UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07737
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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
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Registrant's telephone number, including area code
Date of fiscal year end: AUGUST 31, 2005
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Date of reporting period: AUGUST 31, 2005
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ITEM 1. REPORT TO STOCKHOLDERS.
The Purisima Funds
ANNUAL REPORT
AUGUST 31, 2005 [GRAPHIC]
The Purisima Total Return Fund
The Purisima Pure American Fund
The Purisima Pure Foreign Fund
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TABLE OF CONTENTS
A Letter to Our Shareholders 2
Performance Summaries
Total Return Fund 5
Pure American Fund 6
Pure Foreign Fund 7
Sector Breakdown 8
Expense Example 9
Schedule of Investments
Total Return Fund 11
Pure American Fund 15
Pure Foreign Fund 18
Statements of Assets and Liabilities 22
Statements of Operations 23
Statement of Changes in Net Assets
Total Return Fund 24
Pure American Fund 25
Pure Foreign Fund 26
Financial Highlights
Total Return Fund 27
Pure American Fund 28
Pure Foreign Fund 29
Notes to Financial Statements 30
Report of Independent Registered Public Accounting Firm 36
Other Information 38
Trustee and Officer Information 42
Privacy Notice 46
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INVESTMENT OBJECTIVES
PURISIMA TOTAL RETURN FUND
Seeks to provide investors with a high level of total
return by considering both domestic and foreign securities.
PURISIMA PURE AMERICAN FUND
Seeks to provide investors with a high level of total return, while
concentrating its holdings in U.S. securities.
PURISIMA PURE FOREIGN FUND
Seeks to provide investors with a high level of total return, while
concentrating its holdings in securities outside the U.S.
EACH 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 FUNDS WILL NOT ACCEPT YOUR ACCOUNT IF YOU ARE INVESTING
FOR ANOTHER PERSON AS ATTORNEY-IN-FACT. THE FUNDS 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 annual report for the Purisima Funds for the twelve-month period
ended August 31, 2005. The Funds remained fully invested in equities throughout
the period, participating in strong gains. After posting healthy returns through
the end of 2004, major equity indexes only gained modest ground to date in 2005.
More recently, we feel encouraging signs are emerging that the positive
fundamental backdrop for equities is translating into further forward momentum
in share prices. We remain optimistic in the near term, as we believe key
bullish factors we have identified have yet to be fully recognized by market
participants.
MARKET REVIEW AND OUTLOOK:
Global equities posted strong gains in the final third of 2004 but have remained
range-bound thus far in 2005. Sentiment has been gloomier than fundamentals
seemingly justify, but we expect this pessimism will dissipate, and equities
will experience gains over the next six months.
We see a variety of positive factors not yet adequately factored into pricing
that should drive stock price looking forward:
o Corporate earnings continue to materially exceed expectations.
o Global long-term bond yields remain benign causing equities to be
increasingly attractive relative to fixed income alternatives.
o Corporate balance sheets are in excellent health and have great
capacity for re-leveraging through share buybacks, increased
dividends, and acquisitions.
o The push for further market-based reforms is proceeding in
significant economies such as Japan and Germany.
While the macro picture appears bright to us, risk factors remain. Some of the
more significant ones in our estimation include the increased interest in the US
Congress for protectionist measures in response to global competition, and the
vulnerability of private property rights following the Kelo decision in the US
Supreme Court.
On balance, however, we feel the period ahead should be favorable for stocks
globally.
2
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PORTFOLIO POSITIONING
Based on our bullish outlook, the Funds are fully invested in equities. At the
sub-asset allocation level, we believe the Funds are positioned to thrive in a
more volatile, rising environment. Important sector overweights include Energy
and Technology. The Energy weights were increased during the period due to our
expectation that energy prices would remain firm, while others anticipated a
decline. Technology stocks should respond well to robust capital spending and
business investment.
The Total Return Fund is overweight US stocks. In US dollar terms, foreign
stocks have outperformed for over three years despite slower economic growth.
The current superiority of the US economy should soon be reflected in share
prices. Our outlook for a strengthening dollar also supports this theme. The
Fund is also materially overweight Japan. Japan's economy has shown strong signs
of growth tied to increased capital spending, exports, and domestic consumption.
Its banking industry has also undergone significant improvement, and the decade
long deflationary spiral appears over.
The largest country underweight in the Pure Foreign and Total Return Funds
remains the United Kingdom. Australia and Canada are also below benchmark
weight. In our opinion, these countries generally exhibit higher inflation
expectations, tighter monetary conditions, and less favorable sector allocations
than other major markets.
Stylistically, the Funds are fairly neutral in terms of average market
capitalization and relative valuations versus their respective benchmarks,
although it would not be surprising to see a style shift occur in coming months.
CONCLUSION
The last year produced solid absolute returns with relatively little volatility.
We expect the ride to get bumpier, but we also anticipate that global equity
markets will rise over the months ahead.
Bullish fundamentals abound, yet investors are still primarily focused on
perceived negatives. This has muted gains so far in 2005, but we believe such
dour sentiment should eventually fade in the face of positive realities driving
corporate and economic performance. We believe the Funds are optimally
positioned to capitalize on such circumstances.
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Thank you for your continued interest and support.
Sincerely,
/s/ KENNETH L. FISHER
- ---------------------
Kenneth L. Fisher
Chairman and Chief Investment Officer
Fisher Asset Management, LLC.
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. 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.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS. PLEASE READ IT
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
QUASAR DISTRIBUTORS, LLC, DISTRIBUTOR 10/05
4
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PERFORMANCE SUMMARIES
FOR YEAR ENDED AUGUST 31, 2005
PURISIMA TOTAL RETURN FUND
GROWTH OF $10,000.
PURISIMA TOTAL RETURN FUND CUMULATIVE TOTAL RETURN VERSUS MSCI WORLD INDEX
$10,000 INVESTED FROM INCEPTION ON 10/31/96 TO 8/31/05*
[The following table was represented as a line graph in the printed material.]
TOTAL MSCI WORLD
RETURN INDEX
31-Oct-96 10,000 10,000
28-Feb-97 10,480 10,629
31-Aug-97 11,870 11,693
28-Feb-98 13,576 13,190
31-Aug-98 12,494 12,130
28-Feb-99 16,305 14,866
31-Aug-99 17,498 16,141
29-Feb-00 19,198 17,651
31-Aug-00 19,709 18,258
28-Feb-01 18,970 15,135
31-Aug-01 19,448 13,611
28-Feb-02 19,594 12,952
31-Aug-02 16,196 11,273
28-Feb-03 14,376 10,286
31-Aug-03 17,851 12,504
29-Feb-04 20,601 14,847
31-Aug-04 19,407 14,455
28-Feb-05 21,946 16,628
31-Aug-05 22,357 17,073
PURISIMA TOTAL RETURN FUND
ONE-YEAR
Average Annual Total Return(2)** 15.20%
FIVE-YEAR
Average Annual Total Return(2)** 2.55%
SINCE INCEPTION (10/28/96)
Cumulative Total Return(1)** 123.57%
Average Annual Total Return(2)** 9.52%
MSCI WORLD INDEX*
ONE-YEAR
Average Annual Total Return(2)** 18.11%
FIVE-YEAR
Average Annual Total Return(2)** (1.33%)
SINCE INCEPTION (10/28/96)
Cumulative Total Return(1)** 70.73%
Average Annual Total Return(2)** 6.23%
Please note past performance is not predictive of future results. SHARE PRICE
AND RETURN WILL FLUCTUATE, AND INVESTORS MAY EXPERIENCE A GAIN OR LOSS WHEN THEY
SELL THEIR SHARES. TO OBTAIN A PROSPECTUS ON THE PURISIMA FUNDS PLEASE CALL
1-800-841-0199. THE PROSPECTUS CONTAINS MORE INFORMATION, INCLUDING THE
POLITICAL, ECONOMIC, CURRENCY RISKS AND POTENTIAL VOLATILITY OF FOREIGN
INVESTING. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
1 Cumulative total return measures the change in value of an investment over
the periods indicated and reflects all fund fees and expenses.
2 Average annual total return represents the average annual change in value
of an investment over the periods indicated and reflects all fund fees and
expenses. Average annual total return and cumulative total return for the
one-year period would be identical.
* The MSCI World is obtained from Morgan Stanley. It is an unmanaged global
stock index comprised of various world stock markets, including the U.S.
The total return of a Fund's $10,000 investment includes all expenses.
month-end inception was 10/31/96 with actual inception on 10/28/96.
** The total returns shown do not reflect the deduction of taxes a
shareholder would pay on fund distributions or redemption of fund shares.
