November 6, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
Re: Rule 30d
Purisima Funds
Registration No. 333-9153, CIK No. 0001019946
Ladies and Gentlemen:
We are filing electronically on behalf of the Purisima Total
Return Fund (the "Fund"), concurrently with this letter, one copy of the
EDGARized version of the August 31, 1997 Annual Report to Shareholders in
compliance with the provisions of Section 30 of the Investment Company Act of
1940.
If you have any questions concerning the enclosed filings,
please do not hesitate to call me at (626) 852-1033.
Very truly yours,
/s/ Joy Ausili
Joy Ausili
cc: David Hearth, Esq.
<PAGE>
Purisima Funds
Annual Report
During the third quarter the market marched forward with strong returns. The
portfolio was heavily invested in big cap stocks. We believe big cap should
prevail over small cap in the months ahead. We continue to foresee more bull
market ahead and don't plan to call the top until after we've seen it, but we
are in the later stages of this terrific run. There's plenty of time left for
good returns, but it's important to be in big cap because the potential return
in small cap isn't worth the risk to be there this late in the bull. Although
this bull has lasted a long time, it won't end overnight. A rolling top will
mark the turnaround, not a spike-top.
We believe a stronger economy in Europe is just around the bend. Stock markets
in places like Germany, Italy, and Switzerland are already discounting signs of
real recovery. All three are up to 40% or more year to date. Over in Japan,
things are slowly improving. The consumption tax enacted last spring slowed
recovery for a while, but Japan is bottoming out. We expect to see momentum
swing in a positive direction very soon.
For the rest of 1997, we see things continuing much as they have been. Perhaps
some more volatility, but overall a nice quarter. We'll remain bullish until we
see the top. Big cap stocks should beat out small cap in the months ahead. We
believe the market will finish the remainder of 1997 with good numbers giving
1998 a strong start.
<PAGE>
Letter to the Shareholders
Our portfolio remained tilted toward the very biggest stocks during the third
quarter -- but it hurt us as small stocks bested big stocks and we sat on the
wrong side. The Russell 2000 index, reflective of small stocks, rose 14.88% for
the quarter while the S&P 500 rose 7.49%. With our stocks averaging even bigger
than the S&P 500s' stocks, we suffered. But we still think we're positioned
right for the period ahead. We still believe owning the biggest stocks is the
place to be and that this quarter's action was just a bounce-back, counter-trend
rally for small stocks in a longer environment that will favor huge stocks.
Third quarter foreign equity markets were flat as evidenced by the EAFE Index
being off -.70%. EAFE (Europe, Australasia, and the Far East) is the standard
non-U.S. stock measure. We did slightly better. Europe and Japan still suffer
from lackluster economies. Germany saw new all-time high unemployment numbers.
Japan slipped back into what appears to be recession. Outside America only a few
isolated countries show any real sign of economic pick-up. Elsewhere things are
dull. This is good. You buy into bad times--sell into good times. This is just
the kind of market we want to be positioned for facing into 1998. We believe
these markets will heat up nicely.
Positioning the Fund's Portfolio
Our turnover remains low and we see little reason to vary from our prior
strategy. We believe loose money will ultimately stimulate overseas economies.
But first it is side-stepped here. Take Japan. They can borrow at the bank at
less than 1% per year and turn around and buy a one year U.S. Treasury for 5.5%
and pick up the 4.5% spread. Unless they fear that the dollar might fall, the
arbitrage potential is immense. Leveraged speculators can attack an arbitrage
potential of at least 1.5% against the dollar in every major country except for
England, Italy and Sweden. Much of this money is simply flooding America right
now but can reverse courses quickly at the first sign of dollar weakness. The
dollar weakens every few years. We don't know when. But our foreign exposure is
aimed to hedge us against this process unwinding.
Japan keeps struggling to find a bottom from its long super-bear market.
Meanwhile our Japanese stocks, concentrated in the huge global exporters, are
doing much better. We like Japan. We like continental Europe. The kinds of big,
basic European producers we own should do well in an environment where Europe's
economy warms. We feel pretty darned warm and fuzzy on these stocks.
