REVERE PAUL VARIABLE ANNUITY CONTRACT ACCMULATION FUND, 485BPOS, 1997-05-01

REVERE PAUL VARIABLE ANNUITY CONTRACT ACCMULATION FUND
485BPOS, 1997-05-01

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20550

FORM N-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/

Pre Effective Amendment No.: / /
Post Effective Amendment No.: 51 /X/

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
CO. ACT OF 1940 /X/

Amendment No.: 51 /X/

THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

18 Chestnut Street, Worcester, Massachusetts 01608
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

Registrant's Telephone Number (including area code): (508) 799-4441

John H. Budd
18 Chestnut Street
Worcester, MA 01608

(NAME AND ADDRESS OF AGENT FOR SERVICE)

Approximate Date of Proposed Public Offering: May 1, 1997

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

/ / immediately upon filing pursuant to Paragraph (b) of Rule 485
/X/ on May 1, 1997, pursuant to Paragraph (b) of Rule 485
/ / 60 days after filing, pursuant to Paragraph (a)(i) of Rule 485
/ / on , pursuant to Paragraph (a) of Rule 485
(Amended by Sec. Act. Rel. No. 6402, Inv. Co. Act. Rel. No. 1234,
eff. 6/14/82)

<PAGE>

THE PAUL REVERE VARIABLE ANNUITY
CONTRACT ACCUMULATION FUND

Cross Reference Sheet Showing Location in Preliminary Prospectus for Individual
"Level Charge" and Group Variable Administration Variable Annuity Contracts of
Items Called for by Registration Statement on Form N-8B-1.

Form N-8B-1
ITEM NO. HEADING IN PROSPECTUS (PART A) PAGE NO.
- -------- ------------------------------ --------

1 Cover Page 1
2 Definitions 2
3 Summary 3
4 Per Unit Income and Capital Changes (a) 4
5 Description of Insurance Company and the
Accumulation Fund 6
6 Management 8
7 Deductions and Expenses 8
8 Description of Contracts 11
9 Payments to Annuitants 12
10 Payments at Death 13
11 Purchase Payment Provisions 11
12 Redemption 14
13 Federal Tax Status 17
14 Legal Proceedings 19

STATEMENT OF ADDITIONAL INFORMATION (PART B)

16 Cover Page 1
17 Table of Contents 2
18 General Information and History of Insurance
Company and the Accumulation Fund 3
19 Investment Objectives and Policies 4
20 Management 5
21 Investment Advisory Services 8
22 Brokerage Allocation 11
24 Underwriters 12
23 Purchase and Pricing of Contracts 12
26 Annuity Payments 13
27 Financial Statements 14

OTHER INFORMATION (PART C)

28(a) Financial Statements and Exhibits 1
28(b) List of Exhibits 1
29 Directors and Officers of the Insurance Company 2
30 Persons Controlled by or under Common Control
with Registrant 2
31 Number of Contractowners 2
32 Indemnification 2
33 Business and Other Connections of Investment
Advisers 2

34 Principal Underwriters 2
35 Location of Accounts and Records 3
36 Management Services 3
37 Undertakings 3
<PAGE>
P R O S P E C T U S
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND
VARIABLE ANNUITY CONTRACTS
Sold By
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
Worcester, Massachusetts 01608 508-799-4441

This Prospectus describes the following Variable Annuity Contracts ("Contracts")
offered by The Paul Revere Variable Annuity Insurance Company ("Company"). They
are:

1. Flexible Purchase Payment Variable Annuity Contract
("Flexible");

2. Single Payment Variable Annuity Contract ("Single");

3. Individual "Level Charge" Variable Annuity Contract
("Level"); and

4. Group Variable Annuity Contract ("Group").

The purchase payments received pursuant to these contracts are invested in The
Paul Revere Variable Annuity Contract Accumulation Fund ("Accumulation Fund"), a
separate account of the Insurance Company. The Accumulation Fund consists of two
Series. Series Q is applicable to contracts which were afforded special tax
treatment under the Internal Revenue Code ("IRC") and are commonly referred to
as "qualified contracts". Series N is applicable to all other contracts. Funds
may be accumulated and annuity payments made on a variable basis, a fixed basis
or a combination variable and fixed basis except with respect to the Group
Contract which does not provide for fixed accumulation.

The primary investment objective of both Series of the Accumulation Fund is
growth of capital. The assets of the Accumulation Fund will usually be invested
in common stock believed to have potential for growth but may, from time to
time, be invested in other securities. When deemed necessary for defensive
purposes, the Accumulation Fund may substantially increase that portion of its
assets invested in fixed income obligations and held in cash. As the contracts
are subject to the risks associated with common stock investment and changing
economic conditions, there can be no assurance that the investment objective
will be attained.

This Prospectus sets forth information about the Contracts and Accumulation Fund
that a prospective investor ought to know before investing. A Statement of
Additional Information about the Company, the Accumulation Fund and the
Contracts has been filed with the Securities and Exchange Commission and is
available, without charge, upon written or oral request received by the Company
at its Home Office located at 18 Chestnut Street, Worcester, Massachusetts
01608. Please refer to page 20 to examine the Table of Contents of the Statement
of Additional Information.

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 carefully and retain it for future reference.
The date of this Prospectus is May 1, 1997.
The date of the Statement of Additional Information is May 1, 1997.

1
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
Definitions.................................... 2
Summary........................................ 3
Selected Per Unit Data and Ratios.............. 4
Description of the Company and
the Accumulation Fund........................ 6
A. Investment Policies and Restrictions.... 7
Management..................................... 8
Deductions and Expenses........................ 8
A. Sales and Administrative Functions
and Expenses........................... 8
B. Investment Advisory Fees................ 9
C. Expense and Mortality and Expense
Risk Assumptions....................... 9
D. Brokerage Expenses and Portfolio
Turnover................................ 10
Description of Contracts....................... 11
A. Types of Contracts...................... 11
B. Purchase Payment Provisions............. 11
C. Accumulation Units...................... 11
D. Net Asset Value......................... 12
E. Annuity Unit............................ 12
F. Payments to Annuitants.................. 12
G. Payments at Death....................... 13
H. Early or Deferred Commencement Dates.... 14
I. Redemption............................. 14
J. Voting Rights.......................... 14
K. Miscellaneous Provisions................ 14
Prior Contracts................................ 15
A. Flexible Payment Contracts Issued Prior
to
June 1, 1977........................... 15
B. Group Contracts Issued Prior to June 1,
1977.................................... 16
C. Group Deposit Administration Variable
Annuity Contracts...................... 16
Fixed Accumulation............................. 17
Federal Tax Status............................. 17
Changes in Operation of the Separate Account... 19
Legal Proceedings.............................. 19
Statement of Additional Information
Table of Contents............................ 20
</TABLE>

DEFINITIONS

ACCUMULATION UNIT - an accounting device used to determine the value of a
contract before annuity payments begin, the value of which varies in
accordance with the investment experience of the appropriate Series of the
Accumulation Fund.

ANNUITANT - the person or persons whose life determines the duration of annuity
payments involving life contingencies.

ANNUITY - a series of payments generally for life or for life with specified
minimums.

ANNUITY COMMENCEMENT DATE - the date on which annuity payments will begin.

ANNUITY UNIT - an accounting device used to determine the amount of annuity
payments.

CONTRACT OWNER - the person or entity with legal rights of ownership of the
annuity contract.

FIXED ANNUITY - an annuity with payments fixed in amount throughout the annuity
period.

PLAN - an employer pension plan, profit sharing plan, or annuity purchase plan
under which benefits are to be provided by the Variable Annuity Contracts
described herein.

PURCHASE PAYMENTS - payments to the Company, after specific deductions, under an
annuity contract.

VARIABLE ANNUITY - an annuity providing for payments varying in amount in
accordance with the investment experience of the appropriate Series of the
Accumulation Fund.

2
<PAGE>
SUMMARY

<TABLE>
<CAPTION>
CONTRACTS
----------------------------------------------------
FLEXIBLE* SINGLE* LEVEL* GROUP*
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CONTRACT OWNER TRANSACTION EXPENSES:
Sales Load Imposed on Purchases
(as a percentage of purchase payments)........... 7.5% 6.0% 5.0% 5.0%
Collection Fee (per payment)...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
ANNUAL EXPENSES (as a percentage of average net
assets):
Management Fees................................... .5% .5% .5% .5%
Mortality and Expense Risk Fees................... 1.0% 1.0% 1.0% 1.0%
----- ----- ----- -----
Total Annual Expenses........................... 1.5% 1.5% 1.5% 1.5%
----- ----- ----- -----
</TABLE>

*See pages 10 and 11 for full contract name.

If you either surrender or annuitize your contract at the end of the applicable
time period, you would have paid the following expenses on a $1,000 investment
(or annual $1,000 investments), assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
YEAR
------------------------------------------
1
-- 3 5 10
--- --- ---------
<S> <C> <C> <C> <C>
Flexible (one time $1000 deposit)................. 90 120 152 242
Flexible (annual $1000 deposits).................. 90 315 603 1,628
Single............................................ 75 106 138 230
Level/Group....................................... 66 96 129 222
</TABLE>

This fee table is designed to summarize and illustrate all of the deductions and
expenses described on pages 8, 9 and 10 for the contracts offered by this
Prospectus. State premium taxes, as described on page 9 may also apply.

GENERAL INFORMATION:

The Accumulation Fund is registered under the Investment Company Act of 1940 as
an open-end diversified investment company. It is the separate account through
which the Company sets aside, separate and apart from its general assets, assets
attributable to the variable portion of its variable annuity contracts.
Registration under the Investment Company Act of 1940 ("1940 Act") does not
involve supervision of management or investment practices or policies by the
Securities and Exchange Commission.

Four types of variable annuity contracts are offered by this Prospectus. Three
of these contracts are issued to individuals and one is a group contract. Two of
the "individual" contracts provide for a series of purchase payments to be made
over a period of time and one calls for only a single purchase payment.

These contracts are designed for use in connection with retirement plans, some
of which may qualify for federal income tax advantages available under Sections
401, 403, or 408 of the IRC.

This Prospectus generally describes only the variable portion of contracts
issued by the Company, except where fixed accumulation or fixed annuity payments
are specifically mentioned. Fixed annuities are funded by the Company's general
assets and are not placed in the Accumulation Fund. (See Fixed Accumulation,
page 17).

The portion of contract values placed in either Series of the Accumulation Fund
are subject to the investment risks inherent in any equity investment. These
risks include changing economic conditions as well as the risks inherent

(CONTINUED ON PAGE 6)

3
<PAGE>
SELECTED PER UNIT DATA AND RATIOS (A)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SERIES N -----------------------------------------------------------------------------------------
(NON-QUALIFIED) 1996(B) 1995(B) 1994(B) 1993(B) 1992(B) 1991 1990

<S> <C> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES
Investment income...................... $ .137 $ .117 $ .099 $ .055 $ .071 $ .085 $ .111
Operating expenses..................... .134 .109 .102 .092 .094 .076 .072
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss)........... .003 .008 (.003) (.037) (.023) .009 .039
CAPITAL CHANGES
Net realized and unrealized gains
(losses) from securities............. 1.459 1.769 (.023) .318 .194 1.361 (.102)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net asset
value................................ 1.462 1.777 (.026) .281 .171 1.370 (.063)
Accumulation unit net asset value:
Beginning of year.................... 7.267 5.490 5.516 5.235 5.064 3.694 3.757
----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year.......................... $ 8.729 $ 7.267 $ 5.490 $ 5.516 $ 5.235 $ 5.064 $ 3.694
----------- ----------- ----------- ----------- ----------- ----------- -----------
RATIOS
Operating expenses to average
accumulation fund balance............ 1.69% 1.71% 1.73% 1.73% 1.74% 1.76% 1.80%
Net investment income (loss) to average
accumulation fund balance............ 0.04% 0.13% (0.05% ) (0.69% ) (0.42% ) 0.21% 0.96%
Portfolio turnover rate................ 94% 67% 62% 62% 66% 109% 84%
Accumulation units outstanding at end
of year (in thousands)............... 566 586 604 640 662 684 735

SERIES N
(NON-QUALIFIED) 1989 1988 1987
<S> <C> <C> <C>
INCOME AND EXPENSES
Investment income...................... $ .104 $ .070 $ .042
Operating expenses..................... .059 .047 .038
----------- ----------- -----------
Net investment income (loss)........... .045 .023 .004
CAPITAL CHANGES
Net realized and unrealized gains
(losses) from securities............. 1.002 .201 .019
----------- ----------- -----------
Net increase (decrease) in net asset
value................................ 1.047 .224 .023
Accumulation unit net asset value:
Beginning of year.................... 2.710 2.486 2.463
----------- ----------- -----------
End of year.......................... $ 3.757 $ 2.710 $ 2.486
----------- ----------- -----------
RATIOS
Operating expenses to average
accumulation fund balance............ 1.80% 1.81% 1.80%
Net investment income (loss) to average
accumulation fund balance............ 1.36% 0.88% 0.17%
Portfolio turnover rate................ 84% 64% 138%
Accumulation units outstanding at end
of year (in thousands)............... 774 942 1,085
</TABLE>

(a) The per unit amounts represent the proportionate distribution of actual
investment results as related to the change in unit net asset values for the
year.

(b) See the Report of Independent Auditors on page 13 of the Statement of
Additional Information.

