FIRST VARIABLE ANNUITY FUND E, 497, 1996-05-09

FIRST VARIABLE ANNUITY FUND E
497, 1996-05-09

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[Logo of First Variable Life]

Marketing and Executive Office: Variable Service Center:
10 Post Office Square P.O. Box 1317
Boston, MA 02109 Des Moines, IA 50305-1317
(800) 499-0713

INDIVIDUAL VARIABLE ANNUITY CONTRACTS
Funded in
FIRST VARIABLE ANNUITY FUND E

Prospectus
Dated: May, 1, 1996

The Individual Flexible Purchase Payment Deferred Variable and Fixed Annuity
Contracts (the "Contracts") described in this Prospectus were issued by First
Variable Life Insurance Company (the "Company") prior to May 15, 1994 and on the
date of this Prospectus are available in a limited number of states (FL, ID,
MT, NJ, OR, WA). The Contracts provide for accumulation of Contract Values and
payment of monthly annuity payments on a fixed and variable basis and are
designed for use by individuals in retirement plans on a Qualified or
Non-Qualified basis. (See "Definitions.")

Purchase Payments for the Contracts may be allocated to the Company's segregated
investment account called First Variable Annuity Fund E (the "Separate Account")
or to the Company's General Account. The Separate Account invests in selected
Portfolios of Variable Investors Series Trust, a mutual fund. The Portfolios
available under a Contract on the date of this Prospectus are: Cash Management
Portfolio, High Income Bond Portfolio, Multiple Strategies Portfolio, Common
Stock Portfolio, U.S. Government Bond Portfolio, Tilt Utility Portfolio, World
Equity Portfolio, Growth & Income Portfolio and Small Cap Portfolio. (See
"Variable Investors Series Trust.")

Subject to regulatory approval, the Company intends to substitute shares of the
Prime Money Fund II of Federated Insurance Series for shares of the Cash
Management Portfolio of Variable Investors Series Trust. After approval is
received, the Prime Money Fund II will be available for allocation of Purchase
Payments or transfers of Contract Value instead of the Cash Management Portfolio
of Variable Investors Series Trust. (See "Proposed Substitution of Cash
Management Portfolio Shares" and "Federated Insurance Series.")

The Contracts are not deposits or obligations of, or guaranteed or endorsed by,
any financial institution, and the Contracts are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. An investment in the Contract is subject to risk that may cause the
value of the Owner's investment to fluctuate, and when the Contract is
surrendered, the value may be higher or lower than the Purchase Payments.

This Prospectus contains information that an investor should know before
investing. A Statement of Additional Information about the Contracts and the
Separate Accounts, which has the same date as this Prospectus, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The table of contents of the Statement of Additional Information can
be found on page 31 of this Prospectus. For a copy of the Statement of
Additional Information, which is available at no cost, write the Company at its
Variable Service Center or call the number shown above.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.

<PAGE>

TABLE OF CONTENTS

DEFINITIONS..................................................................1

HIGHLIGHTS...................................................................2

FEE TABLE....................................................................4

CONDENSED FINANCIAL INFORMATION..............................................7

THE COMPANY..................................................................8

THE SEPARATE ACCOUNT........................................................10

Variable Investors Series Trust.............................................10
Proposed Substitution of Cash Management Portfolio Shares...................11
Voting Rights...............................................................12
Substitution of Other Securities...........................................12

CHARGES AND DEDUCTIONS......................................................12

Deduction for Withdrawal Charge (Sales Load)................................12
Deduction for Morality and Expense Risk Charge..............................13
Deduction for Administrative Charge.........................................13
Deduction for Annual Contract Maintenance Charge............................14
Deduction for Premium Taxes.................................................14
Deduction for Income Taxes..................................................14
Deduction for Expenses of the Investment Options............................14
Transfer Charge.............................................................14
Elimination or Reduction of Charges and Deductions..........................14

THE CONTRACTS...............................................................15

Application and Issuance of a Contract......................................15
Ownership...................................................................16
Annuitant...................................................................16
Assignment..................................................................16
Transfers by the Company....................................................16
Beneficiary.................................................................16
Change of Beneficiary.......................................................17
Transfers of Contract Values During the Accumulation Period.................17
Telephone Requests..........................................................17
Death Benefit Provided by the Contract......................................17
Amount of Death Benefit Prior to Annuity Date...............................18
Amounts Payable On Death of Payee...........................................18

ANNUITY PROVISIONS..........................................................19

Annuity Date and Annuity Option.............................................19
Change in Annuity Date and Annuity Option...................................19
Allocation of Annuity Payments..............................................19
Transfers During the Annuity Period.........................................19
Annuity Options.............................................................19
Frequency and Amount of Annuity Payments....................................20

PURCHASE PAYMENTS AND CONTRACT VALUE........................................21

Purchase Payments...........................................................21
Allocation of Purchase Payments.............................................21
Dollar Cost Averaging.......................................................21
Distribution................................................................21

<PAGE>

Contract Value..............................................................22
Accumulation Unit...........................................................22

WITHDRAWALS.................................................................22

Systematic Withdrawals......................................................23
Texas Optional Retirement Program...........................................23
Suspension of Payments or Transfers.........................................23

ADMINISTRATION OF THE CONTRACTS.............................................24

Cash Management Portfolio...................................................24
Other Portfolios............................................................24

TAX STATUS..................................................................25

General.....................................................................25
Diversification.............................................................27
Contracts Owned by Other than Natural Persons...............................27
Multiple Contracts..........................................................27
Tax Treatment of Assignments................................................27
Income Tax Withholding......................................................28
Tax Treatment of Withdrawals - Non-Qualified Contracts....................28
Qualified Plans.............................................................28
Tax Treatment of Withdrawals - Qualified Contracts..........................29
Tax-Sheltered Annuities - Withdrawal Limitations............................30

FINANCIAL STATEMENTS........................................................30

LEGAL PROCEEDINGS...........................................................30

TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION................31

<PAGE>

DEFINITIONS

Account - General Account and/or one or more of the Sub-Accounts of the Separate
Account.

Accumulation Period - The period during which Purchase Payments may be made
prior to the Annuity Date.

Accumulation Unit - A unit of measure used to calculate the Contract Value of a
Sub-Account of the Separate Account prior to the Annuity Date.

Annuitant -The natural person on whose life Annuity Payments are based.

Annuity Date -The date on which Annuity Payments begin.

Annuity Payments -The series of payments made to the Annuitant after the Annuity
Date under the Annuity Option elected.

Annuity Period -The period after the Annuity Date during which Annuity Payments
are made.

Annuity Unit - A unit of measure used to calculate Variable Annuity Payments
after the Annuity Date.

Beneficiary - The person(s) or entity who will receive the death benefit.

Company - First Variable Life Insurance Company.

Contract Anniversary - An anniversary of the Issue Date.

Contract Value - The sum of the Owner's interest in the Sub-Accounts of the
Separate Account and in the General Account.

Contract Year - One year from the Issue Date and from each Contract Anniversary.

Distributor - First Variable Capital Services, Inc., 10 Post Office Square,
12th Floor, Boston, MA 02109

Fixed Annuity - A series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company.

General Account - The Company's general investment account which contains all
the assets of the Company with the exception of the Separate Account and other
segregated asset accounts.

General Account Value - The Owner's interest in the General Account.

Investment Option - An investment entity which can be selected by the Owner to
be an underlying investment of the Contract.

Issue Date - The date on which the first Contract Year begins.

Non-Qualified Contracts - Contracts issued under Non-Qualified Plans which do
not receive favorable tax treatment under Sections 401, 403(b), 408 or 457 of
the Internal Revenue Code.

Owner - The person, persons or entity entitled to all the ownership rights under
the Contracts and in whose name the Contracts have been issued.

Portfolio - A segment of an Investment Option which constitutes a separate and
distinct class of shares. It is sometimes referred to as a Fund.

Purchase Payment - An amount paid to the Company to provide benefits under the
Contracts.

1
<PAGE>

Qualified Contracts - Contracts issued under Qualified Plans which receive
favorable tax treatment under Sections 401, 403(b), 408 or 457 of the Internal
Revenue Code.

Separate Account - A separate investment account of the Company, designated as
First Variable Annuity Fund E, into which Purchase Payments or Contract Values
may be allocated.

Sub-Account - A segment of the Separate Account representing an investment in an
Investment Option or a Portfolio of an Investment Option.

Valuation Date - The Separate Account will be valued each day that the New York
Stock Exchange is open for trading which is Monday through Friday, except for
normal business holidays.

Valuation Period - The period beginning at the close of business of the New York
Stock Exchange on each Valuation Date and ending at the close of business for
the next succeeding Valuation Date.

Variable Account Value - The Owner's interest in the Sub-Accounts of the
Separate Account.

Variable Annuity - A series of payments made during the Annuity Period which
vary in amount with the investment experience of each applicable Sub-Account.

Variable Service Center - The Company's administrative service center for newly
issued Contracts is located at 1206 Mulberry Street, Des Moines, IA 50309

Withdrawal Value - The Withdrawal Value is:

1) the Contract Value for the Valuation Period next following the
Valuation Period during which a written request for withdrawal is
received at the Company; less

2) any applicable taxes not previously deducted; less

3) the Withdrawal Charge, if any; less

4) the Annual Contract Maintenance Charge, if any.

HIGHLIGHTS

At the Owner's direction, Purchase Payments for the Contracts will be
allocated to the General Account or to a segregated investment account of First
Variable Life Insurance Company (the "Company") which account has been
designated First Variable Annuity Fund E (the "Separate Account"). On the date
of this Prospectus, the Separate Account invests in Portfolios of the Variable
Investors Series Trust. Subject to regulatory approval, the Separate Account
will substitute shares of the Prime Money Fund II of Federated Insurance Series
for shares of the Cash Management Portfolio of Variable Investors Series Trust.
(See "Variable Investors Series Trust," "Proposed Substitution of Cash Managment
Portfolio Shares," and "Federated Insurance Series.") Owners bear the investment
risk for all amounts allocated to the Separate Account.

Owners have the right to return a Contract according to the terms of its
"free-look" right. The Company reserves the right to delay initial investments
of Purchase Payments in the Separate Account in certain instances, but it does
not currently do so. (See "The Contracts - Application and Issuance of a
Contract - Free-Look Right" and "Delayed Investment Start Date.")

A Withdrawal Charge (sales load) may be deducted in the event of a
withdrawal of all or a portion of the Contract Value. No Withdrawal Charge will
be assessed upon any withdrawal unless the amount withdrawn exceeds the Free
Withdrawal Amount. The annual Free Withdrawal Amount is determined as the sum of
(a) 10% of Purchase Payments still subject to the Withdrawal Charge; plus (b)
the excess of the Contract Value over Purchase Payments not previously
withdrawn; plus (c) any Purchase Payments no longer subject to the Withdrawal
Charge. The Withdrawal

2
<PAGE>

Charge will vary in amount, depending upon the Contract Year in which the
Purchase Payment being surrendered was made. (See "Charges and Deductions -
Deduction for Withdrawal Charge (Sales Load)".)

There is a Mortality and Expense Risk Charge which is equal, on an
annual basis, to 1.25% of the average daily net asset value of the Separate
Account. This Charge compensates the Company for assuming the mortality and
expense risks under the Contracts. (See "Charges and Deductions - Deduction for
Mortality and Expense Risk Charge.")

There is an Administrative Charge which is equal, on an annual basis, to
.15% of the average daily net asset value of the Separate Account. This Charge
compensates the Company for costs associated with the administration of the
Contracts and the Separate Account. (See "Charges and Deductions - Deduction for
Administrative Charge.")

There is an Annual Contract Maintenance Charge of $30 each Contract
Year. (See "Charges and Deductions - Deduction for Annual Contract Maintenance
Charge.")

Premium taxes or other taxes payable to a state or other governmental
entity will be charged against the Contract Values. (See "Charges and Deductions
- - Deduction for Premium Taxes.")

Under certain circumstances, a transfer charge may be assessed when an
Owner transfers Contract Values from one Sub-Account to another Sub-Account or
to or from the General Account. (See "Charges and Deductions - Transfer
Charge.")

A ten percent (10%) federal income tax penalty may be applied to the
income portion of any distriubtion from a Non-Qualified Contract before the
Owner reaches age 59 1/2, with certain exceptions. Separate tax withdrawal
penalties and restrictions apply to a Qualified Contract. Special restrictions
apply to distribution from a 403(b) annuity. (See "Tax Status -- Tax Treatment
of Withdrawals - Non-qualified Contracts," " Tax Treatment of Withdrawals-
Qualified Contracts," and "Tax Sheltered Annuities -- Withdrawal Limitations.")

Because of certain exemptive and exclusionary provisions, interests in
the General Account are not registered under the Securities Act of 1933 and the
General Account is not registered as an investment company under the Investment
Company Act of 1940, as amended. Accordingly, neither the General Account nor
any interests therein are subject to the provisions of these Acts, and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in the Prospectus relating to the
General Account. Disclosures regarding the General Account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.

3
<PAGE>

FIRST VARIABLE ANNUITY FUND E

FEE TABLE

Owner Transaction Expenses

Withdrawal Charge (see Note 2 below) Contract Charge
(as a percentage of Purchase Payment withdrawn) Anniversary
Since Purchase
Payment
0 and 1 5%
2 4%
3 3%
4 2%
5 1%
6+ 0%

Transfer Fee None Currently (See Note 3)
Annual Contract Maintenance Charge $30 per Contract year

Separate Account Annual Expenses
(as a percentage of average account value)

Mortality and Expense Risk Charge....... 1.25%
Administrative Charge................... .15%
-----
Total Separate Account Annual Expenses.. 1.40%

Variable Investors Series Trust's Annual Expenses
(as a percentage of the average daily net assets of a Portfolio)

Cash Common High Income World Multiple Tilt U.S. Gov't Growth & Small
Mgmt Stock Bond Equity Strategies Utility Bond Income Cap
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees: .50% .70% .70% .70% .70% .65% .60% .75% .85%

Other Operating
Expenses
(after expense
reimbursement -
see Note 5 below: .25% .47% .50% .50% .50% .50% .25% .50% .50%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Trust Annual
Expenses: .75% 1.17% 1.20% 1.20% 1.20% 1.15% .85% 1.25% 1.35%

</TABLE>

4
<PAGE>

Federated Insurance Series Annual Expenses
(as a percentage of the average daily net assets of a Fund)

Prime
Money
Fund II
Management Fees: .50%
Other Operating
Expenses: .30%
----
Total Trust Annual
Expenses: .80%

Examples

An Owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:

a) upon surrender at the end of each time period;
b) if the Contract is not surrendered or is annuitized.

1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Cash Management Portfolio a) $ 98 $187 $277 $550
b) $ 52 $158 $267 $550
Common Stock Portfolio a) $ 102 $200 $298 $593
b) $ 56 $171 $288 $593
High Income Bond Portfolio a) $ 103 $201 $300 $596

b) $ 57 $172 $290 $596
World Equity Portfolio a) $ 103 $201 $300 $596
b) $ 57 $172 $290 $596
Multiple Strategies Portfolio a) $ 103 $201 $300 $596

b) $ 57 $172 $290 $596
Tilt Utility Portfolio a) $ 102 $199 $297 $591
b) $ 56 $170 $287 $591
Growth & Income a) $ 103 $202 $302 $601
b) $ 57 $173 $292 $601
Small Cap a) $ 104 $205 $307 $611
b) $ 58 $176 $297 $611
U.S. Government Bond Portfolio a) $ 99 $190 $282 $561

b) $ 53 $161 $272 $561
Prime Money Fund II a) $ 99 $189 $279 $555
b) $ 53 $160 $269 $555

</TABLE>

5
<PAGE>

Explanation of Fee Table and Examples

1. The purpose of the Fee Table is to assist the Owner in understanding the
various costs and expenses that an Owner will incur, directly or
indirectly. The Table reflects expenses of the Separate Account as well
as of the Investment Options. For additional information, see "Charges
and Deductions" in this Prospectus and the Prospectus for Variable
Investors Series Trust.

2. An Owner may make a withdrawal each Contract Year of the Free Withdrawal
Amount or some portion thereof provided that the amount withdrawn is at
least $1,000 or the Owner's entire interest in the Sub-Account, if less.
The minimum Contract Value which must remain in a Sub-Account after a
partial withdrawal is $1,000. Subject to any conditions and fees the
Company may impose, an Owner may elect to have this amount paid in equal
periodic installments. The Company reserves the right to charge a fee
for this service. Currently, however, there are no charges for this
service. (See "Charges and Deductions - Deduction for Withdrawal Charge
(Sales Load)" and "Withdrawals - Systematic Withdrawals.") The 10% free
withdrawal has been factored into the Examples above.

3. The Company reserves the right to charge up to $25.00 for exchanges and
transfers when the total of exchanges and transfers in any Contract year
exceeds 12.

4. Prior to April 1, 1994, the Tilt Utility Portfolio was known as the
"Equity Income Portfolio" and had different investment objectives and
policies.

5. First Variable Advisory Services Corp. has agreed through April 1, 1996
to reimburse Variable Investors Series Trust for all operating expenses
(exclusive of management fees) in excess of .50% of a Portfolio's
average net assets (.25% in the case of the Cash Management Portfolio
and the U.S. Government Bond Portfolio).

6. Premium taxes are not reflected. Premium taxes may apply. (See "Charges
and Deductions - Deduction for Premium Taxes.")

7. The assumed initial Purchase Payment is $1,000.

8. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

6
<PAGE>

FIRST VARIABLE ANNUITY FUND E

CONDENSED FINANCIAL INFORMATION

ACCUMULATION UNIT VALUES
(for a unit outstanding throughout the period)

The following condensed financial information is derived from the
financial statements of the Separate Account (Policy Forms 7800 and 20224). The
information should be read in conjunction with the financial statements, related
notes and other financial information for the Separate Account included in the
Statement of Additional Information. The financial statements and report of
independent auditors of the Company are also contained in the Statement of
Additional Information.

Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash Management Sub-Account
Beginning of Period $11.22 $10.97 $10.86 $10.67 $10.24 $10.00
End of Period $11.67 $11.22 $10.97 $10.86 $10.67 $10.24
Number of Accum. Units Outstanding 406,002 123,042 52,908 309,216 207,448 63,260
U.S. Government Bond Sub-Account
Beginning of Period $12.93 $13.48 $12.49 $11.94 $10.56 $10.00
End of Period $15.32 $12.93 $13.48 $12.49 $11.94 $10.56
Number of Accum. Units Outstanding 222,013 207,710 175,294 175,547 494,291 6,523
High Income Bond Sub-Account
Beginning of Period $13.86 $15.12 $13.34 $11.70 $9.34 $10.00
End of Period $16.26 $13.86 $15.12 $13.34 $11.70 $ 9.34
Number of Accum. Units Outstanding 309,472 190,699 437,508 337,571 195,048 536
Multiple Strategies Sub-Account
Beginning of Period $13.28 $14.02 $12.86 $12.59 $10.34 $10.00
End of Period $17.32 $13.28 $14.02 $12.86 $12.59 $10.34
Number of Accum. Units Outstanding 795,702 529,845 167,168 169,897 128,348 11,761
Common Stock Sub-Account
Beginning of Period $12.61 $12.89 $11.98 $13.16 $9.93 $10.00
End of Period $17.05 $12.61 $12.89 $11.98 $13.16 $ 9.93
Number of Accum. Units Outstanding 518,976 242,120 187,792 213,353 157,474 6,736
World Equity Sub-Account
Beginning of Period $11.97 $11.03 $ 9.54 $ 9.85 $ 9.25 $10.00
End of Period $14.67 $11.97 $11.03 $9.54 $9.54 $ 9.25
Number of Accum. Units Outstanding 719,094 349,771 151.437 92,431 72,323 5,125
Tilt Utility Sub-Account *
Beginning of Period $14.70 $15.06 $12.95 $12.99 $10.15 $10.00
End of Period $19.34 $14.70 $15.06 $12.95 $12.99 $10.15
Number of Accum. Units Outstanding 455,859 265,271 211,775 203,350 98,273 6,477
Growth and Income Sub-Account
Beginning of Period (5/31/95) $10.00
End of Period $11.22
Number of Accum. Units Outstanding 289,200
Small Cap Sub-Account
Beginning of Period 5/4/95) $10.00
End of Period $12.931
Number of Accum. Units Outstanding 278,163

</TABLE>

7
<PAGE>

Six
Months Year Year
Ended Ended Ended
6/30/92 12/31/91 12/31/90
------- -------- --------
<S> <C> <C> <C>
Real Estate Investment Division**
Beginning of Period $11.74 $8.93 $10.00
End of Period $11.58 $11.74 $8.93
Number of Accum. Units Outstanding 0 6,903 904
Natural Resources Division**
Beginning of Period $ 9.19 $9.22 $10.0
End of Period $ 8.81 $9.19 $9.22
Number of Accum. Units Outstanding 0 9,794 1,237
World Bond Division**
Beginning of Period $12.27 $10.91 $10.00
End of Period $12.29 $12.27 $10.91
Number of Accum. Units Outstanding 0 47,602 4,343
Aggressive Growth Division**
Beginning of Period $11.81 $ 9.28 $10.00
End of Period $10.02 $11.81 $ 9.28
Number of Accum. Units Outstanding 0 41,617 3,269
</TABLE>

*On April 1, 1994, the Tilt Utility Portfolio changed its name from the
"Equity Income Portfolio" and changed its investment objectives, policies and
restrictions, and the Tilt Utility Sub-Account changed its name from the "Equity
Income Division."

**On June 29, 1992, the Real Estate Investment, Natural Resources,
Aggressive Growth and World Bond Investment Divisions of Fund E, and the
corresponding Portfolios of the Trust were terminated, based primarily on their
small size and the limited prospect for growth in the foreseeable future.
Investments in these four Investment Divisions were transferred into the
remaining Investment Divisions.

THE COMPANY

First Variable Life Insurance Company (the "Company") is a stock life
insurance company which was organized under the laws of the State of Arkansas in
1968. The Company is principally engaged in the annuity business. The Company is
licensed in 49 States, the District of Columbia and the U.S. Virgin Islands. The
Company is a wholly-owned subsidiary of Irish Life of North America, Inc.
("ILoNA") which in turn is beneficially owned by Irish Life plc. ("Irish Life").
ILoNA also owns Interstate Assurance Company ("Interstate") of Des Moines, Iowa.
Irish Life was formed in 1939 through a consolidation of a number of Irish and
British Life offices transacting business in Ireland. In terms of assets, Irish
Life controls over 50% of the Irish domestic market. As Ireland's leading
institutional investor, it owns in excess of 10% of the leading Irish publicly
traded stocks. Irish Life, through its international subsidiaries, conducts
business in Ireland, the United Kingdom, the United States and France. As the
end of 1995, the Irish Life consolidated group had in excess of $11 million in
assets. ILoNA is a Delaware corporation, incorporated as Carrig International,
Inc. in 1986, which is the holding company of Interstate and the Company.

The Company has an A- (Excellent) rating from A.M. Best, an independent
firm that analyzes insurance carriers. This rating is assigned to companies that
have a strong ability to meet their obligations to policyholders over a long
period of time. The Company also has an AA (Double A) rating from Duff & Phelps
Credit Rating Co. and an AA- (Double A minus) from Standard & Poor's on claims
paying ability. The financial strength of the Company may be relevant with
respect to the Company's ability to satisfy its General Account obligations
under the Policies.

THE COMPANY MAY PUBLISH IN ADVERTISEMENTS AND REPORTS TO OWNERS, THE
RATINGS AND OTHER INFORMATION ASSIGNED IT BY ONE OR MORE INDEPENDENT RATING
SERVICES. FURTHER, THE COMPANY MAY PUBLISH CHARTS AND OTHER INFORMATION
CONCERNING DOLLAR COST AVERAGING, TAX-DEFERENCE AND OTHER INVESTMENT METHODS.

<PAGE>

THE SEPARATE ACCOUNT

The Board of Directors of the Company adopted a resolution to establish
a segregated asset account pursuant to Arkansas insurance law on December 4,
1979. This segregated asset account has been designated First Variable Annuity
Fund E (the "Separate Account"). The Company has caused the Separate Account to
be registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940.

The assets of the Separate Account are the property of the Company.
However, the assets of the Separate Account, equal to the reserves and other
contract liabilities with respect to the Separate Account, are not chargeable
with liabilities arising out of any other business the Company may conduct.
Income, gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Separate Account without regard to
other income, gains or losses of the Company. The Company's obligations arising
under the Contracts are general obligations.

The Separate Account meets the definition of a "separate account" under
the federal securities laws.

The Separate Account is divided into Sub-Accounts, with the assets of
each Sub-Account invested in one Portfolio of Variable Investors Series Trust.
There is no assurance that the investment objective of any of the Portfolios
will be met. Owners bear the complete investment risk for Purchase Payments
allocated to a Sub-Account. Contract Values will fluctuate in accordance with
the investment performance of the Sub-Account(s) to which Purchase Payments are
allocated, and in accordance with the imposition of the fees and charges
assessed under the Contracts.

Variable Investors Series Trust

Variable Investors Series Trust (the "Trust") has been established to
act as one of the funding vehicles for the Contracts offered. The Trust is
managed by First Variable Advisory Services Corp. ("Investment Adviser"), a
wholly-owned subsidiary of the Company. The Investment Adviser retains the
services of sub- advisers pursuant to Sub-Advisory Agreements to manage the
assets of the Portfolios of the Trust as follows: Federated Investment
Counseling with respect to the Cash Management Portfolio and the High Income
Bond Portfolio, Value Line, Inc. with respect to the Multiple Strategies
Portfolio and the Common Stock Portfolio, Strong Capital Management, Inc. with
respect to the U.S. Government Bond Portfolio, State Street Bank and Trust
Company with respect to the Tilt Utility Portfolio, Keystone Investment
Management Company with respect to the World Equity Portfolio, Warburg Pincus
Counsellors, Inc. with respect to the Growth & Income Portfolio and Pilgrim
Baxter & Associates, Ltd. with respect to the Small Cap Portfolio. Prior to
April 1, 1994, INVESCO Capital Management, Inc. was the investment adviser of
the Trust. The Trust is an open-end management investment company. While a brief
summary of the investment objectives of the Portfolios is set forth below, more
comprehensive information, including a discussion of potential risks, is found
in the current Prospectus for the Trust which is included with this Prospectus.
Purchasers should read this Prospectus and the Prospectus for the Trust
carefully before investing.

The Trust is intended to meet differing investment objectives with its
currently available separate Portfolios: Cash Management Portfolio, High Income
Bond Portfolio, Multiple Strategies Portfolio, Common Stock Portfolio, U.S.
Government Bond Portfolio, Tilt Utility Portfolio, World Equity Portfolio,
Growth & Income Portfolio, and Small Cap Portfolio. The investment objectives of
the Portfolios are as follows:

U.S. Government Bond Portfolio. The investment objective of this Portfolio is
to seek current income and preservation of capital through investment primarily
in securities issued or guaranteed as to principal and interest by the U.S.
Government or by its agencies, authorities, or instrumentalities.

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capital appreciation when consistent with its primary objective. The Portfolio
seeks to achieve its investment objectives by investing primarily in
fixed-income securities rated lower than A. Many of the high yield securities in
which the Portfolio may invest are commonly referred to as "junk bonds." For
special, and significant, risks involved with investing in such securities
(including among others, risk of default and illiquidity) see "Investment
Objectives and Policies of the Portfolios - High Income Bond Portfolio" in the
Trust prospectus.

Tilt Utility Portfolio. The investment objective of this Portfolio is to seek
capital appreciation and current income by investing in a diversified portfolio
of common stock and income securities issued by companies engaged in the
utilities industry ("Utility Securities"). Under normal market conditions, at
least 80% of the Portfolio's assets will be invested in Utility Securities. The
Portfolio is intended to achieve investment returns that are higher than the
Standard & Poor's Utilities Index with equivalent risk, diversification and
price volatility. Prior to April 1, 1994, the Tilt Utility Portfolio was known
as the Equity Income Portfolio and had different investment objectives, policies
and restrictions.

World Equity Portfolio. The investment objective of this Portfolio is to
maximize long-term total return by investing primarily in common stocks, and
securities convertible into common stocks, traded in securities markets located
in countries around the world, including the United States. See "Foreign
Investments" under "Policies and Techniques Applicable to all Portfolios" in the
Trust prospectus for a discussion of the risks involved in investing in foreign
securities.

Common Stock Portfolio. The investment objective of this Portfolio is capital
growth which it seeks to achieve through a policy of investing primarily in a
diversified portfolio of common stocks and securities convertible into or
exchangeable for common stock. The secondary objective is current income when
consistent with its primary objective.

Multiple Strategies Portfolio. The investment objective of this Portfolio is to
seek as high a level of total return over an extended period of time as is
considered consistent with prudent investment risk by investing in equity
securities, bonds, and money market instruments in varying proportions.

Growth & Income Portfolio. The investment objective of this Portfolio is to
provide growth of capital and income. The Portfolio seeks to achieve its
objectives by investing in equity securities, fixed income securities and money
market instruments. The portion of the Portfolio invested at any given time in
each of these asset classes will vary depending on market conditions, and there
may be extended periods when the Portfolio is primarily invested in one of them.
in addition, the amount of income derived from the Portfolio is primarily
invested in one of them. In addition, the amount of income derived from the
Portfolio will fluctuate depending on the composition of the Portfolio's
holdings and will tend to be lower when a higher portion of the Portfolio is
invested in equity securities. The Portfolio may also purchase without
limitation dollar-denominated American Depository Receipts ("ADRs"). ADRs are
issued by domestic banks and evidence ownership of underlying foreign
securities.

Small Cap Portfolio. The investment objective of this Portfolio is to seek
capital appreciation. The Portfolio will invest, under normal conditions, at
least 65% of its total assets in securities of companies with small
capitalizations (market capitalizations or annual revenues under $1 billion at
the time of purchase).

Proposed Substitution of Cash Management Portfolio Shares

On April 15, 1996, the Company filed an application with the Securities
and Exchange Commission ("Commission") requesting an order approving a proposal
to substitute shares (the "Substitution") of the Prime Money Fund II of the
Federated Insurance Series ("Federated Series") for shares of the Cash
Management Portfolio of the Trust. Upon obtaining the order from the Commission
approving the Substitution, and subject to any prior approval by applicable
insurance authorities, the Company and the Separate Account propose to effect
the Substitution as soon as is practicable. Thereafter, the Prime Money Fund II
of the Federated Series will be available for investment by Contract Owners
through the Separate Account, instead of the Cash Management Portfolio of the
Trust.

The Company has proposed the Substitution to provide a transfer of the
assets of the Cash Management Portfolio that currently and in the future may be
expected to be of insufficient size to promote investment performance or to
reduce operating expenses. An Owner, prior to the date of Substitution, will be
provided with notice and permitted a specified period of at least thirty (30)
days to transfer his or her Cash Management Sub-Account value to any other
sub-account without any limitation or charge being imposed.

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Federated Series is an open-end investment management company that was
formed as a series trust to provide funding options for variable life insurance
and variable annuity contracts. Pursuant to an investment advisory contract with
Federated Series, investment decisions for Federated Series are made by
Federated Advisers, an affiliate of Federated Investment Counseling. Prime Money
Fund II. The investment objective of this series is to provide current income
consistent with the stability of principal and liquidity. The Fund pursues its
investment objective by investing exclusively in a portfolio of money market
instruments maturing in 397 days or less. An investment in the Prime Money Fund
II is neither insured nor guaranteed by the U.S. Government.

Investors should read this prospectus and the prospectus for Federated
Series carefully before investing. Prospectuses for Federated Series may be
obtained by contacting the Variable Service Center.

Additional Portfolios and/or Investment Options may be made available to
Owners.

Voting Rights

In accordance with its view of present applicable law, the Company will
vote the shares of the Trust and Federated Series that are in the Separate
Account at special meetings of the shareholders in accordance with instructions
received from persons having the voting interest in the Separate Account. The
Company will vote shares for which it has not received instructions, as well as
shares attributable to it, in the same proportion as it votes shares for which
it has received instructions. Neither the Trust nor Federated Series holds
regular meetings of shareholders.

Shares of the Trust and Federated Series are sold to the Company for
allocation to the Separate Account (Fund E) in connection with the Contracts,
and for allocation to other separate accounts funding other variable annuity
contracts and variable life insurance policies issued, or to be issued, by the
Company. Shares of the Trust and Federated Series may also be sold to other
insurance companies, either affiliated or unaffiliated with the Company, for the
same purpose. It is conceivable that, in the future, it may be disadvantageous
for variable annuity separate accounts and variable life separate accounts to
invest in one or more of the Trust's Portfolios or Federated Series
simultaneously if the interests of variable annuity and variable life
policyholders differ. The Board of Trustees of the Trust and the Trustees of
Federated Series intend to monitor events to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response thereto.

The number of shares which a person has a right to vote will be
determined as of a date to be chosen by the Company not more than sixty (60)
days prior to a shareholder meeting. Voting instructions will be solicited by
written communication at least ten (10) days prior to the meeting.

Substitution of Other Securities

If other shares of the Trust or Federated Series (or any Portfolio
within the Trust or any other Investment Option), are no longer available for
investment by the Separate Account or, if in the judgment of the Company,
further investment in the shares should become inappropriate in view of the
purpose of the Contracts, the Company may substitute shares of another
Investment Option (or Portfolio) for shares already purchased or to be purchased
in the future by Purchase Payments under the Contracts. No substitution of
securities may take place without prior approval of the Securities and Exchange
Commission and under the requirements it may impose.

CHARGES AND DEDUCTIONS

Various charges and deductions are made from Contract Values and the
Separate Account. These charges and deductions are:

Deduction for Withdrawal Charge (Sales Load)

If all or a portion of the Contract Value (see "Withdrawals" on Page 23)
is withdrawn, a Withdrawal Charge (sales load) will be calculated at the time of
each withdrawal and will be deducted from the Contract Value. This Charge
reimburses the Company for expenses incurred in connection with the promotion,
sale and distribution of the Contracts. No Withdrawal Charge will be assessed
upon any withdrawal unless the amount withdrawn exceeds the Free

<PAGE>

Withdrawal Amount. The annual Free Withdrawal Amount is determined as the sum of
(a) 10% of Purchase Payments still subject to the Withdrawal Charge; plus (b)
the excess of the Contract Value over Purchase Payments not previously
withdrawn; plus (c) any Purchase Payments no longer subject to the Withdrawal
Charge. The Withdrawal Charge is determined by multiplying the excess of the
amount withdrawn over the Free Withdrawal Amount by the applicable percentage(s)
from the Table of Withdrawal Charges below. The Withdrawal Charge percentages
are based upon the number of Contract Anniversaries that Purchase Payments have
remained in the Contract before being withdrawn. Purchase Payments are deemed to
be withdrawn in the order in which they are made.

TABLE OF WITHDRAWAL CHARGES:

Contract Anniversaries
Since Purchase Payment Charge
---------------------- ------

0 and 1 5%
2 4%
3 3%
4 2%
5 1%
6+ 0%

Any partial withdrawal is subject to a $500. If a partial withdrawal is
requested that would leave an aggregate value of less than the sum of taxes
which have not yet been deducted, the Annual Contract Maintenance Charge, if
applicable, and any Withdrawal Charge, then such partial withdrawal will be
treated as a total withdrawal. If the aggregate value of a Contract after any
withdrawal falls below $300, a Contract may, at the Company's option, be
automatically surrendered and the aggregate value, less any applicable charges,
will be paid to the Owner.

In the event of the death of the Owner, the Company will waive the
Withdrawal Charge with respect to any death benefits paid.

For a partial withdrawal, the Withdrawal Charge will be deducted from
the remaining Withdrawal Value, if sufficient; otherwise it will be deducted
from the amount withdrawn. The amount deducted from the Contract Value will be
determined by subtracting values from the General Account and/or canceling
Accumulation Units from each applicable Sub-Account in the ratio that the value
of each Account bears to the total Contract Value. The Owner must specify in
writing in advance which Units are to be canceled from each Sub-Account and/or
whether values are to be deducted from the General Account if other than the
above method of cancellation is desired.

