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PROTECTIVE INVESTMENT COMPANY
ANNUAL REPORT
DECEMBER 31, 1995
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PROTECTIVE INVESTMENT COMPANY
LETTER TO INVESTORS
DEAR INVESTORS: FEBRUARY 1,1996
We are pleased to have the opportunity to review the performance and discuss the
holdings of the investment portfolios offered by the Protective Investment
Company for the 12-month period ended December 31, 1995. To help put the
portfolios' performance in perspective, our investment advisers, Goldman Sachs
Asset Management (GSAM) and Goldman Sachs Asset Management International
(GSAMI), will also provide an overview of the investment environment during the
period.
U.S. STOCK MARKET SURGED TO RECORD HEIGHTS...
In sharp contrast to 1994's lackluster performance, the U.S. stock market soared
in 1995, rising 37.6% (as measured by the total return of the Standard & Poor's
500 stock index). The Dow Jones Industrial Average set two major milestones:
breaking the 4000 mark in February and the 5000 mark in November. During the
year, large-capitalization stocks (as measured by the S&P 500) outperformed the
Russell 2000 index of small-capitalization stocks by approximately 9%.
Technology stocks fueled the market during the first half of the year, ceding
leadership to financial and consumer growth stocks by year end.
The stock market maintained its upward momentum every month but October due to a
favorable combination of low inflation, falling interest rates and moderate
economic growth. In addition, many large U.S. companies posted corporate
earnings growth that exceeded expectations. This was partly due to a weakened
dollar, which made American exports more competitive. The possibility of a lower
capital gains tax, which would be a long-term boost to stocks, also helped to
fuel the rally.
...AMID MODERATING ECONOMIC GROWTH
When 1995 began, the economy was still growing, but more slowly than in 1994.
Annualized real Gross Domestic Product (GDP) rose 1.7% and 0.7% in the first and
second quarters, respectively, well below the robust levels of the prior year.
Though revised third-quarter GDP rebounded to 3.2%, this increase was partly
attributable to increased federal government spending in anticipation of the
budget debate. GDP for the fourth quarter is estimated to be approximately 1%
(annualized), a more indicative reading of the economy's sluggish growth. The
economic slowdown was the result of a number of factors, including a decline in
consumer confidence and spending, which hurt retail sales, culminating in an
extremely weak Christmas season, and a buildup in inventories among retailers,
wholesalers and manufacturers. Sales and starts of new single-family homes in
spring and early summer rebounded, however, both exhibited a consistent pattern
of slippage through October, then recovered in November in most regions,
according to the most recent government statistics available. In addition, a
number of temporary factors, including a sharp contraction in nondefense
government spending and a strike at Boeing aircraft, had a major impact on GDP
in the fourth quarter.
THE FED TIGHTENED IN FEBRUARY, BUT REVERSED COURSE BY MIDYEAR IN RESPONSE TO A
SLOWING ECONOMY
The U.S. Federal Reserve Board raised the federal funds rate (the rate banks
charge one another for overnight borrowing) by 50 basis points to 6.00% in
February 1995. This increase was the last in the Fed's tightening cycle, which
included seven rate hikes from February 1994 through February 1995, a total
increase of 300 basis points. The Fed then remained neutral until July, when
receding inflationary pressures and the weakening economy prompted it to cut the
federal funds rate 25 basis points. Additional easing did not occur until
December 1995, when the Fed cut the federal funds rate another 25 basis points
to 5.50%.
OUTLOOK FOR 1996: A SLOW START WITH STRENGTHENING EXPECTED IN THE SECOND HALF
Though lower interest rates would be positive for the stock market, the
weakening economy increases the probability of much slower corporate earnings
growth, which could hurt stock prices during the first half of the year. As a
result, many investors are turning to defensive stocks, such as consumer
nondurables and utilities. Fed easing in early 1996 is a possibility if
additional weakening occurs and a budget accord is reached in Washington. By
year end 1996, many anticipate a resurgence in growth with a gradual pickup in
inflation. In general, 1996 is expected to be a good year for stocks,
approximately in line with historical averages, but far below 1995's spectacular
run. Of course, no one can predict the market with certainty. Managing your
expectations to realistic levels is essential.
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THE DOLLAR STRENGTHENED AFTER FALLING TO HISTORIC LOWS
Starting in February 1995, the U.S. dollar weakened significantly, sliding to
new postwar lows against the Deutsche mark and Japanese yen in April. The
dollar's precipitous drop was attributed in part to the U.S.-Japan trade
imbalance and the weakness in the U.S. economy (which led to reduced
expectations of rising rates). The dollar rallied against the yen and the
Deutsche mark during the summer and early fall, due to the resolution of the
U.S.-Japan trade dispute, Japan's stimulative monetary policy, and the
intervention of U.S. and foreign central banks in support of the dollar. By year
end, the dollar stabilized, having risen by approximately 28% against the yen
and by approximately 6% against the Deutsche mark from its April low.
THE INTERNATIONAL MARKET ENVIRONMENT: EUROPEAN MARKETS GENERALLY PERFORMED WELL
BUT OTHER REGIONS WERE WEAK
Despite generally positive performance, international stock markets typically
lagged the U.S. during 1995, with the Japanese market being particularly weak.
During the period, many foreign bond markets rallied, with Canada and Australia
outperforming the U.S.
- - EUROPE. Europe's economic recovery slowed during the past year, in part
because monetary policy had prematurely tightened in anticipation of higher
growth, and short-term interest rates remained high during the first half of the
year. Still, most European stock markets did well during the year, returning
over 16% (as measured by Financial Times-Actuaries Europe Index designated in
local currencies). Stock markets in Switzerland, Sweden, Denmark and the U.K.
turned in strong performances, while Italy and France lagged, plagued by
political, budgetary and inflationary problems. European bond markets generally
rallied as well, supported by weakening economies and relatively low inflation.
- - JAPAN. Japanese stocks (as measured by the Tokyo Stock Price Index [TOPIX]
in local currency) rose only 1.19% during the year, reflecting Japan's
stagnating economy, deflationary environment and weakened banking system. From
January through April, the yen traded at historically high levels versus the
dollar and thwarted exports. In addition, the economy felt the impact of the
costly Kobe earthquake. With wages basically flat, consumer spending was
sluggish and real GDP growth for 1995 was estimated to be only 0.3%. Japanese
stocks rallied during the latter half of the period as the yen declined, and
recouped most of their losses from earlier in the year. A side effect of Japan's
economic distress was a relatively favorable bond market environment during the
first half of the year. By midyear, the Japanese government had introduced a
stimulative fiscal policy which is expected to help the economy and stocks in
1996, but could put pressure on bond prices.
- - ASIA. Asian stock markets experienced high volatility and generally low
volumes during 1995, despite relatively stable economic fundamentals for most of
the region. Hong Kong provided the strongest and most consistent gains, while
political turmoil in India, major current account deficits in Malaysia and a
series of natural disasters in the Philippines took their toll in their
respective markets. Further, Asian markets generally declined during the third
quarter as the rising U.S. dollar drained liquidity from the region. The year
ended with a stronger finish in December, when Hong Kong, Malaysia, Singapore
and Indonesia recorded solid gains and funds began to flow into the region
again.
PERFORMANCE AND PORTFOLIO REVIEW BY FUND
PROTECTIVE SELECT EQUITY FUND
OBJECTIVE AND STRATEGIES: The Protective Select Equity Fund seeks to provide
high total return consisting of capital appreciation plus dividend income. The
Fund invests in a widely diversified portfolio of stocks, while typically
maintaining sector weightings, average capitalizations and risk characteristics
similar to the S&P 500 Index. To select investments, the Fund utilizes a
disciplined approach which combines fundamental investment research provided by
the Goldman Sachs Investment Research Department with quantitative analysis
generated by a proprietary model developed by GSAM, the Fund's investment
adviser. Those stocks ranked highly both by the Goldman Sachs Investment
Research Department and by GSAM's quantitative analysis are selected for the
Fund's portfolio.
PERFORMANCE REVIEW AND HOLDINGS: For the 12 months ended December 31, 1995, the
Protective Select Equity Fund had a total return of 36.73%(1) based on net asset
value compared with 37.57% for the S&P 500 stock index, the Fund's benchmark.
The Fund performed nearly in line with the benchmark, with both reflecting an
outstanding year for U.S. equities. In addition, the Fund did well compared with
its peers, ranking 72nd out of 401 variable annuity growth funds based on total
return and outperforming the category average of 31.50% for the 12-month period
ended December 31, 1995, according to Lipper Analytical Services, Inc. (Please
note that Lipper rankings do not take sales charges into account and that past
performance does not guarantee future results.)
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The following chart shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus
the S&P 500 Index.
[GRAPH]
<TABLE>
<CAPTION>
TOTAL RETURN(1) SUMMARY
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1995 December 31, 1995 (a) December 31, 1995 (a)
----------------- --------------------- ----------------------
<S> <C> <C> <C>
Select Equity Fund 36.73% 37.46% 19.33%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
A more detailed picture shows the Fund outperformed the benchmark during the
second and third quarters of 1995, when the key factors favored by GSAM's model
- -- value (stocks with low price/earnings ratios), growth (stocks with rising
earnings estimates) and stable earnings (large stocks not dependent on the
economy) -- all worked well. During the fourth quarter, investors focused almost
exclusively on large, defensive stocks (i.e., utilities, consumer nondurables),
and responded indifferently to most other fundamental factors. Even stocks with
rising earnings estimates did not fare particularly well as the market expressed
skepticism that earnings could continue to advance in the weakening economy.
A number of the best performing stocks during the period were large-
capitalization companies in widely diverse industries including PHILIP MORRIS
COMPANIES, INC. (tobacco and food products), SEARS, ROEBUCK AND CO. (retailing),
FEDERAL NATIONAL MORTGAGE ASSOCIATION (mortgage finance), MONSANTO CO.
(chemicals), ALLSTATE CORP. (insurance) and INTEL CORP. (computer chips).
During the period, the Fund attracted a healthy stream of cash inflows that were
invested gradually over time. In this positive environment, the Fund had a
higher cash position than usual (on average, 3% to 5% of assets). Even this
small cash position can have an impact on performance in a sharply rising
market.
As of December 31, 1995, the Fund was invested in 101 stocks, which were well
diversified by industry and sectors. While its sector weightings were generally
in line with the S&P 500 Index, the Fund was slightly overweighted in finance
and basic industry and slightly underweighted in the health, capital spending
and retail sectors. The slight over and underweightings were the result of the
Fund's bottom-up stock selection process and were not due to GSAM's views of
specific sectors.
A number of the Fund's valuation characteristics continued to be more favorable
than the benchmark. For example, as of December 31, 1995, the Fund had a lower
price/earnings ratio based on 1995 estimated earnings than the S&P 500 Index
(13.9x versus 16.1x), a lower price/book ratio (2.5x versus 2.9x) and better
long-term growth characteristics (13.0% versus 12.1%).
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OUTLOOK: Given last year's strong market performance, high levels of bullish
sentiment and low market dividend yields, GSAM's quantitative model currently
favors large stocks, stocks with low price/earnings multiples, and stocks with
positive earnings estimate revisions and price momentum. The model is currently
warning against stocks with overly optimistic year-over-year growth
expectations.
PROTECTIVE GROWTH AND INCOME FUND
OBJECTIVE AND STRATEGIES: The Protective Growth and Income Fund seeks long-term
capital appreciation 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 Goldman Sachs Asset Management (GSAM)
focuses on companies whose stocks are inexpensive relative to their expected
long-term earnings power and their ability to pay dividends. Investments may
include well-known companies that are temporarily out of favor due to cyclical
economic conditions or are experiencing near-term difficulties the portfolio
managers judge to be temporary in nature. In-depth fundamental research of a
company's financial structure, its competitive position in the market and its
management's commitment to increasing shareholder value are all critical parts
of the Fund's investment evaluation approach.
PERFORMANCE REVIEW AND HOLDINGS: For the 12-month period ended December 31,
1995, the Protective Growth and Income Fund had a total return of 32.29%(1)
based on net asset value compared with 37.57% for the S&P 500 stock index, the
Fund's benchmark. The Fund provided solid returns for the year but
underperformed the S&P 500 Index partly because growth stocks outperformed
value during the latter part of the year, which worked against the Fund's
value orientation. In addition, the market's top-performing sectors,
technology stocks and large-capitalization consumer stocks, were considered
overvalued by the Fund's portfolio managers and were therefore underweighted.
Finally, large stocks outperformed mid-sized and smaller stocks. As of
December 31, 1995, the Fund's average weighted market capitalization was
$12.6 billion compared with $30.6 billion for the S&P 500.
The following chart shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus the
S&P 500 Index.
[GRAPH]
<TABLE>
<CAPTION>
TOTAL RETURN(1) SUMMARY
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1995 December 31, 1995 (a) December 31, 1995 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Growth and Income Fund 32.29% 29.83% 15.61%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
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Successful positions during the period included LOCKHEED-MARTIN CORP., MCDONNELL
DOUGLAS CORP. and NORTHROP GRUMMAN CORP., which benefited from investors'
recognition of the opportunities for margin expansion and cash flow potential of
these defense-related companies. Despite weakness early in the year, TENET
HEALTHCARE CORP. recovered when the market responded favorably to the company's
announced acquisitions, finishing 1995 as one of the Fund's best performers. A
number of the Fund's holdings in the finance and banking sectors also produced
strong returns. BANKAMERICA CORP. and NATIONSBANK CORP. benefited from earnings
growth, and TRAVELERS GROUP, INC., a well-managed, diversified financial
services company with brokerage and insurance operations, saw its share price
rise significantly in November after the announcement of its acquisition of
Aetna's property and casualty business.
Though it was underweighted in technology, the Fund benefited from several of
its holdings in the sector, including ADVANCED MICRO DEVICES, COMPAQ COMPUTER
CORP. and DELL COMPUTER CORP. Advanced Micro Devices and Dell Computer were sold
during the period after they reached GSAM's target prices for fair valuation.
The Fund's cyclically oriented investments, such as FORD MOTOR COMPANY, came
under pressure during the period as auto sales slowed due to investor
uncertainty stemming from the economic slowdown. The Fund was overweighted in
the paper sector compared with the benchmark, which was particularly hard hit
due to an inventory buildup and declining demand, which led to price
discounting. The Fund had trimmed its investments in STONE CONTAINER CORP.,
CHAMPION INTERNATIONAL CORP. and GEORGIA-PACIFIC CORP. earlier in the year when
paper stocks were strong, and subsequently increased its holdings when their
prices fell, on the expectation that the paper sector will rebound.
A number of new holdings were added during the period. These included the LONG
ISLAND LIGHTING COMPANY, which was inexpensive because investors perceived it as
a high-cost electrical utility with significant political exposure, and GOODYEAR
TIRE & RUBBER CO., which appeared undervalued due to the prevailing assumption
that its earnings were dependent on the North American auto cycle. The portfolio
managers believe these investments offer favorable long-term growth potential.
OUTLOOK: GSAM will continue to apply intensive research techniques and
disciplined valuation methods to select its investments for the long term. The
portfolio managers intend to continue researching attractive investment
opportunities that are consistent with the Fund's management style, avoiding
areas where valuation levels appear excessively high.
PROTECTIVE CAPITAL GROWTH FUND
OBJECTIVE AND STRATEGIES: The Protective Capital Growth Fund seeks long-term
growth primarily through investments in stocks considered to have long-term
capital appreciation potential. Stocks are selected primarily by using a value-
oriented investment style, emphasizing extensive fundamental research to
identify companies that are believed to be underpriced in the market compared
with their long-term growth potential. The average weighted market
capitalization of the Fund was approximately $16 billion as of December 31, 1995
compared with $30.6 billion for the S&P 500.
