As filed with the Securities and Exchange
Commission on September 29, 1998
Registration No. 333-09153
File No. 811-07737
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 5 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6 [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 LLP
345 California Street, 29th Floor
San Francisco, CA 94104
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant to paragraph (b)
|_| On __(date)____, 1998, 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
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THE PURISIMA FUNDS
CONTENTS OF REGISTRATION STATEMENT
This registration statement contains the following documents:
Facing Sheet
Contents of Registration Statement
Cross-Reference sheets for The Purisima Funds
PART A
Combined Prospectus for The Purisima Funds
The Purisima Total Return Fund
The Purisima Pure American Fund
The Purisima Pure Foreign Fund
PART B
Combined Statement of Additional Information for The Purisima Funds
The Purisima Total Return Fund
The Purisima Pure American Fund
The Purisima Pure Foreign Fund
PART C
Other Information
Signature Page
Exhibits
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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).
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<CAPTION>
CAPTION OR SUBHEADING IN PROSPECTUS OR
ITEM NO. ON FORM N-1A STATEMENT OF ADDITIONAL INFORMATION
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<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis "Summary of Expenses and Example" and
"Prospectus Summary"
3. Condensed Financial Information "Financial Highlights": The Purisima Funds
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)
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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
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<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>
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(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 September 29, 1998
Registration No. 333-09153
File No. 811-07737
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Part A
COMBINED PROSPECTUS
THE PURISIMA FUNDS
The Purisima Total Return Fund
The Purisima Pure American Fund
The Purisima Pure Foreign Fund
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<PAGE>
THE PURISIMA FUNDS
PROSPECTUS
SEPTEMBER 29, 1998
<PAGE>
THE PURISIMA TOTAL RETURN FUND
THE PURISIMA PURE AMERICAN FUND
THE PURISIMA PURE FOREIGN FUND
The Purisima Funds (the "Trust") is a no-load, open-end management
investment company consisting of three separate diversified portfolios (the
"Funds"), each of which is a separate mutual fund.
o THE PURISIMA TOTAL RETURN FUND (the "Total Return Fund")
The investment objective of this 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.
o THE PURISIMA PURE AMERICAN FUND (the "American Fund")
This Fund seeks to provide investors with a high level of total return.
The Fund limits its portfolio to those securities and assets in the
domestic component of the Total Return Fund.
o THE PURISIMA PURE FOREIGN FUND (the "Foreign Fund")
This Fund seeks to provide investors with a high level of total return.
The Fund limits its portfolio to those securities and assets in the
foreign component of the Total Return Fund.
Fisher Investments, Inc. (the "Adviser") serves as the investment
adviser to the Funds. Kenneth L. Fisher, founder, Chairman and Chief Executive
Officer of Fisher Investments, Inc., manages the investment program of the Funds
and is primarily responsible for the day-to-day management of the Funds'
investment portfolios.
This Prospectus sets forth concisely the information about the Funds
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 September 29, 1998, 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.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
There can be no assurance that the investment objective of any Fund
will be achieved.
The Purisima Funds
13100 Skyline Boulevard
Woodside, California 94062
September 29, 1998
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TABLE OF CONTENTS
Expense Summary................................................................1
Shareholder Transaction Expenses...............................................1
Annual Operating Expenses......................................................1
Financial Highlights...........................................................3
Adviser Investment Returns.....................................................4
Prospectus Summary.............................................................5
Investment Objectives and Policies.............................................6
Portfolio Securities, Investment Techniques and Related Risks..................8
Principal Investment Limitations..............................................13
Management....................................................................14
Service and Distribution Plan.................................................16
Pricing of Fund Shares........................................................16
How to Purchase Shares........................................................18
How to Exchange Shares........................................................21
How to Redeem Shares..........................................................23
Dividends and Distributions...................................................26
Shareholder Reports and Information...........................................26
Retirement Plans..............................................................27
Taxes.........................................................................27
Capital Structure.............................................................28
Transfer and Dividend Disbursing Agent, Custodian and Independent
Accountants.................................................................28
<PAGE>
Fund Performance..............................................................29
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MAdE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUNDS OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE FUNDS IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE>
EXPENSE SUMMARY
The following information is designed to assist you in understanding
the expenses you will bear directly or indirectly as a shareholder of the Funds.
Shareholder Transaction Expenses are charges that you pay when buying or selling
shares of a Fund. Annual Operating Expenses are paid out of a 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 a 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* None
Exchange Fees None
* 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
other services. Please see their materials for more information.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
TOTAL RETURN FUND AMERICAN FUND FOREIGN FUND
Management Fees 1.00% 1.50%(1) 1.50%(1)
Rule 12b-1 expenses (2) 0.25% None None
Other expenses after
expense reimbursement 0.25% None None
----- ----- -----
Total Fund operating 1.50% 1.50% 1.50%
expenses after expense ===== ===== =====
reimbursement (3)
(1) The Management Fee for the Pure American and Pure Foreign Funds
compensates the Manager for advisory services and other ordinary
operating expenses of the Funds, for which the Adviser is responsible.
See "Management."
1
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(2) The maximum level of distribution expenses is 0.25% per annum of the
Total Return 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) Expenses for the Total Return Fund are based on actual expenses and
expense limitations for the fiscal year ended August 31, 1998. Although
not required to do so, the Adviser has voluntarily agreed to limit the
annual operating expenses of the Total Return Fund to 1.50% (excluding
interest, taxes, brokerage and extraordinary expenses). The expense
limitation may be terminated or revised at any time. Absent the
voluntary limitation for the Total Return Fund, "Other Expenses" would
have been 1.46%, and "Total Fund Operating Expenses" would have been
2.71% for the period ended August 31, 1998.
In subsequent years, overall operating expenses for the Total Return
Fund may not fall below the applicable voluntary percentage limitation
until the Adviser has been fully reimbursed for fees reduced or
expenses paid by it under the Investment Advisory Agreement. The Fund
will reimburse the Adviser in the three following years if operating
expenses (before reimbursement) are less than the applicable percentage
limitation charged to the Fund.
EXAMPLE
TOTAL RETURN FUND AMERICAN FUND FOREIGN FUND
One Year $ 15 $ 15 $ 15
Three Years $ 47 $ 47 $ 47
Five Years $ 82 NA NA
Ten Years $178 NA NA
The example assumes that the annual operating expenses of each Fund is
limited to the total shown. The example should not be considered a
representation of past or future expenses. Actual Fund expenses for the Total
Return Fund may be greater or less than those shown. The assumption of a 5%
return, as used in the example above, is required by the Securities and Exchange
Commission's regulations. The 5% assumption is applicable to all mutual funds
and does not represent the projected or actual performance of any Fund.
2
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FINANCIAL HIGHLIGHTS
The financial information below for the year ended August 31, 1998 and
for the period from October 28, 1996 (inception) to August 31, 1997 has been
audited by PricewaterhouseCoopers LLP, independent accountants, 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 charge by writing or calling the address or
telephone on the cover page.
For a share outstanding through the period:
Year Oct. 28, 1996*
The Purisima ended to
Total Return Fund Aug. 31, 1998 Aug. 31, 1997
- ----------------- ------------- --------------
Net Asset Value, Beginning of Period $ 11.87 $10.00
Income from Investment Operations:
Net Investment Income 0.02 0.02
Net Realized and Unrealized
Gains on Investments 0.60 1.85
Total from Investment Operations 0.62 1.87
Less Distributions:
Dividends From Net Investment Income (0.02) --
Net Asset Value, End of Period $ 12.47 $11.87
Total Return 5.26% 18.70%+
Net Assets at End of Period ('000) $21,479 $4,236
Ratio of Expenses to Average Net Assets:
Before Expense Reimbursement 2.71% 20.97%#
After Expense Reimbursement 1.50% 1.50%#
Ratio of Net Investment Income to Average
Net Assets (Net of Expense Reimbursement) 0.28% 0.56%#
Portfolio Turnover Rate 15.89% 1.35%+
* Commencement of operations
+ Not annualized
# Annualized
3
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ADVISER INVESTMENT RETURNS
Set forth in the following table is certain performance data provided
by the Adviser relating to the performance record of the Adviser for the
domestic and foreign components of the Total Return Fund, each of which used the
respective investment objective, policies and restrictions specified in this
prospectus for the American Fund and the Foreign Fund. The Adviser separately
managed the domestic and foreign components of the Total Return Fund. The
accounts represented by each component were the only accounts managed by the
Adviser with full regard for the policies and restrictions that apply to the
American Fund and the Foreign Fund. The results presented are not intended to
predict or suggest the return to be experienced by the American or Foreign Funds
or the return an investor might achieve by investing in the American or Foreign
Funds.
INVESTMENT RETURNS
Avg. Annual Return
from Inception
12 months (Oct. 28, 1996)
ended through
August 31, 1998 August 31, 1998
--------------- ---------------
Domestic component
of Total Return Fund 15.65% 43.34%
S&P 500 8.06% 33.77%
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Foreign component
of Total Return Fund -6.84% 7.21%
MSCI EAFE -0.16% 3.06%
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Please read the following important notes concerning the performance
information:
1. The results account for both income and capital appreciation
or depreciation (total return). Returns are net of all
applicable fees and expenses (no fees or expenses apply to the
indexes).
2. Investors should note that the American and Foreign Funds will
compute and disclose their average annual compounded rate of
return using the standard formula set forth in Securities and
Exchange Commission ("SEC") rules, which differs in certain
respects from returns noted above. However, the Adviser does
not believe that the differences are material. The SEC total
return and calculation method calls for computation and
disclosure of an average annual compounded
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rate of return for one-, five- and ten-year periods or shorter
periods from inception. The SEC formula provides a rate of
return that equates a hypothetical initial investment of
$1,000 to an ending redeemable value. The returns shown above
are net of advisory fees in accordance with the SEC
calculation formula, which requires that returns shown be net
of advisory fees as well as all other applicable Fund
operating expenses.
3. All Fund level fees and expenses and cash for the Total Return
Fund are apportioned pro rata according to relative net assets
of the two components of the Total Return Fund.
