PURISIMA FUNDS
2000 ANNUAL REPORT
The Purisima Total Return Fund
The Purisima Pure American Fund
The Purisima Pure Foreign Fund
<PAGE>
TABLE OF CONTENTS
Shareholder Letter 2-5
Performance Summaries 6-7
Financial Information 8-22
Notes to Financial Statements 23-26
Report of Independent Accountants 27
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.
1
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A LETTER TO OUR SHAREHOLDERS
We are pleased to present the annual report of the Purisima Funds for the
twelve-month period ended August 31, 2000. During the reporting period, we
continued to pursue our investment objective of seeking a high total return for
our shareholders.
DOMESTIC OVERVIEW
The Pure American Fund disappointed this year in contrast with its
benchmark, the S&P 500. Size played an important part in the underperformance.
Small cap stocks outperformed big caps, and thus we were hurt by our deliberate
style decision to be bigger in cap than the market. The extreme positive
performance of Technology and Biotechnology was the primary driver of smaller
cap stocks in late 1999 and early 2000. We were underweight to those sectors,
which also contributed to our relative underperformance. Our overweight in
telecommunications, which was mainly a function of our style decision, also hurt
as phone companies suffered for most of the period.
We correctly anticipated the bursting of the technology bubble in March
2000, led by the fall of Internet stocks, which benefited our performance
throughout Technology's downturn. Many Internet stocks we identified as most
likely to burn through their cash balances went out of business as the equity
financing market dried up. We continue to believe Technology stocks will
experience another slump as massive new supply of stock comes to market,
diluting the value of the sector as a whole.
Given our negative outlook for Technology, we chose to overweight
Healthcare, which classically is negatively correlated to Technology. Despite
our Technology outlook, we continue to maintain some exposure to protect the
portfolio in case we are wrong and Technology resumes its upward move.
Our forecast for the domestic market for calendar year 2000 is unchanged.
We believe the S&P 500 should end the year about flat and Technology stocks as
measured by the Nasdaq Composite should have a double digit negative return.
While it is too early to make a specific forecast for 2001, we believe risk
in the domestic market will increase. Historically, the S&P 500 has experienced
the preponderance of its downside risk in the first two years of the US
presidential cycle. This means the likelihood of a US bear market increases as
we enter the new year.
2
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In such an environment, we believe it wise to stay bigger than the market.
Small stocks traditionally underperform big stocks at the end of bull markets
and throughout the ensuing bear markets. The time to shift to small stocks will
not come until after the next bear market is over.
FOREIGN OVERVIEW
The Pure Foreign Fund performed well for the year, significantly
outperforming its benchmark, the MSCI EAFE Index. Our overweight to European
countries such as France, Spain, and the Netherlands, combined with our
underweight to the United Kingdom, accounted for much of the added value. Japan,
our largest country weight, had poor absolute performance, but our Japanese
stocks did well relative to the benchmark. Looking forward, numerous economic,
structural, and monetary factors cause us to believe the overseas markets will
provide terrific opportunities. Europe is entering the sweet spot of economic
expansion, and next year its growth rate may surpass the US. Japan is showing
signs of finally emerging from economic doldrums. The ideal time to buy stocks
is at the early stages of economic expansion.
A great many structural changes are taking place throughout Europe and
Japan. Germany, France, and Japan are already instituting significant tax
reductions which will encourage growth and investment. Many neighboring
countries will soon follow their lead. Consolidation, corporate restructuring,
and deregulation are sweeping across these same countries in similar fashion to
the US in the early 1990s. These trends will lay the foundation for strong
growth for years to come.
Monetary policy is also highly favorable for stock markets in Europe and
Japan. Steep yield curves, which are powerful indicators of future economic
strength, prevail in Euroland and Japan. Money supply is growing in these areas
at aggressive rates. The European Central Bank is motivated to maintain this
condition to ensure economic growth until the legacy currencies of Europe are
officially phased out in late 2001. In Japan, monetary accommodation should
persist until the Japanese economy is on firm ground.
For almost two years we have anticipated a weak Euro. While it has put a
damper on otherwise great returns, it should not be cause for concern. A weak
currency assists exporting companies which in turn spurs economic growth. We
believe the Euro will begin to appreciate sometime in the next twelve months as
the market begins to discount the eventuality of the Euro completing its
phase-in period, becoming a permanent, hard currency.
3
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GLOBAL OVERVIEW
Performance of the Total Return fund was in line with the MSCI World Index
benchmark. We began the period with an overweight in domestic stocks, and
foreign did better than domestic. In early 2000, we shifted to an overweight in
foreign holdings. They lagged our domestic performance. The good news is that
while our core strategies did not work perfectly, our counter strategies allowed
the total portfolio to keep up with the benchmark. The key to portfolio
management is to maximize the likelihood of beating the benchmark by building in
negatively correlated components which protect the portfolio when you are wrong
about your main strategy.
