PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT (Form: 485BPOS, Received: 04/25/2002 15:28:34)

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As filed with the Securities and Exchange Commission on April 25, 2002

File No. 333-94047
File No. 811-8108

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933        /x/
Pre-Effective Amendment No.        / /
Post-Effective Amendment No. 3        /x/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940        /x/
Amendment No. 35         /x/

Protective Variable Annuity
Separate Account
(Exact Name of Registrant)

Protective Life Insurance Company
(Name of Depositor)

2801 Highway 280 South
Birmingham, Alabama 35223
(Address of Depositor's Principal Executive Offices)

(205) 879-9230
(Depositor's Telephone Number, including Area Code)

STEVE M. CALLAWAY, Esquire
Protective Life Insurance Company
2801 Highway 280 South
Birmingham, Alabama, 35223
(Name and Address of Agent for Services)

Copy to:
STEPHEN E. ROTH, Esquire
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
(202) 383-0158

It is proposed that this filing become effective (check appropriate box):

/ / immediately upon filing pursuant to paragraph (b) of Rule 485;

/x/ on May 1, 2002 pursuant to paragraph (b) of Rule 485;

/ / 60 days after filing pursuant to paragraph (a) of Rule 485;

/ / on May 1, 2002 pursuant to paragraph a(i) of Rule 485;

Title of Securities Being Registered: Interests in a separate
account issued through variable annuity contracts.

PART A

INFORMATION REQUIRED TO BE IN THE PROSPECTUS

Protective Life Insurance Company
Protective Variable Annuity
Separate Account
P.O. Box 10648
Birmingham, Alabama 35202-0648
Telephone: 1-800-456-6330
www.protectiveannuities.com

This Prospectus describes the Protective Variable Annuity II Contract, a group and individual flexible premium deferred variable and fixed annuity contract offered by Protective Life Insurance Company. The Contract is designed for investors who desire to accumulate capital on a tax deferred basis for retirement or other long term investment purpose. It may be purchased on a non-qualified basis or for use with certain qualified retirement plans.

You may allocate your Purchase Payments to one or more of the Sub-Accounts of the Protective Variable Annuity Separate Account, the Guaranteed Account, or both. The assets of each Sub-Account will be invested solely in a corresponding Fund of Protective Investment Company, Van Kampen Life Investment Trust, MFS® Variable Insurance Trust ^SM , Oppenheimer Variable Account Funds, and Lord Abbett Series Fund. The Funds are:

Protective Investment Company Protective Investment Company International Equity Fund Small Cap Value Fund Capital Growth Fund CORE ^SM U.S. Equity Fund Growth and Income Fund Global Income Fund		MFS® Variable Insurance Trust New Discovery Series Emerging Growth Series Research Series Investors Growth Stock Series Investors Trust Series Utilities Series Total Return Series
Oppenheimer Variable Account Funds Aggressive Growth Fund/VA Global Securities Fund/ VA Capital Appreciation Fund/VA Main Street Growth & Income Fund/VA High Income Fund/VA Money Fund/VA Strategic Bond Fund/VA		Van Kampen Life Investment Trust Aggressive Growth Portfolio Class II Emerging Growth Portfolio Class I Enterprise Portfolio Class I Comstock Portfolio Class I Growth and Income Portfolio Class I Lord Abbett Series Fund Growth and Income Portfolio Mid-Cap Value Portfolio Bond-Debenture Portfolio

The value of your Contract, except amounts you allocate to the Guaranteed Account, will vary according to the investment performance of the Funds in which the selected Sub-Accounts are invested. You bear the investment risk on amounts you allocate to the Sub-Accounts.

This Prospectus sets forth basic information about the Contract and the Variable Account that a prospective investor should know before investing. The Statement of Additional Information, which has been filed with the Securities and Exchange Commission, contains additional information about the Contract and the Variable Account. The Statement of Additional Information is dated the same date as this Prospectus and is incorporated herein by reference. The Table of Contents for the Statement of Additional Information is on the last page of this Prospectus. You may obtain a copy of the Statement of Additional Information free of charge by writing or calling Protective Life at the address or telephone number shown above. You may also obtain an electronic copy of the Statement of Additional Information, as well as other material that we file electronically and certain material incorporated by reference, at the SEC web site (http://www.sec.gov).

Please read this prospectus carefully. Investors should keep a copy for future reference. This prospectus must be accompanied by a current prospectus for each of the Funds.

The Protective Variable Annuity II Contract is not a deposit or obligation of, or guaranteed by, any bank or financial institution. It is not insured by the Federal Deposit Insurance Corporation or any other government agency, and it is subject to investment risk, including the possible loss of principal.

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this Prospectus is May 1, 2002

TABLE OF CONTENTS

		Page
DEFINITIONS		3
EXPENSES		4
Examples		7
SUMMARY		11
The Contract		11
Federal Tax Status		13
THE COMPANY, VARIABLE ACCOUNT AND FUNDS		14
Protective Life Insurance Company		14
Protective Variable Annuity Separate Account		14
Administration		14
The Funds		15
Protective Investment Company (PIC)		15
Van Kampen Life Investment Trust		16
MFS® Variable Insurance Trust		16
Oppenheimer Variable Account Funds		17
Lord Abbett Series Fund		17
Other Information about the Funds		18
Other Investors in the Funds		19
Addition, Deletion or Substitution of Investments		19
DESCRIPTION OF THE CONTRACT		20
The Contract		20
Parties to the Contract		20
Issuance of a Contract		21
Purchase Payments		22
Right to Cancel		22
Allocation of Purchase Payments		22
Variable Account Value		23
Transfers		25
Surrenders and Partial Surrenders		27
THE GUARANTEED ACCOUNT		29
DEATH BENEFIT		31
Standard Death Benefit		31
Optional Benefit Packages		32
Earnings Enhancement Death Benefit (not available in Minnesota, North Dakota or Washington)		33
SUSPENSION OR DELAY IN PAYMENTS		35
SUSPENSION OF CONTRACTS		35
CHARGES AND DEDUCTIONS		35
Surrender Charge		35
Mortality and Expense Risk Charge		37
Administration Charges		38
Transfer Fee		38
Contract Maintenance Fee		38
Fund Expenses		38
Premium Taxes		38
Other Taxes		38
ANNUITIZATION		38
Annuity Commencement Date		38
Fixed Income Payments		39
Variable Income Payments		39
Annuity Options		40
Minimum Amounts		41
Death of Annuitant or Owner After Annuity Commencement Date		41
YIELDS AND TOTAL RETURNS		41
Yields		42
Total Returns		42
Standardized Average Annual Total Returns		42
Non-Standard Average Annual Total Returns		43
Performance Comparisons		43
Other Matters		43
FEDERAL TAX MATTERS		44
Introduction		44
The Company's Tax Status		44
TAXATION OF ANNUITIES IN GENERAL		44
Tax Deferral During Accumulation Period		44
Taxation of Partial and Full Surrenders		46
Taxation of Annuity Payments		46
Taxation of Death Benefit Proceeds		47
Assignments, Pledges, and Gratuitous Transfers		47
Penalty Tax on Premature Distributions		47
Aggregation of Contracts		48
Loss of Interest Deduction Where Contract Is Held by or for the Benefit of Certain Nonnatural Persons		48
QUALIFIED RETIREMENT PLANS		48
In General		48
Direct Rollovers		51
FEDERAL INCOME TAX WITHHOLDING		52
GENERAL MATTERS		52
The Contract		52
Error in Age or Gender		52
Incontestability		52
Non-Participation		53
Assignment or Transfer of a Contract		53
Notice		53
Modification		53
Reports		53
Settlement		53
Receipt of Payment		53
Protection of Proceeds		53
Minimum Values		54
Application of Law		54
No Default		54
DISTRIBUTION OF THE CONTRACTS		54
Inquiries		54
IMSA		55
LEGAL PROCEEDINGS		55
VOTING RIGHTS		55
FINANCIAL STATEMENTS		56
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS		57
APPENDIX A: Death Benefit calculation examples		A-1
APPENDIX B: Surrender Charge calculation examples		B-1
APPENDIX C: Variable Annuitization calculation		C-1
APPENDIX D: Earnings Enhancement Death Benefit Calculation		D-1
APPENDIX E: Additional Allocation Options for Certain Contracts Purchased before May 1, 2002		E-1
APPENDIX F: Condensed Financial Information		F-1

DEFINITIONS

"We", "us", "our", "Protective Life", and "Company" refer to Protective Life Insurance Company. "You" and "your" refer to the person(s) who has been issued a Contract.

Accumulation Unit: A unit of measure used to calculate the value of a Sub-Account prior to the Annuity Commencement Date.

Allocation Option: Any account to which you may allocate Purchase Payments or transfer Contract Value under this Contract. The Allocation Options are the Sub-Accounts of the Variable Account and the fixed accounts of the Guaranteed Account that are available in this Contract.

Annuity Commencement Date: The date as of which the Contract Value, less applicable premium tax, is applied to an Annuity Option.

Annuity Option: The payout option under which the Company makes annuity income payments.

Annuity Unit: A unit of measure used to calculate the amount of the variable income payments.

Assumed Investment Return: The assumed annual rate of return used to calculate the amount of the variable income payments.

Contract: The Protective Variable Annuity II, a flexible premium, deferred, variable and fixed annuity contract.

Contract Anniversary: The same month and day as the Effective Date in each subsequent year of the Contract.

Contract Value: Prior to the Annuity Commencement Date, the sum of the Variable Account value and the Guaranteed Account value.

Contract Year: Any period of 12 months commencing with the Effective Date or any Contract Anniversary.

DCA: Dollar cost averaging.

DCA Fixed Accounts: The DCA Fixed Accounts are part of the Company's general account and are not part of or dependent upon the investment performance of the Variable Account. These accounts are available for dollar cost averaging only and may not be available in all states.

Effective Date: The date as of which we credit the initial Purchase Payment to the Contract and the date the Contract takes effect.

Fixed Account: The Fixed Account is part of the Company's general account and is not part of or dependent upon the investment performance of the Variable Account. This account may not be available in all states.

Fund: Any investment portfolio in which a corresponding Sub-Account invests.

Guaranteed Account: The Fixed Account, DCA Fixed Accounts, and any other Allocation Option we may offer with interest rate guarantees.

Purchase Payment: The amount(s) paid by the Owner and accepted by the Company as consideration for this Contract.

Qualified Contracts: Contracts issued in connection with retirement plans that receive favorable tax treatment under Sections 401, 403, 408, 408A or 457 of the Internal Revenue Code.

Qualified Plans: Retirement plans that receive favorable tax treatment under Sections 401, 403, 408, 408A or 457 of the Internal Revenue Code.

Sub-Account: A separate division of the Variable Account.

Valuation Day: Each day on which the New York Stock Exchange is open for business.

Valuation Period: The period which begins at the close of regular trading on the New York Stock Exchange on any Valuation Day and ends at the close of regular trading on the next Valuation Day.

Variable Account: The Protective Variable Annuity Separate Account, a separate investment account of Protective Life.

Written Notice: A notice or request submitted in writing in a form satisfactory to the Company that we receive at the administrative office via hand delivery, courier, mail, or facsimile transmission.

EXPENSES

The Expenses and Examples are intended to assist the owner in understanding the costs and expenses that he or she will bear directly or indirectly. Except as otherwise noted, they reflect the expenses for the Variable Account and each Fund for the period January 1, 2001 to December 31, 2001. For a more complete description of the various costs and expenses associated with the Contract, see "Charges and Deductions" in this prospectus. For a more complete description of the management fees associated with the Funds, see the prospectuses for each of the Funds, which accompany this prospectus. The expense information regarding the Funds was provided by those Funds. We have not independently verified this information. In addition to the expenses listed below, premium taxes currently varying from 0 to 3.5% may be applicable in certain states.

The following expense information assumes that the entire Contract Value is Variable Account value.

OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchase Payments	None
Maximum Surrender Charge Imposed on Amount Surrendered (contingent deferred sales charge as a % of amount surrendered)	7.0%	*
Transfer Processing Fee	None	**
ANNUAL CONTRACT MAINTENANCE FEE	$30	***

	with Standard Benefits	with Optional Benefit Package	with Standard Benefits and EEDB	with Optional Benefit Package and EEDB
ANNUAL VARIABLE ACCOUNT EXPENSES (as a percentage of average Variable Account value)
Mortality and Expense Risk Charge	1.10%	1.25%	1.35%	1.50%
Administration Charge	0.15%	0.15%	0.15%	0.15%
Total Annual Variable Account Expenses	1.25%	1.40%	1.50%	1.65%

*		The Surrender Charge declines over time. (See "Charges and Deductions.")
**		Protective Life reserves the right to charge a Transfer Fee in the future. (See "Charges and Deductions".)
***		The contract maintenance fee may not apply. (See "Charges and Deductions".)

ANNUAL FUND EXPENSES
For the period ending December 31, 2001
(after reimbursement and as percentage of average net assets)

	Management (Advisory) Fees		12b-1 Fees*		Other Expenses After Reimbursement		Total Annual Fund Expenses (after reimbursements)

Protective Investment Company (PIC) (1)
International Equity Fund	1.10	%			0.00	%	1.10	%
Small Cap Value Fund	0.80	%			0.00	%	0.80	%
Capital Growth Fund	0.80	%			0.00	%	0.80	%
CORE ^SM U.S. Equity Fund	0.80	%			0.00	%	0.80	%
Growth and Income Fund	0.80	%			0.00	%	0.80	%
Global Income Fund	1.10	%			0.00	%	1.10	%
Van Kampen Life Investment Trust (2)
Aggressive Growth Portfolio Class II	0.00	%	0.25	%	1.02	%	1.27	%
Emerging Growth Portfolio	0.70	%			0.06	%	0.76	%
Enterprise Portfolio	0.48	%			0.12	%	0.60	%
Comstock Portfolio	0.60	%			0.21	%	0.81	%
Growth and Income Portfolio	0.60	%			0.15	%	0.75	%
MFS® Variable Insurance Trust ^SM (3, 4)
New Discovery Series	0.90	%			0.16	%	1.06	%
Emerging Growth Series	0.75	%			0.12	%	0.87	%
Research Series	0.75	%			0.15	%	0.90	%
Investors Growth Stock Series	0.75	%			0.17	%	0.92	%
Investors Trust Series	0.75	%			0.15	%	0.90	%
Utilities Series	0.75	%			0.18	%	0.93	%
Total Return Series	0.75	%			0.14	%	0.89	%
Oppenheimer Variable Account Funds
Aggressive Growth Fund/VA	0.64	%			0.04	%	0.68	%
Global Securities Fund/VA	0.64	%			0.06	%	0.70	%
Capital Appreciation Fund/VA	0.64	%			0.04	%	0.68	%
Main Street Growth & Income Fund/VA	0.68	%			0.05	%	0.73	%
High Income Fund/VA	0.74	%			0.05	%	0.79	%
Strategic Bond Fund/VA (5)	0.74	%			0.05	%	0.79	%
Money Fund/VA	0.45	%			0.07	%	0.52	%
Lord Abbett Series Fund, Inc. (6)
Growth and Income Portfolio	0.50	%			0.47	%	0.97	%
Mid-Cap Value Portfolio	0.75	%			0.35	%	1.10	%
Bond-Debenture Portfolio	0.50	%			0.35	%	0.85	%

The 12b-1 fees deducted from 12b-1 classes of the Funds cover certain distribution and shareholder support services provided by the companies selling Contracts investing in those Funds. The portion of the 12b-1 fees assessed against Fund assets attributable to the Contracts will be remitted to Investment Distributors, Inc., the principal underwriter of the Contracts.

Additional Allocation Options may be available for certain Contracts purchased before May 1, 2002. Please see Appendix E for more information.

(1)		The annual expenses listed for all of the PIC funds are net of certain reimbursements by PIC's investment manager. (See "The Funds".) Absent the reimbursements, total expenses for the period ended December 31, 2001 were: CORE ^SM U.S. Equity Fund 0.87%, Small Cap Value Fund 0.91%, International Equity Fund 1.37%, Growth and Income Fund 0.87%, Capital Growth Fund 0.86%, and Global Income Fund 1.35%. PIC's investment manager has voluntarily agreed to reimburse certain of each Fund's expenses in excess of its management fees. Although this reimbursement may be ended on 120 days' notice to PIC, the investment manager has no present intention of doing so.
(2)		The Advisor has voluntarily agreed to reimburse the Portfolios for all advisory fees in excess of certain thresholds. This agreement was in effect for the period of January 1, 2001 to December 31, 2001 and will continue through the period of January 1, 2002 to December 31, 2002. There is no guarantee that the Advisor will continue the reimbursement beyond December 31, 2002. Absent the reimbursements, the advisory fees would have been 0.75% for the Aggressive Growth Portfolio Class II, and 0.50% for the Enterprise Portfolio; the "Other Expenses" would have been 6.95% for the Aggressive Growth Portfolio Class II, and 0.12% for the Enterprise Portfolio.
(3)		MFS has contractually agreed, subject to reimbursement, to bear expenses for the series such that each series' "Other Expenses" (after taking into account the expense offset arrangement described in Note 4 below), do not exceed the following percentages of the average daily net assets of these series during the current fiscal year: 0.15% for New Discovery Series. These contractual fee arrangements will continue until at least May 1, 2003, unless changed with the consent of the board of trustees which oversees this series.
(4)		Each Series has an expense offset arrangement which reduces the Series' custodian based fee based on the amount of cash maintained by the Series with its custodian and dividend disbursing agent. Each Series may enter into other such arrangements and directed brokerage arrangements, which would also have the effect of reducing the Series' expenses. "Other Expenses" do not take into account these expense reductions and are therefore higher than the actual expenses of the Series. Had these fee reductions been taken into account, "Total Expenses" would be lower for certain series and would equal: 1.05% for the New Discovery Series; 0.86% for the Emerging Growth Series; 0.89% for the Research Series; 0.89% for the Investors Trust Series; 0.90% for the Investors Growth Stock Series; 0.88% for the Total Return Series, and 0.92% for the Utilities Series.
(5)		OppenheimerFunds, Inc. will reduce the management fee by 0.10% as long as the fund's trailing 12-month performance at the end of the quarter is in the fifth Lipper peer-group quintile; and by 0.05% as long as it is in the fourth quintile. The waiver is voluntary and may be terminated by the Manager at any time.
(6)		The Mid-Cap Value, Growth and Income and Bond-Debenture Portfolios have each established non-12b-1 service fee arrangements which are reflected under "Other Expenses". The information in the chart above relating to the Mid-Cap Value and Bond-Debenture Portfolios has been restated to reflect the fees and expenses that will be applicable during 2002. For the year 2001, Lord Abbett & Co. (Lord Abbett), voluntarily waived a portion of its management fees for the Mid-Cap Value Portfolio and subsidized a portion of the Mid-Cap Value and Bond-Debenture Portfolios' expenses to the extent necessary to maintain the "Other Expenses" for the Mid-Cap Value and Bond-Debenture Portfolios at an aggregate of 0.35% of each Portfolio's average daily net assets. Absent any waivers and reimbursements the total annual gross expenses for the Mid-Cap Value Portfolio would have been 1.20% for the year 2001. Absent any reimbursements the total annual gross expenses for the Bond-Debenture Portfolio would have been 0.33% on an unannualized basis for the period December 3, 2001 (commencement of operations) through December 31, 2001. For the year 2002, Lord Abbett does not intend to waive its management fees for the Mid-Cap Value Portfolio but has contractually agreed to continue to reimburse a portion of the Mid-Cap Value and Bond-Debenture Portfolios' expenses to the extent necessary to maintain the "Other Expenses" for the Mid-Cap Value and Bond- Debenture Portfolios at an aggregate of 0.35% of each Portfolio's average daily net assets.

EXAMPLES

At the end of the applicable time period, you would have paid the following expenses on a $1,000 investment, assuming selection of the benefit combination shown and a 5% annual return on assets. The Examples also assume that no transfer fee or premium taxes have been assessed and that the contract maintenance fee is equivalent to 0.04%.

The Examples should not be considered a representation of past or future expenses. Actual expenses may be greater or less than those shown. The assumed 5% annual return is hypothetical and should not be considered a representation of past or future annual returns, which may be greater or less than the assumed amount.

	Standard Death Benefit without EEDB
	If Contract is Surrendered at End of Applicable Period								If Contract is Not Surrendered at End of Applicable Period
Sub-Account	1 Year		3 Years		5 Years		10 Years		1 Year		3 Years		5 Years		10 Years
PIC International Equity	$	85	$	130	$	166	$	273	$	24	$	75	$	128	$	273
PIC Small Cap Value		82		121		152		242		21		65		112		242
PIC Capital Growth		82		121		152		242		21		65		112		242
PIC CORE ^SM U. S. Equity		82		121		152		242		21		65		112		242
PIC Growth and Income		82		121		152		242		21		65		112		242
PIC Global Income		85		130		166		273		24		75		128		273
Van Kampen Aggressive Growth II		87		134		174		290		26		80		136		290
Van Kampen Emerging Growth		82		120		150		238		21		64		110		238
Van Kampen Enterprise		81		115		142		221		19		59		102		221
Van Kampen Comstock		83		121		152		243		21		66		113		243
Van Kampen Growth and Income		82		120		149		237		21		64		110		237
MFS New Discovery		85		129		164		269		24		73		126		269
MFS Emerging Growth		83		123		155		249		22		68		116		249
MFS Research		83		124		157		252		22		69		117		252
MFS Investors Growth Stock		84		125		157		254		22		69		118		254
MFS Investors Trust		83		124		157		252		22		69		117		252
MFS Utilities		84		125		158		255		23		69		119		255
MFS Total Return		83		124		156		251		22		68		117		251
Oppenheimer Aggressive Growth		81		118		146		230		20		62		106		230
Oppenheimer Global Securities		81		118		147		232		20		62		107		232
Oppenheimer Capital Appreciation		81		118		146		230		20		62		106		230
Oppenheimer Main Street Growth & Income		82		119		148		235		21		63		109		235
Oppenheimer High Income		82		121		151		241		21		65		112		241
Oppenheimer Strategic Bond		82		121		151		241		21		65		112		241
Oppenheimer Money Fund		80		113		138		213		18		57		98		213
Lord Abbett Growth and Income		84		126		160		260		23		71		121		260
Lord Abbett Mid-Cap Value		85		130		166		273		24		75		128		273
Lord Abbett Bond-Debenture		83		123		154		247		22		67		115		247

Additional Allocation Options may be available for certain Contracts purchased before May 1, 2002. Please see Appendix E for more information.

	Optional Benefit Package without EEDB
	If Contract is Surrendered at End of Applicable Period								If Contract is Not Surrendered at End of Applicable Period
Sub-Account	1 Year		3 Years		5 Years		10 Years		1 Year		3 Years		5 Years		10 Years
PIC International Equity	$	87	$	134	$	173	$	288	$	26	$	79	$	135	$	288
PIC Small Cap Value		84		125		159		257		23		70		120		257
PIC Capital Growth		84		125		159		257		23		70		120		257
PIC CORE ^SM U. S. Equity		84		125		159		257		23		70		120		257
PIC Growth and Income		84		125		159		257		23		70		120		257
PIC Global Income		87		134		173		288		26		79		135		288
Van Kampen Aggressive Growth II		88		139		182		304		27		84		143		304
Van Kampen Emerging Growth		83		124		157		253		22		69		118		253
Van Kampen Enterprise		82		120		149		237		21		64		110		237
Van Kampen Comstock		84		126		159		258		23		70		120		258
Van Kampen Growth and Income		83		124		157		252		22		69		117		252
MFS New Discovery		86		133		172		284		25		78		133		284
MFS Emerging Growth		85		127		162		265		23		72		124		265
MFS Research		85		128		164		268		24		73		125		268
MFS Investors Growth Stock		85		129		165		270		24		74		126		270
MFS Investors Trust		85		128		164		268		24		73		125		268
MFS Utilities		85		129		165		271		24		74		127		271
MFS Total Return		85		128		163		267		24		73		125		267
Oppenheimer Aggressive Growth		83		122		153		245		22		66		114		245
Oppenheimer Global Securities		83		123		154		247		22		67		115		247
Oppenheimer Capital Appreciation		83		122		153		245		22		66		114		245
Oppenheimer Main Street Growth & Income		83		123		156		250		22		68		116		250
Oppenheimer High Income		84		125		158		256		23		70		119		256
Oppenheimer Strategic Bond		84		125		158		256		23		70		119		256
Oppenheimer Money Fund		81		117		145		229		20		62		106		229
Lord Abbett Growth and Income		85		130		167		275		24		75		129		275
Lord Abbett Mid-Cap Value		87		134		173		288		26		79		135		288
Lord Abbett Bond-Debenture		84		127		161		263		23		72		123		263

Additional Allocation Options may be available for certain Contracts purchased before May 1, 2002. Please see Appendix E for more information.

	Standard Death Benefit with EEDB
	If Contract is Surrendered at End of Applicable Period								If Contract is Not Surrendered at End of Applicable Period
Sub-Account	1 Year		3 Years		5 Years		10 Years		1 Year		3 Years		5 Years		10 Years
PIC International Equity	$	88	$	137	$	178	$	297	$	27	$	82	$	140	$	297
PIC Small Cap Value		85		128		164		268		24		73		125		268
PIC Capital Growth		85		128		164		268		24		73		125		268
PIC CORE ^SM U. S. Equity		85		128		164		268		24		73		125		268
PIC Growth and Income		85		128		164		268		24		73		125		268
PIC Global Income		88		137		178		297		27		82		140		297
Van Kampen Aggressive Growth II		89		142		186		314		28		87		148		314
Van Kampen Emerging Growth		84		127		162		264		23		72		123		264
Van Kampen Enterprise		83		123		154		247		22		67		115		247
Van Kampen Comstock		85		129		164		269		24		73		126		269
Van Kampen Growth and Income		84		127		161		263		23		72		123		263
MFS New Discovery		87		136		176		293		26		81		138		293
MFS Emerging Growth		85		130		167		275		24		75		129		275
MFS Research		86		131		169		278		25		76		130		278
MFS Investors Growth Stock		86		132		170		280		25		77		131		288
MFS Investors Trust		86		131		169		278		25		76		130		278
MFS Utilities		86		132		170		281		25		77		132		281
MFS Total Return		86		131		168		277		25		76		130		277
Oppenheimer Aggressive Growth		84		125		158		255		23		69		119		255
Oppenheimer Global Securities		84		125		159		257		23		70		120		257
Oppenheimer Capital Appreciation		84		125		158		255		23		69		119		255
Oppenheimer Main Street Growth & Income		84		126		160		261		23		71		122		261
Oppenheimer High Income		85		128		163		267		24		73		125		267
Oppenheimer Strategic Bond		85		128		163		267		24		73		125		267
Oppenheimer Money Fund		82		120		150		239		21		65		111		239
Lord Abbett Growth and Income		86		133		172		285		25		78		134		285
Lord Abbett Mid-Cap Value		88		137		178		297		27		82		140		297
Lord Abbett Bond-Debenture		85		130		166		273		24		75		128		273

Additional Allocation Options may be available for certain Contracts purchased before May 1, 2002. Please see Appendix E for more information.

	Optional Benefit Package with EEDB
	If Contract is Surrendered at End of Applicable Period								If Contract is Not Surrendered at End of Applicable Period
Sub-Account	1 Year		3 Years		5 Years		10 Years		1 Year		3 Years		5 Years		10 Years
PIC International Equity	$	89	$	141	$	185	$	312	$	28	$	87	$	147	$	312
PIC Small Cap Value		86		132		171		283		25		78		133		283
PIC Capital Growth		86		132		171		283		25		78		133		283
PIC CORE ^SM U. S. Equity		86		132		171		283		25		78		133		283
PIC Growth and Income		86		132		171		283		25		78		133		283
PIC Global Income		89		141		185		312		28		87		147		312
Van Kampen Aggressive Growth II		91		146		193		328		30		92		156		328
Van Kampen Emerging Growth		86		131		169		279		25		76		131		279
Van Kampen Enterprise		84		127		161		263		23		72		123		263
Van Kampen Comstock		86		133		172		284		25		78		133		284
Van Kampen Growth and Income		86		131		169		278		25		76		130		278
MFS New Discovery		89		140		183		308		28		85		145		308
MFS Emerging Growth		87		134		174		290		26		80		136		290
MFS Research		87		135		176		292		26		81		138		292
MFS Investors Growth Stock		87		136		177		294		26		81		139		294
MFS Investors Trust		87		135		176		292		26		81		138		292
MFS Utilities		87		136		177		295		27		81		139		295
MFS Total Return		87		135		175		291		26		80		137		291
Oppenheimer Aggressive Growth		85		129		165		271		24		74		127		271
Oppenheimer Global Securities		85		130		166		273		24		75		128		273
Oppenheimer Capital Appreciation		85		129		165		271		24		74		127		271
Oppenheimer Main Street Growth & Income		86		131		168		276		25		75		129		276
Oppenheimer High Income		86		132		171		282		25		77		132		282
Oppenheimer Strategic Bond		86		132		171		282		25		77		132		282
Oppenheimer Money Fund		84		125		157		254		22		69		118		254
Lord Abbett Growth and Income		88		137		179		299		27		83		141		299
Lord Abbett Mid-Cap Value		89		141		185		312		28		87		147		312
Lord Abbett Bond-Debenture		87		134		173		288		26		79		135		288

Additional Allocation Options may be available for certain Contracts purchased before May 1, 2002. Please see Appendix E for more information.

SUMMARY

The Contract


What is the Protective Variable Annuity II Contract?		The Protective Variable Annuity II Contract is a flexible premium deferred variable and fixed annuity contract issued by Protective Life. (See "The Contract.") In certain states the Contract is offered as a group contract to eligible persons.
How may I purchase a Contract?		Protective Life sells the Contracts through registered representatives of broker-dealers. We pay commissions to the broker-dealers for selling the Contracts. (See "Distribution of the Contracts.")
		Protective Life will issue your Contract when it receives and accepts your complete application information and an initial Purchase Payment through the broker-dealer you have selected. (See "Issuance of a Contract.")
What are the Purchase Payments?		The minimum amount that Protective Life will accept as an initial Purchase Payment is $2,000. Initial Purchase Payments may be made at any time prior to the earlier of: (1) the oldest Owner's 85th birthday; or (2) the Annuitant's 85th birthday. No Purchase Payment will be accepted within 7 years of the Annuity Commencement Date then in effect. The minimum subsequent Purchase Payment we will accept is $100, or $50 if the payment is made under our current automatic purchase payment plan. The maximum aggregate Purchase Payment(s) we will accept without prior administrative office approval is $2,000,000. We reserve the right not to accept any Purchase Payment. (See "Purchase Payments.")
Can I cancel the Contract?		You have the right to return the Contract within a certain number of days (which varies by state and is never less than ten) after you receive it. The returned Contract will be treated as if it were never issued. Protective Life will refund the Contract Value in states where permitted. This amount may be more or less than the Purchase Payments. Where required, we will refund Purchase Payments. (See "Right to Cancel.")
Can I transfer amounts in the Contract?		Prior to the Annuity Commencement Date, you may request transfers from one Allocation Option to another. No transfers may be made into a DCA Fixed Account. At least $100 must be transferred. Protective Life reserves the right to limit the maximum amount that may be transferred from the Fixed Account to the greater of (a) $2,500; or (b) 25% of the value of the Fixed Account per Contract Year. The Company reserves the right to charge a transfer fee of $25 for each transfer after the 12th transfer during such Contract Year. (See "Transfers.")
Can I surrender the Contract?		Upon Written Notice before the Annuity Commencement Date, you may surrender the Contract and receive its surrender value. (See "Surrenders and Partial Surrenders.") Surrenders may have federal and state income tax consequences. In addition, surrenders from Contracts issued pursuant to Section 403(b) of the Internal Revenue Code may not be allowed in certain circumstances. (See "Federal Tax Matters.")

Is there a death benefit?		If any Owner dies prior to the Annuity Commencement Date and while this Contract is in force, a death benefit, less any applicable premium tax, will be payable to the Beneficiary. The death benefit is determined as of the end of the Valuation Period during which we receive due proof of the Owner's death. The standard death benefit will equal the greater of: (1) the Contract Value; or (2) aggregate Purchase Payments less aggregate amounts surrendered, including surrender charges. Only one death benefit is payable under this Contract, even though the Contract may, in some circumstances, continue beyond the time of an Owner's death. (See "Death Benefit.")
		At the time of application the Owner may purchase an optional benefit package that may provide a death benefit which is greater than the standard death benefit provided under the contract. (See "Optional Benefit Packages.")
		At the time of application the Owner, subject to age limitations, may also purchase an Earnings Enhancement Death Benefit to the Contract. This additional benefit may provide an additional amount based on certain Contract earnings, if any. (See "Earnings Enhancement Death Benefit.")
Are there charges and deductions from my Contract?		The following charges and deductions are made in connection with the Contract:
Surrender charges.		Full or partial surrenders are subject to a surrender charge. The surrender charge is equal to a specified percentage (maximum 7.0%) of the amount you surrender. (See "Surrender Charges.")
Mortality and expense risk charge.		We will deduct a mortality and expense risk charge to compensate us for assuming certain mortality and expense risks. For Contracts issued with the standard death benefit, the charge equals, on an annual basis, 1.10% of the average daily net assets of the Variable Account value attributable to the Contracts. For Contracts issued with an optional benefit package, the charge equals 1.25% of such assets prior to the Annuity Commencement Date. (See "Optional Benefit Packages.") For Contracts with an Earnings Enhancement Death Benefit, the charge will be 0.25% greater until the Annuity Commencement Date. (See "Earnings Enhancement Death Benefit.") On and after the Annuity Commencement Date, the charge equals 1.10% of such assets. (See "Mortality and Expense Risk Charge.")
Administration charge.		We will deduct an administration charge equal, on an annual basis, to 0.15% of the average daily net assets of the Variable Account value supporting the Contracts. (See "Administration Charge.")
Contract maintenance fee.		Prior to the Annuity Commencement Date a contract maintenance fee of $30 is deducted from the Contract Value on each Contract Anniversary, and on any day that the Contract is surrendered, if the surrender occurs on any day other than the Contract Anniversary. Under certain circumstances, we may waive this fee. (See "Contract Maintenance Fee.")

Taxes.		Some states impose premium taxes at rates currently ranging up to 3.5%. If premium taxes apply to your Contract, we will deduct them from the Purchase Payment(s) when accepted or from the Contract Value upon a full or partial surrender, death or annuitization. The Company reserves the right to impose a charge for other taxes attributable to the Variable Account. (See "Charges and Deductions.")
Investment management fees and other expenses of the Funds.		The net assets of each Sub-Account of the Variable Account will reflect the investment management fee the corresponding Fund incurs as well as the other operating expenses and any applicable distribution and/or service (12b-1) fees of that Fund. For each Fund, the investment manager receives a daily fee for its investment management services. The management fees are based on the average daily net assets of the Fund. (See "Fund Expenses" and the Funds' prospectuses.)
What Annuity Options are available?		Currently, we apply the Contract Value, less any applicable premium tax, to an Annuity Option on the Annuity Commencement Date, unless you choose to receive the surrender value in a lump sum. Annuity Options include: payments for a certain period and life income with or without payments for a certain period. Some Annuity Options are available on either a fixed or variable payment basis. (See "Annuitization".)
Is the Contract available for qualified retirement plans?		You may purchase the Contract for use within certain qualified retirement plans or arrangements that receive favorable tax treatment, such as individual retirement accounts and individual retirement annuities (IRAs), pension and profit sharing plans (including H.R. 10 Plans), and tax sheltered annuity plans. Many of these qualified plans, including IRAs, provide the same type of tax deferral as provided by the Contract. The Contract, however, provides a number of benefits and features not provided by such retirement plans or arrangements alone. There are costs and expenses under the Contract related to these benefits and features. You should consult a qualified tax or financial adviser for information specific to your circumstances to determine whether the use of the Contract within a qualified retirement plan is an appropriate investment for you. (See "Description of the Contract, The Contract," and "Federal Tax Matters, Qualified Retirement Plans.")
Where may I find financial information about the Sub-Accounts?		You may find financial information about the Sub-Accounts in Appendix F to this prospectus and in the Statement of Additional Information.
Other contracts		We offer other types of annuity contracts and insurance policies that also invest in the same Funds in which your Contract invests. These other types of contracts and policies may have different charges that could affect the value of their Sub-Accounts and may offer different benefits than the Contract. To obtain more information about these other contracts and policies, you may contact our administrative office in writing or by telephone.

Federal Tax Status

Generally all earnings on the Investments underlying the Contract are tax-deferred until withdrawn or until annuity income payments begin. A distribution from the Contract, which includes a full or partial surrender or payment of a death benefit, will generally result in taxable income if there has been an increase in the Contract Value. In certain circumstances, a 10% penalty tax may also apply. (See "Federal Tax Matters").

THE COMPANY, VARIABLE ACCOUNT AND FUNDS

Protective Life Insurance Company

The Contracts are issued by Protective Life. A Tennessee corporation founded in 1907, Protective Life provides individual life insurance, annuities, and guaranteed investment contracts. Protective Life is currently licensed to transact life insurance business in 49 states and the District of Columbia. As of December 31, 2001, Protective Life had total assets of approximately $19.6 billion. Protective Life is the principal operating subsidiary of Protective Life Corporation ("PLC"), an insurance holding company whose stock is traded on the New York Stock Exchange. PLC, a Delaware corporation, had total assets of approximately $19.7 billion at December 31, 2001.

Protective Variable Annuity Separate Account

The Protective Variable Annuity Separate Account is a separate investment account of Protective Life. The Variable Account was established under Tennessee law by the Board of Directors of Protective Life on October 11, 1993. The Variable Account is registered with the Securities and Exchange Commission (the "SEC") as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act") and meets the definition of a separate account under federal securities laws. This registration does not involve supervision by the SEC of the management or investment policies or practices of the Variable Account.

Protective Life owns the assets of the Variable Account. These assets are held separate from other assets and are not part of Protective Life's general account. The portion of the assets of the Variable Account equal to the reserves or other contract liabilities of the Variable Account will not be charged with liabilities that arise from any other business Protective Life conducts. Protective Life may transfer to its general account any assets which exceed the reserves and other contract liabilities of the Variable Account. Protective Life may accumulate in the Variable Account the charge for mortality and expense risks and investment results applicable to those assets that are in excess of the net assets supporting the contracts. The income, gains and losses, both realized and unrealized, from the assets of the Variable Account are credited to or charged against the Variable Account without regard to any other income, gains or losses of Protective Life. The obligations under the Contracts are obligations of Protective Life.

Currently, twenty-eight Sub-Accounts of the Variable Account are available under this Contract: PIC International Equity; PIC Small Cap Value; PIC Capital Growth; PIC CORE ^SM U.S. Equity; PIC Growth and Income; PIC Global Income; Van Kampen Aggressive Growth II; Van Kampen Emerging Growth; Van Kampen Enterprise; Van Kampen Comstock; Van Kampen Growth and Income; MFS New Discovery; MFS Emerging Growth; MFS Research; MFS Investors Growth Stock; MFS Investors Trust; MFS Utilities; MFS Total Return; Oppenheimer Aggressive Growth; Oppenheimer Global Securities; Oppenheimer Capital Appreciation; Oppenheimer Main Street Growth & Income; Oppenheimer High Income; Oppenheimer Strategic Bond; Oppenheimer Money Fund; Lord Abbett Growth and Income; Lord Abbett Mid-Cap Value; and Lord Abbett Bond-Debenture. Each Sub-Account invests in shares of a corresponding Fund. Therefore, the investment experience of your Contract depends on the experience of the Sub-Accounts that you select.

This Contract may not offer all the Sub-Accounts of the Variable Account. Other contracts Protective Life issues may offer some or all of the Sub-Accounts of the Variable Account. Additional Sub-Accounts may be available for certain Contracts purchased before May 1, 2002. Please see Appendix E for more information.

Administration

Protective Life Insurance Company performs the Contract administration at its administrative office at 2801 Highway 280 South, Birmingham, Alabama 35223. Contract administration includes processing applications for the Contracts and subsequent Owner requests; processing Purchase Payments, transfers, surrenders and death benefit claims as well as performing record maintenance and disbursing annuity income payments.

The Funds

Each Sub-Account invests in a corresponding Fund. Each Fund is an investment portfolio of one of the following investment companies: Protective Investment Company ("PIC") managed by Protective Investment Advisors, Inc., and subadvised by Goldman Sachs Asset Management or Goldman Sachs Asset Management International; Van Kampen Life Investment Trust managed by Van Kampen Asset Management Inc.; Oppenheimer Variable Account Funds managed by OppenheimerFunds, Inc.; MFS® Variable Insurance Trust ^SM managed by MFS Investment Management; Lord Abbett Series Trust, managed by Lord, Abbett & Co. Shares of these funds are offered only to:

(1) the Variable Account,

(2) other separate accounts of Protective Life and its affiliates supporting variable annuity contracts or variable life insurance policies,

(3) separate accounts of other life insurance companies supporting variable annuity contracts or variable life insurance policies, and

(4) certain qualified retirement plans.

Such shares are not offered directly to investors but are available only through the purchase of such contracts or policies or through such plans. See the prospectus for each Fund for details about that Fund.

There is no guarantee that any Fund will meet its investment objectives. Please refer to the prospectus for each of the Funds you are considering for more information.

Protective Investment Company (PIC)

International Equity Fund.

This Fund seeks to provide long-term capital appreciation. The Fund pursues its objective by investing, under normal circumstances, substantially all, and at least 80%, of its net assets plus any borrowings for investment purposes (measured at time of purchase) in a diversified portfolio of equity investments in companies that are organized outside the United States or whose securities are principally traded outside the United States. The Fund intends to invest in companies with public stock market capitalizations that are larger than $1 billion at the time of investment.

Small Cap Value Fund.

This Fund seeks to provide long-term growth of capital. The Fund pursues its objective by investing, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) in a diversified portfolio of equity investments in small-cap issuers with public stock market capitalizations (based upon shares available for trading on an unrestricted basis) within the range of the market capitalization of companies constituting the Russell 2000 Value Index at the time of investment (currently between $12 million and $3 billion).

Capital Growth Fund

This Fund seeks long-term growth of capital. The Fund pursues its investment objective by investing, under normal circumstances, at least 90% of its total assets (not including securities lending collateral and any investment of that collateral) measured at time of purchase in equity investments that are considered by the investment adviser to have long-term capital appreciation potential.

CORE ^SM U.S. Equity Fund.

This Fund seeks long-term growth of capital and dividend income. The Fund pursues its investment objectives by investing, under normal circumstances, at least 90% of its total assets (not including securities lending collateral and any investment of that collateral) measured at time of purchase in equity investments in U.S. issuers, including foreign companies 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.

Growth and Income Fund.

This Fund seeks long-term growth of capital and growth of income. The Fund pursues its objectives by investing, under normal circumstances, at least 65% of its total assets (not including securities lending collateral and any investment of that collateral) measured at time of purchase in equity investments that the investment adviser considers to have favorable prospects for capital appreciation and/or dividend-paying ability.

Global Income Fund.

This Fund seeks a high total return, emphasizing current income and, to a lesser extent, providing opportunities for capital appreciation. The Fund pursues its objectives by investing, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) in a portfolio of fixed-income securities of U.S. and foreign issuers (including non-dollar securities). The Fund also enters into foreign currency transactions.

Van Kampen Life Investment Trust

Aggressive Growth Portfolio Class II.

Seeks capital growth.

Emerging Growth Portfolio.

Seeks capital appreciation.

Enterprise Portfolio.

Seeks capital appreciation through investment in securities believed by the investment adviser to have above average potential for capital appreciation.

Comstock Portfolio.

Seeks capital growth and income through investments in equity securities, including common stocks, preferred stocks and securities convertible into common and preferred stocks.

Growth and Income.

Seeks long-term growth of capital and income.

MFS® Variable Insurance Trust ^SM

New Discovery Series.

This Fund seeks capital appreciation.

Emerging Growth Series.

This Fund seeks to provide long-term growth of capital.

Research Series.

This Fund seeks to provide long-term growth of capital and future income.

Investors Growth Stock Series.

This Fund seeks to provide long-term growth of capital and future income rather than current income.

Investors Trust Series.

This Fund seeks mainly to provide long-term growth of capital and secondarily to provide reasonable current income.

Utilities Series.

This Fund seeks capital growth and current income (income above that available from a portfolio invested entirely in equity securities).

Total Return Series.

This Fund seeks mainly to provide above-average income (compared to a portfolio invested entirely in equity securities) consistent with the prudent employment of capital and secondarily to provide a reasonable opportunity for growth of capital and income.

Oppenheimer Variable Account Funds

Aggressive Growth Fund/VA.

This Fund seeks capital appreciation.

Global Securities Fund/VA.

This Fund seeks long-term capital appreciation by investing in securities of foreign issuers, "growth-type" companies and cyclical industries.

Capital Appreciation Fund/VA.

This Fund seeks to achieve long-term capital appreciation by investing in securities of well-known established companies.

Main Street Growth & Income Fund/VA.

This Fund seeks a high total return (which includes growth in the value of its shares as well as current income) from equity and debt securities. The Fund invests mainly in common stocks of U.S. companies.

High Income Fund/VA.

This Fund seeks a high level of current income from investment in high yield fixed-income securities.

Money Fund/VA.

This Fund seeks maximum current income from investments in "money market" securities consistent with low capital risk and the maintenance of liquidity. An investment in the Money Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. The yield of this Fund may become very low during periods of low interest rates. After deduction of Variable Account charges, the yield in the Sub-Account that invests in this Fund could be negative.

Strategic Bond Fund/VA.

This Fund seeks a high level of current income by investing mainly in three market sectors: debt securities of foreign governments and companies, U.S. government securities and high yield securities of U.S. and foreign companies.

Lord Abbett Series Fund, Inc.

Growth and Income Portfolio.

This Fund's investment objective is long-term growth of capital and income without excessive fluctuations in market value.

Mid-Cap Value Portfolio.

The Fund seeks capital appreciation through investments, primarily in equity securities, which are believed to be undervalued in the marketplace.

Bond-Debenture Portfolio.

The Fund's investment objective is to seek high current income and the opportunity for capital appreciation to produce a high total return.

There is no assurance that the stated objectives and policies of any of the Funds will be achieved. More detailed information concerning the investment objectives, policies and restrictions of the Funds, the expenses of the Funds, the risks attendant to investing in the Funds and other aspects of their operations can be found in the current prospectuses for the Funds, which accompany this prospectus, and the current Statement of Additional Information for each of the Funds. You should read the Funds' prospectuses carefully before making any decision concerning the allocation of Purchase Payments or transfers among the Sub-Accounts.

Certain Funds may have investment objectives and policies similar to other mutual funds (sometimes having similar names) that are managed by the same investment adviser or manager. The investment results of the Funds, however, may be more or less favorable than the results of such other mutual funds. Protective Life does not guarantee or make any representation that the investment results of any Fund is, or will be, comparable to any other mutual fund, even one with the same investment adviser or manager.

Additional Funds may be available for certain Contracts purchased before May 1, 2002. Please see Appendix E for more information.

Protective Life may from time to time publish certain "model portfolios" designed to effect certain investment strategies. In selecting a model portfolio as a Purchase Payment allocation, an Owner is allocating prescribed percentages of Purchase Payments to each of the Sub-Accounts comprising the model. Protective Life does not warrant that the underlying Funds in the model will achieve their investment objective(s) or that the model will achieve its investment strategy. Likewise, Protective Life does not represent or imply that a model selected by an Owner is suitable for that Owner. From time to time, Protective Life may revise the composition of a model portfolio. In this event, Protective Life will not change an Owner's existing Purchase Payment allocation or percentages to reflect changes in a model selected by the Owner. If an Owner desires to change his or her Purchase Payment allocation or percentages to reflect a revised or different model, he or she must submit new allocation instructions. You should carefully consider your own investment objectives and risk tolerance before selecting any Sub-Accounts or model portfolios.

Other Information about the Funds

Each Fund sells its shares to the Variable Account in accordance with the terms of a participation agreement between the appropriate investment company and Protective Life. The termination provisions of these agreements vary. Should a participation agreement relating to a Fund terminate, the Variable Account may not be able to purchase additional shares of that Fund. In that event, Owners may no longer be able to allocate Variable Account value or Purchase Payments to Sub-Accounts investing in that Fund. In certain circumstances, it is also possible that a Fund may refuse to sell its shares to the Variable Account despite the fact that the participation agreement relating to that Fund has not been terminated. Should a Fund decide to discontinue selling its shares to the Variable Account, Protective Life would not be able to honor requests from Owners to allocate Purchase Payments or transfer Account Value to the Sub-Account investing in shares of that Fund.

For Funds that pay 12b-1 fees, our affiliate, Investment Distributors, Inc., the principal underwriter for the Contracts, will receive 12b-1 fees deducted from Fund assets for providing certain distribution and shareholder support services to the Fund. Protective Life has entered into agreements with the investment managers or advisers of the Funds pursuant to which each such investment manager or adviser pays Protective Life a servicing fee based upon an annual percentage of the average daily net assets invested by the Variable Account (and other separate accounts of Protective Life and its affiliates) in the Funds managed by that manager or advisor. These percentages differ, and some investment managers or advisors pay us more than other investment managers or advisors. These fees are in consideration for administrative services provided to the Funds by Protective Life and its affiliates. Payments of fees under these agreements by managers or advisers do not increase the fees or expenses paid by the Funds or their shareholders. The amounts we receive under these agreements may be significant.

Other Investors in the Funds

PIC currently sells shares of its Funds only to Protective Life as the underlying investment for the Variable Account as well as for variable life insurance contracts issued through Protective Life, and to Protective Life Annuity and Insurance Company (formerly American Foundation Life Insurance Company) a Protective Life affiliate, as the underlying investment for variable annuity contracts issued by Protective Life and Annuity Insurance Company. PIC may in the future sell shares of its Funds to other separate accounts of Protective Life or its life insurance company affiliates supporting other variable annuity contracts or variable life insurance policies. In addition, upon obtaining regulatory approval, PIC may sell shares to certain retirement plans qualifying under Section 401 of the Internal Revenue Code of 1986. Protective Life currently does not foresee any disadvantages to Owners that would arise from the possible sale of shares to support its variable annuity and variable life insurance policies or those of its affiliates or from the possible sale of shares to such retirement plans. However, the board of directors of PIC will monitor events in order to identify any material irreconcilable conflicts that might possibly arise if such shares were also offered to support variable annuity policies other than the Contracts or variable life insurance policies or to retirement plans. In event of such a conflict, the board of directors would determine what action, if any, should be taken in response to the conflict. In addition, if Protective Life believes that PIC's response to any such conflicts insufficiently protects Owners, it will take appropriate action on its own, including withdrawing the Account's investment in the Fund. (See the PIC Prospectus for more detail.)

