As filed with the Securities and Exchange Commission on May 7, 2004
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
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(Exact name of registrant as specified in charter)
13100 SKYLINE BLVD.
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WOODSIDE, CALIFORNIA 94062
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(Address of principal executive offices) (Zip code)
U.S. BANCORP FUND SERVICES, LLC
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2020 EAST FINANCIAL WAY, SUITE 100
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GLENDORA, CA 91741
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(Name and address of agent for service)
(650) 851-3334
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Registrant's telephone number, including area code
Date of fiscal year end: AUGUST 31, 2004
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Date of reporting period: FEBRUARY 29, 2004
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ITEM 1. REPORT TO STOCKHOLDERS.
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Semi-Annual report February 29, 2004.
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The Purisima Funds
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Semi-Annual Report (unaudited)
February 29, 2004
The Purisima Total Return Fund
The Purisima Pure American Fund
The Purisima Pure Foreign Fund
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TABLE OF CONTENTS
A Letter to Our Shareholders 2
Schedule of Investments
Total Return Fund 6
Pure American Fund 10
Pure Foreign Fund 14
Statements of Assets and Liabilites 18
Statements of Operations 19
Statement of Changes in Net Assets
Total Return Fund 20
Pure American Fund 21
Pure Foreign Fund 22
Financial Highlights
Total Return Fund 23
Pure American Fund 24
Pure Foreign Fund 25
Notes to Financial Statements 26
Other Information 32
Privacy Notice 34
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INVESTMENT OBJECTIVES
Purisima Total Return Fund
Seeks to provide investors with a high level of total return by considering both
domestic and foreign securities.
Purisima Pure American Fund
Seeks to provide investors with a high level of total return, while
concentrating its holdings in U.S. securities.
Purisima Pure Foreign Fund
Seeks to provide investors with a high level of total return, while
concentrating its holdings in securities outside the U.S.
Each Fund reserves the right to reject any order for the purchase of its shares
or to limit or suspend, without prior notice, the offering of its shares. The
required minimum investments may be waived in the case of certain qualified
retirement plans. The Funds will not accept your account if you are investing
for another person as attorney-in-fact. The Funds also will not accept accounts
with a "Power of Attorney" in the registration section of the Purchase
Application.
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A LETTER TO OUR SHAREHOLDERS
We are pleased to bring you the semi-annual report for the Purisima Funds for
the six-month period ended February 29, 2004. During the reporting period, the
primary investment objective of the Funds remained achieving high total return
for shareholders.
MARKET OVERVIEW AND OUTLOOK:
Equity markets rose sharply during the period as a broad-based pickup in global
economic activity became apparent and corporate earnings continued to exceed
expectations. Each of the Funds remained fully invested in equities during the
period, benefiting from our bullish posture.
Early in calendar year 2003, we predicted that accommodative monetary policy,
benign interest rates, decreasing risk aversion tied to geopolitical events,
global economic recovery and favorable valuations would lead to a major rally in
global equity markets. Indeed, stock prices began rising in March, accelerated
toward the end of 2003, and finished strongly in the last two months of the
reporting period.
Economically sensitive sectors continued to lead in general, although technology
shares lagged during the period after posting significant out-performance
earlier in 2003. Small cap continued to outperform large cap in the US and in
most other major markets. Foreign markets did better than the US in dollar
terms.
Regionally, Japan rallied strongly early in the period, led by financials, but
lagged in more recent months. Driven by continuing structural reforms, the
European markets posted the strongest returns in the period along with the UK,
boosted largely by currency effects.
Looking ahead, we remain optimistic about both U.S. and foreign equities,
although not to the extent we have been in recent periods. There are several
reasons we expect above average gains in the remainder of 2004:
o Consensus estimates this year are for "average returns" in the 0-15%
range. Because the market discounts current expectations, it is
unlikely the consensus return will occur. This means the actual return
will most likely be either negative or up a lot. We think there are
too many positive surprise factors ahead to make a negative year
likely.
o We expect GDP growth to exceed expectations. The combination of forces
driving strong economic and corporate performance in the last six
months should continue to provide upside surprise to already strong
forecasts.
o Short-term interest rates will remain benign and global yield curves
will remain steep. Almost uniformly, forecasters around the world
expect interest rates to rise in 2004. Whenever the marketplace
uniformly leans in one direction, prices
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often head the other way or do not move at all. On the short end of
yield curves, we feel most major central banks will remain wary of
raising rates while the economic recovery is young and inflationary
pressures remain benign. In the U.S., The Federal Reserve will be
loath to act prior to the November elections for fear of appearing to
interfere. Low rates and a steep yield curve should promote stronger
economic growth and keep stocks attractive versus alternative
investments.
o Recent financial industry scandals should prove bullish as anxiety
concerning them eases. Bull markets love to climb a wall of worry. As
the source of specific anxieties is lifted, marginal buyers re-enter
the market pushing prices higher. The recent mutual fund scandals are
but one source of anxiety that we believe will soon be seen as
"problem solved" by the public.
o Re-election years are good for the U.S. stock market. Our analysis
tells us that President Bush will most likely be re-elected. If this
is the case, the market will respond favorably as re-election removes
the uncertainty that comes with a new person occupying the White
House. Even if he is defeated, the U.S. market has historically
delivered positive returns an overwhelming majority of the time in the
fourth year of a president's term.
o Geopolitical risk should continue to wane. We expect more countries to
follow the Libya example and willingly dismantle their weapons of mass
destruction programs. Terrorism will not go away, but the real issue
is whether terrorists will gain access to WMD. As that risk
diminishes, markets will benefit.
There are a few commonly mentioned factors we think are worth noting that we do
not believe will affect stock prices materially. While the developing situation
in Iraq will continue to be in the headlines, we do not believe it will have a
great impact on the market. Widely covered news stories are discounted into
pricing and have no surprise power. Many are also concerned about the U.S.
current account deficit. The deficit has been a function of the U.S. having a
shortage of adequate savings to fund its economic growth over the last two
decades. We view this as a positive, not a negative. Without the imported
capital, internal investment opportunities would have been lost. Our research
concludes that the U.S. government budget deficit is also not predictive of
future stock market returns.
During the period, we maintained relative overweights to cyclical sectors
sensitive to an economic recovery. For right now, we believe this focus remains
appropriate and will help generate outperformance. Materials companies should
continue to benefit from economic recovery and will discount any future
inflation pick-up in higher stock prices before it hits. Corporate spending has
just begun to pick up. As more firms complete necessary software and equipment
upgrades, leading technology firms should prosper.
In similar fashion, the Funds maintain a modest bias toward smaller cap stocks.
Small caps tend to outperform in the early phase of a bull market. In the Pure
Foreign and Total Return Funds, we are maintaining overweights in Continental
Europe and
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underweights in the U.K. and Japan. The U.K. did not experience a recessionary
period and we do not believe growth there will be as robust due to relatively
tight monetary policy. Japan is making only timid progress with its troubled
banking system and many problems remain. We do not believe true reform is
happening quickly enough. On the other hand, France has initiated policy
reducing benefits to the long-term unemployed, and Germany continues to overhaul
labor laws and cut taxes. These are bullish signals.
