Westport Funds Select Cap Fund Q3 Commentary

Portfolio Review

During the third quarter, the Westport Select Cap Fund’s Class R shares fell 3.43%, ahead of the Russell 2000® Index’s loss of 7.36%. For the first nine months of 2014, the Westport Select Cap Fund’s Class R shares outperformed the Russell 2000® Index with a positive return of 1.34% compared to a decline of 4.41% for the Index.

Since inception 16¾ years ago, theWestport Select Cap Fund has outperformed the Index by more than 3% points a year, with an annual average return of 10.14% to 7.06%, respectively.

Once again, data provided by Lipper, Inc. provides an interesting overview of the Westport Select Cap Fund’s performance in the first nine months of 2014 and for the twelve months ended September 30. According to Lipper, the average Small-Cap Core fundi lost 6.7% in the quarter and gained 5.7% over the twelve month period while the average Mid-Cap Growth fundii, a category used by Morningstar, Inc. in rating the Westport Select Cap Fund was down 2.3% in the quarter but was up 9.92% for the latest four quarters. By comparison, for the latest twelve months the Westport Select Cap Fund had a gain of 10.87%.

The third quarter saw particular weakness in small cap stocks as the Russell 2000® Index declined 7.36% compared to a gain of 1.13% for the S&P 500. In this environment the Westport Select Cap Fund’s outperformance of the Russell 2000® Index by nearly 4 percentage points was, in our opinion, quite acceptable.

A major factor in the Fund’s outperformance this quarter was the fact that the majority of the Fund’s holdings, sixteen of twenty-four, outperformed the Index.

Once again, Universal Health Services, Inc. (UHS), Class B shares, the Fund’s largest holding, was the principal contributor to positive performance gaining 9.1% and adding 120 basis pointsiii. Also up was United Rentals, Inc. (URI), the Fund’s second largest position which rose 6.1% and added 54 basis points. Four other stocks bucked the downward trend – DeVry (DV) Education Group, Inc., Brown & Brown, Inc. (BRO), Darden Restaurants, Inc. (DRI) and Synopsys, Inc. (SNPS) – in total adding 48 basis points positive performance.

On the downside, the eight holdings that underperformed the Index in total subtracted 398 basis points from results. The largest losses were incurred by FEI Company, down 17% and costing 122 basis points and Rogers Corp., also down 17% and impacting by 76 basis points.

Moving to results for the nine month period, the 575 basis point outperformance was largely generated by four positions. Once again Universal Health Services, Inc., our largest position, was the major contributor, up over 28%, adding 196 basis points. Close behind was United Rentals, Inc. which was up 43%, contributing 170 basis points. The other two important contributors were Big Lots, Inc., up 33% and adding 87 basis points, and DeVry Education Group, Inc., up over 20%, contributing 85 basis points. On the negative side, 12 positions underperformed the Index, costing in total 390 basis points. Importantly, because several of these holdings are small positions in the portfolio, their total impact to performance was in fact less than the 441 basis point decline in the Index. The largest negative contribution of 75 basis points came from a 12% decline in Precision Castparts Corp. Only two other holdings cost the Fund more than 50 basis points, FEI Company declined 136% with a 57 basis point negative impact and IPG Photonics Corp. fell 11%, subtracting 56 basis points. During the first nine months of the year one position, CACI International, Inc., was eliminated and two new holdings, Yadkin Financial Corp. and Zebra Technologies Corp., were added. There was no merger or acquisition activity so far this year.

Investors should consider the investment objectives, risk, and charges and expenses of The Westport Funds carefully before investing; this and other information about the Funds is in the prospectus, or summary prospectus, which can be obtained by calling 1-888-593-7878 or at our website www.westportfunds.com. Read the prospectus or summary prospectus carefully before you invest.

The views expressed and any forward-looking statements are as of the date of the publication and are those of the portfolio managers and/or the Advisor. Future events or results may vary significantly from those expressed and are subject to change at any time in response to changing circumstances and industry developments.

There are special risks associated with small and mid-capitalization issues such as market illiquidity and greater market volatility than larger capitalization issues.

i Small-Cap Core Funds – Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) below Lipper’s USDE small-cap ceiling. Small-cap core funds have more latitude in the companies in which they invest. These funds typically have average characteristics compared to the S&P SmallCap 600 Index. ii Mid-Cap Growth Funds – Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) below Lipper’s USDE large-cap floor. Mid-cap growth funds typically have above-average characteristics compared to the S&P MidCap 400 Index.

iii Basis Point is a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.

Portfolio composition is subject to change at any time and should not be considered a recommendation to purchase or sell a particular security. On September 30, 2014, the following securities comprised these respective percentages of the Westport Select Cap Fund: Universal Health Services, Inc. – Class B shares (13.5%), United Rentals, Inc. (8.9%), DeVry Education Group, Inc. (6.3%), Brown & Brown, Inc. (3.4%), Darden Restaurants, Inc. (0.8%), Synopsys, Inc. (6.1%), FEI Company (5.9%), Rogers Corp. ((3.4%), Big Lots, Inc. (5.7%), Precision Castparts Corp. (8.1%), IPG Photonics Corp. (7.1%), CACI International, Inc. (0.0%), Yadkin Financial Corp. (0.7%), Zebra Technologies Corp. (2.1%).

Westport Funds Select Cap Fund Q3 Letter To Investors
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