Shares of the Van Kampen Life Investment Trust, the MFS® Variable Insurance Trust ^SM , Oppenheimer Variable Account Funds, Lord Abbett Series Fund, Calvert Variable Series, Inc. (available only in certain Contracts issued before May 1, 2002), and Van Eck Worldwide Insurance Trust (available only in certain Contracts issued before May 1, 2002), are sold to separate accounts of insurance companies, which may or may not be affiliated with Protective Life or each other, a practice known as "shared funding." They may also be sold to separate accounts to serve as the underlying investment for both variable annuity contracts and variable life insurance policies, a practice known as "mixed funding." As a result, there is a possibility that a material conflict may arise between the interests of Owners of Protective Life's Contracts, whose Contract Values are allocated to the Variable Account, and of owners of other contracts whose contract values are allocated to one or more other separate accounts investing in any one of the Funds. Shares of some of these Funds may also be sold to certain qualified pension and retirement plans. As a result, there is a possibility that a material conflict may arise between the interests of Contract Owners generally or certain classes of Contract Owners, and such retirement plans or participants in such retirement plans. In the event of any such material conflicts, Protective Life will consider what action may be appropriate, including removing the Fund from the Variable Account or replacing the Fund with another fund. As is the case with PIC, the boards of directors (or trustees) of the Van Kampen Life Investment Trust, the MFS® Variable Insurance Trust ^SM , Oppenheimer Variable Account Funds, Lord Abbett Series Fund, Calvert Variable Series, Inc., and Van Eck Worldwide Insurance Trust monitor events related to their Funds to identify possible material irreconcilable conflicts among and between the interests of the Fund's various investors. There are certain risks associated with mixed and shared funding and with the sale of shares to qualified pension and retirement plans, as disclosed in each Fund's prospectus.

Addition, Deletion or Substitution of Investments

Protective Life reserves the right, subject to applicable law, to make additions to, deletions from, or substitutions for the shares that are held in the Variable Account or that the Variable Account may purchase. If the shares of a Fund are no longer available for investment or if in Protective Life's judgment further investment in any Fund should become inappropriate in view of the purposes of the Variable Account, Protective Life may redeem the shares, if any, of that Fund and substitute shares of another registered open-end management company or unit investment trust. The new funds may have higher fees and charges than the ones they replaced. Protective Life will not substitute any shares attributable to a Contract's interest in the Variable Account without notice and any necessary approval of the Securities and Exchange Commission and state insurance authorities.

Protective Life also reserves the right to establish additional Sub-Accounts of the Variable Account, each of which would invest in shares corresponding to a new Fund. Subject to applicable law and any

required SEC approval, Protective Life may, in its sole discretion, establish new Sub-Accounts or eliminate one or more Sub-Accounts if marketing needs, tax considerations or investment conditions warrant. We may make any new Sub-Accounts available to existing Owner(s) on a basis we determine. All Sub-Accounts and Funds may not be available to all classes of contracts.

If we make any of these substitutions or changes, Protective Life may by appropriate endorsement change the Contract to reflect the substitution or other change. If Protective Life deems it to be in the best interest of Owners and Annuitants, and subject to any approvals that applicable law may require, we may operate the Variable Account as a management company under the 1940 Act, we may de-register it under that Act if registration is no longer required, or we may combine it with other Protective Life separate accounts. Protective Life reserves the right to make any changes to the Variable Account that the 1940 Act or other applicable law or regulation requires.

DESCRIPTION OF THE CONTRACT

The following sections describe the Contracts currently being offered.

The Contract

The Protective Variable Annuity II Contract is a flexible premium deferred variable and fixed annuity contract issued by Protective Life. In certain states we offer the Contract as a group contract to eligible persons who have established accounts with certain broker-dealers that have entered into a distribution agreement with Protective Life to offer the Contract. In those states we may also offer the Contract to members of other eligible groups. In all other states, we offer the Contract as an individual contract. If you purchase an interest in a group Contract, you will receive a certificate evidencing your ownership interest in the group Contract. Otherwise, you will receive an individual Contract.

Use of the Contract in Qualified Plans.

You may purchase the Contract on a non-qualified basis. You may also purchase it for use within certain qualified retirement plans or in connection with other employee benefit plans or arrangements that receive favorable tax treatment. Such qualified plans include individual retirement accounts and individual retirement annuities (IRAs), pension and profit sharing plans (including H.R. 10 Plans), and tax sheltered annuity plans. Many of these qualified plans, including IRAs, provide the same type of tax deferral as provided by the Contract. The Contract, however, provides a number of benefits and features not provided by such retirement plans and employee benefit plans or arrangements alone. There are costs and expenses under the Contract related to these benefits and features. You should consult a qualified tax and/or financial adviser regarding the use of the Contract within a qualified plan or in connection with other employee benefit plans or arrangements. You should carefully consider the benefits and features provided by the Contract in relation to their costs as they apply to your particular situation.

Parties to the Contract

Owner.

The Owner is the person or persons who own the Contract and are entitled to exercise all rights and privileges provided in the Contract. In those states where the Contract is issued as a group contract, the term "Owner" refers to the holder of the certificate evidencing an interest in the group contract. Two persons may own the Contract together; they are designated as the Owner and the Joint Owner. In the case of Joint Owners, provisions relating to action by the Owner means both Joint Owners acting together. Individuals as well as nonnatural persons, such as corporations or trusts, may be Owners. Protective Life will only issue a Contract prior to each Owner's 85th birthday.

The Owner of this Contract may be changed by Written Notice provided:

(1): each new Owner's 85th birthday is after the Effective Date; and
(2): each new Owner's 90th birthday is on or after the Annuity Commencement Date.

For a period of 1 year after any change of ownership involving a natural person, the death benefit will equal the Contract Value regardless of the death benefit option selected. Naming a nonnatural person as an Owner or changing the Owner may result in a tax liability. (See "Taxation of Annuities in General.")

Beneficiary.

The Beneficiary is the person or persons who may receive the benefits of this Contract upon the death of any Owner.

Primary — The Primary Beneficiary is the surviving Joint Owner, if any. If there is no surviving Joint Owner, the Primary Beneficiary is the person or persons designated by the Owner and named in our records.

Contingent — The Contingent Beneficiary is the person or persons designated by the Owner and named in our records to be Beneficiary if the Primary Beneficiary is not living at the time of the Owner's death.

If no Beneficiary designation is in effect or if no Beneficiary is living at the time of an Owner's death, the Beneficiary will be the estate of the deceased Owner. If any Owner dies on or after the Annuity Commencement Date, the Beneficiary will become the new Owner.

Unless designated irrevocably, the Owner may change the Beneficiary by Written Notice prior to the death of any Owner. An irrevocable Beneficiary is one whose written consent is needed before the Owner can change the Beneficiary designation or exercise certain other rights. In the case of certain Qualified Contracts, Treasury Department regulations prescribe certain limitations on the designation of a Beneficiary.

Annuitant.

The Annuitant is the person on whose life annuity income payments may be based. The Owner is the Annuitant unless the Owner designates another person as the Annuitant. The Contract must be issued prior to the Annuitant's 85th birthday. If the Annuitant is not an Owner and dies prior to the Annuity Commencement Date, the Owner will become the new Annuitant unless the Owner designates otherwise. However, if the Owner is a nonnatural person, the death of the Annuitant will be treated as the death of the Owner.

The Owner may change the Annuitant by Written Notice prior to the Annuity Commencement Date. However, if any Owner is not an individual the Annuitant may not be changed. The new Annuitant's 90th birthday must be on or after the Annuity Commencement Date in effect when the change of Annuitant is requested.

Payee.

The Payee is the person or persons designated by the Owner to receive the annuity income payments under the Contract. The Annuitant is the Payee unless the Owner designates another party as the Payee. The Owner may change the Payee at any time.

Issuance of a Contract

To purchase a Contract, you must submit certain application information and an initial Purchase Payment to Protective Life through a licensed representative of Protective Life, who is also a registered representative of a broker/dealer having a distribution agreement with Investment Distributors, Inc. The minimum initial Purchase Payment is $2,000. Protective Life reserves the right to accept or decline a request to issue a Contract. Contracts may be sold to or in connection with retirement plans which do

not qualify for special tax treatment as well as retirement plans that qualify for special tax treatment under the Internal Revenue Code.

If the necessary application information for a Contract accompanies the initial Purchase Payment, we will allocate the initial Purchase Payment (less any applicable premium tax) to the Allocation Options as you direct on the appropriate form within two business days of receiving such Purchase Payment at the administrative office. If we do not receive the necessary application information, Protective Life will retain the Purchase Payment for up to five business days while it attempts to complete the information. If the necessary application information is not complete after five days, Protective Life will inform the applicant of the reason for the delay and return the initial Purchase Payment immediately unless the applicant specifically consents to Protective Life retaining it until the information is complete. Once the information is complete, we will allocate the initial Purchase Payment to the appropriate Allocation Options within two business days. You may transmit information necessary to complete an application to the Company by telephone, facsimile, or electronic media.

Purchase Payments

In all states except Oregon we will only accept initial Purchase Payments before the earlier of the oldest Owner's 85th birthday, or the Annuitant's 85th birthday. No Purchase Payment will be accepted within 7 years of the Annuity Commencement Date then in effect. In the state of Oregon, we will only accept Purchase Payments (initial or subsequent) before the earlier of the oldest Owner's 85th birthday or the Annuitant's 85th birthday. The minimum subsequent Purchase Payment we will accept is $100 or $50 if made by electronic funds transfer. We reserve the right not to accept any Purchase Payment. Under certain circumstances, we may be required by law to reject a Purchase Payment.

Purchase Payments are payable at our administrative office. You may make them by check payable to Protective Life Insurance Company or by any other method we deem acceptable. Protective Life retains the right to limit the maximum aggregate Purchase Payment that can be made without prior administrative office approval. This amount is currently $2,000,000.

Under the current automatic purchase payment plan, you may select a monthly or quarterly payment schedule pursuant to which Purchase Payments will be automatically deducted from a bank account. We currently accept automatic Purchase Payments on the 1st through the 28th day of each month. Each automatic Purchase Payment must be at least $50. You may not allocate payments made through the automatic purchase payment plan to any DCA Fixed Account. You may not elect the automatic purchase payment plan and the partial automatic withdrawal plan simultaneously. (See "Surrenders and Partial Surrenders".) Upon notification of the death of any Owner the Company will terminate deductions under the automatic purchase payment plan. (See "Allocation of Purchase Payments".)

Right to Cancel

You have the right to return the Contract within a certain number of days after you receive it by returning it, along with a written cancellation request, to our administrative office or the sales representative who sold it. In the state of Connecticut, non-written requests are also accepted. The number of days, which is at least ten, is determined by state law in the state where the Contract is delivered. Return of the Contract by mail is effective on being post-marked, properly addressed and postage pre-paid. We will treat the returned Contract as if it had never been issued. Where permitted, Protective Life will refund the Contract Value plus any fees deducted from either Purchase Payments or Contract Value. This amount may be more or less than the aggregate amount of your Purchase Payments up to that time. Where required, we will refund the Purchase Payment.

Allocation of Purchase Payments

When we have received all necessary application information and your initial Purchase Payment, we will allocate your initial Purchase Payment among the Allocation Options you have selected at the next

price determined after we apply your initial Purchase Payment. After we have issued your Contract, we will allocate any subsequent Purchase Payments you make among the Allocation Options you have selected at the next price determined after we receive your subsequent Purchase Payment. In certain circumstances, we reserve the right to allocate Purchase Payments to the Oppenheimer Money Fund Sub- Account until the expiration of the right-to-cancel period. (See "Allocation of Purchase Payments.")

We do not always receive your Purchase Payment or your application on the day you send them or give them to your sales representative. In some circumstances, such as when you purchase a Contract in exchange for an existing annuity contract from another company, we may not receive your Purchase Payment from the other company for a substantial period of time after you sign the application and send it to us.

Owners must indicate in the application how their initial and subsequent Purchase Payments are to be allocated among the Allocation Options. The Fixed Account is not available in the states of Washington, Oregon, Maryland, Massachusetts, or South Carolina.

If your allocation instructions are indicated by percentages, whole percentages must be used. Subsequent Purchase Payments made through the automatic purchase payment plan may not be allocated to any DCA Fixed Account. Subsequent Purchase Payments will not be allocated to a DCA Fixed Account if, on the day we receive the Purchase Payment, the value of that DCA Fixed Account is greater than $0.

For Individual Retirement Annuities and Contracts issued in states where, upon cancellation during the right-to-cancel period, we return at least your Purchase Payments, we reserve the right to allocate the portion of your initial Purchase Payment (and any subsequent Purchase Payment made during the right-to-cancel period) that you allocated to the Sub-Accounts to the Oppenheimer Money Fund Sub-Account until the expiration of the right-to-cancel period. Thereafter, we will allocate all Purchase Payments according to your allocation instructions then in effect.

Owners may change allocation instructions by Written Notice at any time. Owners may also change instructions by telephone, automated telephone system or via the Internet at www.protectiveannuities.com. For non-written instructions regarding allocations, we will require a form of personal identification prior to acting on instructions and we will record any telephone voice instructions. If we follow these procedures, we will not be liable for any losses due to unauthorized or fraudulent instructions. We reserve the right to limit or eliminate any of these non-written communication methods for any Contract or class of Contracts at any time for any reason.

Variable Account Value

Sub-Account Value.

A Contract's Variable Account value at any time is the sum of the Sub-Account values and therefore reflects the investment experience of the Sub-Accounts to which it is allocated. There is no guaranteed minimum Variable Account value. The Sub-Account value for any Sub-Account as of the Effective Date is equal to the amount of the initial Purchase Payment allocated to that Sub-Account. On subsequent Valuation Days prior to the Annuity Commencement Date, the Sub-Account value is equal to that part of any Purchase Payment allocated to the Sub-Account and any Contract Value transferred to the Sub-Account, adjusted by income, dividends, net capital gains or losses (realized or unrealized), decreased by partial surrenders (including any applicable surrender charges and premium tax), Contract Value transferred out of the Sub-Account and fees deducted from the Sub-Account.

The Sub-Account value for a Contract may be determined on any day by multiplying the number of Accumulation Units attributable to the Contract in that Sub-Account by the Accumulation Unit value for the appropriate class of Accumulation Units in that Sub-Account on that day. (See "Determination of Accumulation Units" and "Determination of Accumulation Unit Value.") The class of Accumulation

Units attributable to a Contract depends on the benefits package chosen by the Owner. (See "Condensed Financial Information, Accumulation Units.")

Determination of Accumulation Units.

Purchase Payments allocated and Contract Value transferred to a Sub-Account are converted into Accumulation Units. An Accumulation Unit is a unit of measure used to calculate the value of a Sub-Account prior to the Annuity Commencement Date. We determine the number of Accumulation Units to be credited to a Contract by dividing the dollar amount directed to the Sub-Account by the Accumulation Unit value of the appropriate class of Accumulation Units of that Sub-Account for the Valuation Day as of which the allocation or transfer occurs. Purchase Payments allocated or amounts transferred to a Sub-Account under a Contract increase the number of Accumulation Units of that Sub-Account credited to the Contract. We execute such allocations and transfers as of the end of the Valuation Period in which we receive a Purchase Payment or Written Notice or other instruction requesting a transfer.

Certain events reduce the number of Accumulation Units of a Sub-Account credited to a Contract. The following events result in the cancellation of the appropriate number of Accumulation Units of a Sub-Account:

•: surrenders and applicable surrender charges;
•: partial surrenders and applicable surrender charges;
•: partial automatic withdrawals;
•: transfer from a Sub-Account and any applicable transfer fee;
•: payment of a death benefit claim;
•: application of the Contract Value to an Annuity Option; and
•: deduction of the annual contract maintenance fee.

Accumulation Units are canceled as of the end of the Valuation Period in which we receive Written Notice of or other instructions regarding the event.

Determination of Accumulation Unit Value.

The Accumulation Unit value for each class of Accumulation Units in a Sub-Account at the end of every Valuation Day is the Accumulation Unit value for that class at the end of the previous Valuation Day times the net investment factor.

Net Investment Factor.

The net investment factor measures the investment performance of a Sub-Account from one Valuation Period to the next. For each Sub-Account, the net investment factor reflects the investment performance of the Fund in which the Sub-Account invests and the charges assessed against that Sub-Account for a Valuation Period. Each Sub-Account has a net investment factor for each Valuation Period which may be greater or less than one. Therefore, the value of an Accumulation Unit may increase or decrease. The net investment factor for any Sub-Account for any Valuation Period is determined by dividing (1) by (2) and subtracting (3) from the result, where:

(1): is the result of:

a.: the net asset value per share of the Fund held in the Sub-Account, determined at the end of the current Valuation Period; plus
b.: the per share amount of any dividend or capital gain distributions made by the Funds held in the Sub-Account, if the "ex-dividend" date occurs during the current Valuation Period.

(2): is the net asset value per share of the Fund held in the Sub-Account, determined at the end of the most recent prior Valuation Period.
(3): is a factor representing the mortality and expense risk charge and the administration charge for the number of days in the Valuation Period and a charge or credit for any taxes attributed to the investment operations of the Sub-Account, as determined by the Company.

Transfers

Prior to the Annuity Commencement Date, you may instruct us to transfer Contract Value between and among the Allocation Options. When we receive your transfer instructions, we will allocate the Contract Value you transfer at the next price determined for the Allocation Options you indicate.

You must transfer at least $100, or if less, the entire amount in the Allocation Option each time you make a transfer. If after the transfer, the Contract Value remaining in any Allocation Option from which a transfer is made would be less than $100, then we may transfer the entire Contract Value in that Allocation Option instead of the requested amount. We reserve the right to limit the number of transfers to no more than 12 per Contract Year. For each additional transfer over 12 during each Contract Year, we reserve the right to charge a Transfer Fee which will not exceed $25. The Transfer Fee, if any, will be deducted from the amount being transferred. (See "Charges and Deductions — Transfer Fee".)

Transfers involving a Guaranteed Account are subject to additional restrictions. The maximum amount that may be transferred from the Fixed Account during a Contract Year is the greater of:

(1): $2,500; or
(2): 25% of the Contract Value in the Fixed Account value.

Transfers into any DCA Fixed Account are not permitted.

Owners may request transfers by Written Notice at any time. Owners also may request transfers by telephone, automated telephone system or via the Internet at www.protectiveannuities.com. From time to time and at our sole discretion, we may introduce additional methods for requesting transfers or discontinue any method for making non-written requests and facsimile transmitted requests for such transfers. We will require a form of personal identification prior to acting on non-written requests and facsimile transmitted requests and we will record telephone requests. We will send you a confirmation of all transfer requests communicated to us. If we follow these procedures we will not be liable for any losses due to unauthorized or fraudulent transfer requests.

After the Annuity Commencement Date, when Variable Income Payments are selected, transfers are allowed between Sub-Accounts, but are limited to one transfer per month. Dollar cost averaging and portfolio rebalancing are not allowed. No transfers are allowed within the Guaranteed Account or between the Guaranteed Account or any Sub-Account.

Reliability of Communications Systems.

The Internet and telephone systems may not always be available. Any computer or telephone system, whether it is yours, your service providers', your registered representative's, or ours, can experience unscheduled outages or slowdowns for a variety of reasons. Such outages or delays may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you experience problems, you can make your transaction by writing to us.

Reservation of Rights to Limit Transfers.

We reserve the right to limit amounts transferred into or out of any account within the Guaranteed Account. We reserve the right to modify, limit, suspend or eliminate the transfer privileges (including acceptance of non-written instructions and facsimile transmitted instructions) without prior notice for any Contract or class of Contracts at any time for any reason.

Excessive transfer activity can disrupt orderly Fund management strategies and increase Fund expenses by causing the following:

•

increased trading and transaction costs;

•

disruption of planned investment strategies;

•

forced and unplanned portfolio turnover;

•

lost opportunity costs; and

•

large asset swings that decrease the Fund's ability to provide maximum investment return to all Contract Owners.

In response to excessive trading, we may refuse to honor transfers requested by a third party acting on behalf of more than one Contract Owner, such as market timing services. We may also refuse to honor

transfers when we determine, in our sole discretion, that transfers are harmful to the Funds or Contract Owners as a whole.

Dollar Cost Averaging.

Prior to the Annuity Commencement Date, you may instruct us by Written Notice to systematically and automatically transfer, on a monthly or quarterly basis, amounts from a DCA Fixed Account (or any other Allocation Option) to any Allocation Option, except that no transfers may be made into a DCA Fixed Account. This is known as the "dollar-cost averaging" method of investment. By transferring equal amounts of Contract Value on a regularly scheduled basis, as opposed to allocating a larger amount at one particular time, an Owner may be less susceptible to the impact of market fluctuations in the value of Sub-Account Accumulation Units. Protective Life, however, makes no guarantee that the dollar cost averaging method will result in a profit or protection against loss.

You may make dollar cost averaging transfers on the 1st through the 28th day of each month. In states where, upon cancellation during the right-to-cancel period, we are required to return your Purchase Payment, we reserve the right to delay commencement of dollar cost averaging transfers until the expiration of the right-to-cancel period.

Any Purchase Payment allocated to a DCA Fixed Account must include instructions regarding the period and frequency of the dollar cost averaging transfers, and the Allocation Option(s) into which the transfers are to be made. Currently, the maximum period for dollar cost averaging from DCA Fixed Account 1 is six months and from DCA Fixed Account 2 is twelve months. Dollar cost averaging transfers may be made monthly or quarterly. From time to time, we may offer different maximum periods for dollar cost averaging amounts from a DCA Fixed Account. In Oregon, only your initial Purchase Payment may be allocated to a DCA Fixed Account.

The periodic amount transferred from a DCA Fixed Account will be equal to the Purchase Payment allocated to the DCA Fixed Account divided by the number of dollar cost averaging transfers to be made. Interest credited will be transferred from the DCA Fixed Account after the last dollar cost averaging transfer. We will process dollar cost averaging transfers until the earlier of the following: (1) the DCA Fixed Account Value equals $0, or (2) the Owner instructs us by Written Notice to cancel the automatic transfers. If you terminate transfers from a DCA Fixed Account before the amount remaining in that account is $0, we will immediately transfer any amount remaining in that DCA Fixed Account according to your instructions. If you do not provide instructions, we will transfer the remaining amount to the Fixed Account. In states where the Fixed Account is not available, we will transfer the

remaining amount to the Oppenheimer Money Fund Sub-Account. Upon the death of any Owner, dollar cost averaging transfers will continue until canceled by the Beneficiary(s).

From time to time, we may offer interest rates on our DCA Fixed Accounts that are higher than the interest rates we offer on the Fixed Account. The interest rates on the DCA Fixed Accounts, however, apply to the declining balance in the account. Therefore the amount of interest actually paid with respect to a Purchase Payment allocated to the DCA Fixed Account will be substantially less than the amount that would have been paid if the full Purchase Payment remained in the DCA Fixed Account for the full period.

There is no charge for dollar cost averaging. Automatic transfers made to facilitate dollar cost averaging will not count toward the 12 transfers permitted each Contract Year if we elect to limit transfers, or the designated number of free transfers in any Contract Year if we elect to charge for transfers in excess of that number in any Contract Year. We reserve the right to discontinue dollar cost averaging upon written notice to the Owner.

Portfolio Rebalancing.

Prior to the Annuity Commencement Date, you may instruct Protective Life by Written Notice to periodically transfer your Variable Account value among specified Sub-Accounts to achieve a particular percentage allocation of Variable Account value among such Sub-Accounts ("portfolio rebalancing"). The portfolio rebalancing percentages must be in whole numbers and must allocate amounts only among the Sub-Accounts. You may not transfer any Contract Value to or from the Guaranteed Account as part of portfolio rebalancing. Unless you instruct otherwise, portfolio rebalancing is based on your Purchase Payment allocation instructions in effect with respect to the Sub-Accounts at the time of each rebalancing transfer. We deem portfolio rebalancing instructions from you that differ from your current Purchase Payment allocation instructions to be a request to change your Purchase Payment allocation.

You may elect portfolio rebalancing to occur on the 1st through 28th day of a month on either a quarterly, semi-annual or annual basis. If you do not select a day, transfers will occur on the same day of the month as your Contract Anniversary, or on the 28th day of the month if your Contract Anniversary occurs on the 29th, 30th or 31st day of the month. You may change or terminate portfolio rebalancing by Written Notice, or by other non-written communication methods acceptable for transfer requests. Upon the death of any Owner portfolio rebalancing will continue until canceled by the Beneficiary(s).

There is no charge for portfolio rebalancing. Automatic transfers made to facilitate portfolio rebalancing will not count toward the 12 transfers permitted each Contract Year if Protective Life elects to limit transfers, or the designated number of free transfers in any Contract Year if the Company elects to charge for transfers in excess of that number in any Contract Year. We reserve the right to discontinue portfolio rebalancing upon written notice to the Owner.

Surrenders and Partial Surrenders

Surrender.

At any time before the Annuity Commencement Date, you may request a surrender of your Contract for its surrender value. To surrender your Contract, you must return the Contract to us and make your surrender request by Written Notice. We will pay you the surrender value in a lump sum unless you request payment under another payment option that we are making available at the time. Partial and full surrenders from Contracts issued as tax sheltered annuities are prohibited in certain circumstances. (See "Federal Tax Matters.") A surrender may have federal and state income tax consequences. (See "Taxation of Partial and Full Surrenders".) A surrender value may be available under certain Annuity Options. (See "Annuitization".) In accordance with SEC regulations, surrenders and partial surrenders are generally payable within 7 calendar days of our receiving Written Notice of your request. (See "Suspension or Delay in Payments".)

Surrender Value.

The surrender value of your Contract is equal to the Contract Value minus any applicable surrender charge, contract maintenance fee and premium tax. We will determine the surrender value as of the end of the Valuation Period during which we receive your Written Notice requesting surrender and your Contract at our administrative office.

Partial Surrender.

At any time before the Annuity Commencement Date, you may request a partial surrender of your Contract Value provided the Contract Value remaining after the partial surrender is at least $2,000. You may request a partial surrender by Written Notice or, if we have received your completed Telephone Withdrawal Authorization Form, by telephone. Partial surrenders by telephone are subject to limitations. We may eliminate partial withdrawals by telephone or change the requirements for partial withdrawals by telephone for any Contract or class of Contracts at any time without prior notice.

We will withdraw the amount of your partial surrender from the Contract Value as of the end of the Valuation Period during which we receive your request for the partial surrender. The amount we will pay you upon a partial surrender is equal to the Contract Value surrendered minus any applicable surrender charge and any applicable premium tax.

You may specify the amount of the partial surrender to be made from any Allocation Option. If you do not so specify, or if the amount in the designated account(s) is inadequate to comply with the request, the partial surrender will be made from each Allocation Option based on the proportion that the value of each Allocation Option bears to the total Contract Value.

A partial surrender may have federal and state income tax consequences. (See "Taxation of Partial and Full Surrenders".)

Cancellation of Accumulation Units.

Surrenders and partial surrenders, including any surrender charges, will result in the cancellation of Accumulation Units from each applicable Sub-Account(s) and/or in a reduction of the Guaranteed Account value.

Surrender and Partial Surrender Restrictions.

The Owner's right to make surrenders and partial surrenders is subject to any restrictions imposed by applicable law or employee benefit plan.

Restrictions on Distributions from Certain Types of Contracts.

There are certain restrictions on surrenders and partial surrenders of Contracts used as funding vehicles for Internal Revenue Code Section 403(b) retirement plans. Section 403(b)(11) of the Code restricts the distribution under Section 403(b) annuity contracts of:

(i): contributions made pursuant to a salary reduction agreement in years beginning after December 31, 1988;
(ii): earnings on those contributions; and
(iii): earnings after December 31, 1988 on amounts attributable to salary reduction contributions held as of December 31, 1988.

Distributions of those amounts may only occur upon the death of the employee, attainment of age 59 ¹ / 2 , separation from service, disability, or hardship. In addition, income attributable to salary reduction contributions may not be distributed in the case of hardship.

In the case of certain Qualified Plans, federal tax law imposes restrictions on the form and manner in which benefits may be paid. For example, spousal consent may be needed in certain instances before a distribution may be made.

Partial Automatic Withdrawals.

Currently, the Company offers a partial automatic withdrawal plan. This plan allows you to pre-authorize periodic partial surrenders prior to the Annuity Commencement Date. You may elect to participate in this plan at the time of application or at a later date by properly completing an election form. In order to participate in the plan you must have:

(1): made an initial Purchase Payment of at least $5,000; or
(2): a Contract Value as of the previous Contract Anniversary equal to $5,000.

The partial automatic withdrawal plan and the automatic purchase payment plan may not be elected simultaneously. (See "Purchase Payments".) There may be federal and state income tax consequences to partial automatic withdrawals from the Contract and the Owner should, therefore, consult with his or her tax advisor before participating in any withdrawal program. (See "Taxation of Partial and Full Surrenders".)

When you elect the partial automatic withdrawal plan, you will instruct Protective Life to withdraw a level dollar amount from the Contract on a monthly or quarterly basis. Partial automatic withdrawals may be made on the 1st through the 28th day of each month. The amount requested must be at least $100 per withdrawal. We will process withdrawals for the designated amount until you instruct us otherwise. If, during any Contract Year, the amount of the withdrawals exceeds the "free withdrawal amount" described in the "Surrender Charge" section of this prospectus, we will deduct a surrender charge where applicable. (See "Surrender Charge.") Partial automatic withdrawals will be taken pro-rata from the Allocation Options in proportion to the value each Allocation Option bears to the total Contract Value and will be made only by an electronic fund transfer. We will pay you the amount requested each month or quarter as applicable and cancel the applicable Accumulation Units.

If any partial automatic withdrawal transaction would result in a Contract Value of less than $5,000 after the withdrawal, the transaction will not be completed and the partial automatic withdrawal plan will terminate. Once partial automatic withdrawals have terminated due to insufficient Contract Value, they will not be automatically reinstated in the event that your Contract Value should reach $5,000 again. The partial automatic withdrawal plan will also terminate in the event that a non-automated partial surrender is made from a Contract participating in the plan, except in the case of a partial surrender taken as a minimum required distribution from a Qualified Plan. (See "Qualified Retirement Plans".) Upon notification of the death of any Owner, we will terminate the partial automatic withdrawal plan. The partial automatic withdrawal plan may be discontinued by the Owner at any time by Written Notice.

There is no charge for the partial automatic withdrawal plan. We reserve the right to discontinue the partial automatic withdrawal plan upon written notice to you.

THE GUARANTEED ACCOUNT

The Guaranteed Account has not been, and is not required to be, registered with the SEC under the Securities Act of 1933, and neither these accounts nor the Company's general account have been registered as an investment company under the 1940 Act. Therefore, neither the Guaranteed Account, the Company's general account, nor any interests therein are generally subject to regulation under the 1933 Act or the 1940 Act. The disclosures relating to the Guaranteed Account included in this prospectus are for the Owner's information and have not been reviewed by the SEC. However, such disclosures may be subject to certain generally applicable provisions of federal securities law relating to the accuracy and completeness of statements made in prospectuses.

The Guaranteed Account currently includes the Fixed Account and two DCA Fixed Accounts. The Fixed Account and the DCA Fixed Accounts are part of Protective Life's general account. The assets of Protective Life's general account support its insurance and annuity obligations and are subject to Protective Life's general liabilities from business operations. Since the Fixed Account and the DCA Fixed Accounts are part of the general account, Protective Life assumes the risk of investment gain or loss on this amount.

From time to time and subject to regulatory approval, we may offer Fixed Accounts or DCA Fixed Accounts with different interest guaranteed periods. We, in our sole discretion, establish the interest rates for each account in the Guaranteed Account. We will not declare a rate that is less than an annual effective interest rate of 3.00%. You bear the risk that we will not declare a rate that is higher than the minimum rate. Because these rates vary from time to time, allocations made to the same account within the Guaranteed Account at different times may earn interest at different rates.

The Fixed Account.

The Fixed Account is not available in the states of Washington, Oregon, Maryland, Massachusetts or South Carolina.

In states where the Fixed Account and DCA Fixed Accounts are available, you may allocate some or all of your Purchase Payments and may transfer some or all of your Contract Value to the Fixed Account. Amounts allocated or transferred to the Fixed Account earn interest from the date the funds are credited to the account.

The interest rate we apply to Purchase Payments and transfers into the Fixed Account is guaranteed for one year from the date the Purchase Payment or transfer is credited to the account. When an interest rate guarantee expires, we will set a new interest rate, which may not be the same as the interest rate then in effect for Purchase Payments or transfers allocated to the Fixed Account. The new interest rate is also guaranteed for one year.

The DCA Fixed Accounts.

DCA Fixed Accounts are designed to systematically transfer amounts to other Allocation Options over a designated period. (See "Transfers, Dollar Cost Averaging.") The DCA Fixed Accounts are available only for Purchase Payments designated for dollar cost averaging. Purchase Payments may not be allocated into any DCA Fixed Account when that DCA Fixed Account value is greater than $0, and all funds must be transferred from a DCA Fixed Account before allocating a Purchase Payment to that DCA Fixed Account. Where we agree, under current administrative procedures, to allocate a Purchase Payment to any DCA Fixed Account in installments from more than one source, we will credit each installment with the interest rate applied to the first installment we receive. The interest rate we apply to Purchase Payments allocated to a DCA Fixed Account is guaranteed for the period over which transfers are allowed from that DCA Fixed Account.

Guaranteed Account Value.

Any time prior to the Annuity Commencement Date, the Guaranteed Account value is equal to the sum of:

(1): Purchase Payments allocated to the Guaranteed Account; plus
(2): amounts transferred into the Guaranteed Account; plus
(3): interest credited to the Guaranteed Account; minus
(4): amounts transferred out of the Guaranteed Account, including any applicable transfer fee; minus
(5): the amount of any surrenders removed from the Guaranteed Account, including any applicable premium tax and surrender charges; minus
(6): fees deducted from the Guaranteed Account.

For the purposes of interest crediting, amounts deducted, transferred or withdrawn from accounts within the Guaranteed Account will be separately accounted for on a "first-in, first-out" (FIFO) basis.

DEATH BENEFIT

If any Owner dies before the Annuity Commencement Date and while this Contract is in force, we will pay a death benefit, less any applicable premium tax, to the Beneficiary. We will determine the death benefit as of the end of the Valuation Period during which we receive due proof of death. Only one death benefit is payable under this Contract, even though the Contract may, in some circumstances, continue beyond the time of an Owner's death. If any Owner is not a natural person, the death of the Annuitant is treated as the death of an Owner. In the case of certain Qualified Contracts, Treasury Department regulations prescribe certain limitations on the designation of a Beneficiary.

Payment of the Death Benefit.

The Beneficiary may take the death benefit in one sum immediately, in which event the Contract will terminate. If the death benefit is not taken in one sum immediately, the death benefit will become the new Contract Value as of the end of the Valuation Period during which we receive due proof of death, and the entire interest in the Contract must be distributed under one of the following options:

(1): the entire interest must be distributed over the life of the Beneficiary, or over a period not extending beyond the life expectancy of the Beneficiary, with distributions beginning within one year of the Owner's death; or,
(2): the entire interest must be distributed within 5 years of the Owner's death.

If no option is elected, we will distribute the entire interest within 5 years of the Owner's death.

Continuation of the Contract by a Surviving Spouse.

If the Beneficiary is the deceased Owner's spouse, the surviving spouse may elect, in lieu of receiving a death benefit, to continue the Contract and become the new Owner, provided the deceased Owner's spouse's 85th birthday is after the Effective Date and the 90th birthday is after the Annuity Commencement Date then in effect. The Contract will continue with the value of the death benefit, including the Earnings Enhancement Death Benefit if it was selected, having become the new Contract Value as of the end of the Valuation Period during which we received due proof of death. Neither the death benefit nor the optional Earnings Enhancement Death Benefit, if it was selected, is terminated by a surviving spouse's continuation of the Contract. The surviving spouse may select a new Beneficiary. Upon this spouse's death, the death benefit may be taken in one sum immediately and the Contract will terminate. If the death benefit is not taken in one sum immediately, the death benefit will become the new Contract Value as of the end of the Valuation Period during which we receive due proof of death and must be distributed to the new Beneficiary according to option (1) or (2), above.

A Contract may be continued by a surviving spouse only once. This benefit will not be available to any subsequent surviving spouse under the continued Contract.

If there is more than one Beneficiary, the foregoing provisions apply to each Beneficiary individually.

The death benefit provisions of this Contract shall be interpreted to comply with the requirements of §72(s) of the Internal Revenue Code. We reserve the right to endorse this Contract, as necessary, to conform with regulatory requirements. We will send you a copy of any endorsement containing such Contract modifications.

Standard Death Benefit

The standard death benefit will equal the greater of:

(1): the Contract Value; or

(2): aggregate Purchase Payments less aggregate amounts surrendered, including associated surrender charges.

Optional Benefit Packages

At the time of application, the Owner may purchase an optional benefit package that may provide a death benefit which is greater than the standard death benefit provided under the Contract and a waiver of surrender charges under certain circumstances. A death benefit available under an optional benefit package must be distributed according to the rules in the "Death Benefit" section above. See "Charges and Deductions, Surrender Charges" for a discussion of the waiver of surrender charges.

Currently, two optional benefit packages are available. If you purchase one of these packages, the mortality and expense risk expense charge will increase by 0.15% to 1.25%, for total mortality and expense risk and administration charges of 1.40%. (See "Charges and Deductions".) Once you select an optional benefit package, you may not cancel or change the option. If any Owner is not a natural person, we will treat references to the Owner's birthday as references to the Annuitant's birthday.

For a period of one year after any change of ownership involving a natural person, the death benefit will equal the Contract Value regardless of whether the standard or optional death benefit was selected and without any change in the Contract's mortality and expense risk charge. It is possible that, at the time of an Owner's death, the death benefits under the optional benefit packages will be no greater than the standard death benefit. You should consult a qualified financial advisor to carefully consider these possibilities and the added cost of the optional benefit packages before you decide whether an optional benefit package is right for you.

Refer to Appendix A for an example of the calculation of each death benefit.

Annual Reset Death Benefit Package.

We will determine an annual reset anniversary value, for each Contract Anniversary occurring before the earlier of the deceased Owner's 80th birthday or the deceased Owner's date of death. Each annual reset anniversary value is equal to the sum of:

•: the Contract Value on that Contract Anniversary; plus
•: all Purchase Payments since that Contract Anniversary;
•: minus all amounts surrendered, including associated surrender charges, since that Contract Anniversary.

The death benefit will equal the greatest of:

(1): the Contract Value; or
(2): aggregate Purchase Payments less aggregate surrenders, including associated surrender charges; or
(3): the greatest annual reset anniversary value attained.

Compound and 3-Year Reset Death Benefit Package (Not available in the State of Washington).

We will determine a compound anniversary value on the most recent Contract Anniversary before the earlier of the deceased Owner's 80th birthday or the deceased Owner's date of death.

The compound anniversary value is equal to the sum of:

(a): the accumulation to the Contract Anniversary of all Purchase Payments prior to that Contract Anniversary, minus the accumulation of amounts surrendered, including associated surrender charges, prior to that Contract Anniversary; plus,

(b): any Purchase Payments on or since that Contract Anniversary, minus any amounts surrendered, including associated surrender charges, on or since that Contract Anniversary.

If the Effective Date is before the deceased Owner's 71st birthday, the amounts in (a) will accumulate at an annual effective interest rate of 4.00%. If the Effective Date is on or after the deceased Owner's 71st birthday, the amounts in (a) will accumulate at an annual effective interest rate of 3.00%.

We will determine a 3-year reset anniversary value for every 3rd Contract Anniversary occurring before the earlier of the deceased Owner's 80th birthday or the deceased Owner's date of death. Each 3-year reset anniversary value is equal the sum of:

•: the Contract Value on that Contract Anniversary;
•: plus all Purchase Payments since that Contract Anniversary;
•: minus all amounts surrendered, including associated surrender charges, since that Contract Anniversary.

The death benefit will equal the greatest of:

(1): the Contract Value; or
(2): aggregate Purchase Payments less aggregate surrenders, including associated surrender charges; or
(3): the compound anniversary value; or
(4): the greatest 3-year reset anniversary value attained.

Refer to Appendix A for an example of the calculation of each death benefit.

Earnings Enhancement Death Benefit (not available in Minnesota, North Dakota or Washington)

The Earnings Enhancement Death Benefit is an amount we pay in addition to the death benefit under a Contract. Subject to a maximum, the additional amount payable under this benefit will be equal to a percentage of your Contract's earnings, if there are any, between the effective date of the benefit and the date as of which the death benefit is determined. If the oldest Owner is younger than 70 years old on the benefit's effective date, the benefit will pay 40% of earnings, up to a maximum of 80% of net Purchase Payments. If the oldest Owner is age 70 or more on that date, the benefit will pay 25% of earnings, up to a maximum of 50% of net Purchase Payments.

The earnings to which the Earnings Enhancement Death Benefit applies are calculated during the first 12 months after the effective date of the benefit as follows:

•: the Contract Value on the date as of which the amount of the death benefit is determined;
•: minus the Contract Value on the benefit's effective date and any Purchase Payments made afterwards; and
•: plus any Purchase Payments that were withdrawn during this period, including any surrender charges. (For purposes of this calculation, we will apply partial withdrawals against gains in the Contract first, and then against Purchase Payments.)

After the first 12 months, earnings will be calculated in the same way except that they will be based on your Contract's death benefit instead of its Contract Value on the date as of which the amount of the death benefit is determined.

For purposes of determining the maximum amount payable under this benefit, net Purchase Payments will be the net of:

•: the Contract Value on the benefit's effective date;
•: plus any Purchase Payments made afterwards;
•: minus any Purchase Payments that were withdrawn during this period, including any surrender charges; (For purposes of this calculation, we will apply partial withdrawals against gains in the Contract first, and then against Purchase Payments.)
•: minus any Purchase Payments made after the date 12 months before the deceased Owner's death.

For Contracts that have been continued by a surviving spouse after the death of the original owner, the earnings to which the Earnings Enhancement Death Benefit applies are calculated as follows:

•: the amount of the death benefit (or Contract Value if the surviving spouse dies during the first 12 months after the effective date of the benefit);
•: minus the Contract Value on the date as of which we determined the value of the death benefit upon the death of the original owner and any Purchase Payments made afterwards; and
•: plus any Purchase Payments that were withdrawn during this period, including any surrender charges. (For purposes of this calculation, we will apply partial withdrawals against gains in the Contract first, and then against Purchase Payments.)

For purposes of determining the maximum amount payable under this benefit for a continued Contract, net Purchase Payments will be the net of:

•: the Contract Value as of the date we determined the value of the death benefit upon the death of the original owner;
•: plus any Purchase Payments made afterwards;
•: minus any Purchase Payments that were withdrawn during this period, including any surrender charges. (For purposes of this calculation, we will apply partial withdrawals against gains in the Contract first, and then against Purchase Payments.)
•: minus any Purchase Payments made after the date 12 months before the original surviving spouse's death.

The Earnings Enhancement Death Benefit is currently available only at the time you apply for a Contract. You may purchase the Earnings Enhancement Death Benefit when you apply for a Contract provided that the effective date of this benefit is before the oldest Owner's 76th birthday. The effective date of this benefit will be the Effective Date of the Contract.

The Earnings Enhancement Death Benefit will increase the Contract's mortality and expense risk charge by 0.25% from 1.10% to 1.35% for a Contract with the standard death benefit and from 1.25% to 1.50% for a Contract with an optional benefits package. (See "Charges and Deductions.") No amount will be payable under this benefit after it terminates or if the Contract is transferred to any new Owner who was age 70 or more on the benefit's effective date. Additionally, no amount will be payable under this benefit if there are no earnings, as described above, as of the date on which we determine the death benefit. You should consult a qualified financial advisor to carefully consider these possibilities and the benefit's added cost before you decide whether this benefit is right for you.

Once purchased, neither Protective nor you can unilaterally terminate the Earnings Enhancement Death Benefit unless the entire Contract is terminated. The Earnings Enhancement Death Benefit will automatically terminate on the earlier of (1) the Annuity Commencement Date or (2) the later of the 10th Contract Anniversary or the oldest Owner's 90th birthday. Upon termination of this benefit, the mortality and expense risk charge will decrease by 0.25%.

As of the date of this prospectus, we are not offering the Earnings Enhancement Death Benefit for use with Contracts in connection with Qualified Plans. In the future, we may make the benefit available for such use. If the Earnings Enhancement Death Benefit is offered for use in connection with Qualified Plans, owners who intend to use their Contracts in connection with such plans, including IRAs, should consider the potentially adverse effects that the Earnings Enhancement Death Benefit may have on their plan. See the discussions of death benefits in "Federal Tax Matters, Qualified Retirement Plans." Please consult your tax advisor.

Please see Appendix D for an example of the calculation of the Earnings Enhancement Death Benefit.

SUSPENSION OR DELAY IN PAYMENTS

Payments of a partial or full surrender of the Variable Account value or death benefit are usually made within seven (7) calendar days. However, we may delay such payment of a partial or full surrender of the Variable Account value or death benefit for any period in the following circumstances where permitted by state law:

(1): when the New York Stock Exchange is closed; or
(2): when trading on the New York Stock Exchange is restricted; or
(3): when an emergency exists (as determined by the SEC as a result of which (a) the disposal of securities in the Variable Account is not reasonably practical; or (b) it is not reasonably practical to determine fairly the value of the net assets of the Variable Account); or
(4): when the SEC, by order, so permits for the protection of security holders.

We may delay payment of a partial or full surrender from the Guaranteed Account for up to six months where permitted.

SUSPENSION OF CONTRACTS

Under certain circumstances, we may be required by law to block transactions in a Contract. Under these circumstances, we must refuse to honor any request for transfers, withdrawals, surrenders or death benefits until we receive instructions from the appropriate regulator or law enforcement authority.

CHARGES AND DEDUCTIONS

Surrender Charge (Contingent Deferred Sales Charge)

General.

We do not deduct any charge for sales expenses from Purchase Payments at the time you make them. However, within certain time limits described below, we deduct a surrender charge (contingent deferred sales charge) from the Contract Value when you make a full or partial surrender before the Annuity Commencement Date or, if you elected early annuitization, when you fully or partially surrender your Contract for a commuted value while variable income payments under Annuity Option A (payments for a certain period) are being made. (See "Annuitization, Annuity Commencement Date."). We do not apply the surrender charge to the payment of a death benefit.

In the event surrender charges are not sufficient to cover sales expenses, we will bear the loss; conversely, if the amount of such charges provides more than enough to cover such expenses, we will retain the excess. Protective Life does not currently believe that the surrender charges imposed will cover the expected costs of distributing the Contracts. Any shortfall will be made up from Protective Life's general assets, which may include amounts derived from the mortality and expense risk charge.

Free Withdrawal Amount.

Each Contract Year you may withdraw a specified amount, called the "free withdrawal amount", from your Contract without incurring a surrender charge. During the first Contract Year the free withdrawal amount is equal to 15% of your initial Purchase Payment. In any subsequent Contract Year the free withdrawal amount is equal to the greatest of: (1) the earnings in your Contract as of the prior Contract Anniversary; (2) 15% of your cumulative Purchase Payments as of the prior Contract Anniversary; or (3) 15% of the Contract Value as of the prior Contract Anniversary. For the purpose of determining the free withdrawal amount, earnings equal the Contract Value minus the Purchase Payments not previously assessed with a surrender charge, both measured as of the Contract Anniversary for which values are being determined. Withdrawals in excess of the free withdrawal amount in any Contract Year are treated as surrenders. Withdrawals, including withdrawals of the free withdrawal amount, may be subject to income taxation and may be subject to a 10% federal penalty tax if taken before the Owner reaches age 59 ¹ / 2 . (See "Taxation of Annuities in General, Taxation of Partial and Full Surrenders.")

Determining the Surrender Charge.

We calculate the surrender charge by first allocating surrendered Contract Value in excess of any free withdrawal amount to Purchase Payments or portions of Purchase Payments not previously assessed with a surrender charge on a "first-in, first-out" (FIFO) basis. We then allocate any remaining surrendered Contract Value pro-rata to these Purchase Payments. The surrender charge is the total of each of the allocated amounts of surrendered Contract Value multiplied by its applicable surrender charge percentage, as shown below. If the surrendered Contract Value exceeds any free withdrawal amount and if no surrendered Contract Value was allocated to Purchase Payments, we determine the surrender charge on the surrendered Contract Value by applying the surrender charge percentage associated with the most recent Purchase Payment we accepted.

Number of Full Years Elapsed Between the Date Purchase Payment was Accepted and the Date of Surrender		Surrender Charge as Percentage of Amount Surrendered
0		7.0%
1		6.0%
2		6.0%
3		5.0%
4		4.0%
5		3.0%
6		2.0%
7+		0%

Refer to Appendix B for an example of how the surrender charge is calculated.

Reduction or Elimination of Surrender Charge.

We may decrease or waive surrender charges on Contracts issued to a trustee, employer or similar entity pursuant to a retirement plan or when sales are made in a similar arrangement where offering the Contracts to a group of individuals under such a program results in savings of sales expenses. We will determine the entitlement to such a reduction in surrender charge.

We may also waive surrender charges on partial surrenders taken as a minimum distribution required under federal or state tax laws on amounts attributable to Protective Life annuity contracts. (See "Qualified Retirement Plans".) During any Contract Year, the total amount of such partial surrenders will reduce the free withdrawal amount available on any subsequent partial surrender.

Waiver of Surrender Charges.

If you select an optional benefit package we will waive any applicable surrender charge if, at any time after the first Contract Year:

(1): you are first diagnosed as having a terminal illness by a physician that is not related to you or the Annuitant; or,
(2): you enter, for a period of at least ninety (90) days, a facility which is both

(a): licensed by the state (in New Hampshire, operated pursuant to law); and
(b): qualified as a skilled nursing home facility under Medicare or Medicaid.

For Contracts purchased in the State of Texas, we will also waive surrender charges on these conditions during the first Contract Year.

The term "terminal illness" means that you are diagnosed as having a non-correctable medical condition that, with a reasonable degree of medical certainty, will result in your death in less than 12 months. A "physician" is a medical doctor licensed by a state's Board of Medical Examiners, or similar authority in the United States, acting within the scope of his or her license. You must submit written proof satisfactory to us of a terminal illness or nursing home confinement. We reserve the right to require an examination by a physician of our choice.

Once we have granted the waiver of surrender charges, no surrender charges will apply to the Contract in the future and we will accept no additional Purchase Payments.

If any Owner is not an individual, the waiver of surrender charge provisions will apply to the Annuitant.

Suspension of Benefits.

For a period of one year after any change of ownership involving a natural person, we will not waive the surrender charges under the provision above.

