Purisima Funds
Semi-Annual Report (unaudited)
February 29, 2000
THE PURISIMA TOTAL RETURN FUND
THE PURISIMA PURE AMERICAN FUND
THE PURISIMA PURE FOREIGN FUND
<PAGE>
Table of Contents
The Purisima Fund Family 2
A Letter to Our Shareholders 3
Schedule of Investments 6
Statements of Assets and Liabilities 14
Statements of Operations 15
Statement of Changes in Net Assets 16
Financial Highlights 19
Notes to Financial Statements 21
Change in Certifying Accountant 25
<PAGE>
The Purisima Fund Family
Fisher Investments manages over $5 billion for large institutions and
high-net-worth individuals. We built our business by offering personal service,
a history of performance and generally low fees to large investors. We create
domestic, foreign and global portfolios for our clients. Yet, few investors have
the over $500,000 necessary to build a customized portfolio of stocks. That's
why we created the Purisima Mutual Funds.
These Mutual Funds allow us to pool the money of many investors together
any buy enough stocks to create a diversified portfolio, while also having
sufficient assets under management to keep costs relatively low. Our funds are
made up of what we believe are three ideal portfolios: domestic, foreign and
global. Purisima Pure American is composed of securities we believe will most
likely appreciate. Purisima Pure Foreign contains those foreign securities we
think are the best investments. Purisima Total Return has a portfolio that
contains both foreign and domestic securities.
PURE AMERICAN. Many investors, large and small, simply don't want to own
foreign stocks. They wish to avoid the political and economic issues of foreign
countries or the currency risk involved in overseas investments. Fisher
Investments satisfies the desire for a handpicked U.S. only portfolio by
offering the Purisima Pure American Fund, which invests only in American
securities and seeks to consistently beat the S&P 500 stock index.
PURE FOREIGN. Some investors like to pick their own U.S. stocks, but don't
feel comfortable selecting foreign ones. Yet, they want the advantages of global
diversification that requires owning foreign securities. Pure Foreign allows
them to obtain this foreign diversification, which may help lower the volatility
and risks of their entire investment portfolio. The Purisima Pure Foreign Fund
owns only the foreign securities Fisher Investments believes will most likely
appreciate and, by combining it with a U.S. portfolio, investors can create a
complete global portfolio.
TOTAL RETURN. This fund combines our top U.S. and foreign security picks in
one mutual fund. We believe the Purisima Total Return Fund is the single best
way for small investors to manage their money. Through global diversification
targeted at securities we anticipate will outpace the market, it strives for a
high total return, while seeking to achieve a reduced level of risk, as many
large investors have sought from Fisher Investments.
2
<PAGE>
SHAREHOLDER LETTER
We are pleased to bring you the semi-annual report for the Purisima Funds for
the six-month period ended February 29, 2000. During the reporting period we
continued to pursue our investment objective of seeking a high total return for
our shareholders.
DOMESTIC OVERVIEW
Y2K did not prove to be calamitous, and we were rewarded by staying fully
invested in equities as the US stock market surged ahead late in 1999. However,
the Pure American Fund was disappointing relative to its benchmark, the S&P 500,
due to two primary factors. First, the positive move in the domestic market was
mostly limited to a narrow group of stocks concentrated in the Technology
sector. Our Tech holdings participated in the extraordinary move, but a modest
underweight to this sector and little exposure to pure-play Internet stocks
detracted from our relative performance. In contrast, areas in which we were
overweighted, Healthcare and Communication Services, were generally depressed.
Second, small cap stocks staged a sharp resurgence after years of
underperforming their large cap brethren. Our focus on supercaps hurt during the
period, but our conviction to the underlying strategy of keeping our US
portfolio bigger than the market remains intact. We feel a shift to small cap
this late in our aged bull market would be both dangerous and unjustified.
Although we are not bearish, our expectations for the US market are more modest
than any time in the past five years. A massive shift in sentiment from
trepidation to bullishness, especially among professional market forecasters,
causes us pause. Where in recent years forecasters have predicted below
historical average returns, expectations have now risen to more lofty levels.
The professional forecasting world tells us what NOT to expect: a market return
in the average to above average range. This leaves three scenarios: way up, way
down, or flat. As we see it, the only logical conclusion will be a flat year, as
measured by the S&P 500. Here's why:
While another huge positive year is possible, our analysis forecasts this
outcome is unlikely. Rarely does the fourth year of a president's term exceed
the third year, and if it did this year, we would truly be in unprecedented
territory.
