THE PURISIMA FUNDS
SEMI-ANNUAL REPORT
FEBRUARY 28, 1997
This report is submitted for the general information of shareholders of the
Purisima Total Return Fund. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the Fund. The prospectus includes complete information about management
fees and expenses, investment objectives, risks and operating policies of the
Fund. Please read the prospectus carefully.
DEAR SHAREHOLDER:
During the fourth quarter the portfolio was tilted toward big cap stocks. We
continue to believe big cap stocks will best small cap for some time to come -
both domestically and overseas - perhaps through the next bear market bottom.
Fourth quarter foreign equity markets were generally positive. Multiple
interest rate cuts rippled across Europe and Japan as they desperately tried to
revive their lackluster economies. En route hundreds of billions of dollars of
newly printed money flowed from there to "park" here and England, awaiting a
better economy at home. We expect this excess capital from abroad to flow back
out of the U.S. to fuel a major foreign market boom sometime later this year.
In the quarter rate cuts occurred in: Australia, France, Israel, Italy, Japan,
Portugal, Spain and Sweden. Although Germany did not cut rates, it did reduce
reserve requirements, which essentially has the same stimulative effect as a
rate cut.
POSITIONING THE FUND'S PORTFOLIO
The combination of foreign rate cuts, an ever increasing supply of money and
declining inflation draws our attention to 1997's potential economic
turnarounds. We believe loose money will ultimately work to stimulate overseas
economies. We are bullish for stocks in continental Europe and Japan for 1997.
Japan is struggling to find a bottom and end its seven year super-bear market.
There are few markets that have ever been less popular than Japan is now, which
is why, based on our style of simply avoiding overly popular markets, we simply
must own Japan. By contrast, Europe is already early in a bull market that
seems robust, dynamic and responsive to recent rapid monetary expansion
throughout the continent.
Domestically, we see more inflation building than most folks expect. Note, year
end CPI analysis focused on all the wrong parts. Observers noted that the CPI,
ex-energy, was only up 2.6%, seemingly pretty good. We miss the ex-energy
distinction since few consumers can sidestep their energy purchases as easily as
many other categories. You must heat your house and pay for you car's gas.
Little noted as 1997 began was that the overall CPI number for 1996 was 3.3%,
the highest total CPI number for a single year since 1990. We suspect Federal
Reserve Chairman Alan Greenspan will notice that number before the March Fed
meeting. In an environment where the domestic market might deteriorate, huge
stocks should do best while small growth should lag. We believe the small
growth cycle ended in May and will be the laggard until the bottom the next bear
market. So, to get big, which means bigger than the market, we have to remain
devoted to the only very biggest stocks, which is what you see in our portfolio.
We appreciate your support of the Purisima Total Return Fund and look forward to
continuing to serve your investment needs and objectives.
Sincerely,
Kenneth L. Fisher
PURISIMA TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
February 28, 1997 (Unaudited)
Number of
Shares Value
- --------- -----
COMMON STOCK 99.4%
AEROSPACE 1.8%
100 Boeing Co. $10,175
-------
AUTOMOBILES 9.5%
100 Daimler-Benz AG ADR * 7,250
150 Ford Motor Co. 4,931
200 General Motors Co. 11,575
900 Nissan Motor Co., Ltd. ADR 10,575
300 Toyota Motor Corp. 15,450
