Registration Nos. 333-66807
811-09093
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No.
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Post-Effective Amendment No. 15 /X/
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 18 /X/
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(Check appropriate box or boxes)
E*TRADE FUNDS
(Exact name of Registrant as specified in charter)
4500 Bohannon Drive
Menlo Park, CA 94025
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (650) 331-6000
Kathy Levinson
E*TRADE Securities, Inc.
4500 Bohannon Drive
Menlo Park, CA 94025
(Name and address of agent for service)
Please send copies of all communications to:
David A. Vaughan, Esq. Kathy Levinson
Dechert Price & Rhoads E*TRADE Securities, Inc.
1775 Eye Street, NW 4500 Bohannon Drive
Washington, DC 20006 Menlo Park, CA 94025
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
Immediately upon filing pursuant to paragraph (b)
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on __________ __, 2000 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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X 75 days after filing pursuant to paragraph (a)(2) of Rule 485
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If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
E*TRADE FUNDS
E*TRADE PREMIER MONEY MARKET FUND
Prospectus dated February __, 2000
This Prospectus concisely sets forth information about the E*TRADE Premier Money
Market Fund (the "Fund") that an investor needs to know before investing. Please
read this Prospectus carefully before investing, and keep it for future
reference. The Fund is a series of E*TRADE Funds.
Objectives, Goals and Principal Strategies.
The Fund's investment objective is to provide investors with a high level of
income, while preserving capital and liquidity. The Fund seeks to achieve its
investment objective by investing in a master portfolio, that, in turn, invests
in high quality, short-term investments.
Eligible Investors.
This Fund is designed and built specifically for on-line investors. In order to
be a shareholder of the Fund, you need to have an account with E*TRADE
Securities, Inc. ("E*TRADE Securities"). In addition, the Fund requires you to
consent to receive all information about the Fund electronically. If you wish to
rescind this consent or close your E*TRADE Securities account, the Fund will
redeem all of your shares in your Fund account. The Fund is a true no-load fund,
which means you pay no sales charges or 12b-1 fees. The minimum initial
investment in the Fund is $25,000 for regular accounts and $15,000 for IRA
accounts.
About E*TRADE.
E*TRADE Group, Inc. ("E*TRADE") is the direct parent of E*TRADE Asset
Management, Inc., the Fund's investment advisor. E*TRADE, through its group
companies, is a leader in providing secure online investing services. E*TRADE's
focus on technology has enabled it to eliminate traditional barriers, creating
one of the most powerful and economical investing systems for the self-directed
investor. To give you ultimate convenience and control, E*TRADE offers
electronic access to your account virtually anywhere, at any time.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
Prospectus dated February __, 2000
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY....................................................3
FEES AND EXPENSES......................................................4
INVESTMENT OBJECTIVE, STRATEGIES AND RELATED RISKS.....................5
YEAR 2000..............................................................6
FUND MANAGEMENT........................................................6
THE FUND'S STRUCTURE...................................................7
PRICING OF FUND SHARES.................................................8
HOW TO BUY, SELL AND EXCHANGE SHARES...................................9
DIVIDENDS AND OTHER DISTRIBUTIONS.....................................13
TAX CONSEQUENCES......................................................13
<PAGE>
RISK/RETURN SUMMARY
This is a summary. You should read this section along with the rest of this
Prospectus.
Investment Objectives/Goals
The Fund's investment objective is to provide a high level of income, while
preserving capital and liquidity.
Principal Strategies
The Fund seeks to achieve its investment objective by investing all of its
assets in the Money Market Master Portfolio (the "Master Portfolio"), a series
of Master Investment Portfolio ("MIP"), a registered open-end management
investment company, rather than directly in a portfolio of securities. In turn,
the Master Portfolio seeks to provide investors with a high level of income,
while preserving capital and liquidity, by investing in high quality, short-term
investments. These securities include obligations of the U.S. Government, its
agencies and instrumentalities (including government-sponsored enterprises),
certificates of deposit and U.S. Treasury bills, high-quality debt obligations,
such as corporate debt, obligations of U.S. banks and repurchase agreements. The
Fund will invest solely in securities denominated U.S. dollars.
Principal Risks
There is no assurance that the Fund will achieve its investment objective. The
Master Portfolio's investments are expected to present minimal risks because of
their relatively short maturities and the high credit quality (financial)
strength of the issuers. The Master Portfolio seeks to maintain a portfolio of
investments that will permit shareholders to maintain a net asset value of $1.00
per share; however, there is not assurance that this will be achieved.
The Master Portfolio could lose money or underperform as a result of default.
Although the risk of default generally is considered unlikely, any default on
the part of a portfolio investment could cause the Fund's share price or yield
to fall.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
Performance
This Fund is expected to commence operations in February 2000. Therefore, the
performance information (including annual total returns and average annual total
returns) for a full calendar year is not yet available.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. The Fund is new, and therefore, has no historical expense
data. Thus, the numbers under the Annual Fund Operating Expenses below are
estimates.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed in Reinvested
Dividends and other Distributions None
Redemption Fee (as a % of redemption proceeds None
payable only if shares are redeemed within four
months of purchase)
Annual Fund Operating Expenses*
(expenses that are deducted from Fund assets)
Management Fees 0.12%**
Distribution (12b-1) Fees None
Other Expenses (Administration) 0.30%***
Total Annual Fund Operating Expenses 0.42%
* The cost reflects the expenses at both the Fund and the Master Portfolio
levels.
** Management fees include a fee equal to 0.10% of average daily net assets
payable at the Master Portfolio level to its investment advisor and an
investment advisory fee equal to 0.02% payable by the Fund to its investment
advisor.
*** The administrative fee is payable by the Fund to E*TRADE Asset Management,
Inc. The administrative fee is based on estimated amounts for the current fiscal
year.
You should also know that the Fund does not charge investors any account
maintenance fees, account set-up fees, low balance fees, transaction fees or
customer service fees. E*TRADE Securities charges $20 for wire transfers out of
your E*TRADE Securities account. You will be responsible for opening and
maintaining an e-mail account and internet access at your own expense.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 year* 3 years*
$44 $148
* Reflects costs at both the Fund and Master Portfolio levels.
INVESTMENT OBJECTIVE, STRATEGIES AND RELATED RISKS
The Master Portfolio seeks to provide investors with a high level of income,
while preserving capital and liquidity, by investing in high quality, short-term
investments. These securities include obligations of the U.S. Government, its
agencies and instrumentalities (including government-sponsored enterprises),
certificates of deposit and U.S. Treasury bills, high-quality debt obligations,
such as corporate debt, certain obligations of U.S. banks (including, but not
limited to, negotiable certificates of deposits, banker's acceptances and fixed
time deposits) and certain repurchase agreements (including, but not limited to,
government securities and mortgage-related securities). The Fund will invest
solely in securities denominated in U.S. dollars.
The Master Portfolio emphasizes safety of principal and high credit quality. In
particular, the internal investment policies of the Master Portfolio's
investment advisor, have always prohibited the purchase by the Master Portfolio
of many types of floating-rate instruments commonly referred to as derivatives
that are considered to be potentially volatile. The Master Portfolio may only
invest in floating-rate securities that bear interest at a rate that resets
quarterly or more frequently, and that resets based on changes in standard money
market rate indices such as U.S. Government Treasury bills, London Interbank
Offered Rate, the prime rate, published commercial paper rates, federal funds
rates, Public Securities Associates floaters or JJ Kenney index floaters.
The Master Portfolio must maintain a dollar-weighted average portfolio maturity
of no more than 90 days, and cannot invest in any security whose remaining
maturity is longer than 397 days (13 months). Any security that the Master
Portfolio purchases must present minimal credit risks and be of "high-quality,"
meaning, it must be rated in the top two rating categories by the requisite
nationally recognized short-term securities ratings organization or if unrated,
determined to be of comparable quality to such rated securities by the Master
Portfolio's investment advisor under guidelines adopted by the Master
Portfolio's board of trustees. The Master Portfolio and the Fund may not achieve
as high a level of current income as other mutual funds that do not limit their
investments to the high credit quality instruments in which the Master Portfolio
invests.
The Fund and the Master Portfolio must comply with certain investment criteria
designed to provide liquidity and reduce risk to allow shareholders to maintain
a stable net asset value of $1.00 per share. The Master Portfolio seeks to
reduce risk by investing its assets in securities of various issuers. As such,
the Master Portfolio is considered diversified for purposes of the 1940 Act.
The Master Portfolio's investment advisor's maturity decisions will also effect
the yield, and in unusual circumstances potentially could affect the share price
of the Master Portfolio and the Fund. To the extent that the Master Portfolio's
investment advisor's anticipates interest rate trends imprecisely, the Master
Portfolio's and the Fund's yields at times could lag those of other money market
funds.
If the Master Portfolio invests more than 25% of its total assets in bank
obligations, it may be subject to adverse developments in the banking industry
that may affect the value of the Master Portfolio's investments more than if the
Master Portfolio investments were not invested to such a degree in the banking
industry. Normally, the Master Portfolio intends to invest more than 25% of its
total assets in bank obligations.
YEAR 2000
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its investment advisor, the Fund's other service providers, or persons
with whom they deal, do not properly process and calculate date-related
information and data on and after January 1, 2000. This possibility is commonly
known as the "Year 2000 Problem." Virtually all operations of the Fund are
computer reliant. The investment advisor, administrator, transfer agent and
custodian have informed the Fund that they are actively taking steps to address
the Year 2000 Problem with regard to their respective computer systems. The Fund
is also taking measures to obtain assurances that comparable steps are being
taken by the Fund's other significant service providers. While there can be no
assurance that the Fund's service providers will be Year 2000 compliant, the
Fund's service providers expect that their plans to be compliant will be
achieved. The Master Portfolio's investment advisor and principal service
providers have also advised the Master Portfolio that they are working on any
necessary changes to their systems and that they expect their systems to be Year
2000 compliant in time. There can, of course, be no assurance of success by
either the Fund's or the Master Portfolio's service providers. In addition,
because the Year 2000 Problem affects virtually all organizations, the issuers
in whose securities the Master Portfolio invests and the economy as a whole also
could be adversely impacted by the Year 2000 Problem. The extent of such impact
cannot be predicted.
FUND MANAGEMENT
Investment Advisor. Under an investment advisory agreement with the Fund,
E*TRADE Asset Management, Inc. ("Investment Advisor"), a registered investment
advisor, provides investment advisory services to the Fund. The Investment
Advisor is a wholly owned subsidiary of E*TRADE Group, Inc. and is located at
4500 Bohannon Drive, Menlo Park, CA 94025. The Investment Advisor commenced
operating in February 1999 and therefore has limited experience as an investment
advisor. As of December 31, 1999, the Investment Advisor provided investment
advisory services for over $166 million in assets.
Subject to general supervision of the E*TRADE Funds' Board of Trustees (the
"Board") and in accordance with the investment objective, policies and
restrictions of the Fund, the Investment Advisor provides the Fund with ongoing
investment guidance, policy direction and monitoring of the Master Portfolio.
The Investment Advisor may in the future manage cash and money market
instruments for cash flow purposes. For its advisory services, the Fund pays the
Investment Advisor an investment advisory fee at an annual rate equal to 0.02%
of the Fund's average daily net assets invested in the Master Portfolio, but
0.12% of the Fund's average daily net assets if the Fund's assets are not
invested in the Master Portfolio.
The Master Portfolio's investment advisor is Barclays Global Fund Advisors
("BGFA"). BGFA is a wholly owned direct subsidiary of Barclays Global Investors,
N.A. (which, in turn, is an indirect subsidiary of Barclays Bank PLC) and is
located at 45 Fremont Street, San Francisco, California 94105. BFGA has provided
asset management, administration and advisory services for over 25 years. As of
March 31, 1999, Barclays Global Investors and its affiliates, including BGFA,
provided investment advisory services for over $650 billion of assets. BGFA
receives a monthly advisory fee from the Master Portfolio at an annual rate
equal to 0.10% of the Master Portfolio's average daily net assets. From time to
time, BGFA may waive such fees in whole or in part. Any such waiver will reduce
the expenses of the Master Portfolio, and accordingly, have a favorable impact
on its performance.
The Fund bears a pro rata portion of the investment advisory fees paid by the
Master Portfolio, as well as certain other fees paid by the Master Portfolio,
such as accounting, legal, and SEC registration fees.
THE FUND'S STRUCTURE
The Fund is a separate series of E*TRADE Funds, a Delaware business trust
organized in 1998. The Fund is a feeder fund in a master/feeder structure.
Accordingly, the Fund invests all of its assets in the Master Portfolio. The
Master Portfolio, in turn, seeks to provide investors with a high level of
income, while preserving capital and liquidity, by investment in high quality,
short-term investments. In addition to selling its shares to the Fund, the
Master Portfolio has and may continue to sell its shares to certain other mutual
funds or other accredited investors. The expenses and, correspondingly, the
returns of other investment options in the Master Portfolio may differ from
those of the Fund.
The Fund's Board believes that, as other investors invest their assets in the
Master Portfolio, certain economic efficiencies may be realized with respect to
the Master Portfolio. For example, fixed expenses that otherwise would have been
borne solely by the Fund (and the other existing interestholders in the Master
Portfolio) would be spread across a larger asset base as more funds invest in
the Master Portfolio. However, if a mutual fund or other investor withdraws its
investment from the Master Portfolio, the economic efficiencies (e.g., spreading
fixed expenses across a larger asset base) that the Fund's Board believes should
be available through investment in the Master Portfolio may not be fully
achieved or maintained. In addition, given the relatively complex nature of the
master/feeder structure, accounting and operational difficulties could occur.
For example, coordination of calculation of net asset value ("NAV") would be
affected at the master and/or feeder level.
Fund shareholders may be asked to vote on matters concerning the Master
Portfolio.
The Fund may withdraw its investments in the Master Portfolio if the Board
determines that it is in the best interests of the Fund and its shareholders to
do so. Upon any such withdrawal, the Board would consider what action might be
taken, including the investment of all the assets of the Fund in another pooled
investment entity having the same investment objective as the Fund, direct
management of the Fund by the Investment Advisor or the hiring of a sub-advisor
to manage the Fund's assets.
Investment of the Fund's assets in the Master Portfolio is not a fundamental
policy of the Fund and a shareholder vote is not required for the Fund to
withdraw its investment from the Master Portfolio.
PRICING OF FUND SHARES
The Fund is a true no-load fund, which means you may buy or sell shares directly
at the NAV next determined after E*TRADE Securities receives your request in
proper form. If E*TRADE Securities receives such request prior to the close of
the New York Stock Exchange, Inc. ("NYSE") on a day on which the NYSE is open,
your share price will be the NAV determined that day. The Fund's investments are
valued each day the NYSE is open for business as of the close of trading on the
floor of the NYSE (generally 4:00 p.m., Eastern time). The Fund reserves the
right to change the time at which purchases and redemptions are priced if the
NYSE closes at a time other than 4:00 p.m. Eastern time or if an emergency
exists.
The Fund's investment in the Master Portfolio is valued at the NAV of the Master
Portfolio's shares held by the Fund. The Master Portfolio calculates the NAV of
its shares on the same day and at the same time as the Fund. Net asset value per
share is computed by dividing the value of the Master Portfolio's net assets
(i.e., the value of its assets less liabilities) by the total number of
outstanding shares of such Master Portfolio. The Master Portfolio's investments
are valued each day the NYSE is open for business.
The Master Portfolio values its portfolio instruments using the amortized cost
method. The amortized cost method involves valuing a security at its costs and
amortizing any discount or premium over the period until maturity, generally
without regard to the impact of fluctuating interest rates on the market value
of the security. The Master Portfolio's Board of Trustees believes this
valuation method accurately reflects fair value.
The amortized cost method of valuation seeks to maintain a stable net asset
value per share ("NAV") of $1.00, even where there are fluctuations in interest
rates that affect the value of portfolio instruments. Accordingly, this method
of valuation can in certain circumstances lead to a dilution of a shareholder's
interest.
HOW TO BUY, SELL AND EXCHANGE SHARES
This Fund is designed and built specifically for on-line investors. In order to
become a shareholder of the Fund, you will need to have an E*TRADE Securities
account. In addition, the Fund requires you to consent to receive all
information about the Fund electronically. If you wish to rescind this consent,
the Fund will redeem your position in the Fund, unless a new class of shares of
the Fund has been formed for those shareholders who rescinded consent,
reflecting the higher costs of paper-based information delivery. Shareholders
required to redeem their shares because they revoked their consent to receive
Fund information electronically may experience adverse tax consequences.
E*TRADE Securities reserves the right to deliver paper-based documents in
certain circumstances, at no cost to the investor. Shareholder information
includes prospectuses, financial reports, confirmations and statements.
In order to buy shares, you will need to: 1) open an E*TRADE Securities account;
2) deposit money in the account; and 3) execute an order to buy shares.
Step 1: How to Open an E*TRADE Securities Account
To open an E*TRADE Securities account, you must complete the application
available through our Website (www.etrade.com). You will be subject to E*TRADE
Securities' general account requirements as described in E*TRADE Securities'
customer agreement.
On-line. You can access E*TRADE Securities' online application through multiple
electronic gateways, including the Internet, WebTV, Prodigy, AT&T Worldnet,
Microsoft Investor, by GO ETRADE on CompuServe, with the keyword ETRADE on
America Online and via personal digital assistant. For more information on how
to access E*TRADE Securities electronically, please refer to our online
assistant E*STATION at www.etrade.com, available 24 hours a day.
By Mail. You can request an application by visiting the "Open an Account" area
of our Website, or by calling 1-800-786-2575. Complete and sign the application.
Make your check or money order payable to: E*TRADE Securities, Inc. Mail to:
E*TRADE Securities, Inc., P.O. Box 8160, Boston, MA 02266-8160, or if by
overnight mail: 66 Brooks Drive, Braintree, MA 02184-8160.
Telephone. Request a new account kit by calling 1-800-786-2575. E*TRADE's
customer service is available 24 hours, seven days a week.
STEP 2: Funding Your Account.
By check or money order. Make your check or money order payable to E*TRADE
Securities, Inc. and mail it to: E*TRADE Securities, Inc., P.O. Box 8160,
Boston, MA 02266-8160, or if by overnight mail to: E*TRADE Securities, Inc., 66
Brooks Drive, Braintree, MA 02184-8160.
In Person. Investors may visit E*TRADE Securities' self-service center in Menlo
Park, California at the address on the back cover page of this prospectus
between 8:00 a.m. and 5:00 p.m. (pacific time). Customer service will only
accept checks or money orders made payable to E*TRADE Securities, Inc.
Wire. Send wired funds to:
The Bank of New York
48 Wall Street
New York, NY 10286
ABA #021000018
FBO: E*TRADE Securities, Inc.
A/C #8900346256 for further credit to (your name and account number).
After your account is opened, E*TRADE Securities will contact you with an
account number so that you can immediately wire funds.
STEP 3: Execute an Order to Buy/Sell/Exchange Shares
Minimum Investment Requirements:
For your initial investment in the Fund $ 25,000
To buy additional shares of the Fund $ 1,000
Continuing minimum investment* $ 20,000
To invest in the Fund for your IRA, Roth IRA,
or one-person SEP account $ 15,000
To invest in the Fund for your Education IRA account $ 15,000
To invest in the Fund for your UGMA/UTMA account $ 15,000
To invest in the Fund for your SIMPLE, SEP-IRA,
Profit Sharing or Money Purchase Pension Plan,
or 401(a) account $ 15,000
* Your shares may be automatically redeemed, if, as a result of selling or
exchanging shares, you no longer meet the Fund's minimum balance requirements.
Before taking such action, the Fund will provide you with written notice and at
least 30 days to buy more shares to bring your investment up to $20,000.
After your account is established you may use the methods described below to
buy, sell or exchange shares. You can only sell funds that are held in your
E*TRADE Securities account; that means you cannot "short" shares of the Fund.
Whether you are investing in the Fund for the first time or adding to an
existing investment, you can only buy Fund shares on-line. Because the Fund's
NAV changes daily, your purchase price will be the next NAV determined after the
Fund receives and accepts your purchase order.
You can access the money you have invested in the Fund at any time by selling
some or all of your shares back to the Fund. As soon as E*TRADE Securities
receives the shares or the proceeds from the Fund, the transaction will appear
in your account. This usually occurs the business day following the transaction,
but in any event, no later than three days thereafter.
On-line. You can access E*TRADE Securities' secure trading pages at
www.etrade.com via the internet, WebTV, Prodigy, AT&T Worldnet, Microsoft
Investor, by GO ETRADE on CompuServe, with the keyword ETRADE on America Online
and via personal digital assistant. By clicking on one of several mutual fund
order buttons, you can quickly and easily place a buy, sell or exchange order
for shares in the Fund. You will be prompted to enter your trading password
whenever you perform a transaction so that we can be sure each buy or sell is
secure. It is for your own protection to make sure you or your co-account
holder(s) are the only people who can place orders in your E*TRADE account. When
you buy shares, you will be asked to: 1) affirm your consent to receive all Fund
documentation electronically, 2) provide an e-mail address and 3) affirm that
you have read the prospectus. The prospectus will be readily available for
viewing and printing on our Website.
Our built-in verification system lets you double-check orders before they are
sent to the markets, and you can change or cancel any unfilled order subject to
prior execution.
If you are already a shareholder, you may call 1-800-STOCKS5 (1-800-786-2575) to
sell or exchange shares by phone through an E*TRADE Securities broker for an
additional $15 fee.
The Fund reserves the right to refuse a telephone redemption request or exchange
request if it believes it advisable to do so.
Investors will bear the risk of loss from fraudulent or unauthorized
instructions received over the telephone provided that the Fund reasonably
believes that such instructions are genuine. The Fund and its transfer agent
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. The Fund may incur liability if it does not follow these
procedures.
Due to increased telephone volume during periods of dramatic economic or market
changes, you may experience difficulty in implementing a broker-assisted
telephone redemption. In these situations, investors may want to consider
trading online by accessing our Website or use TELE*MASTER, E*TRADE Securities'
automated telephone system, to effect such a transaction by calling
1-800-STOCKS1 (1-800-786-2571).
Signature Guarantee. For your protection, certain requests may require a
signature guarantee.
A signature guarantee is designed to protect you and the Fund against fraudulent
transactions by unauthorized persons. In the following instances, the Fund will
require a signature guarantee for all authorized owners of an account:
1. If you transfer the ownership of your account to another individual or
organization.
2. When you submit a written redemption for more than $25,000.
3. When you request that redemption proceeds be sent to a different name or
address than is registered on your account.
4. If you add or change your name or add or remove an owner on your account.
5. If you add or change the beneficiary on your transfer-on-death account.
For other registrations, access E*STATION through our Website or call
1-800-786-2575 for instructions.
You will have to wait to redeem your shares until the funds you use to buy them
have cleared (e.g., your check has cleared).
The right of redemption may be suspended during any period in which (i) trading
on the NYSE is restricted, as determined by the SEC, or the NYSE is closed for
other than weekends and holidays; (ii) the SEC has permitted such suspension by
order; or (iii) an emergency as determined by the SEC exists, making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable.
Exchange. You may exchange your shares of the Fund for shares of another E*TRADE
fund. An exchange is two transactions: a sale (or redemption) of shares of one
fund and the purchase of shares of a different fund with the redemption
proceeds. After we receive your exchange request, the Fund's transfer agent will
simultaneously process exchange redemptions and exchange purchases at the share
prices next determined, as further explained under "Pricing of Fund Shares."
Shares still subject to a redemption fee of another E*TRADE fund will be
assessed that fee if exchanged.
You must meet the minimum investment requirements for the E*TRADE fund into
which you are exchanging or purchasing shares. The Fund reserves the right to
revise or terminate the exchange privilege, limit the amount of an exchange, or
reject an exchange at any time, without notice.
Closing your account. If you close your E*TRADE Securities account, you will be
required to redeem your shares in your Fund account.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund intends to pay dividends from net investment income monthly. The Fund
does not expect to distribute any capital gains. The Fund may make additional
distributions if necessary.
Unless you choose otherwise, all your dividends will be automatically reinvested
in additional Fund shares. Shares are purchased at the net asset value
determined on the payment date.
TAX CONSEQUENCES
The following information is meant as a general summary for U.S. taxpayers.
Please see the Fund's Statement of Additional Information for more information.
You should rely on your own tax advisor for advice about the particular federal,
state and local tax consequences to you of investing in the Fund.
The Fund generally will not have to pay income tax on amounts it distributes to
shareholders, although shareholders will be taxed on distributions they receive.
The Fund will distribute substantially all of its income to its shareholders
every year. If the Fund declares a dividend in October, November or December but
pays it in January, you may be taxed on the dividend as if you received it in
the previous year.
You will generally be taxed on dividends you receive from the Fund, regardless
of whether they are paid to you in cash or are reinvested in additional Fund
shares.
If you invest through a tax-deferred retirement account, such as an IRA, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to complex tax rules, and you should
consult your tax advisor about investment through a tax-deferred account.
The Fund will send you a tax report each year that will tell you which dividends
must be treated as ordinary income.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to you if you
fail to provide the Fund with your correct taxpayer identification number or to
make required certifications, or if you have been notified by the IRS that you
are subject to backup withholding. Backup withholding is not an additional tax,
but is a method in which the IRS ensures that it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
<PAGE>
[Outside back cover page.]
The Statement of Additional Information for the Fund, dated February __, 2000
("SAI"), contains further information about the Fund. The SAI is incorporated
into this Prospectus by reference (that means it is legally considered part of
this Prospectus). Additional information about the Fund's investments will be
available in the Fund's annual and semi-annual reports to shareholders. In the
Fund's annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its fiscal year.
Additional information including the SAI and the most recent annual and
semi-annual reports (when available) may be obtained without charge, at our
Website (www.etrade.com). Shareholders will be notified when a prospectus,
prospectus update, amendment, annual or semi-annual report is available.
Shareholders may also call the toll-free number listed below for additional
information or with any inquiries.
Further information about the Fund (including the SAI) can also be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. You may call
1-800-942-0330 for information about the operations of the public reference
room. Reports and other information about the Fund are also available on the
SEC's Internet site at http://www.sec.gov or copies can be obtained, upon
payment of a duplicating fee, by electronic request at the following e-mail
address: [email protected] or by writing the Public Reference Section of the
SEC, Washington, D.C. 20549-0102.
E*TRADE Securities, Inc.
4500 Bohannon Drive
Menlo Park, CA 94025
Telephone: (650) 331-6000
Toll-Free: (800) 786-2575
http://www.etrade.com
Investment Company Act File No.: 811-09093
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
E*TRADE Funds
E*TRADE PREMIER MONEY MARKET FUND
February __, 2000
This Statement of Additional Information ("SAI") is not a prospectus. This SAI
should be read together with the for the E*TRADE Premier Money Market Fund (the
"Fund"), a separate series of E*TRADE Funds, dated February __, 2000 (as amended
from time to time).
To obtain a copy of the Fund's Prospectus and the Fund's most recent
shareholders report (when issued) free of charge, please access our Website
online (www.etrade.com) or call our toll-free number at (800) 786-2575. Only
customers of E*TRADE Securities, Inc. who consent to receive all information
about the Fund electronically may invest in the Fund.
<PAGE>
TABLE OF CONTENTS
Page
FUND HISTORY.................................................................3
THE FUND.....................................................................3
INVESTMENT STRATEGIES AND RISKS..............................................3
FUND POLICIES...............................................................10
TRUSTEES AND OFFICERS.......................................................14
INVESTMENT MANAGEMENT.......................................................17
SERVICE PROVIDERS...........................................................19
PORTFOLIO TRANSACTIONS AND BROKERAGE SELECTION..............................21
ORGANIZATION, DIVIDEND AND VOTING RIGHTS....................................22
SHAREHOLDER INFORMATION.....................................................23
TAXATION....................................................................24
UNDERWRITER.................................................................28
MASTER PORTFOLIO ORGANIZATION...............................................29
PERFORMANCE INFORMATION.....................................................29
APPENDIX....................................................................35
<PAGE>
FUND HISTORY
The E*TRADE Premier Money Market Fund (the "Fund") is a diversified series of
E*TRADE Funds (the "Trust"). The Trust is organized as a Delaware business trust
and was formed on November 4, 1998.
THE FUND
The Fund is classified as an open-end, management investment company. The Fund
seeks to provide investors with a high level of income, while preserving capital
and liquidity. The Fund seeks to achieve its objective by investing in a master
portfolio that, in turn, invests in high quality, short-term investments. This
investment objective is fundamental and therefore, cannot be changed without
approval of a majority (as defined in the Investment Company Act of 1940, as
amended, and the Rules thereunder ("1940 Act")) of the Fund's outstanding voting
interests.
The Fund seeks to achieve its investment objective by investing substantially
all of its assets in the Money Market Master Portfolio (the "Master Portfolio"),
a series of Master Investment Portfolio ("MIP"), an open-end, management
investment company. However, this policy is not a fundamental policy of the Fund
and a shareholder vote is not required for the Fund to withdraw its investment
from the Master Portfolio.
INVESTMENT STRATEGIES AND RISKS
The following supplements the discussion in the Prospectus of the Master
Portfolio's investment strategies, policies and risks. These investment
strategies and policies may be changed without shareholder approval of either
the Fund or the Master Portfolio unless otherwise noted.
Asset Backed Securities. The Master Portfolio may purchase asset-backed
securities, which are securities backed by installment contracts, credit-card
receivables or other assets. Asset-backed securities represent interests in
"pools" of assets in which payments of both interest and principal on the
securities are made monthly, thus in effect "passing through" monthly payments
made by the individual borrowers on the assets that underlie the securities, net
of any fees paid to the issuer or guarantor of the securities. The average life
of asset-backed securities varies with the maturities of the underlying
instruments and is likely to be substantially less than the original maturity of
the assets underlying the securities as a result of prepayments. For this and
other reasons, an asset-backed security's stated maturity may be shortened, and
the security's total return may be difficult to predict precisely. The Master
Portfolio may invest in such securities up to the limits prescribed by Rule 2a-7
and other provisions of the 1940 Act.
Bank Obligations. The Master Portfolio may invest in bank obligations which
include, but are not limited to, negotiable certificates of deposit ("CDs"),
bankers' acceptances and fixed time deposits. The Master Portfolio also may
invest in high-quality short-term obligations of foreign branches of U.S. banks
or U.S. branches of foreign banks that are denominated in and pay interest in
U.S. dollars.
