<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000
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. 12
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 17
FIRSTHAND FUNDS
(Exact name of Registrant as Specified in Charter)
125 SOUTH MARKET, SUITE 1200, SAN JOSE, CALIFORNIA 95113
(Address of Principal Executive Offices)
(408) 294-2200
Registrant's Telephone Number, including Area Code
KEVIN M. LANDIS
FIRSTHAND CAPITAL MANAGEMENT, INC.
125 SOUTH MARKET, SUITE 1200, SAN JOSE, CALIFORNIA 95113
(Name and Address of Agent for Service)
Copies of all communications to:
OMAR BILLAWALA
FIRSTHAND CAPITAL MANAGEMENT, INC.
125 SOUTH MARKET, SUITE 1200, SAN JOSE, CALIFORNIA 95113
JULIE TEDESCO
STATE STREET BANK AND TRUST COMPANY P.O. BOX 1713 BOSTON, MA 02105
<PAGE>
It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on _______________ 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
<PAGE>
April 28, 2000
[GRAPHIC]FIRSTHAND-Registered Trademark- FUNDS
SUPPLEMENT TO PROSPECTUS DATED APRIL 28, 2000 (THE "PROSPECTUS")
The following information supplements the information contained in
the Prospectus:
Firsthand Funds will institute redemption fees starting July 1, 2000
Shares of the Technology Value Fund, the Technology Leaders Fund and the
Technology Innovators Fund purchased prior to July 1, 2000, are not subject to a
2% redemption fee. However, new shares purchased after July 1 by new or existing
shareholders will be subject to the 2% fee if the shares are redeemed within 180
days of purchase. These fees are deducted from the amount sold and are paid
directly to the Fund and become part of that Fund's daily net asset value (NAV)
calculations.
Redemption fees are often used in the mutual fund industry to minimize the
impact of short-term trading on mutual funds and to protect the interests of
long-term investors. Short-term trading activity can increase fund cash flow
volatility, making a fund more difficult to manage. For example, this additional
volatility could force fund managers to trade more frequently or to avoid
investing as fully as they would like to ensure that sufficient cash is
available to meet redemption requests. Short-term trading can also increase the
tax liability of fund shareholders if a fund manager is forced to sell stocks
(and realize capital gains) to meet redemptions.
<PAGE>
[LOGO]
[PHOTO]
P R O S P E C T U S
The Technology Value Fund-Registered Trademark-
The Technology Leaders Fund
The Technology Innovators Fund*
The Communications Fund-TM-
The e-Commerce Fund-TM-
April 28, 2000
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.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF A BANK AND IS NOT GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
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.
*THE TECHNOLOGY INNOVATORS FUND IS CURRENTLY CLOSED TO NEW INVESTORS.
<PAGE>
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE INVESTMENT OBJECTIVES,
STRATEGIES AND RISKS OF THE FUNDS THAT YOU SHOULD KNOW BEFORE YOU INVEST IN
THEM. PLEASE READ IT CAREFULLY AND KEEP IT WITH YOUR INVESTMENT RECORDS. EACH
FUND IS NON-DIVERSIFIED AND HAS AS ITS INVESTMENT OBJECTIVE LONG-TERM GROWTH OF
CAPITAL.
THE INITIAL MINIMUM INVESTMENT FOR EACH FUND IS $10,000 EXCEPT FOR CERTAIN
RETIREMENT ACCOUNTS. FOR INDIVIDUAL RETIREMENT ACCOUNTS (IRAS), ROTH IRAS AND
403(b) ACCOUNTS, THE INITIAL MINIMUM INVESTMENT IS $2,000. FOR EDUCATION IRAS,
THE INITIAL MINIMUM INVESTMENT IS $500. FOR ALL OTHER RETIREMENT ACCOUNTS, THE
INITIAL MINIMUM INVESTMENT IS $10,000. LOWER MINIMUMS ARE AVAILABLE TO INVESTORS
PURCHASING SHARES OF THE FUNDS THROUGH CERTAIN BROKERAGE FIRMS. PLEASE SEE "HOW
TO PURCHASE SHARES" IN THIS PROSPECTUS FOR ADDITIONAL INFORMATION.
<PAGE>
CONTENTS
Technology Value Fund 2
-----------------------------------------------------------------------
Technology Leaders Fund 6
-----------------------------------------------------------------------
Technology Innovators Fund (CURRENTLY CLOSED TO NEW INVESTORS) 10
-----------------------------------------------------------------------
The Communications Fund 14
-----------------------------------------------------------------------
The e-Commerce Fund 18
-----------------------------------------------------------------------
Additional Investment Techniques and Strategies 22
-----------------------------------------------------------------------
Additional Risk Considerations 23
-----------------------------------------------------------------------
Portfolio Management 25
-----------------------------------------------------------------------
Operation of the Funds 25
-----------------------------------------------------------------------
How to Purchase Shares 27
-----------------------------------------------------------------------
How to Redeem Shares 29
-----------------------------------------------------------------------
Shareholder Services 32
-----------------------------------------------------------------------
Exchange Privilege 33
-----------------------------------------------------------------------
Fund Distributions 34
-----------------------------------------------------------------------
Taxes 35
-----------------------------------------------------------------------
Calculation of Share Price 36
-----------------------------------------------------------------------
Financial Highlights 37
-----------------------------------------------------------------------
CALL TOLL-FREE 1.888.884.2675 Prospectus | 1
<PAGE>
TECHNOLOGY VALUE FUND-Registered Trademark- (TVFQX)
OBJECTIVE
The Fund seeks long-term growth of capital.
STRATEGY
The Fund seeks to achieve its objective by investing at least 65% of its assets
in securities of companies in technology fields that the Investment Advisor
considers to be undervalued and have potential for capital appreciation.
The Investment Advisor's analysis of a potential investment will focus on
valuing an enterprise and purchasing securities of the enterprise when the
Investment Advisor believes the value exceeds the market price. In assessing a
company's potential, the Investment Advisor may consider a number of factors,
including technical vision, marketing acumen, proprietary technological
advantages and the company's ability to rapidly respond to changing market
conditions.
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.
PLEASE SEE "ADDITIONAL INVESTMENT TECHNIQUES AND STRATEGIES" FOR FURTHER
INFORMATION.
RISKS
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 Advisor. As a result, there
is a risk that you could lose money by investing in the Fund.
Because the Fund is non-diversified, it invests in fewer issuers, and is subject
to greater risk than a more-diversified fund. The Fund is also subject to
greater risk because of its concentration of investments in technology
companies, which can be highly volatile. The value of such investments can, and
often does, fluctuate dramatically and may expose you to greater than average
financial and market risk.
2 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
The Fund may also invest in securities issued by smaller companies and in
connection with initial public offerings, which typically have additional risks.
Smaller companies may have more-limited product lines, markets and financial
resources than larger, more-seasoned companies and their securities may trade
less frequently and in more-limited volume than those of larger, more-mature
companies.
The Fund's ability to invest in foreign companies may expose shareholders to
additional risks. Foreign stock markets tend to be more volatile than the U.S.
market due to greater economic and political instability in some countries.
PLEASE SEE "ADDITIONAL RISK CONSIDERATIONS" FOR FURTHER INFORMATION.
From time to time the Fund may close and reopen to new and/or existing investors
at the Investment Advisor's discretion.
PAST FUND PERFORMANCE
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 from year to year since the Fund's inception and by showing how the average
annual returns of the Fund compare to those of broad-based market indices. How
the Fund has performed in the past cannot guarantee how the Fund will perform in
the future.
[GRAPH]
<TABLE>
<S> <C>
1995 61.17%
1996 60.55%
1997 6.46%
1998 23.71%
1999 190.40%
</TABLE>
CALL TOLL-FREE 1.888.884.2675 Prospectus | 3
<PAGE>
During the periods 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1999
One Year 5 Years Since Inception*
----------------------------------------------------------------------------
<S> <C> <C> <C>
Technology Value Fund 190.40% 58.15% 59.23%
Dow Jones Industrial Average (1) 27.01% 26.79% 27.26%
Standard & Poor's 500 Index (2) 20.89% 28.24% 28.51%
NASDAQ Composite Index (3) 85.95% 40.63% 41.11%
</TABLE>
* The public offering of shares of the Fund commenced on December 15,
1994.
(1) The Dow Jones Industrial Average is a measurement of general market
price movement for 30 widely held stocks listed primarily 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 that averages the
trading prices of almost 5,000 domestic companies.
EXPENSE INFORMATION
The following table shows the fees and expenses you may pay if you buy and hold
shares of this Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
----------------------------------------------------------------------------
<S> <C>
Sales load imposed on purchases None
Sales load imposed on reinvested distributions None
Deferred sales load None
Exchange fee None
Redemption fee 2.00%*
</TABLE>
* A redemption fee of 2.00% is charged on investments held for less than
180 days. Redemption fees collected will be paid to the Fund. A wire
transfer fee is charged by the Fund's Transfer Agent in the case of
redemptions made by wire. This fee is currently $8.
4 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
----------------------------------------------------------------------------
<S> <C>
Management fee 1.50%
Distribution (12b-1) fee None
Other expenses 0.41%
Total annual fund operating expenses* 1.91%
</TABLE>
* 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.
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...$194 3 years...$599 5 years...$1,030 10 years...$2,224
----------------------------------------------------------------------------
CALL TOLL-FREE 1.888.884.2675 Prospectus | 5
<PAGE>
TECHNOLOGY LEADERS FUND (TLFQX)
OBJECTIVE
The Fund seeks long-term growth of capital.
STRATEGY
The Fund seeks to achieve its objective by investing at least 65% of its assets
in securities of companies in the high technology field that the Investment
Advisor considers to have the strongest competitive position. In assessing the
strength of a company's competitive position, the Investment Advisor 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 Investment Advisor's analysis of a potential investment will focus on
valuing an enterprise and purchasing securities of the enterprise when the
Investment Advisor believes the value exceeds the market price. In assessing a
company's potential, the Investment Advisor may consider a number of factors,
including technical vision, marketing acumen, proprietary technological
advantages and the company's ability to rapidly respond to changing market
conditions.
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.
PLEASE SEE "ADDITIONAL INVESTMENT TECHNIQUES AND STRATEGIES" FOR FURTHER
INFORMATION.
RISKS
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 Advisor. As a result, there
is a risk that you could lose money by investing in the Fund.
6 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
Because the Fund is non-diversified, it invests in fewer issuers, and is subject
to greater risk than a more-diversified fund. The Fund is also subject to
greater risk because of its concentration of investments in technology
companies, which can be highly volatile. 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 in securities issued by smaller companies and in
connection with initial public offerings, which typically have additional risks.
Smaller companies may have more-limited product lines, markets and financial
resources than larger more-seasoned companies and their securities may trade
less frequently and in more-limited volume than those of larger, more-mature
companies.
The Fund's ability to invest in foreign companies may expose shareholders to
additional risks. Foreign stock markets tend to be more volatile than the U.S.
market due to greater economic and political instability in some countries.
PLEASE SEE "ADDITIONAL RISK CONSIDERATIONS" FOR FURTHER INFORMATION.
From time to time the Fund may close and reopen to new and/or existing investors
at the Investment Advisor's discretion.
PAST FUND PERFORMANCE
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 from year to year since the Fund's inception and by showing how the average
annual returns of the Fund compare to those of broad-based market indices. How
the Fund has performed in the past cannot guarantee how the Fund will perform in
the future.
[GRAPH]
<TABLE>
<S> <C>
1998 78.15%
1999 152.58%
</TABLE>
CALL TOLL-FREE 1.888.884.2675 Prospectus | 7
<PAGE>
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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1999
One Year Since Inception*
----------------------------------------------------------------------------
<S> <C> <C>
Technology Leaders Fund 152.58% 108.22%
Dow Jones Industrial Average (1) 27.01% 20.88%
Standard & Poor's 500 Index (2) 20.89% 23.68%
NASDAQ Composite Index (3) 85.95% 56.83%
</TABLE>
* The public offering of shares of the 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 primarily 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 that averages the
trading prices of almost 5,000 domestic companies.
EXPENSE INFORMATION
The following table shows the fees and expenses you may pay if you buy and hold
shares of this Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
----------------------------------------------------------------------------
<S> <C>
Sales load imposed on purchases None
Sales load imposed on reinvested distributions None
Deferred sales load None
Exchange fee None
Redemption fee 2.00%*
</TABLE>
* A redemption fee of 2.00% is charged on investments held for less than
180 days. Redemption fees collected will be paid to the Fund. A wire
transfer fee is charged by the Fund's Transfer Agent in the case of
redemptions made by wire. This fee is currently $8.
8 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
----------------------------------------------------------------------------
<S> <C>
Management fee 1.50%
Distribution (12b-1) fee None
Other expenses 0.44%
Total annual fund operating expenses* 1.94%
</TABLE>
* 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.
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...$197 3 years...$609 5 years...$1,045 10 years...$2,255
----------------------------------------------------------------------------
CALL TOLL-FREE 1.888.884.2675 Prospectus | 9
<PAGE>
TECHNOLOGY INNOVATORS FUND (TIFQX)
Currently closed to new investors.*
OBJECTIVE
The Fund seeks long-term growth of capital.
STRATEGY
The Fund seeks to achieve its objective by investing at least 65% of its assets
in securities of companies in the high technology field that the Investment
Advisor considers to be best positioned to introduce successful new products. In
assessing a company's capacity for innovation, the Investment Advisor may
consider a number of factors, including technical vision, marketing acumen,
proprietary technological 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.
The Investment Advisor's analysis of a potential investment will focus on
valuing an enterprise and purchasing securities of the enterprise when the
Investment Advisor believes the value exceeds the market price. In assessing a
company's potential, the Investment Advisor may consider a number of factors,
including technical vision, marketing acumen, proprietary technological
advantages and the company's ability to rapidly respond to changing market
conditions.
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.
PLEASE SEE "ADDITIONAL INVESTMENT TECHNIQUES AND STRATEGIES" FOR FURTHER
INFORMATION.
RISKS
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 Advisor. As a result, there
is a risk that you could lose money by investing in the Fund.
10 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
Because the Fund is non-diversified, it invests in fewer issuers and is subject
to greater risk than a more-diversified fund. The Fund is also subject to
greater risk because of its concentration of investments in technology
companies, which can be highly volatile. 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 in securities issued by smaller companies and in
connection with initial public offerings, which typically have additional risks.
Smaller companies may have more-limited product lines, markets and financial
resources than larger, more-seasoned companies and their securities may trade
less frequently and in more-limited volume than those of larger, more-mature
companies.
The Fund's ability to invest in foreign companies may expose shareholders to
additional risks. Foreign stock markets tend to be more volatile than the U.S.
market due to greater economic and political instability in some countries.
PLEASE SEE "ADDITIONAL RISK CONSIDERATIONS" FOR FURTHER INFORMATION.
* From time to time, the Fund may reopen and close to new and/or existing
investors at the Investment Advisor's discretion. Currently, existing
shareholders may make additional investments into their existing accounts or
may open new accounts. Please be advised that if you redeem your total
investment in the Fund, your account will be closed and you will not be able
to make additional investments into the Fund.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 11
<PAGE>
PAST FUND PERFORMANCE
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 from year to year since the Fund's inception and by showing how the average
annual returns of the Fund compare to those of broad-based market indices. How
the Fund has performed in the past cannot guarantee how the Fund will perform in
the future.
[GRAPH]
<TABLE>
<S> <C>
1999 212.34%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
54.79% during the quarter ended December 31, 1999, and the lowest return for a
quarter was 15.21% during the quarter ended September 30, 1999.
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1999
One Year Since Inception*
----------------------------------------------------------------------------
<S> <C> <C>
Technology Innovators Fund 212.34% 170.21%
Dow Jones Industrial Average (1) 27.01% 17.83%
Standard & Poor's 500 Index (2) 20.89% 20.54%
NASDAQ Composite Index (3) 85.95% 63.47%
</TABLE>
* The public offering of shares of the Fund commenced on May 20, 1998.
(1) The Dow Jones Industrial Average is a measurement of general market
price movement for 30 widely held stocks listed primarily 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 that averages the
trading prices of almost 5,000 domestic companies.
12 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
EXPENSE INFORMATION
The following table shows the fees and expenses you may pay if you buy and hold
shares of this Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
----------------------------------------------------------------------------
<S> <C>
Sales load imposed on purchases None
Sales load imposed on reinvested distributions None
Deferred sales load None
Exchange fee None
Redemption fee 2.00%*
</TABLE>
* A redemption fee of 2.00% is charged on investments held for less than
180 days. Redemption fees collected will be paid to the Fund. A wire
transfer fee is charged by the Fund's Transfer Agent in the case of
redemptions made by wire. This fee is currently $8.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
----------------------------------------------------------------------------
<S> <C>
Management fee 1.50%
Distribution (12b-1) fee None
Other expenses 0.43%
Total annual fund operating expenses* 1.93%
</TABLE>
* 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.
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...$196 3 years...$605 5 years...$1,040 10 years...$2,245
----------------------------------------------------------------------------
CALL TOLL-FREE 1.888.884.2675 Prospectus | 13
<PAGE>
THE COMMUNICATIONS FUND-TM- (TCFQX)
OBJECTIVE
The Fund seeks long-term growth of capital.
STRATEGY
The Fund seeks to achieve its objective by investing at least 65% of its assets
in securities of companies, both domestic and foreign, that the Investment
Advisor considers to be best positioned to benefit significantly from their
involvement in or support of the communications industry. The Fund considers the
communications industry to include companies that engage in designing,
developing, operating, financing, manufacturing or providing the following
activities, products and services: communications equipment and service;
electronic components and equipment; broadcast; computer equipment; mobile
communications; electronic mail; local and wide area networking; publishing and
information systems; video; photonics; and emerging technologies combining
telephone, television and/or computer systems.
The Investment Advisor's analysis of a potential investment will focus on
valuing an enterprise and purchasing securities of the enterprise when the
Investment Advisor believes the value exceeds the market price. In assessing a
company's potential, the Investment Advisor may consider a number of factors,
including technical vision, marketing acumen, proprietary technological
advantages and the company's ability to rapidly respond to changing market
conditions.
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.
PLEASE SEE "ADDITIONAL INVESTMENT TECHNIQUES AND STRATEGIES" FOR FURTHER
INFORMATION.
14 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
RISKS
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 Advisor. As a result, there
is a risk that you could lose money by investing in the Fund.
Because the Fund is non-diversified, it invests in fewer issuers and is subject
to greater risk than a more-diversified fund. The Fund is also subject to
greater risk because of its concentration of investments in technology
companies, which can be highly volatile. 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 in securities issued by smaller companies and in
connection with initial public offerings, which typically have additional risks.
Smaller companies may have more-limited product lines, markets and financial
resources than larger, more-seasoned companies and their securities may trade
less frequently and in more-limited volume than those of larger, more-mature
companies.
The Fund's ability to invest in foreign companies may expose shareholders to
additional risks. Foreign stock markets tend to be more volatile than the U.S.
market due to greater economic and political instability in some countries.
PLEASE SEE "ADDITIONAL RISK CONSIDERATIONS" FOR FURTHER INFORMATION.
From time to time the Fund may close and reopen to new and/or existing investors
at the Investment Advisor's discretion.
PAST FUND PERFORMANCE
The Fund was launched on September 30, 1999. Performance results have not been
provided because the Fund has not yet been in existence for a full calendar
year.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 15
<PAGE>
EXPENSE INFORMATION
The following table shows the fees and expenses you may pay if you buy and hold
shares of this Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
----------------------------------------------------------------------------
<S> <C>
Sales load imposed on purchases None
Sales load imposed on reinvested distributions None
Deferred sales load None
Exchange fee None
Redemption fee 2.00%*
</TABLE>
* A redemption fee of 2.00% is charged on investments held for less than
180 days. Redemption fees collected will be paid to the Fund. A wire
transfer fee is charged by the Fund's Transfer Agent in the case of
redemptions made by wire. This fee is currently $8.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
----------------------------------------------------------------------------
<S> <C>
Management fee 1.50%
Distribution (12b-1) fee None
Other expenses* 0.45%
Total annual fund operating expenses** 1.95%
</TABLE>
* Other expenses are based on estimates for the current fiscal year.
** 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.
16 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<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...$1,050 10 years...$2,266
----------------------------------------------------------------------------
CALL TOLL-FREE 1.888.884.2675 Prospectus | 17
<PAGE>
THE E-COMMERCE FUND-TM- (TEFQX)
OBJECTIVE
The Fund seeks long-term growth of capital.
STRATEGY
The Fund seeks to achieve its objective by investing at least 65% of its assets
in securities of companies, both domestic and foreign, that the Investment
Advisor considers to be best positioned to benefit significantly from their
involvement in or support of electronic commerce (e-commerce). The Fund
considers eligible companies to be those that engage in designing, developing,
operating, financing, manufacturing or providing the following activities,
products and services: internet access, equipment and service; electronic
components and equipment; commerce infrastructure tools such as security and
payment systems; computers; software tools and utilities; electronic
communications; web presence/solution providers; local and wide area networking;
publishing and information systems; and emerging technologies combining
communications, commerce, media and/or computer systems.
The Investment Advisor's analysis of a potential investment will focus on
valuing an enterprise and purchasing securities of the enterprise when the
Investment Advisor believes the value exceeds the market price. In assessing a
company's potential, the Investment Advisor may consider a number of factors,
including technical vision, marketing acumen, proprietary technological
advantages and the company's ability to rapidly respond to changing market
conditions.
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.
PLEASE SEE "ADDITIONAL INVESTMENT TECHNIQUES AND STRATEGIES" FOR FURTHER
INFORMATION.
18 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
RISKS
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 Advisor. As a result, there
is a risk that you could lose money by investing in the Fund.
Because the Fund is non-diversified, it invests in fewer issuers and is subject
to greater risk than a more-diversified fund. The Fund is also subject to
greater risk because of its concentration of investments in technology
companies, which can be highly volatile. 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 in securities issued by smaller companies and in
connection with initial public offerings, which typically have additional risks.
Smaller companies may have more-limited product lines, markets and financial
resources than larger, more-seasoned companies and their securities may trade
less frequently and in more-limited volume than those of larger, more-mature
companies.
The Fund's ability to invest in foreign companies may expose shareholders to
additional risks. Foreign stock markets tend to be more volatile than the U.S.
market due to greater economic and political instability in some countries.
PLEASE SEE "ADDITIONAL RISK CONSIDERATIONS" FOR FURTHER INFORMATION.
From time to time the Fund may close and reopen to new and/or existing investors
at the Investment Advisor's discretion.
PAST FUND PERFORMANCE
The Fund was launched on September 30, 1999. Performance results have not been
provided because the Fund has not yet been in existence for a full calendar
year.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 19
<PAGE>
EXPENSE INFORMATION
The following table shows the fees and expenses you may pay if you buy and hold
shares of this Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
----------------------------------------------------------------------------
<S> <C>
Sales load imposed on purchases None
Sales load imposed on reinvested distributions None
Deferred sales load None
Exchange fee None
Redemption fee 2.00%*
</TABLE>
* A redemption fee of 2.00% is charged on investments held for less than
180 days. Redemption fees collected will be paid to the Fund. A wire
transfer fee is charged by the Fund's Transfer Agent in the case of
redemptions made by wire. This fee is currently $8.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
----------------------------------------------------------------------------
<S> <C>
Management fee 1.50%
Distribution (12b-1) fee None
Other expenses* 0.45%
Total annual fund operating expenses** 1.95%
</TABLE>
* Other expenses are based on estimates for the current fiscal year.
** 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.
20 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<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...$1,050 10 years...$2,266
----------------------------------------------------------------------------
CALL TOLL-FREE 1.888.884.2675 Prospectus | 21
<PAGE>
ADDITIONAL 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. Each Fund may invest up to
15% of its net assets in illiquid securities.
The Investment Advisor's analysis of a potential investment will focus on
valuing an enterprise and purchasing securities of the enterprise when the
Investment Advisor believes that value exceeds the market price. The Investment
Advisor intends to focus on the fundamental worth of the companies under
consideration. 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 Advisor's
analysis, fundamental worth is a reflection of the value of an enterprise's
assets and its earning power, and may 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 Advisor may use in appraising an investment. Applicable
price-earnings ratios depend on the earnings potential of an enterprise as
determined by the Investment Advisor. 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
and market capitalization of the companies involved in IPOs, the Investment
Advisor will often purchase IPO shares that would qualify as a permissible
investment for a Fund but will, instead, decide to allocate those IPO purchases
to other Funds the Investment Advisor advises. 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
22 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
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.
ADDITIONAL
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
Advisor. 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.
SMALL CAPITALIZATION COMPANIES. Each Fund may, from time to time, invest a
substantial portion of its assets in small capitalization companies. While
smaller companies often have potential for rapid growth, investment in them
frequently involves greater 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 of securities of
smaller companies, 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.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 23
<PAGE>
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 Depositary 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 investments 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 and
other taxes.
TEMPORARY DEFENSIVE MEASURES. For defensive purposes, each Fund may temporarily
hold all or a portion of its assets in cash or 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 CERTAIN INDUSTRIES. Each Fund invests primarily
in companies within the high technology sector. The Funds are subject to greater
risk because of their concentration of investments in a single industry and
within certain segments of that industry. For example, investments in the high
technology sector include the risk that certain high technology products and
services are subject to competitive pressures and aggressive pricing.
Investments in companies that focus on new or unproven products in the high
technology sector, such as investments in that area by the Technology Innovators
Fund, include the additional risk that the new products will not meet
expectations or even reach the marketplace.
Although the Investment Advisor currently believes that investments by the Funds
in certain 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.
24 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
Each of the Funds will invest primarily in one or more of the following high
technology sector segments. At any point in time, 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 SECTOR SEGMENTS
- Semiconductor
- Computer
- Computer Peripheral
- Software
- Telecommunication
- Mass Storage Device
- Medical
PORTFOLIO MANAGEMENT
Firsthand Funds (the "Trust") retains Firsthand Capital Management, Inc. (the
"Investment Advisor"), 125 South Market, Suite 1200, San Jose, California 95113,
to manage the investments of each Fund. The Investment Advisor 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
Advisor, Mr. Landis served as New Products Marketing Manager for S-MOS Systems,
Inc., a San Jose, California semiconductor firm.
The portfolios of The Communications Fund and The e-Commerce Fund are managed by
the Investment Advisor's Technology Equities Team.
OPERATION OF THE FUNDS
The Investment Advisor 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 Advisor to waive its management fees and, if necessary, reimburse
expenses
CALL TOLL-FREE 1.888.884.2675 Prospectus | 25
<PAGE>
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. For the fiscal
year ended December 31, 1999, the Technology Value Fund paid total annual
operating expenses at a rate of 1.91%, the Technology Leaders Fund paid total
annual operating expenses at a rate of 1.94%, and the Technology Innovators Fund
paid total annual operating expenses at a rate of 1.93%.
The Trust has entered into a separate contract (the "Administration Agreement")
with the Investment Advisor wherein the Investment Advisor is responsible for
providing administrative and general supervisory services to the Funds. Under
the Administration Agreement, the Investment Advisor oversees the maintenance of
all books and records with respect to the Funds' securities transactions and the
Funds' book of accounts in accordance with all applicable federal and state laws
and regulations. The Investment Advisor 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 Investment Company
Act of 1940. The Investment Advisor is responsible for the equipment, staff,
office space and facilities necessary to perform its obligations. The Investment
Advisor 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 Advisor under the Administration Agreement, the Investment Advisor
receives a fee from each Fund at the annual rate of 0.45% of its average daily
net assets up to $200 million, 0.40% of such assets from $200 million to $500
million, 0.35% of such assets from $500 million to $1 billion, and 0.30% of such
assets in excess of $1 billion.
ALPS Mutual Funds Services, Inc. (the "Underwriter"), a member of the National
Association of Securities Dealers, Inc. (NASD), 370 17th Street, Suite 3100,
Denver, Colorado 80202, serves as principal underwriter and distributor for the
Funds and as such, is the exclusive agent for the distribution of shares of the
Funds.
26 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
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. For Individual Retirement Accounts (IRAs), Roth IRAs and 403(b)
accounts, the initial minimum investment is $2,000. For Education IRAs, the
initial minimum investment is $500. For all other retirement accounts, the
initial minimum investment is $10,000. 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 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 and
reports to shareholders. Purchase orders received by such agents prior to the
close of the regular session of trading on the New York Stock Exchange (NYSE) on
that day (the cut-off time) are confirmed at the net asset value determined as
of the close of the regular session of trading on the NYSE 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
before the cut-off 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 8356, Boston,
Massachusetts 02266-8356. Checks should be made payable to "Firsthand Funds."
Third party checks will not be accepted.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 27
<PAGE>
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
that 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.
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 8356, Boston,
Massachusetts 02266-8356. 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.
The Technology Innovators Fund is presently closed to new investors. However,
from time to time, the Fund may reopen and close to new and/or existing
investors at the Investment Advisor's discretion. Currently, existing
shareholders may make additional investments into their existing accounts or may
open new accounts. Please be advised
28 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
that if you redeem your total investment in the Fund, your account will be
closed and you will not be able to make additional investments into the Fund.
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, less any applicable redemption fees. 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 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 that you designated on your account
application at any time by writing to the Transfer Agent with your signature
guaranteed by any eligible guarantor institution (including banks,
brokers-dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations). 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.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 29
<PAGE>
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.
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 held in your
name by a securities broker or dealer by placing a wire redemption request
through that broker-dealer. Unaffiliated broker-dealers may charge you a fee for
this service. You will
30 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
receive the net asset value per share next determined after receipt by the Trust
or its agent of your wire redemption request from that broker-dealer. 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' Transfer
Agent. The Transfer Agent reserves the right, upon thirty days' written notice,
to change the processing fee. All charges will be deducted from the amount of
your redemption proceeds. 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 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 SEC. 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.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 31
<PAGE>
Any redemption fees will apply to exchanges and redemptions out of a Fund. The
redemption fees are intended to compensate the Funds for the increased expenses
to longer-term shareholders resulting from the disruptive effect on the
portfolios caused by short-term investments. The redemption fee will be assessed
on the net asset value of the shares redeemed or exchanged and will be deducted
from the redemption proceeds otherwise payable to the shareholder. Each Fund
will retain the fee charged. The Funds reserve the right to waive the redemption
fee under certain circumstances.
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:
- Individual retirement account (IRA) plans for individuals and their
non-employed spouses, including Roth IRAs and Education IRAs
- 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 of 1986 (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.
32 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<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 applicable initial minimum investment still applies. 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 SSgA
Money Market Fund (the "Money Market Fund") (a series of SSgA Funds), which
invests in high quality money market instruments. Shares of the Money Market
Fund acquired via exchange may be reexchanged for shares of any Fund at net
asset value. In order to exchange your Fund shares for shares of the Money
Market Fund, you must first read its prospectus and open a separate Money Market
Fund account. To obtain a prospectus and account application for the Money
Market Fund call 1.888.884.2675.
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 that day's net asset value. Requests received
by the Transfer Agent after the cut-off time will be filled at the next day's
net asset value.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 33
<PAGE>
The telephone exchange privilege is automatically available to all shareholders.
Neither the Trust, the Transfer Agent, nor their respective affiliates will be
liable for any loss, damage, cost or expense in acting on such telephone
instructions when complying with telephone instructions they reasonably believe
to be genuine. 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 sixty days' prior notice to shareholders. Before making an
exchange for shares of the Money Market Fund, contact the Transfer Agent to
obtain a current prospectus and more information about exchanges among the
Funds.
Exchanges are considered redemptions of the exchanged Fund shares for the
purpose of assessing any applicable redemption fee. In general, exchanges are
taxable for federal income tax purposes.
FUND DISTRIBUTIONS
Each Fund expects to distribute substantially all of its net investment income
and net realized gains, if any, at least annually. Distributions are
automatically reinvested in additional shares of the Funds on the reinvestment
date (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.
34 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
If you elect to receive distributions in cash and the U.S. Postal Service is
unable to deliver your checks, or if your checks remain uncashed for six months,
your distributions 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.
TAXES
The following discussion regarding taxes is based on federal income tax laws
which were in effect as of the date of this prospectus and summarizes only some
of the important federal income tax considerations generally affecting the Funds
and their shareholders. It is not intended as a substitute for careful tax
planning; you should consult your own tax advisors regarding the foreign,
federal, state and local income tax consequences to you of an investment in the
Funds. Further federal income tax considerations are discussed in the Statement
of Additional Information.
Each Fund will distribute substantially all of its income and gains.
Distributions of a Fund's net capital gains (generally, the excess of long-term
capital gains over short-term capital losses) will be taxable to you as
long-term capital gains, regardless of the length of time you have held your
Fund shares. Distributions of a Fund's income from all other sources generally
will be taxable to you as ordinary income. Distributions from a Fund normally
will be taxable to you when paid, whether you take the distribution in cash or
automatically reinvest them in additional Fund shares.
Redemptions (including redemptions in-kind) and exchanges of Fund shares
ordinarily will result in a taxable capital gain or loss, depending on the
amount you receive for your shares (or are deemed to receive in the case of
exchanges) and the amount you paid (or are deemed to have paid) for them. If you
have held your Fund shares for more than one year at the time of redemption or
exchange, such capital gain or loss will be a long-term capital gain or loss.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 35
<PAGE>
Foreign shareholders may be subject to different tax treatment, including
withholding taxes. U.S. residents may be subject to backup withholding at a 31%
rate on distributions from and redemption proceeds paid by a Fund.
Each year the Trust will send you a statement indicating the amount and federal
income tax status of all distributions made to you during the previous year.
CALCULATION OF SHARE PRICE
On each day that the Trust is open for business, 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 NYSE (normally 4:00 p.m., eastern time). The Trust is
open for business on each day the NYSE is open for business. 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 calculated 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 NYSE 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 NYSE 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 in good faith in
accordance with consistently applied procedures established by the Board of
Trustees. The net asset value per share of each Fund will fluctuate with the
value of the securities it holds.
36 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
Because each Fund may invest in foreign securities that are listed on foreign
exchanges that may trade on weekends or other days when the Fund does not price
its shares, the net asset value of each Fund's shares may change on days when
shareholders will not be able to purchase or redeem shares.
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 distributions). The information for the periods ended
December 31, 1995 through December 31, 1999 has been audited by Tait, Weller &
Baker. Their report, along with the Funds' financial statements, are included in
the Statement of Additional Information, which is available upon request.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 37
<PAGE>
FINANCIAL HIGHLIGHTS - TECHNOLOGY VALUE FUND
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 32.24 $ 26.06 $ 26.66 $ 18.44 $ 11.70
-------------------------------------------------------------
Income from investment operations:
Net investment loss (0.35) (0.59) (0.26) (0.08) (0.14)
-------------------------------------------------------------
Net realized and unrealized gains on investments 61.36 6.77 1.90 11.20 7.28
-------------------------------------------------------------
Total from investment operations 61.01 6.18 1.64 11.12 7.14
-------------------------------------------------------------
Less distributions:
Distributions from net realized gains (2.71) -- (1.80) (2.90) (0.40)
-------------------------------------------------------------
Distributions in excess of net realized gains (0.02) -- (0.44) -- --
-------------------------------------------------------------
Total distributions (2.73) -- (2.24) (2.90) (0.40)
-------------------------------------------------------------
Net asset value at end of period $ 90.52 $ 32.24 $ 26.06 $ 26.66 $ 18.44
-------------------------------------------------------------
-------------------------------------------------------------
Total return 190.40% 23.71% 6.46% 60.55% 61.17%
-------------------------------------------------------------
-------------------------------------------------------------
Net assets at end of period (millions) $1,355.6 $ 178.1 $ 194.4 $ 35.1 $ 2.7
-------------------------------------------------------------
-------------------------------------------------------------
Ratio of expenses to average net assets 1.91% 1.95% 1.93% 1.81% 1.98%
-------------------------------------------------------------
Ratio of net investment loss to average net assets (1.27%) (1.80%) (1.43%) (0.55%) (1.45%)
-------------------------------------------------------------
Portfolio turnover rate 41% 126% 101% 43% 45%
-------------------------------------------------------------
</TABLE>
38 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
FINANCIAL HIGHLIGHTS - TECHNOLOGY LEADERS FUND
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
Year Year Period
Ended Ended Ended
12/31/99 12/31/98 12/31/97(a)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<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) (0.17) (0.09) 0.01
-------------------------------------
Net realized and unrealized gains on investments 27.40 7.96 0.06
-------------------------------------
Total from investment operations 27.23 7.87 0.07
-------------------------------------
Less distributions:
Dividends from net investment income -- -- --
-------------------------------------
Distributions from net realized gains (0.49) -- --
-------------------------------------
Total distributions (0.49) -- --
-------------------------------------
Net asset value at end of period $ 44.68 $ 17.94 $ 10.07
-------------------------------------
-------------------------------------
Total return 152.58% 78.15% 0.70%(b)
-------------------------------------
-------------------------------------
Net assets at end of period (millions) $ 395.6 $ 42.8 $ 3.6
-------------------------------------
-------------------------------------
Ratio of expenses to average net assets 1.94% 1.94% 1.80%(c)
-------------------------------------
Ratio of net investment income (loss) to average net assets (1.27%) (1.03%) 1.77%(c)
-------------------------------------
Portfolio turnover rate 16% 105% 0%
-------------------------------------
</TABLE>
(a) Represents the period from the commencement of operations (December 10,
1997) through December 31, 1997.
(b) Not annualized.
(c) Annualized.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 39
<PAGE>
FINANCIAL HIGHLIGHTS - TECHNOLOGY INNOVATORS FUND
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
Year Period
Ended Ended
12/31/99 12/31/98(a)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period $ 16.01 $ 10.00
-------------------------
Income from investment operations:
Net investment loss (0.06) (0.01)
-------------------------
Net realized and unrealized gains on investments 33.98 6.02
-------------------------
Total from investment operations 33.92 6.01
-------------------------
Less distributions:
Dividends from net investment income -- --
-------------------------
Distributions from net realized gains (0.57) --
-------------------------
Total distributions (0.57) --
-------------------------
Net asset value at end of period $ 49.36 $ 16.01
-------------------------
-------------------------
Total return 212.34% 60.10%(b)
-------------------------
-------------------------
Net assets at end of period (millions) $ 603.9 $ 6.5
-------------------------
-------------------------
Ratio of expenses to average net assets 1.93% 1.92%(c)
-------------------------
Ratio of net investment loss to average net assets (0.59%) (0.59%)(c)
-------------------------
Portfolio turnover rate 44% 188%(b)
-------------------------
</TABLE>
(a) Represents the period from the commencement of operations (May 20, 1998)
through December 31, 1998.
(b) Not annualized.
(c) Annualized.
40 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
FINANCIAL HIGHLIGHTS - THE COMMUNICATIONS FUND
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
Period
Ended
12/31/99(a)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value at beginning of period $ 10.00
--------------
Income from investment operations:
Net investment loss (0.00)
--------------
Net realized and unrealized gains on investments 4.65
--------------
Total from investment operations 4.65
--------------
Less distributions:
Dividends from net investment income --
--------------
Distributions from net realized gains --
--------------
Total distributions --
--------------
Net asset value at end of period $ 14.65
--------------
--------------
Total return 46.50%(b)
--------------
--------------
Net assets at end of period (millions) $ 182.2
--------------
--------------
Ratio of expenses to average net assets 1.95%(c)
--------------
Ratio of net investment loss to average net assets (0.30%)(c)
--------------
Portfolio turnover rate 0%
--------------
</TABLE>
(a) Represents the period from the commencement of operations (September 30,
1999) through December 31, 1999.
(b) Not annualized.
(c) Annualized.
CALL TOLL-FREE 1.888.884.2675 Prospectus | 41
<PAGE>
FINANCIAL HIGHLIGHTS - THE E-COMMERCE FUND
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
Period
Ended
12/31/99(a)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value at beginning of period $ 10.00
--------------
Income from investment operations:
Net investment loss 0.00
--------------
Net realized and unrealized gains on investments 4.86
--------------
Total from investment operations 4.86
--------------
Less distributions:
Dividends from net investment income --
--------------
Distributions from net realized gains --
--------------
Total distributions --
--------------
Net asset value at end of period $ 14.86
--------------
--------------
Total return 48.60%(b)
--------------
--------------
Net assets at end of period (millions) $ 298.7
--------------
--------------
Ratio of expenses to average net assets 1.95%(c)
--------------
Ratio of net investment loss to average net assets 0.05%(c)
--------------
Portfolio turnover rate 0%
--------------
</TABLE>
(a) Represents the period from the commencement of operations (September 30,
1999) through December 31, 1999.
(b) Not annualized.
(c) Annualized.
42 | FIRSTHAND WWW.FIRSTHANDFUNDS.COM
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
[LOGO]
FIRSTHAND FUNDS
125 South Market
Suite 1200
San Jose, CA 95113
INVESTMENT ADVISER
Firsthand Capital Management, Inc.
125 South Market
Suite 1200
San Jose, CA 95113
UNDERWRITER
ALPS Mutual Funds Services, Inc.
Member NASD
370 17th Street
Suite 3100
Denver, CO 80202
TRANSFER AGENT
State Street Bank and Trust Co.
P.O. Box 8356
Boston, MA 02266-8356
Additional information about the Funds and their investments is included in the
Statement of Additional Information ("SAI"). The SAI is incorporated herein by
reference (legally forms a part of the prospectus). The Funds' Annual and
Semi-Annual Reports include a discussion of each Fund's holdings and recent
market conditions and investment strategies that affected performance.
