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PROTECTIVE INVESTMENT COMPANY
ANNUAL REPORT
December 31, 1994
Wording on cover is Annual Report, Protective Investment Company and
December 31, 1994. Cover description is a picture which includes books, stock
certificates, a pocket watch, and a pen, all set in black and white.
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PROTECTIVE INVESTMENT COMPANY
LETTER TO INVESTORS
Dear Investors:
In this annual report, we welcome this opportunity to review the performance and
strategies of the investment portfolios offered by Protective Investment Company
for the period from their inception on March 14, 1994 through December 31, 1994.
Our investment sub-advisers, Goldman Sachs Asset Management (GSAM) and Goldman
Sachs Asset Management-International (GSAM-I), will also provide an overview of
the investment environment during the period as well as their outlook for 1995.
THE IMPACT OF HIGHER INTEREST RATES ON U.S. STOCK AND BOND MARKETS
In 1994, the U.S. stock and bond markets felt the impact of higher interest
rates as the Federal Reserve moved aggressively in an effort to head off
inflation by pursuing a tighter monetary policy. A robust recovery,
characterized by healthy economic growth, strong corporate earnings, decreasing
unemployment, high plant capacity utilization and rising commodity prices,
coupled with a weakening dollar, caused the Federal Reserve to raise the federal
funds rate (the rate banks charge one another for overnight loans) six times by
a total of 2.50% to 5.50% from February 4 through December 31, 1994. During
this period, long-term interest rates (as measured by 30-year Treasury bonds)
have also escalated, hovering at 7.88% at year end, compared with just over
6.34% in December 1993.
As interest rates rapidly rose across the maturity spectrum, prices fell in much
of the fixed income market, surprising many investors who had become accustomed
to bond prices moving in the opposite direction during the previous decade. In
fact, 1994 was the second worst year for 20-year Treasury bonds and the worst
for five-year Treasury notes since 1926, according to data compiled by Ibbotson
Associates, a Chicago-based research firm.
The stock market also felt the brunt of rising interest rates during the period
under review. March was a particularly difficult month, as the market declined
sharply after the first Federal Reserve increase in the federal funds rate. A
relatively stable second quarter was followed by a summer rally, after which the
market retreated in September as fears of inflation and weakness in the U.S.
bond market affected stocks. The fourth quarter of 1994 was also difficult,
with the market shunning cyclical stocks in favor of consumer growth companies
whose fortunes are relatively independent of the growth of the economy. For the
year, the S&P 500 Composite Index returned 1.33% (with dividends reinvested).
Stocks with capitalizations smaller than those included in the S&P 500 were even
more volatile. However, GSAM believes the Federal Reserve's policy to restrain
monetary growth and contain inflation will prove beneficial to both the economy
and the stock market over the long term.
THE INTERNATIONAL MARKET ENVIRONMENT
During 1994, international equity and bond markets were turbulent, following
generally strong gains in 1993. The volatility was largely triggered by the
sharp increase in U.S. short-term interest rates, by greater uncertainty
regarding expectations for corporate profit growth in Europe, and by a marked
slowdown of investments into international equities in general.
EUROPE: In Europe, equity markets were strong at the beginning of 1994, peaking
in most cases by early February, with major market indices subsequently
declining 10% to 15% by November as the economic recovery faltered. European
bond markets also suffered significant losses that began with the sell-off in
the U.S. and were sustained as short-term bond yields began to rise much more
rapidly than expected in Europe as well, causing bond prices to decline sharply.
The dramatic rise in short-term bond yields did not logically follow from
Europe's economic fundamentals. More specifically, the recovery in Europe was
driven by external demand while domestic demand remained weak and unemployment
levels remained high (the reverse of the U.S.). This and other factors kept
inflation levels in Europe low. European bond markets saw some improvement in
October and November, but weakened again in December.
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ASIA: Equity markets in the Asia-Pacific region were extremely volatile during
the period. Extraordinary gains in December 1993 quickly eroded following
interest rate increases in the U.S., which caused a rise in redemptions in U.S.-
based mutual funds investing in the region. A summer rally starting in July
lifted Asian markets, followed by a sharp retreat beginning in September.
Volatility in the region continued through year end.
JAPAN: The Japanese equity market also posted negative returns during the
period under review, with the Nikkei 300 declining by 3.77% from March 14
through December 31, 1994. During the same period, the yield on Japanese 10-
year government bonds rose from 4.15% to 4.57%. The Japanese economy remained
weak during the year, hindered by a strong yen and low domestic consumption.
The government stepped in with an aggressive fiscal stimulus program that
resulted in a patchy economic recovery in last few months of 1994.
PERFORMANCE AND PORTFOLIO REVIEW BY FUND
SELECT EQUITY FUND
OBJECTIVE AND STRATEGY: The Select Equity Fund seeks to provide high total
return consisting of capital appreciation plus dividend income. The Fund's
objective is to add value through superior stock selection by using the
fundamental investment research of the Goldman Sachs Investment Research
Department and the technical stock-by-stock valuation analysis generated by a
proprietary quantitative model developed by the Fund's sub-adviser, Goldman
Sachs Asset Management. The model forecasts a stock's return using many
different factors including valuation measures, growth, earnings momentum, risk
as well as current economic conditions. A diversified list of stocks across a
broad range of industries is then selected based on the analysis.
PERFORMANCE REVIEW: From inception on March 14 through December 31, 1994, the
Select Equity Fund had a total return based on net asset value of 0.53%(1)
compared with a total return of 0.73% for the S&P 500 Composite Index, the
Fund's benchmark. As indicated in the previous section, both the Fund and the
benchmark reflected generally difficult stock market conditions. The Fund's
slight underperformance during the period can be attributed to several specific
stocks which were hurt during the fourth quarter. These included Telefonas de
Mexico, which reflected the sharp downturn in Mexican stocks in general due to
the devaluation of the Peso, and J.C. Penney, which was affected by the
continuing decline in retail stocks. Some of the better performing holdings
included General Electric, American International Group, Disney Co. and the
Gartner Group, a technology company. The following chart shows a comparison of
a hypothetical $10,000 investment in the Fund versus the S&P 500.
[Graph]
(a) Commencement of investment operations.
2
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PORTFOLIO COMPOSITION: The Fund's portfolio was fully invested in a broadly
diversified list of securities. Its sector weightings were generally in line
with those of the S&P 500 within two percentage points with the exception of the
following as of December 31: Finance (3.4% overweighted), Consumer Services
(2.1% overweighted) and Capital Spending (2.2% underweighted). During the
period, the Fund's quantitative characteristics remained attractive relative to
the S&P 500. For example, as of December 31, the Fund had a higher return on
equity (20.7% versus 19.0% for the S&P), a lower price/earnings ratio based on
1995 estimated earnings (10.6 times versus 12.2 times), and lower risk as
measured by the average debt ratio (21.6% versus 26.7%).
OUTLOOK: As interest rates stabilize in 1995, GSAM expects high-quality
companies with strong fundamentals to do well. In addition, GSAM has continued
to improve its quantitative model in order to facilitate more timely shifts
among sector and style categories that more closely reflect current economic
conditions.
GROWTH AND INCOME FUND
OBJECTIVE AND STRATEGY: The Growth and Income Fund seeks long-term growth of
capital and growth of income primarily through investments in a diversified
portfolio of common stocks and other equity securities. The Fund is managed
with a value style, which means the Fund's portfolio managers focus on companies
whose stocks are inexpensive relative to their expected earnings, with free cash
flows and the ability to pay dividends. Investments may include well-known
companies that are temporarily out of favor due to cyclical economic conditions
or which have near-term difficulties the portfolio managers judge to be
temporary in nature. In-depth fundamental research of a company's financial
structure, competitive position in the market and its management's commitment to
increasing shareholder value are all critical parts of the Fund's investment
approach
PERFORMANCE REVIEW AND HOLDINGS: From inception through December 31, 1994, the
Growth and Income Fund had a total return based on net asset value of -1.86%(1)
compared with the S&P 500 Composite Index's return of 0.73%. The Fund
outperformed the S&P during the second and third quarters, giving back some
gains during the difficult fourth quarter. More specifically, during the second
quarter of 1994, pullbacks enabled the Fund's portfolio managers to add to
existing positions in several stocks, including National Medical Enterprises,
Inc. and Chiquita Brands. The Fed's final interest rate increase during the
fourth quarter had a negative impact on financial services stocks, the Fund's
largest sector exposure, as well as on cyclical stocks in general, which are
well represented in the Fund through such stocks as General Motors Corp. and
Stone Container Corp. (pulp and paper products). Stocks that did particularly
well during the period included McDonnell Douglas Corp. and Consolidated
Freightways, one of the three largest trucking carriers in the U.S., both with
attractive prospects for 1995. The Fund ended the year with 85% of its assets
invested in common stock, 1% in convertible preferred stock and 14% in cash and
cash equivalents. The following chart shows a comparison of a hypothetical
$10,000 investment in the Fund versus the S&P 500.
[Graph]
(a) Commencement of investment operations.
3
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OUTLOOK: GSAM takes a long-term view of the market, and therefore the Fund's
investment focus will remain the same on stocks evaluated as inexpensive
compared with their estimated future earnings and ability to pay dividends.
While over the short term, the market favors different investment styles and
sectors, GSAM remains confident that their emphasis on undervalued, well-
established companies will prove rewarding over the long term.
SMALL CAP EQUITY FUND
OBJECTIVE AND STRATEGIES: The Fund's objective is long-term capital growth,
primarily through investments in equity securities of U.S. companies with market
capitalizations of $1 billion or less. The Fund is managed using a "business
value" approach to investing which means the Fund's portfolio managers look for
attractive companies with high or improving returns on capital that they believe
can achieve solid, sustainable growth, as well as generate free cash after
investing for future growth. The approach used does not attempt to invest in
companies with high multiples on the basis of rapid, but frequently
unsustainable, growth rates. Instead, GSAM uses its own rigorous fundamental
research, meeting with a company's management and interviewing the company's
competitors, customers and suppliers, to build the Fund's portfolio one stock at
a time.
PERFORMANCE REVIEW AND HOLDINGS: During the period under review, smaller cap
stocks had a particularly difficult time. Like their larger counterparts, small
cap stocks enjoyed a brief rally in July and August. Since then, small cap
stocks have declined more sharply than larger cap stocks. The market has been
particularly unforgiving to the stocks of small companies that have reported
disappointing earnings, with even modest shortfalls resulting in substantial
stock price declines. In this environment the Small Cap Equity Fund had a total
return based on net asset value of -9.87%(1) compared with a decline of 4.53%
for the Russell 2000, a small stock index and the Fund's benchmark. The
following chart shows a comparison of a hypothetical $10,000 investment in the
Fund versus the Russell 2000 (which income reinvested).
[Graph]
(a) Commencement of investment operations.
4
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The Fund's performance reflects the difficult market for small stocks in general
as well as specific setbacks that the portfolio managers believe will prove
temporary for several of its holdings. For example, retailer Musicland Stores,
Corp. stock suffered as a result of the company's new aggressive pricing and
promotional strategy that hurt current profits, but which could pay off in the
long term. Tax-loss selling by mutual funds hurt the stock prices of Foamex
International (foam products) and J. Baker Inc. (shoe and apparel retailer), but
the declines have been used as an opportunity to add to the portfolio's
positions in those stocks at what are believed to be very attractive valuations.
Other holdings suffered price declines after reporting disappointing earnings.
These included Brookstone, ABT Building Products and International Post. GSAM
expects improved operating results from each of these companies in 1995 and
beyond. In general, the portfolio was hurt by its concentration in the retail
sector which underperformed the market in 1994. In addition, the portfolio was
underweighted in the high-tech sector, which rallied strongly starting in July.
Several of the Fund's investments performed quite well during the year. In
particular, Black Box, a catalog marketer of data communications and networking
products and Plantronics, a producer of lightweight headsets and
telecommunications equipment, reported higher than expected earnings and the
stock price responded accordingly. During the fourth quarter, several new
stocks were added to the Fund's portfolio: Levitz Furniture, a leading retailer
of moderately priced furniture, TJX Co., the parent company of T.J. Maxx
(discount retailer) and Grancare, a provider of skilled nursing home care.
