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[GRAPHIC]
Semi-Annual Report
June 30, 2000 (unaudited)
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FIRSTHAND-REGISTERED TRADEMARK- FUNDS 2000
Q 2
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THE DOW JONES INDUSTRIAL AVERAGE (DJIA) IS A GROUP OF 30 STOCKS TRACKED BY
THE DOW JONES COMPANY. THE NASDAQ COMPOSITE (NASDAQ) IS A
CAPITALIZATION-WEIGHTED INDEX OF ALL COMMON STOCKS LISTED ON NASDAQ. THE
STANDARD & POOR'S 500 INDEX (S&P 500) IS A MARKET-WEIGHTED INDEX OF 500
STOCKS OF WELL ESTABLISHED COMPANIES. EACH INDEX REPRESENTS AN UNMANAGED,
BROAD-BASED BASKET OF STOCKS. THESE INDICES ARE TYPICALLY USED AS BENCHMARKS
FOR OVERALL MARKET PERFORMANCE.
<PAGE>
OUR NEWEST FUND:
GLOBAL TECHNOLOGY FUND
Over the past six years, we've invested in many successful technology
companies. With the growth of the Internet, advancements in the
communications industry, and a greater number of people worldwide having
access to these new technologies, the time is right to further expand our
fund family by offering a portfolio with greater emphasis on global
technology players.
We do not believe that traditional financial analysis methods alone can
predict whose technology will excel in the marketplace, whose marketing
strategy will make them an industry leader, or whose endeavors are doomed
to failure. We think that this requires firsthand experience in the high
tech industry, a keen understanding of the competitive landscape, the
ability to decipher the technology, and a network of industry professionals
to help evaluate the likelihood of success in each case. Our team of
investment professionals is poised to identify outstanding technology
companies for this new fund, regardless of geographic location.
The Global Technology Fund subscription period for direct shareholders
starts 1 September, 2000.
LAUNCHING 29 SEPTEMBER, 2000
FOR INFORMATION ON THE GLOBAL TECHNOLOGY FUND, PLEASE CALL 1.888.884.2675
FOR A FREE PROSPECTUS. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND
MONEY.
Semi-Annual Report 1
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PERFORMANCE SUMMARY
PERIOD RETURNS (TOTAL RETURNS AS OF 6/30/00)
<TABLE>
<CAPTION>
Q2'00 YTD 1-YEAR 3-YEAR 5-YEAR
TOTAL** TOTAL** TOTAL
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<S> <C> <C> <C> <C> <C>
TVFQX -10.21% 26.38% 119.98% 59.38% 58.35%
TLFQX -8.05% 19.61% 105.52% - -
TIFQX -6.28% 26.15% 124.98% - -
TCFQX -18.82% 12.49% n/a - -
TEFQX -5.48% -2.42% n/a - -
DJIA -3.98% -8.45% -3.31% 12.69% 20.27%
S&P 500 -2.66% -0.42% 7.25% 19.64% 23.77%
NASDAQ -13.23% -2.46% 47.96% 40.52% 33.99%
<CAPTION>
RETURNS SINCE INCEPTION (AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/00)
TVFQX TLFQX TIFQX TCFQX TEFQX
INCEPTION DATE 5/20/94* 12/10/97 5/20/98 9/30/99** 9/30/99**
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Avg. Annual 56.83% 93.71% 138.89% 64.80% 45.00%
Total Return
VERSUS:
DJIA 20.61% 12.56% 8.75% 2.19% 2.19%
S&P 500 23.21% 18.49% 15.14% 14.40% 14.40%
NASDAQ 32.44% 42.32% 43.98% 44.63% 44.63%
</TABLE>
* TVFQX INCEPTION DATE IS 5/20/94; TVFQX EFFECTIVENESS DATE IS 12/15/94.
TVFQX AVERAGE ANNUAL TOTAL RETURN SINCE EFFECTIVENESS IS 59.29%
** NOT ANNUALIZED
RETURNS ASSUME REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. PAST
PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
EACH FUND CONCENTRATES ITS INVESTMENTS IN THE TECHNOLOGY INDUSTRY. THE
FUNDS ARE SUBJECT TO GREATER RISK BECAUSE OF THEIR CONCENTRATION OF
INVESTMENTS IN A SINGLE INDUSTRY AND WITHIN CERTAIN SEGMENTS OF THE
INDUSTRY. IN ADDITION, EACH FUND MAY, FROM TIME TO TIME, INVEST A
SUBSTANTIAL PORTION OF ITS ASSETS IN THE SECURITIES OF SMALL CAPITALIZATION
COMPANIES. THE SECURITIES OF SMALLER COMPANIES OFTEN INVOLVE HIGHER RISKS
AND MAY BE SUBJECT TO WIDER PRICE FLUCTUATIONS THAN SECURITIES OF LARGER
COMPANIES. THERE ARE CERTAIN RISKS ASSOCIATED WITH INVESTMENTS IN THE
TECHNOLOGY INDUSTRY, SUCH AS THE RISK THAT THE PRODUCTS AND SERVICES OF
COMPANIES IN THOSE INDUSTRIES ARE SUBJECT TO RAPID OBSOLESCENCE CAUSED BY
SCIENTIFIC DEVELOPMENTS AND TECHNOLOGICAL ADVANCES.
THE STOCK MARKETS PERFORMED EXCEPTIONALLY WELL IN 1999 AND FIRSTHAND
FUNDS BENEFITED FROM THAT PERFORMANCE. INVESTORS SHOULD MAINTAIN
REALISTIC EXPECTATIONS FOR FUTURE PERFORMANCE. SUCH PERFORMANCE IS NOT
SUSTAINABLE. THESE FUNDS' RETURNS WERE POSITIVELY IMPACTED BY THEIR
BUYING TECHNOLOGY COMPANIES IN A PERIOD FAVORABLE FOR THESE STOCKS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
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CONTENTS
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<S> <C>
PRESIDENT'S LETTER 6
PERFORMANCE AND PORTFOLIO DISCUSSIONS
Technology Value Fund 14
Technology Leaders Fund 16
Technology Innovators Fund 18
The Communications Fund 20
The e-Commerce Fund 22
FINANCIAL STATEMENTS
Portfolio of Investments
Technology Value Fund 26
Technology Leaders Fund 29
Technology Innovators Fund 31
The Communications Fund 34
The e-Commerce Fund 37
Statements of Assets and Liabilities 39
Statements of Operations 40
Statements of Changes in Net Assets 41
Financial Highlights
Technology Value Fund 44
Technology Leaders Fund 45
Technology Innovators Fund 46
The Communications Fund 47
The e-Commerce Fund 48
Notes to Financial Statements 49
</TABLE>
Semi-Annual Report 3
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PRESIDENT'S LETTER
Semi-Annual Report 5
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Dear Fellow Shareholders,
We are pleased with our Funds' performance in first half 2000's
extremely volatile technology stock market. Technology Value
Fund-Registered Trademark- (+26.38%), Technology Leaders Fund (+19.61%),
Technology Innovators Fund (+26.15%), and The Communications
Fund-TM- (+12.49%) handily beat the NASDAQ Composite (-2.46%) and the
Lipper Science and Technology Fund Index (+8.92%). Although The
e-Commerce Fund-TM- declined 2.42%, its focus on providers of essential
products and services to all e-commerce participants protected
shareholders from the heavy damage sustained by overvalued web site high
flyers and more speculative dot-com start-ups.
A shareholder I spoke with recently compared our Funds' first half 2000
performance to golfing phenom Tiger Woods' runaway victory in the recent
U.S. Open Championship, praising us for making birdies while the rest of
the field was struggling to save par. Our performance was not quite that
impressive -- other tech funds also beat the NASDAQ Composite. However, as
evidenced by the Funds' superior performance versus their peer group
benchmarks, we finished this reporting period near the top of the leader
board. Like Tiger Woods, we work hard on our game. We credit our success to
our research intensive investment discipline, the talent and experience of
our analysts, and the expertise of our numerous industry contacts right
here in Silicon Valley.
THE REAR VIEW MIRROR
In Firsthand Funds' 1999 Annual Report, I said, "While I believe that the
general trend in prices of technology stocks will continue to be positive,
it is highly likely that over the next year we will see at least one or two
10%-20% corrections in technology stocks." Instead, we got a 37% correction
in just ten short weeks. After rising 24.10% from the start of the year to
its March 10 peak of 5048.62, the NASDAQ Composite fell 37.3% to its May 23
low of 3164.55. The late-May/June tech stock rally helped the NASDAQ regain
a lot of
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lost ground and closed first half 2000 with a relatively modest decline.
However, as I write, most tech stocks remain well below their 26 week
highs.
Recent years' technology stock corrections were caused by major
macro-economic shocks (the collapse of emerging market Asia in the fall of
1997) and financial market turmoil (the hedge fund implosion and liquidity
crisis in the fall of 1998). This year's correction was spawned by high
valuations and a dramatic shift in investor psychology. There were no
economic or market crises, technology industry fundamentals remained good,
and, for the most part, tech companies' operating results continued to meet
or exceed consensus expectations. But, after the spectacular advance that
began in mid-October 1999 and continued through the first two months of
2000, tech stocks sported historically unprecedented valuations. Investors,
who seemingly couldn't pay too much for technology stocks in February,
suddenly decided they were much too pricey in March and panic buying
abruptly turned into panic selling.
FEAR BREEDS FEAR
What caused this reversal of fortune? Some market observers blame rising
short-term interest rates and uncertainty over how this would impact
technology spending. Others cite concerns that if the Federal Reserve
succeeds in slowing the economy, tech stock earnings would fail to live up
to rather grand expectations. Everybody points to rich valuations. All
three are valid fundamental reasons for the technology stock correction,
but do not explain its severity.
It is said that fear and greed are the two most dominant investor emotions.
In the technology stock market, I think it is fear and fear -- investors'
fear that they may be missing out on a get-rich-quick opportunity fuels the
breathtaking rallies and fear that they have too much riding on companies
they don't really understand sparks the sharp sell-offs. It is critical to
remember that technology stocks' long-term performance will be dictated by
earnings growth. If technology companies continue to grow profits faster
than companies in other
Semi-Annual Report 7
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industries -- in our opinion, a strong probability -- tech stocks should
continue to deliver superior long-term performance.
THE VALUATION ISSUE
We recognize that the fear/fear syndrome will cause tech stocks to
periodically become substantially under and over-valued. What is a
technology company growing at 30% annually worth at any given point in
time? Whatever the market says it's worth. What is it worth five years from
now? Unless it is purchased at a point when it is quite substantially
over-valued, very probably more than it is worth today.
We are valuation sensitive. Importantly, our investment discipline is
designed to identify quality technology stocks ahead of the investment
competition -- before they are bid up by institutions "discovering" the
stock and long before momentum investors push valuations to extremes. If we
can continue to identify great technology companies first, we will be
buying at opportunistic prices and reasonable valuations relative to
current and long-term growth prospects.
LIVING WITH VOLATILITY
As we have cautioned shareholders since the inception of our funds,
volatility is a fact of life in the technology stock market. The very
nature of tech stock investing -- buying relatively young companies that
are developing brand new ways of doing things -- involves greater
uncertainty than investing in more established companies in mature
industries. Of course, technology stocks also have much greater growth
potential. Tech stocks' higher risk/reward profile guarantees more
pronounced volatility.
Volatile markets tend to turn investors into traders. We resist this
temptation. However, we will take advantage of opportunities presented by
volatility. For example, we significantly increased our exposure to web
hosting companies following this year's dot-com stock massacre. Our
rationale was that these companies' growth prospects
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were more directly tied to the need of large, well financed companies to
develop on-line capabilities than to the success or failure of cash burning
e-commerce start ups. Web hosting companies were the proverbial babies
being thrown out with the dot-com bath water, and in our view, represented
excellent long-term growth opportunities at discounted prices.
We will also take profits in holdings that we believe have become too
extravagantly valued. For example, in the second quarter, we harvested
gains in JDS Uniphase, which we owned in the Technology Leaders and
Technology Innovators Funds, because we believed the growth rate inferred
by the stock's valuation was not likely to be achievable. However, we
believe our long-term success will depend on finding great technology
companies early in their growth cycles and holding these stocks as long as
they meet our fundamental expectations. We are not generally concerned with
what they will earn in the next quarter or even the next year. We focus on
what they can earn five years down the road. As aforementioned, we expect
our portfolio holdings to go through cycles of under and over-valuation.
