The E*TRADE Technology Index Fund commenced operations on August 13, 1999. This
annual report contains audited financial statements for a period of less than
six months and, therefore, does not contain an analysis of the results of
operations for the period ended December 31, 1999. Relying on financial
statements reporting operating results for such a period is subject to inherent
limitations resulting from the shortness of the period. The Fund's early returns
were achieved buying securities issued by technology companies in a period
favorable for these stocks. Such favorable returns involve accepting the risk of
volatility, and not expecting that such returns can be consistently achieved
over long periods of time.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCK (103.3% OF NET ASSETS)
- -----------------------
BLANKBOOKS & LOOSELEAF BINDERS (0.1%)
Deluxe Corp. 957 $ 26,257
---------
COMMUNICATIONS SERVICES (0.6%)
America Tower Corp. 1,758 53,729
At Home Corp. 4,024 172,529*
Crown Castle International Corp. 1,483 47,641*
---------
273,899
---------
COMPUTER FACILITIES MANAGEMENT (0.3%)
Comverse Technology, Inc. 851 123,182*
---------
COMPUTER INTEGRATED SYSTEMS DESIGN (1.2%)
Bea Systems, Inc. 1,446 101,130*
Cognex Corp. 497 19,383*
Computer Sciences Corp. 1,946 184,140
Inktomi Corp. 1,176 104,370*
Network Appliance, Inc. 1,756 145,858*
---------
554,881
---------
COMPUTER PERIPHERAL (10.7%)
Adaptec, Inc. 1,262 62,942*
Cabletron Systems, Inc. 2,102 54,652*
Cisco Systems 39,238 4,203,371*
Lexmark International Group Inc., Class A 1,565 141,633*
Qlogic Corp. 430 68,746*
Storage Technology Corp. 1,199 22,107*
Symbol Technologies, Inc. 1,073 68,203
3-Com Corp. 4,407 207,129*
---------
4,828,783
---------
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMPUTERS, PERIPHERALS & SOFTWARE (0.3%)
Creative Technology Ltd. 1,087 $ 18,887
Ingram Micro Inc., Class A 827 10,854*
National Instruments Corp. 595 22,759*
Safeguard Scientifics, Inc. 396 64,177*
Tech Data Corp. 623 16,899*
-----------
133,576
-----------
COMPUTER PROGRAMMING SERVICES (0.4%)
Amdocs Limited 2,423 83,594*
American Management Systems, Inc. 518 16,252*
Ciber, Inc. 725 19,938*
Electronics for Imaging, Inc. 667 38,769*
Keane, Inc. 860 27,305
Visio Corp. 356 16,910*
-----------
202,768
-----------
COMPUTER RELATED SERVICES (1.2%)
Cambridge Tech 714 18,743*
Electronic Data Systems Corp. 5,996 401,357
Paychex, Inc. 2,997 119,880
Whittman-Hart, Inc. 657 35,232*
-----------
575,212
-----------
COMPUTER STORAGE DEVICES (3.3%)
EMC Corp. 12,324 1,346,397
Iomega Corp. 3,176 10,719*
Quantum Corp. 2,080 31,460*
Seagate Technology, Inc. 2,714 126,371*
-----------
1,514,947
-----------
DATA PROCESSING & PREPARATION (2.8%)
Acxiom Corp. 1,039 24,936*
Affiliated Computer Services, Inc. 575 26,450*
Automatic Data Processing, Inc. 7,536 406,002
Bisys Group, Inc. 325 21,206*
DST Systems, Inc. 755 57,616*
First Data Corp. 5,259 259,334
Fiserv, Inc. 1,500 57,469*
National Data Corp. 413 14,016
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
DATA PROCESSING & PREPARATION, CONTINUED
SEI Investment Co. 217 $ 25,826
Shared Medical Systems Corp. 318 16,198
Sterling Commerce 1,141 38,865*
Sungard Data Systems, Inc. 1,404 33,345*
Transaction Systems Architects, Inc. 406 11,368*
Verio, Inc. 906 41,846*
Verisign, Inc. 1,220 232,715*
-----------
1,267,192
-----------
DEPOSIT BANKING (0.2%)
Concord EFS, Inc. 2,398 61,749*
Nova Corp. 863 27,238*
-----------
88,987
-----------
DIRECT MAIL ADVERTISING SERVICES (0.7%)
CMG Information 1,163 322,005*
-----------
ELECTRONIC COMPONENTS (0.3%)
American Power Conversion Corp. 2,333 61,533*
SCI Systems, Inc. 880 72,325*
-----------
133,858
-----------
ELECTRONIC COMPUTERS (17.6%)
Apple Computer, Inc. 1,940 199,456*
Compaq Computer Corp. 20,591 557,244
Ceridian Corp. 1,744 37,605
Dell Computer Corp. 30,927 1,577,277*
Gateway Inc. 3,809 274,486*
Hewlett Packard Co. 12,328 1,404,622
International Business Machines 20,395 2,202,660
Micron Electronics 1,211 13,472*
Rational Software Corp. 1,057 51,925*
Silicon Graphics, Inc. 2,280 22,373*
Sun Microsystems Inc. 18,846 1,459,387*
Unisys Corp. 3,312 105,777
-----------
7,906,284
-----------
ELECTRONIC PARTS & EQUIPMENT (0.3%)
Arrow Electronics, Inc. 1,135 28,801
Avnet, Inc. 433 26,197
Checkfree Holdings Corp. 627 65,522*
-----------
120,520
-----------
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
HEALTH SERVICES (0.2%)
Sapient Corp. 680 $ 95,838*
-----------
INFORMATION RETRIEVAL SERVICES (8.8%)
Amazon.Com, Inc. 4,106 312,569*
America Online, Inc. 26,352 1,987,929
