-----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, TTc/pZv6x060jBP7cfLEeBYvOTDYw8knLuuiTyNNY41xOS7woc0wogHNt4P1iaIE Aak9H3Qa84SCFv4Z+mr5WQ== 0001144204-04-018096.txt : 20041109 0001144204-04-018096.hdr.sgml : 20041109 20041109145536 ACCESSION NUMBER: 0001144204-04-018096 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040831 FILED AS OF DATE: 20041109 DATE AS OF CHANGE: 20041109 EFFECTIVENESS DATE: 20041109 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: 041129080 BUSINESS ADDRESS: STREET 1: C/O FISHER INVESTMENTS STREET 2: 13100 SKYLINE BLVD CITY: WOODSIDE STATE: CA ZIP: 94062 BUSINESS PHONE: 8088410199 MAIL ADDRESS: STREET 1: C/O FISHER INVESTMENTS STREET 2: 13100 SKYLINE BLVD CITY: WOODSIDE STATE: CA ZIP: 94062 N-CSR 1 v08082_ncsr.txt As filed with the Securities and Exchange Commission on November 9, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07737 --------- 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, CA 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, 2004 ---------------- Date of reporting period: August 31, 2004 ---------------- Item 1. Report to Stockholders. - ------------------------------- Annual report August 31, 2004. Purisima Funds - -------------------------------------------- Annual Report August 31, 2004 The Purisima Total Return Fund The Purisima Pure American Fund The Purisima Pure Foreign Fund [LOGO] - -------------------------------------------------------------------------------- Table of Contents A Letter to Our Shareholders 2 Performance Summaries Total Return Fund 6 Pure American Fund 7 Pure Foreign Fund 8 Schedule of Investments Total Return Fund 12 Pure American Fund 16 Pure Foreign Fund 20 Statements of Assets and Liabilites 24 Statements of Operations 25 Statement of Changes in Net Assets Total Return Fund 26 Pure American Fund 27 Pure Foreign Fund 28 Financial Highlights Total Return Fund 29 Pure American Fund 30 Pure Foreign Fund 31 Notes to Financial Statements 32 Other Information 40 Report of Independent Registered Public Accounting Firm 42 Privacy Notice 43 [LOGO] - -------------------------------------------------------------------------------- Investment Objectives Purisima Total Return Fund Seeks to provide investors with a high level of total return by considering both domestic and foreign securities. Purisima Pure American Fund Seeks to provide investors with a high level of total return, while concentrating its holdings in U.S. securities. Purisima Pure Foreign Fund Seeks to provide investors with a high level of total return, while concentrating its holdings in securities outside the U.S. Each Fund reserves the right to reject any order for the purchase of its shares or to limit or suspend, without prior notice, the offering of its shares. The required minimum investments may be waived in the case of certain qualified retirement plans. The Funds will not accept your account if you are investing for another person as attorney-in-fact. The Funds also will not accept accounts with a "Power of Attorney" in the registration section of the Purchase Application. 1 [LOGO] - -------------------------------------------------------------------------------- A Letter to Our Shareholders Welcome to the annual report for the Purisima Funds for the year ended August 31, 2004. The Funds remained fully invested in equities throughout the period. Following strong positive returns in the 4th quarter of 2003, global equities have traded in a tight range during 2004, with indexes remaining mostly flattish. We remain, however, optimistic about upside in the medium term as the core drivers underpinning our expectation for meaningful stock appreciation for the rest of the year are still largely intact. Market Overview and Outlook: A robust fourth quarter capped off a terrific year for global stock markets in 2003. Our forecast called for 2004 to be another good year, above consensus expectations and above historical averages. Most expected better returns in the first half of the year, but we continue to believe this year will again be back-end loaded. Our 2003 forecast was more accurate than most in our survey from those available in the standard national business publications we reviewed. Many of our expectations played out correctly. As we suspected, monetary policy remained accommodative and interest rates benign and below expectations. The pension plan crisis did not sink the market, and many funds fully resolved their under-funded status. Geopolitical concerns and related risk aversion diminished. Stocks proved not to be dramatically overvalued as evidenced by their impressive rise. The presidential election cycle delivered another strong third year. The surprise we expected that did not materialize was the direction of the regulatory environment, which became even more stringent. Most importantly, though, our forecast that 2003 would be a very strong year was correct and owning stocks paid off. Our views about 2004 have been mostly accurate, but so far market returns are lagging our expectations. We envisioned and continue to expect a back-end loaded year, especially as the uncertainty surrounding the US Presidential election unwinds. As 2004 commenced, interest rates declined modestly in an environment where virtually everyone expected them to rise. The US dollar also went against the grain of expectations, gaining ground against the euro and major currencies overall. Lastly, corporate profits accelerated due to efficiency gains and improved economic conditions. Much hullabaloo has been made about oil prices recently. While the focus in the media is about the high prices of crude and gas, we see a consensus in the financial community that oil prices will decline. Energy stocks seem to reflect this expectation. We believe oil prices will remain firmer than most expect for at least the remainder of the year. Demand will continue to increase, consistent with our forecast of strong 2 [LOGO] - -------------------------------------------------------------------------------- economic growth. Because many producers are already pumping at capacity, supply should be relatively constrained for some time. This should drive the earnings of energy companies involved in exploration and production and surrounding activities. However, we don't expect high oil prices to materially inhibit economic growth and increased corporate profits. Economic and corporate performance surged forward in the second quarter as fundamentals continued to improve, yet the investing public generally still feels bad about future prospects. We interpret this as very bullish. Emotion will probably swing toward reality rather than reality swinging toward emotion in the coming months. We therefore still expect a strong period immediately ahead and remain bullish and fully invested. Our recent portfolio strategy has been engineered to capitalize on an up-a-lot scenario. The three funds continued to hold a bias toward stocks that are smaller than the weighted average market capitalization of their respective benchmarks. On a sector basis, weights in Energy and Financials were increased. If the recent surge in US interest rate expectations proves overblown, as we believe, it will be good for Financials. With short rates staying low, the yield curve is very steep, also good. A strong market will increase capital markets activity and investment banking revenue. What makes this all the more compelling is that Financials are generally trading at low relative valuations. The Funds remain overweight to Technology, and we maintain the belief that the sector will outperform in the future as capital spending grows. To make room for the new purchases, proceeds were generated primarily from sales within the Materials sector. Materials stocks in general have performed well during the last 18 months, but usually do best in the beginning phases of an economic recovery. Some of the value built into Materials stocks presumes strong growth and continued demand from China. Should the Chinese "miracle" not play out as strongly as many expect, it will negatively affect Materials. Furthermore, our measures indicate sentiment for Materials has strengthened considerably in recent months, indicating much of the outperformance may be in the past. To control risk relative to benchmark, all three of the Funds maintain active counter-strategies in case we are wrong on our core economic and market assumptions. The Funds hold underweight positions in large cap and growth-oriented companies as well as positions in more defensive sectors like Health Care, Consumer Staples, and Utilities. The Total Return Fund is overweight in US stocks. The relative outlook for the US economy continues to strengthen in our opinion and corporate earnings are strengthening beyond consensus expectations. Though torrid US economic conditions have eased modestly of late, we've also positioned the portfolio to capture relative 3 [LOGO] - -------------------------------------------------------------------------------- strength in Continental Europe. To accommodate these views, we've taken a larger underweight position to the United Kingdom, whose comparatively less accommodative monetary policy and tighter fiscal policy pose additional risk going forward. We also eliminated a small weight in Australia. We switched our Japanese stance from an underweight to an overweight. Should the economy there continue to gain traction, there is tremendous potential for gains in Japan's equity markets. We now believe the recent strong economic reports and GDP data are sustainable