<PAGE> 1
LETTER FROM THE FUNDS' MANAGEMENT 1
Dear Shareholder:
We are pleased to provide you with the Annual Report of the Pilot International
Equity Fund for the year ended August 31, 1996.
The Fund delivered strong performance relative to its benchmark as most
international markets produced a modest rally after a lackluster 1994-95 period.
Your Fund has benefited from continued favorable trends in global economic
conditions, including signs of economic recovery in Japan and strong performance
in many of the European economies, in particularly Switzerland, the Netherlands,
and Sweden. Our portfolio managers believe that the outlook for international
markets is attractive. We encourage all shareholders to view the Fund as an
excellent vehicle for achieving international diversification for their total
portfolio.
The Pilot Funds are pleased to announce the introduction of two new
portfolios which will be available for investment this October*. The Pilot
Growth Equity Fund is designed to provide investors with long-term capital
growth by investing in companies expected to sustain superior profitability,
strong competitive advantages, and the potential for above-average appreciation
over time. The Pilot Diversified Bond Income Fund will seek to provide investors
with total return, emphasizing current income and preservation of capital by
investing primarily in debt securities with average weighted maturities between
five and fifteen years. We believe these two new portfolios will provide
shareholders and new investors with even greater investment diversification
within The Pilot Family of Funds.
It was announced on August 30, 1996 that Boatmen's Bancshares, Inc., of
which The Pilot Funds' investment advisor, Boatmen's Trust Company is a
subsidiary, will be acquired by Nationsbank Corporation, N.A. of Charlotte, NC.
The combined Nations/Boatmen's organizations will continue to provide the same
superior investment management expertise to The Pilot Funds that shareholders
have come to expect.
Thank you for choosing The Pilot Funds to help meet your investment goals.
Should you have any questions or wish to learn more about any of the Funds,
please call your local Boatmen's representative or The Pilot Funds at
1-800-71-PILOT (717-4568).
Sincerely,
David F. Toth
SENIOR VICE PRESIDENT
Boatmen's Trust Company
- -------------------------------------------------------------------------------
* The Funds are effective and registered with the SEC. They will not be
available for sale, by decision of the Distributor, until October, 1996.
<PAGE> 2
FUND HIGHLIGHTS 2
- -------------------------------------------------------------------------------
Average Annual Total Returns for The Pilot International Equity Fund
as of August 31, 1996
<TABLE>
<CAPTION>
1-Year 5-Year* 10-Year*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pilot Shares 10.64% 8.59% 9.42%
- ---------------------------------------------------------------------------------------------------------------------------
Class A Shares at NAV** 10.40% 8.31% 9.14%
- ---------------------------------------------------------------------------------------------------------------------------
Class A Shares at Offer** 5.44% 7.32% 8.64%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES AT NAV*** -2.85%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES AT CDSC*** -7.22%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
*Periods of more than one year are annualized.
**Effective August 21, 1995 the Administration Class Shares of the Fund were
redesignated as the Class A Shares of the Fund.
***Effective July 1, 1996, the Fund commenced offering Class B Shares.
</TABLE>
Past performance is not a guarantee of future results. Investment returns and
principal value may fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Note: This table reflects the fact that Class A and Class B Shares are subject
to different fees and expenses. Class A Shares are subject to a front-end sales
load of up to 4.5% of the offering price and a Rule 12b-1 fee of up to .25 of
1%. Class B Shares are subject to Contingent Deferred Sales Charges for
redemptions before the periods outlined in the Funds' prospectuses and a Rule
12b-1 fee of up to 1%. All other Fund expenses related to Class A and B Shares
are the same as for Pilot Shares.
For periods prior to July 12, 1993, the performance information for the Fund
reflects the performance for the Kleinwort Benson International Equity Portfolio
of Kleinwort Benson Investment Strategies, all of the assets of which were
acquired by the Pilot International Equity Fund in a reorganization effective
July 12, 1993. Prior to that date, the Kleinwort Benson International Equity
Portfolio was advised solely by Kleinwort Benson International Investment
Limited.
International funds are subject to special risks such as currency fluctuations
and differences in accounting and taxation standards.
- -------------------------------------------------------------------------------
THE FUNDS ARE ADVISED BY BOATMEN'S TRUST COMPANY, A NON-BANK SUBSIDIARY OF
BOATMEN'S BANCSHARES, INC., AND ARE DISTRIBUTED BY PILOT FUNDS DISTRIBUTORS,
INC., WHICH IS NOT AFFILIATED WITH BOATMEN'S TRUST COMPANY. BOATMEN'S TRUST
COMPANY RECEIVES FEES FOR PROVIDING INVESTMENT ADVISORY SERVICES TO THE FUNDS.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE> 3
FUND HIGHLIGHTS 3
- -------------------------------------------------------------------------------
Portfolio Composition by Sector*
as of 8/31/96
[Pie Chart inserted here]
Finance 16.3%
Utilities 8.9%
Food and Tobacco 5.7%
Health and Personal Care 7.5%
Merchandising 20.4%
Autos, Appliances 4.3%
Technology 11.6%
Capital Goods and
Construction 7.3%
Metals 4.4%
Building Materials, Chemicals,
Forest Products 6.2%
Energy 3.7%
Multi-Industry 3.7%
Ten Largest Holdings*
as of 8/31/96
<TABLE>
<CAPTION>
Percentage
Security Description Country of Portfolio
- ------------------------------------------------------------
<S> <C> <C>
Ahold The Netherlands 1.3%
- ------------------------------------------------------------
Roche Holdings Genusscheine Switzerland 1.2%
- ------------------------------------------------------------
Toyota Motor Japan 1.2%
- ------------------------------------------------------------
Randstad Holdings The Netherlands 1.1%
- ------------------------------------------------------------
Tokio Marine & Fire Japan 1.1%
- ------------------------------------------------------------
Gehe Germany 1.1%
- ------------------------------------------------------------
Secom Company Japan 1.1%
- ------------------------------------------------------------
Wolters Kluwer The Netherlands 1.1%
- ------------------------------------------------------------
Hoya Corporation Japan 1.1%
- ------------------------------------------------------------
Sharp Corporation Japan 1.1%
- ------------------------------------------------------------
<FN>
*Fund holdings are subject to change.
</TABLE>
[Graph inserted here]
- ------------------------------------------------------------
Growth of a $10,000 Investment
<TABLE>
<CAPTION>
11/83 8/96
<S> <C> <C>
EAFE(TM) Index $10,000 $59,852
Pilot Shares 10,000 49,831
Class A Shares (at offer) 10,000 46,093
</TABLE>
The Morgan Stanley Capital International EAFE(TM) Index is an unmanaged index
representing major European, Australian and Far East common stock.
<PAGE> 4
LETTER FROM THE PORTFOLIO MANAGERS 4
Pilot International Equity Fund
Dear Shareholder:
The Pilot International Equity Fund had a good year, gaining 10.8% (Pilot
Shares), while the benchmark Morgan Stanley Capital International Europe
Australasia Far East Index (EAFE(TM) Index) rose 7.9%. Stock selection was an
overall positive with the regional portfolios in the UK, Japan, Mature Pacific
and Latin America performing well. Asset allocation was also generally positive,
with the portfolio benefiting from its overweighting in the Pacific ex-Japan and
its underweighting to Japan. Exposure to Japan was increased as signs of a weak
economic recovery began to emerge and the outlook for corporate earnings
improved. This proved to be premature but the Fund is still underweight compared
to the index thereby limiting the effect of this market's relative
underperformance. The Morgan Stanley Capital International (MSCI) Japan Index
fell 2.2% over this period in dollar terms, performance being adversely affected
by the weakness of the Yen which fell by 10.5% against the dollar. However, your
Fund's performance was considerably enhanced by its hedging strategy which
protected the portfolio's U.S. dollar returns from the U.S. dollar's strength.
