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[logo] PROTECTIVE INVESTMENT COMPANY
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SEMI-ANNUAL REPORT
[artwork]
JUNE 30, 1997
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PROTECTIVE INVESTMENT COMPANY
LETTER TO INVESTORS
August 1, 1997
DEAR INVESTORS:
We are pleased to report on the seven investment funds available through the
Protective Investment Company for the six-month period ended June 30, 1997.
Our investment subadvisers, Goldman Sachs Asset Management and Goldman Sachs
Asset Management International, will discuss the performance and activity of
each of the funds during the period, and have assisted in preparing the
following overview of the investment environment.
U.S. EQUITY MARKET REACHED RECORD LEVELS AS VOLATILITY INCREASED
During the first half of 1997, the U.S. stock market rose 20.6% as measured
by the Standard & Poor's 500 stock index, led by "mega-cap" stocks (stocks in
the top decile of the S&P 500 in capitalization terms). The market's
impressive performance was accompanied by a significant amount of volatility,
as investor sentiment fluctuated between optimism and pessimism. During
January and February, positive economic trends and favorable earnings reports
buoyed investor confidence, which helped stock prices to soar. This trend
reversed during March, when the U.S. Federal Reserve increased the Federal
funds rate by 25 basis points to 5.50%. Investors perceived this negatively,
and the market sold off sharply from mid-March through mid-April. By the end
of April, however, investors regained confidence in the market when
unexpectedly strong earnings growth was reported and the economy showed signs
of moderating, which made further rate hikes appear less likely. As a
result, stock prices rebounded and reached new highs.
ECONOMIC ACTIVITY WAS ROBUST DURING THE FIRST HALF OF THE PERIOD, THEN
MODERATED
Economic activity gained momentum during the first quarter of 1997, with real
GDP surging at a revised 4.9% annualized rate, one of the largest jumps in a
decade. The primary drivers of the economy's strength included an upswing in
consumer spending, rising factory output and buoyant construction outlays.
Growth moderated during the second quarter, however, as indicated by
declining housing starts and sluggish retail sales. Though robust growth
early in the period fanned fears of potential economic overheating,
underlying inflation remained surprisingly mild.
OUTLOOK IN THE U.S.: ECONOMIC GROWTH IS EXPECTED TO ACCELERATE IN THE SECOND
HALF OF 1997
Despite slowing economic activity during the second quarter, many economists
expect above-average growth to resume later in the year. If growth does
accelerate, fears of economic overheating could reemerge and increase the
likelihood of further Fed rate hikes by year-end. While the market's
year-to-date gains have been impressive, additional monetary tightening could
affect equity performance. As always, it is important to maintain realistic
expectations regarding your equity investments' returns.
THE INTERNATIONAL MARKET ENVIRONMENT: U.S. AND EUROPEAN MARKETS PERFORMED
BEST WHILE ASIA LAGGED
During the six-month period under review, slower than expected economic
growth persisted in several European and Asian countries while the U.S. and
the U.K. accelerated sharply. The U.S. and most European equity markets
continued to perform very well, buoyed by healthy earnings and an increased
focus on improving shareholder value. In Asia, Japan and several other
countries, markets declined but showed signs of improvement by the end of
June.
- - EUROPE. Europe's overall economic recovery continued, but growth for
specific countries was mixed. The economies of the U.K., the Netherlands and
parts of Scandinavia showed the most improvement, while those of Germany,
France and Italy were disappointing despite signs of a moderate upturn.
However, the fundamental themes that supported stocks in continental Europe
throughout 1996 -- loose monetary policy, subdued inflation, the strong U.S.
dollar and healthy profit growth -- remained in place. In contrast, the U.K.
market was weak due to rising inflationary pressures and the strong pound
sterling, which impacted the profitability of export-dependent companies.
- - JAPAN. For the six-month period ended June 30, Japanese stocks (as
measured by the TOPIX index in yen without dividends reinvested) rose 5.6%,
underperforming most other equity markets. Though Japan's economy
strengthened, the recovery remained
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fragile and investors lacked confidence in the sustainability of corporate
profits. With future earnings uncertain, investors focused on international
blue-chip stocks that benefited from the weakness of the yen, and shied away
from the rest of the market. Despite these concerns, the market strengthened
during the second half of the period, when healthy demand from pension plans
and foreign investors supported equity prices.
- - ASIA. The Asian stock markets were up 2.6% during the period, as measured
by the Morgan Stanley Capital International All Country Asia Free (Ex Japan)
Index (in U.S. dollar terms without dividends reinvested). The weak
performance indicated by the Index masks the extreme divergence of
performance among the individual Asian markets. For example, India rose
36.4%, Taiwan climbed 26.6% and Hong Kong returned 8.1%. In contrast,
Thailand dropped 35.3% as it continued to experience severe economic problems.
A NEW MANAGEMENT TEAM ASSUMES RESPONSIBILITY FOR THE PROTECTIVE CAPITAL
GROWTH FUND
In January, Goldman Sachs Asset Management acquired Liberty Investment
Management, a Florida-based investment advisory firm. At the same time,
Herbert Ehlers, Liberty's former CEO and Chief Investment Officer, was named
a Managing Director of Goldman Sachs. As of January 1, Mr. Ehlers and his
portfolio management team assumed primary responsibility for the Protective
Capital Growth Fund, which they manage using a "growth at a reasonable price"
investment style. To implement the team's investment style, the Protective
Capital Growth Fund will emphasize growing companies with characteristics
such as strong brand franchises, dominant market share, recurring revenue,
product pricing flexibility, long product life cycles, strong free cash flow,
excellent management and favorable long-term prospects. In addition, the
Fund's new management team will buy a stock meeting their rigorous criteria
only if it trades at a reasonable discount to the company's intrinsic value.
Thank you for making the Protective Investment Company part of your long-term
financial plan. If you have questions, please call your investment
representative or contact us directly at 1-800-456-6330 for variable
annuities or 1-800-265-1545 for variable life insurance.
Sincerely,
[signature]
Carolyn King
Chairman and President
Protective Investment Company
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PERFORMANCE AND PORTFOLIO REVIEW BY FUND
PROTECTIVE CORE U.S. EQUITY FUND
PERFORMANCE REVIEW AND HOLDINGS: For the six months ended June 30, 1997, the
Protective CORE U.S. Equity Fund had a total return of 19.22%(1) based on net
asset value, compared with 20.61% for the S&P 500 stock index, the Fund's
benchmark. The Fund achieved a strong absolute return, but slightly lagged
the benchmark primarily due to its defensive tilt during the period.
Successful stock selection drove the Fund's performance during the period.
During the first half of the period, the Fund particularly benefited from the
proprietary quantitative model developed by Goldman Sachs Asset Management.
Of the four investment themes considered by the model -- value, growth,
momentum and low risk -- the portfolio was tilted toward stocks with low-risk
features, such as lower price volatility, and value-oriented features, such
as low price/earnings ratios. This strategy worked in the Fund's favor as
value stocks generally outperformed growth stocks beyond the largest
capitalization tier of the S&P 500. In addition, the qualitative stock
recommendations produced by the Goldman Sachs Global Investment Research
Department, which were somewhat premature during the first quarter, achieved
strong results during the second quarter.
The Fund's best performers came from a wide range of sectors, including
technology (MICROSOFT CORP., INTERNATIONAL BUSINESS MACHINES INC.), oil/gas
(EXXON CORP.), retailing (DAYTON HUDSON CORP.) and machinery (CATERPILLAR
INC.).
PORTFOLIO COMPOSITION: In general, the Fund's sector exposures approximated
that of the S&P 500 stock index, although its tilt toward defensive, value
stocks resulted in a slight overweighting in sectors such as consumer
durables and utilities and an underweighting in cyclically oriented sectors
such as consumer nondurables and consumer services. These differences were
the residual effect of the Fund's bottom-up stock selection process and not a
reflection of an economic forecast for specific sectors.
The Fund's valuation characteristics were generally more attractive than the
benchmark. For example, the Fund had a lower price/earnings ratio based on
1997 estimated earnings than the S&P 500 (17.2x versus 19.3x) and an
equivalent price/book ratio (3.5x), while having a slightly higher yield than
the benchmark. In other respects, the Fund maintained growth and risk
characteristics that were in line with the S&P 500.
SPECIAL EVENT: The name of the Protective Select Equity Fund was changed to
the Protective CORE U.S. Equity Fund. The Fund's objective and investment
focus remain the same.
OUTLOOK: We intend to maintain a balanced approach by considering each of
our factors (value, growth, momentum and low risk) when making investment
decisions. In the near term, however, the decoupling of stock and bond
markets, a low equity risk premium and increasing market volatility have
increased our preference for low-risk stocks. As a result, the Fund is
likely to favor stocks with defensive characteristics such as below-average
price volatility, attractive valuations and good near-term growth prospects.
ROBERT C. JONES KENT A. CLARK VICTOR H. PINTER
Senior Portfolio Manager, Portfolio Manager, Portfolio Manager,
Quantitative Equity Quantitative Equity Quantitative Equity
Protective CORE U.S. Equity Fund
August 1, 1997
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PROTECTIVE GROWTH AND INCOME FUND
PERFORMANCE REVIEW AND HOLDINGS: During the six months ended June 30, 1997,
the Protective Growth and Income Fund had a total return of 19.80%(1) based on
net asset value, compared with a total return of 20.61% for the S&P 500 stock
index.
The Fund's bottom-up stock selection approach is reflected by the top
performers in the portfolio during the period, which represent a variety of
sectors. SUNBEAM CORP., a leading consumer products company, appreciated when
reforms initiated by its new CEO -- including asset sales, improved
distribution and new product introductions -- drew positive investor
response. LEAR SEATING CORP., the world's largest supplier of automotive
seats, benefited from its successful strategic acquisitions of third-tier
suppliers. In addition, Lear appears to be well positioned to benefit from
automakers' increasing reliance on outside suppliers and the globalization of
the automotive supply industry. TERADYNE INC., the world's largest supplier
of automotive test equipment and software for the electronics and
telecommunication industries, reported significant new orders and introduced
new systems innovations. After Teradyne reached our price target, we sold
the position.
Other investments benefited from consolidation in the health sector. CIGNA
CORP., a Philadelphia-based insurance and healthcare provider, reported
unexpectedly strong first-quarter earnings as it de-emphasized its property/
casualty business to focus on its HMO operations and acquired Healthsource
Inc., an owner of managed healthcare companies. AETNA INC. purchased U.S.
Healthcare, a high-quality, low-cost producer in the HMO business, and
benefited from synergies resulting from its previous acquisitions.
Investments that did not meet our expectations included UNICOM CORP., the
parent company of Commonwealth Edison and Unicom Enterprises, which was
impacted by negative press and rulings by the Nuclear Regulatory Commission.
We believe that the market has overreacted to these concerns and that they
are not a permanent loss of value but can be addressed by management. We
continue to have confidence in the company's fundamentals and expect it to
benefit from a recent change in senior management as well as an improving
operating environment. Another disappointing performer was FRUIT OF THE LOOM
INC., which was impacted by a price war in screenprint tee shirts.
OUTLOOK: Over the last six months, we have seen the continued absorption of
money into the largest cap stocks, as many investors perceive them to be the
easiest way to invest their cash rapidly. In contrast, our management team
intends to continue to seek out undervalued, less widely understood
securities that we expect to be less subject to investor anxiety and market
cycles. We believe that our strategy positions the Fund to take advantage of
short-term price declines while minimizing potential downside volatility.
RONALD E. GUTFLEISH G. LEE ANDERSON EILEEN A. APTMAN
Senior Portfolio Manager, Portfolio Manager, Portfolio Manager,
U.S. Active Equity Value U.S. Active Equity Value U.S. Active Equity Value
LAWRENCE S. SIBLEY
Portfolio Manager,
U.S. Active Equity Value
Protective Growth and Income Fund
August 1, 1997
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PROTECTIVE CAPITAL GROWTH FUND
PERFORMANCE REVIEW AND HOLDINGS: For the six-month period ended June 30,
1997, the Protective Capital Growth Fund had a total return of 21.18%(1) based
on net asset value, outperforming the 20.61% return of the S&P 500 stock
index, the Fund's benchmark, during the same period.
The strongest contributors to the Fund's performance included pharmaceutical
companies BRISTOL-MYERS SQUIBB CO. and PFIZER, INC. These stocks were buoyed
by a number of positive factors, including new product introductions, a
benign political environment, a more accommodative FDA, strong unit growth,
powerful free cash flow and reasonable valuations. Over the coming decades,
we believe these companies are positioned to benefit as the baby boomers age
and require more health-related products and services.
In the financial sector, two of the Fund's commercial bank holdings,
BANKAMERICA CORP. and NATIONSBANK CORP., were prime beneficiaries of the
"Goldilocks" economy. This favorable environment, which has been
characterized by steady economic growth, modest loan demand, low inflation
and stable interest rates, contributed to strong earnings gains for both
banks. In addition, MBNA CORP., the second largest credit card lender in the
world, appreciated due to surging growth in credit card accounts, new
affiliations with sponsoring organizations for its affinity cards and the
rapid growth of its U.K. business.
Several producers of household products also performed well. These included
companies with world-class franchises and/or strong brand names such as
PROCTOR & GAMBLE CO., GILLETTE CO., COLGATE-PALMOLIVE CO. and AVON PRODUCTS,
INC., all of which reported solid earnings gains and high returns on equity.
These companies are benefiting from strong international growth as capitalism
spreads throughout the world and per capita income rises.
An investment that lagged during the period was GAYLORD ENTERTAINMENT CO., a
diversified entertainment and communications company, as investors responded
negatively to the sale of its two cable channels (The Nashville Network and
Country Music Television) to Westinghouse. Under terms of the agreement,
Gaylord will receive a fixed amount of Westinghouse stock, which minimized
the company's risk but also limited its upside potential in the surging stock
market. We continue to believe Gaylord is attractively valued.
OUTLOOK: The outlook for the economy and the stock market appears favorable,
with low inflation, stable interest rates and modest economic growth expected
to help the Fund's holdings produce favorable earnings gains. We believe the
Fund is currently well positioned to benefit from the positive investing
climate that we anticipate. During the past six months, we increased the
Fund's diversification among industry sectors and increased its holdings of
large-cap growth stocks, with the intention of providing favorable long-term
returns and reducing portfolio risk.