Fixed time deposits are obligations of U.S. banks, foreign branches of U.S.
banks of foreign banks which are payable at a stated maturity date and bear a
fixed rate of interest. Generally fixed time deposits may be withdrawn on demand
by the investor, but they may be subject to early withdrawal penalties which
vary depending upon market conditions and the remaining maturity of the
obligation. Although fixed time deposits do not have an established market,
there are no contractual restrictions on the Master Portfolio's right to
transfer a beneficial interest in the deposit to a third party. It is the policy
of the Master Portfolio not to invest in fixed time deposits subject to
withdrawal penalties, other than overnight deposits, or in repurchase agreements
with more than seven days to maturity or other illiquid securities, if more than
10% of the value of its net assets would be so invested.
Obligations of foreign banks and foreign branches of U.S. banks involve somewhat
different investment risks from those affecting domestic obligations, including
the possibilities that liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of U.S. banks, that a foreign jurisdiction might impose
withholding taxes on interest income payable on those obligations, that foreign
deposits may be seized or nationalized, that foreign governmental restrictions
(such as foreign exchange controls) may be adopted which might adversely affect
the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to U.S. banks. In
that connection, foreign banks are not subject to examination by any U.S.
Government agency or instrumentality.
Commercial Paper and Short-Term Corporate Debt Instruments. The Master Portfolio
may invest in commercial paper (including variable amount master demand notes),
which consists of short-term, unsecured promissory notes issued by corporations
to finance short-term credit needs. Commercial paper is usually sold on a
discount basis and has a maturity at the time of issuance not exceeding nine
months. Variable amount master demand notes are demand obligations that permit
the investment of fluctuating amounts at varying market rates of interest
pursuant to arrangements between the issuer and a commercial bank acting as
agent for the payee of such notes whereby both parties have the right to vary
the amount of the outstanding indebtedness on the notes. BGFA monitors on an
ongoing basis the ability of an issuer of a demand instrument to pay principal
and interest on demand.
The Master Portfolio also may invest in non-convertible corporate debt
securities (e.g., bonds and debentures) with not more than one year remaining to
maturity at the date of settlement. The Master Portfolio will invest only in
such corporate bonds and debentures that are rated at the time of purchase at
least "Aa" by Moody's or "AA" by S&P. Subsequent to its purchase by the Master
Portfolio, an issue of securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Master Portfolio.
BGFA will consider such an event in determining whether the Master Portfolio
should continue to hold the obligation. To the extent the Master Portfolio
continues to hold such obligations, it may be subject to additional risk of
default.
Floating- and variable- rate obligations. The Master Portfolio may purchase
floating- and variable-rate obligations as described in the Prospectus. The
Master Portfolio may purchase floating- and variable-rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of
thirteen months, but which permit the holder to demand payment of principal at
any time, or at specified intervals not exceeding thirteen months. Variable rate
demand notes include master demand notes that are obligations that permit the
Master Portfolio to invest fluctuating amounts, which may change daily without
penalty, pursuant to direct arrangements between the Master Portfolio, as
lender, and the borrower. The interest rates on these notes fluctuate from time
to time. The issuer of such obligations ordinarily has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of days'
notice to the holders of such obligations. The interest rate on a floating-rate
demand obligation is based on a known lending rate, such as a bank's prime rate,
and is adjusted automatically each time such rate is adjusted. The interest rate
on a variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Master
Portfolio's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. Such obligations frequently are not rated by
credit rating agencies and the Master Portfolio may invest in obligations which
are not so rated only if BGFA determines that at the time of investment the
obligations are of comparable quality to the other obligations in which the
Master Portfolio may invest. BGFA, on behalf of the Master Portfolio, considers
on an ongoing basis the creditworthiness of the issuers of the floating- and
variable-rate demand obligations in the Master Portfolio's portfolio. The Master
Portfolio will not invest more than 10% of the value of its total net assets in
floating- or variable-rate demand obligations whose demand feature is not
exercisable within seven days. Such obligations may be treated as liquid,
provided that an active secondary market exists.
Foreign Obligations. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to uniform accounting, auditing and financial reporting standards or
governmental supervision comparable to those applicable to domestic issuers. In
addition, with respect to certain foreign countries, taxes may be withheld at
the source under foreign income tax laws, and there is a possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries.
Forward Commitments, When-Issued Purchases and Delayed-Delivery Transactions.
The Master Portfolio may purchase securities on a when-issued or forward
commitment (sometimes called a delay-delivery) basis, which means that the price
is fixed at the time of commitment, but delivery and payment ordinarily take
place a number of days after the date of the commitment to purchase. The Master
Portfolio will make commitments to purchase such securities only with the
intention of actually acquiring the securities, but the Master Portfolio may
sell these securities before the settlement date if it is deemed advisable. The
Master Portfolio will not accrue income in respect of a security purchased on a
forward commitment basis prior to its stated delivery date.
Securities purchased on a when-issued or forward commitment basis and certain
other securities held in the Master Portfolio's investment portfolio are subject
to changes in value (both generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities purchased on a
when-issued or forward commitment basis may expose the Master Portfolio to risk
because they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or forward commitment basis can involve
the additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction itself.
A segregated account of the Master Portfolio consisting of cash or U.S.
Government obligations or other high quality liquid debt securities at least
equal at all times to the amount of the when-issued or forward commitments will
be established and maintained at the Master Portfolio's custodian bank.
Purchasing securities on a forward commitment basis when the Master Portfolio is
fully or almost fully invested may result in greater potential fluctuation in
the value of the Master Portfolio's total net assets and its net asset value per
share. In addition, because the Master Portfolio will set aside cash and other
high quality liquid debt securities as described above, the liquidity of the
Master Portfolio's investment portfolio may decrease as the proportion of
securities in the Master Portfolio's portfolio purchased on a when-issued or
forward commitment basis increases.
The value of the securities underlying a when-issued purchase or a forward
commitment to purchase securities, and any subsequent fluctuations in their
value, is taken into account when determining the Master Portfolio's net asset
value starting on the day the Master Portfolio agrees to purchase the
securities. The Master Portfolio does not earn interest on the securities it has
committed to purchase until they are paid for and delivered on the settlement
date. When the Master Portfolio makes a forward commitment to sell securities it
owns, the proceeds to be received upon settlement are included in the Master
Portfolio's assets, and fluctuations in the value of the underlying securities
are not reflected in the Master Portfolio's net asset value as long as the
commitment remains in effect.
Illiquid Securities. The Master Portfolio may invest in securities not
registered under the 1933 Act and other securities subject to legal or other
restrictions on resale. Because such securities may be less liquid than other
investments, they may be difficult to sell promptly at an acceptable price.
Delay or difficulty in selling securities may result in a loss or be costly to
the Master Portfolio.
Letters of Credit. Certain of the debt obligations, certificates of
participation, commercial paper and other short-term obligations which the
Master Portfolio is permitted to purchase may be backed by an unconditional and
irrevocable letter of credit of a bank, savings and loan association or
insurance company which assumes the obligation for payment of principal and
interest in the event of default by the issuer. Letter of credit-backed
investments must, in the opinion of BGFA, be of investment quality comparable to
other permitted investments of the Master Portfolio.
Loans of Portfolio Securities. The Master Portfolio may lend its securities to
brokers, dealers and financial institutions, provided (1) the loan is secured
continuously by collateral consisting of cash, U.S. Government securities or an
irrevocable letter of credit which is marked daily to ensure that each loan is
fully collateralized; (2) the Master Portfolio may at any time recall the loan
and obtain the return of the securities loaned within five business days; (3)
the Master Portfolio will receive any interest or dividends paid on the
securities loaned; and (4) the aggregate market value of securities loaned will
not at any time exceed on-third of the total assets of the Master Portfolio. The
Master Portfolio may earn income in connection with securities loans either
through the reinvestment of the cash collateral or the payment of fees by the
borrower. The Master Portfolio does not currently intend to lend its portfolio
securities.
Municipal Obligations. The Master Portfolio may invest in municipal obligations.
Municipal bonds generally have a maturity at the time of issuance of up to 40
years. Medium-term municipal notes are generally issued in anticipation of the
receipt of tax Master Portfolios, of the proceeds of bond placements, or of
other revenues. The ability of an issuer to make payments on notes is therefore
especially dependent on such tax receipts, proceeds from bond sales or other
revenues, as the case may be. Municipal commercial paper is a debt obligation
with a state maturity of 270 days or less that is issued to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
debt.
The Master Portfolio will invest in `high-quality' (as that term is defined in
Rule 2a-7 of the 1940 Act) long-term municipal bonds, municipal notes and
short-term commercial paper, with remaining maturities not exceeding 13 months.
Other Investment Companies. The Master Portfolio may invest in shares of other
open-end investment companies that invest exclusively in high-quality short-term
securities subject. The Master Portfolio may also purchase shares of exchange
listed closed-end Master Portfolios.
Participation Interests. The Fund may invest in participation interests in any
type of security in which the Fund may invest. A participation interest gives
the Fund an undivided interest in the underlying securities in the proportion
that the Fund's participation interest bears to the total principal amount of
the underlying securities.
Pass-Through Obligations. Certain of the debt obligations in which the Master
Portfolio may invest may be pass-through obligations that represent an ownership
interest in a pool of mortgages and the resultant cash flow from those
mortgages. Payments by homeowners on the loans in the pool flow through to
certificate holders in amounts sufficient to repay principal and to pay interest
at the pass-through rate. The stated maturities of pass-through obligations may
be shortened by unscheduled prepayments of principal on the underlying
mortgages. Therefore, it is not possible to predict accurately the average
maturity of a particular pass-through obligation. Variations in the maturities
of pass-through obligations will affect the yield of any Master Portfolio
investing in such obligations. Furthermore, as with any debt obligation,
fluctuations in interest rates will inversely affect the market value of
pass-through obligations.
Repurchase Agreements. The Master Portfolio may engage in a repurchase agreement
with respect to any security in which it is authorized to invest, although the
underlying security may mature in more than thirteen months. The Master
Portfolio may enter into repurchase agreements wherein the seller of a security
to the Master Portfolio agrees to repurchase that security from the Master
Portfolio at a mutually agreed-upon time and price that involves the acquisition
by the Master Portfolio of an underlying debt instrument, subject to the
seller's obligation to repurchase, and the Master Portfolio's obligation to
resell, the instrument at a fixed price usually not more than one week after its
purchase. Securities acquired as collateral by the Master Portfolio under a
repurchase agreement will be held in a segregated account at a bank. The Master
Portfolio may enter into repurchase agreements only with respect to securities
of the type in which it may invest, including government securities and
mortgage-related securities, regardless of their remaining maturities, and
requires that additional securities be deposited with the custodian if the value
of the securities purchased should decrease below resale price. BGFA monitors on
an ongoing basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. Certain costs may be incurred by the Master
Portfolio in connection with the sale of the underlying securities if the seller
does not repurchase them in accordance with the repurchase agreement. In
addition, if bankruptcy proceedings are commenced with respect to the seller of
the securities, disposition of the securities by the Master Portfolio may be
delayed or limited. While it does not presently appear possible to eliminate all
risks from these transactions (particularly the possibility of a decline in the
market value of the underlying securities, as well as delay and costs to the
Master Portfolio in connection with insolvency proceedings), it is the policy of
the Master Portfolio to limit repurchase agreements to selected creditworthy
securities dealers or domestic banks or other recognized financial institutions.
The Master Portfolio considers on an ongoing basis the creditworthiness of the
institutions with which it enters into repurchase agreements. Repurchase
agreements are considered to be loans by the Master Portfolio under the 1940
Act.
Rule 144A. It is possible that unregistered securities, purchased by the Master
Portfolio in reliance upon Rule 144A under the Securities Act of 1933, could
have the effect of increasing the level of the Master Portfolio's illiquidity to
the extent that qualified institutional buyers become, for a period,
uninterested in purchasing these securities.
Unrated Investments. The Master Portfolio may purchase instruments that are not
rated if, in the opinion of BGFA, such obligations are of investment quality
comparable to their rated investments that are permitted for purchase by the
Master Portfolio, if they are purchased in accordance with the Master
Portfolio's procedures adopted by the Trust's Board of Trustees in accordance
with Rule 2a-7 under the 1940 Act. Such procedures require approval or
ratification by the Trustees of the purchase of unrated securities. After
purchase by the Master Portfolio, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Master Portfolio.
Neither event will require an immediate sale of such security by the Master
Portfolio provided that, when a security ceases to be rated, the Trust's Board
of Trustees determines that such security presents minimal credit risks and,
provided further that, when a security rating is downgraded below the eligible
quality for investment or no longer presents minimal credit risks, the Board
finds that the sale of such security would not be in the Master Portfolio"
interestholder's best interests.
To the extent the ratings given by a nationally recognized statistical ratings
organization ("NRSRO") may change as a result of changes in such organizations
or their rating systems, the Master Portfolio will attempt to use comparable
ratings as standards for investments in accordance with the investment policies
contained in the Prospectus and in this SAI. The ratings of NRSROs are more
fully described in the SAI Appendix.
U.S. Government Obligations. The Master Portfolio may invest in various types of
U.S. Government obligations. U.S. Government obligations include securities
issued or guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities. Payment of principal and interest on U.S.
Government obligations (i) may be backed by the full faith and credit of the
United States (as with U.S. Treasury obligations and GNMA certificates) or (ii)
may be backed solely by the issuing or guaranteeing agency or instrumentality
itself (as with FNMA notes). In the latter case, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government would
provide financial support to its agencies or instrumentalities where it is not
obligated to do so. As a general matter, the value of debt instruments,
including U.S. Government obligations, declines when market interest rates
increase and rises when market interest rates decrease. Certain types of U.S.
Government obligations are subject to fluctuations in yield or value due to
their structure or contract terms.
FUND POLICIES
Fundamental Investment Restrictions
The following are the Fund's fundamental investment restrictions which, along
with the Fund's investment objective, cannot be changed without shareholder
approval by a vote of a majority of the outstanding shares of the Fund, as set
forth in the 1940 Act.
Unless noted otherwise, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a change
in the Fund's assets (i.e., due to cash inflows or redemptions) or in market
value of the investment or the Fund's assets will not constitute a violation of
that restriction.
Unless indicated otherwise below, the Fund may not:
1. Purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of the Fund's investments in that industry would be 25% or
more of the current value of the Fund's total assets, provided that there is no
limitation with respect to investments in (i) obligations of the U.S.
Government, its agencies or instrumentalities; and (ii) obligations of banks, to
the extent that the Securities and Exchange Commission ("SEC"), by rule or
interpretation, permits funds to reserve freedom to concentrate in such
obligations;
2. Purchase or sell real estate or real estate limited partnerships (other than
securities secured by real estate or interests therein or securities issued by
companies that invest in real estate or interest therein);
3. Purchase commodities or commodity contracts (including futures contracts),
except that the Fund may purchase securities of an issuer which invests or deals
in commodities or commodity contracts;
4. Purchase interests, leases, or limited partnership interests in oil, gas, or
other mineral exploration or development programs;
5. Purchase securities on margin (except for short-term credits necessary for
the clearance of transactions and except for margin payments in connection with
options, futures and options on futures) or make short sales of securities;
6. Underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Fund's investment program may be deemed to be an
underwriting;
7. Make investments for the purpose of exercising control or management;
8. Borrow money or issue senior securities as defined in the 1940 Act, except
that the Fund may borrow from banks up to 10% of the current value of its net
assets for temporary purposes only in order to meet redemptions, and these
borrowings may be secured by the pledge of up to 10% of the current value of its
net assets (but investments may not be purchased while any such outstanding
borrowing in excess of 5% of its net assets exists);
9. Write, purchase or sell puts, calls, straddles, spreads, warrants, options or
any combination thereof, except that the Fund may purchase securities with put
rights in order to maintain liquidity;
10. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities) if, as a result, with
respect to 75% of its total assets, more than 5% of the value of the Fund's
total assets would be invested in the securities of any one issuer or, with
respect to 100% of its total assets the Fund's ownership would be more than 10%
of the outstanding voting securities of such issuer; and
11. Make loans, except that the Fund may purchase or hold debt instruments or
lend its portfolio securities in accordance with its investment policies, and
may enter into repurchase agreements.
Non-Fundamental Operating Restrictions
The following are the Fund's non-fundamental operating restrictions, which may
be changed by the Fund's Board of Trustees without shareholder approval.
1. The Fund may invest in shares of other open-end management investment
companies, subject to the limitations of Section 12(d)(1) of the 1940 Act. Under
the 1940 Act, the Fund's investment in such securities currently is limited,
subject to certain exceptions, to (i) 3% of the total voting stock of any one
investment company, (ii) 5% of the Fund's net assets with respect to any one
investment company, and (iii) 10% of the Fund's net assets in the aggregate.
Other investment companies in which the Fund invests can be expected to charges
fees for operating expenses, such as investment advisory and administration
fees, that would be in addition to those charged by the Fund;
2. The Fund may not invest more than 10% of its net assets in illiquid
securities. For this purpose, illiquid securities include, among others, (i)
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale, (ii) fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, and (iii) repurchase agreements not terminable within seven days;
and
3. The Fund may lend securities from its portfolio to brokers, dealers and
financial institutions, in amounts not to exceed (in the aggregate) one-third of
the Fund's total assets. Any such loans of portfolio securities will be fully
collateralized based on values that are marked to market daily. The Fund will
not enter into any portfolio security lending arrangement having a duration of
longer than one year.
MASTER PORTFOLIO
Fundamental Investment Restrictions
The Master Portfolio is subject to the following fundamental investment
restrictions which cannot be changed without approval by the holders of a
majority (as defined in the 1940 Act) of the Master Portfolio's outstanding
voting securities. If a percentage restriction is adhered to at the time of
investment, a later change in percentage resulting from a change in values or
assets will not constitute a violation of such restriction.
The Master Portfolio may not:
1. Purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of the Master Portfolio's investments in that industry would
be 25% or more of the current value of the Master Portfolio's total assets,
provided that there is no limitation with respect to investments in (i)
obligations of the U.S. Government, its agencies or instrumentalities; and (ii)
obligations of banks, to the extent that the SEC, by rule or interpretation,
permits funds to reserve freedom to concentrate in such obligations;
2. Purchase or sell real estate or real estate limited partnerships (other than
securities secured by real estate or interests therein or securities issued by
companies that invest in real estate or interest therein);
3. Purchase commodities or commodity contracts (including futures contracts),
except that the Master Portfolio may purchase securities of an issuer which
invests or deals in commodities or commodity contracts;
4. Purchase interests, leases, or limited partnership interests in oil, gas, or
other mineral exploration or development programs;
5. Purchase securities on margin (except for short-term credits necessary for
the clearance of transactions and except for margin payments in connection with
options, futures and options on futures) or make short sales of securities;
6. Underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Master Portfolio's investment program may be deemed to be an
underwriting;
7. Make investments for the purpose of exercising control or management;
8. Borrow money or issue senior securities as defined in the 1940 Act, except
that the Master Portfolio may borrow from banks up to 10% of the current value
of its net assets for temporary purposes only in order to meet redemption's, and
these borrowings may be secured by the pledge of up to 10% of the current value
of its net assets (but investments may not be purchased while any such
outstanding borrowing in excess of 5% of its net assets exists);
9. Write, purchase or sell puts, calls, straddles, spreads, warrants, options or
any combination thereof, except that the Master Portfolio may purchase
securities with put rights in order to maintain liquidity;
10. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities) if, as a result, with
respect to 75% of its total assets, more than 5% of the value of the Master
Portfolio's total assets would be invested in the securities of any one issuer
or, with respect to 100% of its total assets the Master Portfolio's ownership
would be more than 10% of the outstanding voting securities of such issuer; and
11. Make loans, except that the Master Portfolio may purchase or hold debt
instruments or lend its portfolio securities in accordance with its investment
policies, and may enter into repurchase agreements.
Non-Fundamental Operating Policies
The Master Portfolio is subject to the following non-fundamental operating
policies which may be changed by the Board of Trustees of the Master Portfolio
without the approval of the holders of the Master Portfolio's outstanding
securities.
1. The Master Portfolio may invest in shares of other open-end management
investment companies, subject to the limitations of Section 12(d)(1) of the 1940
Act. Under the 1940 Act, the Master Portfolio's investment in such securities
currently is limited, subject to certain exceptions, to (i) 3% of the total
voting stock of any one investment company, (ii) 5% of the Master Portfolio's
net assets with respect to any one investment company, and (iii) 10% of the
Master Portfolio's net assets in the aggregate. Other investment companies in
which the Master Portfolio invests can be expected to charges fees for operating
expenses, such as investment advisory and administration fees, that would be in
addition to those charged by the Master Portfolio;
2. The Master Portfolio may not invest more than 10% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (i) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (ii) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (iii) repurchase agreements not terminable within
seven days; and
3. The Master Portfolio may lend securities from its portfolio to brokers,
dealers and financial institutions, in amounts not to exceed (in the aggregate)
one-third of the Master Portfolio's total assets. Any such loans of portfolio
securities will be fully collateralized based on values that are marked to
market daily. The Master Portfolio will not enter into any portfolio security
lending arrangement having a duration of longer than one year.
TRUSTEES AND OFFICERS
The Board has the responsibility for the overall management of the Fund,
including general supervision and review of its investment activities and the
conformity with Delaware Law and the stated policies of the Fund. The Board
elects the officers of the Trust who are responsible for administering the
Fund's day-to-day operations. Trustees and officers of the Fund, together with
information as to their principal business occupations during the last five
years, and other information are shown below. Each "interested or affiliated
person," as defined in the 1940 Act, is indicated by an asterisk (*):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Name, Address, and Age Position(s) Held with Principal Occupation(s) During
the Fund the Past 5 Years
- ------------------------------------------------------------------------------------
<S> <C> <C>
*Leonard C. Purkis (51) Trustee Mr. Purkis is chief financial
4500 Bohannon Drive, officer and executive vice
Menlo Park, CA 94025 president of finance and
administration of E*TRADE
Group, Inc. He previously
served as chief financial
officer for Iomega
Corporation (Hardware
Manufacturer) from 1995 to
1998. Prior to joining
Iomega, he served in numerous
senior level domestic and
international finance
positions for General
Electric Co. and its
subsidiaries, culminating his
career there as senior vice
president, finance, for GE
Capital Fleet Services
(Financial Services).
*Shelly J. Meyers (40) Trustee Ms. Meyers is the Manager,
(1) Chief Executive Officer,
Chief Financial Officer and
founder of Meyers Capital
Management, a registered
investment adviser formed in
January 1996. She has also
managed the Meyers Pride
Value Fund since June 1996.
Prior to that, she was
employed by The Boston
Company Asset Management,
Inc. as Assistant Vice
President of its
Institutional Asset
Management group.
Ashley T. Rabun (47) Trustee Ms. Rabun is the Founder and
Chief Executive Officer of
InvestorReach (which is a
consulting firm specializing
in marketing and distribution
strategies for financial
services companies formed in
October 1996). From 1992 to
1996, she was a partner and
President of Nicholas
Applegate Mutual Funds, a
division of Nicholas
Applegate Capital Management.
Steven Grenadier (34) Trustee Mr. Grenadier is an Associate
Professor of Finance at the
Graduate School of Business
at Stanford University, where
he has been employed as a
professor since 1992.
George J. Rebhan (65) Trustee Mr. Rebhan has been a Trustee
for the Trust For Investment
Managers (investment company)
since August 30, 1999. Mr.
Rebhan retired in December
1993, and prior to that he
was President of Hotchkis and
Wiley Funds (investment
company) from 1985 to 1993.
*Brian C. Murray (42) President Mr. Murray is President of
4500 Bohannon Drive, E*TRADE Asset Management,
Menlo Park, CA 94025 Inc. He joined E*TRADE
Securities, Inc. in January
1998. Prior to that Mr.
Murray was Principal of
Alameda Consulting (Financial
Services Consulting) and
prior to that he was
Director, Mutual Fund
Marketplace of Charles Schwab
Corporation (Financial
Services).
*W. David Moore (39) Vice President and Mr. Moore is Vice President
4500 Bohannon Drive Secretary of Operations, E*TRADE Asset
Menlo Park, CA 94025 Management, Inc. He joined
E*TRADE Securities, Inc. in
February 1999. Prior to that
Mr. Moore was a Sales
Consultant of BARRA Inc.
(investment analytics)
beginning in 1998. From 1995
to 1997, he was Client
Services Manager of Templeton
Europe (investment
management).
___________________
<FN>
(1) Ms. Meyers may be considered an "interested person," although that
status is neither admitted nor denied.
</FN>
</TABLE>
The Trust pays each non-affiliated Trustee a quarterly fee of $1,500 per Board
meeting for the Fund. In addition, the Trust reimburses each of the
non-affiliated Trustees for travel and other expenses incurred in connection
with attendance at such meetings. Other officers and Trustees of the Trust
receive no compensation or expense reimbursement. The following table provides
an estimate of each Trustee's compensation from the Fund for the current fiscal
year ending December 31, 2000 and the total compensation received from the Trust
for the fiscal year ended December 31, 1999:
Estimated Compensation Table
- ------------------------------------------------------------------------------
Total Compensation
Name of Person, Position Aggregate From Fund and Fund
Compensation from Complex Paid to
the Fund (1) Trustees (2)
- ------------------------------------------------------------------------------
Leonard C. Purkis, Trustee None None
Shelly J. Meyers (3) $6,000 $22,500
Ashley T. Rabun $6,000 $22,500
Steven Grenadier $6,000 $22,500
George J. Rebhan $6,000 None
No Trustee will receive any benefits upon retirement. Thus, no pension or
retirement benefits have accrued as part of the Fund's expenses.
- ------------
(1) This amount represents the estimated aggregate amount of compensation paid
to each non-affiliated Trustee from the Fund for service on the Board of
Trustees for the fiscal year ending December 31, 2000.
(2) The Fund Complex consists of eight series of the Trust, six of which began
operations in 1999.
(3) Ms. Meyers may be considered an "interested person," although that status
is neither admitted nor denied. However, she is not an affiliate, employee
or officer of E*TRADE and is compensated by the Trust for serving as
Trustee.
Control Persons and Principal Holders of Securities
A shareholder that owns 25% or more of the Fund's voting securities is in
control of the Fund on matters submitted to a vote of shareholders. To satisfy
regulatory requirements, as of February ___, 2000, E*TRADE Asset Management,
Inc. owned 100% of the Fund's outstanding shares. There are no other
shareholders holding 25% or more. E*TRADE Asset Management, Inc., the Fund's
investment advisor, is a Delaware corporation and is wholly owned by E*TRADE
Group, Inc. Its address is 4500 Bohannon Drive, Menlo Park, CA 94025.
INVESTMENT MANAGEMENT
Investment Advisor. Under an investment advisory agreement ("Investment Advisory
Agreement") with the Fund, E*TRADE Asset Management, Inc. ("Investment Advisor"
or "E*TRADE Asset Management"), a registered investment advisor, provides
investment advisory services to the Fund. The Investment Advisor is a wholly
owned subsidiary of E*TRADE Group, Inc. and is located at 4500 Bohannon Drive,
Menlo Park, CA 94025. The Investment Advisor commenced operating in February
1999 and, therefore, has limited experience as an investment advisor. As of
December 31, 1999, the Investment Advisor provided investment advisory services
for over $166 million in assets.
Subject to the general supervision of the Trust's Board of Trustees and in
accordance with the investment objective, policies and restrictions of the Fund,
the Investment Advisor provides the Fund with ongoing investment management
guidance, policy direction and monitoring of the Master Portfolio. The
Investment Advisor may in the future manage cash and money market instruments
for cash flow purposes. For its advisory services, the Fund pays the Investment
Advisor an investment advisory fee at an annual rate equal to 0.02% of the
Fund's average daily net assets invested in the Master Portfolio, but 0.12% of
the Fund's average daily net assets if the Fund's assets are not invested in the
Master Portfolio.
The Master Portfolio's Investment Advisor. The Master Portfolio's investment
advisor is Barclays Global Fund Advisors ("BGFA"). BGFA is a direct subsidiary
of Barclays Global Investors, N.A. (which, in turn, is an indirect subsidiary of
Barclays Bank PLC) and is located at 45 Fremont Street, San Francisco,
California 94105. BFGA has provided asset management, administration and
advisory services for over 25 years. As of March 31, 1999, Barclays Global
Investors and its affiliates, including BGFA, provided investment advisory
services for over $650 billion of assets. Barclays Bank PLC has been involved in
banking in the United Kingdom for over 300 years. Pursuant to an Investment
Advisory Contract (the "Advisory Contract") with the Master Portfolio, BGFA
provides investment advisory services in connection with the management of the
Master Portfolio's assets. Pursuant to the Advisory Contract, BGFA furnishes to
the Master Portfolio's Board of Trustees periodic reports on the investment
strategy and performance of the Master Portfolio. BGFA is entitled to receive
monthly fees at the annual rate of 0.10% of the average daily net assets of the
Master Portfolio as compensation for its advisory services. From time to time,
BGFA may waive such fees in whole or in part. Any such waiver will reduce the
expenses of the Master Portfolio, and accordingly, have a favorable impact on
its performance. This advisory fee is an expense of the Master Portfolio borne
proportionately by its interestholders, including the Fund.
BGFA has agreed to provide to the Master Portfolio, among other things, money
market security and fixed-income research, analysis and statistical and economic
data and information concerning interest rate and security market trends,
portfolio composition, credit conditions and average maturities of the Master
Portfolio's investment portfolio.
The Advisory Contract is subject to annual approval (i) by the holders of a
majority of the Master Portfolio's outstanding voting securities or by the
Master Portfolio's Board of Trustees and (ii) by a majority of the Trustees of
the Master Portfolio who are not parties to the Advisory Contract or affiliated
of any such party. The Advisory Contract may be terminated on 60 days' written
notice by either party without penalty and will terminate automatically if
assigned.
Purchase and sale orders for portfolio securities of the Master Portfolio may be
combined with those of other accounts that BGFA manages or advises, and for
which it has brokerage placement authority in the interest of seeking the most
favorable result. When BGFA determines that a particular security should be
bought or sold for the Master Portfolio and other accounts managed by BGFA, it
undertakes to allocate those transactions among the participants equally. In
some cases, these procedures may adversely affect the size of the position
obtained for or disposed of by the Master Portfolio or the price paid or
received by the Master Portfolio.
