FILE NOS. 33-73832, 811-8268
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 9
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 14
FIRSTHAND FUNDS
(Exact name of Registrant as Specified in Charter)
101 PARK CENTER PLAZA, SUITE 1300, SAN JOSE, CALIFORNIA 95113
(Address of Principal Executive Offices)
(408) 294-2200
Registrant's Telephone Number, including Area Code
KEVIN M. LANDIS
INTERACTIVE RESEARCH ADVISERS, INC.
101 PARK CENTER PLAZA, SUITE 1300, SAN JOSE, CALIFORNIA 95113
(Name and Address of Agent for Service)
Copies of all communications to:
OMAR BILLAWALA
INTERACTIVE RESEARCH ADVISERS, INC.
101 PARK CENTER PLAZA, SUITE 1300, SAN JOSE, CALIFORNIA 95113
It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on _______________ pursuant to paragraph (a)(2) of Rule 485
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Registrant's Rule 24f-2 Notice for the fiscal year ended December 31, 1998, was
filed with the Commission on February 22, 1999.
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CONTENTS OF REGISTRATION STATEMENT
This registration statement contains the following documents:
o Facing Sheet
o Contents of Registration Statement
o Part A - Combined Prospectus for the Technology Value Fund, the Technology
Leaders Fund and the Technology Innovators Fund
o Part A - Prospectus for the Medical Specialists Fund
o Part B - Combined Statement of Additional Information for the Technology
Value Fund, the Technology Leaders Fund, the Technology Innovators Fund and
the Medical Specialists Fund. Incorporated by reference to Post-Effective
Amendment No. 7 to the Registration Statement as filed with the Commission
on May 11, 1999
o Part C - Other Information Signature Page
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PART A
Technology Value Fund
Technology Leaders Fund
Technology Innovators Fund
Prospectus
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[LOGO]
[PHOTO]
P R O S P E C T U S
The Technology Value Fund
The Technology Leaders Fund
The Technology Innovators Fund
August 31, 1999
Firsthand Funds has registered each mutual fund offered in this prospectus with
the U.S. Securities and Exchange Commission (SEC). That registration does not
imply, however, that the SEC endorses the Funds.
The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
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Firsthand Funds
101 Park Center Plaza, Suite 1300
San Jose, CA 95113
408.294.2200
The Technology Value Fund
The Technology Leaders Fund
The Technology Innovators Fund
No-Load Funds
Firsthand Funds (the "Trust") currently offers several series of shares to
investors. Three of them are described in this prospectus: The Technology
Value Fund, The Technology Leaders Fund, and The Technology Innovators Fund
(individually, a "Fund," and collectively, the "Funds"). Each Fund is
non-diversified and has as its investment objective long-term growth of
capital. Although certain of the Funds' investments may produce dividends,
interest or other income, current income is not a consideration in
selecting a Fund's investments.
This Prospectus has information you should know before you invest. Please
read it carefully and keep it with your investment records.
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Contents
Risk/Return Summary 2
Performance Summary 4
Expense Information 6
Additional Investment Strategies
and Risk Considerations 7
Operation of the Funds 11
How to Purchase Shares 12
How to Redeem Shares 14
Shareholder Services 17
Exchange Privilege 18
Dividends and Distributions 19
Taxes 20
Calculation of Share Price 21
Financial Highlights 22
FOR INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
Nationwide (Toll-Free): 1.888.884.2675
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Risk/Return
Summary
What are the Funds' investment objectives?
Each Fund's investment objective is long-term growth of capital.
What are the Funds' principal investment strategies?
The Technology Value Fund (TVF) seeks to achieve its objective by investing
at least 65% of its assets in securities of companies in the electronic
technology and medical technology fields which the Investment Adviser
considers to be undervalued and have potential for capital appreciation.
The Technology Leaders Fund (TLF) seeks to achieve its objective by
investing at least 65% of its assets in securities of companies in the high
technology field which the Investment Adviser considers to have the
strongest competitive position. In assessing the strength of a company's
competitive position, the Investment Adviser may consider such factors as
technology leadership, market share, patents and other intellectual
property, strength of management, marketing prowess and product development
capabilities. The high technology field includes the semiconductor,
computer, computer peripheral, software, telecommunication and mass storage
device segments of the technology industry.
The Technology Innovators Fund (TIF) seeks to achieve its objective by
investing at least 65% of its assets in securities of companies in the high
technology field which the Investment Adviser considers to be best
positioned to introduce successful new products. In assessing a company's
capacity for innovation, the Investment Adviser may consider a number of
factors, including technical vision, marketing acumen, proprietary
technological
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advantages and a demonstrated ability to bring products to market quickly.
The high technology field includes the semiconductor, computer, computer
peripheral, software, telecommunication and mass storage device segments of
the technology industry.
What are the principal risks of investing in the Funds?
The return on and value of an investment in the Funds will fluctuate in
response to stock market movements. Stocks and other equity securities are
subject to market risks and fluctuations in value due to earnings, economic
conditions and other factors beyond the control of the Investment Adviser.
As a result, there is a risk that you could lose money by investing in the
Funds.
The Funds will be subject to greater risk because of their concentration of
investments in the technology industry and within certain segments of the
technology industry. Although the Investment Adviser currently believes
that investments by the Funds in the technology industry may offer greater
opportunity for growth of capital than investments in other industries, the
value of such investments can and often does fluctuate dramatically and may
expose you to greater than average financial and market risk.
Each Fund may also invest a portion of its assets in securities that entail
certain risks, such as foreign securities and securities of small companies
and unseasoned issuers (including companies offering shares in initial
public offerings). Please see "Additional Investment Strategies and Risk
Considerations" in this Prospectus for additional information.
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Performance
Summary
The bar charts and performance tables shown below provide an indication of
the risks of investing in the Funds by showing the changes in the
performance of the Funds from year to year since the Funds' inceptions and
by showing how the average annual returns of the Funds compare to those of
broad-based securities market indices. No performance information is
presented for The Technology Innovators Fund, as that Fund has less than
one full calendar year of operating history as of the date of this
Prospectus. How the Funds have performed in the past is not necessarily an
indication of how the Funds will perform in the future.
Technology Value Fund*
[CHART OMITTED]
* TVF inception date is 05/20/94.
During the period shown in the bar chart, the highest return for a quarter
was 60.64% during the quarter ended December 31, 1998 and the lowest return
for a quarter was -29.68% during the quarter ended September 30, 1998.
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Technology Leaders Fund*
[CHART OMITTED]
* TLF inception date is 12/10/97.
During the period shown in the bar chart, the highest return for a quarter
was 58.90% during the quarter ended December 31, 1998 and the lowest return
for a quarter was -12.62% during the quarter ended September 30, 1998.
Average Annual Returns for Periods Ended December 31, 1998
One Year Since Inception*
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The Technology Value Fund 23.71% 37.24%
Dow Jones Industrial Average(1) 18.13% 27.28%
Standard & Poor's 500 Index(2) 28.58% 30.42%
NASDAQ Composite Index(3) 39.63% 31.78%
The Technology Leaders Fund 78.15% 73.54%
Dow Jones Industrial Average(1) 18.13% 15.21%
Standard & Poor's 500 Index(2) 25.58% 26.22%
NASDAQ Composite Index(3) 39.63% 33.05%
* The public offering of shares of The Technology Value Fund commenced
on December 15, 1994 and the public offering of shares of The
Technology Leaders Fund commenced on December 10, 1997.
(1) The Dow Jones Industrial Average is a measurement of general market
price movement for 30 widely held stocks listed on the New York Stock
Exchange.
(2) The Standard & Poor's 500 Index is a widely recognized, unmanaged
index of common stock prices.
(3) The NASDAQ Composite Index is an unmanaged index which averages the
trading prices of more than 3,000 domestic over-the-counter companies.
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Expense
Information
This table describes the fees and expenses that you will pay if you buy and
hold shares of the Funds.
Shareholder Fees (fees paid directly from your investment):
TVF TLF TIF
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Sales load imposed on purchases None None None
Sales load imposed on reinvested dividends None None None
Deferred sales load None None None
Exchange fee None None None
Redemption fee None* None* None*
* A wire transfer fee is charged by the Funds' Custodian in the case of
redemptions made by wire. Such fee is subject to change and is
currently $8. See "How to Redeem Shares."
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees 1.50% 1.50% 1.50%
Distribution (12b-1) Fees None None None
Other Expenses .45% .45% .45%
Total Annual Fund Operating Expenses(A) 1.95% 1.95% 1.95%
(A) The Advisory Agreement limits each Fund's total annual operating
expenses to 1.95% of the Fund's average daily net assets up to $200
million, 1.90% of such assets from $200 million to $500 million, 1.85%
of such assets from $500 million to $1 billion, and 1.80% of such
assets in excess of $1 billion.
Example:
This Example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds. It assumes that you
invest $10,000 in a Fund for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year and that a Fund's operating
expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
TVF TLF TIF
---------------------------------------------------------------------------
1 Year $ 198 $ 198 $ 198
3 Years 612 612 612
5 Years 1,052 1,052 1,052
10 Years 2,275 2,275 2,275
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Additional Investment
Strategies and Risk Considerations
Investment Techniques and Strategies
The equity securities in which the Funds may invest include common stock,
convertible long-term corporate debt obligations, preferred stock,
convertible preferred stock and warrants. The securities selected will
typically be traded on a national securities exchange, the NASDAQ System or
over-the-counter, and may include securities of both large, well-known
companies as well as smaller, less well-known companies, including foreign
securities listed on a foreign securities exchange or traded in the United
States. Although certain of the Funds' investments may produce dividends,
interest or other income, current income is not a consideration in
selecting a Fund's investments.