HERBERT E. EHLERS GEORGE D. ADLER ROBERT G. COLLINS
Senior Portfolio Manager, Portfolio Manager, Portfolio Manager,
U.S. Active Equity Growth U.S. Active Equity Growth U.S. Active Equity
Growth
GREGORY H. EKIZIAN ERNEST C. SEGUNDO DAVID G. SHELL
Portfolio Manager, Portfolio Manager, Portfolio Manager,
U.S. Active Equity Growth U.S. Active Equity Growth U.S. Active Equity
Growth
Protective Capital Growth Fund
August 1, 1997
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PROTECTIVE SMALL CAP EQUITY FUND
PERFORMANCE REVIEW AND HOLDINGS: The Protective Small Cap Equity Fund
significantly outperformed its benchmark for the six-month period ended June
30, 1997, achieving a total return of 19.67%(1) based on net asset value,
compared with a return of 10.20% for the Russell 2000, an index that tracks
the stock price performance of small companies.
Small-cap stocks continued to lag large caps, primarily due to the relatively
weak performance of emerging growth small-caps early in the year. Though the
emerging growth sector strengthened during the second quarter, small-cap
stocks with value characteristics, which the Fund emphasizes, significantly
outperformed small-cap growth stocks for the period as a whole.
The Fund's strongest performers during the period came from a wide range of
industries.
- - The stock prices of several holdings rebounded when company fundamentals
stabilized and began to improve after previous earnings disappointments or
operational difficulties. These included health-related companies such as
MARINER HEALTH GROUP INC. and SUN HEALTHCARE GROUP INC. (providers of
long-term care services) as well as specialty retailers such as GENERAL
NUTRITION COS. INC. (vitamins and nutrition supplements) and J. BAKER INC.
(men's apparel and discount licensed shoe departments).
- - A number of stocks appreciated when their continued strong underlying
growth began to be more widely recognized by the market. These included
two of the Fund's restaurant investments, IHOP CORP. and MORTON'S
RESTAURANT GROUP INC.; financial stocks such as IPC HOLDINGS LTD.
(catastrophe reinsurance) and HORACE MANN EDUCATORS CORP. (property,
casualty and life insurance for the educator market); and MOVADO GROUP INC.
(owner of the Movado, Concord and Esquire watch brands).
- - Some holdings performed well when they received and accepted merger
proposals. These included AMPHENOL CORP. (coaxial cable and connector
manufacturer), HERITAGE MEDIA CORP. (in-store marketing products and
services), DECISIONONE CORP. (provider of computer maintenance support
services) and LESLIE'S POOLMART (swimming pool supplies).
During the period, the Fund's cash position increased significantly as we
sold a number of holdings (e.g., HORACE MANN EDUCATORS CORP., AMPHENOL CORP.,
LESLIE'S POOLMART) after they reached our target prices. We have been
gradually reinvesting the proceeds, and we expect this cash position to
decline as we identify attractive investments that meet our disciplined
selection criteria.
An investment that did not meet our expectations was GROUPE AB, the largest
independent provider of content for French television, which declined due to
concerns over the potential cancellation of a major customer's expected youth
programming orders. We believe the market has overreacted to this news as
Groupe AB has already begun to benefit from the distribution of its library
of youth programming to other television broadcasters.
OUTLOOK: To a significant extent, the performance of small caps will depend
on investors broadening their focus from the largest, most liquid stocks to
smaller, less widely followed issues. Though small caps have lagged, this
trend has left many interesting investment opportunities trading at
attractive valuations. In addition, we remain optimistic that the Fund's
current holdings should offer the potential for above-average returns through
the compounding of sustainable internal growth and the advantageous
reinvestment of excess cash flow.
PAUL D. FARRELL MATTHEW B. MCLENNAN TIMOTHY G. EBRIGHT
Senior Portfolio Manager, Portfolio Manager, Portfolio Manager,
U.S. Active Equity Value U.S. Active Equity Value U.S. Active Equity Growth
Protective Small Cap Equity Fund
August 1, 1997
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PROTECTIVE INTERNATIONAL EQUITY FUND
PERFORMANCE REVIEW AND HOLDINGS: The Fund outperformed its benchmark during
the period under review, achieving a total return of 12.50%(1) based on net
asset value, compared with a return of 10.69% for the Financial Times/S&P
Actuaries Europe & Pacific Index ("Europac") unhedged. Europac is a
capitalization-weighted composite of approximately 1,500 stocks from 23
countries in Europe and the Asia-Pacific region and is calculated on a
monthly basis.
The Fund's strong performance versus the Europac can primarily be attributed
to successful stock selection across regions.
- - EUROPE. The Fund was overweighted in European stocks relative to the
Index, 55.3% versus 51.5%. Two of the portfolio's best performers in the
region were temporary employment agencies ADECCO (Switzerland) and RANDSTAD
HOLDINGS (Netherlands), which appreciated due to earnings upgrades and a
cyclical upturn in the temporary employment industry. In other sectors,
NOVARTIS (Switzerland), one of the world's largest pharmaceutical companies
that was formed through the merger of Sandoz and Ciba Geigy, reacted
positively to news that cost cutting remained on track, as well as favorable
progress on new product development over the course of the period. ADIDAS
(Germany), the European market leader in athletic shoes and sports apparel,
also performed well as it produced double-digit profit and sales growth. In
contrast, HOECHST, a German pharmaceutical company, came under pressure when
it announced that it had decided not to spin off its pharmaceutical business,
as it had previously announced.
- - JAPAN. As of June 30, the Fund's 30.3% allocation in Japan was
underweighted compared with the benchmark (34.6%). Top performers included
TAKEDA CHEMICAL INDUSTRIES, the largest pharmaceutical company in Japan,
which reported higher than expected earnings primarily due to its U.S. joint
venture with Abbott Laboratories. SMC CORP., a manufacturer of pneumatic
control devices used in automated assembly lines, continued to benefit from
its dominant market share in Japan and successful expansion of its overseas
operations. CANON, INC., a manufacturer of office equipment, cameras and
computer peripherals, performed well due to good earnings results and a
bright outlook for PC peripherals.
- - ASIA-PACIFIC. The portfolio was underweighted in Asia (outside Japan)
compared with the benchmark, 8.5% versus 10.1%. One of the region's top
performers was ASIA SATELLITE TELECOMMUNICATION HOLDINGS LTD., a leading
satellite owner and operator in the Asia-Pacific region. The company
performed well when satellite utilization and transponder rates remained
firm, which eased market concerns that an impending oversupply of
transponders would impact the profitability of Asian satellite operators.
OUTLOOK: We continue to have a positive view of the European market
environment for the coming months. Despite modest economic growth, companies
are reporting good profit growth as they benefit from low interest rates,
corporate restructuring and improved global competitiveness. We remain
reasonably optimistic on Japan, where we believe interest rates are likely to
edge up during the next year, but not to the levels that would be harmful to
stock valuations. We are generally positive on other Asian markets for the
remainder of 1997. Asian equities remain attractively valued on a historical
basis and are expected to benefit from a pickup in export growth, continued
low inflation and a modest economic recovery throughout the region.
RODERICK D. JACK MARCEL JONGEN SHOGO MAEDA
Portfolio Manager, London Portfolio Manager, London Portfolio Manager, Tokyo
WARWICK M. NEGUS
Portfolio Manager, Singapore
Protective International Equity Fund
August 1, 1997
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PROTECTIVE GLOBAL INCOME FUND
PERFORMANCE REVIEW AND HOLDINGS: For the six-month period ended June 30,
1997, the total return of the Protective Global Income Fund was 3.37%(1),
compared with a return of 4.01% for its benchmark, the J.P. Morgan Global
Government Bond Index (hedged into U.S. dollars) (the "Index").
The Fund benefited from its overweighting in U.K. bonds, which achieved
strong gains at the end of the period, and its underweighting in the U.S.,
the weakest market. However, the portfolio lagged the benchmark primarily
because it was underweighted in Japanese assets, both bonds and currency.
Japanese Government Bonds (JGBs) performed well during the first half of the
period, and the yen performed well during May and June.
The following is a snapshot of the Fund's positions as of June 30, 1997.
- - U.S. As noted, the portfolio was underweighted in U.S. Treasuries (21.8%
as of June 30), which significantly benefited its performance relative to
the Index.
- - OTHER DOLLAR BLOC. During the period, the Fund's position in Australia was
increased to take advantage of improving bond fundamentals and a widening
of the Australia/U.S. bond yield differential. After Australian bonds
surged in response to the central bank's 50-basis-point interest rate cut,
the Fund's overweighted position was sold. Despite our generally negative
view of Canadian bonds, we established a position in that market in
December 1996 following a sharp sell-off. We later sold this position at a
profit after the market rebounded.
- - EUROPE. European bonds were the strongest performers and contributed to
the Fund's favorable results.
- - GERMANY. Germany's bond market continued to be supported by the belief
that the Bundesbank would maintain its very easy monetary policy. The Fund
held an overweighted position in Germany relative to the Index, 10.3%
versus 8.8%.
- - U.K. In January, the Fund's U.K. allocation was increased in the belief
that the forward interest rate curve reflected an overly pessimistic view
of potential monetary tightening. This strategy was successful when the
gilt rebounded following the Labor Party's election victory. As of June
30, the U.K. accounted for an 8.9% position, overweighted compared with the
benchmark (6.6%).
- - SPAIN, ITALY AND SWEDEN. Among the higher yielding European markets, Spain
performed well due to positive economic fundamentals and was then sold in
June as the market fully discounted Spain's joining EMU. In contrast, the
Fund's weightings in Italy and Sweden were both increased significantly
over the period, to 20.4% and 7.2% respectively.
- - FRANCE. The Fund established a small position in France in the belief that
the underperformance of shorter term bonds in that market presented an
attractive investment opportunity relative to Germany. By June 30, France
represented 3.3% of the Fund.
- - JAPAN. The Fund significantly underweighted Japan relative to the Index
during most of the period. As of June 30, Japan accounted for 6.6% of the
portfolio versus 14.8% for the Index.
- - CASH EQUIVALENTS. The Fund's cash equivalent position was reduced to 9.4%,
down from 17.2% six months ago.
OUTLOOK: We expect to maintain the Fund's underweighted exposure to U.S.
Treasuries, as we believe that growth will rebound in the third quarter and
prompt the Fed to tighten further. In Europe, we will likely maintain a
neutral exposure both overall and between the core and high-yielding markets.
The recent rally in the high yielders now largely discounts a broader EMU
commencing as scheduled on January 1, 1999. In our view, there are now risks
that threats of delay could result in these markets underperforming. We
anticipate that interest rates will rise in Japan, which would have negative
implications for the JGB market.
STEPHEN C. FITZGERALD ANDREW F. WILSON GARETH I. EVANS
Portfolio Manager, Portfolio Manager, Portfolio Manager,
Fixed Income Investments Fixed Income Investments Currency
Protective Global Income Fund
London, August 1, 1997
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PROTECTIVE MONEY MARKET FUND
PERFORMANCE REVIEW AND COMPOSITION: As of June 30, 1997, the 7-day current
yield of the Protective Money Market Fund was 4.94%. We expect to maintain a
weighted average maturity in a range between 20 and 40 days in order to best
meet the objectives of the Fund.
OUTLOOK: Goldman Sachs' economists expect to see an acceleration of economic
growth during the second half of the year as the demand side of the economy
expands due to increasing household wealth. This increase in demand,
combined with a continuously tight labor market, is likely to create renewed
pressure for tighter monetary policy toward the end of the year. Goldman
Sachs' economists anticipate that real GDP gains will remain in a 3.0% to
3.5% range over the next two quarters, and expect a 5.75% Federal funds rate
by year-end.
ELIZABETH D. ANDERSON
Portfolio Manager,
Money Market Investments
Protective Money Market Fund
August 1, 1997
(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 insurance or annuity
contract. If the performance information included the effect of these
charges, performance numbers would be lower.
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PROTECTIVE GLOBAL INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
PRINCIPAL
AMOUNT
SECURITY DESCRIPTION (000) U.S. $ VALUE
-------------------- -------- ------------
GOVERNMENT AND AGENCY SECURITIES--90.6%
FRANCE--3.3%
Government of France
4.750%, 03/12/2002 . . . . . . . . . FRF 8,000 $ 1,372,062
------------
GERMANY--10.3%
Federal Republic of Germany
6.750%, 04/22/2003 . . . . . . . . . DEM 5,500 3,441,403
6.500%, 10/14/2005 . . . . . . . . . 300 183,309
LB Rheinland--Pfalz Giro
5.750%, 10/16/2003 . . . . . . . . . 1,000 590,333
-----------
4,215,045
-----------
ITALY--20.4%
Republic of Italy
9.500%, 05/01/2001 . . . . . . . . . ITL 9,000,000 5,870,014
5.125%, 07/29/2003 . . . . . . . . . 80,000 811,377
8.750%, 07/01/2006 . . . . . . . . . 2,500,000 1,659,243
-----------
8,340,634
-----------
JAPAN--6.6%
Asian Development Bank
5.625%, 02/18/2002 . . . . . . . . . JPY 100,000 1,019,674
International Bank Reconstruction
& Development
4.500%, 03/20/2003 . . . . . . . . . 170,000 1,682,461
-----------
2,702,135
-----------
NEW ZEALAND--7.7%
Government of New Zealand
8.000%, 02/15/2001. . . . . . . . . . . NZD 4,500 3,177,973
-----------
SWEDEN--7.2%
Kingdom of Sweden
5.500%, 04/12/2002 . . . . . . . . . SEK 19,000 2,428,699
6.000%, 02/09/2005 . . . . . . . . . 4,000 506,517
-----------
2,935,216
-----------
UNITED KINGDOM--8.9%
U.K. Treasuries
8.000%, 06/10/2003 . . . . . . . . . GBP 1,000 1,735,555
10.000%, 09/08/2003. . . . . . . . . 1,000 1,902,607
-----------
3,638,162
-----------
UNITED STATES--26.2%
Bayerische Landesbank Girozent
6.625%, 06/25/2007 . . . . . . . . . USD 1,800 $ 1,782,540
United States Treasury Notes
7.875%, 11/15/2004 . . . . . . . . . 1,300 1,402,986
6.500%, 08/15/2005 . . . . . . . . . 1,100 1,096,909
7.000%, 07/15/2006 . . . . . . . . . 2,000 2,057,500
6.500%, 10/15/2006 . . . . . . . . . 4,400 4,381,432
-----------
10,721,367
-----------
TOTAL GOVERNMENT
AND AGENCY SECURITIES--
(Cost $36,792,641) . . . . . . . . . 37,102,594
-----------
SHORT TERM INVESTMENT--9.4%
TIME DEPOSIT--9.4%
State Street Bank and Trust Co.