SERVICE PROVIDERS
Principal Underwriter. E*TRADE Securities, Inc., 4500 Bohannon Drive, Menlo
Park, CA 94025, is the Fund's principal underwriter. The underwriter is a wholly
owned subsidiary of E*TRADE Group, Inc.
Co-Administrators and Placement Agent of the Master Portfolio. Stephens, Inc.
("Stephens"), and Barclays Global Investors, N.A. ("BGI") serve as
co-administrators on behalf of the Master Portfolio. Stephens and BGI provide
the Master Portfolio with administrative services, including: (i) general
supervision of the Master Portfolio's non-investment operations, and
coordination of the other services provided to the Master Portfolio; (ii)
compilation of information for reports to, and filings with, the SEC and state
securities commissions; and preparation of proxy statements and shareholder
reports for the Master Portfolio; and (iii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the MIP's officers and Board. Stephens also furnishes office space and
certain facilities required for conducting the business of the Master Portfolio,
and compensates the MIP's trustees, officers and employees who are affiliated
with Stephens. In addition, Stephens and BGI will be responsible for paying all
expenses incurred by the Master Portfolio, other than the fees payable to BGFA.
Stephens and BGI are not entitled to compensation for providing administration
services to the Master Portfolio. BGI has delegated certain of its duties as
co-administrator to Investors Bank & Trust Company ("IBT"). IBT, as
sub-administrator is compensated by BGI for performing certain administrative
services.
Stephens also acts as the placement agent of Master Portfolio's shares pursuant
to a Placement Agency Agreement (the "Placement Agency Agreement") with the
Master Portfolio.
IBT currently acts as the Master Portfolio's custodian. IBT is not entitled to
receive compensation for its custodial services so long as it is entitled to
receive compensation for providing sub-administrative services to the Master
Portfolio.
Administrator of the Fund. E*TRADE Asset Management, the Fund's Investment
Advisor, also serves as the Fund's administrator. As the Fund's administrator,
E*TRADE Asset Management provides administrative services directly or through
sub-contracting, including: (i) coordinating the services performed by the
investment advisor, transfer and dividend disbursing agent, custodian,
sub-administrator, shareholder servicing agent, independent auditors and legal
counsel; (ii) preparing or supervising the preparation of periodic reports to
the Fund's shareholders; (iii) generally supervising regulatory compliance
matters, including the compilation of information for documents such as reports
to, and filings with, the SEC and other federal or state governmental agencies;
and (iv) monitoring and reviewing the Fund's contracted services and
expenditures. E*TRADE Asset Management also furnishes office space and certain
facilities required for conducting the business of the Fund. Pursuant to an
agreement with the Fund, E*TRADE Asset Management receives a fee equal to 0.30%
of the average daily net assets of the Fund. This fee is waived to the extent
independent trustee expenses and any fees of their counsel, equal or exceed
0.005% of the Fund's average daily net assets. E*TRADE Asset Management is
responsible under that agreement for expenses otherwise payable by the Fund,
including registration and qualification filing, transfer agency, dividend
disbursing, custody, auditing and legal (other than litigation) fees and
expenses, to the extent that those fees and expenses (together with independent
trustees' expenses and their counsel fees, if any) would otherwise equal or
exceed 0.005% of the Fund's average daily net assets. E*TRADE Asset Management
is not responsible for any fees or expenses incurred at the master fund level.
Custodian, Fund Accounting Services Agent and Sub-administrator. Investors Bank
& Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116, serves as
custodian of the assets of the Fund and the Master Portfolio. As a result, IBT
has custody of all securities and cash of the Fund and the Master Portfolio,
delivers and receives payment for securities sold, receives and pays for
securities purchased, collects income from investments, and performs other
duties, all as directed by the officers of the Fund and the Master Portfolio.
The custodian has no responsibility for any of the investment policies or
decisions of the Fund and the Master Portfolio. IBT also acts as the Fund's
Accounting Services Agent. IBT also serves as the Fund's sub-administrator,
under an agreement among IBT, the Trust and E*TRADE Asset Management, providing
management reporting and treasury administration and financial reporting to Fund
management and the Fund's Board of Trustees and preparing income tax provisions
and tax returns. IBT is compensated for its services by E*TRADE Asset
Management.
Transfer Agent and Dividend Disbursing Agent. PFPC Inc., 400 Bellevue Parkway,
Wilmington, DE 19809, acts as transfer agent and dividend-disbursing agent for
the Fund.
Retail Shareholder Servicing Agent. Under a Retail Shareholder Servicing
Agreement with E*TRADE Securities and E*TRADE Asset Management, E*TRADE
Securities, 4500 Bohannon Drive, Menlo Park, CA 94025, acts as shareholder
servicing agent for the Fund. As shareholder servicing agent, E*TRADE Securities
provides personal services to the Fund's shareholders and maintains the Fund's
shareholder accounts. Such services include: (i) providing to an approved
shareholder mailing agent for the purpose of providing certain Fund-related
materials the names and contact information of all shareholders; (ii) delivering
current Fund prospectuses, statements of additional information, annual and
other periodic reports upon shareholder requests; (iii) delivering statements to
shareholders on a monthly basis; (iv) producing and providing confirmation
statements reflecting purchases and redemptions; (v) answering shareholder
inquiries regarding, among other things, share prices, account balances,
dividend amounts and dividend payment dates; (vi) communicating purchase,
redemption and exchange orders reflecting orders received from shareholders;
(vii) preparing and filing with the appropriate governmental agencies returns
and reports required to be reported for dividends and other distributions made,
amounts withheld on dividends and other distributions and payments under
applicable federal and state laws, rules and regulations, and, as required,
gross proceeds of sales transactions; and (viii) providing such other related
services as the Fund or a shareholder may reasonably request, to the extent
permitted by applicable law.
Independent Accountants. Deloitte & Touche LLP, Suite 1500, 1000 Wilshire Blvd.,
Los Angeles, CA 90017-2472, acts as independent accountants for the Fund.
Legal Counsel. Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, DC
20006-2401, acts as legal counsel for the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE SELECTION
The Master Portfolio has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Master Portfolio's Board of Trustees, BGFA as
advisor, is responsible for the Master Portfolio's investment portfolio
decisions and the placing of portfolio transactions. In placing orders, it is
the policy of the Master Portfolio to obtain the best results taking into
account the broker/dealer's general execution and operational facilities, the
type of transaction involved and other factors such as the broker/dealer's risk
in positioning the securities involved. While BGFA generally seeks reasonably
competitive spreads or commissions, the Master Portfolio will not necessarily be
paying the lowest spread or commission available.
Purchase and sale orders of the securities held by the Master Portfolio may be
combined with those of other accounts that BGFA manages, and for which it has
brokerage placement authority, in the interest of seeking the most favorable
overall net results. When BGFA determines that a particular security should be
bought or sold for the Master Portfolio and other accounts managed by BGFA, BGFA
undertakes to allocate those transactions among the participants equitably.
Under the 1940 Act, persons affiliated with the Master Portfolio such as
Stephens, BGFA and their affiliates are prohibited from dealing with the Master
Portfolio as a principal in the purchase and sale of securities unless an
exemptive order allowing such transactions is obtained from the SEC or an
exemption is otherwise available.
Except in the case of equity securities purchased by the Master Portfolio,
purchases and sales of securities usually will be principal transactions.
Portfolio securities normally will be purchased or sold from or to dealers
serving as market makers for the securities at a net price. The Master Portfolio
also will purchase portfolio securities in underwritten offerings and may
purchase securities directly from the issuer. Generally, money market
securities, adjustable rate mortgage securities ("ARMS"), municipal obligations,
and collateralized mortgage obligations ("CMOs") are traded on a net basis and
do not involve brokerage commissions. The cost of executing the Master
Portfolio's investment portfolio securities transactions will consist primarily
of dealer spreads and underwriting commissions.
Purchases and sales of equity securities on a securities exchange are effected
through brokers who charge a negotiated commission for their services. Orders
may be directed to any broker including, to the extent and in the manner
permitted by applicable law, Stephens or BGI. In the over-the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.
In placing orders for portfolio securities of the Master Portfolio, BGFA is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that BGFA seeks to execute each transaction at a
price and commission, if any, that provide the most favorable total cost or
proceeds reasonably attainable in the circumstances. While BGFA generally seeks
reasonably competitive spreads or commissions, the Master Portfolio will not
necessarily be paying the lowest spread or commission available. In executing
portfolio transactions and selecting brokers or dealers, BGFA seeks to obtain
the best overall terms available for the Master Portfolio. In assessing the best
overall terms available for any transaction, BGFA considers factors deemed
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. Rates are established pursuant to
negotiations with the broker based on the quality and quantity of execution
services provided by the broker in the light of generally prevailing rates. The
allocation of orders among brokers and the commission rates paid are reviewed
periodically by the Master Portfolio's Board of Trustees.
Certain of the brokers or dealers with whom the Master Portfolio may transact
business offer commission rebates to the Master Portfolio. BGFA considers such
rebates in assessing the best overall terms available for any transaction. The
overall reasonableness of brokerage commissions paid is evaluated by BGFA based
upon its knowledge of available information as to the general level of
commission paid by other institutional investors for comparable services.
ORGANIZATION, DIVIDEND AND VOTING RIGHTS
The Fund is a diversified series of E*TRADE Funds (the "Trust"), an open-end
investment company, organized as a Delaware business trust on November 4, 1998.
The Trust may issue additional series and classes.
All shareholders may vote on each matter presented to shareholders. Fractional
shares have the same rights proportionately as do full shares. Shares of the
Trust have no preemptive, conversion, or subscription rights. All shares, when
issued, will be fully paid and non-assessable by the Trust. If the Trust issues
additional series, each series of shares will be held separately by the
custodian, and in effect each series will be a separate fund.
All shares of the Trust have equal voting rights. Approval by the shareholders
of a fund is effective as to that fund whether or not sufficient votes are
received from the shareholders of the other investment portfolios to approve the
proposal as to those investment portfolios.
Generally, the Trust will not hold an annual meeting of shareholders unless
required by the 1940 Act. The Trust will hold a special meeting of its
shareholders for the purpose of voting on the question of removal of a Trustee
or Trustees if requested in writing by the holders of at least 10% of the
Trust's outstanding voting securities, and to assist in communicating with other
shareholders as required by Section 16(c) of the 1940 Act.
Each share of the Fund represents an equal proportional interest in the Fund and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to the Fund as are declared in the discretion of the Trustees.
In the event of the liquidation or dissolution of the Trust, shareholders of a
Fund are entitled to receive the assets attributable to the Fund that are
available for distribution, and a distribution of any general assets not
attributable to a particular investment portfolio that are available for
distribution in such manner and on such basis as the Trustees in their sole
discretion may determine.
The Declaration of Trust further provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust
and that the Trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a Trustee against any liability to
which the Trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of the Trustee's office.
Under Delaware law, the shareholders of the Fund are not generally subject to
liability for the debts or obligations of the Trust. Similarly, Delaware law
provides that a series of the Trust will not be liable for the debts or
obligations of any other series of the Trust. However, no similar statutory or
other authority limiting business trust shareholder liability exists in other
states or jurisdictions. As a result, to the extent that a Delaware business
trust or a shareholder is subject to the jurisdiction of courts of such other
states or jurisdictions, the courts may not apply Delaware law and may thereby
subject the Delaware business trust shareholders to liability. To guard against
this risk, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of a series of the Trust. Notice
of such disclaimer will generally be given in each agreement, obligation or
instrument entered into or executed by a series or the Trustees. The Declaration
of Trust also provides for indemnification by the relevant series for all losses
suffered by a shareholder as a result of an obligation of the series. In view of
the above, the risk of personal liability of shareholders of a Delaware business
trust is remote.
The Fund only recently commenced operations. Like any venture, there can be no
assurance that the Fund as an enterprise will be successful or will continue to
operate indefinitely.
SHAREHOLDER INFORMATION
Shares are sold through E*TRADE Securities.
Pricing of Fund Shares. The net asset value of the Fund will be determined as of
the close of trading on each day the New York Stock Exchange ("NYSE") is open
for trading. The NYSE is open for trading Monday through Friday except on
national holidays observed by the NYSE.
The Fund values its portfolio instruments at amortized cost, which means they
are valued at their acquisition cost, as adjusted for amortization of premium or
discount, rather than at current market value. Calculations are made to compare
the value of the Fund's investments at amortized cost with market values. When
determining market values for portfolio securities, the Fund uses market quotes
if they are readily available. In cases where quotes are not readily available,
the Fund may value securities based on fair values developed using methods
approved by the Fund's Board of Trustees Fair values may be determined by using
actual quotations or estimates of market value, including pricing service
estimates of market values or values obtained from yield data relating to
classes of portfolio securities.
The amortized cost method of valuation seeks to maintain a stable net asset
value per share ("NAV") of $1.00, even where there are fluctuations in interest
rates that affect the value of portfolio instruments. Accordingly, this method
of valuation can in certain circumstances lead to a dilution of a shareholder's
interest.
If a deviation of 1/2 of 1% or more were to occur between the NAV calculated
using market values and the Fund's $1.00 NAV calculated using amortized cost or
if there were any other deviation that the Board of Trustees believed would
result in a material dilution to shareholders or purchasers, the Board of
Trustees would promptly consider what action, if any, should be initiated. If
the Fund's NAV calculated using market values declined, or were expected to
decline, below the Fund's $1.00 NAV calculated using amortized cost, the Board
of Trustees might temporarily reduce or suspend dividend payments in an effort
to maintain the fund's $1.00 NAV. As a result of such reduction or suspension of
dividends or other action by the Board of Trustees, an investor would receive
less income during a given period than if such a reduction or suspension had not
taken place. Such action could result in investors receiving no dividend for the
period during which they hold their shares and receiving, upon redemption, a
price per share lower than that which they paid. On the other hand, if the
Fund's NAV (calculated using market values) were to increase, or were
anticipated to increase above the Fund's $1.00 (calculated using amortized
cost), the Board of Trustees might supplement dividends in an effort to maintain
the Fund's $1.00 NAV.
Telephone and Internet Redemption Privileges. The Fund employs reasonable
procedures to confirm that instructions communicated by telephone or the
Internet are genuine. The Fund may not be liable for losses due to unauthorized
or fraudulent instructions. Such procedures include but are not limited to
requiring a form of personal identification prior to acting on instructions
received by telephone or the Internet, providing written confirmations of such
transactions to the address of record, tape recording telephone instructions and
backing up Internet transactions.
Retirement Plans. You can find information about the retirement plans offered by
E*TRADE Securities by accessing our Website. You may fill out an IRA application
online or request our IRA application kit by mail.
TAXATION
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Fund and the purchase, ownership, and disposition of Fund shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may be relevant to shareholders in light of their
particular circumstances. This discussion is based upon present provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and judicial and administrative ruling authorities, all
of which are subject to change, which change may be retroactive. Prospective
investors should consult their own tax advisors with regard to the federal tax
consequences of the purchase, ownership, or disposition of Fund shares, as well
as the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.
Taxation of the Fund. The Fund intends to be taxed as a regulated investment
company under Subchapter M of the Code. Accordingly, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities or currencies; and (b) diversify its holdings so that, at
the end of each fiscal quarter, (i) at least 50% of the value of the Fund's
total assets is represented by cash and cash items, U.S. Government securities,
the securities of other regulated investment companies and other securities,
with such other securities limited, in respect of any one issuer, to an amount
not greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer (other
than U.S. Government securities and the securities of other regulated investment
companies).
As a regulated investment company, the Fund generally is not subject to U.S.
federal income tax on income and gains that it distributes to shareholders, if
at least 90% of the Fund's investment company taxable income (which includes,
among other items, dividends, interest and the excess of any net short-term
capital gains over net long-term capital losses) for the taxable year is
distributed. The Fund intends to distribute substantially all of such income.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax at the
Fund level. To avoid the tax, the Fund must distribute during each calendar year
an amount equal to the sum of (1) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) at
least 98% of its capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending on October 31 of
the calendar year, and (3) all ordinary income and capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, the Fund intends to make distributions in accordance with the
calendar year distribution requirement.
Distributions. Distributions of investment company taxable income (including net
short-term capital gains) are taxable to a U.S. shareholder as ordinary income,
whether paid in cash or shares. Dividends paid by the Fund to a corporate
shareholder, to the extent such dividends are attributable to dividends received
by the Fund from U.S. corporations, may, subject to limitation, be eligible for
the dividends received deduction. However, the alternative minimum tax
applicable to corporations may reduce the value of the dividends received
deduction. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses) designated by the Fund as
capital gain dividends, whether paid in cash or reinvested in Fund shares, will
generally be taxable to shareholders as long-term capital gain, regardless of
how long a shareholder has held Fund shares.
Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of newly
issued shares will receive a report as to the net asset value of the shares
received. A distribution will be treated as paid on December 31 of a calendar
year if it is declared by the Fund in October, November or December of that year
with a record date in such a month and paid by the Fund during January of the
following year. Such distributions will be taxable to shareholders in the
calendar year in which the distributions are declared, rather than the calendar
year in which the distributions are received.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by the Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of the Fund just
prior to a distribution. The price of shares purchased at this time will include
the amount of the forthcoming distribution, but the distribution will generally
be taxable to the shareholder.
Dispositions. Upon a redemption, sale or exchange of shares of the Fund, a
shareholder will realize a taxable gain or loss depending upon his or her basis
in the shares. A gain or loss will be treated as capital gain or loss if the
shares are capital assets in the shareholder's hands, and will be long-term
capital gain or loss if the shares are held for more than one year and
short-term capital gain or loss if the shares are held for not more than one
year. Any loss realized on a redemption, sale or exchange will be disallowed to
the extent the shares disposed of are replaced (including through reinvestment
of dividends) within a period of 61 days, beginning 30 days before and ending 30
days after the shares are disposed of. In such a case the basis of the shares
acquired will be adjusted to reflect the disallowed loss. If a shareholder holds
Fund shares for six months or less and during that period receives a
distribution taxable to the shareholder as long-term capital gain, any loss
realized on the sale of such shares during such six-month period would be a
long-term loss to the extent of such distribution.
Backup Withholding. The Fund generally will be required to withhold federal
income tax at a rate of 31% ("backup withholding") from dividends paid, capital
gain distributions, and redemption proceeds to shareholders if (1) the
shareholder fails to furnish the Fund with the shareholder's correct taxpayer
identification number or social security number, (2) the IRS notifies the
shareholder or the Fund that the shareholder has failed to report properly
certain interest and dividend income to the IRS and to respond to notices to
that effect, or (3) when required to do so, the shareholder fails to certify
that he or she is not subject to backup withholding. Any amounts withheld may be
credited against the shareholder's federal income tax liability.
Other Taxation. Distributions may be subject to additional state, local and
foreign taxes, depending on each shareholder's particular situation.
Market Discount. If the Fund purchases a debt security at a price lower than the
stated redemption price of such debt security, the excess of the stated
redemption price over the purchase price is "market discount". If the amount of
market discount is more than a de minimis amount, a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which the Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that principal payment first to the portion of the market discount on
the debt security that has accrued but has not previously been includable in
income. In general, the amount of market discount that must be included for each
period is equal to the lesser of (i) the amount of market discount accruing
during such period (plus any accrued market discount for prior periods not
previously taken into account) or (ii) the amount of the principal payment with
respect to such period. Generally, market discount accrues on a daily basis for
each day the debt security is held by the Fund at a constant rate over the time
remaining to the debt security's maturity or, at the election of the Fund, at a
constant yield to maturity which takes into account the semi-annual compounding
of interest. Gain realized on the disposition of a market discount obligation
must be recognized as ordinary interest income (not capital gain) to the extent
of the "accrued market discount."
Original Issue Discount. Certain debt securities acquired by the Fund may be
treated as debt securities that were originally issued at a discount. Very
generally, original issue discount is defined as the difference between the
price at which a security was issued and its stated redemption price at
maturity. Although no cash income on account of such discount is actually
received by the Fund, original issue discount that accrues on a debt security in
a given year generally is treated for federal income tax purposes as interest
and, therefore, such income would be subject to the distribution requirements
applicable to regulated investment companies. Some debt securities may be
purchased by the Fund at a discount that exceeds the original issue discount on
such debt securities, if any. This additional discount represents market
discount for federal income tax purposes (see above).
Options, Futures and Forward Contracts. Any regulated futures contracts and
certain options (namely, nonequity options and dealer equity options) in which
the Fund may invest may be "section 1256 contracts." Gains (or losses) on these
contracts generally are considered to be 60% long-term and 40% short-term
capital gains or losses. Also, section 1256 contracts held by the Fund at the
end of each taxable year (and on certain other dates prescribed in the Code) are
"marked to market" with the result that unrealized gains or losses are treated
as though they were realized.
Transactions in options, futures and forward contracts undertaken by the Fund
may result in "straddles" for federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by the Fund, and losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized. In
addition, certain carrying charges (including interest expense) associated with
positions in a straddle may be required to be capitalized rather than deducted
currently. Certain elections that the Fund may make with respect to its straddle
positions may also affect the amount, character and timing of the recognition of
gains or losses from the affected positions.
Because only a few regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to the Fund are not entirely
clear. The straddle rules may increase the amount of short-term capital gain
realized by the Fund, which is taxed as ordinary income when distributed to
shareholders. Because application of the straddle rules may affect the character
of gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders as ordinary income or long-term capital gain may be
increased or decreased substantially as compared to a fund that did not engage
in such transactions.
Constructive Sales. Under certain circumstances, the Fund may recognize gain
from a constructive sale of an "appreciated financial position" it holds if it
enters into a short sale, forward contract or other transaction that
substantially reduces the risk of loss with respect to the appreciated position.
In that event, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the
constructive sale. The character of gain from a constructive sale would depend
upon the Fund's holding period in the property. Loss from a constructive sale
would be recognized when the property was subsequently disposed of, and its
character would depend on the Fund's holding period and the application of
various loss deferral provisions of the Code. Constructive sale treatment does
not apply to transactions closed in the 90-day period ending with the 30th day
after the close of the taxable year, if certain conditions are met.
UNDERWRITER
Distribution of Securities. Under a Distribution Agreement with the Fund
("Distribution Agreement"), E*TRADE Securities Inc., 4500 Bohannon Drive, Menlo
Park, CA 94025, acts as underwriter of the Fund's shares. The Fund pays no
compensation to E*TRADE Securities, Inc. for its distribution services. The
Distribution Agreement provides that the Distributor will use its best efforts
to distribute the Fund's shares.
The Fund is a no-load fund, therefore investors pay no sales charges when
buying, exchanging or selling shares of the Fund. The Distribution Agreement
further provides that the Distributor will bear any costs of printing
prospectuses and shareholder reports which are used for selling purposes, as
well as advertising and any other costs attributable to the distribution of the
Fund's shares. The Distributor is a wholly owned subsidiary of E*TRADE Group,
Inc. The Distribution Agreement is subject to the same termination and renewal
provisions as are described above with respect to the Advisory Agreement.
MASTER PORTFOLIO ORGANIZATION
The Master Portfolio is a series of Master Investment Portfolio ("MIP"), an
open-end, series management investment company organized as Delaware business
trust. MIP was organized on October 21, 1993. In accordance with Delaware law
and in connection with the tax treatment sought by MIP, the Declaration of Trust
provides that its investors are personally responsible for Trust liabilities and
obligations, but only to the extent the Trust property is insufficient to
satisfy such liabilities and obligations. The Declaration of Trust also provides
that MIP must maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of the Trust, its investors,
trustees, officers, employees and agents covering possible tort and other
liabilities, and that investors will be indemnified to the extent they are held
liable for a disproportionate share of MIP's obligations. Thus, the risk of an
investor incurring financial loss on account of investor liability is limited to
circumstances in which both inadequate insurance existed and MIP itself was
unable to meet its obligations.
The Declaration of Trust further provides that obligations of MIP are not
binding upon its trustees individually but only upon the property of MIP and
that the trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a trustee against any liability to
which the trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of the trustee's office.
The interests in the Master Portfolio have substantially identical voting and
other rights as those rights enumerated above for shares of the Fund. MIP is
generally not required to hold annual meetings, but is required by Section 16(c)
of the 1940 Act to hold a special meeting and assist investor communications
under certain circumstances. Whenever the Fund is requested to vote on a matter
with respect to the Master Portfolio, the Fund will hold a meeting of Fund
shareholders and will cast its votes as instructed by such shareholders.
In a situation where the Fund does not receive instruction from certain of its
shareholders on how to vote the corresponding shares of the Master Portfolio,
such Fund will vote such shares in the same proportion as the shares for which
the Fund does receive voting instructions.
PERFORMANCE INFORMATION
The Fund may advertise a variety of types of performance information as more
fully described below. The Fund's performance is historical and past performance
does not guarantee the future performance of the Fund. From time to time, the
Investment Advisor may agree to waive or reduce its management fee and/or to
reimburse certain operating expenses of the Fund. Waivers of management fees and
reimbursement of other expenses will have the effect of increasing the Fund's
performance.
Current Yield. The current yield will be calculated based on a 7-day period, by
determining the net change, exclusive of capital changes and income other than
investment income, in the value of a hypothetical pre-existing account having a
balance of one shares at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then multiplying the base period return by
(365/7) with the resulting yield figure carried to at least the nearest
hundredth of one percent.
Effective Yield. The effective yield will be calculated, carried to the nearest
hundredth of one percent, by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
Effective yield = [(Base period return + 1)365/7 ] -1
Tax Equivalent Current Yield Quotation. The tax equivalent current yield will be
calculated by dividing the portion of the Fund's current yield that is
tax-exempt by 1 minus a stated income tax rate and adding the quotient to that
portion, if any, of the Fund's yield that is not tax-exempt.
Tax Equivalent Effective Yield Quotation. The tax equivalent effective yield
will be calculated by dividing that portion of the Fund's effective yield that
is tax-exempt by 1 minus a stated income tax rate and adding the quotient to
that portion, if any, of the Fund's effective yield that is not tax-exempt.
Average Annual Total Return. The Fund's average annual total return quotation
will be computed in accordance with a standardized method prescribed by rules of
the SEC. The average annual total return for the Fund for a specific period is
calculated as follows:
P(1+T)(To the power of n) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the applicable period at the end of the period.
The calculation assumes that all income and capital gains dividends paid by the
Fund have been reinvested at net asset value on the reinvestment dates during
the period and all recurring fees charges to all shareholder accounts are
included.
Total Return. Calculation of the Fund's total return is not subject to a
standardized formula. Total return performance for a specific period will be
calculated by first taking an investment (assumed below to be $1,000) ("initial
investment") in the Fund's shares on the first day of the period and computing
the "ending value" of that investment at the end of the period. The total return
percentage is then determined by subtracting the initial investment from the
ending value and dividing the remainder by the initial investment and expressing
the result as a percentage. The calculation assumes that all income and capital
gains dividends paid by the Fund have been reinvested at net asset value of the
Fund on the reinvestment dates during the period. Total return may also be shown
as the increased dollar value of the hypothetical investment over the period.
Cumulative Total Return. Cumulative total return represents the simple change in
value of an investment over a stated period and may be quoted as a percentage or
as a dollar amount. Total returns and cumulative total returns may be broken
down into their components of income and capital (including capital gains and
changes in share price) in order to illustrate the relationship between these
factors and their contributions to total return.
Distribution Rate. The distribution rate for the Fund would be computed,
according to a non-standardized formula by dividing the total amount of actual
distributions per share paid by the Fund over a twelve month period by the
Fund's net asset value on the last day of the period. The distribution rate
differs from the Fund's yield because the distribution rate includes
distributions to shareholders from sources other than dividends and interest,
such as short-term capital gains. Therefore, the Fund's distribution rate may be
substantially different than its yield. Both the Fund's yield and distribution
rate will fluctuate.
Yield. The yield would be calculated based on a 30-day (or one-month) period,
computed by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period and
annualizing the result, according to the following formula:
YIELD = 2[(a-b+1)(To the power of 6)-1],
---
cd
where:
a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends;
d = the maximum offering price per share on the last day of the period.
The net investment income of a Fund includes actual interest income, plus or
minus amortized purchase discount (which may include original issue discount) or
premium, less accrued expenses. Realized and unrealized gains and losses on
portfolio securities are not included in a Fund's net investment income.
Performance Comparisons:
Certificates of Deposit. Investors may want to compare the Fund's performance to
that of certificates of deposit offered by banks and other depositary
institutions. Certificates of deposit may offer fixed or variable interest rates
and principal is guaranteed and may be insured. Withdrawal of the deposits prior
to maturity normally will be subject to a penalty. Rates offered by banks and
other depositary institutions are subject to change at any time specified by the
issuing institution.
Money Market Funds. Investors may also want to compare performance of the Fund
to that of other money market funds. Money market fund yields will fluctuate and
shares are not insured, but share values usually remain stable.
Lipper Analytical Services, Inc. ("Lipper") and Other Independent Ranking
Organizations. From time to time, in marketing and other fund literature, the
Fund's performance may be compared to the performance of other mutual funds in
general or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets, may be
cited. Lipper performance figures are based on changes in net asset value, with
all income and capital gains dividends reinvested. Such calculations do not
include the effect of any sales charges imposed by other funds. The Fund may be
compared to Lipper's appropriate fund category, that is, by fund objective and
portfolio holdings. The Fund's performance may also be compared to the average
performance of its Lipper category.
Morningstar, Inc. The Fund's performance may also be compared to the performance
of other mutual funds by Morningstar, Inc., which rates funds on the basis of
historical risk and total return. Morningstar's ratings range from five stars
(highest) to one star (lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a weighted average for 3, 5,
and 10 year periods. Ratings are not absolute and do not represent future
results.
Independent Sources. Evaluations of fund performance made by independent sources
may also be used in advertisements concerning the Fund, including reprints of,
or selections from, editorials or articles about the Fund, especially those with
similar objectives. Sources for fund performance and articles about the Fund may
include publications such as Money, Forbes, Kiplinger's, Smart Money, Financial
World, Business Week, U.S. News and World Report, The Wall Street Journal,
Barron's, and a variety of investment newsletters.
Indices. The Fund may compare its performance to a wide variety of indices.
There are differences and similarities between the investments that the Fund may
purchase and the investments measured by the indices.
Historical Asset Class Returns. From time to time, marketing materials may
portray the historical returns of various asset classes. Such presentations will
typically compare the average annual rates of return of inflation, U.S. Treasury
bills, bonds, common stocks, and small stocks. There are important differences
between each of these investments that should be considered in viewing any such
comparison. The market value of stocks will fluctuate with market conditions,
and small-stock prices generally will fluctuate more than large-stock prices.