To obtain a free copy of any of these documents or to request other information
or ask questions about a Fund, call Firsthand Funds at 1.888.884.2675 or visit
Firsthand's web site at WWW.FIRSTHANDFUNDS.COM.
The SAI, the Funds' Annual and Semi-Annual Reports and other related materials
are available on the SEC's Internet Web site at www.sec.gov. You can obtain
copies of this information upon paying a duplicating fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-6009. You can also review
and copy information about the Funds, including the Funds' SAI, at the SEC's
Public Reference Room in Washington, D.C. Call 1.800.SEC.0330 for information on
the operation of the SEC's Public Reference Room.
Firsthand and Technology Value Fund are registered trademarks of Firsthand
Capital Management, Inc.
CONTACT US AT:
888.884.2675
WWW.FIRSTHANDFUNDS.COM
File Nos. 33-73832, 811-8268
<PAGE>
- --------------------------------------------------------------------------------
PART B
Statement of Additional Information
for
Technology Value Fund-Registered Trademark-
Technology Leaders Fund
Technology Innovators Fund
The Communications Fund-TM-
The e-Commerce Fund-TM-
<PAGE>
FIRSTHAND FUNDS
STATEMENT OF ADDITIONAL INFORMATION
APRIL 28, 2000
TECHNOLOGY VALUE FUND-REGISTERED TRADEMARK-
TECHNOLOGY LEADERS FUND
TECHNOLOGY INNOVATORS FUND
THE COMMUNICATIONS FUND-TM-
THE e-COMMERCE FUND-TM-
This Statement of Additional Information is not a Prospectus. It should be read
in conjunction with the Prospectus for the Funds dated April 28, 2000, as may be
amended. A copy of the Prospectus can be obtained by writing to Firsthand Funds
at P.O. Box 8356, Boston, MA 02266-8356, or by calling Firsthand Funds toll-free
at 1.888.884.2675.
The Funds' Annual Report to Shareholders, as filed with the Securities and
Exchange Commission on March 6, 2000, has been incorporated by reference into
this SAI. The annual report is available, without charge, upon request, by
calling 1.888.884.2675.
TABLE OF CONTENTS
THE TRUST..................................................................B-2
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS..............................B-2
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS....................B-10
INVESTMENT RESTRICTIONS....................................................B-12
TRUSTEES AND OFFICERS......................................................B-13
CODES OF ETHICS............................................................B-14
INVESTMENT ADVISORY AND OTHER SERVICES.....................................B-14
THE UNDERWRITER............................................................B-16
SECURITIES TRANSACTIONS....................................................B-17
PORTFOLIO TURNOVER.........................................................B-18
PURCHASE, REDEMPTION AND PRICING OF SHARES.................................B-18
TAXES......................................................................B-20
HISTORICAL PERFORMANCE INFORMATION.........................................B-22
PRINCIPAL SECURITY HOLDERS.................................................B-25
CUSTODIAN..................................................................B-28
LEGAL COUNSEL AND AUDITORS.................................................B-28
STATE STREET BANK AND TRUST COMPANY........................................B-28
FINANCIAL STATEMENTS.......................................................B-29
B-1
<PAGE>
THE TRUST
Firsthand Funds (the "Trust"), an open-end management investment company, was
organized as a Delaware business trust on November 11, 1993, and offers
several series of shares. This Statement of Additional Information ("SAI")
pertains to the Technology Value Fund, the Technology Leaders Fund, the
Technology Innovators Fund, The Communications Fund and The e-Commerce Fund
(each a "Fund" and collectively the "Funds"). Each Fund is a non-diversified
series and has its own investment objective and policies. Prior to May 1,
1998, the name of the Trust was Interactive Investments Trust.
Shares of each Fund have equal voting rights and liquidation rights, and are
voted in the aggregate and not by Fund except in matters where a separate
vote is required by the Investment Company Act of 1940, as amended, (the
"1940 Act") or when the matter affects only the interest of a particular
Fund. When matters are submitted to shareholders for a vote, each shareholder
is entitled to one vote for each full share owned and fractional votes for
fractional shares owned. The Trust does not normally hold annual meetings of
shareholders. The Trustees shall promptly call and give notice of a meeting
of shareholders for the purpose of voting upon removal of any Trustee when
requested to do so in writing by shareholders holding 10% or more of the
Trust's outstanding shares. The Trust will comply with the provisions of
Section 16(c) of the 1940 Act in order to facilitate communications among
shareholders.
Each share of a Fund represents an equal proportionate interest in the assets
and liabilities belonging to that Fund with each other share of that Fund and
each share entitled to such dividends and distributions out of the income
belonging to the Fund as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares
of any Fund into a greater or lesser number of shares of that Fund so long as
the proportionate beneficial interests in the assets belonging to that Fund
and the rights of shares of any other Fund are in no way affected. In case of
any liquidation of a Fund, the holders of shares of the Fund being liquidated
will be entitled to receive as a class a distribution out of the assets, net
of the liabilities, belonging to that Fund. Expenses attributable to any Fund
are borne by that Fund. Any general expenses of the Trust not readily
identifiable as belonging to a particular Fund are allocated by or under the
direction of the Trustees in such manner as the Trustees allocate such
expenses on the basis of relative net assets or number of shareholders. No
shareholder is liable to further calls or to assessment by the Trust without
his or her express consent.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and investment policies
described in the Prospectus appears below:
MAJORITY. As used in the Prospectus and this SAI, the term "majority" of the
outstanding shares of the Trust (or of any Fund) means the lesser of (1) two-
B-2
<PAGE>
thirds or more of the outstanding shares of the Trust (or the applicable Fund)
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Trust (or the applicable Fund) are present or represented at such meeting
or (2) more than 50% of the outstanding shares of the Trust (or the applicable
Fund).
DEBT SECURITIES. Each Fund may invest in debt obligations of corporate issuers,
the U.S. Government, states, municipalities or state or municipal government
agencies that in the opinion of the Investment Adviser offer long-term capital
appreciation possibilities because of the timing of such investments. Each Fund
intends that no more than 35% of its total assets will be comprised of such debt
securities. Investments in such debt obligations may result in long-term capital
appreciation because the value of debt obligations varies inversely with
prevailing interest rates. Thus, an investment in debt obligations that is sold
at a time when prevailing interest rates are lower than they were at the time of
investment will typically result in capital appreciation. However, the reverse
is also true, so that if an investment in debt obligations is sold at a time
when prevailing interest rates are higher than they were at the time of
investment, a capital loss will typically be realized. Accordingly, if a Fund
invests in the debt obligations described above, such investments will generally
be made when the Investment Adviser expects that prevailing interest rates will
be falling, and will generally be sold when the Investment Adviser expects
interest rates to rise.
Each Fund's investments in this area will consist solely of investment grade
securities (rated BBB or higher by Standard & Poor's Ratings Group ("Standard &
Poor's") or Baa or higher by Moody's Investors Service, Inc. ("Moody's), or
unrated securities determined by the Investment Adviser to be of comparable
quality). While securities in these categories are generally accepted as being
of investment grade, securities rated BBB or Baa have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to pay principal and interest than is
the case with higher grade securities. In the event a security's rating is
reduced below a Fund's minimum requirements, the Fund will sell the security,
subject to market conditions and the Investment Adviser's assessment of the most
opportune time for sale.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from one
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. Each Fund will only invest in commercial
paper rated A-1 by Standard & Poor's or Prime-1 by Moody's or unrated paper
of issuers who have outstanding unsecured debt rated AA or better by Standard
& Poor's or Aa or better by Moody's. Certain notes may have floating or
variable rates. Variable and floating rate notes with a demand notice period
exceeding seven days will be subject to each Fund's policy with respect to
illiquid investments unless, in the judgment of the Investment Adviser, such
note is liquid.
The rating of Prime-1 is the highest commercial paper rating assigned by
Moody's. The factors considered by Moody's in assigning ratings include the
following: valuation of the management of the issuer; economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and
B-3
<PAGE>
quality of long-term debt; trend of earnings over a period of 10 years;
financial strength of the issuer's parent company and the relationships that
exist with the issuer; and recognition by the management of obligations that may
be present or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers of commercial paper rated A
(highest quality) by Standard & Poor's have the following characteristics:
liquidity ratios are adequate to meet cash requirements; long-term senior debt
is rated "A" or better (although in some cases "BBB" credits may be allowed);
the issuer has access to at least two additional channels of borrowing; basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances; typically, the issuer's industry is well established and the
issuer has a strong position within the industry; and the reliability and
quality of management are unquestioned. The relative strength or weakness of the
above factors determines whether the issuer's commercial paper is rated A-1.
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Funds may invest
consist of certificates of deposit, bankers' acceptances and time deposits
issued by national banks and state banks, trust companies and mutual savings
banks, or by banks or institutions the accounts of which are insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Certificates of deposit are negotiable certificates evidencing the
indebtedness of a commercial bank to repay funds deposited with it for a
definite period of time (usually from 14 days to one year) at a stated or
variable interest rate. Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft that has been drawn on it by a customer,
and these instruments reflect the obligation both of the bank and of the drawer
to pay the face amount of the instrument upon maturity. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. A Fund will not invest in time
deposits maturing in more than seven days if, as a result thereof, more than 15%
of the value of its net assets would be invested in such securities and other
illiquid securities.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which a Fund
purchases a security and simultaneously commits to resell that security to the
seller at an agreed upon time and price, thereby determining the yield during
the term of the agreement. In the event of a bankruptcy or other default by the
seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of its net
assets would be invested in such securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear maturities
exceeding one year, settlement for the repurchase would never be more than one
year after the Fund's acquisition of the securities and normally would be within
a shorter period of time. The resale price will be in excess of the purchase
price, reflecting an agreed upon market rate effective for
B-4
<PAGE>
the period of time the Fund's money will be invested in the securities, and will
not be related to the coupon rate of the purchased security. At the time a Fund
enters into a repurchase agreement, the value of the underlying security,
including accrued interest, will equal or exceed the value of the repurchase
agreement, and, in the case of a repurchase agreement exceeding one day, the
seller will agree that the value of the underlying security, including accrued
interest, will at all times equal or exceed the value of the repurchase
agreement. The collateral securing the seller's obligation must be of a credit
quality at least equal to a Fund's investment criteria for portfolio securities
and will be held by the Custodian or in the Federal Reserve Book Entry System.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
a Fund to the seller subject to the repurchase agreement and is therefore
subject to a Fund's investment restriction applicable to loans. It is not clear
whether a court would consider the securities purchased by a Fund subject to a
repurchase agreement as being owned by that Fund or as being collateral for a
loan by the Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the securities before
repurchase of the security under a repurchase agreement, a Fund may encounter
delay and incur costs when trying to sell the security. Costs incurred as a
result of delays may include loss of interest or a decline in price of a
security. If a court characterized the transaction as a loan and a Fund has not
perfected a security interest in the security, that Fund may be required to
return the security to the seller's estate and be treated as an unsecured
creditor of the seller. As an unsecured creditor, a Fund would be at the risk of
losing some or all of the principal and income involved in the transaction. As
with any unsecured debt obligation purchased by a Fund, the Investment Adviser
seeks to minimize the risk of loss through repurchase agreements by analyzing
the creditworthiness of the obligor, in this case, the seller. Apart from the
risk of bankruptcy or insolvency proceedings, there is also the risk that the
seller may fail to repurchase the security, in which case a Fund may incur a
loss if the proceeds to that Fund of the sale of the security to a third party
are less than the repurchase price. However, if the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund involved will direct the seller of the
security to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be unsuccessful in seeking to
enforce the seller's contractual obligation to deliver additional securities.
MONEY MARKET FUNDS. Each Fund may under certain circumstances invest a
portion of its assets in money market investment companies. The 1940 Act
prohibits a Fund from investing more than 5% of the value of its total assets
in any one investment company, or more than 10% of the value of its total
assets in investment companies in the aggregate, and also restricts a Fund's
investment in any investment company to 3% of the voting securities of such
investment company. Investment in a money market investment company involves
payment of that company's pro rata share of advisory and administrative fees
paid by such company, in addition to those paid by the Funds.
WARRANTS. Each Fund may invest a portion of its assets in warrants, but only to
the extent that such investments do not exceed 5% of a Fund's net assets at the
time of purchase. A warrant gives the holder a right to purchase at any time
during a specified period a predetermined number
B-5
<PAGE>
of shares of common stock at a fixed price. Unlike convertible debt securities
or preferred stock, warrants do not pay a fixed coupon or dividend. Investments
in warrants involve certain risks, including the possible lack of a liquid
market for resale of the warrants, potential price fluctuations as a result of
speculation or other factors, and failure of the price of the underlying
security to reach or have reasonable prospects of reaching a level at which the
warrant can be prudently exercised (in which event the warrant may expire
without being exercised, resulting in a loss of a Fund's entire investment
therein).
FOREIGN SECURITIES. Subject to each Fund's investment policies and quality
standards, the Funds may invest in the securities of foreign issuers. Because
the Funds may invest in foreign securities, an investment in a Fund involves
risks that are different in some respects from an investment in a fund that
invests only in securities of U.S. domestic issuers. Foreign investments may
be affected favorably or unfavorably by changes in currency rates and
exchange control regulations. There may be less publicly available
information about a foreign company than about a U.S. company, and foreign
companies may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S. companies.
There may be less governmental supervision of foreign securities markets,
brokers and issuers of securities. Securities of some foreign companies are
less liquid or more volatile than securities of U.S. companies, and foreign
brokerage commissions and custodian fees are generally higher than in the
United States. Settlement practices may include delays and may differ from
those customary in United States markets. Investments in foreign securities
may also be subject to other risks that differ from those affecting U.S.
investments, including political or economic developments, expropriation or
nationalization of assets, restrictions on foreign investment and
repatriation of capital, imposition of withholding taxes on dividend or
interest payments, currency blockage (which would prevent cash from being
brought back to the United States), and difficulty in enforcing legal rights
outside the United States.
NON-DIVERSIFICATION OF INVESTMENTS. Each Fund is operated as a "non-diversified"
portfolio. As non-diversified investment companies, the Funds may be subject to
greater risks than diversified companies because if a Fund concentrates its
investments in only a few issuers and the value of those issuers fluctuates, the
value of the Fund is affected to a greater degree than if the Fund had a more
diversified portfolio. However, at the close of each fiscal quarter at least 50%
of the value of each Fund's total assets will be represented by one or more of
the following: (i) cash and cash items, including receivables; (ii) U.S.
Government securities; (iii) securities of other regulated investment companies;
and (iv) securities (other than U.S. Government securities and securities of
other regulated investment companies) of any one or more issuers which meet the
following limitations: (a) the Fund will not invest more than 5% of its total
assets in the securities of any such issuer and (b) the entire amount of the
securities of such issuer owned by the Fund will not represent more than 10% of
the outstanding voting securities of such issuer. Additionally, not more than
25% of the value of a Fund's total assets may be invested in the securities of
any one issuer.
WRITING COVERED CALL OPTIONS. Each Fund may write covered call options on equity
securities or futures contracts to earn premium income, to assure a definite
price for a security that a Fund has considered selling, or to close out options
previously
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purchased. A call option gives the holder (buyer) the right to purchase a
security or futures contract at a specified price (the exercise price) at any
time before a certain date (the expiration date). A call option is "covered" if
a Fund owns the underlying security subject to the call option at all times
during the option period. A covered call writer is required to deposit in escrow
the underlying security in accordance with the rules of the appropriate clearing
agency and the exchanges on which the option is traded.
The writing of covered call options is a conservative investment technique that
the Investment Adviser believes involves relatively little risk. However, there
is no assurance that a closing transaction can be effected at a favorable price.
During the option period, the covered call writer has, in return for the premium
received, given up the opportunity for capital appreciation above the exercise
price should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security decline.
Writing covered call options is not a principal investment strategy of the
Funds.
WRITING COVERED PUT OPTIONS. Each Fund may write covered put options on equity
securities and futures contracts to assure a definite price for a security if
the Fund is considering acquiring the security at a lower price than the current
market price or to close out options previously purchased. A put option gives
the holder of the option the right to sell, and the writer has the obligation to
buy, the underlying security at the exercise price at any time during the option
period. The operation of put options in other respects is substantially
identical to that of call options. When a Fund writes a covered put option, it
maintains in a segregated account with its Custodian cash or liquid securities
in an amount not less than the exercise price at all times while the put option
is outstanding.
The risks involved in writing put options include the chance that a closing
transaction cannot be effected at a favorable price and the possibility that the
price of the underlying security may fall below the exercise price, in which
case a Fund may be required to purchase the underlying security at a higher
price than the market price of the security at the time the option is exercised.
Writing covered put options is not a principal investment strategy of the Funds.
OPTIONS TRANSACTIONS GENERALLY. Option transactions in which the Funds may
engage involve the specific risks described above as well as the following
risks: the writer of an option may have that option exercised at any time during
the option period; disruptions in the markets for underlying instruments could
result in losses for options investors; imperfect or no correlation between the
option and the securities being hedged; the insolvency of a broker could present
risks for the broker's customers; and market imposed restrictions may prohibit
the exercise of certain options. In addition, the option activities of a Fund
may affect its portfolio turnover rate and the amount of brokerage commissions
paid by a Fund. The success of a Fund in using the option strategies described
above depends, among other things, on the Investment Adviser's ability to
predict the direction and volatility of price movements in the options, futures
contracts and securities markets and the Investment Adviser's ability to select
the proper time, type and duration of the options.
By writing options, a Fund forgoes the opportunity to profit from an increase in
the market price of the underlying security or stock index above the exercise
price except insofar as the premium
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represents such a profit. Each Fund also may seek to earn additional income
through receipt of premiums by writing covered put options. The risk involved in
writing such options is that there could be a decrease in the market value of
the underlying security or stock index. If this occurs, the option could be
exercised and the underlying security would then be sold to the Fund at a price
higher than its then current market value. The Funds may purchase put and call
options to attempt to provide protection against adverse price effects from
anticipated changes in prevailing prices of securities or stock indices. The
purchase of a put option generally protects the value of portfolio holdings in a
falling market, while the purchase of a call option generally protects cash
reserves from a failure to participate in a rising market. In purchasing a call
option, a Fund would realize a gain if, during the option period, the price of
the security or stock index increased by an amount greater than the premium
paid. A Fund would realize a loss if the price of the security or stock index
decreased, remained the same, or did not increase during the period by more than
the amount of the premium. If a put or call option purchased by a Fund were
permitted to expire without being sold or exercised, its premium would represent
a realized loss to the Fund. When writing put options a Fund will be required to
segregate cash and/or liquid securities to meet its obligations. When writing
call options a Fund will be required to own the underlying financial instrument
or segregate with its Custodian cash and/or liquid securities to meet its
obligations under written calls. By so doing, a Fund's ability to meet current
obligations, to honor redemptions or to achieve its investment objective may be
impaired. The staff of the Securities and Exchange Commission has taken the
position that over-the-counter options and the assets used as "cover" for
over-the-counter options are illiquid securities.
The imperfect correlation in price movement between an option and the underlying
financial instrument and/or the costs of implementing such an option may limit
the effectiveness of the strategy. A Fund's ability to establish and close out
options positions will be subject to the existence of a liquid secondary market.
Although the Funds generally will purchase or sell only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option or
at any particular time. If an option purchased by a Fund expires unexercised,
the Fund will lose the premium it paid. In addition, a Fund could suffer a loss
if the premium paid by the Fund in a closing transaction exceeds the premium
income it received. When a Fund writes a call option, its ability to participate
in the capital appreciation of the underlying obligation is limited.
It is the present intention of the Adviser not to commit greater than 30% of a
Fund's net assets to option strategies.
BORROWING. Each Fund may borrow from banks for temporary or emergency purposes
in an aggregate amount not to exceed 25% of its total assets. Borrowing
magnifies the potential for gain or loss on the portfolio securities of a Fund
and, therefore, if employed, increases the possibility of fluctuation in the
Fund's net asset value. This is the speculative factor known as leverage. To
reduce the risks of borrowing, each Fund will limit its borrowings as described
above. Each Fund may pledge its assets in connection with borrowings. While a
Fund's borrowings exceed 5% of its total assets, it will not purchase portfolio
securities.
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The use of borrowing by a Fund involves special risk considerations that may not
be associated with other funds having similar policies. Since substantially all
of a Fund's assets fluctuate in value, whereas the interest obligation resulting
from a borrowing will be fixed by the terms of the Fund's agreement with its
lender, the asset value per share of the Fund will tend to increase more when
its portfolio securities increase in value and decrease more when its portfolio
securities decrease in value than would otherwise be the case if the Fund did
not borrow funds. In addition, interest costs on borrowings may fluctuate with
changing market rates of interest and may partially offset or exceed the return
earned on borrowed funds. Under adverse market conditions, a Fund might have to
sell portfolio securities to meet interest or principal payments at a time when
fundamental investment considerations would not favor such sales.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities to
banks, brokers and dealers. Lending portfolio securities exposes a Fund to the
risk that the borrower may fail to return the loaned securities or may not be
able to provide additional collateral or that a Fund may experience delays in
recovery of the loaned securities or loss of rights in the collateral if the
borrower fails financially. To minimize these risks, the borrower must agree to
maintain collateral, marked to market daily, in the form of cash and/or U.S.
Government obligations, with the Funds' Custodian in an amount at least equal to
the market value of the loaned securities. Each Fund will limit the amount of
its loans of its portfolio securities to no more than 30% of its total assets.
Under applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the loaned
securities. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by a Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. The
Funds receive amounts equal to the dividends or interest on loaned securities
and also receive one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt securities
purchased with such collateral; either type of interest may be shared with the
borrower. The Funds may also pay fees to placing brokers as well as custodian
and administrative fees in connection with loans. Fees may only be paid to a
placing broker provided that the Trustees determine that the fee paid to the
placing broker is reasonable and based solely upon services rendered, that the
Trustees separately consider the propriety of any fee shared by the placing
broker with the borrower, and that the fees are not used to compensate the
Investment Adviser or any affiliated person of the Trust or an affiliated person
of the Investment Adviser or other affiliated person. The terms of the Funds'
loans must meet applicable tests under the Internal Revenue Code and permit the
Funds to reacquire loaned securities on five days' notice or in time to vote on
any important matter. Loans of portfolio securities are not a principal
investment strategy of the Funds.
ILLIQUID SECURITIES. Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933 (the "Securities Act"),
securities that are otherwise not readily marketable, and securities such as
repurchase agreements having a maturity of longer than seven days. Securities
that have not been registered under the Securities Act are referred to as
private placements or restricted securities and are purchased directly from the
issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or
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other illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemption requirements. A mutual fund
also might have to register such restricted securities in order to dispose of
them, resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such investments. The
Board of Trustees may determine that such securities are not illiquid securities
notwithstanding their legal or contractual restrictions on resale. In all other
cases, however, securities subject to restrictions on resale will be deemed
illiquid.
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
THE RATINGS OF MOODY'S AND STANDARD & POOR'S FOR CORPORATE BONDS IN WHICH THE
FUNDS MAY INVEST ARE AS FOLLOWS:
MOODY'S
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large (or by an exceptionally
stable) margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, fluctuation of protective elements may
be of greater amplitude or, there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds that are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be
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characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
STANDARD & POOR'S
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A - Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
THE RATINGS OF MOODY'S AND STANDARD & POOR'S FOR PREFERRED STOCKS IN WHICH THE
FUNDS MAY INVEST ARE AS FOLLOWS:
MOODY'S
aaa - An issue that is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
aa - An issue that is rated aa is considered a high-grade preferred stock. This
rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a - An issue that is rated a is considered to be an upper-medium grade preferred
stock. Although risks are judged to be somewhat greater than in the aaa and aa
classifications, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
baa - An issue that is rated baa is considered to be medium grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
STANDARD & POOR'S
AAA - This is the highest rating that may be assigned by Standard & Poor's to a
preferred stock issue and it indicates an extremely strong capacity to pay the
preferred stock obligations.
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AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the diverse effects of
changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
INVESTMENT RESTRICTIONS
The Trust has adopted certain fundamental investment restrictions that are
designed to reduce the risk of investing in a Fund. These restrictions may not
be changed with respect to any Fund without the affirmative vote of a majority
of the outstanding voting securities of that Fund. Each Fund may not:
1. Underwrite the securities of other issuers, except that a Fund may, as
indicated in the Prospectus, acquire restricted securities under circumstances
where, if such securities are sold, the Fund might be deemed to be an
underwriter for purposes of the Securities Act.
2. Purchase or sell real estate or interests in real estate, but a Fund may
purchase marketable securities of companies holding real estate or interests in
real estate.
3. Purchase or sell commodities or commodity contracts, including futures
contracts, except that the Technology Leaders Fund, the Technology Innovators
Fund, The Communications Fund and The e-Commerce Fund may purchase and sell
futures contracts to the extent authorized by the Board of Trustees.
4. Make loans to other persons except (i) by the purchase of a portion of an
issue of publicly distributed bonds, debentures or other debt securities or
privately sold bonds, debentures or other debt securities immediately
convertible into equity securities, such purchases of privately sold debt
securities not to exceed 5% of a Fund's total assets, and (ii) the entry into
portfolio lending agreements (i.e., loans of portfolio securities) provided that
the value of securities subject to such lending agreements may not exceed 30% of
the value of a Fund's total assets.
5. Purchase securities on margin, but a Fund may obtain such short-term credits
as may be necessary for the clearance of purchases and sales of securities.
6. Borrow money from banks except for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests that might otherwise
require the untimely disposition of securities, in an aggregate amount not
exceeding 25% of the value of a Fund's
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total assets at the time any borrowing is made. While a Fund's borrowings are in
excess of 5% of its total assets, the Fund will not purchase portfolio
securities.
7. Purchase or sell puts and calls on securities, except that the Technology
Leaders Fund, the Technology Innovators Fund, The Communications Fund and The
e-Commerce Fund may purchase and sell puts and calls on stocks and stock
indices.
8. Make short sales of securities.
9. Participate on a joint or joint and several basis in any securities trading
account.
10. Purchase the securities of any other investment company except in compliance
with the 1940 Act.
With respect to the percentages adopted by the Trust as maximum limitations on a
Fund's investment policies and restrictions, an excess above the fixed
percentage (except for the percentage limitations relative to the borrowing of
money) will not be a violation of the policy or restriction unless the excess
results immediately and directly from the acquisition of any security or the
action taken.
TRUSTEES AND OFFICERS
The business of the Trust is managed under the direction of the Board of
Trustees in accordance with the Declaration of Trust of the Trust. The
Declaration of Trust has been filed with the Securities and Exchange Commission
("SEC") and is available upon request. Pursuant to the Declaration of Trust, the
Trustees shall elect officers including a president, secretary and treasurer.
The Board of Trustees retains the power to conduct, operate and carry on the
business of the Trust and has the power to incur and pay any expenses which, in
the opinion of the Board of Trustees, are necessary or incidental to carry out
any of the Trust's purposes. The Trustees, officers, employees and agents of the
Trust, when acting in such capacities, shall not be subject to any personal
liability except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties. Following is a list of
the Trustees and executive officers of the Trust and their compensation from the
Trust for the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
YEAR OF
NAME BIRTH POSITION HELD TOTAL COMPENSATION**
<S> <C> <C> <C>
Kevin M. Landis* 1961 Trustee/President N/A
Michael T. Lynch 1961 Trustee $20,000
Mark Taguchi*** 1956 Trustee $20,000
Jerry Wong*** 1951 Trustee $0
Yakoub Bellawala 1965 Treasurer N/A
Omar Billawala 1961 Secretary N/A
</TABLE>
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* Kevin M. Landis is an affiliated person of Firsthand Capital Management,
Inc., the Funds' investment adviser, and is an "interested person" of the
Trust within the meaning of Section 2(a)(19) of the 1940 Act.
** The Trust does not maintain pension or retirement plans.
*** Mark Taguchi resigned effective November 1999. After accepting his
resignation, the Board of Trustees then appointed Jerry Wong as a new
independent trustee of the Trust.
The principal occupations of the Trustees and executive officers of the Trust
during the past five years are set forth below:
KEVIN M. LANDIS, 125 South Market, Suite 1200, San Jose, CA 95113, is President
of Firsthand Capital Management, Inc., and has been a portfolio manager with
Firsthand Capital Management, Inc. since 1994.
MICHAEL T. LYNCH, 400 North 34th St., Suite 300, Seattle, WA 98103, is currently
a Vice President of Sales and Business Development at Digital Intelligence, Inc.
Mr. Lynch served as a Product Manager for Iomega Corp. from 1995 through 1999.
Mr. Lynch served as a Product Manager for Adaptec, Inc. during 1995. He served
as Product Line Manager for Calera Recognition Systems, Inc., a manufacturer of
Optical Character Recognition Software, from 1990 to 1995.
JERRY WONG, 999 Baker Way, Suite 100, San Mateo, CA 94104, is currently Vice
President of Finance and Executive Vice President of U.S. Operations of Poet
Holdings, Inc. Mr. Wong served as a Corporate Controller for Blyth Software Inc.
from 1993 through July 1995 and has been with Poet since 1995. Mr. Wong served
as Corporate Controller and Secretary of Corporation for Protocol Engines Inc.
from 1991 to 1993.
YAKOUB BELLAWALA, 125 South Market, Suite 1200, San Jose, CA 95113, is Vice
President of Business Development of Firsthand Capital Management, Inc. He
was previously the Database Marketing Manager for Silicon Graphics, Inc. from
1995 through 1996. Prior to that he was the Director of Product Management and
Product Marketing for Starbase Corporation from 1994 through 1995 and a Senior
Product Manager for Oracle Corporation from 1989 through 1994.
OMAR BILLAWALA, 125 South Market, Suite 1200, San Jose, CA 95113, is Chief
Operating Officer of Firsthand Capital Management, Inc. Prior to that, he was an
associate at Paul Hastings, Janofsky & Walker LLP from 1997 to 1999.
CODES OF ETHICS
The Trust and its Investment Adviser and principal underwriter have adopted
codes of ethics under Rule 17j-1 of the 1940 Act. These codes of ethics
permit personnel subject to the codes to invest in securities that may be
purchased or held by a Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
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Firsthand Capital Management, Inc. (the "Investment Adviser"), 125 South
Market, Suite 1200, San Jose, California 95113, is registered as an
investment adviser with the SEC under the 1940 Act. The Investment Adviser is
controlled by Kevin M. Landis. Prior to September 1999, the Investment
Adviser was named Interactive Research Advisers, Inc.
Under the terms of the Investment Advisory and Management Agreement (the
"Advisory Agreement") between the Trust and the Investment Adviser, the
Investment Adviser (i) manages the investment operations of each Fund and the
composition of its portfolio, including the purchase, retention and disposition
of securities in accordance with each Fund's investment objective, (ii) provides
all statistical, economic and financial information reasonably required by the
Funds and reasonably available to the Investment Adviser, (iii) provides the
Custodian of the Funds' securities on each business day with a list of trades
for that day, and (iv) provides persons satisfactory to the Trust's Board of
Trustees to act as officers and employees of the Trust.
Pursuant to the Advisory Agreement, each Fund pays to the Investment Adviser, on
a monthly basis, an advisory fee at an 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. For the fiscal years ended December 31, 1999,
1998, and 1997, the Technology Value Fund paid advisory fees of $6,202,423,
$2,734,532, and $1,830,251, respectively. For the fiscal year and period ended
December 31, 1999, 1998 and 1997, the Technology Leaders Fund paid advisory fees
of $1,769,767, $286,734 and $1,769, respectively. For the fiscal period ended
December 31, 1999 and 1998, the Technology Innovators Fund paid advisory fees of
$1,751,713 and $14,782, respectively. For the fiscal period ended December 31,
1999, The Communications Fund paid advisory fees of $248,417. For the fiscal
period ended December 31, 1999, The e-Commerce Fund paid advisory fees of
$404,384.
By its terms, the Advisory Agreement remains in force from year to year, subject
to annual approval by (a) the Board of Trustees or (b) a vote of the majority of
a Fund's outstanding voting securities; provided that in either event
continuance is also approved by a majority of the Trustees who are not
interested persons of the Trust, by a vote cast in person at a meeting called
for the purpose of voting such approval. The Advisory Agreement may be
terminated at any time, on 60 days' written notice, without the payment of any
penalty, by the Board of Trustees, by a vote of the majority of a Fund's
outstanding voting securities, or by the Investment Adviser. The Advisory
Agreement automatically terminates in the event of its assignment, as defined by
the 1940 Act and the rules thereunder.
The Board of Trustees of the Trust has approved an Administration Agreement with
the Investment Adviser wherein the Investment Adviser is responsible for the
provision of administrative and supervisory services to the Funds. The
Investment Adviser, at its expense, shall supply the Trustees and the officers
of the Trust with all statistical information and reports reasonably required by
it and reasonably available to the Investment Adviser. The Investment
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Adviser shall oversee the maintenance of all books and records with respect to
the Funds' security transactions and the Funds' books of account in accordance
with all applicable federal and state laws and regulations. The Investment
Adviser will arrange for the preservation of the records required to be
maintained by the 1940 Act.
Pursuant to the Administration Agreement, each Fund will pay to the Investment
Adviser, on a monthly basis, a fee equal to 0.45% per annum of its average daily
net assets up to $200 million, 0.40% of such assets from $200 million to $500
million, 0.35% of such assets from $500 million to $1 billion, and 0.30% of such
assets in excess of $1 billion.
For the fiscal years ended December 31, 1999, 1998, and 1997, the Technology
Value Fund paid administrative fees of $1,703,732, $816,383, and $778,503,
respectively. For the fiscal years and period ended December 31, 1999, 1998 and
1997, the Technology Leaders Fund paid administrative fees of $524,251, $86,020
and $531, respectively. For the fiscal year and period ended December 31, 1999
and 1998, the Technology Innovators Fund paid administrative fees of $505,227
and $4,435, respectively. For the fiscal period ended December 31, 1999, The
Communications Fund and The e-Commerce Fund paid administrative fees of $74,525
and $120,372, respectively.
The Administration Agreement may be terminated by the Trust at any time, on 60
days' notice to the Investment Adviser, without penalty either (a) by vote of
the Board of Trustees of the Trust, or (b) by vote of a majority of the
outstanding voting securities of a Fund. It may be terminated at any time by the
Investment Adviser on 60 days' written notice to the Trust.
THE UNDERWRITER
ALPS Mutual Funds Services, Inc. (the "Underwriter"), 370 17th Street,
Suite 3100, Denver, CO 80202, serves as principal underwriter for the Trust
pursuant to a Distribution Agreement. Shares are sold on a continuous basis
by the Underwriter. The Underwriter has agreed to use its best efforts to
solicit orders for the sale of Trust shares, but it is not obligated to sell
any particular amount of shares. The Distribution Agreement provides that,
unless sooner terminated, it will continue in effect from year to year,
subject to annual approval by (a) the Board of Trustees or a vote of a
majority of the outstanding shares, and (b) by a majority of the Trustees who
are not interested persons of the Trust or of the Underwriter by vote cast in
person at a meeting called for the purpose of voting on such approval.
The Distribution Agreement may be terminated by the Trust at any time, without
the payment of any penalty, by vote of a majority of the entire Board of
Trustees of the Trust or by vote of a majority of the outstanding shares of the
Funds on 60 days' written notice to the Underwriter, or by the Underwriter at
any time, without the payment of any penalty, on 60 days' written notice to the
Trust. The Distribution Agreement will automatically terminate in the event of
its assignment.
B-16
<PAGE>
SECURITIES TRANSACTIONS
The Investment Adviser furnishes advice and recommendations with respect to the
Funds' portfolio decisions and, subject to the supervision of the Board of
Trustees of the Trust, determines the broker to be used in each specific
transaction. In executing the Funds' portfolio transactions, the Investment
Adviser seeks to obtain the best net results for the Funds, taking into account
such factors as the overall net economic result to the Funds (involving both
price paid or received and any commissions and other costs paid), the efficiency
with which the specific transaction is effected, the ability to effect the
transaction where a large block is involved, the known practices of brokers and
the availability to execute possibly difficult transactions in the future, and
the financial strength and stability of the broker. While the Investment Adviser
generally seeks reasonably competitive commission rates, the Funds do not
necessarily pay the lowest commission or spread available.
The Investment Adviser may direct the Funds' portfolio transactions to persons
or firms because of research and investment services provided by such persons or
firms if the amount of commissions in effecting the transactions is reasonable
in relationship to the value of the investment information provided by those
persons or firms. Such research and investment services are those which
brokerage houses customarily provide to institutional investors and include
statistical and economic data and research reports on particular companies and
industries. These services may be used by the Investment Adviser in connection
with all of its investment activities, and some of the services obtained in
connection with the execution of transactions for the Funds may be used in
managing the Investment Adviser's other investment accounts.
The Funds may deal in some instances in securities that are not listed on a
national securities exchange but are traded in the over-the-counter market. The
Funds may also purchase listed securities through the "third market" (i.e.,
otherwise than on the exchanges on which the securities are listed). When
transactions are executed in the over-the-counter market or the third market,
the Investment Adviser will seek to deal with primary market makers and to
execute transactions on the Funds' own behalf, except in those circumstances
where, in the opinion of the Investment Adviser, better prices and executions
may be available elsewhere. The Funds do not allocate brokerage business in
return for sales of the Funds' shares.
Neither the Investment Adviser nor any affiliated person thereof will
participate in commissions paid by the Funds to brokers or dealers or will
receive any reciprocal business, directly or indirectly, as a result of such
commissions.
The Technology Value Fund paid brokerage commissions of $332,719, $110,003,
and $275,303 during the fiscal years ended December 31, 1999, 1998, and 1997,
respectively. The Technology Leaders Fund paid brokerage commissions of
$31,982, $19,440 and $876 during the fiscal year and period ended December
31, 1999, 1998 and 1997, respectively. The Technology Innovators Fund paid
brokerage commissions of $67,099, $1,050 during the fiscal year and period
ended December 31, 1999 and 1998. The Communications Fund and the e-Commerce
Fund paid brokerage commissions of $19,626 and $13,240, respectively, for the
fiscal period ended December 31, 1999.
B-17
<PAGE>
The Board of Trustees reviews periodically the allocation of brokerage orders to
monitor the operation of these policies.
PORTFOLIO TURNOVER
A Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs, which will be borne
directly by the Funds and could reduce the Funds' returns. A 100% turnover
rate would occur if all of a Fund's portfolio securities were replaced once
within a one year period.
Generally, each Fund intends to invest for long-term purposes. However, the
rate of portfolio turnover will depend upon market and other conditions, and
it will not be a limiting factor when the Investment Adviser believes that
portfolio changes are appropriate. The turnover for each Fund is not expected
to exceed 200% annually.
PURCHASE, REDEMPTION AND PRICING OF SHARES
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
(the "Exchange") (currently 4:00 p.m., eastern time), on each day the Trust
is open for business. The Trust is open for business on every day except
Saturdays, Sundays and the following holidays: New Year's Day, Martin Luther
King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas. The Trust may also be open for
business on other days during which there is sufficient trading in a Fund's
portfolio securities so that its net asset value might be materially
affected. For a description of the methods used to determine the share price,
see "Calculation of Share Price" in the Prospectus.
In valuing a Fund's assets for the purpose of determining net asset value,
readily marketable portfolio securities listed on a national securities exchange
are valued at the last sale price on such exchange on the business day as of
which such value is being determined. If there has been no sale on such exchange
on such day, the security is valued at the closing bid price on such day. If no
bid price is quoted on such exchange on such day, then the security is valued by
such method as the Investment Adviser under the supervision of the Board of
Trustees determines in good faith to reflect its fair value. Readily marketable
securities traded only in the over-the-counter market are valued at the last
sale price, if available, otherwise at the most recent bid price. If no bid
price is quoted on such day, then the security is valued by such method as the
Investment Adviser under the supervision of the Board of Trustees determines in
good faith to
B-18
<PAGE>
reflect its fair value. All other assets of the Funds, including restricted
securities and securities that are not readily marketable, are valued in such
manner as the Investment Adviser under the supervision of the Board of Trustees
in good faith deems appropriate to reflect their fair value.
PURCHASE OF SHARES
Orders for shares received by the Trust in proper form prior to the close of
business on the Exchange on each day during such periods that the Exchange is
open for trading are priced at net asset value per share computed as of the
close of the regular session of trading on the Exchange on that day. Orders
received in proper form after the close of the Exchange, or on a day it is
not open for trading, are priced at the close of such Exchange on the next
day on which it is open for trading at the next determined net asset value
per share.
REDEMPTION OF SHARES
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven calendar days after the receipt of a
shareholder's redemption request made in accordance with the procedures set
forth in the "How to Redeem Shares" section of the Prospectus, except (a) for
any period during which the Exchange is closed (other than customary weekend
and holiday closing) or during which the SEC determines that trading thereon
is restricted, (b) for any period during which an emergency (as determined by
the SEC) exists as a result of which disposal by a Fund of securities owned
by it is not reasonably practicable or as a result of which it is not
reasonably practicable for a Fund to fairly determine the value of its net
assets, or (c) for any other period that the SEC may by order permit for the
protection of security holders of the Funds.
The Trust will redeem all or any portion of a shareholder's shares of the Funds
when requested in accordance with the procedures set forth in the "How to Redeem
Shares" section of the Prospectus.
