As filed with the Securities and Exchange Commission on November 9, 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
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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: August 31, 2004
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Item 1. Report to Stockholders.
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Annual report August 31, 2004.
Purisima Funds
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Annual Report
August 31, 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
Performance Summaries
Total Return Fund 6
Pure American Fund 7
Pure Foreign Fund 8
Schedule of Investments
Total Return Fund 12
Pure American Fund 16
Pure Foreign Fund 20
Statements of Assets and Liabilites 24
Statements of Operations 25
Statement of Changes in Net Assets
Total Return Fund 26
Pure American Fund 27
Pure Foreign Fund 28
Financial Highlights
Total Return Fund 29
Pure American Fund 30
Pure Foreign Fund 31
Notes to Financial Statements 32
Other Information 40
Report of Independent Registered Public Accounting Firm 42
Privacy Notice 43
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Investment Objectives
Purisima Total Return Fund
Seeks to provide investors with a high level of total return by
considering both domestic and foreign securities.
Purisima Pure American Fund
Seeks to provide investors with a high level of total return, while
concentrating its holdings in U.S. securities.
Purisima Pure Foreign Fund
Seeks to provide investors with a high level of total return, while
concentrating its holdings in securities outside the U.S.
Each Fund reserves the right to reject any order for the purchase of its shares
or to limit or suspend, without prior notice, the offering of its shares. The
required minimum investments may be waived in the case of certain qualified
retirement plans. The Funds will not accept your account if you are investing
for another person as attorney-in-fact. The Funds also will not accept accounts
with a "Power of Attorney" in the registration section of the Purchase
Application.
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A Letter to Our Shareholders
Welcome to the annual report for the Purisima Funds for the year ended
August 31, 2004. The Funds remained fully invested in equities throughout the
period. Following strong positive returns in the 4th quarter of 2003, global
equities have traded in a tight range during 2004, with indexes remaining mostly
flattish. We remain, however, optimistic about upside in the medium term as the
core drivers underpinning our expectation for meaningful stock appreciation for
the rest of the year are still largely intact.
Market Overview and Outlook:
A robust fourth quarter capped off a terrific year for global stock
markets in 2003. Our forecast called for 2004 to be another good year, above
consensus expectations and above historical averages. Most expected better
returns in the first half of the year, but we continue to believe this year will
again be back-end loaded.
Our 2003 forecast was more accurate than most in our survey from those
available in the standard national business publications we reviewed. Many of
our expectations played out correctly. As we suspected, monetary policy remained
accommodative and interest rates benign and below expectations. The pension plan
crisis did not sink the market, and many funds fully resolved their under-funded
status. Geopolitical concerns and related risk aversion diminished. Stocks
proved not to be dramatically overvalued as evidenced by their impressive rise.
The presidential election cycle delivered another strong third year. The
surprise we expected that did not materialize was the direction of the
regulatory environment, which became even more stringent. Most importantly,
though, our forecast that 2003 would be a very strong year was correct and
owning stocks paid off.
Our views about 2004 have been mostly accurate, but so far market returns
are lagging our expectations. We envisioned and continue to expect a back-end
loaded year, especially as the uncertainty surrounding the US Presidential
election unwinds. As 2004 commenced, interest rates declined modestly in an
environment where virtually everyone expected them to rise. The US dollar also
went against the grain of expectations, gaining ground against the euro and
major currencies overall. Lastly, corporate profits accelerated due to
efficiency gains and improved economic conditions.
Much hullabaloo has been made about oil prices recently. While the focus
in the media is about the high prices of crude and gas, we see a consensus in
the financial community that oil prices will decline. Energy stocks seem to
reflect this expectation. We believe oil prices will remain firmer than most
expect for at least the remainder of the year. Demand will continue to increase,
consistent with our forecast of strong
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economic growth. Because many producers are already pumping at capacity, supply
should be relatively constrained for some time. This should drive the earnings
of energy companies involved in exploration and production and surrounding
activities. However, we don't expect high oil prices to materially inhibit
economic growth and increased corporate profits.
Economic and corporate performance surged forward in the second quarter as
fundamentals continued to improve, yet the investing public generally still
feels bad about future prospects. We interpret this as very bullish. Emotion
will probably swing toward reality rather than reality swinging toward emotion
in the coming months. We therefore still expect a strong period immediately
ahead and remain bullish and fully invested. Our recent portfolio strategy has
been engineered to capitalize on an up-a-lot scenario.
The three funds continued to hold a bias toward stocks that are smaller
than the weighted average market capitalization of their respective benchmarks.
On a sector basis, weights in Energy and Financials were increased. If the
recent surge in US interest rate expectations proves overblown, as we believe,
it will be good for Financials. With short rates staying low, the yield curve is
very steep, also good. A strong market will increase capital markets activity
and investment banking revenue. What makes this all the more compelling is that
Financials are generally trading at low relative valuations. The Funds remain
overweight to Technology, and we maintain the belief that the sector will
outperform in the future as capital spending grows.
To make room for the new purchases, proceeds were generated primarily from
sales within the Materials sector. Materials stocks in general have performed
well during the last 18 months, but usually do best in the beginning phases of
an economic recovery. Some of the value built into Materials stocks presumes
strong growth and continued demand from China. Should the Chinese "miracle" not
play out as strongly as many expect, it will negatively affect Materials.
Furthermore, our measures indicate sentiment for Materials has strengthened
considerably in recent months, indicating much of the outperformance may be in
the past.
To control risk relative to benchmark, all three of the Funds maintain
active counter-strategies in case we are wrong on our core economic and market
assumptions. The Funds hold underweight positions in large cap and
growth-oriented companies as well as positions in more defensive sectors like
Health Care, Consumer Staples, and Utilities.
The Total Return Fund is overweight in US stocks. The relative outlook for
the US economy continues to strengthen in our opinion and corporate earnings are
strengthening beyond consensus expectations. Though torrid US economic
conditions have eased modestly of late, we've also positioned the portfolio to
capture relative
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strength in Continental Europe. To accommodate these views, we've taken a larger
underweight position to the United Kingdom, whose comparatively less
accommodative monetary policy and tighter fiscal policy pose additional risk
going forward. We also eliminated a small weight in Australia.
We switched our Japanese stance from an underweight to an overweight.
Should the economy there continue to gain traction, there is tremendous
potential for gains in Japan's equity markets. We now believe the recent strong
economic reports and GDP data are sustainable as robust growth in a variety of
segments is fueling the recovery. A critical part of this is an end to
deflation, which now appears to be mostly staved off. Some broad measures of
inflation have popped into healthier positive territory. The health of the
country's financial system has also shown signs of improvement. The yield curve
has steepened significantly in recent months. Bank loan activity has increased
and the non-performing loan problems have been dramatically reduced. Because of
poor economic performance in the past, many Japanese companies have delayed
capital expenditures. A new capital spending cycle appears to be underway and
should prove to be substantial following years of stagnation. This will spur
economic activity.
Pure American's long equity positions are focused on US companies.
Likewise, Pure Foreign's are focused on foreign companies only, but otherwise
bear similar regional weightings to the foreign component of the Total Return
Fund described above.
Conclusion
Each of the Funds is poised to participate in future equity gains and we
expect each to outpace respective benchmarks should our forecasts prove correct.
We remain confident with our asset allocation. We see too many positives that
are not widely appreciated for a "Down-a-Lot" scenario to be a likely outcome.
Still, the market has not kept a pace required to vindicate our forecast for the
calendar year 2004.
We would like to have seen better performance in the first part of 2004.
However, we did predict the year would be back-end loaded and still feel there
is a strong likelihood the coming months will be very rewarding for equity
shareholders. We continue to believe many of the current concerns have been
overblown: worries over rising interest rates, inflation and Iraq are less
impactful than most anticipate. Sentiment seems to be focused on the anticipated
slow down in earnings growth in 2005, which indicates to us upside surprise
power if this year's momentum even partially carries into next year. It's too
soon to have a strong opinion about 2005 at this time.
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As always, if we were to see anything ahead largely ignored by others that
indicates a high probability of substantial capital loss, we would take
appropriate defensive action.
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. 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. Fund
holdings and sector allocations are subject to change and are not
recommendations to buy or sell any security. The MSCI World Index is a broad
based unmanaged capitalization-weighted stock index that includes most 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, 08/04 Privacy Notice
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Performance Summaries
for year ended August 31, 2004
Purisima Total Return Fund
Growth of $10,000.
Purisima Total Return Fund cummulative total return versus MSCI Worl Index
$10,000 invested from inception on 10/31/96 to 8/31/04*
[The following was represented as a mountain chart in the printed material.]
