PURISIMA FUNDS
1999 ANNUAL REPORT
The Purisima Total Return Fund
The Purisima Pure American Fund
The Purisima Pure Foreign Fund
"Perhaps the only investment you'll need."
<PAGE>
TABLE OF CONTENTS
Shareholder Letter Pages 1 - 4
Performance Summaries Pages 5 - 6
Financial Information Pages 7 - 15
Notes to Financial Statements Pages 16 - 18
Report of Independent Accountants Page 19
INVESTMENT OBJECTIVES
Total Return Fund
Seeks to provide investors with a high level of total return by considering
both domestic and foreign securities.
PURE AMERICAN FUND
Seeks to provide investors with a high level of total return, while
concentrating its holdings in U.S. securities.
PURE FOREIGN FUND
Seeks to provide investors with a high level of total return, while
concentrating its holdings in securities outside the U.S.
<PAGE>
A LETTER TO OUR SHAREHOLDERS
We are pleased to bring you the annual report of the Purisima Funds for the
twelve-month period ended August 31, 1999. During the reporting period, we
continued to pursue our investment objective of seeking a high total return for
our shareholders. The Purisima Total Return Fund is now only two months away
from recording three years of offering the portfolio management skills of Fisher
Investments to mutual fund investors. Meanwhile, the Pure American and Pure
Foreign Funds are just one month away from concluding their first year. Begun on
September 29, 1998, both these funds have established solid performance over the
preceding eleven months by building on our many years of experience in managing
domestic and foreign portfolios for large investors.
DOMESTIC OVERVIEW
America's stock market performance over the one-year period had a direct
impact on the Purisima Pure American Fund with its 99.4% weighting in U.S.
stocks, while the Total Return Fund with its significant exposure to domestic
holdings was also very much affected by U.S. economic developments. Many of
these developments were positive, as the current expansion has become the
longest peacetime period of sustained economic growth in our history. During the
reporting period, corporate profits hit new highs, while positive earnings
surprises were their loftiest in twelve years. The rising economy has been
driven by increases in productivity, substantial growth in real wages, low
inflation and healthy consumer spending.
PURISIMA TOTAL RETURN
Country Allocation as of 8/31/99
United States 65.9%
Japan 8.9%
France 4.1%
Netherlands 3.8%
Spain 3.7%
Germany 2.9%
Sweden 2.2%
Italy 2.1%
Denmark 1.3%
Finland 1.3%
Australia 1.2%
Norway 1.2%
United Kingdom 0.7%
Portugal 0.6%
Strong economic fundamentals drove stock prices higher. This period was
notable for the style performance of U.S. stocks. As has previously been the
case, performance was often an issue of size, though Internet stocks remained
unpredictable with their prices fluctuating wildly. We continue to believe that
late in a bull market the largest stocks offer superior returns and lower risk,
versus smaller stocks. The performance spread between large and small stocks was
significant in 1998, and the year finished still favoring the equities of
companies with the largest capitalizations.
- --------------------------------------------------------------------------------
1
<PAGE>
The first quarter of 1999 saw mixed results, while May and June of the
second quarter strongly favored small stocks over large ones. In our opinion
this was a short-lived countertrend, and we saw evidence of this pattern
reversing to again favor large stocks toward the reporting period's end. On a
calendar year basis giant stocks have led the broad market each year since 1995.
We expect 1999 to be no exception, and our research continues to support our
inclination toward holding those domestic stocks with the greatest market
capitalizations.
Stocks largely shrugged off two quarter-point interest rate hikes by the
Federal Reserve in 1999. Earlier upheavals in foreign markets had partially led
the Fed to previously cut rates three times. Many pundits believe that with
those foreign economies improving, the Fed was simply moving U.S. rates closer
to where they were prior to the earlier cuts, and this signaled little in
regards to America's economy. Such rate hikes however, portend a potential
increase in foreign investment. We believe with U.S. interest rates
substantially higher and more attractive than those offered in the European
Union or Japan, many overseas investors will continue to pour money into
America.
FOREIGN OVERVIEW
Although our foreign selections lagged the very strong performance of our
U.S. stock picks in 1998, the current year has witnessed the opposite occurring.
This very scenario is why we have advised folks to maintain some foreign equity
exposure. While we remain over-weighted in domestic stocks and are still bullish
on them, we realize our American holdings cannot always outperform other
investments in every given calendar quarter. The global portfolio of our Total
Return Fund is structured in what we believe is the ideal mix of return and risk
with the belief that our foreign holdings will take a leadership role during
periods when our domestic stocks lag.
PURISIMA PURE FOREIGN
Country Allocation as of 8/31/99
Japan 24.8%
France 12.5%
Spain 11.9%
Netherlands 11.1%
Sweden 8.5%
Italy 7.6%
Germany 7.5%
Finland 4.3%
Norway 3.6%
Australia 3.5%
Denmark 3.5%
Portugal 1.1%
- --------------------------------------------------------------------------------
2
<PAGE>
Over the past several months this strategy paid off handsomely for
shareholders of the Total Return Fund, while those holding our Pure Foreign Fund
enjoyed strong returns, as our foreign selections did significantly better than
many investment alternatives. This performance was robust enough for the Pure
Foreign Fund to eclipse our Pure American Fund, the S&P 500, and its own
benchmark of the Morgan Stanley EAFE Foreign Index, during the reporting period.
