E*TRADE GLOBAL TITANS FUND
SEMIANNUAL REPORT
Dear E*TRADE Funds Shareholders,
We are writing to report the results of the E*TRADE Global Titans Fund (the
"Fund") from the Fund's inception through June 30, 2000. We'd also like to take
this opportunity to thank all of you for your investment in the Fund.
The E*TRADE Global Titans Fund commenced operations on February 18, 2000. This
semiannual report contains unaudited financial statements for a period of less
than six months. Relying on financial statements and reporting operating results
for such a period is subject to inherent limitations resulting from the brevity
of the period.
The Fund's investment objective is to provide investment results that match,
before fees and expenses, the total return of the stocks comprising the Dow
Jones Global TitansSM (DJGTSM) IndexSM (the "Index").* The DJGT Index consists
of securities of 50 companies, and includes some of the world's most well known
and well established blue-chip companies. The DJGT Index includes only the
largest of large-cap companies in the world and currently consists of stocks of
companies with capitalization of at least $20 billion.
The Fund has returned 3.80% from inception to June 30, 2000. This compares with
the Index return of 4.31% during the same period. Since March 1, 2000, the Fund
has returned 4.01%, compared with the Index's performance of 4.31% during the
same period. ** The investment return and principal value of an investment in
the Fund will fluctuate, and your shares, when redeemed, may be worth more or
less than their original cost.
The Fund is limited to invest in companies in the DJGT Index. Many of these
securities may be traded principally outside the United States. As a result the
Fund maybe subject to different or greater risks than if it were invested solely
in U.S. companies. Such risks may include among others, different account,
auditing and financial reporting standards, higher commission rates on the
purchase or sales of securities in the DJGT Index and adverse changes in
regulatory and market structures.
Overall, the large cap companies that make up the Global Titans Index performed
well during the month of March. While the tech-heavy NASDAQ fell by 2.6% as
investors began to move away from the new economy companies, the companies in
the Index benefited from the flight to quality. The Fund and the Index
experienced a great deal of volatility during the month. Of the 50 names in the
Index, 43 produced positive returns during the month. In March, the best
performing security was Toyota Motors, which rose 31%. In general, Japanese
securities did well during the month, as the MSCI Japan Index rose 8.25% in
U.S.dollar terms, partly due to the strength of the yen. Bank of
Tokyo-Mitsubishi, the only other Japanese security in the Index, gained 17%.
The second quarter opened with the government's ruling against Microsoft on
April 3. Microsoft, with a loss of 25% for the quarter, was the largest
contributor to the Index's negative return. National telecom companies didn't
fair well either. AT&T fell 44%, British Telecommunications lost 31%, Deutsche
Telekom returned -29% and France Telecom was down 19%. AT&T's loss of 44% made
it the worst performing security in the Index for the quarter, while Johnson
&Johnson, which rose 45%, was the best performer.
The biggest event relating to the Index during the second quarter was the annual
reconstitution of the Index constituents. Effective June 19, 2000, five
securities were added to the Index. The additions were Total Fina
(France),Vodafone Airtouch (UK), Cisco Systems (U.S.), Sony Corp, (Japan), and
Nokia(Finland). These additions represented 18% of the portfolio. The five
securities removed were Boeing, Chevron and Dupont (U.S.), ENI (Italy), and
Unilever(Netherlands), which represented 3% of the portfolio. In order to
replicate the Index after the additions and deletions, 30% of the names in the
portfolio had to be traded.
The reconstitution reduced the Index's exposure to the U.S. and increased
coverage of Europe and Asia. Also, the Index's exposure to technology and
telecommunications increased from 37% to 46%, which could lead to increased
volatility.
You should remember that past performance is no guarantee of future returns and
the Fund may not be able to duplicate its performance. The Fund's unaudited
financial statements for the period from February 18, 2000 to June 30, 2000 are
provided below. We hope you will find them useful for evaluating and monitoring
your investment. Thank you again for your continued participation in the E*TRADE
Global Titans Fund.
Sincerely,E*TRADE Funds
*"Dow JonesSM," "Global TitansSM" and "Dow Jones Global Titans IndexSM" are
service marks of Dow Jones & Company, Inc. and have been licensed for use for
certain purposes by E*TRADE Asset Management, Inc. The Fund is not sponsored,
endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation
regarding the advisability of investing in such Fund.