4. The Standard & Poor's 500 Stock Index ("S&P 500) is an
unmanaged index composed of 500 widely held common stocks
listed on the NYSE, AMEX and OTC markets. The Morgan Stanley
Capital International Europe, Australasia, Far East Index
("MSCI EAFE") is an unmanaged capitalization-weighted index
that includes all major developed world stock markets except
those in North America.
PROSPECTUS SUMMARY
GENERAL. The Purisima Funds (the "Trust") is a Delaware business trust
organized on June 27, 1996, and is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"). Purisima offers investors three no-load diversified mutual funds:
The Purisima Total Return Fund, The Purisima Pure American Fund and The Purisima
Pure Foreign Fund. Each Fund has its own investment objective and policies. See
"Investment Objectives and Policies" for a full discussion.
THE INVESTMENT ADVISER. The Adviser, Fisher Investments, Inc., is a
registered investment adviser organized as a California corporation in 1986. The
adviser managed approximately $2 billion for corporations, pension plans,
endowments, foundations, governmental agencies and individuals as of September
1998. Kenneth L. Fisher, the founder, Chairman and Chief Executive Officer of
the Adviser controls the Adviser. The adviser manages the investment program for
the Funds and is primarily responsible for the day-to-day management of the
Funds' portfolio. See "Management."
MANAGEMENT FEE. The Adviser receives a fee accrued daily and paid
monthly at the annual rate of 1.00% of daily net assets for the Total Return
Fund for advisory services, and 1.50% for the American Fund and the Foreign Fund
for advisory services and other ordinary services and expenses of the Funds. See
"Management."
INVESTMENT RISKS. Like all investments, any investment in a Fund
involves certain risks. The securities held by the Funds and the value of the
Funds' shares will fluctuate with market and other economic conditions so that
investors' shares, when redeemed, may be worth more or less than their original
cost. The Total Return Fund and the Foreign Fund invest in securities of foreign
companies and present higher risks than mutual funds investing only in U.S.
companies.
5
<PAGE>
Investment in any one Fund, or in any combination of Funds, is not intended to
constitute a balanced investment program. See "Investment Risks" for a further
discussion of certain risks.
MINIMUM PURCHASE. The minimum initial investment in a Fund is $25,000
(or $2,000 for IRAs).
OFFERING PRICE. Shares are offered at their net asset value without a
sales charge and may be redeemed at their net asset value on any business day.
See "How to Purchase Shares" and "How to Redeem Shares."
DIVIDEND AND DISTRIBUTIONS. Each Fund expects to declare dividends from
net investment income--if any--annually and distribute substantially all net
realized capital gains--if any--at least annually. The Board of Trustees may
determine to declare dividends and make distributions more or less frequently.
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. If
you do not specify an election, dividends and capital gains distributions (net
of any required tax withholding) are automatically reinvested in additional
shares at the net asset value in effect on the business day after the dividend
record date.
You may change your election at any time by sending written
notification to the Funds.
INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The following descriptions are designed to help you choose the
Fund that best fits your investment needs. You may want to pursue more than one
objective by investing in more than one Fund. There can be no assurance that any
objective will be met. In addition, each Fund may use certain types of
investments and investment techniques that are described under the caption
"Portfolio Securities, Investment Techniques and Related Risks." For a
discussion of certain risks associated with an investment in the Funds,
including the use of derivatives, see "Investment Risks."
THE PURISIMA TOTAL RETURN FUND
The investment objective of the TOTAL RETURN FUND is to seek a high
level of total return. The Fund invests in a portfolio allocated between
domestic and foreign common stocks, corporate and governmental debt securities,
short-term money market instruments and other equity type securities.
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
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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
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 substantially 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.
THE PURISIMA PURE AMERICAN FUND
The investment objective of the AMERICAN FUND is to seek a high level
of total return. The Fund's holdings are limited to the same domestic portfolio
assets held by the Total Return Fund. The Fund invests in a portfolio that may
be composed of common stocks and other equity-type securities, corporate and
government debt securities and short-term money market instruments. Like the
Total Return Fund, 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 domestic economic and market conditions. The Fund
tends to favor large capitalization stocks; however, the Adviser is free to
emphasize small capitalization stocks. The Adviser is limited only by its best
judgment as to what will help achieve the Fund's investment objective. See
"Portfolio Securities, Investment Techniques and Related Risks" for the
investment instruments this Fund may acquire.
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THE PURISIMA PURE FOREIGN FUND
The investment objective of the FOREIGN FUND is to seek a high level of
total return. The Fund's holdings are limited to the same foreign portfolio
assets held by the Total Return Fund. The Fund invests in a portfolio that may
be composed of common stocks and other equity-type securities, corporate and
government debt securities, and short-term money market instruments. 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
global economic and market conditions. The Adviser generally approaches country
selection on a contrarian basis by avoiding those countries that the Adviser
considers to be too popular or "overbought" by investors. The Adviser is limited
only by its best judgment as to what will help achieve the Fund's investment
objective. For temporary or defensive purposes this Fund may invest
substantially all of its assets in domestic short-term fixed income securities
and instruments. See "Portfolio Securities, Investment Techniques and Related
Risks" for the investment instruments this Fund may acquire.
PORTFOLIO SECURITIES, INVESTMENT TECHNIQUES AND RELATED RISKS
The following provides a summary of the securities and techniques used
by the Funds. The Statement of Additional Information contains more detailed
information about these investments and the risks associated with them.
EQUITY SECURITIES. The Funds may invest in equity securities, including
common stock, preferred stock, convertible securities, warrants, rights and
depository receipts. To the extent that a Fund's portfolio is primarily invested
in common stocks and other equity-type securities, that Fund's net asset value
may be subject to greater fluctuation than a portfolio primarily invested in
fixed income securities.
Each 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. A 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 a Fund in units or attached to securities are
not subject to these restrictions.
FIXED INCOME SECURITIES. Each Fund, as appropriate, 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
Foreign Fund will invest in U.S. government or domestic fixed income securities
only for temporary or defensive purposes. No Fund is 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
8
<PAGE>
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 Funds 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 a 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 Funds 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 Funds
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. A 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 Funds may invest
temporarily up to 100% of their total assets in short-term, high-quality money
market instruments. The Funds 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 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
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agreements. The Funds' 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, a 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 a Fund's net assets that may
be subject to repurchase agreements maturing in seven days or less.
The Funds' investments 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 Funds bear directly in connection with its
own operations, as a shareholder of another investment company, the Funds would
bear their 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
Funds' shareholders.
SMALLER CAPITALIZATION COMPANIES. The Funds may invest a substantial
portion of their 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 these
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 and other markets 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 a 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 Total Return Fund and Foreign 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% (25% for the Foreign Fund) of their 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
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<PAGE>
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
Funds irrespective of the performance of the underlying investments in foreign
issuers.
Fixed-income securities that may be purchased by the Funds include debt
obligations issued or guaranteed by foreign governments, their subdivisions,
agencies or instrumentalities, or by supranational entities that have been
constituted by the governments of several countries to promote economic
development, such as The World Bank and The Asian Development Bank. Foreign
investment in certain foreign government debt is restricted or controlled to
varying degrees.
The Funds may invest in fixed-income securities of issuers located in
emerging foreign markets. Such markets generally include every country in the
world other than the U.S., Canada, Japan, Australia, New Zealand, Hong Kong,
Singapore, Korea and most Western European countries. From time to time,
emerging markets have offered the opportunity for higher returns but involve a
higher level of risk. Accordingly, the Adviser believes that the ability of the
Funds to invest in emerging markets throughout the world may enable the Funds to
obtain a wider range of attractive investment opportunities. Emerging market
securities include securities issued or guaranteed by governments, their
agencies, instrumentalities or central banks ("sovereign debt"); securities of
issuers organized and operated to restructure the investment characteristics of
sovereign debt; securities of banks and other business entities; and securities
denominated in or indexed to currencies of emerging markets. These securities
include "Brady Bonds," which afford emerging market countries a means to
restructure their outstanding commercial bank debt. Foreign governmental issuers
of debt or the governmental authorities that control repayment of the debt may
be unable or unwilling to repay principal or pay interest when due and all or a
portion of the interest payments and/or principal repayment with respect to
Brady Bonds may be uncollateralized.
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
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 Funds may be subject to
greater fluctuation than the value of securities of domestic companies.
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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 (the
"1933 Act") 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 Funds 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 a Fund to lock in
a fixed price or yield on a security it intends to purchase. However, when a
Fund purchases a when-issued security, it immediately assumes the risk of
ownership, including the risk of price fluctuation.
The greater a 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 a
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 designate
permissible liquid assets to secure its outstanding commitments for when-issued
securities.
HEDGING STRATEGIES. The Funds 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. A 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. No Fund will 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 Funds' 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 a Fund and the price
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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 a 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. A 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 portfolio turnover for each Fund is currently expected to be
less than 100%; however, the Funds do not consider each portfolio turnover rate
as a limiting factor.
PRINCIPAL INVESTMENT LIMITATIONS
Each Fund has adopted certain fundamental investment restrictions that
may be changed only with the approval by a majority of its outstanding shares. A
list of the Funds' restrictions, both fundamental and nonfundamental, is
contained in the Statement of Additional Information. In order to provide a
degree of flexibility, each 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 a Fund's investment objective may
result in the Fund's having investment objectives different from the objective
which the shareholder considered appropriate at the time of investment in the
Fund. However, no Fund will 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 Funds' policies and
supervise and review the Trust's management. The Trust, on behalf of the Total
Return Fund, has entered into an investment management agreement with the
Adviser (the "Investment Management Agreement"), pursuant to which the Adviser
furnishes continuous investment advisory services to this Fund. The Trust, on
behalf of the Pure American and Pure Foreign Funds, has entered into a
Comprehensive Management Agreement with the Adviser (the "Comprehensive
Management Agreement"), pursuant to which the Adviser furnishes advisory
services and other ordinary services and expenses to the Funds for a single fee.
The day-to-day operations of the Funds are administered by the officers of the
Trust and by the Adviser pursuant to the terms of the Investment Management
Agreement and Comprehensive Management Agreement.
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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 Funds 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 Funds' investment
portfolios. As of September 1998 the Adviser managed approximately $2 billion
for large corporations, pension plans, endowments, foundations, governmental
agencies and individuals. Kenneth L. Fisher, the founder, Chairman and Chief
Executive Officer of the Adviser, controls the Adviser.
