E*TRADE S&P 500 INDEX ANNUAL REPORT
FOR THE PERIOD FROM FEBRUARY 17, 1999 TO DECEMBER 31, 1999
DEAR E*TRADE FUNDS SHAREHOLDER,
We'd like to take this opportunity to thank all our shareholders for their
investment in the E*TRADE Family of Funds. We'd also like to welcome all our new
shareholders to the E*TRADE S&P 500 Index Fund (the "Fund").
For the fiscal year period from February 17, 1999 (inception date of the Fund)
through December 31, 1999, the Fund returned 19.31%. Of course, past performance
is no guarantee of future results. The investment return and principal value of
an investment will fluctuate, and your shares, when redeemed, may be worth more
or less than their original cost. Performance reflects reinvestment of dividends
and other earnings and also reflects fee waivers in effect. In the absence of
fee waivers, performance would be reduced.
THE YEAR IN REVIEW
The investment objective of the Fund is to provide investment results that
attempt to match the total return of the stocks making up the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index"). The Fund seeks to achieve
its investment objective by investing all of its assets in the S&P 500 Index
Master Portfolio ("Master Portfolio"). The Master Portfolio, in turn, invests
substantially all of its assets in the same stocks and in substantially the same
percentages as the S&P 500 Index.
The fiscal year opened on a positive note for large-cap stocks. A healthy U.S.
economy and an appetite for technology stocks drove the market, with an emphasis
on rising earnings that left value stocks largely ignored in favor of growth
stocks.
During the months of April and May, concern surfaced about an overheated
economy. Although unemployment figures remained benign, consumer and wholesale
prices had begun to heat up. A recovery in European countries compounded worries
of potential inflation and corresponding Federal Reserve intervention. Markets
reflected this apprehension, as investors shunned growth stocks for value.
However, worries over higher interest rates were rekindled as many companies
released favorable earnings reports in July. After reaching new highs on July
16, U.S. equities tumbled through the end of the third quarter and into the
second week of October, giving back some of the gains they had accumulated for
the year. Tightening labor markets and strong domestic demand figures released
in August contributed to the decline.
October began on a negative note as high producer price reports provided further
indications of an overheated economy. However, the tide soon changed and markets
rebounded sharply during the second half of the month and into the end of the
year.
<PAGE>
The following table shows the hypothetical return of $10,000 invested in the S&P
500 Composite Stock Price Index (and not the return of any fund).
S&P 500 COMPOSITE
STOCK PRICE
DATE INDEX*
- -----------------------------------
2/17/99 $ 10,000
2/28/99 $ 10,121
3/31/99 $ 10,526
4/30/99 $ 10,935
5/31/99 $ 10,677
6/30/99 $ 11,270
7/31/99 $ 10,918
8/31/99 $ 10,864
9/30/99 $ 10,566
10/31/99 $ 11,235
11/30/99 $ 11,464
12/31/99 $ 12,139
The following table provides the hypothetical account values of $10,000 invested
in the Fund as of the end of each month in which the Fund was operational for
the period ended December 31, 1999.
E*TRADE
S&P 500
DATE INDEX FUND**
- --------------------------------------------------------------------------------
2/17/99 $ 10,000
2/28/99 $ 9,980
3/31/99 $ 10,374
4/30/99 $ 10,775
5/31/99 $ 10,515
6/30/99 $ 11,099
7/31/99 $ 10,748
8/31/99 $ 10,697
9/30/99 $ 10,397
10/31/99 $ 11,060
11/30/99 $ 11,271
12/31/99 $ 11,932
[insert graph]
Past performance does not predict future performance.
*This graph assumes reinvested dividends and does not reflect the costs of
investing. This graph does not reflect the return of any fund. "Standard &
Poor's(R)," "S&P(R)" "S&P 500(R)", "Standard & Poor's 500(R)", and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by
E*TRADE Asset Management, Inc. for use in connection with the Fund. The Fund is
not sponsored, endorsed, sold, or promoted by Standard & Poor's and Standard &
Poor's makes no representation regarding the advisability of investing in the
Fund.
**Hypothetical illustration of $10,000 invested at inception (commencement
of operations was February 17, 1999), assuming reinvestment of dividends and
capital gains at net asset value through December 31, 1999. It reflects costs at
both the Fund and Master Portfolio levels. The illustration also reflects fee
waivers in effect, in the absence of which performance would be reduced.
<PAGE>
GOING FORWARD
You should remember that past performance is no guarantee of future returns and
the Fund may not be able to duplicate its strong 1999 performance.
We appreciate your investment in the Fund. We are committed to provide you with
outstanding services that may help you reach your financial goals. To that end,
we've recently launched a new E*TRADE Family of Funds site to make it easier for
you to find information to help you make investment decisions. Check it out at
http://etradefunds.etrade.com.
The financial statements for the period ended December 31, 1999 for the Fund are
provided below. We'd like to take this opportunity to remind all of our
shareholders that investing in the Fund is a long-term proposition and
shareholders should not invest assets that will be needed in the near term.
Sincerely,
E*TRADE Funds
<PAGE>
MASTER INVESTMENT PORTFOLIO--S&P 500 INDEX
MASTER PORTFOLIO--DECEMBER 31, 1999
Portfolio of Investments
<TABLE>
<CAPTION>
Security Name Shares Value
<S> <C> <C> <C>
COMMON STOCKS--96.26%
ADVERTISING--0.27%
Interpublic Group Co Inc 107,383 6,194,657
Omnicom Group 67,509 6,750,900
--------------
TOTAL ADVERTISING
- VALUE $12,945,557
- COST $ 6,043,792
AEROSPACE / DEFENSE--1.18%
Boeing Co 356,357 14,811,088
General Dynamics Corp 71,266 3,759,281
Goodrich (B F) Co 34,653 952,957
Honeywell International Inc 299,106 17,254,677
Lockheed Martin Corp 151,413 3,312,159
Northrop Grumman Corp 26,579 1,436,927
Raytheon Co Class B 129,063 3,428,236
United Technologies Corp 182,808 11,882,520
--------------
TOTAL AEROSPACE / DEFENSE
- VALUE $56,837,845
- COST $50,908,685
AIRLINES--0.22%
AMR Corp + 57,567 3,856,989
Delta Air Lines Inc 53,167 2,648,381
Southwest Airlines Co 193,037 3,124,786
USAirways Group Inc + 28,465 912,659
--------------
TOTAL AIRLINES
- VALUE $10,542,815
- COST $ 9,589,571
APPAREL--0.17%
Liz Claiborne Inc 24,271 913,196
Nike Inc Class B 107,232 5,314,686
Reebok International Ltd + 22,146 181,320
Russell Corp 13,707 229,592
VF Corp 46,290 1,388,700
--------------
TOTAL APPAREL
- VALUE $ 8,027,494
- COST $ 8,026,371
AUTO MANUFACTURERS--0.93%
