E*TRADE TECHNOLOGY INDEX FUND
SEMIANNUAL REPORT
Dear E*TRADE Funds Shareholders,
We're writing to report the results of the E*TRADE Technology Index Fund (the
"Fund") for the first half of 2000. We'd also like to take this opportunity to
thank all of you for your investment in the Fund.
The Fund's investment objective is to match, before fees and expenses, the total
return of the stocks making up the Goldman Sachs Technology (GSTITM Composite)
Index (the "Index").* The GSTI Composite Index is one of the broadest measures
of U.S. traded technology stocks available. The GSTI Composite Index generally
includes over 175 companies representing six different segments of the U.S.
technology marketplace selectedby Goldman Sachs & Co. (including hardware,
internet, multi-media networking,semiconductors, services, and software). The
GSTI Composite Index primarily consists of stocks of companies in the technology
industry with capitalizations of at least $1 billion. However, it may also
include companies with smaller capitalizations.
For the first half of 2000, the Fund gained 5.63%, returning 56.02% since
inception on August 13, 1999. In comparison, the Index returned 5.60% for the
first half of 2000. Since September 1, 1999, the Fund has returned 51.77%, while
the Index has returned 51.49%.** The investment return and principal value of an
investment will fluctuate, and your shares, when redeemed, may be worth more or
less than their original cost.
The Fund is limited to invest in industry segments of the U.S. stock market that
are generally associated with technology. Greater risk and increased volatility
are associated with investments in segments of the stock market. The technology
segment can be affected by specific risks including aggressive product prices
due to competition pressure from numerous market entrants, short product cycles
and product obsolescence, among others.
The first half of 2000 saw some extraordinary events paired with extreme
volatility. The major benchmarks set all-time records. The Federal Reserve
raised rates not once but three times. The Nasdaq reached an all-time high on
March 10, then dropped 37.32% by May 23 to reach its year low.
Higher-than-expected fourth quarter GDP figures renewed investor concerns about
the possibility of increased interest rates. In response, markets tumbled in
January, dragged down by the technology sector. However, the Nasdaq roared back
in February, gaining over 15% for the month. The Federal Reserve raised interest
rates in February and again in March, as strong economic numbers continued to
surface.
The second quarter opened with the government's ruling against Microsoft on
April 3. The stock tumbled 14.47% on the news, triggering a sell-off among
technology stocks. When higher-than-expected economic numbers were released on
April 14, the sell-off spread. The Nasdaq Composite Index declined an astounding
25% in one week. On May 16, a much-anticipated 0.50% interest hike by the
Federal Reserve, accompanied by a suggestion that future rate increases were
likely, spurred additional volatility in the markets and sent stock prices
lower. Thanks to positive economic numbers released in June, pointing to as
lower economy, the Federal Reserve left rates unchanged. The markets responded
by rebounding in June with technology stocks leading the way. The Nasdaq rose
16.64% to end the quarter down 13.23%.
The divergence between growth and value stocks during the last quarter of 1999
continued during the first quarter of 2000. But growth stocks collapsed as the
technology sector was pummeled during the last two weeks of March and most of
April, and value stocks came back into favor. By the end of May, value stocks
were strongly outperforming growth, with old-economy sectors such as financials
and utilities leading the pack. In June, a pause in interest rate increases by
the Federal Reserve led to new interest in new economy stocks, and growth
resumed its lead.
You should remember that past performance is no guarantee of future returns and
the Fund may not be able to duplicate its performance. The Fund's unaudited
financial statements for the period ended June 30, 2000 are provided below. We
hope you will find them useful for evaluating and monitoring your investment.
We'd also like to take this opportunity to remind you that investing in the Fund
is a long-term proposition and shareholders should not invest assets that will
be needed in the near future. Thank you again for your participation in the
E*TRADE Technology Index Fund.
Sincerely,E*TRADE Funds
* "GSTI TM" is a trademark of Goldman, Sachs & Co. and has been licensed for
use by E*TRADE Asset Management, Inc. for use in connection with the Fund. The
Fund is not sponsored, endorsed, sold, or promoted by Goldman, Sachs & Co. or
any of its affiliates and neither Goldman, Sachs & Co. nor any of its
affiliates makes any representation regarding the advisability of investing in
the Fund.