Deduction for Morality and Expense Risk Charge

The Company deducts on each Valuation Date, both prior to the Annuity
Date and during the Annuity Period, a Mortality and Expense Risk Charge which is
equal, on an annual basis, to 1.25% of the average daily net asset value of the
Separate Account. The mortality risks assumed by the Company arise from its
contractual obligation to make annuity payments after the Annuity Date for the
life of the Annuitant and to waive the Withdrawal Charge in the event of the
death of the Owner. The Company also bears a mortality risk with respect to the
death benefit. The expense risk assumed by the Company is that all actual
expenses involved in administering the Contracts, including Contract maintenance
costs, administrative costs, mailing costs, data processing costs, legal fees,
accounting fees, filing fees and the costs of other services may exceed the
amount recovered from the Annual Contract Maintenance Charge and the
Administrative Charge.

To the extent that the Withdrawal Charge is insufficient to cover the
actual cost of distribution, the Company may use any of its corporate assets,
including potential profit which may arise from the Mortality and Expense Risk
Charge to provide for any difference.

Deduction for Administrative Charge

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Company for the expenses it incurs in the establishment and maintenance of the
Contracts and the Separate Account. These expenses include but are not limited
to: preparation of the Contracts, confirmations, annual reports and statements,
maintenance of Owner records, maintenance of Separate Account records,
administrative personnel costs, mailing costs, data processing costs, legal
fees, accounting fees, filing fees, the costs of other services necessary for
Owner servicing and all accounting, valuation, regulatory and reporting
requirements. Since this charge is an asset-based charge, the amount of the
charge attributable to a particular Contract may have no relationship to the
administrative costs actually incurred by that Contract. The Company does not
intend to profit from this charge. This charge will be reduced to the extent
that the amount of this charge is in excess of that necessary to reimburse the
Company for its administrative expenses. Should this charge prove to be
insufficient, the Company will not increase this charge and will incur the loss.

Deduction for Annual Contract Maintenance Charge

An annual charge of $30 (the "Annual Contract Maintenance Charge") is
assessed against the Contract every Contract Year during the Accumulation
Period. In the case of a total withdrawal occurring 31 or more days after the
beginning of a Contract Year, the full Annual Contract Maintenance Charge for
that year will be deducted. The Annual Contract Maintenance Charge is not
assessed if all Contract Value is in the Fixed Account. This charge is deducted
by subtracting values from the General Account and/or canceling Accumulation
Units from each applicable Sub-Account in the ratio that the value of each
Account bears to the total Contract Value. The Company has set this charge at a
level so that, when considered in conjunction with the Administrative Charge
(see above), it will not make a profit from the charges assessed for
administration.

Deduction for Premium Taxes

Premium taxes or other taxes payable to a state or other governmental
entity will be charged against the Contract Values. The Company currently
intends to deduct premium taxes when incurred. Some states assess premium taxes
at the time Purchase Payments are made; others assess premium taxes at the time
annuity payments begin. Premium taxes generally range from 0% to 4%.

Deduction for Income Taxes

While the Company is not currently maintaining a provision for federal
income taxes with respect to the Separate Account, the Company has reserved the
right to establish a provision for income taxes if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of the
Separate Account. The Company will deduct for any income taxes incurred by it as
a result of the operation of the Separate Account whether or not there was a
provision for taxes and whether or not it was sufficient. The Company will
deduct any withholding taxes required by applicable law. (See "Tax Status -
Income Tax Withholding" on Page 28.)

Deduction for Expenses of the Investment Options

There are other deductions from and expenses paid out of the assets of
the Investment Options which are described in the accompanying Trust and
Federated Series Prospectuses.

Transfer Charge

The Company reserves the right to charge up to $25.00 for exchanges and
transfers when the total of exchanges and transfers in any Contract Year exceeds
12.

Elimination or Reduction of Charges and Deductions.

The charges and deductions on a Contract may be reduced or eliminated,
in whole or in part, when sales of Contracts are made to individuals or to a
group of individuals in a manner that results in savings or administration
expenses. Any reductions will be determined by the Company after examination of
relevant factors such as:

[bullet] the size and type of group to which sales are to be made because
expenses for a larger group are generally less than for a smaller
group since large numbers of Contracts may be implemented and
administered with fewer contacts;

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<PAGE>

[bullet] the total amount of Purchase Payments to be received because expenses
are likely to be less on larger Purchase Payments than on smaller
ones;

[bullet] any prior or existing relationship with the Company because of the
likelihood of implementing the Contract with fewer contracts; and

[bullet] other circumstances, of which the Company is not presently aware,
which could result in reduced expenses.

Charges may also be eliminated when a Contract is issued to an officer,
director, employee or agent of the Company or any of its affiliates. In no event
will reductions or elimination of the charges be permitted where reductions or
elimination will be unfairly discriminatory to any person.

THE CONTRACTS

Application and Issuance of a Contract

An application must be completed and submitted to the Company to
purchase a Contract, together with the minimum required initial Purchase
Payment. (See "Purchase Payments") A Contract ordinarily will be issued with
respect to Owners and Annuitants up to Age 80. Investors in Qualified Contracts
for Owners and Annuitants beyond Age 70-1/2 should consult with qualified tax
advisers on the impact of minimum distribution requirement under their existing
retirement plans. Any required annual minimum distribution amount should be
withdrawn from an existing retirement plan before amounts are transferred to
purchase a Qualified Contract. (See "Tax Considerations- Withdrawals from
Qualified Contracts.")

The Owner, Annuitant, and beneficiary of a Contract are initially
designated in the application and subject to the Company's underwriting rules.
If the Application for a Contract is in good order, the Company will apply the
Purchase Payment within 2 business days of receipt: (a) to the Separate Account
and credit the Contracts with Accumulation Units; and/or (b) to the Fixed
Account and credit the Contract with dollars. If the Application for a Contract
is not in good order, the Company will attempt to get in good order or the
Company will return the Application and the Purchase Payment within 5 business
days. The Company will not retain a Purchase Payment for more than 5 business
days while processing an incomplete Application unless it has been authorized by
the purchaser. The Company may decline any application.

Free Look Right. An Owner has the right to review a Contract during an initial
inspection period specified in the Contract and, if dissatisfied, to return it
to the Company or to the agent through whom it was purchased. When the Contract
is returned to the Company during the permitted period, it will be voided as if
it had never been in force. The Company will ordinarily refund the Contract
Value (which may be greater or less than the Purchase Payments received) on a
Contract returned during the permitted period, unless a different amount is
required. The "free look period" is at least 10 days, and may be greater
depending on state requirements.

Delayed Investment Start Date. Purchase Payments are generally allocated to the
Sub-Accounts or to the General Account as selected by the Owner. In certain
instances, however, the Company reserves the right to allocate Purchase Payments
to the Cash Management Sub-Account (or, after the Substitution, to the Prime
Money Fund II Sub-Account) for a period of up to 5 days beyond a `free look"
inspection period before they will be invested (together with any investment
gain) in any other Sub-Account(s) designated by the Owner. If the Company elects
to delay such initial investments in Sub-Accounts, the delay would apply where a
Contract is issued: (a) in a state which requires that Purchase Payments less
withdrawals be refunded upon the exercise of (i) a "free look" right or (ii) an
inspection right following a "replacement" of an existing life insurance or
annuity contract; or (b) as in Individual Retirement Annuity (or as the initial
investment of an Individual Retirement Account).

On the date of this Prospectus, the Company does not delay investment
start dates and, should it elect to do so, it will so advise prospective
investors in a Contract.

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<PAGE>

Ownership

The Owner has all rights and may receive all benefits under the
Contract. Prior to the Annuity Date, the Owner is the person designated in the
Application, unless changed. On and after the Annuity Date, the Annuitant is the
Owner. Upon the death of the Annuitant, the Beneficiary is the Owner.

The Owner may change the Owner at any time prior to the Annuity Date. A
change of Owner will automatically revoke any prior designation of Owner. A
request for change must be: (1) made in writing; and (2) received by the Company
at the Variable Service Center. The change will become effective as of the date
the written request is signed. A new designation of Owner will not apply to any
payment made or action taken by the Company prior to the time it was received.

For Non-Qualified Contracts, in accordance with Internal Revenue Code
Section 72(u), a deferred annuity contract held by a corporation or entity that
is not a natural person is not treated as an annuity contract for tax purposes.
Income on the contract is treated as ordinary income received by the Owner
during the taxable year. However, for purposes of Code Section 72(u), an annuity
contract held by a trust or other entity as agent for a natural person is
considered held by a natural person and treated as an annuity contract for tax
purposes. Tax advice should be sought prior to purchasing a Contract which is to
be owed by a trust or other non-natural person.

Annuitant

The Annuitant is the person on whose life Annuity Payments are based.
The Annuitant is the person designated in the Application, unless changed prior
to the Annuity Date. The Annuitant may not be changed in a Contract which is
owned by a non-natural person.

Assignment

The Owner may, at any time during his or her lifetime, assign his or her
rights under the Contract. The Company will not be bound by any assignment until
written notice is received by the Company. The Company is not responsible for
the validity of any assignment. The Company will not be liable as to any payment
or other settlement made by the Company before receipt of the assignment.

If the Contract is issued pursuant to a retirement plan which receives
favorable tax treatment under the provisions of Sections 401, 403(b), 408 or 457
of the Internal Revenue Code, it may not be assigned, pledged or otherwise
transferred except as may be allowed under applicable law.

Transfers by the Company

The Company may, subject to applicable regulatory approvals, transfer
its obligations under the Contracts to another qualified life insurance company
under an assumption reinsurance arrangement without the prior consent of the
Owner.

Beneficiary

The Beneficiary is named in the Application and, unless changed, is
entitled to receive the benefits to be paid at the death of the Owner.

Unless the Owner provides otherwise, the Death Benefit will be paid in
equal shares or all to the survivor(s) as follows:

(1) to the primary Beneficiaries who survive the Owner's death; or if
there are none,

(2) to the contingent Beneficiaries who survive the Owner's death; or if
there are none,

(3) to the estate of the Owner.

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<PAGE>

Change of Beneficiary

Subject to the rights of any irrevocable Beneficiary(ies), the Owner may
change the primary Beneficiary(ies) or contingent Beneficiary(ies). A change may
be made by filing a written request with the Company at its Variable Service
Center. The change will take effect as of the date the notice is signed. The
Company will not be liable for any payment made or action taken before it
records the change.

Transfers of Contract Values During the Accumulation Period

Prior to the Annuity Date, an Owner may transfer all or part of an
Account without the imposition of any fee or charge if there have been no more
than 12 transfers made in the Contract Year. If more than 12 transfers have been
made in the Contract Year, the Company reserves the right to deduct a transfer
fee but does not do so currently. (See "Charges and Deductions - Deduction for
Transfer Fee" above and "Purchase Payments and Contract Value Dollar Cost
Averaging.") All transfers are subject to the following:

(1) Allocations, transfers and allocations to the fixed account must
be at least $100.00

(2) All Purchase Payments and transfers allocated to the General
Account must remain in the General Account for one year prior to
any transfer from the General Account.

(3) Any transfer direction must clearly specify the amount which is to
be transferred and the Accounts which are to be affected.

(4) The Company reserves the right at any time and without prior
notice to any party including, but not limited to, the
circumstances described in the "Suspension of Payments or
Transfers" provision, below, to terminate, suspend or modify the
transfer privileges described above.

Programmed or other frequent requests to transfer all or part of an
Account by, or on behalf of, an Owner may have a detrimental effect on
Investment Option share values held in the Separate Account. The Company may
therefore limit the number of permitted transfers in any Contract Year, or
refuse to honor any transfer request for an Owner or a group of Owners if it is
informed that the purchase or redemption of shares of one or more of the
Investment Options is to be restricted because of excessive trading, or if a
specific transfer or group of transfers is deemed to have a detrimental effect
on Accumulation Unit Value or Investment Option share prices.

The Company may also at any time suspend or cancel its acceptance of
third party authorizations on behalf of an Owner; or restrict the Investment
Options that will be available for such transfers. Notice will be provided to
the third party in advance of the restrictions. The restrictions will not be
imposed, however, if the Company is given satisfactory evidence that : (a) the
third party has been appointed by the Owner to act on the Owner's behalf for all
financial affairs; or (b) the third party has been appointed by a court of
competent jurisdiction to act on the Owner's behalf.

Telephone Requests

An Owner may elect to make transfers by telephone. If there are Joint
Owners, unless the Company is informed to the contrary, instructions will be
accepted from either one of the Joint Owners. The Company will use reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If it does not, the Company may be liable for any losses due to unauthorized or
fraudulent instructions. The Company tape records all telephone instructions.

Death Benefit Provided by the Contract

If the Annuitant is not the Owner and the Owner dies while the Contract
is in effect, while the Annuitant is living, and before the Annuity Date, the
Company, upon receipt of due proof of death of the Owner, will pay a death
benefit to the Owner's beneficiary. (For Contracts owned by non-natural persons,
the Annuitant will be deemed to be the Owner for this purpose and the death or a
change of the Annuitant shall be treated as the death of the Owner.) If there is
no Owner's beneficiary living on the date of death of the Owner, the Company
will pay the death benefit, upon

<PAGE>

receipt of due proof of the death of both the Owner and the Owner's beneficiary,
in one sum to the estate of the Owner. If the Owner's beneficiary is not an
individual or the death benefit is payable to the Owner's estate, the death
benefit must be distributed within five years of the Owner's death. If the
Owner's beneficiary is an individual, such individual may receive payments in a
lump sum or over a period of years not exceeding his or her life expectancy
beginning not later than one year after the Owner's death. If the Owner's spouse
is the Owner's beneficiary, the spouse may elect to keep the Contract in effect
and become the new Owner. If the Annuitant is not the Owner and the Owner dies
before the Annuity Date, except in the case of a spouse who elects to become the
new Owner, all rights of the Annuitant cease upon the Owner's death.

If the Annuitant dies while the Contract is in effect and before the
Annuity Date, the Company, upon receipt of due proof of death, will pay a death
benefit to the Annuitant's beneficiary, either in a lump sum or under one of the
annuity options as provided under "Annuity Provisions - Annuity Options." If
there is no Annuitant's beneficiary living on the date of the death of the
Annuitant, the Company will pay the death benefit in a lump sum to the Owner
upon receipt of due proof of the death of both the Annuitant and the Annuitant's
beneficiary. If written election of a method of settlement of the Death Benefit
is not received within 60 days following the date due proof of death is received
at the Company's Variable Service Center, the Annuitant's Beneficiary or the
Owner's beneficiary, as the case may be, if an individual, will be deemed to
have elected Fixed Annuity Option B, a life annuity with 120 monthly payments
certain as of the last day of the 60 day period.

In the event of the simultaneous death of the Owner and the Annuitant,
the Company will pay a death benefit to the Owner's beneficiary.

On or after the Annuity Date, no death benefit will be payable under the
Contract except as may be provided under the annuity option elected or
automatically placed in effect. In the event of the death of the Owner after the
Annuity Commencement Date, benefits must be distributed at least as rapidly as
the method of distribution in effect on the Owner's death.

The Contract provides that upon the death of the Annuitant prior to the
Annuity Commencement Date, the death benefit will be paid to the named
beneficiary. Such payments made upon the death of the Annuitant who is not the
Owner of the Contract do not qualify for the Death of Owner exception to the ten
percent (10%) federal income tax penalty applied to the income portion of any
distribution from Non-Qualified Contracts and will be subject to the ten percent
(10%) premature distribution penalty unless the beneficiary is 59-1/2 or one of
the other exceptions applies. (See "Tax Status - Tax Treatment of Withdrawals
Non-Qualified Contracts.")

Amount of Death Benefit Prior to Annuity Date

Prior to the Annuity Date the death benefit is equal to the greater of
(a) the Contract Value, (b) the sum of all Purchase Payments made under the
Contract, less the sum of all amounts withdrawn of (c) the Contract Value as of
the first day of the current five Contract Year period plus any Purchase
Payments made since the date and less any withdrawals made since that date. The
first five Contract Year period begins on the Issue Date, the second five
Contract Year period begins on the fifth Contract Anniversary, and so forth. For
Contracts issued in Texas and North Carolina, the death benefit is equal to the
greater of (a) or (b).

In certain states the Company may issue a Contract to an Owner over age
85. In such cases, the death benefit payable on the Owner's death is equal to
the Withdrawal Value (Contract Value less applicable charges).

The Accumulation Unit values used in determining the amount of the death
benefit will be those determined at the close of the Valuation Period in which
due proof of death is received by the Company at the Variable Service Center.

If written election of a method of settlement of the Death Benefit is not
received within 60 days following the date due proof of death is received at the
Company's Variable Service Center, the Annuitant's Beneficiary or the Owner's
beneficiary, as the case may be, if an individual, will be deemed to have
elected Fixed Annuity Option B, a life annuity with 120 monthly payments certain
as of the last day of the 60 day period.

Amounts Payable On Death of Payee

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In the event of the death of a payee on or after the Annuity Date, and
prior to the expiration of a period certain, if any, the annuity payments for
the remainder of such period certain will be paid (a) to the Annuitant's
beneficiary as such payments come due; of (b) if there is no designated
beneficiary then living, to the estate of the deceased payee in a lump sum equal
to the commuted value of such payments. all payments made in one sum by the
Company as provided in this paragraph are made in lieu of paying any remaining
annuity payments under the Annuity Option then in effect.

ANNUITY PROVISIONS

Annuity Date and Annuity Option

The Owner selects an Annuity Date and Annuity Option at the time of
application. The Annuity Date must always be the first day of a calendar month
and must be at least one month after the Issue Date. The Annuity Date may not be
later than the Annuitant's 85th birthday. If no Annuity Option is elected, and
in effect on the 30th day prior to the Annuity Date, Option B with a 120 month
guarantee will automatically be applied.

Change in Annuity Date and Annuity Option

Prior to the Annuity Date, the Owner may change the Annuity Date. Any
changes must be in writing and must be requested prior to the new Annuity Date.
The Annuity Date must always be the first day of a calendar month and must be at
least one month after the Issue Date. The Annuity Date may not be later than the
Annuitant's 85th birthday.

The Owner may, upon written notice to the Company, at any time prior to
the Annuity Date, change the Annuity Option. Any change must be requested at
least seven (7) days prior to the Annuity Date.