The Fund's underweighting in the UK and Ireland negatively impacted performance,
as the MSCI UK Index returned 15.6%. However, excellent stock selection in the
region helped minimize any downside. Fund performance was enhanced by our
overweighted stance in the main Asian markets. The MSCI Pacific ex-Japan Index
returned 13.0% with Hong Kong performing particularly well.
EUROPE
Europe was the second best performing region in the EAFETM Index, just behind
the UK, despite worries over an economic slowdown and political concerns in
France and Italy. This was largely due to the region's more benign interest rate
environment as the Bundesbank cut rates to stimulate the economy. Despite recent
attempts by the Bundesbank to promote Deutschemark weakness and hence increase
competitiveness, the U.S. dollar strengthened by only 0.9% against the
Deutschemark over the last twelve months. The MSCI European Index rose 15.2%
with Switzerland, the Netherlands and Sweden contributing particularly strong
performance.
- -------------------------------------------------------------------------------
Portfolio Composition by Region*
as of 8/31/96
[Graph inserted here of
percentage points for the
following regions]
<TABLE>
<CAPTION>
Japan Continental Emerging UK and Far East Cash
Europe Markets Ireland
<S> <C> <C> <C> <C> <C>
28.8% 31.7% 14.0% 11.0% 11.1% 3.4%
<FN>
*Portfolio holdings are subject to change.
</TABLE>
<PAGE> 5
5
JAPAN
Japan began to show tentative signs of a recovery as economic indicators showed
a slight pick-up in activity and investors perceived the worst of the recession
to be over. However, domestic investors remained on the sidelines, failing to
support the market, and concerns over the banks' bad loan write-offs persisted.
The Yen weakened by 10.5% against the U.S. dollar and within the portfolio a
bias towards capital goods and exporters ensured that the portfolio benefited
from this Yen weakness.
ASIA
Asian markets had a strong twelve months with the MSCI Pacific ex-Japan Index
rising 13.0% in U.S. dollar terms. Following the strong performance of the U.S.
market in 1995, investors turned their attention to the Asian markets which had
underperformed. As the performance of the main Asian economies are closely tied
to U.S. interest rates, declines in U.S. interest rates supported valuations in
the region with the property and bank sectors benefiting in particular. Foreign
asset flows into the region accelerated significantly and exerted considerable
influence on the main markets with the Hang Seng Index rising by 21.6% in local
terms.
EMERGING MARKETS
After an exceptionally weak 1995 fourth quarter due to political concerns,
volatile interest rates and exchange rates, Latin America rallied strongly this
year to end up 7.1% over the last twelve months. Despite the flow of foreign
money into the Pacific region, the emerging markets remained relatively subdued
due to concerns about overheating and politics. Thailand in particular has
suffered, falling 16.2% in local terms over the last twelve months due to
economic concerns, a growing current account deficit and disappointing corporate
earnings. Overall, the IFC Composite Investables gave a total return in U.S.
dollars of 6.3%.
Sincerely,
Michael E. Kenneally
Senior Vice President
Boatmen's Trust Company
Sally Godley Maynard
Senior Portfolio Manager
Kleinwort Benson Investment
Management Americas Inc.
Please place broker/dealer information here.
- ---------------------------------------------
| |
| |
| |
| |
| |
- ---------------------------------------------
<PAGE> 6
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1996
==========================================================
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
<S> <C> <C>
- -------------------------------------------------------------
COMMON STOCKS--94.8%
ARGENTINA PESO--0.3%
Telecommunications--0.3%
269,966 Naviera Perez Comp., Class A* $ 1,532,767
------------
AUSTRALIAN DOLLAR--4.1%
Banking--0.4%
475,000 Commonwealth Bank of Australia 2,574,471
------------
Broadcasting & Publishing--0.5%
565,000 News Corp. Ltd. 3,013,090
------------
Commercial Services--0.8%
140,000 Brambles Industries Ltd. 2,093,600
400,000 Mayne Nickless Ltd. 2,680,694
------------
4,774,294
------------
Energy Sources--0.5%
209,000 Broken Hill Proprietary Co. Ltd. 2,847,628
------------
Entertainment--0.5%
2,000,000 Sydney Harbour Casino Holdings* 2,848,435
------------
Metals & Mining--1.0%
2,070,000 M.I.M. Holdings Ltd. 2,653,317
501,250 Western Mining Corp. 3,490,124
------------
6,143,441
------------
22,201,359
------------
AUSTRIAN SCHILLING--0.4%
Engineering--0.4%
20,000 VA Technologies A.G. 2,561,806
------------
BELGIAN FRANC--0.6%
Retail Stores/Catalog--0.6%
83,000 G.I.B. Holdings NPV 3,671,310
------------
BRITISH POUND STERLING--10.2%
Advertising--0.8%
1,425,000 WPP Group PLC 5,133,871
------------
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
- -------------------------------------------------------------
<S> <C> <C>
Banking--1.1%
285,281 Royal Bank of Scotland $ 2,171,506
407,512 Standard Chartered Bank PLC 4,522,285
------------
6,693,791
------------
Chemicals--0.6%
250,000 BOC Group PLC 3,391,711
------------
Commercial Services--1.1%
600,000 Inchcape PLC 2,789,956
961,500 Securicor PLC 4,057,628
------------
6,847,584
------------
Electrical Components & Instruments--0.7%
415,789 Premier Farnell Electronic PLC 4,269,702
------------
Financial Services--0.6%
1,000,000 Invesco PLC 3,766,831
------------
Food & Household Products--0.7%
411,000 Reckitt & Coleman PLC 4,374,698
------------
Leisure & Tourism--0.9%
403,354 Granada Group PLC 5,494,307
------------
Multi-Industry--0.6%
567,638 Morgan Crucible Co., PLC 3,823,912
------------
Oil & Gas Products & Services--0.8%
343,000 Shell Transport & Trading Co. 4,991,177
------------
Pharmaceuticals--0.8%
200,000 Zeneca PLC 4,782,782
------------
Printing & Publishing--1.4%
400,000 Emap PLC 4,451,426
349,000 Reuters Holdings PLC 4,069,335
------------
8,520,761
------------
62,091,127
------------
BRAZILIAN CRUZIERO--0.7%
Home Appliances--0.4%
7,000,000 Brasmotor S.A. 2,134,762
------------
</TABLE>
- ----------------------------------------------------------
See Notes to Financial Statements.