** The Fund began operations on August 13, 1999. Index Comparisons began on
September 1, 1999.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCK (100.1% OF NET ASSETS)
------------
ADVERTISING (0.1%)
Doubleclick, Inc. 2,229 $ 84,981
-------------
BLANKBOOKS & LOOSELEAF BINDERS (0.0%)
Deluxe Corp. 1,489 35,085
-------------
BUSINESS SERVICES (0.2%)
Engage Technologies, Inc. 1,923 24,879
Internet Capital Group, Inc. 5,224 193,370
-------------
218,249
-------------
COMMUNICATIONS SERVICES (0.4%)
American Tower Corp. 2,901 120,935
At Home Corp. 6,906 143,300*
Crown Castle International Corp. 2,906 106,069*
-------------
370,304
-------------
COMPUTER FACILITIES MANAGEMENT (0.3%)
Comverse Technology, Inc. 3,049 283,557*
-------------
COMPUTER INTEGRATED SYSTEMS DESIGN (1.5%)
Bea Systems, Inc. 4,900 242,244*
Cognex Corp. 835 43,211*
Computer Sciences Corp. 3,206 239,448
Inktomi Corp. 2,158 255,183*
IXL Enterprises, Inc. 1,288 18,676
Network Appliance, Inc. 5,953 479,217*
Software.Com, Inc. 818 106,238
-------------
1,384,217
-------------
COMPUTER PERIPHERAL EQUIPMENT (11.4%)
Adaptec, Inc. 2,037 46,342*
Cabletron Systems, Inc. 3,611 91,178*
Cisco Systems 134,474 8,547,503*
Emulex Corp. 705 46,310
Juniper Networks, Inc. 6,196 901,905
Lexmark International Group,
Inc., Class A 2,551 171,555*
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMPUTER PERIPHERAL EQUIPMENT, CONTINUED
Qlogic Corp. 1,462 $ 96,583*
Storage Technology Corp. 2,023 22,127*
Symbol Technologies, Inc. 2,642 142,668
3-Com Corp. 6,847 394,558*
-------------
10,460,729
-------------
COMPUTERS, PERIPHERALS & SOFTWARE (0.2%)
Creative Technology Ltd. 1,908 45,554
National Instruments Corp. 987 43,058*
Safeguard Scientifics, Inc. 2,104 67,460*
-------------
156,072
-------------
COMPUTER PROGRAMMING SERVICES (0.5%)
Amdocs Limited 3,479 267,013*
American Management Systems, Inc. 806 26,459*
Ciber, Inc. 1,100 14,575*
Electronics for Imaging, Inc. 1,101 27,869*
Entrust Technologies, Inc. 890 73,648
Keane, Inc. 1,441 31,162
US Internetworking, Inc. 1,855 37,912
-------------
478,638
-------------
COMPUTER RELATED SERVICES (0.9%)
Electronic Data Systems Corp. 9,412 388,245
Marchfirst, Inc. 1,112 20,294*
Paychex, Inc. 7,407 311,093
Red Hat, Inc. 2,760 74,693
-------------
794,325
-------------
COMPUTER STORAGE DEVICES (3.7%)
EMC Corp. 40,588 3,122,739
Iomega Corp. 5,304 21,216*
Quantum Corp. 3,322 32,182*
Seagate Technology, Inc. 4,155 228,525*
-------------
3,404,662
-------------
DATA PROCESSING & PREPARATION (2.4%)
Acxiom Corp. 1,717 46,788*
Affiliated Computer Services,
Inc. 910 30,087*
Automatic Data Processing, Inc. 12,464 667,603
Bisys Group, Inc. 547 33,641*
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
DATA PROCESSING & PREPARATION, CONTINUED
DST Systems, Inc. 1,258 $ 95,765*
First Data Corp. 8,357 414,715
Fiserv, Inc. 2,444 105,703*
Infospace.com, Inc. 3,854 212,934
SEI Investment Co. 1,065 42,400
Sungard Data Systems, Inc. 2,575 79,824*
Verio, Inc. 1,540 85,446*
Verisign, Inc. 2,045 360,943*
-------------
2,175,849
-------------
DEPOSIT BANKING (0.2%)
Concord EFS, Inc. 4,113 106,938*
Nova Corp. 1,465 40,928*
-------------
147,866
-------------
DIRECT MAIL ADVERTISING SERVICES (0.2%)
CMG Information 4,919 225,352*
-------------
ELECTRONIC COMPONENTS (0.3%)
American Power Conversion Corp. 3,837 156,598*
Sawtek, Inc. 848 48,813
SCI Systems, Inc. 2,883 112,978*
-------------
318,389
-------------
ELECTRONIC COMPUTERS (14.9%)
Apple Computer, Inc. 6,420 336,248*
Ceridian Corp. 2,887 69,467
Compaq Computer Corp. 33,761 863,016
Dell Computer Corp. 51,164 2,523,025*
