As filed with the Securities and Exchange Commission on [date]
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
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: AUGUST 31, 2007
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ITEM 1. REPORT TO STOCKHOLDERS.
THE PURISIMA FUNDS
ANNUAL REPORT
AUGUST 31, 2007
The Purisim a Total Return Fund
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TABLE OF CONTENTS
A Letter to Our Shareholders 2
Performance Summary 5
Sector Breakdown 6
Expense Example 6
Schedule of Investments 8
Statement of Assets and Liabilities 16
Statement of Operations 17
Statement of Changes in Net Assets 18
Financial Highlights 19
Notes to Financial Statements 20
Report of Independent Registered Public Accounting Firm 26
Other Information 27
Trustees and Officer Information 28
Privacy Notice 32
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INVESTMENT OBJECTIVES
PURISIMA TOTAL RETURN FUND
Seeks to provide investors with a high level of total return by considering both
domestic and foreign securities.
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
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A LETTER TO OUR SHAREHOLDERS
Welcome to the annual report for the Purisima Total Return Fund for the
twelve-month period ended August 31, 2007. The primary investment objective of
the Fund is achieving high total return for shareholders.
MARKET REVIEW AND OUTLOOK:
Global equities again finished th e period with strong, positive returns. The
MSCI World Index gained 16.97%. Volatility increased markedly during the latter
half of the period as investor fears drove stocks into the second correction of
this bull market. However, we expect the bull run to continue through the latter
half of this year, lifted by a bevy of underappreciated positive fundamentals.
The benefits of global diversification were once again evident during the period
as fo reign stocks outperformed domestic is sues (comparing the above MSCI World
Index performance to the S&P 500 Index return of 15.13% for the same period). We
expect 2007 to be the sixth consecutive year of of reign leadership.
The upward trend in global equity markets continued virtually friction free,
until the middle of July when markets experienced some turbulence seemingly in
reaction to subprime mortgage concerns. Subprime was subsequently linked in the
media to the highly publicized collapse of two Bear Stearns hedge funds and some
cases of Wall Street firms' failure to find buyers for some corporate bonds in
tended to fund leveraged buyouts. Talk of an impending "credit crunch" was
pervasive as some feared these events were harbingers of the end of the
so-called "easy money" which fueled the acquisition boom and propelled equity
prices higher.
However, we believe the resulting volatility was a temporary sentiment shift in
reaction to minor events relative to the broader economy. In our experience,
typical bull market corrections are relatively brief, purely psychological,
induced by fear and media hype, and very difficult to time. We believe this
latest bout of volatility to be a typical bull market correction.
Looking ahead, the bullish themes outlined in previous letters remain intact.
The global economy and corporate earnings have been growing solidly, surpassing
tepid expectations. A relatively low in terest rate environment and
comparatively modest stock valuations have been fueling massive acquisition and
share buyback activity--and though there were some minor hiccups as liquidity
temporarily dried up, we expect this trend to continue on the back half of the
year.
Sentiment remains cautious as investors tend to be focusing on
"glass-is-half-empty" stories. Financial headlines stress supposed problems--a
credit crunch, private equity firms run wild, high energy prices, predatory
foreign investors, poor real estate sales, and record highs for stock indexes
implying future declines. But such stories have either lacked the substance or
surprise power necessary to sink markets.
Perhaps the most deep-seated fear relates to rising long-term interest rates. If
they rise significantly from here, enough to eliminate the positive earnings
yield-bond yield spread, concern would be warranted. But the magnitude of the
recent move thus far has already happened numerous times in this bull market
and, in our opinion, reflects normal volatility. It does not necessarily portend
substantially higher rates ahead. Rates are still benign by historical
2
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comparison and, in our view, far from levels endangering economic activity.
Furthermore, credit spreads have remained favorable.
A plausible scenario that we believe could lead to much higher long-term rates
is if in flation accelerates considerably. But meaningful in flation in dicators
don't point to precipitous price increases. Higher energy prices distract
attention fr om many other goods and services that have experienced flat or
falling prices. We believe many fail to recognize today's profound gains in
global productivity have been keeping in flation contained during this period of
healthy economic growth.
The political agenda on Capitol Hill continues to stagnate. The US Congress is
thankfully a "do nothing" bunch. Attempts at major new legislation have become
either casualties of political in fighting or have been vetoed.
Overseas, political change is afoot in two of the world's largest fo reign
economies. France elected as president the right-leaning Nicolas Sarkozy, who
purportedly brings a seemingly contradictory mix of pro-growth reforms and
protectionist desires. In Japan, Prime Minister Shinzo Abe resigned from his
post, creating a renewed period of political uncertainty in the region. Our
sense is that no legislation of political import will happen soon in either
country, just more stasis consistent with the rest of the developed world in
recent years.
In summary, stocks around th e world still appear to be the best value relative
to alternatives such as bonds and cash. We do not believe any visible risks are
potent enough to derail the global stock market for now and remain excited
about the balance of 2007.
FUND POSITIONING
We maintain our positive outlook for the global equity markets and continue to
be fully invested in equities. Global economic growth has been strong and
fundamentals indicate favorable market conditions.
The Fund remains slightly overweight to of reign equities to take advantage of
what we believe will be strong global corporate earnings, or bust merger and
acquisition activity, and share repurchase activity. Japan remains our largest
overweight, followed by Emerging Markets and Germany. While our overweight to
Japan detracted from returns relative to the benchmark, overall absolute
performance was slightly positive. Our performance benefited from an overweight
to Emerging Markets and to Germany, both relative to the benchmark and on an
absolute basis. Better than expected global economic growth continued to benefit
Emerging Markets countries. We anticipate manufacturing and industrial growth in
these markets to continue to accelerate due to persistent high demand for raw
materials.
Energy and Industrials continue to represent the largest sector overweights in
the Fund. Our overweight to these sectors have generated positive results both
relative to the benchmark and to absolute performance. We believe energy and
Industrial companies remain in a good position to benefit from strong global
demand and from consolidation. In addition, our third largest sector overweight
to Materials also provided a huge positive impact on performance. Materials
companies greatly benefited from steadily high commodity prices due to
production capacity limitations. Because of our positive economic growth
outlook, we have positioned our sector overweights to take advantage of
economically sensitive sectors and remain underweight to less sensitive sectors,
such as Health Care and Consumer Staples.
3
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In the upcoming period, we expect strong economic and corporate earnings growth
combined with attractive relative earnings yields to continue to drive equity
prices higher. Robust merger and acquisition as well as share repurchase
activity should also provide further support. We believe the Fund is
well-positioned to take advantage of the impact from these positive factors.
CLOSING REMARKS
Overall, both the MSCI World benchmark and the Fund realized strong positive
absolute returns during this period. The Fund slightly underperformed the MSCI
World benchmark with rising, unwarranted concerns over slowing exports, in
flation, weakening currencies detracting from otherwise sound allocation
decisions. But with economic in dicators showing increasingly strong global
performance and sound fundamentals in place, we expect the Fund is well
positioned to peform on both an absolute and relative basis in the upcoming
period.
