--------------------------------------------------------------------------------
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
PICTET EASTERN EUROPEAN FUND
--------------------------------------------------------------------------------
[GRAPHIC OF PICTET FUNDS LOGO OMITTED]
SEMI-ANNUAL REPORT
JUNE 30, 2000
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
PICTET EASTERN EUROPEAN FUND
--------------------------------------------------------------------------------
Dear Shareholders,
It is with pleasure that I present to you the Pictet Funds 2000 Semi Annual
Report which summarizes the performance of your funds over the last six months
together with our outlook for the remainder of the year.
The Pictet Global Emerging Markets Fund suffered from the flight of capital
in emerging markets as liquidity conditions worsened as a result of higher US
interest rates. We feel Asia should continue to provide many opportunities in
both the "new" and "old" economies while Latin America should benefit from
rising commodities, but remains vulnerable to US interest rate rises. We
strongly believe emerging markets should outperform the MSCI World Equity Index
once global markets settle down.
The Pictet International Small Companies Fund has benefited from a more
conservative posture this year. This does not imply however that we have changed
our approach. We expect to continue focusing our research effort on identifying
reasonably valued companies with strong business models or technology, solid
management and the potential to achieve superior earnings growth. The new
economy will not disappear and the best small companies are well positioned to
provide the services larger companies and consumers will demand in the coming
years.
The Pictet Eastern European Fund continues to show strong performance. We
feel well positioned to benefit from the expected uncovering of corporate value
as a result of the convergence play in Central Eastern Europe. The region's GDP
growth rate of 4% to 5% is double the world growth rate. Interestingly, this
fund is one of only a few funds in the United States providing an Eastern
European mandate.
Lastly, I am also pleased to announce we are in the process of launching
two additional funds. The Pictet International Equity Fund and the Pictet
European Equity Fund will provide an excellent complement to the three existing
niche funds. We are committed to providing you access to carefully structured
investment vehicles to help you achieve your investment objectives.
Yours sincerely,
/S/ SIGNATURE
Jean Pilloud
President and Chairman
[BULLET] Investing in foreign securities may involve certain additional risks,
including exchange rate fluctuations, less liquidity, greater
volatility and less regulation. The risks 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.
[BULLET] The Morgan Stanley Capital International (MSCI) World Equity Index is
an unmanaged index. It is not possible to invest directly in any
index. The index is a broad based securities index that represents the
U.S. and global (ex-U.S.) equity markets in terms of capitalization
and performance.
[BULLET] Mutual fund shares are not insured by FDIC or guaranteed by any bank.
Shares are subject to investment risks, including possible loss of
principal invested.
Distributor: Provident Distributors, Inc.
Date of First Use: August 29, 2000
1
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
--------------------------------------------------------------------------------
FUND MANAGER'S REPORT
PERFORMANCE SUMMARY
Emerging markets have had a very turbulent start to the year. The
investment performance of the portfolio has been particularly difficult in the
second quarter, with a decline of 20% compared with a decline of 9.7% for the
benchmark. This is mainly attributable to two factors; first, the violent falls
in TMT(1) stocks worldwide, which especially affected India, China, Korea and
Taiwan (together 520 basis points ("bps") of negative attribution); and second,
the recent outperformance of growth against value in emerging markets (the two
big `value' markets, Russia and South Africa, accounted for 138 bps of loss).
Value is fundamental to our process. Market stress has now eased and there are
reasons to expect better performance in emerging markets.
The second quarter was unusually volatile, with markets initially reacting
as if in crisis before recovering sharply towards the end of the period. It is
clear, looking at historical evidence (see chart), that periods of market crisis
typically favor a `growth' investment style over `value'. In large part this is
because value stocks are mainly represented by mid and small capitalization
stocks which have relatively lower liquidity. In times of market stress,
investors prize liquidity above all else, to the detriment of stocks that are
fundamentally undervalued, but are not liquid enough to trade actively.
[GRAPHIC OMIITED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTEDG RAPHIC AS FOLLOWS:
Low PBV High PBV IFCI
------- -------- ----
12/30/88 100.00 100.00 100.00
1/6/89 103.51 100.20 101.24
1/13/89 103.73 103.31 103.34
1/20/89 86.70 103.38 100.29
1/27/89 83.16 105.97 101.18
2/3/89 88.74 105.93 103.33
2/10/89 88.05 105.78 104.64
2/17/89 90.78 106.70 104.36
2/24/89 98.17 108.27 106.50
3/3/89 105.40 108.38 104.32
3/10/89 105.62 108.90 104.50
3/17/89 116.04 108.37 107.61
3/24/89 113.99 107.26 106.95
3/31/89 127.78 108.04 109.79
4/7/89 127.70 108.28 110.49
4/14/89 143.52 113.42 117.30
4/21/89 157.55 116.01 121.55
4/28/89 168.67 116.24 123.86
5/5/89 168.47 116.83 124.75
5/12/89 189.12 116.51 123.76
5/19/89 196.54 117.82 126.00
5/26/89 198.74 113.98 122.38
6/2/89 209.24 116.36 128.44
6/9/89 188.44 114.19 122.91
6/16/89 147.33 114.18 120.65
6/23/89 144.74 114.91 118.75
6/30/89 131.23 115.11 121.87
7/7/89 155.13 110.69 127.23
7/14/89 148.22 85.45 120.62
7/21/89 143.57 88.26 120.62
7/28/89 148.77 86.21 121.55
8/4/89 145.43 87.16 121.52
8/11/89 147.43 89.32 124.96
8/18/89 149.50 91.81 124.73
8/25/89 154.97 95.63 126.07
9/1/89 147.36 97.13 127.50
9/8/89 151.37 102.29 133.18
9/15/89 149.82 110.87 137.82
9/22/89 154.29 115.32 141.76
9/29/89 154.80 125.35 149.64
10/6/89 166.09 130.95 153.72
10/13/89 172.28 135.71 154.90
10/20/89 173.82 128.21 149.79
10/27/89 170.98 125.23 147.21
11/3/89 160.52 124.09 145.50
11/10/89 148.84 124.27 140.16
11/17/89 149.24 123.18 141.40
11/24/89 152.48 121.20 145.02
12/1/89 130.94 123.48 142.45
12/8/89 136.09 124.58 145.93
12/15/89 148.65 119.63 148.93
12/22/89 137.09 123.08 150.60
12/29/89 152.78 130.26 155.20
1/5/90 153.37 137.85 156.99
1/12/90 153.94 140.74 157.52
1/19/90 154.70 144.30 157.18
1/26/90 151.48 133.51 151.71
2/2/90 149.95 142.87 157.65
2/9/90 163.66 152.81 164.23
2/16/90 162.61 148.51 165.63
2/23/90 147.82 137.87 160.56
3/2/90 158.64 142.57 162.17
3/9/90 143.27 135.18 159.36
3/16/90 143.22 134.93 158.62
3/23/90 95.69 136.37 152.75
3/30/90 84.82 130.79 150.68
4/6/90 90.38 132.21 149.12
4/13/90 90.50 128.65 152.95
4/20/90 92.54 130.39 154.42
4/27/90 93.86 127.97 154.89
5/4/90 97.36 133.16 159.34
5/11/90 102.64 135.32 164.64
5/18/90 104.26 140.34 168.06
5/25/90 108.02 136.91 171.20
6/1/90 101.48 137.22 169.99
6/8/90 98.22 141.02 170.40
6/15/90 96.24 144.07 168.24
6/22/90 98.70 153.71 172.24
6/29/90 106.30 168.16 177.45
7/6/90 110.17 176.22 180.75
7/13/90 112.40 171.62 183.67
7/20/90 122.21 173.18 188.31
7/27/90 127.52 178.24 190.93
8/3/90 134.52 182.13 191.42
8/10/90 127.80 163.34 177.12
8/17/90 132.08 177.49 179.67
8/24/90 130.41 154.27 157.66
8/31/90 133.47 164.77 171.46
9/7/90 132.62 154.54 166.62
9/14/90 131.59 157.14 166.97
9/21/90 134.39 162.71 163.90
9/28/90 127.82 148.20 152.15
10/5/90 130.35 149.35 155.59
10/12/90 129.12 144.89 154.20
10/19/90 133.33 137.90 152.71
10/26/90 136.95 139.01 157.13
11/2/90 137.65 123.20 149.68
11/9/90 136.21 111.15 144.64
11/16/90 139.14 113.92 147.37
11/23/90 143.97 117.08 150.17
11/30/90 142.41 108.39 144.44
12/7/90 146.15 126.15 154.54
12/14/90 145.48 121.66 154.91
12/21/90 143.16 111.06 148.59
12/28/90 142.46 107.01 146.27
1/4/91 144.23 108.31 147.43
1/11/91 136.25 101.99 139.59
1/18/91 139.26 110.34 146.10
1/25/91 142.18 105.33 144.21
2/1/91 147.63 110.52 150.13
2/8/91 152.02 115.06 156.06
2/15/91 157.47 119.55 160.76
2/22/91 156.09 125.42 165.32
3/1/91 163.57 121.65 165.67
3/8/91 171.09 117.62 169.41
3/15/91 177.32 113.08 169.35
3/22/91 191.33 106.01 168.66
3/29/91 194.44 105.69 168.91
4/5/91 194.79 105.06 172.85
4/12/91 190.35 106.97 173.85
4/19/91 199.17 105.04 175.97
4/26/91 200.29 98.53 171.52
5/3/91 197.60 95.85 168.91
5/10/91 208.37 93.28 169.39
5/17/91 224.09 89.91 168.64
5/24/91 221.41 90.92 174.72
5/31/91 231.53 88.30 175.85
6/7/91 244.81 89.29 176.43
6/14/91 245.23 86.42 174.14
6/21/91 247.29 85.00 172.53
6/28/91 246.14 80.57 169.45
7/5/91 232.99 78.91 169.30
7/12/91 244.22 77.67 171.12
7/19/91 245.29 77.52 173.04
7/26/91 254.47 78.99 173.64
8/2/91 272.68 78.47 174.71
8/9/91 268.87 76.24 170.29
8/16/91 284.23 73.47 171.30
8/23/91 309.57 73.15 174.45
8/30/91 318.34 73.79 177.55
9/6/91 326.81 74.12 178.01
9/13/91 334.29 71.80 177.06
9/20/91 341.60 69.85 175.65
9/27/91 321.14 69.86 172.79
10/4/91 321.83 68.34 172.34
10/11/91 339.16 68.36 177.23
10/18/91 353.85 68.76 180.79
10/25/91 342.11 69.34 179.92
11/1/91 355.62 69.84 182.01
11/8/91 334.86 70.18 182.43
11/15/91 326.88 72.43 186.00
11/22/91 283.28 71.40 180.05
11/29/91 293.93 70.12 181.32
12/6/91 315.11 70.08 184.74
12/13/91 329.85 71.21 184.47
12/20/91 366.43 71.66 189.94
12/27/91 390.55 73.78 198.03
1/3/92 428.33 75.74 206.15
1/10/92 442.11 78.16 211.31
1/17/92 434.95 83.35 215.39
1/24/92 496.40 87.81 225.80
1/31/92 477.47 84.49 225.60
2/7/92 451.19 81.37 225.86
2/14/92 428.78 80.74 226.04
2/21/92 477.61 78.05 231.80
2/28/92 475.94 79.20 231.05
3/6/92 489.42 75.22 228.03
3/13/92 494.78 70.57 225.74
3/20/92 497.76 71.53 230.52
3/27/92 475.91 69.19 229.53
4/3/92 514.29 68.03 229.41
4/10/92 545.81 66.65 229.82
4/17/92 565.48 67.10 233.43
4/24/92 530.89 68.12 231.55
5/1/92 511.06 69.01 229.46
5/8/92 533.63 69.54 231.59
5/15/92 543.44 68.45 231.42
5/22/92 501.53 68.37 228.53
5/29/92 490.40 68.06 227.54
6/5/92 472.34 67.78 225.57
6/12/92 460.40 68.99 223.94
6/19/92 422.20 66.95 213.85
6/26/92 419.99 64.33 207.30
7/3/92 397.19 64.52 205.64
7/10/92 441.87 65.58 208.77
7/17/92 461.37 65.76 212.40
7/24/92 430.34 64.36 199.07
7/31/92 419.93 64.80 202.77
8/7/92 421.63 64.11 201.10
8/14/92 400.25 62.28 194.73
8/21/92 391.64 61.45 189.75
8/28/92 444.43 62.17 194.87
9/4/92 428.48 63.19 193.64
9/11/92 430.74 62.77 190.77
9/18/92 418.51 62.75 188.06
9/25/92 440.29 64.16 189.03
10/2/92 415.55 64.40 190.27
10/9/92 385.31 64.73 187.16
10/16/92 358.14 65.05 186.48
10/23/92 383.51 67.01 192.69
10/30/92 391.90 68.87 197.81
11/6/92 373.23 71.49 197.82
11/13/92 352.78 70.66 193.08
11/20/92 354.33 69.83 192.90
11/27/92 363.34 68.86 196.56
12/4/92 365.59 69.05 198.25
12/11/92 377.54 67.40 198.50