Mr. Fisher serves as the Funds' portfolio manager and as such is
primarily responsible for the day-to-day management of the Funds' portfolio. He
has served as portfolio manager of the Total Return 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.
THE TOTAL RETURN FUND. Under the Investment Management Agreement, the
Adviser, at its own expense and without reimbursement from the Total Return
Fund, furnishes office space and all necessary office facilities, equipment and
executive personnel for making the investment decisions necessary for managing
the Funds and maintaining their 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 average daily net
assets of the Total Return Fund. The Adviser may voluntarily reduce all or a
portion of its advisory fee and/or absorb operating expenses that the Funds are
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 Funds are 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 PURE AMERICAN AND PURE FOREIGN FUNDS. Under the Comprehensive
Management Agreement, the Adviser, at its own expense and without reimbursement
from the Pure American and Pure Foreign Funds, provides advisory and other
ordinary services and expenses, including administration, transfer agency,
custody and auditing services. These Funds separately pay brokerage commission,
dealer mark-ups, taxes, interest and extraordinary items. For providing these
services and expenses, the Pure American Fund and Pure Foreign Fund each pay the
Adviser a monthly fee of 1/12 of 1.50% of its average daily net assets. Because
this comprehensive fee is intended to cover all ordinary services and expenses,
no separate expense limitation has been adopted like with the Total Return Fund.
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This comprehensive fee arrangement requires the Adviser to absorb and
pay out of its own resources all operating expenses of these Funds that exceed
an annual rate of 1.50%. Newer and smaller mutual funds usually exceed that
expense level by a significant amount. However, as these Funds grow and become
more economical to operate, the comprehensive fee arrangement has the potential
to generate greater profit for the Adviser than the arrangement for the Total
Return Fund where fees and expenses are separated.
The rates of the advisory fees are higher than those paid by most
mutual funds. The factors the Adviser considers in determining which brokers or
dealers to use for the Funds' portfolio transactions are described in the
Statement of Additional Information. Provided the Funds receive 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"), 2020 East Financial Way, Suite 100, Glendora,
California, 91741, acts as administrator for the Funds. The Administrator
supervises the overall administration of the Funds 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
to the Total Return Fund, the Administrator receives from that 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 per Fund, plus reimbursement of out-of-pocket
expenses. The Adviser pays the Administrator's fees out of the comprehensive
management fee and the Advisor's own resources for the Pure American Fund and
Pure Foreign Fund.
DISTRIBUTION. First Fund Distributors, Inc. ("First Fund") acts as
distributor for the Funds pursuant to a Distribution Agreement between First
Fund and the Trust on behalf of the Funds (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 Total Return Fund
pays all of its own other expenses, including without limitation: the cost of
preparing and printing its registration statement required under the 1933 Act
and the 1940 Act and any amendments thereto; the expense of registering shares
with the SEC and filing required notifications 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 Funds'
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 Service and Distribution Plan. See "Service and Distribution
Plan."
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The Adviser pays these expenses for the Pure American and Pure Foreign
Funds out of its own resources. These Funds, however, remain separately
responsible for brokerage commissions, dealer mark-ups, taxes, interest and
extraordinary items approved by a majority of the disinterested Trustees.
SERVICE AND DISTRIBUTION PLAN (Total Return Fund only)
The Total Return 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 Adviser (as distribution coordinator) and 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 that 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 are not tied exclusively to
actual distribution and service expenses, and the payments may exceed
distribution and service expenses actually incurred. It is possible that in the
future payments to the Adviser under the Plan will exceed actual distribution
expenses incurred by the Adviser, resulting in a profit for the Adviser.
PRICING OF FUND SHARES
The price you pay when buying a Fund's shares, and the price you
receive when selling (redeeming) a 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 a Fund upon a purchase and no charge is deducted upon a redemption. The
Funds currently charge a $9 fee for each redemption made by wire. See "How to
Redeem Shares."
The per share net asset value of each 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 a
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
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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 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 a 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 that 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 Funds are no-load mutual funds, so you may purchase, redeem or
exchange shares directly at net asset value without paying a sales charge.
Because each 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 $ 1,000
Automatic Investment Plan $25,000 $ 100
Gift to Minors $25,000 $ 1,000
Individual Retirement
Account ("IRA") $ 2,000 $ 100
Each Fund reserves the right to reject any order for the purchase of
its shares or to limit or suspend, without prior notice, the offering of its
shares. The required minimum investments may be waived in the case of certain
qualified retirement plans. The Funds will not accept your account if you are
investing for another person as attorney-in-fact. The Funds also will not accept
accounts with a "Power of Attorney" in the registration section of the Purchase
Application.
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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 Funds by calling 1-800-841-2858. (Please
complete an IRA Application to establish an IRA.)
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 Funds 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 Funds 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:
(The Purisima __________ Fund)
(investor account number)
(name or account registration)
You must promptly complete a Purchase Application and mail it to the
Funds 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 Funds receive 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
Funds reserve the right to refuse a telephone transaction if it believes it
advisable to do so.
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IF YOU HAVE ANY QUESTIONS, PLEASE CALL THE FUNDS 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 Funds 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 a 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 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 A 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 a Fund
automatically on a regular, monthly basis ($100 minimum per transaction). You
must meet the Automatic Investment Plan's (the "Plan's") 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 Funds require 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 Funds 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 Funds 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 Funds 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 FUNDS AS A RESULT.
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When a purchase is made pursuant to the Plan and a redemption or
exchange is requested shortly thereafter, the Funds will delay payment of the
redemption proceeds or the completion of an exchange for a 15 day holding
period. This delay allows the Funds 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 Funds by calling 1-800-841- 2858. In the event you
discontinue participation in the Plan, the Funds reserve 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 Funds'
Prospectus. Certain services of the Funds 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 Funds may accept
requests to purchase additional shares into a broker-dealer street name account
only 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 Funds 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 Funds 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 Funds 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 FUNDS AS A RESULT. In order to
relieve you of responsibility for the safekeeping and delivery of stock
certificates, the Funds do not issue certificates.
When a purchase is made by check or electronic funds transfer and a
redemption or exchange is requested shortly thereafter, the Funds will delay
payment of the redemption proceeds or the completion of an exchange for a 15 day
holding period. This delay allows the Funds 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.
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HOW TO EXCHANGE SHARES
Shareholders may exchange ($500 minimum per transaction) all or a
portion of their shares in a Fund for shares in the Countrywide Money Market
Fund (the "Money Market Fund"). The Money Market Fund is not affiliated with the
Trust. You must obtain a copy of the Money Market Fund prospectus from the Funds
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 Funds after receipt and
acceptance of proper instructions for the exchange by the Funds or their agent
or subagent. If you desire to use the exchange privilege, you should contact the
Funds 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 Funds by 3:00 p.m. (Central Time) on a day during
which the Funds' net asset values are determined will be effective that day for
both a 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 Funds at
1-800-841-2858 for further information.
Because of the risks associated with common stock investments, each
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 Funds'
performance and Fund shareholders, the Funds reserve 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 a 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 Funds 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
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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 Funds 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 Funds will delay payment of the redemption proceeds or the
completion of an exchange for a 15 day holding period. This delay allows the
Funds 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 a 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 Funds 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 Funds 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 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 Funds in advance.
The Funds will mail payment for redemptions within seven business days
after they receive proper instructions for redemption. However, the Funds will
delay payment for a 15 day holding period on redemptions of recent purchases
made by check or electronic funds transfer. This allows the Funds 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 Funds at 1- 800-841-2858. Proceeds redeemed by telephone will be
mailed to your address, or wired or
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transmitted by electronic funds transfer to your preauthorized bank account as
shown on the records of the Funds. 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. 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. 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 Funds. 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. 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 Funds' control.
To change the designated account, send a written request with the signatures
guaranteed to the Funds. The Funds reserve 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 Funds' control. There is currently a $9 fee for each wire
redemption. It will be deducted from your account.
The Funds reserve 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 Funds at any time. In an effort to prevent unauthorized or
fraudulent redemption or exchange requests by telephone, the Funds have
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 these
procedures are followed, the Funds 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 Funds 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.
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The Funds reserve 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 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 Funds will delay payment of the redemption proceeds or the
completion of an exchange for a 15 day holding period. This delay allows the
Funds 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 Funds reserve 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
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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, except for IRA and retirement
plan accounts, 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 Funds reserve 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.
DIVIDENDS AND DISTRIBUTIONS
The Funds intend to pay dividends from net investment income, if any,
annually and distribute substantially all net realized capital gains, if any, at
least annually. The Funds 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 a Fund or in cash as designated on
the Purchase Application. You may change your election at any time by sending
written notification to the Funds. The election is effective for distributions
with a dividend record date on or after the date that the Funds receive 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 relevant 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
Funds 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.
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SHAREHOLDER REPORTS AND INFORMATION
The Funds 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 Funds.
If you need information on your account with the Funds 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 Funds have a program under which you may establish an Individual
Retirement Account ("IRA") with the Funds 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 Funds may be used as investment vehicles for established defined
contribution plans, including 401(k), profit-sharing, money purchase pension
plans ("Retirement Plans") and Keogh, SEP IRA's. For details concerning
Retirement Plans, please call 1-800-841-2858.
TAXES
The Funds have elected (and the newer Funds intend to elect) and intend
to qualify to be treated as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). In each taxable year
that a 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 a
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.
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In years in which a 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 capital gain (with
the capital gains tax rate generally dependent on the Fund's holding period),
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
Funds provide federal tax information to their shareholders annually, including
information about dividends and other distributions paid during the preceding
year.
The Funds 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 Funds and their 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 one or more series or "funds" and each fund
may have more than one class of shares. The Funds are currently authorized to
issue a single class of shares. The Funds' shares may be issued in an unlimited
number by the trustees of the Trust.
Shares issued by the Funds 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 Funds and to the net assets of
the Funds upon liquidation or dissolution. Each 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 Funds 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.
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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 Funds' 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 Funds' investments. Neither the Transfer and Dividend
Disbursing Agent nor the Custodian has any part in deciding the Funds'
investment policies or which securities are to be purchased or sold for the
Funds' portfolios. PricewaterhouseCoopers LLP has been selected to serve as
independent accountants of the Trust for the fiscal year ending August 31, 1999.
