Daily Fed Funds Effective Rate less 1.30%.
(1,272,502
) The accompanying notes are an integral part of these financial statements. 19
SCHEDULE OF SWAP CONTRACTS (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND
Notional
Maturity
September 30, 2013
Total Return Swap Contracts (continued) Television0.00%
$
6,693,345 3/6/2014
Nippon Televison Holdings Inc.
$
(2,656
)
Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of Nippon Televison Holdings Inc in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.60%.
Web Portals / ISP0.06%
25,062,461 3/6/2014
Google Inc, Class A.
(48,799
)
Agreement with Morgan Stanley, dated 03/01/2012 to receive the total return of the shares of Google Inc, Class A in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.45%.
42,069,124 3/6/2014
NAVER Corp.
247,353
Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of NAVER Corp in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.90%.
14,730,580 3/6/2014
Yahoo Japan Corp.
440,552
Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of Yahoo Japan Corp in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.60%.
639,106
Wireless Equipment0.01%
15,863,528 3/6/2014
Samsung SDI Co Ltd.
164,206
Agreement with Morgan Stanley, dated 03/01/2010 to receive the total return of the shares of Samsung SDI Co Ltd in exchange for an amount to be paid monthly equal to the Daily Fed Funds Effective Rate plus 0.90%.
Total Swap Contracts
$
2,139,274 The accompanying notes are an integral part of these financial statements. 20
SCHEDULE OF SWAP CONTRACTS (continued)
Amount
Date
Unrealized
Gain/(Loss)
ACAP STRATEGIC FUND Swap Contracts By Industry
September 30, 2013 Audio / Video Products
(0.01
%) Building Products Doors & Windows
0.00
% Capacitors
(0.02
%) Computers
0.01
% Computers Peripheral Equipment
0.01
% E-Commerce / Products
0.15
% Electric Products Miscellaneous
0.00
% Electronic Components Miscellaneous
0.00
% Electronic Components Semiconductors
(0.01
%) Finance Investment Banker / Broker
0.00
% Food Retail
0.02
% Hotels & Motels
0.02
% Internet Content Entertainment
0.00
% Metal Processors & Fabrication
0.00
% Office Automation & Equipment
0.04
% Photo Equipment & Supplies
0.02
% Retail Drug Stores
0.00
% Retail Restaurants
0.00
% Semiconductor Components Integrated Circuits
(0.11
%) Television
0.00
% Web Portals / ISP
0.06
% Wireless Equipment
0.01
% Total Swap Contracts
0.19
% The accompanying notes are an integral part of these financial statements. 21
SCHEDULE OF SWAP CONTRACTS (concluded)
Percentage of
Net Assets (%)
ACAP STRATEGIC FUND
For the Eleven Months Ended Investment Income Dividends (net of foreign withholding tax of $41,818)
$
8,513,246 Interest
1,318,717 Total investment income
9,831,963 Expenses Incentive Fee
37,119,421 Management fees
17,039,855 Stock loan fees
7,603,258 Dividends on securities sold, not yet purchased
5,221,634 Shareholder servicing fees
2,125,451 Administration fees
699,052 Professional fees
315,128 Transfer agent fees
278,460 Custody fees
224,296 Insurance expense
68,546 Registration fees
68,320 Trustees fees
40,416 Interest expense
20,903 Miscellaneous expense
513,633 Total expenses
71,338,373 Net investment loss
(61,506,410
) Realized and unrealized gain/(loss) from investment activities, foreign currency transactions and total return swaps Realized gain/(loss) from investment activities, foreign currency transactions and total return swaps Investment securities
55,535,695 Securities sold, not yet purchased
(39,500,714
) Foreign currency transactions
(1,169,329
) Total return swaps
11,903,394 Net realized gain/(loss) from investment activities, foreign currency transactions and total return swaps
26,769,046 Net change in unrealized gain/(loss) from investment activities and foreign currency transactions
179,805,334 Net change in unrealized gain/(loss) of total return swaps
3,257,294 Net change in unrealized gain/(loss) from investment activities, foreign currency transactions and total return swaps
183,062,628 Net realized and unrealized gain/(loss) from investment activities, foreign currency transactions and total return swaps
209,831,674 Net increase in net assets resulting from operations
$
148,325,264 The accompanying notes are an integral part of these financial statements. 22
STATEMENT OF OPERATIONS
September 30, 2013
ACAP STRATEGIC FUND
For the Eleven Months Ended
For the Year Ended From operations: Net investment loss
$
(61,506,410
)
$
(23,731,346
) Net realized gain/(loss) from investment activities, foreign currency transactions and total return swaps
26,769,046
4,652,342 Net change in unrealized gain/(loss) from investment activities, foreign currency transactions and total return swaps
183,062,628
32,431,414 Net increase/(decrease) in net assets resulting from operations
148,325,264
13,352,410 Distributions to shareholders: From net realized gain ($0.0584 per share)
(1,957,432
) Net decrease in net assets resulting from distributions to shareholders
(1,957,432
) From transactions in shares: Net proceeds from sale of shares
384,356,513
389,272,122 Reinvestment of distributions
1,498,250 Cost of shares repurchased
(89,914,361
)
(32,855,664
) Net increase in net assets from transactions in shares
294,442,152
357,914,708 Net increase in net assets
442,767,416
369,309,686 Net assets at beginning of period
694,581,216
325,271,530 Net assets at end of period
$
1,137,348,632
$
694,581,216 Accumulated Undistributed Net Investment Loss
$
(105,400,651
)
$
(43,894,241
) The accompanying notes are an integral part of these financial statements. 23
STATEMENT OF CHANGES IN NET ASSETS
September 30, 2013
October 31, 2012
ACAP STRATEGIC FUND 1. Organization ACAP Strategic Fund (the Fund) was organized as a Delaware statutory trust in June 2009. The Fund commenced operations on March 1, 2010. The Fund is registered under the Investment Company Act of 1940 (the 1940 Act) as a non-diversified, closed-end management investment company. The Fund
operates as an interval fund under Rule 23c-3 of the 1940 Act and, as such, offers to repurchase between 5% 25% of its outstanding Shares at their net asset value as of or prior to the end of each fiscal quarter. SilverBay Capital Management LLC serves as the investment adviser of the Fund (the Adviser). The
Adviser is controlled by its managing member, Alkeon Capital Management, LLC (Alkeon). Each of the Adviser and Alkeon is registered with the SEC as an investment adviser. The Funds investment objective is to achieve maximum capital appreciation. The Fund pursues this objective by investing its assets primarily in equity securities of U.S. and foreign companies that the Adviser believes are well positioned to benefit from demand for their products or services, including companies
that can innovate or grow rapidly relative to their peers in their markets. The Fund also pursues its objective by effecting short sales of securities when the Adviser believes that the market price of a security is above its estimated intrinsic or fundamental value. The Fund may also borrow money for investment
purposes, i.e., leverage its assets. The use of short sales and leverage are speculative investment practices and involve a high degree of risk. The Fund is authorized to issue an unlimited number of Shares of beneficial interest (Shares), $0.001 par value. The minimum initial investment in the Fund by an investor is $100,000, subject to reduction at the discretion of an investors broker, dealer or other financial intermediary, but not below $50,000.
Minimum subsequent investments must be at least $10,000 (in each case, including a sales load if applicable). Investors may be charged a sales load up to a maximum of 3% on the amount they invest. The specific amount of the sales load is not fixed and will be determined by the investor and its broker, dealer or
other financial intermediary. Shares may only be purchased through, and with funds drawn on, an investors brokerage account with Mainsail Group, L.L.C. (the Underwriter) or with brokers or dealers retained by the Underwriter to act as selling agents to assist in the distribution of Shares (Selling Agents).
Shares of the Fund may be purchased only by investors who certify to the Fund or its agents that they have a net worth of more than $2,000,000 (excluding the value of the primary residence of such person and any debt secured by such property up to its current market value). As an interval fund, the Fund has
adopted a fundamental policy to offer to repurchase at least 5% of its outstanding Shares at their net asset value at regular intervals. Currently, the Fund intends to offer to repurchase 25% of its outstanding Shares as of or prior to the end of each fiscal quarter. However, repurchase offers in excess of 5% of the
Funds outstanding Shares for any particular fiscal quarter are entirely within the discretion of the Board of Trustees of the Fund (the Board) and, as a result, there can be no assurance that the Fund will make repurchase offers for amounts in excess of 5% of the outstanding Shares for any particular fiscal
quarter. The Board has overall responsibility for the management and supervision of the operations of the Fund. The Board has delegated responsibility for management of the Funds day-to-day operations to the Adviser. The Board exercises the same powers, authority and responsibilities on behalf of the Fund as are
customarily exercised by the board of directors of a registered investment company organized as a corporation. The persons comprising the Board (the Trustees) are not required to invest in the Fund or to own Shares. A majority of the Trustees are persons who are not interested persons (as defined in the 1940
Act) of the Fund (the Independent Trustees). The Independent Trustees perform the same functions for the Fund as are customarily exercised by the non-interested directors of a registered investment company organized as a corporation. On September 20, 2012, the Board approved a change in the fiscal year-end from October 31 to September 30. The change was effective as of October 31, 2012. Our current fiscal year covers the eleven-month period beginning November 1, 2012 and ending September 30, 2013. Our next fiscal year will cover the
period from October 1, 2013 through September 30, 2014. 24
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013
ACAP STRATEGIC FUND 2. Significant Accounting Policies The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires (hereafter referred to as authoritative guidance) the Adviser to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Adviser believes that the estimates utilized in preparing the Funds financial statements are reasonable and prudent; however, actual results could differ from these estimates. In January 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (ASC 210), Balance Sheet. The update addresses implementation issues about ASU 2011-11 and applies to
derivatives accounted for in accordance with ASC 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with ASC 210 or ASC 815 or
subject to an enforceable master netting arrangement or similar agreement. The guidance was effective January 1, 2013 and was applied retrospectively. The adoption of ASU 2013-01 had an effect on our disclosures but did not have an effect on our accompanying statement of assets and liabilities or statement of
operations. In June 2013, the FASB issued ASU No. 2013-08, Financial ServicesInvestment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements (ASU 2013-08). ASU 2013-08 changes the approach to the assessment of whether a company is an investment company, clarifies the
characteristics of an investment company, provides comprehensive guidance for the investment company assessment and contains certain disclosure requirements. ASU 2013-08 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application is prohibited.
