<PAGE>
As filed with the Securities and Exchange Commission on August 30, 1999
File No. 333 - 80473
File No. 811 - 09383
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 1 [X]
HAMBRECHT & QUIST FUND TRUST
(Exact Name of Registrant as Specified on Charter)
One Bush Street
San Francisco, California 94104
(Address of Principal Executive Offices)
(415) 439-3000
(Registrant's Telephone Number)
David R. Krimm
President
Hambrecht & Quist Fund Management, LLC
One Bush Street
San Francisco, California 94104
(Name and Address for Agent of Service)
Copies to:
Andre W. Brewster, Esq.
Howard Rice Nemerovski Canady Falk & Rabkin, A Professional Corporation
Three Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered: Shares of Beneficial Interest of the
Hambrecht & Quist Fund Trust.
Registrant will file a notice pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended, within ninety days after its fiscal year end.
Registrant hereby amends this Registration Statement under the Securities Act of
1933 on such date or dates as may be necessary to delay its effective date until
Registrant shall file further amendment which specifically states that such
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until such
Registration Statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
H&Q IPO & EMERGING COMPANY FUND
Prospectus _______________, 1999
Adviser Classes
As with all mutual funds, the Securities and Exchange
Commission (SEC) has not approved these securities or passed
on whether the information in this prospectus is adequate and
accurate. Anyone who indicates otherwise is committing a
federal crime.
ABOUT THE FUND
The H&Q IPO & Emerging Company Fund (Fund) is designed to offer individual
investors the benefits of investing in a diversified portfolio of common stocks
acquired as part of, or within 18 months after, a company's initial public
offering.
The Fund uses a quantitatively driven strategy to make buy and sell
decisions. The strategy employs a range of proprietary techniques, developed
through an extensive analysis of performance and other data related to newly
public companies.
CONTENTS
Goal.............................
Main Strategy....................
Main Risks.......................
Risk Return Bar
Chart and Table...............
Fund Fees and Expenses...........
Fund Management..................
Investing in the Fund............
Buying Shares.............
Selling Shares............
Shareholder Services......
Transaction Policies.............
Distributions and Taxes..........
To Learn More....................
<PAGE>
GOAL
The Fund's goal is capital appreciation.
MAIN STRATEGY
The Fund seeks to achieve its goal by investing, under normal market
conditions, at least 65% of its assets in a diversified portfolio of common
stocks acquired as part of, or within 18 months after, a company's initial
public offering and traded on the New York Stock Exchange, American Stock
Exchange or NASDAQ National Market. The common stocks of these emerging
companies will be referred to generally in this prospectus as IPOs.
The Fund's sub-adviser, Symphony Asset Management, LLC, has developed a
quantitative model which tracks historical IPO performance. At the time of the
initial public offering, the sub-adviser will purchase IPO shares that meet
certain minimum quantitative criteria for offering size, issuer market
capitalization and lead underwriter, among other factors. The sub-adviser will
attempt to purchase these shares directly from the underwriters, at the offering
price. If shares cannot be obtained at the offering price, they will be
purchased in the secondary market. For a period of up to 18 months after the
initial public offering, the sub-adviser will also purchase IPO shares based
upon the above criteria and certain aftermarket criteria, such as analyst
ratings, price, performance, valuation relative to the industry and insider
activity. IPO shares held by the Fund will be sold based upon similar
aftermarket criteria. The Fund normally expects to sell most of its IPO holdings
within a year of purchase. When making investment decisions, the sub-adviser
will employ qualitative, as well as quantitative, techniques and will emphasize
issuers with growth characteristics.
When the sub-adviser believes that the number or quality of IPOs available
for Fund investment is inadequate, the sub-adviser intends to invest in
futures contracts or participations based on equity indexes, such as the S&P
500-Registered Trademark-Index, Russell 2000-Registered Trademark- Index or
Wilshire 4500-Registered Trademark- Index. The sub-adviser may also purchase
non-IPO equity securities (including common stocks, preferred stocks,
convertible securities and warrants) issued primarily by companies which have
capitalizations of $1 billion or less at the time of investment. Pending
investment and to provide liquidity for redemptions, the Fund may also hold
its assets in cash and cash equivalent instruments, such as money market
mutual funds, Treasury bills, commercial paper and repurchase agreements. The
Fund's investment in assets other than IPOs will, in normal circumstances, be
limited to 35% of its assets. The Fund may not achieve its investment
objective during periods when it has taken a temporary defensive position
because of adverse market, economic, political or other conditions.
The Fund will consider closing to new purchasers when the Fund's assets exceed
$300 million.
MAIN RISKS
SPECIAL RISKS OF IPOS
[In a separate box]
2
<PAGE>
Most IPOs involve a high degree of risk not normally associated with offerings
of more seasoned companies. Companies involved in IPOs generally have limited
operating histories, and their prospects for future profitability are uncertain.
These companies often are engaged in new and evolving businesses and are
particularly vulnerable to competition and to changes in technology, markets and
economic conditions. They may be dependent on certain key managers and third
parties, need more personnel and other resources to manage growth and require
significant additional capital. They may also be dependent on limited product
lines and uncertain property rights and need regulatory approvals. Investors in
IPOs can be affected by substantial dilution in the value of their shares, by
sales of additional shares and by concentration of control in existing
management and principal shareholders. Stock prices of IPOs can also be highly
unstable, due to the absence of a prior public market, the small number of
shares available for trading and limited investor information.
STOCK MARKETS WILL FALL PERIODICALLY. As with any investment whose performance
is tied to stock markets, the value of your investment in the Fund will
fluctuate, which means that you could lose money.
MANY FACTORS CAN AFFECT STOCK MARKET PERFORMANCE. Political and economic news
can influence market-wide trends. Other factors may be ignored by the market as
a whole but may cause movements in the price of one company's stock or the stock
of companies in one or more industries. All of these factors may have a greater
impact on IPOs.
THE NUMBER OR QUALITY OF IPOS AVAILABLE FOR FUND PURCHASE MAY BE INADEQUATE FOR
EXTENDED PERIODS OF TIME. During such periods, the Fund will not be able to
implement its main investment strategy.
THE IPO MARKET TENDS TO FAVOR CERTAIN INDUSTRIES FROM TIME TO TIME. As a result,
the companies in which the Fund invests at any given time may represent a
limited number of industries, and the Fund's share price may be subject to
greater volatility. Currently, the industry comprised of Internet related
companies is one of the industries favored by the IPO market.
THE FUND MAY BE UNABLE TO PURCHASE IPOS AT THE OFFERING PRICE. The price of IPO
shares in the aftermarket may greatly exceed the offering price, making it more
difficult for the Fund to realize a profit.
THE INVESTMENT ADVISER MAY APPEAR TO HAVE A CONFLICT OF INTEREST WHEN THE FUND
PURCHASES IPOS FROM UNDERWRITING SYNDICATES OF WHICH HAMBRECHT & QUIST LLC, THE
FUND'S DISTRIBUTOR AND AN AFFILIATE OF THE FUND'S INVESTMENT ADVISER, ACTS AS A
MEMBER OR MANAGER. The Fund will not purchase IPOs directly from Hambrecht &
Quist LLC and the Fund otherwise intends to conduct these purchases in
compliance with applicable SEC rules.
THE FUND NORMALLY EXPECTS TO SELL MOST OF ITS IPO HOLDINGS WITHIN A YEAR. This
turnover of the Fund's portfolio will increase the Fund's transaction costs. Any
gains from such sales will also be treated as short-term capital gains, taxable
as ordinary income to the Fund's shareholders.
3
<PAGE>
THE FUND MAY HAVE TO SELL STOCKS AT A LOSS IN ORDER TO FUND SHAREHOLDER SALES.
Sales are more likely to occur when prices of IPO stocks are declining, and
prices of IPO stocks may fall more rapidly than those of other securities.
THE FUND AND THE INVESTMENT ADVISER HAVE NO OPERATING HISTORY AND THE
SUB-ADVISER'S MODEL HAS NOT BEEN PREVIOUSLY IMPLEMENTED BY A MUTUAL FUND. The
model is based largely on a limited period of past market performance and may
fail to anticipate shifts in market dynamics over time.
THE SUB-ADVISER'S MODEL RELIES ON MARKET AND OTHER DATA COMPILED FROM OTHER
SOURCES, PRIMARILY QUOTE.COM, A LEADING PROVIDER OF IPO INFORMATION. If this
information were to become unavailable, the Fund's investment strategy could be
disrupted.
THE FUND MAY INVEST IN OTHER INSTRUMENTS THAT ALSO INVOLVE RISK. For example,
futures contracts and index participations, which the Fund may use to gain
exposure to the stock market, could hurt the Fund's performance if they do not
perform as expected. In addition, the Fund may invest in non-IPO equity
securities with small capitalizations, as well as in futures contracts and
participations based on these securities. Investing in small capitalization
companies carries many of the same risks as investing in IPOs.
THE FUND COULD BE ADVERSELY AFFECTED BY THE FAILURE OF COMPUTER SYSTEMS USED BY
THE FUND'S SERVICE PROVIDERS AND OTHERS TO PROPERLY PROCESS DATA CONTAINING
DATES OCCURRING AFTER DECEMBER 31, 1999 (YEAR 2000 PROBLEM). The Year 2000
problem could also have an adverse effect on the companies whose securities are
held by the Fund or the securities markets and their participants generally.
RISK/RETURN BAR CHART AND TABLE
The Fund is recently organized and therefore has no performance history. Once
the Fund has performance for at least one calendar year, a Bar Chart and
Performance Table will be included in the prospectus. Although past performance
of a fund is no guarantee of how it will perform in the future, historical
performance may give you some indication of the risks of investing in the Fund.
4
<PAGE>
FUND FEES AND EXPENSES
The following table describes what you can expect to pay as a Fund investor.
"Shareholder fees" are expenses charged to you directly by Hambrecht & Quist LLC
(H&Q), the Fund's distributor. "Annual operating expenses" are paid out of Fund
assets, so their effect is included in total return.
PERCENTAGE FEE TABLE
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
SHAREHOLDER FEES
Maximum sales charge
(as a % of offering price).................... 5.50%(1) None
Maximum deferred sales charge
(as a % of lower of offering
or sale price)................................ None 5.00%(2)
Redemption fees (as a % of sale price).......... None(3) None(3)
ANNUAL OPERATING EXPENSES
(as a % of average net assets)
Management fees................................. 0.65% 0.65%
Distribution fees............................... 0.30 1.00
Other expenses4................................. 0.65 0.65
-------------------------
Total annual operating expenses(5).............. 1.60% 2.30%
</TABLE>
- -----------------------
(1)Imposed upon shares purchased (other than dividend reinvestments). Purchases
of $1,000,000 or more sold within a year may be subject to a 1.00% contingent
deferred sales charge. See "Investing in the Fund--Buying Shares--Choosing a
Share Class--Class A".
(2)Imposed upon shares sold (other than dividend reinvestments) within five
years of purchase at a rate of 5.00% the first year, declining to 1.00% in the
fifth year, and eliminated thereafter. See "Investing in the Fund--Buying
Shares--Choosing a Share Class--Class B."
(3)The Fund's transfer agent charges a fee (currently $10.00) for each wire
redemption. Brokers, dealers or other financial intermediaries may also
charge a transaction fee for redemptions.
(4)Estimated amounts for the Fund's current fiscal year.
(5)Contractually guaranteed by the investment adviser until January 1, 2001.
5
<PAGE>
EXPENSES ON A $10,000 INVESTMENT
DESIGNED TO HELP YOU COMPARE EXPENSES, THIS EXAMPLE USES THE SAME
ASSUMPTIONS AS ALL MUTUAL FUND PROSPECTUSES: A $10,000 INVESTMENT, A 5%
RETURN EACH YEAR, THE SAME OPERATING EXPENSES THROUGHOUT THE PERIOD AND
SALE OF YOUR SHARES AT THE END OF THE PERIOD. YOUR ACTUAL COSTS MAY BE
HIGHER OR LOWER.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Class A $704 $1027
Class B $733 $1018
</TABLE>
YOU WOULD PAY THE FOLLOWING EXPENSES IF YOU DID NOT SELL YOUR SHARES.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Class B $233 $718
</TABLE>
FUND MANAGEMENT
The investment adviser for the Fund is Hambrecht & Quist Fund Management, LLC
(HQFM), One Bush Street, San Francisco, CA 94104. HQFM oversees the asset
management and administration of the Fund. As compensation for its services,
HQFM receives a management fee from the Fund of 0.65% of its average daily net
assets, a portion of which is used to pay the Fund's sub-adviser.
HQFM is wholly owned by Hambrecht & Quist California, the parent company for
H&Q, a leading investment bank specializing in emerging growth companies.
Hambrecht & Quist California is, in turn, a wholly-owned subsidiary of Hambrecht
& Quist Group. Through its subsidiaries, Hambrecht & Quist Group provides a
variety of financial services, including investment advisory services to
registered closed-end mutual funds, wrap-fee programs, employee benefit plans,
private investment funds and individuals. HQFM was recently formed to serve as
investment adviser for the Fund and has no other advisory clients.
The Fund's sub-adviser is Symphony Asset Management, LLC (Symphony), 555
California Street, San Francisco, CA 94104. Founded in 1994, Symphony is owned
50% by BARRA, Inc., a leading provider of analytical models since 1975, and 50%
by Symphony's managers through Maestro LLC. Symphony, and its affiliate,
Symphony Asset Management, Inc., have more than $2.7 billion in assets under
management.
Ross Sakamoto, who has been a Portfolio Manager for the sub-adviser since 1996,
handles the Fund's day-to-day management. Prior to 1996, he was a Principal in
the Investment Strategies Group of Barclays Global Investors and its
predecessors.
6
<PAGE>
INVESTING IN THE FUND
On the following pages you will find information on buying and selling shares.
Information on taxes is included as well.
The Fund offers multiple classes of shares. This prospectus offers the Class A
shares and Class B shares (Adviser Classes), which are sold through financial
intermediaries and have different costs. If you would prefer to invest in the
Fund without the assistance of a financial intermediary, please contact the
Fund's transfer agent, PFPC Inc., at 877-613-7975 to request a copy of the
Fund's Common Class prospectus. For TDD service, call 877-613-7973.
BUYING SHARES
Shares of the Adviser Classes may be purchased through H&Q, the Fund's
distributor, or through a variety of brokers, dealers and other financial
intermediaries who have been authorized by the distributor to sell Fund shares.
You will need to take the following steps to buy shares of the Fund:
STEP 1
CHOOSING A SHARE CLASS
You will need to choose a share class before making your initial investment.
Each share class has its own fee structure. In making your choice, you should
weigh the impact of all potential costs over the length of your investment,
including sales charges and annual fees.
- Class A shares may be appropriate for investors who prefer to pay the
Fund's sales charge up front rather than upon the sale of their shares
or want to take advantage of the reduced sales charge for larger
investments.
- Class B shares may be appropriate for investors who wish to avoid a
front-end sales charge and put 100% of their investment dollars to work
immediately. Class B shares are subject to a contingent deferred sales
charge (CDSC) for sales within five years of purchase, and to a higher
distribution fee than Class A shares.
The Fund has adopted a plan under Rule 12b-1 that allows the Fund to pay
distribution expenses for the sale and distribution of the Class A and Class B
shares. Because these fees are paid out of Fund assets on an ongoing basis, over
time these fees will increase the cost of your investment in the Fund and may
cost more than paying other types of sales charges.
7
<PAGE>
CLASS A -- CHARGED WHEN YOU BUY SHARES
<TABLE>
<CAPTION>
Sales charge as % of Sales charge as % of your
Your investment offering price(1) net investment
- ----------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 5.50% 5.82%
$50,000 to $99,999 4.75% 4.99%
$100,000 to $249,999 3.75% 3.90%
$250,000 to $499,999 2.75% 2.83%
$500,000 to $999,999 2.00% 2.04%
$1,000,000 or more(2) None None
</TABLE>
- ----------------
(1) Offering price includes the front-end sales charge.
(2)Purchases of $1,000,000 or more sold within one year of purchase may be
subject to a 1.00% CDSC.
Purchases of Class A shares may be eligible for reduced sales charges in
accordance with the Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain Retirement Plans or
Exemption for Certain Other Investors. See the statement of additional
information or consult your financial intermediary to determine if you qualify
for a reduced sales charge. In addition to the front-end sales charge, Class A
shares carry an annual Rule 12b-1 fee of 0.30% of average daily net assets.
CLASS B -- CHARGED WHEN YOU SELL SHARES
<TABLE>
<CAPTION>
CDSC as % of your
Time since you bought the offering or sale price
shares you are selling (whichever is less)
- ---------------------- -----------------
<S> <C>
First year 5.00%
Second year 4.00%
Third year 3.00%
Fourth year 2.00%
Fifth year 1.00%
Sixth year and thereafter None
</TABLE>
In addition to the CDSC, Class B shares carry an annual Rule 12b-1 fee of 1.00%
of average daily net assets. Class B Shares automatically convert to Class A
shares five years from the date of purchase. The conversion will not occur if
the Fund is advised that the conversion may constitute a taxable event for
federal tax purposes.
8
<PAGE>
STEP 2
DECIDE HOW MUCH YOU WANT TO INVEST.
<TABLE>
<CAPTION>
Minimum Initial Minimum Additional Minimum Balance
Investment Investment
- ----------------------------------------------------------------------
<S> <C> <C>
$5,000 $100 $2,500
($2,000 for retirement ($25 for retirement and ($1,000 for retirement and
and custodial accounts) custodial accounts) and custodial accounts)
</TABLE>
STEP 3
CHOOSE AN OPTION FOR FUND DISTRIBUTIONS. The three options are described below.
If you do not indicate a choice, we will assume you have selected the first
option.
OPTION FEATURE
- -----------------------------------------------------------------
Reinvestment All dividend and capital gain distributions are invested
automatically in shares of the Fund
- -----------------------------------------------------------------
Cash/Reinvestment You receive payment for dividends, while any capital
Mix gain distributions are invested in shares of the Fund
- -----------------------------------------------------------------
Cash You receive payment for all dividends and capital gains
distributions
STEP 4
PLACE YOUR ORDER. You may purchase shares of the Adviser Classes through H&Q or
any other authorized financial intermediary. Your financial intermediary will be
responsible for forwarding your purchase request to PFPC Inc. Please talk with
your financial intermediary about the methods it has available to purchase
shares of the Fund.
SELLING SHARES
Shares of the Adviser Classes may be sold through your financial intermediary.
Your financial intermediary will be responsible for forwarding your sale request
to PFPC Inc. PFPC Inc. will send the sale proceeds to your financial
intermediary, who will be responsible for retaining the proceeds in your account
or forwarding the proceeds to you.
9
<PAGE>
When selling shares, please be aware of the following policies:
- The Fund may take up to seven days to pay sale proceeds
- If you are selling shares that were recently purchased by check, the
proceeds may be delayed until the check clears; this may take up to 15
days from the date of purchase
- If necessary to minimize any applicable CDSC, the Fund will sell shares
you have held the longest
- Sale requests in excess of $25,000, or requests to send proceeds to a
third party, may require a Medallion Program signature guarantee of an
eligible institution (available from most banks and trust companies);
please call PFPC Inc. at 877-613-7975 with any questions concerning
signature guarantees
SHAREHOLDER SERVICES
The Fund offers the following shareholder services. To take advantage of any of
these services, please talk to your financial intermediary.
- AUTOMATIC INVESTMENT PLAN - Allows you to buy additional shares ($100
minimum) of the Fund monthly, bi-monthly, quarterly or annually by a
direct transfer of funds from your account to PFPC Inc. Minimum and
frequencies may vary.
- SYSTEMATIC WITHDRAWAL PLAN - Allows you to withdraw a set amount ($25
minimum) of your investment in the Fund on a monthly, quarterly or
annual basis, as long as your beginning account balance is at least
$5,000 and your account balance remains at or above $2,500. Minimums
and frequencies may vary.
- REINSTATEMENT PRIVILEGE - Allows you to repurchase Class A shares which
you have sold within the preceding 60 days without paying an additional
sales charge.
OTHER TRANSACTION POLICIES
The Fund is open for business each day that the New York Stock Exchange (NYSE)
is open for regular trading. The Fund calculates its share price each business
day, after the close of regular trading on the NYSE (generally 4 p.m. Eastern
time). The Fund's share price is its net asset value per share, or NAV, which is
the Fund's net assets divided by the number of shares outstanding.
In valuing its securities, the Fund uses market quotes if they are readily
available. In cases where quotes are not readily available, the Fund may value
securities based on fair values developed using methods approved by the Fund's
Trustees.
The effective time of your purchase or sale, which determines the price you pay
or receive for your shares, will be the time the Fund's transfer agent, PFPC
Inc., or a financial intermediary authorized to accept orders on behalf of the
transfer agent, receives your order. Orders received in proper form prior to the
close of regular trading on the NYSE will be valued at the net asset
10
<PAGE>
value per share calculated that day. Orders received after the close of regular
trading on the NYSE will be priced the next day the Fund calculates its net
asset value. Financial intermediaries may charge transaction or other fees in
addition to those described in this prospectus.
THE FUND RESERVES CERTAIN RIGHTS, including the following:
- To withdraw or suspend any part of the offering made by this prospectus
- To close the Fund to investors, other than current shareholders and
certain retirement plans and investment advisory clients, when the
Fund's assets exceed $300 million
- To refuse any purchase order, including those that appear to be
associated with short-term trading activities
- To change or waive the Fund's investment minimums
- To suspend the right to sell shares back to the Fund, and delay sending
proceeds, during times when trading on the NYSE is restricted or halted,
or otherwise as permitted by the SEC
- To pay you in portfolio securities, rather than in cash, if the value of
the shares you sell exceeds $250,000 or 1% of the Fund's assets
- To automatically sell your shares if your account is closed for any
reason or if your balance falls below the minimum required as a result
of selling your shares
- To terminate any of the services described under "Shareholder Services"
on 60 days' notice
DISTRIBUTIONS AND TAXES
Any investment in the Fund typically involves several tax considerations. The
information below is meant as a general summary for U.S. citizens and residents.
Because each person's tax situation is different, you should consult your tax
adviser about the tax implications of your investment in the Fund. You also can
visit the Internal Revenue Service (IRS) web site at www.irs.ustreas.gov.
--------------------
As a shareholder, you are entitled to your share of income and gains the Fund
earns. Every year, the Fund distributes to its shareholders substantially all of
its net investment income and net capital gains, if any. These distributions
typically are paid in December to all shareholders of record.
Unless you are investing through a tax-deferred or Roth retirement account, your
Fund distributions generally have tax consequences. The Fund's net investment
income and short-
11
<PAGE>
term capital gains are distributed as dividends and are taxable as ordinary
income. It is expected that most of the Fund's capital gains will be short-term.
Other capital gain distributions are taxable as long-term capital gains,
regardless of how long you have held your shares in the Fund. Distributions are
generally taxable in the year they are declared, whether you reinvest them or
take them in cash.
If you are investing through a taxable account and purchase shares of the Fund
just before it declares a distribution, you may receive a portion of your
investment back as a taxable distribution. This is because when the Fund makes a
distribution, the share price is reduced by the amount of the distribution. You
can avoid "buying a dividend," as it is often called, by contacting PFPC Inc. at
877-613-7975 to determine if a distribution is imminent and waiting until
afterwards to invest. Of course, you may decide that the opportunity for
investment gain during the period before the distribution outweighs the tax
consequences of buying a dividend.
Generally, any sale of your shares is a taxable event. A sale may result in a
capital gain or loss to you. A gain or loss generally will be treated as
short-term if shares are held for 12 months or less, long-term if shares are
held longer.
At the beginning of every year, the Fund provides shareholders with information
detailing the tax status of any distributions the Fund paid during the previous
calendar year.
12
<PAGE>
TO LEARN MORE
This prospectus contains important information about the Fund and should be read
and kept for reference. You also can obtain more information from the following
sources:
- SHAREHOLDER REPORTs, which will be mailed to Fund investors
semi-annually, will discuss recent performance and portfolio holdings.
- THE STATEMENT OF ADDITIONAL INFORMATIOn (SAI) includes a more detailed
discussion of investment policies and the risks associated with various
investments. The SAI is incorporated by reference into the prospectus,
making it part of the prospectus.
You can obtain copies of these documents by contacting your financial
intermediary, the Fund's transfer agent, PFPC Inc., or the SEC at the locations
below. All materials from financial intermediaries and the transfer agent are
free; the SEC charges a duplicating fee. You also can review these materials in
person at the SEC's Public Reference Room.
PFPC INC.
400 Bellevue Parkway
Wilmington, Delaware 19809
877-613-7975
www.hamquist.com
- ----------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-6009
800-SEC-0330 (Public Reference Section)
www.sec.gov
- -----------
SEC FILE NUMBER
H&Q IPO & Emerging
Company Fund 811-09383
13
<PAGE>
H&Q IPO & EMERGING COMPANY FUND
Prospectus _______________, 1999
Common Class
As with all mutual funds, the Securities and Exchange
Commission (SEC) has not approved these securities or passed on
whether the information in this prospectus is adequate and
accurate. Anyone who indicates otherwise is committing a
federal crime.
ABOUT THE FUND
The H&Q IPO & Emerging Company Fund (Fund) is designed to offer individual
investors the benefits of investing in a diversified portfolio of common stocks
acquired as part of, or within 18 months after, a company's initial public
offering.
The Fund uses a quantitatively driven strategy to make buy and sell
decisions. The strategy employs a range of proprietary techniques, developed
through an extensive analysis of performance and other data related to newly
public companies.
CONTENTS
Goal...................................
Main Strategy..........................
Main Risks.............................
Risk Return Bar
Chart and Table.....................
Fund Fees and Expenses.................
Fund Management........................
Investing in the Fund..................
Buying Shares.................
Selling Shares................
Shareholder Services..........
Transaction Policies...................
Distributions and Taxes................
To Learn More..........................
<PAGE>
GOAL
The Fund's goal is capital appreciation.
MAIN STRATEGY
The Fund seeks to achieve its goal by investing, under normal market
conditions, at least 65% of its assets in a diversified portfolio of common
stocks, acquired as part of, or within 18 months after, a company's initial
public offering and traded on the New York Stock Exchange, American Stock
Exchange or NASDAQ National Market. The common stocks of these emerging
companies will be referred to generally in this prospectus as IPOs.
The Fund's sub-adviser, Symphony Asset Management, LLC, has developed a
quantitative model which tracks historical IPO performance. At the time of the
initial public offering, the sub-adviser will purchase IPO shares that meet
certain minimum quantitative criteria for offering size, issuer market
capitalization and lead underwriter, among other factors. The sub-adviser will
attempt to purchase these shares directly from the underwriters, at the offering
price. If shares cannot be obtained at the offering price, they will be
purchased in the secondary market. For a period of up to 18 months after the
initial public offering, the sub-adviser will also purchase IPO shares based
upon the above criteria and certain aftermarket criteria, such as analyst
ratings, price, performance, valuation relative to the industry and insider
activity. IPO shares held by the Fund will be sold based upon similar
aftermarket criteria. The Fund normally expects to sell most of its IPO holdings
within a year of purchase. When making investment decisions, the sub-adviser
will employ qualitative, as well as quantitative, techniques and will emphasize
issuers with growth characteristics.
