<PAGE>
PROTECTIVE INVESTMENT COMPANY
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
PERFORMANCE AND PORTFOLIO REVIEW BY FUND
PROTECTIVE GLOBAL INCOME FUND
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
PERFORMANCE REVIEW -- Over the 12-month period ended December 31, 1998, the Fund
generated a 10.40% cumulative total return. Over the same time period, the
Fund's benchmark, the J.P. Morgan Global Government Bond Index (hedged into U.S.
dollars), generated a cumulative total return of 11.46%.
The key factor behind the Fund's slight underperformance relative to its
benchmark was the Fund's overweight position in New Zealand bonds during the
first quarter of 1998. Offsetting this, however, was a generally positive view
on bond markets as they rallied, and an overweight UK gilt position versus
German bunds with the 10-year yield spread tightening to around .80% by period
end.
PORTFOLIO HIGHLIGHTS
- - DANISH GOVERNMENT BONDS -- The flight to quality through the recent
sell-off in perceived higher risk assets also affected the Danish
government bond market, and management used this as an opportunity to
increase this position. The team expects Denmark to join the euro within
the next three years. Moreover, the Danish Central Bank appears to be
committed to keeping the krona closely pegged with the deutschemark/euro.
- - UK BONDS -- After the extreme weakness in the export and manufacturing
sectors, management has finally begun to see weakness in the consumer
sector; for example, consumer confidence and retail sales have both
markedly declined recently. While the Bank of England has already eased
rates, management expects 50 to 75 basis points of further rate cuts
through the first half of 1999 as the consumer sector continues to
deteriorate. This presents a favorable scenario for UK bonds.
- - AUSTRALIAN BONDS -- During the period, the Fund held an overweight
position in Australian bonds since, at one stage, the market was
discounting a rate hike as the currency weakened. Management viewed
this as a temporary phenomenon prompted by the general weakness in Asian
economies and did not believe there was sufficient evidence to justify a
rate hike. As a result, the team purchased Australian bonds at spreads
close to 1.0% to equivalent-maturity U.S. bonds. The reduction of risk
premia toward the end of the reporting period also translated into a
stronger Australian dollar and an unwinding of rate hike expectations. This
brought the Australian/U.S. spreads in by over .70%, where the Fund took
profits.
OUTLOOK -- Conditions remain favorable for bond markets globally, with
inflationary pressures continuing to decline and economic conditions remaining
sluggish. Furthermore, the economic problems facing Brazil may intensify, which
could cause a further bout of economic weakness. In the U.S., economic data
remains buoyant with housing activity and consumer confidence at historically
high levels. However, the management team expects that Treasuries will be
supported by a favorable inflationary environment and by the expectations that
the weak global economy will ultimately impact on the U.S. economy--especially
if conditions were to deteriorate in South America.
Within the EMU region, weak manufacturing activity, high levels of unemployment,
deteriorating business and consumer confidence, and falling commodity prices are
all counteracting inflationary pressures that are beneficial for bonds.
Similarly, in the UK, weakness in the manufacturing and export sectors, as well
as extremely poor business confidence, should place downward pressure on UK bond
yields.
The management team believes the rise in yields in Japan has been caused by
supply side fears, and not an improvement in Japan's economic outlook. The
steepness of the yield curve and the magnitude of the fall mean that the
argument for underweighting Japanese bonds has weakened in recent days, and it
is possible that Japanese bonds will remain firm in the short term.
1
Global Income Fund Management Team
January 29, 1999
<PAGE>
PROTECTIVE GLOBAL INCOME FUND
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
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]
<TABLE>
<CAPTION>
4/1/94(b) 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
Protective Global Income Fund $10,000 $10,014 $11,711 $12,820 $14,093 $15,610
J.P. Morgan Global Government
Bond Index (Hedged) $10,000 $ 9,911 $11,684 $12,693 $14,071 $15,559
</TABLE>
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1998 December 31, 1998 December 31, 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Protective Global Income Fund 10.40% 54.24% (a) 9.44% (a)
J.P. Morgan Global Government
Bond Index (Hedged) 11.46% 56.10% (b) 9.71% (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.
<TABLE>
<CAPTION>
BOND ALLOCATION AS OF DECEMBER 31, 1998*
--------------------------------------------------------------------------------------
PERCENTAGE OF
COUNTRY OF ISSUER NET ASSETS
--------------------------------------------------------------------------------------
<S> <C>
United States 30.1%
United Kingdom 14.6
Germany 11.2
Japan 9.7
Italy 8.9
Denmark 4.9
Canada 3.4
Spain 3.0
France 2.1
The Netherlands 1.7
--------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
PERFORMANCE REVIEW -- Over the 12-month period ended December 31, 1998, the Fund
generated a 20.65% cumulative total return. Over the same time period, the
Fund's benchmark, the FT/S&P-Actuaries Europe & Pacific ("Europac") Index
unhedged, generated a cumulative total return of 19.30%.
The Fund outperformed its benchmark for most of the year. However, in the final
three months of the period under review, stock selection in both Japan and
Europe slightly hurt performance. In Japan, the Fund suffered from overweight
positions in a number of export oriented companies within the technology sector.
All of these stocks suffered from unprecedented Yen strength in the month of
October. Also in the fourth quarter, the Fund was somewhat disadvantaged by its
lack of exposure to Japanese banks, which performed strongly in October,
although the underweight bank position, in general, benefited the Fund over the
year.
In Europe, strong first half performance was negatively impacted by the
increased volatility in the markets in September and October. However, the
positioning towards strong business franchises in sectors which we believe offer
good structural growth prospects, strong cash generation and reinvestment
opportunities allowed the Fund to benefit from the substantial market turnaround
of November and December. Specifically, the business services sector and the
telecommunications sector continue to feature prominently in the Fund. Although
the financials sector is facing unprecedented change and consolidation with the
advent of the euro, we also see a number of competitive threats facing the
sector. Accordingly, the Fund is only neutrally weighted in European banks, with
exposure to selected banks possessing strong franchise value.
PORTFOLIO HIGHLIGHTS
- - TNT POST GROUP -- TNT Post Group is one of the most efficient postal groups
in the world. The company is very pro-active in reinvesting its cash flow
in higher value-added logistics and express businesses, positioning itself
at the forefront of postal and information delivery in the move towards
European postal deregulation.
- - NTT CORP. -- NTT Corp. is a dominant player in Japan's fast-growing
cellular market. The company listed in October as part of the
government's attempt to further deregulate telephone and telecommunications
industries. Its earnings before depreciation cost are generally expected to
double over the next seven years, at a much faster rate than most domestic
companies. Based on this profit growth, management believes NTT Corp's IPO
price was cheap compared to its international peers.
- - VIVENDI -- Vivendi is a French utility that uses the cash generative
attributes of its water and power provision businesses to reinvest in
telecommu-nications and media. In telecommunications, it owns the second
largest mobile phone company in France, as well as a fixed line network. In
media, it runs Canal + and Havas, and has recently purchased Cendent's
software business.
OUTLOOK
- - EUROPE -- The management team believes that, with the advent of the single
currency, the euro, prospects for equities are bright. The team believes
that the consolidation process within industries will continue unabated
and, as companies strive to lower their costs and to dominate in Europe,
investors will benefit.
- - JAPAN -- Japan's economy is expected to contract more than 2% over the
fiscal year ending March 1999, and lackluster performance is expected to
continue into the following fiscal year. Faced with weak domestic demand,
the government is expected to implement stimulatory economic packages,
including tax cuts, which the management team believes could have a
positive impact on bottom-line earnings next year given the continued
cost-cutting efforts of Japanese companies.
- - ASIA -- Macro risks going forward include a slowing of the U.S. and
European economies and a possible renewed weakness in the Yen. The
management team also believes that investors will begin to focus on the
timing of economic recoveries in Asian countries, as well as a possible
earnings recovery for many companies. Therefore, bottom-up stock
selectivity will become more important in the coming year, since not all
companies or sectors will participate equally in the economic recovery. The
team intends to continue its focus on finding companies whose earnings it
believes are likely to grow sharply as these economies recover.
3
Goldman Sachs International Equity Management Team
January 29, 1999
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
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]
<TABLE>
<CAPTION>
4/1/94(b) 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
Protective International Equity Fund 10,000 9,793 11,718 13,949 14,565 17,572
Financial Times/S&P Actuaries Europe
& Pacific Index (Unhedged ) 10,000 10,051 11,121 11,768 11,741 14,167
</TABLE>
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1998 December 31, 1998 December 31, 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Protective International Equity Fund 20.65% 71.90% (a) 11.94% (a)
Financial Times/S&P Actuaries Europe
& Pacific Index (Unhedged ) 19.30% 41.67% (b) 7.52% (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.
<TABLE>
<CAPTION>
TOP 10 PORTFOLIO HOLDINGS AS OF DECEMBER 31, 1998*
----------------------------------------------------------------------------------------------
PERCENTAGE OF
COMPANY COUNTRY LINE OF BUSINESS NET ASSETS
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank of Ireland Ireland Commercial Banks 3.4%
TNT Post Group N.V. The Netherlands Business Services 3.2
Rentokil Group PLC United Kingdom Business Services 3.2
Wolters Kluwer N.V. The Netherlands Broadcast Media 2.9
Dexia France France Financial Services 2.8
Verenigde Nederlandse The Netherlands Publishing 2.7
Telecom Italia Italy Telephone 2.6
Glaxco Wellcome PLC United Kingdom Pharmaceuticals 2.5
Elf Aquitaine SA France Chemicals 2.5
Misys PLC United Kingdom Business Services 2.5
----------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
PERFORMANCE REVIEW -- Over the 12-month period ended December 31, 1998, the Fund
generated a 34.76% cumulative total return. Over the same time period, the
Fund's benchmark, the Standard & Poor's 500 Index (with dividends reinvested),
generated a cumulative total return of 28.57%.
Throughout the review period, in a market that rewarded consistency and
sustainability of above-average earnings growth, the Fund benefited from the
management team's focus on companies with enduring competitive advantages.
PORTFOLIO HIGHLIGHTS
- - WARNER-LAMBERT, PFIZER, and BRISTOL MYERS SQUIBB--The Fund's pharmaceutical
holdings have recently been the biggest contributors to positive
performance, as the team believes these stable, consistent growers
continued to represent a safe haven in an uncertain market environment. In
companies such as Warner-Lambert, Pfizer and Bristol Myers Squibb, the team
finds common characteristics which form the basis of long-term strategic
advantage. These companies benefit from favorable (aging) population
demographics in the U.S. and abroad, as well as the newly reformed FDA
approval process.
- - MICROSOFT, CISCO, INTEL, EMC CORP. and AMERICA ONLINE--The Fund's
technology holdings have performed strongly. Management underweights
technology broadly as it feels that short-product lifecycles, rapid
commoditization and short operating histories do not make many technology
companies favorable long-term investments.
However, the team has found a few companies in this sector that fit its criteria
for long-term growth. Management believes each one of its technology stocks has
significant lasting competitive advantages over its competitors that will enable
it to retain its leadership position. Microsoft, Cisco, Intel and EMC Corp. are
some of these companies that are strategically positioned to continue to
generate consistent long-term growth. These companies are technology-oriented,
but have recurring revenue streams and dominant market shares. The team also
initiated a position in America Online, as it believes the company fits its
criteria. America Online benefits from the recurring revenue it generates from
subscriptions, as well as market dominance for internet users.
OUTLOOK -- While the Fund's management team neither makes nor relies on economic
forecasts to make investment decisions, it is generally bullish on the U.S.
economy. Over the last decade, global communication has increased, a result of
significant technological advances as well as generally stable political
conditions worldwide. The management team believes that this trend, combined
with favorable demographic trends (such as the aging of the Baby Boom generation
and the spread of capitalism) will benefit U.S. growth companies over the long
term. More fundamentally, though, the team continues to focus on the core
business characteristics which it believes provide a foundation for long-term
growth, such as strength of franchise, quality of management, and free cash
flow, along with favorable demographic trends. The team believes that the
enduring competitive advantages of the companies it owns - based on the criteria
mentioned above - will have the potential to withstand even an uncertain market
environment.
5
Growth Equity Management Team
January 29, 1999
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
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]
<TABLE>
<CAPTION>
6/13/95 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C>
Protective Capital Growth Fund $10,000 $10,693 $13,051 $17,564 $23,688
S&P 500 Index (with income reinvested) $10,000 $11,626 $14,293 $19,060 $24,542
</TABLE>
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1998 December 31, 1998 (a) December 31, 1998 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Protective Capital Growth Fund 34.76% 136.68% 27.44%
S&P 500 Index (with income reinvested) 28.57% 145.42% 28.74%
</TABLE>
(a) From the commencement of investment operations on June 13, 1995.
<TABLE>
<CAPTION>
TOP 10 PORTFOLIO HOLDINGS AS OF DECEMBER 31, 1998*
--------------------------------------------------------------------------------------------------------
PERCENTAGE OF
COMPANY LINE OF BUSINESS NET ASSETS
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Microsoft Corp. Computer Software & Services 3.0%
AES Corp. Electric Utilities 2.6
Pfizer, Inc. Drugs & Health Care 2.5
Bristol Myers Squibb Co. Drugs & Health Care 2.5
Federal Home Loan Mortgage Corp. Financial Services 2.4
Tele-Communications, Inc. Telecommunications 2.4
General Electric Corp. Diversified Manufacturing 2.3
BankAmerica Corp. Banks 2.2
CBS Corp. Broadcast Media 2.2
Federal National Mortgage Assn. Financial Services 2.1
--------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
PERFORMANCE REVIEW -- Over the 12-month period ended December 31, 1998, the Fund
declined 2.92%. Over the same time period, the Fund's benchmark, the Standard &
Poor's (S&P) 500 Index (with dividends reinvested), generated a cumulative total
return of 28.57%.
During the third quarter of 1998, as the S&P 500 Stock Index demonstrated an
atypically high level of volatility due to global economic uncertainties, many
investors sought the security and quality of Treasuries while selling the
perceived uncertainty of stocks. Those who continued to invest in stocks in this
risk-averse environment overwhelmingly favored the quality and perceived safety
of blue-chip, large cap, growth-oriented industry leaders. In this environment,
value stocks significantly underperformed large cap growth stocks.
The Growth and Income Fund invests primarily in companies whose stock prices may
be trading at a discount to the companies intrinsic values because of
uncertainty or pessimism in the marketplace. As with many value funds, the
short-term performance of the Growth and Income Fund suffered in this market
environment.
Also hurting the Fund's performance over the period was the Fund's lack of
exposure to the narrow leadership of the market. On a relative basis,
performance was hurt by what the Fund did not own, as the market's continued
rapid ascent was led mainly by large-cap growth stocks and, in particular, high
price/earnings and price/book value technology stocks. For example, in 1998, the
five best-performing stocks created 24% of the total S&P 500 Index return, and
the largest 50 stocks generated approximately 70% of the 1998 total return. More
specifically, mega-cap growth stocks led the pack: the S&P 500/BARRA Growth
Index returned 42.2% for the year, while the S&P 500/Barra Value Index returned
14.7%.
INVESTMENT STRATEGY UPDATE
During the period, management took steps to improve the Fund's level of
diversification and liquidity by increasing the number of holdings in the Fund's
portfolio and its concentration in the large-cap market segment (companies whose
capitalizations are greater than $5 billion), and by reducing the Fund's sector
concentrations.
PORTFOLIO HIGHLIGHTS
- - AETNA INC. -- Aetna is the largest health benefit provider in the U.S. The
Company also offers various insurance and financial services products
throughout the U.S. and international markets. While Aetna suffered through
the cyclical downturn with many of its competitors, management believed,
through its diversity of earnings, a dynamic capital allocation and the
downsizing of non-profitable businesses such as Medicare, in the company's
strong position in the event of a recovery of the healthcare sector. As
management is now seeing signs of a recovery, the team believes that
Aetna's position remains solid.
- - UNICOM CORP. -- Unicom is an electric utility serving the northern third of
Illinois; it is the largest nuclear utility, operating 12 nuclear units at
six sites. As Unicom and a number of other utility companies undergo
restructuring and consolidation, management believes that unrecognized
asset values will be recognized (which exceed the current earnings-based
valuations).