Eurodollar Time Deposit
5.950%, 07/01/1997 . . . . . . . . . USD 3,853 3,853,000
-----------
TOTAL SHORT TERM INVESTMENT--
(Cost $3,853,000). . . . . . . . . . 3,853,000
-----------
NUMBER OF
CONTRACTS
(000)
----------
PUT OPTIONS PURCHASED--0.0%
Government of France
4.75%, 03/12/2002 - 4.845%, put
expiration 07/24/1997 . . . . . . . . 8,000 272
-----------
TOTAL PUT OPTIONS PURCHASED--
(Cost $10,369) . . . . . . . . . . . . 272
-----------
TOTAL INVESTMENTS--
(Cost $40,656,010)--100.0% . . . . . . $ 40,955,866
-----------
-----------
See Glossary of Terms on page 40.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- -------- ------------
COMMON STOCK--90.4%
AUSTRALIA--2.0%
Australia and New Zealand
Banking Group Ltd . . . . . . . . . 173,255 $ 1,296,281
Woodside Petroleum Ltd . . . . . . . . . 148,000 1,275,101
-----------
2,571,382
-----------
AUSTRIA--0.3%
Oester Elektrizita . . . . . . . . . . . 5,345 376,462
-----------
FRANCE--6.3%
Comptoirs Modernes . . . . . . . . . . . 4,690 2,474,007
Dexia France . . . . . . . . . . . . . . 31,695 3,084,986
SGS-Thomson Microelectronics N.V. *. . . 30,600 2,416,050
-----------
7,975,043
-----------
GERMANY--4.7%
Adidas AG. . . . . . . . . . . . . . . . 22,990 2,544,046
Hoechst AG . . . . . . . . . . . . . . . 79,015 3,351,602
-----------
5,895,648
-----------
HONG KONG--3.2%
Asia Satellite Telecom Holdings Ltd. . . 636,000 1,949,712
Dao Heng Bank Group Ltd. . . . . . . . . 155,000 848,296
Sun Hung Kai Properties. . . . . . . . . 105,000 1,263,827
-----------
4,061,835
-----------
IRELAND--2.3%
Bank of Ireland. . . . . . . . . . . . . 268,542 2,947,649
-----------
ITALY--2.5%
Telecom Italia . . . . . . . . . . . . . 584,000 1,889,890
Telecom Italia (savings shares). . . . . 690,000 1,234,194
-----------
3,124,084
-----------
JAPAN--30.3%
Aderans Co.. . . . . . . . . . . . . . . 39,000 1,109,231
Autobacs Seven Co. . . . . . . . . . . . 9,800 776,339
Canon Inc. . . . . . . . . . . . . . . . 120,000 3,266,446
Circle K Japan Co. . . . . . . . . . . . 40 2,296
Hoya Corp. . . . . . . . . . . . . . . . 25,000 1,112,371
Inaba Denkisangyo Co.. . . . . . . . . . 45,100 806,622
Itoen Ltd. . . . . . . . . . . . . . . . 22,000 497,121
Kokuyo Co. . . . . . . . . . . . . . . . 66,000 1,785,029
Kyocera Corp.. . . . . . . . . . . . . . 30,000 2,381,783
Max Co.. . . . . . . . . . . . . . . . . 69,000 1,294,277
Mirai Industry Co. . . . . . . . . . . . 43,010 983,129
Mitsubishi Heavy Industries Ltd. . . . . 431,000 3,305,261
Mitsui Marine & Fire . . . . . . . . . . 330,000 2,383,877
Nintendo Co. . . . . . . . . . . . . . . 22,100 1,850,986
Ono Pharmaceutical Co. . . . . . . . . . 21,000 740,185
Santen Pharmaceutical Co.. . . . . . . . 65,600 1,322,073
Sanyo Shinpan Finance Co. Ltd. . . . . . 19,100 1,181,461
Shimachu Co. . . . . . . . . . . . . . . 60,000 1,800,733
SMC Corp.. . . . . . . . . . . . . . . . 35,600 3,006,526
Taikisha Ltd.. . . . . . . . . . . . . . 81,000 1,307,363
Takeda Chemical Industries . . . . . . . 66,000 1,854,127
TDK Corp.. . . . . . . . . . . . . . . . 36,000 2,641,424
Tostem Corp. . . . . . . . . . . . . . . 70,000 1,935,962
York Benimaru Co.. . . . . . . . . . . . 29,600 929,682
-----------
38,274,304
-----------
MALAYSIA--0.9%
Commerce Asset Holdings. . . . . . . . . 204,000 537,480
Commerce Asset Holdings (Rights) * . . . 77,600 2,767
Commerce Asset Holdings (Warrants) * . . 48,500 7,494
UTD Engineers Bhd. . . . . . . . . . . . 77,000 555,230
-----------
1,102,971
-----------
NETHERLANDS--4.9%
ASM Lithography Holding *. . . . . . . . 53,030 3,066,333
Randstad Holdings N.V. . . . . . . . . . 4,405 464,534
Wolters Kluwer N.V.. . . . . . . . . . . 21,523 2,620,611
-----------
6,151,478
-----------
PHILIPPINES--0.4%
Metro Pacific Corp.. . . . . . . . . . . 2,246,000 485,373
-----------
SINGAPORE--1.0%
Parkway Holdings Ltd.. . . . . . . . . . 276,000 1,235,504
-----------
SPAIN--2.0%
Banco Popular Espana . . . . . . . . . . 10,460 2,562,647
-----------
SWEDEN--7.9%
Ericsson LM Telephone. . . . . . . . . . 64,470 2,537,795
Hoganas AB, Class B. . . . . . . . . . . 11,355 377,986
Securitas AB, Class B. . . . . . . . . . 94,310 2,657,822
Sparbanken Sverige AB, Class A . . . . . 85,230 1,895,102
Swedish Match. . . . . . . . . . . . . . 767,715 2,580,388
-----------
10,049,093
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- -------- ------------
COMMON STOCK (CONTINUED)
SWITZERLAND--7.4%
Adecco SA. . . . . . . . . . . . . . . . 7,432 $ 2,850,630
Cie Financier Richemont AG . . . . . . . 1,175 1,698,116
Novartis AG. . . . . . . . . . . . . . . 3,010 4,811,877
-----------
9,360,623
-----------
UNITED KINGDOM--14.3%
British Airport Authority PLC. . . . . . 118,856 1,095,548
Electrocomponents PLC. . . . . . . . . . 405,687 3,019,892
Misys PLC. . . . . . . . . . . . . . . . 137,155 3,085,743
Premier Farnell. . . . . . . . . . . . . 304,187 2,365,649
Rentokil Group PLC . . . . . . . . . . . 1,060,430 3,719,060
Siebe PLC. . . . . . . . . . . . . . . . 134,740 2,284,216
Standard Chartered PLC . . . . . . . . . 168,964 2,577,403
-----------
18,147,511
-----------
TOTAL COMMON STOCK--
(Cost $91,982,579) . . . . . . . . . . 114,321,607
-----------
PREFERRED STOCK--3.6%
AUSTRALIA--1.0%
Village Roadshow Ltd., Class A . . . . . 485,187 1,228,378
-----------
GERMANY--2.6%
Fresenius AG . . . . . . . . . . . . . . 14,688 3,334,928
-----------
TOTAL PREFERRED STOCK--
(Cost $2,669,169). . . . . . . . . . . 4,563,306
-----------
SHORT TERM INVESTMENT--6.0%
TIME DEPOSIT--6.0%
State Street Bank and Trust Co.
Eurodollar Time Deposit
5.950%, 07/01/1997 . . . . . . . . . USD 7,545 7,545,000
-----------
TOTAL SHORT TERM INVESTMENT--
(Cost $7,545,000). . . . . . . . . . . 7,545,000
-----------
TOTAL INVESTMENTS--
(Cost $102,196,748)--100.0%. . . . . . $ 126,429,913
-----------
-----------
* Denotes non-income producing security.
See Glossary of Terms on page 40.
ANALYSIS OF INDUSTRY CLASSIFICATIONS
INDUSTRY % OF INVESTMENTS VALUE
Auto Components 0.6 % $ 776,339
Business Services 10.1 12,777,789
Commercial Banks 10.0 12,675,119
Computer/Office Equipment 6.0 7,589,270
Conglomerates 1.0 1,235,504
Construction 1.5 1,935,962
Consumer Goods 3.4 4,339,540
Electrical Equipment 1.8 2,277,406
Electronics 12.0 15,168,700
Engineering 4.9 6,144,707
Entertainment/Leisure/Toy 2.4 3,079,364
Financial Services 3.4 4,266,447
Food/Wholesale 0.4 497,121
Health Care 12.2 15,414,792
Insurance 1.9 2,383,877
Machinery 3.4 4,313,889
Media 2.1 2,620,611
Metal Products 0.3 377,986
Oil 1.0 1,275,101
Real Estate 1.0 1,263,827
Retail Trade 5.0 6,315,949
Textile 2.0 2,544,046
Time Deposit 6.0 7,545,000
Tobacco 2.0 2,580,388
Transportation 0.9 1,095,548
Utility 4.3 5,450,258
Wholesale Trade 0.4 485,373
----- --------------
Totals 100.0 $ 126,429,913
----- --------------
----- --------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK--90.9%
AEROSPACE/DEFENSE--1.3%
McDonnell Douglas Corp.. . . . . . . . . 9,700 $ 664,450
-----------
ALUMINUM--0.1%
Aluminum Co. of America. . . . . . . . . 1,000 75,375
-----------
AUTO PARTS--0.8%
Lear Seating Corp. * . . . . . . . . . . 9,100 403,813
-----------
BEVERAGES--3.5%
Anheuser Busch Cos. Inc. . . . . . . . . 8,700 364,856
Coca Cola Co.. . . . . . . . . . . . . . 10,400 702,000
PepsiCo Inc. . . . . . . . . . . . . . . 19,500 732,469
-----------
1,799,325
-----------
BROADCAST MEDIA--1.1%
Cablevision Systems Corp. *. . . . . . . 3,200 172,800
Gaylord Entertainment Co.. . . . . . . . 5,800 133,763
HBO & Co.. . . . . . . . . . . . . . . . 3,500 241,062
-----------
547,625
-----------
BUILDING MATERIALS--0.4%
Home Depot Inc.. . . . . . . . . . . . . 3,300 227,494
-----------
BUSINESS SERVICES--3.3%
Ecolab Inc.. . . . . . . . . . . . . . . 11,000 525,250
First Data Corp. . . . . . . . . . . . . 13,200 579,975
Service Corporation International. . . . 17,900 588,462
-----------
1,693,687
-----------
CHEMICALS--1.3%
BetzDearborn Inc.. . . . . . . . . . . . 1,200 79,200
E I Du Pont De Nemours & Co. . . . . . . 3,300 207,487
Monsanto Co. . . . . . . . . . . . . . . 4,200 180,863
Sherwin-Williams Co. . . . . . . . . . . 4,200 129,675
Sigma-Aldrich Corp.. . . . . . . . . . . 2,500 87,656
-----------
684,881
-----------
COMPUTER SOFTWARE & SERVICES--4.2%
Autodesk Inc.. . . . . . . . . . . . . . 3,100 118,769
Cisco Systems Inc. * . . . . . . . . . . 2,700 181,237
International Business Machines Inc. . . 3,700 333,694
Intuit Inc. *. . . . . . . . . . . . . . 2,500 57,344
Microsoft Corp. *. . . . . . . . . . . . 7,000 884,625
Oracle Corp. * . . . . . . . . . . . . . 6,800 342,550
Peoplesoft Inc. *. . . . . . . . . . . . 1,500 79,125
Sterling Commerce Inc. * . . . . . . . . 4,800 157,800
-----------
2,155,144
-----------
COSMETICS--2.5%
Avon Products Inc. . . . . . . . . . . . 8,000 $ 564,500
Gillette Co. . . . . . . . . . . . . . . 7,700 729,575
-----------
1,294,075
-----------
DIVERSIFIED OPERATIONS--0.8%
American Standard Cos. Inc. *. . . . . . 4,000 179,000
Corning Inc. . . . . . . . . . . . . . . 1,200 66,750
Norfolk Southern Corp. . . . . . . . . . 1,500 151,125
-----------
396,875
-----------
DRUGS & HEALTH CARE--14.3%
American Home Products Corp. . . . . . . 6,800 520,200
Bristol Myers Squibb Co. . . . . . . . . 20,280 1,642,680
Eli Lilly & Co.. . . . . . . . . . . . . 7,000 765,187
Johnson & Johnson Co.. . . . . . . . . . 15,600 1,004,250
Merck & Co. Inc. . . . . . . . . . . . . 6,900 714,150
Perkin Elmer Corp. . . . . . . . . . . . 2,400 190,950
Pfizer Inc.. . . . . . . . . . . . . . . 12,000 1,434,000
Schering-Plough Corp.. . . . . . . . . . 10,200 488,325
Tenet Healthcare Corp. * . . . . . . . . 9,500 280,844
US Surgical Corp.. . . . . . . . . . . . 2,900 108,025
Warner Lambert Co. . . . . . . . . . . . 2,200 273,350
-----------
7,421,961
-----------
ELECTRIC UTILITIES--0.4%
AES Corp. *. . . . . . . . . . . . . . . 3,200 226,400
-----------
ELECTRONICS--6.4%
Avnet Inc. . . . . . . . . . . . . . . . 5,500 316,250