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 IN VESTED. FOREIGN IN VESTING 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. The S&P 500 Index is a broad
based unmanaged index of 500 stocks, which is widely recognized as
representative of the equity market in general. One cannot invest directly in an
index.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FISHER INVESTMENTS
IS THE ADVISOR TO THE PURISMA FUNDS. THE PURISIMA FUNDS ARE DISTRIBUTED BY
QUASAR DISTRIBUTORS, LLC, 09/07 PERFORMANCE SUMMARY FOR YEAR ENDED AUGUST 31,
2007
4
PERFORMANCE SUMMARY
FOR THE YEAR ENDED AUGUST 31, 2007
PURISIMA TOTAL RETURN FUND
GROWTH OF $10,000
PURISIMA TOTAL RETURN FUND CUMULATIVE TOTAL RETURN VERSUS MSCI WORLD
INDEX $10,000 INVESTED FROM 9/1/97 O T 8/31/07*
GRAPH OMITTED
Total
Return MSCI World Index
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30-Sep-97 10,623 10,542
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28-Feb-98 11,437 11,280
31-Aug-98 10,526 10,374
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28-Feb-99 13,737 12,713
31-Aug-99 14,742 13,803
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29-Feb-00 16,174 15,095
31-Aug-00 16,604 15,614
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28-Feb-01 15,982 12,939
31-Aug-01 16,384 11,650
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28-Feb-02 16,508 11,086
31-Aug-02 13,645 9,648
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28-Feb-03 12,112 8,804
31-Aug-03 15,039 10,702
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29-Feb-04 17,356 12,707
31-Aug-04 16,350 12,372
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28-Feb-05 18,489 14,232
31-Aug-05 18,836 14,613
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28-Feb-06 21,054 16,118
31-Aug-06 21,575 16,918
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28-Feb-07 23,157 18,673
31-Aug-07 24,948 19,789
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PURISIMA TOTAL RETURN FUND MSCI WORLD INDEX*
ONE-YEAR ONE-YEAR
Average Annual Total Return(2)** 15.63% Average Annual Total Return(2)** 16.97%
FIVE-YEAR FIVE-YEAR
Average Annual Total Return(2)** 12.83% Average Annual Total Return(2)** 15.45%
TEN-YEAR TEN-YEAR
Cumulative Total Return(1)** 196.14% Cumulative Total Return(1)** 97.86%
Average Annual Total Return(2)** 9.57% Average Annual Total Return(2)** 7.06%
Please note past performance is not predictive of future results. SHARE PRICE
AND RETURN WILL FLUCTUATE, AND INVESTORS MAY EXPERIENCE A GAIN OR LOSS WHEN THEY
SELL THEIR SHARES. TO OBTAIN A PROSPECTUS ON THE PURISIMA FUNDS PLEASE CALL
1-800-841-0199. THE PROSPECTUS CONTAINS MORE INFORMATION, INCLUDING THE
POLITICAL, ECONOMIC, CURRENCY RISKS AND POTENTIAL VOLATILITY OF FOREIGN
INVESTING. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
1 Cumulative measures the change in value of an investment over the total
return periods indicated and reflects all fund fees and expenses.
2 Average annual total return represents the average annual change in value
of an investment over the periods indicated fund fees and expenses. Average
annual total return and and reflects cumulative total return for the
one-year period would be identical.
* The MSCI World Index is an unmanaged global stock index comprised of Index
various world stock markets, including the U.S. The total return of a
$10,000 investment includes all expenses.
** The total returns shown do not reflect the deduction of taxes a shareholder
would pay on fund distributions or redemption of fund shares. The total
return reflects the rate an investment would have earned (or lost) on an
investment in the Fund, assuming reinvestment of all dividends and
distributions.
5
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SECTOR BREAKDOWN(1) (UNAUDITED)
PURISIMA TOTAL RETURN FUND
---------------------------------------------
Consumer Discretionary 4.7%
Consumer Staples 2.6%
Energy 19.2%
Financial 21.7%
Health Care 8.1%
Industrial 18.9%
Information Technology 6.4%
Materials 9.1%
Telecommunication Services 3.5%
Utilities 5.2%
Mutual Funds 0.6%
---------------------------------------------
Total 100.0%
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(1) Percentage of Total Investments as of August 31, 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 March 1, 2007 to August 31,
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.
6
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HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratios and assumed
rates of return of 5% per year before expenses, which are not the Fund's actual
returns. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads), 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)
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Beginning Account Value (03/01/07) $ 1,000.00 $ 1,000.00
Ending Account Value (08/31/07) $ 1,077.40 $ 1,018.20
Expenses Paid During Period(1) $ 7.28 $ 7.07
- --------------------------------------------------------------------------------
- -----------
(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 184/365 (to reflect the one-half year
period).
7
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PURISIM A TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 2007
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS: 99.2%
AEROSPACE & DEFENSE: 3.7%
11,400 Embraer-Empresa Brasileira
de Aeronautica S.A. - ADR $ 514,824
116,800 Honeywell n I ternational, Inc. 6,558,320
47,800 Lockheed Martin Corp. 4,738,892
74,900 United Technologies Corp. 5,589,787
------------
17,401,823
------------
AIR FREIGHT & LOGISTICS: 1.3%
52,600 FedEx Corp. 5,769,168
4,100 TPG NV 173,142
------------
5,942,310
------------
AUTO COMPONENTS: 1.3%
102,800 Autoliv, Inc. 5,897,636
------------
AUTOMOBILES: 0.8%
1,000 DaimlerChrysler AG 88,791
183,000 Nissan Motor Co. Ltd. - ADR 3,495,300
------------
3,584,091
------------
BEVERAGES: 0.1%
4,100 Fomento Economico Mexicano S.A. de CV ADR 142,844
2,850 Heineken NV 180,454
------------
323,298
------------
BIOTECHNOLOGY: 1.3%
96,300 Celgene Corp. (a) 6,183,423
------------
CAPITAL MARKETS: 9.4%
6,630 3I Group 141,030
29,045 Ameriprise Financial, Inc. 1,772,035
149,700 Credit Suisse Group - ADR 9,826,308
44,525 Goldman Sachs Group, I n c. 7,836,845
188,600 Invesco Plc - ADR 4,487,216
19,700 Janus Capital Group, Inc. 523,823
1,800 Julius Baer Holding 119,117
72,950 Lehman Brothers Holdings, Inc. 3,999,848
14,800 Man Group Plc 147,263
93,600 Morgan Stanley 5,837,832
203,550 Nomura Holdings, Inc. - ADR 3,596,729
8,700 Schroders 232,248
8 The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
CAPITAL MARKETS: 9.4% (CONTINUED)
103,350 UBS AG $ 5,399,004
------------
43,919,298
------------
CHEMICALS: 2.2%
72,600 BASF AG - ADR 9,589,734
11,700 Sigma-Aldrich Corp. 524,160
------------
10,113,894
------------
COMMERCIAL BANKS: 4.8%
3,300 Banco Bilbao Vizcaya Argentaria S.A. 75,928
15,400 Banco Bradesco S.A. 380,072
2,500 Banco De Chile - ADR 121,375
6,000 Banco Popolare (a) 150,065
399,175 Banco Santander Central Hispano S.A. - ADR 7,292,927
4,200 Bank Pekao GDR 399,000
473,500 Bank Rakyat 315,162
40,500 Commerce Asset Holdings 126,075
3,900 Danske Bank A/S 160,117
1,900 HDFC Bank Ltd. - ADR 168,435
4,300 ICICI Bank Ltd. - ADR 191,135
126,532 Intesa Sanpaolo S P A - ADR 5,723,384
5,800 Kookmin Bank - ADR (a) 472,410
319,200 Mitsubishi Ufj Financial Group, Inc. - ADR 3,064,320
6,000 Nedbank Group Ltd 113,255
5,900 PNC Financial Services Group 415,183
3,500 Shinhan Financial Group Co Ltd - ADR 434,000
286,100 Sumitomo Mitsui Financial Group, Inc. - ADR 2,258,388
7,800 Woori Finance Holdings Co. Ltd. - ADR 540,930
------------
22,402,161
------------
COMMERCIAL SERVICES & SUPPLIES: 0.0%
3,100 Adecco S.A. 201,940
------------
COMMUNICATIONS EQUIPMENT: 0.9%