The total return reflects the rate an investment would have earned (or
lost) on an investment in the Fund, assuming reinvestment of all dividends
and distributions.
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PERFORMANCE SUMMARIES
FOR YEAR ENDED AUGUST 31, 2005
PURISIMA PURE AMERICAN FUND
GROWTH OF $10,000.
PURE AMERICAN FUND CUMULATIVE TOTAL RETURN VERSUS S&P 500 INDEX $10,000 INVESTED
FROM INCEPTION ON 9/30/98 TO 8/31/05*
[The following table was represented as a line chart in the printed material.]
PURE S&P 500
AMERICAN INDEX
28-Feb-99 12,630 12,242
31-Aug-99 13,000 13,137
29-Feb-00 12,333 13,677
31-Aug-00 13,493 15,282
28-Feb-01 13,774 12,557
31-Aug-01 13,757 11,556
28-Feb-02 14,118 11,363
31-Aug-02 11,844 9,476
28-Feb-03 10,635 8,786
31-Aug-03 12,899 10,621
29-Feb-04 14,492 12,171
31-Aug-04 13,864 11,837
28-Feb-05 15,478 13,018
31-Aug-05 15,715 13,322
PURISIMA PURE AMERICAN FUND
ONE-YEAR
Average Annual Total Return(2)** 13.35%
FIVE-YEAR
Average Annual Total Return(2)** 3.10%
SINCE INCEPTION (9/30/98)
Cumulative Total Return(1)** 57.15%
Average Annual Total Return(2)** 6.74%
S&P 500 INDEX*
ONE-YEAR
Average Annual Total Return(2)** 12.55%
FIVE-YEAR
Average Annual Total Return(2)** (2.71%)
SINCE INCEPTION (9/30/98)
Cumulative Total Return(1)** 33.22%
Average Annual Total Return(2)** 4.23%
Please note past performance is not predictive of future results. SHARE PRICE
AND RETURN WILL FLUCTUATE, AND INVESTORS MAY EXPERIENCE A GAIN OR LOSS WHEN THEY
SELL THEIR SHARES. TO OBTAIN A PROSPECTUS ON THE PURISIMA FUNDS PLEASE CALL
1-800-841-0199. THE PROSPECTUS CONTAINS MORE INFORMATION, INCLUDING THE
POLITICAL, ECONOMIC, CURRENCY RISKS AND POTENTIAL VOLATILITY OF FOREIGN
INVESTING. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
1 Cumulative total return measures the change in value of an investment over
the periods indicated and reflects all fund fees and expenses.
2 Average annual total return represents the average annual change in value
of an investment over the periods indicated and reflects all fund fees and
expenses. Average annual total return and cumulative total return for the
one-year period would be identical.
* The S&P 500 is obtained from Standard & Poors Corp. It is an unmanaged
stock index that measures the performance of 500 large cap companies
traded in the U.S. The total return of a $10,000 investment in Purisima
includes all expenses. Fund's month-end inception was 9/30/98 with actual
inception on 9/29/98.
** The total returns shown do not reflect the deduction of taxes a
shareholder would pay on fund distributions or redemption of fund shares.
The total return reflects the rate an investment would have earned (or
lost) on an investment in the Fund, assuming reinvestment of all dividends
and distributions.
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PERFORMANCE SUMMARIES
FOR YEAR ENDED AUGUST 31, 2005
PURISIMA PURE FOREIGN FUND
GROWTH OF $10,000.
PURE FOREIGN FUND CUMULATIVE TOTAL RETURN VERSUS MSCI EAFE FOREIGN INDEX $10,000
INVESTED FROM INCEPTION ON 9/30/98 TO 8/31/05*
[The following table was represented as a line chart in the printed material.]
PURE MSCI EAFE
FOREIGN INDEX
28-Feb-99 11,750 11,742
31-Aug-99 13,520 12,963
29-Feb-00 17,290 14,732
31-Aug-00 17,311 14,204
28-Feb-01 16,428 12,170
31-Aug-01 17,233 10,722
28-Feb-02 17,528 9,829
31-Aug-02 15,313 9,119
28-Feb-03 13,621 8,113
31-Aug-03 16,990 9,951
29-Feb-04 20,917 12,459
31-Aug-04 20,193 12,201
28-Feb-05 24,240 14,786
31-Aug-05 24,913 15,081
PURISIMA PURE FOREIGN FUND
ONE-YEAR
Average Annual Total Return(2)** 23.38%
FIVE-YEAR
Average Annual Total Return(2)** 7.55%
SINCE INCEPTION (9/30/98)
Cumulative Total Return(1)** 149.13%
Average Annual Total Return(2)** 14.09%
MSCI EAFE INDEX*
ONE-YEAR
Average Annual Total Return(2)** 23.60%
FIVE-YEAR
Average Annual Total Return(2)** 1.21%
SINCE INCEPTION (9/30/98)
Cumulative Total Return(1)** 50.81%
Average Annual Total Return(2)** 6.11%
Please note past performance is not predictive of future results. SHARE PRICE
AND RETURN WILL FLUCTUATE, AND INVESTORS MAY EXPERIENCE A GAIN OR LOSS WHEN THEY
SELL THEIR SHARES. TO OBTAIN A PROSPECTUS ON THE PURISIMA FUNDS PLEASE CALL
1-800-841-0199. THE PROSPECTUS CONTAINS MORE INFORMATION, INCLUDING THE
POLITICAL, ECONOMIC, CURRENCY RISKS AND POTENTIAL VOLATILITY OF FOREIGN
INVESTING. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
1 Cumulative total return measures the change in value of an investment over
the periods indicated and reflects all fund fees and expenses.
2 Average annual total return represents the average annual change in value
of an investment over the periods indicated and reflects all fund fees and
expenses. Average annual total return and cumulative total return for the
one-year period would be identical.
* The MSCI EAFE Index is obtained from Morgan Stanley. It is an unmanaged
stock index that measures the performance of selected stock markets
outside the U.S. The total return of a $10,000 investment includes all
expenses. Fund's month-end inception was 9/30/98 with actual inception on
9/29/98.
** The Total Returns shown do not reflect the deduction of taxes a
shareholder would pay on fund distributions or redemption of fund shares.
The total return reflects the rate an investment would have earned (or
lost) on an investment in the Fund, assuming reinvestment of all dividends
and distributions.
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SECTOR BREAKDOWN(1)
PURISIMA TOTAL RETURN FUND
---------------------------------------
Basic Materials 2.4%
Communications 7.3%
Consumer, Cyclical 7.9%
Consumer, Non-cyclical 7.3%
Energy 15.4%
Financial 27.6%
Industrial 17.0%
Technology 12.6%
Utilities 2.2%
Short-Term Investment 0.3%
Total 100.0%
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PURISIMA PURE AMERICAN FUND
---------------------------------------
Communications 10.9%
Consumer, Cyclical 7.0%
Consumer, Non-cyclical 14.1%
Energy 16.8%
Financial 21.5%
Industrial 12.4%
Technology 16.7%
Short-Term Investment 0.6%
Total 100.0%
---------------------------------------
PURISIMA PURE FOREIGN FUND
---------------------------------------
Basic Materials 4.0%
Communications 7.6%
Consumer, Cyclical 13.3%
Consumer, Non-cyclical 8.3%
Energy 14.1%
Financial 31.9%
Industrial 15.1%
Technology 5.7%
Total 100.0%
---------------------------------------
1 % of Total Investments as of August 31, 2005.
8
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IMPORTANT INFORMATION
The following disclosure provides important information regarding the Funds'
Expense Example. Please refer to this information when reviewing the Expense
Example for the Funds.
EXPENSE EXAMPLE
As a shareholder of the Funds, 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 (Total Return Fund only); and
other fund expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Funds and to compare these costs
with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period indicated and held for the entire period from March 1, 2005 to August 31,
2005.
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 Funds' actual expense ratios and assumed
rates of return of 5% per year before expenses, which are not the Funds' actual
returns. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Funds and other 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.
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EXPENSE EXAMPLE (UNAUDITED)
ACTUAL HYPOTHETICAL PERFORMANCE
PURISIMA TOTAL RETURN FUND PERFORMANCE (5% RETURN BEFORE EXPENSES)
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Beginning Account
Value (03/01/05) $1,000.00 $1,000.00
Ending Account
Value (08/31/05) $1,018.70 $1,017.80
Expenses Paid
During Period(1) $ 7.48 $ 7.48
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ACTUAL HYPOTHETICAL PERFORMANCE
PURISIMA PURE AMERICAN FUND PERFORMANCE (5% RETURN BEFORE EXPENSES)
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Beginning Account
Value (03/01/05) $1,000.00 $1,000.00
Ending Account
Value (08/31/05) $1,015.30 $1,017.64
Expenses Paid
During Period(1) $ 7.62 $ 7.63
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ACTUAL HYPOTHETICAL PERFORMANCE
PURISIMA PURE FOREIGN FUND PERFORMANCE (5% RETURN BEFORE EXPENSES)
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Beginning Account
Value (03/01/05) $1,000.00 $1,000.00
Ending Account
Value (08/31/05) $1,027.80 $1,017.64
Expenses Paid
During Period(1) $ 7.67 $ 7.63
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1 Expenses are equal to the Funds' expense ratio for the six month period of
1.47% for the Total Return Fund and 1.50% for the Pure American Fund and
Pure Foreign Fund multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one half year period).
