UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07737
The Purisima Funds
(Exact name of registrant as specified in charter)
13100 Skyline Blvd.
Woodside, California 94062
(Address of principal executive offices) (Zip code)
U. S. Bancorp Fund Services, LLC
2020 East Financial Way, Suite 100
Glendora, California 91741
(Name and address of agent for service)
(650) 851-3334
Registrant's telephone number, including area code
Date of fiscal year end: August 31
Date of reporting period: February 28, 2006
Item 1. Report to Stockholders.
Semi-Annual Report (Unaudited)
February 28, 2006
![](https://capedge.com/proxy/N-CSRS/0001144204-06-018953/logo_purisimafunds.jpg)
Semi-Annual Report (Unaudited)
February 28, 2006
The Purisima Total Return Fund![](https://capedge.com/proxy/N-CSRS/0001144204-06-018953/pagehead_left.jpg)
Table of Contents |
A Letter to Our Shareholders | 1 |
Sector Breakdown | 5 |
Expense Example | 5 |
Schedule of Investments | 7 |
Statement of Assets and Liabilities | 11 |
Statement of Operations | 12 |
Statement of Changes in Net Assets | 13 |
Financial Highlights | 14 |
Notes to Financial Statements | 15 |
Other Information | 21 |
Privacy Notice | 28 |
Investment Objective
Purisima Total Return Fund
Seeks to provide investors with a high level of total return by considering both domestic and foreign securities.
The Fund reserves the right to reject any order for the purchase of its shares or to limit or suspend, without prior notice, the offering of its shares. The required minimum investments may be waived in the case of certain qualified retirement plans. The Fund will not accept your account if you are investing for another person as attorney-in-fact. The Fund also will not accept accounts with a ‘‘Power of Attorney’’ in the registration section of the Purchase Application.
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A Letter to Our Shareholders
Welcome to the semi-annual report for the Purisima Total Return Fund for the six-month period ended February 28, 2006. The primary investment objective of the Fund is achieving high total return for shareholders.
Market Review and Outlook:
The bull market in global equities resumed its ascent during the period. Stronger than expected economic growth, attractive fundamentals and compelling valuations all provided a strong foundation for gains. The Fund capitalized on these trends by maintaining a fully invested posture and also benefited from sub-asset allocation decisions.
Our forecast that the world economy and corporate profit machine would exceed expectations proved correct. Predictions of a strengthening dollar, benign long term interest rates, attractive relative valuations and significant increases in merger and acquisition activity were also on target.
The benefits of global diversification were evident during the period. Foreign stocks once again significantly outperformed domestic issues. We do not foresee any catalysts that are likely to cause a reversal of the trend of foreign leadership.
Regionally, the best country returns in the developed world for the period came from Japan. The Japanese economy continued its emergence from the deflationary spiral in which it has been mired for more than a decade, and recent pro-market reforms gained traction. We believe the Japanese economy is still in the nascent stages of recovery and will continue to outperform countries that are farther along their economic cycles. Emerging markets exhibited tremendous strength as developing economies benefited from the expanding global economy.
Strong global economic growth continues to keep demand for energy products high, while supply remains constrained, keeping oil and natural gas prices high. As a result, both foreign and domestic energy companies have been turning in record profits
Recently, much has been made of the flattening and partial inversion of the yield curve in the U.S. As financial institutions increasingly operate in global credit markets, they are no longer bound by the borrowing and lending rates of their domicile alone. We believe this makes the notion of a ‘‘global yield curve’’ a more useful leading indicator for stocks and the global economy than the yield curve of any single market. We have constructed a GDP weighted global yield curve which illustrates that the global lending environment is much more favorable than the domestic yield curve portends.
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As we predicted, there was downward pressure on the supply of equities as mergers, acquisitions and share repurchase activity far outpaced new share issuances in the form of IPOs and secondary stock offerings. We expect this trend to continue as global long term rates remain benign. Because equities prices are based on the supply and demand of equities themselves, a reduction in the supply of equities is bullish.
Looking ahead, we anticipate most of the aforementioned positive market fundamentals will remain firmly in place. Low global interest rates continue to provide stimulus to the global economy by creating sources of inexpensive capital. We do not see significant inflation risks on the horizon that would cause long term rates to rise materially. Equity valuations remain exceptionally attractive relative to relevant fixed income alternatives in our estimation. In fact, a comparison of earnings yield (the inverse of the P/E ratio) and government bond yields reveals that equities are relatively undervalued to a greater degree than at any time since the bear market bottom in March, 2003.
Though we feel that the environment for equities in the upcoming period remains resoundingly positive, risk factors do remain. Protectionist measures in the US and abroad could curtail the benefits of trade that have helped fuel global expansion. Higher than expected rates of inflation could lead to a rise in global long term interest rates making equity valuations less attractive and reducing sources of low cost capital. If central banks collectively become too hawkish with monetary policy, the global yield curve could invert — a scenario which could portend deteriorating corporate earnings and possibly a global recession. Geopolitical stability could deteriorate as Iran takes an increasingly aggressive course in advancing its nuclear capabilities.
It is always important to be mindful of potential risks to our forecast, but we believe that on balance the positive market fundamentals outweigh the market risks.
In spite of these promising fundamentals, we are unable to derive conviction that investor sentiment will improve enough to fully reflect them. If sentiment remains dour, we would expect stocks to only be up a little bit in upcoming year. If sentiment improves markedly, we would expect stocks to have a very big year. We find it hard to envision sentiment collapsing as the world is not at euphoric levels and has not been since the beginning of the current bull market, thus down-a-lot is very unlikely. However, we also cannot clearly identify a new catalyst for the sentiment trend to significantly improve, which is why our forecast is not more emphatically upbeat.
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Fund Positioning
We expect many of the underlying factors that have supported markets recently to continue to drive markets going forward. Subsequently, we believe that many of the same countries and sectors that have outperformed recently will continue to do so. Many of our sub-asset allocation decisions are based on the continuation of existing trends.
We have increased the Fund’s exposure to foreign equities and included small positions in emerging markets and Canada. Canada led the developed markets in 2005 with returns driven largely by concentrated exposure to the Energy and Industrials sectors. We believe the outlook for these sectors remains compelling. We maintain an overweight position in Japan. Recent economic data has supported our belief that the recovery of the world’s second largest economy is well underway.
From a sector standpoint, we believe that Energy stocks will continue their climb as demand for oil and gas products remains strong. Similarly, a robust global economy should benefit the Materials and Industrial companies by creating strong demand for commodities and capital goods.
Flattening yield curves have tempered our enthusiasm for banks in general, although we do feel capital markets companies will benefit from increased merger and acquisition activity and buoyant equity markets.
We believe the Fund is positioned well to take advantage of what should continue to be a good year for the global equity markets.
Closing Remarks
For the period, the Fund outperformed the MSCI World Index1 benchmark and delivered solid total return (Purisima Total Return Fund: 11.78% vs. MSCI World Index: 10.29%) . We believe the current strategy should allow the Fund to outperform in what should be another good period for stocks.
Globally, equities are now entering the fourth year of rising markets. This leads us to sharpen our focus in looking for signs that the bull may be aging. As always, we are prepared to take defensive action if we come to expect a large, extended market decline. Fortunately, we do not foresee this occurring in the immediate future given the positive attributes of the current environment.
1 | Morgan Stanley Capital International World Index is an unmanaged capitalization weighted stock index that includes all major world stock markets |
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Thank you for your continued interest and support.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0001144204-06-018953/sig_purisimakfisher.jpg)
Kenneth L. Fisher
Chairman and Chief Investment Officer
Fisher Investments
Opinions expressed above are those of Kenneth L. Fisher and are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security.
Past performance does not guarantee future results.
Fund holdings and sector allocations are subject to change and are not recommendations to buy or sell any security.
Mutual fund investing involves risk of loss. Principal loss is possible. The Fund may use short sales of securities, which involve the risk that losses may exceed the original amount invested. Foreign investing involves special risks, including a greater volatility and political, economic and currency risks and differences in accounting methods. Small- and Medium-capitalization companies tend to have limited liquidity and greater price volatility than large capitalization companies. Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Investments in debt securities typically decrease in value when interest rates rise. This risk is greater for longer-term debt securities.
Price to Earnings (P/E) Ratio reflects the multiple of earnings at which a stock sells. The MSCI World Index is a broad-based unmanaged capitalization-weighted stock index designed to measure global developed market equity performance. It consists of 23 developed market country indices. One cannot invest directly in an index.
This material must be preceded or accompanied by a prospectus.
Quasar Distributors, LLC, Distributor 04/06
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Sector Breakdown1 | |
(Unaudited) |
Purisima Total Return Fund | ||||
Basic Materials | 6.0 | % | ||
Communications | 2.1 | % | ||
Consumer, Cyclical | 6.0 | % | ||
Consumer, Non-cyclical | 10.1 | % | ||
Energy | 18.6 | % | ||
Financial | 28.7 | % | ||
Industrial | 18.1 | % | ||
Technology | 4.5 | % | ||
Utilities | 5.0 | % | ||
Short-Term Investment | 0.9 | % | ||
Total | 100.0 | % |
1 Percentage of Total Investments as of February 28, 2006. |
Important Information
The following disclosure provides important information regarding the Fund’s Expense Example. Please refer to this information when reviewing the Expense Example for the Fund.