The Investment Adviser's analysis of a potential investment will focus on
valuing an enterprise and purchasing securities of the enterprise when the
Investment Adviser believes that value exceeds the market price. The
Investment Adviser intends to focus on the fundamental worth of the
companies under consideration, where fundamental worth is defined as the
value of the basic businesses of the firm, including products,
technologies, customer relationships and other sustainable competitive
advantages. For purposes of the Investment Adviser's analysis, fundamental
worth is a reflection of the value of an enterprise's assets and its
earning power, and will be determined by use of price-earnings ratios and
comparison with sales of comparable assets to independent third party
buyers in arms' length transactions. Balance sheet strength, the ability to
generate earnings and a strong competitive position are the major factors
the Investment Adviser will use in appraising an investment. Applicable
price-earnings ratios depend on the earnings potential of an enterprise as
determined by the Investment Adviser. For example, an enterprise that is a
relatively high growth company would normally command a higher
price-earnings ratio than lower growth companies because expected future
profits would be higher.
Each Fund may purchase shares in initial public offerings (IPOs). Due to
the typically small size of the IPO allocation available to the Funds and
the nature
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and market capitalization of the companies involved in IPOs, most of the
shares are purchased by The Technology Innovators Fund. Because IPO shares
frequently are volatile in price, the Funds may hold IPO shares for a very
short period of time. This may increase the turnover of a Fund's portfolio
and may lead to increased expenses to a Fund, such as commissions and
transaction costs. By selling shares, a Fund may realize taxable capital
gains that it will subsequently distribute to shareholders.
Risk Considerations
Equity Securities
Each Fund invests primarily in equity securities, which by definition
entail risk of loss of capital. Investments in equity securities are
subject to inherent market risks and fluctuation in value due to earnings,
economic conditions and other factors beyond the control of the Investment
Adviser. Securities in a Fund's portfolio may not increase as much as the
market as a whole and some undervalued securities may continue to be
undervalued for long periods of time. Some securities may be inactively
traded, and thus may not be readily bought or sold. Although profits in
some Fund holdings may be realized quickly, it is not expected that most
investments will appreciate rapidly. Each Fund may invest up to 15% of its
net assets in illiquid securities.
Small Capitalization Companies
Each Fund may, from time to time, invest a substantial portion of its
assets in small capitalization companies. While smaller companies generally
have potential for rapid growth, they often involve higher risks because
they lack the management experience, financial resources, product
diversification and competitive strengths of larger corporations. In
addition, in many instances the securities of smaller companies are traded
only over-the-counter or on a regional securities exchange, and the
frequency and volume of their trading is substantially less than is typical
of larger companies. Therefore, the securities of smaller companies may be
subject to wider price fluctuations. When making large sales, a Fund may
have to sell portfolio holdings at discounts from quoted prices or may have
to make a series of small sales over an extended period of time.
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Foreign Securities
Each Fund may purchase foreign securities that are listed on a foreign
securities exchange or over-the-counter market, or which are represented by
American Depository Receipts and are listed on a domestic securities
exchange or traded in the United States on over-the-counter markets.
Foreign investments may be subject to risks that are not typically
associated with investing in domestic companies. For example, such
investment may be adversely affected by changes in currency rates and
exchange control regulations, future political and economic developments
and the possibility of seizure or nationalization of companies, or the
imposition of withholding taxes on income.
Temporary Defensive Measures
For defensive purposes, each Fund may temporarily hold all or a portion of
its assets in money market instruments. Such action may help a Fund
minimize or avoid losses during adverse market, economic or political
conditions. During such a period, a Fund may not achieve its investment
objective. For example, should the market advance during this period, a
Fund may not participate as much as it would have if it had been more fully
invested.
Concentration of Investments in the Technology and Medical Industries
The Technology Value Fund will invest primarily in a combination of
companies within the high technology and medical technology segments, while
each of The Technology Leaders Fund and The Technology Innovators Fund will
invest primarily in companies within the high technology segment. The Funds
will be subject to greater risk because of their concentration of
investments in a single industry and within certain segments of the
industry. For example, investments in the health and biotechnology segments
include the risk that the economic prospects, and the share prices, of
health and biotechnology companies can fluctuate dramatically due to
changes in the regulatory or competitive environments. Investments in the
high technology segment include the risk that certain high technology
products and services are subject to competitive pressures and aggressive
pricing. Investments in companies that offer new products in the high
technology segment, such as investments in that area by The Technology
Innovators Fund, include the risk that the new products will not meet
expectations or even reach the marketplace.
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Additionally, health, biotechnology and high technology segment products
and services are subject to risk of rapid obsolescence caused by scientific
developments and technological advances. Also, the technology and medical
industries are generally more susceptible to effects caused by changes in
the economic climate, broad market swings, moves in a dominant industry
stock or regulatory changes.
Although the Investment Adviser currently believes that investments by the
Funds in certain health, biotechnology and technology companies may offer
greater opportunities for growth of capital than investments in other
industries, such investments may also expose investors to greater than
average financial and market risk. Accordingly, an investment in one or
more of the Funds does not constitute a balanced investment program.
The Funds intend to invest primarily in the following industry segments.
The Technology Leaders Fund and the Technology Innovators Fund will invest
primarily in the following high technology segments. The Technology Value
Fund will invest in both the following high technology and health and
biotechnology segments. At any point in time, however, each Fund may invest
more than 25% of its assets in any one industry segment. This will further
increase each Fund's risk and will make the Funds more volatile.
- --------------------------------------------------------------------------------
High Technology Segments Health and Biotechnology Segments
o Semiconductor o Cardiovascular Medical Device
o Computer o Minimally Invasive Surgical Tool
o Computer Peripheral o Pharmaceutical
o Software o Biotechnology
o Telecommunication o Managed Care Provider
o Mass Storage Device o Generic Drug
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Year 2000 Problem
The Funds and their service providers depend upon the smooth functioning of
their computer systems. Unfortunately, because of the way dates are encoded
and calculated, many computer systems in use today cannot recognize the
year 2000, but revert to
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1900 or another incorrect date. Computer failures due to the year 2000
problem could negatively impact the handling of securities trades and
pricing and account services.
The Funds' software vendors and service providers have assured the Funds
that their systems will be adapted in sufficient time to avoid serious
problems. There can be no guarantee, however, that all of their computer
systems will be adapted in time. The Funds do not expect year 2000
conversion costs to be substantial for the Funds because those costs are
borne by the Funds' vendors and service providers and not directly by the
Funds.
Brokers and other intermediaries that hold shareholder accounts may still
experience incompatibility problems. It is also important to keep in mind
that year 2000 issues may negatively impact the companies in which the
Funds invest and, by extension, the value of those companies' shares held
by the Funds.
Operation
of the Funds
The Trust retains Interactive Research Advisers, Inc. (the "Investment
Adviser"), 101 Park Center Plaza, Suite 1300, San Jose, California 95113,
to manage the investments of each Fund. The Investment Adviser is
controlled by Kevin M. Landis, who also serves as a Trustee of the Trust.
Mr. Landis has been a portfolio manager of The Technology Value Fund since
the Fund's inception in 1994. Mr. Landis is the portfolio manager of The
Technology Leaders Fund and The Technology Innovators Fund. Prior to his
association with the Investment Adviser, Mr. Landis served as New Products
Marketing Manager for S-MOS Systems, Inc., a San Jose, California-based
semiconductor firm.
The Investment Adviser receives from each Fund a management fee at the
annual rate of 1.50% of its average daily net assets. The Advisory
Agreement requires the Investment Adviser to waive its management fees and,
if necessary, reimburse expenses of the Funds to the extent necessary to
limit each Fund's total operating expenses to 1.95% of its average net
assets up to $200 million, 1.90% of such assets from $200 million to $500
million, 1.85% of such assets from $500 million to $1 billion, and 1.80% of
such assets in excess of $1 billion.
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The Trust has entered into a separate contract (the "Administration
Agreement") with the Investment Adviser wherein the Investment Adviser is
responsible for providing administrative and general supervisory services
to the Funds. Under the Administration Agreement, the Investment Adviser
oversees the maintenance of all books and records with respect to the
Funds' securities transactions and the Funds' books of accounts in
accordance with all applicable federal and state laws and regulations. The
Investment Adviser also arranges for the preservation of journals, ledgers,
corporate documents, brokerage account records and other records which are
required to be maintained pursuant to the 1940 Act. The Investment Adviser
is responsible for the equipment, staff, office space and facilities
necessary to perform its obligations. The Investment Adviser has also
assumed responsibility for payment of all of the Funds' operating expenses
except for brokerage and commission expenses and any extraordinary and
non-recurring expenses. For the services rendered by the Investment Adviser
under the Administration Agreement, the Investment Adviser receives a fee
from each Fund at the annual rate of .45% of its average daily net assets
up to $200 million, .40% of such assets from $200 million to $500 million,
.35% of such assets from $500 million to $1 billion, and .30% of such
assets in excess of $1 billion.
CW Fund Distributors, Inc. (the "Underwriter"), 312 Walnut Street,
Cincinnati, Ohio 45202, serves as principal underwriter for the Funds and
as such, is the exclusive agent for the distribution of shares of the
Funds. The Underwriter is an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., a New York Stock Exchange listed
company principally engaged in the business of residential mortgage
lending.
How to
Purchase Shares
You may purchase shares directly through the Funds' Transfer Agent or
through a brokerage firm or financial institution that has agreed to sell
the Funds' shares. Your initial investment in the Funds ordinarily must be
at least $10,000 per Fund (or $2,000 per Fund for Firsthand Funds IRAs).
Lower minimums are available to investors purchasing shares of the Funds
through certain brokerage firms. Shares of each Fund are sold on a
continuous basis at the net asset value next determined after receipt of a
purchase order by the Trust or an authorized agent of the Trust. Any order
placed with such brokerage firm is treated as if it were placed directly
with the Trust.
