UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-8268
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FIRSTHAND FUNDS
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(Exact name of registrant as specified in charter)
125 SOUTH MARKET
SUITE 1200
SAN JOSE, CALIFORNIA 95113
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(Address of principal executive offices)(Zip code)
(Name and Address of Agent for Service) Copy to:
Kevin M. Landis Kelvin K. Leung, Esq.
Firsthand Capital Management, Inc. Firsthand Capital Management, Inc.
125 South Market, Suite 1200 125 South Market, Suite 1200
San Jose, California 95113 San Jose, California 95113
Karen Jacoppo-Wood, Esq.
State Street Bank and Trust Company
One Federal Street, 9th Floor
Boston, Massachusetts 02110
Steven G. Cravath, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Avenue, NW
Washington, DC 20006-1888
Registrant's telephone number, including area code: (408) 294-2200
Date of fiscal year end: December 31
Date of reporting period: December 31, 2003
Item 1. Reports to Shareholders.
Firsthand Funds
Report to Shareholders
[GRAPHIC OMITTED]
Firsthand Technology Value Fund (R)
Firsthand Technology Leaders Fund
Firsthand Technology Innovators Fund
Firsthand e-Commerce Fund
Firsthand Global Technology Fund
[LOGO]Firsthand(R) December 2003
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This report is provided for the general information of the shareholders of
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 complete information about Firsthand Funds, please call
toll free 1.888.884.2675 or visit www.firsthandfunds.com for a prospectus, which
contains more information, including risks, fees, and expenses. Read the
prospectus carefully before investing or sending money.
Firsthand Funds are distributed by ALPS Distributors, Inc.
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Contents
Performance Summary 2
President's Letter 3
Performance and Portfolio Discussions
Firsthand Technology Value Fund(R) 6
Firsthand Technology Leaders Fund 8
Firsthand Technology Innovators Fund 10
Firsthand e-Commerce Fund 12
Firsthand Global Technology Fund 14
Financial Statements
Portfolio of Investments
Firsthand Technology Value Fund 17
Firsthand Technology Leaders Fund 22
Firsthand Technology Innovators Fund 24
Firsthand e-Commerce Fund 28
Firsthand Global Technology Fund 30
Statements of Assets and Liabilities 32
Statements of Operations 34
Statements of Changes in Net Assets 36
Financial Highlights
Firsthand Technology Value Fund 41
Firsthand Technology Leaders Fund 42
Firsthand Technology Innovators Fund 43
Firsthand e-Commerce Fund 44
Firsthand Global Technology Fund 45
Notes to Financial Statements 46
Additional Information 61
Performance Summary
Period Returns (average annual total returns as of 12/31/03)
Q4 '03 1-YEAR 3-YEAR 5-YEAR
FUND TOTAL*
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Firsthand Technology Value Fund(R) 9.28% 74.52% -24.60% 2.30%
Firsthand Technology Leaders Fund 15.02% 61.78% -20.15% -0.52%
Firsthand Technology Innovators Fund 6.35% 55.80% -20.64% -0.63%
Firsthand e-Commerce Fund 11.27% 47.12% -22.72% o
Firsthand Global Technology Fund 17.60% 90.50% -19.23% o
Nasdaq 12.30% 50.77% -6.35% -1.45%
DJIA 13.40% 28.29% 1.02% 4.56%
S&P 500 12.18% 28.68% -4.04% -0.57%
* Not annualized.
Returns Since Inception (average annual total returns as of 12/31/03)
AVERAGE ANNUAL
FUND (INCEPTION DATE) TOTAL RETURN NASDAQ DJIA S&P 500
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Firsthand Technology Value Fund(R)(5/20/94**) 17.67% 11.50% 13.47% 11.66%
Firsthand Technology Leaders Fund (12/10/97) 9.65% 3.90% 6.34% 3.67%
Firsthand Technology Innovators Fund (5/20/98) 8.12% 1.81% 4.51% 1.49%
Firsthand e-Commerce Fund (9/30/99) -24.17% -6.84% 2.19% -1.88%
Firsthand Global Technology Fund (9/29/00) -21.07% -16.67% 1.45% -6.11%
** Firsthand Technology Value Fund commenced operations on May 20, 1994; the
SEC effective date for Firsthand Technology Value Fund is December 15,
1994. Firsthand Technology Value Fund's average annual total return since
effective date is 16.76%.
Returns assume reinvestment of all dividends and distributions but do not
reflect the impact of taxes. The performance data quoted represent past
performance. Past performance cannot guarantee future results, and current
and future performance may be lower or higher than the performance quoted.
Performance information does not reflect the impact of taxes. Both the
return from and the principal value of an investment in the Funds will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. To obtain performance as of the most
recent month-end, please contact Firsthand Funds by calling 1.888.884.2675
or go to www.firsthandfunds.com. Each Fund may invest in
small-capitalization companies and Initial Public Offerings ("IPOs").
These investments may be more volatile than investments in
large-capitalization companies and loss of principal could be greater. The
Funds may invest in foreign securities, which may be subject to greater
risks than investing in domestic securities. Because the Funds are not
diversified, they can take larger positions in fewer companies, increasing
their risk profile. The Funds invest in several industries within the
technology sector and the relative weightings of these industries in a
Fund's portfolio may change at any time. The performance charts on the
following pages assume an initial investment of $10,000 and reinvestment
of dividends and capital gains and include all fund expenses. The
hypothetical charts do not reflect the effect of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. The Dow
Jones Industrial Average (DJIA) is a group of 30 stocks tracked by the Dow
Jones Company. The Nasdaq Composite Index (Nasdaq) is a
capitalization-weighted index of all common stocks listed with 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. The Lipper Science and
Technology Fund Index includes the largest 30 mutual funds in the group,
which, by prospectus or portfolio practice, invest at least 80% of their
equity portfolios in science and technology stocks.
[LOGO]Firsthand(R)
[PHOTO]
DEAR FELLOW SHAREHOLDERS,
What a difference a year makes. Twelve months ago, we were wondering if the
recession was really over, preparing for a war in Iraq, and looking at Nasdaq
1335. Now, for the first time in several years, I am pleased to report that more
things went right this past year than wrong. As a result, we enjoyed a healthy
rally in the stock market, punctuated on December 29 by the Nasdaq Composite
Index closing above 2000 points for the first time in two years.
WHAT WENT RIGHT
Several factors contributed to the stock market recovery in 2003. Foremost, we
believe, was progress in the war with Iraq. The markets were soft in the first
quarter as tensions escalated but rebounded sharply as major hostilities
concluded early in the second quarter.
It was also a good year for the economy, as the recovery gathered strength with
each passing month. Most economic indicators are now positive, though job
creation is lagging (per conventional economic wisdom). U.S. GDP growth
surpassed 8% (annualized) in the third quarter, marking the sharpest quarterly
uptick in 20 years.
Consumer spending increased as well. As we have mentioned before, U.S. consumers
were responsible for keeping the economy out of a deeper recession in 2002. This
trend continued in 2003, as low interest rates, tax refunds, and retail
incentives encouraged consumers to keep spending. Many technology companies were
major beneficiaries of this spending, with sales of DVD players, digital
cameras, MP3 players, flat-panel TVs, cell phones, and even personal computers
reaching record levels.
Company fundamentals also improved, particularly in the technology sector. With
the exception of companies dependent upon a few weak markets, technology
companies generally experienced increasing sales and profitability in 2003. The
rebound in PC sales was perhaps the biggest surprise of 2003, but we are also
seeing other signs that corporate IT spending will soon return to healthier
levels.
Additionally, although the telecom industry is struggling, wireless technologies
are hot once again, driven by a replacement cycle in cell phone handsets and the
rapid adoption of Wi-Fi wireless networking technology.
Finally, 2003 saw a sharp swing in investor sentiment. In 2002, putting new
money into the stock market--especially technology stocks--seemed to be the last
thing investors wanted to do. As Iraq tensions eased and the economy showed
signs of recovery, investors came back into the market. In fact, U.S. equity
mutual funds enjoyed one of the best years in history in terms of fund sales.
2003 Annual Report | 3
WHAT DIDN'T GO SO RIGHT
The telecom industry remained in a funk in 2003. While there were pockets of
opportunity within the industry--notably wireless--the dramatic overbuilding of
the late 1990s took its toll in terms of weak sales. We have witnessed
tremendous consolidation among industry suppliers, and some of the survivors
will emerge from the downturn in a much stronger market position.
Corporate IT budgets were still very tight in 2003, but we believe there is hope
for a rebound in the coming year. Some companies, including Intel, Cisco, and
Siebel, indicated that they were seeing signs of increased corporate IT spending
near the end of the year. While there is reason for optimism here, it is too
early to change our cautious outlook.
I would be remiss if I did not address what has become known as the "mutual fund
scandal." Although the industry events of late 2003 had no direct impact on our
investments or our shareholders, they certainly gave the mutual fund industry a
pretty big black eye. It is disheartening to see how a small minority of fund
companies have given a bad name to the industry and I am proud to say that
Firsthand has, for many years now, had procedures in place to deter market
timing and to prevent other unethical conduct.
THE LONG ROAD
This past year brought welcome relief to long-term investors and showed just how
great an impact a change in investor sentiment can have. We are encouraged by
our success in 2003, but we have not forgotten that we are a long way from
recapturing the market peak of early 2000. We appreciate the confidence and
investment discipline you have shown over the past few years, and we thank you
for the opportunity to be your technology investing partner.
Best wishes for a great 2004.
/s/ Kevin Landis
Kevin Landis
President and Chief Executive Officer
[LOGO]Firsthand(R)
PERFORMANCE AND PORTFOLIO DISCUSSIONS
Firsthand Technology Value Fund(R)
Firsthand Technology Leaders Fund
Firsthand Technology Innovators Fund
Firsthand e-Commerce Fund
Firsthand Global Technology Fund
2003 Annual Report | 5
Firsthand Technology Value Fund
Performance and Portfolio Discussion
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How did the Fund perform in 2003?
In 2003, Firsthand Technology Value Fund (TVFQX) posted a 74.52% gain, versus a
50.77% increase for the Nasdaq Composite Index and a 51.32% gain for the Lipper
Science and Technology Fund Index. For the six months ended December 31, 2003,
Firsthand Technology Value Fund rose 33.15% as compared with 23.77% and 23.54%
gains for the Nasdaq and the Lipper peer group benchmarks, respectively.
Which industries had the greatest impact on the Fund's performance?
The portfolio's exposure to the semiconductor and telecom industries contributed
most to the Fund's superior performance versus its benchmarks in 2003. With
sizeable exposure to the semiconductor industry, the Fund capitalized on the
industry's sharp recovery. The Fund also benefitted from its exposure to the
consumer electronics market, which has remained strong over the past three
years.
Which individual holdings were the largest contributors to the Fund's
performance?
Within the consumer electronics market, removable flash memory--a form of
portable storage used to store digital pictures and data--was a leading
contributor to Fund performance in 2003. Our holdings in flash memory
manufacturers SanDisk (SNDK) and Lexar Media (LEXR) produced outstanding results
thanks, in large part, to the increasing popularity of digital photography.
While the much-maligned telecom industry is still struggling in the U.S., it is
experiencing significant growth in Asia. Shares of telecom equipment supplier
UTStarcom (UTSI) rose as the company enjoyed growing acceptance of its wireless
local loop technology in China.
UTStarcom's Personal Access System phones have helped accelerate the rollout of
phone service to areas with no existing infrastructure. UTStarcom is
aggressively expanding beyond China into other emerging markets, including
India, Vietnam, and Taiwan.
Another company with fortunes tied to the health of the telecom industry is
software maker Comverse Technology (CMVT), which supplies enhanced phone service
products such as voice-controlled dialing and instant messaging to service
providers. Comverse's stock rose dramatically as carriers began offering these
services to customers. Handset maker Motorola (MOT) rose in response to a robust
forecast for cell phone sales in 2003. However, we closed our stake in Motorola
toward the end of the year, concerned that delays in rolling out a new line of
camera phones could cause the company to lose market share.
Regarding the Fund's venture capital investments, we are pleased to report that
Radia Communications was acquired in July 2003 by Texas Instruments (TXN) at a
healthy multiple to our initial investment. Radia specializes in the development
of radio frequency chips for 802.11 wireless local area networking and should
help Texas Instruments extend its reach in the rapidly growing Wi-Fi networking
market.
Which holdings were the greatest detractors from the Fund's performance?
Investors soured on Microtune (TUNE) and Riverstone Networks (RSTN) after they
were targeted by the SEC for potential accounting irregularities. Troubled
disk-drive manufacturer Read-Rite (RDRT) filed for bankruptcy and sold its
remaining assets to Western Digital (WDC).
[LOGO]Firsthand(R)
Fund Performance and Holding Information (as of December 31, 2003)
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Firsthand Technology Value Fund vs. Market Indices
TVFQX NASDAQ DJIA S&P 500
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Since Inception(a) 17.67% 11.50% 13.47% 11.66%
Since Effectiveness(a) 16.76% 12.21% 14.17% 12.26%
5-Year 2.30% -1.45% 4.56% -0.57%
3-Year -24.60% -6.35% 1.02% -4.04%
1-Year 74.52% 50.77% 28.29% 28.68%
Q4 '03 Total Return(b) 9.28% 12.30% 13.40% 12.18%
(a) Firsthand Technology Value Fund commenced operations on May 1994; the SEC
effective date for Firsthand 20, Technology Value Fund is December 15,
1994.
(b) Not annualized.
Growth of a Hypothetical $10,000 Investment
[The following table was depicted as a mountain chart in the printed material]
INCEPTON DATE MAY 20, 1994
SEC EFFECTIVE DATE DEC 15, 1994
TVFQX NASDAQ DJIA S&P 500
----- ------ ---- -------
5/31/1994 10040 10108 10004 10013
6/30/1994 9190 9706 9666 9768
7/30/1994 9430 9929 10045 10088
8/30/1994 10510 10527 10489 10502
9/30/1994 11200 10510 10320 10246
10/30/1994 12170 10690 10504 10475
11/30/1994 11830 10316 10094 10094
12/30/1994 12530 10339 10372 10244
1/30/1995 12412 10386 10407 10509
2/28/1995 13215 10926 10905 10919
3/30/1995 13333 11260 11325 11241
4/30/1995 14436 11634 11778 11572
5/30/1995 14543 11930 12217 12034
6/30/1995 15742 12890 12487 12314
7/30/1995 17980 13832 12913 12722
8/30/1995 19212 14103 12691 12754
9/30/1995 20679 14435 13206 13293
10/30/1995 20047 14335 13122 13245
11/30/1995 20294 14663 14053 13827
12/30/1995 20194 14577 14194 14093
1/30/1996 20063 14687 14976 14573
2/29/1996 21454 15255 15274 14708
3/30/1996 21585 15273 15581 14849
4/30/1996 26984 16513 15539 15068
5/30/1996 30751 17251 15801 15457
6/30/1996 27970 16444 15855 15516
7/30/1996 26316 14997 15519 14830
8/30/1996 27400 15845 15817 15143
9/30/1996 30291 17035 16594 15996
10/30/1996 29251 16962 17023 16437
11/30/1996 32786 17952 18470 17679
12/30/1996 32422 17934 18293 17329
1/30/1997 34915 19170 19337 18411
2/28/1997 31886 18189 19579 18556
3/30/1997 29438 16980 18771 17793
4/30/1997 31039 17532 19998 18856
5/30/1997 38053 19484 20972 20004
6/30/1997 38713 20075 21974 20900
7/30/1997 43857 22195 23565 22563
8/30/1997 42281 22110 21898 21299
9/30/1997 42466 23487 22855 22465
10/30/1997 38142 22211 21418 21715
11/30/1997 37311 22316 22576 22720
12/30/1997 34519 21907 22854 23110
1/30/1998 35791 22591 22857 23366
2/28/1998 39036 24700 24769 25051
3/31/1998 39897 25609 25538 26334
4/30/1998 42666 26074 26314 26599
5/31/1998 36995 24832 25902 26142
6/30/1998 37802 26459 26085 27204
7/31/1998 35020 26154 25897 26914
8/31/1998 26385 20949 22037 23023
9/30/1998 26583 23678 22959 24498
10/31/1998 33020 24768 25166 26490
11/30/1998 38199 27268 26771 28096
12/31/1998 42703 30681 26997 29715
1/31/1999 49007 35067 27528 30958
2/28/1999 43577 32027 27441 29995
3/31/1999 48398 34468 28895 31196
4/30/1999 56094 35616 31868 32404
5/31/1999 61961 34612 31262 31638
6/30/1999 71246 37645 32517 33393
7/31/1999 75379 36985 31599 32350
8/31/1999 80703 38408 32190 32189
9/30/1999 81114 38513 30766 31307
10/31/1999 86650 41609 31952 33288
11/30/1999 98756 46806 32454 33966
12/31/1999 124009 57105 34341 35966
1/31/2000 132435 55300 32694 34159
2/29/2000 185904 65923 30323 33513
3/31/2000 174547 64194 32743 36791
4/30/2000 155409 54202 32196 35685
5/31/2000 137969 47755 31628 34952
6/30/2000 156724 55700 31440 35814
7/31/2000 144926 52908 31683 35254
8/31/2000 179874 59089 33846 37444
9/30/2000 168229 51603 32183 35467
10/31/2000 149173 47348 33171 35317
11/30/2000 104486 36512 31564 32533
12/31/2000 111642 34731 32719 32692
1/31/2001 127277 38984 33054 33852
2/28/2001 78553 30261 31936 30765
3/31/2001 64960 25889 30087 28816
4/30/2001 78779 29776 32724 31055
5/31/2001 74888 29704 33345 31263
6/30/2001 73687 30418 32112 30503
7/31/2001 67183 28534 32210 30202
8/31/2001 59749 25421 30538 28312
9/30/2001 44218 21110 27179 26026
10/31/2001 53050 23810 27911 26522
11/30/2001 61791 27203 30383 28557
12/31/2001 62525 27492 30939 28807
1/31/2002 60175 27269 30659 28387
2/28/2002 47306 24419 31305 27839
3/31/2002 52763 26035 32256 28887
4/30/2002 44048 23823 30867 27135
5/31/2002 41001 22807 30890 26935
6/30/2002 33983 20662 28800 25017
7/31/2002 27859 18761 27256 23066
8/31/2002 27450 18578 27094 23218
9/30/2002 22388 16568 23775 20694
10/31/2002 25389 18802 26353 22516
11/30/2002 33225 20916 27999 23841
12/31/2002 27420 18899 26294 22441
1/31/2003 26010 18696 25419 21853
2/28/2003 25586 18947 24980 21525
3/31/2003 25859 19008 25337 21734
4/30/2003 29072 20758 26922 23524
5/31/2003 35650 22631 28192 24764
6/30/2003 35938 23021 28662 25079
7/31/2003 41653 24619 29499 25522
8/31/2003 45109 25699 30154 26019
9/30/2003 43790 25374 29746 25743
10/31/2003 48883 27459 31493 27199
11/30/2003 50065 27868 31518 27438
12/31/2003 47852 28494 33731 28878
Holdings by Industry(c)
% of Net Assets
Semiconductors 30.9%
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Software 18.7%
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Communications Equipment 12.6%
- ------------------------------------------
Networking 11.0%
- ------------------------------------------
Defense & Aerospace 8.0%
- ------------------------------------------
Services 5.5%
- ------------------------------------------
Photonics 3.8%
- ------------------------------------------
Peripherals 3.2%
- ------------------------------------------
Communications 2.7%
- ------------------------------------------
Other Electronics 0.8%
- ------------------------------------------
Semiconductor Equipment 0.8%
- ------------------------------------------
Intellectual Property 0.7%
- ------------------------------------------
Media 0.0%*
- ------------------------------------------
Net Cash 1.3%
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(c) Based on percentage of net assets as of December 31, 2003.
