As filed with the Securities and Exchange
Commission on November 14, 1997
Registration No. 333-09153
File No. 811-07737
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 3 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 4 [X]
THE PURISIMA FUNDS
(Exact Name of Registrant as Specified in Charter)
13100 SKYLINE BOULEVARD
WOODSIDE, CALIFORNIA 94062-4547
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 851-7925
KENNETH L. FISHER
13100 Skyline Boulevard.
Woodside, California 94062-4547
(Name and Address of Agent for Service)
Copy to:
David Hearth, Esq.
Paul, Hastings, Janofsky & Walker
345 California Street, 29th Floor
San Francisco, CA 94104
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[X] On November 14 , 1997, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On __(date)____, pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On __(date)____, pursuant to paragraph (a)(2) of Rule 485
<PAGE>
THE PURISIMA FUNDS
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and the
Statement of Additional Information of the responses to the Items of Parts A and
B of Form N-1A).
<TABLE>
<CAPTION>
Caption or Subheading in Prospectus or
Item No. on Form N-1A Statement of Additional Information
--------------------- -----------------------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant The Purisima Funds; Investment Objective;
Investment Policies and Risk Considerations;
Investment Limitations
5. Management of the Fund Management; Transfer and Dividend Disbursing
Agent, Custodian and Independent Accountants
5A. Management's Discussion of Fund
Performance
6. Capital Stock and Other Securities Capital Structure; Dividends and Distributions;
Taxes; Shareholder Reports and Information
7. Purchase of Securities Being Offered How to Purchase Shares; Pricing of Fund Shares;
How to Exchange Shares; Retirement Plans;
Service and Distribution Plan
8. Redemption or Repurchase How to Redeem Shares; Pricing of Fund Shares;
How to Exchange Shares
9. Legal Proceedings (1)
</TABLE>
<PAGE>
PART B-INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Caption or Subheading in Prospectus or
Item No. on Form N-1A Statement of Additional Information
--------------------- -----------------------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History (2)
13. Investment Objectives and Policies Additional Investment Information; Investment
Restrictions
14. Management of the Fund Additional Trust Information
15. Control Persons and Principal Holders of Additional Trust Information
Securities
16. Investment Advisory and Other Services Additional Trust Information
17. Brokerage Allocation and Other Policies Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities Description of Shares
19. Purchase, Redemption and Pricing Included in the Prospectus under the heading
of Securities Being Offered "How to Purchase Shares," "Pricing of Fund
Shares," "How to Exchange Shares" and "How to
Redeem
Shares" and in the Statement of Additional
Information under the headings "Individual
Retirement Accounts"
20. Tax Status Included in the Prospectus under the headings
"Taxes" and "Dividends and Distributions" and in
the Statement of Additional Information under
the
heading "Taxes" and "Additional Investment
Information"
21. Underwriters (1)
22. Calculation of Performance Data Included in the Prospectus under the heading
"Fund Performance" and in the Statement of
Additional
Information under the heading "Performance
Information"
23. Financial Statements Financial Statements
</TABLE>
- ----------------------
(1) Answer negative or inapplicable
(2) Complete answer to Item is contained in the Prospectus
<PAGE>
As filed with the Securities and
Exchange Commission on November 14, 1997
Registration No. 333-09153
File No. 811-07737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Part A
of
Form N-1A
REGISTRATION STATEMENT
THE PURISIMA FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
NOVEMBER 14, 1997
PROSPECTUS
Purisima Total Return Fund
The Purisima Total Return Fund (the "Fund"), constituting the initial
series of The Purisima Funds (the "Trust"), is a no-load, open-end management
investment company, commonly known as a mutual fund. The investment objective of
the Fund is to produce a high level of total return. The Fund may emphasize
investments 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 by the Fund's investment adviser. When selecting
securities, the Fund's investment adviser will be limited (except as discussed
herein) only by its best judgment as to what will help achieve the Fund's
investment objective.
Fisher Investments, Inc. (the "Adviser") serves as the investment
adviser to the Fund. Kenneth L. Fisher, founder, Chairman and Chief Executive
Officer of Fisher Investments, Inc., manages the investment program of the Fund
and is primarily responsible for the day-to-day management of the Fund's
investment portfolio.
This Prospectus sets forth concisely the information about the Fund
that you should know before investing. You are advised to read this Prospectus
carefully and keep it for future reference.
A Statement of Additional Information, dated November 14, 1997, which
is incorporated herein by reference, has been filed with the Securities and
Exchange Commission ("SEC"). The Statement of Additional Information, which may
be revised from time-to-time, contains further information about the Fund and is
available, without charge, by writing to the Fund at P.O. Box 5354, Cincinnati,
Ohio 45201-5354, or calling 1-800-841-2858.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November 14, 1997.
<PAGE>
Table of Contents
Expense Summary 1
The Purisima Funds 4
Investment Objective 6
Investment Policies and Risk Considerations 6
Investment Limitations 21
Management 23
Pricing of Fund Shares 27
How to Purchase Shares 30
How to Exchange Shares 39
How to Redeem Shares 43
Dividends and Distributions 52
Shareholder Reports and Information 53
Retirement Plans 54
Service and Distribution Plan 54
Taxes 56
Capital Structure 57
Transfer and Dividend Disbursing Agent,
Custodian and Independent Accountants 59
Fund Performance 60
No person has been authorized to give any information or to make any
representations not contained in theis Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. This prospectus does no constitute an offering
by the Fund in any jurisdiction in which such offering may not lawfully be made.
<PAGE>
Expense Summary
The following table is designed to assist you in understanding the
expenses you will bear directly or indirectly as a shareholder of the Purisima
Total Return Fund. Shareholder Transaction Expenses are charges that you pay
when buying or selling shares of the Fund. Annual Operating Expenses are paid
out of the Fund's assets and include fees for portfolio management, maintenance
of shareholder accounts, general Fund administration, shareholder servicing,
custody, accounting and other services. The Annual Operating Expenses are the
expenses expected to be incurred by the Fund during the current fiscal year.
Actual total operating expenses may be higher or lower than those indicated. An
example based on the summary is also shown.
Shareholder Transaction Expenses
Maximum Sales Load
Imposed on Purchases None
Maximum Sales Load Imposed
on Reinvested Dividends None
Deferred Sales Load Imposed
on Redemptions None
Redemption Fees(1) None
Exchange Fees None
Annual Operating Expenses
(as a percentage of average net assets)
Management Fees 1.00%
12b-1 Fees(2) 0.25%
Other Expenses
(net of reimbursement)(3) 0.25%
Total Operating Expenses
(net of reimbursement)(3) 1.50%
(1) A fee of $9.00 is charged for each wire redemption. Investment
advisors, broker-dealers and other financial intermediaries may
independently charge additional fees for shareholder transactions
(purchases and redemptions) or for advisory services. Please see their
materials for more information.
(2) The maximum level of distribution expenses is 0.25% per annum of the
Fund's average net assets. See "Service and Distribution Plan" for
further details. The distribution expenses for long-term shareholders
may total more than the maximum sales charge that would have been
permissible if imposed entirely as an initial sales charge.
(3) The Fund's investment adviser has voluntarily agreed to limit the
Fund's total operating expenses (excluding interest, taxes, brokerage
and extraordinary expenses) to an annual rate of 1.50% of the Fund's
average net assets. The expense limitation may be terminated or revised
at any time. For the period ended August 31, 1997, absent the
limitation, "Other Expenses" would have been 19.72%, and "Total
Operating Expenses" would have been 20.97%.
Example
Based on the foregoing table, you would pay the following expenses on a
$1,000 investment, assuming (i)
<PAGE>
a 5% annual return and (ii) redemption at the end of each time period:
One Year $15
Three Years $47
Five Years $82
Ten Years $178
The examples shown above should not be considered representations of
past or future expenses or rates of return. The Purisima Total Return Fund
recently commenced operations and actual operating expenses and investment
return may be more or less than those shown. Information about the actual
performance of the Fund is contained in the Fund's annual report to
shareholders, which may be obtained without charge by calling 1-800-841- 2858.
FINANCIAL HIGHLIGHTS
The financial information below has been audited by Price Waterhouse,
LLP, independent accountant, whose unqualified report covering the period
indicated below is incorporated by reference herein and appears in the annual
report to shareholders. The table should be read in conjunction with the
financial statements and related notes incorporated by reference in the
Statement of Additional Information. Further information about the Fund's
performance is contained in its annual report, which may be obtained without
charges by writing or calling at the address or telephone on the cover page.
For a share outstanding through the period
October 28, 1996* to
August 31, 1997
Net Asset Value,
Beginning of Period $10.00
Income from Investment Operations
Net Investment Income 0.02
Net Realized and Unrealized
gains on Securities 1.85
Total from Investment Operations 1.87
Net Asset Value, End of Period $11.87
Total Return 18.70%^
Net Assets at End of Period ('000) $4,236
Ratio of Expenses to Average Net Assets:
Before Expense Reimbursement 20.97%#
After Expenses Reimbursement 1.50%#
Ratio of Net Investment Income to Average
Net Assets (Net of Expense Reimbursement) 0.56%
Portfolio Turnover Rate 1.35%
<PAGE>
Average Commission Rate Paid Per Share $0.0326
* Commencement of operations
^ Not annualized
# Annualized
The Purisima Funds
The Purisima Total Return Fund is a no-load diversified mutual fund. It
constitutes the initial series of The Purisima Funds, a Delaware business trust
organized on June 27, 1996, which is registered as an open-end management
investment company under the Investment Company Act of 1940 (the "1940 Act").
Fisher Investments, Inc. serves as the Fund's investment adviser.
Kenneth L. Fisher, founder, Chairman and Chief Executive Officer of the Adviser,
manages the investment program of the Fund and is primarily responsible for the
day-to-day management of the Fund's portfolio. See "Management."
Investment Objective
The investment objective of the Fund is to produce a high level of total return.
The Fund seeks to achieve its objective by following the policies discussed
below. Because of the risks inherent in all investments, there can be no
assurance that the Fund will meet its objective. The Fund is not intended by
itself to constitute a balanced investment program.
Investment Policies and Risk Considerations
General. The Fund seeks to achieve its objective of producing a high
level of total return by investing in common stocks and other equity-type
securities, corporate and government debt securities and short-term money market
instruments. Through active portfolio management, the Adviser will consider the
relative returns from asset allocation, equity style, as well as individual
security selection, in seeking to achieve the Fund's objective. Unless
specifically designated as a "fundamental" policy (which may be changed only
with the approval by a majority of the Fund's outstanding shares, as defined in
the 1940 Act), all investment policies described below may be changed by the
Fund's Board of Trustees without shareholder approval.
The relative percentages of assets invested in equity, fixed income and
money market securities are not fixed and will vary depending on the Adviser's
assessment of economic and market conditions. At times, when the investment
climate is viewed as favorable, common stocks and other equity-type securities
may be emphasized (up to 100% of the Fund's total assets). Conversely, when the
Adviser believes that, in light of economic and market conditions, a more
defensive position would be appropriate and that the Fund's objective may be
more readily attained by investing in fixed income securities and money market
investments, these investments will be emphasized (up to 100% of the Fund's
total assets). Likewise, the relative percentages of Fund assets invested in
U.S. and foreign securities is not fixed, and from time to time the Fund may
invest up to 100% of its total assets in U.S. securities, or up to 100% of its
total assets (directly and indirectly through depository receipts) in foreign
securities.
In the same manner, and except as discussed below, the Fund may invest
in portfolio securities without regard to objective investment criteria such as
company size (market capitalization), earnings history, valuation or other
factors. At times, the Fund may emphasize securities of small, mid- or large
capitalization companies. In addition, at times the Fund may emphasize
securities of companies which it believes are undervalued relative to earnings,
book value or other factors or companies which it expects to have above-average
earnings growth prospects. When selecting securities, the Adviser will, except
as otherwise described below, be limited only by its best judgment as to what
will help achieve the Fund's investment objective.
In seeking to achieve the Fund's investment objective, the Adviser
divides investment opportunities into a number of categories and allocates the
Fund's investments among those categories that it believes may provide the most
attractive investment opportunities. The domestic and foreign equity categories
are two important categories. Within the foreign equity category, country
selection is a high priority, and the Adviser generally approaches country
selection on a contrarian basis by avoiding those countries that the Adviser
considers to be too popular or "over bought" by investors. Within the domestic
equity category, the Adviser evaluates various criteria such as
<PAGE>
large-capitalization stocks versus small-capitalization stocks, and growth
stocks versus value stocks, in an effort to determine which areas may provide
the most attractive investment opportunities at that time. From time-to-time,
the Fund's portfolio may emphasize heavily either domestic or foreign equities.
During other periods, if the Adviser anticipates the potential for poor
prospects generally in the U.S. or foreign equity sectors, the Adviser may adopt
a more defensive strategy by investing in fixed income securities and money
market instruments, or may seek to hedge its portfolio through the use of index
put options and other derivative hedging techniques. See "Additional Investment
Information" in the Statement of Additional Information.
Equity Securities. The Fund may invest in equity securities, including
common stock, preferred stock, convertible securities, warrants, rights and
depository receipts. To the extent that the Fund's portfolio is primarily
invested in common stocks and other equity-type securities, the Fund's net asset
value may be subject to greater fluctuation than a portfolio primarily invested
in fixed income securities.
The Fund will limit its investments in warrants and rights to no more
than 5% of its net assets, valued at the lower of cost or market. Warrants and
rights entitle the holder to buy equity securities during a specific period of
time. The Fund will make such investments only if the underlying equity
securities are deemed appropriate by the Adviser for inclusion in the Fund's
portfolio. Warrants and rights acquired by the Fund in units or attached to
securities are not subject to these restrictions.
Fixed Income Securities. The Fund may invest in fixed income securities
issued by domestic or foreign corporations or other entities, or by U.S. or
foreign governments or their agencies or instrumentalities. The Fund is not
limited as to the maturity of its fixed income investments. Corporate and
foreign governmental debt securities are subject to the risk of the issuer's
inability to meet principal and interest payments on the obligations (credit
risk), and may also be subject to price volatility due to such factors as
interest rate sensitivity, market perception of the creditworthiness of the
issuer and general market liquidity (market risk). The market value of all debt
obligations is affected by changes in prevailing interest rates. The market
value of such instruments generally reacts inversely to interest rate changes.
If prevailing interest rates decline, the market value of debt obligations
generally increases. If prevailing interest rates increase, the market value of
debt obligations generally decreases. In general, the longer the maturity of a
debt obligation, the greater its sensitivity to changes in interest rates.
In order to reduce the risk of non-payment of principal or interest on
these securities, fixed income securities purchased by the Fund will be limited
to investment grade fixed income securities. Investment grade securities are
those securities which, at the time of purchase, are rated within the four
highest rating categories by Moody's Investors Service, Inc. ("Moody's") (Baa or
higher), Standard & Poor's Corporation ("S&P") (BBB or higher), or other
nationally recognized securities rating organizations, or securities which are
unrated but deemed by the Adviser to be comparable in quality to instruments
that are so rated. Obligations rated in the lowest of the top four ratings,
though considered investment grade, are considered to have speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher rated securities. Subsequent to its
purchase by the Fund, a rated security may cease to be rated or its rating may
be reduced below the minimum rating required for purchase by the Fund. The
Adviser will consider such an event in determining whether the Fund should
continue to hold the security, but such an event will not require the Fund to
dispose of the security. See the Statement of Additional Information for a
description of applicable debt ratings.
Fixed income securities in which the Fund may invest include
obligations issued by the U.S. government or by any agency, instrumentality or
sponsored enterprise thereof supported by the full faith and credit of the U.S.
government, the authority of the issuer to borrow from the U.S. Treasury, or the
discretionary authority of the U.S. government to purchase the obligations of
the agency, instrumentality or enterprise; obligations fully guaranteed as to
principal and interest by an agency, instrumentality or sponsored enterprise of
the U.S. government; and obligations of U.S. government agencies,
instrumentalities or sponsored enterprises which are not guaranteed. The Fund
may also invest in zero coupon U.S. Treasury securities and in zero coupon
securities issued by financial institutions, which represent a proportionate
interest in underlying U.S. Treasury securities. The Fund will not invest in
mortgage- and asset-backed securities if after the purchase more than 5% of the
Fund's net assets would be invested in these securities.
Money Market Instruments. During times when the Adviser believes that
adverse economic or market conditions justify such actions, the Fund may invest
temporarily up to 100% of its total assets in short-term, high-quality money
market instruments. The Fund may also invest in such instruments pending
investment in other types of securities, to meet anticipated redemption
requests, and/or to retain the flexibility to respond promptly to changes
<PAGE>
in market and economic conditions. It is impossible to predict when or for how
long the Adviser may employ these strategies.
Money market instruments are short-term, high-quality debt securities
(rated in the top two categories by S&P, Moody's or other nationally recognized
securities rating organizations) denominated in U.S. dollars or other freely
convertible currency, including short-term obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities, U.S. finance company
obligations, corporate commercial paper, obligations of banks and repurchase
agreements. The Fund's repurchase agreements will be fully collateralized.
However, if the seller of the securities fails to pay the agreed-upon repurchase
price on the delivery date, the Fund's risks may include the costs of disposing
of the collateral and losses that might result from any delays in foreclosing on
the collateral. There is no limit on the amount of the Fund's net assets that
may be subject to repurchase agreements maturing in seven days or less.
The Fund's investment in money market instruments may also include
securities issued by other investment companies that invest in high quality,
short-term debt securities (i.e., money market instruments). In addition to the
advisory fees and other expenses the Fund bears directly in connection with its
own operations, as a shareholder of another investment company, the Fund would
bear its pro rata portion of the other investment company's advisory fees and
other expenses, and such fees and other expenses will be borne indirectly by the
Fund's shareholders.
Smaller Capitalization Companies. The Fund may invest a substantial
portion of its assets in companies with modest capitalization, as well as
start-up companies. While the Adviser believes that small- and medium-sized
companies as well as start-up companies can provide greater growth potential
than larger, more mature companies, investing in the securities of such
companies also involves greater risk, potential price volatility and cost. These
companies often involve higher risks because they lack the management
experience, financial resources, product diversification, markets, distribution
channels and competitive strengths of larger companies. In addition, in many
instances, the frequency and volume of their trading is substantially less than
is typical of larger companies. Therefore, the securities of smaller companies
as well as start-up companies may be subject to wider price fluctuations. The
spreads between the bid and asked prices of the securities of these companies in
the U.S. over-the-counter market typically are larger than the spreads for more
actively traded securities. As a result, a Fund could incur a loss if it
determined to sell such a security shortly after its acquisition. When making
large sales, a Fund may have to sell portfolio holdings at discounts from quoted
prices or may have to make a series of small sales over an extended period of
time due to the trading volume of smaller company securities.
Investors should be aware that, based on the foregoing factors, to the
extent the Fund invests a significant portion of its assets in the securities of
smaller companies, an investment in the Fund may be subject to greater price
fluctuations than if it invested primarily in larger, more established
companies.
Foreign Securities. The Fund may invest without limitation in
securities of foreign issuers through sponsored and unsponsored Depositary
Receipts ("DRs"), e.g., American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs"), Continental
Depositary Receipts ("CDRs"), or other forms of DRs, and may invest up to 5% of
its net assets at the time of purchase directly in the securities of foreign
issuers. DRs are receipts typically issued in connection with a United States or
foreign bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. Unsponsored DRs differ from sponsored DRs in
that the establishment of unsponsored DRs is not approved by the issuer of the
underlying securities. As a result, available information concerning the issuer
may not be as current or reliable as the information for sponsored DRs, and the
price of unsponsored DRs may be more volatile.
Investments in foreign securities involve special risks, costs and
opportunities which are in addition to those inherent in domestic investments.
Political, economic or social instability of the issuer or the country of issue,
the possibility of expropriation or confiscatory taxation, limitations on the
removal of assets or diplomatic developments, and the possibility of adverse
changes in investment or exchange control regulations are among the inherent
risks. Securities of some foreign companies are less liquid, more volatile and
more difficult to value than securities of comparable U.S. companies. Foreign
companies are not subject to the regulatory requirements of U.S. companies and,
as such, there may be less publicly available information about such companies.
Moreover, foreign companies are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those applicable to
U.S. companies. Currency fluctuations will affect the net asset value of the
Fund irrespective of the performance of the underlying investments in foreign
issuers. Dividends and interest payable on a Fund's foreign portfolio securities
may be subject to foreign withholding taxes. To the extent such taxes are not
<PAGE>
offset by credits or deductions allowed to investors under U.S. federal income
tax law, such taxes may reduce the net return to shareholders. See "Taxes" in
the Statement of Additional Information. Because of these and other factors, the
value of securities of foreign companies acquired by the Fund may be subject to
greater fluctuation than the value of securities of domestic companies.
Illiquid Securities. The Fund may invest up to 15% of its net assets in
illiquid securities. Illiquid securities are securities that are not readily
marketable, including restricted securities and repurchase obligations maturing
in more than seven days. Certain restricted securities that may be resold to
institutional investors under Rule 144A under the Securities Act of 1933 and
Section 4(2) commercial paper may be determined to be liquid under guidelines
adopted by the Trust's Board of Trustees.
When-Issued Securities. The Fund may invest without limitation in
securities purchased on a when-issued or delayed delivery basis. Although the
payment and interest terms of these securities are established at the time the
purchaser enters into the commitment, these securities may be delivered and paid
for at a future date. Purchasing when-issued securities allows the Fund to lock
in a fixed price or yield on a security it intends to purchase. However, when
the Fund purchases a when-issued security, it immediately assumes the risk of
ownership, including the risk of price fluctuation.
The greater the Fund's outstanding commitments for these securities,
the greater the exposure to potential fluctuations in the net asset value of the
Fund. Purchasing when-issued securities may involve the additional risk that the
yield available in the market when the delivery occurs may be higher, or the
market price lower, than that obtained at the time of commitment. Although the
Fund may be able to sell these securities prior to the delivery date, it will
purchase when-issued securities for the purpose of actually acquiring the
securities, unless, after entering into the commitment, a sale appears desirable
for investment reasons. When required by SEC guidelines, the Fund will set aside
permissible liquid assets in a segregated account to secure its outstanding
commitments for when-issued securities.
Hedging Strategies. The Fund may use various options transactions for
the purpose of hedging or earning additional income, which may be deemed
speculative. There can be no assurance that such efforts will succeed. The Fund
may write (i.e. sell) call and put options, and buy put or call options. These
options may relate to particular securities or stock or bond indexes, may or may
not be listed on a securities exchange, and may or may not be issued by the
Options Clearing Corporation. These options are considered derivative
instruments because they derive their value from the performance of underlying
assets, interest rates or indices. The Fund will not purchase put and call
options where the aggregate premiums on its outstanding options exceed 5% of its
net assets at the time of purchase, and will not write options on more than 25%
of the value of its net assets (measured at the time an option is written).
Options trading is a highly specialized activity that entails greater than
ordinary investment risks. In addition, unlisted options are not subject to the
protections afforded purchasers of listed options issued by the Options Clearing
Corporation, which performs the obligations of its members if they default. It
is contemplated the Fund's use of options will primarily be limited to options
on stock indexes. These options are based on indexes of stock prices that change
in value according to the market value of the stocks they include. Some stock
index options are based on a broad market index, such as the New York Stock
Exchange Composite Index or the Standard & Poor's 500 Composite Index. Other
index options are based on a market segment or on stocks in a single industry.
Stock index options are traded primarily on securities exchanges. The value of
an index option depends primarily on movements in the value of the index rather
than in the price of a single security. The primary risks associated with the
use of options are: (a) the imperfect correlation between the change in market
value of the instruments held by the Fund and the price of the option; (b) the
possible inability to control losses by closing its position where a liquid
secondary market does not exist; (c) losses caused by unanticipated market
movements; and (d) the Adviser's ability to predict correctly the direction of
securities prices or the stock market generally, and economic factors. For
further discussion of risks involved with the use of options, see "Additional
Investment Information - Hedging Strategies" in the Statement of Additional
Information.
Portfolio Turnover. In order to achieve the Fund's investment
objective, the Adviser will generally purchase and sell securities without
regard to the length of time the security has been held. The Adviser intends to
purchase a given security whenever it believes it will contribute to the stated
objective of the Fund, even if the same security has only recently been sold.
The Fund may sell a given security, regardless of how long it has been held in
the portfolio, and whether the sale is at a gain or loss, if the Adviser
believes that it is appropriate to do so. High portfolio turnover in any year
will result in the payment by the Fund of above-average transaction costs and
could result in the payment by shareholders of above-average amounts of taxes on
realized investment gains. The annual
<PAGE>
portfolio turnover for the Fund is currently expected to be less than 150%;
however, the Fund does not consider the portfolio turnover rate as a limiting
factor.
Investment Limitations
The Fund has adopted certain fundamental investment restrictions that
may be changed only with the approval by a majority of its outstanding shares.
The following description summarizes several of the Fund's fundamental
restrictions which have been adopted to maintain portfolio diversification and
reduce risk.
The Fund may not:
1. purchase the securities of any issuer if the purchase would cause more than
5% of the value of the Fund's total assets to be invested in securities of
any one issuer (except securities of the U.S. government or any agency or
instrumentality thereof), or purchase more than 10% of the outstanding
voting securities of any one issuer, except that up to 25% of the Fund's
total assets may be invested without regard to these limitations;
2. invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the same
industry; and
3. borrow money except for temporary purposes in amounts up to 331/3% of the
value of its total assets at the time of borrowing.
A list of the Fund's restrictions, both fundamental and nonfundamental,
is contained in the Statement of Additional Information. In order to provide a
degree of flexibility, the Fund's investment objective, as well as other
policies which are not deemed fundamental, may be modified by the trustees
without shareholder approval. Any change in the Fund's investment objective may
result in the Fund having investment objectives different from the objective
which the shareholder considered appropriate at the time of investment in the
Fund. However, the Fund will not change its investment objective without written
notice to shareholders sent at least 30 days in advance of any such change.
Management
As a Delaware business trust, the business affairs of the Trust are
managed by its Board of Trustees. The trustees establish the Fund's policies and
supervise and review its management. The Trust, on behalf of the Fund, has
entered into an investment management agreement with Fisher Investments, Inc.
