PURISIMA FUNDS
Supplement dated December 26, 2000
to the Purisima Funds Prospectus dated December 7, 1999
THE FOLLOWING PARAGRAPHS ARE ADDED TO THE PURISIMA FUNDS PROSPECTUS:
THIS WILL REPLACE THE LAST BULLET ON PAGE 3 IN THE SECTION TITLED "MAIN
INVESTMENT STRATEGIES"
* DEFENSIVE STRATEGY FOR ALL THREE FUNDS: If the Adviser anticipates the
potential for poor prospects in the U.S. and/or foreign stock markets, the
Funds may adopt a defensive strategy by investing substantially in
fixed-income securities, or money market instruments, or employing index
put option and other derivative hedging techniques, to include short
selling. The Funds may sell securities short in an amount up to 40% of net
assets.
THIS WILL BE THE LAST BULLET ON PAGE 4 IN THE SECTION TITLED "PRINCIPAL
INVESTMENT RISKS":
* RISKS OF SHORT SELLING FOR ALL THREE FUNDS: Selling short is selling a
security that the Fund does not own. The Fund borrows a security from a
broker, then immediately sells it. Later, the Fund repurchases the security
and delivers it to the broker as repayment for the borrowed shares. There
is the risk that the price of the stock will go up between the time the
Fund borrowed and repurchased the stock, which would result in the Fund
losing money.
THIS WILL BE THE LAST PARAGRAPH ON PAGE 12 IN THE SECTION TITLED "OTHER
IMPORTANT RISK DISCLOSURES":
* SHORT SALE RISK: The Funds' short positions represent stocks that the Fund
has borrowed from their owners, and then sold to other investors. The Fund
remains obligated to return the borrowed stocks to their owners. To do
this, the Fund will have to purchase the borrowed stocks back at some point
in the future and pay whatever the market price for those stocks may then
be. If the price of those stocks has gone up since the time the Fund
borrowed the stocks and sold them, the Fund will lose money on the
investment. Although the Fund's gain is limited to the amount for which it
sold the borrowed security, its potential loss is unlimited. A mutual fund
that engages in short selling is more risky than other mutual funds.
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THE FOLLOWING TABLE REPLACES THE ONE FOUND ON PAGE 6:
FEES AND EXPENSES
SHAREHOLDER FEES(1)
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Pure Pure
Total Return American Foreign
Fund Fund Fund
----- ----- -----
Maximum sales charge (load) imposed on
purchases (AS A PERCENTAGE OF OFFERING PRICE) None None None
Maximum deferred sales charge (load)
(AS A PERCENTAGE OF THE LOWER OF ORIGINAL
PURCHASE PRICE OR REDEMPTION PROCEEDS) None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Pure Pure
Total Return American Foreign
Fund Fund Fund
----- ----- -----
Management Fees 1.00% 1.50%(2) 1.50%(2)
Distribution 12b-1 Fees 0.25% None None
Other Expenses 0.37% None None
----- ----- -----
Total Annual Fund
Operating Expenses 1.62% 1.50% 1.50%
----- ----- -----
Fee Reduction and/or
Expense Reimbursement (0.12%) None None
----- ----- -----
Net Expenses 1.50%(3) 1.50%(2) 1.50%(2)
----- ----- -----
(1) A fee of $12.00 is charged for each wire redemption.
(2) The Management Fee for the Pure American and Pure Foreign Funds compensates
the Adviser for advisory services and other ordinary operating expenses of
the Funds, for which the Adviser is responsible. CURRENTLY, THE ADVISER IS
VOLUNTARILY REDUCING THE ENTIRE MANAGEMENT FEE TO 0% FOR THE PURE AMERICAN
AND PURE FOREIGN FUNDS. This voluntary reduction may be discontinued at any
time.
(3) The Adviser is contractually obligated to limit the Total Return Fund's
expenses to 1.50%. The contract has a rolling 10-year term.
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PURISIMA FUNDS
Supplement dated December 26, 2000
to the Purisima Funds Statement of Additional Information
dated December 7, 1999
THE FOLLOWING PARAGRAPH IS, EFFECTIVE IMMEDIATELY, PART OF THE PURISIMA FUNDS
STATEMENT OF ADDITIONAL INFORMATION AS THE LAST PARAGRAPH OF THE SECTION TITLED
"HEDGING STRATEGIES" IN THE SECTION TITLED "ADDITIONAL INVESTMENT INFORMATION":
SWAP TRANSACTIONS. The Funds may use another type of derivative
transaction, known as a swap transaction, in an effort to hedge risk or to earn
additional returns. Swaps allow the parties to exchange the dividend income or
other components of return on an equity or other investment (E.G., a group of
equity securities or an index) for a component of return on another non-equity
or equity investment. Swaps are derivatives, and their values can be very
volatile. To the extent that the Adviser does not accurately analyze and predict
the potential relative fluctuation of the components swapped with another party,
a Fund may suffer a loss. The value of some components of a swap (like the
dividends on a common stock) may also be sensitive to changes in interest rates.
Furthermore, during the period a swap is outstanding, the Fund may suffer a loss
if the counterparty defaults. Swaps are not liquid investments.
THE FOLLOWING PARAGRAPH IS, EFFECTIVE IMMEDIATELY, PART OF THE PURISIMA FUNDS
STATEMENT OF ADDITIONAL INFORMATION AS THE LAST PARAGRAPH ON PAGE 12 IN THE
SECTION TITLED "ADDITIONAL INVESTMENT INFORMATION":
SHORT SALES. The Funds may seek to realize additional gains through short
sales. Short sales are transactions in which the Fund sells a security that it
does not own, in anticipation of a decline in the value of that security. To
complete such a transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is then obligated to replace the security borrowed by
purchasing it in the market at or prior to the time of replacement. The price at
such time may be more or less than the price at which the security was sold by
the Fund. Until the security is replaced, the Fund is required to repay the
lender any dividends or interest that accrue during the period of the loan. To
borrow the security, the Fund may also be required to pay a premium, which would
increase the cost of the security sold. The net proceeds of the short sale will
be retained by the broker (or by the Trust's custodian in a special custody
account), to the extent necessary to meet margin requirements, until the short
position is closed out. The Fund will also incur transaction costs in effecting
short sales.
The Fund will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date which the
Fund replaces the borrowed security. The Fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased, and the amount of loss increased, by the amount of the premium,
dividends, interest, or expense the Fund may be required to pay in connection
with a short sale. An increase in the value of a security sold short by the Fund
over the price at which it was sold short will result in a loss to the Fund.
There can be no assurance that the Fund will be able to close out the position
at any particular time or at any acceptable price.
<PAGE>
The staff of the Securities and Exchange Commission is of the opinion that
a short sale involves the creation of a senior security and is, therefore,
subject to the limitations of Section 18 of the Investment Company Act of 1940,
as amended (the "1940 Act"). The staff has taken the position that in order to
comply with the provisions of Section 18, the Fund must put in a segregated
account (not with the broker) an amount of cash or securities equal to the
difference between: (a) the market value of the securities sold short, and (b)
any cash or securities required to be deposited as collateral with the broker in
connection with the short sale (not including the proceeds from the short sale).
In addition, until the Fund replaces the borrowed security, it must daily
maintain the segregated account at such a level that the amount deposited in it
plus the amount deposited with the broker as collateral will equal the current
market value of the securities sold short.
