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
--------------
Registrant's telephone number, including area code
Date of fiscal year end: AUGUST 31
---------
Date of reporting period: FEBRUARY 28, 2007
-----------------
ITEM 1. REPORT TO STOCKHOLDERS.
Semi-annual Report
THE PURISIMA FUNDS
SEMI-ANNUAL REPORT (UNAUDITED)
FEBRUARY 28, 2007
The Purisima Total Return Fund
TABLE OF CONTENTS
A Letter to Our Shareholders 2
Sector Breakdown 5
Expense Example 5
Schedule of Investments 7
Statement of Assets and Liabilities 12
Statement of Operations 13
Statement of Changes in Net Assets 14
Financial Highlights 15
Notes to Financial Statements 16
Other Information 21
Trustees and Officer Information 24
Privacy Notice 28
INVESTMENT OBJECTIVES
PURISIMA TOTAL RETURN FUND
Seeks to provide investors with a high level of total return by
considering both domestic and foreign securities.
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.
1
A LETTER TO OUR SHAREHOLDERS
Welcome to the semi-annual report for the Purisima Total Return Fund for the
six-month period ended February 28, 2007. The primary investment objective of
the Fund is achieving high total return for shareholders.
MARKET REVIEW AND OUTLOOK:
The bull market forged ahead virtually unabated during the period. As expected,
global markets rebounded from the mid-2006 correction with vigor, and the MSCI
World Index benchmark gained 10.4%. The Fund benefited from these gains by
maintaining maximum equity exposure throughout the period.
Energy was the only sector in the MSCI World Index benchmark to post a negative
return for the period. Oil and gas prices were constrained by unseasonably warm
weather in the US and Europe, curbing demand for heating oil and natural gas. In
addition, many historically volatile regions were subdued from a geopolitical
standpoint, reducing concerns about energy supply disruptions. We believe these
are temporary phenomena and energy prices will continue to benefit from global
economic strength. The Telecommunications Services sector was particularly
strong during the period, returning almost 20% with the Materials and Consumer
Discretionary sectors not far behind.
Strong foreign currencies and equity markets led to another period in which
foreign equities outperformed domestic issues. Additionally, calendar year 2006
marked the fifth consecutive year of foreign leadership, and the trend has
continued through the first months of 2007. Equity valuations are extremely
compelling in the US, but these conditions are even more pronounced abroad. As a
result, we believe foreign stocks should continue to lead the way, and the Fund
should continue to benefit from global diversification.
In addition to attractive valuations, economic and market conditions have
continued to create an extremely positive backdrop for global equities.
Forecasters are almost uniformly cynical of the current economic expansion,
restricting their debate to whether the global economy is in for a hard or soft
landing. The possibility that the global economy might not be in for a landing
at all is almost universally ignored and thus contains tremendous potential for
a positive surprise. We believe the current economic expansion will continue to
exceed expectations, and this continued expansion should be reflected in
stronger than expected corporate earnings growth and higher equity prices.
Benign inflation expectations have resulted in low interest rates globally. This
environment has made inexpensive capital readily available to both corporations
and individuals, fueling global economic growth and propelling equity prices.
Nowhere is the impact more manifest than in the continued wave of global merger
and acquisition activity. Total global merger and acquisition activity in 2006
approached an astonishing $4 trillion, and the torrid pace shows no sign of
moderating in 2007. Hundreds of billions of dollars in deals have already been
announced this year, and the momentum should continue.
2
Low interest rates and attractive relative equity valuations are also driving a
dramatic increase in corporate share repurchases. Share repurchases and merger
and acquisition activity combine to reduce the overall supply of equities in an
environment where new share issuance is limited. This is bullish because equity
prices, like all market based prices, are determined by the intersection of
supply and demand. In other words, if demand for equities stays constant or
increases, as we believe it will given the aforementioned bullish factors, a
shrinking supply of equities will result in higher equity prices.
Despite our optimism for global equities, we are ever mindful of potential risk
factors. Many perceived risks appear overblown and pose little, if any, real
threat in our view. Sub-prime mortgage delinquencies, the US housing market, and
a weak US dollar make good headlines, but they lack significant economic
relevance. At most, these factors could restrain investor sentiment and keep the
reality of extremely positive economic conditions from being fully reflected in
equity prices in the short term.
The potential for increased legislation in the US and abroad poses one of the
most significant actual risks to global equity markets. Attempts by legislators
to correct perceived problems such as trade disparities, the sub-prime mortgage
"crisis", and "inequalities" in wealth distribution are more often than not
ill-conceived and do more harm than good. We are hopeful legislators will be
cautious about enacting measures that would disrupt the efficiencies of the
global economy, but these factors warrant close monitoring.
At present, we believe positive market and economic fundamentals make the
potential for strong equity returns extremely compelling and outweigh potential
risks. Once again, the greatest unknown for equity markets is the degree to
which the positive fundamentals will be realized. Restrained investor sentiment
could result in modest gains for global equities, but more emphatic positive
sentiment could lead to extremely strong returns. Given the very bullish
backdrop for equities and barring deterioration of the aforementioned actual
risk factors, we do not believe a significant decline in equity prices is in the
cards.
FUND POSITIONING
The Fund remains fully invested in equities. Fund positioning has not changed
materially as many of the underlying factors that have supported markets
throughout this bull market remain firmly in place. The Fund is positioned to
take advantage of strong global economic growth by emphasizing economically
sensitive sectors such as Energy and Industrials. It is also positioned to
capitalize on continued robust merger and acquisition activity by holding a high
concentration of shares of companies we believe make attractive acquisition
targets.
The Fund remains overweight to foreign equities relative to the MSCI World Index
benchmark. The foreign component includes some exposure to emerging markets,
which we believe are particularly well suited to take advantage of global
economic growth and increased globalization. On a country basis, the Fund
remains significantly overweight to Japan. Economic conditions in the world's
second largest economy continue to improve, indicating the country has emerged
from years of economic stagnation. In addition, Japanese equities should benefit
from new laws scheduled to go into effect later this year intended to enable
acquisitions by foreign companies.
3
We believe the Fund is positioned well to take advantage of what should continue
to be a good or possibly great year for the global equity markets.
CLOSING REMARKS
For the 6-month period ending February 28, 2007, the Fund achieved strong
absolute returns but underperformed the MSCI World Index benchmark (Purisima
Total Return Fund: 8.00% vs. MSCI World Index: 10.38%). Looking forward, we
believe the current strategy should allow the Fund to produce strong absolute
and relative returns. Global equity markets are now entering the fifth year of
this bull market, and the environment for equities indicates there are more
gains to come. As always, we are monitoring market, economic and political
conditions closely for indications risk factors are becoming more relevant, but
at present we see little cause for concern and many reasons for optimism.
Thank you for your continued interest and support.
Sincerely,
/s/ Kenneth L. Fisher
Kenneth L. Fisher
Chairman and Chief Investment Officer
Fisher Investments
Opinions expressed above are those of Kenneth L. Fisher and are subject to
change, are not guaranteed and should not be considered recommendations to buy
or sell any security.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
Fund holdings and sector allocations are subject to change and are not
recommendations to buy or sell any security.
MUTUAL FUND INVESTING INVOLVES RISK OF LOSS. PRINCIPAL LOSS IS POSSIBLE. THE
FUND MAY USE SHORT SALES OF SECURITIES, WHICH INVOLVE THE RISK THAT LOSSES MAY
EXCEED THE ORIGINAL AMOUNT INVESTED. FOREIGN INVESTING INVOLVES SPECIAL RISKS,
INCLUDING A GREATER VOLATILITY AND POLITICAL, ECONOMIC AND CURRENCY RISKS AND
DIFFERENCES IN ACCOUNTING METHODS. SMALL- AND MEDIUM-CAPITALIZATION COMPANIES
TEND TO HAVE LIMITED LIQUIDITY AND GREATER PRICE VOLATILITY THAN LARGE
CAPITALIZATION COMPANIES. GROWTH STOCKS TYPICALLY ARE MORE VOLATILE THAN VALUE
STOCKS; HOWEVER, VALUE STOCKS HAVE A LOWER EXPECTED GROWTH RATE IN EARNINGS AND
SALES. INVESTMENTS IN DEBT SECURITIES TYPICALLY DECREASE IN VALUE WHEN INTEREST
RATES RISE. THIS RISK IS GREATER FOR LONGER-TERM DEBT SECURITIES.
The MSCI World Index is a broad-based unmanaged capitalization-weighted stock
index designed to measure global developed market equity performance. It
consists of 23 developed market country indices. One cannot invest directly in
an index.
This material must be preceded or accompanied by a prospectus.
Fisher Investments is the Adviser to The Purisima Funds. The Purisima Funds are
distributed by Quasar Distributors, LLC 04/07
4
SECTOR BREAKDOWN(1) (UNAUDITED)
PURISIMA TOTAL RETURN FUND
---------------------------------------
Basic Materials 7.9%
Communications 1.9%
Consumer, Cyclical 6.0%
Consumer, Non-cyclical 10.8%
Energy 17.3%
Financial 27.9%
Industrial 18.5%
Technology 3.9%
Utilities 5.2%
Mutual Funds 0.6%
---------------------------------------
Total 100.0%
- ----------
(1) Percentage of Total Investments as of February 28, 2007.