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PURISIMA TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 2005
SHARES VALUE
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COMMON STOCKS: 99.7%
AEROSPACE & DEFENSE: 4.0%
136,200 Honeywell International, Inc. $ 5,213,736
49,600 Lockheed Martin Corp. 3,087,104
95,000 United Technologies Corp. 4,750,000
------------
13,050,840
------------
AIR FREIGHT & LOGISTICS: 1.4%
53,400 FedEx Corp. 4,348,896
------------
AIR TRANSPORTATION, SCHEDULED: 0.6%
134,500 Japan Airlines Corp. - ADR 1,881,924
------------
AUTOMOBILES: 1.6%
246,000 Nissan Motor Co., Ltd. - ADR 5,188,140
------------
CAPITAL MARKETS: 9.1%
158,500 Credit Suisse Group - ADR 6,913,770
43,600 Goldman Sachs Group, Inc. 4,847,448
67,600 Lehman Brothers Holdings, Inc. 7,142,616
68,900 Morgan Stanley Dean Witter & Co. 3,504,943
234,000 Nomura Holdings, Inc. - ADR 3,219,840
48,600 UBS AG 3,990,060
------------
29,618,677
------------
CHEMICALS: 1.6%
74,600 BASF AG - ADR 5,262,284
------------
COMMERCIAL BANKS: 9.5%
437,100 Banco Santander Central Hispano S.A. - ADR 5,389,443
100,700 Barclays Plc - ADR 4,058,210
39,500 Comerica, Inc. 2,389,355
63,000 HSBC Holdings Plc - ADR 5,092,920
425,600 Mitsubishi Tokyo Financial Group, Inc. - ADR 4,404,960
38,100 SunTrust Banks, Inc. 2,677,668
79,800 Wachovia Corp. 3,959,676
374,000 Sumitomo Mitsui Financial Group, Inc. - ADR 3,035,496
------------
31,007,728
------------
COMMUNICATIONS EQUIPMENT: 1.3%
243,900 Cisco Systems, Inc.* 4,297,518
------------
See accompanying Notes to Financial Statements. 11
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SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS: 4.3%
116,700 Dell Computer Corp.* $ 4,154,520
343,400 EMC Corp.* 4,416,124
66,800 International Business Machines Corp. 5,385,416
------------
13,956,060
------------
CONCRETE PRODUCTS, EXCEPT BLOCK AND BRICK: 1.5%
208,500 Lafarge S.A. - ADR 4,895,580
------------
CONSTRUCTION MACHINERY AND EQUIPMENT: 0.9%
62,900 Komatsu, Ltd. - ADR 2,773,292
------------
CONSUMER FINANCE: 2.4%
72,000 American Express Co. 3,977,280
47,700 ORIX Corp. - ADR 3,935,250
------------
7,912,530
------------
DIVERSIFIED FINANCIAL SERVICES: 1.1%
123,771 ING Groep N.V. - ADR 3,616,588
------------
DIVERSIFIED TELECOMMUNICATION SERVICES: 2.1%
59,700 Alltel Corp. 3,700,803
61,256 Telefonica S.A. - ADR 3,049,324
------------
6,750,127
------------
ELECTRONIC COMPUTERS: 1.5%
79,800 Hitachi, Ltd. - ADR 4,912,488
------------
ENERGY EQUIPMENT & SERVICES: 4.1%
124,900 Baker Hughes, Inc. 7,337,875
101,600 Transocean Sedco Forex, Inc.* 5,998,464
------------
13,336,339
------------
HOUSEHOLD DURABLES: 2.0%
240,700 Matsushita Electric Industrial Co., Ltd. - ADR 4,221,878
66,200 Sony Corp. - ADR 2,225,644
------------
6,447,522
------------
HOUSEHOLD PRODUCTS: 1.9%
54,700 Kimberly-Clark Corp. 3,408,904
49,200 Procter & Gamble Co. 2,729,616
------------
6,138,520
------------
INDUSTRIAL CONGLOMERATES: 3.0%
71,700 General Electric Co. 2,409,837
42,800 Siemens AG - ADR 3,274,200
146,400 Tyco International, Ltd. 4,074,312
------------
9,758,349
------------
INSURANCE: 4.3%
88,900 Allstate Corp. 4,997,069
81,544 American International Group, Inc. 4,827,405
159,600 Axa S.A. - ADR 4,261,320
------------
14,085,794
------------
12 See accompanying Notes to Financial Statements.
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SHARES VALUE
- --------------------------------------------------------------------------------
MACHINERY: 4.8%
172,200 Caterpillar, Inc. $ 9,555,378
55,200 Illinois Tool Works, Inc. 4,652,256
45,600 Kubota Corp. - ADR 1,420,440
------------
15,628,074
------------
MEDIA: 2.8%
222,100 Time Warner, Inc. 3,980,032
201,900 Walt Disney Co. 5,085,861
------------
9,065,893
------------
METALS SERVICE CENTERS AND OFFICES: 0.8%
11,900 Mitsui & Co., Ltd. - ADR 2,469,488
------------
MOTOR VEHICLES AND PASSENGER CAR BODIES: 0.5%
38,100 Fuji Heavy Industries, Ltd. - ADR 1,648,995
------------
MULTI-UTILITIES & UNREGULATED POWER: 0.8%
93,400 Duke Energy Corp. 2,707,666
------------
NATIONAL COMMERCIAL BANKS: 1.1%
126,996 Sanpaolo IMI SpA - ADR 3,658,755
------------
OIL & GAS: 11.3%
72,500 Anadarko Petroleum Corp. 6,588,075
63,300 Chevron Corp. 3,886,620
93,400 ConocoPhillips 6,158,796
63,600 Occidental Petroleum Corp. 5,280,708
114,600 Royal Dutch Shell Plc - ADR 7,444,416
56,857 Total S.A. - ADR 7,496,027
------------
36,854,642
------------
PAPER & FOREST PRODUCTS: 0.7%
77,600 International Paper Co. 2,393,960
------------
PETROLEUM REFINING: 1.4%
141,600 E.ON AG - ADR 4,517,040
------------
PHARMACEUTICALS: 5.4%
81,500 AstraZeneca Plc - ADR 3,758,780
90,400 GlaxoSmithKline Plc - ADR 4,404,288
57,100 Johnson & Johnson 3,619,569
42,200 Merck & Co., Inc. 1,191,306
107,280 Sanofi-Aventis - ADR 4,587,293
------------
17,561,236
------------
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT: 4.6%
167,400 Intel Corp. 4,305,528
111,200 KLA-Tencor Corp. 5,644,512
156,900 Texas Instruments, Inc. 5,127,492
------------
15,077,532
------------
See accompanying Notes to Financial Statements. 13
LOGO----------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
SOFTWARE: 3.7%
196,400 Microsoft Corp. $ 5,381,360
324,200 Oracle Corp.* 4,204,874
308,000 Siebel Systems, Inc. 2,541,000
------------
12,127,234
------------
SPECIALTY RETAIL: 2.5%
175,000 Gap, Inc. 3,326,750
72,400 Lowe's Companies, Inc. 4,656,044
------------
7,982,794
------------
TELEPHONE COMMUNICATIONS: 1.1%
92,000 BT Group Plc - ADR 3,598,120
------------
TOTAL COMMON STOCKS
(cost $263,285,670) $324,530,625
------------
SHORT-TERM INVESTMENT: 0.3%
930,290 SEI Daily Income Trust Government Fund $ 930,290
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $930,290) 930,290
------------
TOTAL INVESTMENTS
(cost $264,215,960): 100.0% 325,460,915
Liabilities in Excess of Other Assets: 0.0% (36,744)
------------
NET ASSETS: 100.0% $325,424,171
============
- ----------
ADR - American depositary receipt.
* Non-income producing security.