4
<PAGE>
SELECTED PER UNIT DATA AND RATIOS (A)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SERIES Q -----------------------------------------------------------------------------------------
(QUALIFIED) 1996(B) 1995(B) 1994(B) 1993(B) 1992(B) 1991 1990

<S> <C> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES
Investment income...................... $ .153 $ .119 $ .081 $ .054 $ .068 $ .093 $ .116
Operating expenses..................... .133 .096 .073 .079 .076 .066 .055
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss)........... .020 .023 .008 (.025) (.008) .027 .061
CAPITAL CHANGES
Net realized and unrealized gains
(losses) from securities............. 1.551 1.711 (.020) .291 .159 1.295 (.107)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net asset
value................................ 1.571 1.734 (.012) .266 .151 1.322 (.046)
Accumulation unit net asset value:
Beginning of year.................... 7.062 5,328 5.340 5.074 4.923 3.601 3.647
----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year.......................... $ 8.633 $ 7.062 $ 5.328 $ 5.340 $ 5.074 $ 4.923 $ 3.601
----------- ----------- ----------- ----------- ----------- ----------- -----------
RATIOS
Operating expenses to average
accumulation fund balance............ 1.57% 1.55% 1.55% 1.56% 1.56% 1.56% 1.58%
Net investment income (loss) to average
accumulation fund balance............ 0.24% 0.38% 0.17% (0.50% ) (0.17% ) 0.64% 1.76%
Portfolio turnover rate................ 78% 64% 64% 59% 61% 98% 80%
Accumulation units outstanding at end
of year (in thousands)............... 2,093 5,491 5,597 5,700 5,753 5,839 5,961

SERIES Q
(QUALIFIED) 1989 1988 1987
<S> <C> <C> <C>
INCOME AND EXPENSES
Investment income...................... $ .122 $ .078 $ .037
Operating expenses..................... .051 .041 .028
----------- ----------- -----------
Net investment income (loss)........... .071 .037 .009
CAPITAL CHANGES
Net realized and unrealized gains
(losses) from securities............. .928 .194 .030
----------- ----------- -----------
Net increase (decrease) in net asset
value................................ .999 .231 .039
Accumulation unit net asset value:
Beginning of year.................... 2.648 2.417 2.378
----------- ----------- -----------
End of year.......................... $ 3.647 $ 2.648 $ 2.417
----------- ----------- -----------
RATIOS
Operating expenses to average
accumulation fund balance............ 1.58% 1.59% 1.63%
Net investment income (loss) to average
accumulation fund balance............ 2.20% 1.45% 0.51%
Portfolio turnover rate................ 89% 66% 133%
Accumulation units outstanding at end
of year (in thousands)............... 6,157 6,385 6,703
</TABLE>

(a) The per unit amounts represent the proportionate distribution of actual
investment results as related to the change in unit net asset values for the
year.

(b) See the Report of Independent Auditors on page 13 of the Statement of
Additional Information.

5
<PAGE>
in management's ability to make appropriate investment choices. There is no
guarantee under a variable annuity contract that the variable annuity payments
or the accumulation values will equal or exceed total purchase payments.

All contracts contain the Company's promise that on the annuity commencement
date, the contract owner or annuitant may elect to have provided an annuity
payable for the lifetime of the annuitant provided the initial monthly annuity
payment equals or exceeds $25. If the initial monthly annuity payment would be
less than $25, payment shall be made at less frequent intervals or the value of
the account shall be distributed in a lump sum as selected by the annuitant. The
annuity payment will be based on the contract value and in case of variable
annuity payments, will be affected only by the investment performance of the
appropriate Series of the Accumulation Fund and not by adverse mortality
experience or by increases in the Companys expenses above those assumed and for
which deductions are provided for in the contract. Owners of individual
contracts and participants in group contracts to which variable accumulation
units are credited, have the right to vote on particular questions affecting the
management of the Accumulation Fund. (see Voting Rights, page 14)

Withdrawal or redemption of funds from certain contracts may result in tax
penalties. (see Federal Tax Status, page 17)

DESCRIPTION OF THE COMPANY
AND THE ACCUMULATION FUND

The Company, with an address of 18 Chestnut Street, Worcester, Massachusetts, is
a stock insurance company organized under the laws of Massachusetts. Its
principal business is the sale and administration of life and annuity insurance
policies. The Company was organized on August 6, 1965. The Accumulation Fund was
organized on December 22, 1965 and is registered as a diversified open-end
investment company under the 1940 Act.

Under Massachusetts law, regulation of the Company by the Insurance Commissioner
of Massachusetts includes regulation of its Accumulation Fund which is not a
separately incorporated entity.

The Company is a wholly-owned subsidiary of The Paul Revere Life Insurance
Company, a Massachusetts corporation. The Paul Revere Life Insurance Company is
wholly-owned by The Paul Revere Corporation ("Paul Revere"), a Massachusetts
corporation with its principal office at 18 Chestnut Street, Worcester,
Massachusetts 01608. Paul Revere is comprised of The Paul Revere Life Insurance
Company, The Paul Revere Variable Annuity Insurance Company, The Paul Revere
Protective Life Insurance Company and other non-insurance affiliates.

Paul Revere was formerly 83%-owned by Textron Inc. and 17%-owned publicly. On
April 29, 1996, Paul Revere and Provident Companies, Inc. ("Provident")
announced they had signed a definitive merger agreement pursuant to which
Patriot Acquisition Corporation, a wholly owned subsidiary of Provident would
merge with and into Paul Revere with Paul Revere as the surviving corporation.
On November 6, 1996, Paul Revere and Provident announced that they had amended
and restated the merger agreement to, among other things, extend the date as of
which the parties would be entitled to terminate the agreement and to adjust the
exchange ratio to be used in determining the number of shares of Provident
common stock that Textron will receive in the transaction (as amended, the
"Merger Agreement"). The transaction closed on March 27, 1997. Provident is a
Delaware corporation with its principal office at 1 Fountain Square,
Chattanooga, Tennessee 37402.

Income, gains and losses, whether or not realized, resulting from assets
allocated to the Accumulation Fund are, in accordance with applicable variable
annuity contracts, credited to or charged against the Accumulation Fund without
regard to other income gains or losses of the Company. For this purpose, each
Series of the Accumulation Fund under Massachusetts law may not be charged with
liabilities arising out of any other business of the Company to the extent they
are set aside for variable annuity contracts. However, obligations arising under
such contracts are the obligation of the Company.

The Accumulation Fund consists of two Series. Series Q is made up of qualified
contracts which were afforded special tax treatment under the IRC. Series N is
made up of all other contracts.

6
<PAGE>
The Home Office and Agency retirement plans of The Paul Revere Life Insurance
Company, 18 Chestnut Street, Worcester, Massachusetts 01608 held 36% of the
outstanding units of the Accumulation Fund at December 31, 1996.

A. INVESTMENT POLICIES AND RESTRICTIONS

The fundamental investment policies and restrictions of the Accumulation Fund
(including Series Q and Series N) are enumerated in Items 1 and 4 through 10
below. They may not be changed without the approval of a majority in interest of
contracts having a voting interest in the Accumulation Fund. A majority as used
in this Prospectus, means (a) 67% or more of the voting interests of the
contract owners present and entitled to vote if voting interests of over 50% are
present or represented by proxy or (b) more than 50% of the voting interest in
the Accumulation Fund, whichever is less. Items 2, 3 and 11 through 15 are not
fundamental investment policies and may be changed by the Board of Managers.

1. The growth of capital is the primary investment objective of the Accumulation
Fund. Assets of the Accumulation Fund, including any earned income and realized
capital gains, shall be kept fully invested except for reasonable amounts held
in cash to meet current expenses or normal contract payments and for reasonable
amounts held for temporary periods pending investment in accordance with the
investment policy.

2. Common stocks believed to have potential for growth will usually constitute a
major portion of the Accumulation Fund portfolio but in keeping with the
objective of growth of capital, the investments may be made from time to time in
other securities. When deemed necessary for defensive purposes, the Accumulation
Fund may substantially increase the portion of its assets invested in fixed
income obligations and held in cash.

3. Investments of the Accumulation Fund are controlled by provisions of Sections
132H, Chapter 175 of the General Laws of Massachusetts. In general, this
releases the Accumulation Fund assets from investment restrictions applicable to
life insurance company reserve investments, limits investments in securities of
any one issuer to 10% of the value of the Accumulation Fund assets and requires
common stock purchases to be listed or admitted to trading on a securities
exchange located in the United States or Canada or to be traded in the
over-the-counter securities market. Such section as may be amended from time to
time will be followed.

The Accumulation Fund will not:

4. Acquire more than 5% of the voting securities of any one issuer.

5. Purchase the securities of an issuer, if, immediately after and as a result
of such purchase, the value of its holdings in the securities of such issuer
shall exceed 5% of the value of its total assets.

6. Invest more than 25% of the value of its assets in any one industry.

7. Engage in the purchase or sale of interests in real estate which are not
readily marketable.

8. Borrow money except from banks as a temporary measure for extraordinary or
emergency purposes and then not to exceed 5% of the value of its assets.

9. Engage in the purchase or sale of commodities or commodity contracts.

10. Act as an underwriter of securities of another issuer (except where the
Accumulation Fund may be deemed to be a statutory underwriter in connection with
the disposition of restricted securities).

11. Make purchases on margin, except such short-term credit as is necessary for
clearance of transactions.

12. Make short sales of securities.

13. Invest for the purpose of exercising control or management.

14. Purchase securities of other investment companies except (i) of closed-end
companies in the open market at customary brokerage commissions and then with an
aggregate investment in such securities not exceeding 5% of the value of its
assets and the total outstanding voting interest in any one such investment
company not to exceed 3% or (ii) as a part of a merger or consolidation.

15. Invest in excess of 10% of the value of its assets in restricted securities.

7
<PAGE>
As of the year ended December 31, 1996, the Accumu-lation Fund did not engage in
the purchase or sale of interests in real estate, invest in repurchase
agreements or non-negotiable time deposits maturing in more than seven days, or
make loans of securities. The Accumulation Fund has never engaged in puts, calls
or straddles and has no intention to do so at the present time.

MANAGEMENT

The property and business of the Accumulation Fund are managed by a Board of
Managers selected by the owners of the contracts to which variable accumulation
units are credited. A majority of the Accumulation Funds five managers are not
deemed to be "interested persons" of the Accumulation Fund or the Company as
defined in the 1940 Act.

The Board of Managers has the following responsibilities and duties: a) to
select and approve annually an independent certified public accountant, b) to
execute and approve annually an agreement providing for sales and administrative
services, c) to execute and approve annually an agreement providing for
investment advisory services, d) to recommend any changes in the fundamental
investment policies of the Accumulation Fund, and e) to authorize all
investments of the assets of the Accumulation Fund in accordance with the
fundamental investment policies of the Accumulation Fund, and to submit
semi-annual and annual reports to the contract owners.

The Company pursuant to a written agreement acts as Investment Advisor and
Administrative Manager of the Accumulation Fund and also assumes certain
expenses and mortality and expense risks in connection with the variable annuity
contracts.

Pursuant to the Investment Advisory Agreement between the Accumulation Fund and
the Company, the Company is authorized, and has employed, at its own expense,
the services of an Investment Sub-Advisor. An Investment Sub-Advisory Agreement
between the Company and MFS Institutional Advisors, Inc. ("MFSI"), formerly MFS
Asset Management, Inc., went into effect on August 16, 1984. MFSI is registered
with the Securities and Exchange Commission as an investment advisor. Its
principal offices are located at 500 Boylston Street, Boston, Massachusetts
02116. MFSI serves as investment advisor to substantial private and
institutional accounts. MFS serves as investment advisor to certain mutual fund
and insurance company separate accounts. As of December 31, 1996, Massachusetts
Financial Services Company ("MFS") and its subsidiaries including MFSI, had over
$52.4 billion in assets under management, which included over $7 billion in
assets managed by MFSI. Under the Sub-Advisory Agreement, MFSI will provide the
Board of Managers with an investment program for their consideration and will
execute the program approved by the Board.

This Sub-Advisory Agreement was approved by a majority of the members of the
Board of Managers who were not interested persons of the Accumulation Fund, the
Company or MFS. The continuation of both agreements was approved by a vote of
the majority of the Board of Managers who were not interested persons and by a
majority of the entire Board at the first meeting called for that purpose
following the Annual Meeting of Variable Annuity Contract Owners which occurred
on March 27, 1997.

Both agreements shall continue in full force and effect unless terminated by the
Board of Managers of the Accumulation Fund or by a vote of the majority in
interest of the contracts, which termination may be accomplished without the
payment of any penalty with not more than 60 days written notice. Both
agreements shall (i) automatically terminate upon assignment by either party;
(ii) continue in effect from year to year, after it has been in effect for two
years, only if approved annually by a vote of a majority of the Board of
Managers of the Accumulation Fund who are not parties to the agreements or not
interested persons of any of the parties to the agreement.

DEDUCTIONS AND EXPENSES

A. SALES AND ADMINISTRATIVE FUNCTIONS AND
EXPENSES

The Company acts as principal underwriter and performs detailed administrative
functions relative to the variable annuity contracts offered by this Prospectus
and the Accumulation Fund. The Company incurs distribution costs which exceed
the sales charges received in the first contract year and finances these excess
costs. This financing procedure results in no additional expenses to the
Accumulation Fund.

The total amounts received by the Company in connection with the sales and
administrative functions in 1996, 1995 and 1994 were $4,434, $4,452, and $6,529,
respectively.

8
<PAGE>
1. Sales Charges

Sales charges deducted from purchase payments received are in accordance with
the following:

(a) Flexible Purchase Payment Variable Annuity Contracts.