Conversely, a disastrous year is equally unlikely. The current ultra-high P/E of
the market tells us not to expect a big negative year. The US market has never
crashed in an ultra-high P/E environment; such valuations indicate strong
earnings ahead. History also shows that barring a depression or world war, the
fourth year of a President's term is never negative. These factors combined with
rapidly growing money supply and a strong economy do not foretell a bear market.
Thus, we expect a flat return.
3
<PAGE>
Our biggest concern looking forward is the technology bubble which has been
building to monstrous proportions. It reminds us of the energy bubble of 1980,
when the market was consumed by the unwavering belief the supply of oil was
dangerously limited and oil prices would rise forever. In 2000, market
participants are similarly unwavering in their belief that demand for technology
is infinite and will be forever profitable. Energy stock prices began their
collapse in 1981. We believe Technology stock prices will endure a similar fate
sometime later this year, with Internet stocks leading the way down.
FOREIGN OVERVIEW
The strength of foreign markets continued in the latter part of 1999 and into
early 2000. A revitalized Japan and a strengthening Europe propelled foreign
returns ahead of domestic as measured both by indexes and our portfolios.
Within the Pure Foreign Fund, underweighting the UK and overweighting
continental European countries such as France, the Netherlands, and Spain
contributed to our significant outperformance of the MSCI EAFE benchmark. Our
Telecommunications and Technology holdings provided much of the steam which
drove the portfolio ahead, although breadth was good across the portfolio.
Our primary focus remains structuring our country weights advantageously versus
the benchmark to avoid risk and capitalize on opportunity. Japan remained our
largest foreign country weight, and during the period we increased our exposure
to this still recovering market. This proved a wise decision, as Japan's stock
market enjoyed the strongest returns of all major markets in 1999. Underpinning
these results were two consecutive quarters of economic expansion, breaking a
long string of contraction. While their recovery has been fragile, still
requiring significant government reform and a return of consumer confidence, we
are optimistic that Japan has finally rounded the corner to more prosperous
times.
GLOBAL OVERVIEW
The Total Return Fund beat its MSCI World benchmark for the reporting period
despite a weak relative US return. We were rewarded for our material foreign
exposure (albeit less than our benchmark for most of the period) as most of our
outperformance came from overseas holdings.
In recent months, we have made a dynamic shift from domestic to foreign
overweighting in the Total Return Fund. The US stock market has been dominant
for many years. We believe the time has come for foreign markets to outperform.
The Total Return Fund is structured in what we believe to be the ideal balance
of return and risk, the driver being that our foreign holdings will take a
leadership role during periods when our domestic stocks lag.
4
<PAGE>
CLOSING REMARKS
The world's major economies should continue to forge ahead. Despite rising
interest rates, monetary conditions around the world are emphatically
expansionary, and inflation remains in check for now. All in all, equities
remain the asset class in which to be invested, and prudent global
diversification within that asset class will be key to successful investing.
Expectations should be lower this year than in the recent past. We believe
adherence to big cap domestic stocks, prudent country selection, and a cautious
stance toward Technology will be central to outperforming the markets in the
months ahead. Historically, the outperformance of small cap over their large cap
counterparts is derived almost entirely from periods immediately following bear
markets. Only during such a period do we envision changing our domestic strategy
to favor companies with smaller capitalizations. Overseas, we continue to focus
on continental Europe and Japan. The 1990s was undisputedly America's decade for
stocks. The beginning of the 21st century could prove to be Europe's time to
shine, and the Japanese equity market offers perhaps the best opportunity from a
contrarian perspective. Lastly, we continue to resist getting caught up with the
emotions driving the Tech bubble.
Thank you for your continued support.
Sincerely,
/s/ Kenneth L. Fisher
Kenneth L. Fisher
Chairman and Chief Investment Officer
Fisher Investments, Inc.