Our shift to more foreign has neither helped nor hurt to date. Over the
year, where we lost on domestic returns we compensated with our foreign
investments. At the same time, we avoided most countries that had negative
returns. We feel strongly the overseas markets will outperform the US market
over the next year, and we therefore are maintaining our foreign overweight to
the benchmark. If Europe and Japan continue to progress as we forecast, and if
the dollar weakens to the Euro and Yen, we should achieve strong portfolio
returns for the coming year. We have fashioned the portfolio, however, to be
prepared in case we are wrong.
In our last report we advised lowering expectations. This stance should be
maintained. While there are excellent opportunities to capture positive return,
the markets will be characterized by increased risk, particularly in the US.
Navigating the waters correctly will be key to success in the coming months.
Throwing money at the last hot sector or country will prove dangerous.
CLOSING REMARKS
On the foreign side, currency has had its drag on the portfolio, although
looking forward our sense is the Euro will rebound. As the legacy European
currencies are phased out and the Euro becomes a hard currency, the market will
begin to discount its true value. The strength of the dollar has been both a
cause and symptom of foreign money seeking higher returns in US investments. As
foreign economies strengthen, the probability of foreign funds flowing home
increases. This could be a key contributing factor to the decoupling of US and
foreign returns in the next year.
4
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Although the American economy remains strong, we are prepared to see a
slowdown in domestic market performance. We continue to hold the largest US
stocks for, among other reasons, their resilience in trying times, and we
optimize our selections based on capitalization and strategic sector
allocations. With favorable developments in Europe and Japan underway, we
believe we are well positioned to reap benefits for our shareholders.
Thank you for your continued support.
Sincerely,
/s/ Kenneth L. Fisher
Kenneth L. Fisher
Chairman and Chief Investment Officer
Fisher Investments Inc.
5
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PERFORMANCE SUMMARIES
FOR PERIOD ENDING AUGUST 31, 2000
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 8/31/00*
Purisima MSCI World
Total Return Index
------------ -----
30-Apr-99 17,117 16,091
31-May-99 16,606 15,501
30-Jun-99 17,728 16,222
31-Jul-99 17,388 16,171
31-Aug-99 17,498 16,141
30-Sep-99 17,147 15,982
31-Oct-99 18,350 16,810
30-Nov-99 18,961 17,281
31-Dec-99 19,940 18,677
31-Jan-00 19,037 17,605
29-Feb-00 19,198 17,651
31-Mar-00 20,321 18,869
30-Apr-00 19,709 18,069
31-May-00 19,398 17,610
30-Jun-00 20,351 18,200
31-Jul-00 19,378 17,685
31-Aug-00 19,709 18,258
ONE-YEAR
Cumulative Total Return(1) 12.64%
SINCE INCEPTION (10/28/96)
Cumulative Total Return(1) 97.09%
Average Annual Total Return(2) 19.31%
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
6
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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 8/31/00+
Purisima EAFE
Pure Foreign Foreign Index
------------ -------------
30-Apr-99 13,040 13,224
31-May-99 12,630 12,912
30-Jun-99 13,390 13,629
31-Jul-99 12,930 13,203
31-Aug-99 13,000 13,137
30-Sep-99 12,530 12,777
31-Oct-99 13,560 13,586
30-Nov-99 13,760 13,862
31-Dec-99 13,893 14,677
31-Jan-00 13,433 13,940
29-Feb-00 12,333 13,677
31-Mar-00 13,553 15,014
30-Apr-00 13,533 14,563
31-May-00 13,463 14,264
30-Jun-00 13,843 14,616
31-Jul-00 13,413 14,388
31-Aug-00 13,493 15,282
ONE-YEAR
Cumulative Total Return(1) 3.79%
SINCE INCEPTION (9/29/98)
Cumulative Total Return(1) 34.93%
Average Annual Total Return(2) 16.85%
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 8/31/00++
Purisima S&P 500
Pure American Index
------------- -----
30-Apr-99 12,740 12,727
31-May-99 12,320 12,072
30-Jun-99 13,210 12,543
31-Jul-99 13,410 12,915
31-Aug-99 13,520 12,963
30-Sep-99 13,660 13,094
31-Oct-99 14,190 13,585
30-Nov-99 14,980 14,056
31-Dec-99 17,132 15,318
31-Jan-00 15,991 14,346
29-Feb-00 17,290 14,732
31-Mar-00 17,850 15,303
30-Apr-00 17,153 14,498
31-May-00 16,804 14,145
30-Jun-00 17,871 14,698
31-Jul-00 16,794 14,082
31-Aug-00 17,311 14,204
ONE-YEAR
Cumulative Total Return(1) 28.04%