Driving our strong foreign performance were several important factors. We
remained focused on large, global exporters in developed economies. Stock prices
for many of these companies experienced significant increases, as several
overseas economies showed signs of sustainable economic growth. Our primary
portfolio focus remained maintaining proper country weights versus the Morgan
Stanley EAFE Foreign Index, and this had a substantial, positive impact on our
foreign returns. Among Europe's larger economies we significantly overweighted
Spain, the Netherlands, and Sweden, while maintaining little or no exposure to
England or Switzerland.
Japan remained our largest foreign country weight, and over the period we
increased our Japanese exposure. This proved a wise decision, as Japan's stock
market enjoyed the strongest returns of all major markets in the first half of
1999. Propelling this breakout performance, the Japanese economy expanded for
the first time in eighteen months between January and March. Japan's government
is optimistic that this is the light at the end of the dark tunnel of recession
they've been in. Although also hopeful, we don't anticipate substantially
increasing our exposure further, until seeing more signs their minor expansion
is sustainable and Japanese commitment to further economic reform is real.
- --------------------------------------------------------------------------------
3
<PAGE>
Closing Remarks
In our domestic portfolio selection we expect to continue in the short term
investing exclusively in the largest U.S. stocks. Although Fisher Investments
was a pioneer of small cap value investing, we don't anticipate purchasing
smaller stocks until the end of the next bear market. Many folks claim small
stocks outperform large, but on a historical basis the outperformance of small
caps is derived almost entirely from periods right after bear markets. Only
during such a period do we envision changing our domestic strategy to favor
companies with smaller capitalizations. In our foreign selections, we plan to
continue emphasizing Western Europe and Japan. Despite a small position in
Australia, we remain wary of most other foreign markets. We do not anticipate
considering the non-Japan Pacific Rim for some time.
Looking forward, we are optimistic in regards to the world's major
economies. We believe Europe's economic growth will continue, while Japan has
shown the first signs of a possible economic turnaround. Meanwhile, America's
economy could hardly be healthier in our view. As we head into the last four
months of 1999, we believe U.S. stocks will finish strong. Equities remain an
asset class that in our opinion offers superior returns with what we judge to be
below average risk in the current environment. The reporting period saw bond
prices take a beating, and we were rewarded for having no exposure to this asset
class. Going forward, we believe our current portfolios are well structured to
successfully continue the growth of our shareholders' assets.
Sincerely,
/s/ Kenneth L. Fisher
Kenneth L. Fisher
CHAIRMAN AND CHIEF INVESTMENT OFFICER
FISHER INVESTMENTS, INC.
- --------------------------------------------------------------------------------
4
<PAGE>
PERFORMANCE SUMMARIES
FOR PERIOD ENDING
AUGUST 31, 1999
PURISIMA TOTAL RETURN FUND
GROWTH OF $10,000
PURISIMA TOTAL RETURN FUND CUMULATIVE TOTAL RETURN VERSUS MSCI WORLD INDEX
$10,000 INVESTED FROM INCEPTION ON 10/31/96 TO 8/31/99*
Purisima Total Return MSCI World Index
--------------------- ----------------
10/28/96 $ 10,000 $ 10,000
11/30/96 $ 10,260 $ 10,558
12/31/96 $ 10,100 $ 10,387
1/31/97 $ 10,550 $ 10,511
2/28/97 $ 10,480 $ 10,630
3/31/97 $ 10,250 $ 10,417
4/30/97 $ 10,860 $ 10,756
5/31/97 $ 11,520 $ 11,418
6/30/97 $ 12,200 $ 11,985
7/31/97 $ 12,770 $ 12,535
8/31/97 $ 11,870 $ 11,695
9/30/97 $ 12,610 $ 12,328
10/31/97 $ 11,910 $ 11,677
11/30/97 $ 12,150 $ 11,882
12/31/97 $ 12,384 $ 12,025
1/31/98 $ 12,755 $ 12,358
2/28/98 $ 13,576 $ 13,192
3/31/98 $ 14,228 $ 13,747
4/30/98 $ 14,709 $ 13,879
5/31/98 $ 14,568 $ 13,703
6/30/98 $ 14,928 $ 14,026
7/31/98 $ 14,929 $ 14,001
8/31/98 $ 12,494 $ 12,132
9/30/98 $ 12,845 $ 12,344
10/31/98 $ 14,157 $ 13,458
11/30/98 $ 15,199 $ 14,256
12/31/98 $ 16,035 $ 14,950
1/31/99 $ 16,806 $ 15,276
2/28/99 $ 16,305 $ 14,868
3/31/99 $ 16,836 $ 15,485
4/30/99 $ 17,117 $ 16,093
5/31/99 $ 16,606 $ 15,503
6/30/99 $ 17,728 $ 16,224
7/31/99 $ 17,388 $ 16,173
8/31/99 $ 17,498 $ 16,142
ONE-YEAR
Cumulative Total Return(1) 40.05%
SINCE INCEPTION (10/28/96)
Cumulative Total Return(1) 74.98%
Average Annual Total Return(2) 21.77%
PLEASE NOTE PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. SHARE PRICE
AND RETURN WILL FLUCTUATE, AND INVESTORS MAY EXPERIENCE A GAIN OR LOSS WHEN THEY
SELL THEIR SHARES. TO OBTAIN A PROSPECTUS ON THE PURISIMA FUNDS PLEASE CALL
1-800/841-0199. THE PROSPECTUS CONTAINS MORE INFORMATION, INCLUDING THE
POLITICAL, ECONOMIC, CURRENCY RISKS AND POTENTIAL VOLATILITY OF FOREIGN
INVESTING. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
1. Cumulative total return measures the change in value of an investment over
the periods indicated and reflects all fund fees and expenses.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and reflects all fund fees and
expenses. Average annual total return and cumulative total return for the
one-year period would be identical.