as robust growth in a variety of segments is fueling the recovery. A critical part of this is an end to deflation, which now appears to be mostly staved off. Some broad measures of inflation have popped into healthier positive territory. The health of the country's financial system has also shown signs of improvement. The yield curve has steepened significantly in recent months. Bank loan activity has increased and the non-performing loan problems have been dramatically reduced. Because of poor economic performance in the past, many Japanese companies have delayed capital expenditures. A new capital spending cycle appears to be underway and should prove to be substantial following years of stagnation. This will spur economic activity. Pure American's long equity positions are focused on US companies. Likewise, Pure Foreign's are focused on foreign companies only, but otherwise bear similar regional weightings to the foreign component of the Total Return Fund described above. Conclusion Each of the Funds is poised to participate in future equity gains and we expect each to outpace respective benchmarks should our forecasts prove correct. We remain confident with our asset allocation. We see too many positives that are not widely appreciated for a "Down-a-Lot" scenario to be a likely outcome. Still, the market has not kept a pace required to vindicate our forecast for the calendar year 2004. We would like to have seen better performance in the first part of 2004. However, we did predict the year would be back-end loaded and still feel there is a strong likelihood the coming months will be very rewarding for equity shareholders. We continue to believe many of the current concerns have been overblown: worries over rising interest rates, inflation and Iraq are less impactful than most anticipate. Sentiment seems to be focused on the anticipated slow down in earnings growth in 2005, which indicates to us upside surprise power if this year's momentum even partially carries into next year. It's too soon to have a strong opinion about 2005 at this time. 4 [LOGO] - -------------------------------------------------------------------------------- As always, if we were to see anything ahead largely ignored by others that indicates a high probability of substantial capital loss, we would take appropriate defensive action. Thank you for your continued interest and support. Sincerely, /s/ Kenneth L. Fisher Kenneth L. Fisher Chairman and Chief Investment Officer Fisher Investments, Inc. Opinions expressed above are those of Kenneth L. Fisher and are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security. Past performance does not guarantee future results. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Fund holdings and sector allocations are subject to change and are not recommendations to buy or sell any security. The MSCI World Index is a broad based unmanaged capitalization-weighted stock index that includes most major world stock markets. The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. The MSCI EAFE Index consists of the Morgan Stanley World Index components without the United States and Canada. One cannot invest directly in an index. Mutual fund investing involves risk of loss. Principal loss is possible. Foreign investing involves special risks, including a greater volatility and political, economic and currency risks and differences in accounting methods. This material must be preceded or accompanied by a prospectus. Please read it carefully before you invest or send money. Purisima Securities, LLC, Distributor, 08/04 Privacy Notice 5 [LOGO] - -------------------------------------------------------------------------------- Performance Summaries for year ended August 31, 2004 Purisima Total Return Fund Growth of $10,000. Purisima Total Return Fund cummulative total return versus MSCI Worl Index $10,000 invested from inception on 10/31/96 to 8/31/04* [The following was represented as a mountain chart in the printed material.] Total Return MSCI World Index - ---------------------------------------- 31-Oct-96 10,000 10,000 30-Nov-96 10,260 10,558 31-Dec-96 10,100 10,387 - ---------------------------------------- 31-Jan-97 10,550 10,511 28-Feb-97 10,480 10,629 31-Mar-97 10,250 10,417 30-Apr-97 10,860 10,755 30-May-97 11,520 11,417 30-Jun-97 12,200 11,984 31-Jul-97 12,770 12,534 31-Aug-97 11,870 11,693 30-Sep-97 12,610 12,327 31-Oct-97 11,910 11,676 30-Nov-97 12,150 11,880 31-Dec-97 12,384 12,023 - ---------------------------------------- 31-Jan-98 12,755 12,356 28-Feb-98 13,576 13,190 31-Mar-98 14,228 13,745 30-Apr-98 14,709 13,877 31-May-98 14,568 13,701 30-Jun-98 14,929 14,024 31-Jul-98 14,929 13,999 31-Aug-98 12,494 12,130 30-Sep-98 12,845 12,343 31-Oct-98 14,157 13,456 30-Nov-98 15,199 14,254 31-Dec-98 16,035 14,948 - ---------------------------------------- 31-Jan-99 16,806 15,274 28-Feb-99 16,305 14,866 31-Mar-99 16,836 15,483 30-Apr-99 17,117 16,091 31-May-99 16,606 15,501 30-Jun-99 17,728 16,222 31-Jul-99 17,388 16,171 31-Aug-99 17,498 16,141 30-Sep-99 17,147 15,982 31-Oct-99 18,350 16,810 30-Nov-99 18,961 17,281 31-Dec-99 19,940 18,677 - ---------------------------------------- 31-Jan-00 19,037 17,605 29-Feb-00 19,198 17,651 31-Mar-00 20,321 18,869 30-Apr-00 19,709 18,069 31-May-00 19,398 17,610 30-Jun-00 20,351 18,200 31-Jul-00 19,378 17,685 31-Aug-00 19,709 18,258 30-Sep-00 18,887 17,285 31-Oct-00 18,957 16,993 30-Nov-00 18,235 15,959 31-Dec-00 18,461 16,215 - ---------------------------------------- 31-Jan-01 18,295 16,534 28-Feb-01 18,970 15,135 31-Mar-01 19,136 14,130 30-Apr-01 18,700 15,168 31-May-01 18,659 14,955 30-Jun-01 18,482 14,486 31-Jul-01 18,970 14,299 31-Aug-01 19,448 13,611 30-Sep-01 20,071 12,411 31-Oct-01 19,936 12,648 30-Nov-01 19,352 13,394 31-Dec-01 19,214 13,477 - ---------------------------------------- 31-Jan-02 19,145 13,067 28-Feb-02 19,594 12,952 31-Mar-02 19,214 13,549 30-Apr-02 19,433 13,064 31-May-02 18,937 13,086 30-Jun-02 17,832 12,291 31-Jul-02 16,323 11,253 31-Aug-02 16,196 11,273 30-Sep-02 14,341 10,031 31-Oct-02 15,136 10,771 30-Nov-02 16,092 11,350 31-Dec-02 14,994 10,799 - ---------------------------------------- 31-Jan-03 14,691 10,469 28-Feb-03 14,376 10,286 31-Mar-03 14,341 10,252 30-Apr-03 15,659 11,160 31-May-03 16,638 11,795 30-Jun-03 16,731 11,998 31-Jul-03 17,303 12,241 31-Aug-03 17,851 12,504 30-Sep-03 17,489 12,579 31-Oct-03 18,795 13,324 30-Nov-03 19,075 13,525 31-Dec-03 20,285 14,373 - ---------------------------------------- 31-Jan-04 20,378 14,603 29-Feb-04 20,601 14,847 31-Mar-04 20,179 14,749 30-Apr-04 19,618 14,446 31-May-04 19,735 14,566 30-Jun-04 20,215 14,876 31-Jul-04 19,465 14,391 31-Aug-04 19,407 14,455
Purisima Total Return Fund MSCI World Index One-year One-year Average Annual Total Return(2)** 8.72% Average Annual Total Return(2)** 15.61% Five-year Five-year Average Annual Total Return(2)** 2.09% Average Annual Total Return(2)** (2.17%) Since Inception (10/28/96) Since Inception (10/28/96) Cumulative Total Return(1)** 94.07% Cumulative Total Return(1)** 44.55% Average Annual Total Return(2)** 8.82% Average Annual Total Return(2)** 4.81%
Please note past performance is not predictive of future results. Share price and return will fluctuate, and investors may experience a gain or loss when they sell their shares. To obtain a prospectus on the Purisima Funds please call 1-800/841-0199. The prospectus contains more information, including the political, economic, currency risks and potential volatility of foreign investing. Read the prospectus carefully before investing. (1) Cumulative total return measures the change in value of an investment over the periods indicated and reflects all fund fees and expenses. (2) Average annual total return represents the average annual change in value of an investment over the periods indicated and reflects all fund fees and expenses. Average annual total return and cumulative total return for the one-year period would be identical. * The Morgan Stanley MSCI World is obtained from Morgan Stanley and is an unmanaged global stock index comprised of various world stock markets, including the U.S. Purisima total return of a $10,000 investment includes all expenses. Fund's month-end inception was 10/31/96 with actual inception on 10/28/96. ** The Total Returns shown do not reflect the deduction of taxes a shareholder would pay on fund distributions or redemption of fund shares. The Total Return reflects the rate an investment would have earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions. Purisima Securities, LLC Woodside, CA 94062 6 [LOGO] - -------------------------------------------------------------------------------- Performance Summaries for year ended August 31, 2004 Pure American Fund Growth of $10,000. Pure American Fund cummulative total return versus S&P Index $10,000 invested from inception on 9/30/98 to 8/31/04+ [The following was depicted as a mountain chart in the printed material.] Pure American S&P 500 Index - ------------------------------------- 30-Sep-98 10,000 10,000 31-Oct-98 11,190 10,812 30-Nov-98 11,920 11,467 31-Dec-98 12,810 12,128 - ------------------------------------- 31-Jan-99 13,300 12,635 28-Feb-99 12,630 12,242 31-Mar-99 12,940 12,731 30-Apr-99 13,040 13,224 31-May-99 12,630 12,912 30-Jun-99 13,390 13,629 31-Jul-99 12,930 13,203 31-Aug-99 13,000 13,137 30-Sep-99 12,530 12,777 31-Oct-99 13,560 13,586 30-Nov-99 13,760 13,862 31-Dec-99 13,893 14,677 - ------------------------------------- 31-Jan-00 13,433 13,940 29-Feb-00 12,333 13,677 31-Mar-00 13,553 15,014 30-Apr-00 13,533 14,563 31-May-00 