<PAGE>
PROTECTIVE INVESTMENT COMPANY
ANNUAL REPORT
DECEMBER 31, 1996
<PAGE>
PROTECTIVE INVESTMENT COMPANY
LETTER TO INVESTORS
February 1, 1997
DEAR INVESTORS:
We are glad that you have chosen to purchase a variable annuity or variable life
insurance contract from Protective Life Insurance Company. In this report, we
will review the 1996 performance and the current holdings of each of the seven
separate investment funds of Protective Investment Company that are available
under your contract.
Our investment subadvisers, Goldman Sachs Asset Management and Goldman Sachs
Asset Management International, assisted in the preparation of this report and
in providing an overview of the investment environment during the period.
U.S. STOCKS CONTINUED TO CLIMB AMID HEIGHTENED VOLATILITY
The U.S. stock market surged to record levels during 1996, rising an impressive
23.0% (as measured by the Standard & Poor's 500 stock index.) Volatility
increased during the period, with the market buffeted by fears of rising
inflationary pressures due to an accelerating economy on the one hand and by
concerns regarding the sustainability of corporate earnings growth on the other.
Though these issues triggered a sharp sell-off in July, stock prices rebounded
quickly in August when economic growth showed signs of moderating and most
companies reported healthy second-quarter results. Stocks continued to advance
throughout the autumn, with the Dow Jones Industrial Average crossing the 6000
mark for the first time by mid-October. Though small-cap stocks led the market
during the first half of the year, the post-July rally was dominated by large-
cap, growth companies. Furthermore, the rally was narrowly focused, with the
largest 50 stocks in the S&P 500 contributing almost 60% of the index's
performance for the year. That trend was particularly exaggerated in the third
quarter, with 25 companies accounting for more than 88% of the S&P's gains.
AFTER A WEAK START, ECONOMIC GROWTH REBOUNDED, THEN MODERATED
When the year began, lackluster consumer spending, harsh winter weather and the
General Motors strike restrained economic growth. Despite these adverse
conditions, the economy advanced faster than expected, with first-quarter real
Gross Domestic Product (GDP) growth reported at 2.0% (annualized). Momentum
accelerated even more dramatically during the second quarter, as industrial
activity, automobile sales and home sales all showed significant improvement.
As a result, second-quarter GDP rose a robust 4.7% (annualized), its highest
rate in two years.
The economy's torrid growth cooled markedly during the third quarter, with
annualized real GDP slowing to 2.1%, largely due to lackluster consumer spending
and a widening U.S. trade deficit. This slowdown proved to be temporary,
however, as a wide range of economic reports pointed towards renewed strength
from October through December. Consumer spending rose at a healthy 3% annual
rate in the fourth quarter, a pickup in foreign demand led to a substantial
narrowing in the trade deficit, manufacturing activity accelerated and sales of
new single-family homes surged in November. As a result of the broad-based
rebound, fourth-quarter real GDP growth was reported at 4.7% (annualized).
Despite firm growth, underlying inflation remained surprisingly mild. For all
of 1996, consumer prices (excluding food and energy) rose only 2.6%.
THE FED REMAINED NEUTRAL AFTER EASING IN JANUARY
In response to weak year-end 1995 economic conditions, the U.S. Federal Reserve
cut the Federal funds rate by 25 basis points in January 1996. The Fed then
remained neutral from February through the end of the year, leaving the Federal
funds rate at 5.25% as of December 31, 1996.
OUTLOOK IN THE U.S.: ECONOMIC GROWTH IS EXPECTED TO CONTINUE TO STRENGTHEN
A favorable economic environment of moderate growth and low inflation appears
likely to persist in the near term, which could translate to a seventh year of
profit growth for U.S. corporations in 1997. If that scenario prevails, some
strategists believe 1997 will be another good year for U.S. equities, but few
expect it to be as strong as the past two years. Some of the factors that could
dampen domestic equity performance are a potential faltering of economic growth
either in the U.S. or abroad, or higher than expected inflation in the U.S.
Most strategists agree that investors should expect greater volatility in the
coming year and manage their expectations accordingly.
1
<PAGE>
THE INTERNATIONAL MARKET ENVIRONMENT: EUROPEAN EQUITIES WERE THE STRONGEST
NON-U.S. PERFORMERS WITH MODEST ECONOMIC GROWTH WORLDWIDE
During the period under review, most global economies experienced modest growth,
with long-awaited recoveries in Europe and Japan falling short of expectations.
In contrast to the generally sluggish economic conditions, most global equity
markets performed very well.
- - EUROPE. Economic growth improved in some European markets, such as the U.K.,
Norway and Ireland, but overall growth remained weak throughout most of Europe.
Several European countries attempted to stimulate their economies through
monetary easing, but maintained tight fiscal policies in an attempt to reduce
their deficits enough to qualify for membership in the European Monetary Union.
This strategy proved to be only modestly successful, as exports rose while
unemployment remained at record highs. Though the pace of economic growth was
generally disappointing, European equity markets rose approximately 23.0% during
the period (as measured by the FT/S&P-Actuaries Europe Index in terms of U.S.
dollars), fueled by low inflation, low interest rates and relatively strong bond
markets. In addition, corporate profits improved, reflecting greater emphasis
on cost cutting and restructuring. The equity markets of Spain, Sweden and the
Netherlands were among the strongest performers, while British stocks lagged
much of Europe due to a strengthening currency and an increase in short-term
interest rates.
- - JAPAN. The Japanese economy strengthened during 1996, but earnings growth
fell short of expectations. During 1996, Japanese stocks (as measured by the
TOPIX index in yen) declined 6.8%, underperforming nearly all other global
equity markets. During the first half of the period, the Japanese market was
bolstered by heavy demand from European and U.S. investors. However, during the
latter half of the year, foreign investors became net sellers when the economic
recovery softened and raised uncertainty surrounding the sustainability of
corporate profits. In addition, investors grew concerned when the Liberal
Democratic Party (LDP) won the national election in October, as the LDP is
viewed as likely to hamper future growth by cutting back on economic stimulus
and delaying deregulation. Market conditions continued to deteriorate after the
period ended, with the TOPIX falling sharply in January 1997 when investors
became increasingly concerned about the negative impact of the government's
austerity program that included a hike in the national sales tax.
- - ASIA. The Asian stock markets rose 8.9% during the period, as measured by the
MSCI All Country Asia Free (Ex Japan) Index (in terms of local currencies).
Most Asian markets began on a strong note, but several markets faltered during
the spring and summer due to political uncertainty arising from national
elections in several Asian countries and slowing economic growth throughout the
region, principally due to weak electronics exports. During the autumn, Asian
equity markets improved slightly due to stronger corporate earnings and
stabilizing exports. However, the period ended on a weak note, as uncertainty
regarding the direction of U.S. interest rates hurt some of the regional markets
in December. Hong Kong was one of the region's best performing markets during
the period under review, rising 29.0%, while Thailand (-36.8%) was the weakest
(both in terms of local currencies).
PERFORMANCE AND PORTFOLIO REVIEW BY FUND
PROTECTIVE SELECT EQUITY FUND
OBJECTIVE AND STRATEGIES: The Protective Select Equity Fund seeks to provide
investors with a total return consisting of capital appreciation plus dividend
income. The Fund invests in a broadly diversified portfolio of large-cap and
blue-chip stocks, while typically maintaining sector weightings, average
capitalizations and risk characteristics similar to the S&P 500 stock index. To
select investments, the Fund utilizes a disciplined approach that combines
fundamental investment research provided by the Goldman Sachs Global Investment
Research Department with quantitative analysis generated by a proprietary model
developed by Goldman Sachs Asset Management, the Fund's investment subadviser.
Those stocks ranked highly both by the Goldman Sachs Global Investment Research
Department and by Goldman Sachs Asset Management's quantitative analysis are
selected for the Fund's portfolio.
PERFORMANCE REVIEW AND HOLDINGS: For the 12-month period ended December 31,
1996, the Protective Select Equity Fund had a total return of 21.94%(1) based on
net asset value, compared with 22.96% for the S&P 500 stock index, the Fund's
benchmark. The quantitative model significantly helped the Fund's performance
during the period. Of the three themes considered in the model -- value,
growth-and-momentum and low-risk -- stocks with value-oriented features (such as
low price/earnings ratios) received the highest weighting during the period,
which worked to the Fund's advantage when that
2
<PAGE>
theme performed well, particularly during the fourth quarter. In addition, the
Fund participated when other investment themes led the market, such as low-risk,
which was strong during the first quarter, and growth-and-momentum, which did
well in the second and third quarters. Goldman Sachs' fundamental research also
contributed to the stock selection process, primarily during the first half of
the year when the firm's "avoid" ratings helped the Fund steer clear of
underperforming stocks. On a sector level, the Fund benefited from a slight
overweighting in financial stocks and an underweighting in telephone stocks.
The following graph shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus the
S&P 500 Index.
[GRAPH]
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1996 December 31, 1996 (a) December 31, 1996 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Select Equity Fund 21.94% 67.62% 20.24%
S&P 500 Index (with income reinvested) 22.96% 70.36% 22.88%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
During the period, the Fund attracted a healthy stream of cash inflows. This
caused its cash position to be higher than usual, which proved to be a drag on
performance in the rising market. To address this issue, the Fund has recently
utilized procedures to invest cash holdings more rapidly.
The Fund's best performers included large-capitalization stocks from a wide
range of sectors including banks (BANKAMERICA CORP. and NATIONSBANK CORP.),
technology (INTEL CORP., MICROSOFT CORP. and IBM CORP.), energy (EXXON CORP.),
electrical equipment (GENERAL ELECTRIC CO.) and tobacco (PHILIP MORRIS
COMPANIES, INC.). Stocks that fell short of the investment subadviser's
expectations included some of the Fund's utility, telecommunication and
technology investments such as UNICOM CORP., AT&T CORP. and MOTOROLA INC.
During the first quarter of 1996, the Fund's quantitative model favored growth-
and-momentum characteristics (such as earnings momentum and price momentum) and
put a smaller, positive weight on stocks with value or low-risk characteristics.
As the year progressed, however, the Fund's strategy became gradually more
defensive as the model increased its emphasis on value and low-risk themes.
This shift was due to a number of indicators that pointed to emerging excesses
in the equity market. These included the below-average levels of cash held by
equity mutual funds, the increasing volatility of equity prices, the record low
dividend yields and the divergence in returns between stocks and bonds.
3
<PAGE>
PORTFOLIO COMPOSITION: As of December 31, 1996, the Fund held 114 stocks.
While its sector exposures were generally in line with the S&P 500 index, the
Fund was slightly overweighted in energy (10.8% for the Fund versus 8.1% for the
S&P 500) and electric/gas (5.5% versus 3.5%), and underweighted in consumer
nondurables (9.1% versus 12.9%). The slight over- and underweightings were the
result of the Fund's stock selection process and were not a reflection of the
investment subadviser's economic outlook for specific sectors.
A number of the Fund's valuation characteristics were more attractive than the
benchmark. These included a lower price/earnings ratio based on 1996 estimated
earnings than the S&P 500 (18.2x versus 20.6x) as well as a lower price/book
ratio (2.9x versus 3.2x). The Fund achieved these favorable valuation levels
while maintaining growth and risk characteristics in line with the S&P 500.
OUTLOOK: Goldman Sachs expects the U.S. equity market to continue to advance in
1997, although returns will likely be more modest and more volatile than the
unusually strong and stable results of 1995 and 1996. As we enter 1997, the
portfolio managers will continue to maintain a balanced approach by considering
risk, value and growth-and-momentum simultaneously, but the relative importance
of avoiding riskier stocks has increased in the current market environment.
Accordingly, the investment subadviser's stock selection is expected to be
somewhat more defensive, with new purchases focusing primarily on stocks with
below-average price volatility and near-term earnings expectations (i.e., low
"disappointment risk"), such as DAYTON-HUDSON, INC., SALOMON, INC. and TEXAS
UTILITIES CO. Finally, at present, the portfolio managers expect roughly
similar results from large- and small-capitalization stocks, and therefore have
no preferences with respect to the size of a stock's capitalization.
PROTECTIVE GROWTH AND INCOME FUND
OBJECTIVE AND STRATEGIES: The Protective Growth and Income Fund seeks long-term
capital appreciation and growth of income primarily through investments in a
diversified portfolio of common stocks and other equity securities. The Fund is
managed with a value style, which means that Goldman Sachs Asset Management
focuses on companies whose stocks are inexpensive relative to their expected
long-term earnings power and their ability to pay dividends. Investments may
include well-known companies that are temporarily out of favor due to cyclical
economic conditions or are experiencing near-term difficulties the portfolio
managers judge to be temporary in nature. In-depth fundamental research of a
company's financial structure, its competitive position in the market and its
management's commitment to increasing shareholder value are all critical parts
of the Fund's investment evaluation approach.
PERFORMANCE REVIEW AND HOLDINGS: The Protective Growth and Income Fund
significantly outperformed its benchmark during the 12-month period under
review, achieving a total return of 26.82%(1) based on net asset value, compared
with a total return of 22.96% for the S&P 500 stock index.
4
<PAGE>
The following graph shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus the
S&P 500 Index.
[GRAPH]
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1996 December 31, 1996 (a) December 31, 1996 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Growth and Income Fund 26.82% 64.67% 19.47%
S&P 500 Index (with income reinvested) 22.96% 70.36% 22.88%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
The strongest contributors to the Fund's performance included a number of its
financial stocks as well as specific energy and defense-related holdings.
Performance also benefited from the portfolio managers' decision to limit the
Fund's exposure to the media and communication sector due to high valuations and
concerns regarding increased competition between the local exchange and long
distance companies.
Top performers in the financial sector were BANKAMERICA CORP. and NATIONSBANK
CORP., the country's third and fourth largest banks, respectively, which both
reported stronger than expected earnings due to successful cost cutting and
aggressive capital management. Several of the Fund's energy holdings also
significantly contributed to its performance, such as TOSCO CORP., an oil
refiner and distributor, which more than doubled in price as it consolidated its
market position through an ambitious acquisition strategy, and LONG ISLAND
LIGHTING CO., which rose on its announced acquisition by Brooklyn Union Gas. In
other sectors, MCDONNELL DOUGLAS CORP., the Fund's largest holding, rose
significantly on its proposed merger with Boeing Co.; SUNBEAM CORP., a leading
consumer products company, sharply appreciated due to investor enthusiasm
regarding its new CEO's aggressive restructuring program; and OWENS-ILLINOIS,
INC., a manufacturer of packaging products, benefited from consolidation in the
glass container industry.
A number of positions that were initiated during the period also achieved strong
results. AVNET, INC., a distributor of electronic components and computer
products, reported record sales and earnings from its Electronic Marketing
Group; AETNA INC. acquired U.S. Healthcare, making it the largest provider of
managed care services in the United States; DEAN WITTER DISCOVER & CO.
experienced good growth in both its brokerage and credit card businesses; and
FRUIT OF THE LOOM, INC. achieved better than expected earnings due to aggressive
cost cutting.
5
<PAGE>
Disappointing performers included CONSOLIDATED FREIGHTWAYS, INC., which suffered
from high fuel prices and a price war in the trucking industry, and GEON CORP.,
a low-cost polyvinyl chloride manufacturer, which was impacted by lower prices
for its basic chemicals. During the period, several stocks were sold after they
appreciated and reached the investment subadviser's price targets, including
GREENPOINT FINANCIAL CORP., ANHEUSER BUSCH COMPANIES, INC. and MOBIL CORP.