* The Morgan Stanley MSCI World is obtained from Morgan Stanley and is an
unmanaged global stock index comprised of various world stock markets,
including the U.S. Purisima total return of a $10,000 investment includes
all expenses. Fund's month-end inception was 10/31/96 with actual inception
on 10/28/96.
+ The S&P 500 is obtained from Standard & Poors corp. It is an unmanaged stock
index that measures the performance of 500 large cap companies traded in the
U.S. Total return of a $10,000 investment in Purisima includes all expenses.
Fund's month-end inception was 9/30/98 with actual inception on 9/29/98.
++ The EAFE Index is obtained from Morgan Stanley. It is an unmanaged stock
index that measures the performance of selected stock markets outside the U.S.
Purisima total return of a $10,000 investment includes all expenses.Fund's
month-end inception was 9/30/98 with actual inception on 9/29/98.
FIRST FUND DISTRIBUTORS, INC. PHOENIX, AZ 85018.
- --------------------------------------------------------------------------------
5
<PAGE>
PURE AMERICAN FUND
GROWTH OF $10,000
PURE AMERICAN FUND CUMULATIVE TOTAL RETURN VERSUS S&P 500 INDEX $10,000 INVESTED
FROM INCEPTION ON 9/30/98 TO 8/31/99+
Purisima Pure American S&P 500 Index
---------------------- -------------
9/30/98 $ 10,000 $ 10,000
10/31/98 $ 11,190 $ 10,813
11/30/98 $ 11,920 $ 11,468
12/31/98 $ 12,810 $ 12,128
1/31/99 $ 13,300 $ 12,638
2/28/99 $ 12,630 $ 12,243
3/31/99 $ 12,940 $ 12,732
4/30/99 $ 13,040 $ 13,228
5/31/99 $ 12,630 $ 12,801
6/30/99 $ 13,390 $ 13,630
7/31/99 $ 12,930 $ 13,206
8/31/99 $ 13,000 $ 13,139
SINCE INCEPTION (9/29/98)
Cumulative Total Return(1) 30.00%
PURE FOREIGN FUND
GROWTH OF $10,000
PURE FOREIGN FUND CUMULATIVE TOTAL RETURN VERSUS EAFE FOREIGN INDEX $10,000
INVESTED FROM INCEPTION ON 9/30/98 TO 8/31/99++
Purisima Pure Foreign EAFE Foreign Index
--------------------- ------------------
9/30/98 $ 10,000 $ 10,000
10/31/98 $ 10,710 $ 11,042
11/30/98 $ 11,430 $ 11,607
12/31/98 $ 11,740 $ 12,064
1/31/99 $ 12,150 $ 12,028
2/28/99 $ 11,750 $ 11,742
3/31/99 $ 12,350 $ 12,232
4/30/99 $ 12,740 $ 12,727
5/31/99 $ 12,320 $ 12,072
6/30/99 $ 13,210 $ 12,543
7/31/99 $ 13,410 $ 12,915
8/31/99 $ 13,520 $ 12,965
SINCE INCEPTION (9/29/98)
Cumulative Total Return(1) 35.20%
- --------------------------------------------------------------------------------
6
<PAGE>
SCHEDULE OF INVESTMENTS
PURISIMA TOTAL RETURN
AUGUST 31, 1999
% OF
# OF SHARES COMMON STOCKS NET ASSETS VALUE
- ----------- ------------- ---------- -----------
AUTOMOBILES 3.0%
6,516 DaimlerChrysler AG - ADR $ 489,922
18,720 Fiat SpA - ADR 608,400
5,000 Toyota Motors - ADR 314,687
5,700 Volvo AB - ADR 158,531
-----------
1,571,540
-----------
BANKING 6.4%
34,900 Banco Bilbao Vizcaya - ADR 468,969
16,615 BankAmerica Corp. 1,005,207
49,650 Bank of Tokyo - Mitsubishi - ADR 775,781
5,800 National Australia Bank LTD - ADR 440,075
18,696 San Paolo - IMI SpA - ADR 501,286
7,800 WestPac Banking - ADR 237,900
-----------
3,429,218
-----------
CHEMICALS 1.9%
9,700 Hoechst AG Sponsored ADR 408,006
15,000 Norsk Hydro A/S - ADR 629,062
-----------
1,037,068
-----------
COMMUNICATION EQUIPMENT 6.0%
24,700 Alcatel Alsthom - ADR 764,156
19,600 Ericsson (LM) Telecommunications - ADR 638,225
17,300 Lucent Technologies, Inc. 1,108,281
8,400 Nokia Corp. - ADR A 700,350
-----------
3,211,012
-----------
COMPUTER COMPONENTS & SOFTWARE 6.1%
18,024 Cisco Systems, Inc.* 1,222,252
12,500 Microsoft Corp.* 1,157,031
10,900 NEC Corp. - ADR 877,450
-----------
3,256,733
-----------
COMPUTERS 5.2%
29,400 Dell Computer Corp.* 1,435,087
10,800 IBM Corp. 1,345,275
-----------
2,780,362
-----------
CONSUMER PRODUCTS 2.2%
19,800 Coca-Cola Co. 1,184,288
-----------
ELECTRIC UTILITIES 1.1%
29,600 Endesa SA - ADR 595,700
-----------
ELECTRICAL EQUIPMENT 5.8%
27,700 ABB AB - ADR 373,950
10,400 General Electric Co. 1,168,050
8,050 Hitachi Ltd - ADR 816,069
6,750 Philips Electronics 693,984
-----------
3,052,053
-----------
FINANCIAL SERVICES 3.4%
25,075 Citigroup Inc. 1,114,270
7,100 Federal National Mortgage Association 441,088
5,000 ING Groep N.V. - ADR 274,375
-----------
1,829,733
-----------
FOOD 0.7%
5,625 Unilever N.V. 387,422
-----------
HOUSEHOLD PRODUCTS 2.2%
12,000 Procter & Gamble Co. 1,191,000
-----------
HOUSEHOLD AUDIO & VIDEO EQUIPMENT 1.3%
5,400 Sony Corp. - ADR 687,488
-----------
INSURANCE 4.6%
12,996 American Int'l Group 1,204,567
4,700 Axa SA - ADR 294,338