General Electric Co. . . . . . . . . . . 22,900 1,497,087
Hewlett Packard Co.. . . . . . . . . . . 3,700 207,200
Intel Corp.. . . . . . . . . . . . . . . 9,100 1,290,494
-----------
3,311,031
-----------
ENTERTAINMENT--0.9%
Walt Disney Co.. . . . . . . . . . . . . 5,600 449,400
-----------
FINANCIAL SERVICES--6.2%
Federal Home Loan Mortgage Corp. . . . . 21,600 742,500
Federal National Mortgage Assn.. . . . . 16,700 728,537
MBNA Corp. . . . . . . . . . . . . . . . 32,800 1,201,300
State Street Corp. . . . . . . . . . . . 11,400 527,250
-----------
3,199,587
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
FOODS--3.7%
Campbell Soup Co.. . . . . . . . . . . . 5,200 $ 260,000
Kellogg Co.. . . . . . . . . . . . . . . 5,960 510,325
Nabisco Holdings Corp. . . . . . . . . . 10,500 418,687
Ralston Purina Group . . . . . . . . . . 3,000 246,563
Wrigley (WM) Jr. Co. . . . . . . . . . . 7,040 471,680
-----------
1,907,255
-----------
HOSPITAL MANAGEMENT--0.5%
Columbia/HCA Healthcare Corp.. . . . . . 7,100 279,119
-----------
HOTELS--0.3%
Mirage Resorts Inc. *. . . . . . . . . . 5,300 133,825
-----------
HOUSEHOLD PRODUCTS--2.5%
Amway Asia Pacific Ltd.. . . . . . . . . 800 34,900
Colgate-Palmolive Co.. . . . . . . . . . 3,900 254,475
Procter & Gamble Co. . . . . . . . . . . 7,000 988,750
-----------
1,278,125
-----------
INSURANCE--3.0%
Aetna Inc. . . . . . . . . . . . . . . . 4,373 447,686
AMBAC Inc. . . . . . . . . . . . . . . . 200 15,275
American International Group Inc.. . . . 2,700 403,312
Nationwide Financial Services Inc. . . . 4,500 120,645
SunAmerica Inc.. . . . . . . . . . . . . 11,400 555,750
-----------
1,542,668
-----------
MAJOR REGIONAL BANKS--8.5%
Banc One Corp. . . . . . . . . . . . . . 30,780 1,490,895
BankAmerica Corp.. . . . . . . . . . . . 24,000 1,549,500
NationsBank Corp.. . . . . . . . . . . . 21,300 1,373,850
-----------
4,414,245
-----------
MANUFACTURING--1.2%
Hasbro Inc.. . . . . . . . . . . . . . . 4,200 119,175
Minnesota Mining & Manufacturing Co. . . 4,800 489,600
-----------
608,775
-----------
MULTIMEDIA--2.5%
Gannett Inc. . . . . . . . . . . . . . . 5,200 513,500
Time Warner Inc. . . . . . . . . . . . . 10,800 521,100
Tribune Co.. . . . . . . . . . . . . . . 5,600 269,150
-----------
1,303,750
-----------
OFFICE EQUIPMENT & SUPPLIES--0.4%
Xerox Corp.. . . . . . . . . . . . . . . 2,300 $ 181,413
-----------
OIL--4.9%
Amoco Corp.. . . . . . . . . . . . . . . 2,100 182,569
Atlantic Richfield Co. . . . . . . . . . 2,000 141,000
Exxon Corp.. . . . . . . . . . . . . . . 3,200 196,800
Mobil Corp.. . . . . . . . . . . . . . . 8,000 559,000
Schlumberger Ltd.. . . . . . . . . . . . 1,700 212,500
Texaco Inc.. . . . . . . . . . . . . . . 10,200 1,109,250
Unocal Corp. . . . . . . . . . . . . . . 3,300 128,081
-----------
2,529,200
-----------
PACKAGING & CONTAINERS--0.3%
Owens Illinois Inc. *. . . . . . . . . . 4,600 142,600
-----------
PAPER AND FOREST PRODUCTS--0.7%
Georgia Pacific Corp.. . . . . . . . . . 4,270 364,551
-----------
PHOTOGRAPHY--0.9%
Eastman Kodak Co.. . . . . . . . . . . . 6,200 475,850
-----------
POLLUTION CONTROL--0.5%
Waste Management Inc.. . . . . . . . . . 8,815 283,182
-----------
PUBLISHING--1.5%
Valassis Communications Inc. * . . . . . 31,700 760,800
-----------
PUBLISHING/NEWSPAPERS--0.9%
Central Newspapers Inc.. . . . . . . . . 2,300 164,738
New York Times Co. . . . . . . . . . . . 6,300 311,850
-----------
476,588
-----------
RESTAURANTS--1.3%
Marriot International Inc. . . . . . . . 9,500 583,062
McDonald's Corp. . . . . . . . . . . . . 2,300 111,119
-----------
694,181
-----------
RETAIL--4.1%
Autozone Inc. *. . . . . . . . . . . . . 3,800 89,538
CVS Corp.. . . . . . . . . . . . . . . . 3,900 199,875
Federated Dept. Stores Inc. *. . . . . . 3,000 104,250
Tandy Corp.. . . . . . . . . . . . . . . 4,700 263,200
Toys "R" Us Inc. * . . . . . . . . . . . 7,500 262,500
Wal-Mart Stores Inc. . . . . . . . . . . 15,100 510,569
Walgreen Co. . . . . . . . . . . . . . . 13,100 702,487
-----------
2,132,419
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
TECHNOLOGY--0.2%
Millipore Corp.. . . . . . . . . . . . . 2,200 $ 96,800
-----------
TELECOMMUNICATIONS--3.5%
Lucent Technologies Inc. . . . . . . . . 15,300 1,102,556
Tele-Communications Inc.
TCI Unit Series A * . . . . . . . . . . 6,500 96,688
Tele-Communications Inc.
Liberty Media Unit* . . . . . . . . . . 25,700 610,375
-----------
1,809,619
-----------
TELEPHONE--0.1%
AirTouch Communications Inc. * . . . . . 2,400 65,700
-----------
TIRES & RUBBER--0.4%
Goodyear Tire & Rubber Co. . . . . . . . 3,600 227,925
-----------
TOBACCO--1.5%
Philip Morris Cos. Inc.. . . . . . . . . 15,300 678,937
UST Inc. . . . . . . . . . . . . . . . . 4,300 119,325
-----------
798,262
-----------
TOTAL COMMON STOCK--
(Cost $38,519,779) . . . . . . . . . . 47,057,975
-----------
DEPOSITORY RECEIPTS--1.7%
OIL--0.8%
Royal Dutch Petroleum Co.. . . . . . . . 7,200 $ 391,500
-----------
PUBLISHING--0.9%
Reuters Holdings PLC . . . . . . . . . . 7,600 478,800
-----------
TOTAL DEPOSITORY RECEIPTS--
(Cost $798,613). . . . . . . . . . . . 870,300
-----------
PRINCIPAL
AMOUNT
(000)
---------
SHORT TERM INVESTMENT--7.4%
REPURCHASE AGREEMENT--7.4%
State Street Bank and Trust Co.
5.750%, 07/01/1997, maturity value
of $3,817,610, dated 06/30/1997,
(Collateralized by $3,805,000
United States Treasury Note,
6.500%, 8/15/2005, with a value
of $3,894,855) . . . . . . . . . . . $ 3,817 3,817,000
-----------
TOTAL SHORT TERM INVESTMENT--
(Cost $3,817,000). . . . . . . . . . . 3,817,000
-----------
TOTAL INVESTMENTS--
(Cost $43,135,392)--100.0% . . . . . . $ 51,745,275
-----------
-----------
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK--97.9%
AEROSPACE/DEFENSE--4.8%
Lockheed Martin Corp.. . . . . . . . . . 99,300 $ 10,283,756
McDonnell Douglas Corp.. . . . . . . . . 54,800 3,753,800
-----------
14,037,556
-----------
AIRLINES--3.9%
AMR Corp. *. . . . . . . . . . . . . . . 60,400 5,587,000
Continental Airlines Inc., Class B * . . 164,000 5,719,500
-----------
11,306,500
-----------
AUTO PARTS--4.7%
Lear Seating Corp. * . . . . . . . . . . 306,800 13,614,250
-----------
AUTOMOBILE--2.9%
Ford Motor Co. . . . . . . . . . . . . . 222,500 8,399,375
-----------
CHEMICALS--3.0%
Geon Co. . . . . . . . . . . . . . . . . 120,500 2,440,125
Union Carbide Corp.. . . . . . . . . . . 135,900 6,395,794
-----------
8,835,919
-----------
COMPUTER HARDWARE--2.9%
Quantum Corp. *. . . . . . . . . . . . . 419,400 8,519,063
-----------
DRUGS & HEALTH CARE--4.9%
Foundation Health Systems Inc. * . . . . 198,600 6,020,063
Tenet Healthcare Corp. * . . . . . . . . 283,400 8,378,012
-----------
14,398,075
-----------
ELECTRIC UTILITIES--5.2%
Long Island Lighting Co. . . . . . . . . 197,900 4,551,700
Unicom Corp. . . . . . . . . . . . . . . 475,200 10,573,200
-----------
15,124,900
-----------
ELECTRONICS--3.1%
Avnet Inc. . . . . . . . . . . . . . . . 157,100 9,033,250
-----------
FINANCIAL SERVICES--6.3%
Dean Witter Discover & Co. . . . . . . . 205,200 8,836,425
Fleet Financial Group Inc. . . . . . . . 41,700 2,637,525
Republic New York Corp.. . . . . . . . . 63,500 6,826,250
-----------
18,300,200
-----------
HOMEBUILDING--3.5%
Centex Corp. . . . . . . . . . . . . . . 72,700 $ 2,953,437
Lennar Corp. . . . . . . . . . . . . . . 228,900 7,310,494
-----------
10,263,931
-----------
HOSPITAL MANAGEMENT--1.7%
Columbia/HCA Healthcare Corp.. . . . . . 127,100 4,996,619
-----------
HOUSEWARES--3.9%
Sunbeam Corp.. . . . . . . . . . . . . . 303,100 11,442,025
-----------
INSURANCE--9.6%
Aetna Inc. . . . . . . . . . . . . . . . 101,000 10,339,875
CIGNA Corp.. . . . . . . . . . . . . . . 59,700 10,596,750
Lincoln National Corp. . . . . . . . . . 58,800 3,785,250
Loews Corp.. . . . . . . . . . . . . . . 34,500 3,454,312
-----------
28,176,187
-----------
LEISURE TIME--1.4%
Royal Caribbean Cruises Ltd. . . . . . . 120,800 4,220,450
-----------
MAJOR REGIONAL BANKS--5.2%
BankAmerica Corp.. . . . . . . . . . . . 91,400 5,901,012
Chase Manhattan Corp.. . . . . . . . . . 67,600 6,561,425
NationsBank Corp.. . . . . . . . . . . . 41,600 2,683,200
-----------
15,145,637
-----------
NETWORKING PRODUCTS--2.9%
Bay Networks Inc. *. . . . . . . . . . . 220,600 5,859,688
Cabletron Systems Inc. * . . . . . . . . 88,400 2,502,825
-----------
8,362,513
-----------
OIL--3.2%
Atlantic Richfield Co. . . . . . . . . . 72,200 5,090,100
Texaco Inc.. . . . . . . . . . . . . . . 40,600 4,415,250
-----------
9,505,350
-----------
PACKAGING & CONTAINERS--1.6%
Owens Illinois Inc. *. . . . . . . . . . 147,100 4,560,100
-----------
PAPER AND FOREST PRODUCTS--4.5%
Georgia Pacific Corp.. . . . . . . . . . 79,400 6,778,775
Stone Container Corp.. . . . . . . . . . 437,300 6,258,856
-----------
13,037,631
-----------
PETROLEUM SERVICES--3.3%
Tosco Corp.. . . . . . . . . . . . . . . 327,200 9,795,550
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
RETAIL--3.7%
Fleming Cos. Inc.. . . . . . . . . . . . 299,600 $ 5,392,800
Supervalu Inc. . . . . . . . . . . . . . 160,400 5,533,800
-----------
10,926,600
-----------
STEEL--1.5%
AK Steel Holding Corp. . . . . . . . . . 97,200 4,288,950
-----------
TEXTILE--2.3%
Fruit of the Loom Inc. * . . . . . . . . 216,000 6,696,000
-----------
TIRES & RUBBER--3.1%
Goodyear Tire & Rubber Co. . . . . . . . 141,600 8,965,050
-----------
TOBACCO--2.1%
Philip Morris Cos. Inc.. . . . . . . . . 140,000 6,212,500
-----------
TRANSPORTATION--2.7%
Canadian Pacific Ltd.. . . . . . . . . . 141,400 4,021,063
CNF Transportation Inc.. . . . . . . . . 120,500 3,886,125
-----------
7,907,188
-----------
TOTAL COMMON STOCK--
(Cost $232,637,966). . . . . . . . . . 286,071,369
-----------
PREFERRED STOCK--0.3%
LEISURE TIME--0.3%
Royal Caribbean Cruises Ltd. . . . . . . 15,000 $ 926,250
-----------
TOTAL PREFERRED STOCK--
(Cost $750,000). . . . . . . . . . . . 926,250
-----------
PRINCIPAL
AMOUNT
(000)
---------
SHORT TERM INVESTMENT--1.8%
REPURCHASE AGREEMENT--1.8%
State Street Bank and Trust Co.