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period indicated and held for the entire period from September 1, 2005 to February 28, 2006, for the Total Return Fund.
Actual Expenses
The information in the table under the heading ‘‘Actual Performance’’ provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the row entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
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Hypothetical Example for Comparison Purposes
The information in the table under the heading ‘‘Hypothetical Performance (5% return before expenses)’’ provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and assumed rates of return of 5% per year before expenses, which are not the Fund’s actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the information under the heading ‘‘Hypothetical Performance (5% return before expenses)’’ is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expense Example
(Unaudited)
Hypothetical | |||||||
Performance | |||||||
Purisima Total Return Fund | Actual | (5% return | |||||
(Inception date: 10/31/1996) | Performance | before expenses) | |||||
Beginning Account Value (09/01/05) | $ | 1,000.00 | $ | 1,000.00 | |||
Ending Account Value (02/28/06) | $ | 1,117.80 | $ | 1,017.50 | |||
Expenses Paid During Period1 | $ | 7.72 | $ | 7.35 |
1 | Expenses are equal to the Fund’s expense ratio for the six month period of 1.47% for the Total Return Fund multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
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Purisima Total Return Fund | |||
Schedule of Investments | |||
February 28, 2006 (Unaudited) |
Shares | Value | |||
COMMON STOCKS: 99.0% | ||||
Aerospace & Defense: 3.8% | ||||
137,500 | Honeywell International, Inc. | $ | 5,630,625 | |
44,800 | Lockheed Martin Corp. | 3,264,576 | ||
82,300 | United Technologies Corp. | 4,814,550 | ||
13,709,751 | ||||
Air Freight & Logistics: 1.6% | ||||
53,700 | FedEx Corp. | 5,758,788 | ||
Automobiles: 1.4% | ||||
220,500 | Nissan Motor Co. Ltd. - ADR | 5,073,705 | ||
Biotechnology: 1.9% | ||||
94,200 | Celgene Corp. (a) | 3,579,600 | ||
90,300 | Medimmune, Inc. (a) | 3,295,047 | ||
6,874,647 | ||||
Capital Markets: 9.4% | ||||
14,545 | Ameriprise Financial, Inc. | 661,507 | ||
144,800 | Credit Suisse Group - ADR | 8,007,440 | ||
44,000 | Goldman Sachs Group, Inc. | 6,216,760 | ||
39,425 | Lehman Brothers Holdings, Inc. | 5,754,079 | ||
69,800 | Morgan Stanley | 4,164,268 | ||
203,550 | Nomura Holdings, Inc. - ADR | 3,926,479 | ||
50,075 | UBS AG | 5,319,467 | ||
34,050,000 | ||||
Chemicals: 1.5% | ||||
71,200 | BASF AG - ADR | 5,382,008 | ||
Commercial Banks: 5.1% | ||||
417,675 | Banco Santander Central Hispano S.A. - ADR | 6,106,409 | ||
431,200 | Mitsubishi Ufj Financial Group, Inc. - ADR | 6,424,880 | ||
538,700 | Sumitomo Mitsui Financial Group, Inc. - ADR | 5,953,281 | ||
18,484,570 | ||||
Communications Equipment: 1.3% | ||||
221,000 | Motorola, Inc. | 4,729,400 | ||
Computers & Peripherals: 1.6% | ||||
269,400 | EMC Corp. (a) | 3,776,988 | ||
50,000 | Fujitsu Limited - ADR | 2,022,450 | ||
5,799,438 |
See accompanying Notes to Financial Statements.
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Shares | Value | |||
Construction Machinery And Equipment: 1.7% | ||||
87,700 | Komatsu Ltd. - ADR | $ | 6,314,856 | |
Consumer Finance: 1.8% | ||||
48,825 | ORIX Corp. - ADR | 6,469,313 | ||
Diversified Financial Services: 1.3% | ||||
125,927 | ING Groep N.V. - ADR | 4,733,596 | ||
Diversified Telecommunication Services: 0.8% | ||||
45,600 | Alltel Corp. | 2,879,640 | ||
Electric Utilities: 2.9% | ||||
56,500 | American Electric Power Co., Inc. | 2,062,250 | ||
81,600 | DPL, Inc. | 2,196,672 | ||
46,600 | Edison International | 2,067,176 | ||
41,600 | FirstEnergy Corp. | 2,124,928 | ||
69,600 | PPL Corp. | 2,213,280 | ||
10,664,306 | ||||
Electronic Computers: 1.0% | ||||
52,225 | Hitachi Ltd. - ADR | 3,647,916 | ||
Energy Equipment & Services: 6.1% | ||||
117,900 | Baker Hughes, Inc. | 8,013,663 | ||
57,000 | Schlumberger Ltd. | 6,555,000 | ||
102,700 | Transocean, Inc. (a) | 7,618,286 | ||
22,186,949 | ||||
Food Products: 2.0% | ||||
83,500 | Cadbury Schweppes Plc - ADR | 3,416,820 | ||
168,200 | Groupe Danone - ADR | 4,048,574 | ||
7,465,394 | ||||
Health Care Providers & Services: 1.9% | ||||
29,500 | Cigna Corp. | 3,621,125 | ||
71,100 | Health Net, Inc. (a) | 3,409,245 | ||
7,030,370 | ||||
Household Durables: 2.1% | ||||
219,300 | Matsushita Electric Industrial Co. Ltd. - ADR | 4,629,423 | ||
68,475 | Sony Corp. - ADR | 3,210,108 | ||
7,839,531 | ||||
Household Products: 0.8% | ||||
49,725 | Procter & Gamble Co. | 2,980,019 | ||
Industrial Conglomerates: 2.9% | ||||
72,550 | General Electric Co. | 2,384,719 | ||
87,750 | Siemens AG - ADR | 8,071,245 | ||
10,455,964 |
See accompanying Notes to Financial Statements. |
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Shares | Value | |||
Insurance: 3.1% | ||||
163,750 | AXA - ADR | $ | 5,793,475 | |
53,950 | Millea Holdings, Inc. - ADR | 5,474,846 | ||
11,268,321 | ||||
Investment Company: 3.8% | ||||
160,100 | Amvescap Plc - ADR | 3,051,506 | ||
112,200 | iShares MSCI Emerging Markets Index Fund | 10,872,180 | ||
13,923,686 | ||||
Machinery: 5.5% | ||||
104,500 | Caterpillar, Inc. | 7,636,860 | ||
55,200 | Illinois Tool Works, Inc. | 4,738,368 | ||
152,800 | Kubota Corp. - ADR | 7,497,896 | ||
19,873,124 | ||||
Measuring, Analyzing, And Controlling Instruments: 0.5% | ||||
45,000 | Hoya Corp. - ADR | 1,802,718 | ||
Metals & Mining: 4.5% | ||||
92,500 | BHP Billiton Ltd. - ADR | 3,338,325 | ||
92,100 | Freeport-McMoRan Copper & Gold, Inc. | 4,663,023 | ||
214,700 | Kobe Steel Ltd. - ADR | 4,133,662 | ||
21,900 | Rio Tinto Plc - ADR | 4,131,216 | ||
16,266,226 | ||||
Metals Service Centers And Offices: 0.9% | ||||
12,110 | Mitsui & Co. Ltd. - ADR | 3,269,700 | ||
Motor Vehicles And Passenger Car Bodies: 0.6% | ||||
38,775 | Fuji Heavy Industries Ltd. - ADR | 2,109,065 | ||
Multi-Utilities & Unregulated Power: 0.6% | ||||
44,900 | Sempra Energy | 2,148,016 | ||
National Commercial Banks: 1.2% | ||||
129,277 | Sanpaolo IMI SpA - ADR | 4,563,478 | ||
Oil & Gas: 12.5% | ||||
72,500 | Anadarko Petroleum Corp. | 7,189,100 | ||
59,100 | Canadian Natural Resources Ltd. | 3,224,496 | ||
94,400 | ConocoPhillips | 5,754,624 | ||
61,500 | Devon Energy Corp. | 3,605,745 | ||
74,500 | EnCana Corp. | 3,077,595 | ||
63,600 | Occidental Petroleum Corp. | 5,821,944 | ||
108,300 | Royal Dutch Shell Plc - ADR | 6,549,984 | ||
53,700 | Talisman Energy, Inc. | 2,820,324 | ||
57,654 | Total S.A. - ADR | 7,271,899 | ||
45,315,711 |
See accompanying Notes to Financial Statements.