13,463 14,264 30-Jun-00 13,843 14,616 31-Jul-00 13,413 14,388 31-Aug-00 13,493 15,282 30-Sep-00 13,423 14,475 31-Oct-00 13,803 14,414 30-Nov-00 13,333 13,278 31-Dec-00 13,275 13,343 - ------------------------------------- 31-Jan-01 13,234 13,817 28-Feb-01 13,774 12,557 31-Mar-01 13,889 11,761 30-Apr-01 13,587 12,675 31-May-01 13,618 12,760 30-Jun-01 13,566 12,450 31-Jul-01 14,065 12,328 31-Aug-01 13,757 11,556 30-Sep-01 14,011 10,622 31-Oct-01 13,933 10,825 30-Nov-01 13,909 11,655 31-Dec-01 13,909 11,758 - ------------------------------------- 31-Jan-02 13,851 11,586 28-Feb-02 14,118 11,363 31-Mar-02 13,851 11,790 30-Apr-02 13,828 11,075 31-May-02 13,491 10,993 30-Jun-02 12,668 10,211 31-Jul-02 11,867 9,415 31-Aug-02 11,844 9,476 30-Sep-02 10,498 8,446 31-Oct-02 11,160 9,190 30-Nov-02 11,763 9,731 31-Dec-02 11,048 9,160 - ------------------------------------- 31-Jan-03 10,788 8,920 28-Feb-03 10,635 8,786 31-Mar-03 10,729 8,871 30-Apr-03 11,567 9,602 31-May-03 12,144 10,108 30-Jun-03 12,286 10,238 31-Jul-03 12,698 10,418 31-Aug-03 12,899 10,621 30-Sep-03 12,663 10,508 31-Oct-03 13,500 11,103 30-Nov-03 13,595 11,201 31-Dec-03 14,255 11,788 - ------------------------------------- 31-Jan-04 14,433 12,005 29-Feb-04 14,492 12,171 31-Mar-04 14,303 11,988 30-Apr-04 13,936 11,799 31-May-04 14,101 11,961 30-Jun-04 14,433 12,193 31-Jul-04 13,959 11,790 31-Aug-04 13,864 11,837 Purisima American Fund S&P 500 Index One-year One-year Average Annual Total Return(2)** 7.49% Average Annual Total Return(2)** 11.46% Five-year Five-year Average Annual Total Return(2)** 1.30% Average Annual Total Return(2)** (2.07%) Since Inception (9/30/98) Since Inception (9/30/98) Cumulative Total Return(1)** 38.64% Cumulative Total Return(1)** 18.37% Average Annual Total Return(2)** 5.67% Average Annual Total Return(2)** 2.89%
Please note past performance is not predictive of future results. Share price and return will fluctuate, and investors may experience a gain or loss when they sell their shares. To obtain a prospectus on the Purisima Funds please call 1-800/841-0199. The prospectus contains more information, including the political, economic, currency risks and potential volatility of foreign investing. Read the prospectus carefully before investing. (1) Cumulative total return measures the change in value of an investment over the periods indicated and reflects all fund fees and expenses. (2) Average annual total return represents the average annual change in value of an investment over the periods indicated and reflects all fund fees and expenses. Average annual total return and cumulative total return for the one-year period would be identical. + The S&P 500 is obtained from Standard & Poors Corp. It is an unmanaged stock index that measures the performance of 500 large cap companies traded in the U.S. Total return of a $10,000 investment in Purisima includes all expenses. Fund's month-end inception was 9/30/98 with actual inception on 9/29/98. ** The Total Returns shown do not reflect the deduction of taxes a shareholder would pay on fund distributions or redemption of fund shares. The Total Return reflects the rate an investment would have earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions. Purisima Securities, LLC Woodside, CA 94062 7 [LOGO] - -------------------------------------------------------------------------------- Performance Summaries for year ended August 31, 2004 Pure Foreign Fund Growth of $10,000 Pure Foreign Fund cumulative total return versus EAFE Foreign Index $10,000 invested from inception On 9/30/98 to 8/31/04++ [The following was presented as a mountain chart in the printed material.] Pure Foreign MSCI EAFE Index - --------------------------------------- 30-Sep-98 10,000 10,000 31-Oct-98 10,710 11,042 30-Nov-98 11,430 11,607 31-Dec-98 11,740 12,065 - --------------------------------------- 31-Jan-99 12,150 12,028 28-Feb-99 11,750 11,742 31-Mar-99 12,350 12,232 30-Apr-99 12,740 12,727 31-May-99 12,320 12,072 30-Jun-99 13,210 12,543 31-Jul-99 13,410 12,915 31-Aug-99 13,520 12,963 30-Sep-99 13,660 13,094 31-Oct-99 14,190 13,585 30-Nov-99 14,980 14,056 31-Dec-99 17,132 15,318 - --------------------------------------- 31-Jan-00 15,991 14,346 29-Feb-00 17,290 14,732 31-Mar-00 17,850 15,303 30-Apr-00 17,153 14,498 31-May-00 16,804 14,145 30-Jun-00 17,871 14,698 31-Jul-00 16,794 14,082 31-Aug-00 17,311 14,204 30-Sep-00 16,297 13,513 31-Oct-00 15,991 13,194 30-Nov-00 15,378 12,699 31-Dec-00 15,782 13,150 - --------------------------------------- 31-Jan-01 15,815 13,154 28-Feb-01 16,428 12,170 31-Mar-01 16,643 11,343 30-Apr-01 16,245 12,123 31-May-01 16,234 11,674 30-Jun-01 16,127 11,194 31-Jul-01 16,503 11,001 31-Aug-01 17,233 10,722 30-Sep-01 17,536 9,636 31-Oct-01 17,491 9,883 30-Nov-01 17,399 10,248 31-Dec-01 17,328 10,308 - --------------------------------------- 31-Jan-02 17,176 9,761 28-Feb-02 17,528 9,829 31-Mar-02 17,317 10,408 30-Apr-02 17,657 10,429 31-May-02 17,352 10,561 30-Jun-02 16,661 10,141 31-Jul-02 14,681 9,140 31-Aug-02 15,313 9,119 30-Sep-02 13,415 8,140 31-Oct-02 14,411 8,577 30-Nov-02 15,313 8,966 31-Dec-02 14,509 8,665 - --------------------------------------- 31-Jan-03 14,059 8,303 28-Feb-03 13,621 8,113 31-Mar-03 13,378 7,954 30-Apr-03 14,606 8,734 31-May-03 15,457 9,263 30-Jun-03 15,859 9,487 31-Jul-03 16,528 9,717 31-Aug-03 16,990 9,951 30-Sep-03 17,124 10,257 31-Oct-03 18,413 10,897 30-Nov-03 18,802 11,138 31-Dec-03 20,392 12,008 - ---------------------------------------- 31-Jan-04 20,667 12,178 29-Feb-04 20,917 12,459 31-Mar-04 20,717 12,529 30-Apr-04 20,155 12,246 31-May-04 20,280 12,271 30-Jun-04 20,855 12,556 31-Jul-04 20,018 12,148 31-Aug-04 20,193 12,201 Purisima Foreign Fund MSCI EAFE Index One-year One-year Average Annual Total Return(2)** 17.76% Average Annual Total Return(2)** 22.64% Five-year Five-year Average Annual Total Return(2)** 8.35% Average Annual Total Return(2)** (1.16%) Since Inception (9/30/98) Since Inception (9/30/98) Cumulative Total Return(1)** 101.93% Cumulative Total Return(1)** 22.01% Average Annual Total Return(2)** 12.60% Average Annual Total Return(2)** 3.42%
Please note past performance is not predictive of future results. Share price and return will fluctuate, and investors may experience a gain or loss when they sell their shares. To obtain a prospectus on the Purisima Funds please call 1-800/841-0199. The prospectus contains more information, including the political, economic, currency risks and potential volatility of foreign investing. Read the prospectus carefully before investing. (1) Cumulative total return measures the change in value of an investment over the periods indicated and reflects all fund fees and expenses. (2) Average annual total return represents the average annual change in value of an investment over the periods indicated and reflects all fund fees and expenses. Average annual total return and cumulative total return for the one-year period would be identical. ++ The EAFE Index is obtained from Morgan Stanley. It is an unmanaged stock index that measures the performance of selected stock markets outside the U.S. Purisima total return of a $10,000 investment includes all expenses. Fund's month-end inception was 9/30/98 with actual inception on 9/29/98. ** The Total Returns shown do not reflect the deduction of taxes a shareholder would pay on fund distributions or redemption of fund shares. The Total Return reflects the rate an investment would have earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions. Purisima Securities, LLC Woodside, CA 94062 8 [LOGO] - -------------------------------------------------------------------------------- Purisima Total Return Fund SECTOR BREAKDOWN(1) - ------------------------------------------------------------- Basic Materials 2.7% Communications 6.2% Consumer, Cyclical 10.2% Consumer, Non-cyclical 11.9% Energy 10.5% Financial 28.4% Industrial 13.1% Technology 11.6% Utilities 3.1% Short-Term Investment 2.3% - ------------------------------------------------------------- Purisima Pure American Fund SECTOR BREAKDOWN(1) - ------------------------------------------------------------- Basic Materials 3.1% Communications 5.8% Consumer, Cyclical 11.3% Consumer, Non-cyclical 14.1% Energy 11.2% Financial 26.8% Industrial 10.9% Technology 14.3% Utilities 1.9% Short-Term Investment 0.6% - ------------------------------------------------------------- Purisima Pure Foreign Fund SECTOR BREAKDOWN(1) - ------------------------------------------------------------- Basic Materials 5.6% Communications 5.4% Consumer, Cyclical 15.0% Consumer, Non-cyclical 9.6% Energy 12.9% Financial 31.0% Industrial 11.5% Technology 5.3% Utilities 3.2% Short-Term Investment 0.5% - ------------------------------------------------------------- (1) % of Total Investments as of August 31, 2004. 9 [LOGO] - -------------------------------------------------------------------------------- Important Information The following disclosure provides important information regarding the Funds' Expense Example. Please refer to this information when reviewing the Expense Example for the Funds. Expense Example As a shareholder of the Funds, you incur two types of costs: (1) transaction costs including exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees (Total Return Fund only); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period indicated and held for the entire period from 03/01/04 to 08/31/04. Actual Expenses The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Funds' actual expense ratios and assumed rates of return of 5% per year before expenses, which are not the Funds' actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. 10 [LOGO] - --------------------------------------------------------------------------------