25,800 Cisco Systems, Inc. (a) 823,536
176,600 Motorola, Inc. 2,993,370
13,000 QUALCOMM, Inc. 518,570
------------
4,335,476
------------
COMPUTERS & PERIPHERALS: 1.5%
276,050 EMC Corp. (a) 5,427,143
50,000 Fujitsu Limited - ADR 1,705,990
------------
7,133,133
------------
CONSTRUCTION MACHINERY AND EQUIPMENT: 2.1%
79,700 Komatsu Ltd. - ADR 9,818,538
------------
CONSTRUCTION MATERIALS: 0.1%
8,463 Cemex S.A. de C.V. - ADR (a) 273,270
4,500 Italcementi 111,262
------------
384,532
------------
The accompanying notes are an integral part of these financial statements. 9
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SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER FINANCE: 1.1%
41,950 Discover Financial Services (a) $ 970,723
37,000 ORIX Corp. - ADR (a) 3,932,730
------------
4,903,453
------------
DIVERSIFIED FINANCIAL SERVICES: 1.1%
122,827 ING Group N.V. - ADR 4,936,417
------------
DIVERSIFIED TELECOMMUNICATION SERVICES: 1.2%
5,800 Philippine Long Distance Telephone - ADR 340,634
57,400 Telefonica S.A. - ADR 4,286,632
7,600 Telekomunikasi Indonesia Tbk PT - ADR 358,416
47,147 Windstream Corp. 673,259
------------
5,658,941
------------
ELECTRIC UTILITIES: 3.1%
56,500 American Electric Power Co., Inc. 2,513,120
8,800 Companhia Energetica de Minas Gerais 167,200
107,900 DPL, Inc. 2,843,165
46,600 Edison International 2,456,286
12,700 Enersis S.A./Chile - ADR 228,346
48,100 FirstEnergy Corp. 2,955,264
69,600 PPL Corp. 3,358,896
------------
14,522,277
------------
ELECTRONIC COMPUTERS: 0.6%
42,225 Hitachi Ltd. - ADR 2,721,401
20,640 Hon Hai Precision - GDR (a) 311,137
------------
3,032,538
------------
ENERGY EQUIPMENT & SERVICES: 7.3%
9,500 Aker Kvearner ASA 238,720
126,200 Baker Hughes, n I c. 10,583,132
13,000 Helix Energy Solutions Group, Inc. (a) 499,590
10,300 Oceaneering International, Inc. (a) 691,748
6,300 Petroleum Geo - Services 148,043
7,800 Saipem SpA 292,096
119,500 Schlumberger Ltd. 11,531,750
3,000 Technip S.A. 239,443
6,400 Tenaris S.A. - ADR 300,352
91,300 Transocean, Inc. (a) 9,594,717
------------
34,119,591
------------
FOOD & STAPLES RETAILING: 0.1%
16,700 Jeronimo Martins 95,321
4,800 Wal-Mart De Mexico S.A. de C.V. - ADR 170,655
------------
265,976
------------
FOOD PRODUCTS: 1.9%
10,400 Archer-Daniels-Midland Co. 350,480
79,200 Cadbury Schweppes Plc - ADR 3,740,616
316,250 Groupe Danone - ADR 4,820,883
------------
8,911,979
------------
10 The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES: 1.8%
2,400 Celesio AG $ 150,229
84,300 Cigna Corp. 4,356,624
71,100 Health Net, Inc. (a) 3,895,569
5,000 Rhoen Klinikum AG 153,730
------------
8,556,152
------------
HOUSEHOLD DURABLES: 0.9%
219,300 Matsushita Electric Industrial Co. Ltd.- ADR 3,828,978
8,400 The Stanley Works 476,616
------------
4,305,594
------------
HOUSEHOLD PRODUCTS: 0.5%
36,225 Procter & Gamble Co. 2,365,855
------------
INDUSTRIAL CONGLOMERATES: 3.3%
95,850 General Electric Co. 3,725,689
62,100 Mmc Corporation 130,354
16,000 Orkla ASA 259,072
90,250 Siemens AG - ADR 11,308,325
------------
15,423,440
------------
INFORMATION RETRIEVAL SERVICES: 0.1%
7,900 Nutri System, Inc. (a) 428,417
------------
INSURANCE: 2.7%
173,550 AXA - ADR 6,974,974
2,700 China Life Insurance Co Ltd - ADR 196,911
134,875 Millea Holdings, Inc. - ADR 5,212,784
------------
12,384,669
------------
MACHINERY: 4.9%
11,600 AGCO Corp. (a) 501,120
96,900 Caterpillar, Inc. 7,342,113
125,700 Illinois Tool Works, Inc. 7,311,969
5,600 Konecranes Oyj 212,609
149,800 Kubota Corp. - ADR 5,858,678
4,500 Scania AB-B Shares 104,379
6,250 Terex Corp. (a) 499,250
10,700 Trinity Industries, Inc. 401,999
900 Vallourec 240,791
11,000 Volvo AB-B 190,165
24,100 Weg S.A. 255,617
------------
22,918,690
------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS: 0.8%
100,300 Hoya Corp. - ADR 3,478,464
------------
MEDIA: 0.3%
600 Affichage Hldg 136,488
18,500 Comcast Corp. (a) 482,665
The accompanying notes are an integral part of these financial statements. 11
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SHARES VALUE
- --------------------------------------------------------------------------------
MEDIA: 0.3% (CONTINUED)
5,800 Grupo Televisa S.A. - ADR $ 151,148
4,300 Naspers Ltd - ADR 107,372
7,100 Publicis Groupe 306,795
5,300 Vivendi Universal S.A. 216,670
------------
1,401,138
------------
METALS & MINING: 6.9%
52,550 Allegheny Technologies, Inc. 5,222,944
3,003 Anglo American 172,199
2,000 AngloGold Ashanti Ltd. - ADR 78,060
92,300 BHP Billiton Ltd. - ADR 5,828,745
3,800 Cia Siderurgica Nacional S.A. - ADR 214,358
10,500 Cia Vale Do Rio Doce 438,375
14,600 Commercial Metals Co. 421,794
700 Eramet 192,698
77,300 Freeport-McMoRan Copper & Gold, Inc. 6,757,566
10,700 Gerdau S.A. 257,228
3,300 Gold Fields Ltd. - ADR 50,028
54,300 Grupo Mexico S.A. de CV 339,738
4,800 Harmony Gold Mining Co., Ltd. - ADR (a) 42,960
20,000 Industrias Penoles S.A. de CV 267,072
2,200 KGHM Polska Miedz GDR (a) 174,900
273,200 Kobe Steel Ltd. - ADR 4,973,060
21,150 Rio Tinto Plc - ADR 5,812,020
500 Salzgitter AG 98,763
5,500 Southern Copper Corp. 578,875
------------
31,921,383
------------
METALS SERVICE CENTERS & OFFICES: 1.1%
12,110 Mitsui & Co. Ltd. - ADR 5,081,598
------------
MULTILINE RETAIL: 0.1%
7,000 JC Penney Co. Inc. (Holding Co.) 481,320
------------
MULTI-UTILITIES & UNREGULATED POWER: 0.5%
14,300 International Power Plc 116,627
37,900 Sempra Energy 2,085,637
------------
2,202,264
------------
OFFICE ELECTRONICS: 0.1%
25,800 Xerox Corp. ( a ) 441,954
------------
OIL & GAS: 8.6%
6,100 Apache Corp. 472,018
8,500 BP Plc 95,545
59,100 Canadian Natural Resources Ltd. 4,037,121
3,300 China Petroleum & Chemical Corp. - ADR 363,495
2,800 CNOOC Ltd. - ADR 344,120
68,000 Devon Energy Corp. 5,121,080
12 The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
OIL & GAS: 8.6% (CONTINUED)
80,500 EnCana Corp. $ 4,709,250
7,100 ENI SpA 245,474
71,000 EOG Resources, Inc. 4,782,560
2,100 Mol Hungarian Oil Spons - ADR (a) 252,000
121,500 Occidental Petroleum Corp. 6,887,835
6,200 Petroleo Brasileiro S.A. - ADR 383,408
9,800 Pkn Orlen GDR (a) 392,000
4,400 Sasol Ltd. - ADR 177,012
161,100 Talisman Energy, Inc. 2,764,476
106,808 Total S.A. - ADR 8,020,213
7,000 Valero Energy Corp. 479,570
5,500 XTO Energy, Inc. 298,980
------------
39,826,157
------------
OIL, GAS & CONSUMABLE FUELS: 3.3%
138,650 Anadarko Petroleum Corp. 6,791,077
94,500 ConocoPhillips 7,738,605
477,000 Medco Energi Intl 198,115
5,100 Norsk Hydro ASA 188,952
6,400 OAO Gazprom Sponsored - ADR (a) 266,200
------------
15,182,949
------------
PETROLEUM REFINING: 1.6%
134,300 E.ON AG - ADR 7,518,114
------------
PHARMACEUTICALS: 4.9%
95,100 AstraZeneca Plc - ADR 4,678,920
17,100 Bristol-Myers Squibb Co. 498,465
88,250 GlaxoSmithKline Plc - ADR 4,608,415
49,900 Johnson & Johnson 3,083,321
259,000 King Pharmaceuticals, Inc. (a) 3,892,770
108,800 Merck & Co., Inc. 5,458,496
1,400 Novartis AG 73,828
12,600 Schering Plough Corporation 378,252
2,400 Stada Arzneimittel 153,923
3,300 Teva Pharmaceutical Industries, Ltd. - ADR 141,900
------------
22,968,290
------------
REAL ESTATE: 1.8%
18,200 Alexandria Real Estate Equities, Inc. 1,698,606
31,900 AMB Property Corp. 1,753,862
22,550 Camden Property Trust 1,386,600
14,200 Essex Property Trust, Inc. 1,672,618
17,300 Host Marriott Corp. 385,617
20,418 Public Storage, Inc. 1,547,276
------------
8,444,579
------------
The accompanying notes are an integral part of these financial statements. 13
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
ROAD & RAIL: 1.4%
89,900 Canadian Pacific Railway Ltd. $ 6,336,152
9,200 CSX Corp. 377,200
------------
6,713,352
------------
SHIPBUILDING: 0.1%
5,200 Daewoo Shipbuilding GDR (a) 620,845
------------
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT: 2.8%
50,279 Advanced Semiconductor Engr - ADR 251,397