Total
Return MSCI World Index
- ----------------------------------------
31-Oct-96 10,000 10,000
30-Nov-96 10,260 10,558
31-Dec-96 10,100 10,387
- ----------------------------------------
31-Jan-97 10,550 10,511
28-Feb-97 10,480 10,629
31-Mar-97 10,250 10,417
30-Apr-97 10,860 10,755
30-May-97 11,520 11,417
30-Jun-97 12,200 11,984
31-Jul-97 12,770 12,534
31-Aug-97 11,870 11,693
30-Sep-97 12,610 12,327
31-Oct-97 11,910 11,676
30-Nov-97 12,150 11,880
31-Dec-97 12,384 12,023
- ----------------------------------------
31-Jan-98 12,755 12,356
28-Feb-98 13,576 13,190
31-Mar-98 14,228 13,745
30-Apr-98 14,709 13,877
31-May-98 14,568 13,701
30-Jun-98 14,929 14,024
31-Jul-98 14,929 13,999
31-Aug-98 12,494 12,130
30-Sep-98 12,845 12,343
31-Oct-98 14,157 13,456
30-Nov-98 15,199 14,254
31-Dec-98 16,035 14,948
- ----------------------------------------
31-Jan-99 16,806 15,274
28-Feb-99 16,305 14,866
31-Mar-99 16,836 15,483
30-Apr-99 17,117 16,091
31-May-99 16,606 15,501
30-Jun-99 17,728 16,222
31-Jul-99 17,388 16,171
31-Aug-99 17,498 16,141
30-Sep-99 17,147 15,982
31-Oct-99 18,350 16,810
30-Nov-99 18,961 17,281
31-Dec-99 19,940 18,677
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31-Jan-00 19,037 17,605
29-Feb-00 19,198 17,651
31-Mar-00 20,321 18,869
30-Apr-00 19,709 18,069
31-May-00 19,398 17,610
30-Jun-00 20,351 18,200
31-Jul-00 19,378 17,685
31-Aug-00 19,709 18,258
30-Sep-00 18,887 17,285
31-Oct-00 18,957 16,993
30-Nov-00 18,235 15,959
31-Dec-00 18,461 16,215
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31-Jan-01 18,295 16,534
28-Feb-01 18,970 15,135
31-Mar-01 19,136 14,130
30-Apr-01 18,700 15,168
31-May-01 18,659 14,955
30-Jun-01 18,482 14,486
31-Jul-01 18,970 14,299
31-Aug-01 19,448 13,611
30-Sep-01 20,071 12,411
31-Oct-01 19,936 12,648
30-Nov-01 19,352 13,394
31-Dec-01 19,214 13,477
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31-Jan-02 19,145 13,067
28-Feb-02 19,594 12,952
31-Mar-02 19,214 13,549
30-Apr-02 19,433 13,064
31-May-02 18,937 13,086
30-Jun-02 17,832 12,291
31-Jul-02 16,323 11,253
31-Aug-02 16,196 11,273
30-Sep-02 14,341 10,031
31-Oct-02 15,136 10,771
30-Nov-02 16,092 11,350
31-Dec-02 14,994 10,799
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31-Jan-03 14,691 10,469
28-Feb-03 14,376 10,286
31-Mar-03 14,341 10,252
30-Apr-03 15,659 11,160
31-May-03 16,638 11,795
30-Jun-03 16,731 11,998
31-Jul-03 17,303 12,241
31-Aug-03 17,851 12,504
30-Sep-03 17,489 12,579
31-Oct-03 18,795 13,324
30-Nov-03 19,075 13,525
31-Dec-03 20,285 14,373
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31-Jan-04 20,378 14,603
29-Feb-04 20,601 14,847
31-Mar-04 20,179 14,749
30-Apr-04 19,618 14,446
31-May-04 19,735 14,566
30-Jun-04 20,215 14,876
31-Jul-04 19,465 14,391
31-Aug-04 19,407 14,455
Purisima Total Return Fund MSCI World Index
One-year One-year
Average Annual Total Return(2)** 8.72% Average Annual Total Return(2)** 15.61%
Five-year Five-year
Average Annual Total Return(2)** 2.09% Average Annual Total Return(2)** (2.17%)
Since Inception (10/28/96) Since Inception (10/28/96)
Cumulative Total Return(1)** 94.07% Cumulative Total Return(1)** 44.55%
Average Annual Total Return(2)** 8.82% Average Annual Total Return(2)** 4.81%
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 Morgan Stanley MSCI World is obtained from Morgan Stanley and is an
unmanaged global stock index comprised of various world stock markets,
including the U.S. Purisima total return of a $10,000 investment includes
all expenses. Fund's month-end inception was 10/31/96 with actual
inception on 10/28/96.
** The Total Returns shown do not reflect the deduction of taxes a
shareholder would pay on fund distributions or redemption of fund shares.
The Total Return reflects the rate an investment would have earned (or
lost) on an investment in the Fund, assuming reinvestment of all dividends
and distributions.
Purisima Securities, LLC Woodside, CA 94062
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Performance Summaries
for year ended August 31, 2004
Pure American Fund
Growth of $10,000.
Pure American Fund cummulative total return versus S&P Index $10,000
invested from inception on 9/30/98 to 8/31/04+
[The following was depicted as a mountain chart in the printed material.]
Pure
American S&P 500 Index
- -------------------------------------
30-Sep-98 10,000 10,000
31-Oct-98 11,190 10,812
30-Nov-98 11,920 11,467
31-Dec-98 12,810 12,128
- -------------------------------------
31-Jan-99 13,300 12,635
28-Feb-99 12,630 12,242
31-Mar-99 12,940 12,731
30-Apr-99 13,040 13,224
31-May-99 12,630 12,912
30-Jun-99 13,390 13,629
31-Jul-99 12,930 13,203
31-Aug-99 13,000 13,137
30-Sep-99 12,530 12,777
31-Oct-99 13,560 13,586
30-Nov-99 13,760 13,862
31-Dec-99 13,893 14,677
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31-Jan-00 13,433 13,940
29-Feb-00 12,333 13,677
31-Mar-00 13,553 15,014
30-Apr-00 13,533 14,563
31-May-00 13,463 14,264
30-Jun-00 13,843 14,616
31-Jul-00 13,413 14,388
31-Aug-00 13,493 15,282
30-Sep-00 13,423 14,475
31-Oct-00 13,803 14,414
30-Nov-00 13,333 13,278
31-Dec-00 13,275 13,343
- -------------------------------------
31-Jan-01 13,234 13,817
28-Feb-01 13,774 12,557
31-Mar-01 13,889 11,761
30-Apr-01 13,587 12,675
31-May-01 13,618 12,760
30-Jun-01 13,566 12,450
31-Jul-01 14,065 12,328
31-Aug-01 13,757 11,556
30-Sep-01 14,011 10,622
31-Oct-01 13,933 10,825
30-Nov-01 13,909 11,655
31-Dec-01 13,909 11,758
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31-Jan-02 13,851 11,586
28-Feb-02 14,118 11,363
31-Mar-02 13,851 11,790
30-Apr-02 13,828 11,075
31-May-02 13,491 10,993
30-Jun-02 12,668 10,211
31-Jul-02 11,867 9,415
31-Aug-02 11,844 9,476
30-Sep-02 10,498 8,446
31-Oct-02 11,160 9,190
30-Nov-02 11,763 9,731
31-Dec-02 11,048 9,160
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31-Jan-03 10,788 8,920
28-Feb-03 10,635 8,786
31-Mar-03 10,729 8,871
30-Apr-03 11,567 9,602
31-May-03 12,144 10,108
30-Jun-03 12,286 10,238
31-Jul-03 12,698 10,418
31-Aug-03 12,899 10,621
30-Sep-03 12,663 10,508
31-Oct-03 13,500 11,103
30-Nov-03 13,595 11,201
31-Dec-03 14,255 11,788
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31-Jan-04 14,433 12,005
29-Feb-04 14,492 12,171
31-Mar-04 14,303 11,988
30-Apr-04 13,936 11,799
31-May-04 14,101 11,961
30-Jun-04 14,433 12,193
31-Jul-04 13,959 11,790
31-Aug-04 13,864 11,837
Purisima American Fund S&P 500 Index
One-year One-year
Average Annual Total Return(2)** 7.49% Average Annual Total Return(2)** 11.46%
Five-year Five-year
Average Annual Total Return(2)** 1.30% Average Annual Total Return(2)** (2.07%)
Since Inception (9/30/98) Since Inception (9/30/98)
Cumulative Total Return(1)** 38.64% Cumulative Total Return(1)** 18.37%
Average Annual Total Return(2)** 5.67% Average Annual Total Return(2)** 2.89%
Please note past performance is not predictive of future results. Share price
and return will fluctuate, and investors may experience a gain or loss when they
sell their shares. To obtain a prospectus on the Purisima Funds please call
1-800/841-0199. The prospectus contains more information, including the
political, economic, currency risks and potential volatility of foreign
investing. Read the prospectus carefully before investing.