Ford Motor Co 458,260 24,488,269
General Motors Corp Class A 243,639 17,709,510
Navistar International Corp + 25,666 1,215,927
PACCAR Inc 30,273 1,341,472
--------------
TOTAL AUTO MANUFACTURERS
- VALUE $44,755,178
- COST $31,543,211
AUTO PARTS & EQUIPMENT--0.20%
Cooper Tire & Rubber Co 29,617 460,915
Dana Corp 64,030 1,916,898
Delphi Automotive Systems Corp 216,361 3,407,686
Goodyear Tire & Rubber Co 60,125 1,694,773
TRW Inc 46,477 2,413,899
--------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TOTAL AUTO PARTS & EQUIPMENT
- VALUE $ 9,894,171
- COST $11,608,581
BANKS--4.96%
Amsouth Bancorp 133,902 2,585,982
Bank of New York Co Inc 279,156 11,166,240
Bank One Corp 437,601 14,030,582
BankAmerica Corp 647,205 32,481,601
BB&T Corp 120,484 3,298,250
Chase Manhattan Corp 313,185 24,330,560
Comerica Inc 59,938 2,798,355
Fifth Third Bancorp 109,658 8,046,156
First Union Corp 362,892 11,907,394
Firstar Corp 374,181 7,904,574
FleetBoston Financial Corp 349,568 12,169,336
Golden West Financial 63,654 2,132,409
Huntington Bancshares Inc 88,677 2,117,163
KeyCorp 171,409 3,792,424
Mellon Financial Corp 195,583 6,662,046
Morgan (J P) & Co Inc 66,489 8,419,170
National City Corp 235,464 5,577,554
Northern Trust Corp 85,146 4,512,738
Old Kent Financial Corp 34,400 1,216,900
PNC Bank Corp 114,295 5,086,127
Regions Financial Corp 85,833 2,156,554
Republic New York Corp 40,184 2,893,248
SouthTrust Corp 63,289 2,393,115
State Street Boston Corp 61,542 4,496,412
Summit Bancorp 66,056 2,022,965
SunTrust Banks Inc 122,242 8,411,778
Synovus Financial Corp 103,581 2,058,672
U.S. Bancorp 278,309 6,627,233
Union Planters Corp 53,845 2,123,512
Wachovia Corp 77,040 5,238,720
Washington Mutual Inc 220,472 5,732,272
Wells Fargo & Co 623,474 25,211,730
--------------
TOTAL BANKS
- VALUE $239,601,772
- COST $226,819,971
BEVERAGES--1.91%
Anheuser-Busch Inc 177,324 12,567,839
Brown-Forman Corp Class B 26,460 1,514,835
Coca-Cola Co 934,391 54,428,276
Coca-Cola Enterprises Co 162,898 3,278,322
Coors (Adolph) Co Class B 14,382 755,055
Diageo PLC ADR (UK) 17 544
Pepsico Inc 553,554 19,512,779
--------------
TOTAL BEVERAGES
- VALUE $92,057,650
- COST $80,351,664
BIOTECHNOLOGY--0.66%
Amgen Inc + 386,562 23,217,880
Monsanto Co 240,552 8,569,739
--------------
TOTAL BIOTECHNOLOGY
- VALUE $31,787,619
- COST $15,323,757
BUILDING MATERIALS--0.13%
Armstrong World Industries Inc 15,543 518,748
Masco Corp 156,883 3,980,906
Owens Corning Fiberglas Corp 20,986 405,292
Vulcan Materials Co 32,120 1,282,793
--------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TOTAL BUILDING MATERIALS
- VALUE $6,187,739
- COST $6,873,934
CHEMICALS--1.20%
Air Products & Chemicals Inc 87,959 2,952,124
Ashland Inc 28,437 936,644
Dow Chemical Co 83,558 11,165,438
Du Pont (E I) de Nemours 394,057 25,958,505
Eastman Chemical Co 30,282 1,444,073
Engelhard Corp 48,653 918,325
Grace (W R) Co + 27,178 377,095
Great Lakes Chemical Corp 22,691 866,513
Hercules Inc 38,616 1,076,421
Praxair Inc 60,801 3,059,050
Rohm & Haas Co 81,296 3,307,731
Sherwin Williams Co 65,777 1,381,317
Sigma-Aldrich Corp 39,041 1,173,670
Union Carbide Corp 51,017 3,405,385
--------------
TOTAL CHEMICALS
- VALUE $58,022,291
- COST $47,443,341
COMMERCIAL SERVICES--0.49%
Block (H R) Inc 37,527 1,641,806
Cendant Corp + 274,479 7,290,848
Deluxe Corp 30,074 825,155
Donnelley (R R) & Sons Co 49,915 1,238,516
Dun & Bradstreet Corp 62,396 1,840,682
Ecolab Inc 50,020 1,957,033
Equifax Inc 55,846 1,315,871
McKesson HBOC Inc 105,816 2,387,474
Paychex Inc 94,001 3,760,040
Quintiles Transnational Corp + 25,800 482,137
Service Corp International 101,954 707,306
--------------
TOTAL COMMERCIAL SERVICES
- VALUE $23,446,868
- COST $28,439,975
COMPUTERS--9.58%
3Com Corp + 133,118 6,256,546
Adaptec Inc + 31,300 1,561,087
Apple Computer Inc + 60,296 6,199,183
Cabletron Systems Inc + 62,807 1,632,982
Ceridian Corp + 55,853 1,204,330
Cisco Systems Inc + 1,229,986 131,762,250
Compaq Computer Corp 644,412 17,439,400
Computer Sciences Corp + 61,031 5,775,058
Dell Computer Corp + 961,746 49,049,046
Electronic Data Systems Corp 179,898 12,041,922
EMC Corp + 383,629 41,911,468
Gateway Inc + 119,048 8,578,897
Hewlett-Packard Co 383,434 43,687,511
International Business Machine Corp 681,649 73,618,092
Lexmark International Group Class A + 44,975 4,070,237
Network Appliance Inc + 53,250 4,423,078
Seagate Technology Inc + 79,776 3,714,570
Silicon Graphics Inc + 73,128 717,569
Sun Microsystems Inc + 585,786 45,361,803
Unisys Cor + 108,675 3,470,808
--------------
TOTAL COMPUTERS
- VALUE $462,475,837
- COST $176,115,888
COSMETICS / PERSONAL CARE--2.16%
Alberto-Culver Co Class B 21,777 562,119
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Avon Products Inc 96,143 3,172,719
Colgate-Palmolive Co 221,134 14,373,710
Gillette Co 408,333 16,818,215
International Flavor & Fragrances Inc 40,998 1,547,674
Kimberly-Clark Corp 202,091 13,186,438
Procter & Gamble Co 497,231 54,477,871
--------------
TOTAL COSMETICS / PERSONAL CARE
- VALUE $104,138,746
- COST $68,964,678
DISTRIBUTION / WHOLESALE--0.19%
Costco Wholesale Corp + 83,938 7,659,342
Genuine Parts Co 69,138 1,715,489
--------------
TOTAL DISTRIBUTION / WHOLESALE
- VALUE $9,374,831
- COST $5,792,322
DIVERSIFIED FINANCIAL SERVICES--4.91%
American Express Corp 169,847 28,237,064
Associates First Capital Corp 276,610 7,589,487
Bear Stearns Co Inc 47,199 2,017,757
Capital One Financial Corp 75,490 3,637,674
Citigroup Inc 1,275,154 70,850,744
Countrywide Credit Industries Inc 43,374 1,095,193
Federal Home Loan Mortgage Corporation 263,711 12,410,899
Federal National Mortgage Association 388,233 24,240,298
Franklin Resources Inc 96,631 3,098,231
Household International Inc 181,216 6,750,296
Lehman Brothers Holdings 45,325 3,838,461
MBNA Corp 304,775 8,305,119
Merrill Lynch & Co Inc 140,237 11,709,789
Morgan Stanley Dean Witter 211,367 30,172,639
Paine Webber Group Inc 55,154 2,140,665
Price (T Rowe) & Associates 35,000 1,292,812
Providian Financial Corp 54,109 4,927,301
Schwab (Charles) Corp 310,318 11,908,453
SLM Holding Corp 61,684 2,606,149
--------------
TOTAL DIVERSIFIED FINANCIAL SERVICES
- VALUE $236,829,031
- COST $143,235,527
ELECTRIC--1.56%
AES Corp + 73,105 5,464,599
Ameren Corp 52,966 1,734,636
American Electric Power Inc 74,389 2,389,747
Carolina Power & Light Co 59,226 1,802,691
Central & South West Corp 82,182 1,643,640
Cinergy Corp 61,411 1,481,540
CMS Energy Corp 43,993 1,372,032
Consolidated Edison Inc 84,720 2,922,840
Constellation Energy Group 57,860 1,677,940
Dominion Resources Inc 73,506 2,885,110
DTE Energy Co 56,010 1,757,314
Duke Energy Corp 138,806 6,957,651
Edison International 132,874 3,479,638
Entergy Corp 94,882 2,443,211
FirstEnergy Corp 90,161 2,045,528
Florida Progress Corp 37,858 1,601,867