Earthlink Network, Inc. 386 16,405*
Ebay, Inc. 1,569 196,419*
Gartner Group Inc., Class A 1,286 19,612
Mindspring Enterprises, Inc. 755 19,937*
Psinet, Inc. 786 48,536*
Yahoo! Inc. 3,099 1,340,899*
-----------
3,942,306
-----------
MANIFOLD BUSINESS FORMS (0.0%)
Reynolds & Reynolds Co., Class A 954 21,464
-----------
MOTION PICTURE & VIDEO PRODUCTION (0.1%)
C/Net, Inc. 866 49,146*
-----------
PREPACKAGED SOFTWARE (18.9%)
Adobe Systems, Inc. 1,479 99,463
Autodesk, Inc. 721 24,334
Baan Co. 2,515 35,524*
BMC Software, Inc. 2,832 226,383*
Cadence Design System, Inc. 2,974 71,376*
Check Point Software Technologies Ltd. 440 87,450*
Citrix Systems, Inc. 1,056 129,888*
Computer Associates International 6,529 456,622
Compuware Corp. 4,326 161,144*
CSG Systems, Inc. 624 24,882*
Electronic Arts 760 63,840*
Informix Corp. 2,279 25,924*
Intuit, Inc. 2,276 136,418*
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- ------
PREPACKAGED SOFTWARE, CONTINUED
I2 Technologies, Inc. 891 $ 173,745*
J. D. Edwards & Co. 1,266 37,822*
Legato Systems, Inc. 991 68,193*
Lernout & Hauspie Speech Products ADR 714 33,023*
LHS Group, Inc. 633 15,548*
Microsoft Corp. 29,519 3,446,343*
Networks Associates, Inc. 1,705 45,502*
Novell, Inc. 4,079 162,395*
Oracle Systems Corp. 17,521 1,963,447*
Parametric Technology Corp. 3,301 89,333*
Peoplesoft, Inc. 2,939 62,637*
Policy Management Systems Corp. 430 10,992*
Realnetworks, Inc. 870 105,433*
Siebl Systems, Inc. 2,220 186,480*
Sterling Software, Inc. 1,005 31,658
Symantec Corp. 694 40,686*
Synopsys, Inc. 863 57,605*
Veritas Software Co. 3,026 433,096*
-----------
8,507,186
-----------
PRINTED CIRCUIT BOARDS (0.2%)
Jabil Circuit, Inc. 1,008 73,583*
-----------
PROCESS CONTROL INSTRUMENTS (0.1%)
Perkinelmer, Inc. 565 23,552
-----------
RADIO & TV COMMUNICATIONS
EQUIPMENT (5.5%)
Andrew Corp. 985 18,653*
Harris Corp. 964 25,727
Motorola, Inc. 7,340 1,080,815
Qualcomm Inc. 7,248 1,277,460*
Scientific Atlanta, Inc. 931 51,787
-----------
2,454,442
-----------
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
RADIOTELEPHONE COMMUNICATIONS (6.4%)
Loral Space & Communications 2,937 $ 71,406*
Lucent Technologies, Inc. 37,584 2,811,753
-----------
2,883,159
-----------
SECURITY BROKERS & DEALERS (0.2%)
E*TRADE Group, Inc. 2,825 73,802*
-----------
SEMICONDUCTORS & RELATED DEVICES (15.6%)
Advanced Micro Devices, Inc. 1,790 51,798
Altera Corp. 2,420 119,941*
Analog Devices, Inc. 2,102 195,486*
Applied Micro Circuits Corp. 650 82,713*
Atmel Corp. 2,434 71,955*
Broadcom Corp. 469 127,744*
Conexant Systems, Inc. 2,339 155,251*
Dallas Semiconductor Corp. 362 23,326
E-Tek Dynamics 746 100,430*
Intel Corp. 40,803 3,358,597
Lattice Semiconductor Corp. 565 26,626*
Linear Technology Corp. 1,870 133,822
LSI Logic Corp. 1,743 117,653*
Maxim Integrated Products, Inc. 3,290 155,247*
Microchip Technology, Inc. 616 42,158*
Micron Technology, Inc. 3,051 237,215
National Semiconductor Corp. 2,035 87,123*
PMC-Sierra, Inc. 769 123,280*
Rambus, Inc. 285 19,220*
RF Micro Devices Inc. 961 65,768*
SGS-Thomson Microelectronics N.V. 3,404 515,493
Texas Instruments, Inc. 9,547 924,866
Vitesse Semiconductor, Inc. 1,859 97,481*
Xilinx, Inc. 3,826 173,963*
-----------
7,007,156
-----------
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
SPECIAL INDUSTRY MACHINERY (2.0%)
Applied Materials, Inc. 4,569 $ 578,835*
ASM Lithography Holding 1,689 192,124*
LAM Research Corp. 467 52,100*
Novellus System, Inc. 471 57,712*
-----------
880,771
-----------
TELEPHONE & TELEGRAPH APPARATUS (5.3%)
ADC Telecommunications, Inc. 1,649 119,656*
Ciena Corp. 1,476 84,870*
General Instrument Corp. 2,060 175,100*
Newbridge Networks Corp. 2,162 48,780*
Nortel Networks Corp. ADR 16,265 1,642,765
Tellabs, Inc. 4,765 305,853*
-----------
2,377,024
-----------
VOCATIONAL SCHOOLS (0.0%)
Perot Systems Corp. 1,096 20,824*
-----------
TOTAL COMMON STOCK (Cost: $37,015,205) 46,482,604
-----------
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS, CONCLUDED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
--------------- -----
SHORT-TERM INVESTMENTS (4.1%)
- ----------------------
Provident Institutional Funds --
TempCash Portfolio $ 912,622 $ 912,622
Samson Street Money Market Fund 912,622 912,622
-------------
TOTAL SHORT-TERM INVESTMENTS (Cost: $1,825,244) 1,825,244
-------------
TOTAL INVESTMENTS (Cost:$38,840,449) (107.4%) 48,307,848
LIABILITIES IN EXCESS OF
OTHER ASSETS (-7.4%) (3,337,011)
-----------
NET ASSETS (100.0%) $44,970,837
===========
* Non-income producing security.
ADR American Depository Receipt.