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Your shares will be held in a pooled account in the broker's name, and the
broker will maintain your individual ownership information. In addition,
your brokerage firm may charge you a fee for handling your order. Your
brokerage firm is responsible for processing your order correctly and
promptly, keeping you advised of the status of your individual account,
confirming your transactions and ensuring that you receive copies of the
Trust's Prospectus. Purchase orders received by such agents prior to 4:00
p.m., eastern time, on any business day are confirmed at the net asset
value determined as of the close of the regular session of trading on the
New York Stock Exchange on that day. It is the responsibility of agents to
transmit properly completed orders promptly. Agents may charge a fee
(separately negotiated with their customers) for effecting purchase orders.
Direct purchase orders received by the Transfer Agent by 4:00 p.m., eastern
time, are confirmed at that day's net asset value.
You may open an account and make an initial investment in the Funds through
selected brokerage firms or financial intermediaries or by sending a check
and a completed account application form to Firsthand Funds, P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to "Firsthand
Funds." Third-party checks will not be accepted. An account application is
included with this Prospectus.
The Transfer Agent (or your broker) mails you confirmations of all
purchases or redemptions of Fund shares. Certificates representing shares
are not issued. The Trust reserves the rights to limit the amount of
investments and to refuse to sell to any person.
If an order to purchase shares is cancelled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
Provided the Trust has received a completed account application form, you
may also purchase shares of the Funds by bank wire. Please telephone the
Transfer Agent (Nationwide call toll-free 1.888.884.2675) for instructions.
You should be prepared to give the name of the Fund in which you wish to
purchase shares, the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the
account, and the name of the bank which will wire the money. Your
investment will be made at the next determined net asset value after your
wire is received together with the
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account information indicated above. If the Transfer Agent does not receive
timely and complete account information, there may be a delay in the
investment of your money and any accrual of dividends. To make your initial
wire purchase, you must mail a completed account application to the
Transfer Agent. Your bank may impose a charge for sending your wire. There
is presently no fee for receipt of wired funds, but the Transfer Agent
reserves the right to charge shareholders for this service upon thirty
days' prior notice to shareholders.
You may purchase and add shares to your account ($50 minimum) by mail or by
bank wire. Checks should be sent to Firsthand Funds, P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to "Firsthand
Funds." Bank wires should be sent as outlined above. Each additional
purchase request must contain the account name and number to permit proper
crediting.
How to
Redeem Shares
You may redeem shares of each Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined
after receipt by the Transfer Agent of your redemption request in the form
described below. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares
purchased by check will be effected only after the check has been
collected, which may take up to fifteen days from the purchase date. To
eliminate this delay, you may purchase shares of the Funds by certified
check or wire.
By Telephone
You may redeem shares having a value of less than $50,000 by telephone. The
proceeds will be sent by mail to the address designated on your account or
wired directly to your existing account in any commercial bank or brokerage
firm in the United States as designated on your application. To redeem by
telephone, call the Transfer Agent (Nationwide call toll-free
1.888.884.2675). The redemption proceeds will normally be sent by mail or
by wire within three business days after receipt of your telephone
instructions. IRA accounts are not redeemable by telephone.
The telephone redemption privilege is automatically available to all new
accounts. If you do not want the telephone redemption privilege, you must
indicate this in
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the appropriate area on your account application or you must write to the
Transfer Agent and instruct them to remove this privilege from your
account.
You may change the bank or brokerage account which you have designated at
any time by writing to the Transfer Agent with your signature guaranteed by
any eligible guarantor institution (including banks, brokers and dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations) or by completing
a supplemental telephone redemption authorization form. Contact the
Transfer Agent to obtain this form. Further documentation will be required
to change the designated account if shares are held by a corporation,
fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account has been changed within the previous 30 days.
Neither the Trust, the Transfer Agent, nor their respective affiliates will
be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expenses in acting on such
telephone instructions. The affected shareholders will bear the risk of any
such loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the
Trust and/or the Transfer Agent do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal
identification prior to acting upon telephone instructions, providing
written confirmation of the transactions and/or tape recording telephone
instructions.
By Mail
You may redeem any number of shares from your account by sending a written
request to the Transfer Agent. The request must state the number of shares
or the dollar amount to be redeemed and your account number. The request
must be signed exactly as your name appears on the Trust's account records.
If the shares to be redeemed have a value of $50,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above. If the name(s) or the
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address on your account has been changed within 30 days of your redemption
request, you will be required to request the redemption in writing with
your signature guaranteed, regardless of the value of the shares being
redeemed.
Written redemption requests may also direct that the proceeds be deposited
directly in a domestic bank or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by
mail are normally mailed within three business days following receipt of
instructions in proper form.
Through Broker-Dealers
You may also redeem shares of the Funds by placing a wire redemption
request through a securities broker or dealer. Unaffiliated broker-dealers
may charge you a fee for this service. You will receive the net asset value
per share next determined after receipt by the Trust or its agent of your
wire redemption request. It is the responsibility of broker-dealers to
promptly transmit wire redemption orders.
Additional Redemption Information
If your instructions request a redemption by wire, the proceeds will be
wired directly to your existing account in any commercial bank or brokerage
firm in the United States as designated on your application and you will be
charged an $8 processing fee by the Funds' Custodian. The Trust reserves
the right, upon thirty days' written notice, to change the processing fee.
All charges will be deducted from your account by redemption of shares in
your account. Your bank or brokerage firm may also impose a charge for
processing the wire. In the event that wire transfer of funds is impossible
or impractical, the redemption proceeds will be sent by mail to the
designated account.
Redemption requests may direct that the proceeds be deposited directly in
your account with a commercial bank or other depository institution by way
of an Automated Clearing House (ACH) transaction. There is currently no
charge for ACH transactions. Contact the Transfer Agent for more
information about ACH transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The
Trust reserves the right to require you to close your account, other than
an IRA account, if at any time the value of your
16
<PAGE>
shares is less than $10,000 (based on actual amounts invested, unaffected
by market fluctuations), or such other minimum amount as the Trust may
determine from time to time. After notification to you of the
Trustintention to close your account, you will be given sixty days to
increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under
unusual circumstances as determined by the Securities and Exchange
Commission. Under unusual circumstances, when the Board of Trustees deems
it appropriate, the Funds may make payment for shares redeemed in portfolio
securities of the Funds taken at current value.
Shareholder
Services
Contact the Transfer Agent (nationwide call toll-free 1.888.884.2675) for
additional information about the shareholder services described below.
Tax-Deferred Retirement Plans
Shares of each Fund are available for purchase in connection with the
following tax-deferred retirement plans:
o Keogh Plans for self-employed individuals
o Individual retirement account (IRA) plans for individuals and
their non-employed spouses, including Roth IRAs and Education
IRAs
o Qualified pension and profit-sharing plans for employees,
including those profit-sharing plans with a 401(k) provision
o 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit organizations
meeting certain requirements of the Internal Revenue Code (the
"Code")
Direct Deposit Plans
Shares of each Fund may be purchased through direct deposit plans offered
by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or Social
Security checks transferred automatically to purchase shares of the Funds.
17
<PAGE>
Automatic Investment Plan
By completing the Automatic Investment Plan section of the account
application, you may make automatic monthly investments in each Fund from
your bank, savings and loan or other depository institution account. The
minimum investment must be $50 under the plan. The Transfer Agent pays the
costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Funds. You may
change the amount of the investment or discontinue the plan at any time by
writing to the Transfer Agent.
Exchange
Privilege
Shares of the Funds may be exchanged for each other at net asset value.
Shares of any Fund may also be exchanged at net asset value for shares of
the Short Term Government Income Fund (a series of Countrywide Investment
Trust), which invests in short-term U.S. Government obligations backed by
the "full faith and credit" of the United States and seeks high current
income, consistent with protection of capital. Shares of the Short Term
Government Income Fund acquired via exchange may be reexchanged for shares
of any Fund at net asset value.
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also be requested by telephone. An
exchange will be effected at the next determined net asset value after
receipt of a request by the Transfer Agent. Your request is subject to the
Funds' cut-off time which is normally 4:00 p.m. eastern time. Requests
received by the Transfer Agent prior to the cut-off time will receive the
same day's net asset value. Requests received by the Transfer Agent after
the cut-off time will have next day's net asset value.
The telephone exchange privilege is automatically available to all
shareholders. Neither the Trust, the Transfer Agent, nor their respective
affiliates will be liable for complying with telephone instructions they
reasonably believe to be genuine
18
<PAGE>
for any loss, damage, cost or expense in acting on such telephone
instructions. The affected shareholders will bear the risk of any such
loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the
Trust and/or the Transfer Agent do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal
identification prior to acting upon telephone instructions, providing
written confirmation of the transactions and/or tape recording telephone
instructions.
Exchanges may only be made for shares of Funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or
terminated by the Board of Trustees upon 60 days' prior notice to
shareholders. Before making an exchange for shares of the Short Term
Government Income Fund, contact the Transfer Agent to obtain a current
prospectus and more information about exchanges among the Funds.
Dividends
and Distributions
Each Fund expects to distribute substantially all of its net investment
income and net realized gains, if any, at least annually. Dividends and
distributions are automatically reinvested in additional shares of the
Funds (the Share Option) unless cash payments are specified on your
application or are otherwise requested by contacting the Transfer Agent.
All distributions will be based on the net asset value in effect on the
payable date.
If you elect to receive dividends in cash and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the
then-current net asset value and your account will be converted to the
Share Option. No interest will accrue on amounts represented by uncashed
distribution checks.
19
<PAGE>
Taxes
Each Fund has qualified in all prior years and intends to continue to
qualify and to be treated as a "regulated investment company" under
Subchapter M of the Code by annually distributing substantially all of its
net investment company taxable income, net tax-exempt income and net
capital gains in dividends to its shareholders and by satisfying certain
other requirements related to the sources of its income and the
diversification of its assets. By so qualifying, a Fund will not be subject
to federal income tax or excise tax on that part of its investment company
taxable income and net realized short-term and long-term capital gains
which it distributes to its shareholders in accordance with the Code's
timing requirements.