(1) Cumulative total return measures the change in value of an investment over
the periods indicated and reflects all fund fees and expenses.
(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated and reflects all fund fees and
expenses. Average annual total return and cumulative total return for the
one-year period would be identical.
+ The S&P 500 is obtained from Standard & Poors Corp. It is an unmanaged
stock index that measures the performance of 500 large cap companies
traded in the U.S. Total return of a $10,000 investment in Purisima
includes all expenses. Fund's month-end inception was 9/30/98 with actual
inception on 9/29/98.
** The Total Returns shown do not reflect the deduction of taxes a
shareholder would pay on fund distributions or redemption of fund shares.
The Total Return reflects the rate an investment would have earned (or
lost) on an investment in the Fund, assuming reinvestment of all dividends
and distributions.
Purisima Securities, LLC Woodside, CA 94062
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Performance Summaries
for year ended August 31, 2004
Pure Foreign Fund
Growth of $10,000
Pure Foreign Fund cumulative total return versus EAFE Foreign Index
$10,000 invested from inception On 9/30/98 to 8/31/04++
[The following was presented as a mountain chart in the printed material.]
Pure
Foreign MSCI EAFE Index
- ---------------------------------------
30-Sep-98 10,000 10,000
31-Oct-98 10,710 11,042
30-Nov-98 11,430 11,607
31-Dec-98 11,740 12,065
- ---------------------------------------
31-Jan-99 12,150 12,028
28-Feb-99 11,750 11,742
31-Mar-99 12,350 12,232
30-Apr-99 12,740 12,727
31-May-99 12,320 12,072
30-Jun-99 13,210 12,543
31-Jul-99 13,410 12,915
31-Aug-99 13,520 12,963
30-Sep-99 13,660 13,094
31-Oct-99 14,190 13,585
30-Nov-99 14,980 14,056
31-Dec-99 17,132 15,318
- ---------------------------------------
31-Jan-00 15,991 14,346
29-Feb-00 17,290 14,732
31-Mar-00 17,850 15,303
30-Apr-00 17,153 14,498
31-May-00 16,804 14,145
30-Jun-00 17,871 14,698
31-Jul-00 16,794 14,082
31-Aug-00 17,311 14,204
30-Sep-00 16,297 13,513
31-Oct-00 15,991 13,194
30-Nov-00 15,378 12,699
31-Dec-00 15,782 13,150
- ---------------------------------------
31-Jan-01 15,815 13,154
28-Feb-01 16,428 12,170
31-Mar-01 16,643 11,343
30-Apr-01 16,245 12,123
31-May-01 16,234 11,674
30-Jun-01 16,127 11,194
31-Jul-01 16,503 11,001
31-Aug-01 17,233 10,722
30-Sep-01 17,536 9,636
31-Oct-01 17,491 9,883
30-Nov-01 17,399 10,248
31-Dec-01 17,328 10,308
- ---------------------------------------
31-Jan-02 17,176 9,761
28-Feb-02 17,528 9,829
31-Mar-02 17,317 10,408
30-Apr-02 17,657 10,429
31-May-02 17,352 10,561
30-Jun-02 16,661 10,141
31-Jul-02 14,681 9,140
31-Aug-02 15,313 9,119
30-Sep-02 13,415 8,140
31-Oct-02 14,411 8,577
30-Nov-02 15,313 8,966
31-Dec-02 14,509 8,665
- ---------------------------------------
31-Jan-03 14,059 8,303
28-Feb-03 13,621 8,113
31-Mar-03 13,378 7,954
30-Apr-03 14,606 8,734
31-May-03 15,457 9,263
30-Jun-03 15,859 9,487
31-Jul-03 16,528 9,717
31-Aug-03 16,990 9,951
30-Sep-03 17,124 10,257
31-Oct-03 18,413 10,897
30-Nov-03 18,802 11,138
31-Dec-03 20,392 12,008
- ----------------------------------------
31-Jan-04 20,667 12,178
29-Feb-04 20,917 12,459
31-Mar-04 20,717 12,529
30-Apr-04 20,155 12,246
31-May-04 20,280 12,271
30-Jun-04 20,855 12,556
31-Jul-04 20,018 12,148
31-Aug-04 20,193 12,201
Purisima Foreign Fund MSCI EAFE Index
One-year One-year
Average Annual Total Return(2)** 17.76% Average Annual Total Return(2)** 22.64%
Five-year Five-year
Average Annual Total Return(2)** 8.35% Average Annual Total Return(2)** (1.16%)
Since Inception (9/30/98) Since Inception (9/30/98)
Cumulative Total Return(1)** 101.93% Cumulative Total Return(1)** 22.01%
Average Annual Total Return(2)** 12.60% Average Annual Total Return(2)** 3.42%
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 EAFE Index is obtained from Morgan Stanley. It is an unmanaged stock
index that measures the performance of selected stock markets outside the
U.S. Purisima total return of a $10,000 investment includes all expenses.
Fund's month-end inception was 9/30/98 with actual inception on 9/29/98.
** The Total Returns shown do not reflect the deduction of taxes a
shareholder would pay on fund distributions or redemption of fund shares.
The Total Return reflects the rate an investment would have earned (or
lost) on an investment in the Fund, assuming reinvestment of all dividends
and distributions.
Purisima Securities, LLC Woodside, CA 94062
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Purisima Total Return Fund
SECTOR BREAKDOWN(1)
- -------------------------------------------------------------
Basic Materials 2.7%
Communications 6.2%
Consumer, Cyclical 10.2%
Consumer, Non-cyclical 11.9%
Energy 10.5%
Financial 28.4%
Industrial 13.1%
Technology 11.6%
Utilities 3.1%
Short-Term Investment 2.3%
- -------------------------------------------------------------
Purisima Pure American Fund
SECTOR BREAKDOWN(1)
- -------------------------------------------------------------
Basic Materials 3.1%
Communications 5.8%
Consumer, Cyclical 11.3%
Consumer, Non-cyclical 14.1%
Energy 11.2%
Financial 26.8%
Industrial 10.9%
Technology 14.3%
Utilities 1.9%
Short-Term Investment 0.6%
- -------------------------------------------------------------
Purisima Pure Foreign Fund
SECTOR BREAKDOWN(1)
- -------------------------------------------------------------
Basic Materials 5.6%
Communications 5.4%
Consumer, Cyclical 15.0%
Consumer, Non-cyclical 9.6%
Energy 12.9%
Financial 31.0%
Industrial 11.5%
Technology 5.3%
Utilities 3.2%
Short-Term Investment 0.5%
- -------------------------------------------------------------
(1) % of Total Investments as of August 31, 2004.
9
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- --------------------------------------------------------------------------------
Important Information
The following disclosure provides important information regarding the Funds'
Expense Example. Please refer to this information when reviewing the Expense
Example for the Funds.
Expense Example
As a shareholder of the Funds, you incur two types of costs: (1) transaction
costs including exchange fees; and (2) ongoing costs, including management fees;
distribution and/or service (12b-1) fees (Total Return Fund only); and other
Fund expenses. This Example is intended to help you understand your ongoing
costs (in dollars) of investing in the Funds and to compare these costs with the
ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period indicated and held for the entire period from 03/01/04 to 08/31/04.
Actual Expenses
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in these columns together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the row entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Funds' actual expense ratios and assumed
rates of return of 5% per year before expenses, which are not the Funds' actual
returns. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Funds and other funds. To do so, compare this 5% hypothetical example with the
5% hypothetical examples that appear in the shareholder reports of the other
funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the information
under the heading "Hypothetical Performance (5% return before expenses)" is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
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- --------------------------------------------------------------------------------
Purisima Total Return Fund
Actual Hypothetical Performance
EXPENSE EXAMPLE: Performance (5% return before expenses)
- ---------------------------------------------------------------------------------------------
Total Return Fund Total Return Fund
Beginning Account Value (03/01/04) $1,000 $1,000
Ending Account Value (08/31/04) $ 942 $1,018
Expenses Paid During Period (1) $ 7.32 $ 7.61
- ---------------------------------------------------------------------------------------------
Purisima Pure American Fund
Actual Hypothetical Performance
EXPENSE EXAMPLE: Performance (5% return before expenses)
- ---------------------------------------------------------------------------------------------
Pure American Fund Pure American Fund
Beginning Account Value (03/01/04) $1,000 $1,000
Ending Account Value (08/31/04) $ 957 $1,018
Expenses Paid During Period (1) $ 7.38 $ 7.61
- ---------------------------------------------------------------------------------------------
Purisima Pure Foreign Fund
Actual Hypothetical Performance
EXPENSE EXAMPLE: Performance (5% return before expenses)
- ---------------------------------------------------------------------------------------------
Pure Foreign Fund Pure Foreign Fund
Beginning Account Value (03/01/04) $1,000 $1,000
Ending Account Value (08/31/04) $ 965 $1,018
Expenses Paid During Period (1) $ 7.41 $ 7.61
- ---------------------------------------------------------------------------------------------
(1) Expenses are equal to the Fund's annalized expense ratio 1.50% multiplied
by the average account value over the period, multiplied by 184/366 (to
reflect the one-half year period).