Purisima Total Return Fund Actual Hypothetical Performance EXPENSE EXAMPLE: Performance (5% return before expenses) - --------------------------------------------------------------------------------------------- Total Return Fund Total Return Fund Beginning Account Value (03/01/04) $1,000 $1,000 Ending Account Value (08/31/04) $ 942 $1,018 Expenses Paid During Period (1) $ 7.32 $ 7.61 - --------------------------------------------------------------------------------------------- Purisima Pure American Fund Actual Hypothetical Performance EXPENSE EXAMPLE: Performance (5% return before expenses) - --------------------------------------------------------------------------------------------- Pure American Fund Pure American Fund Beginning Account Value (03/01/04) $1,000 $1,000 Ending Account Value (08/31/04) $ 957 $1,018 Expenses Paid During Period (1) $ 7.38 $ 7.61 - --------------------------------------------------------------------------------------------- Purisima Pure Foreign Fund Actual Hypothetical Performance EXPENSE EXAMPLE: Performance (5% return before expenses) - --------------------------------------------------------------------------------------------- Pure Foreign Fund Pure Foreign Fund Beginning Account Value (03/01/04) $1,000 $1,000 Ending Account Value (08/31/04) $ 965 $1,018 Expenses Paid During Period (1) $ 7.41 $ 7.61 - ---------------------------------------------------------------------------------------------
(1) Expenses are equal to the Fund's annalized expense ratio 1.50% multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 11 [LOGO] - -------------------------------------------------------------------------------- Schedule of Investments Purisima Total Return Fund August 31, 2004 Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS: 99.6% Aerospace/Defense Equipment: 2.8% 67,100 Lockheed Martin Corp. $ 3,608,638 50,500 United Technologies Corp. 4,742,455 ------------ 8,351,093 ------------ Airlines: 0.6% 134,500 Japan Airlines Corp. - ADR* 1,942,530 ------------ Automotive: 2.4% 38,100 Fuji Heavy Industries Ltd. - ADR 1,923,315 246,000 Nissan Motor Co. Ltd. - ADR 5,362,800 ------------ 7,286,115 ------------ Banking: 15.7% 437,100 Banco Santander Central - ADR 4,314,177 100,700 Barclays Plc - ADR 3,764,166 39,500 Comerica, Inc. 2,375,925 168,500 Credit Suisse Group - ADR 5,267,310 52,000 HSBC Holdings Plc - ADR 4,049,760 484,500 Mitsubishi Tokyo Finance - ADR 4,389,570 66,775 National City Corp. 2,523,427 126,996 San Paolo - IMI SpA - ADR 2,857,410 374,000 Sumitomo Mitsui - ADR 2,252,639 38,100 SunTrust Banks, Inc. 2,594,610 57,800 UBS AG 3,900,922 140,000 US Bancorp 4,130,000 118,300 Washington Mutual, Inc. 4,593,589 ------------ 47,013,505 ------------ Biomedicine: 1.0% 52,000 Amgen, Inc.* 3,083,080 ------------ Biotechnology: 0.8% 48,000 Genentech, Inc.* 2,341,440 ------------ 12 [LOGO] - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- Computers: 3.6% 135,200 Dell Computer Corp.* $ 4,710,368 110,400 Electronic Data Systems Corp. 2,121,888 368,100 EMC Corp.* 3,964,437 ------------ 10,796,693 ------------ Electrical Equipment: 3.6% 71,700 General Electric Co. 2,351,043 79,800 Hitachi Ltd. - ADR 5,032,986 240,700 Matsushita Electric Industries Co., Ltd - ADR 3,249,450 ------------ 10,633,479 ------------ Financial Services: 7.4% 78,000 American Express Co. 3,901,560 43,600 Goldman Sachs Group Inc. 3,908,740 137,771 ING Groep N.V. - ADR 3,367,123 71,600 Lehman Brothers Holdings, Inc. 5,290,524 234,000 Nomura Holdings, Inc. - ADR 3,247,920 47,700 Orix Corp. - ADR 2,447,010 ------------ 22,162,877 ------------ Foods: 1.2% 155,800 Sara Lee Corp. 3,447,854 ------------ Household Audio & Video Equipment: 1.0% 82,600 Sony Corp. - ADR 2,863,742 ------------ Household Products: 2.1% 54,700 Kimberly-Clark Corp. 3,648,490 49,200 Procter & Gamble Co. 2,753,724 ------------ 6,402,214 ------------ Import & Export: 0.6% 11,900 Mitsui & Co. Ltd. - ADR 1,920,660 ------------ Insurance: 5.8% 94,900 Allstate Corp. 4,480,229 81,544 American International Group, Inc. 5,809,195 180,800 Axa S.A. - ADR 3,715,440 73,300 Marsh & McLennan Co. 3,275,777 ------------ 17,280,641 ------------ Machinery: 2.2% 90,600 Caterpillar, Inc. 6,586,620 ------------ 13 [LOGO] - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- Media: 2.7% 40,000 Gannett Co. 3,388,000 201,900 Walt Disney Co. 4,532,655 ------------ 7,920,655 ------------ Miscellaneous Manfacturing: 4.2% 55,200 Illinois Tool Works 5,039,208 208,500 Lafarge S.A. - ADR 4,514,025 42,800 Siemens AG - ADR 2,955,340 ------------ 12,508,573 ------------ Oil & Gas: 12.3% 77,000 Anadarko Petroleum Corp. 4,559,940 124,900 Baker Hughes, Inc. 4,912,317 81,100 BASF AG - ADR 4,411,029 39,000 ChevronTexaco Corp. 3,802,500 57,600 ConocoPhillips 4,287,168 63,600 Occidental Petroleum Corp. 3,284,940 114,600 Royal Dutch Petroleum Co. - ADR 5,809,074 56,857 Total Fina S.A. - ADR 5,571,418 ------------ 36,638,386 ------------ Paper & Forest Products: 1.3% 93,300 International Paper Co. 3,733,866 ------------ Pharmaceuticals: 6.0% 97,000 Astrazeneca Plc - ADR 4,513,410 90,400 GlaxoSmithKline Plc - ADR 3,719,056 57,100 Johnson & Johnson 3,317,510 42,200 Merck & Co., Inc. 1,897,734 121,280 Sanofi-Aventis - ADR* 4,368,517 ------------ 17,816,227 ------------ Retail: 5.6% 126,900 Albertson's, Inc. 3,119,202 104,600 Costco Wholesale Corp. 4,306,382 175,000 Gap, Inc. 3,279,500 68,200 Ito Yokado Co., Ltd. - ADR 2,510,619 72,400 Lowe's Companies, Inc. 3,598,280 ------------ 16,813,983 ------------ Semiconductors: 3.6% 196,500 Intel Corp. 4,183,485 111,200 KLA-Tencor Corp.* 4,154,432 217,500 Micron Technology, Inc.* 2,503,425 ------------ 10,841,342 ------------ 14 [LOGO] - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- Software: 4.6% 108,400 First Data Corp. 4,579,900 115,200 Microsoft Corp. 3,144,960 365,800 Oracle Corp.* 3,647,026 308,000 Siebel Systems, Inc.* 2,343,880 ------------ 13,715,766 ------------ Telecommunications: 3.6% 59,700 Alltel Corp. 3,262,605 155,350 Bellsouth Corp. 4,157,166 103,600 BT Group Plc - ADR 3,439,520 ------------ 10,859,291 ------------ Transportation: 1.7% 61,400 Fedex Corp. 5,034,186 ------------ Utilities: 3.2% 93,400 Duke Energy Corp. 2,067,876 57,500 E. ON AG - ADR 4,096,875 85,700 Enel SpA - ADR 3,332,016 ------------ 9,496,767 ------------ TOTAL COMMON STOCKS (cost $280,524,758) 297,491,585 ------------ SHORT-TERM INVESTMENT: 2.4% 6,983,156 SEI Daily Income Trust Government Class B (cost $6,983,156) 6,983,156 ------------ TOTAL INVESTMENTS IN SECURITIES (cost $287,507,914): 102.0% 304,474,741 Liabilities in Excess of Other Assets: ( 2.0%) (5,852,523) ------------ NET ASSETS: 100.0% $298,622,218 ============ ADR - American depositary receipt. * Non-income producing security. See accompanying Notes to Financial Statements. 15 [LOGO] - -------------------------------------------------------------------------------- Schedule of Investments Purisima Pure American Fund August 31, 2004 Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS: 99.3% Aerospace/Defense Equipment: 2.7% 300 Lockheed Martin Corp. $ 16,134 1,050 Northrop Grumman Corp. 54,232 ------------ 70,366 ------------ Banking: 12.0% 1,350 Bank of America Corp. 60,723 900 Banknorth Group, Inc. 30,573 900 Comerica, Inc. 54,135 2,050 National City Corp. 77,469 750 UnionBanCal Corp. 44,595 900 Wachovia Corp. 42,219 ------------ 309,714 ------------ Biomedicine: 1.2% 525 Amgen, Inc.* 31,127 ------------ Biotechnology: 0.8% 450 Genentech, Inc.* 21,951 ------------ Chemicals: 1.2% 750 Rohm & Haas Co. 30,397 ------------ Computer Components & Software: 5.6% 1,800 BMC Software, Inc.* 26,946 2,475 Cisco Systems, Inc.* 46,431 1,000 Microsoft Corp. 27,300 3,400 Siebel Systems, Inc.* 25,874 1,000 Veritas Software Corp.* 16,720 ------------ 143,271 ------------ Computers: 6.4% 1,100 Dell Computer Corp.* 38,324 1,350 Electronic Data Systems Corp. 25,947 3,200 EMC Corp.* 34,464 500 IBM Corp. 42,345 5,900 Sun Microsystems, Inc.* 22,656 ------------ 163,736 ------------ 16 [LOGO] - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- Consumer Products: 4.3% 850 Clorox Co. (The) $ 44,914 575 Coca Cola Co. (The) 25,708 525 Nike, Inc. - Class B 39,538 ------------ 110,160 ------------ Diversified Commercial Services: 0.9% 575 Cintas Corp. 23,581 ------------ Electrical Equipment:1.4% 650 Johnson Controls, Inc. 36,595 ------------ Electronics: 1.1% 5,300 Solectron Corp.* 27,348 ------------ Financial Services: 10.2% 725 American Express Co. 36,264 1,116 Citigroup, Inc. 51,983 425 Goldman Sachs Group Inc. 38,101 425 Lehman Brothers Holdings, Inc. 31,403 750 Merrill Lynch & Co., Inc. 38,303 1,325 T Rowe Price Group, Inc. 65,627 ------------ 261,681 ------------ Foods: 1.5% 1,800 Sara Lee Corp. 39,834 ------------ Health Care Equipment: 0.9% 450 Medtronic, Inc. 22,388 ------------ Household Products: 1.5% 700 Procter & Gamble Co. 39,179 ------------ Insurance: 4.6% 487 American International Group 34,694 19 Berkshire Hathaway, Inc. - Class B* 54,986 600 Safeco. Corp. 28,902 ------------ 118,582 ------------ Machinery: 1.8% 625 Caterpillar, Inc. 45,438 ------------ Media: 1.7% 1,950 Walt Disney Co. 43,778 ------------ Miscellaneous Manufacturing: 1.8% 550 3M Co. 45,298 ------------ 17 [LOGO] - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- Office Supplies: 1.4% 1,250 Staples, Inc. $ 35,850 ------------ Oil & Gas: 11.2% 1,050 BJ Services Co. 50,453 1,200 Burlington Resources, Inc. 43,476 475 ChevronTexaco Corp. 46,312 875 ConocoPhillips 65,126 1,100 Ensco International, Inc. 32,076 1,100 Exxon Mobil Corp. 50,710 ------------ 288,153 ------------ Paper & Forest Products: 1.9% 1,250 International Paper Co. 50,025 ------------ Pharmaceuticals: 5.3% 750 Johnson & Johnson 43,575 575 Lilly (Eli) & Co. 36,484 650 Merck & Co., Inc. 29,231 750 Wyeth 27,428 ------------ 136,718 ------------ Restaurants: 2.0% 1,900 McDonald's Corp. 51,338 ------------ Retail: 4.0% 675 Costco Wholesale Corp. 27,790 600 Federated Department Stores 26,040 2,400 Limited Brands 48,192 ------------ 102,022 ------------ Semi-conductors: 4.1% 1,900 Intel Corp. 40,451 625 KLA-Tencor Corp.