* Represents less than 0.05% of the holdings of the Fund by industry.
Top 10 Holdings(d)
% of Net Assets
Cisco Systems, Inc. 8.8%
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SanDisk Corp. 8.5%
- ------------------------------------------
Comverse Technology, Inc. 4.2%
- ------------------------------------------
Lexar Media, Inc. 4.0%
- ------------------------------------------
Corning, Inc. 3.6%
- ------------------------------------------
Raytheon Co. 3.3%
- ------------------------------------------
UTStarcom, Inc. 3.3%
- ------------------------------------------
Wind River Systems, Inc. 3.0%
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Zoran Corp. 2.9%
- ------------------------------------------
PMC-Sierra, Inc. 2.9%
- ------------------------------------------
(d) Top 10 stock holdings total 44.5% of net assets. These holdings are
current as of December 31, 2003, and may not be representative of current
or future investments.
2003 Annual Report | 7
Firsthand Technology Leaders Fund
Performance and Portfolio Discussion
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How did the Fund perform in 2003?
In 2003, Firsthand Technology Leaders Fund (TLFQX) posted a 61.78% gain, versus
a 50.77% increase for the Nasdaq Composite Index and a 51.32% gain for the
Lipper Science and Technology Fund Index. For the six months ended December 31,
2003, Firsthand Technology Leaders Fund rose 28.58% as compared with 23.77% and
23.54% gains for the Nasdaq and the Lipper peer group benchmarks, respectively.
Which industries had the greatest impact on the Fund's performance?
The portfolio's exposure to the semiconductor and software industries helped the
Fund top its benchmarks in 2003. The software industry experienced the beginning
of a turnaround in 2003 as the combination of an economic recovery and pent-up
demand led businesses to gradually step up purchases after a long freeze on
technology spending.
Which individual holdings were the largest contributors to the Fund's
performance?
For the period, the Fund's top contributor within the semiconductor industry was
flash memory supplier SanDisk (SNDK). Flash memory cards store data in products
such as digital cameras, MP3 players, and cell phones. SanDisk enjoyed a banner
year as demand for this type of removable storage rose along with increasing
sales of consumer electronics. Intel (INTC) was also a top performer, as sales
of personal computers grew briskly, helping shares of the chip giant double in
2003.
Texas Instruments (TXN) is another company whose business is highly dependent
upon growth in consumer electronics. The company's products include digital
signal processor (DSP) chips, which are highly specialized data-processing
devices. Key applications for these chips include cell phones, digital cameras,
PCs, and digital televisions. Increasing sales in all these product categories
contributed to Texas Instruments' success in 2003. Other semiconductor firms
that boosted Fund performance were chip foundry Taiwan Semiconductor
Manufacturing Co. (TSM), as well as Altera (ALTR) and Xilinx (XLNX), makers of
programmable logic devices.
Among our software holdings, SAP AG (SAP) and Electronic Arts (ERTS) led the
pack. SAP, a leading provider of business application software, rallied as an
improving economy resulted in an uptick in corporate spending on enterprise
software. Electronic Arts, the video game industry's leading game developer,
offers a diverse lineup of games that appeals to gamers of all ages. With nearly
50% of U.S. households already having at least one type of game console, we
believe future growth in the industry will be driven by the sale of games. It
was this type of growth in demand that helped Electronic Arts achieve record
results in 2003.
Which holdings were the greatest detractors from the Fund's performance?
Due to extremely favorable market conditions, there were only a few Fund
holdings that detracted from performance on an absolute basis. One of the Fund's
larger losses was in InterActiveCorp (IACI), the online commerce conglomerate.
InterActiveCorp has managed to accumulate some of the top Internet properties
such as Hotwire.com, Expedia, Home Shopping Network, and LendingTree. Since the
Fund started purchasing shares mid-year, however, InterActiveCorp's stock price
has fallen, resulting in an unrealized loss for the Fund. The Fund also realized
a small loss after closing its position in communications giant AT&T (T) during
Q1.
[LOGO]Firsthand(R)
Fund Performance and Holding Information (as of December 31, 2003)
- --------------------------------------------------------------------------------
Firsthand Technology Leaders Fund vs. Market Indices
TLFQX NASDAQ DJIA S&P 500
- --------------------------------------------------------------------------------
Since Inception(a) 9.65% 3.90% 6.34% 3.67%
5-Year -0.52% -1.45% 4.56% -0.57%
3-Year -20.15% -6.35% 1.02% -4.04%
1-Year 61.78% 50.77% 28.29% 28.68%
Q4 '03 Total Return(b) 15.02% 12.30% 13.40% 12.18%
(a) Firsthand Technology Leaders Fund commenced operations on December 10,
1997.
(b) Not annualized.
Growth of a Hypothetical $10,000 Investment
[The following table was depicted as a mountain chart in the printed material]
INCEPTON DATE DEC 10, 1997
TLFQX NASDAQ DJIA S&P 500
----- ------ ---- -------
11/30/1997 10000 10000 10000 10000
12/30/1997 10070 9695 9836 9955
1/30/1998 11070 9997 9837 10065
2/28/1998 12150 10930 10660 10791
3/31/1998 12190 11333 10991 11344
4/30/1998 13151 11538 11326 11458
5/31/1998 12141 10989 11148 11261
6/30/1998 12922 11709 11227 11718
7/31/1998 13685 11574 11146 11594
8/31/1998 10822 9270 9484 9918
9/30/1998 11291 10478 9881 10553
10/31/1998 13861 10961 10831 11411
11/30/1998 15811 12067 11522 12103
12/31/1998 17942 13577 11619 12800
1/31/1999 20772 15518 11848 13336
2/28/1999 18772 14173 11811 12921
3/31/1999 21832 15253 12436 13438
4/30/1999 22702 15761 13716 13959
5/31/1999 22072 15317 13455 13629
6/30/1999 26372 16659 13995 14385
7/31/1999 26702 16367 13600 13936
8/31/1999 28823 16996 13855 13866
9/30/1999 29431 17043 13242 13486
10/31/1999 32038 18413 13752 14339
11/30/1999 36849 20713 13968 14632
12/31/1999 45316 25271 14780 15493
1/31/2000 43683 24472 14071 14715
2/29/2000 58196 29173 13051 14436
3/31/2000 58947 28408 14092 15849
4/30/2000 56218 23986 13857 15372
5/31/2000 48034 21133 13612 15056
6/30/2000 54200 24649 13532 15428
7/31/2000 49604 23413 13636 15186
8/31/2000 58670 26148 14567 16130
9/30/2000 51987 22836 13852 15278
10/31/2000 45090 20953 14276 15214
11/30/2000 34898 16157 13585 14014
12/31/2000 34333 15369 14082 14083
1/31/2001 38574 17251 14226 14582
2/28/2001 25577 13391 13745 13253
3/31/2001 22067 11457 12949 12413
4/30/2001 27464 13177 14084 13378
5/31/2001 25273 13145 14351 13467
6/30/2001 24157 13461 13821 13140
7/31/2001 22057 12627 13863 13010
8/31/2001 19013 11249 13144 12196
9/30/2001 14163 9342 11698 11211
10/31/2001 16192 10536 12013 11425
11/30/2001 19358 12038 13077 12301
12/31/2001 19135 12166 13316 12409
1/31/2002 19652 12067 13196 12228
2/28/2002 16994 10806 13473 11992
3/31/2002 18729 11521 13883 12443
4/30/2002 15969 10542 13285 11689
5/31/2002 14904 10093 13295 11603
6/30/2002 12794 9144 12395 10776
7/31/2002 10917 8302 11731 9936
8/31/2002 10562 8221 11661 10001
9/30/2002 8898 7332 10233 8914
10/31/2002 10460 8320 11342 9699
11/30/2002 12611 9256 12051 10270
12/31/2002 10805 8363 11317 9667
1/31/2003 10704 8273 10940 9413
2/28/2003 10714 8384 10751 9272
3/31/2003 10947 8411 10905 9362
4/30/2003 12226 9186 11587 10133
5/31/2003 13626 10015 12134 10667
6/30/2003 13595 10188 12336 10803
7/31/2003 14539 10895 12696 10994
8/31/2003 15939 11372 12978 11208
9/30/2003 15198 11229 12802 11089
10/31/2003 16964 12151 13554 11717
11/30/2003 17430 12332 13565 11820
12/31/2003 17481 12609 14518 12440
Holdings by Industry(c)
% of Net Assets
Software 31.4%
- ------------------------------------------
Semiconductors 22.5%
- ------------------------------------------
Internet 8.5%
- ------------------------------------------
Semiconductor Equipment 6.8%
- ------------------------------------------
Networking 6.7%
- ------------------------------------------
Services 6.1%
- ------------------------------------------
Communications Equipment 3.5%
- ------------------------------------------
Other Electronics 3.4%
- ------------------------------------------
Defense & Aerospace 3.0%
- ------------------------------------------
Communications 2.1%
- ------------------------------------------
Media 2.0%
- ------------------------------------------
Peripherals 1.9%
- ------------------------------------------
Photonics 1.8%
- ------------------------------------------
Net Cash 0.3%
- ------------------------------------------
(c) Based on percentage of net assets as of December 31, 2003.
Top 10 Holdings(d)
% of Net Assets
Cisco Systems, Inc. 6.7%
- ------------------------------------------
SAP AG - ADR 5.5%
- ------------------------------------------
Taiwan Semiconductor
Manufacturing Co. - ADR 4.3%
- ------------------------------------------
Electronic Arts, Inc. 4.2%
- ------------------------------------------
Time Warner, Inc. 3.9%
- ------------------------------------------
SanDisk Corp. 3.8%
- ------------------------------------------
Flextronics International Ltd. 3.8%
- ------------------------------------------
Altera Corp. 3.5%
- ------------------------------------------
Intel Corp. 3.5%
- ------------------------------------------
Texas Instruments, Inc. 3.5%
- ------------------------------------------
(d) Top 10 stock holdings total 42.7% of net assets. These holdings are
current as of December 31, 2003, and may not be representative of current
or future investments.
2003 Annual Report | 9
Firsthand Technology Innovators Fund
Performance and Portfolio Discussion
- --------------------------------------------------------------------------------
How did the Fund perform in 2003?
In 2003, Firsthand Technology Innovators Fund (TIFQX) posted a 55.80% gain,
versus a 50.77% increase for the Nasdaq Composite Index and a 51.32% gain for
the Lipper Science and Technology Fund Index. For the six months ended December
31, 2003, Firsthand Technology Innovators Fund rose 24.30% as compared with
23.77% and 23.54% gains for the Nasdaq and the Lipper peer group benchmarks,
respectively.
Which industries had the greatest impact on the Fund's performance?
Over the past 12 months, the Fund was able to outperform its benchmarks due to
its exposure to the semiconductor, telecom, and software industries. The
semiconductor industry benefitted from booming sales of consumer electronic
devices and renewed strong demand for personal computers. In anticipation of
this, we positioned the Fund heavily in semiconductor companies that had
considerable exposure to the consumer market.
Which individual holdings were the largest contributors to the Fund's
performance?
Within the area of consumer electronics, digital photography played a large part
in the Fund's success in 2003. Chip manufacturer OmniVision Technologies' (OVTI)
camera chip helped revitalize the cell phone industry as handset manufacturers
began integrating them into their products, creating the heretofore unheard of
"camera phone." Demand for these phones is on the rise, and as a result,
OmniVision saw its stock price quadruple in 2003.
SanDisk (SNDK) and Lexar Media (LEXR) have also capitalized on the digital
photography trend by providing consumers with the digital equivalent of film:
removable flash memory. These memory cards can be reused to store pictures and
have rapidly become the primary form of portable storage for various electronic
devices, including PDAs, digital camcorders, and MP3 players. These two
companies are leading manufacturers of removable flash cards and both
contributed considerably to Fund performance in 2003.
After several lean years for the PC industry, we began to see signs that a PC
replacement cycle was starting to emerge. Rather than owning mature, slow-growth
PC makers, we invested in component suppliers like graphics-chip company ATI
Technologies (ATYT) and disk-drive equipment manufacturer Intevac (IVAC). The
stock prices for these companies increased as they benefitted from an uptick in
PC sales. Other stocks that boosted Fund performance included wireless
communications equipment supplier SpectraLink (SLNK), electronic design
automation firm Magma Design Automation (LAVA), and NetScreen Technologies
(NSCN), a provider of firewalls and virtual private networks.
Which holdings were the greatest detractors from the Fund's performance?
The Fund's biggest money-loser during the period was billing and customer
relationship management company Portal Software (PRSF), which suffered after
missing its Q3 revenue target by a significant margin. Earlier in the year, we
closed out our positions in Virage Logic (VIRL) and Nassda (NSDA) with losses
after both companies lowered their revenue and earnings forecasts for 2003. A
number of factors led us to sell and realize a loss in chipmaker Genesis
Microchip (GNSS), including the abrupt resignation of its CEO and the
termination of the company's proposed merger with rival Pixelworks.
[LOGO]Firsthand(R)
Fund Performance and Holding Information (as of December 31, 2003)
- --------------------------------------------------------------------------------
Firsthand Technology Innovators Fund vs. Market Indices
TIFQX NASDAQ DJIA S&P 500
- --------------------------------------------------------------------------------
Since Inception(a) 8.12% 1.81% 4.51% 1.49%
5-Year -0.63% -1.45% 4.56% -0.57%
3-Year -20.64% -6.35% 1.02% -4.04%
1-Year 55.80% 50.77% 28.29% 28.68%
Q4 '03 Total Return(b) 6.35% 12.30% 13.40% 12.18%
(a) Firsthand Technology Innovators Fund commenced operations on May 20, 1998.
(b) Not annualized.
Growth of a Hypothetical $10,000 Investment
[The following table was depicted as a mountain chart in the printed material]
INCEPTON DATE MAY 20, 1998
TIFQX NASDAQ DJIA S&P 500
----- ------ ---- -------
4/30/1998 10000 10000 10000 10000
5/31/1998 10160 9637 9837 9836
6/30/1998 11030 10269 9907 10235
7/31/1998 11057 10150 9836 10126
8/31/1998 8503 8130 8369 8662
9/30/1998 8110 9189 8720 9217
10/31/1998 10930 9613 9558 9967
11/30/1998 13420 10582 10168 10571
12/31/1998 16010 11907 10253 11180
1/31/1999 18350 13609 10455 11648
2/28/1999 16570 12429 10422 11286
3/31/1999 20451 13377 10974 11737
4/30/1999 21511 13822 12103 12192
5/31/1999 22271 13433 11873 11904
6/30/1999 28041 14610 12350 12564
7/31/1999 28231 14354 12001 12172
8/31/1999 31041 14906 12226 12111
9/30/1999 32307 14947 11685 11779
10/31/1999 34339 16148 12135 12525
11/30/1999 39545 18165 12326 12780
12/31/1999 50006 22162 13043 13532
1/31/2000 53025 21462 12417 12853
2/29/2000 79386 25584 11517 12609
3/31/2000 67310 24913 12436 13843
4/30/2000 57736 21035 12228 13426
5/31/2000 48264 18533 12012 13151
6/30/2000 63085 21617 11941 13475
7/31/2000 55405 20533 12033 13264
8/31/2000 64289 22932 12855 14088
9/30/2000 56367 20027 12223 13345
10/31/2000 45578 18375 12598 13288
11/30/2000 28427 14170 11988 12240
12/31/2000 31031 13479 12427 12301
1/31/2001 36438 15129 12554 12737
2/28/2001 22955 11744 12129 11575
3/31/2001 18273 10047 11427 10842
4/30/2001 20862 11556 12428 11685
5/31/2001 21546 11528 12664 11763
6/30/2001 22592 11805 12196 11477
7/31/2001 21600 11074 12233 11364
8/31/2001 19225 9866 11598 10652
9/30/2001 14127 8193 10323 9792
10/31/2001 17347 9240 10601 9979
11/30/2001 20446 10557 11539 10745
12/31/2001 22002 10670 11751 10839
1/31/2002 20178 10583 11644 10681
2/28/2002 15241 9477 11890 10475
3/31/2002 17213 10104 12251 10869
4/30/2002 15147 9246 11723 10210
5/31/2002 13443 8851 11732 10134
6/30/2002 11430 8019 10938 9413
7/31/2002 9820 7281 10352 8679
8/31/2002 9391 7210 10290 8736
9/30/2002 7741 6430 9030 7786
10/31/2002 8747 7297 10009 8472
11/30/2002 11833 8117 10634 8970
12/31/2002 9955 7334 9986 8443
1/31/2003 9753 7256 9654 8222
2/28/2003 8828 7353 9487 8099
3/31/2003 8855 7377 9623 8177
4/30/2003 10317 8056 10225 8851
5/31/2003 12477 8783 10707 9317
6/30/2003 12477 8934 10886 9436
7/31/2003 14248 9555 11204 9603
8/31/2003 15039 9973 11452 9790
9/30/2003 14583 9848 11297 9686
10/31/2003 15884 10657 11961 10234
11/30/2003 16166 10815 11971 10324
12/31/2003 15509 11058 12811 10865
Holdings by Industry(c)
% of Net Assets
Semiconductors 34.9%
- ------------------------------------------
Software 11.0%
- ------------------------------------------
Services 8.5%
- ------------------------------------------
Other Electronics 8.1%
- ------------------------------------------
Communications Equipment 7.5%
- ------------------------------------------
Photonics 7.0%
- ------------------------------------------
Intellectual Property 4.5%
- ------------------------------------------
Electronic Design Automation 4.4%
- ------------------------------------------
Defense & Aerospace 2.9%
- ------------------------------------------
Networking 2.4%
- ------------------------------------------
Peripherals 2.3%
- ------------------------------------------
Internet 1.5%
- ------------------------------------------
Net Cash 5.0%
- ------------------------------------------
(c) Based on percentage of net assets as of December 31, 2003.