Dividends and distributions paid to shareholders (whether received in cash
or reinvested in additional shares) are generally subject to federal income
tax and may be subject to state and local income tax. Dividends from net
investment income and distributions from any excess of net realized
short-term capital gains over net realized capital losses are taxable to
shareholders (other than tax-exempt entities that have not borrowed to
purchase or carry their shares of the Funds) as ordinary income.
Distributions of net capital gains (the excess of net long-term capital
gains over net short-term capital losses) by a Fund to its shareholders are
taxable to you as capital gains, without regard to the length of time you
have held your Fund shares. Capital gains distributions may be taxable at
different rates depending on the length of time a Fund holds its assets.
Redemptions of shares of the Funds are taxable events on which you may
realize a gain or loss. An exchange of a Fund's shares for shares of
another Fund will be treated as a sale of such shares and any gain on the
transaction may be subject to federal income tax.
The Trust will mail a statement to you annually indicating the amount and
federal income tax status of all distributions made during the year. The
Funds' distributions may be subject to federal income tax whether received
20
<PAGE>
in cash or reinvested in additional shares. In addition to federal taxes,
you may be subject to state and local taxes on distributions.
Calculation of
Share Price
The share price (net asset value) of the shares of each Fund is determined
as of the close of the regular session of trading on the New York Stock
Exchange (normally 4:00 p.m., eastern time) on each day the New York Stock
Exchange is open for business and may also be determined on any other day
when there is sufficient trading in a Fund's investments that its net asset
value might be materially affected. The net asset value per share of each
Fund is calculated by dividing the sum of the value of the securities held
by the Fund plus cash or other assets minus all liabilities (including
estimated accrued expenses) by the total number of shares outstanding of
the Fund, rounded to the nearest cent. The price at which a purchase or
redemption of Fund shares is effected is based on the next calculation of
net asset value after the order is placed.
Portfolio securities are valued as follows: (1) securities which are traded
on stock exchanges or are quoted by NASDAQ are valued at the last reported
sale price as of the close of the regular session of trading on the New
York Stock Exchange on the day the securities are being valued, or, if not
traded on a particular day, at the most recent bid price, (2) securities
traded in the over-the-counter market, and which are not quoted by NASDAQ,
are valued at the last sale price (or, if the last sale price is not
readily available, at the most recent bid price as quoted by brokers that
make markets in the securities) as of the close of the regular session of
trading on the New York Stock Exchange on the day the securities are being
valued, (3) securities which are traded both in the over-the-counter market
and on a stock exchange are valued according to the broadest and most
representative market, and (4) securities (and other assets) for which
market quotations are not readily available are valued at their fair value
as determined
21
<PAGE>
in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees.
The net asset value per share of each Fund will fluctuate with the value of
the securities it holds.
Financial
Highlights
The financial highlights tables are intended to help you understand the
Funds' financial performance. Certain information reflects financial
results for a single Fund share. The total returns in the tables represent
the rate that an investor would have earned or lost on an investment in the
Funds (assuming reinvestment of all dividends and distributions). The
information for the periods ended December 31, 1994 through December 31,
1998 has been audited by Tait, Weller & Baker, whose report, along with the
Funds' financial statements, are included in the Statement of Additional
Information, which is available upon request.
22
<PAGE>
Financial Highlights - Technology Value Fund
<TABLE>
<CAPTION>
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Period
Six Months Year Year Year Year Period
Ended Ended Ended Ended Ended Ended
6/30/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94(A)
(Unaudited)
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $32.24 $26.06 $26.66 $18.44 $11.70 $10.00
------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.27) (0.59) (0.26) (0.08) (0.14) (0.03)
Net realized and unrealized gains
on investments 21.82 6.77 1.90 11.20 7.28 2.56
------------------------------------------------------------------
Total from investment operations 21.55 6.18 1.64 11.12 7.14 2.53
------------------------------------------------------------------
Less distributions:
Distributions from net realized gains -- -- (1.80) (2.90) (0.40) (0.83)
Distributions in excess of net
realized gains -- -- (0.44) -- -- --
------------------------------------------------------------------
Total distributions -- -- (2.24) (2.90) (0.40) (0.83)
------------------------------------------------------------------
Net asset value at end of period $53.79 $32.24 $26.06 $26.66 $18.44 $11.70
==================================================================
Total return 66.84%(B) 23.71% 6.46% 60.55% 61.17% 25.30%(B)
==================================================================
Net assets at end of period (millions) $325.9 $178.1 $194.4 $ 35.1 $ 2.7 $ 0.2
==================================================================
Ratio of expenses to average net assets 1.94%(C) 1.95% 1.93% 1.81% 1.98% 1.96%(C)
Ratio of net investment loss to average
net assets (1.66%)(C) (1.80%) (1.43%) (0.55%) (1.45%) (1.29%)(C)
Portfolio turnover rate 57%(B) 126% 101% 43% 45% 56%(B)
</TABLE>
(A) Represents the period from the commencement of operations (May 20, 1994)
through December 31, 1994.
(B) Not annualized.
(C) Annualized.
23
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights - Technology Leaders Fund
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Period
Six Months Year Period
Ended Ended Ended
6/30/99 12/31/98 12/31/97(A)
(Unaudited)
===================================================================================================
<S> <C> <C> <C>
Net asset value at beginning of period $ 17.94 $ 10.07 $ 10.00
------------------------------------
Income from investment operations:
Net investment income (loss) (0.12) (0.09) 0.01
Net realized and unrealized gains on investments 8.55 7.96 0.06
------------------------------------
Total from investment operations 8.43 7.87 0.07
------------------------------------
Less distributions:
Dividends from net investment income -- -- --
Distributions from net realized gains -- -- --
------------------------------------
Total distributions -- -- --
------------------------------------
Net asset value at end of period $ 26.37 $ 17.94 $ 10.07
====================================
Total return 47.00%(B) 78.15% 0.70%(B)
====================================
Net assets at end of period (millions) $ 96.3 $ 42.8 $ 3.6
====================================
Ratio of expenses to average net assets 1.94%(C) 1.94% 1.80%(C)
Ratio of net investment income (loss) to average net assets (1.49%)(C) (1.03%) 1.77%(C)
Portfolio turnover rate 29%(B) 105% 0%
</TABLE>
(A) Represents the period from the commencement of operations (December 10,
1997) through December 31, 1997.
(B) Not annualized.
(C) Annualized.
24
<PAGE>
Financial Highlights - Technology Innovators Fund
Selected Per Share Data and Ratios for a
Share Outstanding Throughout Each Period
Six Months Period
Ended Ended
6/30/99 12/31/98 (A)
(Unaudited)
================================================================================
Net asset value at beginning of period $ 16.01 $ 10.00
-----------------------
Income from investment operations:
Net investment loss (0.04) (0.01)
Net realized and unrealized gains on investments 12.07 6.02
-----------------------
Total from investment operations 12.03 6.01
-----------------------
Less distributions:
Dividends from net investment income -- --
Distributions from net realized gains -- --
-----------------------
Total distributions -- --
-----------------------
Net asset value at end of period $ 28.04 $ 16.01
=======================
Total return 75.14%(B) 60.10%(B)
=======================
Net assets at end of period (millions) $ 50.2 $ 6.5
=======================
Ratio of expenses to average net assets 1.92%(C) 1.92%(C)
Ratio of net investment loss to average net assets (1.04%)(C) (0.59%)(C)
Portfolio turnover rate 80%(B) 188%(B)
(A) Represents the period from the commencement of operations (May 20, 1998)
through December 31, 1998.
(B) Not annualized.
(C) Annualized.
25
<PAGE>
[LOGO]
FIRSTHAND FUNDS
101 Park Center Plaza
Suite 1300
San Jose, CA 95113
INVESTMENT ADVISER
Interactive Research Advisers, Inc.
101 Park Center Plaza
Suite 1300
San Jose, CA 95113
TRANSFER AGENT/ADMINISTRATOR
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, OH 45201
(Toll-Free) 1-888-884-2675
DISTRIBUTOR
CW Fund Distributors, Inc.
312 Walnut Street, 21st Floor
Cincinnati, OH 45202
Additional information about the Funds is included in the Statement of
Additional Information ("SAI"), which is incorporated by reference in its
entirety. Additional information about the Funds' investments is available in
the Funds' annual and semiannual reports to shareholders. In the Funds' annual
report, you will find a discussion of the market conditions and strategies that
significantly affected the Funds' performance during their last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Funds, or to make shareholder inquiries about the Funds,
please call 1.888.884.2675.
Information about the Funds (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's public reference room in Washington,
D.C. Information about the operation of the public reference room can be
obtained by calling the Commission at 1.800.SEC.0330. Reports and other
information about the Funds are available on the Commission's Internet site at
http://www.sec.gov. Copies of information on the Commission's Internet site may
be obtained, upon payment of a duplicating fee, by writing to: Securities and
Exchange Commission, Public Reference Section, Washington, D.C. 20549-6009.
contact us at:
888.884.2675
www.firsthandfunds.com
<PAGE>
PART A
Medical Specialists Fund
Prospectus
<PAGE>
Firsthand
[PHOTO]
Prospectus
August 31, 1999
Medical Specialists Fund
Firsthand Funds has registered each mutual fund offered in this prospectus with
the U.S. Securities and Exchange Commission (SEC). That registration does not
imply, however, that the SEC endorses the Funds.