6
<PAGE> 7
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1996
=============================================================
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
<S> <C> <C>
- -------------------------------------------------------------
Telecommunications--0.3%
32,300,000 Telec Brasilieiras S.A. $ 1,958,958
------------
4,093,720
------------
DANISH KRONE--0.3%
Telecommunications--0.3%
32,000 Tele Danmark, Class B 1,579,895
------------
FINNISH MARKKA--0.8%
Airlines--0.3%
250,000 Finnair OY 1,773,466
------------
Forest Products & Paper--0.5%
370,000 Enso Gutzeit OY* 3,162,924
------------
4,936,390
------------
FRENCH FRANC--7.8%
Automotive--0.8%
40,000 Peugeot S.A. 4,588,508
------------
Beverages & Tobacco--0.7%
20,000 LVMH Moet Hennessy 4,220,636
------------
Broadcasting & Publishing--0.6%
33,000 TV Francaise 3,772,465
------------
Building Materials & Components--0.4%
46,000 Lafarge-Coppee 2,547,413
------------
Business & Public Service--0.3%
20,054 Lyonnaise Des Eaux-Dumez 1,760,240
------------
Electronic Products--0.5%
200,000 Unisor Sacilor S.A. 2,749,149
------------
Energy Sources--0.7%
60,000 Societe Elf Aquitaine S.A. 4,376,487
------------
Financial Services--0.8%
50,000 CIE Bancaire 4,954,402
------------
Shares or
Principal Value
Amount Description (Note 2)
- -------------------------------------------------------------
Food & Household Products--0.4%
17,058 Groupe Danone 2,358,244
------------
Health & Personal Care--0.7%
18,500 Roussel-UCLAF $ 4,302,913
------------
Leisure & Tourism--0.6%
31,941 Accor 3,872,509
------------
Merchandising--0.6%
20,231 Castorama Dubois Investments 3,937,276
------------
Office Equipment & Services--0.6%
50,000 Strafor-Facom 3,906,165
------------
47,346,407
------------
GERMAN DEUTSCHEMARK--4.6%
Banking--1.4%
100,000 Deutsche Bank, A.G. 4,958,726
87,900 Deutsche Pfandbrief and Hypo
Bank, A.G. 3,500,419
------------
8,459,145
------------
Chemicals--0.5%
75,000 Henkel Kgaa-Vorzug 3,067,907
------------
Conglomerates--0.5%
13,000 Preussag, A.G. 3,066,588
------------
Construction & Housing--0.5%
38,260 Hochtief, A.G. 1,807,112
4,000 Weru, A.G. 1,393,965
------------
3,201,077
------------
Insurance--0.6%
1,500 Muenchener Rueckversich 3,456,153
------------
Pharmaceuticals--1.1%
100,000 GEHE, A.G. 6,563,139
------------
27,814,009
------------
HONG KONG DOLLAR--5.1%
Banking--1.2%
409,400 HSBC Holdings PLC 7,067,970
------------
</TABLE>
- ----------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE> 8
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1996
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
<S> <C> <C>
- -------------------------------------------------------------
Broadcasting & Publishing--0.3%
440,000 Television Broadcasts, Ltd. $ 1,564,772
------------
Business & Public Services--0.7%
1,060,000 Wharf Holdings 4,002,712
------------
Merchandising--0.4%
2,612,000 Giordano International, Ltd. 2,161,816
------------
Multi-Industry--1.7%
650,000 Hutchison Whampoa 3,933,913
450,000 Swire Pacific, Class A, (HKD) 4,000,836
3,400,000 Guangdong Investment 2,440,268
------------
10,375,017
------------
Real Estate--1.0%
1,500,000 Shargri La Asia Ltd. 1,959,197
400,000 Sun Hung Kai Properties, Ltd. 3,905,463
------------
5,864,660
------------
31,036,947
------------
INDONESIAN RUPIAH--0.6%
Beverages & Tobacco--0.3%
464,000 Gudang Garam 1,703,842
------------
Multi-Industry--0.3%
1,550,000 PT Astra International 2,018,574
------------
3,722,416
------------
IRISH PUNT--0.7%
Building Materials & Components--0.7%
404,557 CRH PLC (Dublin Registered) 4,162,953
------------
ITALIAN LIRA--1.5%
Machinery & Engineering--0.4%
660,000 SASIB 2,361,868
------------
Telecommunications--0.7%
1,300,000 Societe Fiananziaria Telefonica 4,135,257
------------
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
- -------------------------------------------------------------
Utilities-Electric & Gas--0.5%
200,000 Edison SPA 1,081,529
500,000 Italgas 1,709,770
------------
2,791,299
------------
9,288,424
------------
JAPANESE YEN--28.7%
Appliances & Household Durables--1.7%
400,000 Sharp Corp. $ 6,335,171
800,000 Sanyo Electric Co. 4,125,228
------------
10,460,399
------------
Automobiles--1.2%
300,000 Toyota Motor Corp. 7,237,565
------------
Banking--2.3%
240,000 Sanwa Bank 4,243,091
200,000 Fuji Bank 3,683,239
282,000 Bank of Toyko -- Mitsubishi 5,738,671
------------
13,665,001
------------
Building Materials & Components--0.3%
164,000 INAX Corp. 1,570,533
------------
Business & Public Services--2.8%
209,000 Canon Sales Co., Inc. 5,465,558
100,000 Secom Co., Ltd. 6,399,628
400,000 Toppan Printing Co. 5,046,037
------------
16,911,223
------------
Chemicals--2.3%
860,000 Asahi Chemical Industries 5,780,844
900,000 Dainippon Ink & Chemicals, Inc. 3,928,174
250,000 Shin-Etsu Chemical 4,419,887
------------
14,128,905
------------
Construction & Housing--1.0%
800,000 Mitsubishi Heavy Industries 6,327,805
------------
Electrical & Electronic--2.6%
600,000 Fujitsu 5,408,837
600,000 Hitachi 5,513,809
300,000 Matsushita Electric Industries 5,055,246
------------
15,977,892
------------
</TABLE>
- -------------------------------------------------------------
See Notes to Financial Statements.
8
<PAGE> 9
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1996
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
<S> <C> <C>
=============================================================
Electrical Components & Instruments--2.6%
100,000 TDK Corp. $ 5,764,269
63,000 Kyocera Corp. 4,281,213
44,000 Keyence Corp. 5,591,157
------------
15,636,639
------------
Food & Household Products--1.5%
194,000 House Foods Industry 3,537,014
483,000 KAO Corp. 5,737,289
------------
9,274,303
------------
Health & Personal Care--1.7%
200,000 Hoya Corp. 6,353,587
266,000 Daiichi Pharmaceutical Co., Ltd. 4,065,928
------------
10,419,515
------------
Industrial Components--0.7%
400,000 NGK Spark Plug Co. 4,125,228
------------
Insurance--1.1%
600,000 Tokio Marine & Fire 6,850,825
------------
Merchandising--1.4%
96,500 York-Benimaru Co. 3,794,243
250,000 Marui Co., Ltd. 4,903,312
------------
8,697,555
------------
Recreation & Other Consumer Goods--1.4%
500,000 Citizen Watch Co. 4,019,335
400,000 Nikon Corp. 4,346,222
------------
8,365,557
------------
Steel--0.9%
1,650,000 Nippon Steel 5,226,516
------------
Telecommunications--0.9%
400,000 Nippon Comsys Corp. 5,303,864
------------
Tools-Hand/Machine--0.7%
260,000 Mori Seiki Co. 4,309,390
------------
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
=============================================================
Transportation-Road/Rail--1.6%
600,000 Nippon Express Co. 5,287,290
225,000 Shimano, Inc. 4,164,362
------------
9,451,652
------------
173,940,367
------------
MALAYSIAN RINGGIT--1.0%
Diversified--0.1%
130,000 Sime Darby $ 440,493
------------
Financial --0.1%
440,000 Public Bank Berhad 843,374
------------
Leisure--0.2%
145,000 Genting Berhad 1,069,856
------------
Machinery & Engineering--0.4%
300,000 United Engineers Berhad 2,129,286
------------
Telecommunications--0.2%
160,000 Telekom Malaysia Berhad 1,411,503
------------
5,894,512
------------
MEXICAN PESO--0.2%
Diversified--0.0%
108,500 Invercorpaction S.A.* 13,729
------------
Financial Services--0.2%
600,000 Grupo Financiero Banamexico --
Class B* 1,293,789
------------
1,307,518
------------
NETHERLANDS GUILDER--6.0%
Appliances & Household Durables--0.6%
115,760 Philips Electronics NV 3,920,107
------------
Broadcasting & Publishing--1.1%
50,574 Wolters Kluwer CVA 6,365,169
------------
Business & Public Services--2.1%
248,128 Getronics NV 6,051,091
92,000 Randstad Holdings 6,919,623
------------
12,970,714
------------
</TABLE>
- -------------------------------------------------------------
See Notes to Financial Statements.