OUTLOOK: With regard to small-cap stocks in particular, the market is currently
experiencing an intra-cycle correction that GSAM believes will prove temporary.
Historically, small-cap stocks have experienced relatively long, dramatic cycles
during which they outperform their larger brethren, followed by periods in which
they underperform. Typically, these cycles last from 7 to 10 years, beginning
when small-cap stocks are extremely undervalued and ending when they are
extremely overvalued. During these longer cycles, there are generally several
periodic pullbacks or corrections of 10% to 15%. In the opinion of the
investment sub-adviser, the latest positive small-cap cycle, which began in
early 1991, still has several years to go. Their analysis indicates that many
small cap stocks are still attractively valued relative to larger stocks and to
their own earnings potential. GSAM remains committed to their disciplined,
stock-by-stock approach, which are expected to uncover attractive opportunities
for investors over the long term.
INTERNATIONAL EQUITY FUND
OBJECTIVE AND STRATEGIES: The International Equity Fund seeks long-term capital
appreciation by investing in equity securities of companies based outside the
U.S. which the Fund's portfolio managers believe have the potential to achieve
superior returns over the long term. The Fund focuses on selecting attractively
valued companies with strong, competitive positions in industries expected to
grow. This bottom-up approach focuses on individual companies, rather than on
making investment choices based on a particular country or industry sector.
Currency risk, inherent in any international investment, is managed by a
separate team of currency specialists based in London. At mid-year, GSAM-I
added a Tokyo based portfolio manager to its international equity team.
PERFORMANCE AND HOLDINGS: From inception through December 31, the International
Equity Fund had a total return of -4.18%(1) based on net asset value. From
April 1, 1994 (the first full month of performance for the Fund) through
December 31, the Fund had a total return of -2.07%(1) compared with a return of
0.51% for the Fund's benchmark, the Financial Times-Actuaries Europe & Pacific
Index ("Europac") combined hedged and unhedged.(2) Europac is a capitalization-
weighted composite of approximately 1,500 stocks from 20 countries in Europe and
the Asia Pacific region and is calculated on a monthly basis. The following
chart shows a comparison of a hypothetical $10,000 investment in the Fund versus
the Europac.
5
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[Graph]
(a) Performance for the benchmark is not available for the period March
14, 1994 (commencement of investment operations) through March 31,
1994. For that reason, performance is shown from April 1, 1994.
(b) The value of the hypothetical investment has been calculated using the
unhedged performance of the benchmark for the entire period.
(c) The value of the hypothetical investment has been calculated using the
hedged performance of the benchmark through August 31, 1994 and the
unhedged performance of the Index thereafter.
One of the principal reasons the Fund underperformed the Index for the period
under review was its limited exposure for most of the year in Japan, which
enjoyed relatively positive stock market returns compared to other countries in
the index. By contrast, the Fund's position was overweighted in Asia compared
with the Index, based on GSAM-I's positive view for long-term prospects in that
region. Although the Asian stocks in the portfolio collectively outperformed
their markets, they have felt the negative impact of the general market declines
in the region in recent months.
During the fourth quarter, the Fund's portfolio managers started to build a
significant position in Japanese stocks as they became more confident about the
potential for an earnings recovery in Japan next year. GSAM-I carefully
selected companies that were taking aggressive steps to restructure their
businesses in order to reduce costs and optimize the use of their assets. Two
of our new Japanese investments included Mirai, a company that produces electric
cable conduits, wiring boxes and other electrical accessories for the commercial
and residential sectors, and Hoya Corporation, the world's leading maker of
optical glass, which has successfully applied its technology to the development
of various electronic products including photomasks and high-density glass
magnetic-memory disks.
One of the portfolio's best performers was Hoganas (Sweden), a company that
dominates the world market for iron and steel powder used in the production of
automobile components, as well as in welding and alloying. With the automobile
market enjoying a very strong cyclical upturn worldwide, the GSAM-I believes
Hoganas will continue to benefit. Another successful holding was Consolidated
Electric Power of Asia (CEPA) (Hong Kong), one of the region's largest
independent power producers which the Fund's portfolio managers believe is well
positioned to benefit from the increased use of private power operators to
produce incremental power-generating capacity in Asia.
OUTLOOK: Because the Fund's focuses primarily on identifying individual
companies which are attractively priced relative to their intrinsic value rather
than on broader economic or regional views, a general market outlook is not a
major consideration in managing the Fund. Nevertheless, the Fund's portfolio
managers believe that while worldwide markets are likely to continue to
experience significant volatility in the short run, the medium-term
6
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outlook for stocks is still positive. The broader economic picture in Europe
and Japan appears to be improving, which should help selected companies in those
markets. The key will be to identify those companies that will not fall prey to
competitive pressures or to a squeeze on their profit margins. The emphasis
will continue to be on finding companies with above-average ability to perform
well under a variety of economic conditions.
GLOBAL INCOME FUND
OBJECTIVE AND STRATEGIES: The investment objective of the Global Income Fund is
to generate a high total return emphasizing current income and to a lesser
extent providing opportunities for capital appreciation. The Fund may invest in
government and other high-quality, fixed income securities issued in the U.S.
and in foreign markets. The Fund also engages in currency transactions to hedge
exchange rate risk and enhance return when possible.
PERFORMANCE AND STRATEGIES: For the period from March 14 through December 31,
1994, the total return of the Global Income Fund was -0.74%(1) based on net
asset value. From April 1 (the first full month of performance for the Fund)
through December 31, the Fund had a total return of 0.14%(1) compared with the
J.P. Morgan Global Government Bond Index (hedged into U.S. dollars) which was -
0.89% for the same period. As previously mentioned, this has been an extremely
volatile time in world bond markets which accounts for the Fund's slight
decline. As of December 31, the portfolio's bond allocations by country
weightings (based on % of total investments) were: U.S.(40.3%); U.K. (14.0%);
continental Europe (21.5%); Australia (4.3%), Japan (3.3%) and cash (16.6%).
The chart on the following page shows a comparison of a hypothetical $10,000
investment in the Fund versus the J.P. Morgan Global Government Bond Index
(hedged).
[Graph]
(a) Performance for the benchmark is not available for the period from
March 14, 1994 (commencement of investment operations) through March
31, 1994. For that reason, performance is shown from April 1, 1994.
OUTLOOK: A strengthening worldwide economy and the need for capital to fuel the
growth are likely to cause upward pressure on interest rates. As a result, the
Fund is relatively defensively positioned. In the coming months, the Fund's
portfolio managers will be looking for attractive opportunities in the dollar
bloc countries (countries whose currency movements generally correlate with the
movement of the U.S. Dollar), the U.K. and Italy, while avoiding Sweden and
Spain. In general, GSAM-I expects further volatility in 1995. In their
opinion, the key to global bond markets lies in the U.S. If the Federal Reserve
is successful in controlling inflationary pressures, the U.S. bond market will
stabilize and other bond markets around the world, which are fundamentally more
attractive, are likely to rally.
7
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MONEY MARKET FUND
OBJECTIVE: The Money Market Fund is designed to preserve capital, maximize
current income and maintain liquidity. The Fund invests in high quality money
market securities, including certificates of deposit and banker's acceptances;
high-quality commercial paper and other short-term obligations of U.S.
companies, state and municipal governments and other issuers; and repurchase
agreements relating to these securities. The Fund may also invest in securities
issued or guaranteed by the U.S. government or its agencies. However, the
Fund's shares are not guaranteed by the U.S. government.
PERFORMANCE AND COMPOSITION: As of December 31, 1994, the Fund's 7-day yield
was 5.2%. The Fund's average maturity was 16.3 days. As previously mentioned,
the Federal Reserve raised the federal funds rate six times in 1994, five of
which were during the period under review for this Fund.
OUTLOOK: Recent economic data points to continuing strong economic growth,
despite weaker retail sales in December. With unemployment at a four-year low,
strong corporate earnings and high plant capacity utilization, GSAM expects
another Fed tightening early in the first quarter of 1995 and expect the federal
funds rate to rise from 6.5% to 7.0% during the first half of 1995. Given the
near term outlook, the Fund's portfolio managers will seek to keep the Fund's
average weighted maturity in the 10 to 30 day range.
In conclusion, we want to thank you for your support during 1994. Regardless of
market conditions, the Funds portfolio managers will continue to use a
disciplined investment approach to pursue each Fund's specific objectives, while
at the same time, trying to carefully manage risk.
Sincerely,
/s/ R. Stephen Briggs
R. Stephen Briggs
Chairman and President
Protective Investment Company
_______________________________________________________________________
(1) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the last
day of each period reported. Distributions are assumed, for purposes of this
calculation, to be reinvested at the net asset value per share on the respective
payment dates of each Fund. Results represent past performance and do not
indicate future results. The value of an investment and the return on an
investment will fluctuate and redemption proceeds may be higher or lower than an
investor's original cost.
Further, all performance data is historical and includes changes in share price
and reinvestment of dividends and capital gains. Performance numbers are net of
all Fund operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If the performance
information included the effect of the insurance charges, performance numbers
would be lower.
(2) Europac is calculated on both a hedged and unhedged basis. From inception
of the Fund until 8/31/94, the Fund was managed using the hedged Europac as a
benchmark; after that date the unhedged Europac was used reflecting the fund
manager's decision to reduce currency hedging costs and use currency resources
in a more efficient manner.
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PROTECTIVE GLOBAL INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT U.S. $ VALUE
-------------------- --------- ------------
<S> <C> <C>
GOVERNMENT AND AGENCY SECURITIES - 78.4%
AUSTRALIA - 4.2%
Commonwealth of Australia, 9.000%, 09/15/2004. . . . . . . . . . . AUD 1,000,000 $ 726,002
-------------
FRANCE - 3.3%
Government of France, 8.500%, 03/28/2000 . . . . . . . . . . . . . FRF 3,000,000 573,881
-------------
GERMANY - 7.0%
Federal Republic of Germany, 9.000%, 10/20/2000. . . . . . . . . . DEM 1,750,000 1,202,807
-------------
ITALY - 7.5%
Republic of Italy, 8.500%, 01/01/1997. . . . . . . . . . . . . . . ITL 325,000,000 190,677
Republic of Italy, 8.500%, 04/01/1999. . . . . . . . . . . . . . . 2,000,000,000 1,098,644
-------------
1,289,321
-------------
NETHERLANDS - 3.0%
Dutch Government, 6.500%, 04/15/2003 . . . . . . . . . . . . . . . NLG 1,000,000 535,745
-------------
UNITED KINGDOM - 13.8%
U.K. Treasury, 9.000%, 03/03/2000. . . . . . . . . . . . . . . . . GBP 350,000 554,925
U.K. Treasury, 8.000%, 12/07/2000. . . . . . . . . . . . . . . . . 750,000 1,139,945
U.K. Treasury, 6.750%, 11/26/2004. . . . . . . . . . . . . . . . . 500,000 682,646
-------------
2,377,516
-------------
UNITED STATES - 39.6%
United States Treasury Notes, 6.875%, 07/31/1999 . . . . . . . . . US $1,500,000 1,443,750
United States Treasury Notes, 8.500%, 11/15/2000 . . . . . . . . . 600,000 618,468
United States Treasury Notes, 6.250%, 02/15/2003 . . . . . . . . . 1,400,000 1,266,118
United States Treasury Notes, 7.875%, 11/15/200. . . . . . . . . . 43,500,000 3,509,835
-------------
6,838,171
-------------
TOTAL GOVERNMENT AND AGENCY SECURITIES - (Cost $13,785,540) 13,543,443
-------------
CORPORATE BONDS - 3.2%
JAPAN - 3.2%
Japan Development Bank, 6.500%, 09/20/2001 . . . . . . . . . . . . JPY 50,000,000 559,706
-------------
TOTAL CORPORATE BONDS - (Cost $564,618) 559,706
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
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PROTECTIVE GLOBAL INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT U.S. $ VALUE
-------------------- --------- ------------
<S> <C> <C>
TIME DEPOSIT - 16.3%
UNITED STATES - 16.3%
State Street Bank and Trust Co.