FUND PERFORMANCE
From time-to-time, the Funds may advertise their "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 Funds and the Funds' returns 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 Funds' annual total return for any one year in the period
might have been greater or less than the average for the entire period. The
Funds also may use "aggregate" total return figures for various periods,
representing the cumulative change in value of an investment in the Funds for a
specific period (again reflecting changes in the Funds' share price and assuming
reinvestment of dividends and distributions).
The Funds may quote their average annual total and/or aggregate total
return for various time periods in advertisements or communications to
shareholders. The Funds may also compare their 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 Funds' total returns 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
Funds' performance.
The Funds' total returns 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 Funds represent the Funds' past
performance and should not be considered as representative of future results.
The investment return and principal value of an investment in the Funds will
fluctuate so that an investor's shares, when redeemed, may be
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worth more or less than their original cost. The methods used to compute the
Funds' 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
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As filed with the Securities and
Exchange Commission on September 29, 1998
Registration No. 333-09153
File No. 811-07737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Part B
COMBINED STATEMENT OF
ADDITIONAL INFORMATION
THE PURISIMA FUNDS
The Purisima Total Return Fund
The Purisima Pure American Fund
The Purisima Pure Foreign Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE PURISIMA TOTAL RETURN FUND
THE PURISIMA PURE AMERICAN FUND
THE PURISIMA PURE FOREIGN FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information dated September 29, 1998, is
meant to be read in conjunction with the Prospectus dated September 29, 1998 for
the funds named above (collectively, the "Funds") 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 Funds should be made solely upon the information contained herein. Copies of
the Prospectus for the Funds 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.
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 FUNDS OR THE DISTRIBUTOR. THE PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUNDS IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
<PAGE>
TABLE OF CONTENTS
Page
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ADDITIONAL INVESTMENT INFORMATION............................................1
INVESTMENT RESTRICTIONS.....................................................10
ADDITIONAL TRUST INFORMATION................................................13
DISTRIBUTION OF SHARES......................................................19
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................20
TAXES.......................................................................22
DESCRIPTION OF SHARES.......................................................25
INDIVIDUAL RETIREMENT ACCOUNTS..............................................29
PERFORMANCE INFORMATION.....................................................29
OTHER INFORMATION...........................................................32
FINANCIAL STATEMENTS........................................................34
APPENDIX A..................................................................36
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
This Statement of Additional Information relates to the following three
series or mutual funds of The Purisima Funds, a Delaware business trust (the
"Trust"):
The Purisima Total Return Fund (the "Total Return Fund"),
The Purisima Pure American Fund (the "American Fund"),
The Purisima Pure Foreign Fund (the "Foreign Fund")
The investment objective of each Fund is to produce a high level of
total return. Because of the risks inherent in all investments, there can be no
assurance that any Fund will meet its objective. No Fund is intended by itself
to constitute a balanced investment program.
The following information supplements the investment policies of the
Funds 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 a Fund's outstanding shares, as defined in the Investment Company Act of
1940), all investment policies described below may be changed by the Funds'
Board of Trustees without shareholder approval.
UNITED STATES GOVERNMENT OBLIGATIONS. The Funds 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 Funds 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
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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 Funds 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 a 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 Funds' 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 a 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 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.
ASSET-BACKED SECURITIES. The Funds 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
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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 Funds may include collateralized mortgage obligations
("CMOs") issued by private companies.
The Funds 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
Funds 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
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the debtors are entitled to the protection of a 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 a
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 Funds 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"), a Fund may be required to distribute a portion of such
discount and may be required to dispose of
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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 Funds 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. Each 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, 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 each 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, a 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, a 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 a 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.
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WARRANTS. The Funds 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 a 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. No Fund will invest more than
5% of its net assets, taken at market value, in warrants. Warrants attached to
other securities acquired by a Fund are not subject to this restriction.
FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY
TRANSACTIONS. The Funds 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 Funds 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, a Fund may dispose
of or renegotiate a commitment after entering into it. A Fund also may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date.
When a Fund purchases securities on a when-issued, delayed-delivery or
forward commitment basis, the Fund's custodian or subcustodian will designate
liquid assets having a value (determined daily) at least equal to the amount of
the Fund's purchase commitments.
HEDGING STRATEGIES. The Funds 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 Funds 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. No
Fund will 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).
Hedging instruments on securities generally are used to hedge against
price movements in one or more particular securities positions that a 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 a Fund has invested or expects to invest. The use of hedging
instruments is subject to applicable regulations of the Securities and Exchange
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Commission, the several options exchanges upon which they are traded and various
state regulatory authorities. In addition, a Fund's ability to use hedging
instruments may be limited by tax considerations.
GENERAL. The Funds 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.
A 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
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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 a Fund 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 as collateral 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 a Fund expires unexercised, the Fund realizes
a loss equal to the premium paid. If a 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 a
Fund expires on the stipulated expiration date or if a 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 a 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 a 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
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different skills and techniques than predicting changes in the prices of
individual securities. In addition, a 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 Funds'
securities will not duplicate the components of an index, the correlation will
not be perfect. Consequently, a 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 a 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 a 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.
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 a
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 a 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 a Fund has purchased) expose a Fund to an obligation to another
party. No Fund will 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
Funds will comply with Securities and Exchange Commission guidelines regarding
cover for these instruments and, if the guidelines so require, designate liquid
assets with their Custodian in the prescribed amount. Under current SEC
guidelines, a 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
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commitment of a large portion of a 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. Each 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
each 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 a Fund to receive favorable tax treatment. The Funds are 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 each Fund will generally not exceed 100%. However, this should not be
considered as a limiting factor.
INVESTMENT RESTRICTIONS
Each 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 a 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 a Fund's investment limitations except with respect to the Fund's
restrictions on borrowings as set forth in fundamental restriction 7 below.
No Fund's fundamental restrictions can 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.
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No Fund may:
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 business 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 designated
liquid assets where appropriate.
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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.
No Fund may:
1. Purchase securities of other investment companies except to
the extent permitted by the 1940 Act and the rules and
regulations thereunder.
2. 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.
3. 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.
4. 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.)
5. 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.
In determining industry classification with respect to the Funds, the
Adviser intends to use the industry classification titles in the Standard
Industrial Classification Manual.
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<PAGE>
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 a Fund, does not exceed 10% of the value of the Fund's
total assets.
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.
13
<PAGE>
<TABLE>
<CAPTION>
Year Position(s) Held Other Principal
Name Born with Trust Occupation(s) During Past Five Years
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kenneth L. 1950 President Chief Executive Officer and majority shareholder of the
Fisher* and Trustee 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 A. 1949 Assistant Senior Vice President and Corporate Secretary of the
Fisher Secretary Adviser. Ms. Fisher has been employed by the Adviser
since 1984.
Pierson E. Clair 1948 Trustee President and Chief Operating Officer of Brown & Haley
III since 1998 (fine confectioners); Vice President of
Blummer Chocolate Company from 1980 to 1997, where he
had been employed since 1970. Director of Signature
Foods, Inc.
Bryan F. Morse 1952 Trustee Sole proprietor of Bryan F. Morse, RIA, a registered
investment adviser since 1990.
Grover T. 1949 Trustee Attorney in private practice in Palo Alto, California
Wickersham for more than six 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, 1998. Mr. Fisher did not receive any Trustees fees.
- --------
*"Interested person" of the Trust, as defined in the 1940 Act.
14
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Retirement Total
Aggregate Benefits Accrued As Estimated Annual Compensation from
Compensation Part of Benefits Company
Name from Company Company Expenses Upon Retirement Paid to Directors
- ---- ------------ ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Mr. Fisher* $ 0 $0 $0 $ 0
Mr. Clair $2000 $0 $0 $2000
Mr. Morse $2000 $0 $0 $2000
Mr. Wickersham $2500 $0 $0 $2500
</TABLE>
PRINCIPAL SHAREHOLDERS. As of August 31, 1998, the officers and
trustees of the Trust owned, as a group, 4.90% of the Total Return Fund's
outstanding securities. To the best knowledge of the Trust's officers, no
shareholders owned 5% or more of the outstanding shares of the Total Return Fund
as of August 31, 1998.
SERVICES PROVIDED TO THE FUNDS.
INVESTMENT ADVISER. The investment adviser to the Funds 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.
ADVISORY SERVICES FOR THE TOTAL RETURN FUND. Pursuant to the Investment
Management Agreement entered into between the Trust on behalf of the Total
Return 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
("Management Services"). Included as part of these Management Services the
Adviser also (a) provides the Total Return 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 Total Return 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.
The Investment Management Agreement is dated as of October 25, 1996, as
amended April 16, 1998. The Investment Management Agreement has an initial term
of two years from the Fund's commencement of operations 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
15
<PAGE>
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 Total Return Fund on September 26, 1996. The Investment
Management Agreement is terminable with respect to the Fund 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 if it is assigned (as defined in the 1940 Act).
The Adviser voluntarily agreed to reimburse the Fund to the extent
aggregate annual operating expenses exceed the expense limits stated in the
Prospectus. Those limits 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 approval by the Board of Trustees
and the Fund's ability to effect such reimbursement and remain in compliance
with applicable expense limitations. Any such management fee or expense
reimbursement will be accounted for only in the notes to 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 Total Return Fund pays to the
Adviser a monthly advisory fee at the annual rate specified in the Prospectus.
The organizational expenses of the Total Return Fund were advanced by the
Adviser and were reimbursed by the Fund. For the fiscal year ended August 31,
1998, the adviser waived its advisory fee of $128,907 and reimbursed the Total
Return Fund expenses in the amount of $28,375, and for the fiscal year ended
August 31, 1997, the adviser waived its advisory fee of $9,327 and reimbursed
the Total Return Fund expenses in the amount of $173,958, bringing total
voluntary advisory fee reductions since inception (October 28, 1996) to $138,234
and total voluntary reimbursements of Fund expenses to $202,333.