This does not justify constantly reshuffling the portfolio deck and, in the
process, adding significantly to our shareholders' short-term capital gains
tax liabilities. This philosophy is reflected in our Funds' low turnover
rates relative to their peers.
WHAT'S NEXT?
At the close of first half 2000, the NASDAQ Composite was just 2.46% below
this year's starting point. Investors are still asking the very same
questions they were asking six months ago. How many more Federal Reserve
rate hikes will be necessary to slow the economy? Will economic
deceleration have a materially negative impact on tech stock earnings and
valuations? Does it make more sense to invest in theoretically cheap old
economy companies or should we ignore tech stocks' premium valuations and
go for growth?
Semi-Annual Report 9
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We have carefully considered opinions on these issues, if not infallible
answers to these questions. We expect the Fed to continue to increase rates
until it sees solid evidence the economy is slowing down. A somewhat weaker
economy would likely restrain earnings growth for companies in more
economically sensitive, commodity oriented technology sectors such as
personal computers and basic semiconductors. It should not have a
meaningful impact on profits for tech companies in sectors with strong
secular growth trends. Rising interest rates usually result in P/E*
multiple contractions in all industry groups, including technology. But,
rapid earnings growth can compensate for some contraction in multiples.
That's the beauty of growth stocks. Should investors buy fundamentally
cheap slower growth companies in mature industries? If you look back five
years from now, I doubt that buying companies growing earnings at 8% per
year will have proven more productive than owning companies growing
earnings at 30% annually, despite the current valuation gap between old
economy and new economy stocks.
We can be relatively certain that over the short term uncertainty will
contribute to ongoing volatility, particularly in the technology sector.
So, while we are encouraged by the tech stock rebound in the last five
weeks of this reporting period, and still believe the long-term trend for
technology stocks is positive, we know additional corrections could be on
the horizon. But, rather than speculating on the short-term direction of
the tech stock market, let's focus on longer term secular trends and some
of the companies that are particularly well positioned to benefit.
DYNAMIC TECH TRENDS
A lot of digital data is still traveling on the slow roads (copper wires)
feeding into the fiber optic superhighway. The highway is complete, but the
entrance ramps (connections to the home and office) are still under
construction. The companies providing the materials and tools
* THE PRICE OF A STOCK DIVIDED BY ITS EARNINGS PER SHARE. A
PRICE/EARNINGS MULTIPLE GIVES YOU AN IDEA OF HOW MUCH IS BEING PAID
FOR A COMPANY'S EARNING POWER.
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for this construction should experience tremendous growth over the next
several years. These companies range from diversified telecom equipment
giants such as Lucent Technologies to mid-sized fiber optic pioneer
Corning, to small, young companies including CIENA, Finisar and GlobeSpan.
Most folks would love to save space on their office desk and in their
living room with a flat screen computer monitor and television set. Many of
us will be doing just that in the coming years. Right now, prices for flat
screen displays are not yet competitive with the bulky old cathode ray tube
-- the natural result of all the time, energy and financial resources
devoted to perfecting the technology and improving the manufacturing
process. However, better technology and manufacturing efficiencies will
drive prices down and demand will explode -- a standard pattern for new
technology products. This will be an enormous market -- we estimate as much
as 100 million units annually -- and a powerful growth engine for companies
such as Genesis Microchip and Silicon Image, two leading component
suppliers to flat screen display manufacturers.
e-Commerce is real. The world is going to do business on the Internet. You
can speculate on which dot-com company will be successful and which will
fail. Or you can invest in the companies that will provide the essential
products and services to all the e-commerce players. Will Barnes&Noble.com
eventually sell more books on-line than Amazon.com? We don't know. We can
be a lot more certain that both will probably use servers made by Sun
Microsystems and networks built with Cisco Systems' equipment. Will we make
money investing in Sun and Cisco? Despite their rather rich valuations,
these two companies' dominant positions in their respective markets will
likely reward long-term shareholders. Are there more reasonably priced ways
to take advantage of the growth in e-commerce? Yes. Web hosting companies
such as Exodus Communications and Globix, which handle e-commerce
operations for major corporations, and innovative software companies
including Art Technology Group, which write
Semi-Annual Report 11
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programs for CRM (customer relationship management) applications, are
valued quite reasonably relative to what we believe are exceptional growth
prospects.
IN CLOSING
We have experienced a "she loves me, she loves me not, she loves me"
technology stock market in first half 2000. Wall Street continues to debate
the economic and market issues impacting tech stocks' short-term prospects.
Savvy investors -- we like to put our shareholders and ourselves in this
category -- remain focused on very favorable long-term trends in technology
and on those companies positioned to take maximum advantage of the evolving
opportunities.
We are proud of our Funds' performance in this challenging environment and
will be working hard to build on this success. The technology stock market
will continue to be volatile and we will have our ups and downs. However,
technology should continue to be the pre-eminent growth industry in the
world and we believe the most fertile ground for superior long-term
investment profits.
Warmest Regards,
/s/Kevin Landis
Kevin Landis
President, Chief Executive Officer
Firsthand Funds
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PERFORMANCE AND PORTFOLIO DISCUSSIONS
Technology Value Fund
Technology Leaders Fund
Technology Innovators Fund
The Communications Fund
The e-Commerce Fund
Semi-Annual Report 13
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TECHNOLOGY VALUE FUND
PERFORMANCE & PORTFOLIO DISCUSSION
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Technology Value Fund (TVF) was our best performing fund in first half 2000,
returning 26.38% compared to the NASDAQ Composite's 2.46% loss and the Lipper
Science and Technology Fund Index's 8.92% advance. Good value was appreciated
during a period in which lofty technology stock valuations were called into
question. None of the industry sectors represented by our top ten holdings stood
out as particularly rewarding or disappointing during this reporting period. We
had a good stock picking batting average, and as has often been the case, the
Fund's performance was bolstered by big moves in several of its largest
holdings.
Seagate Technology (SEG), one of our major holdings through this reporting
period, gained 19.89% since we began buying the stock in early-February
(2/8/00). Seagate is the world's largest manufacturer of computer disk drives --
a decent business, but not the driving force behind Seagate stock's superb
performance over the last six months. Seagate owns approximately one third of
VERITAS Software (VRTS), a provider of data storage management programs. This is
a great growth business driven by the strong demand for software that enables
corporate information technology departments to effectively manage security,
access, and distribution in corporate data and e-commerce networks. VERITAS is
currently the clear-cut leader in this business. We began accumulating Seagate
shares as a backdoor method of buying VERITAS stock. At our entry point, the
value of Seagate's position in VERITAS was worth twice Seagate's market
capitalization. So, we were not only getting VERITAS stock at an attractive
discount, but also Seagate's disk drive business for free.
Vitesse Semiconductor Corp. (VTSS), another of our largest holdings, advanced
40.29% during this reporting period. Vitesse (French for speed) is a leading
producer of gallium arsenide-based semiconductors used in high-speed
communications products. The strong demand for Internet bandwidth has resulted
in a rapidly expanding market for all
RELATIVE PERFORMANCE:
TVF VS. MARKET INDICES
TVF
[GRAPH]
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<CAPTION>
TVF NASDAQ DJIA S&P 500
<S> <C> <C> <C> <C>
5/31/94 $10,040 $10,108 $10,004 $10,013
6/30/94 9,190 9,706 9,666 9,768
7/30/94 9,430 9,929 10,045 10,088
8/30/94 10,510 10,527 10,489 10,502
9/30/94 11,200 10,510 10,320 10,246
10/30/94 12,170 10,690 10,504 10,475
11/30/94 11,830 10,316 10,094 10,094
12/30/94 12,530 10,339 10,372 10,244
1/30/95 12,412 10,386 10,407 10,509
2/28/95 13,215 10,926 10,905 10,919
3/30/95 13,333 11,260 11,325 11,241
4/30/95 14,436 11,634 11,778 11,572
5/30/95 14,543 11,930 12,217 12,034
6/30/95 15,742 12,890 12,487 12,314
7/30/95 17,980 13,832 12,913 12,722
8/30/95 19,212 14,103 12,691 12,754
9/30/95 20,679 14,435 13,206 13,293
10/30/95 20,047 14,335 13,122 13,245
11/30/95 20,294 14,663 14,053 13,827
12/30/95 20,194 14,577 14,194 14,093
1/30/96 20,063 14,687 14,976 14,573
2/29/96 21,454 15,255 15,274 14,708
3/30/96 21,585 15,273 15,581 14,849
4/30/96 26,984 16,513 15,539 15,068
5/30/96 30,751 17,251 15,801 15,457
6/30/96 27,970 16,444 15,855 15,516
7/30/96 26,316 14,997 15,519 14,830
8/30/96 27,400 15,845 15,817 15,143
9/30/96 30,291 17,035 16,594 15,996
10/30/96 29,251 16,962 17,023 16,437
11/30/96 32,786 17,952 18,470 17,679
12/30/96 32,422 17,934 18,293 17,329
1/30/97 34,915 19,170 19,337 18,411
2/28/97 31,886 18,189 19,579 18,556
3/30/97 29,438 16,980 18,771 17,793
4/30/97 31,039 17,532 19,998 18,856
5/30/97 38,053 19,484 20,972 20,004
6/30/97 38,713 20,075 21,974 20,900
7/30/97 43,857 22,195 23,565 22,563
8/30/97 42,281 22,110 21,898 21,299
9/30/97 42,466 23,487 22,855 22,465
10/30/97 38,142 22,211 21,418 21,715
11/30/97 37,311 22,316 22,576 22,720
12/30/97 34,519 21,907 22,854 23,110
1/30/98 35,791 22,591 22,857 23,366
2/28/98 39,036 24,700 24,769 25,051
3/31/98 39,897 25,609 25,538 26,334
4/30/98 42,666 26,074 26,314 26,599
5/31/98 36,995 24,832 25,902 26,142
6/30/98 37,802 26,459 26,085 27,204
7/31/98 35,020 26,154 25,897 26,914
8/31/98 26,385 20,949 22,037 23,023
9/30/98 26,583 23,678 22,959 24,498
10/31/98 33,020 24,768 25,166 26,490
11/30/98 38,199 27,268 26,771 28,096
12/31/98 42,703 30,681 26,997 29,715
1/31/99 49,007 35,067 27,528 30,958
2/28/99 43,577 32,027 27,441 29,995
3/31/99 48,398 34,468 28,895 31,196
4/30/99 56,094 35,616 31,868 32,404
5/31/99 61,961 34,612 31,262 31,638
6/30/99 71,246 37,645 32,517 33,393
7/31/99 75,379 36,985 31,599 32,350
8/31/99 80,703 38,408 32,190 32,189
9/30/99 81,114 38,513 30,766 31,307
10/31/99 86,650 41,609 31,952 33,288
11/30/99 98,756 46,806 32,454 33,966
12/31/99 124,009 57,105 34,341 35,966
1/31/00 132,435 55,300 32,694 34,159
2/29/00 185,904 65,923 30,323 33,513
3/31/00 174,547 64,194 32,743 36,791
4/30/00 155,406 54,202 32,196 35,685
5/31/00 137,967 47,755 31,628 34,952
6/30/00 156,722 55,700 31,440 35,814
</TABLE>
(INCEPTION MAY 20, '94)
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TVF HOLDINGS BY SECTOR*
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[CHART]
<TABLE>
<S> <C>
Semiconductors 26.6%
Comm Equip 15.2%
Software 12.8%
Net Cash 10.9%
Peripherals 9.1%
Photonics 8.7%
Networking 5.9%
Medical 3.4%
Services 3.0%
Communications 2.8%
Semi Equip 1.4%
EDA 0.2%
</TABLE>
* BASED ON PERCENTAGE OF NET ASSETS AS OF JUNE 30, 2000
of Vitesse's products. The company's high-speed transceivers, which are designed
into equipment used in Wide-Area-Networks (Internet), are a particularly hot
product. We believe Vitesse's technological leadership will keep it ahead of the
competition in the explosive growth market for tools that will increase the
speed of digital data transmission.
Our substantial position in Digital Microwave (DMIC) rewarded us with a gain of
62.67% during this reporting period. As its name implies, the company makes
digital microwave radios for wireless communications networks. Digital
Microwave's customers include wireless telecom providers BellSouth PCS and
Winstar, and leading wireless equipment manufacturers Nortel, Motorola, and
Siemens. Future growth in wireless communications is not simply a function of
the growth in cellular telephones. Digital Microwave's markets should expand
even further as the demand for wireless access to high-speed data networks
increases and fixed wireless becomes the communications system of choice in many
developing nations.
