HAMBRECHT & QUIST FUND TRUST, 497, 1999-09-23

HAMBRECHT & QUIST FUND TRUST
497, 1999-09-23

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<PAGE>
H&Q IPO & EMERGING COMPANY FUND
Supplement dated September 23, 1999 to
Adviser Classes Prospectus dated September 15, 1999

Hambrecht & Quist LLC (H&Q), the distributor for the H&Q IPO & Emerging Company
Fund (Fund), will solicit orders to purchase shares of the Fund during an
initial offering period from September 23, 1999 to October 28, 1999
(Subscription Period). Orders received during the Subscription Period will be
accepted by the Fund and invested at the initial offering price of $10.00 per
share on October 29, 1999.

Shares of the Fund will not be available to the public prior to the Fund's
commencement of operations except through the subscription offer.
<PAGE>

H&Q IPO & EMERGING COMPANY FUND

Prospectus September 15, 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.

<PAGE>

CONTENTS

About the Fund....................3
Goal..............................4
Main Strategy.....................4
Main Risks........................4
Risk/Return Bar
Chart and Table................6
Fund Fees and Expenses............7
Fund Management...................8
Investing in the Fund.............9
Buying Shares..............9
Selling Shares............11
Shareholder Services......12
Other Transaction Policies.......12
Distributions and Taxes..........13
To Learn More............Back Cover

<PAGE>

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.

3
<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 Fund defines shares acquired as part
of the initial public offering as IPOs and shares acquired within 18 months
thereafter as emerging company shares.

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 IPOs 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 in the initial public offering
at the offering price, they will be purchased in the secondary market shortly
thereafter. For a period of up to 18 months after the initial public
offering, the sub-adviser will also purchase emerging company shares based
upon the above criteria and certain aftermarket criteria, such as analyst
ratings, price, performance, valuation relative to the industry and insider
activity. IPOs and emerging company shares held by the Fund will be sold based
upon similar aftermarket criteria. The Fund normally expects to sell most of
its 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 or emerging
company shares 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 equity securities that are not IPOs
or emerging company shares (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 and emerging company shares 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 AND EMERGING COMPANY SHARES

[In a separate box]

4
<PAGE>

Most IPOs and emerging company shares 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
and emerging company shares 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 and emerging company shares 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 and emerging company shares.

THE NUMBER OR QUALITY OF IPOs AND EMERGING COMPANY SHARES 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 FUND MAY AGREE TO CONTRACTUAL RESTRICTIONS ON ITS RESALE OF CERTAIN IPOs.
These restrictions, known as "lock-ups," will typically extend from 30 to 180
days after the initial public offering. During the period of the lock-up, the
Fund will not be able to sell these securities and the value of these securities
may decline as a result of adverse market movements.

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 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.

5
<PAGE>

THE FUND MAY HAVE TO SELL STOCKS AT A LOSS IN ORDER TO FUND SHAREHOLDER
REDEMPTIONS. Redemptions are more likely to occur when prices of IPOs and
emerging company shares are declining, and prices of IPOs and emerging
company shares 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 equity
securities with small capitalizations other than IPOs and emerging company
shares, 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 and emerging company shares.

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.

6
<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 (load) imposed on purchases
(as a % of offering price).................... 5.50%(1) None
Maximum deferred sales charge
(as a % of lower of offering
or sale price)................................ None(2) 5.00%(3)
Redemption fees (as a % of sale price).......... None(4) None(4)

ANNUAL OPERATING EXPENSES
(as a % of average net assets)
Management fees................................. 0.65% 0.65%
Distribution fees............................... 0.30 1.00
Other expenses(5)............................... 0.65 0.65
-------------------------

Total annual operating expenses(6).............. 1.60% 2.30%
</TABLE>

- -----------------------

(1)No sales charge is imposed on dividend reinvestments.
(2)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."
(3)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."
(4)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.
(5)Estimated amounts for the Fund's current fiscal year.
(6)Contractually guaranteed by the investment adviser until January 1, 2001.