Eurodollar Time Deposit, 6.375%, 01/03/1995. . . . . . . . . . . US$ 2,808,000 $ 2,808,000
-------------
TOTAL TIME DEPOSIT - (Cost $2,808,000) 2,808,000
-------------
TOTAL INVESTMENTS - (Cost $17,158,158) -- 97.9% 16,911,149
OTHER ASSETS LESS LIABILITIES -- 2.1% 370,323
-------------
NET ASSETS -- 100.0% $ 17,281,472
-------------
-------------
</TABLE>
See Glossary of Terms on page 42.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
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PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- ------ ------------
<S> <C> <C>
COMMON STOCK - 79.8%
AUSTRIA - 2.8%
Oester Elektrizita . . . . . . . . . . . . . . . . . . . . . . . . 13,375 $ 772,519
-------------
BELGIUM - 2.2%
Colruyt SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,600 602,389
-------------
DENMARK - 2.8%
Tele Danmark AS-B share. . . . . . . . . . . . . . . . . . . . . . 15,000 761,534
-------------
FINLAND - 1.2%
Kone Corp. B share . . . . . . . . . . . . . . . . . . . . . . . . 3,000 341,945
-------------
HONG KONG - 9.3%
Consolidated Electric Power of Asia. . . . . . . . . . . . . . . . 343,200 754,092
Hong Kong Electric (Holdings) Ltd. . . . . . . . . . . . . . . . . 284,500 777,714
National Mutual Asia . . . . . . . . . . . . . . . . . . . . . . . 842,000 555,021
South China Morning Post (Holdings) Ltd. . . . . . . . . . . . . . 789,380 461,670
-------------
2,548,497
-------------
INDONESIA - 2.3%
Astra International. . . . . . . . . . . . . . . . . . . . . . . . 238,500 455,732
Indostat * . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 64,490
Mulia Industrindo. . . . . . . . . . . . . . . . . . . . . . . . . 39,000 106,461
-------------
626,683
-------------
JAPAN - 21.9%
Aiwa Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,000 689,101
Hoya Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 801,607
Inaba Denkisangyo. . . . . . . . . . . . . . . . . . . . . . . . . 13,000 352,587
Max Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000 485,183
Mirai Industry Co. . . . . . . . . . . . . . . . . . . . . . . . . 16,000 368,056
Mitsubishi Electric Corp.. . . . . . . . . . . . . . . . . . . . . 129,000 916,153
Mitsubishi Heavy Industries. . . . . . . . . . . . . . . . . . . . 121,000 923,757
Santen Pharmaceutical Co.. . . . . . . . . . . . . . . . . . . . . 23,000 639,980
Shimachu Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,000 829,432
-------------
6,005,856
-------------
MALAYSIA - 0.6%
Tanjong. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,000 157,744
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- ------ ------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
NETHERLANDS - 6.6%
N.V. GTI Holdings. . . . . . . . . . . . . . . . . . . . . . . . . 2,000 $ 175,125
Randstad Holdings N.V. . . . . . . . . . . . . . . . . . . . . . . 14,900 805,985
Wolters Kluwer N.V.. . . . . . . . . . . . . . . . . . . . . . . . 11,035 816,231
-------------
1,797,341
-------------
NORWAY - 2.5%
Helikopter Service AS. . . . . . . . . . . . . . . . . . . . . . . 15,000 177,449
Unitor Ships Service AS . . . . . . . . . . . . . . . . . . . . . 30,430 512,979
-------------
690,428
-------------
SPAIN - 4.8%
Banco Popular Espana . . . . . . . . . . . . . . . . . . . . . . . 8,360 993,991
Zardoya-Otis . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,025 314,623
-------------
1,308,614
-------------
SWEDEN - 12.4%
Arjo AB *. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,600 431,944
Getinge Industrier AB, class B . . . . . . . . . . . . . . . . . . 15,260 396,358
Hoganas AB, class B. . . . . . . . . . . . . . . . . . . . . . . . 49,600 767,637
Securitas AB, class B. . . . . . . . . . . . . . . . . . . . . . . 32,000 861,303
Skane Gripen AB. . . . . . . . . . . . . . . . . . . . . . . . . . 19,900 136,584
Volvo AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,500 800,743
-------------
3,394,569
-------------
SWITZERLAND - 3.3%
Cie Financier Richemont AG . . . . . . . . . . . . . . . . . . . . 880 914,006
-------------
UNITED KINGDOM - 7.1%
Boots Co. PLC. . . . . . . . . . . . . . . . . . . . . . . . . . . 49,562 391,157
British Airport Authority PLC. . . . . . . . . . . . . . . . . . . 103,595 767,310
Rentokil Group PLC . . . . . . . . . . . . . . . . . . . . . . . . 217,000 781,553
-------------
1,940,020
-------------
TOTAL COMMON STOCK - (Cost $21,585,435) 21,862,145
-------------
PREFERRED STOCK - 3.0%
GERMANY - 3.0%
Fresenius AG . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,706 823,548
-------------
TOTAL PREFERRED STOCK - (Cost $622,981) 823,548
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- ------ ------------
<S> <C> <C>
AMERICAN DEPOSITORY RECEIPTS - 1.2%
INDONESIA - 1.2%
Perusahaan Industries *. . . . . . . . . . . . . . . . . . . . . . 8,900 $ 318,175
-------------
TOTAL DEPOSITORY RECEIPTS - (Cost $302,862) 318,175
-------------
<CAPTION>
CONTRACTS
---------
<S> <C> <C>
OPTIONS PURCHASED - 0.4%
JAPAN - 0.4%
Nikkei 300 Call @ 284.70, expiring 03/09/95. . . . . . . . . . . . 290,000,000 71,217
Nikkei 300 Call @ 328.55, expiring 12/22/95. . . . . . . . . . . . 1,656,946 35,619
-------------
106,836
-------------
TOTAL OPTIONS PURCHASED - (Cost $357,172) 106,836
-------------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
TIME DEPOSIT - 18.0%
UNITED STATES - 18.0%
State Street Bank and Trust Co.
Eurodollar Time Deposit, 6.375%, 01/03/1995. . . . . . . . . . . . US$ 4,922,000 4,922,000
-------------
TOTAL TIME DEPOSIT - (Cost $4,922,000) 4,922,000
-------------
TOTAL INVESTMENTS - (Cost $27,790,450) -- 102.4% 28,032,704
OTHER ASSETS LESS LIABILITIES -- (2.4)% (647,643)
-------------
NET ASSETS -- 100.0% $ 27,385,061
-------------
-------------
<FN>
*Denotes non-income producing security.
</TABLE>
See Glossary of Terms on page 42.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK - 85.1%
AEROSPACE/DEFENSE - 4.4%
Lockheed Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 $ 290,500
McDonnell Douglas Corp.. . . . . . . . . . . . . . . . . . . . . . 7,800 1,107,600
Northrop Grumman Corp. . . . . . . . . . . . . . . . . . . . . . . 10,800 453,600
-------------
1,851,700
-------------
AIRLINES - 0.5%
AMR Corp Delaware *. . . . . . . . . . . . . . . . . . . . . . . . 3,600 191,700
-------------
AUTOMOBILE - 3.3%
General Motors Corp. * . . . . . . . . . . . . . . . . . . . . . . 33,400 1,411,150
-------------
AUTOPARTS - ORIGINAL EQUIPMENT - 1.1%
Lear Seating Corp. . . . . . . . . . . . . . . . . . . . . . . . . 22,700 451,163
-------------
BROKERAGE FIRMS - 3.8%
Bear Stearns Cos. Inc. . . . . . . . . . . . . . . . . . . . . . . 78,385 1,205,169
Lehman Brothers Holdings Inc.. . . . . . . . . . . . . . . . . . . 26,600 392,350
-------------
1,597,519
-------------
CHEMICALS - 1.1%
Geon Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,600 481,800
-------------
CONTAINERS - PAPER - 4.3%
Owens Illinois Inc. *. . . . . . . . . . . . . . . . . . . . . . . 30,300 333,300
Stone Container Corp. *. . . . . . . . . . . . . . . . . . . . . . 85,300 1,471,425
-------------
1,804,725
-------------
DOMESTIC OIL - 1.4%
Atlantic Richfield Co. . . . . . . . . . . . . . . . . . . . . . . 3,600 366,300
Tenneco Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,900 208,250
-------------
574,550
-------------
DRUGS & HEALTH CARE - 1.0%
FHP International Corp. *. . . . . . . . . . . . . . . . . . . . . 16,450 423,588
-------------
ELECTRIC COMPANIES - 4.5%
DQE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,400 633,975
Dominion Resources Inc.. . . . . . . . . . . . . . . . . . . . . . 8,800 314,600
Texas Utilities Co.. . . . . . . . . . . . . . . . . . . . . . . . 29,700 950,400
-------------
1,898,975
-------------
ELECTRONICS - INSTRUMENTATION - 1.8%
Texas Instruments Inc. . . . . . . . . . . . . . . . . . . . . . . 10,400 778,700
-------------
ELECTRONICS - SEMICONDUCTORS - 2.9%
Advanced Micro Devices Inc. *. . . . . . . . . . . . . . . . . . . 48,800 1,213,900
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
FINANCIAL - 0.1%
Liberty Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 $ 38,063
-------------
FINANCIAL SERVICES - 4.3%
North American Mortgage Co.. . . . . . . . . . . . . . . . . . . . 45,000 663,750
Student Loan Marketing Assn. . . . . . . . . . . . . . . . . . . . 12,200 396,500
Travelers Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 22,900 744,250
-------------
1,804,500
-------------
FOODS - 2.4%
Chiquita Brands International Inc. . . . . . . . . . . . . . . . . 75,700 1,031,412
-------------
GAMING COMPANIES - 0.3%
Penn National Gaming Inc. *. . . . . . . . . . . . . . . . . . . . 21,800 141,700
-------------
HOMEBUILDING - 0.5%
Centex Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,200 209,300
-------------
HOSPITAL MANAGEMENT - 4.8%
Community Psychiatric Centers. . . . . . . . . . . . . . . . . . . 48,400 532,400
National Medical Enterprises Inc. *. . . . . . . . . . . . . . . . 104,900 1,481,712
-------------
2,014,112
-------------
HOUSEHOLD PRODUCTS - 1.4%
Playtex Products Inc. *. . . . . . . . . . . . . . . . . . . . . . 84,300 600,638
-------------
HOUSEWARES - 1.7%
National Presto Industries Inc.. . . . . . . . . . . . . . . . . . 17,400 722,100
-------------
INSURANCE BROKERS - 1.2%
Aetna Life & Casualty Co.. . . . . . . . . . . . . . . . . . . . . 10,800 508,950
-------------
LEISURE TIME - 3.3%
Brunswick Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . 42,200 796,525
Outboard Marine Corp.. . . . . . . . . . . . . . . . . . . . . . . 30,900 606,412
-------------
1,402,937
-------------
LIQUOR - 0.9%
Anheuser Busch Cos. Inc. . . . . . . . . . . . . . . . . . . . . . 7,300 371,388
-------------
MAJOR REGIONAL BANKS - 3.7%
BankAmerica Corp.. . . . . . . . . . . . . . . . . . . . . . . . . 25,500 1,007,250
Chemical Banking Corp. . . . . . . . . . . . . . . . . . . . . . . 4,300 154,263