**The Fund began operations on February 18, 2000. Index Comparisons began on
March 1, 2000.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C> <C> <C>
FINLAND (3.6%)
TELECOMMUNICATIONS
Nokia Oyj 13,563 $ 694,922
-----------
TOTAL FINLAND (Cost: $796,083) 694,922
-----------
FRANCE (3.1%)
ENERGY SOURCES (1.6%)
Total Fina Elf 2,063 317,598
-----------
INSURANCE (0.7%)
AXA 890 140,769
-----------
TELECOMMUNICATIONS (0.8%)
France Telecom SA 1,071 150,301
-----------
TOTAL FRANCE (Cost: $615,161) 608,668
-----------
GERMANY (3.4%)
AUTOMOBILES (0.6%)
Daimler-Chrysler AG 2,318 123,544
-----------
ELECTRONICS (1.2%)
Siemens AG 1,581 237,635
-----------
INSURANCE (0.7%)
Allianz AG 356 127,050
-----------
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
TELECOMMUNICATIONS (0.9%)
Deutsche Telekom AG 2,985 $ 172,828
-----------
TOTAL GERMANY (Cost: $747,989) 661,057
-----------
JAPAN (4.3%)
AUTOMOBILES (2.4%)
Toyota Motor Corp. 10,000 456,515
-----------
BANKING (0.8%)
Bank of Tokyo - Mitsubishi Ltd. 13,000 157,399
-----------
ELECTRONICS (1.1%)
Sony Corp. 2,300 215,214*
-----------
TOTAL JAPAN (Cost: $820,862) 829,128
-----------
NETHERLANDS (2.7%)
ENERGY SOURCES (1.9%)
Royal Dutch Petroleum 5,821 363,255
-----------
FINANCIAL SERVICES (0.8%)
ING Groep 2,332 158,268
-----------
TOTAL NETHERLANDS (Cost: $453,559) 521,523
-----------
SWITZERLAND (5.5%)
BANKING (1.6%)
Credit Suisse Group 702 140,092
United Bank of Switzerland 1,223 179,757
-----------
319,849
-----------
FOOD & HOUSEHOLD PRODUCTS (1.2%)
Nestle SA 112 $ 224,886
-----------
HEALTH & PERSONAL CARE (2.7%)
Novartis AG 211 335,302
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
Roche Holding AG 20 195,318
-----------
530,620
-----------
TOTAL SWITZERLAND (Cost: $977,557) 1,075,355
-----------
UNITED KINGDOM (10.2%)
BANKING (2.1%)
HSBC Holdings PLC 22,165 253,511
Lloyds Tsb Group PLC 15,589 147,264
-----------
400,775
-----------
ENERGY SOURCES (3.2%)
BP Amoco PLC 65,279 626,552
-----------
TELECOMMUNICATIONS (4.9%)
British Telecommunications PLC 18,529 239,554
Vodafone Airtouch PLC 176,940 715,207*
-----------
954,761
-----------
TOTAL UNITED KINGDOM (Cost: $2,133,973) 1,982,088
-----------
COMMON STOCK (66.8%)
AUTOMOBILES (1.2%)
Ford Motor Co. 3,420 147,060
General Motors Corp. 1,568 91,042
Visteon Corp. 448 5,428*
-----------
243,530
-----------
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
BEVERAGES & TOBACCO (2.8%)
Coca-Cola Co. 6,158 $ 353,700
Philip Morris Cos., Inc. 6,896 183,175
-----------
536,875
-----------
COMPUTER PERIPHERAL EQUIPMENT (6.4%)
Cisco Sytems 19,635 1,248,050*
-----------
COMPUTERS, PERIPHERALS & SOFTWARE (9.4%)
Hewlett-Packard Co. 2,378 296,953
International Business Machines
Corp. 5,205 570,273
Microsoft Corp. 11,938 955,040*
-----------
1,822,266
-----------
ELECTRONICS (16.7%)
General Electric Co. 28,247 1,497,091
Intel Corp. 9,094 1,215,754
Lucent Technologies, Inc. 9,213 545,870
-----------
3,258,715
-----------
ENERGY SOURCES (4.0%)
Exxon Mobil Corp. 9,973 782,881
-----------
FINANCIAL SERVICES (4.4%)
Citigroup, Inc. 9,740 586,835
Morgan Stanley Dean Witter & Co. 3,231 268,981
-----------
855,816
-----------
FOOD & HOUSEHOLD PRODUCTS (1.1%)
Procter & Gamble Co. 3,737 213,943
-----------
HEALTH SERVICES (4.7%)
Johnson & Johnson 3,823 389,468
Merck & Co., Inc. 6,764 518,292
-----------
907,760
-----------
INSURANCE (2.3%)
American International Group 3,870 454,725
-----------
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
MOTION PICTURE & VIDEO PRODUCTION (1.2%)
The Walt Disney Co. 5,881 $ 228,256
-----------
NATIONAL COMMERCIAL BANKS (1.9%)
Bank of America Corp. 4,851 208,593
Chase Manhattan Corp. 3,511 161,725
-----------
370,318
-----------
RETAIL SALES (2.4%)
Wal-Mart Stores, Inc. 8,000 461,000
-----------
TELEPHONE COMMUNICATIONS (8.3%)
American Telephone & Telegraph Co. 11,082 350,468
Bell Atlantic Corp. 4,412 224,185
BellSouth Corp. 5,348 227,959
SBC Communications, Inc. 9,873 427,006
Worldcom, Inc. 8,295 380,533*
-----------
1,610,151
-----------
TOTAL COMMON STOCK (Cost: $12,615,254) 12,994,286
-----------
SHORT-TERM INVESTMENTS (0.6%)
British Pounds 692 1,048
European Monetary Unit 26,309 25,220
Japanese Yen 238,433 2,254
Samson Street Money Market Fund 80,370 80,370
Swiss Francs 16,190 9,956
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost: $118,617) 118,848
-----------
TOTAL INVESTMENTS (Cost: $19,279,055) (100.2%) 19,485,875
LIABILITITES IN EXCESS OF
OTHER ASSETS (-0.2%) (37,231)
-----------
NET ASSETS (100.0%) $19,448,644
===========
</TABLE>
* Non-Income producing security.