* 23,350 3,700 Micron Technology, Inc.* 42,587 ------------ 106,388 ------------ Telecommunications: 2.3% 1,175 BellSouth Corp. 31,443 1,000 Scientific-Atlanta, Inc. 27,240 ------------ 58,683 ------------ Transportation: 3.6% 1,500 Burlington Northern Santa Fe Corp. 53,700 475 Fedex Corp. 38,945 ------------ 92,645 ------------ 18 [LOGO] - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- Utilities: 1.9% 1,600 Southern Co. 48,560 ------------ TOTAL COMMON STOCKS (cost $2,419,378) 2,554,806 ------------ SHORT-TERM INVESTMENT: 0.6% 16,150 SEI Daily Income Trust Government Class B (cost $16,150) 16,150 ------------ TOTAL INVESTMENTS IN SECURITIES (cost $2,435,528): 99.9% 2,570,956 Other Assets less Liabilities: 0.1% 1,059 ------------ NET ASSETS: 100% $ 2,572,015 ============ * Non-income producing security. See accompanying Notes to Financial Statements. 19 [LOGO] - -------------------------------------------------------------------------------- Schedule of Investments Purisima Pure Foreign Fund August 31, 2004 Shares Value - -------------------------------------------------------------------------------- COMMON STOCKS: 99.4% Australia: 3.9% 5,300 BHP Billiton Ltd. - ADR $ 99,163 350 National Australia Bank Ltd. - ADR 32,949 ------------ 132,112 ------------ France: 11.7% 4,150 Axa S.A. - ADR 85,283 1,100 Dassault Systemes S.A. - ADR 47,332 4,300 Groupe Danone - ADR 69,445 1,100 Publicis Groupe - ADR 29,810 1,740 Sanofi-Aventis - ADR 62,675 1,047 Total Fina S.A. - ADR 102,595 ------------ 397,140 ------------ Germany: 8.4% 900 BASF AG - ADR 48,951 3,200 Bayerische Hypo-Und Vereinsbank AG - ADR 52,190 750 DaimlerChrysler AG 31,328 1,600 Deutsche Telekom AG - ADR* 28,048 3,100 Infineon Technologies AG* 30,411 1,000 SAP AG - ADR 36,460 850 Siemens AG - ADR 58,693 ------------ 286,081 ------------ Italy: 6.4% 2,050 Enel SpA - ADR 79,704 600 Eni SpA - ADR 61,728 2,506 San Paolo - IMI SpA - ADR 56,385 690 Telecom Italia SpA - ADR 20,707 ------------ 218,524 ------------ Japan: 28.3% 1,350 Canon, Inc. - ADR 64,760 375 Fuji Heavy Industries Ltd. - ADR 18,930 1,675 Hitachi, Ltd. - ADR 105,642 1,500 Ito Yokado Co., Ltd.- ADR 55,219 1,300 Japan Airlines Corp. - ADR* 18,775 4,000 Komatsu Ltd. - ADR 97,827 750 Kyocera Corp. - ADR 55,020 6,500 Matsushita Electric Industrial Co., Ltd. - ADR 87,750 1,200 Millea Holdings, Inc. - ADR 82,537 100 Mitsui & Co. Ltd. - ADR 16,140 20 [LOGO] - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- Japan - Continued 5,100 NEC Corp. - ADR $ 32,742 3,400 Nissan Motor Co. Ltd. - ADR 74,120 3,000 Nomura Holdings, Inc. - ADR 41,640 1,300 Orix Corp. - ADR 66,690 2,275 Sony Corp. - ADR 78,874 11,100 Sumitomo Mitsui - ADR 66,856 ------------ 963,522 ------------ Netherlands: 7.8% 3,970 ABN Amro Holding N.V. - ADR 84,521 2,206 ING Groep N.V. - ADR 53,915 1,700 Royal Dutch Petroleum Co. - ADR 86,173 1,800 TPG N.V. - ADR 42,030 ------------ 266,639 ------------ Norway: 1.6% 850 Norsk Hydro A/S - ADR 53,176 ------------ Portugal: 1.1% 3,632 Portugal Telecom S.A. - ADR 37,046 ------------ Spain: 5.9% 4,500 Banco Bilbao Vizcaya Argentaria S.A. - ADR 60,300 6,375 Banco Santander Central Hispano S.A. - ADR 62,921 2,100 Repsol S.A. - ADR 43,554 801 Telefonica S.A. - ADR 34,379 ------------ 201,154 ------------ Sweden: 2.8% 2,750 Volvo AB - ADR 94,325 ------------ Switzerland: 5.1% 1,000 Novartis AG - ADR 46,450 1,850 UBS AG - ADR 124,856 ------------ 171,306 ------------ United Kingdom: 16.4% 1,300 Abbey National Plc - ADR 27,625 500 AstraZeneca Plc - ADR 23,265 2,000 Barclays Plc - ADR 74,760 1,700 BP Plc - ADR 91,290 1,000 BT Group Plc - ADR 33,200 3,050 Cadbury Schweppes Plc - ADR 99,583 550 GlaxoSmithKline Plc - ADR 22,627 1,025 HSBC Holdings Plc - ADR 79,827 700 National Grid Group - ADR 29,687 425 Rio Tinto Plc - ADR 43,172 600 Signet Group Plc - ADR 33,552 ------------ 558,588 ------------ 21 [LOGO] - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (cost $3,095,876) $ 3,379,613 ------------ SHORT-TERM INVESTMENT: 0.5% 17,248 SEI Daily Income Trust Government Class B (cost $17,248) 17,248 ------------ TOTAL INVESTMENTS IN SECURITIES (cost $3,113,124): 99.9% 3,396,861 Other Assets less Liabilities: 0.1% 4,761 ------------ NET ASSETS: 100.0% $ 3,401,622 ============ ADR - American depositary receipt. * Non-income producing security. See accompanying Notes to Financial Statements. 22 [LOGO] - -------------------------------------------------------------------------------- Schedule of Investments by Industry Purisima Pure Foreign Fund August 31, 2004 Industry % of Net Assets - -------------------------------------------------------------------------------- Advertising 0.9% Airlines 0.5% Automobile Manufacturers 6.4% Banking 21.3% Chemicals 1.4% Electric 6.3% Electronics 3.5% Finance 3.2% Foods 5.0% Home Furnishings 4.9% Import/Export 0.5% Insurance 6.5% Machinery 2.9% Mining 4.2% Miscellaneous Manufacturing 1.7% Office/Business Equipment 1.9% Oil & Gas 12.9% Pharmaceuticals 4.6% Retail 2.6% Software 2.5% Telecommunications 4.5% Transportation 1.2% ---------------- TOTAL COMMON STOCKS 99.4% SHORT-TERM INVESTMENTS 0.5% ---------------- TOTAL INVESTMENTS IN SECURITIES 99.9% Other Assets less Liabilities 0.1% ---------------- NET ASSETS 100.0% ================ See accompanying Notes to Financial Statements. 23 [LOGO] - -------------------------------------------------------------------------------- Purisima Funds Statements of Assets and Liabilites August 31, 2004
Total Return Pure American Pure Foreign Fund Fund Fund ------------- ------------- ------------- ASSETS Investments in securities, at cost $287,507,914 $2,435,528 $3,113,124 ------------- ------------- ------------- Investments in securities, at value $304,474,741 $2,570,956 $3,396,861 Receivables: Dividends and interest 662,677 4,336 9,032 Fund shares sold 49,923 -- -- Other assets 18,821 -- -- ------------- ------------- ------------- Total Assets 305,206,162 2,575,292 3,405,893 ------------- ------------- ------------- LIABILITIES Payables for securities purchased 5,901,536 -- -- Payables for fund shares redeemed 114,512 -- -- Accrued advisory fees (Note 3) 249,337 3,277 4,271 Accrued distribution fees (Note 4) 188,900 -- -- Accrued administration fees (Note 3) 21,181 -- -- Accrued transfer agent fees 30,929 -- -- Other accrued expenses 77,549 -- -- ------------- ------------- ------------- Total Liabilities 6,583,944 3,277 4,271 ------------- ------------- ------------- NET ASSETS $298,622,218 $2,572,015 $3,401,622 ============= ============= ============= Number of shares issued and outstanding (unlimited shares authorized, $0.01 par value) 18,011,556 219,617 210,478 ============= ============= ============= Net asset value, offering and redemption price per share $16.58 $11.71 $16.16 ============= ============= ============= COMPONENTS OF NET ASSETS Paid-in capital $292,716,274 $2,662,117 $3,359,087 Accumulated net investment income 1,196,897 4,632 42,041 Accumulated net realized loss on investments (12,257,780) (230,162) (283,243) Net unrealized appreciation on investments . 16,966,827 135,428 283,737 ------------- ------------- ------------- Net assets $298,622,218 $2,572,015 $3,401,622 ============= ============= =============
See accompanying Notes to Financial Statements. 24 [LOGO] - -------------------------------------------------------------------------------- Purisima Funds Statements of Operations For the Year Ended August 31, 2004
Total Return Pure American Pure Foreign Fund Fund Fund ------------ ------------- ------------ INVESTMENT INCOME Income Dividends (net of foreign taxes witheld of $379,487, $0, and $0, respectively) $5,501,051 $48,123 $114,642 Interest 9,527 64 124 ----------- ----------- ----------- Total income 5,510,578 48,187 114,766 ----------- ----------- ----------- Expenses Advisory fees 2,878,075 43,556 48,060 Distribution fees 719,519 -- -- Administration fees 242,355 -- -- Transfer agent fees 129,463 -- -- Fund accounting fees 88,926 -- -- Custody fees 62,689 -- -- Insurance expense 60,427 -- -- Registration fees 24,067 -- -- Audit fees 19,050 -- -- Reports to shareholders 18,794 -- -- Legal fees 15,672 -- -- Trustee fees 3,342 -- -- Miscellaneous 9,505 -- -- ----------- ----------- ----------- Total expenses 4,271,884 43,556 48,060 Add: Expenses recouped by Adviser (Note 3) 44,954 -- -- ----------- ----------- ----------- Net expenses 4,316,838 43,556 48,060 ----------- ----------- ----------- Net investment income 1,193,740 4,631 66,706 ----------- ----------- ----------- CHANGE IN REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investments 1,326,029 4,726 82,432 Net unrealized appreciation on investments 18,232,293 217,852 312,226 ----------- ----------- ----------- Net realized and unrealized gain on investments 19,558,322 222,578 394,658 ----------- ----------- ----------- Net increase in net assets resulting from operations $20,752,062 $227,209 $461,364 =========== =========== ===========