(the "Investment Management Agreement"), pursuant to which the Adviser furnishes
continuous investment advisory services to the Fund. The day-to-day operations
of the Fund are administered by the officers of the Trust and by the Adviser
pursuant to the terms of the Investment Management Agreement.
Investment Adviser. Fisher Investments, Inc., 13100 Skyline Boulevard,
Woodside, California, 94062-4547, is the Fund's investment adviser. The Adviser
supervises and manages the investment portfolio of the Fund, and subject to such
policies as the trustees may determine, directs the purchase or sale of
investment securities in the day-to-day management of the Fund's investment
portfolio. As of September 1997 the Adviser managed in excess of $1.6 billion
for large corporations, pension plans, endowments, foundations, governmental
agencies and individuals. The Adviser has served previously as sub-investment
adviser to four mutual funds. Kenneth L. Fisher, the founder, Chairman and Chief
Executive Officer of the Adviser, controls the Adviser.
Mr. Fisher serves as the Fund's portfolio manager and as such is
primarily responsible for the day-to-day management of the Fund's portfolio. He
has served as portfolio manager of the Fund since its commencement of operations
in October 1996. Mr. Fisher has over 20 years of investment management
experience. Mr. Fisher began Fisher Investments as a sole proprietorship in 1978
and incorporated the company under the name Fisher Investments, Inc. in 1986.
Under the Investment Management Agreement, the Adviser, at its own
expense and without reimbursement from the Fund, furnishes office space and all
necessary office facilities, equipment and executive personnel for making the
investment decisions necessary for managing the Fund and maintaining its
organization, and pays the salaries and fees of all officers and trustees of the
Trust (except the fees paid to those trustees who are not interested persons of
the Trust or the Adviser). For the foregoing, the Adviser receives a monthly fee
of 1/12 of 1.00% of the
<PAGE>
average daily net assets of the Fund. The Adviser may voluntarily waive all or a
portion of its advisory fee and/or absorb operating expenses that the Fund is
obligated to pay from time-to-time. See "Expense Summary." The Investment
Management Agreement permits the Adviser to seek reimbursement of any reductions
made to its management fee and any payments by the Adviser of operating expenses
that the Fund is obligated to pay within the three-year period following such
reduction or payment, subject to the Fund's ability to effect such reimbursement
and remain in compliance with applicable expense limitations. See "Additional
Trust Information - Investment Adviser" in the Statement of Additional
Information for a further discussion. The rate of the advisory fee is higher
than that paid by most mutual funds. However, the trustees believe the advisory
fee is appropriate for the Fund in light of the Fund's investment objective and
policies. The factors the Adviser considers in determining which brokers or
dealers to use for the Fund's portfolio transactions are described in the
Statement of Additional Information. Provided the Fund receives prompt execution
at competitive prices, the Adviser may consider the sale of the Fund's shares as
a factor in selecting broker-dealers.
Administration. Pursuant to an Administration Agreement (the
"Administration Agreement"), Investment Company Administration Corporation, (the
"Administrator" or "ICAC"), 2025 East Financial Way, Suite 101, Glendora,
California, 91741, acts as administrator for the Fund. The Administrator,
supervises the overall administration of the Fund including, among other
responsibilities, the preparation and filing of documents required for
compliance by the trust with applicable laws and regulations, arranging for the
maintenance of books and records of the trust and supervision of other
organizations that provide service to the Trust. For its administrative
services, the Administrator receives from the Fund a fee, computed daily and
payable monthly, based on the Fund's aggregate average net assets at the annual
rate of 0.10% of first $200 million of average net assets, 0.05% of next $300
million average net assets, and 0.03% thereafter, subject to an annual minimum
of $40,000, plus reimbursement of out-of-pocket expenses.
Distribution. First Fund Distributors, Inc. ("First Fund") acts as
distributor for the Fund pursuant to a Distribution Agreement between First Fund
and the Trust on behalf of the Fund (the "Distribution Agreement"). Shares also
may be sold by authorized dealers who have entered into dealer agreements with
First Fund or the Trust. First Fund is an affiliate of the administrator. First
Fund receives no fee for its distribution services. See "Service and
Distribution Plan."
Expenses. In addition to the fees payable under the Investment
Management Agreement and the Administration Agreement, the Fund pays all of its
own other expenses, including without limitation: the cost of preparing and
printing its registration statement required under the Securities Act of 1933
and the 1940 Act and any amendments thereto; the expense of registering shares
with the SEC and in the various states; the printing and distribution costs of
prospectuses mailed to existing shareholders, reports to shareholders, reports
to government authorities and proxy statements; fees paid to trustees who are
not interested persons of the Trust or Adviser; interest charges; taxes; legal
expenses; association membership dues; auditing services; insurance premiums;
brokerage commissions and expenses in connection with portfolio transactions;
fees and expenses of the custodian of the Fund's assets; printing and mailing
expenses and charges and expenses of dividend disbursing agents, administration
and accounting services agents, pricing services, custodians, registrars and
stock transfer agents; and payments pursuant to the Fund's Service and
Distribution Plan. See "Service and Distribution Plan."
Pricing of Fund Shares
The price you pay when buying the Fund's shares, and the price you
receive when selling (redeeming) the Fund's shares, is the net asset value of
the shares next determined after receipt and acceptance of a purchase or
redemption request in proper form. No front end sales charge or commission of
any kind is added by the Fund upon a purchase and no charge is deducted upon a
redemption. The Fund currently charges a $9 fee for each redemption made by
wire. See "How to Redeem Shares."
The per share net asset value of the Fund is determined by dividing the
total value of its net assets (meaning its assets less its liabilities) by the
total number of its shares outstanding at that time. The net asset value is
determined as of the close of regular trading (currently 4:00 p.m. Eastern Time)
on the New York Stock Exchange (the "Exchange") on each day the Exchange is open
for trading. This determination is applicable to all transactions in shares of
the Fund prior to that time and after the previous time as of which the Fund's
net asset value was determined. Accordingly, investments accepted or redemption
requests received in proper form prior to the close of regular trading on a day
the Exchange is open for trading will be valued as of the close of trading that
day, and
<PAGE>
investments accepted or redemption requests received in proper form after that
time will be valued as of the close of the next trading day.
Investments are considered received only when an investor's check,
wired funds or electronically transferred funds are received by the Fund or its
agent or subagent. Investments by telephone pursuant to an investor's prior
authorization to the Fund to draw on his or her bank account are considered
received when the proceeds from the bank account are received by the Fund, which
generally takes two to three banking days.
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, subject to review and possible revision by the Adviser. Any
modification of the price of a debt security furnished by a pricing service is
made pursuant to procedures adopted by the trustees. 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 trustees.
How to Purchase Shares
The Fund is a no-load fund, so you may purchase, redeem or exchange shares
directly at net asset value without paying a sales charge. Because the Fund's
net asset value changes daily, your purchase price will be the next net asset
value determined after the Fund, or its agent or subagent, receives and accepts
your purchase order. See "Pricing of Fund Shares."
Initial Additional
Minimum Minimum
Type of Account Investment Investment
- ------------------------------------------------------------------------
Regular $25,000 $5,000
Automatic Investment Plan $25,000 $ 100
Gift to Minors $25,000 $5,000
Individual Retirement
Account ("IRA") $25,000* $ 100
*IRAs may only be established by roll-over of or direct transfer from
an existing IRA or other retirement plan. See "Retirement Plans".
The 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 Fund will not accept your account if you are investing for
another person as attorney-in-fact. The Fund also will not accept accounts with
a "Power of Attorney" in the registration section of the Purchase Application.
How to Open Your Account by Mail. Please complete the Purchase Application which
accompanies this Prospectus. You may duplicate any application or you can obtain
additional copies of the Purchase Application and a copy of the IRA Purchase
Application from the Fund by calling 1-800-841-2858. (Please complete an IRA
Application to establish an IRA.)
<PAGE>
Your completed Purchase Application should be mailed directly to:
The Purisima Funds
P.O. Box 5354
Cincinnati, Ohio 45201-5354
To purchase shares by overnight or express mail, please use the following street
address:
The Purisima Funds
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
All applications must be accompanied by payment in the form of a check
made payable to "The Purisima Funds." All purchases must be made in U.S. dollars
and checks must be drawn on U.S. banks. No cash, credit cards or third party
checks will be accepted. When a purchase is made by check and a redemption or
exchange is made shortly thereafter, the Fund will delay the mailing of a
redemption check for a 15 day holding period. If you contemplate needing access
to your investment shortly after purchase, you should purchase the shares by
wire as discussed below.
How to Open Your Account by Wire. To avoid redemption delays, you may
make purchases by direct wire transfers. To ensure proper credit to your
account, please call the Fund at 1-800-841-2858 for instructions prior to wiring
funds. Funds should be wired through the Federal Reserve System as follows:
Star Bank, n.a.
A.B.A. Number 042000013
For credit to The Purisima Funds
Account Number 4864-84413
For further credit to:
(investor account number)
(name or account registration)
You must promptly complete a Purchase Application and mail it to the
Fund at the following address: The Purisima Funds, P.O. Box 5354, Cincinnati,
Ohio 45201-5354. Payment of redemption proceeds may be delayed and taxes may be
withheld until the Fund receives a properly completed and executed Purchase
Application. If you wish to send it via overnight delivery, you may send it to:
The Purisima Funds, 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. The
Fund reserves the right to refuse a telephone transaction if it believes it
advisable to do so.
If you have any questions, please call the Fund at 1-800-841-2858.
How to Add to Your Account By Mail. You may make additional investments
by mail or by wire in the minimums listed above. When adding to an account by
mail, you should send the Fund your check, together with the additional
investment form from a recent statement. If this form is unavailable, you should
send a signed note giving the full name of the account and the account number.
See "Additional Purchase Information" for more information regarding purchases
made by check or electronic funds transfer.
How to Add to Your Account By Electronic Funds Transfer. You may also
make additional investments by telephone if you have previously selected this
service. By selecting this service, you authorize the Fund to draw on your
preauthorized bank account as shown on the records of the Fund and receive the
proceeds by electronic funds transfer. Electronic funds transfers may be made
commencing ten business days after receipt by the Fund of your request to adopt
this service. This time period allows the Fund to verify your bank information.
Investments made by telephone in any one account must be in an amount of at
least $5,000. Investments made by electronic funds transfer will be effective at
the net asset value next computed after receipt by the Fund of the proceeds from
your bank account. See "Additional Purchase Information" for more information
regarding purchases made by check or electronic funds transfer. This service may
be selected by completing the appropriate section on the Purchase Application.
Changes to bank information must be made in writing and signed by all registered
holders of the account with all signatures guaranteed by a commercial bank or
trust company in the United States, a member firm of the National Association of
Securities Dealers, Inc. ("NASD") or other eligible guarantor institution. A
notary public is not an acceptable guarantor. See "Pricing of Fund Shares."
How to Add to Your Account by Wire. For additional investments made by
wire transfer, you should use the
<PAGE>
wiring instructions listed above. Be sure to include your account number. Wired
funds are considered received in good order on the day they are deposited in the
Fund's account if they reach the Fund's bank account by the Fund's cut-off time
for purchases and all required information is provided in the wire instructions.
The wire instructions will determine the terms of the purchase transaction.
Automatic Investment Plan. You may make purchases of shares of the Fund
automatically on a regular, monthly basis ($100 minimum per transaction). You
must meet the Automatic Investment Plan's (the "Plan") minimum initial
investment of $25,000 before the Plan may be established. Under the Plan, your
designated bank or other financial institution debits a preauthorized amount on
your account each month and applies the amount to the purchase of Fund shares.
The Fund requires ten business days after the receipt of your request to
initiate the Plan to verify your account information. Generally, the Plan will
begin on the next transaction date scheduled by the Fund for the Plan following
this ten business day period. The Plan can be implemented with any financial
institution that is a member of the Automated Clearing House. No service fee is
currently charged by the Fund for participation in the Plan. You will receive a
statement on a quarterly basis showing the purchases made under the Plan. A $25
fee will be imposed by the Fund if sufficient funds are not available in your
account or your account has been closed at the time of the automatic transaction
and your purchase will be canceled. You will also be responsible for any losses
suffered by the Fund as a result.
When a purchase is made pursuant to the Plan and a redemption or
exchange is requested shortly thereafter, the Fund will delay payment of the
redemption proceeds or the completion of an exchange for a 15 day holding
period. This delay allows the Fund to verify that proceeds used to purchase fund
shares will not be returned due to insufficient funds and is intended to protect
the remaining investors from loss. You may adopt the Plan at the time an account
is opened by completing the appropriate section of the Purchase Application. To
establish the Plan after an account is opened, an application may be obtained
from the Fund by calling 1-800-841-2858. In the event you discontinue
participation in the Plan, the Fund reserves the right to redeem your Fund
account involuntarily, upon 60 days written notice, if the account's net asset
value is $10,000 or less. Redeeming all funds from your account will discontinue
your Plan privileges unless otherwise specified.
Purchasing Shares Through Other Institutions. If you purchase shares
through a program of services offered or administered by a broker-dealer,
financial institution, or other service provider, you should read the program
materials, including information relating to fees, in addition to the Fund's
Prospectus. Certain services of the Fund may not be available or may be modified
in connection with the program of services provided, and the broker-dealer or
financial institution may charge a transaction based fee, commission or other
fee on purchases of Fund shares. The Fund may only accept requests to purchase
additional shares into a broker-dealer street name account from the
broker-dealer. Banks and other financial service providers may be subject to
various state laws regarding the services described above, and may be required
to register as dealers pursuant to state law.
Certain broker-dealers, financial institutions, or other service
providers that have entered into an agreement with the Trust may enter purchase
orders on behalf of their customers by phone, with payment to follow within
several days as specified in the agreement. The Fund may effect such purchase
orders at the net asset value next determined after receipt of the telephone
purchase order. It is the responsibility of the broker-dealer, financial
institution, or other service provider to place the order with the Fund on a
timely basis. If payment is not received within the time specified in the
agreement, the broker-dealer, financial institution, or other service provider
could be held liable for any resulting fees or losses.
Additional Purchase Information. The Fund will charge a $25 service fee
against your account for any check, wire or electronic funds transfer that is
returned unpaid and your purchase will be canceled. You will also be responsible
for any losses suffered by the Fund as a result. In order to relieve you of
responsibility for the safekeeping and delivery of stock certificates, the Fund
does not issue certificates.
When a purchase is made by check or electronic funds transfer and a
redemption or exchange is requested shortly thereafter, the Fund will delay
payment of the redemption proceeds or the completion of an exchange for a 15 day
holding period. This delay allows the Fund to verify that proceeds used to
purchase Fund shares will not be returned due to insufficient funds and is
intended to protect the remaining investors from loss.
How to Exchange Shares
Shareholders may exchange ($500 minimum per transaction) all or a
portion of their shares in the Fund for shares in the Countrywide Money Market
Fund (the "Money Market Fund"). The Money Market Fund is not
<PAGE>
affiliated with the Trust. You must obtain a copy of the Money Market Fund
prospectus from the Fund by calling 1-800-841-2858, and you are advised to read
it carefully, before authorizing any investment in shares of the Money Market
Fund. See "Additional Exchange Information" regarding telephone exchanges.
The value to be exchanged and the price of the shares being purchased
will be the net asset value next determined by the Fund after receipt and
acceptance of proper instructions for the exchange by the Fund or its agent or
subagent. If you desire to use the exchange privilege, you should contact the
Fund at 1-800-841-2858 for further information about the procedures and
effective times for exchanges. Generally, exchange requests received in proper
order and accepted by the Fund by 3:00 p.m. (Central Time) on a day during which
the Fund's net asset value is determined will be effective that day for both the
Fund being purchased and the Fund being redeemed. Please note that when
exchanging from the Fund to the Money Market Fund, you will begin accruing
income from the Money Market Fund on the day following the exchange. When
exchanging less than all the balance from the Money Market Fund to the Fund your
exchange proceeds will exclude accrued and unpaid income from the Money Market
Fund through the date of exchange. When exchanging your entire balance from the
Money Market Fund, accrued income will automatically be exchanged into the Fund
when the income is collected from the Money Market Fund, typically after the end
of each month. An exchange to and from the Money Market Fund is treated the same
as an ordinary sale and purchase for federal income tax purposes and you
generally will realize a capital gain or loss when exchanging shares to the
Money Market Fund.
See "Additional Exchange Information" regarding purchases made by check
or electronic funds transfer. If you intend to exchange shares soon after their
purchase, you should purchase the shares by wire or contact the Fund at
1-800-841-2858 for further information.
Because of the risks associated with common stock investments, the Fund
is intended to be a long-term investment vehicle and not designed to provide
investors with a means of speculating on short-term stock market movements. In
addition, because excessive trading can hurt the Fund's performance and Fund
shareholders, the Fund reserves the right to temporarily or permanently
terminate, with or without advance notice, the exchange privilege of any
investor who makes excessive use of the exchange privilege (e.g. more than four
exchanges per calendar year). Your exchanges may be restricted or refused if the
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges with a "market
timer" strategy may be disruptive to the Fund. Contact the Fund for additional
information concerning the exchange privilege.
Automatic Exchange Plan. You may make automatic monthly exchanges from
the Money Market Fund to a Fund account ($100 minimum per transaction). An
exchange from one fund to another is treated the same as an ordinary sale and
purchase for federal income tax purposes and generally, you will realize a
capital gain or loss. You must meet the Fund's minimum initial investment
requirements before this Plan is established. You may adopt the Plan at the time
an account is opened by completing the appropriate section of the Purchase
Application. You may obtain an application to establish the Automatic Exchange
Plan after an account is open by calling the Fund at 1-800-841-2858.
Additional Exchange Information. When a purchase is made by check or
electronic funds transfer and a redemption or exchange is requested shortly
thereafter, the Fund will delay payment of the redemption proceeds or the
completion of an exchange for a 15 day holding period. This delay allows the
Fund to verify that proceeds used to purchase Fund shares will not be returned
due to insufficient funds and is intended to protect the remaining investors
from loss.
Signature guarantees must be signed by an authorized signatory of the
bank, trust company, or member firm and "Signature Guaranteed" must appear with
the signature.
How to Redeem Shares
You may redeem shares of the Fund at any time. The price at which the
shares will be redeemed is the net asset value per share next determined after
proper redemption instructions are received by the Fund or its agent or
subagent. See "Pricing of Fund Shares." There are no charges for the redemption
of shares except that a fee of $9 is charged by the Fund for each wire
redemption. Depending upon the redemption price you receive, you may realize a
capital gain or loss for federal income tax purposes.
How to Redeem by Mail. To redeem shares by mail, simply send an
unconditional written request to the Fund specifying the number of shares or
dollar amount to be redeemed, the name of the Fund, the name(s) on the account
registration and the account number. A request for redemption must be signed
exactly as the shares are
<PAGE>
registered. If the amount requested is greater than $25,000, or the proceeds are
to be sent to a person other than the recordholder or to a location other than
the address of record, each signature must be guaranteed by a commercial bank or
trust company in the United States, a member firm of the NASD or other eligible
guarantor institution. A notary public is not an acceptable guarantor.
Guarantees must be signed by an authorized signatory of the bank, trust company,
or member firm and "Signature Guaranteed" must appear with the signature. See
"Additional Redemption Information" for instructions on redeeming shares in
corporate accounts. Additional documentation is required for the redemption of
shares held by persons acting pursuant to a Power of Attorney. In case of any
questions, contact the Fund in advance.
The Fund will mail payment for redemptions within seven business days
after it receives proper instructions for redemption. However, the Fund will
delay payment for a 15 day holding period on redemptions of recent purchases
made by check or electronic funds transfer. This allows the Fund to verify that
the check will not be returned due to insufficient funds and is intended to
protect the remaining investors from loss.
How to Redeem by Telephone. See "Additional Information" regarding
telephone redemptions. Shares may be redeemed, in an amount up to $25,000, by
calling the Fund at 1-800-841-2858. Proceeds redeemed by telephone will be
mailed to your address, or wired or transmitted by electronic funds transfer to
your preauthorized bank account as shown on the records of the Fund. A
redemption request in excess of $25,000 must be made in writing and signed by
each registered holder of the account with signatures guaranteed by a commercial
bank or trust company in the United States, a member of the NASD or other
eligible guarantor institution. A notary public is not an acceptable guarantor.
Any written requests received within 30 days after an address change made by
telephone must be accompanied by a signature guarantee and no telephone
redemptions will be allowed within 30 days of such a change. A redemption
request within that 30 day period must be in writing and signed by each
registered holder of the account with signatures guaranteed. A notary public is
not an acceptable guarantor. Telephone redemptions must be in amounts of $500 or
more and may not be made for amounts greater than $25,000.
In order to arrange for telephone redemptions after your account has
been opened or to change the bank account or address designated to receive
redemption proceeds, you must send a written request to the Fund. The request
must be signed by each registered holder of the account with the signatures
guaranteed by a commercial bank or trust company in the United States, a member
firm of the NASD or other eligible guarantor institution. A notary public is not
an acceptable guarantor. Further documentation may be requested from
corporations, executors, administrators, trustees and guardians.
Payment of the redemption proceeds for Fund shares redeemed by
telephone where you request wire payment will normally be made in federal funds
on the next business day. Electronically transferred funds will ordinarily
arrive at your bank within two to three banking days after transmission. Once
funds are transmitted, the time and receipt are not within the Fund's control.
To change the designated account, send a written request with the signatures
guaranteed to the Fund. A notary public is not an acceptable guarantor. The Fund
reserves the right to delay payment for a period of up to seven days after
receipt of the redemption request. Once the funds are transmitted, the time of
receipt and the availability of the funds are not within the fund's control.
There is currently a $9 fee for each wire redemption. It will be deducted from
your account.
The Fund reserves the right to refuse a telephone redemption or
exchange transaction if it believes it is advisable to do so. Procedures for
redeeming or exchanging shares of the Fund by telephone may be modified or
terminated by the Fund at any time. In an effort to prevent unauthorized or
fraudulent redemption or exchange requests by telephone, the Fund has
implemented procedures designed reasonably to assure that telephone instructions
are genuine. These procedures include: requesting verification of certain
personal information; recording telephone transactions; confirming transactions
in writing; and restricting transmittal of redemption proceeds to preauthorized
designations. Other procedures may be implemented from time-to-time. If
reasonable procedures are implemented, the Fund and/or the Transfer Agent will
not be liable for any loss due to unauthorized or fraudulent transactions.
You should be aware that during periods of substantial economic or
market change, telephone or wire redemptions may be difficult to implement. If
you are unable to contact the Fund by telephone, you may also redeem shares by
delivering or mailing the redemption request to: The Purisima Funds, P.O. Box
5354, Cincinnati, Ohio 45201-5354. If you wish to send the information via
overnight delivery, you may send it to: The Purisima Funds, 312 Walnut Street,
21st Floor, Cincinnati, Ohio 45202.
The Fund reserves the right to suspend or postpone redemptions during
any period when: trading on the Exchange is restricted, as determined by the
SEC, or the Exchange is closed for other than customary weekend and
<PAGE>
holiday closings; the SEC has by order permitted such suspension; or an
emergency, as determined by the SEC, exists making disposal of portfolio
securities or valuation of net assets of a Fund not reasonably practicable.
Additional Redemption Information. When a purchase is made by check or
electronic funds transfer and a redemption or exchange is requested shortly
thereafter, the Fund will delay payment of the redemption proceeds or the
completion of an exchange for a 15 day holding period. This delay allows the
Fund to verify that proceeds used to purchase Fund shares will not be returned
due to insufficient funds and is intended to protect the remaining investors
from loss.
Any redemption or transfer of ownership request for corporate accounts
will require the following written documentation:
1. A written letter of instruction signed by the required number of authorized
officers, along with their respective positions. For redemption requests in
excess of $25,000, the written request must be signature guaranteed. A
signature guarantee may be obtained from a commercial bank or trust company
in the United States, a member firm of the NASD or other guarantor and
"Signature Guaranteed" must appear with the signature. A notary public is
not an acceptable guarantor.
2. A dated copy of your Corporate Resolution that states who is empowered to
act, transfer or sell assets on behalf of the corporation.
3. If the Corporate Resolution is more than 60 days old from the date of the
transaction request, a certificate of Incumbency from the Corporate
Secretary which specifically states the officer or officers named in the
resolution have the authority to act on the account. The Certificate of
Incumbency must be dated within 60 days of the requested transaction. If
the Corporate Resolution confers authority on officers by title and not by
name, the Certificate of Incumbency must name the officer(s) and their
title(s).
Signature guarantees must be signed by an authorized signatory of the
bank, trust company, or member of the firm and "Signature Guaranteed" must
appear with the signature.
When redeeming shares from the Money Market Fund, if you redeem less
than all of the balance of your account, your redemption proceeds will exclude
accrued and unpaid income through the date of the redemption. When redeeming
your entire balance from the Money Market Fund, accrued income will be paid
separately when the income is collected and paid from the Money Market Fund,
typically at the end of the month.
The Fund reserves the right to suspend or postpone redemptions during
any period when: trading on the Exchange is restricted, as determined by the
SEC, or that the Exchange is closed for other than customary weekend and holiday
closings; the SEC has by order permitted such suspension; or an emergency, as
determined by the SEC, exists making disposal of portfolio securities or
valuation of net assets of a Fund not reasonably practicable.
Due to the relatively high cost of maintaining small accounts, if your
account balance falls below the $25,000 minimum as a result of a redemption or
exchange or if you discontinue the Automatic Investment Plan before your account
balance reaches the required minimum, you will be given a 60-day notice to
reestablish the minimum balance or activate an Automatic Investment Plan. If
this requirement is not met, your account may be closed and the proceeds sent to
you. If your account balance in the Money Market Fund is redeemed, accrued
interest will be paid at the end of the following month. Systematic Withdrawal
Plan. The Fund offers a Systematic Withdrawal Plan which allows you to designate
that a fixed amount (limited to those shareholders with a balance of $100,000 or
greater upon commencement of participation in the Plan) be distributed to you at
regular intervals. The required redemption ($500 minimum per transaction) takes
place on the last business day of the month, but if the day you designate falls
on a Saturday, Sunday or legal holiday, the distribution will be made on the
prior business day. Any changes made to distribution information must be made in
writing and signed by each registered holder of the account with signatures
guaranteed by a commercial bank or trust company in the United States, a member
firm of the NASD or other eligible guarantor institution. A notary public is not
an acceptable guarantor.