REDEMPTION IN KIND
Payment of the net redemption proceeds may be made either in cash or in
portfolio securities (selected in the discretion of the Investment Adviser under
supervision of the Board of Trustees and taken at their value used in
determining the net asset value), or partly in cash and partly in portfolio
securities. However, payments will be made wholly in cash unless the Board of
Trustees believes that economic conditions exist which would make such a
practice detrimental to the best interests of a Fund. If payment for shares
redeemed is made wholly or partly in portfolio securities, brokerage costs may
be incurred by the investor in converting the securities to cash. The Trust has
filed an election with the Securities and Exchange Commission pursuant to which
a Fund will effect a redemption in portfolio securities only if the particular
shareholder of record is redeeming more than $250,000 or 1% of net assets,
whichever is less, during any 90-day period. The Trust expects, however, that
the amount of a redemption request would have to be significantly greater than
$250,000 or 1% of net assets before a redemption wholly or partly in portfolio
securities would be made.
B-19
<PAGE>
TAXES
Each Fund has elected, and intends to qualify annually, for the special tax
treatment afforded regulated investment companies under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). To qualify as a
regulated investment company, a Fund must, among other things, (a) derive in
each taxable year at least 90% of its gross income from dividend, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of stock, securities or foreign currencies, or other income
(including gains from options, futures and forward contracts) derived with
respect to their business of investing in such stock, securities or currencies;
(b) diversify its holdings so that, at the end of each quarter of the taxable
year, (i) at least 50% of the market value of the Fund's assets are represented
by cash, U.S. Government securities, the securities of other regulated
investment companies, and other securities, with such other securities of any
one issuer limited for the purposes of this calculation to an amount not greater
than 5% of the value of the Fund's total assets or 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets are invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment companies)
or in two or more issuers which the Funds control and which are engaged in the
same or similar trades or businesses; and (c) distribute at least 90% of its
investment company taxable income (which includes dividends, interest and net
short-term capital gains in excess of any net long-term capital losses) each
taxable year.
As regulated investment companies, each Fund will not be subject to U.S. Federal
income tax on its investment company taxable income and net capital gains (any
long-term capital gains in excess of the sum of net short-term capital losses
and capital loss carryovers available from the eight prior years), if any, that
it distributes to shareholders. Each Fund intends to distribute annually to its
shareholders substantially all of its investment company taxable income and any
net capital gains. In addition, amounts not distributed by a Fund on a timely
basis in accordance with a calendar year distribution requirement are subject to
a nondeductible 4% excise tax. To avoid the tax, a Fund must distribute during
each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income (with adjustment) for the calendar year, (2) at least 98% of
its capital gains in excess of its capital losses (and adjusted for certain
ordinary losses) for the 12 month period ending on October 31 of the calendar
year, and (3) all ordinary income and capital gains for previous years that were
not distributed during such years. In order to avoid application of the excise
tax, each Fund intends to make distributions in accordance with these
distribution requirements.
In view of each Fund's investment policies, it is expected that dividends
received from domestic and certain foreign corporations will be part of each
Fund's gross income. Distributions by a Fund of such dividends to corporate
shareholders may be eligible for the "70% dividends received" deduction, subject
to the holding period and debt-financing limitations of the Code. However, the
portion of each Fund's gross income attributable to dividends received from
qualifying corporations is largely dependent on its investment activities for a
particular year and therefore cannot be predicted with certainty. In addition,
for purposes of the dividends received deduction available to corporations, a
capital gain dividend received from a regulated investment company is not
treated as a dividend. Corporate shareholders should be aware that availability
of
B-20
<PAGE>
the dividends received deduction is subject to certain restrictions. For
example, the deduction is not available if Fund shares are deemed to have been
held for less than 46 days (within the 90-day period that begins 45 days before
the ex-dividend date and ends 45 days after the ex-dividend date) and is reduced
to the extent such shares are treated as debt-financed under the Code.
Dividends, including the portions thereof qualifying for the dividends received
deduction, are includable in the tax base on which the federal alternative
minimum tax is computed. Dividends of sufficient aggregate amount received
during a prescribed period of time and qualifying for the dividends received
deduction may be treated as "extraordinary dividends" under the Code, resulting
in a reduction in a corporate shareholder's federal tax basis in its Fund
shares.
Each Fund may invest as much as 15% of its net assets in securities of foreign
companies and may therefore be liable for foreign withholding and other taxes,
which will reduce the amount available for distribution to shareholders. Tax
conventions between the United States and various other countries may reduce or
eliminate such taxes. A foreign tax credit or deduction is generally allowed for
foreign taxes paid or deemed to be paid. A regulated investment company may
elect to have the foreign tax credit or deduction claimed by its shareholders
rather than the company if certain requirements are met, including the
requirement that more than 50% of the value of the company's total assets at the
end of the taxable year consist of securities in foreign corporations. Because
the Funds do not anticipate investment in securities of foreign corporations to
this extent, the Funds will likely not be able to make this election and foreign
tax credits will be allowed only to reduce a Fund's tax liability, if any.
Under the Code, upon disposition of certain securities denominated in a foreign
currency, gains or losses attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the securities and the date
of disposition are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "Section 988" gains or losses, may increase or
decrease the amount of a Fund's investment company taxable income.
Any dividend or distribution received shortly after a share purchase will have
the effect of reducing the net asset value of such shares by the amount of such
dividend or distribution. Such dividend or distribution is fully taxable.
Accordingly, prior to purchasing shares of the Funds, an investor should
carefully consider the amount of dividends or capital gains distributions that
are expected to be or have been announced.
Generally, the Code's rules regarding the determination and character of gain or
loss on the sale of a capital asset apply to a sale, exchange, redemption or
repurchase of shares of the Funds that are held by the shareholder as capital
assets. However, if a shareholder sells shares of the Funds which he has held
for less than six months and on which he has received distributions of capital
gains, any loss on the sale or exchange of such shares must be treated as
long-term capital loss to the extent of such distributions. Any loss realized on
the sale of shares of the Funds will be disallowed by the "wash sale" rules to
the extent the shares sold are replaced (including through the receipt of
additional shares through reinvested dividends) within a period of time
beginning 30 days before and ending 30 days after the shares are sold. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
B-21
<PAGE>
The Trust is required to withhold and remit to the U.S. Treasury a portion (31%)
of dividend income on any account unless the shareholder provides a taxpayer
identification number and certifies that such number is correct and that the
shareholder is not subject to backup withholding.
Provided that a Fund qualifies as a regulated investment company under the Code,
it will not be liable for California corporate taxes, other than a minimum
franchise tax, if all of its income is distributed to shareholders for each
taxable year. Shareholders, however, may be liable for state and local income
taxes on distributions from the Funds.
The above discussion and the related discussion in the Prospectus are not
intended to be complete discussions of all federal tax consequences applicable
to an investment in the Funds. Nonresident aliens and foreign persons are
subject to different tax rules, and may be subject to withholding of up to 30%
on certain payments received from the Funds. Shareholders are advised to consult
with their own tax advisors concerning the application of foreign, federal,
state and local taxes to an investment in the Funds.
HISTORICAL PERFORMANCE INFORMATION
A Fund's total returns are based on the overall dollar or percentage change in
value of a hypothetical investment in the Fund, assuming all dividends and
distributions are reinvested. Average annual total return reflects the
hypothetical annually compounded return that would have produced the same
cumulative total return if the Fund's performance had been constant over the
entire period presented. Because average annual total returns tend to smooth out
variations in the Fund's returns, investors should recognize that they are not
the same as actual year-by-year returns.
For the purposes of quoting and comparing the performance of the Funds to
that of other mutual funds and to other relevant market indices in
advertisements, performance will be stated in terms of average annual total
return. Under regulations adopted by the SEC, funds that intend to advertise
performance must include average annual total return quotations calculated
according to the following formula:
n
P(1+T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5, or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1-, 5-, or 10-year period, at the end of such period (or
fractional portion thereof).
- ----------
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication, and will cover 1-, 5-,
and 10-year periods of a Fund's existence or
B-22
<PAGE>
shorter periods dating from the commencement of the Fund's operations. In
calculating the ending redeemable value, all dividends and distributions by
the Fund are assumed to have been reinvested at net asset value as described
in the Prospectus on the reinvestment dates during the period. Additionally,
redemption of shares is assumed to occur at the end of each applicable time
period.
The foregoing information should be considered in light of a Fund's investment
objectives and policies, as well as the risks incurred in the Fund's investment
practices. Future results will be affected by the future composition of a Fund's
portfolio, as well as by changes in the general level of interest rates, and
general economic and other market conditions.
The average annual total returns of the Funds for the periods ended December 31,
1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Technology Value Fund:
1-Year 190.40%
5-Year 58.15%
Since inception (May 20, 1994) 56.53%
Since SEC effective date (December 15, 1994) 59.23%
Technology Leaders Fund:
1-Year 152.58%
Since inception (December 10, 1997) 108.22%
Technology Innovators Fund:
1-Year 212.34%
Since inception (May 20, 1998) (not annualized) 170.21%
The Communications Fund
Since inception (September 30, 1999)
(not annualized) 46.50%
The e-Commerce Fund
Since inception (September 30, 1999)
(not annualized) 48.60%
</TABLE>
Each Fund may also advertise total return (a "nonstandardized quotation") which
is calculated differently from average annual total return. A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions.
The Technology Value Fund's total returns as calculated in this manner for each
of its past five fiscal years are as follows:
B-23
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED TOTAL RETURN
------------ ------------
<S> <C>
December 31, 1995 61.17%
December 31, 1996 60.55%
December 31, 1997 6.46%
December 31, 1998 23.71%
December 31, 1999 190.40%
</TABLE>
The Technology Leaders Fund's total returns as calculated in this manner for its
past two fiscal years are as follows:
<TABLE>
<CAPTION>
YEAR ENDED TOTAL RETURN
------------ ------------
<S> <C>
December 31, 1998 78.15%
December 31, 1999 152.58%
</TABLE>
The Technology Innovators Fund's total returns as calculated in this manner
for its past fiscal year is as follows:
<TABLE>
YEAR ENDED TOTAL RETURN
------------ ------------
<S> <C>
December 31, 1999 212.34%
</TABLE>
A nonstandardized quotation may also indicate average annual compounded rates of
return over periods other than those specified for average annual total return.
A nonstandardized quotation of total return will always be accompanied by a
Fund's average annual total return as described above.
The performance quotations described above are based on historical earnings and
are not intended to indicate future performance of the Funds.
To help investors better evaluate how an investment in a Fund might satisfy
their investment objective, advertisements regarding each Fund may discuss
various measures of Fund performance, including current performance ratings
and/or rankings appearing in financial magazines, newspapers and publications
that track mutual fund performance. Advertisements may also compare performance
(using the calculation methods set forth in the Prospectus) to performance as
reported by other investments, indices and averages. When advertising current
ratings or rankings, the Funds may use the following publications or indices to
discuss or compare a Fund's performance:
B-24
<PAGE>
Both Morningstar Principia Pro and Lipper Mutual Fund Performance Analysis
measure total return and average current yield for the mutual fund industry
and rank individual mutual fund performance over specified time periods
assuming reinvestment of all distributions, exclusive of sales loads. The
Funds may provide comparative performance information appearing in any
appropriate category published by Morngingstar, Inc., or by Lipper Analytical
Services, Inc. In addition, the Funds may use comparative performance
information of relevant indices, including the S&P 500 Index, the Dow Jones
Industrial Average, the Russell 2000 Index, the NASDAQ Composite Index and
the Value Line Composite Index. The S&P 500 Index is an unmanaged index of
500 stocks, the purpose of which is to portray the pattern of common stock
price movement. The Dow Jones Industrial Average is a measurement of general
market price movement for 30 widely held stocks listed on the Exchange. The
Russell 2000 Index, representing approximately 8% of the total market
capitalization of the Russell 3000 Index, is an unmanaged index comprised of
the 2,000 smallest U.S. domiciled publicly-traded common stocks in the
Russell 3000 Index (an unmanaged index of the 3,000 largest U.S. domiciled
publicly-traded common stocks by market capitalization representing
approximately 98% of the investable U.S. equity market). The NASDAQ Composite
Index is an unmanaged index that averages the trading prices of more than
almost 5,000 domestic companies. The Value Line Composite Index is an
unmanaged equal-weighted index comprised of approximately 1,700 stocks, the
purpose of which is to portray the pattern of common stock price movement.
In assessing such comparisons of performance an investor should keep in mind
that the composition of the investments in the reported indices and averages is
not identical to the composition of the Funds' portfolios, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Funds to calculate
their performance. In addition, there can be no assurance that the Funds will
continue this performance as compared to such other averages.
PRINCIPAL SECURITY HOLDERS
As of April 12, 2000 the following persons owned of record 5% or more of the
shares of the Funds:
TECHNOLOGY VALUE FUND:
<TABLE>
<CAPTION>
NAME SHARES % OWNERSHIP
<S> <C> <C>
Charles Schwab & Co., Inc. 12,095,096.2810 38.41%
For Benefit of Customers ("FBOC")
101 Montgomery Street
San Francisco, California 94104-4122
National Financial Services Corp. 7,705,804.8260 24.47%
FBOC
One World Financial Center
200 Liberty Street, 5th Floor
New York, New York 10281
B-25
<PAGE>
National Investors Services Corp. 2,345,673.8380 7.45%
FBOC
55 Water Street 32nd Floor
New York, New York 10041
Donaldson Lufkin & Jenrette 1,935,684.1900 6.15%
Attn: Barbara Capasso
P.O. Box 2052
Jersey City, New Jersey 07303-2052
</TABLE>
TECHNOLOGY LEADERS FUND:
<TABLE>
<CAPTION>
NAME SHARES % OWNERSHIP
<S> <C> <C>
Charles Schwab & Co., Inc. 5,779,760.0080 40.41%
FBOC
101 Montgomery Street
San Francisco, California 94104-4122
National Financial Services Corp. 3,115,912.3550 21.78%
One World Financial Center
200 Liberty Street, 5th Floor
New York, New York 10281-1003
Donaldson Lufkin & Jenrette Securities 907,459.0770 6.34%
Attn Barbara Capasso
P. O. Box 2052
Jersey City, New Jersey 07303-2052
National Investors Services Corp. 874,321.3080 6.11%
FBOC
55 Water Street 32nd Floor
New York, New York 10041-3299
</TABLE>
TECHNOLOGY INNOVATORS FUND:
<TABLE>
<CAPTION>
NAME SHARES % OWNERSHIP
<S> <C> <C>
Charles Schwab & Co., Inc. 6,105,277.3240 42.44%
FBOC
101 Montgomery Street
San Francisco, California 94104-4122
National Financial Services Corp. 3,057,288.6400 21.25%
B-26
<PAGE>
FBOC
One World Financial Center
200 Liberty Street, 5th Floor
New York, New York 10281-5500
National Investors Services Corp. 1,092,077.2700 7.59%
FBOC
55 Water Street 32nd Floor
New York, New York 10041-3299
Donald Lufkin & Jenrette Securities 743,695.2230 5.17%
Attn: Barbara Capasso
P. O. Box 2052
Jersey City, New Jersey 07303-2052
</TABLE>
THE COMMUNICATIONS FUND:
<TABLE>
<CAPTION>
NAME SHARES % OWNERSHIP
<S> <C> <C>
Charles Schwab & Co., Inc. 13,736,882.8350 35.48%
FBOC
101 Montgomery Street
San Francisco, California 94104-4122
National Financial Services Corp. 11,169,420.0230 28.85%
FBOC
200 Liberty Street
One World Financial Center
New York, New York 10281-1003
National Investor Services Corp. 3,344,308.0170 8.64%
FBOC
55 Water Street, 32nd Floor
New York, New York 10041-3299
</TABLE>
THE e-COMMERCE FUND:
<TABLE>
<CAPTION>
NAME SHARES % OWNERSHIP
<S> <C> <C>
Charles Schwab & Co., Inc. 16,286,694.0570 39.16%
FBOC
101 Montgomery Street
San Francisco, California 94101-4122
National Investor Services Corp. 2,965,339.7600 7.13%
FBOC
B-27
<PAGE>
55 Water Street, 32nd Floor
New York, New York 10041-3299
National Financial Services Corp. 9,553,610.1560 22.97%
FBOC
200 Liberty Street
One World Financial Center
New York, New York 10281-1003
</TABLE>
Charles Schwab & Co., a corporation organized in California, may be deemed to
control the Technology Value Fund and the Technology Leaders Fund. National
Financial Services Corp., a corporation organized in New York, may be deemed to
control the Technology Leaders Fund and the Technology Innovators Fund. For
purposes of voting on matters submitted to shareholders, any person who owns
more than 50% of the outstanding shares of a Fund generally will be able to
cast the deciding vote.
As of April 12, 2000, the Trustees and officers of the Trust owned of record or
beneficially less than 1% of each Fund's outstanding shares.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, has been retained to act as Custodian for each
Fund's investments. State Street Bank and Trust Company acts as each Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds as instructed and maintains
records in connection with its duties.
LEGAL COUNSEL AND AUDITORS
The law firm of Morrison & Foerster LLP, 2000 Pennsylvania Avenue, NW,
Washington, DC 20006, acts as legal counsel for the Trust and the Trust's
independent Trustees.
The firm of Tait, Weller & Baker, 8 Penn Center Plaza, Philadelphia,
Pennsylvania 19103, has been selected as independent auditors for the Trust for
the fiscal year ending December 31, 2000. Tait, Weller & Baker performs an
annual audit of the Trust's financial statements and will advise the Trust as to
certain accounting matters.
STATE STREET BANK AND TRUST COMPANY
State Street, 225 Franklin Street, Boston, Massachusetts 02110, is retained
by the Investment Adviser to maintain the records of each shareholder's
account, process purchases and redemptions of the Funds' shares and act as
dividend and distribution disbursing agent. State Street also provides
sub-administrative services
B-28
<PAGE>
to each Fund, calculates daily net asset value per share and maintains such
books and records as are necessary to enable State Street to perform its duties.
For the performance of these services, the Investment Adviser (not the Funds)
pays State Street (1) a fee for sub-administrative services at the annual rate
of 0.03% of the first $1 billion of the Trust's average daily net assets, 0.025%
of the next $1 billion of the Trust's average daily net assets, 0.02% of the
next $1 billion of the Trust's average daily net assets, 0.015% of the next $2
billion of the Trust's average daily net assets, and 0.010% of the average daily
net assets of the Trust thereafter; (2) a fee for transfer agency and
shareholder services at the annual rate of 0.02% of the Trust's average daily
net assets; and (3) a fee for accounting and pricing services at the annual rate
of 0.0125% of the first $1 billion of the Trust's average daily net assets,
0.01% of the next $1 billion of the Trust's average daily net assets, 0.005% of
the next $1 billion of the Trust's average daily net assets, and 0.0025% of the
Trust's average daily net assets thereafter.
FINANCIAL STATEMENTS
Audited financial statements for the relevant periods ended December 31,
1999, for each Fund as contained in the Annual Report to Shareholders of the
Funds for the fiscal year or period ended December 31, 1999, which was filed
with the SEC on March 6, 2000,are incorporated herein by this reference.
B-29
<PAGE>
- --------------------------------------------------------------------------------
PART C
Other Information
- --------------------------------------------------------------------------------
<PAGE>
Firsthand Funds
Form N-1A
Part C
Item 23. EXHIBITS
(a) Declaration of Trust
(i) Declaration of Trust - Incorporated by reference to
Post-Effective Amendment No. 7 to the Registrant's
Registration Statement as filed with the Securities and
Exchange Commission (the "SEC") 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 - 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) Instruments Defining Rights of Security Holders - Incorporated by
reference to the Declaration of Trust and Bylaws.
(d) Form of Investment Advisory Agreement - Incorporated by reference to
Post-Effective Amendment No. 10 to the Registrant's Registration
Statement as filed with the SEC on September 30, 1999 ("Post-Effective
Amendment No. 10").
(e) Form of Distribution Agreement with ALPS Mutual Funds Services,
Inc., filed herewith.
(f) Bonus or Profit Sharing Contracts - Not Applicable.
(g) Form of Custody Agreement with State Street Bank and Trust Company,
filed herewith.
(h) Other Material Contracts
(i) Form of Administration Agreement with Firsthand Capital
Management, Inc.
(ii) Transfer Agency and Service Agreement with State Street Bank
and Trust Company, dated March 15, 2000, filed herewith.
(iii) Administration Agreement between Firsthand Capital Management,
Inc. and State Street Bank and Trust Company, dated April
30, 2000, filed herewith.
(iv) Investment Accounting Agreement with State Street Bank and
Trust Company, dated April 30, 2000, filed herewith.
(i) Opinion and Consent of Counsel relating to Issuance of Shares.
<PAGE>
(j) Other Opinions - Consent of Independent Certified Public Accountants.
(k) Omitted Financial Statements - Not Applicable.
(l) Agreement Relating to Initial Capital incorporated by reference to
Registration Statement on Form N-1A.
(m) Rule 12b-1 Plan - Not Applicable.
(n) Rule 18f-3 Plan - Not Applicable.
(p) Codes of Ethics.
(i) Code of Ethics for Firsthand Capital Management, Inc.,
dated March 16, 2000, filed herewith.
(ii) Code of Ethics for ALPS Mutual Funds Services, Inc., dated
May 1999 and revised March 1, 2000, filed herewith.
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 Firsthand Funds (formerly known as
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 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
<PAGE>
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 that 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
Not Applicable.
Item 27. Principal Underwriters.
(a) ALPS Mutual Funds Services, Inc. acts as underwriter for
the following open-end investment companies: Financial
Investors Trust (this includes FIT Funds, Aristata Funds, and
United Association S&P 500 Index Fund), First Funds, Westcore
Funds, Stonebridge Funds, and Holland Balanced Fund. ALPS
Mutual Funds Services, Inc. also acts as underwriter for the
following exchange traded funds: Select Sector SPDRs Trust,
Diamonds Trust, Mid Cap SPDR Trust, and SPDR Trust.
(b) The following list sets forth the directors and executive
officers of the Distributor, as well as the address for each
person.
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS TITLE POSITION WITH REGISTRANT
<S> <C> <C>
W. R. Alexander Secretary, Director None
370 17th Street, Suite 3100
Denver, CO 80202
Arthur J. Lucey President, Director None
370 17th Street, Suite 3100
Denver, CO 80202
Edmund J. Burke Executive Vice President, None
370 17th Street, Suite 3100 Director
Denver, CO 80202
Thomas Carter Chief Financial Officer and None
370 17th Street, Suite 3100 Treasurer
Denver, CO 80202
Jeremy O. May Vice President, Director of None
370 17th Street, Suite 3100 Mutual Funds
Denver, CO 80202 Operations and Assistant
Secretary
Robert Szydlowski Vice President of Information None
370 17th Street, Suite 3100 Systems
Denver, CO 80202
Rick A. Pederson Director None
Frederick Ross Company
[730] 17th Street, Suite 500
Denver, CO 80202
Chris Woessner Director None
Loomis Sayles & Co., LP
555 California Street, Suite 2750
San Francisco, CA 94104
John W. Hannon, Jr. Director None
Seven Lakes
Box 2233
West End, NC 27376
</TABLE>
(c) Not Applicable.
<PAGE>
Item 28. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the Rules promulgated thereunder,
will be maintained as follows:
- For the Investment Adviser - 125 South Market, Suite 1200, San
Jose, CA 95113;
- For Administration - 125 South Market, Suite 1200, San Jose,
CA 95113, and 225 Franklin St., Boston, MA 02111;
- For Investment Accounting, Custodian, and Transfer Agency -
225 Franklin St., Boston, MA 02110; and
- For Distribution - 370 17th St., Suite 3100, Denver, CO 80202.
Item 29. Management Services Not Discussed in Parts A and B.
Not Applicable.
Item 30. Undertakings.
Not Applicable.
<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 certifies that it
meets all of the requirements for effectiveness of this registration statement
under Rule 485(b) under the Securities Act and 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 27th
of April, 2000.
FIRSTHAND FUNDS
By: /s/ Omar Billawala
-------------------------
Omar Billawala, Secretary
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.
- -------------------------
Michael Lynch* Trustee April 27, 2000
- -------------------------
Jerry Wong* Trustee April 27, 2000
- -------------------------
Kevin Landis* Chairman of the Board April 27, 2000
of Trustees
- -------------------------
Yakoub Bellawala* Treasurer April 27, 2000
*By: /s/ Omar Billawala
------------------
Omar Billawala, attorney-in-fact pursuant to powers of attorney
<PAGE>
FIRSTHAND FUNDS
PART C - EXHIBIT LIST FOR POST-EFFECTIVE AMENDMENT 12 AS FILED ON
APRIL 28, 2000
Item
<TABLE>
<S><C>
23 (e) Form of Distribution Agreement with ALPS Mutual Funds Services, Inc.
23 (g) Form of Custody Agreement with State Street Bank and Trust Co.
23 (h)(i) Form of Administration Agreement with Firsthand Capital Management, Inc.
23 (h)(ii) Transfer Agency and Service Agreement with State Street Bank and Trust Co.
23 (h)(iii) Administration Agreement between Firsthand Capital Management, Inc. and State Street Bank and Trust Co.
23 (h)(iv) Investment Accounting Agreement with State Street Bank and Trust Co.
23 (i) Opinion and Consent of Counsel relating to Issuance of Shares.
23(j) Consent of Independent Certified Public Accountants.
23 (p)(i) Code of Ethics for Firsthand Capital Management, Inc.
23 (p)(ii) Code of Ethics for ALPS Mutual Funds Services, Inc.
</TABLE>
Additional Exhibits
Power of Attorney from Jerry Wong, Michael Lynch, Kevin Landis, and
Yakoub Bellawala.
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT dated as of _________________________ between Firsthand
Funds Trust (the "Fund"), an open-end, management investment company organized
as a trust under the laws of the State of ____________________ and ALPS Mutual
Funds Services, Inc., a Colorado corporation and a registered broker-dealer
under the Securities Exchange Act of 1934, having its principal place of
business in Denver, Colorado (the "Distributor").
WHEREAS, the Fund wishes to employ the services of the Distributor in
connection with the promotion and distribution of the shares of each series of
the Fund (the "Shares"); and
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained, the parties agree as follows:
1. Documents - The Fund has furnished the Distributor with copies of the
Fund's Certificate of Incorporation, advisory agreement, custodian agreement,
transfer agency agreement, administration agreement, current prospectuses and
statement of additional information, and all forms relating to any plan, program
or service offered by the Fund. The Fund shall furnish promptly to the
Distributor a copy of any amendment or supplement to any of the above-mentioned
documents. The Fund shall furnish promptly to the Distributor any additional
documents necessary or advisable to perform its functions hereunder. As used in
this Agreement the terms "registration statement", "prospectus" and "statement
of additional information" shall mean any registration statement, prospectus and
statement of additional information filed by the Fund with the Securities and
Exchange Commission ("SEC") and any amendments and supplements thereto which at
any time shall have been filed with the SEC.
2. Sales of Shares - The Fund grants to the Distributor the right to sell
the Shares as agent on behalf of the Fund, during the term of this Agreement,
subject to the registration requirements of the Securities Act of 1933, as
amended (the "1933 Act"), the Investment Company Act of 1940 (the "1940 Act")
and of the laws governing the sale of securities in the various states ("Blue
Sky Laws"), under the terms and conditions set forth in this Agreement. The
Distributor shall have the right to sell, as agent on behalf of the Fund, the
Shares covered by the registration statement, prospectus and statement of
additional information for the Fund then in effect under the 1933 Act and 1940
Act.
3. Sales of Shares by the Fund - The rights granted to the Distributor
shall be nonexclusive in that the Fund reserves the right to sell Shares to
investors on applications received and accepted by the Fund.
4. Public Offering Price - Except as otherwise noted in the Fund's current
prospectuses and/or statement of additional information, all Shares sold to
investors by the Distributor or the Fund will be sold at the public offering
price. The public offering price for all accepted subscriptions will be the net
asset value per Share, as determined in
N:FirstHand Funds/distribution agreement
Page 1 of 8
<PAGE>
the manner described in the Fund's current prospectuses and/or statement of
additional information.
5. Suspension of Sales - The Fund reserves the right to suspend sales and
the Distributor's authority to process orders for Shares on behalf of the Fund
if, in the judgment of the Fund, it is in the best interests of the Fund to do
so. Suspension will continue for such period as may be determined by the Fund.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use its best efforts to solicit orders
for the sale of the Shares at the public offering price and will undertake such
advertising and promotion as it believes is reasonable in connection with such
solicitation. The Distributor shall review and file such materials with the SEC
and the National Association of Securities, Inc. (the "NASD") to the extent
required by the Securities Exchange Act of 1934 (the "Exchange Act"), and the
1940 Act and the rules and regulations thereunder, and by the rules of the NASD.
This shall not prevent the Distributor from entering into like arrangements
(including arrangements involving the payment of underwriting commissions) with
other issuers. The Distributor will act only on its own behalf as principal
should it choose to enter into selling agreements with selected dealers or
others.
7. Authorized Representations - The Distributor is not authorized by the
Fund to give any information or to make any representations other than those
contained in the registration statement or prospectus and statement of
additional information, or contained in shareholder reports or other material
that may be prepared by or on behalf of the Fund for the Distributor's use.
Consistent with foregoing, the Distributor may prepare and distribute sales
literature or other material as it may deem appropriate in consultation with the
Fund, provided such sales literature complies with applicable law and
regulation.
8. Registration of Shares - The Fund agrees that it will take all action
necessary to register the Shares under the 1933 Act and the 1940 Act (subject to
the necessary approval of its shareholders). The Fund shall make available to
the Distributor, at the Distributor's expense, such number of copies of its
prospectuses and statements of additional information as the Distributor may
reasonably request. The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Shares of the
Fund.
9. Distribution Fees and Expenses - The Distributor shall furnish, at its
expense and without cost to the Fund, the services of personnel to the extent
that such services are required to carry out its obligations under this
Agreement. Such personnel shall consist of one or more persons, during normal
business hours (7:00 a.m. to 6:00 p.m. mountain time), to respond to telephone
questions with respect to the Distributor's responsibilities to the Fund.
10. Fund Expenses - Unless otherwise agreed to by the parties hereto in
writing or by the Fund and the Fund's other agents, the Distributor shall not be
responsible for fees
N:FirstHand Funds/distribution agreement
Page 2 of 8
<PAGE>
and expenses in connection with (a) filing of any registration statement,
printing and the distribution of any prospectus and statement of additional
information under the 1933 Act and/or the 1940 Act and amendments prepared for
use in connection with the offering of Shares for sale to the public, preparing,
setting in type, printing and mailing the prospectus, statement of additional
information and any supplements thereto sent to existing shareholders, (b)
preparing, setting in type, printing and mailing any report (including annual
and semi-annual reports) or other communication to shareholders of the Fund, and
(c) with the Blue Sky registration and qualification of Shares for sale in the
various states in which the officers of the Fund shall determine it advisable to
qualify such Shares for sale (including registering the Fund as a broker or
dealer or any officer of the Fund as agent or salesman in any state).
11. Use of the Distributor's Name - The Fund shall not use the name of the
Distributor, or any of its affiliates, in any prospectus or statement of
additional information, sales literature, and other material relating to the
Fund in any manner without the prior written consent of the Distributor (which
shall not be unreasonably withheld); provided, however, that the Distributor
hereby approves all lawful uses of the names of the Distributor and its
affiliates in the prospectus and statement of additional information of the Fund
and in all other materials which merely refer to accurate terms to their
appointment hereunder or which are required by the SEC, NASD, OCC or any state
securities authority.
12. Use of the Fund's Name - Neither the Distributor nor any of its
affiliates shall use the name of the Fund in any publicly disseminated
materials, including sales literature in any manner without the prior consent of
the Fund (which shall not be unreasonably withheld); provided, however, that the
Fund hereby approves all lawful uses of its name in any required regulatory
filings of the Distributor which merely refer in accurate terms to the
appointment of the Distributor hereunder, or which are required by the SEC,
NASD, OCC or any state securities authority.
13. Insurance - The Distributor agrees to maintain fidelity bond and
liability insurance coverages which are, in scope and amount, consistent with
coverages customary for distribution activities. The Distributor shall notify
the Fund upon receipt of any notice of material, adverse change in the terms or
provisions of its insurance coverage. Such notification shall include the date
of change and the reason or reasons therefor. The Distributor shall notify the
Fund of any material claims against it, whether or not covered by insurance, and
shall notify the Fund from time to time as may be appropriate of the total
outstanding claims made by it under its insurance coverage.
14. Indemnification - The Fund agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act,
against any loss, liability, claim, damages or expenses (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith) arising by reason of any person acquiring any Shares, based upon the
ground that the registration statement, prospectus, statement of additional
N:FirstHand Funds/distribution agreement
Page 3 of 8
<PAGE>
information, shareholder reports or other information filed or made public by
the Fund (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements not misleading under the 1933 Act, the
1940 Act or any other statute or the common law. However, the Fund does not
agree to indemnify the Distributor or hold it harmless to the extent that the
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund by or in behalf of the Distributor. In no case
(i) is the indemnity of the Fund in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person against any
liability to the Fund or its security holders to which the Distributor or such
person would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Fund to be liable under its indemnity agreement contained in the paragraph with
respect to any claim made against the Distributor or any person indemnified
unless the Distributor or person, as the case may be, shall have notified the
Fund in writing of the claim promptly after the summons or other first written
notification giving information of the nature of the claims shall have been
served upon the Distributor or any such person (or after the Distributor or such
person shall have received notice of service on any designated agent). However,
failure to notify the Fund of any claim shall not relieve the Fund from any
liability which it may have to any person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund shall be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any claims, and if the Fund elects to assume the defense, the defense
shall be conducted by counsel chosen by the Fund. In the event the Fund elects
to assume the defense of any suit and retain counsel, the Distributor, officers
or directors or controlling person(s), defendant(s) in the suit, shall bear the
fees and expenses of any additional counsel retained by them. If the fund does
not elect to assume the defense of any suit, it will reimburse the Distributor,
officers or directors or controlling person(s) or defendant(s) in the suit for
the reasonable fees and expenses of any counsel retained by them. The Fund
agrees to notify the Distributor promptly of the commencement of any litigation
or proceeding against it or any of its officers in connection with the issuance
or sale of any of the Shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Fund and each of its officers and person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act, against any loss,
liability, damages, claims or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, damages, claim or
expense and reasonable counsel fees incurred in connection therewith) arising by
reason of any person acquiring any Shares, based upon the 1933 Act, the 1940 Act
or any other statute or common law, alleging (a) any wrongful act of the
Distributor or any of its employees or (b) that any sales literature,
advertisements, information, statements or representations used or made by the
Distributor or any of its affiliates or employees or that the registration
statement, prospectus, statement of additional information, (as from time to
time amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order
N:FirstHand Funds/distribution agreement
Page 4 of 8
<PAGE>
to make the statements not misleading, insofar as the statement or omission was
made in reliance upon, and in conformity with, information furnished to the Fund
by or on behalf of the Distributor. In no case (i) is the indemnity of the
Distributor in favor of the Fund or any person indemnified to be deemed to
protect the Fund or any person against any liability to which the Fund or such
person would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or person, as the case may be, shall have notified
the Distributor in writing of the claim promptly after the summons or other
first written notification giving information of the nature of the claim shall
have been served upon the Fund or any such person (or after the Fund or such
person shall have received notice of service on any designated agent). However,
failure to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Fund or any person against whom the
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. In the case of any notice to the Distributor it shall be
entitled to participate, at its own expense, in the defense or, if it so elects,
to assume the defense of any suit brought to enforce the claim, and if the
Distributor elects to assume the defense, the defense shall be consulted by
counsel chosen by it and satisfactory to the Fund, to its officers and to any
controlling person(s) or defendant(s) in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel, the
Fund or controlling person(s), defendant(s) in the suit, shall bear the fees and
expense of any additional counsel retained by them. If the Distributor does not
elect to assume the defense of any suit, it will reimburse the Fund, officers or
controlling person(s), defendant(s) in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees to notify the
Fund promptly of the commencement of any litigation or proceedings against it in
connection with the Fund and sale of any of the Shares.
15. Supplemental Information - The Distributor and the Fund shall regularly
consult with each other regarding the Distributor's performance of its
obligations under this Agreement. In connection therewith, the Fund shall submit
to the Distributor at a reasonable time in advance of filing with the SEC copies
of any amended or supplemented registration statement (including exhibits) under
the 1933 Act and the 1940 Act; provided, however, that nothing contained in this
Agreement shall in any way limit the Fund's right to file at any time such
amendments to any registration statement and/or supplements to any prospectus or
statement of additional information, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and unconditional.
The Distributor acknowledges that the only information provided to it by the
Fund is that contained in the registration statement, the prospectus, the
statement of additional information and reports and financial information
referred to herein. Neither the Distributor nor any other person is authorized
by the Fund to give any information or to make any representations, other than
those contained in such documents and any sales
N:FirstHand Funds/distribution agreement
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<PAGE>
literature or advertisements specifically approved by appropriate
representatives of the Fund.
16. Term - This Agreement shall become effective as of ___________________
and shall continue until two years from such date and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually (i) by the Fund's Board of Directors or
(ii) by a vote of a majority of the outstanding voting securities of the
relevant Portfolios of the Fund (as defined in the 1940 Act), provided that in
either event the continuance is also approved by the majority of the Directors
of the Fund who are not interested persons (as defined in the 1940 Act) of any
party to this Agreement. by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable with out
penalty on sixty days' notice by the Fund's Board of Directors, by vote of the
holders of a majority of the Fund's outstanding Shares or by the Distributor.
This Agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act).
Upon the termination of this Agreement, the Distributor, at the Fund's expense
and direction, shall transfer to such successor as the Fund shall specify all
relevant books, records and other data established or maintained by the
Distributor under this Agreement.
17. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by (i) telex,, (ii) telecopier,
or (iii) registered or certified mail, postage prepaid, addressed by the party
giving notice to the other party at the last address furnished by the other
party to the party giving notice: if to the Fund at ________, with a copy to:
______; and if to the Distributor, at 370 17th Street, Suite 3100, Denver,
Colorado, 80202, Attn: Russell C. Burk, or such other telex number or address as
may be furnished by one party to the other.
18. Confidential Information - The Distributor, its officers, directors,
employees and agents will treat confidentially and as proprietary information of
the Fund all records and other information relative to the Fund and to prior or
present shareholders or to those persons or entities who respond to the
Distributor's inquiries concerning investment in the Fund, and will not use such
records and information for any purposes other than performance of its
responsibilities and duties hereunder. If Distributor is requested or required
by, but not limited to, oral questions, interrogatories, requests for
information or documents, subpoena, civil investigation, demand or other action,
proceeding or process or as otherwise required by law, statute, regulation,
writ, decree or the like to disclose such information, Distributor will provide
the Fund with prompt written notice of any such request or requirement so that
the Fund may seek an appropriate protective order or other appropriate remedy
and/or waive compliance with this provision. If such order or other remedy is
not sought, or obtained, or waiver not received, Distributor may without
liability hereunder, disclose to the person, entity or agency requesting or
requiring the information, that portion of the information that is legally
required in the opinion of Distributor's counsel.
N:FirstHand Funds/distribution agreement
Page 6 of 8
<PAGE>
19. Limitation of Liability - The Distributor is expressly put on notice of
the limitation of shareholder, officer and Director liability as set forth in
the Certificate of Incorporation of the Fund and agrees that the obligations
assumed by the Fund under this contract shall be limited in all cases to the
Fund and its assets. The Distributor agrees that it shall not seek satisfaction
of any such obligation from the shareholders or any individual shareholder of
the Fund. Nor shall the Distributor seek satisfaction of any such obligation
from the Directors, officers or any individual Director or officer of the Fund.
The Distributor understands that the rights and obligations of each series of
Shares of the Fund under the Fund's Certificate of Incorporation are separate
and distinct from those of any and all other series.
Any obligations of the Fund entered into in the name or on behalf thereof by any
of the Directors or officers, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Directors or officers, shareholders, or representatives of the Fund personally,
but bind only the Fund property, and all persons dealing with any class of
Shares of the Fund must look solely to the Fund property belonging to such class
for the enforcement of any claims against the Fund.
20. Miscellaneous - Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by, and construed and interpreted in accordance with, the laws of the
State of ________________. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may not be changed, waived, discharged or amended except by written
instrument with shall make specific reference to this Agreement and which shall
be signed by the party against which enforcement of such change, waiver,
discharge or amendment is sought. This Agreement may be executed simultaneously
in two or more counterparts, each of which taken together shall constitute one
and the same instrument.
All activities by Distributor and its agents and employees as distributor of the
Shares shall comply with all applicable laws, rules and regulations including,
without limitation, all rules and regulations made or adopted by the SEC or any
securities association registered under the Exchange Act.
Distributor will promptly transmit any orders received by it for purchase,
redemption or exchange of the Shares to the Fund's transfer agent.
N:FirstHand/distribution agreement
Page 7 of 8
<PAGE>
IN WITNESS WHEREOF, the Fund has executed this instrument in its name and
behalf, and the Distributor has executed this instrument in its name and behalf,
as of the date and year first above written.
* ALPS MUTUAL FUND SERVICES, INC.