200 Volvo AB ADR 4,975
-------
54,756
-------
BANKING 6.6%
100 Banco Bilbao Vizcaya ADR 5,850
350 Bank of Tokyo Mitsubishi ADR 5,819
100 Barclays PLC ADR 7,250
600 Espirito Santo Financial ADR 8,400
300 Instituto Mobiliare Ital SP ADR 7,875
100 Westpac Banking ADR 2,837
-------
38,031
-------
CHEMICALS 4.8%
100 E. I. du Pont de Nemours & Co. 10,725
200 Norsk Hydro A/A ADR 10,000
200 Rhone-Poulenc SA ADR 6,975
-------
27,700
-------
COMMERCIAL SERVICES 1.1%
100 Reuters Holdings PLC ADR 6,413
-------
COMMUNICATION EQUIPMENT 5.3%
100 Alcatel Alsthom CGE ADR 2,050
200 Ericsson (LM) ADR 6,309
100 Lucent Technologies, Inc. 5,388
200 Motorola, Inc. 11,175
100 Nokia Corp. ADR Class A 5,850
-------
30,772
-------
Number of
Shares Value
- --------- -----
COMPUTER COMPONENTS & SOFTWARE 3.1%
150 Cisco Systems, Inc. * $8,344
100 Microsoft Corp. * 9,750
-------
18,094
-------
COMPUTERS 7.4%
200 Hewlett Packard Co. 11,200
150 Hitachi Ltd. ADR 13,163
50 International Business Machines Corp. 7,187
200 NEC Corp. ADR 11,550
-------
43,100
-------
CONSUMER PRODUCTS 2.0%
350 PepsiCo, Inc. 11,506
-------
COSMETICS AND TOILETRIES 1.4%
100 Gillette Co. 7,913
-------
ELECTRIC UTILITIES 1.0%
100 Empresa Nacional de Electricidad SA ADR 6,137
-------
ELECTRICAL EQUIPMENT 2.9%
100 General Electric Co. 10,287
150 Philips Electronics NV NY 6,750
-------
17,037
-------
ENTERTAINMENT 1.3%
100 Walt Disney Co. (The) 7,425
-------
FINANCIAL SERVICES 1.7%
50 ABB AB ADR 5,587
100 Federal National Mortgage Assoc. 4,000
-------
9,587
-------
FOOD 1.6%
50 Unilever NV 9,525
-------
HOSPITALS & HEALTH CARE FACILITIES 1.4%
200 Columbia Healthcare Corp. 8,400
-------
HOUSEHOLD PRODUCTS 2.1%
100 Procter & Gamble Co. 12,013
-------
Number of
Shares Value
- --------- -----
INSURANCE 2.2%
100 Aegon NV ADR $ 6,688
50 American International Group, Inc. 6,050
-------
12,738
-------
MANUFACTURING & MINING 3.0%
100 De Beers Consolidated Mines, Ltd. ADR 3,478
150 Minnesota Mining & Manufacturing Co. 13,800
-------
17,278
-------
OIL & GAS 9.6%
100 Amoco Corp. 8,450
200 Elf Aquitane ADR 9,600
100 Exxon Corp. 9,988
200 Repsol SA ADR 7,600
100 Texaco, Inc. 9,887
250 Total S.A. ADR 9,906
-------
55,431
-------
PHARMACEUTICALS 8.4%
150 Abbott Laboratories 8,438
50 American Home Products Corp. 3,200
100 Astra AB ADR A 4,813
50 Bristol-Myers Squibb Co. 6,525
200 Johnson & Johnson 11,525
50 Merck & Co., Inc. 4,600
100 Novo Nordisk ADR * 4,812
50 Pfizer, Inc. 4,581
-------
48,494
-------
PHOTOGRAPHY 1.5%
100 Eastman Kodak Co. 8,963
-------
RESTAURANTS 1.5%
200 McDonald's Corp. 8,650
-------
RETAIL 3.5%
200 Coles Myer Ltd. ADR 7,150
150 Home Depot, Inc. 8,175
200 Wal-Mart Stores, Inc. 5,275
-------
20,600
-------
Number of
Shares Value
- --------- -----
SEMICONDUCTORS 5.6%
100 Intel Corp. $ 14,188
100 Kyocera Corp. ADR 11,675
100 SGS - Thomson Microelec NY * 6,600
-------
32,463
-------
STEEL 1.8%
200 British Steel PLC ADR 4,975
200 Broken Hill Proprietary Co., Ltd. 5,325
-------
10,300
-------
TELECOMMUNICATIONS 6.1%
100 Ameritech Corp. 6,375
150 AT&T Corp. 5,981
100 Bell Atlantic Corp. 6,912
100 Bellsouth Corp. 4,688
100 Stet Soc Finanz Telef ADR 4,275
100 Telefonica DE Espana ADR 6,887
-------
35,118
-------
TOBACCO PRODUCTS 1.2%
50 Philip Morris Cos., Inc. 6,756
-------
Total Common Stock (cost $567,988) 575,375
-------
Principal
Amount
SHORT-TERM INVESTMENTS 5.3%
$30,681 UMB Bank n.a. Money Market Fiduciary 30,681
-------
Total Short-Term Investments (cost $30,681) 30,681
-------
Total Investments (cost $598,669) 104.7% 606,056
-------
Liabilities, less
Cash and Other Assets -4.7% (27,000)
--------
NET ASSETS 100.0% $579,056
--------
*Non-income producing security.