Stocks are generally more volatile than bonds. In return for this volatility,
stocks have generally performed better than bonds or cash over time. Bond prices
generally will fluctuate inversely with interest rates and other market
conditions, and the prices of bonds with longer maturities generally will
fluctuate more than those of shorter-maturity bonds. Interest rates for bonds
may be fixed at the time of issuance, and payment of principal and interest may
be guaranteed by the issuer and, in the case of U.S. Treasury obligations,
backed by the full faith and credit of the U.S. Treasury.
Portfolio Characteristics. In order to present a more complete picture of the
Fund's portfolio, marketing materials may include various actual or estimated
portfolio characteristics, including but not limited to median market
capitalizations, earnings per share, alphas, betas, price/earnings ratios,
returns on equity, dividend yields, capitalization ranges, growth rates,
price/book ratios, top holdings, sector breakdowns, asset allocations, quality
breakdowns, and breakdowns by geographic region.
Measures of Volatility and Relative Performance. Occasionally statistics may be
used to specify fund volatility or risk. The general premise is that greater
volatility connotes greater risk undertaken in achieving performance. Measures
of volatility or risk are generally used to compare the Fund's net asset value
or performance relative to a market index. One measure of volatility is beta.
Beta is the volatility of a fund relative to the total market as represented by
the Standard & Poor's 500 Stock Index. A beta of more than 1.00 indicates
volatility greater than the market, and a beta of less than 1.00 indicates
volatility less than the market. Another measure of volatility or risk is
standard deviation. Standard deviation is a statistical tool that measures the
degree to which a fund's performance has varied from its average performance
during a particular time period.
Standard deviation is calculated using the following formula:
Standard deviation = the square root of S(xi - xm)2
----------
n-1
Where: S = "the sum of",
xi = each individual return during the time period,
xm = the average return over the time period, and
n = the number of individual returns during the time period.
Statistics may also be used to discuss the Fund's relative performance. One such
measure is alpha. Alpha measures the actual return of a fund compared to the
expected return of a fund given its risk (as measured by beta). The expected
return is based on how the market as a whole performed, and how the particular
fund has historically performed against the market. Specifically, alpha is the
actual return less the expected return. The expected return is computed by
multiplying the advance or decline in a market representation by the Fund's
beta. A positive alpha quantifies the value that the fund manager has added, and
a negative alpha quantifies the value that the fund manager has lost. Other
measures of volatility and relative performance may be used as appropriate.
However, all such measures will fluctuate and do not represent future results.
Discussions of economic, social, and political conditions and their impact on
the Fund may be used in advertisements and sales materials. Such factors that
may impact the Fund include, but are not limited to, changes in interest rates,
political developments, the competitive environment, consumer behavior, industry
trends, technological advances, macroeconomic trends, and the supply and demand
of various financial instruments. In addition, marketing materials may cite the
portfolio management's views or interpretations of such factors.
<PAGE>
APPENDIX
Description of certain ratings assigned by Standard & Poor's Corporation
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors
Service, Inc. ("Fitch"), Duff & Phelps, Inc. ("Duff") and IBCA Inc. and IBCA
Limited ("IBCA"):
S&P
Bond Ratings
"AAA"
Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
"AA"
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
"A"
Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories.
"BBB"
Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
"BB, B, CCC, CC or C"
Bonds rated "BB, B, CCC, CC or C" are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse debt
conditions.
"C1"
Bonds rated "C1" is reserved for income bonds on which no interest is
being paid.
"D"
Bonds rated "D" are in default and payment of interest and/or payment of
principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus (+) or
minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.
Commercial Paper Rating
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
Moody's
Bond Ratings
"Aaa"
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa"
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
"A"
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa"
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba"
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
"B"
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
"Caa"
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
"Ca"
Bonds which are rated Ca represent obligations which are speculative to a
high degree. Such issues are often in default or have other marked shortcomings.
"C"
Bonds which are rated C are the lowest class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies the numerical modifiers "1", "2" and "3" to show relative
standing within the major rating categories, except in the "Aaa" category. The
modifier "1" indicates a ranking for the security in the higher end of a rating
category; the modifier "2" indicates a mid-range ranking; and the modifier "3"
indicates a ranking in the lower end of a rating category.
Commercial Paper Rating
The rating ("P-1") Prime-1 is the highest commercial paper rating assigned
by Moody's. Issuers of "P-1" paper must have a superior capacity for repayment
of short-term promissory obligations, and ordinarily will be evidenced by
leading market positions in well established industries, high rates of return on
funds employed, conservative capitalization structures with moderate reliance on
debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers (or relating supporting institutions) rated ("P-2") Prime-2 have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
"AAA"
Bonds rated "AAA" are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
"AA"
Bonds rated "AA" are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA". Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short- term debt of these issuers is generally
rated "F-1+".
"A"
Bonds rated "A" are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
"BBB"
Bonds rated "BBB" are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds and, therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
"F-1+"
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
"F-1"
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
"F-2"
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
Duff
Bond Ratings
"AAA"
Bonds rated AAA are considered highest credit quality. The risk factors
are negligible, being only slightly more than for risk-free U.S. Treasury debt.
"AA"
Bonds rated AA are considered high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A"
Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
"BBB"
Bonds rated BBB are considered to have below average protection factors
but still considered sufficient for prudent investment. Considerable variability
in risk during economic cycles.
Plus (+) and minus (-) signs are used with a rating symbol (except AAA) to
indicate the relative position of a credit within the rating category.
Commercial Paper Rating
The rating "Duff-1" is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by ample asset
protection. Risk factors are minor. Paper rated "Duff-2" is regarded as having
good certainty of timely payment, good access to capital markets and sound
liquidity factors and company fundamentals. Risk factors are small.
IBCA
Bond and Long-Term Ratings
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations for which there
is a very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly.
Commercial Paper and Short-Term Ratings
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.
International and U.S. Bank Ratings
An IBCA bank rating represents IBCA's current assessment of the strength
of the bank and whether such bank would receive support should it experience
difficulties. In its assessment of a bank, IBCA uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In addition, IBCA assigns
banks Long- and Short-Term Ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradation from 1 through 5, address the
question of whether the bank would receive support provided by central banks or
shareholders if it experienced difficulties, and such ratings are considered by
IBCA to be a prime factor in its assessment of credit risk. Individual Ratings,
which range in gradations from A through E, represent IBCA's assessment of a
bank's economic merits and address the question of how the bank would be viewed
if it were entirely independent and could not rely on support from state
authorities or its owners.
<PAGE>
4500 Bohannon Drive
Menlo Park, CA 94025
Telephone: (650) 331-6000
Toll-Free: (800) 786-2575
Internet: http://www.etrade.com
<PAGE>
PART C:
OTHER INFORMATION
Item 23. Exhibits
(a)(i) Certificate of Trust.1
(a)(ii) Trust Instrument.1
(b) By-laws.2
(c) Certificates for Shares will not be issued. Articles II, VII, IX and
X of the Trust Instrument, previously filed as exhibit (a)(ii),
define the rights of holders of the Shares.1
(d)(i) Form of Investment Advisory Agreement between E*TRADE Asset
Management, Inc. and the Registrant with respect to the E*TRADE S&P
500 Index Fund.2
(d)(ii) Form of Amended and Restated Investment Advisory Agreement between
E*TRADE Asset Management, Inc. and the Registrant with respect to
the E*TRADE S&P 500 Index Fund, E*TRADE Extended Market Index Fund,
E*TRADE Bond Index Fund, and E*TRADE International Index Fund.3
(d)(iii) Form of Amendment No. 1 to Amended and Restated Investment Advisory
Agreement between E*TRADE Asset Management, Inc. and the Registrant
with respect to the E*TRADE International Index Fund.
(d)(iv) Form of Investment Advisory Agreement between E*TRADE Asset
Management, Inc. and the Registrant with respect to the E*TRADE
Technology Index Fund.3
(d)(v) Form of Investment Subadvisory Agreement among E*TRADE Asset
Management, Inc., Barclays Global Fund Advisors and the Registrant
with respect to the E*TRADE Technology Index Fund.3
(d)(vi) Form of Investment Advisory Agreement between E*TRADE Asset
Management, Inc. and the Registrant with respect to the E*TRADE
E-Commerce Index Fund.5
(d)(vii) Form of Investment Subadvisory Agreement among E*TRADE Asset
Management, Inc., Barclays Global Fund Advisors and the Registrant
with respect to the E*TRADE E-Commerce Index Fund.5
(d)(viii) Form of Investment Advisory Agreement between E*TRADE Asset
Management, Inc. and the Registrant with respect to the E*TRADE
Global Titans Index Fund.
(d)(ix) Form of Investment Subadvisory Agreement among E*TRADE Asset
Management, Inc., Barclays Global Fund Advisors and the Registrant
with respect to the E*TRADE Global Titans Index Fund.
(d)(x) Form of Investment Advisory Agreement between E*TRADE Asset
Management, Inc. and the Registrant with respect to the E*TRADE
Premier Money Market Fund.
(e)(i) Form of Underwriting Agreement between E*TRADE Securities, Inc. and
the Registrant with respect to the E*TRADE S&P 500 Index Fund.2
(e)(ii) Amended and Restated Underwriting Agreement between E*TRADE
Securities, Inc. and the Registrant with respect to E*TRADE Extended
Market Index Fund, E*TRADE Bond Index Fund, E*TRADE Technology Index
Fund, E*TRADE International Index Fund, and E*TRADE E-Commerce Index
Fund.3
(e)(iii) Form of Amendment No. 1 to the Underwriting Agreement between
E*TRADE Securities, Inc. and the Registrant with respect to E*TRADE
Global Titans Index Fund and E*TRADE Premier Money Fund.
(f) Bonus or Profit Sharing Contracts: Not applicable.
(g)(i) Form of Custodian Agreement between the Registrant and Investors
Bank & Trust Company with respect to the E*TRADE S&P 500 Index
Fund.2
(g)(ii) Form of Amendment No. 1 to the Custodian Agreement between the
Registrant and Investors Bank & Trust Company with respect to
E*TRADE Extended Market Index Fund, E*TRADE Bond Index Fund, and
E*TRADE International Index Fund.3
(g)(iii) Form of Amendment No. 2 to the Custodian Agreement between the
Registrant and Investors Bank & Trust Company with respect to
E*TRADE Premier Money Market Fund.
(g)(iv) Form of Custodian Services Agreement between Registrant and PFPC
Trust Company with respect to the E*TRADE Technology Index Fund and
E*TRADE E-Commerce Index Fund.3
(g)(v) Form of Amended Exhibit A to the Custodian Services Agreement
between Registrant and PFPC Trust Company with respect to the
E*TRADE Global Titans Index Fund.
(h)(1)(i) Form of Third Party Feeder Fund Agreement among the Registrant,
E*TRADE Securities, Inc. and Master Investment Portfolio with
respect to the E*TRADE S&P 500 Index Fund.2
(h)(1)(ii) Form of Third Party Feeder Fund Agreement among the Registrant,
E*TRADE Securities, Inc. and Master Investment Portfolio with
respect to the E*TRADE S&P 500 Index Fund, E*TRADE Extended Market
Index Fund, and E*TRADE Bond Index Fund.3
(h)(1)(iii) Form of Amended and Restated to the Third Party Feeder Fund
Agreement among the Registrant, E*TRADE Securities, Inc. and Master
Investment Portfolio with respect to the E*TRADE S&P 500 Index Fund,
E*TRADE Extended Market Index Fund, E*TRADE Bond Index Fund, and
E*TRADE International Index Fund.
(h)(1)(iv) Form of Amendment No. 1 to the Amended and Restated Third Party
Feeder Agreement among the Registrant, E*TRADE Securities Inc., and
Master Investment Portfolio with respect to E*TRADE Premier Money
Market Fund.
(h)(2)(i) Form of Administrative Services Agreement between the Registrant and
E*TRADE Asset Management, Inc. with respect to the E*TRADE S&P 500
Index Fund.2
(h)(2)(ii) Form of Amendment No. 1 to the Administrative Services Agreement
between the Registrant and E*TRADE Asset Management, Inc. with
respect to the E*TRADE Extended Market Index Fund, E*TRADE Bond
Index Fund, E*TRADE Technology Index Fund, E*TRADE International
Index Fund, and E*TRADE E-Commerce Index Fund.3
(h)(2)(iii) Form of the Amended and Restated Administrative Services Agreement
between the Registrant and E*TRADE Asset Management, Inc. with
respect to the E*TRADE Extended Market Index Fund, E*TRADE Bond
Index Fund, E*TRADE Technology Index Fund, E*TRADE International
Index Fund and E*TRADE E-Commerce Index Fund.
(h)(2)(iv) Form of Amendment No. 1 to the Amended and Restated Administrative
Services Agreement between the Registrant and E*TRADE Asset
Management, Inc. with respect to the E*TRADE Global Titans Index
Fund and E*TRADE Premier Money Market Fund.
(h)(3)(i) Form of Sub-Administration Agreement among E*TRADE Asset Management,
Inc., the Registrant and Investors Bank & Trust Company with respect
to the E*TRADE S&P 500 Index Fund.4
(h)(3)(ii) Form of Amendment No. 1 to the Sub-Administration Agreement among
E*TRADE Asset Management, Inc., the Registrant and Investors Bank &
Trust Company with respect to the E*TRADE Extended Market Index
Fund, E*TRADE Bond Index Fund and E*TRADE International Index Fund.3
(h)(3)(iii) Form of Amendment No. 2 to the Sub-Administration Agreement among
E*TRADE Asset Management, Inc., the Registrant and Investors Bank &
Trust Company with respect to the E*TRADE Premier Money Market Fund.
(h)(4) Form of Sub-Administration and Accounting Services Agreement between
E*TRADE Funds and PFPC, Inc. with respect to the E*TRADE Technology
Index Fund.3
(h)(4)(i) Exhibit A to the Sub-Administration and Accounting Services
Agreement between E*TRADE Funds and PFPC, Inc. with respect to the
E*TRADE E-Commerce Index Fund.5
(h)(4)(ii) Form of Amended Exhibit A to the Sub-Administration and Accounting
Services Agreement between E*TRADE Funds and PFPC, Inc. with respect
to the E*TRADE Global Titans Index Fund.
(h)(5)(i) Form of Transfer Agency Services Agreement between PFPC, Inc. and
the Registrant with respect to the E*TRADE S&P 500 Index Fund.2
(h)(5)(ii) Form of Amended Exhibit A to the Transfer Agency Services Agreement
between PFPC, Inc. and the Registrant with respect to the E*TRADE
Extended Market Index Fund, E*TRADE Bond Index Fund, E*TRADE
Technology Index Fund, E*TRADE International Index Fund, and E*TRADE
E-Commerce Index Fund.3
(h)(5)(iii) Form of Amended Exhibit A to the Transfer Agency Services Agreement
between PFPC, Inc. and the Registrant with respect to the E*TRADE
Global Titans Index Fund and E*TRADE Premier Money Market Fund.
(h)(6)(i) Form of Retail Shareholder Services Agreement among E*TRADE
Securities, Inc., the Registrant and E*TRADE Asset Management, Inc.
with respect to the E*TRADE S&P 500 Index Fund.4
(h)(6)(ii) Form of Amendment No. 1 to the Retail Shareholder Services Agreement
among E*TRADE Securities, Inc., the Registrant and E*TRADE Asset
Management, Inc. with respect to the E*TRADE Extended Market Index
Fund, E*TRADE Bond Index Fund, E*TRADE Technology Index Fund,
E*TRADE International Index Fund, and E*TRADE E-Commerce Index
Fund.3
(h)(6)(iii) Form of Amendment No. 2 to the Retail Shareholder Services Agreement
among E*TRADE Securities, Inc., the Registrant and E*TRADE Asset
Management, Inc. with respect to the E*TRADE Global Titans Index
Fund and E*TRADE Premier Money Market Fund.
(h)(7) State Securities Compliance Services Agreement between E*TRADE Funds
and PFPC, Inc. with respect to S&P 500 Index Fund, E*TRADE Extended
Market Index Fund, E*TRADE Bond Index Fund, E*TRADE Technology Index
Fund, E*TRADE International Index Fund, and E*TRADE E-Commerce Index
Fund.3
(h)(7)(i) Form of Amended Exhibit A to the State Securities Compliance
Services Agreement between E*TRADE Funds and PFPC, Inc. with respect
to E*TRADE Global Titans Index Fund and E*TRADE Premier Money Market
Fund.
(i)(1) Opinion and Consent of Dechert Price & Rhoads with respect to the
E*TRADE S&P 500 Index Fund.2
(i)(2) Opinion and Consent of Dechert Price & Rhoads with respect to the
E*TRADE Extended Market Index Fund, E*TRADE Bond Index Fund and
E*TRADE Technology Index Fund.3
(i)(3) Opinion and Consent of Dechert Price & Rhoads with respect to the
E*TRADE E-Commerce Index Fund.5
(i)(4) Opinion and Consent of Dechert Price & Rhoads with respect to the
E*TRADE International Index Fund.6
(i)(5) Opinion and Consent of Dechert Price & Rhoads with respect to the
E*TRADE Premier Money Market Fund.
(j) Consent of Deloitte & Touche LLP: Not applicable.
(k) Omitted Financial Statements: Not applicable.
(l) Form of Subscription Letter Agreements between E*TRADE Asset
Management, Inc. and the Registrant.2
(m) Rule 12b-1 Plan: Not applicable.
(n) Rule 18f-3 Plan: Not applicable.
(p) Code of Ethics7
(p)(i) Code of Ethics for Master Portfolio7
* Form of Power of Attorney for the Registrant.
** Power of Attorney for Master Investment Portfolio.2
*** Power of Attorney and Secretary's Certificate of Registrant for
signature on behalf of Registrant.4
1 Incorporated by reference from the Registrant's Initial Registration Statement
on Form N-1A filed with the Securities and Exchange Commission ("SEC") on
November 5, 1998.
2 Incorporated by reference from the Registrant's Pre-effective Amendment
No. 2 to the Registration Statement on Form N-1A filed with the SEC on
January 28, 1999.
3 Incorporated by reference from the Registrant's Post-Effective Amendment
No. 4 to the Registration Statement on Form N-1A filed with the SEC on August
11, 1999.
4 Incorporated by reference from the Registrant's Post-Effective Amendment
No. 7 to the Registration Statement on Form N-1A filed with the SEC on
October 8, 1999.
5 Incorporated by reference from the Registrant's Post-Effective Amendment
No. 9 to the Registration Statement on Form N-1A filed with the SEC on
October 20, 1999.
6 Incorporated by reference from the Registrant's Post-Effective Amendment
No. 10 to the Registration Statement on Form N-1A filed with the SEC on
October 20, 1999.
7 To be filed by amendment in next Post-Effective Amendment to the Registration
Statement on Form N-1A filed with the SEC on or after March 1, 2000.
Item 24. Persons Controlled by or Under Common Control With Registrant
E*TRADE Asset Management, Inc. ("E*TRADE Asset Management") (a Delaware
corporation), may own more than 25% of one or more series of the Registrant,
as described in the Statement of Additional Information, and thus may be
deemed to control that series. E*TRADE Asset Management is a wholly owned
subsidiary of E*TRADE Group, Inc. ("E*TRADE Group") (a Delaware
corporation). Other companies of which E*TRADE Group owns greater than 25%
include: E*TRADE Securities, Inc., Clearstation, Inc. Sharedata, Inc.,
Confluent, Inc., OptionsLink, TIR (Holdings) Limited, Telebanc Financial
Corporation and E*Offering Corp.
Item 25. Indemnification
Reference is made to Article X of the Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore, is unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, officers or
controlling persons in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 26. Business and Other Connections of Investment Adviser
E*TRADE Asset Management, Inc. (the "Investment Advisor") is a Delaware
corporation that offers investment advisory services. The Investment Advisor's
offices are located at 4500 Bohannon Drive, Menlo Park, CA 94025. The directors
and officers of the Investment Advisor and their business and other connections
are as follows:
<TABLE>
<CAPTION>
Directors and Officers of Title/Status with Other Business
- -------------------------- ------------------ --------------
Investment Adviser Investment Adviser Connections
- ------------------ ------------------ -----------
<S> <C> <C>
Kathy Levinson Director Director, President and
Chief Operating
Officer, E*TRADE
Securities, Inc. and
Executive Vice
President, Operations
and Customer Operations
Officer, E*TRADE Group,
Inc. 1997-98
Connie M. Dotson Director, Secretary and Corporate Secretary and
Treasurer Senior Vice President,
E*TRADE Securities, Inc.
Brian C. Murray President and Director Vice President and
General Manager of
Mutual Funds, E*TRADE
Securities, Inc.;
Principal of Alameda
Consulting, 1997
Jerry D. Gramaglia Director Senior Vice President,
E*TRADE Group, Inc.,
1998; Vice President,
Sprint Corp., 1997-98
W. David Moore Vice President and Secretary Sr. Manager - Third
Party Funds, E*TRADE
Securities Inc.,
February 1999-December
1999
</TABLE>
Barclays Global Fund Advisors ("BGFA"), a wholly owned subsidiary of
Barclays Global Investors, N.A. ("BGI"), is the sub-advisor for the E*TRADE
Technology Index Fund, E*TRADE E-Commerce Index Fund and E*TRADE Global Titans
Index Fund. BGFA is a registered investment adviser to certain open-end,
management investment companies and various other institutional investors. The
directors and officers of the sub-advisor and their business and other
connections are as follows:
Name and Position at BGFA Other Business Connections
Patricia Dunn Director of BGFA and Co-Chairman and
Director Director of BGI, 45 Fremont Street, San
Francisco, CA 94105
Lawrence G. Tint, Chairman of the Board of Directors of
Chairman and Director BGFA and Chief Executive Officer of BGI,
45 Fremont Street, San Francisco, CA
94105
Geoffrey Fletcher Chief Financial Officer of BGFA and BGI
since May 1997, 45 Fremont Street, San
Francisco, CA 94150 Managing Director
and Principal Accounting Officer at
Bankers Trust Company from 1988 - 1997,
505 Market Street, San Francisco, CA
94111
Item 27. Principal Underwriters
(a) E*TRADE Securities, Inc. (the "Distributor") serves as Distributor of
Shares of the Trust. The Distributor is a wholly owned subsidiary of
E*TRADE Group, Inc.
(b) The officers and directors of E*TRADE Securities, Inc. are:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
<S> <C> <C>
Kathy Levinson Director, President and None
Chief Operating Officer
Stephen C. Richards Director and Senior Vice None
President
Steve Hetlinger Director and Vice President None
Connie M. Dotson Corporate Secretary and None
Senior Vice President
<FN>
* The business address of all officers of the Distributor is 4500 Bohannon
Drive, Menlo Park, CA 94025.
</FN>
</TABLE>
Item 28. Location of Accounts and Records
The account books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder will be maintained in the physical possession of:
(1) E*TRADE Asset Management, Inc., the Registrant's investment advisor,
is located at 4500 Bohannon Drive, Menlo Park, CA 94025;
(2) Investors Bank & Trust Company, the Registrant's custodian, accounting
services agent and sub-administrator with respect to the E*TRADE S&P 500 Index
Fund, E*TRADE Extended Market Index Fund, E*TRADE Bond Index Fund, E*TRADE
International Index Fund and E*TRADE Premier Money Market Fund, is located at
200 Clarendon Street, Boston, MA 02111;
(3) PFPC Inc., the Registrant's transfer agent and dividend disbursing
agent, is located at 400 Bellevue Parkway, Wilmington, DE 19809;
(4) PFPC Trust Company, the Registrant's custodian, accounting services
agent and sub-administrator with respect to the E*TRADE Technology Index Fund,
E*TRADE E-Commerce Index Fund and E*TRADE Global Titans Index, is located at 400
Bellevue Parkway, Wilmington, DE 19809; and
(5) Barclays Global Fund Advisors, the Master Portfolio's investment
advisor and sub-advisor with respect to the E*TRADE Technology Index Fund,
E*TRADE E-Commerce Index Fund and E*TRADE Global Titans Index Fund, is located
at 45 Fremont Street, San Francisco, CA 94105.
Item 29. Management Services
Not applicable
Item 30. Undertakings
Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Post-Effective Amendment No. 15 to the
Registration Statement to be signed on its behalf by the undersigned, duly
authorized, in the City of Menlo Park in the State of California on the 3rd day
of February, 2000.
E*TRADE FUNDS
(Registrant)
By: /s/
---------------------------
Name: Brian C. Murray
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 15 to the Registration Statement has been
signed by the following persons in the capacities and on the dates indicated:
Signature Title Date
/s/
- ---------------------------
Leonard C. Purkis Trustee and Treasurer February 3, 2000
(Principal Financial
and Accounting Officer)
/s/
- ---------------------------
Brian C. Murray President (Principal February 3, 2000
Executive Officer)
/s/
- ---------------------------
Shelly J. Meyers Trustee February 3, 2000
/s/
- ---------------------------
Ashley T. Rabun Trustee February 3, 2000
/s/
- ---------------------------
Steven Grenadier Trustee February 3, 2000
/s/
- ---------------------------
George J. Rebhan Trustee February 3, 2000
*By
------------------------
David A. Vaughan
Attorney-In-Fact
<PAGE>
EXHIBIT LIST
Exhibit
No. DESCRIPTION
(d)(iii) Form of Amendment No. 1 to Amended and Restated Investment Advisory
Agreement between E*TRADE Asset Management, Inc. and the Registrant
with respect to the E*TRADE International Index Fund.
(d)(viii) Form of Investment Advisory Agreement between E*TRADE Asset
Management, Inc. and the Registrant with respect to the E*TRADE
Global Titans Index Fund.
(d)(ix) Form of Investment Subadvisory Agreement among E*TRADE Asset
Management, Inc., Barclays Global Fund Advisors and the Registrant
with respect to the E*TRADE Global Titans Index Fund.
(d)(x) Form of Investment Advisory Agreement between E*TRADE Asset
Management, Inc. and the Registrant with respect to the E*TRADE
Premier Money Market Fund.
(e)(iii) Form of Amendment No. 1 to the Underwriting Agreement between
E*TRADE Securities, Inc. and the Registrant with respect to E*TRADE
Global Titans Index Fund and E*TRADE Premier Money Fund.
(g)(iii) Form of Amendment No. 2 to the Custodian Agreement between the
Registrant and Investors Bank & Trust Company with respect to
E*TRADE Premier Money Market Fund.
(g)(v) Form of Amended Exhibit A to the Custodian Services Agreement
between Registrant and PFPC Trust Company with respect to the
E*TRADE Global Titans Index Fund.
(h)(1)(iii) Form of Amended and Restated Third Party Feeder Fund Agreement among
the Registrant, E*TRADE Securities, Inc. and Master Investment
Portfolio with respect to the E*TRADE S&P 500 Index Fund, E*TRADE
Extended Market Index Fund, E*TRADE Bond Index Fund, and E*TRADE
International Index Fund.
(h)(1)(iv) Form of Amendment No. 1 to the Amended and Restated Third Party
Feeder Fund Agreement among the Registrant, E*TRADE Securities Inc.,
and Master Investment Portfolio with respect to E*TRADE Premier
Money Market Fund.
(h)(2)(iii) Form of the Amended and Restated Administrative Services Agreement
between the Registrant and E*TRADE Asset Management, Inc. with
respect to the E*TRADE Extended Market Index Fund, E*TRADE Bond
Index Fund, E*TRADE Technology Index Fund, E*TRADE International
Index Fund and E*TRADE E-Commerce Index Fund.
(h)(2)(iv) Form of Amendment No. 1 to the Amended and Restated Administrative
Services Agreement between the Registrant and E*TRADE Asset
Management, Inc. with respect to the E*TRADE Global Titans Index
Fund and E*TRADE Premier Money Market Fund.
(h)(3)(iii) Form of Amendment No. 2 to the Sub-Administration Agreement among
E*TRADE Asset Management, Inc., the Registrant and Investors Bank &
Trust Company with respect to the E*TRADE Premier Money Market Fund.
(h)(4)(ii) Form of Amended Exhibit A to the Sub-Administration and Accounting
Services Agreement between E*TRADE Funds and PFPC, Inc. with respect
to the E*TRADE Global Titans Index Fund.
(h)(5)(iii) Form of Amended Exhibit A to the Transfer Agency Services Agreement
between PFPC, Inc. and the Registrant with respect to the E*TRADE
Global Titans Index Fund and E*TRADE Premier Money Market Fund.
(h)(6)(iii) Form of Amendment No. 2 to the Retail Shareholder Services Agreement
among E*TRADE Securities, Inc., the Registrant and E*TRADE Asset
Management, Inc. with respect to the E*TRADE Global Titans Index
Fund and E*TRADE Premier Money Market Fund.
(h)(7)(i) Form of Amended Exhibit A to the State Securities Compliance
Services Agreement between E*TRADE Funds and PFPC, Inc. with respect
to E*TRADE Global Titans Index Fund and E*TRADE Premier Money Market
Fund.
(i)(5) Opinion and Consent of Dechert Price & Rhoads with respect to the
E*TRADE Premier Money Market Fund.
* Form of Power of Attorney for the Registrant.
FORM OF
AMENDMENT NO. 1
to the
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
WHEREAS, E*TRADE Asset Management, Inc. ("Advisor") and E*TRADE Funds
("Trust") wish to include the E*TRADE International Index Fund under
substantially the same terms as the Amended and Restated Investment Advisory
Agreement ("Agreement") dated as of August 12, 1999, between the Trust and the
Advisor, the Agreement is hereby amended as follows:
1. Exhibit A is hereby amended and substituted with the attached Exhibit A.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
the Amended and Restated Investment Advisory Agreement to be executed by their
respective officers thereunto duly authorized as of October 22, 1999.
E*TRADE FUNDS
By:_________________________________
Name:
Title:
E*TRADE ASSET MANAGEMENT, INC.
By:_________________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO THE
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
Name of Fund Advisory Fee
E*TRADE S&P 500 Index Fund 0.02%, if the Fund invests all of its
assets in a master fund and 0.07% on
that portion of the Fund's assets not
invested in a master fund.
E*TRADE Extended Market Index Fund 0.02%, if the Fund invests all of its
assets in a master fund and 0.08% on
that portion of the Fund's assets not
invested in a master fund
E*TRADE Bond Index Fund 0.02%, if the Fund invests all of its
assets in a master fund and 0.08% on
that portion of the Fund's assets not
invested in a master fund.