Mortality and Expense Risk Charge

To compensate Protective Life for assuming mortality and expense risks, we deduct a daily mortality and expense risk charge. Prior to the Annuity Commencement Date, for Contracts issued with the standard death benefit the charge is equal, on an annual basis, to 1.10% of the average daily net assets of the Variable Account attributable to your Contract. If you select one of the optional benefit packages, the mortality and expense risk expense charge will increase by 0.15% for a total mortality and expense risk charge of 1.25% of the average annual daily net assets of the Variable Account attributable to your Contract. (See "Optional Benefit Packages".) On, and after the Annuity Commencement Date, the mortality and expense risk charge is equal to 1.10% of the average annual daily net assets of the Variable Account attributable to a Contract. If you purchase the Earnings Enhancement Death Benefit, the mortality and expense risk charge will increase by 0.25% to 1.35% for the standard benefit and 1.50% for the optional benefit package until the Earnings Enhancement Death Benefit terminates. (See "Earnings Enhancement Death Benefit.") We deduct the mortality and expense risk charge only from the Variable Account.

The mortality risk Protective Life assumes is that Annuitant(s) may live for a longer period of time than estimated when the guarantees in the Contract were established. Because of these guarantees, each Payee is assured that longevity will not have an adverse effect on the annuity payments received. The mortality risk that Protective Life assumes also includes a guarantee to pay a death benefit if the Owner dies before the Annuity Commencement Date. The expense risk that Protective Life assumes is the risk that the administration charge, contract maintenance fee and transfer fees may be insufficient to cover actual future expenses. It is possible that the mortality and expense risk charge (or a portion of it) could be treated as a distribution from the Contract for tax purposes. (See "Federal Tax Matters.") We may incur a profit or a loss from the mortality and expense risk charge. Any profit may be used to finance distribution expenses.

Administration Charges

We will deduct an administration charge equal, on an annual basis, to 0.15% of the daily net asset value of the Variable Account attributable to your Contract. We make this deduction to reimburse Protective Life for expenses incurred in the administration of the Contract and the Variable Account. We deduct the administration charge only from the Variable Account value.

Transfer Fee

Currently, there is no charge for transfers. Protective Life reserves the right, however, to charge $25 for each transfer after the first 12 transfers in any Contract Year. For the purpose of assessing the fee, we would consider each request to be one transfer, regardless of the number of Allocation Options affected by the transfer in one day. We would deduct the fee from the amount being transferred.

Contract Maintenance Fee

Prior to the Annuity Commencement Date, we deduct a contract maintenance fee of $30 from the Contract Value on each Contract Anniversary, and on any day that you surrender the Contract other than the Contract Anniversary. We will deduct the contract maintenance fee from the Allocation Options in the same proportion as their values are to the Contract Value. We will waive the contract maintenance fee in the event the Contract Value or the aggregate Purchase Payments reduced by surrenders and associated surrender charges equals or exceeds $50,000 on the date we are to deduct the contract maintenance fee.

Fund Expenses

The net assets of each Sub-Account of the Variable Account will reflect the investment management fees and other operating expenses the Funds incur. For each Fund, an investment manager receives a daily fee for its services. Some Funds also deduct 12b-1 fees from Fund assets. Over time these fees, which are paid out of a Fund's assets on an ongoing basis, will increase the cost of an investment in Fund shares. (See the prospectuses for the Funds, which accompany this Prospectus.)

Premium Taxes

Some states impose premium taxes at rates currently ranging up to 3.5%. If premium taxes apply to your Contract, we will deduct them from the Purchase Payment(s) when accepted or from the Contract Value upon a full or partial surrender, death or annuitization.

Other Taxes

Currently, no charge will be made against the Variable Account for federal, state or local taxes other than premium taxes. We reserve the right, however, to deduct a charge for taxes attributable to the operation of the Variable Account.

Other Information

We sell the Contracts through registered representatives of broker-dealers. These registered representatives are also appointed and licensed as insurance agents of Protective Life. We pay commissions to the broker-dealers for selling the Contracts. You do not directly pay the commissions, we do. We intend to recover commissions, marketing, administrative and other expenses and costs of Contract benefits through fees and charges imposed under the Contracts. See "Distribution of the Contracts" for more information.

ANNUITIZATION

Annuity Commencement Date

On the Effective Date, the Annuity Commencement Date is the later of (1) the oldest Owner's or Annuitant's 90th birthday or (2) the 10th Contract Anniversary. Annuity Commencement Dates that

occur or are scheduled to occur at an advanced age for the Annuitant ( e.g. , past age 85), may in certain circumstances have adverse income tax consequences. (See "Federal Tax Matters".) Distributions from Qualified Contracts may be required before the Annuity Commencement Date.

On the Annuity Commencement Date, we will apply your Contract Value, less any applicable charges and premium tax, to the Annuity Option you have selected to determine an annuity income payment. You may elect to receive a fixed income payment, a variable income payment, or a combination of both using the same Annuity Option and certain period.

Changing the Annuity Commencement Date.

In all states except Oregon, the Owner may change the Annuity Commencement Date by Written Notice. Except as we may allow under the early annuitization privilege, described below, the proposed Annuity Commencement Date must be at least 30 days after the date the written request is received by the Company and at least 7 years after the most recent Purchase Payment. The new Annuity Commencement Date may be any date before or on the Owner's or Annuitant's 90th birthday and may not be later than that date unless approved by Protective Life.

Early Annuitization.

At any time after the second Contract Anniversary, we will permit you to elect the immediate annuitization of your Contract under certain Annuity Options. To elect this early annuitization, you must make your election by Written Notice, and you must select an Annuity Option providing either (i) life income with or without a certain period, or (ii) payments for a certain period of at least 10 years. We will not accept an early annuitization election if you select payments for a certain period of less than 10 years. Once we accept your early annuitization election, we will change the Annuity Commencement Date to the date on which we accepted the election, and we will apply your Contract Value, less any applicable charges and premium tax, to the Annuity Option you have selected to determine an annuity income payment.

We will waive any surrender charges that may otherwise apply on the date we accept your election of early annuitization. However, surrender charges will apply if, after your early annuitization election, you fully or partially surrender your Contract for a commuted value while variable income payments under Annuity Option A (payments for a certain period) are being made. In this case, the surrender charge will be determined as described in "Charges and Deductions, Surrender Charge," but without regard to any free withdrawal amount that may have otherwise been available. (See "Charges and Deductions, Surrender Charge.")

We reserve the right to modify, limit, suspend or eliminate the early annuitization privilege without prior notice for any Contract or class of Contracts at any time for any reason.

Fixed Income Payments

Fixed income payments are periodic payments from the Company to the designated Payee, the amount of which is fixed and guaranteed by the Company. Fixed income payments are not in any way dependent upon the investment experience of the Variable Account. Once fixed income payments have begun, they may not be surrendered.

Variable Income Payments

Variable income payments are periodic payments from the Company to the designated Payee, the amount of which varies from one payment to the next as a reflection of the net investment experience of the Sub-Account(s) you select to support the payments.

Annuity Units.

On the Annuity Commencement Date, we will apply the Contract Value you have allocated to variable income payments (less applicable charges and premium taxes) to the variable Annuity Option you have selected. Using an interest assumption of 5%, we will determine the dollar amount that would

equal a variable income payment if a payment were made on that date. (No payment is actually made on that date.) We will then allocate that dollar amount among the Sub-Accounts you selected to support your variable income payments, and we will determine the number of Annuity Units in each of those Sub-Accounts that is credited to your Contract. We will make this determination based on the Annuity Unit values established at the close of regular trading on the New York Stock Exchange on the Annuity Commencement Date. If the Annuity Commencement Date is a day on which the New York Stock Exchange is closed, we will determine the number of Annuity Units on the next day the New York Stock Exchange is open. The number of Annuity Units attributable to each Sub-Account under a Contract generally remains constant unless there is an exchange of Annuity Units between Sub-Accounts.

Determining the Amount of Variable Income Payments.

We will determine the amount of your variable income payment no earlier than five Valuation Days before the date on which a payment is due, using values established at the close of regular trading on the New York Stock Exchange that day.

We determine the dollar amount of each variable income payment attributable to each Sub-Account by multiplying the number of Annuity Units of that Sub-Account credited to your Contract by the Annuity Unit value (described below) for that Sub-Account on the Valuation Period during which the payment is determined. The dollar value of each variable income payment is the sum of the variable income payments attributable to each Sub-Account.

The Annuity Unit value of each Sub-Account for any Valuation Period is equal to (a) multiplied by (b) divided by (c) where:

(a): is the net investment factor for the Valuation Period for which the Annuity Unit value is being calculated;
(b): is the Annuity Unit value for the preceding Valuation Period; and
(c): is a daily Assumed Investment Return (AIR) factor adjusted for the number of days in the Valuation Period.

The AIR is equal to 5%.

If the net investment return of the Sub-Account for a variable income payment period is equal to the AIR during that period, the variable income payment attributable to that Sub-Account for that period will equal the payment for the prior period. To the extent that such net investment return exceeds the AIR for that period, the payment for that period will be greater than the payment for the prior period; to the extent that such net investment return falls short of the AIR for that period, the payment for that period will be less than the payment for the prior period.

Refer to Appendix C for an explanation of the variable annuitization calculation.

Exchange of Annuity Units.

After the Annuity Commencement Date, you may exchange the dollar amount of a designated number of Annuity Units of a particular Sub-Account for an equivalent dollar amount of Annuity Units of another Sub-Account. On the date of the exchange, the dollar amount of a variable income payment generated from the Annuity Units of either Sub-Account would be the same. We allow only one exchange between Sub-Accounts in any calendar month, and allow no exchanges between the Guaranteed Account and the Variable Account.

Annuity Options.

You may select an Annuity Option, or change your selection by Written Notice the Company receives no later than 30 days before the Annuity Commencement Date. You may not change your selection of Annuity Option less than 30 days before the Annuity Commencement Date. If you have not selected an Annuity Option within 30 days of the Annuity Commencement Date, we will apply your Contract Value to Option B — Life Income with Payments for a 10 Year Certain Period, with the Variable Account value used to purchase variable income payments and the Guaranteed Account value used to purchase fixed income payments.

You may select from among the following Annuity Options:

Option A — Payments For a Certain Period:

We will make payments for the period you select. No certain period may be longer than 30 years. Payments under this Annuity Option do not depend on the life of an Annuitant. The Contract may be fully or partially surrendered for a commuted value while variable income payments under Option A are being made, but fixed income payments under this option may not be surrendered. Refer to Appendix C for an explanation of the commuted value calculation.

Option B — Life Income With Or Without A Certain Period:

Payments are based on the life of the named Annuitant(s). If you elect to include a certain period, we will make payments for the lifetime of the Annuitant(s), with payments guaranteed for the certain period you select. No certain period may be longer than 30 years. Payments stop at the end of the selected certain period or when the Annuitant(s) dies, whichever is later. We reserve the right to demand proof that the Annuitant(s) is living prior to making any payment under Option B. If no certain period is selected, payments will stop upon the death of the Annuitant(s), no matter how few or how many payments have been made. The Contract may not be surrendered while variable income payments under Option B are being made regardless of whether fixed or variable income payments are selected.

Additional Option:

You may use the Contract Value, less applicable premium tax, to purchase any annuity contract that we offer on the date you elect this option.

Minimum Amounts

If your Contract Value is less than $5,000 on the Annuity Commencement Date, we reserve the right to pay the Contract Value in one lump sum. If at any time your annuity income payments are less than the minimum payment amount according to the Company's rules then in effect, we reserve the right to change the frequency to an interval that will result in a payment at least equal to the minimum.

Death of Annuitant or Owner After Annuity Commencement Date

In the event of the death of any Owner on or after the Annuity Commencement Date, the Beneficiary will become the new Owner. If any Owner or Annuitant dies on or after the Annuity Commencement Date and before all benefits under the Annuity Option you selected have been paid, we will pay any remaining portion of such benefits at least as rapidly as under the Annuity Option in effect when the Owner or Annuitant died. After the death of the Annuitant, any remaining payments shall be payable to the Beneficiary unless you specified otherwise before the Annuitant's death.

YIELDS AND TOTAL RETURNS

From time to time, Protective Life may advertise or include in sales literature yields, effective yields, and total returns for the Sub-Accounts. These figures are based on historic results and do not indicate or project future performance. More detailed information about the calculation of performance information appears in the Statement of Additional Information.

Yields, effective yields, and total returns for the Sub-Accounts are based on the investment performance of the corresponding Funds. The Funds' performance also reflects the Funds' expenses, including any 12b-1 fees. Certain of the expenses of each Fund may be reimbursed by the investment manager. (See the Prospectuses for the Funds.)

Yields

The yield of the Oppenheimer Money Fund Sub-Account refers to the annualized income generated by an investment in the Sub-Account over a specified seven-day period. The yield is calculated by assuming that the income generated for that seven-day period is generated each seven day period over a 52 week period and is shown as a percentage of the investment. The effective yield is calculated similarly but when annualized the income earned by an investment in the Sub-Account is assumed to be reinvested. The effective yield will be slightly higher than the yield because of the compounding effect of this assumed reinvestment.

The yield of a Sub-Account (except the Oppenheimer Money Fund Sub-Account) refers to the annualized income generated by an investment in the Sub-Account over a specified 30 day or one-month period. The yield is calculated by assuming that the income generated by the investment during that 30 day or one month period is generated each period over a 12 month period and is shown as a percentage of the investment.

Total Returns

The total return of a Sub-Account refers to return quotations assuming an investment under a Contract has been held in the Sub-Account for various periods of time including a period measured from the date the Sub-Account commenced operations. Average annual total return refers to total return quotations that are based on an average return over various periods of time.

Certain Funds have been in existence prior to the investment by the Sub-Accounts in such Funds. Protective Life may advertise and include in sales literature the performance of the Sub-Accounts that invest in these Funds for these prior periods. The performance information of any period prior to the investments by the Sub-Accounts is calculated as if the Sub-Accounts had invested in those Funds during those periods, using current charges and expenses associated with the Contract.

Standardized Average Annual Total Returns

The average annual total return quotations represent the average annual compounded rates of return that would equate an initial investment of $1,000 under a Contract to the redemption value of that investment as of the last day of each of the periods for which the quotations are provided. Average annual total return information shows the average percentage change in the value of an investment in the Sub-Account from the beginning date of the measuring period to the end of that period. This standardized version of average annual total return reflects all historical investment results, less all charges and deductions applied against the Sub-Account and any surrender charges that would apply if you terminated the Contract at the end of each indicated period, but excluding any deductions for premium taxes.

When a Sub-Account has been in operation prior to the commencement of the offering of the Contract described in this prospectus, Protective Life may advertise and include in sales literature the performance of the Sub-Accounts for these prior periods. The Sub-Account performance information of any period prior to the commencement of the offering of the Contract is calculated as if the Contract had been offered during those periods, using current charges and expenses.

Until a Sub-Account (other than the Oppenheimer Money Fund Sub-Account) has been in operation for 10 years, Protective Life will always include quotes of standard average annual total return for the period measured from the date that Sub-Account began operations. When a Sub-Account (other than the Oppenheimer Money Fund Sub-Account) has been in operation for one, five and ten years, respectively, the standard version average annual total return for these periods will be provided.

Non-Standard Average Annual Total Returns

In addition to the standard version of average annual total return described above, total return performance information computed on non-standard bases may be used in advertisements or sales literature. Non-standard average annual total return information may be presented, computed on the same basis as the standard version except deductions may not include the surrender charges or the contract maintenance fee. In addition, Protective Life may from time to time disclose average annual total return in other non-standard formats and cumulative total return for Contracts funded by the Sub-Accounts.

Protective Life may, from time to time, also disclose yield, standard average annual total returns, and non-standard total returns for the Funds.

Non-standard performance data will only be disclosed if the standard performance data for the periods described in "Standardized Average Annual Total Returns," above, is also disclosed. For additional information regarding the calculation of other performance data, please refer to the Statement of Additional Information.

Performance Comparisons

Protective Life may, from time to time, advertise or include in sales literature Sub-Account performance relative to certain performance rankings and indices compiled by independent organizations. In advertising and sales literature, the performance of each Sub-Account may be compared to the performance of other variable annuity issuers in general or to the performance of particular types of variable annuities investing in mutual funds, or investment portfolios of mutual funds with investment objectives similar to each of the Sub-Accounts. Lipper Analytical Services, Inc. ("Lipper"), the Variable Annuity Research Data Service ("VARDS"), and Morningstar Inc. ("Morningstar") are independent services which monitor and rank the performance of variable annuity issuers in each of the major categories of investment objectives on an industry-wide basis.

Lipper and Morningstar rankings include variable life insurance issuers as well as variable annuity issuers. VARDS rankings compare only variable annuity issuers. The performance analyses prepared by Lipper, Morningstar and VARDS each rank such issuers on the basis of total return, assuming reinvestment of distributions, but do not take sales charges, redemption fees, or certain expense deductions at the separate account level into consideration. In addition, VARDS prepares risk adjusted rankings, which consider the effects of market risk on total return performance. This type of ranking provides data as to which funds provide the highest total return within various categories of funds defined by the degree of risk inherent in their investment objectives.

Advertising and sales literature may also compare the performance of each Sub-Account to the Standard & Poor's Index of 500 Common Stocks, a widely used measure of stock performance. This unmanaged index assumes the reinvestment of dividends but does not reflect any "deduction" for the expense of operating or managing an investment portfolio. Other independent ranking services and indices may also be used as a source of performance comparison.

Other Matters

Protective Life may also report other information including the effect of tax-deferred compounding on a Sub-Account's investment returns, or returns in general, which may be illustrated by tables, graphs, or charts.

All income and capital gains derived from Sub-Account investments are reinvested and can lead to substantial long-term accumulation of assets, provided that the underlying Fund's investment experience is positive.

FEDERAL TAX MATTERS

Introduction

The following discussion of the federal income tax treatment of the Contract is not exhaustive, does not purport to cover all situations, and is not intended as tax advice. The federal income tax treatment of the Contract is unclear in certain circumstances, and you should always consult a qualified tax adviser regarding the application of law to individual circumstances. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Department regulations, and interpretations existing on the date of this Prospectus. These authorities, however, are subject to change by Congress, the Treasury Department, and judicial decisions.

This discussion does not address state or local tax consequences associated with the purchase of the Contract. In addition, Protective Life makes no guarantee regarding any tax treatment — federal, state or local — of any Contract or of any transaction involving a Contract.

The Company's Tax Status

Protective Life is taxed as a life insurance company under the Internal Revenue Code. Since the operations of the Variable Account are a part of, and are taxed with, the operations of the Company, the Variable Account is not separately taxed as a "regulated investment company" under the Internal Revenue Code. Under existing federal income tax laws, investment income and capital gains of the Variable Account are not taxed to the extent they are applied under a Contract. Protective Life does not anticipate that it will incur any federal income tax liability attributable to such income and gains of the Variable Account, and therefore does not intend to make provision for any such taxes. If Protective Life is taxed on investment income or capital gains of the Variable Account, then Protective Life may impose a charge against the Variable Account in order to make provision for such taxes.

TAXATION OF ANNUITIES IN GENERAL

Tax Deferral During Accumulation Period

Under existing provisions of the Internal Revenue Code, except as described below, any increase in an Owner's Contract Value is generally not taxable to the Owner until received, either in the form of annuity payments as contemplated by the Contracts, or in some other form of distribution. However, this rule applies only if:

(1): the investments of the Variable Account are "adequately diversified" in accordance with Treasury Department regulations;
(2): the Company, rather than the Owner, is considered the owner of the assets of the Variable Account for federal income tax purposes; and
(3): the Owner is an individual (or an individual is treated as the Owner for tax purposes).

Diversification Requirements.

The Internal Revenue Code and Treasury Department regulations prescribe the manner in which the investments of a segregated asset account, such as the Variable Account, are to be "adequately diversified." If the Variable Account fails to comply with these diversification standards, the Contract will not be treated as an annuity contract for federal income tax purposes and the Owner would generally be taxable currently on the excess of the Contact Value over the premiums paid for the Contact. Protective Life expects that the Variable Account, through the Funds, will comply with the diversification requirements prescribed by the Internal Revenue Code and Treasury Department regulations.

Ownership Treatment.

In certain circumstances, variable annuity contract owners may be considered the owners, for federal income tax purposes, of the assets of a segregated asset account, such as the Variable Account, used to support their contracts. In those circumstances, income and gains from the segregated asset account would be includable in the contract owners' gross income. The Internal Revenue Service (the "IRS") has stated in published rulings that a variable contract owner will be considered the owner of the assets of a segregated asset account if the owner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. In addition, the Treasury Department announced, in connection with the issuance of regulations concerning investment diversification, that those regulations "do not provide guidance concerning the circumstances in which investor control of the investments of a segregated asset account may cause the investor, rather than the insurance company, to be treated as the owner of the assets in the account." This announcement also stated that the IRS would issue guidance by way of regulations or rulings on the "extent to which policyholders may direct their investments to particular sub-accounts [of a segregated asset account] without being treated as owners of the underlying assets." As of the date of this Prospectus, the IRS has not issued any such guidance.

The ownership rights under the Contract are similar to, but different in certain respects from, those described by the IRS in rulings in which it was determined that contract owners were not owners of the assets of a segregated asset account. For example, the Owner of this Contract has the choice of more investment options to which to allocate purchase payments and Variable Account values, and may be able to transfer among investment options more frequently than in such rulings. These differences could result in the Owner being treated as the owner of the assets of the Variable Account and thus subject to current taxation on the income and gains from those assets. In addition, the Company does not know what standards will be set forth in the regulations or rulings which the Treasury Department has stated it expects to issue. Protective Life therefore reserves the right to modify the Contract as necessary to attempt to prevent Contract Owners from being considered the owners of the assets of the Variable Account. However, there is no assurance such efforts would be successful.

Nonnatural Owner.

As a general rule, Contracts held by "nonnatural persons" such as a corporation, trust or other similar entity, as opposed to a natural person, are not treated as annuity contracts for federal tax purposes. The income on such Contracts (as defined in the tax law) is taxed as ordinary income that is received or accrued by the Owner of the Contract during the taxable year. There are several exceptions to this general rule for nonnatural Owners. First, Contracts will generally be treated as held by a natural person if the nominal owner is a trust or other entity which holds the Contract as an agent for a natural person. However, this special exception will not apply in the case of any employer who is the nominal owner of a Contract under a non-qualified deferred compensation arrangement for its employees.

In addition, exceptions to the general rule for nonnatural Owners will apply with respect to:

(1): Contracts acquired by an estate of a decedent by reason of the death of the decedent;
(2): certain Qualified Contracts;
(3): Contracts purchased by employers upon the termination of certain Qualified Plans;
(4): certain Contracts used in connection with structured settlement agreements; and
(5): Contracts purchased with a single purchase payment when the annuity starting date is no later than a year from purchase of the Contract and substantially equal periodic payments are made, not less frequently than annually, during the annuity period.

Delayed Annuity Commencement Dates.

If the Contract's Annuity Commencement Date occurs (or is scheduled to occur) at a time when the Annuitant has reached an advanced age ( e.g. , past age 85), it is possible that the Contract would not be treated as an annuity for federal income tax purposes. In that event, the income and gains under the Contract could be currently includable in the Owner's income.

The remainder of this discussion assumes that the Contract will be treated as an annuity contract for federal income tax purposes.

Taxation of Partial and Full Surrenders

In the case of a partial surrender, amounts you receive are generally includable in income to the extent your Contract Value before the surrender exceeds your "investment in the contract." Amounts received under a partial automatic withdrawal plan are treated as partial surrenders. In the case of a full surrender, amounts received are includable in income to the extent they exceed the "investment in the contract." For these purposes, the investment in the contract at any time equals the total of the Purchase Payments made under the Contract to that time (to the extent such payments were neither deductible when made nor excludable from income as, for example, in the case of certain contributions to Qualified Contracts) less any amounts previously received from the Contract which were not included in income. Partial and full surrenders may be subject to a 10% penalty tax. (See "Penalty Tax on Premature Distributions.") Partial and full surrenders may also be subject to federal income tax withholding requirements. (See "Federal Income Tax Withholding.") In addition, in the case of partial and full surrenders from certain Qualified Contracts, mandatory withholding requirements may apply, unless a "direct rollover" of the amount surrendered is made. (See "Direct Rollovers".)

Under the Waiver of Surrender Charges provision of the Contract, amounts we distribute may not be subject to Surrender Charges if you have a terminal illness or enter, for a period of at least 90 days, certain nursing home facilities. However, such distributions will be treated as surrenders for federal income tax purposes.

The Contract offers optional death benefits (and may include an Earnings Enhancement Death Benefit) that in certain circumstances may exceed the greater of the Purchase Payments or the Contract Value. As described elsewhere in this Prospectus, the Company imposes certain charges with respect to these death benefits. It is possible that these charges (or some portion thereof) could be treated for federal tax purposes as a distribution from the Contract.

Taxation of Annuity Payments

Normally, the portion of each annuity income payment taxable as ordinary income equals the excess of the payment over the exclusion amount. In the case of variable income payments, the exclusion amount is the "investment in the contract" (defined above) you allocate to the variable Annuity Option, adjusted for any period certain or refund feature, when payments begin divided by the number of payments expected (as determined by Treasury Department regulations which take into account the Annuitant's life expectancy and the form of annuity benefit selected). In the case of fixed income payments, the exclusion amount is determined by multiplying (1) the payment by (2) the ratio of the investment in the contract you allocate to the fixed Annuity Option, adjusted for any period certain or refund feature, to the total expected amount of annuity income payments for the term of the Contract (determined under Treasury Department regulations).

Once the total amount of the investment in the Contract is excluded using the above formulas, annuity income payments will be fully taxable. If annuity income payments cease because of the death of the Annuitant and before the total amount of the investment in the contract is recovered, the unrecovered amount generally will be allowed as a deduction.

There may be special income tax issues present in situations where the Owner and the Annuitant are not the same person and are not married to one another. You should consult a tax advisor in those situations.

Annuity income payments may be subject to federal income tax withholding requirements. (See "Federal Income Tax Income Withholding".) In addition, in the case of annuity income payments from certain Qualified Plans, mandatory withholding requirements may apply, unless a "direct rollover" of such annuity payments is made. (See "Direct Rollovers".)

Taxation of Death Benefit Proceeds

Prior to the Annuity Commencement Date, we may distribute amounts from a Contract because of the death of an Owner or, in certain circumstances, the death of the Annuitant. Such death benefit proceeds are includable in income as follows:

(1): if distributed in a lump sum, they are taxed in the same manner as a full surrender, as described above; or
(2): if distributed under an Annuity Option, they are taxed in the same manner as annuity income payments, as described above.

After the Annuity Commencement Date, where a guaranteed period exists under an Annuity Option, and the Annuitant dies before the end of that period, payments we make to the Beneficiary for the remainder of that period are includable in income as follows:

(1): if received in a lump sum, they are included in income to the extent that they exceed the unrecovered investment in the contract at that time; or
(2): if distributed in accordance with the existing Annuity Option selected, they are fully excluded from income until the remaining investment in the contract is deemed to be recovered, and all annuity income payments thereafter are fully includable in income.

Proceeds payable on death may be subject to federal income tax withholding requirements. (See "Federal Income Tax Withholding".) In addition, in the case of such proceeds from certain Qualified Contracts, mandatory withholding requirements may apply, unless a "direct rollover" of such proceeds is made. (See "Direct Rollovers".)

Assignments, Pledges, and Gratuitous Transfers

Other than in the case of Qualified Contracts (which generally cannot be assigned or pledged), any assignment or pledge of (or agreement to assign or pledge) any portion of the Contract Value is treated for federal income tax purposes as a surrender of such amount or portion. The investment in the contract is increased by the amount includable as income with respect to such assignment or pledge, though it is not affected by any other aspect of the assignment or pledge (including its release). If an Owner transfers a Contract without adequate consideration to a person other than the Owner's spouse (or to a former spouse incident to divorce), the Owner will be taxed on the difference between his or her Contract Value and the investment in the contract at the time of transfer. In such case, the transferee's investment in the contract will increase to reflect the increase in the transferor's income.

Penalty Tax on Premature Distributions

Where we have not issued the Contract in connection with a Qualified Plan, there generally is a 10% penalty tax on the amount of any payment from the Contract that is includable in income unless the payment is:

(a): received on or after the Owner reaches age 59 ¹ / 2 ;
(b): attributable to the Owner's becoming disabled (as defined in the tax law);

(c): made on or after the death of the Owner or, if the Owner is not an individual, on or after the death of the primary annuitant (as defined in the tax law);
(d): made as a series of substantially equal periodic payments (not less frequently than annually) for the life (or life expectancy) of the Owner or the joint lives (or joint life expectancies) of the Owner and a designated Beneficiary (as defined in the tax law); or
(e): made under a Contract purchased with a single Purchase Payment when the annuity starting date is no later than a year from purchase of the Contract and substantially equal periodic payments are made, not less frequently than annually, during the annuity period.

(Similar rules, discussed below, apply in the case of certain Qualified Contracts.)

Aggregation of Contracts

In certain circumstances, the IRS may determine the amount of an annuity income payment or a surrender from a Contract that is includable in income by combining some or all of the annuity contracts a person owns that were not issued in connection with Qualified Plans. For example, if a person purchases a Contract offered by this Prospectus and also purchases at approximately the same time an immediate annuity issued by Protective Life, the IRS may treat the two contracts as one contract. Similarly, if a person transfers part of his or her interest in one annuity contract to purchase another annuity contract, the IRS might treat the two contracts as one contract. In addition, if a person purchases two or more deferred annuity contracts from the same insurance company (or its affiliates) during any calendar year, all such contracts will be treated as one contract for purposes of determining whether any payment that was not received as an annuity (including surrenders prior to the Annuity Commencement Date) is includable in income. The effects of such aggregation are not always clear; however, it could affect the amount of a surrender or an annuity payment that is taxable and the amount which might be subject to the 10% penalty tax described above.

Loss of Interest Deduction Where Contract Is Held By or For the Benefit of Certain Nonnatural Persons

In the case of Contracts issued after June 8, 1997 to a nonnatural taxpayer (such as a corporation or a trust), or held for the benefit of such an entity, a portion of otherwise deductible interest may not be deductible by the entity, regardless of whether the interest relates to debt used to purchase or carry the Contract. However, this interest deduction disallowance does not affect Contracts where the income on such Contracts is treated as ordinary income that the Owner received or accrued during the taxable year. Entities that are considering purchasing the Contract, or entities that will be Beneficiaries under a Contract, should consult a tax adviser.

QUALIFIED RETIREMENT PLANS

In General

The Contracts are also designed for use in connection with certain types of retirement plans which receive favorable treatment under the Internal Revenue Code. Numerous special tax rules apply to the participants in Qualified Plans and to Contracts used in connection with Qualified Plans. Therefore, we make no attempt in this Prospectus to provide more than general information about use of the Contract with the various types of Qualified Plans. State income tax rules applicable to Qualified Plans and Qualified Contracts often differ from federal income tax rules, and this prospectus does not describe any of these differences. Those who intend to use the Contract in connection with Qualified Plans should seek competent advice.

The tax rules applicable to Qualified Plans vary according to the type of plan and the terms and conditions of the plan itself. For example, both the amount of the contribution that you may make, and the tax deduction or exclusion that you may claim for such contribution, are limited under Qualified Plans and vary with the type of plan. Also, for full surrenders, partial automatic withdrawals, partial surrenders, and annuity income payments under Qualified Contracts, there may be no "investment in the contract" and the total amount received may be taxable. Similarly, loans from Qualified Contracts, where available, are subject to a variety of limitations, including restrictions as to the amount that may be borrowed, the duration of the loan, and the manner in which the loan must be repaid. (Owners should always consult their tax advisors and retirement plan fiduciaries prior to exercising any loan privileges that are available.) Both the amount of the contribution that you and/or your employer may make, and the tax deduction or exclusion that you and/or your employer may claim for such contribution, are limited under Qualified Plans.

If you use this Contract in connection with a Qualified Plan, the Owner and Annuitant must be the same individual. Additionally, for Contracts issued in connection with Qualified Plans subject to the Employee Retirement Income Security Act ("ERISA"), the spouse or former spouse of the Owner will have rights in the Contract. In such a case, the Owner may need the consent of the spouse or former spouse to change annuity options, to elect a partial automatic withdrawal option, or to make a partial or full surrender of the Contract.

In addition, special rules apply to the time at which distributions must commence and the form in which the distributions must be paid. For example, the length of any guarantee period may be limited in some circumstances to satisfy certain minimum distribution requirements under the Internal Revenue Code. Furthermore, failure to comply with minimum distribution requirements applicable to Qualified Plans will result in the imposition of an excise tax. This excise tax generally equals 50% of the amount by which a minimum required distribution exceeds the actual distribution from the Qualified Plan. In the case of Individual Retirement Accounts or Annuities ("IRAs"), distributions of minimum amounts (as specified in the tax law) must generally commence by April 1 of the calendar year following the calendar year in which the Owner attains age 70 ¹ / 2 . In the case of certain other Qualified Plans, distributions of such minimum amounts must generally commence by the later of this date or April 1 of the calendar year following the calendar year in which the employee retires. The death benefit under your Contract may affect the amount of the minimum required distribution that must be taken from your Contract.

There may be a 10% penalty tax on the taxable amount of payments from certain Qualified Contracts. There are exceptions to this penalty tax which vary depending on the type of Qualified Plan. In the case of an IRA, exceptions provide that the penalty tax does not apply to a payment:

(a): received on or after the Owner reaches age 59 ¹ / 2 ;
(b): received on or after the Owner's death or because of the Owner's disability (as defined in the tax law); or
(c): made as a series of substantially equal periodic payments (not less frequently than annually) for the life (or life expectancy) of the Owner or for the joint lives (or joint life expectancies) of the Owner and his designated beneficiary (as defined in the tax law).

These exceptions, as well as certain others not described herein, generally apply to taxable distributions from other Qualified Plans (although, in the case of plans qualified under sections 401 and 403, exception "c" above for substantially equal periodic payments applies only if the Owner has separated from service). In addition, the penalty tax does not apply to certain distributions from IRAs which are used for qualified first time home purchases or for higher education expenses. You must meet special conditions to be eligible for these two exceptions to the penalty tax. Those wishing to take a distribution from an IRA for these purposes should consult their tax advisor.

When issued in connection with a Qualified Plan, we will amend a Contract as generally necessary to conform to the requirements of the plan. However, Owners, Annuitants, and Beneficiaries are cautioned

that the rights of any person to any benefits under Qualified Plans may be subject to the terms and conditions of the plans themselves, regardless of the terms and conditions of the Contract. In addition, the Company shall not be bound by terms and conditions of Qualified Plans to the extent such terms and conditions contradict the Contract, unless the Company consents.

Following are brief descriptions of various types of Qualified Plans in connection with which the Company may issue a Contract.

Individual Retirement Accounts and Annuities.

Section 408 of the Internal Revenue Code permits eligible individuals to contribute to an individual retirement program known as an IRA. IRAs are subject to limits on the amounts that may be contributed and deducted, the persons who may be eligible and on the time when distributions may commence. Also, subject to the direct rollover and mandatory withholding requirements (discussed below), you may "roll over" distributions from certain Qualified Plans on a tax-deferred basis into an IRA.

However, you may not use the Contract in connection with a "Coverdell Education Savings Account" (formerly known as an "Education IRA") under Section 530 of the Internal Revenue Code, a "Simplified Employee Pension" under Section 408(k) of the Internal Revenue Code, or a "Simple IRA" under Section 408(p) of the Internal Revenue Code.

Roth IRAs.

Section 408A of the Internal Revenue Code permits eligible individuals to contribute to a type of IRA known as a "Roth IRA." Roth IRAs are generally subject to the same rules as non-Roth IRAs, but differ in several respects. Among the differences is that, although contributions to a Roth IRA are not deductible, "qualified distributions" from a Roth IRA will be excludable from income.

A qualifed distribution is a distribution that satisfies two requirements. First, the distribution must be made in a taxable year that is at least five years after the first taxable year for which a contribution to any Roth IRA established for the Owner was made. Second, the distribution must be either (1) made after the Owner attains the age of 59 ¹ / 2 ; (2) made after the Owner's death; (3) attributable to the Owner being disabled; (4) a qualified first-time homebuyer distribution within the meaning of Section 72(t)(2)(F) of the Internal Revenue Code. In addition, distributions from Roth IRAs need not commence when the Owner attains age 70 ¹ / 2 . A Roth IRA may accept a "qualified rollover contribution" from a non-Roth IRA, but a Roth IRA may not accept rollover contributions from other qualified plans.

As described above (see "Individual Retirement Accounts and Annuities"), there is some uncertainty regarding the proper characterization of the Contract's optional death benefit for purposes of the tax rules governing IRAs (which include Roth IRAs).

Corporate and Self-Employed ("H.R. 10" and "Keogh") Pension and Profit-Sharing Plans.

Sections 401(a) and 403(a) of the Code permit corporate employers to establish various types of tax-favored retirement plans for employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly referred to as "H.R. 10" or "Keogh," permits self-employed individuals also to establish such tax-favored retirement plans for themselves and their employees. Such retirement plans may permit the purchase of the Contract in order to provide benefits under the plans. If the Owner of the Contract purchases an optional death benefit package, the death benefit in certain circumstances may exceed the greater of the Purchase Payments and the Contract Value. It is possible the IRS could characterize such a death benefit as an incidental death benefit. There are limitations on the amount of incidental benefits that may be provided under pension and profit sharing plans. In addition, the provision of such benefits may result in currently taxable income to participants.

Section 403(b) Policies.

Section 403(b) of the Internal Revenue Code permits public school employees and employees of certain types of charitable, educational and scientific organizations specified in Section 501(c)(3) of Internal Revenue the Code to have their employers purchase annuity contracts for them and, subject to certain limitations, to exclude the amount of purchase payments from gross income for tax purposes. Purchasers of the Contracts for use as a "Section 403(b) Policy" should seek competent advice as to eligibility, limitations on permissible amounts of purchase payments and other tax consequences associated with such Contracts. In particular, purchasers and their advisers should consider that the optional benefit packages under the Contract provide a death benefit that in certain circumstances may exceed the greater of the Purchase Payments and the Contract Value. It is possible the IRS could characterize the death benefit as an "incidental death benefit". If the death benefit were so characterized, this could result in currently taxable income to purchasers. In addition, there are limitations on the amount of incidental death benefits that may be provided under a Section 403(b) Policy.

Section 403(b) Policies contain restrictions on withdrawals of:

(i): contributions made pursuant to a salary reduction agreement in years beginning after December 31, 1988;
(ii): earnings on those contributions; and
(iii): earnings after December 31, 1988 on amounts attributable to salary reduction contributions held as of December 31, 1988.

These amounts can be paid only if the employee has reached age 59 ¹ / 2 , separated from service, died, become disabled, or in the case of hardship. Amounts permitted to be distributed in the event of hardship are limited to actual contributions; earnings thereon can not be distributed on account of hardship. (These limitations on withdrawals do not apply to the extent the Company is directed to transfer some or all of the Contract Value to the issuer of another Section 403(b) Policy or into a
Section 403(b)(7) custodial account.)

Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations.

Section 457 of the Internal Revenue Code permits employees of state and local governments and tax-exempt organizations to defer a portion of their compensation without paying current taxes. The employees must be participants in an eligible deferred compensation plan. Generally, a Contract purchased by a state or local government or a tax-exempt organization will not be treated as an annuity contract for federal income tax purposes. The Contract will be issued in connection with a Section 457 deferred compensation plan sponsored by a state or local government only if the plan has established a trust to hold plan assets, including the Contract.

Direct Rollovers

If your Contract is used in connection with a pension, profit-sharing, or annuity plan qualified under sections 401(a) or 403(a) of the Code, is a Section 403(b) Policy, or is used with an eligible deferred compensation plan that has a government sponsor and that is qualified under Section 457(b), any "eligible rollover distribution" from the Contract will be subject to direct rollover and mandatory withholding requirements. An eligible rollover distribution generally is any taxable distribution from a qualified pension plan under Section 401(a) of the Internal Revenue Code, qualified annuity plan under Section 403(a) of the Code, Section 403(b) annuity or custodial account, or an eligible Section 457(b) deferred compensation plan that has a government sponsor, excluding certain amounts (such as minimum distributions required under Section 401(a)(9) of the Internal Revenue Code, distributions which are part of a "series of substantially equal periodic payments" made for life or a specified period of 10 years or more, or hardship distributions as defined in the tax law).

Under these requirements, federal income tax equal to 20% of the eligible rollover distribution will be withheld from the amount of the distribution. Unlike withholding on certain other amounts distributed from the Contract, discussed below, you cannot elect out of withholding with respect to an eligible rollover distribution. However, this 20% withholding will not apply if, instead of receiving the eligible rollover distribution, you elect to have it directly transferred to certain Qualified Plans. Prior to receiving an eligible rollover distribution, you will receive a notice (from the plan administrator or the Company) explaining generally the direct rollover and mandatory withholding requirements and how to avoid the 20% withholding by electing a direct transfer.

FEDERAL INCOME TAX WITHHOLDING

Protective Life will withhold and remit to the federal government a part of the taxable portion of each distribution made under a Contract unless the distributee notifies Protective Life at or before the time of the distribution that he or she elects not to have any amounts withheld. In certain circumstances, Protective Life may be required to withhold tax. The withholding rates applicable to the taxable portion of periodic annuity payments (other than eligible rollover distributions) are the same as the withholding rates generally applicable to payments of wages. In addition, a 10% withholding rate applies to the taxable portion of non-periodic payments (including surrenders prior to the Annuity Commencement Date) and conversions of, or rollovers from, non-Roth IRAs to Roth IRAs. Regardless of whether you elect not to have federal income tax withheld, you are still liable for payment of federal income tax on the taxable portion of the payment. As discussed above, the withholding rate applicable to eligible rollover distributions is 20%.

GENERAL MATTERS

The Contract

The Contract and its attachments, including the copy of your application and any endorsements, riders and amendments, constitute the entire agreement between you and us. All statements in the application shall be considered representations and not warranties. The terms and provisions of this Contract are to be interpreted in accordance with the Internal Revenue Code and applicable regulations.

Error in Age or Gender

When a benefit of the Contract is contingent upon any person's age or gender, we may require proof of such. We may suspend payments until we receive proof. When we receive satisfactory proof, we will make the payments which were due during the period of suspension. Where the use of unisex mortality rates is required, we will not determine or adjust benefits based upon gender.

If after we receive proof of age and gender (where applicable), we determine that the information you furnished was not correct, we will adjust any benefit under this Contract to that which would be payable based upon the correct information. If we have underpaid a benefit because of the error, we will make up the underpayment in a lump sum. If the error resulted in an overpayment, we will deduct the amount of the overpayment from any current or future payment due under the Contract. We will deduct up to the full amount of any current or future payment until the overpayment has been fully repaid. Underpayments and overpayments will bear interest at an annual effective interest rate of 3% when permitted by the state of issue.

Incontestability

We will not contest the Contract.

Non-Participation

The Contract is not eligible for dividends and will not participate in Protective Life's surplus or profits.

Assignment or Transfer of a Contract

You have the right to assign or transfer a Contract if it is permitted by law. Generally, you do not have the right to assign or transfer a qualified Contract. We do not assume responsibility for any assignment or transfer. Any claim made under an assignment or transfer is subject to proof of the nature and extent of the assignee's or transferee's interest before we make a payment. Assignments and transfers have federal income tax consequences. An assignment or transfer may result in the Owner recognizing taxable income. (See "Taxation of Annuities in General, Assignments, Pledges and Gratuitous Transfers" in the prospectus.)

Notice

All instructions and requests to change or assign the Contract must be in writing in a form acceptable to us, signed by the Owner(s), and received at our administrative office. The instruction, change or assignment will relate back to and take effect on the date it was signed, except we will not be responsible for following any instruction or making any change or assignment before we receive it.

Modification

No one is authorized to modify or waive any term or provision of this Contract unless we agree to the modification or waiver in writing and it is signed by our President, Vice-President or Secretary. We reserve the right to change or modify the provisions of this Contract to conform to any applicable laws, rules or regulations issued by a government agency, or to assure continued qualification of the Contract as an annuity contract under the Internal Revenue Code. We will send you a copy of the endorsement that modifies the Contract, and where required we will obtain all necessary approvals, including that of the Owner(s).

Reports

At least annually prior to the Annuity Commencement Date, we will send to you at the address contained in our records a report showing the current Contract Value and any other information required by law.

Settlement

Benefits due under this Contract are payable from our administrative office. You may apply the settlement proceeds to any payout option we offer for such payments at the time you make the election. Unless directed otherwise in writing, we will make payments according to the Owner's instructions as contained in our records at the time we make the payment. We shall be discharged from all liability for payment to the extent of any payments we make.

Receipt of Payment

If any Owner, Annuitant, Beneficiary or Payee is incapable of giving a valid receipt for any payment, we may make such payment to whomever has legally assumed his or her care and principal support. Any such payment shall fully discharge us to the extent of that payment.

Protection of Proceeds

To the extent permitted by law and except as provided by an assignment, no benefits payable under this Contract will be subject to the claims of creditors.

Minimum Values

The values available under the Contract are at least equal to the minimum values required in the state where the Contract is delivered.

Application of Law

The provisions of the Contract are to be interpreted in accordance with the laws of the state where the Contract is delivered, with the Internal Revenue Code and with applicable regulations.

No Default

The Contract will not be in default if subsequent Purchase Payments are not made.

DISTRIBUTION OF THE CONTRACTS

We have entered into an agreement with Investment Distributors, Inc. ("IDI") under which IDI has agreed to distribute the Contracts on a "best efforts" basis. Under the agreement, IDI serves as principal underwriter (as defined under Federal securities laws and regulations) for the Contracts. IDI, a wholly-owned subsidiary of PLC, is an affiliate of and shares the same address as Protective Life. IDI is registered with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is a member of the National Association of Securities Dealers, Inc.

IDI does not sell Contracts directly to purchasers. IDI enters into distribution agreements with other broker-dealers (collectively, "Selling Broker-Dealers") for the sale of the Contracts. Registered representatives of the Selling Broker-Dealers sell the Contracts directly to purchasers. Registered representatives of the Selling Broker-Dealers must be licensed by applicable state insurance authorities to sell Protective Life's Contracts.

We will pay commissions to Selling Broker-Dealers for selling the Contracts. We pay commissions as a percentage of Purchase Payments at the time we receive them, as a percentage of Contract Value on an ongoing basis, or a combination of both. While commissions may vary, we do not expect them to exceed 8% of any Purchase Payment. As compensation for marketing, training and/or other services provided, we may pay Selling Broker-Dealers asset-based amounts, bonuses, overrides and marketing allowances in addition to ordinary commissions. These payments, which may be different for different Selling Broker-Dealers, will be made by Protective Life or IDI out of their own assets and will not change the amounts paid by Contract owners to purchase, hold or surrender their Contracts. We may use any of our corporate assets to pay commissions and other costs of distributing the Contracts, including any profit from the mortality and expense risk charge or other fees and charges imposed under the Contracts.

IDI does not retain any commission payment or other amounts as principal underwriter for the Contracts. However, we may pay some or all of IDI's operating and other expenses. Additionally, IDI receives the 12b-1 fees assessed against shares of certain Funds attributable to the Contracts. IDI may pay some or all of these amounts to us as compensation for our provision of distribution and shareholder support services relating to the Contracts on IDI's behalf.

We offer the Contract on a continuous basis. While we anticipate continuing to offer the Contracts, we reserve the right to discontinue the offering at any time.

Inquiries

You may make inquiries regarding a Contract by writing to Protective Life at its administrative office.

IMSA

Protective Life Insurance Company is a member of the Insurance Marketplace Standards Association ("IMSA"), and as such may include the IMSA logo and information about IMSA membership in its advertisements. Companies that belong to IMSA subscribe to a set of ethical standards covering the various aspects of sales and service for individually sold life insurance and annuities.

LEGAL PROCEEDINGS

Protective Life and its subsidiaries, like other insurance companies, in the ordinary course of business are involved in some class action and other lawsuits, or alternatively in arbitration. In some class action and other lawsuits involving insurance companies, substantial damages have been sought and material settlement payments have been made. Although the outcome of any litigation or arbitration cannot be predicted, Protective Life believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse impact on Protective Life's or the Variable Account's financial position.

VOTING RIGHTS

In accordance with its view of applicable law, Protective Life will vote the Fund shares held in the Variable Account at special shareholder meetings of the Funds in accordance with instructions received from persons having voting interests in the corresponding Sub-Accounts. If, however, the 1940 Act or any regulation thereunder should be amended, or if the present interpretation thereof should change, or Protective Life determines that it is allowed to vote such shares in its own right, it may elect to do so.

The number of votes available to an Owner will be calculated separately for each Sub-Account of the Variable Account, and may include fractional votes. The number of votes attributable to a Sub-Account will be determined by applying an Owner's percentage interest, if any, in a particular Sub-Account to the total number of votes attributable to that Sub-Account. An Owner holds a voting interest in each Sub-Account to which that Owner has allocated Accumulation Units or Annuity Units. Before the Annuity Commencement Date, the Owner's percentage interest, if any, will be percentage of the dollar value of Accumulation Units allocated for his or her Contract to the total dollar value of that Sub-Account. On or after the Annuity Commencement Date, the Owner's percentage interest, if any, will be percentage of the dollar value of the liability for future variable income payments to be paid from the Sub-Account to the total dollar value of that Sub-Account. The liability for future payments is calculated on the basis of the mortality assumptions, (if any), the Assumed Investment Return and the Annuity Unit Value of that Sub-Account. Generally, as variable income payments are made to the payee, the liability for future payments decreases as does the number of votes.

The number of votes which are available to the Owner will be determined as of the date coincident with the date established by the Fund for determining shareholders eligible to vote at the relevant meeting of that Fund. Voting instructions will be solicited by written communication prior to such meeting in accordance with procedures established by the Fund.

Shares as to which no timely instructions are received and shares held by Protective Life in a Sub-Account as to which no Owner has a beneficial interest will be voted in proportion to the voting instructions which are received with respect to all Contracts participating in that Sub-Account. Voting instructions to abstain on any item to be voted upon will be applied to reduce the votes eligible to be cast on that item.

Each person having a voting interest in a Sub-Account will receive proxy materials, reports, and other material relating to the appropriate Fund.

FINANCIAL STATEMENTS

The audited statement of assets and liabilities of The Protective Variable Annuity Separate Account as of December 31, 2001 and 2000 and the related statements of operations and changes in net assets for the years ended December 31, 2001 and 2000 as well as the Report of Independent Accountants are contained in the Statement of Additional Information.

The audited consolidated balance sheets for Protective Life as of December 31, 2001 and 2000 and the related consolidated statements of income, share-owner's equity, and cash flows for the three years in the period ended December 31, 2001 and the related financial statement schedules as well as the Report of Independent Accountants are contained in the Statement of Additional Information.

STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS

		Page
CALCULATION OF YIELDS AND TOTAL RETURNS		3
Oppenheimer Money Fund Sub-Account Yield		3
Other Sub-Account Yields		4
Total Returns		5
Effect of the Contract Maintenance Fee on Performance Data		6
SAFEKEEPING OF ACCOUNT ASSETS		6
STATE REGULATION		6
RECORDS AND REPORTS		6
LEGAL MATTERS		7
INDEPENDENT ACCOUNTANTS		7
OTHER INFORMATION		7
FINANCIAL STATEMENTS		7

APPENDIX A

EXAMPLE OF DEATH BENEFIT CALCULATIONS

Assume an Owner is 55 on the Effective Date, 1/1/yy. The following transactions occur prior to the Owner's death on 7/1(yy+5) when the Contract Value is $185,000. For purposes of this example, also assume that proof of death was provided immediately, and no premium tax is applicable.

Date	Transaction	Amount
1/1/yy	Purchase Payment	$	100,000
4/1/(yy+2)	Partial Surrender	$	25,000
10/1(yy+4)	Purchase Payment	$	80,000

The Contract Values on each Contract Anniversary are shown below. These Contract Values are hypothetical and are solely for the purpose of illustrating death benefit calculations. The Contract Values presented are net of all expenses and charges (except any charge for premium taxes), including Fund expenses and Variable Account expenses and charges. This illustration does not reflect historical investment results, nor does it predict or guarantee future investment results. Actual results may be higher or lower.

Anniversary Date		Contract Value
1/1(yy+1)		$120,000
1/1(yy+2)		$130,000
1/1(yy+3)		$105,000
1/1(yy+4)		$110,000
1/1(yy+5)		$180,000

Standard Death Benefit

Under the Standard Death Benefit, the death benefit payable is the greater of:

(1): Contract Value of $185,000 or,
(2): aggregate Purchase Payments less aggregate surrenders, or $180,000 less $25,000 equals $155,000.

The death benefit payable is then $185,000.

Annual Reset Death Benefit Option

The Annual Reset Death Benefit is equal to the greatest annual reset anniversary value attained, where an annual reset anniversary value equals the Contract Value on the Contract Anniversary plus all subsequent Purchase Payments minus all subsequent amounts surrendered, as shown below.

Anniversary

Anniversary Date		Anniversary Value
1/1/(yy+1)		$120,000 minus $25,000 plus $80,000 equals $175,000
1/1/(yy+2)		$130,000 minus $25,000 plus $80,000 equals $185,000
1/1/(yy+3)		$105,000 plus $80,000 equals $185,000
1/1/(yy+4)		$110,000 plus $80,000 equals $190,000
1/1/(yy+5)		$180,000

The Annual Reset Death Benefit is the greatest annual reset anniversary value attained, or $190,000.

Under the Annual Reset Death Benefit option, the death benefit payable is the greater of:

(1): the Standard Death Benefit of $185,000; or
(2): the Annual Reset Death Benefit of $190,000.

The death benefit payable is then $190,000.

A-1

Compound and 3-Year Reset Death Benefit Option

The Compound Death Benefit is equal to the accumulation to the most recent Contract Anniversary of all prior Purchase Payments less all prior amounts surrendered, using an annual effective interest rate of 4%, plus all Purchase Payments on or since that Contract Anniversary less all amounts surrendered since that Contract Anniversary.

An accumulation interest rate of 3% would have been applicable if the Effective Date of the Contract had been on or after the deceased Owner's 71st birthday.

For ease of understanding, this example assumes an equal number of days in each quarterly period. In practice, the actual number of days in each period will be taken into account.

The Compound Death Benefit is:

Purchase Payment of $100,000 times (1.04 TO THE POWER OF 5) equals $121,665.29;
minus
Surrender of $25,000 times (1.04 TO THE POWER OF 2.75) equals $27,847.21; plus
Purchase Payment of $80,000 times (1.04 TO THE POWER OF 0.25) equals $80,788.27;

equals $174,606.35.

The 3-Year Reset Death Benefit is equal to the greatest 3-year reset anniversary value attained, where a 3-year reset anniversary value equals the Contract Value on that Contract Anniversary plus all subsequent Purchase Payments minus all subsequent amounts surrendered, as shown below.

The only 3-year reset anniversary was on 1/1/(yy+3), where the anniversary value was $105,000 plus $80,000 equals $185,000.

The 3-Year Reset Death Benefit is the greatest 3-year reset anniversary value attained, or $185,000.

Under the Compound and 3-Year Reset Death Benefit option, the death benefit payable is the greatest of:

(1): the standard Death Benefit of $185,000; or
(2): the Compound Death Benefit, of $174,606.35; or
(3): the 3-Year Reset Death Benefit, of $185,000.

The death benefit payable is then $185,000.

A-2

APPENDIX B

EXAMPLE OF SURRENDER CHARGE CALCULATION

Surrender charges are applied to Contract Value surrendered according to the table below:

Number of Full Years Elapsed Between the Date Purchase Payment was Accepted and the Date of Surrender		Surrender Charge Percentage
0		7.0%
1		6.0%
2		6.0%
3		5.0%
4		4.0%
5		3.0%
6		2.0%
7+		0.0%

Assume an initial Purchase Payment of $100,000 is made on the Effective Date, followed 5 years later by a subsequent Purchase Payment of $50,000. On the sixth Contract Anniversary, assume the Contract Value is $175,000.

During the seventh Contract Year, when the Contract Value has increased to $185,000, a partial surrender of $50,000 is requested. On the eighth Contract Anniversary, when the Contract Value is $200,000, a full surrender is requested.

When the partial surrender is requested, 15% of $175,000 equals $26,250 is available free of surrender charges. The remaining surrendered amount of $50,000 less $26,250 equals $23,750 is allocated to the initial Purchase Payment of $100,000. Since 6 full years have elapsed since the initial Purchase Payment, a 2.0% surrender charge percentage will apply and the surrender charge is $23,750 times 2.0% equals $475.

From the $200,000 surrendered, $73,750 represents earnings in the Contract and is free of surrender charges. The remaining $200,000 less $73,750 equals $126,250 is prorated to surrendered Purchase Payments as follows:

• $76,250 is allocated to the initial Purchase Payment

• $50,000 is allocated to the surrendered subsequent Purchase Payment

Since 8 full years have elapsed since the initial Purchase Payment, a 0.0% surrender charge percentage will apply to $76,250.

Since 3 full years have elapsed since the subsequent Purchase Payment, a 5.0% surrender charge percentage will apply to $50,000.

The total surrender charge upon the full surrender is $2,500.

B-1

APPENDIX C

EXPLANATION OF THE VARIABLE ANNUITIZATION CALCULATION

Assuming a Contract Value (less applicable charges and premium taxes) of $100,000 on the Annuity Commencement Date and annual variable income payments selected under Option A with a 5 year certain period, the dollar amount of the payment determined, but not paid, on the Annuity Commencement Date is calculated using an interest assumption of 5%, as shown below.

There are 5 annual payments scheduled. Assuming an interest rate of 5%, the applied Contract Value is then assumed to have a balance of $0 after the last payment is made at the end of the 5th year. The amount of the payment determined on the Annuity Commencement Date is the amount necessary to force this balance to $0.

Date	Interest Earned During Year at 5%		Contract Value Before Payment		Payment Made		Contract Value After Payment
Annuity Commencement Date			$	100,000.00	$	0.00	$	100,000.00
End of 1st year	$	5,000.00	$	105,000.00	$	23,097.48	$	81,902.52
End of 2nd year	$	4,095.13	$	85,997.65	$	23,097.48	$	62,900.17
End of 3rd year	$	3,145.01	$	66,045.17	$	23,097.48	$	42,947.69
End of 4th year	$	2,147.38	$	45,095.08	$	23,097.48	$	21,997.60
End of 5th year	$	1,099.88	$	23,097.48	$	23,097.48	$	0.00

Assuming an interest rate of 5%, a payment of $23,097.48 is determined, but not paid, on the Annuity Commencement Date.

The actual variable income payment made at the end of the 1st year will equal $23,097.48 only if the net investment return during the 1st year equals 5%. If the net investment return exceeds 5%, then the 1st payment will exceed $23,097.48. If the net investment return is less than 5%, then the 1st payment will be less than $23,097.48.

Subsequent variable payments will vary based on the net investment return during the year in which the payment is scheduled to be made. A payment will equal the payment made at the end of the prior year only if the net investment return equals 5%. If the net investment return exceeds 5%, then the payment will exceed the prior payment. If the net investment return is less than 5%, then the payment will be less than the prior payment.

EXPLANATION OF THE COMMUTED VALUE CALCULATION

A Contract may be fully or partially surrendered for a commuted value while variable income payments under Annuity Option A are being made. (See "Annuity Options.") If the Contract is surrendered, the amount payable will be the commuted value of future payments at the assumed interest rate of 5%, which will be equal to the values shown in the column titled "Contract Value after Payment," above. If the Contract is surrendered while variable income payments are being made under Annuity Option A and the early annuitization privilege, the amount payable will be reduced by any applicable surrender charge. (See "Annuity Commencement Date, Early Annuitization .")

C-1

APPENDIX D

EXAMPLE OF EARNINGS ENHANCEMENT DEATH BENEFIT CALCULATION:

Earnings Enhancement Death Benefit

The Earnings Enhancement Death Benefit (EEDB) is an amount we may pay in addition to the death benefit under a Contract. Subject to a cap, the additional amount payable under this benefit will be calculated in accordance with the formula:

A × B = EEDB, where:

A	=	It the oldest Owner is younger than 70 years old on this benefit's effective date, 40%; if the oldest Owner is age 70 or more on that date, 25%.
B	=	During the first 12 months after the effective date of the benefit: the current Contract Value minus the Earnings Benefit Base. Afterwards, the Contract's death benefit minus the Earnings Benefit Base. This amount is capped at 200% of: the net of the Earnings Benefit Base minus any Purchase Payments made within 12 months of the deceased Owner's date of death.
		The Earnings Benefit Base is equal to: the Contract Value on the benefit's effective date, plus any Purchase Payments made afterwards, minus any Purchase Payments withdrawn during that period (including any applicable surrender charges).
		For purposes of calculating the EEDB, withdrawals are applied against earnings in the Contract first, and then against Purchase Payments.

Example:

Assume that the Owner is age 69 on the Effective Date, 1/1/yy. The following hypothetical transactions and consequent valuations occur on a Contract that had a standard death benefit and Earnings Enhancement Death Benefit when it was purchased:

Date	Transaction Type	Transaction Amount	Contract Value	Death Benefit	Earnings Benefit Base	Contract Earnings	EEDB
1/1/yy	Purchase Payment	100,000	100,000	100,000	100,000	—	—
1/1/yy+1	Withdrawal	5,000	85,000	95,000	95,000	—	—
7/1/yy+7	Purchase	10,000	250,000	250,000	105,000	145,000	58,000
	Payment
1/1/yy+8	Withdrawal	15,000	305,000	305,000	105,000	200,000	76,000
1/1/yy+12	Withdrawal	50,000	355,000	355,000	105,000	250,000	84,000

Explanation:

On January 1, yy, an initial Purchase Payment of $100,000 is received. At this point, the death benefit and the Earnings Benefit Base are both equal to the Contract Value on the benefit's effective date ($100,000) and the EEDB is zero. (40% × [$100,000 - $100,000] = 0)

On January 1, yy+1, a withdrawal of $5,000 is taken from the Contract and the Contract shows $10,000 loss in its sub-account investments. The Contract Value after this withdrawal is $85,000, and the death benefit is $95,000. Because the Contract's earnings prior to withdrawal are zero, the entire $5,000 is withdrawn from Purchase Payments and the Earnings Benefit Base is reduced to $95,000. Again, the EEDB is zero. (40% ×[$95,000 - $95,000] = 0)

D-1

On July 1, yy+7 a subsequent Purchase Payment of $10,000 is received. Combined with cumulative Contract earnings of $145,000, this makes the Contract Value, and therefore the death benefit, equal to $250,000. The Earnings Benefit Base also increases to $105,000 as a result of this Purchase Payment. The EEDB equals 40% of earnings, because the cap is higher than this amount. In this case, the EEDB works out to be $58,000 (40% × [$250,000 - $105,000] = $58,000)

On January 1, yy+8, a withdrawal of $15,000 is taken from the Contract. Because the Contract earnings prior to withdrawal are greater than the withdrawal, the entire $15,000 is withdrawn from cumulative earnings of $215,000 leaving a cumulative $200,000 of earnings in the Contract. This makes the Contract Value, and therefore the death benefit, equal to $305,000. The $200,000 in earnings cannot be used to calculate the EEDB, however, because the earnings are in excess of the cap. The cap is 200% of the Earnings Benefit Base minus Purchase Payments received in the prior 12 months. (200% × [$105,000 - $10,000] = $190,000) Because the cap on the EEDB has triggered, the EEDB is equal to $76,000. (40% × $190,000 = $76,000)

On January 1, yy+12, a withdrawal of $50,000 is taken from the Contract. Because the Contract earnings prior to withdrawal are greater than the withdrawal, the entire $50,000 is withdrawn from cumulative earnings of $300,000, leaving a cumulative $250,000 of earnings in the Contract. This makes the Contract Value, and the death benefit, equal to $355,000. The $250,000 in earnings cannot be used to calculate the EEDB, however, because the cap on the earnings that can be applied to this benefit is $210,000. (200% × [$105,000 - $0] = $210,000) Because the cap on the EEDB has triggered, the EEDB is equal to $84,000. (40% × $210,000 =$84,000).

D-2

APPENDIX E

ADDITIONAL ALLOCATION OPTIONS
for Certain Contracts Purchased before May 1, 2002

Owners who purchased or applied to purchase their Contract before May 1, 2002, may allocate Purchase Payments or transfer Contract Value to one or more of the Sub-Accounts identified below in addition to those Sub-Accounts described elsewhere in this prospectus if they meet one or more of the following conditions:

1. As of April 30, 2002, Contract Value was allocated to the Sub-Account;

2. As of April 30, 2002, we had a current allocation instruction from the Owner directing us to allocate amounts to the Sub-Account in the future; or

3. As of April 30, 2002, we had a current dollar cost averaging transfer instruction from the Owner directing us to transfer amounts to the Sub-Account in the future.

The additional Sub-Accounts invest solely in a corresponding Fund of Calvert Variable Series, Inc. and Van Eck Worldwide Insurance Trust. The Funds are:

Calvert Variable Series, Inc. Social Small Cap Growth Portfolio Social Balanced Portfolio		Van Eck Worldwide Insurance Trust Worldwide Hard Assets Fund Worldwide Real Estate Fund

EXPENSES

The Expenses and Examples are intended to assist the owner in understanding the costs and expenses that he or she will bear directly or indirectly. Please refer to "Expenses," on page 4 of this prospectus for information about the Variable Account expenses. Except as otherwise noted, the Expenses and Examples reflect the expenses for the Variable Account and each Fund for the period January 1, 2001 to December 31, 2001. For a more complete description of the various costs and expenses associated with the Contract, see "Charges and Deductions" in this prospectus. For a more complete description of the management fees associated with the Funds, see the prospectus for each of the Funds. The expense information regarding the Funds was provided by those Funds. We have not independently verified this information.

ANNUAL FUND EXPENSE
For the Period ending December 31, 2001
(after reimbursement and as a percentage of average net assets)

	Management (Advisory) Fees		Other Expenses After Reimbursement		Total Annual Fund Expenses (after reimbursements)

Calvert Variable Series, Inc. (1)
Social Small Cap Growth Portfolio	1.00	%	0.39	%	1.39	%
Social Balanced Portfolio	0.70	%	0.18	%	0.88	%
Van Eck Worldwide Insurance Trust (2)
Worldwide Hard Assets Fund	1.00	%	0.15	%	1.15	%
Worldwide Real Estate Fund	1.00	%	0.50	%	1.50	%

(1)		"Other Expenses" reflect an indirect fee. Net fund operating expenses after reductions for fees paid indirectly would be 0.87% for Calvert Social Balanced, and 1.22% for Calvert Social Small Cap Growth.
(2)		Expense ratios are shown after fee waivers and reimbursements by the investment adviser. The expense ratios before the waiver and reimbursements would have been as follows for the Worldwide Hard Assets Fund: "Management Fees" of 1.00%, "Other Expenses" of 0.18% and "Total Expenses" of 1.18%. For the Worldwide Real Estate Fund the expense ratios would have been: "Management Fees" of 1.00%, "Other Expenses" of 0.62% and "Total Expenses" of 1.62%.

E-1

EXAMPLES

At the end of the applicable time period, you would have paid the following expenses on a $1,000 investment, assuming selection of the benefit combination shown and a 5% annual return on assets. The Examples also assumes that no transfer fee or premium taxes have been assessed and that the contract maintenance fee is equivalent to 0.04%.

	Standard Death Benefit without EEDB
	If Contract is Surrendered at End of Applicable Period								If Contract is Not Surrendered at End of Applicable Period
Sub-Account	1 Year		3 Years		5 Years		10 Years		1 Year		3 Years		5 Years		10 Years
Calvert Social Small Cap Growth	$	88	$	138	$	180	$	301	$	27	$	83	$	142	$	301
Calvert Social Balanced		83		123		156		250		22		68		116		250
Van Eck Worldwide Hard Assets		86		131		169		278		25		76		130		278
Van Eck Worldwide Real Estate		89		141		185		312		28		87		147		312

	Optional Benefit Package without EEDB
	If Contract is Surrendered at End of Applicable Period								If Contract is Not Surrendered at End of Applicable Period
Sub-Account	1 Year		3 Years		5 Years		10 Years		1 Year		3 Years		5 Years		10 Years
Calvert Social Small Cap Growth	$	89	$	142	$	187	$	316	$	29	$	88	$	149	$	316
Calvert Social Balanced		85		128		163		266		24		72		124		266
Van Eck Worldwide Hard Assets		87		135		176		292		26		81		138		292
Van Eck Worldwide Real Estate		90		145		192		326		30		91		155		326

	Standard Death Benefit with EEDB
	If Contract is Surrendered at End of Applicable Period								If Contract is Not Surrendered at End of Applicable Period
Sub-Account	1 Year		3 Years		5 Years		10 Years		1 Year		3 Years		5 Years		10 Years
Calvert Social Small Cap Growth	$	90	$	145	$	192	$	325	$	30	$	91	$	154	$	325
Calvert Social Balanced		86		131		168		276		25		75		129		276
Van Eck Worldwide Hard Assets		88		138		181		302		27		84		142		302
Van Eck Worldwide Real Estate		91		148		197		336		31		94		160		336

	Optional Benefit Package with EEDB
	If Contract is Surrendered at End of Applicable Period								If Contract is Not Surrendered at End of Applicable Period
Sub-Account	1 Year		3 Years		5 Years		10 Years		1 Year		3 Years		5 Years		10 Years
Calvert Social Small Cap Growth	$	92	$	149	$	199	$	339	$	31	$	95	$	162	$	339
Calvert Social Balanced		87		135		175		290		26		80		137		290
Van Eck Worldwide Hard Assets		89		142		188		317		29		88		150		317
Van Eck Worldwide Real Estate		93		152		204		349		32		98		167		349

E-2

CONDENSED FINANCIAL INFORMATION
(for Additional Allocation Options)

Sub-Accounts

The date of inception of each of the additional Sub-Accounts is as follows:

July 1, 1997 —		Calvert Social Small Cap Growth Calvert Social Balanced
November 5, 1998 —		Van Eck Worldwide Hard Assets Van Eck Worldwide Real Estate

Accumulation Units

The following tables show, for each additional Sub-Account, Accumulation Unit values and outstanding Accumulation Units for the classes of Accumulation Units available in the Protective Variable Annuity II Contract as of December 31 of each year listed. We offer other variable annuity contracts with classes of Accumulation Units in each Sub-Account that have different mortality and expense risk charges and administration charges than the classes of Accumulation Units offered in the Protective Variable Annuity II Contract. Only the classes of Accumulation Units available in the Protective Variable Annuity II Contract are shown in the following tables. For charges associated with each class of Accumulation Units, see "Annual Variable Account Expenses" on page 4 of this prospectus.

You should read the information in the following tables in conjunction with the Variable Account's financial statements and the related notes in the Statement of Additional Information.

Accumulation Unit Values*
Standard Death Benefit without EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
Calvert
Social Small Cap Growth	—	—	—	—	—	—	12.62	13.76
Social Balanced	—	—	—	—	—	—	13.51	12.42
Van Eck
Worldwide Hard Assets	—	—	—	—	—	—	12.47	11.02
Worldwide Real Estate	—	—	—	—	—	—	11.76	12.23

Accumulation Unit Values*
Optional Benefit Package without EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
Calvert
Social Small Cap Growth	—	—	—	11.04	10.22	12.01	12.61	13.73
Social Balanced	—	—	—	11.14	12.77	14.10	13.50	12.38
Van Eck
Worldwide Hard Assets	—	—	—	—	9.50	11.32	12.45	11.00
Worldwide Real Estate	—	—	—	—	10.39	10.02	11.75	12.20

Accumulation Unit values are rounded to the nearest whole cent.

E-3

Accumulation Unit Values*
Standard Death Benefit with EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
Calvert
Social Small Cap Growth	—	—	—	—	—	—	—	13.73
Social Balanced	—	—	—	—	—	—	—	12.39
Van Eck
Worldwide Hard Assets	—	—	—	—	—	—	—	11.00
Worldwide Real Estate	—	—	—	—	—	—	—	12.21

Accumulation Unit Values*
Optional Benefit Package with EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
Calvert
Social Small Cap Growth	—	—	—	—	—	—	—	13.70
Social Balanced	—	—	—	—	—	—	—	12.36
Van Eck
Worldwide Hard Assets	—	—	—	—	—	—	—	10.97
Worldwide Real Estate	—	—	—	—	—	—	—	12.17

Accumulation Units Outstanding**
Standard Death Benefit without EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
Calvert
Social Small Cap Growth	—	—	—	—	—	—	6,813	16,996
Social Balanced	—	—	—	—	—	—	18,281	38,238
Van Eck
Worldwide Hard Assets	—	—	—	—	—	—	—	9
Worldwide Real Estate	—	—	—	—	—	—	—	2,833

Accumulation Units Outstanding**
Optional Benefit Package without EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
Calvert
Social Small Cap Growth	—	—	—	12,376	53,800	83,449	113,582	133,355
Social Balanced	—	—	—	94,365	481,687	908,525	1,002,497	822,438
Van Eck
Worldwide Hard Assets	—	—	—	—	0	3,459	6,646	18,068
Worldwide Real Estate	—	—	—	—	0	5,743	14,780	55,155

*		Accumulation Unit values are rounded to the nearest whole cent.
**		Accumulation Units are rounded to the nearest whole cent.

E-4

Accumulation Units Outstanding**
Standard Death Benefit with EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
Calvert
Social Small Cap Growth	—	—	—	—	—	—	—	—
Social Balanced	—	—	—	—	—	—	—	615
Van Eck
Worldwide Hard Assets	—	—	—	—	—	—	—	—
Worldwide Real Estate	—	—	—	—	—	—	—	—

Accumulation Units Outstanding**
Optional Benefit Package with EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
Calvert
Social Small Cap Growth	—	—	—	—	—	—	—	—
Social Balanced	—	—	—	—	—	—	—	1,263
Van Eck
Worldwide Hard Assets	—	—	—	—	—	—	—	685
Worldwide Real Estate	—	—	—	—	—	—	—	115

Accumulation Units are rounded to the nearest whole cent.

E-5

The Additional Funds

Calvert Variable Series, Inc.

Social Small Cap Growth Portfolio.

This Fund seeks to provide long-term capital appreciation by investing primarily in equity securities of companies that have small market capitalizations.

Social Balanced Portfolio.

This Fund seeks to achieve a competitive total return through an actively managed portfolio of stocks, bonds, and money market instruments that offer income and capital growth opportunity and that satisfy the investment and social criteria.

Van Eck Worldwide Insurance Trust

Worldwide Hard Assets Fund.

This Fund seeks long-term capital appreciation by investing primarily in "Hard Asset Securities". Hard Asset Securities are the stocks, bonds and other securities of companies that derive at least 50% of gross revenue or profit from the exploration, development, production or distribution of (together "Hard Assets"):

(i): precious metals;
(ii): natural resources;
(iii): real estate; and
(iv): commodities.

Worldwide Real Estate Fund.

This Fund seeks a high total return by investing in equity securities of companies that own significant real estate or that principally do business in real estate.

There is no assurance that the stated objectives and policies of any of the Funds will be achieved. More detailed information concerning the investment objectives, policies and restrictions of the Funds, the expenses of the Funds, the risks attendant to investing in the Funds and other aspects of their operations can be found in the current prospectuses for the Funds and the current Statement of Additional Information for each of the Funds. You should read the Funds' prospectuses carefully before making any decision concerning the allocation of Purchase Payments or transfers among the additional Sub-Accounts.

Refer to "Other Information about the Funds" and "Other Investors in the Funds" in this prospectus for more information about the Funds.

E-6

APPENDIX F

CONDENSED FINANCIAL INFORMATION

Sub-Accounts

The date of inception of each of the Sub-Accounts is as follows:

March 14, 1994 —	PIC International Equity
	PIC Small Cap Value
	PIC CORE ^SM U.S. Equity
	PIC Growth and Income
	PIC Global Income
	Oppenheimer Money Fund
June 13, 1995 —	PIC Capital Growth
July 1, 1997 —	MFS Emerging Growth
	MFS Research
	MFS Investors Trust
	MFS Total Return
	Oppenheimer Aggressive Growth
	Oppenheimer Capital Appreciation
	Oppenheimer Main Street Growth & Income
	Oppenheimer Strategic Bond
November 5, 1998 —	MFS New Discovery
	MFS Utilities
	Oppenheimer Global Securities
	Oppenheimer High Income
May 1, 2000 —	MFS Investors Growth Stock
	Van Kampen Emerging Growth
	Van Kampen Enterprise
	Van Kampen Comstock
	Van Kampen Growth and Income
October 1, 2000 —	Van Kampen Aggressive Growth II
May 1, 2002 —	Lord Abbett Growth and Income
	Lord Abbett Mid-Cap Value
	Lord Abbett Bond-Debenture

Accumulation Units

The following tables show, for each Sub-Account, Accumulation Unit values and outstanding Accumulation Units for the classes of Accumulation Units available in the Protective Variable Annuity II Contract as of December 31 of each year listed. We offer other variable annuity contracts with classes of Accumulation Units in each Sub-Account that have different mortality and expense risk charges and administration charges than the classes of Accumulation Units offered in the Protective Variable Annuity II Contract. Only the classes of Accumulation Units available in the Protective Variable Annuity II Contract are shown in the following tables. For charges associated with each class of Accumulation Units, see "Annual Variable Account Expenses" on page 4 of this prospectus.

You should read the information in the following tables in conjunction with the Variable Account's financial statements and the related notes in the Statement of Additional Information.

Additional Sub-Accounts may be available for certain Contracts purchased before May 1, 2002. Please see Appendix E for more information.

F-1

Accumulation Unit Values*
Standard Death Benefit without EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
PIC
International Equity	—	—	—	—	—	—	17.90	13.68
Small Cap Value	—	—	—	—	—	—	15.58	18.72
Capital Growth	—	—	—	—	—	—	25.38	21.44
CORE ^SM U. S. Equity	—	—	—	—	—	—	27.01	23.76
Growth and Income	—	—	—	—	—	—	18.88	16.88
Global Income	—	—	—	—	—	—	15.12	15.64
Van Kampen
Aggressive Growth II	—	—	—	—	—	—	7.62	4.65
Emerging Growth	—	—	—	—	—	—	7.30	4.94
Enterprise	—	—	—	—	—	—	7.77	6.10
Comstock	—	—	—	—	—	—	13.02	12.54
Growth and Income	—	—	—	—	—	—	11.13	10.35
MFS
New Discovery	—	—	—	—	—	—	19.80	18.57
Emerging Growth	—	—	—	—	—	—	20.78	13.65
Research	—	—	—	—	—	—	15.22	11.84
Investors Growth Stock	—	—	—	—	—	—	8.69	6.51
Investors Trust	—	—	—	—	—	—	14.26	11.84
Utilities	—	—	—	—	—	—	14.52	10.87
Total Return	—	—	—	—	—	—	14.31	14.17
Oppenheimer
Aggressive Growth	—	—	—	—	—	—	19.29	13.09
Global Securities	—	—	—	—	—	—	18.26	15.86
Capital Appreciation	—	—	—	—	—	—	18.88	16.29
Main Street Growth & Income	—	—	—	—	—	—	13.20	11.71
High Income	—	—	—	—	—	—	10.27	10.34
Money Fund	—	—	—	—	—	—	1.27	1.30
Strategic Bond	—	—	—	—	—	—	10.77	11.15
Lord Abbett
Growth and Income	—	—	—	—	—	—	—	—
Mid-Cap Value	—	—	—	—	—	—	—	—
Bond-Debenture	—	—	—	—	—	—	—	—

Accumulation Unit values are rounded to the nearest whole cent.

F-2

Accumulation Unit Values*
Optional Benefit Package without EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
PIC
International Equity	9.48	11.18	13.12	13.51	16.07	21.06	17.88	13.65
Small Cap Value	8.91	9.35	11.09	14.46	12.07	11.91	15.56	18.67
Capital Growth	—	10.36	12.48	16.56	22.00	27.67	25.35	21.38
CORE ^SM U. S. Equity	9.94	13.40	16.12	20.81	25.10	30.40	26.98	23.69
Growth and Income	9.71	12.66	15.83	20.27	19.40	20.24	18.86	16.84
Global Income	9.82	11.32	12.22	13.25	14.42	14.02	15.10	15.60
Van Kampen
Aggressive Growth II	—	—	—	—	—	—	7.62	4.64
Emerging Growth	—	—	—	—	—	—	7.29	4.93
Enterprise	—	—	—	—	—	—	7.76	6.09
Comstock	—	—	—	—	—	—	13.01	12.51
Growth and Income	—	—	—	—	—	—	11.12	10.32
MFS
New Discovery	—	—	—	—	11.97	20.43	19.78	18.52
Emerging Growth	—	—	—	11.36	15.02	26.14	20.76	13.61
Research	—	—	—	10.89	13.24	16.18	15.20	11.81
Investors Growth Stock	—	—	—	—	—	—	8.68	6.49
Investors Trust	—	—	—	11.40	13.75	14.44	14.25	11.81
Utilities	—	—	—	—	10.65	13.72	14.51	10.84
Total Return	—	—	—	11.10	12.29	12.47	14.30	14.13
Oppenheimer
Aggressive Growth	—	—	—	10.97	12.16	21.97	19.26	13.05
Global Securities	—	—	—	—	11.26	17.57	18.24	15.82
Capital Appreciation	—	—	—	11.22	13.72	19.13	18.85	16.25
Main Street Growth & Income	—	—	—	11.83	12.21	14.63	13.19	11.68
High Income	—	—	—	—	10.51	10.79	10.26	10.31
Money Fund	1.02	1.05	1.09	1.13	1.17	1.21	1.27	1.30
Strategic Bond	—	—	—	10.33	10.47	10.61	10.75	11.12
Lord Abbett
Growth and Income	—	—	—	—	—	—	—	—
Mid-Cap Value	—	—	—	—	—	—	—	—
Bond-Debenture	—	—	—	—	—	—	—	—

Accumulation Unit values are rounded to the nearest whole cent.

F-3

Accumulation Unit Values*
Standard Death Benefit with EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
PIC
International Equity	—	—	—	—	—	—	—	13.65
Small Cap Value	—	—	—	—	—	—	—	18.68
Capital Growth	—	—	—	—	—	—	—	21.39
CORE ^SM U. S. Equity	—	—	—	—	—	—	—	23.70
Growth and Income	—	—	—	—	—	—	—	16.84
Global Income	—	—	—	—	—	—	—	15.61
Van Kampen
Aggressive Growth II	—	—	—	—	—	—	—	4.64
Emerging Growth	—	—	—	—	—	—	—	4.93
Enterprise	—	—	—	—	—	—	—	6.09
Comstock	—	—	—	—	—	—	—	12.52
Growth and Income	—	—	—	—	—	—	—	10.33
MFS
New Discovery	—	—	—	—	—	—	—	18.53
Emerging Growth	—	—	—	—	—	—	—	13.62
Research	—	—	—	—	—	—	—	11.81
Investors Growth Stock	—	—	—	—	—	—	—	6.50
Investors Trust	—	—	—	—	—	—	—	11.81
Utilities	—	—	—	—	—	—	—	10.85
Total Return	—	—	—	—	—	—	—	14.14
Oppenheimer
Aggressive Growth	—	—	—	—	—	—	—	13.06
Global Securities	—	—	—	—	—	—	—	15.82
Capital Appreciation	—	—	—	—	—	—	—	16.26
Main Street Growth & Income	—	—	—	—	—	—	—	11.68
High Income	—	—	—	—	—	—	—	10.32
Money Fund	—	—	—	—	—	—	—	1.30
Strategic Bond	—	—	—	—	—	—	—	11.12
Lord Abbett
Growth and Income	—	—	—	—	—	—	—	—
Mid-Cap Value	—	—	—	—	—	—	—	—
Bond-Debenture	—	—	—	—	—	—	—	—

Accumulation Unit values are rounded to the nearest whole cent.

F-4

Accumulation Unit Values*
Optional Benefit Package with EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
PIC
International Equity	—	—	—	—	—	—	—	13.62
Small Cap Value	—	—	—	—	—	—	—	18.63
Capital Growth	—	—	—	—	—	—	—	21.34
CORE ^SM U. S. Equity	—	—	—	—	—	—	—	23.64
Growth and Income	—	—	—	—	—	—	—	16.80
Global Income	—	—	—	—	—	—	—	15.57
Van Kampen
Aggressive Growth II	—	—	—	—	—	—	—	4.63
Emerging Growth	—	—	—	—	—	—	—	4.91
Enterprise	—	—	—	—	—	—	—	6.07
Comstock	—	—	—	—	—	—	—	12.48
Growth and Income	—	—	—	—	—	—	—	10.30
MFS
New Discovery	—	—	—	—	—	—	—	18.48
Emerging Growth	—	—	—	—	—	—	—	13.58
Research	—	—	—	—	—	—	—	11.78
Investors Growth Stock	—	—	—	—	—	—	—	6.48
Investors Trust	—	—	—	—	—	—	—	11.78
Utilities	—	—	—	—	—	—	—	10.82
Total Return	—	—	—	—	—	—	—	14.10
Oppenheimer
Aggressive Growth	—	—	—	—	—	—	—	13.02
Global Securities	—	—	—	—	—	—	—	15.78
Capital Appreciation	—	—	—	—	—	—	—	16.21
Main Street Growth & Income	—	—	—	—	—	—	—	11.65
High Income	—	—	—	—	—	—	—	10.29
Money Fund	—	—	—	—	—	—	—	1.29
Strategic Bond	—	—	—	—	—	—	—	11.09
Lord Abbett
Growth and Income	—	—	—	—	—	—	—	—
Mid-Cap Value	—	—	—	—	—	—	—	—
Bond-Debenture	—	—	—	—	—	—	—	—

Accumulation Unit values are rounded to the nearest whole cent.

F-5

Accumulation Units Outstanding**
Standard Death Benefit without EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
PIC
International Equity	—	—	—	—	—	—	20,319	37,024
Small Cap Value	—	—	—	—	—	—	3,046	14,613
Capital Growth	—	—	—	—	—	—	34,555	75,255
CORE ^SM U. S. Equity	—	—	—	—	—	—	32,063	74,274
Growth and Income	—	—	—	—	—	—	27,902	62,482
Global Income	—	—	—	—	—	—	5,634	24,077
Van Kampen
Aggressive Growth II	—	—	—	—	—	—	3,385	48,320
Emerging Growth	—	—	—	—	—	—	151,480	486,834
Enterprise	—	—	—	—	—	—	124,873	363,295
Comstock	—	—	—	—	—	—	83,971	317,634
Growth and Income	—	—	—	—	—	—	104,687	354,821
MFS
New Discovery	—	—	—	—	—	—	12,152	19,584
Emerging Growth	—	—	—	—	—	—	13,419	34,782
Research	—	—	—	—	—	—	31,672	87,514
Investors Growth Stock	—	—	—	—	—	—	37,663	142,472
Investors Trust	—	—	—	—	—	—	60,794	166,826
Utilities	—	—	—	—	—	—	18,004	59,443
Total Return	—	—	—	—	—	—	21,098	104,938
Oppenheimer
Aggressive Growth	—	—	—	—	—	—	20,434	32,139
Global Securities	—	—	—	—	—	—	18,404	45,011
Capital Appreciation	—	—	—	—	—	—	41,363	105,923
Main Street Growth & Income	—	—	—	—	—	—	81,257	213,601
High Income	—	—	—	—	—	—	7,523	26,941
Money Fund	—	—	—	—	—	—	85,730	431,932
Strategic Bond	—	—	—	—	—	—	18,434	66,723
Lord Abbett
Growth and Income	—	—	—	—	—	—	—	—
Mid-Cap Value	—	—	—	—	—	—	—	—
Bond-Debenture	—	—	—	—	—	—	—	—

Accumulation Units are rounded to the nearest unit.

F-6

Accumulation Units Outstanding**
Optional Benefit Package without EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
PIC
International Equity	2,588,605	4,954,564	7,363,767	9,722,696	10,798,391	10,449,270	9,951,471	7,941,172
Small Cap Value	2,347,968	4,579,808	5,797,119	7,429,530	8,201,197	6,671,154	5,558,766	4,939,011
Capital Growth	—	930,249	2,419,601	4,493,710	6,926,984	9,304,240	9,490,574	8,045,942
CORE ^SM U. S. Equity	1,682,927	4,128,798	6,300,382	8,495,067	10,415,387	11,889,192	11,358,606	9,740,951
Growth and Income	4,260,743	10,012,351	13,291,398	17,539,696	19,909,590	16,852,150	13,775,704	11,356,707
Global Income	1,457,712	2,438,238	3,081,317	3,677,919	4,330,727	4,417,091	3,895,619	3,416,464
Van Kampen
Aggressive Growth II	—	—	—	—	—	—	35,328	217,831
Emerging Growth	—	—	—	—	—	—	2,624,094	5,026,914
Enterprise	—	—	—	—	—	—	1,365,309	3,098,090
Comstock	—	—	—	—	—	—	770,357	3,857,912
Growth and Income	—	—	—	—	—	—	1,072,397	4,708,671
MFS
New Discovery	—	—	—	—	0	119,735	556,357	592,137
Emerging Growth	—	—	—	292,318	1,102,153	2,417,374	3,152,340	2,637,417
Research	—	—	—	577,212	1,987,679	3,724,827	4,780,858	4,372,647
Investors Growth Stock	—	—	—	—	—	—	512,272	1,468,634
Investors Trust	—	—	—	234,240	1,409,735	4,336,388	5,157,196	5,313,155
Utilities	—	—	—	—	0	142,311	623,345	950,939
Total Return	—	—	—	157,430	1,060,293	2,530,284	2,996,679	4,102,590
Oppenheimer
Aggressive Growth	—	—	—	238,172	931,993	1,430,515	2,303,048	1,952,500
Global Securities	—	—	—	—	0	255,811	1,135,818	1,381,578
Capital Appreciation	—	—	—	321,669	1,167,782	2,744,570	4,288,750	4,235,334
Main Street Growth & Income	—	—	—	247,774	1,644,982	3,650,951	5,419,206	5,952,189
High Income	—	—	—	—	0	74,135	257,115	516,852
Money Fund	3,034,056	4,273,270	5,577,080	3,151,349	4,526,291	10,833,442	11,194,895	18,537,802
Strategic Bond	—	—	—	284,169	1,524,677	2,478,990	2,641,573	2,916,350
Lord Abbett
Growth and Income	—	—	—	—	—	—	—	—
Mid-Cap Value	—	—	—	—	—	—	—	—
Bond-Debenture	—	—	—	—	—	—	—	—

Accumulation Units are rounded to the nearest unit.

F-7

Accumulation Units Outstanding**
Standard Death Benefit with EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
PIC
International Equity	—	—	—	—	—	—	—	393
Small Cap Value	—	—	—	—	—	—	—	—
Capital Growth	—	—	—	—	—	—	—	129
CORE ^SM U. S. Equity	—	—	—	—	—	—	—	1,003
Growth and Income	—	—	—	—	—	—	—	379
Global Income	—	—	—	—	—	—	—	11
Van Kampen
Aggressive Growth II	—	—	—	—	—	—	—	890
Emerging Growth	—	—	—	—	—	—	—	12,158
Enterprise	—	—	—	—	—	—	—	5,078
Comstock	—	—	—	—	—	—	—	6,836
Growth and Income	—	—	—	—	—	—	—	8,294
MFS
New Discovery	—	—	—	—	—	—	—	37
Emerging Growth	—	—	—	—	—	—	—	15
Research	—	—	—	—	—	—	—	392
Investors Growth Stock	—	—	—	—	—	—	—	3,755
Investors Trust	—	—	—	—	—	—	—	1,253
Utilities	—	—	—	—	—	—	—	349
Total Return	—	—	—	—	—	—	—	1,808
Oppenheimer
Aggressive Growth	—	—	—	—	—	—	—	16
Global Securities	—	—	—	—	—	—	—	997
Capital Appreciation	—	—	—	—	—	—	—	2,467
Main Street Growth & Income	—	—	—	—	—	—	—	3,062
High Income	—	—	—	—	—	—	—	1,870
Money Fund	—	—	—	—	—	—	—	—
Strategic Bond	—	—	—	—	—	—	—	266
Lord Abbett
Growth and Income	—	—	—	—	—	—	—	—
Mid-Cap Value	—	—	—	—	—	—	—	—
Bond-Debenture	—	—	—	—	—	—	—	—

Accumulation Units are rounded to the nearest unit.

F-8

Accumulation Units Outstanding**
Optional Benefit Package with EEDB

Sub-Account	1994	1995	1996	1997	1998	1999	2000	2001
PIC
International Equity	—	—	—	—	—	—	—	1,958
Small Cap Value	—	—	—	—	—	—	—	2,958
Capital Growth	—	—	—	—	—	—	—	11,151
CORE ^SM U. S. Equity	—	—	—	—	—	—	—	12,278
Growth and Income	—	—	—	—	—	—	—	9,672
Global Income	—	—	—	—	—	—	—	4,390
Van Kampen
Aggressive Growth II	—	—	—	—	—	—	—	15,263
Emerging Growth	—	—	—	—	—	—	—	151,585
Enterprise	—	—	—	—	—	—	—	81,191
Comstock	—	—	—	—	—	—	—	122,188
Growth and Income	—	—	—	—	—	—	—	138,633
MFS
New Discovery	—	—	—	—	—	—	—	2,488
Emerging Growth	—	—	—	—	—	—	—	3,842
Research	—	—	—	—	—	—	—	12,754
Investors Growth Stock	—	—	—	—	—	—	—	16,974
Investors Trust	—	—	—	—	—	—	—	26,722
Utilities	—	—	—	—	—	—	—	5,833
Total Return	—	—	—	—	—	—	—	47,261
Oppenheimer
Aggressive Growth	—	—	—	—	—	—	—	2,103
Global Securities	—	—	—	—	—	—	—	13,074
Capital Appreciation	—	—	—	—	—	—	—	21,620
Main Street Growth & Income	—	—	—	—	—	—	—	29,317
High Income	—	—	—	—	—	—	—	9,105
Money Fund	—	—	—	—	—	—	—	51,427
Strategic Bond	—	—	—	—	—	—	—	10,921
Lord Abbett
Growth and Income	—	—	—	—	—	—	—	—
Mid-Cap Value	—	—	—	—	—	—	—	—
Bond-Debenture	—	—	—	—	—	—	—	—

Accumulation Units are rounded to the nearest unit.

F-9

Please tear off, complete and return this form to order a free Statement of Additional Information for the Contracts offered under the prospectus. Address the form to Protective Life's Investment Products Division, customer service center at the address shown on the cover.

Please send me a free copy of the Statement of Additional Information for the Protective Variable Annuity II.


Name



Address



City, State, Zip



Daytime Telephone Number

PART B

INFORMATION REQUIRED TO BE IN
THE STATEMENT OF ADDITIONAL INFORMATION

PROTECTIVE LIFE INSURANCE COMPANY
P.O. Box 10648
Birmingham, Alabama 35202-0648
Telephone: 1-800-456-6330

STATEMENT OF ADDITIONAL INFORMATION
PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
PROTECTIVE VARIABLE ANNUITY II
A FLEXIBLE PREMIUM
DEFERRED VARIABLE AND FIXED ANNUITY CONTRACT

This Statement of Additional Information contains information in addition to the information described in the Prospectus for the Protective Variable Annuity II, a group and individual flexible premium deferred variable and fixed annuity contract (the "Contract") offered by Protective Life Insurance Company. This Statement of Additional Information is not a Prospectus. It should be read only in conjunction with the Prospectuses for the Contract and the Funds. The Prospectus for the Contract is dated the same as this Statement of Additional Information. You may obtain a copy of the Prospectus by writing or calling us at our address or phone number shown above.

THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS MAY 1, 2002.

STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS

		Page
CALCULATION OF YIELDS AND TOTAL RETURNS		3
Oppenheimer Money Fund Sub-Account Yield		3
Other Sub-Account Yields		4
Total Returns		5
Effect of the Contract Maintenance Fee on Performance Data		6
SAFEKEEPING OF ACCOUNT ASSETS		6
STATE REGULATION		6
RECORDS AND REPORTS		6
LEGAL MATTERS		7
INDEPENDENT ACCOUNTANTS		7
OTHER INFORMATION		7
FINANCIAL STATEMENTS		7

CALCULATION OF YIELDS AND TOTAL RETURNS

From time to time, Protective Life may disclose yields, total returns, and other performance data pertaining to the Contracts for a Sub-Account. Such performance data will be computed or accompanied by performance data computed, in accordance with the standards defined by the Securities and Exchange Commission ("SEC").

Because of the charges and deductions imposed under a Contract, yields for the Sub-Accounts will be lower than the yields for their respective Funds. The calculations of yields, total returns, and other performance data do not reflect the effect of premium tax that may be applicable to a particular Contract. Premium taxes currently range from 0% to 3.50% of premium based on the state in which the Contract is sold.

Oppenheimer Money Fund Sub-Account Yield

From time to time, advertisements and sales literature may quote the current annualized yield of the Oppenheimer Money Fund Sub-Account for a seven-day period in a manner which does not take into consideration any realized or unrealized gain, or losses on shares of the Oppenheimer Variable Account Funds Money Fund or on its portfolio securities.

This current annualized yield is computed by determining the net change (exclusive of realized gains and losses on the sale of securities and unrealized appreciation and depreciation) at the end of the seven day period in value of a hypothetical account under a Contract having a balance of 1 Accumulation Unit of the Oppenheimer Money Fund Sub-Account at the beginning of the period, dividing such net change in account value by the value of the hypothetical account at the beginning of the period to determine the base period return, and annualizing this quotient on a 365-day basis. The net change in account value reflects: 1) net income from the Oppenheimer Variable Account Funds Money Fund attributable to the hypothetical account; and 2) charges and deductions imposed under the Contract attributable to the hypothetical account. The charges and deductions reflect the per unit charges for the hypothetical account for: 1) the Annual Contract Maintenance Fee; 2) Administration Charge; and 3) the Mortality and Expense Risk Charge. For purposes of calculating current yields for a Contract, an average per unit Contract Maintenance Fee is used based on the $30 Contract Maintenance Fee deducted at the end of each Contract Year. Current Yield will be calculated according to the following formula:

Current Yield = ((NCS-ES)/UV) × (365/7)

Where:

NCS		the net change in the value of the Fund (exclusive of unrealized gains or losses on the sale of securities and unrealized appreciation and depreciation) for the seven-day period attributable to a hypothetical Account having a balance of 1 Sub-Account Accumulation Unit.
ES		per Accumulation Unit expenses attributable to the hypothetical account for the seven-day period.
UV		The Accumulation Unit value as of the end of the last day of the prior seven-day period.

The effective yield of the Oppenheimer Money Fund Sub-Account determined on a compounded basis for the same seven-day period may also be quoted.

The effective yield is calculated by compounding the unannualized base period return according to the following formula:

Effective Yield = (1+((NCS-ES)/UV)) ^365/7 - 1

Where:

NCS		the net change in the value of the portfolio (exclusive of realized gains and losses on the sale of securities and unrealized appreciation and depreciation) for the seven-day period attributable to a hypothetical account having a balance of 1 Sub-Account Accumulation Unit.
ES		per Accumulation Unit expenses attributable to the hypothetical account for the seven-day period.
UV		the Accumulation Unit value as of the end of the last day of the prior seven-day period.

Because of the charges and deductions imposed under the Contract, the current and effective yields for the Oppenheimer Money Fund Sub-Account will be lower than such yields for the Oppenheimer Variable Account Funds Money Fund.

The current and effective yields on amounts held in the Oppenheimer Money Fund Sub-Account normally will fluctuate on a daily basis. Therefore, the disclosed yield for any given past period is not an indication or representation of future yields or rates of return. The Oppenheimer Money Fund Sub-Account's actual yield is affected by changes in interest rates on money market securities, average portfolio maturity of the Oppenheimer Variable Account Funds Money Fund, the types of quality of portfolio securities held by the Oppenheimer Variable Account Funds Money Fund and the Oppenheimer Variable Account Funds Money Fund's operating expenses. Yields on amounts held in the Oppenheimer Money Fund Sub-Account may also be presented for periods other than a seven day period.

Other Sub-Account Yields

From time to time, sales literature or advertisements may quote the current annualized yield of one or more of the Sub-Accounts (except the Oppenheimer Money Fund Sub-Account) for a Contract for 30-day or one-month periods. The annualized yield of a Sub-Account refers to income generated by the Sub-Account over a specific 30 day or one month period. Because the yield is annualized, the yield generated by a Sub-Account during a 30-day or one-month period is assumed to be generated each period over a 12-month period.

The yield is computed by: 1) dividing the net investment income of the Fund attributable to the Sub-Account Accumulation Units less Sub-Account expenses for the period; by 2) the maximum offering price per Accumulation Unit on the last day of the period times the daily average number of units outstanding for the period; by 3) compounding that yield for a six-month period; and by 4) multiplying that result by 2. Expenses attributable to the Sub-Account include the Annual Contract Maintenance Fee, the Administration Charge and the Mortality and Expense Risk Charge. The yield calculation assumes a Contract Maintenance Fee of $30 per year per Contract deducted at the end of each Contract Year. For purposes of calculating the 31-day or one-month yield, an average administration fee per dollar of Contract value in the Variable Account is used to determine the amount of the charge attributable to the Sub-Account for the 30-day or one-month period. The 30 day or one month yield is calculated according to the following formula:

Yield = 2 × [(((NI-ES)/ (U × UV))+1) ⁶ - 1]

Where:

NI		net income of the Fund for the 30 day or one month period attributable to the Sub-Account Accumulation Units.
ES		expenses of the Sub-Account for the 30 day or one month period.
U		the average number of Accumulation Units outstanding.
UV		the Accumulation Unit value as of the end of the last day in the 30 day or one month period.