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Shares | Value | ||||
Petroleum Refining: 1.4% | |||||
141,600 | E.ON AG - ADR | $ | 5,244,864 | ||
Pharmaceuticals: 4.4% | |||||
82,400 | AstraZeneca Plc - ADR | 3,811,000 | |||
91,450 | GlaxoSmithKline Plc - ADR | 4,647,489 | |||
57,700 | Johnson & Johnson | 3,326,405 | |||
118,450 | Merck & Co., Inc. | 4,129,167 | |||
15,914,061 | |||||
Real Estate: 2.0% | |||||
13,800 | Alexandria Real Estate Equities, Inc. | 1,214,676 | |||
21,400 | AMB Property Corp. | 1,148,110 | |||
16,900 | Camden Property Trust | 1,112,865 | |||
11,900 | Essex Property Trust, Inc. | 1,185,835 | |||
30,400 | Reckson Associates Realty Corp. | 1,243,360 | |||
19,900 | Shurgard Storage Centers, Inc. | 1,276,187 | |||
7,181,033 | |||||
Road & Rail: 1.2% | |||||
82,300 | Canadian Pacific Railway Ltd. | 4,212,937 | |||
Semiconductor & Semiconductor Equipment: 2.9% | |||||
112,075 | KLA-Tencor Corp. | 5,853,677 | |||
158,950 | Texas Instruments, Inc. | 4,744,658 | |||
10,598,335 | |||||
Specialty Retail: 1.0% | |||||
51,800 | Lowe’s Companies, Inc. | 3,531,724 | |||
TOTAL COMMON STOCKS | |||||
(Cost $270,359,249) | $ | 359,753,160 | |||
SHORT TERM INVESTMENT: 0.9% | |||||
$3,252,340 | SEI Daily Income Trust Government Fund | 3,252,340 | |||
TOTAL SHORT TERM INVESTMENT | |||||
(Cost $3,252,340) | $ | 3,252,340 | |||
TOTAL INVESTMENTS (Cost $273,611,589): 99.9% | $ | 363,005,500 | |||
Other Assets in Excess of Liabilities: 0.1% | 370,474 | ||||
TOTAL NET ASSETS: 100.0% | $ | 363,375,974 |
Footnotes
Percentages are stated as a percent of net assets.
ADR - American Depository Receipt
(a) Non Income Producing
See accompanying Notes to Financial Statements.
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Purisima Total Return Fund |
Statement of Assets and Liabilities |
February 28, 2006 (Unaudited) |
ASSETS | ||||
Investments in securities, at cost | $ | 273,611,589 | ||
Investments in securities, at value | $ | 363,005,500 | ||
Receivables: | ||||
Dividends and interest | 552,759 | |||
Fund shares sold | 395,951 | |||
Other assets | 61,388 | |||
Total Assets | 364,015,598 | |||
LIABILITIES | ||||
Payables for fund shares redeemed | 9,893 | |||
Accrued advisory fees (Note 3) | 276,994 | |||
Accrued distribution fees (Note 4) | 252,737 | |||
Accrued administration fees (Note 3) | 21,494 | |||
Accrued transfer agent fees | 38,346 | |||
Other accrued expenses | 40,160 | |||
Total Liabilities | 639,624 | |||
NET ASSETS | $ | 363,375,974 | ||
Number of shares issued and outstanding (unlimited shares authorized, $0.01 par value) | 17,162,336 | |||
Net asset value, offering and redemption price per share | $ | 21.17 | ||
COMPONENTS OF NET ASSETS | ||||
Paid-in capital | $ | 276,185,687 | ||
Accumulated net investment (loss) | (396,909 | ) | ||
Accumulated net realized loss on investments | (1,806,715 | ) | ||
Net unrealized appreciation on investments | 89,393,911 | |||
Net assets | $ | 363,375,974 |
See accompanying Notes to Financial Statements.
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Purisima Total Return Fund
Statement of Operations
Statement of Operations
For the Six Months Ended February 28, 2006 (Unaudited)
INVESTMENT INCOME | ||||
Income | ||||
Dividends (net of foreign taxes witheld of $68,721) | $ | 2,064,929 | ||
Interest & other income | 30,834 | |||
Total income | 2,095,763 | |||
Expenses | ||||
Advisory fees | 1,689,718 | |||
Distribution fees (Note 4) | 422,430 | |||
Administration fees | 132,562 | |||
Transfer agent fees | 78,043 | |||
Fund accounting fees | 45,061 | |||
Custody fees | 34,113 | |||
Insurance expense | 37,987 | |||
Reports to shareholders | 14,348 | |||
Registration fees | 14,489 | |||
Audit fees | 10,465 | |||
Legal fees | 9,126 | |||
Trustee fees | 1,836 | |||
Miscellaneous | 2,602 | |||
Total expenses | 2,492,780 | |||
Add: Expenses recouped by Adviser (Note 3) | 31 | |||
Net expenses | 2,492,811 | |||
Net investment (loss) | (397,048 | ) |
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain on investments | 11,569,094 | |||
Change in net unrealized appreciation on investments | 28,148,955 | |||
Net gain on investments | 39,718,049 | |||
Net increase in net assets resulting from operations | $ | 39,321,001 |
See accompanying Notes to Financial Statements.
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Purisima Total Return Fund | ||
Statement of Changes in Net Assets |
Six Months | |||||||
Ended | Year Ended | ||||||
February 28, | August 31, | ||||||
2006* | 2005 | ||||||
INCREASE IN NET ASSETS FROM: | |||||||
OPERATIONS | |||||||
Net investment income (loss) | $ | (397,048 | ) | $ | 1,644,637 | ||
Net realized gain (loss) on investments | 11,569,094 | (1,118,029 | ) | ||||
Change in net unrealized appreciation on | |||||||
investments | 28,148,955 | 44,278,128 | |||||
Net increase in net assets resulting from | |||||||
operations | 39,321,001 | 44,804,736 | |||||
DISTRIBUTION TO SHAREHOLDERS | |||||||
From net investment income | (1,644,004 | ) | (1,194,234 | ) | |||
Total distributions to shareholders | (1,644,004 | ) | (1,194,234 | ) | |||
CAPITAL SHARE TRANSACTIONS | |||||||
Net increase (decrease) in net assets derived | |||||||
from net change in outstanding shares (a) | 274,806 | (16,808,549 | ) | ||||
Total increase in net assets | 37,951,803 | 26,801,953 | |||||
NET ASSETS | |||||||
Beginning of period | 325,424,171 | 298,622,218 | |||||
End of period | $ | 363,375,974 | $ | 325,424,171 | |||
Undistributed net investment income (loss) | $ | (396,909 | ) | $ | 1,644,143 |
(a) A summary of capital share transactions is as follows:
Six Months Ended | Year Ended | ||||||||||||
February 28, 2006* | August 31, 2005 | ||||||||||||
Shares | Value | Shares | Value | ||||||||||
Shares sold | 1,263,659 | $ | 24,274,006 | 2,859,161 | $ | 51,815,699 | |||||||
Shares issued on reinvestment | |||||||||||||
of distributions | 77,233 | 1,558,558 | 63,323 | 1,149,948 | |||||||||
Shares issued from merger | 325,790 | 6,431,095 | — | — | |||||||||
Shares redeemed | (1,603,481 | ) | (31,988,853 | ) | (3,834,905 | ) | (69,774,196 | ) | |||||
Net increase (decrease) | 63,201 | $ | 274,806 | (912,421 | ) | $ | (16,808,549 | ) |
* Unaudited. |
See accompanying Notes to Financial Statements.
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Purisima Total Return Fund
Financial Highlights
Financial Highlights
For a capital share outstanding throughout each period.
The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Semi-Annual Report.
Six | |||||||||||||||||||
Months | |||||||||||||||||||
Ended | Year Ended August 31, | ||||||||||||||||||
Feb. 28, | |||||||||||||||||||
2006++ | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||
Net asset value, beginning | |||||||||||||||||||
of period | $ | 19.03 | $ | 16.58 | $ | 15.31 | $ | 14.06 | $ | 18.73 | $ | 19.65 | |||||||
Income from investment | |||||||||||||||||||
operations: | |||||||||||||||||||
Net investment income | (0.02 | ) | 0.10 | 0.07 | 0.07 | 0.09 | 0.31^ | ||||||||||||
Net realized and | |||||||||||||||||||
unrealized gain (loss) | |||||||||||||||||||
on investments | 2.26 | 2.42 | 1.27 | 1.34 | (2.91 | ) | (0.61)^ | ||||||||||||
Total from investment | |||||||||||||||||||
operations | 2.24 | 2.52 | 1.34 | 1.41 | (2.82 | ) | (0.30)^ | ||||||||||||
Less distributions: | |||||||||||||||||||
From net investment | |||||||||||||||||||
income | (0.10 | ) | (0.07 | ) | (0.07 | ) | (0.05 | ) | (0.19 | ) | — | ||||||||
From net realized gain | — | — | — | (0.11 | ) | (1.66 | ) | (0.62 | ) | ||||||||||
Total distributions | (0.10 | ) | (0.07 | ) | (0.07 | ) | (0.16 | ) | (1.85 | ) | (0.62 | ) | |||||||
Net asset value, end of | |||||||||||||||||||
period | $ | 21.17 | $ | 19.03 | $ | 16.58 | $ | 15.31 | $ | 14.06 | $ | 18.73 | |||||||
Total return | 11.78 | %** | 15.20 | % | 8.72 | % | 10.22 | % | (16.72 | )% | (1.33 | )% | |||||||
Ratios/supplemental | |||||||||||||||||||
data: | |||||||||||||||||||
Net assets, end of | |||||||||||||||||||
period (millions) | $ | 363.4 | $ | 325.4 | $ | 298.6 | $ | 244.1 | $ | 181.6 | $ | 122.4 | |||||||
Ratio of expenses to | |||||||||||||||||||
average net assets: | |||||||||||||||||||
Before fees waived and | |||||||||||||||||||
expenses absorbed or | |||||||||||||||||||
recouped | 1.47 | %* | 1.46 | % | 1.49 | % | 1.56 | % | 1.51 | %† | 1.61 | %† | |||||||
After fees waived and | |||||||||||||||||||
expenses absorbed or | |||||||||||||||||||
recouped | 1.47 | %* | 1.49 | % | 1.50 | % | 1.50 | % | 1.50 | %† | 1.50 | %† | |||||||
Ratio of net investment | |||||||||||||||||||
income (loss) to | |||||||||||||||||||
average net assets # | (0.23 | )%* | 0.52 | % | 0.42 | % | 0.55 | % | 1.03 | % | 1.68 | % | |||||||
Portfolio turnover rate | 38.64 | %** | 16.68 | % | 19.50 | % | 12.57 | % | 60.76 | % | 105.90 | % |
* | Annualized. |
** | Not annualized. |
++ | Unaudited. |
# | Net of fees waived |
^ | Calculations are based on average shares outstanding for the period. |
† | With dividend expense on securities sold short, which was 0.10% for 2002 and 0.05% for 2001. Otherwise, ratio of net expenses to average net assets would be 1.50% for 2002 and 2001. |
See accompanying Notes to Financial Statements.