Not all of our top ten holdings contributed positively to returns. Legato
Systems, Inc. (LGTO) was a major disappointment, declining 78.02%. Legato
competes with VERITAS Software in the data storage management software business.
Legato stock swooned when analysts began questioning its revenue recognition
accounting practices. We think management has effectively addressed this issue
and that Legato will be given a clean bill of financial health. There is plenty
of room for more than just one quality company in this business. VERITAS is well
ahead of everyone else in the pack, but we believe Legato Systems can grab a
nice slice of this big pie in the years ahead.
Semi-Annual Report 15
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TECHNOLOGY LEADERS FUND
PERFORMANCE & PORTFOLIO DISCUSSION
--------------------------------------------------------------------------------
Technology Leaders Fund (TLF) finished just a few strides behind Technology
Value Fund in first half 2000's performance race, gaining 19.61% versus the
NASDAQ Composite's 2.46% loss and the Lipper Science and Technology Fund Index's
8.92% advance. Among the Fund's top ten holdings, technology blue chips Cisco
Systems and Sun Microsystems, and lower profile tech companies Corning, Vitesse
Semiconductor, and Wind River Systems were solid performers. The Fund's
investments in large cap telecommunications and telecom equipment companies
AT&T, Lucent Technologies, and particularly QUALCOMM disappointed.
As its name implies, the Technology Leaders Fund focuses on companies big and
small that have clear cut leadership positions in their respective industries.
Dominant market share companies generally produce more consistent earnings.
Also, investors tend to be more patient with companies that are recognized as
the very best in their business. For these reasons, we expect the Technology
Leaders Fund to post good performance during tech stock advances and hold up
well on a relative basis during tech stock declines. The Fund has demonstrated
this performance pattern since its inception.
Corning (GLW), up 59.28% since we began buying shares in mid-February (2/11/00),
first emerged as a technology company way back in 1851 when it supplied Thomas
Edison with the glass for the first electric light bulb. It remained in the
forefront of new technologies by helping develop television tubes in the 1940's
and refrigerator-to-oven cookware in the 1950's. In the ensuing decades, it lost
its tech identity as it devoted its resources to more prosaic businesses.
Corning has reestablished itself as a technology company via its fiber optic and
photonic components businesses. Firsthand Fund's initial position in Corning
resulted from its acquisition of one of our Technology Value Fund holdings, Oak
Industries. We increased our position and added it to the Technology Leaders
Fund as
RELATIVE PERFORMANCE:
TLF VS. MARKET INDICES
TLF
[GRAPH]
<TABLE>
<CAPTION>
TLF DJIA NASDAQ S&P 500
<S> <C> <C> <C> <C>
Nov '97 $10,000 $10,000 $10,000 $10,000
Dec '97 10,070 9,836 9,695 9,955
Jan '98 11,070 9,837 9,997 10,065
Feb '98 12,150 10,660 10,930 10,791
Mar '98 12,190 10,991 11,333 11,344
Apr '98 13,151 11,326 11,538 11,458
May '98 12,141 11,148 10,989 11,261
Jun '98 12,922 11,227 11,709 11,718
Jul '98 13,685 11,146 11,574 11,594
Aug '98 10,822 9,484 9,270 9,918
Sep '98 11,291 9,881 10,478 10,553
Oct '98 13,861 10,831 10,961 11,411
Nov '98 15,811 11,522 12,067 12,103
Dec '98 17,942 11,619 13,577 12,800
Jan '99 20,772 11,848 15,518 13,336
Feb '99 18,772 11,811 14,173 12,921
Mar '99 21,832 12,436 15,253 13,438
Apr '99 22,702 13,716 15,761 13,959
May '99 22,072 13,455 15,317 13,629
Jun '99 26,372 13,995 16,659 14,385
Jul '99 26,702 13,600 16,367 13,936
Aug '99 28,823 13,855 16,996 13,866
Sep '99 29,431 13,242 17,043 13,486
Oct '99 32,038 13,752 18,413 14,339
Nov '99 36,849 13,968 20,713 14,632
Dec '99 45,316 14,780 25,271 15,493
Jan '00 43,683 14,071 24,472 14,715
Feb '00 58,196 13,051 29,173 14,436
Mar '00 58,947 14,092 28,408 15,849
Apr '00 56,216 13,857 23,986 15,372
May '00 48,032 13,612 21,133 15,056
Jun '00 54,198 13,532 24,649 15,428
</TABLE>
(INCEPTION DEC 10, '97)
[LOGO]FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
TLF HOLDINGS BY SECTOR*
--------------------------------------------------------------------------------
[CHART]
<TABLE>
<S> <C>
Communications 3.7%
Net Cash 6.7%
Computer 8.0%
Software 13.2%
Internet 1.4%
Networking 3.9%
Peripherals 1.8%
Photonics 9.4%
Semiconductors 25.7%
Semi Equip 8.0%
Other Electronics 1.5%
Comm Equip 16.7%
</TABLE>
* BASED ON PERCENTAGE OF NET ASSETS AS OF JUNE 30, 2000
Corning demonstrated its commitment to growing the communications technology
businesses. We believe Corning's core competencies in fiber optics and glass
chemistry will compliment its newly acquired photonics equipment division and
that earnings will accelerate in the coming years.
You may not be aware of the fact, but you are surrounded by embedded computer
systems. They are in your car, your fax machine, your cellular telephone and
your new digital camera. Wind River Systems (WIND), up 3.41% during this
reporting period, writes the specific function software for these small
computers. Wind River is not exactly a household name technology stock. Over the
next five years, we believe it will become one. Wind River's proprietary
software for running high-speed communications switches, routers, and network
systems (the backbone of the Internet), should be the engine driving earnings
growth.
QUALCOMM (QCOM), which declined 65.93% during this reporting period, is the
biggest disappointment among our ten largest holdings. QUALCOMM is the developer
of Code Division Multiple Access (CDMA) technology used in advanced wireless
communications systems throughout the world. QUALCOMM's sharp decline resulted
from uncertainty over whether several large wireless systems being built in Asia
would be CDMA-based. We don't expect all the new wireless systems on the global
drawing board to use CDMA, but we believe it will be the technology of choice
for many. Even if CDMA does not become the universal wireless standard it was
expected to be, new business and licensing revenue from QUALCOMM's large
existing customer base should allow the company to sustain its very attractive
growth rate over the next five years. We are among the many investors licking
our wounds over QUALCOMM's poor showing this reporting period, but believe its
longer term performance will reward shareholders.
Semi-Annual Report 17
<PAGE>
TECHNOLOGY INNOVATORS FUND
PERFORMANCE & PORTFOLIO DISCUSSION
--------------------------------------------------------------------------------
Technology Innovators Fund (TIF) gained 26.15% in first half 2000 compared to
the NASDAQ Composite's 2.46% decline and the Lipper Science and Technology Fund
Index's 8.92% return. Among the Fund's ten largest holdings, optical networking
equipment producers Osicom Technologies, Inc. and CIENA Corp. excelled, and
wireless communications component manufacturer Digital Microwave Corp. posted an
impressive gain. Web hosting company NaviSite and fiber optic systems provider
Finisar disappointed.
Focusing on young technology companies in the very early stages of what we
believe will be extended growth cycles, Technology Innovators Fund is our "high
octane" fund. We expect it to excel during big tech stock rallies, when
investors are aggressively searching for the most promising young firms, and be
more vulnerable during sharp tech stock corrections when investors are inclined
to gravitate to the safety of more established tech companies. During its brief
life, Technology Innovators Fund has followed this performance pattern. It was
our best performing fund during the big October 1999-February 2000 tech stock
rally, but proved the most vulnerable in the sharp March-late May 2000
correction. We anticipate that Technology Innovators Fund will remain quite
volatile. However, if we succeed in finding the very best young tech companies
very early in their growth cycle, long-term shareholders should be generously
rewarded.
CIENA Corp. (CIEN) was the best performer among the Fund's ten largest holdings,
gaining 189.89% in first half 2000. A pioneer in Dense Wavelength Division
Multiplexing technology (DWDM), CIENA manufactures the gear used to transport
voice and data over fiber optic networks. Optical transport technology, which
was once limited to long-haul systems, is now being deployed in local metro area
networks as communications companies try to keep up with the demand for Internet
bandwidth. With the market for
RELATIVE PERFORMANCE:
TIF VS. MARKET INDICES
TIF
[GRAPH]
<TABLE>
<CAPTION>
TIF DJIA NASDAQ S&P500
<S> <C> <C> <C> <C>
Apr '98 $10,000 $10,000 $10,000 $10,000
May '98 $10,160 $9,837 $9,637 $9,836
Jun '98 $11,030 $9,907 $10,269 $10,235
Jul '98 $11,057 $9,836 $10,150 $10,126
Aug '98 $8,503 $8,369 $8,130 $8,662
Sep '98 $8,110 $8,720 $9,189 $9,217
Oct '98 $10,930 $9,558 $9,613 $9,967
Nov '98 $13,420 $10,168 $10,582 $10,571
Dec '98 $16,010 $10,253 $11,907 $11,180
Jan '99 $18,350 $10,455 $13,609 $11,648
Feb '99 $16,570 $10,422 $12,429 $11,286
Mar '99 $20,451 $10,974 $13,377 $11,737
Apr '99 $21,511 $12,103 $13,822 $12,192
May '99 $22,271 $11,873 $13,433 $11,904
Jun '99 $28,041 $12,350 $14,610 $12,564
Jul '99 $28,231 $12,001 $14,354 $12,172
Aug '99 $31,041 $12,226 $14,906 $12,111
Sep '99 $32,307 $11,685 $14,947 $11,779
Oct '99 $34,339 $12,135 $16,148 $12,525
Nov '99 $39,545 $12,326 $18,165 $12,780
Dec '99 $50,006 $13,043 $22,162 $13,532
Jan '00 $53,025 $12,417 $21,462 $12,853
Feb '00 $79,386 $11,517 $25,584 $12,609
Mar '00 $67,310 $12,436 $24,913 $13,843
Apr '00 $57,735 $12,228 $21,035 $13,426
May '00 $48,263 $12,012 $18,533 $13,151
Jun '00 $63,084 $11,941 $21,617 $13,475
</TABLE>
(INCEPTION MAY 20 '98)
[LOGO]FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
TIF HOLDINGS BY SECTOR*
--------------------------------------------------------------------------------
[CHART]
<TABLE>
<S> <C>
Comm Equip 32.5%
Semiconductors 27.0%
Software 16.2%
Services 9.3%
Photonics 5.2%
Other Electronics 4.4%
Net Cash 2.8%
Networking 2.3%
Semi Equip 0.3%
</TABLE>
* BASED ON PERCENTAGE OF NET ASSETS AS OF JUNE 30, 2000
CIENA's products expanding rapidly, we believe earnings growth will continue to
be robust.
GlobeSpan Semiconductor (GSPN), up 87.45% in first half 2000, is a leader in
chipsets for Digital Subscriber Line (DSL) modems. Telephone companies are
aggressively building out DSL lines to meet the public's strong demand for
high-speed Internet access. DSL modems are 25 times faster than the fastest
analog modems. Over the next several years, we should see explosive growth in
this business and, we believe, in GlobeSpan's revenues and profits.
Cree Research, Inc. (CREE), another of our largest holdings, gained 56.37% in
this reporting period. Cree is the world's largest supplier of silicon carbide
wafers for advanced semiconductors. Silicon carbide is superior to plain silicon
for the chips used in high-frequency, high-temperature, high-powered wireless
telecommunications equipment. Cree doesn't sell to the wireless equipment
manufacturers, but rather to their component suppliers. While lower on the
wireless communications value-added food chain, Cree Research should continue to
be a prime beneficiary of growth in this sector.
Genesis Microchip (GNSS) was not an exceptionally good performer in first half
2000. In fact, it declined 15.38% over this reporting period. However, we
believe Genesis is well positioned to benefit from what we believe will be
explosive growth in Flat Panel Display (FPD) computer monitors. Prices will be
coming down and demand for FPD products should explode. Genesis manufactures
chips that ensure that one can plug a digital flat panel monitor into any
computer and get high-resolution graphics and video, regardless of the graphics
format being used (VGA or SVGA, analog or digital). While it does have some
competition, Genesis has great products and is one of the few pure-plays in this
exciting growth business.
