UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-9050 ---------- Pictet Funds ------------------------------------------------------- (Exact name of registrant as specified in charter) 101 Federal Street Boston, MA 02110 ------------------------------------------------------- (Address of principal executive offices) (Zip code) Lisa King, Esq. PFPC Inc. 400 Bellevue Parkway Wilmington, DE 19809 ------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 617-535-0525 Date of fiscal year end: December 31, 2003 Date of reporting period: June 30, 2003 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET INTERNATIONAL EQUITY FUND PICTET GLOBAL WATER FUND [LOGO OMITTED] 1805 PICTET FUNDS SEMI-ANNUAL REPORT (UNAUDITED) JUNE 30, 2003 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- Dear Shareholders, It is with pleasure that I present to you the Pictet Funds 2003 Semi-Annual Report that summarizes the performance of your funds over the last six months and our outlook for the rest of 2003. Over the period we have seen a higher degree of volatility due to the swings in sentiment engendered by the military conflict in Iraq, and Asian markets impacted by SARS. Emerging markets showed strong performance in the first half of 2003 and the PICTET GLOBAL EMERGING MARKETS FUND outperformed the MSCI EMF index by 396 basis points (bps) posting a rise of 20.09% over the period. This out-performance, again showing the benefits of diversification, was owed to positive asset allocation and very strong stock selection, particularly in Asia even though these markets took a while to join in the global rally as a result of SARS. In the first half of 2003, the PICTET INTERNATIONAL SMALL COMPANIES FUND recorded a gain of 16.3% lagging its benchmark by 263 bps. Against a lackluster background small caps performed surprisingly well in most cases better than large caps. Looking forward to the second half of the year we are encouraged by several factors and continue to focus on companies with a combination of low valuations and relative acceleration in earnings. The PICTET INTERNATIONAL EQUITY FUND'S return of 9.86% over the first half of 2003 slightly out-performed the MSCI EAFE Index return of 9.47%. April saw the strongest performance for European equities in a calendar month since 1986 with encouraging further gains in May and June. An upbeat earnings season combined with receding fears of bankruptcy meant Japanese equities also participated in the global rebound in equity markets. In the Fund, stock selection contributed particularly to performance, with most of the gains originating from Europe, and in particular the UK. The PICTET GLOBAL WATER FUND was unable to resist the general downtrend for equities and under-performed its benchmark in the six months to end June. Reflecting a cautious market outlook the Fund remains under-invested in the more economic sensitive segments, lowering the cyclical exposure. We are grateful for the trust you have put in our funds and we want to reaffirm our commitment to provide carefully structured investment funds that will help you to achieve your investment objectives. Yours sincerely, /S/ JEAN PILLOUD Jean Pilloud President and Chairman o Investing in foreign securities may involve certain additional risks, including exchange rate fluctuations, less liquidity, greater volatility and less regulation. The risk may be magnified for emerging markets. Small company stocks may be subject to a higher degree of market risk than the securities of more established companies because they tend to be more volatile and less liquid. Sector funds may be subject to a higher degree of market risk than more diversified funds because of their concentration in a specific industry, sector, or geographic region. o This document must be preceded or accompanied by a current prospectus. Mutual Fund shares are not insured by FDIC or guaranteed by any bank. Shares are subject to investment risks, including possible loss of the principal invested. Distributor: PFPC Distributors Inc., 760 Moore Road, King of Prussia, PA 19406 1 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- PORTFOLIO MANAGER'S REPORT The portfolio managed to pull further ahead of emerging markets as they accelerated in the first half of 2003, rising by +20.09% against +16.13% for the MSCI index for a gain of +396 basis points. This came despite a loss of ground in June as overweights in Brazil and Southeast Asia suffered pullbacks, and as the still-strong rand hurt South African resources. Over the second quarter, SOUTH AFRICA was positive. Adding to ANGLO AMERICAN in May proved premature. The currency has not yet weakened given the weak dollar, despite the start of a sustained period of declining interest rates; and commodity plays have not yet risen in line with strong moves in electronics stocks in anticipation of global economic recovery. Having taken profits in our few industrial holdings, we have moved underweight South Africa with positions remaining in resources and in financials given the direction of domestic interest rates. The ISRAELI rally has showed no signs of slowing but at least other markets have been catching up, reducing its relative impact as the quarter rolled on. There is still value in a few stocks, but the return to positive GDP growth this year and next will not be vigorous enough to justify aggressive buying at this late stage. Our positive view of TURKEY compensated for this loss as stocks rebounded from the government's March refusal to support the American attack on Iraq. We added to TURKCELL and the holding companies KOC and SABANCI. Our HUNGARIAN holdings out-performed the local market but that was not enough to beat off the impact of a weak economy. RUSSIA was more damaging as huge domestic liquidity flows swamped any fundamental valuation perspective. Our underweight was at least partially redeemed by good stock performance, and we reduced our holding in SURGUTNEFTEGAZ after a particularly sharp spike. Latin American markets generally made positive net contributions. The outlier was CHILE as our sole holding, ENTEL, gave back some gains following a strong rally and a marginal negative contribution from VENEZUELA and COLOMBIA, however our absence from PERU did no harm in the second quarter whilst positions built up in ARGENTINA benefited from strong moves. We have begun cutting back in Argentina, where illiquidity means it would be imprudent to sit on too much of an overweight indefinitely. Our BRAZILIAN overweight has not yet been pulled back substantially but we have rotated positions as relative values shift, taking brewer AMBEV down to neutral in favor of textile manufacturer COTEMINAS and trimming COPEL after outperformance in March and April. Being underweight MEXICO had little asset allocation impact, but stock selection boosted the numbers as AMERICA MOVIL and ELEKTRA outperformed TELMEX and WALMEX in the telecoms and retailing sectors respectively. Given the SARS hiccup Asian markets took a while to join in the global rally, with China and Taiwan being understandable laggards. This gave the opportunity to move slightly overweight TAIWAN and, in particular, overweight Taiwanese technology with purchases in SILICONWARE PRECISION, WINBOND and ASUSTEK as second-quarter data points showed signs of good news at last in the sector. We would expect to add further to technology over the summer. CHINA was reduced after good performance from industrials (ALUMINUM CORP, CHINA SHIPPING). Our marginal underweight in SOUTH KOREA was more than compensated by good stock selection given its sharp recovery from last quarter's traumas. We added to SSANGYONG MOTORS and SAMSUNG ELECTRO-MECHANICS. INDIA continued to see strong stock selection adding to performance despite poor quarterly results from software houses and by sluggishness across large caps in general as speculation focused on the smaller banks. Monetary liquidity is building up, and so we are happy to sit on attractive valuations. Southeast Asia was more productive for us, although THAILAND was held back by underperformance from the big-cap banks which have very much become consensus holdings. This lost ground was made up by our overweight in INDONESIA where we switched from TELKOM INDONESIA and ASTRA INTERNATIONAL into INDONESIA SATELLITE. Illiquidity precludes a similarly large position in the PHILIPPINES but PHILIPPINE LONG DISTANCE TELEPHONE and BANK OF THE PHILIPPINE ISLANDS were strong outperformers. By not joining the rally until May, MALAYSIA was an underperformer. We have not yet moved to close off our underweight here. 2 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED JUNE 30, 2003 SINCE INCEPTION YTD 1 YEAR 5 YEARS (10/4/95) ------ ------ ------- -------- PICTET GLOBAL EMERGING MARKETS FUND - INSTITUTIONAL CLASS ... 20.09% 9.66% 3.86% (1.79)% MSCI EMERGING MARKETS FREE INDEX 1,2 ........................ 16.13% 6.96% 3.96% (1.85)% - --------------------------------------------------------------------------------------------------------------- 1 The International Finance Corporation Global Composite Index Total Return ("IFC Global Composite Index") includes securities of approximately 1,812 companies domiciled in 34 markets. The IFC Global Composite Index was used as the Fund's benchmark until June 30, 2002. As of July 1, 2002 the Fund uses the Morgan Stanley Capital International Emerging Markets Free Index ("MSCI Emerging Markets Free Index") as its benchmark. The MSCI Emerging Markets Free Index includes securities of approximately 680 companies domiciled in 26 markets. The Fund has selected the MSCI Emerging Markets Free Index because the Fund's investment adviser believes that the MSCI Emerging Markets Free Index provides a more accurate benchmark for comparing Fund performance. 2 Index performance reflects no deductions for fees, expenses or taxes. An individual investor can not invest directly into an index. * Assumes the reinvestment of all dividends and distributions. Index information is available at month-end only; therefore, the closest month-end inception date of the Fund has been used. NOTE: The performance shown represents past performance and is not a guarantee of future results. The Fund's share price and investment return will vary with market conditions, and the principal value of shares, when redeemed, may be more or less than original cost. 3 PICTET FUNDS PICTET INTERNATIONAL SMALL COMPANIES FUND - -------------------------------------------------------------------------------- PORTFOLIO MANAGER'S REPORT The Fund rose by 16.3% over the first half of 2003, lagging the benchmark's rise of 18.9%. Despite strong showings from many of our technology and cyclical stocks in the second quarter, stock selection was disappointing in Continental Europe, where our portfolio rose 23% but did not match the index's exceptionally strong advance of 27%. The second quarter began strongly as investors reacted to the swift conclusion to the military conflict in Iraq. Having been relatively weak in the run up to the war, European exchanges led the rebound, with the Asian region subdued. The SARS epidemic was front-page news, while in Japan the market was further undermined by pension fund selling and the ongoing erosion of bank shares. Markets extended their gains in May, reacting to more positive investor sentiment emanating from the States, though there was little comfort in terms of economic news in Japan or Europe. Nevertheless, small caps continued to perform well, in most cases better than large caps, continuing their strong relative run over the last six months. There was a particularly large rebound in the Asia ex-Japan region as the SARS epidemic receded but once again, Japan was a relatively weak performer. Global markets continued their advance in June, despite mixed economic releases from the US and the Fed's concerns about deflation. As well as the increased appetite for risk, bond market momentum reversed, with yields rising sharply from abnormally low levels. Having lagged over the last two months, Japan led the way, propelled by the strongest net foreign buying for several years. Encouragement was taken from a long-awaited rise in yields, perhaps heralding the end of deflation, and there were strong machinery orders. Other markets in Asia also reacted positively to better sentiment about the US consumer, with technology shares at the forefront. European markets rose modestly against this background with returns subdued by the weakness of the Euro. Within the benchmark, individual stock performance was somewhat indiscriminate, and many lower quality stocks that had previously under-performed rose sharply on the hopes of a recovery. While we had few negative shocks in the portfolio, under-performance reflected our relatively cautious stance, being invested in high-quality (and therefore "low-beta") shares. As we have argued previously, the expectations of investors appear to have run ahead of the hard evidence. The equity markets (and more recently bond markets) anticipate recovery while the Fed is apparently concerned with deflation. Looking at the manufacturing sector, most surveys improved between May and June, but in most cases the pick up was small. The only particular area of strength in the US appears to be the housing market, which accounts for just 5% of GDP, and the likelihood of further weakness in the US job market does not argue well for consumer demand in the months ahead. The Eurozone remains encumbered by the feeble growth of Germany and France, so more cuts in interest rates are likely before growth is stimulated. In this context, the UK economy is relatively strong, with retail sales actually showing growth, albeit moderate and slowing. Economic conditions also continue to deteriorate in Japan, with industrial activity down from its peak in April and retail activity weaker than expected. Against this lackluster background it is perhaps surprising that small caps have continued to perform so well. Although investor sentiment has risen (and risk aversion declined sharply) in recent months, smaller shares were outperforming earlier in the year even as growth expectations were being pared back, suggesting both attractive valuations and an appetite for stock-specific growth from investors. We anticipate this trend to continue regardless of whether expectations continue to improve, and have resisted the temptation to buy into low quality momentum-driven stocks that are currently in demand due to their extreme leverage into any US-led recovery. Rather we have stuck with our favored combination of both low valuations and a relative acceleration in earnings. 