IMPORTANT INFORMATION
The following disclosure provides important information regarding the Fund's
Expense Example. Please refer to this information when reviewing the Expense
Example for the Fund.
EXPENSE EXAMPLE (UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs; and (2) ongoing costs, including management fees; distribution and/or
service (12b-1) fees; and other fund expenses. This Example is intended to help
you understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period indicated and held for the entire period from September 1, 2006 to
February 28, 2007, for the Total Return Fund.
Actual Expenses
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in these columns together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value
by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the row entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
5
Hypothetical Example for Comparison Purposes
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratios and assumed
rates of return of 5% per year before expenses, which are not the Fund's actual
returns. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads), or redemption 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.
ACTUAL HYPOTHETICAL PERFORMANCE
PURISIMA TOTAL RETURN FUND PERFORMANCE (5% RETURN BEFORE EXPENSES)
- --------------------------------------------------------------------------------
Beginning Account Value (09/01/06) $1,000.00 $1,000.00
Ending Account Value (02/28/07) $1,073.30 $1,017.80
Expenses Paid During Period(1) $ 7.25 $ 7.05
- --------------------------------------------------------------------------------
- ----------
(1) Expenses are equal to the Fund's expense ratio for the six month period of
1.41% for the Total Return Fund multiplied by the average account value
over the period, multiplied by 181/365 (to reflect the one-half year
period).
6
PURISIMA TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 2007 (UNAUDITED)
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS: 99.4%
AEROSPACE & DEFENSE: 4.2%
27,400 Embraer-Empresa Brasileira
de Aeronautica S.A. - ADR $ 1,242,590
137,500 Honeywell International, Inc. 6,385,500
44,800 Lockheed Martin Corp. 4,358,144
82,300 United Technologies Corp. 5,401,349
------------
17,387,583
------------
AIR FREIGHT & LOGISTICS: 1.6%
58,600 FedEx Corp. 6,690,948
------------
AUTOMOBILES: 1.4%
252,600 Nissan Motor Co. Ltd. - ADR 5,807,274
------------
BIOTECHNOLOGY: 2.2%
108,600 Celgene Corp. (a) 5,788,380
110,900 Medimmune, Inc. (a) 3,538,819
------------
9,327,199
------------
CAPITAL MARKETS: 10.6%
14,545 Ameriprise Financial, Inc. 850,301
165,800 Credit Suisse Group - ADR 11,481,650
44,000 Goldman Sachs Group, Inc. 8,870,400
78,850 Lehman Brothers Holdings, Inc. 5,779,705
89,800 Morgan Stanley 6,727,816
203,550 Nomura Holdings, Inc. - ADR 4,388,538
106,050 UBS AG 6,261,192
------------
44,359,602
------------
CHEMICALS: 1.9%
78,200 BASF AG - ADR 7,953,722
------------
COMMERCIAL BANKS: 6.9%
25,900 Banco Bradesco S.A. - ADR 952,861
444,675 Banco Santander Central Hispano S.A. - ADR 8,248,721
134,232 Intesa Sanpaolo SpA - ADR (a) 5,856,676
14,800 Kookmin Bank - ADR 1,322,232
459,200 Mitsubishi Ufj Financial Group, Inc. - ADR 5,611,424
538,700 Sumitomo Mitsui Financial Group, Inc. - ADR 5,228,569
19,300 Woori Finance Holdings Co. Ltd. - ADR 1,476,643
------------
28,697,126
------------
The accompanying notes are an integral part of these financial statements.
7
SHARES VALUE
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT: 1.1%
239,000 Motorola, Inc. $ 4,426,280
------------
COMPUTERS & PERIPHERALS: 1.4%
288,400 EMC Corp. (a) 4,023,180
50,000 Fujitsu Limited - ADR 1,734,395
------------
5,757,575
------------
CONSTRUCTION MACHINERY & EQUIPMENT: 1.9%
87,700 Komatsu Ltd. - ADR 7,801,476
------------
CONSTRUCTION MATERIALS: 0.4%
47,400 Cemex S.A. de C.V. - ADR (a) 1,610,652
------------
CONSUMER FINANCE: 1.6%
48,825 ORIX Corp. - ADR 6,693,908
------------
DIVERSIFIED FINANCIAL SERVICES: 1.3%
125,927 ING Groep N.V. - ADR 5,380,861
------------
DIVERSIFIED TELECOMMUNICATION SERVICES: 0.8%
45,600 Alltel Corp. 2,762,904
47,147 Windstream Corp. 709,562
------------
3,472,466
------------
ELECTRIC UTILITIES: 3.1%
56,500 American Electric Power Co., Inc. 2,534,590
81,600 DPL, Inc. 2,461,872
46,600 Edison International 2,186,472
48,100 FirstEnergy Corp. 3,009,617
69,600 PPL Corp. 2,646,192
------------
12,838,743
------------
ELECTRONIC COMPUTERS: 0.7%
42,225 Hitachi Ltd. - ADR 2,934,637
------------
ENERGY EQUIPMENT & SERVICES: 6.1%
129,600 Baker Hughes, Inc. 8,438,256
119,800 Schlumberger Ltd. 7,523,440
35,000 Tenaris S.A. - ADR 1,589,350
102,700 Transocean, Inc. (a) 7,875,036
------------
25,426,082
------------
FOOD & STAPLES RETAILING: 0.3%
38,300 Wal-Mart De Mexico S.A. de C.V. - ADR 1,475,454
------------
FOOD PRODUCTS: 2.2%
83,500 Cadbury Schweppes Plc - ADR 3,593,005
168,200 Groupe Danone - ADR 5,720,482
------------
9,313,487
------------
The accompanying notes are an integral part of these financial statements.
8
SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES: 2.1%
33,400 Cigna Corp. $ 4,759,500
71,100 Health Net, Inc. (a) 3,801,717
------------
8,561,217
------------
HOUSEHOLD DURABLES: 1.0%
219,300 Matsushita Electric Industrial Co. Ltd. - ADR 4,396,965
------------
HOUSEHOLD PRODUCTS: 0.8%
49,725 Procter & Gamble Co. 3,157,040
------------
INDUSTRIAL CONGLOMERATES: 2.9%
72,550 General Electric Co. 2,533,446
92,150 Siemens AG - ADR 9,734,726
------------
12,268,172
------------
INSURANCE: 3.0%
174,550 AXA - ADR 7,451,539
134,875 Millea Holdings, Inc. - ADR 5,001,165
------------
12,452,704
------------
INVESTMENT ADVICE: 1.0%
175,100 Amvescap Plc - ADR 4,179,637
------------
MACHINERY: 5.0%
104,500 Caterpillar, Inc. 6,731,890
125,700 Illinois Tool Works, Inc. 6,498,690
149,800 Kubota Corp. - ADR 7,451,052
------------
20,681,632
------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS: 0.8%
100,300 Hoya Corp. - ADR 3,470,731
------------
METALS & MINING: 5.6%
21,300 AngloGold Ashanti Ltd. - ADR 938,478
102,500 BHP Billiton Ltd. - ADR 4,409,550
52,000 Cia Vale Do Rio Doce - ADR 1,536,600
92,100 Freeport-McMoRan Copper & Gold, Inc. 5,287,461
306,400 Kobe Steel Ltd. - ADR 6,154,626
23,900 Rio Tinto Plc - ADR 5,178,174
------------
23,504,889
------------
METALS SERVICE CENTERS & OFFICES: 1.0%
12,110 Mitsui & Co. Ltd. - ADR 4,289,362
------------
MOTOR VEHICLES & PASSENGER CAR BODIES: 0.5%
38,775 Fuji Heavy Industries Ltd. - ADR 2,114,079
------------
The accompanying notes are an integral part of these financial statements.
9
SHARES VALUE
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER: 0.6%
44,900 Sempra Energy $ 2,696,245
------------
OIL & GAS: 11.6%
145,000 Anadarko Petroleum Corp. 5,833,350
59,100 Canadian Natural Resources Ltd. 2,972,730
100,200 ConocoPhillips 6,555,084
68,000 Devon Energy Corp. 4,468,280
74,500 EnCana Corp. 3,620,700
127,200 Occidental Petroleum Corp. 5,874,096
108,300 Royal Dutch Shell Plc - ADR 7,040,583
31,800 Sasol Ltd. - ADR 1,023,960
161,100 Talisman Energy, Inc. 2,782,197
124,008 Total S.A. - ADR 8,348,219
------------
48,519,199
------------
PETROLEUM REFINING: 1.5%
141,600 E.ON AG - ADR 6,175,176
------------
PHARMACEUTICALS: 4.7%
98,200 AstraZeneca Plc - ADR 5,511,966
91,450 GlaxoSmithKline Plc - ADR 5,136,746
57,700 Johnson & Johnson 3,637,985
118,450 Merck & Co., Inc. 5,230,752
------------
19,517,449
------------
REAL ESTATE: 2.4%
18,200 Alexandria Real Estate Equities, Inc. 1,914,458
31,900 AMB Property Corp. 1,875,082
25,400 Camden Property Trust 1,828,292
16,100 Essex Property Trust, Inc. 2,236,129
20,418 Public Storage, Inc. 2,067,731
------------
9,921,692
------------
ROAD & RAIL: 1.0%
82,300 Canadian Pacific Railway Ltd. 4,395,643
------------
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT: 2.6%
112,075 KLA-Tencor Corp. 5,798,761
158,950 Texas Instruments, Inc. 4,921,092
------------
10,719,853
------------
The accompanying notes are an integral part of these financial statements.
