-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BHdeAD0LUkPaOaBLZSrFlH3CRgmB3N2E+U6Z5pKNZwjKqqMOrWH0Lk4C68cq6pxY hBHgojS6D5wM/TQFIXzTvw== 0000909012-07-001388.txt : 20071109 0000909012-07-001388.hdr.sgml : 20071109 20071109084332 ACCESSION NUMBER: 0000909012-07-001388 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070831 FILED AS OF DATE: 20071109 DATE AS OF CHANGE: 20071109 EFFECTIVENESS DATE: 20071109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PURISIMA FUNDS CENTRAL INDEX KEY: 0001019946 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07737 FILM NUMBER: 071228395 BUSINESS ADDRESS: STREET 1: C/O FISHER INVESTMENTS STREET 2: 13100 SKYLINE BLVD CITY: WOODSIDE STATE: CA ZIP: 94062 BUSINESS PHONE: 650-851-3334 MAIL ADDRESS: STREET 1: C/O FISHER INVESTMENTS STREET 2: 13100 SKYLINE BLVD CITY: WOODSIDE STATE: CA ZIP: 94062 0001019946 S000005935 The Purisima Total Return Fund C000016365 The Purisima Total Return Fund PURIX 0001019946 S000005936 The Purisima All-Purpose Fund C000016366 The Purisima All-Purpose Fund PURLX N-CSR 1 t303787.txt As filed with the Securities and Exchange Commission on [date] UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07737 THE PURISIMA FUNDS ------------------ (Exact name of registrant as specified in charter) 13100 SKYLINE BLVD. WOODSIDE, CALIFORNIA 94062 (Address of principal executive offices) (Zip code) U. S. BANCORP FUND SERVICES, LLC 2020 EAST FINANCIAL WAY, SUITE 100 GLENDORA, CALIFORNIA 91741 (Name and address of agent for service) (650) 851-3334 Registrant's telephone number, including area code Date of fiscal year end: AUGUST 31 --------- Date of reporting period: AUGUST 31, 2007 --------------- ITEM 1. REPORT TO STOCKHOLDERS. THE PURISIMA FUNDS ANNUAL REPORT AUGUST 31, 2007 The Purisim a Total Return Fund - -------------------------------------------------------------------------------- TABLE OF CONTENTS A Letter to Our Shareholders 2 Performance Summary 5 Sector Breakdown 6 Expense Example 6 Schedule of Investments 8 Statement of Assets and Liabilities 16 Statement of Operations 17 Statement of Changes in Net Assets 18 Financial Highlights 19 Notes to Financial Statements 20 Report of Independent Registered Public Accounting Firm 26 Other Information 27 Trustees and Officer Information 28 Privacy Notice 32 - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVES PURISIMA TOTAL RETURN FUND Seeks to provide investors with a high level of total return by considering both domestic and foreign securities. EACH FUND RESERVES THE RIGHT TO REJECT ANY ORDER FOR THE PURCHASE OF ITS SHARES OR TO LIMIT OR SUSPEND, WITHOUT PRIOR NOTICE, THE OFFERING OF ITS SHARES. THE REQUIRED MINIMUM INVESTMENTS MAY BE WAIVED IN THE CASE OF CERTAIN QUALIFIED RETIREMENT PLANS. THE FUNDS WILL NOT ACCEPT YOUR ACCOUNT IF YOU ARE INVESTING FOR ANOTHER PERSON AS ATTORNEY-IN-FACT. THE FUNDS ALSO WILL NOT ACCEPT ACCOUNTS WITH A "POWER OF ATTORNEY" IN THE REGISTRATION SECTION OF THE PURCHASE APPLICATION. 1 - -------------------------------------------------------------------------------- A LETTER TO OUR SHAREHOLDERS Welcome to the annual report for the Purisima Total Return Fund for the twelve-month period ended August 31, 2007. The primary investment objective of the Fund is achieving high total return for shareholders. MARKET REVIEW AND OUTLOOK: Global equities again finished th e period with strong, positive returns. The MSCI World Index gained 16.97%. Volatility increased markedly during the latter half of the period as investor fears drove stocks into the second correction of this bull market. However, we expect the bull run to continue through the latter half of this year, lifted by a bevy of underappreciated positive fundamentals. The benefits of global diversification were once again evident during the period as fo reign stocks outperformed domestic is sues (comparing the above MSCI World Index performance to the S&P 500 Index return of 15.13% for the same period). We expect 2007 to be the sixth consecutive year of of reign leadership. The upward trend in global equity markets continued virtually friction free, until the middle of July when markets experienced some turbulence seemingly in reaction to subprime mortgage concerns. Subprime was subsequently linked in the media to the highly publicized collapse of two Bear Stearns hedge funds and some cases of Wall Street firms' failure to find buyers for some corporate bonds in tended to fund leveraged buyouts. Talk of an impending "credit crunch" was pervasive as some feared these events were harbingers of the end of the so-called "easy money" which fueled the acquisition boom and propelled equity prices higher. However, we believe the resulting volatility was a temporary sentiment shift in reaction to minor events relative to the broader economy. In our experience, typical bull market corrections are relatively brief, purely psychological, induced by fear and media hype, and very difficult to time. We believe this latest bout of volatility to be a typical bull market correction. Looking ahead, the bullish themes outlined in previous letters remain intact. The global economy and corporate earnings have been growing solidly, surpassing tepid expectations. A relatively low in terest rate environment and comparatively modest stock valuations have been fueling massive acquisition and share buyback activity--and though there were some minor hiccups as liquidity temporarily dried up, we expect this trend to continue on the back half of the year. Sentiment remains cautious as investors tend to be focusing on "glass-is-half-empty" stories. Financial headlines stress supposed problems--a credit crunch, private equity firms run wild, high energy prices, predatory foreign investors, poor real estate sales, and record highs for stock indexes implying future declines. But such stories have either lacked the substance or surprise power necessary to sink markets. Perhaps the most deep-seated fear relates to rising long-term interest rates. If they rise significantly from here, enough to eliminate the positive earnings yield-bond yield spread, concern would be warranted. But the magnitude of the recent move thus far has already happened numerous times in this bull market and, in our opinion, reflects normal volatility. It does not necessarily portend substantially higher rates ahead. Rates are still benign by historical 2 - -------------------------------------------------------------------------------- comparison and, in our view, far from levels endangering economic activity. Furthermore, credit spreads have remained favorable. A plausible scenario that we believe could lead to much higher long-term rates is if in flation accelerates considerably. But meaningful in flation in dicators don't point to precipitous price increases. Higher energy prices distract attention fr om many other goods and services that have experienced flat or falling prices. We believe many fail to recognize today's profound gains in global productivity have been keeping in flation contained during this period of healthy economic growth. The political agenda on Capitol Hill continues to stagnate. The US Congress is thankfully a "do nothing" bunch. Attempts at major new legislation have become either casualties of political in fighting or have been vetoed. Overseas, political change is afoot in two of the world's largest fo reign economies. France elected as president the right-leaning Nicolas Sarkozy, who purportedly brings a seemingly contradictory mix of pro-growth reforms and protectionist desires. In Japan, Prime Minister Shinzo Abe resigned from his post, creating a renewed period of political uncertainty in the region. Our sense is that no legislation of political import will happen soon in either country, just more stasis consistent with the rest of the developed world in recent years. In summary, stocks around th e world still appear to be the best value relative to alternatives such as bonds and cash. We do not believe any visible risks are potent enough to derail the global stock market for now and remain excited about the balance of 2007. FUND POSITIONING We maintain our positive outlook for the global equity markets and continue to be fully invested in equities. Global economic growth has been strong and fundamentals indicate favorable market conditions. The Fund remains slightly overweight to of reign equities to take advantage of what we believe will be strong global corporate earnings, or bust merger and acquisition activity, and share repurchase activity. Japan remains our largest overweight, followed by Emerging Markets and Germany. While our overweight to Japan detracted from returns relative to the benchmark, overall absolute performance was slightly positive. Our performance benefited from an overweight to Emerging Markets and to Germany, both relative to the benchmark and on an absolute basis. Better than expected global economic growth continued to benefit Emerging Markets countries. We anticipate manufacturing and industrial growth in these markets to continue to accelerate due to persistent high demand for raw materials. Energy and Industrials continue to represent the largest sector overweights in the Fund. Our overweight to these sectors have generated positive results both relative to the benchmark and to absolute performance. We believe energy and Industrial companies remain in a good position to benefit from strong global demand and from consolidation. In addition, our third largest sector overweight to Materials also provided a huge positive impact on performance. Materials companies greatly benefited from steadily high commodity prices due to production capacity limitations. Because of our positive economic growth outlook, we have positioned our sector overweights to take advantage of economically sensitive sectors and remain underweight to less sensitive sectors, such as Health Care and Consumer Staples. 3 - -------------------------------------------------------------------------------- In the upcoming period, we expect strong economic and corporate earnings growth combined with attractive relative earnings yields to continue to drive equity prices higher. Robust merger and acquisition as well as share repurchase activity should also provide further support. We believe the Fund is well-positioned to take advantage of the impact from these positive factors. CLOSING REMARKS Overall, both the MSCI World benchmark and the Fund realized strong positive absolute returns during this period. The Fund slightly underperformed the MSCI World benchmark with rising, unwarranted concerns over slowing exports, in flation, weakening currencies detracting from otherwise sound allocation decisions. But with economic in dicators showing increasingly strong global performance and sound fundamentals in place, we expect the Fund is well positioned to peform on both an absolute and relative basis in the upcoming period. Thank you for your continued interest and support. Sincerely, /s/ KENNETH L. FISHER - ----------------------- Kenneth L. Fisher Chairman and Chief Investment Officer Fisher Investments OPINIONS EXPRESSED ABOVE ARE THOSE OF KENNETH L. FISHER AND ARE SUBJECT TO CHANGE, ARE NOT GUARANTEED AND SHOULD NOT BE CONSIDERED RECOMMENDATIONS TO BUY OR SELL ANY SECURITY. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. FUND HOLDINGS AND SECTOR ALLOCATIONS ARE SUBJECT TO CHANGE AND ARE NOT RECOMMENDATIONS TO BUY OR SELL ANY SECURITY. MUTUAL FUND INVESTING INVOLVES RISK OF LOSS. PRINCIPAL LOSS IS POSSIBLE. THE FUND MAY USE SHORT SALES OF SECURITIES, WHICH INVOLVE THE RISK THAT LOSSES MAY EXCEED THE ORIGINAL AMOUNT IN VESTED. FOREIGN IN VESTING INVOLVES SPECIAL RISKS, INCLUDING A GREATER VOLATILITY AND POLITICAL, ECONOMIC AND CURRENCY RISKS AND DIFFERENCES IN ACCOUNTING METHODS. SMALL-AND MEDIUM-CAPITALIZATION COMPANIES TEND TO HAVE LIMITED LIQUIDITY AND GREATER PRICE VOLATILITY THAN LARGE CAPITALIZATION COMPANIES. GROWTH STOCKS TYPICALLY ARE MORE VOLATILE THAN VALUE STOCKS; HOWEVER, VALUE STOCKS HAVE A LOWER EXPECTED GROWTH RATE IN EARNINGS AND SALES. INVESTMENTS IN DEBT SECURITIES TYPICALLY DECREASE IN VALUE WHEN INTEREST RATES RISE. THIS RISK IS GREATER FOR LONGER-TERM DEBT SECURITIES. The MSCI World Index is a broad-based unmanaged capitalization-weighted stock index designed to measure global developed market equity performance. It consists of 23 developed market country indices. The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. One cannot invest directly in an index. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FISHER INVESTMENTS IS THE ADVISOR TO THE PURISMA FUNDS. THE PURISIMA FUNDS ARE DISTRIBUTED BY QUASAR DISTRIBUTORS, LLC, 09/07 PERFORMANCE SUMMARY FOR YEAR ENDED AUGUST 31, 2007 4 PERFORMANCE SUMMARY FOR THE YEAR ENDED AUGUST 31, 2007 PURISIMA TOTAL RETURN FUND GROWTH OF $10,000 PURISIMA TOTAL RETURN FUND CUMULATIVE TOTAL RETURN VERSUS MSCI WORLD INDEX $10,000 INVESTED FROM 9/1/97 O T 8/31/07* GRAPH OMITTED Total Return MSCI World Index - ----------- ------------------------ 30-Sep-97 10,623 10,542 - ----------- ------------------------ 28-Feb-98 11,437 11,280 31-Aug-98 10,526 10,374 - ----------- ------------------------ 28-Feb-99 13,737 12,713 31-Aug-99 14,742 13,803 - ----------- ------------------------ 29-Feb-00 16,174 15,095 31-Aug-00 16,604 15,614 - ----------- ------------------------ 28-Feb-01 15,982 12,939 31-Aug-01 16,384 11,650 - ----------- ------------------------ 28-Feb-02 16,508 11,086 31-Aug-02 13,645 9,648 - ----------- ------------------------ 28-Feb-03 12,112 8,804 31-Aug-03 15,039 10,702 - ----------- ------------------------ 29-Feb-04 17,356 12,707 31-Aug-04 16,350 12,372 - ----------- ------------------------ 28-Feb-05 18,489 14,232 31-Aug-05 18,836 14,613 - ----------- ------------------------ 28-Feb-06 21,054 16,118 31-Aug-06 21,575 16,918 - ----------- ------------------------ 28-Feb-07 23,157 18,673 31-Aug-07 24,948 19,789 - ----------- ------------------------
PURISIMA TOTAL RETURN FUND MSCI WORLD INDEX* ONE-YEAR ONE-YEAR Average Annual Total Return(2)** 15.63% Average Annual Total Return(2)** 16.97% FIVE-YEAR FIVE-YEAR Average Annual Total Return(2)** 12.83% Average Annual Total Return(2)** 15.45% TEN-YEAR TEN-YEAR Cumulative Total Return(1)** 196.14% Cumulative Total Return(1)** 97.86% Average Annual Total Return(2)** 9.57% Average Annual Total Return(2)** 7.06%
Please note past performance is not predictive of future results. SHARE PRICE AND RETURN WILL FLUCTUATE, AND INVESTORS MAY EXPERIENCE A GAIN OR LOSS WHEN THEY SELL THEIR SHARES. TO OBTAIN A PROSPECTUS ON THE PURISIMA FUNDS PLEASE CALL 1-800-841-0199. THE PROSPECTUS CONTAINS MORE INFORMATION, INCLUDING THE POLITICAL, ECONOMIC, CURRENCY RISKS AND POTENTIAL VOLATILITY OF FOREIGN INVESTING. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. 1 Cumulative measures the change in value of an investment over the total return periods indicated and reflects all fund fees and expenses. 2 Average annual total return represents the average annual change in value of an investment over the periods indicated fund fees and expenses. Average annual total return and and reflects cumulative total return for the one-year period would be identical. * The MSCI World Index is an unmanaged global stock index comprised of Index various world stock markets, including the U.S. The total return of a $10,000 investment includes all expenses. ** The total returns shown do not reflect the deduction of taxes a shareholder would pay on fund distributions or redemption of fund shares. The total return reflects the rate an investment would have earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions. 5 - -------------------------------------------------------------------------------- SECTOR BREAKDOWN(1) (UNAUDITED) PURISIMA TOTAL RETURN FUND --------------------------------------------- Consumer Discretionary 4.7% Consumer Staples 2.6% Energy 19.2% Financial 21.7% Health Care 8.1% Industrial 18.9% Information Technology 6.4% Materials 9.1% Telecommunication Services 3.5% Utilities 5.2% Mutual Funds 0.6% --------------------------------------------- Total 100.0% - -------- (1) Percentage of Total Investments as of August 31, 2007. IMPORTANT INFORMATION The following disclosure provides important information regarding the Fund's Expense Example. Please refer to this information when reviewing the Expense Example for the Fund. EXPENSE EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period indicated and held for the entire period from March 1, 2007 to August 31, 2007, for the Total Return Fund. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. 6 - -------------------------------------------------------------------------------- HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and assumed rates of return of 5% per year before expenses, which are not the Fund's actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), or redemption fees. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. ACTUAL HYPOTHETICAL PERFORMANCE PURISIMA TOTAL RETURN FUND PERFORMANCE (5% RETURN BEFORE EXPENSES) - -------------------------------------------------------------------------------- Beginning Account Value (03/01/07) $ 1,000.00 $ 1,000.00 Ending Account Value (08/31/07) $ 1,077.40 $ 1,018.20 Expenses Paid During Period(1) $ 7.28 $ 7.07 - -------------------------------------------------------------------------------- - ----------- (1) Expenses are equal to the Fund's expense ratio for the six month period of 1.41% for the Total Return Fund multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). 7
- -------------------------------------------------------------------------------- PURISIM A TOTAL RETURN FUND SCHEDULE OF INVESTMENTS AUGUST 31, 2007 SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCKS: 99.2% AEROSPACE & DEFENSE: 3.7% 11,400 Embraer-Empresa Brasileira de Aeronautica S.A. - ADR $ 514,824 116,800 Honeywell n I ternational, Inc. 6,558,320 47,800 Lockheed Martin Corp. 4,738,892 74,900 United Technologies Corp. 5,589,787 ------------ 17,401,823 ------------ AIR FREIGHT & LOGISTICS: 1.3% 52,600 FedEx Corp. 5,769,168 4,100 TPG NV 173,142 ------------ 5,942,310 ------------ AUTO COMPONENTS: 1.3% 102,800 Autoliv, Inc. 5,897,636 ------------ AUTOMOBILES: 0.8% 1,000 DaimlerChrysler AG 88,791 183,000 Nissan Motor Co. Ltd. - ADR 3,495,300 ------------ 3,584,091 ------------ BEVERAGES: 0.1% 4,100 Fomento Economico Mexicano S.A. de CV ADR 142,844 2,850 Heineken NV 180,454 ------------ 323,298 ------------ BIOTECHNOLOGY: 1.3% 96,300 Celgene Corp. (a) 6,183,423 ------------ CAPITAL MARKETS: 9.4% 6,630 3I Group 141,030 29,045 Ameriprise Financial, Inc. 1,772,035 149,700 Credit Suisse Group - ADR 9,826,308 44,525 Goldman Sachs Group, I n c. 7,836,845 188,600 Invesco Plc - ADR 4,487,216 19,700 Janus Capital Group, Inc. 523,823 1,800 Julius Baer Holding 119,117 72,950 Lehman Brothers Holdings, Inc. 3,999,848 14,800 Man Group Plc 147,263 93,600 Morgan Stanley 5,837,832 203,550 Nomura Holdings, Inc. - ADR 3,596,729 8,700 Schroders 232,248 8 The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- CAPITAL MARKETS: 9.4% (CONTINUED) 103,350 UBS AG $ 5,399,004 ------------ 43,919,298 ------------ CHEMICALS: 2.2% 72,600 BASF AG - ADR 9,589,734 11,700 Sigma-Aldrich Corp. 524,160 ------------ 10,113,894 ------------ COMMERCIAL BANKS: 4.8% 3,300 Banco Bilbao Vizcaya Argentaria S.A. 75,928 15,400 Banco Bradesco S.A. 380,072 2,500 Banco De Chile - ADR 121,375 6,000 Banco Popolare (a) 150,065 399,175 Banco Santander Central Hispano S.A. - ADR 7,292,927 4,200 Bank Pekao GDR 399,000 473,500 Bank Rakyat 315,162 40,500 Commerce Asset Holdings 126,075 3,900 Danske Bank A/S 160,117 1,900 HDFC Bank Ltd. - ADR 168,435 4,300 ICICI Bank Ltd. - ADR 191,135 126,532 Intesa Sanpaolo S P A - ADR 5,723,384 5,800 Kookmin Bank - ADR (a) 472,410 319,200 Mitsubishi Ufj Financial Group, Inc. - ADR 3,064,320 6,000 Nedbank Group Ltd 113,255 5,900 PNC Financial Services Group 415,183 3,500 Shinhan Financial Group Co Ltd - ADR 434,000 286,100 Sumitomo Mitsui Financial Group, Inc. - ADR 2,258,388 7,800 Woori Finance Holdings Co. Ltd. - ADR 540,930 ------------ 22,402,161 ------------ COMMERCIAL SERVICES & SUPPLIES: 0.0% 3,100 Adecco S.A. 201,940 ------------ COMMUNICATIONS EQUIPMENT: 0.9% 25,800 Cisco Systems, Inc. (a) 823,536 176,600 Motorola, Inc. 2,993,370 13,000 QUALCOMM, Inc. 518,570 ------------ 4,335,476 ------------ COMPUTERS & PERIPHERALS: 1.5% 276,050 EMC Corp. (a) 5,427,143 50,000 Fujitsu Limited - ADR 1,705,990 ------------ 7,133,133 ------------ CONSTRUCTION MACHINERY AND EQUIPMENT: 2.1% 79,700 Komatsu Ltd. - ADR 9,818,538 ------------ CONSTRUCTION MATERIALS: 0.1% 8,463 Cemex S.A. de C.V. - ADR (a) 273,270 4,500 Italcementi 111,262 ------------ 384,532 ------------ The accompanying notes are an integral part of these financial statements. 