Semi-Annual Report 19
<PAGE>
THE COMMUNICATIONS FUND
PERFORMANCE & PORTFOLIO DISCUSSION
--------------------------------------------------------------------------------
The Communications Fund (TCF) returned 12.49% in first half 2000 versus a 2.46%
loss for the NASDAQ Composite and an 8.92% advance for the Lipper Science &
Technology Fund Index. In general, our communications technology holdings such
as Williams Communications Group and Advanced Fibre Communications performed
well, with Osicom Technologies posting an impressive gain. Our biggest portfolio
disappointment was QUALCOMM, which declined sharply due to uncertainty over
whether new Asian wireless communications systems would be using its technology.
We believe the battle for dominance in the communications industry will be won
by the swift and brave rather than the big and strong. We have already seen
upstarts such as Qwest, Level 3, Global Crossing, Williams Communication Group,
and Winstar emerge from obscurity to grab sizable shares in their respective
communications markets. A host of small companies are engineering most of the
major breakthroughs in communications technology. Consequently, The
Communications Fund portfolio is heavily weighted in young, entrepreneurial
companies that are either developing new communications technologies or
aggressively taking advantage of windows of opportunity in the rapidly changing
communications business.
Among our largest holdings, Osicom Technologies, Inc. (FIBR) was a stellar
performer, gaining 86.50% during this reporting period. Osicom is a manufacturer
of Dense Wavelength Division Multiplexing (DWDM) equipment used to increase the
capacity of fiber optic networks. As more and more data is pushed through the
Internet, networks must find ways to enhance their capacity of fiber optic
transmission lines. Osicom's DWDM equipment is helping accomplish this goal.
Williams Communication Group (WCG), up 14.36%, was formed in January 1998 by
parent Williams Companies, an oil and natural gas pipeline company. The company
is
RELATIVE PERFORMANCE:
TCF VS. MARKET INDICES
TCF
[GRAPH]
<TABLE>
<CAPTION>
TCF DJIA NASDAQ S&P 500
<S> <C> <C> <C> <C>
9/30/99 $10,000 $10,000 $10,000 $10,000
10/31/99 10,630 10,385 10,804 10,633
11/30/99 11,330 10,549 12,153 10,849
12/31/99 14,650 11,162 14,828 11,488
1/31/00 16,580 10,627 14,359 10,911
2/29/00 21,940 9,856 17,117 10,705
3/31/00 20,300 10,642 16,668 11,752
4/30/00 16,080 10,465 14,074 11,398
5/31/00 14,300 10,280 12,400 11,164
6/30/00 16,480 10,219 14,463 11,440
</TABLE>
(INCEPTION SEPT 30, '99)
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
TCF HOLDINGS BY SECTOR*
--------------------------------------------------------------------------------
[CHART]
<TABLE>
<S> <C>
Net Cash 5.2%
Networking 3.5%
Software 1.1%
Communications 30.5%
Comm Equip 35.8%
Semiconductors 4.9%
Services 14.5%
Photonics 4.5%
</TABLE>
* BASED ON PERCENTAGE OF NET ASSETS AS OF JUNE 30, 2000
building out a fiber optic communications network along the parent's extensive
pipeline system. This is not the first time a Williams entity has taken
advantage of its miles of pipeline. In 1985, Williams Companies began laying
fiber optic cable through its pipelines creating WilTel, which was spun-off to
shareholders, then acquired in 1995 by what is now WorldCom. As part of the
deal, Williams was barred from re-entering the business until 1998. As soon as
it was unshackled, Williams Communication Group was formed and began laying more
fiber. Williams Communication does not operate the system, but rather leases
capacity to telecommunications companies including SBC. With fiber networks in
great demand and Williams Communication Group expanding its system and customer
base, we think the company will continue to grow at an attractive rate.
Advanced Fibre Communications, Inc. (AFCI), up 14.53% since we began
accumulating it in mid-January (1/13/00), was another of our largest holdings
posting good gains. Advanced Fibre manufactures equipment used in extending
fiber optic networks directly to telephone subscribers' homes and offices. With
all the major telecommunications companies scrambling to offer their customers
high-speed broadband services, the extension of fiber optic networks through the
"local loop" will be an enormous business. Advanced Fibre should be a major
beneficiary.
Finisar Corp. (FNSR), down 70.86% during this reporting period, is one of our
larger holdings. We are somewhat bloodied, but remain unbowed. In fact, we
believe Finisar has enormous upside potential. Finisar is a manufacturer of
components used in fiber optic networks. It specializes in Gigabit Interface
Convertors (GBICs), optical multiplexers, and network analyzers for high-speed
local communications networks. Fiber optic systems are now the backbone of
communications networks. Fiber is in the process of being extended directly to
the home. Finisar is providing quality tools to help bring high-speed fiber
capacity to Local Area Networks (LANs) and we believe it will make a lot of
money doing it.
Semi-Annual Report 21
<PAGE>
THE e-COMMERCE FUND
PERFORMANCE & PORTFOLIO DISCUSSION
--------------------------------------------------------------------------------
The e-Commerce Fund (TEF) declined 2.42% in first half 2000 versus a 2.46% loss
for the NASDAQ Composite and an 8.92% advance for the Lipper Science &
Technology Fund Index. Blue chip e-commerce equipment manufacturers and software
developers such as Oracle, Sun Microsystems, and Cisco Systems performed well.
In general, our small e-commerce software holdings including OnDisplay, Allaire
Corp., and VeriSign, and our web hosting company investments such as Verio,
Globix Corp. and Exodus performed poorly.
We discussed the future of e-commerce in some detail in the President's letter
at the beginning of this semi-annual report. To summarize our opinions,
e-commerce is the wave of the future. Corporate America is going on-line. We
haven't a clue as to which dot-coms will earn a lot of money and which will
prove to be a bust. That's why we have chosen not to invest directly in this
sector of the e-commerce universe. We are quite confident that quality providers
of essential products and services to all the companies going on-line will
prosper. So, we are investing in the companies selling materials and tools to
the e-commerce miners. This strategy has already served shareholders well. The
Fund did not make any progress on what has been a bumpy road for most everything
with an e-commerce label, but it missed most of the big potholes that resulted
in major break-downs for Internet oriented mutual funds loaded up with the more
glamorous and richly priced dot-com stocks.
We believe The e-Commerce Fund is well positioned to take advantage of some
exceptional long-term opportunities. Let's start with several e-commerce
software holdings. OnDisplay (ONDS) develops information and transaction
software for corporate web sites. Its clients include Honda, pharmaceutical
giant McKesson, W.W. Grainger, and Travelocity, the leading travel site on the
Internet. Art Technology Group (ARTG) provides Java based software for customer
relationship management (CRM)
RELATIVE PERFORMANCE:
TEF VS. MARKET INDICES
TEF
[GRAPH]
<TABLE>
<CAPTION>
TEF DJIA NASDAQ S&P 500
<S> <C> <C> <C> <C>
9/30/99 $10,000 $10,000 $10,000 $10,000
10/31/99 10,750 10,385 10,804 10,633
11/30/99 12,090 10,549 12,153 10,849
12/31/99 14,860 11,162 14,828 11,488
1/30/00 14,310 10,627 14,359 10,911
2/29/00 17,370 9,856 17,117 10,705
3/31/00 15,340 10,642 16,668 11,752
4/30/00 12,330 10,465 14,074 11,398
5/31/00 11,200 10,280 12,400 11,164
6/30/00 14,500 10,219 14,453 11,440
</TABLE>
(INCEPTION SEPT 30, '99)
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
TEF HOLDINGS BY SECTOR*
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Software 66.4%
Services 27.5%
Computer 3.8%
Communications 2.3%
</TABLE>
* BASED ON PERCENTAGE OF NET ASSETS AS OF JUNE 30, 2000
applications for clients such as AT&T, 3M, and Sony. Allaire Corp. (ALLR)
produces web site design software used by customers including Siemens, Reebok,
and Casio. These companies have four things in common: superior software, blue
chip customer bases, exceptional growth potential, and what we believe to be
fundamentally attractive stock prices.
We believe our investments in web hosting companies such as Verio (VRIO), Globix
Corp. (GBIX) and Exodus (EXDS) will also be rewarding. Virtually every company
in America is developing on-line capabilities. Corporate information technology
officers have the option of doing it entirely in-house - finding a place for all
those servers and enough qualified techies to run them - or outsourcing it to
web hosting companies. Many are choosing the second option. Most web hosting
companies are not yet profitable, primarily because they are expanding so fast
to meet demand. However, strong cash flow growth should turn into strong
earnings over the next several years and, in the process, attract a lot of
investor attention.
"IBM" are probably the three most famous letters in the technology alphabet.
Although IBM (IBM) is hardly a pure-play on e-commerce, we believe earnings
growth will accelerate as the company takes full advantage of its unique
combination of e-commerce hardware, software, and consulting assets. Big Blue
didn't do much for us during this reporting period. However, we believe it
will reward us as more investors recognize that e-commerce is reinvigorating
this technology giant.
Semi-Annual Report 23
<PAGE>
[GRAPHIC]
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
FINANCIAL STATEMENTS
(as of 6/30/00)
Semi-Annual Report 25
<PAGE>
PORTFOLIO OF TECHNOLOGY VALUE FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
NON-INCOME PRODUCING % SHARES VALUE
----------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK 89.1% $3,609,045,463
(Cost $2,997,975,460) --------------
COMMUNICATIONS 2.8% 114,922,787
--------------
AT&T Corp. 2,252,400 71,232,150
NEXTLINK Communications, Inc. - A * 396,656 15,048,137
PSINet, Inc. * 1,140,000 28,642,500
COMMUNICATIONS EQUIPMENT 15.2% 615,218,881
--------------
ADC Telecommunications, Inc. * 984,000 82,533,000
Alcatel SA (2) 819,760 54,514,040
CIENA Corp. * 659,000 109,847,063
Digital Microwave Corp. (1) * 5,667,000 216,054,375
Harmonic, Inc. * 1,435,400 35,526,150
Lucent Technologies, Inc. 350,000 20,737,500
Osicom Technologies, Inc. * 136,250 11,530,156
P-Com, Inc. (1) * 7,627,500 43,381,406
Proxim, Inc. * 37,500 3,711,328
Tekelec, Inc. * 775,800 37,383,863
ELECTRONIC DESIGN AUTOMATION 0.2% 8,045,702
--------------
Avant! Corp. * 429,462 8,045,702
MEDICAL 3.4% 136,168,478
--------------
Amgen, Inc. * 643,400 45,198,850
Boston Scientific Corp. * 146,800 3,220,425
Guidant Corp. * 511,129 25,300,885
Immunex Corp. * 182,000 8,997,625
Johnson & Johnson 15,020 1,530,163
MedicaLogic/Medscape, Inc. * 289,900 2,681,575
Medtronic, Inc. 418,906 20,866,755
Merck & Co., Inc. 312,000 23,907,000
Novoste Corp. * 73,200 4,465,200
NETWORKING EQUIPMENT 5.9% 238,739,281
--------------
Brocade Communications Systems, Inc. * 300,000 55,045,312
Cabletron Systems, Inc. * 7,149,800 180,532,450
Packeteer, Inc. * 108,550 3,161,519
</TABLE>
(1) Denotes affiliated issuers.
(2) ADR--American Depositary Receipts
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
PORTFOLIO OF TECHNOLOGY VALUE FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
(CONTINUED) NON-INCOME PRODUCING % SHARES VALUE
----------------------------------------------------------------------------------
<S> <C> <C> <C>
PERIPHERALS 9.1% $ 366,614,500
--------------
Seagate Technology, Inc. * 6,483,900 356,614,500
Western Digital Corp. * 2,000,000 10,000,000
PHOTONICS 8.7% 350,756,844
--------------
Corning, Inc. 1,210,250 326,616,219
Methode Electronics, Inc. - A 625,000 24,140,625
SEMICONDUCTOR CAPITAL EQUIPMENT 1.4% 56,280,562
--------------
Applied Science & Technology, Inc. * 97,500 2,522,812
Asyst Technologies, Inc. * 798,000 27,331,500
Cymer, Inc. * 196,000 9,359,000
Veeco Instruments, Inc. * 233,000 17,067,250
SEMICONDUCTORS 26.6% 1,079,151,679
--------------
Applied Micro Circuits Corp. * 1,922,000 189,797,500
Broadcom Corp. - A (3) * 9,325 2,041,634
Celeritek, Inc. * 522,200 21,312,288
EPCOS AG (2) * 223,800 22,044,300
Genesis Microchip, Inc. * 97,500 1,742,813
GlobeSpan, Inc. * 828,500 101,141,727
NETsilicon, Inc. (1) * 603,800 19,774,450
PMC-Sierra, Inc. * 1,495,800 265,784,962
TranSwitch Corp. (1) * 2,565,400 198,016,812
Vitesse Semiconductor Corp. * 2,705,300 199,008,631
Zoran Corp. (1) * 887,000 58,486,562
SERVICES 3.0% 122,655,491
--------------
Genuity, Inc. - A * 3,456,100 31,644,916
Globix Corp. (1) * 1,907,200 55,904,800
NaviSite, Inc. * 839,600 35,105,775
</TABLE>
(1) Denotes affiliated issuers.