The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
<PAGE>
Firsthand Funds
101 Park Center Plaza, Suite 1300
San Jose, CA 95113
408.294.2200
The Medical Specialists Fund
A No-Load Fund
Firsthand Funds (the "Trust") currently offers series of shares to
investors, including The Medical Specialists Fund (the "Fund"). The Fund is
non-diversified and has as its investment objective long-term growth of
capital. Although certain of the Fund's investments may produce dividends,
interest or other income, current income is not a consideration in
selecting the Fund's investments.
This Prospectus has information you should know before you invest. Please
read it carefully and keep it with your investment records.
2
<PAGE>
Contents
Risk/Return Summary 4
Expense Information 6
Additional Investment Strategies
and Risk Considerations 7
Operation of the Fund 10
How to Purchase Shares 12
How to Redeem Shares 14
Shareholder Services 16
Exchange Privilege 17
Dividends and Distributions 18
Taxes 19
Calculation of Share Price 20
Financial Highlights 21
FOR INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
Nationwide (Toll-Free): 1.888.884.2675
3
<PAGE>
Risk/Return
Summary
What is the Fund's investment objective?
The Fund's investment objective is long-term growth of capital.
What are the Fund's principal investment strategies?
The Fund seeks to achieve its objective by investing at least 65% of its
assets in securities of companies in the health and biotechnology fields
which the Investment Adviser considers to have a strong earnings growth
outlook and potential for capital appreciation. The health and
biotechnology fields include the cardiovascular medical device, minimally
invasive surgical tool, pharmaceutical, biotechnology, managed care
provider and generic drug segments of the technology industry.
What are the principal risks of investing in the Fund?
The return on and value of an investment in the Fund will fluctuate in
response to stock market movements. Stocks and other equity securities are
subject to market risks and fluctuations in value due to earnings, economic
conditions and other factors beyond the control of the Investment Adviser.
As a result, there is a risk that you could lose money by investing in the
Fund.
The Fund will be subject to greater risk because of its concentration of
investments in the technology industry and within certain segments of the
technology industry. Although the Investment Adviser currently believes
that investments by the Fund in the technology industry may offer greater
opportunity for growth of capital than investments in other
4
<PAGE>
industries, the value of such investments can and often does fluctuate
dramatically and may expose you to greater than average financial and
market risk.
The Fund may also invest a portion of its assets in securities that entail
certain risks, such as foreign securities and securities of small companies
and unseasoned issuers (including companies offering shares in initial
public offerings). Please see "Additional Investment Strategies and Risk
Considerations" in this Prospectus for additional information.
Performance Summary
The bar chart and performance table shown below provide an indication of
the risks of investing in the Fund by showing the changes in the
performance of the Fund since the Fund's inception and by showing how the
average annual returns of the Fund compare to those of broad-based
securities market indices. How the Fund has performed in the past is not
necessarily an indication of how the Fund will perform in the future.
[CHART OMITTED]
During the period shown in the bar chart, the highest return for a quarter
was 31.97% during the quarter ended December 31, 1998 and the lowest return
for a quarter was -19.74% during the quarter ended June 30, 1998.
Average Annual Total Returns for Periods Ended December 31, 1998
One Year Since Inception*
- --------------------------------------------------------------------------------
The Medical Specialists Fund -4.55% -3.21%
Dow Jones Industrial Average(1) 18.13% 15.21%
Standard & Poor's 500 Index(2) 28.58% 26.22%
NASDAQ Composite Index(3) 39.63% 33.05%
* The public offering of shares of The Medical Specialists Fund commenced
on December 10, 1997.
5
<PAGE>
(1) The Dow Jones Industrial Average is a measurement of general market
price movement for 30 widely held stocks listed on the New York Stock
Exchange.
(2) The Standard & Poor's 500 Index is a widely recognized, unmanaged
index of common stock prices.
(3) The NASDAQ Composite Index is an unmanaged index which averages the
trading prices of more than 3,000 domestic over-the-counter companies.
Expense
Information
This table describes the fees and expenses that you will pay if you buy and
hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment):
Sales load imposed on purchases None
Sales load imposed on reinvested dividends None
Deferred sales load None
Exchange fee None
Redemption fee None*
* A wire transfer fee is charged by the Funds' Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently
$8. See "How to Redeem Shares."
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Management Fees 1.50%
Distribution (12b-1) Fees None
Other Expenses .45%
Total Annual Fund Operating Expenses(A) 1.95%
(A) The Advisory Agreement limits the Fund's total annual operating
expenses to 1.95% of the Fund's average daily net assets up to $200
million, 1.90% of such assets from $200 million to $500 million, 1.85%
of such assets from $500 million to $1 billion, and 1.80% of such
assets in excess of $1 billion.
6
<PAGE>
Example:
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem
all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 Year $ 198
3 Years 612
5 Years 1,052
10 Years 2,275
Additional Principal Investment
Strategies and Risk Considerations
Investment Techniques and Strategies
The equity securities in which the Fund may invest include common stock,
convertible long-term corporate debt obligations, preferred stock,
convertible preferred stock and warrants. The securities selected will
typically be traded on a national securities exchange, the NASDAQ System or
over-the-counter, and may include securities of both large, well-known
companies as well as smaller, less well-known companies, including foreign
securities listed on a foreign securities exchange or traded in the United
States. Although certain of the Fund's investments may produce dividends,
interest or other income, current income is not a consideration in
selecting the Fund's investments.
The Investment Adviser's analysis of a potential investment will focus on
valuing an enterprise and purchasing securities of the enterprise when the
Investment Adviser believes that value exceeds the market price. The
Investment Adviser intends to focus on the fundamental worth of the
companies under consideration, where fundamental worth is defined as the
value of the basic businesses of the firm, including products,
technologies, customer relationships and other sustainable competitive
advantages. For purposes of the Investment Adviser's analysis, fundamental
worth is a reflection of the value of an enterprise's assets and its
earning power, and will be determined by use of price-earnings ratios and
comparison with sales of comparable assets to independent third party
buyers in arms' length transactions. Balance
7
<PAGE>
sheet strength, the ability to generate earnings and a strong competitive
position are the major factors the Investment Adviser will use in
appraising an investment. Applicable price-earnings ratios depend on the
earnings potential of an enterprise as determined by the Investment
Adviser. For example, an enterprise that is a relatively high growth
company would normally command a higher price-earnings ratio than lower
growth companies because expected future profits would be higher.
The Fund may purchase shares in initial public offerings (IPOs). Because
IPO shares frequently are volatile in price, the Fund may hold IPO shares
for a very short period of time. This may increase the turnover of the
Fund's portfolio and may lead to increased expenses to the Fund, such as
commissions and transaction costs. By selling shares, the Fund may realize
taxable capital gains that it will subsequently distribute to shareholders.
Risk Considerations
Equity Securities
The Fund invests primarily in equity securities, which by definition entail
risk of loss of capital. Investments in equity securities are subject to
inherent market risks and fluctuation in value due to earnings, economic
conditions and other factors beyond the control of the Investment Adviser.
Securities in the Fund's portfolio may not increase as much as the market
as a whole and some undervalued securities may continue to be undervalued
for long periods of time. Some securities may be inactively traded, and
thus may not be readily bought or sold. Although profits in some Fund
holdings may be realized quickly, it is not expected that most investments
will appreciate rapidly. The Fund may invest up to 15% of its net assets in
illiquid securities.
Small Capitalization Companies
The Fund may, from time to time, invest a substantial portion of its assets
in small capitalization companies. While smaller companies generally have
potential for rapid growth, they often involve higher risks because they
lack the management experience, financial resources, product
diversification and competitive strengths of larger corporations. In
addition, in many instances the securities of smaller companies are traded
only over-the-counter or on a regional securities exchange, and the
frequency and
8
<PAGE>
volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies may be subject to
wider price fluctuations. When making large sales, the Fund may have to
sell portfolio holdings at discounts from quoted prices or may have to make
a series of small sales over an extended period of time.
Foreign Securities
The Fund may purchase foreign securities that are listed on a foreign
securities exchange or over-the-counter market, or which are represented by
American Depository Receipts and are listed on a domestic securities
exchange or traded in the United States on over-the-counter markets.
Foreign investments may be subject to risks that are not typically
associated with investing in domestic companies. For example, such
investment may be adversely affected by changes in currency rates and
exchange control regulations, future political and economic developments
and the possibility of seizure or nationalization of companies, or the
imposition of withholding taxes on income.
Temporary Defensive Measures
For defensive purposes, the Fund may temporarily hold all or a portion of
its assets in money market instruments. Such action may help the Fund
minimize or avoid losses during adverse market, economic or political
conditions. During such a period, the Fund may not achieve its investment
objective. For example, should the market advance during this period, the
Fund may not participate as much as it would have if it had been more fully
invested.
Concentration of Investments in Medical Industries
The Fund will invest primarily in companies within the health and
biotechnology segments. The Fund will be subject to greater risk because of
its concentration of investments in a single industry and within certain
segments of the industry. For example, investments in the health and
biotechnology segments include the risk that the economic prospects, and
the share prices, of health and biotechnology companies can fluctuate
dramatically due to changes in the regulatory or competitive environments.
Additionally, health and biotechnology segment products
9
<PAGE>
and services are subject to risk of rapid obsolescence caused by scientific
developments and technological advances. Also, the medical industry is
generally more susceptible to effects caused by changes in the economic
climate, broad market swings, moves in a dominant industry stock or
regulatory changes.
Although the Investment Adviser currently believes that investments by the
Fund in certain health and biotechnology companies may offer greater
opportunities for growth of capital than investments in other industries,
such investments may also expose investors to greater than average
financial and market risk. Accordingly, an investment in the Fund does not
constitute a balanced investment program.
The Fund intends to invest primarily in the following health and
biotechnology segments. At any point in time, however, the Fund may invest
more than 25% of its assets in any one industry segment. This will further
increase the Fund's risk and will make the Fund more volatile.