E*TRADE International Index Fund 0.02%, if the Fund invests all of its
assets in a master fund and 0.08% on
that portion of the Fund's assets not
invested in a master fund.
FORM OF
INVESTMENT ADVISORY AGREEMENT
E*TRADE FUNDS
with respect to
E*TRADE GLOBAL TITANS INDEX FUND
AGREEMENT, effective commencing as of __________, 2000 between E*TRADE
Asset Management, Inc. (the "Adviser") and E*TRADE Funds (the "Trust") with
respect to E*TRADE Global Titans Index Fund (the "Fund").
WHEREAS, the Trust is a Delaware business trust organized pursuant to a
Declaration of Trust dated November 4, 1998 (the "Declaration of Trust"), and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified management investment company, and the Fund
is a portfolio of the Trust; and
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to furnish such
services to the Fund; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Trust and the Adviser as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties.
(a) Subject to the supervision of the Trustees of the Trust, the Adviser
will: (i) provide a program of continuous investment management for the Fund in
accordance with the Fund's investment objective, policies and limitations as
stated in the Fund's Prospectus and Statement of Additional Information included
as part of the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC") and as the Prospectus and Statement of Additional
Information may be amended from time to time, copies of which shall be provided
to the Adviser by the Trust; and (ii) select and manage, subject to approval by
the Trustees, investment subadvisers, who may be granted discretionary
investment authority for the Fund.
(b) In performing its investment management services to the Fund hereunder,
the Adviser will provide the Fund with ongoing investment guidance, policy
direction, including oral and written research, monitoring of all subadvised
portions of the Fund, analysis, advice, statistical and economic data and
judgments regarding individual investments, general economic conditions and
trends and long-range investment policy.
(c) To the extent permitted by the Adviser's Form ADV as filed with the SEC
and subject to the approval of the Trustees of the Trust, the Adviser shall have
the authority to manage cash and money market instruments for cash flow
purposes.
(d) To the extent permitted by the Adviser's current Form ADV as filed with
the SEC, the Adviser will advise as to the securities, instruments, repurchase
agreements, options and other investments and techniques that the Fund will
purchase, sell, enter into or use, and will provide an ongoing evaluation of the
Fund's portfolio. The Adviser will advise as to what portion of the Fund's
portfolio shall be invested in securities and other assets, and what portion if
any, should be held uninvested.
(e) The Adviser may engage and remove one or more subadvisers, subject to
the legally required approvals of the Trust and its shareholders, and the
Adviser shall monitor the performance of any subadviser and report to the Trust
thereon.
(f) The Adviser further agrees that, in performing its duties hereunder, it
will:
(i) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the Internal Revenue Code (the "Code") and all other
applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Trustees;
(ii) use reasonable efforts to manage the Fund so that it will qualify,
and continue to qualify, as a regulated investment company under Subchapter M of
the Code and regulations issued thereunder;
(iii) place orders pursuant to the Fund's investment determinations as
approved by the Trustees for the Fund directly with the issuer, or with any
broker or dealer, in accordance with applicable policies expressed in the Fund's
Prospectus and/or Statement of Additional Information and in accordance with
applicable legal requirements;
(iv) furnish to the Trust whatever statistical information the Trust may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Adviser will keep the Trust and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Adviser's own initiative, furnish to the Trust from time to time whatever
information the Adviser believes appropriate for this purpose;
(v) make available to the Trust's administrator (the "Administrator")
and the Trust, promptly upon their request, such copies of its investment
records and ledgers with respect to the Fund as may be required to assist the
Administrator and the Trust in their compliance with applicable laws and
regulations. The Adviser will furnish the Trustees with such periodic and
special reports regarding the Fund and any subadviser as they may reasonably
request;
(vi) immediately notify the Trust in the event that the Adviser or any
of its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the SEC or other regulatory
authority. The Adviser further agrees to notify the Trust immediately of any
material fact known to the Adviser respecting or relating to the Adviser that is
not contained in the Trust's Registration Statement regarding the Fund, or any
amendment or supplement thereto, but that is required to be disclosed thereon,
and of any statement contained therein that becomes untrue in any material
respect; and
(vii) in providing investment advice to the Fund, use no inside
information that may be in its possession or in the possession of any of its
affiliates, nor will the Adviser seek to obtain any such information.
3. Futures and Options. The Adviser's investment authority shall include advice
with regard to purchasing, selling, covering open positions, and generally
dealing in financial futures contracts and options thereon, or master funds
which do so in accordance with Rule 4.5 of the Commodity Futures Trading
Commission.
The Adviser's authority shall include authority to: (i) open and maintain
brokerage accounts for financial futures and options (such accounts hereinafter
referred to as "Brokerage Accounts") on behalf of and in the name of the Fund;
and (ii) execute for and on behalf of the Brokerage Accounts, standard customer
agreements with a broker or brokers. The Adviser may, using such of the
securities and other property in the Brokerage Accounts as the Adviser deems
necessary or desirable, direct the custodian to deposit on behalf of the Fund,
original and maintenance brokerage deposits and otherwise direct payments of
cash, cash equivalents and securities and other property into such brokerage
accounts and to such brokers as the Adviser deems desirable or appropriate.
4. Use of Securities Brokers and Dealers. The Adviser will monitor the use by
any subadviser of broker-dealers. To the extent permitted by the Adviser's Form
ADV as filed with the SEC, purchase and sale orders will usually be placed with
brokers who are selected by the Adviser as able to achieve "best execution" of
such orders. "Best execution" shall mean prompt and reliable execution at the
most favorable securities price, taking into account the other provisions
hereinafter set forth. Whenever the Adviser places orders, or directs the
placement of orders, for the purchase or sale of portfolio securities on behalf
of the Fund, in selecting brokers or dealers to execute such orders, the Adviser
is expressly authorized to consider the fact that a broker or dealer has
furnished statistical, research or other information or services which enhance
the Adviser's research and portfolio management capability generally. It is
further understood in accordance with Section 28(e) of the Securities Exchange
Act of 1934, as amended, that the Adviser may negotiate with and assign to a
broker a commission which may exceed the commission which another broker would
have charged for effecting the transaction if the Adviser determines in good
faith that the amount of commission charged was reasonable in relation to the
value of brokerage and/or research services (as defined in Section 28(e))
provided by such broker, viewed in terms either of the Fund or the Adviser's
overall responsibilities to the Adviser's discretionary accounts.
Neither the Adviser nor any parent, subsidiary or related firm shall act as
a securities broker with respect to any purchases or sales of securities which
may be made on behalf of the Fund, provided that this limitation shall not
prevent the Adviser from utilizing the services of a securities broker which is
a parent, subsidiary or related firm, provided such broker effects transactions
on a "cost only" or "nonprofit" basis to itself and provides competitive
execution. Unless otherwise directed by the Trust in writing, the Adviser may
utilize the service of whatever independent securities brokerage firm or firms
it deems appropriate to the extent that such firms are competitive with respect
to price of services and execution.
5. Allocation of Charges and Expenses.
(a) Except as otherwise specifically provided in this section 5, the Adviser
shall pay the compensation and expenses of all of its directors, officers and
employees who serve as trustees, officers and executive employees of the Trust
(including the Trust's share of payroll taxes), and the Adviser shall make
available, without expense to the Fund, the service of its directors, officers
and employees who may be duly elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law.
(b) The Adviser shall not be required to pay pursuant to this Agreement any
expenses of the Fund other than those specifically allocated to the Adviser in
this section 5. In particular, but without limiting the generality of the
foregoing, the Adviser shall not be responsible, except to the extent of the
reasonable compensation of such of the Trust's employees as are officers or
employees of the Adviser whose services may be involved, for the following
expenses of the Fund: organization and certain offering expenses of the Fund
(including out-of-pocket expenses, but not including the Adviser's overhead and
employee costs); fees payable to the Adviser and to any other Fund advisers or
consultants; legal expenses; auditing and accounting expenses; interest
expenses; telephone, telex, facsimile, postage and other communications
expenses; taxes and governmental fees; fees, dues and expenses incurred by or
with respect to the Fund in connection with membership in investment company
trade organizations; cost of insurance relating to fidelity coverage for the
Trust's officers and employees; fees and expenses of the Fund's Administrator or
of any custodian, subcustodian, transfer agent, registrar, or dividend
disbursing agent of the Fund; expenses of any master fund in which the Fund
invests; payments to the Administrator for maintaining the Fund's financial
books and records and calculating its daily net asset value; other payments for
portfolio pricing or valuation services to pricing agents, accountants, bankers
and other specialists, if any; expenses of preparing share certificates; other
expenses in connection with the issuance, offering, distribution or sale of
securities issued by the Fund; expenses relating to investor and public
relations; expenses of registering and qualifying shares of the Fund for sale;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; brokerage commissions or other costs of acquiring
or disposing of any portfolio securities or other assets of the Fund, or of
entering into other transactions or engaging in any investment practices with
respect to the Fund; expenses of printing and distributing prospectuses,
Statements of Additional Information, reports, notices and dividends to
stockholders; costs of stationery or other office supplies; any litigation
expenses; costs of stockholders' and other meetings; the compensation and all
expenses (specifically including travel expenses relating to the Fund's
business) of officers, Trustees and employees of the Trust who are not
interested persons of the Adviser; and travel expenses (or an appropriate
portion thereof) of officers or Trustees of the Trust who are officers,
directors or employees of the Adviser to the extent that such expenses relate to
attendance at meetings of the Board of Trustees of the Trust with respect to
matters concerning the Fund, or any committees thereof or advisers thereto.
6. Compensation.
As compensation for the services provided and expenses assumed by the
Adviser under this Agreement, the Trust will arrange for the Fund to pay the
Adviser at the end of each calendar month an advisory fee computed daily at an
annual rate equal to the amount of average daily net assets listed opposite the
Fund's name in Exhibit A, attached hereto. The "average daily net assets" of the
Fund shall mean the average of the values placed on the Fund's net assets as of
4:00 p.m. (New York time) on each day on which the net asset value of the Fund
is determined consistent with the provisions of Rule 22c-1 under the 1940 Act
or, if the Fund lawfully determines the value of its net assets as of some other
time on each business day, as of such other time. The value of net assets of the
Fund shall always be determined pursuant to the applicable provisions of the
Declaration of Trust and the Registration Statement. If, pursuant to such
provisions, the determination of net asset value is suspended for any particular
business day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of the close of the New York Stock Exchange, or as of such other time
as the value of the net assets of the Fund's portfolio may lawfully be
determined, on that day. If the determination of the net asset value of the
shares of the Fund has been so suspended for a period including any month end
when the Adviser's compensation is payable pursuant to this section, then the
Adviser's compensation payable at the end of such month shall be computed on the
basis of the value of the net assets of the Fund as last determined (whether
during or prior to such month). If the Fund determines the value of the net
assets of its portfolio more than once on any day, then the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this section 6.
7. Books and Records. The Adviser agrees to maintain such books and records with
respect to its services to the Fund as are required by Section 31 under the 1940
Act, and rules adopted thereunder, and by other applicable legal provisions, and
to preserve such records for the periods and in the manner required by that
Section, and those rules and legal provisions. The Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-1 and Rule 31a-2 under
the 1940 Act and otherwise in connection with its services hereunder are the
property of the Trust and will be surrendered promptly to the Trust upon its
request. The Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable laws and regulations.
8. Aggregation of Orders. Provided that the investment objective, policies and
restrictions of the Fund are adhered to, the Trust agrees that the Adviser may
aggregate sales and purchase orders of securities held in the Fund with similar
orders being made simultaneously for other accounts managed by the Adviser or
with accounts of the affiliates of the Adviser, if in the Adviser's reasonable
judgment such aggregation shall result in an overall economic benefit to the
respective Fund taking into consideration the advantageous selling or purchase
price, brokerage commission and other expenses. The Trust acknowledges that the
determination of such economic benefit to the Fund by the Adviser represents the
Adviser's evaluation that the Fund is benefited by relatively better purchase or
sales prices, lower commission expenses and beneficial timing of transactions or
a combination of these and other factors.
9. Standard of Care and Limitation of Liability. The Adviser shall exercise its
best judgment in rendering the services provided by it under this Agreement. The
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund or the holders of the Fund's shares in connection
with the matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Adviser against
any liability to the Trust, the Fund or to holders of the Fund's shares to which
the Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or by
reason of the Adviser's reckless disregard of its obligations and duties under
this Agreement or otherwise for breach of this Agreement. As used in this
Section 9, the term "Adviser" shall include any officers, directors, employees
or other affiliates of the Adviser performing services with respect to the Fund.
Notwithstanding any other provision of this Agreement, the Adviser shall not be
liable for any loss to the Fund caused directly or indirectly by circumstances
beyond the Adviser's reasonable control including, but not limited to,
government restrictions, exchange or market rulings, suspensions of trading,
acts of civil or military authority, national emergencies, earthquakes, floods
or other catastrophes, acts of God, wars or failures of communication or power
supply.
10. Services Not Exclusive. It is understood that the services of the Adviser
are not exclusive, and that nothing in this Agreement shall prevent the Adviser
from providing similar services to other investment companies or to other series
of investment companies, including the Trust (whether or not their investment
objectives and policies are similar to those of the Fund) or from engaging in
other activities, provided such other services and activities do not, during the
term of this Agreement, interfere in a material manner with the Adviser's
ability to meet its obligations to the Fund hereunder. When the Adviser
recommends the purchase or sale of a security for other investment companies and
other clients, and at the same time the Adviser recommends the purchase or sale
of the same security for the Fund, it is understood that in light of its
fiduciary duty to the Fund, such transactions will be executed on a basis that
is fair and equitable to the Fund. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Adviser nor any of
its directors, officers or employees shall act as a principal or agent or
receive any commission. If the Adviser provides any advice to its clients
concerning the shares of the Fund, the Adviser shall act solely as investment
counsel for such clients and not in any way on behalf of the Trust or the Fund.
11. Duration and Termination.
(a) This Agreement shall continue for a period of two years from the date
of commencement, and thereafter shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by (i) the Trustees or (ii) a vote of a "majority" (as defined in the
1940 Act) of the Fund's outstanding voting securities (as defined in the 1940
Act), provided that in either event the continuance is also approved by a
majority of the Trustees who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any party to this Agreement, by vote
cast in person (to the extent required by the 1940 Act) at a meeting called for
the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated: (a)
at any time without penalty by the Fund upon the vote of a majority of the
Trustees or by vote of the majority of the Fund's outstanding voting securities,
upon sixty (60) days' written notice to the Adviser or (b) by the Adviser at any
time without penalty, upon sixty (60) days' written notice to the Trust. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
12. Amendments. This Agreement may be amended at any time but only by the mutual
agreement of the parties to this Agreement and in accordance with any applicable
legal or regulatory requirements.
13. Proxies. Unless the Trust gives written instructions to the contrary, the
Adviser shall vote all proxies solicited by or with respect to the issuers of
securities in which assets of the Fund may be invested in a manner which best
serves the interests of the Fund's shareholders. The Adviser shall use its best
good faith judgment to vote such proxies in a manner which best serves the
interests of the Fund's shareholders.
14. Use of "E*TRADE" Name.
(a) It is understood that the name "E*TRADE" and any logo associated with
that name, is the valuable property of E*TRADE Group, Inc., and that the Trust
and Adviser have the right to include "E*TRADE" as a part of their name only so
long as this Agreement shall continue in effect and the Adviser is a wholly
owned subsidiary of the E*TRADE Group, Inc. Further, the Trust and the Adviser
agree that: (i) they will use the name "E*TRADE" only as a component of the
names of the Trust, the Fund and the Adviser, and for no other purposes; (ii)
neither will purport to grant to any third party any rights in the name
"E*TRADE"; (iii) at the request of E*TRADE Group, Inc., the Trust or the Adviser
take such action as may be required to provide their consent to use of the name
"E*TRADE" by E*TRADE Group, Inc. or any affiliate of E*TRADE Group, Inc., to
whom E*TRADE Group, Inc. shall have granted the right to such use; and (iv)
E*TRADE Group, Inc. may use or grant to others the right to use the name
"E*TRADE", or any abbreviation thereof, as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of such right to
any other investment company.
(b) Upon termination of this Agreement as to the Trust or its Fund, the
Trust and the Adviser shall, upon request of E*TRADE Group, Inc., cease to use
the name "E*TRADE" as part of the name of the Trust, the Fund or the Adviser, as
applicable. In the event of any such request by E*TRADE Group, Inc. that use of
the name "E*TRADE" shall cease, the Trust and the Adviser shall cause their
officers, trustees, directors and stockholders to take any and all such actions
which E*TRADE Group, Inc. may request to effect such request and to reconvey to
E*TRADE Group, Inc. any and all rights to the name "E*TRADE."
15. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
California without regard to the conflicts of law provisions thereof, provided
that nothing herein shall be construed in a manner inconsistent with the 1940
Act, the Advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
(c) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein s hall be construed as constituting the Adviser as
an agent of the Trust or the Fund.
(e) All liabilities of the Trust hereunder are limited to the assets
of the Fund.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the date first set forth
above.
E*TRADE FUNDS
By:
Name:
Title:
E*TRADE ASSET MANAGEMENT, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT A
Name of Fund Advisory Fee
E*TRADE Global Titans Index Fund 0.25% of the Fund's average daily
net assets, calculated as
described in Section 6 of the
foregoing Agreement.
FORM OF
INVESTMENT SUBADVISORY AGREEMENT
E*TRADE FUNDS
with respect to
E*TRADE GLOBAL TITANS INDEX FUND
AGREEMENT, effective commencing as of __________, 2000 among Barclays
Global Fund Advisors (the "Subadviser"), E*TRADE Asset Management, Inc. (the
"Adviser") and E*TRADE Funds (the "Trust") with respect to E*TRADE Global Index
Fund (the "Fund").
WHEREAS, the Trust is a Delaware business trust organized pursuant to a
Declaration of Trust dated November 4, 1998 (the "Declaration of Trust"), and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified management investment company, and the Fund
is a portfolio of the Trust; and
WHEREAS, the Trust has retained the Adviser to render investment advisory
services to the Trust on behalf of the Fund, pursuant to an Investment Advisory
Agreement dated as of October 22, 1999, among the Adviser and the Trust
("Investment Advisory Agreement");
WHEREAS, the Trust's Board of Trustees, including a majority of the
Trustees who are not "interested persons," as defined in the 1940 Act, and the
Fund shareholders have approved the appointment of the Subadviser to perform
certain investment advisory services for the Trust on behalf of the Fund
pursuant to this Subadvisory Agreement ("the "Subadvisory Agreement") and the
Subadviser is willing to perform such services for the Trust on behalf of the
Fund; and
WHEREAS, the Subadviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Subadviser, the Adviser and the Trust
as follows:
1. Appointment. The Trust and Adviser hereby appoint the Subadviser to act as
investment adviser to the Fund for the periods and on the terms set forth in
this Subadvisory Agreement. The Subadviser accepts such appointment and agrees
to furnish the services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties.
(a) Subject to the supervision of the Trustees of the Trust and the
Adviser, the Subadviser will, in coordination with the Adviser: (i) provide a
program of continuous investment management for the Fund in accordance with the
Fund's investment objective, policies and limitations as stated in the Fund's
Prospectus and Statement of Additional Information included as part of the
Trust's Registration Statement filed with the Securities and Exchange Commission
("SEC") and as the Prospectus and Statement of Additional Information may be
amended from time to time, copies of which shall be provided to the Subadviser
by the Adviser; (ii) make investment decisions for the Fund; and (iii) place
orders to purchase and sell securities and other assets for the Fund.
(b) In performing its investment management services to the Fund
hereunder, the Subadviser will provide the Fund, among other things, as received
by the index compilation provider, analysis of statistical and economic data and
information concerning index compilation, including portfolio composition. The
Subadviser will determine the securities, instruments, repurchase agreements,
futures, options and other investments and techniques that the Fund will
purchase, sell, enter into or use, and will provide an ongoing evaluation of the
Fund's portfolio. The Subadviser will advise as to what portion of the Fund's
portfolio shall be invested in securities and other assets, and what portion if
any, should be held uninvested.
(c) The Subadviser's duties shall not include and the Subadviser shall
have no responsibility for tax reporting or securities lending.
(d) The Subadviser further agrees that, in performing its duties hereunder,
it will:
(i) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the Internal Revenue Code (the "Code") and all other
applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Trustees;
(ii) manage the Fund so that it will qualify, and continue to qualify,
as a regulated investment company under Subchapter M of the Code and regulations
issued thereunder;
(iii) place orders for the Fund directly with the issuer, or with any
broker or dealer, in accordance with applicable policies expressed in the Fund's
Prospectus and/or Statement of Additional Information and in accordance with
applicable legal requirements;
(iv) furnish to the Trust whatever statistical information the Trust
may reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Subadviser will keep the Trust, the Trustees and
the Adviser informed of developments materially affecting the Fund's portfolio
and shall, when requested meet quarterly with the Trustees to explain its
activities. Further, on the Subadviser's own initiative, furnish to the Trust
from time to time whatever information the Subadviser believes appropriate for
this purpose;
(v) make available to the Trust's administrator (the "Administrator"),
the Adviser and the Trust, promptly upon their request, such copies of its
investment records and ledgers with respect to the Fund as may be required to
assist the Administrator, the Adviser and the Trust in their compliance with
applicable laws and regulations. The Subadviser will furnish the Trustees with
such periodic and special reports regarding the Fund and any subadviser as they
may reasonably request;
(vi) immediately notify the Trust in the event that the Subadviser or
any of its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Subadviser from serving as investment adviser
pursuant to this Subadvisory Agreement; or (2) becomes aware that it is the
subject of an administrative proceeding or enforcement action by the SEC or
other regulatory authority. The Subadviser further agrees to notify the Trust
immediately of any material fact known to the Subadviser respecting or relating
to the Subadviser that is not contained in the Trust's Registration Statement
regarding the Fund, or any amendment or supplement thereto, but that is required
to be disclosed thereon, and of any statement contained therein that becomes
untrue in any material respect; and
(vii) in providing investment advice to the Fund, use no inside
information that may be in its possession or in the possession of any of its
affiliates, nor will the Subadviser seek to obtain any such information.
3. Futures and Options. The Subadviser's investment authority shall include
advice with regard to purchasing, selling, covering open positions, and
generally dealing in financial futures contracts and options thereon, in
accordance with Rule 4.5 of the Commodity Futures Trading Commission.
The Subadviser's authority shall include authority to: (i) open and maintain
brokerage accounts for financial futures and options (such accounts hereinafter
referred to as "Brokerage Accounts") on behalf of and in the name of the Fund;
and (ii) execute for and on behalf of the Brokerage Accounts, standard customer
agreements with a broker or brokers. The Subadviser may, using such of the
securities and other property in the Brokerage Accounts as the Subadviser deems
necessary or desirable, direct the custodian to deposit on behalf of the Fund,
original and maintenance brokerage deposits and otherwise direct payments of
cash, cash equivalents and securities and other property into such brokerage
accounts and to such brokers as the Subadviser deems desirable or appropriate.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION (THE
"COMMISSION") IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE CLIENTS, THIS
BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH
THE COMMISSION. THE COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN
A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR
DISCLOSURE. CONSEQUENTLY, THE COMMISSION HAS NOT REVIEWED OR APPROVED THIS
TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.
The Trust represents and warrants that it is a "qualified eligible client"
within the meaning of CFTC Regulations Section 4.7 and, as such, consents to
treat the Fund in accordance with the exemption contained in CFTC Regulations
Section 4.7(b).
4. Use of Securities Brokers and Dealers. The Subadviser will monitor the use of
broker-dealers. To the extent permitted by the Subadviser's Form ADV as filed
with the SEC, purchase and sale orders will usually be placed with brokers who
are selected by the Subadviser as able to achieve "best execution" of such
orders. "Best execution" shall mean prompt and reliable execution at the most
favorable securities price, taking into account the other provisions hereinafter
set forth. Whenever the Subadviser places orders, or directs the placement of
orders, for the purchase or sale of portfolio securities on behalf of the Fund,
in selecting brokers or dealers to execute such orders, the Subadviser is
expressly authorized to consider the fact that a broker or dealer has furnished
statistical, research or other information or services which enhance the
Subadviser's research and portfolio management capability generally. It is
further understood in accordance with Section 28(e) of the Securities Exchange
Act of 1934, as amended, that the Subadviser may negotiate with and assign to a
broker a commission which may exceed the commission which another broker would
have charged for effecting the transaction if the Subadviser determines in good
faith that the amount of commission charged was reasonable in relation to the
value of brokerage and/or research services (as defined in Section 28(e))
provided by such broker, viewed in terms either of the Fund or the Subadviser's
overall responsibilities to the Subadviser's discretionary accounts.
Neither the Subadviser nor any parent, subsidiary or related firm shall act
as a securities broker with respect to any purchases or sales of securities
which may be made on behalf of the Fund, provided that this limitation shall not
prevent the Subadviser from utilizing the services of a securities broker which
is a parent, subsidiary or related firm, provided such broker effects
transactions on a "cost only" or "nonprofit" basis to itself and provides
competitive execution. Unless otherwise directed by the Trust in writing, the
Subadviser may utilize the service of whatever independent securities brokerage
firm or firms it deems appropriate to the extent that such firms are competitive
with respect to price of services and execution.
5. Allocation of Charges and Expenses.
(a) Except as otherwise specifically provided in this section 5, the
Subadviser shall pay the compensation and expenses of all of its directors,
officers and employees who serve as trustees, officers and executive employees
of the Trust (including the Trust's share of payroll taxes), and the Subadviser
shall make available, without expense to the Fund, the service of its directors,
officers and employees who may be duly elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law.
(b) The Subadviser shall not be required to pay pursuant to this Subadvisory
Agreement any expenses of the Fund other than those specifically allocated to
the Subadviser in this section 5. In particular, but without limiting the
generality of the foregoing, the Subadviser shall not be responsible, except to
the extent of the reasonable compensation of such of the Trust's employees as
are officers or employees of the Subadviser whose services may be involved, for
the following expenses of the Fund: organization and certain offering expenses
of the Fund (including out-of-pocket expenses, but not including the
Subadviser's overhead and employee costs); fees payable to the Subadviser and to
any other Fund advisers or consultants; legal expenses; auditing and accounting
expenses; interest expenses; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by or with respect to the Fund in connection with membership in
investment company trade organizations; cost of insurance relating to fidelity
coverage for the Trust's officers and employees; fees and expenses of the Fund's
Administrator or of any custodian, subcustodian, transfer agent, registrar, or
dividend disbursing agent of the Fund; payments to the Administrator for
maintaining the Fund's financial books and records and calculating its daily net
asset value; other payments for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates; other expenses in connection with the issuance,
offering, distribution or sale of securities issued by the Fund; expenses
relating to investor and public relations; expenses of registering and
qualifying shares of the Fund for sale; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
or other assets of the Fund, or of entering into other transactions or engaging
in any investment practices with respect to the Fund; expenses of printing and
distributing prospectuses, Statements of Additional Information, reports,
notices and dividends to stockholders; costs of stationery or other office
supplies; any litigation expenses; costs of stockholders' and other meetings;
the compensation and all expenses (specifically including travel expenses
relating to the Fund's business) of officers, Trustees and employees of the
Trust who are not interested persons of the Subadviser; and travel expenses (or
an appropriate portion thereof) of officers or Trustees of the Trust who are
officers, directors or employees of the Subadviser to the extent that such
expenses relate to attendance at meetings of the Board of Trustees of the Trust
with respect to matters concerning the Fund, or any committees thereof or
advisers thereto.
6. Compensation.
As compensation for the services provided and expenses assumed by the
Subadviser under this Subadvisory Agreement, the Adviser will pay the Subadviser
at the end of each calendar month an advisory fee computed daily at an annual
rate equal to the amount of average daily net assets listed opposite the Fund's
name in Exhibit A, and subject to any minimum fees stated therein. The "average
daily net assets" of the Fund shall mean the average of the values placed on the
Fund's net assets as of 4:00 p.m. (New York time) on each day on which the net
asset value of the Fund is determined consistent with the provisions of Rule
22c-1 under the 1940 Act or, if the Fund lawfully determines the value of its
net assets as of some other time on each business day, as of such other time.
The value of net assets of the Fund shall always be determined pursuant to the
applicable provisions of the Declaration of Trust and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
Section 6, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of the New York Stock
Exchange, or as of such other time as the value of the net assets of the Fund's
portfolio may lawfully be determined, on that day. If the determination of the
net asset value of the shares of the Fund has been so suspended for a period
including any month end when the Subadviser's compensation is payable pursuant
to this section, then the Subadviser's compensation payable at the end of such
month shall be computed on the basis of the value of the net assets of the Fund
as last determined (whether during or prior to such month). If the Fund
determines the value of the net assets of its portfolio more than once on any
day, then the last such determination thereof on that day shall be deemed to be
the sole determination thereof on that day for the purposes of this Section 6.
7. Books and Records. The Subadviser agrees to maintain such books and records
with respect to its services to the Fund as are required by Section 31 under the
1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Subadviser
also agrees that records it maintains and preserves pursuant to Rules 31a-1 and
Rule 31a-2 under the 1940 Act and otherwise in connection with its services
hereunder are the property of the Trust and will be surrendered promptly to the
Trust upon its request. The Subadviser further agrees that it will furnish to
regulatory authorities having the requisite authority any information or reports
in connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable laws and regulations.
8. Aggregation of Orders. Provided that the investment objective, policies and
restrictions of the Fund are adhered to, the Trust agrees that the subadviser
may aggregate sales and purchase orders of securities held in the Fund with
similar orders being made simultaneously for other accounts managed by the
subadviser or with accounts of the affiliates of the Subadviser, if in the
Subadviser's reasonable judgment such aggregation shall result in an overall
economic benefit to the respective Fund taking into consideration the
advantageous selling or purchase price, brokerage commission and other expenses.
The Trust acknowledges that the determination of such economic benefit to the
Fund by the subadviser represents the Subadviser's evaluation that the Fund is
benefited by relatively better purchase or sales prices, lower commission
expenses and beneficial timing of transactions or a combination of these and
other factors.
9. Standard of Care. The Subadviser shall exercise its best judgment in
rendering the services provided by it under this Subadvisory Agreement.