Gateway, Inc. 6,312 358,206*
Hewlett Packard Co. 20,319 2,537,335
International Business Machines 35,953 3,939,101
Rational Software Corp. 1,735 161,247*
Silicon Graphics, Inc. 3,650 13,687*
Sun Microsystems, Inc. 31,149 2,832,612*
Unisys Corp. 6,198 90,258
-------------
13,724,202
-------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
ELECTRONIC PARTS & EQUIPMENT (0.2%)
Arrow Electronics, Inc. 1,912 $ 59,272
Avnet, Inc. 831 49,237
Checkfree Holdings Corp. 1,045 53,883*
-------------
162,392
-------------
HEALTH SERVICES (0.2%)
Sapient Corp. 1,145 122,443*
-------------
INFORMATION RETRIEVAL SERVICES (4.8%)
Amazon.Com, Inc. 6,815 247,470*
America on Line, Inc. 44,580 2,351,595
Commerce One, Inc. 2,894 131,360
Earthlink, Inc. 2,333 36,016*
Ebay, Inc. 5,152 279,817*
Psinet, Inc. 2,619 65,802*
Yahoo! Inc. 10,498 1,300,440*
-------------
4,412,500
-------------
MANIFOLD BUSINESS FORMS (0.0%)
Reynolds & Reynolds Co., Class A 1,558 28,434
-------------
MEASURING & CONTROLLING DEVICES (0.2%)
Kla-Tencor Corp. 3,579 209,595
-------------
MOTION PICTURE & VIDEO PRODUCTION (0.0%)
C/Net Networks, Inc. 1,458 35,812
-------------
NETWORK EQUIMPENT (0.1%)
Extreme Networks, Inc. 1,063 112,147
-------------
PREPACKAGED SOFTWARE (17.5%)
Adobe Systems, Inc. 2,392 310,960
Ariba, Inc. 3,670 359,832
Art Technology Group, Inc. 1,298 131,017
Autodesk, Inc. 1,218 42,249
Baan Co. 4,258 11,177*
BMC Software, Inc. 4,848 176,875*
Broadvision, Inc. 4,652 236,380
Cadence Design System, Inc. 4,850 98,819*
Check Point Software Technologies
Ltd. 1,442 305,344*
Citrix Systems, Inc. 3,560 67,418*
Computer Associates International 11,646 596,130
Compuware Corp. 7,142 74,098*
CSG Systems, Inc. 1,047 58,697*
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
PREPACKAGED SOFTWARE, CONTINUED
Electronic Arts 1,258 $ 91,755*
Informix Corp. 4,037 30,025*
Intuit, Inc. 3,819 158,010*
I2 Technologies, Inc. 3,069 319,991*
J. D. Edwards & Co. 2,133 32,128*
Legato Systems, Inc. 1,728 26,136*
Lernout & Hauspie Speech Products ADR 2,360 103,988*
LHS Group, Inc. 1,148 39,606*
Lycos, Inc. 2,024 109,296
Macromedia, Inc. 1,002 96,881
Mercury Interactive Corp. 1,534 148,415
Microsoft Corp. 66,219 5,297,520*
Networks Associates, Inc. 2,766 56,357*
Novell, Inc. 6,645 61,465*
Oracle Systems Corp. 56,787 4,773,657*
Parametric Technology Corp. 5,429 59,719*
Peoplesoft, Inc. 5,376 90,048*
Peregrine Systems, Inc. 2,015 69,895
Phone.Com, Inc. 1,288 83,881
Realnetworks, Inc. 2,955 149,412*
Siebel Systems, Inc. 3,768 616,304*
Symantec Corp. 1,159 62,514*
Synopsys, Inc. 1,414 48,871*
Veritas Software Co. 7,751 875,984*
Vignette Corp. 3,354 174,460
-------------
16,045,314
-------------
PRESSED & BLOWN GLASS (1.4%)
Corning, Inc. 4,877 1,316,180*
-------------
PRINTED CIRCUIT BOARDS (0.7%)
Jabil Circuit, Inc. 3,288 163,167*
Solectron Corp. 11,819 494,921
-------------
658,088
-------------
PROCESS CONTROL INSTRUMENTS (0.3%)
Perkinelmer, Inc. 925 61,166
Teradyne, Inc. 3,415 251,003
-------------
312,169
-------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
RADIO & TV COMMUNICATIONS (2.6%)
Equipment
Andrew Corp. 1,610 $ 54,036*
Harris Corp. 1,569 51,385
Motorola, Inc. 42,429 1,233,092
Qualcomm, Inc. 13,162 789,720*
Scientific Atlanta, Inc. 3,141 234,005
-------------
2,362,238
-------------
RADIOTELEPHONE COMMUNICATIONS (4.1%)
Loral Space & Communications 4,894 33,952*
Lucent Technologies, Inc. 62,668 3,713,079
-------------
3,747,031
-------------
SECURITY BROKERS & DEALERS (0.1%)
E*TRADE Group, Inc. 5,617 92,681*
-------------
SEMICONDUCTORS & RELATED DEVICES (22.5%)
Advanced Micro Devices, Inc. 2,955 228,274