SINCE INCEPTION (9/29/98)
Cumulative Total Return(1) 73.11%
Average Annual Total Return(2) 33.02%
7
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SCHEDULE OF INVESTMENTS
PURISIMA TOTAL RETURN
AUGUST 31, 2000
Shares Value
-------- -----------
COMMON STOCKS: 98.1%
AUTOMOBILE: 4.0%
13,800 DaimlerChrysler AG - ADR $ 718,463
29,718 Ford Motor Co. 718,804
24,500 Toyota Motor Corp. - Unsponsored ADR 2,137,625
-----------
3,574,892
-----------
BANKING: 9.4%
96,000 Banco Bilbao Vizcaya - ADR 1,434,000
115,000 Banco Santander Central - ADR 1,257,813
22,315 BankAmerica Corp. 1,195,247
177,050 Bank of Tokyo - Mitsubishi - ADR 2,168,862
18,600 National Australia Bank, Ltd. - ADR 1,385,700
28,696 San Paolo - IMI SpA - ADR 1,025,882
-----------
8,467,504
-----------
CHEMICALS: 2.2%
15,000 Akzo Nobel N.V. - ADR 671,250
31,000 Norsk Hydro A/S - ADR 1,342,687
-----------
2,013,937
-----------
COMMUNICATION EQUIPMENT: 7.5%
34,000 Alcatel Alsthom - ADR 2,817,750
62,000 Ericsson (LM) Telecommunications - ADR 1,271,000
27,000 Lucent Technologies, Inc. 1,128,937
33,600 Nokia Corp. - ADR - Class A 1,509,900
-----------
6,727,587
-----------
COMPUTER COMPONENTS & SOFTWARE: 5.5%
21,248 Cisco Systems, Inc.* 1,458,144
16,000 Microsoft Corp.* 1,117,000
16,500 NEC Corp. - ADR 2,390,437
-----------
4,965,581
-----------
COMPUTERS: 1.9%
12,600 IBM Corp. 1,663,200
-----------
CONSUMER PRODUCTS: 1.1%
18,300 Coca-Cola Co. 963,038
-----------
DIVERSIFIED OPERATIONS: 1.8%
27,600 Seagrams Co., Ltd. - ADR 1,661,175
-----------
ELECTRICAL EQUIPMENT: 6.3%
28,900 General Electric Co. 1,696,069
18,150 Hitachi, Ltd - ADR 2,185,941
35,070 Philips Electronics N.V. - ADR 1,729,389
-----------
5,611,399
-----------
FINANCIAL SERVICES: 3.3%
19,167 Citigroup, Inc. 1,118,854
27,800 ING Groep N.V. - ADR 1,874,763
-----------
2,993,617
-----------
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Shares Value
-------- -----------
FOOD: 1.1%
21,000 Unilever N.V. - ADR $ 992,250
-----------
HOUSEHOLD AUDIO & VIDEO EQUIPMENT: 2.5%
20,000 Sony Corp. - ADR 2,285,000
-----------
HOUSEHOLD PRODUCTS: 0.6%
8,400 Procter & Gamble Co. 519,225
-----------
INSURANCE: 4.3%
12,144 American International Group 1,082,334
24,200 Axa S.A. - ADR 1,701,562
560 Berkshire Hathaway, Inc. - Class B* 1,071,280
-----------
3,855,176
-----------
MULTIMEDIA: 0.9%
38,000 AT&T Corp. - Liberty Media* 812,250
-----------
OIL & GAS: 6.0%
15,000 ENI SpA - ADR 876,570
17,500 Exxon Mobil Corp. 1,428,437
25,700 Royal Dutch Petroleum - ADR 1,572,519
19,857 Total Fina SA - ADR 1,479,347
-----------
5,356,873
-----------
PHARMACEUTICALS: 15.7%
21,000 American Home Products Corp. 1,137,938
27,500 Astrazeneca Plc - ADR 1,252,969
26,976 Aventis - ADR 2,016,456
30,000 Bayer AG - ADR 1,267,500
18,100 Bristol-Myers Squibb Co. 959,300
22,700 Glaxo Wellcome Plc - ADR 1,306,669
11,400 Johnson & Johnson 1,048,087
18,700 Lilly (Eli) & Co. 1,365,100
21,200 Merck & Co., Inc. 1,481,350
52,000 Pfizer, Inc. 2,249,000
-----------
14,084,369
-----------
PHOTOGRAPHY: 2.2%
54,000 Fuji Photo Film - ADR 1,930,500
-----------
RADIO & TV BROADCASTING EQUIPMENT: 2.5%
8,100 Matsushita Electric Industrial Co., Ltd. - ADR 2,224,462
-----------
RESTAURANTS: 1.2%
36,000 McDonald's Corp. 1,075,500
-----------
RETAIL: 2.9%
25,900 Home Depot, Inc. (The) 1,244,819
28,100 Wal-Mart Stores, Inc. 1,332,994
-----------
2,577,813
-----------
SEMI-CONDUCTORS: 1.9%
23,000 Intel Corp. 1,722,125
-----------
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Shares Value
-------- -----------
TELECOMMUNICATIONS: 12.7%
54,450 Bellsouth Corp. $ 2,031,666
33,200 China Mobile (Hong Kong) Ltd. - ADR* 1,280,275
37,800 Deutsche Telekom - ADR 1,471,837
105,000 Portugal Telecom S.A. - ADR 1,128,750
32,450 SBC Communications, Inc. 1,354,788
37,500 Tele Danmark A/S - ADR 1,113,281
19,732 Telefonica De Espana - ADR* 1,130,890
42,700 Verizon Communications 1,862,788
-----------
11,374,275
-----------
TOBACCO PRODUCTS: 0.6%
18,400 Philip Morris Co., Inc. 545,100
-----------
TOTAL COMMON STOCKS
(cost $73,328,566) 87,996,848
-----------
Principal
Amount
---------
SHORT-TERM INVESTMENTS: 0.5%
$483,951 Firstar Stellar Treasury Fund
(cost $483,951) 483,951
-----------
TOTAL INVESTMENTS IN SECURITIES
(cost $73,812,517+): 98.6% 88,480,799
Other Assets less Liabilities: 1.4% 1,286,644
-----------
NET ASSETS: 100.0% $89,767,443
===========
ADR - American depositary receipt.