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Purisima Total Return Fund
Notes to Financial Statements
February 28, 2006 (Unaudited)
NOTE 1 - ORGANIZATION
The Purisima Funds (the ‘‘Trust’’) was organized as a Delaware business trust on June 27, 1996 and is registered under the Investment Company Act of 1940, as amended (the ‘‘1940 Act’’) as an open-end management investment company issuing its shares in series. Each series represents a distinct portfolio with its own investment objectives and policies. The Trust consists of two diversified series. The Purisima Total Return Fund (the ‘‘Fund’’), representing the initial series of the Trust, which commenced operations on October 28, 1996, is covered by this report. Fisher Asset Management, LLC (doing business as Fisher Investments) (the ‘‘Adviser’’) serves as the investment adviser to the Fund.
The investment objectives of the Total Return Fund is as follows:
The Fund seeks to produce a high level of total return. It invests primarily in common stocks and other equity-type securities, or securities acquired primarily to produce income, or a combination of both depending on the assessment of market conditions.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America.
A. | Security Valuation. Investments in securities traded on a national securities exchange are valued at the last sales price on the business day as of which such value is being determined. Investments in securities traded on the Nasdaq Stock Market, Inc. (‘‘Nasdaq’’) will be valued at the Nasdaq Official Closing Price, which may not necessarily represent the last sale price. Securities traded on an exchange or Nasdaq for which there have been no sales and other over-the- counter securities are valued at the closing bid. Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees or their designee, taking into consideration: (I) fundamental analytical data relating to the investment; (II) the nature and duration of restrictions on disposition of the securities; and (III) an evaluation of the forces which influence the market in which these securities are purchased and sold. Debt securities with remaining maturities of 60 days or less are valued at cost which, when combined with accrued interest, approximates market value. Discounts and Premiums on securities purchased are amortized over the lives of the respective securities using the straight-line method. |
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B. | Federal Income and Excise Taxes. The Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their income to its shareholders. Therefore, no federal income or excise tax provision is required. |
The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable based upon their current interpretations of the tax rules and regulation that exist in the markets in which they invest. |
C. | Security Transactions, Investment Income and Distributions. Security transactions are accounted for on trade date. Dividend income and distributions to shareholders are recorded on the ex-dividend date and interest income is recognized on the accrual basis. Realized gains and losses are evaluated on the bases of identified costs. |
D. | Use of estimates. The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions. |
E. | Concentration of Risk. Investments in securities of non-U.S. issues in certain countries involve special investment risks. These risks may include but are not limited to, investment restrictions, adverse political, social and economic developments, government involvement in the private sector, limited and less reliable investor information, lack of liquidity, certain local tax law considerations, and limited regulation of the securities markets. |
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F. | Options. Exchange traded options are valued at the last reported sale price at the close of the exchange on which the security is primarily traded. Certain markets are not closed at the time that a Fund prices portfolio securities. In these situations, snapshot prices are provided by the individual pricing services or other alternate sources at the close of the NYSE as appropriate. If no sales are reported, the mean between the last reported bid and asked prices will be used. Non-exchange traded options will also be valued at the mean between bid and asked prices. ‘‘Fair value’’ of other private options are valued after consulting with the Adviser using a mathematical model. |
Options purchased are recorded as investments; options written (sold) are accounted for as liabilities. When an option expires, the premium (original option value) is realized as a gain if the option was written or as a loss if the option was purchased. When the exercise of an option result in a cash settlement, the difference between the premium and the settlement proceeds is realized as a gain or loss. When securities are acquired or delivered upon exercise of an option, the acquisition cost or sale proceeds are adjusted by the amount of the premium. When an option is closed, the difference between the premium and the cost to close the position is realized as a gain or loss. The Fund may purchase options which are included in the Fund’s Schedules of Investments and subsequently marked to market to reflect the current value of the option. At February 28, 2006, the Fund had no options outstanding. |
G. | Securities Sold Short. To the extent the Fund engages in selling securities short, it is obligated to replace a security borrowed by purchasing the same security at the current market value. The Fund would incur a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund would realize a gain if the price of the security declines between those dates. |
The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Fund must also maintain a deposit with the broker consisting of cash having a value equal to a specified percentage of the value of the securities sold short. |
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H. | Indemnification Obligations. Under the Fund’s organizational documents, its current and former officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that has not yet occurred or that would be covered by other parties. |
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
The Fund has an Investment Management Agreement with the Adviser to provide investment advisory services to the Fund. The Adviser furnishes all investment advice, office space, facilities, and most of the personnel needed by the Fund. As compensation for its services, the Adviser is entitled to a monthly fee at the annual rate of 1.00% of the Fund’s average daily net assets.
The Fund is responsible for its own operating expenses. The Adviser has agreed to limit the Fund’s total expenses (exclusive of brokerage, interest, taxes, dividends on securities sold short and extraordinary expenses) to not more than 1.50% of the average daily net assets.
Any fee withheld or voluntarily reduced and/or any Fund expense absorbed by the Adviser pursuant to an agreed upon expense cap shall be reimbursed by the Fund to the Adviser, if so requested by the Adviser, anytime before the end of the third fiscal year following the year to which the fee reduction, waiver, or expense absorption relates, provided the aggregate amount of the Fund’s current operating expenses for such fiscal year does not exceed the applicable limitation on Fund expenses. Any such reimbursement is also contingent upon Board of Trustees review and approval prior to the time the reimbursement is also initiated. The Fund must pay its current ordinary operating expenses before the Adviser is entitled to any reimbursement of fees and/or expenses. For the six months ended February 28, 2006, the Adviser recouped fees previously waived and expenses absorbed of $31 from the Total Return Fund.
As of February 28, 2006, the Adviser has recouped all available reimbursements from the Total Return Fund.
U.S. Bancorp Fund Services, LLC (the ‘‘Administrator’’) acts as the Trust’s Administrator under an Administration Agreement. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the trustees; monitors the activities of the Fund custodian, transfer agent and accountants; coordinates the preparation and payment of Fund expenses and reviews the Fund’s expense accruals.
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For its services, the Administrator receives a monthly fee based on the value of the total average net assets of the Trust at an annual rate of 0.10% of the first $200 million of such net assets, 0.05% of the next $300 million, and 0.03% thereafter, subject to a minimum fee of $40,000 per Fund.
NOTE 4 - SERVICE AND DISTRIBUTION PLAN
The Trust has adopted a Service and Distribution Plan (the ‘‘Plan’’) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Total Return Fund is authorized to pay expenses incurred for the purpose of financing activities, including the employment of other dealers, intended to result in the sale of shares of the Fund. The fee accrues at an annual rate not to exceed 0.25% of the Fund’s average daily net assets. For the six months ended February 28, 2006, the Fund incurred $422,430 in distribution fees. Quasar Distributors, LLC, an affiliate of the Administrator, serves as distributor of the Fund pursuant to a Distribution Agreement with the Trust.
NOTE 5 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, excluding U.S. Government securities and short-term investments, for the six months ended February 28, 2006 were as follows:
Fund | Purchases | Sales | |||||
Total Return Fund | $ | 131,243,551 | $ | 140,845,011 |
NOTE 6 - FEDERAL INCOME TAX MATTERS
As of February 28, 2006, the components of distributable earnings on a tax basis were as follows:
Total Return | ||||
Cost of investments for tax purposes | $ | 273,312,537 | ||
Gross tax unrealized appreciation | $ | 94,124,149 | ||
Gross tax unrealized depreciation | $ | (4,431,186 | ) | |
Net tax unrealized appreciation | $ | 89,692,963 |
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Because tax adjustments are calculated annually, the above table reflects the tax adjustments outstanding at the Fund’s previous fiscal year end. For the previous fiscal year’s federal income tax information, please refer to the Notes to the Financial Statements section in the Fund’s most recent annual report.
As of August 31, 2005, the Total Return Fund has a capital loss carryforward available to offset future capital gains, if any, of $13,076,757, of which $11,619,847 expires in 2011, $338,881 expires in 2012 and $1,118,029 expires in 2013.