The Systematic Withdrawal Plan may be terminated by you at any time
without charge or penalty, and the Fund reserves the right to terminate or
modify the Systematic Withdrawal Plan upon 60-days' written notice. Withdrawals
involve redemption of Fund shares and may result in a gain or loss for federal
income tax purposes. An application for participation in the Systematic
Withdrawal Plan may be obtained from the Fund by calling 1-800-841-2858.
<PAGE>
Dividends and Distributions
The Fund intends to pay dividends from net investment income, if any,
annually and distribute substantially all net realized capital gains, if any, at
least annually. The Fund may make additional distributions if necessary to avoid
imposition of a 4% excise tax imposed on net income or other tax on
undistributed income and gains. You may elect to reinvest all income dividends
and capital gains distributions in shares of the Fund or in cash as designated
on the Purchase Application. You may change your election at any time by sending
written notification to the Fund. The election is effective for distributions
with a dividend record date on or after the date that the Fund receives notice
of the election. If you do not specify an election, all income dividends and
capital gains distributions will automatically be reinvested in full and
fractional shares of the Fund. Shares will be purchased at the net asset value
in effect on the business day after the dividend record date and will be
credited to your account on such date. Reinvested dividends and distributions
receive the same tax treatment as those paid in cash. Dividends and capital
gains distributions, if any, will reduce the net asset value of the Fund by the
amount of the dividend or capital gains distribution, so that a purchase of Fund
shares shortly before the record date for a distribution may result in the
receipt of taxable income that, in essence, represents a return of capital.
Shareholder Reports and Information
The Fund will provide the following statements and reports to keep you
current regarding the status of your investment account:
Confirmation Statements. Except for Automatic Investment Plan
transactions, after each transaction that affects the account balance or account
registration, you will receive a confirmation statement. Participants in the
Automatic Investment Plan will receive quarterly confirmations of all automatic
transactions.
Account Statements. All shareholders will receive quarterly account
statements.
Financial Reports. Financial reports are provided to shareholders at
least semi-annually. Annual reports will include audited financial statements.
To reduce Fund expenses, one copy of each report will be mailed to each taxpayer
identification number even though the investor may have more than one account in
the Fund.
If you need information on your account with the Fund or if you wish to
submit any applications, redemption requests, inquiries or notifications, you
should contact: The Purisima Funds, P.O. Box 5354, Cincinnati, Ohio 45201-5354
or call 1-800-841-2858. If you wish to send the information via overnight
delivery, you may send it to: The Purisima Funds, 312 Walnut Street, 21st Floor,
Cincinnati, Ohio, 45202.
Retirement Plans
The Fund has a program under which you may establish an Individual
Retirement Account ("IRA") with the Fund and into which you may roll over funds
from an existing IRA. You may obtain additional information regarding
establishing such an account by calling the Fund at 1-800-841-2858.
The Fund may be used as investment vehicles for established defined
contribution plans, including 401(k), profit-sharing and money purchase pension
plans ("Retirement Plans"). For details concerning Retirement Plans, please call
1-800-841-2858.
Service and Distribution Plan
The Fund has adopted a Service and Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the
Fund in connection with the distribution of its shares at an annual rate of up
to 0.25% of the Fund's average daily net assets.
Payments may be made by the Fund under the Plan for the purpose of
financing any activity primarily intended to result in the sales of shares of
the Fund as determined by the trustees. Such activities include: advertising;
compensation of the Fund's distributor, compensation for sales and sales
marketing activities of others, such as the Adviser, dealers, distributors or
financial institutions; shareholder account servicing; production and
dissemination of prospectuses and sales and marketing materials; and capital or
other expenses of associated equipment, rent, salaries, bonuses, interest and
other overhead. To the extent any activity is one which the Fund may finance
without a Plan, the Fund may also make payments to finance such activity outside
of the Plan and not subject to its limitations. The Adviser may also finance
certain distribution activities out of the Adviser's own resources. Payments
under the Plan
<PAGE>
are not tied exclusively to actual distribution and service expenses, and the
payments may exceed distribution and service expenses actually incurred.
Taxes
The Fund intends to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Code. In each taxable year that the
Fund so qualifies, the Fund (but not its shareholders) will be relieved of
federal income tax on that part of its investment company taxable income and net
capital gain that is distributed to shareholders. If in any taxable year the
Fund does not qualify as a regulated investment company, all its taxable income
will be taxable to the Fund at corporate rates and all its distributions will be
taxable to the shareholders as dividends to the extent of the Fund's current and
accumulated earnings and profits.
In years in which the Fund qualifies as a regulated investment company,
dividends from the Fund's investment company taxable income (whether paid in
cash or reinvested in additional shares) are generally taxable to its
shareholders as ordinary income. Distributions of the Fund's net capital gain,
when designated as such, are taxable to its shareholders as long-term capital
gain, regardless of how long they have held their Fund shares and whether such
distributions are paid in cash or reinvested in additional Fund shares. The Fund
provides federal tax information to its shareholders annually, including
information about dividends and other distributions paid during the preceding
year.
The Fund will be required to withhold federal income tax at a rate of
31% ("backup withholding") from dividend payments and redemption and exchange
proceeds if you fail to complete the certification section included as part of
the Purchase Application. The foregoing is only a summary of some of the
important federal income tax considerations generally affecting the Fund and its
shareholders. See "Taxes" in the Statement of Additional Information for further
discussion. There may be other federal income tax considerations and state or
local tax considerations applicable to you as an investor. You therefore are
urged to consult your tax adviser regarding any tax-related issues.
Capital Structure
The Trust is a business trust established under Delaware law. The Trust
was established under a Certificate of Trust dated as of June 25, 1996. The
Trust's shares of beneficial interest have a par value of $0.01 per share.
Shares of the Trust may be issued in two or more series or "funds" and each fund
may have more than one class of shares. The Fund is currently authorized to
issue a single class of shares, and the Fund is currently the Trust's only fund.
The Fund's shares may be issued in an unlimited number by the trustees of the
Trust.
Shares issued by the Fund have no preemptive, conversion or
subscription rights. Each whole share is entitled to one vote as to any matter
on which it is entitled to vote and each fractional share is entitled to a
proportionate fractional vote. Shareholders have equal and exclusive rights as
to dividends and distributions as declared by the Fund and to the net assets of
the Fund upon liquidation or dissolution. The Fund, as a separate series of the
Trust, votes separately on matters affecting only the Fund (e.g., approval of
the Investment Management Agreement). The Fund and all future series of the
Trust will vote as a single class on matters affecting all series of the Trust
(e.g., election or removal of trustees). Voting rights are not cumulative, so
that the holders of more than 50% of the shares voting in any election of
trustees can, if they so choose, elect all of the trustees of the Trust. While
the Trust is not required and does not intend to hold annual meetings of
shareholders, such meetings may be called by trustees at their discretion, or
upon demand by the holders of 10% or more of the outstanding shares of the Trust
for the purpose of electing or removing trustees. Shareholders may receive
assistance in communicating with other shareholders in connection with the
election or removal of trustees pursuant to the provisions of Section 16(c) of
the 1940 Act.
Transfer and Dividend Disbursing Agent, Custodian and Independent Accountants
Countrywide Fund Services, Inc. 312 Walnut Street, 21st Floor,
Cincinnati, Ohio, 45202, has been retained to act as the Fund's Transfer and
Dividend Disbursing Agent. UMB Bank, n.a., which has its principal address at
928 Grand Avenue, Kansas City, Missouri 64141, has been retained to act as
Custodian of the Fund's investments.
<PAGE>
Neither the Transfer and Dividend Disbursing Agent nor the Custodian has any
part in deciding the Fund's investment policies or which securities are to be
purchased or sold for the Fund's portfolio. Price Waterhouse LLP has been
selected to serve as independent accountants of the Trust for the fiscal year
ending August 31, 1998.
Fund Performance
From time-to-time, the Fund may advertise its "average annual total
return" over various periods of time. An average annual total return refers to
the rate of return which, if applied to an initial investment at the beginning
of a stated period and compounded over the period, would result in the
redeemable value of the investment at the end of the stated period assuming
reinvestment of all dividends and distributions and reflecting the effect of all
recurring fees. An investor's principal in the Fund and the Fund's return are
not guaranteed and will fluctuate according to market conditions. When
considering "average" total return figures for periods longer than one year, you
should note that the Fund's annual total return for any one year in the period
might have been greater or less than the average for the entire period. The Fund
also may use "aggregate" total return figures for various periods, representing
the cumulative change in value of an investment in the Fund for a specific
period (again reflecting changes in the Fund's share price and assuming
reinvestment of dividends and distributions).
The Fund may quote the Fund's average annual total and/or aggregate
total return for various time periods in advertisements or communications to
shareholders. The Fund may also compare its performance to that of other mutual
funds with similar investment objectives and to stock and other relevant indices
or to rankings prepared by independent services or industry publications. For
example, the Fund's total return may be compared to data prepared by Lipper
Analytical Services, Inc., Morningstar, Value Line Mutual Fund Survey and CDA
Investment Technologies, Inc. Total return data as reported in such national
financial publications as The Wall Street Journal, The New York Times,
Investor's Business Daily, USA Today, Barron's, Money, and Forbes as well as in
publications of a local or regional nature, may be used in comparing the Fund's
performance.
The Fund's total return may also be compared to such indices as the Dow
Jones Industrial Average, Standard & Poor's 500 Composite Index, NASDAQ
Composite OTC Index or NASDAQ Industrials Index, Consumer Price Index, Russell
2000 Index, Salomon Brothers High Grade Bond Index and the Morgan Stanley
Europe, Australia, Far East Index. Further information on performance
measurement may be found in the Statement of Additional Information.
Performance quotations of the Fund represent the Fund's past
performance and should not be considered as representative of future results.
The investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. The methods used to compute the Fund's total return
and yield are described in more detail in the Statement of Additional
Information.
For Fund information, prices, literature, account balances and other information
about your Purisima Funds account, call 1-800-841-2858.
The Purisima Funds
P.O. Box 5354
Cincinnati, Ohio 45201-5354
<PAGE>
As filed with the Securities and Exchange
Commission on November 14, 1997
Registration No. 333-09153
File No. 811-07737
================================================================================
Part B
of
Form N-1A
REGISTRATION STATEMENT
THE PURISIMA FUNDS
================================================================================
<PAGE>
PURISIMA TOTAL RETURN FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information dated November 14, 1997, is meant to be
read in conjunction with the Purisima Total Return Fund Prospectus dated
November 14 (hereinafter referred to as the "Fund") and is incorporated by
reference in its entirety into the Prospectus. Because this Statement of
Additional Information is not itself a prospectus, no investment in shares of
the Fund should be made solely upon the information contained herein. Copies of
the Prospectus for the Fund may be obtained by writing the Fund, P.O. Box 5354,
Cincinnati, Ohio, 45201-5354, or calling 1-800-871-2665. Capitalized terms used
but not defined herein have the same meanings as in the Prospectus.
<PAGE>
TABLE OF CONTENTS
Page
----
ADDITIONAL INVESTMENT INFORMATION............................................ 1
INVESTMENT RESTRICTIONS...................................................... 9
ADDITIONAL TRUST INFORMATION................................................. 11
Trustees and Officers................................................... 11
Investment Adviser...................................................... 13
Administrator........................................................... 14
Custodian, Transfer Agent and Dividend Paying Agent..................... 15
Legal Counsel .......................................................... 15
Independent Accountants................................................. 15
DISTRIBUTION OF SHARES....................................................... 15
PORTFOLIO TRANSACTIONS AND BROKERAGE......................................... 16
TAXES........................................................................ 17
DESCRIPTION OF SHARES........................................................ 21
INDIVIDUAL RETIREMENT ACCOUNTS............................................... 24
PERFORMANCE INFORMATION...................................................... 24
OTHER INFORMATION............................................................ 26
FINANCIAL STATEMENTS......................................................... 29
APPENDIX A (Description of Securities Ratings)............................... 30
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS STATEMENT OF ADDITIONAL INFORMATION OR IN
THE PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBUTOR. THE PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
ADDITIONAL INVESTMENT INFORMATION
The investment objective of the Fund is to produce a high level of total
return. Because of the risks inherent in all investments, there can be no
assurance that the Fund will meet its objective. The Fund is not intended by
itself to constitute a balanced investment program.
<PAGE>
The following information supplements the investment policies of the Fund
as set forth in the Prospectus. Unless specifically designated as a
"fundamental" policy (which may be changed only with the approval by a majority
of the Fund's outstanding shares, as defined in the Investment Company Act of
1940), all investment policies described below may be changed by the Fund's
Board of Trustees without shareholder approval.
United States Government Obligations. The Fund may invest in Treasury
securities which differ only in their interest rates, maturities and times of
issuance. Treasury Bills have initial maturities of one year or less; Treasury
Notes have initial maturities of one to ten years; and Treasury Bonds generally
have initial maturities of greater than ten years.
Obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by any of the following: (a) the full faith and
credit of the U.S. Treasury (for example, Ginnie Mae Certificates); (b) the
right of the issuer to borrow from the Treasury (such as obligations of the
Federal Home Loan Banks); (c) the discretionary authority of the U.S. Government
to purchase certain obligations of the agency or instrumentality (such as those
issued by Fannie Mae); and (d) only the credit of the agency or instrumentality
itself (such as those issued by the Student Loan Marketing Association). While
the U.S. Government provides financial support to such U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it will always do
so because it is not so obligated.
Money Market Instruments. The Fund may invest in a variety of money market
instruments for temporary defensive purposes, pending investment in other types
of securities, to meet anticipated redemption requests and/or to retain the
flexibility to respond promptly to changes in market and economic conditions.
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding companies, corporations and finance
companies. Certificates of deposit are generally negotiable certificates issued
against funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand
by the investor, but may also be subject to early withdrawal penalties that vary
depending upon market conditions and the remaining maturity of the obligation.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party, although there is no market
for such deposits. Bank notes and bankers' acceptances rank junior to deposit
liabilities of the bank and pari passu with other senior, unsecured obligations
of the bank. Bank notes are classified as "other borrowings" on a bank's balance
sheet, while deposit notes and certificates of deposit are classified as
deposits. Bank notes are not insured by the Federal Deposit Insurance
Corporation or any other insurer. Deposit notes are insured by the Federal
Deposit Insurance Corporation only to the extent of $100,000 per depositor per
bank.
Repurchase Agreements. The Fund may agree to purchase portfolio securities
from financial institutions subject to the seller's agreement to repurchase them
at a mutually agreed upon date and price ("repurchase agreements"). Although the
securities subject to a repurchase agreement may bear maturities exceeding one
year, settlement for the repurchase agreement will never be more than one year
after the Fund's acquisition of the securities and normally will be within a
shorter period of time. Securities subject to repurchase agreements are held
either by the Fund's custodian or subcustodian (if any), or in the Federal
Reserve/Treasury Book-Entry System. The seller under a repurchase agreement will
be required to maintain the value of the securities subject to the agreement in
an amount exceeding the repurchase price (including accrued interest).
Repurchase agreements may be considered loans to the seller, collateralized by
the underlying securities. The risk to the Fund is limited to the ability of the
seller to pay the agreed upon sum on the repurchase date; in the event of
default, the repurchase agreement provides that the Fund is entitled to sell the
underlying collateral. If the value of the collateral declines after the
agreement is entered into, however, and if the seller defaults under a
repurchase agreement when the value of the underlying collateral is less than
the repurchase price, the Fund could incur a loss of both principal and
1-
<PAGE>
interest. The Adviser monitors the value of the collateral at the time the
agreement is entered into and at all times during the term of the repurchase
agreement in an effort to determine that the value of the collateral always
equals or exceeds the agreed-upon repurchase price to be paid to the Fund. If
the seller were to be subject to a federal bankruptcy proceeding, the ability of
the Fund to liquidate the collateral could be delayed or impaired because of
certain provisions of the bankruptcy laws.
Asset-Backed Securities. The Fund may purchase asset-backed securities,
which are securities backed by mortgages, installment contracts, credit card
receivables or other assets. Asset-backed securities represent interests in
"pools" of assets in which payments of both interest and principal on the
securities are made monthly, thus in effect "passing through" monthly payments
made by the individual borrowers on the assets that underlie the securities, net
of any fees paid to the issuer or guarantor of the securities. The average life
of asset-backed securities varies with the maturities of the underlying
instruments, and the average life of a mortgage-backed instrument, in
particular, is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as a result of mortgage pre-payments.
For this and other reasons, an asset-backed security's stated maturity may be
shortened, and the security's total return may be difficult to predict
precisely. Asset-backed securities acquired by the Fund may include
collateralized mortgage obligations ("CMOs") issued by private companies.
The Fund may acquire several types of mortgage-backed securities, including
guaranteed mortgage pass-through certificates, which provide the holder with a
pro rata interest in the underlying mortgages, and CMOs, which provide the
holder with a specified interest in the cash flow of a pool of underlying
mortgages. Issuers of CMOs ordinarily elect to be taxed as pass-through entities
known as real estate mortgage investment conduits ("REMICs"). CMOs are issued in
multiple classes, each with a specified fixed or floating interest rate and a
final distribution date. The relative payment rights of the various CMO classes
may be structured in a variety of ways. The Fund will not purchase "residual"
CMO interests, which normally exhibit greater price volatility.
There are a number of important differences among the agencies and
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities guaranteed
by the GNMA include GNMA Mortgage Pass-Through Certificates (also known as
"Ginnie Maes"), which are guaranteed as to the timely payment of principal and
interest by GNMA and backed by the full faith and credit of the United States.
GNMA is a wholly-owned U.S. government corporation within the Department of
Housing and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments under
its guarantee. Mortgage-backed securities issued by the FNMA include FNMA
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes"),
which are solely the obligations of the FNMA and are not backed by or entitled
to the full faith and credit of the United States, but are supported by the
discretionary authority of the U.S. Treasury to provide certain credit support.
FNMA is a government-sponsored organization owned entirely by private
stockholders. Fannie Maes are guaranteed as to timely payment of the principal
and interest by FNMA. Mortgage-related securities issued by the FHLMC include
FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or
"PCS"). FHLMC is a corporate instrumentality of the United States, created
pursuant to an Act of Congress, which is owned entirely by Federal Home Loan
Banks. Freddie Macs are not guaranteed and do not constitute a debt or
obligation of the United States or any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by FHLMC.
FHLMC guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When FHLMC does not guarantee timely
payment of principal, FHLMC may remit the amount due on account of its guarantee
of ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Non-mortgage asset-backed securities involve certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not have
the benefit of the same security interest in the underlying collateral. Credit
card receivables are generally unsecured and the debtors are entitled to the
protection of a
2-
<PAGE>
number of state and federal consumer credit laws, many of which have given
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. Most issuers of automobile receivables permit the
servicers to retain possession of the underlying obligations. If the servicer
were to sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral may
not, in some cases, be able to support payments on these securities.
The yield characteristics of asset-backed securities differ from
traditional debt securities. A major difference is that the principal amount of
the obligations may be prepaid at any time because the underlying assets (i.e.,
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
decrease, yield to maturity. In calculating the average weighted maturity of the
Fund, the maturity of asset-backed securities will be based on estimates of
average life.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore, prepayment
rates are influenced by a variety of economic and social factors. In general,
the collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments. Like other fixed income securities, when interest rates rise the
value of an asset-backed security generally will decline; however, when interest
rates decline, the value of an asset-backed security with prepayment features
may not increase as much as that of other fixed income securities.
Zero-Coupon, Step-Coupon and Pay-In-Kind Securities. The Fund may invest in
zero-coupon, step-coupon, and pay-in-kind securities. These securities are debt
securities that do not make regular interest payments. Zero-coupon and
step-coupon securities are sold at a deep discount to their face value.
Pay-in-kind securities pay interest through the issuance of additional
securities. Because such securities do not pay current income, the price of
these securities can be volatile when interest rates fluctuate. While these
securities do not pay current cash income, federal income tax law requires the
holders of taxable zero-coupon, step-coupon, and certain pay-in-kind securities
to report as interest each year the portion of the original issue discount (or
deemed discount) on such securities accruing that year. In order to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), the Fund may be required to distribute a portion of such
discount and may be required to dispose of other portfolio securities, which may
occur in periods of adverse market prices, in order to generate cash to meet
these distribution requirements.
Yields and Ratings. The yields on certain obligations, including the money
market instruments in which the Fund may invest, are dependent on a variety of
factors, including general economic conditions, conditions in the particular
market for the obligation, financial condition of the issuer, size of the
offering, maturity of the obligation and ratings of the issue. The ratings of
S&P, Moody's, and other rating agencies represent their respective opinions as
to the quality of the obligations they undertake to rate. Ratings, however, are
general and are not absolute standards of quality. Consequently, obligations
with the same rating, maturity and interest rate may have different market
prices.
Illiquid Securities. The Fund may invest up to 15% of its net assets in
illiquid securities (i.e., securities that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which the
Fund has valued the securities). The Board of Trustees or its delegate has the
ultimate authority to determine which securities are liquid or illiquid for
purposes of this limitation. Certain securities exempt from registration or
issued in transactions exempt from registration ("restricted securities") under
the Securities Act of 1933, as amended ("Securities Act"), that may be resold
pursuant to Rule 144A or Regulation S under the Securities Act,
3-
<PAGE>
may be considered liquid. The Trustees have delegated to the Adviser the
day-to-day determination of the liquidity of a security, although it has
retained oversight and ultimate responsibility for such determinations. Certain
securities are deemed illiquid by the Securities and Exchange Commission
including repurchase agreements maturing in greater than seven days and options
not listed on a securities exchange or not issued by the Options Clearing
Corporation. These securities will be treated as illiquid and subject to the
Fund's limitation on illiquid securities.
Restricted securities may be sold in privately negotiated or other exempt
transactions, qualified non-U.S. transactions, such as under Regulation S, or in
a public offering with respect to which a registration statement is in effect
under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
time may elapse between the decision to sell and the sale date. If, during such
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed - when it decided to sell. Restricted securities
will be priced at fair value as determined in good faith by the Trustees.
If through the appreciation of illiquid securities or the depreciation of
liquid securities, more than 15% of the value of the Fund's net assets are
invested in illiquid assets, including restricted securities which are not
readily marketable, the Fund will take such steps as it deems advisable, if any,
to reduce the percentage of such securities to 15% or less of the value of its
net assets.
Warrants. The Fund may purchase warrants and similar rights, which are
privileges issued by a corporation enabling the owners to subscribe to and
purchase a specified number of shares of the corporation at a specified price
during a specific period of time. The purchase of warrants involves the risk
that the Fund could lose the purchase price of a warrant if the right to
subscribe to additional shares is not exercised prior to the warrant's
expiration. Also, the purchase of warrants involves the risk that the effective
price paid for the warrant added to the subscription price of the related
security may exceed the value of the subscribed security's market price such as
when there is no movement in the level of the underlying security. The Fund will
not invest more than 5% of its net assets, taken at market value, in warrants.
Warrants attached to other securities acquired by the Fund are not subject to
this restriction.
Forward Commitments, When-Issued Securities and Delayed-Delivery
Transactions. The Fund may purchase securities on a when-issued basis or
purchase or sell securities on a forward commitment (sometimes called
delayed-delivery) basis. These transactions involve a commitment by the Fund to
purchase or sell securities at a future date. The price of the underlying
securities and the date when the securities will be delivered and paid for (the
settlement date) are fixed when the transaction is negotiated. When-issued
purchases and forward commitment transactions are normally negotiated directly
with the other party. The Fund will purchase securities on a when-issued basis
or sell securities on a forward commitment basis only with the intention of
completing the transaction and actually purchasing or selling the securities. If
deemed advisable as a matter of investment strategy, however, the Fund may
dispose of or renegotiate a commitment after entering into it. The Fund also may
sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date.
When the Fund purchases securities on a when-issued, delayed-delivery or
forward commitment basis, the Fund's custodian or subcustodian will maintain in
a segregated account liquid assets having a value (determined daily) at least
equal to the amount of the Fund's purchase commitments.
Hedging Strategies. The Fund may use various options transactions for the
purpose of hedging or earning additional income. There can be no assurance that
such efforts will succeed. The Fund may write (i.e. sell) call and put options,
and buy put or call options. These options may relate to particular securities
or stock or bond indexes and may or may not be listed on a securities exchange
and may or may not be issued by the Options Clearing Corporation. The Fund will
not purchase put and call options where the aggregate premiums on its
4-
<PAGE>
outstanding options exceed 5% of its net assets at the time of purchase, and
will not write options on more than 25% of the value of its net assets (measured
at the time an option is written).
Hedging instruments on securities generally are used to hedge against price
movements in one or more particular securities positions that the Fund owns or
intends to acquire. Hedging instruments on stock indices, in contrast, generally
are used to hedge against price movements in broad equity market sectors in
which the Fund has invested or expects to invest. The use of hedging instruments
is subject to applicable regulations of the Securities and Exchange Commission,
the several options exchanges upon which they are traded and various state
regulatory authorities. In addition, the Fund's ability to use hedging
instruments may be limited by tax considerations.
General. The Fund may purchase and write (i.e. sell) put and call options.
Such options may relate to particular securities or securities indices, and may
or may not be listed on a domestic or foreign securities exchange and may or may
not be issued by the Options Clearing Corporation. Options trading is a highly
specialized activity that entails greater than ordinary investment risk. Options
may be more volatile than the underlying instruments, and therefore, on a
percentage basis, an investment in options may be subject to greater fluctuation
than an investment in the underlying instruments themselves.
A call option for a particular security gives the purchaser of the option
the right to buy, and the writer (seller) the obligation to sell, the underlying
security at the stated exercise price at any time (or, in some cases, on certain
specified dates) prior to the expiration of the option, regardless of the market
price of the security. A put option for a particular security gives the
purchaser the right to sell the security at the stated exercise price at any
time prior to the expiration date of the option, regardless of the market price
of the security. The premium paid to the writer is in consideration for
undertaking the obligation under the option contract.