* Non-income producing security.
+ At August 31, 2000, the basis of investments for federal income tax
purposes was $73,959,986.
Unrealized appreciation and depreciation was as follows:
Gross unrealized appreciation $16,419,999
Gross unrealized depreciation (1,899,186)
-----------
Net unrealized appreciation $14,520,813
===========
See Accompanying Notes to Financial Statements.
10
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SCHEDULE OF INVESTMENTS
PURE AMERICAN
AUGUST 31, 2000
Shares Value
-------- -----------
COMMON STOCKS: 99.3%
AUTOMOBILES: 2.5%
1,136 Ford Motor Co. $ 27,477
-----------
BANKING: 3.5%
700 BankAmerica Corp. 37,494
-----------
COMPUTER COMPONENTS & SOFTWARE: 12.1%
675 Cisco Systems, Inc.* 46,322
550 Microsoft Corp.* 38,397
500 Oracle Corp.* 45,469
-----------
130,188
-----------
COMPUTERS: 4.9%
400 IBM Corp. 52,800
-----------
CONSUMER PRODUCTS: 2.7%
550 Coca-Cola Co. 28,944
-----------
ELECTRICAL EQUIPMENT: 4.9%
900 General Electric Co. 52,819
-----------
FINANCIAL SERVICES: 3.6%
667 Citigroup, Inc. 38,917
-----------
INSURANCE: 6.9%
412 American International Group 36,719
20 Berkshire Hathaway, Inc. - Class B* 38,260
-----------
74,979
-----------
OIL & GAS: 4.4%
575 Exxon Mobil Corp. 46,934
-----------
PHARMACEUTICALS: 22.7%
600 American Home Products Corp. 32,513
550 Bristol-Myers Squibb Co. 29,150
425 Johnson & Johnson 39,073
350 Lilly (Eli) & Co. 25,550
675 Merck & Co., Inc. 47,166
812 Pfizer, Inc. 35,119
925 Schering-Plough Corp. 37,116
-----------
245,687
-----------
RESTAURANT: 2.8%
1,000 McDonald's Corp. 29,875
-----------
RETAIL: 6.6%
775 Home Depot, Inc. (The) 37,248
725 Wal-Mart Stores, Inc. 34,392
-----------
71,640
-----------
11
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Shares Value
-------- -----------
SEMI-CONDUCTORS: 4.5%
650 Intel Corp. $ 48,669
-----------
TELECOMMUNICATIONS: 13.6%
1,000 AT&T Corp. - Liberty Media - Class A* 21,375
1,300 Bellsouth Corp. 48,506
1,225 SBC Communications, Inc. 51,144
600 Verizon Communications 26,175
-----------
147,200
-----------
TOBACCO PRODUCTS: 3.6%
1,325 Philip Morris Cos., Inc. 39,253
-----------
TOTAL COMMON STOCKS
(cost $1,005,794) 1,072,876
-----------
Principal
Amount
---------
SHORT-TERM INVESTMENTS: 0.8%
$ 8,397 Firstar Stellar Treasury Fund
(cost $8,397) $ 8,397
-----------
TOTAL INVESTMENTS IN SECURITIES
(cost $1,014,191+): 100.1% 1,081,273
LIABILITIES IN EXCESS OF OTHER ASSETS: (0.1%) (1,250)
-----------
NET ASSETS: 100.0% $ 1,080,023
===========
* Non-income producing security.
+ At August 31, 2000, the basis of investments for federal income tax
purposes was the same as their cost for financial reporting purposes.
Unrealized appreciation and depreciation was as follows:
Gross unrealized appreciation $ 139,129
Gross unrealized depreciation (72,047)
-----------
Net unrealized appreciation $ 67,082
===========
See Accompanying Notes to Financial Statements.