9
<PAGE> 10
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1996
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
<S> <C> <C>
=============================================================
Energy--0.6%
25,000 Royal Dutch Petroleum Co. NV $ 3,742,556
------------
Manufacturing-Capital Goods--0.3%
20,000 DSM NV 1,847,132
------------
Merchandising--1.3%
138,162 Koninklijke Ahold 7,739,505
------------
36,585,183
------------
NORWEGIAN KRONE--0.3%
Machinery & Engineering--0.3%
28,000 Kvaerner Industries, A.S. Class B 917,777
25,074 Kvaerner Industries, A.S. Class A 894,273
------------
1,812,050
------------
PHILIPPINE PESO--0.2%
Banking--0.1%
25,600 Philippine National Bank* 427,562
------------
Utilities-Electric & Gas--0.1%
84,500 Manila Electric Co., Class B 648,387
------------
1,075,949
------------
POLISH ZLOTY--0.1%
Construction & Housing--0.1%
280,000 Mostostal-Export, S.A. 797,512
------------
PORTUGUESE ESCUDA--0.9%
Banking--0.1%
40,000 Banco Espirito Santo* 665,127
------------
Building Materials & Components--0.2%
32,000 Cimpor Cimentos de Portugal, S.A. 718,971
44,000 Corticeira Amorim Gestora 505,180
------------
1,224,151
------------
Engineering--0.1%
62,000 Engil-SGPS 561,293
------------
Food & Household Products--0.1%
9,100 Estabelev Jeronimo Martins 846,651
------------
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
- -------------------------------------------------------------
Insurance--0.2%
61,000 Companhia de Seguros Mundial
Confianca S.A.* $ 507,159
32,600 Companhia de Seguros Tranquilidade 638,878
------------
1,146,037
------------
General Merchandise--0.0%
9,000 Modelo Continente Sociedade
Gestora 260,112
------------
Telecommunications--0.1%
29,000 Portugal Telecom S.A. 776,714
------------
5,480,085
------------
SINGAPOREAN DOLLAR--3.2%
Banking--0.6%
290,687 Development Bank of Singapore,
Ltd. 3,408,352
------------
Food & Household Products--0.5%
43,200 Fraser & Neave, Warrants, 5/7/98* 204,146
300,000 Fraser & Neave 3,027,224
------------
3,231,370
------------
Leisure & Tourism--0.2%
185,000 Genting Berhad 1,367,225
------------
Machinery & Engineering--0.6%
450,000 Keppel 3,421,616
------------
Multi-Industry--0.5%
1,200,000 Singapore Technologies Industrial
Corp. 2,848,148
------------
Printing & Publishing--0.3%
120,000 Singapore Press Holdings 2,080,683
------------
Real Estate--0.5%
375,000 City Developments 3,117,827
------------
19,475,221
------------
SPANISH PESETA--2.4%
Banking--0.5%
75,000 Corporacion Bancaria de Espana 3,100,883
------------
</TABLE>
- -------------------------------------------------------------
See Notes to Financial Statements.
10
<PAGE> 11
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1996
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
<S> <C> <C>
=============================================================
Energy Sources--0.5%
100,000 Respol S.A. $ 3,250,829
------------
Utilities-Electric & Gas--1.4%
20,000 Gas Natural SDG S.A. 3,838,617
76,000 Empresa Nacional Electricidad 4,430,723
------------
8,269,340
------------
14,621,052
------------
SWEDISH KRONA--1.0%
Machine Construction & Manufacturing--0.7%
200,000 Atlas Copco Atiebolag, Class A 4,005,871
------------
Telecommunications--0.4%
100,000 Tlelfonaktiebolaget LM Ericsson 2,335,498
------------
6,341,369
------------
SWISS FRANC--4.1%
Business & Consumer Services--0.6%
1,500 SGS Holdings 3,513,368
------------
Diversified--0.8%
4,000 ABB A.G. 4,940,008
------------
Financial Services--0.9%
40,000 CS Holdings 4,158,424
------------
Food & Household Products--0.7%
3,856 Nestle, S.A. 4,523,898
------------
Health & Personal Care--1.2%
970 Roche Holdings, Warrants* 26,526
970 Roche Holdings, A.G. 7,407,214
------------
7,433,740
------------
24,569,438
------------
THAI BAHT--1.0%
Banking--0.3%
160,000 Bangkok Bank (FGN) 2,023,311
------------
Building Materials & Components--0.1%
168,000 T.P.I. Polene (FOR) 770,123
------------
Shares or
Principal Value
Amount Description (Note 2)
=============================================================
Utilities-Electric & Gas--0.2%
440,000 Electricity Generating $ 1,304,087
------------
Real Estate--0.3%
147,200 Land & House 2,117,395
------------
6,214,916
------------
TURKISH LIRE--0.3%
Appliances & Household Durables--0.1%
4,818,325 PT Arcelik, A.S. 427,604
------------
Building Materials & Components--0.1%
16,579,163 Trakya Cam Sananyll 773,879
------------
Food & Household Products--0.1%
704,700 Migros Turk 560,413
------------
1,761,896
------------
UNITED STATES DOLLAR--8.1%
Automobiles--0.2%
85,500 Tata Engineering & Locomotion
Co.(GDR) 1,421,010
------------
Banking--0.9%
36,000 Banco Frances (ADR) 832,500
88,000 Banco Industrial Colombiano,
S.A.(ADR) 1,628,000
------------
85,000 Banco O'Higgins (ADR) 1,880,625
10,000 Banque Marocaine (ADR)* 130,000
40,000 Credicorp Ltd. 780,000
------------
5,251,125
------------
Beverages & Tobacco--0.3%
182,300 Quilmes Industrial (ADR) 1,823,000
------------
Closed-End Mutual Funds--0.8%
798,600 Five Arrow Chile Investment Trust 2,343,891
55,000 Korea Fund, Inc. 1,051,875
120,000 Republic of China Fund* 1,320,000
------------
4,715,766
------------
Construction--0.1%
115,000 Cemex S.A. (ADR)* 842,755
------------
</TABLE>
- -------------------------------------------------------------
See Notes to Financial Statements.
11
<PAGE> 12
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1996
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
==============================================================
<S> <C> <C>
Electrical & Electronics--0.7%
190,000 Elektrim, S.A. (ADR) $ 1,871,500
40,000 Korea Electric (ADR) 850,000
38,350 Manila Electric Co. (GDS) 1,418,950
3,930 Samsung Electric Co. (GDS) 107,707
10,661 Samsung Electric Co. (NV) (GDR) 247,868
------------
4,496,025
------------
Engineering--0.2%
198,000 Advanced Semiconducting
Engineering (GDR) 1,410,750
------------
Entertainment--0.2%
49,300 Grupo Televisa (GDR) 1,497,488
------------
Financial Services--0.2%
183,318 Corporacion Financiera (ADR) 1,407,424
------------
Food & Household Products--0.2%
222,937 Mavesa, S.A. (ADR) 1,126,411
------------
Health & Personal Care--0.1%
80,000 Barlow, Ltd. (ADR) 736,256
------------
Merchandising--0.3%
1,030,000 Cifra, S.A. de C.V. (ADR)* 1,596,500
------------
Metals-Iron/Steel--0.1%
35,000 Pohang Iron & Steel, Ltd. (ADR) 765,625
------------
Metal-Non Ferrous--0.5%
60,000 Hindalco Industries (GDR) 2,010,000
270,000 Siderurgica Venezolana (ADR) 871,101
2,881,101
------------
Mining--0.1%
50,000 Impala Platinum Holdings (ADR) 662,945
------------
Multi-Industry--0.4%
72,000 Corimon CASACA (ADR)* 50,400
110,552 Desc, S.A. de C.V. (ADR)* 2,266,316
------------
2,316,716
------------
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
- --------------------------------------------------------------
Consumer Goods--0.9%
30,000 Gedeon Richter (ADR) 1,704,000
50,000 Luxottica Group (ADR) 3,818,750
------------
5,522,750
------------
Telecommunications--0.7%
36,700 Philippine Long Distance
Telephone (ADR) $ 2,197,413
76,900 Telefonica del Peru (ADR) 1,797,537
------------
3,994,950
------------
Utilities-Electric & Gas--1.1%
55,694 Cemig, S.A. (ADR) 1,676,562
52,000 Enersis, S.A. (ADR) 1,618,500
75,220 Empresa Nacional de Electricidad,
S.A. (ADR) 1,476,193
10,000 Empresa Nacional de Electricidad,
S.A. (ADR) 587,500
50,000 Hub Power Co. (GDR)* 1,081,250
------------
6,440,005
------------
48,908,602
------------
- --------------------------------------------------------------
TOTAL COMMON STOCKS (cost $508,646,348) 574,825,200
- --------------------------------------------------------------
PREFERRED STOCKS--1.2%
BRAZILIAN CRUZEIRO--0.4%
Banking--0.4%
276,644,579 Banco Bradesco, S.A. $ 2,340,509
------------
GERMAN DEUTSCHEMARK--0.7%
Machinery & Engineering--0.4%
6,875 GEA, A.G. 2,233,051
------------
Health & Personal Care--0.4%
50,000 Fielmann, A.G. 2,121,398
------------
4,354,449
------------
U.S. DOLLAR--0.1%
Electrical & Electronic--0.1%
11,306 Cemig 340,346
------------
- -------------------------------------------------------------
TOTAL PREFERRED STOCKS (cost $5,694,614) 7,035,304
- -------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS (cost $514,340,962) 581,860,504
</TABLE>
- -------------------------------------------------------------
See Notes to Financial Statements.