Top 10 Holdings(d)
% of Net Assets
Aeroflex, Inc. 5.5%
- ------------------------------------------
ATI Technologies, Inc. 4.9%
- ------------------------------------------
PDF Solutions, Inc. 4.4%
- ------------------------------------------
Kopin Corp. 4.0%
- ------------------------------------------
Zoran Corp. 3.7%
- ------------------------------------------
NetScreen Technologies, Inc. 3.2%
- ------------------------------------------
OmniVision Technologies, Inc. 3.2%
- ------------------------------------------
Lexar Media, Inc. 3.2%
- ------------------------------------------
TeleCommunication
Systems, Inc. - A 2.8%
- ------------------------------------------
Avici Systems, Inc. 2.7%
- ------------------------------------------
(d) Top 10 stock holdings total 37.6% of net assets. These holdings are
current as of December 31, 2003, and may not be representative of current
or future investments.
2003 Annual Report | 11
Firsthand e-Commerce Fund
Performance and Portfolio Discussion
- --------------------------------------------------------------------------------
How did the Fund perform in 2003?
In 2003, Firsthand e-Commerce Fund (TEFQX) posted a 47.12% gain, versus a 50.77%
increase for the Nasdaq Composite Index and a 51.32% gain for the Lipper Science
and Technology Fund Index. For the six months ended December 31, 2003, Firsthand
e-Commerce Fund rose 20.95% as compared with 23.77% and 23.54% gains for the
Nasdaq and the Lipper peer group benchmarks, respectively.
Which industries had the greatest impact on the Fund's performance?
The portfolio's exposure to the software and Internet industries drove Fund
performance in 2003. However, technology sector funds that were more diversified
among different industries within the technology sector and funds that had
considerably more exposure to Internet stocks fared better than Firsthand
e-Commerce Fund in 2003. Nonetheless, there were several bright spots in the
Fund's portfolio.
Which individual holdings were the largest contributors to the Fund's
performance?
Over the past 12 months, Internet stocks outperformed the broader market by a
substantial margin, and our holdings in eBay (EBAY), Amazon.com (AMZN), and
Yahoo! (YHOO) contributed strongly to the Fund's performance. Solid growth in
online sales during the holiday shopping season drove strong earnings growth for
many online retailers. The Fund's Internet weighting has grown from 14.0% at the
beginning of the year to 22.8% at year end. We increased our Internet exposure
by adding shares of online DVD rental company Netflix (NFLX) and e-commerce
conglomerate InterActiveCorp (IACI), the parent company of popular Internet
sites such as Expedia, LendingTree, Ticketmaster, and Hotwire.
Network security stocks also did well in 2003, despite tight corporate IT
budgets. This difficult environment appeared to favor small projects that could
be easily implemented and offered a quick return on investment. This benefitted
companies such as anti-virus software maker Symantec (SYMC), firewall and
virtual private network supplier NetScreen Technologies (NSCN), and employee
Internet management software vendor Websense (WBSN). After being a drag on the
Fund in early 2003, Websense bounced back in Q3 and Q4 on robust demand for the
company's latest version of its flagship product.
Which holdings were the greatest detractors from the Fund's performance?
One of the Fund's larger underperformers was Concord EFS (CE), a leading
processor of credit and debit card transactions, which was set to be acquired by
First Data (FDC) in April 2003. However, the Department of Justice initially
blocked the deal on antitrust grounds, saying it would hurt competition and
result in higher prices for debit-card transactions. News of the decision sent
shares of CE spiraling downward. Then late in the year, the Justice Department
agreed to allow the merger to proceed, but on new financial terms that lowered
the value of the merger, which failed to bring the company's stock price back to
its earlier highs.
Information technology consultants dependent upon government spending also fared
poorly during 2003. Shares of PEC Solutions (PECS) slumped after delayed
government contracts negatively affected the company's earnings and revenue
forecast for the year. Faced with an uncertain outlook, we closed our position
in IT consultant CACI International (CAI) at a loss.
[LOGO]Firsthand(R)
Fund Performance and Holding Information (as of December 31, 2003)
- --------------------------------------------------------------------------------
Firsthand e-Commerce Fund vs. Market Indices
TEFQX NASDAQ DJIA S&P 500
- --------------------------------------------------------------------------------
Since Inception(a) -24.17% -6.84% 2.19% -1.88%
3-Year -22.72% -6.35% 1.02% -4.04%
1-Year 47.12% 50.77% 28.29% 28.68%
Q4 '03 Total Return(b) 11.27% 12.30% 13.40% 12.18%
(a) Firsthand e-Commerce Fund commenced operations on September 30, 1999.
(b) Not annualized.
Growth of a Hypothetical $10,000 Investment
[The following table was depicted as a mountain chart in the printed material]
INCEPTON DATE SEP 30, 1999
TEFQX NASDAQ DJIA S&P 500
----- ------ ---- -------
9/30/1999 10000 10000 10000 10000
10/31/1999 10750 10804 10385 10633
11/30/1999 12090 12153 10549 10849
12/31/1999 14860 14828 11162 11488
1/31/2000 14310 14359 10627 10911
2/29/2000 17370 17117 9856 10705
3/31/2000 15340 16668 10642 11752
4/30/2000 12330 14074 10465 11398
5/31/2000 11200 12400 10280 11164
6/30/2000 14500 14463 10219 11440
7/31/2000 12210 13738 10298 11261
8/31/2000 13690 15343 11001 11960
9/30/2000 12220 13399 10461 11329
10/31/2000 9720 12294 10782 11281
11/30/2000 6450 9480 10259 10392
12/31/2000 6675 9018 10635 10443
1/31/2001 6595 10122 10744 10813
2/28/2001 4229 7857 10380 9827
3/31/2001 3041 6722 9779 9204
4/30/2001 3605 7732 10636 9920
5/31/2001 3776 7713 10838 9986
6/30/2001 3766 7898 10437 9743
7/31/2001 3131 7409 10469 9647
8/31/2001 2739 6601 9926 9043
9/30/2001 2024 5481 8834 8313
10/31/2001 2648 6182 9072 8472
11/30/2001 3121 7063 9875 9122
12/31/2001 3353 7138 10056 9202
1/31/2002 3172 7081 9965 9067
2/28/2002 2739 6341 10175 8892
3/31/2002 3081 6760 10484 9227
4/30/2002 2658 6186 10033 8668
5/31/2002 2547 5922 10040 8604
6/30/2002 2275 5365 9361 7991
7/31/2002 1843 4872 8859 7368
8/31/2002 1832 4824 8807 7416
9/30/2002 1581 4302 7728 6610
10/31/2002 1994 4882 8566 7192
11/30/2002 2346 5431 9101 7615
12/31/2002 2094 4907 8546 7168
1/31/2003 2104 4854 8262 6980
2/28/2003 1973 4920 8119 6875
3/31/2003 1984 4935 8235 6942
4/30/2003 2225 5390 8750 7514
5/31/2003 2457 5876 9163 7910
6/30/2003 2547 5978 9316 8011
7/31/2003 2698 6393 9588 8152
8/31/2003 2910 6673 9801 8311
9/30/2003 2769 6589 9668 8223
10/31/2003 3041 7130 10236 8688
11/30/2003 3021 7236 10244 8764
12/31/2003 3081 7399 10964 9224
Holdings by Industry(c)
% of Net Assets
Software 51.2%
- ------------------------------------------
Internet 22.8%
- ------------------------------------------
Services 11.6%
- ------------------------------------------
Communications 6.9%
- ------------------------------------------
Containers/Packaging 2.0%
- ------------------------------------------
Health Care 1.9%
- ------------------------------------------
Financial 1.1%
- ------------------------------------------
Networking 1.1%
- ------------------------------------------
Net Cash 1.4%
- ------------------------------------------
(c) Based on percentage of net assets as of December 31, 2003.
Top 10 Holdings(d)
% of Net Assets
Websense, Inc. 9.1%
- ------------------------------------------
Netflix, Inc. 6.6%
- ------------------------------------------
Symantec Corp. 4.6%
- ------------------------------------------
BEA Systems, Inc. 3.6%
- ------------------------------------------
Yahoo! Inc. 3.4%
- ------------------------------------------
NetScreen Technologies, Inc. 3.2%
- ------------------------------------------
@Road, Inc. 3.2%
- ------------------------------------------
Concord EFS, Inc. 3.1%
- ------------------------------------------
Cognizant Technology
Solutions Corp. 3.1%
- ------------------------------------------
eBay, Inc. 3.1%
- ------------------------------------------
(d) Top 10 stock holdings total 43.0% of net assets. These holdings are
current as of December 31, 2003, and may not be representative of current
or future investments.
2003 Annual Report | 13
Firsthand Global Technology Fund
Performance and Portfolio Discussion
- --------------------------------------------------------------------------------
How did the Fund perform in 2003?
In 2003, Firsthand Global Technology Fund (GTFQX) posted a 90.50% gain, versus a
50.77% increase for the Nasdaq Composite Index and a 51.32% gain for the Lipper
Science and Technology Fund Index. For the six months ended December 31, 2003,
Firsthand Global Technology Fund rose 29.86% as compared with 23.77% and 23.54%
gains for the Nasdaq and the Lipper peer group benchmarks, respectively.
Which industries had the greatest impact on the Fund's performance?
The Fund handily outpaced its benchmarks during 2003 due to its weightings in
the semiconductor, telecommunications, and software industries. In particular,
wireless communications, including services, cellular handsets, and Wi-Fi,
helped drive renewed telecom industry growth.
Which individual holdings were the largest contributors to the Fund's
performance?
The Fund's two largest holdings at year end, UTStarcom (UTSI) and Alvarion
(ALVR), were among the largest contributors to the Fund's outstanding results.
UTStarcom provides telecom equipment for wireline and wireless networks in
emerging markets. The company managed to avoid the telecom collapse in the U.S.
by focusing on China, which is arguably the fastest-growing telecom market in
the world. UTStarcom experienced significant success there in 2003 and is
looking to expand to other rapidly developing regions, including India, Latin
America, and Africa.
Similarly, Israel-based Alvarion saw its business improve after an increase in
demand for the company's wireless broadband equipment. Alvarion plays an
integral role in the build-out of the so-called "last-mile" infrastructure by
providing high-speed Internet and voice services to rural and suburban regions
worldwide.
Semiconductor foundries and outsourcers were among the first to feel the effects
of an uptick in chip demand in the first half of the year. Our holdings in Amkor
Technology (AMKR), Taiwan Semiconductor Manufacturing Co. (TSM), ASML Holding
(ASML), and ChipPAC (CHPC) all contributed strongly to Fund performance in 2003.
Market share gains on top of a moderate rise in PC sales helped drive profits
for graphics chip manufacturer ATI Technologies (ATYT), while the growing
popularity of digital photography bolstered OmniVision Technologies' (OVTI)
bottom line. OmniVision benefitted from the rapid adoption of its camera chips
that are used in digital cameras and camera phones.
Standouts in the software industry included enterprise software giant SAP AG
(SAP) and electronic design automation software provider Magma Design Automation
(LAVA).
Which holdings were the greatest detractors from the Fund's performance?
There were very few disappointments for the Fund in 2003. The Fund's biggest
underperformer during the period was Portal Software (PRSF), a billing and CRM
company whose price dropped after it significantly missed its Q3 revenue target.
Similarly, j2 Global Communications (JCOM), a provider of outsourced messaging
and communication services, fell hard after it failed to meet analyst forecasts
for Q3. We also closed our position in EDA software maker Synopsys (SNPS)
earlier in the year at a loss.
[LOGO]Firsthand(R)
Fund Performance and Holding Information (as of December 31, 2003)
- --------------------------------------------------------------------------------
Firsthand Global Technology Fund vs. Market Indices
GTFQX NASDAQ DJIA S&P 500
- --------------------------------------------------------------------------------
Since Inception(a) -21.07% -16.67% 1.45% -6.11%
3-Year -19.23% -6.35% 1.02% -4.04%
1-Year 90.50% 50.77% 28.29% 28.68%
Q4 '03 Total Return(b) 17.60% 12.30% 13.40% 12.18%
(a) Firsthand Global Technology Fund commenced operations on September 29,
2000.
(b) Not annualized.
Growth of a Hypothetical $10,000 Investment
[The following table was depicted as a mountain chart in the printed material]
INCEPTON DATE SEP 29, 2000
GTFQX NASDAQ DJIA S&P 500
----- ------ ---- -------
9/30/2000 10000 10000 10000 10000
10/31/2000 9890 9175 10307 9958
11/31/2000 8890 7076 9808 9173
12/31/2000 8782 6730 10166 9218
1/31/2001 9766 7555 10270 9545
2/28/2001 6925 5864 9923 8674
3/31/2001 5671 5017 9349 8125
4/30/2001 6584 5770 10168 8756
5/31/2001 6052 5756 10361 8815
6/30/2001 5520 5895 9978 8600
7/31/2001 5299 5530 10008 8516
8/31/2001 4697 4926 9489 7983
9/30/2001 3774 4091 8445 7338
10/31/2001 4346 4614 8672 7478
11/30/2001 4938 5272 9441 8052
12/31/2001 5159 5328 9613 8122
1/31/2002 4968 5284 9526 8004
2/28/2002 4155 4732 9727 7849
3/31/2002 4958 5045 10023 8145
4/30/2002 4286 4617 9591 7651
5/31/2002 3894 4420 9598 7594
6/30/2002 3232 4004 8949 7053
7/31/2002 2780 3636 8469 6504
8/31/2002 2519 3600 8419 6546
9/30/2002 2037 3211 7387 5835
10/31/2002 2268 3644 8188 6348
11/30/2002 2901 4053 8700 6722
12/31/2002 2429 3662 8170 6327
1/31/2003 2389 3623 7898 6161
2/28/2003 2349 3672 7762 6069
3/31/2003 2349 3683 7873 6128
4/30/2003 2800 4023 8365 6633
5/31/2003 3402 4386 8760 6982
6/30/2003 3563 4461 8906 7071
7/31/2003 3984 4771 9166 7196
8/31/2003 4266 4980 9369 7336
9/30/2003 3934 4917 9243 7258
10/31/2003 4426 5321 9785 7669
11/30/2003 4577 5400 9793 7736
12/31/2003 4627 5522 10481 8142
Holdings by Industry(c)
% of Net Assets
Software 23.4%
- ------------------------------------------
Communications Equipment 20.6%
- ------------------------------------------
Semiconductors 17.5%
- ------------------------------------------
Services 11.8%
- ------------------------------------------
Other Electronics 11.1%
- ------------------------------------------
Semiconductor Equipment 4.4%
- ------------------------------------------
Electronic Design Automation 3.9%
- ------------------------------------------
Peripherals 2.8%
- ------------------------------------------
Media 1.0%
- ------------------------------------------
Internet 0.9%
- ------------------------------------------
Advanced Materials 0.4%
- ------------------------------------------
Net Cash 2.2%
- ------------------------------------------
(c) Based on percentage of net assets as of December 31, 2003.
Top 10 Holdings(d)
% of Net Assets
Alvarion Ltd. 9.2%
- ------------------------------------------
UTStarcom, Inc. 7.6%
- ------------------------------------------
Mercury Interactive Corp. 4.0%
- ------------------------------------------
Amkor Technology, Inc. 4.0%
- ------------------------------------------
PDF Solutions, Inc. 3.9%
- ------------------------------------------
Taiwan Semiconductor
Manufacturing Co. - ADR 3.7%
- ------------------------------------------
ChipPAC, Inc. 3.6%
- ------------------------------------------
Ceragon Networks Ltd. 3.3%
- ------------------------------------------
ATI Technologies, Inc. 3.2%
- ------------------------------------------
STMicroelectronics N.V. - ADR 2.9%
- ------------------------------------------
(d) Top 10 stock holdings total 45.4% of net assets. These holdings are
current as of December 31, 2003, and may not be representative of current
or future investments.