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments at-value (cost: $19,279,055) (Note 1) ................ $19,485,875
Dividends receivable ............................................. 17,739
Interest receivable .............................................. 783
Receivable for fund shares sold .................................. 32,809
Unrealized foreign exchange gain ................................. 24
-----------
TOTAL ASSETS ............................................ 19,537,230
-----------
LIABILITIES
Accrued administration fee (Note 2) .............................. 5,556
Accrued advisory fee (Note 2) .................................... 3,969
Payable for fund shares redeemed ................................. 9,002
Payable for investment securities purchased ...................... 70,059
-----------
TOTAL LIABILITIES ....................................... 88,586
-----------
TOTAL NET ASSETS ................................................. $19,448,644
===========
NET ASSETS CONSIST OF:
Paid-in capital .................................................. 19,240,545
Net investment income ............................................ 58,103
Net realized loss on investments and foreign currency transactions (56,848)
Net unrealized appreciation of investments ....................... 206,844
-----------
TOTAL NET ASSETS ................................................. $19,448,644
===========
SHARES OUTSTANDING (UNLIMITED AUTHORIZED, PAR VALUE $.01) ........ 1,873,434
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ... $ 10.38
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
STATEMENT OF OPERATIONS
Period from February 18, 2000 (commencement of operations) through June 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends ............................................................... $ 100,622
Interest ................................................................ 6,892
Foreign taxes withheld .................................................. (11,387)
---------
TOTAL INVESTMENT INCOME ............................... 96,127
---------
EXPENSES (NOTE 2):
Advisory fee ............................................................. 14,884
Administration fee ....................................................... 20,838
Trustee fees ............................................................. 292
---------
TOTAL EXPENSES BEFORE WAIVER OF TRUSTEE FEES .......... 36,014
Waived Trustees fees (Note 2) ............................................ (292)
---------
NET EXPENSES .......................................... 35,722
---------
NET INVESTMENT INCOME .................................................... 60,405
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain/(loss) from:
Sale of investments .................................................... (56,848)
Foreign currency transactions .......................................... (2,302)
Net Change in unrealized appreciation/
(depreciation) on:
Investments ............................................................ 206,820
Foreign currency transactions .......................................... 24
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ................. 147,694
---------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ...................................................... $ 208,099
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period from
February 18, 2000
(commencement
of operations)
through
June 30, 2000
----------------
(Unaudited)
<S> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income .................................................... $ 60,405
Net realized loss on sale of investments and foreign currency transactions (59,150)
Change in unrealized appreciation of investments and currency transactions 206,844
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... 208,099
-----------
TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares ......................................... 20,697,882
Cost of shares redeemed (net of redemption fees of $14,492) .............. (1,457,337)
-----------
NET INCREASE IN NET ASSETS FROM TRANSACTIONS IN SHARES OF COMMON STOCK ... 19,240,545
-----------
NET INCREASE IN NET ASSETS ............................................... 19,448,644
NET ASSETS:
Beginning of period ...................................................... --
-----------
END OF PERIOD ............................................................ $19,448,644
===========
SHARE TRANSACTIONS:
Number of shares sold .................................................... 2,013,069
Number of shares redeemed ................................................ (139,635)
-----------