10
SHARES/PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
SPECIALTY RETAIL: 0.8%
103,600 Lowe's Companies, Inc. $ 3,373,216
------------
TEXTILE MILL PRODUCTS: 0.8%
47,000 Toray Industries, Inc. - ADR 3,391,567
------------
TOTAL COMMON STOCKS
(cost $289,810,395) $415,141,543
------------
MUTUAL FUNDS: 0.6%
2,421,436 SEI Daily Income Trust Government Fund 2,421,436
------------
TOTAL MUTUAL FUNDS
(cost $2,421,436) $ 2,421,436
------------
TOTAL INVESTMENTS
(cost $292,231,831): 100.0% $417,562,979
------------
Liabilities in Excess of Other Assets: 0.0% (177,201)
NET ASSETS: 100.0% $417,385,778
============
ADR - American depositary receipt.
(a) Non-income producing security.
The accompanying notes are an integral part of these financial statements.
11
PURISIMA TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 2007 (UNAUDITED)
ASSETS
Investments in securities, at cost $292,214,994
============
Investments in securities, at value $417,562,979
Receivables:
Dividends and interest 544,975
Fund shares sold 202,292
Other assets 76,431
------------
Total Assets 418,386,677
------------
LIABILITIES
Payables for fund shares redeemed 277,904
Accrued advisory fees (Note 3) 327,869
Accrued distribution fees (Note 4) 279,940
Accrued administration fees (Note 3) 24,065
Accrued transfer agent fees 33,774
Other accrued expenses 57,347
------------
Total Liabilities 1,000,899
------------
NET ASSETS $417,385,778
============
Number of shares issued and outstanding
(unlimited shares authorized, $0.01 par value) 18,137,323
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 23.01
============
COMPONENTS OF NET ASSETS
Paid-in capital $297,621,897
Accumulated net investment loss (3,848,255)
Accumulated net realized loss on investments (1,735,849)
Net unrealized appreciation on investments 125,347,985
------------
Net assets $417,385,778
============
The accompanying notes are an integral part of these financial statements.
12
PURISIMA TOTAL RETURN FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 2007 (UNAUDITED)
INVESTMENT INCOME
Income
Dividends (net of foreign taxes withheld of $162,138) $ 2,817,314
Interest & other income 70,888
------------
Total income 2,888,202
------------
Expenses
Advisory fees (Note 3) 2,010,941
Distribution fees (Note 4) 353,734
Administration fees (Note 3) 150,136
Transfer agent fees 73,852
Fund accounting fees 51,358
Custody fees 43,257
Insurance expense 41,789
Reports to shareholders 10,285
Registration fees 12,417
Audit fees 11,901
Legal fees 19,931
Trustee fees 9,258
Miscellaneous 4,614
------------
Total expenses 2,793,473
------------
NET INVESTMENT INCOME 94,729
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 108,679
Change in net unrealized appreciation on investments 28,330,659
------------
Net gain on investments 28,439,338
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 28,534,067
============
The accompanying notes are an integral part of these financial statements.
13
PURISIMA TOTAL RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 *AUGUST 31, 2006
----------------- ----------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 94,729 $ 674,614
Net realized gain on investments 108,679 11,633,430
Change in net unrealized appreciation
on investments 28,330,659 34,526,644
------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 28,534,067 46,834,688
------------ ------------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (1,378,884) (4,857,625)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,378,884) (4,857,625)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from
net change in outstanding shares (a) 2,932,236 19,897,125
------------ ------------
TOTAL INCREASE IN NET ASSETS 30,087,419 61,874,188
------------ ------------
NET ASSETS
Beginning of period 387,298,359 325,424,171
------------ ------------
END OF PERIOD $417,385,778 $387,298,359
============ ============
Undistributed net investment loss $ (3,848,255) $ (2,564,100)
============ ============
(a) A summary of capital share transactions is as follows:
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007* AUGUST 31, 2006
------------------------ ------------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
Shares sold 1,568,007 $ 35,379,062 3,149,391 $ 66,243,656
Shares issued on
reinvestment of
distributions 56,352 1,288,215 216,984 4,596,749
Shares issued from merger -- -- 325,790 6,431,095
Shares redeemed (1,493,124) (33,735,041) (2,785,212) (57,374,375)
---------- ------------ ---------- ------------
Net increase 131,235 $ 2,932,236 906,953 $ 19,897,125
========== ============ ========== ============
- ----------
* Unaudited.
The accompanying notes are an integral part of these financial statements.
14
PURISIMA TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Semi-Annual Report.
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED ------------------------------------------------------------
FEB. 28, 2007++ 2006 2005 2004 2003 2002
---------------- -------- -------- -------- -------- --------
Net asset value, beginning
of period $ 21.51 $ 19.03 $ 16.58 $ 15.31 $ 14.06 $ 18.73
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.28) 0.04 0.10 0.07 0.07 0.09
Net realized and unrealized
gain (loss) on investments 1.86 2.72 2.42 1.27 1.34 (2.91)
-------- -------- -------- -------- -------- --------
Total from investment operations 1.58 2.76 2.52 1.34 1.41 (2.82)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income (0.08) (0.28) (0.07) (0.07) (0.05) (0.19)
From net realized gain -- -- -- -- (0.11) (1.66)
-------- -------- -------- -------- -------- --------
Total distributions (0.08) (0.28) (0.07) (0.07) (0.16) (1.85)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 23.01 $ 21.51 $ 19.03 $ 16.58 $ 15.31 $ 14.06
======== ======== ======== ======== ======== ========
Total return 7.33%** 14.54% 15.20% 8.72% 10.22% (16.72%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(millions) $ 417.4 $ 387.3 $ 325.4 $ 298.6 $ 244.1 $ 181.6
RATIO OF EXPENSES TO AVERAGE
NET ASSETS:
Before fees waived and expenses
absorbed or recouped 1.41%* 1.49% 1.46% 1.49% 1.56% 1.51%+
After fees waived and expenses
absorbed or recouped 1.41%* 1.49% 1.49% 1.50% 1.50% 1.50%+
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS # 0.06%* 0.21% 0.52% 0.42% 0.55% 1.03%
Portfolio turnover rate 0.30%** 43.47% 16.68% 19.50% 12.57% 60.76%
* Annualized.
** Not annualized.
++ Unaudited.
# Net of fees waived.
+ With dividend expense on securities sold short, which was 0.10%.
Otherwise, ratio of net expenses to average net assets would be 1.50%.
The accompanying notes are an integral part of these financial statements.
15
PURISIMA TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2007 UNAUDITED
NOTE 1 - ORGANIZATION
The Purisima Funds (the "Trust") was organized as a Delaware business trust on
June 27, 1996 and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act") as an open-end management investment company issuing
its shares in series. Each series represents a distinct portfolio with its own
investment objectives and policies. The accompanying financial statements
include the Total Return Fund (the "Fund"), which commenced operations on
October 28, 1996, one of the two portfolios comprising the Trust. Fisher Asset
Management, LLC (doing business as Fisher Investments) (the "Adviser") serves as
the investment adviser to the Funds.
The investment objective of the Total Return Fund is as follows:
The Fund seeks to produce a high level of total return. It invests primarily in
common stocks and other equity-type securities, or securities acquired primarily
to produce income, or a combination of both depending on the assessment of
market conditions.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with accounting principles generally accepted in the
United States of America.
A. Security Valuation. Investments in securities traded on a national
securities exchange are valued at the last sales price on the
business day as of which such value is being determined. Investments
in securities traded on the NASDAQ Global Market, the NASDAQ Global
Select Market and the NASDAQ Capital Market will be valued at the
NASDAQ Official Closing Price ("NOCP"), 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 amortized cost
which, when combined with accrued interest, approximates market
value.
16
B. Federal Income and Excise Taxes. The Fund intends to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
income to its shareholders. Therefore, no federal income or excise
tax provision is required.
The Fund may be subject to foreign taxes on income, gains on
investments or currency repatriation, a portion of which may be
recoverable. The Fund will accrue such taxes and recoveries as
applicable based upon its current interpretations of the tax rules
and regulation that exist in the markets in which it invests.
As of August 31, 2006, the Total Return Fund has a capital loss
carryforward available to offset future capital gains, if any, of
$1,540,425, of which $83,515 expires in 2011, $338,881 expires in
2012 and $1,118,029 expires in 2013.
C. Security Transactions, Investment Income and Distributions. Security
transactions are accounted for on trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend date
and interest income is recognized on the accrual basis. Realized
gains and losses are evaluated on the bases of identified costs.
D. Use of Estimates. The presentation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates and assumptions.
E. Concentration of Risk. Investments in securities of non-U.S. issues
in certain countries involve special investment risks. These risks
may include but are not limited to, investment restrictions, adverse
political, social and economic developments, government involvement
in the private sector, limited and less reliable investor
information, lack of liquidity, certain local tax law
considerations, and limited regulation of the securities markets.
F. Securities Sold Short. To the extent the Fund engages in selling
securities short, it is obligated to replace a security borrowed by
purchasing the same security at the current market value. The Fund
would incur a loss if the price of the security increases between
the date of the short sale and the date on which the Fund replaces
the borrowed security. The Fund would realize a gain if the price of
the security declines between those dates.