12
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SCHEDULE OF INVESTMENTS
PURE FOREIGN
AUGUST 31, 2000
Shares Value
-------- -----------
COMMON STOCKS: 94.8%
AUSTRALIA: 2.5%
950 National Australia Bank, Ltd. - ADR $ 70,775
-----------
CANADA: 2.4%
1,100 Seagrams Co., Ltd. - ADR 66,206
-----------
CHINA: 2.3%
1,700 China Mobile (Hong Kong) Ltd. - ADR* 65,556
-----------
DENMARK: 2.2%
600 Novo Nordisk A/S - ADR 60,900
-----------
FINLAND: 2.4%
1,500 Nokia Corp. - ADR 67,406
-----------
FRANCE: 12.1%
1,200 Alcatel Alsthom - ADR 99,450
1,100 Aventis S.A. - ADR 82,225
1,125 Axa S.A. - ADR 79,102
1,047 Total Fina S.A. - ADR 78,002
-----------
338,779
-----------
GERMANY: 6.0%
1,000 Bayer AG - ADR 42,250
1,700 DaimlerChrysler AG - ADR 88,506
1,000 Deutsche Telekom AG - ADR 38,937
-----------
169,693
-----------
ITALY: 3.7%
1,950 Fiat SpA - ADR 48,141
1,556 San Paolo - IMI SpA - ADR 55,627
-----------
103,768
-----------
JAPAN: 27.9%
8,975 Bank of Toyko - Mitsubishi - ADR 109,944
2,600 Fuji Photo Film - ADR 92,950
1,000 Hitachi, Ltd. - ADR 120,437
390 Matsushita Electric Industrial Co., Ltd. - ADR 107,104
825 NEC Corp. - ADR 119,522
1,100 Sony Corp. - ADR 125,675
1,250 Toyota Motor Corp. - Unsponsored ADR 109,062
-----------
784,694
-----------
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<PAGE>
Shares Value
-------- -----------
NETHERLANDS: 12.2%
1,375 ING Groep N.V. - ADR $ 92,727
1,772 Philips Electronics N.V. - ADR 87,382
1,375 Royal Dutch Petroleum Co. - ADR 84,133
1,669 Unilever N.V. - ADR 78,860
-----------
343,102
-----------
NORWAY: 2.7%
1,775 Norsk Hydro A/S - ADR 76,880
-----------
PORTUGAL: 2.2%
5,800 Portugal Telecom S.A. - ADR 62,350
-----------
SPAIN: 6.5%
4,300 Banco Bilbao Vizcaya - ADR 64,231
6,175 Banco Santander Central - ADR 67,539
900 Telefonica De Espana - ADR 51,581
-----------
183,351
-----------
SWEDEN: 4.6%
3,500 Ericsson (LM) Telecommunications - ADR 71,750
2,500 Scania AB - ADR 56,900
-----------
128,650
-----------
UNITED KINGDOM: 5.1%
1,600 Astrazeneca Group Plc - ADR $ 72,900
1,200 Glaxo Wellcome Plc - ADR 69,075
-----------
141,975
-----------
TOTAL COMMON STOCKS
(cost $2,500,552) 2,664,085
===========
Principal
Amount
---------
SHORT-TERM INVESTMENTS: 1.4%
$ 39,982 Firstar Stellar Treasury Fund
(cost $39,982) 39,982
-----------
TOTAL INVESTMENTS IN SECURITIES
(cost $2,540,534+): 96.2% 2,704,067
Other Assets less Liabilities: 3.8% 106,119
-----------
NET ASSETS: 100.0% $ 2,810,186
===========
ADR - American depositary receipt.
* Non-income producing security.
+ At August 31, 2000, the basis of investments for federal income tax
purposes was $2,592,254.
Unrealized appreciation and depreciation was as follows:
Gross unrealized appreciation $ 220,355
Gross unrealized depreciation (108,542)
-----------
Net unrealized appreciation $ 111,813
===========
See Accompanying Notes to Financial Statements.
14
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STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 2000
Total Pure Pure
Return American Foreign
Fund Fund Fund
----------- ----------- -----------
ASSETS
Investments in securities, at cost $73,812,517 $ 1,014,191 $ 2,540,534
=========== =========== ===========
Investments in securities, at value $88,480,799 $ 1,081,273 $ 2,704,067
Cash 2,130 223 --
Receivables:
Investment securities sold 8,043,308 110,519 157,466
Dividends and interest 100,446 1,760 2,493
Fund shares sold 69,240 -- 106,924
Deferred organization costs 30,932 -- --
Other assets 21,788 1,419 4,579
----------- ----------- -----------
Total Assets 96,748,643 1,195,194 2,975,529
----------- ----------- -----------
LIABILITIES
Payables:
Investment securities purchased 6,854,868 113,660 161,835
Due to adviser (Notes 2 and 4) 86,979 1,511 3,508
Accrued expenses 39,353 -- --
----------- ----------- -----------
Total Liabilities 6,981,200 115,171 165,343
----------- ----------- -----------
NET ASSETS $89,767,443 $ 1,080,023 $ 2,810,186
=========== =========== ===========
Number of shares issued and
outstanding (unlimited shares
authorized, $0.01 par value) 4,568,585 80,063 171,494
----------- ----------- -----------
Net asset value, offering and
redemption price per share $ 19.65 $ 13.49 $ 16.39
=========== =========== ===========
COMPONENTS OF NET ASSETS
Paid-in Capital $74,037,725 $ 976,445 $ 2,665,930
Accumulated net investment income -- -- 3,786
Accumulated net realized gain (loss)
on investments 1,061,436 36,496 (23,063)
Net unrealized appreciation
on investments 14,668,282 67,082 163,533
----------- ----------- -----------
Net assets $89,767,443 $ 1,080,023 $ 2,810,186
=========== =========== ===========
See Accompanying Notes to Financial Statements.