10. Liability.
(a) Neither the Subadviser nor its officers, directors, employees,
affiliates, agents or controlling persons shall be liable to the Trust, the
Fund, its shareholders and/or any other person for the acts, omissions, errors
of judgment and/or mistakes of law of any other fiduciary and/or person with
respect to the Fund.
(b) Neither the Subadviser nor its officers, directors, employees,
affiliates, agents or controlling persons or assigns shall be liable for any
act, omission, error of judgment or mistake of law and/or for any loss suffered
by the Trust, the Fund, its shareholders and/or any other person in connection
with the matters to which this Subadvisory Agreement relates; provided that no
provision of this Subadvisory Agreement shall be deemed to protect the
Subadviser against any liability to the Trust, the Fund and/or its shareholders
which it might otherwise be subject by reason of any willful misfeasance, bad
faith or gross negligence in the performance of its duties or the reckless
disregard of its obligations and duties under this Subadvisory Agreement or
otherwise for breach of this Subadvisory Agreement.
(c) The Trust on behalf of the Fund, hereby agrees to indemnify and hold
harmless the Subadviser, its directors, officers and employees and agents and
each person, if any, who controls the Subadviser (collectively, the "Indemnified
Parties") against any and all losses, claims damages or liabilities (including
reasonable attorneys fees and expenses), joint or several, relating to the Trust
or Fund, to which any such Indemnified Party may become subject under the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, the
Investment Advisers Act or other federal or state statutory law or regulation,
at common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (1)
any act, omission, error and/or mistake of any other fiduciary and/or any other
person; or (2) any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission to state a material fact required to be
stated or necessary to make the statements made not misleading in (a) the
Registration Statement, the prospectus or any other filing, (b) any
advertisement or sales literature authorized by the Trust for use in the offer
and sale of shares of the Fund, or (c) any application or other document filed
in connection with the qualification of the Trust or shares of the Fund under
the Blue Sky or securities laws of any jurisdiction, except insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any such untrue statement or omission or alleged untrue
statement or omission (i) in a document prepared by the Subadviser, or (ii) made
in reliance upon and in conformity with information furnished to the Trust by or
on behalf of the Subadviser pertaining to or originating with the Subadviser for
use in connection with any document referred to in clauses (a), (b) or (c).
(d) It is understood, however, that nothing in this paragraph 10 shall
protect any Indemnified Party against, or entitle any Indemnified Party to,
indemnification against any liability to the Trust, Fund and/or its shareholders
to which such Indemnified Party is subject, by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of any reckless disregard of its obligations and duties under this
Subadvisory Agreement or any breach of this Subadvisory Agreement.
(e) Notwithstanding any other provision of this Subadvisory Agreement, the
Subadviser shall not be liable for any loss to the Fund or the Adviser caused
directly or indirectly by circumstances beyond the Subadviser's reasonable
control including, but not limited to, government restrictions, exchange or
market rulings, suspensions of trading, acts of civil or military authority,
national emergencies, earthquakes, floods or other catastrophes, acts of God,
wars or failures of communication or power supply.
11. Services Not Exclusive. It is understood that the services of the Subadviser
are not exclusive, and that nothing in this Subadvisory Agreement shall prevent
the Subadviser from providing similar services to other investment companies or
to other series of investment companies, including the Trust (whether or not
their investment objectives and policies are similar to those of the Fund) or
from engaging in other activities, provided such other services and activities
do not, during the term of this Subadvisory Agreement, interfere in a material
manner with the Subadviser's ability to meet its obligations to the Fund
hereunder. When the Subadviser recommends the purchase or sale of a security for
other investment companies and other clients, and at the same time the
Subadviser recommends the purchase or sale of the same security for the Fund, it
is understood that in light of its fiduciary duty to the Fund, such transactions
will be executed on a basis that is fair and equitable to the Fund. In
connection with purchases or sales of portfolio securities for the account of
the Fund, neither the Subadviser nor any of its directors, officers or employees
shall act as a principal or agent or receive any commission. If the Subadviser
provides any advice to its clients concerning the shares of the Fund, the
Subadviser shall act solely as investment counsel for such clients and not in
any way on behalf of the Trust or the Fund.
12. Duration and Termination.
(a) This Subadvisory Agreement shall continue for a period of two years from
the date of commencement, and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically approved at
least annually by (i) the Trustees or (ii) a vote of a "majority" (as defined in
the 1940 Act) of the Fund's outstanding voting securities (as defined in the
1940 Act), provided that in either event the continuance is also approved by a
majority of the Trustees who are not parties to this Subadvisory Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Subadvisory Agreement, by vote cast in person (to the extent required by the
1940 Act) at a meeting called for the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Subadvisory Agreement may be
terminated: (a) at any time without penalty by the Fund upon the vote of a
majority of the Trustees or by vote of the majority of the Fund's outstanding
voting securities, upon sixty (60) days' written notice to the Subadviser or (b)
by the Subadviser at any time without penalty, upon sixty (60) days' written
notice to the Trust. This Subadvisory Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).
13. Amendments. This Subadvisory Agreement may be amended at any time but
only by the mutual written agreement of the parties to this Subadvisory
Agreement and in accordance with any applicable legal or regulatory
requirements.
14. Proxies. Unless the Trust gives written instructions to the contrary, the
Subadviser shall vote all proxies solicited by or with respect to the issuers of
securities in which assets of the Fund may be invested in a manner which best
serves the interests of the Fund's shareholders. The Subadviser shall use its
best good faith judgment to vote such proxies in a manner which best serves the
interests of the Fund's shareholders. The Subadviser shall maintain a record of
how the Subadviser voted and such record shall be available to the Trust or
Adviser upon request.
15. Use of Name. The Subadviser hereby consents to the use of its name and
the names of its affiliates in the Fund's disclosure documents, shareholder
communications, advertising, sales literature and similar communications.
16. Confidential Information. The Subadviser shall maintain the strictest
confidence regarding the business affairs of the Fund. Written reports furnished
by the Subadviser to the Trust or the Adviser shall be treated by such entities
as confidential and for the exclusive use and benefit of the Trust except as
disclosure may be required by applicable law.
17. Notices. All notices hereunder shall be provided in writing and
delivered by first class postage pre-paid U.S. mail or by fax. Notices
delivered by mail shall be deemed given three days after mailing and upon
receipt if sent by fax.
If to Trust: E*Trade funds
4500 Bohannon Drive
Menlo Park, CA 94025
Attn: President
Fax No.: (650) 331-6802
If to Adviser: E*Trade asset management, INC.
4500 Bohannon Drive
Menlo Park, CA 94025
Attn: President
Fax No.: (650) 331-6802
<PAGE>
If to Subadviser: barclays global fund advisors
45 Fremont Street
San Francisco, CA 94105
Attn: Legal Department
Fax No.: (415) 597-2698
18. Miscellaneous.
(a) This Subadvisory Agreement shall be governed by the laws of the State of
California without regard to the conflicts of law provisions thereof, provided
that nothing herein shall be construed in a manner inconsistent with the 1940
Act, the Advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Subadvisory Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(c) If any provision of this Subadvisory Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Subadvisory Agreement shall not be affected hereby and, to this extent, the
provisions of this Subadvisory Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Subadviser as an
agent of the Adviser, the Trust or the Fund.
(e) All liabilities of the Trust hereunder are limited to the assets of the
Fund.
(f) Concurrently with the execution of this Subadvisory Agreement, the
Subadviser is delivering to the Adviser and the Trust a copy of part II of its
Form ADV, as revised, on file with the SEC. The Adviser and the Trust hereby
acknowledge receipt of such copy.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the date first stated above.
E*TRADE FUNDS
By:
Name: __________________________
Title:__________________________
E*TRADE ASSET MANAGEMENT, INC.
By:
Name: __________________________
Title:__________________________
BARCLAYS GLOBAL FUND ADVISORS
By:
Name: __________________________
Title:__________________________
<PAGE>
EXHIBIT A
Name of Fund Subadvisory Fee
E*TRADE Global Titans Index Fund Based on an annual basis of
the Fund's daily net assets
calculated as described in
Section 6 of the foregoing
Subadvisory Agreement using
the following rates: 0.20% of
daily net assets on amounts
up to $200 million; 0.15% of
daily net assets on amounts
between $200 and $500
million; and 0.12% of daily
net assets on amounts above
$500 million; provided,
however, that if such fee as
calculated above would be
less than $40,000 for any
year this Subadvisory
Agreement is in effect, then
the fee shall be $40,000.
Any such minimum fee shall be
prorated for any year in
which this Subadvisory
Agreement terminates.
FORM OF
INVESTMENT ADVISORY AGREEMENT
E*TRADE FUNDS
with respect to
E*TRADE PREMIER MONEY MARKET FUND
AGREEMENT, effective commencing as of __________, 2000 between E*TRADE
Asset Management, Inc. (the "Adviser") and E*TRADE Funds (the "Trust") with
respect to E*TRADE Premier Money Market Fund (the "Fund").
WHEREAS, the Trust is a Delaware business trust organized pursuant to a
Declaration of Trust dated November 4, 1998 (the "Declaration of Trust"), and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and the Fund is a portfolio
of the Trust; and
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to furnish such
services to the Fund; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Trust and the Adviser as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties.
(a) Subject to the supervision of the Trustees of the Trust, the Adviser
will: (i) provide a program of continuous investment management for the Fund in
accordance with the Fund's investment objective, policies and limitations as
stated in the Fund's Prospectus and Statement of Additional Information included
as part of the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC") and as the Prospectus and Statement of Additional
Information may be amended from time to time, copies of which shall be provided
to the Adviser by the Trust; (ii) select and manage, subject to approval by the
Trustees, investment subadvisers, who may be granted discretionary investment
authority for the Fund; and (iii) select, subject to approval by the Trustees,
master funds in which to invest.
(b) In performing its investment management services to the Fund hereunder,
the Adviser will provide the Fund with ongoing investment guidance, policy
direction, including oral and written research, monitoring of all subadvised
portions of the Fund, analysis, advice, statistical and economic data and
judgments regarding individual investments, general economic conditions and
trends and long-range investment policy.
(c) To the extent permitted by the Adviser's Form ADV as filed with the SEC
and subject to the approval of the Trustees of the Trust, the Adviser shall have
the authority to manage cash and money market instruments for cash flow purposes
even though the Fund may function as a feeder fund.
(d) To the extent permitted by the Adviser's current Form ADV as filed with
the SEC, the Adviser will advise and manage on a discretionary basis with regard
to the securities, instruments, repurchase agreements, options and other
investments and techniques that the Fund will purchase, sell, enter into or use,
and will provide an ongoing evaluation of the Fund's portfolio. The Adviser will
advise as to what portion of the Fund's portfolio shall be invested in
securities and other assets, and what portion if any, should be held uninvested.
(e) The Adviser may engage and remove one or more subadvisers, subject to the
legally required approvals of the Trust and its shareholders, and the Adviser
shall monitor the performance of any subadviser and report to the Trust thereon.
(f) The Adviser further agrees that, in performing its duties hereunder, it
will:
(i) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the Internal Revenue Code (the "Code") and all other
applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Trustees;
(ii) use reasonable efforts to manage the Fund so that it will qualify,
and continue to qualify, as a regulated investment company under Subchapter M of
the Code and regulations issued thereunder;
(iii) place orders pursuant to the Fund's investment determinations as
approved by the Trustees for the Fund directly with the issuer, or with any
broker or dealer, in accordance with applicable policies expressed in the Fund's
Prospectus and/or Statement of Additional Information and in accordance with
applicable legal requirements;
(iv) furnish to the Trust whatever statistical information the Trust may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Adviser will keep the Trust and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Adviser's own initiative, furnish to the Trust from time to time whatever
information the Adviser believes appropriate for this purpose;
(v) make available to the Trust's administrator (the "Administrator") and
the Trust, promptly upon their request, such copies of its investment records
and ledgers with respect to the Fund as may be required to assist the
Administrator and the Trust in their compliance with applicable laws and
regulations. The Adviser will furnish the Trustees with such periodic and
special reports regarding the Fund and any subadviser as they may reasonably
request;
(vi) immediately notify the Trust in the event that the Adviser or any of
its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the SEC or other regulatory
authority. The Adviser further agrees to notify the Trust immediately of any
material fact known to the Adviser respecting or relating to the Adviser that is
not contained in the Trust's Registration Statement regarding the Fund, or any
amendment or supplement thereto, but that is required to be disclosed thereon,
and of any statement contained therein that becomes untrue in any material
respect; and
(vii) in providing investment advice to the Fund, use no inside
information that may be in its possession or in the possession of any of its
affiliates, nor will the Adviser seek to obtain any such information.
3. Futures and Options. The Adviser's investment authority shall include advice
with regard to purchasing, selling, covering open positions, and generally
dealing in financial futures contracts and options thereon, or master funds
which do so in accordance with Rule 4.5 of the Commodity Futures Trading
Commission.
The Adviser's authority shall include authority to: (i) open and maintain
brokerage accounts for financial futures and options (such accounts hereinafter
referred to as "Brokerage Accounts") on behalf of and in the name of the Fund;
and (ii) execute for and on behalf of the Brokerage Accounts, standard customer
agreements with a broker or brokers. The Adviser may, using such of the
securities and other property in the Brokerage Accounts as the Adviser deems
necessary or desirable, direct the custodian to deposit on behalf of the Fund,
original and maintenance brokerage deposits and otherwise direct payments of
cash, cash equivalents and securities and other property into such brokerage
accounts and to such brokers as the Adviser deems desirable or appropriate.
4. Use of Securities Brokers and Dealers. The Adviser will monitor the use by
any subadviser of broker-dealers. To the extent permitted by the Adviser's Form
ADV as filed with the SEC, purchase and sale orders will usually be placed with
brokers who are selected by the Adviser as able to achieve "best execution" of
such orders. "Best execution" shall mean prompt and reliable execution at the
most favorable securities price, taking into account the other provisions
hereinafter set forth. Whenever the Adviser places orders, or directs the
placement of orders, for the purchase or sale of portfolio securities on behalf
of the Fund, in selecting brokers or dealers to execute such orders, the Adviser
is expressly authorized to consider the fact that a broker or dealer has
furnished statistical, research or other information or services which enhance
the Adviser's research and portfolio management capability generally. It is
further understood in accordance with Section 28(e) of the Securities Exchange
Act of 1934, as amended, that the Adviser may negotiate with and assign to a
broker a commission which may exceed the commission which another broker would
have charged for effecting the transaction if the Adviser determines in good
faith that the amount of commission charged was reasonable in relation to the
value of brokerage and/or research services (as defined in Section 28(e))
provided by such broker, viewed in terms either of the Fund or the Adviser's
overall responsibilities to the Adviser's discretionary accounts.
Neither the Adviser nor any parent, subsidiary or related firm shall act as a
securities broker with respect to any purchases or sales of securities which may
be made on behalf of the Fund, provided that this limitation shall not prevent
the Adviser from utilizing the services of a securities broker which is a
parent, subsidiary or related firm, provided such broker effects transactions on
a "cost only" or "nonprofit" basis to itself or otherwise in accordance with
applicable law and provides competitive execution. Unless otherwise directed by
the Trust in writing, the Adviser may utilize the service of whatever
independent securities brokerage firm or firms it deems appropriate to the
extent that such firms are competitive with respect to price of services and
execution.
5. Allocation of Charges and Expenses.
(a) Except as otherwise specifically provided in this section 5, the Adviser
shall pay the compensation and expenses of all of its directors, officers and
employees who serve as trustees, officers and executive employees of the Trust
(including the Trust's share of payroll taxes), and the Adviser shall make
available, without expense to the Fund, the service of its directors, officers
and employees who may be duly elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law.
(b) The Adviser shall not be required to pay pursuant to this Agreement any
expenses of the Fund other than those specifically allocated to the Adviser in
this section 5. In particular, but without limiting the generality of the
foregoing, the Adviser shall not be responsible, except to the extent of the
reasonable compensation of such of the Trust's employees as are officers or
employees of the Adviser whose services may be involved, for the following
expenses of the Fund: organization and certain offering expenses of the Fund
(including out-of-pocket expenses, but not including the Adviser's overhead and
employee costs); fees payable to the Adviser and to any other Fund advisers or
consultants; legal expenses; auditing and accounting expenses; interest
expenses; telephone, telex, facsimile, postage and other communications
expenses; taxes and governmental fees; fees, dues and expenses incurred by or
with respect to the Fund in connection with membership in investment company
trade organizations; cost of insurance relating to fidelity coverage for the
Trust's officers and employees; fees and expenses of the Fund's Administrator or
of any custodian, subcustodian, transfer agent, registrar, or dividend
disbursing agent of the Fund; expenses of any master fund in which the Fund
invests; payments to the Administrator for maintaining the Fund's financial
books and records and calculating its daily net asset value; other payments for
portfolio pricing or valuation services to pricing agents, accountants, bankers
and other specialists, if any; expenses of preparing share certificates; other
expenses in connection with the issuance, offering, distribution or sale of
securities issued by the Fund; expenses relating to investor and public
relations; expenses of registering and qualifying shares of the Fund for sale;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; brokerage commissions or other costs of acquiring
or disposing of any portfolio securities or other assets of the Fund, or of
entering into other transactions or engaging in any investment practices with
respect to the Fund; expenses of printing and distributing prospectuses,
Statements of Additional Information, reports, notices and dividends to
stockholders; costs of stationery or other office supplies; any litigation
expenses; costs of stockholders' and other meetings; the compensation and all
expenses (specifically including travel expenses relating to the Fund's
business) of officers, Trustees and employees of the Trust who are not
interested persons of the Adviser; and travel expenses (or an appropriate
portion thereof) of officers or Trustees of the Trust who are officers,
directors or employees of the Adviser to the extent that such expenses relate to
attendance at meetings of the Board of Trustees of the Trust with respect to
matters concerning the Fund, or any committees thereof or advisers thereto.
6. Compensation.
As compensation for the services provided and expenses assumed by the Adviser
under this Agreement, the Trust will arrange for the Fund to pay the Adviser at
the end of each calendar month an advisory fee computed daily at an annual rate
equal to the amount of average daily net assets listed opposite the Fund's name
in Exhibit A, attached hereto. The "average daily net assets" of the Fund shall
mean the average of the values placed on the Fund's net assets as of 4:00 p.m.
(New York time) on each day on which the net asset value of the Fund is
determined consistent with the provisions of Rule 22c-1 under the 1940 Act or,
if the Fund lawfully determines the value of its net assets as of some other
time on each business day, as of such other time. The value of net assets of the
Fund shall always be determined pursuant to the applicable provisions of the
Declaration of Trust and the Registration Statement. If, pursuant to such
provisions, the determination of net asset value is suspended for any particular
business day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of the close of the New York Stock Exchange, or as of such other time
as the value of the net assets of the Fund's portfolio may lawfully be
determined, on that day. If the determination of the net asset value of the
shares of the Fund has been so suspended for a period including any month end
when the Adviser's compensation is payable pursuant to this section, then the
Adviser's compensation payable at the end of such month shall be computed on the
basis of the value of the net assets of the Fund as last determined (whether
during or prior to such month). If the Fund determines the value of the net
assets of its portfolio more than once on any day, then the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this section 6.
7. Books and Records. The Adviser agrees to maintain such books and records with
respect to its services to the Fund as are required by Section 31 under the 1940
Act, and rules adopted thereunder, and by other applicable legal provisions, and
to preserve such records for the periods and in the manner required by that
Section, and those rules and legal provisions. The Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-1 and Rule 31a-2 under
the 1940 Act and otherwise in connection with its services hereunder are the
property of the Trust and will be surrendered promptly to the Trust upon its
request. The Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable laws and regulations.
8. Aggregation of Orders. Provided that the investment objective, policies and
restrictions of the Fund are adhered to, the Trust agrees that the Adviser may
aggregate sales and purchase orders of securities held in the Fund with similar
orders being made simultaneously for other accounts managed by the Adviser or
with accounts of the affiliates of the Adviser, if in the Adviser's reasonable
judgment such aggregation shall result in an overall economic benefit to the
respective Fund taking into consideration the advantageous selling or purchase
price, brokerage commission and other expenses. The Trust acknowledges that the
determination of such economic benefit to the Fund by the Adviser represents the
Adviser's evaluation that the Fund is benefited by relatively better purchase or
sales prices, lower commission expenses and beneficial timing of transactions or
a combination of these and other factors.
9. Standard of Care and Limitation of Liability. The Adviser shall exercise its
best judgment in rendering the services provided by it under this Agreement. The
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund or the holders of the Fund's shares in connection
with the matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Adviser against
any liability to the Trust, the Fund or to holders of the Fund's shares to which
the Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or by
reason of the Adviser's reckless disregard of its obligations and duties under
this Agreement or otherwise for breach of this Agreement. As used in this
Section 9, the term "Adviser" shall include any officers, directors, employees
or other affiliates of the Adviser performing services with respect to the Fund.
Notwithstanding any other provision of this Agreement, the Adviser shall not be
liable for any loss to the Fund caused directly or indirectly by circumstances
beyond the Adviser's reasonable control including, but not limited to,
government restrictions, exchange or market rulings, suspensions of trading,
acts of civil or military authority, national emergencies, earthquakes, floods
or other catastrophes, acts of God, wars or failures of communication or power
supply.
10. Services Not Exclusive. It is understood that the services of the Adviser
are not exclusive, and that nothing in this Agreement shall prevent the Adviser
from providing similar services to other investment companies or to other series
of investment companies, including the Trust (whether or not their investment
objectives and policies are similar to those of the Fund) or from engaging in
other activities, provided such other services and activities do not, during the
term of this Agreement, interfere in a material manner with the Adviser's
ability to meet its obligations to the Fund hereunder. When the Adviser
recommends the purchase or sale of a security for other investment companies and
other clients, and at the same time the Adviser recommends the purchase or sale
of the same security for the Fund, it is understood that in light of its
fiduciary duty to the Fund, such transactions will be executed on a basis that
is fair and equitable to the Fund. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Adviser nor any of
its directors, officers or employees shall act as a principal or agent or
receive any commission. If the Adviser provides any advice to its clients
concerning the shares of the Fund, the Adviser shall act solely as investment
counsel for such clients and not in any way on behalf of the Trust or the Fund.
11. Duration and Termination.
(a) This Agreement shall continue for a period of two years from the date of
commencement, and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually by
(i) the Trustees or (ii) a vote of a "majority" (as defined in the 1940 Act) of
the Fund's outstanding voting securities (as defined in the 1940 Act), provided
that in either event the continuance is also approved by a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any party to this Agreement, by vote cast in person
(to the extent required by the 1940 Act) at a meeting called for the purpose of
voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated: (a) at
any time without penalty by the Fund upon the vote of a majority of the Trustees
or by vote of the majority of the Fund's outstanding voting securities, upon
sixty (60) days' written notice to the Adviser or (b) by the Adviser at any time
without penalty, upon sixty (60) days' written notice to the Trust. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
12. Amendments. This Agreement may be amended at any time but only by the
mutual agreement of the parties to this Agreement and in accordance with any
applicable legal or regulatory requirements.
13. Proxies. Unless the Trust gives written instructions to the contrary, the
Adviser shall vote all proxies solicited by or with respect to the issuers of
securities in which assets of the Fund may be invested in a manner which best
serves the interests of the Fund's shareholders. The Adviser shall use its best
good faith judgment to vote such proxies in a manner which best serves the
interests of the Fund's shareholders.
14. Use of "E*TRADE" Name.
(a) It is understood that the name "E*TRADE" and any logo associated with
that name, is the valuable property of E*TRADE Group, Inc., and that the Trust
and Adviser have the right to include "E*TRADE" as a part of their name only so
long as this Agreement shall continue in effect and the Adviser is a wholly
owned subsidiary of the E*TRADE Group, Inc. Further, the Trust and the Adviser
agree that: (i) they will use the name "E*TRADE" only as a component of the
names of the Trust, the Fund and the Adviser, and for no other purposes; (ii)
neither will purport to grant to any third party any rights in the name
"E*TRADE"; (iii) at the request of E*TRADE Group, Inc., the Trust or the Adviser
take such action as may be required to provide their consent to use of the name
"E*TRADE" by E*TRADE Group, Inc. or any affiliate of E*TRADE Group, Inc., to
whom E*TRADE Group, Inc. shall have granted the right to such use; and (iv)
E*TRADE Group, Inc. may use or grant to others the right to use the name
"E*TRADE", or any abbreviation thereof, as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of such right to
any other investment company.
(b) Upon termination of this Agreement as to the Trust or its Fund, the
Trust and the Adviser shall, upon request of E*TRADE Group, Inc., cease to use
the name "E*TRADE" as part of the name of the Trust, the Fund or the Adviser, as
applicable. In the event of any such request by E*TRADE Group, Inc. that use of
the name "E*TRADE" shall cease, the Trust and the Adviser shall cause their
officers, trustees, directors and stockholders to take any and all such actions
which E*TRADE Group, Inc. may request to effect such request and to reconvey to
E*TRADE Group, Inc. any and all rights to the name "E*TRADE."
15. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of California
without regard to the conflicts of law provisions thereof, provided that nothing
herein shall be construed in a manner inconsistent with the 1940 Act, the
Advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Agreement are included for convenience only and in
no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
(c) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Adviser as an
agent of the Trust or the Fund.
(e) All liabilities of the Trust hereunder are limited to the assets of the
Fund.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the date first set forth
above.
E*TRADE FUNDS
By:
Name:
Title:
E*TRADE ASSET MANAGEMENT, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT A
Name of Fund Advisory Fee
E*TRADE Premier Money Market Fund 0.12% of the Fund's average
daily net assets, calculated
as described in Section 6 of
the foregoing Agreement,
provided, however, that such
fee shall be reduced by an
amount equal to the
management fee payable by the
master fund with respect to
those assets of the Fund
while invested in such master
fund.
FORM OF
AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED
UNDERWRITING AGREEMENT
E*TRADE FUNDS
4500 Bohannon Drive
Menlo Park, CA 94025
As of________ __, 2000
E*TRADE Securities, Inc.
4500 Bohannon Drive
Menlo Park, CA 94025
Re: Amendment No. 1 to the Amended and Restated Underwriting
Agreement
Ladies or Gentlemen:
E*TRADE Funds (the "Company") and E*TRADE Securities, Inc. entered into an
Amended and Restated Underwriting Agreement ("Agreement") dated as of August 12,
1999 with respect to the E*TRADE S&P 500 Index Fund, E*TRADE Extended Market
Index Fund, E*TRADE Bond Index Fund, E*TRADE Technology Index Fund, E*TRADE
International Index Fund and E*TRADE E-Commerce Index Fund. The purpose of this
document is to amend the Agreement to permit E*TRADE Securities to also act as
the exclusive selling agent and principal underwriter for the Shares of the
E*TRADE Global Titans Index Fund and the E*TRADE Premier Money Market Fund, each
a new series of the Trust, under substantially the same terms as the Agreement.
Except as amended below, all terms of the Agreement shall continue in effect.
The Agreement is hereby amended as follows:
<PAGE>
1. Schedule A is hereby amended and substituted with the attached Schedule
A.
2. Section 12 of the Amended and Restated Underwriting Agreement is hereby
amended as follows:
Term of the Agreement. The Amended and Restated Underwriting Agreement
shall continue in effect with respect to each Fund as indicated on Schedule B
hereto. The Amended and Restated Underwriting Agreement shall continue annually
thereafter for successive one (1) year periods if approved at least annually for
a Fund (i) by a vote of a majority of the outstanding voting securities of the
respective Fund or by a vote of the Trustees of the Company, and (ii) by a vote
of a majority of the Trustees of the Company who are not interested persons or
parties to the Agreement (other than as Trustees of the Company), cast in person
at a meeting called for the purpose of voting on this Agreement.
If the foregoing meets with your approval, please acknowledge your
acceptance by signing each of the enclosed counterparts hereof and returning
such counterparts to us, whereupon this shall constitute a binding agreement as
of the date first above written.
Very truly yours,
E*TRADE FUNDS
(on behalf of each Fund listed in the attached
Schedule A)
By: ___________________________________
Title: ___________________________________
Agreed to and Accepted:
E*TRADE SECURITIES, INC.
By: ______________________________
Title: ______________________________
<PAGE>
SCHEDULE A
The series of E*TRADE Funds currently subject to this Amended and Restated
Underwriting Agreement are as follows:
E*TRADE S&P 500 Index Fund
E*TRADE Extended Market Index Fund
E*TRADE Bond Index Fund
E*TRADE Technology Index Fund
E*TRADE International Index Fund
E*TRADE E-Commerce Index Fund
E*TRADE Global Titans Index Fund
E*TRADE Premier Money Market Fund
<PAGE>
SCHEDULE B
FUND End of Initial Term
E*TRADE S&P 500 Index Fund February 3, 2001
E*TRADE Extended Market Index Fund August 12, 2001
E*TRADE Bond Index Fund August 12, 2001
E*TRADE Technology Index Fund August 12, 2001
E*TRADE International Index Fund October 22, 2001
E*TRADE E-Commerce Index Fund October 22, 2001
E*TRADE Global Titans Index Fund _______ __, 2002
E*TRADE Premier Money Market Fund _______ __, 2002
FORM OF
AMENDMENT NO. 2
to the
CUSTODIAN AGREEMENT
The Custodian Agreement dated as of February 15, 1999, as amended, between
E*TRADE FUNDS and INVESTORS BANK & TRUST COMPANY is hereby amended as follows:
1. Appendix A is hereby amended and substituted with the attached Appendix A.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
the Custodian Agreement to be executed by their respective officers thereunto
duly authorized as of ________ __, 2000.
E*TRADE FUNDS
By:_________________________________
Name:
Title:
Investors Bank & Trust Company
By:_________________________________
Name:
Title:
<PAGE>
APPENDIX A
to the
CUSTODIAN AGREEMENT
Portfolios
E*TRADE S&P 500 Index Fund
E*TRADE Extended Market Index Fund
E*TRADE Bond Index Fund
E*TRADE International Index Fund
E*TRADE Premier Money Market Fund
FORM OF
AMENDED EXHIBIT A
This Exhibit A, amended as of _________ __, 2000 is Exhibit A to that
certain Custodian Services Agreement dated as of August 12, 1999 between PFPC
Trust Company and E*TRADE Funds.
PORTFOLIOS
E*TRADE Technology Index Fund
E*TRADE E-Commerce Index Fund
E*TRADE Global Titans Index Fund
PFPC Trust Company
By:
Title:
E*TRADE FUNDS
By:
Title:
AMENDED AND RESTATED
THIRD PARTY FEEDER FUND
AGREEMENT
AMONG
E*TRADE FUNDS
E*TRADE SECURITIES, INC.