Because of the charges and deductions imposed under the Contracts, the yield for the Sub-Account will be lower than the yield for the corresponding Fund.

The yield on the amounts held in the Sub-Accounts normally will fluctuate over time. Therefore, the disclosed yield for any given past period is not an indication or representation of future yields or rates of return. The Sub-Account's actual yield is affected by the types and quality of portfolio securities held by the corresponding Fund and its operating expenses.

Yield calculations do not take into account the surrender charge under the Contract equal to 2% to 7% of Purchase Payments during the seven years prior to the surrender (including the year in which the surrender is made) on amounts surrendered.

Total Returns

From time to time, sales literature or advertisements may also quote total returns for one or more of the Sub-Accounts for various periods of time.

Until a Sub-Account has been in operation for 10 years, Protective Life will always include quotes of standard average annual total return for the period measured from the date that Sub-Account began operations. When a Sub-Account has been in operation for 1, 5, and 10 years, respectively, the standard average annual total return for these periods will be provided. Average annual total returns for other periods of time may, from time to time, also be disclosed.

Average annual total returns represent the average annual compounded rates of return that would equate an initial investment of $1,000 under a Contract to the redemption value of that investment as of the last day of each of the periods. The ending date of each period for which total return quotations are provided will generally be for the most recent month-end practicable considering the type and media of the communication and will be stated in the communication.

All average annual total returns will be calculated using Sub-Account unit values computed on each Valuation Day based on the performance of the Sub-Account's underlying Fund, the deductions for the mortality and expense risk charge and the administration charge.

The standard average annual total return calculation assumes that the contract maintenance fee is $30 per year per contract, expressed as a percentage of the average Contract Value. For any period less than seven years, the standard average annual total return will also reflect the deduction of a surrender charge. The standard average annual total return will be calculated according to the following formula:

TR = (ERV/P) ^1/N - 1

Where:

TR	=	the average annual total return net of Sub-Account recurring charges.
ERV	=	the ending redeemable value (net of any applicable charges) of the hypothetical account at the end of the period.
P	=	a hypothetical single Purchase Payment of $1,000.
N	=	the number of years in the period.

In addition to standard average annual total returns, sales literature or advertisements may from time to time also quote nonstandard average annual total returns that do not reflect the contract maintenance fee or the surrender charge. These nonstandard average annual total returns are calculated in exactly the same way as standard average annual total returns described above, except that the ending redeemable value of the hypothetical account for the period is replaced with an ending value for the period that does not take into account the contract maintenance fee or the deduction of a surrender charge.

Protective Life may also disclose cumulative total returns in conjunction with the formats described above. The cumulative total returns will be calculated using the following formula:

CTR = (EV/P) - 1

Where:

CTR	=	The cumulative total return net of Sub-Account recurring charges for the period.
EV	=	The ending value of the hypothetical investment at the end of the period that does not take into account the contract maintenance fee or the surrender charge.
P	=	A hypothetical single Purchase Payment of $1,000.

Effect of the Contract Maintenance Fee on Performance Data

The Contract provides for a $30 annual contract maintenance fee to be deducted at the end of each Contract Year from the Sub-Accounts based on the proportion that the value of each such Sub-Account bears to the total Contract Value. For purposes of reflecting the contract maintenance fee in yield and total return quotations, the annual charge is converted into a per-dollar per-day charge based on the average Variable Account Value of all Contracts on the last day of the period for which quotations are provided. The per-dollar per-day average charge is then adjusted to reflect the basis upon which the particular quotation is calculated.

SAFEKEEPING OF ACCOUNT ASSETS

Title to the assets of the Variable Account is held by Protective Life. The assets are kept physically segregated and held separate and apart from the Company's General Account assets and from the assets in any other separate account.

Records are maintained of all purchases and redemptions of Fund shares held by each of the Sub-Accounts.

The officers and employees of Protective Life are covered by an insurance company blanket bond issued in the amount of $20 million dollars. The bond insures against dishonest and fraudulent acts of officers and employees.

STATE REGULATION

Protective Life is subject to regulation and supervision by the Department of Insurance of the State of Tennessee which periodically examines its affairs. It is also subject to the insurance laws and regulations of all jurisdictions where it is authorized to do business. Where required, a copy of the Contract form has been filed with, and, if applicable, approved by, insurance officials in each jurisdiction where the Contracts are sold. Protective Life is required to submit annual statements of its operations, including financial statements, to the insurance departments of the various jurisdictions in which it does business for the purposes of determining solvency and compliance with local insurance laws and regulations.

RECORDS AND REPORTS

Protective Life will maintain all records and accounts relating to the Variable Account. As presently required by the 1940 Act and regulations promulgated thereunder, reports containing such information as may be required under the Act or by any other applicable law or regulation will be sent to Owner(s) periodically at the last known address.

LEGAL MATTERS

Sutherland, Asbill & Brennan LLP of Washington, D. C. has provided advice on certain matters relating to the federal securities laws.

INDEPENDENT ACCOUNTANTS

The statement of assets and liabilities of The Protective Variable Annuity Separate Account as of December 31, 2001 and 2000 and the related statements of operations and changes in net assets for the years then ended and the consolidated balance sheets of Protective Life as of December 31, 2001 and 2000 and the related consolidated statements of income, share-owner's equity and cash flows for each of the three years ended December 31, 2001 and the related financial statement schedules included in this Statement of Additional Information and in the registration statement have been so included herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in accounting and auditing.

OTHER INFORMATION

A registration statement has been filed with the SEC under the Securities Act of 1933 as amended, with respect to the Contracts discussed in this Statement of Additional Information. Not all the information set forth in the registration statement, amendments and exhibits thereto has been included in this Statement of Additional Information. Statements contained in this Statement of Additional Information concerning the content of the Contracts and other legal instruments are intended to be summaries. For a complete statement of the terms of these documents, reference should be made to the instruments filed with the SEC at 450 Fifth Street, N. W., Washington, D.C. 20549.

FINANCIAL STATEMENTS

The audited statement of assets and liabilities of The Protective Variable Annuity Separate Account as of December 31, 2001 and 2000 and the related statements of operations and changes in net assets for the years then ended as well as the Report of Independent Accountants are contained herein.

The audited consolidated balance sheets for Protective Life as of December 31, 2001 and 2000 and the related consolidated statements of income, share-owner's equity, and cash flows for each of the three years in the period ended December 31, 2001 as well as the Report of Independent Accountants are contained herein.

Financial Statements follow this page.

INDEX TO FINANCIAL STATEMENTS

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
Report of Independent Accountants		F-2
Statement of Assets and Liabilities as of December 31, 2001		F-3
Statement of Assets and Liabilities as of December 31, 2000		F-8
Statement of Operations for the year ended December 31, 2001		F-13
Statement of Operations for the year ended December 31, 2000		F-18
Statement of Changes in Net Assets for the year ended December 31, 2001		F-23
Statement of Changes in Net Assets for the year ended December 31, 2000		F-28
Notes to Financial Statements		F-33
PROTECTIVE LIFE INSURANCE COMPANY
Report of Independent Accountants		F-43
Consolidated Statements of Income for the years ended December 31, 2001, 2000, and 1999		F-44
Consolidated Balance Sheets as of December 31, 2001 and 2000		F-45
Consolidated Statements of Share-Owner's Equity for the years ended December 31, 2001, 2000, and 1999		F-46
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000, and 1999		F-47
Notes to Consolidated Financial Statements		F-48
Financial Statement Schedules:
Schedule III — Supplementary Insurance Information		S-1
Schedule IV — Reinsurance		S-2

All other schedules to the financial statements required by Article 7 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted.

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Contract Owners and Board of Directors
of Protective Life Insurance Company

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and changes in net assets present fairly, in all material respects, the financial position of The Protective Variable Annuity Separate Account, consisting of PIC Growth and Income, PIC International Equity, PIC Global Income, PIC Small Cap Value, PIC Core US Equity, PIC Capital Growth, Calvert Social Small Cap Growth, Calvert Social Balanced, MFS Emerging Growth, MFS Research, MFS Investors Trust, MFS Total Return, MFS New Discovery, MFS Utilities, MFS Investors Growth Stock, Oppenheimer Aggressive Growth, Oppenheimer Capital Appreciation, Oppenheimer Main Street Growth and Income, Oppenheimer Money Fund, Oppenheimer Strategic Bond, Oppenheimer Global Securities, Oppenheimer High Income, Van Eck Hard Asset, Van Eck Real Estate, Van Kampen Emerging Growth, Van Kampen Enterprise, Van Kampen Comstock, Van Kampen Growth and Income, Van Kampen Strategic Stock, Van Kampen Asset Allocation, Van Kampen Aggressive Growth and Goldman Sachs Internet Tollkeeper sub-accounts, at December 31, 2001 and 2000, and the results of its operations and changes in net assets for the years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2001 and 2000 by correspondence with the custodians and brokers, provide a reasonable basis for our opinion.

April 2, 2002

F-2

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2001
(In Thousands)

	PIC Growth and Income		PIC International Equity		PIC Global Income		PIC Small Cap Value		PIC CORE US Equity		PIC Capital Growth		Calvert Social Small Cap Growth
Assets
Investment in sub-accounts at market value	$	196,572	$	111,688	$	56,473	$	94,401	$	242,466	$	181,485	$	2,404
Receivable from Protective Life Insurance Company		0		0		0		0		0		0		0

Total assets-	$	196,572	$	111,688	$	56,473	$	94,401	$	242,466	$	181,485	$	2,404

The accompanying notes are an integral part of these financial statements.

F-3

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES, CONTINUED

December 31, 2001
(In Thousands)

	Calvert Social Balanced		MFS Emerging Growth		MFS Research		MFS Investors Trust		MFS Total Return		MFS New Discovery		MFS Utilities
Assets
Investment in sub-accounts at market value	$	11,448	$	41,054	$	57,592	$	73,551	$	67,779	$	13,817	$	13,873
Receivable from Protective Life Insurance Company		0		7		0		0		0		0		0

Total assets-	$	11,448	$	41,061	$	57,592	$	73,551	$	67,779	$	13,817	$	13,873

The accompanying notes are an integral part of these financial statements.

F-4

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES, CONTINUED

December 31, 2001
(In Thousands)

	MFS Investors Growth Stock		Oppenheimer Aggressive Growth		Oppenheimer Capital Appreciation		Oppenheimer Main St Growth and Income		Oppenheimer Money Fund		Oppenheimer Strategic Bond		Oppenheimer Global Securities
Assets
Investment in sub-accounts at market value	$	13,215	$	28,586	$	79,599	$	82,075	$	27,028	$	36,915	$	27,076
Receivable from Protective Life Insurance Company		0		0		0		0		0		0		0

Total assets-	$	13,215	$	28,586	$	79,599	$	82,075	$	27,028	$	36,915	$	27,076

The accompanying notes are an integral part of these financial statements.

F-5

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES, CONTINUED

December 31, 2001
(In Thousands)

	Oppenheimer High Income		Van Eck Hard Asset		Van Eck Real Estate		Van Kampen Emerging Growth		Van Kampen Enterprise		Van Kampen Comstock		Van Kampen Growth and Income
Assets
Investment in sub-accounts at market value	$	7,045	$	384	$	1,015	$	34,140	$	26,312	$	65,219	$	65,450
Receivable from Protective Life Insurance Company		0		0		0		1		0		1		1

Total assets-	$	7,045	$	384	$	1,015	$	34,141	$	26,312	$	65,220	$	65,451

The accompanying notes are an integral part of these financial statements.

F-6

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES, CONTINUED

December 31, 2001
(In Thousands)

	Van Kampen Strategic Stock		Van Kampen Asset Allocation		Van Kampen Aggressive Growth		Goldman Sachs Internet Tollkeeper		Total
Assets
Investment in sub-accounts at market value	$	3,339	$	7,387	$	1,700	$	352	$	1,671,440
Receivable from Protective Life Insurance Company		0		0		1		0		11

Total assets-	$	3,339	$	7,387	$	1,701	$	352	$	1,671,451

The accompanying notes are an integral part of these financial statements.

F-7

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2000
(In Thousands)

	PIC Growth and Income		PIC International Equity		PIC Global Income		PIC Small Cap Value		PIC CORE US Equity		PIC Capital Growth		Calvert Social Small Cap Growth
Assets
Investment in sub-accounts at market value	$	262,668	$	181,380	$	60,328	$	87,763	$	315,922	$	248,261	$	1,738
Receivable from Protective Life Insurance Corporation		0		0		0		0		0		0		0

Total assets-	$	262,668	$	181,380	$	60,328	$	87,763	$	315,922	$	248,261	$	1,738

The accompanying notes are an integral part of these financial statements.

F-8

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES, CONTINUED

December 31, 2000
(In Thousands)

	Calvert Social Balanced		MFS Emerging Growth		MFS Research		MFS Investors Trust		MFS Total Return		MFS New Discovery		MFS Utilities
Assets
Investment in sub-accounts at market value	$	14,336	$	71,859	$	77,328	$	80,631	$	45,359	$	13,894	$	12,576
Receivable from Protective Life Insurance Corporation		0		0		0		0		0		0		0

Total assets-	$	14,336	$	71,859	$	77,328	$	80,631	$	45,359	$	13,894	$	12,576

The accompanying notes are an integral part of these financial statements.

F-9

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES, CONTINUED

December 31, 2000
(In Thousands)

	MFS Investors Growth Stock		Oppenheimer Aggressive Growth		Oppenheimer Capital Appreciation		Oppenheimer Main St Growth and Income		Oppenheimer Money Fund		Oppenheimer Strategic Bond		Oppenheimer Global Securities
Assets
Investment in sub-accounts at market value	$	5,870	$	48,211	$	87,958	$	79,205	$	14,894	$	30,068	$	25,002
Receivable from Protective Life Insurance Corporation		0		0		0		0		0		0		0

Total assets-	$	5,870	$	48,211	$	87,958	$	79,205	$	14,894	$	30,068	$	25,002

The accompanying notes are an integral part of these financial statements.

F-10

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES, CONTINUED

December 31, 2000
(In Thousands)

	Oppenheimer High Income		Van Eck Hard Asset		Van Eck Real Estate		Van Kampen Emerging Growth		Van Kampen Enterprise		Van Kampen Comstock		Van Kampen Growth and Income
Assets
Investment in sub-accounts at market value	$	3,178	$	295	$	332	$	21,971	$	12,634	$	12,270	$	14,541
Receivable from Protective Life Insurance Corporation		0		0		0		0		0		0		0

Total assets-	$	3,178	$	295	$	332	$	21,971	$	12,634	$	12,270	$	14,541

The accompanying notes are an integral part of these financial statements.

F-11

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF ASSETS AND LIABILITIES, CONTINUED

December 31, 2000
(In Thousands)

	Van Kampen Strategic Stock		Van Kampen Asset Allocation		Van Kampen Aggressive Growth		Goldman Sachs Internet Tollkeeper		Total
Assets
Investment in sub-accounts at market value	$	1,499	$	1,531	$	340	$	73	$	1,833,915
Receivable from Protective Life Insurance Corporation		0		0		0		0		0

Total assets-	$	1,499	$	1,531	$	340	$	73	$	1,833,915

The accompanying notes are an integral part of these financial statements.

F-12

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF OPERATIONS

For the Year Ended December 31, 2001
(In Thousands)

	PIC Growth and Income			PIC International Equity			PIC Global Income			PIC Small Cap Value			PIC CORE US Equity			PIC Capital Growth			Calvert Social Small Cap Growth
Investment income
Dividends	$	1,237		$	915		$	4,911		$	853		$	2,385		$	633		$	0

Expense
Mortality and expense risk and administrative charges		3,088			1,958			833			1,281			3,823			2,932			28

Net investment income (loss)		(1,851	)		(1,043	)		4,078			(428	)		(1,438	)		(2,299	)		(28	)

Net realized and unrealized gains (losses) on investments
Net realized gain (loss) from redemption of investment shares		(19,086	)		(5,619	)		257			904			(6,270	)		(5,190	)		(10	)
Capital gain distribution		0			18,692			0			0			35,994			22,207			31

Net realized gain (loss) on investments		(19,086	)		13,073			257			904			29,724			17,017			21
Net unrealized appreciation (depreciation) on investments during the period		(6,374	)		(52,480	)		(2,383	)		15,894			(66,095	)		(52,839	)		184

Net realized and unrealized gain (loss) on investments		(25,460	)		(39,407	)		(2,126	)		16,798			(36,371	)		(35,822	)		205

Net increase (decrease) in net assets resulting from operations-	$	(27,311	)	$	(40,450	)	$	1,952		$	16,370		$	(37,809	)	$	(38,121	)	$	177

The accompanying notes are an integral part of these financial statements.

F-13

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED

For the Year Ended December 31, 2001
(In Thousands)

	Calvert Social Balanced			MFS Emerging Growth			MFS Research			MFS Investors Trust			MFS Total Return			MFS New Discovery			MFS Utilities
Investment income
Dividends	$	433		$	0		$	9		$	380		$	1,120		$	0		$	460

Expense
Mortality and expense risk and administrative charges		178			708			912			1,061			788			189			203

Net investment income (loss)		255			(708	)		(903	)		(681	)		332			(189	)		257

Net realized and unrealized gains (losses) on investments
Net realized gain (loss) from redemption of investment shares		(409	)		(7,186	)		(1,667	)		(990	)		(21	)		(158	)		(170	)
Capital gain distribution		211			3,392			8,708			1,953			1,653			433			1,206

Net realized gain (loss) on investments		(198	)		(3,794	)		7,041			963			1,632			275			1,036
Net unrealized appreciation (depreciation) on investments during the period		(1,198	)		(20,433	)		(23,712	)		(15,029	)		(2,368	)		(1,056	)		(5,566	)

Net realized and unrealized gain (loss) on investments		(1,396	)		(24,227	)		(16,671	)		(14,066	)		(736	)		(781	)		(4,530	)

Net increase (decrease) in net assets resulting from operations-	$	(1,141	)	$	(24,935	)	$	(17,574	)	$	(14,747	)	$	(404	)	$	(970	)	$	(4,273	)

The accompanying notes are an integral part of these financial statements.

F-14

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED

For the Year Ended December 31, 2001
(In Thousands)

	MFS Investors Growth Stock			Oppenheimer Aggressive Growth			Oppenheimer Capital Appreciation			Oppenheimer Main St Growth and Income			Oppenheimer Money Fund		Oppenheimer Strategic Bond			Oppenheimer Global Securities
Investment income
Dividends	$	10		$	360		$	527		$	433		$	748	$	824		$	179

Expense
Mortality and expense risk and administrative charges		138			490			1,175			1,123			292		475			363

Net investment income (loss)		(128	)		(130	)		(648	)		(690	)		456		349			(184	)

Net realized and unrealized gains (losses) on investments
Net realized gain (loss) from redemption of investment shares		(69	)		(2,311	)		(818	)		(667	)		0		14			(157	)
Capital gain distribution		80			5,621			7,913			0			0		1,169			3,315

Net realized gain (loss) on investments		11			3,310			7,095			(667	)		0		1,183			3,158
Net unrealized appreciation (depreciation) on investments during the period		(2,359	)		(18,661	)		(19,664	)		(8,482	)		0		(415	)		(6,753	)

Net realized and unrealized gain (loss) on investments		(2,348	)		(15,351	)		(12,569	)		(9,149	)		0		768			(3,595	)

Net increase (decrease) in net assets resulting from operations-	$	(2,476	)	$	(15,481	)	$	(13,217	)	$	(9,839	)	$	456	$	1,117		$	(3,779	)

The accompanying notes are an integral part of these financial statements.

F-15

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED

For the Year Ended December 31, 2001
(In Thousands)

	Oppenheimer High Income			Van Eck Hard Asset			Van Eck Real Estate			Van Kampen Emerging Growth			Van Kampen Enterprise			Van Kampen Comstock			Van Kampen Growth and Income
Investment income
Dividends	$	425		$	3		$	12		$	25		$	30		$	0		$	16

Expense
Mortality and expense risk and administrative charges		77			5			9			383			259			518			535

Net investment income (loss)		348			(2	)		3			(358	)		(229	)		(518	)		(519	)

Net realized and unrealized gains (losses) on investments
Net realized gain (loss) from redemption of investment shares		0			(2	)		(5	)		(73	)		(26	)		(35	)		(8	)
Capital gain distribution		0			0			0			0			1,104			78			162

Net realized gain (loss) on investments		0			(2	)		(5	)		(73	)		1,078			43			154
Net unrealized appreciation (depreciation) on investments during the period		(405	)		(38	)		20			(9,890	)		(4,557	)		(1,752	)		(1,076	)

Net realized and unrealized gain (loss) on investments		(405	)		(40	)		15			(9,963	)		(3,479	)		(1,709	)		(922	)

Net increase (decrease) in net assets resulting from operations-	$	(57	)	$	(42	)	$	18		$	(10,321	)	$	(3,708	)	$	(2,227	)	$	(1,441	)

The accompanying notes are an integral part of these financial statements.

F-16

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED

For the Year Ended December 31, 2001
(In Thousands)

	Van Kampen Strategic Stock			Van Kampen Asset Allocation			Van Kampen Aggressive Growth			Goldman Sachs Internet Tollkeeper			Total
Investment income
Dividends	$	42		$	77		$	10		$	0		$	17,057

Expense
Mortality and expense risk and administrative charges		35			54			13			3			23,929

Net investment income (loss)		7			23			(3	)		(3	)		(6,872	)

Net realized and unrealized gains (losses) on investments
Net realized gain (loss) from redemption of investment shares		(38	)		(2	)		(3	)		(6	)		(49,821	)
Capital gain distribution		0			14			0			0			113,936

Net realized gain (loss) on investments		(38	)		12			(3	)		(6	)		64,115
Net unrealized appreciation (depreciation) on investments during the period		13			(40	)		(332	)		(87	)		(307,933	)

Net realized and unrealized gain (loss) on investments		(25	)		(28	)		(335	)		(93	)		(243,818	)

Net increase (decrease) in net assets resulting from operations-	$	(18	)	$	(5	)	$	(338	)	$	(96	)	$	(250,690	)

The accompanying notes are an integral part of these financial statements.

F-17

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF OPERATIONS

For the Year Ended December 31, 2000
(In Thousands)

	PIC Growth and Income			PIC International Equity			PIC Global Income			PIC Small Cap Value			PIC CORE US Equity			PIC Capital Growth			Calvert Social Small Cap Growth
Investment income
Dividends	$	5,101		$	2,806		$	4,209		$	449		$	1,528		$	244		$	0

Expense
Mortality and expense risk and administrative charges		4,195			2,895			846			1,151			4,975			3,737			20

Net investment income (loss)		906			(89	)		3,363			(702	)		(3,447	)		(3,493	)		(20	)

Net realized and unrealized gains (losses) on investments
Net realized gain (loss) from redemption of investment shares		(4,323	)		(118	)		(74	)		(4,087	)		899			(31	)		9
Capital gain distribution		6,073			28,441			0			0			41,713			18,705			65

Net realized gain (loss) on investments		1,750			28,323			(74	)		(4,087	)		42,612			18,674			74
Net unrealized appreciation (depreciation) on investments during the period		(23,676	)		(61,802	)		1,047			26,725			(79,748	)		(38,031	)		(13	)

Net realized and unrealized gain (loss) on investments		(21,926	)		(33,479	)		973			22,638			(37,136	)		(19,357	)		61

Net increase (decrease) in net assets resulting from operations-	$	(21,020	)	$	(33,568	)	$	4,336		$	21,936		$	(40,583	)	$	(22,850	)	$	41

The accompanying notes are an integral part of these financial statements.

F-18

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED

For the Year Ended December 31, 2000
(In Thousands)

	Calvert Social Balanced			MFS Emerging Growth			MFS Research			MFS Investors Trust			MFS Total Return		MFS New Discovery			MFS Utilities
Investment income
Dividends	$	246		$	0		$	27		$	322		$	879	$	0		$	65

Expense
Mortality and expense risk and administrative charges		200			1,110			1,079			1,040			534		141			115

Net investment income (loss)		46			(1,110	)		(1,052	)		(718	)		345		(141	)		(50	)

Net realized and unrealized gains (losses) on investments
Net realized gain (loss) from redemption of investment shares		11			(159	)		(25	)		23			3		(49	)		(2	)
Capital gain distribution		434			4,298			4,707			585			846		163			493

Net realized gain (loss) on investments		445			4,139			4,682			608			849		114			491
Net unrealized appreciation (depreciation) on investments during the period		(1,154	)		(21,744	)		(9,259	)		(879	)		4,358		(1,030	)		(256	)

Net realized and unrealized gain (loss) on investments		(709	)		(17,605	)		(4,577	)		(271	)		5,207		(916	)		235

Net increase (decrease) in net assets resulting from operations-	$	(663	)	$	(18,715	)	$	(5,629	)	$	(989	)	$	5,552	$	(1,057	)	$	185

The accompanying notes are an integral part of these financial statements.

F-19

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED

For the Year Ended December 31, 2000
(In Thousands)

	MFS Investors Growth Stock			Oppenheimer Aggressive Growth			Oppenheimer Capital Appreciation			Oppenheimer Main St Growth and Income			Oppenheimer Money Fund			Oppenheimer Strategic Bond			Oppenheimer Global Securities
Investment income
Dividends	$	0		$	0		$	86		$	257		$	809		$	2,245		$	29

Expense
Mortality and expense risk and administrative charges		24			745			1,134			1,032			191			403			246

Net investment income (loss)		(24	)		(745	)		(1,048	)		(775	)		618			1,842			(217	)

Net realized and unrealized gains (losses) on investments
Net realized gain (loss) from redemption of investment shares		(3	)		(133	)		(113	)		(28	)		(2	)		15			59
Capital gain distribution		0			1,697			4,588			3,394			0			0			1,647

Net realized gain (loss) on investments		(3	)		1,564			4,475			3,366			(2	)		15			1,706
Net unrealized appreciation (depreciation) on investments during the period		(543	)		(11,762	)		(6,897	)		(10,808	)		0			(1,506	)		(1,992	)

Net realized and unrealized gain (loss) on investments		(546	)		(10,198	)		(2,422	)		(7,442	)		(2	)		(1,491	)		(286	)

Net increase (decrease) in net assets resulting from operations-	$	(570	)	$	(10,943	)	$	(3,470	)	$	(8,217	)	$	616		$	351		$	(503	)

The accompanying notes are an integral part of these financial statements.

F-20

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED

For the Year Ended December 31, 2000
(In Thousands)

	Oppenheimer High Income			Van Eck Hard Asset			Van Eck Real Estate		Van Kampen Emerging Growth			Van Kampen Enterprise			Van Kampen Comstock		Van Kampen Growth and Income
Investment income
Dividends	$	158		$	1		$	4	$	0		$	0		$	85	$	118

Expense
Mortality and expense risk and administrative charges		31			3			4		104			54			39		49

Net investment income (loss)		127			(2	)		0		(104	)		(54	)		46		69

Net realized and unrealized gains (losses) on investments
Net realized gain (loss) from redemption of investment shares		(1	)		0			4		(8	)		(1	)		1		8
Capital gain distribution		0			0			0		0			0			72		632

Net realized gain (loss) on investments		(1	)		0			4		(8	)		(1	)		73		640
Net unrealized appreciation (depreciation) on investments during the period		(261	)		26			41		(4,693	)		(2,138	)		1,365		(29	)

Net realized and unrealized gain (loss) on investments		(262	)		26			45		(4,701	)		(2,139	)		1,438		611

Net increase (decrease) in net assets resulting from operations-	$	(135	)	$	24		$	45	$	(4,805	)	$	(2,193	)	$	1,484	$	680

The accompanying notes are an integral part of these financial statements.

F-21

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF OPERATIONS, CONTINUED

For the Year Ended December 31, 2000
(In Thousands)

	Van Kampen Strategic Stock			Van Kampen Asset Allocation			Van Kampen Aggressive Growth			Goldman Sachs Internet Tollkeeper			Total
Investment income
Dividends	$	0		$	0		$	0		$	0		$	19,668

Expense
Mortality and expense risk and administrative charges		5			6			0			0			26,108

Net investment income (loss)		(5	)		(6	)		0			0			(6,440	)

Net realized and unrealized gains (losses) on investments
Net realized gain (loss) from redemption of investment shares		0			0			0			0			(8,125	)
Capital gain distribution		0			0			0			0			118,553

Net realized gain (loss) on investments		0			0			0			0			110,428
Net unrealized appreciation (depreciation) on investments during the period		157			(31	)		(9	)		(13	)		(244,555	)

Net realized and unrealized gain (loss) on investments		157			(31	)		(9	)		(13	)		(134,127	)

Net increase (decrease) in net assets resulting from operations-	$	152		$	(37	)	$	(9	)	$	(13	)	$	(140,567	)

The accompanying notes are an integral part of these financial statements.

F-22

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS

For the Year Ended December 31, 2001
(In Thousands)

	PIC Growth and Income			PIC International Equity			PIC Global Income			PIC Small Cap Value			PIC CORE US Equity			PIC Capital Growth			Calvert Social Small Cap Growth
From operations
Net investment income (loss)	$	(1,851	)	$	(1,043	)	$	4,078		$	(428	)	$	(1,438	)	$	(2,299	)	$	(28	)
Net realized gain (loss) on investments		(19,086	)		13,073			257			904			29,724			17,017			21
Net unrealized appreciation (depreciation) of investments during the period		(6,374	)		(52,480	)		(2,383	)		15,894			(66,095	)		(52,839	)		184

Net increase (decrease) in net assets resulting from operations		(27,311	)		(40,450	)		1,952			16,370			(37,809	)		(38,121	)		177

From variable annuity contract transactions
Contract owners' net payments		2,498			1,356			903			832			3,761			3,518			132
Contract maintenance fees		(121	)		(70	)		(26	)		(45	)		(132	)		(106	)		(1	)
Surrenders		(17,958	)		(10,531	)		(5,340	)		(6,698	)		(20,285	)		(13,412	)		(75	)
Death benefits		(3,082	)		(1,544	)		(810	)		(825	)		(3,199	)		(2,279	)		(5	)
Transfers (to) from other portfolios		(20,122	)		(18,453	)		(534	)		(2,996	)		(15,792	)		(16,376	)		438

Net increase (decrease) in net assets resulting from variable annuity policy transactions		(38,785	)		(29,242	)		(5,807	)		(9,732	)		(35,647	)		(28,655	)		489

Net increase (decrease) in net assets		(66,096	)		(69,692	)		(3,855	)		6,638			(73,456	)		(66,776	)		666

Net assets, beginning of year		262,668			181,380			60,328			87,763			315,922			248,261			1,738

Net assets, end of year	$	196,572		$	111,688		$	56,473		$	94,401		$	242,466		$	181,485		$	2,404

The accompanying notes are an integral part of these financial statements.

F-23

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED

For the Year Ended December 31, 2001
(In Thousands)

	Calvert Social Balanced			MFS Emerging Growth			MFS Research			MFS Investors Tust			MFS Total Return			MFS New Discovery			MFS Utilities
From operations
Net investment income (loss)	$	255		$	(708	)	$	(903	)	$	(681	)	$	332		$	(189	)	$	257
Net realized gain (loss) on investments		(198	)		(3,794	)		7,041			963			1,632			275			1,036
Net unrealized appreciation (depreciation) of investments during the period		(1,198	)		(20,433	)		(23,712	)		(15,029	)		(2,368	)		(1,056	)		(5,566	)

Net increase (decrease) in net assets resulting from operations		(1,141	)		(24,935	)		(17,574	)		(14,747	)		(404	)		(970	)		(4,273	)

From variable annuity contract transactions
Contract owners' net payments		395			1,530			2,265			2,814			3,925			540			1,056
Contract maintenance fees		(8	)		(31	)		(35	)		(36	)		(24	)		(8	)		(6	)
Surrenders		(1,073	)		(3,108	)		(3,415	)		(4,230	)		(2,842	)		(665	)		(765	)
Death benefits		(87	)		(543	)		(593	)		(955	)		(559	)		(110	)		(64	)
Transfers (to) from other portfolios		(974	)		(3,711	)		(384	)		10,074			22,324			1,136			5,349

Net increase (decrease) in net assets resulting from variable annuity policy transactions		(1,747	)		(5,863	)		(2,162	)		7,667			22,824			893			5,570

Net increase (decrease) in net assets		(2,888	)		(30,798	)		(19,736	)		(7,080	)		22,420			(77	)		1,297
Net assets, beginning of year		14,336			71,859			77,328			80,631			45,359			13,894			12,576

Net assets, end of year	$	11,448		$	41,061		$	57,592		$	73,551		$	67,779		$	13,817		$	13,873

The accompanying notes are an integral part of these financial statements.

F-24

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED

For the Year Ended December 31, 2001
(In Thousands)

	MFS Investors Growth Stock			Oppenheimer Aggressive Growth			Oppenheimer Capital Appreciation			Oppenheimer Main St Growth and Income			Oppenheimer Money Fund			Oppenheimer Strategic Bond			Oppenheimer Global Securities
From operations
Net investment income (loss)	$	(128	)	$	(130	)	$	(648	)	$	(690	)	$	456		$	349		$	(184	)
Net realized gain (loss) on investments		11			3,310			7,095			(667	)		0			1,183			3,158
Net unrealized appreciation (depreciation) of investments during the period		(2,359	)		(18,661	)		(19,664	)		(8,482	)		0			(415	)		(6,753	)

Net increase (decrease) in net assets resulting from operations		(2,476	)		(15,481	)		(13,217	)		(9,839	)		456			1,117			(3,779	)

From variable annuity contract transactions
Contract owners' net payments		1,803			1,281			4,166			4,101			3,277			1,555			1,931
Contract maintenance fees		(4	)		(23	)		(44	)		(39	)		(7	)		(16	)		(13	)
Surrenders		(476	)		(2,202	)		(4,911	)		(4,844	)		(7,267	)		(2,632	)		(1,445	)
Death benefits		(102	)		(303	)		(574	)		(932	)		(492	)		(547	)		(252	)
Transfers (to) from other portfolios		8,600			(2,897	)		6,221			14,423			16,167			7,370			5,632

Net increase (decrease) in net assets resulting from variable annuity policy transactions		9,821			(4,144	)		4,858			12,709			11,678			5,730			5,853

Net increase (decrease) in net Assets		7,345			(19,625	)		(8,359	)		2,870			12,134			6,847			2,074
Net assets, beginning of year		5,870			48,211			87,958			79,205			14,894			30,068			25,002

Net assets, end of year	$	13,215		$	28,586		$	79,599		$	82,075		$	27,028		$	36,915		$	27,076

The accompanying notes are an integral part of these financial statements.

F-25

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED

For the Year Ended December 31, 2001
(In Thousands)

	Oppenheimer High Income			Van Eck Hard Asset			Van Eck Real Estate			Van Kampen Emerging Growth			Van Kampen Enterprise			Van Kampen Comstock			Van Kampen Growth and Income
From operations
Net investment income (loss)	$	348		$	(2	)	$	3		$	(358	)	$	(229	)	$	(518	)		(519	)
Net realized gain (loss) on investments		0			(2	)		(5	)		(73	)		1,078			43			154
Net unrealized appreciation (depreciation) of investments during the period		(405	)		(38	)		20			(9,890	)		(4,557	)		(1,752	)		(1,076	)

Net increase (decrease) in net assets resulting from operations		(57	)		(42	)		18			(10,321	)		(3,708	)		(2,227	)		(1,441	)

From variable annuity contract transactions
Contract owners' net payments		634			8			54			5,588			3,368			8,660			7,254
Contract maintenance fees		(1	)		0			0			(12	)		(7	)		(12	)		(12	)
Surrenders		(613	)		(24	)		(48	)		(1,797	)		(678	)		(2,477	)		(2,058	)
Death benefits		(47	)		0			0			(367	)		(110	)		(307	)		(356	)
Transfers (to) from other portfolios		3,951			147			659			19,079			14,813			49,313			47,523

Net increase in net assets resulting from variable annuity policy transactions		3,924			131			665			22,491			17,386			55,177			52,351

Net increase in net assets		3,867			89			683			12,170			13,678			52,950			50,910
Net assets, beginning of year		3,178			295			332			21,971			12,634			12,270			14,541

Net assets, end of year	$	7,045		$	384		$	1,015		$	34,141		$	26,312		$	65,220		$	65,451

The accompanying notes are an integral part of these financial statements.

F-26

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED

For the Year Ended December 31, 2001
(In Thousands)

	Van Kampen Strategic Stock			Van Kampen Asset Allocation			Van Kampen Aggressive Growth			Goldman Sachs Internet Tollkeeper			Total
From operations
Net investment income (loss)	$	7		$	23		$	(3	)	$	(3	)	$	(6,872	)
Net realized gain (loss) on investments		(38	)		12			(3	)		(6	)		64,115
Net unrealized appreciation (depreciation) of investments during the period		13			(40	)		(332	)		(87	)		(307,933	)

Net increase (decrease) in net assets resulting from operations		(18	)		(5	)		(338	)		(96	)		(250,690	)

From variable annuity contract transactions
Contract owners' net payments		225			799			477			127			70,833
Contract maintenance fees		(1	)		(1	)		0			0			(841	)
Surrenders		(573	)		(177	)		(29	)		(21	)		(122,669	)
Death benefits		0			(17	)		(1	)		(2	)		(19,064	)
Transfers (to) from other portfolios		2,207			5,257			1,252			271			159,967

Net increase in net assets resulting from variable annuity policy transactions		1,858			5,861			1,699			375			88,226

Net increase (decrease) in net assets		1,840			5,856			1,361			279			(162,464	)
Net assets, beginning of year		1,499			1,531			340			73			1,833,915

Net assets, end of year	$	3,339		$	7,387		$	1,701		$	352		$	1,671,451

The accompanying notes are an integral part of these financial statements.

F-27

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS

For the Year Ended December 31, 2000
(In Thousands)

	PIC Growth and Income			PIC International Equity			PIC Global Income			PIC Small Cap Value			PIC CORE US Equity			PIC Capital Growth			Calvert Social Small Cap Growth
From operations
Net investment income (loss)	$	906		$	(89	)	$	3,363		$	(702	)	$	(3,447	)	$	(3,493	)	$	(20	)
Net realized gain (loss) on investments		1,750			28,323			(74	)		(4,087	)		42,612			18,674			74
Net unrealized appreciation (depreciation) of investments during the period		(23,676	)		(61,802	)		1,047			26,725			(79,748	)		(38,031	)		(13	)

Net increase (decrease) in net assets resulting from operations		(21,020	)		(33,568	)		4,336			21,936			(40,583	)		(22,850	)		41

From variable annuity contract transactions
Contract owners' net payments		3,180			5,218			987			1,115			9,429			9,730			385
Contract maintenance fees		(130	)		(74	)		(23	)		(34	)		(130	)		(98	)		(1	)
Surrenders		(23,052	)		(13,493	)		(5,133	)		(5,648	)		(27,362	)		(19,130	)		(15	)
Death benefits		(2,373	)		(1,308	)		(739	)		(439	)		(2,910	)		(1,911	)		(38	)
Transfers (to) from other portfolios		(36,854	)		3,295			(2,045	)		(9,171	)		11,149			21,589			343

Net increase (decrease) in net assets resulting from variable annuity policy transactions		(59,229	)		(6,362	)		(6,953	)		(14,177	)		(9,824	)		10,180			674

Net increase (decrease) in net assets		(80,249	)		(39,930	)		(2,617	)		7,759			(50,407	)		(12,670	)		715
Net assets, beginning of year		342,917			221,310			62,945			80,004			366,329			260,931			1,023

Net assets, end of year	$	262,668		$	181,380		$	60,328		$	87,763		$	315,922		$	248,261		$	1,738

The accompanying notes are an integral part of these financial statements.

F-28

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED

For the Year Ended December 31, 2000
(In Thousands)

	Calvert Social Balanced			MFS Emerging Growth			MFS Research			MFS Investors Trust			MFS Total Return			MFS New Discovery			MFS Utilities
From operations
Net investment income (loss)	$	46		$	(1,110	)	$	(1,052	)	$	(718	)	$	345		$	(141	)	$	(50	)
Net realized gain (loss) on investments		445			4,139			4,682			608			849			114			491
Net unrealized appreciation (depreciation) of investments during the period		(1,154	)		(21,744	)		(9,259	)		(879	)		4,358			(1,030	)		(256	)

Net increase (decrease) in net assets resulting from operations		(663	)		(18,715	)		(5,629	)		(989	)		5,552			(1,057	)		185

From variable annuity contract transactions
Contract owners' net payments		643			7,651			6,131			5,431			2,073			2,700			3,515
Contract maintenance fees		(8	)		(28	)		(29	)		(29	)		(17	)		(3	)		(1	)
Surrenders		(627	)		(4,306	)		(3,764	)		(3,577	)		(2,015	)		(293	)		(335	)
Death benefits		(108	)		(463	)		(361	)		(471	)		(374	)		(30	)		(21	)
Transfers (to) from other portfolios		2,132			21,467			18,877			14,167			7,640			9,685			6,714

Net increase in net assets resulting from variable annuity policy transactions		2,032			24,321			20,854			15,521			7,307			12,059			9,872

Net increase in net assets		1,369			5,606			15,225			14,532			12,859			11,002			10,057
Net assets, beginning of year		12,967			66,253			62,103			66,099			32,500			2,892			2,519

Net assets, end of year	$	14,336		$	71,859		$	77,328		$	80,631		$	45,359		$	13,894		$	12,576

The accompanying notes are an integral part of these financial statements.

F-29

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED

For the Year Ended December 31, 2000
(In Thousands)

	MFS Investors Growth Stock			Oppenheimer Aggressive Growth			Oppenheimer Capital Appreciation			Oppenheimer Growth and Income			Oppenheimer Money Fund			Oppenheimer Strategic Bond			Oppenheimer Global Securities
From operations
Net investment income (loss)	$	(24	)	$	(745	)	$	(1,048	)	$	(775	)	$	618		$	1,842		$	(217	)
Net realized gain (loss) on investments		(3	)		1,564			4,475			3,366			(2	)		15			1,706
Net unrealized appreciation (depreciation) of investments during the period		(543	)		(11,762	)		(6,897	)		(10,808	)		0			(1,506	)		(1,992	)

Net increase (decrease) in net assets resulting from operations		(570	)		(10,943	)		(3,470	)		(8,217	)		616			351			(503	)

From variable annuity contract transactions
Contract owners' net payments		1,985			7,124			9,587			9,078			6,470			1,113			5,605
Contract maintenance fees		0			(20	)		(29	)		(29	)		(3	)		(13	)		(5	)
Surrenders		(51	)		(3,077	)		(3,891	)		(3,865	)		(4,666	)		(1,785	)		(634	)
Death benefits		0			(197	)		(494	)		(603	)		(1,877	)		(348	)		(40	)
Transfers (to) from other portfolios		4,506			23,086			30,688			26,464			(267	)		3,504			14,885

Net increase (decrease) in net assets resulting from variable annuity contract transactions		6,440			26,916			35,861			31,045			(343	)		2,471			19,811

Net increase in net assets		5,870			15,973			32,391			22,828			273			2,822			19,308
Net assets, beginning of year		0			32,238			55,567			56,377			14,621			27,246			5,694

Net assets, end of year	$	5,870		$	48,211		$	87,958		$	79,205		$	14,894		$	30,068		$	25,002

The accompanying notes are an integral part of these financial statements.

F-30

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED

For the Year Ended December 31, 2000
(In Thousands)

	Oppenheimer High Income			Van Eck Hard Asset			Van Eck Real Estate			Van Kampen Emerging Growth			Van Kampen Enterprise			Van Kampen Comstock			Van Kampen Growth and Income
From operations
Net investment income (loss)	$	127		$	(2	)	$	0		$	(104	)	$	(54	)	$	46		$	69
Net realized gain (loss) on investments		(1	)		0			4			(8	)		(1	)		73			640
Net unrealized appreciation (depreciation) of investments during the period		(261	)		26			41			(4,693	)		(2,138	)		1,365			(29	)

Net increase (decrease) in net assets resulting from operations		(135	)		24			45			(4,805	)		(2,193	)		1,484			680

From variable annuity contract transactions
Contract owners' net payments		823			10			0			6,010			3,466			2,608			3,073
Contract maintenance fees		0			0			0			(2	)		(1	)		0			(1	)
Surrenders		(131	)		(6	)		(7	)		(437	)		(110	)		(61	)		(177	)
Death benefits		(26	)		0			0			(41	)		(9	)		0			(9	)
Transfers (to) from other portfolios		1,597			211			133			21,246			11,481			8,239			10,975

Net increase in net assets resulting from variable annuity policy transactions		2,263			215			126			26,776			14,827			10,786			13,861

Net increase in net assets		2,128			239			171			21,971			12,634			12,270			14,541
Net assets, beginning of year		1,050			56			161			0			0			0			0

Net assets, end of year	$	3,178		$	295		$	332		$	21,971		$	12,634		$	12,270		$	14,541

The accompanying notes are an integral part of these financial statements.

F-31

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

STATEMENT OF CHANGES IN NET ASSETS, CONTINUED

For the Year Ended December 31, 2000
(In Thousands)

	Van Kampen Strategic Stock			Van Kampen Asset Allocation			Van Kampen Aggressive Growth			Goldman Sachs Internet Tollkeeper			Total
From operations
Net investment income (loss)	$	(5	)	$	(6	)	$	0		$	0		$	(6,440	)
Net realized gain (loss) on investments		0			0			0			0			110,428
Net unrealized appreciation (depreciation) of investments during the period		157			(31	)		(9	)		(13	)		(244,555	)

Net increase (decrease) in net assets resulting from operations		152			(37	)		(9	)		(13	)		(140,567	)

From variable annuity contract transactions
Contract owners' net payments		116			322			159			25			115,762
Contract maintenance fees		0			0			0			0			(708	)
Surrenders		(16	)		(20	)		(3	)		0			(127,687	)
Death benefits		(10	)		(9	)		0			0			(15,209	)
Transfers (to) from other portfolios		1,257			1,275			193			61			228,522

Net increase in net assets resulting from variable annuity policy transactions		1,347			1,568			349			86			200,680

Net increase in net assets		1,499			1,531			340			73			60,113
Net assets, beginning of year		0			0			0			0			1,773,802

Net assets, end of year	$	1,499		$	1,531		$	340		$	73		$	1,833,915

The accompanying notes are an integral part of these financial statements.

F-32

THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2001 and 2000

(In Thousands)

1. ORGANIZATION

The Protective Variable Annuity Separate Account (Separate Account) was established by Protective Life Insurance Company (Protective Life) under the provisions of Tennessee law and commenced operations on March 14, 1994. The Separate Account is an investment account to which net proceeds from individual flexible premium deferred variable annuity contracts (the Contracts) are allocated until maturity or termination of the Contracts.

Protective Life has structured the Separate Account into a unit investment trust form registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940, as amended.

At December 31, 1999, the Separate Account was comprised of six proprietary sub-accounts and seventeen independent sub-accounts. The six proprietary sub-accounts were the PIC Growth and Income, PIC International Equity, PIC Global Income, PIC Small Cap Value, PIC Core US Equity, and PIC Capital Growth sub-accounts. Funds are transferred to Protective Investment Company (the Fund) in exchange for shares of the corresponding portfolio of the Fund. The seventeen independent sub-accounts were the Calvert Social Small Cap Growth, Calvert Social Balanced, MFS Emerging Growth, MFS Research, MFS Growth with Income, MFS Total Return, MFS New Discovery, MFS Utilities, Oppenheimer Aggressive Growth, Oppenheimer Capital Appreciation, Oppenheimer Main Street Growth and Income, Oppenheimer Money Fund, Oppenheimer Strategic Bond, Oppenheimer Global Securities, Oppenheimer High Income, Van Eck Hard Asset, and Van Eck Real Estate sub-accounts. Ten of these sub-accounts were added to the portfolio July 1, 1997, with sales beginning on that date. The remaining seven sub-accounts were added April 1, 1999, with sales beginning on that date. Protective Life invests contract owners' funds in exchange for shares in the independent funds. Protective Life then holds the shares for the contract owners.

During the year ended December 31, 2000, the Separate Account added nine additional sub-accounts. These sub-accounts include the MFS Growth, Van Kampen Emerging Growth, Van Kampen Enterprise, Van Kampen Comstock, Van Kampen Growth and Income, Van Kampen Strategic Stock, and Van Kampen Asset Allocation which were added May 1, 2000, with sales beginning on that date. The Van Kampen Aggressive Growth and Goldman Sachs Internet Tollkeeper sub-accounts were added October 1, 2001, with sales beginning on that date.

During the year ended December 31, 2001 the MFS Growth With Income Fund changed its name to the MFS Investors Trust Fund and the MFS Growth Fund changed its name to the MFS Investors Growth Stock Fund.

Gross premiums from the Contracts are allocated to the sub-accounts in accordance with contract owner instructions and are recorded as variable annuity contract transactions in the statement of changes in net assets. Such amounts are used to provide money to pay contract values under the Contracts (see Note 5). The Separate Account's assets are the property of Protective Life.

Contract owners may allocate some or all of gross premiums or transfer some or all of the contract value to the Guaranteed Account, which is part of Protective Life's General Account. The assets of Protective Life's General Account support its insurance and annuity obligations and are subject to Protective Life's general liabilities from business operations. The Guaranteed Account balance as of December 31, 2001 and 2000 was approximately $217.2 million and $197.1 million, respectively.

F-33

Transfers to/from other portfolios, included in the statement of changes in net assets, include transfers between the individual sub-accounts and between the sub-accounts and the Guaranteed Account.

2. SIGNIFICANT ACCOUNTING POLICIES

Investment Valuation - Investments are made in shares and are valued at the net asset values of the respective portfolios. The net assets of each sub-account of the Separate Account reflect the investment management fees and other operating expenses incurred by the Funds. Transactions with the Funds are recorded on the trade date.

Realized Gains and Losses - Realized gains and losses on investments include gains and losses on redemptions of the Funds' shares (determined on the last-in-first-out (LIFO) basis) and capital gain distributions from the Funds.

Dividend Income and Capital Gain Distributions - Dividend income and capital gain distributions are recorded on the ex-dividend date. Distributions are from net investment income and net realized gains recorded in the financial statements of the underlying investment company.

Mortality and Expense Risk - Protective Life deducts a daily charge from the assets of the Separate Account to compensate Protective Life for assuming mortality and expense risks and to reimburse Protective Life for expenses incurred in the administration of the annuity contracts and the Separate Account. The mortality risk that Protective Life assumes includes the risk that annuitants may live for a longer period of time than estimated when the guarantees in the annuity contract were established. The mortality risk that Protective Life assumes also includes a guarantee to pay a death benefit if the annuity contract owner dies before the annuity commencement date. The expense risk that Protective Life assumes is the risk that the administration charge, contract maintenance fee and transfer fees may be insufficient to cover actual future expenses. The mortality and expense risk and administration charges do not apply to the portion of the net assets that are allocated to the General Account. The mortality and expense risk and administration charges are determined according to the terms of the annuity contract.