We do not believe the adoption of ASU 2013-08 will have a material impact on our financial statements. The following is a summary of the significant accounting policies of the Fund: a. Revenue Recognition Securities transactions, including related revenue and expenses, are recorded on a trade date basis. Dividends are recorded on the ex-dividend date, net of foreign withholding tax. Interest income and expense are recorded on the accrual basis. The Fund amortizes premium and accretes discount on bonds using the effective yield method. b. Portfolio Valuation The value of the net assets of the Fund is determined on each business day as of the close of regular business of the NYSE in accordance with the procedures set forth below or as may be determined from time to time pursuant to policies established by the Board. Domestic exchange traded equity securities (other than options) other than those that trade on NASDAQ are valued at their last reported composite sale prices as reported on such exchanges or, in the absence of any reported sale on a particular day, at their composite bid prices (for securities held long) or their
composite ask prices (for securities sold short), as reported by such exchanges. Securities traded on NASDAQ are valued: (i) at the NASDAQ Official Closing Price (NOCP) (which is the last trade price at or before 4:00 p.m. (EST) adjusted up to NASDAQs best offer price if the last trade is below such bid and
down to NASDAQs best offer price if the last trade is above such offer price); (ii) if no NOCP is available, at the last sale price on NASDAQ prior to the calculation of the Funds net asset value; (iii) if no sale is shown on NASDAQ, at the bid price; or (iv) if no sale is shown and no bid price is available for a
period of seven business days, the price will be deemed stale and the value will be determined at fair value. Securities traded on a foreign securities exchange are valued at their last sale prices on the exchange where the securities are primarily traded, or in the absence of a 25
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
ACAP STRATEGIC FUND 2. Significant Accounting Policies (continued) b. Portfolio Valuation (continued) reported sale on a particular day, at their bid prices (in the case of securities held long) or ask prices (in the case of securities sold short) as reported by that exchange. Total return swaps on equity securities are generally valued based upon the price for the reference asset, as determined in the manner specified above. Other securities for which market quotations are readily available are valued at their bid prices (or ask prices in the case of securities sold short) as obtained from one or more dealers making markets for those securities. If market quotations are not readily available, securities and other assets will be valued at fair
value as determined in good faith by the Adviser under the supervision of the Board in accordance with authoritative guidance. Debt securities (other than convertible securities) are valued in accordance with the procedures described above, which with respect to these securities may include the use of valuations furnished by a pricing service which employs a matrix to determine valuations for normal institutional size trading units. The
Adviser monitors the reasonableness of valuations provided by the pricing service. If in the view of the Adviser, the bid price of a listed option or debt security (or ask price in the case of any such security sold short) does not fairly reflect the market value of the security, the security may be valued at fair value in good faith pursuant to procedures adopted by the Board. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars using foreign exchange rates provided by a pricing service compiled as of 4:00 p.m. London time. Trading in foreign securities generally is completed, and the values of foreign securities are determined prior to the close
of securities markets in the U.S. Foreign exchange rates are also determined prior to such close. On occasion, the values of foreign securities and exchange rates may be materially affected by events occurring before the Fund calculates its net asset value but after the close of the primary markets or exchanges on
which foreign securities are traded. These intervening events might be country-specific (e.g., natural disaster, economic or political developments, interest-rate change), issuer-specific (e.g., earnings report, merger announcement), or U.S. market specific (e.g., a significant movement in the U.S. markets that is deemed
to affect the value of foreign securities). When such an event materially affects the values of securities held by the Fund or its liabilities (including foreign securities for which there is a readily available market price), such securities and liabilities may be valued at fair value, taking into account the aforementioned
factors, in good faith pursuant to procedures adopted by the Board. The Fund follows authoritative guidance for fair value measurement. The guidance establishes a framework for measuring fair value and a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most
observable inputs be used when available. The guidance establishes three levels of inputs that may be used to measure fair value. Various inputs are used in determining the value of the Funds investments. These inputs are summarized in the three broad levels listed below. Level 1observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments). The Fund recognizes transfers into and out of levels indicated above at the end of the reporting period. There were no such transfers during the eleven months ended September 30, 2013. 26
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
ACAP STRATEGIC FUND 2. Significant Accounting Policies (continued) b. Portfolio Valuation (continued) The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. Additional information on the investments can be found in the Schedule of Investments, the Schedule of Securities Sold, Not Yet Purchased and the Schedule of Swap Contracts. The Financial Accounting Standards Board (FASB) issued Codification Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Active Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 expands the
qualitative and quantitative fair value disclosure requirements for fair value measurements categorized in Level 3 of the fair value hierarchy and requires a description of the valuation processes in place and a description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships
between those inputs if a change in those inputs would result in a significantly different fair value measurement. The adoption of ASU 2011-04 did not have a material impact on the Funds financial statements. The following is a summary of the inputs used, as of September 30, 2013, in valuing the Funds investments at fair value.
Level 1
Level 2
Level 3
Balance Assets Common Stock
$
1,382,382,487
$
$
$
1,382,382,487 Total Return Swaps
2,139,274
2,139,274 Total Assets
$
1,382,382,487
$
2,139,274
$
$
1,384,521,761 Liabilities Common Stock
$
411,605,616
$
$
$
411,605,616 c. Cash and Cash Equivalents The Fund considers all financial instruments that mature within three months of the date of purchase as cash equivalents. At September 30, 2013, $93,635,650 in cash equivalents were held in a BNY Mellon Money Market Account, including foreign currency with a U.S. Dollar value of $21,078,108. Amounts may at
times exceed federally insured limits. d. Dividends and Distributions Dividends and distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with authoritative guidance. To the extent these differences are permanent, such
amounts are reclassified within the capital account based on their federal tax basis treatment; temporary differences do not require such reclassification. e. Income Taxes Each year the Fund intends to operate in a manner to qualify as, and has elected to be treated as, a regulated investment company under Subchapter M of the Internal Revenue Code of 1986 (the Code), as amended. To qualify as a regulated investment company, the Fund must comply with certain requirements
relating to, among other things, the sources of its income and diversification of its assets. If the Fund so qualifies and distributes each year to its shareholders at least 90% of its investment company taxable income (generally including ordinary income and net short-term capital gain, but not net capital gain, which is
the excess of net long-term capital gain over net short-term capital loss) and meets certain other requirements, it will not be required to pay federal income taxes 27
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
September 30,
2013
ACAP STRATEGIC FUND 2. Significant Accounting Policies (continued) e. Income Taxes (continued) on any income it distributes to shareholders. The Fund intends to distribute at least the minimum amount necessary to satisfy the 90% distribution requirement. The Fund will not be subject to federal income tax on any net capital gain distributed to shareholders. Foreign securities held by the Fund may be subject to foreign taxation on dividend income received. The Fund may be subject to a tax imposed on net realized gains on securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities in an amount that would be payable if the securities were disposed of on the valuation date. At September 30,
2013, the Fund had no deferred tax liability. It is the Funds policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are
required. f. Due to/from Broker Due to/from broker consists of U.S. dollar cash balances held at the Funds prime broker (Morgan Stanley & Co., Inc.). The Fund is charged interest on cash it borrows at agreed upon rates with its prime broker. The amount due from broker primarily represents receivables for funds held by the broker which result
from proceeds of short sales and cash proceeds from the unwind of swap positions. It is the Funds policy to monitor the credit standing of the broker and other financial institutions with which it conducts business. 3. Management Fee In consideration of management services provided by the Adviser and for services provided by the Adviser or an affiliate for certain administrative services, the Fund pays the Adviser a monthly management fee computed at the annual rate of 2.00% of the Funds average daily net assets (the Management Fee),
which is due and payable in arrears within five business days after the end of each month. This fee is accrued daily as an expense to be paid out of the Funds assets and has the effect of reducing the net asset value of the Fund. During the eleven months ended September 30, 2013, Management Fees totaled
$17,039,855, of which $1,841,140 remained payable to the Adviser at the end of the reporting period and is included on the Statement of Assets and Liabilities. 4. Incentive Fee The Fund also pays the Adviser a performance-based incentive fee (the Incentive Fee). The Incentive Fee is determined as of the end of the fiscal year in an amount equal to 20% of the amount by which the Funds net profits for all Fiscal Periods (defined below) exceed the balance of the loss carryforward
account (described below), without duplication for any Incentive Fees paid during such fiscal year. The Fund also pays the Adviser the Incentive Fee in the event a Fiscal Period is triggered in connection with a Share repurchase offer by the Fund. For purposes of calculating the Incentive Fee, net profits means the amount by which: (a) the net assets of the Fund as of the end of a Fiscal Period, increased by the dollar amount of Shares repurchased during the Fiscal Period (excluding Shares to be repurchased as of the last day of the Fiscal Period after
determination of the Incentive Fee) and by the amount of dividends and other distributions paid to shareholders during the Fiscal period and not reinvested in additional Shares (excluding any dividends and other distributions to be paid as of the last day of the Fiscal Period), exceeds (b) the net assets of the Fund
as of the beginning of the Fiscal Period, increased by the dollar amount of Shares issued 28
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
ACAP STRATEGIC FUND 4. Incentive Fee (continued) during the Fiscal Period (excluding any Shares issued in connection with the reinvestment of dividends and other distributions paid by the Fund). Net assets means the total value of all assets of the Fund, less an amount equal to all accrued debts, liabilities and obligations of the Fund, determined in accordance with the valuation and accounting policies and procedures of the Fund. Fiscal Period means each period ending on the Funds fiscal year-end, provided that whenever the Fund conducts a Share repurchase offer, the period of time from the last Fiscal Period-end through the effective date of the repurchase offer also constitutes a Fiscal Period. The Incentive Fee is payable for a Fiscal Period only if there is no positive balance in the Funds loss carryforward account. The loss carryforward account is an account that is credited as of the end of each Fiscal Period with the amount of any net loss of the Fund for that Fiscal Period and will be debited (but not