<TABLE>
<CAPTION>
PURCHASE SALES
PAYMENTS CHARGE
<S> <C> <C>
-------------------------
1st $ 15,000 7.5%
Next 10,000 6.0
Next 25,000 5.0
Next 50,000 4.0
Over 100,000 2.0
</TABLE>

(b) Single Payment Variable Annuity Contracts.

<TABLE>
<S> <C> <C>
First $ 25,000 6.0%
Next 25,000 3.0
Over 50,000 1.5
</TABLE>

Sales charge equals 5% of each purchase payment.

(d) Group Variable Annuity Contracts.

(i) For contracts with anticipated annual purchase payments under $50,000
- 5%.

(ii) For contracts with anticipated annual purchase payments of $50,000 or
more - 2% plus a charge of the lesser of $50 or 0.5% of amount
withdrawn except payments upon the death of a participant.

(iii) No sales charge on an initial purchase payment of $250,000 if being
transferred from another Section 403(b) plan. Funds in the hands of
the Company or its parent, The Paul Revere Life Insurance Company,
may be transferred without charge, once each year, into a variable
annuity contract if the funds are already held in connection with a
plan qualifying under Section 403(b) of the IRC.

2. Collection Fee

A collection fee for administrative expenses incurred in processing purchase
payments in the amount of $1 is deducted from each purchase payment. This
collection fee is not guaranteed and may be increased up to a maximum of $3 if
necessary to reflect actual administrative expenses.

3. State Premium Taxes

The Company will, where such taxes are imposed by state law, make a deduction
for premium taxes when incurred, which could be (i) at the annuity
commencement date, (ii) when total surrender occurs or (iii) when premiums are
paid. It is the Companys practice to compute and deduct at the time of receipt
of each purchase payment a charge for premium tax only upon that portion equal
to the sales charges and collection fee delaying the charge on other amounts
until the annuity commencement date. The Company gains no special benefit from
its charge for premium taxes. The 0% to 3.5% premium tax rates vary by state
and are subject to change by legislation, administrative interpretation or
judicial acts.

B. INVESTMENT ADVISORY FEES

The Company, as the Investment Advisor and Administrative Manager of the
Accumulation Fund, assesses a service charge as of each valuation, which, on an
annual basis, equals 0.50% of the average daily net asset value of each Series
of the Accumulation Fund.

MFSI, pursuant to an Investment Sub-Advisory Agreement with the Company,
receives an advisory fee in an amount each month equal, on an annual basis, to
0.35% of the average daily net assets of the Accumulation Fund. This fee does
not affect the charges made by the Company to the Accumulation Fund.

The advisory fee paid to the Company for the three years 1996, 1995 and 1994
amounted to $134,458, $191,061 and $167,704, respectively. The fees paid to MFSI
by the Company in 1996, 1995 and 1994 were $94,120, $133,743 and $117,393,
respectively.

C. EXPENSE AND MORTALITY AND EXPENSE RISK
ASSUMPTIONS

Although variable annuity payments will vary in accordance with investment
performance of the Series of the Accumulation Fund in which the reserves are
invested, the Company assures that the payments will not vary by reason of

9
<PAGE>
either increased life expectancy or increased expenses to amounts in excess of
expense amounts provided for in the contract.

The Company, as the Sales and Administrative Manager of the Accumulation Fund,
in return for a charge to the Accumulation Fund on each valuation in an amount
which on an annual basis equals 1% of the average daily net asset value of the
Accumulation Fund, assumes the risks that (i) annuitants may live longer than
foreseen in the actuarial estimates of life expectancies; (ii) the aggregate
purchase payments may exceed the redemption value as of the date of death of the
annuitant (See Payments at Death, page 13); and (iii) charges by the Company for
services and expenses as provided by the contract may not prove sufficient to
cover the actual expenses. It is the opinion of the Company that an appropriate
estimate of the division of the charge would attribute 0.55% to (i) and (ii) and
0.45% to expenses and (iii) but there has not been sufficient experience in this
area to provide other than an estimate. If these charges prove insufficient the
loss will fall on the Company. The charges for expense and mortality and expense
risk assumed for the 3 years, 1996, 1995 and 1994 amounted to $268,915, $382,123
and $335,408, respectively.

At the present time, the Company believes that there are no statutory or
regulatory limitations on expenses that may be deducted from the Accumulation
Fund but assures that all expense deductions (i.e., Company charges and direct
expenses other than for taxes, such as charges for investment advisory service
and expense and mortality and expense risk assumptions, audit expenses and fees
and expenses of the Board of Managers) will not annually exceed 2% of the
average daily net asset value of the Accumulation Fund.

D. BROKERAGE EXPENSES AND PORTFOLIO TURNOVER

MFSI in its capacity as sub-advisor selects the securities for purchase and sale
by the Accumulation Fund. The Company has no set formula for the distribution of
brokerage business in connection with the placing of orders for the purchase and
sale of investments, as it is the Company's policy to place orders with the
primary objective of obtaining the most favorable price and execution.
Consideration may be given in the allocation of business, however, to services
provided by a broker, including the furnishing of statistical data and research,
if the commissions charged are reasonable.

Under the Sub-Advisory Agreement and as permitted by Section 28 (e) of the
Securities Exchange Act of 1934, MFSI may cause the Accumulation Fund to pay a
broker-dealer who provides brokerage and research services to the Accumulation
Fund and to MFSI, an amount of commission for effecting a securities transaction
for the Accumulation Fund in excess of the amount another broker-dealer would
have charged for the transaction. This will be done if MFSI determines in good
faith that the greater commission is reasonable in relation to the value of the
brokerage research services provided by the executing broker-dealer viewed in
terms of either a particular transaction or MFSI's overall responsibility to the
Accumulation Fund or to its other clients.

The advisory fee paid by the Company to MFSI will not be reduced as a
consequence of MFSI's receipt of brokerage and research services. To the extent
that the Accumulation Fund's portfolio transactions are used to obtain such
services, the brokerage commissions paid by the Accumulation Fund will exceed
those that might otherwise be paid by an amount which cannot be determined. Such
services are useful and of value to MFSI in serving both the Accumulation Fund
and other clients and conversely such service obtained by placement of brokerage
business of other clients would be useful to MFSI in carrying out its
obligations to the Accumulation Fund. While such services are not expected to
reduce the expenses of MFSI, through the use of the services, MFSI avoids the
additional expense which would be incurred if it should attempt to develop
comparable information through its own staff.

Brokerage commissions paid in the years ended December 31, 1996, 1995 and 1994
amounted to $56,322, $62,318 and $49,933, respectively. Stated as a percentage
of gross purchase payments received, brokerage commissions aggregated 49.1%,
9.4% and 8.2% for these three periods. Brokerage commissions were paid to 63
brokers in 1996. In the years ended December 31, 1996, 1995 and 1994 the
aggregate rates of portfolio turnover were 81%, 65% and 64%, respectively.

10
<PAGE>
DESCRIPTION OF CONTRACTS

A. TYPES OF CONTRACTS

The Company is registered with the Securities and Exchange Commission as a
broker dealer and is a member of the National Association of Securities Dealers,
Inc. The variable annuity contracts will be sold by registered representatives
of the Company who are also licensed with the State Insurance Department for the
sale of such contracts.

There are 4 types of variable annuity contracts offered by this Prospectus. They
are:

1. Flexible Purchase Payment Variable Annuity Contract.

The Flexible Contract provides for purchase payments to be made in the amounts
and at such times as the contract owner desires with certain contract limits and
limits provided for by the IRC when contracts are issued in connection with
plans qualifying for special tax treatment.

2. Single Payment Variable Annuity Contract.

The Single Contract provides for additional payments after the first only at the
option of the Company.

3. Individual "Level Charge" Variable Annuity Contract.

The Level Contract is designed to be issued to an individual qualifying for tax
deferred treatment under Section 403(b) of the IRC.

4. Group Variable Annuity Contract.

The Group Contract is issued as a master group contract to an employer in
connection with a plan qualifying under Section 403(b) of the IRC. Each
participant employee is issued a certificate evidencing his interest in the
Accumulation Fund which at all times is fully vested.

All Contracts except Group provide for accumulation of values within the general
assets of the Company as well as the Accumulation Fund.

The Company reserves the right to reject any application. If an initial purchase
payment cannot be credited within 5 business days of receipt by the Company it
will be returned to the payor immediately unless the applicant consents to its
being held for a longer period. Initial purchase payments accompanied by
properly completed applications will be credited no later than 2 business days
following receipt.

Any inquiries concerning these Contracts can be made at the principal offices of
the Company, 18 Chestnut Street, Worcester, Massachusetts 01608.

B. PURCHASE PAYMENT PROVISIONS

Purchase payments are payable to the Company at its Home Office. In the case of
Flexible Contracts each purchase payment must be at least $50 except when paid
by pre-authorized check plan or under a payroll deduction plan when the minimum
purchase payment is $25. In the case of Level Contracts, the minimum purchase
payment is $25. Purchase payments for Group Contracts must aggregate a minimum
of $300 annually with respect to each participant. The minimum initial purchase
payment under a Single Contract is $2,500. Subsequent payments may be made only
with the consent of the Company.

Under Flexible Contracts the maximum purchase payment is $2,500 except where a
larger purchase payment is being made on a regular basis. In such case the
maximum purchase payment that can be made in any contract year without the
consent of the Company is an amount 3 times the amount paid in the first
contract year.

Purchase payments for Level and Group Contracts must be made monthly or such
other frequency agreed to by the Company.

Under all contracts and certificates (in the case of Group Contracts) the
purchase payment, net of sales charge, deductions for applicable premium tax
charge and collection fee or contract charge (in the case of Single Contracts)
will be credited to the contract (or certificate) as accumulation units. The
number of accumulation units to be credited will be determined by dividing the
net purchase payment by the value of an accumulation unit next determined after
receipt of the purchase payment (or the issue of the contract or certificate in
the case of an initial purchase payment.)

C. ACCUMULATION UNITS

Accumulation units are a measure of the value of the contract before the annuity
commencement date. Accumulation units are credited separately for variable and
fixed accumulations. The number of accumulation units credited is equal to the
net purchase payment applied divided by the value of the accumulation unit next
determined following the receipt of the purchase payment by

11
<PAGE>
the Company at its Home Office (or the issue of the contract or certificate).
The number of accumulation units credited is not changed by any subsequent
variation in the value of an accumulation unit. The value of variable
accumulation units will vary from valuation to valuation reflecting the
investment experience of the Accumulation Fund.

The value of a variable accumulation unit for each Series is determined as of a
valuation date by dividing (a) the net asset value of that Series of the
Accumulation Fund by (b) the number of accumulation units within that Series.
Changes in the value of a Series of the Accumulation Fund depend on investment
experience, such as, realized and unrealized capital gains and losses on
portfolio securities and upon net income from such securities.

D. NET ASSET VALUE

The net asset value of a Series of the Accumulation Fund is determined each
business day of the Company as of the close of the New York Stock Exchange and
on such other business days when there is sufficient activity in the portfolio
securities of the Series to affect the value thereof by adding the cash held
plus the value of securities plus other assets and subtracting any liabilities
or obligations chargeable to the Series. Securities are valued at the closing
price for such securities traded on organized exchanges and at the last bid
price for non-traded securities and securities not traded on an organized
exchange. Other assets including restricted securities are valued at fair value
as determined in good faith by or under the direction of the Board of Managers.
Obligations chargeable are (i) incurred expenses for audit (ii) fees and
expenses of the Board of Managers and (iii) charges made by the Company for
expenses and mortality and expense risk assumed and investment management and
advisory services in an amount which on an annual basis is not to exceed 2.0% of
the average daily net asset value of the Series of the Accumulation Fund.

E. ANNUITY UNIT
1. VALUE OF VARIABLE ANNUITY UNIT

The value of a variable annuity unit as of any valuation date is determined by
multiplying the value of the preceding annuity unit value by a factor to
neutralize the assumed net investment rate (3 1/2% or 5% per annum as selected
by the contract owner and included in the annuity tables used to determine the
first payment) and further multiplied by the ratio of the value of a variable
accumulation unit as of the current valuation to the value of a variable
accumulation unit of the preceding valuation. The number of variable annuity
units determining annuity payments remains constant once the number has been
determined. Generally, the election of the 5% net investment rate will produce
higher initial annuity payments but such payments will rise more slowly or fall
more rapidly than annuity payments based on 3 1/2% assumed net investment rate
under conditions of similar investment performance.

2. AMOUNT OF MONTHLY ANNUITY PAYMENTS

The number of annuity units determining each monthly annuity payment is equal to
(a) the value applied to provide the annuity payment (less any applicable
premium tax); multiplied by (b) the applicable annuity purchase rates; and
divided by (c) the annuity unit value when the number is being determined. The
number of annuity units will remain fixed unless the units are split as
described herein.

Each monthly annuity payment will be equal to the number of annuity units as
determined above, multiplied by the value of an annuity unit determined in the
daily valuation two weeks preceding the date on which payment is due, but in no
event as of a time preceding the effective date of the contract. The amount of
each variable annuity payment will vary from month to month depending on the
investment experience of the appropriate Series of the Accumulation Fund but the
Company guarantees that the amount of each payment will not be affected by
variations in mortality experience among annuitants or by expenses incurred in
excess of expense assumptions. (See Expense and Mortality and Expense Risk
Assumptions, page 9).

F. PAYMENTS TO ANNUITANTS
1. ANNUITY SETTLEMENT OPTIONS

Under the variable annuity contracts offered by this Prospectus, the contract
owner or participant in a group contract may elect to have the annuitant receive
variable annuity benefit payments in accordance with one or more of the options
described below under each of which payments will be made from the Accumulation
Fund. If no option is selected, Option I with 120 monthly payments guaranteed
will be assumed to have been elected.