12/18/92 382.30 66.55 198.89
12/25/92 403.95 67.47 203.38
1/1/93 406.83 66.84 202.81
1/8/93 433.60 66.11 206.53
1/15/93 429.26 66.37 205.26
1/22/93 415.24 67.75 207.14
1/29/93 404.21 67.91 201.68
2/5/93 401.83 69.53 203.92
2/12/93 412.72 70.24 205.57
2/19/93 448.39 69.31 205.10
2/26/93 454.36 69.87 206.56
3/5/93 427.00 67.00 206.11
3/12/93 443.10 65.56 206.26
3/19/93 476.17 64.84 208.93
3/26/93 453.99 64.18 209.56
4/2/93 458.65 64.40 213.71
4/9/93 446.66 65.03 215.82
4/16/93 466.46 65.69 219.57
4/23/93 484.53 64.51 220.37
4/30/93 465.52 63.31 219.15
5/7/93 464.84 61.01 216.79
5/14/93 469.37 63.39 217.13
5/21/93 504.87 59.90 220.48
5/28/93 513.63 60.82 222.79
6/4/93 548.44 60.89 224.97
6/11/93 558.26 61.84 226.64
6/18/93 548.16 62.20 230.16
6/25/93 559.39 60.39 228.61
7/2/93 534.51 62.54 229.11
7/9/93 554.62 60.50 230.68
7/16/93 540.56 60.11 228.90
7/23/93 549.73 61.43 232.82
7/30/93 545.29 62.58 235.65
8/6/93 520.87 63.84 236.87
8/13/93 535.44 63.55 240.56
8/20/93 581.65 66.16 251.36
8/27/93 592.89 67.51 255.89
9/3/93 596.90 69.24 261.86
9/10/93 592.21 69.50 264.05
9/17/93 613.68 70.63 263.47
9/24/93 598.82 71.59 262.87
10/1/93 628.46 74.31 265.81
10/8/93 653.97 76.13 274.29
10/15/93 674.78 77.89 284.66
10/22/93 637.01 78.22 283.70
10/29/93 643.56 79.72 286.12
11/5/93 647.75 79.57 284.90
11/12/93 674.35 81.86 295.59
11/19/93 689.07 82.51 302.63
11/26/93 683.46 82.12 304.60
12/3/93 679.79 84.59 311.37
12/10/93 701.92 88.34 321.80
12/17/93 710.86 92.56 331.15
12/24/93 738.45 97.19 345.55
12/31/93 782.08 100.12 355.73
1/7/94 818.32 99.05 362.96
1/14/94 790.05 95.15 352.21
1/21/94 764.35 89.98 359.63
1/28/94 755.10 85.92 351.94
2/4/94 817.15 83.12 367.03
2/11/94 812.58 78.37 366.20
2/18/94 786.12 84.73 358.49
2/25/94 747.13 81.42 348.34
3/4/94 774.93 75.49 336.86
3/11/94 798.68 73.35 330.40
3/18/94 798.98 71.37 321.92
3/25/94 780.24 67.58 319.35
4/1/94 735.75 67.20 313.50
4/8/94 715.20 66.68 302.73
4/15/94 668.72 70.58 302.68
4/22/94 692.39 71.75 299.96
4/29/94 746.21 71.36 305.62
5/6/94 705.51 70.17 294.42
5/13/94 705.93 70.70 295.27
5/20/94 726.65 70.86 309.80
5/27/94 731.07 70.53 312.55
6/3/94 756.92 68.52 311.30
6/10/94 761.70 70.70 312.23
6/17/94 771.51 72.52 313.29
6/24/94 735.39 70.49 299.26
7/1/94 727.66 68.52 299.48
7/8/94 752.68 68.34 306.50
7/15/94 793.98 70.51 311.42
7/22/94 774.36 69.93 309.60
7/29/94 791.70 72.10 321.63
8/5/94 873.51 75.90 343.35
8/12/94 881.71 77.45 346.27
8/19/94 956.44 80.34 361.90
8/26/94 969.67 78.45 361.45
9/2/94 1,002.33 80.68 366.33
9/9/94 1,009.48 81.32 370.38
9/16/94 1,025.02 81.44 373.65
9/23/94 1,043.74 81.20 377.81
9/30/94 1,048.04 79.20 371.13
10/7/94 989.45 78.62 361.50
10/14/94 1,011.25 79.67 369.93
10/21/94 955.66 79.01 361.35
10/28/94 1,004.87 78.50 360.34
11/4/94 986.54 77.06 356.16
11/11/94 1,018.41 75.16 352.81
11/18/94 991.04 75.93 347.76
11/25/94 928.39 73.34 337.14
12/2/94 938.26 71.44 336.26
12/9/94 963.82 68.60 330.62
12/16/94 983.59 70.06 331.06
12/23/94 905.62 72.10 309.05
12/30/94 912.83 71.64 307.40
1/6/95 855.52 70.07 290.96
1/13/95 880.03 65.18 283.81
1/20/95 855.41 64.10 273.62
1/27/95 838.77 62.84 267.54
2/3/95 855.21 66.01 276.39
2/10/95 780.77 69.81 275.17
2/17/95 725.01 70.50 267.36
2/24/95 754.33 69.36 264.91
3/3/95 702.60 69.29 257.12
3/10/95 659.29 67.09 245.95
3/17/95 674.66 68.04 250.60
3/24/95 724.10 67.31 256.19
3/31/95 724.31 69.73 261.18
4/7/95 734.53 70.63 267.87
4/14/95 706.24 71.04 263.71
4/21/95 765.03 71.53 271.49
4/28/95 803.22 68.56 271.38
5/5/95 843.56 69.87 279.29
5/12/95 851.65 73.82 284.91
5/19/95 853.73 73.00 281.63
5/26/95 829.98 75.22 282.75
6/2/95 839.69 77.51 287.83
6/9/95 797.52 76.95 282.47
6/16/95 806.30 76.64 283.30
6/23/95 779.66 76.75 283.25
6/30/95 793.36 74.68 281.82
7/7/95 852.78 76.56 292.70
7/14/95 863.15 77.27 296.07
7/21/95 836.16 75.78 290.37
7/28/95 829.61 76.66 290.40
8/4/95 859.64 76.20 295.32
8/11/95 855.11 73.98 291.20
8/18/95 837.80 72.26 285.67
8/25/95 846.05 72.08 284.32
9/1/95 844.81 70.87 282.99
9/8/95 860.60 69.10 283.22
9/15/95 881.90 69.50 285.31
9/22/95 864.00 69.60 283.66
9/29/95 857.80 68.24 279.56
10/6/95 850.48 68.32 279.39
10/13/95 848.17 66.93 275.81
10/20/95 856.83 67.12 277.83
10/27/95 805.22 66.38 269.81
11/3/95 799.60 63.91 265.67
11/10/95 773.39 61.70 261.89
11/17/95 775.17 60.64 260.10
11/24/95 797.09 61.91 263.09
12/1/95 828.71 63.19 269.17
12/8/95 825.23 64.89 273.11
12/15/95 811.62 65.03 272.37
12/22/95 833.31 65.73 278.17
12/29/95 826.64 65.26 275.79
1/5/96 867.80 68.16 288.81
1/12/96 876.38 70.06 293.83
1/19/96 882.42 70.65 296.68
1/26/96 892.24 70.17 297.00
2/2/96 950.37 71.61 305.23
2/9/96 942.86 70.42 301.23
2/16/96 913.37 70.21 298.46
2/23/96 923.48 69.28 297.48
3/1/96 896.33 69.70 294.76
3/8/96 858.31 69.66 290.00
3/15/96 867.15 68.86 290.62
3/22/96 889.48 70.21 295.89
3/29/96 879.35 70.30 295.21
4/5/96 883.46 72.03 296.95
4/12/96 882.81 71.61 298.65
4/19/96 908.54 72.70 305.71
4/26/96 912.18 72.96 305.03
5/3/96 915.44 73.02 303.85
5/10/96 927.63 72.76 304.93
5/17/96 931.73 71.98 304.93
5/24/96 923.54 71.27 301.99
5/31/96 927.25 71.17 302.31
6/7/96 900.84 71.25 300.93
6/14/96 903.62 70.53 300.42
6/21/96 936.83 71.46 303.22
6/28/96 926.87 71.69 305.23
7/5/96 949.30 72.10 306.52
7/12/96 959.20 71.28 301.61
7/19/96 942.01 70.77 299.95
7/26/96 898.64 67.90 287.55
8/2/96 936.36 69.21 293.53
8/9/96 929.41 68.92 292.20
8/16/96 929.04 68.31 290.27
8/23/96 904.20 69.38 291.79
8/30/96 915.68 69.52 293.07
9/6/96 925.88 68.72 292.15
9/13/96 933.44 69.80 295.29
9/20/96 937.86 70.99 298.33
9/27/96 936.42 70.96 297.02
10/4/96 947.88 72.49 301.69
10/11/96 955.60 70.87 298.30
10/18/96 968.52 72.21 299.04
10/25/96 939.08 72.02 294.38
11/1/96 939.81 70.69 291.13
11/8/96 923.18 71.46 292.49
11/15/96 921.66 71.47 294.29
11/22/96 925.26 73.01 295.07
11/29/96 925.13 73.29 294.16
12/6/96 933.73 72.29 291.29
12/13/96 908.16 71.63 285.94
12/20/96 941.18 72.25 291.03
12/27/96 947.40 72.49 292.18
1/3/97 954.20 73.90 295.78
1/10/97 1,000.54 75.87 306.66
1/17/97 1,038.10 76.01 312.69
1/24/97 1,017.01 78.02 313.66
1/31/97 1,036.57 78.44 315.42
2/7/97 1,087.04 78.86 322.29
2/14/97 1,117.64 79.73 328.52
2/21/97 1,116.83 80.84 331.91
2/28/97 1,115.92 81.17 330.65
3/7/97 1,123.28 79.68 328.27
3/14/97 1,136.64 79.29 327.36
3/21/97 1,105.48 78.37 324.32
3/28/97 1,107.51 78.00 325.19
4/4/97 1,129.29 74.23 318.55
4/11/97 1,121.78 73.96 317.57
4/18/97 1,112.32 72.07 314.87
4/25/97 1,132.37 71.65 315.96
5/2/97 1,149.06 71.06 316.39
5/9/97 1,157.47 71.78 319.64
5/16/97 1,162.07 69.87 315.40
5/23/97 1,182.94 71.10 320.15
5/30/97 1,208.83 71.53 324.81
6/6/97 1,207.78 72.30 328.47
6/13/97 1,245.07 70.72 331.25
6/20/97 1,260.56 72.04 335.02
6/27/97 1,311.07 71.64 338.09
7/4/97 1,401.05 72.39 346.16
7/11/97 1,375.86 71.34 343.63
7/18/97 1,258.54 69.06 329.80
7/25/97 1,344.14 70.44 337.72
8/1/97 1,342.76 69.32 336.76
8/8/97 1,370.68 66.14 333.01
8/15/97 1,340.23 63.92 321.99
8/22/97 1,287.71 63.60 317.35
8/29/97 1,222.60 57.25 296.75
9/5/97 1,300.70 56.82 307.94
9/12/97 1,268.50 58.02 306.30
9/19/97 1,292.48 58.45 305.44
9/26/97 1,298.01 58.37 304.96
10/3/97 1,386.53 58.95 306.75
10/10/97 1,374.23 59.37 311.91
10/17/97 1,366.29 59.32 305.69
10/24/97 1,304.56 57.84 287.31
10/31/97 1,068.43 52.33 255.46
11/7/97 1,073.82 54.71 260.61
11/14/97 991.12 50.95 245.46
11/21/97 1,044.20 52.94 249.20
11/28/97 975.36 52.22 243.34
12/5/97 1,024.41 54.03 249.91
12/12/97 919.50 53.18 234.73
12/19/97 938.87 53.35 236.11
12/26/97 974.37 53.63 239.00
1/2/98 844.54 53.35 245.81
1/9/98 758.53 51.30 220.92
1/16/98 775.19 50.61 223.28
1/23/98 747.53 52.34 221.16
1/30/98 792.96 51.81 229.60
2/6/98 813.42 53.66 243.57
2/13/98 810.28 53.44 240.05
2/20/98 814.45 54.50 243.95
2/27/98 834.58 56.93 252.87
3/6/98 858.47 56.26 249.28
3/13/98 893.27 56.69 256.69
3/20/98 896.98 57.02 259.07
3/27/98 894.62 58.73 264.98
4/3/98 848.69 58.96 259.45
4/10/98 866.21 59.42 263.08
4/17/98 866.37 61.28 264.91
4/24/98 850.76 61.45 263.44
5/1/98 842.40 61.24 262.38
5/8/98 802.36 60.10 254.01
5/15/98 756.59 59.40 246.14
5/22/98 710.54 60.55 242.57
5/29/98 673.86 56.57 228.12
6/5/98 697.91 56.37 227.97
6/12/98 636.70 53.63 210.73
6/19/98 638.05 55.60 212.12
6/26/98 624.20 54.01 204.12
7/3/98 647.42 55.73 208.54
7/10/98 653.55 56.87 209.84
7/17/98 714.38 59.20 222.34
7/24/98 683.99 57.89 214.46
7/31/98 683.46 57.34 211.89
8/7/98 604.88 55.64 195.88
8/14/98 550.31 52.04 183.59
8/21/98 531.22 51.30 173.44
8/28/98 482.11 45.16 153.81
9/4/98 443.45 44.79 151.72
9/11/98 423.63 45.40 147.87
9/18/98 452.83 45.72 156.68
9/25/98 457.87 45.23 161.74
10/2/98 440.48 41.30 151.68
10/9/98 462.18 42.76 155.73
10/16/98 499.11 45.29 168.61
10/23/98 517.86 47.04 173.14
10/30/98 511.20 48.08 177.01
11/6/98 576.83 49.56 189.41
11/13/98 544.45 47.60 180.25
11/20/98 601.09 51.24 192.38
11/27/98 624.42 51.55 193.67
12/4/98 579.05 50.97 181.88
12/11/98 607.20 50.45 183.66
12/18/98 578.70 49.47 179.57
12/25/98 616.33 51.15 186.25
1/1/99 613.14 51.32 186.76
1/8/99 642.20 54.27 195.59
1/15/99 570.64 52.24 180.33
1/22/99 526.13 52.89 178.54
1/29/99 525.39 53.16 181.77
2/5/99 536.43 52.83 183.46
2/12/99 549.11 54.10 186.59
2/19/99 529.37 53.58 184.42
2/26/99 513.10 55.10 184.77
3/5/99 535.87 53.42 188.15
3/12/99 572.89 55.55 197.33
3/19/99 617.06 57.84 205.39
3/26/99 624.81 56.38 203.83
4/2/99 649.69 57.01 208.03
4/9/99 692.28 58.41 215.26
4/16/99 728.38 58.98 226.19
4/23/99 744.47 59.18 228.11
4/30/99 766.09 59.37 233.14
5/7/99 813.94 60.77 244.65
5/14/99 791.79 60.33 241.70
5/21/99 750.09 60.19 236.09
5/28/99 733.94 57.43 226.62
6/4/99 774.62 58.98 234.43
6/11/99 809.42 61.95 242.58
6/18/99 827.60 63.10 249.86
6/25/99 842.72 62.41 248.26
7/2/99 877.59 63.66 259.58
7/9/99 844.13 63.93 262.37
7/16/99 836.71 61.52 257.94
7/23/99 817.47 62.78 250.21
7/30/99 799.64 61.49 248.39
8/6/99 752.58 59.60 240.31
8/13/99 754.82 62.94 245.70
8/20/99 734.96 65.88 245.99
8/27/99 765.57 65.68 252.37
9/3/99 794.14 66.65 251.58
9/10/99 821.98 68.97 256.13
9/17/99 800.64 69.06 252.16
9/24/99 804.98 66.14 247.62
10/1/99 787.72 66.87 243.29
10/8/99 814.06 68.67 249.71
10/15/99 786.26 67.88 243.94
10/22/99 812.50 66.57 243.75
10/29/99 832.96 66.78 247.57
11/5/99 901.25 67.58 259.39
11/12/99 910.34 68.96 265.70
11/19/99 936.22 69.40 270.02
11/26/99 947.05 67.29 267.34
12/3/99 991.21 69.74 274.38
12/10/99 1,000.63 70.90 283.06
12/17/99 1,050.07 71.33 284.82
12/24/99 1,116.80 71.85 289.95
12/31/99 1,214.46 77.93 305.29
1/7/00 1,187.16 80.83 303.44
1/14/00 1,246.03 83.22 317.99
1/21/00 1,234.77 82.12 313.88
1/28/00 1,221.89 83.12 309.60
2/4/00 1,283.22 83.33 317.10
2/11/00 1,294.06 84.79 325.60
2/18/00 1,264.08 83.09 314.42
2/25/00 1,261.38 80.30 308.60
3/3/00 1,310.92 81.61 315.90
3/10/00 1,296.62 81.04 316.42
GROWTH VS VALUE
An analysis of our portfolios confirms that we are heavily exposed to
shares at the `value' end of most sectors. The valuation gap between the five
largest companies in each industry and the sector averages is wider now than at