OUTLOOK: As we enter the seventh year of a bull market for U.S. equities, the
stock market is somewhere between fairly valued and relatively expensive. This
is a market in which stock pricing skills and extensive fundamental research
will be particularly important in identifying undervalued companies with solid
long term prospects.
PROTECTIVE CAPITAL GROWTH FUND
OBJECTIVE AND STRATEGIES: The Protective Capital Growth Fund seeks long-term
growth primarily through investments in stocks considered to have long-term
capital appreciation potential. Stocks are selected primarily by using a value-
oriented investment style, emphasizing extensive fundamental research to
identify companies that are believed to be underpriced in the market compared
with their long-term growth potential. The average weighted market
capitalization of the Fund was approximately $19.0 billion as of December 31,
1996, compared with $39.3 billion for the S&P 500.
PERFORMANCE REVIEW AND HOLDINGS: For the 12 months ended December 31, 1996, the
Protective Capital Growth Fund had a total return of 22.05%(1) based on net
asset value, compared with 22.96% for the S&P 500 stock index, the Fund's
benchmark, during the same period.
The following graph shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus the
S&P 500 Index.
[GRAPH]
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1996 December 31, 1996 (a) December 31, 1996 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Capital Growth Fund 22.05% 30.49% 18.72%
S&P 500 Index (with income reinvested) 22.96% 42.93% 25.96%
(a) From the commencement of investment operations on June 13, 1995.
</TABLE>
6
<PAGE>
A wide range of holdings contributed to the Fund's performance during the
period, including financial services, technology, energy and defense stocks. In
addition, relative to the benchmark, the Fund was underweighted in
media/communications stocks, a sector that fared poorly during the period.
Top performers in the financial sector included credit card issuers MBNA CORP.
and FIRST USA INC., which both reported better than expected earnings;
commercial banks such as BANKAMERICA CORP. and NATIONSBANK CORP., which
appreciated when investors grew confident the Fed wouldn't raise interest rates
in 1996; and investment bank LEHMAN BROTHERS HOLDINGS, which reported strong
revenue growth in its investment banking and trading operations.
Several of the Fund's technology holdings also performed well. INTEL CORP., the
dominant microprocessor manufacturer, more than doubled in price due to
improving investor sentiment regarding the sustainability of its above-average
growth rate. COMPAQ COMPUTER CORP., the world's largest manufacturer of
personal computers, reported strong earnings due to a healthy personal computer
market. AVNET, INC., a distributor of electronic components and computer
products, appreciated when investors recognized its stable earnings and strong
cash flows.
The Fund's holdings in other sectors also contributed to its positive
performance. Integrated oil companies TEXACO, INC., CHEVRON CORP. and ROYAL
DUTCH PETROLEUM CO. all did well due to rising oil prices and cost-control
measures. Consolidation in the defense industry helped two of the Fund's long-
standing investments. MCDONNELL DOUGLAS CORP. rose significantly on the
announcement of its proposed merger with Boeing Co., and NORTHROP GRUMMAN CORP.
performed well due to its purchase of Westinghouse Electric Corp.'s defense
electronics businesses.
Investments that lagged during the period included SILICON VALLEY GROUP, INC., a
leading manufacturer of equipment to produce semiconductors, which suffered when
oversupply caused a sharp drop in semiconductor prices and declining equipment
orders, and GEON CORP., a low-cost polyvinyl chloride manufacturer, was impacted
by lower selling prices for its basic chemicals.
During 1996, the Fund's holdings in the health sector were increased
significantly while its holdings in capital goods/basic industry companies were
reduced. Both changes were driven by the investment subadviser's bottom-up
stock selection process, not specific sector preference decisions. New health-
related positions included AETNA INC., a provider of healthcare services, and
BAXTER INTERNATIONAL INC., a manufacturer and distributor of hospital supplies
and related medical equipment. Stocks sold during the period included several
cyclical stocks, such as steel producer QUANEX CORP. and industrial equipment
manufacturers KEYSTONE INTERNATIONAL INC. and HARNISCHFEGER INDUSTRIES, INC.
OUTLOOK: In 1997, low inflation, moderate job growth and economic improvement
appear likely to continue. Though stock returns are not expected to reach
1996's outstanding results, the investment subadviser anticipates market
returns in the high single digits, still better than both bonds and cash.
Goldman Sachs Asset Management, the Fund's investment adviser, will continue
to emphasize selection of individual stocks believed to offer long-term
growth potential.
PROTECTIVE SMALL CAP EQUITY FUND
OBJECTIVE AND STRATEGIES: The Protective Small Cap Equity Fund's objective is
long-term capital appreciation, primarily through investments in equity
securities of U.S. companies with market capitalizations of $1 billion or less.
The Fund particularly emphasizes companies with market capitalizations of $500
million or less. The Fund is managed using a "business value" approach to
investing, which means that Goldman Sachs Asset Management, the Fund's
investment subadviser, looks for attractive companies with high or improving
returns on capital that it believes can achieve solid, sustainable growth as
well as generate free cash flow after investing for future growth. This
approach differs markedly from many pure growth small-cap funds that invest in
companies with high multiples solely on the basis of rapid, but frequently
unsustainable, growth rates. Using its own rigorous fundamental research, which
includes meeting with a company's management and considering a company's
competitors, customers and suppliers, the investment subadviser builds the
Fund's portfolio one stock at a time.
PERFORMANCE REVIEW AND HOLDINGS: The Protective Small Cap Equity Fund
outperformed its benchmark for the 12 months ended December 31, 1996, achieving
a total return of 20.22%(1) based on net asset value, compared with 16.49% for
the Russell 2000, an index that tracks the stock price performance of small
companies.
7
<PAGE>
The following graph shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus the
Russell 2000.
[GRAPH]
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1996 December 31, 1996 (a) December 31, 1996 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Small Cap Equity Fund 20.22% 15.37% 5.23%
Russell 2000 (with income reinvested) 16.49% 42.90% 15.68%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
The Fund's outperformance of the benchmark was due to successful stock selection
in a variety of industries. Top performers included a number of stocks that
were either ignored or shunned by the market in 1995 but rallied in 1996 when
earnings improved and investors recognized their strong fundamentals. These
included MOVADO GROUP, INC., the owner of the Movado, Concord and Esquire watch
brands; BLACK BOX CORP., a catalog marketer of communications and networking
products; MORNINGSTAR GROUP, INC., a manufacturer of specialty foods; and
AMERICAN SAFETY RAZOR CO., a manufacturer of shaving blades. In addition,
several financial holdings performed well, including HORACE MANN EDUCATORS CO.,
a provider of property, casualty and life insurance for the educator market, and
TERRA NOVA BERMUDA HOLDINGS, a worldwide provider of catastrophe reinsurance.
During the period, a number of new positions were initiated. These included the
Fund's largest holding, DECISIONONE CORP., the leading independent provider of
computer hardware and maintenance support services to U.S. companies;
FRIEDMAN'S, INC., a retailer of inexpensive jewelry with significant expansion
potential and a very low-cost operating strategy; LINENS 'N THINGS, a retailer
of home accessories that is attractively valued versus its key competitor, Bed,
Bath and Beyond, and has significant store expansion and margin improvement
potential; and SUN HEALTHCARE GROUP, INC., a well-managed owner/operator of
nursing homes with attractive long-term growth potential that has been
temporarily impacted by a government investigation of one of its subsidiaries.
The Fund's investment subadviser believes that the market overreacted to this
issue, which it expects to be resolved with minimal impact on its financial
condition.
The Fund sold several stocks after they appreciated and reached their target
prices, such as GREENPOINT FINANCIAL CORP., a New York-based bank; NIMBUS CD
INTERNATIONAL INC., a compact disc manufacturer; and WESTERN NATIONAL
CORPORATION, a marketer of annuity products. In contrast, the Fund's position
in MUSICLAND STORES CORP. was liquidated because its business continued to
deteriorate due to a very competitive music-retailing environment.
8
<PAGE>
Several of the Fund's holdings were hurt by disappointing earnings, although the
Fund's investment subadviser continues to believe in their long-term prospects.
For example, LANDSTAR SYSTEM, INC. experienced short-term weakness when the
restructuring of its trucking operations from a fixed cost to a variable cost
business took longer than expected. The Fund's investment subadviser expects
the move to improve future profitability and therefore continued to hold the
stock. In addition, CENTRAL MAINE POWER CO. was impacted by uncertainty in the
regulatory environment, and ALPINE LACE BRANDS INC., a developer and marketer of
cheese products, declined due to an increase in cheese prices. The investment
subadviser continues to have confidence in both companies and has used the price
declines to increase the Fund's positions.
OUTLOOK: Small-capitalization stocks as a group currently appear undervalued
relative to large-capitalization stocks and to their own expected earnings
potential. The Fund's investment subadviser continues to uncover attractive
investment opportunities in areas that the Fund traditionally de-emphasized,
such as finance, healthcare and technology. Goldman Sachs Asset Management is
optimistic regarding the Fund's future performance based on the strong earnings
growth and the free cash flow it expects from many of its top holdings, as well
as from new investments.
PROTECTIVE GLOBAL INCOME FUND
OBJECTIVE AND STRATEGIES: The investment objective of the Protective Global
Income Fund is to generate a high total return, composed of both current income
and, to a lesser extent, capital appreciation. The Fund invests primarily in
government and other high-quality fixed income securities issued in the U.S. and
in foreign markets. The Fund also engages in currency transactions to hedge
exchange rate risk and enhance return when possible.
PERFORMANCE REVIEW AND HOLDINGS: For the 12 months ended December 31, 1996, the
total return of the Protective Global Income Fund was 9.48%,(1) outperforming
the 8.64% return of its benchmark, the J.P. Morgan Global Government Bond Index
(hedged into U.S. dollars) (the "Index"). The Fund benefited from its
overweighting in European bonds during most of the period and its underweighting
in U.S. Treasuries during part of the period. The Fund's significant
underweighting in Japanese bonds worked in its favor during the first half of
the year, but not in the second half when Japanese bonds rebounded.
The following graph shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus the
J.P. Morgan Global Government Bond Index (hedged to U.S. dollars).
[GRAPH]
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1996 December 31, 1996 December 31, 1996
----------------- ------------------ --------------------
<S> <C> <C> <C>
Global Income Fund 9.48% 27.08% (a) 8.93% (a)
J.P. Morgan Global Government
Bond Index (hedged to U.S. dollars) 8.64% 26.93% (b) 8.70% (b)
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
(b) Performance for the benchmark is not available for the period
March 14, 1994 (commencement of investment operations) through
March 31, 1994. For that reason, performance is shown from April 1,
1994.
9
<PAGE>
During 1996, global bonds generally performed well, particularly during the
second half of the year, with a number of markets achieving extremely strong
returns. Most European bond markets benefited from a favorable bond environment
of sluggish economic growth and low inflation, with Italy, Spain and Sweden
emerging as the best performers of all the major bond markets (in local currency
terms). In Japan, the total return of Japanese Government Bonds (JGBs) was
lower than those of most European bond markets but still positive (in local
currency terms). U.S. Treasuries underperformed all of the major bond markets
as a stronger than expected economy triggered a correction during the first half
of 1996. Within the dollar bloc, Canadian bonds did well during the period,
reflecting monetary easing, a strong currency and a relatively weak economy.
The following is an overview of the Fund's holdings as of December 31, 1996.
- - U.S. As of December 31, 29.3% of the portfolio was invested in U.S.
Treasuries. During part of the period, the portfolio was underweighted in
Treasuries relative to the benchmark, which worked to the Fund's advantage
when the U.S. underperformed the other markets.
- - CANADA. In December, the Fund's portfolio managers reestablished a
position in Canada (2.3%), which had been sold earlier in the year.
- - AUSTRALIA. The portfolio held an overweighted position in Australia of
4.1%, based on slowing economic growth and waning inflationary pressures.
- - EUROPE. The Fund's European holdings were significant contributors to its
positive performance during 1996. After strong performances by the higher
yielding markets during most of the period, some of these positions were
reduced at a profit during the fourth quarter of 1996. By December 31, the
Fund had a neutral market exposure in European bonds relative to the Index.
-- U.K. The U.K. experienced moderate growth during the first half of the
year, but by September economic activity began to accelerate. The
portfolio managers successfully traded between U.K. gilts and German bond
taking advantage of the volatility in the yield spread created by political
uncertainty in the U.K. The portfolio finished the period with a U.K.
position of 5.7%.
-- GERMANY. The Bundesbank aggressively cut interest rates to help
stimulate Germany's anemic economy, but high unemployment and weak
manufacturing activity continued to persist. To benefit from this
favorable bond market environment, the Fund was significantly overweighted
at 18.4% (versus 9.4% for the Index).
-- SWEDEN, ITALY AND SPAIN. During the period, the Fund held overweighted
positions in the higher yielding markets, then trimmed its exposures after
they rallied. Specifically, Spain and Sweden, which were both major
contributors to the Fund's favorable performance, were reduced to 2.5% and
1.5%, respectively. Italy also performed very well due to a tight fiscal
policy, expected interest rate cuts and better than anticipated inflation
data, and it continued to be slightly overweighted at 5.7% as of December
31.
-- IRELAND. The Fund initiated a new position in Ireland, on the basis
that it would be one of the founding members of European Monetary Union.
Ireland accounted for 2.4% of the portfolio as of December 31, making a
positive contribution to performance.
-- DENMARK. The Fund's holdings in Denmark benefited from the country's
favorable economic fundamentals. The position was then sold after it
achieved the investment subadviser's return target.
-- BELGIUM. Belgium bonds performed well during the first part of the
period, after which the position was gradually trimmed. The portfolio's
remaining holdings were then sold in favor of Dutch bonds, which offered
greater total return potential.
-- FRANCE. Over the course of the year, the position in France was reduced
and the remaining holdings were sold in favor of German bonds.
- - JAPAN. JGBs accounted for 8.6% of the portfolio, compared with the
benchmark allocation of 15.0%. This significant underweighting benefited
the Fund when JGBs were weak during the first half of 1996, but did not
work in its favor when JGBs rebounded in the second half of the year.
- - CASH EQUIVALENTS. As of December 31, cash equivalents accounted for 17.2%
of the portfolio. The relatively high cash equivalent position arose from
the Fund's underweighted position in Japan and the portfolio managers'
favoring European bonds with longer maturities compared with the Index.
OUTLOOK: In January 1997, the Fund's portfolio managers increased its European
weightings, as they believe European bonds will continue to outperform U.S.
Treasuries. In general, the outlook for Europe is positive based on domestic
fundamentals of muted economic growth and low inflation. In addition, fiscal
policy is likely to remain restrictive to help
10
<PAGE>
meet the budget deficit criteria for participation in European Monetary Union.
These factors should lead to continued accommodative monetary policies and
relatively attractive bond markets. The portfolio managers have a positive
longer term view of the higher yielding markets of Italy and Spain, as the
favorable environment resulting from the movement towards European Monetary
Union convergence continues. As of this writing, the U.S. market appears less
attractive, as its accelerating economy is likely to result in further upward
pressure on bond yields. In Japan, the investment subadviser believes that the
economic recovery will remain muted due to the government's policy of fiscal
contraction. Given Japan's nonexistent inflationary pressures, monetary policy
is likely to remain on hold during the first half of 1997. Though these factors
would normally contribute to a favorable bond market environment, the portfolio
managers expect to continue to underweight Japan, where yields are hovering near
historical lows and any signs of renewed growth are likely to push yields
higher.