below zero) with the amount of any net profits of the Fund for that Fiscal Period. This is sometimes known as a high water mark. The loss carryforward account is also reduced by: (i) the payment by the Fund of any dividend or other distribution to Shareholders (unless the full amount thereof is reinvested in
Shares of the Fund); and (ii) any repurchase by the Fund of its Shares. During the eleven months ended September 30, 2013, earned incentive amounted to $37,119,421, of which $36,781,256 remained payable at the end of the reporting period and is included in the accompanying Statement of Assets and Liabilities. 5. Shareholder Servicing Fee Under the terms of the distribution agreement with the Fund, the Fund pays ongoing shareholder servicing fees to the Underwriter to compensate it for providing, or arranging for the provision of, ongoing investor services and account maintenance services to investors in the Fund. The Underwriter may retain all
or a portion of these payments. These fees are accrued daily and paid monthly in an amount not to exceed, in the aggregate, 0.25% (on an annualized basis) of the net asset value of the Fund. During the eleven months ended September 30, 2013, Shareholder Servicing Fees amounted to $2,125,451. At September 30, 2013, $230,075 remained payable and is included in the accompanying Statement of Assets and Liabilities. 6. Administration Fee, Related Party and Other BNY Mellon Investment Servicing (US) Inc. (BNY Mellon) serves as the Funds administrator and provides various administration, fund accounting, investor accounting and taxation services to the Fund. BNY Mellon also provides transfer agency services to the Fund. In consideration of the administration and
accounting services, the Fund pays BNY Mellon a monthly asset-based fee which is not anticipated to exceed .08% of the Funds average net assets. The Fund also reimburses BNY Mellon for certain out-of-pocket expenses. The Bank of New York Mellon (the Custodian) serves as the primary custodian of the Funds assets, and may maintain custody of the Funds assets with domestic and foreign sub-custodians (which may be banks, trust companies, securities depositories and clearing agencies), approved by the Board in accordance
with the requirements set forth in Section 17(f) of the 1940 Act and the rules adopted thereunder. Assets of the Fund are not held by the Adviser or commingled with the assets of other accounts other than to the extent that securities are held in the name of a custodian in a securities depository, clearing agency or
omnibus customer account of a custodian. 29
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
ACAP STRATEGIC FUND 6. Administration Fee, Related Party and Other (continued) Mainsail Group, L.L.C. (previously defined as the Underwriter), an underwriter under the federal securities laws, serves as underwriter of the Funds Shares on a best efforts basis. Pursuant to the terms of the underwriters distribution agreement with the Fund, the Underwriter may retain unaffiliated brokers or
dealers (i.e. Selling Agents) to assist in the distribution of Shares. For the eleven months ended September 30, 2013, the Underwriter did not receive compensation from the Fund. Each Independent Trustee receives an annual retainer of $15,000 plus reimbursement of reasonable out of pocket expenses. Trustees who are interested persons do not receive any annual or other fee from the Fund. Trustees who are interested persons are reimbursed by the Fund for all reasonable out-of-
pocket expenses incurred in performing their duties. The Officers of the Fund serve without compensation. 7. Indemnifications and Financial Guarantees The Fund has entered into several contracts that contain routine indemnification clauses. The Funds maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The Fund has had no claims or payments pursuant to
these or prior agreements, and the Fund believes the likelihood of a claim being made is remote. 8. Securities Transactions Aggregate purchases and sales of investment securities for the eleven months ended September 30, 2013, amounted to $1,671,308,041 and $1,286,065,322, respectively. Aggregate proceeds received and paid for securities sold, not yet purchased for the eleven months ended September 30, 2013, amounted to
$559,736,054 and $490,916,381, respectively. 9. Borrowings The Fund is authorized to borrow money for investment purposes, to meet repurchase requests and for liquidity purposes. Borrowings by the Fund (which do not include securities sold, not yet purchased and derivative transactions), subject to limitations of the 1940 Act, will not exceed 331/3 percent of the Funds
total assets. Purchasing equity securities on margin involves an initial cash requirement representing at least 50% of the underlying securitys value with respect to transactions in U.S. markets and varying (typically lower) percentages with respect to transactions in foreign markets. Borrowings to purchase equity
securities typically will be secured by the pledge of those securities. Borrowing for investment purposes (a practice known as leverage) is a speculative investment practice and involves certain risks. Although leverage can increase investment returns if the Fund earns a greater return on the investments purchased with borrowed funds than it pays for the use of those funds, the use of leverage will decrease investment returns if the Fund fails to earn as much on investments purchased with borrowed funds as it
pays for the use of those funds. The use of leverage will therefore magnify the impact of changes in the value of investments held by the Fund on the Funds net asset value and thus can increase the volatility of the Funds net asset value per Share. The Adviser expects that the Funds investment program will make
frequent use of leverage. For the eleven months ended September 30, 2013, the average daily amount of such borrowings was $1,946,146 and the daily weighted average annualized interest rate was 1.17%. 30
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
ACAP STRATEGIC FUND 10. Transactions in Shares Transactions in Shares were as follows:
For the Eleven Months Ended Shares at the beginning of the period
61,302,489 Shares sold
33,426,920 Shares reinvested
Shares repurchased
(7,654,451
) Net increase (decrease)
25,772,469 Shares at the end of the period
87,074,958 As of September 30, 2013, the Investment Adviser and its affiliates own 10,058.657 shares of the Fund. 11. Principal and Non-Principal Fund Investment Practices and Their Risks Although the Funds principal investment strategy is to invest primarily in equity securities of U.S. and foreign companies, the Fund may invest its assets in other types of securities and in other asset classes when, in the judgment of the Adviser (subject to any policies established by the Board), such investments
present opportunities for the Fund to achieve maximum capital appreciation, taking into account the availability of equity investment opportunities, market conditions, the relative risk/reward analysis of other investments compared to equity securities, and such other considerations as the Adviser deems
appropriate. Authoritative guidance on disclosures about derivative instruments and hedging activities requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related
contingent features in derivative agreements. The realized gain/(loss) on swap contracts and foreign currency transactions is reflected on the Statement of Operations within these financial statements. The net change in unrealized appreciation/(depreciation) on swap contracts is reflected on the Statement of
Operations and Schedule of Swap Contracts within these financial statements. The net change in unrealized appreciation/(depreciation) on foreign currency transactions is reflected on the Statement of Operations within these financial statements as a component of the net change in unrealized
appreciation/(depreciation) from investment activities and foreign currency transactions. Option contracts serve as components of the Funds investment strategies and are utilized to structure investments to enhance the performance of the Fund. a. Bonds and Other Fixed-Income Securities The Fund may invest without limit in high quality fixed-income securities for temporary defensive purposes and to maintain liquidity. For these purposes, fixed-income securities are bonds, notes and debentures issued by corporations; debt securities issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities (U.S. Government Securities) or by a foreign government; municipal securities; and mortgage-backed and asset-backed securities. These securities may pay fixed, variable or floating rates of interest, and may include zero coupon obligations. Fixed-income securities are subject to the
risk of the issuers inability to meet principal and interest payments on its obligations (i.e., credit risk) and are subject to price volatility due to such factors as interest rate sensitivity, market perception of the credit worthiness of the issuer and general market liquidity (i.e., market risk). The Fund may also invest in both investment grade and non-investment grade debt securities. Investment grade debt securities are securities that have received a rating from at least one nationally recognized statistical rating organization (NRSRO) in one of the four highest rating categories or, if not rated by any
NRSRO, have been determined by the Adviser to be of comparable quality. 31
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
September 30, 2013 Shares
ACAP STRATEGIC FUND 11. Principal and Non-Principal Fund Investment Practices and Their Risks (continued) a. Bonds and Other Fixed-Income Securities (continued) Non-investment grade debt securities (typically called junk bonds) are securities that have received a rating from an NRSRO of below investment grade or have been given no rating, and are considered by the NRSRO to be predominantly speculative with respect to the issuers capacity to pay interest and repay
principal. Non-investment grade debt securities in the lowest rating categories may involve a substantial risk of default or may be in default. Adverse changes in economic conditions or developments regarding the individual issuer are more likely to cause price volatility and weaken the capacity of the issuers of non-
investment grade debt securities to make principal and interest payments than is the case for higher grade debt securities. An economic downturn affecting an issuer of non-investment grade debt securities may result in an increased incidence of default. In addition, the market for lower grade debt securities may be
thinner and less active than for higher grade debt securities. The Fund does not expect to invest more than 15% of its net assets in non-convertible debt securities. The Funds investments in non-investment grade debt securities, if any, are not expected to exceed 5% of its net assets. There was no activity of bonds and other fixed-income securities in the Fund during the eleven months ended September 30, 2013. b. Exchange Traded Funds and Other Similar Instruments The Fund may purchase retail Shares of exchange-traded funds that are registered under the 1940 Act (ETFs) and retail Shares of similar investment vehicles that are not registered under the 1940 Act (together with the ETFs, Traded Funds) and effect short sales of these Shares. Transactions in Traded Funds
may be used in seeking maximum capital appreciation or for hedging purposes. Typically, a Traded Fund holds a portfolio of common stocks designed to track the performance of a particular index or a basket of stocks of companies within a particular industry sector or group. Traded Funds sell and redeem their
Shares at net asset value in large blocks (typically 50,000 Shares) called creation units. Shares representing fractional interests in these creation units are listed for trading on national securities exchange and can be purchased and sold in the secondary market in lots of any size at any time during the trading day
(i.e., retail Shares). Investments in Traded Funds involve certain inherent risks generally associated with investments in a broadly-based portfolio of stocks including risks that the general level of stock prices may decline, thereby adversely affecting the value of each unit of the Traded Funds. In addition, a Traded Fund may not fully