any time in recent history. The premium at which the largest companies trade
relative to their sectors is set out in the table (valuations are taken from
Pictet's proprietary emerging markets database). Even sectors which are
particularly undervalued relative to their peers in the developed world, such as
telecoms, have displayed the same characteristics, with the most expensive
companies sharply outperforming their cheaper counterparts. A good example is
Telmex which accounts for 2-3% of key benchmarks and which, according to our
Adjusted Value ranking, was significantly more expensive than the median
emerging telecom stock. Yet other Latin American telecom stocks, in which our
portfolios were more heavily invested, and that were valued at half the median,
fell twice as much as Telmex alone.
--------------------------------------------------------------------------------
SECTOR ADJ VALUE $ (DISCOUNT)
TOP 5 AVERAGE PREMIUM
--------------------------------------------------------------------------------
RETAIL 2,790.95 2,224.46 25.4%
TELECOM 3,099.07 1,313.99 135.8%
CELLULAR 2,510.73 1,269.03 97.8%
PLASTICS 2,974.59 2,114.30 40.6%
STEEL 242.04 165.56 46.2%
MINING 770.88 787.54 (2.1)%
ELECTRIC 1,261.13 621.14 103.0%
-------------------------------------
(1) telecoms, media & technology
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TMT DECLINES
A strong argument in favor of emerging markets has been their low historic
correlation with developed markets. However, not only has the correlation risen,
but the Global emerging TMT sectors have been converging with their
counterparts. Although emerging TMT stocks are cheap by global standards,
especially in India, these stocks were just as badly hit during the quarter as
their first world peers. We held significant - though not overweight - positions
in telecom and technology stocks in India, Taiwan, China and Korea. In these
markets, TMT accounts for between 40% and 70% of the index. Our stocks were hit
harder because, although cheaper, they suffered a loss of liquidity. In all
these markets, although we cut back exposure, it was impossible to escape
damage. We do not expect similar factors to recur in the foreseeable future.
OUTLOOK AND CONCLUSIONS
The fundamental reasons for investing in emerging markets are intact. In
our view, the most compelling are:
[BULLET] To benefit from CONVERGENCE with the developed world (Greece,
Turkey, Poland, Hungary, Czech Republic and Mexico)
[BULLET] To gain pure exposure to the COMMODITY cycle in periods of tight
global demand/supply (e.g. South Africa, Brazil and Russia)
[BULLET] To take advantage of FOREIGN DIRECT INVESTMENT and M&A trends,
coupled with the sector revaluations which these flows often
ignite (telecoms, media, utilities and, increasingly, basic
industries such as paper, steel and mining)
[BULLET] To identify sectors where HIGH EDUCATION and LOW LABOR/PRODUCTION
COSTS converge (e.g. Indian software, Taiwanese foundries)
[BULLET] To pioneer UNDISCOVERED MARKETS (Eastern Europe, Middle East,
Africa) and reap the rewards of early entry
We plan to remain committed to our value-based screening process and
believe our methods are ideally suited to picking those companies, and markets,
that benefit from the above factors.
We also believe that emerging markets have settled back to levels from
which they can resume their out performance of developed markets, and that
value-based strategies will do best. An appetite for risk has resurfaced, with
signs of slower growth in the US easing pressures on emerging debt yields. With
earnings and orders still robust in most major markets in our universe, we
believe there is plenty of scope for a recovery in emerging equities over the
months ahead.
THERE ARE RISKS INVOLVED IN FOREIGN INVESTING. SUCH RISKS MAY INCLUDE
FLUCTUATION IN FOREIGN EXCHANGE RATES, POLITICAL OR ECONOMIC INSTABILITY IN THE
COUNTRIES IN WHICH THE SECURITY ISSUERS ARE LOCATED, AND MAY BE MORE VOLATILE.
THE RISKS MAY BE MAGNIFIED FOR EMERGING MARKETS.
REVIEW AND OUTLOOK
In general we have been pleased to see good progress at the economic and
political level in all but a few of the developing countries which we cover.
Perhaps the most surprising news was the election of Vicente Fox as President of
MEXICO, overturning more than 70 years of government by the Partido
Revolucionario Institucional (PRI) party. A victory for democracy, but
expectations will now run very high in Mexico, and some disappointments are
inevitable. He inherits an economy growing at close to 8% in Q1, but still very
dependent on its northern neighbor for exports. BBVA of Spain finally bought
BANCOMER, the country's largest bank, thereby pushing the consolidation of the
sector one step closer to conclusion. The weakness of the banking sector has
been one of the factors stopping the Standard and Poor from upgrading Mexico to
investment grade, alongside Moodys. BRAZIL continues to work quietly in the
background to restore its international credibility, with some success, allowing
the Central Bank to cut rates by 1.5% in recent weeks to 17%. The country's
fiscal performance has been stellar, with huge surpluses easily beating the
International Monetary Fund's stringent targets, and the falling interest rate
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environment is forcing a reallocation to equities by domestic investors. In
CHILE the new government stood by its election promise to start dismantling
barriers to foreign investment in the equity market by eliminating the one year
holding period for investors. A law has been sent to Congress to abolish the
last remaining withholding taxes.
An improving tone to the World Trade Organization entry negotiations,
combined with strong economic numbers, have boosted CHINA. There have also been
big changes to the country's weighting in the MSCI index which has led to a
reallocation of funds there. Towards the end of the quarter the flotation of a
second mobile phone operator, CHINA UNICOM, served to remind investors of the
attractions of this market and the huge growth potential in sectors such as
telecoms. TAIWAN has been whipped between competing forces this quarter.
Excellent results from the electronics sector were ignored by investors who
preferred to focus first on the conciliatory speeches of the new President, then
on the risk of a US slowdown and the potential impact on the exporters. The
market is trading on the basis that the country is hostage to developments in
the US and China. MALAYSIA, on the other hand, has continued to trade
independently of global events. The market was re-included in the MSCI indices
on 1st June which has prompted little in the way of buying by foreign investors
so far. Corporate governance concerns resurfaced with the announcement of a
rights issue by UEM, and there was the threat of a further overhang of stock
from the release for sale of stocks that used to trade over-the-counter in
Singapore, before capital controls were imposed. In KOREA the continued credit
problems in the investment trust sector, worries over Hyundai's solvency,
diminishing external surpluses and risk of interest rate increases spurred a
sharp sell off in April. The market recovered thereafter aided by government
support measures and strong DRAM prices, which propelled Samsung and Hyundai
Electronics. This continued into June, and was supported by Daimler-Chrysler's
move to take a 10% stake in Hyundai Motor and a rebound into surplus for the May
trade account. Liquidity in the PHILIPPINES remained poor, which exacerbated
investors' concerns with both politics and the pace of economic reform. However
the passing of a new banking law allowing 100% foreign ownership, a new retail
law and the power bill confirmed that reform is on track. In THAILAND progress
was made on the debt restructuring of Thai Petrochemical after the chairman was
forced to step down, and this provided temporary relief for the banks. But the
external fears of rising interest rates bore down heavily on the market during
May. A positive development was a deal by Norway's Telenor for a third of the
shares in Total Access Communication, one of the two main cellular operators in
Thailand. There were further political sackings by President Wahid of INDONESIA,
first in the cabinet and then at the central bank. The uncertainty caused by
these moves, together with ongoing concerns over banking reform, undermined both
the market and currency over the quarter.
In RUSSIA, the market weakened because of renewed concerns over corporate
governance after UES, the largest Russian utility, proposed to dispose of some
of its more attractive assets at very low prices. On the macroeconomic front
Russia continues to deliver with reserves above USD 20bn and industrial output
continuing to grow at above 10% per month. In POLAND, political risk reared its
head with the resignation of the Finance Minister who quarreled with Congress
over the Budget. There was better news in the market when, despite a rash of
companies announcing capital increases, TPSA was finally sold to France Telecom
for USD 4bn. Government action in HUNGARY has worked against the market by
announcing a 12% increase in gas price. This dashed any hope for MOL's earnings
recovery in the medium term and the company is now looking to sell back its gas
assets. The CZECH REPUBLIC confirmed its recovery with 4.4% Gross Domestic
Product growth in Q1. Utility CEZ held up well on speculation EDF of France is
interested in taking a stake, and then strengthened further on the sale of two
thirds of their telecom assets to VIVENDI.
SOUTH AFRICA wobbled precariously as the rand fell from 6.10/$ (Jan) to
7.20/$ (mid-May) driven largely by fears over the unrest in neighboring
Zimbabwe. These concerns have largely abated now and the economy is recovering
slowly - next year's privatizations (telecom, electricity, transport) should
boost fiscal receipts at an important time. The banking sector is looking for
direction after key mergers were blocked by the government on competition
grounds. On the metals and mining side, the price of platinum remains far above
most analysts' forecasts. ZIMBABWE turned in a big performance in June, after
four months' of decline. The Movement for Democratic Change managed to draw
equal with Zanu-PF in parliamentary elections despite widespread (and
continuing) violence. The end of President Mugabe's disastrous mis-rule thus
edges closer. In ISRAEL the economy is recovering as expected, with growth
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rising from zero last year to 4.5% this year. Unfortunately Ehud Barak's
coalition faces endless squabbles, which are becoming increasingly distracting
as peace talks with Arafat get under way. So long as Barak can appeal to the
populace via a referendum, he can bypass the Knesset and make a deal on
Palestine, but parliamentary interference with the referendum would be bearish.