Allocation of Annuity Payments

If all of the Contract Value on the seventh calendar day before the
Annuity Date is allocated to the General Account, the Annuity will be paid as a
Fixed Annuity. If all of the Contract Value on that date is allocated to the
Separate Account, the Annuity will be paid as a Variable Annuity. If the
Contract Value on that date is allocated to both the General Account and the
Separate Account, the Annuity will be paid as a combination of a Fixed Annuity
and a Variable Annuity to reflect the allocation between the Accounts.

Transfers During the Annuity Period

During the Annuity Period the Owner may:

1. transfer Contract Value among the Sub-Accounts of the Separate
Account.

2. once each Contract Year, make a transfer of Contract Value from
one or more Sub-Accounts to the General Account. The Owner may not
make a transfer from the General Account to the Separate Account.
Amounts transferred from a Sub-Account to the General Account are
subject to certain procedures set out in the Contract.

3. The Company reserves the right at any time and without prior
notice to any party including, but not limited to, the
circumstances described in the "Suspension of Payments or
Transfers" provision, to terminate, suspend or modify the transfer
privileges described above.

Annuity Options

The actual dollar amount of Variable Annuity Payments is dependent upon
(i) the Contract Value on the Annuity Date, (ii) the annuity table specified in
the Contract, (iii) the Annuity Option selected, and (iv) the investment
performance of the Sub-Account selected.

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<PAGE>

decrease. If a higher assumed investment rate was used, the initial payment
would be higher, but the actual net investment rate would have to be higher in
order for Variable Annuity Payments to increase.

Variable Annuity Payments will reflect the investment performance of the
Separate Account in accordance with the allocation of the Contract Value to the
Sub-Account on the Annuity Date. Thereafter, allocations may not be changed
except as provided in "Transfers During the Annuity Period", above. The total
dollar amount of each Annuity Payment is the sum of the Variable Annuity Payment
and the Fixed Annuity Payment.

The amount payable under the Contract may be made under one of the
following options or any other option acceptable to the Company:

Option A. Life Annuity. An annuity payable monthly during the lifetime of the
Annuitant. Payments cease at the death of the Annuitant.

Option B. Life Annuity with Periods Certain of 60, 120, 180 or 240 Months. An
annuity payable monthly during the lifetime of the Annuitant and in any event
for sixty (60), one hundred twenty (120), one hundred eighty (180) or two
hundred forty (240) months certain as selected.

Option C. Joint and Survivor Annuity. An annuity payable monthly during the
joint lifetime of the Annuitant and a designated second person. At the death of
either Payee, Annuity Payments will continue to be made to the survivor Payee.
The survivor's Annuity Payments will be equal to 100%, 75%, 662/3% or 50% of the
amount payable during the joint lifetime, as chosen.

Option D. Joint and Contingent Annuity. An annuity payable monthly during the
lifetime of the Annuitant and continuing during the lifetime of a designated
second person after the Annuitant's death. The second person's annuity payments
will be equal to 100%, 75%, 662/3% or 50% of the amount payable, as chosen.

Option E. Fixed Payments for a Period Certain. An annuity payable monthly for a
fixed amount for any specified period (at least five (5) years but not exceeding
thirty (30) years), as chosen.

Annuity Options A, B, C & D are available on a Fixed Annuity basis, a
Variable Annuity basis or a combination of both. Annuity Option E is available
on a Fixed Annuity basis only.

Frequency and Amount of Annuity Payments

Annuity Payments will be paid as monthly installments. However, if the
net amount available to apply under any Annuity Option is less than $5,000, the
Company has the right to pay the amount in one single lump sum in lieu of
Annuity Payments. If the Annuity Payment would be or become less than $200 where
only a Fixed Annuity Payment or a Variable Annuity is selected, or if the
Annuity Payment would be or become less than $100 on each basis when a
combination of Fixed and Variable Annuities is selected, the Company will reduce
the frequency of payments to an interval which will result in each payment being
at least $200, or $100 on each basis if a combination of Fixed and Variable
Annuities is selected.

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<PAGE>

PURCHASE PAYMENTS AND CONTRACT VALUE

Purchase Payments

The Contracts are purchased under a flexible Purchase Payment plan. The
initial Purchase Payment is due on the Issue Date. For Non-Qualified Contracts,
the minimum initial Purchase Payment is $5,000. The minimum initial Purchase
Payment for Qualified Contracts issued pursuant to Section 408 of the Internal
Revenue Code is $250. For all Contracts, the maximum subsequent Purchase Payment
is $1,000,000 and the minimum subsequent Purchase Payment is $100. The Company
reserves the right to decline any Application or Purchase Payment.

Allocation of Purchase Payments

Purchase Payments are allocated to the General Account or appropriate
Sub-Account(s) within the Separate Account as selected by the Owner. Unless
elected otherwise by the Owner, subsequent Purchase Payments are allocated in
the same manner as the initial Purchase Payment. Under certain circumstances,
Purchase Payments which have been designated by prospective purchasers to be
allocated to Sub-Accounts other than the Cash Management Sub-Account may
initially be allocated to the Cash Management Sub-Account. (See "Highlights.")
For each Sub-Account, Purchase Payments are converted into Accumulation Units.
The number of Accumulation Units credited to the Contract is determined by
dividing the Purchase Payment allocated to the Sub-Account by the value of the
Accumulation Unit for the Sub-Account as of the Valuation Period during which
the Purchase Payment is allocated to the Sub-Account. Purchase Payments
allocated to the General Account are credited in dollars.

Under certain circumstances, the Company may delay the initial
investment of Purchase Payments to be allocated to Investment Options in the
Separate Account, but it does not currently do so. (See "The Contracts -
Application and Issuance of a Contract--Delayed Investment Start Date.")

Dollar Cost Averaging

Dollar Cost Averaging is a program which, if elected, permits an Owner
to systematically transfer amounts for each month or quarter from the Cash
Management Sub-Account or the General Account to any Sub-Account(s). By
allocating amounts on a regularly scheduled basis as opposed to allocating the
total amount at one particular time, an Owner may be less susceptible to the
impact of market fluctuations. The minimum amount which may be transferred is
$500. An Owner must have a minimum of $6,000 of Contract Value in the Cash
Management Sub-Account or the General Account, or the amount required to
complete the Owner's designated program, in order to participate in the Dollar
Cost Averaging program. After the Substitution, the Dollar Cost Averaging
requirements applicable to the Cash Management Sub-Account will apply to the
Prime Money Fund II Sub-Account. (See "Proposed Substitution of Cash Management
Portfolio Shares.")

All Dollar Cost Averaging transfers will be made on the same day of each
month or quarter (or the next Valuation Date if the same day of the month or
quarter is not a Valuation Date). If the Owner is participating in the Dollar
Cost Averaging program, such transfers are not taken into account in determining
any transfer fee. Under certain circumstances, there may be restrictions with
respect to an Owner's ability to participate in the Dollar Cost Averaging
program and limitations on the amounts that can be transferred from the General
Account to any Sub-Accounts. An Owner participating in the Dollar Cost Averaging
program may not make systematic withdrawals of his or her Contract Value. (See
"Withdrawals--Systematic Withdrawals.")

Distribution

First Variable Capital Services, Inc. ("FVCS"), 10 Post Office Square,
Boston, MA 02109, acts as the distributor of the Contracts. FVCS is a
wholly-owned subsidiary of the Company. The Contract is offered on a continuous
basis through FVCS and approved broker-dealers who are members of the National
Association of Securities Dealers, Inc.

The Company and FVCS have agreements with various broker-dealers under
which the Contracts will be sold by registered representatives of the
Broker-dealers. The Registered representatives are required to be authorized
under

<PAGE>

applicable state regulations to sell variable annuity contracts. The
commissions payable to a broker-dealer for sales of the Contract may vary with
the sales agreement, but is not expected to exceed 7% of Purchase Payments.
Broker- dealers may also receive expense allowances, wholesaler fees, bonuses
and training fees.

Contract Value

The Contract Value of the Contract on any Valuation Date is the sum of
the Owner's interest in the Sub-Accounts of the Separate Account and in the
General Account. The value of each Sub-Account is determined by multiplying the
number of Accumulation Units attributable to the Sub-Account by the value of an
Accumulation Unit for the Sub-Account.

Accumulation Unit

Purchase Payments allocated to the Separate Account and amounts
transferred to or within the Separate Account are converted into Accumulation
Units. This is done by dividing each Purchase Payment by the value of an
Accumulation Unit as of the Valuation Period during which the Purchase Payment
is allocated to the Separate Account or the transfer is made. The Accumulation
Unit value for each Sub-Account was arbitrarily set initially at $10. The
Accumulation Unit value for any later Valuation Period is determined by
subtracting (2) from (1) and dividing the result by (3) where:

(1) is the net result of:

(a) the assets of the Sub-Account attributable to Accumulation
Units; plus or minus

(b) the cumulative charge or credit for taxes reserved which
is determined by the Company to have resulted from the
operation or maintenance of the Sub-Account;

(2) is the cumulative unpaid charge for the Mortality and Expense
Risk Charge and for the Administrative Charge (see "Charges and
Deductions"); and

(3) is the number of Accumulation Units outstanding at the end of
such Valuation Period.

The Accumulation Unit value may increase or decrease from Valuation
Period to Valuation Period.

WITHDRAWALS

While the Contract is in force and before the Annuity Date, the Company
will, upon written request to the Company by the Owner, allow the withdrawal of
all or a portion of the Contract for its Withdrawal Value. Withdrawals will
result in the cancellation of Accumulation Units from each applicable
Sub-Account of the Separate Account or a reduction in the General Account Value
in the ratio that the Sub-Account Value and/or the General Account Value bears
to the total Contract Value. The Owner must specify in writing in advance which
units are to be canceled or values are to be reduced if other than the
above-mentioned method of cancellation is desired. The Company will pay the
amount of any withdrawal within seven (7) days of receipt of a request in good
order, unless the "Suspension of Payments or Transfers" provision is in effect
(see "Suspension of Payments or Transfers").

The Withdrawal Value is the Contract Value for the Valuation Period next
following the Valuation Period during which a written request for withdrawal is
received at the Company reduced by the sum of:

(a) any applicable taxes not previously deducted;

(b) any applicable Annual Contract Maintenance Charge; and

Each partial withdrawal must be for an amount which is not less than
$1,000 or, if smaller, the remaining value in the Sub-Account or General
Account. The remaining value in each Sub-Account or the General Account from
which a partial withdrawal is requested must be at least $1,000 after the
partial withdrawal is completed.

<PAGE>

Certain tax withdrawal penalties and restrictions may apply to
withdrawals from Contracts. (See "Tax Status.") For Contracts purchased in
connection with 403(b) plans, the Code limits the withdrawal of amounts
attributable to contributions made pursuant to a salary reduction agreement (as
defined in Section 403(b)(11) of the Code) to circumstances only when the Owner:
(1) attains age 591/2; (2) separates from service; (3) dies; (4) becomes
disabled (within the meaning of Section 72(m)(7) of the Code); or (5) in the
case of hardship.

However, withdrawals for hardship are restricted to the portion of the
Owner's Contract Value which represents contributions made by the Owner and does
not include any investment results. The limitations on withdrawals became
effective on January 1, 1989 and apply only to salary reduction contributions
made after December 31, 1988, to income attributable to such contributions and
to income attributable to amounts held as of December 31, 1988. However, these
limitations will apply to all amounts (regardless of when or how the
contributions were originally made) which are transferred or rolled over from a
custodial account (as defined in Section 403(b)(7) of the Code) into the Owner's
Account. The limitations on withdrawals do not affect rollovers or transfers
between certain Qualified Plans. Owners should consult their own tax counsel or
other tax adviser regarding any distributions.

Systematic Withdrawals

As stated above, an Owner may request a withdrawal of the Contract's
Withdrawal Value. In addition, and subject to any conditions and fees the
Company may impose, an Owner may elect to make equal periodic withdrawals
("systematic withdrawals") of his or her Contract Values. Currently, however,
there are no charges for systematic withdrawals.

Under the program, systematic withdrawals are made on the same day (or
next Valuation Date of each month or quarter. Owners must be 59-1/2 or older to
participate. Systematic withdrawals are taken pro-rata from the Investment
Options of a Contract and are transferred automatically to an Owner's bank
account, provided the account is maintained at a bank that is a member of the
Automated Clearing House (ACH). the right to a 10% free single sum withdrawal is
forfeited. Systematic withdrawals are not allowed simultaneously with the dollar
cost averaging program.

The Company reserves the right to modify, suspend or eliminate the program at
any time.

Texas Optional Retirement Program

A Contract issued to a participant in the Texas Optional Retirement
Program ("ORP") will contain an ORP endorsement that will amend the Contract as
follows: a) If for any reason a second year of ORP participation is not begun,
the total amount of the State of Texas' first-year contribution will be returned
to the appropriate institution of higher education upon its request. b) No
benefits will be payable, through surrender of the Contract or otherwise, until
the participant dies, accepts retirement, terminates employment in all Texas
institutions of higher education or attains the age of 701/2. The value of the
Contract may, however, be transferred to other contracts or carriers during the
period of ORP participation. A participant in the ORP is required to obtain a
certificate of termination from the participant's employer before the value of a
Contract can be withdrawn.

Suspension of Payments or Transfers

The Company reserves the right to suspend or postpone payments for
withdrawals or transfers for any period when:

(1) the New York Stock Exchange is closed (other than customary
weekend and holiday closings);

(2) trading on the New York Stock Exchange is restricted;

(3) an emergency exists as a result of which disposal of securities
held in the Separate Account is not reasonably practicable or it
is not reasonably practicable to determine the value of the
Separate Account's net assets; or

(4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of Owners;
provided that applicable rules and regulations of the Securities
and Exchange

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<PAGE>

Commission will govern as to whether the conditions described in
(2) and (3) exist.

The Company reserves the right to defer payment for a withdrawal or
transfer from the General Account for the period permitted by law but not for
more than six months after written election is received by the Company.

ADMINISTRATION OF THE CONTRACTS

The Company has established a Variable Service Center to administer
newly issued Contracts, and has retained Alliance - One Services, L.P.
("Alliance") successor to Vantage Computer Systems, Inc., 301 West 11th St.,
Kansas City, Missouri 64105 to provide administration on previously issued
contracts. Such administrative services include maintenance of Owners' records.
The Company will pay all fees and charges of Alliance. Alliance serves as the
administrator to various insurance companies offering variable and fixed annuity
and variable life insurance contracts.

PERFORMANCE INFORMATION

Cash Management Portfolio

From time to time, the Cash Management Sub-Account of the Separate
Account may advertise its "yield" and "effective yield." Both yield figures are
based on historical earnings and are not intended to indicate future
performance. The "yield" of the Cash Management Sub-Account refers to the income
generated by Contract Values in the Cash Management Sub-Account over a seven-day
period (which period will be stated in the advertisement). This income is
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the Contract Values in the Cash Management Sub-Account.
The "effective yield" is calculated similarly. However, when annualized, the
income earned by Contract Values is assumed to be reinvested. This results in
the "effective yield" being slightly higher than the "yield" because of the
compounding effect of the assumed reinvestment. The yield figure will reflect
the deduction of any asset-based charges and any applicable Annual Contract
Maintenance Charge, but will not reflect the deduction of any Withdrawal Charge.
The deduction of any Withdrawal Charge would reduce any percentage increase or
make greater any percentage decrease. The "yield" and the "effective yield" of
the Prime Money Fund II Sub-Account may be advertised after the Substitution.
(See "Proposed Substitution of Cash Management Portfolio Shares.")

Other Portfolios

From time to time, the Company may advertise performance data for the
various other Portfolios under the Contract. Such data will show the percentage
change in the value of an Accumulation Unit based on the performance of an
investment medium over a period of time, usually a calendar year, determined by
dividing the increase (decrease) in value for that Unit by the Accumulation Unit
value at the beginning of the period. This percentage figure will reflect the
deduction of any asset-based charges and any applicable Annual Contract
Maintenance Charges under the Contracts, but will not reflect the deduction of
any Withdrawal Charge. The deduction of any Withdrawal Charge would reduce any
percentage increase or make greater any percentage decrease.

Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return figures
reflect the deduction of any applicable Annual Contract Maintenance Charges and
Withdrawal Charges, as well as any asset-based charges.

The Company may make available yield information with respect to some of
the Portfolios. Such yield information will be calculated as described in the
Statement of Additional Information. The yield information will reflect the
deduction of any applicable Annual Contract Maintenance Charge as well as any
asset-based charges.

The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.

<PAGE>

500 Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
Portfolio being compared. The Standard & Poor's Composite 500 Stock Price Index
is an unmanaged, unweighted average of 500 stocks, the majority of which are
listed on the New York Stock Exchange. The Dow Jones Industrial Average is an
unmanaged, weighted average of thirty blue chip industrial corporations listed
on the New York Stock Exchange. Both the Standard & Poor's 500 Stock Index and
the Dow Jones Industrial Average assume quarterly reinvestment of dividends.

The Company may also distribute sales literature which compares the
performance of the Accumulation Unit values of the Contracts issued through the
Separate Account with the unit values of variable annuities issued through the
separate accounts of other insurance companies. Such information will be derived
from the Lipper Variable Insurance Products Performance Analysis Service,
Morningstar or from the VARDS Report.

The Lipper Variable Insurance Products Performance Analysis Service is
published by Lipper Analytical Services, Inc., a publisher of statistical data
which currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.

The VARDS Report is a monthly variable annuity industry analysis
compiled by Variable Annuity Research & Data Service of Miami and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges.

Morningstar rates a variable annuity subaccount against its peers with
similar investment objectives. Morningstar does not rate any subaccount that has
less than three years of performance data.

TAX STATUS

General

NOTE: The following description is based upon the Company's
understanding of current federal income tax law applicable to annuities in
general. The Company cannot predict the probability that any changes in such
laws will be made. Purchasers are cautioned to seek competent tax advice
regarding the possibility of such changes. The Company does not guarantee the
tax status of the Contracts. Purchasers bear the complete risk that the
Contracts may not be treated as "annuity contracts" under federal income tax
laws. It should be further understood that the following discussion is not
exhaustive and that special rules not described in this Prospectus may be
applicable in certain situations. Moreover, no attempt has been made to consider
any applicable state or other tax laws.