9 - -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- CONSUMER FINANCE: 1.1% 41,950 Discover Financial Services (a) $ 970,723 37,000 ORIX Corp. - ADR (a) 3,932,730 ------------ 4,903,453 ------------ DIVERSIFIED FINANCIAL SERVICES: 1.1% 122,827 ING Group N.V. - ADR 4,936,417 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES: 1.2% 5,800 Philippine Long Distance Telephone - ADR 340,634 57,400 Telefonica S.A. - ADR 4,286,632 7,600 Telekomunikasi Indonesia Tbk PT - ADR 358,416 47,147 Windstream Corp. 673,259 ------------ 5,658,941 ------------ ELECTRIC UTILITIES: 3.1% 56,500 American Electric Power Co., Inc. 2,513,120 8,800 Companhia Energetica de Minas Gerais 167,200 107,900 DPL, Inc. 2,843,165 46,600 Edison International 2,456,286 12,700 Enersis S.A./Chile - ADR 228,346 48,100 FirstEnergy Corp. 2,955,264 69,600 PPL Corp. 3,358,896 ------------ 14,522,277 ------------ ELECTRONIC COMPUTERS: 0.6% 42,225 Hitachi Ltd. - ADR 2,721,401 20,640 Hon Hai Precision - GDR (a) 311,137 ------------ 3,032,538 ------------ ENERGY EQUIPMENT & SERVICES: 7.3% 9,500 Aker Kvearner ASA 238,720 126,200 Baker Hughes, n I c. 10,583,132 13,000 Helix Energy Solutions Group, Inc. (a) 499,590 10,300 Oceaneering International, Inc. (a) 691,748 6,300 Petroleum Geo - Services 148,043 7,800 Saipem SpA 292,096 119,500 Schlumberger Ltd. 11,531,750 3,000 Technip S.A. 239,443 6,400 Tenaris S.A. - ADR 300,352 91,300 Transocean, Inc. (a) 9,594,717 ------------ 34,119,591 ------------ FOOD & STAPLES RETAILING: 0.1% 16,700 Jeronimo Martins 95,321 4,800 Wal-Mart De Mexico S.A. de C.V. - ADR 170,655 ------------ 265,976 ------------ FOOD PRODUCTS: 1.9% 10,400 Archer-Daniels-Midland Co. 350,480 79,200 Cadbury Schweppes Plc - ADR 3,740,616 316,250 Groupe Danone - ADR 4,820,883 ------------ 8,911,979 ------------ 10 The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES: 1.8% 2,400 Celesio AG $ 150,229 84,300 Cigna Corp. 4,356,624 71,100 Health Net, Inc. (a) 3,895,569 5,000 Rhoen Klinikum AG 153,730 ------------ 8,556,152 ------------ HOUSEHOLD DURABLES: 0.9% 219,300 Matsushita Electric Industrial Co. Ltd.- ADR 3,828,978 8,400 The Stanley Works 476,616 ------------ 4,305,594 ------------ HOUSEHOLD PRODUCTS: 0.5% 36,225 Procter & Gamble Co. 2,365,855 ------------ INDUSTRIAL CONGLOMERATES: 3.3% 95,850 General Electric Co. 3,725,689 62,100 Mmc Corporation 130,354 16,000 Orkla ASA 259,072 90,250 Siemens AG - ADR 11,308,325 ------------ 15,423,440 ------------ INFORMATION RETRIEVAL SERVICES: 0.1% 7,900 Nutri System, Inc. (a) 428,417 ------------ INSURANCE: 2.7% 173,550 AXA - ADR 6,974,974 2,700 China Life Insurance Co Ltd - ADR 196,911 134,875 Millea Holdings, Inc. - ADR 5,212,784 ------------ 12,384,669 ------------ MACHINERY: 4.9% 11,600 AGCO Corp. (a) 501,120 96,900 Caterpillar, Inc. 7,342,113 125,700 Illinois Tool Works, Inc. 7,311,969 5,600 Konecranes Oyj 212,609 149,800 Kubota Corp. - ADR 5,858,678 4,500 Scania AB-B Shares 104,379 6,250 Terex Corp. (a) 499,250 10,700 Trinity Industries, Inc. 401,999 900 Vallourec 240,791 11,000 Volvo AB-B 190,165 24,100 Weg S.A. 255,617 ------------ 22,918,690 ------------ MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS: 0.8% 100,300 Hoya Corp. - ADR 3,478,464 ------------ MEDIA: 0.3% 600 Affichage Hldg 136,488 18,500 Comcast Corp. (a) 482,665 The accompanying notes are an integral part of these financial statements. 11 - -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- MEDIA: 0.3% (CONTINUED) 5,800 Grupo Televisa S.A. - ADR $ 151,148 4,300 Naspers Ltd - ADR 107,372 7,100 Publicis Groupe 306,795 5,300 Vivendi Universal S.A. 216,670 ------------ 1,401,138 ------------ METALS & MINING: 6.9% 52,550 Allegheny Technologies, Inc. 5,222,944 3,003 Anglo American 172,199 2,000 AngloGold Ashanti Ltd. - ADR 78,060 92,300 BHP Billiton Ltd. - ADR 5,828,745 3,800 Cia Siderurgica Nacional S.A. - ADR 214,358 10,500 Cia Vale Do Rio Doce 438,375 14,600 Commercial Metals Co. 421,794 700 Eramet 192,698 77,300 Freeport-McMoRan Copper & Gold, Inc. 6,757,566 10,700 Gerdau S.A. 257,228 3,300 Gold Fields Ltd. - ADR 50,028 54,300 Grupo Mexico S.A. de CV 339,738 4,800 Harmony Gold Mining Co., Ltd. - ADR (a) 42,960 20,000 Industrias Penoles S.A. de CV 267,072 2,200 KGHM Polska Miedz GDR (a) 174,900 273,200 Kobe Steel Ltd. - ADR 4,973,060 21,150 Rio Tinto Plc - ADR 5,812,020 500 Salzgitter AG 98,763 5,500 Southern Copper Corp. 578,875 ------------ 31,921,383 ------------ METALS SERVICE CENTERS & OFFICES: 1.1% 12,110 Mitsui & Co. Ltd. - ADR 5,081,598 ------------ MULTILINE RETAIL: 0.1% 7,000 JC Penney Co. Inc. (Holding Co.) 481,320 ------------ MULTI-UTILITIES & UNREGULATED POWER: 0.5% 14,300 International Power Plc 116,627 37,900 Sempra Energy 2,085,637 ------------ 2,202,264 ------------ OFFICE ELECTRONICS: 0.1% 25,800 Xerox Corp. ( a ) 441,954 ------------ OIL & GAS: 8.6% 6,100 Apache Corp. 472,018 8,500 BP Plc 95,545 59,100 Canadian Natural Resources Ltd. 4,037,121 3,300 China Petroleum & Chemical Corp. - ADR 363,495 2,800 CNOOC Ltd. - ADR 344,120 68,000 Devon Energy Corp. 5,121,080 12 The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- OIL & GAS: 8.6% (CONTINUED) 80,500 EnCana Corp. $ 4,709,250 7,100 ENI SpA 245,474 71,000 EOG Resources, Inc. 4,782,560 2,100 Mol Hungarian Oil Spons - ADR (a) 252,000 121,500 Occidental Petroleum Corp. 6,887,835 6,200 Petroleo Brasileiro S.A. - ADR 383,408 9,800 Pkn Orlen GDR (a) 392,000 4,400 Sasol Ltd. - ADR 177,012 161,100 Talisman Energy, Inc. 2,764,476 106,808 Total S.A. - ADR 8,020,213 7,000 Valero Energy Corp. 479,570 5,500 XTO Energy, Inc. 298,980 ------------ 39,826,157 ------------ OIL, GAS & CONSUMABLE FUELS: 3.3% 138,650 Anadarko Petroleum Corp. 6,791,077 94,500 ConocoPhillips 7,738,605 477,000 Medco Energi Intl 198,115 5,100 Norsk Hydro ASA 188,952 6,400 OAO Gazprom Sponsored - ADR (a) 266,200 ------------ 15,182,949 ------------ PETROLEUM REFINING: 1.6% 134,300 E.ON AG - ADR 7,518,114 ------------ PHARMACEUTICALS: 4.9% 95,100 AstraZeneca Plc - ADR 4,678,920 17,100 Bristol-Myers Squibb Co. 498,465 88,250 GlaxoSmithKline Plc - ADR 4,608,415 49,900 Johnson & Johnson 3,083,321 259,000 King Pharmaceuticals, Inc. (a) 3,892,770 108,800 Merck & Co., Inc. 5,458,496 1,400 Novartis AG 73,828 12,600 Schering Plough Corporation 378,252 2,400 Stada Arzneimittel 153,923 3,300 Teva Pharmaceutical Industries, Ltd. - ADR 141,900 ------------ 22,968,290 ------------ REAL ESTATE: 1.8% 18,200 Alexandria Real Estate Equities, Inc. 1,698,606 31,900 AMB Property Corp. 1,753,862 22,550 Camden Property Trust 1,386,600 14,200 Essex Property Trust, Inc. 1,672,618 17,300 Host Marriott Corp. 385,617 20,418 Public Storage, Inc. 1,547,276 ------------ 8,444,579 ------------ The accompanying notes are an integral part of these financial statements. 13 - -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- ROAD & RAIL: 1.4% 89,900 Canadian Pacific Railway Ltd. $ 6,336,152 9,200 CSX Corp. 377,200 ------------ 6,713,352 ------------ SHIPBUILDING: 0.1% 5,200 Daewoo Shipbuilding GDR (a) 620,845 ------------ SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT: 2.8% 50,279 Advanced Semiconductor Engr - ADR 251,397 112,075 KLA-Tencor Corp. 6,440,950 10,800 MEMC Electronic Materials, Inc. (a) 663,336 25,000 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR 248,000 151,300 Texas Instruments, Inc. 5,180,512 ------------ 12,784,195 ------------ SEMICONDUCTORS AND RELATED DEVICES: 0.3% 8,500 Hynix Semiconductor GDR (a) 305,593 1,750 Samsung Electronic 555,625 29,342 Siliconware Precision Inds Ltd - ADR 316,600 ------------ 1,177,818 ------------ SOFTWARE: 0.2% 18,300 Citrix Systems, Inc. (a) 665,205 2,300 Dassault Systemes S.A. 135,228 4,600 SAP AG 247,708 ------------ 1,048,141 ------------ SPECIALTY RETAIL: 0.2% 5,800 Advance Auto Parts 206,248 11,425 Tiffany & Co. 586,445 ------------ 792,693 ------------ TEXTILE MILL PRODUCTS: 1.0% 59,400 Toray Industries, Inc. - ADR 4,535,131 ------------ TEXTILES, APPAREL & LUXURY GOODS: 0.1% 3,300 ADIDAS-SALOMON AG 193,978 4,300 Luxottica Group SpA 146,793 ------------ 340,771 ------------ THRIFTS & MORTGAGE FINANCE: 0.8% 112,000 The PMI Group Inc. 3,548,160 ------------ WATER UTILITIES: 0.0% 9,300 Kelda Group Plc 163,510 ------------ 14 The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------- SHARES VALUE - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES: 2.2% 4,700 America Movil SA de CV - ADR $ 284,162 1,400 Bouygues S.A. 110,252 146,500 China Mobile Hong Kong Ltd. - ADR 9,931,235 39,300 Vodafone Group Plc 126,624 ------------ 10,452,273 ------------ TOTAL COMMON STOCKS (Cost $327,988,464) 461,500,641 ------------ PREFERRED STOCKS: 0.1% AIRLINES: 0.0% 5,300 Tam S.A. 122,748 ------------ BEVERAGES: 0.0% 2,400 Companhia de Bebidas das Americas A (MBEV), - ADR 167,928 ------------ COMMERCIAL BANKS - 0.1% 4,100 Banco Itau Holding Financeira S.A. 178,473 1,500 Uniao de Bancos Brasileiros S.A. 167,370 ------------ 345,843 ------------ HOUSEHOLD PRODUCTS: 0.0% 2,900 Henkel KGAA 149,369 ------------ MULTILINE RETAIL: 0.0% 21,000 Lojas Americanas S.A. 171,254 ------------ TOTAL PREFERRED STOCKS (Cost $1,104,581) 957,142 ------------ SHORT TERM INVESTMENTS: 0.6% $ 2,934,675 SEI Daily Income Trust Government Fund 2,934,675 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $2,934,675) 2,934,675 ------------ TOTAL INVESTMENTS (Cost $332,027,720): 99.9% 465,392,458 OTHER ASSETS IN EXCESS OF LIABILITIES: 0.1% 331,524 ------------ NET ASSETS: 100.0% $465,723,982 ============ - ----------- ADR - American depositary receipt. GDR - Global depositary receipt. (a) Non-income producing security. The accompanying notes are an integral part of these financial statements. 15
- -------------------------------------------------------------------------------- PURISIM A TOTAL RETURN FUND STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2007 ASSETS Investments in securities, at cost $ 332,027,720 ============= Investments in securities, at value $ 465,392,458 Receivables: Dividends and interest 567,581 Fund shares sold 569,407 From the Administrator 6,500 Other assets 23,184 ------------- Total Assets 466,559,130 ------------- LIABILITIES Payable for fund shares redeemed 28,667 Payable to the custodian 3,083 Accrued advisory fees (Note 3) 386,346 Accrued distribution fees (Note 4) 240,841 Accrued administration fees (Note 3) 26,741 Accrued transfer agent fees 49,624 Accrued tax liability (Note 2) 6,500 Other accrued expenses 93,346 ------------- Total Liabilities 835,148 ------------- NET ASSETS $ 465,723,982 ============= Number of shares issued and outstanding (unlimited shares authorized, $0.01 par value) 18,784,710 ============= NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 24.79 ============= COMPONENTS OF NET ASSETS Paid-in capital $ 313,621,395 Accumulated net investment loss (1,276,122) Accumulated net realized gain on investments 20,013,971 Net unrealized appreciation on investments 133,364,738 ------------- Net assets $ 465,723,982 ============= 16 The accompanying notes are an integral part of these financial statements.