14 See accompanying Notes to Financial Statements.
- ----------------------------------------------------------------------------LOGO
PURISIMA PURE AMERICAN FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 2005
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS: 99.3%
AEROSPACE & DEFENSE: 4.3%
1,300 Honeywell International, Inc. $ 49,764
300 Lockheed Martin Corp. 18,672
725 Northrop Grumman Corp. 40,665
------------
109,101
------------
AIR FREIGHT & LOGISTICS: 1.1%
350 FedEx Corp. 28,504
------------
BEVERAGES: 1.3%
750 Coca-Cola Co.(The) 33,000
------------
CAPITAL MARKETS: 9.2%
350 Goldman Sachs Group, Inc. 38,913
325 Lehman Brothers Holdings, Inc. 34,340
725 Merrill Lynch & Co, Inc. 41,441
1,000 Morgan Stanley Dean Witter & Co. 50,870
1,050 T. Rowe Price Group, Inc. 66,150
------------
231,714
------------
COMMERCIAL BANKS: 6.0%
1,075 Bank of America Corp. 46,257
725 Comerica, Inc. 43,855
350 UnionBanCal Corp. 23,720
750 Wachovia Corp. 37,215
------------
151,047
------------
COMMERCIAL SERVICES & SUPPLIES: 1.3%
1,600 Cendant Corp. 32,544
------------
COMMUNICATIONS EQUIPMENT: 4.8%
2,475 Cisco Systems, Inc.* 43,609
1,800 Motorola, Inc. 39,384
1,000 Scientific-Atlanta, Inc. 38,260
------------
121,253
------------
COMPUTERS & PERIPHERALS: 5.3%
1,150 Dell Computer Corp.* 40,940
3,200 EMC Corp.* 41,152
650 International Business Machines Corp. 52,403
------------
134,495
------------
CONSUMER FINANCE: 1.6%
725 American Express Co. 40,049
------------
See accompanying Notes to Financial Statements. 15
LOGO----------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES: 1.5%
891 Citigroup, Inc. $ 38,999
------------
DIVERSIFIED TELECOMMUNICATION SERVICES: 1.2%
1,175 BellSouth Corp. 30,891
------------
ENERGY EQUIPMENT & SERVICES: 6.2%
825 BJ Services Co. 52,041
1,100 ENSCO International, Inc. 44,946
1,000 Transocean, Inc.* 59,040
------------
156,027
------------
HEALTH CARE EQUIPMENT & SUPPLIES: 1.9%
825 Medtronic, Inc. 47,025
------------
HOTELS RESTAURANTS & LEISURE: 2.1%
1,675 McDonald's Corp. 54,354
------------
HOUSEHOLD PRODUCTS: 2.8%
725 Clorox Co.(The) 41,738
525 Procter & Gamble Co. 29,127
------------
70,865
------------
INDUSTRIAL CONGLOMERATES: 3.9%
525 3M Co. 37,354
950 General Electric Co. 31,929
1,100 Tyco International, Ltd. 30,613
------------
99,896
------------
INSURANCE: 3.2%
412 American International Group, Inc. 24,390
9 Berkshire Hathaway, Inc.* 24,984
600 Safeco Corp. 31,284
------------
80,658
------------
MACHINERY: 1.8%
800 Caterpillar, Inc. 44,392
------------
MEDIA: 3.4%
2,000 Time Warner, Inc. 35,840
1,950 Walt Disney Co. 49,120
------------
84,960
------------
MULTILINE RETAIL: 1.4%
500 Federated Department Stores 34,490
------------
OIL & GAS: 10.6%
975 Burlington Resources, Inc. 71,945
800 Chevron Corp. 49,120
1,200 ConocoPhillips 79,128
1,125 Exxon Mobil Corp. 67,388
------------
267,581
------------
16 See accompanying Notes to Financial Statements.
- ----------------------------------------------------------------------------LOGO
SHARES VALUE
- --------------------------------------------------------------------------------
PHARMACEUTICALS: 6.8%
750 Eli Lilly & Co. $ 41,265
600 Johnson & Johnson 38,034
1,150 Merck & Co., Inc. 32,464
700 Pfizer, Inc. 17,829
950 Wyeth 43,501
------------
173,093
------------
ROAD & RAIL: 1.2%
578 Burlington Northern Santa Fe Corp. 30,646
------------
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT: 6.6%
2,200 Applied Materials, Inc. 40,282
1,900 Intel Corp. 48,868
475 KLA-Tencor Corp. 24,111
1,650 Texas Instruments, Inc. 53,922
------------
167,183
------------
SOFTWARE: 6.3%
1,950 Microsoft Corp. 53,430
3,550 Oracle Corp.* 46,043
2,500 Siebel Systems, Inc. 20,625
1,824 Symantec Corp.* 38,268
------------
158,366
------------
SPECIALTY RETAIL: 2.3%
950 Limited Brands 20,881
1,650 Staples, Inc. 36,234
------------
57,115
------------
TEXTILES, APPAREL & LUXURY GOODS: 1.2%
400 Nike, Inc. 31,564
------------
TOTAL COMMON STOCKS
(cost $2,151,901) $ 2,509,812
------------
SHORT-TERM INVESTMENT: 0.6%
16,167 SEI Daily Income Trust Government Fund 16,167
TOTAL SHORT-TERM INVESTMENTS
(cost $16,167) $ 16,167
------------
TOTAL INVESTMENTS
(cost $2,168,068): 99.9% 2,525,979
Other Assets in Excess of Liabilities: 0.1% 1,948
------------
NET ASSETS: 100.0% $ 2,527,927
============
- ----------
* Non-income producing security.
See accompanying Notes to Financial Statements. 17
LOGO----------------------------------------------------------------------------
PURISIMA PURE FOREIGN FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 2005