2003 Annual Report | 15
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
Firsthand Funds
San Jose, California
We have audited the accompanying statements of assets and liabilities of
Firsthand Funds comprising, respectively, Firsthand Technology Value Fund,
Firsthand Technology Leaders Fund, Firsthand Technology Innovators Fund,
Firsthand e-Commerce Fund, and Firsthand Global Technology Fund, including the
portfolios of investments as of December 31, 2003, and the related statements of
operations for the year then ended, changes in net assets for each of the two
years in the period then ended, and the financial highlights for the periods
indicated thereon. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Firsthand Funds as of December 31, 2003, the results of their operations, the
changes in their net assets, and the financial highlights for the periods
referred to above, in conformity with accounting principles generally accepted
in the United States of America.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 16, 2004
[LOGO]Firsthand(R)
Portfolio of Investments Firsthand Technology Value Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
non-income producing % shares value
- ----------------------------------------------------------------------------------------------------------
COMMON STOCK 98.5% $864,323,256
------------
(Cost $1,440,451,638)
COMMUNICATIONS 2.7% 23,409,293
------------
@Road, Inc. o 386,600 5,141,780
Comcast Corp. - Special Class A o 43,100 1,348,168
Concurrent Computer Corp. o 860,700 3,761,259
Hughes Electronics Corp. o 24,450 404,639
Inet Technologies, Inc. o 25,000 300,000
Intrado, Inc. o 409,100 8,979,745
Metro One Telecommunications, Inc. o 96,500 250,900
Raindance Communications, Inc. o 98,000 269,500
ViaSat, Inc. o 154,300 2,953,302
COMMUNICATIONS EQUIPMENT 12.6% 111,032,337
------------
Anaren, Inc. (1) o 1,211,900 17,112,028
ARRIS Group, Inc. o 100,600 728,344
CIENA Corp. o 645,200 4,284,128
Harris Corp. 300,000 11,385,000
NHC Communications, Inc. o 328,700 213,648
Powerwave Technologies, Inc. o 959,100 7,337,115
REMEC, Inc. o 440,000 3,700,400
SpectraLink Corp. 180,000 3,450,600
Stratex Networks, Inc. (1) o 4,832,036 20,536,153
Tekelec, Inc. o 875,800 13,618,690
UTStarcom, Inc. o 773,300 28,666,231
DEFENSE & AEROSPACE 8.0% 70,042,024
------------
FLIR Systems, Inc. o 470,600 17,176,900
Herley Industries, Inc. o 372,400 7,708,680
L-3 Communications Holdings, Inc. o 320,000 16,435,200
Raytheon Co. 956,100 28,721,244
INTELLECTUAL PROPERTY 0.6% 5,107,400
------------
Silicon Genesis Corp. - 1-E (1) (2) o 4,071,226 4,315,500
Silicon Genesis Corp. - D (1) (2) o 705,840 791,900
MEDIA 0.0% 82,722
------------
The News Corp. Ltd. - Preferred ADR 2,735 82,722
NETWORKING 11.0% 96,815,874
------------
Caspian Networks, Inc. - AAA (2) o 3,378,104 810,745
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
2003 Annual Report | 17
Portfolio of Investments Firsthand Technology Value Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(continued) non-income producing % shares value
- ----------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. o 3,170,800 $ 77,018,732
Enterasys Networks, Inc. o 1,818,200 6,818,250
Extreme Networks, Inc. o 12,695 91,531
IP Unity, Inc. - C (2) o 1,104,265 1,747,389
iShares Goldman Sachs
Networking Index Fund o 103,400 2,854,874
McDATA Corp. - B o 514,700 4,905,091
Polaris Networks, Inc. - A (2) o 297,848 33,836
Riverstone Networks, Inc. o 2,284,168 2,535,426
OTHER ELECTRONICS 0.8% 6,968,450
------------
Centerpoint Broadband
Technologies, Inc. - D (2) o 19,290 0
NanoMuscle, Inc. - C (2) o 1,250,000 1,250,000
PerkinElmer, Inc. 335,000 5,718,450
PERIPHERALS 3.2% 28,553,150
------------
Electronics For Imaging, Inc. o 200,000 5,204,000
Read-Rite Corp. o 990,000 4,950
Western Digital Corp. o 1,980,000 23,344,200
PHOTONICS 3.8% 33,555,483
------------
Celox Networks, Inc. - A-1 (2) o 1,000,000 0
Celox Networks, Inc. -
Common Stock (2) o 138,121 0
Corning, Inc. o 3,050,000 31,811,500
Finisar Corp. o 198,700 621,931
Luminous Networks, Inc. - D (2) o 868,710 937,642
Luminous Networks, Inc. - E (2) o 434,724 184,410
LuxN, Inc. - Common Stock (2) o 362,757 0
Maple Optical
Systems, Inc. - A-1 (1) (2) o 10,352,054 0
SEMICONDUCTOR EQUIPMENT 0.8% 6,942,242
------------
Global Locate, Inc. - A (1) (2) o 6,030,896 5,942,242
Global Locate, Inc. - C (1) (2) o 1,111,111 1,000,000
SEMICONDUCTORS 30.8% 269,896,522
------------
Aeroflex, Inc. o 1,250,600 14,619,514
Applied Micro Circuits Corp. o 2,899,900 17,341,402
AuthenTec, Inc. - C (2) o 1,472,495 738,000
Celeritek, Inc. o 522,200 3,874,724
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Portfolio of Investments Firsthand Technology Value Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(continued) non-income producing % shares value
- ----------------------------------------------------------------------------------------------------------
Clarisay, Inc. - B (1) (2) o 2,605,306 $ 0
Clarisay, Inc. - C (1) (2) o 7,194,244 0
Genesis Microchip, Inc. o 97,500 1,758,900
Kopin Corp. o 299,100 2,006,961
Lexar Media, Inc. o 1,999,200 34,846,056
Marvell Technology Group Ltd. o 300,000 11,379,000
Microtune, Inc. o 917,300 2,247,385
PMC-Sierra, Inc. o 1,255,700 25,302,355
SanDisk Corp. o 1,218,700 74,511,318
Skyworks Solutions, Inc. o 1,118,300 9,729,210
STMicroelectronics N.V. - ADR 783,400 21,159,634
TranSwitch Corp. o 3,693,000 8,493,900
TriQuint Semiconductor, Inc. o 2,332,400 16,490,068
Zoran Corp. o 1,460,500 25,398,095
SERVICES 5.5% 48,030,079
------------
Anteon International Corp. o 320,900 11,568,445
CACI International, Inc. - A o 499,500 24,285,690
SunGard Data Systems, Inc. o 340,000 9,421,400
TeleCommunication Systems,
Inc. - A o 557,600 2,754,544
SOFTWARE 18.7% 163,887,680
------------
Adobe Systems, Inc. 454,100 17,846,130
Comverse Technology, Inc. o 2,110,900 37,130,731
Concord Communications, Inc. (1) o 1,189,300 23,750,321
Electronic Arts, Inc. o 500,000 23,890,000
NetScreen Technologies, Inc. o 186,355 4,612,286
Progress Software Corp. o 224,400 4,591,224
Roxio, Inc. o 1,000,000 4,790,000
Websense, Inc. o 726,300 21,237,012
Wind River Systems, Inc. o 2,972,600 26,039,976
WARRANTS 0.1% 342,409
------------
(Cost $0)
INTELLECTUAL PROPERTY 0.1% 334,403
------------
Silicon Genesis Corp. - 1-E
Warrants (1) (2) o 1,257,859 334,339
Silicon Genesis Corp. - Common
Stock Warrants (1) (2) o 37,982 38
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
2003 Annual Report | 19
Portfolio of Investments Firsthand Technology Value Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(continued) non-income producing % shares/principal amount value
- ----------------------------------------------------------------------------------------------------------
Silicon Genesis Corp. - D
Warrants (1) (2) o 26,469 $ 26
OTHER ELECTRONICS 0.0% 0
------------
NanoMuscle, Inc. - C Anti-Dilution
Warrants (2) o 1 0
NanoMuscle, Inc. - C Performance
Warrants (2) o 1 0
PHOTONICS 0.0% 0
------------
Celox Networks, Inc. - A-1
Warrants (2) o 500,000 0
Luminous Networks, Inc. - D
Warrants (2) o 144,785 0
SEMICONDUCTOR EQUIPMENT 0.0% 4,079
------------
Global Locate, Inc. - C
Warrants (1) (2) o 370,370 3,704
Global Locate, Inc. Common
Stock Warrants (1) (2) o 75,000 375
SEMICONDUCTORS 0.0% 3,927
------------
AuthenTec, Inc. - C Warrants (2) o 392,665 3,927
Clarisay, Inc. Warrants
06/03/2005 (1) (2) o 500,000 0
Clarisay, Inc. Warrants
07/07/2005 (1) (2) o 500,000 0
Clarisay, Inc. Warrants
08/07/2005 (1) (2) o 500,000 0
Clarisay, Inc. Warrants
09/12/2005 (1) (2) o 250,000 0
Clarisay, Inc. Warrants
09/19/2005 (1) (2) o 100,000 0
Clarisay, Inc. Warrants
11/10/2005 (1) (2) o 500,000 0
CONVERTIBLE BONDS 0.1% 1,007,139
------------
(Cost $2,350,000)
SEMICONDUCTORS 0.1% 1,007,139
------------
Clarisay, Inc. 8.00%
06/03/2005 (1) (2) 500,000 214,285
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Portfolio of Investments Firsthand Technology Value Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(continued) non-income producing % shares/principal amount value
- ----------------------------------------------------------------------------------------------------------
Clarisay, Inc. 8.00%
07/07/2005 (1) (2) 500,000 $ 214,285
Clarisay, Inc. 8.00%
08/07/2005 (1) (2) 500,000 214,285
Clarisay, Inc. 8.00%
09/12/2005 (1) (2) 250,000 107,142
Clarisay, Inc. 8.00%
09/19/2005 (1) (2) 100,000 42,857
Clarisay, Inc. 8.00%
11/10/2005 (1) (2) 500,000 214,285
CASH EQUIVALENTS 1.6% 14,009,531
------------
(Cost $14,009,531)
SSgA Prime Money Market Portfolio 12,886,339 12,886,339
State Street Bank and Trust Company
Repurchase Agreement, 0.400%
dated 12/31/2003, to be
repurchased at $1,123,217 on
01/02/2004, collateralized by
$785,000 U.S. Treasury Bond,
8.750% maturing 08/15/2020
(value $1,173,820) 1,123,192 1,123,192
TOTAL INVESTMENT SECURITIES 100.3% 879,682,335
(Cost $1,456,811,169)
LIABILITIES IN EXCESS OF OTHER ASSETS (0.3)% (2,243,389)
------------
NET ASSETS 100.0% $877,438,946
============
(1) Affiliated issuer.
(2) Restricted security.
ADR American Depositary Receipts.
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
2003 Annual Report | 21
Portfolio of Investments Firsthand Technology Leaders Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
non-income producing % shares value
- ----------------------------------------------------------------------------------------------------------
COMMON STOCK 99.7% $155,638,630
------------
(Cost $165,104,405)
COMMUNICATIONS 2.1% 3,258,970
------------
Cox Communications, Inc. - A o 94,600 3,258,970
COMMUNICATIONS EQUIPMENT 3.5% 5,403,786
------------
QUALCOMM, Inc. 100,200 5,403,786
DEFENSE & AEROSPACE 3.0% 4,626,160
------------
Raytheon Co. 154,000 4,626,160
INTERNET 8.5% 13,238,534
------------
eBay, Inc. o 74,700 4,824,873
InterActiveCorp o 67,700 2,297,061
Time Warner, Inc. o 340,000 6,116,600
MEDIA 2.0% 3,166,553
------------
Pixar Animation Studios o 45,700 3,166,553
NETWORKING 6.7% 10,490,851
------------
Cisco Systems, Inc. o 431,900 10,490,851
OTHER ELECTRONICS 3.4% 5,390,569
------------
Agilent Technologies, Inc. o 184,356 5,390,569
PERIPHERALS 1.9% 2,994,856
------------
EMC Corp. o 231,800 2,994,856
PHOTONICS 1.8% 2,879,723
------------
Corning, Inc. o 276,100 2,879,723
SEMICONDUCTOR EQUIPMENT 6.8% 10,550,781
------------
Applied Materials, Inc. o 138,800 3,116,060
ASML Holding N.V o 130,300 2,612,515
KLA-Tencor Corp. o 44,800 2,628,416
Teradyne, Inc. o 86,200 2,193,790
SEMICONDUCTORS 22.5% 35,097,152
------------
Altera Corp. o 242,800 5,511,560
Flextronics International Ltd. o 398,100 5,907,804
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Portfolio of Investments Firsthand Technology Leaders Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(continued) non-income producing % shares value
- ----------------------------------------------------------------------------------------------------------
Intel Corp. 170,700 $ 5,496,540
Samsung Electronics Co., Ltd. - GDR 7,500 1,419,429
SanDisk Corp. o 97,400 5,955,036
Texas Instruments, Inc. 187,050 5,495,529
Xilinx, Inc. o 137,100 5,311,254
SERVICES 6.1% 9,488,679
------------
ChipPAC, Inc. - A o 361,380 2,742,874
Taiwan Semiconductor
Manufacturing Co. - ADR o 658,770 6,745,805
SOFTWARE 31.4% 49,052,016
------------
Adobe Systems, Inc. 100,500 3,949,650
Amdocs Ltd. o 121,800 2,738,064
BEA Systems, Inc. o 338,980 4,169,454
Business Objects SA - ADR o 106,600 3,695,822
Electronic Arts, Inc. o 138,100 6,598,418
Mercury Interactive Corp. o 51,100 2,485,504
Microsoft Corp. 146,000 4,020,840
Oracle Corp. o 301,900 3,985,080
SAP AG - ADR 205,300 8,532,268
Symantec Corp. o 117,200 4,060,980
VERITAS Software Corp. o 129,600 4,815,936
CASH EQUIVALENTS 0.7% 1,118,507
------------
(Cost $1,118,507)
SSgA Prime Money Market Portfolio 1,118,507 1,118,507
TOTAL INVESTMENT SECURITIES 100.4% 156,757,137
(Cost $166,222,912)
LIABILITIES IN EXCESS OF OTHER ASSETS (0.4)% (615,468)
------------
NET ASSETS 100.0% $156,141,669
============
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
2003 Annual Report | 23
Portfolio of Investments Firsthand Technology Innovators Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
non-income producing % shares value
- ----------------------------------------------------------------------------------------------------------
COMMON STOCK 93.8% $ 82,644,431
------------
(Cost $106,265,411)
COMMUNICATIONS EQUIPMENT 7.5% 6,588,683
------------
NHC Communications, Inc. o 507,700 329,994
Powerwave Technologies, Inc. o 139,400 1,066,410
SpectraLink Corp. 106,700 2,045,439
Tekelec, Inc. o 58,600 911,230
Teledyne Technologies, Inc. o 118,600 2,235,610
DEFENSE & AEROSPACE 2.9% 2,560,986
------------
Applied Signal Technology, Inc. 40,000 920,400
Microvision, Inc. o 215,300 1,640,586
ELECTRONIC DESIGN AUTOMATION 4.4% 3,884,430
------------
PDF Solutions, Inc. o 260,700 3,884,430
INTELLECTUAL PROPERTY 4.5% 3,921,216
------------
MIPS Technologies, Inc. o 350,000 1,905,750
Silicon Genesis Corp. - C (1) (2) o 155,556 284,217
Silicon Genesis Corp. - 1-E (1) (2) o 1,633,254 1,731,249
INTERNET 1.5% 1,362,500
------------
RADWARE Ltd. o 50,000 1,362,500
NETWORKING 2.4% 2,137,420
------------
IP Unity, Inc. - C (2) o 1,117,957 1,769,055
Polaris Networks, Inc. - A (2) o 702,152 79,765
Riverstone Networks, Inc. o 260,000 288,600
OTHER ELECTRONICS 8.1% 7,095,443
------------
ActivCard Corp. o 194,500 1,532,660
Centerpoint Broadband
Technologies, Inc. - D (2) o 27,092 0
Cree, Inc. o 30,900 546,621
Drexler Technology Corp. o 80,000 1,093,600
Intevac, Inc. o 114,200 1,611,362
LeapFrog Enterprises, Inc. o 40,000 1,061,200
NanoMuscle, Inc. - C (2) o 1,250,000 1,250,000
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Portfolio of Investments Firsthand Technology Innovators Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(continued) non-income producing % shares value
- ----------------------------------------------------------------------------------------------------------
PERIPHERALS 2.3% $ 2,016,700
------------
SafeNet, Inc. o 30,000 923,100
Universal Display Corp. o 80,000 1,093,600
PHOTONICS 7.0% 6,187,535
------------
Avici Systems, Inc. o 300,000 2,385,000
Finisar Corp. o 586,500 1,835,745
Luminous Networks, Inc. - D (2) o 1,522,719 1,643,546
Luminous Networks, Inc. - E (2) o 762,008 323,244
LuxN, Inc. - Common Stock (2) o 336,544 0
Maple Optical Systems,
Inc. - A-1 (1) (2) o 9,647,945 0
SEMICONDUCTORS 34.4% 30,268,447
------------
Aeroflex, Inc. o 414,100 4,840,829
Agere Systems, Inc. - A o 550,000 1,677,500
ATI Technologies, Inc. o 286,800 4,336,416
AuthenTec, Inc. - C (2) o 736,248 369,000
Clarisay, Inc. - B (1) (2) o 2,861,519 0
Kopin Corp. o 528,500 3,546,235
Lexar Media, Inc. o 160,000 2,788,800
Monolithic System Technology, Inc. o 270,600 2,313,630
NuTool, Inc. - D (2) o 533,503 847,950
O2Micro International Ltd. o 35,000 784,000
OmniVision Technologies, Inc. o 50,500 2,790,125
Power Integrations, Inc. o 25,000 836,500
Sigmatel, Inc. o 20,000 493,600
Silicon Image, Inc. o 50,000 361,500
Silicon Optix, Inc. - B (2) o 1,111,111 1,000,000
Zoran Corp. o 188,750 3,282,362
SERVICES 7.8% 6,886,167
------------
Innovion Corp. - C (1) (2) o 1,500,000 1,675,650
j2 Global Communications, Inc. o 61,100 1,513,447
Lightbridge, Inc. o 140,000 1,274,000
TeleCommunication
Systems, Inc. - A o 490,500 2,423,070
SOFTWARE 11.0% 9,734,904
------------
MSC.Software Corp. o 100,000 945,000
NetScreen Technologies, Inc. o 113,300 2,804,175
Roxio, Inc. o 312,000 1,494,480
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
2003 Annual Report | 25
Portfolio of Investments Firsthand Technology Innovators Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(continued) non-income producing % shares/principal amount value
- ----------------------------------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. o 41,700 $ 1,201,377
Verint Systems, Inc. o 96,200 2,170,272
Witness Systems, Inc. o 120,000 1,119,600
WARRANTS 0.0% 3,510
------------
(Cost $0)
INTELLECTUAL PROPERTY 0.0% 944
------------
Silicon Genesis Corp. - 1-E (1) (2) o 94,339 944
OTHER ELECTRONICS 0.0% 0
------------
NanoMuscle, Inc. - C Anti-Dilution
Warrants (2) o 1 0
NanoMuscle, Inc. - C Performance
Warrants (2) o 1 0
PHOTONICS 0.0% 0
------------
Luminous Networks, Inc. - D
Warrants (2) o 253,787 0
SEMICONDUCTORS 0.0% 1,963
------------
AuthenTec, Inc. - C Warrants (2) o 196,333 1,963
Clarisay, Inc. Warrants
05/08/2005 (1) (2) o 500,000 0
Clarisay, Inc. Warrants
09/19/2005 (1) (2) o 150,000 0
Clarisay, Inc. Warrants
10/10/2005 (1) (2) o 500,000 0
Clarisay, Inc. Warrants
12/31/2010 (1) (2) o 109,290 0
SERVICES 0.0% 603
------------
Innovion Corp. Warrants (1) (2) o 602,577 603
CONVERTIBLE BONDS 1.2% 1,095,432
------------
(Cost $1,752,577)
SEMICONDUCTORS 0.5% 492,855
------------
Clarisay, Inc. 8.00%
05/08/2005 (1) (2) 500,000 214,285
Clarisay, Inc. 8.00%
09/19/2005 (1) (2) 150,000 64,285
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Portfolio of Investments Firsthand Technology Innovators Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(continued) non-income producing % shares/principal amount value
- ----------------------------------------------------------------------------------------------------------
Clarisay, Inc. 8.00%
10/10/2005 (1) (2) 500,000 $ 214,285
SERVICES 0.7% 602,577
------------
Innovion Corp. 8.00%
03/07/2005 (1) (2) 602,577 602,577
CASH EQUIVALENTS 6.2% 5,416,625
------------
(Cost $5,416,625)
SSgA Prime Money Market Portfolio 3,561,977 3,561,977
State Street Bank and Trust Company
Repurchase Agreement, 0.400%
dated 12/31/2003, to be
repurchased at $1,854,689 on
01/02/2004, collateralized by
$1,885,000 U.S. Treasury Note,
4.250% maturing 11/15/2013
(value $1,904,549) 1,854,648 1,854,648
TOTAL INVESTMENT SECURITIES 101.2% 89,159,998
(Cost $113,434,613)
LIABILITIES IN EXCESS OF OTHER ASSETS (1.2)% (1,055,255)
------------
NET ASSETS 100.0% $ 88,104,743
============
(1) Affiliated issuer.