FPL Group Inc 68,706 2,941,476
GPU Inc 48,607 1,455,172
New Century Energies Inc 44,293 1,345,400
Niagra Mohawk Holdings Inc + 72,680 1,012,978
Northern States Power Co 58,795 1,146,502
PECO Energy Co 71,748 2,493,243
PG&E Corp 147,012 3,013,746
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Pinnacle West Capital Corp 23,500 718,219
PP & L Resources Inc 59,377 1,358,249
Public Service Enterprise Group 84,063 2,926,443
Reliant Energy Inc 112,934 2,583,365
Southern Co 260,050 6,111,175
Texas Utilities Co 105,661 3,757,569
Unicom Corp 83,448 2,795,508
--------------
TOTAL ELECTRIC
- VALUE $75,319,029
- COST $77,602,095
ELECTRICAL COMPONENTS & EQUIPMENT--0.25%
Emerson Electric Co 165,032 9,468,711
Molex Inc 50,600 2,868,387
--------------
TOTAL ELECTRICAL COMPONENTS & EQUIPMENT
- VALUE $12,337,098
- COST $10,607,048
ELECTRONICS--0.66%
Analog Devices Inc + 59,990 5,579,070
Johnson Controls Inc 32,858 1,868,799
Millipore Corp 17,225 665,316
Parker Hannifin Corp 41,831 2,146,453
PE Corp-PE Biosystems Group 38,586 4,642,378
PerkinElmer Inc 17,648 735,701
Solectron Corp + 106,352 10,116,734
Tektronix Inc 18,410 715,689
Teradyne Inc + 56,740 3,744,840
Thermo Electron Corp + 61,303 919,545
Thomas & Betts Corp 21,793 694,652
--------------
TOTAL ELECTRONICS
- VALUE $31,829,177
- COST $20,085,745
ENGINEERING & CONSTRUCTION--0.03%
Fluor Corp 29,408 1,349,107
Foster Wheeler Corp 15,952 141,574
--------------
TOTAL ENGINEERING & CONSTRUCTION
- VALUE $1,490,681
- COST $1,940,013
ENTERTAINMENT--0.05%
Harrah's Entertainment Inc + 48,115 1,272,040
Mirage Resorts Inc + 73,225 1,121,258
--------------
TOTAL ENTERTAINMENT
- VALUE $2,393,298
- COST $2,764,549
ENVIRONMENTAL CONTROL--0.09%
Allied Waste Industries Inc + 50,915 448,688
Waste Management Inc 234,418 4,029,059
--------------
TOTAL ENVIRONMENTAL CONTROL
- VALUE $4,477,747
- COST $12,258,279
FOOD--1.92%
Albertson's Inc 160,326 5,170,514
Archer-Daniels-Midland Co 236,583 2,883,355
Bestfoods 106,212 5,582,768
Campbell Soup Co 165,111 6,387,732
ConAgra Inc 186,381 4,205,221
General Mills Inc 116,686 4,171,524
Great Atlantic & Pacific Tea Co 14,838 413,609
Heinz (H J) Co 136,452 5,432,495
Hershey Foods Corp 53,535 2,542,913
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Kellogg Co 154,449 4,758,960
Kroger Co + 316,160 5,967,520
Nabisco Group Holdings Corp 125,413 1,332,513
Quaker Oats Co 51,208 3,360,525
Ralston-Purina Group 123,746 3,449,420
Safeway Inc + 190,959 6,790,979
Sara Lee Corp 343,377 7,575,755
Super Value Inc 46,279 925,580
Sysco Corp 126,212 4,993,262
Unilever NV 216,889 11,806,895
Winn-Dixie Stores Inc 57,358 1,373,007
Wrigley (W M) Jr Co 44,437 3,685,494
--------------
TOTAL FOOD
- VALUE $92,810,041
- COST $95,478,258
FOREST PRODUCTS & PAPER--0.65%
Boise Cascade Corp 22,043 892,742
Champion International Corp 36,981 2,290,511
Fort James Corp 85,028 2,327,642
Georgia-Pacific Corp 65,839 3,341,329
International Paper Co 157,147 8,868,984
Louisiana-Pacific Corp 41,771 595,237
Mead Corp 39,296 1,706,920
Potlatch Corp 11,371 507,431
Temple-Inland Inc 21,587 1,423,393
Westvaco Corp 38,863 1,267,905
Weyerhauser Co 83,345 5,985,213
Willamette Industries Inc 42,972 1,995,512
--------------
TOTAL FOREST PRODUCTS & PAPER
- VALUE $31,202,819
- COST $24,681,546
GAS--0.07%
Eastern Enterprises 8,432 484,313
NICOR Inc 18,445 599,463
ONEOK Inc 12,234 307,379
Peoples Energy Corp 13,909 465,952
Sempra Energy 92,729 1,611,166
--------------
TOTAL GAS
- VALUE $3,468,273
- COST $3,873,551
HAND / MACHINE TOOLS--0.11%
Black & Decker Corp 33,627 1,757,011
Grainger (W W) Inc 36,123 1,727,131
Milacron Inc 14,859 228,457
Snap-On Inc 23,453 622,970
Stanley Works 34,452 1,037,867
--------------
TOTAL HAND / MACHINE TOOLS
- VALUE $5,373,436
- COST $4,908,947
HEALTH CARE--2.24%
Allergan Inc 50,800 2,527,300
Bard (C R) Inc 19,978 1,058,834
Bausch & Lomb Inc 21,821 1,493,375
Baxter International Inc 110,721 6,954,663
Becton Dickinson & Co 96,061 2,569,632
Biomet Inc 43,468 1,738,720
Boston Scientific Corp + 152,221 3,329,834
Columbia/HCA Healthcare Corp 214,786 6,295,915
Guidant Corp + 115,111 5,410,217
Healthsouth Corp + 160,259 861,392
Humana Inc + 64,704 529,764
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Johnson & Johnson 520,147 48,438,689
Mallinckrodt Group Inc 27,624 878,789
Manor Care Inc + 42,886 686,176
Medtronics Inc 444,856 16,209,441
St Jude Medical Inc + 32,653 1,002,039
Tenet Healthcare Corp + 119,123 2,799,391
United Healthcare Corp 66,303 3,522,347
Wellpoint Health Networks + 25,355 1,671,845
--------------
TOTAL HEALTH CARE
- VALUE $107,978,363
- COST $84,180,983
HOLDING COMPANIES-DIVERSIFIED--0.15%
Seagrams Co Ltd 164,437 7,389,388
--------------
TOTAL HOLDING COMPANIES-DIVERSIFIED
- VALUE $7,389,388
- COST $6,502,451
HOME BUILDERS--0.03%
Centex Corp 23,215 573,120
Fleetwood Enterprises Inc 13,708 282,728
Kaufman & Broad Home Corp 17,979 434,867
Pulte Corp 17,087 384,458
--------------
TOTAL HOME BUILDERS
- VALUE $1,675,173
- COST $1,648,851
HOME FURNISHINGS--0.10%
Leggett & Platt Inc 56,700 1,215,506
Maytag Corp 33,811 1,622,928
Whirlpool Corp 29,131 1,895,336
--------------
TOTAL HOME FURNISHINGS
- VALUE $4,733,770
- COST $4,062,818
HOUSEHOLD PRODUCTS / WARES--0.30%
American Greetings Corp Class A 26,270 620,629
Avery-Dennison Corp 43,633 3,179,755
Clorox Co 90,052 4,536,370
Fortune Brands Inc 64,148 2,120,893
Jostens Inc 13,796 335,415
Newell Rubbermaid Inc 107,840 3,127,360
Tupperware Corp 22,621 383,143
--------------
TOTAL HOUSEHOLD PRODUCTS / WARES
- VALUE $14,303,565
- COST $12,785,042
INSURANCE--2.91%
Aetna Inc 54,289 3,030,005
AFLAC Corp 101,382 4,783,963
Allstate Corp 303,349 7,280,376
American General Corp 94,773 7,190,901
American International Group Inc 585,625 63,320,703
Aon Corp 98,022 3,920,860
Chubb Corp 63,769 3,590,992
CIGNA Corp 70,827 5,706,000
Cincinnati Financial Corp 63,644 1,984,897
Conseco Inc 123,646 2,210,172
Hartford Financial Services Group 86,412 4,093,769
Jefferson-Pilot Corp 40,464 2,761,668
Lincoln National Corp 76,197 3,047,880
Loews Corp 41,313 2,507,183
Marsh & McLennan Companies Inc 100,335 9,600,805
MBIA Inc 38,539 2,035,341
MGIC Investment Corp 41,931 2,523,722
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Progressive Corp Ohio 28,125 2,056,641
SAFECO Corp 51,422 1,279,122
St Paul Cos 86,993 2,930,577
Torchmark Corp 51,586 1,499,218
UNUMProvident Corp 91,610 2,937,246
--------------
TOTAL INSURANCE
- VALUE $140,292,041
- COST $108,341,003
IRON / STEEL--0.09%
Allegheny Technologies Inc 37,270 836,246
Bethlehem Steel Corp + 50,451 422,527
Nucor Corp 33,724 1,848,497
USX - U.S. Steel Group 34,183 1,128,039
--------------
TOTAL IRON / STEEL
- VALUE $4,235,309
- COST $4,772,269
LEISURE TIME--0.25%