PROTECTIVE INTERNATIONAL EQUITY FUND
OBJECTIVE AND STRATEGIES: The Protective International Equity Fund seeks long-
term capital appreciation by investing in equity securities of foreign issuers
that the Fund's portfolio management team believes have the potential to
appreciate over the long term. The Fund focuses on selecting attractively
valued companies with strong, competitive positions in industries expected to
grow. The Fund's portfolio managers are based in London, Tokyo and Singapore,
and their knowledge of local markets plays an important role in uncovering
investment opportunities. While the Fund does not allocate assets across
specific countries based on top-down economic or market forecasts, the portfolio
managers strive to manage risk by remaining diversified by country and industry
sector and by closely monitoring economic and political events in countries in
which the Fund does invest. Currency risk, inherent in any international
investment, is managed by a separate team of currency specialists based in
London.
PERFORMANCE REVIEW AND HOLDINGS: The Fund significantly outperformed its
benchmark during the period under review, achieving a total return of 19.00%(1)
based on net asset value, compared with a return of 5.82% 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.
11
<PAGE>
The following graph shows a comparison of a hypothetical investment of $10,000
in the Fund (assumes reinvestment of all dividends and distributions) versus the
Financial Times/S&P Actuaries Europe & Pacific Index (Unhedged).
[GRAPH]
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1996 December 31, 1996 December 31, 1996
----------------- ------------------ --------------------
<S> <C> <C> <C>
International Equity Fund 19.00% 36.45%(a) 11.73%(a)
Financial Times/S&P Actuaries Europe &
Pacific Index (Unhedged) 5.82% 21.82%(b) 6.40%(b)
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
(b) Performance for the benchmark is not available for the period
March 14, 1994 (commencement of investment operations) through
March 31, 1994. For that reason, performance is shown from April 1,
1994.
The Fund's superior performance was primarily due to successful stock selection
across regions, as well as its underweighting in Japan, relative to the
benchmark. As of December 31, 1996, the Fund held positions in 55 companies
based in 16 countries. In terms of total assets, the five largest country
exposures were Japan (30.5%), the U.K. (13.3%), Sweden (8.0%), Germany (6.2%)
and Switzerland (6.1%).
EUROPE. At the end of the period, the portfolio's 52.2% allocation in European
stocks was in line with that of the Europac. Several of the portfolio's longer
term holdings were, once again, among its strongest performers. SECURITAS
(Sweden), the largest security services company in Europe, benefited from
acquisitions in Germany, France and Portugal. FRESENIUS AG (Germany), a major
producer of medical equipment, more than doubled when it merged its global
kidney dialysis division with W. R. Grace's National Medical Center healthcare
subsidiary and spun off the resulting company. RANDSTAD HOLDINGS (Netherlands),
the leading temporary help organization in its market, saw its stock rise after
reporting strong sales and earnings. Other top performers were COMPTOIRS
MODERNES (France), a supermarket chain operator, and WOLTERS KLUWER
(Netherlands), a publisher of tax- and business-related publications, both of
which benefited from recent acquisitions. ERICSSON TELECOMMUNICATIONS (Sweden),
one of the world's leading suppliers of mobile telephones and infrastructure,
was a disappointing performer during the first half of the period, but rebounded
significantly during the second half of the year. European stocks added during
the period included HOECHST (Germany), one of the world's largest chemical and
drug companies, whose acquisition and restructuring plans indicate a commitment
to improving shareholder value, and SGS THOMSON (France), a semiconductor
manufacturer that operates in the high-value-added sector of the market.
12
<PAGE>
JAPAN. Approximately 30% of the Fund was invested in Japan, which was
underweighted relative to the benchmark during the course of the year primarily
because stock valuations remained high compared with other markets. After a
reasonably strong first half, the Japanese stock market faltered for the
remainder of the year, with volatility reflecting the economy's gyrations
between strengthening and weakening. For the year as a whole, Japanese stocks
(as measured by the TOPIX index in yen) fell 6.8%. Despite the poor performance
of the market, the Fund's larger Japanese positions performed well, including
TDK CORP., a manufacturer of electronic components primarily for personal
computers and business machines, which achieved better than expected earnings;
MIRAI INDUSTRY, a market leader in electric cables, pipes and other electric
wiring, which introduced new products and cut costs; and HOYA CORPORATION, an
optical glass manufacturer, which aggressively restructured its operations and
successfully improved profit margins both in its optical glass and its
electronics businesses. In contrast, KYOCERA CORP., an electronics components
manufacturer, reported disappointing results due to slowdowns in the
semiconductor and communication equipment businesses. New additions included
CANON, INC., a manufacturer of office equipment, cameras and computer
peripherals, and TAKEDA CHEMICAL INDUSTRIES, the largest pharmaceutical company
in Japan, where strong new management initiatives are improving the
profitability of its core prescription drug business.
ASIA-PACIFIC. The Fund's 12.6% investment in Asia (excluding Japan), was
slightly overweighted compared with the benchmark's 10.4% weighting. Hong Kong
represented the Fund's largest country position in Asia (excluding Japan) at
5.9% of the portfolio. Top performers included COMMERCE ASSET-HOLDINGS, the
fifth largest financial group in Malaysia, which benefited from its merchant
banking operations and strong loan growth, and SUN HUNG KAI PROPERTIES, which
appreciated due to the recovery in Hong Kong's property market. A
disappointment was LEADER UNIVERSAL HOLDINGS, Malaysia's leading manufacturer of
power and telecommunication cable, which reported lower than expected earnings
due to very low export margins. New positions included AUSTRALIA AND NEW
ZEALAND BANKING GROUP LTD., a bank that is positioned to benefit from the
potential deregulation in Australia's financial services sector, and ASIA
SATELLITE TELECOMMUNICATIONS HOLDINGS LTD., a Hong Kong telecommunication
company.
OUTLOOK: In the near term, Goldman Sachs Asset Management International, the
Fund's investment subadviser, expects most international economies to continue
to experience moderate growth and subdued inflation. The investment subadviser
has a positive outlook for Europe, where it expects somewhat stronger economic
growth in 1997. In general, European equities are trading at reasonable
valuations and should continue to benefit from strong profit growth, primarily
driven by restructuring, cost cutting and the sale of underperforming assets.
The investment subadviser remains cautious with respect to Japan, as it awaits
evidence of a sustainable economic upturn. In this state of uncertainty,
careful stock selection will be essential, and the investment subadviser intends
to emphasize companies with clear earnings visibility and attractive valuations.
Stock valuations in Japan are becoming more reasonable by historical standards,
particularly after a significant stock market correction in early January 1997,
though they are certainly not cheap. In addition, the investment subadviser
expects 8% to 10% earnings growth in Japan in 1997, which is not as attractive
as its earnings expectations for other countries. In non-Japan Asia, the
picture is improving as better political stability and export growth should help
stocks. Within the region, Hong Kong is expected to continue to do well after
its handover to China, as it is in China's best interests to maintain Hong
Kong's current success.
PROTECTIVE MONEY MARKET FUND
OBJECTIVE: The Protective Money Market Fund is designed to preserve capital,
maximize current income and maintain liquidity. The Fund invests in high-
quality short-term securities, including certificates of deposit and banker's
acceptances; high-quality commercial paper and other short-term obligations of
U.S. corporations, state and municipal governments, and other issuers; and
repurchase agreements relating to these securities. The Fund may also invest in
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities. However, please note that the Fund's shares are not
guaranteed or insured by the U.S. government, and Protective Investment Company
cannot assure that it will maintain a stable net asset value of $1.00 per share.
13
<PAGE>
PERFORMANCE REVIEW AND COMPOSITION: As of December 31, 1996, the 7-day current
yield of the Protective Money Market Fund was 4.81%. The investment subadviser
expects 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 are currently estimating that real GDP
growth will be slightly above 3% for the first half of 1997. In addition,
Goldman Sachs is forecasting that inflation (as measured by the Consumer Price
Index) will rise to approximately 3.2% in 1997, up from 2.9% in 1996. This
estimate of a slight pickup in inflation, in combination with above-trend growth
and an unemployment rate approaching 5%, is expected to prompt the U.S. Federal
Reserve to tighten monetary policy during the first half of 1997.
In conclusion, we appreciate your business. The Funds' portfolio managers
intend to continue to utilize a disciplined investment approach to pursue each
Fund's investment objectives while seeking to carefully manage risk. If you
have any questions, please call your investment representative; or we can be
reached at 1-800-456-6330 for variable annuities or 1-800-265-1545 for variable
life insurance.
Sincerely,
/s/ Carolyn King
Carolyn King
Chairman and President
Protective Investment Company
(1) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day of the fiscal period and a sale at net asset value
per share on the last day of each period reported. Distributions are assumed,
for purposes of this calculation, to be reinvested at the net asset value per
share on the respective payment dates of each Fund. Results represent past
performance and do not indicate future results. The value of an investment and
the return on an investment will fluctuate, and redemption proceeds may be
higher or lower than an investor's original cost.
Further, all performance data is historical and includes changes in share price
and reinvestment of dividends and capital gains. Performance numbers are net of
all Fund operating expenses but do not include any insurance charges imposed in
connection with your variable insurance or annuity contract. If the performance
information included the effect of these charges, performance numbers would be
lower.
14
<PAGE>
PROTECTIVE GLOBAL INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
PRINCIPAL
AMOUNT
SECURITY DESCRIPTION (000) U.S. $ VALUE
-------------------- ----- ------------
GOVERNMENT AND AGENCY SECURITIES--82.8%
AUSTRALIA--4.1%
Commonwealth of Australia
6.750%, 11/15/2006 . . . . . . AUD 2,000 $ 1,522,295
------------
CANADA--2.3%
Government of Canada
7.000%, 12/01/2006 . . . . . . CAD 1,100 844,702
------------
GERMANY--18.4%
Federal Republic of Germany
6.750%, 07/15/2004 . . . . . . DEM 4,500 3,138,127
6.500%, 10/14/2005 . . . . . . 5,300 3,616,454
------------
6,754,581
------------
IRELAND--2.5%
Republic of Ireland
8.000%, 10/18/2000 . . . . . . IEP 500 903,814
------------
ITALY--5.7%
Republic of Italy
10.500%, 11/01/2000 . . . . . . ITL 2,800,000 2,081,635
------------
JAPAN--8.6%
International Bank Reconstruction
& Development
6.750%, 06/18/2001 . . . . . . JPY 70,000 737,415
Japan Development Bank
6.500%, 09/20/2001 . . . . . . 230,000 2,414,245
------------
3,151,660
------------
NETHERLANDS--2.2%
Dutch Government
7.000%, 06/15/2005 . . . . . . NLG 1,300 820,965
------------
SPAIN--2.5%
Government of Spain
10.300%, 06/15/2002 . . . . . . ESP 100,000 914,539
------------
SWEDEN--1.5%
Kingdom of Sweden
6.000%, 02/09/2005 . . . . . . SEK 4,000 568,442
------------
UNITED KINGDOM--5.7%
U.K. Treasuries
8.500%, 12/07/2005 . . . . . . GBP 600 1,094,686
7.500%, 12/07/2006 . . . . . . 600 1,028,216
------------
2,122,902
------------
UNITED STATES--29.3%
United States Treasury Notes
6.875%, 07/31/1999 . . . . . . USD 1,250 1,275,387
5.250%, 01/31/2001 . . . . . . 2,100 2,033,388
6.375%, 03/31/2001 . . . . . . 2,400 2,416,128
7.875%, 11/15/2004 . . . . . . 2,000 2,182,500
6.500%, 08/15/2005 . . . . . . 1,100 1,107,051
7.000%, 07/15/2006 . . . . . . 1,700 1,766,147
------------
10,780,601
------------
TOTAL GOVERNMENT AND
AGENCY SECURITIES--
(Cost $29,862,025) . . . . . . 30,466,136
------------
TIME DEPOSIT--17.2%
UNITED STATES--17.2%
State Street Bank and Trust Co.
Eurodollar Time Deposit
6.375%, 01/02/1997 . . . . . . USD 6,328 6,328,000
------------
TOTAL TIME DEPOSIT--(Cost $6,328,000) 6,328,000
------------
TOTAL INVESTMENTS--
(Cost $36,190,025)--100.0% $ 36,794,136
------------
------------
See Glossary of Terms on page 44.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- ------ ------------
COMMON STOCK--93.4%
AUSTRALIA--3.5%
Australia and New Zealand
Banking Group Ltd. . . . . . . . . . 272,200 $ 1,715,719
Woodside Petroleum Ltd. . . . . . . . . 229,600 1,677,151
------------
3,392,870
------------
AUSTRIA--2.3%
Oester Elektrizita . . . . . . . . . . . 29,075 2,176,429
------------
BELGIUM--1.0%
Credit Communal Holding/Dexia . . . . . 10,500 958,081
------------
FRANCE--5.1%
Comptoirs Modernes . . . . . . . . . . . 4,106 2,215,824
Credit Local de France . . . . . . . . . 7,900 688,214
Seita . . . . . . . . . . . . . . . . . 9,051 378,542
SGS-Thomson Microelectronics N.V.. . . . 22,800 1,612,721
------------
4,895,301
------------
GERMANY--3.9%
Adidas AG . . . . . . . . . . . . . . . 24,050 2,078,665
Hoechst AG . . . . . . . . . . . . . . . 36,000 1,700,806
------------
3,779,471
------------
HONG KONG--5.9%
Asia Satellite Telecom
Holdings Ltd. . . . . . . . . . . . . 415,500 964,280
HSBC Holdings . . . . . . . . . . . . . 117,000 2,503,523
Sun Hung Kai Properties . . . . . . . . 175,000 2,143,804
------------
5,611,607
------------
IRELAND--2.4%
Bank of Ireland . . . . . . . . . . . . 257,992 2,352,535
------------
ITALY--2.1%
Telecom Italia (savings shares) . . . . 690,000 984,739
Telecom Italia . . . . . . . . . . . . . 419,000 1,059,239
------------
2,043,978
------------
JAPAN--30.5%
Aderans Co. . . . . . . . . . . . . . . 13,000 317,675
Canon Inc. . . . . . . . . . . . . . . . 103,000 2,276,833
Circle K Japan Co. . . . . . . . . . . . 200 8,635
Hoya Corp. . . . . . . . . . . . . . . . 61,000 2,396,598
Inaba Denkisangyo Co. . . . . . . . . . 45,100 864,537
Kokuyo Co. . . . . . . . . . . . . . . . 69,000 1,703,998
Kyocera Corp. . . . . . . . . . . . . . 28,000 1,745,618
Max Co. . . . . . . . . . . . . . . . . 69,000 1,155,859
Mirai Industry Co. . . . . . . . . . . . 37,400 1,017,270
Mitsubishi Heavy Industries Ltd. . . . . 307,000 2,438,822
Mitsui Marine & Fire . . . . . . . . . . 243,000 1,307,219
Santen Pharmaceutical Co. . . . . . . . 84,000 1,740,782
Sanyo Shinpan Finance Co. Ltd. . . . . . 17,000 1,064,243
Shimachu Co. . . . . . . . . . . . . . . 55,000 1,410,500
SMC Corp. . . . . . . . . . . . . . . . 28,000 1,883,430
Taikisha Ltd. . . . . . . . . . . . . . 77,000 1,043,865
Takeda Chemical Industries . . . . . . . 86,000 1,804,507
TDK Corp. . . . . . . . . . . . . . . . 36,000 2,346,947
Tostem Corp. . . . . . . . . . . . . . . 69,000 1,906,571
York Benimaru Co. . . . . . . . . . . . 33,000 920,387
------------
29,354,296
------------
MALAYSIA--2.0%
Commerce Asset Holdings . . . . . . . . 210,000 1,579,885
Leader Universal Holdings . . . . . . . 181,000 379,846
------------
1,959,731
------------
NETHERLANDS--3.9%
Randstad Holdings N.V. . . . . . . . . . 21,600 1,560,361
Wolters Kluwer N.V. . . . . . . . . . . 16,095 2,138,112
------------
3,698,473
------------
SINGAPORE--1.3%
Singapore Land . . . . . . . . . . . . . 226,000 1,251,697
------------
SPAIN--2.1%
Banco Popular Espana . . . . . . . . . . 10,460 2,054,535
------------
SWEDEN--8.0%
Ericsson LM Telephone . . . . . . . . . 62,600 1,936,972
Hoganas AB, Class B . . . . . . . . . . 53,400 1,871,569
Securitas AB, Class B . . . . . . . . . 69,600 2,025,985
Swedish Match . . . . . . . . . . . . . 538,000 1,893,477
------------
7,728,003
------------
SWITZERLAND--6.1%
Adecco SA . . . . . . . . . . . . . . . 6,182 1,551,851
Cie Financier Richemont AG . . . . . . . 1,175 1,650,355
Novartis AG* . . . . . . . . . . . . . . 2,290 2,622,764
------------
5,824,970
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- ------ ------------
COMMON STOCK (CONTINUED)
UNITED KINGDOM--13.3%
British Airport Authority PLC . . . . . 231,081 $1,915,451
Electrocomponents PLC . . . . . . . . . 311,612 2,460,235
Misys PLC . . . . . . . . . . . . . . . 136,584 2,598,815
Premier Farnell . . . . . . . . . . . . 183,142 2,352,398
Rentokil Group PLC . . . . . . . . . . . 259,000 1,951,704
Siebe PLC . . . . . . . . . . . . . . . 83,183 1,544,278
------------
12,822,881
------------
TOTAL COMMON STOCK--
(Cost $75,120,895) . . . . . . . . . 89,904,858
------------
PREFERRED STOCK--2.3%
GERMANY--2.3%
Fresenius AG . . . . . . . . . . . . . . 10,700 2,211,204
------------
TOTAL PREFERRED STOCK--
(Cost $599,010) . . . . . . . . . . . 2,211,204
------------
TIME DEPOSIT--4.3%
UNITED STATES--4.3%
State Street Bank and Trust Co.