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS: 99.3%
AUSTRALIA: 4.7%
2,125 BHP Billiton, Ltd. - ADR $ 66,534
1,200 Coles Myer, Ltd. - ADR 71,400
450 National Australia Bank, Ltd. - ADR 53,280
------------
191,214
------------
FRANCE: 10.6%
4,150 Axa S.A. - ADR 110,805
950 Dassault Systemes S.A. - ADR 46,598
3,300 Groupe Danone - ADR 70,290
1,100 Publicis Groupe - ADR 36,586
1,340 Sanofi-Aventis - ADR 57,298
797 Total S.A. - ADR 105,076
------------
426,653
------------
GERMANY: 8.9%
600 BASF AG - ADR 42,324
1,950 Bayerische Hypo-und Vereinsbank AG - ADR * 55,111
675 DaimlerChrysler AG 34,884
1,950 Deutsche Telekom AG - ADR 37,206
3,200 Infineon Technologies AG - ADR * 30,080
1,975 SAP AG - ADR 84,273
950 Siemens AG - ADR 72,675
------------
356,553
------------
HONG KONG: 1.7%
3,200 China Mobile Hong Kong, Ltd. - ADR 69,920
------------
ITALY: 4.6%
600 ENI SpA - ADR 88,950
2,281 Sanpaolo IMI SpA - ADR 65,716
965 Telecom Italia SpA - ADR 30,552
------------
185,218
------------
JAPAN: 31.5%
1,350 Canon, Inc. - ADR 68,377
375 Fuji Heavy Industries, Ltd. - ADR 16,230
1,425 Hitachi, Ltd. - ADR 87,723
1,300 Japan Airlines Corp. - ADR 18,190
3,500 Komatsu, Ltd. - ADR 154,317
3,400 Kubota Corp. - ADR 105,910
875 Kyocera Corp. - ADR 61,031
1,000 Makita Corp. - ADR 19,820
18 See accompanying Notes to Financial Statements.
- ----------------------------------------------------------------------------LOGO
SHARES VALUE
- --------------------------------------------------------------------------------
JAPAN (CONTINUED)
5,500 Matsushita Electric Industrial Co., Ltd. - ADR $ 96,470
1,150 Millea Holdings, Inc. - ADR 84,065
5,600 Mitsubishi Tokyo Financial Group, Inc. - ADR 57,960
160 Mitsui & Co., Ltd. - ADR 33,203
11,500 NEC Corp. - ADR 61,985
3,200 Nissan Motor Co., Ltd. - ADR 67,488
5,550 Nomura Holdings, Inc. - ADR 76,368
1,125 ORIX Corp. - ADR 92,812
2,275 Sony Corp. - ADR 76,486
11,100 Sumitomo Mitsui Financial Group, Inc. - ADR 90,091
------------
1,268,526
------------
NETHERLANDS: 7.3%
3,470 ABN AMRO Holding N.V. - ADR 83,801
2,156 ING Groep N.V. - ADR 62,998
1,700 Royal Dutch Shell Plc - ADR 110,432
1,500 Tnt N.V. - ADR 38,790
------------
296,021
------------
NORWAY: 2.3%
850 Norsk Hydro A/S - ADR 91,256
------------
PORTUGAL: 0.9%
3,632 Portugal Telecom S.A. - ADR 34,613
------------
SPAIN: 6.4%
4,500 Banco Bilbao Vizcaya Argentaria S.A. - ADR 75,240
4,975 Banco Santander Central Hispano S.A. - ADR 61,342
2,300 Repsol YPF S.A. - ADR 67,988
1,083 Telefonica S.A. - ADR 53,911
------------
258,481
------------
SWEDEN: 2.9%
2,750 Volvo AB - ADR 118,498
------------
SWITZERLAND: 4.9%
1,250 Novartis AG - ADR 60,937
1,675 UBS AG 137,518
------------
198,455
------------
See accompanying Notes to Financial Statements. 19
LOGO----------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
UNITED KINGDOM: 12.6%
700 AstraZeneca Plc - ADR $ 32,284
2,150 Barclays Plc - ADR 86,645
1,500 BP Plc ADR - ADR 102,570
1,025 BT Group Plc - ADR 40,088
1,750 Cadbury Schweppes Plc - ADR 69,790
850 GlaxoSmithKline Plc - ADR 41,412
1,025 HSBC Holdings Plc - ADR 82,861
350 Rio Tinto Plc - ADR 50,102
------------
505,752
------------
TOTAL COMMON STOCKS
(cost $3,220,534) $ 4,001,160
------------
TOTAL INVESTMENTS
(cost $3,220,534): 99.3% 4,001,160
Other Assets in Excess of Liabilities: 0.7% 27,550
------------
NET ASSETS: 100.0% $ 4,028,710
============
- ----------
ADR - American depositary receipt.
* Non-income producing security.
20 See accompanying Notes to Financial Statements.
- ----------------------------------------------------------------------------LOGO
PURISIMA PURE FOREIGN FUND
SCHEDULE OF INVESTMENTS BY INDUSTRY
AUGUST 31, 2005
INDUSTRY % OF NET ASSETS
------------------------------------------------------
Advertising Agencies 0.9%
Air Freight & Logistics 1.0%
Air Transportation 0.5%
Automobiles 5.8%
Capital Markets 5.3%
Chemicals 1.0%
Commercial Banks 17.7%
Computers & Peripherals 3.7%
Finance 3.9%
Electronics 3.2%
Food Products 3.5%
Household Durables 4.8%
Industrial Conglomerates 1.8%
Insurance 4.9%
Machinery 6.4%
Metals & Mining 3.7%
Oil & Gas 14.0%
Pharmaceuticals 4.7%
Retailing 1.8%
Semiconductor & Equipment 0.8%
Software 3.2%
Telecommunication 5.0%
Wireless Telecommunication Services 1.7%
----------
TOTAL COMMON STOCKS 99.3%
----------
TOTAL INVESTMENTS 99.3%
Other Assets in Excess of Liabilities 0.7%
----------
NET ASSETS 100.0%
==========
See accompanying Notes to Financial Statements. 21
LOGO----------------------------------------------------------------------------
PURISIMA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 2005
TOTAL PURE PURE
RETURN AMERICAN FOREIGN
FUND FUND FUND
------------ ------------ ------------
ASSETS
Investments in securities, at cost $264,215,960 $ 2,168,068 $ 3,220,534
============ ============ ============
Investments in securities, at value $325,460,915 $ 2,525,979 $ 4,001,160
Receivables:
Securities sold -- -- 184,795
Dividends and interest 717,373 5,169 9,085
Fund shares sold 80,670 -- --
Other assets 16,636 -- --
------------ ------------ ------------
Total Assets 326,275,594 2,531,148 4,195,040
------------ ------------ ------------
LIABILITIES
Cash overdraft -- -- 113,137
Payables for securities purchased -- -- 47,828
Payables for fund shares redeemed 237,350 -- --
Accrued advisory fees (Note 3) 317,281 3,221 5,365
Accrued distribution fees (Note 4) 188,006 -- --
Accrued administration fees (Note 3) 22,403 -- --
Accrued transfer agent fees 23,763 -- --
Other accrued expenses 62,620 -- --
------------ ------------ ------------
Total Liabilities 851,423 3,221 166,330
------------ ------------ ------------
NET ASSETS $325,424,171 $ 2,527,927 $ 4,028,710
============ ============ ============
Number of shares issued and outstanding
(unlimited shares authorized, $0.01 par value) 17,099,135 190,733 205,577
============ ============ ============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 19.03 $ 13.25 $ 19.60
============ ============ ============
COMPONENTS OF NET ASSETS
Paid-in capital $ 275,910,88 $ 2,301,616 $ 3,250,666
Accumulated net investment income 1,644,143 9,380 8,742
Accumulated net realized loss on investments (13,375,809) (140,980) (11,324)
Net unrealized appreciation on investments 61,244,955 357,911 780,626
------------ ------------ ------------
Net assets $325,424,171 $ 2,527,927 $ 4,028,710
============ ============ ============
22 See accompanying Notes to Financial Statements.
- ----------------------------------------------------------------------------LOGO
PURISIMA FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2005
TOTAL PURE PURE
RETURN AMERICAN FOREIGN
FUND FUND FUND
------------ ------------ ------------
INVESTMENT INCOME
Income
Dividends (net of foreign taxes withheld of
$448,347, $0, and $12,881, respectively) $ 6,346,856 $ 47,169 $ 97,185
Interest & other income 23,202 353 795
------------ ------------ ------------
Total income 6,370,058 47,522 97,980
------------ ------------ ------------
Expenses
Advisory fees 3,179,697 38,142 60,632
Distribution fees 711,036 -- --
Administration fees 256,838 -- --
Transfer agent fees 151,021 -- --
Fund accounting fees 89,265 -- --
Custody fees 65,363 -- --
Insurance expense 74,191 -- --
Reports to shareholders 33,509 -- --
Registration fees 30,045 -- --
Audit fees 18,998 -- --
Legal fees 14,848 -- --
Trustee fees 3,333 -- --
Miscellaneous 1,501 -- --
------------ ------------ ------------
Total expenses 4,629,645 38,142 60,632
Add: expenses recouped by Adviser (Note 3) 95,776 -- --
------------ ------------ ------------
Net expenses 4,725,421 38,142 60,632
------------ ------------ ------------
NET INVESTMENT INCOME 1,644,637 9,380 37,348
------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments (1,118,029) 89,182 271,919
Change in net unrealized appreciation
on investments 44,278,128 222,483 496,889
------------ ------------ ------------
Net gain on investments 43,160,099 311,665 768,808
------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 44,804,736 $ 321,045 $ 806,156
============ ============ ============
See accompanying Notes to Financial Statements. 23
LOGO----------------------------------------------------------------------------
PURISIMA FUNDS
STATEMENT OF CHANGES IN NET ASSETS
TOTAL RETURN FUND
YEAR ENDED YEAR ENDED
AUGUST 31, 2005 AUGUST 31, 2004
--------------- ---------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 1,644,637 $ 1,193,740
Net realized gain (loss) on investments (1,118,029) 1,326,029
Change in net unrealized appreciation on investments 44,278,128 18,232,293
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 44,804,736 20,752,062
------------- -------------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (1,194,234) (1,073,580)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,194,234) (1,073,580)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived
from net change in outstanding shares (a) (16,808,549) 34,807,495
------------- -------------
TOTAL INCREASE IN NET ASSETS 26,801,953 54,485,977
------------- -------------
NET ASSETS
Beginning of year 298,622,218 244,136,241
------------- -------------
END OF YEAR $ 325,424,171 $ 298,622,218
------------- -------------
Undistributed net investment income $ 1,644,143 $ 1,196,897
============= =============
(a) A summary of capital share transactions is as follows:
YEAR ENDED YEAR ENDED
AUGUST 31, 2005 AUGUST 31, 2004
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
Shares sold 2,859,161 $ 51,815,699 5,098,409 $ 85,836,402
Shares issued on reinvestment
of distributions 63,323 1,149,948 62,124 1,035,611
Shares redeemed (3,834,905) (69,774,196) (3,094,870) (52,064,518)