(2) ADR--American Depositary Receipts
(3) Restricted security.
Semi-Annual Report 27
<PAGE>
PORTFOLIO OF TECHNOLOGY VALUE FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
(CONTINUED) NON-INCOME PRODUCING % SHARES VALUE
----------------------------------------------------------------------------------
<S> <C> <C> <C>
SOFTWARE 12.8% $ 520,491,258
--------------
BindView Development Corp. * 791,500 9,498,000
Concord Communications, Inc. (1) * 1,269,000 50,601,375
i2 Technologies, Inc. * 74,000 7,715,656
Legato Systems, Inc. (1) * 5,981,000 90,462,625
Micromuse, Inc. * 599,100 99,141,689
Pervasive Software, Inc. * 331,500 1,864,688
Visual Networks, Inc. (1) * 1,428,300 40,706,550
Wind River Systems, Inc. (1) * 5,821,800 220,500,675
CASH EQUIVALENTS 10.8% 438,087,499
--------------
(Cost $438,087,499)
American Express Credit Corp. 07/03/2000 160,000,000 159,941,778
Ford Motor Credit Co. 07/03/2000 40,000,000 39,986,444
SSGA Prime Money Market Portfolio 78,045,050 78,045,050
State Street Bank and Trust Company
Repurchase Agreement, 3.500% dated
06/30/2000, to be repurchased at
$160,160,927 on 07/03/2000,
collateralized by U.S. Treasury Bills,
ranging in rates from 5.670% to
5.980%, and ranging in maturities
from 08/24/2000 to 05/31/2001;
combined total par value of
$171,960,000 (value $163,333,395) 160,114,227 160,114,227
TOTAL INVESTMENT SECURITIES 99.9% 4,047,132,962
(Cost $3,436,062,959)
OTHER ASSETS IN EXCESS OF LIABILITIES 0.1% 4,170,291
--------------
NET ASSETS 100.0% $4,051,303,253
==============
</TABLE>
(1) Denotes affiliated issuers.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
PORTFOLIO OF TECHNOLOGY LEADERS FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
NON-INCOME PRODUCING % SHARES VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK 93.3% $813,129,974
(Cost $594,854,023) ------------
COMMUNICATIONS 3.7% 32,415,625
------------
AT&T Corp. 1,025,000 32,415,625
COMMUNICATIONS EQUIPMENT 16.7% 145,678,906
------------
Lucent Technologies, Inc. 467,000 27,669,750
Nokia Corp. (1) 400,000 19,975,000
QUALCOMM, Inc. * 428,400 25,704,000
Scientific-Atlanta, Inc. 580,000 43,210,000
Tellabs, Inc. * 425,500 29,120,156
COMPUTERS 8.0% 69,408,125
------------
Hewlett-Packard Co. 83,000 10,364,625
International Business Machines Corp. 182,000 19,940,375
Sun Microsystems, Inc. * 430,000 39,103,125
INTERNET 1.4% 12,660,000
------------
America Online, Inc. * 240,000 12,660,000
NETWORKING EQUIPMENT 3.9% 34,323,750
------------
Cisco Systems, Inc. * 540,000 34,323,750
OTHER ELECTRONICS 1.5% 12,667,005
------------
Agilent Technologies, Inc. * 171,756 12,667,005
PERIPHERALS 1.8% 15,387,500
------------
EMC Corp. * 200,000 15,387,500
PHOTONICS 9.4% 81,772,125
------------
Corning, Inc. 303,000 81,772,125
SEMICONDUCTOR CAPITAL EQUIPMENT 8.0% 69,959,125
------------
Applied Materials, Inc. * 265,000 24,015,625
KLA-Tencor Corp. * 408,000 23,893,500
Teradyne, Inc. * 300,000 22,050,000
</TABLE>
(1) ADR--American Depositary Receipt
Semi-Annual Report 29
<PAGE>
PORTFOLIO OF TECHNOLOGY LEADERS FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
(CONTINUED) NON-INCOME PRODUCING % SHARES VALUE
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SEMICONDUCTORS 25.7% $ 223,836,312
--------------
Altera Corp. * 220,000 22,426,250
Amkor Technology, Inc. * 700,000 24,718,750
Conexant Systems, Inc. * 155,000 7,536,875
Intel Corp. 127,705 17,072,562
PMC-Sierra, Inc. * 260,000 46,198,750
Texas Instruments, Inc. 229,000 15,729,438
Vitesse Semiconductor Corp. * 872,000 64,146,500
Xilinx, Inc. * 315,000 26,007,187
SOFTWARE 13.2% 115,021,501
--------------
Microsoft Corp. * 133,500 10,680,000
Oracle Corp. * 585,000 49,176,563
Wind River Systems, Inc. * 1,456,500 55,164,938
CASH EQUIVALENTS 6.2% 53,952,460
--------------
(Cost $53,952,460)
SSGA Prime Money Market Portfolio 34,382,188 34,382,188
State Street Bank and Trust Company
Repurchase Agreement, 3.500% dated
06/30/2000, to be repurchased at
$19,575,980 on 07/03/2000,
collateralized by $21,080,000 U.S.
Treasury Bill, 5.980% maturing
05/31/2001 (value $19,962,760) 19,570,272 19,570,272
TOTAL INVESTMENT SECURITIES 99.5% 867,082,434
(Cost $648,806,483)
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5% 4,502,407
--------------
NET ASSETS 100.0% $ 871,584,841
==============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
PORTFOLIO OF TECHNOLOGY INNOVATORS FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
NON-INCOME PRODUCING % SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK 97.2% $ 839,501,205
--------------
(Cost $586,245,379)
COMMUNICATIONS EQUIPMENT 32.5% 280,523,811
--------------
Adaptive Broadband Corp. * 130,000 4,777,500
Advanced Fibre Communications, Inc. * 180,000 8,156,250
Airnet Communications Corp. * 125,000 3,265,625
CIENA Corp. * 279,500 46,589,156
Digital Microwave Corp. * 1,336,000 50,935,000
Harmonic, Inc. * 231,500 5,729,625
NHC Communications, Inc. * 308,400 2,406,770
ONI Systems Corp. * 5,000 586,016
Osicom Technologies, Inc. (1) * 914,750 77,410,719
P-Com, Inc. * 1,222,500 6,952,969
SpectraLink Corp. * 599,950 8,774,269
Tekelec, Inc. * 891,200 42,944,700
Teledyne Technologies, Inc. * 1,232,550 20,645,212
Vyyo, Inc. * 50,000 1,350,000
NETWORKING EQUIPMENT 2.3% 19,621,906
--------------
Cobalt Networks, Inc. * 500 28,938
Extreme Networks * 1,000 105,500
F5 Networks, Inc. * 35,000 1,909,687
Juniper Networks, Inc. * 103,000 14,992,937
Packeteer, Inc. * 88,750 2,584,844
OTHER ELECTRONICS 4.4% 38,194,350
--------------
Cree Research, Inc. * 286,100 38,194,350
PERIPHERALS 0.0% 45,125
--------------
StorageNetworks, Inc. * 500 45,125
PHOTONICS 5.2% 45,385,347
--------------
Bookham Technology PLC (2) * 26,000 1,540,500
Cielo Communications, Inc. (3) * 842,857 1,475,000
Exfo Electro-Optical Engineering, Inc. * 17,000 745,875
Finisar Corp. * 1,505,450 39,423,972
Micro Photonix Integration Corp. (3) * 348,360 2,200,000
</TABLE>
(1) Denotes affiliated issuer.
(2) ADR--American Depositary Receipts
(3) Restricted security.
Semi-Annual Report 31
<PAGE>
PORTFOLIO OF TECHNOLOGY INNOVATORS FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
(CONTINUED) NON-INCOME PRODUCING % SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SEMICONDUCTOR CAPITAL EQUIPMENT 0.3% $ 2,231,875
--------------
Cymer, Inc. * 15,000 716,250
Rudolph Technologies, Inc. * 35,000 1,356,250
Silicon Laboratories, Inc. * 3,000 159,375
SEMICONDUCTORS 27.0% 233,214,047
--------------
American Xtal Technology, Inc. * 240,000 10,380,000
Genesis Microchip, Inc. (1) * 1,250,200 22,347,325
GlobeSpan, Inc. (2) * 405,462 49,498,066
Kopin Corp. * 125,000 8,656,250
NETsilicon, Inc. (1) * 600,000 19,650,000
Sage, Inc. * 287,500 3,719,531
Silicon Image, Inc. * 273,400 13,635,825
TranSwitch Corp. * 540,000 41,681,250
V3 Semiconductors, Inc. * 49,200 873,300
Zoran Corp. (1) * 952,000 62,772,500
SERVICES 9.3% 80,560,256
--------------
Aether Systems, Inc. * 84,350 17,291,750
Exodus Communications, Inc. * 204,800 9,433,600
Globix Corp. * 699,000 20,489,437
NaviSite, Inc. * 797,500 33,345,469
SOFTWARE 16.2% 139,724,488
--------------
Allaire Corp. * 100,000 3,675,000
BindView Development Corp. * 589,500 7,074,000
Calico Commerce, Inc. * 160,000 2,600,000
Check Point Software Technologies, Ltd.* 26,000 5,505,500
Concord Communications, Inc. * 584,500 23,306,937
Internet Pictures Corp. * 250,000 3,781,250
Intraware, Inc. * 15,000 240,938
Legato Systems, Inc. * 471,400 7,129,925
Loudeye Technologies, Inc. * 105,000 1,830,938
Macromedia, Inc. * 160,000 15,470,000
Nuance Communications, Inc. * 181,000 15,079,562
Numerical Technologies, Inc. * 530,000 25,771,250
Pervasive Software, Inc. * 428,500 2,410,313
VeriSign, Inc. * 110,000 19,415,000
Visual Networks, Inc. * 225,750 6,433,875
</TABLE>
(1) Denotes affiliated issuer.