EGYPT remains cheap but hobbled by the government's inability to deal with macro
difficulties and liquidity shortage. Reform of the state banking sector is
essential together with, eventually, the abolition of the EGP/USD peg. In
PAKISTAN the military government is continuing in the face of strong resistance
to attempt to codify the unofficial economy. The need to widen the weak tax base
seems to be well understood by the leadership. The recent budget was neither
positive nor negative. The collapse of some Lahore speculators combined with a
series of strikes hit the stock market in May but, as in India, a recovery has
set in during June. March's falls in the INDIAN markets continued into April and
May despite heavy foreign buying, usually a source of strength. The nervousness
was demonstrated by a series of panics over what were largely irrelevant
stories--unfounded worries over taxation of foreign investors and a supposed
drought were the leading examples. The mood turned in late May, triggered by an
encouraging monsoon forecast, and the markets have been rallying over the last
weeks. Input from the public sector has been mixed: subsidy cuts announced in
the budget were passed despite arguments amongst the coalition, but
privatization of the petroleum and telecom sectors continues to face fierce
resistance. The software majors should expect strong results this quarter (80%
growth in earnings year-on-year) and, given their cost advantages over more
expensive global rivals, may not be disadvantaged by a US slowdown.
5
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PICTET FUNDS
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FUND MANAGER'S REPORT
The value of the portfolio declined by 8.9% during the second quarter while
the HSBC World ex-US Smaller Companies Index lost 7.8%. In the first half of
2000, the portfolio has recorded a gain of 26.5%, compared to a loss of 1.6% for
the benchmark index. We had been careful to book profits on top performing
holdings over the course of the first quarter and the portfolio has benefited
from the more conservative posture we have adopted. Unfortunately, the positive
contribution from stock selection in Europe and Japan was offset by the cost of
the portfolio's overweight position in Continental Europe and the Asia Pacific
region.
The second quarter started much as the first quarter ended. Volatility on
Nasdaq, caused by concerns over interest rates and valuations, was a catalyst
for a correction in growth segments of the equity market. We had elected not to
participate in the first quarter's rush into ".com" and other speculative
internet stocks and consequently, we were not affected by the severe falls
suffered by many of these companies. Nevertheless, profit-taking in European
holdings such as PUBLICIS (-27%) and CE CONSUMER (-26%), together with isolated
events such as the profit-warning from BELL GROUP (-73%) of the UK partially
offset the excellent performance of the likes of WEDECO (+66%), CHLORIDE (+54%),
VOLEX (+49%) and MARIONNAUD PARFUMERIES (+38%).
In Asia, the underweight position in Japan and the shift away from
overvalued "New Japan" stocks paid dividends. Unfortunately, gains in Japan were
more than offset by the cost of poor stock selection in the rest of Asia. Stock
specific events such as a profit-warning from NATSTEEL ELECTRONICS (-53%) were
exacerbated by a severe sell-off in Hong Kong's media and electronics sectors.
On a positive note, weakness in April and May was welcome in that it
redressed at least part of the valuation differential between the old and new
economies. Investor enthusiasm for themes such as media and communications
convergence and e-commerce, combined with record flows of cash into technology
and growth funds, had driven ratings in certain sectors to unsustainable levels.
The tide turned again towards the end of May as investors took comfort from the
first signs of a slowdown in the US economy following the (+50 bps) increase
implemented by the Fed in mid-May.
Asia responded well to the pickup on Wall Street. Japanese small and large
caps posted decent gains in June despite the weakening of the Liberal Democratic
Party's (LDP) position in parliamentary elections and only modest signs of a
sustained recovery in the economy. The power of the rally in Hong Kong in late
May and early June demonstrated yet again that it is an excellent proxy for
sentiment in the US.
European markets rallied sharply before pausing again after the (+50 bps)
increase announced by the European Central Bank (ECB) on June 8. While the rate
increase underscores the extent to which economic conditions have improved in
Europe, it now appears that economic growth expectations have peaked. Further,
inflation is ticking up and the risk of a deterioration in liquidity conditions
in Europe has increased. Earnings forecasts have yet to be adjusted to account
for the impact of higher interest rates and, as valuations leave little scope
for downgrades, it is no surprise that European investors have largely ignored
more positive news from the US.
Looking ahead, we remain cautious on the outlook for equity markets in the
summer months. It is too early to call the peak in US interest rates on the
basis of a small number of economic releases. The number of profit warnings and
forecast downgrades in the US over the past few weeks demonstrate that earnings
expectations are still aggressive.
European markets may struggle to make much progress in the near term.
European flows into equity funds have been outstanding over the past year but
the pace has slowed of late. In the meantime, the flow of new issues picked up
again in June and the pipeline of deals scheduled for this autumn continues to
grow. While we remain positive on the medium and long term potential of the
Continental small cap market, we may elect to reduce our longstanding overweight
position in the region in the coming months. One of the recipients of any cash
raised on the Continent could be the UK, where valuations are appealing and
tighter monetary conditions have already had an impact.
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Japan could also be a beneficiary of cash raised in Europe. We have been
underweight in this market all year, largely because we are less bullish than
many analysts on the potential for a recovery in consumption. The pace of
restructuring is another question mark. We are not convinced that the concept of
shareholder value has really taken root in Japan. Further, the weakening of the
LDP's position could well herald another round of fiscal stimulus to appease
core rural voters. Nevertheless, we must acknowledge that preliminary
indications of a recovery in capital spending could feed through to the broader
economy in the coming quarters. Given the size of the pool of available savings,
a recovery in consumer confidence could have a major impact on the economy and
the stock market.
The resurgence of other Asian equity markets in June was unconvincing, but
not because of a deterioration in fundamentals. Economic conditions have
improved, especially in China, and there is no shortage of cheap, attractive
companies. However, sentiment still counts for more than value in the Asia
Pacific region. Furthermore, poor disclosure and opaque corporate practice mean
that Asian small caps are especially susceptible to earnings shocks and other
unforeseen developments. Given our concerns over the risk of another round of
turbulence in the US, we have not boosted our commitment to Asia significantly
though we are actively looking for companies which stand to gain from a recovery
in consumption in China.
We expect to continue to focus our research effort on identifying
reasonably- valued companies with strong business models or technology, solid
management and potential. At the regional level, the portfolio was underweight
in the UK and Japan and neutral in Europe and the Asia Pacific region at the end
of the quarter. At the sector level, we expect to continue to favor electronics,
leisure, media and other consumer and corporate services over areas such as
retailing, traditional manufacturing, raw materials and financials.
THERE ARE RISKS INVOLVED IN FOREIGN INVESTING. SUCH RISKS MAY INCLUDE
FLUCTUATIONS IN FOREIGN EXCHANGE RATES, POLITICAL OR ECONOMIC INSTABILITY IN THE
COUNTRIES IN WHICH THE SECURITY ISSUERS ARE LOCATED, AND MAY BE MORE VOLATILE.
SMALL COMPANY STOCKS MAY BE SUBJECT TO A HIGHER DEGREE OF MARKET RISK THAN THE
SECURITIES OF THE MORE ESTABLISHED COMPANIES BECAUSE THEY TEND TO BE MORE
VOLATILE AND LESS LIQUID.
REVIEW AND OUTLOOK
JAPAN
Japanese equities were volatile throughout the quarter, with evidence of a
narrowly-based and modest economic recovery not enough to counter the
uncertainty surrounding both US interest rates and plunging technology stocks.
Towards the end of the period, further distraction came from the Lower House
elections in which a weak coalition was returned. Better performance was
achieved by low-priced shares, partly due to the granting of debt forgiveness to
the troubled retailer SOGO, and also because of a modest increase in interest in
cyclical stocks. By contrast, many of the more prominent "New Japan" themed
stocks listed on the over-the-counter (OTC) market continued to suffer.
The release of Gross Domestic Product (GDP) figures for the first quarter
(+2.4%) at the beginning of June technically ended the recession and confirmed
the better momentum suggested throughout the year by actual machinery orders and
IT-related investment. Nevertheless, forecasts for the next fiscal year show a
wide dispersion as many analysts are unconvinced that the recovery is
sustainable. Given that the large contribution from net exports and fiscal
priming may decline, the debate essentially centers on the outlook for private
consumption, which itself accounts for around two thirds of GDP. Optimistic
forecasters point out that improving corporate profits have always fed through
to wages and hence consumption, and that the high offers-to-applicants ratio
already shows that the labor market is in recovery. Bears counter that firms are
unlikely to raise wages when under pressure to restructure, and that hiring is
actually only taking place in specialized fields.
The Tankan survey of industrial conditions provided little to settle the
debate, indicating something of a two-tier economy. On the one hand, large
manufacturing exporters are enjoying strong overseas demand, especially for
electronics. On the other, smaller companies and firms geared to domestic demand
continue to endure a deteriorating background. As a result, forecasts for GDP
growth in the current fiscal year range from slightly negative to more than 3%,
with consumption the contentious issue.
7
<PAGE>
PICTET FUNDS
PICTET INTERNATIONAL SMALL COMPANIES FUND
--------------------------------------------------------------------------------
Against this background, the Japanese equity market lacked thematic direction,
with sector leadership rotating on a daily basis, often taking its lead from the
United States.
In order to progress significantly, Japan needs to see an unequivocal
recovery in consumption, or more likely, a new round of restructuring. While the
momentum of "western-style" radical cost reduction appears to have dissipated, a
new impetus may come from portfolio reorganization. Huge benefits would accrue
to shareholders if companies could spin off non-core assets, especially real
estate, and also allow subsidiaries to be valued more transparently. The last
few months have seen western banks become heavily involved in mergers, and even
if an aggressive takeover is not imminent, Japanese companies are likely to take
advantage of imminent legislation which makes it easier to effect these sweeping
changes. Thus, while we are modestly underweight at the moment, we are watching
closely for these developments.
ASIA PACIFIC
Markets in the Asia Pacific region were very weak until calm on the Nasdaq
brought a strong rebound in June. In the first part of the quarter, defensive
shares, utilities and banks performed relatively well, with high-techs leading
the rebound later in the quarter. In Hong Kong, property shares also rallied
strongly in June after the government announced a reduction in its plans for
public housing supply.
In contrast to Japan, much of the region saw unequivocally better
macro-economic figures. Especially encouraging was the first quarter data from
China, with industrial output (+11.9%), GDP (+8.1%) and most importantly, retail
sales (+10.4%) all suggesting an imminent end to two years of deflation. Unlike
last year's growth, which was largely fuelled by fiscal stimulus and exports,
the economy appears to be on firmer ground. With the World Trade Organization
(WTO) deal requiring market-opening reforms, foreign multi-nationals are active
once again and Foreign Direct Investment (FDI) contracts are up 25% in the first
five months of the year. In Hong Kong, GDP growth was a huge 14.3% in the first
quarter, though this is expected to slow to a rate of 2.2% in twelve months.
Nevertheless, the level of unemployment is falling and retail sales grew by 8%
in April, the fourth consecutive monthly rise. The consensus forecast for
economic growth in Singapore is also rising, to 6.8% this year and 5.9% for
2001.
In Asia, we are encouraged by the outlook for the outlook for private
consumption and continued FDI in China and the potential for growth elsewhere.
In the short term, markets are reacting to the beneficial effects of easing of
interest fears in the US, though investors will continue to monitor indicators
of external demand very closely. Of particular concern will be the shipment of
electronic components and goods, which are key determinants of the region's
exports. Our research effort is centered on undervalued stocks that should
benefit from a recovery in Chinese consumption, either directly or indirectly.
CONTINENTAL EUROPE
We had noted in our report for the quarter ended March 31 "the outlook for
European equities is less favorable than it was in mid-1999." This statement was
based on expectations that economic growth assumptions would level off after a
period of steady upgrades and on concerns that earnings forecasts were too
ambitious, at least in certain sectors. The second quarter of the new millennium
has provided evidence that our concerns were well-founded.
Looking at the good news first, economic data released in the second
quarter confirmed the positive trends which have emerged over the course of the
past few quarters. A recovery in the manufacturing sector led by strong export
growth has allowed laggards such as Germany and Italy to make a positive
contribution. This has fed through to sentiment - Germany's Institut fur
Wirtschaftsforschung (IFO) index of business confidence has risen to its highest
level since 1991.
Consumer confidence remains at high levels and unemployment is falling
throughout the region. The German jobless rate has declined in seven of the last
eight months to set a new four-year low. French unemployment is at its lowest
level since 1991, the Swiss rate has fallen below 2% for the first time since
February 1992, and the number of jobless in Spain has declined to a twenty year
low. Buoyant consumer sentiment has had a limited impact on retail sales, not
because of declining volumes, but rather because of the impact on prices of
severe competition.