The Investment Management Agreement provides that the Adviser shall not
be liable to the Total Return Fund or its shareholders for any error of judgment
or mistake of law or for
16
<PAGE>
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 Total Return Fund's Administrator. Pursuant to an administration agreement
with the Trust on behalf of the Fund, the Administrator supervises the overall
administration of the Trust and the Fund including, among other
responsibilities, the preparation and filing of all documents 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 of the Fund,
0.05% of the next $300 million of such net assets, and 0.03% thereafter, subject
to a minimum annual fee of $40,000.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT. UMB Bank, N.A.
(the "Custodian") serves as the custodian and Countrywide Fund Services, Inc.
(the "Transfer Agent") serves as the transfer and dividend paying agent for the
Total Return 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 the Transfer Agent do not exercise any supervisory functions
over the management of the Trust or the Fund or the purchase and sale of
securities.
MANAGEMENT SERVICES FOR THE AMERICAN FUND AND THE FOREIGN FUND. The
Trust, on behalf of the American Fund and the Foreign Fund, has entered into a
Comprehensive Management Agreement with the Adviser, dated September 29, 1998
(the "Comprehensive Management Agreement"). The fee payable to the Adviser by
each of these Funds under the Comprehensive Agreement is the only fee or expense
payable by the Fund for the ordinary services described below:
(a) The Adviser provides these Funds with all Management Services as
described above for the Total Return Fund.
(b) The Adviser provides these Funds with all administrative services,
primarily by retaining the Administrator to perform the same administrative
services for these Funds as the Administrator performs for the Total Return
Fund.
17
<PAGE>
(c) The Adviser provides these Funds with custody and transfer agency
services by retaining the Custodian and Transfer Agent to perform the same
services for these Funds as they perform for the Total Return Fund.
As compensation for its services, these Funds pay to the Adviser a
monthly management fee at the annual rate specified in the Prospectus.
The Comprehensive Management Agreement is dated as of September 29,
1998. The Comprehensive Management Agreement has an initial term of two years
from a Fund's commencement of operations 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 Comprehensive 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 Comprehensive 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 July 16, 1998
and by the initial shareholder of each Fund on September 29, 1998. The
Comprehensive Management Agreement is terminable with respect to a Fund 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 if it is assigned (as defined in the 1940 Act).
Because the fee paid to the Adviser under the Comprehensive Management
Agreement covers all services and operating expenses ordinarily incurred by a
Fund (other than brokerage commissions, dealer mark-ups, taxes, interest and
extraordinary items), the Adviser has not separately agreed to reimburse or
limit Fund expenses. The contractual fee paid to the Adviser effectively limits
Fund operating expenses. Under the Investment Management Agreement for the Total
Return Fund, the Adviser may recoup prior reductions or expense reimbursements
for three years if the Total Return Fund's expenses fall below the applicable
expense cap. The Comprehensive Management Agreement contains no provision for
the Adviser to recoup these amounts. Instead, the Adviser would continue to
receive its specified fee even if actual total fund operating expenses would be
less than the contractual rate. The Adviser may potentially earn greater profits
under the Comprehensive Management Agreement if assets of the Funds grow
sufficiently large to reduce actual operating expenses to less than the
Adviser's comprehensive fee. The Board of Trustees will consider the level of
profitability of the comprehensive fee in its decision to renew the
Comprehensive Management Agreement.
As with the Investment Management Agreement, the Adviser's services to
these Funds is not exclusive and the Adviser may provide similar services to
other investment companies and clients.
18
<PAGE>
The Comprehensive Management Agreement provides that the Adviser shall
not be liable to these Funds or their 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.
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. PricewaterhouseCoopers LLP are the independent
accountants for the Funds. They are responsible for performing an audit of the
Funds' 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 PricewaterhouseCoopers LLP
given on the authority of that firm as experts in auditing and accounting.
DISTRIBUTION OF SHARES
DISTRIBUTION AGREEMENT. First Fund Distributors, Inc. (the
"Distributor") an affiliate of the Administrator, serves as distributor of the
Funds pursuant to a Distribution Agreement with the Trust on behalf of each 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 been
renewed through July 10, 1999 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 16,
1998. The Agreement is terminable without penalty on 60-days' written notice by
the Trustees, by vote of a majority of a 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).
SERVICE AND DISTRIBUTION PLAN (RULE 12B-1 PLAN). 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
Total Return 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. The Plan does not apply to the American
Fund or the Foreign Fund. The Adviser would make any payments for distribution
of shares of these Funds out of the Adviser's own resources.
19
<PAGE>
For the fiscal years ending August 31, 1998, and 1997, the Total Return
Fund paid $32,227 and $2,332, respectively, (for a total of $34,559 since
inception of the Fund on October 28, 1996) in distribution expenses to the
Adviser, as distribution coordinator, for advertising, printing and mailing of
prospectuses to other than current shareholders and compensation to sales
personnel, pursuant to the Plan.
The Plan was adopted in anticipation that the Fund would benefit from
the Plan through increased sales of shares of the Fund, thereby ultimately
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 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 Total Return 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 Funds' portfolio
transactions and the allocation of brokerage activities. In arranging such
transactions, the Adviser will seek to obtain best execution for the Funds,
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 Funds will not necessarily always receive the
lowest commission available.
The Funds have 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 Funds. 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
20
<PAGE>
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 Funds, and not all such
information may be used by the Adviser in connection with the Funds. 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 Funds. 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 Funds may also direct brokerage to broker-dealers
who facilitate sales of the Funds' shares, subject to also obtaining best
execution as described above from such broker-dealer.
A portion of the securities in which the Funds may invest are traded in
the over-the-counter markets, and the Funds intend 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 the 1940 Act,
persons affiliated with the Funds are prohibited from dealing with the Funds 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 Funds and their "affiliates,"
including, among others, the Trust's Trustees, officers, and employees and the
Adviser, and any affiliates of such affiliates. Affiliated persons of the Funds
are permitted to serve as its broker in over-the-counter transactions conducted
on an agency basis only.
Investment decisions for the Funds 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 Total Return Fund for the year
ended August 31, 1998 totaled $20,175, of which $14,319 (70.97%) was paid to
firms which provided research or other services to the Adviser. Total brokerage
commissions paid by the Total Return Fund for the period October 28, 1996
(inception) to August 31, 1997 totaled $2,341, of which $1,856 (79%) was paid to
firms that provided research or other services to the Adviser.
21
<PAGE>
TAXES
GENERAL. Each Fund believes that it has qualified (or will qualify) for
tax treatment as regulated investment company ("RIC") under Subchapter M of the
Code for its fiscal year, and intends to be able to continue to so qualify. In
order to do so, a 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 Funds 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 Funds and received by the
shareholders on December 31 of that year if the distributions are paid by the
Funds during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
The Funds 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 Funds.
Any gain or loss realized by a 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 a Fund will result in short-term capital gain. Any security,
option, or other position entered into or held by a 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
a Fund's gains and losses with 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
22
<PAGE>
would otherwise constitute short-term capital losses, be treated as long-term
capital losses. Different elections are available to a 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 a 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 a 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 a 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.
A 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.
23
<PAGE>
FOREIGN TAXES. Dividends and interest received by a 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
a 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, a 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 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. A 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 a 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. A 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, a 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 a 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
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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 Funds and their 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 Funds.
The foregoing discussion and the related discussion in the Prospectus
has been prepared by the management of the Funds, and does not purport to be a
complete description of all tax implications of an investment in the Funds.
Paul, Hastings, Janofsky & Walker LLP, legal counsel to the Funds, 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 Funds.
Under the terms of the Trust Agreement, each share of a 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 a
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 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
a 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,
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(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 a 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.
If 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 successor to such
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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.
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<PAGE>
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 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 Funds offer a prototype IRA plan which may be adopted by
individuals for rollovers from existing IRAs or retirement plans.
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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 Funds 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 a 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.
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.
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<PAGE>
Total return performance for a specific period is calculated by first
taking an investment ("initial investment") in a 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 a 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.
A Fund's performance figures will be based upon historical results and
will not necessarily be indicative of future performance. A 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 Funds' average annual return for the relevant periods is shown
below:
Inception*
Year ended through
Fund August 31, 1998 August 31, 1998
- ---- --------------- ---------------
Total Return Fund 5.26% 24.94%
American Fund N/A N/A
Foreign Fund N/A N/A
*Inception for the Total Return Fund was October 28, 1996.
From time to time, in marketing and other literature, a 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. A Fund will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings.
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<PAGE>
A 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 Funds, including reprints of or selections
from editorials or articles about a Fund. Sources for Fund performance and
articles about the Funds 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.
A Fund may compare its performance to a wide variety of indices and
measures of inflation including the Standard & Poor's Index of 500 Stocks and
the NASDAQ Over-the- Counter Composite Index. There are differences and
similarities between the investments that a Fund may purchase for its portfolios
and the investments measured by these indices.
Occasionally statistics may be used to specify a Fund's volatility or
risk. Measures of volatility or risk are generally used to compare a 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 Funds. The
description may include a "risk/return spectrum" which compares a 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 Funds may include discussions or illustrations of the potential
investment goals of a prospective investor, investment management techniques,
policies or investment suitability of the Funds, 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
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advertisements or communications to investors may summarize the substance of
information contained in shareholder reports (including the investment
composition of the Funds), 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 Funds. In addition, advertisements or
shareholder communications may include a discussion of certain attributes or
benefits to be derived by an investment in the Funds. 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 each 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 Funds may be exchanged for shares of the Countrywide
Money Market Fund as provided in the Prospectus. Countrywide Fund Services,
Inc., the Funds' 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 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
T MID-CAP MID-CAP
VALUE GROWTH
----------------------------------------------------
C
A SMALL CAP SMALL CAP
P VALUE GROWTH
----------------------------------------------------
VALUATION
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<PAGE>
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 a 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 Funds. 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 Funds may refer to this information in
their 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 a 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
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<PAGE>
their purchase price. An investor may want to consider his or 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 a 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, each 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 a 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, a
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 a Fund in
the form of securities will generally be treated as a taxable sale of such
securities by the shareholder.
FINANCIAL STATEMENTS
Audited financial statements for the relevant periods ending August 31,
1998, for the Total Return Fund, as contained in the Annual Report to
Shareholders of that Fund for the fiscal year ended August 31, 1998 (the
"Report"), are incorporated herein by reference to the Report.