replicate the performance of its benchmark index because of the temporary unavailability of certain index securities in the secondary market or discrepancies between the Traded Fund and the index with respect to the weighting of securities or number of stocks held. Because Traded Funds bear various fees and expenses, the Funds investment in these instruments will involve certain indirect costs, as well as transaction costs, such as brokerage commissions. The Adviser considers the expenses associated with an investment in determining whether to invest in a Traded Fund. At September 30, 2013, the fair value of Exchange Traded Funds was $(54,755,817). c. Temporary Investments; U.S. Government Securities Risk During periods of adverse market conditions in the equity securities markets, the Fund may deviate from its investment objective and invest all or a portion of its assets in high quality debt securities, money market instruments, or hold its assets in cash. Securities will be deemed to be of high quality if they are rated
in the top four categories by an NRSRO or, if unrated, are determined to be of comparable quality by the Adviser. Money market instruments are high quality, short-term debt 32
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
ACAP STRATEGIC FUND 11. Principal and Non-Principal Fund Investment Practices and Their Risks (continued) c. Temporary Investments; U.S. Government Securities Risk (continued) obligations (which generally have remaining maturities of one year or less), and may include: U.S. Government Securities; commercial paper; certificates of deposit and bankers acceptances issued by domestic branches of United States banks that are members of the Federal Deposit Insurance Corporation
(FDIC); and repurchase agreements for U.S. Government Securities. In lieu of purchasing money market instruments, the Fund may purchase Shares of money market mutual funds that invest primarily in U.S. Government Securities and repurchase agreements involving those securities, subject to certain
limitations imposed by the 1940 Act. The Fund may also invest in money market instruments or purchase shares of money market mutual funds pending investment of its assets in equity securities or non-money market debt securities, or to maintain such liquidity as may be necessary to effect repurchases of Shares from shareholders or for other
purposes. It is possible that the U.S. Government would not provide financial support to its agencies or instrumentalities if it were not required to do so by law. If a U.S. Government agency or instrumentality in which the Fund invests defaults and the U.S. Government does not stand behind the obligation, the Funds Share
price or yield could fall. The U.S. Governments guarantee of ultimate payment of principal and timely payment of interest of the U.S. Government Securities owned by the Fund does not imply that the Funds Shares are guaranteed by the FDIC or any other government agency, or that the price of the Funds
Shares will not continue to fluctuate. There was no activity of the above-mentioned investments in the Fund during the eleven months ended September 30, 2013. d. Total Return Swaps The Adviser may use total return swaps to pursue the Funds investment objective of maximum capital appreciation. The Adviser may also use these swaps for hedging purposes. A swap is a contract under which two parties agree to make periodic payments to each other based on specified interest rates, an index
or the value of some other instrument, applied to a stated, or notional, amount. Swaps generally can be classified as interest rate swaps, currency swaps, commodity swaps, total return swaps or equity swaps, depending on the type of index or instrument used to calculate the payments. Such swaps would increase
or decrease the Funds investment exposure to the particular interest rate, currency, commodity or equity involved. Total return swaps are where one party exchanges a cash flow indexed (on a long or short basis) to a non-money market asset (e.g., an equity security). Most swap agreements entered into by the Fund require the calculation of the obligations of the parties to the agreements on a net basis. Consequently, current obligations (or rights) under a swap agreement generally will be equal to only the net amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement (the net amount). The Fund is subject to the market risk associated with changes in the value of the underlying investment or instrument, as well as exposure to credit risk associated with counterparty non-performance on swap contracts. The risk of loss with respect to swaps is limited to the net amount of payments that the Fund is
contractually obligated to make. If the other party to a swap defaults, the Funds risk of loss consists of the net amount of payments that the Fund contractually is entitled to receive, which may be different than the amounts recorded on the Statement of Assets and Liabilities. e. Call and Put Options on Individual Securities The Fund may purchase call and put options in respect of specific securities, and may write and sell covered or uncovered call and put options for hedging purposes and non-hedging purposes to pursue its investment objective. A put option gives the purchaser of the option the right to sell, and obligates the writer to
buy, the underlying security at a stated exercise price at any time prior to the expiration of the 33
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
ACAP STRATEGIC FUND 11. Principal and Non-Principal Fund Investment Practices and Their Risks (continued) e. Call and Put Options on Individual Securities (continued) option. Similarly, a call option gives the purchaser of the option the right to buy, and obligates the writer to sell, the underlying security at a stated exercise price at any time prior to the expiration of the option. A covered call option written by the Fund is a call option with respect to which the Fund owns the
underlying security. A covered put option written by the Fund is a put option with respect to which cash or liquid securities have been placed in a segregated account on the Funds books or with the Funds custodian to fulfill the obligation undertaken. The Fund may close out a position when writing options by purchasing an option on the same security with the same exercise price and expiration date as the option that it has previously written on the security. The Fund will realize a profit or loss if the amount paid to purchase an option is less or more, as the case
may be, than the amount received from the sale thereof. To close out a position as a purchaser of an option, the Fund would ordinarily make a similar closing sale transaction, which involves liquidating the Funds position by selling the option previously purchased, although the Fund would be entitled to exercise
the option should it deem it advantageous to do so. The Fund may also invest in so-called synthetic options or other derivative instruments written by broker-dealers. Options transactions may be effected on securities exchanges or in the over-the-counter market. Over-the-counter options purchased and sold by the Fund may also include options on baskets of specific securities. There was no activity of the above-mentioned investments in the Fund during the eleven months ended September 30, 2013. f. Foreign Currency Transactions Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a
foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S.
dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board. The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in the net change in unrealized appreciation/(depreciation) from investment activities and foreign currency transactions on the Statement of Operations. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. 12. Balance Sheet Offsetting In the normal course of business the Fund has entered into derivative transactions subject to an enforceable master netting agreement. The netting agreement allows the Fund and the counterparty to make net payments in respect of all transactions in the same currency, settling on the same date. The Fund posts
cash as collateral with the Custodian for the counterparty and is held by the Custodian in a segregated account and its use is restricted. The Fund receives or posts cash as collateral with its prime broker based on the unrealized gain/loss of the swaps. 34
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
ACAP STRATEGIC FUND 12. Balance Sheet Offsetting (continued) In the event of default (i.e., the Fund a) fails to post said collateral, b) fails to comply with any restrictions or provisions, or c) fails to comply with or perform any agreement or obligation), then the counterparty has the right to set-off any amounts payable by the Fund with respect to any obligations against any
posted collateral or the cash equivalent of any posted collateral. Further, the counterparty has the right to liquidate, sell, pledge, re-hypothecate, or dispose of such posted collateral to satisfy any outstanding obligations. The table below presents the swap contracts that are set-off, if any, as well as collateral delivered, related to those swap contracts. Offsetting of Financial Assets and Derivative Assets
Gross Amount
Gross Amounts
Net Amounts
Gross Amounts
Net
Financial
Cash Total return swaps
$
5,275,344
$
(3,136,070
)
$
2,139,274
$
$
(19,320,000
)
$
(17,180,726
) Offsetting of Financial Liabilities and Derivative Liabilities
Gross Amount
Gross Amounts
Net Amounts
Gross Amounts
Net
Financial
Cash Total return swaps
$
3,136,070
$
(3,136,070
)
$
$
$
92,377,237
$
The fair value of derivative instruments as of September 30, 2013 was as follows:
Derivatives not
Notional
Net unrealized Total return swapsLong
$
270,916,904
$
1,577,980 Total return swapsShort
(219,960,248
)
561,294 Total
$
50,956,656
$
2,139,274 Effect of derivative instruments trading activities for the eleven months ended September 30, 2013:
Derivatives not
Realized gain/(loss)
Net change in unrealized Total return swapsLong
$
61,387,312
$
(99,324
) Total return swapsShort
(49,483,918
)
3,356,618 Total
$
11,903,394
$
3,257,294 35
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
of Recognized
Assets
Offset in the
Statement of
Assets and Liabilities
of Assets Presented
in the Statement of
Assets and Liabilities
Not Offset in the
Statement of Assets
and Liabilities
Amount
Instruments
Collateral
Received
of Recognized
Liabilities
Offset in the
Statement of
Assets and Liabilities
of Liabilities Presented
in the Statement of
Assets and Liabilities
Not Offset in the
Statement of Assets
and Liabilities
Amount
Instruments
Collateral
Pledged
accounted for
as hedging
instruments
appreciation on
total return swaps
on the Statement of
Assets and
Liabilities
accounted for
as hedging
instruments
from total return swaps
recognized on the
Statement of
Operations
gain/(loss) of total return
swaps recognized on the
Statement of
Operations
ACAP STRATEGIC FUND 13. Federal Income Tax Information At September 30, 2013, the aggregate cost and proceeds for Federal income tax purposes of portfolio investments and securities sold, not yet purchased was $1,130,109,497, and $417,168,165, respectively. For Federal income tax purposes, at September 30, 2013, accumulated net unrealized gain on portfolio
investments was $252,272,990, consisting of $272,975,972 gross unrealized gain and $20,702,982 gross unrealized loss. The accumulated net unrealized gain on securities sold, not yet purchased, was $18,275,768, consisting of $13,283,225 gross unrealized gain and $31,558,993 gross unrealized loss. The difference
between book basis and tax basis unrealized gain on portfolio investments and unrealized gain on securities sold, not yet purchased is attributable primarily to cumulative loss deferrals on wash sales and loss deferrals on unsettled short positions, respectively. During the eleven months ended September 30, 2013, taxable gain differs from net increase in net assets resulting from operations primarily due to: (1) unrealized gain/(loss) from investment activities and foreign currency transactions, as investment gains and losses are not included in taxable income until they are
realized; (2) deferred wash sales losses, and (3) recognition of unrealized gain/(loss) of swap contracts currently in taxable income. Listed below is a reconciliation of net increase in net assets resulting from operations to taxable gain for the fiscal year ended September 30, 2013. Net increase in net assets resulting from operations
$
148,325,264 Net change in unrealized gain/(loss) from investment activities and foreign currency transactions
(179,805,334
) Book/tax difference due to deferred wash sales losses
7,844,908 Book/tax difference due to short sales
290,888 Capital losses utilized
(17,706,128
) Current year net operating losses written off
17,779,612 Other book-tax differences
25,129,950 Taxable Gain(1)
$
1,859,160
(1)
The Funds taxable gain is an estimate and will not be finally determined until the Fund files its tax return for the year ended September 30, 2013. Therefore, the final taxable income may be different than the estimate.