PERFORMANCE REVIEW AND HOLDINGS: From its inception on June 13, 1995 through
December 31, 1995, the Protective Capital Growth Fund had a total return of
6.93%(1) based on net asset value compared with 16.26% for the S&P 500 Index,
the Fund's benchmark, during the same period.
5
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The following chart shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus the
S&P 500 Index.
[GRAPH]
<TABLE>
<CAPTION>
TOTAL RETURN(1) SUMMARY
Cumulative Total
Period Ended Return through
December 31, 1995 (a) December 31, 1995 (a)
-------------------- ---------------------
<S> <C> <C>
Capital Growth Fund 6.93% 6.93%
</TABLE>
(a) From the commencement of investment operations on June 13, 1995.
While the Fund had positive returns, it underperformed the benchmark for three
main reasons.
- - First, during the period since the Fund's inception, the market has favored
large, growth stocks while at inception the Fund was heavily invested in
value-oriented, cyclical stocks in the paper and forest industry,
automotive and capital equipment sectors, all of which felt the impact of a
slowing economy during the fourth quarter of 1995. These included such
well-known names as GEORGIA-PACIFIC CORP., STONE CONTAINER CORP. and
CHAMPION INTERNATIONAL CORP., which suffered from price discounting as
demand for paper and pulp products in the U.S. and abroad declined amid
healthy supply. With consumer confidence faltering during the last quarter
of the year, automotive sales declined and affected Wall Street's view of
GENERAL MOTORS CORP. and FORD MOTOR COMPANY, both held by the Fund. In
addition, the Fund invested in a number of capital equipment manufacturers,
including HARNISCHFEGER INDUSTRIES, INC. (construction and mining
equipment), TENNECO INC. (a diversified industrial holding company) and
KEYSTONE INTERNATIONAL (industrial machinery), which experienced a slow
down in orders.
- - Second, specialty retailers did poorly during the second half of the year,
and the Fund's holdings in the sector (ANN TAYLOR STORES CORP. and CHARMING
SHOPPES, INC., both in women's apparel, and MUSICLAND STORES CORP., which
sells CDs, tapes and videos) reflected the disappointing climate for
retailing.
- - Third, the Fund had little or no representation in technology, financial
services or utility stocks until the fourth quarter of 1995, all of which
were strong performers during the year.
In anticipation of a continued slow economy, the Fund's investment adviser has
reduced the portfolio's cyclically oriented exposure by selling a number of
holdings. In addition, the portfolio's sector diversification has been broadened
by the addition of investments in the financial services, media and energy
sectors, including FEDERAL NATIONAL MORTGAGE ASSOCIATION (a dominant player in
the secondary mortgage market), NATIONSBANK CORP. (a diversified financial
services company based in North Carolina), TELE-COMMUNICATIONS INC., (the
largest cable company in the U.S.), LONG ISLAND LIGHTING COMPANY (an electric
and gas utility serving Long Island, N.Y.) and TEXACO (energy).
Other newer purchases include WAL-MART STORES, INC., the country's dominant
general merchandise retailer, whose stock was available at an attractive price
in November based on investors' fears regarding the depressed retail
environment; AT&T, which was purchased by the Fund both before and after AT&T's
proposed breakup and most recently announced
6
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layoffs, based on the belief that the sum of its parts is worth more than the
whole; and PALL CORP., a filtration company with a particular expertise in blood
filtration.
During the period under review, the portfolio's strongest performers were TJX
COMPANIES, INC., owner of TJ Maxx, a discount clothing chain, which strengthened
its franchise by announcing the acquisition of Marshall's, and PHILIP MORRIS
COMPANIES, INC., whose shares rebounded from a depressed valuation that resulted
from concerns about competitive pressures and potential litigation. MCDONNELL
DOUGLAS CORP., a leader in aerospace and defense, has continued to generate a
significant cash flow and added to shareholder value with a stock repurchase
program. In addition, the stock rose on speculation regarding consolidation in
the defense industry.
OUTLOOK: As noted, the Fund has increased its diversification to position
itself for what may be a slower economy in the months ahead. Goldman Sachs Asset
Management, the Fund's investment adviser, will continue to emphasize selection
of individual stocks believed to offer long-term growth potential.
PROTECTIVE SMALL CAP EQUITY FUND
OBJECTIVE AND STRATEGIES: The Protective Small Cap Equity Fund's objective is
long-term capital appreciation, 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
we look for attractive companies with high or improving returns on capital that
GSAM believes can achieve solid, sustainable growth, as well as generate free
cash after investing for future growth. This approach differs markedly from many
pure growth small-cap funds that invest in companies with high multiples solely
on the basis of rapid, but frequently unsustainable, growth rates. Using its own
rigorous fundamental research, which includes meeting with a company's
management and interviewing a company's competitors, customers and suppliers,
GSAM builds the Fund's portfolio one stock at a time.
PERFORMANCE REVIEW AND HOLDINGS: During the period under review, the Protective
Small Cap Equity Fund had a total return of 6.46%(1) based on net asset value
compared with 28.44% for the Russell 2000, the Fund's benchmark. The Fund's
performance lagged the benchmark primarily due to the disappointing results of a
number of its holdings. In addition, the Fund's overweighting in the specialty
retailing sector hurt performance when consumer spending slowed in 1995. During
the first half of the period, the Fund was also hindered by being underweighted
in the technology sector, which led the market.
The following chart shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus
the Russell 2000.
[GRAPH]
<TABLE>
<CAPTION>
TOTAL RETURN(1) SUMMARY
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1995 December 31, 1995 (a) December 31, 1995 (a)
----------------- -------------------- ---------------------
<S> <C> <C> <C>
Small Cap Equity Fund 6.46% (4.04)% (2.27)%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
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Among the portfolio's retail stocks that suffered price declines were CHARMING
SHOPPES, INC. (a specialty retailer of moderately priced women's apparel), J.
BAKER, INC. (specialty apparel and discount shoes), MUSICLAND STORES CORP.
(music retailer) and LEVITZ FURNITURE, INC. (furniture retailer). The Fund
liquidated some of its retailing positions, such as ERNST HOME CENTER, INC. and
SHOE CARNIVAL, INC., when their deteriorating fundamentals appeared to undermine
their long-term success, and sold others that the portfolio managers believed
had reached their fair market value (e.g., AUTHENTIC FITNESS CORP. and NORTON
MCNAUGHTON, INC.).
In addition to trimming its exposure in the retail sector, the Fund also sold a
number of other holdings, including FOAMEX INTERNATIONAL, INC. (foam products)
and GRANCARE INC. (health care facility operator), to take advantage of other
potentially more attractive investments. The Fund also sold its holdings in
CHILDREN'S DISCOVERY CENTERS (child care provider) after the stock had
appreciated considerably.
The Fund generally benefited from its investments in the financial sector during
the period. Top performers included HORACE MANN EDUCATORS CO. (property,
casualty and life insurance for the educator market), THE PAUL REVERE CORP. (a
leader in personal disability insurance), WESTERN NATIONAL CORP. (annuity
product marketer) and INSIGNIA FINANCIAL GROUP, INC. (real estate management).
A number of the Fund's newer, nonfinancial positions also performed well. For
example, AMPHENOL CORP. (coaxial cable and connector manufacturer) rose on the
expectation that telecommunications legislation would be passed by Congress.
TRUMP HOTELS & CASINOS (hotels and casinos) appreciated considerably, overcoming
Wall Street's skepticism about Donald Trump which enabled the Fund to buy the
stock at what the portfolio managers deemed to be an attractive price.
The Fund's patient, long-term approach to investing was also rewarded during the
period when some of its previously depressed holdings rebounded. These included
DIMAC CORP. (a direct marketer of database management services), which agreed to
be acquired by Heritage Media at a very attractive price; TJX COMPANIES, INC.
(off-price women's apparel and accessories), which sold its underperforming "Hit
or Miss" chain and acquired Marshall's, a retailer that management expects to
result in a substantially more profitable operation; USA MOBILE COMMUNICATIONS
(Midwest-based provider of paging products), which appreciated due to a tender
offer from Arch Communications and was subsequently sold; and FIGGIE
INTERNATIONAL, INC. (industrial conglomerate), where new management has been
selling less profitable, noncore businesses to pay down debt and improve
profitability.
OUTLOOK: Going forward, the Fund will stress investments that offer growth at a
reasonable price, emphasizing companies that possess both strong value
characteristics and the growth potential necessary for long-term success. To
that end, the Fund's portfolio managers are reexamining previously underweighted
sectors and considering portfolio additions within these sectors when attractive
opportunities arise. In general, GSAM believes small-cap stocks are inexpensive
relative to their larger counterparts and are expected to perform well in 1996.
PROTECTIVE GLOBAL INCOME FUND
OBJECTIVE AND STRATEGIES: The investment objective of the Protective Global
Income Fund is to generate a high total return, composed of both current income
and, to a lesser extent, capital appreciation. The Fund will invest primarily 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 REVIEW AND STRATEGIES: For the 12 months ended December 31, 1995,
the Protective Global Income Fund had a total return of 16.94%1 compared with a
return of 17.89% for its benchmark, the J.P. Morgan Global Government Bond Index
(hedged into U.S. dollars). The Fund benefited from the positive performance of
global bonds, as well as from several successful currency strategies. Though the
Fund is typically fully hedged, the portfolio managers correctly anticipated
that the dollar would decline and unhedged part of the Fund's Japanese yen and
Deutsche mark exposure early in the year. Despite its competitive performance,
the Fund slightly lagged the benchmark due to its underweighting in the higher
yielding bond markets of Europe in the second half of 1995.
8
<PAGE>
The following chart shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus
the J.P. Morgan Global Government Bond Index (hedged).
[GRAPH]
<TABLE>
<CAPTION>
TOTAL RETURN(1) SUMMARY
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1995 December 31, 1995 (a) December 31, 1995 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Global Income Fund 16.94% 16.07% 8.63%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
(b) 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.
Foreign bond markets recorded impressive gains during the past 12 months,
following the lead of the U.S. bond market. Bond markets in dollar bloc
countries, including New Zealand and Canada, continued to perform well. In
Europe, the "core" and "near core" bond markets (e.g., Germany, Holland,
Belgium, France and Denmark) rallied due to a supportive bond environment
characterized by slowing economic activity, relatively low inflation and
declining interest rates. While the European higher yielding markets (Italy,
Spain and Sweden) were affected by political uncertainties and inflation fears
over the first half of 1995, better inflation performance and expectations of
interest rate cuts in core European markets provided the basis for a strong
performance in the second half of the year.
The following is a snapshot of the fund's key positions as of December 31, 1995.
- - The portfolio's single largest country holding was its 25.6% position in
the U.S., significantly underweighted versus the Index's U.S. allocation
(42.8%). In the opinion of GSAMI, the Fund's Investment Adviser, U.S. bond
yields did not adequately compensate for the U.S. economy's potential
inflationary risk.
- - OTHER DOLLAR BLOC COUNTRIES. The Fund held a 7.3% position in Canada,
significantly overweighting the Index (2.8%), since Canada's bond
environment appeared attractive due to its low inflation and tight fiscal
policy. In December, the Fund established a position in New Zealand bonds
(8.0%) when that country's economy showed signs of slowing.
- - CONTINENTAL EUROPE. The Fund is significantly overweighted in continental
Europe (41.6%) as compared with the Index (33.9%) due to the portfolio
managers' generally favorable view of the region.
-- Germany, a 9.7% Fund position, was considered attractive due to its
relatively low inflation and weak monetary growth.
-- France (12.4%) was overweighted relative to the Index (7.3%), based
on GSAMI's positive view of President Chirac's apparent commitment
to reduce France's budget deficit and reform its social security
system.
-- The Fund established a 4.0% position in Spain, once Spain's economic
and political risks appeared to be fully reflected in its bond
prices, and added a 2.7% allocation in Belgium, which GSAMI expects
to emerge as a key member of the European monetary union.
-- The Fund's position in Italy was liquidated, due to the country's
political and economic uncertainty.
9
<PAGE>
-- In Scandinavia, 7.5% of the Fund was invested in Denmark versus a
benchmark weighting of 1.6%. Denmark appeared attractive compared
with other European countries because of its improving fiscal
position, relatively contained inflation and favorably priced
market.
-- The Fund added an allocation in Sweden in November (5.3% as of
December 31), partly due to that country's apparent commitment to a
2% inflation target.
- - U.K. The portfolio cut its U.K. position in half to 4.3% in the latter
part of the year, underweighted versus the Index position of 6.3%, because
GSAMI believed the U.K. market was fully valued.
- - JAPAN. The Fund reduced its Japanese holdings in the latter half of 1995
in the belief that the Japanese government's aggressive monetary easing and
expansionary fiscal policy will put pressure on Japanese bond prices. As of
December 31, 1995, the Fund held a 3.8% position in Japanese bonds,
significantly underweighted versus the Index allocation of 13.1%.
- - CASH EQUIVALENTS. As of December 31, the Fund's cash position was 5.9%,
reduced from last year's 16.6% position in order to take advantage of
attractive investment opportunities.
OUTLOOK: Within the dollar bloc, GSAMI continues to prefer Canada and New
Zealand because of their wide yield spreads over U.S. Treasuries. GSAMI intends
to keep an overweighted position in continental Europe compared with the
benchmark due to its slow economic growth and its prospects for lower long-term
interest rates, which generally bode well for bonds. The U.K. presents a
different picture, as financial markets may be affected by political instability
and the possibility of increased wage-based inflation. Consequently, GSAMI
currently expects to continue underweighting the portfolio's U.K. position
relative to the benchmark. GSAMI also anticipates maintaining the portfolio's
underweighted exposure in Japan, since early signs of growth in the Japanese
economy have begun pushing bond yields higher at year end. Any further economic
strength will continue to undermine the Japanese bond market.
PROTECTIVE INTERNATIONAL EQUITY FUND
OBJECTIVE AND STRATEGIES: The Protective International Equity Fund seeks long-
term capital appreciation by investing in equity securities of foreign issuers
that the Fund's portfolio management team believes have the potential to
appreciate over the long term. The Fund focuses on selecting attractively valued
companies with strong, competitive positions in growth industries. The Fund's
portfolio managers are based in Europe, Japan and Asia, and their knowledge of
local markets plays an important role in uncovering investment opportunities.
While the Fund does not allocate assets across specific countries based on top-
down economic or market forecasts, the portfolio managers strive to manage risk
by remaining diversified by country and industry sector and by closely
monitoring economic and political events in countries in which the Fund does
invest. Currency risk, inherent in any international investment, is managed by a
separate team of currency specialists based in London.
PERFORMANCE REVIEW AND HOLDINGS: For the 12 months ended December 31, 1995, the
Protective International Equity Fund had a total return of 19.66%1 based on net
asset value compared with a return of 10.63% for the Fund's benchmark, the
Financial Times-Actuaries Europe & Pacific Index ("Europac") unhedged. 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 Fund also did well compared with its peers. Based on total return,
the Fund ranked fifth out of 241 variable annuity international equity funds
tracked by Lipper Analytical Services, Inc. for the 12 months ended December 31,
1995. (Please note that Lipper rankings do not take sales charges into account
and that past performance is not a guarantee of future results.)
10
<PAGE>
The following chart shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus
the Europac.
[GRAPH]
<TABLE>
<CAPTION>
TOTAL RETURN(1) SUMMARY
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1995 December 31, 1995 (a) December 31, 1995 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
International Equity Fund 19.66% 14.66% 7.89%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
(b) 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.
(c) The value of the hypothetical investment has been calculated using the
unhedged performance of the benchmark for the entire period.