Securities index options are put options and call options on various
securities indexes. In most respects, they are identical to listed options on
common stocks or bonds. The primary difference between securities options and
index options occurs when index options are exercised. In the case of securities
options, the underlying security, is delivered. However, upon the exercise of an
index option, settlement does not occur by delivery of the securities comprising
the index. The option holder who exercises the index option receives an amount
of cash if the closing level of the securities index upon which the option is
based is greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. This amount of cash is equal to the
difference between the closing price of the securities index and the exercise
price of the option expressed in dollars times a specified multiple. A
securities index fluctuates with changes in the market value of the stocks
included in the index. For example, some stock index options are based on a
broad market index, such as the Standard & Poor's 500 or the Value Line
Composite Index, or a narrower market index, such as the Standard & Poor's 100.
Indexes may also be based on an industry or market segment, such as the AMEX Oil
and Gas Index or the Computer and Business Equipment Index. Options on
securities indexes are currently traded on the following exchanges: the Chicago
Board Options Exchange, the New York Stock Exchange, the American Stock
Exchange, the Pacific Stock Exchange, and the Philadelphia Stock Exchange.
The Fund's obligation to sell an instrument subject to a call option
written by it, or to purchase an instrument subject to a put option written by
it, may be terminated prior to the expiration date of the option by the Fund's
execution of a closing purchase transaction, which is effected by purchasing on
an exchange an option of the same series (i.e., same underlying instrument,
exercise price and expiration date) as the option previously written. A closing
purchase transaction will ordinarily be effected to realize a profit on an
outstanding option, to prevent an underlying instrument from being called, to
permit the sale of the underlying instrument or to permit the writing of a new
option containing different terms on such underlying instrument. The cost of
such a liquidation purchase plus transaction costs may be greater than the
premium received upon the original option, in which event the Fund
5-
<PAGE>
will have incurred a loss in the transaction. There is no assurance that a
liquid secondary market will exist for any particular option. An option writer,
unable to effect a closing purchase transaction, will not be able to sell the
underlying instrument or liquidate the assets held in the segregated account
until the option expires or the optioned instrument is delivered upon exercise
with the result that the writer in such circumstances will be subject to the
risk of market decline or appreciation in the instrument during such period.
If an option purchased by the Fund expires unexercised, the Fund realizes a
loss equal to the premium paid. If the Fund enters into a closing sale
transaction on an option purchased by it, the Fund will realize a gain if the
premium received by the Fund on the closing transaction is more than the premium
paid to purchase the option, or a loss if it is less. If an option written by
the Fund expires on the stipulated expiration date or if the Fund enters into a
closing purchase transaction, it will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the net premium received when the option is
sold). If an option written by the Fund is exercised, the proceeds of the sale
will be increased by the net premium originally received and the Fund will
realize a gain or loss.
Certain Risks Regarding Options. There are a number of special risks
associated with transactions in options. For example, there are significant
differences between the securities and options markets that could result in an
imperfect correlation between these markets, causing a given transaction to not
achieve its objectives. In addition, a liquid secondary market for particular
options, whether traded over-the-counter or on an exchange, may be absent for
various reasons, including: there may be insufficient trading interest in
certain options; restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; trading halts, suspensions or
other restrictions may be imposed with respect to particular classes or series
of options or underlying securities or currencies; unusual or unforeseen
circumstances may interrupt normal operations on an exchange; the facilities of
an exchange or the Options Clearing Corporation may not at all times be adequate
to handle current trading value; or one or more exchanges could, for economic or
other reasons, decide or be compelled to discontinue the trading of options (or
a particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
Successful use by the Fund of options on stock indexes will be subject to
the ability of the Adviser to correctly predict movements in the directions of
the stock market. This requires different skills and techniques than predicting
changes in the prices of individual securities. In addition, the Fund's ability
to effectively hedge all or a portion of the securities in its portfolio, in
anticipation of or during a market decline, through transactions in put options
on stock indexes, depends on the degree to which price movements in the
underlying index correlate with the price movements of the securities held by
the Fund. Because the Fund's securities will not duplicate the components of an
index, the correlation will not be perfect. Consequently, the Fund will bear the
risk that the prices of its securities being hedged will not move in the same
amount as the prices of its put options on the stock indexes. It is also
possible that there may be a negative correlation between the index and the
Fund's securities which would result in a loss on both such securities and the
options on securities indexes acquired by the Fund.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The purchase of securities
index options involves the risk that the premium and transaction costs paid by
the Fund in purchasing an option will be lost as a result of unanticipated
movements in prices of the securities comprising the securities index on which
the option is based.
6-
<PAGE>
There is no assurance that a liquid secondary market on an options exchange
will exist for any particular option, or at any particular time, and for some
options no secondary market on an exchange or elsewhere may exist. If the Fund
is unable to close out a call option on securities that it has written before
the option is exercised, the Fund may be required to purchase the optioned
securities in order to satisfy its obligation under the option to deliver such
securities. If the Fund is unable to effect a closing sale transaction with
respect to options on securities that it has purchased, it would have to
exercise the option in order to realize any profit and would incur transaction
costs upon the purchase and sale of the underlying securities.
Cover for Options Positions. Transactions using options (other than options
that the Fund has purchased) expose the Fund to an obligation to another party.
The Fund will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities or other options or (2) cash,
receivables and short-term debt securities with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. The
Fund will comply with Securities and Exchange Commission guidelines regarding
cover for these instruments and, if the guidelines so require, set aside liquid
assets in a segregated account with its Custodian in the prescribed amount.
Under current SEC guidelines, the Fund will segregate assets to cover
transactions in which the Fund writes or sells options.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding option is open, unless they are replaced with
similar assets. As a result, the commitment of a large portion of the Fund's
assets to cover or in segregated accounts could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.
Investment Companies. The Fund intends to limit its investments in
securities issued by other investment companies so that, as determined
immediately after a purchase of such securities is made: (a) not more than 5% of
the value of the Fund's total assets will be invested in the securities of any
one investment company; (b) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of investment companies as a
group; and (c) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund or by the Trust as a whole.
Calculation of Portfolio Turnover Rate. The portfolio turnover rate for the
Fund is calculated by dividing the lesser of purchases or sales of portfolio
investments for the reporting period by the monthly average value of the
portfolio investments owned during the reporting period. The calculation
excludes all securities, including options, whose maturities or expiration dates
at the time of acquisition are one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may be
affected by cash requirements for redemption of shares and by requirements which
enable the Fund to receive favorable tax treatment. The Fund is not restricted
by policy with regard to portfolio turnover and will make changes in its
investment portfolio from time to time as business and economic conditions as
well as market prices may dictate. It is anticipated the portfolio turnover rate
for the Fund will generally not exceed 150%. However, this should not be
considered as a limiting factor.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions consistent with its
investment objective. The following restrictions supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment restriction
states a maximum percentage of the Fund's assets that may be invested in any
security or other asset, such percentage restriction will be determined
immediately after and as a result of the Fund's acquisition of such security or
other asset. Accordingly, any subsequent change in values, net assets, or other
circumstances will not be considered when determining whether the investment
complies with the Fund's investment limitations except with respect to the
Fund's restrictions on borrowings as set forth in fundamental restriction 7
below.
7-
<PAGE>
The Fund's fundamental restrictions cannot be changed without the approval
of the holders of the lesser of: (i) 67% of the Fund's shares present or
represented at a shareholders meeting at which the holders of more than 50% of
such shares are present or represented; or (ii) more than 50% of the outstanding
shares of the Fund.
The following are the Fund's fundamental investment restrictions.
The Fund may not:
1. Issue senior securities, except as permitted under the Investment
Company Act of 1940 (the "1940 Act"); provided, however, the Fund may engage in
transactions involving options, futures and options on futures contracts.
2. Lend money or securities (except by purchasing debt securities or
entering into repurchase agreements or lending portfolio securities).
3. With respect to seventy-five percent (75%) of its total assets, purchase
(a) the securities of any issuer (except securities of the U.S. government or
any agency or instrumentality thereof), if such purchase would cause more than
five percent (5%) of the value of the Fund's total assets to be invested in
securities of any one issuer or (b) the securities of any issuer if such
purchase would cause the Fund to own more than ten percent (10%) of the
outstanding voting securities of any one issuer.
4. Purchase the securities of any issuer if, as a result, 25% or more of
the value of its total assets, determined at the time an investment is made,
exclusive of U.S. government securities, are in securities issued by companies
primarily engaged in the same industry.
5. Act as an underwriter or distributor of securities other than shares of
the Fund except to the extent that the Fund's participation as part of a group
in bidding or by bidding alone, for the purchase of permissible investments
directly from an issuer or selling shareholders for the Fund's own portfolio may
be deemed to be an underwriting, and except to the extent that the Fund may be
deemed an underwriter under the Securities Act by virtue of disposing of
portfolio securities.
6. Purchase or sell real estate (but this shall not prevent the Fund from
investing in securities that are backed by real estate or issued by companies
that invest or deal in real estate or in participation interests in pools of
real estate mortgage loans exclusive of investments in real estate limited
partnerships).
7. Borrow money, except that the Fund may borrow money from a bank for
temporary or emergency purposes (not for leveraging) in an amount not exceeding
33 1/3% of the value of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that exceed 33 1/3% of the
Fund's total assets by reason of a decline in net asset value will be reduced
within three days to the extent necessary to comply with the 33 1/3% limitation.
Transactions involving options, futures and options on futures, will not be
deemed to be borrowings if properly covered by a segregated account where
appropriate.
8. Purchase or sell physical commodities or commodities contracts unless
acquired as a result of ownership of securities or other instruments (but this
shall not prevent the Fund from engaging in transactions involving foreign
currencies, futures contracts, options on futures contracts or options, or from
investing in securities or other instruments backed by physical commodities).
The following investment restrictions are not fundamental, and may be changed
without shareholder approval.
8-
<PAGE>
The Fund may not:
1. Purchase warrants, valued at the lower of cost or market, in excess of
5% of the Fund's net assets. Warrants acquired by the Fund in units or attached
to securities are not subject to this restrictions.
2. Purchase securities of other investment companies except to the extent
permitted by the 1940 Act and the rules and regulations thereunder.
3. Make investments for the purpose of exercising control or management of
any company except that the Fund or its agent may vote portfolio securities in
their discretion.
4. Acquire illiquid securities if, as a result of such investments, more
than fifteen percent (15%) of the Fund's net assets (taken at market value at
the time of each investment) would be invested in illiquid securities.
5. Purchase securities on margin (except to obtain such short-term credits
as are necessary for the clearance of purchases and sales of securities) or
participate in a joint trading account; provided, however, the Fund may (i)
purchase or sell futures contracts and options thereon, (ii) make initial and
variation margin payments in connection with purchases or sales of futures
contracts or options on futures contracts, (iii) write or invest in put or call
options on securities and indexes, and (iv) engage in foreign currency
transactions. (The "bunching" of orders for the sale or purchase of marketable
portfolio securities with other accounts under the management of the Adviser to
save brokerage costs or average prices among them is not deemed to result in a
joint securities trading account.)
6. Borrow money except for temporary bank borrowings (not in excess of five
percent (5%) of the value of its total assets) for emergency or extraordinary
purposes, or engage in reverse repurchase agreements, or pledge any of its
assets except to secure borrowings and only to an extent not greater than ten
percent (10%) of the value of the Fund's net assets; provided, however, the Fund
may engage in transactions involving options. The Fund will not purchase any
security while borrowings representing more than 5% of its total assets are
outstanding.
7. Purchase any interest in any oil, gas or any other mineral exploration
or development program, including any oil, gas or mineral leases.
In determining industry classification with respect to the Fund, the
Adviser intends to use the industry classification titles in the Standard
Industrial Classification Manual.
A guarantee of a security is not deemed to be a security issued by the
guarantor when the value of all securities issued and guaranteed by the
guarantor, and owned by the Fund, does not exceed 10% of the value of the Fund's
total assets.
9-
<PAGE>
ADDITIONAL TRUST INFORMATION
Trustees and Officers. Information regarding the Board of Trustees and
officers of the Trust, including their principal business occupations during at
least the last five years, is set forth below. Each Trustee who is an
"interested person" of the Trust or the Adviser as defined in the 1940 Act, is
indicated by an asterisk. Except where otherwise indicated, each of the
individuals below has served in his or her present capacity with the Trust since
July 1996. The address of each of the officers and Trustees is c/o The Purisima
Funds, 13100 Skyline Blvd., Woodside, CA 94062-4547.
<TABLE>
<CAPTION>
Position(s) Held Other Principal
Name with Trust Occupation(s) During Past Five Years
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kenneth L. Fisher(1) President and Trustee Chief Executive Officer and majority shareholder of
the Adviser, and has served in such capacities since the
incorporation of the Adviser in 1986. Prior thereto, he
was the founder of Fisher Investments, a sole
proprietorship which commenced operations in 1978.
Sherrilyn Fisher Assistant Secretary Senior Vice President and Corporate Secretary of the
Adviser. Ms. Fischer has been employed by the
Adviser since 1984.
Pierson E. Clair III Trustee Vice President of Blummer Chocolate Company where
he has been employed since 1970 and served as Vice
President since 1980. Director of Signature Foods, Inc.
Bryan F. Morse Trustee Sole proprietor of Bryan F. Morse, RIA, a registered
investment adviser since 1990.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------
(1)"Interested person" of the Trust, as defined in the 1940 Act.
10-
<PAGE>
<TABLE>
<S> <C> <C>
Grover T. Wickersham Trustee Attorney in private practice in Palo Alto, California for
more than five years and has been Chairman of Oxcal
Venture Corporation, a venture capital fund, since
January of 1996. Director of the California Culinary
Academy, a San Francisco-based public company
engaged in culinary education, since March of 1996.
Prior to entering private practice in June of 1981,
served as a Branch Chief of the Los Angeles Regional
Office of the U.S. Securities and Exchange
Commission.
</TABLE>
The Trustees of the Trust who are officers of the Adviser receive no
remuneration from the Trust. Each of the other Trustees is paid a fee of $500
for each meeting attended and is reimbursed for the expenses of attending
meetings. The table below sets forth the compensation of the Trustees for the
fiscal year ended August 31, 1997. Mr. Fisher did not receive any Trustees fees.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Retirement Total
Aggregate Benefits Accrued As Estimated Annual Compensation from
Compensation Part of Company Benefits Company
Name of Person from Company Company Expenses Upon Retirement Paid to Directors
- -------------- ------------ ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Mr. Fisher $ 0 $0 $0 $ 0
Mr. Clair $1500 $0 $0 $1500
Mr. Morse $1500 $0 $0 $1500
Mr. Wickersham $1500 $0 $0 $1500
</TABLE>
As of October 31, 1997, the officers and directors of the Fund owned, as a
group, 2.44% of the Fund's outstanding securities.
Investment Adviser. The investment adviser to the Fund is Fisher
Investments, Inc. (the "Adviser"). Mr. Kenneth L. Fisher is the founder,
Chairman and Chief Executive Officer of the Adviser and is a majority
shareholder of the Adviser. As such, he controls the Adviser.
Pursuant to the Investment Management Agreement entered into between the
Trust on behalf of the Fund and the Adviser (the "Investment Management
Agreement"), the Adviser determines the composition of the Fund's portfolio, the
nature and timing of the changes to the Fund's portfolio, and the manner of
implementing such changes. The Adviser also (a) provides the Fund with
investment advice, research and related services for the investment of its
assets, subject to such directions as it may receive from the Board of Trustees;
(b) pays all of the Trust's executive officers' salaries and executive expenses
(if any); (c) pays all expenses incurred in performing its investment advisory
duties under the Investment Management Agreement; and (d) furnishes the Fund
with office space and certain administrative services. The services of the
Adviser or any affiliate thereof are not deemed to be exclusive and the Adviser
or any affiliate thereof may provide similar services to other series of the
Trust, other investment companies and other clients, and may engage in other
activities. The Fund may reimburse the Adviser (on a cost recovery basis only)
for any services performed for the Fund by the Adviser outside its duties under
the Investment Management Agreement.
11-
<PAGE>
The Investment Management Agreement is dated as of October 25, 1996. The
Investment Management Agreement has an initial term of two years and thereafter
is required to be approved annually by the Board of Trustees of the Trust or by
vote of a majority of the Fund's outstanding voting securities (as defined in
the 1940 Act). Each annual renewal must also be approved by the vote of a
majority of the Trustees who are not parties to the Investment Management
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Investment Management
Agreement was approved by the vote of a majority of the Trustees who are not
parties to the Investment Management Agreement or interested persons of any such
party on September 26, 1996 and by the initial shareholder of the Fund on
September 26, 1996. The Investment Management Agreement is terminable without
penalty on 60-days' written notice by the Trustees, by vote of a majority of the
Fund's outstanding voting securities, or by the Adviser, and will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
The Investment Management Agreement requires the Adviser to reimburse the
Fund in the event that the expenses and charges payable by the Fund in any
fiscal year, including the advisory fee but excluding taxes, interest, brokerage
commissions, and similar fees, exceed a percentage of the average net asset
value of the Fund for such year which is the most restrictive percentage
provided by the state laws of the various states in which the Fund's shares are
qualified for sale. As of the date of this Statement of Additional Information,
none of the states in which the Fund's shares are qualified for sale impose an
applicable expense limitation on the Fund. Additionally, the Adviser voluntarily
agreed to reimburse the Fund to the extent aggregate annual operating expenses
as described above exceeded 1.50% of the average daily net assets of the Fund
for the two fiscal years ending August 31, 1998. The Adviser may voluntarily
continue to waive all or a portion of the advisory fees otherwise payable by the
Fund. Such a waiver may be terminated at any time in the Adviser's discretion
upon notice to the Fund and certain of its agents. Reimbursement of expenses in
excess of the applicable limitation will be paid to the Fund by reducing the
Adviser's fee, subject to later adjustment. The Adviser may from time to time
voluntarily absorb expenses for the Fund in addition to the reimbursement of
expenses in excess of the foregoing.
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. Such
reimbursement may be paid prior to the Fund's payment of current expenses if so
requested by the Adviser even if such practice may require the Adviser to waive,
reduce, or absorb current Fund expenses. Any such management fee or expense
reimbursement will be accounted for on the financial statements of the Fund as a
contingent liability of the Fund until such time as it appears that the Fund
will be able to effect such reimbursement. At such time as it appears probable
that the Fund is able to effect 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.
As compensation for its services, the Fund pays to the Adviser a monthly
advisory fee at the annual rate specified in the Prospectus. The organizational
expenses of the Fund were advanced by the Adviser and will be reimbursed by the
Fund. For the period commencing October 28, 1996 to August 31, 1997, the Adviser
waived its advisory fee of $9,327 and reimbursed the Fund expenses in the amount
of $173,958.
The Investment Management Agreement provides that the Adviser shall not be
liable to the Fund or its shareholders for any error of judgment or mistake of
law or for anything other than willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations or duties.
Administrator. Investment Company Administration Corporation serves as the
Fund's Administrator. Pursuant to an administration agreement with the Fund, the
Administrator supervises the overall administration of the Trust and the Funds
including, among other responsibilities, the preparation and filing of all
documents
12-
<PAGE>
required for compliance by the Trust or the Fund with applicable laws and
regulations, arranging for the maintenance of books and records of the Trust and
the Fund, and supervision of other organizations that provide services to the
Fund. Certain junior officers of the Trust and the Fund may be provided by the
Administrator. The Trust has agreed to pay the Administrator an annual fee equal
to 0.10% of the first $200 million of average daily net assets, 0.05% of the
next $300 million of such net assets, and 0.03% thereafter, subject to a minimum
annual fee of $40,000 per Fund.
Custodian, Transfer Agent and Dividend Paying Agent. UMB Bank, N.A. (the
"Custodian") serves as the custodian and Countrywide Fund Services, Inc. serves
as the transfer and dividend paying agent for the Fund. Under the terms of the
respective agreements, the Custodian is responsible for the receipt and delivery
of the Fund's securities and cash, and Countrywide Fund Services, Inc. is
responsible for processing purchase and redemption requests for Fund shares as
well as the recordkeeping of ownership of the Fund's shares, payment of
dividends as declared by the Trustees and the issuance of confirmations of
transactions and annual statements to shareholders. The Custodian and
Countrywide Fund Services, Inc. do not exercise any supervisory functions over
the management of the Trust or the Fund or the purchase and sale of securities.
Legal Counsel. The validity of the shares offered by the Prospectus has
been passed on by Paul, Hastings, Janofsky & Walker LLP, 345 California Street,
San Francisco, California 94104.
Independent Accountants. Price Waterhouse LLP are the independent
accountants for the Fund. They are responsible for performing an audit of the
Fund's year-end financial statements as well as providing accounting and tax
advice to the management of the Trust. The financial statements incorporated by
reference in this Statement of Additional Information from the Annual Report
have been so included in reliance on the report of Price Waterhouse LLP given on
the said authority of said firm as experts in auditing and accounting.
DISTRIBUTION OF SHARES
First Fund Distributors, Inc. (the "Distributor") an affiliate of the
Administrator, serves as distributor of the Fund pursuant to a Distribution
Agreement with the Trust on behalf of the Fund (the "Distribution Agreement").
Shares may also be sold by authorized dealers who have entered into dealer
agreements with the Distributor or the Trust. The Distribution Agreement is
dated as of July 10, 1997. The Agreement has an initial term through July 10,
1998 and thereafter is required to be approved annually by the Board of Trustees
of the Trust or by vote of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act). Each annual renewal must also be
approved by the vote of a majority of the Trustees who are not parties to the
Distribution Agreement or interested persons of any such party, case in person
at a meeting called for the purpose of voting on such approval. The Agreement
was approved by the vote of a majority of the Trustees who are not parties to
the Agreement or interested persons of any such party on July 10, 1997. The
Agreement is terminable without penalty on 60-days' written notice by the
Trustees, by vote of a majority of the Fund's outstanding voting securities, or
by the Distributor, and will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
As set forth in the Prospectus, the Trust has adopted a Service and
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. The
Plan authorizes payments by the Fund in connection with the distribution of its
shares at an annual rate, as determined from time to time by the Board of
Trustees, of up to 0.25% of the Fund's average daily net assets. For the period
commencing October 28, 1996 to August 31, 1997, the Fund paid $2,332 in
distribution expenses to the Adviser for advertising, printing and mailing of
prospectus to other than current shareholders and compensation to sales
personnel, pursuant to the Plan.
On September 26, 1996, the Board of Trustees of the Trust, including a
majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the 12b-1 Plan
or in any agreement related to the 12b-1 Plan (the "Rule 12b-1 Trustees"),
adopted the 12b-1 Plan for the
13-
<PAGE>
Fund. The initial shareholder of the Fund approved the 12b-1 Plan as of
September 26, 1996. The Plan was adopted in anticipation that the Fund will
benefit from the Plan through increased sales of shares of the Fund, thereby
reducing the Fund's expense ratio and providing an asset size that allows the
Adviser greater flexibility in management. The 12b-1 Plan provides that it shall
continue in effect from year to year provided that a majority of the Board of
Trustees of the Trust, including a majority of the Rule 12b-1 Trustees, vote
annually to continue the 12b-1 Plan. The Plan may be terminated at any time by a
vote of the Rule 12b-1 Trustees of the Fund or by a vote of a majority of the
outstanding shares. Any change in the Plan that would materially increase the
distribution expenses of the Fund provided for in the Plan requires approval of
the shareholders and the Board of Trustees, including the Rule 12b-1 Trustees.
While the Plan is in effect, the selection and nomination of Trustees who
are not interested persons of the Trust will be committed to the discretion of
the Trustees of the Trust who are not interested persons of the Trust. The Board
of Trustees must review the amount and purposes of expenditures pursuant to the
Plan quarterly as reported to it by the officers of the Trust. All distribution
fees paid by the Fund under the 12b-1 Plan will be paid in accordance with Rule
2830 of the Conduct Rules of the National Association of Securities Dealers
Regulation, Inc., as such Rules may change from time to time.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees, the Adviser is
primarily responsible for arranging the execution of the Fund's portfolio
transactions and the allocation of brokerage activities. In arranging such
transactions, the Adviser will seek to obtain best execution for the Fund,
taking into account such factors as price, size of order, difficulty of
execution, operational facilities of the firm involved, the firm's risk in
positioning a block of securities and research, market and statistical
information provided by such firm. While the Adviser generally seeks reasonable
competitive commission rates, the Fund will not necessarily always receive the
lowest commission available.
The Fund has no obligation to deal with any broker or group of brokers in
executing transactions in portfolio securities. Brokers who provide supplemental
research, market and statistical information to the Adviser may receive orders
for transactions by the Fund. The term "research, market and statistical
information" includes advice as to the value of securities, the advisability of
purchasing or selling securities, the availability of securities or purchasers
or sellers of securities, and furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio
strategy, and the performance of accounts. Information so received will be in
addition to and not in lieu of the services required to be performed by the
Adviser under the Investment Management Agreement and the expenses of the
Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information. Such information may be useful to the Adviser in
providing services to clients other than the Fund, and not all such information
may be used by the Adviser in connection with the Fund. Conversely, such
information provided to the Adviser by brokers and dealers through whom other
clients of the Adviser in the future may effect securities transactions may be
useful to the Adviser in providing services to the Fund. To the extent the
Adviser receives valuable research, market and statistical information from a
broker-dealer, the Adviser intends to direct orders for Fund transactions to
that broker-dealer, subject to the foregoing policies, regulatory constraints,
and the ability of that broker-dealer to provide competitive prices and
commission rates. In accordance with the rules of the National Association of
Securities Dealers, Inc., the Fund may also direct brokerage to broker-dealers
who facilitate sales of the Fund's shares, subject to also obtaining best
execution as described above from such broker-dealer.