7
<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.

8
<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. (PFPC), 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.

9
<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.

10
<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. Please talk
with your financial intermediary about the methods it has available to
purchase shares of the Fund. If you use a financial intermediary other than
H&Q, minimum investments and balances required may be higher.

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. PFPC 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.

11
<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 at 877-613-7975 with any questions concerning
signature guarantees

SHAREHOLDER SERVICES

The Fund offers the following shareholder services. Please talk to your
financial intermediary to determine whether these services are available
through your financial intermediary and to take advantage of the services
available.

- 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. 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. Minimum
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. Where quotes are not readily available or where there are
contractual restrictions on resale, the Fund may value securities based on
fair values developed using methods approved by the Fund's Trustees.

12
<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.

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-

13
<PAGE>

term capital gains are distributed as dividends and are taxable as ordinary
income. Other capital gain distributions are taxable as long-term capital
gains, regardless of how long you have held your shares in the Fund. It is
expected that most of the Fund's capital gains will be short-term. Therefore,
you should anticipate that all or a significant portion of the Fund's
distributions will be treated as ordinary income and not as long-term capital
gains. 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 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.

14
<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, 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 19899
877-613-7975

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
<PAGE>
H&Q IPO & EMERGING COMPANY FUND
Supplement dated September 23, 1999 to
Common Class Prospectus dated September 15, 1999

Charles Schwab & Co., Inc. (Schwab) is also soliciting subscriptions of shares
of the Fund during the Subscription Period pursuant to a selected dealer
agreement with H&Q. The $10.00 per share price for shares of the Fund ordered
through Schwab will be paid from a Schwab customer's brokerage account on
October 28, 1999. H&Q will pay Schwab for its services a fee of one hundred
thousand dollars or, if greater, an amount equal to 0.50% of the total dollar
amount of shares of the Fund sold through Schwab not in excess of $25 million;
0.30% of the total gross dollar amount of sales of shares of the Fund sold
through Schwab in excess of $25 million but not in excess of $50 million; 0.25%
of the total gross dollar amount of sales of shares of the Fund sold through
Schwab in excess of $50 million but not in excess of $75 million; and 0.20% of
the total gross dollar amount of sales of shares of the Fund sold through Schwab
in excess of $75 million, during the Subscription Period. All fees paid to
Schwab under these arrangements will be paid solely by H&Q out of its own
resources and will have no effect on the Fund's fees or expenses. After the
Subscription Period, Schwab will receive remuneration for recordkeeping and
shareholder servicing of shares of the Fund purchased through Schwab.

Shares of the Fund will not be available to the public prior to the Fund's
commencement of operations except through these subscription offers.
<PAGE>

H&Q IPO & EMERGING COMPANY FUND

Prospectus September 15, 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.

<PAGE>

CONTENTS
About the Fund..........................3
Goal....................................4
Main Strategy...........................4
Main Risks..............................4
Risk/Return Bar
Chart and Table......................6
Fund Fees and Expenses..................7
Fund Management.........................8
Investing in the Fund...................8
Buying Shares..................9
Selling Shares................11
Shareholder Services..........12
Other Transaction Policies.............12
Distributions and Taxes................13
To Learn More..................Back Cover

<PAGE>

ABOUT THE FUND

<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 Fund defines shares acquired as part
of the initial public offering as IPOs and shares acquired within 18 months
thereafter as emerging company shares.

When the sub-adviser believes that the number or quality of IPOs or emerging
company shares 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 equity securities that are not IPOs or
emerging company shares (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 and emerging company shares 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 AND EMERGING COMPANY SHARES

[In a separate box]

-4-
<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 and emerging company shares 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 and emerging company shares 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.