(d) 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.
The Fund's outperformance of the Index during the period was mainly due to
successful stock selection. As of December 31, 1995, the Fund was widely
diversified with positions in 48 companies based in 17 countries. In terms of
total assets, the five largest country exposures were Japan (34.2%), the U.K.
(10.2%), Sweden (7.5%), Spain (6.3%) and the Netherlands (5.6%). The Fund also
benefited from successfully hedging a portion of its yen exposure, which worked
in its favor when the yen began to depreciate against the dollar during the
third quarter.
JAPAN. Over the course of the year, the Fund built up a substantial position in
Japan (though underweighted compared with the Index). The Fund found a number of
attractive opportunities that performed well during the year, focusing
particularly on companies actively engaged in reducing their costs. For example,
HOYA CORPORATION moved the bulk of its manufacturing to Thailand and MITSUBISHI
HEAVY INDUSTRIES increased its procurement of raw materials from outside Japan.
The Fund has added several new Japanese holdings during the past 12 months,
including CHIYODA, a large shoe and toy manufacturer, which is in the process of
restructuring to reduce costs, and TOSTEM CORP., a producer of aluminum building
materials, which is positioned to benefit from the revival of the Japanese
housing market.
EUROPE. As of December 31, 1995, approximately half of the portfolio was
invested in European stocks, overweighted relative to the Index. Outstanding
performers included FRESENIUS (Germany), a major producer of kidney dialysis
equipment; HOGANAS (Sweden), a leading manufacturer of metal powder; RANDSTAD
HOLDINGS (Netherlands), a temporary help organization; and SECURITAS (Sweden),
the largest security services company in Europe. In addition, several of our
newer European investments did well. These included ELECTROCOMPONENTS (U.K.),
one of the leading catalogue providers of electronic components and other
equipment to businesses in the U.K. and Europe, and THE BANK OF IRELAND, that
country's largest and most profitable bank.
11
<PAGE>
ASIA-PACIFIC. The Fund held an 9.4% position in Asia (outside Japan), with 4.4%
of the Fund invested in Hong Kong, the region's best performing market during
1995. In general, GSAMI the Fund's investment adviser, focused on larger and
more liquid Asian companies. One of the Fund's most successful Asian investments
during the period was KOREA MOBILE TELECOMMUNICATIONS, the dominant provider of
cellular telecommunications and pagers in Korea. There were a number of
additions to the Fund, including Hong Kong-based HSBC HOLDINGS which is one of
the largest and best capitalized banking organizations in the world, and BANGKOK
BANK, commonly considered to be the highest quality and leading bank in
Thailand.
OUTLOOK: GSAMI believes that the prospect for lower interest rates worldwide in
1996 should be favorable for equities and should help stimulate economic growth
as the cost of borrowing declines. While valuations are reasonably attractive in
Europe, GSAMI will closely monitor economic growth, which is currently weak, and
its impact on corporate earnings. Improved growth is expected during the second
half of the year. In Japan, fiscal stimulus and further yen weakness may lead to
a rebound in economic growth as well as corporate earnings upgrades, which GSAMI
expects will be very positive for the country's equity market. Though Asian
markets are still somewhat unpredictable in the near term, they closed the year
with a strong December with evidence of renewed interest from U.S. and other
foreign investors. Our outlook is positive over the longer term, as Asian
markets continue to offer attractive long-term growth potential. As in the past,
GSAMI will stress well-managed companies with the potential to deliver
attractive returns over time.
PROTECTIVE MONEY MARKET FUND
OBJECTIVE: The Protective Money Market Fund is designed to preserve capital,
maximize current income and maintain liquidity. The Fund invests in high-quality
short term securities, including certificates of deposit and banker's
acceptances; high-quality commercial paper and other short-term obligations of
U.S. corporations, 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 or
instrumentalities. However, please note that the Fund's shares are not
guaranteed or insured by the U.S. government and the Company cannot assure that
it will maintain a stable net asset value of $1.00 per share.
PERFORMANCE REVIEW AND COMPOSITION: As of December 31, 1995, the Protective
Money Market Fund's 7-day current yield was 5.07% and its average maturity was
34 days.
OUTLOOK: Given below-trend economic growth and expected inflation of under 3%
in 1996, the portfolio managers anticipate further Fed interest rate reductions
during the first half of 1996. Another 50 basis point decline in short-term
interest rates cannot be ruled out.
The Fund expects to continue to purchase high-quality, liquid securities, and to
maintain a weighted average maturity in a range of 25 to 45 days in order to
best meet the objectives of the Fund. The Fund will attempt to operate closer to
the high end of its range as the timing of the next ease becomes clearer.
In conclusion, we appreciate your support during the past year. The Funds'
portfolio managers will continue to apply a disciplined investment approach to
pursue each Fund's specific investment objectives, while doing their best to
carefully manage risk.
Sincerely,
Carolyn King
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 of the fiscal period 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 annuity contract. If the performance information
included the effect of the insurance charges, performance numbers would be
lower.
12
<PAGE>
PROTECTIVE GLOBAL INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY DESCRIPTION (000) U.S. $ VALUE
-------------------- ----- ------------
<S> <C> <C>
GOVERNMENT AND AGENCY SECURITIES - 90.6%
BELGIUM - 2.7%
Kingdom of Belgium
6.500%, 03/31/2005 . . . . . BEL 25,000 $ 838,260
-----------
CANADA - 7.3%
Government of Canada
7.500%, 09/01/2000. . . . . . CAD 3,000 2,280,774
-----------
DENMARK - 7.5%
Kingdom of Denmark
9.000%, 11/15/2000. . . . . . DKK 4,000 800,792
8.000%, 03/15/2006. . . . . . 8,000 1,518,085
-----------
2,318,877
-----------
FRANCE - 12.4%
Government of France
7.000%, 11/12/1999 . . . . . FRF 8,500 1,813,141
8.500%, 03/28/2000 . . . . . 4,000 897,803
8.500%, 11/25/2002 . . . . . 5,000 1,142,248
-----------
3,853,192
-----------
GERMANY - 9.7%
Federal Republic of Germany
7.125%, 12/20/2002 . . . . . DEM 3,000 2,262,542
7.375%, 01/03/2005 . . . . . 1,000 761,427
-----------
3,023,969
-----------
JAPAN - 3.8%
International Bank Reconstruction &
Development
6.750%, 06/18/2001 . . . . . JPY 70,000 831,680
Japan Development Bank
6.500%, 09/20/2001 . . . . . 30,000 354,438
-----------
1,186,118
-----------
NEW ZEALAND - 8.0%
New Zealand
6.500%, 02/15/2000 . . . . . NZD 3,900 2,471,156
-----------
SPAIN - 4.0%
Government of Spain
10.000%, 02/28/2005. . . . . ESP 150,000 1,250,835
-----------
SWEDEN - 5.3%
Kingdom of Sweden
10.250%, 05/05/2003. . . . . SEK 10,000 1,662,838
-----------
UNITED KINGDOM - 4.3%
U.K. Treasury
9.000%, 03/03/2000 . . . . . GBP 500 $ 838,604
8.500%, 12/07/2005 . . . . . 300 500,397
-----------
1,339,001
-----------
UNITED STATES - 25.6%
United States Treasury Notes
6.875%, 07/31/1999 . . . . . USD 1,250 1,312,500
6.250%, 05/31/2000 . . . . . 750 775,192
6.125%, 09/30/2000 . . . . . 2,000 2,060,000
6.250%, 02/15/2003 . . . . . 400 417,312
7.875%, 11/15/2004 . . . . . 2,000 2,315,000
6.500%, 08/15/2005 . . . . . 1,000 1,065,310
-----------
7,945,314
-----------
TOTAL GOVERNMENT AND AGENCY
SECURITIES - (Cost $27,288,741) 28,170,334
-----------
TIME DEPOSIT - 5.9%
UNITED STATES - 5.9%
State Street Bank and Trust Co
Eurodollar Time Deposit
5.750%, 01/02/1996 . . . . . USD 1,820 1,820,000
-----------
TOTAL TIME DEPOSIT - (Cost $1,820,000) 1,820,000
-----------
TOTAL INVESTMENTS -
(Cost $29,108,741) - 96.5%
29,990,334
OTHER ASSETS LESS LIABILITIES - 3.5% 1,094,982
-----------
NET ASSETS - 100.0% $31,085,316
-----------
-----------
</TABLE>
See Glossary of Terms on page 42.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- ------ ------------
<S> <C> <C>
COMMON STOCK - 88.2%
AUSTRALIA - 1.8%
Boral Ltd. . . . . . . . . . . . . . . . 220,000 $ 555,969
Woodside Petroleum * . . . . . . . . . . 94,600 483,758
------------
1,039,727
------------
AUSTRIA - 3.0%
Oester Elektrizita . . . . . . . . . . . 29,075 1,745,623
------------
BELGIUM - 1.4%
Colruyt SA . . . . . . . . . . . . . . . 3,100 852,158
------------
DENMARK - 1.9%
Tele Danmark AS-B share. . . . . . . . . 20,000 1,090,516
------------
FRANCE - 4.1%
Comptoirs Modernes . . . . . . . . . . . 4,626 1,500,692
Seita. . . . . . . . . . . . . . . . . . 24,806 898,346
------------
2,399,038
------------
GERMANY - 2.0%
Adidas AG. . . . . . . . . . . . . . . . 22,600 1,195,192
------------
HONG KONG - 4.4%
HSBC Holdings 70,000 1,059,166
Hutchison Whampoa. . . . . . . . . . . . 135,000 822,308
Sun Hung Kai Properties. . . . . . . . . 90,000 736,179
------------
2,617,653
------------
IRELAND - 2.3%
Bank Of Ireland. . . . . . . . . . . . . 187,992 1,368,580
------------
JAPAN - 34.2%
Chiyoda Co.. . . . . . . . . . . . . . . 30,000 696,898
Circle K Japan Co. . . . . . . . . . . . 13,000 572,521
Hoya Corp. . . . . . . . . . . . . . . . 47,000 1,614,964
Inaba Denkisangyo. . . . . . . . . . . . 41,000 992,111
Kyocera Corp.. . . . . . . . . . . . . . 17,000 1,262,063
Max Co.. . . . . . . . . . . . . . . . . 59,000 1,222,088
Mirai Industry Co. . . . . . . . . . . . 34,000 809,563
Mitsubishi Electric Corp.. . . . . . . . 232,000 1,668,451
Mitsubishi Heavy Industries . . . . . . 239,000 1,903,857
Mitsui Marine & Fire . . . . . . . . . . 235,000 1,674,103
Santen Pharmaceutical Co.. . . . . . . . 60,000 1,358,951
Sanyo Shinpan Finance Co. Ltd. . . . . . 9,000 740,454
Shimachu Co. . . . . . . . . . . . . . . 34,000 1,089,290
Taikisha . . . . . . . . . . . . . . . . 56,000 959,396
TDK Corp.. . . . . . . . . . . . . . . . 16,000 816,145
Terumo Corporation . . . . . . . . . . . 20,000 179,838
JAPAN (CONTINUED)
Tostem Corp. . . . . . . . . . . . . . . 41,000 $ 1,361,177
York Benimaru Co.. . . . . . . . . . . . 31,000 1,185,210
------------
20,107,080
------------
NETHERLANDS - 5.6%
Philips Electronic . . . . . . . . . . . 24,000 867,452
Randstad Holdings N.V. . . . . . . . . . 29,800 1,351,929
Wolters Kluwer N.V . . . . . . . . . . . 11,226 1,061,947
------------
3,281,328
------------
SPAIN - 6.3%
Banco Popular Espana . . . . . . . . . . 10,260 1,887,469
Repsol SA. . . . . . . . . . . . . . . . 55,515 1,814,738
------------
3,702,207
------------
SWEDEN - 7.5%
Ericsson LM Telephone. . . . . . . . . . 61,700 1,209,038
Hoganas AB, class B. . . . . . . . . . . 43,400 1,269,121
Securitas AB, class B. . . . . . . . . . 26,700 1,267,749
Volvo AB . . . . . . . . . . . . . . . . 34,000 696,994
------------
4,442,902
------------
SWITZERLAND - 1.8%
Cie Financier Richemont AG . . . . . . . 700 1,049,848
------------
THAILAND - 1.7%
Bangkok Bank . . . . . . . . . . . . . . 83,200 1,010,687
------------
UNITED KINGDOM - 10.2%
British Airport Authority PLC 182,595 1,380,161
Electrocomponents. . . . . . . . . . . . 309,922 1,729,272
Rentokil Group PLC . . . . . . . . . . . 259,000 1,346,655
Siebe. . . . . . . . . . . . . . . . . . 126,200 1,554,240
------------
6,010,328
------------
TOTAL COMMON STOCK -
(Cost $46,430,158) 51,912,867
------------
PREFERRED STOCK - 3.1%
GERMANY - 3.1%
Fresenius AG . . . . . . . . . . . . . . 19,060 1,806,131
------------
TOTAL PREFERRED STOCK -
(Cost $797,114) 1,806,131
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- ------ ------------
<S> <C> <C>
DEPOSITORY RECEIPTS - 3.3%
KOREA - 2.7%
Korea Mobile Telecomm Corp.. . . . . . . 35,000 $ 1,557,500
------------
PHILIPPINES - 0.6%
Philippine Long Distance
Telephone Co. . . . . . . . . . . . 7,000 378,875
------------
TOTAL DEPOSITORY
RECEIPTS - (Cost $1,344,002) 1,936,375
------------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
-----
<S> <C> <C>
TIME DEPOSIT - 6.0%
UNITED STATES - 6.0%
State Street Bank and Trust Co.
Eurodollar Time Deposit
5.750%, 01/02/1996 . . . . . . . .USD $3,551 3,551,000
------------
TOTAL TIME DEPOSIT - (Cost $3,551,000) 3,551,000
------------
TOTAL INVESTMENTS -
(Cost $52,122,274) - 100.6% 59,206,373
OTHER ASSETS LESS LIABILITIES - (0.6)% (364,675)
------------
NET ASSETS - 100.0% $ 58,841,698
------------
------------
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF INDUSTRY CLASSIFICATIONS
------------------------------------
INDUSTRY % OF NET ASSETS VALUE
- -------- --------------- -----
<S> <C> <C>
Automobile 1.2% $ 696,994
Business Services 6.7 3,966,333
Commercial Banks 9.1 5,325,902
Communication 2.1 1,209,038
Consumer Goods 3.2 1,865,993
Construction 3.3 1,917,146
Drinks 1.5 898,346
Electrical 5.0 2,899,103
Electronics 12.1 7,091,829
Engineering 3.2 1,903,857
Financial Services 1.3 740,454
Healthcare 5.7 3,344,920
Insurance 2.8 1,674,103
Machinery 1.6 959,396
Media 1.8 1,061,947
Metal Products 2.2 1,269,121
Oil 3.9 2,298,496
Real Estate 2.6 1,558,487
Retail 10.0 5,896,769
Textile 2.0 1,195,192
Time Deposit 6.0 3,551,000
Transportation 2.3 1,380,161
Utilities 8.1 4,772,514
Wholesale Trade 2.9 1,729,272
----- ------------
Totals 100.6 $ 59,206,373
----- ------------
----- ------------
</TABLE>
* Denotes non-income producing security.