See accompanying Notes to Financial Statements. 25 [LOGO] - -------------------------------------------------------------------------------- Purisima Funds Statement of Changes in Net Assets Total Return Fund
Year Ended Year Ended INCREASE (DECREASE) IN NET ASSETS FROM: August 31, 2004 August 31, 2003 --------------- --------------- OPERATIONS Net investment income $1,193,740 $1,076,737 Net realized gain (loss) on investments: Securities 1,326,029 (4,677,248) Options -- 4,958 Net unrealized appreciation on investments 18,232,293 27,195,122 ------------- ------------- Net increase in net assets resulting from operations 20,752,062 23,599,569 ------------- ------------- DISTRIBUTION TO SHAREHOLDERS From net investment income (1,073,580) (649,922) From net realized gain -- (1,595,178) ------------- ------------- Total distributions to shareholders (1,073,580) (2,245,100) ------------- ------------- CAPITAL SHARE TRANSACTIONS Net increase in net assets derived from net change in outstanding shares (a) 34,807,495 41,210,454 ------------- ------------- Total increase in net assets 54,485,977 62,564,923 NET ASSETS Beginning of year 244,136,241 181,571,318 ------------- ------------- End of year $298,622,218 $244,136,241 ============= ============= Accumulated net investment income $1,196,897 $1,073,550 ============= =============
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended August 31, 2004 August 31, 2003 --------------------------- --------------------------- Shares Value Shares Value --------------------------- --------------------------- Shares sold 5,098,409 $85,836,402 5,057,337 $68,171,437 Shares issued on reinvestment of distributions 62,124 1,035,611 167,234 2,202,476 Shares redeemed (3,094,870) (52,064,518) (2,195,711) (29,163,459) --------------------------- --------------------------- Net increase 2,065,663 $34,807,495 3,028,860 $41,210,454 =========================== ===========================
See accompanying Notes to Financial Statements. 26 [LOGO] - -------------------------------------------------------------------------------- Purisima Funds Statement of Changes in Net Assets Pure American Fund
Year Ended Year Ended INCREASE (DECREASE) IN NET ASSETS FROM: August 31, 2004 August 31, 2003 ---------------- --------------- OPERATIONS Net investment income $4,631 $12,758 Net realized gain (loss) on investments : Securities 4,726 (209,661) Net unrealized appreciation on investments 217,852 386,082 ---------- ---------- Net increase in net assets resulting from operations 227,209 189,179 ---------- ---------- DISTRIBUTION TO SHAREHOLDERS From net investment income (12,757) (41,305) ---------- ---------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets derived from net change in outstanding shares (a) (461,116) 53,362 ---------- ---------- Total increase (decrease) in net assets (246,664) 201,236 NET ASSETS Beginning of year 2,818,679 2,617,443 ---------- ---------- End of year $2,572,015 $2,818,679 ========== ========== Accumulated net investment income $4,632 $12,758 ========== ==========
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended August 31, 2004 August 31, 2003 --------------------- --------------------- Shares Value Shares Value --------------------- --------------------- Shares sold 22,297 $257,872 67,395 $667,749 Shares issued on reinvestment of distributions 1,094 12,756 4,325 41,305 Shares redeemed (61,309) (731,744) (70,463) (655,692) --------------------- --------------------- Net increase (decrease) (37,918) $(461,116) 1,257 $53,362 ===================== =====================
See accompanying Notes to Financial Statements. 27 [LOGO] - -------------------------------------------------------------------------------- Statement of Changes in Net Assets Pure Foreign Fund
Year Ended Year Ended INCREASE (DECREASE) IN NET ASSETS FROM: August 31, 2004 August 31, 2003 --------------- --------------- OPERATIONS Net investment income $66,706 $58,412 Net realized gain (loss) on investments: Securities 82,432 (348,963) Net unrealized appreciation on investments 312,226 488,304 ---------- ---------- Net increase in net assets resulting from operations 461,364 197,753 ---------- ---------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income (79,025) (122,709) ---------- ---------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets derived from net change in outstanding shares (a) 293,757 (743,643) ---------- ---------- Total increase (decrease) in net assets 676,096 (668,599) NET ASSETS Beginning of year 2,725,526 3,394,125 ---------- ---------- End of year $3,401,622 $2,725,526 ========== ========== Accumulated net investment income $42,041 $54,360 ========== ==========
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended August 31, 2004 August 31, 2003 ----------------------- ------------------------ Shares Value Shares Value ----------------------- ------------------------ Shares sold 36,377 $591,470 32,333 $395,974 Shares issued on reinvestment of distributions 5,041 78,733 10,175 122,709 Shares redeemed (24,217) (376,446) (108,954) (1,262,326) ----------------------- ------------------------ Net increase (decrease) 17,201 $293,757 (66,446) $(743,643) ======================= ========================
See accompanying Notes to Financial Statements. 28 [LOGO] Purisima Funds Financial Highlights For a capital share outstanding throughout each year. The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Annual Report.
Total Return Fund ---------------------------------------------------------------- Year Ended August 31, ---------------------------------------------------------------- 2004 2003 2002 2001 2000 ------ ------ ------ ------ ------ Net asset value, beginning of year $15.31 $14.06 $18.73 $19.65 $17.46 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) 0.07 0.07 0.09 0.31^ (0.01) Net realized and unrealized gain (loss) on investments 1.27 1.34 (2.91) (0.61)^ 2.22 ------ ------ ------ ------ ------ Total from investment operations 1.34 1.41 (2.82) (0.30)^ 2.21 ------ ------ ------ ------ ------ Less distributions: From net investment income (0.07) (0.05) (0.19) -- (0.02) From net realized gain -- (0.11) (1.66) (0.62) -- ------ ------ ------ ------ ------ Total distributions (0.07) (0.16) (1.85) (0.62) (0.02) ------ ------ ------ ------ ------ Net asset value, end of year $16.58 $15.31 $14.06 $18.73 $19.65 ====== ====== ====== ====== ====== Total return 8.72% 10.22% (16.72%) (1.33%) 12.64% Ratios/supplemental data: Net assets, end of year (millions) $298.6 $244.1 $181.6 $122.4 $89.8 Ratio of expenses to average net assets: Before fees waived and expenses absorbed or recouped 1.49% 1.56% 1.51%+ 1.61%+ 1.62% After fees waived and expenses absorbed or recouped 1.50% 1.50% 1.50%+ 1.50%+ 1.50% Ratio of net investment income (loss) to average net assets # 0.42% 0.55% 1.03% 1.68% (0.04%) Portfolio turnover rate 19.50% 12.57% 60.76% 105.90% 38.42%
# Net of fees waived. ^ Calculations are based on average shares outstanding for the period. + With dividend expense on securities sold short, which was 0.10% for 2002 and 0.05% for 2001. Otherwise, ratio of net expenses to average net assets would be 1.50% for 2002 and 2001. See accompanying Notes to Financial Statements. 29 [LOGO] Purisima Funds Financial Highlights For a capital share outstanding throughout each year. The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Annual Report.
Pure American Fund -------------------------------------------------------------- Year Ended August 31, -------------------------------------------------------------- 2004 2003 2002 2001 2000 -------------------------------------------------------------- Net asset value, beginning of year $10.94 $10.21 $12.45 $13.49 $13.00 ------ ------ ------ ------ ------ Income from investment operations: Net investment income 0.02 0.05 0.43 0.28^ (0.03) Net realized and unrealized gain (loss) on investments 0.80 0.84 (2.07) (0.02)^ 0.52 ------ ------ ------ ------ ------ Total from investment operations 0.82 0.89 (1.64) 0.26^ 0.49 ------ ------ ------ ------ ------ Less distributions: From net investment income (0.05) (0.16) (0.58) (0.28) -- From net realized gain -- -- (0.02) (1.02) (0.00)++ ------ ------ ------ ------ ------ Total distributions (0.05) (0.16) (0.60) (1.30) (0.00)++ ------ ------ ------ ------ ------ Net asset value, end of year $11.71 $10.94 $10.21 $12.45 $13.49 ====== ====== ====== ====== ====== Total return 7.49% 8.91% (13.90%)(1) (1.96%)(1) 3.79% Ratios/supplemental data: Net assets, end of year (millions) $2.6 $2.8 $2.6 $4.5 $1.1 Ratio of expenses to average net assets: Before fees waived 1.50% 1.50% 1.56%+ 1.58% 1.50% After fees waived n/a n/a 1.19%+(1) 0.08%+(1) n/a Ratio of net investment income (loss) to average net assets # 0.16% 0.52% 1.35% 4.09% (0.13%) Portfolio turnover rate 34.99% 31.47% 75.54% 265.29% 45.48%
++ Amount represents less than $0.01 per share. ^ Calculations are based on average shares outstanding for the period. + With dividend expense on securities sold short, which was 0.06% for 2002 and 0.08% for 2001. Otherwise, ratio of expenses (before fees waived) to average net assets would be 1.50% for 2002 and 2001. (1) The Adviser voluntarily waived all of its management fees for the period December 21, 2000 to December 1, 2001. See accompanying Notes to Financial Statements. 30 [LOGO] Purisima Funds Financial Highlights For a capital share outstanding throughout each year. The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Annual Report.