12
<PAGE> 13
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1996
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount Description (Note 2)
<S> <C> <C>
=============================================================
SHORT-TERM INVESTMENTS--3.7%
22,135,042 Banker's Trust Money Fund $ 22,135,042
- -------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (cost $22,135,042) 22,135,042
- -------------------------------------------------------------
TOTAL INVESTMENTS (cost $536,476,004**)--99.7% 603,995,546
- -------------------------------------------------------------
OTHER ASSETS IN EXCESS OF LIABILITIES--0.3% 1,938,019
- -------------------------------------------------------------
NET ASSETS--100.0% $605,933,565
=============================================================
* Non-income producing security.
** Represents cost for financial reporting purposes and
differs from cost basis for federal income tax purposes by
the amount of losses recognized for financial reporting
purposes in excess of federal income tax reporting of
approximately $372,000.
Cost for federal income tax purposes differs from value by
net unrealized appreciation from investments as follows:
Gross unrealized appreciation from investments $ 92,075,253
Gross unrealized depreciation from investments (24,927,506)
- -------------------------------------------------------------
Net unrealized appreciation from investments $ 67,147,747
=============================================================
</TABLE>
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
GDS--Global Depository Shares.
- -------------------------------------------------------------
See Notes to Financial Statements.
13
<PAGE> 14
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Value on Appreciation
Forward Foreign Currency Exchange Contracts Expiring Settlement Date Current Value (Depreciation)
<S> <C> <C> <C> <C>
==============================================================================================================================
CURRENCY SOLD:
German Deutschemark 9/20/96 $22,935,780 $23,664,651 $ (728,871)
Netherlands Guilder 9/20/96 22,261,277 22,932,911 (671,634)
--------------- ------------- --------------
$45,197,057 $46,597,562 $ (1,400,505)
- ------------------------------------------------------------------------------------------------------------------------------
CURRENCY PURCHASED:
Philippine Peso 9/5/96 $ 433,402 $ 432,588 $ (814)
--------------- ------------- --------------
$ 433,402 $ 432,588 $ (814)
==============================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
14
<PAGE> 15
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (cost $514,340,962).................................................... $581,860,504
Short-term investments, at cost........................................................................... 22,135,042
- -------------------------------------------------------------------------------------------------------------------------
Total Investments......................................................................................... 603,995,546
Cash and foreign currency................................................................................. 1,290,272
Receivable from brokers for investments sold.............................................................. 617,921
Dividends receivable...................................................................................... 544,338
Interest receivable....................................................................................... 98,555
Foreign taxes receivable.................................................................................. 501,622
Receivable for Portfolio shares sold...................................................................... 1,627,217
Deferred organization costs and other assets.............................................................. 311,076
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS.............................................................................................. 608,986,547
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable to brokers for investments purchased.............................................................. 912,139
Payable for Portfolio shares redeemed..................................................................... 158,326
Payable for forward foreign currency exchange contracts................................................... 1,401,319
Advisory fees payable..................................................................................... 403,208
Administration fees payable............................................................................... 55,638
Distribution fees payable (Class A Shares)................................................................ 34,076
Distribution fees payable (Class B Shares)................................................................ 141
Custodian fees payable.................................................................................... 76,432
Other accrued expenses.................................................................................... 11,703
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES......................................................................................... 3,052,982
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $605,933,565
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE
($0.001 PAR VALUE, UNLIMITED NUMBER OF SHARES AUTHORIZED):
PILOT SHARES:
Net assets.............................................................................................. $579,019,007
Shares of beneficial interest issued and outstanding.................................................... 33,969,619
Net asset value......................................................................................... $ 17.05
- -------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES:
Net assets.............................................................................................. $ 26,730,103
Shares of beneficial interest issued and outstanding.................................................... 1,581,654
Net asset value......................................................................................... $ 16.90
- -------------------------------------------------------------------------------------------------------------------------
SALES CHARGE--4.50% OF OFFERING PRICE..................................................................... 0.80
- -------------------------------------------------------------------------------------------------------------------------
MAXIMUM OFFERING PRICE.................................................................................... $ 17.70
- -------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES:
Net assets.............................................................................................. $ 184,455
Shares of beneficial interest issued and outstanding.................................................... 10,822
Net asset value......................................................................................... $ 17.04
- -------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at par..................................................................... $ 35,562
Additional paid-in capital................................................................................ 522,301,564
Undistributed net investment income....................................................................... 7,013,267
Accumulated undistributed net realized gains from investment transactions................................. 8,862,534
Accumulated undistributed net realized gains from foreign currency transactions........................... 1,596,900
Net unrealized appreciation from investments.............................................................. 65,436,746
Net unrealized appreciation from translation of assets and liabilities denominated in foreign
currencies.............................................................................................. 686,992
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS, AUGUST 31, 1996............................................................................... $605,933,565
=========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
15
<PAGE> 16
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the year ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes of $1,234,207).......................... $ 7,470,878
Interest................................................................ 1,172,285
- ---------------------------------------------------------------------------------------------------
TOTAL INCOME............................................................ 8,643,163
- ---------------------------------------------------------------------------------------------------
EXPENSES:
Advisory fees........................................................... $3,873,513
Administration fees..................................................... 536,016
Distribution fees (Class A Shares)...................................... 67,600
Distribution fees (Class B Shares)...................................... 136
Accounting fees......................................................... 30,184
Audit fees.............................................................. 93,016
Transfer agent fees and expenses........................................ 51,778
Custodian fees and expenses............................................. 327,872
Registration fees....................................................... 49,240
Amortization of organization expenses................................... 39,336
Legal fees.............................................................. 11,102
Trustees' fees.......................................................... 15,552
Reports to shareholders................................................. 107,452
Other expenses.......................................................... 124,349
- ---------------------------------------------------------------------------------------------------
TOTAL EXPENSES.......................................................... 5,327,146
- ---------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME................................................... 3,316,017
- ---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gains from investment transactions......................... 8,391,035
Net realized gains from foreign currency transactions................... 15,336,402
Net change in unrealized appreciation from investments.................. 38,713,502
Net change in unrealized appreciation from translation of assets and
liabilities denominated in foreign currencies......................... (19,628,913)