112,075 KLA-Tencor Corp. 6,440,950
10,800 MEMC Electronic Materials, Inc. (a) 663,336
25,000 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR 248,000
151,300 Texas Instruments, Inc. 5,180,512
------------
12,784,195
------------
SEMICONDUCTORS AND RELATED DEVICES: 0.3%
8,500 Hynix Semiconductor GDR (a) 305,593
1,750 Samsung Electronic 555,625
29,342 Siliconware Precision Inds Ltd - ADR 316,600
------------
1,177,818
------------
SOFTWARE: 0.2%
18,300 Citrix Systems, Inc. (a) 665,205
2,300 Dassault Systemes S.A. 135,228
4,600 SAP AG 247,708
------------
1,048,141
------------
SPECIALTY RETAIL: 0.2%
5,800 Advance Auto Parts 206,248
11,425 Tiffany & Co. 586,445
------------
792,693
------------
TEXTILE MILL PRODUCTS: 1.0%
59,400 Toray Industries, Inc. - ADR 4,535,131
------------
TEXTILES, APPAREL & LUXURY GOODS: 0.1%
3,300 ADIDAS-SALOMON AG 193,978
4,300 Luxottica Group SpA 146,793
------------
340,771
------------
THRIFTS & MORTGAGE FINANCE: 0.8%
112,000 The PMI Group Inc. 3,548,160
------------
WATER UTILITIES: 0.0%
9,300 Kelda Group Plc 163,510
------------
14 The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES: 2.2%
4,700 America Movil SA de CV - ADR $ 284,162
1,400 Bouygues S.A. 110,252
146,500 China Mobile Hong Kong Ltd. - ADR 9,931,235
39,300 Vodafone Group Plc 126,624
------------
10,452,273
------------
TOTAL COMMON STOCKS
(Cost $327,988,464) 461,500,641
------------
PREFERRED STOCKS: 0.1%
AIRLINES: 0.0%
5,300 Tam S.A. 122,748
------------
BEVERAGES: 0.0%
2,400 Companhia de Bebidas das
Americas A (MBEV), - ADR 167,928
------------
COMMERCIAL BANKS - 0.1%
4,100 Banco Itau Holding Financeira S.A. 178,473
1,500 Uniao de Bancos Brasileiros S.A. 167,370
------------
345,843
------------
HOUSEHOLD PRODUCTS: 0.0%
2,900 Henkel KGAA 149,369
------------
MULTILINE RETAIL: 0.0%
21,000 Lojas Americanas S.A. 171,254
------------
TOTAL PREFERRED STOCKS
(Cost $1,104,581) 957,142
------------
SHORT TERM INVESTMENTS: 0.6%
$ 2,934,675 SEI Daily Income Trust Government Fund 2,934,675
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $2,934,675) 2,934,675
------------
TOTAL INVESTMENTS
(Cost $332,027,720): 99.9% 465,392,458
OTHER ASSETS IN EXCESS OF LIABILITIES: 0.1% 331,524
------------
NET ASSETS: 100.0% $465,723,982
============
- -----------
ADR - American depositary receipt.
GDR - Global depositary receipt.
(a) Non-income producing security.
The accompanying notes are an integral part of these financial statements. 15
- --------------------------------------------------------------------------------
PURISIM A TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2007
ASSETS
Investments in securities, at cost $ 332,027,720
=============
Investments in securities, at value $ 465,392,458
Receivables:
Dividends and interest 567,581
Fund shares sold 569,407
From the Administrator 6,500
Other assets 23,184
-------------
Total Assets 466,559,130
-------------
LIABILITIES
Payable for fund shares redeemed 28,667
Payable to the custodian 3,083
Accrued advisory fees (Note 3) 386,346
Accrued distribution fees (Note 4) 240,841
Accrued administration fees (Note 3) 26,741
Accrued transfer agent fees 49,624
Accrued tax liability (Note 2) 6,500
Other accrued expenses 93,346
-------------
Total Liabilities 835,148
-------------
NET ASSETS $ 465,723,982
=============
Number of shares issued and outstanding
(unlimited shares authorized, $0.01 par value) 18,784,710
=============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 24.79
=============
COMPONENTS OF NET ASSETS
Paid-in capital $ 313,621,395
Accumulated net investment loss (1,276,122)
Accumulated net realized gain on investments 20,013,971
Net unrealized appreciation on investments 133,364,738
-------------
Net assets $ 465,723,982
=============
16 The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
PURISIMA TOTAL RETURN FUND
STATEMENT OF OPERATIO NS
FOR THE YEAR ENDED AUGUST 31, 2007
INVESTMENT INCOME
Income
Dividends (net of foreign taxes withheld of $784,498) $ 7,438,507
Interest income 151,977
-----------
Total income 7,590,484
-----------
Expenses
Advisory fees (Note 3) 4,300,185
Distribution fees (Note 4) 753,306
Administration fees (Note 3) 315,109
Transfer agent fees 185,098
Fund accounting fees 114,339
Custody fees 74,654
Insurance expense 89,296
Reports to shareholders 38,589
Registration fees 33,509
Audit fees 20,787
Legal fees 46,074
Trustee fees 16,368
Interest expense 870
Miscellaneous 12,377
-----------
Total expenses 6,000,561
-----------
Net investment income 1,589,923
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments and foreign currency gains 22,935,435
Change in net unrealized appreciation on investments 36,347,412
-----------
Net gain on investments 59,282,847
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $60,872,770
===========
The accompanying notes are an integral part of these financial statements. 17
- --------------------------------------------------------------------------------
PURISIM A TOTAL RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
August 31, 2007 August 31, 2006
--------------- ---------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 1,589,923 $ 674,614
Net realized gain (loss) on investments 22,935,435 11,633,430
Change in net unrealized appreciation on investments 36,347,412 34,526,644
------------- -------------
Net increase in net assets resulting from operations 60,872,770 46,834,688
------------- -------------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (1,378,881) (4,857,625)
------------- -------------
Total distributions to shareholders (1,378,881) (4,857,625)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from
net change in outstanding shares (a) 18,931,734 19,897,125
------------- -------------
Total increase in net assets 78,425,623 61,874,188
------------- -------------
NET ASSETS
Beginning of year 387,298,359 325,424,171
------------- -------------
END OF YEAR $ 465,723,982 $ 387,298,359
============= =============
Undistributed net investment income (loss) $ (1,276,122) $ (2,564,100)
============= =============
(a) A summary of capital share transactions is as follows:
YEAR ENDED YEAR ENDED
AUGUST 31, 2007 AUGUST 31, 2006
------------------------- --------------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
Shares sold 3,607,216 $ 85,489,850 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 (2,884,946) (67,846,331) (2,785,212) (57,374,375)
---------- ------------ ---------- ------------
Net increase (decrease) 778,622 $ 18,931,734 906,953 $ 19,897,125
========== ============ ========== ============
18 The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
PURISIMA TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH YEAR.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
YEAR ENDED AUGUST 31,
----------------------------------------------------------
2007 2006 2005 2004 2003
---------- ---------- ---------- ---------- ----------
Net asset value, beginning of year $ 21.51 $ 19.03 $ 16.58 $ 15.31 $ 14.06
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.09 0.04 0.10 0.07 0.07
Net realized and unrealized
gain (loss) on investments 3.27 2.72 2.42 1.27 1.34
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.36 2.76 2.52 1.34 1.41
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
From net investment income (0.08) (0.28) (0.07) (0.07) (0.05)
From net realized gain -- -- -- -- (0.11)
---------- ---------- ---------- ---------- ----------
Total distributions (0.08) (0.28) (0.07) (0.07) (0.16)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 24.79 $ 21.51 $ 19.03 $ 16.58 $ 15.31
========== ========== ========== ========== ==========
Total return 15.63% 14.54% 15.20% 8.72% 10.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 465.7 $ 387.3 $ 325.4 $ 298.6 $ 244.1