Eurodollar Time Deposit
6.375%, 01/02/1997 . . . . . . . . . USD 4,136 4,136,000
------------
TOTAL TIME DEPOSIT--(Cost $4,136,000) 4,136,000
------------
TOTAL INVESTMENTS--
(Cost $79,855,905)--100.0% $96,252,062
------------
------------
* Denotes non-income producing security.
See Glossary of Terms on page 44.
ANALYSIS OF INDUSTRY CLASSIFICATIONS
------------------------------------
INDUSTRY % OF NET ASSETS VALUE
- -------- --------------- -----
Business Services 10.1% $ 9,688,716
Commercial Banks 11.6 11,164,278
Computer/Office Equipment 3.8 3,640,970
Construction 2.0 1,906,571
Consumer Goods 4.2 3,997,302
Electrical Equipment 2.3 2,173,129
Electronic/Office Equipment 2.4 2,276,833
Electronics 11.9 11,432,107
Engineering 4.1 3,983,100
Financial Services 1.8 1,752,457
Health Care 10.4 10,080,063
Insurance 1.4 1,307,219
Machinery 3.0 2,927,295
Media 2.2 2,138,112
Metal Products 2.3 2,251,415
Oil 1.7 1,677,151
Real Estate 3.5 3,395,501
Retail Trade 5.1 4,873,021
Textile 2.2 2,078,665
Time Deposit 4.3 4,136,000
Tobacco 2.4 2,272,019
Transportation 2.0 1,915,451
Utility 5.3 5,184,687
----- ------------
Totals 100.0 $ 96,252,062
----- ------------
----- ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK--88.6%
AEROSPACE/DEFENSE--3.2%
McDonnell Douglas Corp. . . . . . . . . 8,000 $ 512,000
Northrop Grumman Corp. . . . . . . . . . 5,600 463,400
------------
975,400
------------
AIRLINES--2.5%
AMR Corp. * . . . . . . . . . . . . . . 5,300 467,062
Southwest Airlines Co. . . . . . . . . . 13,300 294,263
------------
761,325
------------
AUTO PARTS--1.3%
Lear Seating Corp. * . . . . . . . . . . 12,000 409,500
------------
AUTOMOBILE--2.1%
Ford Motor Co. . . . . . . . . . . . . . 19,700 627,938
------------
BROADCAST MEDIA--0.4%
Gaylord Entertainment Co. . . . . . . . 5,200 118,950
------------
BUSINESS SERVICES--2.8%
Ecolab Inc. . . . . . . . . . . . . . . 6,900 259,612
First Data Corp. . . . . . . . . . . . . 8,000 292,000
Service Corporation International . . . 11,100 310,800
------------
862,412
------------
CHEMICALS--1.4%
Geon Co. . . . . . . . . . . . . . . . . 21,400 419,975
------------
COMMUNICATION SERVICES--1.1%
Tele-Communications Inc. * . . . . . . . 11,200 319,900
------------
COMPUTER SOFTWARE & SERVICES--2.1%
Compaq Computer Corp. * . . . . . . . . 8,600 638,550
------------
DRUGS & HEALTH CARE--7.4%
Baxter International Inc. . . . . . . . 17,500 717,500
Beverly Enterprises Inc. * . . . . . . . 5,800 73,950
Fisher Scientific International Inc. . . 14,500 683,313
Health Systems International Inc. * . . 3,600 89,100
Tenet Healthcare Corp. * . . . . . . . . 31,000 678,125
------------
2,241,988
------------
ELECTRIC UTILITIES--1.0%
Long Island Lighting Co. . . . . . . . . 14,100 311,963
------------
ELECTRONICS--6.0%
Avnet Inc. . . . . . . . . . . . . . . . 6,700 390,275
Intel Corp. . . . . . . . . . . . . . . 7,100 929,656
Perkin Elmer Corp. . . . . . . . . . . . 8,300 488,663
------------
1,808,594
------------
FINANCIAL SERVICES--8.4%
Federal National Mortgage Assn. . . . . 10,200 379,950
First USA Inc. . . . . . . . . . . . . . 26,800 927,950
Fleet Financial Group Inc. . . . . . . . 2,498 124,588
Lehman Brothers Holdings Inc. . . . . . 16,900 530,238
MBNA Corp. . . . . . . . . . . . . . . . 13,800 572,700
------------
2,535,426
------------
FOODS--0.6%
Chiquita Brands International, Inc. . . 15,000 191,250
------------
HOSPITAL MANAGEMENT--2.0%
Columbia/HCA Healthcare Corp. . . . . . 14,900 607,175
------------
INDUSTRIAL MACHINERY--4.3%
Applied Materials Inc. * . . . . . . . . 8,800 316,250
Pall Corp. . . . . . . . . . . . . . . . 23,800 606,900
Silicon Valley Group Inc. * . . . . . . 18,600 374,325
------------
1,297,475
------------
INSURANCE--8.7%
Aetna Inc. . . . . . . . . . . . . . . . 16,273 1,301,840
Integon Corp. . . . . . . . . . . . . . 14,200 252,050
Lincoln National Corp. . . . . . . . . . 7,500 393,750
Partner Re Holdings . . . . . . . . . . 20,800 707,200
------------
2,654,840
------------
MAJOR REGIONAL BANKS--5.1%
BankAmerica Corp. . . . . . . . . . . . 8,000 798,000
NationsBank Corp. . . . . . . . . . . . 7,800 762,450
------------
1,560,450
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
OIL--6.2%
Amoco Corp. . . . . . . . . . . . . . . 2,100 $169,050
Atlantic Richfield Co. . . . . . . . . . 2,000 265,000
Chevron Corp. . . . . . . . . . . . . . 1,600 104,000
Mobil Corp. . . . . . . . . . . . . . . 2,700 330,075
Royal Dutch Petroleum Co. . . . . . . . 1,000 170,750
Texaco Inc. . . . . . . . . . . . . . . 8,600 843,875
------------
1,882,750
------------
PACKAGING & CONTAINERS--1.4%
Owens Illinois Inc. * . . . . . . . . . 18,600 423,150
------------
PAPER AND FOREST PRODUCTS--2.3%
Georgia Pacific Corp. . . . . . . . . . 8,100 583,200
Stone Container Corp. . . . . . . . . . 7,700 114,537
------------
697,737
------------
PUBLISHING--2.8%
Knight Ridder Inc. . . . . . . . . . . . 7,900 302,175
Valassis Communications Inc. * . . . . . 26,300 555,587
------------
857,762
------------
RESTAURANTS--0.5%
Marriot International Inc. . . . . . . . 2,800 154,700
------------
RETAIL--5.4%
Dillard Dept. Stores Inc. . . . . . . . 19,500 602,063
Fleming Cos. Inc. . . . . . . . . . . . 8,400 144,900
J C Penney Inc. . . . . . . . . . . . . 4,700 229,125
Wal-Mart Stores Inc. . . . . . . . . . . 28,500 651,937
------------
1,628,025
------------
TELECOMMUNICATIONS--1.3%
Lucent Technologies Inc. . . . . . . . . 8,400 388,500
------------
TIRES & RUBBER--2.7%
Cooper Tire & Rubber Co. . . . . . . . . 10,600 209,350
Goodyear Tire & Rubber Co. . . . . . . . 12,100 621,637
------------
830,987
------------
TOBACCO--2.5%
Philip Morris Cos. Inc. . . . . . . . . 6,800 765,850
------------
TRANSPORTATION--3.1%
Canadian Pacific Ltd. . . . . . . . . . 16,500 437,250
Consolidated Freightways Corp.* . . . . 9,200 81,650
Consolidated Freightways Inc. . . . . . 18,400 409,400
------------
928,300
------------
TOTAL COMMON STOCK--
(Cost $23,011,804) . . . . . . . . . 26,900,872
------------
PRINCIPAL
AMOUNT
(000)
-----
SHORT TERM INVESTMENTS--11.4%
REPURCHASE AGREEMENT--11.2%
State Street Bank and Trust Co.
6.250%, 01/02/1997, maturity value
of $3,398,180, dated 12/31/1996,
(Collateralized by $3,435,000 United
States Treasury Note, 6.000%,
05/31/1998, with a value
of $3,465,431)**. . . . . . . . . . . $3,397 3,397,000
------------
U.S. GOVERNMENT SECURITIES--0.2%
United States Treasury Bills
4.880%, 03/06/1997 ** . . . . . . . . 40 39,653
5.050%, 03/06/1997 ** . . . . . . . . 20 19,820
------------
59,473
------------
TOTAL SHORT TERM
INVESTMENTS--(Cost $3,456,473) 3,456,473
------------
TOTAL INVESTMENTS--
(Cost $26,468,277)--100.0% $ 30,357,345
------------
------------
OTHER INFORMATION--
At December 31, 1996, the Capital Growth Fund had open futures contracts as
follows:
Market Unrealized
Futures Expiration Contracts Value Gain
- ------- ---------- --------- ----- ----
S & P 500 March 1997 4 $1,489,000 $26,975
* 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.
19
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK--91.3%
AEROSPACE/DEFENSE--4.4%
McDonnell Douglas Corp. . . . . . . . . 114,300 $ 7,315,200
Northrop Grumman Corp. . . . . . . . . . 23,600 1,952,900
------------
9,268,100
------------
AIRLINES--3.6%
AMR Corp. * . . . . . . . . . . . . . . 33,800 2,978,625
Continental Airlines Inc., Class B * . . 164,000 4,571,500
------------
7,550,125
------------
AUTO PARTS--2.7%
Lear Seating Corp. * . . . . . . . . . . 167,700 5,722,763
------------
AUTOMOBILE--2.1%
Ford Motor Co. . . . . . . . . . . . . . 137,700 4,389,188
------------
CHEMICALS--1.5%
Geon Co. . . . . . . . . . . . . . . . . 156,100 3,063,463
------------
COMPUTER SOFTWARE & SERVICES--1.0%
Autodesk Inc. . . . . . . . . . . . . . 73,700 2,063,600
------------
DRUGS & HEALTH CARE--4.5%
Baxter International Inc. . . . . . . . 97,400 3,993,400
Tenet Healthcare Corp. * . . . . . . . . 249,500 5,457,812
------------
9,451,212
------------
ELECTRIC UTILITIES--3.4%
CMS Energy Corp. . . . . . . . . . . . . 46,500 1,563,562
Long Island Lighting Co. . . . . . . . . 198,400 4,389,600
Unicom Corp. . . . . . . . . . . . . . . 46,800 1,269,450
------------
7,222,612
------------
ELECTRONICS--3.4%
Avnet Inc. . . . . . . . . . . . . . . . 96,400 5,615,300
Teradyne Inc. * . . . . . . . . . . . . 57,500 1,401,562
------------
7,016,862
------------
FINANCIAL SERVICES--4.7%
Dean Witter Discover & Co. . . . . . . . 82,000 5,432,500
Lehman Brothers Holdings Inc. . . . . . 69,200 2,171,150
Republic New York Corp. . . . . . . . . 26,000 2,122,250
------------
9,725,900
------------
FOODS--1.2%
Chiquita Brands International, Inc. . . 201,600 2,570,400
------------
HOMEBUILDING--3.0%
Centex Corp. . . . . . . . . . . . . . . 72,700 2,735,338
Lennar Corp. . . . . . . . . . . . . . . 132,100 3,599,725
------------
6,335,063
------------
HOUSEWARES--1.9%
Sunbeam Corp. . . . . . . . . . . . . . 154,300 3,973,225
------------
INSURANCE--9.5%
Aetna Inc. . . . . . . . . . . . . . . . 84,900 6,792,000
CIGNA Corp. . . . . . . . . . . . . . . 36,200 4,945,825
Lincoln National Corp. . . . . . . . . . 58,800 3,087,000
Loews Corp. . . . . . . . . . . . . . . 22,400 2,111,200
Partner Re Holdings . . . . . . . . . . 85,000 2,890,000
------------
19,826,025
------------
LEISURE TIME--1.9%
Brunswick Corp. . . . . . . . . . . . . 168,700 4,048,800
------------
MAJOR REGIONAL BANKS--6.1%
BankAmerica Corp. . . . . . . . . . . . 60,100 5,994,975
Chase Manhattan Corp. New . . . . . . . 22,800 2,034,900
NationsBank Corp. . . . . . . . . . . . 49,400 4,828,850
------------
12,858,725
------------
OIL--6.4%
Ashland Inc. . . . . . . . . . . . . . . 66,300 2,908,912
Atlantic Richfield Co. . . . . . . . . . 42,900 5,684,250
Texaco Inc. . . . . . . . . . . . . . . 49,000 4,808,125
------------
13,401,287
------------
PACKAGING & CONTAINERS--2.8%
Owens Illinois Inc. * . . . . . . . . . 255,600 5,814,900
------------
PAPER AND FOREST PRODUCTS--3.4%
Georgia Pacific Corp. . . . . . . . . . 57,700 4,154,400
Stone Container Corp. . . . . . . . . . 204,500 3,041,937
------------
7,196,337
------------
PETROLEUM SERVICES--2.6%
Tosco Corp. . . . . . . . . . . . . . . 69,800 5,522,925
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
RETAIL--6.7%
Fleming Cos. Inc. . . . . . . . . . . . 257,400 $ 4,440,150
J C Penney Inc. . . . . . . . . . . . . 76,100 3,709,875
Sears Roebuck & Co. . . . . . . . . . . 75,000 3,459,375
Supervalu Inc. . . . . . . . . . . . . . 87,000 2,468,625
------------
14,078,025
------------
STEEL--1.6%
AK Steel Holding Corp. . . . . . . . . . 85,500 3,387,938
------------
TEXTILE--2.3%
Fruit of the Loom Inc. * . . . . . . . . 129,100 4,889,663
------------
TIRES & RUBBER--2.7%
Goodyear Tire & Rubber Co. . . . . . . . 111,900 5,748,863
------------
TOBACCO--4.7%
Philip Morris Cos. Inc. . . . . . . . . 51,800 5,833,975
RJR Nabisco Holdings Corp. . . . . . . . 64,080 2,178,720
Universal Corp. Virginia . . . . . . . . 54,600 1,754,025
------------
9,766,720
------------
TRANSPORTATION--3.2%
Canadian Pacific Ltd. . . . . . . . . . 141,400 3,747,100
Consolidated Freightways Corp.* . . . . 14,900 132,237
Consolidated Freightways Inc. . . . . . 122,600 2,727,850
------------
6,607,187
------------
TOTAL COMMON STOCK--
(Cost $156,714,773) . . . . . . . . . 191,499,908
------------
PREFERRED STOCK--0.3%
FOODS--0.1%
Chiquita Brands International, Inc.,
Series A. . . . . . . . . . . . . . 5,800 249,400
------------
TOBACCO--0.2%
RJR Nabisco Holdings Corp.,
Series C . . . . . . . . . . . . . . 50,900 343,575
------------
TOTAL PREFERRED STOCK--
(Cost $591,286) 592,975
------------
DEPOSITORY RECEIPTS--1.8%
MANUFACTURING--1.8%
Unilever N.V. . . . . . . . . . . . . . 21,800 3,820,450
------------
TOTAL DEPOSITORY RECEIPTS--
(Cost $3,446,874) . . . . . . . . . . 3,820,450
------------
PRINCIPAL
AMOUNT
(000)
-----
SHORT TERM INVESTMENT--6.6%
REPURCHASE AGREEMENT--6.6%
State Street Bank and Trust Co.