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Schedule of Investments
Purisima Total Return Fund
August 31, 2004
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 99.6%
Aerospace/Defense Equipment: 2.8%
67,100 Lockheed Martin Corp. $ 3,608,638
50,500 United Technologies Corp. 4,742,455
------------
8,351,093
------------
Airlines: 0.6%
134,500 Japan Airlines Corp. - ADR* 1,942,530
------------
Automotive: 2.4%
38,100 Fuji Heavy Industries Ltd. - ADR 1,923,315
246,000 Nissan Motor Co. Ltd. - ADR 5,362,800
------------
7,286,115
------------
Banking: 15.7%
437,100 Banco Santander Central - ADR 4,314,177
100,700 Barclays Plc - ADR 3,764,166
39,500 Comerica, Inc. 2,375,925
168,500 Credit Suisse Group - ADR 5,267,310
52,000 HSBC Holdings Plc - ADR 4,049,760
484,500 Mitsubishi Tokyo Finance - ADR 4,389,570
66,775 National City Corp. 2,523,427
126,996 San Paolo - IMI SpA - ADR 2,857,410
374,000 Sumitomo Mitsui - ADR 2,252,639
38,100 SunTrust Banks, Inc. 2,594,610
57,800 UBS AG 3,900,922
140,000 US Bancorp 4,130,000
118,300 Washington Mutual, Inc. 4,593,589
------------
47,013,505
------------
Biomedicine: 1.0%
52,000 Amgen, Inc.* 3,083,080
------------
Biotechnology: 0.8%
48,000 Genentech, Inc.* 2,341,440
------------
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- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Computers: 3.6%
135,200 Dell Computer Corp.* $ 4,710,368
110,400 Electronic Data Systems Corp. 2,121,888
368,100 EMC Corp.* 3,964,437
------------
10,796,693
------------
Electrical Equipment: 3.6%
71,700 General Electric Co. 2,351,043
79,800 Hitachi Ltd. - ADR 5,032,986
240,700 Matsushita Electric Industries Co., Ltd - ADR 3,249,450
------------
10,633,479
------------
Financial Services: 7.4%
78,000 American Express Co. 3,901,560
43,600 Goldman Sachs Group Inc. 3,908,740
137,771 ING Groep N.V. - ADR 3,367,123
71,600 Lehman Brothers Holdings, Inc. 5,290,524
234,000 Nomura Holdings, Inc. - ADR 3,247,920
47,700 Orix Corp. - ADR 2,447,010
------------
22,162,877
------------
Foods: 1.2%
155,800 Sara Lee Corp. 3,447,854
------------
Household Audio & Video Equipment: 1.0%
82,600 Sony Corp. - ADR 2,863,742
------------
Household Products: 2.1%
54,700 Kimberly-Clark Corp. 3,648,490
49,200 Procter & Gamble Co. 2,753,724
------------
6,402,214
------------
Import & Export: 0.6%
11,900 Mitsui & Co. Ltd. - ADR 1,920,660
------------
Insurance: 5.8%
94,900 Allstate Corp. 4,480,229
81,544 American International Group, Inc. 5,809,195
180,800 Axa S.A. - ADR 3,715,440
73,300 Marsh & McLennan Co. 3,275,777
------------
17,280,641
------------
Machinery: 2.2%
90,600 Caterpillar, Inc. 6,586,620
------------
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- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Media: 2.7%
40,000 Gannett Co. 3,388,000
201,900 Walt Disney Co. 4,532,655
------------
7,920,655
------------
Miscellaneous Manfacturing: 4.2%
55,200 Illinois Tool Works 5,039,208
208,500 Lafarge S.A. - ADR 4,514,025
42,800 Siemens AG - ADR 2,955,340
------------
12,508,573
------------
Oil & Gas: 12.3%
77,000 Anadarko Petroleum Corp. 4,559,940
124,900 Baker Hughes, Inc. 4,912,317
81,100 BASF AG - ADR 4,411,029
39,000 ChevronTexaco Corp. 3,802,500
57,600 ConocoPhillips 4,287,168
63,600 Occidental Petroleum Corp. 3,284,940
114,600 Royal Dutch Petroleum Co. - ADR 5,809,074
56,857 Total Fina S.A. - ADR 5,571,418
------------
36,638,386
------------
Paper & Forest Products: 1.3%
93,300 International Paper Co. 3,733,866
------------
Pharmaceuticals: 6.0%
97,000 Astrazeneca Plc - ADR 4,513,410
90,400 GlaxoSmithKline Plc - ADR 3,719,056
57,100 Johnson & Johnson 3,317,510
42,200 Merck & Co., Inc. 1,897,734
121,280 Sanofi-Aventis - ADR* 4,368,517
------------
17,816,227
------------
Retail: 5.6%
126,900 Albertson's, Inc. 3,119,202
104,600 Costco Wholesale Corp. 4,306,382
175,000 Gap, Inc. 3,279,500
68,200 Ito Yokado Co., Ltd. - ADR 2,510,619
72,400 Lowe's Companies, Inc. 3,598,280
------------
16,813,983
------------
Semiconductors: 3.6%
196,500 Intel Corp. 4,183,485
111,200 KLA-Tencor Corp.* 4,154,432
217,500 Micron Technology, Inc.* 2,503,425
------------
10,841,342
------------
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- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Software: 4.6%
108,400 First Data Corp. 4,579,900
115,200 Microsoft Corp. 3,144,960
365,800 Oracle Corp.* 3,647,026
308,000 Siebel Systems, Inc.* 2,343,880
------------
13,715,766
------------
Telecommunications: 3.6%
59,700 Alltel Corp. 3,262,605
155,350 Bellsouth Corp. 4,157,166
103,600 BT Group Plc - ADR 3,439,520
------------
10,859,291
------------
Transportation: 1.7%
61,400 Fedex Corp. 5,034,186
------------
Utilities: 3.2%
93,400 Duke Energy Corp. 2,067,876
57,500 E. ON AG - ADR 4,096,875
85,700 Enel SpA - ADR 3,332,016
------------
9,496,767
------------
TOTAL COMMON STOCKS
(cost $280,524,758) 297,491,585
------------
SHORT-TERM INVESTMENT: 2.4%
6,983,156 SEI Daily Income Trust Government Class B
(cost $6,983,156) 6,983,156
------------
TOTAL INVESTMENTS IN SECURITIES
(cost $287,507,914): 102.0% 304,474,741
Liabilities in Excess of Other Assets: ( 2.0%) (5,852,523)
------------
NET ASSETS: 100.0% $298,622,218
============
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
August 31, 2004
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 99.3%
Aerospace/Defense Equipment: 2.7%
300 Lockheed Martin Corp. $ 16,134
1,050 Northrop Grumman Corp. 54,232
------------
70,366
------------
Banking: 12.0%
1,350 Bank of America Corp. 60,723
900 Banknorth Group, Inc. 30,573
900 Comerica, Inc. 54,135
2,050 National City Corp. 77,469
750 UnionBanCal Corp. 44,595
900 Wachovia Corp. 42,219
------------
309,714
------------
Biomedicine: 1.2%
525 Amgen, Inc.* 31,127
------------
Biotechnology: 0.8%
450 Genentech, Inc.* 21,951
------------
Chemicals: 1.2%
750 Rohm & Haas Co. 30,397
------------
Computer Components & Software: 5.6%
1,800 BMC Software, Inc.* 26,946
2,475 Cisco Systems, Inc.* 46,431
1,000 Microsoft Corp. 27,300
3,400 Siebel Systems, Inc.* 25,874
1,000 Veritas Software Corp.* 16,720
------------
143,271
------------
Computers: 6.4%
1,100 Dell Computer Corp.* 38,324
1,350 Electronic Data Systems Corp. 25,947
3,200 EMC Corp.* 34,464
500 IBM Corp. 42,345
5,900 Sun Microsystems, Inc.* 22,656
------------
163,736
------------
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- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Consumer Products: 4.3%
850 Clorox Co. (The) $ 44,914
575 Coca Cola Co. (The) 25,708
525 Nike, Inc. - Class B 39,538
------------
110,160
------------
Diversified Commercial Services: 0.9%
575 Cintas Corp. 23,581
------------
Electrical Equipment:1.4%
650 Johnson Controls, Inc. 36,595
------------
Electronics: 1.1%
5,300 Solectron Corp.* 27,348
------------
Financial Services: 10.2%
725 American Express Co. 36,264
1,116 Citigroup, Inc. 51,983