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived and expenses
absorbed or recouped 1.39% 1.49% 1.46% 1.49% 1.56%
After fees waived and expenses
absorbed or recouped 1.39% 1.49% 1.49% 1.50% 1.50%
Ratio of net investment income
to average net assets # 0.37% 0.21% 0.52% 0.42% 0.55%
Portfolio turnover rate 16.38% 43.47% 16.68% 19.50% 12.57%
- -----------
# Net of fees waived.
The accompanying notes are an integral part of these financial statements. 19
- --------------------------------------------------------------------------------
PURISIM A TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2007
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 a high total return. The Fund seeks to achieve its objective by
investing in a portfolio allocated between domestic and foreign common stocks,
fixed-income securities, money market instruments and other equity-type
securities. The Fund's investments in different types of securities may vary
significantly.
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. If on a particular
day, an exchange-listed security does not trade, then the mean between
the bid and asked prices will be used. Foreign exchange traded equity
securities are valued based upon the price on the exchange or market
on which they trade as of the close of business of such market or
exchange immediately preceding the time the Fund's net asset value is
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 price.
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.
20
- --------------------------------------------------------------------------------
B. FOREIGN CURRENCY TRANSLATION. The Fund's records are maintained in
U.S. dollars. The value of securities, currencies and other assets and
liabilities denominated in currencies other than U.S. dollars are
translated into U.S. dollars based upon foreign exchange rates
prevailing at the end of the reporting period. Purchases and sales of
investment securities, income and expenses are translated on the
respective dates of such transactions.
The Fund does not isolate that portion of their net realized and
unrealized gains and losses on investments resulting from changes in
foreign exchange rates from the impact arising from changes in market
prices. Such fluctuations are included with net realized and
unrealized gain or loss from investments and foreign currency.
Net realized foreign currency transaction gains and losses arise from
sales of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, and the
differences between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign currency translation gains and losses arise from changes in
the value of assets and liabilities, other than investments in
securities, resulting from changes in the exchange rates.
C. 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. During the fiscal year ended August 31, 2007,
the Fund incurred a tax liability of $6,500. The Administrator has
agreed to reimburse the Fund for this tax liability. Accordingly,
there is no impact to the Fund or its shareholders.
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, 2007, the Total Return Fund used its capital loss
carryforward of $1,540,425 to offset capital gains.
D. 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.
E. 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.
21
- --------------------------------------------------------------------------------
F. 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.
G. Securities Sold Short. To the extent the Fund engages in selling
securities short, it is obligated to replace a security borrowed by
purchasing the same security at the current market value. The Fund
would incur a loss if the price of the security increases between the
date of the short sale and the date on which the Fund replaces the
borrowed security. The Fund would realize a gain if the price of the
security declines between those dates.
The Fund is required to establish a margin account with the broker
lending the security sold short. While the short sale is outstanding,
the broker retains the proceeds of the short sale and the Fund must
also maintain a deposit with the broker consisting of cash having a
value equal to a specified percentage of the value of the securities
sold short.
H. Reclassification of Capital Accounts. Accounting principles generally
accepted in the United States of America require that certain
components of net assets relating to permanent 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, 2007, the Total Return Fund
decreased accumulated net investment loss by $1,076,936, and decreased
accumulated net realized gain on investments by $1,076,936.
I. 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.
J. Line of Credit. The Fund has a Loan Agreement with U.S. Bank N.A.
Under the terms of the Loan Agreement, the Fund's borrowings cannot
exceed the lesser of $8,000,000 or 33 1/3% of the net assets of the
Fund. The interest rate paid on the Loan equals the prime rate per
annum, payable monthly.
Borrowing activity under the Loan Agreement for the year ended August
31, 2007, was as follows:
MAXIMUM AMOUNT AVERAGE AVERAGE
AMOUNT INTEREST OUTSTANDING AT AMOUNT INTEREST
OUTSTANDING EXPENSE AUGUST 31, 2007 OUTSTANDING RATE
----------- ------- --------------- ----------- ----
$ 857,000 $ 870 $ 0 $ 11,066 8.250%
22
- --------------------------------------------------------------------------------
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 year
ended August 31, 2007, the Adviser had previously recouped all fees previously
waived and expenses absorbed from the Total Return Fund.
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 year
ended August 31, 2007, Purisima Total Return Fund paid USBFS $315,109 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 year ended August 31, 2007, the Fund
incurred $753,306 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.
23
- --------------------------------------------------------------------------------
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 year ended August 31,
2007 were as follows:
FUND PURCHASES SALES
---- --------- -----
Total Return Fund $88,710,343 $69,895,842
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. 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.
As of August 31, 2007, the components of distributable earnings on a tax basis
were as follows:
TOTAL RETURN
------------
Cost of investments for tax purposes $ 334,292,686
=============
Gross tax unrealized appreciation $ 143,653,280
Gross tax unrealized depreciation $ (12,553,508)
-------------
Net tax unrealized appreciation $ 131,099,772
-------------
Undistributed ordinary income $ 767,824
Undistributed Long Term Capital Gains $ 20,235,777
-------------
Total distributable earnings $ 21,003,601
-------------
Other accumulated earnings $ (786)
-------------
Total accumulated earnings $ 152,102,587
=============
The tax composition of dividends are as follows:
LONG TERM
ORDINARY LONG TERM CAPITAL GAINS
INCOME CAPITAL GAINS PER SHARE
------ ------------- ---------
Total Return Fund
8/31/2007 $ 1,378,881 -- --
8/31/2006 $ 4,857,625 -- --
24
- --------------------------------------------------------------------------------
NOTE 7 -- RECENT ACCOUNTING PRONOUNCEMENTS
In September, 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value
Measurements", which will expand the disclosure requirements for fair value
measurements. The new standard defines fair value as the price that would be
received upon the sale of an asset or transfer of a liability in an orderly
transaction between market participants. As a basis for considering market
participant assumptions in fair value measurements, this Statement also
establishes a fair value hierarchy that distinguishes between (1) market
participant assumptions developed based on market data obtained from sources
independent of the reporting entity (observable inputs) and (2) the reporting
entity's own assumptions about marketing participant assumptions developed based
on the best information available in the circumstances (unobservable inputs).
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and earlier adoption is permitted.
(Management is currently evaluating the impact of adoption of SFAS No. 157 on
its financial statements.)
Effective June 29, 2007, the Company adopted Financial Accounting Standards
Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in
Income Taxes, a clarification of FASB Statement No. 109, Accounting for Income
Taxes. FIN 48 establishes financial reporting rules regarding recognition and
measurement of tax positions taken or expected to be taken on a tax return. The
adoption of FIN 48 had no impact on the Company's net assets or results of
operations.
25
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
The Purisima Funds
Woodside, California
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments of the Purisima Total Return Fund, a series of The
Purisima Funds (the "Trust"), as of August 31, 2007, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Trust
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 2007, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly in all material respects, the financial position of the
Purisima Total Return Fund as of August 31, 2007, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
September 16, 2005
26
- --------------------------------------------------------------------------------
PURISIMA TOTAL RETURN FUND
OTHER INFORMATION
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 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 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.