Domestically, there has been so little bad news that we fear the world is too
conditioned to the easy times. We are postured owning the biggest stocks--which
should rise in a rising market but fall less than the market as a whole when
things turn to a real bear market.
We appreciate your support of the The Purisima Total Return Fund and look
forward to continuing to serve your investment needs and objective.
Sincerely,
/s/ Kenneth L. Fisher
- -------------------------
Kenneth L. Fisher
<PAGE>
Purisima S&P 500 MSCI EAFE
10/28/96 $10,000 $10,000 $10,000
10/31/96 $10,000 $10,149 $ 9,963
11/30/96 $10,260 $10,910 $10,359
12/31/96 $10,100 $10,694 $10,225
1/31/97 $10,550 $11,367 $ 9,868
2/28/97 $10,480 $11,451 $10,029
3/31/97 $10,250 $10,982 $10,066
4/30/97 $10,860 $11,641 $10,119
5/31/97 $11,520 $12,341 $10,778
6/30/97 $12,200 $12,895 $11,371
7/31/97 $12,770 $13,920 $11,556
---------------------------------
8/31/97 $11,870 $13,141 $10,692
---------------------------------
$10,000 invested from 10/28/96 till 8/31/97 was valued at:
S&P MSCI EAFE Purisima Total Return
$13,141 $10,692 $11,870
The percent of The Purisima Total Return since inception has been 18.70%. Past
performance is not predictive of future performance.
<PAGE>
PURISIMA TOTAL RETURN FUND
Schedule of Investments
August 31, 1997
% of Market
Shares Net Assets Value
-------- ------------ ----------
Aerospace 1.7%
1,300 Boeing Co. $ 70,769
----------
Automobile 7.6%
800 Daimler-Benz AC - ADR 59,750
3,440 Fiat Spa - ADR 53,750
1,300 Ford Motor Company 55,900
800 General Motors Corp. 50,200
6,300 Nissan Motor Co. - ADR 80,325
800 Volvo AB - ADR 20,600
----------
320,525
----------
Banking 12.0%
1,600 Banco Bilbao Vizcaya - ADR 42,800
4,950 Bank of Tokyo-Mitsu - ADR 91,575
300 Bankamerica Corp. 19,744
500 Barclays PLC - ADR 45,625
400 Chase Manhattan Corp. 44,475
700 Citicorp 89,338
3,100 Espirito Santo Finl - ADR 57,350
1,200 Istytu Mobiliare Ital-ADR 33,450
600 Nat'l Austrail - ADR 41,625
1,400 Westpac Banking- ADR 40,425
----------
506,407
----------
Chemicals 3.1%
800 Dupont De Nemours & Co. 49,850
400 Norsk Hydro A/S - ADR 21,475
1,600 Rhone - Poulenc SA - ADR 60,600
----------
131,925
----------
Commercial Services 0.1%
100 Reuters Hldgs PLC ADR 6,088
----------
Communication Equipment 4.4%
1,300 Alcatel Alsthom- ADR 32,013
200 Ericsson (LM) Tel - ADR 8,338
1,000 Lucent Technologies Inc. 77,875
200 Motorola Inc. 14,675
700 Nokia Corp - ADR A 54,250
----------
187,151
----------
See Accompanying Notes to Financial Statements.