- - GENERAL MOTORS CORP. -- GM Corp. is the country's largest automotive
manufacturer. The company also offers financing, insurance and mortgage
banking, and manufactures satellites, locomotives and heavy-duty
transmissions. The company has historically traded at a lower multiple than
its peer group due to continuing labor issues, manufacturing inefficiencies
and multi-industry focus. GM management has recently initiated a
restructuring plan that should unlock the value of the separate divisions
beginning with a Delphi spin-off ($1.5 billion initial public offering,
filed November 16, 1998). This marketing initiative is projected to save
$300 million per year and enable continued share repurchases.
OUTLOOK -- The management team believes that the steps it has taken to improve
the Fund's level of diversification and liquidity will have the potential to
provide returns more in line with the Fund's peer group and the S&P 500 Index
going forward. As the team repositions the portfolio, it will maintain a value
bias and intends to add value through stock selection and fundamental research.
7
Value Portfolio Management Team
January 29, 1999
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
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]
<TABLE>
<CAPTION>
3/14/94 12/31/94 12/31/95 12/31/96 12/31/97 13/31/98
<S> <C> <C> <C> <C> <C> <C>
Protective Growth and Income Fund $10,000 $ 9,813 $12,983 $16,465 $21,376 $20,753
S&P 500 Index (with income reinvested) $10,000 $10,073 $13,861 $17,041 $22,724 $30,564
</TABLE>
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1998 December 31, 1998 (a) December 31, 1998 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Protective Growth and Income Fund (2.92)% 107.53% 16.42%
S&P 500 Index (with income reinvested) 28.57% 205.64% 26.17%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
<TABLE>
<CAPTION>
TOP 10 PORTFOLIO HOLDINGS AS OF DECEMBER 31, 1998*
-------------------------------------------------------------------------------------------
PERCENTAGE OF
COMPANY LINE OF BUSINESS NET ASSETS
-------------------------------------------------------------------------------------------
<S> <C> <C>
Philip Morris Cos., Inc. Tobacco 3.1%
Loews Corp. Insurance 2.5
First Union Corp. Banks 2.5
Aetna, Inc. Insurance 2.4
Bank One Corp. Banks 2.4
Elf Aquitaine SA Chemicals 2.3
BankAmerica Corp. Banks 2.3
General Motors Corp. Automobile 2.0
First Data Corp. Business Services 2.0
Atlantic Richfield Co. Oil 2.0
-------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
PROTECTIVE CORE U.S. EQUITY FUND
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
PERFORMANCE REVIEW - Over the 12-month period ended December 31, 1998, the Fund
performed strongly, generating a 22.33% cumulative total return. Nonetheless,
the Fund underperformed the 28.57% cumulative total return of its benchmark, the
Standard & Poor's (S&P) 500 Index (with dividends reinvested).
The CORE Strategy is a well defined investment process that has historically
provided consistent, risk managed outperformance, with a minimized risk that
returns will be very different from those of a specific benchmark over time.
However, the four months ended October 31 were characterized by a sharp
increase in market volatility and an unusual profile of top-performing
equities among the stocks in our universe. This volatility was almost twice
as high as its long-term average (19% versus 10%) in September, and was much
higher than average from July through the end of the 12-month period. As a
result, a modest bias towards the smaller cap stocks within the S&P 500 Index
turned out to be a big detractor from return, as smaller stocks substantially
lagged larger ones. Thus, returns varied substantially from the benchmark.
At the same time, the four basic components that the CORE investment process
emphasizes in stock selection--value, momentum, risk and research--were
negatively impacted by a market driven by uncertainty and fear rather than
underlying company fundamentals. As a result, richly-valued stocks outpaced
cheap ones; stocks with poor momentum fared better than those with good
momentum; low beta but volatile stocks performed well, as did those that were
not favored by industry research analysts. These are all counter to what the
management team has observed historically.
OUTLOOK -- Returns reverted to a more normal pattern starting in October,
both for the factors management tracks and for the overall portfolio.
Although stock volatility remains higher than average, management has
implemented a few changes in its process to seek to ensure a more accurate
forecast of portfolio risk versus the benchmark. Management maintains strong
conviction, however, that its model factors should, over time, lead to solid
returns for investors as the team believes cheaper stocks should outpace more
expensive ones, good momentum stocks should do better than poor momentum
stocks, lower-risk stocks should perform better than higher risk stocks, as
should those favored by industry research analysts.
Goldman Sachs Quantitative Equity Management Team
January 29, 1999
9
<PAGE>
PROTECTIVE CORE U.S. EQUITY FUND
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
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]
<TABLE>
<CAPTION>
3/14/94 12/31/94 12/31/95 12/31/96 12/31/97 13/31/98
<S> <C> <C> <C> <C> <C> <C>
Protective CORE U.S. Equity Fund $10,000 $10,053 $13,746 $16,762 $21,949 $26,850
S&P 500 Index (with income reinvested) $10,000 $10,073 $13,861 $17,041 $22,724 $30,564
</TABLE>
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1998 December 31, 1998 (a) December 31, 1998 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Protective CORE U.S. Equity Fund 22.33% 168.50% 22.83%
S&P 500 Index (with income reinvested) 28.57% 205.64% 26.17%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
<TABLE>
<CAPTION>
TOP 10 PORTFOLIO HOLDINGS AS OF DECEMBER 31, 1998*
------------------------------------------------------------------------------------------
PERCENTAGE OF
COMPANY LINE OF BUSINESS NET ASSETS
------------------------------------------------------------------------------------------
<S> <C> <C>
Microsoft Corp. Computer Software & Services 4.0%
Exxon Corp. Oil 3.6
General Electric Co. Diversified Manufacturing 3.5
IBM, Inc. Computer Hardware/Software & Services 3.0
AT&T Corp. Telecommunications 2.5
BankAmerica Corp. Banks 2.1
Intel Corp. Semiconductors 1.8
Wal-Mart Stores, Inc. Retail 1.7
Cisco Systems, Inc. Computer Hardware/Software & Services 1.6
Dayton Hudson Corp. Retail 1.6
------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
PROTECTIVE SMALL CAP VALUE FUND(2)
(FORMERLY SMALL CAP EQUITY FUND)
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
PERFORMANCE REVIEW -- Over the 12-month period ended December 31, 1998, the Fund
declined 15.32%, compared with a 2.56% decline for the Russell 2000 Index, which
tracks the stock price performance of small capitalization companies.
The Fund's underperformance during the year was primarily attributable to the
market upheaval in the third quarter and the resulting discount in value of
small cap companies. In the broadest sense, the Fund's portfolio was deeply
affected by the "flight to quality" mentality. Near-term uncertainty translated
into stock price declines which management believes not only exaggerated the
actual impact of negative fundamental developments in a number of specific
holdings, but also derailed companies with solid fundamentals. In the second
half of the year, the Fund was negatively impacted by several macro factors: the
lowest capitalization ranges of the market were the hardest-hit during the third
quarter, and the Fund's median market cap was in the bottom quartile.
Furthermore, growth stocks outperformed value stocks. Finally, tax loss selling
in the latter part of the year dealt an additional blow to small cap stocks,
especially the poorest performers.
Several specific stocks also detracted from the Fund's performance, but
management is pleased to report that many of these have rebounded substantially.
Among the stocks highlighted on this page, management discusses some of the
holdings that were detrimental to returns in the third quarter but which led a
fourth quarter rebound. The team believes that examples such as these help to
illustrate what it does as value investors: The team aims to exploit market
anomalies by investigating what is undiscovered or misunderstood by the
marketplace. By applying a disciplined investment strategy to small cap
companies which sell at a discount to their peers, the team believes it will
create long-term value for its clients.
PORTFOLIO HIGHLIGHTS
- - ESG RE: ESG Re, a specialty reinsurance firm, had been trading below the
value of the cash on its balance sheet last month. In addition to its
rebound from this extraordinarily cheap valuation, the company has
benefited from growing investor confidence about premium growth in 1999.
- - FRIEDMAN's--This jewelry retailer recovered from a depressed valuation of
0.5x book value (reached in the third quarter) as management optimism and
the resolution of earnings uncertainty restored investor confidence.
- - MEMC ELECTRONIC MATERIAl-- This manufacturer of silicon wafers (a
component of semiconductors) was up more than 180% in the fourth quarter.
Its stock rebounded from its price level at 1/3 of book value earlier this
year; this depressed price level was a consequence of a poor near-term
outlook for semiconductors, but management believed that the company's
standing as one of only five providers of silicon wafers comprised a
valuable business.
OUTLOOK: As value investors, the management team believes that extremes in
valuation are not sustainable, and as small caps (especially some of our
holdings) declined while the broad market continued its ascent, the team
remained committed to its research-based value portfolio. The management team
remains positive about the potential long-term value offered by small caps and
especially by its portfolio. The asset class reached a tremendous discount
relative to larger cap issues in 1998. Comparable disparities have occurred only
twice within the past two decades, and in both instances the discount was
followed by significant outperformance by small caps.
Small cap stocks have also exhibited the ability to generate strong earnings
even as larger cap companies' profits slow. Earnings of the overall S&P 500
Index have been slowing since 1997, and in an environment of global uncertainty
and modest growth expectations, smaller cap stocks may benefit from their
relative economic insensitivity. Furthermore, 1998 gains of the S&P 500 were
driven by a small group of mega-cap and internet stocks. Without the largest 250
companies in the index, the S&P 500 would have posted negative returns for the
year. The team believes the discounted valuation of small caps may re-attract
capital to the asset class and drive a return to more normal valuations -
historically, small caps have traded at a valuation premium to larger companies.
In all environments, the management team performs rigorous, first-hand research
into small cap stocks which trade at a discount to the market and their peers
due to obscurity or uncertainty. The management team aims to exploit market
anomalies by investigating what is undiscovered or misunderstood by the
marketplace. All investment ideas are put to qualitative tests by the team in an
effort to assess downside risk and return potential, and all holdings adhere to
a disciplined investment strategy employing quantitative portfolio constraints
to manage security and sector exposure, cash levels, turnover and tracking
error. Strong fourth quarter results strengthen the team's belief that its
combination of a value-based approach with a well prioritized and disciplined
investment strategy offers substantial upside potential to the long-term
investor.
Small Cap Value Management Team
January 29, 1999
11
<PAGE>
PROTECTIVE SMALL CAP VALUE FUND (FORMERLY SMALL CAP EQUITY FUND)
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
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.
[GRAPHIC]
<TABLE>
<CAPTION>
3/14/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
Protective Small Cap Value Fund $10,000 $9,013 $ 9,596 $11,537 $15,251 $12,914
Russell 2000 (with income reinvested) $10,000 $9,547 $12,263 $14,290 $18,414 $17,942
</TABLE>
TOTAL RETURN(1) SUMMARY
<TABLE>
<CAPTION>
Cumulative Total Average Annual
Year Ended Return through Total Return through
December 31, 1998 December 31, 1998 (a) December 31, 1998 (a)
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Protective Small Cap Value Fund (15.32)% 29.14% 5.47%
Russell 2000 (with income reinvested) (2.56)% 79.42% 12.94%
</TABLE>
(a) From the commencement of investment operations on March 14, 1994.
<TABLE>
<CAPTION>
TOP 10 PORTFOLIO HOLDINGS AS OF DECEMBER 31, 1998*
--------------------------------------------------------------------------------------------
PERCENTAGE OF
COMPANY LINE OF BUSINESS NET ASSETS
--------------------------------------------------------------------------------------------
<S> <C> <C>
Pacific Century Financial Corp. Financial Services 3.2%
HealthPlan Services Corp. Drugs & Health Care 2.9
Friedman's, Inc. Retail 2.9
Quest Diagnostics, Inc. Drugs & Health Care 2.9
ESG Re Ltd. Insurance 2.7
Integrated Health Services, Inc. Health Care 2.5
Prime Hospitality Corp. Hotels 2.4
Amerin Corp. Insurance 2.3
Vishay Intertechnology, Inc. Semiconductors 2.3
UCAR International, Inc. Steel 2.2
--------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
PROTECTIVE MONEY MARKET FUND(3)
MANAGED BY GOLDMAN SACHS ASSET MANAGEMENT
PERFORMANCE REVIEW AND COMPOSITION -- As of December 31, 1998, the 7-day current
yield of the Protective Money Market Fund was 4.48%. The management team expects
to maintain a weighted average maturity in a range between 20 to 40 days in
order to best meet the objectives of the Fund. As the Fund nears its close, the
team intends to bring the Fund's weighted average maturity down to a range of
0-20 days.
OUTLOOK -- Near term, with the financing pressure of year-end behind
institutional investors, the management team is looking to extend the Fund's
weighted average maturity somewhat as it sees opportunities on the yield curve.
While there are a variety of opinions as to when the Fed will move, based on
current signs of non-inflationary growth in areas of consumer spending, new home
sales and third quarter GDP, most anticipate that easing will come later rather
than sooner. Goldman Sachs economists' 1999 outlook anticipates a 50 basis point
cumulative ease in the second half of the year.
While consumer spending remains strong, management believes the manufacturing
side of the economy is likely to weaken because of a trade drag and a slowdown
in capital spending.
Money Market Investment Management Team
January 29, 1999
- -------------------
* OPINIONS EXPRESSED REPRESENT OUR PRESENT OPINIONS ONLY. REFERENCE TO
INDIVIDUAL SECURITIES SHOULD NOT BE CONSTRUED AS A COMMITMENT THAT SUCH
SECURITIES WILL BE RETAINED IN THE FUND. FROM TIME TO TIME, THE FUND MAY
CHANGE THE INDIVIDUAL SECURITIES IT HOLDS, THE NUMBER OR TYPES OF SECURITIES
HELD AND THE MARKETS IN WHICH IT INVESTS. REFERENCES TO INDIVIDUAL SECURITIES
DO NOT CONSTITUTE A RECOMMENDATION TO THE INVESTOR TO BUY, HOLD OR SELL SUCH
SECURITIES. IN ADDITION, REFERENCES TO PAST PERFORMANCE OF THE FUND DO NOT
INDICATE FUTURE RETURNS, WHICH ARE NOT GUARANTEED AND WILL VARY. FURTHERMORE,
THE VALUE OF SHARES OF THE FUND MAY FALL AS WELL AS RISE.
1 Total return is calculated assuming a purchase of shares at net asset value
per share on the last day of the prior 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 reflect any fees and
charges imposed in connection with a variable annuity or variable life
insurance contract. If the performance information included the effect of
these charges or had Protective Life Insurance Company or Protective
Investment Advisors, Inc. not reimbursed certain Fund expenses, total returns
would be lower.
2 The stocks of smaller companies are often associated with higher risks and
greater volatility than stocks of larger companies.
3 An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks
to preserve the value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.
13
<PAGE>
PROTECTIVE GLOBAL INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY DESCRIPTION (000) U.S. $ VALUE
-------------------- ----- ------------
<S> <C> <C> <C>
CORPORATE BONDS--23.7%
GERMANY--6.3%
Baden-Wuerttembergishe Bank AG
5.375%, 02/05/2010 ..... DEM 2,000 $ 1,294,783
Bayerische Landesbank Girozent
6.625%, 06/25/2007 ..... USD 1,800 1,905,192
LB Rheinland--Pfalz Girozent
5.750%, 10/16/2003 ..... DEM 1,000 649,706
-------------
3,849,681
-------------
JAPAN--4.1%
Asian Development Bank
5.625%, 02/18/2002 ..... JPY 100,000 1,003,745
International Bank for
Reconstruction & Development
5.625%, 03/17/2003 ....... USD 500 505,815
5.750%, 02/06/2008 ....... USD 400 414,440
2.000%, 02/18/2008 ..... JPY 70,000 615,932
-------------
2,539,932
-------------
SPAIN--0.7%
Instituto De Credito Official
6.000%, 05/19/2008........ USD 400 418,040
-------------
THE NETHERLANDS--1.7%
Nederlandse Waterschapsbank
6.125%, 02/13/2008 ..... USD 1,000 1,042,766
-------------
UNITED KINGDOM--3.0%
Abbey National Treasury
8.000%, 04/02/2003 ..... GBP 700 1,281,354
Bank Ned Gemeenten
6.375%, 03/30/2005 ..... GBP 300 531,666
-------------
1,813,020
-------------
UNITED STATES--7.9%
Ameritech Capital Fund
5.875%, 02/19/2003 ..... USD 1,100 1,123,760
Ford Motor Credit Co.
