PROTECTIVE INVESTMENT CO, 497, 1999-05-07

PROTECTIVE INVESTMENT CO
497, 1999-05-07

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<PAGE>
[LOGO]
PROTECTIVE CORE U.S. EQUITY FUND
PROTECTIVE CAPITAL GROWTH FUND
PROTECTIVE SMALL CAP VALUE FUND
PROTECTIVE INTERNATIONAL EQUITY FUND
PROTECTIVE GROWTH AND INCOME FUND
PROTECTIVE GLOBAL INCOME FUND

The Securities and Exchange Commission has not approved or disapproved shares of
the Funds or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

An investment in the Funds is not a bank deposit and is not insured, guaranteed,
or endorsed by the Federal Deposit Insurance Corporation, or any other
government agency. An investment in a Fund involves investment risks, including
possible loss of principal.

May 1, 1999
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
THE PROTECTIVE INVESTMENT COMPANY FUNDS
[PROTECTIVE INVESTMENT COMPANY] Protective CORE U.S. Equity Fund .......................... 1
Protective Capital Growth Fund ............................ 3
Protective Small Cap Value Fund ........................... 5
THE PROTECTIVE INVESTMENT COMPANY (THE Protective Growth and Income Fund ......................... 8
"COMPANY") IS AN OPEN-END MANAGEMENT Protective International Equity Fund ...................... 10
INVESTMENT COMPANY CONSISTING OF SIX Protective Global Income Fund ............................. 12
SEPARATE INVESTMENT PORTFOLIOS OR "FUNDS." HOW THE FUNDS ACHIEVE THEIR OBJECTIVES .................... 15
THIS PROSPECTUS DESCRIBES EACH FUND -- PRINCIPAL RISKS OF THE FUNDS .............................. 16
PLEASE READ IT AND RETAIN IT FOR FUTURE HIGHER RISK SECURITIES AND TECHNIQUES ..................... 18
REFERENCE. PRINCIPAL INVESTMENT SECURITIES AND 25
TECHNIQUES ................................................ 27
EACH FUND HAS ITS OWN INVESTMENT OBJECTIVE, MANAGEMENT OF THE FUNDS ................................... 31
INVESTMENT POLICIES, RESTRICTIONS, AND YEAR 2000 ................................................. 31
ATTENDANT RISKS. THOSE INVESTMENT DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS ................. 31
RESTRICTIONS AND POLICIES OF A FUND THAT DETERMINATION OF NET ASSET VALUE .......................... 33
ARE DESIGNATED AS FUNDAMENTAL CANNOT BE TAXATION .................................................. 34
CHANGED WITHOUT APPROVAL OF A MAJORITY OF FINANCIAL HIGHLIGHTS ......................................
THE OUTSTANDING SHARES OF THAT FUND AS ADDITIONAL INFORMATION ABOUT THE FUNDS
DEFINED IN THE STATEMENT OF ADDITIONAL
INFORMATION ("SAI").
SHARES OF EACH FUND ARE OFFERED EXCLUSIVELY
TO CERTAIN REGISTERED SEPARATE ACCOUNTS OF
PROTECTIVE LIFE INSURANCE COMPANY
("PROTECTIVE LIFE") AND PROTECTIVE LIFE AND
ANNUITY INSURANCE COMPANY ("PLAI")
(FORMERLY, AMERICAN FOUNDATION LIFE
INSURANCE COMPANY) AS FUNDING VEHICLES FOR
CERTAIN VARIABLE ANNUITY AND VARIABLE LIFE
INSURANCE CONTRACTS ISSUED BY PROTECTIVE
LIFE AND PLAI AND ARE NOT OFFERED DIRECTLY
TO THE PUBLIC.
</TABLE>

i
<PAGE>
FUND INVESTMENT OBJECTIVES AND STRATEGIES AND RISK/RETURN SUMMARIES
- --------------------------------------------------------------------------------

PROTECTIVE CORE U.S. EQUITY FUND

INVESTMENT OBJECTIVE: Long-term growth of capital and dividend income.

INVESTMENT ADVISER: Goldman Sachs Asset Management ("GSAM")

BENCHMARK: S&P 500 Index

INVESTMENT FOCUS: U.S. equity securities representing a variety of industries

INVESTMENT STYLE: Blend (Value and Growth), enhanced by a proprietary
quantitative model (CORE).

[GRAPH]

Principal Investment Strategies: EQUITY SECURITIES. The Fund seeks its
investment objective by investing in a broadly diversified portfolio of large
cap and blue chip equity securities representing all major sectors of the U.S.
economy. Under normal circumstances, the Fund invests at least 90% of its total
assets in equity securities of U.S. issuers, including the equity securities of
foreign issuers that are traded in the United States.

The Fund's investments are selected using both a variety of quantitative
techniques and fundamental research in seeking to maximize the Fund's expected
return, while maintaining risk, style, capitalization and industry
characteristics similar to the S&P 500 Index. The Fund seeks a broad
representation in most major sectors of the U.S. economy and a portfolio of
securities of companies with average long-term earnings growth expectations and
dividend yields.

OTHER. The Fund's investments in fixed-income securities are limited to those
securities that are considered cash equivalents.

Principal Risks: The Fund is subject to market risk, the risk that the value of
securities in which the Fund invests may go up or down in response to the
prospects of individual companies and/or general economic conditions. Loss of
money is a significant risk of investing in this Fund.

CORE STANDS FOR COMPUTER-OPTIMIZED RESEARCH ENHANCED

The CORE U.S. Equity Fund uses the multifactor model, a rigorous computerized
rating system developed by the Investment Adviser, to forecast the returns of
securities held in the investment portfolio of the Fund.

The multifactor model incorporates common variables covering measures of:

- - Value (stock price-to-book value, stock price-to-earnings, cash flow to
enterprise value)
- - Momentum (earnings momentum, price momentum, sustainable growth)
- - Risk (market risk, company-specific risk, earnings risk)

All of the factors are carefully evaluated within the multi factor model since
each has demonstrated a significant impact on the performance of the securities
and markets they were designed to forecast. The multifactor model is described
in greater detail in the SAI.

1
<PAGE>
To the extent that the Fund invests in higher-risk securities, it takes on
additional risks that could adversely affect its performance. For example, to
the extent that the Fund invests in securities of foreign issuers, it will be
subject to the risks related to such securities. The risks associated with these
and certain other higher-risk securities and practices that the Fund may utilize
are described in more detail later in this Prospectus and the SAI.

PERFORMANCE INFORMATION

HOW WELL HAS THE CORE U.S. EQUITY FUND PERFORMED SINCE ITS INCEPTION?

The following bar chart provides an illustration of the performance of the CORE
U.S. Equity Fund since its inception. The bar chart is intended to show you the
amount of variability the CORE U.S. Equity Fund has experienced in its
performance from year to year and is an indication of the degree of risk that is
involved with investing in the CORE U.S. Equity Fund.

PLEASE REMEMBER THAT PAST PERFORMANCE IS NO INDICATION OR GUARANTEE OF THE
RESULTS THE CORE U.S. EQUITY FUND MAY ACHIEVE IN THE FUTURE. FUTURE RETURNS MAY
BE HIGHER OR LOWER THAN THE RETURNS THAT THE CORE U.S. EQUITY FUND HAS ACHIEVED
IN THE PAST. PERFORMANCE REFLECTS EXPENSE LIMITATIONS THAT ARE CURRENTLY IN
EFFECT. THE PERFORMANCE INFORMATION PRESENTED IN THE CHART DOES NOT REFLECT THE
FEES AND CHARGES ASSOCIATED WITH THE VARIABLE ANNUITY AND VARIABLE LIFE
INSURANCE CONTRACTS ISSUED BY PROTECTIVE LIFE AND PLAI (THE "CONTRACTS"). IF
THESE EXPENSE LIMITATIONS WERE NOT IN EFFECT OR IF THE FEES AND CHARGES OF THE
CONTRACTS WERE INCLUDED, THE FUND'S PERFORMANCE WOULD HAVE BEEN REDUCED.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PROTECTIVE CORE U.S. EQUITY FUND
<S> <C>
YEAR BY YEAR TOTAL RETURN AS OF 12/31 EACH YEAR
1995 36.73%
1996 21.94%
1997 30.95%
1998 22.33%
</TABLE>

<TABLE>
<CAPTION>
RETURN
-----------
<S> <C> <C>
Best Quarter 4th Qtr 1998 22.44%
Worst Quarter -- 3rd Qtr 1998 -15.50%
</TABLE>

The following table compares the annual total returns of the CORE U.S. Equity
Fund with the performance of the S&P 500 Index.*

<TABLE>
<CAPTION>
CORE US S&P 500
ANNUAL RETURN EQUITY FUND INDEX
---------------- ------------- ------------
<S> <C> <C>
One Year 22.33% 28.57%
Since Inception 22.83%(a) 26.17%(b)
</TABLE>

(a) From the commencement of investment operations on 3/14/94.

(b) Performance of the benchmark is not available for the period 3/14/94
(commencement of investment operations) through 3/31/94. For that reason,
performance is shown from 4/01/94.

* The S&P 500 Index is the Standard & Poor's Corporation's Composite Index of
500 stocks, a widely recognized, unmanaged index of common stock prices. The S&P
500 Index figures do not reflect any fees or expenses.

2
<PAGE>
PROTECTIVE CAPITAL GROWTH FUND

INVESTMENT OBJECTIVE: Long-term growth of capital

INVESTMENT ADVISER: GSAM

BENCHMARK: S&P 500 Index

INVESTMENT FOCUS: U.S. equity securities that offer long-term capital
appreciation potential

INVESTMENT STYLE: Growth

[GRAPH]

Principal Investment Strategies: EQUITY SECURITIES. The Fund invests, under
normal circumstances, at least 90% of its total assets in equity securities. The
Fund seeks its investment objective by investing in a diversified portfolio of
equity securities that the Investment Adviser considers to have long-term
capital appreciation potential. Although the Fund invests primarily in U.S.
equity securities, it may invest up to 10% of its total assets in securities of
foreign issues and non-dollar securities, including securities of issuers in
emerging countries and securities quoted in foreign countries.

To the extent that the Fund invests in higher-risk securities, it takes on
additional risks that could adversely affect its performance. For example, to
the extent that the Fund invests in securities of foreign issuers, it will be
subject to the risks related to such securities. The risks associated with these
and certain other higher-risk securities and practices that the Fund may utilize
are described in more detail later in this Prospectus and the SAI.

GROWTH COMPANIES HAVE EARNINGS EXPECTATIONS THAT EXCEED THOSE OF THE STOCK
MARKET AS A WHOLE.

THE GROWTH INVESTMENT STYLE
In selecting stocks for the Capital Growth Fund, the Investment Adviser applies
the following principles:

1. Invest as if buying the company/business, not simply trading its stock:
- Understand the business, management, products and competition.
- Perform intensive, hands-on fundamental research.
- Seek businesses with strategic competitive advantages.
- Over the long-term, expect each company's stock price ultimately to
track the growth of the business.

2. Buy high-quality growth businesses that possess strong business franchises,
favorable long-term prospects and excellent management.

3. Purchase superior long-term growth at a favorable price -- seek to purchase
at a fair valuation, giving the investor the potential to fully capture
returns from above-average growth rates.

3
<PAGE>
PERFORMANCE INFORMATION

HOW WELL HAS THE CAPITAL GROWTH FUND PERFORMED SINCE ITS INCEPTION?

The following bar chart provides an illustration of the performance of the
Capital Growth Fund since its inception. The bar chart is intended to show you
the amount of variability the Capital Growth Fund has experienced in its
performance from year to year and is an indication of the degree of risk that is
involved with investing in the Capital Growth Fund.