A portion of the securities in which the Fund may invest are traded in the
over-the-counter markets, and the Fund intends to deal directly with the dealers
who make markets in the securities involved, except as limited by applicable law
and in certain circumstances where better prices and execution are available
elsewhere. Securities traded through market makers may include markups or
markdowns, which are generally not determinable. Under
14-
<PAGE>
the 1940 Act, persons affiliated with the Fund are prohibited from dealing with
the Fund as principal in the purchase and sale of securities except after
application for and receipt of an exemptive order from the Securities and
Exchange Commission. The 1940 Act restricts transactions involving the Fund and
its "affiliates," including, among others, the Trust's Trustees, officers, and
employees and the Adviser, and any affiliates of such affiliates. Affiliated
persons of the Fund are permitted to serve as its broker in over-the-counter
transactions conducted on an agency basis only.
Investment decisions for the Fund are made independently from those of
accounts advised by the Adviser or its affiliates. However, the same security
may be held in the portfolios of more than one account. When two or more
accounts advised by the Adviser simultaneously engage in the purchase or sale of
the same security, the prices and amounts will be equitably allocated among each
account. In some cases, this procedure may adversely affect the price or
quantity of the security available to a particular account. In other cases,
however, an account's ability to participate in large volume transactions may
produce better executions and prices.
Total brokerage commissions paid by the Fund during the period October 28,
1996 (inception) to August 31, 1997 totaled $2,341, of which $1,856 (79%) was
paid to firms which provided research or other services to the Adviser.
TAXES
General. The Fund believes that it has qualified for tax treatment as regulated
investment company ("RIC") under Subchapter M of the Code for its fiscal year
ended August 31, 1997, and intends to be able to continue to so qualify. In
order to do so, the Fund must distribute to its shareholders for each taxable
year at least 90% of its investment company taxable income (consisting generally
of net investment income, net short-term capital gain and net gains from certain
foreign currency transactions) and must meet several additional requirements:
(1) the Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in securities or those currencies;(2) at
the close of each quarter of the Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items (including
receivables), U.S. government securities, securities of other RICs, and other
securities, with these other securities limited, with respect to any one issuer,
to an amount that does not exceed 5% of the value of the Fund's total assets and
that does not represent more than 10% of the issuer's outstanding voting
securities; and (3) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. government securities or the securities of other RICs) of any
one issuer.
Dividends and other distributions declared by the Fund in, and payable to
shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
The Fund may invest in securities of foreign issuers, forward contracts and
options. These investments involve complex rules to determine the character and
timing of recognition of income received in connection therewith by the Fund.
Any gain or loss realized by the Fund upon the expiration or sale of
options held by it generally will be capital gain or loss. Expiration of a call
option written by the Fund will result in short-term capital gain. Any security,
option, or other position entered into or held by the Fund that substantially
diminishes its risk of loss from any other position held by the Fund may
constitute a "straddle" for federal income tax purposes. In general, straddles
are subject to certain rules that may affect the amount, character and timing of
the Fund's gains and losses with
15-
<PAGE>
respect to straddle positions by requiring, among other things, that the loss
realized on disposition of one position of a straddle be deferred until gain is
realized on disposition of the offsetting position; the Fund's holding period in
certain straddle positions not begin until the straddle is terminated (possibly
resulting in the gain being treated as short-term capital gain rather than
long-term capital gain); and that losses recognized with respect to certain
straddle positions, which would otherwise constitute short-term capital losses,
be treated as long-term capital losses. Different elections are available to the
Fund that may mitigate the effects of the straddle rules.
Certain options (including options on a broad-based index, such as the
Standard & Poor's 500 index) and forward contracts that are subject to Section
1256 of the Code ("Section 1256 Contracts") and that are held by the Fund at the
end of its taxable year generally will be required to be "marked to market" for
federal income tax purposes, that is, deemed to have been sold at market value.
Sixty percent of any net gain or loss recognized on these deemed sales and 60%
of any net gain or loss realized from any actual sales of Section 1256 Contracts
will be treated as long-term capital gain or loss, and the balance will be
treated as short-term gain or loss.
Section 988 of the Code contains special tax rules applicable to certain
foreign currency transactions that may affect the amount, timing and character
of income, gain or loss recognized by the Fund. Under these rules, foreign
exchange gain or loss realized with respect to foreign currency-denominated debt
instruments, foreign currency forward contracts, foreign currency-denominated
payables and receivables and foreign currency options and futures contracts
(other than options and futures contracts that are governed by the
mark-to-market and 60/40 rules of Section 1256 of the Code and for which no
election is made) is treated as ordinary income or loss. Some part of the Fund's
gain or loss on the sale or other disposition of securities of a foreign
corporation may, because of changes in foreign currency exchange rates, be
treated as ordinary income or loss under Section 988 of the Code, rather than
capital gain or loss.
A portion of the dividends from the Fund's investment company taxable
income (whether paid in cash or reinvested in additional Fund shares) may be
eligible for the dividends-received deduction allowed to corporations. The
eligible portion may not exceed the aggregate dividends received by the Fund
from U.S. corporations. However, that portion of dividends received by a
corporate shareholder and deducted by it pursuant to the dividends-received
deduction may be subject to the alternative minimum tax. In addition,
availability of the deduction is subject to certain holding period and
debt-financing limitations.
All or a portion of a loss realized upon the sale or redemption of shares
of the Fund may be disallowed to the extent shares of the Fund are purchased
(including shares acquired by means of reinvested dividends) within 30 days
before or after such redemption. Investors also should be aware that if shares
are purchased shortly before the record date for any distribution, the
shareholder will pay full price for the shares and receive some portion of the
price back as a taxable dividend or capital gain distribution.
The Fund will be subject to a nondeductible 4% excise tax on net income to
the extent it fails to distribute by the end of any calendar year substantially
all of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
Foreign Taxes. Dividends and interest received by the Fund may be subject to
income, withholding, or other taxes imposed by foreign countries that would
reduce the yield on the Fund's portfolio securities. Tax conventions between
certain countries and the United States may reduce or eliminate these foreign
taxes, however, and many foreign countries do not impose taxes on capital gains
in respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign
income taxes paid by it. Pursuant to the election, the Fund will treat those
taxes as dividends paid to its shareholders and each shareholder will be
required to (1) include in gross income, and treat as paid by him or her, his or
her proportionate share of those taxes, (2) treat his or her share of those
taxes and of any dividend paid by the Fund
16-
<PAGE>
that represents income from foreign sources as his or her own income from those
sources, and (3) either deduct the taxes deemed paid by him or her in computing
his taxable income or, alternatively, use the foregoing information in
calculating the foreign tax credit against his or her federal income tax. The
Fund will report to its shareholders shortly after each taxable year their
respective shares of the Fund's income from sources within, and taxes paid to,
foreign countries if it makes this election.
Passive Foreign Investment Companies. If the Fund acquires stock in certain
non-U.S. corporations that receive at least 75% of their annual gross income
from passive sources (such as sources that produce interest, dividends, rental,
royalty or capital gain income) or hold at least 50% of their assets in such
passive sources ("passive foreign investment companies"), the Fund could be
subject to federal income tax and additional interest charges on "excess
distributions" received from such companies or gains from the sale of stock in
such companies, even if all income or gain actually received by the Fund is
timely distributed to its shareholders. The Fund would not be able to pass
through to its shareholders any credit or deduction for such tax. In some cases,
elections may be available that would ameliorate these adverse tax consequences,
but such elections would require the Fund to include certain amounts as income
or gain (subject to the distribution requirements described above) without a
concurrent receipt of cash and could result in the conversion of capital gain to
ordinary income. The Fund may limit its investments in passive foreign
investment companies or dispose of such investments if potential adverse tax
consequences are deemed material in particular situations. Because it is not
always possible to identify a foreign issuer as a passive foreign investment
company in advance of making the investment, the Fund may incur the tax in some
instances.
Non-U.S. Shareholders. Distributions of net investment income by the Fund to a
shareholder who, as to the United States, is a nonresident alien individual,
nonresident alien fiduciary of a trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder") will be subject to U.S. withholding
tax at a rate of 30% (or lower treaty rate). Withholding will not apply if a
dividend paid by the Fund to a foreign shareholder is "effectively connected
with the conduct of a U.S. trade or business" and the foreign shareholder
provides the Fund with the certification required by the IRS to that effect, in
which case the reporting and withholding requirements applicable to domestic
taxpayers will apply. Distributions of net capital gain to a foreign shareholder
generally are not subject to withholding.
The foregoing is a general and abbreviated summary of certain U.S. federal
income tax considerations affecting the Fund and its shareholders and is based
on current provisions of the Code and applicable Treasury Regulations, which are
subject to change (possibly on a retroactive basis). Investors are urged to
consult their own tax advisers for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from the Fund.
The foregoing discussion and the related discussion in the Prospectus has
been prepared by the management of the Fund, and does not purport to be a
complete description of all tax implications of an investment in the Fund. Paul,
Hastings, Janofsky & Walker LLP, legal counsel to the Fund, has expressed no
opinion in respect thereof. Shareholders should consult their own advisers
concerning the application of federal, state and local tax to their particular
situations.
DESCRIPTION OF SHARES
The Trust Agreement permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of one or more
separate series or classes representing interests in different investment
portfolios. The Trust may hereafter create series in addition to the Fund. Under
the terms of the Trust Agreement, each share of the Fund has a par value of
$0.01, represents a proportionate interest in the Fund with each other share of
its class and is entitled to such dividends and distributions out of the income
belonging to the Fund as are declared by the Trustees. Upon any liquidation of
the Fund, shareholders are entitled to share in the net assets of the Fund
available for distribution. Shares do not have any preemptive or conversion
rights. The right of
17-
<PAGE>
redemption is described in the Prospectus. Pursuant to the terms of the 1940
Act, the right of a shareholder to redeem shares and the date of payment by the
Fund may be suspended for more than seven days (a) for any period during which
the New York Stock Exchange is closed, other than the customary weekends or
holidays, or trading in the markets the Fund normally utilizes is closed or is
restricted as determined by the Securities and Exchange Commission, (b) during
any emergency, as determined by the Securities and Exchange Commission, as a
result of which it is not reasonably practicable for the Fund to dispose of
instruments owned by it or fairly to determine the value of its net assets, or
(c) for such other period as the Securities and Exchange Commission may by order
permit for the protection of the shareholders of the Fund. The Trust may also
suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions. In addition, the Trust reserves
the right to adopt, by action of the Trustees, a policy pursuant to which it
may, without shareholder approval, redeem all of a shareholder's shares (a) if
such shares have an aggregate value below a designated amount, (b) to the extent
that such shareholder owns Shares equal to or in excess of a percentage of the
outstanding Shares determined from time to time by the Trustees, (c) to the
extent that such shareholder owns Shares equal to or in excess of a percentage,
determined from time to time by the Trustees, of the outstanding Shares of the
Trust, or (d) if the Trustees determine that it is not practical, efficient or
advisable to continue the operation of the Fund and that any applicable
requirements of the 1940 Act have been met. Shares when issued as described in
the Prospectus are validly issued, fully paid and nonassessable.
In the event additional funds are created, the proceeds received by each
fund for each issue or sale of its shares, and all net investment income,
realized and unrealized gain and proceeds thereof, subject only to the rights of
creditors, will be specifically allocated to and constitute the underlying
assets of that fund. The underlying assets of each fund will be segregated on
the books of accounts, and will be charged with the liabilities in respect to
that fund and with a share of the general liabilities of the Trust. Expenses
with respect to the portfolios of the Trust will normally be allocated in
proportion to the net asset value of the respective portfolios except where
allocations of direct expenses can otherwise be fairly made.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each investment portfolio affected by such matter. Rule 18f-2 further provides
that an investment portfolio shall be deemed to be affected by a matter unless
the interest of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment advisory agreement, a
distribution plan subject to Rule 12b-1 under the 1940 Act or any change in a
fundamental investment policy would be effectively acted upon with respect to an
investment portfolio only if approved by a majority of the outstanding shares of
such investment portfolio. However, Rule 18f-2 also provides that the
ratification of the appointment of independent accountants, the approval of the
principal underwriting contracts and the election of Trustees may be effectively
acted upon by shareholders of the Trust voting together in the aggregate without
regard to a particular investment portfolio.
The term "majority of the outstanding shares" of either the Trust or a
particular fund or investment portfolio means the vote of the lesser of (i) 67%
or more of the shares of the Trust or such fund or portfolio present at a
meeting, if the holders of more than 50% of the outstanding shares of the Trust
or such fund or portfolio are present or represented by proxy, or (ii) more than
50% of the outstanding shares of the Trust or such fund or portfolio.
As a general matter, the Trust does not hold annual or other meetings of
shareholders. This is because the Trust Agreement provides for shareholders
voting only for the election or removal of one or more Trustees, if a meeting is
called for that purpose, and for certain other designated matters. Each Trustee
serves until the next meeting of shareholders, if any, called for the purpose of
considering the election or reelection of such Trustee or of a
18-
<PAGE>
successor to such Trustee, and until the election and qualification of his
successor, if any, elected at such meeting, or until such Trustee sooner dies,
resigns, retires or is removed by the holders of two-thirds of the shares.
Under Delaware law, shareholders of the Trust are not generally personally
liable for obligations of the Trust. The Delaware Business Trust Act provides
that a shareholder of a Delaware business trust shall be entitled to the same
limitation of liability extended to shareholders of private for-profit
corporations. However, no similar statutory or other authority limiting business
trust shareholder liability exists in many states. As a result, to the extent
that a Delaware business trust or a shareholder is subject to the jurisdiction
of courts in such other states, the courts may not apply Delaware law and may
thereby subject the Trust's shareholders to liability. To guard against this
risk, the Trust Agreement (i) contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and will require that notice of
such disclaimer be given in each agreement, obligation and instrument entered
into or executed by the Trust or its Trustees and (ii) provides for
indemnification out of the property of the Trust of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a Trust
shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (1) a court refused to apply Delaware law; (2) the
liability arose under tort law or, if not, no contractual limitation of
liability was in effect; and (3) the Trust itself would be unable to meet its
obligations.
The Trust Agreement provides that each Trustee of the Trust will be liable
for his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustees
("disabling conduct"), and for nothing else, and will not be liable for errors
of judgment or mistakes of fact or law. The Trust Agreement provides further
that the Trust will indemnify Trustees and officers of the Trust against
liabilities and expenses incurred in connection with litigation and other
proceedings in which they may be involved (or with which they may be threatened)
by reason of their positions with the Trust, except that no Trustee or officer
will be indemnified against any liability to the Trust or its shareholders to
which he would otherwise be subject by reason of disabling conduct.
The Trust Agreement provides that each shareholder, by virtue of becoming
such, will be held to have expressly assented and agreed to the terms of the
Trust Agreement and to have become a party thereto.
The Trust Agreement also contains procedures for the removal of Trustees by
its shareholders. At any meeting of shareholders, duly called and at which a
quorum is present, the shareholders may, by the affirmative vote of the holders
of two-thirds of the votes entitled to be cast thereon, remove any Trustee or
Trustees from office and may elect a successor or successors to fill any
resulting vacancies for unexpired terms of removed Trustees.
Upon the written request of the holders of shares entitled to not less than
ten percent (10%) of all the votes entitled to be cast at such meeting, the
Secretary of the Trust shall promptly call a special meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee. Whenever ten
or more shareholders of record who have been such for at least six months
preceding the date of application, and who hold in the aggregate either shares
having a net asset value of at least $25,000 or at least one percent (1%) of the
total outstanding shares, whichever is less, shall apply to the Trust's
Secretary in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures to submit a request for a
meeting as described above and accompanied by a form of communication and
request which they wish to transmit, the Secretary shall within five business
days after such application either: (1) afford to such applicants access to a
list of the names and addresses of all shareholders as recorded on the books of
the Trust; or (2) inform such applicants as to the approximate number of
shareholders of record and the approximate cost of mailing to them the proposed
communication and form of request.
If the Secretary elects to follow the course specified in clause (2) of the
last sentence of the preceding paragraph, the Secretary, upon the written
request of such applicants, accompanied by a tender of the material to be mailed
and of the reasonable expenses of mailing, shall, with reasonable promptness,
mail such material to all
19-
<PAGE>
shareholders of record at their addresses as recorded on the books unless within
five business days after such tender the Secretary shall mail to such applicants
and file with the Securities and Exchange Commission, together with a copy of
the material to be mailed, a written statement signed by at least a majority of
the Board of Trustees to the effect that in their opinion either such material
contains untrue statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law, and specifying the basis of such opinion.
After opportunity for hearing upon the objections specified in the written
statement so filed, the Securities and Exchange Commission may, and if demanded
by the Board of Trustees or by such applicants shall, enter an order either
sustaining one or more of such objections or refusing to sustain any of them. If
the Securities and Exchange Commission shall enter an order refusing to sustain
any of such objections, or if, after the entry of an order sustaining one or
more of such objections, the Securities and Exchange Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail copies
of such material of all shareholders with reasonable promptness after the entry
of such order and the renewal of such tender.
INDIVIDUAL RETIREMENT ACCOUNTS
Individuals who receive compensation or earned income, even if they are
active participants in a qualified retirement plan (or certain similar
retirement plans), may establish their own tax-sheltered Individual Retirement
Account ("IRA"). The Fund offers a prototype IRA plan which may be adopted by
individuals for rollovers from existing IRAs or retirement plans. Because of the
applicable $25,000 minimum purchase amount to establish an account with the
Fund, the Fund's prototype IRA may only be used to rollover proceeds from an
existing IRA or retirement plan. There is currently no charge for establishing
an IRA account, although there is an annual maintenance fee. Earnings on amounts
held in an IRA are not taxed until withdrawal.
A description of applicable service fees and certain limitations on
contributions and withdrawals, as well as application forms, are available from
the transfer agent upon request at 1-800-841-2858. The IRA documents contain a
disclosure statement which the Internal Revenue Service requires to be furnished
to individuals who are considering adopting an IRA. Because a retirement program
involves commitments covering future years, it is important that the investment
objective of the Fund be consistent with the participant's retirement
objectives. Premature withdrawals from a retirement plan will result in adverse
tax consequences. Consultation with a competent financial and tax adviser
regarding the foregoing retirement plans is recommended.
PERFORMANCE INFORMATION
The Fund may from time to time advertise performance data such as "average
annual total return" and "total return." To facilitate the comparability of
historical performance data from one mutual fund to another, the SEC has
developed guidelines for the calculation of average annual total return.
The average annual total return for the Fund for a specific period is found
by first taking a hypothetical $1,000 investment ("initial investment") in the
Fund's shares on the first day of the period and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is then
divided by the initial investment, and this quotient is taken to the Nth root (N
representing the number of years in the period) and 1 is subtracted from the
result, which is then expressed as a percentage. The calculation assumes that
all income and capital gains dividends paid by the Fund have been reinvested at
net asset value on the reinvestment dates during the period.
This calculation can be expressed as follows:
P(1 + T)N = ERV
Where: T = average annual total return.
20-
<PAGE>
ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning of the
period.
P = hypothetical initial payment of $1,000.
N = period covered by the computation, expressed in terms of years.
Total return performance for a specific period is calculated by first
taking an investment ("initial investment") in the Fund's shares on the first
day of the period and computing the "ending value" of that investment at the end
of the period. The total return percentage is then determined by subtracting the
initial investment from the ending value and dividing the remainder by the
initial investment and expressing the result as a percentage. The calculation
assumes that all income and capital gains dividends paid by the Fund have been
reinvested at net asset value on the reinvestment dates during the period. Total
return may also be shown as the increased dollar value of the investment over
the period or as a cumulative total return which represents the change in value
of an investment over a stated period and may be quoted as a percentage or as a
dollar amount.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value is determined
by assuming complete redemption of the hypothetical investment and the deduction
of all nonrecurring charges at the end of the period covered by the
computations.
The Fund's performance figures will be based upon historical results and
will not necessarily be indicative of future performance. The Fund's returns and
net asset value will fluctuate and the net asset value of shares when sold may
be more or less than their original cost. Any additional fees charged by a
dealer or other financial services firm would reduce the returns described in
this section. The Fund's total return for the period from commencement of
operations (October 28, 1996) through August 31, 1997, was 18.70%.
From time to time, in marketing and other literature, the Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objective and assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income and capital gains dividends
reinvested. Such calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings.
The Fund's performance may also be compared to the performance of other
mutual funds by Morningstar, Inc., which rates funds on the basis of historical
risk and total return. Morningstar's ratings range from five stars (highest) to
one star (lowest) and represent Morningstar's assessment of the historical risk
level and total return of a fund as a weighted average for 3, 5, and 10 year
periods. Ratings are not absolute or necessarily predictive of future
performance.
Evaluations of Fund performance made by independent sources may also be
used in advertisements concerning the Fund, including reprints of or selections
from editorials or articles about the Fund. Sources for Fund performance and
articles about the Fund may include publications such as Money, Forbes,
Kiplinger's, Financial World, Business Week, U.S. News and World Report, the
Wall Street Journal, Barron's and a variety of investment newsletters.
The Fund may compare its performance to a wide variety of indices and
measures of inflation including the
21-
<PAGE>
Standard & Poor's Index of 500 Stocks and the NASDAQ Over-the-Counter Composite
Index. There are differences and similarities between the investments that the
Fund may purchase for its portfolios and the investments measured by these
indices.
Occasionally statistics may be used to specify the Fund's volatility or
risk. Measures of volatility or risk are generally used to compare the Fund's
net asset value or performance relative to a market index. One measure of
volatility is beta. Beta is the volatility of a fund relative to the total
market as represented by the Standard & Poor's 500 Stock Index. A beta of more
than 1.00 indicates volatility greater than the market, and a beta of less than
1.00 indicates volatility less than the market. Another measure of volatility or
risk is standard deviation. Standard deviation is used to measure variability of
net asset value or total return around an average, over a specified period of
time. The premise is that greater volatility connotes greater risk undertaken in
achieving performance.
Marketing and other Trust literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other funds or broad categories of funds, such as money market, bond or equity
funds, in terms of potential risks and returns. Risk/return spectrums also may
depict funds that invest in both domestic and foreign securities or a
combination of bond and equity securities. Money market funds are designed to
maintain a constant $1.00 share price and have a fluctuating yield. Share price,
yield and total return of a bond fund will fluctuate. The share price and return
of an equity fund also will fluctuate. The description may also compare a fund
to bank products, such as certificates of deposit. Unlike mutual funds,
certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
The Fund may include discussions or illustrations of the potential
investment goals of a prospective investor, investment management techniques,
policies or investment suitability of the Fund, economic conditions, the effects
of inflation and historical performance of various asset classes, including but
not limited to, stocks, bonds and Treasury bills. From time to time
advertisements or communications to investors may summarize the substance of
information contained in shareholder reports (including the investment
composition of the Fund), as well as the views of the Adviser as to current
market, economic, trade and interest rate investment strategies and related
matters believed to be of relevance to the Fund. In addition, advertisements or
shareholder communications may include a discussion of certain attributes or
benefits to be derived by an investment in the Fund. Such advertisements or
communications may include symbols, headlines or other material which highlight
or summarize the information discussed in more detail.
OTHER INFORMATION
As set forth in the Prospectus, the net asset value of the Fund will be
determined as of the close of trading on each day the New York Stock Exchange is
open for trading. The New York Stock Exchange is open for trading Monday through
Friday except New Year's Day, Martin Luther King Jr.'s Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Additionally, if any of the aforementioned holidays falls on a
Saturday, the New York Stock Exchange will not be open for trading on the
preceding Friday, and when any such holiday falls on a Sunday, the New York
Stock Exchange will not be open for trading on the following Monday unless
unusual business conditions exist, such as the ending of a monthly or the yearly
accounting period.
Shares of the Fund may be exchanged for shares of the Money Market Fund as
provided in the Prospectus. Countrywide Fund Services, Inc., the Fund's transfer
agent, receives a service fee from the Money Market Fund at the annual rate of
0.25 of 1% of the average daily net asset value of the shares of the Fund
exchanged into the Money Market Fund.
With respect to the management of domestic equity securities, the Adviser
believes a significant portion of the
22-
<PAGE>
return is derived from a weighted exposure to the market's styles. Style is
defined as the combination of market capitalization size (i.e., big, mid, and
small cap) and valuation (low/"value" or high/"growth"). The resulting six
styles are:
M BIG CAP BIG CAP
A VALUE GROWTH
R ----------------------------------------
K
E MID-CAP MID-CAP
T VALUE GROWTH
----------------------------------------
C SMALL CAP SMALL CAP
A VALUE GROWTH
P
----------------------------------------
VALUATION
The Adviser believes that for extended periods, the market has favored one
style over the others. This favoritism has rotated, with all styles leading (and
lagging) at some time. The Adviser also believes that this observation may be
more important in achieving investment returns than individual stock or manager
selection.
In seeking to achieve the Fund's investment objective, the Adviser utilizes
"exclusionary" management. This means deciding what not to own -- or what styles
to avoid. In contrast, many investors utilize "inclusionary" management --
deciding what to own in the equity universe. The Adviser seeks a high level of
total return by seeking to avoid the worst styles and owning the rest. By
avoiding the worst performing parts of the market, the Adviser seeks relatively
lower volatility in investment returns than the broad market as a whole because
in the Adviser's experience the most out-of-phase styles typically have the
highest volatility (standard deviation). In an attempt to replicate the
performance of each style, the Adviser uses semi-passive emulation, i.e., the
Adviser purchases a basket of quantitatively chosen stocks optimized to the
style's characteristics.
Mr. Kenneth L. Fisher is the portfolio manager of the Fund. He is primarily
known to the public through his writing. He has written the Portfolio Strategy
column in Forbes magazine since 1984. His writings include three books, "Super
Stocks," a tutorial on fundamental stock research published in 1984, "The Wall
Street Waltz," a financial overview and historical lessons through 90
visualizations published in 1987, and "100 Minds that Made the Market," a set of
100 cameo biographies of pioneers of American finance published in 1993. His
writings have been published widely and he has been interviewed by numerous
financial publications and programs. The Fund may refer to this information in
its marketing materials.