15
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
Total Pure Pure
Return American Foreign
Fund Fund Fund
----------- ---------- ----------
INVESTMENT INCOME
Income
Dividends (net of foreign
taxes witheld of $6,454, $0,
and $390, respectively) $ 1,042,304 $ 19,103 $ 22,984
Interest 34,002 503 2,309
----------- ---------- ----------
Total income 1,076,306 19,606 25,293
----------- ---------- ----------
Expenses
Advisory fees 738,805 21,393 21,504
Distribution fees 184,701 -- --
Administration fees 73,880 -- --
Registration fees 40,701 -- --
Transfer agent fees 34,860 -- --
Fund accounting fees 31,288 -- --
Amortization of deferred
organizational costs 27,927 -- --
Audit fees 15,451 -- --
Custody fees 9,848 -- --
Reports to shareholders 9,427 -- --
Legal fees 8,147 -- --
Insurance expense 3,693 -- --
Trustee fees 2,231 -- --
Miscellaneous 14,652 -- --
----------- ---------- ----------
Total expenses 1,195,611 21,393 21,504
Less: fees waived (Note 4) (87,515) -- --
----------- ---------- ----------
Net expenses 1,108,096 21,393 21,504
----------- ---------- ----------
Net investment income (loss) (31,790) (1,787) 3,789
----------- ---------- ----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investments 1,253,990 36,527 2,501
Net unrealized appreciation
on investments 6,228,361 127 125,192
----------- ---------- ----------
Net realized and unrealized
gain on investments 7,482,351 36,654 127,693
----------- ---------- ----------
Net increase in net assets
resulting from operations $ 7,450,561 $ 34,867 $ 131,482
=========== ========== ==========
See Accompanying Notes to Financial Statements.
16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
TOTAL RETURN FUND
INCREASE (DECREASE) IN Year Ended Year Ended
NET ASSETS FROM: August 31, 2000 August 31, 1999
------------ ------------
OPERATIONS
Net investment loss $ (31,790) $ (1,500)
Net realized gain (loss) on investments 1,253,990 (48,382)
Net unrealized appreciation on investments 6,228,361 10,181,524
------------ ------------
Net increase in net assets resulting
from operations 7,450,561 10,131,642
------------ ------------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (56,328) (7,442)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net
change in outstanding shares(a) 29,173,714 21,596,327
------------ ------------
NET INCREASE IN NET ASSETS 36,567,947 31,720,527
NET ASSETS
Beginning of year 53,199,496 21,478,969
------------ ------------
END OF YEAR $ 89,767,443 $ 53,199,496
============ ============
Accumulated net investment income -- $ 16,171
============ ============
(a) A summary of capital share transactions is as follows:
Year Ended Year Ended
August 31, 2000 August 31, 1999
--------------------------- ---------------------------
Shares Value Shares Value
----------- ------------ ----------- ------------
Shares sold 2,088,552 $ 40,208,875 1,750,545 $ 28,558,152
Shares issued on
reinvestment of
distributions 2,933 56,228 464 7,421
Shares redeemed (569,538) (11,091,389) (426,832) (6,969,246)
----------- ------------ ----------- ------------
Net increase 1,521,947 $ 29,173,714 1,324,177 $ 21,596,327
=========== ============ =========== ============
See Accompanying Notes to Financial Statements.
17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
PURE AMERICAN FUND
September 29, 1998+
INCREASE (DECREASE) IN Year Ended through
NET ASSETS FROM: August 31, 2000 August 31, 1999
----------- -----------
OPERATIONS
Net investment loss $ (1,787) $ (2,107)
Net realized gain on investments 36,527 2,444
Net unrealized appreciation
on investments 127 66,955
----------- -----------
Net increase in net assets resulting
from operations 34,867 67,292
----------- -----------
DISTRIBUTION TO SHAREHOLDERS
From net realized gain (368) --
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets
derived from net change in outstanding
shares (a) (456,916) 1,335,148
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS (422,417) 1,402,440
NET ASSETS
Beginning of period 1,502,440 100,000
----------- -----------
END OF PERIOD $ 1,080,023 $ 1,502,440
=========== ===========
Accumulated net investment loss -- $ (2,107)
=========== ===========
(a) A summary of capital share transactions is as follows:
Year Ended September 29, 1998+
August 31, 2000 through August 31, 1999
---------------------- ----------------------
Shares Value Shares Value
--------- ---------- --------- ----------
Shares sold 26,767 $ 357,839 119,426 $1,506,919
Shares issued on reinvestment
of distributions 26 368 -- --
Shares redeemed (62,331) (815,123) (13,825) (171,771)
--------- ---------- --------- ----------
Net increase (decrease) (35,538) $ (456,916) 105,601 $1,335,148
========= ========== ========= ==========
+ Commencement of operations.