PLEASE REMEMBER THAT PAST PERFORMANCE IS NO INDICATION OR GUARANTEE OF THE
RESULTS THE CAPITAL GROWTH FUND MAY ACHIEVE IN THE FUTURE. FUTURE RETURNS MAY BE
HIGHER OR LOWER THAN THE RETURNS THAT THE CAPITAL GROWTH FUND HAS ACHIEVED IN
THE PAST. PERFORMANCE REFLECTS EXPENSE LIMITATIONS THAT ARE CURRENTLY IN EFFECT.
THE PERFORMANCE INFORMATION IN THE CHART DOES NOT REFLECT THE FEES AND CHARGES
ASSOCIATED WITH THE CONTRACTS. IF THESE EXPENSE LIMITATIONS WERE NOT IN EFFECT
OR IF THE FEES AND CHARGES OF THE CONTRACTS WERE INCLUDED, THE FUND'S
PERFORMANCE WOULD HAVE BEEN REDUCED.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PROTECTIVE CAPITAL GROWTH FUND
<S> <C>
YEAR BY YEAR TOTAL RETURN AS OF 12/31 EACH YEAR
1996 22.05%
1997 34.59%
1998 34.76%
</TABLE>

<TABLE>
<CAPTION>
RETURN
-----------
<S> <C> <C>
Best Quarter 4th Qtr 1998 24.55%
Worst Quarter 3rd Qtr 1998 -11.05%
</TABLE>

The following table compares the annual total returns of the Capital Growth Fund
with the performance of the S&P 500 Index.*

<TABLE>
<CAPTION>
CAPITAL S&P 500
ANNUAL RETURN GROWTH FUND INDEX
---------------- ------------- --------------
<S> <C> <C>
One Year 34.76% 28.57%
Since Inception 27.44%(a) 28.74%(a)
</TABLE>

(a) From the commencement of investment operations on 6/13/95.

4
<PAGE>
PROTECTIVE SMALL CAP VALUE FUND

INVESTMENT OBJECTIVE: Long-term growth of capital

INVESTMENT ADVISER: GSAM

BENCHMARK: Russell 2000 Index

INVESTMENT FOCUS: Small-capitalization U.S. stocks that are believed to be
undervalued or undiscovered by the marketplace.

INVESTMENT STYLE: Value

[GRAPH]

Principal Investment Strategies: The Fund invests, under normal circumstances,
at least 65% of its total assets in equity securities of companies with public
stock market capitalizations of $1 billion or less at the time of investment.
Under normal circumstances, the Fund's investment horizon for ownership of
stocks will be two to three years. Dividend income, if any, is an incidental
consideration. If the market capitalization of a company held by the Fund
increases above $1 billion, the Fund may, consistent with its investment
objective, continue to hold the security.

The Fund invests in companies which the Investment Adviser believes are
well-managed niche businesses that have the potential to achieve high or
improving returns on capital and/or above average sustainable growth. The Fund
may invest in securities of small market capitalization companies which may have
experienced financial difficulties. The Fund may also invest in companies that
are in the early stages of their life and that the Investment Adviser believes
have significant growth potential. The Investment Adviser believes that the
companies in which the Fund may invest offer greater opportunity for growth of
capital than larger, more mature, better known companies. Although the Fund will
invest primarily in publicly traded U.S. securities, it may invest up to 25% of
its total assets in securities of foreign issuers and non-dollar securities,
including securities of issuers in emerging countries.

OTHER. The Fund may invest in the aggregate up to 35% of its total assets in
companies with public stock market capitalizations in excess of $1 billion at
the time of investment and in fixed-income securities.

VALUE EXISTS WHEN A STOCK'S PRICE BECOMES INEXPENSIVE RELATIVE TO THE COMPANY'S
ESTIMATED EARNINGS AND/OR DIVIDEND-PAYING ABILITY OVER THE LONG TERM.

The Investment Adviser manages the Small Cap Value Fund using a "value"
investment style. The Investment Adviser seeks stocks that are discounted due
to:

- - Company-specific problems that are over-discounted in the marketplace.
- - Cyclically out-of-favor status.
- - Unrecognized positive fundamentals.

The Investment Adviser seeks to identify unrecognized value through:

- - Firsthand fundamental research.
- - Maintaining a long-term investment horizon.
- - A team approach to decision making.

5
<PAGE>
money is a significant risk of investing in this Fund. In addition to the risks
that are described above with regard to equity securities in general, the Fund
also is subject to the following risks:
- - SMALL COMPANY STOCKS -- Small capitalization stocks involve greater risk
than those associated with larger, more established companies. Small company
stocks may be subject to more abrupt or erratic price movements.
- - FOREIGN INVESTMENTS -- The Small Cap Value Fund also is subject to the risks
associated with securities of foreign issuers and non-dollar securities that are
not normally associated with dollar-denominated securities of domestic
issuers. The risks associated with such securities normally will be greatest
when the Fund invests in issuers located in emerging countries. These risks
are discussed in detail under the caption "Higher Risk Securities" later in
this Prospectus and in the SAI.

The risks associated with these and certain other higher-risk securities and
practices that the Fund may utilize, are described in more detail later in this
Prospectus and in the SAI.

6
<PAGE>
PERFORMANCE INFORMATION

HOW WELL HAS THE SMALL CAP VALUE FUND PERFORMED SINCE ITS INCEPTION?

The following bar chart provides an illustration of the performance of the Small
Cap Value Fund since its inception. The bar chart is intended to show you the
amount of variability the Small Cap Value Fund has experienced in its
performance from year to year and is an indication of the degree of risk that is
involved with investing in the Small Cap Value Fund.

PLEASE REMEMBER THAT PAST PERFORMANCE IS NO INDICATION OR GUARANTEE OF THE
RESULTS THE SMALL CAP VALUE FUND MAY ACHIEVE IN THE FUTURE. FUTURE RETURNS MAY
BE HIGHER OR LOWER THAN THE RETURNS THAT THE SMALL CAP VALUE FUND HAS ACHIEVED
IN THE PAST. PERFORMANCE REFLECTS EXPENSE LIMITATIONS THAT ARE CURRENTLY IN
EFFECT. THE PERFORMANCE INFORMATION IN THE CHART DOES NOT REFLECT THE FEES AND
CHARGES ASSOCIATED WITH THE CONTRACTS. IF THESE EXPENSE LIMITATIONS WERE NOT IN
EFFECT OR IF THE FEES AND CHARGES OF THE CONTRACTS WERE INCLUDED, THE FUND'S
PERFORMANCE WOULD HAVE BEEN REDUCED.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PROTECTIVE SMALL CAP VALUE FUND
<S> <C>
YEAR BY YEAR TOTAL RETURN AS OF 12/31 EACH YEAR
1995 6.46%
1996 20.22%
1997 32.20%
1998 -15.32%
</TABLE>

<TABLE>
<CAPTION>
RETURN
-----------
<S> <C> <C>
Best Quarter 3rd Qtr 1997 16.58%
Worst Quarter 3rd Qtr 1998 -32.27%
</TABLE>

The following table compares the annual total returns of the Small Cap Value
Fund with the performance of the Russell 2000 Index.*

*The Russell 2000 Index is an unmanaged index of common stock prices. The
Russell 2000 Index figures do not reflect any fees or expenses.

<TABLE>
<CAPTION>
SMALL CAP RUSSELL
ANNUAL RETURN VALUE FUND 2000 INDEX
---------------- -------------- --------------
<S> <C> <C>
One Year -15.32% -2.56%
Since Inception 5.47%(a) 12.94%(b)
</TABLE>

(a) From the commencement of investment operations on 3/14/94.

(b) Performance of the benchmark is not available for the period 3/14/94
(commencement of investment operations) through 3/31/94. For that reason,
performance is shown from 4/01/94.

7
<PAGE>
PROTECTIVE GROWTH AND INCOME FUND

INVESTMENT OBJECTIVE: Long-term growth of capital and growth of income.

INVESTMENT ADVISER: GSAM

BENCHMARK: S&P 500 Index

INVESTMENT FOCUS: Large capitalization stocks that are believed to be
undervalued or undiscovered by the marketplace.

INVESTMENT STYLE: Value

[GRAPH]

Principal Investment Strategies: EQUITY SECURITIES. The Fund invests, under
normal circumstances, at least 65% of its total assets in equity securities that
the Investment Adviser considers to have favorable prospects for capital
appreciation and/or dividend-paying ability. Although the Fund will primarily
invest in publicly traded U.S. securities, it may invest up to 25% of its total
assets in securities of foreign issuers and non-dollar securities, including
securities of issuers in emerging countries.

OTHER. The Fund also may invest up to 35% of its total assets in fixed-income
securities that offer the potential to further the Fund's investment objective.

Principal Risks: As with any fund that invests in stocks and also seeks income,
the Growth and Income Fund is subject to market and interest rate risks, and the
value of an investment in the Fund will fluctuate in response to stock market
and interest rate movements. Loss of money is a risk of investing in this Fund.
To the extent that it invests in certain securities, the Fund may be affected by
additional risks relating to securities of foreign issuers and non-dollar
securities and lower-rated debt securities.

The risks associated with these and certain other higher-risk securities and
practices that the Fund may utilize, are described in more detail later in this
Prospectus and in the SAI.

VALUE EXISTS WHEN A STOCK'S PRICE BECOMES INEXPENSIVE RELATIVE TO THE COMPANY'S
ESTIMATED EARNINGS AND/OR DIVIDEND-PAYING ABILITY OVER THE LONG TERM.

The Investment Adviser manages the Growth and Income Fund using a "value"
investment style. The Investment Adviser seeks companies that are discounted due
to:

- - Company-specific problems that are over-discounted in the marketplace.
- - Cyclically out-of-favor status.
- - Unrecognized positive fundamentals.

The Investment Adviser seeks to identify value through:

- - Firsthand fundamental research.
- - Maintaining a long-term investment horizon.
- - A team approach to decision making.

8
<PAGE>
PERFORMANCE INFORMATION

HOW WELL HAS THE GROWTH AND INCOME FUND PERFORMED SINCE ITS INCEPTION?

The following bar chart provides an illustration of the performance of the
Growth and Income Fund since its inception. The bar chart is intended to show
you the amount of variability the Growth and Income Fund has experienced in its
performance from year to year and is an indication of the degree of risk that is
involved with investing in the Growth and Income Fund.

PLEASE REMEMBER THAT PAST PERFORMANCE IS NO INDICATION OR GUARANTEE OF THE
RESULTS THE GROWTH AND INCOME FUND MAY ACHIEVE IN THE FUTURE. FUTURE RETURNS MAY
BE HIGHER OR LOWER THAN THE RETURNS THAT THE GROWTH AND INCOME FUND HAS ACHIEVED
IN THE PAST. PERFORMANCE REFLECTS EXPENSE LIMITATIONS THAT ARE CURRENTLY IN
EFFECT. THE PERFORMANCE INFORMATION IN THE CHART DOES NOT REFLECT THE FEES AND
CHARGES ASSOCIATED WITH THE CONTRACTS. IF THESE EXPENSE LIMITATIONS WERE NOT IN
EFFECT OR IF THE FEES AND CHARGES OF THE CONTRACTS WERE INCLUDED, THE FUND'S
PERFORMANCE WOULD HAVE BEEN REDUCED.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PROTECTIVE GROWTH & INCOME FUND
<S> <C>
YEAR BY YEAR TOTAL RETURN AS OF 12/31 EACH YEAR
1995 32.29%
1996 26.82%
1997 29.84%
1998 -2.92%
</TABLE>

<TABLE>
<CAPTION>
RETURN
-----------
<S> <C> <C>
Best Quarter 2nd Qtr 1997 16.12%
Worst Quarter 3rd Qtr 1998 -15.42%
</TABLE>

The following table compares the annual total returns of the Growth and Income
Fund with the performance of the S&P 500 Index.*

<TABLE>
<CAPTION>
GROWTH & S&P 500
ANNUAL RETURN INCOME FUND INDEX
---------------- -------------- --------------
<S> <C> <C>
One Year -2.92% 28.57%
Since Inception 16.42%(a) 26.17%(b)
</TABLE>

(a) From the commencement of investment operations on 3/14/94.