(2) Restricted security.
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
2003 Annual Report | 27
Portfolio of Investments Firsthand e-Commerce Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
non-income producing % shares value
- ----------------------------------------------------------------------------------------------------------
COMMON STOCK 98.6% $ 65,486,191
------------
(Cost $57,084,994)
COMMUNICATIONS 6.9% 4,592,390
------------
@Road, Inc. o 158,300 2,105,390
Liberty Media Corp. - A o 150,000 1,783,500
WebEx Communications, Inc. o 35,000 703,500
CONTAINERS/PACKAGING 2.0% 1,326,430
------------
Sealed Air Corp. o 24,500 1,326,430
FINANCIAL 1.1% 759,000
------------
E*TRADE FINANCIAL Corp. o 60,000 759,000
HEALTH CARE 1.9% 1,227,077
------------
Drugstore.com, Inc. o 222,700 1,227,077
INTERNET 22.8% 15,165,491
------------
1-800-FLOWERS.COM, Inc. - A o 10,000 110,600
Amazon.com, Inc. o 30,000 1,579,200
Ask Jeeves, Inc. o 10,000 181,200
Autobytel, Inc. o 60,000 544,800
eBay, Inc. o 31,600 2,041,044
InterActiveCorp o 54,800 1,859,364
LivePerson, Inc. o 100,000 507,900
Netflix, Inc. o 80,600 4,408,014
Time Warner, Inc. o 93,100 1,674,869
Yahoo! Inc. o 50,000 2,258,500
NETWORKING 1.1% 728,700
------------
Cisco Systems, Inc. o 30,000 728,700
SERVICES 11.6% 7,728,843
------------
Ameritrade Holding Corp. o 50,000 703,500
Anteon International Corp. o 11,700 421,785
Certegy, Inc. 17,500 574,000
CNET Networks, Inc. o 255,400 1,741,828
Fair, Issac and Company, Inc. 20,000 983,200
PEC Solutions, Inc. o 115,400 1,956,030
WebMD Corp. o 150,000 1,348,500
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Portfolio of Investments Firsthand e-Commerce Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(continued) non-income producing % shares/principal amount value
- ----------------------------------------------------------------------------------------------------------
SOFTWARE 51.2% $33,958,260
------------
Adobe Systems, Inc. 15,400 605,220
BEA Systems, Inc. o 193,100 2,375,130
Business Objects SA - ADR o 49,800 1,726,566
Chordiant Software, Inc. o 351,400 1,915,130
Cognizant Technology Solutions
Corp o 45,000 2,053,800
Cognos, Inc. o 19,100 584,842
Concord EFS, Inc. o 140,000 2,077,600
Digital Insight Corp. o 65,000 1,618,500
Global Payments, Inc. 17,000 801,040
Macromedia, Inc. o 98,900 1,764,376
Manhattan Associates, Inc. o 59,900 1,655,636
Mercury Interactive Corp. o 15,700 763,648
NetScreen Technologies, Inc. o 87,100 2,155,725
Roxio, Inc. o 254,500 1,219,055
Symantec Corp. o 88,200 3,056,130
Vastera, Inc. o 43,500 174,000
VeriSign, Inc. o 122,500 1,996,750
VERITAS Software Corp. o 36,900 1,371,204
Websense, Inc. o 206,700 6,043,908
CASH EQUIVALENTS 1.9% 1,273,634
------------
(Cost $1,273,634)
SSgA Prime Money Market Portfolio 987,083 987,083
State Street Bank and Trust Company
Repurchase Agreement, 0.400%
dated 12/31/2003, to be
repurchased at $286,558 on
01/02/2004, collateralized by
$295,000 U.S. Treasury Note,
1.625% maturing 09/30/2005
(value $297,133) 286,551 286,551
TOTAL INVESTMENT SECURITIES 100.5% 66,759,825
(Cost $58,358,628)
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5)% (361,914)
------------
NET ASSETS 100.0% $66,397,911
============
ADR American Depositary Receipts.
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
2003 Annual Report | 29
Portfolio of Investments Firsthand Global Technology Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
non-income producing % shares value
- ----------------------------------------------------------------------------------------------------------
COMMON STOCK 97.8% $ 56,1103,347
------------
(Cost $48,526,226)
ADVANCED MATERIALS 0.4% 211,850
------------
BASF AG - ADR 3,800 211,850
COMMUNICATIONS EQUIPMENT 20.6% 11,845,197
------------
Alvarion Ltd. o 456,200 5,269,110
Ceragon Networks Ltd. o 265,900 1,866,618
NHC Communications, Inc. o 163,600 106,336
QUALCOMM, Inc. 5,000 269,650
UTStarcom, Inc. o 116,900 4,333,483
ELECTRONIC DESIGN AUTOMATION 3.9% 2,233,510
------------
PDF Solutions, Inc. o 149,900 2,233,510
INTERNET 0.9% 545,000
------------
RADWARE Ltd. o 20,000 545,000
MEDIA 1.0% 552,330
------------
The News Corp. Ltd. - ADR 15,300 552,330
OTHER ELECTRONICS 11.1% 6,395,686
------------
Alps Electric Co., Ltd. 65,000 951,323
Drexler Technology Corp. o 30,000 410,100
Fujitsu Ltd. o 223,000 1,315,499
Intevac, Inc. o 69,000 973,590
Sony Corp. - ADR 42,600 1,476,942
TDK Corp. 17,600 1,268,232
PERIPHERALS 2.8% 1,621,554
------------
Maxtor Corp. o 101,900 1,131,090
Western Digital Corp. o 41,600 490,464
SEMICONDUCTOR EQUIPMENT 4.4% 2,508,573
------------
ASML Holding N.V o 66,758 1,338,498
Tokyo Electron Ltd. 15,400 1,170,075
SEMICONDUCTORS 17.5% 10,011,154
------------
Agere Systems, Inc. - A o 200,000 610,000
ATI Technologies, Inc. o 121,500 1,837,080
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Portfolio of Investments Firsthand Global Technology Fund
December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(continued) non-income producing % shares value
- ----------------------------------------------------------------------------------------------------------
Infineon Technologies AG - ADR o 28,700 $ 393,477
Kopin Corp. o 156,000 1,046,760
OmniVision Technologies, Inc. o 25,000 1,381,250
Samsung Electronics Co., Ltd. - GDR 8,800 1,665,463
Skyworks Solutions, Inc. o 100,000 870,000
STMicroelectronics N.V. - ADR 62,400 1,685,424
Zoran Corp. o 30,000 521,700
SERVICES 11.8% 6,768,878
------------
Amkor Technology, Inc. o 125,500 2,285,355
ChipPAC, Inc. - A o 272,200 2,065,998
j2 Global Communications, Inc. o 12,900 319,533
Taiwan Semiconductor
Manufacturing Co. - ADR o 204,882 2,097,992
SOFTWARE 23.4% 13,409,615
------------
Amdocs Ltd. o 70,000 1,573,600
Business Objects SA - ADR o 40,000 1,386,800
Chordiant Software, Inc. o 268,200 1,461,690
Cognos, Inc. o 40,000 1,224,800
Comverse Technology, Inc. o 60,000 1,055,400
Global Payments, Inc. 12,900 607,848
ILOG SA - ADR o 41,700 512,910
Mercury Interactive Corp. o 47,000 2,286,080
Retalix Ltd. o 70,100 1,625,619
SAP AG - ADR 40,300 1,674,868
CASH EQUIVALENTS 2.4% 1,358,538
------------
(Cost $1,358,538)
SSgA Prime Money Market Portfolio 1,358,538 1,358,538
TOTAL INVESTMENT SECURITIES 100.2% 57,461,885
(Cost $49,884,764)
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2)% (123,917)
------------
NET ASSETS 100.0% $ 57,337,968
============
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
- ----------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ----------------------------------------------------------------------------------------------------------
2003 Annual Report | 31
Statements of Assets and Liabilities
December 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FIRSTHAND FIRSTHAND FIRSTHAND
TECHNOLOGY TECHNOLOGY TECHNOLOGY
VALUE LEADERS INNOVATORS
FUND FUND FUND
====================================================================================================================================
ASSETS
Investment securities:
Unaffiliated issuers at acquisition cost $ 1,292,138,569 $ 166,222,912 $ 97,707,693
Affiliated issuers at acquisition cost 164,672,600 -- 15,726,920
-----------------------------------------------------------------
Total acquisition cost $ 1,456,811,169 $ 166,222,912 $ 113,434,613
=================================================================
Unaffiliated issuers at market value $ 804,888,570 $ 156,757,137 $ 84,371,903
Affiliated issuers at market value 74,793,765 -- 4,788,095
-----------------------------------------------------------------
Total market value (Note 2) 879,682,335 156,757,137 89,159,998
Cash 16,481 -- 1,739
Receivable for capital shares sold 643,472 188,661 81,641
Receivable for securities sold 2,306,175 -- 574,593
Receivables from dividends and interest 281,453 30,828 38,972
Deferred trustee compensation (Note 6) 88,625 48,338 48,338
-----------------------------------------------------------------
TOTAL ASSETS 883,018,541 157,024,964 89,905,281
-----------------------------------------------------------------
LIABILITIES
Payable for capital shares redeemed 4,055,598 386,594 687,673
Payable for securities purchased -- -- 916,293
Payable to affiliates (Note 4) 1,435,372 256,879 148,234
Payable for trustee compensation (Note 6) 88,625 48,338 48,338
Payable to custodian -- 191,484 --
-----------------------------------------------------------------
TOTAL LIABILITIES 5,579,595 883,295 1,800,538
-----------------------------------------------------------------
NET ASSETS $ 877,438,946 $ 156,141,669 $ 88,104,743
=================================================================
Net assets consist of:
Paid-in-capital $ 3,655,157,364 $ 494,254,879 $ 456,435,763
Accumulated net realized losses from
security transactions and
foreign currency (2,200,589,584) (328,647,435) (344,056,405)
Net unrealized depreciation on
investments and foreign currency (577,128,834) (9,465,775) (24,274,615)
-----------------------------------------------------------------
NET ASSETS $ 877,438,946 $ 156,141,669 $ 88,104,743
=================================================================
Shares of beneficial interest
outstanding (unlimited number of
shares authorized, no par value) 27,791,452 9,061,760 7,619,910
=================================================================
Net asset value, redemption price
and offering price per share (Note 2) $ 31.57 $ 17.23 $ 11.56
=================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Statements of Assets and Liabilities (continued)
December 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FIRSTHAND
FIRSTHAND GLOBAL
E-COMMERCE TECHNOLOGY
FUND FUND
====================================================================================================================================
ASSETS
Investment securities:
Unaffiliated issuers at acquisition cost $ 58,358,628 $ 49,884,764
Affiliated issuers at acquisition cost -- --
-------------------------------------------
Total acquisition cost $ 58,358,628 $ 49,884,764
===========================================
Unaffiliated issuers at market value $ 66,759,825 $ 57,461,885
Affiliated issuers at market value -- --
-------------------------------------------
Total market value (Note 2) 66,759,825 57,461,885
Cash 719 --
Receivable for capital shares sold 7,393 539,450
Receivable for securities sold 350,002 --
Receivables from dividends and interest 903 247
Deferred trustee compensation (Note 6) 48,338 34,207
-------------------------------------------
TOTAL ASSETS 67,167,180 58,035,789
-------------------------------------------
LIABILITIES
Payable for capital shares redeemed 611,937 526,534
Payable for securities purchased -- --
Payable to affiliates (Note 4) 108,994 93,232
Payable for trustee compensation (Note 6) 48,338 34,207
Payable to custodian -- 43,848
-------------------------------------------
TOTAL LIABILITIES 769,269 697,821
-------------------------------------------
NET ASSETS $ 66,397,911 $ 57,337,968
===========================================
Net assets consist of:
Paid-in-capital $ 473,249,225 $ 129,199,997
Accumulated net realized losses from
security transactions and foreign
currency (415,252,511) (79,439,150)
Net unrealized appreciation on
investments and foreign currency 8,401,197 7,577,121
-------------------------------------------
NET ASSETS $ 66,397,911 $ 57,337,968
===========================================
Shares of beneficial interest
outstanding (unlimited number of
shares authorized, no par value) 21,668,992 12,429,897
===========================================
Net asset value, redemption price
and offering price per share (Note 2) $ 3.06 $ 4.61
===========================================
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
2003 Annual Report | 33
Statements of Operations
For the Year Ended December 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FIRSTHAND FIRSTHAND FIRSTHAND
TECHNOLOGY TECHNOLOGY TECHNOLOGY
VALUE LEADERS INNOVATORS
FUND FUND FUND
====================================================================================================================================
INVESTMENT INCOME
Interest $ 353,527 $ 32,857 $ 91,086
Dividends * 1,199,235 312,440 11,170
Securities lending (Note 2) 212,700 47,062 106,338
-------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,765,462 392,359 208,594
-------------------------------------------------------------
EXPENSES
Investment advisory fees (Note 4) 10,149,078 1,953,954 1,136,971
Administrative fees (Note 4) 2,712,845 586,186 341,091
-------------------------------------------------------------
TOTAL EXPENSES 12,861,923 2,540,140 1,478,062
-------------------------------------------------------------
NET INVESTMENT LOSS (11,096,461) (2,147,781) (1,269,468)
-------------------------------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized losses from security
transactions and foreign currency
(including realized loss of
$(1,250,857), $0, and $0,
respectively, on sales of investments
in affiliated issuers) (350,024,846) (60,900,509) (49,128,316)
Net change in unrealized appreciation
on investments and
foreign currency 718,573,278 125,196,291 83,337,829
-------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS 368,548,432 64,295,782 34,209,513
-------------------------------------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS $ 357,451,971 $ 62,148,001 $ 32,940,045
=============================================================
* Net of foreign tax withholding $ 8,554 $ 13,216 $ --
=============================================================
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Statements of Operations (continued)
For the Year Ended December 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FIRSTHAND
FIRSTHAND GLOBAL
E-COMMERCE TECHNOLOGY
FUND FUND
====================================================================================================================================
INVESTMENT INCOME
Interest $ 14,043 $ 22,274
Dividends * 26,671 23,967
Securities lending (Note 2) 99,323 21,917
-----------------------------------------
TOTAL INVESTMENT INCOME 140,037 68,158
-----------------------------------------
EXPENSES
Investment advisory fees (Note 4) 898,434 563,709
Administrative fees (Note 4) 269,530 169,113
-----------------------------------------
TOTAL EXPENSES 1,167,964 732,822
-----------------------------------------
NET INVESTMENT LOSS (1,027,927) (664,664)
-----------------------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized losses from security
transactions and foreign currency
(including realized loss of $0 and $0,
respectively, on sales of investments
in affiliated issuers) (6,028,799) (8,818,502)
Net change in unrealized appreciation
on investments and
foreign currency 30,614,322 30,956,070
-----------------------------------------
NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS 24,585,523 22,137,568
-----------------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS $ 23,557,596 $ 21,472,904
=========================================
* Net of foreign tax withholding $ -- $ 2,874
=========================================
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
2003 Annual Report | 35
Statements of Changes in Net Assets
For the Years Ended December 31, 2003, and December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FIRSTHAND TECHNOLOGY
--------------------
VALUE FUND
----------
Year Year
Ended Ended
12/31/03 12/31/02
====================================================================================================================================
FROM OPERATIONS:
Net investment loss $ (11,096,461) $ (12,434,971)
Net realized losses from security transactions
and foreign currency (350,024,846) (698,493,252)
Net change in unrealized appreciation
(depreciation) on investments 718,573,278 (45,529,784)
-------------------------------------------
Net increase (decrease) in net assets
from operations 357,451,971 (756,458,007)
-------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 255,958,697 (B) 88,398,134 (B)
Proceeds received in merger -- 24,246,552 (B)
Payments for shares redeemed (A) (228,652,238)(B) (313,374,778)(B)
-------------------------------------------
Net increase (decrease) in net assets from
capital share transactions 27,306,459 (200,730,092)
-------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 384,758,430 (957,188,099)
NET ASSETS:
Beginning of year 492,680,516 1,449,868,615
-------------------------------------------
End of year $ 877,438,946 $ 492,680,516
===========================================
CAPITAL SHARE ACTIVITY:
Shares sold 9,387,545 (B) 3,332,459 (B)
Shares issued in exchange for proceeds
received in merger -- 1,328,422 (B)
Shares redeemed (8,835,656)(B) (12,570,647)(B)
-------------------------------------------
Net increase (decrease) in shares outstanding 551,889 (7,909,766)
Shares outstanding, beginning of year 27,239,563 35,149,329
-------------------------------------------
Shares outstanding, end of year 27,791,452 27,239,563
===========================================
(A) Net of redemption fees of $82,976 and $615,400, respectively.
(B) See Note 5 of notes to financial statements.
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Statements of Changes in Net Assets (continued)
For the Years Ended December 31, 2003, and December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FIRSTHAND TECHNOLOGY
--------------------
LEADERS FUND
------------
Year Year
Ended Ended
12/31/03 12/31/02
====================================================================================================================================
FROM OPERATIONS:
Net investment loss $ (2,147,781) $ (2,601,143)
Net realized losses from security transactions
and foreign currency (60,900,509) (92,835,353)
Net change in unrealized appreciation
(depreciation) on investments 125,196,291 (1,696,371)
-----------------------------------------
Net increase (decrease) in net assets from
operations 62,148,001 (97,132,867)
-----------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 24,579,927 16,238,727
Payments for shares redeemed (A) (35,578,744) (55,395,843)
-----------------------------------------
Net decrease in net assets from
capital share transactions (10,998,817) (39,157,116)
-----------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 51,149,184 (136,289,983)
NET ASSETS:
Beginning of year 104,992,485 241,282,468
-----------------------------------------
End of year $ 156,141,669 $ 104,992,485
=========================================
CAPITAL SHARE ACTIVITY:
Shares sold 1,727,472 1,098,447
Shares redeemed (2,526,281) (4,032,596)
-----------------------------------------
Net decrease in shares outstanding (798,809) (2,934,149)
Shares outstanding, beginning of year 9,860,569 12,794,718
-----------------------------------------
Shares outstanding, end of year 9,061,760 9,860,569
=========================================
(A) Net of redemption fees of $17,446 and $123,058, respectively.