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments at-value (cost: $38,840,449) (Note 1). ............. $48,307,848
Dividends receivable ........................................... 4,050
Interest receivable ............................................ 7,851
Receivable for fund shares sold. ............................... 294,940
-----------
Total Assets ............................................... 48,614,689
-----------
LIABILITIES
Accrued administration fee (Note 2) ............................ 18,960
Accrued advisory fee (Note 2) .................................. 7,900
Payable for fund shares redeemed. .............................. 13,702
Distribution to shareholders ................................... 1,794,887
Payable for investment securities purchased .................... 1,808,403
-----------
Total Liabilities .......................................... 3,643,852
-----------
TOTAL NET ASSETS . ............................................. $44,970,837
===========
Net assets consist of:
Paid-in capital ................................................ 35,854,791
Net investment loss ............................................ (45,718)
Distributions in excess of net realized gains on investments ... (305,635)
Net unrealized appreciation of investments ..................... 9,467,399
-----------
TOTAL NET ASSETS ............................................... $44,970,837
===========
Shares Outstanding (unlimited authorized, par value $.01) ...... 3,165,238
===========
Net Asset Value, Offering Price and Redemption Price per Share . $ 14.21
===========
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
STATEMENT OF OPERATIONS
Period from August 13, 1999 (commencement of operations) through
December 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ..................................................... $ 12,665
Interest ...................................................... 21,462
-----------
Total Investment Income. .................................. 34,127
-----------
EXPENSES (NOTE 2):
Advisory fee ................................................... 23,484
Administration fee ............................................. 56,361
Trustee fees ................................................... 465
-----------
Total expenses before waiver of Trustee fees .............. 80,310
-----------
Waived Trustee fees (Note 2) ................................... (465)
-----------
Net expenses .............................................. 79,845
-----------
NET INVESTMENT LOSS ............................................ (45,718)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments ....................... 1,489,252
Change in unrealized appreciation of investments ............... 9,467,399
-----------
Net Realized and Unrealized Gain on Investments ........... 10,956,651
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ..................................................... $10,910,933
===========
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Period from
August 13, 1999
(commencement
of operations)
through
December 31, 1999
-----------------
INCREASE IN NET ASSETS
Operations:
Net investment loss ............................................ $ (45,718)
Net realized gain on sale of investments ....................... 1,489,252
Change in unrealized appreciation of investments ............... 9,467,399
-----------
Net increase in net assets resulting from operations ........... 10,910,933
-----------
Distributions to Shareholders:
Distributions from net realized gain on sale of investments .... (1,794,887)
-----------
Transactions in Shares of Common Stock:
Net proceeds from sale of shares ............................... 50,572,484
Cost of shares redeemed ........................................ (14,864,700)
-----------
Net increase in net assets from transactions in shares of
common stock .................................................. 35,707,784
-----------
Redemption fees ................................................ 147,007
-----------
Net Increase in Net Assets ..................................... 44,970,837
NET ASSETS:
Beginning of period ............................................ --
-----------
End of period .................................................. $44,970,837
===========
SHARE TRANSACTIONS:
Number of shares sold .......................................... 4,411,921
Number of shares redeemed. ..................................... (1,246,683)
-----------
Net increase in shares outstanding ............................. 3,165,238
===========
See accompanying notes to financial statements.