5.750%, 07/01/1997, Maturity Value
of $5,119,818, dated 6/30/1997,
(Collateralized by $5,105,000
United States Treasury Note,
6.500%, 8/15/2005, with a value
of $5,225,555) . . . . . . . . . . . $ 5,119 5,119,000
-----------
TOTAL SHORT TERM INVESTMENT--
(Cost $5,119,000). . . . . . . . . . . 5,119,000
-----------
TOTAL INVESTMENTS--
(Cost $238,506,966)--100.0%. . . . . . $ 292,116,619
-----------
-----------
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<PAGE>
PROTECTIVE CORE U.S. EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK--96.8%
ADVERTISING--0.7%
Omnicom Group Inc. . . . . . . . . . . . 15,300 $ 942,863
-----------
AEROSPACE/DEFENSE--2.2%
Allied Signal Inc. . . . . . . . . . . . 7,400 621,600
Boeing Co. . . . . . . . . . . . . . . . 21,600 1,146,150
United Technologies Corp.. . . . . . . . 16,200 1,344,600
-----------
3,112,350
-----------
AIRLINES--1.2%
AMR Corp. *. . . . . . . . . . . . . . . 9,000 832,500
Delta Air Lines Inc. . . . . . . . . . . 9,900 811,800
-----------
1,644,300
-----------
AUTO PARTS--1.1%
Genuine Parts Co.. . . . . . . . . . . . 25,500 863,812
TRW Inc. . . . . . . . . . . . . . . . . 11,400 647,663
-----------
1,511,475
-----------
AUTOMOBILE--2.6%
Ford Motor Co. . . . . . . . . . . . . . 33,800 1,275,950
General Motors Corp. . . . . . . . . . . 43,900 2,444,681
-----------
3,720,631
-----------
BEVERAGES--2.9%
Coca Cola Co.. . . . . . . . . . . . . . 39,800 2,686,500
PepsiCo Inc. . . . . . . . . . . . . . . 39,000 1,464,937
-----------
4,151,437
-----------
BUILDING MATERIALS--1.7%
Alumax Inc. *. . . . . . . . . . . . . . 22,100 838,419
Home Depot Inc.. . . . . . . . . . . . . 13,700 944,444
USG Corp. *. . . . . . . . . . . . . . . 16,500 602,250
-----------
2,385,113
-----------
BUSINESS SERVICES--1.2%
Automatic Data Processing Inc. . . . . . 20,900 982,300
Interim Services Inc. *. . . . . . . . . 15,000 667,500
-----------
1,649,800
-----------
CHEMICALS--2.5%
Dow Chemical Co. . . . . . . . . . . . . 16,000 1,394,000
E I Du Pont De Nemours & Co. . . . . . . 17,400 1,094,025
Monsanto Co. . . . . . . . . . . . . . . 23,500 1,011,969
-----------
3,499,994
-----------
COMMERCIAL SERVICES--1.2%
Dun & Bradstreet Corp. . . . . . . . . . 63,500 $ 1,666,875
-----------
COMPUTER HARDWARE--1.3%
Quantum Corp. *. . . . . . . . . . . . . 33,500 680,469
Western Digital Corp. *. . . . . . . . . 35,300 1,116,362
-----------
1,796,831
-----------
COMPUTER SOFTWARE & SERVICES--3.9%
Compaq Computer Corp. *. . . . . . . . . 9,600 952,800
International Business Machines Inc. . . 22,200 2,002,163
Microsoft Corp. *. . . . . . . . . . . . 20,300 2,565,412
-----------
5,520,375
-----------
CONGLOMERATES--0.6%
Textron Inc. . . . . . . . . . . . . . . 12,600 836,325
-----------
COSMETICS--1.0%
Gillette Co. . . . . . . . . . . . . . . 15,000 1,421,250
-----------
DIVERSIFIED OPERATIONS--1.7%
Corning Inc. . . . . . . . . . . . . . . 22,000 1,223,750
Norfolk Southern Corp. . . . . . . . . . 12,800 1,289,600
-----------
2,513,350
-----------
DRUGS & HEALTH CARE--9.2%
Abbott Laboratories. . . . . . . . . . . 23,600 1,575,300
American Home Products Corp. . . . . . . 13,100 1,002,150
Bristol Myers Squibb Co. . . . . . . . . 28,200 2,284,200
Eli Lilly & Co.. . . . . . . . . . . . . 10,600 1,158,712
Forest Labs Inc. * . . . . . . . . . . . 15,000 624,375
Johnson & Johnson Co.. . . . . . . . . . 23,400 1,506,375
Merck & Co. Inc. . . . . . . . . . . . . 23,200 2,401,200
Pfizer Inc.. . . . . . . . . . . . . . . 11,800 1,410,100
Schering-Plough Corp.. . . . . . . . . . 26,400 1,263,900
-----------
13,226,312
-----------
ELECTRIC UTILITIES--3.2%
Dominion Resources Inc.. . . . . . . . . 34,800 1,274,550
Duke Power Co. of New Mexico . . . . . . 17,000 814,938
Edison International . . . . . . . . . . 43,000 1,069,625
Texas Utilities Co.. . . . . . . . . . . 25,000 860,937
Unicom Corp. . . . . . . . . . . . . . . 27,400 609,650
-----------
4,629,700
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<PAGE>
PROTECTIVE CORE U.S. EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
ELECTRONICS--8.4%
General Electric Co. . . . . . . . . . . 90,600 $ 5,922,975
Hewlett Packard Co.. . . . . . . . . . . 26,900 1,506,400
Intel Corp.. . . . . . . . . . . . . . . 19,700 2,793,706
Motorola Inc.. . . . . . . . . . . . . . 22,200 1,687,200
-----------
11,910,281
-----------
ENTERTAINMENT--0.9%
Walt Disney Co.. . . . . . . . . . . . . 15,681 1,258,400
-----------
FINANCIAL SERVICES--2.9%
Federal National Mortgage Assn.. . . . . 26,700 1,164,787
First Bank Systems Inc.. . . . . . . . . 11,600 990,350
Merrill Lynch & Co. Inc. . . . . . . . . 18,400 1,097,100
Salomon Inc. . . . . . . . . . . . . . . 16,500 917,813
-----------
4,170,050
-----------
FOODS--1.4%
ConAgra Inc. . . . . . . . . . . . . . . 10,400 666,900
IBP Inc. . . . . . . . . . . . . . . . . 26,700 620,775
Sara Lee Corp. . . . . . . . . . . . . . 15,800 657,675
-----------
1,945,350
-----------
HEALTH CARE--0.5%
Wellpoint Health Networks Inc. * . . . . 15,300 701,888
-----------
HOSPITAL MANAGEMENT--0.7%
Columbia/HCA Healthcare Corp.. . . . . . 25,400 998,538
-----------
HOUSEHOLD PRODUCTS--1.7%
Alberto-Culver Co. . . . . . . . . . . . 16,700 467,600
Procter & Gamble Co. . . . . . . . . . . 13,400 1,892,750
-----------
2,360,350
-----------
HOUSEWARES--0.7%
Sunbeam Corp.. . . . . . . . . . . . . . 27,600 1,041,900
-----------
INSURANCE--3.9%
Allstate Corp. . . . . . . . . . . . . . 12,405 905,565
American International Group Inc.. . . . 11,300 1,687,937
CIGNA Corp.. . . . . . . . . . . . . . . 6,200 1,100,500
Everest Reinsurance Holdings Inc.. . . . 23,400 927,225
Travelers Inc. . . . . . . . . . . . . . 15,866 1,000,550
-----------
5,621,777
-----------
MACHINERY--1.5%
Case Corp. . . . . . . . . . . . . . . . 11,000 $ 757,625
Caterpillar Inc. . . . . . . . . . . . . 13,200 1,417,350
-----------
2,174,975
-----------
MAJOR REGIONAL BANKS--7.7%
Banc One Corp. . . . . . . . . . . . . . 15,290 740,609
Bank of New York Co. Inc.. . . . . . . . 13,200 574,200
BankAmerica Corp.. . . . . . . . . . . . 32,800 2,117,650
Chase Manhattan Corp.. . . . . . . . . . 12,200 1,184,163
Citicorp . . . . . . . . . . . . . . . . 9,100 1,097,119
First Chicago NBD Corp.. . . . . . . . . 11,000 665,500
H. F. Ahmanson & Co. . . . . . . . . . . 18,500 795,500
NationsBank Corp.. . . . . . . . . . . . 30,800 1,986,600
Providian Financial Corp. *. . . . . . . 30,600 983,025
Wells Fargo & Co.. . . . . . . . . . . . 3,300 889,350
-----------
11,033,716
-----------
MANUFACTURING--0.5%
Tyco International Ltd.. . . . . . . . . 10,500 730,406
-----------
OFFICE EQUIPMENT & SUPPLIES--1.2%
Herman Miller Inc. . . . . . . . . . . . 17,000 612,000
Xerox Corp.. . . . . . . . . . . . . . . 14,200 1,120,025
-----------
1,732,025
-----------
OIL--8.4%
Amoco Corp.. . . . . . . . . . . . . . . 8,600 747,662
Atlantic Richfield Co. . . . . . . . . . 10,200 719,100
Columbia Gas Systems Inc.. . . . . . . . 16,400 1,070,100
Exxon Corp.. . . . . . . . . . . . . . . 61,900 3,806,850
Mobil Corp.. . . . . . . . . . . . . . . 34,600 2,417,675
Phillips Petroleum Co. . . . . . . . . . 23,900 1,045,625
Shell Transport & Trading Co.. . . . . . 5,000 628,750
Texaco Inc.. . . . . . . . . . . . . . . 7,800 848,250
Unocal Corp. . . . . . . . . . . . . . . 19,000 737,438
-----------
12,021,450
-----------
OIL & GAS DRILLING--1.3%
Ensco International Inc. * . . . . . . . 19,400 1,023,350
Rowan Companies Inc. * . . . . . . . . . 28,500 803,344
-----------
1,826,694
-----------
PACKAGING & CONTAINERS--1.8%
Avery Dennison Corp. . . . . . . . . . . 29,900 1,199,737
Tenneco Inc. . . . . . . . . . . . . . . 29,700 1,342,069
-----------
2,541,806
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<PAGE>
PROTECTIVE CORE U.S. EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
PHOTOGRAPHY--0.6%
Eastman Kodak Co.. . . . . . . . . . . . 11,200 $ 859,600
-----------
RESTAURANTS--0.6%
McDonald's Corp. . . . . . . . . . . . . 16,900 816,481
-----------
RETAIL--5.1%
Dayton Hudson Corp.. . . . . . . . . . . 39,200 2,084,950
Ross Stores Inc. . . . . . . . . . . . . 20,700 676,631
Safeway Inc. * . . . . . . . . . . . . . 25,255 1,164,887
Sears Roebuck & Co.. . . . . . . . . . . 17,300 929,875
Tiffany & Co.. . . . . . . . . . . . . . 13,900 642,006
Wal-Mart Stores Inc. . . . . . . . . . . 54,100 1,829,257
-----------
7,327,606
-----------
TELECOMMUNICATIONS--3.9%
BellSouth Corp.. . . . . . . . . . . . . 20,700 959,962
GTE Corp.. . . . . . . . . . . . . . . . 58,200 2,553,525
Lucent Technologies Inc. . . . . . . . . 14,047 1,012,262
Sprint Corp. . . . . . . . . . . . . . . 19,800 1,041,975
-----------
5,567,724
-----------
TELEPHONE--1.4%
Ameritech Corp.. . . . . . . . . . . . . 15,400 1,046,238
Worldcom Inc. *. . . . . . . . . . . . . 28,400 908,800
-----------
1,955,038
-----------
TEXTILE--0.6%
Nike Inc.. . . . . . . . . . . . . . . . 14,400 840,600
-----------
TOBACCO--2.1%
Philip Morris Cos. Inc.. . . . . . . . . 47,100 2,090,062
RJR Nabisco Holdings Corp. . . . . . . . 26,800 884,400
-----------
2,974,462
-----------
UTILITIES-ELECTRIC--0.8%
CINergy Corp.. . . . . . . . . . . . . . 31,800 1,107,038
-----------
TOTAL COMMON STOCK--
(Cost $103,395,755). . . . . . . . . . 137,747,136
-----------
DEPOSITORY RECEIPTS--2.0%
OIL--1.3%
Royal Dutch Petroleum Co.. . . . . . . . 34,400 1,870,500
-----------
TELECOMMUNICATIONS--0.7%
Telecom Argentina Stet-
France Telecom S.A. . . . . . . . . . . 18,300 $ 960,750
-----------
TOTAL DEPOSITORY RECEIPTS--
(Cost $2,048,157). . . . . . . . . . . 2,831,250
-----------
PRINCIPAL
AMOUNT
(000)
---------
SHORT TERM INVESTMENTS--1.2%
REPURCHASE AGREEMENT--1.1%
State Street Bank and Trust Co.
5.750%, 07/01/1997, maturity value
of $1,594,255, dated 06/30/1997,
(Collateralized by $1,590,000
United States Treasury Note,
6.50%, 8/15/2005, with a value
of $1,627,548) **. . . . . . . . . . $ 1,594 1,594,000
-----------
U.S. GOVERNMENT SECURITIES--0.1%
United States Treasury Bills
4.920%, 07/24/1997 **. . . . . . . . 15 14,953
4.950%, 07/24/1997 **. . . . . . . . 15 14,953
4.860%, 09/18/1997 **. . . . . . . . 10 9,893
4.930%, 09/18/1997 **. . . . . . . . 80 79,134
5.210%, 07/10/1997 **. . . . . . . . 90 89,883
-----------
208,816
-----------
TOTAL SHORT TERM INVESTMENTS--
(Cost $1,802,816). . . . . . . . . . . 1,802,816
-----------
TOTAL INVESTMENTS--
(Cost $107,246,728)--100.0%. . . . . . $ 142,381,202
-----------
-----------
OTHER INFORMATION--
At June 30, 1997, the CORE U.S. Equity Fund had open futures contracts as
follows:
Market Unrealized
Futures Expiration Contracts Value Loss
- ------- ---------- --------- ------ ----------
S & P 500 September 1997 3 $1,335,375 (8,402)
* 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.