AND
MASTER INVESTMENT PORTFOLIO
dated as of
October 22, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I. REPRESENTATIONS AND WARRANTIES....................1
1.1 Company...........................................1
1.2 MIP...............................................2
1.3 Distributor.......................................3
ARTICLE II. COVENANTS.........................................4
2.1 Company...........................................4
2.2 MIP...............................................5
2.3 Reasonable Actions................................7
ARTICLE III. INDEMNIFICATION...................................8
3.1 Funds.............................................8
3.2 Distributor.......................................9
3.3 MIP..............................................11
ARTICLE IV. ADDITIONAL AGREEMENTS............................12
4.1 Access to Information............................12
4.2 Confidentiality..................................12
4.3 Obligations of Company and MIP ..................13
ARTICLE V. TERMINATION, AMENDMENT...........................13
5.1 Termination......................................13
5.2 Amendment........................................13
ARTICLE VI. GENERAL PROVISIONS...............................13
6.1 Expenses.........................................14
6.2 Headings.........................................14
6.3 Entire Agreement.................................14
6.4 Successors.......................................14
6.5 Governing Law....................................14
6.6 Counterparts.....................................14
6.7 Third Parties....................................14
6.8 Notices..........................................14
6.9 Interpretation...................................15
6.10 Operation of Funds...............................15
6.11 Relationship of Parties; No Joint Venture, Etc. .15
6.12 Use of Name......................................15
Signatures .................................................16
Schedule A .................................................17
Schedule B .................................................18
<PAGE>
AGREEMENT
THIS AMENDED AND RESTATED THIRD PARTY FEEDER FUND AGREEMENT (the
"Agreement") is made and entered into as of the 22nd day of October, 1999, by
and among E* TRADE Funds, a Delaware business trust (the"Company"), for itself
and on behalf of those series set forth on Schedule A (the "Funds"), E*TRADE
Securities, Inc. (the "Distributor"), a California corporation, and Master
Investment Portfolio ("MIP"), a Delaware business trust, for itself and on
behalf of those series set forth on Schedule B ("the Portfolios"). This
Agreement supersedes the Third Party Feeder Fund Agreement entered into by and
among the parties on February 3, 1999, and the Third Party Feeder Fund Agreement
entered into by and among the parties on August 12, 1999.
WITNESSETH
WHEREAS, Company and MIP are each registered under the Investment Company
Act of 1940 (the"1940 Act") as open-end management investment companies;
WHEREAS, each Fund and its corresponding Portfolio have the same investment
objective and substantially the same investment policies;
WHEREAS, each Fund desires to invest on an ongoing basis all or
substantially all of its investable assets (the "Assets") in exchange for a
beneficial interest in the corresponding Portfolio (the "Investments") on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual promises made
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
1.1 Company. Company represents and warrants to MIP that:
(a) Organization. Company is a business trust duly organized, validly
existing and in good standing under the laws of the State of Delaware, and the
Funds are duly and validly designated series of Company. Company and each of the
Funds has the requisite power and authority to own its property and conduct its
business as proposed to be conducted pursuant to this Agreement.
(b) Authorization of Agreement. The execution and delivery of this
Agreement by Company on behalf of the Funds and the conduct of business
contemplated hereby have been duly authorized by all necessary action on the
part of Company's Board of Trustees and no other action or proceeding is
necessary for the execution and delivery of this Agreement by the Funds, or the
performance by the Funds of their obligations hereunder. This Agreement when
executed and delivered by Company on behalf of the Funds shall constitute a
legal, valid and binding obligation of Company, enforceable against the Funds in
accordance with its terms, except as may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or other similar law
affecting the enforcement of creditors' rights generally, and subject to general
principles of equity. No meeting of, or consent by, shareholders of the Funds is
necessary to approve or implement the Investments.
(c) 1940 Act Registration. Company is duly registered under the 1940 Act as
an open-end management investment company, and such registration is in full
force and effect.
(d) SEC Filings. Company has duly filed all forms, reports, proxy
statements and other documents (collectively, the "SEC Filings") required to be
filed with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act
of 1934 (the "1934 Act") and the 1940 Act, and the rules and regulations
thereunder, (collectively, the "Securities Laws") in connection with the
registration of the Funds' shares, any meetings of its shareholders and its
registration as an investment company. All SEC Filings relating to the Funds
were prepared to comply in all material respects in accordance with the
requirements of the applicable Securities Laws and do not, as of the date of
this Agreement, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(e) Fund Assets. The Funds currently intend on an ongoing basis to invest
their Assets solely in the corresponding Portfolio, although it reserves the
right to invest Assets in other securities and other assets and/or to redeem any
or all units of a corresponding Portfolio at any time without notice.
(f) Registration Statement. Company has reviewed MIP's and each Portfolio's
registration statement on Form N-lA, as filed with the SEC.
(g) Insurance. The Funds have in force an errors and omissions liability
insurance policy insuring each Fund against loss up to $2.5 million for
negligence or wrongful acts.
1.2 MIP. MIP represents and warrants to Company that:
(a) Organization. MIP is a trust duly organized, validly existing and in
good standing under the laws of the State of Delaware and the Portfolios are
duly and validly designated series of MIP. MIP and each of the Portfolios has
the requisite power and authority to own its property and conduct its business
as now being conducted and as proposed to be conducted pursuant to this
Agreement.
(b) Authorization of Agreement. The execution and delivery of this
Agreement by MIP on behalf of the Portfolios and the conduct of business
contemplated hereby have been duly authorized by all necessary action on the
part of MIP's Board of Trustees and no other action or proceeding is necessary
for the execution and delivery of this Agreement by the Portfolios, or the
performance by the Portfolios of their obligations hereunder and the
consummation by the Portfolios of the transactions contemplated hereby. This
Agreement when executed and delivered by MIP on behalf of the Portfolios shall
constitute a legal, valid and binding obligation of MIP and the Portfolios,
enforceable against MIP and the Portfolios in accordance with its terms. No
meeting of, or consent by, interestholders of the Portfolios is necessary to
approve the issuance of the Interests (as defined below) to the Funds.
(c) Issuance of Beneficial Interest. The issuance by MIP of beneficial
interests in the Portfolios ("Interests") in exchange for the Investments by the
Funds of their Assets has been duly authorized by all necessary action on the
part of the Board of Trustees of MIP. When issued in accordance with the terms
of this Agreement, the Interests will be validly issued, fully paid and
non-assessable.
(d) 1940 Act Registration. MIP is duly registered as an open-end management
investment company under the 1940 Act and such registration is in full force and
effect.
(e) SEC Filings; Securities Exemptions. MIP has duly filed all SEC Filings,
as defined herein, relating to the Portfolios required to be filed with the SEC
under the Securities Laws. Interests in the Portfolios are not required to be
registered under the 1933 Act, because such Interests are offered solely in
private placement transactions which do not involve any"public offering" within
the meaning of Section 4(2) of the 1933 Act. In addition, Interests in the
Portfolios are either noticed or qualified for sale or exempt from notice or
qualification requirements under applicable securities laws in those states or
jurisdictions in which Interests are offered and sold. All SEC Filings relating
to the Portfolios comply in all material respects with the requirements of the
applicable Securities Laws and do not, as of the date of this Agreement, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(f) Tax Status. Each Portfolio is taxable as a partnership for federal
income tax purposes under the Internal Revenue Code of 1986, as amended (the
"Code").
(g) Taxable and Fiscal Year. The taxable and fiscal year end of each
Portfolio is currently December 31st.
(h) Insurance. MIP has in force an errors and omissions liability insurance
policy insuring each Portfolio against loss up to $5.0 million for negligence
and wrongful acts.
1.3 Distributor. Distributor represents and warrants to MIP that the
execution and delivery of this Agreement by Distributor have been duly
authorized by all necessary action on the part of Distributor and no other
action or proceeding is necessary for the execution and delivery of this
Agreement by Distributor, or the performance by Distributor of its obligations
hereunder. This Agreement when executed and delivered by Distributor shall
constitute a legal, valid and binding obligation of Distributor, enforceable
against Distributor in accordance with its terms, except as may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium or other
similar law affecting the enforcement of creditors' rights generally, and
subject to general principles of equity.
ARTICLE II
COVENANTS
2.1 Company. Company covenants that:
(a) Advance Review of Certain Documents. Company will furnish MIP at least
ten (10) business days prior to the earlier of filing or first use, with drafts
of each Fund's registration statement on Form N-lA and any amendments thereto,
and also will furnish MIP at least three (3) business days' prior to the earlier
of filing or first use, with drafts of any prospectus or statement of additional
information supplements. In addition, Company will furnish or will cause to be
furnished to MIP at least two (2) business days prior to the earlier of filing
or first use, as the case may be, any proposed advertising or sales literature
that contains language that describes or refers to MIP or the Portfolios and
that was not previously approved by MIP. Company agrees that it will include in
all such Fund documents any disclosures that may be required by law, and that it
will incorporate in all such Fund documents any material and reasonable comments
made by MIP. MIP will not, however, in any way be liable to Company for any
errors or omissions in such documents, whether or not MIP makes any objection
thereto, except to the extent such errors or omissions result from information
provided in each Portfolio's 1940 Act registration statement or otherwise
provided by MIP for inclusion therein. In addition, neither the Funds nor
Distributor will make any other written or oral representations about MIP or the
Portfolios other than those contained in such documents without MIP's prior
written consent.
(b) SEC and Blue Sky Filings. Company will file all SEC Filings required to
be filed with the SEC under the Securities Laws in connection with the
registration of the Funds' shares, any meetings of its shareholders, and its
registration as a series of an investment company. Company will file such
similar or other documents as may be required to be filed with any securities
commission or similar authority by the laws or regulations of any state,
territory or possession of the United States, including the District of
Columbia, in which shares of a Fund are or will be noticed for sale ("State
Filings"). Each Fund's SEC Filings will be prepared in all material respects in
accordance with the requirements of the applicable Securities Laws, and, insofar
as they relate to information other than that supplied or required to be
supplied by MIP, will not, at the time they are filed or used to offer a Fund's
shares, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each Fund's State Filings will be prepared in accordance with
the requirements of applicable state and federal laws and the rules and
regulations thereunder.
(c) 1940 Act Registration. Company will be duly registered as an open-end
management investment company under the 1940 Act.
(d) Tax Status. The Funds will qualify for treatment as regulated
investment companies under Subchapter M of the Code for any taxable year during
which this Agreement continues in effect except to the extent a failure to so
qualify may result from any action or omission of the Portfolio or MIP.
(e) Fiscal Year. The Funds shall take appropriate action to adopt and
maintain the same fiscal year end as their corresponding Portfolio (currently
the last day of December).
(f) Proxy Voting. If requested to vote on matters pertaining to MIP or the
Portfolios, the Funds will vote such shares in accordance with applicable law or
exemption therefrom.
(g) Compliance with Laws. Company shall comply, in all material respects,
with all applicable laws, rules and regulations in connection with conducting
its operations as a registered investment company.
(h) Year 2000 Readiness. Company shall use its best efforts to ensure the
readiness of its computer systems, or those used by it in the performance of its
duties, to properly process information and data from and after January 1, 2000.
Company shall promptly notify MIP of any significant problems that arise in
connection with such readiness.
2.2 MIP. MIP covenants that:
(a) Signature Pages. MIP shall promptly provide all required signature
pages to Company for inclusion in any SEC Filings of Company, provided Company
is in material compliance with its covenants and other obligations under this
Agreement at the time such signature pages are provided and included in the SEC
Filing. Company and Distributor acknowledge and agree that the provision of such
signature pages does not constitute a representation by MIP, its Trustees or
Officers, that such SEC Filing complies with the requirements of the applicable
Securities Laws, or that such SEC Filing does not contain any untrue statement
of a material fact or does not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except with
respect to information provided by MIP for inclusion in such SEC Filing or for
use by Company in preparing such filing, which shall in any event include any
written information obtained from MIP's current registration statement on Form
N-1A.
(b) Redemption. Except as otherwise provided in this Section 2.2(b),
redemptions of Interests owned by the Funds will be effected pursuant to Section
2.2(c). In the event a Fund desires to withdraw its entire Investment from its
corresponding Portfolio, either by submitting a redemption request or by
terminating this Agreement in accordance with Section 5.1 hereof, the Portfolio,
unless otherwise agreed to by the parties, and in all cases subject to Sections
17 and 18 of the 1940 Act and the rules and regulations thereunder, will effect
such redemption "in kind" and in such a manner that the securities delivered to
the corresponding Fund or its custodian for the account of the Fund mirror, as
closely as practicable, the composition of the corresponding Portfolio
immediately prior to such redemption. Each Portfolio further agrees that, to the
extent legally possible, it will not take or cause to be taken any action
without Company's prior approval that would cause the withdrawal of the
corresponding Fund's Investments to be treated as a taxable event to the Fund.
Each Portfolio further agrees to conduct its activities in accordance with all
applicable requirements of Regulation 1.731-2(e) under the Code or any successor
regulation.
(c) Ordinary Course Redemptions. Each Portfolio will effect redemptions of
Interests in accordance with the provisions of the 1940 Act and the rules and
regulations thereunder, including, without limitation, Section 17 thereof. All
redemption requests other than a withdrawal of the corresponding Fund's entire
Investment in the corresponding Portfolio under Section 2.2(b) or, at the sole
discretion of MIP, a withdrawal (or series of withdrawals over any three (3)
consecutive business days) of an amount that exceeds 10% of the Portfolio's net
asset value, will be effected in cash at the next determined net asset value
after the redemption request is received. Each Portfolio will use its best
efforts to settle redemptions on the business day following the receipt of a
redemption request by the corresponding Fund and if such next business day
settlement is not practicable, will immediately notify the Fund regarding the
anticipated settlement date, which shall in all events be a date permitted under
the 1940 Act.
(d) SEC Filings. MIP will file all SEC Filings required to be filed with
the SEC under the Securities Laws in connection with any meetings of each
Portfolio's investors and its registration as an investment company and will
provide copies of all such definitive filings to Company. The Portfolios' SEC
Filings will comply in all material respects with the requirements of the
applicable Securities Laws, and will not, at the time they are filed or used,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(e) 1940 Act Registration. MIP will remain duly registered as an open-end
management investment company under the 1940 Act.
(f) Tax Status. Based upon applicable IRS interpretations and rulings and
Treasury Regulations, each Portfolio will continue to be treated as a
partnership for federal income tax purposes. Each Portfolio will continue to
satisfy (i) the income test imposed on regulated investment companies under
Section 851(b)(2) of the Code and (ii) the diversification test imposed on
regulated investment companies under Section 851(b)(3) of the Code as if such
Sections applied to it for so long as this Agreement continues in effect. MIP
agrees to forward to Company prior to the Fund's initial Investment a copy of
its opinion of counsel or private letter ruling relating to the tax status of
its corresponding Portfolio and agrees that Company and the Funds may rely upon
such opinion or ruling during the term of this Agreement.
(g) Securities Exemptions. Interests in each Portfolio have been and will
continue to be offered and sold solely in private placement transactions which
do not involve any "public offering" within the meaning of Section 4(2) of the
1933 Act or require registration or notification under any state law.
(h) Advance Notice of Certain Changes. MIP shall provide Company with at
least one hundred twenty (120) days' advance notice, or such lesser time as may
be agreed to by the parties, of any change in a Portfolio's investment
objective, and at least sixty (60) days' advance notice, or if MIP has knowledge
or should have knowledge that one of the following changes is likely to occur
more than sixty (60) days in advance of such event, notice shall be provided as
soon as reasonably possible after MIP obtains or should have obtained such
knowledge, of any material change in a Portfolio's investment policies or
activities, any material increase in a Portfolio's fees or expenses, or any
change in a Portfolio's fiscal year or time for calculating net asset value for
purposes of Rule 22c-1.
(i) Compliance with Laws. MIP shall comply, in all material respects, with
all applicable laws, rules and regulations in connection with conducting its
operations as a registered investment company.
(j) Proxy Costs. If and to the extent that: (i) MIP submits a matter to a
vote of a Portfolio's Interestholders; (ii) each Fund determines that it is
necessary or appropriate to solicit proxies from its shareholders in order to
vote its Interests; and (iii) MIP agrees to assume the costs associated with
soliciting proxies from the shareholders of any other feeder fund that invest
substantially all of its investable assets in a corresponding Portfolio, then
MIP shall assume the costs associated with soliciting proxies from the
shareholders of a Fund.
(k) Year 2000 Readiness. MIP shall use its best efforts to ensure the
readiness of its computer systems, or those used by it in the performance of its
duties, to properly process information and data from and after January 1, 2000.
MIP shall promptly notify Company of any significant problems that arise in
connection with such readiness.
2.3 Reasonable Actions. Each party covenants that it will, subject to the
provisions of this Agreement, from time to time, as and when requested by
another party or in its own discretion, as the case may be, execute and deliver
or cause to be executed and delivered all such documents, assignments and other
instruments, take or cause to be taken such actions, and do or cause to be done
all things reasonably necessary, proper or advisable in order to conduct the
business contemplated by this Agreement and to carry out its intent and purpose.
ARTICLE III
INDEMNIFICATION
3.1 Funds
(a) The Funds each agree to indemnify and hold harmless MIP, each Portfolio
and each Portfolio's investment adviser, and any director/trustee, officer,
employee or agent of MIP, a Portfolio or a Portfolio's investment adviser (in
this Section 3.1 and 3.2, each, a "Covered Person" and collectively, "Covered
Persons"), against any and all losses, claims, demands, damages, liabilities or
expenses (including, with respect to each Covered Person, the reasonable cost of
investigating and defending against any claims therefor and reasonable counsel
fees incurred in connection therewith, except as provided in subparagraph (b)),
that:
(i) arise out of or are based upon any violation or alleged violation of
any of the Securities Laws, or any other applicable statute, rule, regulation or
common law, or are incurred in connection with or as a result of any formal or
informal administrative proceeding or investigation by a regulatory agency,
insofar as such violation or alleged violation, proceeding or investigation
arises out of or is based upon any direct or indirect omission or commission (or
alleged omission or commission) by Company or by any of its trustees/directors,
officers, employees or agents, but only insofar as such omissions or commissions
relate to a Fund; or
(ii) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any advertising or sales literature
used by the Distributor, prospectus, registration statement, or any other SEC
Filing relating to Company, or any amendments or supplements to the foregoing
(in this Section 3.1 and 3.2, collectively "Offering Documents"), or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was not
made in the Offering Documents in reliance upon and in conformity with MIP's
registration statement on Form N-1A and other written information furnished by
MIP to a Fund or by any service provider of MIP for use therein or for use by a
Fund in preparing such documents, including but not limited to any written
information contained in MIP's current registration statement on Form N-1A;
provided, however, that in no case shall a Fund be liable for
indemnification hereunder with respect to any claims made against any Covered
Person unless a Covered Person shall have notified Company in writing within a
reasonable time after the summons, other first legal process, notice of a
federal, state or local tax deficiency, or formal initiation of a regulatory
investigation or proceeding giving information of the nature of the claim shall
have properly been served upon or provided to a Covered Person seeking
indemnification. Failure to notify Company of such claim shall not relieve
Company from any liability that it may have to any Covered Person otherwise than
on account of the indemnification contained in this Section.
(b) Company will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if Company elects to assume the defense, such
defense shall be conducted by counsel chosen by the Company, as applicable. In
the event Company elects to assume the defense of any such suit and retain such
counsel, each Covered Person in the suit may retain additional counsel but shall
bear the fees and expenses of such counsel unless (A) Company shall have
specifically authorized the retaining of and payment of fees and expenses of
such counsel or (B) the parties to such suit include any Covered Person and
Company, and any such Covered Person has been advised in a written opinion by
counsel acceptable to Company in its reasonable judgment that one or more legal
defenses may be available to it that may not be available to Company, in which
case Company shall not be entitled to assume the defense of such suit
notwithstanding their obligation to bear the reasonable fees and expenses of one
counsel to such persons. For purposes of the foregoing, the parties agree that
the fact that interests in a Portfolio that are not registered under the 1933
Act shall be deemed not to give rise to one or more legal or equitable defenses
available to a Portfolio that are not available to Company and/or the Funds.
Company shall not be required to indemnify any Covered Person for any settlement
of any such claim effected without the Company's prior written consent, which
consent, in each case shall not be unreasonably withheld or delayed. The
indemnities set forth in paragraph (a) will be in addition to any liability that
Company might otherwise have to Covered Persons.
3.2 Distributor
(a) Distributor agrees to indemnify and hold harmless MIP, each Portfolio
and each Covered Person, against any and all losses, claims, demands, damages,
liabilities or expenses (including, with respect to each Covered Person, the
reasonable cost of investigating and defending against any claims therefor and
reasonable counsel fees incurred in connection therewith, except as provided in
subparagraph (b)), that:
(i) arise out of or are based upon any violation or alleged violation of
any of the Securities Laws, or any other applicable statute, rule, regulation or
common law, or are incurred in connection with or as a result of any formal or
informal administrative proceeding or investigation by a regulatory agency,
insofar as such violation or alleged violation, proceeding or investigation
arises out of or is based upon any direct or indirect omission or commission (or
alleged omission or commission) by Distributor or by any of its
trustees/directors, officers, employees or agents, but only insofar as such
omissions or commissions relate to a Fund; or
(ii) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Offering Documents, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was not
made in the Offering Documents in reliance upon and in conformity with MIP's
registration statement on Form N-1A and other written information furnished by
MIP to a Fund or by any service provider of MIP for use therein or for use by a
Fund in preparing such documents, including but not limited to any written
information contained in MIP's current registration statement on Form N-1A;
provided, however, that in no case shall the Distributor be liable for
indemnification hereunder with respect to any claims made against any Covered
Person unless a Covered Person shall have notified Distributor in writing within
a reasonable time after the summons, other first legal process, notice of a
federal, state or local tax deficiency, or formal initiation of a regulatory
investigation or proceeding giving information of the nature of the claim shall
have properly been served upon or provided to a Covered Person seeking
indemnification. Failure to notify Distributor of such claim shall not relieve
Distributor from any liability that it may have to any Covered Person otherwise
than on account of the indemnification contained in this Section.
(b) Distributor will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if Distributor elects to assume the defense,
such defense shall be conducted by counsel chosen by the Distributor, as
applicable. In the event Distributor elects to assume the defense of any such
suit and retain such counsel, each Covered Person in the suit may retain
additional counsel but shall bear the fees and expenses of such counsel unless
(A) Distributor shall have specifically authorized the retaining of and payment
of fees and expenses of such counsel or (B) the parties to such suit include any
Covered Person and Distributor, and any such Covered Person has been advised in
a written opinion by counsel acceptable to Distributor in its reasonable
judgment that one or more legal defenses may be available to it that may not be
available to Distributor, in which case Distributor shall not be entitled to
assume the defense of such suit notwithstanding their obligation to bear the
reasonable fees and expenses of one counsel to such persons. For purposes of the
foregoing, the parties agree that the fact that interests in a Portfolio that
are not registered under the 1933 Act shall be deemed not to give rise to one or
more legal or equitable defenses available to a Portfolio that are not available
to Distributor and/or the Funds. Distributor shall not be required to indemnify
any Covered Person for any settlement of any such claim effected without its
written consent, which consent, in each case shall not be unreasonably withheld
or delayed. The indemnities set forth in paragraph (a) will be in addition to
any liability that Distributor might otherwise have to Covered Persons.
3.3 MIP.
(a) MIP agrees to indemnify and hold harmless Company, the Funds,
Distributor, and any affiliate of the Company, the Distributor and/or the Funds,
and any trustee/director, officer, employee or agent of any of them (in this
Section-3.3, each, a"Covered Person" and collectively, "Covered Persons"),
against any and all losses, claims, demands, damages, liabilities or expenses
(including, with respect to each Covered Person, the reasonable cost of
investigating and defending against any claims therefor and any counsel fees
incurred in connection therewith, except as provided in subparagraph (b), that:
(i) arise out of or are based upon any violation or alleged violation of
any of the Securities Laws, or any other applicable statute, rule, regulation or
common law or are incurred in connection with or as a result of any formal or
informal administrative proceeding or investigation by a regulatory agency,
insofar as such violation or alleged violation, proceeding or investigation
arises out of or is based upon any direct or indirect omission or commission (or
alleged omission or commission) by MIP, or any of its trustees, officers,
employees or agents; or
(ii) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any advertising or sales literature,
registration statement or any other SEC Filing relating to a Portfolio, or any
amendments or supplements to the foregoing (in this Section-3.3, collectively,
the "Offering Documents") relating to a Portfolio, or arise out of or are based
upon the omission or alleged omission to state therein, a material fact required
to be stated therein, or necessary to make the statements therein in light of
the circumstances under which they were made, not misleading; or
(iii) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Offering Documents relating to
Company or the Funds or relating to the Distributor or any of their affiliates
or arise out of are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to a Fund
by MIP for use therein or for use by a Fund in preparing such documents,
including but not limited to any written information contained in MIP's current
registration statement on Form N-1A.
provided, however, that in no case shall MIP be liable for indemnification
hereunder with respect to any claims made against any Covered Person unless a
Covered Person shall have notified MIP in writing within a reasonable time after
the summons, other first legal process, notice of a federal, state or local tax
deficiency, or formal initiation of a regulatory investigation or proceeding
giving information of the nature of the claim shall have properly been served
upon or provided to a Covered Person seeking indemnification. Without limiting
the generality of the foregoing, a Portfolio's indemnity to Covered Persons
shall include all relevant liabilities of Covered Persons under the Securities
Laws, as if the Offering Documents constitute a "prospectus" within the meaning
of the 1933 Act, and MIP had registered its interests under the 1933 Act
pursuant to a registration statement meeting the requirements of the 1933 Act.
Failure to notify MIP of such claim shall not relieve MIP from any liability
that it may have to any Covered Person otherwise than on account of the
indemnification contained in this Section.
(b) MIP will be entitled to participate at its own expense in the defense
or, if it so elects, to assume the defense of any suit brought to enforce any
such liability, but, if MIP elects to assume the defense, such defense shall be
conducted by counsel chosen by MIP. In the event MIP elects to assume the
defense of any such suit and retain such counsel, each Covered Person in the
suit may retain additional counsel but shall bear the fees and expenses of such
counsel unless (A) MIP shall have specifically authorized the retaining of and
payment of fees and expenses of such counsel or (B) the parties to such suit
include any Covered Person and MIP, and any such Covered Person has been advised
in a written opinion by counsel acceptable to MIP in its reasonable judgment
that one or more legal defenses may be available to it that may not be available
to MIP, in which case MIP shall not be entitled to assume the defense of such
suit notwithstanding its obligation to bear the fees and expenses of one counsel
to such persons. MIP shall not be required to indemnify any Covered Person for
any settlement of any such claim effected without its written consent, which
consent shall not be unreasonably withheld or delayed. The indemnities set forth
in paragraph (a) will be in addition to any liability that MIP might otherwise
have to Covered Persons.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Access to Information. Throughout the life of this Agreement, Company
and MIP shall afford each other reasonable access at all reasonable times to
such party's officers, employees, agents and offices and to all relevant books
and records and shall furnish each other party with all relevant financial and
other data and information as such other party may reasonably request.
4.2 Confidentiality. Each party agrees that it shall hold in strict
confidence all data and information obtained from another party (unless such
information is or becomes readily ascertainable from public or published
information or trade sources or public disclosure of such information is
required by law) and shall ensure that its officers, employees and authorized
representatives do not disclose such information to others without the prior
written consent of the party from whom it was obtained, except if disclosure is
required by the SEC, any other regulatory body, a Fund's or a Portfolio's
respective auditors, or in the opinion of counsel to the disclosing party such
disclosure is required by law, and then only with as much prior written notice
to the other parties as is practical under the circumstances. Each party hereto
acknowledges that the provisions of this Section 4.2 shall not prevent Company
or MIP from filing a copy of this Agreement as an exhibit to a registration
statement on Form N-1A as it relates to a Fund or a Portfolio, respectively, and
that such disclosure by Company or MIP shall not require any additional consent
from the other parties.
4.3 Obligations of Company and MIP. MIP agrees that the financial
obligations of Company under this Agreement shall be binding only upon the
assets of the Funds. MIP shall not seek satisfaction of any such obligation from
the officers, agents, employees, trustees or shareholders of Company or the
Funds and in no case shall MIP or any covered person have recourse to the assets
of any series of the Company other than the Funds. With respect to any
obligation of the Company on behalf of any Funds arising out of this Agreement,
MIP and its Portfolios shall look for payment or satisfaction of such obligation
solely to the assets of the Fund to which such obligation relates as though MIP
and its Portfolios had separately contracted with the Company by separate
written instrument with respect to each Fund. Company agrees that the financial
obligations of MIP under this Agreement shall be binding only upon the assets of
the Portfolios and that, except to the extent liability may be imposed under
relevant Securities Laws, Company shall not seek satisfaction of any such
obligation from the officers, agents, employees, trustees or shareholders of MIP
or other classes or series of MIP. With respect to any obligation of MIP on
behalf of the Portfolios arising out of this Agreement, Company and the Funds
shall look for payment or satisfaction of such obligation solely to the assets
of the Portfolio to which such obligation relates as though Company and the
Funds had separately contracted with MIP by separate written instrument with
respect to each Portfolio.
ARTICLE V
TERMINATION, AMENDMENT
5.1 Termination. This Agreement may be terminated at any time by the mutual
agreement in writing of all parties, or by any party on one hundred and eighty
(180)days' advance written notice to the other parties hereto; provided,
however, that nothing in this Agreement shall limit Company's right to redeem
all or a portion of its units of a Portfolio in accordance with the 1940 Act and
the rules thereunder. The provisions of Article III and Sections 4.2 and 4.3
shall survive any termination of this Agreement.
5.2 Termination with respect to each Fund. Pursuant to Section-5.1 above,
this Agreement may be terminated by the Company on 180 days advance written
notice with respect to one or more specific Funds without terminating with
respect to the other Funds.
5.3 Amendment. This Agreement may be amended, modified or supplemented at
any time in such manner as may be mutually agreed upon in writing by the
parties.
ARTICLE VI
GENERAL PROVISIONS
6.1 Expenses. All costs and expenses incurred in connection with this
Agreement and the conduct of business contemplated hereby shall be paid by the
party incurring such costs and expenses.