6.125%, 04/28/2003 ..... USD 700 711,445
6.125%*, 04/28/2005 .... USD 1,600 1,577,456
KFW International Finance
5.750%, 01/15/2008 ..... USD 400 412,400
Merrill Lynch & Co., Inc.
6.000%, 02/12/2003 ..... USD 400 406,000
Prudential Insurance Company
of America
6.375%, 07/23/2006 ..... USD 600 612,420
-------------
4,843,481
-------------
TOTAL CORPORATE BONDS--
(Cost $13,971,932) 14,506,920
--------------
GOVERNMENT AND AGENCY SECURITIES--69.0%
CANADA--3.4%
Government of Canada
6.000%, 06/01/2008 ..... CAD 1,500 $ 1,062,316
Ontario Hydro
6.100%, 01/30/2008...... USD 1,000 1,042,830
-------------
2,105,146
-------------
DENMARK--5.1%
Kingdom of Denmark
8.000%, 05/15/2003 ..... DKK 17,000 3,100,446
-------------
FRANCE--2.2%
Government of France
5.500%, 10/25/2007 ..... FRF 6,600 1,329,438
-------------
GERMANY--5.2%
Federal Republic of Germany
6.000%, 01/04/2007 ..... DEM 1,400 963,113
6.250%, 01/04/2024 ..... DEM 3,100 2,239,020
-------------
3,202,133
-------------
ITALY--9.1%
Republic of Italy
5.125%, 07/29/2003 ..... JPY 80,000 823,609
Republic of Italy
8.500%, 08/01/2004 ..... ITL 5,700,000 4,297,654
6.750%, 07/01/2007 ..... ITL 600,000 433,596
-------------
5,554,859
-------------
JAPAN--5.7%
Government of Japan
0.900%, 12/22/2008 ..... JPY 450,000 3,522,380
-------------
SPAIN--2.4%
Government of Spain
6.000%, 01/31/2008 ..... ESP 180,000 1,457,782
-------------
SWEDEN--1.1%
Kingdom of Sweden
9.000%, 04/20/2009 ..... SEK 4,000 688,003
-------------
UNITED KINGDOM--12.0%
U.K. Treasury
9.500%, 10/25/2004 ..... GBP 1,800 3,746,378
7.750%, 09/08/2006 ..... GBP 1,800 3,621,738
-------------
7,368,116
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<PAGE>
PROTECTIVE GLOBAL INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY DESCRIPTION (000) U.S. $ VALUE
-------------------- ----- ------------
<S> <C> <C> <C>
GOVERNMENT AND AGENCY--(CONTINUED)
UNITED STATES--22.8%
United States Treasury Bonds
6.750%, 08/15/2026 ..... USD 1,200 $ 1,437,564
United States Treasury Notes
5.625%, 10/31/1999 ..... USD 1,200 1,209,000
7.000%, 07/15/2006 ..... USD 6,000 6,831,540
6.500%, 10/15/2006 ..... USD 500 554,610
6.625%, 05/15/2007 ..... USD 700 787,171
5.625%, 05/15/2008 ..... USD 3,000 3,201,090
-------------
14,020,975
-------------
TOTAL GOVERNMENT AND
AGENCY SECURITIES--
(Cost $40,405,374) 42,349,278
-------------
SHORT TERM INVESTMENT--7.3%
TIME DEPOSIT--7.3%
State Street Bank and Trust Co.
Eurodollar Time Deposit
5.187%, 01/04/1999 ..... USD 4,495 $ 4,495,000
-------------
TOTAL SHORT TERM INVESTMENT--
(Cost $4,495,000) 4,495,000
-------------
TOTAL INVESTMENTS--
(Cost $58,872,306)--100.0% $ 61,351,198
-------------
-------------
</TABLE>
* Variable rate instrument. Interest rate is a rate in effect at
December 31, 1998.
See Glossary of Terms on page 45.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- ------ ------------
<S> <C> <C>
COMMON STOCK--95.6%
AUSTRALIA--2.8%
AMP Ltd. ...................... 44,700 $ 566,317
Fosters Brewing Group Ltd. .... 217,234 588,378
Lend Lease Corp. .............. 59,960 808,334
Tab Corp Holdings Ltd. ........ 72,699 445,487
Telstra Corp. Ltd. ............ 245,800 1,149,246
Westpac Banking Corp. Ltd. .... 109,929 735,599
Woolworths Ltd. ............... 192,714 656,118
-------------
4,949,479
-------------
DENMARK--1.9%
ISS International Service System AS
Class B................... 33,531 2,181,204
Novo-Nordisk AS Series B....... 8,795 1,160,819
-------------
3,342,023
-------------
FRANCE--12.8%
AXA-UAP ....................... 24,969 3,617,401
Dexia France .................. 31,760 4,890,960
Elf Aquitaine SA .............. 37,320 4,312,059
SGS-Thomson Microelectronics N.V. * 38,625 3,039,707
Societe Generale .............. 25,503 4,128,101
Vivendi ....................... 9,346 2,423,842
-------------
22,412,070
-------------
HONG KONG--2.0%
Asia Satellite Telecom Holdings Ltd. 95,300 169,748
Cheung Kong Holdings Ltd. ..... 222,000 1,597,462
China Telecom Ltd. * .......... 664,000 1,148,433
CLP Holdings Ltd. ............. 126,000 627,756
-------------
3,543,399
-------------
IRELAND--3.4%
Bank of Ireland ............... 263,849 5,866,359
-------------
ITALY--3.7%
Mondadori Editore SPA......... 53,595 708,247
Seat Pagine Gialle SPA ........ 1,468,223 1,127,729
Telecom Italia SPA............ 626,185 4,620,313
-------------
6,456,289
-------------
JAPAN--21.6%
Aderans Co. ................... 39,000 1,210,880
Canon, Inc. ................... 85,000 1,815,789
Circle K Japan Co. ............ 53,600 2,356,409
Fuji Photo Film Co. ........... 57,000 2,117,647
Inaba Denkisangyo Co. ......... 42,100 376,126
Itoen Ltd. .................... 22,800 1,175,798
Kao Corp. ..................... 90,000 2,030,075
Kirin Brewery Co. Ltd. ........ 162,000 2,063,512
Kokuyo Co. .................... 89,000 1,197,426
Max Co. ....................... 52,000 492,172
Mirai Industry Co. ............ 43,010 429,910
Mitsui Marine & Fire .......... 431,000 2,268,421
NGK Insulators Ltd. ........... 160,000 2,062,096
Nintendo Co. .................. 20,000 1,937,196
NTT Corp. ..................... 51 2,097,744
Rohm Co. Ltd. ................. 24,000 2,184,520
Sankyo Co. .................... 96,000 2,097,479
SMC Corp. ..................... 18,000 1,436,179
Takefuji Corp. ................ 31,200 2,276,869
TDK Corp. ..................... 25,000 2,284,387
Toppan Forms Co. Ltd. ......... 130,000 2,311,367
Yamanouchi Pharmaceutical Co. Ltd. 48,000 1,545,511
-------------
37,767,513
-------------
PORTUGAL--1.5%
Electricidade de Portugal SA .. 122,213 2,691,973
-------------
SINGAPORE--0.6%
Singapore Airlines Ltd. ....... 47,000 344,458
Singapore Press Holdings Ltd.* 61,000 665,051
-------------
1,009,509
-------------
SPAIN--3.1%
Banco Santander SA ............ 154,182 3,059,339
Telefonica SA ................. 52,441 2,328,333
Telefonica SA Rts.*............ 52,441 46,493
-------------
5,434,165
-------------
SWEDEN--7.0%
Ericsson LM Telephone Series B. 98,031 2,328,670
Forenings Sparbanken Sverige AB,
Class A .................. 158,450 4,095,424
Securitas AB, Class B ......... 252,530 3,916,254
Skandia Forsakrings AB ........ 126,682 1,933,410
-------------
12,273,758
-------------
SWITZERLAND--7.9%
Adecco SA...................... 7,118 3,248,880
Nestle SA...................... 1,892 4,118,133
Novartis AG.................... 1,961 3,854,335
UBS AG *....................... 8,735 2,683,388
-------------
13,904,736
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES U.S. $ VALUE
-------------------- ------ ------------
<S> <C> <C>
COMMON STOCK--(CONTINUED)
THE NETHERLANDS--12.7%
AEGON N.V. .................... 31,206 $ 3,830,363
Benckiser N.V. , Class B....... 44,224 2,895,381
TNT Post Group N.V. ........... 174,601 5,622,697
VNU N.V. ...................... 123,401 4,650,445
Wolters Kluwer N.V............. 24,080 5,150,021
-------------
22,148,907
-------------
UNITED KINGDOM--14.6%
Glaxo Wellcome PLC ............ 126,891 4,368,137
Great Universal Stores PLC .... 187,004 1,972,878
Hays PLC ...................... 390,196 3,435,851
Misys PLC ..................... 585,485 4,299,458
Rentokil Group PLC ............ 741,250 5,603,402
Select Appointments Holdings PLC 289,702 2,984,138
Vodafone Group PLC ............ 171,723 2,790,249
-------------
25,454,113
-------------
TOTAL COMMON STOCK--
(Cost $139,283,999) 167,254,293
-------------
PREFERRED STOCK--2.2%
GERMANY--2.2%
Henkel KGAA Vorzig ............ 43,527 3,891,469
-------------
TOTAL PREFERRED STOCK--
(Cost $3,055,892) 3,891,469
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)
-----
<S> <C> <C> <C>
SHORT TERM INVESTMENT--2.2%
TIME DEPOSIT--2.2%
State Street Bank and Trust Co.
Eurodollar Time Deposit
5.187%, 01/04/1999 ..... USD $3,803 3,803,000
-------------
TOTAL SHORT TERM INVESTMENT--
(Cost $3,803,000) 3,803,000
-------------
TOTAL INVESTMENTS--
(Cost $146,142,891)--100.0% $ 174,948,762
-------------
-------------
</TABLE>
* Denotes non-income producing security.
See Glossary of Terms on page 45.
ANALYSIS OF INDUSTRY CLASSIFICATIONS
<TABLE>
<CAPTION>
INDUSTRY % OF INVESTMENTS VALUE
- -------- ---------------- -----
<S> <C> <C>
Airlines 0.2% $ 344,458
Alcohol 0.3 588,378
Auto Components 1.2 2,062,096
Automobile 0.8 1,436,179
Beverages 1.8 3,239,310
Broadcast Media 2.9 5,150,021
Business Services 9.8 17,086,668
Chemical Products 2.2 3,891,469
Chemicals 2.5 4,312,059
Commercial Services 3.1 5,430,083
Communication Services 0.8 1,318,181
Computer Hardware/Software
& Services 2.5 4,299,458
Cosmetics 1.8 3,240,955
Diversified Operations 4.6 8,027,244
Drugs & Health Care 3.4 5,951,814
Electrical Equipment 0.2 376,126
Electric Utilities 1.9 3,319,729
Electronics 1.3 2,284,387
Electronics - Semiconductors 3.0 5,224,227
Financial Services 8.0 14,037,674
Foods-Diversified 2.4 4,118,134
Healthcare Management 0.7 1,160,819
Household Products 1.7 2,895,381
Industrial Machinery 0.3 492,172
Insurance 4.6 8,014,081
Insurance Brokers 1.3 2,268,421
Leisure Time 0.3 445,487
Major Regional Banks 9.4 16,440,109
Manufacturing - Diversified 0.2 429,910
Media & Communications 0.4 708,247
Office Equipment & Supplies 1.7 3,013,215
Pharmaceuticals 3.4 5,913,648
Photography 1.2 2,117,647
Printing 1.3 2,311,367
Publishing - Newspapers 3.0 5,315,496
Real Estate 0.9 1,597,462
Retail 2.8 4,985,405
Telecommunications 4.8 8,412,065
Telephone 4.0 6,948,984
Time Deposits 2.2 3,803,000
Toys 1.1 1,937,196
------ ----------------
Totals 100.0% $ 174,948,762
------ ----------------
------ ----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK--95.1%
BANKS--5.4%
Bank One Corp. ................ 49,706 $ 2,538,113
BankAmerica Corp. ............. 56,600 3,403,075
Citigroup, Inc. ............... 27,050 1,338,975
First Union Corp. ............. 21,000 1,277,062
-------------
8,557,225
-------------
BEVERAGES--2.6%
Coca Cola Co. ................. 29,400 1,966,125
PepsiCo, Inc. ................. 52,000 2,128,750
-------------
4,094,875
-------------
BROADCAST MEDIA--6.6%
Cablevision Systems Corp.,
Class A * ................ 26,000 1,304,875
CBS Corp. ..................... 103,000 3,373,250
Chancellor Media Corp. * ...... 47,600 2,278,850
Infinity Broadcasting Corp.
Class A *................. 62,300 1,705,462
Jacor Communications, Inc. * .. 25,900 1,667,313
-------------
10,329,750
-------------
BUSINESS SERVICES--4.8%
Ecolab, Inc. .................. 32,400 1,172,475
First Data Corp. .............. 65,200 2,066,025
Galileo International, Inc. ... 25,100 1,091,850
Service Corp. International ... 84,000 3,197,250
-------------
7,527,600
-------------
CHEMICALS--0.7%
Du Pont (E.I.) de Nemours & Co. 11,100 588,994
Minnesota Mining & Manufacturing Co. 7,200 512,100
-------------
1,101,094
-------------
COMPUTER HARDWARE/SOFTWARE &
SERVICES--4.5%
Cisco Systems, Inc. * ......... 22,400 2,079,000
EMC Corp. * ................... 27,200 2,312,000
International Business Machines, Inc. 7,700 1,422,575
Sun Microsystems, Inc. * ...... 15,200 1,301,500
-------------
7,115,075
-------------
COMPUTER SOFTWARE & SERVICES--5.8%
America Online, Inc. .......... 10,500 1,519,875
HBO & Co. ..................... 63,900 1,833,131
Microsoft Corp. * ............. 33,500 4,646,031
Sterling Commerce, Inc. * ..... 25,900 1,165,500
-------------
9,164,537
-------------
COSMETICS--1.9%
Avon Products, Inc. ........... 48,200 2,132,850
Gillette Co. .................. 16,800 811,650
-------------
2,944,500
-------------
DIVERSIFIED MANUFACTURING--2.3%
General Electric Co. .......... 35,500 3,623,219
-------------
DIVERSIFIED OPERATIONS--1.3%
Time Warner, Inc. ............. 34,000 2,110,125
-------------
DRUGS & HEALTH CARE--11.4%
American Home Products Corp. .. 56,200 3,164,762
Bristol Myers Squibb Co. ...... 29,280 3,918,030
Johnson & Johnson Co. ......... 29,300 2,457,537
Pfizer, Inc. .................. 31,300 3,926,194
Schering-Plough Corp. ......... 28,800 1,591,200
Warner-Lambert Co. ............ 38,500 2,894,719
-------------
17,952,442
-------------
ELECTRIC UTILITIES--2.6%
AES Corp. * ................... 85,100 4,031,613
-------------
FINANCIAL SERVICES--9.1%
Ambac Financial Group, Inc. ... 12,600 758,363
Federal Home Loan Mortgage Corp. 57,700 3,718,044
Federal National Mortgage Assn. 44,200 3,270,800
MBNA Corp. .................... 103,900 2,591,006
State Street Corp. ............ 47,000 3,269,437
The CIT Group, Inc., Class A... 20,300 645,794
-------------
14,253,444
-------------
FOODS--3.3%
Nabisco Holdings Corp., Class A 37,800 1,568,700
Ralston Purina Co. ............ 66,200 2,143,225
Wrigley (WM) Jr. Co. .......... 15,840 1,418,670
-------------
5,130,595
-------------
HOTELS--0.8%
Marriott International, Inc., Class A 41,500 1,203,500
HOUSEHOLD PRODUCTS--3.8%
Colgate-Palmolive Co. ......... 34,000 3,157,750
Procter & Gamble Co. .......... 23,000 2,100,187
The Clorox Co. ................ 6,300 735,919
-------------
5,993,856
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK--(CONTINUED)
INSURANCE--3.3%
Aetna, Inc. ................... 18,573 $ 1,460,302
Hartford Life, Inc., Class A... 14,200 827,150
Nationwide Financial Services,
Inc., Class A............. 19,200 992,400
SunAmerica, Inc. .............. 23,000 1,865,875
-------------
5,145,727
-------------
OIL--3.6%
Atlantic Richfield Co. ........ 5,000 326,250
Exxon Corp. ................... 13,500 987,187
Mobil Corp. ................... 10,200 888,675
Schlumberger Ltd. ............. 46,900 2,163,262
Texaco, Inc. .................. 17,700 935,888
Unocal Corp. .................. 10,200 297,713
-------------
5,598,975
-------------
PUBLISHING--1.8%
Valassis Communications, Inc.* 50,500 2,607,062
Ziff-Davis, Inc. * ............ 9,900 156,544
-------------
2,763,606
-------------
PUBLISHING--NEWSPAPERS--3.6%
A.H. Belo Corp., Series A...... 76,700 1,529,206
Central Newspapers, Inc., Class A 17,200 1,228,725
Gannett Co., Inc............... 20,000 1,290,000
New York Times Co., Class A ... 32,000 1,110,000
Tribune Co. ................... 8,200 541,200
-------------
5,699,131
-------------
RECREATIONAL PRODUCTS/LEISURE--0.8%
Hasbro, Inc. .................. 35,200 1,271,600
-------------
RETAIL--6.2%
CVS Corp. ..................... 16,800 924,000
Home Depot, Inc. .............. 21,000 1,284,938
Rite Aid Corp. ................ 22,100 1,095,331
Tandy Corp. ................... 38,200 1,573,363
Wal-Mart Stores, Inc. ......... 33,400 2,720,012
Walgreen Co. .................. 37,100 2,172,669
-------------
9,770,313
-------------
SEMICONDUCTORS--0.8%
Intel Corp. ................... 10,900 1,292,331
-------------
TELECOMMUNICATIONS--6.7%
Comcast Corp., Class A......... 13,600 798,150
Lucent Technologies, Inc. ..... 18,000 1,980,000
MCI WorldCom, Inc. * .......... 21,200 1,521,100
Tele-Communications, Inc. Liberty
Media Group, Series A * .. 80,600 3,712,638
Tele-Communications, Inc. TCI
Group, Series A * ........ 45,735 2,529,717
-------------
10,541,605
-------------
TOBACCO--1.4%
Philip Morris Cos., Inc. ...... 42,400 2,268,400
-------------
TOTAL COMMON STOCK--
(Cost $108,964,892) 149,485,138
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)
----
<S> <C> <C>
SHORT TERM INVESTMENT--4.9%
REPURCHASE AGREEMENT--4.9%
State Street Bank and Trust Co.