By: _______________________________ By: _______________________________
Thomas Carter
Title: President Title: Chief Financial Officer
N:FirstHand Funds/distribution agreement
Page 8 of 8
<PAGE>
CUSTODY AGREEMENT
THIS AGREEMENT is made effective the 1st day of May, 2000, by and
between STATE STREET BANK AND TRUST COMPANY, a trust company chartered under the
laws of the Commonwealth of Massachusetts, having its principal office and place
of business at 225 Franklin Street, Boston, Massachusetts 02110 ("State
Street"), and FIRSTHAND FUNDS, a Delaware business trust having its principal
office and place of business at 125 South Market, Suite 1200, San Jose,
California 95113 ("Fund").
WHEREAS, Fund desires to appoint State Street as custodian of the assets
of the Fund's investment portfolio or portfolios listed on Schedule A (each a
"Portfolio", and collectively the "Portfolios"); and
WHEREAS, State Street is willing to accept such appointment for the
compensation and on the terms and conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints State
Street as Custodian of the investment securities, interests in loans and
other non-cash investment property, and monies at any time owned by each
of the Portfolios and delivered to State Street as custodian hereunder
("Assets").
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to State Street:
1. That it is a trust duly organized and existing and in good
standing under the laws of its state of organization, and that
it is registered under the 1940 Act; and
2. That it has the requisite power and authority under applicable
law, its bylaws and its declaration of trust to enter into
this Agreement; it has taken all requisite action necessary to
appoint State Street as custodian; this Agreement has been
duly executed and delivered by Fund; and this Agreement
constitutes a legal, valid and binding obligation of Fund,
enforceable in accordance with its terms.
B. State Street hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of
Massachusetts; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; this Agreement has
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been duly executed and delivered by State Street; and this
Agreement constitutes a legal, valid and binding obligation of
State Street, enforceable in accordance with its terms.
3. That all books, records, information and data pertaining to
the business of the Fund and its prior, present or potential
shareholders that are received by State Street pursuant to the
performance of State Street's duties under this Agreement
shall remain confidential and shall not be disclosed to any
other person, except as specifically authorized by the Fund
or as may be required by law, and shall not be used for any
purpose other than the performance of State Street's
responsibilities and duties hereunder.
3. DUTIES AND RESPONSIBILITIES OF THE PARTIES.
A. DELIVERY OF ASSETS. Except as permitted by the 1940 Act, Fund will
deliver or cause to be delivered to State Street on the effective
date hereof, or as soon thereafter as practicable, and from time to
time thereafter, all Assets acquired by, owned by or from time to
time coming into the possession of each of the Portfolios during the
term hereof. State Street has no responsibility or liability
whatsoever for or on account of assets not so delivered.
B. DELIVERY OF ACCOUNTS AND RECORDS. Fund will turn over or cause to be
turned over to State Street all of each Portfolio's relevant
accounts and records needed by State Street to perform its duties
and responsibilities hereunder fully and properly. State Street may
rely conclusively on the completeness and correctness of such
accounts and records.
C. DELIVERY OF ASSETS TO THIRD PARTIES. State Street will receive
delivery of and keep safely the Assets of each Portfolio segregated
in a separate account. Upon delivery of any such Assets to a
subcustodian appointed pursuant hereto (hereinafter referred to as
"Subcustodian"), State Street will create and maintain records
identifying such Assets as belonging to the applicable Portfolio.
State Street is responsible for the safekeeping of the Assets only
until they have been transmitted to and received by other persons as
permitted under the terms hereof, except for Assets transmitted to
Subcustodians, for which State Street remains responsible to the
extent provided herein. State Street may participate directly or
indirectly through a subcustodian in the Depository Trust Company
(DTC), Treasury/Federal Reserve Book Entry System (Fed System),
Participant Trust Company (PTC) or other depository approved by Fund
(as such entities are defined at 17 CFR Section 270.17f-4(b)) (each
a "Depository" and collectively the "Depositories"). State Street
will be responsible to Fund for any loss, damage or expense suffered
or incurred by Fund resulting from the actions or omissions of any
Depository only to the same extent such Depository is responsible to
State Street.
D. REGISTRATION. State Street will at all times hold registered Assets
in the name of State Street as custodian, the applicable Portfolio,
or a nominee of either of them, unless
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specifically directed by Instructions, as hereinafter defined, to
hold such registered Assets in so-called "street name," provided
that, in any event, State Street will hold all such Assets in an
account of State Street as custodian containing only Assets of the
applicable Portfolio, or only assets held by State Street as a
fiduciary or custodian for customers; and provided further, State
Street's records will at all times indicate the Portfolio or other
customer for which such Assets are held and the respective interests
therein. If, however, Fund directs State Street to maintain Assets
in "street name", notwithstanding anything contained herein to the
contrary, State Street will be obligated only to utilize its best
efforts to timely collect income due the Portfolio on such Assets
and to notify the Portfolio of relevant information, such as
maturities and pendency of calls, and corporate actions including,
without limitation, calls for redemption, tender or exchange offers,
declaration, record and payment dates and amounts of any dividends
or income, reorganization, recapitalization, merger, consolidation,
split-up of shares, change of par value, or conversion ("Corporate
Actions"). All Assets and the ownership thereof by each Portfolio
will at all times be identifiable on the records of State Street.
Fund agrees to hold State Street and its nominee harmless for any
liability as a shareholder of record of securities held in custody.
E. EXCHANGE. Upon receipt of Instructions, State Street will exchange,
or cause to be exchanged, Assets held for the account of a Portfolio
for other Assets issued or paid in connection with any Corporate
Action or otherwise, and will deposit any such Assets in accordance
with the terms of any such Corporate Action. Without Instructions,
State Street is authorized to exchange Assets in temporary form for
Assets in definitive form, to effect an exchange of shares when the
par value of stock is changed, and, upon receiving payment
therefore, to surrender bonds or other Assets at maturity or when
advised of earlier call for redemption, except that State Street
will receive Instruction prior to surrendering any convertible
security.
F. PURCHASES OF INVESTMENTS -- OTHER THAN OPTIONS AND FUTURES. On each
business day on which a Portfolio makes a purchase of Assets other
than options and futures, Fund will deliver to State Street
Instructions specifying with respect to each such purchase:
1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the Asset;
3. The number of shares and the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission,
taxes and other expenses payable in connection with the
purchase;
7. The total amount payable upon such purchase;
8. The name of the person from whom or the broker or dealer
through whom the purchase was made; and
9. Whether the Asset is to be received in certificated form or
via a specified Depository.
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In accordance with such Instructions, State Street will pay for out
of monies held for the purchasing Portfolio, but only insofar as
such monies are available for such purpose, and receive the Assets
so purchased by or for the account of such Portfolio, except that
State Street, or a Subcustodian, may in its sole discretion advance
funds to such Portfolio, which may result in an overdraft because
the monies held on behalf of such Portfolio are insufficient to pay
the total amount payable upon such purchase. Except as otherwise
instructed by Fund, State Street will make such payment only upon
receipt of Assets: (a) by State Street; (b) by a clearing
corporation of a national exchange of which State Street is a
member; or (c) by a Depository. Notwithstanding the foregoing, (i)
State Street may release funds to a Depository prior to the receipt
of advice from the Depository that the Assets underlying a
repurchase agreement have been transferred by book-entry into the
account maintained with such Depository by State Street on behalf of
its customers; provided that State Street's instructions to the
Depository require that the Depository make payment of such funds
only upon transfer by book-entry of the Assets underlying the
repurchase agreement in such account; (ii) State Street may make
payment for time deposits, call account deposits, currency deposits
and other deposits, foreign exchange transactions, futures contracts
or options, before receipt of an advice or confirmation evidencing
said deposit or entry into such transaction; and (iii) State Street
may make, or cause a Subcustodian to make, payment for the purchase
of Assets the settlement of which occurs outside of the United
States of America in accordance with generally accepted local custom
and market practice.
G. SALES AND DELIVERIES OF INVESTMENTS -- OTHER THAN OPTIONS AND
FUTURES. On each business day on which a Portfolio makes a sale of
Assets other than options and futures, Fund will deliver to State
Street Instructions specifying with respect to each such sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the Asset;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the Assets sold were purchased or other
information identifying the Assets sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by the Portfolio upon such
sale; and
9. The name and address of the broker or dealer through whom or
person to whom the sale was made.
State Street will deliver or cause to be delivered the Assets thus
designated as sold for the account of the selling Portfolio as
specified in the Instructions. Except as otherwise instructed by
Fund, State Street will make such delivery upon receipt of: (a)
payment therefore in such form as is satisfactory to State Street;
(b) credit to the
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<PAGE>
account of State Street with a clearing corporation of a national
securities exchange of which State Street is a member; or (c) credit
to the account maintained by State Street on behalf of its customers
with a Depository. Notwithstanding the foregoing: (i) State Street
will deliver Assets held in physical form in accordance with "street
delivery custom" to a broker or its clearing agent; or (ii) State
Street may make, or cause a Subcustodian to make, delivery of Assets
the settlement of which occurs outside of the United States of
America upon payment therefore in accordance with generally accepted
local custom and market practice.
H. PURCHASES OR SALES OF OPTIONS AND FUTURES. On each business day on
which a Portfolio makes a purchase or sale of the options and/or
futures listed below, Fund will deliver to State Street Instructions
specifying with respect to each such purchase or sale:
1. If applicable, the name of the Portfolio making such purchase
or sale;
2. In the case of security options:
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom
the sale or purchase was made.
3. In the case of options on indices:
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising,
expiring or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through
whom the sale or purchase was made, or other applicable
settlement instructions.
4. In the case of security index futures contracts:
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<PAGE>
a. The last trading date specified in the contract and,
when available, the closing level, thereof;
b. The index level on the date the contract is entered
into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition
to Instructions, and if not already in the possession
of State Street, Fund will deliver a substantially
complete and executed custodial safekeeping account and
procedural agreement, incorporated herein by
reference); and
f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.
5. In the case of options on index future contracts:
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. ASSETS PLEDGED OR LOANED. If specifically allowed for in the
prospectus of a Portfolio, and subject to such additional terms and
conditions as State Street may require:
1. Upon receipt of Instructions, State Street will release or
cause to be released Assets to the designated pledgee by way
of pledge or hypothecation to secure any loan incurred by a
Portfolio; provided, however, that State Street will release
Assets only upon payment to State Street of the monies
borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, further Assets
may be released or caused to be released for that purpose.
Upon receipt of Instructions, State Street will pay, but only
from funds available for such purpose, any such loan upon
redelivery to it of the Assets pledged or hypothecated
therefore and upon surrender of the note or notes evidencing
such loan.
2. Upon receipt of Instructions, State Street will release Assets
to the designated borrower; provided, however, that the Assets
will be released only upon deposit with State Street of full
cash collateral as specified in such Instructions, and that
the lending Portfolio will retain the right to any dividends,
interest or distribution on such loaned Assets. Upon receipt
of Instructions and the loaned Assets, State Street will
release the cash collateral to the borrower.
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<PAGE>
J. ROUTINE MATTERS. State Street will, in general, attend to all
routine and mechanical matters in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings with
the Assets except as may be otherwise provided herein or upon
Instruction from Fund.
K. DEPOSIT ACCOUNTS. State Street will open and maintain one or more
special purpose deposit accounts for each Portfolio in the name of
State Street in such banks or trust companies (including, without
limitation, affiliates of State Street) as may be designated by it
or Fund in writing ("Accounts"), subject only to draft or order by
State Street upon receipt of Instructions. State Street will deposit
all monies received by State Street from or for the account of a
Portfolio in an Account maintained for such Portfolio. Subject to
Section 5 hereof, State Street agrees:
1. To make Fed Funds available to the applicable Portfolio at
9:00 a.m., Kansas City time, on the second business day after
deposit of any check into an Account, in the amount of the
check;
2. To make funds available immediately upon a deposit made by
Federal Reserve wire; and
3. To make funds available on the next business day after deposit
of ACH wires.
L. INCOME AND OTHER PAYMENTS. State Street will:
1. Collect, claim and receive and deposit for the account of the
applicable Portfolio all income (including income from the
Accounts) and other payments which become due and payable on
or after the effective date hereof with respect to the Assets,
and credit the account of such Portfolio in accordance with
the schedule attached hereto as Exhibit A. If, for any reason,
a Portfolio is credited with income that is not subsequently
collected, State Street may reverse that credited amount. If
monies are collected after such reversal, State Street will
credit the Portfolio in that amount;
2. Execute ownership and other certificates and affidavits for
all federal, state and local tax purposes in connection with
the collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with (a) the collection, receipt and deposit of
such income and other payments, including but not limited to
the presentation for payment of all coupons and other income
items requiring presentation; and all other Assets which may
mature or be called, redeemed, retired or otherwise become
payable and regarding which State Street has actual knowledge,
or should reasonably be expected to have knowledge; and (b)
the endorsement for collection, in the
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name of Fund or a Portfolio, of all checks, drafts or other
negotiable instruments.
State Street, however, will not be required to institute suit or
take other extraordinary action to enforce collection except upon
receipt of Instructions and upon being indemnified to its
satisfaction against the costs and expenses of such suit or other
actions. State Street will receive, claim and collect all stock
dividends, rights and other similar items and will deal with the
same pursuant to Instructions.
M. PROXIES AND NOTICES. State Street will promptly deliver or mail or
have delivered or mailed to Fund all proxies properly signed, all
notices of meetings, all proxy statements and other notices,
requests or announcements affecting or relating to Assets and will,
upon receipt of Instructions, execute and deliver or mail (or cause
its nominee to execute and deliver or mail) such proxies or other
authorizations as may be required. Except as provided herein or
pursuant to Instructions hereafter received by State Street, neither
it nor its nominee will exercise any power inherent in any such
Assets, including any power to vote the same, or execute any proxy,
power of attorney, or other similar instrument voting any of such
Assets, or give any consent, approval or waiver with respect
thereto, or take any other similar action.
N. DISBURSEMENTS. State Street will pay or cause to be paid, insofar as
funds are available for the purpose, bills, statements and other
obligations of each Portfolio (including but not limited to
obligations in connection with the conversion, exchange or surrender
of Assets, interest charges, dividend disbursements, taxes,
management fees, custodian fees, legal fees, auditors' fees,
transfer agents' fees, brokerage commissions, compensation to
personnel, and other operating expenses of such Portfolio) pursuant
to Instructions setting forth the name of the person to whom payment
is to be made, and the amount and purpose of the payment.
O. DAILY STATEMENT OF ACCOUNTS. State Street will, within a reasonable
time, render to Fund a detailed statement of the amounts received or
paid and of Assets received or delivered for the account of each
Portfolio during each business day. State Street will maintain such
books and records as are necessary to enable it to render, from time
to time upon request by Fund, a detailed statement of the Assets.
State Street will permit, and upon Instruction will cause any
Subcustodian to permit, such persons as are authorized by Fund,
including Fund's independent public accountants, reasonable access
to such records or will provide reasonable confirmation of the
contents of such records, and if demanded, State Street will permit,
and will cause any Subcustodian to permit, federal and state
regulatory agencies to examine the Assets, books and records of the
Portfolio.
P. APPOINTMENT OF SUBCUSTODIANS. Notwithstanding any other provisions
hereof:
1. All or any of the Assets may be held in State Street's own
custody or in the custody of one or more other banks or trust
companies (including, without limitation, affiliates of State
Street) acting as Subcustodians as may be
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selected by State Street. Any such Subcustodian selected by
State Street must have the qualifications required for a
custodian under the 1940 Act. State Street will be responsible
to the applicable Portfolio for any loss, damage or expense
suffered or incurred by such Portfolio resulting from the
actions or omissions of any Subcustodians selected and
appointed by State Street (except Subcustodians appointed at
the request of Fund and as provided in Subsection 2 below) to
the same extent State Street would be responsible to Fund
hereunder if it committed the act or omission itself.
2. Upon request of Fund, State Street will contract with other
Subcustodians reasonably acceptable to State Street for
purposes of (a) effecting third-party repurchase transactions
with banks, brokers, dealers, or other entities through the
use of a common custodian or subcustodian, or (b) providing
depository and clearing agency services with respect to
certain variable rate demand note securities, or (c) for other
reasonable purposes specified by Fund; provided, however, that
State Street will be responsible to Fund for any loss, damage
or expense suffered or incurred by Fund resulting from the
actions or omissions of any such Subcustodian only to the same
extent such Subcustodian is responsible to State Street. Fund
may review State Street's contracts with such Subcustodians.
Q. FOREIGN CUSTODY MANAGER.
1. DELEGATION TO STATE STREET AS FCM. The Fund, pursuant to
resolution adopted by its Board of Trustees or Directors (the
"Board"), hereby delegates to State Street, subject to Section
(b) of Rule 17f-5 of the 1940 Act, the responsibilities set
forth in this Section Q with respect to Foreign Assets held
outside the United States, and State Street hereby accepts
such delegation, as FCM of each Portfolio.
2. DEFINITIONS. Capitalized terms in this Section Q have the
following meanings:
"Country Risk" means all factors reasonably related to the
systemic risk of holding Foreign Assets in a particular
country including, but not limited to, such country's
political environment; economic and financial infrastructure
(including financial institutions such as any Mandatory
Securities Depositories operating in the country); prevailing
or developing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of
Foreign Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in
section (a)(1) of Rule 17f-5, except that the term does not
include Mandatory Securities Depositories.
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"Foreign Assets" means any of the Portfolios' investments
(including foreign currencies) for which the primary market is
outside the United States and such cash and cash equivalents
in amounts deemed by Fund to be reasonably necessary to effect
the Portfolios' transactions in such investments.
"Foreign Custody Manager" or "FCM" has the meaning set forth
in section (a)(2) of Rule 17f-5.
"Mandatory Securities Depository" means a foreign securities
depository or clearing agency that, either as a legal or
practical matter, must be used if the Fund determines to place
Foreign Assets in a country outside the United States (i)
because required by law or regulation; (ii) because securities
cannot be withdrawn from such foreign securities depository or
clearing agency; or (iii) because maintaining or effecting
trades in securities outside the foreign securities depository
or clearing agency is not consistent with prevailing or
developing custodial or market practices.
3. COUNTRIES COVERED. The FCM is responsible for performing the
delegated responsibilities defined below only with respect to
the countries and custody arrangements for each such country
listed on Exhibit B hereto, which may be amended from time to
time by the FCM. The FCM will list on Exhibit B the Eligible
Foreign Custodians selected by the FCM to maintain the assets
of each Portfolio. Mandatory Securities Depositories are
listed on Exhibit C hereto, which Exhibit C may be amended
from time to time by the FCM. The FCM will provide amended
versions of Exhibits B and C in accordance with subsection 7
of this Section Q.
Upon the receipt by the FCM of Instructions to open an
account, or to place or maintain Foreign Assets, in a country
listed on Exhibit B, and the fulfillment by the Fund of the
applicable account opening requirements for such country, the
FCM is deemed to have been delegated by the Board
responsibility as FCM with respect to that country and to have
accepted such delegation. Following the receipt of
Instructions directing the FCM to close the account of a
Portfolio with the Eligible Foreign Custodian selected by the
FCM in a designated country, the delegation by the Board to
State Street as FCM for that country is deemed to have been
withdrawn and State Street will immediately cease to be the
FCM of the Portfolio with respect to that country.
The FCM may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon
written notice to the Fund. Thirty days (or such longer period
as to which the parties agree in writing) after receipt of any
such notice by the Fund, State Street will have no further
responsibility as FCM to a Portfolio with respect to the
country as to which State Street's acceptance of delegation is
withdrawn.
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4. SCOPE OF DELEGATED RESPONSIBILITIES.
a. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to
the provisions of this Section Q, the FCM may place and
maintain the Foreign Assets in the care of the Eligible
Foreign Custodian selected by the FCM in each country
listed on Exhibit B, as amended from time to time.
In performing its delegated responsibilities as FCM to
place or maintain Foreign Assets with an Eligible
Foreign Custodian, the FCM will determine that the
Foreign Assets will be subject to reasonable care,
based on the standards applicable to custodians in the
country in which the Foreign Assets will be held by
that Eligible Foreign Custodian, after considering all
factors relevant to the safekeeping of such assets,
including, without limitation, those set forth in
Rule 17f-5(c)(1)(i) through (iv).
b. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The FCM
will determine that the contract (or the rules or
established practices or procedures in the case of an
Eligible Foreign Custodian that is a foreign securities
depository or clearing agency) governing the foreign
custody arrangements with each Eligible Foreign
Custodian selected by the FCM will provide reasonable
care for the Foreign Assets held by that Eligible
Foreign Custodian based on the standards applicable to
custodians in the particular country. Each such
contract will include the provisions set forth in Rule
17f-5(c)(2)(I)(A) through (F), or, in lieu of any or
all of the provisions set forth in said (A) through
(F), such other provisions that the FCM determines will
provide, in their entirety, the same or greater level
of care and protection for the Foreign Assets as the
provisions set forth in said (A) through (F) in their
entirety.
c. MONITORING. In each case in which the FCM maintains
Foreign Assets with an Eligible Foreign Custodian
selected by the FCM, the FCM will establish a system to
monitor (a) the appropriateness of maintaining the
Foreign Assets with such Eligible Foreign Custodian and
(b) the contract governing the custody arrangements
established by the FCM with the Eligible Foreign
Custodian. In the event the FCM determines that the
custody arrangements with an Eligible Foreign Custodian
it has selected are no longer appropriate, the FCM will
notify the Board in accordance with subsection 7 of
this Section Q.
5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section Q, the Board will be solely
responsible for considering and determining to accept such
Country Risk as is incurred by placing and
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maintaining the Foreign Assets in each country for which State
Street is serving as FCM of a Portfolio, and the Board will be
solely responsible for monitoring on a continuing basis such
Country Risk to the extent that the Board considers necessary
or appropriate. The Fund, on behalf of the Portfolios, and
State Street each expressly acknowledge that the FCM will not
be delegated any responsibilities under this Section Q with
respect to Mandatory Securities Depositories.
6. STANDARD OF CARE AS FCM OF A PORTFOLIO. In performing the
responsibilities delegated to it, the FCM agrees to exercise
reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of assets of
management investment companies registered under the 1940 Act
would exercise.
7. REPORTING REQUIREMENTS. The FCM will report the withdrawal of
the Foreign Assets from an Eligible Foreign Custodian and the
placement of such Foreign Assets with another Eligible Foreign
Custodian by providing to the Board amended Exhibits B and C
at the end of the calendar quarter in which an amendment to
either Schedule has occurred. The FCM will make written
reports notifying the Board of any other material change in
the foreign custody arrangements of a Portfolio described in
this Section Q after the occurrence of the material change.
8. REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The FCM represents
to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5.
The Fund represents to State Street that the Board has
determined that it is reasonable for the Board to rely on
State Street to perform the responsibilities delegated
pursuant to this Agreement to State Street and as the FCM of
each Portfolio.
9. EFFECTIVE DATE AND TERMINATION OF STATE STREET AS FCM. The
Board's delegation to State Street as FCM of a Portfolio will
be effective as of the date hereof and will remain in effect
until terminated at any time, without penalty, by written
notice from the terminating party to the non-terminating
party. Termination will become effective thirty days after
receipt by the non-terminating party of such notice. The
provisions of subsection 3 of this Section Q govern the
delegation to and termination of State Street as FCM of the
Fund with respect to designated countries.
R. ACCOUNTS AND RECORDS PROPERTY OF FUND. State Street acknowledges
that all of the accounts and records maintained by State Street
pursuant hereto are the property of Fund, and will be made available
to Fund for inspection or reproduction within a reasonable period of
time, upon demand. State Street will assist Fund's independent
auditors, or upon the prior written approval of Fund, or upon
demand, any regulatory body, in any requested review of Fund's
accounts and records, provided that Fund
12
<PAGE>
will reimburse State Street for all expenses and employee time
invested in any such review outside of routine and normal periodic
reviews. Upon receipt from Fund of the necessary information or
instructions, State Street will supply information from the books
and records it maintains for Fund that Fund may reasonably request
for tax returns, questionnaires, periodic reports to shareholders
and such other reports and information requests as Fund and State
Street may agree upon from time to time.
S. ADOPTION OF PROCEDURES. State Street and Fund hereby adopt the Funds
Transfer Operating Guidelines attached hereto as Exhibit D. State
Street and Fund may from time to time adopt such additional
procedures as they agree upon, and State Street may conclusively
assume that no procedure approved or directed by Fund, Fund's or
Portfolio's accountants or other advisors conflicts with or violates
any requirements of the prospectus, bylaws and declaration of trust,
any applicable law, rule or regulation, or any order, decree or
agreement by which Fund may be bound.
T. ADVANCES. Fund will pay on demand any advance of cash or securities
made by State Street or any Subcustodian, in its sole discretion,
for any purpose (including but not limited to securities
settlements, purchase or sale of foreign exchange or foreign
exchange contracts and assumed settlement) for the benefit of any
Portfolio. Any such cash advance will be subject to an overdraft
charge at the rate set forth in the then-current fee schedule from
the date advanced until the date repaid. As security for each such
advance, Fund hereby grants State Street and such Subcustodian a
lien on and security interest in all Assets at any time held for the
account of the applicable Portfolio, including without limitation
all Assets acquired with the amount advanced. Should Fund fail to
promptly repay the advance, State Street and such Subcustodian may
utilize available cash and dispose of such Portfolio's Assets
pursuant to applicable law to the extent necessary to obtain
reimbursement of the amount advanced and any related overdraft
charges.
U. EXERCISE OF RIGHTS; TENDER OFFERS. Upon receipt of Instructions,
State Street will: (1) deliver warrants, puts, calls, rights or
similar securities to the issuer or trustee thereof, or to the agent
of such issuer or trustee, for the purpose of exercise or sale,
provided that the new Assets, if any, are to be delivered to State
Street; and (2) deposit securities upon invitations for tenders
thereof, provided that the consideration for such securities is to
be paid or delivered to State Street or the tendered securities are
to be returned to State Street.
V. FUND SHARES.
1. Fund will deliver to State Street Instructions with respect to
the declaration and payment of any dividend or other
distribution on the shares of capital stock of a Portfolio
("Fund Shares") by a Portfolio. On the date specified in such
Instruction, State Street will pay out of the monies held for
the account of the Portfolio, insofar as it is available for
such purposes, and credit to the account of the Dividend
Disbursing Agent for the Portfolio, the amount specified in
such Instructions.
13
<PAGE>
2. Whenever Fund Shares are repurchased or redeemed by a
Portfolio, Portfolio or its agent will give State Street
Instructions regarding the aggregate dollar amount to be paid
for such shares. Upon receipt of such Instruction, State
Street will charge such aggregate dollar amount to the account
of the Portfolio and either deposit the same in the account
maintained for the purpose of paying for the repurchase or
redemption of Fund Shares or deliver the same in accordance
with such Instruction. State Street has no duty or
responsibility to determine that Fund Shares have been removed
from the proper shareholder accounts or that the proper number
of Fund Shares have been canceled and removed from the
shareholder records.
3. Whenever Fund Shares are purchased from Fund, Fund will
deposit or cause to be deposited with State Street the amount
received for such shares. State Street has no duty or
responsibility to determine that Fund Shares purchased from
Fund have been added to the proper shareholder account or that
the proper number of such shares have been added to the
shareholder records.
4. INSTRUCTIONS.
A. The term "Instructions", as used herein, means written (including
telecopied, telexed, or electronically transmitted) or oral
instructions which State Street reasonably believes were given by a
designated representative of Fund. Fund will deliver to State
Street, prior to delivery of any Assets to State Street and
thereafter from time to time as changes therein are necessary,
written Instructions naming one or more designated representatives
to give Instructions in the name and on behalf of Fund, which
Instructions may be received and accepted by State Street as
conclusive evidence of the authority of any designated
representative to act for Fund and may be considered to be in full
force and effect until receipt by State Street of notice to the
contrary. Unless such written Instructions delegating authority to
any person to give Instructions specifically limit such authority to
specific matters or require that the approval of anyone else will
first have been obtained, State Street will be under no obligation
to inquire into the right of such person, acting alone, to give any
Instructions whatsoever. If Fund fails to provide State Street any
such Instructions naming designated representatives, any
Instructions received by State Street from a person reasonably
believed to be an appropriate representative of Fund will constitute
valid and proper Instructions hereunder. The term "designated
representative" may include Fund's or a Portfolio's employees and
agents, including investment managers and their employees.
B. No later than the next business day immediately following each oral
Instruction, Fund will send State Street written confirmation of
such oral Instruction. At State Street's sole discretion, State
Street may record on tape, or otherwise, any oral Instruction
whether given in person or via telephone, each such recording
identifying the date and the time of the beginning and ending of
such oral Instruction. Prior to recording
14
<PAGE>
such oral Instructions, State Street shall give the caller notice
that recording is taking place.
C. Fund will provide, upon State Street's request, a certificate signed
by an officer or designated representative of Fund, as conclusive
proof of any fact or matter required to be ascertained from Fund
hereunder. Fund will also provide State Street Instructions with
respect to any matter concerning this Agreement requested by State
Street. If State Street reasonably believes that it could not
prudently act according to the Instructions, or the instruction or
advice of Fund's or a Portfolio's accountants or counsel, it may in
its discretion, with notice to Fund, not act according to such
Instructions.
5. LIMITATION OF LIABILITY OF STATE STREET. State Street is not responsible
or liable for, and Fund will indemnify and hold State Street harmless from
and against, any and all costs, expenses, losses, damages, charges,
counsel fees (including without limitation, disbursements and the
allocable cost of in-house counsel), payments and liabilities which may be
asserted against or incurred by State Street or for which State Street may
be held to be liable, provided that in each case, State Street has acted
in good faith and with reasonable care, arising out of or attributable to:
A. State Street's action or failure to act pursuant hereto; provided
that State Street is not liable for consequential, special, or
punitive damages;
B. State Street's payment of money as requested by Fund, or the taking
of any action which might make it or its nominee liable for payment
of monies or in any other way; provided, however, that nothing
herein obligates State Street to take any such action or expend its
own monies in its sole discretion;
C. State Street's action or failure to act hereunder upon any
Instructions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed, including any Instruction, communications, data
or other information received by State Street by means of the
Systems, as hereinafter defined, or any electronic system of
communication;
D. State Street's action or failure to act in good faith reliance on
the advice or opinion of counsel for Fund or of its own counsel with
respect to questions or matters of law, which advice or opinion may
be obtained by State Street at the expense of Fund, or on the
Instruction, advice or statements of any officer or employee of
Fund, or Fund's accountants or other authorized individuals, and
other persons believed by it in good faith to be expert in matters
upon which they are consulted;
E. The purchase or sale of any securities or foreign currency
positions. Without limiting the generality of the foregoing, State
Street is under no duty or obligation to inquire into:
15
<PAGE>
1. The validity of the issue of any securities purchased by or
for any Portfolio, or the legality of the purchase thereof or
of foreign currency positions, or evidence of ownership
required by Fund to be received by State Street, or the
propriety of the decision to purchase or the amount paid
therefore;
2. The legality of the sale of any securities or foreign currency
positions by or for any Portfolio, or the propriety of the
amount for which the same are sold; or
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefore, the
legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefore, or the
legality of the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment of any
stock dividend.
F. Any error, omission, inaccuracy or other deficiency in any
Portfolio's accounts and records or other information provided to
State Street by or on behalf of a Portfolio, or the failure of Fund
to provide, or provide in a timely manner, any accounts, records, or
information needed by State Street to perform its duties hereunder;
G. Fund's refusal or failure to comply with the terms hereof (including
without limitation Fund's failure to pay or reimburse State Street
under Section 5 hereof), Fund's negligence or willful misconduct, or
the failure of any representation or warranty of Fund hereunder to
be and remain true and correct in all respects at all times;
H. The use or misuse, whether authorized or unauthorized, of the
Systems or any electronic system of communication used hereunder, by
Fund or by any person who acquires access to the Systems or such
other systems through the terminal device, passwords, access
instructions or other means of access to such Systems or such other
system which are utilized by, assigned to or otherwise made
available to Fund, except to the extent attributable to any
negligence or willful misconduct by State Street;
I. Any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the
payment of money to be received by State Street on behalf of a
Portfolio until actually received; provided, however, that State
Street will advise Fund promptly if it fails to receive any such
money in the ordinary course of business and will cooperate with
Fund toward the end that such money is received;
J. Except as provided in Section 3.P hereof, loss occasioned by the
acts, omissions, defaults or insolvency of any broker, bank, trust
company, securities system or any other person with whom State
Street may deal; and
16
<PAGE>
K. The failure or delay in performance of its obligations hereunder, or
those of any entity for which it is responsible hereunder, arising
out of or caused, directly or indirectly, by circumstances beyond
the affected entity's reasonable control, including, without
limitation: any interruption, loss or malfunction of any utility,
transportation, computer (hardware or software) or communication
service; inability to obtain labor, material, equipment or
transportation, or a delay in mails; governmental or exchange
action, statute, ordinance, rulings, regulations or direction, war,
strike, riot, emergency, civil disturbance, terrorism, vandalism,
explosions, labor disputes, freezes, floods, fires, tornadoes, acts
of God or public enemy, revolutions, or insurrection.
L. State Street will not confess any claim or settle or make any
compromise in any instance in which the Fund will be asked to
provide indemnification, except with the Fund's prior written
consent. Any amounts payable by the Fund under this Section 5 shall
be satisfied only against the assets of the Portfolio of the Fund
involved in the claim, demand, action or suit and not against the
assets of any other investment portfolio of the Fund.
6. COMPENSATION. In consideration for its services hereunder, Fund will pay
to State Street the compensation set forth in a separate fee schedule,
incorporated herein by reference, to be agreed to by Fund and State Street
from time to time, and upon reasonable demand, reimbursement for State
Street's cash disbursements and reasonable out-of-pocket costs and
expenses, including attorneys' fees and disbursements, incurred by State
Street in connection with the performance of services hereunder. State
Street may charge such compensation against monies held by it for the
account of the Portfolios. State Street will also be entitled to charge
against any monies held by it for the account of the Portfolios the amount
of any loss, damage, liability, advance, overdraft or expense for which it
is entitled to reimbursement from Fund, including but not limited to fees
and expenses due to State Street for other services provided to Fund by
State Street. State Street will be entitled to reimbursement by Fund for
the losses, damages, liabilities, advances, overdrafts and expenses of
Subcustodians only to the extent that (a) State Street would have been
entitled to reimbursement hereunder if it had incurred the same itself
directly, and (b) State Street is obligated to reimburse the Subcustodian
therefore.
7. TERM AND TERMINATION. This Agreement shall become effective on the date of
its execution and shall remain in full force and effect indefinitely from
the effective date unless either party terminates this Agreement by
written notice to the other party, such notice to be in writing, delivered
or mailed postage prepaid, to the other party. For State Street to
terminate this Agreement, State Street shall give at least one hundred
twenty (120) days' prior notice to the Fund. For the Fund to terminate
this agreement, the Fund shall give at least ninety (90) days prior notice
to the State Street. Termination of this Agreement with respect to any
given Portfolio shall in no way affect the continued validity of this
Agreement with respect to any other Portfolio. Upon termination hereof:
A. Fund will pay State Street its fees and compensation due hereunder
and its reimbursable disbursements, costs and expenses paid or
incurred to such date;
17
<PAGE>
B. Fund will designate a successor custodian by Instruction to State
Street. In the event no such Instruction has been delivered to State
Street on or before the date when such termination becomes
effective, then State Street may, at its option, (i) choose as
successor custodian a bank or trust company meeting the
qualifications for custodian set forth in the 1940 Act and having
not less than Two Million Dollars ($2,000,000) aggregate capital,
surplus and undivided profits, as shown by its last published
report, or (ii) apply to a court of competent jurisdiction for the
appointment of a successor or other proper relief, or take any other
lawful action under the circumstances; provided, however, that Fund
will reimburse State Street for its costs and expenses, including
reasonable attorney's fees, incurred in connection therewith; and
C. State Street will, upon payment of all sums due to State Street from
Fund hereunder or otherwise, deliver at State Street's office all
Assets, duly endorsed and in form for transfer, to the successor
custodian, or as specified by the court. State Street will cooperate
in effecting changes in book-entries at all Depositories. Upon
delivery to a successor or as specified by the court, State Street
will have no further obligations or liabilities hereunder.
Thereafter such successor will be the successor hereunder and will
be entitled to reasonable compensation for its services.
In the event that Assets remain in the possession of State Street after
the date of termination hereof for any reason other than State Street's
failure to deliver the same, State Street is entitled to compensation as
provided in the then-current fee schedule for its services during such
period, and the provisions hereof relating to the duties and obligations
of State Street will remain in full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed to
Fund at the address set forth above, or at such other address as Fund may
have designated to State Street in writing, will be deemed to have been
properly given to Fund hereunder. Notices, requests, Instructions and
other writings addressed to State Street at 801 Pennsylvania, Kansas City,
Missouri 64105, Attention: Custody Department, or to such other address as
it may have designated to Fund in writing, will be deemed to have been
properly given to State Street hereunder.
9. THE SYSTEMS; CONFIDENTIALITY.
A. If State Street provides Fund direct access to the computerized
custody recordkeeping and accounting systems used by State Street
("Systems") or if State Street and Fund agree to utilize any
electronic system of communication, Fund agrees to implement and
enforce appropriate security policies and procedures to prevent
unauthorized or improper access to or use of the Systems or such
other system.
B. Fund will preserve the confidentiality of the Systems and the tapes,
books, reference manuals, instructions, records, programs,
documentation and information of, and other materials relevant to,
the Systems and the business of State Street or its affiliates
("Confidential Information"). Fund agrees that it will not
voluntarily
18
<PAGE>
disclose any such Confidential Information to any other person other
than its own employees who reasonably have a need to know such
information pursuant hereto. Fund will return all such Confidential
Information to State Street upon termination or expiration hereof.
C. Fund has been informed that the Systems are licensed for use by
State Street and its affiliates from one or more third parties
("Licensors"), and Fund acknowledges that State Street and Licensors
have proprietary rights in and to the Systems and all other State
Street or Licensor programs, code, techniques, know-how, data bases,
supporting documentation, data formats, and procedures, including
without limitation any changes or modifications made at the request
or expense or both of Fund (collectively, the "Protected
Information"). Fund acknowledges that the Protected Information
constitutes confidential material and trade secrets of State Street
and Licensors. Fund will preserve the confidentiality of the
Protected Information, and Fund hereby acknowledges that any
unauthorized use, misuse, disclosure or taking of Protected
Information, residing or existing internal or external to a
computer, computer system, or computer network, or the knowing and
unauthorized accessing or causing to be accessed of any computer,
computer system, or computer network, may be subject to civil
liabilities and criminal penalties under applicable law. Fund will
so inform employees and agents who have access to the Protected
Information or to any computer equipment capable of accessing the
same. Licensors are intended to be and are third party beneficiaries
of Fund's obligations and undertakings contained in this Section.
D. Fund hereby represents and warrants to State Street that it has
determined to its satisfaction that the Systems are appropriate and
suitable for its use. THE SYSTEMS ARE PROVIDED ON AN AS IS, AS
AVAILABLE BASIS. STATE STREET EXPRESSLY DISCLAIMS ALL WARRANTIES
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, EXCEPT THOSE
WARRANTIES EXPRESSLY STATED HEREIN.
E. State Street will take reasonable steps to ensure that its products
(and those of its third-party suppliers) reflect the available state
of the art technology to offer products that are reasonably free
from material and serious defects. State Street will make the
changes to its products at no cost to the Fund and in a commercially
reasonable time frame and will require third-party suppliers to do
likewise.
Similarly, Fund will take reasonable steps to ensure that its
electronic systems reflect the available state of the art technology
and are reasonably free from material and serious defects, and if
any changes are required, Fund will make the changes to its systems
at no cost to State Street and in a commercially reasonable time
frame.
10. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio, the
following provisions apply:
19
<PAGE>
A. Each Portfolio will be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered
hereby, every reference herein to Fund is deemed to relate solely to
the particular Portfolio to which such transaction relates. Under no
circumstances will the rights, obligations or remedies with respect
to a particular Portfolio constitute a right, obligation or remedy
applicable to any other Portfolio. The use of this single document
to memorialize the separate agreement as to each Portfolio is
understood to be for clerical convenience only and will not
constitute any basis for joining the Portfolios for any reason.
B. Fund may appoint State Street as its custodian for additional
Portfolios from time to time by written notice, provided that State
Street consents to such addition. Rates or charges for each
additional Portfolio will be as agreed upon by State Street and Fund
in writing.
11. MISCELLANEOUS.
A. This Agreement will be construed according to, and the rights and
liabilities of the parties hereto will be governed by, the laws of
the Commonwealth of Massachusetts without reference to the choice of
laws principles thereof.
B. All terms and provisions hereof will be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
C. The representations and warranties, the indemnifications extended
hereunder, and the provisions of Section 9 hereof are intended to
and will continue after and survive the expiration, termination or
cancellation hereof.
D. No provisions hereof may be amended or modified in any manner except
by a written agreement properly authorized and executed by each
party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions hereof or to enforce any rights resulting from
any breach of any of the terms or conditions hereof, including the
payment of damages, will not be construed as a continuing or
permanent waiver of any such terms, conditions, rights or
privileges, but the same will continue and remain in full force and
effect as if no such forbearance or waiver had occurred. No waiver,
release or discharge of any party's rights hereunder will be
effective unless contained in a written instrument signed by the
party sought to be charged.