NOTE 7 - MERGER
At the close of November 18, 2005, the Purisima Total Return Fund (the ‘‘Acquiring Fund’’) acquired all the net assets of the Purisima Pure American Fund and the Purisima Pure Foreign Fund (the ‘‘Acquired Funds’’) in a tax-free exchange of shares pursuant to an agreement and plan of reorganization approved by the Acquired Funds’ shareholders. The number and value of shares issued by the Acquiring Fund are presented in the Acquiring Fund’s Schedule of Changes in Net Assets.
The Acquiring Fund issued 119,793 shares (valued at $2,364,717) for the Purisima Pure American Fund and issued 205,997 shares (valued at $4,066,378) for the Purisima Pure Foreign Fund during acquisition on November 18, 2005. The aggregate net assets of the Acquiring Fund immediately after the merger were $337,737,456.
NOTE 8 - PROXY VOTING PROCEDURES
The Adviser votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust’s Board of Trustees. You may obtain a description of these procedures, free of charge, by calling toll-free 1-800-841-0199. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
NOTE 9 - FORM N-Q DISCLOSURE
The Funds file its complete schedules of portfolio holdings with the SEC for the first and third fiscal quarters on Form N-Q. The Funds’ Form N-Q is available without charge, upon request, by calling 1-800-841-0199. Furthermore, you can obtain the Form N-Q on the SEC’s website at www.sec.gov.
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Other Information — Board Consideration of and Continuation of Investment Advisory Agreement (Unaudited)
On October 27, 2005, the Board of Trustees performed its annual review and renewal of the Investment Management Agreement for the Total Return Fund. The Board of Trustees, including the Independent Trustees, took into consideration information provided at the meeting, as well as a wide variety of materials relating to the services provided by the Adviser, including reports on each Fund’s investment results; portfolio composition; portfolio trading practices; and other information relating to the nature, extent and quality of services provided by Adviser to the Fund. In addition, the Board reviewed information regarding, as applicable, the Fund’s investment results, advisory fee and expense comparisons, financial and profitability information regarding the Adviser, descriptions of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management and administrative services to each Fund.
In deciding to renew the Agreement, the Board of Trustees did not identify any single issue or particular information that, in isolation, was the controlling factor. This summary describes the most important, but not all, of the factors considered by the Board.
1. Nature, Extent and Quality of Services
The Adviser, its personnel and its resources. The Board considered the depth and quality of the Adviser’s investment management process, including its sophisticated methodology; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; and the overall financial strength and stability of its organization. The Board discussed the quality of the product provided by the Adviser and noted that the Quarterly Report from the Adviser was extremely sophisticated and thorough. The Board commented on the quality of the independent capital markets research conducted by the Adviser and reported to the Board on a regular basis. The Board’s consensus was that the Adviser was open about its thinking on the management of the Fund and very available to address any questions or concerns the Board may have from time to time. The Board also considered that the Adviser made available to its investment professionals a variety of resources and systems relating to investment management, compliance, trading, performance and portfolio accounting. The Board further considered the Adviser’s continuing need to attract and retain qualified personnel and to maintain and enhance its resources and systems.
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Other Services. The Board considered the Adviser’s policies, procedures and systems to ensure compliance with applicable laws and regulations and its commitment to these programs; its efforts to keep the Trustees informed; and its attention to matters that may involve conflicts of interest with each Fund.
The Board concluded that the nature, extent and quality of the services provided by the Adviser has benefited and should continue to benefit each Fund and its shareholders.
2. Investment Performance
The Board considered the Fund’s pursuit of its investment objectives and the investment results of the Fund in light of its objective. The Trustees compared the Fund’s total returns with various independent mutual fund indices, and noted the favorable long-term performance of the Fund compared to its benchmark and its peers.
The Board ultimately concluded that the Adviser’s performance record in managing the Fund indicates that its continued management will benefit the Fund and its shareholders.
3. Advisory Fees and Total Expenses
The Board reviewed the advisory fees and total expenses of the Fund and compared such amounts with the average fee and expense levels of other funds in applicable peer fund indices. The Board observed that the Fund’s advisory fees and total expenses were reasonable compared to the median fee and expense levels of the other funds in the indices. The Board noted that, to date, the Adviser had waived significant fees in respect of the Total Return Fund that the Adviser would not be able to recoup, thus indicating a substantial investment by the Adviser in that Fund. The Board concluded that the reasonable level of the fees charged by the Adviser benefits the Fund and its shareholders. The Board then considered the fees charged to the Fund versus the Adviser’s private clients. The Board considered the extra burden of administration, compliance, deadlines, risk and regulations associated with the Fund that do not apply to the private accounts. The Board determined that the respective peer groups provided a better comparison and it found the Fund’s fees reasonable.
4. Adviser, Costs, Level of Profits and Economies of Scale
The Board reviewed information regarding the Adviser’s costs of providing services to the Fund, as well as the resulting level of profits to the Adviser. The Board considered the Adviser’s need to invest in technology, infrastructure and staff to reinforce and offer new services and to accommodate changing regulatory requirements. The Trustees noted that at its present asset size, breakpoints in the Fund’s advisory fee structure were not practicable, but that economies of scale in the cost of operations, to the extent they exist, effectively were being shared given the Adviser’s past waiver of fees in respect of the Fund. The Board concluded that the Fund’s cost structure is reasonable.
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5. Ancillary Benefits
The Board considered a variety of other benefits received by the Adviser, including possible ancillary benefits to its institutional management business. The Board reviewed the Adviser’s portfolio trading practices, noting that the Adviser receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the Fund, and other soft dollar research benefits.
6. Conclusions
Based on its review, including consideration of each of the factors referred to above, the Board concluded that the Agreement is fair and reasonable to the Fund and its shareholders, that the Fund’s shareholders received, and should receive, reasonable value in return for the advisory fees paid to the Adviser by the Fund, and that the renewal of the Agreement was in the best interests of the Fund and its shareholders.
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Trustees and Officer Information (Unaudited)
The Board of Trustees is responsible for the overall management of the Trust’s business. The Board approves all significant agreements between the Trust and persons or companies furnishing services to it, including all agreements with the Adviser, Administrator, Custodian and Transfer Agent. The Board of Trustees delegates the day-to-day operations of the Trust to its Officers, subject to the Funds’ investment objective and policies and to general supervision by the Board. The Statement of Additional Information includes additional information about the Trust’s Trustees and is available, without charge, by calling 1-800-841-0199.
The Trustees and Officers of the Trust, their business addresses and principal occupations during the past five years are:
Number of | ||||||||||
Portfolios in | ||||||||||
Fund | ||||||||||
Position(s) | Complex | Other | ||||||||
Held with | Principal Occupation(s) | Overseen by | Directorships | |||||||
Name, Address, Date of Birth | Trust | Year Elected1 | During Past Five Years | Director | Held | |||||
Kenneth L. Fisher* (born 1950) | President | 1996 | Chief Executive Officer and majority | 2 | None | |||||
13100 Skyline Blvd. | and Trustee | shareholder of the Adviser, and has | ||||||||
Woodside, CA 94062 | served in such capacities since the | |||||||||
incorporation of the Adviser in 1986. | ||||||||||
Prior thereto, he was the founder of | ||||||||||
Fisher Investments, a sole | ||||||||||
proprietorship which commenced | ||||||||||
operations in 1978. | ||||||||||
Pierson E. Clair III (born 1948) | Trustee | 1996 | President and Chief Executive Officer | 2 | Signature | |||||
13100 Skyline Blvd. | of Brown & Haley since 1998 (fine | Foods, Inc. | ||||||||
Woodside, CA 94062 | confectioners); Vice President of | |||||||||
Blummer Chocolate Company from | ||||||||||
1980 to 1997, where he had been | ||||||||||
employed since 1970. | ||||||||||
Scott LeFevre (born 1957) | Trustee | 2001 | Sole proprietor of LeFevre Capital | 2 | None | |||||
13100 Skyline Blvd. | Management, a registered investment | |||||||||
Woodside, CA 94062 | adviser. | |||||||||
Alfred D. McKelvy, Jr. | Trustee | 2003 | Executive Director of the law firm of | 2 | Diablo Valley | |||||
(born 1949) | Berding & Weil, LLP since 1990. | Bank; East | ||||||||
13100 Skyline Blvd. | Bay BOMA. | |||||||||
Woodside, CA 94062 |
24 & 25
Number of | ||||||||||
Portfolios in | ||||||||||
Fund | ||||||||||
Position(s) | Complex | Other | ||||||||
Held with | Principal Occupation(s) | Overseen by | Directorships | |||||||
Name, Address, Date of Birth | Trust | Year Elected1 | During Past Five Years | Director | Held | |||||
Bryan F. Morse (born 1952) | Trustee | 1996 | Sole proprietor of Bryan F. Morse, | 2 | None | |||||
13100 Skyline Blvd. | RIA, a registered investment adviser | |||||||||
Woodside, CA 94062 | since 1990. | |||||||||
Grover T. Wickersham | Trustee | 1996 | Attorney in private practice in Palo | 2 | None | |||||
(born 1949) | Alto, California. Prior to entering | |||||||||
13100 Skyline Blvd. Woodside, CA 94062 | private practice in June of 1981, served as a Branch Chief of the Los | |||||||||
Angeles Regional Office of the U.S. Securities and Exchange Commission. | ||||||||||
Tom Fishel (born 1960) | Chief | 2005 | Vice President and Chief Compliance | N/A | None | |||||
13100 Skyline Blvd. | Compliance | Officer of the Adviser. Vice President | ||||||||
Woodside, CA 94062 | Officer | of Charles Schwab & Co., Inc. from | ||||||||
1995 to 2004, where he had been | ||||||||||
employed since 1983. | ||||||||||
Joy Ausili (born 1966) | Secretary | 2004 | Vice President of U.S. Bancorp Fund | N/A | None | |||||
2020 East Financial Way | and | Services, LLC since 1997. | ||||||||
Glendora, CA 91741 | Assistant | |||||||||
Treasurer | ||||||||||
Rita Dam (born 1966) | Treasurer | 2004 | Vice President of U.S. Bancorp Fund | N/A | None | |||||
2020 East Financial Way | Services, LLC since 1994. | |||||||||
Glendora, CA 91741 |
1 | Trustees and officers of the Funds serve until their resignation, removal or retirement. |
* | ‘‘Interested person’’ of the Trust, as defined in the 1940 Act. |
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Privacy Notice
Fisher Asset Management, LLC (formerly, Fisher Investments, Inc.) and The Purisima Funds collect non-public information about you from the following sources:
• | Information we receive about you on applications or other forms; |
• | Information you give us orally; and |
• | Information about your transactions with us or others. |
We do not disclose any non-public personal information about our customers or former customers without the customer’s authorization, except as required by law or in response to inquiries from governmental authorities. We restrict access to your personal and account information to those employees who need to know that information to provide products and services to you. We also may disclose that information to unaffiliated third parties (such as to brokers or custodians) only as permitted by law and only as needed for us to provide agreed services to you. We maintain physical, electronic and procedural safeguards to guard your non-public personal information.