TOTAL RETURN FUND SUMMARY
The Total Return Fund performances for the six month period, one year, five
years and since inception were 15.41%, 43.30%, 4.79% and 10.36%, respectively,
as compared to the performances of the MSCI World Index of 18.75%, 44.36%,
- -0.01% and 5.55%, respectively.1 The Total Return Fund participated in the
market rally but trailed the MSCI World Index as an overweight to technology to
the U.S. decline during the period. We still believe these exposures are
appropriate and remain committed to the belief they will add value in the coming
months.
PURE AMERICAN FUND SUMMARY
The Pure American Fund performances for the six month period, one year, five
years and since inception were 12.35%, 36.27%, 2.79% and 7.09%, respectively, as
compared to the performances of the S&P 500 Index of 14.59%, 38.52%, -0.12% and
3.69%, respectively.1 The Pure American Fund lagged the S&P 500 for the period,
largely because of an overweight in technology stocks. Holdings within the
sector include market leaders, and we expect they will lead the portfolio to
higher relative returns in the next period.
PURE FOREIGN FUND SUMMARY
The Pure Foreign Fund performances for the six month period, one year, five
years and since inception were 21.98%, 53.58%, 12.23% and 14.60%, respectively,
as compared to the performances of the MSCI EAFE Index of 25.22%, 53.58%, 1.23%
and 4.18%, respectively,/1/ as foreign markets led the way during the period.
The Pure Foreign Fund slightly trailed the MSCI EAFE Index for the period. That
Index enjoyed a higher weight in Japanese financials, which rallied strongly in
the first month of the period. After that, the Fund outperformed the index and
benefited from overweights to Europe and cyclical sectors such as materials.
CLOSING REMARKS
We expect another strong year for global equity markets. Much of what we
forecast at the outset of 2003 developed in the latter half of the year. The
markets gained momentum and the most recent period witnessed strong gains both
domestically and in foreign markets. The Funds all participated in this move.
/1/ The performance data for the Funds quoted above represent past performance,
and current performance may be lower or higher than the performance data
quoted. Past performance does not guarantee future results. The investment
return and principal value will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
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The posture of the portfolio compositions remains largely unchanged. Many of the
themes we envisioned from last year are still of consequence, and we feel
confident they will add value in the coming months. Cyclical sectors leveraged
to global economic recovery should witness relatively higher returns. We
maintain overweights in these areas by owning quality companies with competitive
advantages to their peers.
It is possible the outlook for equities could become more cloudy looking into
2005, but for now we are looking forward to another good year and believe the
Funds are well positioned to add value beyond what should already be a rewarding
market environment.
Thank you for your continued interest and support.
Sincerely,
/s/ Kenneth L. Fisher
Kenneth L. Fisher
Chairman and Chief Investment Officer
Fisher Investments, Inc.
Opinions expressed above are those of Kenneth L. Fisher and are subject to
change, are not guaranteed and should not be considered recommendations to buy
or sell any security. Fund holdings and sector allocations are subject to change
and are not recommendations to buy or sell any security. The MSCI Whole World
Index is a broad based unmanaged capitalization-weighted stock index that
includes all major world stock markets. 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. The MSCI EAFE Index consists of the Morgan Stanley
World Index components without the United States and Canada. One cannot invest
directly in an index.
Mutual fund investing involves risk of loss. Principal loss is possible. Foreign
investing involves special risks, including a greater volatility and political,
economic and currency risks and differences in accounting methods.
This material must be preceded or accompanied by a prospectus. Please read it
carefully before you invest or send money.
Purisima Securities, LLC, Distributor, 02/04
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SCHEDULE OF INVESTMENTS
PURISIMA TOTAL RETURN FUND
FEBRUARY 29, 2004 (UNAUDITED)
SHARES VALUE
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COMMON STOCKS: 99.1%
AEROSPACE/DEFENSE EQUIPMENT: 2.1%
47,100 Lockheed Martin Corp. $ 2,179,788
46,600 United Technologies Corp. 4,292,326
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6,472,114
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AUTOMOTIVE: 2.8%
65,800 DaimlerChrysler AG 2,956,394
246,000 Nissan Motor Co. Ltd. - ADR 5,448,900
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8,405,294
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BANKING: 14.5%
437,100 Banco Santander Central - ADR 5,083,473
94,700 Barclays Plc - ADR 3,489,695
39,500 Comerica, Inc. 2,272,830
168,500 Credit Suisse Group - ADR 6,172,155
52,000 HSBC Holdings Plc - ADR 4,251,000
432,500 Mitsubishi Tokyo Finance - ADR* 3,373,500
20,000 National Australia Bank Ltd. - ADR 2,396,000
66,775 National City Corp. 2,383,867
126,996 San Paolo - IMI SpA - ADR 3,298,086
38,100 SunTrust Banks, Inc. 2,755,011
47,800 UBS AG 3,537,678
118,300 Washington Mutual, Inc. 5,316,402
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44,329,697
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BIOMEDICINE: 0.5%
24,000 Amgen, Inc.* 1,524,720
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BIOTECHNOLOGY: 0.6%
16,000 Genentech, Inc.* 1,726,240
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CHEMICALS: 2.4%
87,225 Rohm & Haas Co. 3,467,194
69,100 BASF AG - ADR 3,694,086
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7,161,280
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SHARES VALUE
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COMPUTERS: 3.5%
119,200 Dell Computer Corp.* $ 3,891,880
110,400 Electronic Data Systems Corp. 2,114,160
330,100 EMC Corp.* 4,727,032
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10,733,072
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ELECTRICAL EQUIPMENT: 3.6%
71,700 General Electric Co. 2,331,684
79,800 Hitachi Ltd. - ADR 5,226,900
240,700 Matsushita Electric Industries Co., Ltd. - ADR 3,490,150
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11,048,734
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FINANCIAL SERVICES: 4.2%
137,771 ING Groep N.V. - ADR 3,387,789
71,600 Lehman Brothers Holdings, Inc. 6,208,436
200,000 Nomura Holdings, Inc. - ADR 3,192,000
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12,788,225
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FOODS: 1.1%
155,800 Sara Lee Corp. 3,399,556
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HOUSEHOLD AUDIO & VIDEO EQUIPMENT: 1.0%
75,100 Sony Corp. - ADR 3,074,594
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HOUSEHOLD PRODUCTS: 1.8%
47,700 Kimberly-Clark Corp. 3,085,236
24,600 Procter & Gamble Co. 2,521,746
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5,606,982
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INSURANCE: 4.9%
94,900 Allstate Corp. 4,330,287
41,544 American International Group, Inc. 3,074,256
180,800 Axa S.A. - ADR 4,176,480
73,300 Marsh & McLennan Co. 3,517,667
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15,098,690
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MACHINERY: 2.1%
84,600 Caterpillar, Inc. 6,408,450
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MEDIA: 4.3%
40,000 Gannett Co., Inc. 3,450,800
119,300 News Corporation Ltd. - ADR 4,467,785
201,900 Walt Disney Co. 5,356,407
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13,274,992
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SHARES VALUE
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MEDICAL INSTRUMENTS: 2.0%
92,200 Guidant Corp.* $ 6,282,508
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MINING: 1.9%
53,400 Rio Tinto Plc - ADR 5,868,660
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MISCELLANEOUS MANUFACTURING: 7.1%
164,200 Alcoa, Inc. 6,152,574
55,200 Illinois Tool Works 4,389,504
195,000 Lafarge S.A. - ADR* 4,243,200
87,800 Siemens AG - ADR 6,830,840
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21,616,118
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OIL & GAS: 7.1%
77,000 Anadarko Petroleum Corp. 3,946,250