<PAGE>
PURISIMA TOTAL RETURN FUND
Schedule of Investments
August 31, 1997
% of Market
Shares Net Assets Value
-------- ------------ ----------
Computer Components & Software 3.3%
950 Cisco Systems, Inc.* 71,606
500 Microsoft Corp.* 66,094
----------
137,700
----------
Computers 6.3%
600 Hewlett-Packard Co. 36,788
850 Hitachi LTD - ADR 79,263
600 IBM Corporation 60,525
1,600 NEC Corp. - ADR 90,800
----------
267,376
----------
Consumer Products 1.1%
1,250 Pepsico, Inc. 45,000
----------
Cosmetics and Toiletries 0.8%
400 Gillette Company 33,125
----------
Electric Utilities 1.5%
3,200 Empresa Nacional de Electricidad SA ADR 63,200
----------
Electrical Equipment 4.9%
1,500 General Electric Co. 93,750
350 Philips Electronics 25,069
1,000 Sony Corp. - ADR 88,125
----------
206,944
----------
Entertainment 1.1%
600 The Walt Disney Co. 46,088
----------
Financial Services 2.2%
300 ABB AB- ADR 43,800
1,100 Federal National Mortgage Association 48,400
----------
92,200
----------
Food 1.4%
300 Unilever N.V. 60,375
----------
Hospitals & Health Care Facilities 0.2%
300 Columbia HCA Healthcare 9,469
----------
Household Products 1.6%
500 Procter & Gamble Company 66,531
----------
See Accompanying Notes to Financial Statements.
<PAGE>
PURISIMA TOTAL RETURN FUND
Schedule of Investments
August 31, 1997
% of Market
Shares Net Assets Value
-------- ------------ ----------
Insurance 1.8%
100 Aegon N.V. ADR 7,425
725 American Int'l Group 68,422
----------
75,847
----------
Manufacturing & Mining 2.3%
1,800 De Beers Cons Mines - ADR 57,713
450 Minnesota Mining & Mfg Co. 40,444
----------
98,157
----------
Oil & Gas 10.5%
400 Amoco Corp. 37,825
700 Chevron Corp. 54,206
600 Elf Aquitaine - ADR 33,450
1,500 Exxon Corp. 91,781
600 Mobil Corp. 43,650
1,200 Repsol SA-SP ADR 47,250
1,300 Royal Dutch Petroleum 65,975
100 Texaco, Inc. 11,525
1,250 Total S.A. - ADR 59,219
----------
444,881
----------
Pharmaceuticals 11.0%
650 Abbott Laboratories 38,959
350 American Home Products 25,200
1,500 Astra AS - ADR - A 24,000
900 Bristol-Myers Squibb Co. 68,400
1,100 Johnson & Johnson 62,356
950 Merck & Co., Inc. 87,222
200 Novartis AC - ADR 14,300
1,200 Novo-Nordisk A/S- ADR 61,200
1,500 Pfizer Inc. 83,063
----------
464,700
----------
Photography 0.9%
100 Eastman Kodak Company 6,538
800 Fuji Photo Film - ADR 30,600
----------
37,138
----------
Restaurants 0.9%
800 Mc Donald's Corp 37,850
----------
Retail 2.3%
200 Coles Myer Ltd. ADR 7,375
225 Home Depot 10,617
2,200 Wal-Mart Stores Inc. 78,100
----------
96,092
----------
See Accompanying Notes to Financial Statements.
<PAGE>
PURISIMA TOTAL RETURN FUND
Schedule of Investments
August 31, 1997
% of Market
Shares Net Assets Value
-------- ------------ ----------
Semiconductors 4.5%
800 Intel Corp. 73,700
700 Kyocera Corp. - ADR 90,650
300 SGS-Thomson Microelectronics* 27,863
----------
192,213
----------
Steel 0.9%
2,000 Ashanti Goldfields - GDR 20,750
200 British Steel PLC - ADR 5,713
500 Broken Hill Proprietary Co., Ltd. - ADR 12,563
----------
39,026
----------
Telecommunications 6.6%
100 Ameritech Corp. 6,269
1,850 AT&T Corp. 72,150
800 Bell Atlantic Corp. 57,900
900 Bellsouth Corp. 39,600
1,100 SBC Communications Inc. 59,813
200 Telecom Italia Spa - ADR 11,800
400 Telefonica De Espana - ADR 31,100
----------
278,632
----------
Tobacco Products 1.8%
1,750 Philip Morris Cons., Inc. 76,344
----------
TOTAL COMMON STOCKS
(cost $4,085,646) 4,091,753
----------
SHORT-TERM INVESTMENTS 8.5%
UMB Bank, n.a.