- ---------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENTS AND FOREIGN
CURRENCIES............................................................ 42,812,026
- ---------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $ 46,128,043
===================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
16
<PAGE> 17
<TABLE>
<CAPTION>
PILOT INTERNATIONAL EQUITY FUND
- ----------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................ $ 3,316,017 $ 2,760,153
Net realized gains from investment transactions.................. 8,391,035 7,897,049
Net realized gains from foreign currency transactions............ 15,336,402 2,930,897
Net change in unrealized appreciation from investments........... 38,713,502 (15,002,978)
Net change in unrealized appreciation from translation of assets
and liabilities denominated in foreign currencies............. (19,628,913) 9,613,918
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations............. 46,128,043 8,199,039
- ----------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Pilot Shares..................................................... (11,112,928) (2,165,488)
Class A Shares................................................... (765,596) (248,680)
- ----------------------------------------------------------------------------------------------------------
Total dividends to shareholders from net investment income......... (11,878,524) (2,414,168)
- ----------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM NET REALIZED GAINS:
Pilot Shares..................................................... (9,018,759) (5,727,080)
Class A Shares................................................... (648,034) (657,682)
- ----------------------------------------------------------------------------------------------------------
Total dividends to shareholders from net realized gains............ (9,666,793) (6,384,762)
- ----------------------------------------------------------------------------------------------------------
PORTFOLIO SHARE TRANSACTIONS:
Proceeds from shares issued...................................... 215,676,940 93,286,629
Dividends reinvested............................................. 16,367,712 7,173,468
Cost of shares redeemed.......................................... (41,530,325) (61,574,895)
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets from Portfolio share transactions..... 190,514,327 38,885,202
- ----------------------------------------------------------------------------------------------------------
Total Increase in Net Assets....................................... 215,097,053 38,285,311
- ----------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period................................................ 390,836,512 352,551,201
- ----------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment
income of $7,013,267 and $2,488,507, respectively.).............. $605,933,565 $390,836,512
==========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
17
<PAGE> 18
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
August 31, 1996
- --------------------------------------------------------------------------------
1. GENERAL
The Pilot International Equity Fund, formerly Pilot Kleinwort Benson
International Equity Fund, (the "Portfolio") is a separate diversified portfolio
of The Pilot Funds (the "Fund"). The Fund is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. The Portfolio seeks to
provide long-term capital growth by investing primarily in equity securities of
companies domiciled in countries outside the United States and listed on major
stock exchanges primarily in Europe and the Pacific Basin. The Fund currently
offers twelve portfolios. The accompanying financial statements are those of the
Portfolio only.
The Portfolio offers three classes of shares: Pilot Shares, Class A Shares and
Class B Shares. Pilot Shares, Class A Shares and Class B Shares are
substantially the same except that Class A Shares bear the fees payable under
the Portfolio's Class A Distribution Plan and Class B Shares bear the fees
payable under the Portfolio's Class B Distribution Plan. The Class B Shares
commenced offering on July 1, 1996.
The Fund entered into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") with FUNDS IV Trust ("FUNDS IV"), a Massachusetts
business trust. The agreement contemplates that each of six investment
portfolios of FUNDS IV will transfer substantially all of the assets and
liabilities of FUNDS IV to a corresponding Portfolio of the Fund. The Board of
Trustees of FUNDS IV and the FUNDS IV shareholders, at a special shareholder
meeting held September 17, 1996, each approved the Reorganization Agreement
which became effective October 21, 1996.
Boatmen's Trust Company ("Boatmen's") serves as the Fund's investment adviser.
Kleinwort Benson Investment Management Americas Inc. ("Kleinwort Benson") serves
as the Portfolio's investment manager. BISYS Fund Services Limited Partnership
("BISYS") serves as the Fund's administrator and Pilot Funds Distributor Inc.
(the "Distributor"), an affiliate of BISYS, serves as the distributor of the
Fund's shares. BISYS is a wholly-owned subsidiary of The BISYS Group, Inc.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consistently
followed by the Portfolio in the preparation of the financial statements. The
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and expenses
for the period. Actual results could differ from those estimates.
A. Investment Valuation
Investments in securities traded on a U.S. or foreign securities exchange or the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
are valued at their last sale or closing price on the principal exchange on
which they are traded or NASDAQ, on the valuation day. If no sale occurs,
securities traded on a U.S. exchange or NASDAQ are valued at the mean between
the closing bid and asked price, and securities traded on a foreign exchange
will be valued at the official bid price. Unlisted equity securities for which
market quotations are available are valued at the mean between the most recent
bid and asked prices.
Debt securities are valued at prices supplied by an independent pricing service,
which reflect broker/dealer-supplied valuations and matrix pricing systems.
Short-term debt obligations maturing in sixty days or less are valued at
amortized cost, which approximates market value. The amortized cost method
involves valuing a security at its cost on the date of purchase or, in the case
of securities
- --------------------------------------------------------------------------------
18
<PAGE> 19
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
August 31, 1996
- --------------------------------------------------------------------------------
purchased with more than 60 days until maturity, at their market value each day
until the 61st day prior to maturity, and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and such valuation. Restricted securities, and other securities for
which quotations are not readily available, are valued at fair value using
methods approved by the Board of Trustees of the Fund.
B. Foreign Currency Translation
The books and records of the Portfolio are maintained in U.S. dollars. Amounts
denominated in foreign currencies are translated into U.S. dollars on the
following basis: (i) investment securities, other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based upon current exchange rates; (ii) purchases and sales of
foreign securities, income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Net realized and unrealized gains (losses) from foreign currency translation
will represent: (i) foreign exchange gains and losses from the sale and holdings
of foreign currencies and securities; (ii) gains and losses between trade date
and settlement date on investment securities transactions and forward exchange
contracts; and (iii) gains and losses from the difference between amounts of
dividends and interest recorded and the amounts actually received.
C. Forward Foreign Currency Exchange Contracts
The Portfolio is authorized to enter into forward foreign exchange contracts for
the purchase of a specific foreign currency at a fixed price on a future date as
a hedge or cross-hedge against either specific transactions or portfolio
positions. The aggregate principal amounts of the contracts are reflected net in
the Portfolio's Statement of Assets and Liabilities. All commitments are
"marked-to-market" daily at the applicable translation rates and any resulting
unrealized appreciation or depreciation is recorded in the Portfolio's financial
statements. The Portfolio records realized gains or losses at the time the
forward contract is offset by entry into a closing transaction or extinguished
by delivery of the currency. Risks may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered. At August 31, 1996, the Fund
had sufficient cash and/or securities to cover any commitments under these
contracts.
D. Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Realized gains and
losses from sales of investments are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, including
accretion of discounts and amortization of premiums on investments, is accrued
daily. Investment income is allocated to the separate classes of shares based
upon their relative net assets.
E. Dividends to Shareholders
Dividends of the Portfolio are declared and paid annually to shareholders of
record at the close of business on the day of declaration. Distributions of net
realized gains, if any, will be paid at least annually. However, to the extent
that net realized gains of the Portfolio can be offset by capital loss
carryovers, such gains will not be distributed. Dividends and distributions are
recorded by the Portfolio on the ex-dividend date.
- --------------------------------------------------------------------------------
19
<PAGE> 20
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
August 31, 1996
- --------------------------------------------------------------------------------
Distributions from net investment income and from net capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments for expiring capital loss carryforwards, foreign currency
transactions, and deferrals of certain losses. Permanent book and tax basis
differences, which affect shareholder distributions, have been reclassified
among the components of net assets.
F. Federal Taxes
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code (the "Code") applicable to regulated investment companies and to
distribute substantially all of its investment company taxable income and
capital gains to its shareholders. Accordingly, no federal tax provision is
required.