F. The captions herein are included for convenience of reference only,
and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
20
<PAGE>
G. This Agreement may be executed in two or more counterparts, each of
which is deemed an original but all of which together constitute one
and the same instrument.
H. If any provision hereof is determined to be invalid, illegal, in
conflict with any law or otherwise unenforceable, the remaining
provisions hereof will be considered severable and will not be
affected thereby, and every remaining provision hereof will remain
in full force and effect and will remain enforceable to the fullest
extent permitted by applicable law.
I. The benefits of this Agreement may not be assigned by either party
nor may either party delegate all or a portion of its duties
hereunder without the prior written consent of the other party.
Notwithstanding the foregoing, Fund agrees that State Street may
delegate all or a portion of its duties to an affiliate of State
Street, provided that such delegation will not reduce the
obligations of State Street under this Agreement.
J. Neither the execution nor performance hereof will be deemed to
create a partnership or joint venture by and between State Street
and Fund or any Portfolio.
K. Except as specifically provided herein, this Agreement does not in
any way affect any other agreements entered into among the parties
hereto and any actions taken or omitted by either party hereunder
will not affect any rights or obligations of the other party
hereunder.
L. Notice is hereby given that a copy of Fund's declaration of trust
and all amendments thereto is on file with the Secretary of State of
the state of its organization; that this Agreement has been executed
on behalf of Fund by the undersigned duly authorized representative
of Fund in his/her capacity as such and not individually; and that
the obligations of this Agreement are binding only upon the assets
and property of Fund and not upon any trustee, officer of
shareholder of Fund individually.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
STATE STREET BANK AND TRUST FIRSTHAND FUNDS
COMPANY
By: By:
--------------------------- ---------------------------
Title: Title:
------------------------ ------------------------
21
<PAGE>
EXHIBIT A -- INCOME AVAILABILITY SCHEDULE
FOREIGN--Income will be credited contractually on pay day in the markets noted
with Contractual Income Policy. The markets noted with Actual income policy will
be credited income when it is received.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
MARKET INCOME POLICY MARKET INCOME POLICY MARKET INCOME POLICY
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Argentina Actual Hong Kong Contractual Poland Actual
- ----------------------------------------------------------------------------------------------------------------------------
Australia Contractual Hungary Actual Portugal Contractual
- ----------------------------------------------------------------------------------------------------------------------------
Austria Contractual India Actual Russia Actual
- ----------------------------------------------------------------------------------------------------------------------------
Bahrain Actual Indonesia Actual Singapore Contractual
- ----------------------------------------------------------------------------------------------------------------------------
Bangladesh Actual Ireland Actual Slovak Republic Actual
- ----------------------------------------------------------------------------------------------------------------------------
Belgium Contractual Israel Actual South Africa Actual
- ----------------------------------------------------------------------------------------------------------------------------
Bermuda Actual Italy Contractual South Korea Actual
- ----------------------------------------------------------------------------------------------------------------------------
* Bolivia Actual Ivory Coast Actual Spain Contractual
- ----------------------------------------------------------------------------------------------------------------------------
Botswana Actual * Jamaica Actual Sri Lanka Actual
- ----------------------------------------------------------------------------------------------------------------------------
Brazil Actual Japan Contractual Swaziland Actual
- ----------------------------------------------------------------------------------------------------------------------------
Canada Contractual Jordan Actual Sweden Contractual
- ----------------------------------------------------------------------------------------------------------------------------
Chile Actual Kenya Actual Switzerland Contractual
- ----------------------------------------------------------------------------------------------------------------------------
China Actual Lebanon Actual Taiwan Actual
- ----------------------------------------------------------------------------------------------------------------------------
Colombia Actual Luxembourg Actual Thailand Actual
- ----------------------------------------------------------------------------------------------------------------------------
Cyprus Actual Malaysia Actual * Trinidad & Actual
Tobago
- ----------------------------------------------------------------------------------------------------------------------------
Czech Republic Actual Mauritius Actual * Tunisia Actual
- ----------------------------------------------------------------------------------------------------------------------------
Denmark Contractual Mexico Actual Turkey Actual
- ----------------------------------------------------------------------------------------------------------------------------
Ecuador Actual Morocco Actual UnitedKingdom Contractual
- ----------------------------------------------------------------------------------------------------------------------------
Egypt Actual Namibia Actual United States See Attached
- ----------------------------------------------------------------------------------------------------------------------------
**Euroclear Contractual/ Netherlands Contractual Uruguay Actual
Actual
- ----------------------------------------------------------------------------------------------------------------------------
Euro CDs Actual New Zealand Contractual Venezuela Actual
- ----------------------------------------------------------------------------------------------------------------------------
Finland Contractual Norway Contractual Zambia Actual
- ----------------------------------------------------------------------------------------------------------------------------
France Contractual Oman Actual Zimbabwe Actual
- ----------------------------------------------------------------------------------------------------------------------------
Germany Contractual Pakistan Actual
- ----------------------------------------------------------------------------------------------------------------------------
Ghana Actual Peru Actual
- ----------------------------------------------------------------------------------------------------------------------------
Greece Actual Philippines Actual
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Market is not 17F-5 eligible
** For Euroclear, contractual income paid only in markets listed with
Income Policy of Contractual.
22
<PAGE>
<TABLE>
<CAPTION>
UNITED STATES--
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME TYPE DTC FED PTC PHYSICAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividends Contractual N/A N/A Actual
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Interest Contractual Contractual N/A Actual
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Rate Interest Contractual Contractual N/A Actual
- -----------------------------------------------------------------------------------------------------------------------------------
GNMA I N/A N/A Contractual PD +1 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
GNMA II N/A N/A Contractual PD *** N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgages Actual Contractual Contractual Actual
- -----------------------------------------------------------------------------------------------------------------------------------
Maturities Actual Contractual N/A Actual
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exceptions to the above Contractual Income Policy include securities that
are:
< Involved in a trade whose settlement either failed, or is pending
over the record date, (excluding the United States);
< On loan under a self directed securities lending program other than
State Street's own vendor lending program;
< Known to be in a condition of default, or suspected to present a
risk of default or payment delay;
< In the asset categories, without limitation, of Private Placements,
Derivatives, Options, Futures, CMOs, and Zero Coupon Bonds.
< Securities whose amount of income and redemption cannot be
calculated in advance of payable date, or determined in advance of
actual collection, examples include ADRs;
< Payments received as the result of a corporate action, not limited
to, bond calls, mandatory or optional puts, and tender offers.
*** For GNMA II securities, if the 19th day of the month is a business
day, Payable/Distribution Date is the next business day. If the 19th is not a
business day, but the 20th is a business day, Payable/Distribution date is the
first business day after the 20th. If both the 19th and 20th are not business
days, Payable/Distribution will be the next business day thereafter.
23
<PAGE>
EXHIBIT B
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain The British Bank of the Middle East (as delegate of the --
Hongkong and Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada State Street Trust Company Canada --
Chile Citibank, N.A. --
People's The Hongkong and Shanghai Banking Corporation --
Republic of Limited, Shanghai and Shenzhen branches
China
Colombia Cititrust Colombia S.A.Sociedad Fiduciaria --
Costa Rica Banco BCT S.A. --
Croatia Privredana Banka Zagreb d.d --
Cyprus The Cyprus Popular Bank Ltd. --
Czech Ceskoslovenska Obchodni Banka, A.S. --
Republic
Denmark Den Danske Bank --
24
<PAGE>
EXHIBIT B
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Ecuador Citibank, N.A. --
Egypt Egyptian British Bank --
(as delegate of The Hongkong and Shanghai Banking
Corporation Limited)
Estonia Hansabank --
Finland Merita Bank Plc --
France Paribas, S.A. --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A Bank of Greece,
System for Monitoring Transactions in
Securities in Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Rt. --
Iceland Icebank Ltd. --
India Deutsche Bank AG --
The Hongkong and Shanghai Banking
Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Paribas, S.A. --
Ivory Coast Societe Generale de Banques en Cote d'Ivoire --
Jamaica Scotiabank Jamaica Trust and Merchant Bank, Ltd. --
Japan The Fuji Bank Limited Japan Securities Depository
The Sumitomo Bank, Limited Center (JASDEC)
25
<PAGE>
EXHIBIT B
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Jordan British Bank of the Middle East (as delegate of The --
Hongkong and Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of The Hongkong and Shanghai Banking --
Korea Corporation Limited
Latvia A/s Hansabank --
Lebanon British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank Malaysia Berhad
--
Mauritius The Hongkong and Shanghai Banking --
Corporation Limited
Mexico Citibank Mexico, S.A.
--
Morocco Banque Commerciale du Maroc
--
Namibia (via) Standard Bank of South Africa
--
Netherlands MeesPierson N.V.
--
New Zealand ANZ Banking Group (New Zealand) Limited --
Norway Christiania Bank og Kreditkasse, ASA --
Oman The British Bank of the Middle East(as delegate of The --
Hongkong and Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Palestine British Bank of the Middle East (as delegate of the --
Hongkong and Shanghai Banking Corporation Limited)
Peru Citibank, N.A. --
26
<PAGE>
EXHIBIT B
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Philippines Standard Chartered Bank --
Poland Citibank (Poland) S.A. --
Portugal Banco Comercial Portugues --
Romania ING Bank, N.V. --
Russia Credit Suisse First Boston, AO, Moscow --
(as delegate of Credit Suisse First Boston, Zurich)
Singapore The Development Bank of Singapore Ltd. --
Slovak Ceskoslovenska Obchodna Banka A.S. --
Republic
Slovenia Banka Austria d.d. --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander Central Hispano, S.A. --
Sri Lanka The Hongkong and Shanghai Banking Corporation Limited --
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
Taiwan - Central Trust of China --
R.O.C.
Thailand Standard Chartered Bank --
Trinidad Republic Bank Ltd. --
& Tobago
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ukraine ING Bank, Ukraine --
27
<PAGE>
EXHIBIT B
STATE STREET GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
United State Street Bank and Trust Company, --
Kingdom London Branch
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Vietnam The Hongkong and Shanghai --
Banking Corporation Limited
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)/State Street London Limited
Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
</TABLE>
28
<PAGE>
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH
USE IS MANDATORY AS A MATTER OF LAW OR EFFECTIVELY
MANDATORY AS A MATTER OF MARKET PRICE
Argentina -Caja de Valores S.A.
Australia -Austraclear Limited;
-Reserve Bank Information and Transfer System
Austria -Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium -Caisse Interprofessionnelle de Depots et de Virement
de Titres S.A.;
-Banque Nationale de Belgique
Brazil -Companhia Brasileira de Liquidacao e
Bulgaria -Central Depository AD
-Bulgarian National Bank
Canada -The Canadian Depository for Securities Limited
Chile -Deposito Central de Valores S.A.
People's Republic -Shanghai Securities Central Clearing and
of China Registration Corporation;
-Shenzhen Securities Central Clearing Co., Ltd.
Colombia -Deposito Centralizado de Valores
Costa Rica -Central de Valores S.A.
Croatia Ministry of Finance; - National Bank of Croatia
Czech Republic --Stredisko cennych papiru;
-Czech National Bank
Denmark -Vaerdipapircentralen (The Danish Securities Center)
Egypt -Misr Company for Clearing, Settlement, and Central
Depository
Estonia -Eesti Vaartpaberite Keskdepositooruim
Finland -The Finnish Central Securities Depository
France -Societe Interprofessionnelle pour la Compensation
des Valeurs Mobilieres
Germany -The Deutscher Borse Clearing AG
29
<PAGE>
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH
USE IS MANDATORY AS A MATTER OF LAW OR EFFECTIVELY
MANDATORY AS A MATTER OF MARKET PRICE
Greece -The Central Securities Depository (Apothetirion
Titlon AE)
Hong Kong -The Central Clearing and Settlement System;
-Central Money Markets Unit
Hungary -Kozponti Elszamolohaz es Ertekatr (Budapest) Rt.
(KELER) [MANDATORY FOR GOV'T BONDS AND
DEMATERIALIZED EQUITIES ONLY; SSB DOES NOT USE FOR
OTHER SECURITIES]
India -The National Securities Depository Limited
-Reserve Bank of India
Indonesia -Bank Indonesia
-PT Kustodian Sentral Efek Indonesia
Ireland -The Central Bank of Ireland, Securities Settlement
Office
Israel -The Tel Aviv Stock Exchange Clearing House Ltd.;
-Bank of Israel (As part of the TASE Clearinghouse
system)
Italy -Monte Titoli S.p.A.;
-Banca d'Italia
Ivory Coast -Depositaire Central - Banque de Reglement
Jamaica -Jamaica Central Securities Depository
Japan -Bank of Japan Net System
Kenya -Central Bank of Kenya
Republic of Korea -Korea Securities Depository Corporation
Latvia -The Latvian Central Depository
Lebanon -The Custodian and Clearing Center of Financial
Instruments for Lebanon and the Middle East
(MIDCLEAR) S.A.L.; - The Central Bank of Lebanon
Lithuania -The Central Securities Depository of Lithuania
Malaysia -The Malaysian Central Depository Sdn. Bhd.;
-Bank Negara Malaysia, Scripless Securities Trading
and Safekeeping Systems
30
<PAGE>
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH
USE IS MANDATORY AS A MATTER OF LAW OR EFFECTIVELY
MANDATORY AS A MATTER OF MARKET PRICE
Mauritius -The Central Depository & Settlement Co. Ltd.
Mexico -S.D. INDEVAL, S.A. de C.V.(Instituto para el
Deposito de Valores);
Morocco -Maroclear
The Netherlands -Nederlands Centraal Instituut voor Giraal
Effectenverkeer B.V. (NECIGEF)
New Zealand -New Zealand Central Securities Depository Limited
Norway -Verdipapirsentralen (the Norwegian Registry of
Securities)
Oman -Muscat Securities Market Depository & Securities
Registration Company
Pakistan -Central Depository Company of Pakistan Limited;
state Bank of Pakistan
Palestine -The Palestine Stock Exchange
Peru -Caja de Valores y Liquidaciones S.A.
Philippines -The Philippines Central Depository Inc.
-The Registry of Scripless Securities (ROSS) of the
Bureau of the Treasury
Poland -The National Depository of Securities (Krajowy
Depozyt Papierow Wartos'ciowych);
-Central Treasury Bills Registrar
Portugal -Central de Valores Mobiliarios (Central)
Romania -National Securities Clearing, Settlement and
Depository Co.;
-Bucharest Stock Exchange Registry Division;
-National Bank of Romania
Singapore -Central Depository (Pte)Limited;
-Monetary Authority of Singapore
Slovak Republic -Stredisko cennych papierov SR Bratislava, a.s.;
-National Bank of Slovakia
Slovenia -Klirinsko Depotna Druzba d.d.
South Africa -The Central Depository Limited
31
<PAGE>
EXHIBIT C
STATE STREET GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES (INCLUDES ENTITIES FOR WHICH
USE IS MANDATORY AS A MATTER OF LAW OR EFFECTIVELY
MANDATORY AS A MATTER OF MARKET PRICE
Spain -Servicio de Compensacion y Liquidacion de Valores,
S.A.;
-Banco de Espana; Central de Anotaciones en Cuenta
Sri Lanka -Central Depository System (Pvt) Limited
Sweden -Vardepapperscentralen VPC AB (the Swedish Central
Securities Depository)
Switzerland -SIS SegaIntersettle
Taiwan - R.O.C. -The Taiwan Securities Central Depository Company,
Ltd.
Thailand -Thailand Securities Depository Company Limited
Tunisia - Societe Tunisienne Interprofessionelle de
Compensation et de Depot de Valeurs Mobilieres
Turkey -Takas ve Saklama Bankasi A.S. (TAKASBANK)
-Central Bank of Turkey
Ukraine -The National Bank of Ukraine
United Kingdom -The Bank of England, The Central Gilts Office; The
Central Moneymarkets Office
Venezuela -Central Bank of Venezuela
Zambia -LuSE Central Shares Depository Limited
-Bank of Zambia
32
<PAGE>
EXHIBIT D -- FUNDS TRANSFER OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: State Street Bank and Trust Company and
affiliates ("SSB") is authorized to promptly debit Client's account(s) upon the
receipt of a payment order in compliance with any of the Security Procedures
chosen by the Client, from those offered on the attached selection form (and any
updated selection forms hereafter executed by the Client), for funds transfers
and in the amount of money that SSB has been instructed to transfer. SSB is
hereby instructed to accept funds transfer instructions only via the delivery
methods and Security Procedures indicated on the attached selection form (and
any updated selection forms hereafter executed by the Client). The Client agrees
that the Security Procedures are reasonable and adequate for its wire transfer
transactions and agrees to be bound by any payment orders, amendments and
cancellations, whether or not authorized, issued in its name and accepted by SSB
after being confirmed by any of the selected Security Procedures. The Client
also agrees to be bound by any other valid and authorized payment order accepted
by SSB. SSB shall execute payment orders in compliance with the selected
Security Procedures and with the Client's/Investment Manager's instructions on
the execution date provided that such payment order is received by the customary
deadline for processing such a request, unless the payment order specifies a
later time. SSB will use reasonable efforts to execute on the execution date
payment orders received after the customary deadline, but if it is unable to
execute any such payment order on the execution date, such payment order will be
deemed to have been received on the next business day.
2. SECURITY PROCEDURES: The Client acknowledges that the selected Security
Procedures were selected by the Client from Security Procedures offered by SSB.
The Client shall restrict access to confidential information relating to the
Security Procedures to authorized persons as communicated in writing to SSB. The
Client must notify SSB immediately if it has reason to believe unauthorized
persons may have obtained access to such information or of any change in the
Client's authorized personnel. SSB shall verify the authenticity of all
instructions according to the selected Security Procedures.
3. ACCOUNT NUMBERS: SSB shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a discrepancy
between any name indicated on the payment order and the account number, the
account number shall take precedence and govern. Financial institutions that
receive payment orders initiated by SSB at the instruction of the Client may
also process payment orders on the basis of account numbers, regardless of any
name included in the payment order. SSB will also rely on any financial
institution identification numbers included in any payment order, regardless of
any financial institution name included in the payment order.
4. REJECTION: SSB reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance in
the account to be charged at the time of SSB's receipt of such payment order;
(b) if initiating such payment order would cause SSB, in SSB's sole judgment, to
exceed any applicable volume, aggregate dollar, network, time, credit or similar
limits upon wire transfers; or (c) if SSB, in good faith, is unable to satisfy
itself that the transaction has been properly authorized.
5. CANCELLATION OR AMENDMENT: SSB shall use reasonable efforts to act on all
authorized requests to cancel or amend payment orders received in compliance
with the selected Security Procedures provided that such requests are received
in sufficient time to afford SSB a reasonable opportunity to act prior to
executing the payment order. However, SSB assumes no liability if the request
for amendment or cancellation cannot be satisfied by SSB's reasonable efforts.
6. ERRORS: SSB shall assume no responsibility for failure to detect any
erroneous payment order provided that SSB complies with the payment order
instructions as received and SSB complies with the selected Security Procedures.
The Security Procedures are established for the purpose of authenticating
payment orders only and not for the detection of errors in payment orders.
7. INTEREST AND LIABILITY LIMITS: SSB shall assume no responsibility for
lost interest with respect to the refundable amount of any unauthorized payment
order, unless SSB is notified of the unauthorized payment order within thirty
(30) days of notification by SSB of the acceptance of such payment order. In no
event (including but not limited to failure to execute a payment order) shall
SSB be liable for special, indirect or consequential damages, even if advised of
the possibility of such damages.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS:
When the Client initiates or receives ACH credit and debit entries pursuant to
these Guidelines and the rules of the National Automated Clearing House
Association and the Mid-America Payment Exchange or other similar body, SSB or
its agent will act as an Originating Depository Financial Institution and/or
Receiving Depository Financial Institution, as the case may be, with respect to
such entries. Credits given with respect to an ACH credit entry are provisional
until final settlement for such entry is received from the Federal Reserve Bank.
If such final settlement is not received, the Client agrees to promptly refund
the amount credited to the Client in connection with such entry, and the party
making payment to the Client via such entry shall not be deemed to have paid the
amount of the entry.
9. CONFIRMATIONS: Confirmation of SSB's execution of payment orders shall
ordinarily be provided within 24 hours. Notice may be delivered through SSB's
account statements, advices, information systems, or by facsimile or callback.
The Client must report any objections to the execution of a payment order within
30 days.
10. MISCELLANEOUS: SSB may use the Federal Reserve System Fedwire to execute
payment orders, and any payment order carried in whole or in part through
Fedwire will be subject to applicable Federal Reserve Board rules and
regulations. SSB and the Client agree to cooperate to attempt to recover any
funds erroneously paid to wrong parties, regardless of any fault of SSB or the
Client, but the party responsible for the erroneous payment shall bear all costs
and expenses incurred in trying to effect such recovery. These Guidelines may
not be amended except by a written agreement signed by the parties.
33
<PAGE>
SECURITY PROCEDURES SELECTION FORM
Please select at least two of the funds transfer security procedures indicated
below.
[] SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions
that provides telecommunication services for its membership. Participation
is limited to securities brokers and dealers, clearing and depository
institutions, recognized exchanges for securities, and investment
management institutions. SWIFT provides a number of security features
through encryption and authentication to protect against unauthorized
access, loss or wrong delivery of messages, transmission errors, loss of
confidentiality and fraudulent changes to messages.
SELECTION OF THIS SECURITY PROCEDURE WOULD BE MOST APPROPRIATE FOR
EXISTING SWIFT MEMBERS.
[] REMOTE BATCH TRANSMISSION
Wire transfer instructions are delivered via Computer-to-Computer
(CPU-CPU) data communications between the Client and/or its agent and SSB
and/or its agent. Security procedures include encryption and/or the use of
a test key by those individuals authorized as Automated Batch Verifiers or
a callback procedure to those individuals.
CLIENTS SELECTING THIS OPTION SHOULD HAVE AN EXISTING FACILITY FOR
COMPLETING CPU-CPU TRANSMISSIONS. THIS DELIVERY MECHANISM IS TYPICALLY
USED FOR HIGH-VOLUME BUSINESS SUCH AS SHAREHOLDER REDEMPTIONS AND DIVIDEND
PAYMENTS.
[] AUTOMATED CLEARING HOUSE (ACH)
SSB or its agent receives an automated transmission from a Client for the
initiation of payment (credit) or collection (debit) transactions through
the ACH network. The transactions contained on each transmission or tape
must be authenticated by the Client. The transmission is sent from the
Client's or its agent's system to SSB's or its agent's system with
encryption.
[] REPETITIVE WIRES
For situations where funds are transferred periodically from an existing
authorized account to the same payee (destination bank and account number)
and only the date and currency amount are variable, a repetitive wire may
be implemented. Repetitive wires will be subject to a $10 million limit.
If the payment order exceeds the $10 million limit, the instruction will
be confirmed by Telephone Confirmation (Call Back) or Test Key prior to
execution. Repetitive wire instructions must be reconfirmed annually.
Clients may establish Repetitive Wires by following the agreed upon
security procedures as described by Telephone Confirmation (Call Back) or
Test Key.
THIS ALTERNATIVE IS RECOMMENDED WHENEVER FUNDS ARE FREQUENTLY TRANSFERRED
BETWEEN THE SAME TWO ACCOUNTS. IF THIS OPTION IS SELECTED, CHOOSE EITHER
TELEPHONE CONFIRMATION OR TEST KEY TO BE USED AS A SECONDARY PROCEDURE
WHEN OVER $10 MILLION.
[] STANDING INSTRUCTIONS
Funds are transferred by SSB to a counter party on the Client's
established list of authorized counter parties. Only the date and the
dollar amount are variable. Clients may establish Standby Instructions by
following the agreed upon security procedures as described by Telephone
Confirmation (Call Back) or Test Key. Additional paperwork will be
required from insurance Clients using 1031 drawdowns.
THIS OPTION IS USED FOR TRANSACTIONS THAT INCLUDE BUT ARE NOT LIMITED TO
FOREIGN EXCHANGE CONTRACTS, TIME DEPOSITS AND TRI-PARTY REPURCHASE
AGREEMENTS. IF THIS OPTION IS SELECTED, CHOOSE EITHER TELEPHONE
CONFIRMATION OR TEST KEY TO BE USED AS A SECONDARY PROCEDURE WHEN OVER $10
MILLION.
[] TELEPHONE CONFIRMATION (CALL BACK)
This procedure requires Clients to designate individuals as authorized
initiators and authorized verifiers. SSB will verify that the instruction
contains the signature of an authorized person and prior to execution of
the payment order, will contact someone other than the originator at the
Client's location to authenticate the instruction.
SELECTION OF THIS ALTERNATIVE IS APPROPRIATE FOR CLIENTS WHO DO NOT HAVE
THE CAPABILITY TO USE OTHER SECURITY PROCEDURES. PLEASE COMPLETE THE
TELEPHONE CONFIRMATION INSTRUCTIONS ATTACHED AS A SCHEDULE HERETO.
[] TEST KEY
Test Key confirmation will be used to verify all non-repetitive funds
transfer instructions received via facsimile or phone. SSB will provide
test keys if this option is chosen. SSB will verify that the instruction
contains the signature of an authorized person and prior to execution of
the payment order, will authenticate the test key provided with the
corresponding test key at SSB.
SELECTION OF THIS ALTERNATIVE IS APPROPRIATE FOR CLIENTS WHO DO NOT HAVE
THE CAPABILITY TO USE OTHER SECURITY PROCEDURES.
The individual signing below must be authorized to sign contract on behalf of
the client. The execution of payment orders under the selected Security
Procedures is governed by the Funds Transfer Operating Guidelines, which are
incorporated by reference.
CLIENT
By:
--------------------------------------
Authorized Signature
- ------------------------------------------
Type or Print Name
- ------------------------------------------
Title
- ------------------------------------------
Date
34
<PAGE>
SCHEDULE TO FUNDS TRANSFER OPERATING GUIDELINES
AND SECURITY PROCEDURES SELECTION FORM
CLIENT/INVESTMENT MANAGER:
-----------------------------------------------------
Company Name
KEY CONTACT INFORMATION
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT
- ------------------------------ ------------------------------
Name Name
- ------------------------------ ------------------------------
Address Address
- ------------------------------ ------------------------------
City/State/Zip Code City/State/Zip Code
- ------------------------------ ------------------------------
Telephone Number Telephone Number
- ------------------------------ ------------------------------
Facsimile Number Facsimile Number
- ------------------------------
SWIFT Number
TELEPHONE CONFIRMATION INSTRUCTIONS
Authorized Initiators (Please Type or Print) - Please provide a listing of your
staff members who are currently authorized to INITIATE wire transfer
instructions:
NAME TITLE SPECIMEN SIGNATURE
- ------------------------- ------------------------- --------------------------
- ------------------------- ------------------------- --------------------------
- ------------------------- ------------------------- --------------------------
- ------------------------- ------------------------- --------------------------
- ------------------------- ------------------------- --------------------------
Authorized Verifiers (Please Type or Print) - Please provide a listing of your
staff members who will be CALLED BACK to verify the initiation of repetitive
wires of $10 million or more and all non-repetitive wire instructions:
NAME CALLBACK PHONE NUMBER DOLLAR LIMITATION (IF ANY)
- ------------------------- ------------------------- --------------------------
- ------------------------- ------------------------- --------------------------
- ------------------------- ------------------------- --------------------------
- ------------------------- ------------------------- --------------------------
- ------------------------- ------------------------- --------------------------
35
<PAGE>
SCHEDULE A
LISTING OF PORTFOLIOS AS OF APRIL 30, 2000
THE TECHNOLOGY VALUE FUND
THE TECHNOLOGY LEADERS FUND
THE TECHNOLOGY INNOVATORS FUND
THE COMMUNICATIONS FUND-TM-
THE E-COMMERCE FUND-TM-
36
<PAGE>
ADMINISTRATION AGREEMENT
This Administration Agreement is made this __th day of ____________, ____, by
and between FIRSTHAND FUNDS, a Delaware business trust (the "Trust"), and
FIRSTHAND CAPITAL MANAGEMENT, INC., a California corporation (the
"Administrator").
WITNESSETH:
WHEREAS, the Trust is engaged in business as a non-diversified open-end
management investment company and is to be registered as such under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Administrator is engaged in the business of rendering
administrative and supervisory services to investment companies; and
WHEREAS, the Trust desires to retain the Administrator to render supervisory and
corporate administrative services to ___________________ (the "Fund") in the
manner and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the terms and provisions
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT OF THE ADMINISTRATOR. The Trust hereby employs the
Administrator to administer the affairs of the Fund subject to the direction of
the Board of Trustees and the officers of the Trust, for the period and on the
terms hereinafter set forth. The Administrator hereby accepts such employment
and agrees during such period to render the services and to assume the
obligations herein set forth for the compensation herein provided. The
Administrator shall for all purposes herein be deemed to be an independent
contractor and, except as expressly provided or authorized (whether herein or
otherwise), shall have no authority to act for or represent the Fund in any way
or otherwise be deemed an agent of the Fund.
2. OBLIGATIONS OF THE ADMINISTRATOR. The Administrator, at its expense,
shall supply the Board of Trustees and officers of the Trust with all
statistical information and reports reasonably required by it and reasonably
available to the Administrator and furnish the Fund with office facilities,
including space, furniture and equipment and all personnel reasonably necessary
for the operation of the Fund. The Administrator shall oversee the maintenance
of all books and records with respect to the Fund's securities transactions and
the Fund's book of account in accordance with all applicable federal and state
laws and regulations. In compliance with the requirements of Rule 31a-3.under
the Act, the Administrator hereby agrees that which it maintains for the Fund
are the property of further agrees to surrender promptly to the Fund an records
upon the Fund's request. The Administrator to arrange for the preservation of
the records required to be maintained by Rule 31a-1 under the Act for the
periods prescribed by Rule 31a-2 under the Act.
3. EXPENSES OF THE FUND. The Administrator assumes and shall pay for
maintaining its staff and personnel, and shall at its own expense provide the
equipment, office space and facilities necessary to perform its obligations
under this Agreement. In addition, the Administrator assumes and shall pay all
other expenses of the Fund, including, without limitation: insurance, taxes,
expenses for legal and auditing services, costs of printing proxies, stock
certificates and prospectuses (except to the extent paid by the investment
adviser pursuant to the Investment Advisory and Management Agreement by and
between the parties hereto dated ________________), the insurance required by
Section 17(g) of
<PAGE>
the Act, charges of a custodian for safekeeping of the Fund's securities,
Securities and Exchange Commission fees, expense of registering the shares of
the Fund under Federal and state securities laws, fees and expenses of trustees
who are not interested persons of the Fund, accounting and pricing costs
(including the daily calculation of net asset value), interest, brokerage costs,
litigation and other extraordinary or non-recurring expenses, and other expenses
properly payable to the Fund.
4. COMPENSATION. As compensation for the services rendered, the facilities
furnished and the expenses assumed by the Administrator, the Fund shall pay to
the Administrator at the end of each calendar month a fee at the annual rate of
.45% of the Fund's 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, as determined and
computed in accordance with the description of the method of determination of
net asset value contained in the Fund's Prospectus and Statement of Additional
Information.
5. ACTIVITIES OF THE ADMINISTRATOR. The services of the Administrator to
the Fund hereunder are not to be deemed exclusive and the Administrator shall be
free to render similar services to others. Subject to, and in accordance with
the Declaration of Trust and By-Laws of the Fund and Section 10(a) of the Act,
it is understood that trustees, officers, agents and beneficial holders of the
Fund are or may be "interested persons" (as defined in the Act) of the
Administrator or its affiliates, and that directors, officers, agents or
shareholders of the Administrator or its affiliates are or may be "interested
persons" of the Fund as beneficial holders or otherwise.
6. LIABILITIES OF THE ADMINISTRATOR. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Administrator, the Administrator shall not
be liable to the Fund or to any beneficial holder of the Fund for any act or
omission in the course of, or in connection with, rendering services hereunder
or for any losses that may be sustained in the purchase, holding or sale of any
security.
7. RENEWAL. The term of this Agreement shall commence on the date hereof
and shall continue in effect until ____________, ____ and is renewable
thereafter for successive one year periods if such continuance is approved at
least annually by (i) the Fund's Board of Trustees, or by a vote of the holders
of a majority of the outstanding voting securities of the Fund, and (ii) a
majority of the Trustees who are not parties to the Agreement or "interested
persons" (as defined in the Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval.
8. TERMINATION. This Agreement (i) may be terminated at any time without
the payment of any penalty either by vote of the Board of Trustees of the Fund,
or by vote of a majority of the outstanding voting securities of the Fund, on 60
days written notice to the Administrator and (ii) may be terminated at any time
by the Administrator on 60 days written notice to the Fund.
9. AMENDMENTS. This Agreement may be amended by the parties only if such
amendment is specifically approved by (i) the Board of Trustees of the Fund, or
by a vote of the holders of a majority of the outstanding voting securities of
the Fund, and (ii) a majority of those trustees of the Fund who are not parties
to this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.
10. NOTICES. Any and all notices or other communications required or
permitted under this Agreement shall be in writing and shall be deemed
sufficient when mailed by United States certified mail, return receipt
requested, or delivered in person against receipt to the party to whom it is to
be given, at the address of such party set forth below: If to the Administrator:
Firsthand Capital Management, Inc. 125 South Market, Suite 1200 San Jose, CA
95113.If to the Fund: Firsthand's
<PAGE>
___________________, 125 South Market, Suite 1200 San Jose, CA 95113 or to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section.
11. SEVERABILITY. If any provision of this Agreement is invalid, illegal or
unenforceable, the balance of this Agreement shall remain in full force and
effect and this Agreement shall be construed in all respects as if such invalid,
illegal or unenforceable provision were omitted.
12. HEADINGS. Any paragraph headings in this Agreement are for convenience
of reference only, and shall be given no effect in the construction and
interpretation of this Agreement or any provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the date first written above,
FIRSTHAND FUNDS
By: __________________________________________
Kevin Landis, President
FIRSTHAND CAPITAL MANAGEMENT, INC.
By: __________________________________________
Kevin Landis, President
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TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
FIRSTHAND FUNDS
AND
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
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1. Terms of Appointment and Duties..........................................1
2. Third Party Administrators for Defined Contribution Plans ...............4
3. Fees and Expenses........................................................5
4. Representations and Warranties of the Transfer Agent.....................6
5. Representations and Warranties of the Fund...............................6
6. Wire Transfer Operating Guidelines.......................................7
7. Data Access and Proprietary Information..................................8
8. Indemnification.........................................................10
9. Standard of Care........................................................11
10. Year 2000...............................................................11
11. Confidentiality.........................................................11
12. Covenants of the Fund and the Transfer Agent............................12
13. Termination of Agreement................................................13
14. Assignment and Third Party Beneficiaries................................14
15. Subcontractors..........................................................14
16. Miscellaneous...........................................................14
17. Additional Funds........................................................16
18. Release.................................................................16
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 15th day of March, 2000, by and between FIRSTHAND
FUNDS, a Delaware business trust, having its principal office and place of
business at 125 South Market, Suite 1300, San Jose, California 95113 (the
"Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Transfer Agent").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Fund intends to initially offer shares in five (5) series, such
series shall be named in the attached SCHEDULE A which may be amended by the
parties from time to time (each such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with SECTION 17, being herein referred to as a "Portfolio", and
collectively as the "Portfolios"); and
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Transfer
Agent as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities, and the
Transfer Agent desires to accept such appointment for the compensation and on
the terms herein provided.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. TERMS OF APPOINTMENT AND DUTIES
1.1 TRANSFER AGENCY SERVICES. Subject to the terms and conditions set forth
in this Agreement, the Fund, on behalf of the Portfolios, hereby employs
and appoints the Transfer Agent to act as, and the Transfer Agent agrees
to act as its transfer agent for the Fund's authorized and issued shares
of its beneficial interest, no par value, ("Shares"), dividend disbursing
agent, custodian of certain retirement plans and agent in connection with
any accumulation, open-account or similar plan provided to the
shareholders of each of the respective Portfolios of the Fund
("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("Prospectus") of the Fund on behalf
of the applicable Portfolio, including without limitation any periodic
investment plan or periodic withdrawal program. The conversion of the
Fund's Shareholder records to the Transfer Agent, is scheduled for April
8, 2000 (the "Conversion Date"). In accordance with procedures
established from time to time by agreement between the Fund on behalf of
each of the Portfolios, as applicable and the Transfer Agent, the
Transfer Agent agrees that it will perform the following services:
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(a) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof to the
Custodian of the Fund authorized pursuant to the Declaration of Trust and
the Bylaws of the Fund (the "Custodian");
(b) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(c) Receive for acceptance redemption requests and redemption directions
and deliver the appropriate documentation thereof to the Custodian;
(d) In respect to the transactions in items (a), (b) and (c) above, the
Transfer Agent shall execute transactions directly with broker-dealers
authorized by the Fund;
(e) At the appropriate time as and when it receives monies paid to it by
the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(f) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(g) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(h) Issue replacement certificates for those certificates alleged to have
been lost, stolen or destroyed upon receipt by the Transfer Agent of
indemnification satisfactory to the Transfer Agent and protecting the
Transfer Agent and the Fund, and the Transfer Agent at its option, may
issue replacement certificates in place of mutilated stock certificates
upon presentation thereof and without such indemnity;
(i) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(j) Record the issuance of Shares of the Fund and maintain pursuant to
SEC Rule 17Ad-10(e) a record of the total number of Shares of the Fund
which are authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Transfer Agent shall also provide the Fund on
a regular basis with the total number of Shares which are authorized and
issued and outstanding and shall have no obligation, when recording the
issuance of Shares, to monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of such Shares,
which functions shall be the sole responsibility of the Fund.
1.2 ADDITIONAL SERVICES. In addition to, and neither in lieu nor in
contravention of, the services set forth in the above paragraph, the
Transfer Agent shall perform the following services:
(a) OTHER CUSTOMARY SERVICES. Perform the customary services of a
transfer agent, dividend disbursing agent, custodian of certain
retirement plans and, as relevant, agent in connection with accumulation,
open-account or similar plan (including without
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<PAGE>
limitation any periodic investment plan or periodic withdrawal program),
including but not limited to: maintaining all Shareholder accounts,
preparing Shareholder meeting lists, mailing Shareholder proxies,
Shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and
filing U.S. Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information;
(b) CONTROL BOOK (ALSO KNOWN AS "SUPER SHEET"). Maintain a daily record
and produce a daily report for the Fund of all transactions and receipts
and disbursements of money and securities and deliver a copy of such
report for the Fund for each business day to the Fund no later than 9:00
AM Eastern Time, or such earlier time as the Fund may reasonably require,
on the next business day;
(c) "BLUE SKY" REPORTING. The Fund shall (i) identify to the Transfer
Agent in writing those transactions and assets to be treated as exempt
from blue sky reporting for each State and (ii) verify the establishment
of transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The responsibility
of the Transfer Agent for the Fund's blue sky State registration status
is solely limited to the initial establishment of transactions subject to
blue sky compliance by the Fund and providing a system which will enable
the Fund to monitor the total number of Shares sold in each State;
(d) NATIONAL SECURITIES CLEARING CORPORATION (THE "NSCC"). (i) accept and
effectuate the registration and maintenance of accounts through
Networking and the purchase, redemption, transfer and exchange of shares
in such accounts through Fund/SERV (networking and Fund/SERV being
programs operated by the NSCC on behalf of NSCC's participants, including
the Fund), in accordance with, instructions transmitted to and received
by the Transfer Agent by transmission from NSCC on behalf of
broker-dealers and banks which have been established by, or in accordance
with the instructions of authorized persons, as hereinafter defined on
the dealer file maintained by the Transfer Agent; (ii) issue instructions
to Fund's banks for the settlement of transactions between the Fund and
NSCC (acting on behalf of its broker-dealer and bank participants); (iii)
provide account and transaction information from the affected Fund's
records on DST Systems, Inc. computer system TA2000 ("TA2000 System") in
accordance with NSCC's Networking and Fund/SERV rules for those
broker-dealers; and (iv) maintain Shareholder accounts on TA2000 System
through Networking;
(e) NEW PROCEDURES. New procedures as to who shall provide certain of
these services in SECTION 1 may be established in writing from time to
time by agreement between the Fund and the Transfer Agent.;
(f) ADDITIONAL TELEPHONE SUPPORT SERVICES. If the parties elect to have
the Transfer Agent provide ADDITIONAL telephone support services under
this Agreement, the parties will agree to such services, fees and
sub-contracting as stated in SCHEDULE 1.2(f) entitled "Telephone Support
Services" attached hereto;
3
<PAGE>
(g) RETIREMENT ACCOUNTS. Establish, maintain, transfer to successor
retirement plan custodians and distribute Shares or monies as the case
may be, for Individual Retirement Accounts, SIMPLE Individual Retirement
Accounts and non Title 1 403(b) Plans where the Transfer Agent is the
named retirement plan custodian for retirement plans using retirement
plan documents or prototypes provided by the Transfer Agent;
(h) TRAINING. Within six (6) months of assignment to the Fund's dedicated
service group: (i) all managers and communication specialists comprising
an elite team shall be Series 6 licensed; (ii) all customer service
representatives shall be Series 6 trained; and (iii) all customer service
representatives shall have completed the M.A.G.I.C. Training Program; and
(i) REMOTE MONITORING BY FUND OF IN-BOUND. AND OUT-BOUND SHAREHOLDER
TELEPHONE CALLS. (i) Within forty-eight (48) hours of the Fund's request
provide cassette recorded in-bound and out-bound Shareholder telephone
calls; and (ii) provide remote Shareholder telephone monitoring service
which includes: (X) direct dial by assigned telephone number to Transfer
Agent's call center; and (Y) silent service observe mode for telephone
call monitoring with cost of telephone call monitoring payable by the
direct dialer the Fund.