Brunswick Corp 35,682 793,925
Carnival Corp Class A 232,789 11,130,224
--------------
TOTAL LEISURE TIME
- VALUE $11,924,149
- COST $11,133,423
LODGING--0.08%
Hilton Hotels Corp 100,112 963,578
Marriott International 95,283 3,007,370
--------------
TOTAL LODGING
- VALUE $3,970,948
- COST $3,919,019
MACHINERY--0.46%
Briggs & Stratton Corp 9,122 489,167
Caterpillar Inc 135,328 6,368,874
Cummins Engine Co Inc 15,900 768,169
Deere & Co 89,327 3,874,559
Dover Corp 79,663 3,614,709
Ingersoll-Rand Co 63,286 3,484,685
McDermott International Inc 23,106 209,398
NACCO Industries Inc Class A 3,027 168,188
Rockwell International Corp 73,145 3,501,817
--------------
TOTAL MACHINERY
- VALUE $22,479,566
- COST $18,440,998
MANUFACTURERS--5.74%
Cooper Industries Inc 36,420 1,472,734
Corning Inc 92,903 11,978,681
Crane Co 26,543 527,542
Danaher Corp 51,856 2,502,052
Eastman Kodak Co 120,341 7,972,591
Eaton Corp 27,696 2,011,422
FMC Corp + 12,392 710,217
General Electric Co 1,239,186 191,764,034
Illinois Tool Works Inc 107,786 7,282,292
ITT Industries Inc 34,073 1,139,316
Minnesota Mining & Manufacturing Co 152,721 14,947,568
National Service Industries Inc 15,998 471,941
Pall Corp 48,399 1,043,603
Polaroid Corp 17,470 328,654
PPG Industries Inc 66,344 4,150,647
Textron Inc 57,334 4,396,801
Tyco International Ltd 633,078 24,610,907
--------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TOTAL MANUFACTURERS
- VALUE $277,311,002
- COST $143,990,320
MEDIA--3.40%
CBS Corp+ 288,983 18,476,851
Clear Channel Communications Inc+ 127,745 11,401,241
Comcast Corp Class A 284,258 14,372,795
Disney (Walt) Co 781,324 22,853,727
Dow Jones & Co Inc 34,936 2,375,648
Gannett Co Inc 106,280 8,668,463
Knight-Ridder Inc 30,498 1,814,631
McGraw-Hill Inc 75,095 4,627,729
MediaOne Group Inc + 229,855 17,655,737
Meredith Corp 20,197 841,962
New York Times Co Class A 66,704 3,276,834
Time Warner Inc 487,770 35,332,839
Times Mirror Co Class A 23,181 1,553,127
Tribune Co 90,382 4,976,659
Viacom Inc Class B + 264,159 15,965,110
--------------
TOTAL MEDIA
- VALUE $164,193,353
- COST $91,189,951
METAL FABRICATE / HARDWARE--0.02%
Timken Co 24,501 500,739
Worthington Industries Inc 36,040 596,913
--------------
TOTAL METAL FABRICATE / HARDWARE
- VALUE $1,097,652
- COST $1,172,632
METALS-DIVERSIFIED--0.47%
Alcan Aluminum Ltd 86,465 3,561,277
Alcoa Inc 139,199 11,553,517
Freeport McMoRan Inc + 63,424 1,339,832
Inco Ltd + 70,437 1,655,270
Phelps Dodge Corp 22,901 1,537,230
Placer Dome Inc 120,056 1,290,602
Reynolds Metals Co 24,353 1,866,049
--------------
TOTAL METALS-DIVERSIFIED
- VALUE $22,803,777
- COST $15,205,426
MINING--0.10%
Barrick Gold Corp 147,998 2,617,715
Homestake Mining Co 92,085 719,414
Newmont Mining Corp 64,155 1,571,798
--------------
TOTAL MINING
- VALUE $4,908,927
- COST $6,518,262
OFFICE / BUSINESS EQUIPMENT--0.22%
Pitney Bowes Inc 102,053 4,930,436
Xerox Corp 252,366 5,725,554
--------------
TOTAL OFFICE / BUSINESS EQUIPMENT
- VALUE $10,655,990
- COST $13,290,457
OIL & GAS PRODUCERS--4.87%
Amerada Hess Corp 34,891 1,980,064
Anadarko Petroleum Corp 46,745 1,595,173
Apache Corp 41,497 1,532,795
Atlantic Richfield Corp 122,330 10,581,545
Burlington Resources Inc 70,978 2,346,710
Chevron Corp 248,501 21,526,399
Coastal Corp 81,860 2,900,914
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Conoco Inc Class B 238,785 5,939,776
Exxon Mobil Corp 1,305,075 105,140,105
Helmerich & Payne Inc 19,470 424,689
Kerr-McGee Corp 32,874 2,038,188
Occidental Petroleum Corp 133,734 2,891,998
Phillips Petroleum Co 96,587 4,539,589
Rowan Co Inc + 32,475 704,302
Royal Dutch Petroleum Corp 811,574 49,049,504
Sunoco Inc 35,137 825,720
Texaco Inc 206,300 11,204,669
Tosco Corp 43,600 1,185,375
Transocean Sedco Forex Inc 40,219 1,354,873
Union Pacific Resources Group 97,483 1,242,908
Unocal Corp 92,813 3,115,036
USX - Marathon Group 118,377 2,922,432
--------------
TOTAL OIL & GAS PRODUCERS
- VALUE $235,042,764
- COST $170,481,951
OIL & GAS SERVICES--0.44%
Baker Hughes Inc 126,058 2,655,097
Halliburton Co 167,918 6,758,700
Schlumberger Ltd 207,742 11,685,488
--------------
TOTAL OIL & GAS SERVICES
- VALUE $21,099,285
- COST $18,232,858
PACKAGING & CONTAINERS--0.13%
Ball Corp 11,780 463,838
Bemis Co 20,358 709,985
Crown Cork & Seal Co 47,391 1,060,374
Owens Illinois Inc + 60,369 1,512,998
Pactiv Corp + 65,875 699,922
Sealed Air Corp + 32,207 1,668,725
--------------
TOTAL PACKAGING & CONTAINERS
- VALUE $6,115,842
- COST $9,121,867
PHARMACEUTICALS--5.99%
Abbott Laboratories 576,420 20,931,251
ALZA Corp + 37,839 1,310,175
American Home Products Corp 494,953 19,519,709
Bristol-Myers Squibb Co 750,938 48,200,833
Cardinal Health Inc 103,852 4,971,915
Lilly (Eli) & Co 413,744 27,513,976
Merck & Co Inc 884,208 59,297,199
Pfizer Inc 1,465,296 47,530,539
Pharmacia & Upjohn Inc 192,356 8,656,020
Schering-Plough Corp 556,114 23,461,059
Warner Lambert Co 323,703 26,523,415
Watson Pharmaceutical Inc + 35,421 1,268,515
--------------
TOTAL PHARMACEUTICALS
- VALUE $289,184,606
- COST $213,451,375
PIPELINES--0.51%
Columbia Energy Group 32,122 2,031,717
Consolidated Natural Gas Co 36,891 2,395,609
El Paso Energy Corp 77,357 3,002,419
Enron Corp 271,020 12,026,513
Williams Co Inc 165,460 5,056,871
--------------
TOTAL PIPELINES
- VALUE $24,513,129
- COST $17,444,082
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
RETAIL--6.40%
AutoZone Inc + 57,606 1,861,381
Bed Bath & Beyond Inc + 41,600 1,445,600
Best Buy Co Inc + 77,898 3,909,506
Circuit City Stores Inc 77,063 3,472,651
Consolidated Stores Corp + 42,302 687,408
CVS Corp 149,244 5,960,432
Darden Restaurants Inc 51,880 940,325
Dayton-Hudson Corp 167,774 12,320,903
Dillards Inc Class A 41,422 836,207
Dollar General Corp 85,424 1,943,396
Federated Department Stores Inc + 79,767 4,033,219
Gap Inc 325,148 14,956,808
Harcourt General Inc 27,581 1,110,135
Home Depot Inc 862,041 59,103,686
IKON Office Solutions Inc 53,983 367,759
Kmart Corp + 190,809 1,920,016
Kohls Corp + 62,134 4,485,298
Limited Inc 81,938 3,548,940
Longs Drug Stores Corp 15,054 388,581
Lowe's Co Inc 142,840 8,534,690
May Department Stores Co 127,673 4,117,454
McDonald's Corp 513,168 20,687,085
Nordstrom Inc 54,615 1,430,230
Office Depot Inc + 138,149 1,511,005
Penney (J C) Co Inc 101,249 2,018,652
Pep Boys (The) - Manny Moe & Jack 20,775 189,572
Rite Aid Corp 100,031 1,119,097
Sears Roebuck & Co 145,124 4,417,212
Staples Inc + 177,729 3,687,877
Tandy Corp 73,625 3,621,430
TJX Companies Inc 122,203 2,497,524
Toys R Us Inc + 96,075 1,375,073
Tricon Global Restaurants + 59,032 2,280,111
Wal-Mart Stores Inc 1,681,610 116,241,291
Walgreen Co 380,778 11,137,757
Wendy's International Inc 47,843 986,762
--------------
TOTAL RETAIL
- VALUE $309,145,073
- COST $172,421,820