4.800%, 01/04/1999, maturity
value of $7,699,104, dated
12/31/98, (collateralized by
$4,835,000 United States
Treasury Bond, 10.625%,
08/15/15, with a value
of $7,851,581) $7,695 7,695,000
TOTAL SHORT TERM INVESTMENT--
(Cost $7,695,000) 7,695,000
-------------
TOTAL INVESTMENTS--
(Cost $116,659,892)--100.0% $ 157,180,138
-------------
-------------
</TABLE>
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK--95.1%
AEROSPACE/DEFENSE--6.2%
Boeing Co. .................... 72,700 $ 2,371,837
General Motors Corp., Class H . 144,600 5,738,812
Honeywell, Inc. ............... 31,500 2,372,344
Lockheed Martin Corp. ......... 74,800 6,339,300
Raytheon Co., Class A ......... 140,500 7,262,094
-------------
24,084,387
-------------
AUTOMOBILE--2.7%
Ford Motor Co. ................ 41,800 2,453,137
General Motors Corp. .......... 109,900 7,864,719
-------------
10,317,856
-------------
AUTO SUPPLIERS--1.7%
Federal-Mogul Corp. ........... 38,200 2,272,900
Magna International, Inc., Class A 70,100 4,346,200
-------------
6,619,100
-------------
BANKS--8.6%
Bank One Corp. ................ 180,300 9,206,569
BankAmerica Corp. ............. 146,400 8,802,300
Chase Manhattan Corp. ......... 85,400 5,812,537
First Union Corp. ............. 156,900 9,541,481
-------------
33,362,887
-------------
BROADCAST MEDIA--0.7%
CBS Corp. ..................... 82,400 2,698,600
-------------
BUSINESS SERVICES--3.2%
Dun & Bradstreet Corp. ........ 143,600 4,532,375
First Data Corp. .............. 248,000 7,858,500
-------------
12,390,875
-------------
CHEMICALS--3.5%
Du Pont (E. I.) de Nemours & Co. 42,100 2,233,931
Elf Aquitaine SA .............. 160,400 9,082,650
Minnesota Mining & Manufacturing Co. 32,800 2,332,900
-------------
13,649,481
-------------
COMPUTER HARDWARE/SOFTWARE &
SERVICES--1.8%
Compaq Computer Corp. ......... 52,300 2,193,331
Hewlett Packard Co. ........... 35,000 2,390,938
International Business Machines, Inc. 13,100 2,420,225
-------------
7,004,494
-------------
DIVERSIFIED OPERATIONS--0.6%
Corning, Inc. ................. 53,200 2,394,000
-------------
DRUGS & HEALTH CARE--4.7%
American Home Products Corp. .. 59,400 3,344,962
Baxter International, Inc. .... 36,400 2,340,975
Johnson & Johnson Co. ......... 29,900 2,507,862
Pharmacia & Upjohn, Inc. ...... 42,500 2,406,563
Tenet Healthcare Corp. * ...... 289,200 7,591,500
-------------
18,191,862
-------------
ELECTRIC UTILITIES--6.3%
Consolidated Edison, Inc. ..... 43,200 2,284,200
Entergy Corp. ................. 156,300 4,864,838
Northeast Utilities * ......... 235,600 3,769,600
Pacificorp .................... 250,200 5,269,837
PG&E Corp. .................... 70,900 2,233,350
Unicom Corp. .................. 148,000 5,707,250
-------------
24,129,075
-------------
ELECTRICAL EQUIPMENT--0.6%
Philips Electronics N.V. ...... 36,000 2,436,750
-------------
ENVIRONMENTAL CONTROL--1.4%
Browning-Ferris Industries, Inc. 196,400 5,585,125
-------------
FINANCIAL SERVICES--1.9%
The CIT Group, Inc., Class A... 152,200 4,841,862
Wells Fargo Co. ............... 61,400 2,452,163
-------------
7,294,025
-------------
FOODS--2.7%
Archer Daniels Midland Co. .... 315,700 5,426,094
ConAgra, Inc. ................. 79,100 2,491,650
Ralston Purina Co. ............ 74,600 2,415,175
-------------
10,332,919
-------------
HEALTHCARE MANAGEMENT--1.2%
Columbia/HCA Healthcare Corp. . 191,100 4,729,725
-------------
HOTELS--2.4%
Hilton Hotels Corp. ........... 307,700 5,884,763
Mirage Resorts, Inc. * ........ 218,800 3,268,325
-------------
9,153,088
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK--(CONTINUED)
HOUSEHOLD PRODUCTS--0.6%
Unilever N.V. ................. 28,100 $ 2,330,544
-------------
INSURANCE--10.4%
Aetna, Inc. ................... 118,600 9,324,925
Allstate Corp. ................ 122,200 4,719,975
CIGNA Corp. ................... 73,700 5,697,931
Hartford Financial Services
Group, Inc. 116,800 6,409,400
Loews Corp. ................... 98,300 9,657,975
Provident Cos., Inc. .......... 105,700 4,386,550
-------------
40,196,756
-------------
METALS--0.6%
Aluminum Co. of America ....... 33,200 2,475,475
-------------
MULTIMEDIA--0.7%
MediaOne Group, Inc. .......... 54,100 2,542,700
-------------
OFFICE EQUIPMENT & SUPPLIES--0.5%
Xerox Corp. ................... 17,400 2,053,200
-------------
OIL--4.1%
Atlantic Richfield Co. ........ 117,500 7,666,875
Exxon Corp. ................... 31,000 2,266,875
Occidental Petroleum Corp. .... 139,800 2,359,125
Texaco, Inc. .................. 34,800 1,840,050
USX-Marathon Group ............ 59,700 1,798,462
-------------
15,931,387
-------------
OIL & GAS DRILLING--0.7%
Transocean Offshore, Inc. ..... 95,900 2,571,319
-------------
PACKAGING & CONTAINER--1.0%
Crown Cork & Seal, Inc. ....... 128,600 3,962,488
-------------
PAPER & FOREST PRODUCTS--1.4%
Georgia Pacific Corp. ......... 90,400 5,294,050
-------------
PETROLEUM SERVICES--1.8%
Halliburton Co. ............... 136,800 4,052,700
Tosco Corp. ................... 115,600 2,991,150
-------------
7,043,850
-------------
POLLUTION CONTROL--0.9%
Waste Management, Inc. ........ 70,300 3,277,738
-------------
PUBLISHING--NEWSPAPERS--1.9%
Gannett Co., Inc............... 35,100 2,263,950
New York Times Co., Class A ... 148,900 5,164,969
-------------
7,428,919
-------------
RECREATIONAL PRODUCTS/LEISURE--1.3%
Hasbro, Inc. .................. 133,800 4,833,525
-------------
RETAIL--5.7%
Dayton Hudson Corp. ........... 87,000 4,719,750
Federated Dept. Stores, Inc. * 97,400 4,242,987
Sears Roebuck & Co. ........... 141,700 6,022,250
TJX Companies, Inc. ........... 87,100 2,525,900
Toys "R" Us, Inc. * ........... 260,000 4,387,500
-------------
21,898,387
-------------
SEMICONDUCTORS--0.6%
Intel Corp. ................... 18,900 2,240,831
-------------
TELECOMMUNICATIONS--7.3%
ALLTEL Corp. .................. 20,200 1,208,213
AT&T Corp. .................... 84,100 6,328,525
BCE, Inc. ..................... 161,200 6,115,525
BellSouth Corp. ............... 53,900 2,688,262
GTE Corp. ..................... 91,000 5,915,000
Tele-Communications, Inc.
TCI Group, Series A * .... 46,800 2,588,625
U. S. West, Inc. .............. 48,600 3,140,775
-------------
27,984,925
-------------
TIRES & RUBBER--0.6%
Goodyear Tire & Rubber Co. .... 44,200 2,229,338
-------------
TOBACCO--4.3%
Philip Morris Cos., Inc. ...... 228,200 12,208,700
RJR Nabisco Holdings Corp. .... 146,900 4,361,094
-------------
16,569,794
-------------
TRANSPORTATION--0.5%
Burlington Northern Santa Fe Corp. 56,800 1,917,000
TOTAL COMMON STOCK--
(Cost $358,851,042) 367,156,475
-------------
DEPOSITORY RECEIPTS--3.8%
AUTOMOBILE--1.0%
Volvo AB ...................... 172,500 4,021,406
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
21
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
DEPOSITORY RECEIPTS--(CONTINUED)
AUTO SUPPLIERS--0.8%
LucasVarity PLC ............... 90,000 $ 3,015,000
-------------
OIL--2.0%
Royal Dutch Petroleum Co. ..... 160,000 7,660,000
-------------
TOTAL DEPOSITORY RECEIPTS--
(Cost $14,594,456) 14,696,406
-------------
</TABLE>
<TABLE>
PRINCIPAL
AMOUNT
(000)
----
<S> <C> <C>
SHORT TERM INVESTMENT--1.1%
REPURCHASE AGREEMENT--1.1%
State Street Bank and Trust Co.