-----------
TAX NOTICE (UNAUDITED)
For the fiscal year ended August 31, 2007, certain dividends paid by the Fund
may be subject to a minimum tax rate of 15%, as provided by the Jobs and Growth
Tax Relief Reconciliation Act of 2003. The Fund designates 100% of dividends
declared from ordinary income as qualified dividend income.
The percentage of dividend income distributed for the year ended August 31, 2007
designated as qualified dividends received deduction available to corporate
shareholders is 63.6% for the Total Return Fund.
For the year ended August 31, 2007, the Total Return Fund earned foreign source
income and paid foreign taxes, which they intend to pass through to their
shareholders pursuant to Section 853 of the Internal Revenue Code as follows:
GROSS DIVIDENDS TAXES WITHHELD
--------------- --------------
Brazil 99,892.72 12,262.75
Canada 148,478.47 22,277.55
Chile 580.44 224.55
France 618,421.98 143,222.30
Germany 705,205.81 116,963.34
Italy 410,717.57 110,893.74
Israel 305.15 48.82
Japan 868,792.13 122,024.60
Netherlands 234,608.74 35,997.02
Philippines 12,751.45 1,999.71
Spain 310,720.52 54,110.26
South Korea 94,713.52 16,133.08
Switzerland 577,752.07 116,609.94
Taiwan 24,434.23 6,982.85
27
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
28
- --------------------------------------------------------------------------------
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 2 Signature
Brown & Haley since 1998 (fine confectioners); Foods, Inc.
Vice President of Blummer Chocolate Company
from 1980 to 1997, where he had been
employed since 1970.
- --------------------------------------------------------------------------------
Sole proprietor of LeFevre Capital 2 None
Management, a registered investment adviser.
- --------------------------------------------------------------------------------
Executive Director of the law firm of 2 Diablo Valley
Berding & Weil, LLP since 1990. Bank; East
Bay BOMA.
- --------------------------------------------------------------------------------
Sole proprietor of Bryan F. Morse, RIA, 2 None
a registered investment adviser since 1990.
- --------------------------------------------------------------------------------
Attorney in private practice in Palo Alto, 2 None
California. Prior to entering private practice in
June of 1981, served as a Branch Chief of the
Los Angeles Regional Office of the U.S. Securities
and Exchange Commission.
- --------------------------------------------------------------------------------
29
- --------------------------------------------------------------------------------
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.
30
- --------------------------------------------------------------------------------
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 of N/A None
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 Fund N/A None
Services, LLC since 2001.
- --------------------------------------------------------------------------------
31
- --------------------------------------------------------------------------------
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.
32
This page is intentionally left blank.
The Purisima Funds
Annual Report
August 31, 2007
The Purisima All-Purpose Fund
A LETTER OF OUR SHAREHOLDERS
Welcome to the annual report for the Purisima All-Purpose Fund for the period
ended August 31, 2007. The Fund commenced on November 1, 2005. It seeks high
total return while also seeking to provide protection against declines in value
of the US and foreign equity markets. During the period, this fund was primarily
invested in US government securities.
Thank you for your continued interest and support.
Sincerely,
/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
RECOMMENDED 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 IN VESTED. FOREIGN IN VESTING 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 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
09/07
-1-
PERFORMANCE SUMMARY
FOR YEAR ENDED AUGUST 31, 2007
PURISIMA ALL-PURPOSE FUND
GROWTH OF $10,000.
PURISIMA ALL-PURPOSE FUND CUMULATIVE TOTAL RETURN VERSES MERRILL LYNCH U.S.
TREASURY BILLS 0-3 MONTHS INDEX $10,000 INVESTED FROM FUND INCEPTION ON 11/01/05
TO 8/31/07 *
GRAPH OMITTED
PURISIMA MERRILL LYNCH
ALL-PURPOSE U.S. TREASURY BILLS
DATE FUND
------------------------------------------------------------------
11/1/2005 10,000 10,000
11/30/2005 10,020 10,030
12/31/2005 10,049 10,061
1/31/2006 10,100 10,094
2/28/2006 10,160 10,127
3/31/2006 10,220 10,165
4/30/2006 10,281 10,201
5/31/2006 10,351 10,243
6/30/2006 10,421 10,284
7/31/2006 10,492 10,327
8/31/2006 10,562 10,370
9/30/2006 10,623 10,414
10/31/2006 10,683 10,455
11/30/2006 10,743 10,499
12/31/2006 10,800 10,545
1/31/2007 10,865 10,589
2/28/2007 10,908 10,629
3/31/2007 10,973 10,675
4/30/2007 11,027 10,721
5/31/2007 11,103 10,767
6/30/2007 11,168 10,808
7/31/2007 11,232 10,851
8/31/2007 11,330 10,904
Purisima All-Purpose Fund Merrill Lynch U.S. Treasury
Bills 0-3 Months Index
ONE-YEAR ONE-YEAR
Average Annual Total Return(2)** 7.27% Average Annual Total Return(2)** 5.15%
SINCE INCEPTION (11/01/2005) SINCE FUND INCEPTION (11/01/2005)
Cumulative Total Return(1)** 13.30% Cumulative Total Return(1)** 9.05%
Average Annual Total Return(2)** 7.06% Average Annual Total Return(2)** 4.85%
PLEASE NOTE PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. SHARE PRICE
AND RETURN WILL FLUCTUATE, AND INVESTORS MAY EXPERIENCE A GAIN OR LOSS WHEN THEY
SELL THEIR SHARES. TO OBTAIN A PROSPECTUS ON THE PURISIMA FUNDS PLEASE CALL
1-800-841-0199. THE PROSPECTUS CONTAINS MORE INFORMATION, INCLUDING THE
POLITICAL, ECONOMIC, CURRENCY RISKS AND POTENTIAL VOLATILITY OF FOREIGN
INVESTING. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
1. Cumulative total return measures the change in value of an investment over
the periods indicated and reflects all fund fees and expenses.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and reflects all fund fees and
expenses. Average annual total return and cumulative total return for the
one-year period would be identical.
* The Merrill Lynch US Treasury Bills 0-3 Months Index is an unmanaged index
of Treasury securities that assumes reinvestment of all income.
** The total returns shown do not reflect the deduction of taxes a shareholder
would pay on fund distributions or redemption of fund shares. The total
return reflects the rate an investment would have earned (or lost) on an
investment in the Fund, assuming reinvestment of all dividends and
distributions.
-2-
SECTOR BREAKDOWN(1)
(Unaudited)
PURISIMA ALL-PURPOSE FUND
- --------------------------------------------------------------------------------
U.S. Treasury Obligations 97.3%
Mutual Funds 2.7%
- --------------------------------------------------------------------------------
Total 100.0%
(1)Percentage of Total Investments as of August 31, 2007.
-3-
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, i n cluding 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 March 1, 2007 to August 31,
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 n i formation 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.
-4-
EXPENSE EXAMPLE (UNAUDITED)
HYPOTHETICAL
PERFORMANCE
PURISIMA ALL-PURPOSE FUND ACUTAL (5% RETURN
(Inception date: 11/01/2005) PERFORMANCE BEFORE EXPENSES)
- --------------------------------------------------------------------------------
Beginning Account Value (03/01/07) $ 1,000.00 $ 1,000.00
Ending Account Value (08/31/07) $ 1,038.70 $ 1,017.64
Expenses Paid During Period(1) $ 7.71 $ 7.63
- --------------------------------------------------------------------------------
(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 184/365 (to reflect the four month
period).