Pure Foreign Fund ---------------------------------------------------------------- Year Ended August 31, ---------------------------------------------------------------- 2004 2003 2002 2001 2000 ------ ------ ------ ------ ------ Net asset value, beginning of year $14.10 $13.07 $15.37 $16.39 $13.52 ------ ------ ------ ------ ------ Income from investment operations: Net investment income 0.35 0.28 0.84 0.33^ 0.01 Net realized and unrealized gain (loss) on investments 2.14 1.21 (2.47) (0.45)^ 3.69 ------ ------ ------ ------ ------ Total from investment operations 2.49 1.49 (1.63) (0.12)^ 3.70 ------ ------ ------ ------ ------ Less distributions: From net investment income (0.43) (0.46) (0.67) (0.35) (0.03) From net realized gain -- -- -- (0.55) (0.80) ------ ------ ------ ------ ------ Total distributions (0.43) (0.46) (0.67) (0.90) (0.83) ------ ------ ------ ------ ------ Net asset value, end of year $16.16 $14.10 $13.07 $15.37 $16.39 ====== ====== ====== ====== ====== Total return 17.76% 10.95% (11.14%)(1) (0.45%)(1) 28.04% Ratios/supplemental data: Net assets, end of year (millions) $3.4 $2.7 $3.4 $8.9 $2.8 Ratio of expenses to average net assets: Before fees waived 1.50% 1.50% 1.50%+ 1.50%+ 1.50% After fees waived n/a n/a 1.07%+ 0.00%+ n/a Ratio of net investment income (loss) to average net assets # 2.09% 2.06% 4.02% 4.21% 0.26% Portfolio turnover rate 34.02% 22.02% 69.59% 258.66% 51.60%
^ Calculations are based on average shares outstanding for the period. + With dividend expense on securities sold short, which was 0.06% for 2002 and 0.08% for 2001. Otherwise, ratio of expenses (before fees waived) to average net assets would be 1.50% for 2002 and 2001. 1 The Adviser voluntarily waived all of its management fees for the period December 21, 2000 to December 1, 2001. See accompanying Notes to Financial Statements. 31 [LOGO] - -------------------------------------------------------------------------------- PURISIMA FUNDS NOTES TO FINANCIAL STATEMENTS August 31, 2004 NOTE 1 - ORGANIZATION The Purisima Funds (the "Trust") was organized as a Delaware business trust on June 27, 1996 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end management investment company issuing its shares in series. Each series represents a distinct portfolio with its own investment objectives and policies. The Trust consists of three diversified series (the "Funds"): Purisima Total Return Fund (the "Total Return Fund"), representing the initial series of the Trust which commenced operations on October 28, 1996, and Purisima Pure American Fund (the "Pure American Fund") and Purisima Pure Foreign Fund (the "Pure Foreign Fund") both of which commenced operations on September 29, 1998. Fisher Investments, Inc. (the "Adviser") serves as the investment adviser to the Funds. The investment objectives of the Funds are as follows: The Total Return Fund seeks to produce a high level of total return. It invests primarily in common stocks and other equity-type securities, or securities acquired primarily to produce income, or a combination of both depending on the assessment of market conditions. The Pure American Fund seeks to provide investors with a high level of total return. The Fund may emphasize investments in common stocks and other equity-type securities acquired primarily to produce income, or a combination of both, depending on the assessment of market conditions by the Fund's Investment Adviser. The Fund will concentrate its portfolio holdings to those securities issued by issuers domiciled in the United States. The Pure Foreign Fund seeks to provide investors with a high level of total return. The Fund may emphasize investments in common stocks and other equity-type securities acquired primarily to produce income, or a combination of both, depending on the assessment of market conditions by the Fund's Investment Adviser. Under normal market conditions, the Fund will concentrate its portfolio holdings to those securities issued by issuers domiciled outside of the United States. 32 [LOGO] - -------------------------------------------------------------------------------- NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America. A. Security Valuation. Investments in securities traded on a national securities exchange are valued at the last sales price on the business day as of which such value is being determined. Investments in securities traded on the Nasdaq Stock Market, Inc. ("Nasdaq") will be valued at the Nasdaq Official Closing Price, which may not necessarily represent the last sale price. Securities traded on an exchange or Nasdaq for which there have been no sales and other over-the-counter securities are valued at the closing bid. Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees or their designee, taking into consideration: (I) fundamental analytical data relating to the investment; (II) the nature and duration of restrictions on disposition of the securities; and (III) an evaluation of the forces which influence the market in which these securities are purchased and sold. Debt securities with remaining maturities of 60 days or less are valued at cost which, when combined with accrued interest, approximates market value. Discounts and Premiums on securities purchased are amortized over the lives of the respective securities using the straight-line method. B. Federal Income and Excise Taxes. The Funds intend to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their income to its shareholders. Therefore, no federal income or excise tax provision is required. The Funds may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Funds will accrue such taxes and recoveries as applicable based upon their current interpretations of the tax rules and regulation that exist in the markets in which they invest. As of August 31, 2004, the Total Return Fund has a capital loss carryforward available to offset future capital gains, if any, of $11,958,728, of which $11,619,847 expires in 2011 and $338,881 expires in 2012. The Pure American Fund has a capital loss carryforward available to offset future capital gains, if any, of $205,896, of which $174,478 expires in 2012, $19,013 expires in 2011 and $12,405 expires in 2010, and the Pure Foreign Fund has a capital loss carryforward available to offset future capital gains, if any, of $280,093, of which $135,135 expires in 2012, $144,188 expires in 2011 and $770 expires in 33 [LOGO] - -------------------------------------------------------------------------------- 2010. In addition, the Pure American Fund had net realized capital losses of $9,421 during the period November 1, 2003 through August 31, 2004, which are treated for federal income tax purposes as arising during the Fund's tax year ending August 31, 2005. These "post-October" losses may be utilized in future years to offset net realized capital gains prior to distributing such gains to shareholders. C. Security Transactions, Investment Income and Distributions. Security transactions are accounted for on the trade date. Dividend income and distributions to shareholders are recorded on the ex-dividend date and interest income is recognized on the accrual basis. Realized gains and losses are evaluated on the bases of identified costs. D. Use of estimates. The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions. E. Concentration of Risk. Investments in securities of non-U.S. issues in certain countries involve special investment risks. These risks may include but are not limited to, investment restrictions, adverse political, social and economic developments, government involvement in the private sector, limited and less reliable investor information, lack of liquidity, certain local tax law considerations, and limited regulation of the securities markets. F. Options. Exchange traded options are valued at the last reported sale price at the close of the exchange on which the security is primarily traded. Certain markets are not closed at the time that a Fund prices portfolio securities. In these situations, snapshot prices are provided by the individual pricing services or other alternate sources at the close of the NYSE as appropriate. If no sales are reported, the mean between the last reported bid and asked prices will be used. Non-exchange traded options will also be valued at the mean between bid and asked prices. "Fair value" of other private options are valued after consulting with the Adviser using a mathematical model. Options purchased are recorded as investments; options written (sold) are accounted for as liabilities. When an option expires, the premium (original option value) is realized as a gain if the option was written or as a loss if the option was purchased. When the exercise of an option result in a cash settlement, the difference between the premium and the settlement proceeds is realized as a gain or loss. When securities are acquired or delivered upon exercise of an option, the acquisition cost or sale proceeds are adjusted by the 34 [LOGO] - -------------------------------------------------------------------------------- amount of the premium. When an option is closed, the difference between the premium and the cost to close the position is realized as a gain or loss. The Trust may purchase options which are included in the Trust's Schedules of Investments and subsequently marked to market to reflect the current value of the option. At August 31, 2004, the Trust had no options outstanding. G. Securities Sold Short. To the extent the Funds engage in selling securities short, they are obligated to replace a security borrowed by purchasing the same security at the current market value. The Funds would incur a loss if the price of the security increases between the date of the short sale and the date on which the Funds replace the borrowed security. The Funds would realize a gain if the price of the security declines between those dates. The Funds are required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Funds must also maintain a deposit with the broker consisting of cash having a value equal to a specified percentage of the value of the securities sold short. H. Reclassification of Capital Accounts. Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended August 31, 2004, the Total Return Fund decreased paid-in-capital by $15, increased accumulated net investment income by $3,187 and increased accumulated realized loss by $3,172. NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS The Total Return Fund (the "Fund") has an Investment Management Agreement with the Adviser to provide investment advisory services to the Fund. The Adviser furnishes all investment advice, office space, facilities, and most of the personnel needed by the Funds. As compensation for its services, the Adviser is entitled to a monthly fee at the annual rate of 1.00% of the Fund's average daily net assets. The Fund is responsible for its own operating expenses. The Adviser has agreed to limit the Fund's total expenses (exclusive of brokerage, interest, taxes, dividends on securities sold short and extraordinary expenses) to not more than 1.50% of the average daily net assets. Any fee withheld or voluntarily reduced and/or any Fund expense absorbed by the Adviser pursuant to an agreed upon expense cap shall be reimbursed by the Fund to the Adviser, if so requested by the Adviser, anytime before the end of the third fiscal 35 [LOGO] - -------------------------------------------------------------------------------- year following the year to which the fee reduction, waiver, or expense absorption relates, provided the aggregate amount of the Fund's current operating expenses for such fiscal year does not exceed the applicable limitation on Fund expenses. Any such reimbursement is also contingent upon Board of Trustees review and approval prior to the time the reimbursement is also initiated. The Fund must pay its current ordinary operating expenses before the Adviser is entitled to any reimbursement of fees and/or expenses. For the year ended August 31, 2004, the Adviser recouped fees previously waived and expenses absorbed of $44,954. At August 31, 2004, the cumulative unreimbursed amount paid and/or waived by the Adviser on behalf of the Fund is $95,807. The Adviser may recapture $95,807 no later than August 31, 2007. The Pure American and Pure Foreign Funds have a Comprehensive Management Agreement with the Adviser to provide advisory and other ordinary services, including administration, transfer agency, custody and auditing services. For providing these services, the Pure American and Pure Foreign Funds each pay the Adviser a monthly fee at the annual rate of 1.50% of the respective Funds' average daily net assets. This comprehensive fee arrangement requires the Adviser to absorb and pay out of its own resources all operating expenses of the Pure American and Pure Foreign Funds U.S. Bancorp Fund Services, LLC (the "Administrator") acts as the Trust's Administrator under an Administration Agreement. The Administrator prepares various federal and state regulatory filings, reports and returns for the Funds; prepares reports and materials to be supplied to the trustees; monitors the activities of the Funds' custodian, transfer agent and accountants; coordinates the preparation and payment of Fund expenses and reviews the Funds' expense accruals. For its services, the Administrator receives a monthly fee based on the value of the total average net assets of the Trust at an annual rate of 0.10% of the first $200 million of such net assets, 0.05% of the next $300 million, and 0.03% thereafter, subject to a minimum fee of $40,000 per Fund. The Pure American and Pure Foreign Funds' administration fees are paid by the Adviser under the Comprehensive Management Agreement. NOTE 4 - SERVICE AND DISTRIBUTION PLAN The Trust has adopted a Service and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Total Return Fund is authorized to pay expenses incurred for the purpose of financing activities, including the employment of other dealers, intended to result in the sale of shares of the Fund. The fee accrues at an annual rate not to exceed 0.25% of the Fund's average daily net assets. For the year ended August 31, 2004, the Fund incurred $719,519 in distribution fees. Purisima Securities LLC ("Purisima Securities"), an affiliate of the Adviser, serves as distributor of the Funds pursuant to a Distribution Agreement with the Trust. 36 [LOGO] - -------------------------------------------------------------------------------- NOTE 5 - INVESTMENT TRANSACTIONS The cost of purchases and the proceeds from sales of securities, excluding U.S. Government securities and short-term investments, for the year ended August 31, 2004 were as follows: FUND PURCHASES SALES ---- --------- ----- Total Return Fund $90,908,917 $55,288,130 Pure American Fund 1,000,010 1,463,940 Pure Foreign Fund 1,373,856 1,070,009 NOTE 6 - DISTRIBUTION TO SHAREHOLDERS The difference between the book and tax basis components of the distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gains distributions reported in the Statements of Changes of Net Assets, if any, are reported as ordinary income for federal tax purposes. As of August 31, 2004, the components of distributable earnings on a tax basis were as follows:
Total Return Pure American Pure Foreign ------------ ------------- ------------ COST OF INVESTMENTS FOR TAX PURPOSES $287,806,966 $2,450,373 $3,116,274 ------------ ---------- ---------- Gross tax unrealized appreciation $ 31,316,871 $ 260,512 $ 381,999 Gross tax unrealized depreciation ($ 14,649,096) ($ 139,929) ($ 101,412) ------------ ---------- ---------- Net tax unrealized appreciation $ 16,667,775 $ 120,583 $ 280,587 UNDISTRIBUTED ORDINARY INCOME $ 1,196,897 $ 4,632 $ 42,041 CAPITAL LOSS CARRYFORWARD ($ 11,958,728) ($ 205,896) ($ 280,093) POST-OCTOBER LOSSES -- ($ 9,421) -- ------------ ---------- ---------- TOTAL ACCUMULATED EARNINGS (LOSSES) $ 5,905,944 ($ 90,102) $ 42,535 ============ ========== ==========
The tax composition of dividends are as follows:
Long Term Ordinary Income Long Term Capital Capital Gains Income Per Share Gains Per Share ------------------------------------------------------------------ Total Return Fund 8/31/2004 $1,073,580 $0.0650 $ -- $ -- 8/31/2003 649,922 $0.0465 1,595,178 0.1141 Pure American Fund 8/31/2004 12,757 0.0487 -- -- 8/31/2003 41,305 0.1565 -- -- Pure Foreign Fund 8/31/2004 79,025 0.4287 -- -- 8/31/2003 122,709 0.4583 -- --
37 [LOGO] - -------------------------------------------------------------------------------- NOTE 7 - PROXY VOTING PROCEDURES (UNAUDITED) The Adviser votes proxies relating to portfolio securities in accordance with procedures that have been approved by the Trust's Board of Trustees. You may obtain a description of these procedures, free of charge, by calling toll-free 800-841-0199. This information is also available through the Securities and Exchange Commission's website at http://www.sec.gov. NOTE 8 - FORM N-Q DISCLOSURE (UNAUDITED) Beginning with its first and third fiscal quarters ending on or after July 9, 2004, Purisima Funds will file the Funds' complete schedules of portfolio holdings with the SEC on form N-Q. The Funds' Form N-Q will be available without charge, upon request, by calling 1-800-841-0199. Furthermore, you can obtain the Form N-Q on the SEC's website at www.sec.gov. NOTE 9 - TAX NOTICE (UNAUDITED) The percentage of dividend income distributed for the year ended August 31, 2004, which is designated as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003, is 100% for each of the Funds. The percentage of dividend income distributed for the year ended August 31, 2004 designated as qualified dividends received deduction available to corporate shareholders, is 100% for the Total Return Fund, 100% for the Pure American Fund and 0% for the Pure Foreign Fund. 38 [LOGO] - -------------------------------------------------------------------------------- This page is intentionally left blank. 39 [LOGO] - -------------------------------------------------------------------------------- Other Information - Trustees and Officer Information (Unaudited)
Number of Portfolios in Fund Position(s) Complex Other Held Year Principal Overseen by Director- Name, Address, Age with Trust Elected(1) Occupation(s) During Past Five Years Director ships Held ------------------ ---------- ---------- ------------------------------------ -------- ---------- Kenneth L. Fisher* (54) President 1996 Chief Executive Officer and majority 3 None Fisher Investments, Inc. and Trustee shareholder of the Adviser, and has served 13100 Skyline Blvd. in such capacities since the incorporation Woodside, CA 94062 of the Adviser in 1986. Prior thereto, he was the founder of Fisher Investments, a sole proprietorship which commenced operations in 1978. Sherrilyn A. Fisher* (55) Secretary 1996 Senior Vice President and Corporate N/A None Fisher Investments, Inc. Secretary of the Adviser. Ms. Fisher has 13100 Skyline Blvd. been employed by the Adviser since 1986. Woodside, CA 94062 Rita Dam (38) Treasurer 2004 From 1994 to Present, Vice President of U.S. N/A None 615 E. Michigan Street Bancorp Fund Services, LLC Milwaukee, WI 53202 Pierson E. Clair III (56) Trustee 1996 President and Chief Executive Officer of 3 Signature Fisher Investments, Inc. Brown & Haley since 1998 (fine Foods, Inc. 13100 Skyline Blvd. confectioners); Vice President of Blummer Woodside, CA 94062 Chocolate Company from 1980 to 1997, where he had been employed since 1970. Bryan F. Morse (52) Trustee 1996 Sole proprietor of Bryan F. Morse, RIA, a 3 None Fisher Investments, Inc. registered investment adviser since 1990. 13100 Skyline Blvd. Woodside, CA 94062 Grover T. Wickersham (55) Trustee 1996 Attorney in private practice in Palo Alto, 3 None Fisher Investments, Inc. California. Prior to entering private 13100 Skyline Blvd. practice in June of 1981, served as a Branch Woodside, CA 94062 Chief of the Los Angeles Regional Office of the U.S. Securities and Exchange Commission. Scott LeFevre (47) Trustee 2001 Sole proprietor of LeFevre Capital 3 None Fisher Investments, Inc. Management. 13100 Skyline Blvd. Woodside, CA 94062 Alfred D. McKelvy, Jr. (55) Trustee 2003 Executive Director of the law firm of 3 Diablo Fisher Investments, Inc. Berding & Weil, LLP since 1990. Valley 13100 Skyline Blvd. Bank; East Woodside, CA 94062: Bay BOMA.
- --------------------------- (1) Trustees and officers of the Funds serve until their resignation, removal or retirement. * "Interested person" of the Trust, as defined in the 1940 Act. 40 and 41 [LOGO] - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees Purisima Funds Woodside, California We have audited the accompanying statements of assets and liabilities, including the schedules of investments of the Purisima Total Return Fund, the Purisima Pure American Fund, and the Purisima Pure Foreign Fund, each a series of shares of the Purisima Funds, as of August 31, 2004, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (US). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2004, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly in all material respects, the financial position of the Purisima Total Return Fund, the Purisima Pure American Fund, and the Purisima Pure Foreign Fund as of August 31, 2004, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. TAIT, WELLER & BAKER Philadelphia, Pennsylvania September 25, 2004 42 [LOGO] - -------------------------------------------------------------------------------- Privacy Notice Fisher Investments, Inc. and The Purisima Funds collect nonpublic information about you from the following sources: o Information we receive about you on applications or other forms; o Information you give us orally; and o Information about your transactions with us or others. We do not disclose any nonpublic personal information about our customers or former customers without the customer's authorization, except as required by law or in response to inquires from governmental authorities. We restrict access to your personal and account information to those employees who need to know that information to provide products and services to you. We also may disclose that information to unaffiliated third parties (such as to brokers or custodians) only as permitted by law and only as needed for us to provide agreed services to you. We maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. 43 This page is intentionally left blank. 44 This page is intentionally left blank. 45 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 offer 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 for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant. --------------------------------------------------------------- FYE 08/31/2003 FYE 08/31/2004 --------------------------------------------------------------- Audit Fees $26,500 $28,500 Audit-Related Fees 0 0 Tax Fees 7,500 7,500 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. All of the principal accountant's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal accountant. (If more than 50 percent of the accountant's hours were spent to audit the registrant's financial statements for the most recent fiscal year, state how many hours were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.) The following table indicates the non-audit fees billed by the registrant's accountant for services to the registrant and to the registrant's investment adviser (and any other controlling entity, etc.--not sub-adviser) for the last two years. The audit committee of the board of trustees/directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant's independence. -------------------------------------------------------------------- Non-Audit Related Fees FYE 8/31/2003 FYE 8/31/2004 -------------------------------------------------------------------- Registrant 0 0 Registrant's Investment Adviser 0 0 -------------------------------------------------------------------- Item 5. Audit Committee of Listed Registrants. - ---------------------------------------------- Not applicable to open-end investment companies. 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. Purchases of Equity Securities by Closed-End Management Investment - -------------------------------------------------------------------------- Company and Affiliated Purchases. - --------------------------------- Not applicable to open-end investment companies. Item 9. Submission of Matters to a Vote of Security Holders. - ------------------------------------------------------------ There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of trustees. Item 10. Controls and Procedures. - --------------------------------- (a) The Registrant's President/Chief Executive Officer and Treasurer/Chief Financial Officer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "1940 Act")) are effective as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 15d-15(b) under the Securities Exchange Act of 1934, as amended. 2 (b) There were no significant changes in the Registrant's internal controls over financial reporting that occurred during the Registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. Item 11. Exhibits. - ------------------ (a) (1) Incorporated by reference to the Registrant's Form N-CSR filed November 7, 2003. (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. (3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies. (b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) The Purisima Funds By (Signature and Title) /s/ KENNETH L. FISHER ------------------------------------ Kenneth L. Fisher, President Date 11/8/2004 ------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ KENNETH L. FISHER ----------------------------------- Kenneth L. Fisher, President Date 11/8/2004 ------------------------------------------------------- By (Signature and Title)* /s/ RITA DAM ------------ Rita Dam, Treasurer Date 11/5/04 ------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. 4 EX-99.CERT 2 v08082_ex99cert.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) 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) [Omit]; (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 registrant's most recent fiscal quarter 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: 11/8/2004 /s/ KENNETH L. FISHER --------------- --------------------- Kenneth L. Fisher President CERTIFICATIONS I, Rita Dam, 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) 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) [Omit]; (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 registrant's most recent fiscal quarter 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: 11/5/04 /s/ RITA DAM ----------------- ------------ Rita Dam Treasurer EX-99.906CERT 3 v08082_ex99906cert.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, 2004 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/ RITA DAM - --------------------- ------------ Kenneth L. Fisher Rita Dam President, Purisima Funds Treasurer, Purisima Funds Dated: 11/8/2004 --------------- 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 Purisima Funds for purposes of the Securities Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----