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[back cover]
The Purisima Funds
____________________________________________________________________________________________________________
Semi-Annual Report (Unaudited)
February 28, 2006
The Purisima All-Purpose Fund
A Letter to Our Shareholders
Welcome to the semi-annual report for the Purisima All-Purpose Fund for the six-month period ended February 28, 2006. The Fund commenced on November 1, 2005. It seeks high total return while also attempting to provide protection against declines in value of the US and foreign equity markets. During the period, this fund was primarily invested in US government securities.
Thank you for your continued interest and support.
Sincerely,
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Kenneth L. Fisher
Chairman and Chief Investment Officer
Fisher Investments
Opinions expressed above are those of Kenneth L. Fisher and are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security.
Fund holdings and sector allocations are subject to change and are not recommendations to buy or sell any security.
Mutual fund investing involves risk. Principal loss is possible. The Fund may use short sales of securities, which involve the risk that losses may exceed the original amount invested. The Fund may also use options and futures contracts, which have the risks of unlimited losses of the underlying holdings due to unanticipated market movements and failure to correctly predict the direction of securities prices, interest rates and currency exchange rates. The Fund may invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. The Fund may invest in debt securities which typically decrease in value when interest rates rise. This risk is greater for longer-term debt securities.
The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund. An investment in the Fund is not suitable for all investors.
This material must be preceded or accompanied by a prospectus.
Quasar Distributors, LLC, Distributor 04/06
SECTOR BREAKDOWN1
(Unaudited)
Purisima All-Purpose Fund
U.S. Treasury Obligations | 97.3 | % | ||
Mutual Funds | 2.7 | % | ||
Total | 100.0 | % |
1Percentage of Total Investments as of February 28, 2006.
Important Information
The following disclosure provides important information regarding the Fund’s Expense Example. Please refer to this information when reviewing the Expense Example for the Fund.
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees; and (2) ongoing costs, including management fees; and other fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period indicated and held for the entire period from November 1, 2005 (Inception) to February 28, 2006 for the All-Purpose Fund.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and assumed rates of return of 5% per year before expenses, which are not the Fund’s actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXPENSE EXAMPLE |
(Unaudited) |
Purisima All-Purpose Fund | Acutal | Hypothetical Performance | |||||
(Inception date: 11/01/2005) | Performance | (5% return before expenses) | |||||
Beginning Account Value (11/01/05) | $1,000.00 | $1,000.00 | |||||
Ending Account Value (02/28/06) | $1,016.00 | $1,011.41 | |||||
Expenses Paid During Period1 | $4.93 | $4.92 | |||||
1 Expenses are equal to the Fund's expense ratio for the four month period of 1.50% for the All-Purpose Fund multiplied by |
the average account value over the period, multiplied by 120/365 (to reflect the four month period). |
Purisima All-Purpose Fund |
Schedule of Investments |
February 28, 2006 (Unaudited) |
Principal | |||||||
Amount | Value | ||||||
U.S. TREASURY OBLIGATIONS - 192.1% | |||||||
U.S. Treasury Bill - 192.1% | |||||||
$ | 49,000 | 4.080%, 04/06/2006 | $ | 48,792 | |||
TOTAL U.S. TREASURY OBLIGATIONS (Cost $48,792) | 48,792 |
Shares | |||||||
MUTUAL FUNDS - 5.3% | |||||||
1,358 | SEI Daily Income Trust Government Fund | $ 1,358 | |||||
TOTAL MUTUAL FUNDS (Cost $1,358) | 1,358 | ||||||
TOTAL INVESTMENTS (Cost $50,150) - 197.4% | 50,150 | ||||||
Liabilities in Excess of Other Assets - (97.4)% | (24,747) | ||||||
TOTAL NET ASSETS - 100.0% | $ | 25,403 |
Footnotes |
Percentages are stated as a percent of net assets. |
See accompanying Notes to Financial Statements.
PURISIMA ALL-PURPOSE FUND |
STATEMENT OF ASSETS AND LIABILITIES at February 28, 2006 (Unaudited) |
All-Purpose Fund | ||||
ASSETS | ||||
Investments in securities, at cost | $ | 50,150 | ||
Investments in securities, at value | $ | 50,150 | ||
Receivables: | ||||
Dividends and interest | 29 | |||
Prepaid expenses | 13,938 | |||
Total Assets | 64,117 | |||
LIABILITIES | ||||
Due to Advisor (Note 3) | 8,464 | |||
Accrued administration fees (Note 3) | 3,288 | |||
Accrued transfer agent fees | 4,204 | |||
Accrued audit fees | 5,498 | |||
Accrued fund accounting fees | 7,827 | |||
Accrued reports to shareholders | 3,091 | |||
Other accrued expenses | 6,342 | |||
Total Liabilities | 38,714 | |||
NET ASSETS | $ | 25,403 | ||
Number of shares issued and outstanding | ||||
(unlimited shares authorized, $0.01 par value) | 2,515 | |||
Net asset value, offering and redemption price | ||||
per share | $ | 10.10 | ||
COMPONENTS OF NET ASSETS | ||||
Paid-in capital | $ | 25,148 | ||
Accumulated net investment income | 259 | |||
Accumulated net realized loss on investments | (4 | ) | ||
Net unrealized appreciation on investments | - | |||
Net assets | $ | 25,403 |
See accompanying Notes to Financial Statements.
PURISIMA ALL-PURPOSE FUND |
STATEMENT OF OPERATIONS |
For the period November 1, 2005 to February 28, 2006 (Unaudited) |
All-Purpose | ||||
Fund ^ | ||||
INVESTMENT INCOME | ||||
Income | ||||
Interest & other income | $ | 530 | ||
Total income | 530 | |||
Expenses | ||||
Advisory fees | 82 | |||
Administration fees | 13,041 | |||
Transfer agent fees | 5,454 | |||
Fund accounting fees | 10,338 | |||
Custody fees | 1,443 | |||
Insurance expense | 1,743 | |||
Reports to shareholders | 3,260 | |||
Registration fees | 7,498 | |||
Audit fees | 5,498 | |||
Legal fees | 4,631 | |||
Trustee fees | 1,630 | |||
Miscellaneous | 3,045 | |||
Total expenses | 57,663 | |||
Less: Reimbursement by Adviser | 57,540 | |||
Net expenses | 123 | |||
Net investment income | 407 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
ON INVESTMENTS | ||||
Net realized (loss) on investments | (4 | ) | ||
Change in net unrealized appreciation on investments | - | |||
Net (loss) on investments | (4 | ) | ||
Net increase in net assets resulting from operations | $ | 403 |
^ Inception date (11/01/2005).
See accompanying Notes to Financial Statements.
PURISIMA ALL-PURPOSE FUND |
STATEMENT OF CHANGES IN NET ASSETS |
For the Period | ||||
November 1, 2005 thru | ||||
DECREASE IN NET ASSETS FROM: | February 28, 2006 *^ | |||
OPERATIONS | ||||
Net investment income | $ | 407 | ||
Net realized loss on investments : | (4 | ) | ||
Change in net unrealized appreciation on investments | - | |||
Net increase in net assets resulting from operations | 403 | |||
DISTRIBUTION TO SHAREHOLDERS | ||||
From net investment income | (148 | ) | ||
Total distributions to shareholders | (148 | ) | ||
CAPITAL SHARE TRANSACTIONS | ||||
Net increase in net assets derived from net change in outstanding shares (a) | 25,148 | |||
Total increase in net assets | 25,403 | |||
NET ASSETS | ||||
Beginning of period | - | |||
End of period | $ | 25,403 | ||
Undistributed net investment income | $ | 259 |
(a) A summary of capital share transactions is as follows:
November 1, 2005 | |||||||
thru February 28, 2006 *^ | |||||||
Shares | Value | ||||||
Shares sold | 2,500 | $ | 25,000 | ||||
Shares issued on reinvestment of distributions | 15 | 148 | |||||
Shares redeemed | - | - | |||||
Net increase | 2,515 | $ | 25,148 | ||||
* Unaudited. |
^ Inception date (11/01/2005). |
See accompanying Notes to Financial Statements.