8
<PAGE>
PICTET FUNDS
PICTET INTERNATIONAL SMALL COMPANIES FUND
--------------------------------------------------------------------------------
The turnaround in the industrial sector and the continued strength of
consumer confidence prompted the European Commission to boost its forecast for
economic growth in the Eurozone to 3.4% this year, the fastest pace in a decade.
Previous expectations had been for 2.9% growth, up from 2.3% in 1999. The bad
news is that the Commission also boosted its inflation estimate to 1.8% from
1.6%, uncomfortably close to the ECB's 2% ceiling. Indeed, Eurozone consumer
prices rose 2.1% in March, the first time the inflation rate had broken through
the target ceiling since the launch of the Euro, before falling back to 1.9% in
May. Money supply growth has also been a worrisome issue. The ECB uses a 4.5%
target but M3 expanded at an annual rate of 6.5% in April.
Faced with mounting evidence of an increase in the risk of inflation, the
ECB has moved firmly into tightening mode. Having boosted rates twice in the
first three months of the year (by a total of 50 bps), the Bank first increased
rates by an additional (+25 bps) in April and then followed up with another (+50
bps) in June to increase the reference rate to 4.25%. Current expectations are
that rates will rise by an additional 0.50% by the end of this year.
This change in the monetary environment has dampened the potential for
further upgrades in European growth forecasts. Expectations had been rising
steadily in the first quarter and most of the second. Only recently has the
consensus shifted to the view that growth in the 3.50 to 3.75% range in 2000
will mark the high-point in the current cycle. Analysts appear to be slow to
factor in the impact of higher rates on their forecasts and valuations do not
leave much room for disappointment. The sluggish performance of European markets
in June suggests that investors are beginning to take a more cautious view on
earnings expectations.
We have been preaching the merits of Europe for some time now. We have also
been overweight on the Continent for more than two years. Structural changes,
such as the flow of funds out of traditional savings pools and into portfolio
investments, the rise of the "equity culture", growth of new exchanges and
service industries, remain supportive and we are confident in the medium to long
term outlook for Continental equities. However, we are concerned that small caps
will struggle to make much progress during the illiquid summer months and we may
elect to reduce exposure to the region slightly.
UNITED KINGDOM
The quarter was marked by a significant improvement in expectations for UK
interest rates. Strong economic growth, booming house prices, record low
unemployment and above-trend growth in wages had set off alarm bells at the Bank
of England. The Monetary Policy Committee obliged with four (+25 bps) increases
between September of last year and February 2000 to move base borrowing costs up
to 6%. Market expectations also deteriorated steadily over that period to the
point where base rates were expected to increase an additional 100 bps by the
end of this year. The impact on local equities was predictable: UK stocks
underperformed Continental markets by a significant margin in the first five
months of this year.
Fortunately, economic releases in the second quarter eased the pressure.
While GDP is still expected to grow 3% this year and unemployment is at a
twenty-year low, growth in consumer spending has moderated and the pace of wage
increases has slowed. Underlying annual inflation is currently running at 2%,
comfortably within the 2.5% target used by the Bank of England. This has
resulted in a significant improvement in the monetary outlook and base rates are
now expected to rise by just (+25 bps) this year. With the UK well ahead of the
European interest rate curve, and local stocks looking relatively cheap, the
market staged a solid recovery in June.
We had moved to an underweight position in the UK over the course of the
first quarter as we liquidated or booked profits on the outstanding performers
of late 1999 and early 2000. At that time, cash had been reinvested on the
Continent because we had been unable to identify suitable investments in the UK.
The recent improvement in the outlook for rates relative to the rest of the
region has prompted us to intensify our research effort in the UK. Subject to
identifying suitable opportunities, we may boost portfolio exposure to the UK in
the coming weeks.
9
<PAGE>
PICTET FUNDS
PICTET EASTERN EUROPEAN FUND
--------------------------------------------------------------------------------
MARKET REVIEWS & INVESTMENT OUTLOOK
Over the quarter the portfolio declined by 21.04% and underperformed the
Barings Eastern Europe index which dropped by 20.29%.
Markets declined in high volatility and without particular trends. After
the strong advance in the first quarter, we positioned the portfolio closer to
the benchmark with fewer big bets and with the intention to capitalize on
trading opportunities. The exceptionally poor liquidity made trading difficult.
The RUSSIAN market was the biggest loser relative to the rest of the
universe. Our overweight position brought a negative contribution of (-35 bps).
After the nomination of Putin as president the political uncertainty increased
and capital flows during the period have been particularly weak. We managed to
partly compensate for the decline through trading gains namely in UES (3.8%) and
LUKOIL (4.4%). Our overweight positions in ROSTELEKOM (1.9%) and NORILSK NICKEL
(2.6%) brought a negative contribution on stock selection of (-141 bps).
POLAND was one of the better performing markets mostly on demand/supply
grounds - the newly capitalized pension funds provided significant support. Our
underweight position subtracted 39 bps from the performance. Stock selection was
also negative (-72 bps) due to our underweight position in the banking sector
which outperformed after much weaker performance in previous quarters.
In the CZECH REPUBLIC, our overweight position in CESKY TELECOM (5.0%) (the
incumbent telecom) caused negative stock selection of (-21 bps). Since the
beginning of this quarter this stock has begun to move, and we believe that the
holding is fundamentally cheap.
HUNGARY contributed positively both on allocation and stock selection. Our
underweight position was justified as Hungary turned to be the third worse
performing market (+11 bps). At the same time the significantly underweight
position in Matav helped the positive stock selection of (+40 bps).
Among the more peripheral markets CROATIA contributed positively (+69 bps)
mostly due to the overweight position in Zagrebacka Banka which managed to
successfully acquire a competitor in the domestic market.
We expect that market volatility and poor liquidity will continue well
through the summer. We plan to continue to look for opportunities in Russia,
Turkey, and Greece where the recent weak market performance ignored the strong
macro fundamentals and corporate earnings.
10
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS -- 91.3%
BRAZIL - 5.1%
135,275,000 Centrais Eletricas Brasileiras SA $ 2,774,569
39,300 Cia Vale do Rio Doce 980,132
75,900 Embratel Participacoes SA, ADR 1,793,138
69,600 Telesp - Telecomunicacoes de Sao Paulo SA 1,287,600
33,600 Uniao de Bancos Brasileiros SA, Sponsored GDR 966,000
------------
7,801,439
------------
CHILE - 0.9%
36,630 Cia de Telecomunicaciones de Chile SA, Sponsored ADR 663,919
45,660 Maderas y Sinteticos SA, Sponsored ADR 539,359
11,450 Sociedad Quimica y Minera de Chile SA, Sponsored ADR, B Shares 254,762
------------
1,458,040
------------
CHINA - 6.4%
2,096,000 China Everbright International, Ltd. 1,640,265
170,000 China Mobile (Hong Kong), Ltd.+ 1,515,746
4,074,000 China Shipping Development Company, Ltd., Class H+ 742,168
574,000 China Unicom, Ltd.+ 1,218,716
988,000 Cosco Pacific, Ltd. 779,516
1,420,000 Great Wall Technology Co., Ltd., Class H 983,728
1,256,000 Legend Holdings, Ltd. 1,216,548
7,048,000 Shanghai Petrochemical Company, Ltd. 958,439
4,082,000 Yizheng Chemical Fibre Company, Ltd., Class H 811,704
------------
9,866,830
------------
CZECH REPUBLIC - 0.5%
264,320 Ceske Energeticke Zavody AS+ 705,595
------------
EGYPT - 0.9%
100,000 Commercial International Bank 1,072,261
21,104 Orascom Construction Industries+ 246,041
------------
1,318,302
------------
GREECE - 4.5%
170,000 Athens Water Supply and Sewage Co. SA 1,463,190
134,000 Hellenic Petroleum SA 1,514,234
130,000 Hellenic Telecommunications Organization SA 3,190,005
67,300 Panafon Hellenic Telecom SA 769,138
------------
6,936,567
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS -- (continued)
HUNGARY - 0.5%
50,290 Mol Magyar Olaj-es Gazipari RT, Sponsored GDR $ 696,517
------------
INDIA - 5.6%
50,000 BSES, Ltd., GDR 925,000
45,000 ICICI Bank, Ltd., Sponsored ADR+ 652,500
43,000 Larsen & Toubro, Ltd., GDR, Registered S Shares+ 477,838
62,000 Mahanagar Telephone Nigam, Ltd., GDR 631,625
25,000 Pentamedia Graphics, Ltd., GDR 346,875
60,000 Reliance Industries, Ltd., GDR 1,200,000
67,000 SSI, Ltd., GDR, Registered S Shares+ 438,850
281,800 The India Fund, Inc. 3,998,037
------------
8,670,725
------------
INDONESIA - 2.9%
2,652,000 PT Astra Agro Lestari Tbk@ 522,691
1,455,500 PT Astra International Tbk+ 457,327
101,312,000 PT Bank Internasional Indonesia (F)@+ 1,157,558
1,903,000 PT Ramayana Lestari Sentosa Tbk@ 1,217,612
167,308 PT Telekomunikasi Indonesia, Sponsored ADR 1,160,699
------------
4,515,887
------------
ISRAEL - 4.1%
300,000 Bezeq Israeli Telecommunication Corporation, Ltd. 1,671,606
64,500 ECI Telecom, Ltd. 2,305,875
31,900 Teva Pharmaceutical Industries, Ltd., Sponsored ADR 1,768,456
20,000 Tower Semiconductor, Ltd.+ 652,500
------------
6,398,437
------------
LUXEMBOURG - 0.5%
75,000 Quilmes Industrial SA, ADR 834,375
------------
MALAYSIA - 6.4%
246,000 AMMB Holdings Berhad 822,164
779,000 Arab-Malaysian Corporation Berhad 588,355
315,000 Genting Berhad 1,160,536
159,000 Hong Leong Industries Berhad 472,819
188,000 Land & General Berhad 46,011
1,798,000 Malayan Cement Berhad 591,452
414,000 Malaysia International Shipping Corporation Berhad 686,374
154,000 Malaysian Pacific Industries Berhad 1,580,539
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS -- (continued)
MALAYSIA - (continued)
522,000 Malaysian Resources Corporation Berhad $ 299,465
70,000 Nestle (Malaysia) Berhad 324,213
2,187,000 Pan Malaysian Industries Berhad 284,888
247,000 Star Publications (Malaysia) Berhad 838,507
674,000 Tenaga Nasional Berhad 2,199,386
------------
9,894,709
------------
MEXICO - 6.0%
312,000 Carso Global Telecom 890,660
614,000 Controladora Comercial Mexicana SA de CV 573,862
708,000 Grupo Elektra SA de CV, CPO 712,065
348,000 Grupo Mexico SA, Series B 979,287
437,000 Grupo Sanborns SA, Series B+ 710,317
19,600 Grupo Televisa SA, Sponsored GDR+ 1,351,175
86,800 Pepsi-Gemex SA, Sponsored GDR+ 385,175
35,300 Telefonos de Mexico SA, Sponsored ADR, Class L 2,016,512
57,800 Tubos de Acero de Mexico SA, Sponsored ADR 801,975
62,600 TV Azteca, SA de CV 825,537
------------
9,246,565
------------
PAKISTAN - 3.4%
1,400,000 ICI Pakistan, Ltd. 402,150
150,103 Pakistan State Oil Company, Ltd. 467,534
7,500,000 Pakistan Telecommunications Company, Ltd.+ 3,877,875
1,600,000 SUI Northern Gas Pipelines, Ltd.+ 496,368
------------
5,243,927
------------
PHILIPPINES - 1.0%
715,000 ABS-CBN Broadcasting Corporation, PDR 884,780
2,770,000 Benpres Holdings Corporation+ 265,891
263,000 Philippine National Bank@ 343,700
------------
1,494,371
------------
POLAND - 1.7%
94,020 Bank Polska Kasa Opieki Grupa Pekao SA+ 1,131,306
5,220 Netia Holdings SA, ADR+ 145,181
187,910 Telekomunikacja Polska SA, GDR+ 1,297,519
------------
2,574,006
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS -- (continued)
RUSSIA - 3.5%
300,000 AO Mosenergo, Sponsored ADR $ 1,170,000
33,000 OAO Lukoil Holding, Sponsored ADR 1,686,960