Copies of the Report are available, upon request and without charge, by
calling the Funds 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.
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Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any 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.
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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:
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"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.
"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."
37
<PAGE>
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, 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.
38
<PAGE>
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.
39
<PAGE>
FITCH INVESTORS SERVICE, INC. INVESTMENT GRADE BOND RATINGS
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.
40
<PAGE>
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.
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.
41
<PAGE>
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
AA slightly from time to time because of economic conditions.
AA-
- --------------------------------------------------------------------------------
A+ Protection factors are average but adequate. However, risk factors are
A more variable and greater in periods of economic areas.
A-
- --------------------------------------------------------------------------------
42
<PAGE>
As filed with the Securities and Exchange
Commission on September 29, 1998
Registration No. 333-09153
File No. 811-07737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Part C
of
Form N-1A
REGISTRATION STATEMENT
THE PURISIMA FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE PURISIMA FUNDS
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements included as a part of this Registrant
Statement
1. Included in Part A of this Registration Statement:
Financial Highlights for the period October 28, 1996
(Inception) to August 31, 1998.
2 Included in Part B of this Registration Statement:
Schedule of Investments as of August 31, 1998;
Statement of Assets and Liabilities as of August 31,
1998; Statement of Changes in Net Assets for the
period October 28, 1996 (Inception) to August 31,
1997 and the year ended August 31, 1998; Statement of
Operations for the year ended August 31, 1998;
Financial Highlights for the period October 28, 1996
(Inception) to August 31, 1997 and the year ended
August 31, 1998; related notes; and the Report of
Independent Accountants for The Purisima Total Return
Fund (the "Fund") dated September 29, 1998 are
incorporated by reference to the Annual Report to
Shareholders of the Fund for the period October 28,
1996 (Inception) to August 31, 1998.
(b) Exhibits
1.1 Certificate of Trust (filed with the Fund's initial
registration statement on Form N-1A dated April 28,
1996)
1.2 Registrant's Agreement and Declaration of Trust
(filed with the Fund's initial registration statement
on Form N-1A dated April 28, 1996)
2. Registrant's By-Laws (filed with the Fund's initial
registration statement on Form N-1A dated April 28,
1996)
3. None.
4. None.
5.1 Investment Management Agreement by and between
Registrant on behalf of the Fund and Fisher
Investments, Inc. (filed with the Fund's initial
registration statement on Form N-1A dated April 28,
1996)
5.2 Form of Comprehensive Management Agreement by and
between Registrant on behalf of the Fund and Fisher
Investments, Inc. (filed herewith)
6.1 Distribution Agreement by and between Registrant and
Sunstone Financial Group, Inc. (filed with the Fund's
Pre-Effective Amendment No. 1 on November 5, 1996)
6.2 Distribution Agreement by and between Registrant and
Sunstone Distribution Services, LLC (filed with the
Fund's Post Effective Amendment No. 1 on April 28,
1997)
6.3 Distribution Agreement by and between Registrant and
First Fund Distributors, Inc. - filed with the Fund's
Post Effective Amendment No. 3 November 14, 1997
7. None.
<PAGE>
8. Custodian Agreement by and between Registrant and UMB
Bank, N.A. (filed with the Fund's initial
registration statement on Form N-1A dated April 28,
1996)
9.1 Administration and Fund Accounting Agreement by and
between Registrant and Sunstone Financial Group, Inc.
(filed with the Fund's Post Effective Amendment No. 1
on April 28, 1997)
9.2 Transfer Agency Agreement by and between Registrant
and Sunstone Investor Services, LLC (filed with the
Fund's Post Effective Amendment No. 1 on April 28,
1997)
9.3 Administration Agreement by and between Registrant
and Investment Company Administration Corporation
(filed with the Fund's Post Effective Amendment No. 3
on November 14, 1997)
9.4 Transfer Agency Agreement by and between Registrant
and Countrywide Fund Services, Inc. (filed with the
Fund's Post Effective Amendment No. 3 on November 14,
1997)
9.5 Fund Accounting Agreement by and between Registrant
and Countrywide Fund Services, Inc. (filed with the
Fund's Post Effective Amendment No. 3 on November 14,
1997)
10.1 Legal Opinion of Heller Ehrman White & McAuliffe,
former counsel for Registrant (filed with the Fund's
initial registration statement on Form N-1A dated
April 28, 1996)
10.2 Legal Opinion of Paul, Hastings, Janofsky & Walker
LLP (filed herewith)
11. Consent of Independent Accountants (filed herewith)
12. None.
13.1 Subscription Agreement (filed with the Fund's initial
registration statement on Form N- 1A dated April 28,
1997)
13.2 Organizational Expense Agreement (filed with the
Fund's initial registration statement on Form N-1A
dated April 28, 1996)
13.3 Individual Retirement Custodial Account Agreement and
Disclosure Statement (filed with the Fund's initial
registration statement on Form N-1A dated April 28,
1996)
14 Registrant's Service and Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act of
1940 (filed with the Fund's initial registration
statement on Form N- 1A dated April 28, 1996)
15 Computation of Performance Figures (filed with the
Fund's Post Effective Amendment No. 3 on November 14,
1997)
16 Financial Data Schedules (filed herewith)
17 Power of Attorney (filed herewith)
<PAGE>
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 August 31, 1998
-------------- -----------------------------
Purisima Total Return Fund 432
$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 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,
<PAGE>
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.
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
<PAGE>
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.
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.
<PAGE>
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
Al Frank Fund (The)
American Trust Allegiance Fund
Avatar Advantage Balanced Fund (The)
Avatar Advantage Equity Allocation Fund (The)
Avatar Advantage Int'lEquity Allocation Fund (The)
Chase Growth Fund
Edgar Lomax Value Fund
Information Tech 100 Mutual Fund
Kaminski Poland Fund
Rockhaven Fund
Rockhaven Premier Dividend Fund
Van Deventer & Hoch American Value Fund
RNC Mutual Fund Group, Inc.
PIC Investment Trust
Professionally Managed Portfolios
Academy Value Fund
Avondale Total Return Fund
Boston Balanced Fund
Osterweis Fund
Perkins Discovery Fund
Perkins Opportunity Fund
ProConscience Women's Equity Mutual Fund
Trent Equity Fund
Leonetti Balanced Fund
Lighthouse Contrarian Fund
U.S. Global Leaders Growth Fund
Harris Bretall Sullivan & Smith Growth Equity Fund
Pzena Focused Value Fund
Titan Financial Services Fund
PGP Korea Growth Fund
PGP Asia Growth Fund
Guinness Flight Investment Funds
Jurika & Voyles Fund Group
Masters Select Investment Trust
Kayne Anderson Mutual Funds
O'Shaughnessy Funds, Inc.
Fleming Capital Mutual Fund Group, Inc.
Fremont Mutual Funds, Inc.
Rainier Investment Management Mutual Funds
The Purisima Funds
UBS Private Investor Funds
Brandes Investment Funds
<PAGE>
(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 2020 E.
Financial Way, Suite 100, 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 certifies that it meets all of
the requirements for effectiveness of this registration statement under Rule
485(b) under the Securities Act 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 29th day of September, 1998.
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 September 29, 1998
- --------------------------------- executive officer; principal
Kenneth L. Fisher financial and accounting officer)
/s/ BRYAN F. MORSE* Trustee September 29, 1998
- ---------------------------------
Bryan F. Morse
/s/ GROVER T. WICKERSHAM* Trustee September 29, 1998
- -----------------------------
Grover T. Wickersham
/s/ PIERSON E. CLAIR, III* Trustee September 29, 1998
- ---------------------------------
Pierson E. Clair, III
</TABLE>
*By: /s/ Kenneth L. Fisher
--------------------------------------
Kenneth L. Fisher, Attorney-In-Fact
Pursuant to Power of Attorney as filed with
post-effective amendment No. 5
<PAGE>
As filed with the Securities and Exchange
Commission on September 29, 1998
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. 5
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6
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: (650) 851-7925
Exhibits 5, 10, 11, 16 and 17
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- -------------- -------
(5.2) FORM OF Comprehensive Management Agreement
(10.2) Legal Opinion of Paul, Hastings, Janofsky & Walker LLP
(11) Consent of Price Waterhouse LLP
(16) Financial Data Schedules
(17) Power of Attorney
COMPREHENSIVE MANAGEMENT AGREEMENT
THIS COMPREHENSIVE MANAGEMENT AGREEMENT is made as of the 29th day of
September, 1998, by and between THE PURISIMA FUNDS, a Delaware business trust
(hereinafter called the "Trust"), on behalf of each series of the Trust listed
in APPENDIX A hereto, as such may be amended from time to time (each series
hereinafter referred to individually as a "Fund" and collectively as the
"Funds") and FISHER INVESTMENTS, INC., a California corporation (hereinafter
called the "Manager").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is engaged in the business of
supplying investment advice and investment management services, as an
independent contractor; and
WHEREAS, the Trust desires to retain the Manager to render investment
advice and investment management services to the Funds pursuant to the terms and
provisions of this Agreement, and the Manager is interested in furnishing said
advice and services;
NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:
1. APPOINTMENT OF MANAGER. The Trust hereby employs the Manager, and
the Manager hereby accepts such employment, to render investment advice and
investment management services with respect to the assets of the Funds for the
period and on the terms set forth in this Agreement, subject to the supervision
and direction of the Trust's Board of Trustees.
2. DUTIES OF MANAGER.
(a) GENERAL DUTIES. The Manager shall, except as otherwise
provided for herein, render or make available all services needed for the
management of the Funds and shall, as part of its duties hereunder, (i) furnish
the Funds with advice and recommendations with respect to the investment of each
Fund's assets and the purchase and sale of portfolio securities for the Funds,
including the taking of such other steps as may be necessary to implement such
advice and recommendations; (ii) furnish the Funds with reports, statements and
other data on securities, economic conditions and other pertinent subjects which
the Trust's Board of Trustees may reasonably request; (iii) manage the
investments of the Funds, subject to the ultimate supervision and direction of
the Trust's Board of Trustees; (iv) prepare and coordinate reports and other
materials with respect to the Funds to be supplied to the Board of Trustees of
the Trust,
-1-
<PAGE>
including, without limitation, such periodic and special reports with respect to
each Fund's investment activities as the Board may reasonably request; (v)
provide personnel, office space, facilities and equipment as may be needed by
the Funds in their day-to-day operations; (vi) provide persons satisfactory to
the Trust's Board of Trustees to act as officers and employees of the Trust and
the Funds (such officers and employees, as well as certain Trustees, may be
trustees, directors, officers, or employees of the Manager or its affiliates);
and (vii) provide the Funds with Fund accounting, including without limitation
furnishing assistance and personnel necessary to price the portfolio securities
of each Fund, calculate each Fund's net asset value for purposes of reporting to
the public and other purposes, and prepare and maintain the books and records
with respect to the Fund's investment portfolio as required by applicable laws.