---------- ------------ ---------- ------------
Net increase (decrease) (912,421) $(16,808,549) 2,065,663 $ 34,807,495
========== ============ ========== ============
24 See accompanying Notes to Financial Statements.
- ----------------------------------------------------------------------------LOGO
PURISIMA FUNDS
STATEMENT OF CHANGES IN NET ASSETS
PURE AMERICAN FUND
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
2005 2004
DECREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 9,380 $ 4,631
Net realized gain on investments 89,182 4,726
Change in net unrealized appreciation on investments 222,483 217,852
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 321,045 227,209
------------ ------------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (4,632) (12,757)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (4,632) (12,757)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from
net change in outstanding shares (a) (360,501) (461,116)
------------ ------------
TOTAL DECREASE IN NET ASSETS (44,088) (246,664)
------------ ------------
NET ASSETS
Beginning of year 2,572,015 2,818,679
------------ ------------
END OF YEAR $ 2,527,927 $ 2,572,015
============ ============
Undistributed net investment income $ 9,380 $ 4,632
============ ============
(a) A summary of capital share transactions is as follows:
YEAR ENDED YEAR ENDED
AUGUST 31, 2005 AUGUST 31, 2004
---------------------- ----------------------
SHARES VALUE SHARES VALUE
------- ---------- ------- ----------
Shares sold 9,540 $ 124,216 22,297 $ 257,872
Shares issued on reinvestment
of distributions 358 4,631 1,094 12,756
Shares redeemed (38,782) (489,348) (61,309) (731,744)
------- ---------- ------- ----------
Net decrease (28,884) $ (360,501) (37,918) $ (461,116)
======= ========== ======= ==========
See accompanying Notes to Financial Statements. 25
LOGO----------------------------------------------------------------------------
PURISIMA FUNDS
STATEMENT OF CHANGES IN NET ASSETS
PURE FOREIGN FUND
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
2005 2004
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 37,348 $ 66,706
Net realized gain on investments 271,919 82,432
Change in net unrealized appreciation on investments 496,889 312,226
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 806,156 461,364
----------- -----------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (70,647) (79,025)
----------- -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (70,647) (79,025)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from
net change in outstanding shares (a) (108,421) 293,757
----------- -----------
TOTAL INCREASE IN NET ASSETS 627,088 676,096
----------- -----------
NET ASSETS
Beginning of year 3,401,622 2,725,526
----------- -----------
END OF YEAR $ 4,028,710 $ 3,401,622
=========== ===========
Undistributed net investment income $ 8,742 $ 42,041
=========== ===========
(a) A summary of capital share transactions is as follows:
YEAR ENDED YEAR ENDED
AUGUST 31, 2005 AUGUST 31, 2004
---------------------- ----------------------
SHARES VALUE SHARES VALUE
------- ---------- ------- ----------
Shares sold 29,478 $ 538,043 36,377 $ 591,470
Shares issued on reinvestment
of distributions 3,917 70,357 5,041 78,733
Shares redeemed (38,296) (716,821) (24,217) (376,446)
------- ---------- ------- ----------
Net increase (decrease) (4,901) $ (108,421) 17,201 $ 293,757
======= ========== ======= ==========
26 See accompanying Notes to Financial Statements.
- ----------------------------------------------------------------------------LOGO
PURISIMA FUNDS FINANCIAL HIGHLIGHTS FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT
EACH YEAR.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
TOTAL RETURN FUND
-----------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of year $ 16.58 $ 15.31 $ 14.06 $ 18.73 $ 19.65
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.10 0.07 0.07 0.09 0.31^
Net realized and unrealized gain (loss)
on investments 2.42 1.27 1.34 (2.91) (0.61)^
-------- -------- -------- -------- --------
Total from investment operations 2.52 1.34 1.41 (2.82) (0.30)^
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income (0.07) (0.07) (0.05) (0.19) --
From net realized gain -- -- (0.11) (1.66) (0.62)
-------- -------- -------- -------- --------
Total distributions (0.07) (0.07) (0.16) (1.85) (0.62)
-------- -------- -------- -------- --------
Net asset value, end of year $ 19.03 $ 16.58 $ 15.31 $ 14.06 $ 18.73
======== ======== ======== ======== ========
Total return 15.20% 8.72% 10.22% (16.72%) (1.33%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions) $ 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 1.46% 1.49% 1.56% 1.51%+ 1.61%+
After fees waived and expenses
absorbed or recouped 1.49% 1.50% 1.50% 1.50%+ 1.50%+
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS # 0.52% 0.42% 0.55% 1.03% 1.68%
Portfolio turnover rate 16.68% 19.50% 12.57% 60.76% 105.90%
# Net of fees
waived/recouped.
^ 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. 27
LOGO----------------------------------------------------------------------------
PURISIMA FUNDS
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH YEAR.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
PURE AMERICAN FUND
-----------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
Net asset value, beginning of year $ 11.71 $ 10.94 $ 10.21 $ 12.45 $ 13.49
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.05 0.02 0.05 0.43 0.28^
Net realized and unrealized gain (loss)
on investments 1.51 0.80 0.84 (2.07) (0.02)^
-------- -------- -------- -------- --------
Total from investment operations 1.56 0.82 0.89 (1.64) 0.26^
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income (0.02) (0.05) (0.16) (0.58) (0.28)
From net realized gain -- -- -- (0.02) (1.02)
-------- -------- -------- -------- --------
Total distributions (0.02) (0.05) (0.16) (0.60) (1.30)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.25 $ 11.71 $ 10.94 $ 10.21 $ 12.45
======== ======== ======== ======== ========
Total return 13.35% 7.49% 8.91% (13.90%)(1) 1.96%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions) $ 2.5 $ 2.6 $ 2.8 $ 2.6 $ 4.5
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 1.50% 1.50% 1.50% 1.56%+ 1.58%+
After fees waived n/a n/a n/a 1.19%+(1) 0.08%+(1)
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS 0.37% 0.16% 0.52% 1.35% 4.09%
Portfolio turnover rate 28.79% 34.99% 31.47% 75.54% 265.29%
- ----------
^ Calculations are based on average shares outstanding for the period.
+ With dividend expense on securities sold short, which was 0.06% for 2002
and 0.08% for 2001. Otherwise, ratio of expenses (before fees waived) to
average net assets would be 1.50% for 2002 and 2001.
1 The Adviser voluntarily waived all of its management fees for the period
December 21, 2000 to December 1, 2001.
28 See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH YEAR.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
PURE FOREIGN FUND
-----------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
Net asset value, beginning of year $ 16.16 $ 14.10 $ 13.07 $ 15.37 $ 16.39
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.15 0.35 0.28 0.84 0.33^
Net realized and unrealized gain (loss)
on investments 3.60 2.14 1.21 (2.47) (0.45)^
-------- -------- -------- -------- --------
Total from investment operations 3.75 2.49 1.49 (1.63) (0.12)^
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income (0.31) (0.43) (0.46) (0.67) (0.35)
From net realized gain -- -- -- -- (0.55)
-------- -------- -------- -------- --------
Total distributions (0.31) (0.43) (0.46) (0.67) (0.90)
-------- -------- -------- -------- --------
Net asset value, end of year $ 19.60 $ 16.16 $ 14.10 $ 13.07 $ 15.37
======== ======== ======== ======== ========
Total return 23.38% 17.76% 10.95% (11.14%)(1) (0.45%)(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions) $ 4.0 $ 3.4 $ 2.7 $ 3.4 $ 8.9
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 1.50% 1.50% 1.50% 1.50%+ 1.50%+
After fees waived n/a n/a n/a 1.07%+ 0.00%+
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS 0.92% 2.09% 2.06% 4.02% 4.21%
Portfolio turnover rate 23.43% 34.02% 22.02% 69.59% 258.66%
- ----------
^ Calculations are based on average shares outstanding for the period.
+ With dividend expense on securities sold short, which was 0.06% for 2002
and 0.08% for 2001. Otherwise, ratio of expense (before fees waived) to
average net assets would be 1.50% for 2002 and 2001.
1 The Adviser voluntarily waived all of its management fees for the period
December 21, 2000 to December 1, 2001.
See accompanying Notes to Financial Statements. 29
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PURISIMA FUNDS
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2005
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 three diversified
series (the "Funds"): Purisima Total Return Fund (the "Total Return Fund"),
representing the initial series of the Trust which commenced operations on
October 28, 1996, Purisima Pure American Fund (the "Pure American Fund") and
Purisima Pure Foreign Fund (the "Pure Foreign Fund") both of which commenced
operations on September 29, 1998. Fisher Asset Management, LLC (formerly, Fisher
Investments, Inc.) (the "Adviser") serves as the investment adviser to the
Funds.
The investment objectives of the Funds are as follows:
The Total Return 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.
The Pure American Fund seeks to provide investors with a high level of total
return. The Fund may emphasize investments in common stocks and other
equity-type securities acquired primarily to produce income, or a combination of
both, depending on the assessment of market conditions by the Fund's Investment
Adviser. The Fund will concentrate its portfolio holdings to those securities
issued by issuers domiciled in the United States.
The Pure Foreign Fund seeks to provide investors with a high level of total
return. The Fund may emphasize investments in common stocks and other
equity-type securities acquired primarily to produce income, or a combination of
both, depending on the assessment of market conditions by the Fund's Investment
Adviser. Under normal market conditions, the Fund will concentrate its portfolio
holdings to those securities issued by issuers domiciled outside of the United
States.