4.800%, 01/04/1999, maturity
value of $4,148,211, dated
12/31/98, (collateralized by
$2,605,000 United States
Treasury Bond, 10.625%,
08/15/15, with a value of
$4,230,273) .............. $ 4,146 4,146,000
-------------
TOTAL SHORT TERM INVESTMENT--
(Cost $4,146,000) 4,146,000
-------------
TOTAL INVESTMENTS--
(Cost $377,591,498)--100.0% $ 385,998,881
-------------
-------------
</TABLE>
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<PAGE>
PROTECTIVE CORE U.S. EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Security Description Shares Value
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK--96.6%
AEROSPACE/DEFENSE--2.6%
General Motors Corp., Class H . 50,200 $ 1,992,313
Honeywell, Inc. ............... 18,900 1,423,406
United Technologies Corp. ..... 31,400 3,414,750
-------------
6,830,469
-------------
AGRICULTURE EQUIPMENT--0.8%
Case Corp. .................... 10,000 218,125
Caterpillar, Inc. ............. 25,800 1,186,800
Deere & Co. ................... 18,600 616,125
-------------
2,021,050
-------------
AIRLINES--0.9%
AMR Corp. * ................... 21,900 1,300,312
Delta Air Lines, Inc. ......... 19,800 1,029,600
-------------
2,329,912
-------------
AUTOMOBILE--2.8%
DaimlerChrysler AG * .......... 14,153 1,359,573
Ford Motor Co. ................ 71,000 4,166,812
Hertz Corp. ................... 37,600 1,715,500
-------------
7,241,885
-------------
BANKS--4.0%
Bank One Corp. ................ 17,820 909,934
BankAmerica Corp. ............. 91,652 5,510,576
Chase Manhattan Corp. ......... 31,800 2,164,388
First Union Corp. ............. 13,200 802,725
U.S. Bancorp .................. 34,800 1,235,400
-------------
10,623,023
-------------
BEVERAGES--2.0%
Coca Cola Co. ................. 54,400 3,638,000
Pepsico, Inc. ................. 39,000 1,596,562
-------------
5,234,562
-------------
BEVERAGES--ALCOHOLIC--0.1%
Anheuser-Busch Cos., Inc. ..... 3,900 255,938
-------------
BUILDING PRODUCTS--0.3%
Lowe's Companies, Inc. ........ 13,400 685,913
-------------
BUSINESS SERVICES--0.5%
Automatic Data Processing, Inc. 14,900 1,194,794
-------------
CHEMICALS--2.3%
Dow Chemical Co. .............. 34,600 $ 3,146,437
Du Pont (E.I.) de Nemours & Co. 25,600 1,358,400
Lyondell Chemical Co. ......... 12,600 226,800
Minnesota Mining & Manufacturing Co. 3,600 256,050
Solutia, Inc. ................. 45,600 1,020,300
-------------
6,007,987
-------------
COMPUTER HARDWARE/SOFTWARE &
SERVICES--7.6%
Cisco Systems, Inc. * ......... 46,600 4,325,062
Computer Sciences Corp. ....... 5,200 335,075
Compuware Corp. * ............. 8,400 656,250
Dell Computer Corp. * ......... 22,100 1,617,444
EMC Corp. * ................... 16,500 1,402,500
Gateway 2000, Inc. * .......... 42,300 2,165,231
International Business Machines, Inc. 42,300 7,814,925
Lexmark International Group, Inc.,
Class A * ................ 4,900 492,450
Sun Microsystems, Inc. * ...... 4,100 351,063
Unisys Corp. * ................ 14,300 492,456
Yahoo!, Inc. * ................ 1,300 308,019
-------------
19,960,475
-------------
COMPUTER SOFTWARE & SERVICES--4.0%
Microsoft Corp. * ............. 75,000 10,401,562
-------------
CONSUMER GOODS--0.7%
American Greetings Corp., Class A 32,100 1,318,106
Fortune Brands, Inc. .......... 18,300 578,738
-------------
1,896,844
-------------
COSMETICS--0.4%
Gillette Co. .................. 23,000 1,111,188
-------------
DIVERSIFIED MANUFACTURING--3.9%
General Electric Co. .......... 90,600 9,246,862
Owens Illinois, Inc. * ........ 22,100 676,813
U.S. Industries, Inc. ......... 14,200 264,475
-------------
10,188,150
-------------
DIVERSIFIED OPERATIONS--1.1%
ACX Technologies, Inc. * ...... 17,000 225,250
Berkshire Hathaway, Inc., Class B * 105 246,750
PPG Industries, Inc. .......... 9,400 547,550
Time Warner, Inc. ............. 21,600 1,340,550
Tyco International Ltd. ....... 8,000 603,500
-------------
2,963,600
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<PAGE>
PROTECTIVE CORE U.S. EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK--(CONTINUED)
DRUGS & HEALTH CARE--12.0%
Abbott Laboratories ........... 47,200 $ 2,312,800
Allergan, Inc. ................ 22,900 1,482,775
American Home Products Corp. .. 26,200 1,475,388
Amgen, Inc. * ................. 26,200 2,739,538
Arterial Vascular Engineering, Inc. * 11,600 609,000
Bristol Myers Squibb Co. ...... 28,200 3,773,512
Cardinal Health, Inc. ......... 28,050 2,128,294
Eli Lilly & Co. ............... 16,800 1,493,100
Johnson & Johnson Co. ......... 36,100 3,027,887
Merck & Co., Inc. ............. 23,200 3,426,350
Pfizer, Inc. .................. 31,400 3,938,737
Schering-Plough Corp. ......... 49,200 2,718,300
Tenet Healthcare Corp. * ...... 33,400 876,750
Warner-Lambert Co. ............ 18,700 1,406,006
-------------
31,408,437
-------------
ELECTRIC UTILITIES--2.5%
Ameren Corp. .................. 53,100 2,266,706
Dominion Resources, Inc. ...... 12,400 579,700
Duke Energy Corp. ............. 12,000 768,750
Edison International .......... 43,000 1,198,625
Unicom Corp. .................. 42,200 1,627,338
-------------
6,441,119
-------------
FINANCIAL--1.3%
Countrywide Credit Industries, Inc. 19,900 998,731
Providian Financial Corp. ..... 33,150 2,486,250
-------------
3,484,981
-------------
FINANCIAL SERVICES--4.3%
Ambac Financial Group, Inc. ... 4,800 288,900
American General Corp. ........ 16,400 1,279,200
Associates First Capital
Corp., Class A............... 34,646 1,468,124
Lehman Brothers Holdings, Inc.. 58,000 2,555,625
Merrill Lynch & Co., Inc. ..... 36,100 2,409,675
Morgan Stanley, Dean Witter,
Discover & Co. ........... 38,100 2,705,100
State Street Corp. ............ 9,800 681,713
-------------
11,388,337
-------------
FOODS--0.6%
Archer Daniels Midland Co. .... 79,800 1,371,562
Interstate Bakeries Corp. ..... 7,200 190,350
-------------
1,561,912
-------------
HEALTHCARE MANAGEMENT--0.6%
Columbia/HCA Healthcare Corp... 34,600 856,350
Wellpoint Health Networks,
Inc. , Class A*.............. 7,600 661,200
-------------
1,517,550
-------------
HOUSEHOLD PRODUCTS--3.2%
Procter & Gamble Co. .......... 26,800 $ 2,447,175
The Clorox Co. ................ 17,700 2,067,581
Unilever NV ................... 45,900 3,806,831
-------------
8,321,587
-------------
INSURANCE--5.4%
Allstate Corp. ................ 24,810 958,286
American International
Group, Inc. ................. 43,425 4,195,941
CIGNA Corp. ................... 31,100 2,404,419
Equitable Companies, Inc. ..... 31,400 1,817,275
Everest Reinsurance
Holdings, Inc. .............. 9,200 358,225
Hartford Financial Services
Group, Inc. ................. 28,800 1,580,400
Nationwide Financial
Services, Inc.,Class A....... 3,700 191,244
SunAmerica, Inc. .............. 7,900 640,887
Travelers Property Casualty
Corp., Class A............... 67,200 2,083,200
-------------
14,229,877
-------------
INTERGRATED OIL--0.3%
Chevron Corp. ................. 3,000 248,813
Columbia Energy Group.......... 7,200 415,800
-------------
664,613
-------------
LEISURE TIME--0.1%
Carnival Corp. ................ 6,900 331,200
-------------
MACHINERY--0.5%
Ingersoll-Rand Co. ............ 29,300 1,375,269
-------------
METALS--0.1%
ALCOA, Inc. ................... 4,800 357,900
-------------
MULTIMEDIA--1.1%
Viacom, Inc., Class B * ....... 21,100 1,561,400
Walt Disney Co. ............... 47,043 1,411,290
-------------
2,972,690
-------------
OFFICE EQUIPMENT & SUPPLIES--1.6%
Xerox Corp. ................... 36,000 4,248,000
-------------
OIL--5.1%
Exxon Corp. ................... 130,600 9,550,125
Mobil Corp. ................... 34,600 3,014,525
Texaco, Inc. .................. 15,600 824,850
-------------
13,389,500
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
24
<PAGE>
PROTECTIVE CORE U.S. EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK--(CONTINUED)
PACKAGING & CONTAINERS--0.4%
Avery Dennison Corp. .......... 21,200 $ 955,325
-------------
PHOTOGRAPHY--0.7%
Eastman Kodak Co. ............. 24,700 1,778,400
-------------
PUBLISHING--NEWSPAPERS--0.4%
Gannett Co., Inc. ............. 5,000 322,500
Tribune Co. ................... 12,000 792,000
-------------
1,114,500
-------------
RESTAURANTS--0.7%
McDonald's Corp. .............. 20,900 1,601,462
Tricon Global Restaurants, Inc. * 6,000 300,750
-------------
1,902,212
-------------
RETAIL--5.9%
Abercrombie & Fitch Co.,
Class A *................... 11,200 792,400
Dayton Hudson Corp. ........... 78,400 4,253,200
Federated Dept. Stores, Inc. * 34,100 1,485,481
Home Depot, Inc. .............. 41,100 2,514,806
Ingram Micro, Inc., Class A * . 13,900 484,763
Mattel, Inc. .................. 17,100 390,094
Ross Stores, Inc. ............. 30,400 1,197,000
Wal-Mart Stores, Inc. ......... 54,100 4,405,769
-------------
15,523,513
-------------
RETAIL--FOOD CHAINS--2.1%
Albertson's, Inc............... 18,700 1,190,956
Kroger Co. *................... 10,800 653,400
Safeway, Inc. * ............... 60,110 3,662,953
-------------
5,507,309
-------------
SEMICONDUCTORS--1.8%
Intel Corp. ................... 39,200 4,647,650
-------------
STEEL--0.3%
Bethlehem Steel Corp. * ....... 105,300 881,888
-------------
TELECOMMUNICATIONS--10.1%
Ameritech Corp. ............... 30,800 1,951,950
AT&T Corp. .................... 88,300 6,644,575
Bell Atlantic Corp. ........... 17,400 922,200
BellSouth Corp. ............... 41,600 2,074,800
GTE Corp. ..................... 58,200 3,783,000
Lucent Technologies, Inc. ..... 34,600 3,806,000
MCI WorldCom, Inc. * .......... 33,700 2,417,975
Northern Telecom Ltd. ......... 15,200 761,900
SBC Communications, Inc. ...... 27,500 1,474,688
Sprint Corp. (FON Group) ...... 28,300 2,380,737
Sprint Corp. (PCS Group) * .... 14,150 327,219
-------------
26,545,044
-------------
TEXTILES--0.3%
Sara Lee Corp. ................ 31,600 $ 890,725
-------------
TOBACCO--1.2%
Philip Morris Cos., Inc. ...... 58,000 3,103,000
-------------
TOTAL COMMON STOCK--
(Cost $174,466,073) 253,489,890
-------------
DEPOSITORY RECEIPTS--1.4%
OIL--1.4%
Royal Dutch Petroleum Co. ..... 77,400 3,705,525
-------------
TOTAL DEPOSITORY RECEIPTS--
(Cost $3,354,225) 3,705,525
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)
-----
<S> <C> <C>
SHORT TERM INVESTMENT--2.0%
REPURCHASE AGREEMENT--1.9%
State Street Bank and Trust Co.
4.800%, 01/04/1999, maturity
value of $4,942,635, dated
12/31/98, (collateralized by
$3,105,000 United States
Treasury Bond, 10.625%,
08/15/15, with a
value of $5,042,225) ..... $ 4,940 4,940,000
-------------
U.S. GOVERNMENT SECURITIES--0.1%
United States Treasury Bills
4.106%, 02/04/1999 ..... 45** 44,827
4.269%, 02/04/1999 ..... 75** 74,701
4.370%, 02/04/1999 ..... 50** 49,796
4.460%, 02/04/1999 ..... 50** 49,789
4.620%, 02/04/1999 ..... 45** 44,804
-------------
263,917
-------------
TOTAL SHORT TERM INVESTMENT--
(Cost $5,203,917) 5,203,917
-------------
TOTAL INVESTMENTS--
(Cost $183,024,215)--100.0% $ 262,399,332
-------------
-------------
</TABLE>
OTHER INFORMATION--
At December 31, 1998, the CORE U.S. Equity Fund had open futures contracts as
follows:
<TABLE>
<CAPTION>
Market Unrealized
Futures Expiration Contracts Value Gain
- ------- ---------- --------- ----- ----
<S> <C> <C> <C> <C>
S&P 500 March 1999 16 $4,982,000 $185,565
</TABLE>
* Denotes non-income producing security.
** Security has been pledged (in whole or in part) to cover
initial margin requirements for futures contracts.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
<PAGE>
PROTECTIVE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK--86.2%
AEROSPACE--1.8%
AVTEAM, Inc., Class A * ....... 165,600 $ 641,700
TriStar Aerospace Co. * ....... 164,200 1,149,400
-------------
1,791,100
-------------
AGRICULTURE EQUIPMENT--1.6%
Titan International, Inc. ..... 162,300 1,541,850
-------------
AIR FREIGHT, TRUCK & OTHER--3.8%
Allied Holdings, Inc. * ....... 143,700 2,065,687
Hub Group, Inc., Class A * .... 49,900 966,813
Landstar Systems, Inc. * ...... 17,600 717,200
-------------
3,749,700
-------------
BUILDING CONSTRUCTION--1.4%
Stone & Webster, Inc. ......... 40,700 1,353,275
-------------
CHEMICALS--0.7%
Methanex Corp. * .............. 49,200 249,075
Spartech Corp. ................ 20,300 446,600
-------------
695,675
-------------
COMMERCIAL PRODUCTS--0.4%
Synthetic Industries, Inc. * .. 23,500 393,625
-------------
COMMERCIAL SERVICES--0.1%
BridgeStreet Accomodations, Inc. * 6,000 19,125
Opinion Research Corp. * ...... 7,800 42,900
-------------
62,025
-------------
COMMUNICATION SERVICES--1.6%
MDC Communications Corp. , Class A* 150,800 1,387,832
Pegasus Communications Corp. ,
Class A*.................. 6,500 162,906
-------------
1,550,738
-------------
COMPUTER HARDWARE--1.4%
Belden, Inc. .................. 66,100 1,400,494
-------------
COMPUTER SOFTWARE & SERVICES--2.6%
BancTec, Inc. * ............... 110,500 1,388,156
Black Box Corp. * ............. 31,900 1,208,213
-------------
2,596,369
-------------
DIVERSIFIED MANUFACTURING--2.0%
Lydall, Inc. * ................ 81,100 963,063
Wolverine Tube, Inc. * ........ 48,100 1,010,100
-------------
1,973,163
-------------
DRUGS & HEALTH CARE--9.5%
HealthPlan Services Corp. ..... 255,800 $ 2,941,700
Matria Healthcare, Inc. * ..... 743,900 2,138,713
Perrigo Co. * ................. 171,100 1,507,819
Quest Diagnostics, Inc. * ..... 161,800 2,882,062
-------------
9,470,294
-------------
EDUCATION--1.0%
Career Education Corp. * ...... 33,900 1,017,000
-------------
ELECTRIC UTILITIES--2.1%
CMP Group, Inc. ............... 108,800 2,053,600
-------------
FINANCIAL SERVICES--3.4%
Annaly Mortgage Management,
Inc. ....................... 28,900 238,425
Pacific Century Financial
Corp. ...................... 130,100 3,171,187
-------------
3,409,612
-------------
HEALTH CARE--4.9%
American Physician Partners,
Inc. *...................... 172,300 1,087,644
Integrated Health Services,
Inc. ....................... 178,400 2,519,900
Mariner Post-Acute Network,
Inc. * ..................... 269,800 1,230,962
-------------
4,838,506
-------------
HOTELS--2.5%
Prime Hospitality Corp. * ..... 230,300 2,432,544
-------------
HOUSEHOLD PRODUCTS--1.0%
American Safety Razor Co. * ... 81,800 981,600
-------------
INSURANCE--11.0%
American Safety Insurance
Group Ltd. * ............. 45,300 436,012
Amerin Corp. * ................ 98,600 2,329,425
ARM Financial Group, Inc.,
Class A................... 45,600 1,011,750
ESG Re Ltd. ................... 133,100 2,695,275
Penn Treaty American Corp. * .. 45,000 1,212,187
PXRE Corp. .................... 63,100 1,581,444
SCPIE Holdings, Inc. .......... 35,700 1,082,156
Seibels Bruce Group, Inc. * ... 108,900 367,538
Symons International Group,
Inc. *..................... 24,200 175,450
-------------
10,891,237
-------------
MACHINERY--1.1%
UNOVA, Inc. * ................. 59,600 1,080,250
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26
<PAGE>
PROTECTIVE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ -----
<S> <C> <C>
COMMON STOCK--(CONTINUED)
NETWORKING PRODUCTS--2.0%
Vanstar Corp. * ............... 218,000 $ 2,016,500
-------------
OIL & GAS DRILLING--2.0%
Swift Energy Co. *............. 201,900 1,489,012
Tesoro Petroleum Corp. * ...... 40,100 486,213
-------------
1,975,225
-------------
PETROLEUM SERVICES--0.4%
BJ Services Co. * ............. 24,800 387,500
-------------
REAL ESTATE--3.0%
Insignia Financial Group, Inc.* 74,666 905,325
Prime Retail, Inc. ............ 82,100 805,606
RFS Hotel Investors, Inc. ..... 104,700 1,282,575
-------------
2,993,506
-------------
RESTAURANTS--2.4%
Friendly Ice Cream Corp. * .... 94,900 581,262
Mortons Restaurant Group, Inc.* 95,800 1,808,225
-------------
2,389,487
-------------
RETAIL--9.7%
Brookstone, Inc. * ............ 62,200 1,065,175
Finlay Enterprises, Inc. * .... 38,100 385,763
Fleming Cos., Inc. ............ 44,800 464,800
Friedman's, Inc., Class A * ... 283,800 2,908,950
J. Baker, Inc. ................ 227,300 1,306,975
Loehmann's, Inc. * ............ 115,000 219,219
Movado Group, Inc. ............ 58,237 1,550,560
Syms Corp. * .................. 160,400 1,443,600
Tefron Ltd. * ................. 48,900 320,906
-------------
9,665,948
-------------
SEMICONDUCTORS--7.8%
General Semiconductor, Inc. * . 191,800 1,570,363
Kemet Corp. * ................. 156,200 1,757,250
MEMC Electronic Materials, Inc.* 250,100 2,125,850
Vishay Intertechnology, Inc. .. 157,485 2,283,532
-------------
7,736,995
-------------
STEEL--3.8%
Carbide/Graphite Group, Inc. * 59,800 $ 882,050
Ispat International N.V., Class A 94,900 735,475
UCAR International, Inc. * .... 122,400 2,180,250
-------------
3,797,775
-------------
TEXTILES--1.2%
Burlington Industries, Inc. * . 104,400 1,148,400
-------------
TOTAL COMMON STOCK--
(Cost $99,247,353) 85,393,993
-------------
DEPOSITORY RECEIPTS--1.4%
MACHINERY--1.4%
Denison International PLC * ... 112,900 1,411,250
-------------
TOTAL DEPOSITORY RECEIPTS--
(Cost $1,875,712) 1,411,250
-------------
PRINCIPAL
AMOUNT
(000)
------
SHORT TERM INVESTMENT--12.4%
REPURCHASE AGREEMENT--12.4%
State Street Bank and
Trust Co.