6.2 Headings. The headings and captions contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.3 Entire Agreement. This Agreement sets forth the entire understanding
between the parties concerning the subject matter of this Agreement and
incorporates or supersedes all prior negotiations and understandings. There are
no covenants, promises, agreements, conditions or understandings, either oral or
written, between the parties relating to the subject matter of this Agreement
other than those set forth herein. This Agreement may be amended only in writing
signed by all parties.
6.4 Successors. Each and all of the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement, nor any
rights herein granted may be assigned to, transferred to or encumbered by any
party, without the prior written consent of the other parties hereto.
6.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to the
conflicts of law provisions thereof; provided, however, that in the event of any
conflict between the 1940 Act and the laws of California, the 1940 Act shall
govern.
6.6 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing one or more counterparts.
6.7 Third Parties. Except as expressly provided in Article III, nothing
herein expressed or implied is intended or shall be construed to confer upon or
give any person, other than the parties hereto and their successors or assigns,
any rights or remedies under or by reason of this Agreement.
6.8 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
when delivered in person or three days after being sent by certified or
registered United States mail, return receipt requested, postage prepaid,
addressed:
If to the Funds:
Joe Van Remortel, Vice President
E*TRADE Funds, c/o E*TRADE Asset Management
4500 Bohannon Drive
Menlo Park, CA 94025
If to Distributor:
E*TRADE Securities, Inc.
4500 Bohannon Drive
Menlo Park, CA 94025
Attn: Brian Murray
If to MIP:
Chief Operating Officer
Master Investment Portfolio
c/o Stephens Inc.
111 Center Street
Little Rock, AR 72201
6.9 Interpretation. Any uncertainty or ambiguity existing herein shall
not be interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arms' length agreements.
6.10 Operation of Funds. Except as otherwise provided herein, this
Agreement shall not limit the authority of the Funds, Company or Distributor to
take such action as it may deem appropriate or advisable in connection with all
matters relating to the operation of the Funds and the sale of their shares.
6.11 Relationship of Parties; No Joint Venture, Etc. It is understood
and agreed that neither Company nor Distributor shall hold itself out as an
agent of MIP with the authority to bind such party, nor shall MIP hold itself
out as an agent of Company or Distributor with the authority to bind such party.
6.12 Use of Name. Except as otherwise provided herein or required by
law (e.g., in Company's Registration Statement on Form N-1A), neither Company,
the Funds nor Distributor shall describe or refer to the name of MIP, the
Portfolios or any derivation thereof, or any affiliate thereof, or to the
relationship contemplated by this Agreement in any advertising or promotional
materials without the prior written consent of MIP, nor shall MIP describe or
refer to the name of Company, the Funds or Distributor or any derivation
thereof, or any affiliate thereof, or to the relationship contemplated by this
Agreement in any advertising or promotional materials without the prior written
consent of Company, the Funds or Distributor, as the case may be. In no case
shall any such consents be unreasonably withheld or delayed. In addition, the
party required to give its consent shall have at least three (3) business days
prior to the earlier of filing or first use, as the case may be, to review the
proposed advertising or promotional materials.
[Remainder of Page left intentionally blank]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers, thereunto duly authorized, as of the date first
written above.
E* TRADE Funds
on behalf of itself and each
Fund set forth on Schedule A
By:
Name: Joseph N. Van Remortel
Title: Vice President
E*TRADE Securities, Inc.
By:
Name: Brian Murray
Title: Vice President
MASTER INVESTMENT PORTFOLIO,
on behalf of itself and each
Master Portfolio set forth on Schedule B
By:
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer
<PAGE>
SCHEDULE A
E*TRADE FUNDS
E*TRADE Bond Index Fund
E*TRADE Extended Market Index Fund
E*TRADE International Index Fund
E*TRADE S&P 500 Index Fund
Approved: October 22, 1999
<PAGE>
SCHEDULE B
MASTER INVESTMENT PORTFOLIOS
Bond Index Master Portfolio
Extended Index Master Portfolio
International Index Master Portfolio
S&P 500 Index Master Portfolio
Approved: October 22, 1999
FORM OF AMENDMENT NO. 1
TO THE AMENDED AND RESTATED
THIRD PARTY FEEDER FUND AGREEMENT
The Amended and Restated Third Party Feeder Fund Agreement, dated as of
October 20, 1999, among E*TRADE Funds, E*TRADE Securities, Inc. and Master
Investment Portfolio is hereby further amended as follows:
1. Schedule A is hereby amended and substituted with the attached
Schedule A.
2. Schedule B is hereby amended and substituted with the attached
Schedule B.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
the Amended and Restated Third Party Feeder Fund Agreement to be executed by
their respective officers, thereunto duly authorized, as of _________ __, 2000.
E*TRADE Funds
on behalf of itself and each Fund
set forth in Schedule A
By:
Title:
E*TRADE Securities, Inc.
By:
Title:
MASTER INVESTMENT PORTFOLIO
on behalf of itself and each Master
Portfolio set forth on Schedule B
By:
Title:
<PAGE>
SCHEDULE A
E*TRADE FUNDS
PORTFOLIOS
E*TRADE S&P 500 Index Fund
E*TRADE Extended Market Index Fund
E*TRADE Bond Index Fund
E*TRADE International Index Fund
E*TRADE Premier Money Market Fund
<PAGE>
SCHEDULE B
MASTER INVESTMENT PORTFOLIO
PORTFOLIOS
S&P 500 Index Master Portfolio
Extended Index Master Portfolio
Bond Index Master Portfolio
International Index Master Portfolio
Money Market Master Portfolio
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT ("Agreement")
originally entered into as of February 3, 1999, amended as of August 12, 1999;
and further amended and restated as of this 11th day of November, 1999, between
E*TRADE Funds (a Delaware business trust, hereinafter referred to as the
"Company"), on behalf of the series listed on Exhibit A hereto, as amended from
time to time (each a "Fund" and collectively, the "Funds"), and E*TRADE Asset
Management, Inc. (a Delaware corporation, hereinafter referred to as the
"Administrator").
WHEREAS, the Company is a registered investment company under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Administrator is able to act as administrator of the Fund;
WHEREAS, the Company wishes to retain the Administrator to render
administrative services with respect to each of the Funds listed on Exhibit A
hereto (as the same may be amended by the mutual written consent of the parties
from time to time), and the Administrator has agreed to act as administrator for
each of the Funds.
NOW, THEREFORE, for good and valuable consideration, the receipt whereof
is hereby acknowledged, and the mutual performance of undertakings herein, it is
agreed by and between the parties hereto as follows:
1. Services to be Provided by the Administrator. The Administrator, as
administrator for the Funds, will, at its own expense:
(a) Furnish to the Funds the services of its employees and agents in the
management and conduct of the corporate business and affairs of the Funds;
(b) If requested, provide the services of its officers as administrative
executives of the Funds and the services of any trustees of the Funds who
are "interested persons" of the Administrator or its affiliates, as that
term is defined in the Act, subject in each case to their individual
consent to serve and to applicable legal limitations;
(c) Provide office space, secretarial and clerical services and wire and
telephone services (not including toll charges, which will be reimbursed
by the Funds under Section 2 below), and monitor and review the Funds'
contracted services and expenditures;
(d) Prepare or supervise the preparation of periodic reports to the Funds'
shareholders and prepare and file, with such advice of counsel as
reasonably deemed necessary by the Administrator, such documents and other
papers as may be required to comply with the rules, regulations and
requirements of the Securities and Exchange Commission ("SEC") and other
governmental agencies, whether state or federal, except that the Funds
shall bear the expenses provided for in Section 2 hereof (special
services, if any, rendered to individual shareholders or groups of
shareholders shall not be included in the services to be rendered by the
Administrator pursuant to this paragraph, but the Administrator shall be
reimbursed for the actual cost of such services pursuant to the provisions
of Section 2 below);
(e) Coordinate the services provided to the Funds by investment advisors,
transfer and dividend disbursing agents, custodians, sub-administrators,
shareholder servicing agent, independent auditors and legal counsel; and
(f) Report to the Trustees of the Company concerning its activities
pursuant to this Agreement at regular meetings of the Trustees and at such
other times as the Trustees may request.
2. Expenses.
(a) Expenses of the Administrator. The Administrator shall bear expenses
incurred by it which are necessary for the performance of its duties and
activities specified in this Agreement, except such expenses as are assumed by
the Funds under this Agreement. The Administrator (or its affiliates, as
applicable) will also pay the compensation and expenses of all officers and
executive employees of the Company who are directors, officers or employees of
the Administrator or of its affiliates and will make available or cause to be
made available, without expense to the Funds, the services of such of the
directors, officers and employees of the Administrator or its affiliates as may
fully be elected officers or trustees of the Company, subject to their
individual consent to serve and to any limitations imposed by law.
(b) Expenses of Each Fund. The Company and each Fund shall bear the
expense of fees of its investment advisors, legal fees related to litigation,
the Administrator's compensation under this Agreement, and any expenses of any
"master" fund in which a Fund invests.
(c) Expenses of the Funds Subject to Cap. Except as described below, the
Funds shall bear all of their other expenses incurred in their operation and not
specifically assumed by the Administrator. The expenses assumed by the Funds
shall include, without limitation: organizational expenses of the Funds; fees
and expenses incurred in connection with the Funds' memberships in investment
company organizations; interest expenses, taxes and governmental fees;
distribution fees; brokerage commissions and other expenses incurred in
acquiring or disposing of the Funds' portfolio securities; expenses of
registering and qualifying the Funds' shares for sale with the SEC and with
various state securities authorities; the expenses of qualifying the Funds to do
business in jurisdictions where such qualification is required; the cost of
preparing share certificates or any other expenses, including clerical and
administrative expenses, related to the issue, redemption and repurchase of Fund
shares; insurance premiums; expenses of obtaining quotations on the Funds'
portfolio securities and pricing of the Funds' shares; expenses of shareholders'
meetings; expenses of preparing and distributing reports, proxies and
prospectuses to existing shareholders, transfer agency, dividend disbursing,
custody, auditing and legal fees (other than litigation), provided, however,
that the Administrator shall pay such expenses or reimburse each Fund for such
expenses to the extent such expenses allocated to such Fund equal or exceed the
maximum amount per Fund as specified in Exhibit B hereto.
(d) Expenses of the Funds Subject to Waiver. The Funds shall bear all
expenses and fees of the Company's Trustees who are not "interested persons" of
the Company, as that term is defined in the 1940 Act, and any independent legal
counsel retained to advise such Trustees. To the extent that such expenses and
fees of such Trustees and such independent legal counsel allocated to a Fund
equal or exceed 0.005% of such Fund's average daily net assets, the
Administrator's fee payable by such Fund under Section 3 of this Agreement will
be reduced by an amount equal to the amount by which such expenses exceed
0.0049% of such Fund's average daily net assets (but not below zero).
3. Compensation. For the services provided and the expenses assumed by the
Administrator, each of the Funds shall pay to the Administrator a fee, computed
daily and to be paid on the last business day of each month equal on an annual
basis to the amount of the average daily net assets of such Fund as listed
opposite that Fund's name in Exhibit A, attached hereto.
The term "average daily net assets of the Fund" is defined as the average
of the values placed on the net assets of the Fund as of the close of the New
York Stock Exchange, on each day on which the net asset value of the portfolio
of the Fund is determined consistent with the provisions of Rule 22c-1 under the
1940 Act or, if the Fund lawfully determines the value of the net assets of its
portfolio as of some other time on each business day, as of such time. The value
of the net assets of the Fund shall be determined pursuant to the applicable
provisions of the Fund's then current registration statement under the 1940 Act
and the Securities Act of 1933 ("Registration Statement"). If, pursuant to such
provisions, the determination of net asset value is suspended for any particular
business day, then for the purposes of this Section 3, the value of the net
assets of the Fund shall be deemed to be the value of such net assets as last
determined in accordance with the Registration Statement. If the determination
of the net asset value of the Fund has been suspended pursuant to the
Registration Statement for a period including a month for which payment pursuant
to this Agreement is due, the Administrator's compensation payable at the end of
such month shall be computed on the basis of the value of the net assets of the
Fund as last determined (whether during or prior to such month).
4. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Administrator hereby agrees that all records which it
maintains or causes to be maintained for the Funds are the property of the Funds
and further agrees to surrender promptly to the Funds any of such records upon
the Company's request. The Administrator further agrees to preserve or cause to
be preserved for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
5. Sub-contracts. The Administrator may, from time to time, at its own
expense, employ or associate with itself such person or persons as it believes
necessary to assist it in carrying out its obligations under this Agreement.
6. Compliance. The Administrator shall observe and comply with the
Certificate of Trust and organizing documents of the Company, the applicable
provisions of the Registration Statement, federal securities laws, all lawful
resolutions of the Company's Trustees and other lawful orders and directions
given to it from time to time by the Trustees. All activities engaged in by the
Administrator hereunder shall be at all times subject to the control of and
review by the Trustees.
7. Limitations of Liability.
(a) Except as may otherwise be required by the 1940 Act or the rules
thereunder or other applicable law, neither the Administrator nor its
shareholders, officers, directors, employees or agents shall be subject to any
liability for, or any damages, expenses or losses incurred in connection with,
any act or omission connected with or arising out of any services rendered under
this Agreement, except by reason of willful misfeasance, bad faith or negligence
in the performance of the Administrator's duties or by reason of reckless
disregard of the Administrator's obligations and duties under this Agreement.
Notwithstanding the foregoing, the Administrator shall not be liable to the
Company or the Funds for the acts and omissions of any party engaged by the
Administrator to assist it in carrying out its obligations under this Agreement
except to the extent that such party is liable to the Administrator for such
acts and omissions pursuant to the contract under which the Administrator shall
have retained such party. Any person, even though also employed by the
Administrator, who may be or become an employee of and paid by the Company shall
be deemed, when acting within the scope of his employment by the Company, to be
acting in such employment solely for the Company and not as the employee or
agent of the Administrator.
(b) The Administrator shall look only to the assets of a particular
Fund for the performance of the Agreement by the Company with respect to such
Fund, and neither the Trustees nor any of the Company's shareholders, officers,
employees or agents, whether past, present or future, shall be personally liable
therefor.
8. Non-Exclusivity. Nothing in this Agreement will in any way limit or
restrict the Administrator or any of its officers, directors, employees, agents
or affiliates from providing administrative services or other services to any
other person or entity pursuant to any contract or otherwise; and no such
performance of administrative or other services or taking of any such action or
doing of any such thing, shall be in any manner restricted or otherwise affected
by any aspect of any relationship of the Administrator to the Company or the
Funds or be deemed to violate or give rise to any duty or obligation of the
Administrator to the Company, except as otherwise imposed by law.
9. Duration and Termination. This Agreement shall continue in effect with
respect to each Fund as indicated on Exhibit C hereto, if not sooner terminated.
This Agreement shall continue in effect with respect to each Fund for successive
12-month periods, unless terminated, provided that each such continuance is
specifically approved at least annually by (a) the vote of a majority of the
entire Board of Trustees of the Funds, or by the vote of a majority of the
outstanding voting securities of the Funds (as defined in the 1940 Act), and (b)
the vote of a majority of those Trustees who are not parties to this Agreement
or interested persons (as such term is defined in the 1940 Act) at a meeting
called for the purpose of voting on such approval. This Agreement may be
terminated at any time without payment of any penalty, by the Company upon the
vote of a majority of the Company's Board of Trustees or by a majority of the
outstanding voting securities of the Fund, or by the Administrator, in each
case, on sixty (60) days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment (as such term is
defined in the 1940 Act).
10. Reliance on Information. In discharging the functions specified in
this Agreement, the Administrator may, without inquiry, rely and act upon all
notices, information or other communications reasonably believed to have been
supplied to it by any one or more of the Trustees or agents of the Company.
11. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
12. Miscellaneous.
a. This Agreement shall be construed in accordance with the laws of the
State of Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, as amended, or rules or orders of the SEC
thereunder.
b. The captions of this Agreement are included for convenience only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect.
c. If any provisions of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
d. The Administrator shall for all purposes herein be deemed to be an
independent contractor and shall have, unless otherwise expressly provided or
authorized, no authority to act for or represent the Company or the Funds in any
way or otherwise be deemed an agent of the Company or the Funds.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
E*TRADE FUNDS (on behalf of
the series listed on Exhibit
A)
By:
---------------------------
Name: Brian Murray
Title: President
E*TRADE ASSET MANAGEMENT, INC.
By:
---------------------------
Name: Joseph N. Van Remortel
Title: Vice President,
Operations
<PAGE>
EXHIBIT A
to the
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
Exhibit A to this Amended and Restated Administrative Services Agreement
dated as of November 11, 1999, between E*TRADE Funds and E*TRADE Asset
Management, Inc.
Name of Fund Fee
E*TRADE S&P 500 Index Fund 0.25%
E*TRADE Extended Market Index Fund 0.26%
E*TRADE Bond Index Fund 0.25%
E*TRADE Technology Index Fund 0.60%
E*TRADE International Index Fund 0.28%
E*TRADE E-Commerce Index Fund 0.70%
E*TRADE FUNDS E*TRADE ASSET MANAGEMENT, INC.
By: By:
-------------------------------- --------------------------------
Name: Name
Title: Title:
<PAGE>
EXHIBIT B
to the
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
Exhibit B to this Amended and Restated Administrative Services Agreement
dated as of November 11, 1999, between E*TRADE Funds and E*TRADE Asset
Management, Inc.
The Administrator is responsible for expenses listed in Section 2(c) of
this Agreement otherwise payable by each Fund to the extent those expenses, when
added to the expenses of such Fund in Section 2(d) of this Agreement, equal or
exceed 0.005% of such Fund's average daily net assets.
Name of Fund
E*TRADE S&P 500 Index Fund
E*TRADE Extended Market Index Fund
E*TRADE Bond Index Fund
E*TRADE Technology Index Fund
E*TRADE International Index Fund
E*TRADE E-Commerce Index Fund
E*TRADE FUNDS E*TRADE ASSET MANAGEMENT, INC.
By: By:
-------------------------------- --------------------------------
Name: Name
Title: Title:
<PAGE>
EXHIBIT C
to the
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
Exhibit C to this Amended and Restated Administrative Services Agreement
dated as of November 11, 1999, between E*TRADE Funds and E*TRADE Asset
Management, Inc.
Fund End of Initial Term
E*TRADE S&P 500 Index Fund February 3, 2001
E*TRADE Extended Market Index Fund August 12, 2001
E*TRADE Bond Index Fund August 12, 2001
E*TRADE Technology Index Fund August 12, 2001
E*TRADE International Index Fund October 19, 2001
E*TRADE E-Commerce Index Fund October 19, 2001
E*TRADE FUNDS E*TRADE ASSET MANAGEMENT, INC.
By: By:
-------------------------------- --------------------------------
Name: Name
Title: Title:
FORM OF
AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
The AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT ("Agreement")
entered into as of November 11, 1999, between E*TRADE Funds (a Delaware business
trust), on behalf of the series listed on Exhibit A, as amended from time to
time (each a "Fund" and collectively, the "Funds"), and E*TRADE Asset
Management, Inc. (a Delaware corporation, hereinafter referred to as the
"Administrator") is hereby amended as follows:
1. Exhibit A is hereby amended and substituted with the attached Exhibit
A.
2. Exhibit B is hereby amended and substituted with the attached Exhibit
B.
3. Exhibit C is hereby amended and substituted with the attached Exhibit
C.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of ________ __, 2000.
E*TRADE FUNDS (on behalf of
the series listed on Exhibit
A)
By:
---------------------------
Name: Brian Murray
Title: President
E*TRADE ASSET MANAGEMENT, INC.
By:
---------------------------
Name: W. David Moore
Title: Vice President
<PAGE>
EXHIBIT A
to the
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
Name of Fund Fee
E*TRADE S&P 500 Index Fund 0.25%
E*TRADE Extended Market Index Fund 0.26%
E*TRADE Bond Index Fund 0.25%
E*TRADE Technology Index Fund 0.60%
E*TRADE International Index Fund 0.28%
E*TRADE E-Commerce Index Fund 0.70%
E*TRADE Global Titans Index Fund 0.35%
E*TRADE Premier Money Market Fund 0.30%
E*TRADE FUNDS E*TRADE ASSET MANAGEMENT, INC.
By: By:
-------------------------------- --------------------------------
Name: Name
Title: Title:
<PAGE>
EXHIBIT B
to the
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
The Administrator is responsible for expenses listed in Section 2(c) of
this Agreement otherwise payable by each Fund to the extent those expenses, when
added to the expenses of such Fund in Section 2(d) of this Agreement, equal or
exceed 0.005% of such Fund's average daily net assets.
Name of Fund
E*TRADE S&P 500 Index Fund
E*TRADE Extended Market Index Fund
E*TRADE Bond Index Fund
E*TRADE Technology Index Fund
E*TRADE International Index Fund
E*TRADE E-Commerce Index Fund
E*TRADE Global Titans Index Fund
E*TRADE Premier Money Market Fund
E*TRADE FUNDS E*TRADE ASSET MANAGEMENT, INC.
By: By:
-------------------------------- --------------------------------
Name: Name
Title: Title:
<PAGE>
EXHIBIT C
to the
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
Fund End of Initial Term
E*TRADE S&P 500 Index Fund February 3, 2001
E*TRADE Extended Market Index Fund August 12, 2001
E*TRADE Bond Index Fund August 12, 2001
E*TRADE Technology Index Fund August 12, 2001
E*TRADE International Index Fund October 19, 2001
E*TRADE E-Commerce Index Fund October 19, 2001
E*TRADE Global Titans Index Fund _______ __, 2002
E*TRADE Premier Money Market Fund _______ __, 2002
E*TRADE FUNDS E*TRADE ASSET MANAGEMENT, INC.
By: By:
-------------------------------- --------------------------------
Name: Name
Title: Title:
FORM OF
AMENDMENT NO. 2
to the
SUB-ADMINISTRATION AGREEMENT
The Sub-Administration Agreement dated February 15, 1999, as amended, by
and among E*TRADE FUNDS, E*TRADE ASSET MANAGEMENT, INC. and INVESTORS BANK &
TRUST COMPANY, is hereby further amended as follows:
1. Appendix A is hereby amended and substituted with the attached Appendix A.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
the Sub-Administration Agreement to be duly executed and delivered by their duly
authorized officers as of ________ __, 2000.
E*TRADE FUNDS E*TRADE ASSET MANAGEMENT, INC.
By:__________________________ By:______________________________
Name: Name:
Title: Title:
INVESTORS BANK & TRUST COMPANY
By:______________________________
Name:
Title:
<PAGE>
APPENDIX A
TO THE
SUB-ADMINISTRATION AGREEMENT
Portfolios End of Initial Two-Year
Term
E*TRADE S&P 500 Index Fund February 3, 2001
E*TRADE Extended Market Index Fund August 12, 2001
E*TRADE Bond Index Fund August 12, 2001
E*TRADE International Index Fund October 22, 2001
E*TRADE Premier Money Market Fund _______ __, 2002
FORM OF
AMENDED EXHIBIT A
THIS Exhibit A, amended as of ____________ __, 2000 is Exhibit A to that
Sub-Administration and Accounting Services Agreement dated August 12, 1999,
among PFPC Inc., E*TRADE Asset Management, Inc. and E*TRADE Funds.
PORTFOLIOS
E*TRADE Technology Index Fund
E*TRADE E-Commerce Index Fund
E*TRADE Global Titans Index Fund
PFPC INC.
By:
Title:
E*TRADE FUNDS
By:
Title:
E*TRADE ASSET MANAGEMENT, INC.
By:
Title:
FORM OF
AMENDED EXHIBIT A
THIS Exhibit A, amended as of ____________ __, 2000 is Exhibit A to that
certain Transfer Agency Services Agreement dated as of December 29, 1998, as
amended on August 12, 1999, by and between PFPC INC. and E*TRADE FUNDS.
PORTFOLIOS
E*TRADE S&P 500 Index Fund
E*TRADE Extended Market Index Fund
E*TRADE Bond Index Fund
E*TRADE Technology Index Fund
E*TRADE International Index Fund
E*TRADE E-Commerce Index Fund
E*TRADE Global Titans Index Fund
E*TRADE Premier Money Market Fund
PFPC INC.
By:______________________________
Name:
Title:
E*TRADE FUNDS
By:______________________________
Name:
Title:
AMENDMENT NO. 2
to the
RETAIL SHAREHOLDER SERVICES AGREEMENT
The Retail Shareholder Services Agreement dated February 3, 1999 and as
amended on August 12, 1999, by and among E*TRADE Securities, Inc., E*TRADE Funds
and E*TRADE Asset Management, Inc., is hereby further amended as follows:
1. Schedule C is hereby amended and substituted with the attached
Scheduled C.
IN WITNESS WHEREOF, each Party has executed this Amendment No. 2 to the
Retail Shareholder Services Agreement by a duly authorized representative of
such party as of _______ __, 2000.
E*TRADE Securities, Inc.
By:____________________________________
Name:
Title:
E*TRADE Funds
By:____________________________________
Name:
Title:
E*TRADE Asset Management, Inc.
By:____________________________________
Name:
Title:
<PAGE>
Schedule C
to the
RETAIL SHAREHOLDER SERVICES AGREEMENT
Fund Portfolios and Classes
Fund Name/Class: Cusip/Ticker Symbol:
E*TRADE S&P 500 Index Fund* 269244109/ET SPX
E*TRADE Extended Market Index Fund* 269244307/
E*TRADE Bond Index Fund* 2692444208/
E*TRADE Technology Index Fund* 269244406/
E*TRADE International Index Fund* __________
E*TRADE E-Commerce Index Fund* __________
E*TRADE Global Titans Index Fund* __________
E*TRADE Premier Money Market Fund* __________
* indicates that the Fund is a "No-Load" or "No-Sales Charge" Fund as defined in
Section 26 of the NASD's Rules of Fair Practice.
FORM OF
AMENDED EXHIBIT A
This Exhibit A, amended as of _________ __, 2000, is Exhibit A to that
certain State Securities Services Agreement dated as of August 12, 1999 between
PFPC Inc. and E*TRADE Asset Management, Inc.
PORTFOLIOS
E*TRADE S&P 500 Index Fund
E*TRADE Extended Market Index Fund
E*TRADE Bond Index Fund
E*TRADE Technology Index Fund
E*TRADE International Index Fund
E*TRADE E-Commerce Index Fund
E*TRADE Global Titans Index Fund
E*TRADE Premier Money Market Fund
PFPC INC.
By: ______________________________
Title: ____________________________
E*TRADE ASSET MANAGEMENT, INC.
By: ______________________________
Title: _____________________________
DECHERT PRICE & RHOADS
1775 EYE STREET, N.W.
WASHINGTON, DC 20006-2401
TELEPHONE: 202-261-3300
FACSIMILE: 202-261-3333
February 3, 2000
E*TRADE Funds
4500 Bohannon Drive
Menlo Park, CA 94025
Re: E*TRADE Funds
Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A
(Registration Nos.: 333-66807, 811-09093)
Dear Sirs:
We have acted as counsel for E*TRADE Funds (the "Fund"), a business trust
organized and validly existing under the laws of the State of Delaware, in
connection with the above-referenced Registration Statement relating to the
issuance and sale by the Fund of an indefinite number of its shares of common
stock under the Securities Act of 1933, as amended and under the Investment
Company Act of 1940, as amended. We have examined such governmental and
corporate certificates and records as we deemed necessary to render this opinion
and we are familiar with the Fund's Certificate of Trust, Trust Instrument and
its Bylaws.
Based upon the foregoing, we are of the opinion that the shares proposed to be
sold pursuant to the Fund's Post-Effective Amendment No. 15 Registration
Statement, when paid for as contemplated in the Fund's Registration Statement,
will be legally and validly issued, fully paid and non-assessable. We hereby
consent to the filing of this opinion as an exhibit to Post-Effective Amendment
No. 15 to the Fund's Registration Statement on Form N-1A, to be filed with the
Securities and Exchange Commission, and to the use of our name in the Fund's
Statement of Additional Information of the Fund's Registration Statement to be
dated as of February 3, 2000, and in any revised or amended versions thereof
under the caption "Legal Counsel." In giving such consent, however, we do not
admit that we are within the category of persons whose consent is required by
Section 7 of the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
Very truly yours,
FORM OF
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, the Trustees and
officers of E*TRADE Funds, a Delaware business trust (the "Trust"), do hereby
constitute and appoint Robert W. Helm, David A. Vaughan and Dilia M. Caballero,
and each of them, his/her true and lawful attorney and agent to do any and all
acts and things and to execute any and all instruments which said attorney and
agent may deem necessary or advisable to enable the Trust to comply with the
Securities Act of 1933, as amended ("Securities Act"), the Investment Company
Act of 1940, as amended ("1940 Act") and any rules, regulations and requirements
of the Securities and Exchange Commission ("SEC"), in connection with the
registration under the Securities Act of the shares of beneficial interest of
the Trust (the "Securities") and in connection with the registration of the
Trust under the 1940 Act, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for on behalf of
the Trust, and each of the undersigned the name of each of the undersigned as
Trustee or an officer, as appropriate, of the Trust to a Registration Statement
or to any amendment thereto filed with the SEC with respect to the Securities or
with respect to the Trust and to any instrument or document filed as part of, as
an exhibit to or in connection with any Registration Statement or amendment.
Further, each of the undersigned hereby ratifies any prior actions taken
by said attorney and agent, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for and on behalf
of each of the undersigned the name of each of the undersigned as Trustee or an
officer, as appropriate, of the Trust to a Registration Statement or to any
amendment thereto filed with the SEC with respect to the Securities or with
respect to the Trust and to any instrument or document filed as part of, as an
exhibit to or in connection with any Registration Statement or amendment.
The undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, each of the undersigned has caused this Power of
Attorney to be executed.
<PAGE>
/s/ /s/
- --------------------------------- ---------------------------------
Leonard C. Purkis, Trustee and Treasurer Brian C. Murray, President
Dated: January 20, 2000 Dated: November 10, 1999
/s/ /s/
- --------------------------------- ---------------------------------
Shelly J. Meyers, Trustee Ashley T. Rabun, Trustee
Dated: November 10, 1999 Dated: November 10, 1999
/s/ /s/
- --------------------------------- ---------------------------------
Steven Grenadier, Trustee George J. Rebhan, Trustee
Dated: November 10, 1999 Dated: January 12, 2000