As of September 30, 2013, the components of net assets on a tax basis were as follows: Accumulated undistributed net investment loss
$
(29,986,468
) Accumulated net realized losses on investments
(13,989,921
) Accumulated unrealized gain from investment activities and foreign currency transactions
252,040,459 Paid-in capital
929,284,562 Total Net Assets
$
1,137,348,632 ASC 740 Accounting for Uncertainty in Income Taxes (ASC 740) provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the Funds Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of
preparing the Funds tax returns to determine whether the tax positions are more-likely-than-not of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Managements determinations
regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. The Fund recognizes the tax benefits of uncertain tax positions only where the position is more-likely-than-not to be
sustained assuming examination by tax authorities. In accordance with authoritative guidance, management has analyzed the Funds tax positions for the open tax years ended October 31, 2012 and September 30, 2013, and has concluded that no provision for income tax is required in the Funds financial statements.
During the period, the Fund did not record 36
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
ACAP STRATEGIC FUND 13. Federal Income Tax Information (continued) any interest or penalties. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. The Regulated Investment Company Modernization Act of 2010 (the Act) was enacted on December 22, 2010. The Act makes changes to several tax rules including the unlimited carryover of future capital losses. In general, the provisions of the Act became effective for the Funds fiscal year beginning after
October 31, 2011. During the eleven months ended September 30, 2013, the Fund did not pay any dividends. 37
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
ACAP STRATEGIC FUND 14. Financial Highlights
For the
For the
For the
For the Period Net asset value per Share, beginning of period
$
11.33
$
11.13
$
10.57
$
10.00 Income from investment operations (a): Net investment loss
(0.75
)
(0.59
)
(0.74
)
(0.66
) Net realized and unrealized gain/(loss) from investment activities, foreign currency transactions and total return swaps
2.48
0.85
1.30
1.23 Total income/(loss) from investment operations
1.73
0.26
0.56
0.57 Distributions to shareholders: Realized capital gains
(0.06
)
Total distributions to shareholders
(0.06
)
Net asset value per Share, end of period
$
13.06
$
11.33
$
11.13
$
10.57 Total returngross (b) (c) (e)
19.06
%
2.93
%
6.55
%
7.32
% Total returnnet (b) (c) (e)
15.27
%
2.38
%
5.30
%
5.70
% Ratios/supplemental data: Net assets (dollars in thousands), end of period
1,137,349
694,581
325,272
152,052 Average net assets (dollars in thousands), end of period
931,507
519,202
269,839
65,890 Ratio of expenses to average net assets (d) (e)
7.99
%
5.68
%
6.81
%
9.81
% Ratio of expenses without incentive fee to average net assets (d) (e)
4.01
%
5.03
%
5.38
%
6.27
% Ratio of incentive fee to average net assets (c) (e)
3.98
%
0.65
%
1.43
%
3.54
% Ratio of expenses without incentive
2.50
%
2.58
%
2.86
%
3.58
% Ratio of dividend and interest expense
0.61
%
0.98
%
1.09
%
1.17
% Ratio of security trading related
0.90
%
1.46
%
1.43
%
1.52
% Ratio of net investment loss to average net assets (d) (e)
(6.84
%)
(4.57
%)
(5.75
%)
(8.62
%) Portfolio turnover on investments in securities (c)
127
%
97
%
108
%
148
% Average debt ratio (d)
0.21
%
0.03
%
0.12
%
0.37
%
(a)
Per Share amounts presented are based on monthly Shares outstanding throughout the period indicated. (b) Total return gross/net of incentive fee is calculated assuming an investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do 38
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (continued)
Eleven Months
Ended
Sepember 30, 2013
Year Ended
October 31, 2012
Year Ended
October 31, 2011
March 1, 2010
(commencement
of operations)
through
October 31, 2010
fee, dividend & interest expense and
security trading related expenses to average net assets (d) (e)
to average net assets (d) (e)
expenses to average net assets (d) (e)
ACAP STRATEGIC FUND 14. Financial Highlights (continued)
not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund Shares.
Non-annualized for periods less than one year. (d) Annualized for periods of less than one year. (e) The computation of such ratios for an individual shareholder may vary from these ratios due to timing of capital activity. 15. Subsequent Events Subsequent to September 30, 2013, and through November 26, 2013, the Fund had capital subscriptions of $80,252,365. The Fund has evaluated the possibility of subsequent events existing in the Funds financial statements, and has determined that there are no material events that would require disclosure in the Funds financial statements. 39
NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2013 (concluded)
(c)
ACAP STRATEGIC FUND Disclosure of Portfolio Holdings: The Fund files a Form N-Q with the Securities and Exchange Commission (the SEC) no more than sixty days after the Funds first and third fiscal quarters of each fiscal year. For the Fund, this would be for the fiscal quarters ending December 31 and June 30. Form N-Q includes a
complete schedule of the Funds portfolio holdings as of the end of those fiscal quarters. The Funds N-Q filings can be found free of charge on the SECs website at http://www.sec.gov, or they may be reviewed and copied at the SECs Public Reference Room in Washington, D.C. (call 800-SEC-0330 for
information on the operation of the Public Reference Room). Voting Proxies on Fund Portfolio Securities: A description of the policies and procedures that the Adviser uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June
30 are available without charge, upon request, by calling your financial advisor, or calling collect (212) 389-8713, or on the SECs website at http://www.sec.gov. Supplemental Tax Information: All reportings are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to report the maximum amount permitted under the Internal Revenue Code and the regulations
thereunder. For the eleven months ended September 30, 2013, the Fund had no distributions. Consideration and Renewal of Investment Advisory Agreement At a meeting held in person on September 30, 2013, the Board of Trustees of ACAP Strategic Fund (the Board) approved renewing the investment advisory agreement between ACAP Strategic Fund, a Delaware statutory trust (the Fund), and SilverBay Capital Management, LLC, a Delaware limited liability
company (the Adviser) (the Advisory Agreement), for an additional one-year period. Also, by a unanimous vote, the members of the Board (the Trustees) who are not interested persons, as defined by the Investment Company Act of 1940 (the 1940 Act), of the Fund (the Independent Trustees)
separately voted to renew the Advisory Agreement. In considering whether to renew the Advisory Agreement, the Board reviewed various materials from the Adviser, which included: (i) information concerning the services rendered to the Fund by the Adviser over the past year; (ii) the investment performance of the Fund and the Adviser, (iii) the fees and expenses
of the Fund, including comparative expense information, (iv) information on the profitability of the Adviser and its affiliates, taking into account their cost of providing services, and (v) other benefits to the Adviser from its relationship with the Fund. The Independent Trustees were represented in their review by
experienced counsel they reasonably believed satisfied the SECs standards as independent legal counsel. In particular, the Board considered the following: (a) The Nature, Extent and Quality of Services Provided by the Adviser. The Trustees reviewed various presentations the Adviser provided to the Board regarding its services to the Fund. In connection with the broad scope of investment advisory services provided to the Fund, the Board discussed, in detail, with representatives of the Adviser, the performance of the Funds investments
in relation to the Funds stated investment objective and policies. In this regard, the Board also considered the experience of the individuals responsible for the day-to-day management and operation of the Funds assets, including personnel of the Adviser and Alkeon Capital Management, LLC (Alkeon), the
Advisers managing member, in managing funds and accounts with similar strategies to those of the Fund. The Board noted that the Adviser, or Alkeon, provides, at its own expense, facilities necessary for the operation of the Fund, and it makes certain of its personnel available to serve as the senior officers of the
Fund, including the Chief Compliance Officer, the Principal Executive Officer and the Principal Financial Officer. The Trustees considered the Advisers performance of its obligations to provide oversight of third-party service providers and to monitor compliance with applicable Fund policies and procedures and
adherence to its investment restrictions. The Board also considered the Advisers representations regarding the adequacy of its financial 40
Supplemental Information
(Unaudited)
ACAP STRATEGIC FUND condition and its financial wherewithal to provide quality services to the Fund, and the representations, in this regard, by Alkeon, in its capacity as managing member of the Adviser, including its commitment to providing or making available to the Adviser, on an ongoing basis, adequate resources (including capital
and personnel) so as to provide meaningful and appropriate support for the operations of the Adviser, including enabling it to perform its obligations, and provide quality services, to the Fund. The Board found it was reasonable to expect that the Fund would continue to receive the services required from the
Adviser under the Advisory Agreement and expressed satisfaction with the nature, extent and quality of services theretofore provided. (b) Investment Performance of the Fund and Adviser In connection with the evaluation of the services provided by the Adviser, the Trustees reviewed the historical investment performance generated by the Adviser for those investment vehicles, such as the Fund, managed by Mr. Panayotis (Takis) Sparaggis, the principal portfolio manager of the Fund and the lead
member of the Advisers Investment Team. The Trustees discussed Mr. Sparaggis more than fifteen years of experience employing alternative investment strategies. The Trustees also took account of the performance of the Fund, as well as a fund that has had substantially the same investment program as that of
the Fund for a longer investment period, but which is not registered under the 1940 Act and, thus, would have had lower investment performance had it been subject to certain investment limitations imposed by applicable securities laws and the effect of the Funds somewhat higher fees and expenses. With respect
to the Fund, the Trustees observed that the Funds investment performance met expectations. Based on the foregoing, the Trustees expressed satisfaction with level and quality of services provided to the Fund. (c) Cost of the Services Provided and Profits Realized by the Adviser from its Relationship with the Fund The Trustees reviewed the cost of services provided by the Adviser and the fees paid under the Advisory Agreement. The Board noted that under the Advisory Agreement the Fund pays the Adviser a fixed management fee of 2.00% and a performance-based incentive fee in an amount equal to 20% of the amount
by which the Funds net profits exceed the balance of a loss carry-forward account. The Board considered the mechanics of the incentive fee, noting that it will continue to be paid at the close of the Funds fiscal year (which was changed to September 30 in late 2012) and each time the Fund conducts a share
repurchase offer, although the fee paid in connection with a share repurchase offer would be limited to that portion of the incentive fee that is proportional to the Funds assets paid in respect of share repurchases. The Trustees further noted that any incentive fee is calculated and accrued daily as a liability of the
Fund and thus is reflected in the Funds net asset value on a daily basis. The Trustees also considered information showing a comparison of the advisory fees and expense ratio of the Fund compared with fees and expenses of other similar closed-end, continuously-offered single manager 1940 Act-registered
products, as well as fees of other funds and accounts advised or sub- advised by Alkeon. The Funds expense ratio approximated the median ratio of the peer group presented in the materials, and the Board was satisfied that the proposed fee structure was within the range of fees charged to other similar funds,
including other funds and accounts managed by Alkeon. The Board also noted that the 2/20 management fee/incentive fee combination was a fee structure commonly charged by alternative fund managers such as the Adviser (or Alkeon). Based on its review, the Board concluded that the proposed level of the
management fee and the incentive fee were fair and reasonable in light of the extent and quality of services that the Fund receives. The Trustees then considered the expenses incurred and profits realized by the Adviser and its affiliates from the relationship with the Fund. Based on the data provided, the Trustees concluded that the Advisers profitability level was not excessive. 41
Supplemental Information
(Unaudited) (continued)
ACAP STRATEGIC FUND (d) The Extent to Which Economies of Scale Would be Realized as the Fund Grows and Whether Fee Levels Would Reflect such Economies of Scale. The Trustees noted that economies of scale may be realized when a funds assets increase significantly. The Trustees did not consider that economies of scale had yet been realized sufficient to consider the effect, if any, on fees. The Trustees determined that they would revisit this issue as appropriate. Conclusion. Based on all of the foregoing, and such other matters as were deemed relevant, the Board found the fee structure under the Advisory Agreement to be fair and reasonable in light of the services provided by the Adviser. No single factor was determinative to the decision of the Board. Based on this determination,
all of the Trustees, including all of the Independent Trustees, approved renewal of the Advisory Agreement for an additional one-year period. 42
Supplemental Information
(Unaudited) (concluded)
ACAP STRATEGIC FUND The identity of the Trustees, and brief biographical information regarding each Trustee, is set forth below. For more information on the Funds Trustees and Officers, please see the Statement of Additional Information (SAI), which is available without charge, upon request, by calling collect (212) 389-8713. Independent Trustees
Name and Age
Position(s)
Term of Office
Principal
Number of
Other
Brad L. Berman, 56
Trustee
Indefinite/Since
Inception
Partner, Fulbright & Jaworski LLP (law firm); Partner, Holland & Knight LLP (law firm); President, Liberian International Ship & Corporate Registry, LLC (ship & corporate registry)
One(1)
None
William F. Murphy, 55
Trustee
Indefinite/Since
Inception
Trader, Bay Hill Capital Management, LLC (investment management firm) Senior Vice President, Derivative Trading, HSBC Bank, NA
One(1)
None
Jorge Orvananos, 45
Trustee
Indefinite/Since
Inception
Analyst, HealthCor Partners Management, L.P. (private equity firm); Technical Strategist, Kingdon Capital Management, LLC (hedge fund sponsor firm)
One(1)
None The address of each independent Trustee is 350 Madison Avenue, 9th Floor, New York, New York 10017.