12
<PAGE>
OPTION I - VARIABLE LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED

A variable annuity payable monthly during the lifetime of the annuitant ceasing
with the last monthly payment due immediately preceding or coincident with the
annuitant's death with a guarantee if, at the death of the annuitant, payments
have been made for less than 120 months or 240 months, as selected, variable
annuity payments will be continued to the beneficiary during the remainder of
the guaranteed period.

OPTION II - UNIT REFUND VARIABLE LIFE ANNUITY

A variable annuity payable for a period certain and after that during the
lifetime of the annuitant. The number of period certain payments is equal to the
amount applied under the option divided by the amount of the first annuity
payment, provided however, that the final period certain payment shall be
multiplied by that part of the answer to the above calculation which is not a
whole number.

OPTION III - JOINT AND SURVIVOR VARIABLE LIFE ANNUITY

A variable annuity payable monthly during the joint lifetime of the primary
annuitant and a secondary annuitant and continuing during the lifetime of the
survivor. SINCE THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED IT WOULD BE
POSSIBLE UNDER THIS OPTION FOR ONLY ONE MONTHLY ANNUITY PAYMENT TO BE MADE, IF
THE ANNUITANT AND THE SECONDARY ANNUITANT BOTH DIE PRIOR TO THE DUE DATE OF THE
SECOND PAYMENT; OR ONLY TWO IF THEY BOTH DIED BEFORE THE THIRD, ETC.

OPTION IV - VARIABLE LIFE ANNUITY

A variable annuity payable monthly during the lifetime of the annuitant and
ceasing with the last monthly payment due immediately preceding or coincident
with the annuitant's death. SINCE THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED, IT WOULD BE POSSIBLE UNDER THIS OPTION FOR ONLY ONE MONTHLY PAYMENT
TO BE MADE IF THE ANNUITANT DIES PRIOR TO THE DUE DATE OF THE SECOND PAYMENT; OR
ONLY TWO IF DEATH WERE BEFORE THE THIRD, ETC.

Additional annuity options as may be agreed to by the Company are available.

2. FIXED ANNUITY OPTIONS

In lieu of any options payable from the Accumulation Fund, the contract owner or
participant may, on 30 days written notice of the Company prior to the annuity
commencement date, specify that all or part of the value of the contract, less
any applicable premium taxes not previously charged for, may be applied to
provide a fixed annuity. The annuity purchase rates will be determined from
either the rate table set forth in the contract or the Companys published rate
tables applicable on the day the first monthly payment falls due, whichever is
more favorable to the annuitant. A fixed annuity is payable from the Companys
general assets and does not participate in the investment experience of the
Accumulation Fund.

3. PROVISIONS AFFECTING ANNUITY BENEFIT PAYMENTS

If the initial monthly annuity payment would be less than $25, payments shall be
made at less frequent intervals or the values of the participants interest shall
be distributed in a lump sum as selected by the contract owner or participant.

G. PAYMENTS AT DEATH

If an annuitant dies prior to the annuity commencement date, the redemption
value of the contract will be payable to the beneficiary named in the contract.
If the redemption value as of the valuation following the date of death is less
than the total amount of purchase payments made adjusted for partial withdrawals
or redemptions, the Company will also pay a death benefit from its general
assets equal to the difference between the adjusted purchase payments and the
redemption value.

At the death of the annuitant after the annuity has commenced, if no other
provision for settlement is applicable, the amount payable, if any, will be
determined as of the valuation following the date of election, which may be made
within 60 days of the date of death by the beneficiary and paid in one sum to
the beneficiary on receipt of acceptable proof of death by the Company at its
Home Office. The beneficiary may, within 60 days following such death, elect in
lieu of a lump sum payment to receive annuity payments subject to the provisions
of the contract as to minimum amounts and time of election in accordance with
Option I or IV or elect to have the amount payable, if any, remain in the
Accumulation Fund to the credit of the beneficiary. Payment options in lieu of
lump

13
<PAGE>
sum payment shall not be available to any estate, fiduciary, corporation,
partnership or association without the consent of the Company. A BENEFICIARY
ENTITLED TO RECEIVE PAYMENTS NOT BASED ON LIFE CONTINGENCIES MAY ELECT A SINGLE
SUM PAYMENT EQUAL TO THE VALUE OF THE CONTRACT.

H. EARLY OR DEFERRED COMMENCEMENT DATES

The contract provides for monthly annuity benefit payments beginning on a
selected annuity commencement date. However, upon written request to the
Company, the contract owner or participant may change this date by electing a
prior annuity commencement date or, with the Company's consent, a later annuity
commencement date.

I. REDEMPTION

The redemption value of any contract on any date prior to the annuity
commencement date is the product of the number of accumulation units credited to
the contract multiplied by the value of an accumulation unit as the valuation
next following receipt of the written request for redemption at the Home Office
of the Company. The contract owner or participant may redeem his contract in
whole or in part at any time prior to the annuity commencement date for an
amount not exceeding its redemption value provided that the value of the
contract following any partial redemption shall at least equal the minimum
initial payment required to purchase such contract. The Company reserves the
right to require the surrender of the variable annuity contract upon its
termination.

Payment for any redemption will be made within 7 days following receipt of the
request at the Home Office of the Company. The right of redemption may be
suspended or the date of payment postponed (a) for any period (i) during which
the New York Stock Exchange is "closed" for other than weekends or holidays or
(ii) during which trading on the New York Stock Exchange is restricted; (b) for
any period during which an emergency exists as a result of which (i) disposal of
securities of the Accumulation Fund is not reasonably practical or (ii) it is
not reasonably practical for the Accumulation Fund to clearly determine the
value of its net assets; or (c) for such other period as the Securities and
Exchange Commission by order permits for the protection of the contract owners.

J. VOTING RIGHTS

Individual Contract owners and participants in Group Contracts described in this
Prospectus (whether prior to or after the annuity commencement date) will be
entitled to vote at meetings of the Accumulation Fund with respect to (i) any
change in fundamental investment or other policies of the Accumulation Fund
requiring approval of interests therein, (ii) approval of the Investment
Advisory Agreement; (iii) election of the members of Board of Managers of the
Accumulation Fund (iv) ratification of an independent certified public
accountant for the Accumulation Fund; and (v) any other business which may
properly come before the meeting.

The number of votes to which a contract owner or participant is entitled is
equal to the number of variable accumulation units credited to his contract or
certificate as of an evaluation not earlier than 120 days nor later than 30 days
prior to the meeting as selected by the Board of Managers. Persons with a voting
interest will be given written notice of the meeting and of the number of votes
to which such person is entitled. Voting may be in person or by proxy. The Home
Office and Agency retirement plans of the Paul Revere Life Insurance Company
held a voting interest of 36% of the total vote as of December 31, 1996.

K. MISCELLANEOUS PROVISIONS

1. OWNERSHIP RIGHTS AND LIMITATIONS

During the lifetime of the annuitant, the contract owner or participant may,
subject to the rights of any designated irrevocable beneficiary or any assignee,
exercise any rights and enjoy any privileges granted by the contract including
the right to designate, change or revoke any beneficiary nomination and to
designate a new contract owner. Any change of beneficiary or ownership or
assignment of the contract or of any benefit under it shall not be binding upon
the Company unless filed at its Home Office.

The Company may rely upon the correctness of information, notice and other
material furnished it by the contract owner or participant including any
determination of classification of any party thereto. The contract owner shall
in no event be considered an agent of the Company for any purposes under these
contracts.

To the extent permitted by law, no annuitant, contingent annuitant, beneficiary
or participant shall have the right to assign, alienate, encumber, anticipate or
commute any

14
<PAGE>
benefit or payment under the contract and no payment shall be subject by
attachment or otherwise to claims of creditors of any contract owner,
participant, annuitant, a secondary annuitant or beneficiary.

2. TRANSFER AND EXCHANGE PRIVILEGES

Once each calendar year a contract owner (except under a Group Contract) may
direct the Company to transfer all or a portion of a variable accumulation value
to the general assets of the Company to provide fixed accumulation value, or all
or a portion of any fixed accumulation to the variable accumulation value of the
contract. The transfer will be made without charge to the contract owner and
will be effected at current value at the valuation next following the receipt of
the request in the Home Office of the Company. The privileges of exchange and
transfer may be discontinued or modified at any time by the Company.

3. SPLITTING UNITS

The Company reserves the right to split the value of an accumulation unit, an
annuity unit, or both, if such action is deemed to be in the best interest of
the contract owner, annuitant and the Company. In effecting any split of unit
value, strict equity will be preserved and the split will have no material
effect on the benefits, provisions, or investment return of the contract owner,
participant, annuitant, beneficiary or to the Company. A split may be effected
to either increase or decrease the number of units.

4. ADJUSTMENTS

The contract owners, participants, annuitants, contingent annuitants and
beneficiaries are required to furnish all information and evidence which the
Company may reasonably require in order to administer the contract. If the age,
sex or other relevant facts with respect to any participant, annuitant,
contingent or beneficiary are misstated, the amount of any benefit payable shall
be payable on the basis of correct information. Any underpayment by the Company
will be paid in full with the next payment due following the determination of
the true facts and any overpayment may be deducted with interest at the rate of
5% per annum for any amounts payable thereafter or charged to the person
overpaid or his representative. The Company may require proof of age before
making any annuity payments and reserves the right to require evidence
satisfactory to it that the annuitant is living on the date on which any annuity
payment is due.

5. EXPERIENCE CREDITS - GROUP CONTRACTS

Experience credits may be allowed on Group Contracts as of any contract
anniversary in accordance with the experience credit plan of the Company in
force at the time. Any experience credits allowed will be credited or applied in
accordance with plan provisions. In no event will experience credits reduce the
number of accumulation units credited to the contract or any participant in the
Accumulation Fund. The granting of experience credits is at the sole discretion
and expense of the Company and it is not obligated to grant such credits.
Experience credits will not be available under Individual Contracts.

For each of the last three fiscal years ended December 31, 1996, no experience
credits have been granted.

6. MODIFICATION OF GROUP CONTRACTS

The Group Contract may be modified in any respect by written agreement between
the contract owner and the Company so long as such modification does not reduce
or take away accumulation value credited to a participant or any annuity
previously provided under the contract. No such modification by the Company will
modify the annuity purchase rates with respect to any accumulation value
credited to the contract unless the modification is for the purpose of
conforming the contract to requirements of the IRC.

PRIOR CONTRACTS

A. FLEXIBLE PAYMENT CONTRACTS ISSUED PRIOR TO
JUNE 1, 1977

The following contract provisions shall remain in effect for contracts issued
prior to June 1, 1977 and shall not apply to contracts issued after that date.

15
<PAGE>
The charge for sales and administration is based upon the aggregate amount of
all purchase payments made under the contract, including payments then being
made, in accordance with the following:

<TABLE>
<CAPTION>
ADMIN-
PURCHASE TOTAL SALES ISTRATIVE
PAYMENTS CHARGES CHARGES CHARGES
<S> <C> <C> <C> <C>
-----------------------------------------------------
First $ 5,000 8.0% 5.5% 2.5%
Next 5,000 7.5 5.0 2.5
Next 5,000 7.0 4.5 2.5
Next 5,000 6.5 4.0 2.5
Next 5,000 6.0 * 3.5 2.5*
Next 25,000 5.0 * 2.5 2.5*
Next 50,000 4.0 * 1.5 2.5*
Over 100,000 2.0 * 1.25 0.75*
</TABLE>

*Maximum administrative charge deducted from one purchase payment is $500.

Total purchase payments in force under Individual Flexible Purchase Payment
Annuity Contracts issued by the Insurance Company and owned by contract owner,
his spouse or his children under age 21 years are combined for the purpose of
determining the aggregate amount of purchase payments.

Contracts issued prior to June 1, 1977 shall not be subject to the $1 collection
fee assessed against each purchase payment.

B. GROUP CONTRACTS ISSUED PRIOR TO JUNE 1, 1977

The following provisions shall remain in effect for all Group Contracts issued
prior to June 1, 1977 and shall not apply to such contracts after that date.

The charge for sales and administration will be 6% of each purchase payment,
3.5% representing the sales charge and 2.5% the administration charge.

A participant may request transfer of the accumulation value credited to any
other Group Contract issued by the Company under which the participant also
qualifies as a participant or to an Individual Contract issued by the Company,
in either case without charge.

Contracts issued prior to June 1, 1977 shall not be subject to the $1 collection
fee assessed against each purchase payment.

C. GROUP DEPOSIT ADMINISTRATION VARIABLE
ANNUITY CONTRACTS

Prior to 1984, the Company issued Group Deposit Administration Variable Annuity
Contracts which were issued as master group contracts to employers or trustees
to cover all present and future participants under a plan. The basic features of
these contracts were substantially the same as those outlined for contracts in
this Prospectus.

Certain of these contracts remain in force and purchase payments are continuing
to be received in connection therewith.

Such contracts issued between June 1, 1980 and January 1, 1984 were subject to a
sales charge based on the aggregate amount of all purchase payments made under
the contract including the payment then being made in accordance with the
following table.