SEMICONDUCTORS--3.62%
Advanced Micro Devices Inc + 55,827 1,615,494
Applied Materials Inc + 142,318 18,029,912
Intel Corp 1,255,365 103,332,232
KLA Instruments Corp + 33,748 3,758,684
LSI Logic Corp + 55,154 3,722,895
Micron Technology Inc + 95,676 7,438,779
National Semiconductor + 64,381 2,756,312
Texas Instruments Inc 298,263 28,894,228
Xilinx Inc + 111,400 5,065,224
--------------
TOTAL SEMICONDUCTORS
- VALUE $174,613,760
- COST $75,366,825
SOFTWARE--9.57%
Adobe Systems Inc 46,726 3,142,324
America Online Inc + 838,542 63,257,512
Autodesk Inc 20,332 686,205
Automatic Data Processing 234,757 12,647,533
BMC Software Inc + 90,534 7,237,062
Citrix Systems Inc + 30,070 3,698,610
Computer Associates International Inc 203,896 14,259,977
Compuware Corp + 136,195 5,073,264
First Data Corp 161,323 7,955,240
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
IMS Health Inc 119,883 3,259,319
Microsoft Corp + 1,943,474 226,900,590
Novell Inc + 128,514 5,132,528
Oracle Corp + 538,861 60,386,111
Parametric Technology Corp + 103,203 2,792,931
PeopleSoft Inc + 90,560 1,930,060
Shared Medical System Corp 10,340 526,694
Yahoo! Inc + 99,540 43,069,714
--------------
TOTAL SOFTWARE
- VALUE $461,955,674
- COST $206,608,210
TELECOMMUNICATION EQUIPMENT--4.97%
ADC Telecommunications + 49,901 3,620,941
Andrew Corp + 32,217 610,109
Comverse Technology Inc + 23,500 3,401,625
General Instrument Corp + 65,466 5,564,610
Lucent Technologies Inc 1,176,833 88,041,819
Motorola Inc 229,918 33,855,426
Nortel Networks Corp 502,367 50,739,067
QUALCOMM Inc + 245,196 43,185,146
Scientific-Atlanta Inc 28,973 1,611,623
Tellabs Inc + 148,663 9,542,306
--------------
TOTAL TELECOMMUNICATION EQUIPMENT
- VALUE $240,172,672
- COST $85,508,910
TELECOMMUNICATIONS--0.93%
Global Crossing Ltd + 283,449 14,172,450
NEXTEL Communications Class A + 133,682 13,785,956
Sprint Corp (PCS Group) + 164,107 16,820,957
--------------
TOTAL TELECOMMUNICATIONS
- VALUE $44,779,363
- COST $15,127,390
TELEPHONE--6.71%
Alltel Corp 114,284 9,449,858
AT&T Corp 1,208,638 61,338,379
Bell Atlantic Corp 587,785 36,185,514
BellSouth Corp 713,419 33,396,927
CenturyTel Inc 52,469 2,485,719
GTE Corp 368,665 26,013,924
MCI WorldCom Inc + 1,063,259 56,419,154
SBC Communications Inc 1,290,288 62,901,540
Sprint Corp 328,630 22,120,907
U.S. West Inc 191,430 13,782,960
--------------
TOTAL TELEPHONE
- VALUE $324,094,882
- COST $209,737,582
TEXTILES--0.01%
Springs Industries Inc Class A 7,142 285,234
--------------
TOTAL TEXTILES
- VALUE $285,234
- COST $288,318
TOBACCO--0.47%
Philip Morris Co Inc 899,120 20,848,345
UST Inc 67,406 1,697,789
--------------
TOTAL TOBACCO
- VALUE $22,546,134
- COST $33,540,360
TOYS / GAMES / HOBBIES--0.07%
Hasbro Inc 75,412 1,437,541
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Mattel Inc 159,572 2,094,383
--------------
TOTAL TOYS / GAMES / HOBBIES
- VALUE $3,531,924
- COST $5,755,424
TRANSPORTATION--0.45%
Burlington Northern Santa Fe Corp 177,184 4,296,712
CSX Corp 83,427 2,617,522
FDX Corp + 113,457 4,644,646
Kansas City Southern Industries Inc 41,791 3,118,653
Norfolk Southern Corp 145,750 2,987,875
Union Pacific Corp 94,580 4,126,053
--------------
TOTAL TRANSPORTATION
- VALUE $21,791,461
- COST $23,262,453
TRUCKING & LEASING--0.01%
Ryder System Inc 26,060 636,841
--------------
TOTAL TRUCKING & LEASING
- VALUE $636,841
- COST $724,416
--------------
TOTAL COMMON STOCKS
- VALUE $4,647,088,660
- COST $2,955,509,045
Interest Maturity
Principal Security Name Rate Date Value
SHORT TERM INSTRUMENTS--4.67%
CASH EQUIVALENTS--1.02%
44,072,532 Goldman Sachs Financial
Square Prime Obligation
Fund ++ 5.40% 01/03/00 44,072,532
5,100,000 Investors Bank & Trust
Depositary Receipt ++ 5.53% 01/03/00 5,100,000
--------------
$49,172,532
REPURCHASE AGREEMENTS--3.33%
160,459,092 Morgan Stanley Tri-party
Repurchase Agreement dated
12/31/99, due 01/03/00 with
a maturity value of
$160,491,184 and an
effective yield of 2.40%,
collateralized by U.S.
Treasury Notes with a rate
of 6.25%, a maturity of 04/30/01
and market value of
$163,671,231. 160,459,092
U.S. TREASURY BILLS--0.32%
15,750,000 U.S. Treasury Bills 5.04% * +++ 03/23/00 15,572,534
TOTAL SHORT TERM INSTRUMENTS
- VALUE $225,204,158
- COST $225,192,218
TOTAL INVESTMENTS IN SECURITIES
(Cost $3,180,701,263) ** (Notes 1 and 3) 100.93% $4,872,292,818
Other Assets and Liabilities, Net (0.93)% (44,767,792)
------ --------------
TOTAL NET ASSETS 100.00% $4,827,525,026
====== ==============
<FN>
- --------------------------------------------------------------------------------
+ Non-income earning securities.
++ Represents investment of collateral received from securities lending
transactions. See Note 4.
+++ These U.S. Treasury Bills are held in segregated accounts in connection
with the Master Portfolio's holdings of S&P 500 futures contracts. See Note
1.
* Yield to Maturity.
** Cost for federal income tax purposes is $3,183,525,561 and net unrealized
appreciation consists of:
Gross Unrealized Appreciation $1,830,907,457
Gross Unrealized Depreciation $ (142,140,200)
--------------
Net Unrealized Appreciation $1,688,767,257
==============
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE S&P 500 INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
ASSETS
INVESTMENTS -
Investment in S&P 500 Index Master Portfolio,
at market value (Note 1) ..................................... $46,921,091
Receivable for fund shares sold ................................ 214,753
-----------
TOTAL ASSETS .............................................. 47,135,844
-----------
LIABILITIES
Payable for fund shares redeemed ............................... 74,241
Accrued administration fee (Note 2) ............................ 9,545
Accrued advisory fee (Note 2) .................................. 764
Distribution payable to shareholders ........................... 145,501
-----------
TOTAL LIABILITIES ......................................... 230,051
-----------
TOTAL NET ASSETS ............................................... $46,905,793
===========
NET ASSETS CONSIST OF:
Paid-in capital ................................................ 42,450,586
Undistributed net investment income ............................ 2,022
Accumulated undistributed net realized gain on sale of investments 73,958
Net unrealized appreciation of investments ..................... 4,300,295
Net unrealized appreciation of futures contracts ............... 78,932
-----------
TOTAL NET ASSETS ............................................... $46,905,793
===========
Shares Outstanding (unlimited authorized, par value $0.01) ..... 3,963,409
===========
Net Asset Value, Offering Price and Redemption Price per Share . $11.83
===========
See accompanying notes to financial statements.