When the sub-adviser believes that the number or quality of IPOs available
for Fund investment is inadequate, the sub-adviser intends to invest in
futures contracts or participations based on equity indexes, such as the S&P
500-Registered Trademark- Index, Russell 2000-Registered Trademark- Index or
Wilshire 4500-Registered Trademark- Index. The sub-adviser may also purchase
non-IPO equity securities (including common stocks, preferred stocks,
convertible securities and warrants) issued primarily by companies which have
capitalizations of $1 billion or less at the time of investment. Pending
investment and to provide liquidity for redemptions, the Fund may also hold
its assets in cash and cash equivalent instruments, such as money market
mutual funds, Treasury bills, commercial paper and repurchase agreements. The
Fund's investment in assets other than IPOs will, in normal circumstances, be
limited to 35% of its assets. The Fund may not achieve its investment
objective during periods when it has taken a temporary defensive position
because of adverse market, economic, political or other conditions.
The Fund will consider closing to new purchasers when the Fund's assets exceed
$300 million.
MAIN RISKS
SPECIAL RISKS OF IPOS
[In a separate box]
Most IPOs involve a high degree of risk not normally associated with offerings
of more seasoned companies. Companies involved in IPOs generally have limited
operating histories, and their prospects for future profitability are uncertain.
These companies often are engaged in new and evolving businesses and are
particularly vulnerable to competition and to changes in technology,
-2-
<PAGE>
markets and economic conditions. They may be dependent on certain key managers
and third parties, need more personnel and other resources to manage growth and
require significant additional capital. They may also be dependent on limited
product lines and uncertain property rights and need regulatory approvals.
Investors in IPOs can be affected by substantial dilution in the value of their
shares, by sales of additional shares and by concentration of control in
existing management and principal shareholders. Stock prices of IPOs can also be
highly unstable, due to the absence of a prior public market, the small number
of shares available for trading and limited investor information.
STOCK MARKETS WILL FALL PERIODICALLY. As with any investment whose performance
is tied to stock markets, the value of your investment in the Fund will
fluctuate, which means that you could lose money.
MANY FACTORS CAN AFFECT STOCK MARKET PERFORMANCE. Political and economic news
can influence market-wide trends. Other factors may be ignored by the market as
a whole but may cause movements in the price of one company's stock or the stock
of companies in one or more industries. All of these factors may have a greater
impact on IPOs.
THE NUMBER OR QUALITY OF IPOS AVAILABLE FOR FUND PURCHASE MAY BE INADEQUATE FOR
EXTENDED PERIODS OF TIME. During such periods, the Fund will not be able to
implement its main investment strategy.
THE IPO MARKET TENDS TO FAVOR CERTAIN INDUSTRIES FROM TIME TO TIME. As a result,
the companies in which the Fund invests at any given time may represent a
limited number of industries, and the Fund's share price may be subject to
greater volatility. Currently, the industry comprised of Internet related
companies is one of the industries favored by the IPO market.
THE FUND MAY BE UNABLE TO PURCHASE IPOS AT THE OFFERING PRICE. The price of IPO
shares in the aftermarket may greatly exceed the offering price, making it more
difficult for the Fund to realize a profit.
THE INVESTMENT ADVISER MAY APPEAR TO HAVE A CONFLICT OF INTEREST WHEN THE FUND
PURCHASES IPOS FROM UNDERWRITING SYNDICATES OF WHICH HAMBRECHT & QUIST LLC, THE
FUND'S DISTRIBUTOR AND AN AFFILIATE OF THE FUND'S INVESTMENT ADVISER, ACTS AS A
MEMBER OR MANAGER. The Fund will not purchase IPOs directly from Hambrecht &
Quist LLC, and the Fund otherwise intends to conduct these purchases in
compliance with applicable SEC rules.
THE FUND NORMALLY EXPECTS TO SELL MOST OF ITS IPO HOLDINGS WITHIN A YEAR. This
turnover of the Fund's portfolio will increase the Fund's transaction costs. Any
gains from such sales will also be treated as short-term capital gains, taxable
as ordinary income to the Fund's shareholders.
THE FUND MAY HAVE TO SELL STOCKS AT A LOSS IN ORDER TO FUND SHAREHOLDER SALES.
Sales are more likely to occur when prices of IPO stocks are declining, and
prices of IPO stocks may fall more rapidly than those of other securities.
THE FUND AND THE INVESTMENT ADVISER HAVE NO OPERATING HISTORY AND THE
SUB-ADVISER'S MODEL HAS NOT BEEN PREVIOUSLY IMPLEMENTED BY A MUTUAL FUND. The
model is based largely on a limited period of past market performance and may
fail to anticipate shifts in market dynamics over time.
-3-
<PAGE>
THE SUB-ADVISER'S MODEL RELIES ON MARKET AND OTHER DATA COMPILED FROM OTHER
SOURCES, PRIMARILY QUOTE.COM, A LEADING PROVIDER OF IPO INFORMATION. If this
information were to become unavailable, the Fund's investment strategy could be
disrupted.
THE FUND MAY INVEST IN OTHER INSTRUMENTS THAT ALSO INVOLVE RISK. For example,
futures contracts and index participations, which the Fund may use to gain
exposure to the stock market, could hurt the Fund's performance if they do not
perform as expected. In addition, the Fund may invest in non-IPO equity
securities with small capitalizations, as well as in futures contracts and
participations based on these securities. Investing in small capitalization
companies carries many of the same risks as investing in IPOs.
THE FUND COULD BE ADVERSELY AFFECTED BY THE FAILURE OF COMPUTER SYSTEMS USED BY
THE FUND'S SERVICE PROVIDERS AND OTHERS TO PROPERLY PROCESS DATA CONTAINING
DATES OCCURRING AFTER DECEMBER 31, 1999 (YEAR 2000 PROBLEM). The Year 2000
problem could also have an adverse effect on the companies whose securities are
held by the Fund or the securities markets and their participants generally.
RISK/RETURN BAR CHART AND TABLE
The Fund is recently organized and therefore has no performance history. Once
the Fund has performance for at least one calendar year, a Bar Chart and
Performance Table will be included in the prospectus. Although past performance
of a fund is no guarantee of how it will perform in the future, historical
performance may give you some indication of the risks of investing the Fund.
-4-
<PAGE>
FUND FEES AND EXPENSES
The following table describes what you can expect to pay as a Fund investor.
"Shareholder fees" are expenses charged to you directly by Hambrecht & Quist LLC
(H&Q), the Fund's distributor. "Annual operating expenses" are paid out of Fund
assets, so their effect is included in total return.
<TABLE>
<CAPTION>
PERCENTAGE FEE TABLE
- ---------------------
<S> <C>
SHAREHOLDER FEES
Maximum sales charge....................... None
Maximum deferred sales charge.............. None
Redemption fees............................ None(1)
ANNUAL OPERATING EXPENSES
(as a % of average net assets)
Management fees............................ 0.65%
Distribution fees.......................... 0.25
Other expenses(2).......................... 0.70
----
Total annual operating expenses(3) 1.60%
</TABLE>
- -----------------------
(1).The Fund's transfer agent charges a fee (currently $10.00) for each wire
redemption. Mutual fund supermarkets may also charge a transaction fee for
redemptions.
(2). Estimated amounts for the Fund's current fiscal year.
(3). Contractually guaranteed by the investment adviser until January 1, 2001.
EXPENSES ON A $10,000 INVESTMENT
DESIGNED TO HELP YOU COMPARE EXPENSES, THIS EXAMPLE USES THE SAME ASSUMPTIONS AS
ALL MUTUAL FUND PROSPECTUSES: A $10,000 INVESTMENT, A 5% RETURN EACH YEAR, THE
SAME OPERATING EXPENSES THROUGHOUT THE PERIOD AND SALE OF YOUR SHARES AT THE END
OF THE PERIOD. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C>
$163 $505
</TABLE>
-5-
<PAGE>
FUND MANAGEMENT
The investment adviser for the Fund is Hambrecht & Quist Fund Management, LLC
(HQFM), One Bush Street, San Francisco, CA 94104. HQFM oversees the asset
management and administration of the Fund. As compensation for its services,
HQFM receives a management fee from the Fund of 0.65% of its average daily net
assets, a portion of which is used to pay the Fund's sub-adviser.
HQFM is wholly owned by Hambrecht & Quist California, the parent company for
H&Q, a leading investment bank specializing in emerging growth companies.
Hambrecht & Quist California is, in turn, a wholly-owned subsidiary of Hambrecht
& Quist Group. Through its subsidiaries, Hambrecht & Quist Group provides a
variety of financial services, including investment advisory services to
registered closed-end mutual funds, wrap-fee programs, employee benefit plans,
private investment funds and individuals. HQFM was recently formed to serve as
investment adviser for the Fund and has no other advisory clients.
The Fund's sub-adviser is Symphony Asset Management, LLC (Symphony), 555
California Street, San Francisco, CA 94104. Founded in 1994, Symphony is owned
50% by BARRA, Inc., a leading provider of analytical models since 1975, and 50%
by Symphony's managers through Maestro LLC. Symphony, and its affiliate,
Symphony Asset Management, Inc., have more than $2.7 billion in assets under
management.
Ross Sakamoto, who has been a Portfolio Manager for the sub-adviser since 1996,
handles the Fund's day-to-day management. Prior to 1996, he was a Principal in
the Investment Strategies Group of Barclays Global Investors and its
predecessors.
INVESTING IN THE FUND
On the following pages you will find information on buying and selling shares.
Information on taxes is included as well.
The Fund offers multiple classes of shares. This prospectus offers the Common
Class shares. If you would prefer to invest in the Fund with the assistance of a
financial intermediary, please contact the Fund's transfer agent, PFPC Inc., at
877-613-7975 to request a copy of the Fund's Adviser Classes prospectus. For TDD
service, call 877-613-7973.
-6-
<PAGE>
BUYING SHARES
Common Class shares may be purchased either directly from the Fund through the
Fund's transfer agent or authorized mutual fund supermarkets.
Common Class shares are purchased and sold without the imposition of either an
initial sales charge or a contingent deferred sales charge and carry an annual
Rule 12b-1 fee of 0.25% of average daily net assets. Because this fee is paid
out of Fund assets on an ongoing basis, over time this fee will increase the
cost of your investment in the Fund and may cost more than paying other types of
sales charges. You will need to take the following steps to buy shares of the
Fund:
STEP 1
DECIDE HOW MUCH YOU WANT TO INVEST.
<TABLE>
<CAPTION>
Minimum Initial Minimum Additional Minimum Balance
Investment Investment
- ------------------------------- --------------------- ---------------------
<S> <C> <C>
$5,000 $100 $2,500
($2,000 for retirement and ($25 for retirement ($1,000 for retirement
custodial accounts) and custodial accounts) and custodial accounts)
</TABLE>
STEP 2
CHOOSE AN OPTION FOR FUND DISTRIBUTIONS. The three options are described below.
If you do not indicate a choice on the subscription application, we will assume
you have selected the first option.
OPTION FEATURE
- -------------------------------- ----------------------------------------------
Reinvestment All dividend and capital gain distributions
are invested automatically in shares of the
Fund
- -------------------------------- ----------------------------------------------
Cash/Reinvestment Mix You receive payment for dividends, while
any capital gain distributions are invested in
shares of the Fund
- -------------------------------- ----------------------------------------------
Cash You receive payment for all dividends and
capital gains distributions
- -------------------------------- ----------------------------------------------
-7-
<PAGE>
STEP 3
PLACE YOUR ORDER. Use any of the following methods to buy shares of the Fund.
PURCHASES THROUGH MUTUAL FUND SUPERMARKETS
You may purchase Common Class shares through authorized mutual fund
supermarkets. Your mutual fund representative will be responsible for forwarding
your purchase request to PFPC Inc. Please talk with your representative about
the methods it has available to purchase Common Class shares of the Fund.
PURCHASES THROUGH THE TRANSFER AGENT
You may purchase shares directly from the Fund through the Fund's Transfer
Agent, PFPC Inc., by mail or wire as follows:
BY MAIL
Complete the subscription application enclosed with the prospectus and
send it with a check payable to H&Q IPO & Emerging Company Fund for the
purchase amount to:
PFPC Inc.
Attention: H&Q IPO & Emerging Company Fund
P.O. Box 8961
400 Bellevue Parkway
Wilmington, Delaware 19809
You may add to your account by sending a check payable to the Fund for
the purchase amount along with the your name and account number to the
address above. Please note that PFPC Inc. does not accept third party
checks as payment for Fund shares.
BY WIRE
Call PFPC Inc. at 877-613-7975 to obtain an account number, mail a
completed subscription application to PFPC Inc. at the address above
and then wire the purchase amount to:
PFPC Trust Co.
Attention: H&Q IPO & Emerging Company Fund
with these instructions:
ABA#_____________
DDA#_____________
Name_________________________
Account No.___________________
You may not sell shares until PFPC Inc. has received the completed and
signed subscription application. You may add to your account by wiring
the purchase amount to PFPC Trust Co. with the instructions above.
Please call PFPC Inc. at the above number prior to wiring additional
funds to your account.
You may visit the Fund's website at www.hamquist.com to download a subscription
application.
Please note that orders to buy shares cannot be revoked after you mail your
check or wire funds.
-8-
<PAGE>
SELLING SHARES
Use one of the following methods to sell shares of the Fund.
MUTUAL FUND SUPERMARKETS
If you have purchased shares through a mutual fund supermarket, you may sell
your shares by contacting your mutual fund supermarket representative. Your
representative will be responsible for forwarding the request to PFPC Inc.
Please talk with your mutual fund supermarket representative about the methods
it has available to transfer your proceeds to you.
SALES THROUGH THE TRANSFER AGENT
If you have purchased shares directly from the Fund, you may sell your shares by
mail or telephone as follows:
BY MAIL
Mail your request, including your name, account number and dollar amount
of the shares being sold to:
PFPC Inc.
Attention: H&Q IPO & Emerging Company Fund
P.O. Box 8961
400 Bellevue Parkway
Wilmington, Delaware 19809
Be sure to include the signature of all persons whose names are on the
account and indicate how you would like to receive the proceeds from the
sale of your shares (for example, by means of a check or a wire transfer
to your bank account). A fee of $10.00 will be charged to your account
for wire transfers.
BY TELEPHONE
Call PFPC Inc. at 877-613-7975. You may only sell shares by telephone if
you have previously authorized PFPC Inc. to act on telephone
instructions, by indicating this authority on your subscription
application or by calling PFPC Inc. to request this service. Neither the
Fund nor PFPC Inc. will be liable for following telephone instructions
reasonably believed to be genuine.
When selling shares, please be aware of the following policies:
- The Fund may take up to seven days to pay sale proceeds
- If you are selling shares that were recently purchased by check, the
proceeds may be delayed until the check clears; this may take up to 15
days from the date of purchase
- Sale requests in excess of $25,000, or requests to send proceeds to a
third party, may require a Medallion Program signature guarantee of an
eligible institution (available from most banks and trust companies);
please call PFPC Inc. at 877-613-7975 with any questions concerning
signature guarantees.
-9-
<PAGE>
SHAREHOLDER SERVICES
The Fund offers the following shareholder services. To take advantage of any of
these services, please talk to your mutual fund supermarket representative or,
if you are investing directly with the Fund, contact PFPC Inc. at 877-613-7975.
- AUTOMATIC INVESTMENT PLAN - Allows you to buy additional shares ($100
minimum) of the Fund monthly, bi-monthly, quarterly or annually by a
direct transfer of funds from your bank account to PFPC Inc. Minimum
and frequencies may vary.
- SYSTEMATIC WITHDRAWAL PLAN - Allows you to withdraw a set amount ($25
minimum) of your investment in the Fund on a monthly, quarterly or
annual basis as long as your beginning balance is at least $5,000 and
your account balance remains at or above $2,500. Minimums and
frequencies may vary.
OTHER TRANSACTION POLICIES
The Fund is open for business each day that the New York Stock Exchange (NYSE)
is open for regular trading. The Fund calculates its share price each business
day, after the close of regular trading on the NYSE (generally 4 p.m. Eastern
time). The Fund's share price is its net asset value per share, or NAV, which is
the Fund's net assets divided by the number of shares outstanding.
In valuing its securities, the Fund uses market quotes if they are readily
available. In cases where quotes are not readily available, the Fund may value
securities based on fair values developed using methods approved by the Fund's
Trustees.
The effective time of your purchase or sale, which determines the price you pay
or receive for your shares, will be the time the Fund's transfer agent, PFPC
Inc., or a financial intermediary authorized to accept orders on behalf of the
transfer agent, receives your order. Orders received in proper form prior to the
close of regular trading on the NYSE will be valued at the net asset value per
share calculated that day. Orders received after the close of regular trading on
the NYSE will be priced the next day the Fund calculates its net asset value.
Investors effecting transactions through mutual fund supermarkets may be charged
transaction or other fees in addition to those described in this prospectus.
THE FUND RESERVES CERTAIN RIGHTS, including the following:
- To withdraw or suspend any part of the offering made by this prospectus
- To close the Fund to investors, other than current shareholders and
certain retirement plans and investment advisory clients, when the
Fund's assets exceed $300 million
- To refuse any purchase order, including those that appear to be
associated with short-term trading activities
- To change or waive the Fund's investment minimums
-10-
<PAGE>
- To suspend the right to sell shares back to the Fund, and delay sending
proceeds, during times when trading on the NYSE is restricted or halted,
or otherwise as permitted by the SEC
- To pay you in portfolio securities, rather than in cash, if the value of
the shares you sell exceeds $250,000 or 1% of the Fund's assets
- To automatically sell your shares if your account is closed for any
reason or if your balance falls below the minimum required as a result
of selling your shares
- To terminate any of the services described under "Shareholder Services"
on 60 days' notice
DISTRIBUTIONS AND TAXES
Any investment in the Fund typically involves several tax considerations. The
information below is meant as a general summary for U.S. citizens and residents.
Because each person's tax situation is different, you should consult your tax
adviser about the tax implications of your investment in the Fund. You also can
visit the Internal Revenue Service (IRS) web site at www.irs.ustreas.gov.
As a shareholder, you are entitled to your share of income and gains the Fund
earns. Every year, the Fund distributes to its shareholders substantially all of
its net investment income and net capital gains, if any. These distributions
typically are paid in December to all shareholders of record.
Unless you are investing through a tax-deferred or Roth retirement account, your
Fund distributions generally have tax consequences. The Fund's net investment
income and short-term capital gains are distributed as dividends and are taxable
as ordinary income. It is expected that most of the Fund's capital gains will be
short-term. Other capital gain distributions are taxable as long-term capital
gains, regardless of how long you have held your shares in the Fund.
Distributions are generally taxable in the year they are declared, whether you
reinvest them or take them in cash.
If you are investing through a taxable account and purchase shares of the Fund
just before it declares a distribution, you may receive a portion of your
investment back as a taxable distribution. This is because when the Fund makes a
distribution, the share price is reduced by the amount of the distribution. You
can avoid "buying a dividend," as it is often called, by contacting PFPC Inc. at
877-613-7975 to determine if a distribution is imminent and waiting until
afterwards to invest. Of course, you may decide that the opportunity for
investment gain during the period before the distribution outweighs the tax
consequences of buying a dividend.
Generally, any sale of your shares is a taxable event. A sale may result in a
capital gain or loss to you. A gain or loss generally will be treated as
short-term if shares are held for 12 months or less, long-term if shares are
held longer.
At the beginning of every year, the Fund provides shareholders with information
detailing the tax status of any distributions the Fund paid during the previous
calendar year.
-11-
<PAGE>
TO LEARN MORE
This prospectus contains important information about the Fund and should be read
and kept for reference. You also can obtain more information from the following
sources:
- SHAREHOLDER REPORTS, which will be mailed to Fund investors
semi-annually, will discuss recent performance and portfolio holdings.
- THE STATEMENT OF ADDITIONAL INFORMATION (SAI) includes a more detailed
discussion of investment policies and the risks associated with various
investments. The SAI is incorporated by reference into the prospectus,
making it part of the prospectus.
You can obtain copies of these documents by contacting your mutual fund
supermarket representative, the Fund's transfer agent, PFPC Inc., or the SEC at
the locations below. All materials from your representative or the transfer
agent are free; the SEC charges a duplicating fee. You also can review these
materials in person at the SEC's Public Reference Room.
PFPC INC.
400 Bellevue Parkway
Wilmington, Delaware 19809
877-613-7975
www.hamquist.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-6009
800-SEC-0330 (Public Reference Section)
www.sec.gov
SEC FILE NUMBER
H&Q IPO & Emerging
Company Fund 811-09383
-12-
<PAGE>
-13-
<PAGE>
H&Q IPO & EMERGING COMPANY FUND
Statement of Additional Information
Adviser Classes
Common Class
_____________ __, 1999
This statement of additional information (SAI) is not a prospectus. It
should be read in conjunction with the H&Q IPO & Emerging Company Fund (Fund)
prospectuses for the Adviser Classes and the Common Class, each dated
____________, 1999 (as amended from time to time). The Fund is currently the
only series of the Hambrecht & Quist Fund Trust.
To obtain a copy of the Adviser Classes prospectus, please call your
financial intermediary. To obtain a copy of the Common Class prospectus, please
call your mutual fund supermarket representative or call the Fund's transfer
agent, PFPC Inc., at 877-613-7975, 24 hours a day, or write to PFPC Inc.,
attention: H&Q IPO & Emerging Company Fund, at 400 Bellevue Parkway, Wilmington,
Delaware 19809. For TDD service, call 877-613-7973, 24 hours a day. The
prospectuses also are available on the Internet at WWW.HAMQUIST.COM.
TABLE OF CONTENTS
PAGE
OTHER STRATEGIES, RISKS AND LIMITATIONS......................................
MANAGEMENT OF THE FUND.......................................................
INVESTMENT ADVISORY AND OTHER SERVICES.......................................
BROKERAGE ALLOCATION AND OTHER PRACTICES.....................................
DESCRIPTION OF THE TRUST.....................................................
PURCHASE, REDEMPTION AND PRICING OF SHARES...................................
TAXATION.....................................................................
CALCULATION AND USE OF PERFORMANCE DATA......................................
FINANCIAL STATEMENTS.........................................................
<PAGE>
OTHER STRATEGIES, RISKS AND LIMITATIONS
OTHER STRATEGIES AND RISKS
The following discussion supplements and should be read in conjunction
with the sections in the prospectus entitled "Main Strategy" and "Main Risks."
In addition to the Fund's principal investment strategies discussed in the
prospectus, the Fund may invest in other securities and engage in other
investment techniques, at all times in accordance with the limitations set forth
below under "Investment Limitations." Investment policies and limitations that
state a maximum percentage of assets that may be invested in a security or other
asset, or that set forth a quality standard, are measured immediately after and
as a result of the Fund's acquisition of the security or asset unless otherwise
noted. Any subsequent change in values, net assets or other circumstances will
not be considered when determining whether the investment complies with the
Fund's policies and limitations. Unless otherwise indicated, policies and
limitations may be changed by the Trustees without shareholder approval. The
Fund's investment objective may be changed only by vote of a majority of its
shareholders.
EQUITY SECURITIES. The Fund's investment in equity securities,
including IPOs and issuers which have capitalizations under $1 billion (small
capitalization issuers), represent ownership interests in corporations, and are
commonly called "stocks." Equity securities historically have outperformed most
other securities, although their prices can fluctuate based on changes in a
company's financial condition, market conditions and political, economic or even
company-specific news. When a stock's price declines, its market value is
lowered even though the intrinsic value of the company may not have changed.
Sometimes factors, such as economic conditions or political events, affect the
value of stocks of companies of the same or similar industry or group of
industries, and may affect the entire stock market. In many instances, the risk
factors described in the prospectus relating to IPO stocks are also applicable
to stocks of small capitalization issuers.
Types of equity securities include common stocks, preferred stocks,
convertible securities and warrants. Common stocks, which are probably the most
recognized type of equity security, usually entitle the owner to voting rights
in the election of the corporation's directors and any other matters submitted
to the corporation's shareholders for voting. Preferred stocks do not ordinarily
carry voting rights or may carry limited voting rights, but normally have
preference over the corporation's assets and earnings. For example, preferred
stocks have preference over common stock in the payment of dividends. Preferred
stocks also may pay specified dividends.
Convertible securities are typically preferred stock or bonds that are
exchangeable for a specific number of another form of security (usually the
issuer's common stock) at a specified price or ratio. A corporation may issue a
convertible security that is subject to redemption after a specified date and
usually under certain circumstances. Convertible bonds typically pay a lower
interest rate than nonconvertible bonds of the same quality and maturity,
because of the conversion feature. Due to their fixed income features,
convertible securities provide higher income potential than the issuer's common
stock, but typically are more sensitive to interest rate changes than the
underlying common stock.
-2-
<PAGE>
Warrants are a type of security usually issued with bonds and
preferred stock that entitle the holder to purchase a proportionate amount of
common stock at a specified price for a specific period of time. The prices of
warrants do not necessarily move parallel to the prices of the underlying common
stock. Warrants have no voting rights, receive no dividends and have no rights
with respect to the assets of the issuer. If a warrant is not exercised within
the specified time period, it becomes worthless.
ILLIQUID SECURITIES. The Fund may purchase and hold securities
considered to be illiquid. Illiquid securities generally are any securities that
cannot be disposed of promptly and in the ordinary course of business at
approximately the amount at which the Fund has valued the instruments. The
liquidity of the Fund's investments is monitored under the supervision and
direction of the Trustees. Investments currently not considered liquid include
repurchase agreements not maturing within seven days and certain restricted
securities. The IPO and small capitalization stocks held by the Fund will tend
to be less liquid than those issued by more established companies.
RESTRICTED SECURITIES. The Fund may purchase and hold restricted
securities. Restricted securities are securities that are subject to legal
restrictions on their sale. Restricted securities may be considered to be liquid
if an institutional or other market exists for these securities. In making this
determination, the Fund, under the direction and supervision of the Trustees,
will take into account the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers willing to purchase or sell
the security and the number of potential purchasers; (3) dealer undertakings to
make a market in the security; and (4) the nature of the security and
marketplace trades (E.G., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). To the extent the Fund
invests in restricted securities that are deemed liquid, the general level of
illiquidity in the Fund's portfolio may be increased if qualified institutional
buyers become uninterested in purchasing these securities.
FUTURES CONTRACTS. The Fund intends to purchase and sell futures
contracts based on equity securities indices as a substitute for purchasing and
selling the individual equity securities represented by the indices. Such
transactions allow the Fund's cash balances to produce returns similar to those
of the indices on which the futures contracts are based. All futures contracts
to which the Fund is a party will be covered by segregating liquid assets equal
to the Fund's obligations under the contracts.