4 PICTET FUNDS PICTET INTERNATIONAL SMALL COMPANIES FUND - -------------------------------------------------------------------------------- With no significant difference in regional economic performance, investors continue to play a game of rotation. In the first quarter the US was the best performing stock market. Europe was the choice of asset allocators in the second quarter, and so far in the third Japan is outperforming strongly. We retain our preference for Europe over Japan, but added to our weighting significantly to the latter in June. We are encouraged by several factors; the surge in liquidity (with monetary base up by 20% in June), the better trend in machinery orders, and the mere fact that, as the market rises, some of Japan's many problems recede. (For example, the banks become less risky, and pressure on domestic institutions to sell equities eases.) Among the most recent stocks added were NIPPON SYSTEM DEVELOPMENT, a software developer, real estate firm SUMITOMO REALTY and chemical company KUREHA. In Asia, contract manufacturer VENTURE was added while European stocks sold included RADIOMETER of Denmark. - ------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED JUNE 30, 2003 SINCE INCEPTION (INST. - 2/7/96 YTD 1 YEAR 5 YEARS (10/4/95) ------ ------ ------- -------- PICTET INTERNATIONAL SMALL COMPANIES FUND - INSTITUTIONAL CLASS .... 16.31% (1.65)% 5.92% 5.32% PICTET INTERNATIONAL SMALL COMPANIES FUND - RETAIL CLASS ........... 16.15% (1.85)% N/A 2.46% HSBC WORLD EXCLUDING U.S. SMALL COMPANIES INDEX 1,2 ................ 18.93% 1.64% (1.22)% (0.17)% - ------------------------------------------------------------------------------------------------------------------------ 1 The HSBC World excluding U.S. Small Companies Index is an index composed of approximately 1,200 smaller company stocks covering 21 markets. 2 Index performance reflects no deductions for fees, expenses or taxes. An individual investor can not invest directly into an index. * Assumes the reinvestment of all dividends and distributions. Index information is available at month-end only; therefore, the closest month-end inception date of the Fund has been used. NOTE: The performance shown represents past performance and is not a guarantee of future results. The Fund's share price and investment return will vary with market conditions, and the principal value of shares, when redeemed, may be more or less than original cost. 5 PICTET FUNDS PICTET INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO MANAGER'S REPORT The Fund's return of 9.86% over the first half of 2003 slightly out-performed the MSCI EAFE Index return of 9.47%. Stock selection contributed particularly to performance, with most of the gains originating from Europe, and in particular the UK. During the second quarter, European performance was 1.0% above the local index. Sector performance reflected the improving market conditions and investor confidence in strengthening economic activity. Sectors more exposed to cyclical influence out-performed including Media, Capital Goods and Retailing, whilst more defensive sectors such as Utilities and Healthcare under-performed. The defensive bias of the Fund resulted in an overall negative contribution from sector allocation, although this was partly offset by positive stock selection. Holdings such as Tesco (which is benefiting from strong current trading, improving formats and lack of real opposition from the UK competition), Roche (which has an excellent product pipeline) and Unicredito Italiano (which has unveiled a new strategic plan) all performed strongly. Stock activity over the review period included the purchase of AWG, the UK water services and infrastructure management group. We believe the value in this stock will be released by management through further restructuring or by a financial bidder. A position in healthcare company Nobel Biocare was also initiated. This company develops and produces dental implants and industrialized dental prosthetics, an area with high growth potential. European stocks sold include Galen (an Irish pharmaceuticals company specializing in women's products), which had performed very well such that valuations began to look less attractive in light of the risk posed by generics. Whilst Roche remains our favored pharmaceutical stock, we took the opportunity to reduce our large overweight position on the back of recent strong performance (switching into Nobel Biocare). In Japan, the Fund's focus on stocks with relatively secure balance sheets and earnings prospects led to a generally defensive portfolio -- these stocks have struggled in the upbeat market environment of the second quarter. The Fund therefore under-performed the benchmark, MSCI Japan Index. Activity has centered around selectively increasing the Fund's technology exposure with the purchase of Mimasu Semiconductor (processes semiconductor materials and manufactures processing equipment) and Lintec (manufactures adhesive products for semiconductors and LCDs). A further addition is Victor Company of Japan (an audio-visual subsidiary of MEI) where product focus and aggressive cost controls under the stewardship of the new President (appointed last year) has resulted in a strong turnaround in the business. Equities rose sharply over the second quarter, recording a gain of 19.3% as measured by the MSCI EAFE Index in US dollars. Equity prices were boosted by a combination of factors including an end to the military conflict in Iraq, further monetary easing by Central banks in the US and Europe, a better than expected first quarter reporting season and higher levels of corporate activity. In the period under review, the European market rose by 22.4%, Japan rose by 11.7%, while Asia ex Japan increased by 15.0% in US dollars. The economic data released over the period has shown a higher than average degree of volatility due to the swings in sentiment engendered by the military conflict in Iraq. Overall data from the European economies continues to point to sluggish activity but with some signs of improving confidence amongst business leaders and consumers. However, uncertainty over future growth prospects and easing inflationary pressures resulted in the European Central Bank lowering interest rates by fifty basis points over the second quarter to a level of 2.0%, a record low. Although the Bank of England held rates steady over the three months to end June at the level of 3.75%, expectations of lower rates over the coming months are building as consumer spending has cooled and the housing market shows signs of moderation. Within Japan, recent economic releases have been mixed and had little impact on the overall direction of share prices. Industrial production and export volumes seem to have leveled off, but 6 PICTET FUNDS PICTET INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- machinery orders and capital expenditure plans within the Bank of Japan's quarterly enterprise survey (Tankan) have been encouraging. The majority of the gains in European equities were in the month of April when the markets recorded a rise of 11.2%, the strongest performance in a calendar month since 1986. Encouragingly, May and June saw further gains to push European equity returns back into positive territory for the year as a whole and up an impressive 28.5% from the lows reached on March 12th. In the first quarter reporting season, the number of companies exceeding analyst expectations has modestly outweighed those disappointing. The majority of companies, however, continued to be guarded over providing too much visibility over the course of 2003 that has been reflected in little change to earnings estimates for the year as a whole. Companies who provided positive earnings surprise for the first quarter included GlaxoSmithkline, Metro and Aventis whilst results from Heineken, and Unilever fell short of analyst expectations. Levels of corporate activity continued to pick up over the quarter with Royal Bank of Scotland purchasing Churchill Insurance from Credit Suisse Group, Japan's Seiko Epson completed its share sale and Benfield Group in the UK completing a successful flotation. An upbeat earnings season combined with receding fears of bankruptcy (following the quasi-nationalization of Resona bank), meant Japanese equities also participated in the global rebound in equity markets, with the upward trend gaining momentum throughout the quarter. Much of this current rally, which has been characterized by large volumes in low priced equities, has been fuelled by foreign institutional buying and has alleviated much of the supply/demand concerns relating to proxy pension fund selling. - ------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED JUNE 30, 2003 SINCE INCEPTION YTD 1 YEAR (8/15/00) ------ ------ --------------- PICTET INTERNATIONAL EQUITY FUND - INSTITUTIONAL CLASS ................ 9.86% (7.34)% (13.52)% MSCI EUROPE, AUSTRALASIA AND FAR EAST INDEX 1,2 ....................... 9.47% (6.46)% (13.11)% - ------------------------------------------------------------------------------------------------------------------------------- 1 The Morgan Stanley Capital International ("MSCI") Europe, Australasia and Far East Index is an index composed of approximately 1,023 stocks covering 21 markets. 2 Index performance reflects no deductions for fees, expenses or taxes. An individual investor can not invest directly into an index. * Assumes the reinvestment of all dividends and distributions. Index information is available at month-end only; therefore, the closest month-end inception date of the Fund has been used. NOTE: The performance shown represents past performance and is not a guarantee of future results. The Fund's share price and investment return will vary with market conditions, and the principal value of shares, when redeemed, may be more or less than original cost. 7 PICTET FUNDS PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- PORTFOLIO MANAGER'S REPORT Global equity markets continued to trend downwards with geopolitical developments throughout the first quarter, most notably the developments in the Iraq conflict, causing a lot of concern. Equity prices were also negatively affected by the uncertainty of the timing of the economic turnaround and the lack of investor confidence. As in the past, the Fund's performance was less volatile than that of global equities and with perhaps a time-lag, unable to resist the general downward trend for equities. Industrial holdings although showing the greatest volatility in the Fund, generally held better than the overall market, whereas consumer staples, and to a lesser degree utilities, tended to be less volatile albeit under greater selling pressure. Our weighting in utilities was reduced -- American Water Works was delisted after US regulatory bodies approved the acquisition of the company by the German utility RWE. We also took profits in Spanish and French utilities and selected industrial groups, reinvesting these proceeds in selected names in industrial and consumer staples where valuation looks attractive. The high dividend yield and the relative transparent business model, of regulated utilities, is likely to continue to dampen the volatility extremities and help limit the downside risk. We remain under-invested in the more economic sensitive segments, lowering our cyclical exposure, thus reflecting our cautious market outlook. The second quarter of 2003 proved to be a good one for equity markets. The rally started in the aftermath of the swift occupation of Iraq and was fuelled by investors' optimism of a rebound in economic activity and a big dose of liquidity available to equity markets. The Fund held up nicely against the world index despite its more definitive characteristics. The main contributors to this positive performance were international water utilities that rebounded from a sell off in March driven by unjustified worries about short-term financing issues. Equipment companies and environmental services performed in line with the market while packaged water companies were lagging. We increased our exposure to international water utilities in early April as the group was looking very inexpensive after the sharp sell off in March. We took profits in UK water utilities. The position in Millipore was increased as the stock started to outperform. The company provides filtration technologies to the booming biotech sector. In relation to its long-term strategy, the Fund remained underinvested in utilities during the second quarter as UK water utilities are trading close to their fair values. Environmental services were underweight as well as the share prices of these companies already discounted an economic recovery that was still to materialize. Equipment stocks were our preferred choice -- offering solid earnings growth in a consolidating market place. - ------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS* PERIODS ENDED JUNE 30, 2003 SINCE INCEPTION YTD 1 YEAR (12/31/01) ----- ------ --------------- PICTET GLOBAL WATER FUND - INSTITUTIONAL CLASS ....................... 