124,900 Baker Hughes, Inc. 4,698,738
49,600 ConocoPhillips 3,415,952
107,600 Royal Dutch Petroleum Co. - ADR 5,335,884
49,357 Total Fina S.A. - ADR 4,540,350
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21,937,174
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PAPER & FOREST PRODUCTS: 1.4%
93,300 International Paper Co. 4,129,458
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PHARMACEUTICALS: 6.1%
84,000 Astrazeneca Plc - ADR 4,084,080
52,276 Aventis - ADR 4,038,321
77,400 GlaxoSmithKline Plc - ADR 3,298,788
57,100 Johnson & Johnson 3,078,261
42,200 Merck & Co., Inc. 2,028,976
48,900 Novartis AG - ADR 2,158,935
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18,687,361
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RETAIL: 4.9%
126,900 Albertson's, Inc. 3,139,506
94,600 Costco Wholesale Corp.* 3,682,778
175,000 Gap, Inc. 3,640,000
81,200 Lowe's Companies, Inc. 4,547,200
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15,009,484
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SEMICONDUCTORS: 4.5%
177,500 Intel Corp. 5,188,325
111,200 KLA-Tencor Corp.* 5,871,360
179,500 Micron Technology, Inc.* 2,699,680
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13,759,365
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SHARES VALUE
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SOFTWARE: 5.0%
108,400 First Data Corp. $ 4,442,232
104,200 Microsoft Corp. 2,761,300
365,800 Oracle Corp.* 4,711,504
263,000 Siebel Systems, Inc.* 3,434,780
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15,349,816
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TELECOMMUNICATIONS: 4.7%
59,700 Alltel Corp. $ 3,092,460
155,350 Bellsouth Corp. 4,281,446
103,600 BT Group Plc - ADR 3,487,176
73,561 Telefonica S.A. - ADR 3,619,937
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14,481,019
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TELECOMMUNICATIONS EQUIPMENT: 1.0%
147,100 Nokia Corp. - ADR 3,202,367
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TRANSPORTATION: 1.2%
53,900 Fedex Corp. 3,701,852
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UTILITIES: 2.8%
93,400 Duke Energy Corp. 2,051,064
47,500 E. ON AG - ADR 3,234,750
85,700 Enel SpA - ADR 3,329,445
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8,615,259
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TOTAL COMMON STOCKS
(cost $264,345,522) 303,693,081
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SHORT-TERM INVESTMENT: 0.9%
2,732,768 SEI Daily Income Trust Government Class B 2,732,768
(cost $2,732,768) ------------
TOTAL INVESTMENTS IN SECURITIES
(cost $267,078,290): 100.0% 306,425,849
Other Assets less Liabilities: 0.0% 126,444
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NET ASSETS: 100.0% $306,552,293
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ADR - American depositary receipt.
* Non-income producing security.
See accompanying Notes to Financial Statements.
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SCHEDULE OF INVESTMENTS
PURISIMA PURE AMERICAN FUND
FEBRUARY 29, 2004 (UNAUDITED)
SHARES VALUE
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COMMON STOCKS: 98.7%
AEROSPACE/DEFENSE EQUIPMENT: 2.8%
450 Lockheed Martin Corp. $ 20,826
650 Northrop Grumman Corp. 65,721
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86,547
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BANKING: 8.3%
800 Bank of America Corp. 65,536
900 Banknorth Group, Inc. 29,997
900 Comerica, Inc. 51,786
2,250 National City Corp. 80,325
500 UnionBanCal Corp. 26,955
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254,599
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CONSUMER PRODUCTS: 4.3%
1,000 Clorox Co. (The) 49,060
775 Coca Cola Co. (The) 38,719
625 Nike, Inc. - Class B 45,781
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133,560
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CHEMICALS: 2.2%
1,700 Rohm & Haas Co. 67,575
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COMPUTER COMPONENTS & SOFTWARE: 7.3%
2,300 BMC Software, Inc.* 45,080
3,175 Cisco Systems, Inc.* 73,342
1,200 Microsoft Corp. 31,800
3,400 Siebel Systems, Inc.* 44,404
1,000 Veritas Software Corp.* 30,420
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225,046
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COMPUTERS: 7.1%
1,100 Dell Computer Corp.* 35,915
1,650 Electronic Data Systems Corp. 31,598
3,600 EMC Corp.* 51,552
600 IBM Corp. 57,900
7,500 Sun Microsystems, Inc.* 40,050
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217,015
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SHARES VALUE
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DIVERSIFIED COMMERCIAL SERVICES: 1.0%
700 Cintas Corp. $ 29,897
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ELECTRICAL EQUIPMENT: 4.2%
1,400 General Electric Co. 45,528
1,450 Johnson Controls, Inc. 84,564
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130,092
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ELECTRONICS: 1.3%
6,300 Solectron Corp.* 40,257
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FINANCIAL SERVICES: 7.5%
1,166 Citigroup, Inc. 58,603
425 Lehman Brothers Holdings, Inc. 36,852
900 Merrill Lynch & Co., Inc. 55,089
1,500 T. Rowe Price Group, Inc. 78,885
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229,429
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FOODS: 1.8%
2,500 Sara Lee Corp. 54,550
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HEALTH CARE EQUIPMENT: 1.7%
1,150 Medtronic, Inc. 53,935
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HOUSEHOLD PRODUCTS: 1.6%
475 Procter & Gamble Co. 48,692
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INSURANCE: 4.3%
487 American International Group 36,038
19 Berkshire Hathaway, Inc. - Class B* 59,527
800 Safeco Corp. 36,000
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131,565
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MACHINERY: 2.4%
975 Caterpillar, Inc. 73,856
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MEDIA: 1.8%
2,100 Walt Disney Co. 55,713
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MISCELLANEOUS MANUFACTURER: 3.0%
1,200 3M Co. 93,624
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OFFICE SUPPLIES: 1.2%
1,400 Staples, Inc.* 36,708
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SHARES VALUE
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OIL & GAS: 6.9%
575 ChevronTexaco Corp. $ 50,801
925 ConocoPhillips 63,705
1,400 Ensco International, Inc. 41,118
1,350 Exxon Mobil Corp. 56,930
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212,554
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PAPER & FOREST PRODUCTS: 2.1%
1,450 International Paper Co. 64,177
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PHARMACEUTICALS: 5.5%
750 Johnson & Johnson 40,433
700 Lilly (Eli) & Co. 51,758
950 Merck & Co., Inc. 45,676
800 Wyeth 31,600
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169,467
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RESTAURANTS: 1.9%
2,100 McDonald's Corp. 59,430
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RETAIL: 4.3%
925 Costco Wholesale Corp.* 36,010
800 Federated Department Stores 41,896
2,700 Limited Brands 53,325
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131,231
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SEMI-CONDUCTORS: 5.3%
2,500 Intel Corp. 73,075
625 KLA-Tencor Corp.* 33,000
3,800 Micron Technology, Inc.* 57,152
------------
163,227
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TELECOMMUNICATIONS: 2.7%
1,400 BellSouth Corp. 38,584
1,300 Scientific-Atlanta, Inc. 43,030
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81,614
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TRANSPORTATION: 4.4%
2,200 Burlington Northern Santa Fe Corp. 70,796
950 Fedex Corp. 65,246
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136,042
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UTILITIES: 1.8%
1,800 Southern Co. 54,576
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SHARES VALUE
================================================================================
TOTAL COMMON STOCKS
(cost $2,741,042) 3,034,978
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SHORT-TERM INVESTMENT: 1.2%
38,146 SEI Daily Income Trust Government Class B
(cost $38,146) 38,146
------------
TOTAL INVESTMENTS IN SECURITIES
(cost $2,779,188): 99.9% 3,073,124
Other Assets less Liabilities: 0.1% 1,730
------------
NET ASSETS: 100.0% $ 3,074,854
============
* Non-income producing security.