A futures contract on an equity index is an agreement between two
parties that obligates one party to buy and the other party to sell the specific
securities underlying the index at an agreed-upon price on a stipulated future
date. Although futures contracts, by their terms, call for the actual delivery
or acquisition of an asset, in the case of futures contracts relating to an
index, the parties usually agree to deliver the final cash settlement price of
the contract at the close of the transaction. In addition, the contractual
obligation underlying a futures contract is often fulfilled (or "offset") before
the expiration date of the futures contract without having to make or take
delivery of the underlying asset. Offset of a futures contract is accomplished
by buying (or selling, as the case may be) on a commodities exchange an
identical futures contract calling for delivery in the same month. Such a
transaction, which is effected through a member of an exchange, cancels the
obligation to make or take delivery of the underlying asset.
-3-
<PAGE>
When buying or selling futures contracts, the Fund must place a
deposit with its broker equal to a fraction of the contract amount. This amount
is known as "initial margin" and must be in the form of liquid instruments,
including cash, cash-equivalents and U.S. government securities. Subsequent
payments to and from the broker, known as "variation margin" may be made daily,
if necessary, as the value of the futures contracts fluctuate. This process is
known as "marking-to-market." Any margin amount remaining after all contractual
obligations are satisfied will be returned to the Fund upon termination of the
futures contracts. The Fund's aggregate initial and variation margin payments
may not exceed 5% of its net assets.
The ordinary spreads between prices in the cash and futures markets,
due to differences in the natures of those markets, are subject to distortions
that may prevent the Fund from successfully using futures contracts. First, all
participants in the futures markets are subject to initial and variation margin
requirements. Rather than meeting variation margin requirements, investors may
close futures contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the liquidity
of the futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent participants
make or take delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, margin
requirements in the futures markets are less onerous than margin requirements in
the cash market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
distortion, a correct prediction of market conditions by the Fund may not result
in a successful transaction.
The Fund's ability to engage in transactions involving futures
contracts will depend on the degree to which liquid secondary markets in such
instruments exist. Reasons for the absence of a liquid market include the
following: (i) there may be insufficient trading interest in a particular
instrument; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of futures contracts; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; or (v) one or more exchanges could,
for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of a particular instrument (or a particular class or
series of such instrument). There can be no assurance that a liquid secondary
market will exist for any particular investment at any specific time. Thus it
may not be possible for the Fund to close certain of its positions.
Adverse market movements could cause the Fund to experience
substantial losses when buying and selling futures contracts. Of course, barring
significant market distortions, similar results would have been expected if the
Fund had instead transacted in the underlying securities directly. In such
situations, if the Fund had insufficient cash and were unable to effect a
closing transaction, it might have to sell securities from its portfolio to meet
daily variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices that reflect the rising market. The Fund may
also have to sell securities at a time when it may be disadvantageous to do so.
There also is the risk of losing any margin payments held by a broker in the
event of its bankruptcy. To reduce the risk of such a loss, the sub-adviser will
only deposit margin amounts with brokers approved by the Trustees. The Fund
incurs transaction costs, including brokerage fees, when engaging in futures
trading.
-4-
<PAGE>
Under regulations of the Commodity Futures Trading Commission,
investment companies registered under the 1940 Act are excluded from regulation
as commodity pools or commodity pool operators if their use of futures is
limited in certain specified ways. The Fund will use futures in a manner
consistent with the terms of this exclusion.
SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
participations in equity indices (index participations), including Standard &
Poor's Depositary Receipts (SPDRs). Index participations are shares of publicly
traded unit investment trusts which own the stocks included in the relevant
index. Index participations, including SPDRs, are subject to the risk of an
investment in a broadly based portfolio of common stocks, including the risk of
declines in the general level of stock prices. They are also subject to trading
halts due to market conditions or other reasons that make trading index
participations inadvisable.
The Fund may also invest its cash reserves in securities issued by
other investment companies, including money market mutual funds managed by the
Fund's custodian. Because other investment companies employ investment advisers
and other service providers, investments by the Fund in other investment
companies may cause shareholders to pay duplicative fees.
U.S. GOVERNMENT SECURITIES, HIGH QUALITY COMMERCIAL PAPER AND
REPURCHASE AGREEMENTS. The Fund may also invest its cash reserves in interest
bearing instruments, including U.S. government securities, high quality
commercial paper and repurchase agreements.
U.S. government securities are debt securities issued by the U.S.
Treasury or issued or guaranteed by the U.S. government or any of its agencies
or instrumentalities. U.S. Treasury securities, include bills, notes and bonds,
and are backed by the full faith and credit of the United States. Not all U.S.
government securities are backed by the full faith and credit of the United
States. Some U.S. government securities are supported by a line of credit the
issuing entity has with the U.S. Treasury. Others are supported solely by the
credit of the issuing agency or instrumentality. There is no assurance that the
U.S. government will provide financial support to U.S. government securities of
its agencies and instrumentalities if it is not obligated to do so. Like other
fixed income securities, U.S. government securities are sensitive to interest
rate changes, which will cause their prices to fluctuate.
Commercial paper is a short-term debt instrument issued by
corporations, financial institutions, governmental entities and other entities,
and may include funding agreements and other short-term debt obligations. The
principal risk associated with commercial paper is the potential insolvency of
the issuer. The Fund will only invest in commercial paper rated Prime 1 by
Moody's Investors Service, Inc. (Moody's) or A-1 by Standard and Poor's Rating
Service (S&P), or if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Repurchase agreements are instruments under which the Fund acquires
ownership of certain securities (usually U.S. government securities) from a bank
or broker-dealer who agrees to repurchase the securities at a mutually
agreed-upon time and price, thereby determining the yield during the buyer's
holding period. The period of repurchase agreements is usually short--from
overnight to one week--although the securities underlying repurchase agreements
may
-5-
<PAGE>
have longer maturity dates. In the event of a bankruptcy or other default of a
repurchase agreement's seller, the Fund might incur expenses in enforcing its
rights, and could experience losses, including a decline in the value of the
underlying securities and loss of income. To reduce the risk of such a loss the
Fund only enters into repurchase agreement with banks or broker-dealers approved
by the Trustees.
BORROWING. The Fund may borrow at times to meet redemption requests
rather than sell portfolio securities to raise the necessary cash. Borrowing may
subject the Fund to interest costs, which may exceed the interest received on
the securities purchased with the borrowed funds.
LENDING. The Fund may engage in security lending arrangements with the
primary objective of increasing its income through investment of the cash
collateral in short-term, interest-bearing obligations, but will do so only to
the extent that it will not lose the tax treatment available to regulated
investment companies. Lending portfolio securities involves the risk that the
borrower may fail to return the securities or provide additional collateral. The
Fund may loan portfolio securities to qualified broker-dealers or other
institutional investors provided: (1) the loan is secured continuously by
collateral consisting of U.S. government securities, letters of credit, cash or
cash equivalents maintained on a daily marked-to-market basis in an amount at
least equal to the current market value of the securities loaned; (2) the Fund
may at any time call the loan and obtain the return of the securities loaned;
(3) the Fund will receive any interest or dividends paid on the loaned
securities, and (4) the aggregate market value of securities loaned will not at
any time exceed one-third of the total assets of the Fund.
YEAR 2000. The year 2000 presents uncertainties and possible risks to
the smooth operations of the Fund and the provision of services to shareholders.
Many computer programs use only two digits to identify a specific year and
therefore may not accurately recognize the upcoming change in the next century.
If not corrected, many computer applications could fail or create erroneous
results by or at year 2000. Due to the Fund's and its service providers'
dependence on computer technology to operate, the nature and impact of year 2000
processing failures on the Fund could be material. The Fund is taking steps to
minimize the risks of year 2000, including seeking assurances from the Fund's
service providers that they are analyzing their systems, testing them for
potential problems and remediating them to the extent possible. There can be no
assurance that these steps will be sufficient to avoid any adverse impact on the
Fund. It is also possible that the Fund's portfolio securities and performance
may be materially affected by year 2000 related problems experienced by issuers
of securities and the securities markets generally.
INVESTMENT LIMITATIONS
THE FOLLOWING FUNDAMENTAL INVESTMENT LIMITATIONS MAY BE CHANGED ONLY
BY VOTE OF A MAJORITY OF THE FUND'S SHAREHOLDERS.
THE FUND MAY NOT:
1) As to 75% of its assets, purchase securities of any issuer (other than
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities or investments in
-6-
<PAGE>
other registered investment companies) if, as a result, more than 5% of the
value of its total assets would be invested in the securities of such
issuer.
2) Purchase more than 10% of any class of securities of any issuer if, as a
result of such purchase, it would own more than 10% of such issuer's
outstanding voting securities. The definition of "securities" does not
include cash and cash items (including receivables), government securities
and the securities of other investment companies, including private
investment companies and qualified purchaser funds.
3) Purchase securities (other than securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities) if, as a result of such
purchase, 25% or more of the value of its total assets would be invested in
any industry.
4) Purchase or sell commodities, commodity contracts or real estate, including
interests in real estate limited partnerships, provided that the Fund may
(1) purchase securities of companies that deal in commodities, real estate
or interests therein and (2) purchase or sell futures contracts, options on
future contracts, equity index participations and index participation
contracts.
5) Lend money to any person, except that the Fund may (1) purchase a portion
of an issue of short-term debt securities or similar obligations (including
repurchase agreements) that are distributed publicly or customarily
purchased by institutional investors, and (2) lend its portfolio
securities.
6) Borrow money or issue senior securities, except that the Fund may borrow
from banks as a temporary measure to satisfy redemption requests or for
extraordinary or emergency purposes and then only in an amount not to
exceed one-third of the value of its total assets (including the amount
borrowed), provided that the Fund will not purchase securities while
borrowings represent more than 5% of its total assets.
7) Pledge, mortgage or hypothecate any of its assets, except that, to secure
allowable borrowings, the Fund may do so with respect to no more than
one-third of the value of its total assets.
8) Underwrite securities issued by others, except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment
portfolio.
THE FOLLOWING NON-FUNDAMENTAL INVESTMENT LIMITATIONS MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
THE FUND MAY NOT:
1) Purchase puts, calls, straddles, spreads or any combination thereof.
2) Make short sales.
-7-
<PAGE>
3) Purchase or sell interests in oil, gas or other mineral development
programs or leases, although it may invest in companies that own or invest
in such interests or leases.
4) Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases and sales of securities.
5) Invest more than 15% of its net assets in illiquid securities, including
repurchase agreements with maturities in excess of seven days.
6) Invest for the purpose of exercising control or management of another
issuer.
7) Purchase securities of other investment companies, except as permitted by
the 1940 Act, including any exemptive relief granted by the Securities and
Exchange Commission (SEC).
With respect to the Fund's policy not to invest more than 25% of the
value of its total assets in any one industry, the Fund deems the following to
be separate industries:
Iron and Steel Health and Medical Services
Precious Metals Drugs and Biosciences
Miscellaneous Metals Medical Equipment/Supplies
Oil and Gas Publishing
Oil Refining Media
Energy Service Leisure Industry
Paper and Forest Products Hotels/Casinos
Agriculture/Foods Transportation/Freight
Construction Transportation
Chemicals Transportation Services
Producer Goods Restaurants
Pollution/Recycling Retail Food/Beverages
Electronics (excluding Semiconductors) Other Retail
Semiconductors and Related Telephone and Related
Aerospace/Defense Electric Utilities
Computer Hardware Gas Utilities
Computer Software Banks
Internet Related Thrift Institutions
Cosmetics/Personal Products Financial Services
Apparel and Textile Life and Other Insurance
Consumer Goods Real Property
Motor Vehicles and Parts Other Services
Miscellaneous
-8-
<PAGE>
MANAGEMENT OF THE FUND
The officers and Trustees of the Fund, their principal occupations
during the past five years and their affiliations, if any, with Hambrecht &
Quist Fund Management, LLC (HQFM) or Hambrecht & Quist LLC (H&Q) are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Name and Age Position With Principal Occupations During Past Five Years
the Trust
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Daniel H. Case III*, 42 Chairman, Trustee Chairman and Chief Executive Officer of
Hambrecht & Quist Group and H&Q since prior
to 1994. Director of Rational Software
Corporation (software development tools),
Electronic Arts Inc.(entertainment
software), AMB Property Corporation, the
National Science and Technology Medal
Foundation and the Bay Area Council.
- --------------------------------------------------------------------------------------------------------
William R. Timken*, 63 Trustee Director and Vice Chairman of Hambrecht &
Quist Group and H&Q since prior to 1994.
- --------------------------------------------------------------------------------------------------------
Mark S. Brandin, 49 Trustee Managing Director of Brandin & Associates
(counsulting) from 1996 to the present;
Executive Vice President Marketing and
Advertising of Quick and Reilly, Inc.
(broker-dealer) from prior to 1994 to 1996.
- --------------------------------------------------------------------------------------------------------
John A. Campbell, 60 Trustee Audit Partner of PricewaterhouseCoopers LLP
and its predecessor from prior to 1994 to
June 1999.** Board Member and Treasurer of
San Francisco Food Bank.
- --------------------------------------------------------------------------------------------------------
, __ Trustee
- --------------------------------------------------------------------------------------------------------
David R. Krimm, 45 President Director of Marketing of H&Q from 1998 to
the present; President of HQFM from July
1999 to the present; Vice President of
ICVerify from 1996 to 1997; and various
positions at Intuit from 1994 to 1996,
including Director of Marketing, Automated
Financial Services, Director of Investment
Services and President of Quicken
Investments.
- --------------------------------------------------------------------------------------------------------
Robert N. Savoie, 42 Chief Financial Officer Tax Director of H&Q from 1997 to the
present; Chief Financial Officer of HQFM
from July 1999 to the present; Principal of
Arthur Andersen LLP, prior to 1997.
- --------------------------------------------------------------------------------------------------------
Steven N. Machtinger, 49 Secretary General Counsel and Secretary of Hambrecht &
Quist Group and H&Q and a Managing Director
of H&Q since prior to 1994; General Counsel
and Secretary of HQFM from July 1999 to the
present.
- --------------------------------------------------------------------------------------------------------
</TABLE>
* An "interested person" of the Fund as defined in the Investment Company Act
of 1940, as amended.
** PricewaterhouseCoopers LLP is the Fund's independent accountant. Mr.
Campbell's responsibilities included auditing investment partnerships of
which the sub-adviser or an affiliate of the sub-adviser was the general
partner.
-9-
<PAGE>
Unless otherwise indicated, the address of each of the above listed individuals
is One Bush Street, San Francisco, California 94104.
The business of the Trust is managed under the direction of the
Trustees. The following table provides information as to the expected annual
compensation of the Trustees:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Pension or
Aggregate Retirement Benefits Estimated Annual
Compensation from Accrued as Part of Benefits Upon Total Compensation
Name of Trustee Trust(1) Fund Expenses Retirement from Fund Complex(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daniel H. Case III $0 $0 $0 $0
- ----------------------------------------------------------------------------------------------------------------------
William R. Timken $0 $0 $0 $0
- ----------------------------------------------------------------------------------------------------------------------
Mark S. Brandin $6,000 $0 $0 $6000
- ----------------------------------------------------------------------------------------------------------------------
John A. Campbell $6,000 $0 $0 $6000
- ----------------------------------------------------------------------------------------------------------------------
$6,000 $0 $0 $6000
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Trustees who are not "interested persons" of the Trust receive a quarterly
fee of $1,000, plus $500 for each Fund meeting attended. Trustees are also
reimbursed for expenses incurred on behalf of the Trust.
(2) A fund complex consists of investment companies that hold themselves out to
investors as related companies for purposes of investment and investor services,
have a common investment adviser or have an investment adviser that is an
affiliated person of the investment adviser of any other investment companies.
Affiliated persons of HQFM and Symphony Asset Management, LLC act as investment
advisers to investment companies other than the Trust. However, none of the
Trustees receives any compensation from these other investment companies.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As part of the Fund's organization, Hambrecht & Quist California, a
California corporation, will purchase 10,000 Class A shares, or 100% of the
Fund's outstanding shares. Hambrecht & Quist California is a wholly-owned
subsidiary of Hambrecht & Quist Group, a Delaware corporation. As long as
their ownership of the Fund exceeds 25% of the shares of the Fund, Hambrecht
& Quist California and Hambrecht & Quist Group may be considered to control
the Fund.
As of the date of this SAI the officers and Trustees, as a group,
owned of record or beneficially none of the outstanding voting securities of
the Fund.
-10-
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The investment adviser for the Fund is HQFM, which is a direct or
indirect subsidiary of Hambrecht & Quist California and Hambrecht & Quist Group
and an affiliate of H&Q, the Fund's distributor. HQFM oversees the asset
management and administration of the Fund. Services performed for the Fund
include maintaining office facilities; furnishing statistical and research data,
clerical services and stationery and office supplies; and generally assisting in
the operations of the Fund.
As compensation for these services, HQFM receives an advisory fee,
accrued daily and payable monthly in arrears, from the Fund of 0.65% of each
class's average daily net assets, a portion of which is used to pay the Fund's
sub-adviser. From time to time, HQFM may agree to waive or reduce some or all of
the compensation to which it is entitled. HQFM has guaranteed that, through at
least December 31, 2000, the total annual operating expenses of the Class A
shares will not exceed 1.60%, the total annual operating expenses of the Class B
shares will not exceed 2.30%, and the total annual operating expenses of the
Common Class shares will not exceed 1.60%, of such class's average daily net
assets.
The Fund pays all expenses not assumed by HQFM, including, but not
limited to, Trustees' expenses, audit fees, legal fees, interest expenses,
brokerage commissions, fees for registration and notification of shares for sale
with the SEC and various state securities commissions, taxes, insurance
premiums, fees of the Fund's administrator, transfer agent, fund accounting
agent or other service providers, and the cost of obtaining quotations for
portfolio securities and the pricing of Fund shares.
SUB-ADVISER
The investment adviser has entered into an investment sub-advisory
agreement with Symphony Asset Management, LLC (sub-adviser or Symphony) pursuant
to which Symphony acts as the Fund's sub-adviser. The sub-adviser furnishes an
investment program for the Fund, determines what securities and other
investments to purchase, retain or sell and places orders for the purchase and
sale of these investments. The sub-adviser makes all investment decisions for
the Fund. Services performed by Symphony also include
furnishing statistical and research data, helping to prepare filings and reports
for the Fund and generally assisting HQFM and the Fund's other service providers
in all aspects of the administration of the Fund.
Symphony utilizes quantitative techniques, proprietary software
models and real-time databases in the performance of its services to the
Fund. Symphony bases its quantitative techniques on data provided by
Quote.com, a leading provider of IPO information, under an agreement granting
Symphony exclusive advance access to certain of Quote.com's IPO databases. In
addition to quantitative techniques, the sub-adviser will apply qualitative
considerations when making investment decisions. Among other considerations,
the sub-adviser may employ fundamental analysis, review issuers' prospectuses
and attend "roadshows" when determining whether to invest in a particular
IPO.
-11-
<PAGE>
For the sub-adviser's services, HQFM pays Symphony an annual
investment sub-advisory fee, payable monthly, of 0.35% of the Fund's average
daily net assets not in excess of $100 million and 0.375% of such assets over
$100 million. In the event that HQFM waives its management fee to satisfy the
expense guarantees described above under "Investment Adviser", the sub-adviser
has agreed to waive a pro rata portion of its fee from HQFM, subject to
receiving a minimum sub-advisory fee of 0.20% of the Fund's average daily net
assets.
DISTRIBUTOR
Pursuant to a distribution agreement, H&Q (distributor), whose address
is One Bush Street, San Francisco, California 94104, is the distributor for
shares of the Fund and is the Fund's agent for the purpose of the continuous
offering of the Fund's shares. The distributor is a wholly-owned subsidiary of
Hambrecht & Quist California and Hambrecht & Quist B/D Subsidiary Corp. and an
affiliate of the investment adviser. The Fund pays for prospectuses and
shareholder reports to be prepared and delivered to existing shareholders. The
distributor pays such costs when the described materials are used in connection
with the offering of shares to prospective investors and for supplementary sales
literature and advertising. For its services under the agreement, the
distributor receives the sales charges collected from sales of Class A shares
and redemptions of Class A and Class B shares and the 12b-1 fees collected on
each class of shares of the Fund.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan (Distribution Plan) to permit
the Fund to pay distribution fees and defray expenses associated with the
distribution of its shares in accordance with Rule 12b-1 under the 1940 Act. The
Distribution Plan was adopted because of its anticipated benefits to the Fund.
These benefits include increased sales of the Fund's shares, enhancement of the
Fund's ability to retain assets, potential economies of scale, increased
stability in the Fund's portfolio positions and greater flexibility in achieving
investment objectives.
Pursuant to the Distribution Plan, the Fund pays the distributor at an
annual rate of .30% of the value of the average daily net assets of Class A
shares, 1.00% of the value of the average daily net assets of Class B shares and
0.25% of the value of the average daily net assets of Common Class shares.
Distribution fees are accrued daily and paid monthly and are charged as expenses
of the Fund as accrued.
The fees payable under the Distribution Plan are used to compensate
the distributor for any expenses intended primarily to result in the sale of the
Fund's shares, including, but not limited to, payments the Distributor makes to
financial intermediaries, including broker-dealers and other third parties,
payments made for the preparation, printing and distributing of advertising and
sales literature, and payments made for printing and distributing prospectuses
and shareholder reports to other than existing shareholders of the Fund.
The Distribution Plan further provides that a portion of these fees, not to
exceed .25% of the aggregate daily net assets attributable to each of the
Class A, Class B and Common Class shares may constitute a service fee used to
compensate the Distributor for expenses the Distributor
-12-
<PAGE>
incurs for personal services and/or the maintenance of shareholder accounts. The
full amount of distribution fees are payable to the Distributor whether the
actual expenses of the Distributor are in excess or less than such fees.
The investment adviser and/or distributor may from time to time and
from its own funds or such other resources as are permitted make payments for
distribution and shareholder services. The distributor provides the Trustees
with a quarterly report of the amounts expended under the Distribution Plan and
the purposes for which such expenditures were incurred.
The Distribution Plan may not be amended to increase materially the
costs which holders of Class A, Class B or Common Class shares may bear pursuant
to the Distribution Plan without the approval of the holders of such shares.
Other material amendments of the Distribution Plan must be approved by the
Trustees, and by a majority of the Trustees who are not "interested persons" of
the Fund and have no direct or indirect financial interest in the operation of
the Distribution Plan or in any related agreements, by vote cast in person at a
meeting called for the purpose of considering such amendments. The Distribution
Plan is subject to annual approval by such vote of the Trustees cast in person
at a meeting called for the purpose of voting on the Distribution Plan. The
Distribution Plan may be terminated with respect to any class of shares at any
time by vote of a majority of the Trustees who are not "interested persons" and
have no direct or indirect financial interest in the operation of the
Distribution Plan or in any related agreements or by vote of the holders of a
majority of such class of shares.
ADMINISTRATOR, FUND ACCOUNTANT, TRANSFER AGENT AND DIVIDEND DISBURSING
AGENT
PFPC Inc. (PFPC), whose principal offices are located at 400 Bellevue
Parkway, Wilmington, Delaware 19809, serves as the administrator, fund
accountant, dividend disbursing and transfer agent for the Fund. The services
provided by PFPC Inc. include day to day maintenance of certain books and
records, calculation of the offering price of the shares, preparation of reports
and liaison with the Fund's custodian. From time to time, the Fund may employ
other entities, including the sponsors of mutual fund supermarkets, as
sub-transfer agents.
CUSTODIAN
PFPC Trust Company, whose principal offices are located at the Airport
Business Center, 200 Stevens Drive, Suite 440, Lester, Pennsylvania 19113,
serves as custodian for the Fund. The custodian is responsible for the daily
safekeeping of securities and cash held by the Fund.
INDEPENDENT ACCOUNTANT
The Fund's independent accountant, PricewaterhouseCoopers LLP, audits
and reports on the annual financial statements of the Fund and reviews certain
regulatory reports and the Fund's federal income tax returns. It also performs
other professional accounting, auditing, tax and advisory services when the Fund
engages it to do so. Its address is 333 Market Street, San Francisco, CA 94105.
-13-
<PAGE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
PORTFOLIO TURNOVER
For reporting purposes, the Fund's portfolio turnover rate is
calculated by dividing the value of purchases or sales of portfolio securities
for the year, whichever is less, by the monthly average value of portfolio
securities the Fund owned during the year. When making the calculation, all
securities whose maturities at the time of acquisition were one year or less
("short-term securities") are excluded. A 100% portfolio turnover rate would
occur, for example, if all portfolio securities (aside from short-term
securities) were sold and either repurchased or replaced once during the year.
The turnover rate of the Fund will fluctuate annually and is expected
to exceed 200% in any given year. Funds with high turnover (100% or more) tend
to generate higher taxable income and gains and transaction costs, including
brokerage commissions.
PORTFOLIO TRANSACTIONS
In effecting securities transactions for the Fund, the sub-adviser
seeks to obtain best price and execution. Subject to the supervision of the
Fund's Trustees, the sub-adviser will generally select brokers and dealers for
the Fund primarily on the basis of the quality and reliability of brokerage
services, including execution capability and financial responsibility.
In assessing these criteria, the sub-adviser will, among other things,
monitor the performance of brokers effecting transactions for the Fund to
determine the effect, if any, that the Fund's transactions through those brokers
have on the market prices of the stocks involved. This may be of particular
importance for the Fund's investments in relatively smaller companies whose
stocks are not as actively traded as those of their larger counterparts. The
Fund will seek to buy and sell securities in a manner that causes the least
possible fluctuation in the prices of those stocks in view of the size of the
transactions.
When the execution capability and price offered by two or more
broker-dealers are comparable, the sub-adviser may, in its discretion, in agency
transactions (and not principal transactions) utilize the services of
broker-dealers that provide it with investment information and other research
resources. Commissions charged by such broker-dealers may be higher than
commissions charged by broker-dealers not providing such resources. Such
resources may be used by the sub-adviser when providing advisory services to
other investment advisory clients, including other mutual funds.
In an attempt to obtain best execution for the Fund, the sub-adviser
may place orders directly with market makers or with third market brokers or
brokers on an agency basis. Placing orders with third market brokers may enable
the Fund to trade directly with other institutional
-14-
<PAGE>
holders on a net basis. At times, this may allow the Fund to trade larger blocks
than would be possible trading through a single market maker.
The Fund expects to purchase IPOs from underwriting syndicates of
which H&Q, the Fund's distributor and an affiliate of the Fund's investment
adviser, acts as a member or manager. Such purchases will be effected in
accordance with the conditions set forth in Rule 10f-3 under the 1940 Act and
related procedures adopted by the Fund's Trustees, including a majority of the
Trustees who are not "interested persons" of the Fund. Among the conditions are
that the IPO issuer will have been in operation for at least three years, that
not more than 25% of the underwriting will be purchased by the Fund and any
other investment company having the same investment adviser or sub-adviser and
that no shares will be purchased from the distributor or any of its affiliates.
DESCRIPTION OF THE TRUST
The Fund is currently the only series of Hambrecht & Quist Fund Trust,
a diversified open-end investment management company organized as a Delaware
business trust on June 7, 1999.