*
Fund Complex means two or more registered investment companies that hold themselves out to investors as related companies for purposes of investment and investor services, or that have a common investment adviser or have an investment adviser that is an affiliated person of the investment adviser of any
of the other registered investment companies. (1) Other than the Fund. As of September 30, 2013, each of the Independent Trustees of the Fund also served in the same capacity for Bluepoint Investment Series Trust (a part of the Fund Complex), for which the Adviser also serves as investment adviser. 43
Supplemental Information
(Unaudited)
with the
Fund
and Length of
Time Served
Occupation(s)
During Past
5 Years
Portfolios
in Fund
Complex*
Overseen by
Trustee
Trusteeships/
Directorships
Held by
Trustee
ACAP STRATEGIC FUND Interested Trustees*
Name and Age
Position(s)
Term of Office
Principal
Number of
Other
Gregory D. Jakubowsky,
41
Trustee, President and
Principal
Executive
Officer
Indefinite/Since
Inception
Chief Operating Officer, Alkeon Capital Management (investment management firm); Chief Executive Officer, Mainsail Group, LLC (broker-dealer)
One(1)
None
George Mykoniatis,
Trustee,
Treasurer
and Principal
Financial
Officer
Indefinite/Since
December 2012
Chief Financial Officer, Alkeon Capital Management (investment management firm); Chief Compliance Officer, Mainsail Group LLC (broker-dealer)
One(1)
None
*
Interested person of the Fund or the Adviser, as defined by the 1940 Act. Mr. Jakubowsky and Mr. Mykoniatis are interested persons of the Fund due to their positions as officers of the Fund. (1) Other than the Fund. As of September 30, 2013, each of the Interested Trustees/Officers of the Fund also served in the same capacity for Bluepoint Investment Series Trust (a part of the Fund Complex), for which the Adviser also serves as investment adviser. 44
Fund Management
(Unaudited) (continued)
with the
Fund
and Length of
Time Served
Occupation(s)
During Past
5 Years
Portfolios
in Fund
Complex
Overseen by
Trustee
Trusteeships/
Directorships
Held by
Trustee
43
ACAP STRATEGIC FUND In accordance with the Funds agreement and declaration of trust (the Declaration of Trust), the Board has selected the following persons to serve as officers of the Fund: Officers
Name and Age
Position(s)
Term of Office
Principal
Number of
Gregory D. Jakubowsky, 41
Trustee, President and
Principal Executive
Officer
Indefinite/Since
Inception
Chief Operating Officer, Alkeon Capital Management (investment management firm); Chief Executive Officer, Mainsail Group, LLC (broker-dealer)
One(1)
George Mykoniatis, 43
Trustee, Treasurer and
Principal Financial
Officer
Indefinite/Since
Inception
Chief Financial Officer, Alkeon Capital Management (investment management firm); Chief Compliance Officer, Mainsail Group, LLC (broker-dealer)
One(1)
A. Tyson Arnedt, 51
Chief Compliance Officer, Chief Legal Officer, Vice President and
Secretary
Indefinite/Since
Inception
General Counsel, Alkeon Capital Management (investment management firm); General Counsel, Mainsail Group, LLC (broker-dealer); Chief Compliance Officer, SilverBay Capital Management LLC (investment managment firm); Independent Consultant;
Chief Operating Officer, EIM Management (USA) Inc. (investment management firm);
One(1) The address of each Officer is 350 Madison Avenue, 9th Floor, New York, New York 10017.
(1) 45
Fund Management
(Unaudited) (concluded)
with the
Fund
and Length of
Time Served
Occupation(s)
During Past
5 Years
Portfolios
in Fund
Complex
Overseen
Other than the Fund. As of September 30, 2013, each of the Officers of the Fund also served in the same capacity for Bluepoint Investment Series Trust (a part of the Fund Complex), for which the Adviser also serves as investment adviser.
ACAP STRATEGIC FUND An important part of our commitment to you is our respect to your right to privacy. Protecting all of the information we are either required to gather or which accumulates in the course of doing business with you is a cornerstone of our relationship with you. This Privacy Notice sets forth the policies of ACAP
Strategic Fund (the Fund) with respect to the collection, sharing and protection of non-public personal information of the Funds investors, prospective investors and former investors. These policies may be changed at any time, provided that a notice of such change is given to you. Please read this Privacy Notice
carefully to understand what we do. We collect personal information about you (such as your name, address, social security or tax identification number, assets and income) in the course of doing business with you or from documents that you may deliver to us or to an agent of the Fund. We may use this information to effectively administer our
customer relationship with you. It also permits us to provide efficient, accurate and responsive service, to help protect you from unauthorized use of your information and to comply with regulatory and other legal requirements. These include those related to institutional risk control and the resolution of disputes or
inquiries. We do not disclose any nonpublic, personal information about the Funds investors, prospective investors or former investors to third parties, except as permitted or required by law. We maintain physical, electronic and procedural safeguards to protect such information, and limit access to such information to
those employees who require it in order to provide services to you. To service your account and effect transactions, we may provide your personal information to our affiliates and to non-affiliate firms (i.e., companies not related by common ownership or control) that assist us in servicing your account and have a need for such information, such as a broker or administrator. We
may also disclose such information to service providers and financial institutions with whom we have marketing arrangements. We require third party service providers and financial institutions with which we have marketing arrangements to protect the confidentiality of your information and to use the information
only for the purposes for which we disclose the information to them. We do not otherwise provide information about you to outside firms, organizations or individuals except to our attorneys, accountants and auditors and as permitted by law. It may be necessary, under anti-money laundering or other laws, to disclose information about you in order to accept your purchase order. Information about you may also be released if you so direct, or if we, or an affiliate, are compelled to do so by law, or in connection with any government or self-regulatory
organization request or investigation. We are committed to upholding these privacy policies. We will notify you on an annual basis of our policies and practices in this regard and at any time that there is a material change thereto. 46
PRIVACY NOTICE
SILVERBAY CAPITAL MANAGEMENT LLC SilverBay, the investment adviser to ACAP Strategic Fund does not disclose nonpublic personal information about its clients, former clients, prospective clients, clients investors, prospective clients investors or former clients investors to third parties other than as described below. This Privacy Policy sets forth
the policies of SilverBay with respect to the collection, sharing and protection of non-public personal information of SilverBays clients, former clients, clients investors, prospective clients investors and former clients investors. These policies may be changed at any time, provided that a notice of such change is
given to you. Please read this Privacy Policy carefully to understand what SilverBay does. SilverBay collects personal information about its clients (such as names, addresses, social security or tax identification numbers, assets and income) in the course of doing business with its clients, from documents that its clients may deliver to it or its agent. SilverBay may use this information to provide advisory
services to its clients, to open an account for its clients, to process a transaction for a clients account or otherwise in furtherance of its business. To service its clients accounts and effect transactions, SilverBay may provide its clients personal information to its affiliates and to non-affiliate firms (i.e., companies not
related by common ownership or control) that assist it in servicing its clients accounts and have a need for such information, such as a broker or fund administrator. SilverBay may also disclose such information to service providers and financial institutions with which it has marketing arrangements. SilverBay requires third party service providers and financial institutions with which it has marketing arrangements to protect the confidentiality of its clients information and to use the information only for the purposes for which SilverBay discloses the information to them. SilverBay does not otherwise
provide information about its clients to outside firms, organizations or individuals except to its attorneys, accountants and auditors and as permitted by law. SilverBay does not disclose any nonpublic, personal information about its clients, former clients, prospective clients, clients investors, prospective clients investors or former clients investors to third parties, except as permitted or required by law. SilverBay maintains physical, electronic and procedural
safeguards to protect such information, and limits access to such information to those employees who require it in order to provide products or services to its clients. If you have any questions regarding SilverBays privacy policy, please contact Tyson Arnedt at (212) 389-8713. 47 Item 2. Code of Ethics. Item 3. Audit Committee Financial Expert. The Registrant’s Board of Trustees (the “Board”)
has determined that Jorge Orvananos is qualified to serve as an audit committee financial expert
serving on the Audit Committee of the Board (the “Audit Committee”) and that he is “independent,” as
defined by Item 3 of Form N-CSR. Item 4. Principal Accountant Fees and Services. Audit Fees Audit-Related Fees Tax Fees All Other Fees Item 5. Audit Committee of Listed registrants. Not applicable. Item 6. Investments. Item 7. Disclosure of Proxy
Voting Policies and Procedures for Closed-End Management Investment Companies. The Board has delegated the responsibility
for voting proxies relating to portfolio securities held by the ACAP Strategic Fund (the “Fund”) to SilverBay Capital
Management LLC (the “Adviser”) as part of the Adviser’s management of the Fund pursuant to the Advisory Agreement.