6.250%, 01/02/1997, maturity value
of $13,763,777, dated 12/31/1996,
(Collateralized by $13,195,000 United
States Treasury Note, 6.000%,
5/31/1998, with a value
of $14,038,273).. . . . . . . . . . . $13,759 13,759,000
------------
TOTAL SHORT TERM INVESTMENT--
(Cost $13,759,000) . . . . . . . . . 13,759,000
------------
TOTAL INVESTMENTS--
(Cost $174,511,933)--100.0% . . . . . $209,672,333
------------
------------
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
21
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK--95.1%
AEROSPACE/DEFENSE--2.0%
Allied Signal Inc. . . . . . . . . . . . 7,400 $ 495,800
Boeing Co. . . . . . . . . . . . . . . . 3,900 414,862
United Technologies Corp. . . . . . . . 16,200 1,069,200
------------
1,979,862
------------
AIRLINES--1.5%
AMR Corp. * . . . . . . . . . . . . . . 9,000 793,125
Delta Air Lines Inc. . . . . . . . . . . 9,900 701,663
------------
1,494,788
------------
AUTO PARTS--0.6%
TRW Inc. . . . . . . . . . . . . . . . . 11,400 564,300
------------
AUTOMOBILE--1.8%
Ford Motor Co. . . . . . . . . . . . . . 15,800 503,625
General Motors Corp. . . . . . . . . . . 23,300 1,298,975
------------
1,802,600
------------
BEVERAGES--1.1%
PepsiCo Inc. . . . . . . . . . . . . . . 39,000 1,140,750
------------
BUILDING MATERIALS--0.6%
Home Depot Inc. . . . . . . . . . . . . 11,700 586,463
------------
BUSINESS SERVICES--0.3%
First Data Corp. . . . . . . . . . . . . 9,200 335,800
------------
CHEMICALS--3.2%
B F Goodrich Co. . . . . . . . . . . . . 13,500 546,750
Dow Chemical Co. . . . . . . . . . . . . 16,000 1,254,000
E I Du Pont De Nemours & Co. . . . . . . 5,800 547,375
Monsanto Co. . . . . . . . . . . . . . . 23,500 913,562
------------
3,261,687
------------
COMMERCIAL SERVICES--1.5%
Dun & Bradstreet Corp. . . . . . . . . . 64,200 1,524,750
------------
COMPUTER SOFTWARE & SERVICES--5.7%
Cisco Systems Inc. * . . . . . . . . . . 14,000 890,750
Compaq Computer Corp. * . . . . . . . . 8,300 616,275
Computer Associates International Inc. . 11,400 567,150
International Business Machines Inc. . . 10,900 1,645,900
Microsoft Corp. * . . . . . . . . . . . 20,800 1,718,600
Oracle System Corp. * . . . . . . . . . 9,150 382,012
------------
5,820,687
------------
CONGLOMERATES--0.6%
Textron Inc. . . . . . . . . . . . . . . 6,300 593,775
------------
CONSTRUCTION MATERIALS--0.4%
Fluor Corp. . . . . . . . . . . . . . . 6,800 426,700
------------
COSMETICS--1.1%
Gillette Co. . . . . . . . . . . . . . . 15,000 1,166,250
------------
DRUGS & HEALTH CARE--0.6%
Abbott Laboratories . . . . . . . . . . 11,700 593,775
------------
ELECTRIC UTILITIES--3.5%
Duke Power Co. of New Mexico . . . . . . 17,000 786,250
Edison International . . . . . . . . . . 43,000 854,625
Texas Utilities Co. . . . . . . . . . . 13,300 541,975
Unicom Corp. . . . . . . . . . . . . . . 51,400 1,394,225
------------
3,577,075
------------
ELECTRICAL EQUIPMENT--0.7%
Applied Materials Inc. * . . . . . . . . 6,000 215,625
Harris Corp. Delaware . . . . . . . . . 7,600 521,550
------------
737,175
------------
ELECTRONICS--6.0%
General Electric Co. . . . . . . . . . . 23,400 2,313,675
Hewlett Packard Co. . . . . . . . . . . 23,600 1,185,900
Intel Corp. . . . . . . . . . . . . . . 19,700 2,579,469
------------
6,079,044
------------
ENTERTAINMENT--1.1%
Walt Disney Co. . . . . . . . . . . . . 15,681 1,091,790
------------
FINANCIAL SERVICES--5.3%
American General Corp. . . . . . . . . . 12,300 502,762
Beneficial Corp. . . . . . . . . . . . . 11,700 741,487
Federal National Mortgage Assn. . . . . 26,700 994,575
First Bank Systems Inc. . . . . . . . . 11,600 791,700
Merrill Lynch & Co. Inc. . . . . . . . . 15,000 1,222,500
Morgan Stanley Group Inc. . . . . . . . 12,400 708,350
Salomon Inc. . . . . . . . . . . . . . . 8,700 409,988
------------
5,371,362
------------
FOODS--1.6%
ConAgra Inc. . . . . . . . . . . . . . . 10,400 517,400
CPC International Inc. . . . . . . . . . 7,400 573,500
Sara Lee Corp. . . . . . . . . . . . . . 15,800 588,550
------------
1,679,450
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
GAS & PIPELINE UTILITIES--0.5%
Williams Cos. Inc. . . . . . . . . . . . 12,450 $ 466,875
------------
GAS EXPLORATION--0.6%
Kerr McGee Corp. . . . . . . . . . . . . 8,300 597,600
------------
HEALTH CARE--1.9%
American Home Products Corp. . . . . . . 13,100 767,987
Columbia/HCA Healthcare Corp. . . . . . 16,800 684,600
Manor Care Inc. . . . . . . . . . . . . 18,100 488,700
------------
1,941,287
------------
HOUSEHOLD PRODUCTS--1.9%
Corning Inc. . . . . . . . . . . . . . . 10,500 485,625
Procter & Gamble Co. . . . . . . . . . . 13,400 1,440,500
------------
1,926,125
------------
INDUSTRIAL MACHINERY--0.4%
Tecumseh Products Co. . . . . . . . . . 7,600 436,050
------------
INSURANCE--5.5%
Allstate Corp. . . . . . . . . . . . . . 12,405 717,939
American International Group Inc. . . . 11,300 1,223,225
CIGNA Corp. . . . . . . . . . . . . . . 6,200 847,075
Loews Corp. . . . . . . . . . . . . . . 4,400 414,700
Safeco Corp. . . . . . . . . . . . . . . 20,800 820,300
Travelers Inc. . . . . . . . . . . . . . 34,466 1,563,895
------------
5,587,134
------------
MACHINERY--1.8%
Case Corp. . . . . . . . . . . . . . . . 11,000 599,500
Caterpillar Inc. . . . . . . . . . . . . 16,400 1,234,100
------------
1,833,600
------------
MAJOR REGIONAL BANKS--6.2%
Banc One Corp. . . . . . . . . . . . . . 15,290 657,470
Bank of New York Co. Inc. . . . . . . . 13,200 445,500
BankAmerica Corp. . . . . . . . . . . . 16,400 1,635,900
Citicorp . . . . . . . . . . . . . . . . 9,100 937,300
First Chicago NBD Corp. . . . . . . . . 11,000 591,250
NationsBank Corp. . . . . . . . . . . . 15,400 1,505,350
Wells Fargo & Co. . . . . . . . . . . . 1,800 485,550
------------
6,258,320
------------
MANUFACTURING--1.3%
Dover Corp. . . . . . . . . . . . . . . 9,400 472,350
Tyco International Ltd. . . . . . . . . 16,600 877,725
------------
1,350,075
------------
MEDICAL PRODUCTS & SUPPLIES--0.5%
Medtronic Inc. . . . . . . . . . . . . . 7,000 476,000
------------
OFFICE EQUIPMENT & SUPPLIES--0.5%
Xerox Corp. . . . . . . . . . . . . . . 8,800 463,100
------------
OIL--11.9%
Amoco Corp. . . . . . . . . . . . . . . 8,600 692,300
Atlantic Richfield Co. . . . . . . . . . 14,200 1,881,500
Columbia Gas Systems Inc. . . . . . . . 18,100 1,151,613
Exxon Corp. . . . . . . . . . . . . . . 23,900 2,342,200
Mobil Corp. . . . . . . . . . . . . . . 4,700 574,575
Phillips Petroleum Co. . . . . . . . . . 9,700 429,225
Royal Dutch Petroleum Co. . . . . . . . 9,700 1,656,275
Texaco Inc. . . . . . . . . . . . . . . 21,200 2,080,250
Unocal Corp. . . . . . . . . . . . . . . 30,900 1,255,312
------------
12,063,250
------------
PACKAGING & CONTAINERS--0.8%
Avery Dennison Corp. . . . . . . . . . . 22,600 799,475
------------
PAPER AND FOREST PRODUCTS--1.9%
Champion International Corp. . . . . . . 14,000 605,500
Georgia Pacific Corp. . . . . . . . . . 11,000 792,000
Mead Corp. . . . . . . . . . . . . . . . 8,600 499,875
------------
1,897,375
------------
PHARMACEUTICALS--6.0%
Bristol Myers Squibb Co. . . . . . . . . 14,100 1,533,375
Eli Lilly & Co. . . . . . . . . . . . . 10,600 773,800
Johnson & Johnson Co. . . . . . . . . . 23,400 1,164,150
Merck & Co. Inc. . . . . . . . . . . . . 13,800 1,093,650
Pfizer Inc. . . . . . . . . . . . . . . 8,800 729,300
Schering Plough Corp. . . . . . . . . . 13,200 854,700
------------
6,148,975
------------
PHOTOGRAPHY--0.6%
Eastman Kodak Co. . . . . . . . . . . . 7,000 561,750
------------
RESTAURANTS--0.5%
McDonald's Corp. . . . . . . . . . . . . 12,200 552,050
------------
RETAIL--4.8%
Dayton Hudson Corp. . . . . . . . . . . 22,200 871,350
Dillard Dept. Stores Inc. . . . . . . . 13,100 404,463
Gap Inc. . . . . . . . . . . . . . . . . 14,600 439,825
Mercantile Stores Inc. . . . . . . . . . 11,800 582,625
Safeway Inc. * . . . . . . . . . . . . . 13,000 555,750
Sears Roebuck & Co. . . . . . . . . . . 17,300 797,962
TJX Cos. Inc. . . . . . . . . . . . . . 12,700 601,662
Wal-Mart Stores Inc. . . . . . . . . . . 26,800 613,050
------------
4,866,687
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<PAGE>
PROTECTIVE SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
TELECOMMUNICATIONS--3.4%
3Com Corp. * . . . . . . . . . . . . . . 8,000 $ 587,000
GTE Corp. . . . . . . . . . . . . . . . 27,300 1,242,150
Lucent Technologies Inc. . . . . . . . . 8,847 409,174
Sprint Corp. . . . . . . . . . . . . . . 29,800 1,188,275
------------
3,426,599
------------
TELEPHONE--1.4%
Airtouch Communications Inc. * . . . . . 19,600 494,900
Ameritech Corp. . . . . . . . . . . . . 15,400 933,625
------------
1,428,525
------------
TEXTILE--1.3%
Liz Claiborne . . . . . . . . . . . . . 12,500 482,813
Nike Inc. . . . . . . . . . . . . . . . 14,400 860,400
------------
1,343,213
------------
TIRES & RUBBER--0.5%
Goodyear Tire & Rubber Co. . . . . . . . 9,600 493,200
------------
TOBACCO--1.7%
Philip Morris Cos. Inc. . . . . . . . . 15,700 1,768,213
------------
TOTAL COMMON STOCK--
(Cost $77,160,237) . . . . . . . . . 96,513,561
------------
DEPOSITORY RECEIPTS--1.8%
ELECTRIC COMPANIES--0.7%
Empresa Nacional De Electric . . . . . . 10,400 728,000
------------
PETROLEUM SERVICES--1.1%
Norsk Hydro AS . . . . . . . . . . . . . 20,800 1,115,400
------------
TOTAL DEPOSITORY RECEIPTS--
(Cost $1,315,401) . . . . . . . . . . 1,843,400
------------
PRINCIPAL
AMOUNT
SECURITY DESCRIPTION (000) VALUE
-------------------- ----- -----
SHORT TERM INVESTMENTS--3.1%
REPURCHASE AGREEMENT--3.0%
State Street Bank and Trust Co.
6.250%, 01/02/1997, maturity value
of $3,072,066, dated 12/31/1996,
(Collateralized by $3,105,000 United
States Treasury Note, 6.00%,
5/31/1998, with a value
of $3,132,507)**. . . . . . . . . . . $3,071 $ 3,071,000
------------
U.S. GOVERNMENT SECURITIES--0.1%
United States Treasury Bills
4.660%, 01/23/1997 ** . . . . . . . . 30 29,915
4.750%, 01/23/1997 ** . . . . . . . . 50 49,855
------------
79,770
------------
TOTAL SHORT TERM INVESTMENTS--
(Cost $3,150,770) . . . . . . . . . . 3,150,770
------------
TOTAL INVESTMENTS--
(Cost $81,626,408)--100.0% . . . . . $101,507,731
------------
------------
OTHER INFORMATION--
At December 31, 1996, the Select Equity Fund had open futures contracts as
follows:
Market Unrealized
Futures Expiration Contracts Value Gain
- ------- ---------- --------- ----- ----
S & P 500 March 1997 5 $1,861,250 $15,525
* 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.