THE NUMBER OR QUALITY OF IPOS AND EMERGING COMPANY SHARES 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 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 FUND MAY AGREE TO CONTRACTUAL RESTRICTIONS ON ITS RESALE OF CERTAIN IPOs.
These restrictions, known as "lock-ups," will typically extend from 30 to 180
days after the initial public offering. During the period of the lock-up, the
Fund will not be able to sell these securities and the value of these
securities may decline as a result of adverse market movements.

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 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.

-5-
<PAGE>

RISK/RETURN BAR CHART AND TABLE

-6-
<PAGE>

FUND FEES AND EXPENSES

<TABLE>
<CAPTION>
PERCENTAGE FEE TABLE
- ---------------------
<S> <C>
SHAREHOLDER FEES
Maximum sales charge (load) imposed on
purchases................................ 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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C>
$163 $505
</TABLE>

-7-
<PAGE>

FUND MANAGEMENT

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. (PFPC), at 877-613-7975 to request a copy of the Fund's Adviser Classes
prospectus. For TDD service, call 877-613-7973.

-8-
<PAGE>

BUYING SHARES

Common Class shares may be purchased either through mutual fund supermarkets
or directly from the Fund through PFPC.

Common Class shares are purchased and sold without the imposition of either an
initial sales charge or a contingent deferred sales charge. The Fund has
adopted a plan under Rule 12b-1 that allows the Fund to pay an annual
distribution fee of 0.25% of average daily net assets for the sale and
distribution of the Common Class shares. 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
- -------------------------------- ----------------------------------------------

-9-
<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. Please talk with your representative about
the methods it has available to purchase shares of the Fund. If you use a
mutual fund supermarket, minimum investments and balances required may be
higher.

PURCHASES THROUGH THE TRANSFER AGENT

You may purchase Common Class shares directly from the Fund through the
Fund's transfer agent, PFPC, 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 19899

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 does not accept third party
checks as payment for Fund shares.

BY WIRE
Call PFPC at 877-613-7975 to obtain an account number, mail a
completed subscription application to PFPC at the address above
and then wire the purchase amount to:

PNC Bank, N.A.
ABA# 031000053
Credit Account Number # 86-1282-3223
From: (Name of Investor)
Account No. (Investor's Account number with the Fund)
For Purchase of: H&Q IPO & Emerging Company Fund
Amount: (Amount to be invested)

You may not sell shares until PFPC has received the completed and
signed subscription application. You may add to your account by wiring
the purchase amount to PNC Bank, N.A. with the instructions above.
Please call PFPC at the above number prior to wiring additional
funds to your account.

Please note that orders to buy shares cannot be revoked after you mail your
check or wire funds.

-10-
<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. PFPC
will send the sale proceeds to your mutual fund supermarket, who will be
responsible for retaining the proceeds in your account or forwarding the
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 19899

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 at 877-613-7975. You may only sell shares by telephone if
you have previously authorized PFPC to act on telephone
instructions, by indicating this authority on your subscription
application or by calling PFPC to request this service. Neither the
Fund nor PFPC 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

-11-
<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 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. 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. Minimum and
frequencies may vary.

OTHER TRANSACTION POLICIES

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, 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

-12-
<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

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. Other capital gain distributions are
taxable as long-term capital gains, regardless of how long you have held your
shares in the Fund. It is expected that most of the Fund's capital gains will
be short-term. Therefore, you should anticipate that all or a significant
portion of the Fund's distributions will be treated as ordinary income and
not as long-term capital gains. Distributions are generally taxable in the
year they are declared, whether you reinvest them or take them in cash.

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.

-13-
<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.

You can obtain copies of these documents by contacting your mutual fund
supermarket representative, the Fund's transfer agent, PFPC, 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 19899
877-613-7975

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

<PAGE>

H&Q IPO & EMERGING COMPANY FUND

Statement of Additional Information

Adviser Classes
Common Class

September 15, 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
September 15, 1999 (as amended from time to time). The Fund is currently the
only series of the Hambrecht & Quist Fund Trust (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 funds.hq.com.