- -------------------------------------------------------------------------------- PURISIMA TOTAL RETURN FUND STATEMENT OF OPERATIO NS FOR THE YEAR ENDED AUGUST 31, 2007 INVESTMENT INCOME Income Dividends (net of foreign taxes withheld of $784,498) $ 7,438,507 Interest income 151,977 ----------- Total income 7,590,484 ----------- Expenses Advisory fees (Note 3) 4,300,185 Distribution fees (Note 4) 753,306 Administration fees (Note 3) 315,109 Transfer agent fees 185,098 Fund accounting fees 114,339 Custody fees 74,654 Insurance expense 89,296 Reports to shareholders 38,589 Registration fees 33,509 Audit fees 20,787 Legal fees 46,074 Trustee fees 16,368 Interest expense 870 Miscellaneous 12,377 ----------- Total expenses 6,000,561 ----------- Net investment income 1,589,923 REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investments and foreign currency gains 22,935,435 Change in net unrealized appreciation on investments 36,347,412 ----------- Net gain on investments 59,282,847 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $60,872,770 =========== The accompanying notes are an integral part of these financial statements. 17
- -------------------------------------------------------------------------------- PURISIM A TOTAL RETURN FUND STATEMENT OF CHANGES IN NET ASSETS Year Ended Year Ended August 31, 2007 August 31, 2006 --------------- --------------- INCREASE IN NET ASSETS FROM: OPERATIONS Net investment income $ 1,589,923 $ 674,614 Net realized gain (loss) on investments 22,935,435 11,633,430 Change in net unrealized appreciation on investments 36,347,412 34,526,644 ------------- ------------- Net increase in net assets resulting from operations 60,872,770 46,834,688 ------------- ------------- DISTRIBUTION TO SHAREHOLDERS From net investment income (1,378,881) (4,857,625) ------------- ------------- Total distributions to shareholders (1,378,881) (4,857,625) ------------- ------------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets derived from net change in outstanding shares (a) 18,931,734 19,897,125 ------------- ------------- Total increase in net assets 78,425,623 61,874,188 ------------- ------------- NET ASSETS Beginning of year 387,298,359 325,424,171 ------------- ------------- END OF YEAR $ 465,723,982 $ 387,298,359 ============= ============= Undistributed net investment income (loss) $ (1,276,122) $ (2,564,100) ============= ============= (a) A summary of capital share transactions is as follows: YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ------------------------- -------------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------ Shares sold 3,607,216 $ 85,489,850 3,149,391 $ 66,243,656 Shares issued on reinvestment of distributions 56,352 1,288,215 216,984 4,596,749 Shares issued from merger -- -- 325,790 6,431,095 Shares redeemed (2,884,946) (67,846,331) (2,785,212) (57,374,375) ---------- ------------ ---------- ------------ Net increase (decrease) 778,622 $ 18,931,734 906,953 $ 19,897,125 ========== ============ ========== ============ 18 The accompanying notes are an integral part of these financial statements.
- -------------------------------------------------------------------------------- PURISIMA TOTAL RETURN FUND FINANCIAL HIGHLIGHTS FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH YEAR. The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Annual Report. YEAR ENDED AUGUST 31, ---------------------------------------------------------- 2007 2006 2005 2004 2003 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of year $ 21.51 $ 19.03 $ 16.58 $ 15.31 $ 14.06 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.09 0.04 0.10 0.07 0.07 Net realized and unrealized gain (loss) on investments 3.27 2.72 2.42 1.27 1.34 ---------- ---------- ---------- ---------- ---------- Total from investment operations 3.36 2.76 2.52 1.34 1.41 ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS: From net investment income (0.08) (0.28) (0.07) (0.07) (0.05) From net realized gain -- -- -- -- (0.11) ---------- ---------- ---------- ---------- ---------- Total distributions (0.08) (0.28) (0.07) (0.07) (0.16) ---------- ---------- ---------- ---------- ---------- Net asset value, end of year $ 24.79 $ 21.51 $ 19.03 $ 16.58 $ 15.31 ========== ========== ========== ========== ========== Total return 15.63% 14.54% 15.20% 8.72% 10.22% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (millions) $ 465.7 $ 387.3 $ 325.4 $ 298.6 $ 244.1 RATIO OF EXPENSES TO AVERAGE NET ASSETS: Before fees waived and expenses absorbed or recouped 1.39% 1.49% 1.46% 1.49% 1.56% After fees waived and expenses absorbed or recouped 1.39% 1.49% 1.49% 1.50% 1.50% Ratio of net investment income to average net assets # 0.37% 0.21% 0.52% 0.42% 0.55% Portfolio turnover rate 16.38% 43.47% 16.68% 19.50% 12.57% - ----------- # Net of fees waived. The accompanying notes are an integral part of these financial statements. 19
- -------------------------------------------------------------------------------- PURISIM A TOTAL RETURN FUND NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2007 NOTE 1 -- ORGANIZATION The Purisima Funds (the "Trust") was organized as a Delaware business trust on June 27, 1996 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end management investment company issuing its shares in series. Each series represents a distinct portfolio with its own investment objectives and policies. The accompanying financial statements include the Total Return Fund (the "Fund"), which commenced operations on October 28, 1996, one of the two portfolios comprising the Trust. Fisher Asset Management, LLC (doing business as Fisher Investments) (the "Adviser") serves as the investment adviser to the Funds. The investment objective of the Total Return Fund is as follows: The Fund seeks a high total return. The Fund seeks to achieve its objective by investing in a portfolio allocated between domestic and foreign common stocks, fixed-income securities, money market instruments and other equity-type securities. The Fund's investments in different types of securities may vary significantly. NOTE 2-- SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America. A. Security Valuation. Investments in securities traded on a national securities exchange are valued at the last sales price on the business day as of which such value is being determined. If on a particular day, an exchange-listed security does not trade, then the mean between the bid and asked prices will be used. Foreign exchange traded equity securities are valued based upon the price on the exchange or market on which they trade as of the close of business of such market or exchange immediately preceding the time the Fund's net asset value is determined. Investments in securities traded on the NASDAQ Global Market, the NASDAQ Global Select Market and the NASDAQ Capital Market will be valued at the NASDAQ Official Closing Price ("NOCP"), which may not necessarily represent the last sale price. Securities traded on an exchange or NASDAQ for which there have been no sales and other over-the-counter securities are valued at the closing price. Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees or their designee, taking into consideration: (I) fundamental analytical data relating to the investment; (II) the nature and duration of restrictions on disposition of the securities; and (III) an evaluation of the forces which influence the market in which these securities are purchased and sold. Debt securities with remaining maturities of 60 days or less are valued at amortized cost which, when combined with accrued interest, approximates market value. 20 - -------------------------------------------------------------------------------- B. FOREIGN CURRENCY TRANSLATION. The Fund's records are maintained in U.S. dollars. The value of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the reporting period. Purchases and sales of investment securities, income and expenses are translated on the respective dates of such transactions. The Fund does not isolate that portion of their net realized and unrealized gains and losses on investments resulting from changes in foreign exchange rates from the impact arising from changes in market prices. Such fluctuations are included with net realized and unrealized gain or loss from investments and foreign currency. Net realized foreign currency transaction gains and losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the differences between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency translation gains and losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rates. C. Federal Income and Excise Taxes. The Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its income to its shareholders. Therefore, no federal income or excise tax provision is required. During the fiscal year ended August 31, 2007, the Fund incurred a tax liability of $6,500. The Administrator has agreed to reimburse the Fund for this tax liability. Accordingly, there is no impact to the Fund or its shareholders. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable based upon its current interpretations of the tax rules and regulation that exist in the markets in which it invests. As of August 31, 2007, the Total Return Fund used its capital loss carryforward of $1,540,425 to offset capital gains. D. SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS. Security transactions are accounted for on trade date. Dividend income and distributions to shareholders are recorded on the ex-dividend date and interest income is recognized on the accrual basis. Realized gains and losses are evaluated on the bases of identified costs. E. USE OF ESTIMATES. The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions. 21 - -------------------------------------------------------------------------------- F. Concentration of Risk. Investments in securities of non-U.S. issues in certain countries involve special investment risks. These risks may include but are not limited to, investment restrictions, adverse political, social and economic developments, government involvement in the private sector, limited and less reliable investor information, lack of liquidity, certain local tax law considerations, and limited regulation of the securities markets. G. Securities Sold Short. To the extent the Fund engages in selling securities short, it is obligated to replace a security borrowed by purchasing the same security at the current market value. The Fund would incur a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund would realize a gain if the price of the security declines between those dates. The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Fund must also maintain a deposit with the broker consisting of cash having a value equal to a specified percentage of the value of the securities sold short. H. Reclassification of Capital Accounts. Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent difference be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended August 31, 2007, the Total Return Fund decreased accumulated net investment loss by $1,076,936, and decreased accumulated net realized gain on investments by $1,076,936. I. Indemnification Obligations. Under the Fund's organizational documents, its current and former officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred or that would be covered by other parties. J. Line of Credit. The Fund has a Loan Agreement with U.S. Bank N.A. Under the terms of the Loan Agreement, the Fund's borrowings cannot exceed the lesser of $8,000,000 or 33 1/3% of the net assets of the Fund. The interest rate paid on the Loan equals the prime rate per annum, payable monthly. Borrowing activity under the Loan Agreement for the year ended August 31, 2007, was as follows: MAXIMUM AMOUNT AVERAGE AVERAGE AMOUNT INTEREST OUTSTANDING AT AMOUNT INTEREST OUTSTANDING EXPENSE AUGUST 31, 2007 OUTSTANDING RATE ----------- ------- --------------- ----------- ---- $ 857,000 $ 870 $ 0 $ 11,066 8.250% 22 - -------------------------------------------------------------------------------- NOTE 3 -- COMMITMENTS, OTHER RELATED PARTY TRANSACTIONS AND OTHER SERVICE PROVIDERS The Fund has an Investment Management Agreement with the Adviser to provide investment advisory services to the Fund. The Adviser furnishes all investment advice, office space, facilities, and most of the personnel needed by the Fund. As compensation for its services, the Adviser is entitled to a monthly fee at the annual rate of 1.00% of the Fund's average daily net assets. The Fund is responsible for its own operating expenses. The Adviser has agreed to limit the Fund's total expenses (exclusive of brokerage, interest, taxes, dividends on securities sold short and extraordinary expenses) to not more than 1.50% of the average daily net assets. Any fee withheld or voluntarily reduced and/or any Fund expense absorbed by the Adviser pursuant to an agreed upon expense cap shall be reimbursed by the Fund to the Adviser, if so requested by the Adviser, anytime before the end of the third fiscal year following the year to which the fee reduction, waiver, or expense absorption relates, provided the aggregate amount of the Fund's current operating expenses for such fiscal year does not exceed the applicable limitation on Fund expenses. Any such reimbursement is also contingent upon Board of Trustees review and approval prior to the time the reimbursement is initiated. The Fund must pay its current ordinary operating expenses before the Adviser is entitled to any reimbursement of fees and/or expenses. For the year ended August 31, 2007, the Adviser had previously recouped all fees previously waived and expenses absorbed from the Total Return Fund. U.S. Bank, N.A. serves as the Fund's Custodian. U.S. Bancorp Fund Services, LLC ("USBFS"), an affiliate of U.S. Bank, N.A., serves as the Administrator, Fund Accountant and Transfer Agent. Certain officers of the Trust, including the Trust's Treasurer, are employees of the Administrator. In its capacity as the Fund's Administrator, USBFS provides general fund management including corporate secretarial services, coordinates the preparation of materials for the Board of Trustees, assists with the annual audit of the Fund's financial statements, monitors the Fund's compliance with federal and state regulations as well as investment restrictions, coordinates the payment of Fund expenses and monitors expense accruals, prepares financial statements and non-investment related statistical data and makes required tax reporting calculations. During the year ended August 31, 2007, Purisima Total Return Fund paid USBFS $315,109 for services rendered in its capacity as the Trust's Administrator. Quasar Distributors, LLC, an affiliate of U.S. Bank, N.A., and USBFS serves as principal underwriter of the Fund and acts as the Fund's distributor in a continuous public offering of the Fund's shares. NOTE 4 -- SERVICE AND DISTRIBUTION PLAN The Trust has adopted a Service and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Total Return Fund is authorized to pay expenses incurred for the purpose of financing activities, including the employment of other dealers, intended to result in the sale of shares of the Fund. The fee accrues at an annual rate not to exceed 0.25% of the Fund's average daily net assets. For the year ended August 31, 2007, the Fund incurred $753,306 in distribution fees. Quasar Distributors, LLC, an affiliate of the Administrator, serves as distributor of the Fund pursuant to a Distribution Agreement with the Trust. 