The Fund will not hold regular shareholder meetings, but may hold
special meetings. Shareholders are entitled to vote only in limited
circumstances, as set forth in the Trust's Agreement and Declaration of the
Trust (Declaration of Trust). Generally, shareholders are entitled to vote (i)
for the election of Trustees (as provided in the 1940 Act); (ii) for the removal
of Trustees ; (iii) on the Fund's entry into investment advisory or management
contracts, except when such vote is not required under the 1940 Act; (iv) on the
termination of the Trust in certain circumstances; (v) on amendments to the
Declaration of Trust affecting certain shareholder voting rights; (vi) when such
vote is otherwise required under applicable law or the Fund's then-current
Registration Statement, Declaration of Trust or By-laws or (vii) when such vote
is submitted to the shareholders in the Trustees discretion. The Declaration
of Trust specifically authorizes the Trustees to terminate the Trust (or any
series) by notice to the shareholders without shareholder approval.
Shareholders are entitled to one vote for each dollar of net asset value, and
a proportional fractional vote for each fractional dollar of net asset value,
represented by the shares owned. Shareholders may vote by proxy or in person.
Proxy materials will be mailed to shareholders prior to any meetings, and
will include a voting card and information explaining the matters to be voted
upon.
Shares representing one-third of the total net asset value of shares
of each affected series or class, or shares representing one-third of the total
net asset value of shares of the Trust, entitled to vote shall be a quorum for
the transaction of business at a shareholders' meeting with respect to such
series or class, or with respect to the entire Trust, respectively. Any lesser
number shall be sufficient for adjournments. Except when a larger vote is
required by applicable law, the Declaration of Trust or the By-laws,
shareholders representing a majority of the total net asset value of shares
voting at a shareholders' meeting shall decide any matters to be voted upon with
respect to the entire Trust and shareholders representing a plurality of the
total net asset value of such shares shall elect a Trustee; provided, that if
the Declaration of Trust or applicable law permits or requires that shares be
voted on any matter by individual series or classes, then shareholders
representing a majority of the total net asset value of shares of that series or
class voting at a shareholders' meeting on the matter shall decide that matter
insofar as that series or
-15-
<PAGE>
class is concerned. Shareholders may act as to the Trust or any series or class
by the written consent of shareholders representing a majority (or such other
amount as may be required by applicable law) of the total net asset value of
shares of the Trust or of such series or class, as the case may be.
Generally, Delaware business trust shareholders are not personally
liable for obligations of the Delaware business trust under Delaware law. The
Delaware Business Trust Act (Delaware Act) provides that shareholders of a
Delaware business trust are entitled to the same limitations on liability
extended to shareholders of private for-profit corporations. The Declaration of
Trust expressly provides that the Trust has been organized under the Delaware
Act and that the Declaration of Trust is to be governed by Delaware law. It is
nevertheless possible that a Delaware business trust, such as the Trust, might
become party to an action in another state whose courts refused to apply
Delaware law, in which case the Trust's shareholders could be subject to
personal liability. To guard against this risk, the Declaration of Trust (i)
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and provides that notice of such disclaimer may be given in each
agreement, obligation and instrument entered into or executed by the Trust or
its Trustees, (ii) provides for the indemnification out of Trust property (from
the applicable series of the Trust) of a shareholder held personally liable
solely by reason of the shareholder's having been a shareholder and (iii)
provides that the Trust will, upon request, assume the defense of any claim made
against such shareholder for any act or obligation of the applicable series of
the Trust and satisfy any judgement thereon. Thus, the risk of a Trust
shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (1) a court refuses to apply Delaware law; (2) the
liability arose under tort law or, if not, no contractual limitation of
liability was in effect; and (3) the Trust itself would be unable to meet its
obligations. In light of Delaware law, the nature of the Trust's business and
the nature of its assets, the risk of personal liability to a Fund shareholder
is remote.
The Trustees may each year, or more frequently, distribute to the
shareholders of each series accrued income less accrued expenses and any net
realized capital gains less accrued expenses. Distributions of each year's
income of each series will be distributed pro rata to shareholders in proportion
to the number of shares of each series held by each of them. Distributions will
be paid in cash or shares or a combination thereof as determined by the
Trustees. Distributions paid in shares will be paid at the net asset value as
determined in accordance with the Declaration of Trust.
Shares of the Trust may be automatically redeemed if held by a
shareholder in an amount less than the minimum required by the Fund.
PURCHASE, REDEMPTION AND PRICING OF SHARES
CLASS A SHARES
Class A shares will normally be more beneficial than Class B shares to
investors who qualify for reduced front-end sales charges on Class A shares, as
set forth in the prospectus. As
-16-
<PAGE>
a result, any order for $250,000 or more for Class B shares may be rejected by
your financial intermediary.
Class A shares are subject to a front-end sales charge, as
described in the adviser classes prospectus. The amount of this sales charge
re-allowed to selected dealers is as follows:
<TABLE>
<CAPTION>
Commission to
selected
dealers as % of
Your investment offering price
- -------------------- ---------------
<S> <C>
Less than $50,000 5.00%
$50,000 to $99,999 4.00%
$100,000 to $249,999 3.00%
$250,000 to $499,999 2.25%
$500,000 to $999,999 1.75%
$1,000,000 or more 1.00%
</TABLE>
With respect to purchases of $1,000,000 or more made through
authorized financial intermediaries, the distributor may pay from its own
resources a fee of up to 1% of the amount invested to compensate such financial
intermediaries for their distribution assistance. Proceeds from the CDSC on
Class A shares are used by the distributor to defray these expenses.
No initial sales charge is imposed on Class A shares issued (i)
pursuant to the automatic reinvestment of income and gains distributions, (ii)
upon the automatic conversion of Class B shares to Class A shares or (iii) to an
investor repurchasing shares which the investor sold within the preceding 60
days.
COMBINED PURCHASE PRIVILEGE AND CUMULATIVE QUANTITY DISCOUNT
Certain investors may qualify for a reduced sales charge according to
the Class A sales charge schedule set forth in the prospectus, by combining
purchases of shares of the Fund into a single "purchase" if the resulting
"purchase" equals at least $50,000. For purposes of this Combined Purchase
Privilege, the term "purchase" refers to: (i) a single purchase by an
individual, or concurrent purchases, which in the aggregate are at least equal
to the prescribed amounts, by an individual, his or her spouse and their
children under the age of 21 years; (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single fiduciary account even though more than
one beneficiary is involved; or (iii) a single purchase for the employee benefit
plans of a single employer. The term "purchase" also includes purchases by a
"company" as the term is defined in the 1940 Act, but does not include purchases
by any such company which has not been in existence for at least six months or
which has no other purpose than the purchase of shares of the Fund or shares of
other registered investment companies. The term "purchase" does not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit card holders of a company, policy holders of
an insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser.
An investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales charge will be
based on the total of : (i) the investor's current purchase; (ii) the net asset
value (at the close of business on the previous day) of all Class A shares of
the Fund held by the investor; and (iii) the net asset value of all shares
described in (ii) owned by another shareholder eligible to combine his or her
purchase with that of the investor in a single "purchase" as described above.
To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on purchases made through a financial intermediary,
the investor or financial intermediary must provide the transfer agent with
sufficient information to verify that each purchase qualifies for the privilege
or discount.
STATEMENT OF INTENTION
-17-
<PAGE>
Class A investors may also obtain a reduced sales charge, as set forth
in the prospectus, by means of a written Statement of Intention, which expresses
the investor's intention to invest at least $50,000 within a period of 13 months
in Class A shares of the Fund. Each purchase under a Statement of Intention will
be made at the public offering price at the time of such purchase applicable to
a single transaction of the dollar amount indicated in the Statement of
Intention. At the investor's option, a Statement of Intention may include
purchases of Fund shares made not more than 90 days prior to the date the
investor signs the Statement of Intention; however, the 13 month period during
which the Statement of Intention is in effect will begin on the date of the
earliest purchase included.
The Statement of Intention is not a binding obligation on the investor
to purchase the full amount indicated. The minimum initial investment under a
Statement of Intention will be 5% of such amount. Shares purchased with the
first 5% will be held in escrow (while remaining registered in the name of the
investor) to secure payment of the higher sales charge applicable to the shares
actually purchased if the full amount indicated in the Statement of Intention is
not purchased, and such escrowed shares will be involuntarily redeemed to pay
the additional sales charge, if necessary. Dividends on escrowed shares, whether
paid in cash or reinvested in additional Fund shares, are not subject to escrow.
When the full amount has been purchased, the escrow will be released. To the
extent the investor purchases more than the dollar amount indicated in the
Statement of Intention and qualifies for a further reduced sales charge, the
sales charge will be adjusted for the entire amount purchased at the end of the
13 month period. The difference in the sales charge will be used to purchase
additional Fund shares subject to the rate of the sales charge applicable to the
actual amount of the aggregate purchase.
PRIVILEGE FOR CERTAIN RETIREMENT PLANS
Multiple participant payroll deduction retirement plans, such as
401(k) plans, may also purchase shares of the Fund at a reduced sales charge on
a monthly basis during the 13-month period following the plan's initial
purchase. The sales charge applicable to the initial purchase of shares of the
Fund will be that normally applicable under the sales charge schedule set forth
in the prospectus to an investment 13 times larger than such initial purchase.
The sales charge applicable to each succeeding monthly purchase will be that
normally applicable, under the schedule, to an investment equal to the sum of
(i) the total purchases previously made during the 13-month period and (ii) the
current month's purchase multiplied by the number of months (including the
current month) remaining in the 13-month period. Sales charges previously paid
during such period will not be retroactively adjusted based on later purchases.
EXEMPTION FOR CERTAIN OTHER INVESTORS
The Fund may sell its Class A shares at net asset value (without an
initial sales charge) and without a CDSC to certain other investors, including:
(i) HQFM, H&Q, Symphony and their affiliates, and their current
officers, partners, directors and employees, any current or former Trustee or
officer of the Trust, any spouse or sibling, direct ancestor or direct
descendent (collectively "relatives") of any such individual, or
-18-
<PAGE>
any trust, individual retirement account or retirement plan account for the
benefit of any such individual or relative;
(ii) qualified retirement plans of HQFM, H&Q, Symphony and their
affiliates;
(iii) any registered representative of any financial intermediary
authorized to sell Class A or Class B shares of the Fund or their respective
spouses, children and parents;
(iv) banks, trust companies and other types of depository institutions
investing for their own accounts or for their customers' accounts;
(v) any state, county or city, or any instrumentality, department,
authority or agent thereof, which is prohibited by applicable investment laws
from paying a sales charge or commission in connection with the purchase of
shares of the Fund;
(vi) pension and profit sharing plans, pension funds and other
company-sponsored benefit plans that (A) buy shares worth $500,000 or more, or
(B) have at the time of purchase, 100 or more eligible participants, or (C)
certify that they project to have annual plan purchases of $200,000 or more;
(vii) "wrap" accounts for the benefit of clients of broker-dealers,
financial institutions or other financial intermediaries that have entered into
an agreement with H&Q, specifying aggregate minimums and certain operating
policies and standards; and
(viii) registered investment advisers investing for accounts for which
they receive asset-based fees.
A purchaser's financial intermediary must certify to the transfer
agent that the purchaser is eligibile for an exemption from the Class A
front-end sales charge and also notify the transfer agent if a previously
eligible purchaser is no longer eligible for such an exemption. Exemptions will
be granted subject to verification of a purchaser's entitlement. Financial
intermediaries may charge a fee for effecting transactions involving Class A
shares of the Fund sold at net asset value .
The CDSC imposed on certain purchases of Class A shares may be waived
in the same manner as the CDSC on Class B shares may be waived, as described
below under "Class B Shares."
CLASS B SHARES
The combination of the CDSC and the distribution fee enables the Fund
to sell the Class B shares without an initial sales charge being deducted at the
time of purchase. The higher distribution fee incurred by Class B shares will
cause such shares to have a higher expense ratio and to pay lower dividends than
those related to Class A and Common Class shares.
-19-
<PAGE>
Proceeds from the CDSC are payable to the Distributor and may be
used in whole or in part to defray the Distributor's expenses relating to the
provision of distribution-related services to the Fund in connection with the
sale of Class B shares, including compensation payments to selected dealers.
The Distibutor pays selected dealers a commission equal to 4.00% of the
amount of Class B shares sold by such selected dealers.
The CDSC may be waived on Class B shares if the redemption relates to:
(a) retirement distributions or loans to participants or beneficiaries from
pension or profit sharing plans, pension funds and other company-sponsored
benefit plans (each a Plan); (b) the death or disability (as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, as amended (Code)) of a
participant in a Plan; (c) hardship withdrawals by a participant or beneficiary
in a Plan; (d) satisfying the minimum distribution requirements of the Code; (e)
the establishment of "substantially equal periodic payments" as described in
Section 72(m)(7) of the Code; (f) the separation from service by a participant
or beneficiary in a Plan; (g) excess contributions distributed from a Plan; (i)
the death or disability (as defined in Section 72(m)(7) of the Code) of a
shareholder if the redemption is made within one year of the event; and (h)
redemption proceeds which are being reinvested in accounts or non-registered
products over which an advisory affiliate of Hambrecht & Quist Group has
investment discretion.
Class B shares convert to Class A shares five years after the end of
the calendar month in which the shareholder's purchase order was accepted. Such
conversion will occur on the basis of the net asset values of the two classes,
without the imposition of any sales load, fee or other charge. The purpose of
the conversion is to reduce the distribution fee paid by Class B shareholders
that have been outstanding long enough for the distributor to have been
compensated for the distribution expenses incurred in the sale of the shares.
For purposes of conversion to Class A shares, Class B shares acquired
through reinvestment of dividends and distributions will convert to Class A
shares based on the date of the initial purchase of the underlying shares on a
pro rata basis.
The conversion of Class B shares to Class A shares is subject to the
availability at the time of conversion of an opinion of counsel or other
assurance to the effect that the conversion of Class B shares to Class A shares
does not constitute a taxable event under federal law. In the event such
assurance is not available, no further conversion of Class B shares would occur
and shares would continue to be subject to a higher distribution fee for an
indefinite period.
PURCHASING AND REDEEMING SHARES OF THE FUND
As long as the Fund or PFPC Inc. follow reasonable procedures to
confirm that your telephone order is genuine, they will not be liable for any
losses you may experience due to unauthorized or fraudulent instructions. These
procedures may include requiring a form of personal identification before acting
upon any telephone order, providing written confirmation of telephone orders and
tape recording telephone orders.
PFPC Inc. does not accept third party checks as payment for Fund
shares. The Fund requires signature guarantees for redemptions in excess of
$250,000. A signature guarantee may be obtained from a domestic bank or trust
company, broker, dealer, clearing agency or savings association who are
participants in a medallion program recognized by the Securities Transfer
Association. The three recognized medallion programs are Securities Transfer
Agents Medallion Program, Stock Exchange Medallion Program and the New York
Stock Exchange, Inc.
-20-
<PAGE>
Medallion Signature Program. Signature guarantees that are not part of these
programs will not be accepted.
Share certificates will not be issued in order to avoid additional
administrative costs, however, share ownership records are maintained by the
Fund's transfer agent, PFPC Inc. Twice a year, financial reports will be mailed
to shareholders describing the Fund's performance and investment holdings. In
order to reduce these mailing costs, each household will receive one
consolidated mailing. If you do not want to receive consolidated mailings, you
may write to the Fund and request that your mailings not be consolidated.
The Fund has made an election with the SEC to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of its net assets at the beginning
of such period. This election is irrevocable without the SEC's prior approval.
Redemption requests in excess of these limits may be paid, in whole or in part,
in investment securities or in cash, as the Trustees may deem advisable. Payment
will be made wholly in cash unless the Trustees believe that economic or market
conditions exist that would make such payment a detriment to the best interests
of the Fund. If redemption proceeds are paid in investment securities, such
securities will be valued as set forth in "Pricing of Shares." A redeeming
shareholder would normally incur brokerage expenses if he or she were to convert
the securities to cash.
PRICING OF SHARES
Securities traded on stock exchanges are valued at the last quoted
sales price that day on the exchange on which such securities are primarily
traded, or, lacking any sales, at the mean between the bid and ask prices.
Securities traded in the over-the-counter market are valued at the last sales
price that day, or if no sales that day, at the mean between the bid and ask
prices.
Open futures contracts will be valued using the closing settlement
price or, in the absence of such a price, the most recent quoted bid price. If
there are no quotations available on the valuation date, the last available
closing settlement price will be used.
U.S. government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less, or by amortizing their fair values as of the 61st
day prior to maturity if their original maturity exceeded 60 days (unless in
either case the Trustees determine that this method does not represent fair
value).
Fixed income securities not maturing within 60 days may be valued on
the basis of the price provided by a pricing service when such prices are
believed to reflect the fair market value of such securities. The prices
provided by a pricing service take into account many factors, including
institutional size trading in similar groups of securities and any developments
related to specific securities.
Securities and assets for which market quotations are not readily
available (including restricted securities that are subject to limitations on
their sale and illiquid securities) are valued at fair value as determined in
good faith pursuant to guidelines adopted by the Trustees.
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<PAGE>
The assets attributable to Class A, Class B and Common Class shares
will be invested together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the liabilities allocated to
that class from the assets belonging to that class in conformance with the
provisions of a plan adopted by the Fund in accordance with Rule 18f-3 under the
1940 Act.
TAXATION
FEDERAL TAX INFORMATION FOR THE FUNDS
It is the Fund's policy to qualify for taxation as a "regulated
investment company" (RIC) by meeting the requirements of Subchapter M of the
Code. By qualifying as a RIC, the Fund expects to eliminate or reduce to a
nominal amount the federal income tax to which it is subject. If the Fund does
not qualify as a RIC under the Code, it will be subject to federal income tax on
its net investment income and any net realized capital gains.
The Code imposes a non-deductible excise tax on RICs that do not
distribute in a calendar year (regardless of whether they otherwise have a
non-calendar taxable year) an amount equal to 98% of their "ordinary income" (as
defined in the Code) for the calendar year plus 98% of their net capital gain
for the one-year period ending on October 31 of such calendar year, plus any
undistributed amounts from prior years. The non-deductible excise tax is equal
to 4% of the deficiency. For the foregoing purposes, the Fund is treated as
having distributed any amount on which it is subject to income tax for any
taxable year ending in such calendar year.
The Fund's transactions in futures contracts may be restricted by the
Code and are subject to special tax rules. In a given case, these rules may
accelerate income to the Fund, defer its losses, cause adjustments in the
holding periods of the Fund's assets, convert short-term capital losses into
long-term capital losses or otherwise affect the character of the Fund's income.
These rules could therefore affect the amount, timing and character of
distributions to shareholders. The Fund will endeavor to make any available
elections pertaining to these transactions in a manner believed to be in the
best interest of the Fund and its shareholders.
FEDERAL INCOME TAX INFORMATION FOR SHAREHOLDERS
The discussion of federal income taxation presented below supplements
the discussion in the Fund's prospectus and only summarizes some of the
important federal tax considerations generally affecting shareholders of the
Fund. Accordingly, prospective investors (particularly those not residing or
domiciled in the United States) should consult their own tax advisers regarding
the consequences of investing in the Fund.
Any dividends declared by the Fund in October, November or December
and paid the following January are treated, for tax purposes, as if they were
received by shareholders on December 31 of the year in which they were declared.
Long-term capital gains distributions are taxable as long-term capital gains,
regardless of how long you have held your shares. However, if you receive a
long-term capital gains distribution with respect to Fund shares held for six
months or less, any loss on the sale or exchange of those shares will, to the
extent of the long-
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<PAGE>
term capital gains distribution, be treated as a long-term capital loss. For
corporate investors in the Fund, dividend distributions the Fund designate to be
from dividends received from qualifying domestic corporations will be eligible
for the 70% corporate dividends-received deduction to the extent they would
qualify if the Fund were a regular corporation. Distributions by the Fund also
may be subject to state, local and foreign taxes, and the Fund's treatment under
applicable tax laws may differ from the federal income tax treatment.
The Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends paid to any shareholder who (1) fails
to provide a correct taxpayer identification number certified under penalty of
perjury; (2) is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (3) fails
to provide a certified statement that he or she is not subject to "backup
withholding." Backup withholding is not an additional tax and any amounts
withheld may be credited against the shareholder's ultimate U.S. tax liability.
Foreign shareholders (i.e., nonresident alien individuals and foreign
corporations, partnerships, trusts and estates) are generally subject to U.S.
withholding tax at the rate of 30% (or a lower tax treaty rate) on distributions
derived from net investment income and short-term capital gains. Distributions
to foreign shareholders of long-term capital gains and any gains from the sale
or other disposition of shares of the Fund generally are not subject to U.S.
taxation, unless the recipient is an individual who meets the Code's definition
of "resident alien." Different tax consequences may result if the foreign
shareholder is engaged in a trade or business within the United States. In
addition, the tax consequences to a foreign shareholder entitled to claim the
benefits of a tax treaty may be different than those described above.
CALCULATION AND USE OF PERFORMANCE DATA
Average annual total return is a standardized measure of performance
calculated using methods prescribed by SEC rules. It is calculated by
determining the ending value of a hypothetical initial investment of $1,000 made
at the beginning of a specified period. The ending value is then divided by the
initial investment, the result of which is annualized and expressed as a
percentage. It is reported for periods of one, five and 10 years or since
commencement of operations for periods not falling on those intervals. In
computing average annual total return, the Fund assumes reinvestment of all
distributions at net asset value on applicable reinvestment dates.
An after-tax total return for the Fund may be calculated by taking its
total return and subtracting applicable federal taxes from the portions of the
Fund's total return attributable to capital gain and ordinary income
distributions. This after-tax total return may be compared to that of other
mutual funds with similar investment objectives as reported by independent
sources.
The Fund also may report the percentage of its total return that would
be paid to taxes annually (at the applicable federal personal income and capital
gains tax rates) before redemption of Fund shares. This proportion may be
compared to that of other mutual funds with similar investment objectives as
reported by independent sources.
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<PAGE>
The Fund also may advertise its cumulative total return since
inception. This number is calculated using the same formula that is used for
average annual total return except that, rather than calculating the total
return based on a one-year period, cumulative total return is calculated from
commencement of operations to the most recent fiscal year end.
The performance of the Fund may be compared with the performance of
other mutual funds by comparing the ratings of mutual fund rating services,
various indices, U.S. government obligations, bank certificates of deposit, the
consumer price index and other investments for which reliable data is available.
The Fund's performance may also be compared to averages, performance rankings,
or other information prepared by recognized mutual fund statistical services. An
index's performance data assumes the reinvestment of dividends but does not
reflect deductions for administrative, management and trading expenses. The Fund
will be subject to these costs and expenses, while an index does not have these
expenses. In addition, various factors, such as holding a cash balance, may
cause the Fund's performance to be higher or lower than that of an index. The
Fund's annual report may contain additional performance information.
FINANCIAL STATEMENTS
[TO COME]
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<PAGE>
HAMBRECHT & QUIST FUND TRUST
Part C - Other Information
<TABLE>
<CAPTION>
Item 23. Exhibits:
---------
<S> <C>
(a) (1) Agreement and Declaration
of Trust dated June 7, 1999(1)
(2) Certificate of Trust dated June 7, 1999(1)
(b) By-laws(1)
(c) Instruments defining Rights
of Security Holders........................................... Not applicable.
(d) Investment Advisory Contracts
(1) Form of Investment Advisory Agreement..................... Filed herewith.
(2) Form of Investment Sub-Advisory Agreement................. Filed herewith
(e) Form of Distribution Agreement................................ Filed herewith.
(f) Bonus or Profit Sharing Contracts............................. None.
(g) Form of Custodian Services Agreement.......................... Filed herewith.
(h) Other Material Contracts
(1) Form of Transfer Agency Services Agreement................ Filed herewith.
(2) Form of Administration and
Accounting Services Agreement............................. Filed herewith.
(i) Legal Opinion................................................. To be filed by amendment.
(j) Other Opinions
Consent of Independent
Accountants................................................... To be filed by amendment.
(k) Omitted Financial Statements.................................. None.
(l) Initial Capital Agreements.................................... To be filed by amendment.
</TABLE>
- ----------------------
(1)Incorporated by reference to the Trust's Registration Statement filed
on Form N-1A with the Securities and Exchange Commission on June 11, 1999.
<PAGE>
<TABLE>
<S> <C>
(m) Form of Rule 12b-1 Plan....................................... Filed herewith.
(n) Form of Rule 18f-3 Plan....................................... Filed herewith.
</TABLE>
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Initially, Hambrecht & Quist California, a California corporation
which is a wholly-owned subsidiary of Hambrecht & Quist Group, a
Delaware corporation, will own 100% of the shares of the Fund. As long
as such ownership exceeds 25%, the Fund may be considered to be under
common control with the following direct and indirect subsidiaries of
Hambrecht & Quist Group:
Hambrecht & Quist LLC (Delaware limited liability company)
Hambrecht & Quist B/D Subsidiary Corp. (California corporation)
Hambrecht & Quist Fund Management, LLC
(California limited liability company)
Hambrecht & Quist Capital Management, Inc. (California corporation)
Hambrecht & Quist Management Corporation (California corporation)
Hambrecht & Quist Venture Partners (California limited partnership)
Hambrecht & Quist Guaranty Finance, LLC
(California limited liability company)
H&Q Venture Management, LLC
(Delaware limited liability company)
Item 25. INDEMNIFICATION
The Agreement and Declaration of Trust (Article IV, Section 3) of the
Trust provides that, in the event a Trustee, officer, employee or
agent of the Trust is sued for his or her activities concerning the
Trust, the Trust will indemnify that person to the fullest extent
permitted by law except if that person has been found by a court or
body before which the proceeding was brought to have acted with
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office or not to
have acted in good faith in the reasonable belief that his action was
in the best interest of the Trust.
The Trust intends to purchase errors and omissions insurance with
Trustees' and officers' liability coverage.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Hambrecht & Quist Fund Management, LLC (adviser), was recently formed
to act as the Fund's investment adviser and has no other businesses of
a substantial nature. Information as to the adviser's officers and
managing member is included in its
2
<PAGE>
Form ADV filed on July 19, 1999 with the Securities and Exchange
Commission (Registration Number 801-5672) and is incorporated herein
by reference.
Symphony Asset Management, LLC (sub-adviser) acts as a sub-adviser to
the Fund pursuant to a sub-advisory contract with the adviser. The
sub-adviser acts as an investment adviser to other accounts, including
registered investment companies. Information as to the sub-adviser's
officers and managing member is included in its Form ADV filed on
August 10, 1999 with the Securities and Exchange Commission
(Registration Number 801-52638) and is incorporated herein by
reference
Item 27. PRINCIPAL UNDERWRITERS
Hambrecht & Quist LLC (distributor) serves as principal
underwriter of the shares of the Fund. The following table sets
forth information concerning each officer of the distributor.