See Accompanying Notes to Financial Statements.
18
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
PURE FOREIGN FUND
INCREASE (DECREASE) IN September 29, 1998+
NET ASSETS FROM: Year Ended through
August 31, 2000 August 31, 1999
----------- -----------
OPERATIONS
Net investment income $ 3,789 $ 884
Net realized gain on investments 2,501 1,467
Net unrealized appreciation on investments 125,192 38,341
----------- -----------
Net increase in net assets resulting
from operations 131,482 40,692
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (887) --
From net realized gain (27,031) --
----------- -----------
Total distributions to shareholders (27,918) --
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from
net change in outstanding shares (a) 2,415,805 240,125
----------- -----------
NET INCREASE IN NET ASSETS 2,519,369 280,817
NET ASSETS
Beginning of period 290,817 10,000
----------- -----------
END OF PERIOD $ 2,810,186 $ 290,817
=========== ===========
Accumulated net investment income $ 3,786 $ 884
=========== ===========
(a) A summary of capital share transactions is as follows:
Year Ended September 29, 1998+
August 31, 2000 through August 31, 1999
---------------------- ----------------------
Shares Value Shares Value
--------- ---------- --------- ----------
Shares sold 183,542 $2,944,646 21,425 $ 250,395
Shares issued on reinvestment
of distributions 1,848 27,103 -- --
Shares redeemed (35,409) (555,944) (912) (10,270)
--------- ---------- --------- ----------
Net increase 149,981 $2,415,805 20,513 $ 240,125
========= ========== ========= ==========
+ Commencement of operations.
See Accompanying Notes to Financial Statements.
19
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH 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 Fund
-----------------------------------------------
Year Ended August 31, October 28, 1996+
---------------------------- through
2000 1999 1998 August 31, 1997
------ ------ ------ ----------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $17.46 $12.47 $11.87 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment (0.01) (0.01) 0.02 0.02
Net realized and
unrealized gains on investments 2.22 5.00 0.60 1.85
------ ------ ------ ------
Total from investment operations 2.21 4.99 0.62 1.87
------ ------ ------ ------
LESS DISTRIBUTIONS:
From net investment income (0.02) -- (0.02) --
------ ------ ------ ------
Net asset value, end of period $19.65 $17.46 $12.47 $11.87
====== ====== ====== ======
Total return 12.64% 40.05% 5.26% 18.70%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 89.8 $ 53.2 $ 21.5 $ 4.2
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 1.62% 1.82% 2.71% 20.97%*
After fees waived 1.50% 1.50% 1.50% 1.50%*
RATIO OF NET INVESTMENT INCOME
(loss) to average net assets # (0.04%) 0.00% 0.28% 0.56%*
Portfolio turnover rate 38.42% 12.72% 15.89% 1.35%**
</TABLE>
* Annualized.
** Not annualized.
+ Commencement of operations.
# Net of fees waived.
See Accompanying Notes to Financial Statements.
20
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
Pure American Fund
------------------------------------
September 29, 1998+
Year Ended through
August 31, 2000 August 31, 1999
--------------- -------------------
Net asset value, beginning of period $13.00 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.03) (0.02)
Net realized and unrealized
gains on investments 0.52 3.02
------ ------
Total from investment operations 0.49 3.00
------ ------
LESS DISTRIBUTIONS:
From net investment income -- --
From net realized gain (0.00)++ --
------ ------
Total distributions (0.00)++ --
------ ------
Net asset value, end of period $13.49 $13.00
====== ======
Total return 3.79% 30.00%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 1.1 $ 1.5
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 1.50% 1.50%*
After fees waived n/a n/a
RATIO OF NET INVESTMENT INCOME
(LOSS) TO AVERAGE NET ASSETS (0.13%) (0.34%)*
Portfolio turnover rate 45.48% 29.73%**
* Annualized.
** Not annualized.
+ Commencement of operations.
++ Amount represents less than $0.01 per share.
See Accompanying Notes to Financial Statements.
