EXPENSE LIMITATION AGREEMENT
                                       FOR
                          E*TRADE FUNDS -- SWEEP FUNDS

         EXPENSE LIMITATION AGREEMENT, effective as of October 7, 2002 by and
between E*TRADE Asset Management, Inc. ("ETAM"), and E*TRADE Funds ("Trust"), on
behalf of each series or class of the Trust set forth in Schedule A (each series
and class is hereinafter referred to as the "Fund").

         WHEREAS, the Trust is a Delaware business trust organized under a
Declaration of Trust ("Declaration of Trust"), and is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management company of the series type, and each Fund is a series of the Trust;

         WHEREAS, the Trust and ETAM have entered into Investment Advisory
Agreement on behalf of each Fund ("Advisory Agreement"), pursuant to which ETAM
provides advisory services to each Fund for compensation based on the value of
the average daily net assets of each Fund;

         WHEREAS, the Trust and ETAM have entered into a Third Restated Amended
and Administrative Services Agreement on behalf of each Fund ("Administrative
Agreement"), pursuant to which ETAM provides administrative services to each
Fund for compensation based on the value of the average daily net assets of each
Fund;

         WHEREAS, the Trust, ETAM and E*TRADE Securities LLC have entered into a
Shareholder Services Agreement on behalf of each Fund ("Shareholder Services
Agreement"), pursuant to which ETAM and E*TRADE Securities LLC provide
shareholder services to each Fund for compensation based on the value of the
average daily net assets of each Fund;

         WHEREAS, the Trust and ETAM have determined that it is appropriate and
in the best interests of each Fund and its shareholders to maintain the expenses
of each Fund at a level below the level to which that Fund would be subject
during the period covering the duration of this agreement ("Transition Period")
and in order to maintain each Fund's expense ratio at the Maximum Annual
Operating Expense Limit (as hereinafter defined) specified for each Fund in
Schedule A hereto; and

         NOW THEREFORE, the parties hereto agree that the Expense Limitation
Agreement is hereby stated in its entirety as of the date hereof as follows:

I.       Expense Limitation.

         1.1. Applicable Expense Limit. To the extent that the aggregate
expenses of every character incurred by each Fund during the Transition Period,
including but not limited to administrative services fees and advisory services
fees of ETAM and fees and expenses of E*TRADE Securities under any Distribution
Plan (but excluding interest, taxes, brokerage commissions, other expenditures
which are capitalized in accordance with generally accepted accounting
principles, and other extraordinary expenses not incurred in the ordinary course
of each Fund's business) ("Fund Operating Expenses"), exceed the Maximum Annual
Operating




Expense Limit, as defined in Section 1.2 below, such excess amount ("Excess
Amount") shall be the liability of ETAM.

     1.2. Maximum Annual Operating Expense Limit. The Maximum Annual Operating
Expense Limit with respect to each Fund shall be the amount specified in
Schedule A based on a percentage of the average daily net assets of each Fund.

     1.3. Method of Computation. To determine ETAM's liability with respect to
the Excess Amount, each month the Fund Operating Expenses for each Fund shall be
annualized as of the last day of the month. If the annualized Fund Operating
Expenses for any month of any Fund exceed the Maximum Annual Operating Expense
Limit of that Fund, ETAM shall first waive or reduce its advisory fees,
administrative services fees and shareholder services fees for such month by an
amount sufficient to reduce the annualized Fund Operating Expenses to an amount
no higher than the Maximum Annual Operating Expense Limit. If the amount of the
waived or reduced advisory fees, administrative services fees and shareholder
services fees for any such month is insufficient to pay the Excess Amount, ETAM
may also remit to the appropriate Fund or Funds an amount that, together with
the waived or reduced advisory fees, administrative services fees and
shareholder services fees, is sufficient to pay such Excess Amount.

     1.4. Year-End Adjustment. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the amount of the advisory fees, administrative
services fees and shareholder services fees waived or reduced and other payments
remitted by ETAM to each Fund or Funds with respect to the previous fiscal year
shall equal the Excess Amount.

II.  Reimbursement of Fee Waivers and Expense Reimbursements.

     2.1. Reimbursement. If during the Transition Period the Advisory Agreement,
Administrative Agreement and Shareholder Servicing Agreement are still in effect
and the estimated aggregate Fund Operating Expenses of any Fund for the fiscal
year are less than the Maximum Annual Operating Expense Limit for that year,
subject to quarterly approval by the Trust's Board of Trustees as provided in
Section 2.2 below, ETAM shall be entitled to reimbursement by that Fund, in
whole or in part as provided below, of the advisory fees, administrative
services fees and shareholder services fees waived or reduced and other payments
remitted by ETAM to the Fund pursuant to Section 1 hereof. The total amount of
reimbursement to which ETAM may be entitled ("Reimbursement Amount") shall
equal, at any time, the sum of all advisory fees, administrative services fees
and shareholder services fees previously waived or reduced by ETAM and all other
payments remitted by ETAM to the Fund, pursuant to Section 1 hereof, during any
of the previous three (3) fiscal years, less any reimbursement previously paid
by the Fund to ETAM, pursuant to Sections 2.2 or 2.3 hereof, with respect to
such waivers, reductions, and payments. The Reimbursement Amount shall not
include any additional charges or fees whatsoever, including, e.g., interest
accruable on the Reimbursement Amount.