<TABLE>
<CAPTION>
----------------------------- --------------------------------------- ------------------------------
Name and Principal Business Positions and Offices Position and Offices
Address* with Underwriter with Registrant
----------------------------- --------------------------------------- ------------------------------
<S> <C> <C>
Daniel H. Case III Chairman and Chief Executive Officer Chairman, Trustee
----------------------------- --------------------------------------- ------------------------------
Patrick J. Allen Managing Director and Chief Financial
Officer
---------------------------- ---------------------------------------- ------------------------------
Todd D. Bakar Managing Director and Director of
Research
----------------------------- --------------------------------------- ------------------------------
David G. Golden Managing Director and Co-Director of
Investment Banking
----------------------------- --------------------------------------- ------------------------------
John P. Hullar Managing Director and Director or
Worldwide Sales
----------------------------- --------------------------------------- ------------------------------
Steven N. Machtinger Managing Director, General Counsel and Secretary
Secretary
----------------------------- --------------------------------------- ------------------------------
David M. McAuliffe Chief Operating Officer
----------------------------- --------------------------------------- ------------------------------
Cristina M. Morgan Managing Director and Co-Director of
Investment Banking
----------------------------- --------------------------------------- ------------------------------
</TABLE>
* All addresses are One Bush Street, San Francisco, California 94104.
Item 28. LOCATION OF ACCOUNTS AND RECORDS
Records required to be maintained by Section 31(a) of the 1940 Act and
the rules thereunder relating to the Trust's portfolio transactions
are maintained by the sub-adviser at 555 California Street, San
Francisco, California 94104. Records relating to the Trust's books and
shareholders are maintained by the Trust's administration and
accounting agent, transfer agent, registrar, dividend disbursing agent
and shareholder servicing agent, PFPC Inc., at 400 Bellevue Parkway,
Wilmington, Delaware 19809. Records relating to the physical
possession of securities are maintained by the Trust's custodian, PFPC
Trust Company, at 200 Stevens Drive,
3
<PAGE>
Lester, Pennsylvania 19113. All other records are maintained by the
adviser at One Bush Street, San Francisco, California 94104.
Item 29. MANAGEMENT SERVICES
Not applicable.
Item 30. UNDERTAKINGS
In accordance with Section 14(a)(3) of the Investment Company Act of
1940, as amended, the Trust hereby undertakes to file a post-effective
amendment with certified financial statements showing the initial
capital received by the Trust before accepting subscriptions from more
than 25 persons.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, duly authorized, in the City of San
Francisco, and State of California, on the 27th day of August, 1999.
HAMBRECHT & QUIST FUND TRUST
(Registrant)
By: /s/ David R. Krimm
-------------------------------
David R. Krimm, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on the date(s) indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Principal Executive Officer
/s/ David R. Krimm Initial Trustee and President August 27, 1999
- -------------------------------------
David R. Krimm
Principal Financial and
Accounting Officer
/s/ Robert N. Savoie Chief Financial Officer August 27, 1999
- -------------------------------------
Robert N. Savoie
</TABLE>
5
<PAGE>
HAMBRECHT & QUIST FUND TRUST
Exhibit Index to Part C
<TABLE>
<CAPTION>
Item No. Description
- -------- -----------
<S> <C>
99(d)(1) Form of Investment Advisory Agreement
99(d)(2) Form of Investment Sub-Advisory Agreement
99(e) Form of Distribution Agreement
99(g) Form of Custodian Services Agreement
99(h)(1) Form of Transfer Agency Services Agreement
99(h)(2) Form of Administration and Accounting Services Agreement
99(m) Form of Rule 12b-1 Plan
99(o) Form of Rule 18f-3 Plan
</TABLE>
6
<PAGE>
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
AGREEMENT made as of __________, 1999 between HAMBRECHT & QUIST FUND
TRUST, a Delaware business trust (herein called the "Trust"), and HAMBRECHT &
QUIST FUND MANAGEMENT, LLC, a California limited liability company and
registered investment adviser ("HQFM").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (1940 Act"); and
WHEREAS, the Trust desires to retain HQFM to furnish investment
advisory and administrative services to the H&Q IPO & Emerging Company Fund, a
series of the Trust (the "Fund");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints HQFM to act as investment
adviser and administrator to the Fund for the period and on the terms set forth
in this Agreement. HQFM accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Trust has furnished HQFM with copies
properly certified or authenticated of each of the following:
(a) the Trust's Agreement and Declaration of Trust, as filed
with the Secretary of State of the State of Delaware on June 7, 1999, and all
amendments thereto or restatements thereof (such Agreement and Declaration of
Trust, as presently in effect and as it shall from time to time be amended or
restated, herein called the "Declaration of Trust");
(b) the Trust's By-Laws and amendments thereto (the "By-Laws");
(c) resolutions of the Trust's Trustees (the "Trustees")
authorizing the appointment of HQFM and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A under
the 1940 Act, as filed with the Securities and Exchange Commission ("SEC") on
June 11, 1999, and all amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") (File No. 333-80473), and under
the 1940 Act (File No. 811-09383), as filed with the SEC on June 11, 1999, and
all amendments thereto insofar as such Registration Statement and amendments
relate to the Fund; and
1
<PAGE>
(f) the Trust's most recent prospectuses and statement of
additional information for the Fund (such prospectuses and statement of
additional information, as presently in effect, and all amendments and
supplements thereto, herein collectively called the "Prospectus").
The Trust will furnish HQFM from time to time with copies of all
amendments of or supplements to the foregoing.
3. SERVICES. Subject to the supervision of the Trustees, HQFM will
monitor or perform for the Fund all aspects of the operations of the Fund,
except for those performed by the distributor for the Fund. More particularly,
HQFM will furnish an investment program in respect of the Fund, determine what
securities and other investments will be purchased, retained or sold by the Fund
and place orders for the purchase and sale of these investments; maintain office
facilities for the Fund; furnish statistical and research data, clerical
services and stationery and office supplies; help prepare filings and reports
for the Fund; and generally assist the Fund's other service providers in all
aspects of the administration of the Fund.
Subject to the provisions of the Declaration of Trust and the 1940
Act, HQFM, at its expense, may select and contract with one or more investment
sub-advisers (the "Sub-Advisers") for the Fund. HQFM may also delegate or
subcontract some or all of HQFM's other duties under this Agreement.
HQFM further agrees that it:
(a) will monitor the Fund's investments and will comply with the
provisions of the Declaration of Trust, the By-Laws and the Fund's stated
investment objectives, policies and restrictions, as they may be amended from
time to time;
(b) will comply with all applicable federal and state statutes,
rules and regulations pertaining to its services under this Agreement;
(c) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with an underwriter, market
maker, or broker or dealer. In placing orders with brokers and dealers, HQFM
will attempt to obtain prompt execution of orders in an effective manner at the
most favorable price. Consistent with this obligation, when the execution and
price offered by two or more brokers are comparable, HQFM may, in its
discretion, purchase or sell portfolio securities through brokers who provide
HQFM with research advice and other services. In no instance will portfolio
securities be purchased or sold through, from or to HQFM or any Sub-Adviser, or
any affiliated person of the Trust, HQFM, or any Sub-Adviser, except as may be
permitted under the 1940 Act;
(d) will treat confidentially and as proprietary information of
the Trust all records and other information relative to the Trust, and will not
use such records and information for any purpose other than performance of its
responsibilities and duties
2
<PAGE>
hereunder, except after prior notification to and approval in writing by the
Trust, which approval shall not be unreasonably withheld and may not be withheld
where HQFM (i) may be exposed to civil or criminal contempt proceedings for
failure to comply, (ii) is requested to divulge such information by duly
constituted authorities or (iii) is so requested by the Trust;
(e) will not make loans to any person to purchase or carry units
of beneficial interest in the Trust or make loans to the Trust;
(f) will direct its personnel, when making investment
recommendations for the Trust, not to inquire or take into consideration whether
the issuers of securities proposed for purchase or sale for the Trust's accounts
are customers of HQFM, any Sub-Adviser or their affiliates. In dealing with such
customers, HQFM and its affiliates will not inquire or take into consideration
whether securities of those customers are held by the Trust;
(g) will provide regular written reports to the Trustees
(including, without limitation, reports on the general investment strategy of
the Fund, the performance of the Fund in relation to standard industry indices
and general conditions affecting the equity markets), will make appropriate
persons available for the purpose of reviewing such reports with the Trustees on
a regular basis at reasonable times, and will provide various other written and
oral reports from time to time as requested by the Trustees; and
(h) will vote proxies received by it in connection with
securities held by the Fund consistent with its fiduciary duties hereunder.
4. BOOKS AND RECORDS. HQFM hereby agrees to maintain and preserve
all accounts, books and records required under the 1940 Act and the Investment
Advisers Act of 1940 and rules thereunder with respect to HQFM's duties
hereunder. HQFM understands and agrees that all records it maintains for the
Trust are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's request.
5. EXPENSES. During the term of this Agreement, HQFM will pay all
expenses incurred by it in connection with its activities under this Agreement,
including, without limitation, all compensation of any Sub-Adviser and any
person employed by or associated with HQFM to assist in the performance of
HQFM's obligations under this Agreement, whether or not such person is also an
officer or employee of the Trust. Other expenses incurred in the operation of
the Fund, including, without limitation, taxes, interest, brokerage fees and
commissions, fees of Trustees who are not officers, directors, shareholders,
members or employees of HQFM or any Sub-Adviser or any affiliate thereof, SEC
and state "blue sky" fees, costs of pricing portfolio securities, fees of the
Fund's investment adviser, distributor, administrator, accounting agent,
transfer and dividend disbursing agent, custodian and other service providers,
insurance premiums, outside auditing and legal expenses, costs of maintaining
the Trust's existence as a
3
<PAGE>
Delaware business trust, typesetting and printing prospectuses for regulatory
purposes and for distribution to current shareholders of the Fund, costs of
shareholders' and Trustees' reports and meetings and any extraordinary expenses,
will be borne by the Fund.
6. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, the Trust will pay HQFM, and HQFM will accept as
full compensation therefor, an advisory fee, accrued daily and payable monthly
in arrears, of sixty-five one hundredths of one percent (0.65%) of the Fund's
average daily net assets. From time to time, HQFM may agree to waive or reduce
some or all of the compensation to which it is entitled under this Agreement.
Through December 31, 2000, HQFM will waive its advisory fee and reimburse
expenses so that the total annual operating expenses of the Class A shares of
the Fund will not exceed 1.60%, the total annual operating expenses of the Class
B shares of the Fund will not exceed 2.25% and the total annual operating
expense of the Common Class shares of the Fund will not exceed 1.60%, of such
class's average daily net assets.
7. SERVICES TO OTHERS. The Trust understands that HQFM may in the
future act as an investment adviser, sub-investment adviser, and/or
administrator to other accounts, including other investment companies. The Trust
has no objection to HQFM's acting in such capacities, provided that whenever the
Fund and one or more other investment accounts advised by HQFM have available
funds for investment, investments suitable and appropriate for each will be
allocated in a manner believed by HQFM to be equitable to each account. The
Trust recognizes that in some cases this procedure may adversely affect the size
of the position that the Fund may obtain in a particular security. In addition,
the Trust understands that the persons employed by HQFM to assist in HQFM's
duties under this Agreement will not devote their full time to such service and
nothing contained in this Agreement will be deemed to limit or restrict the
right of HQFM or any of its affiliates to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
8. YEAR 2000 COMPLIANCE. HQFM, or its affiliates on behalf of HQFM,
have (i) initiated a review and assessment of all areas within HQFM's business
and operations (including those affected by its suppliers and vendors) that
could be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by HQFM (or its suppliers, vendors and customers) may
be unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) developed a
plan and timeline for addressing the Year 2000 Problem on a timely basis, and
(iii) to date, implemented that plan substantially in accordance with that
timetable. Based on the foregoing, HQFM believes that all computer applications
(including those of its suppliers and vendors) that are material to its business
and operations applicable to this Agreement will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"). HQFM shall obtain a similar
representation from any investment sub-adviser or service provider to whom it
delegates any duties under this Agreement.
4
<PAGE>
9. LIMITATION OF LIABILITY. HQFM will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of HQFM in the performance of its duties or from reckless disregard by it
of its obligations and duties under this Agreement. Notwithstanding the
foregoing, the Trust does not waive any right it may have at common law or under
the federal or state securities laws.
10. DURATION AND TERMINATION. This Agreement will become effective as
of the later of (i) the date the Trust's Registration Statement as it relates to
the Fund is declared effective by the SEC and (ii) the date this Agreement has
been approved by a vote of a majority of the outstanding voting securities of
the Fund in accordance with the requirements under the 1940 Act.
This Agreement will remain in effect for two years and thereafter
continue for successive one year periods, provided such continuance is
specifically approved at least annually (a) by the vote of a majority of those
Trustees who are not parties to this Agreement or interested persons of such
parties, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the vote of the Trustees or by the vote of a majority of
the outstanding voting securities of the Fund. Notwithstanding the foregoing,
this Agreement may be terminated at any time, without the payment of any
penalty, on sixty days' written notice by the Trust (by vote of the Trustees or
by vote of a majority of the outstanding voting securities of the Fund) or by
HQFM. This Agreement will immediately terminate in the event of its assignment.
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same meaning
as such terms in the 1940 Act.)
11. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
12. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the laws of the State of California.
The names "Hambrecht & Quist Fund Trust" and "Trustees of Hambrecht &
Quist Fund Trust" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under the
Declaration of Trust, to which reference is hereby made. The obligations of the
Trust entered into in the name or on behalf thereof by any of its Trustees,
officers, representatives or agents are made not
5
<PAGE>
individually, but in such capacities, and are not binding upon any of the
Trustees, officers, representatives, agents or shareholders of the Trust
personally, but bind only the assets of the Trust, and all persons dealing with
any series of shares of the Trust must look solely to the assets of the Trust
belonging to such series for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
HAMBRECHT & QUIST FUND TRUST
By:
--------------------------------
Name: David R. Krimm
Title: President
HAMBRECHT & QUIST FUNDMANAGEMENT, LLC
By:
--------------------------------
Name: David R. Krimm
Title: President
6
<PAGE>
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of ____________, 1999 between HAMBRECHT & QUIST FUND
MANAGEMENT, LLC, a California limited liability company and registered
investment adviser ("HQFM"), and SYMPHONY ASSET MANAGEMENT, LLC, a California
limited liability company and registered investment adviser ("Symphony").
WHEREAS, HQFM is the investment adviser for Hambrecht & Quist Fund
Trust (the "Trust"), an open-end management investment company registered under
the Investment Company Act of 1940, as amended, (the "1940 Act"); and
WHEREAS, HQFM desires to retain Symphony as HQFM's agent to furnish
investment sub-advisory services to the H&Q IPO & Emerging Company Fund, a
series of the Trust (the "Fund");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. APPOINTMENT. HQFM hereby appoints Symphony to provide investment
sub-advisory services to the Fund for the period and on the terms set forth in
this Agreement. Symphony accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. HQFM has furnished Symphony with copies
properly certified or authenticated of each of the following:
a. the Trust's Agreement and Declaration of Trust, as filed
with the Secretary of State of the State of Delaware on June 7, 1999, and all
amendments thereto or restatements thereof (such Agreement and Declaration of
Trust, as presently in effect and as it shall from time to time be amended or
restated, herein called the "Declaration of Trust");
b. the Trust's By-Laws and amendments thereto (the "By-Laws");
c. resolutions of the Trust's Trustees (the "Trustees")
authorizing the appointment of Symphony and approving this Agreement;
d. the Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission (the "SEC") on
June 11, 1999, and all amendments thereto;
e. the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") (File No. 333-80473) and under
the 1940 Act (File No. 811-09383), as filed with the SEC on June 11, 1999 and
all
-1-
<PAGE>
amendments thereto insofar as such Registration Statement and such
amendments relate to the Fund; and
f. the Trust's most recent prospectuses and statement of
additional information for the Fund (such prospectuses and statement of
additional information, as presently in effect, and all amendments and
supplements thereto, herein collectively called the "Prospectus").
HQFM will furnish Symphony from time to time with copies of all
amendments of or supplements to the foregoing.
3. SERVICES. Subject to the supervision of the Trustees and HQFM,
Symphony will furnish an investment program in respect of the Fund, determine
what securities and other investments will be purchased, retained or sold by the
Fund, and place orders for the purchase and sale of these investments; furnish
statistical and research data; help prepare filings and reports for the Fund;
and generally assist HQFM and the Fund's other service providers in all aspects
of the administration of the Fund.
Symphony will utilize quantitative techniques, proprietary software
models and real-time databases (collectively, "quantitative models") in the
performance of the services to be provided under this Agreement. Symphony
represents and warrants that it maintains the full right and authority to use
these quantitative models in connection with the investment management of the
Fund. Symphony further covenants that it will not take any action, or fail to
take any action, including entering into any third party arrangement, that would
restrict its use of the quantitative models in connection with the investment
management of the Fund. Notwithstanding the provisions of Sections 9 and 10
hereto, Symphony agrees to indemnify and hold HQFM and its affiliates and the
Trust harmless from any and all damages, liabilities, costs and expenses,
including attorneys' fees, resulting from a breach of the above representation,
warranty and covenant.
Symphony further agrees that it:
a. will monitor the Fund's investments and comply with the
provisions of the Declaration of Trust, the By-Laws and the Fund's stated
investment objectives, policies and restrictions, as they may be amended from
time to time;
b. will comply with all applicable federal and state statutes,
rules and regulations pertaining to its services under this Agreement;
c. will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with an underwriter, market
maker, or broker or dealer. In placing orders with brokers and dealers, Symphony
will attempt to obtain prompt execution of orders in an effective manner at the
most favorable price. Consistent with this obligation, when the execution and
price ordered by two or more brokers are comparable, Symphony may, in its
discretion, purchase or sell portfolio securities through brokers who provide
Symphony with research advice and other services. In no
-2-
<PAGE>
instance will portfolio securities be purchased or sold through, from or to HQFM
or Symphony, or any affiliated person of the Trust, HQFM or Symphony, except as
may be permitted under the 1940 Act;
d. will treat confidentially and as proprietary information of
the Trust and HQFM and its affiliates all records and other information relative
to the Trust and HQFM and its affiliates, as applicable, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, or HQFM and its affiliates, as applicable,
which approval shall not be unreasonably withheld and may not be withheld where
Symphony (i) may be exposed to civil or criminal contempt proceedings for
failure to comply, (ii) is requested to divulge such information by duly
constituted authorities, or (iii) is so requested by the Trust, or HQFM and
affiliates, as applicable;
e. will not make loans to any person to purchase or carry units
of beneficial interest in the Trust or make loans to the Trust;
f. will direct its personnel, when making investment
recommendations for the Trust, not to inquire or take into consideration whether
the issuers of securities proposed for purchase or sale for the Trust's accounts
are customers of HQFM, Symphony or their affiliates. In dealing with such
customers, Symphony and its affiliates will not inquire or take into
consideration whether securities of those customers are held by the Trust;
g. will provide regular written reports to HQFM and to the
Trustees (including, without limitation, reports on the general investment
strategy of the Fund, the performance of the Fund in relation to standard
industry indices and general conditions affecting the equity markets), will make
appropriate persons available for the purpose of reviewing such reports with
representatives of HQFM and the Trustees on a regular basis at reasonable times,
and will provide various other written and oral reports from time to time as
requested by HQFM or the Trustees;
h. will vote proxies received by it in connection with
securities held by the Fund consistent with its fiduciary duties hereunder;
i. will act upon instructions from HQFM not inconsistent with
its fiduciary duties hereunder, provided that HQFM shall have no authority to
direct the manner in which the Fund's assets are invested;
j. will not use the name of the Trust, the Fund, HQFM or their
affiliates in any prospectus, advertisement, sales literature or other
communication to the public, except (i) in a general listing of its clients,
(ii) as may be required by law or (iii) as may be agreed to in writing by HQFM,
which agreement shall not be unreasonably withheld;
-3-
<PAGE>
k. will promptly notify HQFM in writing of the occurrence of
any event which could have a material impact on the performance of Symphony's
obligations hereunder, including without limitation:
(1) an event which could disqualify it from serving as an
investment adviser of a registered investment company;
(2) a change in control, as deferred in the 1940 Act;
(3) a change in the portfolio manager of the Fund; or
(4) any pending or threatened audit, investigation,
complaint, examination or other inquiry relating to the Fund conducted by
any state or federal regulatory authority;
l. will maintain, with an insurer reasonably acceptable to
HQFM, professional liability insurance in amounts reasonably acceptable to HQFM;
and
m. will adopt and maintain a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act.
4. BOOKS AND RECORDS. Symphony agrees to maintain and preserve all
accounts, books and records required under the 1940 Act and the Investment
Advisers Act of 1940 and rules thereunder with respect to Symphony's duties
hereunder. Symphony understands and agrees that all records it maintains for the
Trust are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's request.
5. EXPENSES. During the term of this Agreement, Symphony will pay
all expenses incurred by it in connection with its activities under this
Agreement, including, without limitation, the cost of the quantitative models
and all compensation of any person employed by or associated with Symphony to
assist in the performance of Symphony's duties under this Agreement, whether or
not such person is also an officer or employee of the Trust.
6. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, HQFM will pay Symphony, and Symphony will accept as
full compensation therefor, a sub-advisory fee, accrued daily and payable
monthly in arrears, of thirty-five one hundredths of one percent (0.35%) of the
Fund's average daily net assets not in excess of $100 million, and three hundred
seventy-five thousandths of one percent (0.375%) of the Fund's average daily net
assets thereafter. From time to time, Symphony may agree to waive or reduce some
or all of the compensation to which it is entitled under this Agreement. In the
event that HQFM waives any portion of its advisory fee to satisfy any expense
guarantee (as set forth in the Fund's then current registration statement),
Symphony shall waive a pro rata portion of its advisory fee from
-4-
<PAGE>
HQFM, subject to receiving a minimum fee of twenty one hundredths of one percent
(0.20%) of the Fund's average daily net assets.
7. SERVICES TO OTHERS. HQFM understands that Symphony may act as an
investment adviser, sub-investment adviser, and/or administrator to other
accounts, including other investment companies. HQFM has no objection to
Symphony's acting in such capacities, provided that whenever the Trust and one
or more other investment accounts advised by Symphony have available funds for
investment, investments suitable and appropriate for each will be allocated in a
manner believed by Symphony to be equitable to each account. HQFM recognizes
that in some cases this procedure may adversely affect the size of the position
that the Fund may obtain in a particular security. In addition, HQFM understands
that persons employed by Symphony to assist in Symphony's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement will be deemed to limit or restrict the right of Symphony or
any of its affiliates to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
8. YEAR 2000 COMPLIANCE. Symphony has (i) initiated a review and
assessment of all areas within its business and operations (including those
affected by its suppliers, vendors and customers) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by Symphony (or its suppliers, vendors and customers) may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) developed a
plan and timeline for addressing the Year 2000 problem on a timely basis, and
(iii) to date, implemented that plan in accordance with that timetable. Based on
the foregoing, Symphony represents that, to the best of its knowledge, all
computer applications (including those of its suppliers, vendors and customers)
that are material to its business and operations will on a timely basis be able
to perform properly date-sensitive functions for all dates before and after
January 1, 2000 (that is, be "Year 2000 compliant").
9. LIMITATION OF LIABILITY. Except as provided in Section 3,
Symphony will not be liable for any error of judgment or mistake of law or for
any loss suffered by HQFM or the Trust in connection with the performance of
this Agreement, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of Symphony in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Notwithstanding the foregoing,
neither HQFM nor the Trust waives any right it may have at common law or under
the federal or state securities laws.
10. INDEMNIFICATION. HQFM and Symphony each agree to indemnify the
other and their respective affiliates against any claim against or loss or
liability to such other party (including reasonable attorneys' fees) arising out
of any action on the part of the indemnifying party which constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard.
-5-
<PAGE>
11. DURATION AND TERMINATION. This Agreement will become effective as
of the later of (i) the date the Trust's Registration Statement as it relates to
the Fund is declared effective by the SEC and (ii) the date this Agreement has
been approved by a vote of a majority of the outstanding voting securities of
the Fund in accordance with the requirements under the 1940 Act.
This Agreement will remain in effect for two years and thereafter
continue for successive one year periods, provided such continuation is
specifically approved at least annually (a) by the vote of a majority of those
Trustees who are not parties to this Agreement or interested persons of such
parties, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the vote of the Trustees or by the vote of a majority of
the outstanding voting securities of the Fund. Notwithstanding the foregoing,
this Agreement may be terminated at any time, without the payment of any
penalty, on sixty days' written notice by the Trust (by vote of the Trustees or
by vote of a majority of the outstanding voting securities of the Fund), by HQFM
or by Symphony. This Agreement will immediately terminate in the event of its
assignment, except as permitted under the 1940 Act. (As used in this Agreement,
the terms "majority of the outstanding voting securities," "interested persons"
and "assignment" have the same meaning as such terms in the 1940 Act.)
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
13. NOTICES. Any notice, demand, request or other communication which
is required, called for or contemplated to be given or made hereunder shall be
deemed to have been duly given or made for all purposes if (a) in writing and
sent by (i) messenger or a recognized national overnight courier service for
next day delivery with receipt therefor, or (ii) certified or registered mail,
postage paid, return receipt requested, or (b) sent by facsimile transmission
with a written copy thereof sent on the same day by postage paid first-class
mail or (c) by personal delivery at the following address:
To: HQFM
One Bush Street
San Francisco, CA 94115
Attention: David R. Krimm
Facsimile No.: (415) 439-3638
To: Symphony
555 California Street
San Francisco, CA 94104
Attention: Neil L. Rudolph
Facsimile No.: (415) 676-2480
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14. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the laws of the State of California.
The name "Hambrecht & Quist Fund Trust" and the "Trustees of Hambrecht
& Quist Fund Trust" refer respectively to the Trust created, and the Trustees,
as trustees but not individually or personally, acting from time to time under
the Declaration of Trust, to which reference is hereby made. The obligations of
the Trust entered into in the name or on behalf thereof by any of its Trustees,
officers, representatives or agents are made not individually, but only in such
capacities, and are not binding upon any of the Trustees, officers,
representatives, agents or shareholders of the Trust personally, but bind only
the assets of the Trust, and persons dealing with any series of shares of the
Trust must look solely to the assets of the Trust belonging to such series for
the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
HAMBRECHT & QUIST FUND
MANAGEMENT, LLC
By:________________________________
Name: David R. Krimm
Title: President
SYMPHONY ASSET MANAGEMENT, LLC
By:________________________________
Name: Neil L. Rudolph
Title: Chief Operating Officer
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<PAGE>
HAMBRECHT & QUIST FUND TRUST
DISTRIBUTION AGREEMENT
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This Distribution Agreement (the "Agreement") is made as of this ___ day of
_________, 1999, by and between Hambrecht & Quist Fund Trust, an open-end
management investment company organized as a Delaware business trust (the
"Trust"), on behalf of each series of the Trust listed in Schedule I attached
hereto, as may be amended from time to time (individually, a "Fund" and,
collectively, the "Funds") and Hambrecht & Quist LLC, a Delaware limited
liability company ("you").