2. THIRD PARTY ADMINISTRATORS FOR DEFINED CONTRIBUTION PLANS
2.1 The Fund may decide to make available to certain of its customers, a
qualified plan program (the "Program") pursuant to which the customers
("Employers") may adopt certain plans of deferred compensation ("Plan or
Plans") for the benefit of the individual Plan participant (the "Plan
Participant"), such Plan(s) being qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended ("Code") and administered by
third party administrators which may be plan administrators as defined in
the Employee Retirement Income Security Act of 1974, as amended (the
"TPA(s)").
2.2 In accordance with the procedures established in the initial SCHEDULE 2.1
entitled "Third Party Administrator Procedures", as may be amended by the
Transfer Agent and the Fund from time to time, the Transfer Agent shall:
(a) Treat Shareholder accounts established by the Plans in the name of
the Trustees, Plans or TPAs as the case may be as omnibus accounts;
(b) Maintain omnibus accounts on its records in the name of the TPA or
its designee as the Trustee for the benefit of the Plan; and
(c) Perform all services under SECTION 1 as transfer agent of the Funds
and not as a record-keeper for the Plans.
4
<PAGE>
2.3 Transactions identified under SECTION 2 of this Agreement shall be deemed
exception services ("Exception Services") when such transactions:
(a) Require the Transfer Agent to use methods and procedures other than
those usually employed by the Transfer Agent to perform services under
SECTION 1 of this Agreement;
(b) Involve the provision of information to the Transfer Agent after the
commencement of the nightly processing cycle of the TA2000 System; or
(c) Require more manual intervention by the Transfer Agent, either in the
entry of data or in the modification or amendment of reports generated by
the TA2000 System than is usually required by non-retirement plan and
pre-nightly transactions.
3. FEES AND EXPENSES
3.1 FEE SCHEDULE. For the performance by the Transfer Agent pursuant to this
Agreement, the Fund agrees to pay the Transfer Agent as set forth in the
attached fee schedule SCHEDULE 3.1. Such fees and reasonable
out-of-pocket expenses and advances identified under SECTION 3.2 below
may be changed from time to time subject to mutual written agreement
between the Fund and the Transfer Agent.
3.2 OUT-OF-POCKET EXPENSES. In addition to the fee paid under SECTION 3.1
above, the Fund agrees to reimburse the Transfer Agent for reasonable
out-of-pocket expenses, including but not limited to confirmation
production, postage, forms, telephone, microfilm, microfiche, mailing and
tabulating proxies, records storage, or advances incurred by the Transfer
Agent for the items set out in SCHEDULE 3.1 attached hereto. In addition,
any other expenses incurred by the Transfer Agent at the request or with
the consent of the Fund, will be reimbursed by the Fund.
3.3 POSTAGE. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all shareholder accounts shall be advanced to the
Transfer Agent by the Fund at least seven (7) days prior to the mailing
date of such materials.
3.4 INVOICES. The Fund agrees to pay all fees and reimbursable expenses
within thirty (30) days following the receipt of the respective billing
notice, except for any fees or expenses that are subject to good faith
dispute. In the event of such a dispute, the Fund may only withhold that
portion of the fee or expense subject to the good faith dispute. The Fund
shall notify the Transfer Agent in writing within twenty-one (21)
calendar days following the receipt of each billing notice if the Fund is
disputing any amounts in good faith. If the Fund does not provide such
notice of dispute within the required time, the billing notice will be
deemed accepted by the Fund. The Fund shall settle such disputed amounts
within five (5) days of the day on which the parties agree on the amount
to be paid by payment of the agreed amount. If no agreement is reached,
then such disputed amounts shall be settled as may be required by law or
legal process.
3.5 LATE PAYMENTS. The Fund shall pay undisputed amounts on Transfer Agent's
invoices (for fees and reimbursable expenses) within thirty (30) days of
the date such invoice was sent. If any undisputed amount in an invoice of
the Transfer Agent (for fees or
5
<PAGE>
reimbursable expenses) is not paid when due, the Fund shall pay the
Transfer Agent interest thereon (from the due date to the date of
payment) at a per annum rate equal to one percent (1.0%) plus the Prime
Rate (that is, the base rate on corporate loans posted by large domestic
banks) published by THE WALL STREET JOURNAL (or, in the event such rate
is not so published, a reasonably equivalent published rate selected by
the Fund) on the first day of publication during the month when such
amount was due. Notwithstanding any other provision hereof, such interest
rate shall be no greater than permitted under applicable provisions of
Delaware law.
3.6 SERVICE STANDARDS. Excluding the first ninety (90) days after the
Conversion Date, the Transfer Agent agrees to (a) perform services to the
standards; (b) be subject to the penalties; and (c) provide daily
reporting on the service standards all detailed in SCHEDULE 3.6 unless
otherwise agreed.
4. REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
4.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
4.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
4.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
5.1 It is a business trust duly organized and existing and in good standing
under the laws of the State of Delaware.
5.2 It is empowered under applicable laws and by its Declaration of Trust and
By-Laws to enter into and perform this Agreement.
5.3 All trust proceedings required by said Declaration of Trust and By-Laws
have been taken to authorize it to enter into and perform this Agreement.
5.4 It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
6
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5.5 A registration statement under the Securities Act of 1933, as amended is
currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
6. WIRE TRANSFER OPERATING GUIDELINES/ARTICLES 4A OF THE UNIFORM COMMERCIAL
CODE
6.1 OBLIGATION OF SENDER. The Transfer Agent is authorized to promptly debit
the appropriate Fund account(s) upon the receipt of a payment order in
compliance with the selected security procedure (the "Security
Procedure") chosen for funds transfer and in the amount of money that the
Transfer Agent has been instructed to transfer. The Transfer Agent shall
execute payment orders in compliance with the Security Procedure and with
the Fund instructions on the execution date provided that such payment
order is received by the customary deadline for processing such a
request, unless the payment order specifies a later time. All payment
orders and communications received after this the customary deadline will
be deemed to have been received the next business day.
6.2 SECURITY PROCEDURE. The Fund acknowledges that the Security Procedure it
has designated on the Fund Selection Form was selected by the Fund from
security procedures offered by the Transfer Agent. The Fund shall
restrict access to confidential information relating to the Security
Procedure to authorized persons as communicated to the Transfer Agent in
writing. The Fund must notify the Transfer Agent immediately if it has
reason to believe unauthorized persons may have obtained access to such
information or of any change in the Fund's authorized personnel. The
Transfer Agent shall verify the authenticity of all Fund instructions
according to the Security Procedure.
6.3 ACCOUNT NUMBERS. The Transfer Agent shall process all payment orders on
the basis of the account number contained in the payment order. In the
event of a discrepancy between any name indicated on the payment order
and the account number, the account number shall take precedence and
govern.
6.4 REJECTION. The Transfer Agent reserves the right to decline to process or
delay the processing of a payment order which (a) is in excess of the
collected balance in the account to be charged at the time of the
Transfer Agent's receipt of such payment order; (b) if initiating such
payment order would cause the Transfer Agent, in the Transfer Agent's
sole judgement, to exceed any volume, aggregate dollar, network, time,
credit or similar limits which are applicable to the Transfer Agent; or
(c) if the Transfer Agent, in good faith, is unable to satisfy itself
that the transaction has been properly authorized.
6.5 CANCELLATION AMENDMENT. The Transfer Agent shall use reasonable efforts
to act on all authorized requests to cancel or amend payment orders
received in compliance with the Security Procedure provided that such
requests are received in a timely manner affording the Transfer Agent
reasonable opportunity to act. However, the Transfer Agent assumes no
liability if the request for amendment or cancellation cannot be
satisfied.
6.6 ERRORS. The Transfer Agent shall assume no responsibility for failure to
detect any erroneous payment order provided that the Transfer Agent
complies with the payment order instructions as received and the Transfer
Agent complies with the Security
7
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Procedure. The Security Procedure is established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.
6.7 INTEREST. The Transfer Agent shall assume no responsibility for lost
interest with respect to the refundable amount of any unauthorized
payment order, unless the Transfer Agent is notified of the unauthorized
payment order within thirty (30) days of notification by the Transfer
Agent of the acceptance of such payment order.
6.8 ACH CREDIT ENTRIES/PROVISIONAL PAYMENTS. When the Fund initiates or
receives Automated Clearing House credit and debit entries pursuant to
these guidelines and the rules of the National Automated Clearing House
Association and the New England Clearing House Association, the Transfer
Agent will act as an Originating Depository Financial Institution and/or
receiving depository Financial Institution, as the case may be, with
respect to such entries. Credits given by the Transfer Agent with respect
to an ACH credit entry are provisional until the Transfer Agent receives
final settlement for such entry from the Federal Reserve Bank. If the
Transfer Agent does not receive such final settlement, the Fund agrees
that the Transfer Agent shall receive a refund of the amount credited to
the Fund in connection with such entry, and the party making payment to
the Fund via such entry shall not be deemed to have paid the amount of
the entry.
6.9 CONFIRMATION. Confirmation of Transfer Agent's execution of payment
orders shall ordinarily be provided within twenty four (24) hours notice
of which may be delivered through the Transfer Agent's proprietary
information systems, or by facsimile or call-back. Fund must report any
objections to the execution of an order within thirty (30) days.
7. DATA ACCESS AND PROPRIETARY INFORMATION
7.1 The Fund acknowledges that the databases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Transfer Agent as part of the Fund's
ability to access certain Fund-related data ("Customer Data") maintained
by the Transfer Agent on databases under the control and ownership of the
Transfer Agent or other third party ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the
Transfer Agent or other third party. In no event shall Proprietary
Information be deemed Customer Data. The Fund agrees to treat all
Proprietary Information as proprietary to the Transfer Agent and further
agrees that it shall not divulge any Proprietary Information to any
person or organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its employees and
agents to:
(a) Use such programs and databases (i) solely on the Fund's computers,
or (ii) solely from equipment at the location agreed to between the Fund
and the Transfer Agent and (iii) solely in accordance with the Transfer
Agent's applicable user documentation;
(b) Refrain from copying or duplicating in any way (other than in the
normal course of performing processing on the Fund's computer(s)), the
Proprietary Information;
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(c) Refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained, to
inform in a timely manner of such fact and dispose of such information in
accordance with the Transfer Agent's instructions;
(d) Refrain from causing or allowing information transmitted from the
Transfer Agent's computer to the Fund's terminal to be retransmitted to
any other computer terminal or other device except as expressly permitted
by the Transfer Agent (such permission not to be unreasonably withheld);
(e) Allow the Fund to have access only to those authorized transactions
as agreed to between the Fund and the Transfer Agent; and
(f) Honor all reasonable written requests made by the Transfer Agent to
protect at the Transfer Agent's expense the rights of the Transfer Agent
in Proprietary Information at common law, under federal copyright law and
under other federal or state law.
7.2 Proprietary Information shall not include all or any portion of any of
the foregoing items that: (i) are or become publicly available without
breach of this Agreement; (ii) are released for general disclosure by a
written release by the Transfer Agent; or (iii) are already in the
possession of the receiving party at the time or receipt without
obligation of confidentiality or breach of this Agreement.
7.3 The Fund acknowledges that its obligation to protect the Transfer Agent's
Proprietary Information is essential to the business interest of the
Transfer Agent and that the disclosure of such Proprietary Information in
breach of this Agreement would cause the Transfer Agent immediate,
substantial and irreparable harm, the value of which would be extremely
difficult to determine. Accordingly, the parties agree that, in addition
to any other remedies that may be available in law, equity, or otherwise
for the disclosure or use of the Proprietary Information in breach of
this Agreement, the Transfer Agent shall be entitled to seek and obtain a
temporary restraining order, injunctive relief, or other equitable relief
against the continuance of such breach.
7.4 If the Fund notifies the Transfer Agent that any of the Data Access
Services do not operate in material compliance with the most recently
issued user documentation for such services, the Transfer Agent shall
endeavor in a timely manner to correct such failure. Organizations from
which the Transfer Agent may obtain certain data included in the Data
Access Services are solely responsible for the contents of such data and
the Fund agrees to make no claim against the Transfer Agent arising out
of the contents of such third-party data, including, but not limited to,
the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN
AS IS, AS AVAILABLE BASIS. THE TRANSFER AGENT EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
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7.5 If the transactions available to the Fund include the ability to
originate electronic instructions to the Transfer Agent in order to (i)
effect the transfer or movement of cash or Shares or (ii) transmit
Shareholder information or other information, then in such event the
Transfer Agent shall be entitled to rely on the validity and authenticity
of such instruction without undertaking any further inquiry as long as
such instruction is undertaken in conformity with security procedures
established by the Transfer Agent from time to time.
7.6 Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this SECTION 7. The obligations of this Section
shall survive any earlier termination of this Agreement.
8. INDEMNIFICATION
8.1 The Transfer Agent shall not be responsible for, and the Fund shall
indemnify and hold the Transfer Agent harmless from and against, any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement (including the defense of
any law suit in which the Transfer Agent or affiliate is a named party),
provided that such actions are taken in good faith and without negligence
bad faith or willful misfeasance;
(b) The Fund's lack of good faith, negligence or willful misfeasance;
(c) The reliance upon, and any subsequent use of or action taken or
omitted, by the Transfer Agent, or its agents or subcontractors on: (i)
any information, records, documents, data, stock certificates or
services, which are received by the Transfer Agent or its agents or
subcontractors by machine readable input, facsimile, CRT data entry,
electronic instructions or other similar means authorized by the Fund,
and which have been prepared, maintained or performed by the Fund or any
other authorized person or firm on behalf of the Fund including but not
limited to any broker-dealer, TPA or previous transfer agent; (ii) any
instructions or requests of the Fund or any of its authorized officers;
(iii) any instructions or opinions of legal counsel with respect to any
matter arising in connection with the services to be performed by the
Transfer Agent under this Agreement which are provided to the Transfer
Agent after consultation with such legal counsel; or (iv) any paper or
document, reasonably believed to be genuine, authentic, or signed by the
proper person or persons;
(d) The offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be registered
or in violation of any stop order or other determination or ruling by any
federal or any state agency with respect to the offer or sale of such
Shares;
(e) The negotiation and processing of any checks including without
limitation for deposit into the Fund's demand deposit account maintained
by the Transfer Agent; or
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(f) Upon the Fund's request entering into any agreements required by the
National Securities Clearing Corporation (the "NSCC") for the
transmission of Fund or Shareholder data through the NSCC clearing
systems.
8.2 In order that the indemnification provisions contained in this SECTION 8
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Transfer Agent, the Transfer Agent shall
promptly notify the Fund of such assertion, and shall keep the Fund
advised with respect to all developments concerning such claim. The Fund
shall have the option to participate with the Transfer Agent in the
defense of such claim or to defend against said claim in its own name or
in the name of the Transfer Agent. The Transfer Agent shall in no case
confess any claim or make any compromise in any case in which the Fund
may be required to indemnify the Transfer Agent except with the Fund's
prior written consent.
9. STANDARD OF CARE
The Transfer Agent shall at all times act in good faith and agrees to use
its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility
and shall not be liable for loss or damage due to errors, including
encoding and payment processing errors, unless said errors are caused by
its negligence, bad faith, or willful misfeasance or that of its
officers, employees or agents. The Transfer Agent shall implement quality
assurance procedures reasonably designed to prevent errors in processing
Shareholder transactions. The parties agree that any encoding or payment
processing errors shall be governed by this standard of care and Section
4-209 of the Uniform Commercial Code is superseded by SECTION 9 of this
Agreement. This standard of care also shall apply to Exception Services,
as defined in SECTION 2.3 herein, but such application shall take into
consideration the manual processing involved in, and time sensitive
nature of, Exception Services.
10. YEAR 2000
The Transfer Agent will take reasonable steps to ensure that its products
(and those of its third-party suppliers) reflect the available technology
to offer products that are Year 2000 ready, including, but not limited
to, century recognition of dates, calculations that correctly compute
same century and multi century formulas and date values, and interface
values that reflect the date issues arising between now and the next
one-hundred years, and if any changes are required, the Transfer Agent
will make the changes to its products at a price to be agreed upon by the
parties and in a commercially reasonable time frame and will require
third-party suppliers to do likewise.
11. CONFIDENTIALITY
11.1 The Transfer Agent and the Fund agree that they will not, at any time
during the term of this Agreement or after its termination, reveal,
divulge, or make known to any person, firm, corporation or other business
organization, any customers' lists, trade secrets, cost figures and
projections, profit figures and projections, or any other secret or
confidential information whatsoever, whether of the Transfer Agent or of
the Fund, used or gained by the Transfer Agent or the Fund during
performance under this Agreement. The Fund
11
<PAGE>
and the Transfer Agent further covenant and agree to retain all such
knowledge and information acquired during and after the term of this
Agreement respecting such lists, trade secrets, or any secret or
confidential information whatsoever in trust for the sole benefit of the
Transfer Agent or the Fund and their successors and assigns. In the event
of breach of the foregoing by either party, the remedies provided by
SECTION 7.3 shall be available to the party whose confidential
information is disclosed. The above prohibition of disclosure shall not
apply to the extent that the Transfer Agent must disclose such data to
its sub-contractor or Fund agent for purposes of providing services under
this Agreement.
11.2 In the event that any requests or demands are made for the inspection of
the Shareholder records of the Fund, other than request for records of
Shareholders pursuant to standard subpoenas from state or federal
government authorities (i.e., divorce and criminal actions), the Transfer
Agent will endeavor to notify the Fund and to secure instructions from an
authorized officer of the Fund as to such inspection. The Transfer Agent
expressly reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person
or if required by law or court order.
12. COVENANTS OF THE FUND AND THE TRANSFER AGENT
12.1 The Fund shall promptly furnish to the Transfer Agent the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Transfer Agent and the execution
and delivery of this Agreement; and
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
12.2 The Transfer Agent hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
12.3 The Transfer Agent shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the Investment Company Act of 1940,
as amended, and the Rules thereunder, the Transfer Agent agrees that all
such records prepared or maintained by the Transfer Agent relating to the
services to be performed by the Transfer Agent hereunder are the property
of the Fund and will be preserved, maintained and made available in
accordance with such Section and Rules, and will be surrendered promptly
to the Fund on and in accordance with its request.
12
<PAGE>
13. TERMINATION OF AGREEMENT
13.1 TERMINATION. For the Fund to terminate this Agreement, the Fund must give
at least ninety (90) days prior written notice to the Transfer Agent. For
the Transfer Agent to terminate this Agreement, the Transfer Agent must
give at least one hundred and twenty (120) days prior written notice to
the Fund.
13.2 RECOVERY OF CONVERSION COSTS. Should the Fund desire to move any of its
services provided by the Transfer Agent hereunder to a successor service
provider prior to the expiration of one year from the Conversion Date, or
without the required notice, the Transfer Agent shall make a good faith
effort to facilitate the conversion on such prior date; however, there
can be no guarantee or assurance that the Transfer Agent will be able to
facilitate a conversion of services on such prior date. In connection
with the foregoing, should services be converted to a successor service
provider, or if the Fund is liquidated or its assets merged or purchased
or the like with or by another entity which does not utilize the services
of the Transfer Agent, the fees payable to the Transfer Agent shall be
two-hundred and fifty-thousand dollars ($250,000). The payment of all
fees to the Transfer Agent as set forth herein shall be accelerated to
the business day immediately prior to the conversion or termination of
services.
13.3 MOVEMENT OF RECORDS AND DE-CONVERSION COSTS. Should either party
exercise its right to terminate (a) all reasonable out-of-pocket expenses
or costs associated with the movement of records and material and (b)
compensation and benefits paid to Fund dedicated customer service
representatives for the lesser of (i) a period of thirty (30) days after
termination or (ii) until re-deployment of the Fund dedicated customer
service representatives within the Transfer Agent shall borne by the
Fund. Additionally, the Transfer Agent reserves the right to charge for
other reasonable expenses associated with such termination. In the event
that the termination is due to a material breach of the Agreement by the
Transfer Agent, there shall be no fees payable under SECTIONS 13.2 AND
13.3 of this Agreement by the Fund.
13.4 CONFIDENTIAL INFORMATION. Upon termination of this Agreement, each
party shall return to the other party all copies of confidential or
proprietary materials or information received from such other party
hereunder, other than materials or information required to be retained by
such party under applicable laws or regulations.
13.5 UNPAID INVOICES. The Transfer Agent may terminate this Agreement
immediately upon an unpaid invoice payable by the Fund to the Transfer
Agent being outstanding for more than ninety (90) days, except with
respect to any amount subject to a good faith dispute within the meaning
of SECTION 3.4 of this Agreement.
13.6 BANKRUPTCY. Either party hereto may terminate this Agreement by notice
to the other party, effective at any time specified therein, in the event
that (a) the other party ceases to carry on its business or (b) an action
is commenced by or against the other party under Title 11 of the United
States Code or a receiver, conservator or similar officer is appointed
for the other party and such suit, conservatorship or receivership is not
discharged within thirty (30) days.
13
<PAGE>
14. ASSIGNMENT AND THIRD PARTY BENEFICIARIES
14.1 Except as provided in SECTION 15.1 below neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party. Any attempt to do so in violation
of this Section shall be void. Unless specifically stated to the contrary
in any written consent to an assignment, no assignment will release or
discharge the assignor from any duty or responsibility under this
Agreement.
14.2 Except as explicitly stated elsewhere in this Agreement, nothing under
this Agreement shall be construed to give any rights or benefits in this
Agreement to anyone other than the Transfer Agent and the Fund, and the
duties and responsibilities undertaken pursuant to this Agreement shall
be for the sole and exclusive benefit of the Transfer Agent and the Fund.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
14.3 This Agreement does not constitute an agreement for a partnership or
joint venture between the Transfer Agent and the Fund. Other than as
provided in SECTION 15.1 and SCHEDULE 1.2(f), neither party shall make
any commitments with third parties that are binding on the other party
without the other party's prior written consent.
15. SUBCONTRACTORS
15.1 The Transfer Agent may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(2) of the
Securities Exchange Act of 1934, as amended, (ii) a BFDS subsidiary duly
registered as a transfer agent or (iii) a BFDS affiliate duly registered
as a transfer agent; provided, however, that the Transfer Agent shall be
fully responsible to the Fund for the acts and omissions of BFDS or its
subsidiary or affiliate as it is for its own acts and omissions.
15.2 Nothing herein shall impose any duty upon the Transfer Agent in
connection with or make the Transfer Agent liable for the actions or
omissions to act of unaffiliated third parties such as by way of example
and not limitation, Airborne Services, Federal Express, United Parcel
Service, the U.S. Mails, the NSCC and telecommunication companies,
provided, if the Transfer Agent selected such company, the Transfer Agent
shall have exercised due care in selecting the same.
16. MISCELLANEOUS
16.1 AMENDMENT. This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Board of Trustees of the Fund.
16.2 DELAWARE LAW TO APPLY. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of
the state of Delaware.
14
<PAGE>
16.3 FORCE MAJEURE. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond
its control, or other causes reasonably beyond its control, such party
shall not be liable for damages to the other for any damages resulting
from such failure to perform or otherwise from such causes.
16.4 CONSEQUENTIAL DAMAGES. Neither party to this Agreement shall be liable to
the other party for special, indirect or consequential damages under any
provision of this Agreement or for any special, indirect or consequential
damages arising out of any act or failure to act hereunder.
16.5 SURVIVAL. All provisions regarding indemnification, warranty, liability,
and limits thereon, and confidentiality and/or protections of proprietary
rights and trade secrets shall survive the termination of this Agreement.
16.6 SEVERABILITY. If any provision or provisions of this Agreement shall be
held invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
16.7 PRIORITIES CLAUSE. In the event of any conflict, discrepancy or ambiguity
between the terms and conditions contained in this Agreement and any
Schedules or attachments hereto, the terms and conditions contained in
this Agreement shall take precedence.
16.8 WAIVER. No waiver by either party or any breach or default of any of the
covenants or conditions herein contained and performed by the other party
shall be construed as a waiver of any succeeding breach of the same or of
any other covenant or condition.
16.9 MERGER OF AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
16.10 COUNTERPARTS. This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
16.11.REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, exhibits,
attachments and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other
similar process. The parties hereto each agree that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence
and whether or not such reproduction was made by a party in the regular
course of business, and that any enlargement, facsimile or further
reproduction shall likewise be admissible in evidence.
15
<PAGE>
16.12 NOTICES. All notices and other communications as required or permitted
hereunder shall be in writing and sent by first class mail, postage
prepaid, addressed as follows or to such other address or addresses of
which the respective party shall have notified the other.
(a) If to State Street Bank and Trust Company, to:
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
1250 Hancock Street, Suite 300N
Quincy, Massachusetts 02169
Attention: Legal Department
Facsimile: (617) 483-5850
(b) If to the Fund, to both:
Firsthand Funds
Attention: Omar Billawala
125 South Market, Suite 1300
San Jose, California 95113
Firsthand Funds
Attention: General Counsel
125 South Market Street, Suite 1300
San Jose, California 95113
17. ADDITIONAL FUNDS
Absent written notification to the contrary by Fund or Transfer Agent,
each new investment portfolio established in the future by Fund shall
automatically become a "Portfolio" for all purposes hereunder as if
listed on SCHEDULE A.
18. RELEASE
The names "Firsthand Funds" and "Trustees of Firsthand Funds" refer
respectively to the Trust created by the Declaration of Trust and the
Trustees as Trustees but not individually or personally. All parties
hereto acknowledge and agree that any and all liabilities of the Trust
arising, directly or indirectly, under this Agreement will be satisfied
solely out of the assets of the Trust and that not Trustee, officer or
shareholder shall be personally liable for any such liabilities. All
persons dealing with any investment Fund of the Trust must look solely to
the property belonging to such Investment Fund for the enforcement of any
claims against the Trust.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
FIRSTHAND FUNDS
BY:
----------------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
----------------------------------
Vice Chairman
17
<PAGE>
SCHEDULE A
Dated: March 15, 2000
Technology Innovators Fund
Technology Leaders Fund
Technology Value Fund
The Communications Fund-TM-
The e-Commerce Fund-TM-
FIRSTHAND FUNDS STATE STREET BANK AND TRUST
COMPANY
BY: BY:
------------------------------- -------------------------------
<PAGE>
SCHEDULE 1.2(f)
ADDITIONAL TELEPHONE SUPPORT FEES AND SERVICES
Dated: March 15, 2000
THIS PAGE LEFT INTENTIONALLY BLANK
BY: BY:
------------------------------- -------------------------------
<PAGE>
SCHEDULE 2.1
THIRD PARTY ADMINISTRATOR(S) PROCEDURES
Dated: March 15, 2000
1. On each Business Day, the TPA(s) shall receive, on behalf of and as agent
of the Fund(s), Instructions (as hereinafter defined) from the Plan.
Instructions shall mean as to each Fund (i) orders by the Plan for the
purchases of Shares, and (ii) requests by the Plan for the redemption of
Shares; in each case based on the Plan's receipt of purchase orders and
redemption requests by Participants in proper form by the time required
by the term of the Plan, but not later than the time of day at which the
net asset value of a Fund is calculated, as described from time to time
in that Fund's prospectus. Each Business Day on which the TPA receives
Instructions shall be a "Trade Date".
2. The TPA(s) shall communicate the TPA(s)'s acceptance of such
Instructions, to the applicable Plan.
3. On the next succeeding Business Day following the Trade Date on which it
accepted Instructions for the purchase and redemption of Shares, (TD+1),
the TPA(s) shall notify the Transfer Agent of the net amount of such
purchases or redemptions, as the case may be, for each of the Plans. In
the case of net purchases by any Plan, the TPA(s) shall instruct the
Trustees of such Plan to transmit the aggregate purchase price for Shares
by wire transfer to the Transfer Agent on (TD+1). In the case of net
redemptions by any Plan, the TPA(s) shall instruct the Fund's custodian
to transmit the aggregate redemption proceeds for Shares by wire transfer
to the Trustees of such Plan on (TD+1). The times at which such
notification and transmission shall occur on (TD+1) shall be as mutually
agreed upon by each Fund, the TPA(s), and the Transfer Agent.
4. The TPA(s) shall maintain separate records for each Plan, which record
shall reflect Shares purchased and redeemed, including the date and price
for all transactions, and Share balances. The TPA(s) shall maintain on
behalf of each of the Plans a single master account with the Transfer
Agent and such account shall be in the name of that Plan, the TPA(s), or
the nominee of either thereof as the record owner of Shares owned by such
Plan.
5. The TPA(s) shall maintain records of all proceeds of redemptions of
Shares and all other distributions not reinvested in Shares.
6. The TPA(s) shall prepare, and transmit to each of the Plans, periodic
account statements showing the total number of Shares owned by that Plan
as of the statement closing date, purchases and redemptions of Shares by
the Plan during the period covered by the statement, and the dividends
and other distributions paid to the Plan on Shares during the statement
period (whether paid in cash or reinvested in Shares).
7. The TPA(s) shall, at the request and expense of each Fund, transmit to
the Plans prospectuses, proxy materials, reports, and other information
provided by each Fund for delivery to its shareholders.
<PAGE>
8. The TPA(s) shall, at the request of each Fund, prepare and transmit to
each Fund or any agent designated by it such periodic reports covering
Shares of each Plan as each Fund shall reasonably conclude are necessary
to enable the Fund to comply with state Blue Sky requirements.
9. The TPA(s) shall transmit to the Plans confirmation of purchase orders
and redemption requests placed by the Plans; and
10. The TPA(s) shall, with respect to Shares, maintain account balance
information for the Plan(s) and daily and monthly purchase summaries
expressed in Shares and dollar amounts.
11. Plan sponsors may request, or the law may require, that prospectuses,
proxy materials, periodic reports and other materials relating to each
Fund be furnished to Participants in which event the Transfer Agent or
each Fund shall mail or cause to be mailed such materials to
Participants. With respect to any such mailing, the TPA(s) shall, at the
request of the Transfer Agent or each Fund, provide at the TPA(s)'s
expense complete and accurate set of mailing labels with the name and
address of each Participant having an interest through the Plans in
Shares.
FIRSTHAND FUNDS STATE STREET BANK AND TRUST
COMPANY
BY: BY:
------------------------------- -------------------------------
2
<PAGE>
SCHEDULE 3.1
FEES
DATED: MARCH 15, 2000
ANNUAL ACCOUNT SERVICE FEES: Fees are calculated on average daily net assets and
are billed on a monthly basis at the rate of 1/12 of the annual fee. Subject to
a minimum of $500,000 complex fee.
Account Service Fees 2.0 Basis Points
Complex Minimum Base Fee (5 Cusips) $500,000
Additional Fee Per Cusip Over 5 Cusips $100,000
Additionally, for every Cusip over five, the Fund shall pay the greater of
$15,000 per new Cusip or 2.0 basis points for each additional new Cusip, if 2.0
basis points of the annualized average assets are less than $15,000.
This fee includes DST Systems, Inc. FAN Web.
ACTIVITY BASED FEES
- -------------------
New Account Set-up $ 5.00/each
Shareholder Service Telephone Calls $ 2.00/per minute
To determine the number of minutes paid, multiply the total number of calls
answered by the average talk time for the month.
IRA AND 403(B) CUSTODIAL FEES
- -----------------------------
Annual Maintenance $ 10.00/account
OUT-OF-POCKET EXPENSES BILLED AS INCURRED
- ----------------------
Out-of-Pocket expenses include but are not limited to reasonable costs for:
confirmation statements, investor statements, postage, forms, voice response,
telephone line charges, bank services, records retention (physical custody of
records), customized programming conforming to Fund systems enhancements,
federal wire, transcripts, microfilm, microfiche, and expenses incurred at the
specific direction of the Fund.
FIRSTHAND FUNDS STATE STREET BANK AND TRUST
COMPANY
BY: BY:
------------------------------- -------------------------------
<PAGE>
SCHEDULE 3.6
CUSTOMER SERVICE STANDARDS
DATED: MARCH 15, 2000
<TABLE>
<CAPTION>
CUSTOMER SERVICE TIMELINESS COMPLIANCE TARGET
STANDARDS
<S> <C> <C>
Phones*
- -------
Average Speed of Answer 15 seconds 15 seconds
Abandonment Rate 2% Above 2%
Service Level 85% 85%
(# of calls/speed of answer)
MAGIC SCORE > 25 26
Correspondence
- --------------
Financial 3 days 98%
Non-Financial 6 days 98%
IRA/Account Transfer 3 days 98%
Request Notices
- ---------------
IRA/Account Transfer 15, 30, 45 days 98%
Reminder Notices
Administration
- --------------
Replacement Checks Mailed within 2 business 98%
days of request for
replacement check.
Daily Confirmation Mailed within 2 business days 98%
Statements after trade date.
Quarterly Statements Mailed within 5 98%
business days after end of
quarter.
Redemption Checks Mailed within 2 business 98%
days after redemption date.
Dividend Checks Mailed within 2 business 98%
days after dividend
payment.
</TABLE>
*The Transfer Agent shall answer Shareholder telephone calls Monday through
Friday from 8:00 a.m.-8:00 p.m. ET.
<PAGE>
SCHEDULE 3.6
CUSTOMER SERVICE STANDARDS
(CONTINUED)
Fee Credits
- -----------
If for two consecutive months the monthly average compliance target for any of
the services listed above is below the standard for that customer service, the
Transfer Agent shall credit ten percent (10%) against the Shareholder Telephones
Service charge on the Fund's next month's invoice for each customer service out
of compliance for the two consecutive months. The Transfer Agent shall provide
the ten percent (10%) credit each month until such customer service is meeting
the compliance target for that customer service. Such credits for any calendar
month will be limited to 100% the Shareholder Service Telephone Call charge.
FIRSTHAND FUNDS STATE STREET BANK AND TRUST
COMPANY
By: By:
------------------------------- -------------------------------
2
<PAGE>
WIRE TRANSFER SECURITY PROCEDURES
FUND SELECTION FORM
SECTION I
Details the types of funds transfers processed on behalf of ___________________.
SECTION II
Lists the types of security procedures offered.
Please select the appropriate security procedures from Section II for each
type of funds transfer listed in Section I.
I. TYPES OF FUNDS TRANSFERS
______ Expedited Redemptions
______ Same Day Wires
______ Manual Wires
______ Wire Transfers Initiated by FAX
______ Group Dividend Wire
______ Remote Batch Transmissions
______ ACH Transactions
1
<PAGE>
WIRE TRANSFER SECURITY PROCEDURES
II. SECURITY PROCEDURES
A. REPETITIVE WIRES/ACH TRANSACTIONS
B. TELEPHONE CONFIRMATION
C. ENCRYPTION
AUTHORIZATION
Boston Financial Data Services, Inc. ("Boston Financial") is hereby
instructed to implement the above checked security procedure(s) in regard to
payment orders initiated by or on behalf of our organization or its
shareholders.
- ------------------------------------------- -------------------------------
Authorized Signature Date
- -------------------------------------------
Title
2
<PAGE>
WIRE TRANSFER SECURITY PROCEDURES
FUNDS TRANSFER SECURITY PROCEDURES DEFINITIONS
REPETITIVE WIRES
1. Shareholder Generated
Wires initiated from existing authorized shareholder accounts. Each wire is
sent to the same pre-established destination bank and beneficiary account
number. Only the date of the wire and dollar amount may vary from instruction
to instruction. Changes to that file can only be performed based on written
instructions coupled with a signature guarantee. The establishment of the
repetitive wire is confirmed via a written notice to the shareholder's
address of record.
2. Client Generated
Manual Wires processed on behalf of the client. Wires are initiated from the
same authorized debit account and sent to the same destination bank and
beneficiary account number each time. Only the date and the dollar amount may
vary from instruction to instruction.
TELEPHONE CONFIRMATION
Telephone confirmation will be used to verify funds transfer instructions
received via telephone, untested facsimile or mail. This security procedure
can be used to authenticate non repetitive and repetitive wire transfers
instructions. Repetitive wires may be subject to a specific threshold at the
client's discretion.
As part of the confirmation process customers must designate individuals as
authorized initiators and authorized confirmers. Within 24 hours of receipt
of the wire instruction and prior to execution, a Boston Financial Data
Services associate will contact someone other than the originator at the
customer's location to authenticate the instructions. Additionally, a
confirmation log will be maintained to provide an evidentiary control as well
as providing an invaluable operational tool for resolving any disputes.
ENCRYPTION
Delivery of wire transfer is completed via computer to computer data
communications between the client and State Street Bank and Trust Company.
Recommended security procedures include encryption, the process by which data
traveling over communication lines is cryptographically transformed
(encrypted). This control is appropriate not only for terminal based
initiation, but is also being used by some institutions in the form of both
encrypted facsimile and encrypted voice communication. This delivery
mechanism is typically used for high volume business such as shareholder
redemptions and dividends.
3
<PAGE>
WIRE TRANSFER SECURITY PROCEDURES
ADDITIONAL INFORMATION
- ----------------------
Telephone Communications
- All telephone communication between BFDS and the client will be
handled on recorded telephone lines.
Transfers Initiated Via Facsimile Transmission
- Transfers initiated via fax may use either repetitive wire
security procedures, telephone confirmation or a combination of both.
Optional Security Procedure
- Client may establish telephone confirmation procedures to
authenticate repetitive manual wires initiated via telephone,
untested facsimile or mail in excess of certain dollar amounts using
the attached forms.
4
<PAGE>
WIRE TRANSFER SECURITY PROCEDURES
- --------------------------------------------------------------------------------
SECTIONS I AND II SHOULD BE COMPLETED BY ALL CLIENTS
- --------------------------------------------------------------------------------
PLEASE TYPE ALL DOCUMENTATION.
SECTION I
Client/Fund
- --------------------------------------------------------------------------------
Street: Apt:
-----------------------------------------------------
City: State: Zip:
------------------------------------ ------------
Phone Number: ( )
---------------------
Fax Number: ( )
---------------------
SECTION II
Please list the number of all demand deposit accounts (DDAs) from which you
intend to initiate wire transfers.
<TABLE>
<CAPTION>
Maximum $ Limit Maximum $ Limit
DDA Number Per Transaction DDA Number Per Transaction
---------- --------------- ---------- ---------------
(8 Digits) (if any) (8 Digits) (if any)
<S> <C> <C> <C>
1. 7.
---------- ---------- ---------- ----------
2. 8.
---------- ---------- ---------- ----------
3. 9.
---------- ---------- ---------- ----------
4. 10.
---------- ---------- --------- ----------
5. 11.
---------- ---------- --------- ----------
6. 12.
---------- ---------- --------- ----------
</TABLE>
5
<PAGE>
WIRE TRANSFER SECURITY PROCEDURES
SECTION - III CALLBACK VERIFICATION FORM
COMPLETE THIS SECTION FOR ALL TRANSFERS BY TELEPHONE ONLY.
NOTE: INDIVIDUAL AUTHORIZED FOR CALLBACK IS RESTRICTED TO VERIFICATION
ONLY. INDIVIDUAL INITIATING TRANSFERS CANNOT PERFORM CALLBACK
VERIFICATION.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ACCOUNT NUMBER A) INDIVIDUAL AUTHORIZED TO CALLBACK PHONE # B) AUTHORIZED INDIVIDUAL FOR
INITIATE TRANSFER INSTRUCTIONS CALLBACK VERIFICATION (LAST
(LAST NAME, FIRST NAME) NAME, FIRST NAME)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------
(OPTIONAL) DOLLAR AUTHORIZED FOR LIMITED TO REPETITIVE
LIMITATION ALL TRANSFERS TRANSFERS
- ------------------------------------------------------------------------
<S> <C> <C>
$
- ------------------------------------------------------------------------
$
- ------------------------------------------------------------------------
$
- ------------------------------------------------------------------------
$
- ------------------------------------------------------------------------
$
- ------------------------------------------------------------------------
$
- ------------------------------------------------------------------------
$
- ------------------------------------------------------------------------
$
- ------------------------------------------------------------------------
$
- ------------------------------------------------------------------------
</TABLE>
______________________ Check ( ) here if you would like to request callbacks on
all repetitive transfers over a specified dollar amount.
Please provide the information below.
<TABLE>
<CAPTION>
Please Callback on Please callback on
Account Number all transfers over this amount: Account Number all transfers over this amount:
- -------------- ------------------------------- -------------- -------------------------------
<S> <C> <C> <C>
1. $ 3. $
--------------- ------------------------------ ------------ ------------------------------
2. $ 4. $
--------------- ------------------------------ ------------ ------------------------------
</TABLE>
<PAGE>
ADMINISTRATION AGREEMENT
Agreement dated as of April 30, 2000 by and between State
Street Bank and Trust Company, a Massachusetts trust company (the
"Administrator"), and Firsthand Funds, a Delaware business trust (the "Trust").