425 Goldman Sachs Group Inc. 38,101
425 Lehman Brothers Holdings, Inc. 31,403
750 Merrill Lynch & Co., Inc. 38,303
1,325 T Rowe Price Group, Inc. 65,627
------------
261,681
------------
Foods: 1.5%
1,800 Sara Lee Corp. 39,834
------------
Health Care Equipment: 0.9%
450 Medtronic, Inc. 22,388
------------
Household Products: 1.5%
700 Procter & Gamble Co. 39,179
------------
Insurance: 4.6%
487 American International Group 34,694
19 Berkshire Hathaway, Inc. - Class B* 54,986
600 Safeco. Corp. 28,902
------------
118,582
------------
Machinery: 1.8%
625 Caterpillar, Inc. 45,438
------------
Media: 1.7%
1,950 Walt Disney Co. 43,778
------------
Miscellaneous Manufacturing: 1.8%
550 3M Co. 45,298
------------
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- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Office Supplies: 1.4%
1,250 Staples, Inc. $ 35,850
------------
Oil & Gas: 11.2%
1,050 BJ Services Co. 50,453
1,200 Burlington Resources, Inc. 43,476
475 ChevronTexaco Corp. 46,312
875 ConocoPhillips 65,126
1,100 Ensco International, Inc. 32,076
1,100 Exxon Mobil Corp. 50,710
------------
288,153
------------
Paper & Forest Products: 1.9%
1,250 International Paper Co. 50,025
------------
Pharmaceuticals: 5.3%
750 Johnson & Johnson 43,575
575 Lilly (Eli) & Co. 36,484
650 Merck & Co., Inc. 29,231
750 Wyeth 27,428
------------
136,718
------------
Restaurants: 2.0%
1,900 McDonald's Corp. 51,338
------------
Retail: 4.0%
675 Costco Wholesale Corp. 27,790
600 Federated Department Stores 26,040
2,400 Limited Brands 48,192
------------
102,022
------------
Semi-conductors: 4.1%
1,900 Intel Corp. 40,451
625 KLA-Tencor Corp.* 23,350
3,700 Micron Technology, Inc.* 42,587
------------
106,388
------------
Telecommunications: 2.3%
1,175 BellSouth Corp. 31,443
1,000 Scientific-Atlanta, Inc. 27,240
------------
58,683
------------
Transportation: 3.6%
1,500 Burlington Northern Santa Fe Corp. 53,700
475 Fedex Corp. 38,945
------------
92,645
------------
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- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Utilities: 1.9%
1,600 Southern Co. 48,560
------------
TOTAL COMMON STOCKS
(cost $2,419,378) 2,554,806
------------
SHORT-TERM INVESTMENT: 0.6%
16,150 SEI Daily Income Trust Government Class B
(cost $16,150) 16,150
------------
TOTAL INVESTMENTS IN SECURITIES
(cost $2,435,528): 99.9% 2,570,956
Other Assets less Liabilities: 0.1% 1,059
------------
NET ASSETS: 100% $ 2,572,015
============
* Non-income producing security.
See accompanying Notes to Financial Statements.
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- --------------------------------------------------------------------------------
Schedule of Investments
Purisima Pure Foreign Fund
August 31, 2004
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS: 99.4%
Australia: 3.9%
5,300 BHP Billiton Ltd. - ADR $ 99,163
350 National Australia Bank Ltd. - ADR 32,949
------------
132,112
------------
France: 11.7%
4,150 Axa S.A. - ADR 85,283
1,100 Dassault Systemes S.A. - ADR 47,332
4,300 Groupe Danone - ADR 69,445
1,100 Publicis Groupe - ADR 29,810
1,740 Sanofi-Aventis - ADR 62,675
1,047 Total Fina S.A. - ADR 102,595
------------
397,140
------------
Germany: 8.4%
900 BASF AG - ADR 48,951
3,200 Bayerische Hypo-Und Vereinsbank AG - ADR 52,190
750 DaimlerChrysler AG 31,328
1,600 Deutsche Telekom AG - ADR* 28,048
3,100 Infineon Technologies AG* 30,411
1,000 SAP AG - ADR 36,460
850 Siemens AG - ADR 58,693
------------
286,081
------------
Italy: 6.4%
2,050 Enel SpA - ADR 79,704
600 Eni SpA - ADR 61,728
2,506 San Paolo - IMI SpA - ADR 56,385
690 Telecom Italia SpA - ADR 20,707
------------
218,524
------------
Japan: 28.3%
1,350 Canon, Inc. - ADR 64,760
375 Fuji Heavy Industries Ltd. - ADR 18,930
1,675 Hitachi, Ltd. - ADR 105,642
1,500 Ito Yokado Co., Ltd.- ADR 55,219
1,300 Japan Airlines Corp. - ADR* 18,775
4,000 Komatsu Ltd. - ADR 97,827
750 Kyocera Corp. - ADR 55,020
6,500 Matsushita Electric Industrial Co., Ltd. - ADR 87,750
1,200 Millea Holdings, Inc. - ADR 82,537
100 Mitsui & Co. Ltd. - ADR 16,140
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- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Japan - Continued
5,100 NEC Corp. - ADR $ 32,742
3,400 Nissan Motor Co. Ltd. - ADR 74,120
3,000 Nomura Holdings, Inc. - ADR 41,640
1,300 Orix Corp. - ADR 66,690
2,275 Sony Corp. - ADR 78,874
11,100 Sumitomo Mitsui - ADR 66,856
------------
963,522
------------
Netherlands: 7.8%
3,970 ABN Amro Holding N.V. - ADR 84,521
2,206 ING Groep N.V. - ADR 53,915
1,700 Royal Dutch Petroleum Co. - ADR 86,173
1,800 TPG N.V. - ADR 42,030
------------
266,639
------------
Norway: 1.6%
850 Norsk Hydro A/S - ADR 53,176
------------
Portugal: 1.1%
3,632 Portugal Telecom S.A. - ADR 37,046
------------
Spain: 5.9%
4,500 Banco Bilbao Vizcaya Argentaria S.A. - ADR 60,300
6,375 Banco Santander Central Hispano S.A. - ADR 62,921
2,100 Repsol S.A. - ADR 43,554
801 Telefonica S.A. - ADR 34,379
------------
201,154
------------
Sweden: 2.8%
2,750 Volvo AB - ADR 94,325
------------
Switzerland: 5.1%
1,000 Novartis AG - ADR 46,450
1,850 UBS AG - ADR 124,856
------------
171,306
------------
United Kingdom: 16.4%
1,300 Abbey National Plc - ADR 27,625
500 AstraZeneca Plc - ADR 23,265
2,000 Barclays Plc - ADR 74,760
1,700 BP Plc - ADR 91,290
1,000 BT Group Plc - ADR 33,200
3,050 Cadbury Schweppes Plc - ADR 99,583
550 GlaxoSmithKline Plc - ADR 22,627
1,025 HSBC Holdings Plc - ADR 79,827
700 National Grid Group - ADR 29,687
425 Rio Tinto Plc - ADR 43,172
600 Signet Group Plc - ADR 33,552
------------
558,588
------------
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- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(cost $3,095,876) $ 3,379,613
------------
SHORT-TERM INVESTMENT: 0.5%
17,248 SEI Daily Income Trust Government Class B
(cost $17,248) 17,248
------------
TOTAL INVESTMENTS IN SECURITIES
(cost $3,113,124): 99.9% 3,396,861
Other Assets less Liabilities: 0.1% 4,761
------------
NET ASSETS: 100.0% $ 3,401,622
============
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
August 31, 2004
Industry % of Net Assets
- --------------------------------------------------------------------------------
Advertising 0.9%
Airlines 0.5%
Automobile Manufacturers 6.4%
Banking 21.3%
Chemicals 1.4%
Electric 6.3%
Electronics 3.5%
Finance 3.2%
Foods 5.0%
Home Furnishings 4.9%
Import/Export 0.5%
Insurance 6.5%
Machinery 2.9%
Mining 4.2%
Miscellaneous Manufacturing 1.7%
Office/Business Equipment 1.9%
Oil & Gas 12.9%
Pharmaceuticals 4.6%
Retail 2.6%
Software 2.5%
Telecommunications 4.5%
Transportation 1.2%
----------------
TOTAL COMMON STOCKS 99.4%
SHORT-TERM INVESTMENTS 0.5%
----------------
TOTAL INVESTMENTS IN SECURITIES 99.9%
Other Assets less Liabilities 0.1%
----------------
NET ASSETS 100.0%
================
See accompanying Notes to Financial Statements.