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
2003 Annual Report | 37
Statements of Changes in Net Assets (continued)
For the Years Ended December 31, 2003, and December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FIRSTHAND TECHNOLOGY
--------------------
INNOVATORS FUND
---------------
Year Year
Ended Ended
12/31/03 12/31/02
====================================================================================================================================
FROM OPERATIONS:
Net investment loss $ (1,269,468) $ (1,720,604)
Net realized losses from security transactions
and foreign currency (49,128,316) (80,035,444)
Net change in unrealized appreciation
(depreciation) on investments 83,337,829 (21,532,983)
-----------------------------------------
Net increase (decrease) in net assets from
operations 32,940,045 (103,289,031)
-----------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 18,073,624 18,389,409
Payments for shares redeemed (A) (25,530,349) (57,421,917)
-----------------------------------------
Net decrease in net assets from capital
share transactions (7,456,725) (39,032,508)
-----------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 25,483,320 (142,321,539)
NET ASSETS:
Beginning of year 62,621,423 204,942,962
-----------------------------------------
End of year $ 88,104,743 $ 62,621,423
=========================================
CAPITAL SHARE ACTIVITY:
Shares sold 1,778,585 1,677,517
Shares redeemed (2,602,998) (5,731,525)
-----------------------------------------
Net decrease in shares outstanding (824,413) (4,054,008)
Shares outstanding, beginning of year 8,444,323 12,498,331
-----------------------------------------
Shares outstanding, end of year 7,619,910 8,444,323
=========================================
(A) Net of redemption fees of $24,200 and $223,848, respectively.
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Statements of Changes in Net Assets (continued)
For the Years Ended December 31, 2003, and December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FIRSTHAND
---------
E-COMMERCE FUND
---------------
Year Year
Ended Ended
12/31/03 12/31/02
====================================================================================================================================
FROM OPERATIONS:
Net investment loss $ (1,027,927) $ (1,116,736)
Net realized losses from security transactions
and foreign currency (6,028,799) (86,992,138)
Net change in unrealized appreciation
on investments and
foreign currency 30,614,322 51,666,318
---------------------------------------
Net increase (decrease) in net assets from
operations 23,557,596 (36,442,556)
---------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 11,440,088 5,580,001
Payments for shares redeemed (A) (20,434,064) (16,762,275)
---------------------------------------
Net decrease in net assets
from capital share transactions (8,993,976) (11,182,274)
---------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 14,563,620 (47,624,830)
NET ASSETS:
Beginning of year 51,834,291 99,459,121
---------------------------------------
End of year $ 66,397,911 $ 51,834,291
=======================================
CAPITAL SHARE ACTIVITY:
Shares sold 4,320,048 2,277,890
Shares redeemed (7,623,899) (7,140,442)
---------------------------------------
Net decrease in shares outstanding (3,303,851) (4,862,552)
Shares outstanding, beginning of year 24,972,843 29,835,395
---------------------------------------
Shares outstanding, end of year 21,668,992 24,972,843
=======================================
(A) Net of redemption fees of $7,309 and $63,730, respectively.
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
2003 Annual Report | 39
Statements of Changes in Net Assets (continued)
For the Years Ended December 31, 2003, and December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FIRSTHAND GLOBAL
----------------
TECHNOLOGY FUND
---------------
Year Year
Ended Ended
12/31/03 12/31/02
====================================================================================================================================
FROM OPERATIONS:
Net investment loss $ (664,664) $ (566,565)
Net realized losses from security transactions
and foreign currency (8,818,502) (19,266,630)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency 30,956,070 (6,065,442)
---------------------------------------
Net increase (decrease) in net assets from
operations 21,472,904 (25,898,637)
---------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 46,141,349 5,167,632
Payments for shares redeemed (A) (30,500,852) (12,025,243)
---------------------------------------
Net increase (decrease) in net assets
from capital share transactions 15,640,497 (6,857,611)
---------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 37,113,401 (32,756,248)
NET ASSETS:
Beginning of year 20,224,567 52,980,815
---------------------------------------
End of year $ 57,337,968 $ 20,224,567
=======================================
CAPITAL SHARE ACTIVITY:
Shares sold 11,641,914 1,516,675
Shares redeemed (7,553,371) (3,481,536)
---------------------------------------
Net increase (decrease) in shares outstanding 4,088,543 (1,964,861)
Shares outstanding, beginning of year 8,341,354 10,306,215
---------------------------------------
Shares outstanding, end of year 12,429,897 8,341,354
=======================================
(A) Net of redemption fees of $1,216 and $31,274, respectively.
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Financial Highlights - Firsthand Technology Value Fund
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Year
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
====================================================================================================================================
Net asset value at
beginning of year $ 18.09 $ 41.25 $ 74.33 $ 90.52 $ 32.24
-------------------------------------------------------------------------
Income from investment
operations:
Net investment loss (0.40) (0.46) (0.65) (1.14) (0.35)
Net realized and
unrealized gains
(losses) on investments 13.88 (22.72) (32.16) (7.29) 61.36
-------------------------------------------------------------------------
Total from investment
operations 13.48 (23.18) (32.81) (8.43) 61.01
-------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- -- -- -- --
Distributions from net
realized gains -- -- (0.38) (7.86) (2.71)
Distributions in excess of
net realized gains -- -- -- -- (0.02)
-------------------------------------------------------------------------
Total distributions -- -- (0.38) (7.86) (2.73)
-------------------------------------------------------------------------
Paid-in-capital from
redemption fees (Note 2) 0.00 (A) 0.02 0.11 0.10 --
-------------------------------------------------------------------------
Net asset value at end of
year $ 31.57 $ 18.09 $ 41.25 $ 74.33 $ 90.52
=========================================================================
Total return 74.52% (56.15%) (44.00%) (9.97%) 190.40%
=========================================================================
Net assets at end of year
(millions) $ 877.4 $ 492.7 $ 1,449.9 $ 3,030.8 $ 1,355.6
=========================================================================
Ratio of expenses to
average net assets 1.90% 1.89% 1.84% 1.83% 1.91%
Ratio of net investment loss
to average net assets (1.64%) (1.56%) (1.20%) (1.29%) (1.27%)
Portfolio turnover rate 38% 44% 57% 59% 41%
(A) Amount is less than $0.01.
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
2003 Annual Report | 41
Financial Highlights - Firsthand Technology Leaders Fund
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Year
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
====================================================================================================================================
Net asset value at
beginning of year $ 10.65 $ 18.86 $ 33.84 $ 44.68 $ 17.94
-----------------------------------------------------------------------
Income from investment
operations:
Net investment loss (0.24) (0.26) (0.41) (0.67) (0.17)
Net realized and
unrealized gains
(losses) on investments 6.82 (7.96) (14.62) (10.19) 27.40
-----------------------------------------------------------------------
Total from investment
operations 6.58 (8.22) (15.03) (10.86) 27.23
-----------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- -- -- -- --
Distributions from net
realized gains -- -- -- (0.01) (0.49)
Distributions in excess of
net realized gains -- -- -- -- --
-----------------------------------------------------------------------
Total distributions -- -- -- (0.01) (0.49)
-----------------------------------------------------------------------
Paid-in-capital from
redemption fees (Note 2) 0.00 (A) 0.01 0.05 0.03 --
-----------------------------------------------------------------------
Net asset value at end of
year $ 17.23 $ 10.65 $ 18.86 $ 33.84 $ 44.68
=======================================================================
Total return 61.78% (43.53%) (44.27%) (24.23%) 152.58%
=======================================================================
Net assets at end of year
(millions) $ 156.1 $ 105.0 $ 241.3 $ 517.2 $ 395.6
=======================================================================
Ratio of expenses to
average net assets 1.95% 1.95% 1.93% 1.90% 1.94%
Ratio of net investment loss
to average net assets (1.65%) (1.63%) (1.54%) (1.44%) (1.27%)
Portfolio turnover rate 28% 46% 44% 35% 16%
(A) Amount is less than $0.01.
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Financial Highlights - Firsthand Technology Innovators Fund
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Year
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
====================================================================================================================================
Net asset value at beginning
of year $ 7.42 $ 16.40 $ 23.13 $ 49.36 $ 16.01
-------------------------------------------------------------------
Income from investment
operations:
Net investment loss (0.17) (0.20) (0.24) (0.85) (0.06)
Net realized and
unrealized gains
(losses) on investments 4.31 (8.80) (6.51) (16.84) 33.98
-------------------------------------------------------------------
Total from investment
operations 4.14 (9.00) (6.75) (17.69) 33.92
-------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- -- -- -- --
Distributions from net
realized gains -- -- -- (8.55) (0.57)
Distributions in excess
of net realized gains -- -- -- -- --
-------------------------------------------------------------------
Total distributions -- -- -- (8.55) (0.57)
-------------------------------------------------------------------
Paid-in-capital from
redemption fees (Note 2) 0.00 (A) 0.02 0.02 0.01 --
-------------------------------------------------------------------
Net asset value at end of
year $ 11.56 $ 7.42 $ 16.40 $ 23.13 $ 49.36
===================================================================
Total return 55.80% (54.76%) (29.10%) (37.94%) 212.34%
===================================================================
Net assets at end of year
(millions) $ 88.1 $ 62.6 $ 204.9 $ 300.4 $ 603.9
===================================================================
Ratio of expenses to
average net assets 1.95% 1.95% 1.94% 1.90% 1.93%
Ratio of net investment loss
to average net assets (1.67%) (1.66%) (1.43%) (1.51%) (0.59%)
Portfolio turnover rate 64% 53% 63% 89% 44%
(A) Amount is less than $0.01.
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
2003 Annual Report | 43
Financial Highlights - Firsthand e-Commerce Fund
Selected Per Share Data and Ratios for a
Share Outstanding Throughout Each Period
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 (A)
====================================================================================================================================
Net asset value at beginning
of period $ 2.08 $ 3.33 $ 6.63 $ 14.86 $ 10.00
------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.05) (0.04) (0.04) (0.21) 0.00 (B)
Net realized and unrealized
gains (losses)
on investments 1.03 (1.21) (3.26) (7.99) 4.86
------------------------------------------------------------------------
Total from investment operations 0.98 (1.25) (3.30) (8.20) 4.86
------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- -- -- (0.00) (B) --
Distributions from net
realized gains -- -- -- (0.05) --
Distributions in excess
of net realized gains -- -- -- -- --
------------------------------------------------------------------------
Total distributions -- -- -- (0.05) --
------------------------------------------------------------------------
Paid-in-capital from
redemption fees (Note 2) 0.00 (B) 0.00 (B) 0.00 (B) 0.02 --
------------------------------------------------------------------------
Net asset value at end
of period $ 3.06 $ 2.08 $ 3.33 $ 6.63 $ 14.86
========================================================================
Total return 47.12% (37.54%) (49.77%) (55.08%) 48.60% (C)
========================================================================
Net assets at end of period
(millions) $ 66.4 $ 51.8 $ 99.5 $ 216.5 $ 298.7
========================================================================
Ratio of expenses to
average net assets 1.95% 1.95% 1.95% 1.92% 1.95% (D)
Ratio of net investment income
(loss) to average net assets (1.72%) (1.69%) (1.13%) (1.44%) 0.05% (D)
Portfolio turnover rate 46% 61% 67% 73% 0%
(A) Represents the period from the commencement of operations
(September 30, 1999) through December 31, 1999.
(B) Amount is less than $0.01.
(C) Not annualized.
(D) Annualized.
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Financial Highlights - Firsthand Global Technology Fund
Selected Per Share Data and Ratios for a
Share Outstanding Throughout Each Period
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
12/31/03 12/31/02 12/31/01 12/31/00 (A)
====================================================================================================================================
Net asset value at beginning of
period $ 2.42 $ 5.14 $ 8.75 $ 10.00
---------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05) (0.07) (0.07) 0.04
Net realized and unrealized
gains (losses) on investments 2.24 (2.65) (3.57) (1.28)
---------------------------------------------------------------
Total from investment operations 2.19 (2.72) (3.64) (1.24)
---------------------------------------------------------------
Less distributions:
Dividends from net investment
income -- -- -- (0.03)
Distributions from net realized
gains -- -- -- --
Distributions in excess of net
realized gains -- -- -- --
---------------------------------------------------------------
Total distributions -- -- -- (0.03)
---------------------------------------------------------------
Paid-in-capital from
redemption fees (Note 2) 0.00 (B) 0.00 (B) 0.03 0.02
---------------------------------------------------------------
Net asset value at end of period $ 4.61 $ 2.42 $ 5.14 $ 8.75
===============================================================
Total return 90.50% (52.92%) (41.26%) (12.18%)(C)
===============================================================
Net assets at end of period
(millions) $ 57.3 $ 20.2 $ 53.0 $ 125.3
===============================================================
Ratio of expenses to average
net assets 1.95% 1.95% 1.95% 1.95%(D)
Ratio of net investment income
(loss) to average net assets (1.77%) (1.73%) (0.95%) 1.66%(D)
Portfolio turnover rate 50% 26% 67% 0%
(A) Represents the period from the commencement of operations
(September 29, 2000) through December 31, 2000.
(B) Amount is less than $0.01.
(C) Not annualized.
(D) Annualized.
- ------------------------------------------------------------------------------------------------------------------------------------
see accompanying notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
2003 Annual Report | 45
Notes to Financial Statements
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Organization
Each of Firsthand Technology Value Fund, Firsthand Technology Leaders Fund,
Firsthand Technology Innovators Fund, Firsthand e-Commerce Fund, and Firsthand
Global Technology Fund (the "Funds") is a non-diversified series of Firsthand
Funds (the "Trust"), an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust, a
Delaware statutory trust, was organized on November 8, 1993. The inception date
for each Fund (the date on which a net asset value was first determined for that
Fund) is as follows:
FUND INCEPTION DATE
--------------------------------------------------------------
Firsthand Technology Value Fund May 20, 1994*
--------------------------------------------------------------
Firsthand Technology Leaders Fund December 10, 1997
--------------------------------------------------------------
Firsthand Technology Innovators Fund May 20, 1998
--------------------------------------------------------------
Firsthand e-Commerce Fund September 30, 1999
--------------------------------------------------------------
Firsthand Global Technology Fund September 29, 2000
--------------------------------------------------------------
* Firsthand Technology Value Fund Investor Class commenced operations on May
20, 1994; the SEC effective date for the Investor Class is December 15,
1994. Firsthand Technology Value Fund Advisor Class commenced operations
on February 1, 2002 and liquidated on February 28, 2003. Each Fund
currently offers one class of shares - Investor Class shares.
Each Fund's investment objective is long-term growth of capital.
Firsthand Technology Value Fund seeks to achieve its investment objective by
investing, under normal circumstances, at least 80% of its assets in
high-technology companies that Firsthand Capital Management, Inc. (the
"Investment Adviser") believes are undervalued and have potential for capital
appreciation.
Firsthand Technology Leaders Fund seeks to achieve its investment objective by
investing, under normal circumstances, at least 80% of its assets in
high-technology companies that the Investment Adviser believes hold dominant
competitive positions in high-growth industries.
Firsthand Technology Innovators Fund seeks to achieve its investment objective
by investing, under normal circumstances, at least 80% of its assets in
high-technology companies that the Investment Adviser considers to be best
positioned to introduce "breakthrough" products in the fastest-growing markets
in the technology sector.
Firsthand e-Commerce Fund seeks to achieve its investment objective by
investing, under normal circumstances, at least 80% of its assets in equity
securities of companies that provide products, services, and technologies that
facilitate the growth of electronic commerce.
Firsthand Global Technology Fund seeks to achieve its investment objective by
investing, under normal circumstances, at least 80% of its assets in
high-technology companies, both domestic and foreign, that the Investment
Adviser considers best positioned to benefit significantly from the adoption of
new technologies worldwide.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Significant Accounting Policies
The following is a summary of the Funds' significant accounting policies:
Securities Valuation--A Fund's portfolio of securities is valued as follows:
1. Securities traded on stock exchanges, or quoted by Nasdaq, are valued
according to the Nasdaq official closing price, if applicable, or at their
last reported sale price as of the close of trading on the New York Stock
Exchange ("NYSE") (normally 4:00 P.M. Eastern Time). If a security is not
traded that day, the security will be valued at its most recent bid price.
2. Securities traded in the over-the-counter market, but 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 closing bid price as quoted by
brokers that make markets in the securities) at the close of trading on
the NYSE.
3. Securities traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative
market.
4. Securities and other assets that do not have market quotations readily
available are valued at their fair value as determined in good faith using
procedures established by the Board of Trustees.
Share Valuation--The net asset value ("NAV") 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. A Fund's shares will not be priced on the days on which the NYSE
is closed for trading. The offering and redemption price per share of each Fund
is equal to a Fund's net asset value per share. Prior to April 30, 2003, the
Investor Class shares of each Fund were charged a 2% redemption fee on shares
redeemed or exchanged within 180 days of purchase. These fees were deducted from
the redemption proceeds otherwise payable to the shareholder. Each Fund retained
the fee charged as paid-in-capital and such fees became part of that Fund's
daily NAV calculation.
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 a Fund enters into a repurchase
agreement, the value of the underlying securities, including accrued interest,
will equal or exceed the value of the repurchase agreement, and in the case of a
repurchase agreement exceeding one day, the seller will agree that the value of
the underlying securities, including accrued interest, will at all times equal
or exceed the value of the repurchase agreement. In the event of a bankruptcy or
other default by the seller of a repurchase agreement, a Fund could experience
delays in liquidating the underlying securities and losses.
Investment Income--Dividend income is recorded on the ex-dividend date. Interest
income is accrued as earned. Discounts and premiums on securities purchased are
amortized over the lives of the respective securities.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2003 Annual Report | 47
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loans of Portfolio Securities--Each Fund may lend its portfolio securities to
banks, brokers, and dealers. Lending portfolio securities exposes a Fund to
risks such as (i) the borrower may fail to return the loaned securities, (ii)
the borrower may not be able to provide additional collateral, or (iii) a Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral, marked to market daily, in the form
of cash and/or U.S. government obligations, with the Funds' custodian in an
amount equal to or greater than the market value of the loaned securities. Each
Fund will limit loans of its portfolio securities to no more than 30% of its
total assets.
At December 31, 2003, Firsthand Technology Value Fund, Firsthand Technology
Leaders Fund, Firsthand Technology Innovators Fund, Firsthand e-Commerce Fund,
and Firsthand Global Technology Fund did not have any securities on loan.
Foreign Securities--Each Fund may invest in companies that trade on U.S.
exchanges as American Depositary Receipts ("ADRs"), on foreign exchanges, or on
foreign over-the-counter markets. Investing in the securities of foreign
companies exposes your investment in a Fund to risk. Foreign stock markets tend
to be more volatile than the U.S. market due to economic and/or political
instability and the regulatory conditions in some countries. In addition, some
of the securities in which the Fund may invest may be denominated in foreign
currencies, the value of which may decline against the U.S. dollar. An
investment in foreign securities may be subject to high levels of foreign
taxation, including foreign taxes withheld at the source.
Options--The Funds (other than Firsthand Technology Value Fund) may purchase put
and call options to attempt to provide protection against adverse price effects
from anticipated changes in prevailing prices of securities or stock indices.