The Automatic Investing Plan permits an investor to use "Dollar Cost
Averaging" in making investments. Instead of trying to time market performance,
a fixed dollar amount is invested in shares of the Fund at predetermined
intervals. This may help investors reduce their average cost per share because
the agreed upon fixed investment amount allows more shares to be purchased
during periods of lower share prices and fewer shares during periods of higher
share prices. In order to be effective, Dollar Cost Averaging should usually be
followed on a sustained, consistent basis. Investors should be aware, however,
that shares bought using Dollar Cost Averaging are purchased without regard to
their price on the day of investment or to market trends. Dollar Cost Averaging
does not assure a profit and does not protect against losses in a declining
market. In addition, while investors may find Dollar Cost Averaging to be
beneficial, it will not prevent a loss if an investor ultimately redeems his
shares at a price which is lower than their purchase price. An investor may want
to consider his or
23-
<PAGE>
her financial ability to continue purchases through periods of low price levels.
It is possible that conditions may exist in the future which would, in the
opinion of the Board of Trustees, make it undesirable for the Fund to pay for
redemptions in cash. In such cases the Board may authorize payment to be made in
portfolio securities of the Fund. However, the Fund has obligated itself under
the 1940 Act to redeem for cash all shares presented for redemption by any one
shareholder up to $250,000 (or 1% of the Fund's net assets if that is less) in
any 90-day period. Securities delivered in payment of redemptions are valued at
the same value assigned to them in computing the net asset value per share.
Shareholders receiving such securities generally will incur brokerage costs when
selling such securities.
Payment for shares of the Fund may, in the discretion of the Adviser, be
made in the form of securities that are permissible investments for the Fund as
described in the Prospectus. For further information about this form of payment,
contact the Transfer Agent. In connection with an in-kind securities payment,
the Fund will require, among other things, that the securities be valued on the
day of purchase in accordance with the pricing methods used by the Fund and that
the Fund receive satisfactory assurances that it will have good and marketable
title to the securities received by it; that the securities be in proper form
for transfer to the Fund; and that adequate information be provided concerning
certain tax matters relating to the securities. Payment for shares of the Fund
in the form of securities will generally be treated as a taxable sale of such
securities by the shareholder. In addition, so long as shares in the Fund are
offered or sold in Texas, any securities that are accepted as payment for the
shares of the Fund will be limited to securities that are issued in transactions
that involve a bona fide reorganization or statutory merger, or will be limited
to other acquisitions of portfolio securities that: (a) meet the investment
objective and policies of the Fund; (b) are acquired for investment and not for
resale; (c) are liquid securities that are not restricted as to transfer either
by law or liquidity of market; and (d) have a value that is readily
ascertainable (and not established only by valuation procedures) as evidenced by
a listing on the American Stock Exchange, New York Stock Exchange or NASDAQ or
as evidenced by their status as U.S. Government Securities, bank certificates of
deposit, banker's acceptances, corporate and other debt securities that are
actively traded, money market securities and other like securities with a
readily ascertainable value.
FINANCIAL STATEMENTS
Incorporated by reference herein are the report of the independent
accountants dated October 17, 1997, and the other portions of Registrant's
annual report to shareholders for the fiscal year ended August 31, 1997, under
the headings: "SCHEDULE OF INVESTMENTS," "STATEMENT OF ASSETS AND LIABILITIES,"
"STATEMENT OF OPERATIONS," "STATEMENT OF CHANGES IN NET ASSETS," "NOTES TO
FINANCIAL STATEMENTS," and "REPORT OF INDEPENDENT ACCOUNTANTS." Copies of the
annual report are available, upon request and without charge, by calling the
Fund's at (800) 841-2858, or by writing to the following address: The Purisima
Funds, 13100 Skyline Blvd., Woodside, CA 94062-4547.
The Prospectus and this Statement of Additional Information do not contain
all the information included in the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act with respect to the
securities offered by the Fund's Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this Statement
of Additional Information, pursuant to the rules and regulations of the
Securities and Exchange Commission. The Registration Statement including the
exhibits filed therewith may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.
Statements contained in the Prospectus or in this Statement of Additional
Information as to the contents of any
24-
<PAGE>
contract or other documents referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement of which the Prospectus and
this Statement of Additional Information form a part, each such statement being
qualified in all respects by such reference.
25-
<PAGE>
APPENDIX A
Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The following summarizes the rating categories used by Standard &
Poor's for commercial paper in which the Fund may invest:
"A-1" - Issue's degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
"A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated "A-1."
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of 9 months. The following summarizes the rating categories used by
Moody's for commercial paper in which the Funds may invest:
"Prime-1" - Issuer or related supporting institutions are considered to
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
capacities: leading market positions in well-established industries; high rates
of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
The three rating categories of Duff & Phelps for investment grade
commercial paper are "Duff 1," "Duff 2" and "Duff 3." Duff & Phelps employs
three designations, "Duff 1+," "Duff 1" and "Duff 1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper in which the Fund may invest:
"Duff 1+" - Debt possesses highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
"Duff 1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.
"Duff 1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
26-
<PAGE>
"Duff 2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding need may
enlarge total financing requirements, access to capital markets is good.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years. The highest rating
category of Fitch for short-term obligations is "F-1." Fitch employs two
designations, "F-1+" and "F-1," within the highest category. The following
summarizes the rating categories used by Fitch for short-term obligations in
which the Funds may invest:
"F-1+" - Securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree than
issues rated "F-1+."
Fitch may also use the symbol "LOC" with its short-term ratings to indicate that
the rating is based upon a letter of credit issued by a commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an untimely
or incomplete payment of principal or interest of unsubordinated instruments
having a maturity of one year or less which are issued by a bank holding company
or an entity within the holding company structure. The following summarizes the
ratings used by Thomson BankWatch in which the Fund may invest:
"TBW-1" - This designation represents Thomson BankWatch's highest rating
category and indicates a very high degree of likelihood that principal and
interest will be paid on a timely basis.
"TBW-2" - this designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short-term debt ratings in which the Fund may
invest:
"A1" - Obligations are supported by the highest capacity for timely
repayment. Where issues possess a particularly strong credit feature, a rating
of A1+ is assigned.
"A2" - Obligations are supported by a good capacity for timely repayment.
Corporate Long-Term Investment Grade Debt Ratings
Standard & Poor's Investment Grade Debt Ratings
A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees. The debt rating is not a recommendation to
purchase, sell, or hold a security, inasmuch as it does not comment as to market
price or suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in,
27-
<PAGE>
or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default - capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in accordance with
the terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA - Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Moody's Long-Term Investment Grade Debt Ratings
- -----------------------------------------------
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Fitch Investors Service, Inc. Investment Grade Bond Ratings
- -----------------------------------------------------------
28-
<PAGE>
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature of taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA - Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated 'AAA.' Because bonds rated
in the 'AAA' and 'AA' categories are not significantly vulnerable to foreseeable
future developments, short-term debt of the issuers is generally rated 'F-1+.'
A - Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB - Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk. Moreover, the character of the risk
factor varies from industry to industry and between corporate, health care and
municipal obligations.
29-
<PAGE>
Duff & Phelps, Inc. Long-Term Investment Grade Debt Ratings
- -----------------------------------------------------------
These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and expertise.
The projected viability of the obligor at the trough of the cycle is a critical
determination.
Each rating also takes into account the legal form of the security (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by
several factors including relative weightings of the different security classes
in the capital structure, the overall credit strength of the issuer, and the
nature of covenant protection. Review of indenture restrictions is important to
the analysis of a company's operating and financial constraints.
The Credit Rating Committee formally reviews all ratings once per quarter (more
frequently, if necessary). Ratings of 'BBB-' and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities.
Rating Scale Definition
- -----------------------
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest, but
may vary slightly from AA time to time because of economic conditions.
AA-
A+ Protection factors are average but adequate. However, risk factors are
more variable and
A greater in periods of economic areas.
A-
30-
<PAGE>
As filed with the Securities and
Exchange Commission on November 14, 1997
Registration No. 333-09153
File No. 811-07737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Part C
of
Form N-1A
REGISTRATION STATEMENT
THE PURISIMA FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
- -------------------------------------------
A. FINANCIAL STATEMENTS (Incorporated by reference in Part B to Post-Effective
Amendment No. 3 to the Registrant Statement)*:
B. EXHIBITS
1.1 Certificate of Trust. (1)
1.2 Registrant's Agreement and Declaration of Trust. (1)
2. Registrant's By-Laws. (1)
3. None.
4. None.
5. Investment Management Agreement by and between Registrant on behalf of the
Fund and Fisher Investments, Inc. (1)
6.3 Distribution Agreement by and between Registrant and First Fund
Distributors, Inc.
7. None.
8. Custodian Agreement by and between Registrant and UMB Bank, N.A. (1)
9.3 Administration Agreement by and between Registrant and Investment Company
Administration Corporation
9.4 Transfer Agency Agreement by and between Registrant and Countrywide Fund
Services, Inc.
9.5 Fund Accounting Agreement by and between Registrant and Countrywide Fund
Services, Inc.
10. Legal Opinion of Heller Ehrman White & McAuliffe, former counsel for
Registrant. (1)
11. Consent of Independent Accountants.
12. None.
13.1 Subscription Agreement. (1)
13.2 Organizational Expense Agreement. (1)
14. Individual Retirement Custodial Account Agreement and Disclosure
Statement. (1)
<PAGE>
15. Registrant's Service and Distribution Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940.
16. Computation of Performance Figures.
17. Financial Data Schedules.
18. None.
(1) Filed a an Exhibit to Post-Effective Amendment No.1 to Resistrant's
Registration Statement on Form N-1A filed electronically on April 28,
1997.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
- -----------------------------------------------------------------------
Registrant neither controls any person nor is under common control with any
other person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
- -----------------------------------------
Number of Record
Title of Class Holders as of October 31, 1997
------------------ ------------------------------
Purisima Total Return Fund 147
$0.01 Par Value
ITEM 27. INDEMNIFICATION.
- -------------------------
Registrant's Board of Trustees has adopted the following By-law provisions which
are in full force and effect and have not been modified or cancelled:
ARTICLE VI
INDEMNIFICATION OF TRUSTEES OFFICERS
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this Article,
"agent" means any person who is or was a Trustee, officer, employee or other
agent of the Trust or is or was serving at the request of the Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation that was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes, without limitation, attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. The Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any proceeding (other
than an action by or in the right of the Trust) by reason of the fact that such
person is or was an agent of the Trust, against expenses, judgments, fines,
settlements and other amounts
<PAGE>
actually and reasonably incurred in connection with such proceeding, if it is
determined that person acted in good faith and reasonably believed: (a) in the
case of conduct in his or her official capacity as a Trustee of the Trust, that
his or her conduct was in the Trust's best interests, and (b) in all other
cases, that his or her conduct was at least not opposed to the Trust's best
interests, and (c) in the case of a criminal proceeding that he or she had no
reasonable cause to believe the conduct of that person was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner which the
person reasonably believed to be in the best interest of the Trust or that the
person had reasonable cause to believe that the person's conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. The Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of the Trust to procure a judgment in its
favor by reason of the fact that such person is or was an agent of the Trust,
against expenses actually and reasonably incurred by that person in connection
with the defense or settlement of that action if that person acted in good
faith, in a manner that person believed to be in the best interests of the Trust
and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to
the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with the Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person shall have
been adjudged to be liable on the basis that personal benefit was improperly
received by him or her, whether or not the benefit resulted from an action taken
in the person's official capacity; or
(b) In respect of any claim, issue or matter as to which that person shall have
been adjudged to be liable in the performance of that person's duty to the
Trust, unless and only to the extent that the court in which that action was
brought shall determine upon application that in view of all the circumstances
of the case, that person was not liable by reason of the disabling conduct set
forth in the preceding paragraph and is fairly and reasonably entitled to
indemnity for the expenses which the court shall determine; or
(c) Of amounts paid in settling or otherwise disposing of a threatened or
pending action, with or without court approval, or of expenses incurred in
defending a threatened or pending action that is settled or otherwise disposed
of without court approval, unless the required approval set forth in Section 6
of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of the
Trust has been successful on the merits in defense of any proceeding referred to
in Sections 2 or 3 of this Article or in defense of any claim, issue or matter
therein, before the court or other body before whom the proceeding was brought,
the agent shall be indemnified against expenses actually and reasonably incurred
by the agent in connection therewith, provided that the Board of Trustees,
including a majority who are disinterested, non-party Trustees, also determines
that, based upon a review of the facts, the agent was not liable by reason of
the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by the Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) a majority vote of a quorum consisting of Trustees who are not parties to
the proceeding and are not interested persons of the Trust (as defined in the
Investment Company Act of 1940); or
(b) a written opinion by an independent legal counsel.
<PAGE>
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i) security for the undertaking; or (ii) the
existence of insurance protecting the Trust against losses arising by reason of
any lawful advances; or (iii) a determination by a majority of a quorum of
Trustees who are not parties to the proceeding and are not interested persons of
the Trust, or by an independent legal counsel in a written opinion, based on a
review of readily available facts, that there is reason to believe that the
agent ultimately will be found entitled to indemnification. Determinations and
authorizations of payments under this Section must conform to the standards set
forth in Section 6 of this Article for determining that the indemnification is
permissible.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of the Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made under
this Article, except as provided in Sections 5 or 6 in any circumstances where
it appears:
(a) that it would be inconsistent with a provision of the Trust's Agreement
and Declaration of Trust, a resolution of the shareholders of the Trust, or an
agreement in effect at the time of accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or other amounts
were paid which prohibits or otherwise limits indemnification; or
(b) that it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of the Trust to purchase such insurance, the Trust shall
purchase and maintain insurance on behalf of any agent of the Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that the Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Trust's Agreement and Declaration of Trust.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article VI does not
apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of the Trust as defined in Section 1 of
this Article VI. Nothing contained in this Article VI shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article VI.
Insofar as indemnification for liability rising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of
Registrant to the foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a Trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such Trustee, officer
or controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Section 11 of the Investment Management Agreement between the Registrant
and the Adviser provides for indemnification of the Adviser in connection with
certain claims and liabilities to which the Adviser, in its capacity as the
Registrant's investment adviser, may be subject. A copy of the Investment
Management Agreement is incorporated by reference as Exhibit 5.
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
- --------------------------------------------------------------
Fisher Investments, Inc., Registrant's investment adviser, provides investment
advisory services for large corporations, pension plans, endowments,
foundations, governmental agencies and individuals. Set forth below is
additional biograhpical information and a description of any company with which
the officers and directors of Fisher Investments, Inc. have been engaged at any
time since June 1, 1994 in the capacity of director, officer, employee, partner
or trustee:
Kenneth L. Fisher is the Chief Executive Officer of Fisher Investments, Inc. and
Chairman of its Investment Policy Committee. Mr. Fisher makes investment policy
and tactical investment decisions. Since July 1984, Mr. Fisher has written a
monthly column for Forbes magazine. Mr. Fisher has operated the Adviser
(including its predecessor) since 1979.
Jeffrey L. Silk is the Director of Operations, Senior Vice President and member
of the Investment Policy Committee of Fisher Investments, Inc. He is responsible
for overseeing the day to day activities of the trading and operations group as
well as development of statistical databases used for screening equity and fixed
income securities. He has been employed by the Adviser since 1983.
Sherrilyn A. Fisher is Senior Vice President and Corporate Secretary of the
Adviser. Her chief responsibilities are the overview of all activities involving
maintenance of the office and its facilities. Ms. Fisher has been employed by
the Adviser since 1984.
ITEM 29. PRINCIPAL UNDERWRITERS.
- --------------------------------
(a) First Fund Distributors, Inc. currently serves as distributor of the
shares of:
Advisors Series Trust
American Trust Allegiance Fund
Information Tech 100 Mutual Fund
Kaminski Poland Fund
Ridgeway Helms Millennium Fund
Rockhaven Fund
Rockhaven Premier Dividend Fund
RNC Mutual Fund Group, Inc.
PIC Investment Trust
Professionally Managed Portfolios
Avondale Total Return Fund
Perkins Opportunity Fund
Osterweis Fund
ProConscience Women's Equity Mutual Fund
Academy Value Fund
Trent Equity Fund
Leonetti Balanced Fund
Lighthouse Growth Fund
U.S. Global Leaders Growth Fund
Boston Managed Growth Fund
Harris Bretall Sullivan & Smith Growth Equity Fund
Pzena Focused Value Fund
Titan Financial Services Fund
Guinness Flight Investment Funds
Jurika & Voyles Fund Group
Masters Select Equity Fund
<PAGE>
Masters Select International Fund
Kayne Anderson Mutual Funds
O'Shaughnessy Funds, Inc.
Fleming Capital Mutual Fund Group, Inc.
Rainier Investment Management Mutual Funds
The Purisima Total Return Fund
UBS Private Investor Funds
( b.) The officers of First Fund Distributors, Inc. are:
Robert H. Wadsworth President and Treasurer
Eric Banhazl Vice President
Steven J. Paggioli Vice President and Secretary
Each officer's business address with the Distributor is 4455 E. Camelback Rd.,
Ste. 261-E, Phoenix, AZ 85018.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
- ------------------------------------------
All accounts, books or other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder
are in the possession of the Registrant, at Registrant's corporate offices,
except (1) records held and maintained by relating to its functions as custodian
and (2) records held and maintained by Sunstone Financial Group, Inc. and
Sunstone Investor Services, LLC, 207 East Buffalo Street, Suite 400, Milwaukee,
Wisconsin, 53202, relating to its functions as administrator, fund accountant
and transfer agent up to August 31, 1997. Subsequent to August 31, 1997,
Investment Company Administration Corporation replaced Sunstone Financial Group,
Inc. as administrator and Countrywide Fund Services, Inc. as fund accountant and
transfer agent. The address for Investment Administration Corporation is 2025 E.
Financial Way, Suite 101, Glendora, CA 91741.
ITEM 31. MANAGEMENT SERVICES.
- -----------------------------
All management-related service contracts entered into by Registrant are
discussed in Parts A and B of this Registration Statement.
ITEM 32. UNDERTAKINGS.
- ----------------------
(a) Registrant undertakes to provide its Annual Report upon request without
charge to any recipient of a Prospectus.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby certifies that it meets
all of the requirements for effectiveness of this Registrant Statement pursuant
to Rule 485 ( b) under the Securities Act of 1933 and has duly caused this
Amendment to the Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Woodside, State of
California, on the 13th day of November, 1997.
THE PURISIMA FUNDS
(Registrant)
By: /s/ Kenneth L. Fisher
--------------------------------
Kenneth L. Fisher
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement on Form N-1A has been signed below by the
following person in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
/s/Kenneth L. Fisher President; Trustee (principal November 13, 1997
- ------------------------------------ executive officer; principal
Kenneth L. Fisher financial and accounting officer)
/s/Bryan F. Morse Trustee November 13, 1997
- ------------------------------------
Bryan F. Morse
/s/Grover T. Wickersham Trustee November 13, 1997
- ------------------------------------
Grover T. Wickersham
/s/Pierson E. Clair, III Trustee November 13, 1997
- ------------------------------------
Pierson E. Clair, III
* By /s/ Kenneth L. Fisher
-----------------------------------------
Kenneth L. Fisher, Attorney-in-Fact
under powers of attorney as filed
</TABLE>
<PAGE>
As filed with the Securities
Exchange Commission on November 14, 1997
Registration No. 333-09153
File No. 811-07737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
EXHIBITS TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 3 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 4 [X]
THE PURISIMA FUNDS
(Exact name of registrant as specified in charter)
13100 Skyline Boulevard
Woodside, California 94062-4547
(Address of principal executive offices)
Registrant's telephone number, including area code: (415)851-7925
Exhibits 6, 9, 11, 15, 16 and 17
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- -------------- -------
(6.3) Distribution Agreement by and between Registrant
and First Fund Distributors, Inc
(9.3) Administration Agreement between Registrant and
Investment Company Administration Corporation,
as amended.
(9.4) Transfer Agency Agreement by and between Registrant
and Countrywide Fund Services, Inc.
(9.5) Fund Accounting Agreement by and between Registrant
and Countrywide Fund Services, Inc.
(11) Consent of Price Waterhouse LLP
(15) Form of Registrant's Service and Distribution Plan
pursuant to Rule 12b-1 under the Investment Company
Act of 1940.
(16) Schedule for Computation of Performance Quotations
(17) Financial Data Schedule
Exhibit 6.3
-----------
DISTRIBUTION AGREEMENT
This Agreement, made as of the 10th day of July, 1997 between The
Purisima Funds, a Delaware business trust (the "Fund"), and First Fund
Distributors, Inc. (the "Distributor").
WITNESSETH:
WHEREAS, the Fund proposes to engage in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "1940 Act") and it is in the interest of
the Fund to offer its shares for sale continuously; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Fund's shares of
beneficial interest (the "Shares"), $.01 par value.
NOW, THEREFORE, the parties agree as follows:
1. Appointment of Distributor. The Fund hereby appoints the
Distributor as its exclusive agent to sell and to arrange for the sale of the
Fund's Shares, on the terms and for the period set forth in this Agreement, and
the Distributor hereby accepts such appointment and agrees to act hereunder
directly and/or through the Fund's transfer agent in the manner set forth in the
Prospectus (as defined below). It is understood and agreed that the services of
the Distributor hereunder are not exclusive, and the Distributor may act as
principal underwriter for the shares of any other registered investment company.
2. Services and Duties of the Distributor.
(a) The Distributor agrees to sell the Shares, as agent for
the Fund, from time to time during the term of this Agreement upon the terms
described in the Fund's Prospectus. As used in this Agreement, the term
"Prospectus" shall mean the prospectus and statement of additional information
included as part of the Fund's Registration Statement, as such prospectus and
statement of additional information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the Registration
Statement most recently filed from time to time by the Fund with the Securities
and Exchange Commission and effective under the 1933 Act and the 1940 Act, as
such Registration Statement is amended by any amendments thereto at the time in
effect. The Distributor shall not be obligated to sell any certain number of
Shares.
(b) The Distributor will hold itself available to receive
orders, satisfactory to the Distributor, for the purchase of the Shares and will
accept such orders and will transmit such orders and
<PAGE>
funds received by it in payment for such Shares as are so accepted to the Fund's
transfer agent or custodian, as appropriate, as promptly as practicable.
Purchase orders shall be deemed effective at the time and in the manner set
forth in the Prospectus. The Distributor shall not make any short sales of
Shares.
(C) The offering price of the Shares shall be the net asset
value per share of the Shares (as defined in the Declaration of Trust of the
Fund). The Fund shall furnish the Distributor, with all possible promptness, an
advice of each computation of net asset value and offering price.
3. Duties of the Fund.
(a) Maintenance of Federal Registration. The Fund shall, at
its expense, take, from time to time, all necessary action and such steps,
including payment of the related filing fees, as may be necessary to register
and maintain registration of a sufficient number of Shares under the 1933 Act.
The Fund agrees to file from time to time such amendments, reports and other
documents as may be necessary in order that there may be no untrue statement of
a material fact in a registration statement or prospectus, or necessary in order
that there may be no untrue statement of a material fact in a registration
statement or prospectus, or necessary in order that there may be no omission to
state a material fact in the registration statement or prospectus which omission
would make the statements therein misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Fund shall,
at its expense, use its best efforts to qualify and maintain the qualification
of an appropriate number of Shares for sale under the securities laws of such
states as the Distributor and the Fund may approve, and, if necessary or
appropriate in connection therewith, to qualify and maintain the qualification
of the Fund as a broker or dealer in such states; provided that the Fund shall
not be required to amend its Declaration of Trust or By-Laws to comply with the
laws of any state, to maintain an office in any state, to change the terms of
the offering of the Shares in any state, to change the terms of the offering of
the Shares in any state from the terms set forth in its Prospectus, to qualify
as a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering and sale of
the Shares. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Fund in
connection with such qualifications.
(C) Copies of Reports and Prospectus. The Fund shall, at its
expense, keep the Distributor fully informed with regard to its affairs and in
connection therewith shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, including such
reasonable number of copies of its Prospectus and annual and interim reports as
the Distributor may request and shall cooperate fully in the efforts of the
Distributor to sell and arrange for the sale of the Shares and in the
performance of the Distributor under this Agreement.
4. Conformity with Applicable Law and Rules. The Distributor agrees
that in selling Shares hereunder it shall conform in all respects with the laws
of the United States and of any state in which Shares may be offered, and with
applicable rules and regulations of the NASD.
5. Independent Contractor. In performing its duties hereunder, the
Distributor shall be an
<PAGE>
independent contractor and neither the Distributor, nor any of its officers,
directors, employees, or representatives is or shall be an employee of the Fund
in the performance of the Distributor's duties hereunder. The Distributor shall
be responsible for its own conduct and the employment, control, and conduct of
its agents and employees and for injury to such agents or employees or to others
through its agents or employees. The Distributor assumes full responsibility for
its agents and employees under applicable statutes and agrees to pay all
employee taxes thereunder.
6. Indemnification.
(a) Indemnification of Fund. The Distributor agrees to
indemnify and hold harmless the Fund and each of its present or former trustees,
officers, employees, representatives and each person, if any, who controls or
previously controlled the Fund within the meaning of Section 15 of the 1933 Act
against any and all losses, liabilities, damages, claims or expenses (including
the reasonable costs or investigating or defending any alleged loss, liability,
damage, claims or expense and reasonable legal counsel fees incurred in
connection therewith) to which the Fund or any such person may become subject
under the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition of any Shares by any person which (I) may be
based upon any wrongful act by the Distributor or any of the Distributor's
directors, officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
covering Shares filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to the Fund by the Distributor. In no case (I) is the
Distributor's indemnity in favor of the Fund, or any person indemnified to be
deemed to protect the Fund or such indemnified person against any liability to
which the Fund or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of his obligations and duties under this
Agreement or (ii) is the Distributor to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against the Fund or
any person indemnified unless the Fund or such person, as the case may be, shall
have notified the Distributor in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Fund or upon such person (or
after the Fund or such person shall have received notice to such service on any
designated agent). However, failure to notify the Distributor of any such claim
shall not relieve the Distributor from any liability which the Distributor may
have to the Fund or any person against whom such action is brought otherwise
than on account of the Distributor's indemnity agreement contained in this
Paragraph.