485 Berkshire Hathaway Inc - Class B* 971,455
-----------
2,470,360
-----------
- --------------------------------------------------------------------------------
7
<PAGE>
% OF
# OF SHARES COMMON STOCKS NET ASSETS VALUE
- ----------- ------------- ---------- -----------
MULTIMEDIA 1.7%
15,600 Time Warner, Inc. $ 925,275
-----------
OIL & GAS 5.5%
3,300 Elf Aquitaine - ADR 290,606
14,000 Exxon Corp. 1,104,250
23,700 Repsol SA - ADR 494,738
10,500 Royal Dutch Petroleum 649,688
6,150 Total Fina SA - ADR 400,134
-----------
2,939,416
-----------
PHARMACEUTICALS 17.7%
19,700 American Home Products 817,550
9,535 Astrazeneca PLC 375,441
16,800 Bristol-Myers Squibb Co. 1,182,300
11,800 Johnson & Johnson 1,206,550
17,200 Lilly (Eli) & Co. 1,283,550
18,000 Merck & Co., Inc. 1,209,375
9,400 Novo-Nordisk A/S- ADR 547,550
33,400 Pfizer, Inc. 1,260,850
8,400 Rhone - Poulenc SA - ADR 407,925
20,000 Schering-Plough Corp. 1,051,250
-----------
9,342,341
-----------
PHOTOGRAPHY 1.2%
17,700 Fuji Photo Film - ADR 646,050
-----------
RADIO & TV BROADCASTING EQUIPMENT 1.1%
Matsushita Electric Industrial Co.,
3,000 Ltd 603,188
-----------
RETAIL 4.4%
18,800 Home Depot 1,149,150
27,200 Wal-Mart Stores, Inc. 1,205,300
-----------
2,354,450
-----------
SEMI-CONDUCTORS 3.0%
19,100 Intel Corp. 1,569,781
-----------
TELECOMMUNICATIONS 13.2%
23,275 AT&T Corp. 1,047,375
18,300 Bell Atlantic Corp. 1,120,875
23,550 Bellsouth Corp. 1,065,638
14,900 DeutscheTelekom - ADR 661,188
15,300 MCI Worldcom, Inc.* 1,158,975
7,000 Portugal Telecom SA 290,938
21,650 SBC Communications Inc. 1,039,200
5,000 Tele Danmark A/S - ADR 140,625
9,051 Telefonica De Espana - ADR 436,145
-----------
6,960,959
-----------
TOBACCO PRODUCTS 2.0%
27,850 Philip Morris Cos., Inc. 1,042,634
-----------
TOTAL COMMON STOCKS 99.7%
(cost $44,628,150) 53,068,071
-----------
SHORT-TERM INVESTMENTS 0.3%
UMB Bank, N.A. Money Market Fiduciary 155,828
(cost $155,828)
TOTAL INVESTMENTS 100.0% 53,223,899
(cost $44,783,978) -----------
LIABILITIES, LESS
OTHER ASSETS 0.0% -24,403
-----------
NET ASSETS 100.0% $53,199,496
-----------
* Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8
<PAGE>
SCHEDULE OF INVESTMENTS
PURE AMERICAN
AUGUST 31, 1999
% OF
# OF SHARES COMMON STOCKS NET ASSETS VALUE
- ----------- ------------- ---------- -----------
BANKING 3.0%
750 BankAmerica Corp. $ 45,375
-----------
COMMUNICATION EQUIPMENT 3.1%
725 Lucent Technologies, Inc. 46,445
-----------
COMPUTER COMPONENTS & SOFTWARE 7.1%
750 Cisco Systems, Inc.* 50,859
600 Microsoft Corp.* 55,538
-----------
106,397
-----------
COMPUTERS 7.0%
1,200 Dell Computer Corp.* 58,575
375 IBM Corp. 46,711
-----------
105,286
-----------
CONSUMER PRODUCTS 3.1%
775 Coca-Cola Co. 46,355
-----------
ELECTRICAL EQUIPMENT 3.4%
450 General Electric Co. 50,541
-----------
FINANCIAL SERVICES 6.2%
1,050 Citigroup Inc. 46,659
750 Federal National Mortgage Association 46,594
-----------
93,253
-----------
HOUSEHOLD PRODUCTS 3.5%
525 Procter & Gamble Co. 52,106
-----------
INSURANCE 6.3%
550 American Int'l Group 50,978
22 Berkshire Hathaway Inc-B* 44,066
-----------
95,044
-----------
OIL & GAS 3.1%
600 Exxon Corp. 47,325
-----------
PHARMACEUTICALS 22.7%
750 American Home Products 31,125
700 Bristol-Myers Squibb Co. 49,262
500 Johnson & Johnson 51,125
750 Lilly (Eli) & Co. 55,969
775 Merck & Co., Inc. 52,070
1,400 Pfizer, Inc. 52,850
950 Schering-Plough Corp. 49,934
-----------
342,335
-----------
PUBLISHING AND PRINTING 3.2%
800 Time Warner, Inc. 47,450
-----------
RETAIL 6.4%
800 Home Depot 48,900
1,075 Wal-Mart Stores, Inc. 47,636
-----------
96,536
-----------
SEMI-CONDUCTORS 3.3%
600 Intel Corp. 49,313
-----------
TELECOMMUNICATIONS 14.8%
975 AT&T Corp. 43,875
750 Bell Atlantic Corp. 45,937
1,000 Bellsouth Corp. 45,250
600 MCI Worldcom, Inc.* 45,450
875 SBC Communications Inc. 42,000
-----------
222,512
-----------
TOBACCO PRODUCTS 3.2%
1,275 Philip Morris Cos., Inc. 47,733
-----------
TOTAL COMMON STOCKS 99.4%
(cost $1,427,051) 1,494,006
-----------
SHORT-TERM INVESTMENTS 0.5%
UMB Bank, N.A. Money Market Fiduciary 7,487
(cost $7,487) -----------
TOTAL INVESTMENTS 99.9% 1,501,493
(COST $1,434,538) -----------
OTHER ASSETS, LESS LIABILITIES 0.1% 947
-----------
NET ASSETS 100.0% $ 1,502,440
-----------
* Non-income producing security.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
9
<PAGE>
SCHEDULE OF INVESTMENTS
PURE FOREIGN
AUGUST 31, 1999
% OF
# OF SHARES COMMON STOCKS NET ASSETS VALUE
- ----------- ------------- ---------- -----------