See accompanying Notes to Financial Statements.
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SCHEDULE OF INVESTMENTS
PURISIMA PURE FOREIGN FUND
FEBRUARY 29, 2004 (UNAUDITED)
SHARES VALUE
================================================================================
COMMON STOCKS: 98.4%
AUSTRALIA: 5.7%
5,100 BHP Billiton Ltd. - ADR $ 97,461
350 National Australia Bank Ltd. - ADR 41,930
1,300 News Corp. Ltd. - ADR 48,685
------------
188,076
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FINLAND: 1.1%
1,700 Nokia Corp. - ADR 37,009
------------
FRANCE: 12.2%
600 Aventis S.A. - ADR 46,350
3,650 Axa S.A. - ADR 84,315
1,000 Dassault Systemes S.A. - ADR 44,140
1,850 Groupe Danone - ADR 64,972
1,100 Publicis Groupe - ADR* 38,313
1,347 Total Fina S.A. - ADR 123,911
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402,001
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GERMANY: 10.3%
850 BASF AG - ADR 45,441
2,050 DaimlerChrysler AG 92,106
3,100 Infineon Technologies AG 43,710
1,500 SAP AG - ADR 59,400
1,250 Siemens AG - ADR 97,250
------------
337,907
------------
ITALY: 4.4%
1,850 Enel SpA - ADR 71,872
690 Telecom Italia SpA - ADR* 21,838
2,006 San Paolo - IMI SpA - ADR 52,096
------------
145,806
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JAPAN: 17.8%
1,200 Canon, Inc. - ADR 58,980
1,475 Hitachi Ltd. - ADR 96,612
600 Kyocera Corp. - ADR 44,160
5,900 Matsushita Electric Industrial Co., Ltd. - ADR 85,550
1,050 Millea Holdings, Inc. - ADR 67,683
3,600 Komatsu Ltd. - ADR 87,512
2,900 Nissan Motor Co. Ltd. - ADR 64,235
1,975 Sony Corp. - ADR 80,856
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585,588
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SHARES VALUE
================================================================================
NETHERLANDS: 9.6%
3,370 ABN Amro Holding N.V. - ADR $ 78,353
1,350 Akzo Nobel N.V. - ADR 52,448
2,206 ING Groep N.V. - ADR 54,246
1,525 Royal Dutch Petroleum Co. - ADR 75,625
2,500 TPG N.V. - ADR 55,075
------------
315,747
------------
NORWAY: 2.6%
1,200 Norsk Hydro A/S - ADR 86,832
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PORTUGAL: 1.6%
4,532 Portugal Telecom S.A. - ADR 51,257
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SPAIN: 6.9%
3,900 Banco Bilbao Vizcaya Argentaria S.A. - ADR 53,859
6,375 Banco Santander Central Hispano S.A. - ADR 74,141
2,100 Repsol S.A. - ADR 43,239
1,101 Telefonica S.A. - ADR 54,180
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225,419
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SWEDEN: 3.4%
3,550 Volvo AB - ADR 112,677
------------
SWITZERLAND: 5.2%
1,000 Novartis AG - ADR 44,150
1,700 UBS AG - ADR 125,817
------------
169,967
------------
UNITED KINGDOM: 17.6%
1,800 Abbey National Plc - ADR 32,850
500 AstraZeneca Plc - ADR 24,310
1,900 Barclays Plc - ADR 70,015
500 BP Plc - ADR 24,600
1,300 BT Group Plc - ADR 43,758
3,050 Cadbury Schweppes Plc - ADR 103,304
550 GlaxoSmithKline Plc - ADR 23,441
1,000 HSBC Holdings Plc - ADR 81,750
700 National Grid Group - ADR 28,420
1,025 Rio Tinto Plc - ADR 112,648
600 Signet Group Plc - ADR 33,727
------------
578,823
------------
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SHARES VALUE
================================================================================
TOTAL COMMON STOCKS
(cost $2,712,762) $ 3,237,109
------------
SHORT TERM INVESTMENT: 1.6%
51,531 SEI Daily Income Trust Government Class B 51,531
(cost $51,531) ------------
TOTAL INVESTMENTS IN SECURITIES
(cost $2,764,293): 100.0% 3,288,640
Other Assets less Liabilities: 0.0% 797
------------
NET ASSETS: 100.0% $ 3,289,437
============
ADR - American depositary receipt.
* Non-income producing security.
See accompanying Notes to Financial Statements.
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SCHEDULE OF INVESTMENTS BY INDUSTRY
PURISIMA PURE FOREIGN FUND
FEBRUARY 29, 2004 (UNAUDITED)
% OF
INDUSTRY NET ASSETS
================================================================================
Advertising 1.1%
Automobile Manufacturers 8.2%
Banking 18.6%
Chemicals 3.0%
Electric 6.0%
Electronics 2.7%
Foods 5.1%
Home Furnishings 5.0%
Insurance 6.3%
Machinery 2.6%
Media 1.5%
Mining 6.4%
Miscellaneous Manufacturing 3.0%
Office/Business Equipment 1.8%
Oil & Gas 10.8%
Pharmaceuticals 4.2%
Retail 1.0%
Software 3.1%
Telecommunications 6.3%
Transportation 1.7%
-------------
TOTAL COMMON STOCKS 98.4%
SHORT-TERM INVESTMENTS 1.6%
-------------
TOTAL INVESTMENTS IN SECURITIES 100.0%
Other Assets less Liabilities 0.0%
-------------
NET ASSETS 100.0%
=============
See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2004 (UNAUDITED)
TOTAL RETURN PURE AMERICAN PURE FOREIGN
FUND FUND FUND
------------- ------------- -------------
ASSETS
Investments in securities, at cost $ 267,078,290 $ 2,779,188 $ 2,764,293
============= ============= =============
Investments in securities, at value $ 306,425,849 $ 3,073,124 $ 3,288,640
Receivables:
Dividends and interest 491,454 5,375 3,767
Fund shares sold 142,457 -- --
Other assets 38,848 -- 935
------------- ------------- -------------
Total Assets 307,098,608 3,078,499 3,293,342
------------- ------------- -------------
LIABILITIES
Accrued advisory fees (Note 3) 246,637 3,645 3,905
Accrued distribution fees (Note 4) 182,669 -- --
Accrued administration fees (Note 3) 20,194 -- --
Accrued transfer agent fees 38,472 -- --
Other accrued expenses 58,343 -- --
------------- ------------- -------------
Total Liabilities 546,315 3,645 3,905
------------- ------------- -------------
NET ASSETS $ 306,552,293 $ 3,074,854 $ 3,289,437
============= ============= =============
Number of shares issued and outstanding
(unlimited shares authorized, $0.01 par value) 17,418,644 251,302 196,484
============= ============= =============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $ 17.60 $ 12.24 $ 16.74
============= ============= =============
COMPONENTS OF NET ASSETS
Paid-in capital $ 282,627,001 $ 3,039,090 $ 3,127,857
Accumulated net investment income (loss) (48,748) 3,809 (28,093)
Accumulated net realized loss on investments (15,373,519) (261,981) (334,674)
Net unrealized appreciation on investments 39,347,559 293,936 524,347
------------- ------------- -------------
Net assets $ 306,552,293 $ 3,074,854 $ 3,289,437
============= ============= =============
See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004 (UNAUDITED)
TOTAL RETURN PURE AMERICAN PURE FOREIGN
FUND FUND FUND
------------ ------------ ------------