(b) Performance of the benchmark is not available for the period 3/14/94
(commencement of investment operations) through 3/31/94. For that reason,
performance is shown from 4/01/94.

9
<PAGE>
PROTECTIVE INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE: Long-term capital appreciation.
INVESTMENT ADVISER: Goldman Sachs Asset Management International ("GSAMI")
BENCHMARK: FT/S&P Actuaries Europe & Pacific Index (unhedged)
PRIMARY INVESTMENT FOCUS: Equity securities of foreign issuers.
INVESTMENT STYLE: Actively managed

[GRAPH]

Principal Investment Strategies: The Fund invests, under normal circumstances,
substantially all, and at least 65% of its total assets in equity securities of
companies that are organized outside the United States or whose securities are
principally traded outside the United States. The Fund may allocate its assets
among countries as determined by the Investment Adviser from time to time
provided that the Fund's assets are invested in at least three foreign
countries, other than the U.S.

The Fund expects to invest a substantial portion of its assets in the securities
of issuers located in the developed countries of Western Europe and in Japan.
However, the Fund may also invest in the securities of issuers located in
Australia, Canada, and New Zealand, as well as issuers located in certain
emerging countries.

OTHER. The Fund also may invest up to 35% of its total assets in fixed-income
securities.

Principal Risks: The Fund is subject to market risk, securities in which the
Fund invests may go up or down in response to the prospects of individual
companies and/or general economic conditions. Loss of money is a significant
risk of investing in this Fund. In addition to the risks that are described
above with regard to equity securities in general, the Fund also is subject to
the following risks:

- - FOREIGN INVESTMENTS -- The International Equity Fund may invest the majority
of its assets in securities of issuers that are organized outside of the
United States. Investing in securities of foreign issuers and non-dollar
securities may involve risks that are not normally associated with
dollar-denominated securities of domestic issuers. The risks associated with
such securities normally will be greatest when the Fund invests in issuers
located in emerging countries. These risks are discussed in detail under the
caption "Higher Risk Securities" later in this Prospectus and in the SAI.

10
<PAGE>
PERFORMANCE INFORMATION

HOW WELL HAS THE INTERNATIONAL EQUITY FUND PERFORMED SINCE ITS INCEPTION?

The following bar chart provides an illustration of the performance of the
International Equity Fund since its inception. The bar chart is intended to show
you the amount of variability the International Equity Fund has experienced in
its performance from year to year and is an indication of the degree of risk
that is involved with investing in the International Equity Fund.

PLEASE REMEMBER THAT PAST PERFORMANCE IS NO INDICATION OR GUARANTEE OF THE
RESULTS THE INTERNATIONAL EQUITY FUND MAY ACHIEVE IN THE FUTURE. FUTURE RETURNS
MAY BE HIGHER OR LOWER THAN THE RETURNS THAT THE INTERNATIONAL EQUITY FUND HAS
ACHIEVED IN THE PAST. PERFORMANCE REFLECTS EXPENSE LIMITATIONS THAT ARE
CURRENTLY IN EFFECT. THE PERFORMANCE INFORMATION IN THE CHART DOES NOT REFLECT
THE FEES AND CHARGES ASSOCIATED WITH THE CONTRACTS. IF THESE EXPENSE LIMITATIONS
WERE NOT IN EFFECT OR IF THE FEES AND CHARGES OF THE CONTRACTS WERE INCLUDED,
THE FUND'S PERFORMANCE WOULD HAVE BEEN REDUCED.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PROTECTIVE INTERNATIONAL EQUITY FUND
<S> <C>
YEAR BY YEAR TOTAL RETURN AS OF 12/31 EACH YEAR
1995 19.66%
1996 19.00%
1997 4.42%
1998 20.65%
</TABLE>

<TABLE>
<CAPTION>
RETURN
-----------
<S> <C> <C>
Best Quarter -- 1st Qtr 1998 17.09%
Worst Quarter -- 3rd Qtr 1998 -13.53%
</TABLE>

The following table compares the annual total returns of the International
Equity Fund with the performance of the FT/S&P Actuaries Europe & Pacific Index
(unhedged).*

<TABLE>
<CAPTION>
FT/S&P
INTERNATIONAL ACTUARIES
ANNUAL RETURN EQUITY FUND E&P INDEX
---------------- ------------- --------------
<S> <C> <C>
One Year 20.65% 19.30%
Since Inception 11.94%(a) 7.52%(b)
</TABLE>

(a) From the commencement of investment operations on 3/14/94.

(b) Performance of the benchmark is not available for the period 3/14/94
(commencement of investment operations) through 3/31/94. For that reason,
performance is shown from 4/01/94.

* The unmanaged FT/S&P Actuaries Europe & Pacific Index is a market
capitalization-weighted composite of approximately 1,500 stocks from 20
countries in Europe and the Asia Pacific region. The FT/S&P Actuaries Europe &
Pacific Index figures do not reflect any fees or expenses.

11
<PAGE>
PROTECTIVE GLOBAL INCOME FUND

INVESTMENT OBJECTIVE: High total return, emphasizing current income, and, to a
lesser extent, providing opportunities for capital appreciation

INVESTMENT ADVISER: GSAMI

BENCHMARK: J.P. Morgan Global Government Bond Index (hedged)

PRIMARY INVESTMENT FOCUS: Fixed income securities of U.S. and foreign issuers

[GRAPH]

Principal Investment Strategies: The Fund primarily invests in high quality
fixed-income securities of U.S. and foreign issuers (including non-dollar
securities) and enters into transactions in foreign currencies. Under normal
market conditions, the Fund:

- - invests at least 30% of its total assets in securities, after considering
the effect of currency positions, denominated in U.S. dollars;
- - invests in securities of issuers from at least three different countries;
and
- - engages in currency transactions to seek to enhance returns and to seek to
hedge its portfolio against fluctuations in currency exchange rates.

The Fund may invest more than 25% of its total assets in the securities of
corporate and government issuers located in each of Canada, Germany, Japan, and
the United Kingdom as well as in the securities of U.S. issuers. Not more than
25% of the Fund's total assets will be invested in securities of issuers in any
other single foreign country or in any single issuer. The Fund may also invest
up to 10% of its total assets in securities of issuers in emerging countries.

THE INVESTMENT ADVISER APPLIES A TEAM APPROACH THAT EMPHASIZES RISK MANAGEMENT
AND CAPITALIZES ON GOLDMAN SACHS' EXTENSIVE RESEARCH CAPABILITIES.

GOLDMAN SACHS' FIXED INCOME INVESTMENT PHILOSOPHY:
ACTIVE MANAGEMENT WITHIN A RISK-MANAGED FRAMEWORK

The Investment Adviser employs a disciplined, multi-step process to evaluate
potential investments:

1. SECTOR ALLOCATION -- The Investment Adviser assesses relative value of
different investment sectors (such as U.S. corporate, asset-backed and
mortgage-backed securities) to create investment strategies that meet the Fund's
objectives.

2. SECURITY SELECTION -- In selecting securities for the Fund, the Investment
Adviser draws on the extensive resources of Goldman Sachs, including
fixed-income research professionals.

3. YIELD CURVE STRATEGIES -- The Investment Adviser adjusts the term structure
of the Fund based on its expectations of changes in the shape of the yield curve
while closely controlling the overall duration of the Fund.

The Investment Adviser de-emphasizes interest predictions as a means of
generating incremental return. Instead, the Investment Adviser seeks to add
value through the selection of particular securities and investment sector
allocation as described above.

12
<PAGE>
The Fund may invest in the following fixed-income securities:

- - U.S. Government Securities and custodial receipts therefor
- - Securities issued or guaranteed by a foreign government or any of its
political subdivisions, authorities, agencies, instrumentalities, or by
supranational entities
- - Corporate debt securities issued by domestic and foreign companies
- - Certificates of deposit and bankers' acceptances issued or guaranteed by, or
time deposits maintained at, U.S. or foreign banks (and their branches wherever
located) with total assets of more than $1 billion
- - Commercial paper
- - Mortgage-backed securities and asset-backed securities

DURATION (UNDER NORMAL INTEREST RATE CONDITIONS): Duration approximates a
Fund's sensitivity to changes in interest rates. Typically, the higher the
duration, the more sensitive the Fund will be to changes in interest rates.

Target Duration = J.P. Morgan Global Government Bond Index (hedged) plus or
minus 2.5 years
Maximum Duration = 7.5 years

EXPECTED APPROXIMATE INTEREST RATE SENSITIVITY: 6 year government bond

CREDIT QUALITY:
Minimum -- BBB or Baa at time of purchase. At least 50% of total assets = AAA or
Aaa.
Securities will either be rated by a Nationally Recognized Statistical Rating
Organization or, if unrated, determined by the Investment Adviser to be of
comparable quality.

Principal Risks: As with any fund that invests in fixed-income securities, the
Global Income Fund is subject to considerable credit risk and interest rate
risk. The value of an investment in the Fund will fluctuate in response to
movements in prevailing interest rates. Loss of money is a significant risk of
investing in this Fund. This Fund also is subject to certain additional risks,
including:

- - NON-DIVERSIFICATION RISK -- The Global Income Fund is "non-diversified" as
that term is defined under the Investment Company Act of 1940, as amended
(the "Act"). It may invest more than 25% of its total assets in securities
of a limited number of issuers in the same industry or geographic region. As
a result, the Fund may be more susceptible to developments affecting the
securities of any single issuer held in its portfolio, and may be more
susceptible to greater loss because of these developments.

Notwithstanding the status of the Global Income Fund under the Act, the
Global Income Fund is still subject to the diversification requirements that
arise under federal tax law. For more information see "Taxes" in the SAI.

- - FOREIGN INVESTMENTS -- The Global Income Fund is subject to the risks
associated with securities of foreign issuers and non-dollar securities that
are not normally associated with dollar-denominated securities of domestic
issuers. The risks associated with such securities normally will be greatest
when the Fund invests in issuers located in emerging countries.

The risks associated with these and certain other higher-risk securities and
practices that the Fund may utilize, are described later in this Prospectus and
in the SAI.

13
<PAGE>
PERFORMANCE INFORMATION

HOW WELL HAS THE GLOBAL INCOME FUND PERFORMED SINCE ITS INCEPTION?

The following bar chart provides an illustration of the performance of the
Global Income Fund since its inception. The bar chart is intended to show you
the amount of variability the Global Income Fund has experienced in its
performance from year to year and is an indication of the degree of risk that is
involved with investing in the Global Income Fund.