NET INCREASE IN SHARES OUTSTANDING ....................................... 1,873,434
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period from
February 18, 2000
(commencement
of operations)
through
June 30, 2000
(Unaudited)
-----------------
<S> <C>
FOR A SHARE OUTSTANDING FOR THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD ......................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................... 0.03
Net realized and unrealized gain on investments ..... 0.34
-------
TOTAL INCOME FROM INVESTMENT OPERATIONS ............. 0.37
-------
REDEMPTION FEES ADDED TO PAID-IN CAPITAL ..................... 0.01
-------
NET ASSET VALUE, END OF PERIOD ............................... $ 10.38
-------
TOTAL RETURN ................................................. 3.80%(1)
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) ............ $19,449
Ratio of expenses to average net assets ............. 0.60%(2)(3)
Ratio of net investment income to average net assets 0.97%(2)
Portfolio turnover rate ............................. 22.31%(1)
<FN>
----------
(1) For the period February 18, 2000 (commencement of operations) to June 30,
2000 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 for the period January 1 through May 19, 2000.
Even though such action had been taken, total annualized operating expenses
as a percentage of average net assets would have remained unchanged at 0.60%
for the period February 18, 2000 (commencement of operations) though June
30, 2000.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
*TRADE GLOBAL TITANS INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
E*TRADE Global Titans Index Fund (the "Fund") is a non-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
June 30, 2000, the Trust offered eight 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, the Technology Index Fund, the Global Titans Index Fund
and the Premier Money Market Fund. These financial statements contain the
E*TRADE Global Titans Index Fund.
The Fund's investment objective is to provide investment results that match,
before fees and expenses, the total return of the stocks comprising the Dow
Jones Global TitansSM (DJGTSM) IndexSM*. The Fund seeks to achieve its objective
by investing substantially all of its assets in the same stocks and in
substantially the same percentages as the stocks that comprise the DJGT Index.
* "Dow JonesSM," "Global TitansSM" and "Dow Jones Global Titans IndexSM" are
service marks of Dow Jones & Company, Inc. and have been licensed for use for
certain purposes by E*TRADE Asset Management, Inc. The Fund is not sponsored,
endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation
regarding the advisability of investing in such Fund.
The following is a summary of significant accounting policies which are
consistently followed by the Funds in the preparation of their financial
statements, and which are in conformity with generally accepted accounting
principles. The preparation of the financial statements in conformity with
accounting principles 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 revenue and expenses during the reporting period. Actual results
could differ from those estimates.
PRINCIPLES OF ACCOUNTING
The Fund used the accrual method of accounting for financial reporting purposes.
INVESTMENT POLICY AND SECURITY VALUATION
The securities of the Fund, except as otherwise noted, that are traded on one or
more than one U.S. national securities exchange are valued at the last sale
price on the business day as of which such value is being determined at the
close of the exchange representing the principal market for such securities.
Securities that are primarily traded on a foreign securities exchange generally
valued at the U.S. dollar equivalent of the preceding closing values for the
securities on their exchange. 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. Short-term debt securities are valued at amortized cost
which approximates market value. 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
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
with procedures established by and under the supervision and responsibility by
the Fund'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). Revenue is recognized 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.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income 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 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. The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. If so
qualified, each 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 June 30, 2000.