4.800%, 01/04/1999, maturity
value of $12,327,571, dated
12/31/98, (Collateralized by
$7,740,000 United States
Treasury Bond, 10.625%,
08/15/15, with a value of
$12,569,025) .... $ 12,321 12,321,000
-------------
TOTAL SHORT TERM INVESTMENT--
(Cost $12,321,000) 12,321,000
-------------
TOTAL INVESTMENTS--
(Cost $113,444,065)--100.0% $ 99,126,243
-------------
-------------
</TABLE>
* Denotes non-income producing security.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
27
<PAGE>
PROTECTIVE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY DESCRIPTION (000) VALUE
-------------------- ----- -----
<S> <C> <C>
GOVERNMENT AND AGENCY SECURITIES--100.0%
FEDERAL AGENCIES--100.0%
Federal Farm Credit Bank
5.040%, 01/12/1999 ..... $ 350 $ 349,461
5.050%, 01/12/1999 ..... 250 249,614
-------------
599,075
-------------
Federal Home Loan Bank
4.800%, 01/04/1999 ..... 400 399,840
4.840%, 01/22/1999 ..... 150 149,577
-------------
549,417
-------------
Federal Home Loan Mortgage Corp.
4.850%, 01/06/1999 ..... 150 149,899
5.020%, 01/06/1999 ..... 250 249,826
5.300%, 01/06/1999 ..... 121 120,911
5.000%, 01/14/1999 ..... 100 99,819
5.030%, 01/15/1999 ..... 400 399,218
4.980%, 03/09/1999 ..... 100 99,073
4.970%, 03/10/1999 ..... 1,100 1,089,674
4.950%, 03/19/1999 ..... 100 98,941
4.969%, 03/26/1999 ..... 400 395,362
-------------
2,702,723
-------------
Federal National Mortgage Assn.
5.020%, 01/04/1999 ..... $ 100 $ 99,958
5.110%, 01/08/1999 ..... 400 399,603
5.070%, 02/02/1999 ..... 400 398,197
5.020%, 02/05/1999 ..... 100 99,512
5.000%, 03/02/1999 ..... 100 99,167
-------------
1,096,437
-------------
Student Loan Marketing
5.050%, 01/04/1999 ..... 113 112,952
------------
Tennessee Valley Authority
5.000%, 01/25/1999 ..... 300 299,000
5.030%, 01/25/1999 ..... 220 219,262
------------
518,262
------------
TOTAL GOVERNMENT AND
AGENCY SECURITIES--
(Cost $5,578,866) 5,578,866
------------
TOTAL INVESTMENTS--
(Cost $5,578,866)--100.0% $ 5,578,866
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
28
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- -----------
<S> <C> <C>
ASSETS
Investments - securities, at value (Note B).................. $ 61,351,198 $ 174,948,762
Investments - repurchase agreements (Note B)................. 0 0
Cash, including foreign currency at value.................... 64,981 80,145
Dividends receivable......................................... 0 86,698
Interest receivable.......................................... 1,418,363 548
Receivable for securities sold............................... 0 14,701
Unrealized appreciation on forward currency contracts (Note H) 328,576 148,052
Receivable for fund shares sold.............................. 460 53,617
Foreign income tax reclaim receivable........................ 0 171,530
Receivable for variation margin.............................. 0 0
Receivable due from Protective Investment Advisors (Note C).. 51,223 159,720
--------------- ---------------
TOTAL ASSETS............................................... 63,214,801 175,663,773
--------------- ---------------
LIABILITIES
Unrealized depreciation on forward currency contracts (Note H) 368,367 417,876
Payable for securities purchased............................. 0 0
Investment management fee payable (Note C)................... 58,486 155,998
Accounts payable and accrued expenses........................ 22,893 104,960
Payable for fund shares redeemed............................. 2,498 7
--------------- ---------------
TOTAL LIABILITIES.......................................... 452,244 678,841
--------------- ---------------
NET ASSETS............................................... $ 62,762,557 $ 174,984,932
--------------- ---------------
--------------- ---------------
NET ASSETS
Paid-in capital.............................................. $ 59,898,401 $ 143,910,037
Undistributed (overdistributed) net investment income (Note B) 123,826 (104,842)
Accumulated net realized gain (loss) on
investments and foreign currency transactions.............. 278,515 2,632,013
Net unrealized appreciation (depreciation) of:
Investments................................................ 2,478,892 28,805,871
Futures.................................................... 0 0
Foreign currency translations.............................. (17,077) (258,147)
--------------- ---------------
NET ASSETS............................................... $ 62,762,557 $ 174,984,932
--------------- ---------------
--------------- ---------------
NET ASSET VALUE PER SHARE
Offering and redemption price per share (based on
shares of capital stock outstanding,
par value $.001 per share)................................. $ 10.650 $ 14.305
Total shares outstanding at end of period.................... 5,893,383 12,232,643
Cost of investments.......................................... $ 58,872,306 $ 146,142,891
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
29
<PAGE>
<CAPTION>
CAPITAL GROWTH AND CORE U.S.
GROWTH FUND INCOME FUND EQUITY FUND
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments - securities, at value (Note B).................. $ 149,485,138 $ 381,852,881 $ 257,459,332
Investments - repurchase agreements (Note B)................. 7,695,000 4,146,000 4,940,000
Cash, including foreign currency at value.................... 190 258 302
Dividends receivable......................................... 108,495 583,311 270,789
Interest receivable.......................................... 1,026 553 658
Receivable for securities sold............................... 719,706 2,443,344 0
Unrealized appreciation on forward currency contracts (Note H) 0 0 0
Receivable for fund shares sold.............................. 110,149 14,701 483,108
Foreign income tax reclaim receivable........................ 47 0 1,674
Receivable for variation margin.............................. 0 0 13,600
Receivable due from Protective Investment Advisors (Note C).. 0 38,497 38,805
-------------- -------------- --------------
TOTAL ASSETS............................................... 158,119,751 389,079,545 263,208,268
-------------- -------------- --------------
LIABILITIES
Unrealized depreciation on forward currency contracts (Note H) 0 0 0
Payable for securities purchased............................. 2,825,621 0 0
Investment management fee payable (Note C)................... 123,053 262,498 170,964
Accounts payable and accrued expenses........................ 22,169 87,587 43,380
Payable for fund shares redeemed............................. 42 439,436 35
-------------- -------------- --------------
TOTAL LIABILITIES.......................................... 2,970,885 789,521 214,379
-------------- -------------- --------------
NET ASSETS............................................... $ 155,148,866 $ 388,290,024 $ 262,993,889
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSETS
Paid-in capital.............................................. $ 111,895,044 $ 375,378,328 $ 182,220,128
Undistributed (overdistributed) net investment income (Note B) 2,655 274,185 45,539
Accumulated net realized gain (loss) on
investments and foreign currency transactions.............. 2,730,921 4,230,128 1,167,540
Net unrealized appreciation (depreciation) of:
Investments................................................ 40,520,246 8,407,383 79,375,117
Futures.................................................... 0 0 185,565
Foreign currency translations.............................. 0 0 0
-------------- -------------- --------------
NET ASSETS............................................... $ 155,148,866 $ 388,290,024 $ 262,993,889
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSET VALUE PER SHARE
Offering and redemption price per share (based on
shares of capital stock outstanding,
par value $.001 per share)................................. $ 20.873 $ 14.068 $ 22.157
Total shares outstanding at end of period.................... 7,433,144 27,599,982 11,869,530
Cost of investments.......................................... $ 116,659,892 $ 377,591,498 $ 183,024,215
<CAPTION>
SMALL CAP MONEY
VALUE FUND MARKET FUND
---------- -----------
<C> <C>
ASSETS
Investments - securities, at value (Note B).................. $ 86,805,243 $ 5,578,866
Investments - repurchase agreements (Note B)................. 12,321,000 0
Cash, including foreign currency at value.................... 694 57,266
Dividends receivable......................................... 15,650 0
Interest receivable.......................................... 1,643 0
Receivable for securities sold............................... 786,161 0
Unrealized appreciation on forward currency contracts (Note H) 0 0
Receivable for fund shares sold.............................. 56,091 0
Foreign income tax reclaim receivable........................ 0 0
Receivable for variation margin.............................. 0 0
Receivable due from Protective Investment Advisors (Note C).. 31,977 2,275
-------------- --------------
TOTAL ASSETS............................................... 100,018,459 5,638,407
-------------- --------------
LIABILITIES
Unrealized depreciation on forward currency contracts (Note H) 0 0
Payable for securities purchased............................. 132,652 0
Investment management fee payable (Note C)................... 65,280 2,884
Accounts payable and accrued expenses........................ 29,337 5,132
Payable for fund shares redeemed............................. 17 21,795
-------------- --------------
TOTAL LIABILITIES.......................................... 227,286 29,811
-------------- --------------
NET ASSETS............................................... $ 99,791,173 $ 5,608,596
-------------- --------------
-------------- --------------
NET ASSETS
Paid-in capital.............................................. $ 118,026,533 $ 5,608,596
Undistributed (overdistributed) net investment income (Note B) 0 0
Accumulated net realized gain (loss) on
investments and foreign currency transactions.............. (3,917,538) 0
Net unrealized appreciation (depreciation) of:
Investments................................................ (14,317,822) 0
Futures.................................................... 0 0
Foreign currency translations.............................. 0 0
-------------- --------------
NET ASSETS............................................... $ 99,791,173 $ 5,608,596
-------------- --------------
-------------- --------------
NET ASSET VALUE PER SHARE
Offering and redemption price per share (based on
shares of capital stock outstanding,
par value $.001 per share)................................. $ 8.657 $ 1.000
Total shares outstanding at end of period.................... 11,527,480 5,608,596
Cost of investments.......................................... $ 113,444,065 $ 5,578,866
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
30
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
INCOME FUND EQUITY FUND
----------- -----------
<S> <C> <C>
INVESTMENT INCOME
Dividend income.............................................. $ 0 $ 2,214,353
Interest income.............................................. 3,230,460 357,902
Foreign taxes withheld....................................... (463) (272,682)
--------------- ---------------
TOTAL INVESTMENT INCOME.................................... 3,229,997 2,299,573
EXPENSES
Investment management fee (Note C)........................... 611,855 1,723,512
Custodian fees and expenses.................................. 84,339 418,483
Transfer agent fee........................................... 2,285 2,285
Audit fee.................................................... 6,880 18,604
Legal fee.................................................... 600 1,622
Directors fee (Note C)....................................... 1,624 4,395
Printing expense............................................. 2,438 6,592
Miscellaneous expense........................................ 70 175
--------------- ---------------
Total operating expenses before reimbursement.............. 710,091 2,175,668
Expense reimbursement borne by Protective Investment
Advisors, Inc. (Note C).................................. (98,236) (452,156)
--------------- ---------------
NET EXPENSES............................................. 611,855 1,723,512
--------------- ---------------
NET INVESTMENT INCOME.................................... 2,618,142 576,061
--------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY, OPTIONS
AND FUTURES TRANSACTIONS Net realized gain (loss) on:
Investments................................................ 2,239,489 12,261,649
Futures.................................................... 0 0
Foreign currency transactions.............................. (948,375) (882,965)
Options.................................................... 0 0
--------------- ---------------
Total net realized gain.................................. 1,291,114 11,378,684
Change in unrealized appreciation (depreciation) of:
Investments................................................ 2,730,862 16,148,229
Futures.................................................... 0 0
Foreign currency translations.............................. (1,159,257) (233,475)
--------------- ---------------
Total change in unrealized appreciation (depreciation)... 1,571,605 15,914,754
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS).................. 2,862,719 27,293,438
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................................. $ 5,480,861 $ 27,869,499
--------------- ---------------
--------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
31
<PAGE>
<TABLE>
<CAPTION>
CAPITAL GROWTH AND CORE U.S.
GROWTH FUND INCOME FUND EQUITY FUND
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income.............................................. $ 1,159,487 $ 6,342,191 $ 3,050,690
Interest income.............................................. 295,764 1,770,578 254,009
Foreign taxes withheld....................................... 0 (31,623) (13,859)
-------------- -------------- --------------
TOTAL INVESTMENT INCOME.................................... 1,455,251 8,081,146 3,290,840
EXPENSES
Investment management fee (Note C)........................... 867,482 3,154,367 1,743,718
Custodian fees and expenses.................................. 47,322 116,605 74,665
Transfer agent fee........................................... 2,285 2,285 2,285
Audit fee.................................................... 10,581 50,231 24,977
Legal fee.................................................... 922 4,379 2,177
Directors fee (Note C)....................................... 2,500 11,866 5,899
Printing expense............................................. 3,749 17,797 8,851
Miscellaneous expense........................................ 55 383 186
-------------- -------------- --------------
Total operating expenses before reimbursement.............. 934,896 3,357,913 1,862,758
Expense reimbursement borne by Protective Investment
Advisors, Inc. (Note C).................................. (67,414) (203,546) (119,040)
-------------- -------------- --------------
NET EXPENSES............................................. 867,482 3,154,367 1,743,718
-------------- -------------- --------------
NET INVESTMENT INCOME.................................... 587,769 4,926,779 1,547,122
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY,
OPTIONS AND FUTURES TRANSACTIONS
Net realized gain (loss) on:
Investments................................................ 5,617,719 20,456,597 2,912,727
Futures.................................................... 0 0 1,007,470
Foreign currency transactions.............................. 0 (3,350) 0
Options.................................................... 0 1,547 0
-------------- -------------- --------------
Total net realized gain.................................. 5,617,719 20,454,794 3,920,197
Change in unrealized appreciation (depreciation) of:
Investments................................................ 27,519,154 (39,609,065) 38,096,285
Futures.................................................... 0 0 155,523
Foreign currency translations.............................. 0 0 0
-------------- -------------- --------------
Total change in unrealized appreciation (depreciation)... 27,519,154 (39,609,065) 38,251,808
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS).................. 33,136,873 (19,154,271) 42,172,005
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................................. $ 33,724,642 $ (14,227,492) $ 43,719,127
-------------- -------------- --------------
-------------- -------------- --------------
<CAPTION>
SMALL CAP MONEY
VALUE FUND MARKET FUND
---------- -----------
<S> <C> <C>
INVESTMENT INCOME
Dividend income.............................................. $ 858,250 $ 0
Interest income.............................................. 521,832 284,269
Foreign taxes withheld....................................... 0 0
-------------- --------------
TOTAL INVESTMENT INCOME.................................... 1,380,082 284,269
EXPENSES
Investment management fee (Note C)........................... 882,229 31,757
Custodian fees and expenses.................................. 67,572 23,689
Transfer agent fee........................................... 2,285 2,285
Audit fee.................................................... 15,224 507
Legal fee.................................................... 1,327 44
Directors fee (Note C)....................................... 3,595 120
Printing expense............................................. 5,395 179
Miscellaneous expense........................................ 117 11
-------------- --------------
Total operating expenses before reimbursement.............. 977,744 58,592
Expense reimbursement borne by Protective Investment
Advisors, Inc. (Note C).................................. (95,515) (26,835)
-------------- --------------
NET EXPENSES............................................. 882,229 31,757
-------------- --------------
NET INVESTMENT INCOME.................................... 497,853 252,512
-------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY,
OPTIONS AND FUTURES TRANSACTIONS
Net realized gain (loss) on:
Investments................................................ 2,864,980 431
Futures.................................................... 0 0
Foreign currency transactions.............................. 0 0
Options.................................................... 988 0
-------------- --------------
Total net realized gain.................................. 2,865,968 431
Change in unrealized appreciation (depreciation) of:
Investments................................................ (21,853,516) 0
Futures.................................................... 0 0
Foreign currency translations.............................. 0 0
-------------- --------------
Total change in unrealized appreciation (depreciation)... (21,853,516) 0
-------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS).................. (18,987,548) 431
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................................. $ (18,489,695) $ 252,943
-------------- --------------
-------------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
32
<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
12/31/98 12/31/97 12/31/98 12/31/97
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income....................... $ 2,618,142 $ 2,251,590 $ 576,061 $ 405,919
Net realized gain on investments,
futures, foreign currency related
transactions and options................ 1,291,114 1,831,449 11,378,684 7,232,491
Net change in unrealized appreciation
(depreciation).......................... 1,571,605 65,428 15,914,754 (3,720,418)
------------- ------------- ------------- --------------
Net increase (decrease) in net assets
resulting from operations............... 5,480,861 4,148,467 27,869,499 3,917,992
------------- ------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE B):
From net investment income.................. (1,431,569) (3,996,275) (74,421) (2,629,399)
From net realized gain on investments....... (1,581,576) (605,051) (8,233,041) (6,951,138)
------------- ------------- ------------- --------------
Net decrease in net assets resulting
from distributions.......................... (3,013,145) (4,601,326) (8,307,462) (9,580,537)
------------- ------------- ------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales..................... 13,043,638 12,870,879 26,827,493 42,023,523
Net proceeds from reinvestment
of distributions........................ 3,013,145 4,601,326 8,307,462 9,580,537
Cost of shares redeemed..................... (4,595,043) (5,860,962) (11,598,983) (10,790,209)
------------- ------------- ------------- --------------
Net increase (decrease) in net assets from
capital stock transactions.................. 11,461,740 11,611,243 23,535,972 40,813,851
------------- ------------- ------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......... 13,929,456 11,158,384 43,098,009 35,151,306