PLEASE REMEMBER THAT PAST PERFORMANCE IS NO INDICATION OR GUARANTEE OF THE
RESULTS THE GLOBAL INCOME FUND MAY ACHIEVE IN THE FUTURE. FUTURE RETURNS MAY BE
HIGHER OR LOWER THAN THE RETURNS THAT THE GLOBAL INCOME FUND HAS ACHIEVED IN THE
PAST. PERFORMANCE REFLECTS EXPENSE LIMITATIONS THAT ARE CURRENTLY IN EFFECT. THE
PERFORMANCE INFORMATION IN THE CHART DOES NOT REFLECT THE FEES AND CHARGES
ASSOCIATED WITH THE CONTRACTS. IF THESE EXPENSE LIMITATIONS WERE NOT IN EFFECT
OR IF THE FEES AND CHARGES OF THE CONTRACTS WERE INCLUDED, THE FUND'S
PERFORMANCE WOULD HAVE BEEN REDUCED.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PROTECTIVE GLOBAL INCOME FUND
<S> <C>
YEAR BY YEAR TOTAL RETURN AS OF 12/31 EACH YEAR
1995 16.94%
1996 9.48%
1997 9.94%
1998 10.40%
</TABLE>

<TABLE>
<CAPTION>
RETURN
-----------
<S> <C> <C>
Best Quarter 3rd Qtr 1998 5.67%
Worst Quarter 2nd Qtr 1994 -1.21%
</TABLE>

The following table compares the annual total returns of the Global Income Fund
with the performance of the J.P. Morgan Global Government Bond Index (hedged).*

<TABLE>
<CAPTION>
J.P. MORGAN
GLOBAL GLOBAL GOVERNMENT
ANNUAL RETURN INCOME FUND BOND INDEX
---------------- ------------- ------------------
<S> <C> <C>
One Year 10.40% 11.46%
Since Inception 9.44%(a) 9.71%(b)
</TABLE>

(a) From the commencement of investment operations on 3/14/94.

(b) Performance of the benchmark is not available for the period 3/14/94
(commencement of investment operations) through 3/31/94. For that reason,
performance is shown from 4/01/94.

* The J.P. Morgan Global Government Bond Index (hedged), an unmanaged index,
does not reflect any fees or expenses.

14
<PAGE>
HOW THE FUNDS ACHIEVE THEIR OBJECTIVES
- --------------------------------------------------------------------------------

While each Fund has its own investment objective, policies, and restrictions,
each Fund may, for temporary defensive purposes to preserve capital, invest all
(35% for CORE U.S. Equity Fund) of their assets in cash and/or money market
instruments. During periods when a Fund adopts such a defensive strategy, the
Fund may not achieve its investment objective and the investment returns the
Fund is able to achieve may be lower than returns the Fund may have achieved
otherwise. Also, each Fund's investment objective, and all policies not
specifically designated as fundamental, are nonfundamental and may be changed by
the Company's board of directors without shareholder approval.

In selecting securities for a Fund, the GSAM and GSAMI (each an "Investment
Adviser" and together the "Investment Advisers") do not consider the portfolio
turnover rate as a limiting factor. A high rate of portfolio turnover (100% or
more) involves correspondingly greater expenses which must be borne by a Fund
and its shareholders. See "Financial Highlights" for a statement of the Funds
historical portfolio turnover rates.

Protective Investment Advisors, Inc. ("PIA") serves as the Company's investment
manager (the "Investment Manager") and is responsible for overall management of
the Company. PIA has engaged GSAMI, an affiliate of Goldman Sachs & Co.
("Goldman Sachs"), as the investment adviser to provide day-to-day portfolio
management for the Protective International Equity Fund and the Protective
Global Income Fund. PIA also has engaged GSAM, a separate operating division of
Goldman Sachs, as the investment adviser to provide day-to-day portfolio
management for each of the other Funds.

TERMS USED IN THIS PROSPECTUS

EQUITY SECURITIES: Equity securities include common stock, preferred stock,
securities convertible or exchangeable into common stock, including convertible
debt securities, convertible preferred stock and warrants or rights to acquire
common stock.

FOREIGN ISSUERS: (1) Companies organized outside the United States, (2)
companies whose securities are principally traded outside of the United States
and (3) foreign governments and agencies or instrumentalities of foreign
governments.

INCOME SECURITIES: Bonds and notes (such as corporate and government debt
obligations), mortgage-backed securities, asset-backed securities and structured
securities that pay fixed or variable rates of interest, debt obligations that
are issued at a discount from face value (I.E., have an imputed rate of
interest), and preferred stock or other securities that pay dividends.

NON-DOLLAR SECURITIES: Securities denominated or quoted in a foreign currency
or paying income in foreign securities.

15
<PAGE>
PRINCIPAL RISKS OF THE FUNDS
- --------------------------------------------------------------------------------

UNDERSTANDING RISK

The risk/return chart below illustrates the relative degree of short-term risk
for diversified portfolios of securities of the various types indicated. In
general, the potential for long-term gain is directly related to the level of
short-term risk that an investor is willing to accept. In other words, as
short-term risk increases so to does the potential for long-term gains.
Short-term risk refers to the likely volatility of a mutual fund's total return
and its potential for gain or loss over a relatively short time period.
Potential long-term gains refer to anticipated increases in a mutual fund's
average annual total return over a relatively long time period, such as 20
years. While historic performance is no guarantee of future results,
historically, accepting greater short-term risk often has lead to greater
average annual total returns over long time periods. Accordingly, an investor
should consider his or her investment time horizon (the length of time that an
investor expects to hold an investment) in deciding how much short-term risk to
accept. The longer the time horizon, the more short-term risk he or she may
consider accepting to achieve his or her investment goals.

[GRAPH]

Loss of money is a risk of investing in each Fund. An investment in a Fund is
not a deposit of any bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. The following
information summarizes some of the important risks that apply to the Funds and
may result in a loss of your investment. None of the Funds should be relied upon
as a complete investment program. There can be no assurance that a Fund will
achieve its investment objective.
<TABLE>
<CAPTION>
CORE U.S. CAPITAL INTERNATIONAL
RISK EQUITY GROWTH SMALL CAP VALUE EQUITY
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
CALL X
- ------------------------------------------------------------------------------------------------------------------------------
NON-DIVERSIFICATION
- ------------------------------------------------------------------------------------------------------------------------------
CREDIT/DEFAULT X X
- ------------------------------------------------------------------------------------------------------------------------------
EXTENSION
- ------------------------------------------------------------------------------------------------------------------------------
FOREIGN X X X
- ------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS X X X
- ------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES
- ------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE X X
- ------------------------------------------------------------------------------------------------------------------------------
STOCK X X X X
- ------------------------------------------------------------------------------------------------------------------------------
SMALL CAP STOCK/REAL ESTATE INVESTMENT TRUSTS ("REIT") X X X X
- ------------------------------------------------------------------------------------------------------------------------------
DERIVATIVES X X X X
- ------------------------------------------------------------------------------------------------------------------------------
MANAGEMENT X X X X
- ------------------------------------------------------------------------------------------------------------------------------
MARKET X X X X
- ------------------------------------------------------------------------------------------------------------------------------
LIQUIDITY X X X X
- ------------------------------------------------------------------------------------------------------------------------------
OTHER X X X X
- ------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
GROWTH AND GLOBAL INCOME
RISK INCOME FUND
<S> <C> <C>
- --------------------------------------------------------------
CALL X X
- --------------------------------------------------------------
NON-DIVERSIFICATION X
- --------------------------------------------------------------
CREDIT/DEFAULT X X
- --------------------------------------------------------------
EXTENSION X X
- --------------------------------------------------------------
FOREIGN X X
- --------------------------------------------------------------
EMERGING MARKETS X X
- --------------------------------------------------------------
U.S. GOVERNMENT SECURITIES X
- --------------------------------------------------------------
INTEREST RATE X X
- --------------------------------------------------------------
STOCK X
- --------------------------------------------------------------
SMALL CAP STOCK/REAL ESTATE INVESTMENT TRUSTS ("REIT") X
- --------------------------------------------------------------
DERIVATIVES X X
- --------------------------------------------------------------
MANAGEMENT X X
- --------------------------------------------------------------
MARKET X X
- --------------------------------------------------------------
LIQUIDITY X X
- --------------------------------------------------------------
OTHER X X
- --------------------------------------------------------------
</TABLE>

16
<PAGE>
- - Call Risk -- The risk that an issuer will exercise its right to pay
principal on an obligation held by a Fund (such as a mortgage-backed
security) earlier than expected. This may happen when there is a decline in
interest rates. Under these circumstances, a Fund may be unable to recoup
all of its initial investment and will also suffer from having to reinvest
in lower yielding securities.

- - Non-Diversification Risk -- The Global Income Fund may invest more than 25%
of its total assets in the securities of corporate and government issuers
located in each of Canada, Germany, Japan and the United Kingdom, as well as
in the securities of U.S. issuers. Concentration of the Fund's investment in
such issuers will subject the Fund, to a greater extent than if investments
were less concentrated, to losses arising from adverse developments
affecting those issuers or countries.

- - Credit/Default Risk -- The risk that an issuer of fixed-income securities
held by a Fund (which may have low credit ratings) may default on its
obligation to pay interest and repay principal.

- - Extension Risk -- The risk that an issuer will exercise its right to pay
principal on an obligation held by a Fund (such as a mortgage-backed
security) later than expected. This may happen when there is a rise in
interest rates. Under these circumstances, the value of the obligation will
decrease, and a Fund will also suffer from the inability to invest in higher
yielding securities.

- - Foreign Risks -- To the extent that a Fund invests in securities of foreign
issuers and non-dollar denominated securities, it will be subject to special
risks not typically associated with domestic issuers. Losses may result
because of less government regulation, less public information and less
economic, political and social stability. Losses also may result from the
imposition of exchange controls, confiscations, and government restrictions.
A Fund will also be subject to the risk of negative foreign currency rate
fluctuations. Foreign risks will normally be greatest when a Fund invests in
issuers located in emerging countries.

- - Emerging Markets Risk -- The securities markets of Asian, Latin American,
Eastern European, African and other emerging countries are less liquid, are
especially subject to greater price volatility, have smaller market
capitalizations, have less government regulation and are not subject to as
extensive and frequent accounting, financial and other reporting
requirements as the securities markets of more developed countries. Further,
investment in equity securities of issuers located in Russia and certain
other emerging countries involves risk of loss resulting from problems in
share registration and custody and substantial economic and political
disruptions. These risks are not normally associated with investment in more
developed countries.

- - U.S. Government Securities Risk -- The risk that the U.S. government will
not provide financial support to U.S. government agencies, instrumentalities
or sponsored enterprises if it is not obligated to do so by law.

- - Interest Rate Risk -- The risk that when interest rates increase the value
of fixed-income securities held by a Fund will decline. Long-term
fixed-income securities will normally have more price volatility because of
this risk than short-term securities.

- - Small Cap Stock and REIT Risk -- The securities of small capitalization
stocks and REITs involve greater risks than those associated with larger,
more established companies and may be subject to more abrupt or erratic
price movements. The securities of such issuers may lack sufficient market
liquidity to enable a Fund to effect sales at an advantageous time or
without a substantial drop in price.

- - Stock Risk -- The risk that stock prices have historically risen and fallen
in periodic cycles. As of the date of this Prospectus, U.S. stock markets
and certain foreign stock markets were trading at or close to record high
levels. There is no guarantee that such levels will continue.

RISKS THAT APPLY TO ALL FUNDS:

- - Derivatives Risk -- The risk that loss may result from a Fund's investments
in options, futures, swaps, structured securities and other derivative
instruments. These instruments may be leveraged so that small price changes
may produce disproportionate losses to a Fund.

17
<PAGE>
- - Liquidity Risk -- The risk that a Fund will not be able to pay redemption
proceeds within the time period stated in this Prospectus, because of
unusual market conditions, an unusually high volume of redemption requests,
or other reasons. Funds that invest in small capitalization stocks, REITs
and emerging country issues will be especially subject to the risk that
during certain periods the liquidity of particular issuers or industries, or
all securities within these investment categories, will shrink or disappear
suddenly and without warning as a result of adverse economic, market or
political events, or adverse investor perceptions whether or not accurate.

- - Management Risk -- The risk that a strategy used by the Investment Adviser
may fail to produce the intended results.