23 - -------------------------------------------------------------------------------- NOTE 5 -- INVESTMENT TRANSACTIONS The cost of purchases and the proceeds from sales of securities, excluding U.S. Government securities and short-term investments, for the year ended August 31, 2007 were as follows: FUND PURCHASES SALES ---- --------- ----- Total Return Fund $88,710,343 $69,895,842 NOTE 6 -- FEDERAL INCOME TAX MATTERS The difference between the book and tax basis components of the distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. These differences are primarily attributable to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains on passive foreign investment companies and return of capital distributions and income adjustments recognized for tax purposes on real estate investment trusts. Short-term gains distributions reported in the Statements of Changes of Net Assets, if any, are reported as ordinary income for federal tax purposes. As of August 31, 2007, the components of distributable earnings on a tax basis were as follows: TOTAL RETURN ------------ Cost of investments for tax purposes $ 334,292,686 ============= Gross tax unrealized appreciation $ 143,653,280 Gross tax unrealized depreciation $ (12,553,508) ------------- Net tax unrealized appreciation $ 131,099,772 ------------- Undistributed ordinary income $ 767,824 Undistributed Long Term Capital Gains $ 20,235,777 ------------- Total distributable earnings $ 21,003,601 ------------- Other accumulated earnings $ (786) ------------- Total accumulated earnings $ 152,102,587 ============= The tax composition of dividends are as follows: LONG TERM ORDINARY LONG TERM CAPITAL GAINS INCOME CAPITAL GAINS PER SHARE ------ ------------- --------- Total Return Fund 8/31/2007 $ 1,378,881 -- -- 8/31/2006 $ 4,857,625 -- -- 24 - -------------------------------------------------------------------------------- NOTE 7 -- RECENT ACCOUNTING PRONOUNCEMENTS In September, 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements", which will expand the disclosure requirements for fair value measurements. The new standard defines fair value as the price that would be received upon the sale of an asset or transfer of a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, this Statement also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entity's own assumptions about marketing participant assumptions developed based on the best information available in the circumstances (unobservable inputs). SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and earlier adoption is permitted. (Management is currently evaluating the impact of adoption of SFAS No. 157 on its financial statements.) Effective June 29, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, a clarification of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 establishes financial reporting rules regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The adoption of FIN 48 had no impact on the Company's net assets or results of operations. 25 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees The Purisima Funds Woodside, California We have audited the accompanying statement of assets and liabilities, including the schedule of investments of the Purisima Total Return Fund, a series of The Purisima Funds (the "Trust"), as of August 31, 2007, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly in all material respects, the financial position of the Purisima Total Return Fund as of August 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. TAIT, WELLER & BAKER LLP Philadelphia, Pennsylvania September 16, 2005 26 - -------------------------------------------------------------------------------- PURISIMA TOTAL RETURN FUND OTHER INFORMATION PROXY VOTING PROCEDURES (UNAUDITED) The Adviser votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, free of charge, by calling toll-free 1-800-841-0199. This information is also available through the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to the portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling toll-free 1-800-841-0199. This information is also available through the Securities and Exchange Commission's website at www.sec.gov. ----------- FORM N-Q DISCLOSURE (UNAUDITED) The Fund files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters on Form N-Q. The Fund's Form N-Q is available without charge, upon request, by calling 1-800-841-0199. Furthermore, you can obtain the Form N-Q on the SEC's website at www.sec.gov. ----------- TAX NOTICE (UNAUDITED) For the fiscal year ended August 31, 2007, certain dividends paid by the Fund may be subject to a minimum tax rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund designates 100% of dividends declared from ordinary income as qualified dividend income. The percentage of dividend income distributed for the year ended August 31, 2007 designated as qualified dividends received deduction available to corporate shareholders is 63.6% for the Total Return Fund. For the year ended August 31, 2007, the Total Return Fund earned foreign source income and paid foreign taxes, which they intend to pass through to their shareholders pursuant to Section 853 of the Internal Revenue Code as follows: GROSS DIVIDENDS TAXES WITHHELD --------------- -------------- Brazil 99,892.72 12,262.75 Canada 148,478.47 22,277.55 Chile 580.44 224.55 France 618,421.98 143,222.30 Germany 705,205.81 116,963.34 Italy 410,717.57 110,893.74 Israel 305.15 48.82 Japan 868,792.13 122,024.60 Netherlands 234,608.74 35,997.02 Philippines 12,751.45 1,999.71 Spain 310,720.52 54,110.26 South Korea 94,713.52 16,133.08 Switzerland 577,752.07 116,609.94 Taiwan 24,434.23 6,982.85 27 - -------------------------------------------------------------------------------- PURISIMA TOTAL RETURN FUND TRUSTEES AND OFFICER INFORMATION (UNAUDITED) The Board of Trustees is responsible for the overall management of the Trust's business. The Board of Trustees approves all significant agreements between the Trust and persons or companies furnishing services to it, including all agreements with the Adviser, Administrator, Custodian and Transfer Agent. The Board of Trustees delegates the day-to-day operations of the Trust to its Officers, subject to the Fund's investment objective and policies and to general supervision by the Board of Trustees. The Statement of Additional Information includes additional information about the Trust's Trustees and is available, without charge, by calling 1-800-841-0199. The Trustees and Officers of the Trust, their business addresses and principal occupations during the past five years are: Name, Address, Position(s) Held Date of Birth with Trust Year Elected(1) - -------------------------------------------------------------------------------- Kenneth L. Fisher* (born 1950) President and Trustee 1996 13100 Skyline Blvd. Woodside, CA 94062 - -------------------------------------------------------------------------------- Pierson E. Clair III (born 1948) Trustee 1996 13100 Skyline Blvd. Woodside, CA 94062 - -------------------------------------------------------------------------------- Scott LeFevre (born 1957) Trustee 2001 13100 Skyline Blvd. Woodside, CA 94062 - -------------------------------------------------------------------------------- Alfred D. McKelvy, Jr. (born 1949) Trustee 2003 13100 Skyline Blvd. Woodside, CA 94062 - -------------------------------------------------------------------------------- Bryan F. Morse (born 1952) Trustee 1996 13100 Skyline Blvd. Woodside, CA 94062 - -------------------------------------------------------------------------------- Grover T. Wickersham (born 1949) Trustee 1996 13100 Skyline Blvd. Woodside, CA 94062 - -------------------------------------------------------------------------------- 28 - -------------------------------------------------------------------------------- Number of Portfolios in Fund Complex Other Principal Occupation(s) Overseen by Directorships During Past Five Years Director Held - -------------------------------------------------------------------------------- Chief Executive Officer and majority shareholder of 2 None Fisher Investment, Inc., the sole shareholder of the Adviser, and has served in such capacities since the incorporation of the Adviser in 1986. Prior thereto, he was the founder of Fisher Investments, a sole proprietorship which commenced operations in 1979. - -------------------------------------------------------------------------------- President and Chief Executive Officer of 2 Signature Brown & Haley since 1998 (fine confectioners); Foods, Inc. Vice President of Blummer Chocolate Company from 1980 to 1997, where he had been employed since 1970. - -------------------------------------------------------------------------------- Sole proprietor of LeFevre Capital 2 None Management, a registered investment adviser. - -------------------------------------------------------------------------------- Executive Director of the law firm of 2 Diablo Valley Berding & Weil, LLP since 1990. Bank; East Bay BOMA. - -------------------------------------------------------------------------------- Sole proprietor of Bryan F. Morse, RIA, 2 None a registered investment adviser since 1990. - -------------------------------------------------------------------------------- Attorney in private practice in Palo Alto, 2 None California. Prior to entering private practice in June of 1981, served as a Branch Chief of the Los Angeles Regional Office of the U.S. Securities and Exchange Commission. - -------------------------------------------------------------------------------- 29 - -------------------------------------------------------------------------------- Position(s) Held Name, Address, Age with Trust Year Elected(1) - -------------------------------------------------------------------------------- Tom Fishel (born 1960) Chief 2005 13100 Skyline Blvd. Compliance Woodside, CA 94062 Officer - -------------------------------------------------------------------------------- Keith Shintani (born 1963) Secretary and 2006 2020 East Financial Way Assistant Glendora, CA 91741 Treasurer - -------------------------------------------------------------------------------- Michael Ricks (born 1977) Treasurer 2006 2020 East Financial Way Glendora, CA 91741 - -------------------------------------------------------------------------------- - ------------- (1) Trustees and officers of the Funds serve until their resignation, removal or retirement. * "Interested person" of the Trust, as defined in the 1940 Act. 30 - -------------------------------------------------------------------------------- Number of Portfolios in Fund Complex Other Principal Occupation(s) Overseen by Directorships During Past Five Years Director Held - -------------------------------------------------------------------------------- Vice President and Chief Compliance Officer of N/A None the Adviser. Vice President of Charles Schwab & Co., Inc. from 1995 to 2004, where he had been employed since 1983. - -------------------------------------------------------------------------------- Vice President of U.S. Bancorp Fund N/A None Services, LLC and its predecessor, Investment Company Administration, LLC since 1998. - -------------------------------------------------------------------------------- Assistant Vice President of U.S. Bancorp Fund N/A None Services, LLC since 2001. - -------------------------------------------------------------------------------- 31 - -------------------------------------------------------------------------------- PRIVACY NOTICE FISHER ASSET MANAGEMENT, LLC (doing business as Fisher Investments) and THE PURISIMA FUNDS collect non-public information about you from the following sources: o Information we receive about you on applications or other forms; o Information you give us orally; and o Information about your transactions with us or others. We are committed to protecting your privacy and your non-public personal information. We do not sell or market your non-public personal information to unaffiliated organizations. We maintain physical, electronic and procedural safeguards to guard your non-public personal information. We hold our employees to strict standards of conduct regarding confidentiality, and employees who violate our Privacy Policy are subject to disciplinary process. We restrict access to your information to those employees who need to know that information to carry out their duties. We do not disclose any non-public personal information about our clients or former clients without the client's authorization, except as permitted by law. We may disclose the non-public information we collect to employees and affiliates, and unaffiliated third parties as permitted by law. Third parties may include law enforcement agencies, government and regulatory authorities, and professionals such as our legal counsel and auditors, and we may disclose information for reasons such as audit purposes, prevention of fraud or money laundering, protection of confidentiality, compliance with laws, and to provide agreed upon products and services to you. Third parties may also include service providers performing financial services for us (such as brokers and custodians) and service providers performing non-financial services for us (such as third parties performing computer related or data maintenance, marketing or other services for us or to assist us in offering our products and services to you). It is our policy to require all third party service providers that will receive information to sign strict confidentiality agreements agreeing to safeguard such information and use it only for the purpose it was provided. 