WHEREAS, the Trust is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust desires to retain the Administrator to
furnish certain administrative services to the Trust, and the Administrator is
willing to furnish such services, on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Trust hereby appoints the Administrator to act as
administrator with respect to the Trust for purposes of providing certain
administrative services for the period and on the terms set forth in this
Agreement. The Administrator accepts such appointment and agrees to render the
services for the compensation and on the terms stated herein.
The Trust will initially consist of the portfolio(s) and/or
class(es) of shares (each an "Investment Fund") listed in Schedule A to this
Agreement. Absent written notification to the contrary by the Trust or the
Administrator, each new investment portfolio established in the future by the
Trust shall automatically become an Investment Fund for all purposes hereunder
as if listed on Schedule A, except to the extent that such provisions (including
those relating to the compensation and expenses payable by the Trust and its
Investment Funds) may be modified with respect to each additional Investment
Fund in writing by the Trust and the Administrator at the time of the addition
of the Investment Fund.
2. DELIVERY OF DOCUMENTS
The Trust will promptly deliver to the Administrator copies of
each of the following documents and all future amendments and supplements, if
any:
a. The Trust's Declaration of Trust and by-laws;
b. The Trust's currently effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act
and the Trust's Prospectus(es) and Statement(s) of Additional Information
relating to all Investment Funds and all amendments and supplements thereto as
in effect from time to time;
c. Certified copies of the resolutions of the Board of
Trustees of the Trust (the "Board") authorizing (1) the Trust to enter into this
Agreement and (2) certain individuals on behalf of the Trust to give
instructions to the Administrator pursuant to this Agreement
d. A copy of the investment advisory agreement between the
Trust and its investment adviser; and
<PAGE>
e. Such other certificates, documents or opinions which the
Administrator may, in its reasonable discretion, deem necessary or appropriate
in the proper performance of its duties.
3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to the Trust that:
a. It is a Massachusetts trust company, duly organized and
existing under the laws of The Commonwealth of Massachusetts;
b. It has the corporate power and authority to carry on its
business in The Commonwealth of Massachusetts;
c. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted
or threatened which would impair the Administrator's ability to perform its
duties and obligations under this Agreement; and
e. Its entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or obligation of the
Administrator or any law or regulation applicable to it.
4. REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to the Administrator that:
a. It is a business trust, duly organized, existing and in
good standing under the laws of the State of Delaware;
b. It has the trust power and authority under applicable laws
and by its charter and by-laws to enter into and perform this Agreement;
c. All requisite proceedings have been taken to authorize it
to enter into and perform this Agreement;
d. It is an investment company properly registered under the
1940 Act;
e. A registration statement under the 1933 Act and the 1940
Act has been filed and will be effective and remain effective during the term of
this Agreement. The Trust also warrants to the Administrator that as of the
effective date of this Agreement, all necessary filings under the securities
laws of the states in which the Trust offers or sells its shares have been made;
f. No legal or administrative proceedings have been instituted
or threatened which would impair the Trust's ability to perform its duties and
obligations under this Agreement;
g. Its entrance into this Agreement will not cause a material
breach or be in material conflict with any other agreement or obligation of the
Trust or any law or regulation applicable to it; and
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h. As of the close of business on the date of this Agreement,
the Trust is authorized to issue an unlimited number of shares of beneficial
interest.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in
each case, subject to the control, supervision and direction of the Board of
Trustees of the Trust and the review and comment by the Trust's auditors and
legal counsel and in accordance with procedures which may be established from
time to time between the Trust and the Administrator:
a. Oversee the determination and publication of the Trust's
net asset value in accordance with the Trust's policy as adopted from time to
time by the Board;
b. Oversee the maintenance by the Trust's custodian of certain
books and records of the Trust as required under Rule 31a-1(b) of the 1940 Act;
c. Prepare the Trust's federal, state and local income tax
returns for review by the Trust's independent accountants and filing by the
Trust's treasurer;
d. Review calculation, submit for approval by officers of the
Trust and arrange for payment of the Trust's expenses;
e. Prepare for review and approval by officers of the Trust
financial information for the Trust's semi-annual and annual reports, proxy
statements and other communications required or otherwise to be sent to Trust
shareholders, and arrange for the printing and dissemination of such reports and
communications to shareholders;
f. Prepare for review by an officer of and legal counsel for
the Trust the Trust's periodic financial reports required to be filed with the
Securities and Exchange Commission ("SEC") on Form N-SAR and financial
information required by Form N-1A and such other reports, forms or filings as
may be mutually agreed upon;
g. Prepare reports relating to the business and affairs of the
Trust as may be mutually agreed upon and not otherwise prepared by the Trust's
investment adviser, custodian, legal counsel or independent accountants;
h. Make such reports and recommendations to the Board
concerning the performance of the independent accountants as the Board may
reasonably request;
i. Make such reports and recommendations to the Board
concerning the performance and fees of the Trust's custodian and transfer and
dividend disbursing agent ("Transfer Agent") as the Board may reasonably request
or deems appropriate;
j. Oversee and review calculations of fees paid to the Trust's
investment adviser, custodian and Transfer Agent;
k. Consult with the Trust's officers, independent accountants,
legal counsel, custodian and Transfer Agent in establishing the accounting
policies of the Trust;
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l. Respond to, or refer to the Trust's officers or Transfer
Agent, shareholder inquiries relating to the Trust;
m. Provide periodic testing of portfolios to assist the
Trust's investment adviser in complying with Internal Revenue Code mandatory
qualification requirements, the requirements of the 1940 Act and Trust
prospectus limitations as may be mutually agreed upon;
n. Review and provide assistance on shareholder
communications;
o. Maintain general corporate calendar;
p. Maintain copies of the Trust's charter and by-laws;
q. Prepare and file annual and semi-annual shareholder reports
with the appropriate regulatory agencies; review text of "President's letters"
to shareholders and "Management's Discussion of Trust Performance" (which shall
also be subject to review by the Trust's legal counsel);
r. Organize, attend and prepare minutes of shareholder and
audit committee meetings;
s. Provide consultation on regulatory matters relating to
portfolio management, Trust operations and any potential changes in the Trust's
investment policies, operations or structure; act as liaison to legal counsel to
the Trust and, where applicable, to legal counsel to the Trust's independent
Board members;
t. Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Trust, update the
Board and the investment adviser on those developments and provide related
planning assistance where requested or appropriate;
u. Develop or assist in developing guidelines and procedures
to improve overall compliance by the Trust and its various agents;
v. Counsel and assist the Trust in the handling of routine
regulatory examinations and work closely with the Trust's legal counsel in
response to any non-routine regulatory matters;
Subject to review and comment by the Trust's legal counsel:
w. Prepare and file with the SEC amendments to the Trust's
registration statement, including updating prospectus(es) and Statement(es) of
Additional Information, where applicable;
x. Prepare and file with the SEC proxy statements; provide
consultation on proxy solicitation matters;
y. Prepare agenda and background materials for Board meetings,
make presentations where appropriate, prepare minutes and follow-up on matters
raised at Board and Audit Committee meetings;
z. Prepare and file with the SEC Rule 24f-2 notices; and
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aa. Perform Blue Sky services pursuant to the specific
instructions of the Trust and as detailed in Schedule B to this Agreement.
The Administrator shall provide the office facilities and the personnel required
by it to perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from the Trust such
compensation for the Administrator's services provided pursuant to this
Agreement as may be agreed to from time to time in a written fee schedule
approved by the parties and initially set forth in the Fee Schedule to this
Agreement. The fees are accrued daily and billed monthly and shall be due and
payable upon receipt of the invoice. Upon the termination of this Agreement
before the end of any month, the fee for the part of the month before such
termination shall be prorated according to the proportion which such part bears
to the full monthly period and shall be payable upon the date of termination of
this Agreement. In addition, the Trust shall reimburse the Administrator for its
reasonable out-of-pocket costs incurred in connection with the performance of
this Agreement.
The Trust agrees promptly to reimburse the Administrator for
any equipment and supplies specially ordered by or for the Trust through the
Administrator and for any other expenses not contemplated by this Agreement that
the Administrator may incur on the Trust's behalf at the Trust's request or with
the Trust's consent.
The Trust will bear all expenses that are incurred in its
operation and not specifically assumed by the Administrator. Expenses to be
borne by the Trust, include, but are not limited to: organizational expenses;
cost of services of independent accountants and outside legal and tax counsel
(including such counsel's review of the Trust's registration statement, proxy
materials, federal and state tax qualification as a regulated investment company
and other reports and materials prepared by the Administrator under this
Agreement); cost of any services contracted for by the Trust directly from
parties other than the Administrator; cost of trading operations and brokerage
fees, commissions and transfer taxes in connection with the purchase and sale of
securities for the Trust; investment advisory fees; taxes, insurance premiums
and other fees and expenses applicable to its operation; costs incidental to any
meetings of shareholders including, but not limited to, legal and accounting
fees, proxy filing fees and the costs of preparation, printing and mailing of
any proxy materials; costs incidental to Board meetings, including fees and
expenses of Board members; the salary and expenses of any officer,
director\trustee or employee of the Trust; costs incidental to the preparation,
printing and distribution of the Trust's registration statements and any
amendments thereto and shareholder reports; cost of typesetting and printing of
prospectuses; cost of preparation and filing of the Form N-1A or N-2 and Form
N-SAR, and all notices, registrations and amendments associated with applicable
federal and state tax and securities laws; all applicable registration fees and
filing fees required under federal and state securities laws; fidelity bond and
directors' and officers' liability insurance; and cost of independent pricing
services used in computing the Trust's net asset value.
The Administrator is authorized to and may employ or associate
with such person or persons as the Administrator may deem desirable to assist it
in performing its duties under this Agreement; provided, however, that the
compensation of such person or persons shall be paid by the Administrator and
that the Administrator shall be as fully responsible to the Trust for the acts
and omissions of any such person or persons as it is for its own acts and
omissions.
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7. INSTRUCTIONS AND ADVICE
At any time, the Administrator may apply to any officer of the
Trust for instructions and may consult, when reasonably necessary in its good
faith judgement, with its own legal counsel or outside counsel for the Trust or
the independent accountants for the Trust at the expense of the Trust, with
respect to any matter arising in connection with the services to be performed by
the Administrator under this Agreement. The Administrator shall not be liable,
and shall be indemnified by the Trust, for any action reasonably taken or
reasonably omitted by it in good faith in reliance upon any such instructions or
advice or upon any paper or document believed by it to be genuine and to have
been signed by the proper person or persons. The Administrator shall not be held
to have notice of any change of authority of any person until receipt of written
notice thereof from the Trust. Nothing in this paragraph shall be construed as
imposing upon the Administrator any obligation to seek such instructions or
advice, or to act in accordance with such advice when received.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall be responsible for the performance of
only such duties as are set forth in this Agreement or as may be agreed to from
time to time in writing by the parties and, except as otherwise provided under
Section 6, shall have no responsibility for the actions or activities of any
other party, including other unaffiliated service providers. The Administrator
shall have no liability for any error of judgment or mistake of law or for any
loss or damage resulting from the performance or nonperformance of its duties
hereunder unless caused by or resulting from the negligence, bad faith or
willful misfeasance of the Administrator, its officers or employees. Unless
resulting from the negligence, bad faith or willful misfeasance of the
Administrator, its officers, agents or employees, the Administrator shall not be
liable for any special, indirect, incidental, or consequential damages not
resulting from its negligence, bad faith or willful misfeasance (including,
without limitation, attorneys' fees) under any provision of this Agreement or
for any such damages arising out of any act or failure to act hereunder. In any
event, the Administrator's liability under this Agreement shall be limited to
two hundred (200) percent of its total compensation earned and fees paid
hereunder during the preceding twelve months for any liability or loss suffered
by the Trust including, but not limited to, any liability relating to
qualification of the Trust as a regulated investment company or any liability
relating to the Trust's compliance with any federal or state tax or securities
statute, regulation or ruling.
The Administrator shall not be responsible or liable for any
failure or delay in performance of its obligations under this Agreement arising
out of or caused, directly or indirectly, by circumstances beyond its control,
including without limitation, work stoppage, power or other mechanical failure,
computer virus, natural disaster, governmental action or communication
disruption.
The Trust shall indemnify and hold the Administrator harmless
from all loss, cost, damage and expense, including reasonable fees and expenses
for counsel, incurred by the Administrator resulting from any claim, demand,
action or suit in connection with the Administrator's acceptance of this
Agreement, any action or omission by it in the performance of its duties
hereunder, or as a result of acting upon any instructions reasonably believed by
it to have been duly authorized by the Trust, provided that this indemnification
shall not apply to actions or omissions of the Administrator, its officers,
agents or employees in cases of its or their own negligence, bad faith or
willful misfeasance.
The indemnification contained herein shall survive the
termination of this Agreement.
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The Administrator will not confess any claim or settle or make
any compromise in any instance in which the Trust will be asked to provide
indemnification, except with the Trust's prior written consent. Any amounts
payable by the Trust under this Section 8 shall be satisfied only against the
assets of the Investment Fund involved in the claim, demand, action or suit and
not against the assets of any other investment portfolio of the Trust.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by
law or in connection with any required disclosure to a banking or other
regulatory authority, it will keep confidential all records and information in
its possession relating to the Trust and its shareholders and shareholder
accounts ("Confidential Information") and will not disclose the same to any
person except at the request or with the written consent of the Trust and shall
not be used for any purpose other than performance of the Administrator's
responsibilities hereunder. The Administrator agrees that all records that
indicate or otherwise relate to the Trust's security holdings are confidential
and agrees to implement and enforce appropriate security policies and procedures
to prevent unauthorized and improper use and dissemination by the
Administrator's employees of this information and the Confidential Information.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
The Trust assumes full responsibility for complying with all
securities, tax, commodities and other laws, rules and regulations applicable to
it.
In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Administrator agrees that all records which it maintains for the
Trust shall at all times remain the property of the Trust, shall be readily
accessible during normal business hours, and shall be promptly surrendered upon
the termination of the Agreement or otherwise on written request by the Trust.
The Administrator further agrees that all records which it maintains for the
Trust pursuant to Rule 31a-1 under the 1940 Act will be preserved for the
periods prescribed by Rule 31a-2 under the 1940 Act unless any such records are
earlier surrendered as provided above. Records shall be surrendered in usable
machine-readable form.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Trust are not to be
deemed exclusive, and the Administrator shall be free to render similar services
to others so long as its provision of services under this Agreement is not
materially impaired. The Administrator shall be deemed to be an independent
contractor and shall, unless otherwise expressly provided herein or authorized
by the Trust from time to time, have no authority to act or represent the Trust
in any way or otherwise be deemed an agent of the Trust.
12. TERM, TERMINATION AND AMENDMENT
This Agreement shall become effective on the date of its
execution and shall remain in full force and effect indefinitely from the
effective date unless either party terminates this Agreement by written notice
to the other party. For the Administrator to terminate this Agreement, the
Administrator shall give at least one hundred twenty (120) days' prior notice to
the Trust. For the Trust to terminate this agreement, the Trust shall give at
least ninety (90) days' prior notice to the Administrator. Termination of this
Agreement with respect to any given Investment Fund shall in no way affect the
continued validity of this Agreement with respect to any other Investment Fund.
Upon termination of this Agreement, the Trust shall pay to the Administrator
such compensation and any reimbursable expenses as may be due under the terms
hereof as
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of the date of such termination. This Agreement may be modified or
amended from time to time by mutual written agreement of the parties hereto.
13. NOTICES
Any notice or other communication authorized or required by
this Agreement to be given to either party shall be in writing and deemed to
have been given when delivered in person or by confirmed facsimile, or posted by
certified mail, return receipt requested, to the following address (or such
other address as a party may specify by written notice to the other): if to the
Trust: 125 South Market, Suite 1200, San Jose, California 95113, Attn (with
separate copies to each): Omar Billawala and General Counsel, fax: (408)
289-5575; if to the Administrator: State Street Bank and Trust Company, 2 Avenue
de Lafayette, Boston, Massachusetts 02111, Attn: Fund Administration Legal
Department, fax: 617-662-3805.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by either party hereto
without the prior consent in writing of the other party, except that the
Administrator may assign this Agreement to a successor of all or a substantial
portion of its business, or to a party controlling, controlled by or under
common control with the Administrator upon written consent by the Trust, which
consent may not be unreasonably withheld.
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the
benefit of the Trust and the Administrator and their respective successors and
permitted assigns.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
previous representations, warranties or commitments regarding the services to be
performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
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19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Delaware.
20. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and
amendments hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
21. RELEASE
The names "Firsthand Funds" and "Trustees of Firsthand Funds"
refer respectively to the Trust created by the Declaration of Trust and the
Trustees as Trustees but not individually or personally. Al l parties hereto
acknowledge and agree that any and all liabilities of the Trust arising,
directly or indirectly, under this Agreement will be satisfied solely out of the
assets of the Trust and that no Trustee, officer or shareholder shall be
personally liable for any such liabilities. All persons dealing with any
Investment Fund of the Trust must look solely to the property belonging to such
Investment Fund for the enforcement of any claims against the Trust.
22. COUNTERPARTS
This Agreement may be executed in two or more counterparts,
each of which is deemed an original but all of which together constitute one and
the same instrument.
23. USE OF NAMES
The Administrator agrees that the names "Firsthand Funds,"
"Firsthand Capital Management," and the names of each of the Investment Funds
are the property of Firsthand Capital Management, Inc., or Firsthand Funds and
the Administrator will not use such names except in accordance with such
policies and procedures as may be mutually agreed to in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
FIRSTHAND FUNDS
By: /s/ Omar Billawala
-------------------
Name: Omar Billawala
Title: Secretary
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STATE STREET BANK AND TRUST COMPANY
By: /s/ Glenn N. Francis, Jr.
-------------------------
Name: Glenn N. Francis, Jr.
Title: Senior Vice President
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ADMINISTRATION AGREEMENT
SCHEDULE A
LISTING OF INVESTMENT FUNDS
Technology Value Fund
Technology Leaders Fund
Technology Innovators Fund
The Communications Fund-TM-
The e-Commerce Fund-TM-
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ADMINISTRATION AGREEMENT
SCHEDULE B
NOTICE FILING WITH
STATE SECURITIES ADMINISTRATORS
AT THE SPECIFIC DIRECTION OF THE TRUST, THE ADMINISTRATOR WILL PREPARE REQUIRED
DOCUMENTATION AND MAKE NOTICE FILINGS IN ACCORDANCE WITH THE SECURITIES LAWS OF
EACH JURISDICTION IN WHICH TRUST SHARES ARE TO BE OFFERED OR SOLD PURSUANT TO
INSTRUCTIONS GIVEN TO THE ADMINISTRATOR BY THE TRUST.
THE TRUST SHALL BE SOLELY RESPONSIBLE FOR THE DETERMINATION (I) OF THOSE
JURISDICTIONS IN WHICH NOTICE FILINGS ARE TO BE SUBMITTED AND (II) THE NUMBER OF
TRUST SHARES TO BE PERMITTED TO BE SOLD IN EACH SUCH JURISDICTION. IN THE EVENT
THAT THE ADMINISTRATOR BECOMES AWARE OF (A) THE SALE OF TRUST SHARES IN A
JURISDICTION IN WHICH NO NOTICE FILING HAS BEEN MADE OR (B) THE SALE OF TRUST
SHARES IN EXCESS OF THE NUMBER OF TRUST SHARES PERMITTED TO BE SOLD IN SUCH
JURISDICTION, THE ADMINISTRATOR SHALL REPORT SUCH INFORMATION TO THE TRUST, AND
IT SHALL BE THE TRUST'S RESPONSIBILITY TO DETERMINE APPROPRIATE CORRECTIVE
ACTION AND INSTRUCT THE ADMINISTRATOR WITH RESPECT THERETO.
The Blue Sky services shall consist of the following:
1. Filing of Trust's Initial Notice Filings, as directed by the
Trust;
2. Filing of Trust's renewals and amendments as required;
3. Filing of amendments to the Trust's registration statement
where required;
4. Filing Trust sales reports where required;
5. Payment at the expense of the Trust of all Trust Notice Filing
fees;
6. Filing the Prospectuses and Statements of Additional
Information and any amendments or supplements thereto where
required;
7. Filing of annual reports and proxy statements where required;
and
8. The performance of such additional services as the
Administrator and the Trust may agree upon in writing.
Unless otherwise specified in writing by the Administrator, Blue Sky services by
the Administrator shall not include determining the availability of exemptions
under a jurisdiction's blue sky law. Any such determination shall be made by the
Trust or its legal counsel. In connection with the services described herein,
the Trust shall issue in favor of the Administrator a power of attorney to
submit Notice Filings on behalf of the Trust, which power of attorney shall be
substantially in the form of Exhibit I attached hereto.
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EXHIBIT I
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of April 30 2000 that the Firsthand Funds
with principal offices at 125 South Market, Suite 1200, San Jose, California,
95113 (the "Trust") makes, constitutes, and appoints STATE STREET BANK AND TRUST
COMPANY (the "Administrator") with principal offices at 225 Franklin Street,
Boston, Massachusetts its lawful attorney-in-fact for it to do as if it were
itself acting, the following:
1. REGISTRATION OF TRUST SHARES. The power to register shares of the Trust
in each jurisdiction in which Trust shares are offered or sold and in
connection therewith the power to prepare, execute, and deliver and
file any and all Trust applications, including without limitation,
applications to register shares, consents, including consents to
service of process, reports, including without limitation, all periodic
reports, claims for exemption, or other documents and instruments now
or hereafter required or appropriate in the judgment of the
Administrator in connection with the registration of Trust shares.
2. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney,
individuals holding the titles of Officer, Blue Sky Manager, or Senior
Blue Sky Administrator at the Administrator shall have authority to act
on behalf of the Trust with respect to item 1 above.
The execution of this limited power of attorney shall be deemed coupled with an
interest and shall be revocable only upon receipt by the Administrator of such
termination of authority. Nothing herein shall be construed to constitute the
appointment of the Administrator as or otherwise authorize the Administrator to
act as an officer, trustee or employee of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed in its
name and on its behalf by and through its duly authorized officer, as of the
date first written above.
FIRSTHAND FUNDS
By: ___________________________
Name:
Title:
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Fund Administration Complex Fee Schedule for
FIRSTHAND FUNDS
- --------------------------------------------------------------------------------
FEES FOR FUND ADMINISTRATION SERVICES
The following fee schedule is for full administration services for
Firsthand Funds. These services include: Compliance, Financial Reporting,
Treasurer's Office Support and Tax Reporting. For these services, the
funds will be charged according to the following fee schedule:
- --------------------------------------------------------------------------------
Annual Fee
Average Assets
Expressed in Basis Points: 1/100 of 1%
<TABLE>
<S> <C>
First $1.0 Billion 3.00
Next $1.0 Billion 2.50
Next $1.0 Billion 2.00
Next $2.0 Billion 1.50
Thereafter 1.00
Minimum Per Fund $95,000
</TABLE>
Fund Fees: Total net assets of all Funds in the series will be
used to calculate the fee by multiplying the net assets of the Funds by the
basis point fees in the above schedule. The minimum will be calculated by
multiplying the minimum fee by the number of Funds in each series to arrive at
the total minimum fee. The greater of the basis points or the minimum will be
accrued to each Fund based on the pro-rata total net asset value of each Fund in
the series.
THIS FEE SCHEDULE WILL APPLY TO THE EXISTING 5 FUNDS AND AN ADDITIONAL
2 NEW FUNDS.
MULTIPLE CLASSES OF SHARES
An additional $10,000 annual fee will be applied for each class of
shares, excluding the first class of shares, if more than one class of
shares is operational in a Fund.
OUT OF POCKET EXPENSES - INCLUDE BUT MAY NOT BE LIMITED TO:
Legal Fees, audit fees and other professional fees
Postage
Supplies related to Fund records
Travel and lodging for Board and Operations meetings
Preparation of financial statements other than Annual and Semi-Annual
Reporting, $3,000 per financial report.
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SPECIAL ARRANGEMENTS
Fees for activities of a non-recurring nature such as reorganizations,
and/or preparation of special reports will be subject to negotiation.
Fees for a change in fund structure (i.e. Core and feeder) are subject to
negotiation.
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INVESTMENT ACCOUNTING AGREEMENT
THIS AGREEMENT is made effective the 30th day of April, 2000, by and
between STATE STREET BANK AND TRUST COMPANY, a trust company chartered under the
laws of the Commonwealth of Massachusetts, having its principal office and place
of business at 225 Franklin Street, Boston, Massachusetts 02110 ("State
Street"), and Firsthand Funds, a Delaware business trust having its principal
office and place of business at 125 South Market, Suite 1200, San Jose,
California 95113 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint State Street as its agent to perform
certain investment accounting and recordkeeping functions for the assets of the
Fund's investment portfolio or portfolios listed on Schedule A (each a
"Portfolio", and collectively the "Portfolios"); and
WHEREAS, State Street is willing to accept such appointment for the
compensation and on the terms and conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
1. APPOINTMENT OF AGENT. Fund hereby constitutes and appoints State Street
as its agent to perform certain accounting and recordkeeping functions
relating to portfolio transactions required of a duly registered
investment company under Rule 31a of the Investment Company Act of
1940, as amended (the "1940 Act") and to calculate the net asset value
of the Portfolios. Absent written notification to the contrary by the
Fund or State Street, each new investment portfolio established in the
future by the Fund shall automatically become a "Portfolio" for all
purposes hereunder as if listed on Schedule A.
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to State
Street:
1. That it is a trust duly organized and existing and in
good standing under the laws of its state of
organization, and that it is registered under the
1940 Act; and
2. That it has the requisite power and authority under
applicable law, its bylaws and its declaration of
trust to enter into this Agreement; it has taken all
requisite action necessary to appoint State Street as
investment accounting and recordkeeping agent; this
Agreement has been duly executed and delivered by
Fund; and this Agreement constitutes a legal, valid
and binding obligation of Fund, enforceable in
accordance with its terms.
B. State Street hereby represents, warrants and acknowledges to Fund:
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1. That it is a trust company duly organized and
existing and in good standing under the laws of the
Commonwealth of Massachusetts; and
2. That it has the requisite power and authority under
applicable law, its charter and its bylaws to enter
into and perform this Agreement; this Agreement has
been duly executed and delivered by State Street; and
this Agreement constitutes a legal, valid and binding
obligation of State Street, enforceable in accordance
with its terms; and
3. That all books, records, information and data
pertaining to the business of the Trust and its
prior, present or potential shareholders that are
received by State Street pursuant to the performance
of State Street's duties under this Agreement shall
remain confidential and shall not be disclosed to any
other person, except as specifically authorized by
the Trust or as may be required by law, and shall not
be used for any purpose other than the performance of
State Street's responsibilities and duties hereunder.
3. DUTIES AND RESPONSIBILITIES OF THE PARTIES.
A. DELIVERY OF ACCOUNTS AND RECORDS. Fund will turn over or cause
to be turned over to State Street all accounts and records
needed by State Street to perform its duties and
responsibilities hereunder fully and properly. State Street
may rely conclusively on the completeness and correctness of
such accounts and records.
B. ACCOUNTS AND RECORDS. State Street will prepare and maintain,
under the direction of and as interpreted by Fund, Fund's or
Portfolio's accountants and/or other advisors, in complete,
accurate and current form such accounts and records: (1)
required to be maintained by Fund with respect to portfolio
transactions under Section 31(a) of the 1940 Act and the rules
and regulations from time to time adopted thereunder; (2)
required as a basis for calculation of each Portfolio's net
asset value; and (3) as otherwise agreed upon by the parties.
Fund will advise State Street in writing of all applicable
record retention requirements, other than those set forth in
the 1940 Act. State Street will preserve such accounts and
records in the manner and for the periods prescribed in the
1940 Act or for such longer period as is agreed upon by the
parties. Fund will furnish, in writing or its electronic or
digital equivalent, accurate and timely information needed by
State Street to complete such accounts and records when such
information is not readily available from generally accepted
securities industry services or publications.
C. ACCOUNTS AND RECORDS PROPERTY OF FUND. State Street
acknowledges that all of the accounts and records maintained
by State Street pursuant hereto are the property of Fund, and
will be made available to Fund for inspection or reproduction
within a reasonable period of time, upon demand. State Street
will assist Fund's independent auditors, or upon the prior
written approval of Fund, or upon demand, any regulatory body,
in any requested review of Fund's accounts and records but
Fund will reimburse State Street for all expenses and employee
time
2
<PAGE>
invested in any such review outside of routine and normal
periodic reviews. Upon receipt from Fund of the necessary
information or instructions, State Street will supply
information from the books and records it maintains for Fund
that Fund may reasonably request for tax returns,
questionnaires, periodic reports to shareholders and such
other reports and information requests as Fund and State
Street may agree upon from time to time.
D. ADOPTION OF PROCEDURES. State Street and Fund may from time to
time adopt such procedures as they agree upon, and State
Street may conclusively assume that no procedure approved or
directed by Fund, Fund's or Portfolio's accountants or other
advisors conflicts with or violates any requirements of the
prospectus, bylaws and declaration of trust, any applicable
law, rule or regulation, or any order, decree or agreement by
which Fund may be bound.
E. VALUATION OF ASSETS. State Street will value the assets of
each Portfolio in accordance with Fund's instructions (defined
below) utilizing the pricing sources designated by Fund
("Pricing Sources") on Exhibit A hereto. State Street will
value the assets of each portfolio using at least two sources
and investigate any discrepancies in such prices. In the event
that Fund specifies Reuters America, Inc., it will enter into
the Agreement attached hereto as Exhibit B. State Street will
calculate each Portfolio's net asset value in accordance with
the Portfolio's prospectus, Statement of Additional
Information, policies and procedures.
4. INSTRUCTIONS.
A. The term "Instructions", as used herein, means written
(including telecopied, telexed, or electronically transmitted)
or oral instructions which State Street reasonably believes
were given by a designated representative of Fund. Fund will
deliver to State Street, on or prior to the date hereof and
thereafter from time to time as changes therein are necessary,
written Instructions naming one or more designated
representatives to give Instructions in the name and on behalf
of Fund, which Instructions may be received and accepted by
State Street as conclusive evidence of the authority of any
designated representative to act for Fund and may be
considered to be in full force and effect until receipt by
State Street of notice to the contrary. Unless such written
Instructions delegating authority to any person to give
Instructions specifically limit such authority to specific
matters or require that the approval of anyone else will first
have been obtained, State Street will be under no obligation
to inquire into the right of such person, acting alone, to
give any Instructions whatsoever. If Fund fails to provide
State Street any such Instructions naming designated
representatives, any Instructions received by State Street
from a person reasonably believed to be an appropriate
representative of Fund will constitute valid and proper
Instructions hereunder. The term "designated representative"
may include Fund's or a Portfolio's employees and agents,
including investment managers and their employees.
B. No later than the next business day immediately following each
oral Instruction, Fund will send State Street written
confirmation of such oral Instruction. At State Street's sole
discretion, State Street may record on tape, or otherwise, any
oral
3
<PAGE>
Instruction whether given in person or via telephone, each
such recording identifying the date and the time of the
beginning and ending of such oral Instruction. Prior to
recording such oral Instruction State Street shall give the
caller notice that recording is taking place.
C. Fund will provide upon State Street's request a certificate
signed by an officer or designated representative of Fund, as
conclusive proof of any fact or matter required to be
ascertained from Fund hereunder. Fund will also provide State
Street Instructions with respect to any matter concerning this
Agreement requested by State Street. If State Street
reasonably believes that it could not prudently act according
to the Instructions, or the instruction or advice of Fund's or
a Portfolio's accountants or counsel, it may in its
discretion, with notice to Fund, not act according to such
Instructions.
5. LIMITATION OF LIABILITY OF STATE STREET. State Street is not
responsible or liable for, and Fund will indemnify and hold State
Street harmless from and against, any and all costs, expenses, losses,
damages, charges, counsel fees (including, without limitation,
disbursements and the allocable cost of in-house counsel), payments and
liabilities which may be asserted against or incurred by State Street
or for which State Street may be held to be liable provided that in
each case, State Street has acted in good faith and with reasonable
care, arising out of or attributable to:
A. State Street's action or failure to act pursuant hereto;
provided that State will not be liable for consequential,
special, or punitive damages;
B. State Street's payment of money as requested by Fund, or the
taking of any action which might make it or its nominee liable
for payment of monies or in any other way; provided, however,
that nothing herein obligates State Street to take any such
action or expend its own monies except in its sole discretion;
C. State Street's action or failure to act hereunder upon any
Instruction, advice, notice, request, consent, certificate or
other instrument or paper appearing to it to be genuine and to
have been properly executed, including any Instructions,
communications, data or other information received by State
Street by means of the Systems, as hereinafter defined, or any
electronic system of communication;
D. State Street's action or failure to act in good faith reliance
on the advice or opinion of counsel for Fund or of its own
counsel with respect to questions or matters of law, which
advice or opinion may be reasonably obtained by State Street
at the expense of Fund, or on the Instruction, advice or
statements of any officer or employee of Fund, or Fund's
accountants or other authorized individuals, and other persons
believed by it in good faith to be expert in matters upon
which they are consulted;
E. Any error, omission, inaccuracy or other deficiency in any
Portfolio's accounts and records or other information provided
to State Street by or on behalf of a Portfolio, including the
accuracy of the prices quoted by the Pricing Sources or for
the information supplied by Fund to value the assets, or the
failure of Fund to
4
<PAGE>
provide, or provide in a timely manner, any accounts,
records, or information needed by State Street to perform
its duties hereunder;
F. Fund's refusal or failure to comply with the terms hereof
(including without limitation Fund's failure to pay or
reimburse State Street under Section 5 hereof), Fund's
negligence, bad faith or willful misfeasance, or the failure
of any representation or warranty of Fund hereunder to be and
remain true and correct in all respects at all times;
G. The use or misuse, whether authorized or unauthorized, of the
Systems or any electronic system of communication used
hereunder, by Fund or by any person who acquires access to the
Systems or such other systems through the terminal device,
passwords, access instructions or other means of access to
such Systems or such other system which are utilized by,
assigned to or otherwise made available to Fund, except to the
extent attributable to any negligence or bad faith or willful
misfeasance by State Street;
H. Loss occasioned by the acts, omissions, defaults or insolvency
of any broker, bank, trust company, securities system or any
other person with whom State Street may deal; and
I. The failure or delay in performance of its obligations
hereunder, or those of any entity for which it is responsible
hereunder, arising out of or caused, directly or indirectly,
by circumstances beyond the affected entity's reasonable
control, including, without limitation: any interruption, loss
or malfunction of any utility, transportation, computer
(hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a
delay in mails; governmental or exchange action, statute,
ordinance, rulings, regulations or direction; war, strike,
riot, emergency, civil disturbance, terrorism, vandalism,
explosions, labor disputes, freezes, floods, fires, tornadoes,
acts of God or public enemy, revolutions, or insurrection.
J. State Street will not confess any claim or settle or make any
compromise in any instance in which the Fund will be asked to
provide indemnification, except with the Fund's prior written
consent. Any amounts payable by the Fund under this Section 5
shall be satisfied only against the assets of the investment
portfolio of the Fund involved in the claim, demand, action or
suit and not against the assets of any other investment
portfolio of the Fund.
6. COMPENSATION. In consideration for its services hereunder, Fund will
pay to State Street the compensation set forth in a separate fee
schedule to be agreed to by Fund and State Street from time to time,
and, upon reasonable demand, reimbursement for State Street's cash
disbursements and reasonable out-of-pocket costs and expenses,
including attorney's fees and disbursements, incurred by State Street
in connection with the performance of services hereunder.
7. TERM AND TERMINATION. This Agreement shall become effective on the date
of its execution and shall remain in full force and effect indefinitely
from the effective date
5
<PAGE>
unless either party terminates this Agreement by written notice to the
other party, such notice to be in writing, delivered or mailed postage
prepaid, to the other party. For the State Street to terminate this
Agreement, State Street shall give at least one hundred twenty (120)
days' prior notice to the Trust. For the Trust to terminate this
agreement, the Trust shall give at least ninety (90) days' prior notice
to the State Street. Termination of this Agreement with respect to any
given Investment Fund shall in no way affect the continued validity of
this Agreement with respect to any other Investment Fund. Upon
termination of this Agreement, the Trust shall pay to the State Street
such compensation and any reimbursable expenses as may be due under the
terms hereof as of the date of such termination. This Agreement may be
modified or amended from time to time by mutual written agreement of
the parties hereto. Upon termination hereof:
A. Fund will pay State Street its fees and compensation due
hereunder and its reimbursable disbursements, costs and
expenses paid or incurred to such date;
B. Fund will designate a successor (which may be Fund) by
Instruction to State Street; and
C. State Street will, upon payment of all sums due to State
Street from Fund hereunder or otherwise, deliver all accounts
and records and other properties of Fund to the successor, or,
if none, to Fund, at State Street's office.
In the event that accounts, records or other properties remain in the
possession of State Street after the date of termination hereof for any
reason other than State Street's failure to deliver the same, State
Street is entitled to compensation as provided in the then-current fee
schedule for its services during such period, and the provisions hereof
relating to the duties and obligations of State Street will remain in
full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed
to Fund at the address set forth above, or at such other address as
Fund may have designated to State Street in writing, will be deemed to
have been properly given to Fund hereunder. Notices, requests,
Instructions and other writings addressed to State Street at the
address set forth above, Attention: Investment Accounting Department,
or to such other address as it may have designated to Fund in writing,
will be deemed to have been properly given to State Street hereunder.
9. THE SYSTEMS; CONFIDENTIALITY.
A. If State Street provides Fund direct access to the
computerized investment portfolio recordkeeping and accounting
systems used by State Street ("Systems") or if State Street
and Fund agree to utilize any electronic system of
communication, Fund agrees to implement and enforce
appropriate security policies and procedures to prevent
unauthorized or improper access to or use of the Systems or
such other system.
B. Fund will preserve the confidentiality of the Systems and the
tapes, books, reference manuals, instructions, records,
programs, documentation and information of, and other
materials relevant to, the Systems and the business of
6
<PAGE>
State Street or its affiliates ("Confidential Information").
Fund agrees that it will not voluntarily disclose any such
Confidential Information to any other person other than its
own employees who reasonably have a need to know such
information pursuant hereto. Fund will return all such
Confidential Information to State Street upon termination or
expiration hereof.
C. Fund has been informed that the Systems are licensed for use
by State Street and its affiliates from one or more third
parties ("Licensors"), and Fund acknowledges that State Street
and Licensors have proprietary rights in and to the Systems
and all other State Street or Licensor programs, code,
techniques, know-how, data bases, supporting documentation,
data formats, and procedures, including without limitation any
changes or modifications made at the request or expense or
both of Fund (collectively, the "Protected Information"). Fund
acknowledges that the Protected Information constitutes
confidential material and trade secrets of State Street and
Licensors. Fund will preserve the confidentiality of the
Protected Information, and Fund hereby acknowledges that any
unauthorized use, misuse, disclosure or taking of Protected
Information, residing or existing internal or external to a
computer, computer system, or computer network, or the knowing
and unauthorized accessing or causing to be accessed of any
computer, computer system, or computer network, may be subject
to civil liabilities and criminal penalties under applicable
law. Fund will so inform employees and agents who have access
to the Protected Information or to any computer equipment
capable of accessing the same. Licensors are intended to be
and are third party beneficiaries of Fund's obligations and
undertakings contained in this Section.
D. Fund hereby represents and warrants to State Street that it
has determined to its satisfaction that the Systems are
appropriate and suitable for its use. THE SYSTEMS ARE PROVIDED
ON AN AS IS, AS AVAILABLE BASIS. STATE STREET EXPRESSLY
DISCLAIMS ALL WARRANTIES INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, EXCEPT THOSE WARRANTIES EXPRESSLY STATED
HEREIN.
E. State Street will take reasonable steps to ensure that its
products (and those of its third-party suppliers) reflect the
available state of the art technology to offer products that
are reasonably free from material and serious defects. State
Street will make the changes to its products at no cost to the
Fund and in a commercially reasonable time frame and will
require third-party suppliers to do likewise.
Similarly, Fund will take reasonable steps to ensure that its
electronic systems reflect the available state of the art
technology and are reasonably free from material and serious
defects, and if any changes are required, Fund will make the
changes to its systems at no cost to State Street and in a
commercially reasonable time frame.
10. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio,
the following provision applies:
7
<PAGE>
Each Portfolio will be regarded for all purposes hereunder as
a separate party apart from each other Portfolio. Unless the
context otherwise requires, with respect to every transaction
covered hereby, every reference herein to Fund is deemed to
relate solely to the particular Portfolio to which such
transaction relates. Under no circumstances will the rights,
obligations or remedies with respect to a particular Portfolio
constitute a right, obligation or remedy applicable to any
other Portfolio. The use of this single document to
memorialize the separate agreement as to each Portfolio is
understood to be for clerical convenience only and will not
constitute any basis for joining the Portfolios for any
reason.
11. MISCELLANEOUS.
A. This Agreement will be construed according to, and the rights
and liabilities of the parties hereto will be governed by, the
laws of the State of Delaware, without reference to the choice
of laws principles thereof.
B. All terms and provisions hereof will be binding upon, inure to
the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
C. The representations and warranties, the indemnifications
extended hereunder, and the provisions of Section 9 hereof are
intended to and will continue after and survive the
expiration, termination or cancellation hereof.
D. No provisions hereof may be amended or modified in any manner
except by a written agreement properly authorized and executed
by each party hereto.