HEALTH AND BIOTECHNOLOGY SEGMENTS
o Cardiovascular Medical Device
o Minimally Invasive Surgical Tool
o Pharmaceutical
o Biotechnology
o Managed Care Provider
o Generic Drug
Year 2000 Problem
The Fund and its service providers depend upon the smooth functioning of
their computer systems. Unfortunately, because of the way dates are encoded
and calculated, many computer systems in use today cannot recognize the
year 2000, but revert to 1900 or another incorrect date. Computer failures
due to the year 2000 problem could negatively impact the handling of
securities trades and pricing and account services.
The Fund's software vendors and service providers have assured the Fund
that their systems will be adapted in sufficient time to avoid serious
problems. There can be no guarantee, however, that all of their computer
systems will be adapted in time. The Fund does not expect year 2000
10
<PAGE>
conversion costs to be substantial for the Fund because those costs are
borne by the Fund's vendors and service providers and not directly by the
Fund.
Brokers and other intermediaries that hold shareholder accounts may still
experience incompatibility problems. It is also important to keep in mind
that year 2000 issues may negatively impact the companies in which the Fund
invests and, by extension, the value of those companies' shares held by the
Fund.
Operation
of the Fund
The Trust retains Interactive Research Advisers, Inc. (the "Investment
Adviser"), 101 Park Center Plaza, Suite 1300, San Jose, California 95113,
to manage the investments of the Fund. Following the closing of a
restructuring of the Investment Adviser that is expected to take place
around September 9, 1999, the Board of Trustees of Firsthand Funds has
agreed to allow, on an interim basis, Ingenuity Capital Management (the
"New Adviser"), 26888 Almaden Court, Los Altos, California 94022, to manage
the investments of the Fund. Kendrick Kam, the portfolio manager of the
Fund and an employee of the Investment Adviser until September 30, 1999, is
the President and 100 percent owner and sole control person of the New
Adviser, a newly-formed investment adviser. Mr. Kam has been a portfolio
manager with the Investment Adviser since 1994 and was a founder. Prior to
his association with the Investment Adviser, Mr. Kam was co-founder and
Vice President of Marketing and Finance for Novoste Corporation, a medical
device company headquartered in Aguadilla, Puerto Rico.
The Independent Trustees of Firsthand Funds agreed, subject to shareholder
approval, to allow the New Adviser to manage the investments of the Fund.
It is expected that a shareholder meeting for the Fund will take place
during September 1999. At that meeting shareholders of the Fund will be
asked to approve a new investment management agreement for the New Adviser
as the investment adviser to the Fund.
11
<PAGE>
During the interim period between the closing of the restructuring of the
Adviser and when the shareholders of the Fund meet to decide whether to
award the investment management contract to the New Adviser, the New
Adviser will not collect fees for managing the Fund's investments. If
shareholders decide to award the investment management contract to the New
Adviser, it is anticipated that the New Adviser will seek shareholder
approval to reorganize the Fund in a tax-free reorganization, out of
Firsthand Funds and into Ingenuity Capital Trust in the near future. The
Independent Trustees have approved this future reorganization of the Fund,
subject to shareholder approval. In each case, the fees charged to
shareholders of the Fund will not change.
The Investment Adviser receives from the Fund a management fee at the
annual rate of 1.50% of its average daily net assets. The Advisory
Agreement requires the Investment Adviser to waive its management fees and,
if necessary, reimburse expenses of the Fund to the extent necessary to
limit the Fund's total operating expenses to 1.95% of its average net
assets up to $200 million, 1.90% of such assets from $200 million to $500
million, 1.85% of such assets from $500 million to $1 billion, and 1.80% of
such assets in excess of $1 billion.
The Trust has entered into a separate contract (the "Administration
Agreement") with the Investment Adviser wherein the Investment Adviser is
responsible for providing administrative and general supervisory services
to the Fund. Under the Administration Agreement, the Investment Adviser
oversees the maintenance of all books and records with respect to the
Fund's securities transactions and the Fund's books of accounts in
accordance with all applicable federal and state laws and regulations. The
Investment Adviser also arranges for the preservation of journals, ledgers,
corporate documents, brokerage account records and other records which are
required to be maintained pursuant to the 1940 Act. The Investment Adviser
is responsible for the equipment, staff, office space and facilities
necessary to perform its obligations. The Investment Adviser has also
assumed responsibility for payment of all of the Fund's operating expenses
except for brokerage and commission expenses and any extraordinary and
non-recurring expenses. For the services rendered by the Investment Adviser
under the Administration Agreement, the
12
<PAGE>
Investment Adviser receives a fee from the Fund at the annual rate of .45%
of its average daily net assets up to $200 million, .40% of such assets
from $200 million to $500 million, .35% of such assets from $500 million to
$1 billion, and .30% of such assets in excess of $1 billion. Following the
closing of the restructuring of the Adviser, the Trustees have agreed to
enter into an administration agreement with the New Adviser.
CW Fund Distributors, Inc. (the "Underwriter"), 312 Walnut Street,
Cincinnati, Ohio 45202, serves as principal underwriter for the Fund and as
such, is the exclusive agent for the distribution of shares of the Fund.
The Underwriter is an indirect wholly-owned subsidiary of Countrywide
Credit Industries, Inc., a New York Stock Exchange listed company
principally engaged in the business of residential mortgage lending.
How to
Purchase Shares
You may purchase shares directly through the Fund's Transfer Agent or
through a brokerage firm or financial institution that has agreed to sell
the Fund's shares. Your initial investment in the Fund ordinarily must be
at least $10,000 (or $2,000 for Firsthand Funds IRAs). Lower minimums are
available to investors purchasing shares of the Fund through certain
brokerage firms. Shares of the Fund are sold on a continuous basis at the
net asset value next determined after receipt of a purchase order by the
Trust or an authorized agent of the Trust. Any order placed with such
brokerage firm is treated as if it were placed directly with the Trust.
Your shares will be held in a pooled account in the broker's name, and the
broker will maintain your individual ownership information. In addition,
your brokerage firm may charge you a fee for handling your order. Your
brokerage firm is responsible for processing your order correctly and
promptly, keeping you advised of the status of your individual account,
confirming your transactions and ensuring that you receive copies of the
Trust's Prospectus. Purchase orders received by such agents prior to 4:00
p.m., eastern time, on any business day are confirmed at the net asset
value determined as of the close of the regular session of trading on the
New York Stock Exchange on that day. It is the responsibility of agents to
transmit properly completed orders promptly. Agents may charge a fee
(separately
13
<PAGE>
negotiated with their customers) for effecting purchase orders. Direct
purchase orders received by the Transfer Agent by 4:00 p.m., eastern time,
are confirmed at that day's net asset value.
You may open an account and make an initial investment in the Fund through
selected brokerage firms or financial intermediaries or by sending a check
and a completed account application form to Firsthand Funds, P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to "Firsthand
Funds." Third party checks will not be accepted. An account application is
included with this Prospectus.
The Transfer Agent (or your broker) mails you confirmations of all
purchases or redemptions of Fund shares. Certificates representing shares
are not issued. The Trust reserves the rights to limit the amount of
investments and to refuse to sell to any person.
If an order to purchase shares is cancelled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
Provided the Trust has received a completed account application form, you
may also purchase shares of the Funds by bank wire. Please telephone the
Transfer Agent (Nationwide call toll-free 1.888.884.2675) for instructions.
You should be prepared to give the name of the Fund in which you wish to
purchase shares, the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the
account, and the name of the bank which will wire the money. Your
investment will be made at the next determined net asset value after your
wire is received together with the account information indicated above. If
the Transfer Agent does not receive timely and complete account
information, there may be a delay in the investment of your money and any
accrual of dividends. To make your initial wire purchase, you must mail a
completed account application to the Transfer Agent. Your bank may impose a
charge for sending your wire. There is presently no fee for receipt of
wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to
shareholders.
14
<PAGE>
You may purchase and add shares to your account ($50 minimum) by mail or by
bank wire. Checks should be sent to Firsthand Funds, P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to "Firsthand
Funds." Bank wires should be sent as outlined above. Each additional
purchase request must contain the account name and number to permit proper
crediting.
How to
Redeem Shares
You may redeem shares of the Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined
after receipt by the Transfer Agent of your redemption request in the form
described below. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares
purchased by check will be effected only after the check has been
collected, which may take up to fifteen days from the purchase date. To
eliminate this delay, you may purchase shares of the Fund by certified
check or wire.
By Telephone
You may redeem shares having a value of less than $50,000 by telephone. The
proceeds will be sent by mail to the address designated on your account or
wired directly to your existing account in any commercial bank or brokerage
firm in the United States as designated on your application. To redeem by
telephone, call the Transfer Agent (Nationwide call toll-free
1.888.884.2675). The redemption proceeds will normally be sent by mail or
by wire within three business days after receipt of your telephone
instructions. IRA accounts are not redeemable by telephone.
The telephone redemption privilege is automatically available to all new
accounts. If you do not want the telephone redemption privilege, you must
indicate this in the appropriate area on your account application or you
must write to the Transfer Agent and instruct them to remove this privilege
from your account.
15
<PAGE>
You may change the bank or brokerage account which you have designated at
any time by writing to the Transfer Agent with your signature guaranteed by
any eligible guarantor institution (including banks, brokers and dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations) or by completing
a supplemental telephone redemption authorization form. Contact the
Transfer Agent to obtain this form. Further documentation will be required
to change the designated account if shares are held by a corporation,
fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account has been changed within the previous 30 days.
Neither the Trust, the Transfer Agent, nor their respective affiliates will
be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expenses in acting on such
telephone instructions. The affected shareholders will bear the risk of any
such loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the
Trust and/or the Transfer Agent do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal
identification prior to acting upon telephone instructions, providing
written confirmation of the transactions and/or tape recording telephone
instructions.