SECTION 1. GENERAL DUTIES AS DISTRIBUTOR OF FUND SHARES
It is hereby agreed that you shall act as principal distributor for each
Fund set forth on Schedule I and any other Fund as the parties may agree
from time to time. Each Fund may be authorized to issue multiple classes of
shares pursuant to Rule l8f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"). As distributor, you shall have the exclusive right
to distribute, as agent for each Fund, shares of each class authorized and
issued by the Fund and shall use your best efforts to solicit or otherwise
cause sales of such shares. You also agree, as agent for each Fund, to
accept for redemption the shares of each class authorized and issued by the
Fund. Whenever the officers of the Trust deem it advisable for the
protection of shareholders, they may suspend or cancel such authority with
respect to one or more of the Funds. In the performance of these duties, you
shall be guided by the requirements of this Agreement and the Trust's
Agreement and Declaration of Trust and By-laws, all as amended from time to
time, and each Fund's prospectus and statement of additional information,
which are from time to time in effect under the Trust's Registration
Statement filed with the U.S. Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"),
and the 1940 Act. You shall also comply with all applicable federal and
state laws, rules and regulations, all as amended from time to time,
including, without limitation, all rules and regulations of the Commission
and the National Association of Securities Dealers, Inc.
SECTION 2. DEALERS
You may, as agent, solicit qualified dealers for orders to purchase shares
of the Funds and may enter into agreements with any such dealers, the form
thereof to be determined by you.
SECTION 3. SALES LITERATURE AND ADVERTISEMENTS
You may provide, at your own expense, sales literature and advertisements to
be used in connection with the sale of the Funds' shares. All such sales
literature or advertisement must be approved in advance by a Trust officer.
In connection with the sale of the Funds' shares, you are authorized to give
only such information and to make only such statements or representations as
are contained in each Fund's then-current prospectus or in such sales
literature or advertisements.
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<PAGE>
SECTION 4. LIMITATION UPON INVESTMENT IN THE TRUST
You shall not accept any initial or subsequent investment in shares of a
Fund, except as described in the Fund's then-current prospectus.
SECTION 5. OFFERING PRICE; NET ASSET VALUE PER SHARE
Shares of each Fund shall be sold only at the offering price in effect at
the time of such sale, as described in the then-current prospectus and
statement of additional information of each Fund, and each Fund shall
receive not less than the full net asset value thereof. Any front-end sales
charge payable upon purchases and any contingent deferred sales charge
("CDSC") payable upon redemptions shall be retained by you, it being
understood that such amounts shall not exceed those set forth in each Fund's
then-current prospectus. You may re-allow to dealers all or any part of
these sales charges.
Any reference to "net asset value per share" shall refer to each Fund's net
asset value per share computed in accordance with the Trust's Agreement and
Declaration of Trust, each Fund's then-current prospectus and statement of
additional information and the instructions of the Trustees, all as amended
from time to time. The Trust or its agent shall advise you as promptly as
practicable of each Fund's net asset value per share on each day on which it
is determined.
SECTION 6. DUTIES UPON SALE OR REDEMPTION OF SHARES OF THE TRUST
You shall remit, or cause to be remitted, to the Trust's transfer agent the
net asset value per share of all shares of each Fund sold by you. Each Fund
shall, as promptly as practicable, cause the account of the purchaser to be
credited with the number of shares purchased. The Trust shall not issue
share certificates.
You shall process, or cause to be processed, requests received from each
Fund's shareholders for redemption of its shares, in the manner prescribed
in the Fund's then-current prospectus and statement of additional
information. Shares shall be redeemed at their net asset value per share
next computed after receipt of the redemption request, subject to any
applicable CDSC or redemption fee as set forth in the Fund's then current
prospectus. You shall arrange for payment to such shareholders from each
Fund's account with the custodian.
You shall reimburse the respective Fund for any loss caused by the failure
of a shareholder to confirm in writing any purchase or redemption order
accepted by you. In the event that orders for the purchase or redemption of
shares of a Fund are placed and subsequently canceled, you shall pay to that
Fund, on at least an annual basis, an amount equal to the losses (net of any
gains) realized by the Fund as a result of such cancellations.
SECTION 7. INFORMATION RELATING TO THE TRUST
The Trust or its agent shall furnish you, at its own expense, all
information that you may reasonably request in connection with the
distribution of the Funds' shares, including a certified copy of all
financial statements and a signed copy of each report prepared by its
independent public accountants. The Trust shall cooperate fully with you in
your efforts to
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2
<PAGE>
sell the Funds' shares and in the performance by you of all of your duties
under this Agreement.
SECTION 8. FILING OF REGISTRATION STATEMENTS
The Trust or its agent shall from time to time file and furnish to you at
its own expense copies of such registration statements, amendments and
supplements thereto, and reports or other documents as may be required under
the 1933 Act, the 1940 Act, or the laws of the states in which you desire to
sell shares of the Funds and shall take such other actions as may be
reasonably necessary in connection with the registration or qualification of
shares of the Funds under federal and state law.
SECTION 9. MULTIPLE CAPACITIES
Nothing contained in this Agreement shall be deemed to prohibit you or your
affiliates from acting, and being separately compensated for acting, in one
or more capacities on behalf of the Trust, including, but not limited to,
the capacities of adviser, administrator and distributor. The Trust
understands that you may act in one or more such capacities on behalf of
other investment companies and customers. You shall give the Trust equitable
treatment under the circumstances in supplying services in any capacity, but
the Trust recognizes that it is not entitled to receive preferential
treatment from you as compared with the treatment given to any other
investment company or customer. Whenever you shall act in multiple
capacities on behalf of the Trust, you shall maintain the appropriate
separate account and records for each such capacity.
SECTION 10. PAYMENT OF FEES AND EXPENSES
You shall be entitled to receive from the Funds for your services as
distributor the fees payable in accordance with any plans adopted by the
Funds (or class of shares of the respective Funds) pursuant to Rule l2b-1
under the 1940 Act. The foregoing shall not be deemed to limit your right to
receive and retain any front-end sales charges or CDSCs referred to in
Section 5 hereof.
SECTION 11. LIABILITY OF THE DISTRIBUTOR
You shall be liable for your own acts and omissions caused by your willful
misfeasance, bad faith, or gross negligence in the performance of your
duties, or by your reckless disregard of your obligations under this
Agreement, and nothing herein shall protect you against any such liability
to the Trust or its shareholders. Subject to the foregoing, you shall not be
liable for any action taken or omitted on advice, obtained in good faith, of
counsel.
SECTION 12. YEAR 2000
You have (i) initiated a review and assessment of all areas within your
business and operations (including those affected by your suppliers and
vendors) that could be adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by you (or your suppliers,
vendors and customers) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31,
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3
<PAGE>
1999), (ii) developed a plan and timeline for addressing the Year 2000
Problem on a timely basis, and (iii) to date, implemented that plan
substantially in accordance with that timetable. Based on the foregoing, you
believe that all computer applications (including those of your suppliers
and vendors) that are material to your business and operations applicable to
this Agreement will on a timely basis be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 compliant").
SECTION 13. TERMINATION OF AGREEMENT; ASSIGNMENT
This Agreement may be terminated at any time, without the payment of any
penalty, on 60 days' written notice (i) by you; (ii) by the Trust as to any
Fund, or class thereof, acting pursuant to a resolution adopted by a
majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the 12b-1
plan relating to such Fund or class or in any agreement related to the 12b-1
plan relating to such Fund or class; or (iii) by the vote of the holders of
the lesser of (1) 67% of the shares of such Fund, or class thereof, present
at a meeting if the holders of more than 50% of the outstanding shares are
present in person or represented by proxy, or (2) more than 50% of the
outstanding shares of such Fund, or class thereof. This Agreement shall
automatically terminate in the event of its assignment. Termination shall
not affect the rights of the parties which have accrued prior thereto.
SECTION 14. DURATION
Unless sooner terminated, this Agreement shall continue in effect for one
year from the date herein above first written, and from year to year
thereafter until terminated, provided that the continuation of this
Agreement and the terms hereof are specifically approved annually in
accordance with the requirements of the 1940 Act, as modified or superseded
by any rule, regulation, order or interpretive position of the Commission.
SECTION 15. DEFINITIONS
The terms "assignment" and "interested person" when used in this Agreement
shall have the meanings given such terms in the 1940 Act.
SECTION 16. CONCERNING APPLICABLE PROVISIONS OF LAW, ETC
This Agreement shall be subject to all applicable provisions of law,
including, without being limited to, the applicable provisions of the 1940
Act, the 1933 Act, and the Securities Exchange Act of 1934, as amended; and
to the extent that any provisions of this Agreement are in conflict with
such laws, the latter shall control.
This Agreement is executed and delivered in California, and the laws of the
State of California shall govern the construction, validity and effect of
this Agreement.
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4
<PAGE>
SECTION 17. MISCELLANEOUS.
The obligations of the Trust and each Fund, or each class thereof, are not
personally binding upon, nor shall resort be had to the private property of,
any of the Trustees, shareholders, officers, employees or agents of the
Trust or any Fund, but only the relevant Fund's, or class's thereof,
property shall be bound. No Fund shall be liable for the obligations of any
other Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
HAMBRECHT & QUIST FUND TRUST
By:
----------------------------
Name: David R. Krimm
Title: President
HAMBRECHT & QUIST LLC
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
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5
<PAGE>
SCHEDULE I
H&Q IPO & Emerging Company Fund
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6
<PAGE>
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of _________, 1999 by and between PFPC TRUST
COMPANY, a limited purpose trust company incorporated under the laws of Delaware
("PFPC Trust"), and HAMBRECHT & QUIST FUND TRUST, a Delaware business trust (the
"Trust").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust wishes to retain PFPC Trust to provide custodian
services, and PFPC Trust wishes to furnish custodian services, either directly
or through an affiliate or affiliates, as more fully described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(c) "AUTHORIZED PERSON" means any officer of the Trust and any other
person authorized by the Trust to give Oral or Written Instructions on
behalf of the Trust and listed on the Authorized Persons Appendix
attached hereto or any amendment thereto as may be received by PFPC
Trust. An Authorized Person's scope of authority may be limited by the
Trust by setting forth such limitation in the Authorized Persons
Appendix.
<PAGE>
(d) "BOOK-ENTRY SYSTEM" means the Federal Reserve Treasury book-entry
system for United States and federal agency securities, its successor
or successors, and its nominee or nominees and any book-entry system
or depository or clearing agency used hereunder.
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "CHANGE OF CONTROL" means a change in ownership or control (not
including transactions between wholly-owned direct or indirect
subsidiaries of a common parent) of 25% or more of the beneficial
ownership of the shares of common stock or shares of beneficial
interest of an entity or its parent(s).
(g) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC Trust from
an Authorized Person or from a person reasonably believed by PFPC
Trust to be an Authorized Person.
(h) "SEC" means the Securities and Exchange Commission.
(i) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940 Act and
the CEA.
(j) "SHARES" mean the shares of beneficial interest of any
series or class of the Trust.
(k) "PROPERTY" means:
(i) any and all securities and other investment items which the
Trust may from time to time deposit, or cause to be deposited,
with PFPC Trust or which PFPC Trust may from time to time
hold for the Trust;
(ii) all income in respect of any of such securities or other
investment items;
(iii) all proceeds of the sale of any of such securities or investment
items; and
(iv) all proceeds of the sale of securities issued by the Trust,
which are received by PFPC Trust from time to time, from or
on behalf of the Trust.
(l) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Persons
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<PAGE>
and received by PFPC Trust. The instructions may be delivered by hand,
mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Trust hereby appoints PFPC Trust to provide custodian
services to the Trust, on behalf of each of its investment portfolios
(each, a "Portfolio"), and PFPC Trust accepts such appointment and agrees
to furnish such services.
3. DELIVERY OF DOCUMENTS. The Trust has provided or, where applicable, will
provide PFPC Trust with the following:
(a) certified or authenticated copies of the resolutions of the Trust's
Trustees, approving the appointment of PFPC Trust to provide services;
(b) a copy of the Trust's most recent effective registration statement;
(c) a copy of each Portfolio's advisory agreements;
(d) a copy of the distribution agreement with respect to each class of
Shares;
(e) a copy of each Portfolio's administration agreement;
(f) copies of any shareholder servicing agreements (other than agreements
with financial intermediaries) made in respect of the Trust or a
Portfolio; and
(g) copies (certified or authenticated, where applicable) of any and all
amendments or supplements to the foregoing.
4. COMPLIANCE WITH LAWS.
PFPC Trust undertakes to comply with applicable requirements of the
Securities Laws and laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PFPC
Trust hereunder. Except as specifically set forth herein, PFPC Trust
assumes no responsibility for such compliance by the Trust or any
Portfolio.
5. INSTRUCTIONS.
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(a) Unless otherwise provided in this Agreement, PFPC Trust shall act only
upon Oral Instructions or Written Instructions.
(b) PFPC Trust shall be entitled to rely upon any Oral Instructions or
Written Instructions it receives from an Authorized Person (or from a
person reasonably believed by PFPC Trust to be an Authorized Person)
pursuant to this Agreement. PFPC Trust may assume that any Oral
Instructions or Written Instructions received hereunder are not in any
way inconsistent with the provisions of organizational documents of
the Trust or of any vote, resolution or proceeding of the Trust's
Trustees or of the Trust's shareholders, unless and until PFPC Trust
receives Written Instructions to the contrary.
(c) The Trust agrees to forward to PFPC Trust Written Instructions
confirming Oral Instructions (except where such Oral Instructions are
given by PFPC Trust or its affiliates) so that PFPC Trust receives the
Written Instructions by the close of business on the business day
after such Oral Instructions are received. The fact that such
confirming Written Instructions are not received by PFPC Trust shall
in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral
Instructions or Written Instructions reasonably appear to have been
received from an Authorized Person, PFPC Trust shall incur no
liability to the Trust in acting upon such Oral Instructions or
Written Instructions provided that PFPC Trust's actions comply with
the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
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<PAGE>
(a) ADVICE OF THE TRUST. If PFPC Trust is in doubt as to any action it
should or should not take, PFPC Trust may request directions or
advice, including Oral Instructions or Written Instructions, from the
Trust.
(b) ADVICE OF COUNSEL. If PFPC Trust shall be in doubt as to any question
of law pertaining to any action it should or should not take, PFPC
Trust may request advice at its own cost from such counsel of its own
choosing (who may be counsel for the Trust, the Trust's investment
adviser or PFPC Trust, at the option of PFPC Trust).
(c) CONFLICTING ADVICE. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PFPC Trust
receives from the Trust, and the advice it receives from counsel, PFPC
Trust shall be entitled to rely upon and follow the advice of counsel.
In the event PFPC Trust so relies on the advice of counsel, PFPC Trust
remains liable for any action or omission on the part of PFPC Trust
which constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by PFPC Trust of any duties, obligations or
responsibilities set forth in this Agreement.
(d) PROTECTION OF PFPC TRUST. PFPC Trust shall be protected in any action
it takes or does not take in reliance upon directions, advice or Oral
Instructions or Written Instructions it receives from the Trust or
from counsel and which PFPC Trust believes, in good faith, to be
consistent with those directions, advice or Oral Instructions or
Written Instructions. Nothing in this section shall be construed so as
to impose an obligation upon PFPC Trust (i) to seek such directions,
advice or
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Oral Instructions or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral Instructions or
Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC Trust's properly
taking or not taking such action. Nothing in this subsection shall
excuse PFPC Trust when an action or omission on the part of PFPC Trust
constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by PFPC Trust of any duties, obligations or
responsibilities set forth in this Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Trust and any
Portfolio, which are in the possession or under the control of PFPC Trust,
shall be the property of the Trust. Such books and records shall be
prepared and maintained as required by the 1940 Act and other applicable
securities laws, rules and regulations. The Trust and Authorized Persons
shall have access to such books and records at all times during PFPC
Trust's normal business hours. Upon the reasonable request of the Trust,
copies of any such books and records shall be provided by PFPC Trust to the
Trust or to an authorized representative of the Trust, at the Trust's
expense.
8. CONFIDENTIALITY. PFPC Trust agrees to keep confidential all records of the
Trust and information relating to the Trust and its shareholders, unless
the release of such records or information is otherwise consented to, in
writing, by the Trust. The Trust agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC Trust may be
exposed to civil or criminal contempt proceedings or when PFPC Trust is
required to divulge such information or records to duly constituted
authorities.
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9. COOPERATION WITH ACCOUNTANTS. PFPC Trust shall cooperate with the Trust's
independent public accountants and shall take all reasonable action to make
any requested information available to such accountants as reasonably
requested by the Trust.
10. DISASTER RECOVERY. PFPC Trust shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment
failures, PFPC Trust shall, at no additional expense to the Trust, take
reasonable steps to minimize service interruptions. PFPC Trust shall have
no liability with respect to the loss of data or service interruptions
caused by equipment failure provided such loss or interruption is not
caused by PFPC Trust's own willful misfeasance, bad faith, gross negligence
or reckless disregard of its duties or obligations under this Agreement.
11. YEAR 2000 READINESS DISCLOSURE. PFPC Trust (a) has reviewed its business
and operations as they relate to the services provided hereunder, (b) has
developed or is developing a program to remediate or replace computer
applications and systems, and (c) has developed a testing plan to test the
remediation or replacement of computer applications/systems, in each case,
to address on a timely basis the risk that certain computer
applications/systems used by PFPC Trust may be unable to recognize and
perform date sensitive functions involving dates prior to, including and
after December 31, 1999, including dates such as February 29, 2000 (the
"Year 2000 Challenge"). To the best of PFPC Trust's knowledge and belief,
the reasonably foreseeable consequences of the Year 2000 Challenge will not
adversely affect PFPC Trust's ability to perform its
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<PAGE>
duties and obligations under this Agreement.
12. COMPENSATION. As compensation for custody services rendered by PFPC Trust
during the term of this Agreement, the Trust, on behalf of each of the
Portfolios, will pay to PFPC Trust a fee or fees as may be agreed to in
writing from time to time by the Trust and PFPC Trust.
13. INDEMNIFICATION. The Trust, on behalf of each Portfolio, agrees to
indemnify and hold harmless PFPC Trust from all taxes, charges,
assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Laws and any state or foreign
securities or blue sky laws, and amendments thereto), and expenses,
including (without limitation) attorneys' fees and disbursements), arising
directly or indirectly from any action or omission to act which PFPC Trust
takes (i) at the request or on the direction of or in reliance on the
advice of the Trust or (ii) upon Oral Instructions or Written Instructions.
Notwithstanding the preceding sentence, PFPC Trust shall not be
indemnified, and PFPC Trust shall not indemnify and hold harmless the Trust
and its affiliates, against any liability (or any expenses incident to such
liability) arising out of PFPC Trust's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties under this Agreement.
Any amounts payable by the Trust hereunder shall be satisfied only against
the relevant Portfolio's assets and not against the assets of any other
investment portfolio of the Trust.
14. RESPONSIBILITY OF PFPC TRUST.
(a) PFPC Trust shall be under no duty to take any action on behalf of the
Trust or any Portfolio except as specifically set forth herein or as
may be specifically agreed to
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<PAGE>
by PFPC Trust in writing. PFPC Trust shall be obligated to exercise
care and diligence in the performance of its duties hereunder and to
act in good faith in performing services provided for under this
Agreement. PFPC Trust shall be liable for any damages arising out of
PFPC Trust's failure to perform its duties under this Agreement to the
extent such damages arise out of PFPC Trust's willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties under this
Agreement.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC Trust shall not be under any duty or
obligation to inquire into and shall not be liable for (i) the
validity or invalidity or authority or lack thereof of any Oral
Instruction or Written Instruction, notice or other instrument which
conforms to the applicable requirements of the Agreement, and which
PFPC Trust reasonably believes to be genuine; or (ii) subject to
section 10, delays, errors, loss of data or other losses occurring by
reason of circumstances beyond PFPC Trust's control, including acts of
civil or military authority, national emergencies, fire, flood,
catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC Trust nor its affiliates shall be liable to the Trust or to any
Portfolio for any consequential, special or indirect losses or damages
which the Trust may incur or suffer, whether or not the likelihood of
such losses or damages was known by PFPC Trust or its affiliates.
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<PAGE>
15. DESCRIPTION OF SERVICES.
(a) DELIVERY OF THE PROPERTY. The Trust will deliver or arrange for
delivery to PFPC Trust, all the Property owned by the Portfolios,
including cash received as a result of the distribution of Shares,
during the term of this Agreement. PFPC Trust will not be responsible
for such property until actual receipt.
(b) RECEIPT AND DISBURSEMENT OF MONEY. PFPC Trust, acting upon Written
Instructions, shall open and maintain separate accounts in the Trust's
name using all cash received from or for the account of the Trust,
subject to the terms of this Agreement. In addition, upon Written
Instructions, PFPC Trust shall open separate custodial accounts for
each separate Portfolio of the Trust (collectively, the "Accounts")
and shall hold in the Accounts all cash received from or for the
Accounts of the Trust specifically designated to each separate
Portfolio.
PFPC Trust shall make cash payments from or for the Accounts of a
Portfolio only for:
(i) purchases of securities in the name of a Portfolio, PFPC
Trust, PFPC Trust's nominee or a sub-custodian or nominee
thereof as provided in sub-section (j) and for which PFPC
Trust has received a copy of the broker's or dealer's
confirmation or payee's invoice, as appropriate;
(ii) redemption of Shares of the Trust delivered to PFPC Trust;
(iii) payment of, subject to Written Instructions, interest,
taxes, administration, accounting, distribution, advisory,
management fees or similar expenses which are to be borne by
a Portfolio;
(iv) payment to, subject to receipt of Written Instructions, the
Trust's transfer agent, as agent for the shareholders, of an
amount equal to the amount of dividends and distributions
stated in the Written Instructions to be distributed in cash
by the transfer agent to shareholders, or, in lieu of paying
the Trust's transfer agent, PFPC Trust may arrange for the
direct payment of cash dividends and distributions to
shareholders in accordance
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with procedures mutually agreed upon from time to time by and
among the Trust, PFPC Trust and the Trust's transfer agent.
(v) payments, upon receipt of Written Instructions, in
connection with the conversion, exchange or surrender of
securities owned or subscribed to by the Trust and held by
or delivered to PFPC Trust;
(vi) payments of the amounts of dividends received with respect
to securities sold short;
(vii) payments made to a sub-custodian pursuant to sub-section (c)
of this Section; and
(viii) other payments, upon Written Instructions.
PFPC Trust is hereby authorized to endorse and collect all checks, drafts
or other orders for the payment of money received as custodian for the
Accounts.
(c) RECEIPT OF SECURITIES; SUBCUSTODIANS.
(i) PFPC Trust shall hold all securities received by it for the
Accounts in a separate account that physically segregates such
securities from those of any other persons, firms or
corporations, except for securities held in a Book-Entry System.
All such securities shall be held or disposed of only upon
Written Instructions of the Trust pursuant to the terms of this
Agreement. PFPC Trust shall have no power or authority to assign,
hypothecate, pledge or otherwise dispose of any such securities
or, except upon the express terms of this Agreement or upon
Written Instructions authorizing the transaction. In no case may
any of the Trust's Trustees, or any officer, employee or agent of
the Trust withdraw any securities.
At PFPC Trust's own expense and for its own convenience, PFPC
Trust may enter into sub-custodian agreements with other banks or
trust companies to perform duties described in this sub-section
(c) with respect to domestic assets. Such bank or trust company
shall have an aggregate capital, surplus and undivided profits,
according to its last published report, of at least two million
dollars ($2,000,000), if it is a subsidiary or affiliate of PFPC
Trust, or at least twenty million dollars ($20,000,000) if such
bank or trust company is not a subsidiary or affiliate of PFPC
Trust. In addition, such bank or trust company must be qualified
to act as custodian and agree to comply with the relevant
provisions of applicable rules and regulations. Any such
arrangement will not be entered into without prior written notice
to the Trust (or as otherwise provided in the
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1940 Act).
In addition, PFPC Trust may enter into arrangements with
sub-custodians with respect to services regarding foreign assets.
Any such arrangement will be entered into with prior written
notice to the Trust (or as otherwise provided in the 1940 Act).
PFPC Trust shall remain responsible for the performance of all of
its duties as described in this Agreement and shall hold the
Trust and each Portfolio harmless from its own acts or omissions,
under the standards of care provided for herein, or the acts and
omissions of any sub-custodian chosen by PFPC Trust under the
terms of this sub-section (c).
(d) TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of Oral Instructions
or Written Instructions and not otherwise, PFPC Trust, directly or
through the use of the Book-Entry System, shall:
(i) deliver any securities held for a Portfolio against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be designated in
such Oral Instructions or Written Instructions, proxies,
consents, authorizations, and any other instruments whereby
the authority of a Portfolio as owner of any securities may
be exercised;
(iii) deliver any securities to the issuer thereof, or its agent,
when such securities are called, redeemed, retired or
otherwise become payable at the option of the holder;
provided that, in any such case, the cash or other
consideration is to be delivered to PFPC Trust;
(iv) deliver any securities held for a Portfolio against receipt
of other securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, tender
offer, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(v) deliver any securities held for a Portfolio to any
protective committee, reorganization committee or other
person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of
any corporation, and receive and hold under the terms of
this Agreement such certificates of deposit, interim
receipts or other instruments or documents as may be issued
to it to evidence such delivery;
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(vi) make such transfer or exchanges of the assets of the
Portfolios and take such other steps as shall be stated in
said Oral Instructions or Written Instructions to be for the
purpose of effectuating a duly authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Trust;
(vii) release securities belonging to a Portfolio to any bank or
trust company for the purpose of a pledge or hypothecation
to secure any loan incurred by the Trust on behalf of that
Portfolio; provided, however, that securities shall be
released only upon payment to PFPC Trust of the monies
borrowed, except that in cases where additional collateral
is required to secure a borrowing already made subject to
proper prior authorization, further securities may be
released for that purpose; and repay such loan upon
redelivery to it of the securities pledged or hypothecated
therefor and upon surrender of the note or notes evidencing
the loan;
(viii)release and deliver securities owned by a Portfolio in
connection with any repurchase agreement entered into on
behalf of the Trust, but only on receipt of payment
therefor; and pay out moneys of the Trust in connection with
such repurchase agreements, but only upon the delivery of
the securities;
(ix) release and deliver or exchange securities owned by the
Trust in connection with any conversion of such securities,
pursuant to their terms, into other securities;
(x) release and deliver securities to a broker in connection
with the broker's custody of margin collateral relating to
futures and options transactions;
(xi) release and deliver securities owned by the Trust for the
purpose of redeeming in kind shares of the Trust upon
delivery thereof to PFPC Trust; and
(xii) release and deliver or exchange securities owned by the
Trust for other purposes.
PFPC Trust must also receive Written Instructions describing
the nature of the corporate purpose and the name and address
of the person(s) to whom delivery shall be made when such
action is pursuant to sub-paragraph (d)(xii).
(e) USE OF BOOK-ENTRY SYSTEM. PFPC Trust is authorized and instructed, on
a continuous basis, to deposit in the Book-Entry System all securities
belonging to
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the Portfolios eligible for deposit therein and to utilize the
Book-Entry System to the extent possible in connection with
settlements of purchases and sales of securities by the Portfolios,
and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. PFPC
Trust shall continue to perform such duties until it receives Written
Instructions or Oral Instructions authorizing contrary actions.