8.20% (7.98)% (9.18)% PICTET GLOBAL WATER FUND - RETAIL CLASS .............................. 8.08% (8.28)% (9.44)% MSCI WORLD INDEX 1,2 ................................................. 11.12% (2.37)% (7.46)% - ------------------------------------------------------------------------------------------------------------------- 1 The Morgan Stanley Capital International World Index is an index composed of approximately 1,500 stocks covering 23 markets. 2 Index performance reflects no deductions for fees, expenses or taxes. An individual investor can not invest directly into an index. * Assumes the reinvestment of all dividends and distributions. Index information is available at month-end only; therefore, the closest month-end inception date of the Fund has been used. NOTE: The performance shown represents past performance and is not a guarantee of future results. The Fund's share price and investment return will vary with market conditions, and the principal value of shares, when redeemed, may be more or less than original cost. 8 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS -- 96.6% ARGENTINA - 1.4% 49,200 BBVA Banco Frances SA, ADR+ $ 302,088 74,800 Telecom Argentina Stet SA, Sponsored ADR+ 486,200 10,593 Tenaris SA, ADR 270,122 ----------- 1,058,410 ----------- BRAZIL - 11.0% 12,542,900 Banco Itau SA, Preference No Par 835,898 27,957 Brasil Telecom Participacoes SA, ADR 1,046,990 40,655,600 Centrais Eletricas Brasileiras SA, Class B, Preference No Par 10.82% 313,170 31,500 Cia de Bebidas das Americas, ADR, Preference No Par 2.53% 641,025 7,607,000 Cia de Saneamento Basico do Estado de Sao Paulo 278,401 5,519,600 Cia de Tecidos Norte de Minas, Preference No Par 1.07% 384,774 152,000 Cia Paranaense de Energia-Copel, Sponsored ADR, Preference No Par+ 456,000 9,300 Cia Siderurgica Nacional SA, Sponsored ADR 230,733 34,000 Cia Vale do Rio Doce 1,006,130 6,100 Cia Vale do Rio Doce, Class A, Preference No Par 166,904 59,900 Cia Vale do Rio Doce, Class B, Preference ##+ 209 88,500 Petroleo Brasileiro SA, ADR 1,571,760 20,400 Petroleo Brasileiro SA, Preference No Par 1.14% 361,922 21,200 Tele Norte Leste Participacoes SA, ADR 247,616 41,000,000 Telemar Norte Leste SA, Class A, Preference No Par 562,193 119,100 Telesp Celular Participacoes SA, ADR+ 464,490 6,400 Uniao de Bancos Brasileiros SA, ADR 109,824 ----------- 8,678,039 ----------- CHILE - 0.4% 65,500 Empresa Nacional de Telecomunicaciones SA 336,029 ----------- CHINA - 4.7% 1,783,000 China Petroleum and Chemical Corporation (Sinopec), Class H 427,562 676,000 China Shipping Development Company, Ltd., Class H 240,556 1,694,000 China Telecom Corporation, Ltd., Class H 388,842 1,208,000 China Unicom, Ltd. 821,012 1,634,000 PetroChina Company, Ltd., Class H 492,410 1,500,000 Sinopec Beijing Yanhua Petrochemical Company, Ltd., Class H+ 205,817 2,024,000 Sinopec Shanghai Petrochemical Company, Ltd., Class H 394,512 2,208,000 Sinopec Yizheng Chemical Fibre Company, Ltd., Class H 314,289 1,351,000 Sinotrans, Ltd., Class H+ 381,140 ----------- 3,666,140 ----------- CROATIA - 0.5% 26,900 Pliva d.d., GDR, Registered Shares 372,834 ----------- SEE NOTES TO FINANCIAL STATEMENTS. 9 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS -- (continued) CZECH REPUBLIC - 0.6% 28,900 Cesky Telecom AS $ 296,828 8,430 Komercni Banka AS, GDR 202,573 ----------- 499,401 ----------- EGYPT - 1.1% 40,700 Commercial International Bank 250,355 45,800 Egyptian Company for Mobile Services 409,393 29,300 Orascom Construction Industries 237,083 ----------- 896,831 ----------- HUNGARY - 1.6% 8,500 Gedeon Richter Rt., Sponsored GDR+ 603,500 12,200 Magyar Tavkozlesi Rt., Sponsored ADR 209,840 19,400 MOL Magyar Olaj-es Gazipari Rt., Sponsored GDR 427,770 ----------- 1,241,110 ----------- INDIA - 7.1% 39,500 Hindalco Industries, Ltd., GDR, Registered Shares@ 637,135 30,100 ITC, Ltd., GDR 523,138 78,000 Mahanagar Telephone Nigam, Ltd., ADR 374,400 38,400 Reliance Industries, Ltd., Sponsored GDR@ 559,872 96,700 State Bank of India, GDR 1,980,416 273,000 Tata Engineering and Locomotive Company, Ltd., Sponsored GDR 1,141,140 16,100 Wipro, Ltd., ADR 371,105 ----------- 5,587,206 ----------- INDONESIA - 4.9% 1,590,153 PT Astra International Tbk+ 689,066 324,000 PT Gudang Garam Tbk 400,582 6,405,000 PT Indofood Sukses Makmur Tbk 659,909 701,000 PT Indonesian Satellite Corporation Tbk 747,733 2,190,500 PT Lippo Bank Tbk+ 131,430 1,000,000 PT Ramayana Lestari Sentosa Tbk 390,909 73,200 PT Telekomunikasi Indonesia, Sponsored ADR 819,840 ----------- 3,839,469 ----------- ISRAEL - 1.0% 39,700 Check Point Software Technologies, Ltd.+ 776,135 ----------- MALAYSIA - 1.9% 397,000 Lafarge Malayan Cement Berhad 70,520 58,000 Malaysian Pacific Industries Berhad 219,790 536,750 Public Bank Berhad (F)+ 426,577 599,000 RHB Capital Berhad 266,399 SEE NOTES TO FINANCIAL STATEMENTS. 10 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS -- (continued) MALAYSIA - (continued) 192,000 Sime Darby Berhad $ 257,685 152,000 Star Publications (Malaysia) Berhad 248,001 ----------- 1,488,972 ----------- MEXICO - 3.6% 166,700 Alfa SA, Series A 335,029 53,000 America Movil SA de CV, Series L, ADR 993,750 91,340 Grupo Elektra SA de CV 280,310 14,000 Grupo Televisa SA, Sponsored ADR 483,000 24,340 Telefonos de Mexico SA de CV, Sponsored ADR, Series L 764,763 ----------- 2,856,852 ----------- PHILIPPINES - 1.9% 615,000 ABS-CBN Broadcasting Corporation, PDR+ 209,996 5,834,000 Ayala Land, Inc. 654,925 529,000 Bank of the Philippine Islands 455,289 14,000 Philippine Long Distance Telephone Company+ 147,996 ----------- 1,468,206 ----------- POLAND - 0.7% 159,200 Telekomunikacja Polska SA, GDR 563,568 ----------- RUSSIA - 2.8% 7,100 AO VimpelCom, Sponsored ADR+ 329,724 3,600 Lukoil, Sponsored ADR 284,760 5,000 Mobile Telesystems, Sponsored ADR+ 295,000 50,800 OAO Gazprom, Sponsored ADR, Registered Shares 956,564 17,100 Surgutneftegaz, Sponsored ADR 354,825 ----------- 2,220,873 ----------- SLOVAKIA - 0.0%# 2,700 Chirana Prema AS ##+ 0 ----------- SOUTH AFRICA - 8.6% 122,100 Anglo American Plc 1,884,166 53,500 Barloworld, Ltd. 382,904 38,500 Harmony Gold Mining Company, Ltd. 504,957 9,400 Impala Platinum Holdings, Ltd. 558,239 83,300 Kumba Resources, Ltd. 333,864 55,800 Nedcor, Ltd. 664,989 921,000 Sanlam, Ltd. 858,450 24,000 Sappi, Ltd. 288,573 50,200 Sasol, Ltd. 558,480 162,700 Standard Bank Group, Ltd. 710,590 ----------- 6,745,212 ----------- SEE NOTES TO FINANCIAL STATEMENTS. 11 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS -- (continued) SOUTH KOREA - 16.6% 127,000 Hanaro Telecom, Inc.+ $ 324,278 65,520 Hyundai Development Company 436,617 93,210 Hyundai Merchant Marine Company, Ltd.+ 262,190 20,220 Hyundai Motor Company, Ltd. 534,912 89,200 Kia Motors Corporation 657,145 46,620 Kookmin Bank 1,405,040 20,100 Korea Electric Power Corporation 318,033 42,000 Korean Air Company, Ltd. 481,708 26,700 LG Chem, Ltd. 1,072,917 9,200 LG Electronics, Inc. 383,558 37,000 Posco, ADR 969,030 87,220 Samsung Corporation 521,348 11,200 Samsung Electro Mechanics Company, Ltd. 368,020 10,680 Samsung Electronics Company, Ltd. 3,174,047 7,230 Samsung Fire & Marine Insurance Company, Ltd. 351,664 103,000 Samsung Heavy Industries Company, Ltd. 413,035 3,350 Shinsegae Company, Ltd. 523,043 53,210 SK Corporation 505,595 68,000 Ssangyong Motor Company+ 370,029 ----------- 13,072,209 ----------- TAIWAN - 13.9% 395,750 Asustek Computer, Inc. 1,000,510 327,000 Chinatrust Financial Holding Company, Ltd.+ 263,600 924,170 Evergreen Marine Corporation 656,870 986,000 Far Eastern Textile, Ltd. 380,321 894,000 First Financial Holding Company, Ltd.+ 552,769 544,772 Fubon Financial Holding Company, Ltd.+ 436,001 162,150 Hon Hai Precision Industry Company, Ltd. 587,968 74,510 Mega Financial Holding Company, Ltd.+ 35,091 682,000 ProMOS Technologies, Inc.+ 276,856 342,800 Quanta Computer, Inc. 708,173 1,490,000 Siliconware Precision Industries Company+ 947,113 1,755,129 SinoPac Holdings Company+ 641,493 433,738 Taiwan Cellular Corporation+ 314,553 1,200,320 Taiwan Semiconductor Manufacturing Company, Ltd.+ 1,976,808 57,200 Taiwan Semiconductor Manufacturing Company, Ltd., Sponsored ADR+ 576,576 723,177 United Microelectronics Corporation+ 465,953 1,452,000 Winbond Electronics Corporation+ 717,390 743,928 Yuanta Core Pacific Securities Company 389,047 ----------- 10,927,092 ----------- SEE NOTES TO FINANCIAL STATEMENTS. 12 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS -- (continued) THAILAND - 6.7% 680,000 Bangkok Bank Public Company, Ltd. (F)+ $ 1,091,777 350,400 Banpu Public Company, Ltd. (F) 387,560 76,000 BEC World Public Company, Ltd. (F) 433,857 1,372,300 Kasikornbank Public Company, Ltd. (F)+ 1,281,180 1,455,600 Land and Houses Public Company, Ltd. (F) 328,918 1,110,200 National Finance Public Company, Ltd. (F) 398,749 349,400 PTT Public Company, Ltd. (F) 552,670 1,084,400 Sansiri Public Company, Ltd. (F)+ 214,086 1,316,000 Shin Corporation Public Company, Ltd. (F) 594,745 ----------- 5,283,542 ----------- TURKEY - 5.1% 197,985,895 Akbank TAS 586,521 137,697,100 Arcelik AS 480,762 69,464,000 Eregli Demir ve Celik Fabrikalari TAS+ 945,622 108,629,600 Haci Omer Sabanci Holding AS 260,512 76,593,878 Koc Holding AS+ 669,909 57,245,400 Turkcell Iletisim Hizmetleri AS+ 383,588 332,878,355 Turkiye Garanti Bankasi AS+ 450,803 90,222,000 Vestel Electronik Sanayi+ 227,504 ----------- 4,005,221 ----------- VENEZUELA - 0.5% 30,195 Cia Anonima Nacional Telefonos de Venezuela, ADR 377,136 ----------- TOTAL COMMON AND PREFERRED STOCKS (COST $69,517,477) 75,960,487 ----------- RIGHTS AND WARRANTS -- 0.0%# (COST $0) THAILAND - 0.0%# 245,684 TelecomAsia, expiration 3/31/2008## 0 ----------- TOTAL INVESTMENTS (COST $69,517,477*) 96.6% 75,960,487 OTHER ASSETS AND LIABILITIES (NET) 3.4% 2,693,170 - ------------------------------------------------------------------------------------------------------------------- NET ASSETS 100.0% $78,653,657 =================================================================================================================== * Aggregate cost for Federal tax purposes. + Non-income producing security. # Amount represents less than 0.1%. ## The valuation of this security has been determined by procedures established by the Pricing Committee of the Board of Trustees. @ Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2003, these securities amount to $1,197,007 or 1.52% of total net assets. Abbreviations: ADR American Depositary Receipt GDR Global Depositary Receipt PDR Philippine Depositary Receipt (F) Foreign Shares SEE NOTES TO FINANCIAL STATEMENTS. 13 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) AT JUNE 30, 2003, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS (UNAUDITED): % OF NET INDUSTRY DIVERSIFICATION ASSETS VALUE - ----------------------------------------------------------------------- COMMON AND PREFERRED STOCKS: Telecommunications Services 15.6% $ 12,300,507 Banks 15.3 12,003,209 Materials 13.4 10,529,657 Semiconductor & Semi Equipment 10.6 8,354,533 Energy 8.6 6,765,832 Automobile & Components 4.3 3,392,292 Diversified Financials 3.6 2,795,711 Technology Hardware & Equipment 3.4 2,664,671 Capital Goods 3.3 2,583,701 Food, Beverage & Tobacco 2.8 2,224,654 Consumer Durables & Apparel 2.8 2,185,837 Transportation 2.6 2,022,464 Media 1.7 1,374,854 Utilities 1.7 1,365,604 Insurance 1.6 1,210,114 Retailing 1.5 1,194,262 Software & Services 1.5 1,147,240 Pharmaceuticals & Biotech 1.2 976,334 Real Estate 1.1 869,011 - ----------------------------------------------------------------------- TOTAL COMMON AND PREFERRED STOCKS 96.6 75,960,487 RIGHTS AND WARRANTS 0.0# 0 - ----------------------------------------------------------------------- TOTAL INVESTMENTS 96.6% 75,960,487 OTHER ASSETS AND LIABILITIES (NET) 3.4 2,693,170 - ----------------------------------------------------------------------- NET ASSETS 100.0% $ 78,653,657 ======================================================================= # Amount represents less than 0.1%. SEE NOTES TO FINANCIAL STATEMENTS. 14 PICTET FUNDS PICTET INTERNATIONAL SMALL COMPANIES FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS -- 99.6% AUSTRALIA - 3.4% 160,000 Computershare, Ltd. $ 200,661 31,750 Flight Centre, Ltd. 468,455 80,000 Iluka Resources, Ltd. 217,294 36,000 Leighton Holdings, Ltd. 241,437 ----------- 1,127,847 ----------- AUSTRIA - 2.1% 10,000 Andritz AG 268,598 2,000 Mayr-Melnhof Karton AG 166,533 10,500 VA Technologie AG+ 277,445 ----------- 712,576 ----------- BELGIUM - 3.1% 12,000 Mobistar SA+ 493,191 13,000 Omega Pharma SA 395,604 3,200 Umicore 165,839 ----------- 1,054,634 ----------- DENMARK - 0.7% 6,000 Topdanmark A/S+ 219,316 ----------- FINLAND - 1.7% 8,000 Lassila & Tikanoja Oyj 168,577 70,000 Perlos Oyj 387,451 ----------- 556,028 ----------- FRANCE - 11.4% 17,380 Alten+ 152,680 4,500 Foncia Groupe 294,550 71,310 Gemplus International SA+ 97,447 14,000 Ginger+ 353,690 65,000 Havas SA 290,358 5,000 Ipsos 310,340 10,000 Linedata Services 144,691 11,500 NRJ Group 170,357 3,450 Pierre & Vacances 206,805 7,000 Rodriguez Group 382,226 3,000 Sagem SA, New Shares 241,152 5,000 Societe Virbac SA 157,897 10,000 Sopra Group 303,163 4,000 Technip-Coflexip SA 350,015 19,110 UBI Soft Entertainment SA+ 367,576 ----------- 3,822,947 ----------- GERMANY - 7.9% 24,030 Comdirect Bank AG+ 182,125 27,500 Epcos AG+ 354,321 830 IDS Scheer AG 8,988 SEE NOTES TO FINANCIAL STATEMENTS. 