32 This page is intentionally left blank. The Purisima Funds Annual Report August 31, 2007 The Purisima All-Purpose Fund A LETTER OF OUR SHAREHOLDERS Welcome to the annual report for the Purisima All-Purpose Fund for the period ended August 31, 2007. The Fund commenced on November 1, 2005. It seeks high total return while also seeking to provide protection against declines in value of the US and foreign equity markets. During the period, this fund was primarily invested in US government securities. Thank you for your continued interest and support. Sincerely, /s/ KENNETH L. FISHER - --------------------- Kenneth L. Fisher Chairman and Chief Investment Officer Fisher Investments OPINIONS EXPRESSED ABOVE ARE THOSE OF KENNETH L. FISHER AND ARE SUBJECT TO CHANGE, ARE NOT GUARANTEED AND SHOULD NOT BE CONSIDERED RECOMMENDATIONS TO BUY OR SELL ANY SECURITY. FUND HOLDINGS AND SECTOR ALLOCATIONS ARE SUBJECT TO CHANGE AND ARE NOT RECOMMENDED TO BUY OR SELL ANY SECURITY. MUTUAL FUND INVESTING INVOLVES RISK OF LOSS. PRINCIPAL LOSS IS POSSIBLE. THE FUND MAY USE SHORT SALES OF SECURITIES, WHICH INVOLVE THE RISK THAT LOSSES MAY EXCEED THE ORIGINAL AMOUNT IN VESTED. FOREIGN IN VESTING INVOLVES SPECIAL RISKS, INCLUDING A GREATER VOLATILITY AND POLITICAL, ECONOMIC AND CURRENCY RISKS AND DIFFERENCES IN ACCOUNTING METHODS. SMALL-AND MEDIUM-CAPITALIZATION COMPANIES TEND TO HAVE LIMITED LIQUIDITY AND GREATER PRICE VOLATILITY THAN LARGE CAPITALIZATION COMPANIES. GROWTH STOCKS TYPICALLY ARE MORE VOLATILE THAN VALUE STOCKS; HOWEVER, VALUE STOCKS HAVE A LOWER EXPECTED GROWTH RATE IN EARNINGS AND SALES. INVESTMENTS IN DEBT SECURITIES TYPICALLY DECREASE IN VALUE WHEN INTEREST RATES RISE. THIS RISK IS GREATER FOR LONGER-TERM DEBT SECURITIES. THE FUND IS NON-DIVERSIFIED, MEANING IT MAY CONCENTRATE ITS ASSETS IN FEWER INDIVIDUAL HOLDINGS THAN A DIVERSIFIED FUND. THEREFORE, THE FUND IS MORE EXPOSED TO INDIVIDUAL STOCK VOLATILITY THAN A DIVERSIFIED FUND. AN INVESTMENT IN THE FUND IS NOT SUITABLE FOR ALL INVESTORS. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS. FISHER INVESTMENTS IS THE ADVISER TO THE PURISIMA FUNDS. THE PURISIMA FUNDS ARE DISTRIBUTED BY QUASAR DISTRIBUTORS, LLC 09/07 -1- PERFORMANCE SUMMARY FOR YEAR ENDED AUGUST 31, 2007 PURISIMA ALL-PURPOSE FUND GROWTH OF $10,000. PURISIMA ALL-PURPOSE FUND CUMULATIVE TOTAL RETURN VERSES MERRILL LYNCH U.S. TREASURY BILLS 0-3 MONTHS INDEX $10,000 INVESTED FROM FUND INCEPTION ON 11/01/05 TO 8/31/07 * GRAPH OMITTED PURISIMA MERRILL LYNCH ALL-PURPOSE U.S. TREASURY BILLS DATE FUND ------------------------------------------------------------------ 11/1/2005 10,000 10,000 11/30/2005 10,020 10,030 12/31/2005 10,049 10,061 1/31/2006 10,100 10,094 2/28/2006 10,160 10,127 3/31/2006 10,220 10,165 4/30/2006 10,281 10,201 5/31/2006 10,351 10,243 6/30/2006 10,421 10,284 7/31/2006 10,492 10,327 8/31/2006 10,562 10,370 9/30/2006 10,623 10,414 10/31/2006 10,683 10,455 11/30/2006 10,743 10,499 12/31/2006 10,800 10,545 1/31/2007 10,865 10,589 2/28/2007 10,908 10,629 3/31/2007 10,973 10,675 4/30/2007 11,027 10,721 5/31/2007 11,103 10,767 6/30/2007 11,168 10,808 7/31/2007 11,232 10,851 8/31/2007 11,330 10,904
Purisima All-Purpose Fund Merrill Lynch U.S. Treasury Bills 0-3 Months Index ONE-YEAR ONE-YEAR Average Annual Total Return(2)** 7.27% Average Annual Total Return(2)** 5.15% SINCE INCEPTION (11/01/2005) SINCE FUND INCEPTION (11/01/2005) Cumulative Total Return(1)** 13.30% Cumulative Total Return(1)** 9.05% Average Annual Total Return(2)** 7.06% Average Annual Total Return(2)** 4.85%
PLEASE NOTE PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. SHARE PRICE AND RETURN WILL FLUCTUATE, AND INVESTORS MAY EXPERIENCE A GAIN OR LOSS WHEN THEY SELL THEIR SHARES. TO OBTAIN A PROSPECTUS ON THE PURISIMA FUNDS PLEASE CALL 1-800-841-0199. THE PROSPECTUS CONTAINS MORE INFORMATION, INCLUDING THE POLITICAL, ECONOMIC, CURRENCY RISKS AND POTENTIAL VOLATILITY OF FOREIGN INVESTING. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. 1. Cumulative total return measures the change in value of an investment over the periods indicated and reflects all fund fees and expenses. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and reflects all fund fees and expenses. Average annual total return and cumulative total return for the one-year period would be identical. * The Merrill Lynch US Treasury Bills 0-3 Months Index is an unmanaged index of Treasury securities that assumes reinvestment of all income. ** The total returns shown do not reflect the deduction of taxes a shareholder would pay on fund distributions or redemption of fund shares. The total return reflects the rate an investment would have earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions. -2- SECTOR BREAKDOWN(1) (Unaudited) PURISIMA ALL-PURPOSE FUND - -------------------------------------------------------------------------------- U.S. Treasury Obligations 97.3% Mutual Funds 2.7% - -------------------------------------------------------------------------------- Total 100.0% (1)Percentage of Total Investments as of August 31, 2007. -3- IMPORTANT INFORMATION The following disclosure provides important information regarding the Fund's Expense Example. Please refer to this information when reviewing the Expense Example for the Fund. EXPENSE EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs; and (2) ongoing costs, i n cluding management fees; and other fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period indicated and held for the entire period from March 1, 2007 to August 31, 2007 for the Purisima All-Purpose Fund. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and assumed rates of return of 5% per year before expenses, which are not the Fund's actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), or redemption fees. Therefore, the n i formation under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -4- EXPENSE EXAMPLE (UNAUDITED) HYPOTHETICAL PERFORMANCE PURISIMA ALL-PURPOSE FUND ACUTAL (5% RETURN (Inception date: 11/01/2005) PERFORMANCE BEFORE EXPENSES) - -------------------------------------------------------------------------------- Beginning Account Value (03/01/07) $ 1,000.00 $ 1,000.00 Ending Account Value (08/31/07) $ 1,038.70 $ 1,017.64 Expenses Paid During Period(1) $ 7.71 $ 7.63 - -------------------------------------------------------------------------------- (1) Expenses are equal to the Fund's expense ratio for the four month period of 1.50% for the Purisima All-Purpose Fund multiplied by the average account value over the period, multiplied by 184/365 (to reflect the four month period). -5-
PURISIMA ALL-PURPOSE FUND SCHEDULE OF INVESTMENTS AUGUST 31, 2007 PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS: 139.9% U.S. TREASURY BILL: 139.9% 40,000 4.810%, 11/23/2007 $ 39,655 --------- TOTAL U.S. TREASURY OBLIGATIONS (COST $39,559) 39,655 --------- SHARES - ------ MUTUAL FUNDS - 3.9% 1,102 SEI Daily Income Trust Government Fund 1,102 --------- TOTAL MUTUAL FUNDS (COST $1,102) 1,102 --------- TOTAL INVESTMENTS (COST $40,661): 143.8% $ 40,757 LIABILITIES IN EXCESS OF OTHER ASSETS: (43.8)% (12,420) --------- TOTAL NET ASSETS: 100.0% $ 28,337 ========= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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PURISIMA ALL-PURPOSE FUND STATEMENT OF ASSETS AND LIABILITIES AT AUGUST 31, 2007 - -------------------------------------------------------------------------------- ALL-PURPOSE FUND ----------- ASSETS Investments in securities, at cost $ 40,661 ========== Investments in securities, at value $ 40,757 Receivables: Dividends and interest 34 Due from Adviser (Note 3) 12,042 Other Assets 4,561 ---------- Total Assets 57,394 ---------- LIABILITIES Accrued administration fees (Note 3) 2,711 Accrued transfer agent fees 3,832 Accrued audit fees 12,997 Accrued fund accounting fees 7,726 Accrued reports to shareholders 502 Other accrued expenses 1,289 ---------- Total Liabilities 29,057 ---------- NET ASSETS $ 28,337 ========== Number of shares issued and outstanding (unlimited shares authorized, $0.01 par value) 2,705 ========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 10.47 ========== COMPONENTS OF NET ASSETS Paid-in capital $ 27,047 Accumulated net investment income 1,195 Accumulated net realized loss on investments (1) Net unrealized appreciation on investments 96 ---------- Net assets $ 28,337 ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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PURISIMA ALL-PURPOSE FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2007 - -------------------------------------------------------------------------------- ALL-PURPOSE FUND ----------- INVESTMENT INCOME Income Interest $ 2,229 ----------- Total income 2,229 ----------- Expenses Advisory fees 273 Administration fees 39,613 Transfer agent fees 15,077 Fund accounting fees 30,294 Custody fees 3,088 Reports to shareholders 2,882 Registration fees 21,416 Audit fees 19,699 Legal fees 955 Trustee fees 15,218 Miscellaneous 468 ----------- Total expenses 148,983 Less: Reimbursement by Adviser (Note 3) 148,574 ----------- Net expenses 409 ----------- NET INVESTMENT INCOME 1,820 ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investments 5 Change in net unrealized appreciation on investments 96 ----------- Net gain on investments 101 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,921 =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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PURISIMA ALL-PURPOSE FUND STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- FOR THE PERIOD YEAR ENDED NOVEMBER 1, 2005^ THRU DECREASE IN NET ASSETS FROM: AUGUST 31, 2007 AUGUST 31, 2006 --------------- ---------------------- OPERATIONS Net investment income $ 1,820 $ 1,422 Net realized gain/loss on investments 5 (6) Change in net unrealized appreciation on investments 96 -- --------------- ---------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,921 1,416 --------------- ---------------------- DISTRIBUTION TO SHAREHOLDERS From net investment income (1,899) (148) --------------- ---------------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,899) (148) --------------- ---------------------- CAPITAL SHARE TRANSACTIONS Net increase in net assets derived from net change in outstanding shares (a) 1,899 25,148 --------------- ---------------------- TOTAL INCREASE IN NET ASSETS 1,921 26,416 --------------- ---------------------- NET ASSETS Beginning of period 26,416 -- --------------- ---------------------- END OF PERIOD $ 28,337 $ 26,416 =============== ====================== Undistributed net investment income $ 1,195 $ 1,274 =============== ====================== (a) A summary of capital share transactions is as follows: YEAR ENDED NOVEMBER 1, 2005^ AUGUST 31, 2007 THRU AUGUST 31, 2006 ------------------ --------------------- SHARES VALUE SHARES VALUE -------- -------- ---------- --------- Shares sold -- $ -- 2,500 $25,000 Shares issued on reinvestment of distributions 190 1,899 15 148 Shares redeemed -- -- -- -- -------- -------- ---------- --------- Net increase 190 $ 1,899 2,515 $25,148 ======== ======== ========== ========= ^ Commencement of Operations. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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PURISIMA ALL-PURPOSE FUND FINANCIAL HIGHLIGHTS FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD. - -------------------------------------------------------------------------------- THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS ANNUAL REPORT. FOR THE YEAR ENDED NOVEMBER 1, 2005^ THRU AUGUST 31, 2007 AUGUST 31, 2006 ------------------ ---------------------- Net asset value, beginning of period $ 10.50 $ 10.00 ------------------ ---------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.69 0.56 Net realized and unrealized gain (loss) on investments 0.04 0.00 ------------------ ---------------------- Total from investment operations 0.73 0.56 ------------------ ---------------------- LESS DISTRIBUTIONS: From net investment income (0.76) (0.06) ------------------ ---------------------- Total distributions (0.76) (0.06) ------------------ ---------------------- Net asset value, end of period $ 10.47 $ 10.50 ================== ====================== Total return 7.27% 5.62%** RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $ 28.3 $ 26.4 RATIO OF EXPENSES TO AVERAGE NET ASSETS: Before fees waived 545.57% 620.25%* After fees waived 1.50% 1.50%* RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS # 6.66% 6.71%* Portfolio turnover rate 0.00% 0.00%** * Annualized. ** Not annualized. # Net of fees waived. ^ Commencement of operations. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-10- PURISIMA ALL-PURPOSE FUND NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2007 NOTE 1 - ORGANIZATION The Purisima Funds (the "Trust") was organized as a Delaware business trust on June 27, 1996 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company issuing its shares in series. Each series represents a distinct portfolio with its own investment objectives and policies. The accompanying financial statements include the Purisima All-Purpose Fund (the "Fund"), a non-diversified fund which commenced operations on November 1, 2005. The Fund is one of the two portfolios comprising the Trust. Fisher Asset Management, LLC (doing business as Fisher Investments) (the "Adviser") serves as the investment adviser to the Fund. The investment objective of the Purisima All-Purpose Fund is as follows: The Fund seeks to provide protection against declines in the value of the U.S. and foreign equity markets. It invests in derivative securities, money market instruments and other securities, including U.S. and foreign common stocks, and fixed income securities. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America. A. SECURITY VALUATION. Investments in securities traded on a national securities exchange are valued at the last sales price on the business day as of which such value is being determined. If on a particular day, an exchange-listed security does not trade, then the mean between the bid and asked prices will be used. Foreign exchange traded equity securities are valued based upon the price on the exchange or market on which they trade as of the close of business of such market or exchange immediately preceding the time the Fund's net asset value is determined. Investments in securities traded on the NASDAQ Global Market, the NASDAQ Global Select Market and the NASDAQ Capital Market will be valued at the NASDAQ Official Closing Price ("NOCP"), which may not necessarily represent the last sale price. Securities traded on an exchange or NASDAQ for which there have been no sales and other over-the-counter securities are valued at the closing price. Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees or their designee, taking into consideration: (I) fundamental analytical data relating to the investment; (II) the nature and duration of restrictions on disposition of the securities; and (III) an evaluation of the forces which i n fluence the market in which these securities are purchased and sold. Debt securities with remaining maturities of 60 days or less are valued at amortized cost which, when combined with accrued interest, approximates market value. -11- PURISIMA ALL-PURPOSE FUND B. FOREIGN CURRENCY TRANSLATION. The Fund's records are maintained in U.S. dollars. The value of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at h t e end of the reporting period. Purchases and sales of investment securities, income and expenses are translated on the respective dates of such transactions. The Fund does not isolate that portion of their net realized and unrealized gains and losses on nv i estments resulting from changes in foreign exchange rates from the impact arising from changes in market prices. Such fluctuations are included with net realized and unrealized gain or loss from investments and foreign currency. Net realized foreign currency transaction gains and losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the differences between the amounts of dividends, interest, and o f reign withholding taxes recorded on the Fund books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency translation gains and l o sses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rates. C. FEDERAL INCOME AND EXCISE TAXES. The Fund has elected to be taxed as a "regulated i nv estment company" and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income or excise tax provision is required. In order to avoid imposition of the excise tax applicable to regulated investment companies, t h e Fund intends to declare each year as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable based upon its current interpretations of the tax rules and regulation t h at exist in the markets in which it invests. As of August 31, 2007, the Fund had a capital loss carryforward of $1 which expires in 2015. D. SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS. Security transactions are accounted for on the trade date. Dividend income and distributions to shareholders are recorded on the ex-dividend date and interest income is recognized on the accrual basis. Realized gains and losses are evaluated on the bases of identified costs. E. USE OF ESTIMATES. The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make -12- PURISIMA ALL-PURPOSE FUND estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions. F. CONCENTRATION OF RISK. Investments in securities of non-U.S. issues in certain countries n i volve special investment risks. These risks may include, but are not limited to, investment restrictions, adverse political, social and economic developments, government involvement i n the private sector, limited and less reliable investor information, lack of liquidity, certain l o cal tax law considerations, and limited regulation of the securities markets. G. OPTIONS. Exchange traded options are valued at the last reported sale price at the close of the exchange on which the security is primarily traded. Certain markets are not closed at the t im e that a Fund prices portfolio securities. In these situations, snapshot prices are provided by the individual pricing services or other alternate sources at the close of the NYSE as appropriate. If no sales are reported, the mean between the last reported bid and asked prices will be used. Non-exchange traded options will also be valued at the mean between bid and asked prices. "Fair value" of other private options are valued after consulting with the Adviser using a mathematical model. Options purchased are recorded as investments; options written (sold) are accounted for as i l abilities. When an option expires, the premium (original option value) is realized as a gain i f the option was written or as a loss if the option was purchased. When the exercise of an option result in a cash settlement, the difference between the premium and the settlement proceeds is realized as a gain or loss. When securities are acquired or delivered upon exercise of an option, the acquisition cost or sale proceeds are adjusted by the amount of the premium. When an option is closed, the difference between the premium and the cost to close the position is realized as a gain or loss. The Fund may purchase options which are n i cluded in the Fund's Schedules of Investments and subsequently marked to market to reflect the current value of the option. At August 31, 2007, the Fund had no options outstanding. H. SECURITIES SOLD SHORT. To the extent the Fund engages in selling securities short, they are obligated to replace a security borrowed by purchasing the same security at the current market value. The Fund would incur a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund would realize a gain if the price of the security declines between those dates. The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Fund must also maintain a deposit with the broker consisting of cash having a value equal to a specified percentage of the value of the securities sold short. I. INDEMNIFICATION OBLIGATIONS. Under the Fund's organizational documents, its current and o f rmer officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the -13- PURISIMA ALL-PURPOSE FUND Fund enters into contracts that contain a variety of representations and warranties that provide general indemnifications. The Fund's maximum exposure under these arrangements i s unknown as this would involve future claims that may be made against the Fund that have not yet occurred or that would be covered by other parties. NOTE 3 - COMMITMENTS, OTHER RELATED PARTY TRANSACTIONS AND OTHER SERVICE PROVIDERS The Fund has an Investment Management Agreement with the Adviser to provide investment advisory services to the Fund. The Adviser furnishes all investment advice, office space, facilities, and most of h t e personnel needed by the Fund. As compensation for its services, the Adviser is entitled to a monthly fee at the annual rate of 1.00% of the Fund's average daily net assets. The Fund is responsible for its own operating expenses. The Adviser has agreed to limit the Fund's total expenses (exclusive of brokerage, interest, taxes, dividends on securities sold short and extraordinary expenses) to not more than 1.50% of the average daily net assets. Any fee withheld or voluntarily reduced and/or any Fund expense absorbed by the Adviser pursuant to an agreed upon expense cap shall be reimbursed by the Fund to the Adviser, if so requested by the Adviser, anytime before the end of the third fiscal year following the year to which the fee reduction, waiver, or expense absorption relates, provided the aggregate amount of the Fund's current operating expenses for such fiscal year does not exceed the applicable limitation on Fund expenses. Any such reimbursement is also contingent upon Board of Trustees review and approval prior to the time the reimbursement is initiated. The Fund must pay its current ordinary operating expenses before the Adviser is entitled to any reimbursement of fees and/or expenses. For the year ended August 31, 2007, t h e Fund paid the Adviser $273. As of August 31, 2007, the Adviser has reimbursed the Fund $148,574 to limit its total expenses to not more than 1.50% of the average daily net assets. U.S. Bank, N.A. serves as the Fund's Custodian. U.S. Bancorp Fund Services, LLC ("USBFS"), an affiliate of U.S. Bank, N.A., serves as the Administrator, Fund Accountant and Transfer Agent. Certain officers of the Trust, including the Trust's Treasurer, are employees of the Administrator. In its capacity as the Fund's Administrator, USBFS provides general fund management including corporate secretarial services, coordinates the preparation of materials for the Board of Trustees, assists with the annual audit of the Fund's financial statements, monitors the Fund's compliance with federal and state regulations as well as investment restrictions, coordinates the payment of Fund expenses and monitors expense accruals, prepares financial statements and non-investment related statistical data and makes required t a x reporting calculations. During the year ended August 31, 2007, Purisima All-Purpose Fund paid USBFS $39,613 for services rendered in its capacity as the Fund's Administrator. Quasar Distributors, LLC, an affiliate of U.S. Bank, N.A., and USBFS serves as principal underwriter of h t e Fund and acts as the Fund's distributor, pursuant to a Distribution Agreement with the Trust, in a continuous public offering of the Fund's shares. -14- PURISIMA ALL-PURPOSE FUND NOTE 4 - SERVICE AND DISTRIBUTION PLAN The Trust has adopted a Service and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund is authorized to pay expenses incurred for the purpose of distribution activities, including the engagement of other dealers, intended to result in the sale of shares of the Fund. The fee accrues at an annual rate not to exceed 0.25% of the Fund's average daily net assets. For the year ended August 31, 2007, the Fund did not utilize the Plan. NOTE 5 - INVESTMENT TRANSACTIONS The cost of purchases and the proceeds from sales of securities, excluding short-term investments, for t h e year ended August 31, 2007, were as follows: FUND PURCHASES SALES ---- --------- ----- Purisima All-Purpose Fund $ 0 $ 0 NOTE 6 - FEDERAL INCOME TAX MATTERS The difference between the book and tax basis components of the distributable earnings relates principally to the timing of recognition of income and gains for federal income tax purposes. These differences are primarily attributable to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains on passive foreign investment companies and return of capital distributions and income adjustments recognized for tax purposes on real estate investment trusts. Short-term gains distributions reported in the Statements of Changes of Net Assets, if any, are reported as ordinary i n come for federal tax purposes. As of August 31, 2007, the components of distributable earnings on a tax basis were as follows: All-Purpose ----------- Cost of investments for tax purposes $ 40,661 ========== Gross tax unrealized appreciation $ 96 Gross tax unrealized depreciation $ -- ----------- Net tax unrealized appreciation $ 96 Undistributed ordinary income $ 1,195 Capital loss carryforward * $ (1) ----------- Total accumulated earnings (losses) $ 1,290 =========== -15- PURISIMA ALL-PURPOSE FUND The tax compositions of dividends are as follows: Long Term Ordinary Long Term Capital Gains Income Capital Gains Per Share ---------------------------------------------------- Purisima All-Purpose Fund 8/31/2007 $1,899 -- -- 8/31/2006 $ 148 -- -- * Under current tax law capital losses realized after October 31 and prior to the Fund's fiscal year end may be deferred as occurring on the first day of the following fiscal year. NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS In September, 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements", which will expand the disclosure requirements for fair value measurements. The new standard defines fair value as the price that would be received upon the sale of an asset or transfer of a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, this Statement also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and earlier adoption is permitted. Management is currently evaluating the impact of adoption of SFAS No. 157 on its financial statements. Effective June 29, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, a clarification of FASB No. 109, Accounting for Income Taxes. FIN 48 establishes financial reporting rules regarding the recognition and measurement of tax positions taken or expected to be taken on a tax return. The adoption of FIN 48 had no impact on the Company's net assets or results of operations. -16- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND BOARD OF TRUSTEES THE PURISIMA FUNDS WOODSIDE, CALIFORNIA We have audited the accompanying statement of assets and liabilities, including the schedule of i nv estments of the Purisima All-Purpose Fund, a series of The Purisima Funds (the "Trust"), as of August 31, 2007, and the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for the year then ended and for the period November 1, 2005 (commencement of operations) to August 31, 2006. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for t h e purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also n i cludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly in all material respects, the financial position of the Purisima All-Purpose Fund as of August 31, 2007, the results of its operations, the changes in its net assets, and the financial highlights for the periods indicated above, in conformity with accounting principles generally accepted in the United States of America. TAIT, WELLER & BAKER LLP PHILADELPHIA, PENNSYLVANIA OCTOBER 22, 2007 -17- OTHER INFORMATION - PROXY VOTING PROCEDURES (UNAUDITED) The Adviser votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, free of charge, by calling toll-free 1-800-841-0199. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. Information regarding how the Fund voted proxies relating to the portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling t o ll-free 1-800-841-0199. This information is also available through the Securities and Exchange Commission's website at HTTP://WWW.SEC.GOV. FORM N-Q DISCLOSURE (UNAUDITED) The Fund files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters on Form N-Q. The Fund's Form N-Q is available without charge, upon request, by calling 1-800-841-0199. Furthermore, you can obtain the Form N-Q on the SEC's website at www.sec.gov. TAX NOTICE (UNAUDITED) Additional Information applicable to foreign shareholders only: The percentage of income distributed for the year ended August 31, 2007, designated qualified interest income under Internal Revenue Code Section 871(k)(1)(C), is 100% for the Fund. -18- TRUSTEES AND OFFICER INFORMATION (Unaudited) The Board of Trustees is responsible for the overall management of the Trust's business. The Board of Trustees approves all significant agreements between the Trust and persons or companies furnishing services to it, including all agreements with the Adviser, Administrator, Custodian and Transfer Agent. The Board of Trustees delegates the day-to-day operations of the Trust to its Officers, subject to the Fund's investment objective and policies and to general supervision by the Board of Trustees. The Statement Additional Information includes additional information about the Trust's Trustees and is available, without charge, by calling 1-800-841-0199. The Trustees and Officers of the Trust, their business addresses and principal occupations during the past five years are:
NUMBER OF PORTFOLIOS IN POSITION(S) FUND COMPLEX OTHER NAME, ADDRESS, HELD YEAR PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTOR- DATE OF BIRTH WITH TRUST ELECTED(1) DURING PAST FIVE YEARS DIRECTOR SHIPS HELD - ----------------------------------------------------------------------------------------------------------------------------- Kenneth L. Fisher* President 1996 Chief Executive Officer and majority 2 None (born 1950) and Trustee shareholder of Fisher Investments, Inc., the sole 13100 Skyline Blvd. shareholder of the Adviser, and has served in Woodside, CA 94062 such capacities since the incorporation of the Adviser in 1986. Prior thereto, he was the founder of Fisher Investments, a sole proprietorship which commenced operations in 1979. Pierson E. Clair III Trustee 1996 President and Chief Executive Officer of Brown 2 Signature (born 1948) & Haley since 1998 (fine confectioners); Vice Foods, Inc. 13100 Skyline Blvd. President of Blummer Chocolate Company from Woodside, CA 94062 1980 to 1997, where he had been employed since 1970. Scott LeFevre Trustee 2001 Sole proprietor of LeFevre Capital Management, 2 None (born 1957) a registered investment adviser. 13100 Skyline Blvd. Woodside, CA 94062 Alfred D. McKelvy, Jr. Trustee 2003 Executive Director of the law firm of Berding & 2 Diablo (born 1949) Weil, LLP since 1990. Valley 13100 Skyline Blvd. Bank; East Woodside, CA 94062 Bay BOMA. Bryan F. Morse Trustee 1996 Sole proprietor of Bryan F. Morse, RIA, 2 None (born 1952) registered investment adviser since 1990. 13100 Skyline Blvd. Woodside, CA 94062 Grover T. Wickersham Trustee 1996 Attorney in private practice in Palo Alto, 2 None (born 1949) California. Prior to entering private practice in 13100 Skyline Blvd. June of 1981, served as a Branch Chief of the Woodside, CA 94062 Los Angeles Regional Office of the U.S. Securities and Exchange Commission. Tom Fishel Chief 2005 Vice President and Chief Compliance Officer of N/A None (born 1960) Compliance the Adviser. Vice President of Charles Schwab 13100 Skyline Blvd. Officer & Co., Inc. from 1995 to 2004, where he had Woodside, CA 94062 been employed since 1983. Keith Shintani Secretary and 2006 Vice President of U.S. Bancorp Fund Services, N/A None (born 1963) Assistant LLC and its predecessor, Investment Company 2020 East Financial Way Treasurer Administration, LLC since 1998. Glendora, CA 91741 Michael Ricks Treasurer 2006 Assistant Vice President of U.S. Bancorp Fund N/A None (born 1977) Services, LLC since 2001. 2020 East Financial Way Glendora, CA 91741 - ----------- 1 Trustees and officers of the Funds serve until their resignation, removal or retirement. * "Interested person" of the Trust, as defined in the 1940 Act.
-19- PRIVACY NOTICE Fisher Asset Management, LLC (doing business as Fisher Investments) and the Purisima Funds collect non-public information about you from the following sources: o Information we receive about you on applications or other forms; o Information you give us orally; and o Information about your transactions with us or others. We are committed to protecting your privacy and your non-public personal information. We do not sell or market your non-public personal information to unaffiliated organizations. We maintain physical, electronic and procedural safeguards to guard your non-public personal information. We hold our employees to strict standards of conduct regarding confidentiality, and employees who violate our Privacy Policy are subject to disciplinary process. We restrict access to your information to those employees who need to know that information to carry out their duties. We do not disclose any non-public personal information about our clients or former clients without the client's authorization, except as permitted by law. We may disclose t h e non-public information we collect to employees and affiliates, and unaffiliated third parties as permitted by law. Third parties may include law enforcement agencies, government and regulatory authorities, and professionals such as our legal counsel and auditors, and we may disclose information for reasons such as audit purposes, prevention of fraud or money laundering, protection of confidentiality, compliance with laws, and to provide agreed upon products and services to you. Third parties may also include service providers performing financial services for us (such as brokers and custodians) and service providers performing non-financial services for us (such as third parties performing computer related or data maintenance, marketing or other services for us or to assist us in offering our products and services to you). It is our policy to require all third party service providers that will receive information to sign strict confidentiality agreements agreeing to safeguard such information and use it only for the purpose it was provided. -20- ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics that applies to the registrant's principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report. The registrant undertakes to provide to any person without charge, upon request, a copy of its code of ethics by mail when they call the registrant at 1-800-851-8845. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's board of trustees has determined that it does not have an audit committee financial expert serving on its audit committee. At this time, the registrant believes that the experience provided by each member of the audit committee together offers the registrant adequate oversight for the registrant's level of financial complexity. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. "Audit services" refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. "Audit-related services" refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. "Tax services" refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant. - ----------------------------- ----------------------- ----------------------- FYE 08/31/2006 FYE 08/31/2007 - ----------------------------- ----------------------- ----------------------- Audit Fees $33,000 $34,000 Audit-Related Fees 0 0 Tax Fees $5,000 $6,000 All Other Fees 0 0 - ----------------------------- ----------------------- ----------------------- The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant. Accordingly, 100% of the services shown above provided by the principal accountant have been approved by the Audit Committee. All of the principal accountant's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal accountant. The following table indicates the non-audit fees billed or expected to be billed by the registrant's accountant for services to the registrant and to the registrant's investment adviser (and any other controlling entity, etc.--not sub-adviser) for the last two years. The audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant's independence. -2- - ------------------------------------ ------------------------ ------------------ Non-Audit Related Fees FYE 08/31/2006 FYE 08/31/2007 - ------------------------------------ ------------------------ ------------------ Registrant 0 0 Registrant's Investment Adviser 0 0 - ------------------------------------ ------------------------ ------------------ ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934). ITEM 6. SCHEDULE OF INVESTMENTS. Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to open-end investment companies. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to open-end investment companies. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to open-end investment companies. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of trustees. ITEM 11. CONTROLS AND PROCEDURES. (a) The Registrant's President and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act")) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant's service provider. -3- (b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a) (1) ANY CODE OF ETHICS OR AMENDMENT THERETO, THAT IS SUBJECT OF THE DISCLOSURE REQUIRED BY ITEM 2, TO THE EXTENT THAT THE REGISTRANT INTENDS TO SATISFY ITEM 2 REQUIREMENTS THROUGH FILING AN EXHIBIT. Incorporated by reference to the Registrant's Form N-CSR filed November 10, 2003. (2) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. Filed herewith. (3) ANY WRITTEN SOLICITATION TO PURCHASE SECURITIES UNDER RULE 23C-1 UNDER THE ACT SENT OR GIVEN DURING THE PERIOD COVERED BY THE REPORT BY OR ON BEHALF OF THE REGISTRANT TO 10 OR MORE PERSONS. Not applicable to open-end investment companies. (B) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. Furnished herewith. -4- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) THE PURISIMA FUNDS By (Signature) /s/ KENNETH L. FISHER ------------------------------------- Kenneth L. Fisher, President Date November 8, 2007 ------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature) /s/ KENNETH L. FISHER ------------------------------------- Kenneth L. Fisher, President Date November 8, 2007 ------------------------------------- By (Signature) /s/ MICHAEL RICKS ------------------------------------- Michael Ricks, Treasurer Date November 8, 2007 ------------------------------------- -5- EX-99.CERT 2 cert99.txt EX.99.CERT CERTIFICATIONS I, Kenneth L. Fisher, certify that: 1. I have reviewed this report on Form N-CSR of The Purisima Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 8, 2007 /s/ KENNETH L. FISHER -------------------------- -------------------------------- Kenneth L. Fisher President CERTIFICATIONS I, Michael Ricks, certify that: 1. I have reviewed this report on Form N-CSR of The Purisima Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 8, 2007 /s/ MICHAEL RICKS -------------------------- -------------------------------- Michael Ricks Treasurer EX-99.906CERT 3 cert906.txt EX.99.906CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of the Purisima Funds, does hereby certify, to such officer's knowledge, that the report on Form N-CSR of the Purisima Funds for the year ended August 31, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Purisima Funds for the stated period. /S/ KENNETH L. FISHER /S/ MICHAEL RICKS - ---------------------------------- ---------------------------------- Kenneth L. Fisher Michael Ricks President, The Purisima Funds Treasurer, The Purisima Funds Dated: This statement accompanies this report on Form N-CSR pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed as filed by The Purisima Funds for purposes of Section 18 of the Securities Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----