PNC Bank Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 19,500 411,937
-------------
1,573,450
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
MANUFACTURING - DIVERSIFIED IN - 0.9%
Figgie International Holdings Inc. * . . . . . . . . . . . . . . . 59,100 $ 361,988
-------------
MEDICAL PRODUCTS & SUPPLIES - 0.1%
Pharmchem Labs Inc. *. . . . . . . . . . . . . . . . . . . . . . . 13,200 26,400
-------------
MULTI-LINE INSURANCE - 0.5%
Cigna Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,300 208,725
-------------
OIL - INTERNATIONAL INTEGRATED - 2.1%
Amoco Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,100 360,662
Exxon Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,300 443,475
Royal Dutch Petroleum Co.. . . . . . . . . . . . . . . . . . . . . 900 96,750
-------------
900,887
-------------
OIL WELL EQUIPMENT & SERVICES - 0.7%
Sonat Offshore Drilling Inc. . . . . . . . . . . . . . . . . . . . 17,600 312,400
-------------
OTHER MAJOR BANKS - 0.1%
Union Bank of San Francisco. . . . . . . . . . . . . . . . . . . . 2,200 58,850
-------------
PAPER AND FOREST PRODUCTS - 3.9%
Champion International Corp. . . . . . . . . . . . . . . . . . . . 13,900 507,350
Georgia Pacific Corp.. . . . . . . . . . . . . . . . . . . . . . . 15,900 1,136,850
-------------
1,644,200
-------------
PETROLEUM SERVICES - 1.0%
Tosco Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,100 410,663
-------------
PROPERTY-CASUALTY - 2.7%
American Premier Underwriters. . . . . . . . . . . . . . . . . . . 20,300 525,262
Home State Holdings Inc. * . . . . . . . . . . . . . . . . . . . . 23,700 355,500
Partner Re Holdings. . . . . . . . . . . . . . . . . . . . . . . . 12,600 261,450
-------------
1,142,212
-------------
PUBLISHING - 1.8%
Valassis Communications Inc. * . . . . . . . . . . . . . . . . . . 49,900 748,500
-------------
PUBLISHING - NEWSPAPERS - 0.5%
American Publishing Co.. . . . . . . . . . . . . . . . . . . . . . 20,900 229,900
-------------
REAL ESTATE INVESTMENT TRUSTS - 3.2%
Centerpoint Properties Corp. . . . . . . . . . . . . . . . . . . . 23,100 450,450
Haagen Alexander Properties Inc. . . . . . . . . . . . . . . . . . 40,000 635,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
LTC Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 15,400 $ 204,050
United Mobile Homes Inc. . . . . . . . . . . . . . . . . . . . . . 11,319 83,481
-------------
1,372,981
-------------
RETAIL - SPECIALTY APPAREL STORE - 2.1%
TJX Cos Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,600 900,000
-------------
SAVINGS AND LOAN HOLDING COMPANIES - 2.2%
GP Financial Corp. . . . . . . . . . . . . . . . . . . . . . . . . 45,900 946,687
-------------
STEEL - 1.0%
Quanex Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,100 436,913
-------------
TEXTILE - APPAREL MANUFACTURERS - 0.9%
Chic By HIS Inc. * . . . . . . . . . . . . . . . . . . . . . . . . 39,700 377,150
-------------
TOBACCO - 2.6%
Philip Morris Cos. Inc.. . . . . . . . . . . . . . . . . . . . . . 6,500 373,750
RJR Nabisco Holdings Corp. * . . . . . . . . . . . . . . . . . . . 8,700 47,850
UST Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 693,750
-------------
1,115,350
-------------
TRUCKERS - 4.1%
Consolidated Freightways Inc.. . . . . . . . . . . . . . . . . . . 76,500 1,711,687
-------------
TOTAL COMMON STOCK - (Cost $36,770,574) 36,003,513
-------------
PREFERRED STOCK - 1.4%
ELECTRONICS - SEMICONDUCTORS - 0.1%
Advanced Micro Devices Inc.. . . . . . . . . . . . . . . . . . . . 700 36,750
-------------
FOODS - 0.6%
Chiquita Brands International Inc. . . . . . . . . . . . . . . . . 5,800 239,250
-------------
TOBACCO - 0.7%
RJR Nabisco Holdings Corp. . . . . . . . . . . . . . . . . . . . . 50,900 305,400
-------------
TOTAL PREFERRED STOCK - (Cost $628,936) 581,400
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- -----
<S> <C> <C>
SHORT TERM INVESTMENT - 14.6%
REPURCHASE AGREEMENT - 14.6%
State Street Bank and Trust Co., 5.625%, 01/03/1995. . . . . . . . $ 6,199,000 $ 6,199,000
(Dated 12/30/1994, collateralized by -------------
$6,285,000 United States Treasury Note,
4.625%, 2/15/1996, with a value of $6,202,874)
TOTAL SHORT TERM INVESTMENT - (Cost $6,199,000) 6,199,000
-------------
TOTAL INVESTMENTS - (Cost $43,598,510) -- 101.1% 42,783,913
OTHER ASSETS LESS LIABILITIES -- (1.1)% (478,795)
-------------
NET ASSETS -- 100.0% $ 42,305,118
-------------
-------------
<FN>
*Denotes non-income producing security.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK - 93.1%
AEROSPACE/DEFENSE - 3.8%
Allied Signal Inc. . . . . . . . . . . . . . . . . . . . . . . . . 7,400 $ 251,600
Rockwell International Corp. . . . . . . . . . . . . . . . . . . . 4,500 160,875
United Technologies Corp.. . . . . . . . . . . . . . . . . . . . . 4,300 270,362
-------------
682,837
-------------
ALUMINUM - 0.9%
Aluminum Co. of America . . . . . . . . . . . . . . . . . . . . . 1,900 164,588
-------------
AUTOMOBILE - 2.7%
Chrysler Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,900 142,100
Ford Motor Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200 173,600
General Motors Corp. . . . . . . . . . . . . . . . . . . . . . . . 4,000 169,000
-------------
484,700
-------------
AUTO PARTS - 0.7%
Masland Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,700 120,313
-------------
BEVERAGES - ALCOHOLIC - 0.7%
Anheuser Busch Cos. Inc. . . . . . . . . . . . . . . . . . . . . . 2,600 132,275
-------------
BEVERAGES - SOFT DRINKS - 3.2%
PepsiCo Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,500 561,875
-------------
BROADCAST MEDIA - 2.2%
Capital Cities ABC Inc.. . . . . . . . . . . . . . . . . . . . . . 4,500 383,625
-------------
BUSINESS SERVICES - 0.7%
Ogden Corp. *. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,552 122,850
-------------
CHEMICALS - 6.8%
Dow Chemical Co. . . . . . . . . . . . . . . . . . . . . . . . . . 5,500 369,875
Du Pont E I De Nemours & Co. . . . . . . . . . . . . . . . . . . . 8,900 500,625
Monsanto Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,700 331,350
-------------
1,201,850
-------------
COMMERCIAL SERVICES - 2.4%
Omnicom Group. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,100 419,175
-------------
COMPUTER SOFTWARE & SERVICES - 2.3%
International Business Machines, Inc.. . . . . . . . . . . . . . . 5,500 404,250
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
CONGLOMERATES - 2.7%
ITT Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400 $ 212,700
Tenneco Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,100 259,250
-------------
471,950
-------------
CONSTRUCTION MATERIALS - 0.7%
Armstrong World Industries Inc.. . . . . . . . . . . . . . . . . . 3,400 130,900
-------------
DRUGS & HEALTH CARE - 1.7%
American Home Products Corp. . . . . . . . . . . . . . . . . . . . 4,700 294,925
-------------
ELECTRIC COMPANIES - 3.4%
General Public Utilities Corp. . . . . . . . . . . . . . . . . . . 6,500 170,625
Peco Energy Co.. . . . . . . . . . . . . . . . . . . . . . . . . . 8,600 210,700
Public Service Co. * . . . . . . . . . . . . . . . . . . . . . . . 16,800 218,400
-------------
599,725
-------------
ELECTRICAL EQUIPMENT - 0.6%
Philips Electronics N.V. . . . . . . . . . . . . . . . . . . . . . 3,700 108,688
-------------
ELECTRONICS - INSTRUMENTATION - 2.7%
Hewlett Packard Co.. . . . . . . . . . . . . . . . . . . . . . . . 3,300 329,587
Texas Instruments Inc. . . . . . . . . . . . . . . . . . . . . . . 1,900 142,263
-------------
471,850
-------------
ELECTRONICS - SEMICONDUCTORS - 1.3%
Intel Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,600 229,950
-------------
ENTERTAINMENT - 1.6%
Disney (Walt) Co. (The). . . . . . . . . . . . . . . . . . . . . . 6,200 285,975
-------------
FINANCIAL - 1.3%
Federal National Mortgage Assn.. . . . . . . . . . . . . . . . . . 3,200 233,200
-------------
FINANCIAL SERVICES - 2.0%
Allstate Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800 113,400
Dean Witter Discover & Co. . . . . . . . . . . . . . . . . . . . . 3,600 121,950
Federal Home Loan Mortgage Corp. . . . . . . . . . . . . . . . . . 2,300 116,150
-------------
351,500
-------------
GAS & PIPELINE UTILITIES - 2.0%
Enron Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,800 176,900
Panhandle Eastern Corp.. . . . . . . . . . . . . . . . . . . . . . 9,200 181,700
-------------
358,600
-------------
HEALTH CARE DRUGS - 3.0%
Schering Plough Corp.. . . . . . . . . . . . . . . . . . . . . . . 7,100 525,400
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
HOSPITAL MANAGEMENT - 1.0%
Columbia HCA Healthcare Corp.. . . . . . . . . . . . . . . . . . . 4,900 $ 178,850
-------------
HOUSEHOLD PRODUCTS - 4.2%
Corning Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,700 200,162
Procter & Gamble Co. . . . . . . . . . . . . . . . . . . . . . . . 7,600 471,200
Unilever N.V.. . . . . . . . . . . . . . . . . . . . . . . . . . . 700 81,550
-------------
752,912
-------------
INSURANCE BROKERS - 0.9%
MGIC Investment Corp.. . . . . . . . . . . . . . . . . . . . . . . 4,800 159,000
-------------
INSURANCE - PROPERTY & CASUALTY - 0.8%
CMAC Investment Corp.. . . . . . . . . . . . . . . . . . . . . . . 5,100 147,263
-------------
MACHINERY - DIVERSIFIED - 1.2%
Caterpillar Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 3,800 209,475
-------------
MAJOR REGIONAL BANKS - 5.2%
BankAmerica Corp.. . . . . . . . . . . . . . . . . . . . . . . . . 5,300 209,350
Citicorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,600 231,700
First Fidelity Bancorp . . . . . . . . . . . . . . . . . . . . . . 3,800 170,525
Nationsbank Corp.. . . . . . . . . . . . . . . . . . . . . . . . . 6,700 302,337
-------------
913,912
-------------
MANUFACTURING - DIVERSIFIED IN - 1.6%
Dover Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500 283,937
-------------
MULTI-LINE INSURANCE - 2.6%
American International Group Inc.. . . . . . . . . . . . . . . . . 4,700 460,600
-------------