PURISIMA ALL-PURPOSE FUND |
FINANCIAL HIGHLIGHTS For a capital share outstanding throughout each period. |
The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Semi-Annual Report. |
For the Period November 1, 2005^ thru | |||||
Feb. 28, 2006++ | |||||
Net asset value, beginning of period | $ | 10.00 | |||
Income from investment operations: | |||||
Net investment income | 0.16 | ||||
Net realized and unrealized gain | |||||
(loss) on investments | (0.00 | ) | |||
Total from investment operations | 0.16 | ||||
Less distributions: | |||||
From net investment income | (0.06 | ) | |||
Total distributions | (0.06 | ) | |||
Net asset value, end of period | $ | 10.10 | |||
Total return | 1.60 | % | ** | ||
Ratios/supplemental data: | |||||
Net assets, end of period (thousands) | $ | 25.4 | |||
Ratio of expenses to average net assets: | |||||
Before fees waived | 703.06 | % | * | ||
After fees waived | 1.50 | % | * | ||
Ratio of net investment income (loss) | |||||
to average net assets # | 4.96 | % | * | ||
Portfolio turnover rate | 0.00 | % | ** |
* | Annualized. |
** | Not annualized. |
++ | Unaudited. |
# | Net of fees waived. |
^ | Inception date (11/01/2005). |
See accompanying Notes to Financial Statements.
PURISIMA ALL-PURPOSE FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 2006 (Unaudited)
NOTE 1 - ORGANIZATION
The Purisima Funds (the “Trust”) was organized as a Delaware business trust on June 27, 1996 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as an open-end management investment company issuing its shares in series. Each series represents a distinct portfolio with its own investment objectives and policies. The Trust consists of two diversified series. The Purisima All-Purpose Fund (the “Fund”), which commenced operations on November 1, 2005, will be covered in this report. Fisher Asset Management, LLC (doing business as Fisher Investments) (the “Adviser”) serves as the investment adviser to the Fund.
The investment objectives of the All-Purpose Fund is as follows:
The Fund seeks to provide protection against declines in the value of the U.S. and foreign equity markets. It invests in derivative securities, money market instruments and other securities, including U.S. and foreign common stocks, and fixed income securities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America.
A. | Security Valuation. Investments in securities traded on a national securities exchange are valued at the last sales price on the business day as of which such value is being determined. Investments in securities traded on the Nasdaq Stock Market, Inc. (“Nasdaq”) will be valued at the Nasdaq Official Closing Price, which may not necessarily represent the last sale price. Securities traded on an exchange or Nasdaq for which there have been no sales and other over-the-counter securities are valued at the closing bid. Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees or their designee, taking into consideration: (I) fundamental analytical data relating to the investment; (II) the nature and duration of restrictions on disposition of the securities; and (III) an evaluation of the forces which influence the market in which these securities are purchased and sold. Debt securities with remaining maturities of 60 days or less are valued at cost which, when combined with accrued interest, approximates market value. Discounts and Premiums on securities purchased are amortized over the lives of the respective securities using the straight-line method. |
B. | Federal Income and Excise Taxes. The Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their income to its shareholders. Therefore, no federal income or excise tax provision is required. |
PURISIMA ALL-PURPOSE FUND
The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable based upon their current interpretations of the tax rules and regulation that exist in the markets in which they invest.
C. | Security Transactions, Investment Income and Distributions. Security transactions are accounted for on the trade date. Dividend income and distributions to shareholders are recorded on the ex-dividend date and interest income is recognized on the accrual basis. Realized gains and losses are evaluated on the bases of identified costs. |
D. | Use of estimates. The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions. |
E. | Concentration of Risk. Investments in securities of non-U.S. issues in certain countries involve special investment risks. These risks may include but are not limited to, investment restrictions, adverse political, social and economic developments, government involvement in the private sector, limited and less reliable investor information, lack of liquidity, certain local tax law considerations, and limited regulation of the securities markets. |
F. | Options. Exchange traded options are valued at the last reported sale price at the close of the exchange on which the security is primarily traded. Certain markets are not closed at the time that a Fund prices portfolio securities. In these situations, snapshot prices are provided by the individual pricing services or other alternate sources at the close of the NYSE as appropriate. If no sales are reported, the mean between the last reported bid and asked prices will be used. Non-exchange traded options will also be valued at the mean between bid and asked prices. “Fair value” of other private options are valued after consulting with the Adviser using a mathematical model. |
Options purchased are recorded as investments; options written (sold) are accounted for as liabilities. When an option expires, the premium (original option value) is realized as a gain if the option was written or as a loss if the option was purchased. When the exercise of an option result in a cash settlement, the difference between the premium and the settlement proceeds is realized as a gain or loss. When securities are acquired or delivered upon exercise of an option, the acquisition cost or sale proceeds are adjusted by the amount of the premium. When an option is closed, the difference between the premium and the cost to close the position is realized as a gain or loss. The Trust may purchase options which are included in the Trust’s Schedules of Investments and subsequently marked to market to reflect the current value of the option. At February 28, 2006, the Trust had no options outstanding.
G. | Securities Sold Short. To the extent the Fund engages in selling securities short, they are obligated to replace a security borrowed by purchasing the same security at the current market value. The Fund would incur a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund would realize a gain if the price of the security declines between those dates. |
PURISIMA ALL-PURPOSE FUND
The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Fund must also maintain a deposit with the broker consisting of cash having a value equal to a specified percentage of the value of the securities sold short.
H. | Indemnification Obligations. Under the Fund’s organizational documents, its current and former officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that has not yet occurred or that would be covered by other parties. |
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
The Fund has an Investment Management Agreement with the Adviser to provide investment advisory services to the Fund. The Adviser furnishes all investment advice, office space, facilities, and most of the personnel needed by the Fund. As compensation for its services, the Adviser is entitled to a monthly fee at the annual rate of 1.00% of the Fund’s average daily net assets.
The Fund is responsible for its own operating expenses. The Adviser has agreed to limit the Fund’s total expenses (exclusive of brokerage, interest, taxes, dividends on securities sold short and extraordinary expenses) to not more than 1.50% of the average daily net assets.
Any fee withheld or voluntarily reduced and/or any Fund expense absorbed by the Adviser pursuant to an agreed upon expense cap shall be reimbursed by the Fund to the Adviser, if so requested by the Adviser, anytime before the end of the third fiscal year following the year to which the fee reduction, waiver, or expense absorption relates, provided the aggregate amount of the Fund’s current operating expenses for such fiscal year does not exceed the applicable limitation on Fund expenses. Any such reimbursement is also contingent upon Board of Trustees review and approval prior to the time the reimbursement is also initiated. The Fund must pay its current ordinary operating expenses before the Adviser is entitled to any reimbursement of fees and/or expenses.
As of February 28, 2006, the Adviser has reimbursed the All-Purpose Fund $57,540 to limit its total expenses to not more than 1.50% of the average daily net assets.
PURISIMA ALL-PURPOSE FUND
U.S. Bancorp Fund Services, LLC (the “Administrator”) acts as the Trust’s Administrator under an Administration Agreement. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the trustees; monitors the activities of the Fund custodian, transfer agent and accountants; coordinates the preparation and payment of Fund expenses and reviews the Fund’s expense accruals.
For its services, the Administrator receives a monthly fee based on the value of the total average net assets of the Trust at an annual rate of 0.10% of the first $200 million of such net assets, 0.05% of the next $300 million, and 0.03% thereafter, subject to a minimum fee of $40,000 per Fund.
NOTE 4 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, excluding U.S. Government securities and short-term investments, for the period November 1, 2005 to February 28, 2006 were as follows:
Fund | Purchases | Sales | ||
All-Purpose Fund | $ 0 | $ 0 |
The All-Purpose Fund purchased $100,214 and sold $51,883 in U.S. Government securities during the period November 1, 2005 to February 28, 2006.
NOTE 5 - FEDERAL INCOME TAX MATTERS
As of February 28, 2006, the components of distributable earnings on a tax basis were as follows:
All-Purpose | |
Cost of investments for tax purposes | $50,150 |
Gross tax unrealized appreciation | $0 |
Gross tax unrealized depreciation | $0 |
Net tax unrealized appreciation | $0 |
NOTE 6 - PROXY VOTING PROCEDURES
The Adviser votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust’s Board of Trustees. You may obtain a description of these procedures, free of charge, by calling toll-free 1-800-841-0199. This information is also available through the Securities and Exchange Commission’s website at http://www.sec.gov.
NOTE 7 - FORM N-Q DISCLOSURE
The Funds file its complete schedules of portfolio holdings with the SEC for the first and third fiscal quarters on Form N-Q. The Funds’ Form N-Q is available without charge, upon request, by calling 1-800-841-0199. Furthermore, you can obtain the Form N-Q on the SEC’s website at www.sec.gov.