Altera Corp. 3,972 404,896*
Amkor Technology, Inc. 2,495 88,105
Analog Devices, Inc. 6,957 528,731*
Applied Micro Circuits Corp. 2,167 213,991*
Atmel Corp. 4,042 149,049*
Broadcom Corp. 2,084 456,266*
Conexant Systems, Inc. 3,925 190,853*
Cypress Semiconductor Corp. 2,198 92,866
Dallas Semiconductor Corp. 1,180 48,085
E-Tek Dynamics 1,335 352,190*
Integrated Device Technology, Inc. 1,810 108,374
Intel Corp. 66,639 8,908,801
JDS Uniphase Corp. 9,018 1,081,033
Lattice Semiconductor Corp. 966 66,775*
Linear Technology Corp. 6,165 394,174
LSI Logic Corp. 5,926 320,745*
Maxim Integrated Products, Inc. 5,460 370,939*
Micrel, Inc. 1,656 71,933
Microchip Technology, Inc. 1,527 88,972*
Micron Technology, Inc. 10,144 893,306
National Semiconductor Corp. 3,441 195,277*
PMC-Sierra, Inc. 2,708 481,178*
Rambus, Inc. 1,890 194,670*
RF Micro Devices, Inc. 1,576 138,097*
SDL, Inc. 1,411 402,400
SGS-Thomson Microelectronics N.V. 18,713 1,201,141
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
SEMICONDUCTORS & RELATED DEVICES, CONTINUED
Texas Instruments, Inc. 31,608 $ 2,171,074
Vitesse Semiconductor, Inc. 3,138 230,839*
Xilinx, Inc. 6,355 524,685*
-------------
20,597,719
-------------
SPECIAL INDUSTRY MACHINERY (2.1%)
Applied Materials, Inc. 15,089 1,367,441*
ASM Lithography Holding 8,339 367,957*
LAM Research Corp. 2,363 88,613*
Novellus System, Inc. 2,344 132,582*
-------------
1,956,593
-------------
STATE COMMERCIAL BANKS (0.0%)
S1 Corp. 931 21,704
-------------
TELEPHONE & TELEGRAPH APPARATUS (5.8%)
ADC Telecommunications, Inc. 6,030 505,766*
Advanced Fibre Communication 1,554 70,416*
Ciena Corp. 2,756 459,391*
Nortel Networks Corp. ADR 55,544 3,790,877
Tellabs, Inc. 8,016 548,595*
-------------
5,375,045
-------------
TELEPHONE COMMUNICATIONS (0.3%)
Exodus Communications, Inc. 6,810 313,686*
-------------
VOCATIONAL SCHOOLS (0.0%)
Perot Systems Corp. 1,815 19,965*
-------------
TOTAL COMMON STOCK (Cost: $82,937,068) 92,164,213
-------------
SHORT-TERM INVESTMENTS (0.0%)
Samson Street Money Market Fund 6,220 6,220
-------------
TOTAL SHORT-TERM INVESTMENTS (Cost: $6,220) 6,220
-------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
TOTAL INVESTMENTS (Cost: $82,943,288) (100.1%) 92,170,433
LIABILITIES IN EXCESS OF (-0.1%)
OTHER ASSETS (98,205)
-------------
NET ASSETS (100.0%) $ 92,072,228
=============
* Non-Income producing security.
ADR American Depository Receipt.
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (Unaudited)
ASSETS
Investments at-value (cost: $82,943,288) (Note 1) ............. $92,170,433
Dividends receivable .......................................... 7,635
Interest receivable ........................................... 1,728
Receivable for fund shares sold ............................... 63,716
-----------
TOTAL ASSETS ......................................... 92,243,512
-----------
LIABILITIES
Accrued administration fee (Note 2) ........................... 44,673
Accrued advisory fee (Note 2) ................................. 18,613
Payable for fund shares redeemed .............................. 107,998
-----------
TOTAL LIABILITIES .................................... 171,284
-----------
TOTAL NET ASSETS .............................................. $92,072,228
===========
NET ASSETS CONSIST OF:
Paid-in capital ............................................... 81,270,361
Net investment loss ........................................... (248,789)
Net realized gain on investments .............................. 1,823,511
Net unrealized appreciation of investments .................... 9,227,145
-----------