<TABLE>
<CAPTION>
PURCHASE SALES
PAYMENTS CHARGES
<S> <C> <C>
-------------------------
First $ 15,000 5.0%
Next 10,000 3.5
Next 25,000 2.5
Over 50,000 2.0
</TABLE>

Contracts issued between June 1, 1977 and June 1, 1980 were subject to one of
two sets of sales charges. Those contracts where the Insurance Company provided
service functions including but not limited to assistance in initial
establishment of employee benefit plan, plan design, employee booklet
preparation, actual evaluation, tax reporting and individual record keeping were
subject to the following sales charges:

<TABLE>
<CAPTION>
PURCHASE SALES
PAYMENTS CHARGES
<S> <C> <C>
-------------------------
First $ 15,000 7.5%
Next 10,000 6.0
Next 25,000 5.0
Next 50,000 4.0
Over 100,000 2.0
</TABLE>

Contracts to which the Company provided no service functions were subject to the
same sales charges as applied to contracts issued between June 1, 1980 and
January 1, 1984.

Contracts issued prior to June 1, 1977 were, and continue to be, subject to
sales charges as shown below except

16
<PAGE>
where the sales charges of the later contracts are more favorable to the
contract owner. In such cases the more favorable sales charge is made.

*The maximum administrative charge deducted from one purchase payment is $500.

Only contracts issued after June 1, 1977 are subject to a collection fee, which
is currently $1. (See Collection Fee, page 9.)

The Company reserves the right to modify these contracts in any respect on the
10th or subsequent contract anniversary including the right to increase sales
and administrative charges or annuity purchase rates as to payments received
subsequent to such modification.

FIXED ACCUMULATION

Individual Variable Annuity Contracts described in this Prospectus have a fixed
accumulation provision which if selected by the contract owner permits an
accumulation at a fixed current rate of interest. This rate is set from time to
time for a specific period. The interest rate credited will never be less than
3 1/2%. Accumulations under the fixed accumulation provision of these annuity
contracts become part of the general assets of the Company which support
insurance and obligations generally. Because of exemptive and exclusionary
provisions, interest in the general assets have not been registered under the
Securities Act of 1933 ("1933 Act") nor are the general assets of the Company
registered as an investment company under the 1940 Act. Accordingly neither the
general assets nor any assets therein are generally subject to the provisions of
the 1933 or 1940 Acts. Disclosure regarding the fixed portion of the annuity
contracts and the general assets, however, may be subject to certain generally
applicable provisions of Federal Securities Law related to the accuracy and
completeness of the statements made in prospectuses.

FEDERAL TAX STATUS

INTRODUCTION

The variable annuity contracts described in this Prospectus are designed for use
in connection with retirement plans that may or may not be qualified plans under
Section 401, 403, and 408 of the IRC. The ultimate effect of federal income tax
on variable accumulation value, on the annuity payments, and on the economic
benefit to the owner, participant, annuitant, payee or the beneficiary depends
on the Company's tax status, upon the type of retirement plan for which the
contract was purchased and upon the tax and employment status of the individual
concerned. The discussion contained herein is general in nature, is based upon
the Company's understanding of current federal income tax law (including
recently enacted amendments), and is not intended as tax advise. Any person
concerned with these tax implications should consult a competent tax advisor.

TAXATION OF ANNUITIES IN GENERAL

Section 72 of the IRC governs taxation of annuities in general. No taxes are
imposed on increases in value of the variable annuity contract until
distribution occurs as either annuity payments under an annuity option elected
or in the form of a cash withdrawal or lump sum payment prior to the annuity
commencement date, except where the variable annuity contract is owned by a
person who is not a natural person (e.g. corporation). In such cases, the income
of the contract is treated as ordinary income received or accrued by the owner
during that taxable year (See IRC Section72 (u)(l)). Section 72 of the IRC has
been amended by the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"),
the Tax Reform Act of 1984 ("The 1984 Act"), the Tax Reform Act of 1986
("TRA-86"), and more recently the Technical and Miscellaneous Revenue Act of
1988 ("TAMRA"), the Omnibus Budget Reconciliation Act of 1989 ("OBRA") and the
Revenue Recognition Act of 1990. The following discussion of annuity taxation
applies only to contributions and attributable earnings made to contracts after
August 13, 1982 as affected by TEFRA, the 1984 Act, TRA-86, TAMRA, OBRA and the
Revenue Recognition Act of 1990. If an owner or participant has made

17
<PAGE>
contributions before August 14, 1982 to another annuity contract and exchanges
that contract for a variable annuity contract offered by this Prospectus, then
different tax treatment may apply to contributions (and attributable earnings)
made before August 14, 1982.

In the case of a non-qualified variable annuity contract (Flexible or Single) a
partial cash withdrawal (i.e., a withdrawal of less than the entire value of the
contract) or if the annuity contract is assigned or pledged as collateral for a
loan, the amount of the loan or withdrawal will be treated as taxable income
until all amounts in excess of cost basis are accounted for. In the case of a
qualified contract, the portion of the distribution which bears the same ratio
to the total distribution as the investment in the contract bears to the total
value of the accrued benefit as of the date of the distribution, is excludable
from gross income. In the case of most qualified contracts, however, the cost
basis of the employee beneficiary will be zero and distributions prior to the
annuity commencement date will therefore be taxable in full. The taxable portion
of a withdrawal or lump sum payment prior to the annuity commencement date is
subject to taxes as ordinary income. In case of payments after the annuity
commencement date under an annuity option, a portion of each payment, generally,
is taxable as ordinary income. The taxable portion is determined by applying to
each payment an "exclusion ratio" which is the ratio the cost basis in the
contract bears to the expected return on the contract. The amount in excess of
the "exclusion amount" is taxable. If the owner recovers his entire cost basis
during the term of annuity payments, then the "exclusion ratio" will no longer
apply and the whole annuity payment will be taxable. In the case of Flexible and
Single Contracts issued on a non-qualified basis, taxable cash withdrawals and
lump sum payments will be subject to a 10% penalty except when made under
certain circumstances. This 10% penalty also affects certain annuity payments.
This penalty will not apply to distributions which are: (a) made to an owner
after the owner reaches 59 1/2; (b) made to a beneficiary or the estate of an
annuitant upon death of the annuitant; (c) attributable to owners becoming
disabled so as to be unable to engage in any substantial gainful occupation or
activity by reason of any medically determinable mental or physical impairment
which can be expected to result in death or to be of long, continuing and
indefinite duration; (d) allocable to purchase payments made before August 14,
1982; (e) made from a qualified pension plan; (f) one in a series of
substantially equal periodic payments made for the life of the annuitant or the
joint lives of that annuitant and his beneficiary; (g) distributions under an
immediate variable annuity contract; or (h) which is purchased by an employer
upon termination of a qualified plan and held by the employer until such time as
the employee separates from service.

In addition, contracts will not be treated as annuity contracts for purposes of
section 72 unless the contract provides (a) that if the contract owner dies on
or after the annuity starting date but prior to the time before the entire
interest in the contract has been distributed the remaining portion of the
interest must be distributed at least as rapidly as under the method of
distribution in effect at the time of the contract owners death; and (b) if the
contract owner dies prior to the annuity commencement date the entire interest
must be (i) distributed within five years after the death of the owner or (ii)
distributed as annuity payment over the life of a designated beneficiary (or
over a period that does not extend beyond the life expectancy of a designated
beneficiary) and such distribution begins within one year of the contract owners
death. However, the contract may be continued in the name of the spouse of the
contract owner.

THE COMPANY BELIEVES THAT THE CONTRACTS DESCRIBED IN THIS PROSPECTUS MEET THESE
REQUIREMENTS.

Withholding for federal income taxes on some distributions may be required
unless the recipient elects not to have such amounts withheld and properly
notifies the Company of that election.

QUALIFIED PLANS

The variable annuity contracts may be used with several types of qualified
plans. The tax rules applicable to participants in such qualified plans vary
according to the type of plan and terms and conditions of the plan itself.
Purchasers of variable annuity contracts for use with any qualified plan should
seek competent legal and tax advice regarding the suitability of the contracts.

A. SECTION 403(B) PLANS

Under Section 403(b) of the IRC payments made by public school systems and
certain tax exempt organizations to

18
<PAGE>
purchase annuity contracts for their employees are excludable from the gross
income of the employee subject to certain limitations. However, such payments
may be subject to FICA (Social Security) taxes.

B. INDIVIDUAL RETIREMENT ANNUITIES

Sections 219 and 408 of the IRC permit individuals or their employers to
contribute to an individual retirement program known as "Individual Retirement
Annuity" or "IRA". IRA's are subject to limitations on the amount which may be
contributed and the time when distributions may commence. In addition,
distribution from certain other types of qualified plans may be placed into an
IRA on a tax deferred basis.

C. CORPORATE PENSION AND PROFIT SHARING PLANS

Sections 401(a) and 403(a) of the IRC permit corporate employers to establish
various types of plans for employees. Such retirement plans may permit the
purchase of a variable annuity contract to provide benefits under the plans.

D. H.R.-10 PLANS

The Self-Employed Individual Tax Retirement Act of 1962 as amended, commonly
referred to as "H.R.-10" permits self- employed individuals to establish tax
qualified plans for themselves and their employees. These plans are limited by
law to maximum permissible contribution, distribution dates and
non-forfeitability of interest. In order to establish such a plan, a plan
document, usually in the form approved in advance by the Internal Revenue
Service, is adopted and implemented by the employer.

CHANGES IN OPERATION OF
THE SEPARATE ACCOUNT

The Company reserves the right, subject to compliance with applicable law, (1)
to operate the Separate Account as a management investment company under the
1940 Act or in any other form permitted by law, (2) to deregister the Separate
Account under the 1940 Act in accordance with the requirements of the 1940 Act
and (3) to substitute the shares of any other registered investment company for
the Fund shares held by the Separate Account, in the event that Fund shares are
unavailable for Separate Account investment, or if the Company shall determine
that further investment in such fund shares is inappropriate in view of the
purpose of the Separate Account. In no event will the changes described above be
made without notice to contract owners in accordance with the 1940 Act.

The company reserves the right, subject to compliance with applicable law, to
change the name of the Separate Account.

LEGAL PROCEEDINGS

There are no material legal proceedings pending to which the Company or the
Accumulation Fund is a party or of which property of either of them is subject.

19
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

General Information and History of the Company
and the Accumulation Fund

Investment Objective and Policies

Management:

Board of Managers of the Accumulation Fund
Directors and Principal Officers of the Company
Remuneration of the Board of Managers
Remuneration of the Directors and Principal
Officers of the Company
Election of the Board of Managers

Investment Advisory Services:
Investment Advisory Agreement
Sales and Administrative Services Agreement
Investment Sub-Advisory Agreement
Ownership and Control

Brokerage Allocation

Underwriters

Purchase and Pricing of Contracts

Annuity Payments

Report of Independent Auditors

Financial Statements of the Contract
Accumulation Fund

Report of Independent Auditors

Financial Statements of The Paul Revere
Variable Annuity Insurance Company

20
<PAGE>
- --------------------------------------------------------------------------------
THE

PAUL REVERE
VARIABLE ANNUITY
CONTRACT ACCUMULATION FUND
PROSPECTUS

- "LEVEL CHARGE" VARIABLE ANNUITY
CONTRACTS

- INDIVIDUAL VARIABLE ANNUITY
CONTRACTS

- GROUP
VARIABLE
ANNUITY
CONTRACTS

[LOGO]

- --------------------------------------------------------------------------------
MAY 1, 1997 -REGISTERED TRADEMARK-

WORCESTER, MASSACHUSETTS

508-799-4441

<PAGE>
- --------------------------------------------------------------------------------

[LOGO]

- --------------------------------------------------------------------------------
-REGISTERED TRADEMARK-

WORCESTER, MA 01608

FORM 5373-96
<PAGE>
- --------------------------------------------------------------------------------
THE

PAUL REVERE
VARIABLE ANNUITY
CONTRACT ACCUMULATION FUND
STATEMENT OF
ADDITIONAL INFORMATION

(TO BE USED WITH PROSPECTUS, MAY, 1, 1997)

- "LEVEL CHARGE" VARIABLE ANNUITY
CONTRACTS

- INDIVIDUAL VARIABLE ANNUITY
CONTRACTS

- GROUP
VARIABLE
ANNUITY
CONTRACTS

[LOGO]

- --------------------------------------------------------------------------------
MAY 1, 1997 -REGISTERED TRADEMARK-

WORCESTER, MASSACHUSETTS

508-799-4441
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TO BE USED WITH MAY 1, 1997 PROSPECTUS
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND
VARIABLE ANNUITY CONTRACTS
Sold By
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
Worcester, Massachusetts 01608 508-799-4441

This Statement of Additional Information should be used to supplement
information provided by the May 1, 1997 Prospectus, which describes Variable
Annuity Contracts ("Contracts") offered by The Paul Revere Variable Annuity
Insurance Company ("Company" or "PRV").

This Statement of Additional Information is not a Prospectus. Please read the
Prospectus carefully before purchasing any of the contracts offered by the
Company. The Statement of Additional Information should be read with the
Prospectus. The Prospectus sets forth information about the contracts and the
Paul Revere Variable Annuity Contract Accumulation Fund ("Accumulation Fund" or
"Fund") that a prospective investor ought to know before investing. The
Prospectus may be obtained, without charge, upon written or oral request
received by the Insurance Company at its Home Office located at 18 Chestnut
Street, Worcester, Massachusetts 01608. Please refer to the Table of Contents
for a cross-reference index to the Prospectus.

The date of this Statement of Additional Information is May 1, 1997.
The date of the Prospectus is May 1, 1997.