AUSTRALIA 3.5%
National Australia Bank - Sponsored
75 ADR $ 5,691
150 Westpac Banking - Sponsored ADR 4,575
-----------
10,266
-----------
DENMARK 3.5%
175 Novo-Nordisk A/S - ADR 10,194
-----------
FINLAND 4.3%
150 Nokia Corp. - ADR 12,506
-----------
FRANCE 12.4%
300 Alcatel Alsthom - Sponsored ADR 9,281
175 Axa SA - Sponsored ADR 10,959
100 Elf Aquitaine - Sponsored ADR 8,806
75 Rhone-Poulenc SA - Sponsored ADR 3,642
50 Total Fina SA - Sponsored ADR 3,253
-----------
35,941
-----------
GERMANY 7.5%
100 DaimlerChrysler AG - ADR 7,519
225 Deutsche Telekom - Sponsored ADR 9,984
100 Hoechst AG - Sponsored ADR 4,206
-----------
21,709
-----------
ITALY 7.6%
300 Fiat SpA - ADR 9,750
456 San Paolo - IMI SpA - ADR 12,227
-----------
21,977
-----------
JAPAN 24.7%
750 Bank of Toyko-Mitsubishi - ADR 11,719
300 Fuji Photo Film - ADR 10,950
100 Hitachi Ltd. - ADR 10,138
40 Matsushita Electric Industrial Co., Ltd. - ADR 8,042
150 NEC Corp. - Sponsored ADR 12,075
75 Sony Corp. - ADR 9,548
150 Toyota Motor Corp. - Unsponsored ADR 9,441
-----------
71,913
-----------
NETHERLANDS 11.0%
175 ING Groep N. V. - ADR 9,603
94 Philips Electronics N.V. - ADR 9,664
75 Royal Dutch Petroleum NY Registry Shares 4,641
119 Unilever N.V. - ADR 8,196
-----------
32,104
-----------
NORWAY 3.6%
250 Norsk Hydro A/S - Sponsored ADR $ 10,484
-----------
PORTUGAL 1.1%
75 Portugal Telecom SA - ADR 3,117
-----------
SPAIN 11.9%
600 Banco Bilbao Vizcaya - ADR 8,063
600 Endesa SA - ADR 12,075
225 Repsol SA - Sponsored ADR 4,697
200 Telefonica De Espana - ADR 9,638
-----------
34,473
-----------
SWEDEN 8.5%
350 ABB AB - Sponsored ADR 4,725
275 Ericsson (LM) Telecommunications - ADR 8,955
400 Volvo AB - Sponsored ADR 11,125
-----------
24,805
-----------
TOTAL COMMON STOCKS 99.6% 289,489
(cost $251,148) -----------
SHORT-TERM INVESTMENTS 0.5%
UMB Bank, N.A. Money Market Fiduciary 1,488
(cost $1,488) -----------
TOTAL INVESTMENTS 100.1% 290,977
(cost $252,636) -----------
LIABILITIES LESS OTHER ASSETS -0.1% -160
-----------
NET ASSETS 100.0% $ 290,817
-----------
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
10
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1999
<TABLE>
<CAPTION>
TOTAL PURE PURE
RETURN AMERICAN FOREIGN
FUND FUND FUND
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments at value $53,223,899 $ 1,501,493 $ 290,977
(cost of $44,783,978, $1,434,538, $252,636)
Dividends and interest receivable 35,739 1,359 193
Receivable for Fund shares sold 5,000 1,419 --
Deferred organizational costs, net 58,859 -- --
Prepaid expenses 21,136 -- --
----------- ----------- -----------
Total Assets 53,344,633 1,504,271 291,170
----------- ----------- -----------
LIABILITIES:
Payable for Fund shares redeemed 12,500 -- --
Payable to adviser (Notes 2 and 4) 76,661 1,713 353
Other accrued expenses 55,976 118 --
----------- ----------- -----------
Total Liabilities 145,137 1,831 353
----------- ----------- -----------
NET ASSETS $53,199,496 $ 1,502,440 $ 290,817
----------- ----------- -----------
COMPOSITION OF NET ASSETS
Capital stock $44,887,908 $ 1,435,148 $ 250,125
Accumulated net investment income (loss) 16,171 -2,107 884
Accumulated net realized gain (loss) on
investments -144,504 2,444 1,467
Net unrealized appreciation on investments 8,439,921 66,955 38,341
----------- ----------- -----------
NET ASSETS $53,199,496 $ 1,502,440 $ 290,817
=========== =========== ===========
Number of shares issued and outstanding
($0.01 par value, unlimited shares
authorized) 3,046,638 115,601 21,513
----------- ----------- -----------
NET ASSET VALUE PER SHARE $ 17.46 $ 13.00 $ 13.52
----------- ----------- -----------
</TABLE>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
11
<PAGE>
STATEMENTS OF OPERATIONS
AUGUST 31, 1999
PURE AMERICAN PURE FOREIGN
TOTAL RETURN FUND FROM FUND FROM
FUND FOR THE 9/29/98+ 9/29/98+
YEAR ENDED THROUGH THROUGH
8/31/99 8/31/99 8/31/99
----------- ----------- -----------
INVESTMENT INCOME:
Dividends
(net of foreign taxes withheld
of $47,619, 0, $576) $ 548,330 $ 6,159 $ 2,718
Interest 17,363 1,002 184
----------- --------- ---------
Total income 565,693 7,161 2,902
----------- --------- ---------
EXPENSES:
Investment advisory 377,917 9,268 2,018
Distribution 94,451 -- --
Administration 43,018 -- --
Federal and state registration 27,680 -- --
Amortization of organizational costs 25,555 -- --
Fund accounting 25,759 -- --
Auditing & tax 19,750 -- --