Surrender Charges - Protective Life may deduct a surrender charge (contingent deferred sales charge) from the contract value of some classes of contracts when an owner makes a full or partial surrender before the end of the surrender charge period. Surrender charges are calculated according to the terms of the annuity contract being surrendered. Surrender charges are imposed to reimburse Protective Life for some of the costs of distributing the contracts.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make various estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Federal Income Taxes - The results of the operations of the Separate Account are included in the federal income tax return of Protective Life Corporation (parent of Protective Life). Under the provisions of the contracts, Protective Life has the right to charge the Separate Account for federal

F-34

income tax attributable to the Separate Account. No charge has been or is currently being made against the Separate Account for such tax.

3. INVESTMENTS

At December 31, 2001 and 2000, the investments by the respective sub-accounts were as follows (in thousands, except share data):

	2001
	Shares	Cost		Market Value
PIC Growth and Income	16,344,262	$	192,605	$	196,572
PIC International Equity	12,344,532		144,403		111,688
PIC Global Income	5,543,196		56,055		56,473
PIC Small Cap Value	6,858,410		67,237		94,401
PIC CORE US Equity	14,777,176		243,943		242,466
PIC Capital Growth	10,480,553		179,267		181,485
Calvert Social Small Cap Growth	162,419		2,095		2,404
Calvert Social Balanced	6,508,022		13,799		11,448
MFS Emerging Growth	2,283,312		54,446		41,054
MFS Research	4,021,797		77,101		57,592
MFS Investors Trust	4,293,697		84,158		73,551
MFS Total Return	3,642,080		65,478		67,779
MFS New Discovery	904,840		15,263		13,817
MFS Utilities	869,757		19,341		13,873
MFS Investors Growth Stock	1,352,609		16,117		13,215
Oppenheimer Aggressive Growth	702,005		45,329		28,586
Oppenheimer Capital Appreciation	2,176,033		91,766		79,599
Oppenheimer Main St. Growth and Income	4,321,993		93,824		82,075
Oppenheimer Money Fund	27,036,969		27,028		27,028
Oppenheimer Strategic Bond	7,990,219		39,162		36,915
Oppenheimer Global Securities	1,185,462		34,556		27,076
Oppenheimer High Income	824,985		7,711		7,045
Van Eck Hard Asset	35,956		393		384
Van Eck Real Estate	93,391		958		1,015
Van Kampen Emerging Growth	1,203,803		48,723		34,140
Van Kampen Enterprise	1,767,093		33,007		26,312
Van Kampen Comstock	5,705,946		65,606		65,219
Van Kampen Growth and Income	4,116,337		66,555		65,450
Van Kampen Strategic Stock	281,793		3,169		3,339
Van Kampen Asset Allocation	736,442		7,458		7,387
Van Kampen Aggressive Growth	376,056		2,041		1,700
Goldman Sachs Internet Tollkeeper	78,155		452		352

	149,019,300	$	1,799,046	$	1,671,440

F-35

	2000
	Shares	Cost		Market Value
PIC Growth and Income	19,662,684	$	252,320	$	262,668
PIC International Equity	13,290,114		161,633		181,380
PIC Global Income	5,682,631		57,527		60,328
PIC Small Cap Value	7,688,651		76,471		87,763
PIC CORE US Equity	14,742,400		251,311		315,922
PIC Capital Growth	10,937,976		193,204		248,261
Calvert Social Small Cap Growth	127,995		1,613		1,738
Calvert Social Balanced	7,160,859		15,489		14,336
MFS Emerging Growth	2,491,631		64,825		71,859
MFS Research	3,717,675		73,125		77,328
MFS Investors Trust	3,837,760		76,209		80,631
MFS Total Return	2,315,407		40,690		45,359
MFS New Discovery	836,489		14,284		13,894
MFS Utilities	533,544		12,478		12,576
MFS Investors Growth Stock	451,535		6,413		5,870
Oppenheimer Aggressive Growth	681,231		46,311		48,211
Oppenheimer Capital Appreciation	1,886,298		80,461		87,958
Oppenheimer Main St. Growth and Income	3,725,552		82,472		79,205
Oppenheimer Money Fund	14,893,616		14,894		14,894
Oppenheimer Strategic Bond	6,411,158		31,900		30,068
Oppenheimer Global Securities	824,325		25,729		25,002
Oppenheimer High Income	342,797		3,439		3,178
Van Eck Hard Asset	24,454		266		295
Van Eck Real Estate	31,284		295		332
Van Kampen Emerging Growth	530,195		26,664		21,971
Van Kampen Enterprise	622,963		14,772		12,634
Van Kampen Comstock	1,043,379		10,905		12,270
Van Kampen Growth and Income	854,864		14,570		14,541
Van Kampen Strategic Stock	125,330		1,342		1,499
Van Kampen Asset Allocation	142,986		1,562		1,531
Van Kampen Aggressive Growth	45,572		349		340
Goldman Sachs Internet Tollkeeper	10,675		86		73

	125,674,030	$	1,653,609	$	1,833,915

F-36

During the year ended December 31, 2001, transactions in shares were as follows (in thousands, except share data):

	PIC Growth and Income			PIC International Equity			PIC Global Income			PIC Small Cap Value			PIC CORE US Equity			PIC Capital Growth			Calvert Social Small Cap Growth
Shares purchased		33,894			100,667			146,629			94,248			55,957			59,463			54,952
Shares received from reinvestment of dividends		99,693			1,978,784			487,840			63,376			2,232,257			1,235,722			2,107

Total shares acquired		133,587			2,079,451			634,469			157,624			2,288,214			1,295,185			57,059
Shares redeemed		(3,452,009	)		(3,025,033	)		(773,904	)		(987,865	)		(2,253,438	)		(1,752,608	)		(22,635	)

Net increase (decrease) in shares owned		(3,318,422	)		(945,582	)		(139,435	)		(830,241	)		34,776			(457,423	)		34,424
Shares owned, beginning of period		19,662,684			13,290,114			5,682,631			7,688,651			14,742,400			10,937,976			127,995

Shares owned, end of period		16,344,262			12,344,532			5,543,196			6,858,410			14,777,176			10,480,553			162,419

Cost of shares acquired	$	7,520		$	24,691		$	8,584		$	4,026		$	48,191		$	31,171		$	885

Cost of shares redeemed	$	(67,235	)	$	(41,921	)	$	(10,056	)	$	(13,260	)	$	(55,559	)	$	(45,108	)	$	(403	)

	Calvert Social Balanced			MFS Emerging Growth			MFS Research			MFS Investors Trust			MFS Total Return			MFS New Discovery			MFS Utilities
Shares purchased		600,294			131,056			247,626			566,775			1,235,442			197,763			372,113
Shares received from reinvestment of dividends		364,324			161,768			532,175			124,106			148,376			28,276			80,601

Total shares acquired		964,618			292,824			779,801			690,881			1,383,818			226,039			452,714
Shares redeemed		(1,617,455	)		(501,143	)		(475,679	)		(234,944	)		(57,145	)		(157,688	)		(116,501	)

Net increase (decrease) in shares owned		(652,837	)		(208,319	)		304,122			455,937			1,326,673			68,351			336,213
Shares owned, beginning of period		7,160,859			2,491,631			3,717,675			3,837,760			2,315,407			836,489			533,544

Shares owned, end of period		6,508,022			2,283,312			4,021,797			4,293,697			3,642,080			904,840			869,757

Cost of shares acquired	$	2,224		$	9,077		$	16,568		$	16,721		$	27,748		$	4,231		$	10,728

Cost of shares redeemed	$	(3,914	)	$	(19,456	)	$	(12,592	)	$	(8,772	)	$	(2,960	)	$	(3,252	)	$	(3,865	)

	MFS Investors Growth Stock			Oppenheimer Aggressive Growth			Oppenheimer Capital Appreciation			Oppenheimer Main St Growth and Income			Oppenheimer Money Fund			Oppenheimer Strategic Bond			Oppenheimer Global Securities
Shares purchased		949,615			42,348			265,650			725,167			24,349,413			1,926,547			354,838
Shares received from reinvestment of dividends		8,211			130,766			221,123			22,702			756,965			435,069			154,100

Total shares acquired		957,826			173,114			486,773			747,869			25,106,378			2,361,616			508,938
Shares redeemed		(56,752	)		(152,340	)		(197,038	)		(151,428	)		(12,963,025	)		(782,555	)		(147,801	)

Net increase in shares owned		901,074			20,774			289,735			596,441			12,143,353			1,579,061			361,137
Shares owned, beginning of period		451,535			681,231			1,886,298			3,725,552			14,893,616			6,411,158			824,325

Shares owned, end of period		1,352,609			702,005			2,176,033			4,321,993			27,036,969			7,990,219			1,185,462

Cost of shares acquired	$	11,078		$	10,448		$	24,117		$	19,312		$	29,734		$	12,527		$	14,371

Cost of shares redeemed	$	(1,374	)	$	(11,430	)	$	(12,812	)	$	(7,960	)	$	(17,600	)	$	(5,265	)	$	(5,544	)

F-37

	Oppenheimer High Income			Van Eck Hard Asset			Van Eck Real Estate			Van Kampen Emerging Growtn			Van Kampen Enterprise			Van Kampen Comstock			Van Kampen Growth and Income
Shares purchased		597,060			15,752			77,687			693,758			1,089,926			4,700,555			3,261,026
Shares received from reinvestment of dividends		47,736			275			1,144			768			76,792			6,898			11,693

Total shares acquired		644,796			16,027			78,831			694,526			1,166,718			4,707,453			3,272,719
Shares redeemed		(162,608	)		(4,525	)		(16,724	)		(20,918	)		(22,588	)		(44,886	)		(11,246	)

Net increase in shares owned		482,188			11,502			62,107			673,608			1,144,130			4,662,567			3,261,473
Shares owned, beginning of period		342,797			24,454			31,284			530,195			622,963			1,043,379			854,864

Shares owned, end of period		824,985			35,956			93,391			1,203,803			1,767,093			5,705,946			4,116,337

Cost of shares acquired	$	6,318		$	186		$	917		$	24,479		$	19,508		$	56,364		$	53,119

Cost of shares redeemed	$	(2,046	)	$	(59	)	$	(254	)	$	(2,420	)	$	(1,273	)	$	(1,663	)	$	(1,134	)

	Van Kampen Strategic Stock			Van Kampen Asset Allocation			Van Kampen Aggressive Growth			Goldman Sachs Internet Tollkeeper
Shares purchased		200,346			593,379			354,887			99,122
Shares received from reinvestment of dividends		3,716			9,443			1,834			0

Total shares acquired		204,062			602,822			356,721			99,122
Shares redeemed		(47,599	)		(9,366	)		(26,237	)		(31,642	)

Net increase in shares owned		156,463			593,456			330,484			67,480
Shares owned, beginning of period		125,330			142,986			45,572			10,675

Shares owned, end of period		281,793			736,442			376,056			78,155

Cost of shares acquired	$	2,596		$	6,159		$	1,911		$	588

Cost of shares redeemed	$	(769	)	$	(263	)	$	(219	)	$	(222	)

During the year ended December 31, 2000, transactions in shares were as follows (in thousands, except share data):

	PIC Growth and Income			PIC International Equity			PIC Global Income			PIC Small Cap Value			PIC CORE US Equity			PIC Capital Growth			Calvert Social Small Cap Growth
Shares purchased		36,814			3,406,163			170,549			67,874			482,916			762,511			59,198
Shares received from reinvestment of dividends		793,480			2,096,773			415,329			43,691			1,849,396			769,173			4,746

Total shares acquired		830,294			5,502,936			585,878			111,565			2,332,312			1,531,684			63,944
Shares redeemed		(4,469,436	)		(4,062,485	)		(910,231	)		(1,644,367	)		(1,088,492	)		(517,265	)		(13,038	)

Net increase (decrease) in shares owned		(3,639,142	)		1,440,451			(324,353	)		(1,532,802	)		1,243,820			1,014,419			50,906
Shares owned, beginning of period		23,301,826			11,849,663			6,006,984			9,221,453			13,498,580			9,923,557			77,089

Shares owned, end of period		19,662,684			13,290,114			5,682,631			7,688,651			14,742,400			10,937,976			127,995

Cost of shares acquired	$	14,631		$	95,315		$	6,851		$	2,100		$	62,650		$	43,015		$	920

Cost of shares redeemed	$	(71,199	)	$	(73,443	)	$	(10,503	)	$	(21,066	)	$	(33,303	)	$	(17,645	)	$	(192	)

F-38

	Calvert Social Balanced			MFS Emerging Growth			MFS Research			MFS Investors Trust			MFS Total Return			MFS New Discovery			MFS Utilities
Shares purchased		1,376,907			710,317			923,169			836,421			536,389			732,581			423,568
Shares received from reinvestment of dividends		336,934			123,209			206,903			42,955			101,152			9,638			24,897

Total shares acquired		1,713,841			833,526			1,130,072			879,376			637,541			742,219			448,465
Shares redeemed		(531,549	)		(87,229	)		(72,632	)		(143,431	)		(152,783	)		(73,151	)		(18,082	)

Net increase in shares owned		1,182,292			746,297			1,057,440			735,945			484,758			669,068			430,383
Shares owned, beginning of period		5,978,567			1,745,334			2,660,235			3,101,815			1,830,649			167,421			103,161

Shares owned, end of period		7,160,859			2,491,631			3,717,675			3,837,760			2,315,407			836,489			533,544

Cost of shares acquired	$	3,940		$	31,909		$	27,276		$	20,041		$	11,916		$	13,748		$	11,026

Cost of shares redeemed	$	(1,418	)	$	(4,524	)	$	(2,779	)	$	(4,631	)	$	(3,409	)	$	(1,715	)	$	(686	)

	MFS Investors Growth Stock			Oppenheimer Aggressive Growth			Oppenheimer Capital Appreciation			Oppenheimer Main St Growth and Income			Oppenheimer Money Fund			Oppenheimer Strategic Bond			Oppenheimer Global Securities
Shares purchased		460,774			316,511			743,141			1,390,783			40,378,404			1,153,107			2,173,259
Shares received from reinvestment of dividends		0			15,759			88,615			155,972			808,840			483,862			51,135

Total shares acquired		460,774			332,270			831,756			1,546,755			41,187,244			1,636,969			2,224,394
Shares redeemed		(9,239	)		(42,766	)		(60,344	)		(110,257	)		(40,914,928	)		(707,807	)		(1,570,345	)

Net increase in shares owned		451,535			289,504			771,412			1,436,498			272,316			929,162			654,049
Shares owned, beginning of period		0			391,727			1,114,886			2,289,054			14,621,300			5,481,996			170,276

Shares owned, end of period		451,535			681,231			1,886,298			3,725,552			14,893,616			6,411,158			824,325

Cost of shares acquired	$	6,668		$	33,829		$	43,706		$	37,932		$	44,038		$	8,479		$	74,275

Cost of shares redeemed	$	(255	)	$	(6,099	)	$	(4,417	)	$	(4,298	)	$	(43,765	)	$	(4,151	)	$	(52,970	)

	Oppenheimer High Income			Van Eck Hard Asset			Van Eck Real Estate			Van Kampen Emerging Growth			Van Kampen Enterprise			Van Kampen Comstock			Van Kampen Growth and Income
Shares purchased		253,456			22,416			17,958			530,691			622,967			1,029,124			810,198
Shares received from reinvestment of dividends		16,329			75			447			0			0			14,265			45,751

Total shares acquired		269,785			22,491			18,405			530,691			622,967			1,043,389			855,949
Shares redeemed		(24,958	)		(3,102	)		(4,743	)		(496	)		(4	)		(10	)		(1,085	)

Net increase in shares owned		244,827			19,389			13,662			530,195			622,963			1,043,379			854,864
Shares owned, beginning of period		97,970			5,065			17,622			0			0			0			0

Shares owned, end of period		342,797			24,454			31,284			530,195			622,963			1,043,379			854,864

Cost of shares acquired	$	2,753		$	249		$	177		$	26,952		$	14,931		$	10,967		$	14,718

Cost of shares redeemed	$	(364	)	$	(36	)	$	(47	)	$	(288	)	$	(159	)	$	(62	)	$	(148	)

F-39

	Van Kampen Strategic Stock			Van Kampen Asset Allocation			Van Kampen Aggressive Growth			Goldman Sachs Internet Tollkeeper
Shares purchased		126,069			143,172			45,583			10,683
Shares received from reinvestment of dividends		0			0			0			0

Total shares acquired		126,069			143,172			45,583			10,683
Shares redeemed		(739	)		(186	)		(11	)		(8	)

Net increase in shares owned		125,330			142,986			45,572			10,675
Shares owned, beginning of period		0			0			0			0

Shares owned, end of period		125,330			142,986			45,572			10,675

Cost of shares acquired	$	1,355		$	1,570		$	354		$	86

Cost of shares redeemed	$	(13	)	$	(8	)	$	(5	)	$	0

F-40

4. FINANCIAL HIGHLIGHTS

	As of December 31, 2001							For the Year Ended December 31, 2001
	Units (000's)	Unit Fair Value Lowest		Unit Fair Value Highest		Net Assets (000's)		Investment Income Ratio*		Expense Ratio Lowest**		Expense Ratio Highest**		Total Return Lowest***		Total Return Highest***
PIC Growth and Income	11,774	$	8.60	$	16.88	$	196,572	0.57	%	0.70	%	1.80	%	-10.87	%	-2.55	%(a)
PIC International Equity	8,233	$	8.00	$	13.68	$	111,688	0.66	%	0.70	%	1.80	%	-23.77	%	-6.46	%(a)
PIC Global Income	3,641	$	11.28	$	15.64	$	56,473	8.35	%	0.70	%	1.80	%	-0.45	%(b)	4.05	%
PIC Small Cap Value	5,064	$	14.89	$	18.72	$	94,401	0.94	%	0.70	%	1.80	%	3.62	%(c)	20.81	%
PIC CORE U.S. Equity	10,422	$	8.82	$	23.76	$	242,466	0.88	%	0.70	%	1.80	%	-12.32	%	1.12	%(d)
PIC Capital Growth	8,635	$	9.27	$	21.44	$	181,485	0.31	%	0.70	%	1.80	%	-15.76	%	-0.86	%(e)
Calvert Social Small Cap Growth	175	$	13.66	$	13.92	$	2,404	0.00	%	0.70	%	1.80	%	1.31	%(f)	9.64	%
Calvert Social Balanced	932	$	9.69	$	12.42	$	11,448	3.41	%	0.70	%	1.80	%	-8.39	%	-2.40	%(g)
MFS Emerging Growth	3,055	$	8.29	$	13.65	$	41,061	0.00	%	0.70	%	1.80	%	-34.52	%	-4.86	%(d)
MFS Research	4,921	$	8.72	$	11.84	$	57,592	0.01	%	0.70	%	1.80	%	-22.48	%	-6.38	%(a)
MFS Investors Trust	6,329	$	8.72	$	11.84	$	73,551	0.50	%	0.70	%	1.80	%	-17.26	%	-0.56	%(h)
MFS Total Return	4,864	$	11.49	$	14.17	$	67,779	1.99	%	0.70	%	1.80	%	-1.44	%(i)	3.56	%(h)
MFS New Discovery	751	$	13.91	$	18.57	$	13,817	0.00	%	0.70	%	1.80	%	-6.51	%	12.69	%(d)
MFS Utilities	1,288	$	9.73	$	10.87	$	13,873	3.23	%	0.70	%	1.80	%	-25.39	%	-3.78	%(j)
MFS Investors Growth Stock	2,033	$	6.46	$	6.57	$	13,215	0.10	%	0.70	%	1.80	%	-25.32	%	-5.21	%(e)
Oppenheimer Aggressive Growth	2,206	$	8.76	$	13.09	$	28,586	1.05	%	0.70	%	1.80	%	-32.34	%	-1.25	%(k)
Oppenheimer Capital Appreciation	4,998	$	10.86	$	16.29	$	79,599	0.63	%	0.70	%	1.80	%	-13.94	%	-0.80	%(h)
Oppenheimer Main Street Growth and Income	7,142	$	8.73	$	11.71	$	82,075	0.54	%	0.70	%	1.80	%	-11.56	%	-0.31	%(d)
Oppenheimer Money Fund	21,029	$	1.10	$	1.30	$	27,028	3.57	%	0.70	%	1.80	%	0.33	%(j)	3.12	%
Oppenheimer Strategic Bond	3,324	$	10.88	$	11.15	$	36,915	2.45	%	0.70	%	1.80	%	1.47	%(l)	4.11	%
Oppenheimer Global Securities	1,742	$	12.32	$	15.86	$	27,076	0.69	%	0.70	%	1.80	%	-13.41	%	4.02	%(m)
Oppenheimer High Income	687	$	9.71	$	10.34	$	7,045	7.70	%	0.70	%	1.80	%	-3.44	%(n)	3.33	%(o)
Van Eck Hard Asset	35	$	10.09	$	11.02	$	384	0.93	%	0.70	%	1.80	%	-11.84	%	5.09	%(p)
Van Eck Real Estate	83	$	11.55	$	12.23	$	1,015	1.92	%	0.70	%	1.80	%	1.73	%(q)	10.32	%(r)
Van Kampen Emerging Growth	6,921	$	4.90	$	4.99	$	34,141	0.09	%	0.70	%	1.80	%	-32.56	%	-11.11	%(s)
Van Kampen Enterprise	4,317	$	6.06	$	6.16	$	26,312	0.16	%	0.70	%	1.80	%	-21.66	%	0.34	%(s)
Van Kampen Comstock	5,205	$	12.45	$	12.67	$	65,220	0.00	%	0.70	%	1.80	%	-8.11	%(t)	-0.18	%(s)
Van Kampen Growth and Income	6,332	$	10.27	$	10.45	$	65,451	0.04	%	0.70	%	1.80	%	-7.28	%	2.40	%(s)
Van Kampen Strategic Stock	289	$	11.48	$	11.68	$	3,339	1.65	%	0.70	%	1.80	%	-3.69	%(u)	0.73	%(v)
Van Kampen Asset Allocation	787	$	9.33	$	9.49	$	7,387	1.96	%	0.70	%	1.80	%	-3.13	%	2.03	%(w)
Van Kampen Aggressive Growth	366	$	4.62	$	4.68	$	1,701	0.98	%	0.70	%	1.80	%	-39.13	%	-7.73	%(x)
Goldman Sachs Internet Tollkeeper	78	$	4.51	$	4.57	$	352	0.00	%	0.70	%	1.80	%	-34.71	%	0.39	%(y)

*		These amounts represent the dividends, excluding distributions of capital gains, received by the sub-account from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the sub-account invests.
**		These ratios represent the annualized contract expenses of the separate acccount, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying funds are excluded.
***		These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented.

(a)	Start date of July 16, 2001	(j)	Start date of September 17, 2001	(s)	Start date of March 29, 2001
(b)	Start date of September 28, 2001	(k)	Start date of August 9, 2001	(t)	Start date of May 1, 2001
(c)	Start date of June 4, 2001	(l)	Start date of March 28, 2001	(u)	Start date of March 9, 2001
(d)	Start date of April 9, 2001	(m)	Start date of April 6, 2001	(v)	Start date of July 11, 2001
(e)	Start date of March 23, 2001	(n)	Start date of June 11, 2001	(w)	Start date of September 4, 2001
(f)	Start date of July 5, 2001	(o)	Start date of October 22, 2001	(x)	Start date of August 6, 2001
(g)	Start date of August 27, 2001	(p)	Start date of November 26, 2001	(y)	Start date of December 4, 2001
(h)	Start date of March 22, 2001	(q)	Start date of April 24, 2001
(i)	Start date of April 27, 2001	(r)	Start date of September 21, 2001

F-41

5. RELATED PARTY TRANSACTIONS

Contract owners' net payments represent premiums received from policyholders less certain deductions made by Protective Life in accordance with the contract terms. These deductions include, where appropriate, tax, surrender, mortality risk and expense and administrative charges. These deductions are made to the individual contracts in accordance with the terms governing each contract as set forth in the contract.

Protective Life offers a loan privilege to contract owners. Contract owners may obtain loans using the Contract as the only security for the loan. Loans are subject to provisions of The Internal Revenue Code of 1986, as amended, and to applicable retirement program rules. Loans outstanding approximated $0.4 million and $0.5 million at December 31, 2001 and 2000, respectively.

F-42

REPORT OF INDEPENDENT ACCOUNTANTS

To the Directors and Share Owner
Protective Life Insurance Company
Birmingham, Alabama

In our opinion, the consolidated financial statements listed in the index on page F-1 of this Form N-4 present fairly, in all material respects, the financial position of Protective Life Insurance Company and Subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index on page F-1 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note A of the Notes to the Consolidated Financial Statements, effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities".

PricewaterhouseCoopers LLP

Birmingham, Alabama
March 1, 2002

F-43

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands)

	Year Ended December 31
	2001			2000			1999
REVENUES
Premiums and policy fees	$	1,389,819		$	1,175,943		$	861,021
Reinsurance ceded		(771,151	)		(686,108	)		(462,297	)

Net of reinsurance ceded		618,668			489,835			398,724
Net investment income		839,103			692,081			617,829
Realized investment gains (losses):
Derivative financial instruments		(1,718	)		2,157			3,425
All other investments		(6,123	)		(16,756	)		1,335
Other income		38,578			35,194			22,599

		1,488,508			1,202,511			1,043,912

BENEFITS AND EXPENSES
Benefits and settlement expenses (net of reinsurance ceded: 2001 — $609,996; 2000 — $538,291; 1999 — $344,474)		972,624			760,778			629,656
Amortization of deferred policy acquisition costs		147,058			143,180			96,689
Amortization of goodwill		2,827			2,514
Other operating expenses (net of reinsurance ceded: 2001 — $167,243; 2000 — $223,498; 1999 — $150,570)		152,041			121,417			130,954

		1,274,550			1,027,889			857,299

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX		213,958			174,622			186,613
INCOME TAX EXPENSE
Current		118,421			12,180			43,945
Deferred		(47,964	)		49,298			24,046

		70,457			61,478			67,991

Net income from continuing operations before cumulative effect of change in accounting principle		143,501			113,144			118,622
Income (loss) from discontinued operations, net of income tax		(10,748	)		10,891			9,636
Loss from sale of discontinued operations, net of income tax		(17,754	)
Net income before cumulative effect of change in accounting principle		114,999			124,035			128,258
Cumulative effect of change in accounting principle, net of income tax		(8,341	)

NET INCOME	$	106,658		$	124,035		$	128,258

See notes to consolidated financial statements

F-44

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	December 31
	2001			2000
ASSETS
Investments:
Fixed maturities, at market (amortized cost: 2001 — $9,719,057; 2000 — $7,463,700)	$	9,812,091		$	7,390,110
Equity securities, at market (cost: 2001 — $62,051; 2000 — $44,450)		60,493			41,792
Mortgage loans on real estate		2,512,844			2,268,224
Investment real estate, net of accumulated depreciation (2001 — $1,452; 2000 — $1,226)		24,173			12,566
Policy loans		521,840			230,527
Other long-term investments		100,686			66,646
Short-term investments		228,396			172,699

Total investments		13,260,523			10,182,564
Cash		107,166			33,517
Accrued investment income		158,841			121,996
Accounts and premiums receivable, net of allowance for uncollectible amounts (2001 — $3,025; 2000 — $2,195)		55,809			72,189
Reinsurance receivables		2,173,987			1,099,574
Deferred policy acquisition costs		1,532,683			1,189,380
Goodwill, net		35,992			241,831
Property and equipment, net		46,337			51,166
Other assets		219,355			120,874
Receivable from related parties					4,768
Assets related to separate accounts:
Variable Annuity		1,910,651			1,841,439
Variable Universal Life		77,162			63,504
Other		3,997			3,746

	$	19,582,503		$	15,026,548

LIABILITIES
Policy liabilities and accruals:
Future policy benefits and claims	$	6,974,685		$	5,033,397
Unearned premiums		901,653			935,605

Total policy liabilities and accruals		7,876,338			5,969,002
Stable value contract deposits		3,716,530			3,177,863
Annuity deposits		3,248,218			1,916,894
Other policyholders' funds		132,124			125,336
Other liabilities		410,621			324,901
Accrued income taxes		125,835			(10,932	)
Deferred income taxes		72,403			72,065
Note payable		2,291			2,315
Indebtedness to related parties		6,000			10,000
Securities sold under repurchase agreements		117,000
Liabilities related to separate accounts:
Variable Annuity		1,910,651			1,841,439
Variable Universal Life		77,162			63,504
Other		3,997			3,746

Total liabilities		17,699,170			13,496,133

COMMITMENTS AND CONTINGENT LIABILITIES — NOTE G
SHARE-OWNER'S EQUITY
Preferred Stock, $1.00 par value, shares authorized and issued: 2,000, liquidation preference $2,000		2			2
Common Stock, $1.00 par value, shares authorized and issued: 5,000,000		5,000			5,000
Additional paid-in capital		785,419			632,805
Note receivable from PLC Employee Stock Ownership Plan		(4,499	)		(4,841	)
Retained earnings		1,044,243			948,819
Accumulated other comprehensive income
Net unrealized gains (losses) on investments (net of income tax: 2001 — $28,629; 2000 — $(27,661))		53,168			(51,370	)

Total share-owner's equity		1,883,333			1,530,415

	$	19,582,503		$	15,026,548

See notes to consolidated financial statements

F-45

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF SHARE-OWNER'S EQUITY

(Dollars in thousands, except per share amounts)

	Preferred Stock		Common Stock		Additional Paid-In Capital		Note Receivable From PLC ESOP			Retained Earnings			Net Unrealized Gains (Losses) on Investments			Total Share- Owner's Equity
Balance, December 31, 1998	$	2	$	5,000	$	327,992	$	(5,199	)	$	686,519		$	55,057		$	1,069,371

Net income for 1999											128,258						128,258
Change in net unrealized gains/losses on investments (net of income tax — $(106,638))														(198,043	)		(198,043	)
Reclassification adjustment for amounts included in net income (net of income tax — $(1,666))														(3,094	)		(3,094	)

Comprehensive loss for 1999																	(72,879	)

Decrease in note receivable from PLC ESOP								51									51

Balance, December 31, 1999		2		5,000		327,992		(5,148	)		814,777			(146,080	)		996,543

Net income for 2000											124,035						124,035
Change in net unrealized gains/losses on investments (net of income tax — $45,887)														85,221			85,221
Reclassification adjustment for amounts included in net income (net of income tax — $5,110)														9,489			9,489

Comprehensive income for 2000																	218,745

Capital contribution						81,000											81,000
Transfer of subsidiaries from PLC (see Note A)						223,813					10,007						233,820
Decrease in note receivable from PLC ESOP								307									307

Balance, December 31, 2000		2		5,000		632,805		(4,841	)		948,819			(51,370	)		1,530,415

Net income for 2001											106,658						106,658
Change in net unrealized gains/losses on investments (net of income tax — $52,019)														96,607			96,607
Reclassification adjustment for amounts included in net income (net of income tax — $2,143)														3,980			3,980
Transition adjustment on derivative financial instruments (net of income tax — $2,127)														3,951			3,951

Comprehensive income for 2001																	211,196

Capital contribution						134,000											134,000
Common dividend — transfer of subsidiary to PLC (see note H)											(2,052	)					(2,052	)
Preferred dividend											(1,000	)					(1,000	)
Transfer of subsidiaries from PLC (see Note A)						18,614					(8,182	)					10,432
Decrease in note receivable from PLC ESOP								342									342

Balance, December 31, 2001	$	2	$	5,000	$	785,419	$	(4,499	)	$	1,044,243		$	53,168		$	1,883,333

See notes to consolidated financial statements

F-46

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	December 31
	2001			2000			1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	106,658		$	124,035		$	128,258
Adjustments to reconcile net income to net cash provided by operating activities:
Realized investment (gains) losses		7,841			14,599			(4,760	)
Amortization of deferred policy acquisition costs		154,383			149,574			104,913
Amortization of goodwill		8,328			3,867
Capitalization of deferred policy acquisition costs		(317,626	)		(338,685	)		(239,483	)
Loss from sale of discontinued operations		17,754
Depreciation expense		11,651			9,581			10,513
Deferred income taxes		(40,970	)		55,161			24,234
Accrued income taxes		139,017			13,265			(14,841	)
Interest credited to universal life and investment products		944,098			766,004			331,746
Policy fees assessed on universal life and investment products		(222,415	)		(197,581	)		(165,818	)
Change in accrued investment income and other receivables		(241,230	)		(160,488	)		(119,183	)
Change in policy liabilities and other policyholder funds of traditional life and health products		443,023			508,454			215,201
Change in other liabilities		138,190			1,809			67,552
Other (net)		8,764			(34,626	)		(5,526	)

Net cash provided by operating activities		1,157,466			914,969			332,806

CASH FLOWS FROM INVESTING ACTIVITIES
Maturities and principal reduction of investments:
Investments available for sale		3,062,262			12,828,276			9,973,742
Other		283,181			133,814			243,280
Sale of investments:
Investments available for sale		8,943,123			810,716			537,343
Other		0			5,222			267,892
Cost of investments acquired:
Investments available for sale		(13,647,757	)		(14,384,625	)		(10,625,354	)
Corporate owned life insurance		(100,000	)
Other		(378,520	)		(463,909	)		(864,100	)
Acquisitions and bulk reinsurance assumptions		(118,557	)		(141,040	)		46,508
Purchase of property and equipment		(10,099	)		(5,085	)		(18,075	)
Sale of discontinued operations, net of cash transferred		216,031
Sale of property and equipment		70						151

Net cash used in investing activities		(1,750,266	)		(1,216,631	)		(438,613	)

CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of credit arrangements and long-term debt		2,574,954			2,197,800			4,351,177
Capital contribution from PLC		134,000			81,000
Principal payments on line of credit arrangements and long-term debt		(2,457,979	)		(2,197,823	)		(4,351,203	)
Principal payment on surplus note to PLC		(4,000	)		(4,000	)		(4,000	)
Dividends to share owner		(1,000	)
Investment product deposits and change in universal life deposits		1,735,653			1,811,484			1,300,736
Investment product withdrawals		(1,315,179	)		(1,553,282	)		(1,190,903	)

Net cash provided by financing activities		666,449			335,179			105,807

INCREASE IN CASH		73,649			33,517			0
CASH AT BEGINNING OF YEAR		33,517			0			0

CASH AT END OF YEAR	$	107,166		$	33,517		$	0

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year:
Interest on debt	$	1,390		$	3,310		$	5,611
Income taxes	$	27,395		$	25,638		$	56,192
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Reduction of principal on note from ESOP	$	342		$	307		$	51
Acquisitions, related reinsurance transactions and subsidiary transfer
Assets acquired	$	2,549,484		$	759,067		$	12,502
Liabilities assumed		(2,430,927	)		(384,207	)		(12,502	)
Equity from subsidiary transfers (see Note A)		(10,432	)		(233,820	)		0

Net	$	108,125		$	141,040		$	0

See notes to consolidated financial statements

F-47

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts in tables are in thousands)

NOTE A — SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements of Protective Life Insurance Company and subsidiaries (Protective) are prepared on the basis of accounting principles generally accepted in the United States of America. Such accounting principles differ from statutory reporting practices used by insurance companies in reporting to state regulatory authorities. (See also Note B.)

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make various estimates that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, as well as the reported amounts of revenues and expenses. Actual results could differ from these estimates.

Entities Included

The consolidated financial statements include the accounts, after intercompany eliminations, of Protective Life Insurance Company and its wholly-owned subsidiaries. Protective is a wholly-owned subsidiary of Protective Life Corporation (PLC), an insurance holding company.

On October 1, 2000, PLC transferred its ownership of twenty companies (that market prepaid dental products) to Protective. This transfer was accounted for in a manner similar to that in pooling-of-interests accounting, which resulted in the assets and liabilities of these companies being transferred at amounts equal to PLC's bases (including approximately $200 million of goodwill). In addition, Protective's share-owner's equity was adjusted by an amount equal to the companies' share-owner's equity at October 1, 2000.

On May 1, 2001, PLC transferred its ownership of another five companies (that market prepaid dental products) to Protective. This transfer was also accounted for in a manner similar to that in pooling-of-interests accounting, which resulted in the assets and liabilities of these companies being transferred at amounts equal to PLC's bases. Protective's share-owner's equity was also adjusted by an amount equal to the companies' share-owner's equity at May 1, 2001.

The results of operations of these companies have been included in the accompanying financial statements since the effective date of the transfer.

On December 31, 2001, Protective sold substantially all of the companies transferred from PLC as part of the sale of the Dental Benefits Division. For more information see the discussion under the heading "Discontinued Operations" included in Note A herein.

Nature of Operations

Protective provides financial services through the production, distribution, and administration of insurance and investment products. Protective markets individual life insurance, credit life and disability insurance, guaranteed investment contracts, guaranteed funding agreements, fixed and variable annuities, and extended service contracts throughout the United States. Protective also maintains a separate division devoted to the acquisition of insurance policies from other companies.

The operating results of companies in the insurance industry have historically been subject to significant fluctuations due to changing competition, economic conditions, interest rates, investment performance, insurance ratings, claims, persistency, and other factors.

F-48

Recently Issued Accounting Standards

On January 1, 2001, Protective adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133, as amended by SFAS Nos. 137 and 138, requires Protective to record all derivative financial instruments, at fair value on the balance sheet. Changes in fair value of a derivative instrument are reported in net income or other comprehensive income, depending on the designated use of the derivative instrument. The adoption of SFAS No. 133 resulted in a cumulative charge to net income, net of income tax, of $8.3 million and a cumulative after-tax increase to other comprehensive income of $4.0 million on January 1, 2001. The charge to net income and increase to other comprehensive income primarily resulted from the recognition of derivative instruments embedded in Protective's corporate bond portfolio. In addition, the charge to net income includes the recognition of the ineffectiveness on existing hedging relationships including the difference in spot and forward exchange rates related to foreign currency swaps used as an economic hedge of foreign-currency-denominated stable value contracts. Prospectively, the adoption of SFAS No. 133 may introduce volatility into Protective's reported net income and other comprehensive income depending on future market conditions and Protective's hedging activities.

In September 2000, the Financial Accounting Standards Board (FASB) issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of SFAS No. 125". SFAS No. 140 revises the standards for accounting for securitizations and other transfers of financial assets. This statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The adoption of this accounting standard did not have a material effect on Protective's financial position or results of operations.

In June 2001, the FASB issued SFAS Nos. 141, "Business Combinations", and 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that business combinations initiated after June 30, 2001, be accounted for using the purchase method. SFAS No. 142 revises the standards for accounting for acquired goodwill and other intangible assets. The standard replaces the requirement to amortize goodwill with one that calls for an annual impairment test, among other provisions. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, and effective for any goodwill or intangible asset acquired after June 30, 2001. Protective expects the adoption of SFAS No. 142 to result in the elimination of up to $2.8 million of goodwill amortization in 2002.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 requires that companies record the fair value of a liability for an asset retirement obligation in the period in which the liability is incurred. The Statement is effective for fiscal years beginning after June 15, 2002. Protective does not expect the adoption of SFAS No. 143 to have a material effect on Protective's financial position or results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 requires that the same accounting model be used for long-lived assets to be disposed of by sales, whether previously held and used or newly acquired, expands the use of discontinued operations accounting to include more types of transactions and changes the timing of when discontinued operations accounting is applied. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. Protective does not expect the adoption of SFAS No. 144 to have a material effect on Protective's financial position or results of operations.

F-49

Investments

Protective has classified all of its investments in fixed maturities, equity securities, and short-term investments as "available for sale."

Investments are reported on the following bases less allowances for uncollectible amounts on investments, if applicable:

•: Fixed maturities (bonds, and redeemable preferred stocks) — at current market value. Where market values are unavailable, Protective obtains estimates from independent pricing services or estimates market value based upon a comparison to quoted issues of the same issuer or issues of other issuers with similar terms and risk characteristics.
•: Equity securities (common and nonredeemable preferred stocks) — at current market value.
•: Mortgage loans — at unpaid balances, adjusted for loan origination costs, net of fees, and amortization of premium or discount.
•: Investment real estate — at cost, less allowances for depreciation computed on the straight-line method. With respect to real estate acquired through foreclosure, cost is the lesser of the loan balance plus foreclosure costs or appraised value.
•: Policy loans — at unpaid balances.
•: Other long-term investments — at a variety of methods similar to those listed above, as deemed appropriate for the specific investment.
•: Short-term investments — at cost, which approximates current market value.

Substantially all short-term investments have maturities of three months or less at the time of acquisition and include approximately $0.6 million in bank deposits voluntarily restricted as to withdrawal.

As prescribed by SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," certain investments are recorded at their market values with the resulting unrealized gains and losses reduced by a related adjustment to deferred policy acquisition costs, net of income tax, reported as a component of share-owner's equity. The market values of fixed maturities increase or decrease as interest rates fall or rise. Therefore, although the application of SFAS No. 115 does not affect Protective's operations, its reported share-owner's equity will fluctuate significantly as interest rates change.

F-50

Protective's balance sheets at December 31, prepared on the basis of reporting investments at amortized cost rather than at market values, are as follows:

	2001		2000
Total investments	$	13,157,623	$	10,258,809
Deferred policy acquisition costs		1,553,786		1,192,696
All other assets		4,789,297		3,654,604

	$	19,500,706	$	15,106,109

Deferred income taxes	$	43,774	$	100,256
All other liabilities		17,626,767		13,424,068

		17,670,541		13,524,324
Share-owner's equity		1,830,165		1,581,785

	$	19,500,706	$	15,106,109

Realized gains and losses on sales of investments are recognized in net income using the specific identification basis.

Derivative Financial Instruments

Protective utilizes a risk management strategy that incorporates the use of derivative instruments, primarily to reduce its exposure to interest rate risk as well as currency exchange risk.

Combinations of interest rate swap contracts, options and futures contracts are sometimes used as hedges against changes in interest rates for certain investments, primarily outstanding mortgage loan commitments and mortgage-backed securities. Interest rate swap contracts generally involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date. Interest rate futures generally involved exchange traded contracts to buy or sell treasury bonds and notes in the future at specified prices. Interest rate options represent contracts that allow the holder of the option to receive cash or purchase, sell or enter into a financial instrument at a specified price within a specified period of time. Protective uses foreign currency swaps to reduce its exposure to currency exchange risk on certain stable value contracts denominated in foreign currencies, primarily the European euro and the British pound.

Derivative instruments expose Protective to credit and market risk. Protective minimizes its credit risk by entering into transactions with highly rated counterparties. Protective manages the market risk associated with interest rate and foreign exchange contracts by establishing and monitoring limits as to the types and degrees of risk that may be undertaken.

Protective monitors its use of derivatives in connection with its overall asset/liability management programs and procedures. Protective's asset/liability committee is responsible for implementing various hedging strategies that are developed through its analysis of data from financial simulation models and other internal and industry sources. The resulting hedging strategies are then incorporated into Protective's overall interest rate and currency exchange risk management strategies.

All derivatives are recognized on the balance sheet (other long-term investments or other liabilities) at their fair value (primarily estimates from independent pricing services). On the date the derivative contract is entered into, Protective designates the derivative as (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment ("fair value" hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized

F-51

asset or liability ("cash flow" hedge), or (3) as a derivative either held for investment purposes or held as a natural hedging instrument designed to act as an economic hedge against the changes in value or cash flows of a hedged item ("other" derivative). Changes in the fair value of a derivative that is highly effective as — and that is designated and qualifies as — a fair-value hedge, along with the loss or gain on the hedged asset or liability that is attributable to the hedged risk (including losses or gains on firm commitments), are recorded in current-period earnings. Changes in the fair value of a derivative that is highly effective as — and that is designated and qualified as — a cash-flow hedge are recorded in other comprehensive income, until earnings are affected by the variability of cash flows. Changes in the fair value of other derivatives are recognized in current earnings and reported in Realized Investment Gains (Losses) — Derivative Financial Instruments in Protective's consolidated statements of income.

Protective formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair-value or cash-flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. Protective also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, Protective discontinues hedge accounting prospectively, as discussed below.

Protective discontinues hedge accounting prospectively when (1) it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item (including firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated, or exercised; (3) the derivative is dedesignated as a hedge instrument, because it is unlikely that a forecasted transaction will occur; (4) because a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designation of the derivative as a hedge instrument is no longer appropriate.

When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair-value hedge, the derivative will continue to be carried on the balance sheet at its fair value, and the hedged asset or liability will no longer be adjusted for changes in fair value. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the derivative will continue to be carried on the balance sheet at its fair value, and any asset or liability that was recorded pursuant to recognition of the firm commitment will be removed from the balance sheet and recognized as a gain or loss in current-period earnings. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the derivative will continue to be carried on the balance sheet at its fair value, and gains and losses that were accumulated in other comprehensive income will remain therein until such time as they are reclassified to earnings as originally forecasted to occur. In all situations in which hedge accounting is discontinued, the derivative will be carried at its fair value on the balance sheet, with changes in its fair value recognized in current-period earnings.

Fair-Value Hedges. Protective has designated, as a fair value hedge, callable interest rate swaps used to modify the interest characteristics of certain stable value contracts. In assessing hedge effectiveness, Protective excludes the embedded call option's time value component from each derivative's total gain or loss. In 2001, total measured ineffectiveness for the fair value hedging relationships was insignificant while the excluded time value component resulted in a pre-tax gain of $1.3 million. Both the measured

F-52

ineffectiveness and the excluded time value component are reported in Realized Investment Gains (Losses) — Derivative Financial Instruments in Protective's consolidated statements of income.

Cash-Flow Hedges. Protective has not designated any hedging relationships as a cash flow hedge.

Other Derivatives. Protective uses certain interest rate swaps, caps, floors, swaptions, options and futures contracts as economic hedges against the changes in value or cash flows of outstanding mortgage loan commitments and certain owned investments. In 2001, Protective recognized total pre-tax losses of $1.2 million representing the change in fair value of these derivative instruments.

On its foreign currency swaps, Protective recognized a $8.2 million pre-tax loss in 2001 while recognizing a $11.2 million foreign exchange pre-tax gain on the related foreign-currency-denominated stable value contracts. The net gain primarily results from the difference in the forward and spot exchange rates used to revalue the currency swaps and the stable value contracts, respectively. This net gain is reflected in Realized Investment Gains (Losses) — Derivative Financial Instruments in Protective's consolidated statements of income.

Protective has entered into asset swap arrangements to effectively sell the equity options embedded in owned convertible bonds in exchange for an interest rate swap that converts the remaining host bond to a variable rate instrument. In 2001, Protective recognized a $12.2 million pre-tax gain for the change in the asset swaps' fair value and recognized a $16.9 million pre-tax loss to separately record the embedded equity options at fair value.

At December 31, 2001, contracts with a notional amount of $4,485.1 million were in a $1.6 million net loss position. At December 31, 2000, contracts with a notional amount of $2,424.3 million were in a $13.0 million net loss position. Protective recognized $2.2 million in realized investment gains related to derivative financial instruments in 2000.

Protective's derivative financial instruments are with highly rated counterparties.

Cash

Cash includes all demand deposits reduced by the amount of outstanding checks and drafts. Protective has deposits with certain financial institutions which exceed federally insured limits. Protective has reviewed the credit worthiness of these financial institutions and believes there is minimal risk of a material loss.

Deferred Policy Acquisition Costs

Commissions and other costs of acquiring traditional life and health insurance, credit insurance, universal life insurance, and investment products that vary with and are primarily related to the production of new business have been deferred. Traditional life and health insurance acquisition costs are amortized over the premium-payment period of the related policies in proportion to the ratio of annual premium income to the present value of the total anticipated premium income. Credit insurance acquisition costs are being amortized in proportion to earned premium. Acquisition costs for universal life and investment products are amortized over the lives of the policies in relation to the present value of estimated gross profits before amortization. Under SFAS No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments," Protective makes certain assumptions regarding the mortality, persistency, expenses, and interest rates (equal to the rate used to compute liabilities for future policy benefits; currently 3.0% to 9.4%) it expects to experience in future periods. These assumptions are to be best

F-53

estimates and are to be periodically updated whenever actual experience and/or expectations for the future change from that assumed. Additionally, relating to SFAS No. 115, these costs have been adjusted by an amount equal to the amortization that would have been recorded if unrealized gains or losses on investments associated with Protective's universal life and investment products had been realized.

The cost to acquire blocks of insurance representing the present value of future profits from such blocks of insurance is also included in deferred policy acquisition costs. Protective amortizes the present value of future profits over the premium payment period, including accrued interest of up to approximately 8%. The unamortized present value of future profits for all acquisitions was approximately $523.4 million and $343.6 million at December 31, 2001 and 2000, respectively. During 2001, $221.9 million of present value of future profits was capitalized (relating to acquisitions made during the year) and $42.1 million was amortized. During 2000, $47.3 million of present value of future profits was capitalized, and $44.3 million was amortized.

Goodwill

Goodwill is being amortized straight-line over periods ranging from 20 to 40 years. Goodwill at December 31, is as follows:

	2001		2000
Goodwill	$	41,363	$	260,773
Accumulated amortization		5,371		18,942

	$	35,992	$	241,831

Protective periodically evaluates the recoverability of its goodwill by comparing expected future cash flows to the amount of unamortized goodwill. If this evaluation were to indicate the unamortized goodwill is impaired, the goodwill would be reduced to an amount representing the present value of applicable estimated future cash flows. A substantial portion of goodwill was disposed of in connection with the 2001 sale of Protective's Dental Benefits Division.

Property and Equipment

Property and equipment are reported at cost. Protective primarily uses the straight-line method of depreciation based upon the estimated useful lives of the assets. Major repairs or improvements are capitalized and depreciated over the estimated useful lives of the assets. Other repairs are expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or retired are removed from the accounts, and resulting gains or losses are included in income.

Property and equipment consisted of the following at December 31:

	2001		2000
Home office building	$	42,980	$	41,184
Other, principally furniture and equipment		67,128		66,484

		110,108		107,668
Accumulated depreciation		63,771		56,502

	$	46,337	$	51,166

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Separate Accounts

The assets and liabilities related to separate accounts in which Protective does not bear the investment risk are valued at market and reported separately as assets and liabilities related to separate accounts in the accompanying consolidated financial statements.