TABLE OF CONTENTS

PAGE

OTHER STRATEGIES, RISKS AND LIMITATIONS.......................................2
MANAGEMENT OF THE FUND........................................................9
INVESTMENT ADVISORY AND OTHER SERVICES.......................................11
BROKERAGE ALLOCATION AND OTHER PRACTICES.....................................14
DESCRIPTION OF THE TRUST.....................................................15
PURCHASE, REDEMPTION AND PRICING OF SHARES...................................16
TAXATION.....................................................................22
CALCULATION AND USE OF PERFORMANCE DATA......................................23
FINANCIAL STATEMENTS.........................................................24

<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, emerging company shares and securities of 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 IPOs and emerging company shares 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 within seven days and in the ordinary course of
business at approximately the amount at which the Fund has valued the
securities. 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, certain restricted securities and securities subject to contractual
restrictions on disposition greater than seven days. From time to time, the
Fund may agree to such contractual restrictions, for periods typically of
between 30 and 180 days, in connection with its purchase of securities in
initial public offerings. The IPOs, emerging company shares 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 or sell 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 and
securities subject to contractual restrictions on resale 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), Symphony Asset Management LLC (Symphony)
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 of Hambrecht & Quist Group (Group)
and H&Q since January 1998 and Chief
Executive Officer of Hambrecht & Quist Group
and H&Q since October 1994; various other
executive positions at Group and H&Q since
joining H&Q in 1981. Director of Rational
Software Corporation (software development
tools), Electronic Arts Inc.(entertainment
software), AMB Property Corporation, National
Science and Technology Medal Foundation,
Technology Network, Bay Area Council and
Securities Industry Association.
- --------------------------------------------------------------------------------------------------------
William R. Timken*, 63 Trustee Director of Group and Hambrecht & Quist
California since prior to 1994; various
other senior positions at Group and H&Q,
including Vice Chairman, since joining H&Q in
1969 until his retirement in June 1999. Past
member of the Board of Governors of the
National Association of Securities Dealers,
Inc. and the Board of Governors of the Pacific
Stock Exchange.
- --------------------------------------------------------------------------------------------------------
Mark S. Brandin**, 49 Trustee Managing Director of Brandin & Associates
(consulting) since June 1996; 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 1974 to June
1999.*** Board Member and Treasurer of San
Francisco Food Bank.
- --------------------------------------------------------------------------------------------------------
Tom D. Seip**, 49 Trustee General Partner of Seip Investments Ltd.
(private investment firm) since June 1998
and Co-President of Seip Family Foundation
(investments in not-for-profit corporations);
Enterprise President of The Charles Schwab
Corporation (Schwab) from September 1997 to
May 1998 and Executive Vice President -
Retail Brokerage from 1994 to September 1997;
various other executive positions at Schwab
since joining Schwab in 1983. Director of
Offroad Capital, Inc. (broker-dealer holding
company) and MERAD Technologies, Inc.
- --------------------------------------------------------------------------------------------------------
David R. Krimm, 45 President Director of Marketing of H&Q since 1998;
President of HQFM since July 1999; Vice
President of ICVerify from 1996 to 1997;
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 since 1997; Chief
Financial Officer of HQFM since July 1999;
Principal of Arthur Andersen LLP from prior
to 1994 to 1997.
- --------------------------------------------------------------------------------------------------------
Steven N. Machtinger, 50 Secretary General Counsel and Secretary of Group and
H&Q since 1988 and Managing Director of H&Q
since 1990; Secretary of HQFM since July 1999.
- --------------------------------------------------------------------------------------------------------
</TABLE>

* An "interested person" of the Fund as defined in the Investment Company Act
of 1940, as amended.