Transfer agent 24,815 -- --
Legal 14,756 -- --
Custody 8,200 -- --
Printing 3,333 -- --
Insurance 11,889 -- --
Trustees 2,667 -- --
Other 10,180 -- --
----------- --------- ---------
Total expenses before reimbursement 689,970 9,268 2,018
Less: reduction of expenses by
Adviser (Note 4) -122,777 -- --
----------- --------- ---------
Net expenses 567,193 9,268 2,018
----------- --------- ---------
Net investment income (loss) -1,500 -2,107 884
----------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments -48,382 2,444 1,467
Net change in unrealized appreciation
on investments 10,181,524 66,955 38,341
----------- --------- ---------
NET GAIN ON INVESTMENTS 10,133,142 69,399 39,808
----------- --------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $10,131,642 $ 67,292 $ 40,692
=========== ========= =========
+ Commencement of operations.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
TOTAL RETURN FUND
FOR THE FOR THE
YEAR ENDED YEAR ENDED
INCREASE IN NET ASSETS FROM: 8/31/99 8/31/98
----------- -----------
OPERATIONS
Net investment income (loss) -$1,500 $ 35,808
Net realized loss on investments -48,382 -95,395
Net change in unrealized appreciation
(depreciation) on investments 10,181,524 -1,747,710
----------- -----------
Increase (decrease) in net assets
resulting from operations 10,131,642 -1,807,297
----------- -----------
DISTRIBUTION TO SHAREHOLDERS
From net investment income -7,442 -16,000
----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 28,558,152 21,195,120
Proceeds from shares issued in reinvestment of
net investment income dividends 7,421 15,952
Cost of shares redeemed -6,969,246 -2,144,750
----------- -----------
Net increase from capital share transactions 21,596,327 19,066,322
----------- -----------
Net increase in net assets 31,720,527 17,243,025
NET ASSETS
Beginning of year 21,478,969 4,235,944
----------- -----------
End of year (including undistributed net investment
income of $16,171 and $25,113, respectively) $53,199,496 $21,478,969
=========== ===========
CHANGES IN SHARES
Shares sold 1,750,545 1,514,495
Shares issued on reinvestment of distributions 464 1,291
Shares redeemed -426,832 -150,179
----------- -----------
Net increase 1,324,177 1,365,607
=========== ===========
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
PURE AMERICAN FUND
FROM 9/29/98+
THROUGH
INCREASE IN NET ASSETS FROM: 8/31/99
----------
OPERATIONS
Net investment loss -$2,107
Net realized gain on investments 2,444
Net change in unrealized appreciation on investments 66,955
----------
Increase in net assets resulting from operations 67,292
----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 1,506,919
Cost of shares redeemed -171,771
----------
Net increase from capital share transactions 1,335,148
----------
Net increase in net assets 1,402,440
NET ASSETS
Beginning of period 100,000
----------
End of period (including accumulated net
investment loss of -$2,107) $1,502,440
==========
CHANGES IN SHARES
Shares sold 119,426
Shares redeemed -13,825
----------
Net increase 105,601
==========
+ Commencement of operations.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
PURE FOREIGN FUND
FROM 9/29/98+
THROUGH
INCREASE IN NET ASSETS FROM: 8/31/99
--------
OPERATIONS
Net investment income $ 884
Net realized gain on investments 1,467
Net change in unrealized appreciation on investments 38,341
--------
Increase in net assets resulting from operations 40,692
--------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 250,395
Cost of shares redeemed -10,270
--------
Net increase from capital share transactions 240,125
--------
Net increase in net assets 280,817
NET ASSETS
Beginning of period 10,000
--------
End of period (including accumulated net
investment income of $884) $290,817
========
CHANGES IN SHARES
Shares sold 21,425
Shares redeemed -912
--------
NET INCREASE 20,513
========
+ Commencement of operations.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
14
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
<TABLE>
<CAPTION>
TOTAL RETURN PURE AMERICAN PURE FOREIGN
FUND FUND FUND
-------------------------------------- ---------- ----------
FOR THE FOR THE FROM 10/28/96+ FROM 9/29/98+ FROM 9/29/98+
YEAR ENDED YEAR ENDED THROUGH THROUGH THROUGH
8/31/99 8/31/98 8/31/97 8/31/99 8/31/99
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.47 $ 11.87 $ 10.00 $ 10.00 $ 10.00
---------- ---------- ---------- ---------- ----------
Income from investment operations