The Fund is required to establish a margin account with the broker
lending the security sold short. While the short sale is
outstanding, the broker retains the proceeds of the short sale and
the Fund must also maintain a deposit with the broker consisting of
cash having a value equal to a specified percentage of the value of
the securities sold short.
17
G. Reclassification of Capital Accounts. Accounting principles
generally accepted in the United States of America require that
certain components of net assets relating to permanent difference 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, 2006, the Total Return Fund
increased accumulated net investment loss by $90,771, and increased
accumulated net realized loss on investments by $36,608.
H. Indemnification Obligations. Under the Fund's organizational
documents, its current and former officers and trustees are
indemnified against certain liabilities arising out of the
performance of their duties to the Fund. In addition, in the normal
course of business, the Fund enters into contracts that contain a
variety of representations and warranties that provide general
indemnifications. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred or that would be
covered by other parties.
NOTE 3 - COMMITMENTS, OTHER RELATED PARTY TRANSACTIONS AND OTHER
SERVICE PROVIDERS
The Fund has an Investment Management Agreement with the Adviser to provide
investment advisory services to the Fund. The Adviser furnishes all investment
advice, office space, facilities, and most of the personnel needed by the Fund.
As compensation for its services, the Adviser is entitled to a monthly fee at
the annual rate of 1.00% of the Fund's average daily net assets.
The Fund is responsible for its own operating expenses. The Adviser has agreed
to limit the Fund's total expenses (exclusive of brokerage, interest, taxes,
dividends on securities sold short and extraordinary expenses) to not more than
1.50% of the average daily net assets.
Any fee withheld or voluntarily reduced and/or any Fund expense absorbed by the
Adviser pursuant to an agreed upon expense cap shall be reimbursed by the Fund
to the Adviser, if so requested by the Adviser, anytime before the end of the
third fiscal year following the year to which the fee reduction, waiver, or
expense absorption relates, provided the aggregate amount of the Fund's current
operating expenses for such fiscal year does not exceed the applicable
limitation on Fund expenses. Any such reimbursement is also contingent upon
Board of Trustees review and approval prior to the time the reimbursement is
initiated. The Fund must pay its current ordinary operating expenses before the
Adviser is entitled to any reimbursement of fees and/or expenses. For the six
months ended February 28, 2007, the Adviser had previously recouped all fees
previously waived and expenses absorbed from the Total Return Fund.
18
U.S. Bank, N.A. serves as the Fund's Custodian. U.S. Bancorp Fund Services, LLC
("USBFS"), an affiliate of U.S. Bank, N.A., serves as the Administrator, Fund
Accountant and Transfer Agent. Certain officers of the Trust, including the
Trust's Treasurer, are employees of the Administrator. In its capacity as the
Fund's Administrator, USBFS provides general fund management including corporate
secretarial services, coordinates the preparation of materials for the Board of
Trustees, assists with the annual audit of the Fund's financial statements,
monitors the Fund's compliance with federal and state regulations as well as
investment restrictions, coordinates the payment of Fund expenses and monitors
expense accruals, prepares financial statements and non-investment related
statistical data and makes required tax reporting calculations. During the six
months ended February 28, 2007, Purisima Total Return Fund paid USBFS $150,136
for services rendered in its capacity as the Trust's Administrator.
Quasar Distributors, LLC, an affiliate of U.S. Bank, N.A., and USBFS serves as
principal underwriter of the Fund and acts as the Fund's distributor in a
continuous public offering of the Fund's shares.
NOTE 4 - SERVICE AND DISTRIBUTION PLAN
The Trust has adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan, the Total Return Fund is
authorized to pay expenses incurred for the purpose of financing activities,
including the employment of other dealers, intended to result in the sale of
shares of the Fund. The fee accrues at an annual rate not to exceed 0.25% of the
Fund's average daily net assets. For the six months ended February 28, 2007, the
Fund incurred $353,734 in distribution fees. Quasar Distributors, LLC, an
affiliate of the Administrator, serves as distributor of the Fund pursuant to a
Distribution Agreement with the Trust.
NOTE 5 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, excluding U.S.
Government securities and short-term investments, for the six months ended
February 28, 2007 were as follows:
FUND PURCHASES SALES
---- --------- -----
Total Return Fund $3,502,192 $1,206,601
NOTE 6 - FEDERAL INCOME TAX MATTERS
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.
19
As of February 28, 2007, the components of distributable earnings on a tax basis
were as follows:
TOTAL RETURN
------------
Cost of investments for tax purposes $296,532,220
------------
Gross tax unrealized appreciation $124,055,352
Gross tax unrealized depreciation $ (3,024,593)
------------
Net tax unrealized appreciation $121,030,759
============
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
2/28/2007 $1,378,884 $0.0763 -- --
8/31/2006 $4,857,625 $0.2825 -- --
NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS
In December, 2005, the Financial Accounting Standards Board ("FASB") released
Financial Accounting Standard Board Statement No. 157 Fair Value Measurements
("SFAS 157"). SFAS 157 establishes a fair valuation hierarchy to increase
consistency and comparability in fair value measurements and related
disclosures. The fair value hierarchy prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels. The fair value
hierarchy gives the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). SFAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007. At this time,
management is evaluating the implications of SFAS 157 and its impact on the
financial statements has not yet been determined.
In July, 2006, the Financial Accounting Standards Board ("FASB") released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48").
FIN 48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether the tax positions are
`'more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required as of the date of the last Net Asset Value ("NAV") calculation in the
first required financial statement reporting period for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of the
effective date. At this time, management is evaluating the implications of FIN
48 and its impact on the financial statements has not yet been determined.
20
PURISIMA TOTAL RETURN FUND
OTHER INFORMATION
BOARD CONSIDERATION OF AND CONTINUATION OF INVESTMENT ADVISORY AGREEMENT
(UNAUDITED)
On October 26, 2006, the Board of Trustees performed its annual review and
renewal of the Investment Management Agreement for the Total Return Fund. The
Board of Trustees, including the Independent Trustees, took into consideration
information provided at the meeting, as well as a wide variety of materials
relating to the services provided by the Adviser, including reports on the
Fund's investment results; portfolio composition; portfolio trading practices;
and other information relating to the nature, extent and quality of services
provided by the Adviser to the Fund. In addition, the Board discussed and
reviewed information regarding the Fund's investment results, advisory fee and
expense comparisons, descriptions of various functions such as compliance
monitoring and portfolio trading practices, and information about the personnel
providing investment management and administrative services to the Fund. The
Board's Independent Trustees met separately to discuss the various factors
summarized below, both without and then with legal counsel to the Fund, who is
not independent legal counsel.
In deciding to renew the Agreement, the Board of Trustees did not identify any
single factor or particular information that, in isolation, was the controlling
factor. This summary describes the most important, but not all, of the factors
considered by the Board.
1. Nature, Extent and Quality of Services
The Adviser, its personnel and its resources. The Board considered
the depth and quality of the Adviser's investment management
process, including its sophisticated methodology; the experience,
capability and integrity of its senior management and other
personnel; the low turnover rates of its key personnel; and the
overall financial strength and stability of its organization. The
Board discussed the quality of the services provided by the Adviser
and noted that the Quarterly Report from the Adviser was extremely
sophisticated and thorough. The Board commented on the quality of
the independent capital markets research conducted by the Adviser
and reported to the Board on a regular basis. The Board's consensus
was that the Adviser was open about its thinking on the management
of the Fund and very available to address any questions or concerns
the Board may have from time to time. The Board also considered that
the Adviser made available to its investment professionals a variety
of resources and systems relating to investment management,
compliance, trading, performance and portfolio accounting. The Board
further considered the Adviser's continuing need to attract and
retain qualified personnel and to maintain and enhance its resources
and systems. The Board also observed that there had been no decline
in the quality of services provided to the Fund despite the growth
of the Adviser's other client business and the relative decline of
the Fund as a percentage of the Adviser's assets under management.
21
Other Services. The Board considered the Adviser's policies,
procedures and systems to ensure compliance with applicable laws and
regulations and its commitment to these programs; its efforts to
keep the Trustees informed; and its attention to matters that may
involve conflicts of interest with the Fund.
The Board concluded that the nature, extent and quality of the
services provided by the Adviser has benefited and should continue
to benefit the Fund and its shareholders.
2. Investment Performance
The Board considered the Fund's pursuit of its investment objective
and the investment results of the Fund in light of its objective.
The Trustees compared the Fund's total returns with various
independent securities price indexes (the Standard & Poor's 500
Stock Price Index, the Morgan Stanley Capital Institutional World
Index and the Morgan Stanley Capital International EAFE Index) and
mutual fund peer groups objectively compiled using data from
Morningstar, Inc., and noted the favorable performance of the Fund
during various periods compared to those indexes and its peers. The
Fund modestly underperformed its peer group of funds for the 3- and
5-year periods, but has shown improved relative outperformance
recently for the one-year periods. The Fund has lagged the indexes
for shorter, recent periods, but has more favorable relative
performance over the longer term (such as since inception).
The Board concluded that the Adviser's performance record in
managing the Fund indicates that its continued management has
benefited and should continue to benefit the Fund and its
shareholders.