- - Market Risk -- The risk that the value of securities (principally equity
securities) in which a Fund invests may increase or decrease in response to
the prospects of individual companies and/or general economic conditions.
Price changes may be temporary or last for extended periods.

- - Other Risks -- Each Fund is subject to other risks, such as the risk that
its operations, or the value of its portfolio securities, will be disrupted
by the "Year 2000 Problem".

While the chart set forth above summarizes the principal types of risk that each
Fund is subject to, each Fund also is subject to certain additional risks,
including risks that relate to specific securities that each Fund may invest in.
More information about the Fund's portfolio securities and investment
techniques, and their associated risks, is contained in the section entitled
"Higher Risk Securities and Techniques" later in this Prospectus and the SAI.
You should consider the investment risks discussed in this section and in the
SAI. Both are important to your investment choice.

HIGHER RISK SECURITIES AND TECHNIQUES

In addition to the securities and techniques that are described over the next
several pages, the SAI also contains information about additional securities in
which the Funds invest in and investment techniques that the Funds follow in
seeking to achieve their respective investment objectives.

RISKS OF INVESTING IN SMALL CAPITALIZATION COMPANIES

Historically, small market capitalization stocks and stocks of recently
organized companies have been more volatile in price than the larger market
capitalization stocks included in the S&P 500 Index. As a result, investing in
the securities of such companies involves greater risk and the possibility of
greater portfolio price volatility. Among the reasons for the greater price
volatility of these small company and unseasoned stocks are the less certain
growth prospects of smaller firms and the lower degree of liquidity in the
markets for such stocks. Small company stocks are thinly traded and may have to
be sold at a discount from current market prices or sold in small lots over an
extended period of time. Small companies also often have limited product lines,
markets or financial resources; may depend on or use a few key personnel for
management; and may be susceptible to losses and risks of bankruptcy. The
transaction costs associated with small company stocks are often higher than
those of larger capitalization companies.

RISKS OF FOREIGN INVESTMENTS

Foreign investments may offer potential benefits that are not available from
investments exclusively in equity securities of domestic issuers quoted in U.S.
dollars. Foreign countries may have economic policies or business cycles
different from those of the U.S., and markets for foreign securities do not
necessarily move in a manner parallel to U.S. markets.

Investing in the securities of foreign issuers and non-dollar securities
involves, however, special risks, including those set forth below, which are not
typically associated with investing in securities of U.S. issuers denominated in
U.S. dollars. Such investments may be affected by changes in currency rates,
changes in foreign or U.S. laws or restrictions applicable to such investments
and in exchange control regulations (E.G., currency blockage). A decline in the
exchange rate of the currency (I.E., weakening of the currency against the U.S.
dollar) in which a portfolio security is quoted or denominated relative to the
U.S. dollar would reduce the value of the portfolio security. In addition, if
the

18
<PAGE>
currency in which a Fund receives dividends, interest or other payments declines
in value against the U.S. dollar before such income is distributed as dividends
to shareholders or converted to U.S. dollars, the Fund may have to sell
portfolio securities to obtain sufficient cash to pay such dividends.

The introduction of a single currency, the euro, on January 1, 1999 for
participating nations in the European Economic and Monetary Union presents
unique uncertainties, including whether the creation of suitable clearing and
settlement payment systems for the new currency will develop the legal treatment
of certain outstanding financial contracts after January 1, 1999 that refer to
existing currencies rather than the euro; the establishment and maintenance of
exchange rates for currencies being converted into the euro; the fluctuation of
the euro relative to non-euro currencies during the transition period from
January 1, 1999 to December 31, 2001 and beyond; whether the interest rate, tax
and labor regimes of European countries participating in the euro will converge
over time; and whether the conversion of the currencies of other countries that
now are or in the future become members of the European Union may have an impact
on the euro. These or other factors, including political and economic risks,
could cause market disruptions before or after the introduction of the euro, and
could adversely affect the value of securities held by the Funds.

Brokerage commissions, custodial services, and other costs relating to
investment in international securities markets generally are more expensive than
in the United States. In addition, clearance and settlement procedures may be
different in foreign countries and, in certain markets, such procedures have
been unable to keep pace with the volume of securities transactions, thus making
it difficult to conduct such transactions.

Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the United States.
Foreign securities markets may have substantially less volume than U.S.
securities markets and securities of many foreign issuers are less liquid and
more volatile than securities of comparable domestic issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationalization,
expropriation or confiscatory taxation, imposition of withholding or other taxes
on dividend or interest payments (or, in some cases, capital gains), limitations
on the removal of funds or other assets of the Funds, political or social
instability or diplomatic developments which could affect investments in those
countries.

Concentration of a Fund's assets in one of a few countries and currencies will
subject a Fund to greater risks than if a Fund's assets were not geographically
concentrated.

INVESTMENTS IN ADRS, EDRS AND GDRS

Many securities of foreign issuers are represented by ADRs, EDRs and GDRs. ADRs
are receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities of foreign corporations. GDRs are receipts
issued by non U.S. financial institutions evidencing an arrangement similar to
ADRs. Generally, ADRs, in registered form, are designed for trading in U.S.
securities markets and GDRs, issued in either registered or bearer form, are
designed for trading on a global basis. EDRs are receipts issued by non-U.S.
financial institutions evidencing an arrangement similar to ADRs. Generally,
EDRs, in bearer form, are designed for trading in European securities markets.
The Funds may invest in ADRs and GDRs and, except for the CORE U.S. Equity Fund,
may invest in EDRs. ADRs represent the right to receive securities of foreign
issuers deposited in a domestic bank or a foreign correspondent bank. Prices of
ADRs are quoted in U.S. dollars, and ADRs are traded in the United States on
exchanges or over-the-counter and are sponsored and issued by domestic banks. In
general, there is a large, liquid market in the United States for ADRs quoted on
a national securities exchange or the NASD's national market system. The
information available for ADRs is subject to the accounting, auditing and
financial reporting standards of the domestic market or exchange on which they
are traded, which standards are more uniform and more exacting than those to
which many foreign issuers may be subject. EDRs and GDRs are receipts evidencing
an arrangement with a non-U.S. bank similar to that for ADRs and are designed
for use in non-U.S. securities markets. EDRs and GDRs are not necessarily quoted
in the same currency as the underlying security.

Depository receipts do not eliminate all the risk inherent in investing in the
securities of foreign issuers. To the extent that a Fund acquires depository
receipts through banks which do not have a contractual relationship with the
foreign

19
<PAGE>
issuer of the security underlying the receipt to issue and service such
Depository receipts, there may be an increased possibility that the Fund would
not become aware of and be able to respond to corporate actions such as stock
splits or rights offerings involving the foreign issuer in a timely manner. The
market value of depository receipts is dependent upon the market value of the
underlying securities and fluctuations in the relative value of the currencies
in which the receipts and the underlying securities are quoted. In addition, the
lack of information may result in inefficiencies in the valuation of such
instruments. However, by investing in Depository receipts rather than directly
in the stock of foreign issuers, a Fund will avoid currency risks during the
settlement period for either purchases or sales.

RISKS OF EMERGING COUNTRIES

The Capital Growth Fund, Small Cap Value Fund, International Equity Fund, Growth
and Income Fund and Global Income Fund may invest in securities of issuers
located in countries with emerging economies and or securities markets. These
countries are located in the Asia-Pacific region, Eastern Europe, Latin and
South America and Africa. Political and economic structures in many of these
countries may be undergoing significant evolution and rapid development, and
such countries may lack the social, political and economic stability
characteristic of more developed countries. Certain of these countries may have
in the past failed to recognize private property rights and have at times
nationalized or expropriated the assets of private companies. As a result, the
risks of foreign investment generally including the risks of nationalization or
expropriation of assets, may be heightened. See "Special Investment Methods and
Risks -- Foreign Securities" above. In addition, unanticipated political or
social developments may affect the values of a Fund's investments in those
countries and the availability to the Fund of additional investments in those
countries.

The small size and inexperience of the securities markets in certain of these
countries and the limited volume of trading in securities in those countries may
also make the Capital Growth Fund, Small Cap Value Fund, International Equity
Fund, Growth and Income Fund or Global Income Fund's investments in such
countries illiquid and more volatile than investments in Japan or most Western
European countries, and these Funds may be required to establish special custody
or other arrangements before making certain investments in those countries.
There may be little financial or accounting information available with respect
to issuers located in certain of such countries, and it may be difficult as a
result to assess the value or prospects of an investment in such issuers.

A Fund's purchase or sale of portfolio securities in certain emerging markets
may be constrained by limitations as to daily changes in the prices of listed
securities, periodic trading or settlement volume and/or limitations on
aggregate holdings of foreign investors. Such limitations may be computed based
on aggregate trading volume by or holdings of a Fund, the Adviser and its
affiliates and their respective clients and other service providers. A Fund may
not be able to sell securities in circumstances where price, trading or
settlement volume limitations have been reached.

Foreign investment in certain emerging securities markets is restricted or
controlled to varying degrees that may limit investment in such countries or
increase the administrative cost of such investments. For example, certain Asian
countries require government approval prior to investments by foreign persons or
limit investment by foreign persons to a specified percentage of an issuer's
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of such company available
for purchase by nationals. In addition, certain countries may restrict or
prohibit investment opportunities in issuers or industries important to national
interests. Such restrictions may affect the market price, liquidity and rights
of securities that may be purchased by a Fund.

Settlement procedures in emerging markets are frequently less developed and
reliable than those in the U.S. and may involve a Fund's delivery of securities
before receipt of payment for their sale. In addition, significant delays are
common in certain markets in registering the transfer of securities. Settlement
or registration problems may make it more difficult for a Fund to value its
portfolio assets and could cause a Fund to miss attractive investment
opportunities, to have its assets uninvested or to incur losses due to the
failure of a counterparty to pay for securities that the Fund has delivered or
due to the Fund's inability to complete its contractual obligations.

20
<PAGE>
Currently, there is no market or only a limited market for many management
techniques and instruments with respect to the currencies and securities markets
of emerging market countries. Consequently, there can be no assurance that
suitable instruments for hedging currency and market-related risks will be
available at the times when a Fund wishes to use them.

FOREIGN CURRENCY TRANSACTIONS GENERALLY

Because investment in foreign issuers will usually involve currencies of foreign
countries, and because the Capital Growth Fund, Small Cap Value Fund,
International Equity Fund, Growth and Income Fund and Global Income Fund may
have currency exposure independent of their securities positions, the value of
the assets of these Funds as measured in U.S. dollars will be affected by
changes in foreign currency exchange rates.

An issuer of securities purchased by a Fund may be domiciled in a country other
than the country in whose currency the instrument is denominated or quoted. The
International Equity and Global Income Funds may also invest in securities
quoted or denominated in the European Currency Unit ("ECU"), which is a "basket"
consisting of specified amounts of the currencies of certain of the twelve
member states of the European Economic Community. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Economic Community from time to time to reflect changes in relative
values of the underlying currencies. In addition, these two Funds may invest in
securities quoted or denominated in other currency "baskets."

Currency exchange rates may fluctuate significantly over short periods of time
causing, along with other factors, a Fund's net asset value to fluctuate as
well. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or anticipated changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the U.S. or abroad. The market in forward foreign currency
exchange contracts, currency swaps and other privately negotiated currency
instruments offers less protection against defaults by the other party to such
instruments than is available for currency instruments traded on an exchange. To
the extent that a substantial portion of a Fund's total assets, adjusted to
reflect the Fund's net position after giving effect to currency transactions, is
denominated or quoted in the currencies of foreign countries, the Fund will be
more susceptible to the risk of adverse economic and political developments
within those countries.