24
<PAGE>
PROTECTIVE SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK--92.8%
AUTO PARTS--2.7%
APS Holding Corp. * . . . . . . . . . . 114,400 $ 1,773,200
------------
BROADCAST MEDIA--5.5%
Groupe AB SA* . . . . . . . . . . . . . 118,500 1,703,437
Heritage Media Corp. * . . . . . . . . . 162,700 1,830,375
------------
3,533,812
------------
BUILDING CONSTRUCTION--1.3%
Synthetic Industries Inc. * . . . . . . 52,500 853,125
------------
BUILDING MATERIALS--1.7%
Congoleum Corp. * . . . . . . . . . . . 81,000 1,123,875
------------
CHEMICALS--1.9%
Spartech Corp. . . . . . . . . . . . . . 110,600 1,230,425
------------
COMMERCIAL SERVICES--1.6%
Healthcare Services Group Inc. * . . . . 87,100 871,000
International Post Ltd. * . . . . . . . 30,700 141,988
------------
1,012,988
------------
COMMUNICATION SERVICES--1.6%
Pegasus Communications Corp. * . . . . . 75,800 1,042,250
------------
COMPUTER SOFTWARE &
SERVICES--9.1%
Black Box Corp. * . . . . . . . . . . . 16,100 664,125
DecisionOne Corp. * . . . . . . . . . . 230,400 3,801,600
Multiple Zones International Inc. * . . 141,400 1,378,650
Opinion Research Corp. * . . . . . . . . 8,600 29,025
------------
5,873,400
------------
ELECTRIC UTILITIES--2.4%
Central Maine Power Co. . . . . . . . . 131,100 1,524,038
------------
ELECTRICAL EQUIPMENT--4.6%
Amphenol Corp. * . . . . . . . . . . . . 52,000 1,157,000
Carbide/Graphite Group Inc. * . . . . . 91,000 1,785,875
------------
2,942,875
------------
ENTERTAINMENT--0.6%
Platinum Entertainment Inc. * . . . . . 51,000 408,000
------------
FINANCE & BANKING--0.8%
Peoples Bank Bridgeport Connecticut. . . 18,400 531,300
------------
FOODS--3.7%
Alpine Lace Brands Inc. * . . . . . . . 96,800 508,200
Dominicks Supermarkets Inc. * . . . . . 25,500 554,625
Morningstar Group Inc. * . . . . . . . . 68,700 1,348,238
------------
2,411,063
------------
HOSPITAL MANAGEMENT--7.7%
Mariner Health Group Inc. * . . . . . . 260,500 2,181,687
Sun Healthcare Group Inc. * . . . . . . 156,200 2,108,700
Theratx Inc. * . . . . . . . . . . . . . 64,200 658,050
------------
4,948,437
------------
HOUSEHOLD PRODUCTS--5.0%
American Safety Razor Co. * . . . . . . 132,800 1,859,200
AMRE Inc. * . . . . . . . . . . . . . . 238,900 388,213
Samsonite Corp. * . . . . . . . . . . . 24,700 947,862
------------
3,195,275
------------
HOUSEWARES--0.6%
Levitz Furniture Inc. * . . . . . . . . 131,700 411,563
------------
INSURANCE--8.4%
Horace Mann Educators Corp. . . . . . . 31,000 1,251,625
IPC Holdings Ltd. . . . . . . . . . . . 59,300 1,326,837
Old Republic International Corp. . . . . 37,000 989,750
Symons International Group Inc. * . . . 27,800 465,650
Terra Nova (Bermuda) Holdings Ltd. . . . 65,800 1,414,700
------------
5,448,562
------------
LEISURE TIME--1.2%
Trump Hotels & Casino Resorts Inc.* . . 64,100 769,200
------------
MANUFACTURING--2.0%
Figgie International
Holdings Inc. Class A * . . . . . . . 54,100 649,200
Figgie International
Holdings Inc. Class B * . . . . . . . 61,900 665,425
------------
1,314,625
------------
PACKAGING & CONTAINER--1.2%
Shorewood Packaging Corp. * . . . . . . 41,300 805,350
------------
REAL ESTATE--0.7%
Insignia Financial Group Inc. * . . . . 18,900 425,250
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
<PAGE>
PROTECTIVE SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
COMMON STOCK (CONTINUED)
RESTAURANTS--8.0%
IHOP Corp. * . . . . . . . . . . . . . . 90,900 $ 2,147,513
Mortons Restaurant Group Inc. * . . . . 128,700 2,171,812
Sonic Corp. * . . . . . . . . . . . . . 33,750 860,625
------------
5,179,950
------------
RETAIL--18.4%
Brookstone Inc. * . . . . . . . . . . . 46,800 491,400
Finlay Enterprises Inc. * . . . . . . . 86,700 1,343,850
Friedman's Inc. * . . . . . . . . . . . 155,800 2,298,050
General Nutrition Cos. Inc. * . . . . . 96,300 1,625,062
J. Baker Inc. . . . . . . . . . . . . . 307,700 1,634,656
Leslie's Poolmart * . . . . . . . . . . 26,300 338,613
Linens 'N Things Inc. * . . . . . . . . 116,000 2,276,500
Movado Group Inc. . . . . . . . . . . . 69,600 1,896,600
------------
11,904,731
------------
TRANSPORTATION--2.1%
Landstar Systems Inc. * . . . . . . . . 57,400 1,334,550
------------
TOTAL COMMON STOCK--
(Cost $59,042,129) . . . . . . . . . 59,997,844
------------
DEPOSITORY RECEIPTS--0.4%
TELECOMMUNICATIONS--0.4%
Vimple-Communications * . . . . . . . . 10,200 240,975
------------
TOTAL DEPOSITORY RECEIPTS--
(Cost $209,100) . . . . . . . . . . . 240,975
------------
PRINCIPAL
AMOUNT
SECURITY DESCRIPTION (000) VALUE
-------------------- ----- -----
SHORT TERM INVESTMENT--6.8%
REPURCHASE AGREEMENT--6.8%
State Street Bank and Trust Co.
6.250%, 01/02/1997, maturity value
of $4,412,532, dated 12/31/1996,
(Collateralized by $4,460,000 United
States Treasury Note, 6.000%,
5/31/1998, with a value
of $4,499,511). . . . . . . . . . . . $ 4,411 $ 4,411,000
------------
TOTAL SHORT TERM
INVESTMENT--(Cost $4,411,000) . . . . 4,411,000
------------
TOTAL INVESTMENTS--
(Cost $63,662,229)--100.0% . . . . . $ 64,649,819
------------
------------
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26
<PAGE>
PROTECTIVE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ------ -----
GOVERNMENT AND AGENCY SECURITIES--100.0%
FEDERAL AGENCIES--100.0%
Federal Farm Credit Bank
5.380%, 01/07/1997 . . . . . . . . . $300,000 $ 299,731
5.270%, 01/16/1997 . . . . . . . . . 300,000 299,341
5.400%, 01/22/1997 . . . . . . . . . 500,000 498,425
Federal Home Loan Bank
5.420%, 01/06/1997 . . . . . . . . . 100,000 99,925
5.240%, 01/24/1997 . . . . . . . . . 130,000 129,565
5.240%, 01/27/1997 . . . . . . . . . 500,000 498,108
5.580%, 01/27/1997 . . . . . . . . . 300,000 298,791
5.240%, 01/30/1997 . . . . . . . . . 840,000 836,454
5.340%, 02/18/1997 . . . . . . . . . 260,000 258,149
Federal Home Loan Mortgage
5.290%, 01/21/1997 . . . . . . . . . 600,000 598,237
Federal National Mortgage Assn.
5.370%, 01/14/1997 . . . . . . . . . 300,000 299,418
5.420%, 01/14/1997 . . . . . . . . . 375,000 374,266
5.330%, 01/16/1997 . . . . . . . . . 200,000 199,556
5.210%, 02/12/1997 . . . . . . . . . 100,000 99,392
5.240%, 03/06/1997 . . . . . . . . . 250,000 247,671
5.310%, 03/06/1997 . . . . . . . . . 315,000 312,026
United States Treasury Bills
4.600%, 01/09/1997 . . . . . . . . . 700,000 699,285
----------
TOTAL GOVERNMENT AND
AGENCY SECURITIES--(Cost $6,048,340) 6,048,340
----------
TOTAL INVESTMENTS--
(Cost $6,048,340)--100.0% $6,048,340
----------
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
27
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- -----------
<S> <C> <C>
ASSETS
Investments in securities, at value (Note B) . . . . . . . . . . . . . . . . . . . $36,794,136 $96,252,062
Investments in repurchase agreements (Note B). . . . . . . . . . . . . . . . . . . 0 0
Cash, including foreign currency at value. . . . . . . . . . . . . . . . . . . . . 76,841 31,742
Dividends receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 138,329
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638,813 733
Receivable for securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . 0 354,652
Receivable for currency sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 365,910
Unrealized appreciation on forward currency contracts (Note G) . . . . . . . . . . 485,229 246,419
Receivable for fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . 104,425 54,731
Foreign income tax reclaim receivable. . . . . . . . . . . . . . . . . . . . . . . 20,801 57,785
Receivable due from Protective Life (Note C) . . . . . . . . . . . . . . . . . . . 26,801 60,933
----------- -----------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,147,046 97,563,296
LIABILITIES
Unrealized depreciation on forward currency contracts (Note G) . . . . . . . . . . 266,191 289,496
Payable for securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . 0 588
Payable for variation margin . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Payable for currency purchased . . . . . . . . . . . . . . . . . . . . . . . . . . 0 366,353
Investment management fee payable (Note C) . . . . . . . . . . . . . . . . . . . . 34,907 87,820
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . . . . . . 49,519 49,888
Payable for fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . 121,712 33,534
----------- -----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472,329 827,679
----------- -----------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $37,674,717 $96,735,617
----------- -----------
----------- -----------
NET ASSETS
Paid-in capital (Note E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,825,417 $79,560,213
Undistributed (distributions in excess of) net investment
income (Note B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (57,056) 459,577
Accumulated net realized gain (loss) on
investments and foreign currency transactions . . . . . . . . . . . . . . . . . 81,574 362,439
Net unrealized appreciation (depreciation) of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604,111 16,396,157
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Foreign currency translations . . . . . . . . . . . . . . . . . . . . . . . . . 220,671 (42,769)
----------- -----------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $37,674,717 $96,735,617
----------- -----------
----------- -----------
NET ASSET VALUE PER SHARE
Offering and redemption price per share (based on
shares of capital stock outstanding,
par value $.001 per share). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.177 $ 12.865
Total shares outstanding at end of year. . . . . . . . . . . . . . . . . . . . . . 3,701,969 7,519,283
Cost of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,190,025 $79,855,905
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
28
<PAGE>
<TABLE>
<CAPTION>
CAPITAL GROWTH AND SELECT SMALL CAP MONEY
GROWTH FUND INCOME FUND EQUITY FUND EQUITY FUND MARKET FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (Note B) . $26,960,345 $195,913,333 $98,436,731 $60,238,819 $6,048,340
Investments in repurchase agreements (Note B). 3,397,000 13,759,000 3,071,000 4,411,000 0
Cash, including foreign currency at value. . . 691 631 323 977 81,286
Dividends receivable . . . . . . . . . . . . . 32,265 365,615 182,846 33,967 0
Interest receivable. . . . . . . . . . . . . . 590 2,389 533 766 0
Receivable for securities sold . . . . . . . . 69,374 697,740 0 97,425 0
Receivable for currency sold . . . . . . . . . 0 0 0 0 0
Unrealized appreciation on forward currency
contracts (Note G). . . . . . . . . . . . . 0 0 0 0 0
Receivable for fund shares sold. . . . . . . . 46,128 140,598 88,200 56,929 0
Foreign income tax reclaim receivable. . . . . 47 2,556 2,084 0 0
Receivable due from Protective Life (Note C) . 17,985 38,567 24,075 23,256 8,551
----------- ------------ ------------ ----------- ----------
TOTAL ASSETS. . . . . . . . . . . . . . . . 30,524,425 210,920,429 101,805,792 64,863,139 6,138,177
LIABILITIES
Unrealized depreciation on forward currency
contracts (Note G). . . . . . . . . . . . . 0 0 0 0 0
Payable for securities purchased . . . . . . . 158,234 70,279 0 319,058 0
Payable for variation margin . . . . . . . . . 29,164 0 36,455 0 0
Payable for currency purchased . . . . . . . . 0 0 0 0 0
Investment management fee payable (Note C) . . 19,923 139,423 68,213 43,085 3,314
Accounts payable and accrued expenses. . . . . 11,813 50,500 40,619 30,117 13,969
Payable for fund shares redeemed . . . . . . . 5,834 73,413 36,925 37,708 234
----------- ------------ ------------ ----------- ----------
TOTAL LIABILITIES . . . . . . . . . . . . . 224,968 333,615 182,212 429,968 17,517
----------- ------------ ------------ ----------- ----------
NET ASSETS. . . . . . . . . . . . . . . . $30,299,457 $210,586,814 $101,623,580 $64,433,171 $6,120,660
----------- ------------ ------------ ----------- ----------
----------- ------------ ------------ ----------- ----------
NET ASSETS
Paid-in capital (Note E) . . . . . . . . . . . $26,477,821 $171,374,846 $80,932,057 $62,596,570 $6,120,660
Undistributed (distributions in excess of)
net investment income (Note B). . . . . . . 0 0 0 268 0
Accumulated net realized gain (loss) on
investments and foreign currency
transactions. . . . . . . . . . . . . . . . (94,407) 4,051,568 794,675 848,743 0
Net unrealized appreciation (depreciation) of:
Investments . . . . . . . . . . . . . . . . 3,889,068 35,160,400 19,881,323 987,590 0
Futures . . . . . . . . . . . . . . . . . . 26,975 0 15,525 0 0
Foreign currency translations . . . . . . . 0 0 0 0 0
----------- ------------ ------------ ----------- ----------
NET ASSETS. . . . . . . . . . . . . . . . $30,299,457 $210,586,814 $101,623,580 $64,433,171 $6,120,660
----------- ------------ ------------ ----------- ----------
----------- ------------ ------------ ----------- ----------
NET ASSET VALUE PER SHARE
Offering and redemption price per share
(based on shares of capital stock
outstanding, par value $.001 per share) . . $ 12.647 $ 14.183 $ 15.437 $ 10.022 $ 1.000
Total shares outstanding at end of year. . . . 2,395,860 14,847,879 6,583,114 6,429,304 6,120,660
Cost of investments. . . . . . . . . . . . . . $26,468,277 $174,511,933 $ 81,626,408 $63,662,229 $6,048,340
</TABLE>
29
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- -----------
<S> <C> <C>
INVESTMENT INCOME
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,383,442 $ 185,793
Dividend income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 1,267,875
Foreign taxes withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,788) (163,441)
----------- -----------
TOTAL INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,357,654 1,290,227
EXPENSES
Investment management fee (Note C) . . . . . . . . . . . . . . . . . . . . . . . . 380,629 871,940
Custodian fees and expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,199 184,376
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,200 21,499
Printing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,960 7,027
Legal fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,299 5,856
Directors' fee (Note C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,375 4,216
Transfer agent fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,288 2,288
Miscellaneous expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 176
----------- -----------
Total operating expenses before reimbursement . . . . . . . . . . . . . . . . . 491,049 1,097,378
Expenses borne by Protective Life (Note C). . . . . . . . . . . . . . . . . . . (110,420) (225,438)
----------- -----------
NET EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,629 871,940
----------- -----------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,977,025 418,287
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FOREIGN CURRENCY,
OPTIONS AND FUTURES TRANSACTIONS
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 918,561 3,727,854
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . 481,271 154,420
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,396 (110,596)
----------- -----------
Total net realized gain . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,435,228 3,771,678
Change in unrealized appreciation (depreciation) of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (277,482) 9,314,829
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Foreign currency translations . . . . . . . . . . . . . . . . . . . . . . . . . 67,046 (89,819)
----------- -----------
Total change in unrealized appreciation (depreciation). . . . . . . . . . . . (210,436) 9,225,010
----------- -----------
NET REALIZED AND UNREALIZED GAIN. . . . . . . . . . . . . . . . . . . . . . . 1,224,792 12,996,688
----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,201,817 $13,414,975
----------- -----------
----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