Section 72 of the Code governs taxation of annuities in general. An
Owner is not taxed on increases in the value of a Contract until distribution
occurs, either in the form of a lump sum payment or as annuity payments under
the Annuity Option selected. For a lump sum payment received as a total
withdrawal (total surrender), the recipient is taxed on the portion of the
payment that exceeds the cost basis of the Contract. For Non-Qualified
Contracts, this cost basis is generally the Purchase Payments, while for
Qualified Contracts there may be no cost basis. The taxable portion of the lump
sum payment is taxed at ordinary income tax rates.

For annuity payments, a portion of each payment in excess of an
exclusion amount is incredible in taxable income. The exclusion amount for
payments based on a fixed annuity option is determined by multiplying the
payment by the ratio that the cost basis of the Contract (adjusted for any
period certain or refund feature) bears to the expected return under the
Contract. The exclusion amount for payments based on a variable annuity option
is determined by dividing the cost basis of the Contract (adjusted for any
period certain or refund guarantee) by the number of years over which the
annuity is expected to be paid. Payments received after the investment in the
Contract has been recovered (i.e. when the total of the excludable amounts
equals the investment in the Contract) are fully taxable. The taxable portion is
taxed at ordinary income tax rates. For certain types of Qualified Plans there
may be no cost basis in the Contract within the meaning of Section 72 of the
Code. Owners, Annuitants and Beneficiaries under the Contracts should seek
competent financial advice about the tax consequences of any distributions.

<PAGE>

The Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the Separate Account is not a separate entity from
the Company and its operations form a part of the Company.

26
<PAGE>

Diversification

Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in imposition of federal income tax
to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract.

The Company intends that all Portfolios of the Trust underlying the
Contracts will be managed by the Investment Adviser for the Trust, and that
Prime Money Fund II will be managed by its investment adviser, to comply with
the diversification requirements set forth in section 817(h) of the Code and
Treas. Reg. 1-817-5 promulgated thereunder.

The Treasury Department has indicated that the diversification
Regulations do not provide guidance regarding the circumstances in which Owner
control of the investments of the Separate Account will cause the Owner to be
treated as the owner of the assets of the Separate Account, thereby resulting in
the loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.

The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered the owner of the assets of the Separate Account
resulting in the imposition of federal income tax to the Owner with respect to
earnings allocable to the Contract prior to receipt of payments under the
Contract.

In the event any forthcoming guidance or ruling is considered to set
forth a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owners
being retroactively determined to be the owners of the assets of the Separate
Account.

Due to the uncertainty in this area, the Company reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.

Contracts Owned by Other than Natural Persons

Under Section 72(u) of the Code, the investment earnings on premiums for
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation, or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to Contracts held by a trust or other entity as an
agent for a natural person or to Contracts held by a tax qualified retirement
plan described in sections 401, 403(a), 403(b) 408, 457 of the Code. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
contract to be owned by a non-natural person.

Multiple Contracts

The Code provides that multiple non-qualified annuity contracts which
are issued within a calendar year to the same contract owner by one company or
its affiliates are treated as one annuity contract for purposes of determining
the tax consequences of any distribution. Such treatment may result in adverse
tax consequences including more rapid taxation of the distributed amounts from
such combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.

Tax Treatment of Assignments

An assignment or pledge of a Contract may be a taxable event. Owners
should therefore consult competent tax advisers should they wish to assign or
pledge their Contracts.

27
<PAGE>

Income Tax Withholding

All distributions or the portion thereof which is includible in the
gross income of the Owner are subject to federal income tax withholding.
Generally, amounts are withheld from periodic payments at the same rate as wages
and at the rate of 10% from non- periodic payments. However, the Owner, in most
cases, may elect not to have taxes withheld or to have withholding done at a
different rate.

Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a mandatory
20% withholding for federal income tax. The 20% withholding requirement
generally does not apply to: (a) a series of substantially equal payments made
at least annually for the life or life expectancy of the participant or joint
and last survivor expectancy of the participant and a designated beneficiary, or
distributions for a specified period of 10 years or more; or (b) distributions
which are required minimum distributions; or (c) the portion of the
distributions not includible in gross income (i.e. return of after-tax
contributions). participants should consult their own tax counsel or other tax
adviser regarding withholding requirements.

Tax Treatment of Withdrawals - Non-Qualified Contracts

Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any distribution. However, the penalty is not imposed on amounts received: (a)
after the taxpayer reaches age 591*2; (b) after the death of the Owner; (c) if
the taxpayer is totally disabled (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (d) in a series of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the taxpayer or for the joint lives (or joint life expectancies)
of the taxpayer and his or her Beneficiary; (e) under an immediate annuity; or
(f) which are allocable to purchase payments made prior to August 14, 1982.

The above information does not apply to Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts.")

Qualified Plans

The Contracts offered by this Prospectus are designed to be suitable for
use under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Contracts issued pursuant to the
plan. Some retirement plans are subject to distribution and other requirements
that are not incorporated into the Company's administrative procedures. Contract
Owners, participants and beneficiaries are responsible for determining
contributions, distributions and other transactions with respect to the Contract
comply with applicable law. Following are general descriptions of the types of
Qualified Plans with which the Contracts may be used. Such descriptions are not
exhaustive and are for general informational purposes only. The tax rules
regarding Qualified Plans are very complex and will have differing applications
depending on individual facts and circumstances. Each purchaser should obtain
competent tax advice prior to purchasing a Contract issued under a Qualified
Plan.

Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described in
this Prospectus. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts.")

On July 6, 1983, the Supreme Court decided in Arizona Governing
Committee v. Norris that optional annuity benefits provided under an employer's
deferred compensation plan could not, under Title VII of the Civil Rights Act of
1964, vary between men and women. The Contracts sold by the Company in
connection with Qualified Plans will utilize annuity tables which do not
differentiate on the basis of sex. Such annuity tables will also be available
for use in connection with certain non-qualified deferred compensation plans.

<PAGE>

H.R. 10 Plans. Section 401 of the Code permits self-employed individuals to
establish Qualified Plans for themselves and their employees, commonly referred
to as "H.R. 10" or "Keogh" plans. Contributions made to the Plan for the benefit
of the employees will not be included in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places limitations
and restrictions on all Plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals--Qualified
Contracts" below.) Purchasers of Contracts for use with an H.R. 10 Plan should
obtain competent tax advice as to the tax treatment and suitability of such an
investment.

Tax-Sheltered Annuities. Section 403(b) of the Code permits the purchase of
"tax-sheltered annuities" by public schools and certain charitable, educational
and scientific organizations described in Section 501(c)(3) of the Code. These
qualifying employers may make contributions to the Contracts for the benefit of
their employees. Such contributions are not includible in the gross income of
the employees until the employees receive distributions from the Contracts. The
amount of contributions to the tax-sheltered annuity is limited to certain
maximums imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals--Qualified
Contracts" and "Tax Sheltered Annuities--Withdrawal Limitations" below.) Any
employee should obtain competent tax advice as to the tax treatment and
suitability of such an investment.

Individual Retirement Annuities. Section 408(b) of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" ("IRA"). Under applicable limitations, certain
amounts may be contributed to an IRA which will be deductible from the
individual's gross income. These IRAs are subject to limitations on eligibility,
contributions, transferability and distributions. (See "Tax Treatment of
Withdrawals - Qualified Contracts" below.) Under certain conditions,
distributions from other IRAs and other Qualified Plans may be rolled over or
transferred on a tax-deferred basis into an IRA. Sales of Contracts for use with
IRAs are subject to special requirements imposed by the Code, including the
requirement that certain informational disclosure be given to persons desiring
to establish an IRA. Purchasers of Contracts to be qualified as Individual
Retirement Annuities should obtain competent tax advice as to the tax treatment
and suitability of such an investment.

Corporate Pension and Profit-Sharing Plans. Sections 401(a) and 401(k) of the
Code permit corporate employers to establish various types of retirement plans
for employees. These retirement plans may permit the purchase of the Contracts
to provide benefits under the Plan. Contributions to the Plan for the benefit of
employees will not be includible in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places limitations
and restrictions on all plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals - Qualified
Contracts" below.) Purchasers of Contracts for use with Corporate Pension or
Profit-Sharing Plans should obtain competent tax advice as to the tax treatment
and suitability of such an investment.

Section 457 Plans. Under Section 457 of the Code, governmental and certain other
tax-exempt employers may establish deferred compensation plans for the benefit
of their employees which may invest in annuity contracts. The Code, as in the
case of Qualified Plans, establishes limitations and restrictions on
eligibility, contributions and distributions. Under these Plans, contributions
made for the benefit of the employees will not be includible in the employee's
gross income until distributed from the Plan. However, under a Section 457 Plan,
all the assets remain solely the property of the employer subject only to the
claims of the employer's general creditors until such time as made available to
the participant or beneficiary.

Tax Treatment of Withdrawals - Qualified Contracts

29
<PAGE>

403(b) (Tax-Sheltered Annuities) and 408(b) (Individual Retirement Annuities).
To the extent amounts are not includible in gross income because they have been
rolled over to an IRA or to another eligible Qualified Plan, no tax penalty will
be imposed. The tax penalty will not apply to the following distributions: (a)
if distribution is made on or after the date on which the Owner or Annuitant (as
applicable) reaches age 59-1/2; (b) distributions following the death or
disability of the Owner or Annuitant (as applicable) (for this purpose
disability is as defined in Section 72(m)(7) of the Code); (c) after separation
from service, distributions that are part of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the Owner or Annuitant (as applicable) or the joint lives (or
joint life expectancies) of such Owner or Annuitant (as applicable) and his or
her designated Beneficiary; (d) distributions to an Owner or Annuitant (as
applicable) who has separated from service after he has attained age 55; (e)
distributions made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) for amounts paid during
the taxable year for medical care; and (f) distributions made to an alternate
payee pursuant to a qualified domestic relations order. The exceptions stated in
(d), (e) and (f) above do not apply in the case of an Individual Retirement
Annuity. The exception stated in (c) above applies to an Individual Retirement
Annuity without the requirement that there be a separation from service.

Generally, distributions from a qualified plan must commence no later
than April 1 of the calendar year, following the year in which the employee
attains age 70-1/2. Required distributions must be over a period not exceeding
the life expectancy of the individual or the joint lives or life expectancies of
the individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed. In addition, distributions in excess of $150,000 per year may be
subject to an additional 15% excise tax unless an exemption applies.

Tax-Sheltered Annuities - Withdrawal Limitations

The Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to circumstances only when the Owner: (1) attains age 59-1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or transfer between certain Qualified Plans. Owners should
consult their own tax counsel or other tax adviser regarding any distributions.

FINANCIAL STATEMENTS

Financial statements of the Company and the Separate Account have been
included in the Statement of Additional Information.

LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Separate
Account, the Distributor or the Company is a party.

30
<PAGE>

TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION

Item Page
- ---- ----
Company 3
Independent Auditors 3
Legal Opinions 3
Distributor 3
Service Provider 3
Yield Calculation for Cash Management Sub-Account 3
Performance Information 4
Annuity Provisions 5
Variable Annuity 5
Fixed Annuity 6
Annuity Unit 6
Mortality and Expense Guarantee 7
Financial Statements 7

31
<PAGE>

FIRST VARIABLE LIFE INSURANCE COMPANY

Marketing and Executive Office: Variable Service Center:
10 Post Office Square, 12th Floor P.O. Box 1317
Boston, MA 02109 Des Moines, IA 50305-1317
(800) 499-0713

INDIVIDUAL VARIABLE ANNUITY CONTRACTS
Funded in
FIRST VARIABLE ANNUITY FUND E

Prospectus
Dated: May, 1, 1996

The Individual Flexible Purchase Payment Deferred Variable and Fixed Annuity
Contracts (the "Contracts") described in this Prospectus are issued by First
Variable Life Insurance Company (the "Company") and provide for accumulation of
Contract Values and payment of monthly annuity payments on a fixed and variable
basis. The Contracts are designed for use by individuals in retirement plans on
a Qualified or Non-Qualified basis. (See "Definitions.")

Subject to regulatory approval, the Company intends to substitute shares of the
Prime Money Fund II of Federated Insurance Series for shares of the Cash
Management Portfolio of Variable Investors Series Trust. After approval is
received, the Prime Money Fund II will be available for allocation of Purchase
Payments or transfers of Contract Value instead of the Cash Management Portfolio
of Variable Investors Series Trust. (See "Proposed Substitution of Cash
Managment Portfolio Shares" and "Federated Insurance Series.")

This Prospectus contains information that an investor should know before
investing. A Statement of Additional Information about the Contracts and the
Separate Accounts, which has the same date as this Prospectus, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The table of contents of the Statement of Additional Information can
be found on page __ of this Prospectus. For a copy of the Statement of
Additional Information, which is available at no cost, write the Company at its
Variable Service Center or call the number shown above.

32
<PAGE>

TABLE OF CONTENTS
Page
DEFINITIONS.............................................................
HIGHLIGHTS..............................................................
FEE TABLE...............................................................
CONDENSED FINANCIAL INFORMATION.........................................
THE COMPANY.............................................................
THE SEPARATE ACCOUNT....................................................
Variable Investors Series Trust.......................................
Proposed Substitution of Cash Management Portfolio Shares
Federated Insurance Series
Voting Rights.........................................................
Substitution of Other Securities......................................
CHARGES AND DEDUCTIONS..................................................
Deduction for Withdrawal Charge (Sales Load)..........................
Deduction for Mortality and Expense Risk Charge.......................
Deduction for Administrative Charge...................................
Deduction for Annual Contract Maintenance Charge......................
Deduction for Premium Taxes...........................................
Deduction for Income Taxes............................................
Deduction for Expenses of the Investment Options......................
Deduction for Transfer Fee............................................
Elimination or Reduction of Charges and Deductions
THE CONTRACTS...........................................................
Application and Issuance of a Contract
Ownership.............................................................
Annuitant.............................................................
Assignment............................................................
Transfers by the Company..............................................
Beneficiary...........................................................
Change of Beneficiary.................................................
Transfers of Contract Values During the Accumulation Period...........
Telephone Requests
Death of the Annuitant................................................
Death of the Owner....................................................
ANNUITY PROVISIONS......................................................
Annuity Date and Annuity Option.......................................
Change in Annuity Date and Annuity Option.............................
Allocation of Annuity Payments........................................
Transfers During the Annuity Period...................................
Annuity Options.......................................................
Option A. Life Annuity............................................
Option B. Life Annuity with Periods Certain of 60, 120, 180 or
240 Months..............................................
Option C. Joint and Survivor Annuity..............................
Option D. Joint and Contingent Annuity............................
Option E. Fixed Payments for a Period Certain.....................
Frequency and Amount of Annuity Payments..............................
PURCHASE PAYMENTS AND CONTRACT VALUE....................................
Purchase Payments.....................................................
Allocation of Purchase Payments.......................................
Dollar Cost Averaging.................................................
Distribution..........................................................
Contract Value........................................................
Accumulation Unit.....................................................
WITHDRAWALS.............................................................
Systematic Withdrawals................................................
Texas Optional Retirement Program.....................................
Suspension of Payments or Transfers...................................

33
<PAGE>

PERFORMANCE INFORMATION.................................................
Cash Management Portfolio.............................................
Other Portfolios......................................................
TAX STATUS..............................................................
General...............................................................
Diversification.......................................................
Contracts Owned by Other than Natural Persons
Multiple Contracts....................................................
Tax Treatment of Assignments..........................................
Income Tax Withholding................................................
Tax Treatment of Withdrawals - Non-Qualified Contracts................
Qualified Plans.......................................................
H.R. 10 Plans......................................................
Tax-Sheltered Annuities............................................
Individual Retirement Annuities....................................
Corporate Pension and Profit-Sharing Plans..........................
Section 457 Plans...................................................
Tax Treatment of Withdrawals - Qualified Contracts....................
Tax-Sheltered Annuities - Withdrawal Limitations......................
FINANCIAL STATEMENTS....................................................
LEGAL PROCEEDINGS.......................................................
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............

-ii-

34
<PAGE>

DEFINITIONS

Account - General Account and/or one or more of the Sub-Accounts of the Separate
Account.

Accumulation Period - The period during which Purchase Payments may be made
prior to the Annuity Date.

Accumulation Unit - A unit of measure used to calculate the Contract Value of a
Sub-Account of the Separate Account prior to the Annuity Date.

Annuitant -The natural person on whose life Annuity Payments are based.

Annuity Date -The date on which Annuity Payments begin.

Annuity Payments -The series of payments made to the Annuitant after the Annuity
Date under the Annuity Option elected.

Annuity Period -The period after the Annuity Date during which Annuity Payments
are made.

Annuity Unit - A unit of measure used to calculate Variable Annuity Payments
after the Annuity Date.

Beneficiary -The person(s) or entity who will receive the death benefit.

Company - First Variable Life Insurance Company.

Contract Anniversary - An anniversary of the Issue Date.

Contract Value - The sum of the Owner's interest in the Sub-Accounts of the
Separate Account and in the General Account.

Contract Year - One year from the Issue Date and from each Contract Anniversary.

Distributor - First Variable Capital Services, Inc., 10 Post Office Square,
12th Floor, Boston, MA 02109.

Fixed Annuity - A series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company.

General Account - The Company's general investment account which contains all
the assets of the Company with the exception of the Separate Account and other
segregated asset accounts.

General Account Value - The Owner's interest in the General Account.

Investment Option - An investment entity which can be selected by the Owner to
be an underlying investment of the Contract.

Issue Date - The date on which the first Contract Year begins.

Non-Qualified Contracts - Contracts issued under Non-Qualified Plans which do
not receive favorable tax treatment under Sections 401, 403(b) 408, or 457 of
the Internal Revenue Code.

Owner - The person, persons or entity entitled to all the ownership rights under
the Contracts and in whose name the Contracts have been issued.

Portfolio - A segment of an Investment Option which constitutes a separate and
distinct class of shares. It is sometimes referred to as a Fund.

Purchase Payment - An amount paid to the Company to provide benefits under the
Contracts.

35
<PAGE>

Qualified Contracts - Contracts issued under Qualified Plans which receive
favorable tax treatment under Sections 401, 403(b) 408, or 457 of the Internal
Revenue Code.