20
<PAGE>
PROTECTIVE SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK--81.0%
AUTO PARTS--2.8%
APS Holding Corp. *. . . . . . . . . . . 281,000 $ 2,458,750
-----------
BROADCAST MEDIA--3.8%
Heritage Media Corp. * . . . . . . . . . 177,800 3,355,975
-----------
BUILDING CONSTRUCTION--1.1%
Synthetic Industries Inc. *. . . . . . . 44,700 944,288
-----------
BUILDING MATERIALS--0.9%
Congoleum Corp. *. . . . . . . . . . . . 64,800 761,400
-----------
BUSINESS SERVICES--0.2%
RCM Technologies Inc. *. . . . . . . . . 18,400 195,500
-----------
CHEMICALS--1.0%
Spartech Corp. . . . . . . . . . . . . . 63,800 829,400
-----------
COMMERCIAL SERVICES--0.1%
International Post Ltd. *. . . . . . . . 30,700 101,694
-----------
COMMUNICATION SERVICES--2.9%
Pegasus Communications Corp. * . . . . . 114,700 1,276,037
Rural Celluar Corp. *. . . . . . . . . . 55,200 569,250
Telephone & Data Systems Inc.. . . . . . 18,600 705,638
-----------
2,550,925
-----------
COMPUTER SOFTWARE & SERVICES--5.3%
Black Box Corp. *. . . . . . . . . . . . 48,400 1,948,100
DecisionOne Corp. *. . . . . . . . . . . 104,900 2,386,475
Multiple Zones International Inc. *. . . 44,700 215,119
Opinion Research Corp. * . . . . . . . . 8,600 32,250
-----------
4,581,944
-----------
CONSUMER DURABLES/ RECREATIONAL PRODUCTS--0.9%
DSI Toys Inc. *. . . . . . . . . . . . . 104,500 809,875
-----------
DRUGS & HEALTH CARE--5.3%
Physicians Resource Group Inc. * . . . . 79,500 715,500
Quest Diagnostics Inc. * . . . . . . . . 110,500 2,272,156
Sierra Health Services Inc. *. . . . . . 51,100 1,596,875
-----------
4,584,531
-----------
ELECTRIC UTILITIES--2.5%
Central Maine Power Co.. . . . . . . . . 179,200 $ 2,217,600
-----------
ELECTRICAL EQUIPMENT--2.0%
Carbide/Graphite Group Inc. *. . . . . . 56,900 1,322,925
Rexel Inc. * . . . . . . . . . . . . . . 24,600 455,100
-----------
1,778,025
-----------
ENTERTAINMENT--0.8%
Platinum Entertainment Inc. *. . . . . . 100,800 680,400
-----------
FINANCE & BANKING--0.8%
BankAtlantic Bancorp Inc.. . . . . . . . 20,000 280,000
Northwest Savings Bank . . . . . . . . . 29,700 460,350
-----------
740,350
-----------
FINANCIAL SERVICES--1.1%
Long Beach Financial Corp. * . . . . . . 108,500 949,375
-----------
FOODS--0.6%
Alpine Lace Brands Inc. *. . . . . . . . 96,800 550,550
-----------
HOSPITAL MANAGEMENT--4.0%
Mariner Health Group Inc. *. . . . . . . 148,300 2,289,381
Sun Healthcare Group Inc. *. . . . . . . 59,100 1,230,019
-----------
3,519,400
-----------
HOTELS--1.0%
Boykin Lodging Co. . . . . . . . . . . . 28,300 677,431
Silverleaf Resorts Inc. *. . . . . . . . 13,800 212,175
-----------
889,606
-----------
INSURANCE--9.6%
Amerin Corp. * . . . . . . . . . . . . . 41,600 1,008,800
ARM Financial Group Inc. * . . . . . . . 11,500 230,000
IPC Holdings Ltd.. . . . . . . . . . . . 47,600 1,285,200
SCPIE Holdings Inc.. . . . . . . . . . . 52,500 1,460,156
Seibels Bruce Group Inc. * . . . . . . . 39,100 307,913
Symons International Group Inc. *. . . . 97,400 1,485,350
Terra Nova (Bermuda) Holdings Ltd. . . . 123,100 2,585,100
-----------
8,362,519
-----------
LEISURE TIME--0.9%
Royal Caribbean Cruises Ltd. . . . . . . 22,300 779,106
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
21
<PAGE>
PROTECTIVE SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
MANUFACTURING--3.6%
Fedders Corp.. . . . . . . . . . . . . . 111,800 $ 628,875
Fedders USA Inc. . . . . . . . . . . . . 73,000 415,187
Figgie International
Holdings Inc. Class A * . . . . . . . . 84,100 1,156,375
Figgie International
Holdings Inc. Class B * . . . . . . . . 72,400 914,050
-----------
3,114,487
-----------
PACKAGING & CONTAINER--0.9%
Shorewood Packaging Corp. *. . . . . . . 33,000 750,750
-----------
PETROLEUM SERVICES--1.0%
Stolt Comex Seaway SA *. . . . . . . . . 34,400 872,900
-----------
PHARMACEUTICALS--1.6%
ChiRex Inc. *. . . . . . . . . . . . . . 74,300 882,313
Perrigo Co. *. . . . . . . . . . . . . . 38,900 486,250
-----------
1,368,563
-----------
REAL ESTATE--1.2%
Insignia Financial Group Inc. *. . . . . 58,700 1,063,938
-----------
RESTAURANTS--4.2%
IHOP Corp. * . . . . . . . . . . . . . . 32,800 1,016,800
Morton's Restaurant Group Inc. * . . . . 132,100 2,625,487
-----------
3,642,287
-----------
RETAIL--15.9%
Brookstone Inc. *. . . . . . . . . . . . 150,800 1,281,800
Finlay Enterprises Inc. *. . . . . . . . 86,700 1,528,088
Friedman's Inc. *. . . . . . . . . . . . 168,800 3,861,300
General Nutrition Cos. Inc. *. . . . . . 13,800 386,400
Hibbett Sporting Goods Inc. *. . . . . . 7,100 127,800
J. Baker Inc.. . . . . . . . . . . . . . 302,100 2,379,037
Linens 'N Things Inc. *. . . . . . . . . 16,600 491,775
Loehmann's Holdings Inc. * . . . . . . . 241,300 1,568,450
Movado Group Inc.. . . . . . . . . . . . 87,625 2,234,437
-----------
13,859,087
-----------
STEEL--1.4%
J&L Specialty Steel Inc. . . . . . . . . 25,800 $ 309,600
Lukens Inc.. . . . . . . . . . . . . . . 46,700 878,544
-----------
1,188,144
-----------
TEXTILE--0.8%
Pluma Inc. * . . . . . . . . . . . . . . 48,200 741,075
-----------
TRANSPORTATION--2.8%
Allied Holdings Inc. * . . . . . . . . . 19,300 214,712
Landstar Systems Inc. *. . . . . . . . . 80,000 2,250,000
-----------
2,464,712
-----------
TOTAL COMMON STOCK--
(Cost $59,771,375) . . . . . . . . . . 70,707,156
-----------
DEPOSITORY RECEIPTS--4.1%
BUILDING CONSTRUCTION--4.1%
Groupe AB SA * . . . . . . . . . . . . . 416,000 3,536,000
-----------
TOTAL DEPOSITORY RECEIPTS--
(Cost $4,620,156). . . . . . . . . . . 3,536,000
-----------
PRINCIPAL
AMOUNT
(000)
---------
SHORT TERM INVESTMENT--14.9%
REPURCHASE AGREEMENT--14.9%
State Street Bank and Trust Co.
5.750%, 07/01/1997, maturity value
of $13,009,078, dated 6/30/1997,
(Collateralized by $12,965,000
United States Treasury Note,
6.500%, 8/15/2005, with a value
of $13,271,168). . . . . . . . . . . $ 13,007 13,007,000
-----------
TOTAL SHORT TERM INVESTMENT--
(Cost $13,007,000) . . . . . . . . . . 13,007,000
-----------
TOTAL INVESTMENTS--
(Cost $77,398,531)--100.0% . . . . . . $ 87,250,156
-----------
-----------
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<PAGE>
PROTECTIVE MONEY MARKET EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ------ -----
GOVERNMENT AND AGENCY SECURITIES--100.0%
FEDERAL AGENCIES--100.0%
Federal Farm Credit Bank
5.420%, 07/01/1997 . . . . . . . . . $ 550,000 $ 550,000
Federal Home Loan Bank
5.510%, 07/11/1997 . . . . . . . . . 610,000 609,066
Federal Home Loan Mortgage
5.440%, 08/01/1997 . . . . . . . . . 550,000 547,424
5.410%, 08/18/1997 . . . . . . . . . 450,000 446,754
Federal National Mortgage Assn.
5.500%, 07/02/1997 . . . . . . . . . 150,000 149,977
5.400%, 07/24/1997 . . . . . . . . . 850,000 847,067
Tennessee Valley Authority
5.450%, 08/04/1997 . . . . . . . . . 450,000 447,684
-----------
3,597,972
-----------
TOTAL GOVERNMENT AND
AGENCY SECURITIES--
(Cost $3,597,972). . . . . . . . . . . 3,597,972
-----------
TOTAL INVESTMENTS--
(Cost $3,597,972)--100.0%. . . . . . . $ 3,597,972
-----------
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- -------------
<S> <C> <C>
ASSETS
Investments in securities, at value (Note B) . . . . . . . . . . . $ 40,955,866 $ 126,429,913
Investments in repurchase agreements (Note B). . . . . . . . . . . 0 0
Cash, including foreign currency at value. . . . . . . . . . . . . 41,381 263,754
Dividends receivable . . . . . . . . . . . . . . . . . . . . . . . 0 204,460
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . 936,460 1,247
Receivable for securities sold . . . . . . . . . . . . . . . . . . 2,371,514 764,318
Receivable for currency sold . . . . . . . . . . . . . . . . . . . 2,398,844 934,271
Unrealized appreciation on forward currency contracts (Note F) . . 433,104 393,620
Receivable for fund shares sold. . . . . . . . . . . . . . . . . . 588 58,072
Foreign income tax reclaim receivable. . . . . . . . . . . . . . . 67,135 129,850
Receivable due from Protective Life (Note C) . . . . . . . . . . . 10,041 29,941
-------------- --------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 47,214,933 129,209,446
LIABILITIES
Unrealized depreciation on forward currency contracts (Note F) . . 805,075 1,089,700
Payable for securities purchased . . . . . . . . . . . . . . . . . 1,115,902 799,929
Payable for variation margin . . . . . . . . . . . . . . . . . . . 0 0
Payable for currency purchased . . . . . . . . . . . . . . . . . . 2,405,791 934,964
Investment management fee payable (Note C) . . . . . . . . . . . . 38,068 110,512
Accounts payable and accrued expenses. . . . . . . . . . . . . . . 43,194 66,272
Payable for fund shares redeemed . . . . . . . . . . . . . . . . . 8,344 18,128
-------------- --------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 4,416,374 3,019,505
-------------- --------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . $ 42,798,559 $ 126,189,941
-------------- --------------
-------------- --------------
NET ASSETS
Paid-in capital (Note E) . . . . . . . . . . . . . . . . . . . . . $ 40,613,709 $ 95,244,502
Undistributed net investment income (Note B) . . . . . . . . . . . 972,341 988,534
Accumulated net realized gain on
investments and foreign currency transactions . . . . . . . . . 1,279,569 6,418,677
Net unrealized appreciation (depreciation) of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 299,856 24,233,165
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Foreign currency translations . . . . . . . . . . . . . . . . . (366,916) (694,937)
-------------- --------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,798,559 $ 126,189,941
-------------- --------------
-------------- --------------
NET ASSET VALUE PER SHARE
Offering and redemption price per share (based on
shares of capital stock outstanding,
par value $.001 per share) . . . . . . . . . . . . . . . . . . . . $ 10.519 $ 14.474
Total shares outstanding at end of period. . . . . . . . . . . . . 4,068,499 8,718,644
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . $ 40,656,010 $ 102,196,748
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
24
<PAGE>
<TABLE>
<CAPTION>
CAPITAL GROWTH AND CORE U.S. SMALL CAP MONEY
GROWTH FUND INCOME FUND EQUITY FUND EQUITY FUND MARKET FUND
------------ -------------- -------------- ------------- -------------
<C> <C> <C> <C> <C>
$ 47,928,275 $ 286,997,619 $ 140,787,202 $ 74,243,156 $ 3,597,972
3,817,000 5,119,000 1,594,000 13,007,000 0
263 724 168 924 180,317
32,475 507,896 175,424 83,218 0
610 817 254 2,078 0
55,217 859,185 0 404,369 0
0 0 0 0 0
0 0 0 0 0
13,622 40,140 24,600 27,064 0
47 0 1,294 0 0
7,455 18,259 10,539 8,726 3,349
-------------- ------------- --------------- -------------- --------------
51,854,964 293,543,640 142,593,481 87,776,535 3,781,638
0 0 0 0 0
1,259,955 3,105,952 0 730,457 0
0 0 5,593 0 0
0 0 0 0 0
32,043 187,772 91,347 55,207 2,225
2,350 30,576 31,769 24,129 11,036
8,198 54,058 21,145 12,884 39,618
-------------- ------------- --------------- -------------- --------------
1,302,546 3,378,358 149,854 822,677 52,879
-------------- ------------- --------------- -------------- --------------
$ 50,552,418 $ 290,165,282 $ 142,443,627 $ 86,953,858 $ 3,728,759
-------------- ------------- --------------- -------------- --------------
-------------- ------------- --------------- -------------- --------------
$ 39,025,840 $ 205,976,686 $ 100,345,462 $ 71,361,336 $ 3,728,759
191,314 1,424,128 705,699 111,654 0
2,725,381 29,154,815 6,266,394 5,629,243 0
8,609,883 53,609,653 35,134,474 9,851,625 0
0 0 (8,402) 0 0
0 0 0 0 0
-------------- ------------- --------------- -------------- --------------
$ 50,552,418 $ 290,165,282 $ 142,443,627 $ 86,953,858 $ 3,728,759
-------------- ------------- --------------- -------------- --------------
-------------- ------------- --------------- -------------- --------------
$ 15.325 $ 16.991 $ 18.404 $ 11.993 $ 1.000
3,298,661 17,078,046 7,739,907 7,250,577 3,728,759
$ 43,135,392 $ 238,506,966 $ 107,246,728 $ 77,398,531 $ 3,597,972
</TABLE>
25
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- -----------
<S> <C> <C>
INVESTMENT INCOME
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,254,847 $ 127,754
Dividend income. . . . . . . . . . . . . . . . . . . . . . . . . . 0 1,138,825
Foreign taxes withheld . . . . . . . . . . . . . . . . . . . . . . (8,490) (157,920)
------------- -----------
TOTAL INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . 1,246,357 1,108,659
EXPENSES
Investment management fee (Note C) . . . . . . . . . . . . . . . . 216,960 579,702
Custodian fees and expenses. . . . . . . . . . . . . . . . . . . . 42,762 131,179
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,590 13,791
Printing expense . . . . . . . . . . . . . . . . . . . . . . . . . 1,376 3,505
Transfer agent fee . . . . . . . . . . . . . . . . . . . . . . . . 1,133 1,133
Directors' fee (Note C). . . . . . . . . . . . . . . . . . . . . . 1,027 2,621
Legal fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 626 1,607
Miscellaneous expense. . . . . . . . . . . . . . . . . . . . . . . 35 88
------------- -----------
Total operating expenses before reimbursement . . . . . . . . . 275,509 733,626
Expenses borne by Protective Life (Note C). . . . . . . . . . . (58,549) (153,924)