Net assets at beginning of period............... 48,833,101 37,674,717 131,886,923 96,735,617
------------- ------------- ------------- --------------
NET ASSETS AT END OF PERIOD*.................... $ 62,762,557 $ 48,833,101 $ 174,984,932 $ 131,886,923
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
SHARES ISSUED AND REPURCHASED:
Shares sold................................. 1,226,140 1,217,747 1,893,779 3,085,412
Shares issued to shareholders from
reinvestment of distributions............. 283,126 453,698 584,358 774,291
Shares repurchased.......................... (434,859) (554,438) (837,232) (787,248)
------------- ------------- ------------- --------------
Net increase (decrease)......................... 1,074,407 1,117,007 1,640,905 3,072,455
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
*Includes undistributed (overdistributed)
distributions of net investment income...... $ 123,826 $ (702,875) $ (104,842) $ 167,201
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
33
<PAGE>
<CAPTION>
CAPITAL GROWTH FUND GROWTH AND INCOME FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/98 12/31/97 12/31/98 12/31/97
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income....................... $ 587,769 $ 458,089 $ 4,926,779 $ 2,550,416
Net realized gain on investments,
futures, foreign currency related
transactions and options................ 5,617,719 4,629,080 20,454,794 53,904,217
Net change in unrealized appreciation
(depreciation).......................... 27,519,154 9,085,049 (39,609,065) 12,856,048
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations............... 33,724,642 14,172,218 (14,227,492) 69,310,681
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE B):
From net investment income.................. (587,870) (455,335) (4,661,662) (2,537,498)
From net realized gain on investments....... (2,717,132) (4,704,337) (26,790,863) (47,393,437)
------------- ------------- ------------- -------------
Net decrease in net assets resulting
from distributions.......................... (3,305,002) (5,159,672) (31,452,525) (49,930,935)
------------- ------------- ------------- -------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales..................... 50,895,298 34,225,506 75,138,167 97,578,882
Net proceeds from reinvestment
of distributions........................ 3,305,002 5,159,672 31,452,525 49,930,935
Cost of shares redeemed..................... (4,513,550) (3,654,705) (29,123,341) (20,973,687)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from
capital stock transactions.................. 49,686,750 35,730,473 77,467,351 126,536,130
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......... 80,106,390 44,743,019 31,787,334 145,915,876
Net assets at beginning of period............... 75,042,476 30,299,457 356,502,690 210,586,814
------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD*.................... $ 155,148,866 $ 75,042,476 $ 388,290,024 $ 356,502,690
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
SHARES ISSUED AND REPURCHASED:
Shares sold................................. 2,785,364 2,255,062 4,535,739 5,741,493
Shares issued to shareholders from
reinvestment of distributions............. 158,431 333,159 2,230,595 3,252,805
Shares repurchased.......................... (254,257) (240,475) (1,784,688) (1,223,841)
------------- ------------- ------------- -------------
Net increase (decrease)......................... 2,689,538 2,347,746 4,981,646 7,770,457
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
*Includes undistributed (overdistributed)
distributions of net investment income...... $ 2,655 $ 2,754 $ 274,185 $ 12,418
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<CAPTION>
CORE U.S. EQUITY FUND
YEAR ENDED YEAR ENDED
12/31/98 12/31/97
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income....................... $ 1,547,122 $ 1,497,231
Net realized gain on investments,
futures, foreign currency related
transactions and options................ 3,920,197 13,184,871
Net change in unrealized appreciation
(depreciation).......................... 38,251,808 21,412,026
------------- --------------
Net increase (decrease) in net assets
resulting from operations............... 43,719,127 36,094,128
------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE B):
From net investment income.................. (1,553,374) (1,468,909)
From net realized gain on investments....... (2,708,751) (13,999,983)
------------- --------------
Net decrease in net assets resulting
from distributions.......................... (4,262,125) (15,468,892)
------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales..................... 52,591,612 51,406,215
Net proceeds from reinvestment
of distributions........................ 4,262,125 15,468,892
Cost of shares redeemed..................... (10,526,909) (11,913,864)
----------- --------------
Net increase (decrease) in net assets from
capital stock transactions.................. 46,326,828 54,961,243
------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......... 85,783,830 75,586,479
Net assets at beginning of period............... 177,210,059 101,623,580
------------- --------------
NET ASSETS AT END OF PERIOD*.................... $ 262,993,889 $ 177,210,059
------------- --------------
------------- --------------
SHARES ISSUED AND REPURCHASED:
Shares sold................................. 2,568,758 2,828,740
Shares issued to shareholders from
reinvestment of distributions............. 190,614 859,034
Shares repurchased.......................... (516,364) (644,366)
------------- --------------
Net increase (decrease)......................... 2,243,008 3,043,408
------------- --------------
------------- --------------
*Includes undistributed (overdistributed)
distributions of net investment income...... $ 45,539 $ 51,791
------------- --------------
------------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
34
<PAGE>
PROTECTIVE INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND MONEY MARKET FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/98 12/31/97 12/31/98 12/31/97
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income....................... $ 497,853 $ 326,302 $ 252,512 $ 217,214
Net realized gain on investments,
futures, foreign currency related
transactions and options................ 2,865,968 16,132,010 431 6
Net change in unrealized appreciation
(depreciation).......................... (21,853,516) 6,548,104 0 0
------------- ------------- ------------- --------------
Net increase (decrease) in net assets
resulting from operations............... (18,489,695) 23,006,416 252,943 217,220
------------- ------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.................. (510,298) (312,710) (252,512) (217,214)
From net realized gain on investments....... (7,958,253) (11,888,468) (431) (6)
In excess of net realized gain on investments (3,918,953) 0 0 0
------------- ------------- ------------- --------------
Net decrease in net assets resulting
from distributions.......................... (12,387,504) (12,201,178) (252,943) (217,220)
------------- ------------- ------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales..................... 20,266,376 29,170,745 13,362,547 9,024,875
Net proceeds from reinvestment
of distributions........................ 12,387,504 12,201,178 252,943 217,220
Cost of shares redeemed..................... (9,969,055) (8,626,785) (11,628,835) (11,740,814)
------------- ------------- ------------- --------------
Net increase (decrease) in net assets from
capital stock transactions.................. 22,684,825 32,745,138 1,986,655 (2,498,719)
------------- ------------- ------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......... (8,192,374) 43,550,376 1,986,655 (2,498,719)
Net assets at beginning of period............... 107,983,547 64,433,171 3,621,941 6,120,660
------------- ------------- ------------- --------------
NET ASSETS AT END OF PERIOD*.................... $ 99,791,173 $ 107,983,547 $ 5,608,596 $ 3,621,941
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
SHARES ISSUED AND REPURCHASED:
Shares sold................................. 1,712,251 2,449,808 13,362,547 9,024,875
Shares issued to shareholders from
reinvestment of distributions............. 1,477,611 1,057,540 252,943 217,220
Shares repurchased.......................... (871,563) (727,471) (11,628,835) (11,740,814)
------------- ------------- ------------- --------------
Net increase (decrease)..................... 2,318,299 2,779,877 1,986,655 (2,498,719)
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
*Includes undistributed (overdistributed)
distributions of net investment income...... $ 0 $ 13,860 $ 0 $ 0
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
35
<PAGE>
PROTECTIVE INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
GLOBAL INCOME FUND FOR THE PERIOD
YEAR ENDED 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 10.134 $ 10.177 $ 10.074 $ 9.558 $ 10.000
---------- ----------- ----------- ---------- -----------
Income (loss) from investment operations:
Net investment income ................. 0.422 0.558 0.628 0.607 0.367
Net realized and unrealized gain (loss) 0.631 0.455 0.310 0.968 (0.442)
---------- ----------- ----------- ---------- -----------
Total from investment operations....... 1.053 1.013 0.938 1.575 (0.075)
---------- ----------- ----------- ---------- -----------
LESS DISTRIBUTIONS:
From net investment income............. (0.255) (0.917) (0.628) (0.553) (0.367)
In excess of net investment income..... (0.000) 0.000 (0.036) (0.323) 0.000
From net realized gain................. (0.282) (0.139) (0.171) (0.183) 0.000
---------- ----------- ----------- ---------- -----------
Total distributions......................... (0.537) (1.056) (0.835) (1.059) (0.367)
---------- ----------- ----------- ---------- -----------
Net asset value, end of period.............. $ 10.650 $ 10.134 $ 10.177 $ 10.074 $ 9.558
---------- ----------- ----------- ---------- -----------
---------- ----------- ----------- ---------- -----------
TOTAL RETURN (a)............................ 10.40% 9.94% 9.48% 16.94% (0.74)%
RATIOS & SUPPLEMENTAL DATA
Net Assets, end of period (000's)........... $ 62,763 $ 48,833 $ 37,675 $ 31,085 $ 17,281
Ratios to average net assets:
Net expenses (b)...................... 1.10% 1.10% 1.10% 1.10% 1.10%
Gross expenses (b) ................... 1.28% 1.32% 1.42% 1.50% 2.12%
Net investment income (b)............. 4.71% 5.27% 5.71% 5.94% 5.58%
Portfolio Turnover Rate..................... 194% 369% 214% 295% 210%
<CAPTION>
INTERNATIONAL EQUITY FUND FOR THE PERIOD
YEAR ENDED 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 12.452 $ 12.865 $ 11.045 $ 9.581 $ 10.000
---------- ----------- ----------- ---------- -----------
Income (loss) from Investment operations:
Net investment income ................. (0.018) 0.038 0.140 0.067 0.048
Net realized and unrealized gain (loss) 2.584 0.525 1.955 1.817 (0.467)
---------- ----------- ----------- ---------- -----------
Total from investment operations....... 2.566 0.563 2.095 1.884 (0.419)
---------- ----------- ----------- ---------- -----------
LESS DISTRIBUTIONS:
From net investment income............. (0.006) (0.238) (0.005) (0.076) 0.000
In excess of net investment income..... 0.000 0.000 0.000 (0.344) 0.000
From net realized gain................. (0.707) (0.738) (0.270) 0.000 0.000
---------- ----------- ----------- ---------- -----------
Total distributions......................... (0.713) (0.976) (0.275) (0.420) 0.000
---------- ----------- ----------- ---------- -----------
Net asset value, end of period.............. $ 14.305 $ 12.452 $ 12.865 $ 11.045 $ 9.581
---------- ----------- ----------- ---------- -----------
---------- ----------- ----------- ---------- -----------
TOTAL RETURN (a)............................ 20.65% 4.42% 19.00% 19.66% (4.18)%
RATIOS & SUPPLEMENTAL DATA
Net Assets, end of Period (000's)........... $ 174,985 $ 131,887 $ 96,736 $ 58,842 $ 27,385
Ratios to average net assets:
Net expenses (b)...................... 1.10% 1.10% 1.10% 1.10% 1.10%
Gross expenses (b) ................... 1.39% 1.37% 1.38% 1.55% 2.24%
Net investment income (b)............. 0.37% 0.34% 0.52% 0.96% 1.25%
Portfolio Turnover Rate..................... 79% 34% 38% 40% 33%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
36
<PAGE>
PROTECTIVE INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CAPITAL GROWTH FUND YEAR ENDED FOR THE PERIOD
------------------------------------ 6/13/95* TO
12/31/98 12/31/97 12/31/96 12/31/95
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 15.820 $ 12.647 $ 10.613 $ 10.000
---------- ----------- ----------- ----------
Income from investment operations:
Net investment income ................. 0.081 0.104 0.134 0.080
Net realized and unrealized gain ...... 5.427 4.243 2.209 0.613
---------- ----------- ----------- ----------
Total from investment operations....... 5.508 4.347 2.343 0.693
---------- ----------- ----------- ----------
LESS DISTRIBUTIONS:
From net investment income............. (0.081) (0.104) (0.134) (0.080)
In excess of net investment income .... (0.000) (0.000) (0.002) (0.000)
From net realized gain................. (0.374) (1.070) (0.125) 0.000
In excess of net realized gain......... 0.000 0.000 (0.048) 0.000
---------- ----------- ----------- ----------
Total distributions......................... (0.455) (1.174) (0.309) (0.080)
---------- ----------- ----------- ----------
Net asset value, end of period.............. $ 20.873 $ 15.820 $ 12.647 $ 10.613
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
TOTAL RETURN (a)............................ 34.76% 34.57% 22.05% 6.93%
RATIOS & SUPPLEMENTAL DATA
Net Assets, end of period (000's)........... $ 155,149 $ 75,042 $ 30,299 $ 10,716
Ratios to average net assets:
Net expenses (b)...................... 0.80% 0.80% 0.80% 0.80%
Gross expenses (b) ................... 0.86% 0.97% 1.02% 1.62%
Net investment income (b)............. 0.54% 0.90% 1.54% 2.57%
Portfolio Turnover Rate..................... 28% 61% 35% 5%
<CAPTION>
GROWTH AND INCOME FUND YEAR ENDED FOR THE PERIOD
--------------------------------------------------- 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 15.762 $ 14.183 $ 12.197 $ 9.661 $ 10.000
---------- ----------- ----------- ---------- -----------
Income (loss) from investment operations:
Net investment income ................. 0.193 0.132 0.266 0.246 0.114
Net realized and unrealized gain (loss) (0.651) 4.030 2.987 2.854 (0.300)
---------- ----------- ----------- ---------- -----------
Total from investment operations....... (0.458) 4.162 3.253 3.100 (0.186)
---------- ----------- ----------- ---------- -----------
LESS DISTRIBUTIONS:
From net investment income............. (0.183) (0.131) (0.266) (0.246) (0.114)
From net realized gain................. (1.053) (2.452) (1.001) (0.318) (0.031)
In excess of net realized gain......... (0.000) (0.000) (0.000) (0.000) (0.008)
---------- ----------- ----------- ---------- -----------
Total distributions......................... (1.236) (2.583) (1.267) (0.564) (0.153)
---------- ----------- ----------- ---------- -----------
Net asset value, end of period.............. $ 14.068 $ 15.762 $ 14.183 $ 12.197 $ 9.661
---------- ----------- ----------- ---------- -----------
---------- ----------- ----------- ---------- -----------
TOTAL RETURN (A)............................ (2.92)% 29.84% 26.82% 32.29% (1.86)%
RATIOS & SUPPLEMENTAL DATA
Net Assets, end of period (000's)........... $ 388,290 $ 356,503 $ 210,587 $ 128,076 $ 42,305
Ratios to average net assets:
Net expenses (b)...................... 0.80% 0.80% 0.80% 0.80% 0.80%
Gross expenses (b) ................... 0.85% 0.85% .88% 0.93% 1.31%
Net investment income (b)............. 1.25% 0.88% 2.11% 2.36% 2.21%
Portfolio Turnover Rate..................... 116% 69% 49% 55% 36%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
37
<PAGE>
PROTECTIVE INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CORE U.S. EQUITY FUND YEAR ENDED FOR THE PERIOD
----------------------------------------------- 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 18.409 $ 15.437 $ 13.109 $ 9.839 $ 10.000
---------- ----------- ----------- ---------- -----------
Income (loss) from investment operations:
Net investment income ................. 0.132 0.170 0.180 0.143 0.093
Net realized and unrealized gain (loss) 3.981 4.568 2.706 3.470 (0.039)
---------- ----------- ----------- ---------- -----------
Total from investment operations....... 4.113 4.738 2.886 3.613 0.054
---------- ----------- ----------- ---------- -----------
LESS DISTRIBUTIONS:
From net investment income............. (0.133) (0.165) (0.180) (0.143) (0.093)
From net realized gain................. (0.232) (1.601) (0.378) (0.200) (0.120)
In excess of net realized gain......... 0.000 0.000 0.000 0.000 (0.002)
---------- ----------- ----------- ---------- -----------
Total distributions......................... (0.365) (1.766) (0.558) (0.343) (0.215)
---------- ----------- ----------- ---------- -----------
Net asset value, end of period.............. $ 22.157 $ 18.409 $ 15.437 $ 13.109 $ 9.839
---------- ----------- ----------- ---------- -----------
---------- ----------- ----------- ---------- -----------
TOTAL RETURN (a)............................ 22.33% 30.95% 21.94% 36.73% 0.53%
RATIOS & SUPPLEMENTAL DATA
Net Assets, end of period (000's)........... $ 262,994 $ 177,210 $ 101,624 $ 56,723 $ 17,717
Ratios to average net assets:
Net expenses (b)...................... 0.80% 0.80% 0.80% 0.80% 0.80%
Gross expenses (b) ................... 0.85% 0.86% 0.91% 1.01% 1.81%
Net investment income (b)............. 0.71% 1.06% 1.44% 1.69% 2.44%
Portfolio Turnover Rate..................... 48% 61% 34% 60% 56%
<CAPTION>
SMALL CAP VALUE FUND YEAR ENDED FOR THE PERIOD
------------------------------------------------ 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 11.726 $ 10.022 $ 9.345 $ 8.951 $ 10.000
---------- ----------- ----------- ---------- -----------
Income (loss) from investment operations:
Net investment income ................. 0.049 0.040 0.030 0.079 0.038
Net realized and unrealized gain (loss) (1.885) 3.162 1.840 0.502 (1.025)
---------- ----------- ----------- ---------- -----------
Total from investment operations....... (1.836) 3.202 1.870 0.581 (0.987)
---------- ----------- ----------- ---------- -----------
LESS DISTRIBUTIONS:
From net investment income............. (0.051) (0.038) (0.030) (0.079) (0.038)
From net realized gain................. (0.792) (1.460) (1.163) (0.031) (0.001)
In excess of net realized gain......... (0.390) 0.000 0.000 (0.077) (0.023)
---------- ----------- ----------- ---------- -----------
Total distributions......................... (1.233) (1.498) (1.193) (0.187) (0.062)
---------- ----------- ----------- ---------- -----------
Net asset value, end of period.............. $ 8.657 $ 11.726 $ 10.022 $ 9.345 $ 8.951
---------- ----------- ----------- ---------- -----------
---------- ----------- ----------- ---------- -----------
TOTAL RETURN (a)............................ (15.32)% 32.20% 20.22% 6.46% (9.87)%
RATIOS & SUPPLEMENTAL DATA
Net Assets, end of period (000's)........... $ 99,791 $ 107,984 $ 64,433 $ 43,830 $ 21,813
Ratios to average net assets:
Net expenses (b)...................... 0.80% 0.80% 0.80% 0.80% 0.80%
Gross expenses (b) ................... 0.89% 0.89% 0.94% 1.00% 1.62%
Net investment income (b)............. 0.45% 0.38% 0.31% 1.09% 1.07%
Portfolio Turnover Rate..................... 96% 99% 100% 60% 17%
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
38
<PAGE>
PROTECTIVE INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
MONEY MARKET FUND YEAR ENDED FOR THE PERIOD
------------------------------------------------ 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ----------- ----------- ---------- -----------
Income from investment operations:
Net investment income ................. 0.048 0.049 0.047 0.052 0.031
---------- ----------- ----------- ---------- -----------
LESS DISTRIBUTIONS:
From net investment income............. (0.048) (0.049) (0.047) (0.052) (0.031)
---------- ----------- ----------- ---------- -----------
Net asset value, end of period.............. 1.000 1.000 1.000 1.000 1.000
---------- ----------- ----------- ---------- -----------
---------- ----------- ----------- ---------- -----------
TOTAL RETURN (a)............................ 4.91% 4.96% 4.82% 5.32% 3.14%
RATIOS & SUPPLEMENTAL DATA
Net Assets, end of period (000's)........... $ 5,609 $ 3,622 $ 6,121 $ 5,070 $ 3,618
Ratios to average net assets:
Net expenses (b)...................... 0.60% 0.60% 0.60% 0.60% 0.60%
Gross expenses (b) ................... 1.11% 1.42% 1.27% 1.17% 2.24%
Net investment income (b)............. 4.77% 4.84% 4.72% 5.19% 3.80%
</TABLE>
*Commencement of operations.