Separate Account - A separate investment account of the Company, designated as
First Variable Annuity Fund E, into which Purchase Payments or Contract Values
may be allocated.

Sub-Account - A segment of the Separate Account representing an investment in an
Investment Option or a Portfolio of an Investment Option.

Valuation Date - The Separate Account will be valued each day that the New York
Stock Exchange is open for trading which is Monday through Friday, except for
normal business holidays.

Valuation Period - The period beginning at the close of business of the New York
Stock Exchange on each Valuation Date and ending at the close of business for
the next succeeding Valuation Date.

Variable Account Value - The Owner's interest in the Sub-Accounts of the
Separate Account.

Variable Annuity - A series of payments made during the Annuity Period which
vary in amount with the investment experience of each applicable Sub-Account.

Variable Service Center - The company's administrative service center for the
Contracts is located at 1206 Mulberry Street, Des Moines, IA 50309.

Withdrawal Value - The Withdrawal Value is:

1) the Contract Value for the Valuation Period next following
the Valuation Period during which a written request for
withdrawal is received at the Company; less

2) any applicable taxes not previously deducted; less

3) the Withdrawal Charge, if any; less

4) the Annual Contract Maintenance Charge, if any.

HIGHLIGHTS

At the Owner's direction, Purchase Payments for the Contracts will be
allocated to the General Account or to a segregated investment account of First
Variable Life Insurance Company (the "Company") which account has been
designated First Variable Annuity Fund E (the "Separate Account"). On the date
of this Prospectus, the Separate Account invests in Portfolios of the Variable
Investors Series Trust. Subject to regulatory approval, the Separate Account
will substitute shares of the Prime Money Fund II of Federated Insurance Series
instead of the Cash Management Account Portfolio of Variable Investors Series
Trust. (See "Variable Investors Series Trust," "Proposed Substitution of Cash
Managment Portfolio Shares," and "Federated Insurance Series.") Owners bear the
investment risk for all amounts allocated to the Separate Account.

Owners have the right to return a Contract according to the terms of
its "free-look" right. The Company reserves the right to delay initial
investments of Purchase Payments in the Separate Account in certain instances,
but it does not currently do so. (See " The Contracts - Application and Issuance
of a Contract - Free-Look Right" and "Delayed Investment Start Date.")

36
<PAGE>

There is an Administrative Charge which is equal, on an annual basis,
to .15% of the average daily net asset value of the Separate Account. This
Charge compensates the Company for costs associated with the administration of
the Contracts and the Separate Account. (See "Charges and Deductions - Deduction
for Administrative Charge.")

There is an Annual Contract Maintenance Charge of $30 each Contract
Year. (See "Charges and Deductions - Deduction for Annual Contract Maintenance
Charge.")

Premium taxes or other taxes payable to a state or other governmental
entity will be charged against the Contract Values. (See "Charges and Deductions
- - Deduction for Premium Taxes.")

Under certain circumstances, a Transfer Fee may be assessed when an
Owner transfers Contract Values from one Sub-Account to another Sub-Account or
to or from the General Account. (See "Charges and Deductions Deduction for
Transfer Fee.")

A ten percent (10%) federal income tax penalty may be applied to the
income portion of any distribution from a Non-Qualified Contract before the
Owner reaches age 59 1/2, with certain exceptions. (See "Tax Status Tax
Treatment of Withdrawals - Non-Qualified Contracts.") Separate tax withdrawal
penalties and restrictions apply to a Qualified Contract. (See "Tax Status - Tax
Treatment of Withdrawals - Qualified Contracts.") Special restrictions apply to
distributions from a 403(b) annuity. (See "Tax Status - Tax-Sheltered Annuities
Withdrawal Limitations.")

For a further discussion of the taxation of a Contract, see "Tax
Status" and "Tax Status Diversification" for a discussion of wner control of
the underlying investments in a variable annuity contract.

FIRST VARIABLE ANNUITY FUND E
FEE TABLE

Owner Transaction Expenses
Withdrawal Charge (see Note 2 below) Contract
(as a percentage of Purchase Payment withdrawn) Anniversaries
Since Purchase
Payment Charge

0 and 1 7%
2 6%
3 5%
4 4%
5 3%
6+ 0%

Transfer Fee (see Note 3 below) No charge for first twelve (12) transfers
in a Contract Year prior to Annuity Date or
for six (6) transfers in a Contract Year
during the Annuity Period. Thereafter, the
fee is the lesser of $25 or 2% of the amount
transferred.

Annual Contract Maintenance Charge............. $30 per Contract per year

37
<PAGE>

Separate Account Annual Expenses
(as a percentage of average account value)
Mortality and Expense Risk Charge.............. 1.25%
Administrative Charge.......................... .15%
-----
Total Separate Account Annual Expenses......... 1.40%

Variable Investors Series Trust's Annual Expenses
(as a percentage of the average daily net assets of a Portfolio)

High U.S.
Cash Common Income World Multiple Tilt Govt. Growth Small
Management Stock Bond Equity Strat. Utility Bond & Income Cap
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Management Fees..... .50% .70% .70% .70% .70% .65% .60% .75% .85%
Other Operating
Expenses........... .25% .47% .50% .50% .50% .50% .25% .50% .50%
--- - --- --- ---- --- ---- ---- ---
(after expense
reimbursement
see Note 5 below)
Total Trust Annual
Expenses........... .75% 1.17% 1.20% 1.20% 1.20% 1.15% .85% 1.25% 1.35%

</TABLE>

Federated Insurance Series Annual Expenses
(as a percentage of the average daily net assets of a Fund)

Prime
Money
Fund II
Management Fees..... .50%
Other Operating
Expenses........... .30%
----
Total Trust Annual
Expenses............ .80%

Examples

An Owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:

a) upon surrender at the end of each time period;

b) if the Contract is not surrendered or is annuitized.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

<S> <C> <C> <C> <C>
Cash Management Portfolio.............................. a) 117 207 298 550
b) 52 158 267 550
Common Stock Portfolio................................. a) 121 219 318 593
b) 56 171 288 593
High Income Bond Portfolio............................. a) 121 220 320 596
b) 57 171 290 596

1 Year 3 Years 5 Years 10 Years
----- ------- ------- --------
World Equity Portfolio................................. a) 121 220 320 596
b) 57 171 290 596
Multiple Strategies Portfolio.......................... a) 121 220 320 596

38
<PAGE>

b) 57 171 290 596
Tilt Utility Portfolio................................. a) 121 219 317 591
b) 56 170 287 591

U.S. Government Bond Portfolio......................... a) 118 210 303 561
b) 53 161 272 561
Growth & Income
Portfolio............................................ a) 122 222 322 601
b) 57 173 292 601
Small Cap Portfolio.................................... a) 123 224 327 611
b) 58 176 297 611
Prime Money Fund II a) 117 208 300 555
b) 53 160 269 555
</TABLE>

Explanation of Fee Table and Examples

1. The purpose of the Fee Table is to assist the Owner in understanding the
various costs and expenses that an Owner will incur, directly or indirectly. The
Table reflects expenses of the Separate Account, the Investment Options, and the
Prime Money Fund II which will be available after regulatory approval of a
substitution is received. (See "Proposed Substitution of Cash Management
Portfolio Shares." For additional information, see "Charges and Deductions" in
this Prospectus and the Prospectuses for Variable Investors Series Trust and
Federated Insurance Series.

2. An Owner may make a withdrawal each Contract Year of the Free Withdrawal
Amount or some portion thereof provided that the amount withdrawn is at least
$1,000 or the Owner's entire interest in the Sub-Account, if less. The minimum
Contract Value which must remain in a Sub-Account after a partial withdrawal is
$1,000. Subject to any conditions and fees the Company may impose, an Owner may
elect to have this amount paid in equal periodic installments. The Company
reserves the right to charge a fee for this service. Currently, however, there
are no charges for this service. (See "Charges and Deductions - Deduction for
Withdrawal Charge (Sales Load).)" The 10% free withdrawal has been factored into
the Examples above.

3. No Transfer Fee will be assessed for a transfer made in connection with the
Dollar Cost Averaging program providing for the automatic transfer of funds from
the Cash Management Sub-Account or the General Account to any other
Sub-Account(s). (See "Dollar Cost Averaging.")

4. Prior to April 1, 1994, the Tilt Utility Portfolio was known as the "Equity
Income Portfolio" and had different investment objectives and policies.

5. First Variable Advisory Services Corp. ("Investment Adviser") has agreed
through April 1, 1997 to reimburse Variable Investors Series Trust for all
operating expenses (exclusive of management fees) in excess of .50% of a
Portfolio's average net assets (.25% in the case of the Cash Management
Portfolio and the U.S. Government Bond Portfolio). Had the Investment Adviser
not reimbursed expenses of the Portfolios, for the year ended December 31, 1995,
the Total Trust Annual Expenses were 1.72% for the Cash Management Portfolio;
1.19% for the Common Stock Portfolio; 2.04% for the High Income Bond Portfolio;
1.33% for the Multiple Strategies Portfolio; 1.51% for the Tilt Utility
Portfolio; 1.59% for the U.S. Government Bond Portfolio; and 1.67% for the World
Equity Portfolio.

6. Premium taxes are not reflected. Premium taxes may apply.

7. The assumed initial Purchase Payment is $1,000.

8. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

39
<PAGE>

FIRST VARIABLE ANNUITY FUND E
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES
(for a unit outstanding throughout the period)

Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C> <C>
Cash Management Sub-Account
Beginning of Period $11.22 $10.97 $10.86 $10.67 $10.24 $10.00
End of Period $11.67 $11.22 $10.97 $10.86 $10.67 $10.24
Number of Accum. Units Outstanding 406,002 123,042 52,908 309,216 207,448 63,260
U.S. Government Bond Sub-Account
Beginning of Period $12.93 $13.48 $12.49 $11.94 $10.56 $10.00
End of Period $15.32 $12.93 $13.48 $12.49 $11.94 $10.56
Number of Accum. Units Outstanding 222,013 207,710 175,294 175,547 494,291 6,523
High Income Bond Sub-Account
Beginning of Period $13.86 $15.12 $13.34 $11.70 $9.34 $10.00
End of Period $16.26 $13.86 $15.12 $13.34 $11.70 $ 9.34
Number of Accum. Units Outstanding 309,472 190,699 437,508 337,571 195,048 536
Multiple Strategies Sub-Account
Beginning of Period $13.28 $14.02 $12.86 $12.59 $10.34 $10.00
End of Period $17.32 $13.28 $14.02 $12.86 $12.59 $10.34
Number of Accum. Units Outstanding 795,702 529,845 167,168 169,897 128,348 11,761
Common Stock Sub-Account
Beginning of Period $12.61 $12.89 $11.98 $13.16 $9.93 $10.00
End of Period $17.05 $12.61 $12.89 $11.98 $13.16 $ 9.93
Number of Accum. Units Outstanding 518,976 242,120 187,792 213,353 157,474 6,736
World Equity Sub-Account
Beginning of Period $11.97 $11.03 $9.54 $9.85 $9.25 $10.00
End of Period $14.67 $11.97 $11.03 $9.54 $9.54 $ 9.25
Number of Accum. Units Outstanding 719,094 349,771 151.437 92,431 72,323 5,125
Tilt Utility Sub-Account *
Beginning of Period $14.70 $15.06 $12.95 $12.99 $10.15 $10.00
End of Period $19.34 $14.70 $15.06 $12.95 $12.99 $10.15
Number of Accum. Units Outstanding 455,859 265,271 211,775 203,350 98,273 6,477
Growth and Income Sub-Account
Beginning of Period (5/31/95) $10.00
End of Period $11.22
Number of Accum. Units Outstanding 289,200
Small Cap Sub-Account
Beginning of Period 5/4/95) $10.00
End of Period $12.931
Number of Accum. Units Outstanding 278,163

</TABLE>

40
<PAGE>

Six
Months
Ended Year Ended Year Ended
6/30/92 12/31/91 12/31/90
<S> <C> <C> <C>
Real Estate Investment Division **
Beginning of Period $11.74 $8.93 $10.00
End of Period $11.58 $11.74 $8.93
Number of Accum. Units Outstanding 0 6,903 904
Natural Resources Division **
Beginning of Period $ 9.19 $9.22 $10.0
End of Period $ 8.81 $9.19 $9.22
Number of Accum. Units Outstanding 0 9,794 1,237
World Bond Division **
Beginning of Period $12.27 $10.91 $10.00
End of Period $12.29 $12.27 $10.91
Number of Accum. Units Outstanding 0 47,602 4,343
Aggressive Growth Division**
Beginning of Period $11.81 $ 9.28 $10.00
End of Period $10.02 $11.81 $ 9.28
Number of Accum. Units Outstanding 0 41,617 3,269
</TABLE>

THE COMPANY

First Variable Life Insurance Company (the "Company") is a stock life
insurance company which was organized under the laws of the State of Arkansas in
1968. The Company is principally engaged in the annuity business. The Company is
licensed in 49 states, the District of Columbia and the U.S. Virgin Islands. The
Company is a wholly-owned subsidiary of Irish Life of North America, Inc.
("ILoNA") which in turn is beneficially owned by Irish Life plc ("Irish Life").
ILoNA also owns Interstate Assurance Company ("Interstate") of Des Moines, IA.
Irish Life was formed in 1939 through a consolidation of a number of Irish and
British Life offices transacting business in Ireland. In terms of assets, Irish
Life controls over 50% of the Irish domestic market. As Ireland's leading
institutional investor, it owns in excess of 10% of the leading Irish publicly
traded stocks. Irish Life, through its international subsidiaries, conducts
business in Ireland, the United Kingdom, the United States and France. As of the
end of 1995, the Irish Life consolidated group had in excess of $11billion in
assets. ILoNA is a Delaware corporation, incorporated as Carrig International,
Inc. in 1986, which is the holding company of Interstate and the Company.

The Company has an A- (Excellent) rating from A.M. Best, an independent
firm that analyzes insurance carries. This rating is assigned to companies that
have a strong ability to meet obligations to policyholders over a long period of
time. The Company also has an AA (Double-A) rating from Duff & Phelps Credit
Rating Co. and an AA- (Double A minus) from Standard's and Poors on claims
paying ability. The financial strength of the Company may be relevant with
respect of the Company's ability to satisfy its General Account obligations
under the Contracts.

The Company may publish in advertisements and reports to Owner, the
ratings and other information assigned it by one or more independent rating
services Further the Company may publish charts and other information concerning
dollar cost averaging, tax-deference and other investment methods.

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THE SEPARATE ACCOUNT

The assets of the Separate Account are the property of the Company.
However, the assets of the Separate Account, equal to the reserves and other
contract liabilities with respect to the Separate Account, are not chargeable
with liabilities arising out of any other business the Company may conduct.
Income, gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Separate Account without regard to
other income, gains or losses of the Company, The Company's obligations arising
under the Contracts are general obligations.

The Separate Account meets the definition of a "separate account" under
the federal securities laws.

The Separate Account is divided into Sub-Accounts. On the date of this
Prospectus, the assets of each Sub-Account are invested in one Portfolio of
Variable Investors Series Trust. (See "Proposed Substitution of Cash Management
Portfolio Shares.") There is no assurance that the investment objective of any
of the Portfolios will be met. Owners bear the complete investment risk for
Purchase Payments allocated to a Sub-Account. Contract Values will fluctuate in
accordance with the investment performance of the Sub-Account(s) to which
Purchase Payments are allocated, and in accordance with the imposition of the
fees and charges assessed under the Contracts.

Variable Investors Series Trust

Variable Investors Series Trust (the "Trust") has been established to
act as one of the funding vehicles for the Contracts offered. The Trust is
managed by First Variable Advisory Services Corp. ("Investment Adviser"), a
wholly-owned subsidiary of the Company. The Investment Adviser retains the
services of sub-advisers pursuant to Sub-Advisory Agreements to manage the
assets of the Portfolios of the Trust as follows: Federated Investment
Counseling with respect to the Cash Management Portfolio and the High Income
Bond Portfolio, Value Line, Inc. with respect to the Multiple Strategies
Portfolio and the Common Stock Portfolio, Strong Capital Management, Inc. with
respect to the U.S. Government Bond Portfolio, State Street Bank and Trust
Company with respect to the Tilt Utility Portfolio, Keystone Investment
Management Company with respect to the World Equity Portfolio, Warburg Pincus
Counsellors, Inc. with respect to the Growth & Income Portfolio and Pilgrim,
Baxter & Associates, Ltd. with respect to the Small Cap Portfolio. Prior to
April 1, 1994, INVESCO Capital Management, Inc. was the investment adviser of
the Trust. The Trust is an open-end management investment company. While a brief
summary of the investment objectives of the Portfolios is set forth below, more
comprehensive information, including a discussion of potential risks, is found
in the current Prospectus for the Trust which is included with this Prospectus.
Purchasers should read this Prospectus and the Prospectus for the Trust
carefully before investing.

The Trust is intended to meet differing investment objectives with its
currently available separate Portfolios: Cash Management Portfolio, High Income
Bond Portfolio, Multiple Strategies Portfolio, Common Stock Portfolio, U.S.
Government Bond Portfolio, Tilt Utility Portfolio, World Equity Portfolio,
Growth & Income Portfolio and Small Cap Portfolio. The investment objectives of
the Portfolios are as follows:

Cash Management Portfolio. The investment objective of this Portfolio is
preservation of capital, maintenance of liquidity and maximum current income
consistent with the foregoing objectives by investing exclusively in a
diversified portfolio of short-term money market instruments. An investment in
the Cash Management Portfolio is neither insured nor guaranteed by the U.S.
Government. Subject to regulatory approval, shares of the Prime Money Fund II of
Federated Insurance Series will be substituted for shares of the Cash Management
Portfolio. Therefore, following the Substitution, the Cash Management Portfolio
will no longer be available for investment. See "Proposed Substitution of Cash
Management Portfolio Shares."

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High Income Bond Portfolio. The investment objective of this Portfolio is to
obtain as high a level of current income as is believed to be consistent with
prudent investment management. As a secondary objective, the Portfolio seeks
capital appreciation when consistent with its primary objective. The Portfolio
seeks to achieve its investment objectives by investing primarily in
fixed-income securities rated lower than A. Many of the high yield securities in
which the Portfolio may invest are commonly referred to as "junk bonds." For
special, and significant, risks involved with investing in such securities
(including among others, risk of default and illiquidity) see "Investment
Objectives and Policies of the Portfolios - High Income Bond Portfolio" in the
Trust prospectus.