The Distributor shall be entitled to participate, at its own
expense, in the defense, or, if the Distributor so elects, to assume the defense
of any suit brought to enforce any such claim, but, if the Distributor elects to
assume the defense, such defense shall be conducted by legal counsel chosen by
the Distributor and satisfactory to the Fund, to the persons indemnified
defendant or defendants, in the suit. In the event that the Distributor elects
to assume the defense of any such suit and retain such legal counsel, the Fund,
the persons indemnified defendant or defendants in the suit, shall bear the fees
and expenses of any additional legal counsel retained by them. If the
Distributor does not elect to assume the defense of any such suit, the
Distributor will reimburse the Fund and the persons indemnified defendant or
defendants in such suit for the reasonable fees and expenses of any legal
counsel retained
<PAGE>
by them. The Distributor agrees to promptly notify the Fund of the commencement
of any litigation of proceedings against it or any of its officers, employees or
representatives in connection with the issue or sale of any Shares.
(b) Indemnification of the Distributor. The Fund agrees to
indemnify and hold harmless the Distributor and each of its present or former
officers, employees, representatives and each person, if any, who controls or
previously controlled the Distributor within the meaning of Section 15 of the
1933 Act against any and all losses, liabilities, damages, claims or expenses
(including the reasonable costs of investigating or defending any alleged loss,
liability, damage, claim or expense and reasonable legal counsel fees incurred
in connection therewith) to which the Distributor or and such person may become
subject under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Shares by any person which (I)
may be based upon any wrongful act by the Fund or any of the Fund's trustees,
officers, employees or representatives, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
covering Shares filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading unless such statement or omission was made in reliance
upon information furnished to the Fund by the Distributor. In no case (i) is the
Fund's indemnity in favor of the Distributor, or any person indemnified to be
deemed to protect the Distributor or such indemnified person against any
liability to which the Distributor or such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his reckless disregard of his obligations and
duties under this Agreement, or (ii) is the Fund to be liable under its
indemnity agreement contained in this Paragraph with respect to any claim made
against Distributor, or person indemnified unless the Distributor, or such
person, as the case may be, shall have notified the Fund in writing of the claim
within a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon the
Distributor or upon such person (or after the Distributor or such person shall
have received notice of such service on any designated agent). However, failure
to notify the Fund of any such claim shall not relieve the Fund from any
liability which the Fund may have to the Distributor or any person against whom
such action is brought otherwise than on account of the Fund's indemnity
agreement contained in this Paragraph.
The Fund shall be entitled to participate, at its own expense,
in the defense, or, if the Fund so elects, to assume the defense of any suit
brought to enforce any such claim, but if the Fund elects to assume the defense,
such defense shall be conducted by legal counsel chosen by the Fund and
satisfactory to the Distributor, to the persons indemnified defendant or
defendants, in the suit. In the event that the Fund elects to assume the defense
of any such suit and retain such legal counsel, the Distributor, the persons
indemnified defendant or defendants in the suit, shall bear the fees and
expenses of any additional legal counsel retained by them. If the Fund does not
elect to assume the defense of any such suit, the Fund will reimburse the
Distributor and the persons indemnified defendant or defendants in such suit for
the reasonable fees and expenses of any legal counsel retained by them. The Fund
agrees to promptly notify the Distributor of the commencement of any litigation
or proceedings against it or any of its trustees, officers, employees or
representatives in connection with the issue or sale of any Shares.
7. Authorized Representation. The Distributor is not authorized by
the Fund to give on
<PAGE>
behalf of the Fund any information of to make any representations in connection
with the sale of Shares other than the information and representations contained
in a registration statement filed with the Securities and Exchange Commission
("SEC") under the 1933 Act and/or the 1940 Act, covering Shares, as such
registration statement and prospectus may be amended or supplemented from time
to time, or contained in shareholder reports or other material that may be
prepared by or on behalf of the Fund for the Distributor's use. This shall not
be construed to prevent the Distributor from preparing and distributing
tombstone ads and sales literature or other material as it may deem appropriate.
No person other than the Distributor is authorized to act as principal
underwriter (as such term is defined in the 1940 Act) for the Fund.
8. Term of Agreement. The term of this Agreement shall begin on the
date first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect through July 10, 1999. Thereafter, this
Agreement shall continue in effect from year to year, subject to the termination
provisions and all other terms and conditions thereof, so long as: (a) such
continuation shall be specifically approved at least annually by the Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Fund and, concurrently with such approval by the Board of Trustees or prior to
such approval by the holders of the outstanding voting securities of the Fund,
as the case may be, by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the trustees of the Fund
who are not parties to the Agreement or interested persons of any such party;
and (b) the Distributor shall not have notified the Fund, in writing, at least
60 days prior to July 10, 1999 or prior to July 10, of any year thereafter, that
it does not desire such continuation. The Distributor shall furnish to the Fund,
promptly upon its request, such information as may reasonably be necessary to
evaluate the terms of this Agreement or any extension, renewal or amendment
hereof.
9. Amendment and Assignment of Agreement. This agreement may not be
amended or assigned without the affirmative vote of a majority of the
outstanding voting securities of the Fund, and this Agreement shall
automatically and immediately terminate in the event of its assignment.
10. Termination of Agreement. This Agreement may be terminated by
either party hereto, without the payment of any penalty, on not more than upon
60 days' nor less than 30 days' prior notice in writing to the other party;
provided, that in the case of termination by the Fund such action shall have
been authorized by resolution of a majority of the trustees of the Fund who are
not parties to this Agreement or interested persons of any such party, or by
vote of a majority of the outstanding voting securities of the Fund.
11. Miscellaneous. The captions of this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Fund to take
any action contrary to its Declaration of Trust or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the Fund of its
<PAGE>
responsibility for and control of the conduct of the affairs of the Fund.
12. Definition of Terms. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretation thereof, if any, by the
United States courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and Exchange Commission
validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities", interested persons",
"assignment", and "affiliated person", as used in Paragraphs 8, 9 and 10 hereof,
shall have the meanings assigned to them by Section 2(a) of the 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is relaxed by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or of general
applications, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
13. Compliance with Securities Laws. The Funds represents that it is
registered as an open-end management investment company under the 1940 Act, and
agrees that it will comply with all the provisions of the 1940 Act and of the
rules and regulations thereunder. The Fund and the Distributor each agree to
comply with all of the applicable terms and provisions on the 1940 Act, the 1933
Act and, subject to the provisions of the 1940 Act, the 1933 Act and, subject to
the provisions of Section 4(d), all applicable "Blue Sky" laws. The Distributor
agrees to comply with all of the applicable terms and provisions of the
Securities Exchange Act of 1934.
14. Notices. Any notice required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid to the Distributor at 479 West 22nd Street, New York, N.Y.
10011.
15. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.
16. No Shareholder Liability. The Distributor understands that the
obligations of this Agreement are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property; the distributor represents that
it has notice of the provisions of the Fund's Declaration of Trust disclaiming
shareholder liability for acts or obligations of the Fund.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their fully authorized representatives and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
The Purisima Funds
By: /s/ Kenneth L. Fisher
-------------------------
Attest:
/s/ Sherrilyn Fisher
- --------------------------
Secretary
First Fund Distributors, Inc.
By:/s/ Eric M. Banhazl
-------------------------
Attest:
/s/ Steven J. Paggioli
- ---------------------------
Secretary
Exhibit 9.3
-----------
ADMINISTRATION AGREEMENT
AGREEMENT made this 14th day of May, 1997 by and between
PURISIMA TOTAL RETURN FUND, a Delaware business trust (the "Trust"), and
INVESTMENT COMPANY ADMINISTRATION CORPORATION, a Delaware Corporation (the
"Administrator").
W I T N E S S E T H
- -------------------
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act"), and
WHEREAS, the Trust wishes to retain the Administrator to provide
certain administrative services in connection with the management of the
operations of the portfolio of the Trust and the Administrator is willing to
furnish such services:
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Administrator to
provide certain administrative services, hereinafter enumerated, in connection
with the management of the portfolio operations for the period and on the terms
set forth in this Agreement. The Administrator agrees to comply with all
relevant provisions of the 1940 Act, applicable rules and regulations
thereunder, and other applicable law.
2. Services on a Continuing Basis. The Administrator will perform the
following services as detailed on the attached Administrative Services list
which would be daily, weekly or as otherwise appropriate.
3. Responsibility of the Administrator. The Administrator shall be
under no duty to take any action on behalf of the Trust or the portfolio except
as set forth herein or as may be agreed to by the Administrator in writing. In
the performance of its duties hereunder, the Administrator shall be obligated to
exercise reasonable care and diligence and to act in good faith and to use its
best efforts. Without limiting the generality of the foregoing or any other
provision of this Agreement, the Administrator shall not be liable for delays or
errors or loss of data occurring by reason of circumstances beyond the
Administrator's control.
4. Reliance Upon Instructions. The Trust agrees that the
Administrator shall be entitled to rely upon any instructions, oral or written,
actually received by the Administrator from the Board of Trustees of the Trust
and shall incur no liability to the Trust or the investment adviser to any
portfolio in acting upon such oral or written instructions, provided such
instructions reasonably appear to have been received from a person duly
authorized by the Board of Trustees of the Trust
<PAGE>
to give oral or written instructions on behalf of the Trust or any portfolio.
5. Confidentiality. The Administrator agrees on behalf of itself and
its employees to treat confidentially all records and other information relative
to the Trust and portfolio and all prior, present or potential shareholders,
except after prior notification to, and approval of release of information in
writing by, the Trust, which approval shall not be unreasonably withheld where
the Administrator may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust or by a portfolio.
6. Equipment Failures. In the event of equipment failures or the
occurrence of events beyond the Administrator's control which render the
performance of the Administrator's functions under this Agreement impossible,
the Administrator shall take reasonable steps to minimize service interruptions
and is authorized to engage the services of third parties to prevent or remedy
such service interruptions.
7. Compensation. As compensation for services rendered by the
Administrator during the term of this Agreement, the Administrator shall receive
a monthly fee at the annual rate of 0.10% of the first $200 million of average
daily net assets, 0.05% of the next $300 million of such net assets, and 0.03%
thereafter, with a minimum fee of $40,000 annually per portfolio, $15,000 for
each additional class.
8. Indemnification. The Trust and portfolio agree to indemnify and
hold harmless the Administrator from all taxes, filing fees, charges, expenses,
assessments, claims and liabilities (including without limitation, liabilities
arising under the Securities Act of 1933, the Securities Exchange Act of 1934,
the 1940 Act, and any state and foreign securities laws, all as amended from
time to time) and expenses, including (without limitation) reasonable attorneys
fees and disbursements, reasonably arising directly or indirectly from any
action or thing which the Administrator takes or does or omits to take or do at
the request of or in reliance upon the advice of the Board of Trustees of the
Trust, provided that the Administrator will not be indemnified against any
liability to a portfolio or to shareholders (or any expenses incident to such
liability) arising out of the Administrator's own willful misfeasance, bad
faith, negligence or reckless disregard of its duties and obligations under this
Agreement. The Administrator agrees to indemnify and hold harmless the Trust and
each of its Trustees from all claims and liabilities (including without
limitation, liabilities under the Securities Act of 1933, the Securities
Exchange Act of 1934, the 1940 Act, and any state and foreign securities laws,
all as amended from time to time) and expenses, including (without limitation)
reasonable attorneys fees and disbursements, arising directly or indirectly from
any action or thing which the Administrator takes or does or omits to take or do
which is in violation of this Agreement or not in accordance with instructions
properly given to the Administrator, or arising out of the Administrator's own
willful misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations under this Agreement.
<PAGE>
9. Duration and termination. This Agreement shall continue until
termination by the Trust on behalf of any portfolio (by resolution of the Board
of Trustees) or the Administrator on 60 days' written notice to the other party.
All notices and other communications hereunder shall be in writing.
10. Amendments. This Agreement or any part hereof may be changed or
waived only by instrument in writing signed by the party against which
enforcement of such change or waiver is sought, provided such amendment is
specifically approved by the Board of Trustees of the Trust.
11. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties thereto with respect to the services to be
performed hereunder, and supersedes all prior agreements and understandings,
relating to the subject matter hereof. The captions in this Agreement are
included for convenience of reference only and in no way define or limit any of
the provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in California and governed by
California law. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
will not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below on the date first written above.
By:/s/ Sherrilyn Fisher
-----------------------
Name: Sherrilyn Fisher
Title: Secreary
INVESTMENT COMPANY ADMINISTRATION CORPORATION
By:/s/ Eric Banhazl
------------------------
Name: Eric Banhazl
Title: Exec. V.P.
Exhibit 9.4
-----------
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
--------------------------------------------------
AND PLAN AGENCY AGREEMENT
-------------------------
AGREEMENT dated as of September 1, 1997 between The Purisima Funds
(the "Trust"), a Delaware business trust, and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to
serve as its transfer, dividend disbursing, shareholder service and plan agent;
and
WHEREAS, Countrywide wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
-----------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. DOCUMENTATION.
-------------
The Trust will furnish from time to time the following documents:
A.Each resolution of the Board of Trustees of the Trust authorizing
the original issue of its shares;
B. Each Registration Statement filed with the Securities and
Exchange Commission (the "SEC") and amendments thereof;
<PAGE>
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
Countrywide;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
F. Such other certificates, documents or opinions which
Countrywide may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Investment Advisory Agreements in effect;
and
H. Copies of all documents relating to special investment or
withdrawal plans which are offered or may be offered in
the future by the Trust and for which Countrywide is to
act as plan agent.
3. COUNTRYWIDE TO RECORD SHARES.
----------------------------
Countrywide shall record the issuance of shares of the Trust and
maintain pursuant to applicable rules of the SEC a record of the total number of
shares of the Trust which are authorized, issued and outstanding, based upon
data provided to it by the Trust. Countrywide shall also provide the Trust on a
regular basis or upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when recording
the issuance of the Trust's shares, except as otherwise set forth herein, to
monitor the issuance of such shares or to take cognizance of any laws relating
to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
4. COUNTRYWIDE TO VALIDATE TRANSFERS.
---------------------------------
Upon receipt of a proper request for transfer and upon surrender to
Countrywide of certificates, if any, in proper form for transfer, Countrywide
shall approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
Countrywide shall notify the Trust in writing of each such transaction and shall
make appropriate entries on the shareholder records maintained by Countrywide.
<PAGE>
5. SHARE CERTIFICATES.
------------------
If the Trust authorizes the issuance of share certificates and an
investor requests a share certificate, Countrywide will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any other instructions
for delivery of certificates representing newly purchased shares and subject to
the limitation that no certificates representing newly purchased shares shall be
mailed to the investor until the cash purchase price of such shares has been
collected and credited to the account of the Trust maintained by the Custodian.
The Trust shall supply Countrywide with a sufficient supply of blank share
certificates and from time to time shall renew such supply upon request of
Countrywide. Such blank share certificates shall be properly signed, manually
or, if authorized by the Trust, by facsimile; and notwithstanding the death,
resignation or removal of any officers of the Trust authorized to sign share
certificates, Countrywide may continue to countersign certificates which bear
the manual or facsimile signature of such officer until otherwise directed by
the Trust. In case of the alleged loss or destruction of any share certificate,
no new certificates shall be issued in lieu thereof, unless there shall first be
furnished an appropriate bond satisfactory to Countrywide and the Trust, and
issued by a surety company satisfactory to Countrywide and the Trust.
6. RECEIPT OF FUNDS.
----------------
Upon receipt of any check or other instrument drawn or endorsed to it
as agent for, or identified as being for the account of, the Trust, Countrywide
shall stamp the check or instrument with the date of receipt, determine the
amount thereof due the Trust and shall forthwith process the same for
collection. Upon receipt of notification of receipt of funds eligible for share
purchases in accordance with the Trust's then current prospectus and statement
of additional information, Countrywide shall notify the Trust, at the close of
each business day, in writing of the amount of said funds credited to the Trust
and deposited in its account with the Custodian.
7. PURCHASE ORDERS.
---------------
Upon receipt of an order for the purchase of shares of the Trust,
accompanied by sufficient information to enable Countrywide to establish a
shareholder account, Countrywide shall, as of the next determination of net
asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall
<PAGE>
mail to the shareholder and/or dealer of record a notice of such credit when
requested to do so by the Trust.
8. RETURNED CHECKS.
---------------
In the event that Countrywide is notified by the Trust's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, Countrywide will:
A. Give prompt notification to the Trust of the non-payment of said
check;
B. In the absence of other instructions from the Trust, take such
steps as may be necessary to redeem any shares purchased on the basis of such
returned check and cause the proceeds of such redemption plus any dividends
declared with respect to such shares to be credited to the account of the Trust
and to request the Trust's Custodian to forward such returned check to the
person who originally submitted the check; and
C. Notify the Trust of such actions and correct the Trust's records
maintained by Countrywide pursuant to this Agreement.
9. DIVIDENDS AND DISTRIBUTIONS.
---------------------------
The Trust shall furnish Countrywide with appropriate evidence of
Trustee action authorizing the declaration of dividends and other distributions.
Countrywide shall establish procedures in accordance with the Trust's then
current prospectus and statement of additional information and with other
authorized actions of the Trust's Board of Trustees under which it will have
available from the Custodian or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, Countrywide shall, as agent for each
shareholder who so requests, invest the dividends and other distributions in
full and fractional shares in accordance with the Trust's then current
prospectus and statement of additional information. If a shareholder has elected
to receive dividends or other distributions in cash, then Countrywide shall
disburse dividends to shareholders of record in accordance with the Trust's then
current prospectus and statement of additional information. Countrywide shall,
on or before the mailing date of such checks, notify the Trust and the Custodian
of the estimated amount of cash required to pay such dividend or distribution,
and the Trust shall instruct the Custodian to make available sufficient funds
therefor in the appropriate account of the Trust. Countrywide shall mail to the
shareholders periodic statements, as requested by the Trust, showing the number
of full and fractional shares and the net asset value per share of shares so
credited. When requested by the Trust, Countrywide shall prepare and file with
the Internal Revenue Service, and when required, shall address and mail to
shareholders, such returns and information relating to dividends and
distributions paid by the
<PAGE>
Trust as are required to be so prepared, filed and mailed by applicable laws,
rules and regulations.
10. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
-----------------------------------------------------
Countrywide shall, at least annually, furnish in writing to the Trust
the names and addresses, as shown in the shareholder accounts maintained by
Countrywide, of all shareholders for which there are, as of the end of the
calendar year, dividends, distributions or redemption proceeds for which checks
or share certificates mailed in payment of distributions have been returned.
Countrywide shall use its best efforts to contact the shareholders affected and
to follow any other written instructions received from the Trust concerning the
disposition of any such unclaimed dividends, distributions or redemption
proceeds.
11. REDEMPTIONS AND EXCHANGES.
-------------------------
A. Countrywide shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by Countrywide. Upon its approval of such
redemption transactions, Countrywide, if requested by the Trust, shall mail to
the shareholder and/or dealer of record a confirmation showing trade date,
number of full and fractional shares redeemed, the price per share and the total
redemption proceeds. For each such redemption, Countrywide shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Countrywide and mail the checks
to the appropriate person, or (b) in the event redemption proceeds are to be
wired through the Federal Reserve Wire System or by bank wire, cause such
proceeds to be wired in federal funds to the bank account designated by the
shareholder, or (c) effectuate such other redemption procedures which are
authorized by the Trust's Board of Trustees or its then current prospectus and
statement of additional information. The requirements as to instruments of
transfer and other documentation, the applicable redemption price and the time
of payment shall be as provided in the then current prospectus and statement of
additional information, subject to such supplemental instructions as may be
furnished by the Trust and accepted by Countrywide. If Countrywide or the Trust
determines that a request for redemption does not comply with the requirements
for redemptions, Countrywide shall promptly notify the shareholder indicating
the reason therefor.
B. If shares of the Trust are eligible for exchange with shares of
any other investment company, Countrywide, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
<PAGE>
C. Countrywide shall notify the Trust and the Custodian on each
business day of the amount of cash required to meet payments made pursuant to
the provisions of this Paragraph 11, and, on the basis of such notice, the Trust
shall instruct the Custodian to make available from time to time sufficient
funds therefor in the appropriate account of the Trust. Procedures for effecting
redemption orders accepted from shareholders or dealers of record by telephone
or other methods shall be established by mutual agreement between Countrywide
and the Trust consistent with the Trust's then current prospectus and statement
of additional information.
D. The authority of Countrywide to perform its responsibilities under
Paragraph 7, Paragraph 9, and this Paragraph 11 shall be suspended with respect
to any series of the Trust upon receipt of notification by it of the suspension
of the determination of such series' net asset value.
12. AUTOMATIC WITHDRAWAL PLANS.
--------------------------
Countrywide will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the current
prospectus and statement of additional information of the Trust. Payments upon
such withdrawal order shall be made by Countrywide from the appropriate account
maintained by the Trust with the Custodian on approximately the last business
day of each month in which a payment has been requested, and Countrywide will
withdraw from a shareholder's account and present for repurchase or redemption
as many shares as shall be sufficient to make such withdrawal payment pursuant
to the provisions of the shareholder's withdrawal plan and the current
prospectus and statement of additional information of the Trust. From time to
time on new automatic withdrawal plans a check for a payment date already past
may be issued upon request by the shareholder.
13. WIRE-ORDER PURCHASES.
--------------------
Countrywide will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer by
the close of business on the business day following receipt of such orders by
Countrywide. Upon receipt of any check drawn or endorsed to the Trust (or
Countrywide, as agent) or otherwise identified as being payment of an
outstanding wire-order, Countrywide will stamp said check with the date of its
receipt and deposit the amount represented by such check to Countrywide's
deposit accounts maintained with the Custodian. Countrywide will cause the
Custodian to transfer federal funds in an amount equal to the net asset value of
the shares so purchased to the Trust's account with the Custodian and will
notify the Trust before noon of each business day of the total amount deposited
in the Trust's deposit accounts, and in the event that payment for a purchase
order is
<PAGE>
not received by Countrywide or the Custodian on the tenth business day following
receipt of the order, prepare an NASD "notice of failure of dealer to make
payment."
14. OTHER PLANS.
-----------
Countrywide will process such accumulation plans, group programs and
other plans or programs for investing in shares of the Trust as are now provided
for in the Trust's current prospectus and statement of additional information
and will act as plan agent for shareholders pursuant to the terms of such plans
and programs duly executed by such shareholders.
15. RECORDKEEPING AND OTHER INFORMATION.
-----------------------------------
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust, any
person retained by the Trust, or any regulatory agency having authority over the
Trust.
16. SHAREHOLDER RECORDS.
-------------------
Countrywide shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each
shareholder, including dividends and distributions in
cash or invested in shares;
E. Information with respect to the source of all dividends
and distributions allocated among income, realized
short-term gains and realized long-term gains;
F. Any instructions from a shareholder including all forms
furnished by the Trust and executed by a shareholder
with respect to (i) dividend or distribution elections
and (ii) elections with respect to payment options in
connection with the redemption of shares;
G. Any correspondence relating to the current maintenance
of a shareholder's account;
H. Certificate numbers and denominations for any
shareholder holding certificates;
I. Any stop or restraining order placed against a
shareholder's account;
J. Information with respect to withholding in the case of
a foreign account or any other account for which
withholding is required by the Internal Revenue Code of
1986, as amended; and
K. Any information required in order for Countrywide to
perform the calculations contemplated under this
Agreement.
17. TAX RETURNS AND REPORTS.
-----------------------
Countrywide will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and, if required, mail
to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
18. OTHER INFORMATION TO THE TRUST.
------------------------------
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
Countrywide
<PAGE>
will also maintain such records as shall be necessary to furnish to the Trust
the following: annual shareholder meeting lists, proxy lists and mailing
materials, shareholder reports and confirmations and checks for disbursing
redemption proceeds, dividends and other distributions or expense disbursements.
19. ACCESS TO SHAREHOLDER INFORMATION.
---------------------------------
Upon request, Countrywide shall arrange for the Trust's investment
adviser to have direct access to shareholder information contained in
Countrywide's computer system, including account balances, performance
information and such other information which is available to Countrywide with
respect to shareholder accounts.
20. COOPERATION WITH ACCOUNTANTS.
----------------------------
Countrywide shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
21. SHAREHOLDER SERVICE AND CORRESPONDENCE.
--------------------------------------
Countrywide will provide and maintain adequate personnel, records and
equipment to receive and answer all shareholder and dealer inquiries relating to
account status, share purchases, redemptions and exchanges and other investment
plans available to Trust shareholders. Countrywide will answer written
correspondence from shareholders relating to their share accounts and such other
written or oral inquiries as may from time to time be mutually agreed upon, and
Countrywide will notify the Trust of any correspondence or inquiries which may
require an answer from the Trust.
22. PROXIES.
-------
Countrywide shall assist the Trust in the mailing of proxy cards and
other material in connection with shareholder meetings of the Trust, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Trust, provide at least one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
23. FURTHER ACTIONS.
---------------
<PAGE>
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
24. COMPENSATION.
------------
For the performance of Countrywide's obligations under this
Agreement, each series of the Trust shall pay Countrywide, on the first business
day following the end of each month, a monthly fee in accordance with the
schedule attached hereto as Schedule A. Countrywide shall not be required to
reimburse the Trust or the Trust's investment adviser for (or have deducted from
its fees) any expenses in excess of expense limitations imposed by certain state
securities commissions having jurisdiction over the Trust. The Trust shall
promptly reimburse Countrywide for any out-of-pocket expenses and advances which
are to be paid by the Trust in accordance with Paragraph 25.
25. EXPENSES.
--------
Countrywide shall furnish, at its expense and without cost to the
Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by
Countrywide under this Paragraph 25 shall be paid by the Trust, including, but
not limited to, costs and expenses of officers and employees of Countrywide in
attending meetings of the Board of Trustees and shareholders of the Trust, as
well as costs and expenses for postage, envelopes, checks, drafts, continuous
forms, reports, communications, statements and other materials, telephone,
telegraph and remote transmission lines, use of outside pricing services, use of
outside mailing firms, necessary outside record storage, media for storage of
records (e.g., microfilm, microfiche, computer tapes), printing, confirmations
and any other shareholder correspondence and any and all assessments, taxes or
levies assessed on Countrywide for services provided under this Agreement.