OIL - INTERNATIONAL INTEGRATED - 5.4%
Amoco Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 177,375
Exxon Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 425,250
Royal Dutch Petroleum Co.. . . . . . . . . . . . . . . . . . . . . 3,300 354,750
-------------
957,375
-------------
PERSONAL LOANS - 0.6%
Beneficial Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 2,900 113,100
-------------
PHOTOGRAPHY - 1.2%
Eastman Kodak Co.. . . . . . . . . . . . . . . . . . . . . . . . . 4,600 219,650
-------------
PUBLISHING - NEWSPAPERS - 0.6%
Gannett Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,100 111,825
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
21
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
RAILROADS & EQUIPMENT - 1.1%
Union Pacific Corp.. . . . . . . . . . . . . . . . . . . . . . . . 4,100 $ 187,062
-------------
RETAIL - FOOD CHAINS - 1.0%
Penn Traffic Co. * . . . . . . . . . . . . . . . . . . . . . . . . 4,600 174,800
-------------
RETAIL - GENERAL MERCHANDISE - 1.7%
Wal Mart Stores Inc. . . . . . . . . . . . . . . . . . . . . . . . 14,000 297,500
-------------
RETAIL - SPECIALTY APPAREL STORE - 2.9%
Federated Department Stores Inc. * . . . . . . . . . . . . . . . . 5,400 103,950
LTD. Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,400 188,500
Sears Roebuck & Co.. . . . . . . . . . . . . . . . . . . . . . . . 4,900 225,400
-------------
517,850
-------------
TELECOMMUNICATIONS - LONG DISTANCE - 4.1%
American Telephone & Telegraph Corp. . . . . . . . . . . . . . . . 10,100 507,525
Sprint Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,100 223,762
-------------
731,287
-------------
TELEPHONE - 1.9%
Ameritech Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . 8,200 331,075
-------------
TEXTILE - APPAREL MANUFACTURERS - 1.0%
V F Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,600 175,050
-------------
TOBACCO - 4.0%
Philip Morris Cos. Inc.. . . . . . . . . . . . . . . . . . . . . . 12,300 707,250
-------------
TOYS - 0.7%
Mattel Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,100 128,138
-------------
TOTAL COMMON STOCK - (Cost $16,846,269) 16,498,912
-------------
AMERICAN DEPOSITORY RECEIPTS - 3.5%
OIL - INTERNATIONAL INTEGRATED - 1.8%
British Petroleum PLC. . . . . . . . . . . . . . . . . . . . . . . 3,900 311,513
-------------
TELEPHONE - 1.7%
British Telecommunications * . . . . . . . . . . . . . . . . . . . 5,000 300,625
-------------
TOTAL DEPOSITORY RECEIPTS - (Cost $600,373) 612,138
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- -----
<S> <C> <C>
SHORT TERM INVESTMENT - 3.1%
REPURCHASE AGREEMENT - 3.1%
State Street Bank and Trust Co., 5.625%, 01/03/1995. . . . . . . . $ 558,000 $ 558,000
(Dated 12/30/1994, collateralized by -------------
$570,000 United States Treasury Note,
4.625%, 2/15/1996, with a value of $558,349)
TOTAL SHORT TERM INVESTMENT - (Cost $558,000) 558,000
-------------
TOTAL INVESTMENTS - (Cost $18,004,642) -- 99.7% 17,669,050
OTHER ASSETS LESS LIABILITIES -- 0.3% 48,399
-------------
NET ASSETS -- 100.0% $ 17,717,449
-------------
-------------
<FN>
*Denotes non-income producing security.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<PAGE>
PROTECTIVE SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK - 65.7%
ADVERTISING - 1.6%
Dimac Corp. *. . . . . . . . . . . . . . . . . . . . . . . . . . . 26,700 $ 337,088
-------------
BUILDING MATERIALS - 3.5%
ABT Building Products Corp. *. . . . . . . . . . . . . . . . . . . 54,100 757,400
-------------
COMMERCIAL SERVICES - 1.0%
Childrens Discovery Centers America *. . . . . . . . . . . . . . . 5,100 58,013
International Post Ltd. *. . . . . . . . . . . . . . . . . . . . . 31,200 148,200
-------------
206,213
-------------
COMMUNICATION - EQUIPMENT/MANUFACTURERS - 2.7%
IPC Information Systems Inc. * . . . . . . . . . . . . . . . . . . 23,000 258,750
Micom Communications * . . . . . . . . . . . . . . . . . . . . . . 16,699 146,116
Plantronics Inc. * . . . . . . . . . . . . . . . . . . . . . . . . 6,100 183,000
-------------
587,866
-------------
COMMUNICATION SERVICES - 2.8%
Black Box Corp. *. . . . . . . . . . . . . . . . . . . . . . . . . 40,600 609,000
-------------
COMPUTER SOFTWARE & SERVICES - 0.2%
Opinion Research Corp.*. . . . . . . . . . . . . . . . . . . . . . 8,600 43,269
-------------
DRUGS & HEALTH CARE - 0.5%
Playtex Products * . . . . . . . . . . . . . . . . . . . . . . . . 16,000 114,000
-------------
ELECTRICAL EQUIPMENT - 0.3%
Holophone Corp. *. . . . . . . . . . . . . . . . . . . . . . . . . 3,600 67,500
-------------
FOODS - 3.1%
Alpine Lace Brands Inc. *. . . . . . . . . . . . . . . . . . . . . 5,300 18,550
Brothers Gourmet Coffees Inc. *. . . . . . . . . . . . . . . . . . 14,100 155,100
Morningstar Group Inc. . . . . . . . . . . . . . . . . . . . . . . 70,000 490,000
-------------
663,650
-------------
HEALTH CARE MISCELLANEOUS - 4.6%
American Healthcorp Inc. * . . . . . . . . . . . . . . . . . . . . 18,900 95,681
Grancare Inc. *. . . . . . . . . . . . . . . . . . . . . . . . . . 36,900 645,750
National Health Labs Inc.. . . . . . . . . . . . . . . . . . . . . 9,600 127,200
Physicians Clinical Labs Inc. *. . . . . . . . . . . . . . . . . . 16,400 143,500
-------------
1,012,131
-------------
HOUSEHOLD PRODUCTS - 1.9%
American Safety Razor Co. *. . . . . . . . . . . . . . . . . . . . 30,400 418,000
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
24
<PAGE>
PROTECTIVE SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
HOUSEWARES - 3.1%
Levitz Furniture Inc. *. . . . . . . . . . . . . . . . . . . . . . 81,800 $ 674,850
-------------
MACHINERY - DIVERSIFIED - 1.7%
DT Industries Inc. . . . . . . . . . . . . . . . . . . . . . . . . 35,100 377,325
-------------
MANUFACTURING - DIVERSIFIED IN - 4.8%
Figgie International Holdings Inc. * . . . . . . . . . . . . . . . 53,000 324,625
Foamex International Inc. *. . . . . . . . . . . . . . . . . . . . 71,200 712,000
-------------
1,036,625
-------------
MEDICAL PRODUCTS & SUPPLIES - 0.1%
American White Cross Inc. *. . . . . . . . . . . . . . . . . . . . 11,700 30,713
-------------
OFFICE EQUIPMENT & SUPPLIES - 0.6%
Nu Kote Holding Inc. * . . . . . . . . . . . . . . . . . . . . . . 5,400 139,725
-------------
OIL - INTERNATIONAL INTEGRATED - 1.9%
Total Petroleum North America Ltd. . . . . . . . . . . . . . . . . 33,400 417,500
-------------
PUBLISHING - NEWSPAPERS - 3.0%
American Publishing Co.. . . . . . . . . . . . . . . . . . . . . . 59,700 656,700
-------------
RESTAURANTS - 3.1%
Quantum Restaurant Group Inc. *. . . . . . . . . . . . . . . . . . 28,200 338,400
Sonic Corp. *. . . . . . . . . . . . . . . . . . . . . . . . . . . 16,900 342,225
-------------
680,625
-------------
RETAIL - SPECIALTY - 14.1%
Brookstone Inc.* . . . . . . . . . . . . . . . . . . . . . . . . . 31,800 202,725
Ernst Home Center Inc. * . . . . . . . . . . . . . . . . . . . . . 37,300 317,050
J. Baker Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 51,900 778,500
Musicland Stores Corp. * . . . . . . . . . . . . . . . . . . . . . 68,100 612,900
North American Watch Corp. . . . . . . . . . . . . . . . . . . . . 28,400 404,700
Oroamerica Inc. *. . . . . . . . . . . . . . . . . . . . . . . . . 9,900 79,200
Service Merchandise Co. Inc. * . . . . . . . . . . . . . . . . . . 43,400 200,725
Shoe Carnival Inc. * . . . . . . . . . . . . . . . . . . . . . . . 32,600 154,850
Supercuts Inc. * . . . . . . . . . . . . . . . . . . . . . . . . . 38,000 313,500
-------------
3,064,150
-------------
RETAIL - SPECIALTY APPAREL STORE - 4.3%
A Pea In The Pod Inc. *. . . . . . . . . . . . . . . . . . . . . . 9,100 20,475
Charming Shoppes Inc.. . . . . . . . . . . . . . . . . . . . . . . 40,600 268,975
TJX Cos Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,900 654,687
-------------
944,137
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
<PAGE>
PROTECTIVE SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
STEEL - 0.8%
Webco Industries Inc. *. . . . . . . . . . . . . . . . . . . . . . 20,900 $ 182,875
-------------
TELECOMMUNICATIONS - LONG DISTANCE - 1.1%
USA Mobile Communications *. . . . . . . . . . . . . . . . . . . . 23,200 229,100
-------------
TEXTILE - APPAREL MANUFACTURERS - 1.7%
Authentic Fitness Corp. *. . . . . . . . . . . . . . . . . . . . . 2,500 34,687
Norton McNaughton Inc. * . . . . . . . . . . . . . . . . . . . . . 22,200 338,550
-------------
373,237
-------------
TOYS - 1.2%
American Recreation Co. Holdings Inc. *. . . . . . . . . . . . . . 37,900 255,825
-------------
TRUCKERS - 2.0%
Consolidated Freightways Inc.. . . . . . . . . . . . . . . . . . . 19,800 443,025
-------------
TOTAL COMMON STOCK - (Cost $15,815,797) 14,322,529
-------------
AMERICAN DEPOSITORY RECEIPTS - 2.7%
COMMERCIAL SERVICES - 2.2%
Automated Security Holdings PLC *. . . . . . . . . . . . . . . . . 210,606 473,863
-------------
PAPER AND FOREST PRODUCTS - 0.5%
Concordia Paper Holdings Ltd. *. . . . . . . . . . . . . . . . . . 10,700 109,675
-------------
TOTAL DEPOSITORY RECEIPTS - (Cost $692,423) 583,538
-------------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
SHORT TERM INVESTMENT - 11.9%
REPURCHASE AGREEMENT - 11.9%
State Street Bank and Trust Co., 5.625%, 01/03/1995. . . . . . . . $ 2,599,000 2,599,000
(Dated 12/30/1994, collateralized by -------------
$2,635,000 United States Treasury Note,
4.625%, 2/15/1996, with a value of $2,600,624)
TOTAL SHORT TERM INVESTMENT - (Cost $2,599,000) 2,599,000
-------------
U.S. GOVERNMENT OBLIGATION - 22.9%
United States Treasury Bill, 1.10%, 01/05/1995 **. . . . . . . . . 5,000,000 4,999,389
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS - (Cost $4,999,389) 4,999,389
-------------
TOTAL INVESTMENTS - (Cost $24,106,609) -- 103.2% 22,504,456
OTHER ASSETS LESS LIABILITIES -- (3.2)% (691,710)
-------------
NET ASSETS -- 100.0% $ 21,812,746
-------------
-------------
<FN>
*Denotes non-income producing security.