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- --------------------------------------------------------------------------------
Purisima Funds
Statements of Assets and Liabilites
August 31, 2004
Total Return Pure American Pure Foreign
Fund Fund Fund
------------- ------------- -------------
ASSETS
Investments in securities, at cost $287,507,914 $2,435,528 $3,113,124
------------- ------------- -------------
Investments in securities, at value $304,474,741 $2,570,956 $3,396,861
Receivables:
Dividends and interest 662,677 4,336 9,032
Fund shares sold 49,923 -- --
Other assets 18,821 -- --
------------- ------------- -------------
Total Assets 305,206,162 2,575,292 3,405,893
------------- ------------- -------------
LIABILITIES
Payables for securities purchased 5,901,536 -- --
Payables for fund shares redeemed 114,512 -- --
Accrued advisory fees (Note 3) 249,337 3,277 4,271
Accrued distribution fees (Note 4) 188,900 -- --
Accrued administration fees (Note 3) 21,181 -- --
Accrued transfer agent fees 30,929 -- --
Other accrued expenses 77,549 -- --
------------- ------------- -------------
Total Liabilities 6,583,944 3,277 4,271
------------- ------------- -------------
NET ASSETS $298,622,218 $2,572,015 $3,401,622
============= ============= =============
Number of shares issued and outstanding
(unlimited shares authorized, $0.01 par
value) 18,011,556 219,617 210,478
============= ============= =============
Net asset value, offering and redemption
price per share $16.58 $11.71 $16.16
============= ============= =============
COMPONENTS OF NET ASSETS
Paid-in capital $292,716,274 $2,662,117 $3,359,087
Accumulated net investment income 1,196,897 4,632 42,041
Accumulated net realized loss on investments (12,257,780) (230,162) (283,243)
Net unrealized appreciation on investments . 16,966,827 135,428 283,737
------------- ------------- -------------
Net assets $298,622,218 $2,572,015 $3,401,622
============= ============= =============
See accompanying Notes to Financial Statements.
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Purisima Funds
Statements of Operations
For the Year Ended August 31, 2004
Total Return Pure American Pure Foreign
Fund Fund Fund
------------ ------------- ------------
INVESTMENT INCOME
Income
Dividends (net of foreign taxes witheld
of $379,487, $0, and $0, respectively) $5,501,051 $48,123 $114,642
Interest 9,527 64 124
----------- ----------- -----------
Total income 5,510,578 48,187 114,766
----------- ----------- -----------
Expenses
Advisory fees 2,878,075 43,556 48,060
Distribution fees 719,519 -- --
Administration fees 242,355 -- --
Transfer agent fees 129,463 -- --
Fund accounting fees 88,926 -- --
Custody fees 62,689 -- --
Insurance expense 60,427 -- --
Registration fees 24,067 -- --
Audit fees 19,050 -- --
Reports to shareholders 18,794 -- --
Legal fees 15,672 -- --
Trustee fees 3,342 -- --
Miscellaneous 9,505 -- --
----------- ----------- -----------
Total expenses 4,271,884 43,556 48,060
Add: Expenses recouped by Adviser (Note 3) 44,954 -- --
----------- ----------- -----------
Net expenses 4,316,838 43,556 48,060
----------- ----------- -----------
Net investment income 1,193,740 4,631 66,706
----------- ----------- -----------
CHANGE IN REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 1,326,029 4,726 82,432
Net unrealized appreciation on investments 18,232,293 217,852 312,226
----------- ----------- -----------
Net realized and unrealized gain on investments 19,558,322 222,578 394,658
----------- ----------- -----------
Net increase in net assets
resulting from operations $20,752,062 $227,209 $461,364
=========== =========== ===========
See accompanying Notes to Financial Statements.
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Purisima Funds
Statement of Changes in Net Assets
Total Return Fund
Year Ended Year Ended
INCREASE (DECREASE) IN NET ASSETS FROM: August 31, 2004 August 31, 2003
--------------- ---------------
OPERATIONS
Net investment income $1,193,740 $1,076,737
Net realized gain (loss) on investments:
Securities 1,326,029 (4,677,248)
Options -- 4,958
Net unrealized appreciation on investments 18,232,293 27,195,122
------------- -------------
Net increase in net assets resulting from operations 20,752,062 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) 34,807,495 41,210,454
------------- -------------
Total increase in net assets 54,485,977 62,564,923
NET ASSETS
Beginning of year 244,136,241 181,571,318
------------- -------------
End of year $298,622,218 $244,136,241
============= =============
Accumulated net investment income $1,196,897 $1,073,550
============= =============
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended
August 31, 2004 August 31, 2003
--------------------------- ---------------------------
Shares Value Shares Value
--------------------------- ---------------------------
Shares sold 5,098,409 $85,836,402 5,057,337 $68,171,437
Shares issued on reinvestment of distributions 62,124 1,035,611 167,234 2,202,476
Shares redeemed (3,094,870) (52,064,518) (2,195,711) (29,163,459)
--------------------------- ---------------------------
Net increase 2,065,663 $34,807,495 3,028,860 $41,210,454
=========================== ===========================
See accompanying Notes to Financial Statements.
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Purisima Funds
Statement of Changes in Net Assets
Pure American Fund
Year Ended Year Ended
INCREASE (DECREASE) IN NET ASSETS FROM: August 31, 2004 August 31, 2003
---------------- ---------------
OPERATIONS
Net investment income $4,631 $12,758
Net realized gain (loss) on investments :
Securities 4,726 (209,661)
Net unrealized appreciation on investments 217,852 386,082
---------- ----------
Net increase in net assets resulting from operations 227,209 189,179
---------- ----------
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) (461,116) 53,362
---------- ----------
Total increase (decrease) in net assets (246,664) 201,236
NET ASSETS
Beginning of year 2,818,679 2,617,443
---------- ----------
End of year $2,572,015 $2,818,679
========== ==========
Accumulated net investment income $4,632 $12,758
========== ==========
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended
August 31, 2004 August 31, 2003
--------------------- ---------------------
Shares Value Shares Value
--------------------- ---------------------
Shares sold 22,297 $257,872 67,395 $667,749
Shares issued on reinvestment of distributions 1,094 12,756 4,325 41,305
Shares redeemed (61,309) (731,744) (70,463) (655,692)
--------------------- ---------------------
Net increase (decrease) (37,918) $(461,116) 1,257 $53,362
===================== =====================
See accompanying Notes to Financial Statements.
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Statement of Changes in Net Assets
Pure Foreign Fund
Year Ended Year Ended
INCREASE (DECREASE) IN NET ASSETS FROM: August 31, 2004 August 31, 2003
--------------- ---------------
OPERATIONS
Net investment income $66,706 $58,412
Net realized gain (loss) on investments:
Securities 82,432 (348,963)
Net unrealized appreciation on investments 312,226 488,304
---------- ----------
Net increase in net assets resulting from operations 461,364 197,753
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (79,025) (122,709)
---------- ----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from net change
in outstanding shares (a) 293,757 (743,643)
---------- ----------
Total increase (decrease) in net assets 676,096 (668,599)
NET ASSETS
Beginning of year 2,725,526 3,394,125
---------- ----------
End of year $3,401,622 $2,725,526
========== ==========
Accumulated net investment income $42,041 $54,360
========== ==========
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended
August 31, 2004 August 31, 2003
----------------------- ------------------------
Shares Value Shares Value
----------------------- ------------------------
Shares sold 36,377 $591,470 32,333 $395,974
Shares issued on reinvestment of distributions 5,041 78,733 10,175 122,709
Shares redeemed (24,217) (376,446) (108,954) (1,262,326)
----------------------- ------------------------
Net increase (decrease) 17,201 $293,757 (66,446) $(743,643)
======================= ========================
See accompanying Notes to Financial Statements.
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Purisima Funds
Financial Highlights
For a capital share outstanding throughout each year.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
Total Return Fund
----------------------------------------------------------------
Year Ended August 31,
----------------------------------------------------------------
2004 2003 2002 2001 2000
------ ------ ------ ------ ------
Net asset value, beginning of year $15.31 $14.06 $18.73 $19.65 $17.46
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) 0.07 0.07 0.09 0.31^ (0.01)
Net realized and unrealized gain (loss)
on investments 1.27 1.34 (2.91) (0.61)^ 2.22
------ ------ ------ ------ ------
Total from investment operations 1.34 1.41 (2.82) (0.30)^ 2.21
------ ------ ------ ------ ------
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 year $16.58 $15.31 $14.06 $18.73 $19.65
====== ====== ====== ====== ======
Total return 8.72% 10.22% (16.72%) (1.33%) 12.64%
Ratios/supplemental data:
Net assets, end of year
(millions) $298.6 $244.1 $181.6 $122.4 $89.8
Ratio of expenses to average net assets:
Before fees waived and
expenses
absorbed or recouped 1.49% 1.56% 1.51%+ 1.61%+ 1.62%
After fees waived and
expenses
absorbed or recouped 1.50% 1.50% 1.50%+ 1.50%+ 1.50%
Ratio of net investment income (loss)
to average net assets # 0.42% 0.55% 1.03% 1.68% (0.04%)
Portfolio turnover rate 19.50% 12.57% 60.76% 105.90% 38.42%
# 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 year.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
Pure American Fund
--------------------------------------------------------------
Year Ended August 31,
--------------------------------------------------------------
2004 2003 2002 2001 2000
--------------------------------------------------------------
Net asset value, beginning of year $10.94 $10.21 $12.45 $13.49 $13.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.02 0.05 0.43 0.28^ (0.03)
Net realized and unrealized gain (loss)
on investments 0.80 0.84 (2.07) (0.02)^ 0.52
------ ------ ------ ------ ------
Total from investment operations 0.82 0.89 (1.64) 0.26^ 0.49
------ ------ ------ ------ ------
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 year $11.71 $10.94 $10.21 $12.45 $13.49
====== ====== ====== ====== ======
Total return 7.49% 8.91% (13.90%)(1) (1.96%)(1) 3.79%
Ratios/supplemental data:
Net assets, end of year
(millions) $2.6 $2.8 $2.6 $4.5 $1.1
Ratio of expenses to average net assets:
Before fees waived 1.50% 1.50% 1.56%+ 1.58% 1.50%
After fees waived n/a n/a 1.19%+(1) 0.08%+(1) n/a
Ratio of net investment income (loss)
to average net assets # 0.16% 0.52% 1.35% 4.09% (0.13%)
Portfolio turnover rate 34.99% 31.47% 75.54% 265.29% 45.48%
++ Amount represents less than $0.01 per share.