Stable Value Contracts Account Balances

Protective markets guaranteed investment contracts to 401 (k) and other qualified retirement savings plans, and fixed and floating rate funding agreements to the trustees of municipal bond proceeds, institutional investors, bank trust departments, and money market funds. Protective also sells funding agreements to special purpose entities that in turn issue notes or certificates in smaller, transferable denominations. In a structured program, Protective issues funding agreements to a special purpose trust or entity formed solely to purchase the funding agreements and simultaneously issue certificates or notes having terms substantially identical to the underlying funding agreements. Stable value contract account balances include guaranteed investment contracts and funding agreements issued by Protective, and the obligations of consolidated special purpose trusts or entities formed to purchase funding agreements issued by Protective. At December 31, 2001 and 2000 Protective had $1.7 billion and $1.0 billion of stable value contract account balances marketed through structured programs.

Revenues and Benefits Expense

•: Traditional Life, Health, and Credit Insurance Products — Traditional life insurance products consist principally of those products with fixed and guaranteed premiums and benefits and include whole life insurance policies, term and term-like life insurance policies, limited-payment life insurance policies, and certain annuities with life contingencies. Life insurance and immediate annuity premiums are recognized as revenue when due. Health and credit insurance premiums are recognized as revenue over the terms of the policies. Benefits and expenses are associated with earned premiums so that profits are recognized over the life of the contracts. This is accomplished by means of the provision for liabilities for future policy benefits and the amortization of deferred policy acquisition costs.

Liabilities for future policy benefits on traditional life insurance products have been computed using a net level method including assumptions as to investment yields, mortality, persistency, and other assumptions based on Protective's experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Reserve investment yield assumptions are graded and range from 2.5% to 7.0%. The liability for future policy benefits and claims on traditional life, health, and credit insurance products includes estimated unpaid claims that have been reported to Protective and claims incurred but not yet reported. Policy claims are charged to expense in the period that the claims are incurred.

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Activity in the liability for unpaid claims is summarized as follows:

	2001			2000			1999
Balance beginning of year	$	109,973		$	120,575		$	90,332
Less reinsurance		25,830			47,661			20,019

Net balance beginning of year		84,143			72,914			70,313

Incurred related to:
Current year		383,371			311,633			311,002
Prior year		(1,080	)		(4,489	)		(5,574	)

Total incurred		382,291			307,144			305,428

Paid related to:
Current year		312,748			241,566			264,298
Prior year		81,220			60,972			40,197

Total paid		393,968			302,538			304,495

Other changes:
Acquisitions and reserve transfers		(6,166	)		6,623			1,668

Net balance end of year		66,300			84,143			72,914
Plus reinsurance		33,723			25,830			47,661

Balance end of year	$	100,023		$	109,973		$	120,575

•: Universal Life and Investment Products — Universal life and investment products include universal life insurance, guaranteed investment contracts, deferred annuities, and annuities without life contingencies. Revenues for universal life and investment products consist of policy fees that have been assessed against policy account balances for the costs of insurance, policy administration, and surrenders. Benefit reserves for universal life and investment products represent policy account balances before applicable surrender charges plus certain deferred policy initiation fees that are recognized in income over the term of the policies. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policy account balances and interest credited to policy account balances. Interest credit rates for universal life and investment products ranged from 3.0% to 9.4% in 2001.

Protective's accounting policies with respect to variable universal life and variable annuities are identical except that policy account balances (excluding account balances that earn a fixed rate) are valued at market and reported as components of assets and liabilities related to separate accounts.

Income Taxes

Protective uses the asset and liability method of accounting for income taxes. Income tax provisions are generally based on income reported for financial statement purposes. Deferred federal income taxes arise from the recognition of temporary differences between the basis of assets and liabilities determined for financial reporting purposes and the basis determined for income tax purposes. Such temporary differences are principally related to the deferral of policy acquisition costs and the provision for future policy benefits and expenses.

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Discontinued Operations

On December 31, 2001, Protective completed the sale to Fortis, Inc. of substantially all of its Dental Benefits Division (Dental Division), and discontinued other remaining Dental Division related operations, primarily other health insurance lines.

The operating results and charges related to the sale of the Dental Division at December 31 are as follows:

	2001			2000			1999
Total revenues	$	346,315		$	254,547		$	210,405

Income (loss) before
income taxes from discontinued operations	$	(13,983	)	$	17,484		$	14,824
Income tax (expense)
Benefit		3,235			(6,593	)		(5,188	)

Income (loss) from discontinued operations	$	(10,748	)	$	10,891		$	9,636

Gain from sale of discontinued operations before income tax	$	27,221
Income tax expense related to sale		(44,975	)

Loss from sale of discontinued operations	$	(17,754	)

Remaining assets and liabilities at December 31, 2001 related to the business sold to Fortis, Inc. consist of reinsurance receivables and policy liabilities and accruals of approximately $51.2 million. Assets and liabilities related to the other discontinued lines of business of approximately $11.1 million and $14.3 million, respectively, remain at December 31, 2001.

Reclassifications

Certain reclassifications have been made in the previously reported financial statements and accompanying notes to make the prior year amounts comparable to those of the current year. Such reclassifications had no effect on previously reported net income, total assets, or share-owners' equity.

NOTE B — RECONCILIATION WITH STATUTORY REPORTING PRACTICES

Financial statements prepared in conformity with accounting principles generally accepted in the United States of America differ in some respects from the statutory accounting practices prescribed or permitted by insurance regulatory authorities. The most significant differences are as follows: (a) acquisition costs of obtaining new business are deferred and amortized over the approximate life of the policies rather than charged to operations as incurred; (b) benefit liabilities are computed using a net level method and are based on realistic estimates of expected mortality, interest, and withdrawals as adjusted to provide for possible unfavorable deviation from such assumptions; (c) deferred income taxes are provided for temporary differences between financial and taxable earnings; (d) the Asset Valuation Reserve and Interest Maintenance Reserve are restored to share-owner's equity; (e) furniture and equipment, agents' debit balances, and prepaid expenses are reported as assets rather than being charged directly to surplus (referred to as nonadmitted assets); (f) certain items of interest income, such as mortgage and bond discounts, are amortized differently; and (g) bonds are recorded at their market values instead of amortized cost. The National Association of Insurance Commissioners (NAIC) has adopted the Codification of Statutory Accounting Principles (Codification). Codification changed

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statutory accounting rules in several areas and was effective January 1, 2001. The adoption of Codification did not have a material effect on Protective's statutory capital.

The reconciliations of net income and share-owner's equity prepared in conformity with statutory reporting practices to that reported in the accompanying consolidated financial statements are as follows:

	Net Income									Share-Owner's Equity
	2001			2000			1999			2001			2000			1999
In conformity with statutory reporting practices:(1)	$	163,181		$	66,694		$	75,114		$	775,138		$	628,274		$	567,634
Additions (deductions) by adjustment:
Deferred policy acquisition costs, net of amortization		163,243			157,617			120,644			1,532,683			1,189,380			1,011,524
Deferred income tax		47,964			(52,580	)		(25,675	)		(74,083	)		(72,065	)		32,335
Asset Valuation Reserve											108,062			103,853			41,104
Interest Maintenance Reserve		(10,444	)		(3,540	)		(226	)		16,959			9,715			19,328
Nonadmitted items											139,500			97,447			51,350
Other timing and valuation adjustments		(33,456	)		(43,757	)		72,527			(334,198	)		(204,985	)		(467,130	)
Discontinued operations		(193,688	)
Noninsurance affiliates		19,022			21,276			20,698
Consolidation elimination		(49,164	)		(21,675	)		(134,824	)		(280,728	)		(221,204	)		(259,602	)

In conformity with generally accepted accounting principles	$	106,658		$	124,035		$	128,258		$	1,883,333		$	1,530,415		$	996,543

(1)

Consolidated

As of December 31, 2001, Protective and its insurance subsidiaries had on deposit with regulatory authorities, fixed maturity and short-term investments with a market value of approximately $81.9 million.

NOTE C — INVESTMENT OPERATIONS

Major categories of net investment income for the years ended December 31 are summarized as follows:

	2001		2000		1999
Fixed maturities	$	609,578	$	529,990	$	462,295
Equity securities		2,247		2,532		775
Mortgage loans		208,830		177,917		172,027
Investment real estate		2,094		2,027		1,949
Policy loans		31,763		14,977		15,994
Other, principally short-term investments		36,695		12,532		19,504

		891,207		739,975		672,544
Investment expenses		52,104		47,894		54,715

	$	839,103	$	692,081	$	617,829

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Realized investment gains (losses) for all other investments for the years ended December 31 are summarized as follows:

	2001			2000			1999
Fixed maturities	$	(4,693	)	$	(14,787	)	$	8,327
Equity securities		2,462			1,685			(3,371	)
Mortgage loans and other investments		(3,892	)		(3,654	)		(3,621	)

	$	(6,123	)	$	(16,756	)	$	1,335

In 2001, gross gains on the sale of investments available for sale (fixed maturities, equity securities and short-term investments) were $62.5 million and gross losses were $68.1 million. In 2000, gross gains were $8.7 million and gross losses were $28.4 million. In 1999, gross gains were $44.1 million and gross losses were $32.3 million. During 2001, Protective recorded other than temporary impairments in its investments of $12.6 million.

Realized investment gains (losses) for derivative financial instruments for the years ended December 31 are summarized as follows:

		2001			2000			1999
Derivative financial instruments		$	(1,718	)	$	2,157		$	3,425

The amortized cost and estimated market values of Protective's investments classified as available for sale at December 31 are as follows:

2001	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Values
Fixed maturities:
Bonds:
Mortgage-backed securities	$	3,709,118	$	84,965	$	33,759	$	3,760,324
United States Government and authorities		98,967		4,088		0		103,055
States, municipalities, and political subdivision		94,022		4,009		0		98,031
Public utilities		807,773		19,763		4,860		822,676
Convertibles and bonds with warrants		96,951		7,423		6,184		98,190
All other corporate bonds		4,910,614		117,092		99,500		4,928,206
Redeemable preferred stocks		1,612		0		3		1,609

		9,719,057		237,340		144,306		9,812,091
Equity securities		62,051		3,565		5,123		60,493
Short-term investments		228,396		0		0		228,396

	$	10,009,504	$	240,905	$	149,429	$	10,100,980

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2000	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Values
Fixed maturities:
Bonds:
Mortgage-backed securities	$	2,915,813	$	49,372	$	33,173	$	2,932,012
United States Government and authorities		95,567		2,662		0		98,229
States, municipalities, and political subdivision		88,222		3,408		0		91,630
Public utilities		631,698		7,803		5,591		633,910
Convertibles and bonds with warrants		69,013		11,277		12,145		68,145
All other corporate bonds		3,662,586		49,536		146,732		3,565,390
Redeemable preferred stocks		801		0		7		794

		7,463,700		124,058		197,648		7,390,110
Equity securities		44,450		2,761		5,419		41,792
Short-term investments		172,699		0		0		172,699

	$	7,680,849	$	126,819	$	203,067	$	7,604,601

The amortized cost and estimated market values of fixed maturities at December 31, by expected maturity, are shown as follows. Expected maturities are derived from rates of prepayment that may differ from actual rates of prepayment.

2001	Amortized Cost		Estimated Market Values
Due in one year or less	$	896,159	$	899,666
Due after one year through five years		3,253,264		3,318,537
Due after five years through ten years		2,199,562		2,228,012
Due after ten years		3,370,072		3,365,876

	$	9,719,057	$	9,812,091

At December 31, 2001 and 2000, Protective had bonds which were rated less than investment grade of $421.3 million and $226.5 million, respectively, having an amortized cost of $499.9 million and $306.0 million, respectively. At December 31, 2001, approximately $63.3 million of the bonds rated less than investment grade were securities issued in company-sponsored commercial mortgage loan securitizations. Approximately $1,762.2 million of bonds are not publicly traded.

The change in unrealized gains (losses), net of income tax, on fixed maturity and equity securities for the years ended December 31 is summarized as follows:

		2001			2000			1999
Fixed maturities		$	108,307		$	109,625		$	(217,901	)
Equity securities			715			(820	)		973

At December 31, 2001, all of Protective's mortgage loans were commercial loans of which 75% were retail, 10% were apartments, 7% were office buildings, and 7% were warehouses, and 1% other. Protective specializes in making mortgage loans on either credit-oriented or credit-anchored commercial properties, most of which are strip shopping centers in smaller towns and cities. No single tenant's leased

F-60

space represents more than 3.5% of mortgage loans. Approximately 76% of the mortgage loans are on properties located in the following states listed in decreasing order of significance: Texas, Tennessee, Georgia, Alabama, North Carolina, South Carolina, Florida, Virginia, California, Mississippi, Washington, Kentucky, and Ohio.

Many of the mortgage loans have call provisions after 3 to 10 years. Assuming the loans are called at their next call dates, approximately $153.4 million would become due in 2002, $560.4 million in 2003 to 2006, and $392.5 million in 2007 to 2011, and $46.7 million thereafter.

At December 31, 2001, the average mortgage loan was approximately $2.1 million, and the weighted average interest rate was 7.6%. The largest single mortgage loan was $18.8 million.

For several years Protective has offered a type of commercial mortgage loan under which Protective will permit a slightly higher loan-to-value ratio in exchange for a participating interest in the cash flows from the underlying real estate. As of December 31, 2001 and 2000, approximately $548.4 million and $572.2 million respectively, of Protective's mortgage loans have this participation feature.

At December 31, 2001 and 2000, Protective's problem mortgage loans (over ninety days past due) and foreclosed properties totaled $29.6 million and $20.6 million, respectively. Since Protective's mortgage loans are collateralized by real estate, any assessment of impairment is based upon the estimated fair value of the real estate. Based on Protective's evaluation of its mortgage loan portfolio, Protective does not expect any material losses on its mortgage loans.

Certain investments with a carrying value of $62.5 million were non-income producing for the twelve months ended December 31, 2001.

Policy loan interest rates generally range from 4.0% to 8.0%.

On December 31, 2001, Protective Life Insurance Company had $117.0 million of securities sold under repurchase agreements with an interest rate of 2.0%. The agreement to repurchase liability is recorded as securities sold under repurchase agreements.

NOTE D — FEDERAL INCOME TAXES

Protective's effective income tax rate varied from the maximum federal income tax rate as follows:

	2001		2000		1999
Statutory federal income tax rate applied to pretax income	35.0	%	35.0	%	35.0	%
Dividends received deduction and tax-exempt interest	(1.7	)	(0.6	)	(0.1	)
Low-income housing credit	(0.5	)	(0.4	)	(0.5	)
Other	(0.1	)	0.0		0.4
State income taxes	0.2		1.2		1.6

Effective income tax rate	32.9	%	35.2	%	36.4	%

The provision for federal income tax differs from amounts currently payable due to certain items reported for financial statement purposes in periods which differ from those in which they are reported for income tax purposes.

F-61

Details of the deferred income tax provision for the years ended December 31 are as follows:

	2001			2000			1999
Deferred policy acquisition costs	$	81,015		$	41,533		$	44,546
Benefits and other policy liability changes		(127,189	)		10,969			(27,158	)
Temporary differences of investment income.		7,145			(3,333	)		6,655
Other items		(8,935	)		129			3

	$	(47,964	)	$	49,298		$	24,046

The components of Protective's net deferred income tax liability as of December 31 were as follows:

	2001		2000
Deferred income tax assets:
Policy and policyholder liability reserves	$	334,876	$	205,815
Other		10,893		1,959

		345,769		207,774

Deferred income tax liabilities:
Deferred policy acquisition costs		379,072		302,631
Unrealized gains (losses) on investments		39,100		(22,792	)

		418,172		279,839

Net deferred income tax liability	$	72,403	$	72,065

Under pre-1984 life insurance company income tax laws, a portion of Protective's gain from operations which was not subject to current income taxation was accumulated for income tax purposes in a memorandum account designated as Policyholders' Surplus. The aggregate accumulation in this account at December 31, 2001 was approximately $70.5 million. Should the accumulation in the Policyholders' Surplus account exceed certain stated maximums, or should distributions including cash dividends be made to PLC in excess of approximately $972 million, such excess would be subject to federal income taxes at rates then effective. Deferred income taxes have not been provided on amounts designated as Policyholders' Surplus. Under current income tax laws, Protective does not anticipate paying income tax on amounts in the Policyholders' Surplus accounts.

Protective's income tax returns are included in the consolidated income tax returns of PLC. The allocation of income tax liabilities among affiliates is based upon separate income tax return calculations.

NOTE E — DEBT

Under revolving line of credit arrangements with several banks, PLC can borrow up to $200 million on an unsecured basis. No compensating balances are required to maintain the line of credit. These lines of credit arrangements contain, among other provisions, requirements for maintaining certain financial ratios, and restrictions on indebtedness incurred by PLC's subsidiaries including Protective. Additionally, PLC, on a consolidated basis, cannot incur debt in excess of 40% of its total capital. At December 31, 2001, PLC had no borrowings outstanding under these credit arrangements.

Protective has a mortgage note on investment real estate amounting to approximately $2.3 million that matures in 2003.

F-62

Included in indebtedness to related parties is a surplus debenture issued by Protective to PLC. At December 31, 2001, the balance of the surplus debenture was $6.0 million. The debenture matures in 2003 and has an interest rate of 8.5%.

Protective routinely receives from or pays to affiliates under the control of PLC reimbursements for expenses incurred on one another's behalf. Receivables and payables among affiliates are generally settled monthly.

Interest expense on debt totaled $1.8 million, $3.8 million, and $5.1 million in 2001, 2000 and 1999, respectively.

NOTE F — RECENT ACQUISITIONS

In September 1999, Protective recaptured a block of credit life and disability policies which it had previously ceded.

In January 2000, Protective acquired the Lyndon Insurance Group (Lyndon). The assets acquired included $47.3 million of present value of future profits and $41.4 million of goodwill.

In January 2001, Protective coinsured a block of individual life policies from Standard Insurance Company.

In October 2001, Protective completed the acquisition of the stock of Inter-State Assurance Company (Inter-State) and First Variable Life Insurance Company (First Variable) from ILona Financial Group, Inc., a subsidiary of Irish Life & Permanent plc of Dublin, Ireland. The purchase price was approximately $250 million. The assets acquired included $132.7 million of present value of future profits.

These transactions have been accounted for as purchases, and the results of the transactions have been included in the accompanying financial statements since their respective effective dates.

Summarized below are the consolidated results of operations for 2001 and 2000, on an unaudited pro forma basis, as if the Inter-State and First Variable acquisitions had occurred as of January 1, 2000. The pro forma information is based on Protective's consolidated results of operations for 2001 and 2000, and on data provided by the acquired companies, after giving effect to certain pro forma adjustments. The pro forma financial information does not purport to be indicative of results of operations that would have occurred had the transaction occurred on the basis assumed above nor are they indicative of results of the future operations of the combined enterprises.

(unaudited)		2001			2000
Total revenues		$	1,557,827		$	1,294,937
Net income			115,433			135,735

NOTE G — COMMITMENTS AND CONTINGENT LIABILITIES

Protective leases administrative and marketing office space in approximately 25 cities including Birmingham, with most leases being for periods of three to five years. The aggregate annual rent is approximately $8.5 million.

Protective has financed the construction of a third building contiguous to its existing home office complex under an operating lease arrangement. Approximately $38 million of construction costs had

F-63

been incurred at December 31, 2001. Protective has an option to purchase the building from the lessor at the end of the lease term.

Under insurance guaranty fund laws, in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. Protective does not believe such assessments will be materially different from amounts already provided for in the financial statements. Most of these laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer's own financial strength.

A number of civil jury verdicts have been returned against insurers and other providers of financial services involving sales practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or persons with whom the insurer does business, and other matters. Increasingly these lawsuits have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive and non-economic compensatory damages. In some states, juries, judges and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very little appellate review. In addition, in some class action and other lawsuits, companies have made material settlement payments. Protective, like other financial service companies, in the ordinary course of business, is involved in such litigation or, alternatively, in arbitration. Although the outcome of any such litigation or arbitration cannot be predicted Protective believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse effect on the financial position, results of operations, or liquidity of Protective.

NOTE H — SHARE-OWNER'S EQUITY AND RESTRICTIONS

At December 31, 2001, approximately $1,053.6 million of consolidated share-owner's equity, excluding net unrealized gains on investments, represented net assets of Protective and its subsidiaries that cannot be transferred to PLC in the form of dividends, loans, or advances. In addition, Protective and its subsidiaries are subject to various state statutory and regulatory restrictions on their ability to pay dividends to PLC. In general, dividends up to specified levels are considered ordinary and may be paid thirty days after written notice to the insurance commissioner of the state of domicile unless such commissioner objects to the dividend prior to the expiration of such period. Dividends in larger mounts are considered extraordinary and are subject to affirmative prior approval by such commissioner. The maximum amount that would qualify as ordinary dividends to PLC by Protective in 2002 is estimated to be $99.0 million.

On October 1, 2001, Protective transferred its ownership interest in a small subsidiary to PLC. This transfer was recorded as a common dividend at an amount equal to Protective's basis in the subsidiary, which approximated fair value.

NOTE I — PREFERRED STOCK

PLC owns all of the 2,000 shares of preferred stock issued by Protective's subsidiary, Protective Life and Annuity Insurance Company (PL&A). The stock pays, when and if declared, noncumulative participating dividends to the extent PL&A's statutory earnings for the immediately preceding fiscal year exceeded $1.0 million. In 2001, PL&A paid a $1.0 million preferred dividend to PLC. PL&A paid no preferred dividends during 2000 or 1999.

F-64

NOTE J — RELATED PARTY MATTERS

On August 6, 1990, PLC announced that its Board of Directors approved the formation of an Employee Stock Ownership Plan (ESOP). On December 1, 1990, Protective transferred to the ESOP 520,000 shares of PLC's common stock held by it in exchange for a note. The outstanding balance of the note, $4.5 million at December 31, 2001, is accounted for as a reduction to share-owner's equity. The stock will be used to match employee contributions to PLC's existing 401(k) Plan. The ESOP shares are dividend paying. Dividends on the shares are used to pay the ESOP's note to Protective.

Protective leases furnished office space and computers to affiliates. Lease revenues were $4.0 million in 2001, $4.0 million in 2000, and $3.7 million in 1999. Protective purchases data processing, legal, investment and management services from affiliates. The costs of such services were $82.6 million, $76.7 million, and $69.2 million in 2001, 2000, and 1999, respectively. Commissions paid to affiliated marketing organizations of $10.0 million, $12.0 million, and $11.4 million in 2001, 2000, and 1999, respectively, were included in deferred policy acquisition costs.

Certain corporations with which PLC's directors were affiliated paid Protective premiums and policy fees or other amounts for various types of insurance and investment products. Such premiums, policy fees, and other amounts totaled $19.6 million, $50.9 million and $70.3 million in 2001, 2000, and 1999, respectively. Protective and/or PLC paid commissions, interest on debt and investment products, and fees to these same corporations totaling $5.9 million, $28.2 million and $16.7 million in 2001, 2000, and 1999, respectively.

For a discussion of indebtedness to related parties, see Note E.

NOTE K — OPERATING SEGMENTS

Protective operates business segments each having a strategic focus which can be grouped into three general categories: life insurance, retirement savings and investment products and specialty insurance products. An operating segment is generally distinguished by products and/or channels of distribution. A brief description of each division follows.

Life Insurance

The Life Marketing segment markets level premium term and term-like insurance, universal life, and variable universal life products on a national basis primarily through networks of independent insurance agents and brokers, and in the "bank owned life insurance" market.

The Acquisitions segment focuses on acquiring, converting, and servicing policies acquired from other companies. The segment's primary focus is on life insurance policies sold to individuals.

Retirement Savings and Investment Products

The Stable Value Contracts segment markets guaranteed investment contracts to 401(k) and other qualified retirement savings plans. The segment also markets fixed and floating rate funding agreements to the trustees of municipal bond proceeds, institutional investors, bank trust departments, and money market funds.

The Annuities segment manufactures, sells, and supports fixed and variable annuity products. These products are primarily sold through stockbrokers, but are also sold through financial institutions and the Life Marketing segment's sales force.

F-65

Specialty Insurance Products

The Credit Products segment markets credit life and disability insurance products through banks, consumer finance companies, and automobile dealers, and markets vehicle and recreational marine extended service contracts.

Corporate and Other

Protective has an additional business segment herein referred to as Corporate and Other. The Corporate and Other segment primarily consists of net investment income and expenses not attributable to the segments above (including net investment income on unallocated capital and interest on substantially all debt). This segment also includes earning from several lines of business which Protective is not actively marketing (mostly cancer insurance and group annuities).

Protective uses the same accounting policies and procedures to measure operating segment income and assets as it uses to measure its consolidated net income and assets. Operating segment income is generally income before income tax. Premiums and policy fees, other income, benefits and settlement expenses, and amortization of deferred policy acquisition costs are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner which most appropriately reflects the operations of that segment. Unallocated realized investment gains (losses) are deemed not to be associated with any specific segment.

Assets are allocated based on policy liabilities and deferred policy acquisition costs directly attributable to each segment.

There are no significant intersegment transactions.

The following table sets forth total operating segment income and assets for the periods shown. Adjustments represent the inclusion of unallocated realized investment gains (losses), the recognition of income tax expense, income from discontinued operations, and cumulative effect of change in accounting principle. Asset adjustments represent the inclusion of assets related to discontinued operations.

In December 2001, Protective sold substantially all of its Dental Division and discontinued other Dental related operations. Additionally, other adjustments were made to combine its life insurance marketing operations into a single segment, and to reclassify certain smaller businesses. Prior period segment results have been restated to reflect these changes.

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F-67

(REPAGINATE SO SPREADING TABLES START ON EVEN PAGE.)

	Life Insurance						Retirement Savings and Investment Products					Specialty Insurance Products
Operating Segment Income	Life Marketing			Acquisitions			Stable Value Contracts			Annuities		Credit Products			Corporate And Other
2001
Gross premiums and policy fees	$	542,407		$	243,914			—		$	28,145	$	524,281		$	51,072
Reinsurance ceded		(421,411	)		(61,482	)		—			—		(274,220	)		(14,038	)

Net premium and policy fees		120,996			182,432			—			28,145		250,061			37,034
Net investment income		178,866			187,535		$	261,079			167,809		48,617			(4,803	)
Realized investment gains (losses)		—			—			7,218			1,139		—			—
Other income		1,134			345			—			3,441		31,907			1,751

Total revenues		300,996			370,312			268,297			200,534		330,585			33,982

Benefits and settlement expenses		190,538			238,877			222,306			137,204		154,893			28,806
Amortization of deferred policy acquisition costs and goodwill		41,399			20,500			1,662			24,021		60,508			1,795
Other operating expenses		(22,957	)		41,684			3,961			24,073		79,453			25,827

Total benefits and expenses		208,980			301,061			227,929			185,298		294,854			56,428

Income from continuing operations before income tax		92,016			69,251			40,368			15,236		35,731			(22,446	)
Income tax expense
Discontinued operations, net of income tax
Change in accounting principle, net of income tax

Net income

2000
Gross premiums and policy fees	$	487,720		$	134,099			—		$	30,127	$	479,397		$	44,600
Reinsurance ceded		(387,907	)		(31,102	)		—			—		(258,931	)		(8,168	)

Net premium and policy fees		99,813			102,997			—			30,127		220,466			36,432
Net investment income		152,317			116,940		$	243,133			132,204		46,464			1,023
Realized investment gains (losses)		—			—			(6,556	)		410		—			—
Other income		(1,379	)		(4	)		—			2,809		28,352			5,416

Total revenues		250,751			219,933			236,577			165,550		295,282			42,871

Benefits and settlement expenses		149,430			125,151			207,143			109,607		135,494			33,953
Amortization of deferred policy acquisition costs and goodwill		48,770			17,081			900			24,156		52,646			2,141
Other operating expenses		(23,255	)		24,077			3,882			18,203		72,316			26,194

Total benefits and expenses		174,945			166,309			211,925			151,966		260,456			62,288

Income from continuing operations before income tax		75,806			53,624			24,652			13,584		34,826			(19,417	)
Income tax expense
Discontinued operations, net of income tax
Change in accounting principle, net of income tax

Net income

1999
Gross premiums and policy fees	$	361,824		$	148,620			—		$	24,248	$	284,891		$	41,438
Reinsurance ceded		(246,111	)		(33,754	)		—			—		(176,928	)		(5,504	)

Net premium and policy fees		115,713			114,866			—			24,248		107,963			35,934
Net investment income		138,044			129,806		$	210,208			106,599		24,121			9,051
Realized investment gains (losses)		—			—			(549	)		1,446		—			—
Other income		(948	)		(9	)		—			2,146		15,831			5,579

Total revenues		252,809			244,663			209,659			134,439		147,915			50,564

Benefits and settlement expenses		147,631			129,581			175,290			88,642		55,899			32,613
Amortization of deferred policy acquisition costs and goodwill		29,481			19,444			744			19,820		24,718			2,482
Other operating expenses		18,201			31,178			4,709			14,617		44,728			17,521

Total benefits and expenses		195,313			180,203			180,743			123,079		125,345			52,616

Income from continuing operations before income tax		57,496			64,460			28,916			11,360		22,570			(2,052	)
Income tax expense
Discontinued operations, net of income tax
Change in accounting principle, net of income tax

Net income

Operating Segment Assets
2001
Investments and other assets	$	3,431,441		$	4,091,672		$	3,872,637		$	4,501,667	$	1,050,546		$	955,984
Deferred policy acquisition costs and goodwill		829,021			418,268			6,374			128,488		177,874			8,650

Total assets	$	4,260,462		$	4,509,940		$	3,879,011		$	4,630,155	$	1,228,420		$	964,634

2000
Investments and other assets	$	2,834,956		$	1,602,352		$	3,340,099		$	3,844,169	$	1,220,733		$	552,178
Deferred policy acquisition costs and goodwill		710,468			222,620			2,144			120,219		150,984			10,006

Total assets	$	3,545,424		$	1,824,972		$	3,342,243		$	3,964,388	$	1,371,717		$	562,184

(1)

Adjustments to net income represent the inclusion of unallocated realized investment gains (losses), the recognition of income tax expense, income from discontinued operations, and cumulative effect of change in accounting principle. Asset adjustments represent the inclusion of assets related to discontinued operations.

F-68

Operating Segment Income	Adjustments(1)			Total Consolidated
2001
Gross premiums and policy fees		—		$	1,389,819
Reinsurance ceded		—			(771,151	)

Net premium and policy fees		—			618,668
Net investment income		—			839,103
Realized investment gains (losses)	$	(16,198	)		(7,841	)
Other income		—			38,578

Total revenues		(16,198	)		1,488,508

Benefits and settlement expenses		—			972,624
Amortization of deferred policy acquisition costs and goodwill		—			149,885
Other operating expenses		—			152,041

Total benefits and expenses		—			1,274,550

Income from continuing operations before income tax		(16,198	)		213,958
Income tax expense		70,457			70,457
Discontinued operations, net of income tax		(28,502	)		(28,502	)
Change in accounting principle, net of income tax		(8,341	)		(8,341	)

Net income				$	106,658

2000
Gross premiums and policy fees		—		$	1,175,943
Reinsurance ceded		—			(686,108	)

Net premium and policy fees		—			489,835
Net investment income		—			692,081
Realized investment gains (losses)	$	(8,453	)		(14,599	)
Other income		—			35,194

Total revenues		(8,453	)		1,202,511

Benefits and settlement expenses		—			760,778
Amortization of deferred policy acquisition costs and goodwill		—			145,694
Other operating expenses		—			121,417

Total benefits and expenses		—			1,027,889

Income from continuing operations before income tax		(8,453	)		174,622
Income tax expense		61,478			61,478
Discontinued operations, net of income tax		10,891			10,891
Change in accounting principle, net of income tax		—			—

Net income				$	124,035

1999
Gross premiums and policy fees		—		$	861,021
Reinsurance ceded		—			(462,297	)

Net premium and policy fees		—			398,724
Net investment income		—			617,829
Realized investment gains (losses)	$	3,863			4,760
Other income		—			22,599

Total revenues		3,863			1,043,912

Benefits and settlement expenses		—			629,656
Amortization of deferred policy acquisition costs and goodwill		—			96,689
Other operating expenses		—			130,954

Total benefits and expenses		—			857,299

Income from continuing operations before income tax		3,863			186,613
Income tax expense		67,991			67,991
Discontinued operations, net of income tax		9,636			9,636
Change in accounting principle, net of income tax		—			—

Net income				$	128,258

Operating Segment Assets
2001
Investments and other assets	$	109,881		$	18,013,828
Deferred policy acquisition costs and goodwill					1,568,675

Total assets	$	109,881		$	19,582,503

2000
Investments and other assets	$	200,850		$	13,595,337
Deferred policy acquisition costs and goodwill		214,770			1,431,211

Total assets	$	415,620		$	15,026,548

(1)

F-69

NOTE L — EMPLOYEE BENEFIT PLANS

PLC has a defined benefit pension plan covering substantially all of its employees. The plan is not separable by affiliates participating in the plan. However, approximately 86% of the participants in the plan are employees of Protective. The benefits are based on years of service and the employee's highest thirty-six consecutive months of compensation. PLC's funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements of ERISA plus such additional amounts as PLC may determine to be appropriate from time to time. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.

The actuarial present value of benefit obligations and the funded status of the plan taken as a whole at December 31 are as follows:

	2001			2000
Projected benefit obligation, beginning of the year	$	45,538		$	36,530
Service cost — benefits earned during the year		3,739			3,338
Interest cost — on projected benefit obligation		3,531			3,195
Actuarial gain (loss)		(357	)		1,968
Plan amendment		1,162			833
Divestiture		(2,165	)
Benefits paid		(579	)		(326	)

Projected benefit obligation, end of the year		50,869			45,538

Fair value of plan assets beginning of the year		40,822			34,420
Actual return on plan assets		(1,440	)		(148	)
Employer contribution		5,221			6,876
Benefits paid		(579	)		(326	)

Fair value of plan assets end of the year		44,024			40,822

Plan assets less than the projected benefit obligation		(6,845	)		(4,716	)
Unrecognized net actuarial loss from past experience different from that assumed		10,213			7,766
Unrecognized prior service cost		2,026			1,226

Net pension asset recognized in balance sheet	$	5,394		$	4,276

Net pension cost of the defined benefit pension plan includes the following components for the years ended December 31:

	2001			2000			1999
Service cost	$	3,739		$	3,338		$	3,270
Interest cost		3,531			3,195			2,779
Expected return on plan assets		(3,669	)		(3,049	)		(2,348	)
Amortization of prior service cost		176			176			115
Amortization of transition asset					(17	)		(17	)
Amortization of losses		141
Recognized net actuarial loss								494
Cost of divestiture		186

Net pension cost	$	4,104		$	3,643		$	4,293

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Protective's share of the net pension cost was approximately $5.4 million, $4.1 million, and $3.6 million, in 2001, 2000, and 1999, respectively.

Assumptions used to determine the benefit obligations as of December 31 were as follows:

	2001		2000		1999
Weighted average discount rate	7.25	%	7.50	%	8.00	%
Rates of increase in compensation level	5.00		5.25		5.75
Expected long-term rate of return on assets	8.50		8.50		8.50

At December 31, 2001 approximately $7.2 million of the assets of the pension plan were in a group annuity contract with Protective and therefore are included in the general assets of Protective. Approximately $36.8 million of the assets of the pension plan are invested in a collective trust managed by Northern Trust Corporation.

Prior to July 1999, upon retirement, the amount of pension plan assets vested in the retiree were used to purchase a single premium annuity from Protective in the retiree's name. Therefore, amounts presented above as plan assets exclude assets relating to such retirees. Beginning July 1999, retiree obligations are being fulfilled from pension plan assets.

PLC also sponsors an unfunded excess benefits plan, which is a nonqualified plan that provides defined pension benefits in excess of limits imposed by federal income tax law. At December 31, 2001 and 2000, the projected benefit obligation of this plan totaled $15.9 million and $14.4 million, respectively, of which $13.8 million and $10.5 million, respectively, have been recognized in PLC's financial statements.

Net pension costs of the excess benefits plan includes the following components for the years ended December 31:

	2001		2000		1999
Service cost	$	686	$	736	$	695
Interest cost		1,121		1,067		887
Amortization of prior service cost		19		19		113
Amortization of transition asset		37		37		37
Recognized net actuarial loss		233		194		265
Cost of divestiture and special termination benefits		1,807

Net pension cost	$	3,903	$	2,053	$	1,997

In addition to pension benefits, PLC provides limited healthcare benefits to eligible retired employees until age 65. The postretirement benefit is provided by an unfunded plan. At December 31, 2001 and 2000, the liability for such benefits was approximately $1.2 million. The expense recorded by PLC was $0.1 million in 2001, 2000 and 1999. PLC's obligation is not materially affected by a 1% change in the healthcare cost trend assumptions used in the calculation of the obligation.

Life insurance benefits for retirees are provided through the purchase of life insurance policies upon retirement from $10,000 up to a maximum of $75,000. This plan is partially funded at a maximum of $50,000 face amount of insurance.

PLC sponsors a defined contribution retirement plan which covers substantially all employees. Employee contributions are made on a before-tax basis as provided by Section 401(k) of the Internal Revenue Code. PLC established an Employee Stock Ownership Plan (ESOP) to match voluntary

F-71

employee contributions to PLC's 401(k) Plan. In 1994, a stock bonus was added to the 401(k) Plan for employees who are not otherwise under a bonus or sales incentive plan. Expense related to the ESOP consists of the cost of the shares allocated to participating employees plus the interest expense on the ESOP's note payable to Protective less dividends on shares held by the ESOP. At December 31, 2001, PLC had committed approximately 166,861 shares to be released to fund employee benefits. The expense recorded by PLC for these employee benefits was less than $0.1 million in 2001, 2000, and 1999.

PLC sponsors a deferred compensation plan for certain directors, officers, agents, and others. Compensation deferred is credited to the participants in cash, PLC Common Stock, or as a combination thereof.

NOTE M — STOCK BASED COMPENSATION

Certain Protective employees participate in PLC's stock-based incentive plans and receive stock appreciation rights (SARs) from PLC.

Since 1973, PLC has had stock-based incentive plans to motivate management to focus on PLC's long-range performance through the awarding of stock-based compensation. Under plans approved by share owners in 1997 and 1998, up to 5,000,000 shares may be issued in payment of awards.

The criteria for payment of performance awards is based upon a comparison of PLC's average return on average equity and total rate of return over a four year award period (earlier upon the death, disability, or retirement of the executive, or in certain circumstances, of a change in control of PLC) to that of a comparison group of publicly held life and multiline insurance companies. If PLC's results are below the median of the comparison group, no portion of the award is earned. If PLC's results are at or above the 90th percentile, the award maximum is earned.

In 1999, 99,380 performance shares were awarded, having an estimated fair value on the grant date of $3.4 million. In 2000, 3,330 performance shares and 513,618 stock appreciation rights (SARs) were awarded, having a combined estimated fair value on the grant date of $3.7 million. In 2001, 153,490 performance shares and 40,000 SARs were awarded, having a combined estimated fair value on the grant date of $4.9 million. The SARs, if earned, expire after ten years.

A performance share is equivalent in value to one share of PLC Common Stock. With respect to SARs, PLC will pay an amount equal to the difference between the specified base price of PLC's Common Stock and the market value at the exercise date. Awards are paid in shares of PLC Common Stock. At December 31, 2002, outstanding awards measured at maximum payouts were 423,362 performance shares and 853,236 SARs.

During 1996, 2000, and 2001, SARs were granted to certain officers of PLC to provide long-term incentive compensation based solely on the performance of PLC's Common Stock. The SARs are exercisable after five years (earlier upon the death, disability, or retirement of the officer, or in certain circumstances, of a change in control of PLC) and expire after ten years or upon termination of employment. In 2000, 217,500 SARs were awarded, having an estimated fair value on the grant date of $1.5 million. In 2001, 62,500 SARs were awarded, having an estimated fair value on the grant date of $0.6 million. The number of SARs granted in 1996, 2000, and 2001, outstanding at December 31, 2001, was 660,000, 215,000, and 62,500, respectively.

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The 1996 SARs have a base price of $17.4375. The 2000 SARs have a base price of $22.31. The 2001 SARs have a base price of $31.26 and $31.29. The fair value of the 2001 SARs was estimated using a Black-Scholes option pricing model. Assumptions used in the model were as follows: expected volatility of 26.4% (approximately equal to that of the S&P Life Insurance Index), a risk-free interest rate of 4.7%, a dividend rate of 1.9%, and an expected exercise date of 2007.

The expense recorded by PLC for its stock-based compensation plans was $5.6 million, $4.1 million, and $4.0 million in 2001, 2000, and 1999, respectively.

NOTE N — REINSURANCE

Protective reinsures certain of its risks with, and assumes risks from other insurers under yearly renewable term, coinsurance, and modified coinsurance agreements. Under yearly renewable term agreements, Protective generally pays specific premiums to the reinsurer and receives specific amounts from the reinsurer as reimbursement for certain expenses. Coinsurance agreements are accounted for by passing a portion of the risk to the reinsurer. Generally, the reinsurer receives a proportionate part of the premiums less commissions and is liable for a corresponding part of all benefit payments. Modified coinsurance is accounted for similarly to coinsurance except that the liability for future policy benefits is held by the original company, and settlements are made on a net basis between the companies. A substantial portion of Protective's new life insurance sales are being reinsured. Protective reviews the financial condition of its reinsurers and monitors the amount of reinsurance it has with its reinsurers.

Protective has reinsured approximately $169.5 billion, $126.0 billion and $93.5 billion in face amount of life insurance risks with other insurers representing $565.1 million, $496.4 million, and $364.7 million of premium income for 2001, 2000, and 1999, respectively. Protective has also reinsured accident and health risks representing $122.7 million, $125.8 million, and $97.1 million of premium income for 2001, 2000, and 1999, respectively. In 2001 and 2000, policy and claim reserves relating to insurance ceded of $2,059.0 million and $988.4 million, respectively, are included in reinsurance receivables. Should any of the reinsurers be unable to meet its obligation at the time of the claim, obligation to pay such claim would remain with Protective. At December 31, 2001 and 2000, Protective had paid $46.4 million and $33.5 million, respectively, of ceded benefits which are recoverable from reinsurers. In addition, at December 31, 2001, Protective had receivables of $69.3 million related to insurance assumed. Included in these receivables are $51.2 million related to the sale of Protective's Dental Division, and $783.9 million related to fixed annuities that were ceded in conjunction with the October 2001 acquisition of two small insurers.

F-73

NOTE O — ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amount and estimated fair values of Protective's financial instruments at December 31 are as follows:

	2001						2000
	Carrying Amount			Estimated Fair Values			Carrying Amount			Estimated Fair Values
Assets (see Notes A and C):
Investments:
Fixed maturities	$	9,812,091		$	9,812,091		$	7,390,110		$	7,390,110
Equity securities		60,493			60,493			41,792			41,792
Mortgage loans on real estate		2,512,844			2,671,074			2,268,224			2,385,174
Short-term investments		228,396			228,396			172,699			172,699
Liabilities (see Notes A and E):
Stable value account balances		3,716,530			3,821,955			3,177,863			3,250,991
Annuity account balances		3,248,218			3,166,052			1,916,894			1,893,749
Notes payable		2,291			2,291			2,315			2,315
Other (see Note A):
Derivative Financial Instruments		(1,634	)		(1,634	)		(6,079	)		(13,011	)

Except as noted below, fair values were estimated using quoted market prices.

Protective estimates the fair value of its mortgage loans using discounted cash flows from the next call date.

Protective believes the fair value of its short-term investments and notes payable to banks approximates book value due to either being short-term or having a variable rate of interest.

Protective estimates the fair value of its guaranteed investment contracts and annuities using discounted cash flows and surrender values, respectively.

Protective believes it is not practicable to determine the fair value of its policy loans since there is no stated maturity, and policy loans are often repaid by reductions to policy benefits.

Protective estimates the fair value of its derivative financial instruments using market quotes or derivative pricing models. The fair value represents the net amount of cash Protective would have received (or paid) had the contracts been terminated on December 31.

F-74

SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION

PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(in thousands)


COL. A	COL. B		COL. C		COL. D		COL. E		COL. F		COL. G			COL. H		COL. I		COL. J
Segment	Deferred Policy Acquisition Costs		Future Policy Benefits and Claims		Unearned Premiums		GIC, Annuity Deposits Policyholders' Funds		Net Premiums and Policy Fees		Net Investment Income(1)			Benefits and Settlement Expenses		Amortization of Deferred Policy Acquisitions Costs		Other Operating Expenses(1)
Year Ended December 31, 2001:
Life Marketing	$	829,021	$	3,326,841	$	303	$	86,937	$	120,996	$	178,866		$	190,538	$	41,399	$	(22,957	)
Acquisitions		418,268		3,046,401		434		876,221		182,432		187,535			238,877		20,500		41,684
Stable Value Contracts		6,374		—		—		3,872,637		0		261,079			222,306		1,662		3,961
Annuities		128,488		281,074		—		2,232,779		28,145		167,809			137,204		24,021		24,073
Credit Products		141,882		211,713		898,340		3,856		250,061		48,617			154,893		57,681		82,280
Corporate and Other		8,650		16,572		2,242		247		37,034		(4,803	)		28,806		1,795		25,827
Adjustments(2)		0		92,084		334		24,195		0		0			0		0		0

TOTAL	$	1,532,683	$	6,974,685	$	901,653	$	7,096,872	$	618,668	$	839,103		$	972,624	$	147,058	$	154,868

Year Ended December 31, 2000:
Life Marketing	$	710,468	$	2,753,191	$	334	$	102,305	$	99,813	$	152,317		$	149,430	$	48,771	$	(23,255	)
Acquisitions		222,620		1,364,830		484		238,465		102,997		116,940			125,151		17,081		24,077
Stable Value Contracts		2,144		162,236		—		3,177,863		—		243,133			207,143		900		3,882
Annuities		120,219		306,021		—		1,633,203		30,127		132,204			109,607		24,156		18,203
Credit Products		112,135		293,253		929,943		3,901		220,466		46,464			135,494		50,132		74,830
Corporate and Other		10,006		40,588		2,242		129		36,432		1,024			33,953		2,140		26,196
Adjustments(2)		11,788		113,278		2,602		64,227		0		0			0		0		0

TOTAL	$	1,189,380	$	5,033,397	$	935,605	$	5,220,093	$	489,835	$	692,082		$	760,778	$	143,180	$	123,933

Year Ended December 31, 1999:
Life Marketing									$	115,713	$	138,044		$	147,631	$	29,481	$	18,201
Acquisitions										114,866		129,806			129,581		19,444		31,178
Stable Value Contracts										—		210,208			175,290		744		4,709
Annuities										24,248		106,599			88,642		19,820		14,617
Credit Products										107,963		24,121			55,899		24,718		44,728
Corporate and Other										35,934		9,051			32,613		2,482		17,521
Adjustments										0		0			0		0		0

TOTAL									$	398,724	$	617,829		$	629,656	$	96,689	$	130,954

(1)		Allocations of Net Investment Income and Other Operating Expenses are based on a number of assumptions and estimates and results would change if different methods were applied.
(2)		Asset adjustments represent the inclusion of assets related to discontinued operations.

S-1

SCHEDULE IV — REINSURANCE

PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES

(Dollars in thousands)


COL. A	COL. B		COL. C		COL. D		COL. E		COL. F
	Gross Amount		Ceded to Other Companies		Assumed from Other Companies		Net Amount		Percentage of Amount Assumed to Net
Year Ended December 31, 2001:
Life insurance in force	$	191,105,511	$	171,449,182	$	23,152,614	$	42,808,143	54.1	%

Premiums and policy fees:
Life insurance	$	774,294	$	565,130	$	198,832	$	407,996	48.7	%
Accident and health insurance		181,508		122,747				58,761	0.0	%
Property and liability insurance		158,890		83,274		76,295		151,911	50.2	%

TOTAL	$	1,114,692	$	771,151	$	275,127	$	618,668

Year Ended December 31, 2000:
Life insurance in force	$	153,371,754	$	128,374,583	$	17,050,342	$	42,047,513	40.6	%

Premiums and policy fees:
Life insurance	$	670,113	$	493,793	$	112,668	$	288,988	39.0	%
Accident and health insurance		203,475		128,520		17,164		92,119	18.6	%
Property and liability insurance		159,354		63,795		13,169		108,728	12.1	%

TOTAL	$	1,032,942	$	686,108	$	143,001	$	489,835

Year Ended December 31, 1999:
Life insurance in force.	$	112,726,959	$	92,566,755	$	17,089,627	$	37,249,831	45.9	%

Premiums and policy fees:
Life insurance	$	530,728	$	368,139	$	130,368	$	292,957	44.5	%
Accident and health insurance		153,812		93,657		11,893		72,048	16.5	%
Property and liability insurance		34,109		501		111		33,719	0.3	%

TOTAL	$	718,649	$	462,297	$	142,372	$	398,724

S-2

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(a) Financial Statements:

All required financial statements are included in Part A and Part B of this Registration Statement.

(b) Exhibits:

1.		Resolution of the Board of Directors of Protective Life Insurance Company authorizing establishment of the Protective Life Variable Annuity Separate Account**
2.		Not applicable
3.		(a) Form of Underwriting Agreement among Protective Life Insurance Company, Investment Distributors, Inc. and the Protective Life Variable Annuity Separate Account**
		(b) Form of Distribution Agreement between Investment Distributors, Inc. and broker-dealers**
4.		(a) Form of Individual Flexible Premium Deferred Variable and Fixed Annuity Contract†††
		(b) Form of Group Flexible Premium Deferred Variable and Fixed Annuity Contract†††
		(c) Participant Certificate for use with Group Flexible Premium Deferred Variable and Fixed Annuity Contract†††
		(d) Annual Reset Death Benefit Rider†††
		(e) Compound Death Benefit Rider†††
		(f) Earnings Enhancement Death Benefit (EEDB) Endorsements††††
		(g) Spousal Continuation Endorsement for Earnings Enhancement Death Benefit (EEDB)††††
		(h) Enhanced Spousal Continuation Benefit Endorsement††††
5.		(a) Form of Contract Application for Individual Flexible Premium Deferred Variable and Fixed Annuity Contract†††
		(b) Form of Contract Application for Group Flexible Premium Deferred Variable and Fixed Annuity Contract†††
6.		(a) Charter of Protective Life Insurance Company.*
		(b) By-Laws of Protective Life Insurance Company.*
7.		Not applicable
8.		(a) Participation/Distribution Agreement (Protective Investment Company)**
		(b) Participation Agreement (Oppenheimer Variable Account Funds)***
		(c) Participation Agreement (MFS Variable Insurance Trust)***
		(d) ParticipationAgreement (Calvert Group, formerly Acacia Capital Corporation)***
		(e) Participation Agreement (Van Eck Worldwide Insurance Trust)†
		(f) Participation Agreement (Van Kampen Life Investment Trust)††
		(g) Participation Agreement (Lord Abbett Series Fund)
9.		Opinion and Consent of Steve M. Callaway, Esq.
10.		(a) Consent of Sutherland, Asbill & Brennan, LLP
		(b) Consent of PricewaterhouseCoopers LLP
11.		No financial statements will be omitted from Item 23
12.		Not applicable
13.		Not applicable
14.		Powers of attorney††††

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*		Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement, (File No. 33-70984) filed with the Commission on October 28, 1993.
**		Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Form N-4 Registration Statement, (File No. 33-70984) filed with the Commission on February 23, 1994.
***		Incorporated herein by reference to Post-Effective Amendment No. 5 to the Form N-4 Registration Statement, (File No. 33-70984) filed with the Commission on April 30, 1997.
****		Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement (File No. 333-68551) filed with the Commission on December 8, 1998.
†		Incorporated herein by reference to Pre-Effective Amendment Number 1 to the Form N-4 Registration Statement, (File No. 333-60149) filed with the Commission on October 26, 1998.
††		Incorporated herein by reference to Post-Effective Amendment No. 9 to the Form N-4 Registration Statement, (File No. 33-70984) filed with the Commission on April 20, 2000.
†††		Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Form N-4 Registration Statement (File No. 333-94047), filed with the Commission on April 24, 2000.
††††		Incorporated herein by reference to Post-Effective Amendment No. 1 to the Form N-4 Registration Statement (File No. 333-94047), filed with the Commission on February 26, 2001.