------------- -----------
NET EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 216,960 579,702
------------- -----------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . 1,029,397 528,957
------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FOREIGN CURRENCY,
OPTIONS AND FUTURES TRANSACTIONS
Net realized gain on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 459,963 4,850,518
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Foreign currency transactions . . . . . . . . . . . . . . . . . 733,737 1,205,720
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,295 0
------------- -----------
Total net realized gain. . . . . . . . . . . . . . . . . . . 1,197,995 6,056,238
Change in unrealized appreciation (depreciation) of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . (304,255) 7,837,008
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Foreign currency translations . . . . . . . . . . . . . . . . . (587,587) (652,168)
------------- -----------
Total change in unrealized appreciation (depreciation) . . . (891,842) 7,184,840
------------- -----------
NET REALIZED AND UNREALIZED GAIN . . . . . . . . . . . . . . 306,153 13,241,078
------------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,335,550 $ 13,770,035
------------- -----------
------------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26
<PAGE>
<TABLE>
<CAPTION>
CAPITAL GROWTH AND CORE U.S. SMALL CAP MONEY
GROWTH FUND INCOME FUND EQUITY FUND EQUITY FUND MARKET FUND
----------- ----------- ----------- ----------- ------------
<C> <C> <C> <C> <C>
$ 94,269 $ 208,902 $ 97,299 $ 187,353 $ 135,450
253,210 2,193,099 1,087,982 213,337 0
(1,704) (3,787) (6,279) 0 0
---------- ------------ ------------- ---------- ----------
345,775 2,398,214 1,179,002 400,690 135,450
154,461 974,086 473,303 289,304 15,080
22,353 36,043 27,568 28,116 12,083
7,100 12,060 8,281 7,100 4,830
1,087 7,628 3,675 2,342 224
1,133 1,133 1,133 1,133 1,133
814 5,703 2,747 1,748 168
503 3,498 1,688 1,070 102
27 190 92 58 5
---------- ------------ ------------- ---------- ----------
187,478 1,040,341 518,487 330,871 33,625
(33,017) (66,255) (45,184) (41,567) (18,545)
---------- ------------ ------------- ---------- ----------
154,461 974,086 473,303 289,304 15,080
---------- ------------ ------------- ---------- ----------
191,314 1,424,128 705,699 111,386 120,370
---------- ------------ ------------- ---------- ----------
2,695,085 25,103,247 5,077,653 4,780,500 0
124,703 0 394,066 0 0
0 0 0 0 0
0 0 0 0 0
---------- ------------ ------------- ---------- ----------
2,819,788 25,103,247 5,471,719 4,780,500 0
4,720,815 18,449,253 15,253,151 8,864,035 0
(26,975) 0 (23,927) 0 0
0 0 0 0 0
---------- ------------ ------------- ---------- ----------
4,693,840 18,449,253 15,229,224 8,864,035 0
---------- ------------ ------------- ---------- ----------
7,513,628 43,552,500 20,700,943 13,644,535 0
---------- ------------ ------------- ---------- ----------
$ 7,704,942 $ 44,976,628 $ 21,406,642 $ 13,755,921 $ 120,370
---------- ------------ ------------- ---------- ----------
---------- ------------ ------------- ---------- ----------
</TABLE>
27
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GLOBAL INCOME FUND INTERNATIONAL EQUITY FUND
SIX MONTHS SIX MONTHS
ENDED 6/30/97 YEAR ENDED ENDED 6/30/97 YEAR ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96
----------- -------- ----------- ---------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . .. $ 1,029,397 $ 1,977,025 $ 528,957 $ 418,287
Net realized gain (loss) on:
Investments. . . . . . . . . . . . . . . . . 459,963 918,561 4,850,518 3,727,854
Futures. . . . . . . . . . . . . . . . . . . 0 0 0 0
Foreign currency transactions. . . . . . . . 733,737 481,271 1,205,720 154,420
Options. . . . . . . . . . . . . . . . . . . 4,295 35,396 0 (110,596)
------------ ------------- ---------- -----------
Total net realized gain. . . . . . . . . . . 1,197,995 1,435,228 6,056,238 3,771,678
Change in unrealized appreciation
(depreciation) of:
Investments. . . . . . . . . . . . . . . . . (304,255) (277,482) 7,837,008 9,314,829
Futures. . . . . . . . . . . . . . . . . . . 0 0 0 0
Foreign currency translations. . . . . . . . (587,587) 67,046 (652,168) (89,819)
------------ ------------- ---------- -----------
Total change in unrealized
appreciation (depreciation) . . . . . . (891,842) (210,436) 7,184,840 9,225,010
------------ ------------- ---------- -----------
Net increase in net assets
resulting from operations . . . . . . . 1,335,550 3,201,817 13,770,035 13,414,975
------------ ------------- ---------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income. . . . . . . . . . . . 0 (1,977,025) 0 (38,556)
In excess of net investment income . . . . . 0 (299,207) 0 0
Net realized gain on investments . . . . . . 0 (594,964) 0 (1,983,461)
In excess of net realized gains. . . . . . . 0 0 0 0
------------ ------------- ---------- -----------
Total dividends and distributions
to shareholders . . . . . . . . . . . . 0 (2,871,196) 0 (2,022,017)
FUND SHARE TRANSACTIONS (NOTE E). . . . . . . . 3,788,292 6,258,780 15,684,289 26,500,961
------------ ------------- ---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS. . . 5,123,842 6,589,401 29,454,324 37,893,919
NET ASSETS
Beginning of period. . . . . . . . . . . . . 37,674,717 31,085,316 96,735,617 58,841,698
------------ ------------- ---------- -----------
End of period (1). . . . . . . . . . . . . . $ 42,798,559 $ 37,674,717 $ 126,189,941 $ 96,735,617
------------ ------------- ---------- -----------
------------ ------------- ---------- -----------
(1) Including undistributed (distributions in
excess of) net investment income. . . . . . $ 972,341 $ (57,056) $ 988,534 $ 459,577
------------ ------------- ---------- -----------
------------ ------------- ---------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
28
<PAGE>
<TABLE>
<CAPTION>
CAPITAL GROWTH FUND GROWTH AND INCOME FUND CORE U.S. EQUITY FUND
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/97 YEAR ENDED ENDED 6/30/97 YEAR ENDED ENDED 6/30/97 YEAR ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96
----------- -------- ----------- -------- ----------- --------
<C> <C> <C> <C> <C> <C>
$ 191,314 $ 312,175 $ 1,424,128 $ 3,495,189 $ 705,699 $ 1,137,758
2,695,085 243,508 25,103,247 16,534,076 5,077,653 2,937,542
124,703 46,353 0 0 394,066 (34,854)
0 0 0 0 0 0
0 0 0 0 0 0
---------- ----------- ------------- ------------- ---------- ------------
2,819,788 289,861 25,103,247 16,534,076 5,471,719 2,902,688
4,720,815 3,715,510 18,449,253 21,786,858 15,253,151 11,847,717
(26,975) 37,400 0 0 (23,927) 15,525
0 0 0 0 0 0
---------- ----------- ------------- ------------- ---------- ------------
4,693,840 3,752,910 18,449,253 21,786,858 15,229,224 11,863,242
---------- ----------- ------------- ------------- ---------- ------------
7,704,942 4,354,946 44,976,628 41,816,123 21,406,642 15,903,688
---------- ----------- ------------- ------------- ---------- ------------
0 (312,175) 0 (3,495,189) 0 (1,137,758)
0 (3,999) 0 0 0 0
0 (289,861) 0 (13,694,011) 0 (2,401,439)
0 (111,306) 0 0 0 0
---------- ----------- ------------- ------------- ---------- ------------
0 (717,341) 0 (17,189,200) 0 (3,539,197)
12,548,019 15,945,890 34,601,840 57,883,907 19,413,405 32,535,620
---------- ----------- ------------- ------------- ---------- ------------
20,252,961 19,583,495 79,578,468 82,510,830 40,820,047 44,900,111
30,299,457 10,715,962 210,586,814 128,075,984 101,623,580 56,723,469
---------- ----------- ------------- ------------- ---------- ------------
$ 50,552,418 $ 30,299,457 $ 290,165,282 $ 210,586,814 $ 142,443,627 $ 101,623,580
---------- ----------- ------------- ------------- ---------- ------------
---------- ----------- ------------- ------------- ---------- ------------
$ 191,314 $ 0 $ 1,424,128 $ 0 $ 705,699 $ 0
---------- ----------- ------------- ------------- ---------- ------------
---------- ----------- ------------- ------------- ---------- ------------
</TABLE>
29
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SMALL CAP EQUITY FUND MONEY MARKET FUND
SIX MONTHS SIX MONTHS
ENDED 6/30/97 YEAR ENDED ENDED 6/30/97 YEAR ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . $ 111,386 $ 170,478 $ 120,370 $ 248,420
Net realized gain (loss) on:
Investments. . . . . . . . . . . . . . . . . 4,780,500 7,907,243 0 0
Futures. . . . . . . . . . . . . . . . . . . 0 0 0 0
Foreign currency transactions. . . . . . . . 0 0 0 0
Options. . . . . . . . . . . . . . . . . . . 0 0 0 0
---------- ---------- ---------- ----------
Total net realized gain. . . . . . . . . . . 4,780,500 7,907,243 0 0
Change in unrealized appreciation
(depreciation of):
Investments. . . . . . . . . . . . . . . . . 8,864,035 1,105,418 0 0
Futures. . . . . . . . . . . . . . . . . . . 0 0 0 0
Foreign currency translations. . . . . . . . 0 0 0 0
---------- ---------- ---------- ----------
Total change in unrealized
appreciation (depreciation) . . . . . . 8,864,035 1,105,418 0 0
---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations . . . . . . . 13,755,921 9,183,139 120,370 248,420
---------- ---------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income. . . . . . . . . . . . 0 (170,210) (120,370) (248,420)
In excess of net investment income . . . . . 0 0 0 0
Net realized gain on investments . . . . . . 0 (6,646,997) 0 0
In excess of net realized gains. . . . . . . 0 0 0 0
---------- ---------- ---------- ----------
Total dividends and distributions
to shareholders . . . . . . . . . . . . 0 (6,817,207) (120,370) (248,420)
FUND SHARE TRANSACTIONS (NOTE E). . . . . . . . 8,764,766 18,237,546 (2,391,901) 1,050,935
---------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS. . . 22,520,687 20,603,478 (2,391,901) 1,050,935
NET ASSETS
Beginning of period. . . . . . . . . . . . . 64,433,171 43,829,693 6,120,660 5,069,725
---------- ---------- ---------- ----------
End of period (1). . . . . . . . . . . . . . $ 86,953,858 $ 64,433,171 $ 3,728,759 $ 6,120,660
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
(1) Including undistributed (distributions in
excess of) net investment income. . . . . . $ 111,654 $ 268 $ 0 $ 0
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
30
<PAGE>
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
31
<PAGE>
PROTECTIVE INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS
FOR A SHARE OF COMMON STOCK OUTSTANDING FOR THE PERIOD INDICATED
<TABLE>
<CAPTION>
Distributions
Net Asset Total Dividends in excess
Value at Net Realized and from from Net of Net Distributions
Beginning Investment Unrealized Investment Investment Investment from Net
of Period Income (3) Gain (Loss) Operations Income Income Realized Gains
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Global Income Fund
1/1/97 - 6/30/97 (Unaudited) . . $10.177 $0.255 $0.087 $0.342 $0.000 $0.000 $0.000
1/1/96 - 12/31/96. . . . . . . . 10.074 0.628 0.310 0.938 (0.628) (0.036) (0.171)
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
1/1/97 - 6/30/97 (Unaudited) . . 12.865 0.052 1.557 1.609 0.000 0.000 0.000
1/1/96 - 12/31/96. . . . . . . . 11.045 0.140 1.955 2.095 (0.005) 0.000 (0.270)
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
1/1/97 - 6/30/97 (Unaudited) . . 12.647 0.058 2.620 2.678 0.000 0.000 0.000
1/1/96 - 12/31/96. . . . . . . . 10.613 0.134 2.209 2.343 (0.134) (0.002) (0.125)
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
1/1/97 - 6/30/97 (Unaudited) . . 14.183 0.083 2.725 2.808 0.000 0.000 0.000
1/1/96 - 12/31/96. . . . . . . . 12.197 0.266 2.987 3.253 (0.266) 0.000 (1.001)
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)
- --------------------------------------------------------------------------------------------------------------------------------
CORE U.S. Equity Fund
1/1/97 - 6/30/97 (Unaudited) . . 15.437 0.091 2.876 2.967 0.000 0.000 0.000
1/1/96 - 12/31/96. . . . . . . . 13.109 0.180 2.706 2.886 (0.180) 0.000 (0.378)
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
1/1/97 - 6/30/97 (Unaudited) . . 10.022 0.015 1.956 1.971 0.000 0.000 0.000
1/1/96 - 12/31/96. . . . . . . . 9.345 0.030 1.840 1.870 (0.030) 0.000 (1.163)
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
1/1/97 - 6/30/97 (Unaudited) . . 1.000 0.024 0.000 0.024 (0.024) 0.000 0.000
1/1/96 - 12/31/96. . . . . . . . 1.000 0.047 0.000 0.047 (0.047) 0.000 0.000
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 six months ended
June 30, 1997: Global Income Fund, $0.240 and 1.40%; International Equity
Fund, $0.035 and 1.39%; Capital Growth Fund, $0.048 and 0.97%; Growth and
Income Fund, $0.080 and 0.85%; CORE U.S. Equity Fund, $0.085 and 0.88%;
Small Cap Equity Fund, $0.010 and 0.92%; and Money Market Fund, $0.019 and
1.34%, respectively. For the year ended December 31, 1996: Global Income
Fund, $0.598 and 1.42%; International Equity Fund, $0.110 and 1.38%;
Capital Growth Fund, $0.115 and 1.02%; Growth and Income Fund, $0.257 and
0.88%; CORE U.S. Equity Fund, $0.166 and 0.91%; Small Cap Equity Fund,
$0.018 and 0.94%; and Money Market Fund, 0.041 and 1.27%, respectively.
For the period 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%; CORE U.S.