**Annualized yield at time of purchase. (unaudited)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26
<PAGE>
PROTECTIVE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- -----
<S> <C> <C>
GOVERNMENT AND AGENCY SECURITIES - 99.4%
FEDERAL AGENCIES - 99.4%
Federal Farm Credit Bank, 5.780%, 01/23/1995 . . . . . . . . . . . $800,000 $ 797,174
Federal Farm Credit Bank, 5.900%, 02/03/1995 . . . . . . . . . . . 270,000 268,540
Federal Home Loan Bank, 5.330%, 01/10/1995 . . . . . . . . . . . . 300,000 299,600
Federal Home Loan Bank, 5.950%, 01/17/1995 . . . . . . . . . . . . 210,000 209,445
Federal Home Loan Mortgage Corp., 5.900%, 01/05/1995 . . . . . . . 200,000 199,869
Federal Home Loan Mortgage Corp., 5.830%, 01/18/1995 . . . . . . . 725,000 723,004
Federal National Mortgage Assn., 5.880%, 01/06/1995. . . . . . . . 400,000 399,673
Federal National Mortgage Assn., 5.300%, 01/09/1995. . . . . . . . 100,000 99,882
Tennessee Valley Authority, 5.760%, 01/24/1995 . . . . . . . . . . 600,000 597,792
-------------
TOTAL GOVERNMENT AND AGENCY SECURITIES - (Cost $3,594,979) 3,594,979
-------------
TOTAL INVESTMENTS - (Cost $3,594,979) -- 99.4% 3,594,979
OTHER ASSETS LESS LIABILITIES -- 0.6% 23,512
-------------
NET ASSETS -- 100.0% $ 3,618,491
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
27
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- -----------
<S> <C> <C>
ASSETS
Investments in securities, at value (Note B) . . . . . . . . . $16,911,149 $28,032,704
Investments in repurchase agreements (Note B). . . . . . . . . 0 0
Cash, including foreign currency at value. . . . . . . . . . . 118 201,463
Receivable for forward currency contracts (Note F) . . . . . . 26,833,959 12,569,070
Interest receivable. . . . . . . . . . . . . . . . . . . . . . 290,704 1,743
Receivable due from Investment Manager (Note C). . . . . . . . 65,864 108,676
Foreign income tax reclaim receivable. . . . . . . . . . . . . 21,651 3,634
Receivable for fund shares sold. . . . . . . . . . . . . . . . 9,234 35,487
Dividends receivable . . . . . . . . . . . . . . . . . . . . . 0 12,918
Receivable for currency sold . . . . . . . . . . . . . . . . . 0 139,101
Receivable for securities sold . . . . . . . . . . . . . . . . 0 21,122
----------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 44,132,679 41,125,918
LIABILITIES
Payable for forward currency contracts (Note F). . . . . . . . 26,773,798 12,682,334
Payable for fund shares redeemed . . . . . . . . . . . . . . . 29,742 53,606
Investment management fee payable (Note C) . . . . . . . . . . 15,504 23,866
Payable for securities purchased . . . . . . . . . . . . . . . 0 740,355
Payable for currency purchased . . . . . . . . . . . . . . . . 0 139,578
Payable for options purchased. . . . . . . . . . . . . . . . . 0 66,424
Accounts payable and accrued expenses. . . . . . . . . . . . . 32,163 34,694
----------- -----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . 26,851,207 13,740,857
----------- -----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $17,281,472 $27,385,061
----------- -----------
----------- -----------
NET ASSETS
Paid-in capital (Note E) . . . . . . . . . . . . . . . . . . . $17,660,172 $27,764,376
Distribution in excess of net investment income (Note B) . . . (19,500) (229,909)
Accumulated net realized gain (loss) on
investments and foreign currency transactions. . . . . . . . (171,358) (277,050)
Net unrealized appreciation (depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . (247,009) 242,254
Foreign currency translations. . . . . . . . . . . . . . . . 59,167 (114,610)
----------- -----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $17,281,472 $27,385,061
----------- -----------
----------- -----------
NET ASSET VALUE PER SHARE
Offering and redemption price per share (based on
shares of capital stock outstanding, par
value $.001 per share) . . . . . . . . . . . . . . . . . . . . $ 9.558 $ 9.581
Total shares outstanding at end of period. . . . . . . . . . . 1,808,152 2,858,191
Cost of investments. . . . . . . . . . . . . . . . . . . . . . $17,158,158 $27,790,450
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
28
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND SELECT SMALL CAP MONEY
INCOME FUND EQUITY FUND EQUITY FUND MARKET FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (Note B) $36,584,913 $17,111,050 $19,905,456 $3,594,979
Investments in repurchase agreements (Note B). . . . . . . 6,199,000 558,000 2,599,000 0
Cash, including foreign currency at value. . . . . . . . . 215 687 315 58,758
Receivable for forward currency contracts (Note F) . . . . 0 0 0 0
Interest receivable. . . . . . . . . . . . . . . . . . . . 1,937 174 812 0
Receivable due from Investment Manager (Note C). . . . . . 60,090 50,771 53,949 29,704
Foreign income tax reclaim receivable. . . . . . . . . . . 0 72 0 0
Receivable for fund shares sold. . . . . . . . . . . . . . 177,728 33,348 28,761 0
Dividends receivable . . . . . . . . . . . . . . . . . . . 78,282 41,461 5,766 0
Receivable for currency sold . . . . . . . . . . . . . . . 0 0 0 0
Receivable for securities sold . . . . . . . . . . . . . . 193,817 0 170,897 0
----------- ----------- ----------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . 43,295,982 17,795,563 22,764,956 3,683,441
LIABILITIES
Payable for forward currency contracts (Note F). . . . . . 0 0 0 0
Payable for fund shares redeemed . . . . . . . . . . . . . 86,201 42,159 48,281 43,729
Investment management fee payable (Note C) . . . . . . . . 26,418 11,260 13,971 1,860
Payable for securities purchased . . . . . . . . . . . . . 847,083 0 862,893 0
Payable for currency purchased . . . . . . . . . . . . . . 0 0 0 0
Payable for options purchased. . . . . . . . . . . . . . . 0 0 0 0
Accounts payable and accrued expenses. . . . . . . . . . . 31,162 24,695 27,065 19,361
----------- ----------- ----------- -----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . 990,864 78,114 952,210 64,950
----------- ----------- ----------- -----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . $42,305,118 $17,717,449 $21,812,746 $3,618,491
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET ASSETS
Paid-in capital (Note E) . . . . . . . . . . . . . . . . . $43,154,895 $18,056,117 $23,471,185 $3,618,488
Distribution in excess of net investment income (Note B) . 0 0 0 0
Accumulated net realized gain (loss) on
investments and foreign currency transactions. . . . . . (35,180) (3,076) (56,286) 3
Net unrealized appreciation (depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . . (814,597) (335,592) (1,602,153) 0
Foreign currency translations. . . . . . . . . . . . . . 0 0 0 0
----------- ----------- ----------- -----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . $42,305,118 $17,717,449 $21,812,746 $3,618,491
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET ASSET VALUE PER SHARE
Offering and redemption price per share (based on
shares of capital stock outstanding,
par value $.001 per share) . . . . . . . . . . . . . . . . $9.661 $9.839 $8.951 $1
Total shares outstanding at end of period. . . . . . . . . 4,378,864 1,800,828 2,436,839 3,618,488
Cost of investments. . . . . . . . . . . . . . . . . . . . $43,598,510 $18,004,642 $24,106,609 $3,594,979
</TABLE>
29
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF OPERATIONS
FOR THE PERIOD MARCH 14, 1994* THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- -----------
<S> <C> <C>
INVESTMENT INCOME
Interest income. . . . . . . . . . . . . . . . . . . . . $556,517 $ 127,027
Dividend income. . . . . . . . . . . . . . . . . . . . . 0 145,093
Foreign taxes withheld . . . . . . . . . . . . . . . . . (16,268) (13,808)
--------- ---------
TOTAL INVESTMENT INCOME. . . . . . . . . . . . . . . . 540,249 258,312
EXPENSES
Investment management fee (Note C) . . . . . . . . . . . 88,896 121,187
Custodian fee and expenses . . . . . . . . . . . . . . . 35,000 74,501
Legal fee. . . . . . . . . . . . . . . . . . . . . . . . 19,400 19,400
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . 13,333 13,333
Registration and filing expense. . . . . . . . . . . . . 5,930 9,241
Directors fees (Note C). . . . . . . . . . . . . . . . . 3,458 3,458
Printing expense . . . . . . . . . . . . . . . . . . . . 2,333 2,333
Transfer agent fee . . . . . . . . . . . . . . . . . . . 1,710 1,710
Miscellaneous expense. . . . . . . . . . . . . . . . . . 1,392 1,392
--------- ---------
Total operating expenses before reimbursement. . . . . 171,452 246,555
Expenses borne by the investment manager (Note C). . . (82,556) (125,368)
--------- ---------
NET EXPENSES . . . . . . . . . . . . . . . . . . . . 88,896 121,187
--------- ---------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . 451,353 137,125
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investments. . . . . . . . . . . . . . . . . . . . . . (259,299) (442,903)
Foreign currency transactions. . . . . . . . . . . . . 63,610 (206,507)
Options. . . . . . . . . . . . . . . . . . . . . . . . 4,831 5,326
Change in unrealized appreciation (depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . (247,009) 492,590
Foreign currency translations. . . . . . . . . . . . . 59,167 (114,610)
Options. . . . . . . . . . . . . . . . . . . . . . . . 0 (250,336)
--------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS). . . . . . . (378,700) (516,440)
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS. . . . . . . . . . . . . . . . $ 72,653 $(379,315)
--------- ---------
--------- ---------
<FN>
*Commencement of investment operations.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
30
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND SELECT SMALL CAP MONEY
INCOME FUND EQUITY FUND EQUITY FUND MARKET FUND
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest income. . . . . . . . . . . . . . . . . . . . . . $ 143,144 $ 49,808 $ 150,441 $133,144
Dividend income. . . . . . . . . . . . . . . . . . . . . . 308,985 168,561 11,131 0
Foreign taxes withheld . . . . . . . . . . . . . . . . . . (671) (1,631) (454) 0
--------- --------- ----------- --------
TOTAL INVESTMENT INCOME. . . . . . . . . . . . . . . . . 451,458 216,738 161,118 133,144
EXPENSES
Investment management fee (Note C) . . . . . . . . . . . . 120,254 53,567 69,074 17,470
Custodian fee and expenses . . . . . . . . . . . . . . . . 21,501 19,700 21,500 3,923
Legal fee. . . . . . . . . . . . . . . . . . . . . . . . . 19,400 19,400 19,400 19,400
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . . 13,333 13,333 13,333 13,333
Registration and filing expense. . . . . . . . . . . . . . 13,655 6,137 7,515 1,823
Directors fees (Note C). . . . . . . . . . . . . . . . . . 3,458 3,458 3,458 3,458
Printing expense . . . . . . . . . . . . . . . . . . . . . 2,333 2,333 2,333 2,333
Transfer agent fee . . . . . . . . . . . . . . . . . . . . 1,710 1,710 1,710 1,710
Miscellaneous expense. . . . . . . . . . . . . . . . . . . 1,392 1,392 1,392 1,377
--------- --------- ----------- --------
Total operating expenses before reimbursement. . . . . . 197,036 121,030 139,715 64,827
Expenses borne by the investment manager (Note C). . . . (76,782) (67,463) (70,641) (47,357)
--------- --------- ----------- --------
NET EXPENSES 120,254 53,567 69,074 17,470
--------- --------- ----------- --------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . 331,204 163,171 92,044 115,674
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain(loss) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . 134,697 211,953 1,583 248
Foreign currency transactions. . . . . . . . . . . . . . 0 0 0 0
Options. . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
Change in unrealized appreciation (depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . . (814,597) (335,592) (1,602,153) 0
Foreign currency translations. . . . . . . . . . . . . . 0 0 0 0
Options. . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
--------- --------- ----------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS). . . . . . . . (679,900) (123,639) (1,600,570) 248
--------- --------- ----------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS. . . . . . . . . . . . . . . . . $(348,696) $ 39,532 $(1,508,526) $115,922
--------- --------- ----------- --------
--------- --------- ----------- --------
</TABLE>
31
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD MARCH 14, 1994* THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income. . . . . . . . . . . . . . . . . . $ 451,353 $ 137,125
Net realized gain (loss) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . (259,299) (442,903)
Foreign currency transactions. . . . . . . . . . . . . . 63,610 (206,507)
Options. . . . . . . . . . . . . . . . . . . . . . . . . 4,831 5,326
Change in unrealized appreciation (depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . . (247,009) 492,590
Foreign currency translations. . . . . . . . . . . . . . 59,167 (114,610)
Options. . . . . . . . . . . . . . . . . . . . . . . . . 0 (250,336)
----------- -----------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . . . . . . . 72,653 (379,315)
Dividends and distributions to shareholders from:
Net investment income. . . . . . . . . . . . . . . . . . (451,353) 0
Net realized gain on investments . . . . . . . . . . . . 0 0
In excess of net realized gains. . . . . . . . . . . . . 0 0
----------- -----------
Total dividends and distributions to shareholders. . . . (451,353) 0
Fund share transactions (Note E) . . . . . . . . . . . . . 17,650,172 27,754,376
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . 17,271,472 27,375,061
Net assets
Beginning of period. . . . . . . . . . . . . . . . . . . 10,000 10,000
----------- -----------
END OF PERIOD (1). . . . . . . . . . . . . . . . . . . . $17,281,472 $27,385,061
----------- -----------
----------- -----------
(1) Including distribution in excess of net investment income $ (19,500) $ (229,909)
----------- -----------
----------- -----------
<FN>
*Commencement of investment operations.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
32
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND SELECT SMALL CAP MONEY
INCOME FUND EQUITY FUND EQUITY FUND MARKET FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income. . . . . . . . . . . . . . . . . . $ 331,204 $ 163,171 $ 92,044 $ 115,674
Net realized gain (loss) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . 134,697 211,953 1,583 248
Foreign currency transactions. . . . . . . . . . . . . . 0 0 0 0
Options. . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
Change in unrealized appreciation (depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . . (814,597) (335,592) (1,602,153) 0
Foreign currency translations. . . . . . . . . . . . . . 0 0 0 0
Options. . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . . . . . . . (348,696) 39,532 (1,508,526) 115,922
Dividends and distributions to shareholders from:
Net investment income. . . . . . . . . . . . . . . . . . (331,204) (163,171) (92,044) (115,674)
Net realized gain on investments . . . . . . . . . . . . (134,697) (211,953) (1,583) (245)
In excess of net realized gains. . . . . . . . . . . . . (35,180) (3,076) (56,286) 0
----------- ----------- ----------- ----------
Total dividends and distributions to shareholders. . . . (501,081) (378,200) (149,913) (115,919)
Fund share transactions (Note E) . . . . . . . . . . . . . 43,144,895 18,046,117 23,461,185 3,608,488
----------- ----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . 42,295,118 17,707,449 21,802,746 3,608,491
Net assets
Beginning of period. . . . . . . . . . . . . . . . . . . 10,000 10,000 10,000 10,000
----------- ----------- ----------- ----------
END OF PERIOD (1). . . . . . . . . . . . . . . . . . . . $42,305,118 $17,717,449 $21,812,746 $3,618,491
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
(1) Including distribution in excess of net
investment income. . . . . . . . . . . . . . . . . . . $ 0 $ 0 $ 0 $ 0
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>
33
<PAGE>
PROTECTIVE INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS
FOR A SHARE OF COMMON STOCK OUTSTANDING FOR THE PERIOD MARCH 14,
1994 (COMMENCEMENT OF INVESTMENT OPERATIONS) THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
Realized and
Unrealized Gain
Net Asset (Loss) on Total Dividends Dividends
Value at Net Investments and from from Net from Net
Beginning Investment Foreign Currency Investment Investment Realized
of Period Income (2)(6) Transactions(6) Operations Income Capital Gains
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Income Fund(1)........... $10.000 $0.367 $(0.442) $(0.075) $(0.367) $0.000
- ------------------------------------------------------------------------------------------------------------------------
International Equity Fund(1).... 10.000 0.048 (0.467) (0.419) 0.000 0.000
- ------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund(1)....... 10.000 0.114 (0.300) (0.186) (0.114) (0.031)
- ------------------------------------------------------------------------------------------------------------------------
Select Equity Fund(1)........... 10.000 0.093 (0.039) 0.054 (0.093) (0.120)
- ------------------------------------------------------------------------------------------------------------------------
Small Cap Equity Fund(1)........ 10.000 0.038 (1.025) (0.987) (0.038) (0.001)
- ------------------------------------------------------------------------------------------------------------------------
Money Market Fund(1)............ 1.000 0.031 0.000 0.031 (0.031) 0.000
- ------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Investment operations commenced on March 14, 1994.