INVESTMENT INCOME
Income
Dividends (net of foreign taxes witheld
of $38,531, $0, and $254, respectively) $ 2,002,345 $ 26,430 $ 18,831
Interest 4,996 35 55
------------ ------------ ------------
Total income 2,007,341 26,465 18,886
------------ ------------ ------------
Expenses
Advisory fees 1,370,889 22,657 22,314
Distribution fees 342,722 -- --
Administration fees 116,932 -- --
Transfer agent fees 69,808 -- --
Fund accounting fees 37,148 -- --
Insurance expense 29,217 -- --
Custody fees 24,632 -- --
Registration fees 23,935 -- --
Reports to shareholders 17,452 -- --
Legal fees 9,972 -- --
Audit fees 9,473 -- --
Trustee fees 1,662 -- --
Miscellaneous 4,726 -- --
------------ ------------ ------------
Total expenses 2,058,568 22,657 22,314
Less: fees waived (Note 3) (2,509) -- --
------------ ------------ ------------
Net expenses 2,056,059 22,657 22,314
------------ ------------ ------------
Net investment income (loss) (48,718) 3,808 (3,428)
------------ ------------ ------------
CHANGE IN REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments:
Securities (1,793,106) (27,093) 31,001
Options 224 -- --
Net unrealized appreciation on investments 40,613,025 376,360 552,836
------------ ------------ ------------
Net realized and unrealized gain on investments 38,820,143 349,267 583,837
------------ ------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 38,771,425 $ 353,075 $ 580,409
============ ============ ============
See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
STATEMENT OF CHANGES IN NET ASSETS
TOTAL RETURN FUND
SIX MONTHS ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS FROM: FEBRUARY 29, 2004* AUGUST 31, 2003
------------------ ---------------
OPERATIONS
Net investment income (loss) $ (48,718) $ 1,076,737
Net realized gain (loss) on investments
Securities (1,793,106) (4,677,248)
Options 224 4,958
Net unrealized appreciation on investments 40,613,025 27,195,122
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 38,771,425 23,599,569
------------- -------------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (1,073,580) (649,922)
From net realized gain -- (1,595,178)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,073,580) (2,245,100)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a) 24,718,207 41,210,454
------------- -------------
TOTAL INCREASE IN NET ASSETS 62,416,052 62,564,923
NET ASSETS
Beginning of period 244,136,241 181,571,318
------------- -------------
END OF PERIOD $ 306,552,293 $ 244,136,241
============= =============
Accumulated net investment income (loss) $ (48,748) $ 1,073,550
============= =============
(a) A summary of capital share transactions is as follows:
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004* AUGUST 31, 2003
---------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Shares sold 2,705,891 $ 45,254,270 5,057,337 $ 68,171,437
Shares issued on reinvestment of distributions 62,124 1,035,611 167,234 2,202,476
Shares redeemed (1,295,264) (21,571,674) (2,195,711) (29,163,459)
------------ ------------ ------------ ------------
Net increase 1,472,751 $ 24,718,207 3,028,860 $ 41,210,454
============ ============ ============ ============
* Unaudited.
See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
STATEMENT OF CHANGES IN NET ASSETS
PURE AMERICAN FUND
SIX MONTHS ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS FROM: FEBRUARY 29, 2004* AUGUST 31, 2003
------------------ ---------------
OPERATIONS
Net investment income $ 3,808 $ 12,758
Net realized loss on investments :
Securities (27,093) (209,661)
Net unrealized appreciation on investments 376,360 386,082
----------- -----------
Net increase in net assets resulting from operations 353,075 189,179
----------- -----------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (12,757) (41,305)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from net
change in outstanding shares (a) (84,143) 53,362
----------- -----------
Total increase in net assets 256,175 201,236
NET ASSETS
Beginning of period 2,818,679 2,617,443
----------- -----------
End of period $ 3,074,854 $ 2,818,679
=========== ===========
Accumulated net investment income $ 3,809 $ 12,758
=========== ===========
(a) A summary of capital share transactions is as follows:
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004* AUGUST 31, 2003
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
Shares sold 15,226 $ 172,486 67,395 $ 667,749
Shares issued on reinvestment of distributions 1,094 12,756 4,325 41,305
Shares redeemed (22,553) (269,385) (70,463) (655,692)
--------- --------- --------- ---------
Net increase (decrease) (6,233) $ (84,143) 1,257 $ 53,362
========= ========= ========= =========
* Unaudited.
See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
STATEMENT OF CHANGES IN NET ASSETS
PURE FOREIGN FUND
SIX MONTHS ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS FROM: FEBRUARY 29, 2004* AUGUST 31, 2003
------------------ ---------------
OPERATIONS
Net investment income (loss) $ (3,428) $ 58,412
Net realized gain (loss) on investments:
Securities 31,001 (348,963)
Net unrealized appreciation on investments 552,836 488,304
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 580,409 197,753
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (79,025) (122,709)
From net realized gain -- --
----------- -----------
Total distributions to shareholders (79,025) (122,709)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from net
change in outstanding shares (a) 62,527 (743,643)
----------- -----------
Total increase (decrease) in net assets 563,911 (668,599)
NET ASSETS
Beginning of period 2,725,526 3,394,125
----------- -----------
End of period $ 3,289,437 $ 2,725,526
=========== ===========
Accumulated net investment income (loss) $ (28,093) $ 54,360
=========== ===========
(a) A summary of capital share transactions is as follows:
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004* AUGUST 31, 2003
-------------------------------- --------------------------------
SHARES VALUE SHARES VALUE
----------- ----------- ----------- -----------
Shares sold 16,406 $ 261,909 32,333 $ 395,974
Shares issued on reinvestment of distributions 5,041 78,733 10,175 122,709
Shares redeemed (18,240) (278,115) (108,954) (1,262,326)
----------- ----------- ----------- -----------
Net decrease 3,207 $ 62,527 (66,446) $ (743,643)
=========== =========== =========== ===========
* Unaudited.
See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Semi-Annual Report.