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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their 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 short-term securities purchased are amortized over the
lives of the respective securities using the straight-line method.
B. FEDERAL INCOME AND EXCISE TAXES. The Funds intend 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 Funds may be subject to foreign taxes on income, gains on investments
or currency repatriation, a portion of which may be recoverable. The Funds
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.
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. The Pure American Fund has a capital
loss carryforward available to offset future capital gains, if any, of
$133,392, which expires in 2012, and the Pure Foreign Fund has a capital
loss carryforward available to offset future capital gains, if any, of
$8,174, which expires in 2012.
31
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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 August 31, 2005, the Trust had no options outstanding.
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G. SECURITIES SOLD SHORT. To the extent the Funds engage in selling
securities short, they are obligated to replace a security borrowed by
purchasing the same security at the current market value. The Funds would
incur a loss if the price of the security increases between the date of
the short sale and the date on which the Funds replace the borrowed
security. The Funds would realize a gain if the price of the security
declines between those dates.
The Funds are 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 Funds 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. RECLASSIFICATION OF CAPITAL ACCOUNTS. Accounting principles generally
accepted in the United States of America require that certain components
of net assets relating to permanent differences be reclassified between
financial and tax reporting. These reclassifications have no effect on net
assets or net asset value per share. For the year ended August 31, 2005,
the Total Return Fund increased paid-in-capital by $3,157 and decreased
accumulated net investment income by $3,157.
I. INDEMNIFICATION OBLIGATIONS. Under the Funds' organizational documents,
its current and former officers and trustees are indemnified against
certain liabilities arising out of the performance of their duties to the
Funds. In addition, in the normal course of business, the Funds enter into
contracts that contain a variety of representations and warranties that
provide general indemnifications. The Funds' maximum exposure under these
arrangements is unknown as this would involve future claims that may be
made against the Funds that have not yet occurred or that would be covered
by other parties.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
The Total Return Fund (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 Funds. 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.
33
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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
year ended August 31, 2005, the Adviser recouped fees previously waived and
expenses absorbed of $95,776.
At August 31, 2005, the cumulative unreimbursed amount paid and/or waived by the
Adviser on behalf of the Fund is $31 which the Adviser may recapture no later
than August 31, 2008.
The Pure American and Pure Foreign Funds have a Comprehensive Management
Agreement with the Adviser to provide advisory and other ordinary services,
including administration, transfer agency, custody and auditing services. For
providing these services, the Pure American and Pure Foreign Funds each pay the
Adviser a monthly fee at the annual rate of 1.50% of the respective Funds'
average daily net assets. This comprehensive fee arrangement requires the
Adviser to absorb and pay out of its own resources all operating expenses of the
Pure American and Pure Foreign Funds.
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 Funds;
prepares reports and materials to be supplied to the trustees; monitors the
activities of the Funds' custodian, transfer agent and accountants; coordinates
the preparation and payment of Fund expenses and reviews the Funds' 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. The Pure American and
Pure Foreign Funds' administration fees are paid by the Adviser under the
Comprehensive Management Agreement.
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 year ended August 31, 2005, the Fund
incurred $711,036 in distribution fees. Quasar Distributors, LLC, an affiliate
of the Administrator, serves as distributor of the Funds pursuant to a
Distribution Agreement with the Trust.
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NOTE 5 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, excluding
short-term investments, for the year ended August 31, 2005 were as follows:
FUND PURCHASES SALES
------ ----------- -----------
Total Return Fund $52,565,554 $68,680,893
Pure American Fund 724,601 1,080,426
Pure Foreign Fund 927,615 1,072,454
NOTE 6 - DISTRIBUTION TO SHAREHOLDERS
The difference between the book and tax basis components of the distributable
earnings relate principally to the timing of recognition of income and gains for
federal income tax purposes. Short-term gains distributions reported in the
Statements of Changes of Net Assets, if any, are reported as ordinary income for
federal tax purposes.
As of August 31, 2005, the components of distributable earnings on a tax basis
were as follows:
TOTAL RETURN PURE AMERICAN PURE FOREIGN
------------ ------------- ------------
Cost of investments for tax purposes $264,515,012 $2,175,656 $3,223,684
------------ ---------- ----------
Gross tax unrealized appreciation $ 72,895,393 $ 440,038 $ 868,282
Gross tax unrealized depreciation $(11,949,490) $ (89,714) $ (90,806)
------------ ---------- ----------
Net tax unrealized appreciation $ 60,945,903 $ 350,324 $ 777,476
Undistributed ordinary income $ 1,644,143 $ 9,380 $ 8,742
Capital loss carryforward $(13,076,757) $ (133,392) $ (8,174)
------------ ---------- ----------
Total accumulated earnings (losses) $ 49,513,289 $ 226,312 $ 778,044
============ ========== ==========
The tax composition of dividends are as follows:
LONG TERM
ORDINARY INCOME LONG TERM CAPITAL GAINS
INCOME PER SHARE CAPITAL GAINS PER SHARE
---------- --------- ------------- -------------
Total Return Fund
8/31/2005 $1,194,234 $ 0.0673 -- --
8/31/2004 1,073,580 0.0650 -- --
Pure American Fund
8/31/2005 4,632 0.0224 -- --
8/31/2004 12,757 0.0487 -- --
Pure Foreign Fund
8/31/2005 70,647 0.3098 -- --
8/31/2004 79,025 0.4287 -- --
35
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
THE PURISIMA FUNDS
WOODSIDE, CALIFORNIA
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of the Purisima Total Return Fund, the Purisima
Pure American Fund, and the Purisima Pure Foreign Fund, each a series of shares
of The Purisima Funds (the "Trust"), as of August 31, 2005, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 2005, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
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In our opinion, the financial statements and financial highlights referred to
above present fairly in all material respects, the financial position of the
Purisima Total Return Fund, the Purisima Pure American Fund, and the Purisima
Pure Foreign Fund as of August 31, 2005, the results of their operations for the
year then ended, the changes in their net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
September 16, 2005
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PURISIMA FUNDS
OTHER INFORMATION
BOARD CONSIDERATION OF AND CONTINUATION OF INVESTMENT ADVISORY AGREEMENT
(UNAUDITED)
On October 21, 2004, the Board of Trustees performed its annual review and
renewal of the Investment Management Agreement for the Total Return Fund and the
Comprehensive Management Agreement for the Pure American and Pure Foreign Funds.
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, each 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 Agreements, 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.
A. 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 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 each Fund.
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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.
B. Investment Performance
The Board considered each Fund's pursuit of its investment objectives and
the investment results of each Fund in light of its objectives. The
Trustees compared each Fund's total returns with various independent
mutual fund indices, and noted the favorable long-term performance of each
Fund compared to its benchmark and its peers.
The Board ultimately concluded that the Adviser's performance record in
managing each Fund indicates that its continued management will benefit
the Fund and its shareholders.
C. Advisory Fees and Total Expenses
The Board reviewed the advisory fees and total expenses of each Fund and
compared such amounts with the average fee and expense levels of other
funds in applicable peer fund indices. The Board observed that each 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 each Fund and its shareholders. The Board then considered the
fees charged to the Funds versus the Adviser's private clients. The Board
considered the extra burden of administration, compliance, deadlines, risk
and regulations associated with the Funds that do not apply to the private
accounts. The Board determined that the respective peer groups provided a
better comparison and it found the Funds' fees reasonable.
D. Adviser, Costs, Level of Profits and Economies of Scale
The Board reviewed information regarding the Adviser's costs of providing
services to the Funds, as well as the resulting level of profits to the
Adviser. The Board also received information regarding the structure and
manner in which the Adviser's investment professionals were compensated
and the Adviser's view of the relationship of such compensation to the
attraction and retention of quality personnel. 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 their present asset sizes
breakpoints in each 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 waivers of fees
in respect of the Funds. The Board concluded that each Fund's cost
structure was reasonable.
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E. 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 or research provided by
broker-dealers executing portfolio transactions on behalf of a Fund, and
other soft dollar research benefits.
F. Conclusions
Based on its review, including consideration of each of the factors
referred to above, the Board concluded that the Agreements are fair and
reasonable to each Fund and its shareholders, that each Fund's
shareholders received, or will receive, as the case may be, reasonable
value in return for the advisory fees paid to the Adviser by the Fund, and
that the renewal or initial approval, as the case may be, of the Agreement
was in the best interests of each Fund and its shareholders.
PROXY VOTING PROCEDURES (UNAUDITED)
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.
FORM N-Q DISCLOSURE (UNAUDITED)
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.