5
<PAGE>
PURISIMA TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 2000
(UNAUDITED)
% of
# of Shares Common Stocks Net Assets Value
- ----------- ------------- ---------- ------------
AUTOMOBILE 7.1%
24,316 DaimlerChrysler AG - ADR $ 1,647,409
28,720 Fiat SpA - ADR 883,140
20,500 Toyota Motor Corp. - Unsponsored ADR 1,666,906
42,600 Volvo AB - ADR 995,775
------------
5,193,230
------------
BANKING 8.8%
70,900 Banco Bilbao Vizcaya - ADR 1,054,638
100,000 Banco Santander Central - ADR 1,050,000
19,315 BankAmerica Corp. 889,697
121,250 Bank of Tokyo - Mitsubishi - ADR 1,500,469
15,800 National Australia Bank, Ltd. - ADR 1,045,763
28,696 San Paolo - IMI SpA - ADR 903,924
------------
6,444,491
------------
CHEMICALS 1.0%
20,000 Norsk Hydro A/S - ADR 747,500
------------
COMMUNICATION EQUIPMENT 7.7%
31,500 Alcatel Alsthom - ADR 1,488,375
12,500 Ericsson (LM) Telecommunications - ADR 1,200,000
21,000 Lucent Technologies, Inc. 1,249,500
8,400 Nokia Corp. - ADR 1,665,825
------------
5,603,700
------------
COMPUTER COMPONENTS & SOFTWARE 5.9%
10,624 Cisco Systems, Inc.* 1,404,360
11,500 Microsoft Corp.* 1,027,813
16,500 NEC Corp. - ADR 1,862,438
------------
4,294,611
------------
COMPUTERS 1.4%
10,100 IBM Corp. 1,030,200
------------
6
<PAGE>
PURISIMA TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 2000
(UNAUDITED)
% of
# of Shares Common Stocks Net Assets Value
- ----------- ------------- ---------- ------------
CONSUMER PRODUCTS 0.9%
14,300 Coca-Cola Co. $ 692,656
------------
DIVERSIFIED OPERATIONS 1.6%
20,500 Seagram Co., Ltd. - ADR 1,204,375
------------
ELECTRICAL EQUIPMENT 5.4%
8,000 General Electric Co. 1,057,500
11,350 Hitachi, Ltd - ADR 1,574,103
6,750 Philips Electronics N.V. - ADR 1,292,625
------------
3,924,228
------------
FINANCIAL SERVICES 2.7%
14,375 Citigroup Inc. 743,008
23,800 ING Groep N.V. - ADR 1,227,188
------------
1,970,196
------------
FOOD 2.0%
31,625 Unilever N.V. - ADR 1,438,938
------------
HOUSEHOLD PRODUCTS 1.0%
8,200 Procter & Gamble Co. 721,600
------------
HOUSEHOLD AUDIO & VIDEO EQUIPMENT 2.8%
6,500 Sony Corp. - ADR 2,036,938
------------
INSURANCE 3.8%
8,096 American Int'l Group 715,990
19,700 Axa SA - ADR 1,241,100
560 Berkshire Hathaway, Inc. - Class B* 806,400
------------
2,763,490
------------
MULTIMEDIA 1.9%
10,000 AT&T Corp. - Liberty Media* 522,500
9,900 Time Warner, Inc. 846,450
------------
1,368,950
------------
7
<PAGE>
PURISIMA TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 2000
(UNAUDITED)
% of
# of Shares Common Stocks Net Assets Value
- ----------- ------------- ---------- ------------
OIL & GAS 5.0%
15,500 Exxon Corp. $ 1,167,344
22,000 Royal Dutch Petroleum - ADR 1,155,000
19,857 Total Fina SA - ADR 1,332,901
------------
3,655,245
------------
PHARMACEUTICALS 12.6%
27,500 Astrazeneca PLC - ADR 910,938
23,976 Aventis - ADR 1,246,752
15,300 Bristol-Myers Squibb Co. 869,231
19,900 Glaxo Wellcome PLC - ADR 970,125
9,900 Johnson & Johnson 710,325
18,700 Lilly (Eli) & Co. 1,111,481
14,400 Merck & Co., Inc. 886,500
24,500 Pfizer, Inc. 787,063
8,200 Schering-Plough Corp. 861,413
10,000 Warner-Lambert Co. 855,625
------------
9,209,453
------------
PHOTOGRAPHY 2.6%
43,400 Fuji Photo Film - ADR 1,931,300
------------
RADIO & TV BROADCASTING EQUIPMENT 2.5%
6,200 Matsushita Electric Industrial Co.,
Ltd. - ADR 1,822,413
------------
RETAIL 2.8%
19,900 Home Depot 1,150,469
18,400 Wal-Mart Stores, Inc. 895,850
------------
2,046,319
------------
SEMI-CONDUCTORS 1.8%
11,500 Intel Corp. 1,299,500
------------
8
<PAGE>
PURISIMA TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 2000
(UNAUDITED)
% of
# of Shares Common Stocks Net Assets Value
- ----------- ------------- ---------- ------------
TELECOMMUNICATIONS 16.3%
16,875 AT&T Corp. $ 834,258
21,700 Bell Atlantic Corp. 1,061,944
30,450 Bellsouth Corp. 1,240,838
8,300 China Telecom - ADR* 1,542,763
22,700 Deutsche Telekom - ADR 1,916,724
18,400 MCI Worldcom, Inc.* 821,100
85,000 Portugal Telecom SA - ADR 1,221,875
32,450 SBC Communications Inc. 1,233,100
28,500 Tele Danmark A/S - ADR 1,177,406
12,232 Telefonica De Espana - ADR 1,060,362
------------
12,110,370
------------
TOBACCO PRODUCTS 1.3%
46,250 Philip Morris Cos., Inc. 927,891
------------
TOTAL COMMON STOCKS 98.9%
(cost $62,382,465) 72,437,594
------------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS 1.1%
UMB Bank, N.A.