Money Market Fiduciary 359,494
----------
Total Investments (cost $ 4,445,140) 4,451,247
----------
Liabilities, less
Other Assets -5.1% (215,303)
----------
NET ASSETS 100.0% $4,235,944
==========
ADR - American Depository Receipt
*Non-income producing security
See Accompanying Notes to Financial Statements.
<PAGE>
PURISIMA TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
ASSETS:
Investments at market value $ 4,451,247
(cost of $4,445,140)
Due from Adviser 183,285
Deferred organizational costs 111,077
Receivable for sale of fund's shares 101,043
Prepaid expenses 9,838
Dividends and interest receivable 5,911
-------------------------------------------------------------------
Total Assets 4,862,401
-------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 317,784
Payable to adviser 281,733
Accrued expenses 15,281
Accrued investment advisory fees 9,327
Accrued distribution expense 2,332
-------------------------------------------------------------------
Total Liabilities 626,457
-------------------------------------------------------------------
NET ASSETS $ 4,235,944
===================================================================
COMPOSITION OF NET ASSETS
Capital stock $ 4,225,260
Undistributed net investment income 5,305
Undistributed net realized loss on investments (728)
Net unrealized appreciation on investments 6,107
-------------------------------------------------------------------
Net Assets $ 4,235,944
===================================================================
Number of shares issued and outstanding
($.01 par value, unlimited shares authorized) 356,856
Net Asset Value Per Share $11.87
===================================================================
See Accompanying Notes to Financial Statements.
<PAGE>
PURISIMA TOTAL RETURN FUND
STATEMENT OF OPERATIONS
For the Period October 28, 1996 (Inception) to August 31, 1997
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $973) $ 15,963
Interest 3,335
--------------------------------------------------------------------
19,298
EXPENSES:
Administration and accounting 56,685
Transfer agent 32,334
Federal and state registration 26,060
Amortization of organizational costs 22,552
Printing 18,044
Investment advisory 9,327
Insurance 8,811
Trustees 7,244
Auditing 7,100
Custody 4,705
Distribution 2,332
Legal 1,516
Other 568
--------------------------------------------------------------------
Total expenses before reimbursement 197,278
Less: reimbursement of expenses by advisor (183,285)
--------------------------------------------------------------------
Net Expenses 13,993
Net Investment Income 5,305
--------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments (728)
Change in unrealized appreciation on investments 6,107
--------------------------------------------------------------------
Net gain on investments 5,379
--------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 10,684
====================================================================
<PAGE>
PURISIMA TOTAL RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period October 28, 1996 (Inception) to August 31, 1997
OPERATIONS
Net investment income $ 5,305
Net realized loss on investments (728)
Change in unrealized appreciation
on investments 6,107
-----------------------------------------------------------------
Increase in net assets resulting
from operations 10,684
-----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 4,162,372
Cost of shares redeemed (37,112)
-----------------------------------------------------------------
Net increase from capital share transactions 4,125,260
-----------------------------------------------------------------
Net Increase in Net Assets 4,135,944
NET ASSETS
Beginning of period 100,000
-----------------------------------------------------------------
End of period $ 4,235,944
=================================================================
CHANGES IN SHARES
Shares sold 350,497
Shares redeemed (3,641)
-----------------------------------------------------------------
Net Increase 346,856
=================================================================
See Accompanying Notes to Financial Statements.
<PAGE>
PURISIMA TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
For the Period October 28, 1996 (Inception) to August 31, 1997
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
Net Assets 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 Expense Reimbursement 1.50%**
Ratio of Net Investment Income to Average
Net Assets (Net of Expense Reimbursement) 0.56%**
Portfolio Turnover Rate 1.35%*
Average Commission Rate Paid $0.0326*
- --------------------------------------------------------
* Not annualized
** Annualized
See Accompanying Notes to Financial Statements.
<PAGE>
Purisima Total Return Fund
Notes to Financial Statements
August 31, 1997
(1) Organization
------------
The Purisima Total Return Fund (the "Fund"), constituting the initial
series of The Purisima Funds (the "Trust"), was organized as a Delaware
business trust on June 27, 1996 and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company issuing its shares in series, each series
representing a distinct portfolio with its own investment objectives
and policies. The only series presently authorized is the Purisima
Total Return Fund. Fisher Investments, Inc. (the "Adviser") serves as
the investment adviser to the Fund and purchased 10,000 shares on
September 11, 1996 for cash in the amount of $100,000 to capitalize the
Fund. Investment operations of the Fund began on October 28, 1996. The
investment objective of the Fund is to produce a high level of total
return.