**Mr. Brandin's address is 275 Willowbrook Drive, Portola Valley, CA 94028.
Mr. Campbell's address is 726 Crossbrook Drive, Moraga, CA 94556. Mr. Seip's
address is 30 Ridge Road, Orinda, CA 94563.
*** PricewaterhouseCoopers LLP is the Fund's independent accountant. Mr.
Campbell's responsibilities at PricewaterhouseCoopers LLP 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>
- -----------------------------------------------------------------------------

Aggregate
Compensation from Total Compensation
Name of Trustee Trust(1) from Fund Complex(2)
- -----------------------------------------------------------------------
<S> <C> <C>
Daniel H. Case III $0 $0
- -----------------------------------------------------------------------
William R. Timken $0 $0
- -----------------------------------------------------------------------
Mark S. Brandin $6,000 $6000
- -----------------------------------------------------------------------
John A. Campbell $6,000 $6000
- -----------------------------------------------------------------------
Tom D. Seip $6,000 $6000
- -----------------------------------------------------------------------
</TABLE>

(1) Trustees who are not "interested persons" of the Trust receive a quarterly
fee of $1,000, plus $500 for each Trust meeting attended. Trustees are also
reimbursed for expenses incurred on behalf of the Trust. The Trust does not
pay any pension or retirement benefits to the Trustees.

(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 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

HQFM has entered into an investment sub-advisory agreement with
Symphony pursuant to which Symphony acts as the Fund's sub-adviser. Symphony
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. Symphony 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, Symphony will apply qualitative
considerations when making investment decisions. Among other considerations,
Symphony may employ fundamental analysis, review issuers' prospectuses
and attend "roadshows" when determining whether to invest in a particular
IPO.

-11-
<PAGE>

For Symphony'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", Symphony 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, 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. H&Q is a wholly-owned subsidiary of Hambrecht
& Quist California and Hambrecht & Quist B/D Subsidiary Corp. and an
affiliate of HQFM, the Fund's investment adviser. The Fund pays for prospectuses
and shareholder reports to be prepared and delivered to existing shareholders.
H&Q 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, H&Q 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 H&Q 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 quarterly on Class A and Class B
shares and monthly on Common Class shares. Distribution fees are charged as
expenses of the Fund as accrued.

The fees payable under the distribution plan are used to compensate
H&Q for any expenses intended primarily to result in the sale of the Fund's
shares, including, but not limited to, payments H&Q 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. 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 H&Q for expenses H&Q

-12-
<PAGE>

incurs for personal services and/or the maintenance of shareholder accounts.
The full amount of distribution fees are payable to H&Q whether the actual
expenses of H&Q are in excess or less than such fees.

HQFM and/or H&Q may from time to time and from its own funds or
such other resources as are permitted make payments for distribution and
shareholder services. H&Q 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 19899, serves as the administrator,
fund accountant, dividend disbursing and transfer agent for the Fund. The
services provided by PFPC 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.

LEGAL COUNSEL

Howard Rice Nemerovski Canady Falk & Rabkin, A Professional
Corporation, Three Embarcadero Center, Seventh Floor, San Francisco,
Californina 94111-4065 serves as legal counsel for the Trust, HQFM and H&Q.

-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, Symphony 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, Symphony 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, Symphony 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 Symphony when providing advisory services to other
investment advisory clients, including other mutual funds.

In an attempt to obtain best execution for the Fund, Symphony 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 HQFM, 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 H&Q 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 offers three classes of shares,
Class A, Class B and Common Class.

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
Trust'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 (i)
sell or convey substantially all of the assets of the Trust or any series to
another series or other open-end investment company or (ii) sell and convert
into money all or substantially all of the assets of the Trust or any series,
in each case without shareholder approval if a majority of the Trustees
determine that the continuation of the Trust or any series is not in the best
interest of the Trust or such series, or their respective shareholders.
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 will be a
quorum for the transaction of business at a shareholders' meeting. Any lesser
number will 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 will 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 will elect a Trustee. 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 will 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.