-5-
PURISIMA ALL-PURPOSE FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS: 139.9%
U.S. TREASURY BILL: 139.9%
40,000 4.810%, 11/23/2007 $ 39,655
---------
TOTAL U.S. TREASURY OBLIGATIONS (COST $39,559) 39,655
---------
SHARES
- ------
MUTUAL FUNDS - 3.9%
1,102 SEI Daily Income Trust Government Fund 1,102
---------
TOTAL MUTUAL FUNDS (COST $1,102) 1,102
---------
TOTAL INVESTMENTS (COST $40,661): 143.8% $ 40,757
LIABILITIES IN EXCESS OF OTHER ASSETS: (43.8)% (12,420)
---------
TOTAL NET ASSETS: 100.0% $ 28,337
=========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-6-
PURISIMA ALL-PURPOSE FUND
STATEMENT OF ASSETS AND LIABILITIES AT AUGUST 31, 2007
- --------------------------------------------------------------------------------
ALL-PURPOSE
FUND
-----------
ASSETS
Investments in securities, at cost $ 40,661
==========
Investments in securities, at value $ 40,757
Receivables:
Dividends and interest 34
Due from Adviser (Note 3) 12,042
Other Assets 4,561
----------
Total Assets 57,394
----------
LIABILITIES
Accrued administration fees (Note 3) 2,711
Accrued transfer agent fees 3,832
Accrued audit fees 12,997
Accrued fund accounting fees 7,726
Accrued reports to shareholders 502
Other accrued expenses 1,289
----------
Total Liabilities 29,057
----------
NET ASSETS $ 28,337
==========
Number of shares issued and outstanding
(unlimited shares authorized, $0.01 par value) 2,705
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $ 10.47
==========
COMPONENTS OF NET ASSETS
Paid-in capital $ 27,047
Accumulated net investment income 1,195
Accumulated net realized loss on investments (1)
Net unrealized appreciation on investments 96
----------
Net assets $ 28,337
==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-7-
PURISIMA ALL-PURPOSE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2007
- --------------------------------------------------------------------------------
ALL-PURPOSE
FUND
-----------
INVESTMENT INCOME
Income
Interest $ 2,229
-----------
Total income 2,229
-----------
Expenses
Advisory fees 273
Administration fees 39,613
Transfer agent fees 15,077
Fund accounting fees 30,294
Custody fees 3,088
Reports to shareholders 2,882
Registration fees 21,416
Audit fees 19,699
Legal fees 955
Trustee fees 15,218
Miscellaneous 468
-----------
Total expenses 148,983
Less: Reimbursement by Adviser (Note 3) 148,574
-----------
Net expenses 409
-----------
NET INVESTMENT INCOME 1,820
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investments 5
Change in net unrealized appreciation on investments 96
-----------
Net gain on investments 101
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,921
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-8-
PURISIMA ALL-PURPOSE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE PERIOD
YEAR ENDED NOVEMBER 1, 2005^ THRU
DECREASE IN NET ASSETS FROM: AUGUST 31, 2007 AUGUST 31, 2006
--------------- ----------------------
OPERATIONS
Net investment income $ 1,820 $ 1,422
Net realized gain/loss on investments 5 (6)
Change in net unrealized appreciation on investments 96 --
--------------- ----------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,921 1,416
--------------- ----------------------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (1,899) (148)
--------------- ----------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,899) (148)
--------------- ----------------------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change
in outstanding shares (a) 1,899 25,148
--------------- ----------------------
TOTAL INCREASE IN NET ASSETS 1,921 26,416
--------------- ----------------------
NET ASSETS
Beginning of period 26,416 --
--------------- ----------------------
END OF PERIOD $ 28,337 $ 26,416
=============== ======================
Undistributed net investment income $ 1,195 $ 1,274
=============== ======================
(a) A summary of capital share transactions is as follows:
YEAR ENDED NOVEMBER 1, 2005^
AUGUST 31, 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-9-
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 ANNUAL REPORT.
FOR THE YEAR ENDED NOVEMBER 1, 2005^ THRU
AUGUST 31, 2007 AUGUST 31, 2006
------------------ ----------------------
Net asset value, beginning of period $ 10.50 $ 10.00
------------------ ----------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.69 0.56
Net realized and unrealized gain
(loss) on investments 0.04 0.00
------------------ ----------------------
Total from investment operations 0.73 0.56
------------------ ----------------------
LESS DISTRIBUTIONS:
From net investment income (0.76) (0.06)
------------------ ----------------------
Total distributions (0.76) (0.06)
------------------ ----------------------
Net asset value, end of period $ 10.47 $ 10.50
================== ======================
Total return 7.27% 5.62%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 28.3 $ 26.4
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 545.57% 620.25%*
After fees waived 1.50% 1.50%*
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS # 6.66% 6.71%*
Portfolio turnover rate 0.00% 0.00%**
* Annualized.
** Not annualized.
# Net of fees waived.
^ Commencement of operations.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-10-
PURISIMA ALL-PURPOSE FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2007
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. If on a particular
day, an exchange-listed security does not trade, then the mean between
the bid and asked prices will be used. Foreign exchange traded equity
securities are valued based upon the price on the exchange or market
on which they trade as of the close of business of such market or
exchange immediately preceding the time the Fund's net asset value is
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 price.
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 i n fluence 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.
-11-
PURISIMA ALL-PURPOSE FUND
B. FOREIGN CURRENCY TRANSLATION. The Fund's records are maintained in
U.S. dollars. The value of securities, currencies and other assets and
liabilities denominated in currencies other than U.S. dollars are
translated into U.S. dollars based upon foreign exchange rates
prevailing at h t e end of the reporting period. Purchases and sales
of investment securities, income and expenses are translated on the
respective dates of such transactions.
The Fund does not isolate that portion of their net realized and
unrealized gains and losses on nv i estments resulting from changes in
foreign exchange rates from the impact arising from changes in market
prices. Such fluctuations are included with net realized and
unrealized gain or loss from investments and foreign currency.
Net realized foreign currency transaction gains and losses arise from
sales of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, and the
differences between the amounts of dividends, interest, and o f reign
withholding taxes recorded on the Fund books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign currency translation gains and l o sses arise from changes in
the value of assets and liabilities, other than investments in
securities, resulting from changes in the exchange rates.
C. FEDERAL INCOME AND EXCISE TAXES. The Fund has elected to be taxed as a
"regulated i nv estment 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.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, t h e 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 t h at exist in the markets in which it invests.
As of August 31, 2007, the Fund had a capital loss carryforward of $1
which expires in 2015.
D. 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.
E. 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
-12-
PURISIMA ALL-PURPOSE FUND
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.
F. CONCENTRATION OF RISK. Investments in securities of non-U.S. issues in
certain countries n i volve special investment risks. These risks may
include, but are not limited to, investment restrictions, adverse
political, social and economic developments, government involvement i
n the private sector, limited and less reliable investor information,
lack of liquidity, certain l o cal tax law considerations, and limited
regulation of the securities markets.
G. 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 t im e 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 i l abilities. When an option expires, the
premium (original option value) is realized as a gain i f the option
was written or as a loss if the option was purchased. When the
exercise of an option result in a cash settlement, the difference
between the premium and the settlement proceeds is realized as a gain
or loss. When securities are acquired or delivered upon exercise of an
option, the acquisition cost or sale proceeds are adjusted by the
amount of the premium. When an option is closed, the difference
between the premium and the cost to close the position is realized as
a gain or loss. The Fund may purchase options which are n i cluded in
the Fund's Schedules of Investments and subsequently marked to market
to reflect the current value of the option. At August 31, 2007, the
Fund had no options outstanding.
H. 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.
I. INDEMNIFICATION OBLIGATIONS. Under the Fund's organizational
documents, its current and o f rmer 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
-13-
PURISIMA ALL-PURPOSE FUND
Fund enters into contracts that contain a variety of representations
and warranties that provide general indemnifications. The Fund's
maximum exposure under these arrangements i s 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 h t e 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 year
ended August 31, 2007, t h e Fund paid the Adviser $273.
As of August 31, 2007, the Adviser has reimbursed the Fund $148,574 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 t a x reporting calculations. During the
year ended August 31, 2007, Purisima All-Purpose Fund paid USBFS $39,613 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 h t e 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.
-14-
PURISIMA ALL-PURPOSE FUND
NOTE 4 - SERVICE AND DISTRIBUTION PLAN
The Trust has adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan, the 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 year ended August 31, 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 t h e year ended August 31, 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 i n come for federal tax
purposes.