Postage for mailings of dividends, proxies, reports and other mailings to all
shareholders shall be advanced to Countrywide three business days prior to the
mailing date of such materials.
26. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
--------------------------------------------------
The parties hereto acknowledge and agree that nothing contained
herein shall be construed to require Countrywide to perform any services for the
Trust which services could cause Countrywide to be deemed an "investment
adviser" of the Trust within the meaning of Section 2(a)(20) of the 1940 Act or
to supersede or contravene the Trust's prospectus
<PAGE>
or statement of additional information or any provisions of the 1940 Act and the
rules thereunder. Except as otherwise provided in this Agreement and except for
the accuracy of information furnished to it by Countrywide, the Trust assumes
full responsibility for complying with all applicable requirements of the 1940
Act, the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
27. REFERENCES TO COUNTRYWIDE.
-------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust will submit printed
matter requiring approval to Countrywide in draft form, allowing sufficient time
for review by Countrywide and its counsel prior to any deadline for printing.
28. EQUIPMENT FAILURES.
------------------
Countrywide shall take all steps necessary to minimize or avoid
service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
29. INDEMNIFICATION OF COUNTRYWIDE.
------------------------------
A. Countrywide may rely on information reasonably believed by it to
be accurate and reliable. Except as may otherwise be required by the 1940 Act
and the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
<PAGE>
shareholder or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.
C. The Trust shall indemnify and hold harmless Countrywide, its
directors, officers, employees, shareholders, agents, control persons and
affiliates from and against any and all claims, demands, expenses and
liabilities (whether with or without basis in fact or law) of any and every
nature which Countrywide may sustain or incur or which may be asserted against
Countrywide by any person by reason of, or as a result of: (i) any action taken
or omitted to be taken by Countrywide in good faith in reliance upon any
certificate, instrument, order or share certificate reasonably believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
person, upon the oral instructions or written instructions of an authorized
person of the Trust or upon the opinion of legal counsel for the Trust or its
own counsel; or (ii) any action taken or omitted to be taken by Countrywide in
connection with its appointment in good faith in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However, indemnification under
this subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
30. TERMINATION.
-----------
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by Countrywide, (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by giving
the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefore. Upon termination of this
Agreement, the Trust shall pay to Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of this
<PAGE>
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
providing for assistance from Countrywide's cognizant personnel in the
establishment of books, records and other data by such successor.
31. SERVICES FOR OTHERS.
-------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
32. LIMITATION OF LIABILITY.
-----------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
33. SEVERABILITY.
------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
34. QUESTIONS OF INTERPRETATION.
---------------------------
This Agreement shall be governed by the laws of the State of Ohio.
Any question of interpretation of any term or provision of this Agreement having
a counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to said 1940 Act. In addition, where the effect
<PAGE>
of a requirement of the 1940 Act, reflected in any provision of this Agreement,
is revised by rule, regulation or order of the SEC, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
35. NOTICES.
-------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: The Purisima Funds
c/o Wadsworth Group
2025 East Financial Way, Suite 101
Glendora, California 91741
Attention: Emmy Butts
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 35. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
36. AMENDMENT.
---------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
37. BINDING EFFECT.
--------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
<PAGE>
38. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
39. FORCE MAJEURE.
-------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
40. MISCELLANEOUS.
-------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
THE PURISIMA FUNDS
By:/s/ Sherrilyn Fisher
-----------------------------
Its: Secretary
COUNTRYWIDE FUND SERVICES, INC.
By:/s/ Robert Dorsey
-----------------------------
Its: President
<PAGE>
Schedule A
----------
COMPENSATION
------------
Services
- --------
FEE
---
(Per Account)
As Transfer, Dividend Disbursing,
Shareholder Service and Plan Agent:
Purisima Total Return Fund Payable monthly at
rate of $17.00/year
The Fund will be subject to a minimum charge of $1,000 per month.
Exhibit 9.5
-----------
ACCOUNTING SERVICES AGREEMENT
-----------------------------
AGREEMENT dated as of September 1, 1997 between The Purisima Funds
(the "Trust"), a Delaware business trust, and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to
provide the Trust with certain accounting and pricing services; and
WHEREAS, Countrywide wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
-----------
The Trust hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Trust. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. CALCULATION OF NET ASSET VALUE.
------------------------------
Countrywide will calculate the net asset value of each series of the
Trust and the per share net asset value of each series of the Trust, in
accordance with the current prospectus and statement of additional information
of each series of the Trust, once daily as of the time selected by the Trust's
Board of Trustees. Countrywide will prepare and maintain a daily valuation of
all securities and other assets of the Trust in accordance with instructions
from a designated officer of the Trust or its investment adviser and in the
manner set forth in the Trust's current prospectus and statement of additional
information. In valuing securities of the Trust, Countrywide may contract with,
and rely upon market quotations provided by, outside services.
3. BOOKS AND RECORDS.
-----------------
Countrywide will maintain and keep current the general ledger for
each series of the Trust, recording all income and expenses, capital share
activity and security transactions of the
<PAGE>
Trust. Countrywide will maintain such further books and records as are necessary
to enable it to perform its duties under this Agreement, and will periodically
provide reports to the Trust and its authorized agents regarding share purchases
and redemptions and trial balances of each series of the Trust. Countrywide will
prepare and maintain complete, accurate and current all records with respect to
the Trust required to be maintained by the Trust under the Internal Revenue Code
of 1986, as amended (the "Code"), and under the rules and regulations of the
1940 Act, and will preserve said records in the manner and for the periods
prescribed in the Code and the 1940 Act. The retention of such records shall be
at the expense of the Trust.
All of the records prepared and maintained by Countrywide pursuant to
this Section 3 which are required to be maintained by the Trust under the Code
and the 1940 Act will be the property of the Trust. In the event this Agreement
is terminated, all such records shall be delivered to the Trust at the Trust's
expense, and Countrywide shall be relieved of responsibility for the preparation
and maintenance of any such records delivered to the Trust.
4. PAYMENT OF TRUST EXPENSES.
-------------------------
Countrywide shall process each request received from the Trust or its
authorized agents for payment of the Trust's expenses. Upon receipt of written
instructions signed by an officer or other authorized agent of the Trust,
Countrywide shall prepare checks in the appropriate amounts which shall be
signed by an authorized officer of Countrywide and mailed to the appropriate
party.
5. FORM N-SAR.
----------
Countrywide shall maintain such records within its control and shall
be requested by the Trust to assist the Trust in fulfilling the requirements of
Form N-SAR.
6. COOPERATION WITH ACCOUNTANTS.
----------------------------
Countrywide shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
7. FURTHER ACTIONS.
---------------
Each party agrees to perform such further acts and execute such
further documents as
<PAGE>
are necessary to effectuate the purposes hereof.
8. FEES.
----
For the performance of the services under this Agreement, each series
of the Trust shall pay Countrywide a monthly fee in accordance with the schedule
attached hereto as Schedule A. The fees with respect to any month shall be paid
to Countrywide on the last business day of such month. The Trust shall also
promptly reimburse Countrywide for the cost of external pricing services
utilized by Countrywide. Countrywide shall not be required to reimburse the
Trust or the Trust's investment adviser for (or have deducted from its fees) any
expenses in excess of expense limitations imposed by certain state securities
commissions having jurisdiction over the Trust.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
--------------------------------------------------
The parties hereto acknowledge and agree that nothing contained
herein shall be construed to require Countrywide to perform any services for the
Trust which services could cause Countrywide to be deemed an "investment
adviser" of the Trust within the meaning of Section 2(a)(20) of the 1940 Act or
to supersede or contravene the Trust's prospectus or statement of additional
information or any provisions of the 1940 Act and the rules thereunder. Except
as otherwise provided in this Agreement and except for the accuracy of
information furnished to it by Countrywide, the Trust assumes full
responsibility for complying with all applicable requirements of the 1940 Act,
the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
10. REFERENCES TO COUNTRYWIDE.
-------------------------
The Trust shall not circulate any printed matter which contains any
reference to Countrywide without the prior written approval of Countrywide,
excepting solely such printed matter as merely identifies Countrywide as
Administrative Services Agent, Transfer, Dividend Disbursing, Shareholder
Service and Plan Agent and Accounting Services Agent. The Trust will submit
printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.
11. EQUIPMENT FAILURES.
------------------
Countrywide shall take all steps necessary to minimize or avoid
service interruptions,
<PAGE>
and has entered into one or more agreements making provision for emergency use
of electronic data processing equipment. Countrywide shall have no liability
with respect to equipment failures beyond its control.
12. INDEMNIFICATION OF COUNTRYWIDE.
------------------------------
A.Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
B.Any person, even though also a director, officer, employee,
shareholder, or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of those entities.
C. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide in
good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
<PAGE>
13. TERMINATION.
-----------
A.The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by Countrywide, (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
B.Either party may terminate this Agreement on any date by giving the
other party at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefore. Upon termination of this Agreement, the
Trust shall pay to Countrywide such compensation as may be due as of the date of
such termination, and shall likewise reimburse Countrywide for any out-of-pocket
expenses and disbursements reasonably incurred by Countrywide to such date.
C.In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
providing for assistance from Countrywide's cognizant personnel in the
establishment of books, records and other data by such successor.
14. SERVICES FOR OTHERS.
-------------------
Nothing in this Agreement shall prevent Countrywide or any affiliated
person (as defined in the 1940 Act) of Countrywide from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that Countrywide expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the Trust under this Agreement.
15. LIMITATION OF LIABILITY.
-----------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to
<PAGE>
impose any liability on any of them personally, but shall bind only the trust
property of the Trust.
16. SEVERABILITY.
------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
17. QUESTIONS OF INTERPRETATION.
---------------------------
This Agreement shall be governed by the laws of the State of Ohio.
Any question of interpretation of any term or provision of this Agreement having
a counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the 1940 Act, reflected in any
provision of this Agreement, is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
18. NOTICES.
-------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: The Purisima Funds
c/o Wadsworth Group
2025 East Financial Way, Suite 101
Glendora, California 91741
Attention: Emmy Butts
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 18. Each such notice shall be deemed delivered (a) on the
date delivered if by personal
<PAGE>
delivery; (b) on the date telecommunicated if by telegraph; (c) on the date of
transmission with confirmed answer back if by telex, telefax or other
telegraphic method; and (d) on the date upon which the return receipt is signed
or delivery is refused or the notice is designated by the postal authorities as
not deliverable, as the case may be, if mailed.
19. AMENDMENT.
---------
This Agreement may not be amended or modified except by a written
agreement executed by both parties.
20. BINDING EFFECT.
--------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
21. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
22. FORCE MAJEURE.
-------------
If Countrywide shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
23. MISCELLANEOUS.
-------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE PURISIMA FUNDS
By:/s/Sherrilyn Fisher
-------------------------
Its: Secretary
COUNTRYWIDE FUND SERVICES, INC.
By:/s/ Robert Dorsey
-------------------------
Its: President
<PAGE>
Schedule A
----------
COMPENSATION
------------
Each series of the Trust will pay Countrywide a monthly fee, according
to the average net assets of such series during such month, as follows:
Average Monthly Net Assets Monthly Fee
-------------------------- -----------
0 - $25,000,000 $1,500
25 - 50,000,000 2,000
50 - 100,000,000 2,500
100 - 200,000,000 3,000
Over 200,000,000 4,000 plus .001%
of such assets in
excess of $200,000,000
EXHIBIT 11
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 3 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 17, 1997, relating to the financial
statements and financial highlights appearing in the August 31, 1997 Annual
Report to Shareholders of The Purisima Total Return Fund, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Transfer and
Dividend Disbursing Agent, Custodian and Independent Accountants" in the
Prospectus and under the heading "Independent Accountants" in the statement of
Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Los Angeles, California
November 13, 1997
Exihibit 15
-----------
AMENDED
SERVICE AND DISTRIBUTION PLAN
OF
THE PURISIMA FUNDS
WHEREAS, The Purisima Funds (the "Trust") engages in business
as an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust's Board of Trustees (the "Board") has
established a separate series of shares of the Trust and hereafter may establish
additional series of shares (each a "Fund," and collectively, the "Funds");
WHEREAS, the Trust proposes or may propose to commence an
offering of shares of the Funds at net asset value without an initial or
contingent deferred sales charge;
WHEREAS, the Trust proposes to engage in activities which are
primarily intended to result in the distribution and sale of the shares of the
Funds and to make payments in connection with the distribution of the shares of
the Funds, and the Trust desires to adopt a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act;
WHEREAS, the principal distribution coordinator of the shares
of the Funds (the "Distribution Coordinator") proposes to incur substantial
expenses in rendering distribution services for the Funds; and
WHEREAS, the Board has determined that there is a reasonable
likelihood that adoption of this Plan will benefit the Funds and their
shareholders.
NOW, THEREFORE, the Trust hereby adopts this Plan with respect
to the shares of each Fund in accordance with Rule 12b-1 under the Act and
containing the following terms and conditions:
Annual Fee. The Trust will pay to the Distribution Coordinator, as the
Funds' principal distribution coordinator, an annual fee for the Distribution
Coordinator's serving in such capacity and providing certain
distribution-related services. The annual fee paid to the Distribution
Coordinator under the Plan will be calculated daily and paid monthly in arrears
by each Fund on the
<PAGE>
first day of each month based on the average daily net assets of such Fund at an
annual rate of 0.20 of 1.0% on each Fund's first $50,000,000 of average net
assets, 0.10 of 1.0% on the next $50,000,000 of average net assets, and 0.05 of
1.0% on average net assets in excess of $100,000,000. In addition, the Trust
will pay the expenses incurred by the Distribution Coordinator which are
primarily intended to result in the sale of a Fund's shares ("Distribution
Expenses"). Payments under this Plan are not tied exclusively to actual
distribution and service expenses, and the payments may exceed distribution and
service expenses actually incurred.
Distribution Expenses in Excess of or Less Than Amount of Fee. The
fees paid by the Trust on behalf of each Fund shall not be refundable if in any
given year the fees are greater than the Distribution Expenses for that year.
Distribution Expenses will be paid on a first-in, first-out basis. In no event
shall the total of the compensation payable and out-of-pocket reimbursements
under Sections 1 and 2 exceed on an annual basis 0.25% of a Fund's average daily
net assets.
Expenses Covered by the Plan. Distribution Expenses which may be paid
under the Plan are those expenses primarily intended to result in the sale of a
Fund's shares, including, but not limited to: (a) costs of payments, including
incentive compensation, made to agents for and consultants to the Distribution
Coordinator, any affiliate of the Distribution Coordinator or the Trust,
including pension administration firms that provide distribution and shareholder
related services and broker-dealers that engage in the distribution of a Fund's
shares; (b) payments made to, and expenses of, persons who provide support
services in connection with the distribution of a Fund's shares and servicing of
a Fund's shareholders, including, but not limited to, personnel of the
Distribution Coordinator and the Fund's investment manager, office space and
equipment, telephone facilities, answering routine inquiries regarding the Fund,
processing shareholder transactions and providing any other shareholder services
not otherwise provided by the Trust's transfer agency or other servicing
arrangements; (c) payments made pursuant to any Distribution Coordination
Agreement (the form of which is attached hereto as exhibits) or other service
agreement; (d) fees and costs relating to the formulation and implementation of
marketing and promotional activities, including, but not limited to, direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (e) costs of printing and distributing prospectuses, statements of
additional information and reports of the Funds to prospective shareholders of
the Funds; (f) costs involved in preparing, printing and distributing sales
literature pertaining to the Fund; and (g) costs involved in obtaining whatever
information, analyses and reports with respect to marketing and promotional
activities that the Trust may, from time to time, deem advisable. Such expenses
shall be deemed incurred whether paid directly by the Distribution Coordinator
or by a third party to the extent reimbursed therefor by the Distribution
Coordinator.
Written Reports. The Distribution Coordinator shall furnish to the
Board, for its review, on a quarterly basis, a written report of the monies paid
to it under the Plan with respect to each Fund, and shall furnish the Board with
such other information as the Board may reasonably request in connection with
the payments made under the Plan in order to enable the Board to make an
informed
<PAGE>
determination of whether the Plan should be continued as to each Fund.
Termination. The Plan may be terminated as to any Fund at any time,
without penalty, by vote of a majority of the outstanding voting securities of
such Fund, and any Distribution Coordination Agreement under the Plan may be
likewise terminated at any time. Once terminated, no further payments shall be
made under the Plan.
Amendments. The Plan and any Distribution Coordination Agreement or
related distribution or service agreement may not be amended with respect to a
Fund to increase materially the amount to be spent by the Fund for distribution
and servicing of Fund shares pursuant to Section 1 hereof without approval by a
majority of the outstanding voting securities of such Fund. All material
amendments to the Plan and any Distribution Coordination Agreement or related
distribution or service agreement entered into with third parties shall be
approved by the Trust's independent Trustees cast in person at a meeting called
for the purpose of voting on any such amendment. The Distribution Coordinator
may assign its responsibilities and liabilities under the Plan to another party
who agrees to act as principal distribution coordinator for the Trust with the
consent of a majority of the Trust's independent Trustees.
Selection of Independent Trustees. So long as the Plan is in effect,
the selection and nomination of the Trust's independent Trustees shall be
committed to the discretion of such independent Trustees.
Effective Date of Plan. The Plan shall take effect at such time as it
has received the requisite Trustee and shareholder approval and, unless sooner
terminated, shall continue in effect for a period of more than one year from the
date of its execution only so long as such continuance is specifically approved
at least annually by the Board, including a majority of the independent
Trustees, cast in person at a meeting called for the purpose of voting on such
continuance.
Preservation of Materials. The Trust will preserve copies of the Plan,
any agreements relating to the Plan and any reports made pursuant to Section 4
above, for a period of not less than six years (the first two years in an easily
accessible place) from the date of the Plan, agreement or report.
<PAGE>
Meanings of Certain Terms. As used in this Plan, the terms "interested
person" and "majority of the outstanding voting securities" will be deemed to
have the same meaning that those terms have under the Act and the rules and
regulations under the Act, subject to any exemption that may be granted to the
Trust under the Act by the Securities and Exchange Commission.
This Plan and the terms and provisions thereof are hereby
accepted and agreed to by the Trust and the Distribution Coordinator, as
evidenced by their execution hereof, as of this 1st day of September 1997.
THE PURISIMA FUNDS
By: _________________________
Title:________________________
FISHER INVESTMENTS, INC.,
as Distribution Coordinator
By: ________________________
Title:_______________________
<PAGE>
THE PURISIMA FUNDS
------------------
Distribution Coordination Agreement
EXHIBIT ONLY
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
Ladies and Gentlemen:
This Distribution Coordination Agreement has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"Company Act"), by THE PURISIMA FUNDS, a Delaware business trust (the "Trust"),
on behalf of the series of the Trust (each series, a "Fund"), as governed by the
terms of the Trust's Service and Distribution Plan adopted pursuant to such Rule
12b-1 (the "Plan").
The Plan has been approved by a majority of the Trust's
Trustees who are not interested persons of the Trust or the Funds and who have
no direct or indirect financial interest in the operation of the Plan (the
"independent Trustees"), cast in person at a meeting called for the purpose of
voting on such Plan. Such approval included a determination that in the exercise
of the reasonable business judgment of the Board of Trustees and in light of the
Trustees' fiduciary duties, there is a reasonable likelihood that the Plan will
benefit each Fund and its shareholders. The Plan also has been approved by a
vote of at least a majority of the outstanding voting securities of each Fund,
as defined in the Company Act.
To the extent you provide eligible services of the type identified
in the Plan to the Funds identified in the attached Schedule (the "Schedule"),
we shall pay you a quarterly fee based on the average net asset value of Fund
shares during any quarter which are attributable to customers of your firm, at
the rate set forth on the Schedule.
In no event may the aggregate annual fee paid to you pursuant to
the Schedule exceed ____ percent of the value of the net assets of each Fund
held in your customers' accounts which are eligible for payment pursuant to this
Agreement (determined in the same manner as the Fund uses to compute its net
assets as set forth in its then effective Prospectus), without approval by a
majority of the outstanding shares of each Fund. Subject to that limitation, the
fee rate may be prospectively
<PAGE>
increased or decreased by us, in our sole discretion, at any time upon notice to
you. Furthermore, we may, in our discretion and without notice, suspend or
withdraw the sale of shares, including the sale of shares to you for the account
of any customer or customers.
You shall furnish us and the Trust with such information as shall
reasonably be requested by us or the Trust's Board of Trustees with respect to
the services performed by you and the fees paid to you pursuant to the Schedule.
We shall furnish to the Board of Trustees of the Trust, for its
review, on a quarterly basis, a written report of the amounts expended under the
Plan by us with respect to each Fund and the purposes for which such
expenditures were made.
You agree to make shares of the Funds available only (a) to your
customers or entities that you service at the net asset value per share next
determined after receipt of the relevant purchase instruction or (b) to each
such Fund itself at the redemption price for shares of the Fund, as described in
each Fund's then-effective Prospectus.
No person is authorized to make any representations concerning a
Fund or shares of a Fund except those contained in each Fund's then-effective
Prospectus or Statement of Additional Information and any such information as
may be released by a Fund as information supplemental to such Prospectus or
Statement of Additional Information.
Additional copies of each such Prospectus or Statement of
Additional Information and any printed information issued as supplemental to
each such Prospectus or Statement of Additional Information will be supplied by
each Fund to you in reasonable quantities upon request.
In no transaction shall you have any authority whatever to act as
agent of the Funds and nothing in this Agreement shall constitute you or any
Fund the agent of the other. You are not authorized to act as an underwriter of
shares of the Funds or as a dealer in shares of the Funds.
By your written acceptance of this Agreement, you agree to and do
release, indemnify and hold us, the Trust and the Funds harmless from and
against any and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder or the purchase,
redemption, transfer or registration of shares (or orders relating to the same)
by or on behalf of your customers. You and your employees will, upon request, be
available during normal business hours to consult with us or our designees
concerning the performance of your responsibilities under this Agreement.
By your written acceptance of this Agreement, you represent,
warrant and agree that: (a) the compensation payable to you hereunder, together
with any other compensation you receive from your customers for services
contemplated by this Agreement, will not be excessive or
<PAGE>
unreasonable under the laws and instruments governing your relationships with
your customers; (b) you will provide to your customers a schedule of any fees
that you may charge to them relating to the investment of their assets in
shares; (c) you are a member in good standing of the NASD and registered as a
broker-dealer under the federal and all applicable state securities laws; (d)
you are empowered under applicable law and by your organizational documents to
enter into and perform this Agreement, and all requisite actions have been taken
to authorize you to enter into and perform this Agreement; and (e) you will
comply at all times with all applicable laws, rules and regulations.
All communications to the Funds shall be sent to: Fisher
Investments, Inc., as Distribution Coordinator for the Funds, 13100 Skyline
Boulevard, Woodside, California 94062-4547. Any notice to you shall be duly
given if mailed or telegraphed to you at your address as indicated in this
Agreement.
This Agreement may be terminated by us or by you, by the vote of a
majority of the independent Trustees, or by a vote of a majority of the
outstanding shares of a Fund, or at any time upon written notice, all without
payment of any penalty. This Agreement shall also be terminated automatically in
the event of its assignment or by any act that terminates the Plan.
<PAGE>
The provisions of the Plan between the Trust and us, insofar as
they relate to you, are incorporated herein by reference.
This Agreement shall take effect on the date indicated below,
and the terms and provisions thereof are hereby accepted and agreed to by us as
evidenced by our execution hereof.
FISHER INVESTMENTS, INC.,
Distribution Coordinator
By: EXHIBIT ONLY
------------------------
Authorized Officer
Dated:
--------------------
Agreed and Accepted:
- ----------------------------
(Name)
By:
--------------------------
(Authorized Officer)
<PAGE>
THE PURISIMA FUNDS
SCHEDULE TO DISTRIBUTION COORDINATION AGREEMENT
BETWEEN FISHER INVESTMENTS, INC.
AS DISTRIBUTION COORDINATOR
AND
________________________
(Name)
Pursuant to the provisions of the Distribution Coordination
Agreement between the above parties with respect to The Purisima Funds, Fisher
Investments, Inc., as Distribution Coordinator, shall pay a quarterly fee to the
above-named party based on the average net asset value of shares of each Fund
during the previous calendar quarter the sales of which are attributable to the
above-named party, as follows:
Fund Fee
---- ---
EXHIBIT 16
----------
SCHEDULE FOR COMPUTATION OF
PERFORMANCE QUOTATIONS OF THE
PURISIMA TOTAL RETURN BOND FUND
TOTAL RETURN FORMULA
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of
the 1-, 5- or 10-year periods at the end
of the 1-, 5- or 10-year periods (or
fractional portion thereof)
For the period October 28, 1986 (inception) to August 31, 1997:
$1,000(1+T) = $1,187.00 or an average annual compounded rate of 18.70%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001019946
<NAME> The Purisima Funds
<SERIES>
<NUMBER> 1
<NAME> Purisima Total Return Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 4,445,140
<INVESTMENTS-AT-VALUE> 4,451,247
<RECEIVABLES> 290,239
<ASSETS-OTHER> 120,915
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,862,401
<PAYABLE-FOR-SECURITIES> 317,784
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 308,673
<TOTAL-LIABILITIES> 626,457
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,225,260
<SHARES-COMMON-STOCK> 356,856
<SHARES-COMMON-PRIOR> 10,000
<ACCUMULATED-NII-CURRENT> 5,305
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (728)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,107
<NET-ASSETS> 4,235,944
<DIVIDEND-INCOME> 15,963
<INTEREST-INCOME> 3,335
<OTHER-INCOME> 0
<EXPENSES-NET> 13,993
<NET-INVESTMENT-INCOME> 5,305
<REALIZED-GAINS-CURRENT> (728)
<APPREC-INCREASE-CURRENT> 6,107
<NET-CHANGE-FROM-OPS> 10,684
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 350,497
<NUMBER-OF-SHARES-REDEEMED> 3,641
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,135,944
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,327
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 197,278
<AVERAGE-NET-ASSETS> 1,115,105
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 1.85
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.87
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