Equity Fund, $0.125 and 1.01%; Small Cap Equity Fund, $0.065 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%; CORE U.S. 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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
32
<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 Average
Net Realized Total End Total of Period to Average Average Turnover Commission
Gains Distributions of Period Return (4) (000) Net Assets (3) Net Assets Rate Rate (7)
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.000 $0.000 $10.519 3.37% $42,799 1.10% (5) 5.22% (5) 232% (6) N/A
0.000 (0.835) 10.177 9.48 37,675 1.10 5.71 214 N/A
0.000 (1.059) 10.074 16.94 31,085 1.10 5.94 295 --
0.000 (0.367) 9.558 (0.74) 17,281 1.10 (5) 5.58 (5) 210 (6) --
- --------------------------------------------------------------------------------------------------------------------------------
0.000 0.000 14.474 12.50 126,190 1.10 (5) 1.00 (5) 20 (6) $0.023
0.000 (0.275) 12.865 19.00 96,736 1.10 0.52 38 0.032
0.000 (0.420) 11.045 19.66 58,842 1.10 0.96 40 --
0.000 0.000 9.581 (4.18) 27,385 1.10 (5) 1.25 (5) 33 (6) --
- --------------------------------------------------------------------------------------------------------------------------------
0.000 0.000 15.325 21.18 50,552 0.80 (5) 0.99 (5) 52 (6) 0.061
(0.048) (0.309) 12.647 22.05 30,299 0.80 1.54 35 0.058
0.000 (0.080) 10.613 6.93 10,716 0.80 (5) 2.57 (5) 5 (6) --
- --------------------------------------------------------------------------------------------------------------------------------
0.000 0.000 16.991 19.80 290,165 0.80 (5) 1.17 (5) 36 (6) 0.059
0.000 (1.267) 14.183 26.82 210,587 0.80 2.11 49 0.058
0.000 (0.564) 12.197 32.29 128,076 0.80 2.36 55 --
(0.008) (0.153) 9.661 (1.86) 42,305 0.80 (5) 2.21 (5) 36 (6) --
- --------------------------------------------------------------------------------------------------------------------------------
0.000 0.000 18.404 19.22 142,444 0.80 (5) 1.19 (5) 32 (6) 0.038
0.000 (0.558) 15.437 21.94 101,624 0.80 1.44 34 0.054
0.000 (0.343) 13.109 36.73 56,723 0.80 1.69 60 --
(0.002) (0.215) 9.839 0.53 17,717 0.80 (5) 2.44 (5) 56 (6) --
- --------------------------------------------------------------------------------------------------------------------------------
0.000 0.000 11.993 19.67 86,954 0.80 (5) 0.31 (5) 58 (6) 0.046
0.000 (1.193) 10.022 20.22 64,433 0.80 0.31 100 0.049
(0.077) (0.187) 9.345 6.46 43,830 0.80 1.09 60 --
(0.023) (0.062) 8.951 (9.87) 21,813 0.80 (5) 1.07 (5) 17 (6) --
- --------------------------------------------------------------------------------------------------------------------------------
0.000 (0.024) 1.000 2.42 3,729 0.60 (5) 4.79 (5) N/A N/A
0.000 (0.047) 1.000 4.82 6,121 0.60 4.72 N/A N/A
0.000 (0.052) 1.000 5.32 5,070 0.60 5.19 N/A --
0.000 (0.031) 1.000 3.14 3,618 0.60 (5) 3.80 (5) N/A --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(5) Annualized.
(6) Non-Annualized.
(7) For fiscal years beginning on or after September 1, 1995, a Fund, which
invests 10% or more of its net assets in equity securities that trade
with a commission, is required to disclose its average commission rate
per share.
33
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
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 shares in seven funds: Global Income Fund, International Equity Fund,
Capital Growth Fund, Growth and Income Fund, CORE U.S. Equity Fund (formerly
the 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, CORE U.S. 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. Effective May
1, 1997, the name of the Select Equity Fund was changed to the CORE U.S.
Equity Fund.
The Company offers each class of its stock to separate accounts of Protective
Life as funding vehicles for certain variable annuity and variable life
contracts issued by Protective Life through separate accounts.
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 contracts are 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.
34
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
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.
35
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
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, Global Income
Fund, Growth and Income Fund, Capital Growth Fund, CORE U.S. Equity Fund and
Small Cap Equity Fund; and declared daily and distributed monthly for Money
Market Fund. Distributions from net realized 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. 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%; CORE U.S. 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%; CORE U.S. 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.
36
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
Goldman Sachs Asset Management acts as the investment adviser (the "Adviser")
of Capital Growth Fund, Growth and Income Fund, Money Market Fund, CORE U.S.
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 $100 million, .30% of the next $100 million,
and .25% of assets in excess of $200 million; Capital Growth Fund, Growth
and Income Fund, CORE U.S. Equity Fund and Small Cap Equity Fund, .40% of the
first $100 million, .30% of the next $100 million, and .20% of assets in
excess of $200 million; and Money Market Fund, .35% of the first $100
million, .25% of the next $100 million, and .15% of assets in excess of $200
million.
Directors of the Company who are not interested persons receive an annual fee
of $2,000 and $2,000 for each meeting attended.
NOTE D - INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities, for the six months ended June 30, 1997, 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 . . . . . . $ 72,137,967 $ 11,845,102 $ 62,652,188 $ 13,725,086
International Equity Fund. . . 34,324,220 0 20,519,474 0
Capital Growth Fund. . . . . . 32,364,818 0 18,753,315 0
Growth and Income Fund . . . . 134,052,164 0 86,520,377 0
CORE U.S. Equity Fund. . . . . 58,852,894 0 36,962,265 0
Small Cap Equity Fund. . . . . 39,163,102 0 38,247,667 0
</TABLE>
Purchases and sales, including maturities, of short-term securities by the
Money Market Fund for the six months ended June 30, 1997 were $37,764,824 and
$40,350,691, 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 June 30, 1997 were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
IDENTIFIED GROSS UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
----------- ------------ ------------- ----------------
<S> <C> <C> <C> <C>
Global Income Fund . . . . . . $ 40,676,208 $ 393,535 $ 113,877 $ 279,658
International Equity Fund. . . 102,222,928 25,863,498 1,656,513 24,206,985
Capital Growth Fund. . . . . . 43,166,620 8,737,733 159,078 8,578,655
Growth and Income Fund . . . . 238,609,513 55,287,902 1,780,796 53,507,106
CORE U.S. Equity Fund. . . . . 107,261,001 35,949,858 829,657 35,120,201
Small Cap Equity Fund. . . . . 77,398,531 14,209,537 4,357,912 9,851,625
Money Market Fund. . . . . . . 3,597,972 0 0 0
</TABLE>
For the six months ended June 30, 1997, Goldman Sachs, the Funds' Advisor,
earned approximately $1,600, $8,900, $43,400, and $300 of brokerage commissions
from portfolio transactions executed on behalf of the International Equity Fund,
Capital Growth Fund, Growth and Income Fund, and Small Cap Equity Funds,
respectively.
37
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
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; CORE U.S. 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
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ --------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . 617,169 $ 6,369,036 745,616 $ 7,605,827
Shares issued to shareholders in
reinvestment of dividends. . . . 0 0 283,177 2,871,192
Shares redeemed or exchanged out . (250,639) (2,580,744) (412,374) (4,218,239)
--------- ----------- -------- ------------
Net increase . . . . . . . . . . . 366,530 $ 3,788,292 616,419 $ 6,258,780
--------- ----------- -------- ------------
--------- ----------- -------- ------------
<CAPTION>
INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY FUND
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ --------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . 1,494,816 $ 19,570,122 2,476,463 $ 29,939,941
Shares issued to shareholders in
reinvestment of dividends. . . . 0 0 159,256 2,022,021
Shares redeemed or exchanged out . (295,456) (3,885,833) (443,758) (5,461,001)
--------- ----------- -------- ------------
Net increase . . . . . . . . . . . 1,199,360 $ 15,684,289 2,191,961 $ 26,500,961
--------- ----------- -------- ------------
--------- ----------- -------- ------------
<CAPTION>
CAPITAL GROWTH FUND CAPITAL GROWTH FUND
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ --------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . 1,007,640 $ 14,005,865 1,471,196 $ 16,890,584
Shares issued to shareholders in
reinvestment of dividends. . . . 0 0 56,365 717,339
Shares redeemed or exchanged out . (104,839) (1,457,846) (141,415) (1,662,033)
--------- ----------- -------- ------------
Net increase . . . . . . . . . . . 902,801 $ 12,548,019 1,386,146 $ 15,945,890
--------- ----------- -------- ------------
--------- ----------- -------- ------------
<CAPTION>
GROWTH AND INCOME FUND GROWTH AND INCOME FUND
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ --------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . 2,774,630 $ 43,040,570 4,215,959 $ 55,439,807
Shares issued to shareholders in
reinvestment of dividends. . . . 0 0 1,221,625 17,189,194
Shares redeemed or exchanged out . (544,464) (8,438,730) (1,090,605) (14,745,094)
--------- ----------- -------- ------------
Net increase . . . . . . . . . . . 2,230,166 $ 34,601,840 4,346,979 $ 57,883,907
--------- ----------- -------- ------------
--------- ----------- -------- ------------
</TABLE>
38
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
CORE U.S. EQUITY FUND CORE U.S. EQUITY FUND
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ --------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . 1,420,434 $ 23,840,284 2,458,365 $ 35,167,409
Shares issued to shareholders in
reinvestment of dividends. . . . 0 0 225,190 3,539,193
Shares redeemed or exchanged out . (263,641) (4,426,879) (427,469) (6,170,982)
--------- ----------- ---------- -----------
Net increase . . . . . . . . . . . 1,156,793 $ 19,413,405 2,256,086 $ 32,535,620
--------- ----------- ---------- -----------
--------- ----------- ---------- -----------
<CAPTION>
SMALL CAP EQUITY FUND SMALL CAP EQUITY FUND
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ --------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . 1,169,461 $ 12,471,439 1,711,568 $ 18,377,940
Shares issued to shareholders in
reinvestment of dividends. . . . 0 0 690,344 6,817,211
Shares redeemed or exchanged out . (348,188) (3,706,673) (662,561) (6,957,605)
--------- ----------- ---------- -----------
Net increase . . . . . . . . . . . 821,273 $ 8,764,766 1,739,351 $ 18,237,546
--------- ----------- ---------- -----------
--------- ----------- ---------- -----------
<CAPTION>
MONEY MARKET FUND MONEY MARKET FUND
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
----------------- -------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ --------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . 3,752,932 $ 3,752,932 10,940,141 $ 10,940,141
Shares issued to shareholders in
reinvestment of dividends. . . . 120,369 120,369 249,104 249,104
Shares redeemed or exchanged out . (6,265,202) (6,265,202) (10,138,310) (10,138,310)
--------- ----------- ---------- -----------
Net increase (decrease). . . . . . (2,391,901) $ (2,391,901) 1,050,935 $ 1,050,935
--------- ----------- ---------- -----------
--------- ----------- ---------- -----------
</TABLE>
39
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
NOTE F - FORWARD FOREIGN CURRENCY CONTRACTS
At June 30, 1997, 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 6/30/97 UNREALIZED
ON ORIGINATION U.S. $ APPRECIATION
FOREIGN CURRENCY PURCHASE CONTRACTS DATE VALUE (DEPRECIATION)
- ----------------------------------- -------------- ------- -------------
<S> <C> <C> <C>
DEM, expiring 07/18/1997-07/22/1997 (2 contracts). . . . . . . . $ 1,320,277 $ 1,309,037 $ (11,240)
FIM, expiring 07/10/1997 (1 contract). . . . . . . . . . . . . . 1,018,242 1,010,367 (7,875)
------------ ------------ -----------
2,338,519 2,319,404 (19,115)
-----------
FOREIGN CURRENCY SALE CONTRACTS
- -----------------------------------
DEM, expiring 07/10/1997-09/12/1997 (4 contracts). . . . . . . . 6,765,994 6,668,547 97,447
ESP, expiring 09/11/1997 (1 contract). . . . . . . . . . . . . . 2,058,000 2,036,738 21,262
FRF, expiring 07/22/1997 (3 contracts) . . . . . . . . . . . . . 3,448,732 3,369,505 79,227
GBP, expiring 08/15/1997 (1 contract). . . . . . . . . . . . . . 3,952,694 4,034,103 (81,409)
ITL, expiring 08/13/1997 (3 contracts) . . . . . . . . . . . . . 7,710,954 7,637,467 73,487
JPY, expiring 07/24/1997-09/22/1997 (2 contracts). . . . . . . . 5,330,563 5,597,139 (266,576)
NZD, expiring 09/19/1997 (1 contract). . . . . . . . . . . . . . 3,274,872 3,248,443 26,429
SEK, expiring 09/12/1997 (1 contract). . . . . . . . . . . . . . 847,559 849,871 (2,312)
------------ ----------- ---------
33,389,368 33,441,813 (52,445)
----------
Offsetting forward currency contracts not yet settled
(13 contracts) (300,411)
---------
NET UNREALIZED DEPRECIATION (371,971)
---------
---------
<CAPTION>
INTERNATIONAL EQUITY FUND U.S. $ COST 6/30/97 UNREALIZED
ON ORIGINATION U.S. $ APPRECIATION
FOREIGN CURRENCY PURCHASE CONTRACTS DATE VALUE (DEPRECIATION)
- ----------------------------------- -------------- ------- --------------
<S> <C> <C> <C>
DEM, expiring 07/22/1997 (1 contract). . . . . . . . . . . . . . $ 587,836 $ 571,087 $ (16,749)
FOREIGN CURRENCY SALE CONTRACTS
- -------------------------------
DEM, expiring 08/21/1997 (1 contract). . . . . . . . . . . . . . 3,888,644 3,843,894 44,750
ESP, expiring 09/11/1997 (1 contract). . . . . . . . . . . . . . 2,247,000 2,222,295 24,705
FRF, expiring 07/22/1997 (3 contracts) . . . . . . . . . . . . . 5,989,133 5,841,012 148,121
HKD, expiring 08/08/1997 (2 contracts) . . . . . . . . . . . . . 3,969,182 3,967,385 1,797
JPY, expiring 09/22/1997 (1 contract). . . . . . . . . . . . . . 12,163,000 12,014,825 148,175
----------- ----------- ------------
28,256,959 27,889,411 367,548
------------
Offsetting forward currency contracts not yet settled
(10 contracts) (1,046,879)
----------
NET UNREALIZED DEPRECIATION $ (696,080)
-----------
-----------
</TABLE>
GLOSSARY OF TERMS
DEM - Deutsche Mark HKD - Hong Kong Dollar
ESP - Spanish Peseta ITL - Italian Lira
FIM - Finnish Markka JPY - Japanese Yen
FRF - French Franc NZD - New Zealand Dollar
GBP - Great British Pound SEK - Swedish Krona
USD - United States Dollar
40
<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
Steve M. Callaway, SECRETARY
_______________
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 insurance and annuity contracts.
- -----------------------------------------------------------------------------
41
<PAGE>
PROTECTIVE [LOGO]
PROTECTIVE LIFE INSURANCE COMPANY
We Protect The Future-Registered
Trademark-
P.O. Box 2606
Birmingham, Alabama 35202