Common Stock Portfolio. The investment objective of this Portfolio is capital
growth by investing primarily in a diversified portfolio of common stocks and
securities convertible into or exchangeable for common stock. The secondary
objective is current income when consistent with its primary objective.

Growth & Income Portfolio. The investment objective of this Portfolio is to
provide growth of capital and income. The Portfolio seeks to achieve its
objectives by investing in equity securities, fixed income securities and money
market instruments. The portion of the Portfolio invested at any given time in
each of these asset classes will vary depending on market conditions, and there
may be extended periods when the Portfolio is primarily invested in one of them.
In addition, the amount of income derived from the Portfolio will fluctuate
depending on the composition of the Portfolio's holdings and will tend to be
lower when a higher portion of the Portfolio is invested in equity securities.
The Portfolio may also purchase without limitation dollar-denominated American
Depository Receipts ("ADRs"). ADRs are issued by domestic banks and evidence
ownership of underlying foreign securities.

Proposed Substitution of Cash Management Portfolio Shares

On April 15, 1996, the Company filed an application with the Securities and
Exchange Commission ("Commission") requesting an order approving a proposal to
substitute shares (the "Substitution") of the Prime Money Fund II of the
Federated Insurance Series ("Federated Series") for shares of the Cash
Management Portfolio of the Trust. Upon obtaining the order from the Commission
approving the Substitution, and subject to any prior approval by applicable
insurance authorities, the Company and the Separate Account propose to effect
the Substitution as soon as is practicable. Thereafter, the Prime Money Fund II
of the Federated Series will be available for investment by Contract Owners
through the Separate Account, instead of the Cash Management Portfolio of the
Trust.

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<PAGE>

reduce operating expenses. An Owner, prior to the date of Substitution, will be
provided with notice and permitted a specified period of at least thirty (30)
days to transfer his or her Cash Management Sub-Account value to any other
Sub-Account without any limitation or charge being imposed.

Federated Insurance Series

Federated Insurance Series is an open-end investment management company that was
formed as a series trust to provide funding options for variable life insurance
and variable annuity contracts. Pursuant to an investment advisory contract with
Federated Series, investment decisions for Federated Series are made by
Federated Advisers, an affiliate of Federated Investment Counseling. Federated
Securities Corp. is the principal distributor for shares of Prime Money Fund II.

Prime Money Fund II. The investment objective of this series is to provide
current income consistent with the stability of principal and liquidity. The
Fund pursues its investment objective by investing exclusively in a portfolio of
money market instruments maturing in 397 days or less. An investment in the
Prime Money Fund II is neither insured nor guaranteed by the U.S. Government.

Investors should read this Prospectus and the prospectus for Federated Series
carefully before investing. Prospectuses for Federated Series may be obtained by
contacting the Variable Service Center.

Additional Portfolios and/or Investment Options may be made available
to Owners.

Voting Rights

Refer to the prospectus of the Trust for further detailed information
on each Portfolio. Shares of the Trust and Federated Series are sold to the
Company for allocation to the Separate Account (Fund E) in connection with the
Contracts, and for allocation to other separate accounts funding other variable
annuity contracts and variable life insurance policies issued, or to be issued,
by the Company. Shares of the Trust and Federated Series may also be sold to
other insurance companies, either affiliated or unaffiliated with the Company,
for the same purpose. It is conceivable that, in the future, it may be
disadvantageous for variable annuity separate accounts and variable life
separate accounts to invest in one or more of the Trust's Portfolios or
Federated Series simultaneously if the interests of variable annuity and
variable life policyholders differ. The Board of Trustees of the Trust and the
Trustees of Federated Series intend to monitor events to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response thereto.

Substitution of Other Securities

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<PAGE>

CHARGES AND DEDUCTIONS

Various charges and deductions are made from Contract Values and the
Separate Account. These charges and deductions are:

Deduction for Withdrawal Charge (Sales Load)

If all or a portion of the Contract Value is withdrawn, a Withdrawal
Charge (sales load) will be calculated at the time of each withdrawal and will
be deducted from the Contract Value. This Charge reimburses the Company for
expenses incurred in connection with the promotion, sale and distribution of the
Contracts. No Withdrawal Charge will be assessed upon any withdrawal unless the
amount withdrawn exceeds the Free Withdrawal Amount. The annual Free Withdrawal
Amount is determined as the sum of (a) 10% of Purchase Payments still subject to
the Withdrawal Charge; plus (b) the excess of the Contract Value over Purchase
Payments not previously withdrawn; plus (c) any Purchase Payments no longer
subject to the Withdrawal Charge. The Withdrawal Charge is determined by
multiplying the excess of the amount withdrawn over the Free Withdrawal Amount
by the applicable percentage(s) from the Table of Withdrawal Charges below. The
Withdrawal Charge percentages are based upon the number of Contract
Anniversaries, that Purchase Payments have remained in the Contract before being
withdrawn. Purchase Payments are deemed to be withdrawn in the order in which
they are made.

TABLE OF WITHDRAWAL CHARGES:

Contract Anniversaries
Since Purchase Payment Charge
0 and 1 7%
2 6%
3 5%
4 4%
5 3%
6+ 0%

An Owner may make a withdrawal each Contract Year of the Free
Withdrawal Amount provided that the amount withdrawn is at least $1,000 or the
Owner's entire interest in the Sub-Account, if less. The minimum Contract Value
which must remain in a Sub-Account after a partial withdrawal is $1,000.

In the event of the death of the Owner, the Company will waive the
Withdrawal Charge with respect to any death benefits paid.

For a partial withdrawal, the Withdrawal Charge will be deducted from
the remaining Withdrawal Value, if sufficient; otherwise it will be deducted
from the amount withdrawn. The amount deducted from the Contract Value will be
determined by subtracting values from the General Account and/or cancelling
Accumulation Units from each applicable Sub-Account in the ratio that the value
of each Account bears to the total Contract Value. The Owner must specify in
writing in advance which Units are to be cancelled from each Sub-Account and/or
whether values are to be deducted from the General Account if other than the
above method of cancellation is desired.

Waiver of Withdrawal Charge. Subject to state availability, the Company will
waive the Withdrawal Charge:

[bullet] If the Owner or Owner's spouse is first diagnosed with a terminal
illness. The Company may require evidence of such illness, including
an examination by a licensed physician of the Company's choice.

[bullet] After the first Contract Year, if the Owner or the Owner's spouse is
confined for 90 consective days in a qualifying nursing home.

To qualify for a waiver of charges based on confinement in a
qualifying nursing home, the Owner or the Owner's spouse, as the case may be,
must never have been confined in a qualifying nursing home on or before the date
the application for the Contract was signed.

Owners should review their Contracts carefully for a complete description of the
terminal illness and nursing home waiver of charges requirements.

<PAGE>

Deduction for Mortality and Expense Risk Charge

If the Mortality and Expense Risk Charge is insufficient to cover the
actual costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects a profit from this charge. To the extent that the
Witdrawal Charge is insufficient to cover the actual cost of distribution, the
Company may use any of its corporate assets, including potential profit which
may arise from the Mortality and Expense Risk Charge to provide for any
difference.

The Mortality and Expense Risk Charge is guaranteed by the Company and
cannot be increased.

Deduction for Administrative Charge

The Company deducts on each Valuation Date, both prior to the Annuity
Date and during the Annuity Period, an Administrative Charge which is equal, on
an annual basis, to .15% of the average daily net asset value of the Separate
Account. This charge, together with the Annual Contract Maintenance Charge (see
below), is to reimburse the Company for the expenses it incurs in the
establishment and maintenance of the Contracts and the Separate Account. These
expenses include but are not limited to: preparation of the Contracts,
confirmations, annual reports and statements, maintenance of Owner records,
maintenance of Separate Account records, administrative personnel costs, mailing
costs, data processing costs, legal fees, accounting fees, filing fees, the
costs of other services necessary for Owner servicing and all accounting,
valuation, regulatory and reporting requirements. Since this charge is an
asset-based charge, the amount of the charge attributable to a particular
Contract may have no relationship to the administrative costs actually incurred
by that Contract. The Company does not intend to profit from this charge. This
charge will be reduced to the extent that the amount of this charge is in excess
of that necessary to reimburse the Company for its administrative expenses.
Should this charge prove to be insufficient, the Company will not increase this
charge and will incur the loss.

Deduction for Annual Contract Maintenance Charge

The Company deducts an Annual Contract Maintenance Charge of $30 from
the Contract Value on each Contract Anniversary. This charge is to reimburse the
Company for its administrative expenses (see above). This charge is deducted by
subtracting values from the General Account and/or cancelling Accumulation Units
from each applicable Sub-Account in the ratio that the value of each Account
bears to the total Contract Value. When the Contract is withdrawn for its full
Withdrawal Value, on other than the Contract Anniversary, the Annual Contract
Maintenance Charge will be deducted at the time of withdrawal. If the Annuity
Date is not a Contract Anniversary, a pro rata portion of the Annual Contract
Maintenance Charge will be deducted on the Annuity Date. After the Annuity Date,
the Annual Contract Maintenance Charge will be collected on a monthly basis and
will result in a reduction of each Annuity Payment. The Company has set this
charge at a level so that, when considered in conjunction with the
Administrative Charge (see above), it will not make a profit from the charges
assessed for administration.

Deduction for Premium Taxes

Deduction for Income Taxes

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While the Company is not currently maintaining a provision for federal
income taxes with respect to the Separate Account, the Company has reserved the
right to establish a provision for income taxes if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of the
Separate Account. The Company will deduct for any income taxes incurred by it as
a result of the operation of the Separate Account whether or not there was a
provision for taxes and whether or not it was sufficient. The Company will
deduct any withholding taxes required by applicable law.

Deduction for Expenses of the Investment Options

There are other deductions from and expenses paid out of the assets of
the Investment Options which are described in the accompanying Trust and
Federated Series Prospectuses.

Deduction for Transfer Fee

Prior to the Annuity Date, an Owner may transfer all or part of an
Account without the imposition of any fee or charge if there have been no more
than 12 transfers made in the Contract Year. During the Annuity Period, an Owner
may transfer all or part of an Account without the imposition of any fee or
charge if there have been no more than six (6) transfers made in a Contract
Year. If more than 12 transfers have been made in the Contract Year (or more
than 6 transfers in the Contract Year during the Annuity Period), the Company
will deduct a transfer fee of $25 per transfer or, if less, 2% of the amount
transferred. If the Owner is participating in the Dollar Cost Averaging program
providing for the automatic transfer of funds from the Cash Management
Sub-Account or the General Account to any other Sub-Account(s), such transfers
are not taken into account in determining any transfer fee.

Elimination or Reduction of Charges and Deductions

The charges and deductions on a Contract may be reduced or eliminated, in whole
or in part, when sales of Contracts are made to individuals or to a group of
individuals in a manner that results in savings of sales or administration
expenses. Any reduction will be determined by the Company after examination of
relevant factors such as:

[bullet] the total amount of Purchase Payments to be received because
expenses are likely to be less on larger Purchase Payments than on
smaller ones;

[bullet] any prior or existing relationship with the Company because of the
likelihood of implementing the Contract with fewer contracts; and

[bullet] other circumstances, of which the Company is not presently aware,
which could result in reduced expenses.

Charges may also be eliminated when a Contract is issued to an officer, director
employee or agent of the Company or any of its affiliates. In no event will
reductions or elimination will be unfairly discriminatory to any person.

THE CONTRACTS

Application and Issuance of a Contract

An Application must be completed and submitted to the Company to
purchase a Contract, together with the minimum required initial Purchase
Payment. A Contract ordinarily will be issued with respect to Owners and
Annuitants up to Age 85. Investors in Qualified Contracts for Owners and
Annuitants beyond Age 70 1/2 should consult with qualified tax advisers on the
impact of minimum distribution requirements under their existing retirement
plans. Any required annual minimum distribution amount should be withdrawn from
an existing retirement plan before amounts are transferred to purchase a
Qualified Contract. (See "Tax Status - Tax Treatment of Withdrawals - Qualified
Contracts.")

The Owner, Annuitant, and Beneficiary of a Contract are initially
designated in the application and subject to the Company's underwriting rules.
If the Application for a Contract is in good order, the Company will apply the
Purchase Payment within 2 business days of receipt: (a) to the Separate Account
and credit the Contract with Accumulation Units; and/or (b) to the General
Account and credit the Contract with dollars. If the application for a

47
<PAGE>

Contract is not in good order, the Company will attempt to get it in good order
or the Company will return the application and the Purchase Payment within 5
business days. The Company will not retain a Purchase Payment for more than 5
business days while processing an incomplete application unless it has been
authorized by the purchaser. The Company may decline any application.

Delayed Investment Start Date. Purchase Payments are generally allocated to the
Sub-Accounts or to the General Account as selected by the Owner. In certain
instances, however, the Company reserves the right to allocate Purchase Payments
to the Cash Management Sub-Account (or, after the Substitution, to the Prime
Money Fund II Sub-Account) for a period of up to 5 days beyond a "free look"
inspection period before they will be invested (together with any investment
gain) in any other Sub-Account(s) designated by the Owner. If the Company elects
to delay such initial investments in Sub-Accounts, the delay would apply where a
Contract is issued: (a) in a state which requires that Purchase Payments less
withdrawals be refunded upon the exercise of (i) a "free look" right or (ii) an
inspection right following a "replacement" of an existing life insurance or
annuity contract; or (b) as in Individual Retirement Annuity (or as the initial
investment of an Individual Retirement Account).

On the date of this Prospectus, the Company does not delay investment
start dates and, should it elect to do so, it will so advise prospective
investors in a Contract.

Ownership

For Non-Qualified Contracts, in accordance with Internal Revenue Code
Section 72(u), a deferred annuity contract held by a corporation or entity that
is not a natural person is not treated as an annuity contract for tax purposes.
Income on the contract is treated as ordinary income received by the Owner
during the taxable year. However, for purposes of Code Section 72 (u), an
annuity contract held by a trust or other entity as agent for a natural person
is considered held by a natural person and treated as an annuity contract for
tax purposes. Tax advice should be sought prior to purchasing a Contract which
is to be owed by a trust or other non-natural person.

Annuitant

Assignment

48
<PAGE>

responsible for the validity of any assignment. The Company will not be liable
as to any payment or other settlement made by the Company before receipt of the
assignment.

If the Contract is issued pursuant to a retirement plan which receives
favorable tax treatment under the provisions of Sections 401, 403(b), 408, or
457 of the Internal Revenue Code, it may not be assigned, pledged or otherwise
transferred except as may be allowed under applicable law.

Transfers by the Company

Beneficiary

The Beneficiary is named in the Application and, unless changed, is
entitled to receive the benefits to be paid at the death of the Owner.

Unless the Owner provides otherwise, the Death Benefit will be paid in
equal shares or all to the survivor(s) as follows:

(1) to the primary Beneficiaries who survive the Owner's death; or if
there are none,

(2) to the contingent Beneficiaries who survive the Owner's death; or
if there are none,

(3) to the estate of the Owner.

Change of Beneficiary

Subject to the rights of any irrevocable Beneficiary(ies), the Owner
may change the primary Beneficiary(ies) or contingent Beneficiary(ies). A change
may be made by filing a written request with the Company at its Variable Service
Center. The change will take effect as of the date the notice is signed. The
Company will not be liable for any payment made or action taken before it
records the change.

Transfers of Contract Values During the Accumulation Period

Prior to the Annuity Date, an Owner may transfer all or part of an
Account without the imposition of any fee or charge if there have been no more
than 12 transfers made in the Contract Year. If more than 12 transfers have been
made in the Contract Year, the Company will deduct a transfer fee. If the Owner
is participating in the Dollar Cost Averaging program providing for the
automatic transfer of funds from the Cash Management Sub-Account or the General
Account to any other Sub-Account(s), such transfers are not taken into account
in determining any transfer fee. All transfers are subject to the following:

(1) the deduction of any transfer fee that may be imposed (no charge
for first 12 transfers in a Contract Year; thereafter, the fee is $25 per
transfer or, if less, 2% of the amount transferred). The transfer fee will be
deducted from the Account from which the transfer is made. However, if the
entire interest in the Account is being transferred, the transfer fee will be
deducted from the amount which is transferred.

(2) The minimum amount which may be transferred is the lesser of (i)
$1,000; or (ii) the Owner's entire interest in the Account, if less. A minimum
Contract Value of $1,000 must remain in the Account after a transfer.

(3) All Purchase Payments and transfers allocated to the General
Account must remain in the General Account for one year prior to any transfer
from the General Account.

(4) Any transfer direction must clearly specify the amount which is to
be transferred and the Accounts which are to be affected.

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<PAGE>

(5) The Company reserves the right at any time and without prior notice
to any party including, but not limited to, the circumstances described in the
"Suspension of Payments or Transfers" provision, below, to terminate, suspend or
modify the transfer privileges described above.

Telephone Requests

Death of the Annuitant

Upon the death of the Annuitant prior to the Annuity Date, the Owner
must designate a new Annuitant. If no designation is made within 30 days of the
death of the Annuitant, the Owner will become the Annuitant. However, if the
Owner is a non-natural person, then the death of the Annuitant will be treated
as the death of the Owner and a new Annuitant may not be designated. (See "Death
of the Owner," below.)

Upon the death of the Annuitant after the Annuity Date, the Death
Benefits, if any, will be as specified in the Annuity Option elected.

Death of the Owner

Upon the death of the Owner prior to the Annuity Date, the Death
Benefit will be paid to the Beneficiary designated by the Owner. In certain
states, the Death Benefit will be the greater of:

1. the Purchase Payments, less any withdrawals including any
applicable Withdrawal Charges;

2. the Contract Value; or

3. the Contract Value as of the first day of the current five
Contract Year period plus any Purchase Payments made since that
day and less any amounts withdrawn since that day.

The first five Contract Year period begins on the Issue Date, the
second five Contract Year period begins on the fifth Contract Anniversary, and
so forth. If the Beneficiary is the spouse of the Owner and elects to continue
the Contract, the Contract Value remains unchanged and no determination of the
Death Benefit is made at that time.