TOTAL NET ASSETS .............................................. $92,072,228
===========
SHARES OUTSTANDING (UNLIMITED AUTHORIZED, PAR VALUE $.01) ..... 6,134,156
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE ............................................. $ 15.01
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
STATEMENT OF OPERATIONS
Six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ..................................................... $ 35,243
Interest ...................................................... 31,130
----------
TOTAL INVESTMENT INCOME ............................... 66,373
----------
EXPENSES (NOTE 2):
Advisory fee .................................................. 92,699
Administration fee ............................................ 222,479
Trustee fees .................................................. 1,817
----------
TOTAL EXPENSES BEFORE WAIVER OF TRUSTEE FEES .......... 316,995
Waived Trustees fees (Note 2) ................................. (1,817)
----------
NET EXPENSES .......................................... 315,178
----------
NET INVESTMENT LOSS ........................................... (248,805)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments ...................... 2,174,880
Change in unrealized appreciation of investments .............. (240,254)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ....... 1,934,626
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ............................................ $1,685,821
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from
August 13, 1999
(commencement
Six months of operations)
ended through
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment loss ................................... $ (248,805) $ (45,718)
Net realized gain on sale of investments .............. 2,174,880 1,489,252
Change in unrealized appreciation of investments ...... (240,254) 9,467,399
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. 1,685,821 10,910,933
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on
sale of investments ................................ -- (1,794,887)
------------ ------------
TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares ...................... 67,328,736 50,572,484
Value of shares issued in reinvestment ................ 1,711,270 --
Cost of shares redeemed (net redemption fees of $198,531
and $147,007 respectively) ......................... (23,624,436) (14,717,693)
------------ ------------
NET INCREASE IN NET ASSETS FROM TRANSACTIONS IN SHARES
OF COMMON STOCK .................................... 45,415,570 35,854,791
------------ ------------
NET INCREASE IN NET ASSETS ............................ 47,101,391 44,970,837
NET ASSETS:
Beginning of period ................................... 44,970,837 --
------------ ------------
END OF PERIOD ......................................... $ 92,072,228 $ 44,970,837
============ ============
SHARE TRANSACTIONS:
Number of shares sold ................................. 4,486,352 4,411,921
Number of shares reinvested ........................... 116,890 --
Number of shares redeemed ............................. (1,634,324) (1,246,683)
------------ ------------
NET INCREASE IN SHARES OUTSTANDING .................... 2,968,918 3,165,238
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period from
August 13, 1999
(commencement
Six months of operations)
ended through
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
<S> <C> <C>
FOR A SHARE OUTSTANDING FOR THE PERIOD
NET ASSET VALUE, BEGINNING OF PERIOD ................... $ 14.21 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ........................... (0.04) (0.01)