$782,975 Money Market Fiduciary
(cost $782,975) 782,975
------------
TOTAL INVESTMENTS 100.0% 73,220,569
(COST $63,165,440)
OTHER ASSETS,
LESS LIABILITIES 0.0% 16,814
------------
NET ASSETS 100.0% $ 73,237,383
============
ADR - American depositary receipt.
* Non-income producing security.
See accompanying Notes to Financial Statements.
9
<PAGE>
PURISIMA PURE AMERICAN FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 2000
(UNAUDITED)
% of
# of Shares Common Stocks Net Assets Value
- ----------- ------------- ---------- -----------
AUTOMOBILES 3.5%
1,000 Ford Motor Co. $ 41,625
-----------
BANKING 3.3%
850 BankAmerica Corp. 39,153
-----------
COMMUNICATION EQUIPMENT 5.0%
1,000 Lucent Technologies, Inc. 59,500
-----------
COMPUTER COMPONENTS & SOFTWARE 8.2%
375 Cisco Systems, Inc.* 49,570
550 Microsoft Corp.* 49,156
-----------
98,726
-----------
COMPUTERS 4.0%
475 IBM Corp. 48,450
-----------
CONSUMER PRODUCTS 3.3%
825 Coca-Cola Co. 39,961
-----------
ELECTRICAL EQUIPMENT 4.4%
400 General Electric Co. 52,875
-----------
FINANCIAL SERVICES 3.2%
750 Citigroup Inc. 38,766
-----------
HOUSEHOLD PRODUCTS 3.1%
425 Procter & Gamble Co. 37,400
-----------
INSURANCE 6.2%
450 American Int'l Group 39,797
24 Berkshire Hathaway, Inc. - Class B* 34,560
-----------
74,357
-----------
OIL & GAS 4.4%
700 Exxon Corp. 52,719
-----------
10
<PAGE>
PURISIMA PURE AMERICAN FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 2000
(UNAUDITED)
% of
# of Shares Common Stocks Net Assets Value
- ----------- ------------- ---------- -----------
PHARMACEUTICALS 23.3%
650 Bristol-Myers Squibb Co. $ 36,928
500 Johnson & Johnson 35,875
750 Lilly (Eli) & Co. 44,578
825 Merck & Co., Inc. 50,789
1,150 Pfizer, Inc. 36,944
1,025 Schering-Plough Corp. 35,747
450 Warner-Lambert Co. 38,503
-----------
279,364
-----------
RETAIL 9.0%
950 Home Depot 54,922
1,075 Wal-Mart Stores, Inc. 52,339
-----------
107,261
-----------
SEMI-CONDUCTORS 4.5%
475 Intel Corp. 53,675
-----------
TELECOMMUNICATIONS 16.8%
825 AT&T Corp. 40,786
825 Bell Atlantic Corp. 40,373
1,000 Bellsouth Corp. 40,751
850 MCI Worldcom, Inc.* 37,931
1,075 SBC Communications Inc. 40,850
-----------
200,691
-----------
TOBACCO PRODUCTS 3.1%
1,875 Philip Morris Cos., Inc. 37,617
-----------
TOTAL COMMON STOCKS 105.3%
(cost $1,326,467) 1,262,140
-----------
TOTAL INVESTMENTS 105.3% 1,262,140
(COST $1,326,467)
LIABILITIES, LESS
OTHER ASSETS -5.3% (64,074)
-----------
NET ASSETS 100.0% $ 1,198,066
===========
* Non-income producing security.