G. Organizational Expenses
Costs incurred by the Fund in connection with its organization and registration
of shares have been deferred and are amortized using the straight-line method
over a period not to exceed five years from the commencement of the public
offering of shares of the Portfolio.
H. Expenses
Expenses incurred by the Fund that do not specifically relate to an individual
portfolio of the Fund are allocated to the portfolios based on each portfolio's
relative net assets. The expenses of the Portfolio (other than expenses incurred
pursuant to the Class A and Class B Distribution Plans) are allocated to the
separate classes of shares based upon their relative net assets.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
A. Advisory Agreement
Boatmen's is the Portfolio's investment adviser under an Advisory Agreement.
Under the Advisory Agreement, Boatmen's supervises the activities of Kleinwort
Benson, the Portfolio's investment manager. As compensation for the services
rendered under the Advisory Agreement and the assumption of the expenses related
thereto, Boatmen's is entitled to a fee, computed daily and payable monthly, at
an annual rate equal to 0.80% of the Portfolio's average daily net assets.
B. Investment Management Agreement
The Portfolio has entered into an Investment Management Agreement with Kleinwort
Benson and Boatmen's. Under the Investment Management Agreement, Kleinwort
Benson, subject to the general supervision of the Portfolio's Board of Trustees
and Boatmen's, manages the investment operations of the Portfolio. As
compensation for the services rendered pursuant to the Investment Management
Agreement, Kleinwort Benson is entitled to a fee, paid by Boatmen's directly out
of Boatmen's advisory fee, computed daily and payable monthly, at an annual rate
equal to 0.40% of the Portfolio's average daily net assets up to $325,000,000
and 0.25% of such assets in excess of $325,000,000.
At a special meeting of stockholders of the Portfolio, held on November 30,
1995, shareholders approved a new Investment Management Agreement between the
Trust, on behalf of the Portfolio, Kleinwort Benson and Boatmen's. Such approval
was necessary because of the merger of Kleinwort Benson Group PLC and Dresdner
Bank AG.
C. Administration Agreement
The Portfolio has entered into an Administration Agreement with BISYS. Pursuant
to the terms of this agreement, BISYS is responsible for assisting in all
aspects of the operations of the Portfolio. For its services, BISYS is entitled
to a fee, accrued daily and paid monthly, at an annual rate of 0.115% of the
first $1.5 billion of the aggregate average net assets of all of the portfolios
constituting the Fund, plus 0.11% of the next $1.5 billion of such assets, plus
0.1075% of such assets in excess of $3.0 billion.
- --------------------------------------------------------------------------------
20
<PAGE> 21
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
August 31, 1996
- --------------------------------------------------------------------------------
D. Distribution Agreements
The Portfolio adopted Distribution Plans pursuant to Rule 12b-1 under the 1940
Act for its Class A and Class B Shares. Under these Plans, the Distributor
receives payments for distribution and support services. The Distribution Plan
for Class A Shares, formerly the Administration Plan, authorizes payments to the
Distributor and service organizations for personal services provided to Class A
shareholders and/or the maintenance of shareholder accounts.
Payments under the Distribution Plan for Class A Shares may not exceed 0.25% (on
an annual basis) of the average daily net assets of the shares to which such
Plan relates. If more money is due the Distributor than it can collect in any
month because of this limitation, the unpaid amount may be carried forward until
it can be paid. Similarly, if in any month the Distributor does not expend the
entire amount to which it would otherwise be entitled, this amount may be used
as a credit and drawn upon to permit the payment of expenses in the future.
Neither of these amounts, however, is payable beyond the fiscal year in which
they accrue. The Distribution Plan for Class A Shares replaced the Portfolio's
Administration Plan effective April 5, 1996 under substantially the same terms.
Fees incurred under the Distribution Plan for Class A Shares and the
Administration Plan have been combined in the financial statements.
Distribution payments under the Distribution Plan for Class B Shares may not
exceed 1.00% (on an annual basis) of the average daily net assets of the Class B
Shares. Not more than 0.25% of such value will be used to compensate service
organizations for personal services provided to Class B shareholders and/or the
maintenance of shareholder accounts. Not more than 0.75% of such value will be
paid to the Distributor as reimbursement for commissions and transaction fees as
well as expenses related to other promotional and distribution activities.
Actual distribution expenses paid by the Distributor with respect to Class B
Shares for any given year may exceed the distribution fees and contingent
deferred sales charges received with respect to those Shares. These excess
expenses may be reimbursed by a Portfolio or its Class B Shareholders out of
contingent deferred sales charges and distribution payments in future years as
long as the Distribution Plan for Class B Shares is in effect.
E. Transfer Agent Agreement
BISYS Fund Services, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of
The BISYS Group, Inc. is the transfer agent for all classes of the Portfolios.
Prior to April 26, 1996, National Financial Data Services was the transfer agent
for Class A Shares. BISYS does not receive a fee for the transfer agent services
provided.
F. Custodian Agreement
Boatmen's is the custodian responsible for holding the investments purchased by
the Portfolio. In connection with the Custodian Agreement with Boatmen's, the
Portfolio incurred expenses of approximately $20,000. Prior to May 6, 1996,
State Street Bank & Trust served the Portfolios as custodian.
G. Fund Accounting Agreement
BISYS is the fund accounting agent for the Portfolio. Pursuant to the terms of
the Fund Accounting Agreement, BISYS is entitled to a fee, accrued daily and
paid monthly, at an annual rate of 0.012% of average daily net assets. The fee
will not exceed, on an annual basis, $200,000.
- --------------------------------------------------------------------------------
21
<PAGE> 22
PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
August 31, 1996
- --------------------------------------------------------------------------------
4. SECURITIES TRANSACTIONS
For the year ended August 31, 1996, cost of purchases and proceeds from sales or
maturities of securities (excluding short-term investments) were $284,891,243
and $103,861,631, respectively.
5. PORTFOLIO SHARE TRANSACTIONS
Transactions in Portfolio shares of the Portfolio are as follows (000 omitted):
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
AUGUST 31, AUGUST 31,
1996 1995
---------- ----------
<S> <C> <C>
CAPITAL TRANSACTIONS:
Pilot Shares:
Proceeds from shares issued..... $214,270 $ 92,626
Dividends reinvested............ 15,491 6,608
Cost of shares redeemed......... (37,293) (44,103)
------- ---------
Change in net assets from Pilot
share transactions............ $192,468 $ 55,131
======= =========
Class A Shares:
Proceeds from shares issued..... $ 1,223 $ 659
Dividends reinvested............ 877 566
Cost of shares redeemed......... (4,237) (17,471)
------- ---------
Change in net assets from Class
A share transactions.......... $ (2,137) $(16,246)
======= =========
Class B Shares:
Proceeds from shares issued..... $ 183
Dividends reinvested............ --
Cost of shares redeemed......... --
-------
Change in net assets from Class
B share transactions.......... $ 183
=======
Total change in net assets from
portfolio share transactions...... $190,514 $ 38,885
======= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
AUGUST 31, AUGUST 31,
1996 1995
---------- ----------
<S> <C> <C>
SHARE TRANSACTIONS:
Pilot Shares:
Issued.......................... 12,865 6,037
Reinvested...................... 967 451
Redeemed........................ (2,235) (2,937)
------- ---------
Change in Pilot Shares.......... 11,597 3,551
======= =========
Class A Shares:
Issued.......................... 73 44
Reinvested...................... 55 39
Redeemed........................ (258) (1,133)
------- ---------
Change in Class A Shares........ (130) (1,050)
======= =========
Class B Shares:
Issued.......................... 11
Reinvested...................... --
Redeemed........................ --
Change in Class B Shares........ 11
-------
Total change in shares.............. 11,478 2,501
======= =========
</TABLE>
6. FEDERAL INCOME TAX INFORMATION
For the year ended August 31, 1996, capital gain dividend distributions from
long-term capital gains were approximately $8,649,780.