Item 25. Directors and Officers of Depositor.

Name and Principal Business Address		Position and Offices with Depositor
John D. Johns		Chairman of the Board, President, and Director
R. Stephen Briggs		Executive Vice President, Director
Allen W. Ritchie		Executive Vice President and Chief Financial Officer and Director
Carolyn King		Senior Vice President, Investment Products, and Director
Deborah J. Long		Senior Vice President, General Counsel, Secretary, and Director
Jim E. Massengale		Executive Vice President, Acquisitions, and Director
Steven A. Schultz		Senior Vice President, Financial Institutions, and Director
Wayne E. Stuenkel		Senior Vice President and Chief Actuary, and Director
Judy Wilson		Senior Vice President, Stable Value Products
T. Davis Keyes		Director
Richard J. Bielen		Senior Vice President, Chief Investment Officer and Treasurer, and Director
Carl S. Thigpen		Senior Vice President, Chief Mortgage and Real Estate Officer and Assistant Secretary
Alan E. Watson		Senior Vice President, Individual Life Sales
Larry Adams		Vice President, PPGA Sales
D. Wayne Hall		Vice President, Acquisition Administration
Steven R. Bivens		Vice President, New Business Operations, Individual Life
Kathleen D. Britton		Vice President, Policyholder Services, Individual Life
Michael G. Byrne		Vice President and Financial Officer, Individual Life
Vita P. Bates		Vice President, Investments
Jerry W. DeFoor		Vice President and Controller and Chief Accounting Officer
John B. Deremo		Vice President, Individual Life Sales
Stephen M. Liberatore		Vice President, Investments
David D. Luczynski		Vice President
Anil S. Manji		Vice President
Brent E. Fritz		Vice President, Individual Life Product Development

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Kevin B. Borie		Vice President and Actuary, Investment Products
Edwin V. Caldwell, II		Vice President, Brokerage Life Operations
William L. McMullen, Jr.		Vice President, Customer Service, Financial Institutions
Lawrence G. Merrill		Vice President, Investment Products Marketing
Edmund P. Perry		Vice President, Individual Life Sales
Charles M. Prior		Vice President, Investments
T. Michael Presley		Vice President and Actuary, Financial Institutions
John Sawyer		Vice President, Equity Marketing, Individual Life
Marcus A. Mears		Vice President, Marketing, Individual Life
Martin L. Reilly		Vice President, Information Systems, Financial Institutions
Kevin P. Riley		Vice President, Key Account Manager, Investment Products
Marion L. Robinson		Vice President, Information Systems, Investment Products
Leon M. Schmitt		Vice President, Administration, Financial Institutions
William L. Vigliotte		Vice President and Chief Underwriter, Individual Life
Banks M. Wood		Vice President, Sales and Marketing, Financial Institutions
Charles D. Evers, Jr.		Vice President, Corporate Accounting and Assistant Secretary
Brent E. Griggs		Vice President, Operations, Financial Institutions
Eva T. Robertson		Vice President, Benefit Plans Group
Stephen R. Peeples		Vice President and Managing Actuary, Individual Life
Michelle G. Winters		Vice President, Operations and Administration, Individual Life
Chris Jones		Vice President, Marketing, Investment Products
Mark Scot Cone		Vice President, Sales, Investment Products

Unless otherwise indicated, principal business address is 2801 Highway 280 South, Birmingham, Alabama 35223.

Item 26. Persons Controlled by or Under Common Control With the Depositor and Registrant.

The registrant is a segregated asset account of the Company and is therefore owned and controlled by the Company. All of the Company's outstanding voting common stock is owned by Protective Life Corporation. Protective Life Corporation is described more fully in the prospectus included in this registration statement. Various companies and other entities controlled by Protective Life Corporation may therefore be considered to be under common control with the registrant or the Company. Such other companies and entities, together with the identity of their controlling persons (where applicable), are set forth in Exhibit 21 to Form 10-K of Protective Life Corporation for the fiscal year ended December 31, 2001 (File No. 1-12332) filed with the Commission on March 27, 2002.

Item 27. Number of Contractowners.

As of the date of this filing, there were 5,326 contract owners of Protective Variable Annuity II individual and group flexible premium deferred variable and fixed annuity contracts offered by Registrant.

Item 28. Indemnification of Directors and Officers.

Article XI of the By-laws of Protective Life provides, in substance, that any of Protective Life's directors and officers, who is a party or is threatened to be made a party to any action, suit or proceeding, other than an action by or in the right of Protective Life, by reason of the fact that he is or was an officer or director, shall be indemnified by Protective Life against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such claim, action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of Protective Life and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. If the

C-3

claim, action or suit is or was by or in the right of Protective Life to procure a judgment in its favor, such person shall be indemnified by Protective Life against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of Protective Life, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to Protective Life unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. To the extent that a director or officer has been successful on the merits or otherwise in defense of any such action, suit or proceeding, or in defense of any claim, issue or matter therein, he shall be indemnified by Protective Life against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, not withstanding that he has not been successful on any other claim issue or matter in any such action, suit or proceeding. Unless ordered by a court, indemnification shall be made by Protective Life only as authorized in the specific case upon a determination that indemnification of the officer or director is proper in the circumstances because he has met the applicable standard of conduct Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to, or who have been successful on the merits or otherwise with respect to, such claim action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion or (c) by the shareholders.

In addition, the executive officers and directors are insured by PLC's Directors' and Officers' Liability Insurance Policy including Company Reimbursement and are indemnified by a written contract with PLC which supplements such coverage.

Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Item 29. Principal Underwriter.

(a): Investment Distributors, Inc. ("IDI") is the principal underwriter of the Contracts as defined in the Investment Company Act of 1940. IDI is also principal underwriter for the PIC Fund and for the Protective Life Variable Separate Account.
(b): The following information is furnished with respect to the officers and directors of Investment Distributors, Inc.

Name and Principal Business Address*	Position and Offices	Position and Offices with Registrant
King, Carolyn	President, Chief Executive Officer and Director	Senior Vice President, Investment Products
Briggs, Robert Stephen	Vice President and Director	Executive Vice President, Director
A.S. Williams, III	Vice President	None

C-4

Borie, Kevin B.	Secretary and Chief Compliance Officer and Director	Vice President and Actuary, Investment Products
Callaway, Steve M.	Director	None
Janet Summey	Assistant Secretary and Principal	Assistant Vice President, Investment Products
Bonnie Miller	Assistant Secretary and Principal	Assistant Vice President, Investment Products
Beth Zaiontz	Assistant Secretary and Principal	None
Gary Carroll	Assistant Secretary and Principal	Assistant Vice President, Rick Management, Individual Life
Thomas R. Barrett	Financial Operations Principal	None
Joseph Gilmer	Assistant Financial Operations Principal	None

Unless otherwise indicated, principal business address is 2801 Highway 280 South, Birmingham, Alabama, 35223.

Item 30. Location of Accounts and Records.

All accounts and records required to be maintained by Section 31(c) of the Investment Company Act of 1940 and the rules thereunder are maintained by Protective Life Insurance Company at 2801 Highway 280 South, Birmingham, Alabama 35223.

Item 31. Management Services.

All management contracts are discussed in Part A or Part B.

Item 32. Undertakings.

(a): Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen (16) months old for so long as payments under the variable annuity contracts may be accepted.
(b): Registrant hereby undertakes to include either (1) as part of any application to purchase a contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information; and
(c): Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statement required to be made available under this Form promptly upon written or oral request.
(d): The Company represents that in connection with its offering of the Contracts as funding vehicles for retirement plans meeting the requirements of Section 403(b) of the Internal Revenue Code of 1986, it is relying on a no-action letter dated November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of 1940, and that paragraphs numbered (1) through (4) of that letter will be complied with.
(e): Protective Life hereby represents that the fees and charges deducted under the Contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Protective Life.

C-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirement of Securities Act Rule 485(b) for effectiveness of this registration statement and has duly caused the amendment to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Birmingham, State of Alabama, on April 25, 2002.

		PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT

		By:		/s/ JOHN D. JOHNS John D. Johns, President Protective Life Insurance Company

		PROTECTIVE LIFE INSURANCE COMPANY

		By:		/s/ JOHN D. JOHNS John D. Johns, President Protective Life Insurance Company

As required by the Securities Act of 1933, the amendment to this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date

/s/ JOHN D. JOHNS John D. Johns	Chairman of the Board and President (Principal Executive Officer)	April 25, 2002
/s/ ALLEN W. RITCHIE Allen W. Ritchie	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	April 25, 2002
/s/ JERRY DEFOOR Jerry DeFoor	Vice President, Controller, and Chief Accounting Officer (Principal Accounting Officer)	April 25, 2002
/s/ JOHN D. JOHNS John D. Johns	Director	April 25, 2002
/s/ ALLEN W. RITCHIE Allen W. Ritchie	Director	April 25, 2002

C-6

* R. Stephen Briggs	Director	April 25, 2002
* Jim E. Massengale	Director	April 25, 2002
* Wayne E. Stuenkel	Director	April 25, 2002
* Steven A. Schultz	Director	April 25, 2002
* Deborah J. Long	Director	April 25, 2002
* Carolyn King	Director	April 25, 2002
* Richard J. Bielen	Director	April 25, 2002
* J. William Hamer, Jr.	Director	April 25, 2002
* T. Davis Keyes	Director	April 25, 2002



By:	/s/ STEVE M. CALLAWAY Steve M. Callaway Attorney-in-fact	April 25, 2002

C-7

QuickLinks

PART A
INFORMATION REQUIRED TO BE IN THE PROSPECTUS
TABLE OF CONTENTS
DEFINITIONS
EXPENSES

EXAMPLES

SUMMARY

The Contract

Federal Tax Status

THE COMPANY, VARIABLE ACCOUNT AND FUNDS

Protective Life Insurance Company

Protective Variable Annuity Separate Account

Administration

The Funds

Protective Investment Company (PIC)

Van Kampen Life Investment Trust

MFS® Variable Insurance Trust ^SM

Oppenheimer Variable Account Funds

Lord Abbett Series Fund, Inc.

Other Information about the Funds

Other Investors in the Funds

Addition, Deletion or Substitution of Investments

DESCRIPTION OF THE CONTRACT

The Contract

Use of the Contract in Qualified Plans.

Parties to the Contract

Issuance of a Contract

Purchase Payments

Right to Cancel

Allocation of Purchase Payments

Variable Account Value

Transfers

Surrenders and Partial Surrenders

THE GUARANTEED ACCOUNT
DEATH BENEFIT

Standard Death Benefit

Optional Benefit Packages

Earnings Enhancement Death Benefit (not available in Minnesota, North Dakota or Washington)

SUSPENSION OR DELAY IN PAYMENTS
SUSPENSION OF CONTRACTS
CHARGES AND DEDUCTIONS

Surrender Charge (Contingent Deferred Sales Charge)

Mortality and Expense Risk Charge

Administration Charges

Transfer Fee

Contract Maintenance Fee

ANNUITIZATION

Annuity Commencement Date

Fixed Income Payments

Variable Income Payments

Annuity Options.

Minimum Amounts

Death of Annuitant or Owner After Annuity Commencement Date

YIELDS AND TOTAL RETURNS

Yields

Total Returns

Standardized Average Annual Total Returns

Non-Standard Average Annual Total Returns

Performance Comparisons

Other Matters

FEDERAL TAX MATTERS

Introduction

The Company's Tax Status

TAXATION OF ANNUITIES IN GENERAL

Tax Deferral During Accumulation Period

Taxation of Partial and Full Surrenders

Taxation of Annuity Payments

Taxation of Death Benefit Proceeds

Assignments, Pledges, and Gratuitous Transfers

Penalty Tax on Premature Distributions

Aggregation of Contracts

Loss of Interest Deduction Where Contract Is Held By or For the Benefit of Certain Nonnatural Persons

QUALIFIED RETIREMENT PLANS

In General

Direct Rollovers

FEDERAL INCOME TAX WITHHOLDING
GENERAL MATTERS

The Contract

Error in Age or Gender

Incontestability

Non-Participation

Assignment or Transfer of a Contract

Protection of Proceeds

Minimum Values

Application of Law

No Default

DISTRIBUTION OF THE CONTRACTS

Inquiries

IMSA
LEGAL PROCEEDINGS
VOTING RIGHTS
FINANCIAL STATEMENTS
STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A
EXAMPLE OF DEATH BENEFIT CALCULATIONS

Standard Death Benefit

Annual Reset Death Benefit Option

Anniversary

Compound and 3-Year Reset Death Benefit Option

APPENDIX B
EXAMPLE OF SURRENDER CHARGE CALCULATION
APPENDIX C
EXPLANATION OF THE VARIABLE ANNUITIZATION CALCULATION
EXPLANATION OF THE COMMUTED VALUE CALCULATION
APPENDIX D
EXAMPLE OF EARNINGS ENHANCEMENT DEATH BENEFIT CALCULATION

Earnings Enhancement Death Benefit

Example

Explanation

APPENDIX E
ADDITIONAL ALLOCATION OPTIONS for Certain Contracts Purchased before May 1, 2002

ANNUAL FUND EXPENSE For the Period ending December 31, 2001 (after reimbursement and as a percentage of average net assets)

Calvert Variable Series, Inc.

Van Eck Worldwide Insurance Trust

APPENDIX F
CONDENSED FINANCIAL INFORMATION

Sub-Accounts

Accumulation Units

PART B
INFORMATION REQUIRED TO BE IN THE STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF ADDITIONAL INFORMATION
CALCULATION OF YIELDS AND TOTAL RETURNS

Oppenheimer Money Fund Sub-Account Yield

Other Sub-Account Yields

Total Returns

Effect of the Contract Maintenance Fee on Performance Data

SAFEKEEPING OF ACCOUNT ASSETS
STATE REGULATION
RECORDS AND REPORTS
LEGAL MATTERS
INDEPENDENT ACCOUNTANTS
OTHER INFORMATION
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
CONSOLIDATED STATEMENTS OF SHARE-OWNER'S EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
PART C
OTHER INFORMATION
SIGNATURES

EXHIBIT 8(g)

FORM OF
FUND PARTICIPATION AGREEMENT

THIS AGREEMENT made as of the 30 ^th day of April, 2002, by and between Lord Abbett Series Fund, Inc. ("Fund"), a Maryland Corporation, on its behalf and on behalf of each separate investment series thereof, whether existing as of the date above or established subsequent thereto, (each a "Portfolio" and collectively, the "Portfolios"), Lord Abbett Distributor LLC, a New York limited liability Company (the "Distributor"), and Protective Life Insurance Company (the ("Company"), a life insurance company organized under the laws of the State of Tennessee.

WHEREAS, Fund is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (the "'40 Act"), as an open-end, diversified management investment company; and

WHEREAS, Fund is organized as a series fund comprised of separate investment series, namely the Portfolios; and

WHEREAS, Fund was organized to act as the funding vehicle for certain variable life insurance and/or variable annuity contracts ("Variable Contracts") offered by life insurance companies through separate accounts of such life insurance companies and also offers its shares to certain qualified pension and retirement plans; and

WHEREAS, Fund has filed an application with the SEC requesting an order granting relief from various provisions of the '40 Act and the rules thereunder to the extent necessary to permit Fund shares to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated participating insurance companies accounts ("Participating Companies") and qualified pension and retirement plans outside the separate account context (including, without limitation, those trusts, plans, accounts contracts or annuities described in Sections 401(a), 403(a), 403(b), 408(a), 408(b), 414(d), 457(b), 408(k), 501(c)(18) of the Internal Revenue Code of 1986, as amended (the "Code") and any other trust, plan, account, contract or annuity trust that is determined to be within the scope of Treasury Regulation §1.817.5(f)(3)(iii)("Plans"); and

WHEREAS, the Company has established or will establish one or more separate accounts ("Separate Accounts") to offer Variable Contracts and is desirous of having Fund as one of the underlying funding vehicles for such Variable Contracts; and

WHEREAS, Distributor is registered with the SEC as a broker-dealer under the Securities Exchange Act of 1934, as amended and acts as Fund's principal underwriter; and

WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares of Fund to fund the aforementioned Variable Contracts and Fund is authorized to sell such shares to the Company at net asset value;

NOW, THEREFORE, in consideration of their mutual promises, the Company, Fund, and Distributor agree as follows:

Article I. SALE OF FUND SHARES

1.1 Fund agrees to make Variable Contract Class shares ("Shares") of the Fund available to the Separate Accounts of the Company for investment of purchase payments of Variable Contracts allocated to the designated Separate Accounts as provided in Fund's then current prospectus and statement of additional information. Company agrees to purchase and redeem the Shares of the Portfolios offered by the then current

prospectus and statement of additional information of the Fund in accordance with the provisions of such prospectus and statement of additional information. Company shall not permit any person other than a Variable Contract owner or such owner's lawfully authorized representative to give instructions to Company which would require Company to redeem or exchange Shares of the Fund.

1.2 Fund agrees to sell to the Company those Shares of the selected Portfolios of Fund which the Company orders, executing such orders on a daily basis at the net asset value next computed after receipt by Fund or its designee of the order for the Shares of Fund. For purposes of this Section 1.2, the Company shall be the designee of Fund for receipt of such orders from the designated Separate Account and receipt by such designee shall constitute receipt by Fund; provided that the Company receives the order by 4:00 p.m. Eastern time and Fund receives notice from the Company by telephone, facsimile (orally confirmed) or by such other means as Fund and the Company may mutually agree of such order by 10:00 a.m. Eastern time on the next following Business Day, provided, however, that Company shall use its best efforts to transmit orders to Fund by 9:00 a.m. Eastern time. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which Fund calculates its net asset value pursuant to the rules of the SEC.

1.3 Fund agrees to redeem on the Company's request, any full or fractional Shares of Fund held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt by Fund or its designee of the request for redemption, in accordance with the provisions of this agreement and Fund's then current registration statement. For purposes of this Section 1.3, the Company shall be the designee of Fund for receipt of requests for redemption from the designated Separate Account and receipt by such designee shall constitute receipt by Fund; provided that the Company receives the request for redemption by 4:00 p.m. Eastern time and Fund receives notice from the Company by telephone, facsimile (orally confirmed) or by such other means as Fund and the Company may mutually agree of such request for redemption by 10:00 a.m. Eastern time on the next following Business Day, provided, however, that Company shall use its best efforts to transmit orders to Fund by 9:00 a.m. Eastern time.

1.4 Fund shall furnish, on or before the ex-dividend date, notice to the Company of any income dividends or capital gain distributions payable on the Shares of any Portfolios of Fund. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's Shares in additional Shares of the Portfolio. Fund shall notify the Company or its designee of the number of Shares so issued as payment of such dividends and distributions.

1.5 Fund shall make the net asset value per share for the selected Portfolios available to the Company on a daily basis, via a mutually agreeable form, as soon as reasonably practicable after the net asset value per share is calculated but shall use its best efforts to make such net asset value available by 6:30 p.m. Eastern time.

1.6 At the end of each Business Day, the Company shall use the information described in Section 1.5 to calculate Separate Account unit values for the day. Using these unit values, the Company shall process each such Business Day's Separate Account transactions based on requests and premiums received by it by the close of regular trading on the floor of the New York Stock Exchange (currently 4:00 p.m. Eastern time) to determine the net dollar amount of Fund Shares which shall be purchased or redeemed at that day's closing net asset value per share. Company shall use its best efforts to transmit net purchase or redemption orders so determined to Fund by 9:00 a.m. Eastern time (but in no event shall such orders be considered timely received by Funds unless they are received prior to 10:00 a.m. Eastern time) on the Business Day next following the Company's receipt of such requests and premiums in accordance with the terms of Sections 1.2 and 1.3 hereof.

1.7 If the Company's order requests the purchase of Fund Shares, the Company shall pay for such purchase by wiring federal funds to Fund or its designated custodial account on the day the order is transmitted by the Company. If the Company's order requests a net redemption resulting in a payment of redemption proceeds to the Company, Fund shall use its best efforts to wire the redemption proceeds to the Company by the next Business Day, unless doing so would require Fund to dispose of Portfolio securities or otherwise incur additional costs. In any event, proceeds shall be wired to the Company within three Business Days or such longer period permitted by the '40 Act or the rules, orders or regulations thereunder and Fund shall notify the

person designated in writing by the Company as the recipient for such notice of such delay by 3:00 p.m. Eastern time the same Business Day that the Company transmits the redemption order to Fund.

1.8 Fund agrees that all Shares of the Portfolios of Fund will be sold only to Participating Insurance Companies which have agreed to participate in Fund to fund their Separate Accounts and/or to Plans, all in accordance with the requirements of Section 817(h) of the Code and Treasury Regulation 1.817-5. Shares of the Portfolios of Fund will not be sold directly to the general public.

1.9 Fund may refuse to sell Shares of any Portfolios to any person, or suspend or terminate the offering of the Shares of any Portfolios if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board of Directors/Trustees of the Fund (the "Board"), deemed necessary, desirable or appropriate.

1.10 Issuance and transfer of Portfolio Shares will be by book entry only. Stock certificates will not be issued to the Company or the Separate Accounts. Shares ordered from Portfolios will be recorded in appropriate book entry titles for the Separate Accounts.

Article II. FEES AND EXPENSES

2.1 Except as otherwise provided under this Agreement, the Fund and Distributor shall pay no fee or other compensation to Company under this Agreement, and Company shall pay no fee or other compensation to the Fund or Distributor, except as made a part of this Agreement as it may be amended from time to time with the mutual consent of the parties hereto. All expenses incident to performance by each party of its respective duties under this Agreement shall be paid by that party, unless otherwise specified in this Agreement.

Article III. REPRESENTATIONS AND WARRANTIES

3.1 The Company represents and warrants that it is an insurance company duly organized and in good standing under the laws of Tennessee and that it has legally and validly established each Separate Account as a segregated asset account under such laws.

3.2 The Company represents and warrants that it has registered or, prior to any issuance or sale of the Variable Contracts, will register each Separate Account as a unit investment trust ("UIT") in accordance with the provisions of the '40 Act and cause each Separate Account to remain so registered to serve as a segregated asset account for the Variable Contracts, unless an exemption from registration is available.

3.3 The Company represents and warrants that the income, gains and losses, whether or not realized, from assets allocated to each Separate Account are, in accordance with the applicable Variable Contracts, to be credited to or charged against such Separate Account without regard to other income, gains or losses from assets allocated to any other accounts of the Company. The Company represents and warrants that the assets of the Separate Account are and will be kept separate from the general account of the Company and any other separate accounts the Company may have, and will not be charged with liabilities from any business that the Company may conduct or the liabilities of any companies affiliated with the Company.

3.4 The Company represents and warrants that the Variable Contracts will be registered under the Securities Act of 1933 (the "'33 Act") unless an exemption from registration is available prior to any issuance or sale of the Variable Contracts and that the Variable Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws and further that the sale of the Variable Contracts shall comply in all material respects with state insurance law suitability requirements. Company agrees to notify each Fund promptly of any investment restrictions imposed by state insurance law and applicable to the Fund.

3.5 The Company represents and warrants that the Variable Contracts are currently and at the time of issuance will be treated as life insurance, endowment or annuity contracts under applicable provisions of the Code, that it will maintain such treatment and that it will notify Fund immediately upon having a reasonable basis for believing that the Variable Contracts have ceased to be so treated or that they might not be so treated in the future.

3.6 Fund represents and warrants that the Portfolio Shares offered and sold pursuant to this Agreement will be registered under the '33 Act and sold in accordance with all applicable federal and state laws, and Fund shall be registered under the '40 Act prior to and at the time of any issuance or sale of such Shares. Fund, subject to Section 1.9 above, shall amend its registration statement under the '33 Act and the '40 Act from time to time as required in order to effect the continuous offering of its Shares. Fund shall register and qualify its Shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by Fund.

3.7 Fund represents and warrants that each Portfolio will comply with the diversification requirements set forth in Section 817(h) of the Code, and the rules and regulations thereunder, including without limitation Treasury Regulation 1.817-5, and will notify the Company immediately upon having a reasonable basis for believing any Portfolio has ceased to comply or might not so comply and will immediately take all reasonable steps to adequately diversify the Portfolio to achieve compliance within the grace period afforded by Treasury Regulations.

3.8 Fund represents and warrants that each Portfolio invested in by the Separate Account is currently qualified as a "regulated investment company" under Subchapter M of the Code, and will make every effort to maintain such qualification for each taxable year and will notify the Company immediately upon having a reasonable basis for believing it has ceased to so qualify or might not so qualify in the future.

3.9 Distributor represents and warrants that it is and will be a member in good standing of the National Association of Securities Dealers, Inc. ("NASD") and is and will be registered as a broker-dealer with the SEC. Distributor further represents that it will sell and distribute Portfolio Shares in accordance with all applicable state and federal laws and regulations, including without limitation the '33 Act, the '34 Act and the '40 Act.

3.10 Distributor represents and warrants that it will remain duly registered and licensed in all material respects under all applicable federal and state securities laws and shall perform its obligations hereunder in compliance in all material respects with any applicable state and federal laws.

3.11 Fund represents and warrants that all its directors, trustees, officers, employees, and other individuals/entities who deal with the money and/or securities of the Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than that required by Rule 17g-1 under the '40 Act. The aforesaid bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. The Fund shall make all reasonable efforts to see that this bond or another bond containing these same provisions is always in effect, and each agrees to notify the Company in the event such coverage no longer applies.

3.12 Company represents and warrants that all of its employees and agents who deal with the money and/or securities of each Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage in an amount not less than that required to be maintained by entities subject to the requirements of Rule 17g-1 of the '40 Act. The aforesaid bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. Company shall make all reasonable efforts to see that this bond or another bond containing these same provisions is always in effect, and each agrees to notify the Fund in the event such coverage no longer applies.

Article IV. PROSPECTUS AND PROXY STATEMENTS

4.1 Fund shall prepare and be responsible for filing with the SEC and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of Fund.

4.2 At least annually, Fund or its designee shall provide the Company, free of charge, with as many copies of the current prospectus for the Shares of the Portfolios as the Company may reasonably request for distribution to existing Variable Contract owners whose Variable Contracts are funded by such Shares. Fund or its designee shall provide the Company, at the Company's expense, with as many more copies of the current prospectus for the Shares as the Company may reasonably request for distribution to prospective purchasers of Variable Contracts. If requested by the Company in lieu thereof, Fund or its designee shall provide such documentation in a mutually agreeable form and such other assistance as is reasonably necessary in order for the parties hereto once a year (or more frequently if the prospectus for the Shares is supplemented or amended) to have the prospectus for the Variable Contracts and the prospectus for the Fund Shares and any other fund shares offered as investments for the Variable Contracts printed together in one document, provided however that Company shall ensure that, except as expressly authorized in writing by Fund, no alterations, edits or changes whatsoever are made to prospectuses or other Fund documentation after such documentation has been furnished to Company or its designee, and Company shall assume liability for any and all alterations, errors or other changes that occur to such prospectuses or other Fund documentation after it has been furnished to Company or its designee. The Fund or its designee shall reimburse the Company for the pro-rata share of the printing costs (excluding any non-printing costs such as composition and document layout costs) for those pages that contain the prospectus for the Shares that the Company may reasonably print for distribution to existing Variable Contract owners whose Variable Contracts are funded by Fund Shares.

4.3 The Fund shall provide the Company with copies of the Fund's proxy statements, Fund reports to shareholders, and other Fund communications to shareholders in such quantity as the Company shall reasonably require for distributing to Variable Contract owners.

4.4 Fund will provide the Company with at least one complete copy of all prospectuses, statements of additional information, annual and semi-annual reports, proxy statements, and all amendments or supplements to any of the above that relate to the Portfolios promptly after the filing of each such document with the SEC or other regulatory authority. The Company will provide Fund with at least one complete copy of all prospectuses, statements of additional information, annual and semi-annual reports, proxy statements, and all amendments or supplements to any of the above that relate to a Separate Account promptly after the filing of each such document with the SEC or other regulatory authority.

Article V. SALES MATERIALS

5.1 The Company will furnish, or will cause to be furnished, to Fund or Distributor, each piece of sales literature or other promotional material in which Fund, Distributor or any affiliate thereof is named, at least fifteen (15) Business Days prior to its intended use. No such material shall be used unless the Fund or Distributor approves such material. Such approval shall be presumed given if notice to the contrary is not received by Company within fifteen Business Days after receipt by the Fund or Distributor of such material.

5.2 Fund or Distributor will furnish, or will cause to be furnished, to the Company, each piece of sales literature or other promotional material in which the Company or its Separate Accounts are named, at least fifteen (15) Business Days prior to its intended use. No such material shall be used unless the Company approves such material. Such approval shall be presumed given if notice to the contrary is not received by Fund or within fifteen Business Days after receipt by the Company of such material.

5.3 Except with the permission of the Company, neither the Fund nor Distributor shall give any information or make any representations on behalf of the Company or concerning the Company, the Separate

Accounts, or the Variable Contracts other than the information or representations contained in the registration statement or prospectus for such Variable Contracts, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports of the Separate Accounts for distribution to owners of such Variable Contracts, or in sales literature or other promotional material approved by the Company or its designee, provided however that such information or representations are used in a context that does not cause the information, representations or statements contained in the registration statement or prospectus for the Variable Contracts, reports of the Separate Account, or sales literature or other promotional material approved by the Company or its designee to be untrue or omit information contained in such documentation otherwise required to be stated or necessary to make the information, representations, or statements not misleading.

5.4 Except with the permission of the Fund or Distributor, neither the Company nor its affiliates or agents shall give any information or make any representations or statements on behalf of the Fund, Distributor or any affiliate thereof or concerning the Fund, Distributor or any affiliate thereof, other than the information or representations contained in the registration statements or prospectuses for the Fund, as such registration statements and prospectuses may be amended or supplemented from time to time, or in reports to shareholders or proxy statements for the Fund, or in sales literature or other promotional material approved by the Fund or Distributor or designee thereof, provided however that such information or representations are used in a context that does not cause the information, representations or statements contained in the registration statements or prospectuses for the Fund, reports to shareholders or proxy statements for the Fund, or sales literature or other promotional material approved by the Fund or Distributor or designee thereof to be untrue or omit information contained in such documentation otherwise required to be stated or necessary to make the information, representations, or statements not misleading.

5.5 For purposes of this Agreement, the phrase "sales literature or other promotional material" or words of similar import include, without limitation, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures or other public media), sales literature (such as any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, or reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports and proxy materials, and any other material constituting sales literature or advertising under NASD rules, the '40 Act or the '33 Act.

Article VI. POTENTIAL CONFLICTS

6.1 The parties acknowledge that Fund filed an application with the SEC requesting an order granting relief from various provisions of the '40 Act and the rules thereunder to the extent necessary to permit Fund Shares to be sold to and held by variable annuity and variable life insurance separate accounts of Participating Companies and Plans. It is anticipated that such exemptive order (the "Mixed and Shared Funding Exemptive Order"), when and if issued, shall require Fund and each Participating Company and Plan to comply with conditions and undertakings substantially as provided in this Article. If the Mixed and Shared Funding Exemptive Order imposes conditions materially different from those provided for in this Article, the conditions and undertakings imposed by the Mixed and Shared Funding Exemptive Order shall govern this Agreement and the parties hereto agree to amend this Agreement consistent with the Mixed and Shared Funding Exemptive Order.

6.2 The Fund's Board will monitor the Fund for the existence of any material irreconcilable conflict between and among the interests of the Variable Contract owners of all Participating Companies and of Plan Participants and Plans investing in the Fund, and determine what action, if any, should be taken in response to such conflicts. An irreconcilable material conflict may arise for a variety of reasons, which may include: (a) an

action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling or any similar action by insurance, tax or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of Fund are being managed; (e) a difference in voting instructions given by variable annuity and variable life insurance contract owners; (f) a decision by a Participating Insurance Company to disregard the voting instructions of Variable Contract owners and (g) if applicable, a decision by a Plan to disregard the voting instructions of plan participants.

6.3 The Company will report any potential or existing conflicts to the Board. The Company will be obligated to for assist the Board in carrying out its duties and responsibilities under the Mixed and Shared Funding Exemptive Order by providing the Board with all information reasonably necessary for the Board to consider any issues raised. The responsibility includes, but is not limited to, an obligation by the Company to inform the Board whenever it has determined to disregard Variable Contract owner voting instructions.

6.4 If a majority of the Board, or a majority of its disinterested Board members, determines that a material irreconcilable conflict exists with regard to contract owner investments in the Fund, the Board shall give prompt notice of the conflict and the implications thereof to all Participating Companies and Plans. If the Board determines that Company is a relevant Participating Company or Plan with respect to said conflict, Company shall at its sole cost and expense, and to the extent reasonably practicable (as determined by a majority of the disinterested Board members), take such action as is necessary to remedy or eliminate the irreconcilable material conflict. Such necessary action may include but shall not be limited to: (a) withdrawing the assets allocable to some or all of the Separate Accounts from Fund or any Portfolio thereof and reinvesting those assets in a different investment medium, which may include another Portfolio of Fund, or another investment company; (b) submitting the question as to whether such segregation should be implemented to a vote of all affected Variable Contract owners and as appropriate, segregating the assets of any appropriate group (i.e variable annuity or variable life insurance contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Variable Contract owners the option of making such a change; and (c) establishing a new registered management investment company (or series thereof) or managed separate account. If a material irreconcilable conflict arises because of the Company's decision to disregard Variable Contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the election of Fund to withdraw the Separate Account's investment in Fund, and no charge or penalty will be imposed as a result of such withdrawal. The responsibility to take such remedial action shall be carried out with a view only to the interests of the Variable Contract owners.

For the purposes of this Article, a majority of the disinterested members of the Board shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict but in no event will Fund or its investment adviser (or any other investment adviser of Fund) be required to establish a new funding medium for any Variable Contract. Further, the Company shall not be required by this Article to establish a new funding medium for any Variable Contracts if any offer to do so has been declined by a vote of a majority of Variable Contract owners materially and adversely affected by the irreconcilable material conflict.

6.5 The Board's determination of the existence of an irreconcilable material conflict and its implications shall be made known promptly and in writing to the Company.

6.6 No less than annually, the Company shall submit to the Board such reports, materials or data as the Board may reasonably request so that the Board may fully carry out its obligations. Such reports, materials, and data shall be submitted more frequently if deemed appropriate by the Board.

6.7 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if Rule 6e-3 is adopted, to provide exemptive relief from any provision of the '40 Act or the rules thereunder with respect to mixed and shared funding on terms and conditions materially different from any exemptions granted in the Mixed and Shared Funding Exemptive Order, then Fund, and/or the Participating Insurance Companies, as appropriate, shall

take such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable.

Article VII. VOTING

7.1 The Company will provide pass-through voting privileges to all Variable Contract owners so long as the SEC continues to interpret the '40 Act as requiring pass-through voting privileges for Variable Contract owners. Accordingly, the Company, where applicable, will vote Shares of the Portfolio held in its Separate Accounts in a manner consistent with voting instructions timely received from its Variable Contract owners. The Company will be responsible for assuring that each of its Separate Accounts that participates in Fund calculates voting privileges in a manner consistent with other Participating Insurance Companies. The Company will vote Shares for which it has not received timely voting instructions, as well as Shares it owns, in the same proportion as its votes those Shares for which it has received voting instructions. Company and its agents shall not oppose or interfere with the solicitation of proxies for Fund Shares held for such Variable Contract owners.

Article VIII. INDEMNIFICATION

8.1 Indemnification by the Company .

(a) Subject to Section 8.3 below, the Company agrees to indemnify and hold harmless Fund and Distributor, and each of their trustees, directors, members, principals, officers, partners, employees and agents and each person, if any, who controls Fund or Distributor within the meaning of Section 15 of the '33 Act (collectively, the "Indemnified Parties" for purposes of this Article) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company, which consent shall not be unreasonably withheld) or litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of Fund's Shares or the Variable Contracts and:

(i): arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus for the Variable Contracts or contained in the Variable Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of an Indemnified Party for use in the registration statement or prospectus for the Variable Contracts or in the Variable Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Variable Contracts or Fund Shares; or
(ii): arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature of Fund not supplied by the Company, or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Variable Contracts or Fund Shares; or
(iii): arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature of Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to Fund by or on behalf of the Company; or

(iv): arise out of or as a result of any alterations, changes or other errors (except those expressly authorized in writing by Fund) in Fund prospectuses, reports or other documents that occur after such Fund documents or a file containing such documents are furnished to Company or its designee; or
(v): arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or
(vi): arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company.

(b) The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement.

(c) The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against an Indemnified Party, the Company shall be entitled to participate at its own expense in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Company to such party of the Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.

8.2 Indemnification by Fund and Distributor.

(a) Subject to Section 8.3 below, the Fund and Distributor agree to indemnify and hold harmless the Company and each of its directors, officers, employees, and agents and each person, if any, who controls the Company within the meaning of Section 15 of the '33 Act (collectively, the "Indemnified Parties" for the purposes of this Article) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of Fund and Distributor which consent shall not be unreasonably withheld) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of Fund's Shares or the Variable Contracts and:

(i): arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus of Fund (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to Fund or Distributor by or on behalf of the Company for use in the registration statement or prospectus for Fund (or any amendment or supplement) or otherwise for use in connection with the sale of the Variable Contracts or Fund Shares; or

(ii): arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature for the Variable Contracts not supplied by Fund or Distributor or persons under its control) or wrongful conduct of Fund or Distributor or persons under its control, with respect to the sale or distribution of the Variable Contracts or Fund Shares; or
(iii): arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement or prospectus covering the Variable Contracts, or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company for inclusion therein by or on behalf of Fund or Distributor; or
(iv): arise as a result of a failure by Fund or Distributor to provide the services and furnish the materials under the terms of this Agreement; or
(v): arise out of or result from any material breach of any representation and/or warranty made by Fund or Distributor in this Agreement or arise out of or result from any other material breach of this Agreement by Fund or Distributor.

(b) Fund or Distributor shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement.

(c) Fund or Distributor, as the case may be, shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified Fund or Distributor, as the case may be, in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify Fund or Distributor of any such claim shall not relieve Fund or Distributor from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, Fund or Distributor shall be entitled to participate at its own expense in the defense thereof. Fund or Distributor also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from Fund or Distributor to such party of Fund's or Distributor's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and Fund or Distributor will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.

8.3 Indemnification for Errors . In the event of any error or delay with respect to information regarding the net asset value per share, purchase, redemption, transfer or registration of Shares of the Fund, the parties agree that each is obligated to make the Separate Accounts and/or the Fund, respectively, whole for any error or delay that it causes, subject in each case to the related Portfolio's policies on materiality of pricing errors, if applicable. In addition, each party agrees that neither will receive compensation from the other for the costs of any reprocessing necessary as a result of an error or delay. Each party agrees to provide the other with prompt notice of any errors or delays of the type referred to in this Section.

Article IX. TERM; TERMINATION

9.1 This Agreement shall be effective as of the date hereof and shall continue in force until terminated in accordance with the provisions herein.

9.2 This Agreement shall terminate in accordance with the following provisions:

(a) At the option of the Company or Fund at any time from the date hereof upon six (6) months notice, unless a shorter time is agreed to by the parties;

(b) At the option of the Company, if Fund Shares are not reasonably available to meet the requirements of the Variable Contracts as determined by the Company. Prompt notice of election to terminate shall be furnished by the Company, said termination to be effective ten days after receipt of notice unless Fund makes available a sufficient number of Shares to reasonably meet the requirements of the Variable Contracts within said ten-day period;

(c) At the option of the Company, upon the institution of formal proceedings against Fund by the SEC, the National Association of Securities Dealers, Inc., or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in the Company's reasonable judgment, materially impair Fund's ability to meet and perform Fund's obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by the Company with said termination to be effective upon receipt of notice;

(d) At the option of Fund, upon the institution of formal proceedings against the Company by the SEC, the NASD, or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in Fund's reasonable judgment, materially impair the Company's ability to meet and perform its obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by Fund with said termination to be effective upon receipt of notice;

(e) In the event Fund's Shares are not registered, issued or sold in accordance with applicable state or federal law, or such law precludes the use of such Shares as the underlying investment medium of Variable Contracts issued or to be issued by the Company. Termination shall be effective upon such occurrence without notice;

(f) At the option of Fund if the Variable Contracts cease to qualify as annuity contracts or life insurance contracts, as applicable, under the Code, or if Fund reasonably believes that the Variable Contracts may fail to so qualify. Termination shall be effective upon receipt of notice by the Company;

(g) At the option of the Company, upon Fund's breach of any material provision of this Agreement, which breach has not been cured to the satisfaction of the Company within ten days after written notice of such breach is delivered to Fund;

(h) At the option of Fund, upon the Company's breach of any material provision of this Agreement, which breach has not been cured to the satisfaction of Fund within ten days after written notice of such breach is delivered to the Company;

(i) At the option of Fund, if the Variable Contracts are not registered, issued or sold in accordance with applicable federal and/or state law. Termination shall be effective immediately upon such occurrence without notice;

(j) In the event this Agreement is assigned without the prior written consent of the Company, Fund, and Distributor, termination shall be effective immediately upon such occurrence without notice.

9.3 Notwithstanding any termination of this Agreement pursuant to Section 9.2 hereof, Fund at the option of the Company will continue to make available additional Fund Shares, as provided below, pursuant to the terms and conditions of this Agreement, for all Variable Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, the owners of the Existing Contracts or the Company, whichever shall have legal authority to do so,

shall be permitted to reallocate investments in Fund, redeem investments in Fund and/or invest in Fund upon the payment of additional premiums under the Existing Contracts.

Article X. NOTICES

Any notice hereunder shall be given by registered or certified mail return receipt requested or express delivery service to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party.

If to the Funds:

                        Lord Abbett Family of Funds
                        90 Hudson Street
                        Jersey City, NJ 07302
                        Attention: General Counsel

with a copy to:

                        Lord, Abbett & Co.
                        90 Hudson Street
                        Jersey City, NJ 07302
                        Attention: Daria L. Foster

If to the Distributor:

                        Lord Abbett Distributor LLC
                        90 Hudson Street
                        Jersey City, NJ 07302
                        Attention: General Counsel

If to the Company:

                        Protective Life Insurance Company
                        2801 Highway 280 South
                        Birmingham, AL 35223
                        Attention: General Counsel

                        with a copy to:

                        Protective Life Insurance Company
                        2801 Highway 280 South
                        Birmingham, AL 35223
                        Attention: Carolyn King, Sr. Vice President, Investment Products Division

Notice shall be deemed given on the date of receipt by the addressee as evidenced by the signed receipt.

Article XI. MISCELLANEOUS

11.1 Privacy . Each party hereto acknowledges that, by reason of its performance under this Agreement, it shall have access to, and shall receive from the other party (and its affiliates, partners and employees), the confidential information of the other party (and its affiliates, partners and employees), including but not limited to the "nonpublic personal information" of their consumers within the meaning of SEC Regulation S-P (collectively, "Confidential Information"). Each party shall hold all such Confidential Information in the strictest confidence and shall use such Confidential Information solely in connection with its performance under this Agreement and for the business purposes set forth in this Agreement. Under no circumstances may a party cause any Confidential Information of the other party to be disclosed to any third party or reused or redistributed without the other party's prior written consent.

11.2 Counterparts . This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument.

11.3 Severability . If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby.

11.4 Governing Law . This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of New York. It shall also be subject to the provisions of the federal securities laws and the rules and regulations thereunder and to any orders of the SEC granting exemptive relief therefrom and the conditions of such orders.

11.5 Liability . This Agreement has been executed on behalf of the Fund by the undersigned officer of the Fund in his or her capacity as an officer of the Fund. The obligations of this Agreement shall be binding upon the assets and property of the Fund and each respective Portfolio thereof only and shall not be binding on any Director/Trustee, officer or shareholder of the Fund individually. In addition, notwithstanding any other provision of this Agreement, no Portfolio shall be liable for any loss, expense, fee, charge or liability of any kind relating to or arising from the actions or omissions of any other Portfolio or from the application of this Agreement to any other Portfolio. It is also understood that each of the Portfolios shall be deemed to be entering into a separate Agreement with the Company so that it is as if each of the Portfolios had signed a separate Agreement with the Company and that a single document is being signed simply to facilitate the execution and administration of the Agreement.

11.6 Inquiries and Investigations . Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby.

11.7 Entire Agreement . This Agreement constitutes the entire agreement and understanding between the parties hereto and supersedes all prior agreement and understandings relating to the subject matter hereof.

11.8 Amendment, Waiver and Other Matters . Neither this Agreement, nor any provision hereof, may be amended, waived, modified or terminated in any manner except by a written instrument properly authorized and executed by all parties hereto. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws.

IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Fund Participation Agreement as of the date and year first above written.

		LORD ABBETT SERIES FUND, INC.

		By:
		Name: Title:

		LORD ABBETT DISTRIBUTOR LLC By: Lord, Abbett & Co., it's Managing Member

		By:
		Name: Title:

		PROTECTIVE LIFE INSURANCE COMPANY

		By:
		Name: Carolyn King Title: Sr. Vice President

[PROTECTIVE LETTERHEAD]

EXHIBIT 9

STEVE M. CALLAWAY
Senior Associate Counsel

Writer's Direct Number: (205) 868-3804
Facsimile Number: (205) 868-3597
Toll-Free Number: (800) 627-0220

April 25, 2002

Protective Life Insurance Company
2801 Highway 280 South
Birmingham, Alabama 35223

Gentlemen:

This opinion is submitted with respect to Post-Effective Amendment No. 3 to the Form N-4 Registration Statement, file numbers 811-8108 and 333-94047, to be filed by Protective Life Insurance Company (the "Company") and Protective Variable Annuity Separate Account (the "Account") with the Securities and Exchange Commission for the purpose of registering under the Securities Act of 1933, as amended, group and individual flexible premium deferred variable and fixed annuity contracts marketed under the name "Protective Variable Annuity II" (the "Contracts"). I have examined such documents and such law as I considered necessary and appropriate, and on the basis of such examination, it is my opinion that:

1. The Company is a corporation duly organized and validly existing as a stock life insurance company under the laws of the State of Tennessee and is duly authorized by the Department of Commerce and Insurance of the State of Tennessee to issue the Contracts.

2. The Account is a duly authorized and existing separate account established pursuant to the provisions of Section 53-3-501 of the Tennessee Code.

3. To the extent so provided under the Contracts, that portion of the assets of the Account equal to the reserves and other contract liabilities with respect to the Account will not be chargeable with liabilities arising out of any other business that the Company may conduct.

4. The Contracts, when issued as contemplated by the Form N-4 registration statement, will constitute legal, validly issued and binding obligations of the Company.

I hereby consent to the filing of this opinion as an exhibit to the Form N-4 registration statement for the Contracts and the Account.

Very truly yours,
/s/ STEVE M. CALLAWAY
Steve M. Callaway

Senior Associate Counsel

Exhibit 10(a)

April 19, 2002

Board of Directors
Protective Life Insurance Company
2801 Highway 201 South
Birmingham, Alabama 35223

Directors:

We hereby consent to the reference to our name under the caption "Legal Matters" in the statement of additional information filed as part of post-effective amendment number 3 to the registration statement on Form N-4 (File No. 333-94047) filed by Protective Life Insurance Company and Protective Variable Annuity Separate Account with the Securities and Exchange Commission. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933.

Sincerely,
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ DAVID S. GOLDSTEIN

David S. Goldstein

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Exhibit 10(b)

Consent of Independent Accountants

We hereby consent to the use, in this Registration Statement on Form N-4 (File No. 333-94047) of our report dated March 1, 2002, relating to the consolidated financial statements and financial statement schedules of Protective Life Insurance Company and Subsidiaries, which appears in such Registration Statement. We also consent to the use in this Registration Statement of our report dated April 2, 2002, on our audits of the financial statements of The Protective Variable Annuity Separate Account, which appears in such Registration Statement. We also consent to the reference to us under the heading "Independent Accountants" in such Registration Statement.

PricewaterhouseCoopers LLP
Birmingham, Alabama
April 25, 2002

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Consent of Independent Accountants

EXHIBIT 14

DIRECTORS' POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors of Protective Life Insurance Company, a Tennessee corporation, ("Company") by his or her execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint John D. Johns, Steve M. Callaway or Jerry W. DeFoor, and each or any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Registration Statement on Form N-4, including any amendments thereto, to be filed by the Company with respect to the Protective Variable Annuity II variable annuity product with the Securities and Exchange Commission, pursuant to the provisions of the Securities Act of 1933 and the Investment Company Act of 1940, and to file same, with all exhibits and schedules thereto and all other documents in connection therewith, with the Securities and Exchange Commission and with such state securities authorities as may be appropriate, granting unto said attorney-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes of the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in-fact and agent or any of them which they may lawfully do in the premises or cause to be done by virtue hereof.

IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand and seal this 25th day of April, 2002.

WITNESS TO ALL SIGNATURES:

/s/ STEVE M. CALLAWAY Steve M. Callaway
/s/ JOHN D. JOHNS John D. Johns		/s/ DEBORAH J. LONG Deborah J. Long
/s/ R. STEPHEN BRIGGS R. Stephen Briggs		/s/ JIM E. MASSENGALE Jim E. Massengale
/s/ ALLEN W. RITCHIE Allen W. Ritchie		/s/ CAROLYN KING Carolyn King
/s/ JERRY DEFOOR Jerry DeFoor		/s/ STEVEN A. SCHULTZ Steven A. Schultz
/s/ WAYNE E. STUENKEL Wayne E. Stuenkel		/s/ J. WILLIAM HAMER, JR. J. William Hamer, Jr.
/s/ T. DAVIS KEYES T. Davis Keyes		/s/ RICHARD J. BIELEN Richard J. Bielen