See Glossary of Terms on page 42.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK - 74.3%
AEROSPACE/DEFENSE - 4.2%
McDonnell Douglas Corp.. . . . . . . . . 1,500 $ 138,000
Northrop Grumman Corp. . . . . . . . . . 4,900 313,600
-----------
451,600
-----------
AIRLINES - 2.0%
AMR Corp. *. . . . . . . . . . . . . . . 2,400 178,200
USAir Group Inc. * . . . . . . . . . . . 2,400 31,800
-----------
210,000
-----------
AUTO PARTS - 0.9%
Lear Seating Corp. * . . . . . . . . . . 3,400 98,600
-----------
AUTOMOBILE - 3.2%
Ford Motor Co. . . . . . . . . . . . . . 9,700 281,300
General Motors Corp. . . . . . . . . . . 1,100 58,162
-----------
339,462
-----------
BROKERAGE FIRMS - 1.0%
Lehman Brothers Holdings Inc. . . . . . 5,000 106,250
-----------
CHEMICALS - 1.9%
Geon Co. . . . . . . . . . . . . . . . . 8,400 204,750
-----------
COMMUNICATION SERVICES - 3.7%
AT&T Corp. . . . . . . . . . . . . . . . 2,600 168,350
Tele Communications Inc. * . . . . . . . 11,600 230,550
-----------
398,900
-----------
COMPUTER SOFTWARE & SERVICES - 1.2%
Compaq Computer Corp. *. . . . . . . . . 2,700 129,600
-----------
CONSTRUCTION & MINING
EQUIPMENT - 0.6%
Harnischfeger Industries, Inc. . . . . . 2,000 66,500
-----------
CONTAINERS - 0.8%
Owens Illinois Inc. *. . . . . . . . . . 5,600 81,200
-----------
DRUGS & HEALTH CARE - 1.8%
Beverly Enterprises Inc. *.. . . . . . . 1,200 12,750
FHP International Corp. *. . . . . . . . 1,600 45,600
Tambrands Inc. . . . . . . . . . . . . . 1,000 47,750
U.S. Healthcare Inc. . . . . . . . . . . 1,900 88,350
-----------
194,450
-----------
ELECTRIC UTILITIES - 0.7%
Long Island Lighting Co. . . . . . . . . 4,800 78,600
-----------
ELECTRICAL EQUIPMENT - 0.5%
Fisher Scientific International Inc. 1,600 53,400
-----------
ELECTRONICS - 3.5%
Intel Corp.. . . . . . . . . . . . . . . 1,800 $ 102,150
National Semiconductor Corp. * . . . . . 4,100 91,225
Perkin Elmer Corp. . . . . . . . . . . . 2,500 94,375
Varian Associates Inc. . . . . . . . . . 1,700 81,175
-----------
368,925
-----------
FINANCIAL SERVICES - 6.5%
Citicorp . . . . . . . . . . . . . . . . 1,500 100,875
Federal National Mortgage Assn. 1,700 211,012
First USA Inc. . . . . . . . . . . . . . 4,800 213,000
Fleet Financial Group Inc. . . . . . . . 2,498 101,794
Penncorp Financial Group Inc. 800 23,500
Salomon Inc. . . . . . . . . . . . . . . 1,200 42,600
-----------
692,781
-----------
FOODS - 0.4%
Chiquita Brands International Inc. 3,100 42,625
-----------
HOSPITAL MANAGEMENT - 1.2%
Columbia/HCA Healthcare Corp. 2,500 126,875
-----------
HOUSEHOLD PRODUCTS - 1.3%
Snap On Inc. . . . . . . . . . . . . . . 3,000 135,750
-----------
INDUSTRIAL MACHINERY - 3.8%
Keystone International Inc. . . . . . . 1,900 38,000
Pall Corp. . . . . . . . . . . . . . . . 8,400 225,750
Silicon Valley Group Inc. *. . . . . . . 5,800 146,450
-----------
410,200
-----------
INSURANCE - 1.1%
Lincoln National Corp. . . . . . . . . . 2,100 112,875
-----------
INSURANCE - PROPERTY &
CASUALTY - 1.4%
Partner Re Holdings. . . . . . . . . . . 5,300 145,750
-----------
MAJOR REGIONAL BANKS - 3.3%
NationsBank Corp.. . . . . . . . . . . . 5,100 355,087
-----------
MANUFACTURING - 1.6%
Millipore Corp.. . . . . . . . . . . . . 4,200 172,725
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
OIL - 4.5%
Amoco Corp.. . . . . . . . . . . . . . . 400 $ 28,750
Chevron Corp.. . . . . . . . . . . . . . 500 26,250
Exxon Corp.. . . . . . . . . . . . . . . 700 56,087
Mobil Corp.. . . . . . . . . . . . . . . 700 78,400
Royal Dutch Petroleum Co.. . . . . . . . 200 28,225
Tenneco Inc. . . . . . . . . . . . . . . 2,100 104,213
Texaco Inc.. . . . . . . . . . . . . . . 2,100 164,850
------------
486,775
------------
PAPER AND FOREST PRODUCTS - 5.2%
Champion International Corp. . . . . . . 2,300 96,600
Georgia-Pacific Corp.. . . . . . . . . . 4,600 315,675
Stone Container Corp.. . . . . . . . . . 10,400 149,500
------------
561,775
------------
PLASTICS - 1.0%
First Brands Corp. . . . . . . . . . . . 2,300 109,538
------------
PUBLISHING - 1.6%
Valassis Communications Inc. * . . . . . 9,900 173,250
------------
PUBLISHING - NEWSPAPERS - 0.5%
Knight Ridder Inc. . . . . . . . . . . . 900 56,250
------------
RAILROADS & EQUIPMENT - 0.2%
Trinity Industries Inc.. . . . . . . . . 800 25,200
------------
RETAIL - 8.2%
Charming Shoppes Inc.. . . . . . . . . . 16,600 47,725
Dillard Dept. Stores Inc.. . . . . . . . 9,000 256,500
Musicland Stores Inc. *. . . . . . . . . 2,000 8,500
Penney J C Inc.. . . . . . . . . . . . . 2,700 128,588
Sears Roebuck & Co.. . . . . . . . . . . 600 23,400
Service Merchandise Co. Inc. * . . . . . 2,300 11,500
TJX Cos Inc. . . . . . . . . . . . . . . 7,500 141,562
Wal-Mart Stores Inc. . . . . . . . . . . 11,600 259,550
------------
877,325
------------
STEEL - 0.4%
Quanex Corp. . . . . . . . . . . . . . . 2,000 38,750
------------
TOBACCO - 4.7%
Philip Morris Cos. Inc.. . . . . . . . . 2,200 199,100
RJR Nabisco Holdings Corp. . . . . . . . 2,300 71,013
Universal Corp. . . . . . . . . . . . . 9,700 236,437
------------
506,550
------------
TRANSPORTATION - 1.4%
Consolidated Freightways Inc. . . . . . 4,200 $ 111,300
Kirby Corp. *. . . . . . . . . . . . . . 2,700 43,875
------------
155,175
------------
TOTAL COMMON STOCK -
(Cost $7,793,924) . . . . . . . . . . 7,967,493
------------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
-----
<S> <C> <C>
SHORT TERM INVESTMENTS - 27.6%
REPURCHASE AGREEMENTS - 27.0%
Nomura Securities
5.700%, 01/02/1996, maturity
value of $2,001,267 . . . . . . . . . $2,000 2,000,000
(Dated 12/29/1995, collateralized
by $2,015,000 United States
Treasury Note, 5.12%, 02/28/1998,
with a value of $2,045,225)
State Street Bank and Trust Co.
5.750%, 01/02/1996, maturity
value of $897,573 . . . . . . . . . . 897 897,000
------------
(Dated 12/29/1995, collateralized
by $580,000 United States
Treasury Note, 12.00%, 08/15/2013,
with a value of $918,106)
TOTAL REPURCHASE AGREEMENTS -
(Cost $2,897,000) . . . . . . . . . . 2,897,000
------------
U.S. GOVERNMENT SECURITIES - 0.6%
United States Treasury Bills
4.600%, 02/29/1996 ** . . . . . . . . 60 59,546
------------
(Cost $59,557)
TOTAL SHORT TERM
INVESTMENTS - (Cost $2,956,557) 2,956,546
------------
TOTAL INVESTMENTS -
(Cost $10,750,481) - 101.9% 10,924,039
OTHER ASSETS LESS LIABILITIES - (1.9)% (208,077)
------------
NET ASSETS - 100.0% $ 10,715,962
------------
------------
</TABLE>
* Denotes non-income producing security.
** Security has been pledged (in whole or in part) to cover initial margin
requirements for futures contracts.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK - 87.3%
AEROSPACE/DEFENSE - 6.3%
Lockheed Corp. . . . . . . . . . . . . . 29,220 $ 2,308,380
McDonnell Douglas Corp.. . . . . . . . . 40,800 3,753,600
Northrop Grumman Corp. . . . . . . . . . 31,700 2,028,800
------------
8,090,780
------------
AIRLINES - 1.0%
AMR Corp. *. . . . . . . . . . . . . . . 16,500 1,225,125
------------
AUTO PARTS - 1.2%
Lear Seating Corp. * . . . . . . . . . . 54,300 1,574,700
------------
AUTOMOBILE - 3.7%
Ford Motor Co. . . . . . . . . . . . . . 133,400 3,868,600
General Motors Corp. . . . . . . . . . . 16,800 888,300
------------
4,756,900
------------
BROKERAGE FIRMS - 1.0%
Lehman Brothers Holdings Inc. . . . . . 60,500 1,285,625
------------
CHEMICALS - 1.1%
Geon Co. . . . . . . . . . . . . . . . . 57,700 1,406,438
------------
COMMUNICATION SERVICES - 2.0%
Tele Communications Inc. * . . . . . . . 130,100 2,585,738
------------
COMPUTER SOFTWARE & SERVICES - 2.1%
Compaq Computer Corp. *. . . . . . . . . 32,200 1,545,600
Storage Technology Corp. * . . . . . . . 45,100 1,076,763
------------
2,622,363
------------
CONTAINERS - 4.3%
Owens Illinois Inc. *. . . . . . . . . . 175,300 2,541,850
Stone Container Corp.. . . . . . . . . . 208,400 2,995,750
------------
5,537,600
------------
DRUGS & HEALTH CARE - 0.1%
Beverly Enterprises Inc. * . . . . . . . 7,300 77,563
------------
ELECTRIC UTILITIES - 4.4%
CMS Energy Corp. . . . . . . . . . . . . 37,900 1,132,262
Entergy Corp.. . . . . . . . . . . . . . 43,700 1,278,225
Long Island Lighting Co. . . . . . . . . 198,400 3,248,800
------------
5,659,287
------------
ELECTRONICS - 1.0%
Loral Corp.. . . . . . . . . . . . . . . 36,700 1,298,263
------------
ENVIRONMENTAL CONTROL - 0.3%
Browning-Ferris Industries Inc.. . . . . 14,700 $ 425,330
------------
FINANCIAL SERVICES - 2.7%
Fleet Financial Group Inc. . . . . . . . 27,479 1,119,769
Salomon Inc. . . . . . . . . . . . . . . 5,800 205,900
Standard Federal Bancorporation. . . . . 21,500 846,563
Travelers Inc. . . . . . . . . . . . . . 21,300 1,339,237
------------
3,511,469
------------
FOODS - 1.7%
Chiquita Brands International Inc. . . . 158,700 2,182,125
------------
HEALTH CARE - 3.1%
Columbia/HCA Healthcare Corp.. . . . . . 26,300 1,334,725
Tenet Healthcare Corp. * . . . . . . . . 129,000 2,676,750
------------
4,011,475
------------
HOMEBUILDING - 1.3%
Centex Corp. . . . . . . . . . . . . . . 9,200 319,700
Lennar Corp. . . . . . . . . . . . . . . 52,300 1,314,038
------------
1,633,738
------------
HOUSEWARES - 1.4%
National Presto Industries Inc. . . . . 17,400 691,650
Sunbeam Corp.. . . . . . . . . . . . . . 72,900 1,111,725
------------
1,803,375
------------
INSURANCE - 3.6%
Allstate Corp. . . . . . . . . . . . . . 29,700 1,221,412
Lincoln National Corp. . . . . . . . . . 58,800 3,160,500
U.S. Life Corp.. . . . . . . . . . . . . 5,250 156,844
------------
4,538,756
------------
INSURANCE - PROPERTY &
CASUALTY - 1.3%
Partner Re Holdings. . . . . . . . . . . 60,200 1,655,500
------------
LEISURE TIME - 3.9%
Brunswick Corp.. . . . . . . . . . . . . 118,400 2,841,600
Outboard Marine Corp.. . . . . . . . . . 104,900 2,137,337
------------
4,978,937
------------
LIQUOR - 1.6%
Anheuser Busch Cos. Inc. . . . . . . . . 31,200 2,086,500
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
MAJOR REGIONAL BANKS - 3.9%
BankAmerica Corp.. . . . . . . . . . . . 23,800 $ 1,541,050
NationsBank Corp.. . . . . . . . . . . . 49,400 3,439,475
------------
4,980,525
------------
MULTI-LINE INSURANCE - 0.8%
Cigna Corp.. . . . . . . . . . . . . . . 9,800 1,011,850
------------
OIL - 8.5%
Ashland Inc. . . . . . . . . . . . . . . 71,900 2,525,487
Atlantic Richfield Co. . . . . . . . . . 10,000 1,107,500
Mobil Corp.. . . . . . . . . . . . . . . 15,300 1,713,600
Royal Dutch Petroleum Co.. . . . . . . . 17,100 2,413,237
Texaco Inc.. . . . . . . . . . . . . . . 40,300 3,163,550
------------
10,923,374
------------
PAPER AND FOREST PRODUCTS - 3.3%
Champion International Corp. . . . . . . 21,000 882,000
Georgia Pacific Corp.. . . . . . . . . . 49,100 3,369,487
------------
4,251,487
------------
PETROLEUM SERVICES - 1.8%
Tosco Corp.. . . . . . . . . . . . . . . 61,700 2,352,313
------------
PUBLISHING - 1.0%
Valassis Communications Inc.* . . . . . 72,800 1,274,000
------------
RETAIL - 8.0%
Fleming Cos. Inc.. . . . . . . . . . . . 87,800 1,810,875
J C Penney Inc.. . . . . . . . . . . . . 67,300 3,205,162
Melville Corp. . . . . . . . . . . . . . 34,300 1,054,725
Sears Roebuck & Co.. . . . . . . . . . . 46,700 1,821,300
Supervalu Inc. . . . . . . . . . . . . . 72,800 2,293,200
------------
10,185,262
------------
SAVINGS AND LOAN HOLDING COMPANIES - 1.0%
Greenpoint Financial Corp. . . . . . . . 47,500 1,270,625
------------
STEEL - 0.3%
Quanex Corp. . . . . . . . . . . . . . . 19,100 370,063
------------
TIRES & RUBBER - 2.6%
Goodyear Tire & Rubber Co. . . . . . . . 72,400 3,285,150
------------
TOBACCO - 5.0%
Philip Morris Cos. Inc.. . . . . . . . . 41,900 $ 3,791,950
RJR Nabisco Holdings Corp. . . . . . . . 81,280 2,509,520
Universal Corp. Virginia . . . . . . . . 3,300 80,437
------------
6,381,907
------------
TRANSPORTATION - 2.0%
Consolidated Freightways Inc.. . . . . . 95,800 2,538,700
------------
TOTAL COMMON STOCK -
(Cost $98,394,226) 111,772,843
------------
PREFERRED STOCK - 0.5%
FOODS - 0.2%
Chiquita Brands International Inc. . . . 5,800 261,725
------------
TOBACCO - 0.3%
RJR Nabisco Holdings Corp. . . . . . . . 50,900 324,487
------------
TOTAL PREFERRED STOCK -
(Cost $591,287) 586,212
------------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
-----
<S> <C> <C>
SHORT TERM INVESTMENT - 11.4%
REPURCHASE AGREEMENT - 11.4%
State Street Bank and Trust Co.