The purchase of a put option generally protects the value of portfolio holdings
in a falling market, while the purchase of a call option generally protects cash
reserves from a failure to participate in a rising market. In purchasing a call
option, a Fund would realize a gain if, during the option period, the price of
the security or stock index increased by an amount greater than the premium
paid. A Fund would realize a loss if the price of the security or stock index
decreased, remained the same, or did not increase during the period by more than
the amount of the premium. If an option purchased by a Fund expires unexercised,
the Fund will lose the premium it paid, which would represent a realized loss to
the Fund. When writing call options, a Fund is required to own the underlying
financial instrument or segregate with its custodian cash and/or liquid
securities to meet its obligations under written calls. By so doing, a Fund's
ability to meet current obligations, to honor redemptions, or to achieve its
investment objective may be impaired.
Distributions to Shareholders--Each Fund expects to distribute its net
investment income and net realized gains, if any, annually. Distributions from
net investment income and capital gains are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States.
Reclassification of Capital Accounts - The Funds account and report for
distributions to shareholders in accordance with the American Institute of
Certified Public Accountant's Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital and Return
of Capital Distributions by Investment Companies. For the year ended December
31, 2003, each Fund recorded the following reclassifications to the accounts
listed below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INCREASE (DECREASE)
-----------------------------------------------------------------------
Paid-in-Capital Accumulated Net Accumulated Net
Investment Loss Realized Loss
- --------------------s----------------------------------------------------------------------------------
Firsthand Technology
Value Fund $(11,096,461) $ 11,096,461 $ --
Firsthand Technology
Leaders Fund (2,147,781) 2,147,781 --
Firsthand Technology
Innovators Fund (1,269,468) 1,269,468 --
Firsthand
e-Commerce Fund (1,027,927) 1,027,927 --
Firsthand Global
Technology Fund (664,336) 664,664 (328)
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
accounting principles generally accepted in the United States of America
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.
Federal Income Tax -- Each Fund has elected, and intends to qualify annually,
for the special tax treatment afforded regulated investment companies under the
Internal Revenue Code of 1986, as amended (the "Code"). 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.
To avoid imposition of the excise tax applicable to regulated investment
companies, each Fund intends 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 12 months ended October 31)
plus undistributed amounts, if any, from prior years.
The following information is based upon the federal income tax cost of portfolio
investments as of December 31, 2003.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2003 Annual Report | 49
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Firsthand Firsthand Firsthand Firsthand
Technology Technology Technology Firsthand Global
Value Leaders Innovators e-Commerce Technology
Fund Fund Fund Fund Fund
===================================================================================================================================
Gross unrealized
appreciation $ 159,324,915 $ 30,446,332 $ 13,179,775 $ 17,892,278 $ 11,711,905
Gross unrealized
depreciation (788,777,637) (40,228,404) (37,454,390) (12,345,813) (4,134,784)
---------------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) $ (629,452,722) $ (9,782,072) $ (24,274,615) $ 5,546,465 $ 7,577,121
===================================================================================================
Federal income
tax cost $ 1,509,135,057 $ 166,539,209 $ 113,434,613 $ 61,213,360 $ 49,884,764
===================================================================================================
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 accounting principles generally accepted in the United
States and income tax regulations. As of December 31, 2003, the Funds had
capital loss carryforwards for federal income tax purposes as follows:
Total Capital
Loss
Carryforward Expiring 2008 Expiring 2009 Expiring 2010 Expiring 2011
====================================================================================================================================
Firsthand Technology
Value Fund $2,057,175,007 $ -- $1,092,189,416 $ 634,016,220 $ 330,969,371
Firsthand Technology
Leaders Fund 305,199,347 7,699,026 134,863,157 109,312,900 53,324,264
Firsthand Technology
Innovators Fund 344,056,405 -- 195,444,987 87,067,727 61,543,691
Firsthand e-Commerce
Fund 412,397,779 -- 265,070,969 141,312,315 6,014,495
Firsthand Global
Technology Fund 79,375,459 -- 50,042,299 13,149,532 16,183,628
For Firsthand Technology Value Fund, $7,924,308 of the $1,092,189,416 capital
loss carryforward expiring in 2009 was acquired in the reorganization with
Firsthand Communications Fund. Firsthand Technology Value Fund, Firsthand
Technology Leaders Fund, Firsthand Technology Innovators Fund, Firsthand
e-Commerce Fund, and Firsthand Global Technology Fund realized net capital
losses of $91,090,689, $23,131,791, $0, $0, and $63,691, respectively, during
the period from November 1, 2003, through December 31,
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2003, which are treated for federal income tax purposes as arising in the tax
year ending December 31, 2004.
3. Investment Transactions
Investment transactions (excluding short-term investments) were as follows for
the year ended December 31, 2003.
Firsthand Firsthand Firsthand Firsthand
Technology Technology Technology Firsthand Global
Value Leaders Innovators e-Commerce Technology
Fund Fund Fund Fund Fund
==========================================================================================================================
Purchase of
investment securities $287,065,490 $ 35,786,025 $ 46,042,413 $ 26,826,391 $ 32,120,592
========================================================================================
Proceeds from
sales and maturities
of investment
securities $246,865,820 $ 47,800,692 $ 54,425,980 $ 36,866,479 $ 17,169,873
========================================================================================
4. Investment Advisory and Administration Agreements
Certain trustees and officers of the Trust are also officers of the Investment
Adviser, or State Street Bank and Trust Company ("State Street"), which is the
sub-administrator, shareholder servicing and transfer agent, investment
accounting agent, and custodian for the Trust.
INVESTMENT ADVISORY AGREEMENT
Each Fund's investments are managed by the Investment Adviser pursuant to the
terms of an Investment Advisory Agreement (the "Advisory Agreement"). Under the
Advisory Agreement, the Investment Adviser provides each Fund with investment
research, advice, management, and supervision and manages the investment and
reinvestment of assets of each Fund consistent with each Fund's investment
objectives, policies, and limitations. The Investment Adviser is responsible for
(i) compensation of any of the Fund's trustees, officers, and employees who are
interested persons of the Investment Adviser; and (ii) compensation of the
Investment Adviser's personnel and other expenses incurred in connection with
the provision of portfolio management services under the Advisory Agreement.
For the services it provides under the Advisory Agreement, the Investment
Adviser receives from each Fund, on a monthly basis, an advisory fee at the
annual rate of 1.50% of its average daily net assets. The Advisory Agreement
requires the Investment Adviser to waive fees and, if necessary, to reimburse
expenses of each such Fund to the extent necessary to limit a 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2003 Annual Report | 51
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADMINISTRATION AGREEMENT
The Trust has entered into a separate Administration Agreement with the
Investment Adviser. The agreement obligates the Investment Adviser to provide
administrative and general supervisory services to each Fund (the
"Administration Agreement").
Under the Administration Agreement, the Investment Adviser renders supervisory
and corporate administrative services to the Trust, as well as 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 Adviser also arranges for
the preservation of journals, ledgers, corporate documents, brokerage account
records, and other records as required by the 1940 Act.
The Investment Adviser is responsible for the equipment, staff, office space,
and facilities necessary to perform its obligations under the Administration
Agreement. Under the Administration Agreement, the Investment Adviser has
assumed responsibility for payment of all of each Fund's operating expenses
excluding independent trustees' compensation; brokerage and commission expenses;
fees payable under "Rule 12b-1 plans", if any, and shareholder servicing plans,
if any; litigation costs; and any extraordinary and non-recurring expenses.
For the services it provides under the Administration Agreement, the Investment
Adviser 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 Adviser has entered into a Sub-Administration Agreement with
State Street. Under this agreement, the Investment Adviser (not the Funds) pays
to State Street the fees for the administrative services provided by State
Street.
5. Capital Shares
Capital share transactions for Firsthand Technology Value Fund for the period
ended December 31, 2003, are noted below:
INVESTOR CLASS ADVISOR CLASS
==============================================================
Shares Amount Shares Amount
Shares sold 9,387,545 $ 255,958,697 -- $ --
Shares redeemed (8,835,652) (228,652,163) (4.486) (75.18)
--------------------------------------------------------------
Net increase (decrease) from
capital share transactions 551,893 $ 27,306,534 (4.486) $(75.18)
==============================================================
Capital share transactions for Firsthand Technology Value Fund for the period
ended December 31, 2002, are noted below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTOR CLASS ADVISOR CLASS
=================================================================
Shares Amount Shares Amount
Shares sold 3,330,281 $ 88,344,875 2,178.060 $53,259.36
Shares issued in conjunction
with merger (Note 10) 1,328,422 24,246,552 -- --
Shares redeemed (12,568,473) (313,323,073) (2,173.574) (51,705.10)
-----------------------------------------------------------------
Net increase (decrease)
from capital share transactions (7,909,770) $(200,731,646) 4.486 $ 1,554.26
=================================================================
6. Deferred Compensation Agreement With Trustees
During the fiscal year ended December 31, 2000, the Trust entered into a
deferred compensation agreement with the independent trustees of the Trust.
Under the deferred compensation agreement, each independent trustee may elect to
defer some or all of his trustee fees. Each independent trustee is paid an
annual retainer of $24,000, $6,000 for each regular meeting attended in person,
and $1,000 for each special meeting attended. Deferred fees may be deemed
invested in the Firsthand Funds selected by each independent trustee on a
tax-deferred basis and deferred fees (and the income, gains, and losses credited
during the deferral period) are payable at least two years after deferral date.
Upon payment of any deferred fees (and the income, gains, and losses credited
during the deferral period), each Fund will expense its pro rata share of those
fees.
7. 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
period ended December 31, 2003, is noted below:
SHARE ACTIVITY
-----------------------------------------------------
Balance Purchases Sales Balance Realized Value Acquisition
Affiliate 12/31/02 12/31/03 Loss 12/31/03 Cost
====================================================================================================================================
Firsthand Technology
Value Fund
Anaren, Inc.* 1,611,900 -- 400,000 1,211,900 $(1,250,857) $17,112,028 $19,562,974
Clarisay,
Inc. Series B & C* 9,799,550 -- -- 9,799,550 -- -- 4,383,855
Clarisay, Inc. Warrants
06/03/2005 -- 500,000 -- 500,000 -- -- --
Clarisay, Inc. Warrants
07/07/2005 -- 500,000 -- 500,000 -- -- --
Clarisay, Inc. Warrants
08/07/2005 -- 500,000 -- 500,000 -- -- --
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2003 Annual Report | 53
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARE ACTIVITY
-------------------------------------------------
Balance Purchases Sales Balance Realized Value Acquisition
Affiliate 12/31/02 12/31/03 Loss 12/31/03 Cost
====================================================================================================================================
Firsthand Technology
Value Fund (cont'd)
Clarisay, Inc. Warrants
09/12/2005 -- 250,000 -- 250,000 $ -- $ -- $ --
Clarisay, Inc. Warrants
09/19/2005 -- 100,000 -- 100,000 -- -- --
Clarisay, Inc. Warrants
11/10/2005 -- 500,000 -- 500,000 -- -- --
Clarisay, Inc. 8.00%
06/03/2005 -- 500,000 -- 500,000 -- 214,285 500,000
Clarisay, Inc. 8.00%
07/07/2005 -- 500,000 -- 500,000 -- 214,285 500,000
Clarisay, Inc. 8.00%
08/07/2005 -- 500,000 -- 500,000 -- 214,285 500,000
Clarisay, Inc. 8.00%
09/12/2005 -- 250,000 -- 250,000 -- 107,142 250,000
Clarisay, Inc. 8.00%
09/19/2005 -- 100,000 -- 100,000 -- 42,857 100,000
Clarisay, Inc. 8.00%
11/10/2005 -- 500,000 -- 500,000 -- 214,285 500,000
Concord Communi-
cations, Inc. 1,189,300 -- -- 1,189,300 -- 23,750,321 47,259,501
Global Locate, Inc.
Series A & C* 6,030,896 1,111,111 -- 7,142,007 -- 6,942,242 6,144,355
Global Locate, Inc.
Series C Warrants -- 370,370 -- 370,370 -- 3,704 --
Global Locate, Inc.
Common Stock
Warrants -- 75,000 -- 75,000 -- 375 --
Maple Optical Systems,
Inc. Series A-1 10,352,054 -- -- 10,352,054 -- -- 3,623,219
Silicon Genesis Corp.
Series 1-E -- 4,071,226 -- 4,071,226 -- 4,315,500 4,315,500
Silicon Genesis Corp.
Series D 705,840** -- -- 705,840 -- 791,900 7,999,994
Silicon Genesis Corp.
Series 1-E Warrants -- 1,257,859 -- 1,257,859 -- 334,339 --
Silicon Genesis Corp.
Common Stock
Warrants -- 37,982 -- 37,982 -- 38 --
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARE ACTIVITY
-------------------------------------------------
Balance Purchases Sales Balance Realized Value Acquisition
Affiliate 12/31/02 12/31/03 Loss 12/31/03 Cost
====================================================================================================================================
Firsthand Technology
Value Fund (cont'd)
Silicon Genesis Corp.
Series D Warrants 26,469** -- -- 26,469 $ -- $ 26 $ --
Stratex Networks, Inc. 4,832,036 -- -- 4,832,036 -- 20,536,153 69,033,202
Zoran Corp. 1,460,500 -- -- 1,460,500 -- 25,398,095 24,473,777
Firsthand Technology
Innovators Fund
Clarisay, Inc. Series B 2,861,519 -- -- 2,861,519 -- -- 2,618,290
Clarisay, Inc. Warrants
05/08/2005 -- 500,000 -- 500,000 -- -- --
Clarisay, Inc. Warrants
09/19/2005 -- 150,000 -- 150,000 -- -- --
Clarisay, Inc. Warrants
10/10/2005 -- 500,000 -- 500,000 -- -- --
Clarisay, Inc. Warrants
12/31/2010 -- 109,290 -- 109,290 -- -- --
Clarisay, Inc. 8.00%
05/08/2005 -- 500,000 -- 500,000 -- 214,285 500,000
Clarisay, Inc. 8.00%
09/19/2005 -- 150,000 -- 150,000 -- 64,285 150,000
Clarisay, Inc. 8.00%
10/10/2005 -- 500,000 -- 500,000 -- 214,285 500,000
Innovion Corp. Series C 1,500,000 -- -- 1,500,000 -- 1,675,650 3,000,000
Innovion Corp. Warrants -- 602,577 -- 602,577 -- 603 --
Innovion Corp. 8.00%
03/07/2005 -- 602,577 -- 602,577 -- 602,577 602,577
Maple Optical Systems,
Inc. Series A-1 9,647,945 -- -- 9,647,945 -- -- 3,376,781
Silicon Genesis Corp.
Series C 155,556** -- -- 155,556 -- 284,217 3,248,023
Silicon Genesis Corp.
Series 1-E -- 1,633,254 -- 1,633,254 -- 1,731,249 1,731,249
Silicon Genesis Corp.
Series 1-E Warrants -- 94,339 -- 94,339 -- 944 --
* Amounts include shares from the merger of Firsthand Communications Fund
into Firsthand Technology Value Fund.
** The beginning share amount has been adjusted to reflect a reverse stock
split which occurred during the year ended
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2003 Annual Report | 55
Notes to Financial Statements (continued)
December 31, 2003.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Restricted securities include securities that have not been registered under the
Securities Act of 1933, as amended, and securities that are subject to
restrictions on resale. A Fund may invest in restricted securities that are
consistent with a Fund's investment objective and investment strategies. A Fund
will not invest in a restricted security if, immediately after and as a result
of the investment in such security, more than 15% of the Fund's net assets would
be invested in illiquid securities. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the issuer's
expense either upon demand by the Fund or in connection with another registered
offering of the securities. Investments in restricted securities are valued at
fair value as determined in good faith in accordance with procedures adopted by
the Board of Trustees. It is possible that the estimated value may differ
significantly from the amount that might ultimately be realized in the near
term, and the difference could be material. As of December 31, 2003, the Funds
were invested in the following restricted securities:
Firsthand Technology Value Fund
Security Acquisition Date Shares Cost Value % Net Assets
- ------------------------------------------------------------------------------------------------------------------------
AuthenTec, Inc. Series C P/S Apr. 4, 2003 1,472,495 $ 738,000 $ 738,000 0.08%
AuthenTec, Inc. Series C
Warrants Apr. 4, 2003 392,665 -- 3,927 0.00%
Caspian Networks, Inc.
Series AAA P/S Feb. 21, 2002 3,378,104 3,378,104 810,745 0.09%
Celox Networks, Inc.
Series A-1 P/S Aug. 23, 2002 1,000,000 1,200,000 -- 0.00%
Celox Networks, Inc. C/S Apr. 17, 2001 138,121 14,999,941 -- 0.00%
Celox Networks, Inc.
Series A-1 Warrants Aug. 23, 2002 500,000 -- -- 0.00%
Centerpoint Broadband
Technologies, Inc.
Series D P/S Oct. 24, 2000 19,290 207,946 -- 0.00%
Clarisay, Inc. Series B P/S Jan. 24, 2001 2,605,306 2,383,855 -- 0.00%
Clarisay, Inc. Series C P/S Aug. 28, 2002 7,194,244 2,000,000 -- 0.00%
Clarisay, Inc. 8.00%
06/03/2005 C/N Jun. 3, 2003 500,000 500,000 214,285 0.02%
Clarisay, Inc. 8.00%
07/07/2005 C/N Jul. 7, 2003 500,000 500,000 214,285 0.02%
Clarisay, Inc. 8.00%
08/07/2005 C/N Aug. 7, 2003 500,000 500,000 214,285 0.02%
Clarisay, Inc. 8.00%
09/12/2005 C/N Sept. 12, 2003 250,000 250,000 107,142 0.01%
Clarisay, Inc. 8.00%
09/19/2005 C/N Sept. 19, 2003 100,000 100,000 42,857 0.00%
Clarisay, Inc. 8.00%
11/10/2005 C/N Nov. 10, 2003 500,000 500,000 214,285 0.02%
Clarisay, Inc. Warrants
06/03/2005 Jun. 3, 2003 500,000 -- -- 0.00%
Clarisay, Inc. Warrants
07/07/2005 Jul. 7, 2003 500,000 -- -- 0.00%
Clarisay, Inc. Warrants
08/07/2005 Aug. 7, 2003 500,000 -- -- 0.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Firsthand Technology Value Fund (cont'd)
Security Acquisition Date Shares Cost Value % Net Assets
- ------------------------------------------------------------------------------------------------------------------------
Clarisay, Inc. Warrants
09/12/2005 Sept. 12, 2003 250,000 $ -- $ -- 0.00%
Clarisay, Inc. Warrants
09/19/2005 Sept. 19, 2003 100,000 -- -- 0.00%
Clarisay, Inc. Warrants
11/10/2005 Nov. 10, 2003 500,000 -- -- 0.00%
Global Locate, Inc.