See accompanying Notes to Financial Statements.
11
<PAGE>
PURISIMA PURE FOREIGN FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 2000
(UNAUDITED)
% of
# of Shares Common Stocks Net Assets Value
- ----------- ------------- ---------- -----------
AUSTRALIA 2.6%
450 National Australia Bank, Ltd. - ADR $ 29,784
CANADA 2.5%
500 Seagram Co., Ltd. - ADR 29,375
CHINA 2.8%
175 China Telecom - ADR* 32,528
DENMARK 2.3%
650 Tele Danmark A/S - ADR 26,853
FINLAND 2.1%
125 Nokia Corp. - ADR 24,789
FRANCE 11.6%
750 Alcatel Alsthom - ADR 35,438
675 Aventis - ADR 35,100
475 Axa SA - ADR 29,925
497 Total Fina SA - ADR 33,361
-----------
133,824
-----------
GERMANY 7.9%
700 DaimlerChrysler AG - ADR 47,425
525 Deutsche Telekom - ADR 44,330
-----------
91,755
-----------
ITALY 4.5%
700 Fiat SpA - ADR 21,525
956 San Paolo - IMI SpA - ADR 30,114
-----------
51,639
-----------
JAPAN 28.1%
3,675 Bank of Toyko - Mitsubishi - ADR 45,478
950 Fuji Photo Film - ADR 42,275
300 Hitachi, Ltd. - ADR 41,606
165 Matsushita Electric Industrial
Co., Ltd. - ADR 48,500
425 NEC Corp. - ADR 47,972
175 Sony Corp. - ADR 54,841
550 Toyota Motor Corp. - Unsponsored ADR 44,722
-----------
325,394
-----------
NETHERLANDS 11.7%
675 ING Groep N.V. - ADR 34,805
169 Philips Electronics N.V. - ADR 32,364
625 Royal Dutch Petroleum - ADR 32,813
769 Unilever N.V. - ADR 34,990
-----------
134,972
-----------
12
<PAGE>
PURISIMA PURE FOREIGN FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 29, 2000
(UNAUDITED)
% of
# of Shares Common Stocks Net Assets Value
- ----------- ------------- ---------- -----------
NORWAY 2.2%
675 Norsk Hydro A/S - ADR $ 25,228
PORTUGAL 2.1%
1,700 Portugal Telecom SA - ADR 24,438
SPAIN 8.1%
2,000 Banco Bilbao Vizcaya - ADR 29,751
2,475 Banco Santander Central - ADR 25,988
430 Telefonica De Espana - ADR 37,276
-----------
93,015
-----------
SWEDEN 5.0%
300 Ericsson (LM) Telecommunications - ADR 28,800
1,200 Volvo AB - ADR 28,050
-----------
56,850
-----------
UNITED KINGDOM 4.9%
800 Astrazaneca PLC - ADR 26,500
625 Glaxo Wellcome PLC - ADR 30,465
-----------
56,965
-----------
TOTAL COMMON STOCKS 98.4% 1,137,409
-----------
(cost $1,002,172)
Principal
Value
- ---------
SHORT-TERM INVESTMENTS 1.7%
$21,085 UMB Bank, N.A. Money Market Fiduciary 21,085
-----------
(cost $21,085)
TOTAL INVESTMENTS 100.1% 1,158,494
-----------
(COST $1,023,257)
LIABILITIES, LESS -0.1%
OTHER ASSETS (1,442)
-----------
NET ASSETS 100.0% $ 1,157,052
===========
- ----------
ADR - American depositary receipt.
* Non-income producing security.
See accompanying Notes to Financial Statements.