By Mail
You may redeem any number of shares from your account by sending a written
request to the Transfer Agent. The request must state the number of shares
or the dollar amount to be redeemed and your account number. The request
must be signed exactly as your name appears on the Trust's account records.
If the shares to be redeemed have a value of $50,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above. If the name(s) or the address on your account has been
changed within 30 days of your redemption request, you will be required to
request the redemption in writing with your signature guaranteed,
regardless of the value of the shares being redeemed.
16
<PAGE>
Written redemption requests may also direct that the proceeds be deposited
directly in a domestic bank or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by
mail are normally mailed within three business days following receipt of
instructions in proper form.
Through Broker-Dealers
You may also redeem shares of the Fund by placing a wire redemption request
through a securities broker or dealer. Unaffiliated broker-dealers may
charge you a fee for this service. You will receive the net asset value per
share next determined after receipt by the Trust or its agent of your wire
redemption request. It is the responsibility of broker-dealers to promptly
transmit wire redemption orders.
Additional Redemption Information
If your instructions request a redemption by wire, the proceeds will be
wired directly to your existing account in any commercial bank or brokerage
firm in the United States as designated on your application and you will be
charged an $8 processing fee by the Funds' Custodian. The Trust reserves
the right, upon thirty days' written notice, to change the processing fee.
All charges will be deducted from your account by redemption of shares in
your account. Your bank or brokerage firm may also impose a charge for
processing the wire. In the event that wire transfer of funds is impossible
or impractical, the redemption proceeds will be sent by mail to the
designated account.
Redemption requests may direct that the proceeds be deposited directly in
your account with a commercial bank or other depository institution by way
of an Automated Clearing House (ACH) transaction. There is currently no
charge for ACH transactions. Contact the Transfer Agent for more
information about ACH transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The
Trust reserves the right to require you to close your account, other than
an IRA
17
<PAGE>
account, if at any time the value of your shares is less than $10,000
(based on actual amounts invested, unaffected by market fluctuations), or
such other minimum amount as the Trust may determine from time to time.
After notification to you of the Trust's intention to close your account,
you will be given sixty days to increase the value of your account to the
minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under
unusual circumstances as determined by the Securities and Exchange
Commission. Under unusual circumstances, when the Board of Trustees deems
it appropriate, the Fund may make payment for shares redeemed in portfolio
securities of the Fund taken at current value.
Shareholder
Services
Contact the Transfer Agent (nationwide call toll-free 1.888.884.2675) for
additional information about the shareholder services described below.
Tax-Deferred Retirement Plans
Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:
o Keogh Plans for self-employed individuals
o Individual retirement account (IRA) plans for individuals and their
non-employed spouses, including Roth IRAs and Education IRAs
o Qualified pension and profit-sharing plans for employees, including
those profit-sharing plans with a 401(k) provision
o 403(b)(7) custodial accounts for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code (the "Code")
Direct Deposit Plans
Shares of the Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder
to have all or a portion of his or her payroll or Social Security checks
transferred automatically to purchase shares of the Fund.
18
<PAGE>
Automatic Investment Plan
By completing the Automatic Investment Plan section of the account
application, you may make automatic monthly investments in the Fund from
your bank, savings and loan or other depository institution account. The
minimum investment must be $50 under the plan. The Transfer Agent pays the
costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Fund. You may
change the amount of the investment or discontinue the plan at any time by
writing to the Transfer Agent.
Exchange
Privilege
Shares of the Fund may be exchanged at net asset value for shares of the
Short Term Government Income Fund (a series of Countrywide Investment
Trust), which invests in short-term U.S. Government obligations backed by
the "full faith and credit" of the United States and seeks high current
income, consistent with protection of capital. Shares of the Short Term
Government Income Fund acquired via exchange may be reexchanged for shares
of the Fund at net asset value.
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also be requested by telephone. An
exchange will be effected at the next determined net asset value after
receipt of a request by the Transfer Agent. Your request is subject to the
Fund's cut-off time which is normally 4:00 p.m. eastern time. Requests
received by the Transfer Agent prior to the cut-off time will receive the
same day's net asset value. Requests received by the Transfer Agent after
the cut-off time will have next day's net asset value.
The telephone exchange privilege is automatically available to all
shareholders. Neither the Trust, the Transfer Agent, nor their respective
affiliates
19
<PAGE>
will be liable for complying with telephone instructions they reasonably
believe to be genuine for any loss, damage, cost or expense in acting on
such telephone instructions. The affected shareholders will bear the risk
of any such loss. The Trust or the Transfer Agent, or both, will employ
reasonable procedures to determine that telephone instructions are genuine.
If the Trust and/or the Transfer Agent do not employ such procedures, they
may be liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, requiring forms of personal
identification prior to acting upon telephone instructions, providing
written confirmation of the transactions and/or tape recording telephone
instructions.
The exchange privilege may be modified or terminated by the Board of
Trustees upon 60 days' prior notice to shareholders. Before making an
exchange for shares of the Short Term Government Income Fund, contact the
Transfer Agent to obtain a current prospectus and more information about
exchanges.
Dividends
and Distributions
The Fund expects to distribute substantially all of its net investment
income and net realized gains, if any, at least annually. Dividends and
distributions are automatically reinvested in additional shares of the Fund
(the Share Option) unless cash payments are specified on your application
or are otherwise requested by contacting the Transfer Agent. All
distributions will be based on the net asset value in effect on the payable
date.
If you elect to receive dividends in cash and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the
then-current net asset value and your account will be converted to the
Share Option. No
20
<PAGE>
interest will accrue on amounts represented by uncashed distribution
checks.
Taxes
The Fund has qualified in all prior years and intends to continue to
qualify and to be treated as a "regulated investment company" under
Subchapter M of the Code by annually distributing substantially all of its
net investment company taxable income, net tax-exempt income and net
capital gains in dividends to its shareholders and by satisfying certain
other requirements related to the sources of its income and the
diversification of its assets. By so qualifying, the Fund will not be
subject to federal income tax or excise tax on that part of its investment
company taxable income and net realized short-term and long-term capital
gains which it distributes to its shareholders in accordance with the
Code's timing requirements.
Dividends and distributions paid to shareholders (whether received in cash
or reinvested in additional shares) are generally subject to federal income
tax and may be subject to state and local income tax. Dividends from net
investment income and distributions from any excess of net realized
short-term capital gains over net realized capital losses are taxable to
shareholders (other than tax-exempt entities that have not borrowed to
purchase or carry their shares of the Fund) as ordinary income.
Distributions of net capital gains (the excess of net long-term capital
gains over net short-term capital losses) by the Fund to its shareholders
are taxable to you as capital gains, without regard to the length of time
you have held your Fund shares. Capital gains distributions may be taxable
at different rates depending on the length of time the Fund holds its
assets.
21
<PAGE>
Redemptions of shares of the Fund are taxable events on which you may
realize a gain or loss. An exchange of the Fund's shares will also be
treated as a sale of such shares and any gain on the transaction may be
subject to federal income tax.
The Trust will mail a statement to you annually indicating the amount and
federal income tax status of all distributions made during the year. The
Funds' distributions may be subject to federal income tax whether received
in cash or reinvested in additional shares. In addition to federal taxes,
you may be subject to state and local taxes on distributions.
Calculation of
Share Price
The share price (net asset value) of the shares of the Fund is determined
as of the close of the regular session of trading on the New York Stock
Exchange (normally 4:00 p.m., eastern time) on each day the New York Stock
Exchange is open for business and may also be determined on any other day
when there is sufficient trading in the Fund's investments that its net
asset value might be materially affected. The net asset value per share of
the Fund is calculated by dividing the sum of the value of the securities
held by the Fund plus cash or other assets minus all liabilities (including
estimated accrued expenses) by the total number of shares outstanding of
the Fund, rounded to the nearest cent. The price at which a purchase or
redemption of Fund shares is effected is based on the next calculation of
net asset value after the order is placed.
Portfolio securities are valued as follows: (1) securities which are traded
on stock exchanges or are quoted by NASDAQ are valued at the last reported
sale price as of the close of the regular session of trading on the New
York Stock Exchange on the day the securities are being valued, or, if not
traded on a particular day, at the most recent bid price, (2) securities
traded in the over-the-counter market, and which are not quoted by NASDAQ,
are valued at the last sale price (or, if the last sale price is not
readily available, at the most recent bid price as quoted by brokers that
make markets in the securities) as of the close of the regular session of
trading on the New York Stock Exchange on the day the securities are being
22
<PAGE>
valued, (3) securities which are traded both in the over-the-counter market
and on a stock exchange are valued according to the broadest and most
representative market, and (4) securities (and other assets) for which
market quotations are not readily available are valued at their fair value
as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the Board of
Trustees. The net asset value per share of each Fund will fluctuate with
the value of the securities it holds.
Financial
Highlights
The financial highlights table on the following page is intended to help
you understand the Fund's financial performance. Certain information
reflects financial results for a single Fund share. The total returns in
the table represent the rate that an investor would have earned or lost on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Tait, Weller & Baker,
whose report, along with the Fund's financial statements, are included in
the Statement of Additional Information, which is available upon request.
23
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights - Medical Specialists Fund
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------------
Six Months Year Period
Ended Ended Ended
6/30/99 12/31/98 12/31/97 (A)
(Unaudited)
=====================================================================================
<S> <C> <C> <C>
Net asset value at beginning of period $ 9.66 $ 10.12 $ 10.00
------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) (0.10) 0.01
Net realized and unrealized gains (losses)
on investments 2.42 (0.36) 0.11
------------------------------------
Total from investment operations 2.34 (0.46) 0.12
------------------------------------
Less distributions:
Dividends from net investment income -- -- --
Distributions from net realized gains -- -- --
------------------------------------
Total distributions -- -- --
------------------------------------
Net asset value at end of period $ 12.00 $ 9.66 $ 10.12
====================================
Total return 24.26%(B) (4.55%) 1.20%(B)
====================================
Net assets at end of period (millions) $ 6.2 $ 4.5 $ 2.4
====================================
Ratio of expenses to average net assets 1.95%(C) 1.95% 1.81%(C)
Ratio of net investment income (loss)
to average net assets (1.64%)(C) (1.33%) 1.75%(C)
Portfolio turnover rate 53%(B) 160% 0%
</TABLE>
(A) Represents the period from the commencement of operations (December 10,
1997) through December 31, 1997.