Net investment income (loss) -0.01 0.02 0.02 -0.02 0.04
Net realized and unrealized
gains on investments 5.00 0.60 1.85 3.02 3.48
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 4.99 0.62 1.87 3.00 3.52
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income -- -0.02 -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 17.46 $ 12.47 $ 11.87 $ 13.00 $ 13.52
========== ========== ========== ========== ==========
Total return 40.05% 5.26% 18.70%** 30.00%** 35.20%**
Net assets at end of
period in thousands $ 53,199 $ 21,479 $ 4,236 $ 1,502 $ 291
Ratio of expenses to average net assets:
Before expense reimbursement 1.82% 2.71% 20.97%* 1.50%* 1.50%*
After expense reimbursement 1.50% 1.50% 1.50%* n/a n/a
Ratio of net investment income
(loss) to average net assets 0.00%# 0.28%# 0.56%#* -0.34%* 0.65%*
Portfolio turnover rate 12.72% 15.89% 1.35%** 29.73%** 7.19%**
</TABLE>
* Annualized.
** Not annualized.
+ Commencement of operations.
# Net of expense reimbursement.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999
(1) ORGANIZATION
The Purisima Funds (the "Trust") was organized as a Delaware business trust
on June 27, 1996 and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company issuing
its shares in series. Each series represents a distinct portfolio with its own
investment objectives and policies. The Trust consists of three diversified
series (the "Funds"): Purisima Total Return Fund (the "Total Return Fund"),
representing the initial series of the Trust which commenced operations on
October 28, 1996, and Purisima Pure American Fund (the "Pure American Fund") and
Purisima Pure Foreign Fund (the "Pure Foreign Fund") both of which commenced
operations on September 29, 1998, upon receipt of capital contributions of
$100,000 and $10,000, respectively. Fisher Investments, Inc. (the "Adviser")
serves as the investment adviser to the Funds.
The investment objectives of the Funds are as follows:
The Total Return Fund seeks to produce a high level of total return. It
invests primarily in common stocks and other equity-type securities, or
securities acquired primarily to produce income, or a combination of both
depending on the assessment of market conditions.
The Pure American Fund seeks to provide investors with a high level of
total return. The Fund may emphasize investments in common stocks and other
equity-type securities acquired primarily to produce income, or a combination of
both, depending on the assessment of market conditions by the Fund's investment
adviser. The Fund will concentrate its portfolio holdings to those securities
issued by issuers domiciled in the United States.
The Pure Foreign Fund seeks to provide investors with a high level of total
return. The Fund may emphasize investments in common stocks and other
equity-type securities acquired primarily to produce income, or a combination of
both, depending on the assessment of market conditions by the Fund's investment
adviser. The Fund will concentrate its portfolio holdings to those securities
issued by issuers domiciled outside of the United States.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates and assumptions.
(a) Securities Valuation
Securities traded on an exchange or Nasdaq are valued at the last sale
price as of the close of trading on the last business day of the reporting
period. Securities for which there were no such transactions, or in the case of
other over-the-counter securities, the closing bid price is used. Securities for
which market quotations are not readily available are valued at their fair value
as determined in good faith by the Board of Trustees or their designee.
Short-term investments are valued at cost which, when combined with accrued
interest, approximates market value.
(b) Organizational Costs
Costs incurred by the Total Return Fund in connection with its
organization, registration and the initial public offering of shares totaling
$133,629 have been deferred and are being amortized over 5 years. If any of the
original shares of the Total Return Fund are redeemed by any holder thereof
prior to the end of the amortization period, the redemption proceeds will be
reduced by the redeeming shareholder's pro rata share of the unamortized costs
as of the date of redemption. The Adviser, on behalf of the Funds, paid the
organizational costs discussed above. As of August 31, 1999, the balance payable
to the Adviser for organization costs was $51,294.