In other states, the Death Benefit will be the greater of:

1. the Purchase Payments, less any withdrawals including any
applicable Withdrawal Charges; or

2. the Contract Value.

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<PAGE>

Owners should refer to their Contract for the applicable Death Benefit
provision.

The Death Benefit will be determined and paid as of the Valuation
Period next following the date of receipt by the Company of both due proof of
death and an election for the payment method. The Beneficiary can elect to have
a single lump sum payment or choose one of the Annuity Options.

If a single sum payment is requested, the proceeds will be paid within
seven (7) days of receipt of proof of death and the election. Payment under an
Annuity Option may only be elected during the sixty-day period beginning with
the date of receipt of proof of death or a single sum payment will be made to
the Beneficiary at the end of the sixty-day period.

The entire Death Benefit must be paid within five (5) years of the date
of death unless:

1. the Beneficiary elects to have the Death Benefit payable under an
Annuity Option over the life of the Beneficiary or over a period not extending
beyond the life expectancy of the Beneficiary with distribution beginning within
one year of the date of death; or

2. if the Beneficiary is the spouse of the Owner, the Beneficiary may
elect to become the Owner of the Contract and the Contract will continue in
effect.

If there are Joint Owners, any reference to the death of the Owner
shall mean the first death of an Owner.

The Contract can be held by Joint Owners. Any Joint Owner must be the
spouse of the other Owner. Upon the death of either Owner, the surviving spouse
will be the primary Beneficiary. Any other Beneficiary designated in the
Application or as subsequently changed will be treated as a contingent
Beneficiary unless otherwise indicated in writing to the Company.

If the Owner is a non-natural person, then for purposes of the Death
Benefit the Annuitant shall be treated as the Owner and the death of the
Annuitant or a change of the Annuitant shall be treated as the death of the
Owner.

ANNUITY PROVISIONS

Annuity Date and Annuity Option

The Owner selects an Annuity Date and Annuity Option at the time of
application. The Annuity Date must always be the first day of a calendar month
and must be at least one month after the Issue Date. The Annuity Date may not be
later than the Annuitant's 85th birthday. If no Annuity Option is elected,
Option B with a 120 month guarantee will automatically be applied.

Change in Annuity Date and Annuity Option

Prior to the Annuity Date, the Owner may change the Annuity Date. Any
changes must be in writing and must be requested at least seven (7) days prior
to the new Annuity Date. The Annuity Date must always be the first day of a
calendar month and must be at least one month after the Issue Date. The Annuity
Date may not be later than the Annuitant's 85th birthday.

The Owner may, upon written notice to the Company, at any time prior to
the Annuity Date, change the Annuity Option. Any change must be requested at
least seven (7) days prior to the Annuity Date.

Allocation of Annuity Payments

Transfers During the Annuity Period

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During the Annuity Period, the Owner may transfer, by written request,
Contract Values among the Accounts subject to the following:

1. the deduction of any transfer fee that may be imposed (no charge
for first six (6) transfers per Contract Year made among the Sub-Accounts;
thereafter, the fee is $25 per transfer or, if less, 2% of the amount
transferred).

2. the Owner may, once each Contract Year, make a transfer from one or
more Sub-Accounts to the General Account. The Owner may not make a transfer from
the General Account to the Separate Account. Amounts transferred from a
Sub-Account to the General Account are subject to certain procedures set out in
the Contract.

Annuity Options

The annuity tables contained in the Contract for Variable Annuity
Payments are based on a four percent (4%) assumed investment rate. If the actual
net investment rate exceeds four percent (4%), payments will increase.
Conversely, if the actual rate is less than four percent (4%), Variable Annuity
Payments will decrease. If a higher assumed investment rate was used, the
initial payment would be higher, but the actual net investment rate would have
to be higher in order for Variable Annuity Payments to increase.

Variable Annuity Payments will reflect the investment performance of
the Separate Account in accordance with the allocation of the Contract Value to
the Sub-Account on the Annuity Date. Thereafter, allocations may not be changed
except as provided in "Transfers During the Annuity Period", above. The total
dollar amount of each Annuity Payment is the sum of the Variable Annuity Payment
and the Fixed Annuity Payment reduced by the applicable portion of the Annual
Contract Maintenance Charge.

The amount payable under the Contract may be made under one of the
following options or any other option acceptable to the Company:

Option A. Life Annuity. An annuity payable monthly during the lifetime of the
Annuitant. Payments cease at the death of the Annuitant.

Option E. Fixed Payments for a Period Certain. An annuity payable monthly for a
fixed amount for any specified period (at least five (5) years but not exceeding
thirty (30) years), as chosen.

Annuity Options A, B, C & D are available on a Fixed Annuity basis, a
Variable Annuity basis or a combination of both. Annuity Option E is available
on a Fixed Annuity basis only.

Frequency and Amount of Annuity Payments

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PURCHASE PAYMENTS AND CONTRACT VALUE

Purchase Payments

The Contracts are purchased under a flexible Purchase Payment plan. The
initial Purchase Payment is due on the Issue Date. For Non-Qualified Contracts,
the minimum initial Purchase Payment is $5,000. The minimum initial Purchase
Payment for Qualified Contracts is $1,000. For all Contracts, the maximum
subsequent Purchase Payment is $1,000,000 and the minimum subsequent Purchase
Payment is $100. The Company reserves the right to decline any Application or
Purchase Payment.

Allocation of Purchase Payments

Purchase Payments are allocated to the General Account or appropriate
Sub-Account(s) within the Separate Account as selected by the Owner. Unless
elected otherwise by the Owner, subsequent Purchase Payments are allocated in
the same manner as the initial Purchase Payment. For each Sub-Account, Purchase
Payments are converted into Accumulation Units. The number of Accumulation Units
credited to the Contract is determined by dividing the Purchase Payment
allocated to the Sub-Account by the value of the Accumulation Unit for the
Sub-Account as of the Valuation Period during which the Purchase Payment is
allocated to the Sub-Account. Purchase Payments allocated to the General Account
are credited in dollars.

Under certain circumstances, the Company may delay the initial
investment of Purchase Payments to be allocated to Investment Options in the
Separate Account, but it does not currently do so. (See "The Contracts
Application and Issuance of a Contract -- Delayed Investment Start Date.")

Dollar Cost Averaging

Dollar Cost Averaging is a program which, if elected, permits an Owner to
systematically transfer amounts for each month or quarter from the Cash
Management Sub-Account or the General Account to any Sub-Account(s). By
allocating amounts on a regularly scheduled basis as opposed to allocating the
total amount at one particular time, an Owner may be less susceptible to the
impact of market fluctuations. The minimum amount which may be transferred is
$500. An Owner must have a minimum of $6,000 of Contract Value in the Cash
Management Sub-Account or the General Account, or the amount required to
complete the Owner's designated program, in order to participate in the Dollar
Cost Averaging program. After the Substitution, the Dollar Cost Averaging
requirements applicable to the Cash Management Sub-Account will apply to the
Prime Money Fund II Sub-Account. (See "Proposed Substitution of Cash Management
Portfolio Shares.")

All Dollar Cost Averaging transfers will be made on the same day of
each month or quarter (or the next Valuation Date if the same day of the month
or quarter is not a Valuation Date). If the Owner is participating in the Dollar
Cost Averaging program, such transfers are not taken into account in determining
any transfer fee. Under certain circumstances, there may be restrictions with
respect to an Owner's ability to participate in the Dollar Cost Averaging
program and limitations on the amounts that can be transferred from the General
Account to any Sub-Accounts. An Owner participating in the Dollar Cost Averaging
program may not make systematic withdrawals of his or her Contract Value. (See
"Withdrawals--Systematic Withdrawals.")

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Distribution

First Variable Capital Services, Inc. ("FVCS"), 10 Post Office Square,
12th Floor, Boston, MA 02109 acts as the distributor of the Contracts. FVCS is a
wholly-owned subsidiary of the Company. The Contracts are offered on a
continuous basis through FVCS and approved broker-dealers who are members of the
National Association of Securities Dealers, Inc.

The Company and FVCS have agreements with various broker-dealers under
which the Contracts will be sold by registered representatives of the
broker-dealers. The registered representatives are required to be authorized
under applicable state regulations to sell variable annuity contracts. The
commissions payable to a broker-dealer may vary with the sales agreement, but
are not expected to exceed 7% of Purchase Payments. Broker-dealers may also
receive expense allowances, wholesaler fees, bonuses and training fees.

Contract Value

Accumulation Unit

(1) is the net result of:

(a) the assets of the Sub-Account attributable to Accumulation
Units; plus or minus

(b) the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the operation
or maintenance of the Sub-Account;

(2) is the cumulative unpaid charge for the Mortality and Expense Risk
Charge and for the Administrative Charge (see "Charges and
Deductions"); and

(3) is the number of Accumulation Units outstanding at the end of such
Valuation Period.

The Accumulation Unit value may increase or decrease from Valuation Period to
Valuation Period.

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WITHDRAWALS

While the Contract is in force and before the Annuity Date, the Company
will, upon written request to the Company by the Owner, allow the withdrawal of
all or a portion of the Contract for its Withdrawal Value. Withdrawals will
result in the cancellation of Accumulation Units from each applicable
Sub-Account of the Separate Account or a reduction in the General Account Value
in the ratio that the Sub-Account Value and/or the General Account Value bears
to the total Contract Value. The Owner must specify in writing in advance which
units are to be cancelled or values are to be reduced if other than the
above-mentioned method of cancellation is desired. The Company will pay the
amount of any withdrawal within seven (7) days of receipt of a request in good
order, unless the "Suspension of Payments or Transfers" provision is in effect.
The Withdrawal Value is the Contract Value for the Valuation Period next
following the Valuation Period during which a written request for withdrawal is
received at the Company reduced by the sum of:

(a) any applicable taxes not previously deducted;

(b) any applicable Annual Contract Maintenance Charge; and

Certain tax withdrawal penalties and restrictions may apply to
withdrawals from Contracts. For Contracts purchased in connection with 403(b)
plans, the Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship.

Systematic Withdrawals

Under the program, systematic withdrawals are made on the same day (or
next Valuation Date) of each month or quarter. Owners must be 59 1/2 or older to
participate. Systematic withdrawals are taken pro-rata from the Investment
Options of a Contract and are transferred automatically to an Owner's bank
account, provided the account is maintained at a bank that is a member of the
Automated Clearing House (ACH). the right to a 10% free single sum withdrawal is
forfeited. Systematic withdrawals are not allowed simultaneously with the dollar
cost averaging program.

Texas Optional Retirement Program

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age of 70-1/2. The value of the Contract may, however, be transferred to other
contracts or carriers during the period of ORP participation. A participant in
the ORP is required to obtain a certificate of termination from the
participant's employer before the value of a Contract can be withdrawn.

Suspension of Payments or Transfers

The Company reserves the right to suspend or postpone payments for
withdrawals or transfers for any period when:

(1) the New York Stock Exchange is closed (other than customary
weekend and holiday closings);

(2) trading on the New York Stock Exchange is restricted;

(3) an emergency exists as a result of which disposal of securities
held in the Separate Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's net
assets; or

(4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of Owners; provided that
applicable rules and regulations of the Securities and Exchange Commission will
govern as to whether the conditions described in (2) and (3) exist.

PERFORMANCE INFORMATION

Cash Management Portfolio

Other Portfolios

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The Company may make available yield information with respect to some
of the Portfolios. Such yield information will be calculated as described in the
Statement of Additional Information. The yield information will reflect the
deduction of any applicable Annual Contract Maintenance Charge as well as any
asset-based charges.

The Company may also show historical Accumulation Unit values in
certain advertisements containing illustrations. These illustrations will be
based on actual Accumulation Unit values.

In addition, the Company may distribute sales literature which compares
the percentage change in Accumulation Unit values for any of the Portfolios
against established market indices such as the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average or other management
investment companies which have investment objectives similar to the Portfolio
being compared. The Standard & Poor's Composite 500 Stock Price Index is an
unmanaged, unweighted average of 500 stocks, the majority of which are listed on
the New York Stock Exchange. The Dow Jones Industrial Average is an unmanaged,
weighted average of thirty blue chip industrial corporations listed on the New
York Stock Exchange. Both the Standard & Poor's 500 Stock Index and the Dow
Jones Industrial Average assume quarterly reinvestment of dividends.

Morningstar rates a variable annuity sub-account against its peers with
similar investment objectives. Morningstar does not rate any sub-account that
has less than three years of performance data.

TAX STATUS

General

For annuity payments, a portion of each payment in excess of an
exclusion amount is includible in taxable income. The exclusion amount for
payments based on a fixed annuity option is determined by multiplying the
payment

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by the ratio that the cost basis of the Contract (adjusted for any
period certain or refund feature) bears to the expected return under the
Contract. The exclusion amount for payments based on a variable annuity option
is determined by dividing the cost basis of the Contract (adjusted for any
period certain or refund guarantee) by the number of years over which the
annuity is expected to be paid. Payments received after the investment in the
Contract has been recovered (i.e. when the total of the excludable amounts
equals the investment in the Contract) are fully taxable. The taxable portion is
taxed at ordinary income tax rates. For certain types of Qualified Plans there
may be no cost basis in the Contract within the meaning of Section 72 of the
Code. Owners, Annuitants and Beneficiaries under the Contracts should seek
competent financial advice about the tax consequences of any distributions.

Diversification

The Company intends that all Portfolios of the Trust underlying the
Contracts will be managed by the Investment Adviser for the Trust, and that
Prime Money Fund II will be managed by its investment adviser, to comply
with the diversification requirements set forth in section 817(h) of the Code
and Treas. Reg. 1-817-5 promulgated thereunder.

The amount of Owner control which may be exercised under the Contract
is different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered the owner of the assets of the Separate Account
resulting in the imposition of federal income tax to the Owner with respect to
earnings allocable to the Contract prior to receipt of payments under the
Contract.

Due to the uncertainty in this area, the Company reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.

Contracts Owned by Other than Natural Persons

Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the owner is a non-natural
person, e.g., a corporation, or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to Contracts held by a trust or other entity as an
agent for a natural person or to Contracts held by a tax-qualified retirement
plan described in

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sections 401,403(a), 403(b), 408, or 457 of the Code.
Purchasers should consult their own tax counsel or other tax adviser before
purchasing a Contract to be owned by a non-natural person.

Multiple Contracts

Tax Treatment of Assignments

An assignment or pledge of a Contract may be a taxable event. Owners
should therefore consult competent tax advisers should they wish to assign or
pledge their Contracts.

Income Tax Withholding

Tax Treatment of Withdrawals--Non-Qualified Contracts

Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any distribution. However, the penalty is not imposed on amounts received: (a)
after the taxpayer reaches age 59-1/2; (b) after the death of the Owner; (c) if
the taxpayer is totally disabled (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (d) in a series of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the taxpayer or for the joint lives (or joint life expectancies)
of the taxpayer and his or her Beneficiary; (e) under an immediate annuity; or
(f) which are allocable to purchase payments made prior to August 14, 1982.

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Qualified Plans

The Contracts offered by this Prospectus are designed to be suitable
for use under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Contracts issued pursuant to the
plan. Some retirement plans are subject to distribution and other requirements
that are not incorporated into the Company's administrative procedures. Contract
Owners, participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the Contract
comply with applicable law. Following are general descriptions of the types of
Qualified Plans with which the Contracts may be used. Such descriptions are not
exhaustive and are for general informational purposes only. The tax rules
regarding Qualified Plans are very complex and will have differing applications
depending on individual facts and circumstances. Each purchaser should obtain
competent tax advice prior to purchasing a Contract issued under a Qualified
Plan.

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Contracts to provide benefits under the Plan. Contributions to the Plan for the
benefit of employees will not be includible in the gross income of the employees
until distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places limitations
and restrictions on all plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals - Qualified
Contracts" below.) Purchasers of Contracts for use with Corporate Pension or
Profit-Sharing Plans should obtain competent tax advice as to the tax treatment
and suitability of such an investment.

Tax Treatment of Withdrawals--Qualified Contracts

In the case of a withdrawal under a Qualified Contract, a ratable
portion of the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Sections 401 (H.R. 10 and
Corporate Pension and Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities)
and 408(b) (Individual Retirement Annuities). To the extent amounts are not
includible in gross income because they have been rolled over to an IRA or to
another eligible Qualified Plan, no tax penalty will be imposed. The tax penalty
will not apply to the following distributions: (a) if distribution is made on or
after the date on which the Owner or Annuitant (as applicable) reaches age
59-1/2; (b) distributions following the death or disability of the Owner or
Annuitant (as applicable) (for this purpose disability is as defined in Section
72(m)(7) of the Code); (c) after separation from service, distributions that are
part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Owner or Annuitant (as
applicable) or the joint lives (or joint life expectancies) of such Owner or
Annuitant (as applicable) and his or her designated Beneficiary; (d)
distributions to an Owner or Annuitant (as applicable) who has separated from
service after he has attained age 55; (e) distributions made to the Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Owner or Annuitant
(as applicable) for amounts paid during the taxable year for medical care; and
(f) distributions made to an alternate payee pursuant to a qualified domestic
relations order. The exceptions stated in (d), (e) and (f) above do not apply in
the case of an Individual Retirement Annuity. The exception stated in (c) above
applies to an Individual Retirement Annuity without the requirement that there
be a separation from service.

Tax-Sheltered Annuities--Withdrawal Limitations

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FINANCIAL STATEMENTS

Financial statements of the Company and the Separate Account have been
included in the Statement of Additional Information.

LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Separate
Account, the Distributor or the Company is a party.

TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION

Item Page
<S> <C>
Company.................................................................................................. 3
Independent Auditors..................................................................................... 3
Legal Opinions........................................................................................... 3
Distributor
Service Provider......................................................................................... 3
Yield Calculation for Cash Management Sub-Account........................................................ 3
Performance Information.................................................................................. 4
Annuity Provisions....................................................................................... 5
Variable Annuity....................................................................................... 5
Fixed Annuity.......................................................................................... 6
Annuity Unit........................................................................................... 6
Mortality and Expense Guarantee........................................................................ 6
Financial Statements..................................................................................... 6
</TABLE>