(2) Net Investment Income and Ratio of Operating Expenses to Average Net Assets
is after reimbursement of certain fees and expenses by the Investment
Manager. (See Note C to the Company's financial statements.) Had the
Investment Manager not undertaken to reimburse expenses related to the
Funds, net investment income per share and the ratio of operating expenses
to average net assets would have been as follows: Global Income Fund,
$0.320 and 2.12%; International Equity Fund, $0.004 and 2.24%; Growth and
Income Fund, $0.097 and 1.31%; Select Equity Fund, $.055 and 1.81%; Small
Cap Equity Fund, $.009 and 1.62%; and Money Market Fund, $0.018 and 2.24%,
respectively.
(3) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the
last day of each period reported. Distributions are assumed, for the
purposes of this calculation, to be reinvested at the net asset value per
share on the respective payment dates of each Fund.
(4) Annualized.
(5) Non-Annualized
(6) The per share computation is a mathematical computation which may appear
inconsistent with the statement of operations.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Distributions Ratio Ratio of Net
in Excess Net Asset of Operating Investment
of Value at Net Assets Expenses Income to Portfolio
Net Realized Total End Total End to Average Average Turnover
Gains Distributions of Period Return(3)(5) of Period Net Assets(4) Net Assets(4) Rate(5)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.000 $(0.367) $9.558 (0.74)% $ 17,281 1.10% 5.58% 210%
- -----------------------------------------------------------------------------------------------------------
0.000 0.000 9.581 (4.18) 27,385 1.10 1.25 33
- -----------------------------------------------------------------------------------------------------------
(0.008) (0.153) 9.661 (1.86) 42,305 0.80 2.21 36
- -----------------------------------------------------------------------------------------------------------
(0.002) (0.215) 9.839 0.53 17,717 0.80 2.44 56
- -----------------------------------------------------------------------------------------------------------
(0.023) (0.062) 8.951 (9.87) 21,813 0.80 1.07 17
- -----------------------------------------------------------------------------------------------------------
0.000 (0.031) 1.000 3.14 3,618 0.60 3.80 N/A
- -----------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE A - ORGANIZATION
Protective Investment Company (the "Company") was incorporated in the State of
Maryland on September 2, 1993 as an open-end management investment company. The
Company offers six separately managed pools of assets which have differing
investment objectives and policies. The Company currently issues six classes of
its shares: Global Income Fund, International Equity Fund, Growth and Income
Fund, Select Equity Fund, Small Cap Equity Fund and Money Market Fund
(collectively a "Fund" and the "Funds"). The Company had no operations prior to
March 2, 1994, other than those relating to organizational matters. The initial
capital contribution of $60,000, $10,000 per class, resulting in 1,000 shares
being issued by the Global Income Fund, International Equity Fund, Growth and
Income Fund, Select Equity Fund and Small Cap Equity Fund and 10,000 shares
being issued by the Money Market Fund, was provided on March 2, 1994 by
Protective Life Insurance Company. The Company commenced investment operations
on March 14, 1994.
The Company offers each class of its stock to a separate account of Protective
Life Insurance Company ("Protective Life") as funding vehicles for certain
variable annuity contracts issued by Protective Life through the separate
account.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Company in the preparation of its financial statements.
VALUATION OF INVESTMENTS - The Company's portfolio securities traded on a
national securities exchange are valued at the last sale price, or, if no sale
occurs, at the mean between the closing bid and closing asked prices. Portfolio
securities traded over-the-counter are valued at the last sale price, or, if no
sale occurs, at the mean between the last bid and asked prices. Debt securities
with a remaining maturity of 61 days or more are valued on the basis of
dealer-supplied quotations or by a pricing service selected by Goldman Sachs
Asset Management, investment adviser to the Company, and approved by the board
of directors of the Company. Short-term securities and debt securities with a
remaining maturity of 60 days or less are valued at their amortized cost which
approximates market value. Options and futures contracts are valued at the last
sale price on the market where any such options or futures contract is
principally traded. Options traded over-the-counter are valued based upon prices
provided by market makers in such securities or dealers in such currencies.
Securities for which current market quotations are unavailable or for which
quotations are not deemed by the investment adviser to be representative of
market values are valued at fair value as determined in good faith pursuant to
procedures established by the board of directors.
FOREIGN SECURITIES - Foreign securities traded on a recognized securities
exchange are valued at the last sale price in the principal market where they
are traded, or, if closing prices are unavailable, at the last bid price
available prior to the time a Fund's net asset value is determined. Foreign
portfolio securities prices are furnished by quotation services expressed in the
local currency's value and are translated into U.S. dollars at the current rate
of exchange.
REPURCHASE AGREEMENTS - In connection with transactions in repurchase
agreements, the Company's custodian takes possession of the underlying
collateral securities, the value or market price of which is at least equal to
the principal amount, including interest, of the repurchase transaction. To the
extent that any repurchase transaction exceeds one business day, the value of
the collateral is marked-to-market on a daily basis to ensure the adequacy of
the collateral. In the event of default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal proceedings.
36
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994
INVESTMENT TRANSACTIONS - Investment security transactions are recorded on the
date of purchase or sale. Realized gains and losses from security transactions
are determined on the basis of identified cost.
INVESTMENT INCOME - Dividend income is recorded on the ex-dividend date, or, in
the case of dividend income on foreign securities, on the ex-dividend date or
when the Fund becomes aware of its declaration. Interest income is recorded on
the accrual basis.
FOREIGN CURRENCY TRANSLATIONS - The records of the Company are maintained in
U.S. dollars. Foreign currency amounts are translated into U.S. dollars at a
current rate of exchange of such currency to determine the value of investments,
other assets and liabilities on the date of any determination of net asset value
of the Funds. Purchases and sales of securities and income and expenses are
converted at the prevailing rate of exchange on the respective dates of such
transactions. Net realized gain or loss on foreign currency includes net
realized currency gains and losses recognized between accrual and payment dates.
Upon the purchase or sale of a security denominated in a foreign currency, the
Company may enter into a foreign currency exchange contract for the purchase or
sale, for a fixed amount of U.S. dollars, of an amount of the foreign currency
required to settle the security transaction. Accordingly, the Company would not
realize currency gains or losses between the trade and settlement dates on such
security transactions.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Company on each day and the resulting net unrealized
appreciation, depreciation and related net receivable or payable amounts are
determined by using forward currency exchange rates supplied by a quotation
service.
FORWARD CURRENCY CONTRACTS - A forward foreign currency contract ("Forward") is
an agreement between two parties to buy and sell a currency at a set price on a
future date. The market value of the Forward fluctuates with changes in currency
exchange rates. The Forward is marked-to-market daily and the change in the
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward is closed, the Fund records a realized gain or loss equal to the
difference between the value at the time its was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of the contract or if the value of the currency changes
unfavorably. The Fund may enter into Forwards in connection with planned
purchases and sales of securities, to hedge specific receivables or payables
against changes in future exchange rates or to hedge the U.S. dollar value of
portfolio securities denominated in a foreign currency. The Funds purchase and
sell forward currency contracts in order to hedge against the fluctuation of
foreign currencies and, in certain circumstances, to increase the Funds total
returns.
CALL AND PUT OPTIONS - A call option written by a Fund obligates the Fund to
sell specified currency or security to the option holder at a specified price at
any time before the expiration date. A put option written by a Fund obligates
the Fund to purchase specified currency or security from the option holder at a
specified price at any time before the expiration date. These transactions
involve a risk that a Fund may, upon exercise of the option, be required to sell
currency or securities at a price that is less than its market value or be
required to purchase currency or securities at a price that exceeds its market
value. A Fund may also realize gains or losses by entering into closing
purchase transactions identical to call or put options that have been written by
the Fund in order to terminate its obligation under a call or put option. In
determining the amount of gain or loss realized, the option premium paid and
related transactions costs are added to the exercise price. The Funds enter
into option transactions to hedge against the fluctuation in a security's value,
index's value or foreign currency's value or to seek to increase the Funds total
returns.
37
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994
EXPENSES - Expenses directly attributable to a Fund are charged to that Fund.
Expenses not directly attributable to a Fund are split evenly among the affected
Funds, allocated on the basis of relative average net assets, or otherwise
allocated among the Funds as the board of directors may direct or approve.
DISTRIBUTIONS - Distributions from net investment income are declared and
distributed at least annually for International Equity Fund, Select Equity Fund
and Small Cap Equity Fund; declared and distributed quarterly for Growth and
Income Fund; declared and distributed monthly for Global Income Fund; and
declared daily and distributed monthly for Money Market Fund. Distributions
from net realized capital gains, if any, are declared and distributed at least
annually. Distributions are recorded on the ex-dividend date.
FEDERAL INCOME TAXES - Each Fund of the Company is treated as a separate entity
for federal tax purposes. Each Fund intends to qualify each year as a regulated
investment company under Subchapter M of the Internal Revenue Code, as amended.
By so qualifying, the Funds will not be subject to federal income taxes to the
extent that they distribute all of their taxable income, including realized
capital gains, for the fiscal year. In addition, by distributing during each
calendar year substantially all of their net investment income, capital gains
and certain other amounts, if any, the Funds will not be subject to a federal
excise tax. Income distributions and capital gains distributions of a Fund are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due
to differing treatments of income and gains on various securities held by a
Fund, timing differences and/or differing characterization of distribution made
by the Funds. Any permanent book and tax basis differences at fiscal year-end
have been reclassified to reflect the tax characterization.