<PAGE>
E*TRADE Technology Index Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Period from
August 13, 1999
(commencement
of operations)
through
For a Share Outstanding for the Period December 31, 1999
-----------------
Net asset value, beginning of period ....................... $ 10.00
Income from investment operations: -------
Net investment loss ..................................... (0.01)
Net realized and unrealized gain on investments ......... 4.75
-------
Total income from investment operations ................. 4.74
-------
Distributions to shareholders:
Distributions from net realized gains ................... (0.58)
-------
Total distributions to shareholders ..................... (0.58)
-------
Redemption fees added to paid-in capital ................... 0.05
-------
Net asset value, end of period ............................. $ 14.21
=======
Total return ............................................... 47.71%(1)
Ratios / Supplemental Data:
Net assets, end of period (000s omitted) ................ $44,971
Ratio of expenses to average net assets ................. 0.85%(2)(3)
Ratio of net investment loss to average net assets ...... (0.49%)(2)
Portfolio turnover rate. ................................ 35.77%(1)
- ----------
(1) For the period August 13, 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. Had such action not been taken, total
annualized operating expenses as a percentage of average net assets would
still have been 0.85% for the period August 13, 1999 (commencement of
operations) through December 31, 1999.
See accompanying notes to financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
E*TRADE Technology 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
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 Technology Index Fund.
The Fund's investment objective is to match, before fees and expenses, the total
return of the stocks making up the Goldman Sachs Technology (GSTI(TM) Composite)
Index. 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
securities that comprise the GSTI Composite Index. "GSTI(TM)" is a registered
trademark of Goldman Sachs & Co. and has 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 Goldman Sachs & Co. and Goldman Sachs & Co. makes
no representation regarding the advisability of investing in the Fund.
"GSTI (TRADEMARK)" is a registered trademark of Goldman Sachs & Co. and has 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 Goldman
Sachs & Co. and Goldman Sachs & Co. 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 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 accordance 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 used the accrual method of accounting for financial reporting purposes.
INVESTMENT POLICY AND SECURITY VALUATION
Investments 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. 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 with policies approved by the Fund's
Board of Trustees.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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. It is the policy of each fund 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 December 31, 1999.
REDEMPTION FEES
Shares held in the Fund less than six 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 TECHNOLOGY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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 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 0.60% of the average daily net assets for administrative
services.
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 Co.
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 August 13, 1999 (commencement of operations) through December 31,
1999.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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 December 31, 1999.
4. FUTURES CONTRACTS
The Fund may purchase 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 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 is 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 December 31, 1999.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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 Statement of Additional Information requires that the
cash investments be fully collateralized based on values that are marked to
market daily. 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 December 31, 1999.
6. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities,
aggregated $45,113,984 and $9,588,031, respectively for period ended December
31, 1999.
7. UNREALIZED APPRECIATION/DEPRECIATION - TAX BASIS
At December 31, 1999, net unrealized appreciation on investments for federal
income tax purposes was as follows:
Unrealized Unrealized Net Unrealized
Appreciation Depreciation Appreciation
------------ ------------ ------------
$9,710,181 $(242,782) $9,467,399
At December 31, 1999, the cost basis of the investments for federal income tax
purposes was $39,191,818.
At December 31, 1999 the Fund had available a capital loss carryforward of
$351,369 that may be used to offset future net capital gains through 2007.
<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, including
the schedule of investments, of E*TRADE Technology Index Fund (the "Fund") (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 August 13, 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 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 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 Technology 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 August 13, 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