PFPC Trust shall administer the Book-Entry System as follows:
(i) With respect to securities of each Portfolio which are maintained
in the Book-Entry System, the records of PFPC Trust shall
identify by Book-Entry or otherwise those securities belonging to
each Portfolio.
(ii) Assets of each Portfolio deposited in the Book-Entry System will
at all times be segregated from any assets and cash controlled by
PFPC Trust in other than a fiduciary or custodian capacity but
may be commingled with other assets held in such capacities.
PFPC Trust will provide the Trust with such reports on its own system
of internal control as the Trust may reasonably request from time to
time.
(f) REGISTRATION OF SECURITIES. All Securities held for a Portfolio which
are issued or issuable only in bearer form, except such securities
held in the Book-Entry System, shall be held by PFPC Trust in bearer
form; all other securities held for a Portfolio may be registered in
the name of the Trust on behalf of that Portfolio, PFPC Trust, the
Book-Entry System, a sub-custodian, or any duly appointed nominee of
the Trust, PFPC Trust, Book-Entry System or sub-custodian. The Trust
reserves the right to instruct PFPC Trust as to the method of
registration and safekeeping of the securities of the Trust. The Trust
agrees to furnish to PFPC Trust appropriate instruments to enable PFPC
Trust to hold or deliver in proper
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<PAGE>
form for transfer, or to register in the name of its nominee or in the
name of the Book-Entry System or in the name of another appropriate
entity, any securities which it may hold for the Accounts and which
may from time to time be registered in the name of the Trust on behalf
of a Portfolio.
(g) VOTING AND OTHER ACTION. Neither PFPC Trust nor its nominee shall vote
any of the securities held pursuant to this Agreement by or for the
account of a Portfolio, except in accordance with Written
Instructions. PFPC Trust, directly or through the use of the
Book-Entry System, shall execute in blank and promptly deliver all
notices, proxies and proxy soliciting materials received by PFPC Trust
as custodian of the Property to the registered holder of such
securities. If the registered holder is not the Trust on behalf of a
Portfolio, then Written Instructions or Oral Instructions must
designate the person who owns such securities.
(h) TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of contrary
Written Instructions, PFPC Trust is authorized to take the following
actions:
(i) COLLECTION OF INCOME AND OTHER PAYMENTS.
(A) collect and receive for the account of each Portfolio, all
income, dividends, distributions, coupons, option premiums,
other payments and similar items, included or to be included
in the Property, and, in addition, promptly advise each
Portfolio of such receipt and credit such income, as
collected, to each Portfolio's custodian account;
(B) endorse and deposit for collection, in the name of the
Trust, checks, drafts, or other orders for the payment of
money;
(C) receive and hold for the account of each Portfolio all
securities received as a distribution on the Portfolio's
securities as a result of
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a stock dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement or
distribution of rights or similar securities issued with
respect to any securities belonging to a Portfolio and held
by PFPC Trust hereunder;
(D) present for payment and collect the amount payable upon all
securities which may mature or be, on a mandatory basis,
called, redeemed, or retired, or otherwise become payable on
the date such securities become payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such income
and other payments and the endorsement for collection of
checks, drafts, and other negotiable instruments.
(ii) MISCELLANEOUS TRANSACTIONS.
(A) PFPC Trust is authorized to deliver or cause to be delivered
Property against payment or other consideration or written
receipt therefor in the following cases:
(1) for examination by a broker or dealer selling for the
account of a Portfolio in accordance with street
delivery custom;
(2) for the exchange of interim receipts or temporary
securities for definitive securities; and
(3) for transfer of securities into the name of the Trust
on behalf of a Portfolio or PFPC Trust or a
sub-custodian or a nominee of one of the foregoing, or
for exchange of securities for a different number of
bonds, certificates, or other evidence, representing
the same aggregate face amount or number of units
bearing the same interest rate, maturity date and call
provisions, if any; provided that, in any such case,
the new securities are to be delivered to PFPC Trust.
(B) unless and until PFPC Trust receives Oral Instructions or
Written Instructions to the contrary, PFPC Trust shall:
(1) present for payment all income items held by it which
call for payment upon presentation and hold the cash
received by it upon such payment for the account of
each Portfolio;
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(2) collect interest and cash dividends received, with
notice to the Trust, to the account of each Portfolio;
(3) hold for the account of each Portfolio all stock
dividends, rights and similar securities issued with
respect to any securities held by PFPC Trust; and
(4) execute as agent on behalf of the Trust all necessary
ownership certificates required by the Internal Revenue
Code or the Income Tax Regulations of the United States
Treasury Department or under the laws of any state now
or hereafter in effect, inserting the Trust's name, on
behalf of a Portfolio, on such certificate as the owner
of the securities covered thereby, to the extent it may
lawfully do so.
(i) SEGREGATED ACCOUNTS.
(i) PFPC Trust shall upon receipt of Written Instructions or Oral
Instructions establish and maintain segregated accounts on its
records for and on behalf of each Portfolio. Such accounts may be
used to transfer cash and securities, including securities in the
Book-Entry System:
(A) for the purposes of compliance by the Trust with the
procedures required by a securities, futures or options
exchange, provided such procedures comply with the 1940 Act
and any releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies; and
(B) upon receipt of Written Instructions, for other corporate
purposes.
(ii) PFPC Trust shall arrange for the establishment of IRA custodian
accounts for such shareholders holding Shares through IRA
accounts, in accordance with the Trust's prospectuses, the
Internal Revenue Code of 1986, as amended (including regulations
promulgated thereunder), and such other procedures as are
mutually agreed upon from time to time by and among the Trust,
PFPC Trust and the Trust's transfer agent.
(j) PURCHASES OF SECURITIES. PFPC Trust shall settle purchased securities
upon receipt of Oral Instructions or Written Instructions that
specify:
(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable;
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<PAGE>
(ii) the number of shares or the principal amount purchased and
accrued interest, if any;
(iii)the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the Portfolio involved; and
(vii)the name of the person from whom or the broker through whom
the purchase was made. PFPC Trust shall upon receipt of
securities purchased by or for a Portfolio pay out of the
moneys held for the account of the Portfolio the total
amount payable to the person from whom or the broker through
whom the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Oral
Instructions or Written Instructions.
(k) SALES OF SECURITIES. PFPC Trust shall settle sold securities upon
receipt of Oral Instructions or Written Instructions that specify:
(i) the name of the issuer and the title of the security, including
CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and accrued
interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Trust upon such sale;
(vi) the name of the broker through whom or the person to whom the
sale was made;
(vii) the location to which the security must be delivered and
delivery deadline, if any; and
(viii)the Portfolio involved.
PFPC Trust shall deliver the securities upon receipt of the total amount
payable to the
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Portfolio upon such sale, provided that the total amount payable is the
same as was set forth in the Oral Instructions or Written Instructions.
Notwithstanding the other provisions thereof, PFPC Trust may accept payment
in such form as shall be satisfactory to it, and may deliver securities and
arrange for payment in accordance with the customs prevailing among dealers
in securities.
(l) REPORTS; PROXY MATERIALS.
(i) PFPC Trust shall furnish to the Trust the following reports:
(A) such periodic and special reports as the Trust may
reasonably request;
(B) a monthly statement summarizing all transactions and entries
for the account of each Portfolio, listing each portfolio
security belonging to each Portfolio with the adjusted
average cost of each issue and the market value at the end
of such month and stating the cash account of each Portfolio
including disbursements;
(C) the reports required to be furnished to the Trust pursuant
to Rule 17f-4 of the 1940 Act; and
(D) such other information as may be agreed upon from time to
time between the Trust and PFPC Trust.
(ii) PFPC Trust shall transmit promptly to the Trust any proxy
statement, proxy material, notice of a call or conversion or
similar communication received by it as custodian of the
Property. PFPC Trust shall be under no other obligation to inform
the Trust as to such actions or events.
(m) COLLECTIONS. All collections of monies or other property in respect,
or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by PFPC Trust) shall be at the sole risk of the
Trust. If payment is not received by PFPC Trust within a reasonable
time after proper demands have been made, PFPC
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Trust shall notify the Trust in writing, including copies of all
demand letters, any written responses and memoranda of all oral
responses and shall await instructions from the Trust. PFPC Trust
shall not be obliged to take legal action for collection unless and
until reasonably indemnified to its satisfaction. PFPC Trust shall
also notify the Trust as soon as reasonably practicable whenever
income due on securities is not collected in due course and shall
provide the Trust with periodic status reports of such income
collected after a reasonable time.
16. DURATION AND TERMINATION. This Agreement shall continue until terminated by
the Trust or PFPC Trust on sixty (60) days' prior written notice to the
other party. In the event this Agreement is terminated (pending appointment
of a successor to PFPC Trust or vote of the shareholders of the Trust to
dissolve or to function without a custodian of its cash, securities or
other property), PFPC Trust shall not deliver cash, securities or other
property of the Portfolios to the Trust. It may deliver them to a bank or
trust company of PFPC Trust's choice, having an aggregate capital, surplus
and undivided profits, as shown by its last published report, of not less
than twenty million dollars ($20,000,000), as a custodian for the Trust to
be held under terms similar to those of this Agreement. PFPC Trust shall
not be required to make any delivery or payment of assets upon termination
until full payment shall have been made to PFPC Trust of all of its fees,
compensation, costs and expenses. PFPC Trust shall have a security interest
in and shall have a right of setoff against the Property as security for
the payment of such fees, compensation, costs and expenses.
17. CHANGE OF CONTROL. Notwithstanding any other provision of this Agreement,
in the event
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of an agreement to enter into a transaction that would result in a Change
of Control of the Trust's adviser or sponsor, the Trust's ability to
terminate the Agreement will be suspended from the time of such agreement
until two years after the Change of Control.
18. NOTICES. All notices and other communications, including Written
Instructions, shall be delivered by hand, mail, tested telegram, cable,
telex or facsimile sending device. Notice shall be addressed (a) if to PFPC
Trust at 200 Stevens Drive, Lester, Pennsylvania 19113, Attention: Sam
Sparhawk; (b) if to the Trust, at One Bush Street, San Francisco,
California, 94101, Attn: David R. Krimm, with a copy to Steven N.
Machtinger, Esq. at _________________________________; or (c) if to neither
of the foregoing, at such other address as shall have been given by like
notice to the sender of any such notice or other communication by the other
party. If notice is sent by tested telegram, cable, telex or facsimile
sending device, it shall be deemed to have been given immediately. If
notice is sent by first-class mail, it shall be deemed to have been given
five days after it has been mailed. If notice is sent by messenger, it
shall be deemed to have been given on the day it is delivered.
19. AMENDMENTS. This Agreement, or any term hereof, may be changed or waived
only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
20. DELEGATION; ASSIGNMENT. PFPC Trust may assign its rights and delegate its
duties hereunder to any majority-owned direct or indirect subsidiary of
PFPC Trust or of PNC Bank Corp., provided that (i) PFPC Trust gives the
Trust 30 days' prior written notice of such assignment or delegation; (ii)
the assignee or delegate agrees to comply with all the
21
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provisions of this Agreement; and (iii) PFPC Trust and such assignee or
delegate promptly provide such information as the Trust may reasonably
request, and respond to such questions as the Trust may reasonably ask,
relative to the assignment or delegation (including, without limitation,
the capabilities of the assignee or delegate); and (iv) PFPC Trust remains
responsible for all of its obligations under this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
22. FURTHER ACTIONS. Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
23. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements
and understandings relating to the subject matter hereof.
(b) CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract made in
Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this
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Agreement shall not be affected thereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by
such party.
(g) LIMITATIONS. The obligations assumed by the Trust under this Agreement
are assumed on behalf of each Portfolio separately, and no Portfolio
shall be liable for the obligations of any other Portfolio. Neither
the Trustees nor any of the Trust's shareholders, officers, employees
or agents, whether past, present or future, shall be personally liable
for the obligations of the Trust or any Portfolio.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC TRUST COMPANY
By:
----------------
Title:
--------------
HAMBRECHT & QUIST FUND TRUST
By:
----------------
Title:
--------------
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AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
DAVID R. KRIMM
- ------------------------- -------------------------
ROBERT N. SAVOIE
- ------------------------- -------------------------
STEVEN N. MACHTINGER
- ------------------------- -------------------------
- ------------------------- -------------------------
- ------------------------- -------------------------
- ------------------------- -------------------------
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TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of , 1999 by and between PFPC INC., a
Delaware corporation ("PFPC"), and HAMBRECHT & QUIST FUND TRUST, a Delaware
business trust (the "Trust").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to its
investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (each a "Portfolio"),
and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(c) "AUTHORIZED PERSON" means any officer of the Trust and any other
person duly authorized by the Trust's Trustees to give Oral
Instructions and Written Instructions on behalf of the Trust and
listed on the Authorized Persons Appendix attached hereto and made a
part hereof or any amendment thereto as may be received by PFPC. An
Authorized Person's scope of authority may be limited by the Trust by
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<PAGE>
setting forth such limitation in the Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "CHANGE OF CONTROL" means a change in ownership or control (not
including transactions between wholly-owned direct or indirect
subsidiaries of a common parent) of 25% or more of the beneficial
ownership of the shares of common stock or shares of beneficial
interest of an entity or its parents(s).
(f) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be
an Authorized Person.
(g) "SEC" means the Securities and Exchange Commission.
(h) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940 Act and
the CEA.
(i) "SHARES" mean the shares of beneficial interest of any series or class
of the Trust.
(j) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile
sending device.
2. APPOINTMENT. The Trust, on behalf of each Portfolio, hereby appoints PFPC
to serve as transfer agent, registrar, dividend disbursing agent and
shareholder servicing agent to the Trust in accordance with the terms set
forth in this Agreement. PFPC accepts such appointment and agrees to
furnish such services.
3. DELIVERY OF DOCUMENTS. The Trust has provided or, where applicable, will
provide PFPC with the following:
(a) Certified or authenticated copies of the resolutions of the Trust's
Trustees,
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<PAGE>
approving the appointment of PFPC or its affiliates to provide
services to the Trust and approving this Agreement;
(b) A copy of the Trust's most recent effective registration statement;
(c) A copy of the advisory agreement with respect to each investment
Portfolio of the Trust (each, a Portfolio);
(d) A copy of the distribution agreement with respect to each class of
Shares of the Trust;
(e) A copy of each Portfolio's administration agreements if PFPC or its
affiliate is not providing the Portfolio with such services;
(f) Copies of any shareholder servicing agreements (other than agreements
with financial intermediaries) made in respect of the Trust or a
Portfolio; and
(g) Copies (certified or authenticated where applicable) of any and all
amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with all
applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to
the duties to be performed by PFPC hereunder. Except as specifically set
forth herein, PFPC assumes no responsibility for such compliance by the
Trust or any of its investment portfolios.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and Written
Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to
this Agreement. PFPC may assume that any Oral Instruction or Written
Instruction received hereunder is not
3
<PAGE>
in any way inconsistent with the provisions of the Trust's
organizational documents or of any vote, resolution or proceeding of
the Trust's Trustees or of the Trust's shareholders, unless and until
PFPC receives Written Instructions to the contrary.
(c) The Trust agrees to forward to PFPC Written Instructions confirming
Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the business day after such Oral Instructions
are received. The fact that such confirming Written Instructions are
not received by PFPC shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral
Instructions. Where Oral Instructions or Written Instructions
reasonably appear to have been received from an Authorized Person,
PFPC shall incur no liability to the Trust in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions
comply with the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE TRUST. If PFPC is in doubt as to any action it should or
should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Trust.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question of law
pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing
(who may be counsel for the Trust, the Trust's investment adviser or
PFPC, at the option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between directions,
advice or Oral
4
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Instructions or Written Instructions PFPC receives from the Trust, and
the advice it receives from counsel, PFPC may rely upon and follow the
advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of
PFPC which constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
(d) PROTECTION OF PFPC. PFPC shall be protected in any action it takes or
does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Trust or from counsel and
which PFPC believes, in good faith, to be consistent with those
directions, advice or Oral Instructions or Written Instructions.
Nothing in this section shall be construed so as to impose an
obligation upon PFPC (i) to seek such directions, advice or Oral
Instructions or Written Instructions, or (ii) to act in accordance
with such directions, advice or Oral Instructions or Written
Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PFPC's properly taking or not
taking such action. Nothing in this subsection shall excuse PFPC when
an action or omission on the part of PFPC constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this
Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Trust, which are
in the possession or under the control of PFPC, shall be the property of
the Trust and shall be surrendered promptly on request of the Trust. Such
books and records shall be prepared
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and maintained by PFPC as required by the 1940 Act and other applicable
securities laws, rules and regulations. The Trust and Authorized Persons
shall have access to such books and records at all times during PFPC's
normal business hours. Upon the reasonable request of the Trust, copies of
any such books and records shall be provided by PFPC to the Trust or to an
Authorized Person, at the Trust's expense.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the Trust
and information relating to the Trust and its shareholders, unless the
release of such records or information is otherwise consented to, in
writing, by the Trust. The Trust agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to
civil or criminal contempt proceedings or when required to divulge such
information or records to duly constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC shall cooperate with the Trust's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the
expression of their opinion, as required by the Trust.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent
appropriate equipment is available. In the event of equipment failures,
PFPC shall, at no additional expense to the Trust, take reasonable steps to
minimize service interruptions. PFPC shall have no liability with respect
to the loss of data or service interruptions caused by equipment failure,
provided such loss or interruption is not caused by PFPC's own willful
misfeasance, bad faith,
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gross negligence or reckless disregard of its duties or obligations under
this Agreement.
11. YEAR 2000 READINESS DISCLOSURE. PFPC (a) has reviewed its business and
operations as they relate to the services provided hereunder, (b) has
developed or is developing a program to remediate or replace computer
applications and systems, and (c) has developed a testing plan to test the
remediation or replacement of computer applications/systems, in each case,
to address on a timely basis the risk that certain computer
applications/systems used by PFPC may be unable to recognize and perform
properly date sensitive functions involving dates prior to, including and
after December 31, 1999, including dates such as February 29, 2000 (the
"Year 2000 Challenge"). To the best of PFPC's knowledge and belief, the
reasonably foreseeable consequences of the Year 2000 Challenge will not
adversely affect PFPC's ability to perform its duties and obligations under
this Agreement.
12. COMPENSATION. As compensation for services rendered by PFPC during the term
of this Agreement, the Trust, on behalf of each Portfolio, will pay to PFPC
a fee or fees as may be agreed to from time to time in writing by the Trust
and PFPC.
13. INDEMNIFICATION. The Trust, on behalf of each Portfolio, agrees to
indemnify and hold harmless PFPC and its affiliates from all taxes,
charges, assessments, claims and liabilities (including, without
limitation, liabilities arising under the Securities Laws and any state and
foreign securities and blue sky laws, and amendments thereto), and
expenses, including (without limitation) attorneys' fees and disbursements,
arising directly or indirectly from (i) any action or omission to act which
PFPC takes (a) at the request or on the direction of or in reliance on the
advice of the Trust or (b) upon Oral
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Instructions or Written Instructions or (ii) the acceptance, processing
and/or negotiation of checks or other methods utilized for the purchase of
Shares. Notwithstanding the preceding sentence, neither PFPC, nor any of
its affiliates, shall be indemnified, and PFPC shall indemnify and hold
harmless the Trust and its affiliates, against any liability (or any
expenses incident to such liability) arising out of PFPC's or its
affiliates' own willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations under this Agreement,
provided that in the absence of a finding to the contrary the acceptance,
processing and/or negotiation of a fraudulent payment for the purchase of
Shares shall be presumed not to have been the result of PFPC's or its
affiliates' own willful misfeasance, bad faith, gross negligence or
reckless disregard of such duties and obligations. Any amounts payable by
the Trust hereunder shall be satisfied only against the relevant
Portfolio's assets and not against the assets of any other investment
portfolio of the Trust.
14. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the Trust
except as specifically set forth herein or as may be specifically
agreed to by PFPC in writing. PFPC shall be obligated to exercise care
and diligence in the performance of its duties hereunder, to act in
good faith and to use its best efforts, within reasonable limits, in
performing services provided for under this Agreement. PFPC shall be
liable for any damages arising out of PFPC's failure to perform its
duties under this Agreement to the extent such damages arise out of
PFPC's willful misfeasance, bad faith, gross negligence or reckless
disregard
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of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC, shall not be liable for losses
beyond its control, provided that PFPC has acted in accordance with
the standard of care set forth above; and (ii) PFPC shall not be under
any duty or obligation to inquire into and shall not be liable for (A)
the validity or invalidity or authority or lack thereof of any Oral
Instruction or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, and which
PFPC reasonably believes to be genuine; or (B) subject to Section 10,
delays or errors or loss of data occurring by reason of circumstances
beyond PFPC's control, including acts of civil or military authority,
national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC nor its affiliates shall be liable to the Trust for any
consequential, special or indirect losses or damages which the Trust
may incur or suffer by or as a consequence of PFPC's or its
affiliates' performance of the services provided hereunder, whether or
not the likelihood of such losses or damages was known by PFPC or its
affiliates.
15. DESCRIPTION OF SERVICES.
(a) SERVICES PROVIDED ON AN ONGOING BASIS, IF APPLICABLE.
(i) Calculate 12b-1 payments and sales charges;
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(ii) Maintain proper shareholder registrations;
(iii) Review new applications and correspond with shareholders to
complete or correct information;
(iv) Direct payment processing of checks or wires;
(v) Prepare and certify stockholder lists in conjunction with proxy
solicitations;
(vi) Countersign Share certificates;
(vii) Prepare and mail to shareholders confirmations of activity;
(viii) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
(ix) Mail duplicate confirmations to broker-dealers of their
clients' activity, whether executed through the broker-dealer
or directly with PFPC;
(x) Provide periodic shareholder lists and statistics to the Trust;
(xi) Provide detailed data for broker confirmations;
(xii) Prepare periodic mailing of year-end tax and statement
information;
(xiii) Notify on a timely basis the investment adviser, accounting
agent, and custodian of Portfolio activity; and
(xiv) Perform other shareholder services as may be agreed upon from
time to time.
(b) SERVICES PROVIDED BY PFPC UNDER ORAL INSTRUCTIONS OR WRITTEN
INSTRUCTIONS.
(i) Accept and post daily Trust purchases and redemptions;
(ii) Accept, post and perform shareholder transfers and exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
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(v) Issue and cancel certificates, if any (when requested in
writing by the shareholder).
(c) PURCHASE OF SHARES. PFPC shall issue and credit an account of an
investor, in the manner described in the Trust's prospectus, once it
receives:
(i) A purchase order;
(ii) Proper information to establish a shareholder account; and
(iii) Confirmation of receipt or crediting of Trusts for such order
to the Trust's custodian.
(d) REDEMPTION OF SHARES. PFPC shall redeem Shares only if that function
is properly authorized by the Trust's Declaration of Trust or
resolution of the Trust's Trustees. Shares shall be redeemed and
payment therefor shall be made in accordance with the Trust's
prospectus, when the recordholder submits the redemption in proper
form and directs the method of redemption. If a redemption submission
is received in proper form, Shares shall be redeemed before the Trusts
are provided to PFPC from the Trust's custodian (the "Custodian"). If
the recordholder has not directed that redemption proceeds be wired,
when the Custodian provides PFPC with Trusts, the redemption check
shall be sent to and made payable to the recordholder, unless:
(i) the surrendered certificate is drawn to the order of an
assignee or holder and transfer authorization is signed by the
recordholder; or
(ii) Transfer authorizations are signed by the recordholder when
Shares are held in book-entry form.
When a broker-dealer notifies PFPC of a redemption desired by a
customer, and the Custodian provides PFPC with Trusts, PFPC shall
prepare and send the
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redemption check to the broker-dealer and made payable to the
broker-dealer on behalf of its customer.
(e) DIVIDENDS AND DISTRIBUTIONS. Upon receipt of a resolution of the
Trust's Trustees authorizing the declaration and payment of dividends
and distributions, PFPC shall issue dividends and distributions
declared by the Trust in Shares, or, upon shareholder election, pay
such dividends and distributions in cash, if provided for in the
Trust's prospectus. Such issuance or payment, as well as payments upon
redemption as described above, shall be made after deduction and
payment of the required amount of Trusts to be withheld in accordance
with any applicable tax laws or other laws, rules or regulations. PFPC
shall mail to the Trust's shareholders such tax forms and other
information, or permissible substitute notice, relating to dividends
and distributions paid by the Trust as are required to be filed and
mailed by applicable law, rule or regulation. PFPC shall prepare,
maintain and file with the IRS and other appropriate taxing
authorities reports relating to all dividends and distributions paid
by the Trust to its shareholders as required by tax or other law, rule
or regulation.
(f) SHAREHOLDER ACCOUNT SERVICES.
(i) PFPC will arrange, in accordance with the prospectus, for
issuance of Shares obtained through:
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks and
applications.
(ii) PFPC will arrange, in accordance with the prospectus, for a
shareholder's:
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- Exchange of Shares for shares of another trust with
which the Portfolio has exchange privileges;
- Automatic redemption from an account where that
shareholder participates in a automatic redemption
plan; and/or
- Redemption of Shares from an account with a
checkwriting privilege.
(g) COMMUNICATIONS TO SHAREHOLDERS. Upon timely Written Instructions, PFPC
shall mail all communications by the Trust to its shareholders,
including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Trust Shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax form information.
In addition, PFPC will receive and tabulate the proxy cards for the
meetings of the Trust's shareholders.
(h) RECORDS. PFPC shall maintain records of the accounts for each
shareholder showing the following information: (i) Name, address and
United States Tax Identification or Social Security number;
(ii) Number and class and series of Shares held and number and class
and series of Shares for which certificates, if any, have been
issued, including certificate numbers and denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and distributions paid and the
date and price for all transactions in a shareholder's account;
(iv) Any stop or restraining order placed against a shareholder's
account;
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<PAGE>
(v) Any correspondence relating to the current maintenance of a
shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer agent to
perform any calculations contemplated or required by this
Agreement.
(i) LOST OR STOLEN CERTIFICATES (IF TRUST ISSUES CERTIFICATES). PFPC shall
place a stop notice against any certificate reported to be lost or
stolen and comply with all applicable federal regulatory requirements
for reporting such loss or alleged misappropriation. A new certificate
shall be registered and issued only upon:
(i) The shareholder's pledge of a lost instrument bond or such
other appropriate indemnity bond issued by a surety company
approved by PFPC; and
(ii) Completion of a release and indemnification agreement signed by
the shareholder to protect PFPC and its affiliates.
(j) SHAREHOLDER INSPECTION OF STOCK RECORDS. Upon a request from any Trust
shareholder to inspect stock records, PFPC will notify the Trust and
the Trust will issue Written Instructions granting or denying such
request. Unless PFPC has acted contrary to the Trust's Written
Instructions, the Trust agrees to, and does hereby, release PFPC from
any liability for refusal of permission for a particular shareholder
to inspect the Trust's stock records.