Series A P/S Oct. 5, 2001 5,861,664 5,000,000 5,775,498 0.66%
Global Locate, Inc.
Series A P/S Mar. 28, 2002 169,232 144,355 166,744 0.02%
Global Locate, Inc.
Series C P/S May 15, 2003 1,111,111 1,000,000 1,000,000 0.11%
Global Locate, Inc.
Series C Warrants May 15, 2003 370,370 -- 3,704 0.00%
Global Locate, Inc.
Common Stock Warrants Sept. 8, 2003 75,000 -- 375 0.00%
IP Unity, Inc. Series C P/S Jul. 27, 2001 1,104,265 1,987,677 1,747,389 0.20%
Luminous Networks, Inc.
Series D P/S May 31, 2001 868,710 1,816,299 937,642 0.11%
Luminous Networks, Inc.
Series E P/S Oct. 16, 2003 434,724 184,410 184,410 0.02%
Luminous Networks, Inc.
Series D Warrants Dec. 31, 2003 144,785 -- -- 0.00%
LuxN, Inc. C/S Dec. 20, 2000 362,757 5,187,425 -- 0.00%
Maple Optical Systems, Inc.
Series A-1 P/S Jul. 31, 2002 5,714,285 2,000,000 -- 0.00%
Maple Optical Systems, Inc.
Series A-1 P/S Aug. 9, 2001 4,637,769 1,623,219 -- 0.00%
NanoMuscle, Inc. Series C Aug. 29, 2003 1,250,000 1,250,000 1,250,000 0.14%
NanoMuscle, Inc. Series C
Anti-Dilution Warrants Aug. 29, 2003 1 -- -- 0.00%
NanoMuscle, Inc. Series C
Performance Warrants Aug. 29, 2003 1 -- -- 0.00%
Polaris Networks, Inc.
Series A P/S Nov. 16, 2001 297,848 297,848 33,836 0.00%
Silicon Genesis Corp.
Series D P/S Apr. 30, 2002 705,840* 7,999,994 791,900 0.09%
Silicon Genesis Corp.
Series D Warrants Apr. 30, 2002 26,469* -- 26 0.00%
Silicon Genesis Corp.
Series 1-E P/S Nov. 4, 2003 4,071,226 4,315,500 4,315,500 0.49%
Silicon Genesis Corp.
Series 1-E Warrants Oct. 31, 2003 1,257,859 -- 334,339 0.04%
Silicon Genesis Corp.
Common Stock Warrants Nov. 4, 2003 37,982 -- 38 0.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2003 Annual Report | 57
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Firsthand Technology Innovators Fund
Security Acquisition Date Shares Cost Value % Net Assets
- ------------------------------------------------------------------------------------------------------------------------
AuthenTec, Inc. Series C P/S Apr. 4, 2003 736,248 $ 369,000 $ 369,000 0.42%
AuthenTec, Inc. Series C
Warrants Apr. 4, 2003 196,333 -- 1,963 0.00%
Centerpoint Broadband
Technologies, Inc.
Series D P/S Oct. 24, 2000 27,092 292,052 -- 0.00%
Clarisay, Inc. Series B P/S Jan. 24, 2001 2,861,519 2,618,290 -- 0.00%
Clarisay, Inc. 8.00%
05/08/2005 C/N May 8, 2003 500,000 500,000 214,285 0.24%
Clarisay, Inc. Warrants
05/08/2005 May 8, 2003 500,000 -- -- 0.00%
Clarisay, Inc. 8.00%
09/19/2005 C/N Sept. 19, 2003 150,000 150,000 64,285 0.07%
Clarisay, Inc. Warrants
09/19/2005 Sept. 19, 2003 150,000 -- -- 0.00%
Clarisay, Inc. 8.00%
10/10/2005 C/N Oct. 10, 2003 500,000 500,000 214,285 0.24%
Clarisay, Inc. Warrants
10/10/2005 Oct. 10, 2003 500,000 -- -- 0.00%
Clarisay, Inc. Warrants
12/31/2010 Dec. 31, 2003 109,290 -- -- 0.00%
Innovion Corp. Series C P/S Feb. 23, 2001 1,500,000 3,000,000 1,675,650 1.90%
Innovion Corp. 8.00%
03/07/2005 C/N Dec. 30, 2003 602,577 602,577 602,577 0.68%
Innovion Corp. Warrants Dec. 30, 2003 602,577 -- 603 0.00%
IP Unity, Inc. Series C P/S Jul. 27, 2001 1,117,957 2,012,323 1,769,055 2.01%
Luminous Networks, Inc.
Series D P/S May 31, 2001 1,522,719 3,183,701 1,643,546 1.87%
Luminous Networks, Inc.
Series E P/S Oct. 16, 2003 762,008 323,244 323,244 0.37%
Luminous Networks, Inc.
Series D Warrants Dec. 31, 2003 253,787 -- -- 0.00%
LuxN, Inc. C/S Dec. 20, 2000 336,544 4,812,579 -- 0.00%
Maple Optical Systems, Inc.
Series A-1 P/S Aug. 9, 2001 9,647,945 3,376,781 -- 0.00%
NanoMuscle, Inc. Series C Aug. 29, 2003 1,250,000 1,250,000 1,250,000 1.42%
NanoMuscle, Inc. Series C
Anti-Dilution Warrants Aug. 29, 2003 1 -- -- 0.00%
NanoMuscle, Inc. Series C
Performance Warrants Aug. 29, 2003 1 -- -- 0.00%
NuTool, Inc. Series D P/S Oct. 22, 2001 533,503 2,085,996 847,950 0.96%
Polaris Networks, Inc.
Series A P/S Nov. 16, 2001 702,152 702,152 79,765 0.09%
Silicon Optix, Inc. Series B P/S Nov. 7, 2003 1,111,111 1,000,000 1,000,000 1.14%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Firsthand Technology Innovators Fund (cont'd)
Security Acquisition Date Shares Cost Value % Net Assets
- ------------------------------------------------------------------------------------------------------------------------
Silicon Genesis Corp.
Series C P/S Mar. 8, 2001 155,556* $3,248,023 $ 284,217 0.32%
Silicon Genesis Corp.
Series 1-E P/S Nov. 4, 2003 1,633,254 1,731,249 1,731,249 1.96%
Silicon Genesis Corp.
Series 1-E Warrants Feb. 26, 2003 94,339 0 944 0.00%
C/S Common Stock
P/S Preferred Stock
C/N Convertible Note
* The share amount has been adjusted to reflect a reverse stock split that
occurred during the year ended December 31, 2003.
8. Risks
Because the return on and value of an investment in each Fund will fluctuate in
response to stock market movements, the most significant risk of investing in a
Fund is that you may lose money. Stocks and other equity securities are subject
to market risks and fluctuations in value due to earnings, as well as economic,
political, or regulatory events, and other factors beyond the Investment
Adviser's control. The Funds are designed for long-term investors who can accept
the risks of investing in a fund with significant common stock holdings in
high-technology industries.
Each Fund is non-diversified. A risk of being non-diversified is that a
significant change in the value of one company will have a greater impact on the
Fund than it would if the Fund diversified its investments. Another risk for the
Fund is its concentration of investments in companies within high-technology
industries. The value of high-technology companies can, and often does,
fluctuate dramatically and may expose you to greater-than-average financial and
market risk.
9. Rule 12b-1 Plan
The Trust has a Plan of Distribution Pursuant to Rule 12b-1 (the "Plan") with
respect to the Advisor Class shares of the Funds that was adopted pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan, in consideration of the services
to be provided and the expenses to be incurred by the Trust's distributor (the
"Distributor") for any activities or expenses primarily intended to result in
the sale of the Advisor Class shares of a Fund, the Fund shall pay to the
Distributor a fee at the aggregate rate of 0.25% per year of the average daily
net assets of the Advisor Class shares of the Funds. As of December 31, 2003,
none of the Funds offer Advisor Class shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2003 Annual Report | 59
Notes to Financial Statements (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10. Fund Reorganization
On December 27, 2002, Firsthand Technology Value Fund (the "Acquiring Fund")
acquired the assets and assumed the liabilities of Firsthand Communications Fund
(the "Acquired Fund") in a tax-free reorganization in exchange for shares of the
Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired
Fund's shareholders. The number and value of shares issued by the Acquiring Fund
are presented in the Schedules of Changes in Net Assets. Net assets and
unrealized depreciation as of the reorganization date were as follows:
Total net assets Acquired Fund
Total net assets Total net assets of Acquiring Fund unrealized
of Acquired Fund of Acquiring Fund after acquisition depreciation
==================================================================================================
$24,246,552 $477,555,846 $501,802,398 $45,450,144
Additional Information (unaudited)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Information about the trustees and officers* of the Funds is set forth in the
following table. The Statement of Additional Information (the "SAI") includes
additional information about the Funds' trustees and officers and is available
free of charge, upon request, by calling 1.888.884.2675, option 2. The address
for each of the persons named below is 125 South Market, Suite 1200, San Jose,
CA 95113.
Name, Year Term of Principal Number of Other
of Birth, Office Occupation(s) Funds in Fund Trusteeships
Position(s) and Length During Past Five Complex Held by
Held With of Time Years Overseen by Trustees
Funds Served (1) Trustee
- -----------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
MICHAEL T. SINCE Mr. Lynch is currently self-employed. He FIVE NONE
LYNCH 1994 was VP of Sales and Business
(1961) Development of AlphaOmega Soft, Inc.
TRUSTEE (a manufacturer of software) from 2002
through 2003. Mr. Lynch served as VP
of Sales and Business Development at
Picture IQ Corporation (a manufacturer
of digital imaging software) from 1999
through 2002. Mr. Lynch served as a
Product Manager for Iomega Corp. (a
manufacturer of computer peripherals)
from 1995 through 1999.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]Firsthand(R)
Additional Information (unaudited) (continued)
December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name, Year Term of Principal Number of Other
of Birth, Office Occupation(s) Funds in Fund Trusteeships
Position(s) and During Past Five Complex Held by
Held With Length of Years Overseen by Trustees
Funds Time Trustee
Served (1)
- ---------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES (CONT'D)
JERRY WONG SINCE Mr. Wong serves as CFO for FIVE NONE
(1951) 1999 Companion Worlds, Inc. (a
TRUSTEE manufacturer of hardware/software to
facilitate fitness and health maintenance)
from June 2003 to present. Mr. Wong
also serves as a consultant from October
2002 to present. Mr. Wong served as
VP of Finance and EVP of U.S.
Operations of Poet Holdings, Inc. (a
manufacturer of software) from 1995 to
2002.
- ---------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
KEVIN M. LANDIS (2) SINCE Mr. Landis is President and Chief FIVE NONE
(1961) 1994 Investment Officer and a Director of
TRUSTEE/PRESIDENT Firsthand Capital Management, Inc. and
has been a portfolio manager with
Firsthand Capital Management, Inc.
since May 1994. From 1998 through
2001, he was also the President and
CEO of Silicon Capital Management LLC.
- ---------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
YAKOUB SINCE Mr. Bellawala is VP of Business Process N/A NONE
BELLAWALA (3) 2003 Development for Firsthand Capital
(1965) Management, Inc. (FCM) from August
SECRETARY 2002 to present. He was VP of
Business Development for FCM from
1999 to 2002. He was also COO of
FCM from 1996 to1999. He was
Treasurer of Firsthand Funds from 1996
to 2003.
OMAR SINCE Mr. Billawala is COO and CFO of N/A NONE
BILLAWALA (3) 2003 Firsthand Capital Management, Inc.
(1961) (FCM) from 1999 to present. He was
TREASURER the COO and CFO of Silicon Capital
Management LLC from 1999 to 2001.
He was also Secretary of Firsthand
Funds from 2000 to 2003. Prior to that,
he was an associate at the law firm of
Paul, Hastings, Janofsky & Walker LLP
from 1997 to 1999.
* The term "officer" means the president, vice president, secretary,
treasurer, controller, or any other officer who performs policy-making
functions.
(1) Each trustee shall serve for the lifetime of Firsthand Funds or until he
dies, resigns, or is removed. Each officer shall serve a one-year term
subject to annual reappointment by the trustees.
(2) Mr. Landis is an interested person of the Funds by reason of his position
with the Adviser.
(3) Mr. Bellawala and Mr. Billawala are brothers.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2003 Annual Report | 61
[LOGO]Firsthand(R)
Firsthand Funds
P.O. Box 8356
Boston, MA 02266-8356
1.888.884.2675
www.firsthandfunds.com
Investment Adviser
Firsthand Capital Management, Inc.
125 South Market
Suite 1200
San Jose, CA 95113
www.firsthandcapital.com
Distributor
ALPS Distributors, Inc.
1625 Broadway
Suite 2200
Denver, CO 80202
Transfer Agent
State Street Bank and Trust Company
P.O. Box 8356
Boston, MA 02266-8356
1.888.884.2675
[LOGO]Firsthand(R)
Item 2. Code of Ethics.
As of the end of the period, December 31, 2003, the registrant has adopted a
code of ethics, as defined in Item 2(b) of Form N-CSR, that applies to the
registrant's principal executive officer and principal financial officer. The
registrant has not made any amendment to its code of ethics during the covered
period. The registrant has not granted any waivers from any provisions of the
code of ethics during the covered period. A copy of the registrant's code of
ethics is filed as Exhibit 11(a)(1) to this Form N-CSR.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees (the "Board") has determined that the
registrant has at least one "audit committee financial expert" as defined in
Item 3 of Form N-CSR serving on its Audit Committee. Mr. Jerry Wong, an
independent trustee for purposes of this Item 3, was deemed qualified and agreed
to serve.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
For the fiscal years ending December 31, 2003 and December 31, 2002, the
aggregate audit fees billed for professional services rendered by the principal
accountant were $96,000 and $96,000, respectively. The nature of the services
are: (1) auditing of the statements of assets and liabilities, related
statements of operations and changes in net assets, and the financial highlights
of each series of the registrant; (2) auditing and reporting on the financial
statements to be included in the amendment to the registrant's registration
statement on Form N-1A to be filed with the Securities and Exchange Commission;
(3) review of the amendment to the registration statement; and (4) issuance of a
Report on Internal Control for inclusion in the registrant's Form N-SAR.
(b) Audit-Related Fees
For the fiscal years ending December 31, 2003 and December 31, 2002, the
principal accountant did not bill the registrant any fees for assurances and
related services that are reasonably related to the performance of the audit of
the registrant's financial statements and are not reported under paragraph (a)
of this Item.
(c) Tax Fees
For the fiscal years ending December 31, 2003 and December 31, 2002, the
aggregate tax fees billed for professional services rendered by the principal
accountant were $10,000 and $10,000, respectively. Services include the review
of income and excise tax returns for the registrant.
(d) All Other Fees
For the fiscal year ending December 31, 2003, the aggregate fees billed for
professional services rendered by the principal accountant in connection with
its audit of the registrant's anti-money laundering program was $1,500.
(e)(1) Audit Committee Pre-Approval Policies and Procedures
The registrant's Audit Committee Charter states the following with respect to
pre-approval procedures:
The Committee hereby delegates to the Chairman of the Committee the authority to
grant pre-approvals of audit and "permissible" non-audit services to be provided
by the Auditors to the Funds, subject to the ratification of the full Committee
at its next regularly scheduled meeting. Both the Auditors and Fund counsel will
be responsible for informing the Committee whether they believe that a
particular non-audit service is permissible or prohibited pursuant to applicable
regulations and standards.
The specific types of non-audit services that the Chairman may pre-approve
include, but are not limited to: reviewing the Funds' internal controls over
financial reporting; providing tax-related services; reviewing and/or developing
an anti-money laundering program; and issuing comfort letters, based on
agreed-upon procedures, in connection with any Fund reorganization.
Pre-approval for a non-audit service provided to a Fund is not required if: (i)
the aggregate amount of all such non-audit services provided to the Fund
constitutes not more than 5% of the total amount of revenues paid by the Fund to
the Auditors during the fiscal year in which the non-audit services are
provided; (ii) such services were not recognized by the Fund at the time of the
engagement to be non-audit services; and (iii) such services are promptly
brought to the attention of the Committee and are approved by the Committee or
by one or more members of the Committee to whom authority to grant such
approvals has been delegated by the Committee prior to the completion of the
audit (the "De Minimus Exceptions").
The Committee shall also pre-approve any non-audit services proposed to be
provided by the Auditors to (i) a Fund's investment adviser and (ii) any entity
controlling, controlled by, or under common control with the investment adviser
that provides ongoing services to the Fund, if the Auditors' engagement with the
investment adviser or any such control persons relates directly to the
operations and financial reporting of the Fund. The De Minimus Exceptions
applies to pre-approvals under this paragraph as well, except that the "total
amount of revenues" calculation is based on the total amount of revenues paid to
the Auditors by the Fund and any other entity that has its services approved
under this paragraph (i.e., the investment adviser or any control person).
(e)(2) Percentages of Services
One hundred percent of the services described in each of paragraphs (b) through
(d) of this Item were approved by the registrant's Audit Committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) For the fiscal years ending December 31, 2003 and December 31, 2002, the
aggregate non-audit fees billed for services rendered to the registrant by the
principal accountant were $11,500 and $10,000, respectively.
(h) Not applicable.
Item 5. Disclosure of Audit Committees for Listed Companies.
Not applicable to the registrant.
Item 6. [Reserved by SEC for future use.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to the registrant.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable to the registrant.
Item 9. Submission of Matters to a Vote of Security Holders.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
Item 10. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective, as of a date within 90 days of the filing date
of the report that includes the disclosure required by this paragraph, based on
their evaluation of these controls and procedures required by Rule 30a-3(b)
under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act that occurred during
the registrant's second fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
Item 11. Exhibits.
(a)(1) Code of Ethics referred to in Item 2.
(a)(2) Certifications of principal executive officer and principal financial
officer of the registrant as required by Rule 30a-2(a) under the 1940 Act.
(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the 1940 Act.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FIRSTHAND FUNDS
By: /s/ Kevin M. Landis
------------------------------------
Kevin M. Landis
President
Date: February 26, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Kevin M. Landis
------------------------------------
Kevin M. Landis
President
Date: February 26, 2004
By: /s/ Omar Billawala
------------------------------------
Omar Billawala
Treasurer
Date: February 26, 2004
EXHIBIT INDEX
(a)(1) Code of Ethics referred to in Item 2.
(a)(2) Certifications of principal executive officer and principal financial
officer of the registrant as required by Rule 30a-2(a) under the 1940 Act.
(EX-99.CERT)
(b) Certifications of principal executive officer and principal financial
officer of the registrant as required by Rule 30a-2(b) under the 1940 Act.
(EX-99.906CERT)