TOTAL RETURN FUND
------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
Feb. 29, ------------------------------------------------------
2004++ 2003 2002 2001 2000 1999
------- ------- ------- ------- ------- -------
Net asset value, beginning of period $ 15.31 $ 14.06 $ 18.73 $ 19.65 $ 17.46 $ 12.47
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.00++ 0.07 0.09 0.31 ^ (0.01) (0.01)
Net realized and unrealized gain (loss)
on investments 2.36 1.34 (2.91) (0.61)^ 2.22 5.00
------- ------- ------- ------- ------- -------
Total from investment operations 2.36 1.41 (2.82) (0.30)^ 2.21 4.99
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income (0.07) (0.05) (0.19) -- (0.02) --
From net realized gain -- (0.11) (1.66) (0.62) -- --
------- ------- ------- ------- ------- -------
Total distributions (0.07) (0.16) (1.85) (0.62) (0.02) --
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 17.60 $ 15.31 $ 14.06 $ 18.73 $ 19.65 $ 17.46
======= ======= ======= ======= ======= =======
Total return 15.41%** 10.22% (16.72%) (1.33%) 12.64% 40.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 306.6 $ 244.1 $ 181.6 $ 122.4 $ 89.8 $ 53.2
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived and expenses absorbed or recouped 1.50%* 1.56% 1.61%+ 1.66%+ 1.62% 1.82%
After fees waived and expenses absorbed or recouped 1.50%* 1.50% 1.60%+ 1.55%+ 1.50% 1.50%
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS # (0.04%)* 0.55% 1.03% 1.68% (0.04%) 0.00%
Portfolio turnover rate 5.74%** 12.57% 60.76% 105.90% 38.42% 12.72%
* Annualized.
** Not annualized.
++ Amount represents less than $0.01 per share.
++ Unaudited.
# Net of fees waived.
^ Calculations are based on average shares outstanding for the period.
+ With dividend expense on securities sold short, which was 0.10% for 2002
and 0.05% for 2001. Otherwise, ratio of net expenses to average net assets
would be 1.50% for 2002 and 2001.
See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Semi-Annual Report.
PURE AMERICAN FUND
------------------------------------------------------------------------------------------
SEPTEMBER 29,
SIX MONTHS ENDED YEAR ENDED AUGUST 31, 1998+ THROUGH
FEB. 29, ---------------------------------------------------- AUGUST 31,
2004++ 2003 2002 2001 2000 1999
------- ------- ------- ------- ------- -------
Net asset value, beginning of period $ 10.94 $ 10.21 $ 12.45 $ 13.49 $ 13.00 $ 10.00
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02 0.05 0.43 0.28 ^ (0.03) (0.02)
Net realized and unrealized gain
(loss) on investments 1.33 0.84 (2.07) (0.02)^ 0.52 3.02
------- ------- ------- ------- ------- -------
Total from investment operations 1.35 0.89 (1.64) 0.26 ^ 0.49 3.00
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income (0.05) (0.16) (0.58) (0.28) -- --
From net realized gain -- -- (0.02) (1.02) (0.00)++ --
------- ------- ------- ------- ------- -------
Total distributions (0.05) (0.16) (0.60) (1.30) (0.00)++ --
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 12.24 $ 10.94 $ 10.21 $ 12.45 $ 13.49 $ 13.00
======= ======= ======= ======= ======= =======
Total return 12.35%** 8.91% (13.90%)/1/ 1.96%/1/ 3.79% 30.00% **
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 3.1 $ 2.8 $ 2.6 $ 4.5 $ 1.1 $ 1.5
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 1.50%* 1.50% 1.56%+ 1.58%+ 1.50% 1.50% *
After fees waived n/a n/a 1.19%+/1/ 0.08%+/1/ n/a n/a
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS 0.25%* 0.52% 1.35% 4.09% (0.13%) (0.34%)*
Portfolio turnover rate 20.72%** 31.47% 75.54% 265.29% 45.48% 29.73%**
* Annualized.
** Not Annualized.
+ Commencement of operations. ++ Amount represents less than $0.01 per
share.
++ Unaudited.
^ Calculations are based on average shares outstanding for the period.
/1/ The Adviser voluntarily waived all of its management fees for the period
December 21, 2000 to December 1, 2001.
+ With dividend expense on securities sold short, which was 0.06% for 2002 and
0.08% for 2001.
Otherwise, ratio of expenses (before fees waived) to average net assets
would be 1.50% for 2002 and 2001.
See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Semi-Annual Report.
PURE FOREIGN FUND
-------------------------------------------------------------------------------------
SEPTEMBER 29,
SIX MONTHS 1998+
ENDED YEAR ENDED AUGUST 31, THROUGH
FEB. 29, --------------------------------------------------- AUGUST 31,
2004++ 2003 2002 2001 2000 1999
------- ------- ------- ------- ------- -------
Net asset value, beginning of period $ 14.10 $ 13.07 $ 15.37 $ 16.39 $ 13.52 $ 10.00
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.00++ 0.28 0.84 0.33^ 0.01 0.04
Net realized and unrealized gain (loss)
on investments 3.07 1.21 (2.47) (0.45)^ 3.69 3.48
------- ------- ------- ------- ------- -------
Total from investment operations 3.07 1.49 (1.63) (0.12)^ 3.70 3.52
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income (0.43) (0.46) (0.67) (0.35) (0.03) --
From net realized gain -- -- -- (0.55) (0.80) --
------- ------- ------- ------- ------- -------
Total distributions (0.43) (0.46) (0.67) (0.90) (0.83) --
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 16.74 $ 14.10 $ 13.07 $ 15.37 $ 16.39 $ 13.52
======= ======= ======= ======= ======= =======
Total return 21.98%** 10.95% (11.14%)/1/ (0.45%)1 28.04% 35.20%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 3.3 $ 2.7 $ 3.4 $ 8.9 $ 2.8 $ 0.3
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 1.50%* 1.50% 1.55%+ 1.58% + 1.50% 1.50%*
After fees waived n/a n/a 1.12%+ 0.08% + n/a n/a
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS (0.23%)* 2.06% 4.02% 4.21% 0.26% 0.65%*
Portfolio turnover rate 15.54%** 22.02% 69.59% 258.66% 51.60% 7.19%**
* Annualized.
** Not Annualized.
+ Commencement of operations.
++ Unaudited.
++ Amount represents less than $0.01 per share.
^ Calculations are based on average shares outstanding for the period.
/1/ The Adviser voluntarily waived all of its management fees for the period
December 21, 2000 to December 1, 2001.
+ With dividend expense on securities sold short, which was 0.05% for 2002
and 0.08% for 2001.
Otherwise, ratio of expenses (before fees waived) to average net assets
would be 1.50% for 2002 and 2001.
See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FEBRUARY 29, 2004
NOTE 1 - ORGANIZATION
The Purisima Funds (the "Trust") was organized as a Delaware business trust on
June 27, 1996 and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act") as an open-end management investment company issuing
its shares in series. Each series represents a distinct portfolio with its own
investment objectives and policies. The Trust consists of three diversified
series (the "Funds"): Purisima Total Return Fund (the "Total Return Fund"),
representing the initial series of the Trust which commenced operations on
October 28, 1996, and Purisima Pure American Fund (the "Pure American Fund") and
Purisima Pure Foreign Fund (the "Pure Foreign Fund") both of which commenced
operations on September 29, 1998. Fisher Investments, Inc. (the "Adviser")
serves as the investment adviser to the Funds.
The investment objectives of the Funds are as follows:
The Total Return Fund seeks to produce a high level of total return. It invests
primarily in common stocks and other equity-type securities, or securities
acquired primarily to produce income, or a combination of both depending on the
assessment of market conditions.
The Pure American Fund seeks to provide investors with a high level of total
return. The Fund may emphasize investments in common stocks and other
equity-type securities acquired primarily to produce income, or a combination of
both, depending on the assessment of market conditions by the Fund's investment
Adviser. The Fund will concentrate its portfolio holdings to those securities
issued by issuers domiciled in the United States.