- --------------------------------------------------------------------------------
22
<PAGE> 23
[THIS PAGE INTENTIONALLY LEFT BLANK]
23
<PAGE> 24
<TABLE>
<CAPTION>
THE PILOT INTERNATIONAL EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------
Financial Highlights
- ---------------------------------------------------------------------------------------------------------------------------
PILOT INTERNATIONAL
EQUITY FUND(A) PILOT KLEINWORT BENSON INTERNATIONAL EQUITY FUND
------------------------------- ----------------------------------------------------
YEAR ENDED
YEAR ENDED YEAR ENDED AUGUST 31, 1994
AUGUST 31, 1996 AUGUST 31, 1995 --------------------------
------------------------------- ----------------------- PILOT
PILOT CLASS A CLASS B PILOT CLASS A PILOT ADMINISTRATION
SHARES SHARES SHARES(B) SHARES SHARES(C) SHARES SHARES
-------- ------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period................ $ 16.24 $ 16.14 $ 17.54 $ 16.34 $ 16.29 $ 14.14 $ 14.13
-------- ------- ---------- ---------- ---------- ---------- -------
Investment Activities
Net investment income (loss)..... 0.18 0.04 -- 0.13(g) 0.08(g) 0.11(g) 0.07(g)
Net realized and unrealized gain
(loss) from investments........ 1.61 1.69 (0.65) (0.22)(g) (0.22)(g) 1.65(g) 1.65(g)
Net realized and unrealized gain
(loss) from foreign
currencies..................... (0.13) (0.12) 0.15 0.39(g) 0.39(g) 0.59(g) 0.59(g)
-------- ------- ---------- ---------- ---------- ---------- -------
Total from Investment
Activities..................... 1.66 1.61 (0.50) 0.30 0.25 2.35 2.31
Distributions
From net investment income....... (0.46) (0.46) -- (0.11) (0.11) -- --
From net realized gains
from investments and
foreign currencies............. (0.39) (0.39) -- (0.29) (0.29) (0.15) (0.15)
-------- ------- ---------- ---------- ---------- ---------- -------
Total distributions.............. (0.85) (0.85) -- (0.40) (0.40) (0.15) (0.15)
-------- ------- ---------- ---------- ---------- ---------- -------
Net Asset Value, End of Period....... $ 17.05 $ 16.90 $ 17.04 $ 16.24 $ 16.14 $ 16.34 $ 16.29
======== ======= ========= ======== ========= ======== =============
Total Return(i)...................... 10.64% 10.40% (2.85)% 2.08% 1.77% 16.75% 16.48%
Ratios/Supplemental Data:
Net Assets at end
of period (000)................ $579,019 $26,730 $ 184 $ 363,212 $ 27,625 $ 307,561 $ 44,990
Ratio of expenses to average net
assets......................... 1.08% 1.32% 2.06%(j) 1.18% 1.42% 1.12% 1.37%
Ratio of net investment income
(loss) to average net assets... 0.69% 0.48% (0.32)%(j) 0.82% 0.50% 0.75% 0.48%
Portfolio turnover rate(k)....... 22.31% 22.31% 22.31% 35.91% 35.91% 35.40% 35.40%
Average commission rate
paid(l)........................ $ 0.0160 $0.0160 $ 0.0160
<FN>
- ---------------
(a) The Pilot Kleinwort Benson International Equity Fund has been renamed the
Pilot International Equity Fund effective November 30, 1995.
(b) Class B Shares were initially issued on July 1, 1996.
(c) The Pilot Administration Shares were redesignated the Class A Shares.
(d) Pilot Shares were initially issued on July 26, 1993.
(e) Prior to July 12, 1993, the Pilot Administration Shares were not subject to
an Administration plan.
(f) Prior to a tax-free reorganization into Pilot Administration Shares
effective July 12, 1993, the Pilot Kleinwort Benson International Equity
Portfolio was a separate portfolio of Kleinwort Benson Investment
Strategies known as Kleinwort Benson International Equity Fund. The
predecessor portfolio was advised by Kleinwort Benson International
Investment Limited and had a December 31 year end.
(g) Calculated based on the average shares outstanding methodology.
(h) For years preceding the fiscal period ended August 31, 1993, net realized
and unrealized gains (losses) from investments included net realized and
unrealized gains (losses) from foreign currencies.
(i) Total return excludes sales charge of Class A Shares and is not annualized.
(j) Annualized.
(k) Portfolio turnover is calculated on the basis of the portfolio as a whole
without distinguishing between the classes of shares issued and is not
annualized.
(l) Represents the total dollar amount of commissions paid on security
transactions, for the time period of May 4, 1996 to August 31, 1996,
divided by total number of security shares purchased and sold for which
commissions were charged. Disclosure is not required for prior periods.
(m) Excludes transfer of assets effective August 6, 1993 from a collective trust
for which Boatmen's Trust Company served as Trustee.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
24
<PAGE> 25
THE PILOT INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KLEINWORT BENSON
PILOT KLEINWORT BENSON INTERNATIONAL EQUITY
INTERNATIONAL EQUITY FUND FUND
------------------------- --------------------
EIGHT MONTHS ENDED YEAR ENDED
AUGUST 31, 1993 DECEMBER 31, 1992
------------------------- --------------------
PILOT PILOT
PILOT ADMINISTRATION ADMINISTRATION
SHARES(D) SHARES SHARES(E)(F)
-------- -------------- --------------------
<S> <C> <C> <C>
$ 13.15 $ 11.85 $ 12.29
-------- ------- -------
(0.01)(g) 0.02(g) 0.04(g)
1.10(g) 2.51(g) (0.46)(g)(h)
(0.10)(g) (0.25)(g) --
-------- ------- -------
0.99 2.28 (0.42)
-- -- (0.02)
-- -- --
-------- ------- -------
-- -- (0.02)
-------- ------- -------
$ 14.14 $ 14.13 $ 11.85
======== ======= =======
7.53% 19.24% (3.42)%
$195,548 $ 55,816 $ 56,358
1.31%(j) 2.17%(j) 1.78%
(0.56)%(j) 0.25%(j) 0.35%
26.65%(m) 26.65%(m) 58.55%
</TABLE>
25
<PAGE> 26
- --------------------------------------------------------------------------------
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of the Pilot International Equity Fund:
We have audited the accompanying statement of assets and liabilities of the
Pilot International Equity Fund (formerly Pilot Kleinwort Benson International
Equity Fund) of The Pilot Funds (a Massachusetts business trust), including the
portfolio of investments as of August 31, 1996, and the related statement of
operations for the period then ended, the statement of changes in net assets for
the periods presented, and the financial highlights for the periods ended August
31, 1996, 1995, 1994 and 1993. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for the period ended December 31,
1992, was audited by other auditors whose report dated January 29, 1993,
expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Pilot International Equity Fund as of August 31, 1996, the results of its
operations and the changes in its net assets for the periods presented and the
financial highlights for the periods ended August 31, 1996, 1995, 1994 and 1993
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
October 21, 1996
26
<PAGE> 27
Financial Pilot International
Direction Equity Fund
[logo]
ANNUAL REPORT
AUGUST 31, 1996
THE
PILOT
FUNDS
NOT May Lose Value
FDIC No Bank Guarantee
INSURED No Govt. Guarantee
Distributor: Pilot Funds Distributors, Inc. 10/96
<PAGE> 28
<TABLE>
<S> <C> <C>
PILINT96ANN ---------------
Bulk Rate
U.S. Postage
PAID
Cleveland, OH
Permit No. 1
---------------
</TABLE>