(2) Restricted security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
PORTFOLIO OF TECHNOLOGY INNOVATORS FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
(CONTINUED) NON-INCOME PRODUCING % SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH EQUIVALENTS 2.0% $ 17,264,756
--------------
(Cost $17,264,756)
SSGA Prime Money Market Portfolio 17,264,756 17,264,756
TOTAL INVESTMENT SECURITIES 99.2% 856,765,961
(Cost $603,510,135)
OTHER ASSETS IN EXCESS OF LIABILITIES 0.8% 6,900,991
--------------
NET ASSETS 100.0% $ 863,666,952
==============
</TABLE>
Semi-Annual Report 33
<PAGE>
PORTFOLIO OF THE COMMUNICATIONS FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
NON-INCOME PRODUCING % SHARES VALUE
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK 94.8% $ 596,372,154
--------------
(Cost $612,789,347)
COMMUNICATIONS 30.5% 192,078,062
--------------
360networks, Inc. * 2,080,400 31,726,100
Covad Communications Co. * 219,700 3,542,662
Global Crossing, Ltd. * 470,000 12,366,875
Inet Technologies, Inc. * 180,000 9,765,000
Intermedia Communications, Inc. * 200,000 5,950,000
Level 3 Communications, Inc. * 304,600 26,804,800
Metromedia Fiber Network, Inc. - A * 231,200 9,175,750
PSINet, Inc. * 200,000 5,025,000
Qwest Communications International, Inc. * 400,000 19,875,000
RCN Corp. * 160,000 4,060,000
Teligent, Inc. - A * 426,000 10,064,250
VoiceStream Wireless Corp. * 200,000 23,259,375
Williams Communications, Inc. * 528,000 17,523,000
Winstar Communications, Inc. * 382,000 12,940,250
COMMUNICATIONS EQUIPMENT 35.8% 225,152,192
--------------
Adaptive Broadband Corp. * 254,000 9,334,500
Advanced Fibre Communications, Inc. * 500,000 22,656,250
Airnet Communications Corp. * 125,000 3,265,625
BreezeCOM, Ltd. * 49,500 2,153,250
CIENA Corp. * 145,000 24,169,687
Digital Microwave Corp. * 634,600 24,194,125
Harmonic, Inc. * 100,000 2,475,000
NewFocus, Inc. * 30,000 2,463,750
NHC Communications, Inc. * 141,600 1,105,054
Nortel Networks Corp. 40,000 2,730,000
ONI Systems Corp. * 5,000 586,016
Osicom Technologies, Inc. * 526,500 44,555,062
P-Com, Inc. * 1,904,000 10,829,000
Proxim, Inc. * 37,500 3,711,328
QUALCOMM, Inc. * 202,500 12,150,000
SpectraLink Corp. * 500,050 7,313,231
Tekelec, Inc. * 200,000 9,637,500
Teledyne Technologies, Inc. * 1,007,250 16,871,438
Tellabs, Inc. * 225,000 15,398,438
UTStarcom, Inc. * 314,500 9,552,938
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
PORTFOLIO OF THE COMMUNICATIONS FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
(CONTINUED) NON-INCOME PRODUCING % SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMPUTERS 0.0% $ 200,250
--------------
Palm, Inc. * 6,000 200,250
NETWORKING EQUIPMENT 3.5% 22,262,125
--------------
Brocade Communications Systems, Inc. * 40,000 7,339,375
Cabletron Systems, Inc. * 591,000 14,922,750
PHOTONICS 4.5% 28,492,813
Avanex Corp. * 1,500 143,250
Bookham Technology PLC (1) * 26,000 1,540,500
Finisar Corp. * 955,000 25,009,063
Micro Photonix Integration Corp. (2) * 285,022 1,800,000
SEMICONDUCTORS 4.9% 30,569,225
--------------
NETsilicon, Inc. * 57,400 1,879,850
Vitesse Semiconductor Corp. * 390,000 28,689,375
SERVICES 14.5% 91,052,987
--------------
Aether Systems, Inc. * 83,550 17,127,750
Exodus Communications, Inc. * 200,000 9,212,500
Genuity, Inc. - A * 543,900 4,980,085
Globix Corp. * 944,500 27,685,656
Interliant, Inc. * 695,600 16,216,175
NaviSite, Inc. * 242,400 10,135,350
Verio, Inc. * 102,650 5,695,471
SOFTWARE 1.1% 6,564,500
--------------
Caldera Systems, Inc. * 10,000 130,625
Visual Networks, Inc. * 225,750 6,433,875
CASH EQUIVALENTS 5.6% 35,424,490
--------------
(Cost $35,424,490)
SSGA Prime Money Market Portfolio 25,001,322 25,001,322
State Street Bank and Trust Company
Repurchase Agreement, 3.500% dated
06/30/2000, to be repurchased at
$10,426,208 on 07/03/2000,
collateralized by $11,230,000 U.S.
Treasury Bill, 5.980% maturing
05/31/2001 (value $10,634,810) 10,423,168 10,423,168
</TABLE>
(1) ADR--American Depositary Receipts
(2) Restricted security.
Semi-Annual Report 35
<PAGE>
PORTFOLIO OF THE COMMUNICATIONS FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
(CONTINUED) NON-INCOME PRODUCING % SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL INVESTMENT SECURITIES 100.4% $ 631,796,644
(Cost $648,213,837)
LIABILITIES IN EXCESS OF OTHER ASSETS (0.4)% (2,418,912)
--------------
NET ASSETS 100.0% $ 629,377,732
==============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
PORTFOLIO OF THE e-COMMERCE FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
NON-INCOME PRODUCING % SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK 100.0% $ 613,241,746
(Cost $615,612,047) --------------
COMMUNICATIONS 2.3% 14,070,000
--------------
PSINet, Inc. * 560,000 14,070,000
COMPUTERS 3.8% 23,501,250
--------------
International Business Machines Corp. 90,000 9,860,625
Sun Microsystems, Inc. * 150,000 13,640,625
SERVICES 27.5% 168,702,429
--------------
Cysive, Inc. * 334,400 7,983,800
Digex, Inc. - A * 270,400 18,370,300
ePlus, Inc. (1) * 726,100 19,196,269
Exodus Communications, Inc. * 440,000 20,267,500
Globix Corp. * 1,011,000 29,634,937
Interliant, Inc. * 959,800 22,375,337
marchFIRST, Inc. * 190,300 3,472,975
NaviSite, Inc. * 259,000 10,829,438
Sapient Corp. * 100,000 10,693,750
Scient Corp. * 200,000 8,825,000
Verio, Inc. * 307,350 17,053,123
SOFTWARE 66.4% 406,968,067
--------------
Accrue Software, Inc. * 360,000 12,780,000
Allaire Corp. * 350,000 12,862,500
Art Technology Group, Inc. * 612,000 61,773,750
BEA Systems, Inc. * 600,000 29,662,500
BindView Development Corp. * 626,000 7,512,000
Bluestone Software, Inc. * 419,600 10,778,475
CacheFlow, Inc. * 1,000 61,563
Caldera Systems, Inc. * 210,000 2,743,125
Calico Commerce, Inc. * 501,000 8,141,250
Chordiant Software, Inc. * 8,000 133,000
Delano Technology Corp. * 230,000 2,788,750
eGain Communications Corp. * 351,000 4,255,875
FirePond, Inc. * 170,000 6,120,000
iManage, Inc. * 124,000 1,232,250
Integrated Information Systems, Inc. * 11,000 90,063
InterWorld Corp. * 120,000 2,460,000
</TABLE>
(1) Denotes affiliated issuer.
Semi-Annual Report 37
<PAGE>
PORTFOLIO OF THE e-COMMERCE FUND
INVESTMENTS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
(CONTINUED) NON-INCOME PRODUCING % SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOFTWARE (cont.)
Interwoven, Inc. * 152,400 $ 16,761,619
Intraware, Inc. * 50,000 803,125
Kana Communications, Inc. * 236,750 14,648,906
Macromedia, Inc. * 626,300 60,555,381
OnDisplay, Inc. * 350,000 28,503,125
Oracle Corp. * 220,000 18,493,750
Pervasive Software, Inc. (1) * 1,417,500 7,973,437
PrimeResponse, Inc. * 10,000 68,750
Software.com, Inc. * 100,000 12,987,500
VeriSign, Inc. * 240,300 42,412,950
Vignette Corp. * 241,500 12,561,773
webMethods, Inc. * 52,000 8,173,750
Websense, Inc. * 780,700 19,615,087
Xpedior, Inc. * 1,000 13,813
TOTAL INVESTMENT SECURITIES 100.0% 613,241,746
(Cost $615,612,047)
OTHER ASSETS IN EXCESS OF LIABILITIES 0.0% 106,295
--------------
NET ASSETS 100.0% $ 613,348,041
==============
</TABLE>
(1) Denotes affiliated issuer.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY TECHNOLOGY TECHNOLOGY THE THE
VALUE LEADERS INNOVATORS COMMUNICATIONS e-COMMERCE
FUND FUND FUND FUND FUND
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
ASSETS
Investment securities:
At acquisition cost $ 3,436,062,959 $ 648,806,483 $ 603,510,135 $ 648,213,837 $ 615,612,047
======================================================================================
At market value (Note 2) $ 4,047,132,962 $ 867,082,434 $ 856,765,961 $ 631,796,644 $ 613,241,746
Cash -- 6,903 392,698 3,520,771 --
Receivable for capital shares sold 29,180,276 7,612,331 18,142,336 976,167 1,840,673
Receivable for securities sold 16,324,618 -- 1,206,978 1,201,311 --
Receivable from custodian
(Note 3) 14,051,309 -- -- -- --
Dividends and interest receivable 1,188,414 400,088 156,238 102,764 340
--------------------------------------------------------------------------------------
TOTAL ASSETS 4,107,877,579 875,101,756 876,664,211 637,597,657 615,082,759
--------------------------------------------------------------------------------------
LIABILITIES
Payable for capital
shares redeemed 15,180,940 1,800,543 1,216,353 1,593,437 693,593
Payable for securities purchased 35,527,100 399,688 10,574,237 5,632,275 --
Payable to affiliates (Note 4) 5,866,286 1,316,684 1,206,669 994,213 911,861
Payable to custodian -- -- -- -- 129,264
--------------------------------------------------------------------------------------
TOTAL LIABILITIES 56,574,326 3,516,915 12,997,259 8,219,925 1,734,718
--------------------------------------------------------------------------------------
NET ASSETS $ 4,051,303,253 $ 871,584,841 $ 863,666,952 $ 629,377,732 $ 613,348,041
======================================================================================
Net assets consist of:
Paid-in-capital 3,289,824,381 650,221,575 556,643,079 646,699,195 610,861,452
Accumulated net
investment loss (16,955,558) (4,413,341) (6,088,154) (3,467,156) (2,966,130)
Accumulated net realized gains
from security transactions 167,364,427 7,500,656 59,856,201 2,562,886 7,823,020
Net unrealized appreciation
(depreciation) on
investments 611,070,003 218,275,951 253,255,826 (16,417,193) (2,370,301)
--------------------------------------------------------------------------------------
NET ASSETS $ 4,051,303,253 $ 871,584,841 $ 863,666,952 $ 629,377,732 $ 613,348,041
======================================================================================
Shares of beneficial interest
outstanding (unlimited
number of shares authorized,
no par value) 35,414,322 16,308,985 13,868,882 38,188,450 42,294,450
Net asset value, redemption price ======================================================================================
and offering price per share
(Note 2) $ 114.40 $ 53.44 $ 62.27 $ 16.48 $ 14.50
======================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
Semi-Annual Report 39
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY TECHNOLOGY TECHNOLOGY THE THE
VALUE LEADERS INNOVATORS COMMUNICATIONS e-COMMERCE
FUND FUND FUND FUND FUND
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 9,808,732 $ 1,302,162 $ 1,870,992 $ 1,809,804 $ 1,913,938
Dividends 2,343,307 727,407 220 305,807 32,100
--------------------------------------------------------------------------------------
TOTAL INVESTMENT
INCOME 12,152,039 2,029,569 1,871,212 2,115,611 1,946,038
--------------------------------------------------------------------------------------
EXPENSES
Investment advisory
fees (Note 4) 23,904,104 5,085,627 6,322,316 4,394,833 3,860,553
Administrative fees (Note 4) 5,203,493 1,357,283 1,637,050 1,187,934 1,066,225
--------------------------------------------------------------------------------------
TOTAL EXPENSES 29,107,597 6,442,910 7,959,366 5,582,767 4,926,778
--------------------------------------------------------------------------------------
NET INVESTMENT LOSS (16,955,558) (4,413,341) (6,088,154) (3,467,156) (2,980,740)
--------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENTS
Net realized gains from
security transactions 170,170,165 7,496,977 58,789,070 2,562,886 7,723,587
Net change in unrealized
appreciation
(depreciation)
on investments 113,380,409 68,152,086 70,526,655 (49,112,731) (53,984,736)
--------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON INVESTMENTS 283,550,574 75,649,063 129,315,725 (46,549,845) (46,261,149)
--------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
OPERATIONS $ 266,595,016 $ 71,235,722 $ 123,227,571 $ (50,017,001) $ (49,241,889)
======================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRST HAND-Registered Trademark- FUNDS
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS ENDED JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY VALUE FUND TECHNOLOGY LEADERS FUND
--------------------- -----------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
6/30/00 12/31/99 6/30/00 12/31/99
(unaudited) (unaudited)
===========================================================================================================================
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment loss $ (16,955,558) $ (5,295,182) $ (4,413,341) $ (1,505,118)
Net realized gains from security transactions 170,170,165 41,940,680 7,496,977 3,962,276
Net change in unrealized
appreciation on investments 113,380,409 493,368,505 68,152,086 139,007,139
----------------------------------------------------------------------
Net increase in net assets from operations 266,595,016 530,014,003 71,235,722 141,464,297
----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains -- (34,321,277) -- (3,159,208)
In excess of net realized gains -- (956,985) -- --
----------------------------------------------------------------------
Decrease in net assets from distributions
to shareholders -- (35,278,262) -- (3,159,208)
----------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 4,246,232,221 1,269,166,926 825,683,962 366,724,426
Net asset value of shares issued in
reinvestment of distributions to shareholders -- 33,194,946 -- 2,977,658
Payments for shares redeemed (1,817,143,216) (619,609,478) (420,923,515) (155,253,222)
----------------------------------------------------------------------
Net increase in net assets from capital share
transactions 2,429,089,005 682,752,394 404,760,447 214,448,862
----------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 2,695,684,021 1,177,488,135 475,996,169 352,753,951
NET ASSETS
Beginning of period 1,355,619,232 178,131,097 395,588,672 42,834,721
----------------------------------------------------------------------
End of period $ 4,051,303,253 $ 1,355,619,232 $ 871,584,841 $ 395,588,672
======================================================================
ACCUMULATED NET INVESTMENT LOSSES $ (16,955,558) $ -- $ (4,413,341) $ --
======================================================================
CAPITAL SHARE ACTIVITY
Shares sold 36,502,448 20,384,168 15,656,387 11,728,243
Shares issued in reinvestment of
distributions to shareholders -- 417,809 -- 83,240
Shares redeemed (16,064,608) (11,350,482) (8,200,856) (5,345,391)
----------------------------------------------------------------------
Net increase in shares outstanding 20,437,840 9,451,495 7,455,531 6,466,092
Shares outstanding, beginning of period 14,976,482 5,524,987 8,853,454 2,387,362
----------------------------------------------------------------------
Shares outstanding, end of period 35,414,322 14,976,482 16,308,985 8,853,454