     2.2. Board Approval. No reimbursement shall be paid to ETAM with respect to
any Fund pursuant to this provision in any fiscal quarter, unless the Trust's
Board of Trustees has determined that the payment of such reimbursement is in
the best interests of that Fund and its



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shareholders. The Trust's Board of Trustees shall determine quarterly in advance
whether any reimbursement may be paid to ETAM with respect to any Fund in such
quarter.

         2.3. Method of Computation. To determine a Fund's payments, if any, to
reimburse ETAM for the Reimbursement Amount, each month the Fund Operating
Expenses of that Fund shall be annualized as of the last day of the month. If
the annualized Fund Operating Expenses of the Fund for any month are less than
the Maximum Annual Operating Expense Limit of that Fund, the Fund, only with the
prior approval of the Trust's Board of Trustees, shall pay to ETAM an amount
sufficient to increase the annualized Fund Operating Expenses of that Fund to an
amount no greater than the Maximum Annual Operating Expense Limit of the Fund,
provided that such amount paid to ETAM will in no event exceed the total
Reimbursement Amount.

         2.4. Year-End Adjustment. If necessary, on or before the last day of
the first month of each fiscal year of the Transition Period, an adjustment
payment shall be made by the appropriate party in order that the actual Fund
Operating Expenses of each Fund for the prior fiscal year (including any
reimbursement payments hereunder with respect to such fiscal year) do not exceed
the Maximum Annual Operating Expense Limit.

III.     Term and Termination of Agreement.

         This Agreement with respect to each Fund shall continue in effect one
year from the date that each Fund commences operations and shall thereafter
continue in effect with respect to each Fund from year to year provided such
continuance is specifically approved by a majority of the Trustees of the Trust
who (i) are not "interested persons" of the Trust or any other party to this
Agreement, as defined in the 1940 Act, and (ii) have no direct or indirect
financial interest in the operation of this Agreement ("Non-Interested
Trustees"). Nevertheless, after one year from the date that each Fund has
commenced operations, this Agreement may be terminated by either party hereto,
without payment of any penalty, upon ninety (90) days' prior written notice to
the other party at its principal place of business; provided that, in the case
of termination by the Trust, such action shall be authorized by resolution of a
majority of the Non-Interested Trustees of the Trust or by a vote of a majority
of the outstanding voting securities of the Trust.

IV.      Miscellaneous.

         4.1. Captions. The captions in this Agreement are included for
convenience of reference only and in no other way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.

         4.2. Interpretation. Nothing herein contained shall be deemed to
require the Trust or any Fund(s) to take any action contrary to the Trust's
Trust Instrument or By-Laws, or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to relieve or
deprive the Trust's Board of Trustees of its responsibility for and control of
the conduct of the affairs of the Trust or any Fund(s).

         4.3. Definitions. Any question of interpretation of any term or
provision of this Agreement, including but not limited to the advisory services
fee or administrative services fee, the computations of net asset values, and
the allocation of expenses, having a counterpart in or




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otherwise derived from the terms and provisions of the Advisory Agreement,
Administrative Agreement, Shareholder Servicing Agreement or the 1940 Act, shall
have the same meaning as and be resolved by reference to such Advisory
Agreement, Administrative Agreement, Shareholder Servicing Agreement or the 1940
Act.

         IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized, as of the day and year
first above written.

                              E*TRADE  FUNDS, on behalf of each Fund listed on
                              Schedule A

                              By: __________________________________________
                              Name:
                              Title:________________________________________



                              E*TRADE ASSET MANAGEMENT, INC.

                              By:___________________________________________
                              Name:
                              Title:________________________________________





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                                   SCHEDULE A
                     MAXIMUM ANNUAL OPERATING EXPENSE LIMITS

This Agreement relates to the following Fund(s) of the Trust:

                                               Maximum Annual Operating Expense
 Name of Fund                                 Limit (as a percentage of average
 ------------                                         daily net assets)
                                              ----------------------------------
 E*TRADE California Money Market Fund                       0.95%

 E*TRADE Government Money Market Fund                       1.10%

 E*TRADE Money Market Fund                                  1.10%

 E*TRADE Municipal Money Market Fund                        1.05%

 E*TRADE New York Money Market Fund                         0.95%