Other Information -
BOARD CONSIDERATION OF AND CONTINUATION OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED)
On October 27, 2005, the Board of Trustees considered its initial approval of the Investment Management Agreement for the All Purpose Fund. The Board of Trustees, including the Independent Trustees, took into consideration information provided at the meeting, as well as a wide variety of materials relating to the services provided by the Adviser, including reports on the Adviser’s investment results; proposed portfolio composition; past portfolio trading practices for other mutual funds advised by the Adviser; and other information relating to the nature, extent and quality of services expected to be provided by the Adviser to the Fund. In addition, the Board reviewed information regarding, as applicable, the Fund’s advisory fee and expense comparisons, descriptions of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management and administrative services to the Fund.
In deciding to approve the Agreement, the Board of Trustees did not identify any single issue or particular information that, in isolation, was the controlling factor. This summary describes the most important, but not all, of the factors considered by the Board.
1. Nature, Extent and Quality of Services
The Adviser, its personnel and its resources. The Board considered the depth and quality of the Adviser’s investment management process, including its sophisticated methodology; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; and the overall financial strength and stability of its organization. The Board discussed the quality of the product provided by the Adviser and noted that the Quarterly Report from the Adviser with respect to its other mutual funds was extremely sophisticated and thorough. The Board commented on the quality of the independent capital markets research conducted by the Adviser and reported to the Board on a regular basis. The Board’s consensus was that the Adviser was open about its thinking on the management of the Fund and very available to address any questions or concerns the Board may have from time to time. The Board also considered that the Adviser made available to its investment professionals a variety of resources and systems relating to investment management, compliance, trading, performance and portfolio accounting. The Board further considered the Adviser’s continuing need to attract and retain qualified personnel and to maintain and enhance its resources and systems.
Other Services. The Board considered the Adviser’s policies, procedures and systems to ensure compliance with applicable laws and regulations and its commitment to these programs; its efforts to keep the Trustees informed; and its attention to matters that may involve conflicts of interest with the Fund.
The Board concluded that the nature, extent and quality of the services expected to be provided by the Adviser should benefit the Fund and its shareholders.
2. Investment Performance
The Fund had not yet commenced investment operations so the Board reviewed the Adviser’s investment performance for its other mutual funds, knowing that such information was only of limited value with respect to the Fund.
The Board ultimately concluded that the Adviser is likely to have investment performance in managing the Fund that will benefit the Fund and its shareholders.
3. Advisory Fees and Total Expenses
The Board reviewed the proposed advisory fees and total expenses of the Fund and compared such amounts with the average fee and expense levels of other funds in applicable peer fund indices. The Board observed that the Fund’s proposed advisory fees and total expenses were reasonable compared to the median fee and expense levels of the other funds, but also recognized the unique investment objective of the Fund and the absence of any close comparisons. The Board noted that the Adviser is likely to need to waived significant fees in respect of the Fund, thus indicating a substantial investment by the Adviser in that Fund. The Board concluded that the reasonable level of the fees charged by the Adviser benefits the Fund and its shareholders. The Board then considered the fees charged to the Fund versus the Adviser’s private clients. The Board considered the extra burden of administration, compliance, deadlines, risk and regulations associated with the Fund that do not apply to the private accounts. The Board determined that the respective peer groups provided a better comparison and it found the Fund’s fees reasonable.
4. Adviser, Costs, Level of Profits and Economies of Scale
The Board reviewed information regarding the Adviser’s likely costs of providing services to the Fund, as well as the resulting absence of profits to the Adviser. The Board considered the Adviser’s need to invest in technology, infrastructure and staff to reinforce and offer new services and to accommodate changing regulatory requirements. The Trustees noted that at its likely initial asset size, breakpoints in the Fund’s advisory fee structure were not practicable, but that economies of scale in the cost of operations, to the extent they might exist in the future, effectively would be shared given the Adviser’s initial likely waiver of fees in respect of the Fund. The Board concluded that the Fund’s cost structure is reasonable.
5. Ancillary Benefits
The Board considered a variety of other benefits possibly received by the Adviser, including possible ancillary benefits to its institutional management business. The Board reviewed the Adviser’s portfolio trading practices, noting that the Adviser may receive the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the Fund, and other soft dollar research benefits.
6. Conclusions
Based on its review, including consideration of each of the factors referred to above, the Board concluded that the Agreement would be fair and reasonable to the Fund and its shareholders, that the Fund’s shareholders should receive, reasonable value in return for the advisory fees paid to the Adviser by the Fund, and that the approval of the Agreement was in the best interests of the Fund and its shareholders.
Trustees and Officer Information (Unaudited)
The Board of Trustees is responsible for the overall management of the Trust’s business. The Board approves all significant agreements between the Trust and persons or companies furnishing services to it, including all agreements with the Adviser, Administrator, Custodian and Transfer Agent. The Board of Trustees delegates the day-to-day operations of the Trust to its Officers, subject to the Funds’ investment objective and policies and to general supervision by the Board. The Statement of Additional Information includes additional information about the Trust’s Trustees and is available, without charge, by calling 1-800-841-0199.
The Trustees and Officers of the Trust, their business addresses and principal occupations during the past five years are:
Name, Address, Date of Birth | Position(s) Held with Trust | Year Elected1 | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Director-ships Held | |
Kenneth L. Fisher* (born 1950) 13100 Skyline Blvd. Woodside, CA 94062 | President and Trustee | 1996 | Chief Executive Officer and majority shareholder of the Adviser, and has served in such capacities since the incorporation of the Adviser in 1986. Prior thereto, he was the founder of Fisher Investments, a sole proprietorship which commenced operations in 1978. | 2 | None | |
Pierson E. Clair III (born 1948) 13100 Skyline Blvd. Woodside, CA 94062 | Trustee | 1996 | President and Chief Executive Officer of Brown & Haley since 1998 (fine confectioners); Vice President of Blummer Chocolate Company from 1980 to 1997, where he had been employed since 1970. | 2 | Signature Foods, Inc. | |
Scott LeFevre (born 1957) 13100 Skyline Blvd. Woodside, CA 94062 | Trustee | 2001 | Sole proprietor of LeFevre Capital Management, a registered investment adviser. | 2 | None | |
Alfred D. McKelvy, Jr. (born 1949) 13100 Skyline Blvd. Woodside, CA 94062: | Trustee | 2003 | Executive Director of the law firm of Berding & Weil, LLP since 1990. | 2 | Diablo Valley Bank; East Bay BOMA. | |
Bryan F. Morse (born 1952) 13100 Skyline Blvd. Woodside, CA 94062 | Trustee | 1996 | Sole proprietor of Bryan F. Morse, RIA, a registered investment adviser since 1990. | 2 | None | |
Grover T. Wickersham (born 1949) 13100 Skyline Blvd. Woodside, CA 94062 | Trustee | 1996 | Attorney in private practice in Palo Alto, California. Prior to entering private practice in June of 1981, served as a Branch Chief of the Los Angeles Regional Office of the U.S. Securities and Exchange Commission. | 2 | None | |
Tom Fishel (born 1960) 13100 Skyline Blvd. Woodside, CA 94062 | Chief Compliance Officer | 2005 | Vice President and Chief Compliance Officer of the Adviser. Vice President of Charles Schwab & Co., Inc. from 1995 to 2004, where he had been employed since 1983. | N/A | None | |
Joy Ausili (born 1966) 2020 East Financial Way Glendora, CA 91741 | Secretary and Assistant Treasurer | 2004 | Vice President of U.S. Bancorp Fund Services, LLC since 1997. | N/A | None | |
Rita Dam (born 1966) 2020 East Financial Way Glendora, CA 91741 | Treasurer | 2004 | Vice President of U.S. Bancorp Fund Services, LLC since 1994. | N/A | None |
1 Trustees and officers of the Funds serve until their resignation, removal or retirement.
* “Interested person” of the Trust, as defined in the 1940 Act.
* “Interested person” of the Trust, as defined in the 1940 Act.
Privacy Notice
Fisher Asset Management, LLC (formerly, Fisher Investments, Inc.)and The Purisima Funds collect non-public information about you from the following sources:
· | Information we receive about you on applications or other forms; |
· | Information you give us orally; and |
· | Information about your transactions with us or others. |
We do not disclose any non-public personal information about our customers or former customers without the customer’s authorization, except as required by law or in response to inquiries from governmental authorities. We restrict access to your personal and account information to those employees who need to know that information to provide products and services to you. We also may disclose that information to unaffiliated third parties (such as to brokers or custodians) only as permitted by law and only as needed for us to provide agreed services to you. We maintain physical, electronic and procedural safeguards to guard your non-public personal information.
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable to open-end investment companies.
Item 6. Schedule of Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) | The Registrant’s President/Chief Executive Officer and Treasurer/Chief Financial Officer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(b) | There were no significant changes in the Registrant's internal controls over financial reporting that occurred during the Registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Incorporated by reference to the Registrant’s Form N-CSR filed November 10, 2003. |
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(b) | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | The Purisima Funds | |
By (Signature and Title) | /s/ Kenneth L. Fisher | |
Kenneth L. Fisher, President |
Date: | 05/09/2006 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Kenneth L. Fisher | |
Kenneth L. Fisher, President | ||
Date: 05/09/2006 | ||
By (Signature and Title)* | /s/ RITA DAM | |
Rita Dam, Treasurer | ||
Date: | 05/01/2006 | |
* Print the name and title of each signing officer under his or her signature.