15 PICTET FUNDS PICTET INTERNATIONAL SMALL COMPANIES FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS -- (continued) GERMANY - (continued) 6,200 Medion AG $ 269,553 28,500 MG Technologies AG 288,659 40,000 MobilCom AG+ 335,316 2,800 Puma AG Rudolf Dassler Sport 278,128 15,000 Rheinmetall AG, Preferred 282,492 6,500 Rhoen-Klinikum AG 251,918 10,720 Zapf Creation AG 398,852 ----------- 2,650,352 ----------- GREECE - 2.2% 39,000 Aktor SA Technical Company 223,031 10,000 Alpha Bank A.E. 174,318 5,000 Germanos SA 83,714 18,350 Hyatt Regency Hotels and Tourism SA 162,677 17,000 Teletypos SA Mega Channel+ 107,370 ----------- 751,110 ----------- HONG KONG - 5.0% 400,000 China Insurance International Holdings Company, Ltd. 192,353 474,000 Fong's Industries Company, Ltd. 264,408 300,000 Fountain Set Holdings, Ltd. 267,370 176,000 Great Eagle Holdings, Ltd. 99,305 714,000 Harbin Brewery Group, Ltd.+ 238,055 1,300,000 Lerado Group Holding Company, Ltd. 216,717 798,000 Moulin International Holdings, Ltd. 396,535 ----------- 1,674,743 ----------- IRELAND - 2.2% 38,000 Anglo Irish Bank Corporation Plc 336,005 5,000 Depfa Bank Plc 389,001 ----------- 725,006 ----------- ITALY - 4.2% 300,000 C.I.R. SpA 358,283 97,380 Cassa di Risparmio di Firenze SpA 126,363 90,000 Cementir SpA 252,176 40,000 Credito Emiliano SpA 214,051 60,000 ERG SpA 288,005 11,000 Fondiaria-Sai SpA 162,950 ----------- 1,401,828 ----------- JAPAN - 15.6% 40,000 Brother Industries, Ltd. 276,490 7,000 Citizen Electronics Company, Ltd. 305,471 9,200 Daiichikosho Company, Ltd. 285,017 12,000 Disco Corporation 460,705 SEE NOTES TO FINANCIAL STATEMENTS. 16 PICTET FUNDS PICTET INTERNATIONAL SMALL COMPANIES FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS -- (continued) JAPAN - (continued) 3,400 Drake Beam Morin-Japan Inc. $ 107,881 8,000 Goldcrest Company, Ltd. 209,866 70 Goodwill Group, Inc. 273,991 8,200 Gulliver International Company, Ltd. 284,085 5,000 Kappa Create Company, Ltd. 245,676 100,000 Kureha Chemical Industry Company, Ltd. 375,593 50,000 Minebea Company, Ltd. 198,206 10,000 Nissin Healthcare Food Service Company, Ltd. 205,702 25,000 NOK Corporation 415,151 8,000 Plenus Company, Ltd. 182,883 4,000 Shimamura Company, Ltd. 220,858 25,000 Shinkawa, Ltd. 424,728 55,000 Sumitomo Realty & Development Company, Ltd. 244,593 6,000 USS Company, Ltd. 303,805 1,000 Yozan, Inc.+ 226,522 ----------- 5,247,223 ----------- NETHERLANDS - 2.9% 23,000 Exact Holding NV+ 368,974 32,500 Vedior NV 294,464 250,000 Versatel Telecom International NV+ 324,407 ----------- 987,845 ----------- NORWAY - 1.5% 60,000 Storebrand ASA+ 241,049 24,100 TGS Nopec Geophysical Company ASA+ 270,432 ----------- 511,481 ----------- SINGAPORE - 0.7% 25,000 Venture Corporation, Ltd. 228,560 ----------- SPAIN - 2.5% 27,800 Corporacion Mapfre SA 296,892 24,900 Indra Sistemas SA 253,055 20,000 Sociedad General de Aguas de Barcelona SA 273,306 ----------- 823,253 ----------- SWEDEN - 4.9% 35,000 Eniro AB 299,503 10,000 Getinge AB, Class B 265,461 9,100 Industriforvaltnings AB Kinnevik, Class B 156,878 20,000 Modern Times Group AB, Class B+ 307,311 19,000 Perbio Science AB 353,657 20,000 Saab AB, Class B 267,335 ----------- 1,650,145 ----------- SEE NOTES TO FINANCIAL STATEMENTS. 17 PICTET FUNDS PICTET INTERNATIONAL SMALL COMPANIES FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS -- (continued) SWITZERLAND - 7.8% 3,900 Actelion, Ltd.+ $ 259,704 500 Centerpulse AG, Registered Shares+ 134,547 27,000 Clariant AG, Registered Shares+ 247,169 700 Kuoni Reisen Holding AG, Registered Shares, Class B 179,840 9,000 Logitech International SA, Registered Shares+ 337,532 27,000 Phonak Holding AG, Registered Shares 345,837 8,800 Saurer AG, Registered Shares+ 240,377 2,800 Straumann AG, Registered Shares 253,222 3,500 Swiss Life Holding+ 354,641 3,300 Unaxis Holding AG, Registered Shares 268,597 ----------- 2,621,466 ----------- UNITED KINGDOM - 19.8% 37,000 AWG Plc+ 341,914 33,100,000 AWG Plc, Redeemable Shares+ 51,889 46,000 Barratt Developments Plc 327,921 64,000 Cattles Plc 342,706 45,000 Computacenter Plc 263,614 47,000 Dairy Crest Group Plc 351,337 89,000 easyJet Plc+ 337,789 160,000 HMV Group Plc 353,135 34,000 Jardine Lloyd Thompson Group Plc 338,036 100,000 JJB Sports Plc 318,482 47,000 Johnston Press Plc 335,825 140,000 LogicaCMG Plc 330,941 34,000 Luminar Plc 255,280 70,000 McAlpine (Alfred) Group Plc 321,122 160,000 Mitie Group Plc 307,591 36,000 National Express Group Plc 337,426 175,000 NHP Plc 328,486 17,380 Rotork Plc 91,345 116,000 Serco Group Plc 306,271 18,000 Travis Perkins Plc 348,267 78,000 William Hill Plc 367,475 103,000 Wood Group (John) Plc 305,941 ----------- 6,662,793 ----------- TOTAL COMMON AND PREFERRED STOCKS (COST $29,776,115*) 33,429,153 ----------- RIGHTS AND WARRANTS -- 0.0%# (COST $0) FRANCE - 0.0%# 3,000 UBI Soft Entertainment SA, expiration 05/14/06+ 1,723 ----------- TOTAL INVESTMENTS (COST $29,776,115) 99.6% 33,430,876 OTHER ASSETS AND LIABILITIES (NET) 0.4% 146,542 - ------------------------------------------------------------------------------------------------------------------- NET ASSETS 100.0% $33,577,418 =================================================================================================================== * Aggregate cost for Federal tax purposes. + Non-income producing security. # Amount represents less than 0.1%. SEE NOTES TO FINANCIAL STATEMENTS. 18 PICTET FUNDS PICTET INTERNATIONAL SMALL COMPANIES FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) AT JUNE 30, 2003, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS (UNAUDITED): % OF NET INDUSTRY DIVERSIFICATION ASSETS VALUE - -------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS: Capital Goods 11.7% $ 3,932,188 Software & Services 8.3 2,776,807 Retailing 7.6 2,566,640 Health Care Equipment & Services 7.1 2,396,781 Consumer Durables & Apparel 5.6 1,871,214 Materials 5.6 1,870,141 Media 5.4 1,821,064 Hotel Restaurants & Leisure 5.4 1,806,338 Insurance 5.4 1,805,237 Technology Hardware & Equipment 5.2 1,743,526 Commercial Services & Supplies 4.3 1,458,775 Telecommunications Services 4.1 1,379,436 Banks 3.7 1,239,738 Energy 3.6 1,214,393 Real Estate 3.5 1,176,800 Semiconductor & Semi Equipment 3.2 1,080,776 Transportation 2.1 675,215 Utilities 2.0 667,109 Food, Beverage & Tobacco 1.8 589,392 Diversified Financials 1.6 524,831 Pharmaceuticals & Biotech 1.2 417,601 Automobile & Components 1.2 415,151 - -------------------------------------------------------------------------------- TOTAL COMMON AND PREFERRED STOCKS 99.6 33,429,153 RIGHTS AND WARRANTS 0.0# 1,723 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS 99.6% 33,430,876 OTHER ASSETS AND LIABILITIES (NET) 0.4 146,542 - -------------------------------------------------------------------------------- NET ASSETS 100.0% $ 33,577,418 ================================================================================ # Amount represents less than 0.1%. SEE NOTES TO FINANCIAL STATEMENTS. 19 PICTET FUNDS PICTET INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON STOCKS -- 96.9% AUSTRALIA - 2.6% 7,400 Alumina, Ltd. $ 20,199 6,000 AMP, Ltd. 19,999 11,400 Foster's Group, Ltd. 32,188 14,500 Iluka Resources, Ltd. 39,384 18,900 Macquarie Infrastructure Group 45,505 11,990 Portman, Ltd. 8,604 5,200 WMC Resources, Ltd.+ 12,241 ---------- 178,120 ---------- FINLAND - 1.9% 5,000 Nokia Oyj 82,336 3,300 UPM-Kymmene Oyj 48,165 ---------- 130,501 ---------- FRANCE - 11.1% 6,400 Alcatel SA+ 57,693 640 L'Air Liquide SA 94,881 2,800 Peugeot Citreon SA 136,010 1,800 Societe Generale, Class A 114,099 1,535 Total SA 231,972 6,150 Vivendi Universal SA+ 111,937 ---------- 746,592 ---------- GERMANY - 2.1% 2,810 E.On AG 144,466 ---------- HONG KONG - 1.7% 14,500 ASM Pacific Technology, Ltd. 42,394 16,000 China Unicom, Ltd. 10,874 12,000 Henderson Land Development Company, Ltd. 34,470 4,000 Hutchison Whampoa, Ltd. 24,365 ---------- 112,103 ---------- INDONESIA - 1.0% 1,092,000 PT Lippo Bank Tbk+ 65,520 ---------- ITALY - 8.4% 11,400 Eni SpA 172,410 27,000 Saipem SpA 202,154 40,900 UniCredito Italiano SpA 194,914 ---------- 569,478 ---------- SEE NOTES TO FINANCIAL STATEMENTS. 20 PICTET FUNDS PICTET INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON STOCKS -- (continued) JAPAN - 15.9% 700 Advantest Corporation $ 31,013 4,700 Asahi Breweries, Ltd. 28,378 700 Bandai Company, Ltd. 26,699 13 Daido Life Insurance Company, Ltd. 28,149 4,000 Daiwa Securities Group, Inc. 22,985 400 Fanuc, Ltd. 19,821 3,000 Fujisawa Pharmaceutical Company, Ltd. 56,214 2,700 Hitachi Chemical Company, Ltd. 27,635 2,600 Hosiden Corporation 19,401 21,000 Hunet, Inc. 55,090 2,800 Keihin Corporation 23,901 2,000 Lintec Corporation 20,820 1,700 Mimasu Semiconductor Industry Company, Ltd. 18,376 7,000 Minebea Company, Ltd. 27,749 7,000 Mitsui Sumitomo Insurance Company, Ltd. 32,471 300 Nintendo Company, Ltd. 21,811 12 Nippon Telegraph and Telephone Corporation 47,070 6 Nippon Unipac Holding 23,435 6,000 Nippon Yusen Kabushiki Kaisha 23,385 5,400 Nissan Motor Company, Ltd. 51,627 20 NTT DoCoMo, Inc. 43,306 500 Promise Company, Ltd. 18,696 3,000 Ricoh Company, Ltd. 49,019 8,000 Sumitomo Chemical Company, Ltd. 25,117 7,000 Sumitomo Corporation 32,296 3,600 Tokyo Broadcasting System, Inc. 43,862 2,200 Tokyo Electric Power Company, Inc. 42,048 3,000 Toyo Suisan Kaisha, Ltd. 30,455 2,100 Toyota Motor Corporation 54,390 6,000 Uny Company, Ltd. 51,667 3,000 Victor Company of Japan, Ltd.+ 24,010 5,000 Yamato Transport Company, Ltd. 55,340 ---------- 1,076,236 ---------- NETHERLANDS - 6.4% 9,124 Aegon NV 91,364 8,346 ING Groep NV 145,007 4,070 Koninklijke (Royal) Philips Electronics NV 77,397 2,516 Royal Dutch Petroleum Company 116,783 ---------- 430,551 ---------- SEE NOTES TO FINANCIAL STATEMENTS. 21 PICTET FUNDS PICTET INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON STOCKS -- (continued) SINGAPORE - 1.6% 2,000 DBS Group Holdings, Ltd. $ 11,698 44,000 Keppel Land, Ltd. 31,981 82,000 MobileOne, Ltd. 62,396 ---------- 106,075 ---------- SPAIN - 4.0% 4,810 Actividades de Construccion y Servicios SA 205,199 2,380 Altadis SA 61,002 ---------- 266,201 ---------- SWEDEN - 1.6% 4,920 Volvo AB, Class B 108,173 ---------- SWITZERLAND - 12.1% 5,200 Credit Suisse Group 136,858 1,135 Nestle SA, Registered Shares 234,199 900 Nobel Biocare Holding AG 60,098 4,400 Novartis AG, Registered Shares 174,111 2,700 Roche Holding AG-Genussshein 211,788 ---------- 817,054 ---------- THAILAND - 1.1% 66,200 Banpu Public Company, Ltd. (F) 73,221 ---------- UNITED KINGDOM - 25.4% 7,879 AWG Plc+ 72,809 12,975,200 AWG Plc, Redeemable Shares+ 20,341 29,450 BT Group Plc 99,017 27,200 Centrica Plc 78,885 13,100 Diageo Plc 139,863 12,000 GlaxoSmithKline Plc 242,178 19,570 HSBC Holdings Plc 231,223 6,500 Reckitt Benckiser Plc 119,274 8,300 Royal Bank of Scotland Group Plc 232,838 55,330 Tesco Plc 200,183 143,220 Vodafone Group Plc 280,059 ---------- 1,716,670 ---------- TOTAL COMMON STOCKS (COST $6,381,687*) 96.9% 6,540,961 OTHER ASSETS AND LIABILITIES (NET) 3.1% 211,590 - ------------------------------------------------------------------------------------------------------------------- NET ASSETS 100.0% $6,752,551 =================================================================================================================== * Aggregate cost for Federal tax purposes. + Non-income producing security. SEE NOTES TO FINANCIAL STATEMENTS. 22 PICTET FUNDS PICTET INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) AT JUNE 30, 2003, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS (UNAUDITED): % OF NET INDUSTRY DIVERSIFICATION ASSETS VALUE - ----------------------------------------------------------------------------- COMMON STOCKS: Banks 12.6% $ 850,292 Energy 10.7 723,319 Pharmaceuticals & Biotech 10.1 684,291 Telecommunications Services 8.0 542,722 Food, Beverage & Tobacco 7.8 526,085 Capital Goods 6.6 438,423 Utilities 5.3 358,549 Materials 5.1 345,247 Diversified Financials 4.8 323,546 Automobile & Components 4.0 265,928 Food & Drug Retailing 3.7 251,850 Technology Hardware & Equipment 3.5 236,084 Insurance 2.5 171,983 Media 2.3 155,799 Consumer Durables & Apparel 1.9 128,106 Transportation 1.8 124,230 Real Estate 1.8 121,541 Household & Personal Products 1.8 119,274 Semiconductor & Semi Equipment 1.4 91,783 Health Care Equipment & Services 0.9 60,098 Software & Services 0.3 21,811 - ----------------------------------------------------------------------------- TOTAL COMMON STOCKS 96.9 6,540,961 OTHER ASSETS AND LIABILITIES (NET) 3.1 211,590 - ----------------------------------------------------------------------------- NET ASSETS 100.0% $6,752,551 ============================================================================= SEE NOTES TO FINANCIAL STATEMENTS. 23 PICTET FUNDS PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON STOCKS -- 97.0% AUSTRIA - 0.3% 1,300 BWT AG $ 17,630 ---------- BRAZIL - 1.0% 6,600 Companhia de Saneamento Basico do Estado de Sao Paulo, ADR 60,720 ---------- CANADA - 3.2% 30,000 Bioteq Environmental Technologies, Inc.+ 14,020 60,000 H2O Innovation (2000), Inc.+ 7,507 11,600 Trojan Technologies, Inc.+ 66,591 6,200 Zenon Environmental, Inc.