13
<PAGE>
PURISIMA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2000
(UNAUDITED)
Total Pure Pure
Return Fund American Fund Foreign Fund
------------ ----------- ------------
ASSETS:
Investments at value $ 73,220,569 $ 1,262,140 $ 1,158,494
(cost of $63,165,440,
$1,326,467, $1,023,257)
Dividends and interest receivable 29,788 1,615 316
Deferred organizational costs, net 44,403 -- --
Other assets 49,095 1,301 149
------------ ----------- -----------
Total Assets 73,343,855 1,265,056 1,158,959
------------ ----------- -----------
LIABILITIES:
Cash overdraft -- 62,771 --
Payable for Fund shares redeemed 8,796 -- --
Payable to adviser (Notes 2 and 4) 60,938 4,219 1,907
Accrued expenses 36,738 -- --
------------ ----------- -----------
Total Liabilities 106,472 66,990 1,907
------------ ----------- -----------
NET ASSETS $ 73,237,383 $ 1,198,066 $ 1,157,052
============ =========== ===========
COMPOSITION OF NET ASSETS
Capital stock $ 59,493,552 $ 1,214,544 $ 1,010,253
Accumulated net investment loss (206,403) (4,253) (2,391)
Accumulated net realized gain
on investments 3,895,105 52,102 13,953
Net unrealized appreciation
(depreciation) on investments 10,055,129 (64,327) 135,237
------------ ----------- -----------
NET ASSETS $ 73,237,383 $ 1,198,066 $ 1,157,052
============ =========== ===========
Number of shares issued and
outstanding ($0.01 par value
unlimited shares authorized) 3,826,606 97,145 70,702
============ =========== ===========
NET ASSET VALUE PER SHARE $ 19.14 $ 12.33 $ 16.37
============ =========== ===========
See accompanying Notes to Financial Statements.
14
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PURISIMA FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Total Pure Pure
Return Fund American Fund Foreign Fund
----------- ------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes witheld $ 294,275 $ 9,998 $ 1,296
of $1,135, $0, and $17, respectively)
Interest 16,144 345 655
----------- --------- ---------
Total income 310,419 10,343 1,951
----------- --------- ---------
EXPENSES:
Investment advisory 317,761 12,489 4,339
Distribution 79,440 -- --
Administration 31,776 -- --
Federal and state registration 18,189 -- --
Amortization of organizational costs 14,456 -- --
Fund accounting 14,953 -- --
Auditing & tax 8,187 -- --
Transfer agent 14,628 -- --
Legal 8,013 -- --
Custody 3,810 -- --
Printing 3,894 -- --
Insurance 3,821 -- --
Trustees 1,138 -- --
Other 5,128 -- --
----------- --------- ---------
Total expenses 525,194 12,489 4,339
Less: fee waivers (Note 4) (48,529) -- --
----------- --------- ---------
Net expenses 476,665 12,489 4,339
----------- --------- ---------
Net investment loss (166,246) (2,146) (2,388)
----------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on investments 4,039,609 50,026 39,517
Net change unrealized appreciation
(depreciation) on investments 1,615,208 (131,282) 96,896
----------- --------- ---------
NET IN GAIN (LOSS) ON INVESTMENTS 5,654,817 (81,256) 136,413
----------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 5,488,571 ($ 83,402) $ 134,025
=========== ========= =========
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE>
PURISIMA FUNDS
STATEMENT OF CHANGES IN NET ASSETS
TOTAL RETURN FUND
For The Six For The
Months Ended Year Ended
INCREASE IN NET ASSETS FROM: 2/29/00* 8/31/99
------------ ------------
OPERATIONS
Net investment loss $ (166,246) $ (1,500)
Net realized gain (loss)
on investments 4,039,609 (48,382)
Net change in unrealized
appreciation on investments 1,615,208 10,181,524
------------ ------------
Increase in net assets
resulting from operations 5,488,571 10,131,642
------------ ------------
DISTRIBUTION TO SHAREHOLDERS
From net investment income (56,328) (7,442)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 19,773,553 28,558,152
Proceeds from shares issued
on reinvestment of distribution 56,228 7,421
Cost of shares redeemed (5,224,137) (6,969,246)
------------ ------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS 14,605,644 21,596,327
------------ ------------
NET INCREASE IN NET ASSETS 20,037,887 31,720,527
NET ASSETS
Beginning of year 53,199,496 21,478,969
------------ ------------
End of period (including accumulated net
investment income (loss) of
($206,403) and $16,171, respectively) $ 73,237,383 $ 53,199,496
============ ============
CHANGES IN CAPITAL SHARES
Shares sold 1,053,084 1,750,545
Shares issued on reinvestment of distribution 2,933 464
Shares redeemed (276,049) (426,832)
------------ ------------
NET INCREASE 779,968 1,324,177
============ ============
- ----------
* Unaudited.