======================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
Semi-Annual Report 41
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE PERIODS ENDED JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY INNOVATORS FUND THE COMMUNICATIONS FUND
-------------------------- ------------------------
Six Months Year Six Months Period
Ended Ended Ended Ended
6/30/00 12/31/99 6/30/00 12/31/99(A)
(unaudited) (unaudited)
===========================================================================================================================
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment loss $ (6,088,154) $ (690,417) $ (3,467,156) $ (52,049)
Net realized gains from security transactions 58,789,070 7,882,318 2,562,886 49,150
Net change in unrealized appreciation
(depreciation) on investments 70,526,655 181,766,125 (49,112,731) 32,695,538
----------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 123,227,571 188,958,026 (50,017,001) 32,692,639
----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains -- (6,269,227) -- --
In excess of net realized gains -- -- -- --
----------------------------------------------------------------------
Decrease in net assets from distributions
to shareholders -- (6,269,227) -- --
----------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 561,115,341 637,596,098 811,372,050 158,460,884
Net asset value of shares issued in reinvestment
of distributions to shareholders -- 5,909,870 -- --
Payments for shares redeemed (424,611,978) (228,747,848) (314,132,661) (8,998,179)
----------------------------------------------------------------------
Net increase in net assets from capital
share transactions 136,503,363 414,758,120 497,239,389 149,462,705
----------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 259,730,934 597,446,919 447,222,388 182,155,344
NET ASSETS
Beginning of period 603,936,018 6,489,099 182,155,344 --
----------------------------------------------------------------------
End of period $ 863,666,952 $ 603,936,018 $ 629,377,732 $ 182,155,344
======================================================================
ACCUMULATED NET INVESTMENT LOSSES $ (6,088,154) $ -- $ (3,467,156) $ --
======================================================================
CAPITAL SHARE ACTIVITY
Shares sold 8,831,252 18,978,792 42,752,119 13,146,370
Shares issued in reinvestment of
distributions to shareholders -- 134,657 -- --
Shares redeemed (7,198,536) (7,282,584) (16,999,857) (710,182)
----------------------------------------------------------------------
Net increase in shares outstanding 1,632,716 11,830,865 25,752,262 12,436,188
Shares outstanding, beginning of period 12,236,166 405,301 12,436,188 --
----------------------------------------------------------------------
Shares outstanding, end of period 13,868,882 12,236,166 38,188,450 12,436,188
======================================================================
</TABLE>
(A) Represents the period from the commencement of operations (September 30,
1999) through December 31, 1999.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRST HAND-Registered Trademark- FUNDS
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE PERIODS ENDED JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
THE e-COMMERCE FUND
-------------------
Six Months Period
Ended Ended
6/30/00 12/31/99 (A)
(Unaudited)
========================================================================================================================
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (2,980,740) $ 14,610
Net realized gains from security transactions 7,723,587 99,433
Net change in unrealized appreciation (depreciation) on investments (53,984,736) 51,614,435
-----------------------------
Net increase (decrease) in net assets from operations (49,241,889) 51,728,478
-----------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains -- --
In excess of net realized gains -- --
-----------------------------
Decrease in net assets from distributions to shareholders -- --
-----------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 560,184,387 259,447,141
Net asset value of shares issued in reinvestment of distributions to shareholders -- --
Payments for shares redeemed (196,280,015) (12,490,061)
-----------------------------
Net increase in net assets from capital share transactions 363,904,372 246,957,080
-----------------------------
TOTAL INCREASE IN NET ASSETS 314,662,483 298,685,558
NET ASSETS
Beginning of period 298,685,558 --
-----------------------------
End of period $ 613,348,041 $ 298,685,558
=============================
ACCUMULATED NET INVESTMENT INCOME (LOSSES) $ (2,966,130) $ 14,610
=============================
CAPITAL SHARE ACTIVITY
Shares sold 36,086,323 21,095,022
Shares issued in reinvestment of distributions to shareholders -- --
Shares redeemed (13,886,281) (1,000,614)
-----------------------------
Net increase in shares outstanding 22,200,042 20,094,408
Shares outstanding, beginning of period 20,094,408 --
-----------------------------
Shares outstanding, end of period 42,294,450 20,094,408
=============================
</TABLE>
(A) Represents the period from the commencement of operations (September 30,
1999) through December 31, 1999.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
Semi-Annual Report 43
<PAGE>
FINANCIAL HIGHLIGHTS - TECHNOLOGY VALUE FUND
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
(Unaudited)
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 90.52 $ 32.24 $ 26.06 $ 26.66 $ 18.44 $ 11.70
--------------------------------------------------------------------------------
Income from investment operations
Net investment loss (0.48) (0.35) (0.59) (0.26) (0.08) (0.14)
Net realized and unrealized gains
on investments 24.36 61.36 6.77 1.90 11.20 7.28
--------------------------------------------------------------------------------
Total from investment operations 23.88 61.01 6.18 1.64 11.12 7.14
--------------------------------------------------------------------------------
Less distributions
Distributions from net investment income -- -- -- -- -- --
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 $ 114.40 $ 90.52 $ 32.24 $ 26.06 $ 26.66 $ 18.44
================================================================================
Total return 26.38%(A) 190.40% 23.71% 6.46% 60.55% 61.17%
================================================================================
Net assets at end of period (millions) $ 4,051.3 $ 1,355.6 $ 178.1 $ 194.4 $ 35.1 $ 2.7
================================================================================
Ratio of expenses to average net assets 1.83%(B) 1.91% 1.95% 1.93% 1.81% 1.98%
Ratio of net investment loss to average
net assets (1.07%)(B) (1.27%) (1.80%) (1.43%) (0.55%) (1.45%)
Portfolio turnover rate 38% 41% 126% 101% 43% 45%
</TABLE>
(A) Not annualized.
(B) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS - TECHNOLOGY LEADERS FUND
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Six Months Year Year Period
Ended Ended Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 (A)
(Unaudited)
==================================================================================================================================
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 44.68 $ 17.94 $ 10.07 $ 10.00
---------------------------------------------------------------------
Income from investment operations
Net investment income (loss) (0.27) (0.17) (0.09) 0.01
Net realized and unrealized gains on investments 9.03 27.40 7.96 0.06
---------------------------------------------------------------------
Total from investment operations 8.76 27.23 7.87 0.07
---------------------------------------------------------------------
Less distributions
Dividends from net investment income -- -- -- --
Distributions from net realized gains -- (0.49) -- --
Distributions in excess of net realized gains -- -- -- --
---------------------------------------------------------------------
Total distributions -- (0.49) -- --
---------------------------------------------------------------------
Net asset value at end of period $ 53.44 $ 44.68 $ 17.94 $ 10.07
=====================================================================
Total return 19.61%(B) 152.58% 78.15% 0.70%(B)
=====================================================================
Net assets at end of period (millions) $ 871.6 $ 395.6 $ 42.8 $ 3.6
=====================================================================
Ratio of expenses to average net assets 1.91%(C) 1.94% 1.94% 1.80%(C)
Ratio of net investment income (loss) to average net assets (1.31%)(C) (1.27%) (1.03%) 1.77%(C)
Portfolio turnover rate 10% 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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
Semi-Annual Report 45
<PAGE>
FINANCIAL HIGHLIGHTS - TECHNOLOGY INNOVATORS FUND
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Six Months Year Period
Ended Ended Ended
6/30/00 12/31/99 12/31/98 (A)
(Unaudited)
============================================================================================================
<S> <C> <C> <C>
Net asset value at beginning of period $ 49.36 $ 16.01 $ 10.00
-----------------------------------------------------
Income from investment operations
Net investment loss (0.44) (0.06) (0.01)
Net realized and unrealized gains on investments 13.35 33.98 6.02
-----------------------------------------------------
Total from investment operations 12.91 33.92 6.01
-----------------------------------------------------
Less distributions
Dividends from net investment income -- -- --
Distributions from net realized gains -- (0.57) --
Distributions in excess of net realized gains -- -- --
-----------------------------------------------------
Total distributions -- (0.57) --
-----------------------------------------------------
Net asset value at end of period $ 62.27 $ 49.36 $ 16.01
=====================================================
Total return 26.15%(B) 212.34% 60.10%(B)
=====================================================
Net assets at end of period (millions) $ 863.7 $ 603.9 $ 6.5
=====================================================
Ratio of expenses to average net assets 1.90%(C) 1.93% 1.92%(C)
Ratio of net investment loss to average net assets (1.45%)(C) (0.59%) (0.59%)(C)
Portfolio turnover rate 25% 44% 188%
</TABLE>
(A) Represents the period from the commencement of operations (May 20, 1998)
through December 31, 1998.
(B) Not annualized.
(C) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS - THE COMMUNICATIONS FUND
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
========================================================================================
Six Months Period
Ended Ended
6/30/00 12/31/99 (A)
(Unaudited)
========================================================================================
<S> <C> <C>
Net asset value at beginning of period $ 14.65 $ 10.00
-----------------------------------
Income from investment operations
Net investment loss (0.09) (0.00)
Net realized and unrealized gains on investments 1.92 4.65
-----------------------------------
Total from investment operations 1.83 4.65
-----------------------------------
Less distributions
Dividends from net investment income -- --
Distributions from net realized gains -- --
Distributions in excess of net realized gains -- --
-----------------------------------
Total distributions -- --
-----------------------------------
Net asset value at end of period $ 16.48 $ 14.65
==================================
Total return 12.49%(B) 46.50%(B)
==================================
Net assets at end of period (millions) $ 629.4 $ 182.2
==================================
Ratio of expenses to average net assets 1.91%(C) 1.95%(C)
Ratio of net investment loss to average net assets (1.19%)(C) (0.30%)(C)
Portfolio turnover rate 45% 0%
</TABLE>
(A) Represents the period from the commencement of operations (September 30,
1999) through December 31, 1999.
(B) Not annualized.
(C) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
Semi-Annual Report 47
<PAGE>
FINANCIAL HIGHLIGHTS - THE e-COMMERCE FUND
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
================================================================================================
Six Months Period
Ended Ended
6/30/00 12/31/99 (A)
(Unaudited)
================================================================================================
<S> <C> <C>
Net asset value at beginning of period $ 14.86 $ 10.00
----------------------------------
Income from investment operations
Net investment income (loss) (0.07) 0.00
Net realized and unrealized gains (losses) on investments (0.29) 4.86
----------------------------------
Total from investment operations (0.36) 4.86
----------------------------------
Less distributions
Dividends from net investment income -- --
Distributions from net realized gains -- --
Distributions in excess of net realized gains -- --
----------------------------------
Total distributions -- --
----------------------------------
Net asset value at end of period $ 14.50 $ 14.86
==================================
Total return (2.42%)(B) 48.60%(B)
==================================
Net assets at end of period (millions) $ 613.3 $ 298.7
==================================
Ratio of expenses to average net assets 1.92%(C) 1.95%(C)
Ratio of net investment income (loss) to average net assets (1.16%)(C) 0.05%(C)
Portfolio turnover rate 21% 0%
</TABLE>
(A) Represents the period from the commencement of operations (September 30,
1999) through December 31, 1999.
(B) Not annualized.
(C) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)
1. Organization
The Technology Value Fund, the Technology Leaders Fund, the Technology
Innovators Fund, The Communications Fund and The e-Commerce Fund (the "Funds")
are each a non-diversified series of Firsthand Funds (formerly Interactive
Investments) (the "Trust"), an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust
was organized as a Delaware business trust on November 8, 1993. The Technology
Value Fund commenced operations on May 20, 1994. The public offering of shares
of the Technology Value Fund commenced on January 3, 1995. The public offering
of shares of the Technology Leaders Fund commenced on December 10, 1997. The
public offering of shares of the Technology Innovators Fund commenced on May 20,
1998. The public offering of shares of The Communications Fund and The
e-Commerce Fund commenced on September 30, 1999.