In addition to investing in securities denominated or quoted in a foreign
currency, certain of the five Funds listed above may engage in a variety of
foreign currency management techniques. These Funds may hold foreign currency
received in connection with investments in foreign securities when, in the
judgment of the Adviser, it would be beneficial to convert such currency into
U.S. dollars at a later date, based on anticipated changes in the relevant
exchange rate. The Funds will incur costs in connection with conversions between
various currencies.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The Capital Growth Fund, Small Cap Value Fund, International Equity Fund, Growth
and Income Fund, and Global Income Fund may purchase or sell forward foreign
currency exchange contracts for hedging purposes. The International Equity and
Global Income Funds also may use the contracts to seek to increase total return
when the Adviser anticipates that the foreign currency will appreciate or
depreciate in value, but securities denominated or quoted in that currency do
not present attractive investment opportunities and are not held in the Fund's
portfolio. When purchased or sold for the purpose of increasing total return,
forward foreign currency exchange contracts are considered speculative. In
addition, these five Funds may enter into forward foreign currency exchange
contracts in order to protect against anticipated changes in future foreign
currency, exchange rates. The International Equity Fund and Global Income Fund
may engage in cross-hedging by using forward contracts in a currency different
from that in which the hedged security is denominated or quoted if the Adviser
determines that there is a pattern of correlation between the two currencies.

All five of these Funds may enter into contracts to purchase foreign currencies
to protect against an anticipated rise in the U.S. dollar price of securities it
intends to purchase. They may enter in contracts to sell foreign currencies to
protect against the decline in value of its foreign currency denominated or
quoted portfolio securities, or a decline in

21
<PAGE>
the value of anticipated dividends from such securities, due to a decline in the
value of foreign currencies against the U.S. dollar. Contracts to sell foreign
currency could limit any potential gain which might be realized by a Fund if the
value of the hedged currency increased.

If a Fund enters into a forward foreign currency exchange contract to sell
foreign currency to increase total return or to buy foreign currency for any
purpose, the Fund will be required to place cash or liquid assets in a
segregated account with the Fund's custodian in an amount equal to the value of
the Fund's total assets committed to the consummation of the forward contract.
If the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the segregated account so that
the value of the account will equal the amount of the Fund's commitment with
respect to the contract.

Forward contracts are subject to the risk that the counterparty to such contract
will default on its obligations. Since a forward foreign currency exchange
contract is not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive a Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or force the Fund to cover its purchase or sale
commitments, if any, at the current market price. A Fund will not enter into
such transactions unless the credit quality of the unsecured senior debt or the
claims-paying ability of the counterparty is considered to be investment grade
by the Adviser.

OPTIONS ON FOREIGN CURRENCIES

The Capital Growth Fund, Small Cap Value Fund, International Equity Fund, Growth
and Income Fund and Global Income Fund may purchase and sell (write) put and
call options on foreign currencies for the purpose of protecting against
declines in the U.S. dollar value of foreign portfolio securities and
anticipated dividends on such securities and against increases in the U.S.
dollar cost of foreign securities to be acquired. The International Equity and
Global Income Funds may use options on currency to cross-hedge, which involves
writing or purchasing options on one currency to hedge against changes in
exchange rates for a different currency, if there is a pattern of correlation
between the two currencies. As with other kinds of option transactions, however,
the writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received. A Fund could be required to
purchase or sell foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may constitute
an effective hedge against exchange rate fluctuations; however, in the event of
exchange rate movements adverse to a Fund's position, the Fund may forfeit the
entire amount of the premium plus related transaction costs. In addition, the
International Equity and Global Income Funds may purchase call or put options on
currency to seek to increase total return when the Adviser anticipates that the
currency will appreciate or depreciate in value, but the securities quoted or
denominated in that currency do not present attractive investment opportunities
and are not held in the Fund's portfolio. When purchased or sold to increase
total return, options on currencies are considered speculative. Options on
foreign currencies to be written or purchased by these Funds will be traded on
U.S. and foreign exchanges or over-the-counter. See "Options on Securities and
Securities Indices" in the SAI for a discussion of the liquidity risks
associated with options transactions.

FOREIGN GOVERNMENT SECURITIES

Foreign government securities are debt obligations of governments and
governmental agencies located outside of the United States of America, including
those of emerging countries.

Investment in sovereign debt obligations involves special risks not present in
debt obligations of corporate issuers. The issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable or
unwilling to repay principal or pay interest when due in accordance with the
terms of such debt, and a Fund may have limited recourse to compel payment in
the event of a default.

A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by:
- - Its cash flow situation
- - The extent of its foreign currency reserves
- - The availability of sufficient foreign exchange on the date a payment is due
- - The relative size of the debt service burden to the economy as a whole
- - The sovereign debtor's policy toward international lenders

22
<PAGE>
- - The political constraints to which a sovereign debtor may be subject

Periods of economic uncertainty may result in the volatility of market prices of
sovereign debt, and in turn a Fund's NAV, to a greater extent than the
volatility inherent in debt obligations of U.S. issuers.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

Mortgage-backed securities are securities that represent direct or indirect
participations in, or are collateralized by and payable from, mortgage loans
secured by real property. Certain Funds may also invest in stripped mortgage-
backed securities ("SMBS") (including interest only and principal only
securities). SMBS are derivative securities and are usually structured with two
different classes: one receiving 100% of the interest payments and the other
receiving 100% of the principal payments from a pool of mortgage loans.

Asset-backed securities are securities whose principal and interest payments are
collateralized by pools of assets such as auto loans, credit card receivables,
leases, installment contracts and personal property. Such asset pools are
securitized through the use of special purpose trusts or corporations. Principal
and interest payments may be credit enhanced by a letter of credit, a pool
insurance policy or a senior/subordinated structure.

If the underlying mortgage loans experience different than anticipated
prepayments of principal, the Fund may fail to recoup fully its initial
investment in these securities and thus, lose money. SMBS have additional risks.
The market value of the class consisting entirely of principal payments
generally is unusually volatile in response to changes in interest rates. The
yields on a class of SMBS that receives all or most of the interest from
mortgage loans are generally higher than prevailing market yields on other
mortgage-backed securities because their cash flow patterns are more volatile
and there is a greater risk that the initial investment will not be fully
recouped. The Fund's investments in SMBS may require the Fund to sell portfolio
securities to generate sufficient cash to satisfy certain income distribution
requirements.

CONVERTIBLE SECURITIES

Convertible securities are preferred stock or debt obligations that are
convertible into common stock. Convertible securities have both equity and debt
or fixed-income risk characteristics. Generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, to
increase as interest rates decline. However, when the market price of the common
stock underlying a convertible security exceeds the conversion price of the
convertible security, the convertible security tends to reflect the market price
of the underlying common stock. As the market price of the underlying common
stock declines, the convertible security, like an income security, tends to
trade increasingly on a yield basis, and thus may not decline in price to the
same extent as the underlying common stock.

Convertible securities rank senior to common stocks in an issuer's capital
structure and, consequently, present less risk than the issuer's common stock.
Convertible securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality.

RISKS OF DERIVATIVE TRANSACTIONS.

A Fund's transactions, if any, in options, futures, options on futures, swaps,
structured securities and currency transactions involve special risks, including
a possible lack of correlation between changes in the value of hedging
instruments and the portfolio assets (if any) being hedged, the potential
illiquidity of the markets for derivative instruments, the risks arising from
margin requirements and related leverage factors associated with such
transactions. The use of these management techniques to seek to increase total
return may be regarded as a speculative practice and involves the risk of loss
if the Investment Adviser is incorrect in its expectation of fluctuations in
securities prices, interest rates or currency prices. A Fund's use of certain
derivative transactions may be limited by the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company.

23
<PAGE>
LOWER-RATED FIXED-INCOME SECURITIES

Debt securities rated BBB or higher by Standard & Poor's or Baa or higher by
Moody's are considered "investment grade." Securities rated BBB or Baa are
considered medium-grade obligations with speculative characteristics, and
adverse economic conditions or changing circumstances may weaken their issuers'
capacity to pay interest and repay principal. A security will be deemed to have
met a rating requirement if it receives the minimum required rating from at
least one such rating organization even though it has been rated below the
minimum rating by one or more other rating organizations, or if unrated by such
rating organizations, determined by the Investment Adviser to be of comparable
credit quality.

Certain Funds may invest in fixed-income securities rated BB or Ba or below (or
comparable unrated securities) which are commonly referred to as "junk bonds."
Junk bonds are considered predominantly speculative and may be questionable as
to principal and interest payments.

In some cases, junk bonds may be highly speculative, have poor prospects for
reaching investment grade standing and be in default. As a result, investment in
such bonds will present greater speculative risks than those associated with
investment in investment grade bonds. Also, to the extent that the rating
assigned to a security in a Fund's portfolio is downgraded by a rating
organization, the market price and liquidity of such security may be adversely
affected.

For more information about the investments of the Funds, please refer to the
SAI.

SHORT-TERM TRADING

Other than the Global Income Fund, no Fund expects to trade in securities for
short-term gain. However, an Investment Adviser may engage in such activity at
any time with regard to any Fund. To the extent that a Fund engages in frequent
trading, the portfolio turnover rate for such a Fund will be higher than a Fund
that does not engage in frequent trading. A high rate of portfolio turnover
(100% or higher) involves correspondingly greater expenses that must be borne by
a Fund and the Fund's shareholders and may, under certain circumstances, make it
more difficult for a Fund to qualify as a regulated investment company under the
Code. For more information concerning the federal tax implications of frequent
trading, please refer to the section entitled "Taxes" in the SAI.

24
<PAGE>
PRINCIPAL INVESTMENT SECURITIES AND TECHNIQUES

The following table shows each Fund's investment limitations with respect to
certain higher risk securities and practices as a percentage of portfolio
assets.

<TABLE>
<CAPTION>
CORE GROWTH GLOBAL
U.S. CAPITAL SMALL CAP INTERNATIONAL AND INCOME
EQUITY GROWTH VALUE EQUITY INCOME FUND
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES
- -----------------------------------------------------------------------------------------------------------------
Borrowings 33-1/3 33-1/3 33-1/3 33-1/3 33-1/3 33-1/3
- -----------------------------------------------------------------------------------------------------------------
Credit and Interest Rate Swaps -- -- -- -- -- -
- -----------------------------------------------------------------------------------------------------------------
Cross-Hedging of Currency -- -- -- - -- -
- -----------------------------------------------------------------------------------------------------------------
Currency Swaps -- -- -- - -- -
- -----------------------------------------------------------------------------------------------------------------
Custodial Receipts - - - - - -
- -----------------------------------------------------------------------------------------------------------------
Equity Swaps 10 10 10 10 10 --
- -----------------------------------------------------------------------------------------------------------------
Futures Contracts and Options on Futures
Contracts -(1) - - - - -
- -----------------------------------------------------------------------------------------------------------------
Foreign Currency Transactions* - - - - - -
- -----------------------------------------------------------------------------------------------------------------
Interest Rate Caps Floors and Collars -- -- -- -- -- -
- -----------------------------------------------------------------------------------------------------------------
Mortgage Dollar Rolls -- -- -- -- -- -
- -----------------------------------------------------------------------------------------------------------------
Mortgage Swaps -- -- -- -- -- -
- -----------------------------------------------------------------------------------------------------------------
Options on Foreign Currencies(2) - - - - - -
- -----------------------------------------------------------------------------------------------------------------
Options on Securities and Securities
Indices(3) - - - - - -
- -----------------------------------------------------------------------------------------------------------------
Repurchase Agreements - - - - - -
- -----------------------------------------------------------------------------------------------------------------
Securities Lending 33-1/3 33-1/3 33-1/3 33-1/3 33-1/3 33-1/3
- -----------------------------------------------------------------------------------------------------------------
Short Sales Against the Box -- 25 25 25 25 --
- -----------------------------------------------------------------------------------------------------------------
Unseasoned Companies - - - - - -
- -----------------------------------------------------------------------------------------------------------------
Warrants and Stock Purchase Rights - - - - - --
- -----------------------------------------------------------------------------------------------------------------
When Issued Securities and Forward
Contracts - - - - - -
- -----------------------------------------------------------------------------------------------------------------
Yield Curve Options -- -- -- -- -- -
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

- - No policy limitation on usage; limited only by the objectives and strategies
of the Fund.
- -- Not permitted.
10 Percent of total assets (ITALIC TYPE)
10 Percent of net assets (roman type)

(1) The CORE U.S. Equity Fund may enter into futures transactions only with
respect to the S&P 500 Index.
(2) May purchase and sell call and put options.
(3) May sell covered call and put options and purchase call and put options.
* Limited by the amount the Fund is permitted to invest in foreign securities.