(2) Significant Accounting Policies
-------------------------------
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles ("GAAP"). The presentation of financial
statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates and assumptions.
(a) Investment Valuation
Securities which are traded on a recognized stock exchange are
valued at the last sale price on the securities exchange on
which such securities are traded. Securities traded on
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.
Short-term investments are valued at cost.
(b) Organization Costs
Costs incurred by the Fund in connection with its
organization, registration and the initial public offering of
shares have been deferred and will be amortized over 5 years.
If any of the original shares of the Fund are redeemed by any
holder thereof prior to the end of the amortization period,
the redemption proceeds will
<PAGE>
be reduced by the pro rata share of the unamortized expenses
as of the date of redemption. The pro rata share by which the
proceeds are reduced will be derived by dividing the number of
original shares outstanding at the time of redemption.
(c) Federal Income and Excise Taxes
The Fund intends to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and
to distribute substantially all investment company net taxable
income and net capital gains to shareholders in a manner which
results in no tax cost to the Fund. Therefore, no federal
income or excise tax provision is required.
(d) Distribution to Shareholders
Dividends from net investment income will be declared and paid
annually. Distributions of net realized gains, if any, will be
declared at least annually. Distributions to shareholders are
recorded on the ex-dividend date. The Fund periodically makes
reclassifications among certain of its capital accounts as a
result of the recognition and characterization of certain
income and capital gain distributions determined annually in
accordance with federal tax regulations which may differ from
generally accepted accounting principles.
(e) Other
Investment transactions are accounted for on the trade date.
The Fund determines the gain or loss realized from investment
transactions by comparing the original cost of the security
lot sold with the net sale proceeds. Dividend income is
recognized on the ex-dividend date and interest income is
recognized on an accrual basis.
(3) Investment Adviser
------------------
The Fund has an Investment Management Agreement with the Adviser, with
whom certain officers and trustees of the Fund are affiliated, to
furnish investment advisory services to the Fund. Under the terms of
this agreement, the Fund will pay the Adviser a monthly fee at the
annual rate of 1.00% of the Fund's average daily net assets. The
Adviser has agreed to voluntarily reduce fees for expenses (exclusive
of brokerage, interest, taxes and extraordinary expenses) that exceed
the expense limitation of 1.50% of the Fund's average daily net assets
for the first fiscal year. During the period from October 28, 1996,
(inception) to August 31, 1997, the Adviser reimbursed $183,285 of
expenses. The Investment Management Agreement permits the Adviser to
seek reimbursement of any reductions made to its management fee and
payments made to limit expenses which are the responsibility of the
fund within the three-year period following such reduction, subject to
the Fund's ability to effect such reimbursement and remain in
compliance with applicable expense limitations. At such time as it
appears probable that the Adviser will seek such reimbursement, the
amount of reimbursement that the Fund is able to effect will be accrued
as an expense of the Fund for that current period.
<PAGE>
(4) Service and Distribution Plan
-----------------------------
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a
Service and Distribution Plan (the "Plan"). Under the Plan, the Fund is
authorized to pay expenses incurred for the purpose of financing
activities, including the employment of other dealers, intended to
result in the sale of shares of the Fund at an annual rate of up to
0.25% of the Fund's average daily net assets.
(5) Investment Transactions
-----------------------
The aggregate purchases and sales of securities, excluding short-term
investments, for the Fund for the fiscal year 1997 is summarized below:
Purchases $4,101,679
Sales $ 16,033
At August 31, 1997, gross unrealized appreciation and depreciation of
investments, based on cost for the federal income tax purposes of
$4,085,646 were as follows:
Appreciation $ 177,276
Depreciation 171,169
----------
Net appreciation on investments $ 6,107
==========