REDEMPTION FEES
Shares held in the Fund that are redeemed within four months are subject to a
fee equal to 1.00% of the proceeds of the redeemed shares. The fee, which is
retained by the Fund, is accounted for as an addition to paid-in capital.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
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 advisory agreement ("Advisory Agreement").
For its services as Investment Advisor, the Investment Advisor is paid by the
Fund a fee at an annual rate of 0.25% average daily net assets.
Barclays Global Fund Advisors, Inc. ("BGFA") serves as the Fund's investment
sub-advisor. For its services, BGFA is paid by the Investment Advisor a fee
calculated at an annual rate equal to 0.20% of the Fund's average daily net
assets on amounts up to $200 million, 0.15% of average daily net assets on
amounts between $200 million and $500 million, and 0.12% of average daily net
assets above $500 million. BGFA, is a direct subsidiary of Barclays Global
Investors, N.A. which, in turn, is an indirect subsidiary of Barclays Bank PLC.
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 Administration
Agreement. The Fund pays the Investment Advisor a monthly fee calculated at an
annual rate of 0.35% of the average daily net assets for its services as
administrator of the Fund.
PFPC Inc. ("PFPC") serves as the Fund's sub-administrator. PFPC also serves as
the Fund's transfer agent and dividend disbursing agent. PFPC Trust Company
serves as the Fund's custodian.
E*TRADE Securities, Inc. , a wholly owned subsidiary of E*TRADE Group, serves as
the shareholder servicing agent (the "Shareholder Servicing Agent") for the
Funds. 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 18, 2000 (commencement of operations) through June 30, 2000.
Effective May 9, 2000, the trustee fees and expenses are no longer a direct
expense of the Fund, but rather those expenses are paid by the Investment
Advisor pursuant to the Administrative Agreement.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
3. PORTFOLIO SECURITIES LOANED
The Fund may participate in securities lending, in which securities are lent to
certain securities dealers in exchange for cash collateral equal to 102% of the
initial market value of the domestic securities lent and 105% of the initial
market value of the non-U.S. securities lent. The amount of collateral is
adjusted daily for changes in the market value of securities lent but at no
subsequent period would the cash collateral equal less than 100% of the market
value of securities lent. The Fund retains a beneficial interest in the
collateral held. The Investment Advisor monitors the creditworthiness of all
parties to which securities are lent. The Fund charges the corresponding party
interest on the market value of securities lent. The Fund did not have any
securities lending activity during the period ending June 30, 2000.
4. FUTURES CONTRACTS
The Fund may purchase or sell futures contracts to gain exposure to market
changes as this may be more efficient or cost effective than actually buying the
securities only if there is an active market for such contracts. 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 Fund 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
Fund 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 "variation margin" and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund 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 Fund may be required to
segregate cash, U.S. Government obligations or other liquid securities in
connection with 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. The Fund did not enter into any futures contracts during the period
ending June 30, 2000.
<PAGE>
E*TRADE GLOBAL TITANS INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
5. REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements. Repurchase agreements are
transactions involving purchases of securities under agreements to resell such
securities at a specified price and time are treated as collateralized financing
transactions and are recorded at their contracted resale amounts. These
repurchase agreements, if any, are detailed in the Fund's Schedule of
Investments. The Fund's Statements of Additional Information requires that the
cash investments be fully collateralized. The Fund's Custodian has custody of,
and holds in a segregated account, securities acquired as collateral by the Fund
under a repurchase agreement. The Fund's Investment Advisor monitors, on an
ongoing basis, the value of the collateral to assure that it always equals or
exceeds the repurchase price. There were no repurchase agreements entered into
by the Fund as of June 30, 2000.
6. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities,
aggregated $22,860,312 and $3,623,226, respectively for period ended June 30,
2000.
7. UNREALIZED APPRECIATION/DEPRECIATION - TAX BASIS
At June 30, 2000, net unrealized appreciation on investments for federal income
tax purposes was as follows:
Unrealized Unrealized Net Unrealized
Appreciation Depreciation Appreciation
------------ ------------ -------------
$ 1,272,365 $(1,065,545) $ 206,820
At June 30, 2000, the cost basis of the investments for federal income tax
purposes was $19,279,055.