See notes to financial statements.
PURISIMA TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1997 (Unaudited)
ASSETS:
Investments at value (cost $598,669) $606,056
Deferred organizational costs 143,097
Prepaid expenses 19,884
Dividends and interest receivable 884
--------
Total Assets 769,921
-------
LIABILITIES:
Payable to Adviser 95,759
Accrued expenses 64,642
Payable for securities purchased 29,622
Accrued investment advisory fee 842
-------
Total Liabilities 190,865
-------
Net Assets $579,056
========
NET ASSETS CONSIST OF:
Capital stock $571,080
Undistributed net investment income 496
Undistributed net realized gain on investments 93
Net unrealized appreciation on investments 7,387
--------
Net Assets $579,056
========
CAPITAL STOCK, $.01 par value, Unlimited Authorization
Issued and outstanding 55,251
-------
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $10.48
======
See notes to financial statements.
PURISIMA TOTAL RETURN FUND
STATEMENT OF OPERATIONS
For the Period October 28, 1996 to February 28, 1997 (Unaudited)
INVESTMENT INCOME:
Dividends $ 992
Interest 766
-------
1,758
-------
EXPENSES:
Fund administration and accounting fees 21,894
Shareholder servicing fees 16,808
Federal and state registration fees 11,636
Amortization of organizational costs 10,432
Legal fees 10,086
Reports to shareholders 6,063
Trustees' fees 4,519
Other 3,662
Audit fees 3,060
Custody fees 1,750
Investment advisory fees 842
-------
Total expenses before reimbursement and waiver 90,752
Reimbursement and waiver of expenses by Adviser (89,490)
--------
Net expenses 1,262
-------
NET INVESTMENT INCOME 496
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 93
Change in unrealized appreciation on investments 7,387
-------
Net gain on investments 7,480
-------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 7,976
=======
See notes to financial statements.
PURISIMA TOTAL RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period October 28, 1996 to February 28, 1997 (Unaudited)
OPERATIONS:
Net investment income $ 496
Net realized gain on investments 93
Change in unrealized appreciation on investments 7,387
-------
Net increase in net assets resulting from operations 7,976
-------
CAPITAL SHARE TRANSACTIONS:
Proceeds from 45,251 shares sold 471,080
-------
TOTAL INCREASE IN NET ASSETS 479,056
NET ASSETS:
Beginning of period 100,000
-------
End of period $579,056
========
See notes to financial statements.
PURISIMA TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS (Unaudited)
October 28, 1996 (1)
to February 28, 1997
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income 0.01
Net realized and unrealized gains
on securities 0.47
-------
Total from investment operations 0.48
Net asset value, end of period $10.48
======
Total return (2) 4.80%
Supplemental data and ratios:
Net assets, end of period $579,056
Ratio of net expenses to average net assets (3)(4) 1.50%
Ratio of net investment income to average net assets (3)(4) 0.59%
Portfolio turnover rate 0.16%
Average commission rate paid on portfolio
investment transactions $0.0289
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Net of reimbursements and waivers. Without reimbursements and waivers, the
ratio of expenses to average net assets would have been 107.86%, and the
ratio of net investment income to average net assets would have been
(105.77%).
PURISIMA TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
(1) Organization
------------
The Purisima Total Return Fund (the "Fund"), constituting the initial
series of The Purisima Funds (the "Trust"), was organized on June 27, 1996
as a Delaware business trust 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 representing a
distinct portfolio with its own investment objectives and policies. The
only series presently authorized is the Purisima Total Return Fund. Fisher
Investments, Inc. (the "Adviser") serves as the investment adviser to the
Fund.