The Pure Foreign Fund seeks to provide investors with a high level of total
return. The Fund may emphasize investments in common stocks and other
equity-type securities acquired primarily to produce income, or a combination of
both, depending on the assessment of market conditions by the Fund's investment
Adviser. Under normal market conditions, the Fund will concentrate its portfolio
holdings to those securities issued by issuers domiciled outside of the United
States.
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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with accounting principles generally accepted in the
United States of America.
A. Security Valuation. Investments in securities traded on a national
securities exchange are valued at the last sales price on the business
day as of which such value is being determined. Investments in
securities traded on the Nasdaq Stock Market, Inc. ("Nasdaq") will be
valued at the Nasdaq Official Closing Price, which may not necessarily
represent the last sale price.
Securities traded on an exchange or Nasdaq for which there have been
no sales and other over-the-counter securities are valued at the
closing bid. Securities for which quotations are not readily available
are valued at their respective fair values as determined in good faith
by the Board of Trustees or their designee. Debt securities with
remaining maturities of 60 days or less are valued at cost which, when
combined with accrued interest, approximates market value. Discounts
and Premiums on securities purchased are amortized over the lives of
the respective securities using the straight-line method.
B. Federal Income and Excise Taxes. The Funds intend to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of their
income to its shareholders. Therefore, no federal income or excise tax
provision is required.
The Funds may be subject to foreign taxes on income, gains on
investments or currency repatriation, a portion of which may be
recoverable. The Funds will accrue such taxes and recoveries as
applicable based upon their current interpretations of the tax rules
and regulation that exist in the markets in which they invest.
As of August 31, 2003, the Total Return Fund has a capital loss
carryforward available to offset future capital gains, if any, of
$11,619,847, all of which expires in 2011. The Pure American Fund has
a capital loss carryforward available to offset future capital gains,
if any, of $31,418, of which $19,013 expires in 2011 and $12,405
expires in 2010, and the Pure Foreign Fund has a capital loss
carryforward available to offset future capital gains, if any, of
$144,958, of which $770 expires in 2010 and $144,188 expires in 2011.
In addition, the Total Return Fund, Pure American Fund and Pure
Foreign Fund had net realized capital losses of $1,782,053, $184,040
and $218,152, respectively, during the period November 1, 2002 through
August 31, 2003,
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which are treated for federal income tax purposes as arising during
the Funds' tax year ending August 31, 2004. These "post-October"
losses may be utilized in future years to offset net realized capital
gains prior to distributing such gains to shareholders.
C. Security Transactions, Investment Income and Distributions. Security
transactions are accounted for on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend date and
interest income is recognized on the accrual basis. Realized gains and
losses are evaluated on the bases of identified costs.
D. Use of Estimates. The presentation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates and assumptions.
E. Concentration of Risk. Investments in securities of non-U.S. issues in
certain countries involve special investment risks. These risks may
include but are not limited to, investment restrictions, adverse
political, social and economic developments, government involvement in
the private sector, limited and less reliable investor information,
lack of liquidity, certain local tax law considerations, and limited
regulation of the securities markets.
F. Options. Options purchased are recorded as investments; options
written (sold) are accounted for as liabilities. When an option
expires, the premium (original option value) is realized as a gain if
the option was written or as a loss if the option was purchased. When
the exercise of an option result in a cash settlement, the difference
between the premium and the settlement proceeds is realized as a gain
or loss. When securities are acquired or delivered upon exercise of an
option, the acquisition cost or sale proceeds are adjusted by the
amount of the premium. When an option is closed, the difference
between the premium and the cost to close the position is realized as
a gain or loss. The Trust may purchase options which are included in
the Trust's Schedules of Investments and subsequently marked to market
to reflect the current value of the option. At August 31, 2003, the
Trust had no options outstanding.
G. Securities Sold Short. To the extent the Funds engage in selling
securities short, they are obligated to replace a security borrowed by
purchasing the same security at the current market value. The Funds
would incur a loss if the price of the security increases between the
date of the short sale and the date on which the Funds replace the
borrowed security. The Funds would realize a gain if the price of the
security declines between those dates.
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The Funds are required to establish a margin account with the broker
lending the security sold short. While the short sale is outstanding,
the broker retains the proceeds of the short sale and the Funds must
also maintain a deposit with the broker consisting of cash having a
value equal to a specified percentage of the value of the securities
sold short.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
The Total Return Fund (the "Fund") has an Investment Management Agreement with
the Adviser to provide investment advisory services to the Fund. The Adviser
furnishes all investment advice, office space, facilities, and most of the
personnel needed by the Funds. As compensation for its services, the Adviser is
entitled to a monthly fee at the annual rate of 1.00% of the Fund's average
daily net assets.
The Fund is responsible for its own operating expenses. The Adviser has agreed
to limit the Fund's total expenses (exclusive of brokerage, interest, taxes,
dividends on securities sold short and extraordinary expenses) to not more than
1.50% of the average daily net assets.
Any fee withheld or voluntarily reduced and/or any Fund expense absorbed by the
Adviser pursuant to an agreed upon expense cap shall be reimbursed by the Fund
to the Adviser, if so requested by the Adviser, anytime before the end of the
third fiscal year following the year to which the fee reduction, waiver, or
expense absorption relates, provided the aggregate amount of the Fund's current
operating expenses for such fiscal year does not exceed the applicable
limitation on Fund expenses. Any such reimbursement is also contingent upon
Board of Trustees review and approval prior to the time the reimbursement is
also initiated. The Fund must pay its current ordinary operating expenses before
the Adviser is entitled to any reimbursement of fees and/or expenses. For the
six months ended February 29, 2004, the Adviser waived fees of $2,509.
At February 29, 2004, the cumulative unreimbursed amount paid and/or waived by
the Adviser on behalf of the Fund is $246,209. The Adviser may recapture
$102,939 no later than August 31, 2004, $11,042 no later than August 31, 2005,
$129,719 no later than August 31, 2006 and $2,509 no later than August 31, 2007.
The Pure American and Pure Foreign Funds have a Comprehensive Management
Agreement with the Adviser to provide advisory and other ordinary services,
including administration, transfer agency, custody and auditing services. For
providing these services, the Pure American and Pure Foreign Funds each pay the
Adviser a monthly fee at the annual rate of 1.50% of the respective Funds'
average daily net assets. This comprehensive fee arrangement requires the
Adviser to absorb and pay out of its own
29
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resources all operating expenses of the Pure American and Pure Foreign Funds.
U.S. Bancorp Fund Services, LLC (the "Administrator") acts as the Trust's
Administrator under an Administration Agreement. The Administrator prepares
various federal and state regulatory filings, reports and returns for the Funds;
prepares reports and materials to be supplied to the trustees; monitors the
activities of the Funds' custodian, transfer agent and accountants; coordinates
the preparation and payment of Fund expenses and reviews the Funds' expense
accruals.
For its services, the Administrator receives a monthly fee based on the value of
the total average net assets of the Trust at an annual rate of 0.10% of the
first $200 million of such net assets, 0.05% of the next $300 million, and 0.03%
thereafter, subject to a minimum fee of $40,000 per Fund.