^ Calculations are based on average shares outstanding for the period.
+ With dividend expense on securities sold short, which was 0.06% for
2002 and 0.08% for 2001. Otherwise, ratio of expenses (before fees
waived) to average net assets would be 1.50% for 2002 and 2001.
(1) The Adviser voluntarily waived all of its management fees for the period
December 21, 2000 to December 1, 2001.
See accompanying Notes to Financial Statements.
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Purisima Funds
Financial Highlights
For a capital share outstanding throughout each year.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
Pure Foreign Fund
----------------------------------------------------------------
Year Ended August 31,
----------------------------------------------------------------
2004 2003 2002 2001 2000
------ ------ ------ ------ ------
Net asset value, beginning of year $14.10 $13.07 $15.37 $16.39 $13.52
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.35 0.28 0.84 0.33^ 0.01
Net realized and unrealized gain (loss)
on investments 2.14 1.21 (2.47) (0.45)^ 3.69
------ ------ ------ ------ ------
Total from investment operations 2.49 1.49 (1.63) (0.12)^ 3.70
------ ------ ------ ------ ------
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 year $16.16 $14.10 $13.07 $15.37 $16.39
====== ====== ====== ====== ======
Total return 17.76% 10.95% (11.14%)(1) (0.45%)(1) 28.04%
Ratios/supplemental data:
Net assets, end of year (millions) $3.4 $2.7 $3.4 $8.9 $2.8
Ratio of expenses to average net assets:
Before fees waived 1.50% 1.50% 1.50%+ 1.50%+ 1.50%
After fees waived n/a n/a 1.07%+ 0.00%+ n/a
Ratio of net investment income (loss)
to average net assets # 2.09% 2.06% 4.02% 4.21% 0.26%
Portfolio turnover rate 34.02% 22.02% 69.59% 258.66% 51.60%
^ Calculations are based on average shares outstanding for the period.
+ With dividend expense on securities sold short, which was 0.06% for
2002 and 0.08% for 2001. Otherwise, ratio of expenses (before fees
waived) to average net assets would be 1.50% for 2002 and 2001.
1 The Adviser voluntarily waived all of its management fees for the period
December 21, 2000 to December 1, 2001.
See accompanying Notes to Financial Statements.
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PURISIMA FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 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, taking into consideration: (I)
fundamental analytical data relating to the investment; (II) the
nature and duration of restrictions on disposition of the
securities; and (III) an evaluation of the forces which influence
the market in which these securities are purchased and sold. Debt
securities with remaining maturities of 60 days or less are valued
at cost which, when combined with accrued interest, approximates
market value. Discounts and Premiums on securities purchased are
amortized over the lives of the respective securities using the
straight-line method.
B. Federal Income and Excise Taxes. The 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, 2004, the Total Return Fund has a capital loss
carryforward available to offset future capital gains, if any, of
$11,958,728, of which $11,619,847 expires in 2011 and $338,881
expires in 2012. The Pure American Fund has a capital loss
carryforward available to offset future capital gains, if any, of
$205,896, of which $174,478 expires in 2012, $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 $280,093, of which $135,135 expires in 2012, $144,188 expires in
2011 and $770 expires in
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2010. In addition, the Pure American Fund had net realized capital
losses of $9,421 during the period November 1, 2003 through August
31, 2004, which are treated for federal income tax purposes as
arising during the Fund's tax year ending August 31, 2005. 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. Exchange traded options are valued at the last reported
sale price at the close of the exchange on which the security is
primarily traded. Certain markets are not closed at the time that a
Fund prices portfolio securities. In these situations, snapshot
prices are provided by the individual pricing services or other
alternate sources at the close of the NYSE as appropriate. If no
sales are reported, the mean between the last reported bid and asked
prices will be used. Non-exchange traded options will also be valued
at the mean between bid and asked prices. "Fair value" of other
private options are valued after consulting with the Adviser using a
mathematical model.
Options purchased are recorded as investments; options written
(sold) are accounted for as liabilities. When an option expires, the
premium (original option value) is realized as a gain if the option
was written or as a loss if the option was purchased. When the
exercise of an option result in a cash settlement, the difference
between the premium and the settlement proceeds is realized as a
gain or loss. When securities are acquired or delivered upon
exercise of an option, the acquisition cost or sale proceeds are
adjusted by the
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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,
2004, 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.
The Funds are required to establish a margin account with the broker
lending the security sold short. While the short sale is
outstanding, the broker retains the proceeds of the short sale and
the Funds must also maintain a deposit with the broker consisting of
cash having a value equal to a specified percentage of the value of
the securities sold short.
H. Reclassification of Capital Accounts. Accounting principles
generally accepted in the United States of America require that
certain components of net assets relating to permanent differences
be reclassified between financial and tax reporting. These
reclassifications have no effect on net assets or net asset value
per share. For the year ended August 31, 2004, the Total Return Fund
decreased paid-in-capital by $15, increased accumulated net
investment income by $3,187 and increased accumulated realized loss
by $3,172.
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
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year following the year to which the fee reduction, waiver, or expense
absorption relates, provided the aggregate amount of the Fund's current
operating expenses for such fiscal year does not exceed the applicable
limitation on Fund expenses. Any such reimbursement is also contingent upon
Board of Trustees review and approval prior to the time the reimbursement is
also initiated. The Fund must pay its current ordinary operating expenses before
the Adviser is entitled to any reimbursement of fees and/or expenses. For the
year ended August 31, 2004, the Adviser recouped fees previously waived and
expenses absorbed of $44,954.
At August 31, 2004, the cumulative unreimbursed amount paid and/or waived
by the Adviser on behalf of the Fund is $95,807. The Adviser may recapture
$95,807 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 resources all operating expenses of the
Pure American and Pure Foreign Funds
U.S. Bancorp Fund Services, LLC (the "Administrator") acts as the Trust's
Administrator under an Administration Agreement. The Administrator prepares
various federal and state regulatory filings, reports and returns for the Funds;
prepares reports and materials to be supplied to the trustees; monitors the
activities of the Funds' custodian, transfer agent and accountants; coordinates
the preparation and payment of Fund expenses and reviews the Funds' expense
accruals.
For its services, the Administrator receives a monthly fee based on the
value of the total average net assets of the Trust at an annual rate of 0.10% of
the first $200 million of such net assets, 0.05% of the next $300 million, and
0.03% thereafter, subject to a minimum fee of $40,000 per Fund. The Pure
American and Pure Foreign Funds' administration fees are paid by the Adviser
under the Comprehensive Management Agreement.
NOTE 4 - SERVICE AND DISTRIBUTION PLAN
The Trust has adopted a Service and Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Total Return Fund
is authorized to pay expenses incurred for the purpose of financing activities,
including the employment of other dealers, intended to result in the sale of
shares of the Fund. The fee accrues at an annual rate not to exceed 0.25% of the
Fund's average daily net assets. For the year ended August 31, 2004, the Fund
incurred $719,519 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.
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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,
2004 were as follows:
FUND PURCHASES SALES
---- --------- -----
Total Return Fund $90,908,917 $55,288,130
Pure American Fund 1,000,010 1,463,940
Pure Foreign Fund 1,373,856 1,070,009
NOTE 6 - DISTRIBUTION TO SHAREHOLDERS
The difference between the book and tax basis components of the distributable
earnings relate principally to the timing of recognition of income and gains for
federal income tax purposes. Short-term gains distributions reported in the
Statements of Changes of Net Assets, if any, are reported as ordinary income for
federal tax purposes.