See accompanying Notes to Financial Statements.
16
<PAGE>
PURISIMA FUNDS
STATEMENT OF CHANGES IN NET ASSETS
PURE AMERICAN FUND
For The Six 9/29/98+
Months Ended Through
INCREASE IN NET ASSETS FROM: 2/29/00* 8/31/99
----------- -----------
OPERATIONS
Net investment loss $ (2,146) $ (2,107)
Net realized gain on investments 50,026 2,444
Net change in unrealized appreciation
(depreciation) on investments (131,282) 66,955
----------- -----------
Increase (decrease) in net assets
resulting from operations (83,402) 67,292
----------- -----------
DISTRIBUTION TO SHAREHOLDERS
From net realized gain (368) --
----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 347,232 1,506,919
Proceeds from shares issued on
reinvestment of distribution 368
Cost of shares redeemed (568,204) (171,771)
----------- -----------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS (220,604) 1,335,148
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS (304,374) 1,402,440
NET ASSETS
Beginning of period 1,502,440 100,000
----------- -----------
End of period (including accumulated net
investment loss of $4,253 and
$2,107, respectively.) $ 1,198,066 $ 1,502,440
=========== ===========
CHANGES IN CAPITAL SHARES
Shares sold 25,990 119,426
Shares issued on reinvestment
of distributions 26 --
Shares redeemed (44,472) (13,825)
----------- -----------
NET INCREASE (18,456) 105,601
=========== ===========
- ----------
+ Commencement of Operations.
* Unaudited.
See accompanying Notes to Financial Statements.
17
<PAGE>
PURISIMA FUNDS
STATEMENT OF CHANGES IN NET ASSETS
PURE FOREIGN FUND
For The Six 9/29/98+
Months Ended Through
INCREASE IN NET ASSETS FROM: 2/29/00* 8/31/99
----------- ---------
OPERATIONS
Net investment income (loss) $ (2,388) $ 884
Net realized gain on investments 39,517 1,467
Net change in unrealized
appreciation on investments 96,896 38,341
----------- ---------
Increase in net assets resulting
from operations 134,025 40,692
----------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (887) --
From net realized gain (27,031) --
----------- ---------
TOTAL DISTRIBUTIONS (27,918) --
----------- ---------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 877,892 250,395
Proceeds from shares issued on
reinvestment of distributions 27,103
Cost of shares redeemed (144,867) (10,270)
----------- ---------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS 760,128 240,125
----------- ---------
NET INCREASE IN NET ASSETS 866,235 280,817
NET ASSETS
Beginning of period 290,817 10,000
----------- ---------
End of period (including accumulated
net investment income (loss) of
($2,391) and $884, respectively.) $ 1,157,052 $ 290,817
=========== =========
CHANGES IN CAPITAL SHARES
Shares sold 57,516 21,425
Shares issued on reinvestment of distributions 1,848 --
Shares redeemed (10,175) (912)
----------- ---------
NET INCREASE 49,189 20,513
=========== =========
- ----------
+ Commencement of Operations.
* Unaudited.
See accompanying Notes to Financial Statements.
18
<PAGE>
PURISIMA FUNDS
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 SEMI-ANNUAL REPORT.
<TABLE>
<CAPTION>
Total Return Fund
----------------------------------------------------------
For The Six For The For The From 10/28/96+
Months Ended Year Ended Year Ended Through
2/29/00++ 8/31/99 8/31/98 8/31/97
---------- ---------- ---------- ----------
<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 income (loss) (0.04) (0.01) 0.02 0.02
Net realized and unrealized
gains on investments 1.74 5.00 0.60 1.85
---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 1.70 4.99 0.62 1.87
---------- ---------- ---------- ----------
Less distributions:
From net investment income (0.02) -- (0.02) --
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 19.14 $ 17.46 $ 12.47 $ 11.87
========== ========== ========== ==========
Total return 9.71%** 40.05% 5.26% 18.70%**
Net assets at end of period
(in thousands) $ 73,237 $ 53,199 $ 21,479 $ 4,236
Ratio of expenses to average
net assets:
Before fee waivers 1.65%* 1.82% 2.71% 20.97%*
After fee waivers 1.50%* 1.50% 1.50% 1.50%*
Ratio of net investment income
(loss) to average net asset (0.52%)* 0.00% 0.28% 0.56%*
Portfolio turnover rate 29.53%** 12.72% 15.89% 1.35%**
</TABLE>
- ----------
* Annualized.