5.750%, 01/02/1996, maturity
value of $14,675,370. . . . . . . . $14,666 14,666,000
------------
(Dated 12/29/95, collateralized by
$9,455,000 United States Treasury
Note, 12.00%, 08/15/2013, with a
value of $14,966,707)
TOTAL SHORT TERM INVESTMENT -
(Cost $14,666,000) 14,666,000
------------
TOTAL INVESTMENTS -
(Cost $113,651,513) - 99.2% 127,025,055
OTHER ASSETS LESS LIABILITIES - 0.8% 1,050,929
------------
NET ASSETS - 100.0% $128,075,984
------------
------------
</TABLE>
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK - 95.4%
AEROSPACE/DEFENSE - 2.6%
Allied Signal Inc. . . . . . . . . . . . 7,400 $ 351,500
Rockwell International Corp. . . . . . . 10,800 571,050
United Technologies Corp.. . . . . . . . 5,900 559,762
------------
1,482,312
------------
AIRLINES - 1.0%
AMR Corp. *. . . . . . . . . . . . . . . 4,100 304,425
Delta Air Lines Inc. . . . . . . . . . . 3,300 243,788
------------
548,213
------------
AUTOMOBILE - 2.0%
General Motors Corp. . . . . . . . . . . 15,800 835,425
Paccar Inc.. . . . . . . . . . . . . . . 7,400 311,725
------------
1,147,150
------------
BEVERAGES - 2.3%
PepsiCo Inc. . . . . . . . . . . . . . . 23,300 1,301,887
------------
BROADCAST MEDIA - 1.7%
Capital Cities/ABC, Inc. . . . . . . . . 5,700 703,237
Viacom Inc. *. . . . . . . . . . . . . . 6,100 288,988
------------
992,225
------------
BUSINESS SERVICES - 0.5%
First Data Corp. . . . . . . . . . . . . 4,600 307,625
------------
CHEMICALS - 3.9%
B F Goodrich Company. . . . . . . . . . 2,900 197,563
Dow Chemical Co. . . . . . . . . . . . . 17,600 1,238,600
E I Du Pont De Nemours & Co. . . . . . . 3,300 230,587
Monsanto Co. . . . . . . . . . . . . . . 4,700 575,750
------------
2,242,500
------------
COMPUTER SOFTWARE &
SERVICES - 4.3%
Cisco Systems Inc. * . . . . . . . . . . 4,100 305,962
Compaq Computer Corp. *. . . . . . . . . 6,000 288,000
International Business
Machines, Inc. . . . . . . . . . . . . 9,800 899,150
Microsoft Corp. *. . . . . . . . . . . . 7,600 666,900
Oracle System Corp. *. . . . . . . . . . 6,100 258,488
------------
2,418,500
------------
DRUGS & HEALTH CARE - 0.9%
Abbott Laboratories. . . . . . . . . . . 11,700 488,475
------------
ELECTRIC UTILITIES - 2.7%
Public Service Co. of New Mexico*. . . . 16,000 $ 282,000
Unicom Corp. . . . . . . . . . . . . . . 38,800 1,270,700
------------
1,552,700
------------
ELECTRICAL EQUIPMENT - 0.8%
Harris Corp. Delaware. . . . . . . . . . 4,300 234,887
Philips Electronics N.V. . . . . . . . . 6,100 218,838
------------
453,725
------------
ELECTRONICS - 4.5%
General Electric Co. . . . . . . . . . . 5,500 396,000
Hewlett Packard Co.. . . . . . . . . . . 6,400 536,000
Intel Corp.. . . . . . . . . . . . . . . 8,600 488,050
Micron Technology Inc. . . . . . . . . . 5,700 225,863
Motorola Inc.. . . . . . . . . . . . . . 8,700 495,900
Texas Instruments Inc. . . . . . . . . . 7,600 393,300
------------
2,535,113
------------
ENTERTAINMENT - 1.7%
ITT Corp. New *. . . . . . . . . . . . . 2,400 127,200
Walt Disney Co. . . . . . . . . . . . . 14,600 861,400
------------
988,600
------------
ENVIRONMENTAL CONTROL - 0.5%
WMX Technologies Inc.. . . . . . . . . . 10,100 301,738
------------
FINANCIAL SERVICES - 5.0%
American General Corp. . . . . . . . . . 15,400 537,075
AT&T Capital Corp. . . . . . . . . . . . 9,400 359,550
Banc One Corp. . . . . . . . . . . . . . 11,500 434,125
Dean Witter Discover & Co. . . . . . . . 11,900 559,300
Federal National Mortgage Assn. . . . . 4,800 595,800
Morgan Stanley Group Inc.. . . . . . . . 4,400 354,750
------------
2,840,600
------------
FOODS - 3.5%
ConAgra, Inc.. . . . . . . . . . . . . . 13,400 552,750
CPC International Inc. . . . . . . . . . 9,500 651,937
Kellogg Co.. . . . . . . . . . . . . . . 3,400 262,650
Sara Lee Corp. . . . . . . . . . . . . . 15,800 503,625
------------
1,970,962
------------
GAS & PIPELINE UTILITIES - 1.3%
Enron Corp.. . . . . . . . . . . . . . . 9,200 350,750
Williams Cos. Inc. . . . . . . . . . . . 9,500 416,813
------------
767,563
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
GAS EXPLORATION - 0.9%
Kerr McGee Corp. . . . . . . . . . . . . 8,300 $ 527,050
------------
HEALTH CARE - 1.0%
American Home Products Corp. . . . . . . 2,800 271,600
United Healthcare Corp.. . . . . . . . . 4,400 288,200
------------
559,800
------------
HOUSEHOLD PRODUCTS - 2.4%
Procter & Gamble Co. . . . . . . . . . . 13,400 1,112,200
Unilever N.V.. . . . . . . . . . . . . . 1,600 225,200
------------
1,337,400
------------
INDUSTRIAL MACHINERY - 0.7%
Tecumseh Products Co.. . . . . . . . . . 7,600 393,300
------------
INSURANCE - 2.4%
Allstate Corp. . . . . . . . . . . . . . 15,805 649,981
Exel LTD.. . . . . . . . . . . . . . . . 5,700 347,700
ITT Hartford Group Inc. *. . . . . . . . 2,400 116,100
MGIC Investment Corp.. . . . . . . . . . 4,200 227,850
------------
1,341,631
------------
INSURANCE - PROPERTY &
CASUALTY - 0.4%
CMAC Investment Corp.. . . . . . . . . . 5,100 224,400
------------
MACHINERY - 0.6%
Caterpillar Inc. . . . . . . . . . . . . 6,100 358,375
------------
MAJOR REGIONAL BANKS - 7.2%
BankAmerica Corp.. . . . . . . . . . . . 16,400 1,061,900
Chemical Banking Corp. . . . . . . . . . 10,700 628,625
Citicorp . . . . . . . . . . . . . . . . 9,100 611,975
Corestates Financial Corp. . . . . . . . 14,900 564,337
NationsBank Corp.. . . . . . . . . . . . 17,800 1,239,325
------------
4,106,162
------------
MANUFACTURING - 0.5%
ITT Industries Inc.. . . . . . . . . . . 2,400 57,600
Nacco Industries Inc.. . . . . . . . . . 3,700 205,350
------------
262,950
------------
MEDICAL PRODUCTS &
SUPPLIES - 0.5%
Medtronic Inc. . . . . . . . . . . . . . 5,600 312,900
------------
METALS - 0.7%
Cyprus Amax Minerals Co. . . . . . . . . 14,900 $ 389,263
------------
MISCELLANEOUS - 1.3%
Fluor Corp.. . . . . . . . . . . . . . . 5,600 369,600
Kennametal Inc.. . . . . . . . . . . . . 12,000 381,000
------------
750,600
------------
MULTI-LINE INSURANCE - 2.6%
American International Group Inc.. . . . 11,300 1,045,250
Loews Corp.. . . . . . . . . . . . . . . 5,200 407,550
------------
1,452,800
------------
OIL - 7.0%
Amoco Corp.. . . . . . . . . . . . . . . 12,900 927,187
Exxon Corp.. . . . . . . . . . . . . . . 14,000 1,121,750
Mobil Corp.. . . . . . . . . . . . . . . 4,300 481,600
Phillips Petroleum Co. . . . . . . . . . 6,900 235,463
Royal Dutch Petroleum Co.. . . . . . . . 8,200 1,157,225
------------
3,923,225
------------
PACKAGING & CONTAINER - 1.7%
Aptargroup Inc.. . . . . . . . . . . . . 10,700 399,913
Avery Dennison Corp. . . . . . . . . . . 11,300 566,412
------------
966,325
------------
PAPER AND FOREST PRODUCTS - 2.3%
Alco Standard Corp.. . . . . . . . . . . 8,000 365,000
Champion International Corp. . . . . . . 5,300 222,600
International Paper Co.. . . . . . . . . 8,200 310,575
Mead Corp. . . . . . . . . . . . . . . . 7,400 386,650
------------
1,284,825
------------
PETROLEUM SERVICES - 0.5%
Coastal Corp.. . . . . . . . . . . . . . 7,400 275,650
------------
PHARMACEUTICALS - 6.0%
Amgen Inc. * . . . . . . . . . . . . . . 4,200 249,375
Bristol Myers Squibb Co. . . . . . . . . 3,400 291,975
Eli Lilly & Co.. . . . . . . . . . . . . 9,000 506,250
Johnson & Johnson Co.. . . . . . . . . . 5,600 479,500
Merck & Co. Inc. . . . . . . . . . . . . 9,700 637,775
Pfizer Inc.. . . . . . . . . . . . . . . 8,800 554,400
Schering Plough Corp.. . . . . . . . . . 12,200 667,950
------------
3,387,225
------------
RESTAURANTS - 0.5%
Darden Restaurants Inc.. . . . . . . . . 25,400 301,625
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
21
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
RETAIL - 4.0%
Safeway Inc. * . . . . . . . . . . . . . 12,800 $ 659,200
Wal-Mart Stores Inc. . . . . . . . . . . 26,800 599,650
Harcourt General Inc.. . . . . . . . . . 9,000 376,875
Longs Drug Stores Corp.. . . . . . . . . 4,300 205,862
Staples Inc. * . . . . . . . . . . . . . 8,600 209,625
Sears Roebuck & Co.. . . . . . . . . . . 5,400 210,600
------------
2,261,812
------------
TELECOMMUNICATIONS - 5.7%
Advanced Micro Devices Inc.. . . . . . . 12,800 211,200
American Telephone &
Telegraph Corp. . . . . . . . . . . . . 27,300 1,767,675
GTE Corp.. . . . . . . . . . . . . . . . 8,000 352,000
MCI Communications Corp. . . . . . . . . 7,500 195,938
Sprint Corp. . . . . . . . . . . . . . . 17,500 697,812
------------
3,224,625
------------
TELEPHONE - 2.7%
Airtouch Communications Inc. * . . . . . 23,000 649,750
Ameritech Corp.. . . . . . . . . . . . . 15,400 908,600
------------
1,558,350
------------
TOBACCO - 2.2%
Philip Morris Cos. Inc.. . . . . . . . . 13,600 1,230,800
------------
TOOLS - 0.4%
Black & Decker Corp. . . . . . . . . . . 5,800 204,450
------------
TOYS - 0.4%
Mattel Inc.. . . . . . . . . . . . . . . 6,900 212,175
------------
TRANSPORTATION - 1.6%
Conrail Inc. . . . . . . . . . . . . . . 6,700 469,000
Federal Express Corp. *. . . . . . . . . 6,000 443,250
------------
912,250
------------
TOTAL COMMON STOCK -
(Cost $46,252,542) 54,099,856
------------
DEPOSITORY RECEIPTS - 2.8%
ELECTRIC COMPANIES - 1.3%
Empresa Nacional De Electric . . . . . . 12,300 $ 704,175
------------
PETROLEUM SERVICES - 1.5%
Norsk Hydro AS . . . . . . . . . . . . . 20,800 871,000
------------
TOTAL DEPOSITORY
RECEIPTS - (Cost $1,388,883) 1,575,175
------------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
-----
<S> <C> <C>
SHORT TERM INVESTMENT - 7.2%
REPURCHASE AGREEMENT - 7.2%
State Street Bank and Trust Co.
5.750%, 01/02/1996, maturity . . . .
value of $4,102,619. . . . . . . . . $4,100 4,100,000
------------
(Dated 12/29/1995, collateralized by
$4,180,000 United States Treasury
Note, 4.25%, 05/15/1996, with a value
of $4,185,798)
TOTAL SHORT TERM
INVESTMENT - (Cost $4,100,000) 4,100,000
------------
TOTAL INVESTMENTS -
(Cost $51,741,425) - 105.4% 59,775,031
OTHER ASSETS LESS LIABILITIES - (5.4)% (3,051,562)
------------
NET ASSETS - 100.0% $ 56,723,469
------------
------------
</TABLE>
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<PAGE>
PROTECTIVE SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK - 86.8%
ADVERTISING - 6.9%
Dimac Corp. *. . . . . . . . . . . . . . 110,800 $ 3,019,300
------------
BUILDING MATERIALS - 1.7%
Congoleum Corp. *. . . . . . . . . . . . 70,400 756,800
------------
CHEMICALS - 1.5%
Buckeye Cellulose Corp. *. . . . . . . . 29,000 638,000
------------
COMMERCIAL SERVICES - 0.3%
International Post Ltd. *. . . . . . . . 30,700 126,638
------------
COMMUNICATION - EQUIPMENT/
MANUFACTURERS - 1.2%
IPC Information Systems Inc. * . . . . . 32,500 536,250
------------
COMMUNICATION SERVICES - 5.0%
Black Box Corp. *. . . . . . . . . . . . 133,300 2,182,787
------------
COMPUTER SOFTWARE & SERVICES - 2.0%
Intersolv Inc. * . . . . . . . . . . . . 65,000 836,875
Opinion Research Corp. * . . . . . . . . 8,600 53,750
------------
890,625
------------
ELECTRIC UTILITIES - 1.6%
Central Maine Power Co.. . . . . . . . . 49,500 711,563
------------
ELECTRICAL EQUIPMENT - 4.6%
Amphenol Corp. * . . . . . . . . . . . . 64,600 1,566,550
UCAR International Inc. *. . . . . . . . 13,500 455,625
------------
2,022,175
------------
ELECTRONICS - 2.2%
Nimbus CD International Inc. * . . . . . 117,600 955,500
------------
FINANCE & BANKING - 0.2%
Greenpoint Financial Corp. . . . . . . . 3,300 88,275
------------
FOODS - 3.8%
Alpine Lace Brands Inc. *. . . . . . . . 5,300 50,350
Brothers Gourmet Coffees Inc. *. . . . . 36,600 132,675
Chiquita Brands International Inc. . . . 53,200 731,500
Morningstar Group Inc. * . . . . . . . . 93,800 750,400
------------
1,664,925
------------
HOUSEHOLD PRODUCTS - 2.1%
American Safety Razor Co. *. . . . . . . 118,000 $ 929,250
------------
HOUSEWARES - 1.2%
Levitz Furniture Inc. *. . . . . . . . . 155,500 524,813
------------
INSURANCE - 5.4%
Horace Mann Educators Corp.. . . . . . . 38,200 1,193,750
Paul Revere Corp.. . . . . . . . . . . . 55,900 1,159,925
------------
2,353,675
------------
INSURANCE-LIFE - 5.0%
John Alden Financial Corp. . . . . . . . 54,900 1,146,037
Western National Corp. . . . . . . . . . 64,900 1,046,513
------------
2,192,550
------------
INSURANCE - PROPERTY &
CASUALTY - 1.2%
Risk Capital Holding Inc. *. . . . . . . 22,800 532,950
------------
LEISURE TIME - 5.5%
International Family
Entertainment Inc. *. . . . . . . . . 33,100 542,012
Trump Hotels & Casino Resorts *. . . . . 87,300 1,876,950
------------
2,418,962
------------
MACHINERY - 1.0%
DT Industries Inc. . . . . . . . . . . . 31,700 427,950
------------
MANUFACTURING - 2.6%
Figgie International
Holdings Inc., Class A * . . . . . . . . 79,300 822,737
Figgie International
Holdings Inc., Class B * . . . . . . . . 30,200 309,550
------------
1,132,287
------------
OIL - 1.3%
Total Petroleum North
America Ltd. . . . . . . . . . . . . . . 59,900 584,025
------------
PACKAGING & CONTAINER - 1.9%
Shorewood Packaging Corp. *. . . . . . . 56,800 809,400
------------
PUBLISHING - NEWSPAPERS - 3.7%
Hollinger International Inc. . . . . . . 153,700 1,613,850
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<PAGE>
PROTECTIVE SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK (CONTINUED)
REAL ESTATE - 3.0%
Insignia Financial Group Inc. *. . . . . 33,900 $ 1,305,150
------------
RESTAURANTS - 4.2%
IHOP Corp. * . . . . . . . . . . . . . . 45,300 1,177,800
Quantum Restaurant Group Inc. *. . . . . 38,200 429,750
Sonic Corp. *. . . . . . . . . . . . . . 11,650 221,350
------------
1,828,900
------------
RETAIL - 12.6%
Brookstone Inc. *. . . . . . . . . . . . 31,800 262,350
Charming Shoppes Inc.. . . . . . . . . . 74,800 215,050
Finlay Enterprises Inc. *. . . . . . . . 68,600 806,050
J. Baker Inc.. . . . . . . . . . . . . . 164,000 943,000
Musicland Stores Inc. *. . . . . . . . . 218,900 930,325
North American Watch Corp. . . . . . . . 29,600 569,800
Service Merchandise Co. Inc. * . . . . . 72,900 364,500
Supercuts Inc. * . . . . . . . . . . . . 48,900 391,200
TJX Cos. Inc.. . . . . . . . . . . . . . 56,900 1,073,987
------------
5,556,262
------------
TEXTILE - 0.8%
Haggar Corp. . . . . . . . . . . . . . . 20,000 360,000
------------
TRANSPORTATION - 4.3%
Landstar System Inc. * . . . . . . . . . 70,300 1,880,525
------------
TOTAL COMMON STOCK -
(Cost $37,783,291) 38,043,387
------------
DEPOSITORY RECEIPTS - 0.3%
COMMERCIAL SERVICES - 0.3%
Automated Security
Holdings PLC * . . . . . . . . . . . 198,106 148,580
------------
TOTAL DEPOSITORY
RECEIPTS - (Cost $526,504) 148,580
------------
SHORT TERM INVESTMENT - 13.8%
REPURCHASE AGREEMENT - 13.8%
State Street Bank and Trust Co.