1
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
General Information and History
of the Company and
the Accumulation Fund.......................... 3
Investment Objective and Policies............... 4
Management:
Board of Managers of the
Accumulation Fund........................... 5
Directors and Principal Officers
of the Company.............................. 6
Remuneration of the Board of Managers......... 8
Remuneration of the Directors
and Principal Officers of
the Company................................. 8
Election of the Board of Managers............. 8
Investment Advisory Services
Investment Advisory Agreement................. 8
Sales and Administrative
Services Agreement.......................... 9
Investment Sub-Advisory Agreement............. 9
Ownership and Control......................... 11
Brokerage Allocation............................ 11
Underwriters.................................... 12
Purchase and Pricing of Contracts............... 12
Annuity Payments................................ 13
Report of Independent Auditors.................. 14
Financial Statements of the Contract
Accumulation Fund.............................. 15
Report of Independent Auditors.................. 26
Financial Statements of The Paul Revere Variable
Annuity Insurance Company...................... 27
</TABLE>

WHERE THIS INFORMATION
CAN BE FOUND IN THE
PROSPECTUS
TABLE OF CONTENTS

<TABLE>
<S> <C>
General Information and History
of the Company and
the Accumulation Fund.......................... 3
Investment Objective and Policies............... 7
Management:
Board of Managers of the
Accumulation Fund........................... 8

Investment Advisory Services:
Investment Advisory Agreement................. 8
Sales and Administrative
Services Agreement.......................... 8
Investment Sub-Advisory Agreement............. 8
Brokerage Allocation............................ 10
Purchase and Pricing of Contracts............... 11
Annuity Payments................................ 12
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY OF
THE COMPANY AND THE
ACCUMULATION FUND

The Company serves as insurer and principal underwriter, and as investment
advisor to The Accumulation Fund. The Company was organized on August 6, 1965
under Massachusetts General Laws and is a stock life insurance company,
wholly-owned by The Paul Revere Life Insurance Company ("PRL"), a Massachusetts
corporation. Each has its principal office at 18 Chestnut Street, Worcester,
Massachusetts. The Paul Revere Life Insurance Company is wholly-owned by The
Paul Revere Corporation ("Paul Revere"), a Massachusetts corporation with its
principal office at 18 Chestnut Street, Worcester, Massachusetts. Paul Revere is
comprised of The Paul Revere Life Insurance Company, The Paul Revere Variable
Annuity Insurance Company, The Paul Revere Protective Life Insurance Company and
other non-insurance affiliates.

Paul Revere was formerly 83%-owned by Textron Inc. and 17%-owned by Textron Inc.
and 17%-owned publicly. On April 29, 1996, Paul Revere and Provident Companies,
Inc. ("Provident") announced they had signed a definitive merger agreement
pursuant to which Patriot Acquisition Corporation, a wholly owned subsidiary of
Provident would merge with and into Paul Revere with Paul Revere as the
surviving corporation. On November 6, 1996, Paul Revere and Provident announced
that they had amended and restated the merger agreement to, among other things,
extend the date as of which the parties would be entitled to terminate the
agreement and to adjust the exchange ratio to be used in determining the number
of shares of Provident common stock that Textron will receive in the transaction
(as amended, the "Merger Agreement"). The transaction closed on March 27, 1997.
Provident is a Delaware corporation with its principal office at 1 Fountain
Square, Chattanooga, Tennessee 37402.

The Accumulation Fund was organized on December 22, 1965 and is registered as a
diversified, open-end investment company under the Investment Company Act of
1940 ("1940 Act"). The Accumulation Fund is the separate account through which
the Company sets aside separate and apart from its general assets, assets
attributable to variable annuity contracts. Under Massachusetts law, regulation
of the Company by the Insurance Commissioner of Massachusetts includes
regulation of its Accumulation Fund which is not a separately incorporated
entity. The Company is subject to the laws of Massachusetts governing life
insurance through the regulation of the Massachusetts Commissioner of Insurance
("the Commissioner"). An Annual Statement in prescribed form is filed with the
Commissioner on or before March 1 of each year covering the operations of the
Company for the preceding year and its financial condition as of December 31 of
such year. Its books and assets are subject to review and examination by the
Commissioner or his agent at all times. A full examination of its operations is
conducted by the Commissioner at least once every 3 years. In addition, the
Company is subject to insurance laws and regulations of other states where it is
licensed to operate.

The Company is taxed as a life insurance company under Sub-Chapter L of the
Internal Revenue Code. Although the operations of the Accumulation Fund are
accounted for separately from other operations of the Company for purposes of
federal taxation, the Accumulation Fund is not separately taxed as a regulated
investment company or otherwise as a taxable entity separate from the Company.
Under existing federal income tax laws, the income (consisting primarily of
interest, dividends and net capital gains) of the Accumulation Fund, to the
extent that it is applied to increase reserves under variable annuity contracts,
is not taxable to the Company.

The Rules and Regulations of the Accumulation Fund provide for a five-member
Board of Managers, members being elected at annual meetings for 3-year terms. A
majority of the Board of Managers will not be "interested persons" as defined in
Section 2(a) of the 1940 Act.

Investment custodial services are provided through an agreement between the
Company and Mellon Bank, 1 Mellon Bank Center, Pittsburgh, Pennsylvania
15258-0001. The Accumulation Fund's independent certified public accountant is
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116.

A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
contracts and the Accumulation Fund discussed in the Prospectus. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in the

3
<PAGE>
Prospectus. Statements contained in the Prospectus concerning the content of the
contract and legal instruments are only summaries. For a complete statement of
the terms of these documents, reference should be made to the instruments filed
with the Commission.

The laws and regulations of the states in which the Company is licensed contain
various requirements as to the amounts of stockholder's equity which the Company
is required to maintain. The Company's statutory capital and surplus of
$72,583,484 and $66,526,066 as of December 31, 1996 and 1995, respectively, is
in compliance with the requirements of all such states. The Company is subject
to various state insurance regulatory restrictions that limit the maximum
amounts of dividends available for payment without prior approval. Under current
law, during 1997, approximately $10,131,050 will be available for payment of
dividends by the Company without state insurance regulatory approval. Dividends
in excess of this amount may only be paid with regulatory approval. Statutory
net income for 1996, 1995 and 1994 was $12,450,268, $8,948,085, and $6,686,096,
respectively. The Company declared and paid dividends to its parent, PRL, of
$8,000,000 in 1996, $8,000,000 in 1995 and $11,000,000 in 1994.

INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of both Series of the Accumulation Fund is
growth of capital. The assets of the Accumulation Fund will usually be invested
in common stocks believed to have potential for growth but may, from time to
time, be invested in other securities. When deemed necessary for defensive
purposes, the Accumulation Fund may substantially increase that portion of its
assets invested in fixed income obligations and held in cash. As the contracts
are subject to the risks associated with common stock investments and changing
economic conditions, there can be no assurance that the investment objective
will be attained. Please refer to the Prospectus for a description of all
fundamental and non-fundamental investment policies.

Fundamental investment policies may not be changed without the approval of a
majority in interest of the owners of annuity contracts to which variable
accumulation units are credited. A majority in interest of the owners of
variable annuity contracts means the vote of (a) 67% or more of the vote of the
contract owners present and entitled to vote at the meeting, if contract owners
who hold with the power to vote over 50% of the variable accumulation units
outstanding are present or represented by proxy; or (b) more than 50% of the
variable accumulation units outstanding, whichever is less. Non-fundamental
investment policies may be changed by a vote of the Board of Managers.

On December 31, 1996, the Accumulation Fund did not own any restricted
securities. If the Accumulation Fund buys restricted securities in the future,
the Board of Managers will be required to value such securities in good faith in
determining the net asset value of the Accumulation Fund. If the Accumulation
Fund sells such securities, it may be deemed an "Underwriter" (as such term is
defined in the Securities Act of 1933 and the Rules and Regulations promulgated
by the Securities and Exchange Commission thereon) with respect thereto, and
registration of such securities under the Securities Act may be required. The
Accumulation Fund will endeavor to have the issuer or some other person agree to
bear the expenses of such registration but if there is no agreement, the
Accumulation Fund might have to bear such expenses which could be substantial.
Where registration is required a considerable period may elapse between the time
when the decision may be made to sell securities and the time the Accumulation
Fund may be permitted to sell under an effective registration statement. During
such period, if adverse market conditions develop, the Accumulation Fund may not
be able to obtain as favorable a price as that prevailing at the time the
decision to sell is made.

The Company has at various times deemed it necessary for defensive purposes to
substantially increase the portion of the Fund's assets in unsecured short-term
notes, normally maturing within two weeks of the date of purchase. It is the
Fund's policy to limit purchases in corporate short-term notes to notes rated
"Prime-I" by Moody's Investors Services. The percentage of the Fund's net assets
held in short-term notes at December 31, 1996, 1995 and 1994 amounted to 0%,
5.6%, and 0%, respectively. MFS Institutional Advisors, Inc. ("MFSI"), formerly
MFS Asset Management, Inc., in its capacity as sub-advisor selects the
securities for purchase and sale by the Accumulation Fund. Changes in the
Accumulation Fund's investments are reviewed by the Board of Managers. The
aggregate portfolio turnover rates for the years 1996, 1995 and 1994 were 81%,
65%, and 64%, respectively.

4
<PAGE>
MANAGEMENT

A. BOARD OF MANAGERS OF THE ACCUMULATION FUND

The property and business of the Accumulation Fund are managed by a Board of
Managers elected by the owners of contracts to which variable accumulation units
are credited. A majority of the Accumulation Fund's five managers namely Messr.
Short and Miller and Ms. Sadowsky are not deemed to be "interested persons" of
the Accumulation Fund or the Company as defined in the Investment Company Act of
1940 ("1940 Act").

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE DURING PAST 5 YEARS

<S> <C> <C>
*John H. Budd, Chairman 58 Director, Senior Vice President, General Counsel and
18 Chestnut Street Secretary of PRV.
Worcester, Massachusetts

Gordon T. Miller, Vice 74 Retired; Former Vice President and Director of
Chairman Industrial Relations of Barry Wright Corporation,
14 Eastwood Road Newton Lower Falls, Massachusetts.
Shrewsbury, Massachusetts

*Aubrey K. Reid, Jr. 69 Retired; Director Emeritus and Former President of
18 Chestnut Street PRV and PRL.
Worcester, Massachusetts

Joan Sadowsky 66 Retired; Former Vice President of Human Resources,
142 Winifred Avenue Atlas Distributing Corporation, Auburn,
Worcester, Massachusetts Massachusetts.

William J. Short 61 President, Worcester Area Chamber of Commerce,
33 Waldo Street Worcester, Massachusetts
Worcester, Massachusetts
</TABLE>

*indicates "interested persons" as defined in the Investment Company Act of
1940.

5
<PAGE>
B. DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY

The following table shows the names, addresses, and principal occupations of all
directors and principal executive officers of the Company as of December 31,
1996.

<TABLE>
<CAPTION>
NAME AND ADDRESS AGE PRINCIPAL OCCUPATION

<S> <C> <C>
Donald E. Boggs 51 Director, Executive Vice President.
18 Chestnut St.
Worcester, MA
01608

John H. Budd 58 Director, Senior Vice President, General Counsel and
18 Chestnut St. Secretary.
Worcester, MA
01608

Gerald M. Gates 46 Director, Senior Vice President.
18 Chestnut St.
Worcester, MA
01608

M. Katherine 45 Director, Vice President.
Hessel
18 Chestnut St.
Worcester, MA
01608

J. Andrew Hilbert 38 Director, Senior Vice President, Chief Financial Officer
18 Chestnut St. and Treasurer.
Worcester, MA
01608

John D. Lemery 46 Director, Senior Vice President and Chief Investment
18 Chestnut St. Officer.
Worcester, MA
01608

Barry E. Lundquist 45 Director, Senior Vice President.
18 Chestnut St.
Worcester, MA
01608

Gary W. MacConnell 62 Director, Vice President and Chief Information Officer.
18 Chestnut St.
Worcester, MA
01608

Richard L. Mucci 46 Director, Executive Vice President and Chief Operating
18 Chestnut St. Officer.
Worcester, MA
01608

Bruce A. Richards 37 Senior Vice President and Chief Actuary.
18 Chestnut St.
Worcester, MA
01608

Charles E. Soule 62 Director, President.
18 Chestnut St.
Worcester, MA
01608
</TABLE>

6
<PAGE>
Effective March 27, 1997 at the time of Provident's acquisition of Paul Revere,
new directors and principal executive officers of the Company were elected, as
set forth below:

<TABLE>
<CAPTION>
NAME AND ADDRESS AGE PRINCIPAL OCCUPATION

<S> <C> <C>
William L. Armstrong 59 Chairman, Ambassador Media Corporation
1625 Broadway, Suite 780
Denver, CO 80202

William H. Bolinder 53 Member of the Corporate Executive Board, Zurich
1400 American Lane Insurance Company
Schaumburg, IL 60196

J. Harold Chandler 47 Chairman, President & CEO, Provident Companies, Inc.
1 Fountain Square
Chattanooga, TN 37402

Steven M. Gluckstern 45 Member of the Corporate Executive Board, Zurich
1 Chase Manhattan Plaza Insurance Company
New York, NY 10005

Charlotte M. Heffner 59 Trustee, The Maclellan Foundation
1 Fountain Square
Chattanooga, TN 37402

Hugh B. Jacks 62 President, Potential Enterprises
101 Carnoustie
Shoal Creek, AL 35242

William B. Johnson 59 Chairman & Chief Executive Officer, The Ritz-Carlton
3414 Peachtree Road, NE Hotel Company, LLC
Suite 300
Atlanta, GA 30326

Hugh O. Maclellan, Jr. 57 President, The Maclellan Foundation
1 Fountain Square
Chattanooga, TN 37402

A.S. MacMillan 52 Chief Executive Officer, Team Resources, Inc.
River Edge One, Suite 425
5500 Interstate North
Parkway, NW
Atlanta, GA 30328-4604

C. William Pollard 58 Chairman, the ServiceMaster Company
One ServiceMaster Way
Downers Grove, IL 60515

Scott L. Probasco, Jr. 68 Director and Chairman of the Executive Committee,
736 Market Street, 16th floor SunTrust Banks, Inc.
Chattanooga, TN 37402
</TABLE>

7
<PAGE>
<TABLE>
<S> <C> <C>
Steven S Reinemund 48 Chairman and Chief Executive Officer, Frito-Lay, Inc.
7701 Legacy Drive
Plano, TX 75024

Burton E. Sorensen 67 Retired Chairman and Chief Executive Officer, Ford
2 Wall Street Securities Corporation
New York, NY 10005

Thomas R. Watjen 42 Vice Chairman and Chief Financial Officer, Provident
1 Fountain Square Companies, Inc.
Chattanooga, TN 37402
</TABLE>

C. REMUNERATION OF THE BOARD OF MANAGERS

The Accumulation Fund is responsible for payment of fees and expenses of the
members of the Board of Managers as well as expenses for audit of the
Accumulation Fund. All other expenses or services relative to the operation of
the Accumulation Fund are paid for by the Company for which it deducts certain
amounts from purchase payments and from the Accumulation Fund (See Prospectus,
page 8). Members of the Board of Managers who are also active or retired
officers, directors or employees of the Company do not receive any fees from the
Accumulation Fund. These members are deemed to be interested persons and receive
direct remuneration or an indirect benefit as active or retired officers and/or
stockholders of the Company. The total aggregate remuneration paid by the
Accumulation Fund to all members of the Board of Managers for the fiscal year
ended December 31, 1996 was $12,600. This amount represents consideration paid
for attendance at meetings of the Board of Managers. Reimbursement for expenses
incurred may also be made if and when applicable.