(b) BROKERAGE. The Manager shall place orders for the purchase
and sale of securities either directly with the issuer or with a broker or
dealer selected by the Manager. In placing each Fund's securities trades, it is
recognized that the Manager will give primary consideration to securing the most
favorable price and efficient execution, in a reasonable effort to ensure that
each Fund's total cost or proceeds in each transaction will be the most
favorable under all the circumstances. Within the framework of this policy, the
Manager may consider the financial responsibility, research and investment
information, and other services provided by brokers or dealers who may effect or
be a party to any such transaction or other transactions to which other clients
of the Manager may be a party.
It is also understood that it is desirable for the Funds that the
Manager have access to investment and market research and securities and
economic analyses provided by brokers and others. It is also understood that
brokers providing such services may execute brokerage transactions at a higher
cost to the Funds than might result from the allocation of brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the purchase and sale of securities for the Funds may be
made with brokers who provide such research and analysis, subject to review by
the Trust's Board of Trustees from time to time. It is understood by both
parties that the Manager may select broker-dealers for the execution of the
Funds' portfolio transactions who provide research and analysis which the
Manager may lawfully and appropriately use in its investment management and
advisory capacities, whether or not such research and analysis may also be
useful to the Manager in connection with its services to other clients.
On occasions when the Manager deems the purchase or sale of a security
to be in the best interest of one or more of the Funds as well as of other
clients, the Manager, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Manager in the manner it considers to
-2-
<PAGE>
be the most equitable under the circumstances and consistent with its fiduciary
obligations to the Funds and to such other clients.
3. BEST EFFORTS AND JUDGMENT. The Manager shall use its best judgment
and efforts in rendering the advice and services to the Funds as contemplated by
this Agreement.
4. INDEPENDENT CONTRACTOR. The Manager shall, for all purposes herein,
be deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized to do so, have no authority to act for or represent the
Trust or the Funds in any way, or in any way be deemed an agent for the Trust or
for the Funds. It is expressly understood and agreed that the services to be
rendered by the Manager to the Funds under the provisions of this Agreement are
not to be deemed exclusive, and the Manager shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be materially impaired thereby.
5. MANAGER'S PERSONNEL. The Manager shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Manager shall be
deemed to include persons employed or retained by the Manager to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Manager or the Trust's Board of Trustees may desire and reasonably request.
6. REPORTS BY FUNDS TO MANAGER. Each Fund will from time to time
furnish to the Manager detailed statements of its investments and assets, and
information as to its investment objective or objectives and needs, and will
make available to the Manager such financial reports, proxy statements, legal
and other information relating to its investments as may be in its possession or
available to it, together with such other information as the Manager may
reasonably request.
7. EXPENSES.
(a) With respect to the operation of each Fund, the Manager is
responsible for (i) the compensation of any of the Trust's Trustees, officers,
and employees who are affiliates of the Manager (but not the compensation of
employees performing services in connection with expenses which are the Fund's
responsibility under Subparagraph 7(b) below), (ii) providing office space and
equipment reasonably necessary for the operation of the Funds, (iii) costs and
expenses of pricing and calculating its net asset value and of maintaining its
books of account required under the 1940 Act, including the pricing of each
Fund's portfolio securities and the calculation of its daily net asset value,
(iv) expenditures in connection with meetings of each Fund's Shareholders and
the Trust's Board of Trustees (other than compensation to the disinterested
Trustees described below); (v) charges and expenses of each Fund's
administration, transfer agency, custody, legal, accounting and auditing
services; (vi) the cost of preparing and printing reports, proxy statements,
prospectuses and statement of additional information of the
-3-
<PAGE>
Funds or other communications for distribution to existing shareholders; (viii)
fees and expenses (including legal fees) of registering and maintaining
registration of the Funds' shares for sale under federal and applicable state
and foreign securities laws; and (ix) all expenses of maintaining and servicing
shareholder accounts, including all charges for transfer, shareholder record
keeping, dividend disbursing, redemption, and other agents for the benefit of
the Funds (including, without limitation, fund accounting and administration
agents), if any.
(b) Each Fund is responsible for and has assumed the
obligation for payment of all of its expenses, other than as stated in
Subparagraph 7(a) above, including but not limited to: (i) brokerage and
commission expenses; (ii) federal, state, local or foreign taxes, including
issue and transfer taxes, incurred by or levied on each Fund; (iii) interest
charges on any borrowings; (iv) the compensation of the Trust's Trustees who are
not affiliated with the Manager; (v) payment of all investment advisory and
management fees (including the fees payable to the Manager under this
Agreement); (vi) insurance premiums on property or personnel of each Fund which
inure to its benefit, including liability and fidelity bond insurance; and (vii)
all other charges and costs of its operation and any extraordinary and
non-recurring expenses approved by a majority of the Fund's disinterested
Trustees, except as herein otherwise prescribed.
(c) To the extent the Manager incurs any costs by assuming
expenses which are an obligation of a Fund as set forth herein, such Fund shall
promptly reimburse the Manager for such costs and expenses, except to the extent
the Manager has otherwise agreed to bear such expenses. To the extent the
services for which a Fund is obligated to pay are performed by the Manager, the
Manager shall be entitled to recover from such Fund to the extent of the
Manager's actual costs for providing such services.
8. INVESTMENT ADVISORY AND MANAGEMENT FEE.
(a) Each Fund shall pay to the Manager, and the Manager agrees
to accept, as full compensation for all investment management and advisory
services furnished or provided to such Fund pursuant to this Agreement, a
management fee as set forth in the Fee Schedule attached hereto as APPENDIX B,
as may be amended in writing from time to time by the Trust and the Manager.
(b) The management fee shall be accrued daily by each Fund and
paid to the Manager monthly.
(c) The initial fee under this Agreement shall be payable
monthly following the effective date of this Agreement and shall be prorated as
set forth below. If this Agreement is terminated prior to the end of any month,
the fee to the Manager shall be prorated for the portion of any month in which
this Agreement is in effect which is not a complete month according to the
proportion which the number of calendar days in the month during which the
Agreement is in effect bears to the number of calendar days in the month, and
shall be payable within ten (10) days after the date of termination.
-4-
<PAGE>
(d) The Manager voluntarily may reduce any portion of the
compensation or reimbursement of expenses due to it pursuant to this Agreement
and may agree to make payments to limit the expenses that are the responsibility
of a Fund under this Agreement. Any such reduction or payment shall be
applicable only to such specific reduction or payment and shall not constitute
an agreement to reduce any future compensation or reimbursement due to the
Manager hereunder or to continue future payments. Any such reduction will be
agreed upon before accrual of the related expense or fee and will be estimated
daily. Any fee withheld or voluntarily reduced and Fund expense paid by the
Manager voluntarily or pursuant to an agreed upon expense cap shall, to the
extent approved by the Trust's disinterested Trustees, be reimbursed by the
appropriate Fund to the Manager in the first, second or third (or any
combination thereof) fiscal year next succeeding the fiscal year of the
withholding, reduction or payment to the extent permitted by applicable law if
the aggregate expenses for the next succeeding fiscal year, second succeeding
fiscal year or third succeeding fiscal year do not exceed the expense limitation
to which the Manager has agreed.
(e) The Manager may agree not to require payment of any
portion of the compensation or reimbursement of expenses otherwise due to it
pursuant to this Agreement prior to the time such compensation or reimbursement
has accrued as a liability of the Fund. Any such agreement shall be applicable
only with respect to the specific items covered thereby and shall not constitute
an agreement not to require payment of any future compensation or reimbursement
due to the Manager hereunder.
9. FUND SHARE ACTIVITIES OF MANAGER'S OFFICERS AND EMPLOYEES. The
Manager agrees that neither it nor any of its officers or employees shall take
any short position in the shares of the Funds. This prohibition shall not
prevent the purchase of such shares by any of the officers or bona fide
employees of the Manager or any trust, pension, profit-sharing or other benefit
plan for such persons or affiliates thereof, at a price not less than the net
asset value thereof at the time of purchase, as allowed pursuant to rules
promulgated under the 1940 Act.
10. CONFLICTS WITH TRUST'S GOVERNING DOCUMENTS AND APPLICABLE LAWS.
Nothing herein contained shall be deemed to require the Trust or the Funds to
take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation, or to relieve or deprive the
Board of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Trust and Funds.
11. MANAGER'S LIABILITIES.
(a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability to the Trust
or the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
-5-
<PAGE>
that may be sustained in the purchase, holding or sale of any security or other
asset or instrument by the Funds.
(b) The Funds shall indemnify and hold harmless the Manager
and the shareholders, directors, officers and employees of the Manager (any such
person, an "Indemnified Party") against any loss, liability, claim, damage or
expense (including the reasonable cost of investigating and defending any
alleged loss, liability, claim, damage or expense and reasonable legal fees
incurred in connection therewith) arising out of the Indemnified Party's
performance or non-performance of any duties under this Agreement, provided,
however, that nothing herein shall be deemed to protect any Indemnified Party
against any liability to which such Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties hereunder or by reason of reckless disregard of its
obligations and duties under this Agreement.
(c) No provision of this Agreement shall be construed to
protect any Trustee or officer of the Trust, or officer of the Manager, from
liability in violation of Sections 17(h) and (i) of the 1940 Act.
12. NON-EXCLUSIVITY. The Trust's employment of the Manager is not an
exclusive arrangement, and the Trust may from time to time employ other
individuals or entities to furnish it with the services provided for herein. In
the event this Agreement is terminated with respect to any Fund, this Agreement
shall remain in full force and effect with respect to any and all other Funds
listed on APPENDIX A hereto, as the same may be amended.