5.750%, 01/02/1996, maturity
value of $6,032,852 . . . . . . . . . $6,029 $ 6,029,000
------------
(Dated 12/29/1995, collateralized by
$6,145,000 United States Treasury
Note, 4.25%, 05/15/1996,
with a value of $6,153,523)
TOTAL SHORT TERM
INVESTMENT - (Cost $6,029,000) 6,029,000
------------
TOTAL INVESTMENTS -
(Cost $44,338,795) - 100.9% 44,220,967
OTHER ASSETS LESS LIABILITIES - (0.9)% (391,274)
------------
NET ASSETS - 100.0% $ 43,829,693
------------
------------
</TABLE>
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
24
<PAGE>
PROTECTIVE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
GOVERNMENT AND AGENCY SECURITIES - 100.3%
FEDERAL AGENCIES - 100.3%
Federal Farm Credit Bank
5.650%, 01/09/1996. . . . . . . . . $ 70,000 $ 69,912
5.630%, 01/11/1996. . . . . . . . . 100,000 99,844
5.550%, 02/06/1996. . . . . . . . . 400,000 397,780
5.540%, 03/06/1996. . . . . . . . . 130,000 128,700
Federal Home Loan Bank
5.590%, 01/16/1996. . . . . . . . . 400,000 399,068
5.570%, 01/18/1996. . . . . . . . . 440,000 438,843
5.610%, 01/19/1996. . . . . . . . . 150,000 149,579
5.550%, 01/24/1996. . . . . . . . . 235,000 234,167
5.580%, 01/25/1996. . . . . . . . . 100,000 99,628
5.570%, 02/01/1996. . . . . . . . . 155,000 154,256
5.580%, 02/05/1996. . . . . . . . . 105,000 104,430
Federal Home Loan Mortgage
5.640%, 01/02/1996. . . . . . . . . 100,000 99,984
5.500%, 01/05/1996. . . . . . . . . 125,000 124,924
5.550%, 02/15/1996. . . . . . . . . 400,000 397,225
5.400%, 03/12/1996. . . . . . . . . 190,000 187,976
Federal National Mortgage Assn.
5.550%, 02/08/1996. . . . . . . . . 100,000 99,414
5.570%, 02/22/1996. . . . . . . . . 180,000 178,552
5.400%, 03/04/1996. . . . . . . . . 300,000 297,165
5.480%, 03/06/1996. . . . . . . . . 470,000 465,350
Tennessee Valley Authority
5.600%, 01/05/1996. . . . . . . . . 150,000 149,907
5.610%, 01/12/1996. . . . . . . . . 800,000 798,629
-----------
TOTAL GOVERNMENT AND
AGENCY SECURITIES - (Cost $5,075,333) 5,075,333
-----------
TOTAL INVESTMENTS -
(Cost $5,075,333) - 100.1% 5,075,333
OTHER ASSETS LESS LIABILITIES - (0.1)% (5,608)
-----------
NET ASSETS -- 100.0% $ 5,069,725
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- ------------
<S> <C> <C>
ASSETS
Investments in securities, at value (Note B) . . . . . . . . . . $ 29,990,334 $ 59,206,373
Investments in repurchase agreements (Note B). . . . . . . . . . 0 0
Cash, including foreign currency at value. . . . . . . . . . . . 148,101 12,175
Dividends receivable . . . . . . . . . . . . . . . . . . . . . . 0 39,008
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . 773,576 1,702
Receivable for securities sold . . . . . . . . . . . . . . . . . 0 0
Receivable for currency sold . . . . . . . . . . . . . . . . . . 149,267 183,890
Unrealized appreciation on forward currency contracts. . . . . . 375,818 151,773
Receivable for fund shares sold 502 31,137
Receivable for variation margin. . . . . . . . . . . . . . . . . 0 0
Foreign income tax reclaim receivable. . . . . . . . . . . . . . 55,600 20,238
Receivable due from Protective Life (Note C) . . . . . . . . . . 28,609 0
------------- -------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 31,521,807 59,646,296
LIABILITIES
Unrealized depreciation on forward currency contracts. . . . . . 220,201 104,161
Payable for securities purchased . . . . . . . . . . . . . . . . 0 383,583
Payable for currency purchased . . . . . . . . . . . . . . . . . 149,267 185,287
Investment management fee payable (Note C) . . . . . . . . . . . 28,517 52,814
Accounts payable and accrued expenses. . . . . . . . . . . . . . 37,402 65,502
Payable for fund shares redeemed . . . . . . . . . . . . . . . . 1,104 9,325
Due to custodian . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Due to Protective Life . . . . . . . . . . . . . . . . . . . . . 0 3,926
------------- -------------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . 436,491 804,598
------------- -------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,085,316 $ 58,841,698
------------- -------------
------------- -------------
NET ASSETS
Paid-in capital (Note E) . . . . . . . . . . . . . . . . . . . . $ 30,566,637 $ 53,059,252
Undistributed (distributions in excess of) net investment
income (Note B). . . . . . . . . . . . . . . . . . . . . . . . (591,214) (398,006)
Accumulated net realized gain (loss) on
investments and foreign currency transactions. . . . . . . . . 74,675 (947,926)
Net unrealized appreciation (depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 881,593 7,081,328
Foreign currency translations. . . . . . . . . . . . . . . . . 153,625 47,050
------------- -------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,085,316 $ 58,841,698
------------- -------------
------------- -------------
NET ASSET VALUE PER SHARE
Offering and redemption price per share (based on
shares of capital stock outstanding,
par value $.001 per share) . . . . . . . . . . . . . . . . . . $ 10.074 $ 11.045
Total shares outstanding at end of period. . . . . . . . . . . . 3,085,550 5,327,322
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . $ 29,108,741 $ 52,122,274
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26
<PAGE>
<TABLE>
<CAPTION>
CAPITAL GROWTH AND SELECT SMALL CAP MONEY
GROWTH FUND INCOME FUND EQUITY FUND EQUITY FUND MARKET FUND
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (Note B) . . . . . . $ 8,027,039 $ 112,359,055 $ 55,675,031 $ 38,191,967 $5,075,333
Investments in repurchase agreements (Note B). . . . . . 2,897,000 14,666,000 4,100,000 6,029,000 0
Cash, including foreign currency at value. . . . . . . . 4,948 4,232 0 0 5,448
Dividends receivable . . . . . . . . . . . . . . . . . . 9,749 218,721 110,521 13,235 0
Interest receivable. . . . . . . . . . . . . . . . . . . 1,383 7,028 1,965 2,889 0
Receivable for securities sold . . . . . . . . . . . . . 0 1,613,009 2,253,751 35,275 0
Receivable for currency sold . . . . . . . . . . . . . . 0 0 0 0 0
Unrealized appreciation on forward currency contracts . 0 0 0 0 0
Receivable for fund shares sold . . . . . . . . . . . . 46,247 288,507 287,673 38,858 10,650
Receivable for variation margin . . . . . . . . . . . . 1,050 0 0 0 0
Foreign income tax reclaim receivable. . . . . . . . . . 47 0 452 0 0
Receivable due from Protective Life (Note C) . . . . . . 17,008 12,876 19,878 15,897 10,458
------------ ------------- ------------ ------------ -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . 11,004,471 129,169,428 62,449,271 44,327,121 5,101,889
LIABILITIES
Unrealized depreciation on forward currency contracts. . 0 0 0 0 0
Payable for securities purchased . . . . . . . . . . . . 267,269 959,831 5,651,236 434,069 0
Payable for currency purchased . . . . . . . . . . . . . 0 0 0 0 0
Investment management fee payable (Note C) . . . . . . . 6,701 83,710 37,191 28,911 2,791
Accounts payable and accrued expenses. . . . . . . . . . 13,808 44,418 34,043 26,084 29,200
Payable for fund shares redeemed . . . . . . . . . . . . 731 5,485 2,571 7,957 173
Due to custodian . . . . . . . . . . . . . . . . . . . . 0 0 761 407 0
Due to Protective Life . . . . . . . . . . . . . . . . . 0 0 0 0 0
------------ ------------- ------------ ------------ -----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . 288,509 1,093,444 5,725,802 497,428 32,164
------------ ------------- ------------ ------------ -----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . $ 10,715,962 $ 128,075,984 $ 56,723,469 $ 43,829,693 $ 5,069,725
------------ ------------- ------------ ------------ -----------
------------ ------------- ------------ ------------ -----------
NET ASSETS
Paid-in capital (Note E) . . . . . . . . . . . . . . . . $ 10,535,930 $ 113,490,939 $ 48,396,437 $ 44,359,024 $ 5,069,725
Undistributed (distributions in excess of) net
investment income (Note B) . . . . . . . . . . . . . . 0 0 0 0 0
Accumulated net realized gain (loss) on
investments and foreign currency transactions. . . . . 16,899 1,211,503 293,426 (411,503) 0
Net unrealized appreciation (depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . 163,133 13,373,542 8,033,606 (117,828) 0
Foreign currency translations. . . . . . . . . . . . . 0 0 0 0 0
------------ ------------- ------------ ------------ -----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . $ 10,715,962 $ 128,075,984 $ 56,723,469 $ 43,829,693 $ 5,069,725
------------ ------------- ------------ ------------ -----------
------------ ------------- ------------ ------------ -----------
NET ASSET VALUE PER SHARE
Offering and redemption price per share (based on
shares of capital stock outstanding,
par value $.001 per share) . . . . . . . . . . . . . . $ 10.613 $ 12.197 $ 13.109 $ 9.345 $ 1.000
Total shares outstanding at end of period. . . . . . . . 1,009,714 10,500,900 4,327,028 4,689,953 5,069,725
Cost of investments. . . . . . . . . . . . . . . . . . . $ 10,750,481 $ 113,651,513 $ 51,741,425 44,338,795 $ 5,075,333
</TABLE>
27
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- -------------
<S> <C> <C>
INVESTMENT INCOME
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,682,358 $ 266,874
Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 655,136
Foreign taxes withheld. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 (83,444)
------------ -------------
TOTAL INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,682,358 838,566
EXPENSES
Investment management fee (Note C). . . . . . . . . . . . . . . . . . . . . . . . . . . 262,733 448,460
Custodian fee and expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,122 138,182
Audit fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,200 21,500
Legal fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,646 9,118
Printing expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,954 6,387
Director's Fee (Note C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,540 4,102
Transfer agent fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,099 2,635
Miscellaneous expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 182
----------- ------------
Total operating expenses before reimbursement . . . . . . . . . . . . . . . . . . . . 357,407 630,566
Expenses borne by Protective Life (Note C). . . . . . . . . . . . . . . . . . . . . . (94,674) (182,106)
----------- ------------
NET EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262,733 448,460
----------- ------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,419,625 390,106
----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FOREIGN CURRENCY, OPTION
AND FUTURES TRANSACTIONS
Net realized gain(loss) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 890,583 (640,025)
Foreign currency transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,263 1,671,359
Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 (357,171)
Futures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Change in unrealized appreciation (depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,128,602 6,588,738
Foreign currency translations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,458 161,660
Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 250,336
Futures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
-------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) . . . . . . . . . . . . . . . . . . . . . . . 2,262,906 7,674,897
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,682,531 $ 8,065,003
-------------- --------------
-------------- --------------
</TABLE>
*For the period from June 13, 1995 (commencement of operations) through
December 31, 1995.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
28
<PAGE>
<TABLE>
<CAPTION>
CAPITAL GROWTH AND SELECT SMALL CAP MONEY
GROWTH FUND* INCOME FUND EQUITY FUND EQUITY FUND MARKET FUND
------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest income . . . . . . . . . . . . . . . . . . . . $ 58,572 $ 570,157 $ 116,960 $ 499,300 $ 279,244
Dividend income . . . . . . . . . . . . . . . . . . . . 46,412 2,044,320 772,009 134,410 0
Foreign taxes withheld. . . . . . . . . . . . . . . . . (70) (1,352) (7,477) (1,936) 0
---------- ---------- ---------- ---------- ----------
TOTAL INVESTMENT INCOME . . . . . . . . . . . . . . . 104,914 2,613,125 881,492 631,774 279,244
EXPENSES
Investment management fee (Note C). . . . . . . . . . . 24,876 661,953 282,954 268,136 28,954
Custodian fee and expenses. . . . . . . . . . . . . . . 9,750 46,307 42,534 37,871 15,798
Audit fee . . . . . . . . . . . . . . . . . . . . . . . 11,000 20,500 15,008 11,000 7,500
Legal fee . . . . . . . . . . . . . . . . . . . . . . . 1,541 17,523 7,329 7,586 1,200
Printing expense. . . . . . . . . . . . . . . . . . . . 1,078 12,276 5,133 5,313 885
Director's Fee (Note C) . . . . . . . . . . . . . . . . 694 7,887 3,297 3,414 1,750
Transfer agent fee. . . . . . . . . . . . . . . . . . . 1,272 3,427 2,122 2,352 392
Miscellaneous expense . . . . . . . . . . . . . . . . . 30 350 147 152 25
---------- ---------- ---------- ---------- ----------
Total operating expenses before reimbursement . . . . 50,241 770,223 358,524 335,824 56,504
Expenses borne by Protective Life (Note C). . . . . . (25,365) (108,270) (75,570) (67,688) (27,550)
---------- ---------- ---------- ---------- ----------
NET EXPENSES. . . . . . . . . . . . . . . . . . . . 24,876 661,953 282,954 268,136 28,954
---------- ---------- ---------- ---------- ----------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . 80,038 1,951,172 598,538 363,638 250,290
---------- ---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FOREIGN CURRENCY, OPTION
AND FUTURES TRANSACTIONS
Net realized gain(loss) on:
Investments. . . . . . . . . . . . . . . . . . . . . . (15,740) 4,484,478 1,136,257 140,108 0
Foreign currency transactions. . . . . . . . . . . . . 0 0 0 0 0
Options. . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0
Futures. . . . . . . . . . . . . . . . . . . . . . . . 32,639 0 0 0 0
Change in unrealized appreciation (depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . 173,558 14,188,139 8,369,198 1,484,325 0
Foreign currency translations. . . . . . . . . . . . . 0 0 0 0 0
Options. . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0
Futures. . . . . . . . . . . . . . . . . . . . . . . . (10,425) 0 0 0 0
---------- ---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) . . . . . . . 180,032 18,672,617 9,505,455 1,624,433 0
---------- ---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . $260,070 $20,623,789 $10,103,993 $1,988,071 $250,290
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
29
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GLOBAL INCOME FUND INTERNATIONAL EQUITY FUND
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
12/31/95 12/31/94* 12/31/95 12/31/94*
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . $ 1,419,625 $ 451,353 $ 390,106 $ 137,125
Net realized gain (loss) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . 890,583 (259,299) (640,025) (442,903)
Foreign currency transactions. . . . . . . . . . . . . . . 149,263 63,610 1,671,359 (206,507)
Options. . . . . . . . . . . . . . . . . . . . . . . . . . 0 4,831 (357,171) 5,326
Futures. . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
Change in unrealized appreciation
(depreciation) of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . 1,128,602 (247,009) 6,588,738 492,590
Foreign currency translations. . . . . . . . . . . . . . . 94,458 59,167 161,660 (114,610)
Options. . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 250,336 (250,336)
Futures. . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . . . . . . . . 3,682,531 72,653 8,065,003 (379,315)
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income. . . . . . . . . . . . . . . . . . . (1,419,625) (451,353) (390,106) 0
In excess of net investment income . . . . . . . . . . . . (828,216) 0 (1,766,850)
Net realized gain on investments . . . . . . . . . . . . . (537,311) 0 0 0
In excess of net realized gains. . . . . . . . . . . . . . 0 0 0 0
----------- ----------- ----------- -----------
Total dividends and distributions
to shareholders. . . . . . . . . . . . . . . . . . . . . (2,785,152) (451,353) (2,156,956) 0
FUND SHARE TRANSACTIONS (Note E) . . . . . . . . . . . . . . 12,906,465 17,650,172 25,548,590 27,754,376
----------- ----------- ----------- -----------
Total increase in net assets . . . . . . . . . . . . . . . 13,803,844 17,271,472 31,456,637 27,375,061
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . 17,281,472 10,000 27,385,061 10,000
----------- ----------- ----------- -----------
END OF PERIOD (1). . . . . . . . . . . . . . . . . . . . . $31,085,316 $17,281,472 $58,841,698 $27,385,061
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
(1) Including undistributed (overdistributed)
net investment income. . . . . . . . . . . . . . . . . $ (591,214) $ (19,500) $ (398,006) $ (229,909)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
* For the period from March 14, 1994 (commencement of operations) through
December 31, 1994.