D. REMUNERATION OF THE DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY

The aggregate remuneration paid in 1996 to the directors and principal officers
of the Company was $252,176. This amount includes all forms of compensation. No
officer or director of the Company individually received in 1996 direct or
indirect remuneration from the Company in excess of $62,119.

E. ELECTION OF THE BOARD OF MANAGERS

Under Article III of the Rules and Regulations of the Accumulation Fund, members
of the Board of Managers are elected at the annual meeting to serve for the term
of three years, following those whose terms are then expiring, provided that
when terms of more than two members of the Board expire in the same year, the
term of members to be elected shall be adjusted in such a manner that terms of
at least one but not more than two members shall expire in each of the next
three years.

Under the terms of the 1940 Act, the Accumulation Fund must have a Board of
Managers, not more than sixty-percent of the members of which are deemed to be
"interested persons" of the Accumulation Fund or its Investment
Advisor/Principal Underwriter as defined in the 1940 Act. Two members of the
Board of Managers whose terms continue -- namely Mr. Short and Mr. Miller -- are
not deemed to be "interested persons" as defined in the 1940 Act. Of the two
nominees for election, Mrs. Sadowsky is not deemed to be an "interested person"
as defined in the 1940 Act whereas Mr. Budd is so deemed. Of the three members
of the Board of Managers whose terms continue, Mr. Reid is deemed to be an
"interested person" by virtue of his status as active or retired officer and/or
director of the Investment Advisor.

INVESTMENT ADVISORY SERVICES

INVESTMENT ADVISORY AGREEMENT

The Company currently serves as investment advisor to the Accumulation Fund
pursuant to an Investment Advisory Agreement, which was approved by contract
owners on August 16, 1984. The agreement must be renewed each year by a majority
of the Accumulation Fund's Board of Managers who are not parties to the
agreement or not interested persons of any part to the agreement.

Under the agreement, the Company agrees to provide "investment advisory
services" to the Accumulation Fund. In that connection, it is required
specifically to provide the

8
<PAGE>
Board of Managers continuously with an investment program for its approval or
rejection and, if rejected, to submit another program for consideration.

Pursuant to the agreement, the Company is responsible for all duties related to
the investment, reinvestment and safekeeping of the assets of the Accumulation
Fund and for all expenses attributable to performing its investment advisory
services, including costs of compensating officers and employees of the Company
connected with providing investment advisory services to the Fund.

In connection with the Company's obligations under the agreement, the Company
bears the cost of all services and expenses attributable to the maintenance and
operation of the Accumulation Fund (other than costs relating to the
administration and distribution of the variable annuity contracts, which are
provided for in the current Sales and Administration Agreement for the
Accumulation Fund). These costs include, among other things: fees paid to MFSI
pursuant to the Investment Sub-Advisory Agreement between the Company and MFSI
as described below; fees required by federal and state securities regulatory
authorities and the National Association of Securities Dealers, Inc.; costs of
maintaining the books and records of the Fund; outside legal, accounting,
actuarial and other professional costs; costs of determining the net asset value
of each series of the Accumulation Fund; and other out-of-pocket expenses
relating to the Fund, including salaries, rent, postage, telephone, travel,
office equipment and stationery. All brokerage commissions and other fees
relating to purchases and sales of investments for the Accumulation Fund are
paid out of the assets of the Fund.

For its advisory services to the Fund under the agreement, the Company charges
an amount which equals, on an annual basis, 0.50% of the average daily net asset
value of each Series of the Fund. This charge is paid weekly by the Fund. At
December 31, 1996, the net asset values for each series of the Fund were
$4,939,806 (Series N) and $18,070,112 (Series Q). For the fiscal years ended
December 31, 1996, 1995 and 1994, the Company received fees under the agreement
aggregating $134,458, $191,061, and $167,704, respectively.

SALES AND ADMINISTRATIVE
SERVICES AGREEMENT

The Company also acts as principal underwriter and performs administrative
functions pursuant to a Sales and Administrative Services Agreement between the
Company and the Accumulation Fund dated February 19, 1970 and re-executed on
February 16, 1989.

Under the agreement, the Company acts as principal underwriter and performs
administrative functions relative to variable annuity contracts, receiving as
compensation the sales and administration charge deducted from purchase payments
as described in the Prospectus. The total sales and administration charges
received by the Company in 1996, 1995 and 1994 were $4,434, $4,452, and $6,529,
respectively.

The Company also received $268,915, $382,123, and $335,408 from the Accumulation
Fund during 1996, 1995 and 1994, respectively, as its charge for assuming the
mortality and expense risks under its variable annuity contracts, this
representing a charge on each valuation date of an amount which, on an annual
basis, equals 1% of the average daily net asset value of the Accumulation Fund
as permitted under the Sales and Administrative Services Agreement. At the
present time the Company believes there are no statutory or regulatory
limitations on the expenses that may be deducted from the Accumulation Fund, but
the Company assures that all expense deductions, other than for taxes, will not
exceed 2% annually based upon the average daily net asset value of the
Accumulation Fund.

The average daily net asset value of the Accumulation Fund means the sum of the
net asset value of the appropriate Series of the Accumulation Fund respectively
computed on each valuation during the period divided by the number of
valuations.

INVESTMENT SUB-ADVISORY AGREEMENT

Under the Investment Advisory Agreement between the Accumulation Fund and
Company, the Company is specifically authorized to employ one or more
sub-advisors in connection with the services to be performed and obligations to
be assumed by the Company. Pursuant thereto, the Company entered into an
Investment Sub-Advisory Agreement ("Sub-Agreement") with Massachusetts Financial
Services Company ("MFS") which was approved by a majority of contract owners on
August 16, 1984. In 1996, this relationship was taken over by MFSI, a
wholly-owned subsidiary of MFS. The Sub-Agreement is subject to the same terms
for approval, renewal and termination as the Agreement itself.

9
<PAGE>
Under the Sub-Agreement, MFSI, subject to the supervision of the Company and the
Board of Managers, is responsible for all aspects of day-to-day management of
the investments of the Accumulation Fund. Among other things, it is required to
(i) perform research and evaluate pertinent data; (ii) provide the Board with an
investment program for the Fund for its approval; (iii) make investment
decisions and carry them out by placing orders for the execution of portfolio
transactions consistent with the investment policies of the Fund as set forth in
its current Prospectus; (iv) report to the Board of Managers at least quarterly
with respect to the implementation of the approved investment plan; (v) transmit
to the Company information necessary for the Company to perform its
responsibilities with respect to the Fund; (vi) create and maintain brokerage
records as required by law; and (vii) provide the office space, material and
personnel necessary to fulfill its obligations under the Sub-Agreement and to
pay all expenses incurred by it in connection with its activities. However, MFSI
is not required to perform services or bear expenses related to the maintenance
and operation of the Fund. (These expenses are properly assumed by the Company
pursuant to the Agreement.)

For the services MFSI furnishes to the Company and the Accumulation Fund as
sub-advisor, the Sub-Agreement provides that the Company will pay MFSI each
month an amount which, on an annual basis, will equal 0.35% of the average daily
net assets of each Series of the Fund. In 1996, 1995 and 1994, respectively, the
Company paid MFSI a total of $94,120, $133,743, and $117,393 as provided for
under the Sub-Agreement. These payments did not affect the amount of the
advisory fees to be paid to the Company by the Accumulation Fund under the
Agreement.

MFSI, formerly Massachusetts Financial Services Company, is a Delaware
corporation with its principal offices at 500 Boylston Street, Boston,
Massachusetts 02116. MFSI, together with its parent corporation, Massachusetts
Financial Services Company and its predecessor organizations, have a history of
money management dating from 1924. MFSI is a wholly-owned subsidiary of MFS.

Since 1982, MFS has been a subsidiary of Sun Life Assurance Company of Canada
(U.S.), One Sun Life Executive Park, Wellesley Hills, Massachusetts, 02181,
which is, in turn, a wholly-owned subsidiary of Sun Life Assurance Company of
Canada, 150 King Street West, Toronto, Canada M5H 1J9.

As of December 31, 1996, MFS and its subsidiaries including MFSI, had over $52.4
billion in assets under management, which included over $7 billion in assets
managed by MFSI.

MFSI serves as investment advisor to substantial private and institutional
accounts. MFS serves as investment advisor to certain mutual fund and insurance
company separate accounts. The mutual funds in separate accounts are registered
as investment companies under the Investment Company Act of 1940. Each of the
separate accounts is established by Sun Life Assurance Company of Canada (U.S.).

The following list shows the names and addresses and principal occupations of
all directors and principal executive officers of MFSI as of December 31, 1996.

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
<S> <C>
*A. Keith Brodkin Chairman and Director of MFS and Chairman of MFSI.
*Thomas J. Cashman,
Jr. President and Director of MFSI.
*Arnold D. Scott Senior Executive Vice President, Director and Secretary of MFS and Director
of MFSI.
*Jeffrey L. Shames President and Director of MFS and Director of MFSI.
*Address is:
500 Boylston Street
Boston, Massachusetts
</TABLE>

10
<PAGE>
OWNERSHIP AND CONTROL

As of December 31, 1996, the members of the Board of Managers of the
Accumulation Fund and the directors and principal officers of the Company as a
group, through their ownership of individual variable annuity contracts, owned
beneficially and of record 11,947 units, being .4% of the total. The Home Office
and the Agency retirement plans of The Paul Revere Corporation were the only
contract owners who, as of the above date, directly or indirectly owned,
controlled or held with power to vote units representing 5% or more of the total
vote. Their combined interests were represented by 959,690 units, representing
36% of the total vote.

BROKERAGE ALLOCATION

MFSI, a sub-advisor to the Company, selects the securities for purchase and sale
by the Accumulation Fund. Changes in the Accumulation Fund's investments are
reviewed by the Board of Managers.

The Company has no set formula for the distribution of brokerage business in
connection with the placing of orders for the purchase and sale of investments.
The primary consideration in placing portfolio security transactions with
broker/dealers is execution at the most favorable prices and in the most
effective manner possible.

MFSI attempts to achieve this result by selecting broker/ dealers to execute
portfolio transactions on behalf of the Accumulation Fund and its other clients
on the basis of their professional capability, the value and quality of the
brokerage services and the level of their brokerage commissions. In the case of
securities traded in the over-the-counter market (where no stated commissions
are paid but prices include a dealer's markup or markdown), MFSI normally seeks
to deal directly with the primary market makers, unless in its opinion, best
execution is available elsewhere. In the case of such securities purchased from
underwriters, the cost of such securities generally included a fixed
underwriting commission or concession. From time to time soliciting dealer fees
may be available to MFSI on the tender of Accumulation Fund portfolio securities
in so-called Tender or Exchange Offers. Such soliciting dealer fees will be, in
effect, recaptured for the Accumulation Fund by MFSI to the extent possible. At
present no other recapture agreements are in effect. Brokerage business is not
allocated based on the sale of variable annuity contracts.

Under the Sub-Advisory Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, MFSI may cause the Accumulation Fund to pay a
broker/dealer who provides brokerage and research services to the Accumulation
Fund and to MFSI, an amount of commission for effecting a securities transaction
for the Accumulation Fund in excess of the amount other broker/dealers would
have charged for the transaction, if MFSI determines in good faith that the
greater commission is reasonable in relation to the value of the brokerage
research services provided by the executing broker/dealer viewed in terms of
either a particular transaction or MFSI's overall responsibility to the
Accumulation Fund or to its other clients. Not all such services are useful or
of value in advising the Accumulation Fund.

The term "broker and research services" includes advice as to the value of the
securities, the advisability of investing in, purchasing or selling securities
and the availability of securities or of purchasers or sellers of securities.