NOTE C - AGREEMENTS AND FEES
The Company has entered into an investment management agreement with Investment
Distributors Advisory Services, Inc. (the "Investment Manager"), a wholly-owned
subsidiary of Protective Life Corporation, under which the Company agrees to pay
for business management and administrative services furnished by the Investment
Manager. For its services to the Company, the Investment Manager receives a
monthly management fee based on the average daily net assets of each Fund at the
following annual rates: Global Income Fund, 1.10%; International Equity Fund,
1.10%; Growth and Income Fund, .80%; Select Equity Fund, .80%; Small Cap Equity
Fund, .80%; and Money Market Fund, .60%.
In order to limit expenses, Protective Life has voluntarily undertaken to pay
certain operating expenses of the Company or of any Fund to the extent that such
expenses (excluding brokerage or other portfolio transaction expenses or
expenses of litigation, indemnification, taxes or other extraordinary expenses,
as accrued for each Fund) exceed the following percentages of that Fund's
estimated average daily net assets on an annualized basis: Global Income Fund,
1.10%; International Equity Fund, 1.10%; Growth and Income Fund, .80%; Select
Equity Fund, .80%; Small Cap Equity Fund, .80%; and Money Market Fund, .60%.
The Investment Manager may end its obligation to pay such expense upon 120 days
notice to the Company.
Goldman Sachs Asset Management acts as the investment adviser (the "Adviser") of
Growth and Income Fund, Money Market Fund, Select Equity Fund and Small Cap
Equity Fund. Goldman Sachs Asset Management-International acts as the Adviser
to Global Income Fund and International Equity Fund. Each Adviser has entered
into an investment advisory agreement for each Fund with the Investment Manager
under which the Adviser manages the investment portfolios of the Funds of which
it is Adviser. As compensation for its services, the Advisers receive a monthly
fee from the Investment Manager based on the average daily net assets of each
Fund at the following annual rates: Global Income Fund and International Equity
Fund, .40% of the first $50 million, .30% of the next $100 million, .25% of the
next $100 million, and .20% of the assets in excess of $250 million; Growth
38
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994
and Income Fund, Select Equity Fund and Small Cap Equity Fund, .40% of the first
$50 million, .30% of the next $150 million, and .20% of assets in excess of $200
million; Money Market Fund, .35% of the first $50 million, .25% of the next $100
million, .20% of the next $100 million, and .15% of assets in excess of $250
million.
Directors of the Company who are not interested persons receive an annual fee of
$2,000 and $1,500 for each meeting attended.
NOTE D - INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities for each Fund other than the Money Market Fund, for the
period from March 14, 1994 (commencement of investment operations) to December
31, 1994 were as follows:
<TABLE>
<CAPTION>
Non-U.S. U.S. Non-U.S. U.S.
Government Government Government Government
Purchases Purchases Sales Sales
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Global Income Fund............ $ 25,087,819 $ 9,243,656 $ 16,171,452 $ 3,689,992
International Equity Fund..... 26,489,544 0 3,804,708 0
Growth and Income Fund........ 43,453,645 0 6,188,832 0
Select Equity Fund............ 21,749,443 0 4,514,754 0
Small Cap Equity Fund......... 17,870,509 0 1,363,872 0
</TABLE>
Purchases and sales, including maturities, of short-term securities by the Money
Market Fund for the period from March 14, 1994 (commencement of investment
operations) to December 31, 1994 were $34,241,424 and $30,779,588, respectively.
The identified cost of investments in securities owned by each Fund for federal
income tax purposes and their respective gross unrealized appreciation and
depreciation at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
Net Unrealized
Identified Gross Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Global Income Fund............ $ 17,203,321 $ 35,726 $ (327,898) $ (292,172)
International Equity Fund..... 27,822,218 1,095,799 (885,313) 210,486
Growth and Income Fund........ 43,747,613 854,457 (1,818,157) (963,700)
Select Equity Fund............ 18,007,718 337,117 (675,785) (338,668)
Small Cap Equity Fund......... 24,106,609 769,467 (2,371,620) (1,602,153)
Money Market Fund............. 3,594,979 0 0 0
</TABLE>
In addition, the following Funds had capital loss carryforwards; Global Income
Fund $123,300 and International Equity Fund $247,765. The capital loss
carryforwards may be utilized to offset capital gains through December 31, 2002.
NOTE E - SHAREHOLDER TRANSACTIONS
The authorized capital stock of the Company consists of 1 billion shares, par
value $.001 per share. Six hundred million of the authorized shares have been
divided into and may be issued in six designated classes as follows: Global
Income Fund, 100 million shares; International Equity Fund, 100 million shares;
Growth and Income Fund, 100 million shares; Select Equity Fund, 100 million
shares; Small Cap Equity Fund, 100 million shares; and Money Market Fund, 100
million shares.
39
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Global Income Fund International Equity Fund
March 14, 1994* to March 14, 1994* to
December 31, 1994 December 31, 1994
----------------- -----------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold.......................... 1,975,710 $ 19,281,417 2,926,579 $ 28,423,406
Shares issued to shareholders in
reinvestment of dividends....... 46,868 451,352 0 0
Shares redeemed...................... (215,426) (2,082,597) (69,388) (669,030)
--------- ------------- --------- -------------
Net increase......................... 1,807,152 $ 17,650,172 2,857,191 $ 27,754,376
--------- ------------- --------- -------------
--------- ------------- --------- -------------
<CAPTION>
Growth and Income Fund Select Equity Fund
March 14, 1994* to March 14, 1994* to
December 31, 1994 December 31, 1994
----------------- -----------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold.......................... 4,404,799 $ 43,422,513 1,816,889 $ 18,229,784
Shares issued to shareholders in
reinvestment of dividends....... 51,337 501,081 38,441 378,199
Shares redeemed...................... (78,272) (778,699) (55,502) (561,866)
--------- ------------- --------- -------------
Net increase......................... 4,377,864 $ 43,144,895 1,799,828 $ 18,046,117
--------- ------------- --------- -------------
--------- ------------- --------- -------------
<CAPTION>
Small Cap Equity Fund Money Market Fund
March 14, 1994* to March 14, 1994* to
December 31, 1994 December 31, 1994
----------------- -----------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold.......................... 2,469,183 $ 23,792,481 19,446,623 $ 19,446,623
Shares issued to shareholders in
reinvestment of dividends....... 16,747 149,912 115,976 115,976
Shares redeemed...................... (50,091) (481,208) (15,954,111) (15,954,111)
--------- ------------- --------- -------------
Net increase......................... 2,435,839 $ 23,461,185 3,608,488 $ 3,608,488
--------- ------------- --------- -------------
--------- ------------- --------- -------------
</TABLE>
* Commencement of investment operations.
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994
NOTE F - FORWARD FOREIGN CURRENCY CONTRACTS
At December 31, 1994, the outstanding forward exchange currency contracts,
which contractually obligate the Fund to deliver currencies at a specified
date, were as follows:
<TABLE>
<CAPTION>
FOREIGN CURRENCY PURCHASE CONTRACTS U.S. $ Cost U.S.$ Unrealized
on Obligations Current Appreciation
Date Value (Depreciation)
-------------- ---------- --------------
<S> <C> <C> <C>
CAD, expiring 03/02/1995................ $2,432,059 $2,432,059 $ 0
CHF, expiring 02/15/1995................ 805,025 805,025 0
DEM, expiring 02/14/1995-03/07/1995..... 1,417,007 1,417,007 0
ESP, expiring 02/09/1995................ 790,287 787,358 (2,929)
FRF, expiring 02/28/1995................ 1,265,193 1,265,193 0
GBP, expiring 02/09/1995-02/14/1995..... 2,339,798 2,340,713 915
NLG, expiring 01/23/1995................ 589,094 589,094 0
-------------- ---------- --------------
9,638,463 9,636,449 (2,014)
--------------
FOREIGN CURRENCY SALE CONTRACTS
AUD, expiring 01/23/1995................ 696,511 718,262 (21,751)
CAD, expiring 03/02/1995................ 2,458,029 2,432,059 25,970
CHF, expiring 02/15/1995................ 803,934 805,025 (1,091)
DEM, expiring 02/09/1995-03/07/1995..... 4,319,288 4,369,250 (49,962)
ESP, expiring 02/09/1995................ 787,358 787,358 0
FRF, expiring 02/28/1995................ 1,902,777 1,878,038 24,739
GBP, expiring 02/07/1995-02/14/1995..... 3,181,541 3,097,561 83,980
ITL, expiring 02/27/1995................ 1,329,121 1,315,566 13,555
JPY, expiring 03/13/1995................ 570,071 574,927 (4,856)
NLG, expiring 01/23/1995................ 1,148,880 1,157,289 (8,409)
-------------- ---------- --------------
17,197,510 17,135,335 62,175
--------------
$ 60,161
--------------
--------------
<CAPTION>
INTERNATIONAL EQUITY FUND U.S. $ Cost U.S. $ Unrealized
on Origination Current Appreciation
FOREIGN CURRENCY PURCHASE CONTRACTS Date Value (Depreciation)
-------------- ---------- -------------
<S> <C> <C> <C>
DEM, expiring 03/03/1995................ $ 1,278,162 $1,280,741 $ 2,579
JPY, expiring 01/23/1995................ 1,914,851 1,926,333 11,482
SEK, expiring 03/06/1995................ 41,359 41,359 0
-------------- ---------- --------------
3,234,372 3,248,433 14,061
--------------
FOREIGN CURRENCY SALE CONTRACTS
DEM, expiring 07/03/1995................ 4,406,797 4,478,812 (72,015)
ESP, expiring 03/03/1995................ 1,278,162 1,282,549 (4,387)
JPY, expiring 01/23/1995................ 326,438 326,438 0
SEK, expiring 03/06/1995................ 3,309,240 3,360,163 (50,923)
-------------- ---------- --------------
9,320,637 9,447,962 (127,325)
--------------
$ (113,264)
--------------
--------------
</TABLE>
41
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994
GLOSSARY OF TERMS
AUD - Australian Dollar
CAD - Canadian Dollar
CHF - Swiss Franc
DEM - Deutsche Mark
ESP - Spanish Peseta
FRF - French Franc
GBP - Great British Pound
ITL - Italian Lira
JPY - Japanese Yen
NLG - Dutch Guilder
SEK - Swedish Krona
US$ - United States Dollar
42
<PAGE>
PROTECTIVE INVESTMENT COMPANY
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE INVESTORS AND BOARD OF DIRECTORS
OF PROTECTIVE INVESTMENT COMPANY
We have audited the accompanying statement of assets and liabilities of
Protective Investment Company (the "Funds") including the schedule of
investments, as of December 31, 1994, and the related statements of operations,
changes in net assets and financial highlights for period March 14, 1994
(commencement of operations) through December 31, 1994. These financial
statements and financial highlights are the responsibility of the Funds
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit 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
December 31, 1994, 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 audit provides 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
Protective Investment Company as of December 31, 1994, the results of its
operations, the changes in its net assets and the financial highlights for the
period March 14, 1994 (commencement of operations) through December 31, 1994, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 15, 1995
43
<PAGE>
PROTECTIVE INVESTMENT COMPANY
_______________
DIRECTORS AND OFFICERS
D. Warren Bailey, DIRECTOR
G. Ruffner Page, Jr., DIRECTOR
Cleophus Thomas, Jr., DIRECTOR
R. Stephen Briggs, PRESIDENT AND DIRECTOR
Doretta Milligan, VICE PRESIDENT AND DIRECTOR
John D. Johns, Executive VICE PRESIDENT AND TREASURER
Richard J. Bielen, VICE PRESIDENT AND COMPLIANCE OFFICER
Jerry W. DeFoor, VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
Lizabeth R. Nichols, VICE PRESIDENT, SECRETARY AND COMPLIANCE OFFICER
_______________
INVESTMENT MANAGER
Investment Distributors Advisory Services, Inc.
_______________
INVESTMENT ADVISERS
Goldman Sachs Asset Management
Goldman Sachs Asset Management-International
_______________
The information contained in this report is intended for general informational
purposes only. This report is not authorized for distribution to prospective
investors unless preceded or accompanied by current Company and Separate Account
prospectuses which contain important information concerning the Company, the
Separate Account and its current public offering of variable annuity contracts.
44
<PAGE>
[Logo Protective Life Insurance Company]