(a) 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. Total
return would have been lower had Protective Life and Protective
Investment Advisors, Inc. not reimbursed certain Fund expenses.
(b) Annualized for periods less than one year.
39
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE A - ORGANIZATION
Protective Investment Company (the "Company") was incorporated in the State
of Maryland on September 2, 1993 as an open-end management investment
company. The Company offers seven separately managed pools of assets which
have differing investment objectives and policies. The Company currently
issues shares in seven Funds: Global Income Fund, International Equity Fund,
Capital Growth Fund, Growth and Income Fund, CORE U.S. Equity Fund, Small Cap
Value Fund (formerly the 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 fund, resulting in 1,000 shares being issued by each of the Global Income
Fund, International Equity Fund, Growth and Income Fund, CORE U.S. Equity
Fund and Small Cap Value Fund and 10,000 shares being issued by the Money
Market Fund, was provided on March 2, 1994 by Protective Life Insurance
Company. The Company commenced investment operations on March 14, 1994. On
June 13, 1995 the Capital Growth Fund commenced investment operations by
issuing 100,000 shares of stock to Protective Life Insurance Company
("Protective Life") in exchange for an initial contribution of $1,000,000.
Effective May 1, 1997, the name of the Select Equity Fund was changed to the
CORE U.S. Equity Fund. Effective May 1, 1998, the name of the Small Cap
Equity Fund was changed to the Small Cap Value Fund.
The Company offers each Fund to separate accounts of Protective Life and an
affiliate, American Foundation as funding vehicles for certain variable annuity
and variable life contracts issued by Protective Life or American Foundation
through separate accounts.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
The accounting policies adopted by the Company 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 sale 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.
40
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
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, a 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 and the Fund may suffer a loss.
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 accounting records of the Funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at the prevailing rate of exchange at period end. Purchases and sales
of securities, income receipts and expense payments are translated into U.S.
dollars at the prevailing exchange rate on the respective dates of
transactions.
The Funds do not isolate the portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in their market prices. Such fluctuations are included
in net realized and unrealized gain or loss from investments. Net realized
exchange gains (losses) from foreign currency transactions represent net
realized exchange gains (losses) from forward foreign currency contracts,
disposition of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, and the difference
between the amount of net investment income recorded on the Portfolios
accounting records and the U.S. dollar equivalent amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities, other than investments in securities,
as a result of changes in exchange rates.
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.
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. 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
41
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
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.
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 their
respective 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 which 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 - The Company's 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 Global Income Fund, International Equity
Fund, Capital Growth Fund, Growth and Income Fund, CORE U.S. Equity Fund and
Small Cap Value 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 substantially 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
paid-in capital to reflect the tax characterization.
NOTE C - AGREEMENTS AND FEES
The Company has entered into an investment management agreement with Protective
Investment Advisors, Inc. (formerly Investment Distributors Advisory Services,
Inc.) ("PIA" or 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, 0.80%; Growth and Income Fund, 0.80%; CORE U.S.
Equity Fund, 0.80%; Small Cap Value Fund, 0.80%; and Money Market Fund, 0.60%.
In order to limit expenses, PIA 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, 0.80%; Growth and
Income Fund, 0.80%; CORE U.S. Equity Fund, 0.80%; Small Cap Value Fund, 0.80%;
and Money Market Fund, 0.60%. PIA may terminate its obligations to pay such
expenses upon 120 days notice to the Company. Prior to May 1, 1998, Protective
Life paid such expenses.
42
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
Goldman Sachs Asset Management acts as the investment adviser (the "Adviser") of
Capital Growth Fund, Growth and Income Fund, CORE U.S. Equity Fund, Small Cap
Value Fund and Money Market 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 with the Investment
Manager under which the Adviser manages the investment portfolios of the Fund of
which it is Adviser. As compensation for their 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, 0.40% of the first $100 million, 0.30% of the next $100 million,
and 0.25% of assets in excess of $200 million; Capital Growth Fund, Growth and
Income Fund, CORE U.S. Equity Fund and Small Cap Value Fund, 0.40% of the first
$100 million, 0.30% of the next $100 million, and 0.20% of assets in excess of
$200 million; and Money Market Fund, 0.35% of the first $100 million, 0.25% of
the next $100 million, and 0.15% 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, 1998, 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.................. $ 81,348,889 $26,652,987 $71,033,422 $27,747,114
International Equity Fund........... 136,324,200 0 119,319,750 0
Capital Growth Fund................. 69,329,448 2,914,961 28,864,717 346,265
Growth and Income Fund.............. 477,653,105 0 418,355,826 0
CORE U.S. Equity Fund............... 146,725,066 18,554 101,464,286 1,818,349
Small Cap Value Fund................ 102,511,658 0 96,189,265 0
</TABLE>
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, 1998 were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
IDENTIFIED GROSS UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Global Income Fund.................. $ 58,872,306 $ 2,794,524 $ (315,632) $ 2,478,892
International Equity Fund........... 147,369,684 34,416,952 (6,837,874) 27,579,078
Capital Growth Fund................. 116,818,539 42,261,828 (1,900,229) 40,361,599
Growth and Income Fund.............. 377,666,422 25,406,285 (17,073,826) 8,332,459
CORE U.S. Equity Fund............... 183,024,215 84,650,706 (5,275,589) 79,375,117
Small Cap Value Fund................ 113,999,239 6,083,140 (20,956,136) (14,872,996)
Money Market Fund................... 5,578,866 0 0 0
</TABLE>
For the year ended December 31, 1998, the Funds' Adviser earned approximately
$895, $2,346, $100,828, $2,762, and $9,517 of brokerage commissions,
respectively, from portfolio transactions executed on behalf of the
International Equity Fund, Capital Growth Fund, Growth and Income Fund, CORE
U.S. Equity Fund, and Small Cap Value Funds, respectively.
43
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
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 Funds as follows: Global Income
Fund, 100 million shares; International Equity Fund, 100 million shares; Capital
Growth Fund, 100 million shares; Growth and Income Fund, 100 million shares;
CORE U.S. Equity Fund, 100 million shares; Small Cap Value Fund, 100 million
shares; and Money Market Fund, 100 million shares.
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,
1998; which designates long term capital gain dividends paid.
<TABLE>
<CAPTION>
LONG TERM
CAPITAL GAIN
DIVIDENDS PAID
--------------
<S> <C>
Global Income Fund.............................................................. $ 269,958
International Equity Fund....................................................... 8,233,041
Capital Growth Fund............................................................. 2,717,132
Growth and Income Fund.......................................................... 21,861,401
CORE U.S. Equity Fund........................................................... 2,527,510
Small Cap Value Fund............................................................ 5,262,993
</TABLE>
NOTE G - SUBSEQUENT EVENT
On October 28, 1998, Protective Life Insurance Company filed with the Securities
and Exchange Commission an application for an order of approval pursuant to
Section 26(b) of the Investment Company Act of 1940 to liquidate the Money
Market Fund. The application is expected to be approved and the Money Market
Fund is expected to be liquidated in April 1999.
NOTE H - FORWARD FOREIGN CURRENCY CONTRACTS
At December 31, 1998, 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 12/31/98 UNREALIZED
- ------------------ ON ORIGINATION U.S. $ APPRECIATION
FOREIGN CURRENCY PURCHASE CONTRACTS DATE VALUE (DEPRECIATION)
- ----------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
DEM, expiring 01/29/99 (1 contract).................. $ 563,949 $ 555,992 $ (7,957)
-------------- ------------- --------------
FOREIGN CURRENCY SALE CONTRACTS
- -------------------------------
CAD, expiring 02/22/99 (1 contract).................. 1,023,876 1,036,241 (12,365)
CHF, expiring 02/17/99 (1 contract).................. 1,460,454 1,474,348 (13,894)
DEM, expiring 01/22/99-02/10/99 (6 contracts)........ 3,909,712 3,899,718 9,994
DKK, expiring 01/13/99 (1 contract).................. 3,240,469 3,175,468 65,001
ESP, expiring 01/20/99 (1 contract).................. 1,426,409 1,432,168 (5,759)
FRF, expiring 01/14/99 (1 contract).................. 1,352,811 1,323,746 29,065
GBP, expiring 01/29/99 (3 contracts)................. 9,457,258 9,334,181 123,077
ITL, expiring 01/12/99 (1 contract).................. 4,694,658 4,722,718 (28,060)
JPY, expiring 02/10/99-03/04/99 (4 contracts)........ 6,178,943 6,383,262 (204,319)
SEK, expiring 01/22/99 (1 contract).................. 339,454 325,692 13,762
-------------- ------------- ------------
33,084,044 33,107,542 (23,498)
-------------
Offsetting forward currency contracts not yet settled
(45 contracts) (8,336)
-------------
NET UNREALIZED DEPRECIATION $ (39,791)
-------------
-------------
</TABLE>
44
<PAGE>
PROTECTIVE INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND U.S. $ COST 12/31/98 UNREALIZED
- ------------------------- ON ORIGINATION U.S. $ APPRECIATION
FOREIGN CURRENCY PURCHASE CONTRACTS DATE VALUE (DEPRECIATION)
- ----------------------------------- --------------- ------------- --------------
<S> <C> <C> <C>
DEM, expiring 01/25/99- 01/29/99 (3 contracts)....... $ 5,881,861 $ 5,829,580 $ (52,281)
JPY, expiring 02/10/99 (1 contract).................. 2,417,439 2,513,308 95,869
-------------- ------------- ------------
8,299,300 8,342,888 43,588
------------
FOREIGN CURRENCY SALE CONTRACTS
CHF, expiring 02/17/99 (1 contract).................. $ 3,947,411 $ 3,984,964 (37,553)
GBP, expiring 01/29/99 (2 contracts)................. 2,140,805 2,108,984 31,821
HKD, expiring 12/08/99 (1 contract).................. 3,638,178 3,685,062 (46,884)
JPY, expiring 03/04/99 (1 contract).................. 2,372,411 2,520,711 (148,300)
-------------- ------------- -------------
12,098,805 12,299,721 (200,916)
-------------
Offsetting forward currency contracts not yet settled
(16 contracts) (112,496)
-------------
NET UNREALIZED DEPRECIATION $ (269,824)
-------------
-------------
</TABLE>
GLOSSARY OF TERMS
CAD - Canadian Dollar GBP - Great Britain Pound
CHF - Swiss Franc HKD - Hong Kong Dollar
DEM - Deutsche Mark ITL - Italian Lira
DKK - Danish Krone JPY - Japanese Yen
ESP - Spanish Peseta SEK - Swedish Krona
FRF - French Franc USD - United States Dollar
45
<PAGE>
PROTECTIVE INVESTMENT COMPANY
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Investors of Protective Investment Company:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Protective Investment Company (the
"Company"), consisting of Global Income Fund, International Equity Fund, Capital
Growth Fund, Growth and Income Fund, CORE U.S. Equity Fund, Small Cap Value Fund
(formerly Small Cap Equity Fund) and Money Market Fund at December 31, 1998, and
the results of their operations, the changes in their net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 12, 1999
46
<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
Richard J. Bielen, DIRECTOR, VICE PRESIDENT AND COMPLIANCE OFFICER
Jerry W. DeFoor, VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
John O'Sullivan, TREASURER
Steve M. Callaway, SECRETARY
---------------
INVESTMENT MANAGER
Protective Investment Advisors, Inc.
---------------
INVESTMENT ADVISERS
Goldman Sachs Asset Management
Goldman Sachs Asset Management International
---------------
PRINCIPAL UNDERWRITER
Investment Distributors, Inc.
---------------
Protective Investment Advisors, Inc., Investment Distributors, Inc.,
Protective Life Insurance Company and American Foundation Life Insurance Company
are each subsidiaries of Protective Life Corporation.
- --------------------------------------------------------------------------------
The information contained in this report is intended for general
informational purposes only. This report is not authorized for
distribution to prospective investors unless preceded or accompanied by
current Company and Separate Account prospectuses which contain important
information concerning the Company, the Separate Account and its current
public offering of variable insurance and annuity contracts.
- --------------------------------------------------------------------------------