As of August 31, 2004, the components of distributable earnings on a tax basis
were as follows:
Total Return Pure American Pure Foreign
------------ ------------- ------------
COST OF INVESTMENTS FOR TAX PURPOSES $287,806,966 $2,450,373 $3,116,274
------------ ---------- ----------
Gross tax unrealized appreciation $ 31,316,871 $ 260,512 $ 381,999
Gross tax unrealized depreciation ($ 14,649,096) ($ 139,929) ($ 101,412)
------------ ---------- ----------
Net tax unrealized appreciation $ 16,667,775 $ 120,583 $ 280,587
UNDISTRIBUTED ORDINARY INCOME $ 1,196,897 $ 4,632 $ 42,041
CAPITAL LOSS CARRYFORWARD ($ 11,958,728) ($ 205,896) ($ 280,093)
POST-OCTOBER LOSSES -- ($ 9,421) --
------------ ---------- ----------
TOTAL ACCUMULATED EARNINGS (LOSSES) $ 5,905,944 ($ 90,102) $ 42,535
============ ========== ==========
The tax composition of dividends are as follows:
Long Term
Ordinary Income Long Term Capital Capital Gains
Income Per Share Gains Per Share
------------------------------------------------------------------
Total Return Fund
8/31/2004 $1,073,580 $0.0650 $ -- $ --
8/31/2003 649,922 $0.0465 1,595,178 0.1141
Pure American Fund
8/31/2004 12,757 0.0487 -- --
8/31/2003 41,305 0.1565 -- --
Pure Foreign Fund
8/31/2004 79,025 0.4287 -- --
8/31/2003 122,709 0.4583 -- --
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NOTE 7 - 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
800-841-0199. This information is also available through the Securities and
Exchange Commission's website at http://www.sec.gov.
NOTE 8 - FORM N-Q DISCLOSURE (UNAUDITED)
Beginning with its first and third fiscal quarters ending on or after July 9,
2004, Purisima Funds will file the Funds' complete schedules of portfolio
holdings with the SEC on form N-Q. The Funds' Form N-Q will be 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.
NOTE 9 - TAX NOTICE (UNAUDITED)
The percentage of dividend income distributed for the year ended August 31,
2004, which is designated as qualified dividend income under the Jobs and Growth
Tax Relief Reconciliation Act of 2003, is 100% for each of the Funds.
The percentage of dividend income distributed for the year ended August 31, 2004
designated as qualified dividends received deduction available to corporate
shareholders, is 100% for the Total Return Fund, 100% for the Pure American Fund
and 0% for the Pure Foreign Fund.
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Other Information - Trustees and Officer Information
(Unaudited)
Number of
Portfolios
in Fund
Position(s) Complex Other
Held Year Principal Overseen by Director-
Name, Address, Age with Trust Elected(1) Occupation(s) During Past Five Years Director ships Held
------------------ ---------- ---------- ------------------------------------ -------- ----------
Kenneth L. Fisher* (54) President 1996 Chief Executive Officer and majority 3 None
Fisher Investments, Inc. and Trustee shareholder of the Adviser, and has served
13100 Skyline Blvd. in such capacities since the incorporation
Woodside, CA 94062 of the Adviser in 1986. Prior thereto, he
was the founder of Fisher Investments, a
sole proprietorship which commenced
operations in 1978.
Sherrilyn A. Fisher* (55) Secretary 1996 Senior Vice President and Corporate N/A None
Fisher Investments, Inc. Secretary of the Adviser. Ms. Fisher has
13100 Skyline Blvd. been employed by the Adviser since 1986.
Woodside, CA 94062
Rita Dam (38) Treasurer 2004 From 1994 to Present, Vice President of U.S. N/A None
615 E. Michigan Street Bancorp Fund Services, LLC
Milwaukee, WI 53202
Pierson E. Clair III (56) Trustee 1996 President and Chief Executive Officer of 3 Signature
Fisher Investments, Inc. Brown & Haley since 1998 (fine Foods, Inc.
13100 Skyline Blvd. confectioners); Vice President of Blummer
Woodside, CA 94062 Chocolate Company from 1980 to 1997, where
he had been employed since 1970.
Bryan F. Morse (52) Trustee 1996 Sole proprietor of Bryan F. Morse, RIA, a 3 None
Fisher Investments, Inc. registered investment adviser since 1990.
13100 Skyline Blvd.
Woodside, CA 94062
Grover T. Wickersham (55) Trustee 1996 Attorney in private practice in Palo Alto, 3 None
Fisher Investments, Inc. California. Prior to entering private
13100 Skyline Blvd. practice in June of 1981, served as a Branch
Woodside, CA 94062 Chief of the Los Angeles Regional Office of
the U.S. Securities and Exchange Commission.
Scott LeFevre (47) Trustee 2001 Sole proprietor of LeFevre Capital 3 None
Fisher Investments, Inc. Management.
13100 Skyline Blvd.
Woodside, CA 94062
Alfred D. McKelvy, Jr. (55) Trustee 2003 Executive Director of the law firm of 3 Diablo
Fisher Investments, Inc. Berding & Weil, LLP since 1990. Valley
13100 Skyline Blvd. Bank; East
Woodside, CA 94062: Bay BOMA.
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(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.
40 and 41
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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Shareholders and Board of Trustees
Purisima Funds
Woodside, California
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments of the Purisima Total Return Fund, the
Purisima Pure American Fund, and the Purisima Pure Foreign Fund, each a series
of shares of the Purisima Funds, as of August 31, 2004, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Funds'
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 (US). 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. An audit
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, 2004, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly in all material respects, the financial position of the
Purisima Total Return Fund, the Purisima Pure American Fund, and the Purisima
Pure Foreign Fund as of August 31, 2004, the results of their operations for the
year then ended, the changes in their net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
September 25, 2004
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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.
43
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44
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45
Item 2. Code of Ethics.
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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.
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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 offer the registrant adequate oversight for the registrant's
level of financial complexity.
Item 4. Principal Accountant Fees and Services.
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The registrant has engaged its principal accountant to perform audit services,
audit-related services, tax services and other services during the past two
fiscal years. "Audit services" refer to performing an audit of the registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years. "Audit-related services" refer to the assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit. "Tax services" refer to professional services rendered
by the principal accountant for tax compliance, tax advice, and tax planning.
The following table details the aggregate fees billed for each of the last two
fiscal years for audit fees, audit-related fees, tax fees and other fees by the
principal accountant.
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FYE 08/31/2003 FYE 08/31/2004
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Audit Fees $26,500 $28,500
Audit-Related Fees 0 0
Tax Fees 7,500 7,500
All Other Fees 0 0
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The audit committee has adopted pre-approval policies and procedures that
require the audit committee to pre-approve all audit and non-audit services of
the registrant, including services provided to any entity affiliated with the
registrant. All of the principal accountant's hours spent on auditing the
registrant's financial statements were attributed to work performed by full-time
permanent employees of the principal accountant. (If more than 50 percent of the
accountant's hours were spent to audit the registrant's financial statements for
the most recent fiscal year, state how many hours were attributed to work
performed by persons other than the principal accountant's full-time, permanent
employees.)
The following table indicates the non-audit fees billed by the registrant's
accountant for services to the registrant and to the registrant's investment
adviser (and any other controlling entity, etc.--not sub-adviser) for the last
two years. The audit committee of the board of trustees/directors has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser is compatible with maintaining the principal
accountant's independence and has concluded that the provision of such non-audit
services by the accountant has not compromised the accountant's independence.
--------------------------------------------------------------------
Non-Audit Related Fees FYE 8/31/2003 FYE 8/31/2004
--------------------------------------------------------------------
Registrant 0 0
Registrant's Investment Adviser 0 0
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Item 5. Audit Committee of Listed Registrants.
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Not applicable to open-end investment companies.
Item 6. Schedule of Investments.
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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
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Management Investment Companies.
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Not applicable to open-end investment companies.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
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Company and Affiliated Purchases.
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Not applicable to open-end investment companies.
Item 9. Submission of Matters to a Vote of Security Holders.
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There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of trustees.
Item 10. Controls and Procedures.
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(a) The Registrant's President/Chief Executive Officer and Treasurer/Chief
Financial Officer 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.
2
(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.
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(a) (1) Incorporated by reference to the Registrant's Form N-CSR filed
November 7, 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.
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Purisima Funds
By (Signature and Title) /s/ KENNETH L. FISHER
------------------------------------
Kenneth L. Fisher, President
Date 11/8/2004
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Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ KENNETH L. FISHER
-----------------------------------
Kenneth L. Fisher, President
Date 11/8/2004
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By (Signature and Title)* /s/ RITA DAM
------------
Rita Dam, Treasurer
Date 11/5/04
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* Print the name and title of each signing officer under his or her signature.
4