30
<PAGE>
<TABLE>
<CAPTION>
CAPITAL GROWTH AND SELECT SMALL CAP MONEY
GROWTH FUND INCOME FUND EQUITY FUND EQUITY FUND MARKET FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest income. . . . . . . . . . . . . . . . . . . $ 141,189 $ 655,247 $ 120,376 $ 361,462 $ 280,005
Dividend income. . . . . . . . . . . . . . . . . . . 334,176 4,174,432 1,665,613 257,351 0
Foreign taxes withheld . . . . . . . . . . . . . . . (1,252) (8,576) (15,935) (1,783) 0
----------- ------------ ------------ ----------- ----------
TOTAL INVESTMENT INCOME . . . . . . . . . . . . . 474,113 4,821,103 1,770,054 617,030 280,005
EXPENSES
Investment management fee (Note C) . . . . . . . . . 161,938 1,325,914 632,296 446,552 31,585
Custodian fees and expenses. . . . . . . . . . . . . 29,401 65,232 47,282 42,255 26,129
Audit fee. . . . . . . . . . . . . . . . . . . . . . 10,998 20,500 23,499 18,998 5,000
Printing expense . . . . . . . . . . . . . . . . . . 985 15,061 6,657 5,516 794
Legal fee. . . . . . . . . . . . . . . . . . . . . . 822 12,551 5,549 4,595 661
Directors' fee (Note C). . . . . . . . . . . . . . . 589 9,037 3,997 3,309 476
Transfer agent fee . . . . . . . . . . . . . . . . . 2,284 2,287 2,287 2,287 2,284
Miscellaneous expense. . . . . . . . . . . . . . . . 25 377 165 139 18
----------- ------------ ------------ ----------- ----------
Total operating expenses before reimbursement . . 207,042 1,450,959 721,732 523,651 66,947
Expenses borne by Protective Life (Note C). . . . (45,104) (125,045) (89,436) (77,099) (35,362)
----------- ------------ ------------ ----------- ----------
NET EXPENSES. . . . . . . . . . . . . . . . . . 161,938 1,325,914 632,296 446,552 31,585
----------- ------------ ------------ ----------- ----------
NET INVESTMENT INCOME . . . . . . . . . . . . . 312,175 3,495,189 1,137,758 170,478 248,420
----------- ------------ ------------ ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FOREIGN CURRENCY,
OPTIONS AND FUTURES TRANSACTIONS
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . 243,508 16,534,076 2,937,542 7,907,243 0
Futures . . . . . . . . . . . . . . . . . . . . . 46,353 0 (34,854) 0 0
Foreign currency transactions . . . . . . . . . . 0 0 0 0 0
Options . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0
----------- ------------ ------------ ----------- ----------
Total net realized gain . . . . . . . . . . . . 289,861 16,534,076 2,902,688 7,907,243 0
Change in unrealized appreciation (depreciation) of:
Investments . . . . . . . . . . . . . . . . . . . 3,715,510 21,786,858 11,847,717 1,105,418 0
Futures . . . . . . . . . . . . . . . . . . . . . 37,400 0 15,525 0 0
Foreign currency translations . . . . . . . . . . 0 0 0 0 0
----------- ------------ ------------ ----------- ----------
Total change in unrealized appreciation
(depreciation) . . . . . . . . . . . . . . . 3,752,910 21,786,858 11,863,242 1,105,418 0
----------- ------------ ------------ ----------- ----------
NET REALIZED AND UNREALIZED GAIN. . . . . . . . 4,042,771 38,320,934 14,765,930 9,012,661 0
----------- ------------ ------------ ----------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS. . . . . . . . . . . . . . . . . . . $4,354,946 $41,816,123 $15,903,688 $9,183,139 $248,420
----------- ------------ ------------ ----------- ----------
----------- ------------ ------------ ----------- ----------
</TABLE>
31
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GLOBAL INCOME FUND INTERNATIONAL EQUITY FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/96 12/31/95 12/31/96 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . $ 1,977,025 $ 1,419,625 $ 418,287 $ 390,106
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . 918,561 890,583 3,727,854 (640,025)
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
Foreign currency transactions . . . . . . . . . . . . . . . . 481,271 149,263 154,420 1,671,359
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,396 0 (110,596) (357,171)
----------- ----------- ----------- -----------
Total net realized gain . . . . . . . . . . . . . . . . . . . 1,435,228 1,039,846 3,771,678 674,163
Change in unrealized appreciation (depreciation) of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . (277,482) 1,128,602 9,314,829 6,588,738
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
Foreign currency translations . . . . . . . . . . . . . . . . 67,046 94,458 (89,819) 161,660
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 250,336
----------- ----------- ----------- -----------
Total change in unrealized appreciation (depreciation). . . . (210,436) 1,223,060 9,225,010 7,000,734
----------- ----------- ----------- -----------
Net increase in net assets resulting from operations. . . . . 3,201,817 3,682,531 13,414,975 8,065,003
----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: (NOTE B)
Net investment income . . . . . . . . . . . . . . . . . . . . (1,977,025) (1,419,625) (38,556) (390,106)
In excess of net investment income. . . . . . . . . . . . . . (299,207) (828,216) 0 (1,766,850)
Net realized gains. . . . . . . . . . . . . . . . . . . . . . (594,964) (537,311) (1,983,461) 0
In excess of net realized gains . . . . . . . . . . . . . . . 0 0 0 0
----------- ----------- ----------- -----------
Total dividends and distributions to shareholders . . . . . . (2,871,196) (2,785,152) (2,022,017) (2,156,956)
FUND SHARE TRANSACTIONS (NOTE E) . . . . . . . . . . . . . . . 6,258,780 12,906,465 26,500,961 25,548,590
----------- ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS. . . . . . . . . . . . . . . . . 6,589,401 13,803,844 37,893,919 31,456,637
NET ASSETS
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 31,085,316 17,281,472 58,841,698 27,385,061
----------- ----------- ----------- -----------
END OF YEAR (1) . . . . . . . . . . . . . . . . . . . . . . . $37,674,717 $31,085,316 $96,735,617 $58,841,698
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
(1) Including undistributed (distributions in
excess of) net investment income. . . . . . . . . . . . . $ (57,056) $ (591,214) $ 459,577 $ (398,006)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
* For the period from June 13, 1995 (commencement of operations) through
December 31, 1995.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
32
<PAGE>
<TABLE>
<CAPTION>
CAPITAL GROWTH FUND GROWTH AND INCOME FUND SELECT EQUITY FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/96 12/31/95* 12/31/96 12/31/95 12/31/96 12/31/95
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . $ 312,175 $ 80,038 $ 3,495,189 $ 1,951,172 $ 1,137,758 $ 598,538
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . 243,508 (15,740) 16,534,076 4,484,478 2,937,542 1,136,257
Futures . . . . . . . . . . . . . . . . . . 46,353 32,639 0 0 (34,854) 0
Foreign currency transactions . . . . . . . 0 0 0 0 0 0
Options . . . . . . . . . . . . . . . . . . 0 0 0 0 0 0
----------- ----------- ------------ ------------ ------------ -----------
Total net realized gain . . . . . . . . . . 289,861 16,899 16,534,076 4,484,478 2,902,688 1,136,257
Change in unrealized appreciation
(depreciation) of:
Investments . . . . . . . . . . . . . . . . 3,715,510 173,558 21,786,858 14,188,139 11,847,717 8,369,198
Futures . . . . . . . . . . . . . . . . . . 37,400 (10,425) 0 0 15,525 0
Foreign currency translations . . . . . . . 0 0 0 0 0 0
Options . . . . . . . . . . . . . . . . . . 0 0 0 0 0 0
----------- ----------- ------------ ------------ ------------ -----------
Total change in unrealized appreciation
(depreciation) . . . . . . . . . . . . . . 3,752,910 163,133 21,786,858 14,188,139 11,863,242 8,369,198
----------- ----------- ------------ ------------ ------------ -----------
Net increase in net assets resulting
from operations. . . . . . . . . . . . . . 4,354,946 260,070 41,816,123 20,623,789 15,903,688 10,103,993
----------- ----------- ------------ ------------ ------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM: (NOTE B)
Net investment income . . . . . . . . . . . (312,175) (80,038) (3,495,189) (1,951,172) (1,137,758) (598,538)
In excess of net investment income. . . . . (3,999) 0 0 0 0 0
Net realized gains. . . . . . . . . . . . . (289,861) 0 (13,694,011) (3,237,795) (2,401,439) (839,755)
In excess of net realized gains . . . . . . (111,306) 0 0 0 0 0
----------- ----------- ------------ ------------ ------------ -----------
Total dividends and distributions to
shareholders . . . . . . . . . . . . . . . (717,341) (80,038) (17,189,200) (5,188,967) (3,539,197) (1,438,293)
FUND SHARE TRANSACTIONS (NOTE E) . . . . . . 15,945,890 10,535,930 57,883,907 70,336,044 32,535,620 30,340,320
----------- ----------- ------------ ------------ ------------ -----------
TOTAL INCREASE IN NET ASSETS. . . . . . . . 19,583,495 10,715,962 82,510,830 85,770,866 44,900,111 39,006,020
NET ASSETS
Beginning of year . . . . . . . . . . . . . 10,715,962 0 128,075,984 42,305,118 56,723,469 17,717,449
----------- ----------- ------------ ------------ ------------ -----------
END OF YEAR (1) . . . . . . . . . . . . . . $30,299,457 $10,715,962 $210,586,814 $128,075,984 $101,623,580 $56,723,469
----------- ----------- ------------ ------------ ------------ -----------
----------- ----------- ------------ ------------ ------------ -----------
(1) Including undistributed (distributions
in excess of) net investment income . . $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
----------- ----------- ------------ ------------ ------------ -----------
----------- ----------- ------------ ------------ ------------ -----------
</TABLE>
33
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL CAP EQUITY FUND MONEY MARKET FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/96 12/31/95 12/31/96 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . $ 170,478 $ 363,638 $ 248,420 $ 250,290
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . 7,907,243 140,108 0 0
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
Foreign currency translations . . . . . . . . . . . . . . . . 0 0 0 0
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
----------- ----------- ---------- ----------
Total net realized gain . . . . . . . . . . . . . . . . . . . 7,907,243 140,108 0 0
Change in unrealized appreciation (depreciation of):
Investments . . . . . . . . . . . . . . . . . . . . . . . . . 1,105,418 1,484,325 0 0
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
Foreign currency translations . . . . . . . . . . . . . . . . 0 0 0 0
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0
----------- ----------- ---------- ----------
Total change in unrealized appreciation (depreciation). . . . 1,105,418 1,484,325 0 0
----------- ----------- ---------- ----------
Net increase in net assets resulting from operations. . . . . 9,183,139 1,988,071 248,420 250,290
----------- ----------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: (NOTE B)
Net investment income . . . . . . . . . . . . . . . . . . . . (170,210) (363,638) (248,420) (250,290)
In excess of net investment income. . . . . . . . . . . . . . 0 0 0 (3)
Net realized gains. . . . . . . . . . . . . . . . . . . . . . (6,646,997) (140,108) 0 0
In excess of net realized gains . . . . . . . . . . . . . . . 0 (355,217) 0 0
----------- ----------- ---------- ----------
Total dividends and distributions to shareholders . . . . . . (6,817,207) (858,963) (248,420) (250,293)
FUND SHARE TRANSACTIONS (NOTE E) . . . . . . . . . . . . . . . 18,237,546 20,887,839 1,050,935 1,451,237
----------- ----------- ---------- ----------
TOTAL INCREASE IN NET ASSETS. . . . . . . . . . . . . . . . . 20,603,478 22,016,947 1,050,935 1,451,234
NET ASSETS
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 43,829,693 21,812,746 5,069,725 3,618,491
----------- ----------- ---------- ----------
END OF YEAR (1) . . . . . . . . . . . . . . . . . . . . . . . $64,433,171 $43,829,693 $6,120,660 $5,069,725
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
(1) Including undistributed (distributions in
excess of) net investment income. . . . . . . . . . . . . $ 268 $ 0 $ 0 $ 0
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
34
<PAGE>
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
35
<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
1/1/96 - 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
1/1/96 - 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
1/1/96 - 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
1/1/96 - 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)
- ----------------------------------------------------------------------------------------------------------------------------------
Select Equity Fund
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
1/1/96 - 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
1/1/96 - 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 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%; Select 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%; Select 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%; Select Equity Fund, $0.055 and 1.81%; Small
Cap Equity Fund, $0.009 and 1.62%; and Money Market Fund, $0.018 and 2.24%,
respectively.
(4) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the
last day of each period reported. Distributions are assumed, for the
purposes of this calculation, to be reinvested at the net asset value per
share on the respective payment dates of each Fund. Total return for a
period of less than one year is not annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
36
<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)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Global Income Fund
1/1/96 - 12/31/96 . . . $0.000 $(0.835) $10.177 9.48% $37,675 1.10% 5.71% 214% N/A
1/1/95 - 12/31/95 . . . 0.000 (1.059) 10.074 16.94 31,085 1.10 5.94 295 --
3/14/94 - 12/31/94 (1). 0.000 (0.367) 9.558 (0.74) 17,281 1.10 (5) 5.58 (5) 210 (6) --
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Fund
1/1/96 - 12/31/96 . . . 0.000 (0.275) 12.865 19.00 96,736 1.10 0.52 38 .032
1/1/95 - 12/31/95 . . . 0.000 (0.420) 11.045 19.66 58,842 1.10 0.96 40 --
3/14/94 - 12/31/94 (1). 0.000 0.000 9.581 (4.18) 27,385 1.10 (5) 1.25 (5) 33 (6) --
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Growth Fund
1/1/96 - 12/31/96 . . . (0.048) (0.309) 12.647 22.05 30,299 0.80 1.54 35 .058
6/13/95 - 12/31/95 (2). 0.000 (0.080) 10.613 6.93 10,716 0.80 (5) 2.57 (5) 5 (6) --
- ------------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund
1/1/96 - 12/31/96 . . . 0.000 (1.267) 14.183 26.82 210,587 0.80 2.11 49 .058
1/1/95 - 12/31/95 . . . 0.000 (0.564) 12.197 32.29 128,076 0.80 2.36 55 --
3/14/94 - 12/31/94 (1). (0.008) (0.153) 9.661 (1.86) 42,305 0.80 (5) 2.21 (5) 36 (6) --
- ------------------------------------------------------------------------------------------------------------------------------------
Select Equity Fund
1/1/96 - 12/31/96 . . . 0.000 (0.558) 15.437 21.94 101,624 0.80 1.44 34 .054
1/1/95 - 12/31/95 . . . 0.000 (0.343) 13.109 36.73 56,723 0.80 1.69 60 --
3/14/94 - 12/31/94 (1). (0.002) (0.215) 9.839 0.53 17,717 0.80 (5) 2.44 (5) 56 (6) --
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Equity Fund
1/1/96 - 12/31/96 . . . 0.000 (1.193) 10.022 20.22 64,433 0.80 0.31 100 .049
1/1/95 - 12/31/95 . . . (0.077) (0.187) 9.345 6.46 43,830 0.80 1.09 60 --
3/14/94 - 12/31/94 (1). (0.023) (0.062) 8.951 (9.87) 21,813 0.80 (5) 1.07 (5) 17 (6) --
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund
1/1/96 - 12/31/96 . . . 0.000 (0.047) 1.000 4.82 6,121 0.60 4.72 N/A N/A
1/1/95 - 12/31/95 . . . 0.000 (0.052) 1.000 5.32 5,070 0.60 5.19 N/A --
3/14/94 - 12/31/94 (1). 0.000 (0.031) 1.000 3.14 3,618 0.60 (5) 3.80 (5) N/A --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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.