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. The income and gains of each
series or class will be distributed pro rata to shareholders in proportion to
the number of shares of each series or class 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.
Upon liquidation of the Trust, shares of each series or class will be
entitled to a pro rata distribution of all assets of such series or class
remaining after payment or provision for all known liabilities of such series
or class.

Shares of the Trust may be automatically redeemed if held by a
shareholder in an amount less than the minimum required by the Fund or for
any other reason under terms set by the Trustees, including the failure of a
shareholder (i) to supply a taxpayer identification number or other
information or certification required by applicable law, (ii) to invest the
required minimum or (iii) to pay when due shares issued to such shareholder.
The Trust may redeem shares and transfer the proceeds to a government unit,
agency, authority or authorized depository without prior notice to a
shareholder and without liability to such shareholder, if such action is
taken (i) in response to a notice of levy, lien or similar action from the
Internal Revenue Service or state tax authority, (ii) in compliance with
state law governing escheat or abandonment of property, (iii) in satisfaction
of witholding tax requirements (including penalties and interest) applicable
to any prior distribution to a shareholder that were not satisfied at the
time of such distribution or (iv) in compliance with any other applicable
legal requirement.

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 prospectus. The portion of this sales charge that is
re-allowed to selected dealers is as follows:

<TABLE>
<CAPTION>
Commission to
selected
dealers as % of
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
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<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 a
front-end 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

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<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 H&Q and
broker-dealers, financial institutions or other financial intermediaries that
have entered into an agreement with H&Q; 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 eligible 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 A shares are offered at net asset value (without a front-end
sales charge) and without a CDSC to the Trustees and other affiliated persons
of the Fund as an incentive to such persons to purchase shares of the Fund
and thereby to align further the interests of such persons with the interests
of the Fund's shareholders.

CLASS B SHARES

The combination of the CDSC and the distribution fee enables the
Fund to sell the Class B shares without a front-end 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 H&Q and may be used in whole
or in part to defray H&Q's expenses relating to the provision of distribution-
related services to the Fund in connection with the sale of Class B shares,
including payments to selected dealers. H&Q pays selected dealers a commission
equal to 4.00% of the price of Class B shares sold.

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

The Fund has authorized one or more brokers to receive on its
behalf purchase and redemption orders for shares of the Fund. Such brokers
are authorized to designate other intermediaries to receive purchase and
redemption orders on the Fund's behalf. The Fund will be deemed to have
received a purchase or redemption order when an authorized broker or designee
receives the order. An order placed through an authorized broker or designee
will be priced at the Fund's net asset value next computed after receipt of
the order by such broker or designee.

As long as the Fund or PFPC 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 does not accept third party checks as payment for Fund
shares. The Fund requires signature guarantees for redemptions in excess of
$25,000. 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. 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 principally
traded, or, lacking any sales, at the mean between the closing bid and asked
prices. Securities traded in the over-the-counter market are valued at the
last bid price that day.

Futures contracts are 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 is used.

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).

Debt instruments not maturing within 60 days are valued on the
basis of the price provided by a pricing service when such prices are
believed to reflect the fair 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 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.

-21-
<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 FUND

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 "net ordinary
income" (as defined in the Code) for the calendar year plus 98% of their
capital gain net income 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-

-22-
<PAGE>

term capital gains distribution, be treated as a long-term capital loss. For
corporate investors in the Fund, dividend distributions the Fund designates
to be from dividends received from qualifying domestic corporations will be
eligible for the corporate dividends-received deduction to the extent they
would qualify if the Fund were a regular corporation and if other applicable
requirements are met. 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" or is present in the United
States for more than 183 days during the year. 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.

-23-
<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

The Trust has undertaken to file a post-effective amendment with
certified financial statements showing the initial capital received by the
Fund before accepting subscriptions from more than 25 persons. It is expected
that such financial statements will show net assets of $100,000, representing
the initial capital contributed by Hambrecht & Quist California.

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