3. Advisory Fees and Total Expenses
The Board reviewed the advisory fees and total expenses of the Fund
and compared such amounts with the average fee and expense levels of
other funds in an applicable group of peer funds compiled using data
from Morningstar, Inc. The Board observed that the Fund's advisory
fees and total expenses were reasonable compared to the median fee
and expense levels of the comparable funds in the indices (meaning
at or below the median). The Board noted that, in the past, the
Adviser had waived significant fees in respect of the Fund to
maintain an overall expense limitation, which the Adviser would not
be able to recoup, thus indicating a substantial investment by the
Adviser in that Fund. The Board noted that the Fund is currently
operating slightly below its expense limit. The Board concluded that
the reasonable level of the fees charged by the Adviser benefits the
Fund and its shareholders. The Board then considered the fees
charged to the Fund versus the Adviser's private clients. The Board
considered the extra burden of administration, compliance,
deadlines, risk and regulations associated with the Fund that do not
apply to the private accounts. The Board determined that the
respective peer groups provided a better comparison and it found the
Fund's fees reasonable.
22
4. Adviser, Costs, Level of Profits and Economies of Scale
The Board discussed the Adviser's costs of providing services to the
Fund, as well as the resulting level of profits to the Adviser. The
Board considered the Adviser's need to invest in technology,
infrastructure and staff to reinforce and offer new services and to
accommodate changing regulatory requirements. The Trustees noted
that at its present asset size, breakpoints in the Fund's advisory
fee structure were not practicable, but that economies of scale in
the cost of operations, to the extent they exist, effectively were
being shared given the Adviser's past waiver of fees in respect of
the Fund. The Board did not specifically examine the Adviser's level
of profitability on the Fund given the Fund's relatively small size
compared to the rest of the Adviser's assets under management and
the reasonability of the Fund's fees and expenses compared to peer
funds. The Board concluded that the Fund's cost structure is
reasonable.
5. Ancillary Benefits
The Board considered a variety of other benefits received by the
Adviser, including possible ancillary benefits to itself or its
institutional management business. The Board noted that the Adviser
ceased the use of third-party soft dollar products from trades by
the Fund, and noted that the small relative size of the Fund
compared to the Adviser's other business would suggest minimal
possible fallout benefits.
6. Conclusions
Based on its review, including consideration of each of the factors
referred to above, the Board concluded that the Agreement is fair
and reasonable to the Fund and its shareholders, that the Fund's
shareholders received, and should receive, reasonable value in
return for the advisory fees paid to the Adviser by the Fund, and
that the renewal of the Agreement was in the best interests of the
Fund and its shareholders.
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.
Information regarding how the Fund voted proxies relating to the portfolio
securities during the most recent 12-month period ended June 30 is available
without charge, upon request, 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 Fund files its complete schedule of portfolio holdings with the SEC for the
first and third fiscal quarters on Form N-Q. The Fund's 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.
23
PURISIMA TOTAL RETURN FUND
TRUSTEES AND OFFICER INFORMATION (UNAUDITED)
The Board of Trustees is responsible for the overall management of the Trust's
business. The Board of Trustees 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 Fund's investment objective and policies and to general
supervision by the Board of Trustees. The Statement of Additional Information
includes additional information about the Trust's Trustees and is available,
without charge, by calling 1-800-841-0199.
The Trustees and Officers of the Trust, their business addresses and principal
occupations during the past five years are:
Name, Address, Position(s) Held
Date of Birth 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:
- --------------------------------------------------------------------------------
Bryan F. Morse (born 1952) Trustee 1996
13100 Skyline Blvd.
Woodside, CA 94062
- --------------------------------------------------------------------------------
Grover T. Wickersham (born 1949) Trustee 1996
13100 Skyline Blvd.
Woodside, CA 94062
24
Number of
Portfolios in
Fund Complex Other
Principal Occupation(s) Overseen by Directorships
During Past Five Years Director Held
- ----------------------------------------------------------------------------------------------
Chief Executive Officer and majority shareholder of 2 None
Fisher Investment, Inc., the sole 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 1979.
- ----------------------------------------------------------------------------------------------
President and Chief Executive Officer of Brown & Haley 2 Signature
since 1998 (fine confectioners); Vice President of Foods, Inc.
Blummer Chocolate Company from 1980 to 1997, where he
had been employed since 1970.
- ----------------------------------------------------------------------------------------------
Sole proprietor of LeFevre Capital Management, a 2 None
registered investment adviser.
- ----------------------------------------------------------------------------------------------
Executive Director of the law firm of Berding & Weil, 2 Diablo Valley
LLP since 1990. Bank; East
Bay BOMA.
- ----------------------------------------------------------------------------------------------
Sole proprietor of Bryan F. Morse, RIA, a registered 2 None
investment adviser since 1990.
- ----------------------------------------------------------------------------------------------
Attorney in private practice in Palo Alto, California. 2 None
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.
- ----------------------------------------------------------------------------------------------
25
Position(s) Held
Name, Address, Age with Trust Year Elected(1)
- --------------------------------------------------------------------------------
Tom Fishel (born 1960) Chief 2005
13100 Skyline Blvd. Compliance
Woodside, CA 94062 Officer
- --------------------------------------------------------------------------------
Keith Shintani (born 1963) Secretary and 2006
2020 East Financial Way Assistant
Glendora, CA 91741 Treasurer
- --------------------------------------------------------------------------------
Michael Ricks (born 1977) Treasurer 2006
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.
26
Number of
Portfolios in
Fund Complex Other
Principal Occupation(s) Overseen by Directorships
During Past Five Years Director Held
- --------------------------------------------------------------------------------
Vice President and Chief Compliance Officer N/A None
of the Adviser. Vice President of Charles
Schwab & Co., Inc. from 1995 to 2004, where
he had been employed since 1983.
- --------------------------------------------------------------------------------
Vice President of U.S. Bancorp Fund N/A None
Services, LLC and its predecessor,
Investment Company Administration, LLC
since 1998.
- --------------------------------------------------------------------------------
Assistant Vice President of U.S. Bancorp N/A None
Fund Services, LLC since 2001.
- --------------------------------------------------------------------------------
27
PRIVACY NOTICE
FISHER ASSET MANAGEMENT, LLC (doing business as Fisher Investments) 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 are committed to protecting your privacy and your non-public personal
information. We do not sell or market your non-public personal information to
unaffiliated organizations. We maintain physical, electronic and procedural
safeguards to guard your non-public personal information. We hold our employees
to strict standards of conduct regarding confidentiality, and employees who
violate our Privacy Policy are subject to disciplinary process. We restrict
access to your information to those employees who need to know that information
to carry out their duties.
We do not disclose any non-public personal information about our clients or
former clients without the client's authorization, except as permitted by law.
We may disclose the non-public information we collect to employees and
affiliates, and unaffiliated third parties as permitted by law. Third parties
may include law enforcement agencies, government and regulatory authorities, and
professionals such as our legal counsel and auditors, and we may disclose
information for reasons such as audit purposes, prevention of fraud or money
laundering, protection of confidentiality, compliance with laws, and to provide
agreed upon products and services to you. Third parties may also include service
providers performing financial services for us (such as brokers and custodians)
and service providers performing non-financial services for us (such as third
parties performing computer related or data maintenance, marketing or other
services for us or to assist us in offering our products and services to you).
It is our policy to require all third party service providers that will receive
information to sign strict confidentiality agreements agreeing to safeguard such
information and use it only for the purpose it was provided.
28
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THE PURISIMA FUNDS
Semi-Annual Report (Unaudited)
February 28, 2007
The Purisima All-Purpose Fund
A LETTER TO OUR SHAREHOLDERS
Welcome to the semi-annual report for the Purisima All-Purpose Fund for the
six-month period ended February 28, 2007. The Fund seeks to provide protection
against declines in value of the US and foreign equity markets. During the
period, the Fund was primarily invested in US government securities.
Thank you for your continued interest and support.
Sincerely,
/s/ Kenneth L. Fisher
Kenneth L. Fisher
Chairman and Chief Investment Officer
Fisher Investments
Opinions expressed above are those of Kenneth L. Fisher and are subject to
change, are not guaranteed and should not be considered recommendations to buy
or sell any security.
Fund holdings and sector allocations are subject to change and are not
recommendations to buy or sell any security.
MUTUAL FUND INVESTING INVOLVES RISK. PRINCIPAL LOSS IS POSSIBLE. THE FUND MAY
USE SHORT SALES OF SECURITIES, WHICH INVOLVE THE RISK THAT LOSSES MAY EXCEED THE
ORIGINAL AMOUNT INVESTED. THE FUND MAY ALSO USE OPTIONS AND FUTURES CONTRACTS,
WHICH HAVE THE RISKS OF UNLIMITED LOSSES OF THE UNDERLYING HOLDINGS DUE TO
UNANTICIPATED MARKET MOVEMENTS AND FAILURE TO CORRECTLY PREDICT THE DIRECTION OF
SECURITIES PRICES, INTEREST RATES AND CURRENCY EXCHANGE RATES. THE FUND MAY
INVEST IN FOREIGN SECURITIES WHICH INVOLVE GREATER VOLATILITY AND POLITICAL,
ECONOMIC AND CURRENCY RISKS AND DIFFERENCES IN ACCOUNTING METHODS. THE FUND MAY
INVEST IN DEBT SECURITIES WHICH TYPICALLY DECREASE IN VALUE WHEN INTEREST
RATES RISE. THIS RISK IS GREATER FOR LONGER-TERM DEBT SECURITIES.