(k) WITHDRAWAL OF SHARES AND CANCELLATION OF CERTIFICATES. Upon receipt of
Written Instructions, PFPC shall cancel outstanding certificates
surrendered by the Trust and reduce the total amount of outstanding
shares by the number of shares surrendered by the Trust.
16. DURATION AND TERMINATION. This Agreement shall continue until terminated by
the
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Trust or by PFPC on sixty (60) days' prior written notice to the other
party.
17. CHANGE OF CONTROL. Notwithstanding any other provision of this Agreement,
in the event of an agreement to enter into a transaction that would result
in a Change of Control of the Trust's adviser or sponsor, the Trust's
ability to terminate the Agreement will be suspended from the time of such
agreement until two years after the Change of Control.
18. NOTICES. All notices and other written communications, including Written
Instructions, shall be delivered by hand, mail, tested telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to
PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the
Trust, at One Bush Street, San Francisco, California 94104, Attn: David R.
Krimm, with a copy to Steven N. Machtinger, Esq. at _____________; or (c)
if to neither of the foregoing, at such other address as shall have been
given by like notice to the sender of any such notice or other
communication by the other party. If notice is sent by tested telegram,
cable, telex or facsimile sending device, it shall be deemed to have been
given immediately. If notice is sent by first-class mail, it shall be
deemed to have been given three days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the day it is
delivered.
19. AMENDMENTS. This Agreement, or any term thereof, may be changed or waived
only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
20. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its duties
hereunder to any majority-owned direct or indirect subsidiary of PFPC or
PNC Bank Corp., provided that (i) PFPC gives the Trust 30 days prior
written notice of such assignment or
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delegation, (ii) the assignee or delegate agrees to comply with all the
provisions of this Agreement, (iii) PFPC and such assignee or delegate
promptly provide such information as the Trust may reasonably request, and
respond to such questions as the Trust may reasonably ask, relative to the
assignment or delegation (including, without limitation, the capabilities
of the assignee or delegate), and (iv) PFPC remains responsible for all of
its obligations under this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
22. FURTHER ACTIONS. Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
23. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements
and understandings relating to the subject matter hereof.
(b) CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract made in
Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be held
or made
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invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by
such party.
(g) LIMITATIONS. The obligations assumed by the Trust under this Agreement
are assumed on behalf of each Portfolio separately, and no Portfolio
shall be liable for the obligations of any other Portfolio. Neither
the Trustees nor any of the Trust's shareholders, officers, employees
or agents, whether past, present or future, shall be personally liable
for the obligations of the Trust or any Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
BY:
------------------------------
TITLE:
---------------------------
HAMBRECHT & QUIST FUND TRUST
BY:
------------------------------
TITLE:
---------------------------
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EXHIBIT A
THIS EXHIBIT A, dated as of ____________ , 1999, is Exhibit A to that
certain Transfer Agency Services Agreement dated as of _____________ , 1999
between PFPC Inc. and Hambrecht & Quist Fund Trust.
PORTFOLIOS
[Hambrecht & Quist IPO Discovery Fund]
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AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
DAVID R. KRIMM
- ------------------------------ ------------------------------
ROBERT N. SAVOIE
- ------------------------------ ------------------------------
STEVEN N. MACHTINGER
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
Dated:_______________, 1999
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<PAGE>
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of , 1999 by and between HAMBRECHT & QUIST FUND
TRUST, a Delaware business trust (the "Trust"), and PFPC INC., a Delaware
corporation ("PFPC"), which is an indirect wholly owned subsidiary of PNC Bank
Corp.
W I T N E S S E T H :
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust wishes to retain PFPC to provide administration and
accounting services to its investment portfolios listed on Exhibit A attached
hereto and made a part hereof, as such Exhibit A may be amended from time to
time (each a "Portfolio"), and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Trust and any other
person duly authorized by the Trust's Trustees to give Oral
Instructions and Written Instructions on behalf of the Trust and
listed on the Authorized Persons Appendix attached hereto and made a
part hereof or any amendment thereto as may be received by PFPC. An
Authorized Person's scope of authority may be limited by the Trust by
setting forth such limitation in the Authorized Persons Appendix.
<PAGE>
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Change of Control" means a change in ownership or control (not
including transactions between wholly-owned direct or indirect
subsidiaries of a common parent) of 25% or more of the beneficial
ownership of the shares of common stock or shares of beneficial
interest of an entity or its parent(s).
(f) "Oral Instructions" mean oral instructions received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be
an Authorized Person.
(g) "SEC" means the Securities and Exchange Commission.
(h) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act and
the CEA. (i) "Shares" means the shares of beneficial interest of any
series or class of the Trust. (j) "Written Instructions" mean written
instructions signed by an Authorized Person and received by PFPC. The
instructions may be delivered by hand, mail, tested telegram, cable,
telex or facsimile sending device.
2. APPOINTMENT. The Trust, on behalf of each Portfolio, hereby appoints PFPC
to provide administration and accounting services to each of the
Portfolios, in accordance with the terms set forth in this Agreement. PFPC
accepts such appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Trust has provided or, where applicable, will
provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the Trust's
Trustees, approving the appointment of PFPC to provide services to
each Portfolio and approving this Agreement;
(b) a copy of the Trust's most recent effective registration statement;
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(c) a copy of each Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement with respect to each
class of Shares representing an interest in a Portfolio;
(e) a copy of any additional administration agreement with respect to
a Portfolio;
(f) a copy of any shareholder servicing agreement (other than
agreements with financial intermediaries) made in respect of
the Trust or a Portfolio; and
(g) copies (certified or authenticated, where applicable) of any
and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS.
PFPC undertakes to comply with all applicable requirements of the
Securities Laws, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be performed
by PFPC hereunder. Except as specifically set forth herein, PFPC assumes no
responsibility for such compliance by the Trust or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and Written
Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to
this Agreement. PFPC may assume that any Oral Instruction or Written
Instruction received hereunder is not in any way inconsistent with the
provisions of the Trust's organizational documents or of any vote,
resolution or proceeding of the Trust's Trustees or of the Trust's
shareholders, unless and until PFPC receives Written Instructions to
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<PAGE>
the contrary.
(c) The Trust agrees to forward to PFPC Written Instructions confirming
Oral Instructions (except where such Oral Instructions are given by
PFPC or its affiliates) so that PFPC receives the Written Instructions
by the close of business on the business day after such Oral
Instructions are received. The fact that such confirming Written
Instructions are not received by PFPC shall in no way invalidate the
transactions or enforceability of the transactions authorized by the
Oral Instructions. Where Oral Instructions or Written Instructions
reasonably appear to have been received from an Authorized Person,
PFPC shall incur no liability to the Trust in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions
comply with the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE TRUST. If PFPC is in doubt as to any action it should or
should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Trust.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question of law
pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing
(who may be counsel for the Trust, the Trust's investment adviser or
PFPC, at the option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PFPC receives from
the Trust and the advice PFPC receives from counsel, PFPC may rely
upon and follow the advice of counsel. In the event PFPC so relies on
the advice of counsel, PFPC remains
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<PAGE>
liable for any action or omission on the part of PFPC which
constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it takes or
does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Trust or from counsel and
which PFPC believes, in good faith, to be consistent with those
directions, advice and Oral Instructions or Written Instructions.
Nothing in this section shall be construed so as to impose an
obligation upon PFPC (i) to seek such directions, advice or Oral
Instructions or Written Instructions, or (ii) to act in accordance
with such directions, advice or Oral Instructions or Written
Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PFPC's properly taking or not
taking such action. Nothing in this subsection shall excuse PFPC when
an action or omission on the part of PFPC constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this
Agreement.
7. RECORDS; VISITS.
(a) The books and records pertaining to the Trust and the Portfolios which
are in the possession or under the control of PFPC shall be the
property of the Trust and shall be surrendered promptly on request of
the Trust. Such books and records shall be prepared and maintained by
PFPC as required by the 1940 Act and other applicable securities laws,
rules and regulations. The Trust and Authorized Persons shall have
access to such books and records at all times during PFPC's
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<PAGE>
normal business hours. Upon the reasonable request of the Trust,
copies of any such books and records shall be provided by PFPC to the
Trust or to an Authorized Person, at the Trust's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to each Portfolio's books of
account;
(ii) records of each Portfolio's securities transactions; and
(iii) all other books and records as PFPC is required to maintain
pursuant to Rule 31a-1 of the 1940 Act in connection with the
services provided hereunder.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the Trust
and information relating to the Trust and its shareholders, unless the
release of such records or information is otherwise consented to, in
writing, by the Trust. The Trust agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to
civil or criminal contempt proceedings or when required to divulge such
information or records to duly constituted authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Trust's
independent public accountants and shall provide account analyses, fiscal
year summaries, and other audit-related schedules with respect to each
Portfolio. PFPC shall take all reasonable action in the performance of its
duties under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their opinion, as
required by the Trust.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent
appropriate equipment is available. In
6
<PAGE>
the event of equipment failures, PFPC shall, at no additional expense to
the Trust, take reasonable steps to minimize service interruptions. PFPC
shall have no liability with respect to the loss of data or service
interruptions caused by equipment failure, provided such loss or
interruption is not caused by PFPC's own willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties or obligations under
this Agreement.
11. YEAR 2000 READINESS DISCLOSURE. PFPC (a) has reviewed its business and
operations as they relate to the services provided hereunder, (b) has
developed or is developing a program to remediate or replace computer
applications and systems, and (c) has developed a testing plan to test the
remediation or replacement of computer applications/systems, in each case,
to address on a timely basis the risk that certain computer
applications/systems used by PFPC may be unable to recognize and perform
properly date sensitive functions involving dates prior to, including and
after December 31, 1999, including dates such as February 29, 2000 (the
"Year 2000 Challenge"). To the best of PFPC's knowledge and belief, the
reasonably foreseeable consequences of the Year 2000 Challenge will not
adversely affect PFPC's ability to perform its duties and obligations under
this Agreement.
12. COMPENSATION. As compensation for services rendered by PFPC during the term
of this Agreement, the Trust, on behalf of each Portfolio, will pay to PFPC
a fee or fees as may be agreed to in writing by the Trust and PFPC.
13. INDEMNIFICATION. The Trust, on behalf of each Portfolio, agrees to
indemnify and hold harmless PFPC and its affiliates from all taxes,
charges, assessments, claims and liabilities (including, without
limitation, liabilities arising under the Securities Laws and any state or
foreign securities and blue sky laws, and amendments thereto), and
expenses,
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<PAGE>
including (without limitation) attorneys' fees and disbursements, arising
directly or indirectly from any action or omission to act which PFPC takes
(i) at the request or on the direction of or in reliance on the advice of
the Trust or (ii) upon Oral Instructions or Written Instructions.
Notwithstanding the preceding sentence, neither PFPC, nor any of its
affiliates, shall be indemnified and PFPC shall indemnify and hold harmless
the Trust and its affiliates, against any liability (or any expenses
incident to such liability) arising out of PFPC's or its affiliates' own
willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties and obligations under this Agreement. Any amounts payable by the
Trust hereunder shall be satisfied only against the relevant Portfolio's
assets and not against the assets of any other investment portfolio of the
Trust.
14. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the Trust
or any Portfolio except as specifically set forth herein or as may be
specifically agreed to by PFPC in writing. PFPC shall be obligated to
exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts, within
reasonable limits, in performing services provided for under this
Agreement. PFPC shall be liable for any damages arising out of PFPC's
failure to perform its duties under this Agreement to the extent such
damages arise out of PFPC's willful misfeasance, bad faith, gross
negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses
beyond its control, provided that PFPC has acted in accordance with
the standard of care set forth above; and
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(ii) PFPC shall not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, and which PFPC reasonably
believes to be genuine; or (B) subject to Section 10, delays or errors
or loss of data occurring by reason of circumstances beyond PFPC's
control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, flood, catastrophe, acts of
God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC nor its affiliates shall be liable to the Trust or to any
Portfolio for any consequential, special or indirect losses or damages
which the Trust or any Portfolio may incur or suffer by or as a
consequence of PFPC's or any affiliates' performance of the services
provided hereunder, whether or not the likelihood of such losses or
damages was known by PFPC or its affiliates.
15. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following accounting services with respect to
each Portfolio:
(i) Journalize investment, capital share and income and expense
activities;
(ii) Verify investment buy/sell trade tickets when received from the
investment adviser or subadviser for the Portfolio (the "Adviser")
and transmit trades to the Trust's custodian (the "Custodian") for
proper settlement;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances with the Custodian, and
provide the Adviser with the beginning cash balance available for
investment purposes;
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(vi) Update the cash availability throughout the day as required by the
Adviser;
(vii) Post to and prepare the Statement of Assets and Liabilities and the
Statement of Operations;
(viii) Calculate various contractual expenses (e.g., advisory and custody
fees);
(ix) Monitor the expense accruals and notify an officer of the Trust of
any proposed adjustments;
(x) Control all disbursements and authorize such disbursements upon
Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine net income;
(xiii) Obtain security market quotes from independent pricing services
approved by the Adviser, or if such quotes are unavailable, then
obtain such prices from the Adviser, and in either case calculate
the market value of the Portfolio's investments in accordance with
procedures adopted by the Trust's Trustees and acceptable to PFPC;
(xiv) Transmit or mail a copy of the daily portfolio valuation to the
Adviser;
(xv) Compute net asset value;
(xvi) As appropriate, compute yields, total return, expense ratios,
portfolio turnover rates, and portfolio average dollar-weighted
maturity; and
(xvii) Prepare a monthly financial statement, which will include the
following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
16. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following administration services with respect to
each Portfolio:
(i) Prepare quarterly broker security transactions summaries;
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(ii) Prepare monthly security transaction listings;
(iii) Supply various normal and customary Portfolio and Trust statistical
data as requested on an ongoing basis;
(iv) Prepare for execution and file the Trust's Federal and state tax
returns;
(v) Prepare and file with the SEC the Trust's Annual and Semi-Annual
Reports on Form N-SAR;
(vi) Prepare and file with the SEC the Trust's annual, and semi-annual,
shareholder reports;
(vii) Assist in the preparation of registration statements and other
filings relating to the registration of Shares;
(viii) Monitor each Portfolio's status as a regulated investment company
under Sub-chapter M of the Internal Revenue Code of 1986, as
amended; and assist the Advisor in monitoring the Portfolio's
compliance with its investment policies and procedures;
(ix) Coordinate contractual relationships and communications between the
Trust and its contractual service providers;
(x) Monitor the Trust's compliance with the amounts and conditions of
each state qualification; and
(xi) Prepare and file all notices and other documents relating to the
Shares under state securities laws.
17. DURATION AND TERMINATION. This Agreement shall continue until terminated by
the Trust or by PFPC on sixty (60) days' prior written notice to the other
party.
18. CHANGE OF CONTROL. Notwithstanding any other provision of this Agreement,
in the event of an agreement to enter into a transaction that would result
in a Change of Control of the Trust's adviser or sponsor, the Trust's
ability to terminate the Agreement will be suspended from the time of such
agreement until two years after the Change of Control.
19. NOTICES. All notices and other written communications, including Written
Instructions, shall be delivered by hand, mail, tested telegram, cable,
telex or facsimile sending device.
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If notice is sent by tested telegram, cable, telex or facsimile sending
device, it shall be deemed to have been given immediately. If notice is
sent by first-class mail, it shall be deemed to have been given three days
after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be
addressed (a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware
19809; (b) if to the Trust, at One Bush Street, San Francisco, California
94104, Attn: David R. Krimm, with a copy to Steven N. Machtinger, Esq., at
_______________________; or (c) if to neither of the foregoing, at such
other address as shall have been provided by like notice to the sender of
any such notice or other communication by the other party.
20. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
21. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its duties
hereunder to any majority-owned direct or indirect subsidiary of PFPC or
PNC Bank Corp., provided that (i) PFPC gives the Trust 30 days prior
written notice of such assignment or delegation, (ii) the assignee or
delegate agrees to comply with all provisions of this Agreement, (iii) PFPC
and such assignee or delegate promptly provide such information as the
Trust may reasonably request, and respond to such questions as the Trust
may reasonably ask, relative to the assignment or delegation (including,
without limitation, the capabilities of the assignee or delegate), and (iv)
PFPC remains responsible for all of its obligations under this Agreement.
22. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the
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same instrument.
23. FURTHER ACTIONS. Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
24. MISCELLANEOUS.
(a) This Agreement embodies the entire agreement and understanding between
the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof. The captions in this Agreement
are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their
construction or effect. Notwithstanding any provision hereof, the
services of PFPC are not, nor shall they be, construed as constituting
legal advice or the provision of legal services for or on behalf of
the Trust or any other person.
(b) This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware law, without regard to principles of conflicts of
law.
(c) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(d) The facsimile signature of any party to this Agreement shall
constitute the valid and binding execution hereof by such party.
(e) The obligations assumed by the Trust under this Agreement are assumed
on behalf of each Portfolio separately, and no Portfolio shall be
liable for the obligations of any other Portfolio. Neither the
Trustees nor any of the Trust's
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shareholders, officers, employees or agents, whether past, present or
future, shall be personally liable for the obligations of the Trust or
any Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:
---------------------------
Title:
------------------------
HAMBRECHT & QUIST FUND TRUST
By:
---------------------------
Title:
------------------------
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EXHIBIT A
THIS EXHIBIT A, dated as of , 1999, is Exhibit A to that certain
Administration and Accounting Services Agreement dated as of , 1999 between PFPC
Inc. and Hambrecht & Quist Fund Trust.
PORTFOLIOS
[Hambrecht & Quist IPO Discovery Fund]
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AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
David R. Krimm
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Robert N. Savoie
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Steven N. Machtinger
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- -------------------------------- ---------------------------------
- -------------------------------- ---------------------------------
- -------------------------------- ---------------------------------
Dated: , 1999
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H&Q IPO & EMERGING COMPANY FUND
RULE 12B-1 PLAN
_____________,1999
The following plan (the "Plan") has been adopted pursuant to Rule
l2b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"), by
Hambrecht & Quist Fund Trust (the "Trust") for the Common Class, Class A and
Class B shares (each a "Class") of the H&Q IPO & Emerging Company Fund (the
"Fund"), a series of the Trust. The Plan has been approved by a majority of the
Trust's Trustees, including a majority of the Trustees who are not "interested
persons" of the Trust (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan (the "non-interested Trustees"), cast in person at a meeting
called for the purpose of voting on the Plan.
1. ANNUAL FEES
The Fund shall pay to Hambrecht & Quist LLC, the Fund's distributor
(the "Distributor"), a monthly fee equal on an annualized basis to .25% of the
aggregate average daily net assets of the Fund attributable to Common Class
shares, .30% of the aggregate average daily net assets of the Fund attributable
to Class A shares and 1.00% of the aggregate average daily net assets of the
Fund attributable to Class B shares.
2. EXPENSES COVERED
A portion of these fees, not to exceed .25% of the aggregate
average daily net assets of the Fund attributable to each of the Class A,
Class B and Common Class shares may, and in the case of the Class B Shares
shall, constitute a service fee (the "Service Fee") to be used to compensate
the Distributor for any expenses the Distributor incurs for personal services
and/or the maintenance of shareholder accounts within the meaning of National
Association of Securities Dealers rules and interpretations, including, but
not limited to, payment the Distributor makes to broker-dealers or other
third parties.
Except for the Service Fee, fees payable under Section 1 shall be
used to compensate the Distributor for any expenses the Distributor incurs
that are primarily intended to result in the sale of the Fund's shares,
including, but not limited to, payments the Distributor makes to
broker-dealers or other third parties, payments made for the preparation,
printing and distribution of advertisements and sales literature, and
payments made for printing and distributing prospectuses and shareholder
reports to other than existing shareholders of the Fund.
3. EXPENSES IN EXCESS OF OR LESS THAN ANNUAL FEES
The fees provided in Section 1 shall be payable whether the actual
expenses of the Distributor are in excess of or less than such fees. All
expenses in excess of such fees shall be borne by the Distributor.
<PAGE>
4. WRITTEN REPORTS
The Distributor shall furnish to the Trustees for their review, on
a quarterly basis, a written report of the amounts expended under the Plan or
any related agreement and the purposes therefor, and shall furnish to the
Trustees, on an annual basis, such other information as may reasonably be
necessary for the Trustees to make an informed determination of whether the
Plan should be continued.
5. TERMINATION
The Plan may be terminated with respect to any Class at any time,
without the payment of any penalty, by the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of such Class or
by the vote of a majority of the non-interested Trustees. Once terminated, no
further payments shall be made under the Plan.
6. AMENDMENTS
This Plan may not be amended to increase materially the amount to
be spent for distribution of shares of any Class without the approval of the
shareholders of such Class. All material amendments to the Plan must be
approved by the Trustees, including the non-interested Trustees, cast in
person at a meeting called for the purpose of voting on such amendments.
7. SELECTION OF NON-INTERESTED TRUSTEES
So long as the Plan is in effect, the selection and nomination of
the Trust's non-interested Trustees shall be committed to the discretion of
the non-interested Trustees.
8. EFFECTIVE DATE AND CONTINUATION
The Plan shall take effect as of the date hereof and, unless sooner
terminated, shall continue in effect for a period of one year from the date
hereof and thereafter only so long as such continuance is specifically approved
at least annually by a majority of the Trustees, including a majority of the
non-interested Trustees, cast in person at a meeting called for the purpose of
voting on such continuance.
9. PRESERVATION OF MATERIALS
The Trust will preserve copies of the Plan, any agreements relating to
the Plan and any report made pursuant to Section 4 above, for a period of not
less than six years (the first two years in an easily accessible place) from the
date of the Plan, agreement or report.
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DRAFT DATED AUGUST 24, 1999
H&Q IPO & EMERGING COMPANY FUND
RULE 18F-3 PLAN
___________, 1999
This Rule 18f-3 Plan (the "Plan") has been adopted by Hambrecht &
Quist Fund Trust (the "Trust") with respect to the Class A, Class B, and Common
Class shares of H&Q IPO & Emerging Company Fund (the "Fund"), a series of the
Trust, in accordance with the provisions of Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Plan has been approved by
a majority of the Trust's Trustees, including a majority of the Trustees who are
not "interested persons" of the Trust (as defined in the 1940 Act).
1. CLASS CHARACTERISTICS
Class A shares are offered at their net asset value ("NAV"), plus a
front-end sales charge, and are subject to a Rule 12b-1 fee, and, under certain
circumstances, a contingent deferred sales charge ("CDSC"), as described in the
Fund's Adviser Classes Prospectus.
Class B shares are offered at their NAV, without a front-end sales
charge, and are subject to a Rule 12b-1 fee and CDSC, as described in the Fund's
Adviser Classes Prospectus.
Common Class shares are offered at their NAV, without a front-end
sales charge or CDSC, and are subject to a Rule l2b-1 fee, as described in the
Fund's Common Class Prospectus (together with the Fund's Adviser Classes
Prospectus, the "Prospectus").
The front-end sales charge on Class A shares and CDSC on Class A and
Class B shares are each subject to reduction or waiver as permitted by the 1940
Act, and as described in the Prospectus and Statement of Additional Information
of the Fund.
Except as otherwise provided herein, each class of shares of the Fund
will be entitled to distributions, if any, calculated in the same manner and at
the same time as each other class of shares of the Fund. For purposes of this
calculation, expenses will be allocated to each class at the same time as to all
other classes. Except as otherwise provided herein, each share will represent an
equal pro rata interest in the Fund, regardless of class, and will have
identical voting, dividend, liquidation and other rights. Each class shall vote
separately with respect to any matter that relates solely to that class.
2. EXPENSE ALLOCATIONS TO EACH CLASS
The following expenses shall be allocated, to the extent practicable,
on a class-by-class basis: (i) Rule 12b-1 fees payable by the Fund to Hambrecht
& Quist
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LLC, the distributor of the Fund's shares (the "Distributor"), according to the
Rule 12b-1 plan adopted by the Fund, and (ii) transfer agency and sub-transfer
agency costs attributable to each class. Subject to the approval of the Fund's
Trustees, including a majority of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust, the following "Class Expenses" may be
allocated, to the extent practicable, on a class-by-class basis: (a) printing
and postage expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current shareholders
of a specific class, (b) SEC registration fees incurred with respect to a
specific class, (c) blue sky and foreign registration fees and expenses incurred
with respect to a specific class, (d) the expenses of administrative personnel
and services required to support shareholders of a specific class (e) litigation
and other legal expenses relating to a specific class, (f) expenses incurred in
connection with shareholders' meetings as a result of issues relating solely to
a specific class, (g) accounting and consulting expenses relating to a specific
class, (h) any fees imposed pursuant to a non-Rule 12b-1 shareholder services
plan that relate to a specific class, and (i) any additional expenses, not
including advisory or custodial fees or other expenses related to the management
of the Fund's assets, if these expenses are actually incurred in a different
amount with respect to a class, or if services are provided with respect to a
class that are of a different kind or to a different degree than with respect to
one or more other classes.
All expenses not now or hereafter designated as Class Expenses ("Fund
Expenses") will be allocated to each class on the basis of the net asset value
of that class in relation to the net asset value of the Fund.
3. FEE WAIVER OR REIMBURSEMENT
Hambrecht & Quist Fund Management, LLC, the Fund's investment adviser
(the "Adviser"), the Distributor or any other service provider may choose to
waive or reimburse any portion of the Class Expenses, subject to the
requirements of the Internal Revenue Code and the rules and regulations
thereunder. Such waiver or reimbursement may be applicable to some or all of the
classes and may be in different amounts for one or more classes.
4. CONVERSION AND EXCHANGE FEATURES
Class B shares, including shares purchased through dividends and
distributions, automatically convert to Class A shares as described in the
Prospectus and, as described in the Prospectus, such conversion may be suspended
upon the occurrence of certain events.
If the Class A shareholders approve any increase in Class Expenses
allocated to Class A shares, existing Class B shares will stop converting into
Class A shares until the Class B shareholders, voting separately as a class,
approve the increase in such expenses. Pending approval of such increase, or if
such increase is not approved, the Trustees shall take such action as is
necessary to ensure that existing Class B shares are exchanged for or converted
into a new class of shares ("New Class shares") identical in
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all material respects to Class A shares as existed prior to the implementation
of the increase in expenses, no later than such shares were previously scheduled
to convert to Class A shares. Class B shares sold after the implementation of
the increase in expenses may convert into Class A shares subject to the higher
expenses, provided that the material features of all fees imposed on Class A
shares and the relationship of such fees to the Class B shares are disclosed in
an effective registration statement.
Conversions or exchanges described in this section shall be effected
in a manner that the Trustees believe will not be subject to federal income
taxation.
5. MONITORING
On an ongoing basis, the Trustees, pursuant to their fiduciary
responsibilities under the 1940 Act and otherwise, will monitor the Fund for the
existence of material conflicts between the interests of the classes of shares.
The Adviser and the Distributor shall be responsible for alerting the Trustees
to any material conflicts that may arise.
6. AMENDMENTS
The Plan may be amended from time to time in accordance with the
requirements of Rule 18f-3 under the 1940 Act.
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