<PAGE>
E*TRADE S&P 500 Index Fund
STATEMENT OF OPERATIONS
Period from February 17, 1999 (commencement of operations) to December 31, 1999
NET INVESTMENT INCOME:
NET INVESTMENT INCOME FROM S&P 500 INDEX MASTER PORTFOLIO
Dividends (net of withholding taxes of $216) .................. $285,994
Interest ...................................................... 62,912
Expenses (Note 2) ............................................. (11,821)
--------
Net Investment Income from S&P 500 Index Master Portfolio ...... 337,085
--------
EXPENSES (NOTE 2):
Advisory fee ................................................... 4,745
Administration fee ............................................. 59,316
Trustee fees ................................................... 1,233
----------
TOTAL EXPENSES BEFORE WAIVER OF TRUSTEE FEES .............. 65,294
----------
Waived Trustee fees (Note 2) ............................ (1,233)
----------
NET EXPENSES .............................................. 64,061
----------
NET INVESTMENT INCOME .......................................... 273,024
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES
CONTRACTS ALLOCATED FROM S&P 500 INDEX MASTER PORTFOLIO
Net realized gain on sale of investments ....................... 110,407
Change in unrealized appreciation of investments ............... 4,300,295
Change in unrealized appreciation of futures contracts ......... 78,932
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES
CONTRACTS ALLOCATED FROM S&P 500 INDEX MASTER PORTFOLIO .. 4,489,634
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ................................................. $4,762,658
==========
See accompanying notes to financial statements.
<PAGE>
E*TRADE S&P 500 INDEX FUND
STATEMENT OF CHANGES IN NET ASSETS
Period from
February 17, 1999
(commencement of
operations ) to
December 31, 1999
-----------------
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income ...................................... $273,024
Net realized gain on sale of investments ................... 110,407
Change in unrealized appreciation of investments ........... 4,300,295
Change in unrealized appreciation of futures contracts ..... 78,932
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... 4,762,658
------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ................... (271,224)
Distributions from net realized gain on sale of investments (35,715)
------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ........................ (306,939)
------------
TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sales of shares .......................... 59,029,508
Net asset value of shares issued to shareholders in reinvestment of
distributions ........................................... 148,331
Cost of shares redeemed .................................... (16,727,765)
------------
NET INCREASE IN NET ASSETS FROM TRANSACTIONS
IN SHARES OF COMMON STOCK ............................... 42,450,074
------------
INCREASE IN NET ASSETS ..................................... 46,905,793
NET ASSETS:
Beginning of period ........................................ -
------------
END OF PERIOD .............................................. $46,905,793
============
SHARE TRANSACTIONS:
Number of shares sold ...................................... 5,467,772
Number of shares issued through reinvestment of distributions 14,032
Number of shares redeemed .................................. (1,518,395)
------------
NET INCREASE IN SHARES OUTSTANDING ......................... 3,963,409
============
See accompanying notes to financial statements.
<PAGE>
E*TRADE S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
Period from
February 17, 1999
(commencement of
operations ) to
December 31, 1999
-----------------
FOR A SHARE OUTSTANDING FOR THE PERIOD (4)
NET ASSET VALUE, BEGINNING OF PERIOD ....................... $10.00
-----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...................................... 0.09
Net realized and unrealized gain on investments and futures
contracts allocated from S&P 500 Index Master Portfolio 1.84
-----------------
TOTAL INCOME FROM INVESTMENT OPERATIONS .................... 1.93
-----------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income .............. (0.09)
Distributions from net realized gains ................. (0.01)
-----------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................... (0.10)
-----------------
NET ASSET VALUE, END OF PERIOD ............................. $11.83
=================
TOTAL RETURN ............................................... 19.31%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) .............. $46,906
Ratio of expenses to average net assets (4) ........... 0.32%(2)(3)
Ratio of net investment income to average net assets (4) 1.14%(2)
(1) For the period February 17, 1999 (commencement of operations) to December
31, 1999 and not indicative of a full year's operating results.
(2) Annualized.
(3) The Investment Advisor has voluntarily agreed to pay the non-affiliated
Trustee expenses for the Fund. Even though such action had been taken, total
annualized operating expenses as a percentage of average net assets would
have remained unchanged at 0.32% for the period February 17, 1999
(commencement of operations) through December 31, 1999.
(4) Per share amounts and ratios reflect income and expenses assuming inclusion
of the Fund's proportionate share of the income and expenses of the S&P 500
Index Master Portfolio.
See accompanying notes to financial statements.
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
E*TRADE S&P 500 Index Fund (the "Fund") is a diversified series of E*TRADE Funds
(the "Trust"), an open-end series management investment company registered under
the Investment Company Act of 1940, as amended. The Trust is organized as a
Delaware business trust and was formed on November 4, 1998. As of December 31,
1999, the Trust offered six series: the S&P 500 Index Fund, the Bond Index Fund,
the Extended Market Index Fund, the International Index Fund, the E-Commerce
Index Fund and the Technology Index Fund. These financial statements contain the
E*TRADE S&P 500 Index Fund.
The Fund's investment objective is to provide investment results that attempt to
match the total return of the stocks making up the Standard & Pooris 500
Composite Stock Price Index.
"Standard & Poor's (REGISTRATION MARK)," "S&P (REGISTRATION MARK)" "S&P 500
(REGISTRATION MARK)", "Standard & Poor's 500 (REGISTRATION MARK)", and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by
E*TRADE Asset Management, Inc. for use in connection with the Fund. The Fund is
not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard &
Poor's makes no representation regarding the advisability of investing in the
Fund.
The following is a summary of significant accounting policies which are
consistently followed by the Fund in the preparation of its financial
statements, and which are in conformity with generally accepted accounting
principles for investment companies. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
PRINCIPLES OF ACCOUNTING
The Fund uses the accrual method of accounting for financial reporting purposes.
INVESTMENT POLICY AND SECURITY VALUATION
The Fund is a "feeder" fund in a "master-feeder" structure. Instead of investing
directly in individual securities, a feeder fund, which is offered to the
public, invests all of its assets in a master portfolio that has substantially
the same investment objective as the feeder fund. It is the master portfolio
that actually invests in the individual securities. The Fund pursues its
investment objective by investing all of its assets in the S&P 500 Index Master
Portfolio (the "Master Portfolio"), a separate series of the Master Investment
Portfolio ("MIP"), a registered open-end management investment company. The
value of the Fund's investment in the Master Portfolio reflects the Fund's
interest in the net assets of the Master Portfolio. As of December 31, 1999, the
value of the Fund's investment in the Master Portfolio was 0.97% of the
outstanding interests of the Master Portfolio.
The Fund's investment in the Master Portfolio is valued at the net asset value
of the Master Portfoliois shares held by the Fund. The equity securities of the
Master Portfolio are valued at the last reported sale price on the primary
securities exchange or national securities market on which such securities are
traded. Securities not listed on an exchange or national securities market, or
securities in which there was no last reported sales price, are valued at the
most recent bid prices. Debt securities are generally traded in the
over-the-counter market and are valued at a price deemed best to reflect fair
value as quoted by dealers who make markets in those securities or by an
independent pricing source. U.S. Government obligations are valued at the last
reported bid price. Debt securities maturing in 60 days or less are valued at
amortized cost, which approximates market value. Any securities, restricted
securities or other assets for which market quotations are not readily
available, are valued at fair value as determined in good faith in accordance
with policies approved by MIP's Board of Trustees.
<PAGE>
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for by the Master Portfolio on the date the
securities are purchased or sold (trade date). Revenue is recognized by the
Master Portfolio as follows: dividend income is recognized on the ex-dividend
date and interest income is recognized on a daily accrual basis. Realized gains
and losses are reported on the basis of identified cost of securities delivered.
Bond discounts and premiums are amortized as required by the Internal Revenue
Code of 1986, as amended (the "Code"). All net investment income and realized
and unrealized capital gains and losses of the Master Portfolio are allocated as
required by the Code.
The performance of the Fund is directly affected by the performance of the
Master Portfolio. The financial statements of the Master Portfolio, including
the Portfolio of Investments, are included elsewhere in this report and should
be read in conjunction with the Fund's financial statements.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income of the Fund are
declared and distributed quarterly. Distributions to shareholders from any net
realized capital gains are declared and distributed annually, generally in
December. Such distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions, market discount, losses deferred to wash sales and excise tax
regulations. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid-in capital and may impact
net investment income per share. Undistributed net investment income may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is distributed
in the following year.
FEDERAL INCOME TAXES
The Fund is treated as a separate entity from each other series of the Trust for
federal income tax purposes. It is the policy of the Fund to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code. If
so qualified, the Fund must distribute annually all of its investment company
taxable income and any net capital gains (taking into account capital loss
carryforwards) sufficient to relieve it from all, or substantially all, federal
income and excise taxes. Accordingly, no provision for federal taxes was
required at December 31, 1999.