TAX NOTICE (UNAUDITED)
The percentage of dividend income distributed for the year ended August 31,
2005, which is designated as qualified dividend income under the Jobs and Growth
Tax Relief Reconciliation Act of 2003, is 100% for each of the Funds.
The percentage of dividend income distributed for the year ended August 31,
2005, designated as qualified dividends received deduction available to
corporate shareholders, is 100% for the Total Return Fund, 100% for the Pure
American Fund and 0% for the Pure Foreign Fund.
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For the year ended August 31, 2005, the Pure Foreign Fund earned foreign source
income and paid foreign taxes, which they intend to pass through to their
shareholders pursuant to Section 853 of the Internal Revenue Code as follows:
COUNTRY GROSS FOREIGN INCOME FOREIGN TAX PAID
- -------------- -------------------- ----------------
Australia $ 5,098.15 $ --
France $ 12,097.66 $ 1,801.69
Germany $ 6,871.40 $ 1,279.74
Hong Kong $ 2,077.00 $ --
Italy $ 13,294.24 $ 3,589.45
Japan $ 11,289.77 $ 1,195.67
Netherlands $ 13,356.31 $ 2,206.12
Norway $ 2,637.70 $ 397.36
Portugal $ 1,551.18 $ 193.90
Spain $ 8,216.95 $ 1,139.84
Sweden $ 5,383.86 $ 807.58
Switzerland $ 6,175.93 $ 269.65
United Kingdom $ 22,015.26 $ --
----------- ----------
$110,065.41 $12,881.00
=========== ==========
SUBSEQUENT EVENT (UNAUDITED)
The Board of Trustees of Trust approved a plan to reorganize the Purisima Pure
American Fund and the Purisima Pure Foreign Fund (collectively, the "Pure
Funds") into the Purisima Total Return Fund. Shareholder approval is needed to
proceed with the reorganization. The shareholder meeting of the Pure Funds will
be held on November 16, 2005.
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PURISIMA FUNDS
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:
Position(s) Held
Name, Address, Age with Trust Year Elected(1)
- --------------------------------------------------------------------------------
Kenneth L. Fisher* (born 1950) President and Trustee 1996
13100 Skyline Blvd.
Woodside, CA 94062
- --------------------------------------------------------------------------------
Pierson E. Clair III (born 1948) Trustee 1996
13100 Skyline Blvd.
Woodside, CA 94062
- --------------------------------------------------------------------------------
Scott LeFevre (born 1957) Trustee 2001
13100 Skyline Blvd.
Woodside, CA 94062
- --------------------------------------------------------------------------------
Alfred D. McKelvy, Jr. (born 1949) Trustee 2003
13100 Skyline Blvd.
Woodside, CA 94062:
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Bryan F. Morse (born 1952) Trustee 1996
13100 Skyline Blvd.
Woodside, CA 94062
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Grover T. Wickersham (born 1949) Trustee 1996
13100 Skyline Blvd.
Woodside, CA 94062
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42
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Number of
Portfolios in
Fund Complex Other
Principal Occupation(s) Overseen by Directorships
During Past Five Years Director Held
- --------------------------------------------------------------------------------
Chief Executive Officer and majority 3 None
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.
- --------------------------------------------------------------------------------
President and Chief Executive 3 Signature
Officer of Brown & Haley since 1998 Foods, Inc.
(fine confectioners); Vice President
of Blummer Chocolate Company from
1980 to 1997, where he had been
employed since 1970.
- --------------------------------------------------------------------------------
Sole proprietor of LeFevre Capital 3 None
Management, a registered investment
adviser.
- --------------------------------------------------------------------------------
Executive Director of the law firm 3 Diablo Valley
of Berding & Weil, LLP since 1990. Bank; East
Bay BOMA.
- --------------------------------------------------------------------------------
Sole proprietor of Bryan F. Morse, 3 None
RIA, a registered investment adviser
since 1990.
- --------------------------------------------------------------------------------
Attorney in private practice in Palo 3 None
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.
- --------------------------------------------------------------------------------
43
Position(s) Held Year
Name, Address, Age with Trust Elected(1)
- --------------------------------------------------------------------------------
Michelle Bryan Senior Vice 2004
Oroschakoff (born 1961) President and
13100 Skyline Blvd. Chief Compliance
Woodside, CA 94062 Officer
- --------------------------------------------------------------------------------
Joy Ausili (born 1966) Secretary and 2004
2020 East Financial Way Assistant
Glendora, CA 91741 Treasurer
- --------------------------------------------------------------------------------
Rita Dam (born 1966) Treasurer 2004
2020 East Financial Way
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.
44
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Number of
Portfolios in
Fund Complex Other
Principal Occupation(s) Overseen by Directorships
During Past Five Years Director Held
- --------------------------------------------------------------------------------
Senior Vice President and Chief N/A None
Legal Officer of the Adviser.
Executive Director/Senior Vice
President of Morgan Stanley from
2001 to 2004, Vice President &
Compliance Manager of Morgan Stanley
Dean Witter from 1999 to 2001
- --------------------------------------------------------------------------------
From 1997 to Present, Vice President N/A None
of U.S. Bancorp Fund Services, LLC
- --------------------------------------------------------------------------------
From 1994 to Present, Vice President N/A None
of U.S. Bancorp Fund Services, LLC
- --------------------------------------------------------------------------------
45
LOGO----------------------------------------------------------------------------
PRIVACY NOTICE
FISHER ASSET MANAGEMENT, LLC (formerly, Fisher Investments, Inc.) and
THE PURISIMA FUNDS collect non-public information about you from the
following sources:
o Information we receive about you on applications or other forms;
o Information you give us orally; and
o 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.
46
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LOGO----------------------------------------------------------------------------
[GRAPHIC]
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer and principal financial officer. The registrant has
not made any amendments to its code of ethics during the period covered by this
report. The registrant has not granted any waivers from any provisions of the
code of ethics during the period covered by this report.
The registrant undertakes to provide to any person without charge, upon request,
a copy of its code of ethics by mail when they call the registrant at
1-800-851-8845.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of trustees has determined that it does not have an audit
committee financial expert serving on its audit committee. At this time, the
registrant believes that the experience provided by each member of the audit
committee together offers the registrant adequate oversight for the registrant's
level of financial complexity.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The registrant has engaged its principal accountant to perform audit services,
audit-related services, tax services and other services during the past two
fiscal years. "Audit services" refer to performing an audit of the registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years. "Audit-related services" refer to the assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit. "Tax services" refer to professional services rendered
by the principal accountant for tax compliance, tax advice, and tax planning.
The following table details the aggregate fees billed for each of the last two
fiscal years for audit fees, audit-related fees, tax fees and other fees by the
principal accountant.
===========================================================
FYE 08/31/2004 FYE 08/31/2005
-----------------------------------------------------------
Audit Fees $28,500 $31,500
Audit-Related Fees 0 0
Tax Fees $7,500 $7,500
All Other Fees 0 0
===========================================================
The audit committee has adopted pre-approval policies and procedures that
require the audit committee to pre-approve all audit and non-audit services of
the registrant, including services provided to any entity affiliated with the
registrant. All of the principal accountant's hours spent on auditing the
registrant's financial statements were attributed to work performed by full-time
permanent employees of the principal accountant. (IF MORE THAN 50 PERCENT OF THE
ACCOUNTANT'S HOURS WERE SPENT TO AUDIT THE REGISTRANT'S FINANCIAL STATEMENTS FOR
THE MOST RECENT FISCAL YEAR, STATE HOW MANY HOURS WERE ATTRIBUTED TO WORK
PERFORMED BY PERSONS OTHER THAN THE PRINCIPAL ACCOUNTANT'S FULL-TIME, PERMANENT
EMPLOYEES.)
The following table indicates the non-audit fees billed by the registrant's
accountant for services to the registrant and to the registrant's investment
adviser (and any other controlling entity, etc.--not sub-adviser) for the last
two years. The audit committee of the board of trustees has considered whether
the provision of non-audit services that were rendered to the registrant's
investment adviser is compatible with maintaining the principal accountant's
independence and has concluded that the provision of such non-audit services by
the accountant has not compromised the accountant's independence.
====================================================================
Non-Audit Related Fees FYE 08/31/2004 FYE 08/31/2005
--------------------------------------------------------------------
Registrant 0 0
Registrant's Investment Adviser 0 0
====================================================================
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 PURCHASES.
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 11/2/05
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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 11/2/05
---------------------------------------------------------------------
By (Signature and Title)* /s/ Rita Dam
------------------------------------------------
Rita Dam, Treasurer
Date 11/2/05
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* PRINT THE NAME AND TITLE OF EACH SIGNING OFFICER UNDER HIS OR HER SIGNATURE.