25
<PAGE>

<TABLE>
<CAPTION>
CORE GROWTH GLOBAL
U.S. CAPITAL SMALL CAP INTERNATIONAL AND INCOME
EQUITY GROWTH VALUE EQUITY INCOME FUND
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Securities
- -----------------------------------------------------------------------------------------------------------------
American, European and Global
Depository Receipts -(4) - - - - --
- -----------------------------------------------------------------------------------------------------------------
Asset-Backed and Mortgage-Backed
Securities(14) -- - - - - -
- -----------------------------------------------------------------------------------------------------------------
Bank Obligations(14) - - - - - -
- -----------------------------------------------------------------------------------------------------------------
Convertible Securities(5)(,)(14) - - - - - --
- -----------------------------------------------------------------------------------------------------------------
Corporate Debt Obligations(14) -(6) - - - - -
- -----------------------------------------------------------------------------------------------------------------
Equity Securities 90+ 90+ 65+ 65+ 65+ --
- -----------------------------------------------------------------------------------------------------------------
Emerging Country Securities -- 10(10) 25 - 25 10
- -----------------------------------------------------------------------------------------------------------------
Fixed Income Securities 10(6) 10 35 35 35 -
- -----------------------------------------------------------------------------------------------------------------
Foreign Securities(14) -(8) 10(10) 25 - 25 -
- -----------------------------------------------------------------------------------------------------------------
Foreign Government Securities -- -- -- - -- -
- -----------------------------------------------------------------------------------------------------------------
Investment Company Securities(12) 10 10 10 10 10 10
- -----------------------------------------------------------------------------------------------------------------
Non-Investment Grade Fixed Income
Securities -- 10 35 35 10 -
- -----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - - - - - --
- -----------------------------------------------------------------------------------------------------------------
Structured Securities - - - - - -
- -----------------------------------------------------------------------------------------------------------------
Temporary Defensive Investments 35 100 100 100 100 100
- -----------------------------------------------------------------------------------------------------------------
U.S. Government Securities(14) - - - - - -
- -----------------------------------------------------------------------------------------------------------------
Zero Coupon Bonds -- - - - - -
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

10 Percent of total assets (ITALIC TYPE)
10 Percent of net assets (roman type)

(4) The CORE U.S. Equity Fund may not invest in European Depository Receipts.
(5) The CORE U.S. Equity Fund has no minimum rating criteria for convertible
securities, and all other Funds use the same rating criteria for
convertible and non-convertible debt securities.
(6) Cash equivalents only.
(8) Equity securities of foreign issuers must be traded in the United States.
(10) The Capital Growth Fund may invest up to 10% of its total assets in
foreign securities, including emerging country securities.
(12) Includes World Equity Benchmark Shares and Standard & Poor's Depository
Receipts.
(14) Limited by the amount the Fund is permitted to invest in fixed-income
securities.

26
<PAGE>
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------

DIRECTORS AND OFFICERS

The Company's board of directors is responsible for deciding matters of general
policy and reviewing the actions of the Investment Manager and the Adviser, the
custodian, accounting and administrative services provider and other providers
of services to the Company. The officers of the Company supervise its daily
business operations. The SAI contains more information about the management of
the Company and the Funds.

INVESTMENT MANAGER

Protective Investment Advisors, Inc. (formerly, Investment Distributors Advisory
Services, Inc.) located at 2801 Highway 280 South, Birmingham, Alabama 35223, is
the investment manager of the Company and its Funds. PIA has managed the Company
and the Funds since 1994. The Company is the sole mutual fund client of PIA.

For its services to the Company, the Investment Manager receives a monthly
management fee. The fee is based upon average daily net assets of each Fund and
is accrued daily and paid to the Investment Manager at the following annual
rates for each of the Funds:

<TABLE>
<CAPTION>
AGGREGATE MANAGEMENT FEES PAID
MANAGEMENT TO PIA DURING THE FISCAL YEAR
FUND FEE ENDED DECEMBER 31, 1998
- ---------------------------------------------------------- ------------- ------------------------------
<S> <C> <C>
CORE U.S. Equity Fund..................................... 0.80% $ 1,743,718
Capital Growth Fund....................................... 0.80% $ 867,482
Small Cap Value Fund...................................... 0.80% $ 882,229
International Equity Fund................................. 1.10% $ 1,723,512
Growth and Income Fund.................................... 0.80% $ 3,154,367
Global Income Fund........................................ 1.10% $ 611,855
</TABLE>

The investment management agreement does not place limits on the operating
expenses of the Company or of any Fund. However, the Investment Manager has
voluntarily undertaken to pay any such expenses (but not including brokerage or
other portfolio transaction expenses or expenses of litigation, indemnification,
taxes or other extraordinary expenses) to the extent that such expenses, as
accrued for each Fund, exceed the following percentages of that Fund's estimated
average daily net assets on an annualized basis: CORE U.S. Equity Fund, 0.80%,
Capital Growth Fund, 0.80%, Small Cap Value Fund, 0.80%, International Equity
Fund, 1.10%, Growth and Income Fund, 0.80%, and Global Income Fund, 1.10%. This
reduction of expenses will increase the yield or total return of the Funds for
any period for which it remains in effect. The Investment Manager may withdraw
this undertaking to pay expenses as to any or all of the Funds upon 120 days
notice to the Company.

See "Investment Manager" in the SAI for more detailed information about the
investment management agreement.

INVESTMENT ADVISERS

<TABLE>
<CAPTION>
INVESTMENT ADVISER FUND
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Asset Management ("GSAM") CORE U.S. Equity
One New York Plaza Capital Growth
New York, New York 10004 Small Cap Value
Growth and Income
- --------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Assets Management International ("GSAMI") International Equity
133 Peterborough Court Global Income
London EC4A 2BB England
</TABLE>

27
<PAGE>
GSAM is a separate operating division of Goldman Sachs, which registered as an
investment adviser in 1981. GSAMI, an affiliate of Goldman Sachs, became a
member of the Investment Regulatory Organization Limited in 1990 and registered
as an investment adviser in 1991. As of January 31, 1999, GSAM and GSAMI,
together with their affiliates, acted as investment adviser or distributor for
assets in excess of $203 billion.

The Investment Advisers provide day-to-day advice as to the Funds' portfolio
transactions. The Investment Advisers make the investment decisions for the
Funds and place purchase and sale orders for the Funds' portfolio transactions
in the U.S. and foreign markets. As permitted by applicable law, these orders
may be directed to any brokers, including Goldman Sachs and its affiliates.
While each Investment Adviser is ultimately responsible for the management of
the Funds, they are able to draw upon the research and expertise of their asset
management affiliates for portfolio decisions and management with respect to
certain portfolio securities. In addition, each Investment Adviser has access to
the research and certain proprietary technical models developed by Goldman
Sachs, and will apply quantitative and qualitative analysis in determining the
appropriate allocations among categories of issuers and types of securities.

M. Roch Hillenbrand, a Managing Director of Goldman, Sachs & Co., is the Head of
Global Equities for GSAM, overseeing U.S., Europe, Japan, and non-Japan Asia. In
this capacity, he is responsible for managing the group as if defines and
implements global portfolio management processes that are consistent, reliable
and predictable. Roch is also President of Commodities Corporation LLC, of which
Goldman, Sachs & Co. is the parent company. Over the course of his 18-year
career at Commidities Corporation, Roch has had extensive experience in dealing
with internal and external investment managers who have managed a range of
futures and equities strategies across multiple markets, using a variety of
styles.

All of the Value Style Funds, which include the Growth and Income and Small Cap
Value Fund, are managed on a team basis with certain members of the team taking
primary responsibility for particular Funds. Each member of the team generally
participates in the active discussion of the composition, structure and strategy
of each Fund. The members of the Value Team are Eileen A. Aptman, Paul D.
Farrell, Matthew B. McLennan and Karma Wilson.

VALUE TEAM (SMALL CAP VALUE FUND AND GROWTH AND INCOME)

VALUE TEAM:
- Thirteen portfolio managers/analysts compose the Investment Adviser's
value investment team.
- Multi-sector focus provides a balanced perspective.
- Across all value products, the Investment Adviser leverages the industry
research expertise of its small, mid and large cap investment teams.

Paul D. Farrell Senior Portfolio Manager -- Since 1992 Mr. Farrell joined GSAM in 1991. In 1998, Mr.
Managing Director Small Cap Value Since 1999 Farrell became responsible for managing GSAM's
Growth and Income Value Team.

Matthew B. McLennan Portfolio Manager -- Since 1996 Mr. McLennan joined GSAM in 1995. From 1994 to
Small Cap Value 1995, he worked in the Investment Banking Division
of Goldman Sachs in Australia. From 1991 to 1994,
Mr. McLennan worked at Queensland Investment
Corporation in Australia.

Karma Wilson Portfolio Manager -- Since 1998 Ms. Wilson joined GSAM in 1994. Prior to 1994, she
Vice President Growth and Income was an investment analyst with Bankers Trust
Australia Ltd.
</TABLE>

28
<PAGE>
QUANTITATIVE EQUITY TEAM (CORE U.S. EQUITY FUND)

QUANTITATIVE EQUITY TEAM:
- A stable and growing team supported by an extensive internal staff
- Access to the research ideas of Goldman Sachs' renowned Global Investment
Research Department
- More than $19 billion in equities currently under management

GROWTH EQUITY INVESTMENT TEAM (CAPITAL GROWTH FUND)

GROWTH EQUITY INVESTMENT TEAM:
- 17 year consistent investment style applied through diverse and complete
market cycles
- More than $8 billion in equities currently under management
- More than 150 client account relationships
- A portfolio management and analytical team with more than 130 years
combined investment experience

29
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO MANAGEMENT TEAM (INTERNATIONAL EQUITY FUND)
- Global portfolio teams based in London, Singapore, Tokyo and New York.
Local presence is a key to GSAMI's fundamental research capabilities

- Teams manage over $27 billion in international equities for retail,
institutional and high net worth clients

- Focus on bottom-up stock selection as main driver of returns, though the
teams leverage the asset allocation, currency and risk management
capabilities of GSAMI