The following reclassifications, which have no impact on the net asset value of
the Fund, were made in order to present the Fund's capital accounts on a tax
basis:
Paid-in Capital Increase
Undistributed Net Investment Income Increase
Accumulated Undistributed
Paid-in Undistributed Net Investment Net Realized Gain on Sale of
Capital Increase Income Increase Investments Decrease
- --------------------------------------------------------------------------------
$512 $222 $734
REDEMPTION FEES
Shares held in the Fund less than four months are subject to a fee equal to
$24.95, (changing to 0.50% of the proceeds of the redeemed shares for fund
shares purchased after January 21, 2000). The fee, which is retained by the
Fund, is accounted for as an addition to paid-in capital.
<PAGE>
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
E*TRADE Asset Management, Inc. (the "Investment Advisor"), a wholly owned
subsidiary of E*TRADE Group, Inc. ("E*TRADE Group"), serves as the investment
advisor for the Fund pursuant to an investment advisory agreement ("Advisory
Agreement"). For its service as investment advisor, the Investment Advisor is
paid by the Fund at an annual rate of 0.02% of the Fund's average daily net
assets.
Pursuant to an Investment Advisory Contract with the Master Portfolio, Barclays
Global Fund Advisors ("BGFA") provides investment advisory services in
connection with the management of the Master Portfoliois assets. For its
services, BGFA is entitled to receive 0.05% of the average daily net assets of
the Master Portfolio. The Fund records daily its proportionate share of the
Master Portfoliois advisory fees, described above, in addition to income,
expenses and realized and unrealized gains and losses.
The Investment Advisor also provides administrative services to the Fund,
pursuant to an administrative services agreement ("Administrative Agreement").
Services provided by the Investment Advisor acting as administrator include, but
are not limited to: coordinating the services performed by the transfer and
dividend disbursing agent, custodian, sub-administrator, shareholder servicing
agent, independent auditors and legal counsel; preparing and supervising the
preparation of periodic reports to the Fund's shareholders; generally
supervising regulatory compliance matters; providing, at its own expense, the
services of its personnel to serve as officers of the Trust; monitoring and
reviewing the Fund's contracted services and expenditures; and report to the
Board of Trustees concerning its activities pursuant to the Administrative
Agreement. The Fund pays the Investment Advisor a monthly fee calculated at an
annual rate of 0.25% of its average daily net assets.
PFPC Inc. ("PFPC") serves as the transfer agent and dividend disbursing agent
for the Fund. Investors Bank & Trust Company ("IBT") serves as
sub-administrator, accounting services agent and custodian for the Fund.
E*TRADE Securities, Inc., a wholly owned subsidiary of E*TRADE Group, serves as
the shareholder servicing agent (the "Shareholder Servicing Agent") for the
Fund. The Shareholder Servicing Agent provides personal services to the Fund's
shareholders and maintains the Fund's shareholder accounts. E*TRADE Securities,
Inc. also serves as the principal underwriter of the Fund. Such services were
provided at no cost to the Fund.
Subject to a limitation of 0.0049% of the Fund's average daily net assets, the
Fund records Trustee fees and expenses and certain other direct expenses of the
Fund. The Investment Advisor voluntarily agreed to reimburse such expenses for
the period February 17, 1999 (commencement of operations) through December 31,
1999.
3. PORTFOLIO SECURITIES LOANED
As of December 31, 1999, the Master Portfolio had loaned securities, which were
collateralized by cash, money market mutual funds and repurchase agreements. The
Master Portfolio receives transaction fees for providing services in connection
with the securities lending program. The risks to the Master Portfolio of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due. The value of the securities on
loan and the value of the related collateral are disclosed in the Master
Portfoliois financial statements.
<PAGE>
S&P 500 INDEX MASTER PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
ASSETS
INVESTMENTS:
In securities, at market value (Cost $3,180,701,263) (Note 1). $4,872,292,818
Receivables:
Dividends and interest ..................................... 4,418,560
Receivable for daily variation margin on open
financial futures contracts ............................. 413,112
--------------
TOTAL ASSETS .......................................... 4,877,124,490
--------------
LIABILITIES
PAYABLES:
Collateral for securities loaned (Note 4) .................. 49,172,532
Due to Bank ................................................ 4,859
Due to BGI (Note 2) ........................................ 422,073
--------------
TOTAL LIABILITIES ..................................... 49,599,464
--------------
TOTAL NET ASSETS ........................................... $4,827,525,026
==============
The accompanying notes are an integral part of these financial statements.
<PAGE>
S&P 500 INDEX MASTER PORTFOLIO
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended
December 31, 1999* February 28, 1999
-------------------- ------------------
NET INVESTMENT INCOME:
<S> <C> <C>
Dividends (1) ............................................. $44,329,664 $36,647,898
Interest (2) .............................................. 9,795,587 8,379,792
-------------------- ------------------
Total Investment Income .................................... 54,125,251 45,027,690
-------------------- ------------------
EXPENSES (NOTE 2):
Advisory fees .............................................. 1,821,793 1,353,414
-------------------- ------------------
Total Expenses ............................................. 1,821,793 1,353,414
-------------------- ------------------
NET INVESTMENT INCOME ...................................... 52,303,458 43,674,276
-------------------- ------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments .................. 147,202,745 143,991,139
Net realized gain on sale of futures contracts ............ 23,076,772 37,982,701
Net change in unrealized appreciation of investments ...... 549,246,681 265,023,900
Net change in unrealized appreciation (depreciation) of futures contracts 12,849,150 (14,225,550)
-------------------- ------------------
Net Gain on Investments .................................... 732,375,348 432,772,190
-------------------- ------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS .............................................. $784,678,806 $476,446,466
==================== ==================
<FN>
- --------------------------------------------------------------------------------------------------------------------------------
(1) Net of foreign withholding tax of ...................... $28,773 $5,288
(2) Interest income includes securities lending income of .. $272,312 $78,935
- --------------------------------------------------------------------------------------------------------------------------------
* For the ten months ended December 31, 1999. The Master Portfolio changed its
fiscal year end from February 28 to December 31.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
S&P 500 INDEX MASTER PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended For the Year Ended
December 31, 1999* February 28, 1999 February 28, 1998
-------------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $52,303,458 $43,674,276 $35,530,147
Net realized gain ................................. 170,279,517 181,973,840 71,368,439
Net change in unrealized appreciation ............. 562,095,831 250,798,350 463,085,650
-------------------- ------------------ ------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . 784,678,806 476,446,466 569,984,236
-------------------- ------------------ ------------------
NET INCREASE IN NET ASSETS RESULTING FROM
BENEFICIAL INTEREST TRANSACTIONS .................. 355,753,442 856,583,098 299,742,532
-------------------- ------------------ ------------------
Increase in Net Assets ............................... 1,140,432,248 1,333,029,564 869,726,768
NET ASSETS:
Beginning net assets ................................. 3,687,092,778 2,354,063,214 1,484,336,446
-------------------- ------------------ ------------------
ENDING NET ASSETS .................................... $4,827,525,026 $3,687,092,778 $2,354,063,214
==================== ================== ==================
<FN>
* For the ten months ended December 31, 1999. The Master Portfolio changed its
fiscal year end from February 28 to December 31.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
S&P 500 INDEX MASTER INVESTMENT PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS
1. Significant Accounting Policies
Master Investment Portfolio (`'MIP") is registered under the Investment
Company Act of 1940, as amended (the `'1940 Act"), as an open-end management
investment company. MIP was organized on October 20, 1993 as a Delaware business
trust pursuant to an Agreement and Declaration of Trust dated May 14, 1993, and
had no operations prior to March 1, 1994. MIP currently issues the following
separate portfolios (the `'Master Portfolios"), the Asset Allocation, Bond
Index, LifePath Income (formerly iLifePath 2000i), LifePath 2010, LifePath 2020,
LifePath 2030, LifePath 2040, Money Market, S&P 500 Index, Extended Index,
International Index and U.S. Equity Index Master Portfolios. These financial
statements relate to S&P 500 Index Master Portfolio (the iMaster Portfolioi).
The following significant accounting policies are consistently followed
by MIP in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Effective February 10, 1999, the Board of Trustees of MIP approved a
change in fiscal year-end of the Master Portfolio from February 28 to December
31. Accordingly, the financial statements are presented for the ten-month period
ended December 31, 1999.