231,600 RAO Unified Energy Systems, GDR 2,617,080
------------
5,474,040
------------
SLOVAKIA - 0.0%
2,700 Chirana Prema AS+## 0
------------
SOUTH AFRICA - 10.9%
190,000 ABSA Group, Ltd. 720,242
50,000 Anglo American Platinum Corporation, Ltd. 1,441,075
25,000 AngloGold, Ltd. 1,021,438
82,300 Anglovaal Mining, Ltd. 631,241
260,000 Barlow, Ltd. 1,564,680
48,000 DataTec, Ltd.+ 331,344
301,000 Dimension Data Holdings, Ltd. 2,490,700
345,800 Gold Fields, Ltd. 1,356,746
450,000 Iscor, Ltd. 766,631
390,000 Old Mutual Plc 862,875
886,600 Sanlam, Ltd. 1,047,496
310,000 Sappi, Ltd. 2,331,975
71,000 South African Breweries, Plc 529,909
135,000 Standard Bank Investment Corporation., Ltd. 527,681
127,000 Tiger Brands, Ltd. 1,138,936
------------
16,762,969
------------
SOUTH KOREA - 7.6%
6,920 Cheil Communications, Inc. 903,023
10,660 Korea Telecom Corporation 938,855
46,855 LG Chemical, Ltd. 937,110
47,470 Pohang Iron & Steel Company, Ltd., Sponsored ADR 1,139,280
18,157 Samsung Electronics 6,008,972
1,865 Samsung Fire & Marine Insurance 51,863
55,500 SK Telecom Company, Ltd. 1,816,835
------------
11,795,938
------------
TAIWAN - 12.9%
224,400 Acer Peripherals, Inc. 633,905
398,000 Advanced Semiconductor Engineering, Inc.+ 1,214,768
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS -- (continued)
TAIWAN - (continued)
686,560 Cathay Life Insurance Co., Ltd. $ 1,582,775
2,467,000 China Steel Corporation 1,682,173
1,883,000 Chinatrust Commercial Bank 1,632,465
920,000 Evergreen Marine Corporation 710,963
1,112,800 Formosa Chemicals & Fiber Corporation 1,423,625
131,200 Hon Hai Precision Industry Company, Ltd. 1,184,298
903,000 Nan Ya Plastic Corporation 1,817,865
113,000 Procomp Informatics Co., Ltd.+ 583,389
386,220 Siliconware Precision Industries Company+ 865,299
76,000 Systex Corporation+ 266,514
1,218,448 Taishin International Bank 779,391
606,080 Taiwan Semiconductor Manufacturing Company, Ltd.+ 2,873,195
728,100 United Microelectronics Corporation 2,021,340
41,000 Via Technologies, Inc.+ 632,353
------------
19,904,318
------------
THAILAND - 3.4%
62,000 Advanced Info Service Public Company, Ltd.+ 771,225
717,000 Bangkok Bank Public Company, Ltd.+ 877,264
1,416,100 Cogeneration Public Company, Ltd.@+ 496,325
96,789 Delta Electronics (Thailand) Public Company, Ltd. (F)@ 626,657
62,500 Siam Cement Public Company, Ltd. (F) 1,172,540
701,100 Siam Commercial Bank Public Company, Ltd.+ 393,163
778,000 TelecomAsia Corporation Public Company, Ltd.+ 862,658
------------
5,199,832
------------
TURKEY - 2.6%
23,625,000 Aksa Akrilik Kimya Sanayii AS 858,079
94,000,000 Tofas Turk Otomobil Fabrikasi AS+ 1,631,208
70,300,000 Turkiye Is Bankasi, Class C 1,503,641
------------
3,992,928
------------
VENEZUELA - 0.0%#
40 C.A. La Electricidad de Caracus 21
------------
TOTAL COMMON STOCKS (COST $138,874,675) 140,786,338
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
================================================================================================================
<S> <C> <C> <C>
PREFERRED STOCKS -- 6.8%
BRAZIL - 6.8%
112,000,000 Acesita SA $ 825,745
7,876,000 Banco Itau SA 692,008
69,032,000 Cia Energetica de Minas Gerais 1,205,417
59,900 Cia Vale do Rio Doce+## 332
16,240,000 Eletropaulo Metropolitana 1,143,315
61,359,556 Lojas Americanas SA 203,404
91,270 Petroleo Brasileiro SA 2,757,406
3,184,938 Tele Norte Leste Participacoes SA 74,594
151,678,180 Telesp Celular Participacoes SA+ 2,741,050
159,800 Usinas Siderurgicas de Minas Gerais SA, Class A 738,787
------------
10,382,058
------------
TAIWAN - 0.0%#
163,185 Taishin International Bank 52,191
------------
TOTAL PREFERRED STOCKS (COST $7,402,080) 10,434,249
------------
TOTAL INVESTMENTS (COST $146,276,755*) 98.1% 151,220,587
OTHER ASSETS AND LIABILITIES (NET) 1.9 2,947,522
----------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $154,168,109
================================================================================================================
</TABLE>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
# Amount represents less than 0.1%.
## The valuations of these securities have been determined by procedures
established by the Pricing Committee of the Board of Trustees. The cost of
the denoted securities at June 30, 2000 was $83,801 with a value of $332
representing 0.00% of total net assets.
@ Illiquid Security (unaudited). These are securities that the Adviser
believes cannot be sold or disposed of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued
the investment. The value of the denoted securities at June 30, 2000 was
$4,364,543, representing 2.83% of total net assets.
Abbreviations:
ADR American Depositary Receipt
GDR Global Depositary Receipt
PDR Philippine Depository Receipt
(F) Foreign Shares
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
AT JUNE 30, 2000, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS:
% OF NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS:
Telecommunications 18.7% $ 28,825,387
Electronic Components and Instruments 12.3 18,877,214
Utilities - Electrical and Gas 8.3 12,847,534
Banking 6.7 10,384,430
Chemicals 5.6 8,663,734
Financial Services 5.5 8,421,563
Data Processing and Reproduction 3.9 6,074,559
Metals - Steel 2.8 4,390,059
Energy Sources 2.8 4,365,245
Broadcasting and Publishing 2.5 3,899,999
Insurance 2.3 3,545,009
Merchandising 2.3 3,498,744
Transportation - Shipping 1.9 2,919,021
Forest Products and Paper 1.9 2,871,334
Metals - Non Ferrous 1.6 2,420,362
Gold Mines 1.5 2,378,184
Automobiles 1.4 2,088,535
Food and Household Products 1.3 1,985,840
Construction and Housing 1.2 1,896,419
Health and Personal Care 1.2 1,768,456
Beverages and Tobacco 1.1 1,749,459
Miscellaneous Materials and Commodities 1.0 1,611,373
Machinery and Engineering 1.0 1,564,680
Leisure and Tourism 0.8 1,160,536
Business and Public Services 0.6 903,023
Multi-Industry 0.5 784,721
Building Materials and Components 0.4 591,452
Real Estate 0.2 299,466
----------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 91.3 140,786,338
PREFERRED STOCKS 6.8 10,434,249
----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 98.1% 151,220,587
OTHER ASSETS AND LIABILITIES (NET) 1.9 2,947,522
----------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $154,168,109
================================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
PICTET FUNDS
PICTET INTERNATIONAL SMALL COMPANIES FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS -- 96.0%
AUSTRALIA - 2.4%
18,000 ERG, Ltd. $ 140,174
90,000 Orbital Engine Corporation, Ltd.+ 98,889
-----------
239,063
-----------
AUSTRIA - 0.8%
4,500 BETandWIN.com Interactive Entertainment AG+ 80,838
-----------
BELGIUM - 1.0%
2,600 Omega Pharma SA 95,955
-----------
DENMARK - 1.6%
2,500 DSV, De Sammensluttede Vognmaend, B Shares 56,219
3,000 Vestas Wind Systems A/S 110,638
-----------
166,857
-----------
FINLAND - 3.2%
3,750 Comptel Oyj 75,848
15,000 Tecnomen Oyj+ 129,410
10,000 Wecan Electronics Oyj+ 116,948
-----------
322,206
-----------
FRANCE - 14.6%
616 A Novo 152,347
2,676 Aubay Technology SA+ 101,325
500 Groupe Steria SCA+ 82,199
1,500 HighWave Optical Technologies+ 108,560
4,000 ILOG SA+ 162,193
6,000 Linedata Services+ 102,953
1,400 Marionnaud Parfumeries+ 151,649
5,000 Net2S+ 101,611
1,000 Parsys 110,238
250 Publicis SA 98,495
3,300 Solving International SA+ 235,827
2,200 UBI Soft Entertainment SA+ 84,567
-----------
1,491,964
-----------
GERMANY - 11.0%
6,900 Adlink Internet Media AG+ 76,064
900 Aixtron AG 124,233
1,000 Brainpool TV AG+ 87,951
750 ce Consumer Electronic AG 107,841
3,000 Energiekontor AG+ 149,540
4,000 Helkon Media AG+ 125,767
500 Heyde AG+ 78,604
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
PICTET FUNDS
PICTET INTERNATIONAL SMALL COMPANIES FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS -- (continued)
GERMANY - (continued)
150 Intershop Communications AG+ $ 68,012
800 Medion AG 82,822
600 Qiagen N.V.+ 104,678
3,000 Wedeco AG Water Technology+ 117,332
-----------
1,122,844
-----------
HONG KONG - 4.6%
200,000 China Everbright, Ltd. 156,514
1,600,000 Hanny Holdings, Ltd. 106,737
150,000 South China Morning Post (Holdings), Ltd. 116,423
250,000 TPV Technology, Ltd. 34,639
100,000 Yuxing Infotech Holdings, Ltd.+ 54,844
-----------
469,157
-----------
IRELAND - 0.9%
2,000 SmartForce Plc, ADR+ 96,000
-----------
ISRAEL - 1.0%
3,000 ProLaser, Ltd.+ 101,371
-----------
ITALY - 3.2%
30,000 Compagnie Industriali Riunite SpA 98,639
6,000 Gruppo Coin SpA+ 63,842
12,500 Industria Macchine Automatiche SpA 102,449
6,600 Italdesign-Giugiaro SpA 59,028
-----------
323,958
-----------
JAPAN - 21.9%
3,000 Autobacs Seven Company, Ltd. 96,957
7,000 Canon Sales Company, Inc. 125,685
700 Citizen Electronics Company, Ltd. 76,734
3,000 C. Uyemura & Company, Ltd. 57,550
4,000 Daito Electron Company, Ltd. 145,530
600 Don Quijote Company, Ltd. 104,895
3,000 Focus Systems Corporation 121,338
1,400 Fuji Seal, Inc. 76,866
2,000 Fuji Soft ABC, Inc. 118,881
2,000 Honda Tsushin Kogyo Company, Ltd. 93,555
4,000 Joint Corporation 136,458
800 Masternet Company, Ltd.+ 105,840
10,000 Mitsubishi Logistics Corporation 90,720
16,000 Nippon Konpo Unyu Soko Company, Ltd. 98,431
15,000 Nissen Company, Ltd.+ 64,638
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
PICTET FUNDS
PICTET INTERNATIONAL SMALL COMPANIES FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS -- (continued)
JAPAN - (continued)
3,000 Sanyo Shinpan Finance Company, Ltd. $ 106,596
2,000 Stella Chemifa Corporation 154,980
4,000 Sumitomo Real Estate Sales Company, Ltd. 134,190
20,000 Tsubakimoto Chain Company 102,060
5,500 Woodland Corporation 127,339
1,000 Yamada Denki Company, Ltd. 89,870
-----------
2,229,113
-----------
NETHERLANDS - 0.0%#
80 Ordina Beheer N.V.+ 2,684
-----------
NORWAY - 0.9%
4,000 Tandberg ASA+ 95,698
-----------
PORTUGAL - 1.1%
10,000 Impresa - Sociedade Gestora de Participacoes SA+ 110,238
-----------
SINGAPORE - 0.7%
24,000 NatSteel Electronics, Ltd. 73,570
-----------
SWEDEN - 2.5%
7,500 Observer AB, B Shares 105,183
3,200 Sigma AB, B Shares 86,838
3,000 Teligent AB+ 59,861
-----------
251,882
-----------
SWITZERLAND - 5.8%
150 Logitech International SA, Registered Shares+ 107,099
200 Micronas Semiconductor Holding AG, Registered Shares+ 111,926
120 Mikron Holding AG, Registered Shares 88,631
100 Saurer AG, Registered Shares+ 62,605
110 SEZ Holding AG, Registered Shares 100,998
200 Think Tools AG+ 116,231
-----------
587,490
-----------
UNITED KINGDOM - 18.8%
40,000 First Choice Holidays Plc 87,503
7,500 ARM Holdings Plc+ 80,388
50,000 Actinic Plc+ 74,181
50,000 Chloride Group Plc 144,577
17,000 Eidos Plc+ 123,534
25,000 Fine Art Developments Plc 99,728
16,000 First Technology Plc 129,590
15,000 Horizon Technology Group Plc+ 117,907
28,000 Imagination Technologies Group Plc+ 121,869
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
PICTET FUNDS
PICTET INTERNATIONAL SMALL COMPANIES FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
================================================================================================================
<S> <C> <C> <C>
COMMON STOCKS -- (continued)
UNITED KINGDOM - (continued)
9,000 Informa Group Plc $ 93,128
37,000 Mentmore Abbey Plc 113,989
10,000 Morse Holdings Plc+ 62,070
16,000 Nestor Healthcare Group Plc 115,662
8,000 Pace Micro Technology Plc 115,662
25,000 Pressac Plc 107,487
15,000 Ricardo Plc 106,730
25,000 Taylor Nelson Sofres Plc 99,728
5,500 Volex Group Plc 122,815
-----------
1,916,548
-----------
TOTAL COMMON STOCKS (COST $8,082,111) 9,777,436
-----------
WARRANTS & RIGHTS -- 0.0%#
AUSTRIA - 0.0%
1,050 Cybertron Telekom AG 0
-----------
FRANCE - 0.0%#
22 Aubay Technology 489
-----------
TOTAL WARRANTS AND RIGHTS (COST $0) 489
-----------
TOTAL INVESTMENTS (COST $8,082,111*) 96.0% 9,777,925
OTHER ASSETS AND LIABILITIES (NET) 4.0 410,533
----------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $10,188,458
================================================================================================================