(2) Significant Accounting Policies
-------------------------------
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with
GAAP 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates and
assumptions.
(a) Investment Valuation
Securities which are traded on a recognized stock exchange are valued at
the last sale price on the securities exchange on which such securities
are primarily traded. Securities traded on only over-the-counter
markets are valued on the basis of closing over-the-counter trade
prices. Securities for which there were no transactions are valued at
the closing bid prices. Debt securities (other than short-term
instruments) are valued at prices furnished by a pricing service. Debt
instruments maturing within 60 days are valued by the amortized cost
method. Any securities for which market quotations are not readily
available are valued at their fair value as determined in good faith by
the Adviser pursuant to guidelines established by the Board of Trustees.
(b) Organization Costs
Costs incurred by the Fund in connection with its organization,
registration and the initial public offering of shares have been
deferred and will be amortized over the period of benefit, but not to
exceed five years from the date upon which the Fund commenced investment
activities. If any of the original shares of the Fund are redeemed by
any holder thereof prior to the end of the amortization period, the
redemption proceeds will be reduced by the pro rata share of the
unamortized expenses as of the date of redemption. The pro rata share
by which the proceeds are reduced will be derived by dividing the number
of original shares of the Funds being redeemed by the total number of
original shares outstanding at the time of redemption.
(c) Federal Income and Excise Taxes
The Fund intends to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute
substantially all investment company net taxable income and net capital
gains to shareholders in a manner which results in no tax cost to the
Fund. Therefore, no federal income or excise tax provision is required.
(d) Distributions to Shareholders
Dividends from net investment income will be declared and paid annually.
Distributions of net realized gains, if any, will be declared at least
annually. Distributions to shareholders are recorded on the ex-dividend
date. The Fund periodically makes reclassifications among certain of
its capital accounts as a result of the recognition and characterization
of certain income and capital gain distributions determined annually in
accordance with federal tax regulations which may differ from generally
accepted accounting principals.
(e) Other
Investment transactions are accounted for on the trade date plus one.
The Fund determines the gain or loss realized from investment
transactions by comparing the original cost of the security lot sold
with the net sale proceeds. Dividend income is recognized on the ex-
dividend date and interest income is recognized on an accrual basis.
(3) Investment Adviser
------------------
The Fund has an Investment Management Agreement with the Adviser, with whom
certain officers and trustees of the Fund are affiliated, to furnish
investment advisory services to the Fund. Under the terms of this
agreement, the Fund will pay the Adviser a monthly fee at the annual rate of
1.00% of the Fund's average daily net assets. The Adviser has agreed to
voluntarily reduce fees for expenses (exclusive of brokerage, interest,
taxes and extraordinary expenses) that exceed the expense limitation of
1.50% of the Fund's average daily net assets for the first fiscal year. The
Investment Management Agreement permits the Adviser to seek reimbursement of
any reductions made to its management fee and payments made to limit
expenses which are the responsibility of the Fund within the three-year
period following such reduction, subject to the Fund's ability to effect
such reimbursement and remain in compliance with applicable expense
limitations. At such time as it appears probable that the Adviser will seek
such reimbursement, the amount of reimbursement that the Fund is able to
effect will be accrued as an expense of the Fund for that current period.
(4) Service and Distribution Plan
-----------------------------
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Service
and Distribution Plan (the "Plan"). Under the Plan, the 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 at an annual rate of up to 0.25% of the Fund's average
daily net assets.
(5) Investment Transactions
-----------------------
The aggregate purchases and sales of securities, excluding short-term
investments and U.S. government obligations, for the Fund for the period
October 28, 1996 to February 28, 1997 are summarized below:
Purchases $568,254
Sales $ 359
At February 28, 1997, gross unrealized appreciation and depreciation of
investments, based on cost for federal income tax purposes of $598,669 were
as follows:
Appreciation $23,969
Depreciation (16,582)
--------
Net appreciation on investments $ 7,387
========
