eTrade 2000 Annual Report Download - page 83

Amortized
Cost
Estimated
Fair Values
Due within one year $ 328,736 $ 329,299
Due within one to five years 49,074 49,635
Due within five to ten years 46,897 47,704
Due after ten years 205,900 194,652
Total $ 630,607 $ 621,290
The gross realized gains and losses on available-for-sale investment securities that were sold in fiscal 2000 were $134.0 million and
$68,000, respectively. The gross realized gains and losses on available-for-sale investment securities that were sold in fiscal 1999 were
$50.7 million and $291,000, respectively. The gross realized gains and losses on available-for-sale investment securities that were sold
in fiscal 1998 were $1.3 million and $8,000, respectively.
Equity Method and Other Investments
Equity method and other investments consist of (in thousands):
September 30,
2000 1999
Equity method investments:
Joint ventures $ 30,492 $ 20,862
Venture funds 68,974 36,270
E*OFFERING — 11,391
Other investments 40,883 37,982
Total equity method and other investments $ 140,349 $ 106,505
In June 1998, the Company entered into a joint venture agreement with SOFTBANK CORP. to form E*TRADE Japan KK to provide
online securities trading services to residents of Japan. As part of the transaction, the Company invested approximately $8 million in
exchange for a 42% ownership position in this joint venture. E*TRADE Japan KK issued shares to the public in an initial public
offering in September 2000. Following E*TRADE Japan KK’ s initial public offering, the Company sold a portion of its investment
recognizing a pre-tax gain of $77.5 million, which was included in gain on sale of investments in non-operating income, reducing its
ownership percentage from 42% to 32%.
In September 2000, the Company entered into a joint venture with Ernst & Young, LLP (“E&Y”) to form eAdvisor to develop an
online personalized financial advice and planning tool for individuals. As part of the transaction, the Company invested approximately
$7.6 million. E&Y and the Company each have a 50% ownership in this joint venture.
Venture Funds
The Company made a $25.0 million contribution to the E*TRADE eCommerce Fund, L.P. (the “Fund”) on October 1, 1999. The
Fund has committed capital of approximately $100.0 million, $75.0 million of which was committed by third-party investors. The
Fund invests in early to mid-stage Internet companies focused on e-commerce, infrastructure tools, communication and services. The
Fund is managed by its General Partner, E*TRADE Ventures I, LLC (the “General Partner”). Christos M. Cotsakos, the Chairman of
the Board of Directors and Chief Executive Officer of the Company, and Thomas A. Bevilacqua, the Company’ s Chief Strategic
Investment Officer, are the managing members of the General Partner. The Company is a non-managing member of the General
Partner. The General Partner receives an annual management fee of 1.75% of the total committed capital. The management fee is paid
in its entirety to the Company and is used to offset the costs and expenses of its corporate development/strategic investment group. In
addition, to the extent that the Fund generates profits, 20% are allocated to the General Partner as a carried interest. As a member of
the General Partner, the Company is entitled to
90
receive 50% of such amount provided that up to one-fifth of the Company’ s interest can be allocated by the managing members to
Company personnel.
The Company made a $50.0 million capital commitment to the E*TRADE eCommerce Fund II, L.P. (“Fund II”) as of June 16, 2000,
of which $1.0 million had been paid as of September 30, 2000. It is anticipated that Fund II will have total committed capital of
between $150-$200 million, with all capital in excess of the E*TRADE contributions being raised from third parties. Fund II invests in
2002. EDGAR Online, Inc.