13. TERM. This Agreement shall become effective at the time the Trust's
initial Registration Statement under the Securities Act of 1933 with respect to
the shares of the Trust is declared effective by the Securities and Exchange
Commission and shall remain in effect for a period of two (2) years, unless
sooner terminated as hereinafter provided. This Agreement shall continue in
effect as to each Fund after such initial two-year period for additional periods
not exceeding one (l) year so long as such continuation is approved with respect
to such Fund at least annually by (i) the Board of Trustees of the Trust or by
the vote of a majority of the outstanding voting securities of such Fund and
(ii) the vote of a majority of the Trustees of the Trust who are not parties to
this Agreement nor interested persons thereof, cast in person at a meeting
called for the purpose of voting on such approval.
14. TERMINATION. This Agreement may be terminated by the Trust on
behalf of any one or more of the Funds, without payment of any penalty, by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of a Fund, upon sixty (60) days' prior written notice to the
Manager, and by the Manager upon sixty (60) days' prior written notice to a
Fund.
15. TERMINATION BY ASSIGNMENT. This Agreement shall terminate
automatically in the event of any transfer or assignment thereof, as defined in
the 1940 Act.
-6-
<PAGE>
16. TRANSFER, ASSIGNMENT. This Agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged without the affirmative
vote or written consent of the holders of a majority of the outstanding voting
securities of each Fund.
17. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.
18. DEFINITIONS. The terms "majority of the outstanding voting
securities" and "interested persons" shall have the meanings as set forth in the
1940 Act.
19. NOTICE OF DECLARATION OF TRUST. The Manager agrees that the Trust's
obligations under this Agreement shall be limited to the Funds and to their
respective assets, and that the Manager shall not seek satisfaction of any such
obligation from the shareholders of the Funds nor from any Trustee, officer,
employee or agent of the Trust or the Funds.
20. CAPTIONS. 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.
21. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation or
rule, including the 1940 Act and the Investment Advisors Act of 1940 and any
rules and regulations promulgated thereunder.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers, all on the day and
year first above written.
THE PURISIMA FUNDS FISHER INVESTMENTS, INC.
By: _______________________ By: _______________________
Name: Kenneth L. Fisher Name: Kenneth L. Fisher
Title: President Title: President
-8-
<PAGE>
THE PURISIMA FUNDS
APPENDIX A
to the Investment Management Agreement
The provisions of the Comprehensive Management Agreement between the Trust and
the Manager apply to the following series of the Trust:
Fund Effective Date
---- --------------
1. The Purisima Pure American Fund September 29, 1998
2. The Purisima Pure Foreign Fund September 29, 1998
-9-
<PAGE>
THE PURISIMA FUNDS
APPENDIX B
to the Investment Management Agreement
Each Fund shall pay to the Manager, as full compensation for all investment
management, advisory and administrative services furnished or provided to such
Fund pursuant to the Comprehensive Management Agreement, a management fee based
upon each Fund's average daily net assets at the following per annum rates:
Fund Fee
---- ---
1. The Purisima Pure American Fund 1.50%
2. The Purisima Pure Foreign Fund 1.50%
-10-
PAUL, HASTINGS, JANOFSKY & WALKER LLP
345 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
Telephone (415) 835-1600
Facsimile (415) 217-5333
September 25, 1998
The Purisima Funds
13100 Skyline Boulevard
Woodside, California 94062
Ladies and Gentlemen:
Re: The Purisima Pure American Fund and The Purisima Pure Foreign Fund
We have acted as counsel to The Purisima Funds, a Delaware business
trust (the "Trust"), in connection with Post-Effective Amendment Nos. 4, 5 and 6
to the Trust's Registration Statement on Form N-1A filed (in the case of
Post-Effective Amendment No. 6, to be filed) with the Securities and Exchange
Commission on June 15, 1998, July 31, 1998 and on or about September 28, 1998,
respectively (the "Post-Effective Amendments") and relating to the issuance by
the Trust of an indefinite number of $0.01 par value shares of beneficial
interest (the "Shares") of two new series of the Trust, The Purisima Pure
American Fund and The Purisima Pure Foreign Fund (collectively, the "Funds").
In connection with this opinion, we have assumed the authenticity of
all records, documents and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of all natural persons, and
the conformity to the originals of all records, documents, and instruments
submitted to us as copies. We have based our opinion on the following:
(a) the Trust's Declaration of Trust dated as of June 27, 1996 (the
"Declaration of Trust"), and the Trust's Certificate of Trust as filed with the
Secretary of State of Delaware on June 27, 1996, certified to us as in effect on
the date hereof;
(b) the By-Laws of the Trust;
<PAGE>
(c) resolutions of the Trustees of the Trust adopted at a meeting on
July 16, 1998, authorizing the establishment of the Funds and the issuance of
the Shares;
(d) the Post-Effective Amendments; and
(e) a certificate of an officer of the Trust as to certain factual
matters relevant to this opinion.
Our opinion below is limited to the federal law of the United States of
America and the business trust law of the State of Delaware. We are not licensed
to practice law in the State of Delaware, and we have based our opinion below
solely on our review of Chapter 38 of Title 12 of the Delaware Code and the case
law interpreting such Chapter as reported in Delaware Code Annotated (as updated
on Westlaw, September 24, 1998). We have not undertaken a review of other
Delaware law or of any administrative or court decisions in connection with
rendering this opinion. We disclaim any opinion as to any law other than that of
the United States of America and the business trust law of the State of Delaware
as described above, and we disclaim any opinion as to any statute, rule,
regulation, ordinance, order or other promulgation of any regional or local
governmental authority.
Based on the foregoing and our examination of such questions of law as
we have deemed necessary and appropriate for the purpose of this opinion, and
assuming that (i) all of the Shares will be issued and sold for cash at the
per-share public offering price on the date of their issuance in accordance with
statements in the Trust's Prospectus included in the Post-Effective Amendments
and in accordance with the Declaration of Trust, (ii) all consideration for the
Shares will be actually received by the Trust, and (iii) all applicable
securities laws will be complied with, it is our opinion that, when issued and
sold by the Trust, the Shares will be legally issued, fully paid and
nonassessable.
This opinion is rendered to you in connection with the Post-Effective
Amendments and is solely for your benefit. This opinion may not be relied upon
by you for any other purpose or relied upon by any other person, firm,
corporation or other entity for any purpose, without our prior written consent.
We disclaim any obligation to advise you of any developments in areas covered by
this opinion that occur after the date of this opinion.
<PAGE>
We hereby consent to (i) the reference to our firm as Legal Counsel in
the Prospectus included in the Post-Effective Amendments, and (ii) the filing of
this opinion as an exhibit to Post-Effective Amendment No. 6.
Very truly yours,
/s/ Paul, Hastings, Janofsky & Walker LLP
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. 6 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated September 29, 1998, relating to the financial
statements appearing in the August 31, 1998 Annual Report on Form N-SAR 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.
PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
September 29, 1998
THE PURISIMA FUNDS
POWER OF ATTORNEY
KNOWN ALL BY THESE PRESENTS, that the person(s) whose signature appears
below constitutes and appoints each of the following individually:
Kenneth L. Fisher
Sherrilyn A. Fisher
David A. Hearth
Eric M. Banhazl
to act as attorney-in-fact and agent, with power of substitution and
resubstitution, for the undersigned in any and all capacities to execute any and
all documents relating to The Purisima Funds, including but not limited to
registration statements, amendments to registration statements, proxy
solicitation materials, applications and amendments to applications, and to file
the same, with exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission and/or securities authorities of the
state and other domestic or foreign jurisdictions, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they might or could do in
person, hereby ratifying and conforming all that said attorney-in-fact, or their
substitute or substitutes, may do or cause to be done by virtue hereof.
Dated: July 16, 1998
/s/ Pierson E. Clair III
--------------------------------
Pierson E. Clair III
Trustee
<PAGE>
THE PURISIMA FUNDS
POWER OF ATTORNEY
KNOWN ALL BY THESE PRESENTS, that the person(s) whose signature appears
below constitutes and appoints each of the following individually:
Kenneth L. Fisher
Sherrilyn A. Fisher
David A. Hearth
Eric M. Banhazl
to act as attorney-in-fact and agent, with power of substitution and
resubstitution, for the undersigned in any and all capacities to execute any and
all documents relating to The Purisima Funds, including but not limited to
registration statements, amendments to registration statements, proxy
solicitation materials, applications and amendments to applications, and to file
the same, with exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission and/or securities authorities of the
state and other domestic or foreign jurisdictions, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they might or could do in
person, hereby ratifying and conforming all that said attorney-in-fact, or their
substitute or substitutes, may do or cause to be done by virtue hereof.
Dated: July 16, 1998
/s/Grover Wickersham
------------------------
Grover Wickersham
Trustee
<PAGE>
THE PURISIMA FUNDS
POWER OF ATTORNEY
KNOWN ALL BY THESE PRESENTS, that the person(s) whose signature appears
below constitutes and appoints each of the following individually:
Kenneth L. Fisher
Sherrilyn A. Fisher
David A. Hearth
Eric M. Banhazl
to act as attorney-in-fact and agent, with power of substitution and
resubstitution, for the undersigned in any and all capacities to execute any and
all documents relating to The Purisima Funds, including but not limited to
registration statements, amendments to registration statements, proxy
solicitation materials, applications and amendments to applications, and to file
the same, with exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission and/or securities authorities of the
state and other domestic or foreign jurisdictions, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they might or could do in
person, hereby ratifying and conforming all that said attorney-in-fact, or their
substitute or substitutes, may do or cause to be done by virtue hereof.
Dated: July 16, 1998
/s/Bryan Morse
----------------------
Bryan Morse
Trustee
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 1019946
<NAME> THE PURISIMA FUNDS
<SERIES>
<NUMBER> 1
<NAME> PURISIMA TOTAL RETURN FUND
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 23617573
<INVESTMENTS-AT-VALUE> 21875970
<RECEIVABLES> 44752
<ASSETS-OTHER> 110022
<OTHER-ITEMS-ASSETS> 0
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