Net realized and unrealized gain on investments 0.81 4.75
------- -------
TOTAL INCOME FROM INVESTMENT OPERATIONS ....... 0.77 4.74
------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
------- -------
Distributions from net realized gains ......... -- (0.58)
------- -------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ........... -- (0.58)
------- -------
REDEMPTION FEES ADDED TO PAID-IN CAPITAL................ 0.03 0.05
------- -------
NET ASSET VALUE, END OF PERIOD ......................... $ 15.01 $ 14.21
======= =======
TOTAL RETURN ........................................... 5.63%(3) 47.71%(1)
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) ...... $92,072 $44,971
Ratio of expenses to average net assets ...... 0.85%(2)(4) 0.85%(2)(4)
Ratio of net investment loss to average
net assets................................... (0.67%)(2) (0.49%)(2)
Portfolio turnover rate........................ 10.02% 35.77%(1)
<FN>
----------
(1) For the period August 13, 1999 (commencement of operations) to December 31,
1999 and not indicative of a full year's operating results.
(2) Annualized.
(3) Total returns for period of less than one year are not annualized.
(4) The Investment Adviser has voluntarily agreed to pay the non-affiliated
Trustee expenses for the Fund for the period January 1, 2000 through May 9,
2000. Even though such action had been taken, total annualized operating
expenses as a percentage of average net assets would have remained
unchanged at 0.85% for the period from August 13, 1999 (commencement of
operations) through December 31, 1999 and for the six months ended June 30,
2000.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
E*TRADE Technology Index Fund (the "Fund") is a non-diversified series of
E*TRADE Funds (the "Trust"), an open-end series management investment company
registered under the Investment Company Act of 1940, as amended. The Trust is
organized as a Delaware business trust and was formed on November 4, 1998. As of
June 30, 2000, the Trust offered eight series: the S&P 500 Index Fund, the Bond
Index Fund, the Extended Market Index Fund, the International Index Fund, the
E-Commerce Index Fund, the Technology Index Fund, the Global Titans Index Fund
and the Premier Money Market Fund. These financial statements contain the
E*TRADE Technology Index Fund.
The Fund's investment objective is to match, before fees and expenses, the total
return of the stocks making up the Goldman Sachs Technology (GSTI(TM) Composite)
Index*. The Fund seeks to achieve its objective by investing substantially all
of its assets in the same stocks and in substantially the same percentages as
the stocks that comprise the GSTI(TM) Composite Index.
* "GSTI(TM)" is a trademark of Goldman, Sachs & Co. and has been licensed for
use by E*TRADE Asset Management, Inc. for use in connection with the Fund. The
Fund is not sponsored, endorsed, sold, or promoted by Goldman, Sachs & Co. or
any of its affiliates and neither Goldman, Sachs & Co. nor any of its affiliates
makes any representation regarding the advisability of investing in the Fund.
The following is a summary of significant accounting policies which are
consistently followed by the Funds in the preparation of their financial
statements, and which are in conformity with generally accepted accounting
principles. The preparation of the financial statements in conformity with
accounting principles accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
PRINCIPLES OF ACCOUNTING
The Fund used the accrual method of accounting for financial reporting purposes.