- --------------------------------------------------------------------------------
16
<PAGE>
(c) Federal Income and Excise Taxes
The Funds intend to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its income to its shareholders. Therefore, no federal
income or excise tax provision is required. As of August 31, 1999, the Total
Return Fund had available for federal income tax purposes a capital loss
carryover of $91,409 which begins to expire in 2005.
(d) Distribution to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The
Funds periodically make reclassifications among certain of their capital
accounts as a result of the recognition and characterization of certain income
and capital gain distributions determined annually in accordance with federal
tax regulations which may differ from GAAP.
(e) Other
Security transactions are accounted for on their trade date. The cost of
securities sold is determined using the specific identification method. Dividend
income is recognized on the ex-dividend date and interest income is recognized
on an accrual basis.
(3) NON-U.S. INVESTMENT RISK
Investments in Securities of non-U.S. issues in certain countries involve
special investment risks. These risks may include but are not limited to,
investment restrictions, adverse political, social and economic developments,
government involvement in the private sector, limited and less reliable investor
information, lack of liquidity, certain local tax law considerations, and
limited regulation of the securities markets.
(4) INVESTMENT ADVISER
The Total Return Fund (the "Fund") has an Investment Management Agreement
with the Adviser to furnish investment advisory services to the Fund. Under the
terms of this agreement, the Fund will pay the Adviser a monthly fee at the
annual rate of 1.00% of the Fund's average daily net assets. The Adviser has
agreed to voluntarily reduce fees for expenses (exclusive of brokerage,
interest, taxes and extraordinary expenses) that exceed the expense limitation
of 1.50% of the Fund's average daily net assets. The Adviser's reductions
totaled $122,777 for the year ended August 31, 1999. 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. The total amount eligible for reimbursement as of August 31, 1999 is
$463,344. The reimbursement must be approved by the Trust's disinterested
Trustees and is subject to the Fund's ability to effect such reimbursement and
remain in compliance with applicable expense limitations. At such time as it
appears probable that the Adviser will seek such reimbursement, the amount of
reimbursement the Fund is able to effect will be accrued as an expense of the
Fund. To date, no fees or payments have been reclaimed.
The Pure American and Pure Foreign Funds have a Comprehensive Management
Agreement with the Adviser to provide advisory and other ordinary services and
expenses, including administration, transfer agency, custody and auditing
services. For providing these services and expenses, the Pure American and Pure
Foreign Funds each pay the Adviser a monthly fee at the annual rate of 1.50% of
the respective Funds' average daily net assets. This comprehensive fee
arrangement requires the Adviser to absorb and pay out of its own resources all
operating expenses of the Pure American and Pure Foreign Funds that exceed the
annual rate of 1.50%.
- --------------------------------------------------------------------------------
17
<PAGE>
The Trust, on behalf of the Funds, entered into an Administration Agreement
with Investment Company Administration, L.L.C. (the "Administrator"). Under its
terms, the Funds pay a fee, payable monthly on the value of the total average
net assets of the Trust at an annual rate of 0.10% of the first $200 million of
such net assets, 0.05% of the next $300 million, and 0.03% thereafter, subject
to a minimum fee of $40,000 per Fund.
(5) SERVICE AND DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Service
and Distribution Plan (the "Plan"). Under the Plan, the Total Return Fund is
authorized to pay expenses incurred for the purpose of financing activities,
including the employment of other dealers, intended to result in the sale of
shares of the Fund. The fee accrues at an annual rate not to exceed 0.25% of the
Fund's average daily net assets.
(6) INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the period ended August 31, 1999 is as follows:
Fund Purchases Sales
------------- ----------- ----------
Total Return $26,146,641 $4,741,583
Pure American 1,618,371 193,763
Pure Foreign 259,650 10,290
At August 31, 1999, the Funds' gross unrealized appreciation and
depreciation on investments based on their basis for federal income tax purposes
which differs from book purposes is as follows:
Gross Unrealized Gross Unrealized Net Unrealized
Fund Basis Appreciation Depreciation Appreciation
- ---- ----------- ----------- ----------- -----------
Total Return $44,837,074 $10,273,768 $(1,886,943) $ 8,386,825
Pure American 1,434,548 131,918 (64,973) 66,945
Pure Foreign 252,636 42,780 (4,439) 38,341
(7) FEDERAL INCOME TAX INFORMATION
For the fiscal period ended August 31, 1999, the Total Return Fund and Pure
Foreign Fund accrued foreign source income of $254,275 and $2,718, respectively,
and foreign withholding taxes of $45,619 and $576, respectively. The taxes
withheld are expected to be passed through to shareholders as foreign tax
credits on Form 1099-DIV for the year ending December 31, 1999.
- --------------------------------------------------------------------------------
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of the Purisima Funds
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Purisima Total Return Fund, the
Purisima Pure American Fund and the Purisima Pure Foreign Fund (constituting the
Purisima Funds, hereafter referred to as the "Trust") at August 31, 1999, the
results of each of their operations, the changes in each of their net assets and
the financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS, LLP
Los Angeles, California
October 13, 1999
- --------------------------------------------------------------------------------
19