</TABLE>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
# Amount represents less than 0.1%.
Abbreviations:
ADR American Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
PICTET FUNDS
PICTET INTERNATIONAL SMALL COMPANIES FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
AT JUNE 30, 2000, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS:
% OF NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS:
Business and Public Services 14.9% $ 1,521,885
Data Processing and Reproduction 13.2 1,350,130
Electrical and Electronics 12.0 1,226,462
Broadcasting and Publishing 8.9 908,947
Electronic Components and Instruments 8.0 818,616
Machinery and Engineering 7.7 785,323
Merchandising 4.8 484,752
Health and Personal Care 4.1 417,666
Telecommunications 2.9 290,882
Recreation, Other Consumer Goods 2.8 288,939
Real Estate 2.7 270,648
Energy Equipment and Services 2.6 260,178
Chemicals 2.1 212,531
Transportation - Shipping 1.9 189,151
Financial Services 1.5 156,514
Automobiles 1.5 155,985
Banking 1.0 106,596
Multi-Industry 1.0 98,639
Appliances and Household Durables 0.9 89,870
Leisure and Tourism 0.9 87,503
Transportation - Airlines 0.6 56,219
----------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 96.0 9,777,436
WARRANTS AND RIGHTS 0.0 489
----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 96.0% 9,777,925
OTHER ASSETS AND LIABILITIES (NET) 4.0 410,533
----------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $10,188,458
================================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
PICTET FUNDS
PICTET EASTERN EUROPEAN FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
===================================================================================================================
<S> <C> <C>
COMMON STOCK -- 91.4%
CROATIA - 6.0%
2,800 Pliva d.d., GDR, Registered Shares $ 28,910
4,789 Zagrebacka Banka d.d., GDR, Registered Shares 87,160
----------
116,070
----------
CZECH REPUBLIC - 13.7%
32,000 Ceske Energeticke Zavody AS 85,423
500 Ceske Radiokomunikace AS, GDR+ 22,212
5,400 Cesky Telecom AS+ 90,865
9,999 Komercni Banka, AS, GDR+ 67,993
----------
266,493
----------
ESTONIA - 0.9%
900 Estonian Telecom Ltd., GDR 18,090
----------
HUNGARY - 24.9%
1,600 BorsodChem RT, GDR 49,720
1,700 Gedeon Richter RT, GDR 91,163
4,800 Matav RT, ADR, Series B 165,300
5,700 MOL Magyar Olaj-es Gazipari RT, GDR 78,945
800 OTP Bank RT, GDR 41,600
1,200 Pannonplast RT 26,103
2,100 Tisza Vegyi Kombinat RT, GDR 29,767
----------
482,598
----------
POLAND - 27.3%
2,600 Bank Polska Kasa Opieki Grupa Pekao SA+ 31,285
7,000 Elektrim Spolka Akcyjna SA 80,370
2,000 Europejski Fundusz Leasingowy SA+ 32,300
6,250 KGHM Polska Miedz SA, GDR 92,969
900 Netia Holdings SA, ADR+ 25,031
2,000 Orbis SA, GDR+ 15,500
800 Polski Koncern Naftowy Orlen SA, GDR 7,520
1,900 Prokom Software SA 48,070
1,000 Przedsiebiorstwo Farmaceutycne JELFA SA 8,611
260 Softbank SA, GDR 13,163
19,000 Telekomunikacja Polska SA, GDR, Series A+ 131,195
5,000 Wielkopolski Bank Kredytowy SA 29,163
1,050 Zaklady Metali Lekkich Kety+ 15,118
----------
530,295
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
PICTET FUNDS
PICTET EASTERN EUROPEAN FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
===================================================================================================================
<S> <C> <C> <C>
COMMON STOCKS -- (continued)
RUSSIA - 18.6%
11,200 AO Mosenergo, ADR $ 43,680
6,800 AO Tatneft, ADR 66,725
2,500 Mosk. Gorod. Tel. 18,750
6,500 Norilsk Nickel+ 47,613
1,600 OAO Lukoil Holding, Sponsored ADR 81,792
14,000 Saint Petersburg Telephone Network 5,252
6,300 RAO Unified Energy Systems, GDR 71,190
1,200 Vimpel-Communications, ADR+ 26,550
----------
361,552
----------
TOTAL COMMON STOCKS (COST $1,710,220) 1,775,098
----------
PREFERRED STOCK -- 1.8% (COST $48,000)
RUSSIA - 1.8%
50,000 Rostelecom+ 35,800
----------
TOTAL INVESTMENTS (COST $1,758,220*) 93.2% 1,810,898
OTHER ASSETS AND LIABILITIES (NET) 6.8 132,048
-------------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $1,942,946
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal tax purposes. + Non-income producing security.
Abbreviations:
ADR American Depositary Receipt
GDR Global Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
PICTET FUNDS
PICTET EASTERN EUROPEAN FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------
AT JUNE 30, 2000, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS:
% OF NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (NOTE 1)
================================================================================================================
<S> <C> <C>
COMMON STOCKS:
Telecommunications 24.7% $ 481,033
Banking 13.2 257,201
Energy Sources 11.7 227,462
Utilities - Electric and Gas 10.7 207,813
Metals - Non Ferrous 8.0 155,700
Health and Personal Care 6.6 128,684
Electronic Components and Instruments 5.3 102,582
Chemicals 4.1 79,487
Data Processing and Reproduction 3.2 61,233
Business and Public Services 1.7 32,300
Building Materials and Components 1.4 26,103
Leisure and Tourism 0.8 15,500
----------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 91.4 1,775,098
PREFERRED STOCKS 1.8 35,800
----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 93.2% 1,810,898
OTHER ASSETS AND LIABILITIES (NET) 6.8 132,048
----------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0% $1,942,946
================================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
PICTET EASTERN EUROPEAN FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2000 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------
PICTET PICTET
GLOBAL INTERNATIONAL PICTET
EMERGING SMALL EASTERN
MARKETS COMPANIES EUROPEAN
FUND FUND FUND
================================================================================================================
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost $146,276,755, $8,082,111
and $1,758,220, respectively) (Note 1)
See accompanying schedule $151,220,587 $ 9,777,925 $1,810,898
Cash -- -- 135,970
Foreign currency (Cost $2,281,191, $336,595
and $43,318, respectively) 2,281,617 342,516 42,986
Receivable for investment securities sold 4,933,715 566,049 41,090
Receivable from investment adviser (Note 2) -- 5,793 9,663
Dividends receivable, interest receivable and reclaim receivable 426,208 12,130 6,154
Unamortized organization costs (Note 1) 2,292 105 5,373
Other assets 26,312 648 233
----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 158,890,731 10,705,166 2,052,367
================================================================================================================
LIABILITIES:
Payable for investment securities purchased 3,063,808 376,946 81,654
Investment advisory fee payable (Note 2) 128,045 -- --
Administration fee payable (Note 2) 16,111 1,353 272
Transfer agent fees payable (Note 2) 73 930 908
Custodian fees payable (Note 2) 13,902 10,973 7,641
Professional fees payable 42,158 16,282 9,926
Printing fees payable 4,501 1,623 1,141
Other accrued expenses and payables 1,454,024 108,601 7,879
----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 4,722,622 516,708 109,421
================================================================================================================
NET ASSETS $154,168,109 $10,188,458 $1,942,946
================================================================================================================
NET ASSETS CONSIST OF:
Accumulated net investment loss $ (372,552) $ (26,717) $ (11,615)
Accumulated net realized gain/(loss) on investments
sold (Note 1) and foreign currency related transactions (39,710,604) 1,792,189 (314,224)
Net unrealized appreciation of investments 4,943,832 1,695,814 52,678
Net unrealized appreciation/(depreciation) of foreign
currency related transactions (118,333) 5,921 (332)
Par value 172,697 7,858 2,055
Paid-in capital in excess of par value (Notes 1 and 4) 189,253,069 6,713,393 2,214,384
----------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $154,168,109 $10,188,458 $1,942,946
================================================================================================================
================================================================================================================
SHARES OF BENEFICIAL INTEREST OUTSTANDING (NOTE 4) 17,269,671 785,834 205,486
================================================================================================================
NET ASSET VALUE:
Net asset value, offering and redemption price per share (Note 4) $8.93 $12.97 $9.46
================================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
PICTET EASTERN EUROPEAN FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
PICTET PICTET
GLOBAL INTERNATIONAL PICTET
EMERGING SMALL EASTERN
MARKETS COMPANIES EUROPEAN
FUND FUND FUND
================================================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $165,305,
$2,392 and $2,175, respectively) $ 1,263,639 $ 24,467 $ 8,763
Interest 108,166 7,385 2,354
----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,371,805 31,852 11,117
----------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee (Note 2) 1,114,002 37,401 17,041
Administration fee (Note 2) 103,308 4,736 1,359
Accounting fee (Note 2) 35,667 24,863 24,863
Transfer agent fees (Note 2) 20,151 5,968 5,968
Custodian fees (Note 2) 205,128 23,351 21,015
Professional fees 43,311 14,711 10,684
Printing fees 22,009 2,055 1,281
Registration and filing fees 8,259 7,486 7,781
Amortization of organization costs (Note 1) 4,436 173 951
Trustees' fees and expenses (Note 2) 14,617 665 190
Other 58,595 11,078 6,877
----------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE EXPENSE REDUCTIONS 1,629,483 132,487 98,010
----------------------------------------------------------------------------------------------------------------
Fees waived and/or expenses reimbursed by
investment adviser (Note 2) (113,659) (87,592) (75,278)
----------------------------------------------------------------------------------------------------------------
NET EXPENSES 1,515,824 44,895 22,732
----------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (144,019) (13,043) (11,615)
================================================================================================================
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(Notes 1 and 4):
Net realized gain/(loss) on:
Securities transactions 9,185,046 1,615,119 328,824
Foreign currency related transactions (394,522) (37,804) 117
----------------------------------------------------------------------------------------------------------------
Net realized gain on investments during the period 8,790,524 1,577,315 328,941
----------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation/(depreciation) of:
Securities (46,427,051) (69,347) (176,327)
Foreign currency related transactions (3,675) 6,225 (332)
----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments
during the period (46,430,726) (63,122) (176,659)
================================================================================================================
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS (37,640,202) 1,514,193 152,282
================================================================================================================
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(37,784,221) $1,501,150 $140,667
================================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: (UNAUDITED) DECEMBER 31, 1999
================================================================================================================
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $ (144,019) $ (263,707)
Net realized gain on investments during the period 8,790,524 14,632,254
Change in unrealized appreciation/(depreciation) of investments
during the period (46,430,726) 55,534,127
----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from operations (37,784,221) 69,902,674
FUND SHARE TRANSACTIONS:
Net increase in net assets from Fund share transactions
(Note 4) 1,677,129 26,010,651
----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets (36,107,092) 95,913,325
NET ASSETS:
Beginning of period 190,275,201 94,361,876
----------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of ($372,552) and ($228,533), respectively) $154,168,109 $190,275,201
================================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
PICTET FUNDS
PICTET INTERNATIONAL SMALL COMPANIES FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: (UNAUDITED) DECEMBER 31, 1999
================================================================================================================
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $ (13,043) $ (985)
Net realized gain on investment during the period 1,577,315 1,366,881
Change in unrealized appreciation/(depreciation) of investments
during the period (63,122) 1,472,274
----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,501,150 2,838,170
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to shareholders from net realized gain on investments -- (760,216)
FUND SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from Fund share transactions
(Note 4) 3,911,720 (3,001,777)
---------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets 5,412,870 (923,823)
NET ASSETS:
Beginning of period 4,775,588 5,699,411
---------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of ($26,717) and ($13,674), respectively) $10,188,458 $4,775,588
===============================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
PICTET FUNDS
PICTET EASTERN EUROPEAN FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: (UNAUDITED) DECEMBER 31, 1999
================================================================================================================
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $ (11,615) $ (18,649)
Net realized gain/(loss) on investment during the period 328,941 (111,298)
Change in unrealized appreciation/(depreciation)
of investments during the period (176,659) 607,652
----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 140,667 477,705
FUND SHARE TRANSACTIONS:
Net decrease in net assets from Fund share transactions
(Note 4) (130,616) (180,828)
----------------------------------------------------------------------------------------------------------------
Net increase in net assets 10,051 296,877
NET ASSETS:
Beginning of period 1,932,895 1,636,018
----------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of ($11,615) and $0, respectively $1,942,946 $1,932,895
================================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------------------------------------
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR PERIOD
JUNE 30, 2000 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/99 12/31/98 12/31/97 12/31/96(A) 12/31/95*(A)
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.15 $ 6.81 $8.87 $10.13 $ 9.51 $10.00
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income/(loss) (0.01) (0.01) 0.04 0.04 0.07 0.02
Net realized and unrealized gain/(loss) on
investments (2.21) 4.35 (2.10) (1.18) 0.71 (0.49)
----------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.22) 4.34 (2.06) (1.14) 0.78 (0.47)
----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Distributions from net investment income -- -- -- (0.02) (0.07) (0.02)
Distributions from net realized capital gains -- -- -- (0.10) (0.09) --
----------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- (0.12) (0.16) (0.02)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.93 $11.15 $6.81 $ 8.87 $10.13 $ 9.51
======================================================================================================================
Total return++ (19.84)% 63.73% (23.22)% (11.29)% 8.32% (4.72)%
======================================================================================================================
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $154,168 $190,275 $94,362 $190,922 $122,047 $9,623
Ratio of operating expenses to average
net assets 1.70%+ 1.70% 1.70% 1.70% 1.70% 1.95%+
Ratio of net investment income/(loss) to
average net assets (0.16)%+ (0.19)% 0.55% 0.32% 0.88% 0.68%+
Ratio of operating expenses to average
net assets without waivers and expenses
reimbursed 1.83%+ 1.92% 2.00% 1.84% 2.20% 8.39%+
Ratio of net investment income/(loss) to
average net assets without waivers
and expenses reimbursed (0.29)%+ (0.42)% 0.25% 0.18% 0.38% (5.77)%+
Portfolio turnover rate 66% 126% 123% 77% 48% 5%
</TABLE>
--------------------
* Pictet Global Emerging Markets Fund commenced operations on October 4, 1995.