+ 65,297 4,900 Zenon Environmental, Inc., Class A+ 41,652 ---------- 195,067 ---------- FRANCE - 15.5% 1,930 Groupe Danone 267,065 15,050 Suez SA 239,536 21,600 Veolia Environnement 443,995 ---------- 950,596 ---------- GERMANY - 6.5% 2,250 Hydrotec AG+ 20,670 11,500 RWE AG 347,184 2,100 Wedeco AG Water Technology+ 29,927 ---------- 397,781 ---------- JAPAN - 3.4% 26,000 Ebara Corporation 91,375 10,600 Kurita Water Industries, Ltd. 117,320 ---------- 208,695 ---------- SPAIN - 3.5% 4,900 Fomento de Construcciones y Contratas SA 136,902 5,700 Sociedad General de Aguas de Barcelona SA 77,892 ---------- 214,794 ---------- SWITZERLAND - 5.7% 400 Ciba Specialty Chemicals AG, Registered Shares+ 24,215 1,590 Nestle SA, Registered Shares 328,085 ---------- 352,300 ---------- SEE NOTES TO FINANCIAL STATEMENTS. 24 PICTET FUNDS PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) SHARES VALUE - ---------------------------------------------------------------------------------------------------------------- COMMON STOCKS -- (continued) UNITED KINGDOM - 20.7% 19,928 AWG Plc+ $ 184,153 29,359,700 AWG Plc, Redeemable Shares+ 46,026 40,700 Kelda Group Plc 287,116 11,929 Pennon Group Plc 134,644 28,600 Severn Trent Plc 322,812 18,700 Shanks Group Plc 33,327 22,900 United Utilities Plc 222,576 8,500 Waste Recycling Group Plc 37,100 ---------- 1,267,754 ---------- UNITED STATES - 37.2% 14,600 Allied Waste Industries, Inc.+ 146,730 950 American States Water Company 25,935 4,470 Calgon Carbon Corporation 25,702 1,100 California Water Service Group 30,932 1,600 Clarcor, Inc. 61,680 1,600 Cuno, Inc.+ 57,792 3,370 Donaldson Company, Inc. 149,797 15,200 Flexible Solutions International, Inc.+ 51,680 2,170 Insituform Technologies, Inc., Class A+ 38,366 1,600 Ionics, Inc.+ 35,792 3,600 ITT Industries, Inc. 235,656 1,300 Lindsay Manufacturing Company 30,186 4,500 Millipore Corporation+ 199,665 11,500 Pall Corporation 258,750 4,400 Pentair, Inc. 171,864 6,100 Philadelphia Suburban Corporation 148,718 8,800 Republic Services, Inc.+ 199,496 4,100 Tetra Tech, Inc.+ 70,233 2,200 Valmont Industries, Inc. 42,812 3,800 Waste Connections, Inc.+ 133,190 4,900 Waste Management, Inc. 118,041 2,400 Watts Industries, Inc., Class A 42,840 ---------- 2,275,857 ---------- TOTAL COMMON STOCKS (COST $5,884,029*) 97.0% 5,941,194 OTHER ASSETS AND LIABILITIES (NET) 3.0% 183,444 - ------------------------------------------------------------------------------------------------------------------- NET ASSETS 100.0% $6,124,638 =================================================================================================================== * Aggregate cost for Federal tax purposes. + Non-income producing security. SEE NOTES TO FINANCIAL STATEMENTS. 25 PICTET FUNDS PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2003 (UNAUDITED) AT JUNE 30, 2003, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS (UNAUDITED): % OF NET INDUSTRY DIVERSIFICATION ASSETS VALUE - -------------------------------------------------------------------------------- COMMON STOCKS: Utilities 39.0% $ 2,392,589 Capital Goods 23.1 1,416,108 Commercial Services & Supplies 19.0 1,162,115 Food, Beverage & Tobacco 9.7 595,150 Pharmaceuticals & Biotech 3.3 199,665 Materials 2.2 132,727 Household & Personal Products 0.7 42,840 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS 97.0 5,941,194 OTHER ASSETS AND LIABILITIES (NET) 3.0 183,444 - -------------------------------------------------------------------------------- NET ASSETS 100.0% $ 6,124,638 ================================================================================ SEE NOTES TO FINANCIAL STATEMENTS. 26 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) PICTET PICTET GLOBAL INTERNATIONAL PICTET PICTET EMERGING SMALL INTERNATIONAL GLOBAL MARKETS COMPANIES EQUITY WATER FUND FUND FUND FUND =================================================================================================================== ASSETS: Investments, at value (Cost $69,517,477, $29,776,115, $6,381,687, and $5,884,029, respectively) $75,960,487 $33,430,876 $6,540,961 $5,941,194 Cash and cash equivalents 2,084,399 2,600,774 96,168 151,849 Foreign currency, at value (Cost $858,136, $917,028, $228,220, and $0, respectively) 858,771 914,124 224,895 -- Receivable for investment securities sold 45,880 578,002 61,290 2,566 Receivable for Fund shares sold 10,709 -- -- 10,000 Receivable from investment adviser -- -- 8,519 10,701 Dividends receivable, interest receivable and reclaim receivable 261,067 83,241 38,389 39,573 Other assets 19,719 6,785 1,916 1,521 - ------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 79,241,032 37,613,802 6,972,138 6,157,404 =================================================================================================================== LIABILITIES: Payable for investment securities purchased 434,052 2,613,006 192,336 -- Payable to investment advisor 50,009 2,914 -- -- Payable for Fund shares redeemed -- 1,367,113 -- -- Administration fees payable 41,837 15,609 4,310 4,712 Transfer agent fees payable 1,829 1,901 951 1,901 Custodian fees payable 32,273 12,619 4,973 4,961 Professional fees payable 13,951 13,511 9,271 8,388 Printing fees payable 4,127 2,720 1,476 1,173 Distribution fees payable 3 361 -- 383 Other accrued expenses and payables 9,294 6,630 6,270 11,248 - ------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 587,375 4,036,384 219,587 32,766 =================================================================================================================== NET ASSETS $78,653,657 $33,577,418 $6,752,551 $6,124,638 =================================================================================================================== SEE NOTES TO FINANCIAL STATEMENTS. 27 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) JUNE 30, 2003 (UNAUDITED) PICTET PICTET GLOBAL INTERNATIONAL PICTET PICTET EMERGING SMALL INTERNATIONAL GLOBAL MARKETS COMPANIES EQUITY WATER FUND FUND FUND FUND =================================================================================================================== NET ASSETS CONSIST OF: Accumulated net investment income $716,091 $270,275 $86,988 $63,665 Accumulated net realized loss on investments sold and foreign currency related transactions (64,108,714) (12,536,436) (3,796,444) (649,208) Net unrealized appreciation of investments 6,443,010 3,654,761 159,274 57,165 Net unrealized appreciation / (depreciation) of foreign currency related transactions (3,354) 167 446 (267) Par value 94,634 44,859 10,460 7,146 Paid-in capital in excess of par value 135,511,990 42,143,792 10,291,827 6,646,137 - ------------------------------------------------------------------------------------------------------------------- TOTAL NET ASSETS $78,653,657 $33,577,418 $6,752,551 $6,124,638 =================================================================================================================== INSTITUTIONAL SHARES: Net assets $78,638,366 $31,455,681 $6,752,551 $4,230,090 Shares of beneficial interest outstanding 9,461,565 4,202,029 1,045,996 493,222 ----------- ----------- ----------- ---------- Net asset value, offering and redemption price per share $8.31 $7.49 $6.46 $8.58 =================================================================================================================== RETAIL SHARES: Net assets $15,291 $2,121,737 N/A $1,894,548 Shares of beneficial interest outstanding 1,841 283,841 N/A 221,425 ----------- ----------- ----------- ---------- Net asset value, offering and redemption price per share $8.31 $7.48 N/A $8.56 =================================================================================================================== SEE NOTES TO FINANCIAL STATEMENTS. 28 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) PICTET PICTET GLOBAL INTERNATIONAL PICTET PICTET EMERGING SMALL INTERNATIONAL GLOBAL MARKETS COMPANIES EQUITY WATER FUND FUND FUND FUND =================================================================================================================== INVESTMENT INCOME: Dividends (net of foreign withholding taxes of $128,715, $30,811, $10,852, and $6,613, respectively) $1,302,314 $403,421 $111,755 $100,158 Interest 834 2,254 1,359 332 - ------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 1,303,148 405,675 113,114 100,490 =================================================================================================================== EXPENSES: Investment advisory fees 421,036 119,931 23,151 27,138 Administration fees 119,210 42,986 10,951 13,348 Accounting fees 25,944 29,753 24,795 31,742 Transfer agent fees 9,839 11,901 5,951 11,901 Custodian fees 91,239 28,341 18,384 18,717 Professional fees 33,682 20,754 11,661 10,475 Printing fees 8,640 3,987 1,384 1,158 Registration and filing fees 10,413 8,098 6,287 8,349 Trustees' fees and expenses 8,831 2,646 992 644 Distribution fees - Retail class 8 805 -- 2,079 Other 51,331 26,228 13,642 9,766 - ------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES BEFORE EXPENSE REDUCTIONS 780,173 295,430 117,198 135,317 =================================================================================================================== Fees waived and/or expenses reimbursed by investment advisor (188,570) (150,708) (86,672) (98,219) - ------------------------------------------------------------------------------------------------------------------- NET EXPENSES 591,603 144,722 30,526 37,098 =================================================================================================================== NET INVESTMENT INCOME 711,545 260,953 82,588 63,392 =================================================================================================================== REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) on: Securities transactions 2,470,346 (553,262) (467,525) (177,332) Foreign currency related transactions (31,767) (3,694) 27,848 1,798 - ------------------------------------------------------------------------------------------------------------------- Net realized gain/(loss) on investments during the period 2,438,579 (556,956) (439,677) (175,534) - ------------------------------------------------------------------------------------------------------------------- Change in unrealized appreciation/(depreciation) of: Securities 10,058,050 3,980,816 977,123 569,680 Foreign currency related transactions (736) (1,309) (2,932) 960 - ------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments during the period 10,057,314 3,979,507 974,191 570,640 - ------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 12,495,893 3,422,551 534,514 395,106 =================================================================================================================== NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $13,207,438 $3,683,504 $617,102 $458,498 =================================================================================================================== SEE NOTES TO FINANCIAL STATEMENTS. 29 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED INCREASE IN NET ASSETS FROM OPERATIONS: (UNAUDITED) DECEMBER 31, 2002 =================================================================================================================== FROM OPERATIONS: Net investment income $ 711,545 $ 118,787 Net realized gain on investments during the period 2,438,579 744,725 Change in unrealized appreciation/(depreciation) of investments during the period 10,057,314 (301,704) - ------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 13,207,438 561,808 DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders from net investment income -- (107,160) FUND SHARE TRANSACTIONS: Net increase/(decrease) in net assets from Fund share transactions (2,070,388) 332,666 - ------------------------------------------------------------------------------------------------------------------- Net increase in net assets 11,137,050 787,314 REDEMPTION FEES Redemption fees 7,436 10,439 NET ASSETS: Beginning of period 67,509,171 66,711,418 - ------------------------------------------------------------------------------------------------------------------- End of period (including accumulated net investment income of $716,091 and $4,546, respectively) $78,653,657 $67,509,171 =================================================================================================================== SEE NOTES TO FINANCIAL STATEMENTS. 30 PICTET FUNDS PICTET INTERNATIONAL SMALL COMPANIES FUND - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED INCREASE IN NET ASSETS FROM OPERATIONS: (UNAUDITED) DECEMBER 31, 2002 =================================================================================================================== FROM OPERATIONS: Net investment income $ 260,953 $ 117,639 Net realized loss on investments during the period (556,956) (2,921,383) Change in unrealized appreciation/(depreciation) of investments during the period 3,979,507 (106,770) - ------------------------------------------------------------------------------------------------------------------- Net increase/(decrease) in net assets resulting from operations 3,683,504 (2,910,514) DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders from net investment income -- (128,834) FUND SHARE TRANSACTIONS: Net increase in net assets from Fund share transactions 7,319,278 3,626,840 - ------------------------------------------------------------------------------------------------------------------- Net increase in net assets 11,002,782 587,492 REDEMPTION FEES: Redemption fees 11,865 41,165 NET ASSETS: Beginning of period 22,562,771 21,934,114 - ------------------------------------------------------------------------------------------------------------------- End of period (including accumulated net investment income of $270,275 and $9,323, respectively) $33,577,418 $22,562,771 =================================================================================================================== SEE NOTES TO FINANCIAL STATEMENTS. 