The Adviser has adopted proxy voting policies and procedures to ensure that it votes proxies in a manner that serves the best interests
of its clients, including the Fund. The following is a summary of the Adviser’s proxy voting policies and procedures. The Adviser has entered into an agreement
with Institutional Shareholder Services Inc. (“ISS”), an independent third party, for ISS to provide the Adviser with
its research and recommendations on proxies and to facilitate the electronic voting of proxies. The Adviser has adopted ISS’s
proxy voting policies and procedures (the “ISS Policies”) in order to ensure that it votes proxies in the best interests
of its clients. The Adviser has instructed ISS to vote all proxies in accordance with the ISS Policies, unless instructed by the
Adviser to vote otherwise. The Adviser instructs each custodian for
its client accounts (including the Fund) to deliver to ISS all proxy solicitation materials that the custodian receives for that
client account. The Adviser (or its designee, which may include an administrator to a client account) provides to ISS a listing
of securities held “long” in each client account as of the 15th and last day of each month to enable ISS to use reasonable
efforts to confirm that ISS has received all proxy solicitation materials concerning such securities. The Adviser, through ISS, will vote proxies
on behalf of client accounts. ISS evaluates all proxy solicitation material and other facts it deems relevant and may seek additional
information from the party soliciting the proxy and independent corroboration of such information when ISS considers it appropriate
and when it is reasonably available. The Adviser has instructed ISS to make voting decisions on behalf of each client account based
on the proxy voting guidelines that ISS provides to the Adviser, subject to certain exceptions in the event of conflicts of interests.
The Adviser may override ISS’ voting decisions if the Adviser deems it in the best interests of the client account. The Adviser
has instructed ISS to use reasonable efforts to respond to each proxy solicitation by the deadline for such response. Information regarding how the Fund voted
proxies relating to portfolio securities during the most recent twelve month period ended June 30 will be reported on Form N-PX
and be made available no later than August 31 of each year. Such information can be obtained (i) without charge, upon request,
by calling the Fund’s Vice President at (212) 389-8713 and (ii) at the SECs website at http://www.sec.gov. Due to the size and nature
of the Adviser’s operations and the Adviser’s limited affiliations in the securities industry, the Adviser does not
expect that material conflicts of interest will arise between the Adviser and a client
account over proxy voting. The Adviser recognizes, however, that such conflicts may arise from time to time, such as, for example,
when the Adviser or one of its affiliates has a business arrangement that could be affected by the outcome of a proxy vote or has
a personal or business relationship with a person seeking appointment or re-appointment as a director of a company. Accordingly,
if the Adviser determines that it has, or may be perceived to have, a conflict of interest when voting a proxy, the Adviser will
address matters involving such conflicts of interest as follows: Item 8. Portfolio Managers
of Closed-End Management Investment Companies. As of the date of this filing,
Mr. Panayotis (“Takis”) Sparaggis serves as the Fund’s principal Portfolio Manager and the lead member of the
Adviser’s Investment Team, and has served as the Fund’s principal Portfolio Manager since the Fund’s inception.
Mr. Sparaggis is the controlling person and Chief Investment Officer of Alkeon Capital Management, LLC (“Alkeon”),
which is the managing member of the Adviser. From May 1995 until he established Alkeon in January 2002, Mr. Sparaggis was associated
with CIBC World Markets Corp. (“CIBC WM”) and its predecessor, Oppenheimer & Co., Inc., where he was a Managing
Director. From January 1996 to December 2001, Mr. Sparaggis also was a Senior Portfolio Manager for Oppenheimer Investment Advisers
(“OIA”), an investment management program offered by CIBC WM, and was then responsible for OIA’s MidCap Managed
Account Portfolios. From 1993 until joining Oppenheimer & Co., Inc. in
1995, Mr. Sparaggis was with Credit Suisse First Boston Investment Management and was responsible for security analysis and portfolio
management for domestic investments, including proprietary trading on long-short equities and convertible arbitrage. As of September 30, 2013, Mr. Sparaggis managed
or was a member of the management team for the following client accounts other than the Fund: Potential Conflicts of Interests The investment activities
of the Adviser and its affiliates for their own accounts and for other accounts they manage (collectively, “Other Accounts”)
may give rise to conflicts of interest that may disadvantage the Fund. The Fund has no interest in these other activities of the
Adviser and its affiliates. As a result of the foregoing, the persons that manage the Fund’s investments and their associated
investment firms and their affiliates: (i) will be engaged in substantial activities other than on behalf of the Adviser and the
Fund, (ii) may have differing economic interests in respect of such activities, and (iii) may have conflicts of interest in allocating
their time and activity between the Fund and Other Accounts. Such persons will devote only so much of their time to the management
of the Fund’s investments as in their judgment is necessary and appropriate. There may be circumstances
under which the Adviser or its associated firms will cause one or more of their Other Accounts to commit a different percentage
of their respective assets to an investment opportunity than to which the Adviser will commit the Fund’s assets. There also
may be circumstances under which the Adviser or its associated firms will consider participation by their Other Accounts in investment
opportunities in which the Adviser does not intend to invest on behalf of the Fund, or vice versa. In addition, Mainsail Group,
L.L.C. (“Mainsail”), the Fund’s distributor, may provide brokerage and other services from time to time to one
or more accounts or entities managed by the Adviser or its affiliates. The Adviser will not purchase securities or other property
from, or sell securities or other property to, the Fund, except that Mainsail may act as broker for, and impose usual and customary
brokerage commissions on, the Fund in effecting securities transactions. Mr. Sparaggis’ compensation consists
of periodic draws and the income from the profits of Alkeon, the managing member of the Adviser, derived by him as its controlling
principal. The level of Alkeon’s profitability in turn is dependent on the advisory fees and performance fees and allocations received
from the Fund and other advisory clients. As of September 30, 2013, Mr. Sparaggis did not own
directly any shares of the Fund. (This does not take into account Mr. Sparaggis’ position as controlling principal of the Adviser’s
managing member.) Item 9. Purchases of Equity
Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. There have been no material changes to
the procedures by which the shareholders may recommend nominees to the Board, where those changes were implemented after the Registrant
last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required
by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item. Item 11. Controls and Procedures. Item 12. Exhibits. SIGNATURES Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized. Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated. * Print the name and title of each signing officer
under his or her signature.
(SilverBay)
PRIVACY POLICY
(a)
The Registrant, as of the end of the period covered by this report, has adopted a code of ethics that
applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller,
or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third
party.
(c)
There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies
to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller,
or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third
party, and that relates to any element of the code of ethics description.
(d)
The Registrant has not granted any waivers, including an implicit waiver, from
a provision of the code of ethics that applies to the Registrant’s principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals
are employed by the Registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this
item’s instructions.
(a) The aggregate fees billed for each
of the last two fiscal years for professional services rendered by
the principal accountant for the audit of the Registrant’s annual
financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements for those fiscal years are $89,250 for 2013 and $85,600
for 2012.
(b) The aggregate fees billed in each
of the last two fiscal years for assurance and related services by
the principal accountant that are reasonably related to the performance
of the audit of the Registrant’s financial statements and are not
reported under paragraph (a) of this Item are
$15,750 for 2013 and $15,750 for 2012. These services related to the review of the
Registrant’s semi-annual, unaudited financial statements, and the auditor’s consent to the
Registrant’s prospectus.
(c) The aggregate fees billed in each
of the last two fiscal years for professional services rendered by
the principal accountant for tax compliance, tax advice, and tax
planning are $0 for 2013 and $0 for 2012. This represents tax work
related to annual audited financial statements.
(d)
The aggregate fees billed in each of the last two fiscal years for products and services provided by
the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $4,250 for 2013
and $3,600 for 2012. These services related to administrative work.
(e)(1)
Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X.
The Registrant’s Audit Committee Charter provides that the Audit Committee shall pre-approve, to the extent required by applicable law, (i) all audit and non–audit services that the Registrant’s independent auditors provide to the Registrant and (ii) all non-audit services that the Registrant’s independent auditors provide to the Registrant’s investment adviser and any entity controlling, controlled by, or under common control with the Registrant’s investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant; provided that the Audit Committee may implement policies and procedures by which such services are approved other than by the full Audit Committee prior to their ratification by the Audit Committee.
(e)(2)
There were no services described in each of paragraphs (b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X
(f)
Not applicable.
(g)
Not applicable.
(h)
Not applicable.
(a) Schedule of Investments in securities of unaffiliated issuers
as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.
(b) Not applicable.