** For the period from June 13, 1995 (commencement of operations) through
December 31, 1995.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
30
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CAPITAL GROWTH FUND GROWTH AND INCOME FUND SELECT EQUITY FUND
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
12/31/95** 12/31/95 12/31/94* 12/31/95 12/31/94*
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . $ 80,038 $ 1,951,172 $ 331,204 $ 598,538 $ 163,171
Net realized gain (loss) on:
Investments. . . . . . . . . . . . . . . . . . (15,740) 4,484,478 134,697 1,136,257 211,953
Foreign currency transactions. . . . . . . . . 0 0 0 0 0
Options. . . . . . . . . . . . . . . . . . . . 0 0 0 0 0
Futures. . . . . . . . . . . . . . . . . . . . 32,639 0 0 0 0
Change in unrealized appreciation
(depreciation) of:
Investments. . . . . . . . . . . . . . . . . . 173,558 14,188,139 (814,597) 8,369,198 (335,592)
Foreign currency translations. . . . . . . . . 0 0 0 0 0
Options. . . . . . . . . . . . . . . . . . . . 0 0 0 0 0
Futures. . . . . . . . . . . . . . . . . . . . (10,425) 0 0 0 0
------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . . 260,070 20,623,789 (348,696) 10,103,993 39,532
------------ ----------- ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income. . . . . . . . . . . . . (80,038) (1,951,172) (331,204) (598,538) (163,171)
In excess of net investment income . . . . . . 0 0 0 0 0
Net realized gain on investments . . . . . . . 0 (3,237,795) (134,697) (839,755) (211,953)
In excess of net realized gains. . . . . . . . 0 0 (35,180) 0 (3,076)
------------ ----------- ------------ ------------ ------------
Total dividends and distributions
to shareholders. . . . . . . . . . . . . . . (80,038) (5,188,967) (501,081) (1,438,293) (378,200)
FUND SHARE TRANSACTIONS (Note E) . . . . . . . . 10,535,930 70,336,044 43,144,895 30,340,320 18,046,117
------------ ----------- ------------ ------------ ------------
Total increase in net assets . . . . . . . . . 10,715,962 85,770,866 42,295,118 39,006,020 17,707,449
NET ASSETS
Beginning of period. . . . . . . . . . . . . . 0 42,305,118 10,000 17,717,449 10,000
------------ ----------- ------------ ------------ ------------
END OF PERIOD (1). . . . . . . . . . . . . . . $ 10,715,962 $128,075,984 $ 42,305,118 $ 56,723,469 $ 17,717,449
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
(1) Including undistributed (overdistributed)
net investment income. . . . . . . . . . . $ 0 $ 0 $ 0 $ 0 $ 0
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------
</TABLE>
31
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL CAP EQUITY FUND MONEY MARKET FUND
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
12/31/95 12/31/94* 12/31/95 12/31/94*
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations: . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . $ 363,638 $ 92,044 $ 250,290 $ 115,674
Net realized gain (loss) on: . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . 140,108 1,583 0 248
Foreign currency transactions . . . . . . . . 0 0 0 0
Options . . . . . . . . . . . . . . . . . . . 0 0 0 0
Futures . . . . . . . . . . . . . . . . . . . 0 0 0 0
Change in unrealized appreciation. . . . . . . .
(depreciation of):
Investments . . . . . . . . . . . . . . . . . 1,484,325 (1,602,153) 0 0
Foreign currency translations . . . . . . . . 0 0 0 0
Options . . . . . . . . . . . . . . . . . . . 0 0 0 0
Futures . . . . . . . . . . . . . . . . . . . 0 0 0 0
------------ ------------ ----------- -----------
Net increase (decrease) in net assets . . . .
resulting from operations . . . . . . . . . . 1,988,071 (1,508,526) 250,290 115,922
------------ ------------ ----------- -----------
Dividends and distributions to shareholders
from:
Net investment income. . . . . . . . . . . . . . (363,638) (92,044) (250,290) (115,674)
In excess of net investment income . . . . . . . 0 0 (3) 0
Net realized gain on investments . . . . . . . . (140,108) (1,583) 0 (245)
In excess of net realized gains. . . . . . . . . (355,217) (56,286) 0 0
------------ ------------ ----------- -----------
Total dividends and distributions
to shareholders . . . . . . . . . . . . . . . (858,963) (149,913) (250,293) (115,919)
FUND SHARE TRANSACTIONS (Note E) 20,887,839 23,461,185 1,451,237 3,608,488
------------ ------------ ----------- -----------
Total increase in net assets. . . . . . . . . 22,016,947 21,802,746 1,451,234 3,608,491
NET ASSETS . . . . . . . . . . . . . . . . . . .
Beginning of period . . . . . . . . . . . . . 21,812,746 10,000 3,618,491 10,000
------------ ------------ ----------- -----------
END OF PERIOD (1) . . . . . . . . . . . . . . $ 43,829,693 $ 21,812,746 $ 5,069,725 $ 3,618,491
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
(1) Including undistributed (overdistributed)
net investment income . . . . . . . . . . . $ 0 $ 0 $ 0 $ 0
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
* For the period from March 14, 1994 (commencement of operations) through
December 31, 1994.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMNTS.
32
<PAGE>
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
33
<PAGE>
PROTECTIVE INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS
FOR A SHARE OF COMMON STOCK OUTSTANDING FOR THE PERIOD INDICATED
<TABLE>
<CAPTION>
REALIZED AND DIVIDENDS
NET ASSET UNREALIZED TOTAL DIVIDENDS IN EXCESS DISTRIBUTIONS
VALUE AT NET GAIN (LOSS) FROM FROM NET OF NET FROM NET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT REALIZED
OF PERIOD INCOME (3)(7) INVESTMENTS(7) OPERATIONS INCOME INCOME CAPITAL GAINS
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Global Income Fund
1/1/95 - 12/31/95 . . . . . . . .$ 9.558 $0.607 $0.968 $1.575 $(0.553) $(0.323) $(0.183)
3/14/94 - 12/31/94 (1). . . . . . 10.000 0.367 (0.442) (0.075) (0.367) 0.000 0.000
- ---------------------------------------------------------------------------------------------------------------------------------
International Equity Fund
1/1/95 - 12/31/95 . . . . . . . . 9.581 0.067 1.817 1.884 (0.076) (0.344) 0.000
3/14/94 - 12/31/94 (1). . . . . . 10.000 0.048 (0.467) (0.419) 0.000 0.000 0.000
- ---------------------------------------------------------------------------------------------------------------------------------
Capital Growth Fund
6/13/95 - 12/31/95 (2) . . . . . 10.000 0.080 0.613 0.693 (0.080) 0.000 0.000
- ---------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund
1/1/95 - 12/31/95 . . . . . . . . 9.661 0.246 2.854 3.100 (0.246) 0.000 (0.318)
3/14/94 - 12/31/94 (1). . . . . . 10.000 0.114 (0.300) (0.186) (0.114) 0.000 (0.031)
- ---------------------------------------------------------------------------------------------------------------------------------
Select Equity Fund
1/1/95 - 12/31/95 . . . . . . . . 9.839 0.143 3.470 3.613 (0.143) 0.000 (0.200)
3/14/94 - 12/31/94 (1). . . . . . 10.000 0.093 (0.039) 0.054 (0.093) 0.000 (0.120)
- ---------------------------------------------------------------------------------------------------------------------------------
Small Cap Equity Fund
1/1/95 - 12/31/95 . . . . . . . . 8.951 0.079 0.502 0.581 (0.079) 0.000 (0.031)
3/14/94 - 12/31/94 (1). . . . . . 10.000 0.038 (1.025) (0.987) (0.038) 0.000 (0.001)
- ---------------------------------------------------------------------------------------------------------------------------------
Money Market Fund
1/1/95 - 12/31/95 . . . . . . . . 1.000 0.052 0.000 0.052 (0.052) 0.000 0.000
3/14/94 - 12/31/94 (1). . . . . . 1.000 0.031 0.000 0.031 (0.031) 0.000 0.000
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Investment operations commenced on March 14, 1994.
(2) Investment operations commenced on June 13, 1995.
(3) Net Investment Income and Ratio of Operating Expenses to Average Net
Assets is after reimbursement of certain fees and expenses by Protective
Life. Had Protective Life 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: For the year
ended December 31, 1995: Global Income Fund, $0.577 and 1.50%;
International Equity Fund, $0.032 and 1.55%; Capital Growth Fund, $0.055
and 1.62%; Growth and Income Fund, $0.236 and 0.93%; Select Equity Fund,
$0.125 and 1.01%; Small Cap Equity Fund, $.065 and 1.00%; and Money Market
Fund, $0.046 and 1.17%, respectively. For the period ended December 31,
1994: 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, $0.055 and 1.81%; Small Cap Equity Fund, $0.009 and 1.62%; and
Money Market Fund, $0.018 and 2.24%, respectively.
(4) 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. Total return for a
period of less than one year is not annualized.
(5) Annualized.
(6) Non-Annualized.
(7) The per share computation is a mathematical computation which may appear
inconsistent with the statement of operations.
34
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS RATIO RATIO OF NET
IN EXCESS NET ASSET NET ASSETS OF OPERATING INVESTMENT
OF VALUE AT END EXPENSES INCOME TO PORTFOLIO
NET REALIZED TOTAL END TOTAL OF PERIOD TO AVERAGE AVERAGE TURNOVER
GAINS DISTRIBUTIONS OF PERIOD RETURN (4) (000) NET ASSETS (3) NET ASSETS RATE
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Global Income Fund
1/1/95 - 12/31/95 . . . . . . $0.000 $(1.059) $10.074 16.94% $31,085 1.10% 5.94% 295%
3/14/94 - 12/31/94 (1) . . . . 0.000 (0.367) 9.558 (0.74) 17,281 1.10 (5) 5.58 (5) 210 (6)
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Fund
1/1/95 - 12/31/95 . . . . . . 0.000 (0.420) 11.045 19.66 58,842 1.10 0.96 40
3/14/94 - 12/31/94 (1) . . . . 0.000 (0.000) 9.581 (4.18) 27,385 1.10 (5) 1.25 (5) 33 (6)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Growth Fund
6/13/95 - 12/31/95 (2) . . . . 0.000 (0.080) 10.613 6.93 10,716 0.80 (5) 2.57 (5) 5 (6)
- ------------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund
1/1/95 - 12/31/95 . . . . . . 0.000 (0.564) 12.197 32.29 128,076 0.80 2.36 55
3/14/94 - 12/31/94 (1) . . . . (0.008) (0.153) 9.661 (1.86) 42,305 0.80 (5) 2.21 (5) 36 (6)
- ------------------------------------------------------------------------------------------------------------------------------------
Select Equity Fund
1/1/95 - 12/31/95 . . . . . . 0.000 (0.343) 13.109 36.73 56,723 0.80 1.69 60
3/14/94 - 12/31/94 (1) . . . . (0.002) (0.215) 9.839 0.53 17,717 0.80 (5) 2.44 (5) 56 (6)
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Equity Fund
1/1/95 - 12/31/95 . . . . . . (0.077) (0.187) 9.345 6.46 43,830 0.80 1.09 60
3/14/94 - 12/31/94 (1) . . . . (0.023) (0.062) 8.951 (9.87) 21,813 0.80 (5) 1.07 (5) 17 (6)
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund . . . . . . . .
1/1/95 - 12/31/95 . . . . . . 0.000 (0.052) 1.000 5.32 5,070 0.60 5.19 N/A
3/14/94 - 12/31/94 (1) . . . . 0.000 (0.031) 1.000 3.14 3,618 0.60 (5) 3.80 (5) N/A
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
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 seven separately managed pools of assets which have differing
investment objectives and policies. The Company currently issues seven classes
of its shares: Global Income Fund, International Equity Fund, Capital Growth
Fund, Growth and Income Fund, Select Equity Fund, Small Cap Equity Fund and
Money Market Fund (individually a "Fund" and collectively 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. On June 13, 1995 the Capital
Growth Fund commenced investment operations by issuing 100,000 shares of stock
to Protective Life Insurance Company ("Protective Life") in exchange for an
initial contribution of $1,000,000.
The Company offers each class of its stock to a separate account of Protective
Life as funding vehicles for certain variable annuity contracts issued by
Protective Life through the separate account.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
The accounting policies are in conformity with generally accepted accounting
principles for Investment companies. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from these estimates.
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 delay due to legal
proceedings.
36
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
INVESTMENT TRANSACTIONS - Investment security transactions are recorded on trade
date. 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 Funds 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.
Unrealized currency gains and losses on securities held are not segregated for
financial statement presentation.
Upon the purchase or sale of a security denominated in a foreign currency, the
Funds 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 Funds 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 Funds as an unrealized gain or loss. A
Forward may be closed prior to the contractual settlement date by entering into
an offsetting position in the same currency with the same settlement terms. The
unrealized gain or loss resulting from the offsetting transaction is not
realized until the contractual settlement date. On the contractual settlement
date the Fund recognizes a realized gain or loss equal to the difference between
the value of the Forward when entered into and the value of the Forward on the
contractual settlement date. The Funds 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 Funds 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, to hedge the U.S. dollar
value of portfolio securities denominated in a foreign currency 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 a 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 a 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, an index's value or a 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, 1995
FUTURES CONTRACTS - In order to gain exposure to or protect against declines in
security values, the Funds may buy and sell futures contracts. The Funds may
also buy or write put or call options on these futures contracts. A Fund
generally sells futures contracts to hedge against declines in the value of
portfolio securities. A Fund may also purchase futures contracts to gain
exposure to market changes as it may be more efficient or cost effective than
actually buying securities. The Funds segregate assets to cover its
commitments under such futures contracts. Upon entering into a futures
contract, a Fund is required to deposit either cash or securities in an amount
(initial margin) equal to a certain percentage of the contract value.
Subsequent payments (variation margin) are made or received by the Fund each
day. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains and losses. The Funds
recognize a realized gain or loss when the contract is closed. Risks of
entering into futures contracts (and related options) include the possibility
that there may be an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
EXPENSES - Expenses directly attributable to a Fund are charged to that Fund.
Expenses not directly attributable to a Fund are, 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, Capital Growth
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 for futures and options, foreign currency transactions
and losses deferred due to wash sales. 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%; Capital Growth Fund, .80%; 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%; Capital Growth Fund, .80%; Growth and
Income Fund, .80%; Select Equity Fund, .80%; Small Cap Equity Fund, .80%; and
Money Market Fund, .60%. Protective Life may terminate its obligations to pay
such expenses upon 120 days notice to the Company.
38
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
Goldman Sachs Asset Management acts as the investment adviser (the "Adviser") of
Capital Growth Fund, 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; Capital Growth Fund, Growth 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; and 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 the year ended December 31, 1995, except for the
Capital Growth Fund, which commenced investment operations on June 13, 1995,
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 . . . . . . $ 56,421,154 $ 13,982,975 $ 44,629,571 $ 13,631,188
International Equity Fund. . . 40,980,955 0 14,607,254 0
Capital Growth Fund. . . . . . 7,969,330 119,136 159,275 60,000
Growth and Income Fund . . . . 97,673,985 0 40,572,459 0
Select Equity Fund . . . . . . 49,382,271 0 20,323,745 0
Small Cap Equity Fund. . . . . 37,172,633 0 15,511,165 0
</TABLE>
Purchases and sales, including maturities, of short-term securities by the Money
Market Fund for the year ended December 31, 1995 were $37,812,955 and
$36,611,849, 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, 1995 were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
IDENTIFIED GROSS UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Global Income Fund . . . . . . $ 29,128,156 $ 914,085 $ 51,907 $ 862,178
International Equity Fund. . . 52,141,129 7,952,616 887,372 7,065,244
Capital Growth Fund. . . . . . 10,751,984 525,733 353,678 172,055
Growth and Income Fund . . . . 113,655,002 15,495,584 2,125,531 13,370,053
Select Equity Fund . . . . . . 51,768,678 8,454,726 448,373 8,006,353
Small Cap Equity Fund. . . . . 44,377,316 4,585,699 4,742,048 (156,349)
Money Market Fund. . . . . . . 5,075,333 0 0 0
</TABLE>
In addition, the International Equity Fund had capital loss carryforwards of
$247,765 and $260,222 for the years ended December 31, 1994 and December 31,
1995, respectively. The capital loss carryforwards may be utilized to offset
capital gains through December 31, 2002 and December 31, 2003, respectively.
39
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
The following option contracts were entered into during the year ended December
31, 1995:
<TABLE>
<CAPTION>
GLOBAL INCOME FUND INTERNATIONAL EQUITY FUND
NUMBER OF NUMBER OF
CONTRACTS COST CONTRACTS COST
--------- ---- --------- ----
<S> <C> <C> <C> <C>
12/31/94 BALANCE 0 $ 0 291,656,946 $ 357,172
WRITTEN 250,000,000 16,788 0 0
CLOSED/EXPIRED 0 0 (291,656,946) (357,172)
EXERCISED (250,000,000) (16,788) 0 0
------------ --------- ------------ ----------
12/31/95 BALANCE 0 $ 0 0 $ 0
------------ --------- ------------ ----------
------------ --------- ------------ ----------
</TABLE>
At December 31, 1995, the Capital Growth Fund had open futures contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
AGGREGATE MARKET LOSS ON
FUTURES EXPIRATION CONTRACTS FACE VALUE VALUE FUTURES
- ------- ---------- --------- ---------- ----- -------
<S> <C> <C> <C> <C> <C>
S&P 500 Index March 1996 3 $938,100 $927,675 ($10,425)
</TABLE>
The aggregate face value of futures contracts opened and closed during the
period ended December 31, 1995 was $2,720,400 and $1,782,300, respectively.
NOTE E - SHAREHOLDER TRANSACTIONS
The authorized capital stock of the Company consists of 1 billion shares, par
value $.001 per share. 700 million of the authorized shares have been divided
into, and may be issued in, seven designated classes as follows: Global Income
Fund, 100 million shares; International Equity Fund, 100 million shares; Capital
Growth 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.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
GLOBAL INCOME FUND GLOBAL INCOME FUND
YEAR ENDED MARCH 14, 1994* TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . 1,255,603 $12,700,315 1,975,710 $19,281,417
Shares issued to shareholders in
reinvestment of dividends. . . . . . . . 276,359 2,785,152 46,868 451,352
Shares redeemed or exchanged out . . . . (254,564) (2,579,002) (215,426) (2,082,597)
--------- ----------- --------- -----------
Net increase . . . . . . . . . . . . . . 1,277,398 $12,906,465 1,807,152 $17,650,172
--------- ----------- --------- -----------
--------- ----------- --------- -----------
<CAPTION>
INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY FUND
YEAR ENDED MARCH 14, 1994* TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . . 2,601,322 $26,748,946 2,926,579 $28,423,406
Shares issued to shareholders in
reinvestment of dividends. . . . . . . . . 195,153 2,156,956 0 0
Shares redeemed or exchanged out . . . . . (327,344) (3,357,312) (69,388) (669,030)
--------- ----------- --------- -----------
Net increase . . . . . . . . . . . . . . . 2,469,131 $25,548,590 2,857,191 $27,754,376
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
40
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
CAPITAL GROWTH FUND
JUNE 13, 1995* TO
DECEMBER 31, 1995
-----------------
SHARES DOLLARS
------ -------
<S> <C> <C>
Shares sold or exchanged in. . . . . . . 1,020,331 $10,646,035
Shares issued to shareholders in
reinvestment of dividends. . . . . . 7,542 80,037
Shares redeemed or exchanged out . . . . (18,159) (190,142)
--------- -----------
Net increase . . . . . . . . . . . . . . 1,009,714 $10,535,930
--------- -----------
--------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND GROWTH AND INCOME FUND
YEAR ENDED MARCH 14, 1994* TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . 6,106,217 $69,914,606 4,404,799 $43,422,513
Shares issued to shareholders in
reinvestment of dividends . . . . . . 431,665 5,188,967 51,337 501,081
Shares redeemed or exchanged out . . . . (415,846) (4,767,529) (78,272) (778,699)
--------- ----------- --------- -----------
Net increase 6,122,036 $70,336,044 4,377,864 $43,144,895
--------- ----------- --------- -----------
--------- ----------- --------- -----------
<CAPTION>
SELECT EQUITY FUND SELECT EQUITY FUND
YEAR ENDED MARCH 14, 1994* TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . 2,599,094 $31,044,432 1,816,889 $18,229,784
Shares issued to shareholders in
reinvestment of dividends. . . . . . 109,717 1,438,293 38,441 378,199
Shares redeemed or exchanged out . . . . (182,611) (2,142,405) (55,502) (561,866)
--------- ----------- --------- -----------
Net increase . . . . . . . . . . . . . . 2,526,200 $30,340,320 1,799,828 $18,046,117
--------- ----------- --------- -----------
--------- ----------- --------- -----------
<CAPTION>
SMALL CAP EQUITY FUND SMALL CAP EQUITY FUND
YEAR ENDED MARCH 14, 1994* TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . 2,572,788 $23,875,696 2,469,183 $23,792,481
Shares issued to shareholders in
reinvestment of dividends. . . . . . 91,938 858,963 16,747 149,912
Shares redeemed or exchanged out . . . . (411,612) (3,846,820) (50,091) (481,208)
--------- ----------- --------- -----------
Net increase . . . . . . . . . . . . . . 2,253,114 $20,887,839 2,435,839 $23,461,185
--------- ----------- --------- -----------
--------- ----------- --------- -----------
<CAPTION>
MONEY MARKET FUND MONEY MARKET FUND
YEAR ENDED MARCH 14, 1994* TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . 8,282,138 8,282,138 19,446,623 19,446,623
Shares issued to shareholders in
reinvestment of dividends. . . . . . 249,594 249,594 115,976 115,976
Shares redeemed or exchanged out . . . . (7,080,495) (7,080,495) (15,954,111 (15,954,111)
---------- ---------- ----------- -----------
Net increase . . . . . . . . . . . . . . 1,451,237 1,451,237 3,608,488 3,608,488
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
*Commencement of investment operations.
41
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE F - FORWARD FOREIGN CURRENCY CONTRACTS
At December 31, 1995, outstanding forward exchange currency contracts, which
contractually obligate the Fund to deliver currencies at a specified date, were
as follows:
<TABLE>
<CAPTION>
GLOBAL INCOME FUND U.S. $ COST U.S. $ UNREALIZED
- ------------------ ON ORIGINATION CURRENT APPRECIATION
FOREIGN CURRENCY PURCHASE CONTRACTS DATE VALUE (DEPRECIATION)
- ----------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
DEM, expiring 01/31/1996-09/09/1996 (4 contracts). $ 1,649,826 $ 1,710,968 $ 61,142
FOREIGN CURRENCY SALE CONTRACTS
- -------------------------------
BEL, expiring 02/28/1996-09/09/1996 (3 contracts). 2,362,426 2,409,573 (47,147)
CAD, expiring 02/05/1996 (1 contracts) . . . . . . 2,289,205 2,257,749 31,456
DEM, expiring 01/24/1996-03/04/1996 (6 contracts). 4,838,073 4,783,185 54,888
DKK, expiring 02/06/1996 (3 contracts) . . . . . . 2,428,348 2,399,838 28,510
ESP, expiring 02/27/1996 (2 contracts) . . . . . . 1,325,000 1,324,255 745
FRF, expiring 02/29/1996 (1 contracts) . . . . . . 3,854,507 3,879,880 (25,373)
GBP, expiring 02/12/1996 (1 contracts) . . . . . . 1,329,052 1,340,123 (11,071)
JPY, expiring 01/17/1996 (3 contracts) . . . . . . 2,835,448 2,756,414 79,034
NZD, expiring 03/05/1996 (2 contracts) . . . . . . 2,506,564 2,597,579 (91,015)
SEK, expiring 02/07/1996 (2 contracts) . . . . . . 1,765,049 1,754,877 10,172
------------ ------------ ------------
25,533,672 25,503,473 30,199
------------
Offsetting forward currency contracts not yet settled 64,276
(10 contracts) ------------
NET UNREALIZED APPRECIATION $ 155,617
------------
------------
<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 02/07/1996-09/09/1996 (3 contracts) $ 3,891,030 $ 3,881,471 $ (9,559)
FOREIGN CURRENCY SALE CONTRACTS
- -------------------------------
BEL, expiring 09/09/1996 (2 contracts) . . . . . 799,600 834,343 (34,743)
HKD, expiring 02/07/1996 (2 contracts) . . . . . 2,470,017 2,470,318 (301)
JPY, expiring 01/17/1996 (1 contracts) . . . . . 5,014,589 4,902,406 112,183
SEK, expiring 02/07/1996 (1 contracts) . . . . . 3,091,431 3,116,612 (25,181)
------------ ------------ ------------
11,375,637 11,323,679 51,958
------------
Offsetting forward currency contracts not yet settled 5,213
(7 contracts) ------------
NET UNREALIZED APPRECIATION $ 47,612
------------
------------
</TABLE>
GLOSSARY OF TERMS
BEL - Belgian Franc GBP - Great British Pound
CAD - Canadian Dollar HKD - Hong Kong Dollar
DEM - Deutsche Mark JPY - Japanese Yen
DKK - Danish Kronner NZD - New Zealand Dollar
ESP - Spanish Peseta SEK - Swedish Krona
FRF - French Franc USD - United States Dollar
42
<PAGE>
PROTECTIVE INVESTMENT COMPANY
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND THE INVESTORS
OF PROTECTIVE INVESTMENT COMPANY
We have audited the accompanying statements of assets and liabilities of
Protective Investment Company (the "Company"), consisting of Global Income Fund,
International Equity Fund, Capital Growth Fund, Growth and Income Fund, Select
Equity Fund, Small Cap Equity Fund and Money Market Fund, including the
schedules of investments, as of December 31, 1995, and the related statements of
operations for the year then ended (for the Capital Growth Fund for the period
June 13, 1995 (commencement of operations) through December 31, 1995) and the
changes in net assets and financial highlights for the year ended December 31,
1995 and for the period March 14, 1994 (commencement of operations) through
December 31, 1994 (for the Capital Growth Fund for the period June 13, 1995
(commencement of operations) through December 31, 1995). These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts of disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Protective Investment Company as of December 31, 1995, the results of its
operations, the changes in its net assets and the financial highlights for each
of the periods referred to above in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 16, 1996
43
<PAGE>
PROTECTIVE INVESTMENT COMPANY
_______________
DIRECTORS AND OFFICERS
D. Warren Bailey, DIRECTOR
G. Ruffner Page, Jr., DIRECTOR
Cleophus Thomas, Jr., DIRECTOR
Carolyn King, PRESIDENT AND CHAIRMAN
R. Stephen Briggs, DIRECTOR
Richard J. Bielen, VICE PRESIDENT AND COMPLIANCE OFFICER
Jerry W. DeFoor, VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
John O'Sullivan, TREASURER
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>
[PROTECTIVE LOGO]
PROTECTIVE LIFE INSURANCE COMPANY
We Protect The Future - Registered Trademark-
P.O. Box 2606
Birmingham, Alabama 35202