31 PICTET FUNDS PICTET INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED INCREASE IN NET ASSETS FROM OPERATIONS: (UNAUDITED) DECEMBER 31, 2002 =================================================================================================================== FROM OPERATIONS: Net investment income $ 82,588 $ 56,137 Net realized loss on investments during the period (439,677) (1,472,053) Change in unrealized appreciation/(depreciation) of investments during the period 974,191 193,640 - ------------------------------------------------------------------------------------------------------------------- Net increase/(decrease) in net assets resulting from operations 617,102 (1,222,276) DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders from net investment income -- (59,817) FUND SHARE TRANSACTIONS: Net increase/(decrease) in net assets from Fund share transactions (69,505) 279,173 - ------------------------------------------------------------------------------------------------------------------- Net increase/(decrease) in net assets 547,597 (1,002,920) NET ASSETS: Beginning of period 6,204,954 7,207,874 - ------------------------------------------------------------------------------------------------------------------- End of period (including accumulated net investment income of $86,988 and $4,400 respectively) $6,752,551 $ 6,204,954 =================================================================================================================== SEE NOTES TO FINANCIAL STATEMENTS. 32 PICTET FUNDS PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED INCREASE IN NET ASSETS FROM OPERATIONS: (UNAUDITED) DECEMBER 31, 2002 =================================================================================================================== FROM OPERATIONS: Net investment income $ 63,392 $ 41,119 Net realized loss on investments during the period (175,534) (471,344) Change in unrealized appreciation/(depreciation) of investments during the period 570,640 (513,742) - ------------------------------------------------------------------------------------------------------------------- Net increase/(decrease) in net assets resulting from operations 458,498 (943,967) DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders from net investment income -- (43,176) FUND SHARE TRANSACTIONS: Net increase in net assets from Fund share transactions 550,046 6,094,850 - ------------------------------------------------------------------------------------------------------------------- Net increase in net assets 1,008,544 5,107,707 REDEMPTION FEES Redemption fees 345 8,042 NET ASSETS: Beginning of period 5,115,749 -- - ------------------------------------------------------------------------------------------------------------------- End of period (including accumulated net investment income of $63,665 and $273 respectively) $6,124,638 $5,115,749 =================================================================================================================== SEE NOTES TO FINANCIAL STATEMENTS. 33 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD. ---------------- RETAIL ---------------- SIX MONTHS ENDED 6/30/03* (UNAUDITED) =============================================================================================== Net Asset Value, beginning of period $6.98 - ----------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.07 Net realized and unrealized gain on investments 1.26 - ----------------------------------------------------------------------------------------------- Total from investment operations 1.33 - ----------------------------------------------------------------------------------------------- Redemption fees added to paid-in capital 0.00# - ----------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $8.31 =============================================================================================== Total return++ 19.05% =============================================================================================== Ratios to average net assets/supplemental data: Net assets, end of period (in 000's) $15 Ratio of operating expenses to average net assets 1.95%+ Ratio of net investment income to average net assets 1.79%+ Ratio of operating expenses to average net assets without waivers and expenses reimbursed 2.49%+ Ratio of net investment income to average net assets without waivers and expenses reimbursed 1.25%+ Portfolio turnover rate 20% ====================== * Pictet Global Emerging Markets Fund -- Retail Class commenced operations on April 9, 2003. + Annualized. ++ Total return represents aggregate total return for the period. # Amount represents less than $0.01 per share. SEE NOTES TO FINANCIAL STATEMENTS. 34 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD. ----------------------------------------------------------------------- INSTITUTIONAL ----------------------------------------------------------------------- SIX MONTHS YEAR YEAR YEAR YEAR YEAR ENDED 6/30/03 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 12/31/02 12/31/01 12/31/00 12/31/99 12/31/98 =================================================================================================================== Net Asset Value, beginning of period $6.92 $6.89 $7.02 $11.15 $6.81 $8.87 - ------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income/(loss) 0.07 0.01 0.10 0.00# (0.01) 0.04 Net realized and unrealized gain/(loss) on investments 1.32 0.03 (0.15) (4.13) 4.35 (2.10) - ------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.39 0.04 (0.05) (4.13) 4.34 (2.06) - ------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: Distributions from net investment income -- (0.01) (0.08) -- -- -- - ------------------------------------------------------------------------------------------------------------------- Total distributions -- (0.01) (0.08) -- -- -- - ------------------------------------------------------------------------------------------------------------------- Redemption fees added to paid-in capital 0.00# 0.00# 0.00# -- -- -- - ------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $8.31 $6.92 $6.89 $7.02 $11.15 $6.81 =================================================================================================================== Total return++ 20.09% 0.60% (0.68)% (36.98)% 63.73% (23.22)% =================================================================================================================== Ratios to average net assets/supplemental data: Net assets, end of period (in 000's) $78,638 $67,509 $66,711 $97,158 $190,275 $94,362 Ratio of operating expenses to average net assets 1.70%+ 1.70% 1.70% 1.70% 1.70% 1.70% Ratio of net investment income/(loss) to average net assets 2.04%+ 0.16% 1.12% 0.04% (0.19)% 0.55% Ratio of operating expenses to average net assets without waivers and expenses reimbursed 2.24%+ 2.31% 2.22% 1.94% 1.92% 2.00% Ratio of net investment income/(loss) to average net assets without waivers and expenses reimbursed 1.50%+ (0.45)% 0.60% (0.20)% (0.42)% 0.25% Portfolio turnover rate 20% 47% 84% 128% 126% 123% =================== + Annualized. ++ Total return represents aggregate total return for the period. # Amount represents less than $0.01 per share. SEE NOTES TO FINANCIAL STATEMENTS. 35 PICTET FUNDS PICTET INTERNATIONAL SMALL COMPANIES FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD. --------------------------------------------- RETAIL --------------------------------------------- SIX MONTHS ENDED PERIOD 6/30/03 ENDED (UNAUDITED) 12/31/02* =================================================================================================================== Net Asset Value, beginning of period $6.44 $7.34 - ------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income+++ 0.06 0.02 Net realized and unrealized gain/(loss) on investments 0.98 (0.90) - ------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.04 (0.88) - ------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: Distributions from net investment income -- (0.03) - ------------------------------------------------------------------------------------------------------------------- Total distributions -- (0.03) - ------------------------------------------------------------------------------------------------------------------- Redemption fees added to paid-in capital 0.00# 0.01 - ------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $7.48 $6.44 =================================================================================================================== Total return++ 16.15% (11.82)% =================================================================================================================== Ratios to average net assets/supplemental data: Net assets, end of period (in 000's) $2,122 $312 Ratio of operating expenses to average net assets 1.45%+ 1.45%+ Ratio of net investment income to average net assets 1.93%+ 0.27%+ Ratio of operating expenses to average net assets without waivers and expenses reimbursed 2.71%+ 2.82%+ Ratio of net investment income/(loss) to average net assets without waivers and expenses reimbursed 0.68%+ (1.99)%+ Portfolio turnover rate 81% 133% ======================= * Pictet International Small Companies Fund -- Retail Class commenced operations on March 5, 2002. + Annualized. ++ Total return represents aggregate total return for the period. +++ Per share numbers have been calculated using the average share method. # Amount represents less than $0.01 per share. SEE NOTES TO FINANCIAL STATEMENTS. 36 PICTET FUNDS PICTET INTERNATIONAL SMALL COMPANIES FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD. ----------------------------------------------------------------------- INSTITUTIONAL ----------------------------------------------------------------------- SIX MONTHS YEAR YEAR YEAR YEAR YEAR ENDED 6/30/03 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 12/31/02 12/31/01 12/31/00 12/31/99 12/31/98 =================================================================================================================== Net Asset Value, beginning of period $6.44 $7.35 $10.21 $10.25 $ 6.55 $9.24 - ------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income/(loss) 0.07+++ 0.04+++ 0.01 0.00# (0.02) 0.07+++ Net realized and unrealized gain/(loss) on investments 0.98 (0.92) (2.87) 0.71 5.66 0.41 - ------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.05 (0.88) (2.86) 0.71 5.64 0.48 - ------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: Distributions from net investment income -- (0.04) -- -- -- -- Distributions from net realized gains -- -- (0.01) (0.75) (1.94) (3.17) - ------------------------------------------------------------------------------------------------------------------- Total distributions -- (0.04) (0.01) (0.75) (1.94) (3.17) - ------------------------------------------------------------------------------------------------------------------- Redemption fees added to paid-in capital 0.00# 0.01 0.01 -- -- -- - ------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $7.49 $6.44 $7.35 $10.21 $10.25 $6.55 =================================================================================================================== Total return++ 16.31% (11.87)% (27.95)% 6.56% 86.45% 5.35% =================================================================================================================== Ratios to average net assets/supplemental data: Net assets, end of period (in 000's) $31,456 $22,251 $21,934 $24,214 $4,776 $5,699 Ratio of operating expenses to average net assets 1.20%+ 1.20% 1.20% 1.20% 1.20% 1.20% Ratio of net investment income/(loss) to average net assets 2.18%+ 0.52% 0.17% (0.37)% (0.02)% 0.65% Ratio of operating expenses to average net assets without waivers and expenses reimbursed 2.46%+ 2.57% 2.28% 2.66% 4.76% 2.36% Ratio of net investment income/(loss) to average net assets without waivers and expenses reimbursed 0.93%+ (1.74)% (0.91)% (1.83)% (3.58)% (0.52)% Portfolio turnover rate 81% 133% 122% 142% 166% 132% ========================== + Annualized. ++ Total return represents aggregate total return for the period. +++ Per share numbers have been calculated using the average share method. # Amount represents less than $0.01 per share. SEE NOTES TO FINANCIAL STATEMENTS. 