(B) Not annualized.
(C) Annualized.
24
<PAGE>
[LOGO]
[GRAPHIC OMITTED]
<PAGE>
FIRSTHAND FUNDS
101 Park Center Plaza
Suite 1300
San Jose, CA 95113
INVESTMENT ADVISER
Interactive Research Advisers, Inc.
101 Park Center Plaza
Suite 1300
San Jose, CA 95113
UNDERWRITER
CW Fund Distributors, Inc.
312 Walnut Street
Cincinnati, Ohio 45202
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201
(Toll-free) 1.888.884.2675
Additional information about the Fund is included in the Statement of Additional
Information ("SAI"), which is incorporated by reference in its entirety.
Additional information about the Fund's investments is available in the Fund's
annual and semiannual reports to shareholders. In the Funds' annual report, you
will find a discussion of the market conditions and strategies that
significantly affected the Fund's performance during its last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Fund, or to make shareholder inquiries about the Fund,
please call 1.888.884.2675.
Information about the Fund (including the SAI) can be reviewed and copied at the
Securities and Exchange Commission's public reference room in Washington, D.C.
Information about the operation of the public reference room can be obtained by
calling the Commission at 1.800.SEC.0330. Reports and other information about
the Fund are available on the Commission's Internet site at http://www.sec.gov.
Copies of information on the Commission's Internet site may be obtained, upon
payment of a duplicating fee, by writing to: Securities and Exchange Commission,
Public Reference Section, Washington, D.C. 20549-6009.
contact us at
888.884.2675
www.FirsthandFunds.com
<PAGE>
PART B
Technology Value Fund
Technology Leaders Fund
Technology Innovators Fund
Medical Specialists Fund
Statement of Additional Information
<PAGE>
Combined Statement of Additional Information for the Technology Value Fund, the
Technology Leaders Fund, the Technology Innovators Fund and the Medical
Specialists Fund. Incorporated by reference to Post-Effective Amendment No. 7 to
the Registration Statement as filed with the Commission on May 11, 1999
<PAGE>
PART C
Other Information
<PAGE>
Part C. OTHER INFORMATION
Item 23. EXHIBITS
(a) Declaration of Trust
(i) Declaration of Trust--Incorporated by reference to Post-Effective
Amendment No. 7 to the Registration Statement as filed with the
Commission on May 11, 1999 ("Post-Effective Amendment No. 7).
(ii) Amendments to Declaration of Trust as adopted on February 14,
1998--Incorporated by reference to Post-Effective Amendment No. 7.
(b) Bylaws
(i) By-Laws--1998--Incorporated by reference to Post-Effective Amendment
No. 7.
(ii) Amendments to By-Laws as adopted on February 14, 1998-- Incorporated
by reference to Post-Effective Amendment No. 7.
(c) Incorporated by reference to the Declaration of Trust and Bylaws
(d) Investment Advisory Agreement--Incorporated by reference to Post-Effective
Amendment No. 7.
(e) Underwriting Agreement with CW Fund Distributors, Inc.*
(f) Inapplicable
(g) Custody Agreement with Firstar, N.A.*
(h) Other Material Contracts
(i) Administration Agreement with Interactive Research Advisers, Inc.*
(ii) Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement with Countrywide Fund Services, Inc.*
(iii) Administration Agreement with Countrywide Fund Services, Inc.*
(iv) Accounting Services Agreement with Countrywide Fund Services, Inc.*
(i) Opinion and Consent of Counsel relating to Issuance of Shares --
Incorporated by reference to Post-Effective Amendment No. 7.
(j) Consent of Independent Public Accountants
(k) Inapplicable
(l) Agreement Relating to Initial Capital*
(m) Inapplicable
(n) Financial Data Schedules*
(o) Inapplicable
* Incorporated by reference to Registration Statement on Form N-1A.
Item 24. Persons Controlled by or Under Common Control with Registrant.
No person is directly or indirectly controlled by or under common
control with the Registrant.
Item 25. Indemnification.
Under section 3817(a) of the Delaware Business Trust Act, a Delaware
business trust has the power to indemnify and hold harmless any
trustee, beneficial owner or other person from and against any and all
claims and demands whatsoever. Reference is made to sections 5.1 and
5.2 of the Declaration of Trust of Interactive Investments (the
"Trust") pursuant to which no trustee, officer, employee or agent of
the Trust shall be subject to any personal liability, when acting in
his or her individual capacity, except for his own bad faith, willful
misfeasance, gross
<PAGE>
negligence or reckless disregard of his or her duties. The Trust shall
indemnify each of its trustees, officers, employees and agents against
all liabilities and expenses reasonably incurred by him or her in
connection with the defense or disposition of any actions, suits or
other proceedings by reason of his or her being or having been a
trustee, officer, employee or agent, except with respect to any matter
as to which he or she shall have been adjudicated to have acted in or
with bad faith, willful misfeasance, gross negligence or reckless
disregard of his or her duties. The Trust will comply with Section
17(h) of the Investment Company Act of 1940, as amended (the "1940
Act") and 1940 Act Releases number 7221 (June 9, 1972) and number
11330 (September 2, 1980).
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Trust pursuant to the foregoing, the Trust
has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy and
therefore may be unenforceable. In the event that a claim for
indemnification (except insofar as it provides for the payment by the
Trust of expenses incurred or paid by a trustee, officer or
controlling person in the successful defense of any action, suit or
proceeding) is asserted against the Trust by such trustee, officer or
controlling person and the Securities and Exchange Commission is still
of the same opinion, the Trust will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication
of such issue.
Indemnification provisions exist in the Advisory Agreement, the
Administration Agreement and the Underwriting Agreement which are
substantially identical to those in the Declaration of Trust noted
above.
The Trust maintains a standard mutual fund and investment advisory
professional and directors and officers liability policy. The policy
provides coverage to the Trust, its Trustees and officers, and its
Investment Adviser. Coverage under the policy includes losses by
reason of any act, error, omission, misstatement, misleading
statement, neglect or breach of duty.
Item 26. Business and Other Connections of the Investment Adviser
(a) Inapplicable
(b) Inapplicable
Item 27. Principal Underwriters.
(a) CW Fund Distributors, Inc. also acts as underwriter for the
following open-end investment companies: Atalanta/Sosnoff
Investment Trust, Brundage, Story and Rose Investment Trust, The
Caldwell & Orkin Funds, Inc., Profit Funds Investment Trust, the
Lake Shore Family of Funds, UC Investment Trust, The Winter
Harbor Fund and The James Advantage Funds.
(b) The following list sets forth the directors and executive
officers of the Distributor. Unless otherwise noted with an
asterisk(*), the address of the persons named below is 312 Walnut
Street, Cincinnati, Ohio 45202.
* The address is 4500 Park Granada Boulevard, Calabasas, California
91302.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Name Position with Distributor Position with Registrant
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
*Angelo R. Mozilo Chairman of the Board, Director None
- --------------------------------------------------------------------------------------------------------
*Andrew S. Bielanski Director None
- --------------------------------------------------------------------------------------------------------
*Thomas H. Boone Director None
- --------------------------------------------------------------------------------------------------------
*Marshall M. Gates Director None
- --------------------------------------------------------------------------------------------------------
Robert H. Leshner President, Vice Chairman, Chief Executive None
Officer, Director
- --------------------------------------------------------------------------------------------------------
Maryellen Peretzky Vice President, Secretary Assistant Secretary
- --------------------------------------------------------------------------------------------------------
Robert L. Bennett Vice President, Chief Operations Officer None
- --------------------------------------------------------------------------------------------------------
Terrie A. Wiedenheft Vice President, Chief Financial Officer, Treasurer None
- --------------------------------------------------------------------------------------------------------
</TABLE>
(c) Inapplicable
Item 28. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant at its
offices located at 101 Park Center Plaza, Suite 1300, San Jose,
California 95113 or at the offices of the Registrant's transfer agent
ocated at 312 Walnut Street, Cincinnati, Ohio 45202.
Item 29. Management Services Not Discussed in Parts A and B.
Inapplicable
Item 30. Undertakings.
Inapplicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Jose and the State of California on the 31st
of August, 1999.
FIRSTHAND FUNDS
By: /s/ Kevin M. Landis
--------------------------
Kevin M. Landis, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Mark Taguchi* Trustee August 31, 1999
- -------------
Mark Taguchi
Mike Lynch* Trustee August 31, 1999
- ----------
Mike Lynch
Ken Kam* Trustee August 31, 1999
- -------
Ken Kam
/s/ Kevin Landis Chairman of the Board of Trustees August 31, 1999
- ----------------
Kevin Landis
*By: /s/ Kevin Landis
----------------
Kevin Landis, attorney-in-fact pursuant to powers of attorney previously
filed
<PAGE>
Exhibits
Consent of Independent Accountants
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective Amendment to the
Registration Statement on Form N-1A of the Firsthand Funds and to the use of our
report dated January 18, 1999 on the financial statements and financial
highlights of the Technology Value Fund, Technology Leaders Fund, Technology
Innovators Fund, and Medical Specialists Fund, each a series of shares of the
Firsthand Funds. Such financial statements and financial highlights appear in
the 1998 Annual Report to Shareholders, which is incorporated by reference in
the Registration Statement.
/s/ Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
August 30, 1999