As of August 31, 2007, the components of distributable earnings on a tax basis
were as follows:
All-Purpose
-----------
Cost of investments for tax purposes $ 40,661
==========
Gross tax unrealized appreciation $ 96
Gross tax unrealized depreciation $ --
-----------
Net tax unrealized appreciation $ 96
Undistributed ordinary income $ 1,195
Capital loss carryforward * $ (1)
-----------
Total accumulated earnings (losses) $ 1,290
===========
-15-
PURISIMA ALL-PURPOSE FUND
The tax compositions of dividends are as follows:
Long Term
Ordinary Long Term Capital Gains
Income Capital Gains Per Share
----------------------------------------------------
Purisima All-Purpose
Fund
8/31/2007 $1,899 -- --
8/31/2006 $ 148 -- --
* 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 September, 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value
Measurements", which will expand the disclosure requirements for fair value
measurements. The new standard defines fair value as the price that would be
received upon the sale of an asset or transfer of a liability in an orderly
transaction between market participants. As a basis for considering market
participant assumptions in fair value measurements, this Statement also
establishes a fair value hierarchy that distinguishes between (1) market
participant assumptions developed based on market data obtained from sources
independent of the reporting entity (observable inputs) and (2) the reporting
entity's own assumptions about market participant assumptions developed based on
the best information available in the circumstances (unobservable inputs). SFAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and earlier adoption is permitted. Management is
currently evaluating the impact of adoption of SFAS No. 157 on its financial
statements.
Effective June 29, 2007, the Company adopted Financial Accounting Standards
Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in
Income Taxes, a clarification of FASB No. 109, Accounting for Income Taxes. FIN
48 establishes financial reporting rules regarding the recognition and
measurement of tax positions taken or expected to be taken on a tax return. The
adoption of FIN 48 had no impact on the Company's net assets or results of
operations.
-16-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
THE PURISIMA FUNDS
WOODSIDE, CALIFORNIA
We have audited the accompanying statement of assets and liabilities, including
the schedule of i nv estments of the Purisima All-Purpose Fund, a series of The
Purisima Funds (the "Trust"), as of August 31, 2007, and the related statement
of operations for the year then ended, the statement of changes in net assets
and the financial highlights for the year then ended and for the period November
1, 2005 (commencement of operations) to August 31, 2006. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Trust
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for t h e purpose
of expressing an opinion on the effectiveness of the Trust's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
n i cludes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 2007, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly in all material respects, the financial position of the
Purisima All-Purpose Fund as of August 31, 2007, the results of its operations,
the changes in its net assets, and the financial highlights for the periods
indicated above, in conformity with accounting principles generally accepted in
the United States of America.
TAIT, WELLER & BAKER LLP
PHILADELPHIA, PENNSYLVANIA
OCTOBER 22, 2007
-17-
OTHER INFORMATION -
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 t o ll-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.
TAX NOTICE (UNAUDITED)
Additional Information applicable to foreign shareholders only: The percentage
of income distributed for the year ended August 31, 2007, designated qualified
interest income under Internal Revenue Code Section 871(k)(1)(C), is 100% for
the Fund.
-18-
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 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 YEAR PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTOR-
DATE OF BIRTH WITH TRUST ELECTED(1) DURING PAST FIVE YEARS DIRECTOR SHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------
Kenneth L. Fisher* President 1996 Chief Executive Officer and majority 2 None
(born 1950) and Trustee shareholder of Fisher Investments, Inc., the sole
13100 Skyline Blvd. shareholder of the Adviser, and has served in
Woodside, CA 94062 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 Brown 2 Signature
(born 1948) & Haley since 1998 (fine confectioners); Vice Foods, Inc.
13100 Skyline Blvd. President of Blummer Chocolate Company from
Woodside, CA 94062 1980 to 1997, where he had been employed
since 1970.
Scott LeFevre Trustee 2001 Sole proprietor of LeFevre Capital Management, 2 None
(born 1957) a registered investment adviser.
13100 Skyline Blvd.
Woodside, CA 94062
Alfred D. McKelvy, Jr. Trustee 2003 Executive Director of the law firm of Berding & 2 Diablo
(born 1949) Weil, LLP since 1990. Valley
13100 Skyline Blvd. Bank; East
Woodside, CA 94062 Bay BOMA.
Bryan F. Morse Trustee 1996 Sole proprietor of Bryan F. Morse, RIA, 2 None
(born 1952) registered investment adviser since 1990.
13100 Skyline Blvd.
Woodside, CA 94062
Grover T. Wickersham Trustee 1996 Attorney in private practice in Palo Alto, 2 None
(born 1949) California. Prior to entering private practice in
13100 Skyline Blvd. June of 1981, served as a Branch Chief of the
Woodside, CA 94062 Los Angeles Regional Office of the U.S.
Securities and Exchange Commission.
Tom Fishel Chief 2005 Vice President and Chief Compliance Officer of N/A None
(born 1960) Compliance the Adviser. Vice President of Charles Schwab
13100 Skyline Blvd. Officer & Co., Inc. from 1995 to 2004, where he had
Woodside, CA 94062 been employed since 1983.
Keith Shintani Secretary and 2006 Vice President of U.S. Bancorp Fund Services, N/A None
(born 1963) Assistant LLC and its predecessor, Investment Company
2020 East Financial Way Treasurer Administration, LLC since 1998.
Glendora, CA 91741
Michael Ricks Treasurer 2006 Assistant Vice President of U.S. Bancorp Fund N/A None
(born 1977) Services, LLC since 2001.
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.
-19-
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 t h e 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.
-20-
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer and principal financial officer. The registrant has
not made any amendments to its code of ethics during the period covered by this
report. The registrant has not granted any waivers from any provisions of the
code of ethics during the period covered by this report.
The registrant undertakes to provide to any person without charge, upon request,
a copy of its code of ethics by mail when they call the registrant at
1-800-851-8845.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of trustees has determined that it does not have an audit
committee financial expert serving on its audit committee. At this time, the
registrant believes that the experience provided by each member of the audit
committee together offers the registrant adequate oversight for the registrant's
level of financial complexity.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The registrant has engaged its principal accountant to perform audit services,
audit-related services, tax services and other services during the past two
fiscal years. "Audit services" refer to performing an audit of the registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years. "Audit-related services" refer to the assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit. "Tax services" refer to professional services rendered
by the principal accountant for tax compliance, tax advice, and tax planning.
The following table details the aggregate fees billed or expected to be billed
for each of the last two fiscal years for audit fees, audit-related fees, tax
fees and other fees by the principal accountant.
- ----------------------------- ----------------------- -----------------------
FYE 08/31/2006 FYE 08/31/2007
- ----------------------------- ----------------------- -----------------------
Audit Fees $33,000 $34,000
Audit-Related Fees 0 0
Tax Fees $5,000 $6,000
All Other Fees 0 0
- ----------------------------- ----------------------- -----------------------
The audit committee has adopted pre-approval policies and procedures that
require the audit committee to pre-approve all audit and non-audit services of
the registrant, including services provided to any entity affiliated with the
registrant. Accordingly, 100% of the services shown above provided by the
principal accountant have been approved by the Audit Committee. All of the
principal accountant's hours spent on auditing the registrant's financial
statements were attributed to work performed by full-time permanent employees of
the principal accountant.
The following table indicates the non-audit fees billed or expected to be billed
by the registrant's accountant for services to the registrant and to the
registrant's investment adviser (and any other controlling entity, etc.--not
sub-adviser) for the last two years. The audit committee of the board of
trustees has considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser is compatible with maintaining
the principal accountant's independence and has concluded that the provision of
such non-audit services by the accountant has not compromised the accountant's
independence.
-2-
- ------------------------------------ ------------------------ ------------------
Non-Audit Related Fees FYE 08/31/2006 FYE 08/31/2007
- ------------------------------------ ------------------------ ------------------
Registrant 0 0
Registrant's Investment Adviser 0 0
- ------------------------------------ ------------------------ ------------------
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 and Treasurer 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.
-3-
(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. 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.
-4-
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) /s/ KENNETH L. FISHER
-------------------------------------
Kenneth L. Fisher, President
Date November 8, 2007
-------------------------------------
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) /s/ KENNETH L. FISHER
-------------------------------------
Kenneth L. Fisher, President
Date November 8, 2007
-------------------------------------
By (Signature) /s/ MICHAEL RICKS
-------------------------------------
Michael Ricks, Treasurer
Date November 8, 2007
-------------------------------------
-5-