SECURITY VALUATION
The equity securities of the Master Portfolio are valued at the last
reported sale price on the primary securities exchange or national securities
market on which such securities are traded. Securities not listed on an exchange
or national securities market, or securities in which there was no last reported
sales price, are valued at the most recent bid prices. Debt securities are
generally traded in the over-the-counter market and are valued at a price deemed
best to reflect fair value as quoted by dealers who make markets in those
securities or by an independent pricing source. U.S. Government obligations are
valued at the last reported bid price. Debt securities maturing in 60 days or
less are valued at amortized cost, which approximates market value. Any
securities, restricted securities or other assets for which market quotations
are not readily available, are valued at fair value as determined in good faith
in accordance with policies approved by MIP's Board of Trustees.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Dividend income is recognized on the ex-dividend
date, and interest income is recognized on a daily accrual basis. Realized gains
or losses are reported on the basis of identified cost of securities delivered.
Bond discounts and premiums are accreted or amortized, respectively, under
provisions of the Internal Revenue Code of 1986, as amended (the iCodei).
<PAGE>
FEDERAL INCOME TAXES
The Master Portfolio intends to qualify as a partnership for federal
income tax purposes. The Master Portfolio, therefore, believes that it will not
be subject to any federal income tax on its income and net realized capital
gains (if any). However, each investor in the Master Portfolio will be taxed on
its allocable share of the partnership's income and capital gains for the
purposes of determining its federal income tax liability. The determination of
such share will be made in accordance with the applicable sections of the Code.
It is intended that the Master Portfolio's assets, income and
allocations will be managed in such a way that a regulated investment company
investing in the Master Portfolio will be able to satisfy the requirements of
Subchapter M of the Code, assuming that the regulated investment company
invested all of its assets in the Master Portfolio.
FUTURES CONTRACTS
The Master Portfolio may purchase long futures contracts to gain
exposure to market changes as this may be more efficient or cost effective than
actually buying the securities. A futures contract is an agreement between two
parties to buy and sell a security at a set price on a future date and is
exchange traded. Upon entering into a futures contract, the Master Portfolio is
required to pledge to the broker an amount of cash, U.S. Government securities
or other high-quality debt securities equal to the minimum `'initial margin"
requirements of the exchange. Pursuant to the contract, the Master Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
ivariation margini and are recorded by the Master Portfolio as unrealized gains
or losses. When the contract is closed, the Master Portfolio records a gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed. Pursuant to regulations
and/or published positions of the Securities and Exchange Commission, the Master
Portfolio is required to segregate cash, U.S. Government securities or high
quality, liquid debt instruments in connection with long futures transactions in
an amount generally equal to the entire futures contract amount. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities. As of December
31, 1999, the Master Portfolio had the following open long futures contracts
outstanding:
S&P 500 INDEX MASTER PORTFOLIO
NUMBER OF EXPIRATION NOTIONAL NET UNREALIZED
CONTRACTS TYPE DATE CONTRACT VALUE APPRECIATION
- --------------------------------------------------------------------------------
484 S&P 500 Index 03/17/00 $179,588,200 $9,872,575
The S&P 500 Index Master Portfolio has pledged to brokers U.S. Treasury
Bills for initial margin requirements with a par value of $15,750,000.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to
resell such securities at a specified price and time ("repurchase agreements")
are treated as collateralized financing transactions and are recorded at their
contracted resale amounts. These repurchase agreements, if any, are detailed in
the Master Portfolio's Portfolio of Investments. The advisor to the Master
Portfolio may pool the Master Portfolio's cash and invest in repurchase
agreements entered into by the other Master Portfolios. The Master Portfolio's
prospectus requires that the cash investments be fully collateralized based on
values that are marked to market daily. The collateral is generally held by an
agent bank under a tri-party agreement. It is the advisor's responsibility to
value collateral daily and to obtain additional collateral as necessary to
maintain the value at equal to or greater than 102% of market value. The
repurchase agreements entered into on December 31, 1999 by the Master Portfolio
are collateralized by U.S. Government securities.
<PAGE>
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an Investment Advisory Contract with the Master Portfolio,
Barclays Global Fund Advisors (iBGFAi) provides investment guidance and policy
direction in connection with the management of the Master Portfoliois assets.
BGFA is entitled to receive 0.05% of the average daily net assets of the S&P 500
Index Master Portfolio as compensation for advisory services. BGFA is an
indirect subsidiary of Barclays Bank PLC.
Investors Bank & Trust Company ("IBT") serves as the custodian to the
Master Portfolio. IBT will not be entitled to receive fees for its custodial
services so long as it is entitled to receive a separate fee from Barclays
Global Investors, N.A. ("BGI") for its services as Sub-Administrator of the
Master Portfolio.
Stephens Inc. ("Stephens"), is the sponsor and placement agent for the
Master Portfolio.
The MIP has entered into administration services arrangements with BGI
and Stephens, as co-administrators, who have agreed jointly to provide general
administration services to the Master Portfolio such as managing and
coordinating third-party service relationships. BGI and Stephens are not
entitled to compensation for providing administration services to the Master
Portfolio. BGI and Stephens may delegate certain of their administration duties
to sub-administrators.
Certain officers and trustees of MIP are also officers of Stephens. As
of December 31, 1999, these officers of Stephens collectively owned less than 1%
of the Master Portfoliois outstanding beneficial interests.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities,
for the Master Portfolio were as follows:
S&P 500 Index
Master Portfolio
--------------------------------
Aggregate Purchases Period ended Year ended
and Sales of: Dec. 31, 1999* Feb. 28, 1999
------------------- -------------- --------------
Purchases at cost $751,.345,661 $1,187,951,471
Sales proceeds 269,734,128 275,613,257
* For the ten months ended December 31, 1999. The Master Portfolio changed its
fiscal year end from February 28 to December 31.
<PAGE>
4. PORTFOLIO SECURITIES LOANED
As of December 31, 1999, the Master Portfolio had loaned securities
which were collateralized by money market mutual funds. The Master Portfolio
receives transaction fees for providing services in connection with the
securities lending program. The risk to the Master Portfolio of securities
lending are that the borrower may not provide additional collateral when
required or return the securities when due. The value of the securities on loan
and the value of the related collateral were as follows:
Value of Value of
Securities Collateral
- --------------------------------------------------------------------------------
S&P 500 Index Master Portfolio $47,645,223 $49,172,532
5. Financial Highlights
The ratios of expenses and net investment income to average net assets
and portfolio turnover rates (excluding short-term securities) for the Master
Portfolio are as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, FEBRUARY 28, FEBRUARY 28,
S&P 500 Index Master Porfolio 1999* 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ratio of expenses to average net assets + 0.05% 0.05% 0.05%
Ratio of net investment income to average net assets + 1.44% 1.61% 1.89%
Portfolio turnover 7% 11% 6%
<FN>
* For the ten months ended December 31, 1999. The Master Portfolio changed its
fiscal year end from February 28 to December 31.
+ Annualized for period of less than one year.
</FN>
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of E*TRADE Funds:
We have audited the accompanying statement of assets and liabilities of E*TRADE
S&P 500 Index Fund (the iFundi) (one of six funds comprising the E*TRADE Funds)
as of December 31, 1999 and the related statement of operations, statement of
changes in net assets, and financial highlights for the period February 17, 1999
(commencement of operations) to December 31, 1999. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 and
financial highlights. Our procedures included confirmation of securities owned
as of December 31, 1999 by correspondence with the custodian. 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 audit provides 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 the
E*TRADE S&P 500 Index Fund as of December 31, 1999 and the results of its
operations, the changes in its net assets, and the financial highlights for the
period February 17, 1999 (commencement of operations) to December 31, 1999 in
conformity with generally accepted accounting principles.
/S/ Deloitte & Touche LLP
Deloitte & Touche LLP
Los Angeles, California
February 23, 2000
<PAGE>
Independent Auditors' Report
To the Interestholders and Board of Trustees of
Master Investment Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of S&P 500 Index Master Portfolio (a portfolio of
Master Investment Portfolio) as of December 31, 1999, and the related statements
of operations for the ten-month period then ended and the year ended February
28, 1999 and the statements of changes in net assets for the ten-month period
then ended and each of the years in the two-year period ended February 28,1999.
These financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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, 1999 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 referred to above present fairly, in
all material respects, the financial position of S&P 500 Index Master Portfolio
as of December 31, 1999, the results of its operations and the changes in its
net assets for the periods indicated above in conformity with generally accepted
accounting principles.
/S/ KPMG
San Francisco, California
February 11, 2000