21
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
Pure Foreign Fund
------------------------------------
September 29, 1998+
Year Ended through
August 31, 2000 August 31, 1999
--------------- -------------------
Net asset value, beginning of period $13.52 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment 0.01 0.04
Net realized and unrealized
gains on investments 3.69 3.48
------ ------
Total from investment operations 3.70 3.52
------ ------
LESS DISTRIBUTIONS:
From net investment income (0.03) --
From net realized gain (0.80) --
------ ------
Total distributions (0.83) --
------ ------
Net asset value, end of period $16.39 $13.52
====== ======
Total return 28.04% 35.20%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 2.8 $ 0.3
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Before fees waived 1.50% 1.50%*
After fees waived n/a n/a
RATIO OF NET INVESTMENT INCOME
(LOSS) TO AVERAGE NET ASSETS 0.26% 0.65%*
Portfolio turnover rate 51.60% 7.19%**
* Annualized.
** Not annualized.
+ Commencement of operations.
See Accompanying Notes to Financial Statements.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
NOTE 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. 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.
NOTE 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").
23
<PAGE>
A. SECURITY VALUATION. Investments in securities traded on a national
securities exchange or Nasdaq are valued at the last reported sales price
at the close of regular trading on each day that the exchanges are open for
trading; securities traded on an exchange or Nasdaq for which there have
been no sales and other over-the-counter securities are valued at the
closing bid. Securities for which quotations are not readily available are
valued at their respective fair values as determined in good faith by the
Board of Trustees or their designee. Debt securities with remaining
maturities of 60 days or less are valued at cost which, when combined with
accrued interest, approximates market value.
B. DEFERRED ORGANIZATION 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 on a straight-line basis over a period of five 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 Total Return Fund, paid the organizational costs discussed above.
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 their income to
its shareholders. Therefore, no federal income or excise tax provision is
required.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS. Security
transactions are accounted for on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend date and
interest income is recognized on the accrual basis.
E. USE OF ESTIMATES. 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.
F. RECLASSIFICATION OF CAPITAL ACCOUNTS. 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.
G. CONCENTRATION OF 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.
24
<PAGE>
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
The Total Return Fund (the "Fund") has an Investment Management Agreement with
the Adviser to provide investment advisory services to the Fund. The Adviser
furnishes all investment advice, office space, facilities, and most of the
personnel needed by the Funds. As compensation for its services, the Adviser is
entitled to a monthly fee at the annual rate of 1.00% of the Fund's average
daily net assets.
The Fund is responsible for its own operating expenses. The Adviser has agreed
to limit the Fund's total expenses (exclusive of brokerage, interest, taxes and
extraordinary expenses) to not more than 1.50% of the average daily net assets.
For the year ended August 31, 2000, the Adviser waived fees of $87,515. The
total amount eligible for reimbursement at August 31, 2000 is $550,859.
Any fee withheld or voluntarily reduced and/or any Fund expense absorbed by the
Adviser pursuant to an agreed upon expense cap shall be reimbursed by the Fund
to the Adviser, if so requested by the Adviser, anytime before the end of the
third fiscal year following the year to which the fee reduction, waiver, or
expense absorption relates, provided the aggregate amount of the Fund's current
operating expenses for such fiscal year does not exceed the applicable
limitation on Fund expenses. Any such reimbursement is also contingent upon
Board of Trustees review and approval prior to the time the reimbursement is
also initiated. The Fund must pay its current ordinary operating expenses before
the Adviser is entitled to any reimbursement of fees and/or expenses.
The Pure American and Pure Foreign Funds have a Comprehensive Management
Agreement with the Adviser to provide advisory and other ordinary services,
including administration, transfer agency, custody and auditing services. For
providing these services, 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%.
Investment Company Administration, L.L.C. (the "Administrator") acts as the
Funds' administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Funds; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Funds' custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Funds'
expense accruals. For its services, the Administrator receives a monthly fee
based 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.
25
<PAGE>
NOTE 4 - SERVICE AND DISTRIBUTION PLAN
The Trust has adopted a Service and Distribution Plan (the "Plan")
Pursuant to Rule 12b-1 under the 1940 Act. 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. For the
year ended August 31, 2000, the Fund incurred $184,701 in distribution
fees.
NOTE 5 - PURCHASES AND SALES
The cost of purchases and the proceeds from sales of securities,
excluding short-term investments, for the year ended August 31, 2000 is
as follows:
Fund Purchases Sales Total
---- ----------- -----------
Total Return $53,391,006 $27,909,260
Pure American 635,473 1,093,258
Pure Foreign 2,976,514 727,739
26
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
Purisima Funds
We have audited the accompanying statement of assets and liabilities of the
Purisima Total Return Fund, the Purisima Pure American Fund and the Purisima
Pure Foreign Fund, each a series of shares of the Purisima Funds, including the
schedules of investments as of August 31, 2000, and the related statements of
operations, changes in net assets and the financial highlights for the year then
ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The statement of changes in net assets and financial highlights
presented for the year ended August 31, 1999 and prior were audited by other
auditors whose report dated October 13, 1999, expressed an unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 2000, by correspondence with the custodian and brokers. Our audits
also include assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion the 2000 financial statements and financial highlights referred
to above 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 as of August 31, 2000, the results of their operations, the
changes in their net assets and their financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 13, 2000
27