THE FUND IS NON-DIVERSIFIED, MEANING IT MAY CONCENTRATE ITS ASSETS IN FEWER
INDIVIDUAL HOLDINGS THAN A DIVERSIFIED FUND. THEREFORE, THE FUND IS MORE EXPOSED
TO INDIVIDUAL STOCK VOLATILITY THAN A DIVERSIFIED FUND. AN INVESTMENT IN THE
FUND IS NOT SUITABLE FOR ALL INVESTORS.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
Fisher Investments is the Adviser to The Purisima Funds. The Purisima Funds are
distributed by Quasar Distributors, LLC. 04/07
SECTOR BREAKDOWN(1)
(Unaudited)
PURISIMA ALL-PURPOSE FUND
---------------------------------------------------------------------------
U.S. Treasury Obligations 81.2%
Mutual Funds 18.8%
---------------------------------------------------------------------------
Total 100.0%
(1) Percentage of Total Investments as of February 28, 2007.
IMPORTANT INFORMATION
The following disclosure provides important information regarding the Fund's
Expense Example. Please refer to this information when reviewing the Expense
Example for the Fund.
EXPENSE EXAMPLE (UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs; and (2) ongoing costs, including management fees; and other fund
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period indicated and held for the entire period from September 1, 2006 to
February 28, 2007 for the Purisima All-Purpose Fund.
Actual Expenses
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in these columns together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the row entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratios and assumed
rates of return of 5% per year before expenses, which are not the Fund's actual
returns. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads), or redemption fees. Therefore, the information under the
heading "Hypothetical Performance (5% return before expenses)" is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
EXPENSE EXAMPLE (UNAUDITED)
PURISIMA ALL-PURPOSE FUND ACUTAL HYPOTHETICAL PERFORMANCE
(Inception date: 11/01/2005) PERFORMANCE (5% RETURN BEFORE EXPENSES)
- --------------------------------------------------------------------------------
Beginning Account Value (09/01/06) $1,000.00 $1,000.00
Ending Account Value (02/28/07) $1,032.70 $1,017.36
Expenses Paid During Period(1) $7.56 $7.50
- --------------------------------------------------------------------------------
(1) Expenses are equal to the Fund's expense ratio for the four month period
of 1.50% for the Purisima All-Purpose Fund multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the four
month period).
PURISIMA ALL-PURPOSE FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS: 108.7%
U.S. TREASURY BILL: 108.7%
30,000 4.940%, 05/24/2007 $ 29,650
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $29,653) 29,650
------------
SHARES
- ------------
MUTUAL FUNDS: 25.1%
6,855 SEI Daily Income Trust Government Fund 6,855
------------
TOTAL MUTUAL FUNDS
(cost $6,855) 6,855
------------
TOTAL INVESTMENTS
(cost $36,508): 133.8% $ 36,505
Liabilities in Excess of Other Assets: (33.8)% (9,230)
------------
TOTAL NET ASSETS: 100.0% $ 27,275
============
The accompanying notes are a integral part of these financial statements.
PURISIMA ALL-PURPOSE FUND
STATEMENT OF ASSETS AND LIABILITIES AT FEBRUARY 28, 2007 (UNAUDITED)
ALL-PURPOSE
FUND
------------
ASSETS
Investments in securities, at cost $ 36,508
============
Investments in securities, at value $ 36,505
Receivables:
Dividends and interest 41
Due from Adviser (Note 3) 11,008
Other Assets 8,613
------------
Total Assets 56,167
------------
LIABILITIES
Accrued administration fees (Note 3) 2,058
Accrued transfer agent fees 3,954
Accrued audit fees 6,942
Accrued fund accounting fees 6,882
Accrued reports to shareholders 273
Other accrued expenses 8,783
------------
Total Liabilities 28,892
------------
NET ASSETS $ 27,275
============
Number of shares issued and outstanding
(unlimited shares authorized, $0.01 par value) 2,705
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $ 10.08
============
COMPONENTS OF NET ASSETS
Paid-in capital $ 27,047
Accumulated net investment income 233
Accumulated net realized loss on investments (2)
Net unrealized depreciation on investments (3)
------------
Net assets $ 27,275
============
The accompanying notes are an integral part of these financial statements.
PURISIMA ALL-PURPOSE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 2007 (UNAUDITED)
ALL-PURPOSE
FUND
------------
INVESTMENT INCOME
Income
Interest $ 1,057
------------
Total income 1,057
------------
Expenses
Advisory fees 133
Administration fees 18,825
Transfer agent fees 7,446
Fund accounting fees 14,368
Custody fees 1,106
Insurance expense 740
Reports to shareholders 483
Registration fees 11,388
Audit fees 6,943
Legal fees 4,197
Trustee fees 9,129
Miscellaneous 92
------------
Total expenses 74,850
Less: Reimbursement by Adviser (Note 3) 74,651
------------
Net expenses 199
------------
NET INVESTMENT INCOME 858
------------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS
Net realized gain on investments 4
Change in net unrealized depreciation on investments (3)
------------
Net gain on investments 1
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 859
============
The accompanying notes are an integral part of these financial statements.
PURISIMA ALL-PURPOSE FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
NOVEMBER 1, 2005^
SIX MONTHS ENDED THRU
DECREASE IN NET ASSETS FROM: FEBRUARY 28, 2007* AUGUST 31, 2006
------------------ ------------------
OPERATIONS
Net investment income $ 858 $ 1,422
Net rea lized gain on investments 4 (6)
Change in net unrealized depreciation on investments (3) --
------------------ ------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 859 1,416
------------------ ------------------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (1,899) (148)
------------------ ------------------
TOTAL DISTRIBUTIONS TO SHARE HOLDERS (1,899) (148)
------------------ ------------------
CAPITAL SHARE TRANSACTIONS
Net increa se in net assets derived from net change in outstanding shares (a) 1,899 25,148
------------------ ------------------
TOTAL INCREASE IN NET ASSETS 859 26,416
------------------ ------------------
NET ASSETS
Beginning of period 26,416 --
------------------ ------------------
END OF PERIOD $ 27,275 $ 26,416
================== ==================
Undistributed net investment income $ 233 $ 1,274
================== ==================
(a) A summary of capital share transactions is as follows:
SIX MONTHS ENDED NOVEMBER 1, 2005^
FEBRUARY 28, 2007* THRU AUGUST 31, 2006
SHARES VALUE SHARES VALUE
------------------ ------------------ ------------------ ------------------
Shares sold -- $ -- 2,500 $ 25,000
Shares issued on reinvestment of distributions 190 1,899 15 148
Shares redeemed -- -- -- --
------------------ ------------------ ------------------ ------------------
Net increase 190 $ 1,899 2,515 $ 25,148
================== ================== ================== ==================
^ Commencement of Operations.
* Unaudited.
The accompanying notes are an integral part of these financial statements.
PURISIMA ALL-PURPOSE FUND
FINANCIAL HIGHLIGHTS FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS SEMI-ANNUAL REPORT.
FOR THE PERIOD
NOVEMBER 1, 2005^
SIX MONTHS ENDED THRU
FEBRUARY 28, 2007++ AUGUST 31, 2006
------------------ ------------------
Net asset value, beginning of period $10.50 $10.00
------------------ ------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.33 0.56
Net realized and unrealized gain
(loss) on investments 0.00 0.00
------------------ ------------------
Total from investment operations 0.33 0.56
------------------ ------------------
LESS DISTRIBUTIONS:
From net investment income (0.75) (0.06)
------------------ ------------------
Total distributions (0.75) (0.06)
------------------ ------------------
Net asset value, end of period $10.08 $10.50
================== ==================
Total return 3.27%** 5.62%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $27.3 $26.4
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 568.62%* 620.25%*
After fees waived 1.50%* 1.50%*
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS # 6.52%* 6.71%*
Portfolio turnover rate 0.00%** 0.00%**
* Annualized.
** Not annualized.
++ Unaudited.
# Net of fees waived.
^ Commencement of operations.
The accompanying notes are an integral part of these financial statements.
PURISIMA ALL-PURPOSE FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 2007 (Unaudited)
NOTE 1 - ORGANIZATION
The Purisima Funds (the "Trust") was organized as a Delaware business trust on
June 27, 1996 and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company issuing
its shares in series. Each series represents a distinct portfolio with its own
investment objectives and policies. The accompanying financial statements
include the Purisima All-Purpose Fund (the "Fund"), a non-diversified fund which
commenced operations on November 1, 2005. The Fund is one of the two portfolios
comprising the Trust. Fisher Asset Management, LLC (doing business as Fisher
Investments) (the "Adviser") serves as the investment adviser to the Fund.
The investment objective of the Purisima All-Purpose Fund is as follows:
The Fund seeks to provide protection against declines in the value of the U.S.
and foreign equity markets. It invests in derivative securities, money market
instruments and other securities, including U.S. and foreign common stocks, and
fixed income securities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of the financial statements. These
policies are in conformity with accounting principles generally accepted in the
United States of America.