37 PICTET FUNDS PICTET INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD. SIX MONTHS ENDED YEAR YEAR PERIOD 6/30/03 ENDED ENDED ENDED (UNAUDITED) 12/31/02 12/31/01 12/31/00* =================================================================================================================== Net Asset Value, beginning of period $5.88 $7.12 $9.08 $10.00 - ------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.07 0.05 0.04 0.00# Net realized and unrealized gain/(loss) on investments 0.51 (1.23) (1.95) (0.90) - ------------------------------------------------------------------------------------------------------------------- Total from investment operations 0.58 (1.18) (1.91) (0.90) - ------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: Distributions from net investment income -- (0.06) (0.05) (0.00)# Distributions from net realized gains -- -- -- (0.02) - ------------------------------------------------------------------------------------------------------------------- Total distributions -- (0.06) (0.05) (0.02) - ------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $6.46 $5.88 $7.12 $9.08 =================================================================================================================== Total return++ 9.86% (16.61)% (21.04)% (8.94)% =================================================================================================================== Ratios to average net assets/supplemental data: Net assets, end of period (in 000's) $6,753 $6,205 $7,208 $9,105 Ratio of operating expenses to average net assets 1.00%+ 1.00% 1.00% 1.00%+ Ratio of net investment income to average net assets 2.68%+ 0.83% 0.55% 0.07%+ Ratio of operating expenses to average net assets without waivers and expenses reimbursed 3.80%+ 3.66% 3.41% 2.87%+ Ratio of net investment loss to average net assets without waivers and expenses reimbursed (0.13)%+ (1.83)% (1.86)% (1.79)%+ Portfolio turnover rate 50% 131% 80% 31% ====================== * Pictet International Equity Fund commenced operations on August 15, 2000. + Annualized. ++ Total return represents aggregate total return for the period. # Amount represents less than $0.01 per share. SEE NOTES TO FINANCIAL STATEMENTS. 38 PICTET FUNDS PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD. --------------------------- ---------------------------- RETAIL INSTITUTIONAL --------------------------- ---------------------------- SIX MONTHS ENDED YEAR SIX MONTHS ENDED YEAR 6/30/03 ENDED 6/30/03 ENDED (UNAUDITED) 12/31/02 (UNAUDITED) 12/31/02 =================================================================================================================== Net Asset Value, beginning of period $7.92 $10.00 $7.93 $10.00 - ------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income+++ 0.08 0.08 0.09 0.10 Net realized and unrealized gain/(loss) on investments 0.56 (2.12) 0.56 (2.12) - ------------------------------------------------------------------------------------------------------------------- Total from investment operations 0.64 (2.04) 0.65 (2.02) - ------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: Distributions from net investment income -- (0.06) -- (0.07) - ------------------------------------------------------------------------------------------------------------------- Total Distributions -- (0.06) -- (0.07) - ------------------------------------------------------------------------------------------------------------------- Redemption fees added to paid-in capital 0.00# 0.02 0.00# 0.02 - ------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $8.56 $7.92 $8.58 $7.93 =================================================================================================================== Total return++ 8.08% (20.23)% 8.20% (19.97)% =================================================================================================================== Ratios to average net assets/supplemental data: Net assets, end of period (in 000's) $1,895 $1,550 $4,230 $3,566 Ratio of operating expenses to average net assets 1.55%+ 1.55% 1.30% 1.30% Ratio of net investment income to average net assets 2.16%+ 0.96% 2.41%+ 1.21% Ratio of operating expenses to average net assets without waivers and expenses reimbursed 5.16%+ 6.30% 4.91%+ 6.05% Ratio of net investment loss to average net assets without waivers and expenses reimbursed (1.46)%+ (3.88)% (1.21)%+ (3.63) Portfolio turnover rate 14% 44% 14% 44% ===================== + Annualized. ++ Total return represents aggregate total return for the period. +++ Per share numbers have been calculated using the average share method. # Amount represents less than $0.01 per share. SEE NOTES TO FINANCIAL STATEMENTS. 39 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Pictet Funds (the "Trust"), a Massachusetts business trust registered on May 23, 1995 under the Investment Company Act of 1940, as amended (the "1940 Act"), is a no-load, diversified (with the exception of the Pictet Global Water Fund, which is non-diversified), open-end management investment company which currently offers shares of four series, Pictet Global Emerging Markets Fund, Pictet International Small Companies Fund, Pictet International Equity Fund and Pictet Global Water Fund (individually, a "Fund" collectively, the "Funds"). The accompanying financial statements and financial highlights are those of the Funds. The Funds' financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of management estimates. The following is a summary of the significant accounting policies followed consistently by the Funds in the preparation of their financial statements. SECURITIES VALUATIONS: Equity securities listed on a U.S. securities exchange and unlisted U.S. securities are generally valued at the last quoted price and securities traded on the NASDAQ National Market System are generally valued at the NASDAQ Official Closing Price, in each case as of the close of the exchange's regular trading hours on the day the valuation is made. Generally, securities listed on a foreign exchange and unlisted foreign securities are valued at the latest quoted sales price available before the time when assets are valued. Price information on listed securities is taken from the exchange where the security is primarily traded. Generally, listed securities not traded on the valuation date for which market quotations are readily available are valued at the mean between the bid and asked prices, if available, otherwise they are valued at the last reported closing price. The value of securities for which no quotations are readily available (including restricted securities) or that have been materially affected by events occurring after a foreign exchange closes, is determined in good faith at fair value using methods approved by the Board of Trustees. In the absence of readily ascertainable market values for such securities, inherent uncertainty of valuation exists. Methods for valuing these securities may differ from the values that would have been used had a ready market for the securities existed, and the differences could be material. One or more pricing services may be used to provide securities valuations in connection with the determination of the net asset value of the Funds. Short-term investments that mature in 60 days or less are valued at amortized cost. REPURCHASE AGREEMENTS: Each Fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the Fund pays a counterparty cash for, and takes possession of, a debt obligation and the seller agrees to repurchase, and the Fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Fund's holding period. This arrangement results in a fixed rate of return that is not subject to market fluctuations during the Fund's holding period. The value of the collateral held by the Fund, at all times, is at least equal to the total amount of the repurchase obligations, including interest. In the event of counterparty default, the Fund generally has the right to use the collateral to offset losses incurred. There is potential loss to the Fund in the event the Fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. The Funds' investment adviser, acting under the supervision of the Board of Trustees, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks. FOREIGN CURRENCY CONTRACTS: Each Fund may enter into forward foreign currency exchange contracts to hedge against anticipated future changes in exchange rates which otherwise might either adversely affect the value of the portfolio securities of the Fund or adversely affect the prices of securities which the Fund intends to purchase or sell at a later date. Forward foreign currency contracts are valued at the forward rate and are marked-to-market daily. The change in market value is recorded by the Fund as an unrealized gain or loss. When the contract is closed, the Fund records a realized 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. 40 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) The use of forward foreign currency exchange contracts does not eliminate fluctuations in the underlying prices of the Funds' investment securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign currency exchange contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. Each Fund may enter into spot foreign currency exchange contracts for the purchase or sale of securities denominated in foreign currencies to "lock" in the U.S. exchange rate of the transaction covering the period between trade date and settlement date. FOREIGN CURRENCY: The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars using the prevailing foreign exchange rates obtained at the time the London Exchange closes (approximately 12:00 noon Eastern Time). Unrealized gains and losses on investments which result from changes in foreign currency exchange rates have been included in the unrealized appreciation/(depreciation) of investments. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date of investment securities transactions, foreign currency transactions and the difference between the amounts of interest and dividends recorded on the books of the Funds and the amount actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase trade date and subsequent sale trade date is included in realized gains and losses on investment securities sold. SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income, if any, are declared and paid annually. The Funds' net realized capital gain (including net short-term capital gain), unless offset by any available capital loss carryforward, is distributed to shareholders annually. Additional distributions of net investment income and capital gain may be made at the discretion of the Board of Trustees in order to avoid the application of a 4% non-deductible Federal excise tax. TAXATION: Each Fund intends to qualify each year as a regulated investment company by complying with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and by distributing substantially all of its earnings to shareholders. Therefore, no Federal income tax provision is required. EXPENSES: General expenses of the Trust are allocated among the Funds based upon relative net assets. Expenses not directly attributable to a specific class are allocated among all of the classes of the Fund based on their relative net assets. Operating expenses directly attributable to a Fund are charged to that Fund's operations. CASH AND CASH EQUIVALENTS: Cash equivalents are short-term, highly liquid investments with an original maturity of three months or less. Cash and cash equivalents include cash in banks and investments in overnight deposits. 2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER FEES The Trust, on behalf of the Funds, has entered into an investment advisory agreement (the "Advisory Agreement") with Pictet International Management Limited ("Pictet International"), a wholly-owned subsidiary of Pictet Canada L.P. ("Pictet Canada"). Pictet Canada is a partnership, whose principal activity is investment accounting, custody and securities brokerage. Pictet Canada has two general partners, Pictet Advisory Services Overseas and FINGEST, and nine limited partners, each of whom is also a partner of 41 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Pictet & Cie, a Swiss private bank founded in 1805. Under the terms of the Advisory Agreement, Pictet Global Emerging Markets Fund, Pictet International Small Companies Fund, Pictet International Equity Fund and Pictet Global Water Fund pay Pictet International a fee, computed daily and payable monthly, at an annual rate of 1.25%, 1.00%, 0.75%, and 1.00%, respectively, of the average daily net assets of each Fund. Pictet International has voluntarily agreed to waive its fees and reimburse expenses to the extent necessary to ensure that the total ordinary annual operating expenses of Pictet Global Emerging Markets Fund - - Institutional Class, Pictet Global Emerging Markets Fund - Retail Class, Pictet International Small Companies Fund - Institutional Class, Pictet International Small Companies Fund - Retail Class, Pictet International Equity Fund - Institutional Class, Pictet Global Water Fund - Institutional Class and Pictet Global Water Fund - Retail Class do not exceed 1.70%, 1.95%, 1.20%, 1.45%, 1.00%, 1.30% and 1.55%, respectively, of each Fund's average daily net assets. For the six months ended June 30, 2003, Pictet International either waived fees and/or reimbursed expenses as follows: PICTET PICTET INTERNATIONAL INTERNATIONAL EXPENSES FEES WAIVED REIMBURSED TOTAL ========================================================================================== Pictet Global Emerging Markets Fund $188,570 -- $188,570 Pictet International Small Companies Fund 119,931 $30,777 150,708 Pictet International Equity Fund 23,151 63,521 86,672 Pictet Global Water Fund 27,138 71,081 98,219 ========================================================================================== The Retail Class shares of the Funds each have adopted a rule 12b-1 distribution plan (the "Plan"). The Plan allows each Fund to pay not more than 0.25% per annum of the average daily net assets of the Retail Class shares of the Fund. PFPC Distributors, Inc. (the "Distributor") serves as the Funds' distributor. The distributor acts as an agent for the Funds and the distribution of their shares. In addition, the Retail Class of each Fund will pay a portion of the fees associated with participation in various network programs. There were no fees paid for the six months ended June 30, 2003 in excess of the 0.25% for these programs. PFPC Inc. ("PFPC") serves as the Trust's Administrator and Accounting Agent. PFPC also serves as the Trust's transfer agent and dividend paying agent. No officer, director or employee of Pictet International, PFPC, or any affiliate thereof, receives any compensation from the Trust for serving as Trustee or officer of the Trust. The Trust pays each Trustee who is not an affiliated person of Pictet International an annual fee of $5,000, plus an additional $500 for each board and committee meeting attended. The Trust also reimburses expenses incurred by each Trustee in attending such meetings. 