Each Fund's investment objective is long-term growth of capital.
The Technology Value Fund seeks to achieve its objective by investing at least
65% of its assets in securities of companies in technology fields that Firsthand
Capital Management, Inc. (formerly Interactive Research Advisers, Inc.) (the
"Investment Advisor") considers to be undervalued and have potential for capital
appreciation.
The Technology Leaders 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.
The Technology Innovators 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.
The Communications 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 e-Commerce 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).
2. Significant Accounting Policies
The following is a summary of the Funds' significant accounting policies:
Securities valuation -- Each Fund's portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange (the
"NYSE"), currently 4:00 p.m., Eastern time. 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
Semi-Annual Report 49
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
day the securities are being valued, or, if not traded on a particular day, at
the most recent bid price. 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.
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.
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.
Repurchase agreements -- Repurchase agreements, which must be secured
with collateral of a credit quality at least equal to a Fund's investment
criteria for its portfolio securities, are valued at cost which, together with
accrued interest, approximates market value. At the time each Fund enters into a
repurchase agreement, the seller agrees that the value of the underlying
securities, including accrued interest, will at all times be equal to or exceed
the value of the repurchase agreement. In the event of bankruptcy or other
default by the seller of a repurchase agreement, a Fund could experience both
delays in liquidating the underlying securities and losses.
Share valuation -- 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
offering and redemption price per share of each Fund is equal to the net asset
value per share. The Communications Fund and The e-Commerce Fund charge a 2%
redemption fee on shares redeemed or exchanged within 180 days of purchase.
Effective July 1, 2000, new shares purchased in the Technology Value Fund, the
Technology Leaders Fund, and the Technology Innovators Fund will be subject to
the 2% redemption fee on shares redeemed or exchanged within 180 days of
purchase. These fees are deducted from the redemption proceeds otherwise payable
to the shareholder. Each Fund will retain the fee charged and such fees become
part of that Fund's daily net asset value ("NAV") calculations.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders -- Each Fund expects to distribute substantially
all of its net investment income and net realized gains, if any, at least
annually. Distributions from net investment income and capital gains are
determined in accordance with income tax regulations, which may differ from
generally accepted accounting principles.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
Federal income tax -- It is each Fund's policy to comply with the provisions
of the Internal Revenue Code (the "Code") applicable to regulated investment
companies. As provided in the Code, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the
income distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as
dividends in each calendar year at least 98% of its net investment income
(earned during the calendar year) and 98% of its net realized capital gains
(earned during the twelve months ended October 31) plus undistributed amounts
from prior years.
The following information is based upon federal income tax cost of portfolio
investments as of June 30, 2000.
<TABLE>
<CAPTION>
TECHNOLOGY TECHNOLOGY TECHNOLOGY THE THE
VALUE LEADERS INNOVATORS COMMUNICATIONS e-COMMERCE
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
Gross unrealized appreciation $ 1,050,250,197 $ 251,350,057 $ 324,618,689 $ 105,900,446 $ 119,793,067
Gross unrealized depreciation (440,057,600) (33,095,307) (71,908,669) (122,317,639) (122,163,368)
--------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $ 610,192,597 $ 218,254,750 $ 252,710,020 $ (16,417,193) $ (2,370,301)
==================================================================================================
Federal income tax cost $ 3,436,940,365 $ 648,827,684 $ 604,055,941 $ 648,213,837 $ 615,612,047
==================================================================================================
</TABLE>
The difference between the acquisition cost and the federal income tax cost of
portfolio investments is due to certain timing differences in the recognition of
capital losses under generally accepted accounting principles and income tax
regulations. Net capital losses of $1,893,364 realized by the Technology Value
Fund during the period from November 1, 1999 through December 31, 1999 are
treated for federal income tax purposes as arising in the tax year ending
December 31, 2000.
3. Investment Transactions/Custody
Investment transactions (excluding short-term investments) were as follows for
the six months ended June 30, 2000.
<TABLE>
<CAPTION>
TECHNOLOGY TECHNOLOGY TECHNOLOGY THE THE
VALUE LEADERS INNOVATORS COMMUNICATIONS e-COMMERCE
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
Purchase of investment securities $ 3,275,455,623 $ 467,992,652 $ 404,400,455 $ 763,710,521 $ 539,379,712
==============================================================================================
Proceeds from sales and maturities
of investment securities $ 1,074,503,587 $ 61,279,274 $ 189,462,058 $ 228,545,586 $ 92,627,168
==============================================================================================
</TABLE>
Receivables due from custodian reflect amounts due from former custodian. The
amount results primarily from shareholder purchases and redemption transactions
that were processed by the former transfer agent.
Semi-Annual Report 51
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
4. Investment Advisory and Administration Agreements
Certain trustees and officers of the Trust are also officers of the Investment
Advisor, or State Street Bank and Trust Company ("State Street"), which is the
administrative services agent, shareholder servicing and transfer agent,
accounting services agent, and custodian for the Trust.
INVESTMENT ADVISORY AGREEMENT
Each Fund's investments are managed by the Investment Advisor pursuant to the
terms of an Investment Advisory Agreement (the "Advisory Agreement"). Under the
Advisory Agreement, the Investment Advisor furnishes advice and recommendations
with respect to each Fund's portfolio of investments and provides persons
satisfactory to the Trust's Board of Trustees to act as officers and employees
of the Trust who are responsible for the overall management and administration
of the Trust, subject to the supervision of the Trust's Board of Trustees. The
Investment Advisor is responsible for (i) the compensation of any of the Trust's
trustees, officers and employees who are directors, officers, employees or
shareholders of the Investment Advisor, (ii) compensation of the Investment
Advisor's personnel and payment of other expenses in connection with the
provision of portfolio management services under the Advisory Agreement, and
(iii) the expenses of printing and distributing each Fund's Prospectus and sales
and advertising materials to prospective clients.
For the services provided by the Investment Advisor under the Advisory
Agreement, 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,
to 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.
ADMINISTRATION AGREEMENT
The Trust has entered into a separate contract with the Investment Advisor
wherein the Investment Advisor is responsible for providing administrative and
supervisory services to each Fund (the "Administration Agreement").
Under the Administration Agreement, the Investment Advisor oversees the
maintenance of all books and records with respect to each Fund's securities
transactions and each Fund's 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
1940 Act.
Under the Administration Agreement, 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 each Fund's operating expenses except for brokerage and commission
expenses and any extraordinary and non-recurring expenses.
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
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.
The Investment Advisor has entered into a Sub-Administration Agreement with
State Street. Under this agreement, the Investment Advisor (not the Funds) pays
State Street's fees for administrative services.
5. Investments in Affiliates and Restricted Securities
Affiliated issuers, as defined by the 1940 Act, are those in which a Fund's
holdings represent 5% or more of the outstanding voting securities of the
issuer. A summary of each Fund's investments in affiliates, if any, for the six
months ended June 30, 2000 is noted below:
<TABLE>
<CAPTION>
Share Activity
--------------------------------------------------- Market
Balance Balance Realized Value Acquisition
Affiliate 12/31/99 Purchases Sales 06/30/00 Gain (Loss) 06/30/00 Cost
-----------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY VALUE FUND
<S> <C> <C> <C> <C> <C> <C> <C>
P-Com, Inc. 70,000 7,957,500 400,000 7,627,500 $ (3,180,911) $ 43,381,406 $ 72,350,644
NETsilicon, Inc. 349,250 394,550 140,000 603,800 (2,729,958) 19,774,450 8,930,942
Wind River Systems, Inc. 690,000 5,131,800 -- 5,821,800 -- 220,500,675 25,025,374
Concord Communications, Inc. 669,000 600,000 -- 1,269,000 -- 50,601,375 51,584,926
Digital Microwave Corp. 1,949,000 3,718,000 -- 5,667,000 -- 216,054,375 165,950,219
Legato Systems, Inc. 39,000 5,942,000 -- 5,981,000 -- 90,462,625 222,519,662
TranSwitch Corp. 744,000 1,821,400 -- 2,565,400 -- 198,016,812 145,462,623
Zoran Corp. 661,000 226,000 -- 887,000 -- 58,486,562 22,782,545
Visual Networks, Inc. -- 1,428,300 -- 1,428,300 -- 40,706,550 88,666,421
Globix Corp. 606,500 1,300,700 -- 1,907,200 -- 55,904,800 35,087,782
TECHNOLOGY
INNOVATORS FUND
NETsilicon, Inc. 576,750 95,900 72,650 600,000 173,431 19,650,000 7,414,205
Osicom Technologies, Inc. 160,250 754,500 -- 914,750 -- 77,410,719 46,475,740
Zoran Corp. 143,500 808,500 -- 952,000 -- 62,772,500 46,600,827
Genesis Microchip, Inc. 554,500 695,700 -- 1,250,200 -- 22,347,325 27,290,046
THE e-COMMERCE FUND
Pervasive Software, Inc. 117,500 1,300,000 -- 1,417,500 -- 7,973,437 21,673,299
ePlus, Inc. -- 726,100 -- 726,100 -- 19,196,269 24,976,565
</TABLE>
Semi-Annual Report 53
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
Restricted securities are securities which have not been registered under the
Securities Act of 1933, as amended, and are subject to restrictions on resale.
Investments in restricted securities are valued at fair value as determined in
good faith in accordance with consistently applied procedures established by and
under the general supervision of the Board of Trustees. As of June 30, 2000, the
Technology Innovators Fund had an 842,857 share investment in Cielo
Communications, Inc. - Class C, valued at $1,475,000 and representing 0.17% of
the Fund's net assets, of which $1,999,998 was acquired on November 16, 1999 and
$950,002 on December 22, 1999, for a total cost of $2,950,000. The Technology
Innovators Fund had a 348,360 share investment in Micro Photonix Integration
Corp. - Class C, valued in $2,200,000 and representing 0.25% of the Fund's net
assets, which was acquired on June 21, 2000 at a cost of $2,200,000. The
Communications Fund had a 285,022 share investment in Micro Photonix Integration
Corp. - Class C, valued at $1,800,000 and representing 0.29% of the Fund's net
assets, which was acquired on June 21, 2000 at a cost of $1,800,000.
As of June 30, 2000 the Technology Value Fund had a 9,325 share investment in
Broadcom Corp. - Class A, of which 9,324 shares are subject to restrictions on
resale until March 1, 2001. The 9,324 share investment, valued at $2,041,415 and
representing 0.05% of the Fund's net assets, was acquired at a cost of $404,970.
The Broadcom Corp. shares were acquired through Broadcom's March 1, 2000
acquisition of previously owned Stellar Semiconductor, Inc. Class B and C
shares. The Technology Innovators Fund had a 405,462 share investment in
Globespan, Inc., of which 14,962 shares are subject to restrictions on resale
until July 26, 2000, at which time the investment will be classified as a Rule
144A stock. The 14,962 share investment, valued at $1,826,534 and representing
0.21% of the Fund's net assets, was acquired at a cost of $999,999. The
GlobeSpan, Inc. shares were acquired through GlobeSpan's acquisition of
previously owned T.sqware, Inc.
6. Risks
Because each Fund is operated as a "non-diversified" portfolio, the Funds invest
in fewer issuers and therefore may be subject to a greater risk than more
diversified funds. Each Fund invests primarily in companies within the high
technology sector. Each Fund is also subject to greater risk because of its
concentration of investments in technology companies, the value of which can be
highly volatile. Each Fund is also subject to greater risk because of its
ability to concentrate its investments in a single industry and within certain
segments of that industry. Although the Investment Advisor currently believes
that investments by the Funds in technology industries 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.
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
[LOGO] FIRSTHAND-Registered Trademark- FUNDS
This report is provided for the general information of the shareholders of the
Firsthand Funds. This report is not intended for distribution to prospective
investors in the Funds, unless preceded or accompanied by an effective
prospectus. For more information regarding any of the Funds, including charges
and expenses, visit our web site at www.FirsthandFunds.com or call
1.888.884.2675 for a free prospectus. Please read it carefully before you invest
or send money.
[GRAPHIC]
2000
Q2
<PAGE>
[GRAPHIC]
FIRSTHAND FUNDS
P.O. Box 8356
Boston, MA 02266-8356
INVESTMENT ADVISOR
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 Company
P.O. Box 8356
Boston, MA 02266-8356
[GRAPHIC]
FIRSTHAND-Registered Trademark- FUNDS