A . Security Valuation. Investments in securities traded on a national
securities exchange are valued at the last sales price on the
business day as of which such value is being determined. Investments
in securities traded on the NASDAQ Global Market, the NASDAQ Global
Select Market and the NASDAQ Capital Market will be valued at the
NASDAQ Official Closing Price ("NOCP"), 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 amortized cost
which, when combined with accrued interest, approximates market
value.
B. Federal Income and Excise Taxes. The Fund has elected to be taxed as
a "regulated investment company" and intends to distribute
substantially all taxable income to its shareholders and otherwise
comply with the provisions of the Internal Revenue Code applicable
to regulated investment companies. Therefore, no federal income or
excise tax provision is required.
PURISIMA ALL-PURPOSE FUND
In order to avoid imposition of the excise tax applicable to
regulated investment companies, the Fund intends to declare each
year as dividends in each calendar year at least 98% of its net
investment income (earned during the calendar year) and 98% of its
net realized capital gains (earned during the twelve months ended
October 31) plus undistributed amounts, if any, from prior years.
The Fund may be subject to foreign taxes on income, gains on
investments or currency repatriation, a portion of which may be
recoverable. The Fund will accrue such taxes and recoveries as
applicable based upon its current interpretations of the tax rules
and regulation that exist in the markets in which it invests.
As of August 31, 2006, the Fund had a post-October loss deferral of
$6.
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
PURISIMA ALL-PURPOSE FUND
proceeds is realized as a gain or loss. When securities are acquired
or delivered upon exercise of an option, the acquisition cost or
sale proceeds are adjusted by the amount of the premium. When an
option is closed, the difference between the premium and the cost to
close the position is realized as a gain or loss. The Fund may
purchase options which are included in the Fund's Schedules of
Investments and subsequently marked to market to reflect the current
value of the option. At February 28, 2007, the Fund had no options
outstanding.
G. Securities Sold Short. To the extent the Fund engages in selling
securities short, they are obligated to replace a security borrowed
by purchasing the same security at the current market value. The
Fund would incur a loss if the price of the security increases
between the date of the short sale and the date on which the Fund
replaces the borrowed security. The Fund would realize a gain if the
price of the security declines between those dates.
The Fund is required to establish a margin account with the broker
lending the security sold short. While the short sale is
outstanding, the broker retains the proceeds of the short sale and
the Fund must also maintain a deposit with the broker consisting of
cash having a value equal to a specified percentage of the value of
the securities sold short.
H. Indemnification Obligations. Under the Fund's organizational
documents, its current and former officers and trustees are
indemnified against certain liabilities arising out of the
performance of their duties to the Fund. In addition, in the normal
course of business, the Fund enters into contracts that contain a
variety of representations and warranties that provide general
indemnifications. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred or that would be
covered by other parties.
NOTE 3 - COMMITMENTS, OTHER RELATED PARTY TRANSACTIONS AND OTHER
SERVICE PROVIDERS
The Fund has an Investment Management Agreement with the Adviser to provide
investment advisory services to the Fund. The Adviser furnishes all investment
advice, office space, facilities, and most of the personnel needed by the Fund.
As compensation for its services, the Adviser is entitled to a monthly fee at
the annual rate of 1.00% of the Fund's average daily net assets.
The Fund is responsible for its own operating expenses. The Adviser has agreed
to limit the Fund's total expenses (exclusive of brokerage, interest, taxes,
dividends on securities sold short and extraordinary expenses) to not more than
1.50% of the average daily net assets.
Any fee withheld or voluntarily reduced and/or any Fund expense absorbed by the
Adviser pursuant to an agreed upon expense cap shall be reimbursed by the Fund
to the Adviser, if so requested by the Adviser, anytime before the end of the
third fiscal year following the year to which the fee reduction, waiver, or
expense absorption relates, provided the aggregate amount of the Fund's current
operating expenses for such fiscal year does not exceed the applicable
limitation on Fund expenses. Any such reimbursement is also contingent upon
Board of Trustees review and approval prior to the time the reimbursement is
initiated. The Fund must pay its current ordinary operating expenses before the
Adviser is entitled to any reimbursement of fees and/or expenses. For the six
months ended February 28, 2007, the Fund paid the Adviser $133.
PURISIMA ALL-PURPOSE FUND
As of February 28, 2007, the Adviser has reimbursed the Fund $74,651 to limit
its total expenses to not more than 1.50% of the average daily net assets.
U.S. Bank, N.A. serves as the Fund's Custodian. U.S. Bancorp Fund Services, LLC
("USBFS"), an affiliate of U.S. Bank, N.A., serves as the Administrator, Fund
Accountant and Transfer Agent. Certain officers of the Trust, including the
Trust's Treasurer, are employees of the Administrator. In its capacity as the
Fund's Administrator, USBFS provides general fund management including corporate
secretarial services, coordinates the preparation of materials for the Board of
Trustees, assists with the annual audit of the Fund's financial statements,
monitors the Fund's compliance with federal and state regulations as well as
investment restrictions, coordinates the payment of Fund expenses and monitors
expense accruals, prepares financial statements and non-investment related
statistical data and makes required tax reporting calculations. During the six
months ended February 28, 2007, Purisima All-Purpose Fund paid USBFS $18,825 for
services rendered in its capacity as the Fund's Administrator.
Quasar Distributors, LLC, an affiliate of U.S. Bank, N.A., and USBFS serves as
principal underwriter of the Fund and acts as the Fund's distributor, pursuant
to a Distribution Agreement with the Trust, in a continuous public offering of
the Fund's shares.
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 Fund is authorized to pay
expenses incurred for the purpose of distribution activities, including the
engagement of other dealers, intended to result in the sale of shares of the
Fund. The fee accrues at an annual rate not to exceed 0.25% of the Fund's
average daily net assets. For the six months ended February 28, 2007, the Fund
did not utilize the Plan.
NOTE 5 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, excluding
short-term investments, for the six months ended February 28, 2007, were as
follows:
FUND PURCHASES SALES
---- --------- -----
Purisima All-Purpose Fund $ 0 $ 0
NOTE 6 - FEDERAL INCOME TAX MATTERS
The difference between the book and tax basis components of the distributable
earnings relates principally to the timing of recognition of income and gains
for federal income tax purposes. These differences are primarily attributable to
the tax deferral of losses on wash sales, the realization for tax purposes of
unrealized gains on passive foreign investment companies and return of capital
distributions and income adjustments recognized for tax purposes on real estate
investment trusts. Short-term gains distributions reported in the Statements of
Changes of Net Assets, if any, are reported as ordinary income for federal tax
purposes.
PURISIMA ALL-PURPOSE FUND
As of February 28, 2007, the components of distributable earnings on a tax basis
were as follows:
All-Purpose
-----------
Cost of investments for tax purposes $ 36,508
===========
Gross tax unrealized appreciation $ 0
Gross tax unrealized depreciation $ (3)
-----------
Net tax unrealized depreciation $ (3)
The tax composition of dividends are as follows:
Long Term
Ordinary Income Long Term Capital Gains
Income Per Share Capital Gains Per Share
------------------------------------------------------
Purisima All-Purpose
Fund
2/28/2007 $1,899 $0.7552 -- --
8/31/2006 $148 $0.0592 -- --
** Under current tax law capital losses realized after October 31 and prior
to the Fund's fiscal year end may be deferred as occurring on the first
day of the following fiscal year.
NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS
In December, 2005, the Financial Accounting Standards Board ("FASB") released
Financial Accounting Standard Board Statement No. 157 Fair Value Measurements
("SFAS 157"). SFAS 157 establishes a fair valuation hierarchy to increase
consistency and comparability in fair value measurements and related
disclosures. The fair value hierarchy prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels. The fair value
hierarchy gives the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). SFAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007. At this time,
management is evaluating the implications of SFAS 157 and its impact on the
financial statements has not yet been determined.
In July, 2006, the Financial Accounting Standards Board ("FASB") released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48").
FIN 48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required as of the date of the last Net Asset Value ("NAV") calculation in the
first required financial statement reporting period for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of the
effective date. At this time, management is evaluating the implications of FIN
48 and its impact on the financial statements has not yet been determined.
OTHER INFORMATION -
BOARD CONSIDERATION OF AND CONTINUATION OF INVESTMENT ADVISORY AGREEMENT
(UNAUDITED)
On October 27, 2005, the Board of Trustees considered its initial approval of
the Investment Management Agreement for the All-Purpose Fund. The Board of
Trustees, including the Independent Trustees, took into consideration
information provided at the meeting, as well as a wide variety of materials
relating to the services provided by the Adviser, including reports on the
Adviser's investment results; proposed portfolio composition; past portfolio
trading practices for other mutual funds advised by the Adviser; and other
information relating to the nature, extent and quality of services expected to
be provided by the Adviser to the Fund. In addition, the Board reviewed
information regarding, as applicable, the Fund's advisory fee and expense
comparisons, descriptions of various functions such as compliance monitoring and
portfolio trading practices, and information about the personnel providing
investment management and administrative services to the Fund.
In deciding to approve the Agreement, the Board of Trustees did not identify any
single issue or particular information that, in isolation, was the controlling
factor. This summary describes the most important, but not all, of the factors
considered by the Board.
1. Nature, Extent and Quality of Services
The Adviser, its personnel and its resources. The Board considered the depth and
quality of the Adviser's investment management process, including its
sophisticated methodology; the experience, capability and integrity of its
senior management and other personnel; the low turnover rates of its key
personnel; and the overall financial strength and stability of its organization.