A. if a proposal is addressed by the ISS Policies, the Adviser will vote in accordance with such policies;
B. if the Adviser believes it is in the best interests of the fund to depart from the ISS Policies,
the Adviser will be subject to the requirements of C or D below, as applicable;
C. if the proxy proposal is (1) not addressed by the ISS Policies or (2) requires a case-by-case determination
by the Adviser, the Adviser may vote such proxy as it determines to be in the best interests of the fund, without taking any action
described in D below, provided that such vote would be against the Adviser’s own interest in the matter (i.e. against
the perceived or actual conflict). The Adviser will memorialize the rationale of such vote in writing; and
D. if the proxy proposal is (1) not addressed by the ISS Policies or
(2) requires a case-by-case determination by the Adviser, and the Adviser believes it should vote in a way that may also benefit,
or be perceived to benefit, its own interest, then the Adviser must take one of the following actions in voting such proxy: (a)
delegate the voting decision for such proxy proposal to an independent third party; (b) delegate the voting decision to an independent
committee of partners, members, directors or other representatives of a fund, as applicable; (c) inform the investors in a fund
of the conflict of interest and obtain consent (majority consent in the case of a fund) to vote the proxy as recommended by the
Adviser; or (d) obtain approval of the decision from the Adviser’s Compliance Committee.
(a)(1) Identification of Portfolio Manager(s) or Management Team
Members and Description of Role of Portfolio Manager(s) or Management Team Members
(a)(2) Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest
Type of
Accounts
Total
No. of Accounts
Managed
Total Assets
No. of
Accounts
where
Advisory Fee
is Based on
Performance
Total Assets in
Accounts where
Advisory Fee is
Based on
Performance
Registered Investment Companies:
3
$ 1,140,945,835
1
$ 2,762,312,026
Other Pooled Investment Vehicles:
10
2,101,264,496
9
2,088,459,372
Other Accounts:
0
(a)(3) Compensation Structure of Portfolio Manager(s) or Management
Team Members
(a)(4) Disclosure of Securities Ownership
(b) Not applicable.
(a) The Registrant’s principal executive and principal financial officers
have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange
Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the Registrant’s internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the Registrant’s second fiscal
quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s
internal control over financial reporting.
(a)(1) Code of ethics that is the subject of disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley
Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley
Act of 2002 are attached hereto.
(Registrant)
ACAP Strategic Fund
By (Signature and Title)*
/s/ Gregory D. Jakubowsky
Gregory D. Jakubowsky, President and Principal Executive Officer
(principal executive officer)
Date
12/6/2013
By (Signature and Title)*
/s/ Gregory D. Jakubowsky
Gregory D. Jakubowsky, President and Principal Executive Officer
(principal executive officer)
Date
12/6/2013
By (Signature and Title)*
/s/ George D. Mykoniatis
George D. Mykoniatis, Treasurer and Principal Financial Officer
(principal financial officer)
Date
12/6/2013
EX-99.CODE ETH
Effective September 20, 2012
ACAP STRATEGIC FUND
BLUEPOINT INVESTMENT SERIES TRUST
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL OFFICERS ADOPTED PURSUANT TO RULES
PROMULGATED UNDER SECTION
406 OF THE SARBANES-OXLEY ACT OF 2002
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I. |
Covered Officers/Purpose of the Code |
This code of ethics (the Code) of ACAP Strategic Fund and Bluepoint Investment Series Trust (each, a Fund), applies to the Funds principal executive officer and principal financial officer (the Covered Officers, each of whom is set forth in Exhibit A) for the purpose of promoting:
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honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
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full, fair, accurate, timely and understandable disclosure in reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission (SEC) and in other public communications made by the Fund; |
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compliance with applicable laws and governmental rules and regulations; |
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the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and |
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accountability for adherence to the Code. |
Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.
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II. |
Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest |
Overview. A conflict of interest occurs when a Covered Officers private interest interferes with the interests of, or the Covered Officers service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of the Covered Officers family, receives improper personal benefits as a result of the Covered Officers position with the Fund.
Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (Investment Company Act) and the Investment Advisers Act of 1940, as amended (Investment Advisers Act). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as affiliated persons of the Fund. The compliance programs and procedures of the Fund and its investment adviser are designed to prevent, or identify and
correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Fund and its investment adviser or a third party service provider of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund or for its investment adviser or a third party service provider, or for one or more of them), be involved in establishing policies and implementing decisions that will have different effects on the adviser, third party service provider and the Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and its adviser or third party service provider and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. The foregoing activities, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, will be deemed to have been handled ethically.
Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The overarching principle with respect to all conflicts of interest covered by the Code is that the personal interest of a Covered Officer should not be placed improperly before the interests of the Fund or its shareholders.
Each Covered Officer of the Fund must:
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not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund; |
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not cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Fund; and |
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report at least annually his or her affiliations or other relationships that could potentially present a conflict of interest with the Fund or its shareholders. |
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III. |
Disclosure and Compliance |
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Each Covered Officer of the Fund shall become familiar with the disclosure requirements generally applicable to the Fund; |
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each Covered Officer of the Fund shall not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Funds management and auditors, and to governmental regulators and self-regulatory organizations; |
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each Covered Officer of the Fund may, to the extent appropriate within the Covered Officers area of responsibility and to the extent deemed necessary in the sole discretion of the Covered Officer, consult with other officers and employees of the Fund and its investment adviser with the goal of promoting full, fair, accurate, timely and |
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understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Fund; and |
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each Covered Officer should seek to promote compliance by the Fund with applicable standards and restrictions imposed by applicable laws, rules and regulations. |
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IV. |
Reporting and Accountability |
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Each Covered Officer must: |
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upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Chief Compliance Officer of the Fund (the CCO) that the Covered Officer has received, read and understands the Code; |
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annually thereafter affirm to the CCO that the Covered Officer has complied with the requirements of the Code; |
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not retaliate against any other Covered Officer or any employee of the Fund or its affiliated persons for reports of potential violations of the Code that are made in good faith; and |
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notify the CCO promptly if the Covered Officer knows of any violation of this Code. Failure to do so is itself a violation of this Code. |
The CCO is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. The CCO is authorized to consult, as appropriate, with counsel to the Fund and counsel to the Trustees of the Fund who are not interested persons, as defined by Section 2(a)(19) of the Investment Company Act, of the Fund (the Independent Trustees) (if the Independent Trustees engage separate counsel), and is encouraged to do so. However, any approvals or waivers1 must be considered by the Independent Trustees.
The Fund will follow these procedures in investigating and enforcing this Code:
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the CCO will take all appropriate action to investigate any reported potential violations; |
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if, after such investigation, the CCO believes that no violation has occurred, the CCO is not required to take any further action; |
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any matter that the CCO believes is a violation will be reported to the Independent Trustees; |
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if the Independent Trustees concur that a violation has occurred, the CCO will inform and make a recommendation to the Board of Trustees of the Fund (the Board), which will |
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consider appropriate action, which may include a review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Funds investment adviser or other relevant service provider; or a recommendation to dismiss the Covered Officer; and |
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any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. |
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V. |
Other Policies and Procedures |
This Code shall be the sole code of ethics adopted by the Fund for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Fund, the Funds investment adviser, principal underwriter(s), or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The codes of ethics, under Rule 17j-1 under the Investment Company Act, of the Fund, its investment adviser (and managing member) and principal underwriter(s), as they may apply to the Covered Officers and others, constitute separate requirements and are not part of this Code.
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VI. |
Amendments |
Amendments to this Code may be made from time to time, as deemed appropriate by the CCO. The Board shall be informed of any such amendment to the extent deemed material by the Funds CCO.
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VII. |
Confidentiality |
All reports and records relating to the Fund prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Funds investment adviser or Board, counsel to the Fund and counsel to the Independent Trustees.
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VIII. |
Internal Use |
The Code is intended solely for the internal use by the Fund and does not constitute an admission, by or on behalf of the Fund, as to any fact, circumstance, or legal conclusion.
Exhibit A
Persons Covered by this Code of Ethics
Greg Jakubowsky
President and Principal Executive Officer
George Mykoniatis
Treasurer and Principal Financial Officer
CODE OF ETHICS
FOR PRINCIPAL EXECUTIVE
AND PRINCIPAL FINANCIAL OFFICER
CERTIFICATE OF COMPLIANCE
As a Covered Officer as defined in the Code of Ethics For Principal Executive and Principal Financial Officers of ACAP Strategic Fund and Bluepoint Investment Series Trust (the Code), I hereby certify that I have received and have read and fully understand the Code, and I recognize that I am subject to the Code. I further certify that I will comply with the requirements of the Code.
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Signature |
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Gregory Jakubowsky, Principal Executive Officer |
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Name |
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Date |
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CODE OF ETHICS
FOR PRINCIPAL EXECUTIVE
AND PRINCIPAL FINANCIAL OFFICER
CERTIFICATE OF COMPLIANCE
As a Covered Officer as defined in the Code of Ethics For Principal Executive and Principal Financial Officers of ACAP Strategic Fund and Bluepoint Investment Series Trust (the Code), I hereby certify that I have received and have read and fully understand the Code, and I recognize that I am subject to the Code. I further certify that I will comply with the requirements of the Code.
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Signature |
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George Mykoniatis, Principal Financial Officer |
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Name |
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Date |
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EX-99.CERT
Certification Pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act
I, Gregory D. Jakubowsky, certify that:
1. | I have reviewed this report on Form N-CSR of ACAP Strategic Fund; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
5. | The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | 12/6/2013 | /s/ Gregory D. Jakubowsky | |
Gregory D. Jakubowsky, President and Principal Executive Officer | |||
(principal executive officer) |
Certification Pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act
I, George D. Mykoniatis, certify that:
1. | I have reviewed this report on Form N-CSR of ACAP Strategic Fund; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
5. | The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | 12/6/2013 | /s/ George D. Mykoniatis | |
George D. Mykoniatis, Treasurer and Principal Financial Officer | |||
(principal financial officer) |
EX-99.906 CERT
Certification Pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act
I, Gregory D. Jakubowsky, President and Principal Executive Officer of ACAP Strategic Fund (the “Registrant”), certify that:
1. | The Form N-CSR of the Registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Date: | 12/6/2013 | /s/ Gregory D. Jakubowsky | |
Gregory D. Jakubowsky, President and Principal Executive Officer | |||
(principal executive officer) |
I, George D. Mykoniatis, Treasurer and Principal Financial Officer of ACAP Strategic Fund (the “Registrant”), certify that:
1. | The Form N-CSR of the Registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Date: | 12/6/2013 | /s/ George D. Mykoniatis | |
George D. Mykoniatis, Treasurer and Principal Financial Officer | |||
(principal financial officer) |