INVESTMENT POLICY AND SECURITY VALUATION
Investments are valued at the last reported sale price on the primary securities
exchange or national securities market on which such securities are traded.
Securities not listed on an exchange or national securities market, or
securities in which there was no last reported sales price, are valued at the
most recent bid prices. Debt securities are generally traded in the
over-the-counter market and are valued at a price deemed best to reflect fair
value as quoted by dealers who make markets in those securities or by an
independent pricing source. U.S. Government obligations are valued at the last
reported bid price. Short-term debt securities are valued at amortized cost
which approximates market value. Restricted securities or other assets for which
market quotations are not readily available are valued at fair value as
determined in good faith in accordance with procedures established by and under
the supervision and responsibility of the Fund's Board of Trustees.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Revenue is recognized as follows: dividend income is
recognized on the ex-dividend date and interest income is recognized on a daily
accrual basis. Realized gains and losses are reported on the basis of identified
cost of securities delivered.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income are declared and
distributed quarterly. Distributions to shareholders from any net realized
capital gains are declared and distributed annually, generally in December. Such
distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for losses deferred
to wash sales and excise tax regulations. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to paid-in capital and may impact net investment income per
share. Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
FEDERAL INCOME TAXES
The Fund is treated as a separate entity from each other series of the Trust for
federal income tax purposes. The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. If so
qualified, each fund must distribute annually all of its investment company
taxable income and any net capital gains (taking into account capital loss
carryforwards) sufficient to relieve it from all, or substantially all, federal
income and excise taxes. Accordingly, no provision for federal taxes was
required at June 30, 2000.
REDEMPTION FEES
Shares redeemed after September 30, 2000 and held in the Fund for less than four
months are subject to a redemption fee of 1.00%, calculated as a percentage of
redemption proceeds. For shares held in the Fund that are redeemed before
October 1, 2000 and within six months from the date of purchase, the redemption
fee is 1.00%. The fee, which is retained by the Fund, is accounted for as an
addition to paid-in capital.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
E*TRADE Asset Management, Inc. (the "Investment Advisor"), a wholly owned
subsidiary of E*TRADE Group, Inc. ("E*TRADE Group"), serves as the investment
advisor for the Fund pursuant to an investment advisory agreement ("Advisory
Agreement"). For its services as investment advisor, the Investment Advisor is
paid by the Fund a fee at an annual rate of 0.25% average daily net assets.
Barclays Global Fund Advisors, Inc. ("BGFA") serves as the Fund's investment
sub-advisor. For its services, BGFA is paid by the Investment Advisor a fee
calculated at an annual rate equal to 0.20% of the Fund's average daily net
assets on amounts up to $200 million, 0.15% of average daily net assets on
amounts between $200 million and $500 million, and 0.12% of average daily net
assets above $500 million. BGFA, is a direct subsidiary of Barclays Global
Investors, N.A. which, in turn, is an indirect subsidiary of Barclays Bank PLC.
The Investment Advisor also provides administrative services to the Fund,
pursuant to an administrative services agreement ("Administrative Agreement").
Services provided by the Investment Advisor acting as administrator include, but
are not limited to: coordinating the services performed by the transfer and
dividend disbursing agent, custodian, sub-administrator, shareholder servicing
agent, independent auditors and legal counsel; preparing and supervising the
preparation of periodic reports to the Fund's shareholders; generally
supervising regulatory compliance matters; providing, at its own expense, the
services of its personnel to serve as officers of the Trust; monitoring and
reviewing the Fund's contracted services and expenditures; and report to the
Board of Trustees concerning its activities pursuant to the Administration
Agreement. The Fund pays the Investment Advisor a monthly fee calculated at an
annual rate of 0.60% of the average daily net assets for its services as
administrator of the Fund.
PFPC Inc. ("PFPC") serves as the Fund's sub-administrator. PFPC also serves as
the Fund's transfer agent and dividend disbursing agent. PFPC Trust Company
serves as the Fund's custodian.