3. PURCHASES AND SALES OF INVESTMENTS Cost of investments purchased and proceeds from sales of investments, excluding short-term securities and U.S. Government securities, for the six months ended June 30, 2003 were as follows: COST OF PROCEEDS FROM INVESTMENTS PURCHASED INVESTMENTS SOLD ========================================================================================== Pictet Global Emerging Markets Fund $13,985,336 $17,270,553 Pictet International Small Companies Fund 27,823,993 19,284,216 Pictet International Equity Fund 3,065,158 2,963,992 Pictet Global Water Fund 1,446,668 739,795 ========================================================================================== 42 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) At June 30, 2003, aggregate gross unrealized appreciation and unrealized depreciation for tax purposes were as follows: NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ APPRECIATION DEPRECIATION (DEPRECIATION) ============================================================================================== Pictet Global Emerging Markets Fund $12,747,374 $(6,307,718) $6,439,656 Pictet International Small Companies Fund 4,247,808 (592,880) 3,654,928 Pictet International Equity Fund 552,161 (392,441) 159,720 Pictet Global Water Fund 350,069 (293,171) 56,898 ============================================================================================== 4. SHARES OF BENEFICIAL INTEREST Pictet International Equity Fund has one class of shares of beneficial interest, par value $0.01 per share, of which an unlimited number of shares is authorized. Pictet Global Emerging Markets Fund, Pictet International Small Companies Fund and Pictet Global Water Fund have two classes of shares of beneficial interest, all par value $.01 per share, of which an unlimited number of shares is authorized. Transactions in shares of beneficial interest were as follows: SIX MONTHS ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, 2002 SHARES AMOUNT SHARES AMOUNT ================================================================================================================= Pictet Global Emerging Markets Fund: Institutional Sold 243,746 $ 1,997,256 838,097 $ 6,074,361 Issued as reinvestment of dividends -- -- 15,488 106,867 Redeemed (539,475) (4,080,537) (785,360) (5,848,562) - ------------------------------------------------------------------------------------------------------------------- Net increase/(decrease) (295,729) $(2,083,281) 68,225 $ 332,666 ================================================================================================================= SIX MONTHS ENDED JUNE 30, 2003** SHARES AMOUNT ================================================================================ Pictet Global Emerging Markets Fund: Retail Sold 1,841 $ 12,893 Redeemed -- -- - -------------------------------------------------------------------------------- Net increase 1,841 $ 12,893 ================================================================================ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, 2002 SHARES AMOUNT SHARES AMOUNT ================================================================================================================= Pictet International Small Companies Fund: Institutional Sold 910,846 $ 6,648,621 1,250,438 $ 8,950,739 Issued as reinvestment of dividends -- -- 19,505 125,026 Redeemed (161,850) (1,046,097) (800,873) (5,780,737) - ----------------------------------------------------------------------------------------------------------------- Net increase 748,996 $ 5,602,524 469,070 $ 3,295,028 ================================================================================================================= SIX MONTHS ENDED PERIOD ENDED JUNE 30, 2003 DECEMBER 31, 2002* SHARES AMOUNT SHARES AMOUNT ================================================================================================================= Pictet International Small Companies Fund: Retail Sold 578,488 $ 4,207,621 49,031 $ 336,502 Issued as reinvestment of dividends -- -- 224 1,434 Redeemed (343,026) (2,490,867) (876) (6,124) - ----------------------------------------------------------------------------------------------------------------- Net increase 235,462 $ 1,716,754 48,379 $ 331,812 ================================================================================================================= 43 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SIX MONTHS ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, 2002 SHARES AMOUNT SHARES AMOUNT ================================================================================================================= Pictet International Equity Fund: Institutional Sold 32,253 $ 199,000 35,578 $ 236,500 Issued as reinvestment of dividends -- -- 10,243 59,816 Redeemed (42,253) (268,505) (2,401) (17,143) - ----------------------------------------------------------------------------------------------------------------- Net increase/(decrease) (10,000) $ (69,505) 43,420 $ 279,173 ================================================================================================================= SIX MONTHS ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, 2002 SHARES AMOUNT SHARES AMOUNT ================================================================================================================= Pictet Global Water Fund: Institutional Sold 69,899 $ 547,197 492,734 $ 4,592,443 Issued as reinvestment of dividends -- -- 3,888 30,595 Redeemed (26,308) (206,913) (46,991) (383,056) - ----------------------------------------------------------------------------------------------------------------- Net increase 43,591 $ 340,284 449,631 $ 4,239,982 ================================================================================================================= SIX MONTHS ENDED YEAR ENDED JUNE 30, 2003 DECEMBER 31, 2002 SHARES AMOUNT SHARES AMOUNT ================================================================================================================= Pictet Global Water Fund: Retail Sold 39,560 $ 319,744 271,278 $ 2,461,142 Issued as reinvestment of dividends -- -- 1,291 10,146 Redeemed (13,762) (109,982) (76,942) (616,420) - ----------------------------------------------------------------------------------------------------------------- Net increase 25,798 $ 209,762 195,627 $ 1,854,868 ================================================================================================================= * Pictet International Small Companies Fund commenced operations of the Retail Class on March 5, 2002. ** Pictet Global Emerging Markets Fund commenced operations of the Retail Class on April 9, 2003. Shares exchanged or redeemed after holding them six months or less (other than shares acquired through reinvestment of dividends or other distributions), incur a fee of 1% of the current net asset value of the shares being exchanged or redeemed, which is assessed and retained by the Fund for the benefit of the remaining shareholders. At June 30, 2003 Pictet Global Emerging Markets Fund had three shareholders owning 24.85%, 24.20% and 19.12%, respectively, of the outstanding shares of beneficial interest of the Fund. At June 30, 2003 Pictet International Small Companies Fund had four shareholders owning 22.00%, 20.74%, 18.00% and 16.59%, respectively, of the outstanding shares of beneficial interest of the Fund. At June 30, 2003 Pictet International Equity Fund had one shareholder owning 99.49% of the outstanding shares of beneficial interest of the Fund. At June 30, 2003 Pictet Global Water Fund had two shareholders owning 54.04% and 14.27%, respectively, of the outstanding shares of beneficial interest of the Fund. 5. FOREIGN SECURITIES Pictet Global Emerging Markets Fund invests primarily in foreign emerging markets securities, Pictet International Small Companies Fund and Pictet International Equity Fund invests primarily in foreign securities and Pictet Global Water Fund invests primarily in securities of companies throughout the world operating in the global water sector ("water companies"). Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. Government. These risks include re-valuation of currencies, less reliable information about issuers, varying securities transaction clearance and settlement practices, and future 44 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) adverse political and economic developments. These risks are heightened for investments in emerging markets countries. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. Government. Investing in a single sector makes the Fund more susceptible to negative impacts on that sector than a less concentrated fund might be. Also, a change in the value of a single company in that industry might affect the value of other companies in that sector. 6. FEDERAL TAX INFORMATION Income and long term capital gain distributions are determined in accordance with Federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences are due primarily to timing differences and differing characterization of distributions made by a Fund. Dividends and other distributions to shareholders are recorded on the ex-dividend date and are reinvested automatically in additional shares of the Funds at the net asset value next determined after such dividend or distribution is declared. Under the current tax law, capital and currency losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended December 31, 2002, the Funds elected to defer capital losses and currency losses occurring between November 1, 2002 and December 31, 2002 as follows: CAPITAL LOSSES CURRENCY LOSSES ================================================================================ Pictet Global Emerging Markets Fund $210,371 -- Pictet International Small Companies Fund 70,548 -- Pictet International Equity Fund 177,888 -- Pictet Global Water Fund 104,310 -- ================================================================================ Such losses will be treated as arising on the first day of the year ending December 31, 2003. At December 31, 2002 the following Funds had available for Federal income tax purposes unused capital losses as follows: EXPIRING IN 2006 EXPIRING IN 2007 EXPIRING IN 2008 EXPIRING IN 2009 EXPIRING IN 2010 ================================================================================================================================ Pictet Global Emerging Markets Fund $45,380,329 -- -- $18,252,183 $2,015,691 Pictet International Small Companies Fund -- -- -- 7,916,015 3,851,669 Pictet International Equity Fund -- -- $90,802 1,496,788 1,462,150 Pictet Global Water Fund -- -- -- -- 240,052 ================================================================================================================================ 45 PICTET FUNDS PICTET GLOBAL EMERGING MARKETS FUND PICTET INTERNATIONAL EQUITY FUND PICTET INTERNATIONAL SMALL COMPANIES FUND PICTET GLOBAL WATER FUND - -------------------------------------------------------------------------------- PRIVACY NOTICE Protecting your privacy is important to us at Pictet International Management Limited (the investment adviser for Pictet Funds). We want you to know how we collect personal information from you and how we use that information. We gather information from you from your account application or other forms that you may deliver to us. We need this information to process your requests and transactions, such as opening an account. We also collect information about your transactions with Pictet Funds. In servicing your account, we may need to provide your personal information to an affiliate or a service provider (which may include Pictet Funds' distributor or transfer agent) for such purposes as sending your account statement or other information about our products and services to you. We do not disclose any information about you or any of our former customers to anyone, except to our affiliates and service providers, as permitted by law. To protect your personal information, we permit access only by authorized employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards that comply with federal standards to guard your personal information. 46 This page is intentionally left blank This page is intentionally left blank This page is intentionally left blank PIC-SAR-6/03 ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Pictet Funds -------------------------------------------------------------------- By (Signature and Title)* /S/ JEAN PILLOUD ------------------------------------------------------- Jean Pilloud, President & Principal Executive Officer Date 8/14/03 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /S/ JEAN PILLOUD ------------------------------------------------------- Jean Pilloud, President & Principal Executive Officer Date 8/14/03 ---------------------------------------------------------------------------- By (Signature and Title)* /S/ PAUL MARTIN ------------------------------------------------------- Paul Martin, Treasurer & Principal Financial Officer Date 8/13/03 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.