<TABLE>
<CAPTION>
YEARS
PRIMARILY
NAME AND TITLE FUND RESPONSIBILITY RESPONSIBLE FIVE YEAR EMPLOYMENT HISTORY
- ------------------------- ------------------------------ ----------- --------------------------------------------------
<C> <S> <C> <C>
Ivor H. Farman Senior Portfolio Manager -- Since 1996 Mr. Farman joined GSAMI as a senior portfolio
Executive Director International Equity manager in 1996. From 1995 to 1996 he was
responsible for originating and marketing French
equity ideas at Exane in Paris. Prior to 1995, he
spent five years engaged in French equity research
and marketing at Banque Nationale de Paris and
Schroders in London.
Paul Greener Portfolio Manager -- Since 1998 Mr. Greener joined GSAMI as a member of the
Associate International Equity Pan-European Equity Team responsible for European
general retailers, and technology sectors in 1996.
From 1994 to 1996, he was an equity analyst at CIN
Management. Prior to 1994, he was a student at the
University of Birmingham.
Susan Noble Senior Portfolio Manager -- Since 1998 Ms. Noble joined the GSAMI as a senior portfolio
Executive Director International Equity manager and head of the European Equity Team in
October 1997. From 1986 to 1997, she worked at
Fleming Investment Management in London, where she
most recently was Portfolio Management Director
for the European equity investment strategy and
process.
Alice Lui Portfolio Manager -- Since 1999 Ms. Lui joined GSAMI as a portfolio manager in
Vice-President International Equity 1990.
Ravi Shanker Senior Portfolio Manager -- Since 1999 Mr. Shanker joined GSAMI as an operations manager
Vice-President International Equity in 1997. From July 1996 to 1997, he worked for
Goldman Sachs in Singapore as a strategic advisor
for transactions involving Infrastructure
Industries in Asia. From 1998 to 1996, he worked
for Goldman Sachs as an investment banker in the
Investment Banking Division.
Siew-Hua Thio Portfolio Manager -- Since 1998 Ms. Thio joined GSAMI as a portfolio manager in
Vice-President International Equity 1998. From 1997 to 1998, she was Head of Research
for Indosuez WI Carr in Singapore. From 1993 fo
1997, she was a research analyst at the same firm.
Shogo Maeda Senior Portfolio Manager -- Since 1994 Mr. Maeda joined GSAMI as a portfolio manager in
Managing Director International Equity 1994. From 1987 to 1994, he worked at Nomura
Investment Management Incorporated as a Senior
Portfolio Manager.
</TABLE>

30
<PAGE>
FIXED INCOME PORTFOLIO MANAGEMENT TEAM (GLOBAL INCOME FUND)

FIXED INCOME PORTFOLIO MANAGEMENT TEAM:

- The fixed-income portfolio management team is comprised of a deep team of
sector specialists

- The team strives to maximize risk-adjusted returns by de-emphasizing
interest rate anticipation and focusing on security selection and sector
allocation

- The team manages approximately $40 billion in fixed-income assets for
retail, institutional and high net work clients

Andrew Wilson Portfolio Manager -- Global Since 1995 Mr. Wilson joined GSAM in 1995. Prior to his
Executive Director Income Fund current position, he spent three years as an
Assistant Director at Rothschild Asset Management,
where he was responsible for managing global and
international bond portfolios with specific focus
on the U.S., Canadian, Australian and Japanese
economies.
</TABLE>

ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGER BY
GOLDMAN SACHS

The involvement of the Investment Advisers, Goldman Sachs and their affiliates
in the management of, or their interest in, other accounts and other activities
of Goldman Sachs may present conflicts of interest with respect to a Fund or
limit a Fund's investment activities. Goldman Sachs and its affiliates engage in
proprietary trading and advise accounts and funds which have investment
objectives similar to those of the Funds and/or which engage in and compete for
transactions in the same types of securities, currencies and instruments as the
Funds. Goldman Sachs and its affiliates will not have any obligation to make
available any information regarding their proprietary activities or strategies,
or the activities or strategies used for other accounts managed by them, for the
benefit of the management of the Funds. The results of a Fund's investment
activities, therefore, may differ from those of Goldman Sachs and its affiliates
and it is possible that a Fund could sustain losses during periods in which
Goldman Sachs and its affiliates and other accounts achieve significant profits
on their trading for proprietary or other accounts. In addition, the Funds may,
from time to time, enter into transactions in which other clients of Goldman
Sachs have an adverse interest. From time to time, a Fund's activities may be
limited because of regulatory restrictions applicable to Goldman Sachs and its
affiliates, and/or their internal policies designed to comply with such
restrictions.

YEAR 2000

Many computer systems were designed using only two digits to signify the year
(for example, "98" for "1998"). On January 1, 2000, if these computer systems
are not corrected, they may incorrectly interpret "00" as the year "1900" rather
than the year "2000," leading to computer shutdowns or errors (commonly known as
the "Year 2000 Problem"). To the extent these systems conduct forward-looking
calculations, these computer problems may occur prior to January 1, 2000.

31
<PAGE>
Like other investment companies and financial and business organizations, the
Funds could be adversely affected in their ability to process securities trades,
price securities, provide shareholder account services and otherwise conduct
normal business operations if the computer systems used by the Investment
Manager, the Investment Adviser or other Fund service providers do not
adequately address this problem in a timely manner.

The Investment Manager has implemented steps intended to assure that its major
computer systems and processes are capable of Year 2000 processing. The
Investment Manager also is working with certain third party service providers to
the Funds, including the Fund's custodian and administrator, to assess the
adequacy of their compliance efforts and is in the process of developing
contingency plans intended to assure that non-preparedness by such service
providers will not materially affect the operations of the Investment Manager or
those of the Funds.

The Investment Adviser has established a dedicated group to analyze issues
relating to the Year 2000 Problem and to implement the systems modifications
necessary to prepare for the Year 2000 Problem. The Investment Manager and the
Investment Adviser will continue to monitor the situation. At this time,
however, no assurance can be given that the actions taken by the Investment
Manager, the Investment Adviser and the Funds' other service providers will be
sufficient to avoid any adverse effect on the Funds due to the Year 2000
Problem. In addition, the Investment Adviser has undertaken measures to
appropriately take into account available information concerning the Year 2000
preparedness of the issuers of securities held by the Funds. The Investment
Adviser may obtain such Year 2000 information from various sources which the
Investment Adviser believes to be reliable, including the issuers' public
regulatory filings. However, the Investment Adviser is not in a position to
verify the accuracy or completeness of such information.

Companies, organizations, governmental entities, and markets in which the Funds
invest will likely be affected by the Year 2000 Problem; however, it is not
possible to predict the degree of impact at this time. It is possible that
foreign issuers and markets, especially those located in emerging countries,
will not be as prepared for the Year 2000 Problem as domestic issuers and
markets. As a result, the performance of Funds that invest in foreign issuers or
markets may be adversely affected.

Currently, neither the Investment Manager nor the Investment Adviser anticipates
that the transition to the 21st Century will have any material impact on their
ability to service the Funds at current levels.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Each Fund intends to distribute substantially all of their net investment income
annually. Each Fund also intends to annually distribute substantially all of its
net realized capital gains. All income dividends and capital gain distributions
made by a Fund will be reinvested in shares of that Fund at that Fund's net
asset value.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each Fund is normally determined once daily as
of the close of regular trading on the New York Stock Exchange, normally 4:00
p.m. New York time, on each day when the New York Stock Exchange is open, except
as noted below. The New York Stock Exchange is scheduled to be open Monday
through Friday throughout the year, except for certain federal and other
holidays. The net asset value of each Fund is determined by dividing the value
of the Fund's securities, cash, and other assets (including accrued but
uncollected interest and dividends), less all liabilities (including accrued
expenses but excluding capital and surplus) by the number of shares of the Fund
outstanding.

The value of each Fund's securities and assets, except for certain short-term
debt securities, is determined on the basis of their market values. Short-term
debt securities having remaining maturities of sixty days or less are valued by
the amortized cost method, which approximates market value. Investments for
which market quotations are not readily available are valued at their fair value
as determined in good faith by, or under authority delegated by, the Company's
board of directors. See "Determination of Net Asset Value" in the SAI.

Foreign securities may trade in their local markets on days a Fund is closed. As
a result, the NAV of a Fund that holds foreign securities may be impacted on
days when investors may not purchase or redeem Fund shares.

32
<PAGE>
TAXATION

For federal income tax purposes, each Fund will be treated as a separate entity.
Each Fund intends to qualify each year as a "regulated investment company" under
the Code. By so qualifying, a Fund will not be subject to federal income taxes
to the extent that its net investment income and net realized capital gains are
distributed to the separate accounts of insurance companies. Further, each Fund
intends to meet certain diversification requirements applicable to mutual funds
underlying variable insurance products.

The shareholders of the Funds are the separate accounts of Protective and PLIA.
Under current law, owners of variable annuity contracts and variable life
insurance policies that have invested in a Fund are not subject to federal
income tax on Fund distributions or on gains realized upon the sale or
redemption of Fund shares until they are withdrawn from the contracts or
policies. For information concerning the federal tax consequences to the
purchasers of the variable annuity contracts and variable life insurance
policies, see the attached prospectus for such contract or policy.

For more information about the tax status of the Funds, see "Taxes" in the SAI.

33
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The following financial highlights tables are intended to help you understand
each Fund's financial performance over the life of the Fund. Certain information
reflects financial results for a single Fund share. The total returns in the
tables represent the rate that an investor would have earned (or lost) on an
investment in a Fund (assuming reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with each Fund's financial statements, are included in the annual report,
which is available upon request.
PROTECTIVE INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
GLOBAL INCOME FUND
<S> <C> <C> <C> <C> <C>
FOR THE
YEAR ENDED PERIOD
------------------------------------------ 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
--------- --------- --------- --------- -------------
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%
</TABLE>

34
<PAGE>
PROTECTIVE INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
<S> <C> <C> <C> <C> <C>
FOR THE
YEAR ENDED PERIOD
-------------------------------------------- 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
----------- --------- --------- --------- -------------
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>

35
<PAGE>
PROTECTIVE INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
CAPITAL GROWTH FUND
<S> <C> <C> <C> <C>
FOR THE
YEAR ENDED PERIOD
------------------------------- 6/13/95* TO
12/31/98 12/31/97 12/31/96 12/31/95
--------- --------- --------- -------------
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%
</TABLE>

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
<S> <C> <C> <C> <C> <C>
FOR THE
YEAR ENDED PERIOD
------------------------------------------ 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
--------- --------- --------- --------- -------------
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>

36
<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
<S> <C> <C> <C> <C> <C>
FOR THE
YEAR ENDED PERIOD
------------------------------------------ 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
--------- --------- --------- --------- -------------
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%
</TABLE>

<TABLE>
<CAPTION>
SMALL CAP VALUE FUND
<S> <C> <C> <C> <C> <C>
FOR THE
YEAR ENDED PERIOD
------------------------------------------ 3/14/94* TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
--------- --------- --------- --------- -------------
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>

* 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.

37
<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUNDS
- --------------------------------------------------------------------------------

For investors who would like more information about the Funds and the Company,
the following documents are available free upon request.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI contains additional information about all aspects of the Funds. A
current SAI has been filed with the Securities and Exchange Commission the
("SEC") and is incorporated herein by reference. For a copy of the SAI, write or
call the Company at the address or phone number listed below.

Information about the Funds (including the SAI) also may be reviewed and copied,
upon payment of a duplicating fee, at the SEC's Public Reference Room in
Washington, D.C. You also can obtain this information, upon payment of a
duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. The SEC also maintains a Web site located at
http://www.sec.gov that contains the SAI, material incorporated herein by
reference, and other information regarding the Funds. For more information about
the operation of the Public Reference Room, please call the SEC at
1-800-SEC-0330.

ANNUAL AND SEMI-ANNUAL REPORTS

The Funds' annual and semi-annual reports provide additional information about
the Funds' investments. The annual report contains a discussion of the market
conditions and investment strategies that significantly affected each Fund's
performance during the last fiscal year.

TO OBTAIN THE SAI OR THE MOST RECENT ANNUAL OR
SEMI-ANNUAL REPORT FOR THE FUNDS YOU MAY WRITE
TO PROTECTIVE INVESTMENT COMPANY AT P.O. BOX
2606, BIRMINGHAM, AL 35202 OR CALL US AT
1-800-866-3555.

Investment Company Act File No. 811-8674