E*TRADE Securities, Inc., a wholly owned subsidiary of E*TRADE Group, serves as
the shareholder servicing agent (the "Shareholder Servicing Agent") for the
Funds. The Shareholder Servicing Agent provides personal services to the Fund's
shareholders and maintains the Fund's shareholder accounts. E*TRADE Securities,
Inc. also serves as the principal underwriter of the Fund. Such services were
provided at no cost to the Fund.
Subject to a limitation of 0.0049% of the Fund's average daily net assets, the
Fund records Trustee fees and expenses and certain other direct expenses of the
Fund. The Investment Advisor voluntarily agreed to reimburse such expenses for
the period January 1, 2000 through June 30, 2000. Effective May 9, 2000, the
trustee fees and expenses are no longer a direct expense of the Fund, but rather
those expenses are paid by the Investment Advisor pursuant to the Administrative
Agreement.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
3. PORTFOLIO SECURITIES LOANED
The Fund may participate in securities lending, in which securities are lent to
certain securities dealers in exchange for cash collateral equal to 102% of the
initial market value of the domestic securities lent and 105% of the initial
market value of the non-U.S. securities lent. The amount of collateral is
adjusted daily for changes in the market value of securities lent but at no
subsequent period would the cash collateral equal less than 100% of the market
value of securities lent. The Fund retains a beneficial interest in the
collateral held. The Investment Advisor monitors the creditworthiness of all
parties to which securities are lent. The Fund charges the corresponding party
interest on the market value of securities lent. The Fund did not have any
securities lending activity during the period ending June 30, 2000.
4. FUTURES CONTRACTS
The Fund may purchase futures contracts to gain exposure to market changes as
this may be more efficient or cost effective than actually buying the
securities. A futures contract is an agreement between two parties to buy and
sell a security at a set price on a future date and is exchange traded. Upon
entering into a futures contract, the Fund is required to pledge to the broker
an amount of cash, U.S. Government securities or other high-quality debt
securities equal to the minimum "initial margin" requirements of the exchange.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as "variation margin" and are recorded by
the Fund as unrealized gains or losses. When the contract is closed, the Fund
records a gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Pursuant to
regulations and/or published positions of the Securities and Exchange
Commission, the Fund is required to segregate cash, U.S. Government obligations
or other liquid securities in connection with futures transactions in an amount
generally equal to the entire futures contract amount. Risks of entering into
futures contracts include the possibility that there may be an illiquid market
and that a change in the value of the contracts may not correlate with changes
in the value of the underlying securities. The Fund did not enter into any
futures contracts during the period ending June 30, 2000.
<PAGE>
E*TRADE TECHNOLOGY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
5. REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements. Repurchase agreements are
transactions involving purchases of securities under agreements to resell such
securities at a specified price and time are treated as collateralized financing
transactions and are recorded at their contracted resale amounts. These
repurchase agreements, if any, are detailed in the Fund's Schedule of
Investments. The Fund's Statement of Additional Information requires that the
cash investments be fully collateralized based on values that are marked to
market daily. The Fund's Custodian has custody of, and holds in a segregated
account, securities acquired as collateral by the Fund under a repurchase
agreement. The Fund's Investment Advisor monitors, on an ongoing basis, the
value of the collateral to assure that it always equals or exceeds the
repurchase price. There were no repurchase agreements entered into by the Fund
as of June 30, 2000.
6. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities,
aggregated $51,159,939 and $7,354,797, respectively for period ended June 30,
2000.
7. UNREALIZED APPRECIATION/DEPRECIATION - TAX BASIS
At June 30, 2000, net unrealized appreciation on investments for federal income
tax purposes was as follows:
Unrealized Unrealized Net Unrealized
Appreciation Depreciation Appreciation
------------ ------------ ------------
$16,908,485 $(7,681,340) $9,227,145
At June 30, 2000, the cost basis of the investments for federal income tax
purposes was $82,943,288.
At December 31, 1999 the Fund had available a capital loss carryforward of
$351,369 that may be used to offset future net capital gains through 2007.