NOTE 4 - SERVICE AND DISTRIBUTION PLAN
The Trust has adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan, the Total Return Fund is
authorized to pay expenses incurred for the purpose of financing activities,
including the employment of other dealers, intended to result in the sale of
shares of the Fund. The fee accrues at an annual rate not to exceed 0.25% of the
Fund's average daily net assets. For the six months ended February 29, 2004, the
Fund incurred $342,722 in distribution fees. Purisima Securities LLC ("Purisima
Securities"), an affiliate of the Adviser, serves as distributor of the Funds
pursuant to a Distribution Agreement with the Trust.
NOTE 5 - INVESTMENT TRANSACTIONS
The cost of purchases and the proceeds from sales of securities, excluding U.S.
Government securities and short-term investments, for the six months ended
February 29, 2004, were as follows:
Fund Purchases Sales
---- --------- -----
Total Return Fund $38,043,946 $15,548,794
Pure American Fund 615,501 725,948
Pure Foreign Fund 454,965 485,155
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At February 29, 2004, the basis of investments for federal income tax purposes
was as follows:
Total Return Pure American Pure Foreign
-------------------------------------------------------------------
Cost of investments for tax purposes $267,246,631 $2,789,741 $2,766,859
-------------------------------------------------------------------
Gross tax unrealized appreciation $47,531,158 $371,867 $574,791
Gross tax unrealized depreciation ($8,351,940) ($88,484) ($53,010)
-------------------------------------------------------------------
Net tax unrealized appreciation $39,179,218 $283,383 $521,781
===================================================================
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OTHER INFORMATION - TRUSTEES AND OFFICER INFORMATION
(Unaudited)
Position(s)
Held Year
Name, Address, Age with Trust Elected/1/
==========================================================
Kenneth L. Fisher* (54) President 1996
Fisher Investments, Inc. and Trustee
13100 Skyline Blvd.
Woodside, CA 94062
- ----------------------------------------------------------
Sherrilyn A. Fisher* (55) Secretary 1996
Fisher Investments, Inc.
13100 Skyline Blvd.
Woodside, CA 94062
- ----------------------------------------------------------
David Ruiz, CPA* (39) Treasurer 2003
Fisher Investments, Inc.
13100 Skyline Blvd.
Woodside, CA 94062
- ----------------------------------------------------------
Pierson E. Clair III (56) Trustee 1996
Fisher Investments, Inc.
13100 Skyline Blvd.
Woodside, CA 94062
- ----------------------------------------------------------
Bryan F. Morse (52) Trustee 1996
Fisher Investments, Inc.
13100 Skyline Blvd.
Woodside, CA 94062
- ----------------------------------------------------------
Grover T. Wickersham (55) Trustee 1996
Fisher Investments, Inc.
13100 Skyline Blvd.
Woodside, CA 94062
- ----------------------------------------------------------
Scott LeFevre (47) Trustee 2001
Fisher Investments, Inc.
13100 Skyline Blvd.
Woodside, CA 94062
- ----------------------------------------------------------
Alfred D. McKelvy, Jr. (55) Trustee 2003
Fisher Investments, Inc.
13100 Skyline Blvd.
Woodside, CA 94062:
- ----------------------------------------------------------
- --------
/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.
32
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Number of
Portfolios
in Fund Other
Complex Director-
Principal Overseen by ships
Occupation(s) During Past Five Years Director Held
==========================================================================
Chief Executive Officer and majority 3 None
shareholder of the Adviser, and has served
in such capacities since the incorporation
of the Adviser in 1986. Prior thereto, he
was the founder of Fisher Investments, a
sole proprietorship which commenced
operations in 1978.
- --------------------------------------------------------------------------
Senior Vice President and Corporate N/A None
Secretary of the Adviser. Ms. Fisher has
been employed by the Adviser since 1986.
- --------------------------------------------------------------------------
Controller of the Advisor since July of N/A None
2001. Prior thereto, Consultant for Agilent
Technologies in the first half of 2001,
Controller for Secure.com (internet related
products) in 2000 and Chief Financial
Officer of Nomura Asset Capital Services
in 1998 and 1999.
- --------------------------------------------------------------------------
President and Chief Executive Officer of 3 Signature
Brown & Haley since 1998 (fine Foods, Inc.
confectioners); Vice President of Blummer
Chocolate Company from 1980 to 1997, where
he had been employed since 1970.
- --------------------------------------------------------------------------
Sole proprietor of Bryan F. Morse, RIA, a 3 None
registered investment adviser since 1990.
- --------------------------------------------------------------------------
Attorney in private practice in Palo Alto, 3 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.
- --------------------------------------------------------------------------
Sole proprietor of LeFevre Capital 3 None
Management.
- --------------------------------------------------------------------------
Executive Director of the law firm of 3 Diablo
Berding & Weil, LLP since 1990. Valley
Bank; East
Bay BOMA.
- --------------------------------------------------------------------------
33
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PRIVACY NOTICE
Fisher Investments, Inc. and The Purisima Funds collect nonpublic information
about you from the following sources:
o Information we receive about you on applications or other forms;
o Information you give us orally; and
o Information about your transactions with us or others.
We do not disclose any nonpublic personal information about our customers or
former customers without the customer's authorization, except as required by law
or in response to inquires from governmental authorities. We restrict access to
your personal and account information to those employees who need to know that
information to provide products and services to you. We also may disclose that
information to unaffiliated third parties (such as to brokers or custodians)
only as permitted by law and only as needed for us to provide agreed services to
you. We maintain physical, electronic and procedural safeguards to guard your
nonpublic personal information.
ITEM 2. CODE OF ETHICS.
- -----------------------
Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- -----------------------------------------
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- -----------------------------------------------
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ----------------------------------------------
Not applicable to open-end investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS.
- --------------------------------
Not applicable for periods ending before July 9, 2004.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
- -------------------------------------------------------------------------
MANAGEMENT INVESTMENT COMPANIES.
- --------------------------------
Not applicable to open-end investment companies.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
- --------------------------------------------------------------------------
COMPANY AND AFFILIATED PURCHASES.
- ---------------------------------
Not applicable to open-end investment companies.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
The registrant's independent trustees serve as its nominating committee, however
they do not make use of a nominating committee charter.
ITEM 10. CONTROLS AND PROCEDURES.
- ---------------------------------
(a) The Registrant's President and Treasurer have concluded that the
Registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940 (the "1940 Act")) are
effective as of a date within 90 days of the filing date of the report that
includes the disclosure required by this paragraph, based on the evaluation
of these controls and procedures required by Rule 30a-3(b) under the 1940
Act and Rules 15d-15(b) under the Securities Exchange Act of 1934, as
amended.
(b) There were no significant changes in the Registrant's internal controls
over financial reporting that occurred during the Registrant's last fiscal
half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
- ------------------
(a) (1) Code of ethics. Incorporate by reference to previous Form N-CSR filing.
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act sent or given during the period covered by the report by or on
behalf of the registrant to 10 or more persons. Not applicable to open-end
investment companies.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Purisima Funds
-------------------------------------
By (Signature and Title) /s/ KENNETH L. FISHER
-------------------------------
Kenneth L. Fisher, President
Date May 5, 2004
-----------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ KENNETH L. FISHER
-------------------------------
Kenneth L. Fisher, President
Date May 5, 2004
-----------------------------------------------------
By (Signature and Title)* /s/ DAVID RUIZ
-------------------------------
David Ruiz, Treasurer
Date May 5, 2004
-----------------------------------------------------
* Print the name and title of each signing officer under his or her signature.