E. The failure of either party to insist upon the performance of
any terms or conditions hereof or to enforce any rights
resulting from any breach of any of the terms or conditions
hereof, including the payment of damages, will not be
construed as a continuing or permanent waiver of any such
terms, conditions, rights or privileges, but the same will
continue and remain in full force and effect as if no such
forbearance or waiver had occurred. No waiver, release or
discharge of any party's rights hereunder will be effective
unless contained in a written instrument signed by the party
sought to be charged.
F. The captions herein are included for convenience of reference
only, and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts,
each of which is deemed an original but all of which together
constitute one and the same instrument.
H. If any provision hereof is determined to be invalid, illegal,
in conflict with any law or otherwise unenforceable, the
remaining provisions hereof will be considered severable and
will not be affected thereby, and every remaining
8
<PAGE>
provision hereof will remain in full force and effect and will
remain enforceable to the fullest extent permitted by
applicable law.
I. The benefits of this Agreement may not be assigned by either
party nor may either party delegate all or a portion of its
duties hereunder without the prior written consent of the
other party. Notwithstanding the foregoing, Fund agrees that
State Street may delegate all or a portion of its duties to an
affiliate of State Street, provided that such delegation will
not reduce the obligations of State Street under this
Agreement.
J. Neither the execution nor performance hereof will be deemed to
create a partnership or joint venture by and between State
Street and Fund or any Portfolio.
K. Except as specifically provided herein, this Agreement does
not in any way affect any other agreements entered into among
the parties hereto and any actions taken or omitted by either
party hereunder will not affect any rights or obligations of
the other party hereunder.
L. Notice is hereby given that a copy of Fund's Trust Agreement
and all amendments thereto is on file with the Secretary of
State of the state of its organization; that this Agreement
has been executed on behalf of Fund by the undersigned duly
authorized representative of Fund in his/her capacity as such
and not individually; and that the obligations of this
Agreement are binding only upon the assets and property of
Fund and not upon any trustee, officer of shareholder of Fund
individually.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.
STATE STREET BANK AND TRUST COMPANY
By:_____________________________
Title:__________________________
FIRSTHAND FUNDS
By:_____________________________
Title:__________________________
9
<PAGE>
EXHIBIT A--PRICE SOURCE AUTHORIZATION
State Street has agreed to value the assets of the Fund in accordance
with the Funds' Instructions utilizing the pricing sources designated by the
Fund. The Fund hereby Instructs State Street to use the following primary and
back-up sources for each of the following security types:
<TABLE>
<CAPTION>
- --------------------------------------- -------------------------------------- -------------------------------------
TYPE OF SECURITY PRIMARY SOURCE BACKUP SOURCE
- --------------------------------------- -------------------------------------- -------------------------------------
<S> <C> <C>
U.S. TREASURIES
- --------------------------------------- -------------------------------------- -------------------------------------
CORPORATE BONDS
- --------------------------------------- -------------------------------------- -------------------------------------
MUNICIPAL BONDS
- --------------------------------------- -------------------------------------- -------------------------------------
MORTGAGE BACKED
- --------------------------------------- -------------------------------------- -------------------------------------
U.S. & CANADIAN EQUITIES
- --------------------------------------- -------------------------------------- -------------------------------------
FOREIGN EQUITIES
- --------------------------------------- -------------------------------------- -------------------------------------
EMERGING MARKET EQUITIES
- --------------------------------------- -------------------------------------- -------------------------------------
AMERICAN DEPOSITORY RECEIPTS
- --------------------------------------- -------------------------------------- -------------------------------------
GLOBAL DEPOSITORY RECEIPTS
- --------------------------------------- -------------------------------------- -------------------------------------
CANADIAN BONDS
- --------------------------------------- -------------------------------------- -------------------------------------
FOREIGN BONDS
- --------------------------------------- -------------------------------------- -------------------------------------
OPTIONS
- --------------------------------------- -------------------------------------- -------------------------------------
EXCHANGE RATES
- --------------------------------------- -------------------------------------- -------------------------------------
- --------------------------------------- -------------------------------------- -------------------------------------
- --------------------------------------- -------------------------------------- -------------------------------------
- --------------------------------------- -------------------------------------- -------------------------------------
</TABLE>
These Instructions may be modified from time to time by further written
Instruction to State Street.
(FUND)
- -------------------------------
By:
Title: ______________________________
Date: ______________________________
10
<PAGE>
EXHIBIT B--REUTERS DATA SERVICE AGREEMENT
The undersigned acknowledges and agrees that some of the data being provided in
the service by State Street to Fund contains information supplied to State
Street by Reuters America Inc. ("Reuters") (the "Data"). Fund agrees that:
(i) although Reuters makes every effort to ensure the accuracy and
reliability of the Data, Fund acknowledges that Reuters, its
employees, agents, contractors, subcontractors, contributors
and third party providers will not be liable for any loss,
cost or damage suffered or incurred by Fund arising out of any
fault, interruption or delays in the Data or out of any
inaccuracies, errors or omissions in the Data however such
faults, interruptions, delays, inaccuracies, errors or
omissions arise, unless due to the negligence, bad faith or
willful misfeasance of Reuters;
(ii) it will not transfer, transmit, recirculate by digital or
analogue means, republish or resell all or part of the Data;
and
(iii) certain parts of the Data are proprietary and unique to
Reuters.
The undersigned further agrees that the benefit of this clause will inure to the
benefit of Reuters.
(FUND NAME)
By:
Title: ______________________________
Date: ______________________________
11
<PAGE>
[LETTERHEAD]
Morrison & Foerster LLP
Attorneys at Law
2000 Pennsylvania Avenue, NW
Washington, DC 20006-1888
April 28, 2000
Firsthand Funds
101 Park Center Plaza
San Jose, California 95113
Re: Shares of Beneficial Interest of
Firsthand Funds
---------------
Dear Ladies and Gentlemen:
We refer to Post-Effective Amendment No. 12 to the Registration Statement
on Form N-1A (SEC File Nos. 33-73832; 811-8268) (the "Registration Statement")
of Firsthand Funds (the "Company") relating to the registration of an indefinite
number of Shares of Beneficial Interest of the Company's series (collectively,
"Shares").
We have been requested by the Company to furnish this opinion as
Exhibit 23(i) to the Registration Statement.
We have examined such records, documents, instruments, and certificates of
public officials and of the Company, made such inquiries of the Company, and
examined such questions of law as we have deemed necessary for the purpose of
rendering the opinion set forth herein. We have examined documents relating to
the organization of the Company and the authorization for registration and sale
of Shares of each of the Company's series. We have assumed the genuineness of
all signatures and the authenticity of all items submitted to us as originals
and the conformity with originals of all items submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that:
<PAGE>
MORRISON & FOERSTER LLP
April 28, 2000
Page Two
The issuance and sale of Shares by the Company have been duly and validly
authorized by all appropriate action, and assuming delivery of the Shares by
sale or in accord with the Company's series' dividend reinvestment plan in
accordance with the description set forth in the Registration Statement, as
amended, the Shares will be validly issued, fully paid and nonassessable.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we consent to the use of our name and to the reference to our
firm under the heading "Legal Counsel and Auditors" in the Statement of
Additional Information.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective Amendment
No. 12 to the Registration Statement on Form N-1A of the Firsthand Funds and to
the use of our report dated January 21, 2000 on the financial statements and
financial highlights of The Technology Value Fund, The Technology Leaders Fund,
The Technology Innovators Fund, The Communications Fund, and The e-Commerce
Fund, each a series of shares of the Firsthand Funds. Such financial statements
and financial highlights appear in the 1999 Annual Report to Shareholders, which
is incorporated by reference in the Registration Statement.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 20, 2000
<PAGE>
FIRSTHAND CAPITAL MANAGEMENT, INC.
&
FIRSTHAND FUNDS
CODE OF ETHICS
Last Updated:
MARCH 16, 2000
<PAGE>
- ------------------------------------------------------------------------------
[LOGO]FIRSTHAND
Page 2 of 11 Revision 7
Code of Ethics
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INTRODUCTION TO THE CODE OF ETHICS
This Code of Ethics (the "Code) has been established for Firsthand Capital
Management, Inc. (the "Adviser") and Firsthand Funds (the "Trust") primarily for
the purpose of establishing rules for the Adviser's and Trust's employees,
officers and trustees with respect to their personal securities transactions.
The Adviser and Trust are required to adopt a Code of Ethics in accord with Rule
17j-1 under the Investment Company Act of 1940 (the "1940 Act"). That Rule is
applicable because the Trust is a registered investment company.
The investment company industry is closely regulated under the provisions of the
1940 Act, and by the regulations and interpretations of the Securities and
Exchange Commission ("SEC") under those statutes. Transactions in securities are
also governed by the provisions of the Securities Act of 1933 (the "Securities
Act") the Securities Exchange Act of 1934 (the "Exchange Act"), and the
Investment Advisers Act of 1940 ("Advisers Act"), as well as by state laws. The
rules of conduct set forth in the Code are based in large part on rules of law
and legal concepts developed under those statutes. These legal concepts do not
remain static, and further developments of the law in these areas may be
expected. We believe that it is our job to conduct our business so as to avoid
not only any violation of law but also any appearance of violation or ground for
criticism. For your guidance, some of the most important legal concepts within
which we operate are mentioned below.
1 FIDUCIARY DUTY
Investment company employees, officers and trustees owe a fiduciary duty
to fund shareholders. This means a duty of loyalty, fairness and good
faith toward the shareholders, and a corresponding duty not to do anything
prejudicial to or in conflict with the interests of the shareholders. This
is a higher standard than that applicable to ordinary arm's length
business transactions between persons who do not owe a fiduciary duty to
the other parties.
2 FRAUD AND DECEIT; INSIDE INFORMATION
The various laws administered by the SEC contain very broad provisions
prohibiting fraud or deceit or "any manipulative or deceptive device or
contrivance" in connection with securities transactions and giving of
investment advice. It is under these broad general provisions that the SEC
and private individuals have successfully brought many of the important
cases in the securities field that have received so much publicity in
recent years, including cases on improper use of material non-public
"inside" information.
3 MANIPULATION
Care must always be taken to avoid market manipulation of securities,
which is strictly prohibited by law.
4 PENALTIES
Under the various federal and state securities statutes, penalties that
may be imposed for violations include civil liability for damages,
temporary suspension or permanent prohibition from engaging in various
aspects of the securities or investment advisory businesses and criminal
penalties.
The Code covers two general topic areas. The first portion of the Code includes
some broad prohibitions against fraudulent conduct in connection with activities
by the Adviser or Trust. Because fraudulent conduct can take many forms, as
noted above, the Code cannot reasonably include an all-inclusive list of actions
or omissions. Further, these general prohibitions are basically the same as
those in the federal securities laws, and are intended to reflect the expansive
and flexible nature of the restrictions that are applicable to our activities.
The second portion of the Code includes specific rules and restrictions with
respect to personal securities transactions. These restrictions have been
adopted with the goal of avoiding any conflicts of interest, or any appearances
of conflicts of interest, between the securities trading that the Trust
undertakes on its own behalf and personal securities trading by the employees,
officers and trustees of the Trust. The rules are intended to better assure that
trading on behalf of clients is given priority over trading for personal
accounts, and that trades for personal accounts do not adversely affect trades
for clients.
As required by the 1940 Act, most persons covered by the Code are also required
to file with the Trust quarterly and annual reports of their personal securities
transactions. These reports will be reviewed by the Chief Compliance Officer of
the Trust to determine whether the information suggests any possible violation
of the Code. These reports
<PAGE>
- ------------------------------------------------------------------------------
[LOGO]FIRSTHAND
Page 3 of 11 Revision 7
Code of Ethics
- ------------------------------------------------------------------------------
also are reviewed by the staff of the SEC when the SEC undertakes compliance
examinations of the Trust. In addition to better ensuring compliance with the
Code, the reporting requirements serve to create greater consciousness of
possible conflicts and, at the same time, provide a means to detect and correct
possible problems. The reporting system is an essential part of the Code and
must be strictly adhered to, without exception.
PERSONS SUBJECT TO THE CODE OF ETHICS
The Code covers all persons who fit within the definition of "Access Person", as
defined below.
The enforcement of these rules and procedures is the responsibility of the Chief
Compliance Officer of the Adviser. As the Code emphasizes, personal trading must
always be carried on in good judgment and good faith. It is obvious that all
possible situations cannot be covered by the Code and that under special
circumstances exceptions may occasionally be appropriate. Any Access Person
contemplating a transaction as to which he or she has any doubt, or anyone who
has any other question as to any part of the Code or our policy, should consult
with the Chief Compliance Officer. If the Chief Compliance Officer is absent or
unavailable, his office will be able to refer you to a senior officer of the
Trust or Adviser for assistance in this regard.
1 DEFINITIONS
1.1 Access Person
any director, trustee, officer or Advisory Person of the Trust or
the Adviser.
1.2 Advisory Person
(a) any employee of the Trust or of the Adviser (or of any
company in a control relationship to the Trust or the
Adviser) who, in connection with his or her regular
functions or duties, makes any recommendation, who
participates in the determination of which recommendation
shall be made, or whose functions or duties relate to the
determination of which recommendations shall be made
regarding the purchase or sale of a security by the Trust,
or whose functions relate to the making of any
recommendations with respect to such purchases or sales or
any employee who, in connection with his or her duties,
obtains any information concerning which securities are
being recommended prior to the effective dissemination of
such recommendations or of the information concerning such
recommendations;
(b) any natural person in a control relationship with the Trust or
the Adviser (such as a director or trustee) who obtains
information concerning recommendations made to the Trust with
regard to the purchase or sale of a security; and
(c) any of the following persons who obtain information concerning
securities recommendations being made to the Trust by the
Adviser before the effective dissemination of such
recommendations:
(i) any person controlling, controlled by or under common
control with the Adviser or the Trust,
(ii) any affiliated person of such person and
(iii) any affiliated person of such affiliated person.
1.3 Affiliated Person of another person
(a) any person directly or indirectly owning, controlling, or
holding with power to vote, 5% or more of the outstanding
voting securities of such other person;
(b) any person 5% or more of whose outstanding voting securities
are directly or indirectly owned, controlled, or held with
power to vote, by such other person;
(c) any person directly or indirectly controlling, controlled by,
or under common controlled with, such other person; and
(d) any officer, director, partner, co-partner or employee of such
other person.
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1.4 Beneficial Ownership
interpreted in the same manner as it would be in determining whether
a person is subject to the provisions of Section 16 of the Exchange
Act. "Beneficial ownership" includes accounts of a spouse, minor
children and relatives resident in the home of the Access Person, as
well as accounts of another person if by reason of any contract,
understanding, relationship, agreement or other arrangement the
Access Person obtains therefrom benefits substantially equivalent to
those of ownership.
1.5 Control
the power to exercise a controlling influence over the management or
policies of a company, unless such power is solely the result of an
official position with such company. Any person who owns
beneficially, either directly or through one or more controlled
companies, more than 25% of the voting securities of a company is
presumed to control such company.
1.6 Disinterested Trustee
a director or trustee of the Trust who is not an "interested person"
of the Trust within the meaning of Section 2(a)(19) of the 1940 Act.
1.7 Eligible Security
a security issued by a company that is either:
(a) a company with a total market valuation of $1.5 billion or
more OR a security having total market value owned by
non-affiliates of the company ("public float") of at least $1
billion; or
(b) a company not substantially engaged in business in an industry
or sector in which companies represented among the Trust's
assets are engaged.
1.8 Purchase or Sale of a Security
includes, among other acts, the writing or acquisition of an option
to purchase or sell a security.
2 GENERAL RESTRICTIONS
2.1 No Access Person may:
(a) employ any device, scheme or artifice to defraud the
Adviser or Trust;
(b) make to the Adviser or Trust any untrue statement of a
material fact or omit to state to such client a material fact
necessary in order to make the statements made in light of the
circumstances under which they are made, not misleading;
(c) engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the
Adviser or Trust; or
(d) engage in any manipulative practice with respect to the
Adviser or Trust.
2.2 Personal Trading Prohibitions
The following rules are intended to prevent any suggestion or
implication that Access Persons are using their relationship with
the Adviser or Trust to obtain advantageous treatment to the
detriment of the interests of the Trust.
(a) Hot Issues
No Access Person may purchase any security in any public
offering that may be construed as a "hot issue"(within the
meaning of the Conduct Rules of the National Association of
Securities Dealers, Inc., as may be in effect).
(b) When the Trust Holds Restricted Securities
If the Trust holds or is considering the purchase of
restricted securities, no Access Person shall purchase any
securities of that issuer (either publicly or privately)
except with the prior permission of the Chief Compliance
Officer. A list of these issuers is available from the Chief
Compliance Officer.
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(c) Dealings With the Trust
No Access Person may knowingly sell any portfolio security to
the Trust or knowingly purchase any portfolio security from
the Trust.
3 PERSONAL SECURITIES TRANSACTIONS SUBJECT TO RESTRICTIONS
3.1 Direct or Indirect Beneficial Ownership
Purchases and sales of securities (other than securities, or
transactions in securities, described in Sections 3.3 or 3.4 below)
by an Access Person for his or her own account, for the account of a
member of his or her family or for any account in which such Access
Person or a member of his or her family may have a direct or
indirect beneficial ownership interest, are subject to the personal
securities transaction rules described in Section 4 hereof. Most of
such transactions are also subject to the reporting requirements of
Section 5 hereof.
3.2 Special Rule for Disinterested Trustees
Notwithstanding subsection 3.1 above, transactions in securities by
Disinterested Trustees of the Trust are not subject to the
requirements of Sections 4 and 5 hereof if the Disinterested Trustee
is an Access Person solely by reason of his or her trusteeship with
the Trust, except where at the time of such transactions such
Disinterested Trustee knew, or in the ordinary course of fulfilling
his or her official duties as a Disinterested Trustee should have
known, that such a transaction would violate the rules described in
Section 4 hereof or received information about a securities
transaction by the Trust within 15 days of its occurrence. Most of
such transactions are also subject to the reporting requirements of
Section 5 hereof.
3.3 Exempted Securities
Notwithstanding subsections 3.1 and 3.2, trading in the following
securities is exempted from the requirements of Section 4 hereof:
(a) U.S. Government securities;
(b) Short-term money market instruments such as bankers'
acceptances, repurchase agreements and commercial paper;
(c) Bank certificates of deposit and bank deposit accounts; and
(d) Shares of open-end investment companies registered under the
1940 Act.
3.4 Exempted Transactions
Notwithstanding subsections 3.1 and 3.2, the following transactions
are exempted from the requirements of Section 4 hereof:
(a) Purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or control.
Employer-sponsored automatic investment programs fall in this
category.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by the Trust.
(c) Purchases or sales which are nonvolitional on the part of the
Access Person (e.g., sale due to a margin call).
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired.
(f) Purchases or sales which receive the prior approval of the
Chief Compliance Officer on the basis that the potential for
harm to the Trust is remote because the transactions would be
very unlikely to affect market price or liquidity, or because
they clearly are not related economically to the securities to
be purchased, sold or held by the Trust.
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4 RESTRICTIONS ON TIMING OF PERSONAL SECURITIES TRANSACTIONS
The following are specific restrictions relating to personal securities
transactions. As described below, these restrictions are applicable with
regard to particular securities and particular transactions based upon
those securities then being actively traded, or actively considered for
trading, on behalf of the Trust.
4.1 Purchases or Sales of Securities
(a) Block Trading
An Access Person may trade in the same security on the same
day as the Trust under the following conditions:
i) the Access Person and the Trust trade in the same
security on the same day through the same brokerage
getting the same average execution for all trades in
that security.
ii) contrary trades are not allowed on the same day (i.e.,
Trust security purchases may not be blocked with Access
Person sales and vice versa).
iii) the brokerage must have the capability to maintain a
holding account which enables Access Persons and the
Trust to get the exact same average execution for all
trades in a specific security on a specific day.
iv) for agency trades through brokerages where the Access
Person's commission rate is higher than the Trust's, if
the brokerage's systems are able to support it, the
Access Person should pay the higher commission rate for
his or her trades.
v) when the Trust trades in the same security through
multiple brokerages on a given day, the Access Person
will get the average execution through the single
brokerage where both he or she and the Trust traded,
which will not necessarily be equal to the Trust's
average execution across all brokerages for that
security.
(b) Front or Back Running
Except in the case of the previously described "block trade",
an Access Person may not knowingly purchase a security within
one day of the Trust's trades in that same security (I.E., IF
THE TRUST TRADES ON A GIVEN WEDNESDAY, AN ACCESS PERSON MAY
TRADE ON MONDAY OR FRIDAY, BUT NOT ON TUESDAY, WEDNESDAY OR
THURSDAY OF THAT WEEK).
An Access Person may not knowingly trade in a security which
is under active buy or sell consideration by the Trust.
Exceptions are granted in the following circumstances:
i) Upon written approval from at least two officers of
the Trust or Adviser, it would not constitute a
violation of the Code if the Trust were to trade in a
security one day or less after an Access Person if
there is significant new market information for that
security not previously known by that Access Person
or significant shareholder redemptions make it
necessary.
ii) Upon written approval from at least two officers of the
Trust or Adviser, an Access Person may sell that
security less than two days after the Trust in order to
meet margin calls. Note involuntary sales due to margin
calls do not require pre-approval
iii) Block trades under subsection 4.1(a) are not subject to
trade blackout periods.
iv) Personal trades in Eligible Securities are not subject
to front or back running restrictions and though they do
not require preapproval, must be entered into the
Personal Trade Ticket System..
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4.2 Other Transactions
(a) Short Sales
Short sales are permitted by Access Persons provided the
requirements of this Section 4 are met.
(b) Convertible Securities
The foregoing restrictions in this Section 4 also apply to any
purchase or sale of a security which is convertible into or
exchangeable or exercisable for a security that is being
purchased or sold, or is actively being considered for,
purchase or sale, for the account of the Trust.
5 REPORTING REQUIREMENTS
5.1 Personal Trading Reports
Copies of the monthly statements in which the personal securities
transactions described in Section 3.1 were effected, except those
subject to the exemption in Section 3.2, must be sent by each Access
Person or their broker, dealer or bank with the Chief Compliance
Officer within ten days after the end of the relevant month. Each
statement must contain the following information:
(a) the date of the transaction, the title and the number of
shares (or the principal amount) of each security involved;
(b) the nature of the transaction (E.G., purchase, sale, option or
any other type of acquisition or disposition);
(c) the price at which the transaction was effected; and
(d) the name of the broker, dealer or bank with or through whom
the transaction was effected.
At the option of the reporting person, the SEC allows such
reports to contain a statement declaring that the reporting of
any transaction is not to be construed as an admission by the
reporting person that he or she has any direct or indirect
beneficial ownership in the security. Using that disclaimer
language may be useful in an unclear situation to avoid a
potential risk in not reporting a transaction while at the
same time avoiding prejudicing any position the person may
take or later seek to take with respect to ownership status.
5.2 Initial and Annual Reports
All Access Persons, upon first becoming an Access Person and
thereafter on an annual basis (initially by January 31 of each year
or on such other date set by the Chief Compliance Officer) shall
submit a report to the Chief Compliance Officer listing all
securities (other than Exempted Securities) with respect to which
that Access Person has beneficial ownership.
5.3 Exemptions from Reporting
Reports are not required with respect to any transactions:
(a) in securities which are direct obligations of the United
States;
(b) in securities of registered open-end investment companies
other than the Trust or the Adviser; or
(c) over which the reporting person does not have any direct or
indirect influence or control. Please note that there are
categories of securities, or particular transactions, which
are not subject to the restrictions of Section 4 (E.G.,
purchases under an automatic dividend reinvestment plan) but
which are subject to the reporting requirement of Section 5.
6 OTHER RULES
6.1 Inside Information
No Access Person may use any material non-public information, no
matter how acquired, in his or her own transactions or in the
discharge of his or her responsibilities to the Trust.
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6.2 Disclosure of Information; Confidentiality
Information about actual purchase or sale decisions, contemplated
purchases or sales, or other transactions under consideration for
the Trust, whether or not actually authorized, must be kept
confidential. Research information on portfolio companies must not
be divulged to persons who do not have a need to know such
information in connection with their employment by the Trust. In
addition, information about clients is and must not be disclosed.
Access Persons must use care in keeping information confidential.
6.3 Gifts and Other Preferential Treatment
An Access Person may not in relation to the business of the Adviser
or the Trust seek or accept from any broker or dealer or other
financial institution to the Adviser or the Trust either:
(a) any gifts of material value (I.E., in excess of $100 per year
[month] excluding occasional dinners and other moderate
entertainment or tickets to sporting events); or
(b) any sort of preferential treatment from, or special
arrangements with, such person or entity.
6.4 Finder's Fees
Access Persons should not become involved in negotiations for
corporate financings, acquisitions or other transactions for outside
companies (whether or not held by any of the clients) without the
prior permission of the Chief Compliance Officer. Specifically, no
finder's or similar fee in connection with any such transactions may
be negotiated or accepted without prior permission.
7 SANCTIONS
Careful adherence to the Code is one of the basis conditions of employment
of every Access Person. Any Access Person may be required to give up any
profit or other benefit realized from any transaction in violation of the
Code, or in appropriate cases the Adviser or Trust may impose other
sanctions for conduct inconsistent with the Code.
In addition, as pointed out in the preamble to the Code, certain
violations of the Code may also involve violation of laws, with the
possibility of civil or criminal penalties.
8 PROCEDURES FOR PERSONAL TRADING COMPLIANCE
In order to enforce compliance with all personal trading restrictions
described in this document, all access persons, before making personal
trades, must enter the trade into the Firsthand Personal Trade Ticket
System (the "System"). Unless the transaction has been otherwise excepted
from pre-clearance under the Code, the transaction cannot be executed
until the Access Person has received an approval notification from the
System.
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ADVISER & TRUST PERSONNEL
FIRSTHAND FUNDS
PRESIDENT Kevin Landis
SECRETARY Omar Billawala
TREASURER Yakoub Bellawala
TRUSTEES Kevin Landis
Michael Lynch
Jerry Wong
FCM
PRESIDENT & SECRETARY Kevin Landis
ASSISTANT SECRETARY Omar Billawala
TREASURER Yakoub Bellawala
OTHER OFFICERS Phil Mosakowski
Ken Pearlman
CHIEF COMPLIANCE OFFICER Omar Billawala
ACCESS PERSONS All Employees
DISINTERESTED TRUSTEES Michael Lynch
Jerry Wong
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REVISION DESCRIPTIONS
REVISION # CHANGES SINCE PREVIOUS REVISION
7 Modified language in several sections per
comments by Counsel
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I have received a copy of and understand the provisions of the Code of Ethics.
Signature Date
------------------------------------ -------------------------
Print Name Position
------------------------------------ ----------------------
<PAGE>
ALPS MUTUAL FUNDS SERVICES, INC.
(THE "COMPANY")
CODE OF ETHICS
I. PURPOSE OF THE CODE OF ETHICS
This code is based on the principle that, you as an access person of
the Company, will conduct your personal investment activities in accordance
with:
- the duty at all times to place the interests of each
Investment Company's shareholders first;
- the requirement that all personal securities transactions be
conducted consistent with this Code of Ethics and in such a
manner as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and
responsibility; and
- the fundamental standard that Company personnel should not
take inappropriate advantage of their positions.
In view of the foregoing, the Company has adopted this Code of Ethics
(the "Code") to specify a code of conduct for certain types of personal
securities transactions which may involve conflicts of interest or an appearance
of impropriety and to establish reporting requirements and enforcement
procedures.
II. LEGAL REQUIREMENT
Pursuant to Rule 17j-1(b) of the Investment Company Act of 1940 (the
"Act"), it is unlawful for any Access Person to:
- employ any device, scheme or artifice to defraud the
Investment Company;
- make any untrue statement of a material fact or fail to state
a material fact necessary in order to make the statements
made, in light of the circumstances under which they were
made, not misleading to the Company;
- engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the
Company; or
- engage in any manipulative practice with respect to any
Trust's investment portfolios,
in connection with the purchase or sale (directly or indirectly) by such Access
Person of a security "held or to be acquired" by an Investment Company.
<PAGE>
III. DEFINITIONS - All definitions shall have the same meaning as explained
in Section 2(a) of the Act and are summarized below.
ACCESS PERSON - Any director, officer, general partner, registered person, or
employee, of the Underwriter, if in connection with his/her regular functions is
in communication or contact with portfolio managers and advisory staff of an
Investment Company of the Underwriter or otherwise has access to current
information about portfolio transactions for an investment adviser in the course
of his/her duties, attends board meetings or visits to the investment advisory
location.
BENEFICIAL OWNERSHIP shall have the same meaning as that set forth in Rule
16a-1(a)(2) of the Exchange Act.
CONTROL shall have the same meaning as that set forth in Section 2(a)(9) of the
Act.
EXEMPT SECURITY - shall include securities issued by the United States
Government, short-term debt securities which are "government securities" within
the meaning of Section 2(a)(16) of the Act, bankers' acceptances, bank
certificates of deposit or commercial paper, shares of registered open-end
investment companies, and high quality short-term debt instruments, including
repurchase agreements.
EXEMPT TRANSACTIONS shall mean:
1. Purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or control.
2. Purchases or sales of securities issued by any company
included in the Standard & Poor's 500 Stock Index and in an
amount less than $10,000.
3. Purchases which are part of an automatic dividend reinvestment
plan.
4. Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired.
INVESTMENT COMPANY - A company registered as such under the Investment Company
Act of 1940 and for which the Underwriter is the principal underwriter.
INVESTMENT PERSONNEL - (a) employees of the Investment Company, its investment
adviser, and/or the Underwriter who participate in making investment
recommendations to the fund; and (b) persons in a control relationship with the
fund or adviser who obtain information about investment recommendations made to
the fund.
COVERED SECURITY - shall have the meaning set forth in Section 2(a)(36) of the
Act except that it does not include an exempt security.
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<PAGE>
SECURITY BEING CONSIDERED FOR PURCHASE OR SALE - when a recommendation to
purchase or sell a security has been made or communicated and, with respect to
the person making the recommendation, when such person seriously considers
making such a recommendation.
SECURITY HELD OR TO BE ACQUIRED means: (1) any Covered Security which, within
the most recent 15 days: (a) is or has been held by the Investment Company; or
(b) is being or has been considered by the Investment Company, or its investment
advisor for purchase by the Investment Company; and (2) any option to purchase
or sell, and any security convertible into or exchangeable for a Covered
Security that is held or to be acquired by the Investment Company.
UNDERWRITER - means ALPS Mutual Funds Services, Inc.
IV. POLICIES OF THE COMPANY REGARDING PERSONAL SECURITIES TRANSACTIONS
GENERAL
No Access Person of the Company shall engage in any act, practice or
course of business that would violate the provisions of Rule 17j-1 as set forth
above, or in connection with any personal investment activity, engage in conduct
inconsistent with this Code.
SPECIFIC POLICIES
No Access Person shall purchase or sell, directly or indirectly, any
security in which he/she has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership and which he/she knows or should have
known at the time of such purchase or sale:
- is being considered for purchase or sale by an Investment
Company; or
- is being purchased or sold by an Investment Company.
PRE-APPROVAL OF INVESTMENTS IN IPOS AND LIMITED OFFERINGS
Investment Personnel must obtain approval from the Investment Company
or the Investment Company's investment adviser before directly or indirectly
acquiring beneficial ownership in any securities in an Initial Public Offering
or in a Limited Offering.
V. REPORTING PROCEDURES
The Compliance Officer of the Company shall notify each person
(annually in January of each year), considered to be an Access Person of the
Investment Company and/or an Access Person of an investment adviser of or
Principal Underwriter for the Investment Company, that they are subject to the
reporting requirements detailed in Sections (a), (b) and (c) below and shall
deliver a copy of this Code to such Access Person.
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<PAGE>
In order to provide the Company with information to enable it to
determine with reasonable assurance whether the provisions of this Code are
being observed, every Access Person of the Company and every Access Person of an
investment adviser of or principal underwriter for the Company, must report to
the Company, investment adviser or Underwriter the following:
a) INITIAL HOLDINGS REPORTS. Every Access Person must report on Exhibit
A, attached hereto, no later than 10 days after becoming an Access Person, the
following information:
- The title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct or
indirect beneficial ownership when the person became an Access
Person;
- The name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were held
for the direct or indirect benefit of the Access Person as of
the date the person became an Access Person; and
- The date that the report is submitted by the Access Person.
b) QUARTERLY TRANSACTION REPORTS. Every Access Person must report on
Exhibit B, attached hereto, no later than 10 days after the end of a calendar
quarter, the following information with respect to any transaction during the
quarter in a Covered Security in which the Access Person had any direct or
indirect beneficial ownership:
- The date of the transaction, the title, the interest rate and
maturity date (if applicable),the number of shares, and the
principal amount of each Covered Security involved;
- The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
- The price of the Covered Security at which the transaction was
effected;
- The name of the broker, dealer or bank with or through whom
the transaction was effected; and
- The date that the report is submitted by the Access Person.
With respect to any account established by the Access Person in which
ANY SECURITIES were held during the quarter for the direct or indirect benefit
of the Access Person, each Access Person must report on Exhibit C, attached
hereto, no later than 10 days after the end of a Calendar quarter the following
information:
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<PAGE>
- The name of the broker, dealer or bank with whom the Access
Person established the account;
- The date the account was established; and
- The date that the report is submitted by the Access Person.
c) ANNUAL HOLDINGS REPORTS. Every Access Person must report on Exhibit
D, attached hereto, annually, the following information (which information must
be current as of a date no more than 30 days before the report is submitted):
- The title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct or
indirect beneficial ownership;
- The name of any broker, dealer or bank with whom the Access
Person maintains an account in which any securities are held
for the direct or indirect benefit of the Access Person; and
- The date that the report is submitted by the Access Person.
VI. REVIEW OF REPORTS
The Compliance Officer of the Company shall be responsible for
reviewing the reports received, maintain a record of the names of the persons
responsible for reviewing these reports, and as appropriate, compare the reports
with this Code, and report to the Company's senior management:
- any transaction that appears to evidence a possible violation
of this Code; and
- apparent violations of the reporting requirements stated
herein.
Senior management shall review the reports made to them hereunder and
shall determine whether the policies established in Sections IV and V of this
Code have been violated, and what sanctions, if any, should be imposed on the
violator. Sanctions include but are not limited to a letter of censure,
suspension or termination of the employment of the violator or termination of
the violator's license with the Underwriter, or the unwinding of the transaction
and the disgorgement of any profits.
Senior management and the board of directors of the Company shall
review the operation of this Code at least annually. All material violations of
this Code and any sanctions imposed with respect thereto shall periodically be
reported to the board of trustees of the Investment Company with respect to the
securities of that investment company.
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<PAGE>
VII. CERTIFICATION
Each Access Person will be required to certify annually that they have
read and understood the provisions of this Code and will abide by them. Each
Access Person will further certify that they have disclosed or reported all
personal securities transactions required to be reported under the Code. A form
of such certification is attached hereto as Exhibit E.
Before the Board of Directors may approve the code of ethics, the
Investment Company must certify to the Board that they have adopted procedures
reasonably necessary to prevent Access Persons from violating their codes. Such
certification shall be submitted to the Board of Directors at least annually
thereafter.
Sources:
Section 17j-1 (as amended) of the Investment Company Act of 1940 (the
"Act");
Section 16 (as amended) of the Securities Exchange Act of 1934 (the
"Exchange Act");
The "Report of the Advisory Group on Personal Investing" issued by the
Investment Company Institute on May 9, 1994; and,
The Securities and Exchange Commission's September 1994 Report on
"Personal Investment Activities of Investment Company Personnel."
DATED: MAY, 1994
REVISED: MARCH 1, 2000
Page 6 of 6
<PAGE>
Exhibit A
ALPS MUTUAL FUNDS SERVICES, INC.
INITIAL HOLDINGS REPORT
To the Compliance Officer of ALPS Mutual Funds Services, Inc.:
At the time I became an Access Person, I had the following Covered Securities
holdings, which are required to be reported pursuant to the ALPS Mutual Funds
Services, Inc. Code of Ethics. I understand that this information must be
reported no later than ten (10) days after I became an Access Person.
<TABLE>
<CAPTION>
No. of Shares and Principal Dollar Broker/Dealer or Bank through whom
Security Amount Effected
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
</TABLE>
This report: (i) excludes transactions with respect to which I had no direct or
indirect influence or control; (ii) excludes other transactions not required to
be reported; and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Date: ___________________________________
Signature: ___________________________________
Print Name: ___________________________________
<PAGE>
Exhibit B
ALPS MUTUAL FUNDS SERVICES, INC.
SECURITIES TRANSACTION REPORT
For the Calendar Quarter Ended March 31, 2000
To the Compliance Officer of ALPS Mutual Funds Services, Inc.:
During the quarter referred to above, the following transactions were effected
in securities of which I had, or by reason of such transaction acquired, direct
or indirect beneficial ownership, and which are required to be reported pursuant
to the ALPS Mutual Funds Services, Inc. Code of Ethics. I understand that this
information must be reported no later than April 10, 2000.
<TABLE>
<CAPTION>
Price of
Covered
Interest Rate No. of Security at
and Maturity Shares and which Broker/Dealer or
Date of Date (if Principal Nature of Transaction Bank through whom
Security Transaction applicable) Amount Transaction was effected Effected
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
This report: (i) excludes transactions with respect to which I had no direct or
indirect influence or control; (ii) excludes other transactions not required to
be reported; and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Date: ___________________________________
Signature: ___________________________________
Print Name: ___________________________________
<PAGE>
Exhibit C
ALPS MUTUAL FUNDS SERVICES, INC.
SECURITIES TRANSACTION REPORT
For the Calendar Quarter Ended March 31, 2000
To the Compliance Officer of ALPS Mutual Funds Services, Inc.:
During the quarter referred to above, I established a securities account with
the following broker/dealer or bank. This information is required to be reported
pursuant to the ALPS Mutual Funds Services, Inc. Code of Ethics. This
information is reported in addition to the information required on Exhibit B
herein. I understand that this information must be reported no later than April
10, 2000.
<TABLE>
<CAPTION>
Broker/Dealer or Bank through whom Account
was Established Date the Account was Established
- ---------------------------------------------------------------------------------------------
<S> <C>
</TABLE>
Date: ___________________________________
Signature: ___________________________________
Print Name: ___________________________________
<PAGE>
Exhibit D
ALPS MUTUAL FUNDS SERVICES, INC.
SECURITIES TRANSACTION REPORT
For the following period: September 1, 1999 through August 31, 2000
To the Compliance Officer of ALPS Mutual Funds Services, Inc.:
During the period referred to above, the following transactions were effected in
Covered Securities of which I had, or by reason of such transaction acquired,
direct or indirect beneficial ownership, and which are required to be reported
pursuant to the ALPS Mutual Funds Services, Inc. Code of Ethics. I understand
that this information must be reported no later than September 10, 2001.
<TABLE>
<CAPTION>
Principal Amount of Broker/Dealer or Bank through
Security Number of Shares Covered Security whom Effected
- --------------------- ------------------------ ------------------------------------ --------------------------------
<S> <C> <C> <C>
</TABLE>
This report: (i) excludes transactions with respect to which I had no direct or
indirect influence or control; (ii) excludes other transactions not required to
be reported; and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Date: _________________________________
Signature: _________________________________
Print Name: _________________________________
<PAGE>
Exhibit E
INVESTMENT COMPANY NAME ANNUAL CERTIFICATION
The undersigned hereby certifies as follows:
1. I have read and understand the revised ALPS Mutual Funds Services, Inc.
Code of Ethics dated March 1, 2000.
2. I acknowledge that I am subject to the Code of Ethics.
3. Since the date of the last Annual Certification (if any), I have complied
and will continue to comply with all requirements under this Code of
Ethics. I understand that any violation of the Code of Ethics may lead to
sanctions, including dismissal.
Signature: _____________________________________
Name (print): _____________________________________
Date: _____________________________________
<PAGE>
[LETTERHEAD]
POWER OF ATTORNEY
FOR
SECURITIES AND EXCHANGE COMMISSION
AND RELATED FILINGS
-----------------------------------
Each of the undersigned Trustees of FIRSTHAND FUNDS (the "Trust") hereby
appoints OMAR BILLAWALA and KEVIN LANDIS his attorneys-in-fact and agent, in all
capacities, to execute and to file any documents relating to the Registration
Statements on Forms N-1A and N-14 under the Investment Company Act of 1940,
under the Securities Act of 1933 of the Trusts and under the laws of the states
and other jurisdictions, including any and all amendments thereto, covering the
registration and the sale of shares by the Trusts, including all exhibits and
any and all documents required to be filed with respect thereto with any
regulatory authority, including applications for exemptive orders or rulings.
Each of the undersigned grants to each of said attorneys full authority to do
every act necessary to be done in order to effectuate the same as fully, to all
intents and purposes, as he could do if personally present, thereby ratifying
all that said attorneys-in-fact and agents may lawfully do or cause to be done
by virtue hereof.
The undersigned Trustees and Officers hereby execute this Power of Attorney as
of this 27th day of April, 2000.
/s/ Michael Lynch
- ------------------------------
Michael Lynch
/s/ Jerry Wong
- ------------------------------
Jerry Wong
/s/ Kevin Landis
- ------------------------------
Kevin Landis
/s/ Yakoub Bellawala
- ------------------------------
Yakoub Bellawala