** Not Annualized.
+ Commencement of Operations.
++ Unaudited.
# Net of Fee Waivers.
See accompanying Notes to Financial Statements.
19
<PAGE>
PURISIMA FUNDS
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 SEMI-ANNUAL REPORT.
<TABLE>
<CAPTION>
Pure American Fund Pure Foreign Fund
-------------------------- ---------------------------
For The Six From 9/29/98+ For The Six From 9/29/98+
Months Ended Through Months Ended Through
2/29/00++ 8/31/99 2/29/00++ 8/31/99
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.00 $ 10.00 $ 13.52 $ 10.00
--------- --------- --------- ---------
Income from investment operations
Net investment income (loss) (0.03) (0.02) (0.05) 0.04
Net realized and unrealized
gains on investments (0.64) 3.02 3.73 3.48
--------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS (0.67) 3.00 3.68 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 $ 12.33 $ 13.00 $ 16.37 $ 13.52
========= ========= ========= =========
Total return** (5.13%) 30.00% 27.88% 35.20%
Net assets at end of period
(in thousands) $ 1,198 $ 1,502 $ 1,157 $ 291
Ratio of expenses to average
net assets:
Before fee waivers* 1.50% 1.50% 1.50% 1.50%
After fee waivers* n/a n/a n/a n/a
Ratio of net investment income
(loss) to average net asset (0.26%) (0.34%) (0.82%) 0.65%
Portfolio turnover rate** 27.47% 29.73% 35.30% 7.19%
</TABLE>
- ----------
* Annualized.
** Not Annualized.
+ Commencement of Operations.
++ Unaudited.
See accompanying Notes to Financial Statements.
20
<PAGE>
PURISIMA FUNDS
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(UNAUDITED)
(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.
(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.
21
<PAGE>
(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 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. As
of February 29, 2000, 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) DISTRIBUTIONS 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.
22
<PAGE>
(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 waive its fees such that Fund expenses (exclusive of
brokerage, interest, taxes and extraordinary expenses) do not exceed the
expense limitation of 1.50% of the Fund's average daily net assets. The
Adviser's waivers totaled $48,529 for the six months ended February 29,
2000.
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%.
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.
23
<PAGE>
(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) SECURITY TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the six months ended February 29, 2000 is as follows:
Fund Purchases Sales
---- ----------- -----------
Total Return $32,709,166 $18,994,460
Pure American 448,950 599,561
Pure Foreign 936,502 224,995
At February 29, 2000, the Funds' gross unrealized appreciation and
depreciation on investments based on their basis for federal income tax
purposes is as follows:
<TABLE>
<CAPTION>
Net Unrealized
Gross Unrealized Gross Unrealized Appreciation
Fund Basis Appreciation Depreciation (Depreciation)
---- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Total Return $63,165,440 $14,884,485 $(4,829,356) $10,055,129
Pure American 1,326,467 108,634 (172,961) (64,327)
Pure Foreign 1,023,257 176,137 (40,900) 135,237
</TABLE>
24
<PAGE>
PURISIMA FUNDS
CHANGE IN CERTIFYING ACCOUNTANT
PricewaterhouseCoopers LLP were previously the principal accountants for the
Purisima Funds. The decision to change accountants was resolved by the board of
trustees in the meeting on January 20, 2000 and Tait, Weller & Baker were
appointed principal accountants.
PricewaterhouseCoopers LLP had served as principal accountants for each of the
two years in the period ended August 31, 1999. The audit report of
PricewaterhouseCoopers LLP on the financial statements of the Purisima Funds for
each of the two years in the period ended August 31, 1999 did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified of modified as
to uncertainty, audit scope, or accounting principles. In connection with the
audits of each of the two years in the period ended August 31, 1999 and the
subsequent interim period through January 20, 2000, there were no disagreements
with PricewaterhouseCoopers LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures,
which disagreements if not resolved to their satisfaction would have caused them
to make reference in connection with their opinion to the subject matter of the
disagreements.
The Purisima Funds represent that it had not consulted with Tait, Weller & Baker
at any time prior to their engagement with respect to the application of
accounting principles to a specified transaction, either completed or proposed:
or the type audit opinion that might be rendered on the Purisima Funds'
financial statements.
25