37
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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, Select Equity Fund, Small Cap Equity Fund and Money
Market Fund (individually a "Fund" and collectively the "Funds"). The Company
had no operations prior to March 2, 1994, other than those relating to
organizational matters. The initial capital contribution of $60,000, $10,000
per class, resulting in 1,000 shares being issued by the Global Income Fund,
International Equity Fund, Growth and Income Fund, Select Equity Fund and Small
Cap Equity Fund and 10,000 shares being issued by the Money Market Fund, was
provided on March 2, 1994 by Protective Life Insurance Company. The Company
commenced investment operations on March 14, 1994. On June 13, 1995 the Capital
Growth Fund commenced investment operations by issuing 100,000 shares of stock
to Protective Life Insurance Company ("Protective Life") in exchange for an
initial contribution of $1,000,000.
The Company offers each class of its stock to 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.
38
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
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.
39
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
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, Select 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%; Select Equity
Fund, .80%; Small Cap Equity Fund, .80%; and Money Market Fund, .60%.
In order to limit expenses, Protective Life has voluntarily undertaken to pay
certain operating expenses of the Company or of any Fund to the extent that such
expenses (excluding brokerage or other portfolio transaction expenses or
expenses of litigation, indemnification, taxes or other extraordinary expenses,
as accrued for each Fund) exceed the following percentages of that Fund's
estimated average daily net assets on an annualized basis: Global Income Fund,
1.10%; International Equity Fund, 1.10%; Capital Growth Fund, .80%; Growth and
Income Fund, .80%; Select Equity Fund, .80%; Small Cap Equity Fund, .80%; and
Money Market Fund, .60%. Protective Life may terminate its obligations to pay
such expenses upon 120 days notice to the Company.
40
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
Goldman Sachs Asset Management acts as the investment adviser (the "Adviser") of
Capital Growth Fund, Growth and Income Fund, Money Market Fund, Select Equity
Fund and Small Cap Equity Fund. Goldman Sachs Asset Management-International
acts as the Adviser to Global Income Fund and International Equity Fund. Each
Adviser has entered into an investment advisory agreement for each Fund with the
Investment Manager under which the Adviser manages the investment portfolios of
the Funds of which it is Adviser. As compensation for its services, the
Advisers receive a monthly fee from the Investment Manager based on the average
daily net assets of each Fund at the following annual rates: Global Income Fund
and International Equity Fund, .40% of the first $100 million, .30% of the next
$100 million, and .25% of assets in excess of $200 million; Capital Growth
Fund, Growth and Income Fund, Select 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 year ended December 31, 1996, 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 . . . . . . . . . . . . . $ 49,589,651 $14,574,059 $50,702,520 $11,485,465
International Equity Fund. . . . . . . . . . 50,605,453 0 28,657,447 0
Capital Growth Fund. . . . . . . . . . . . . 21,028,505 98,790 6,068,785 160,000
Growth and Income Fund . . . . . . . . . . . 121,549,411 0 74,921,467 0
Select Equity Fund . . . . . . . . . . . . . 54,746,265 79,568 26,153,024 0
Small Cap Equity Fund. . . . . . . . . . . . 64,954,592 0 49,360,688 0
</TABLE>
Purchases and sales, including maturities, of short-term securities by the Money
Market Fund for the year ended December 31, 1996 were $51,353,764 and
$50,660,762, respectively.
The identified cost of investments in securities owned by each Fund for federal
income tax purposes and their respective gross unrealized appreciation and
depreciation at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
IDENTIFIED GROSS UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
---------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Global Income Fund . . . . . . . . . . . . . $ 36,210,222 $ 898,024 $ 314,110 $ 583,914
International Equity Fund. . . . . . . . . . 79,882,085 19,968,226 3,598,249 16,369,977
Capital Growth Fund. . . . . . . . . . . . . 26,499,505 4,224,520 386,680 3,857,840
Growth and Income Fund . . . . . . . . . . . 174,614,480 37,312,187 2,254,334 35,057,853
Select Equity Fund . . . . . . . . . . . . . 81,640,681 20,719,913 852,863 19,867,050
Small Cap Equity Fund. . . . . . . . . . . . 63,662,229 8,425,324 7,437,734 987,590
Money Market Fund. . . . . . . . . . . . . . 6,048,340 0 0 0
</TABLE>
For the year ended December 31, 1996, Goldman Sachs, the Funds' Advisor, earned
approximately $2,000, $10,000, $21,000, and $4,000 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.
41
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE E - SHAREHOLDER TRANSACTIONS
The authorized capital stock of the Company consists of 1 billion shares, par
value $.001 per share. 700 million of the authorized shares have been divided
into, and may be issued in, seven designated classes as follows: Global Income
Fund, 100 million shares; International Equity Fund, 100 million shares; Capital
Growth Fund, 100 million shares; Growth and Income Fund, 100 million shares;
Select Equity Fund, 100 million shares; Small Cap Equity Fund, 100 million
shares; and Money Market Fund, 100 million shares.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
GLOBAL INCOME FUND GLOBAL INCOME FUND
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . . . 745,616 $ 7,605,827 1,255,603 $12,700,315
Shares issued to shareholders in
reinvestment of dividends. . . . . . . . . 283,177 2,871,192 276,359 2,785,152
Shares redeemed or exchanged out . . . . . . (412,374) (4,218,239) (254,564) (2,579,002)
------------ ------------ ----------- -----------
Net increase . . . . . . . . . . . . . . . . 616,419 $ 6,258,780 1,277,398 $12,906,465
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
<CAPTION>
INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY FUND
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . . . 2,476,463 $ 29,939,941 2,601,322 $26,748,946
Shares issued to shareholders in
reinvestment of dividends. . . . . . . . . 159,256 2,022,021 195,153 2,156,956
Shares redeemed or exchanged out . . . . . . (443,758) (5,461,001) (327,344) (3,357,312)
------------ ------------ ----------- -----------
Net increase . . . . . . . . . . . . . . . . 2,191,961 $ 26,500,961 2,469,131 $25,548,590
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
<CAPTION>
CAPITAL GROWTH FUND CAPITAL GROWTH FUND
YEAR ENDED JUNE 13, 1995* TO
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . . . 1,471,196 $ 16,890,584 1,020,331 $10,646,035
Shares issued to shareholders in
reinvestment of dividends. . . . . . . . . 56,365 717,339 7,542 80,037
Shares redeemed or exchanged out . . . . . . (141,415) (1,662,033) (18,159) (190,142)
------------ ------------ ----------- -----------
Net increase . . . . . . . . . . . . . . . . 1,386,146 $ 15,945,890 1,009,714 $10,535,930
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
* Commencement of investment operations
<CAPTION>
GROWTH AND INCOME FUND GROWTH AND INCOME FUND
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . . . 4,215,959 $ 55,439,807 6,106,217 $69,914,606
Shares issued to shareholders in
reinvestment of dividends. . . . . . . . . 1,221,625 17,189,194 431,665 5,188,967
Shares redeemed or exchanged out . . . . . . (1,090,605) (14,745,094) (415,846) (4,767,529)
------------ ------------ ----------- -----------
Net increase . . . . . . . . . . . . . . . . 4,346,979 $ 57,883,907 6,122,036 $70,336,044
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
42
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
<CAPTION>
SELECT EQUITY FUND SELECT EQUITY FUND
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . . . 2,458,365 $ 35,167,409 2,599,094 $31,044,432
Shares issued to shareholders in
reinvestment of dividends. . . . . . . . . 225,190 3,539,193 109,717 1,438,293
Shares redeemed or exchanged out . . . . . . (427,469) (6,170,982) (182,611) (2,142,405)
------------ ------------ ----------- -----------
Net increase . . . . . . . . . . . . . . . . 2,256,086 $ 32,535,620 2,526,200 $30,340,320
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
<CAPTION>
SMALL CAP EQUITY FUND SMALL CAP EQUITY FUND
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . . . 1,711,568 $ 18,377,940 2,572,788 $23,875,696
Shares issued to shareholders in
reinvestment of dividends. . . . . . . . . 690,344 6,817,211 91,938 858,963
Shares redeemed or exchanged out . . . . . . (662,561) (6,957,605) (411,612) (3,846,820)
------------ ------------ ----------- -----------
Net increase . . . . . . . . . . . . . . . . 1,739,351 $ 18,237,546 2,253,114 $20,887,839
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
<CAPTION>
MONEY MARKET FUND MONEY MARKET FUND
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares sold or exchanged in. . . . . . . . . 10,940,141 $ 10,940,141 8,282,138 $ 8,282,138
Shares issued to shareholders in
reinvestment of dividends. . . . . . . . . 249,104 249,104 249,594 249,594
Shares redeemed or exchanged out . . . . . . (10,138,310) (10,138,310) (7,080,495) (7,080,495)
------------ ------------ ----------- -----------
Net increase . . . . . . . . . . . . . . . . 1,050,935 $ 1,050,935 1,451,237 $ 1,451,237
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
NOTE F- TAX INFORMATION NOTICE
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Funds for its fiscal year ended December 31,
1996; which designates long term capital gain dividends paid.
LONG TERM
CAPITAL GAIN
DIVIDENDS PAID
--------------
Global Income Fund . . . . . . . . . . . . . . . . . . . . . $116,486
International Equity Fund. . . . . . . . . . . . . . . . . . 983,872
Capital Growth Fund. . . . . . . . . . . . . . . . . . . . . 80,173
Growth and Income Fund . . . . . . . . . . . . . . . . . . . 5,648,102
Select Equity Fund . . . . . . . . . . . . . . . . . . . . . 1,692,447
Small Cap Equity Fund. . . . . . . . . . . . . . . . . . . . 595,694
43
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE G - FORWARD FOREIGN CURRENCY CONTRACTS
At December 31, 1996, 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 12/31/96 UNREALIZED
ON ORIGINATION U.S. $ APPRECIATION
FOREIGN CURRENCY SALE CONTRACTS DATE VALUE (DEPRECIATION)
- ------------------------------- -------------- -------- --------------
<S> <C> <C> <C>
AUD, expiring 01/30/1997 (1 contract). . . . . . . . . . . . . . $ 1,560,261 $ 1,553,687 $ 6,574
CAD, expiring 02/19/1997 (1 contract). . . . . . . . . . . . . . 838,786 829,227 9,559
DEM, expiring 01/29/1997-02/27/1997 (5 contracts). . . . . . . . 6,883,858 6,861,294 22,564
ESP, expiring 01/16/1997 (1 contract). . . . . . . . . . . . . . 930,244 926,222 4,022
GBP, expiring 02/14/1997 (2 contracts) . . . . . . . . . . . . . 2,117,522 2,197,580 (80,058)
IEP, expiring 01/08/1997 (1 contract). . . . . . . . . . . . . . 854,943 906,242 (51,299)
ITL, expiring, 01/29/1997 (3 contracts). . . . . . . . . . . . . 2,049,292 2,068,009 (18,717)
JPY, expiring 01/24/1997 (2 contracts) . . . . . . . . . . . . . 3,298,170 3,171,155 127,015
NLG, expiring 01/09/1997 (1 contract). . . . . . . . . . . . . . 837,575 827,822 9,753
SEK, expiring 01/28/1997 (1 contract). . . . . . . . . . . . . . 586,298 567,652 18,646
----------- ----------- --------
19,956,949 19,908,890 48,059
--------
Offsetting forward currency contracts not yet settled
(12 contracts) 170,979
--------
NET UNREALIZED APPRECIATION $219,038
--------
--------
INTERNATIONAL EQUITY FUND U.S. $ COST 12/31/96 UNREALIZED
ON ORIGINATION U.S. $ APPRECIATION
FOREIGN CURRENCY PURCHASE CONTRACTS DATE VALUE (DEPRECIATION)
- ------------------------------- -------------- -------- --------------
<S> <C> <C> <C>
DEM, expiring 02/27/1997 (2 contracts) . . . . . . . . . . . . . $ 4,656,415 $ 4,514,145 $(142,270)
FOREIGN CURRENCY SALE CONTRACTS
DEM, expiring 01/29/1997 (1 contract). . . . . . . . . . . . . . 5,133,204 5,173,642 (40,438)
HKD, expiring 08/08/1997 (4 contracts) . . . . . . . . . . . . . 5,402,975 5,408,097 (5,122)
----------- ----------- ---------
10,536,179 10,581,739 (45,560)
Offsetting forward currency contracts not yet settled
(4 contracts) 144,753
---------
NET UNREALIZED DEPRECIATION $(43,077)
--------
--------
</TABLE>
GLOSSARY OF TERMS
AUD - Australian Dollar
CAD - Canadian Dollar
DEM - Deutsche Mark
ESP - Spanish Peseta
GBP - Great British Pound
HKD - Hong Kong Dollar
JPY - Japanese Yen
NLG - Netherlands Guilder
IEP - Irish Punt
ITL - Italian Lira
SEK - Swedish Krona
USD - United States Dollar
44
<PAGE>
PROTECTIVE INVESTMENT COMPANY
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND INVESTORS OF PROTECTIVE INVESTMENT COMPANY:
We have audited the accompanying statements of assets and liabilities of
Protective Investment Company (the "Company"), consisting of Global Income Fund,
International Equity Fund, Capital Growth Fund, Growth and Income Fund, Select
Equity Fund, Small Cap Equity Fund and Money Market Fund, including the
schedules of investments, as of December 31, 1996, and the related statements of
operations, the statements of changes in net assets and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentations. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Protective Investment Company as of December 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for each
of the periods indicated therein, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 10, 1997
45
<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
_______________
INVESTMENT MANAGER
Investment Distributors Advisory Services, Inc.
_______________
INVESTMENT ADVISERS
Goldman Sachs Asset Management
Goldman Sachs Asset Management International
_______________
- -------------------------------------------------------------------------------
The information contained in this report is intended for general informational
purposes only. This report is not authorized for distribution to prospective
investors unless preceded or accompanied by current Company and Separate Account
prospectuses which contain important information concerning the Company, the
Separate Account and its current public offering of variable annuity contracts.
- -------------------------------------------------------------------------------
46