The Board discussed the quality of the product provided by the Adviser and noted
that the Quarterly Report from the Adviser with respect to its other mutual
funds was extremely sophisticated and thorough. The Board commented on the
quality of the independent capital markets research conducted by the Adviser and
reported to the Board on a regular basis. The Board's consensus was that the
Adviser was open about its thinking on the management of the Fund and very
available to address any questions or concerns the Board may have from time to
time. The Board also considered that the Adviser made available to its
investment professionals a variety of resources and systems relating to
investment management, compliance, trading, performance and portfolio
accounting. The Board further considered the Adviser's continuing need to
attract and retain qualified personnel and to maintain and enhance its resources
and systems.
Other Services. The Board considered the Adviser's policies, procedures and
systems to ensure compliance with applicable laws and regulations and its
commitment to these programs; its efforts to keep the Trustees informed; and its
attention to matters that may involve conflicts of interest with the Fund.
The Board concluded that the nature, extent and quality of the services expected
to be provided by the Adviser should benefit the Fund and its shareholders.
2. Investment Performance
The Fund had not yet commenced investment operations so the Board reviewed the
Adviser's investment performance for its other mutual funds, knowing that such
information was only of limited value with respect to the Fund.
The Board ultimately concluded that the Adviser is likely to have investment
performance in managing the Fund that will benefit the Fund and its
shareholders.
3. Advisory Fees and Total Expenses
The Board reviewed the proposed advisory fees and total expenses of the Fund and
compared such amounts with the average fee and expense levels of other funds in
applicable peer fund indices. The Board observed that the Fund's proposed
advisory fees and total expenses were reasonable compared to the median fee and
expense levels of the other funds, but also recognized the unique investment
objective of the Fund and the absence of any close comparisons. The Board noted
that the Adviser is likely to need to waive significant fees in respect of the
Fund, thus indicating a substantial investment by the Adviser in that Fund. The
Board concluded that the reasonable level of the fees charged by the Adviser
benefits the Fund and its shareholders. The Board then considered the fees
charged to the Fund versus the Adviser's private clients. The Board considered
the extra burden of administration, compliance, deadlines, risk and regulations
associated with the Fund that do not apply to the private accounts. The Board
determined that the respective peer groups provided a better comparison and it
found the Fund's fees reasonable.
4. Adviser, Costs, Level of Profits and Economies of Scale
The Board reviewed information regarding the Adviser's likely costs of providing
services to the Fund, as well as the resulting absence of profits to the
Adviser. The Board considered the Adviser's need to invest in technology,
infrastructure and staff to reinforce and offer new services and to accommodate
changing regulatory requirements. The Trustees noted that at its likely initial
asset size, breakpoints in the Fund's advisory fee structure were not
practicable, but that economies of scale in the cost of operations, to the
extent they might exist in the future, effectively would be shared given the
Adviser's initial likely waiver of fees in respect of the Fund. The Board
concluded that the Fund's cost structure is reasonable.
5. Ancillary Benefits
The Board considered a variety of other benefits possibly received by the
Adviser, including possible ancillary benefits to its institutional management
business. The Board reviewed the Adviser's portfolio trading practices, noting
that the Adviser may receive the benefit of research provided by broker-dealers
executing portfolio transactions on behalf of the Fund, and other soft dollar
research benefits.
6. Conclusions
Based on its review, including consideration of each of the factors referred to
above, the Board concluded that the Agreement would be fair and reasonable to
the Fund and its shareholders, that the Fund's shareholders should receive,
reasonable value in return for the advisory fees paid to the Adviser by the
Fund, and that the approval of the Agreement was in the best interests of the
Fund and its shareholders.
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.
Information regarding how the Fund voted proxies relating to the portfolio
securities during the most recent 12-month period ended June 30 is available
without charge, upon request, 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 Fund files its complete schedule of portfolio holdings with the SEC for the
first and third fiscal quarters on Form N-Q. The Fund's 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.
TRUSTEES AND OFFICER INFORMATION (Unaudited)
The Board of Trustees is responsible for the overall management of the
Trust's business. The Board of Trustees 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 Fund's investment objective and policies and to general
supervision by the Board of Trustees. The Statement of Additional Information
includes additional information about the Trust's Trustees and is available,
without charge, by calling 1-800-841-0199.
The Trustees and Officers of the Trust, their business addresses and
principal occupations during the past five years are:
NUMBER OF
PORTFOLIOS IN
POSITION(S) FUND COMPLEX OTHER
NAME, ADDRESS, HELD WITH YEAR PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
DATE OF BIRTH TRUST ELECTED(1) DURING PAST FIVE YEARS DIRECTOR HELD
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth L. Fisher* President and 1996 Chief Executive Officer and majority 2 None
(born 1950) Trustee shareholder of Fisher Investments, Inc.,
13100 Skyline Blvd. the sole shareholder of the Adviser, and
Woodside, CA 94062 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 1979.
Pierson E. Clair III Trustee 1996 President and Chief Executive Officer of 2 Signature Foods,
(born 1948) Brown & Haley since 1998 (fine Inc.
13100 Skyline Blvd. confectioners); Vice President of
Woodside, CA 94062 Blummer Chocolate Company from 1980 to
1997, where he had been employed since
1970.
Scott LeFevre Trustee 2001 Sole proprietor of LeFevre Capital 2 None
(born 1957) Management, a registered investment
13100 Skyline Blvd. adviser.
Woodside, CA 94062
Alfred D. McKelvy, Jr. Trustee 2003 Executive Director of the law firm of 2 Diablo Valley
(born 1949) Berding & Weil, LLP since 1990. Bank; East Bay
13100 Skyline Blvd. BOMA.
Woodside, CA 94062:
Bryan F. Morse Trustee 1996 Sole proprietor of Bryan F. Morse, RIA, 2 None
(born 1952) a registered investment adviser since
13100 Skyline Blvd. 1990.
Woodside, CA 94062
Grover T. Wickersham Trustee 1996 Attorney in private practice in Palo 2 None
(born 1949) Alto, California. Prior to entering
13100 Skyline Blvd. private practice in June of 1981, served
Woodside, CA 94062 as a Branch Chief of the Los Angeles
Regional Office of the U.S. Securities
and Exchange Commission.
Tom Fishel Chief Compliance 2005 Vice President and Chief Compliance N/A None
(born 1960) Officer Officer of the Adviser. Vice President
13100 Skyline Blvd. of Charles Schwab & Co., Inc. from 1995
Woodside, CA 94062 to 2004, where he had been employed
since 1983.
Keith Shintani (born 1963) Secretary and 2006 Vice President of U.S. Bancorp Fund N/A None
2020 East Financial Way Assistant Services, LLC and its predecessor,
Glendora, CA 91741 Treasurer Investment Company Administration, LLC
since 1998.
Michael Ricks (born 1977) Treasurer 2006 Assistant Vice President of U.S. Bancorp N/A None
2020 East Financial Way Fund Services, LLC since 2001.
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.
PRIVACY NOTICE
Fisher Asset Management, LLC (doing business as Fisher Investments) 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 are committed to protecting your privacy and your non-public personal
information. We do not sell or market your non-public personal information to
unaffiliated organizations. We maintain physical, electronic and procedural
safeguards to guard your non-public personal information. We hold our employees
to strict standards of conduct regarding confidentiality, and employees who
violate our Privacy Policy are subject to disciplinary process. We restrict
access to your information to those employees who need to know that information
to carry out their duties.
We do not disclose any non-public personal information about our clients or
former clients without the client's authorization, except as permitted by law.
We may disclose the non-public information we collect to employees and
affiliates, and unaffiliated third parties as permitted by law. Third parties
may include law enforcement agencies, government and regulatory authorities, and
professionals such as our legal counsel and auditors, and we may disclose
information for reasons such as audit purposes, prevention of fraud or money
laundering, protection of confidentiality, compliance with laws, and to provide
agreed upon products and services to you. Third parties may also include service
providers performing financial services for us (such as brokers and custodians)
and service providers performing non-financial services for us (such as third
parties performing computer related or data maintenance, marketing or other
services for us or to assist us in offering our products and services to you).
It is our policy to require all third party service providers that will receive
information to sign strict confidentiality agreements agreeing to safeguard such
information and use it only for the purpose it was provided.
Privacy Notice 10.2006
ITEM 2. CODE OF ETHICS.
Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to registrants who are not listed issuers (as defined in Rule
10A-3 under the Securities Exchange Act of 1934).
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments is included as part of the report to shareholders filed
under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to open-end investment companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's President/Chief Executive Officer and Treasurer/Chief
Financial Officer have reviewed the Registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act
of 1940 (the "Act")) as of a date within 90 days of the filing of this
report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or
15d-15(b) under the Securities Exchange Act of 1934. Based on their
review, such officers have concluded that the disclosure controls and
procedures are effective in ensuring that information required to be
disclosed in this report is appropriately recorded, processed, summarized
and reported and made known to them by others within the Registrant and by
the Registrant's service provider.
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
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.
(1) 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 4/27/07
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 4/27/07
By (Signature and Title)* /s/ Michael Ricks
----------------------------
Michael Ricks, Treasurer
Date 5/1/07
* Print the name and title of each signing officer under his or her signature.