+ Annualized.
++ Total return represents aggregate total return for the period.
(a) Per share amounts have been restated to reflect the stock dividend of 9
additional shares for each share outstanding. On December 2, 1996, the Board
of Trustees declared a stock dividend of nine additional shares for each
share outstanding of the Pictet Global Emerging Markets Fund. The record
date of the stock dividend was December 31, 1996, payable on January 1,
1997.
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
PICTET FUNDS
PICTET INTERNATIONAL SMALL COMPANIES FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------------------------------------------
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
JUNE 30, 2000 ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/99 12/31/98 12/31/97 12/31/96*(A)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.25 $ 6.55 $9.24 $10.15 $10.00
-------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income/(loss) (0.01) (0.02) 0.07+++ 0.08 0.09
Net realized and unrealized gain/(loss)
on investments 2.73 5.66 0.41 (0.86) 0.20
-------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.72 5.64 0.48 (0.78) 0.29
-------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Distributions from net investment income -- -- -- (0.13) (0.12)
Distributions from net realized capital gains -- (1.94) (3.17) -- (0.02)
Distributions from capital -- -- -- -- (0.00)#
-------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.94) (3.17) (0.13) (0.14)
-------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.97 $10.25 $6.55 $ 9.24 $10.15
===================================================================================================================
Total return ++ 26.54% 86.45% 5.35% (7.68)% 2.85%
===================================================================================================================
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $10,188 $4,776 $5,699 $23,773 $25,743
Ratio of operating expenses to average
net assets 1.20%+ 1.20% 1.20% 1.20% 1.20%+
Ratio of net investment income/(loss) to
average net assets (0.35)%+ (0.02)% 0.65% 0.82% 1.04%+
Ratio of operating expenses to average
net assets without waivers and expenses
reimbursed 3.53%+ 4.76% 2.36% 2.20% 2.46%+
Ratio of net investment loss to average
net assets without waivers and
expenses reimbursed (2.68)%+ (3.58)% (0.52)% (0.18)% (0.22)%+
Portfolio turnover rate 102% 166% 132% 90% 53%
</TABLE>
---------------------
* Pictet International Small Companies Fund commenced operations on February
7, 1996.
+ 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.
(a) Per share amounts have been restated to reflect the stock dividend of 9
additional shares for each share outstanding. On December 2, 1996, the Board
of Trustees declared a stock dividend of nine additional shares for each
share outstanding of the Pictet International Small Companies Fund. The
record date of the stock dividend was December 31, 1996, payable on January
1, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
PICTET FUNDS
PICTET EASTERN EUROPEAN FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------------------------------
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
SIX MONTHS
ENDED YEAR PERIOD
JUNE 30, 2000 ENDED ENDED
(UNAUDITED) 12/31/99 12/31/98*
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.87 $6.54 $10.00
----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.06) (0.09) 0.00#
Net realized and unrealized gain/(loss) on investments 0.65 2.42 (3.39)
----------------------------------------------------------------------------------------------------------------
Total from investment operations 0.59 2.33 (3.39)
----------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Distributions from net investment income -- -- (0.07)
----------------------------------------------------------------------------------------------------------------
Total distributions -- -- (0.07)
----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.46 $8.87 $ 6.54
================================================================================================================
Total return ++ 6.65% 35.63% (33.93)%
================================================================================================================
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,943 $1,933 $1,636
Ratio of operating expenses to average net assets 2.00%+ 2.00% 2.00%+
Ratio of net investment loss
to average net assets (1.02)%+ (1.15)% (0.06)%+
Ratio of operating expenses to average net assets
without waivers and expenses reimbursed 8.63%+ 11.54% 9.97%+
Ratio of net investment loss to average
net assets without waivers and
expenses reimbursed (7.65)%+ (10.69)% (8.03)%+
Portfolio turnover rate 50% 117% 91%
</TABLE>
--------------------
* Pictet Eastern European Fund commenced operations on April 7, 1998.
+ Annualized.
++ Total return represents aggregate total return for the period.
# Amount represents less than $0.01 per share.
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
PICTET EASTERN EUROPEAN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Pictet Funds (formerly known as Panorama Trust) (the "Trust"), a
Massachusetts business trust registered under the Investment Company Act of
1940, as amended (the "1940 Act"), is a no-load, diversified, open-end
management investment company which currently offers shares of three series,
Pictet Global Emerging Markets Fund, Pictet International Small Companies Fund
and Pictet Eastern European 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 generally accepted accounting principles 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 for which market quotations are available are valued at the last quoted
sale price as of the close of the New York Stock 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. Portfolio
securities primarily traded on the London Stock Exchange are generally valued at
the mid-price between the closing bid and asked prices. This portfolio is valued
after the close of the New York Stock Exchange (roughly 8:30 p.m. London time)
therefore the price used will be the mid-price between the closing bid and asked
prices. The London Stock Exchange will have closed roughly 4 hours before there
is a current price available. Price information on listed securities is taken
from the exchange where the security is primarily traded. Generally, unlisted
U.S. equity securities and 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. The value of securities for which no quotations are
readily available (including restricted securities) 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 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.
34
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
PICTET EASTERN EUROPEAN 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,
such 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 at the bid prices of such currencies against U.S.
dollars last quoted by a major bank. 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, except that certain dividends from foreign securities are recorded as soon
as the Fund is informed of 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. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
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.
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.
ORGANIZATION COSTS: Expenses incurred in connection with the organization
of certain Funds are being amortized on the straight-line method over a period
of five years from the commencement of operations.
EXPENSES: General expenses of the Trust are allocated among the Funds based
upon relative net assets. Operating expenses directly attributable to a Fund are
charged to that Fund's operations.
35
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
PICTET EASTERN EUROPEAN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER PARTY TRANSACTIONS
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) &
Company Limited ("Pictet Canada"). Pictet Canada is a partnership, whose
principal activities are investment accounting, custody and securities
brokerage. Pictet Canada has two general partners, Pictet Advisory Services
Overseas and FINGEST, and eight limited partners, each of whom is also a partner
of 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 and Pictet Eastern European Fund pay Pictet International a
fee, computed daily and payable monthly, at an annual rate of 1.25%, 1.00% and
1.50%, 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, Pictet International Small Companies
Fund and Pictet Eastern European Fund do not exceed 1.70%, 1.20% and 2.00%,
respectively, of each Fund's average daily net assets.
PFPC Inc. ("PFPC"), a majority-owned subsidiary of PNC Bank Corp., serves
as the Trust's administrator, accounting agent and transfer agent. PFPC, as
accounting agent, is paid a fee computed daily and payable monthly at an annual
rate of 0.04% of the average daily net assets of each Fund, subject to a $50,000
annual minimum from each Fund. For administration services, PFPC is entitled to
receive $220,000 per annum from the Trust. In addition, for its services as
transfer agent, PFPC is paid separate compensation.
For the six months ended June 30, 2000, Pictet International and PFPC
either waived fees and/or reimbursed expenses as follows:
<TABLE>
<CAPTION>
PICTET
PICTET INTERNATIONAL
PFPC INTERNATIONAL EXPENSES
FEES WAIVED FEES WAIVED REIMBURSED TOTAL
================================================================================================================
<S> <C> <C> <C> <C>
Pictet Global Emerging Markets Fund $ -- $113,659 $ -- $113,659
Pictet International Small Companies Fund -- 37,401 50,191 87,592
Pictet Eastern European Fund -- 17,041 58,237 75,278
================================================================================================================
</TABLE>
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.
Brown Brothers Harriman & Co. serves as the Funds' custodian. Provident
Distributors, Inc., 3200 Horizon Drive, King of Prussia, Pennsylvania 19406,
serves as the Funds' principal underwriter and distributor.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities,
excluding short-term securities and U.S. Government securities, for the six
months ended June 30, 2000 were as follows:
PURCHASES SALES
===============================================================================
Pictet Global Emerging Markets Fund $117,094,312 $114,866,465
Pictet International Small Companies Fund 11,134,712 7,590,729
Pictet Eastern European Fund 1,045,775 1,320,629
36
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
PICTET EASTERN EUROPEAN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
At June 30, 2000, aggregate gross unrealized appreciation and unrealized
depreciation for tax purposes were as follows:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED NET UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
=================================================================================================================
<S> <C> <C> <C>
Pictet Global Emerging Markets Fund $23,634,694 $18,809,195 $4,825,499
Pictet International Small Companies Fund 2,085,159 383,424 1,701,735
Pictet Eastern European Fund 194,396 142,050 52,346
</TABLE>
4. SHARES OF BENEFICIAL INTEREST
Each Fund has one class of shares of beneficial interest, par value $0.01
per share, of which an unlimited number of shares is authorized. Transactions in
shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
SHARES AMOUNT SHARES AMOUNT
=================================================================================================================
<S> <C> <C> <C> <C>
Pictet Global Emerging Markets Fund:
Sold 353,867 $3,242,035 3,501,546 $ 28,421,838
Redeemed (153,978) (1,564,906) (288,897) (2,411,187)
-----------------------------------------------------------------------------------------------------------------
Net increase 199,889 $1,677,129 3,212,649 $ 26,010,651
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
SHARES AMOUNT SHARES AMOUNT
=================================================================================================================
<S> <C> <C> <C> <C>
Pictet International Small Companies Fund:
Sold 328,744 $4,028,822 -- $ --
Issued as reinvestment of dividends -- -- 74,898 760,214
Redeemed (9,026) (117,102) (479,539) (3,761,991)
-----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) 319,718 $3,911,720 (404,641) $(3,001,777)
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
SHARES AMOUNT SHARES AMOUNT
=================================================================================================================
<S> <C> <C> <C> <C>
Pictet Eastern European Fund:
Sold -- $ -- 49,648 $ 378,319
Redeemed (12,487) (130,616) (81,810) (559,147)
-----------------------------------------------------------------------------------------------------------------
Net decrease (12,487) $(130,616) (32,162) $(180,828)
=================================================================================================================
</TABLE>
At June 30, 2000 Pictet Global Emerging Markets Fund had 4 institutional
shareholders owning 24.18%, 13.44%, 12.31% and 12.14%, respectively, of the
outstanding shares of beneficial interest of the Fund.
At June 30, 2000 Pictet International Small Companies Fund had 2
institutional shareholders owning 62.93% and 26.69%, respectively, of the
outstanding shares of beneficial interest of the Fund.
At June 30, 2000 Pictet Eastern European Fund had 4 institutional
shareholders owning 36.58%, 24.33%, 18.29% and 12.25%, respectively, of the
outstanding shares of beneficial interest of the Fund.
37
<PAGE>
PICTET FUNDS
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
PICTET EASTERN EUROPEAN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
5. FOREIGN SECURITIES
Pictet Global Emerging Markets Fund invests primarily in foreign emerging
markets securities, Pictet International Small Companies Fund invests primarily
in foreign securities and Pictet Eastern European Fund invests primarily in
Eastern European equity securities. 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
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.
6. POST OCTOBER LOSS
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, 1999, the Funds
elected to defer capital losses and currency losses occurring between November
1, 1999 and December 31, 1999 as follows:
CAPITAL LOSSES CURRENCY LOSSES
-------------------------------------------------------------------------------
Pictet Global Emerging Markets Fund $2,450,647 $183,465
Pictet International Small Companies Fund 376,173 7,622
Pictet Eastern European Fund -- 2,225
Such losses will be treated as arising on the first day of the year ending
December 31, 2000.
7. CAPITAL LOSS CARRYFORWARDS
At December 31, 1999 the following Funds had available for Federal income
tax purposes unused capital losses as follows:
EXPIRING IN 2006
--------------------------------------------------------------------------------
Pictet Global Emerging Markets Fund $60,580,799
Pictet Eastern European Fund 521,873
38
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(Back Cover)