It also includes furnishing analysis reports and reports concerning issues,
industries, securities, economic factors, trends, portfolio strategies,
performance of accounts, as well as effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.

Although commissions paid on every transaction will, in the judgment of MFSI, be
reasonable in relation to the value of the brokerage services provided,
commissions exceeding those which another broker/dealer might charge may be paid
to broker/dealers who were selected to execute transactions on behalf of the
Accumulation Fund and MFSI's other clients.

This could occur, in part, when a broker/dealer provides advice as to the
availability of securities or purchasers or sellers of securities and services
in effecting securities transactions and performing functions incidental thereto
such as clearance and settlement.

Broker/dealers may be willing to furnish statistical research and other factual
information or services ("research") to MFSI for no consideration other than
brokerage and underwriting commissions. Securities may be bought or sold

11
<PAGE>
through such broker/dealers but, at present, unless otherwise directed by the
Accumulation Fund, a commission higher than one charged, will not be paid to
such a firm solely because it provided such "research" to MFSI.

MFSI's investment management personnel attempt to evaluate the quality of
"research" provided by brokers. Results of this effort are sometimes used by
MFSI as a consideration in selection of brokers to execute portfolio
transactions. However, MFSI is unable to quantify the amount of commission which
was paid as a result of such "research" because a substantial number of
transactions were effected through brokers who provide "research" but were
selected principally because of their execution capabilities.

In certain instances, there may be securities which are suitable for the
Accumulation Fund's portfolio as well as that of one or more of the other
clients of MFSI. Investment decisions for the Accumulation Fund and for MFSI's
other clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by or bought or sold for other clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling that same security. Some simultaneous
transactions are unavoidable because several clients have similar investment
objectives. When two or more clients are simultaneously engaged in the purchase
or sale of the same security, the securities are allocated among clients in a
manner believed to be equitable to each. It is recognized in some cases this
system could have a detrimental effect on the price or volume of the securities
as far as the Accumulation Fund is concerned. In other cases, it is believed
that the Accumulation Fund's ability to participate in volume transactions will
produce better transaction results for the Accumulation Fund.

Brokerage commissions paid in the years ended December 31, 1996, 1995 and 1994
amounted to $56,322, $62,318, and $49,933, respectively. Brokerage commissions
were paid to 63 brokers in 1996. No brokerage commission was paid to any broker
who was or is an affiliated person of the Company, the Accumulation Fund or
MFSI.

UNDERWRITERS

The Company is the principal underwriter for contracts offered by the
Prospectus. The contracts offered by the Prospectus are available at any time
during the year covered by the Prospectus. The Company did not receive any
underwriting commissions for the sale of these contracts.

PURCHASE AND PRICING
OF CONTRACTS

The contracts offered by the Prospectus will only be sold by registered
representatives of the Company who are also licensed with the State Insurance
Department for the sale of such contracts. Purchase payments are due and payable
by the contract owner at the Home Office at a time required by either the
contract or any other basis mutually agreeable by the contract owner and the
Company. The contract owner is to furnish any information that may be required
by the Company as reasonably necessary for the proper crediting of the purchase
payment.

Please refer to the Prospectus for a description of each contract offered by the
Prospectus (Prospectus, page 11) and the amount of any sales charge and
collection fee assessed against any purchase payment (Prospectus, page 8).

The balance of a purchase payment, after deduction of the sales charge, any
applicable premium tax charge and the collection fee will be applied to provide
accumulation units to the credit of the contract. Variable accumulation units
will be credited on the basis of the value of a variable accumulation unit as of
the valuation date next following its receipt of the purchase payment by the
Company at its Home Office.

The Flexible Purchase Payment Variable Annuity Contract ("Flexible") provides
for an annuity to begin at some future date with voluntary purchase payments in
addition to the initial purchase payment being permitted at the discretion of
the Company, but with certain limits on the exercise of such discretion where
the contract qualifies for special tax treatment under the Internal Revenue
Code.

The Single Payment Variable Annuity Contract ("Single") provides for a purchase
of the contract in one sum at the time the contract is issued and for an annuity
subsequent to the issue date of the contract.

Both contracts permit accumulation on a full variable, fully fixed or combined
variable and fixed basis.

12
<PAGE>
The Individual "Level Charge" Variable Annuity Contract ("Level") is designed
primarily to be issued to an individual who desires to fund a retirement plan
involving a reduction of salary which qualifies for tax-deferred treatment under
the Internal Revenue Code. This contract permits accumulation on a fully
variable, fully fixed or combined variable and fixed basis.

The Group Variable Annuity Contract ("Group") is designed primarily to be issued
as a master group contract to an employer to fund a plan involving reduction of
salary which qualifies for tax-deferred treatment under the Internal Revenue
Code, or plans involving allocation of accumulation values to participants. A
participant has at all times a fully vested interest in the value of his
certificate. This contract provides for variable accumulation only.

Please refer to the Prospectus for a detailed explanation as to how the
accumulation unit is valued (Prospectus, page 12).

ANNUITY PAYMENTS

The number of annuity units determining each monthly annuity payment is equal to
the value applied to annuity payments less any applicable premium tax multiplied
by the applicable annuity purchase rates and divided by the annuity unit value
when the number is being determined. The number of annuity units will remain
fixed unless the units are split as described in the Prospectus (Prospectus,
page 15).

Each monthly annuity payment will be equal to the number of annuity units as
determined above multiplied by the value of an annuity unit determined in the
daily valuation two weeks preceding the date on which payments are due but in no
event as of the time preceding the effective date of the contract. The amount of
each variable annuity payment will vary from month to month depending on the
investment experience of the appropriate Series of the Accumulation Fund but the
Company guarantees the amount of each payment will not be affected by variations
in mortality experience among annuitants or by expenses incurred in excess of
expense assumptions (see Prospectus, page 10).

ILLUSTRATION OF VARIABLE
ANNUITY PAYMENT CALCULATION

<TABLE>
<S> <C>
Value applied to provide an
annuity: $47,750
MULTIPLIED BY
Annuity purchase rate $6.40 per
(from tables): $1,000
EQUALS
Tabular annuity amount: $305.60
DIVIDED BY
Annuity unit value on the
valuation when the number of
annuity units is determined: $0.522602
EQUALS
Number of annuity units
determining each monthly
annuity payment: 584.766
MULTIPLIED BY
Annuity unit value for valuation
two weeks preceding date
annuity benefit payable: $0.533170
EQUALS
Annuity payment for month in
dollars: $311.78
</TABLE>

The annuity payment due for each succeeding month is computed in the same manner
using the fixed figure determined for the number of annuity units (e.g. 584.766)
and the then applicable annuity unit value for the valuation two weeks preceding
the date the annuity benefit is payable.

13
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Owners of Variable Annuity Contracts of
The Paul Revere Variable Annuity Insurance Company and
the Board of Managers of
The Paul Revere Variable Annuity Contract Accumulation Fund of
The Paul Revere Variable Annuity Insurance Company:

We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of The Paul Revere Variable Annuity Contract
Accumulation Fund (comprising the Qualified and Non-Qualified Portfolios) as of
December 31, 1996, the related statement of operations for the year then ended
and the statement of changes in net assets for each of the two years in the
period then ended, and the selected per unit data and ratios for each of the
five years in the period then ended. These financial statements and per unit
data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and per
unit data and ratios based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per unit data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and selected per unit data and ratios
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting The Paul Revere
Variable Annuity Contract Accumulation Fund at December 31, 1996, the results of
their operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended, and the selected per unit data
and ratios for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.

Ernst & Young LLP

Boston, Massachusetts
February 14, 1997

14
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND
STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
----------------------------
SERIES Q SERIES N
(QUALIFIED) (NON-QUALIFIED)
----------- ---------------
<S> <C> <C>
ASSETS
Investments in securities of unaffiliated companies at market value
(Cost: Series Q $13,796,376, Series N $3,738,252)
(see Statement of Investments)............................................ $17,610,584 $ 4,763,593
Cash....................................................................... 532,088 148,183
Dividends and interest receivable.......................................... 28,314 7,312
Receivable from securities sold............................................ 56,721 7,563
Receivable from The Paul Revere Variable Annuity Insurance Company......... -- 23,252
----------- ---------------
Total assets.......................................................... 18,227,707 4,949,903
----------- ---------------
LIABILITIES
Surrenders payable......................................................... 6,566 --
Payable for securities purchased........................................... 11,612 5,806
Payable to The Paul Revere Variable Annuity Insurance Company.............. 112,172 --
Other...................................................................... 27,245 4,291
----------- ---------------
Total liabilities.................................................... 157,595 10,097
----------- ---------------
TOTAL NET ASSETS........................................................... $18,070,112 $ 4,939,806
----------- ---------------
----------- ---------------
CONTRACT OWNERS' EQUITY
Deferred contracts terminable by owner..................................... $14,863,418 $ 3,400,213
Currently payable contracts................................................ 3,206,694 1,539,593
----------- ---------------
Total net assets..................................................... $18,070,112 $ 4,939,806
----------- ---------------
----------- ---------------
ACCUMULATION UNITS OUTSTANDING............................................. 2,093,030 565,935
----------- ---------------
----------- ---------------
NET ASSET VALUE PER ACCUMULATION UNIT...................................... $ 8.633 $ 8.729
----------- ---------------
----------- ---------------
</TABLE>

See accompanying notes to financial statements.

15
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND
STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------
SERIES N
SERIES Q (QUALIFIED) (NON-QUALIFIED)
------------------------ ----------------------
INCREASE/DECREASE IN NET ASSETS 1996 1995 1996 1995
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Operations:
Net investment income........................ $ 52,342 $ 129,286 $ 1,718 $ 4,785
Net realized gain on investments
(unaffiliated companies).................. 8,351,181 4,293,754 718,025 465,264
Net increase (decrease) in unrealized
appreciation of investments (unaffiliated
companies)................................ (4,309,054) 5,138,033 118,379 581,843
----------- ----------- ---------- ----------
Increase in net assets from operations.... 4,094,469 9,561,073 838,122 1,051,892
Contract receipts:
Gross purchase payments received............. 106,019 653,977 8,707 7,770
Deductions from purchase payments............ 3,892 3,969 542 483
----------- ----------- ---------- ----------
Net purchase payments received............ 102,127 650,008 8,165 7,287
Payments to contract owners:
Annuity payments to contract owners.......... 304,504 260,591 170,686 142,452
Terminations and withdrawals to contract
owners.................................... 24,628,563 1,128,000 58,037 43,041
----------- ----------- ---------- ----------
Total payments to contract owners......... 24,933,067 1,388,591 228,723 185,493
----------- ----------- ---------- ----------
Net contract receipts (payments) to/from
contract owners........................... (24,830,940) (738,583) (220,558) (178,206)
Other additions................................ 31,550 128,917 60,821 71,953
----------- ----------- ---------- ----------
Total increase (decrease) in net assets... (20,704,921) 8,951,407 678,385 945,639
NET ASSETS
Beginning of year.............................. 38,775,033 29,823,626 4,261,421 3,315,782
----------- ----------- ---------- ----------
End of year.................................... $18,070,112 $38,775,033 $4,939,806 $4,261,421
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>

See accompanying notes to financial statements.

16
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND
STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1996
----------------------------
SERIES Q SERIES N
(QUALIFIED) (NON-QUALIFIED)
----------- ---------------
<S> <C> <C>
INVESTMENT INCOME
Income (unaffiliated companies):
Dividends................................................................ $ 336,996 $ 67,817
Interest................................................................. 62,320 10,620
----------- ---------------
Total income.......................................................... 399,316 78,437
Expenses:
Mortality and expense risk fees.......................................... 222,849 46,066
Investment management and advisory service fees.......................... 111,425 23,033
Professional services.................................................... 12,700 7,620
----------- ---------------
Total expenses........................................................ 346,974 76,719
----------- ---------------
Net investment income...................................................... 52,342 1,718
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments sold
(unaffiliated companies)................................................. 8,351,181 718,025
Net increase (decrease) in unrealized appreciation of investments
(unaffiliated companies)................................................. (4,309,054) 118,379
----------- ---------------
Net realized and unrealized gain on investments............................ 4,042,127 836,404
----------- ---------------
Increase in net assets from operations..................................... $4,094,469 $ 838,122
----------- ---------------
----------- ---------------
</TABLE>

See accompanying notes to financial statements.

17
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND

STATEMENT OF INVESTMENTS DECEMBER 31, 1996

<TABLE>
<CAPTION>
SERIES Q (QUALIFIED) SERIES N (NON-QUALIFIED)
------------------------------------------------- ---------------------------------------------
% OF % OF
SECURITIES OF NUMBER MARKET NET NUMBER MARKET NET
UNAFFILIATED COMPANIES OF SHARES COST (A) VALUE ASSETS OF SHARES COST (A) VALUE ASSETS
----------- ----------- ----------- --------- --------- ---------- ---------- ---------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
AEROSPACE
AlliedSignal Inc.......... 2,800 $ 98,189 $ 187,600 700 $ 24,632 $ 46,900
Boeing Co................. 800 73,448 85,200 500 49,467 53,250
----------- ----------- ---------- ----------
171,637 272,800 1.5% 74,099 100,150 2.0%
----------- ----------- ---------- ----------
APPAREL & TEXTILES
(b) Fila Holdings ADS........ 900 95,169 52,200 200 21,149 11,600
NIKE Inc. Class B......... 900 51,241 54,000 200 11,389 12,000
----------- ----------- ---------- ----------
146,410 106,200 0.6% 32,538 23,600 0.5%
----------- ----------- ---------- ----------
AUTOMOTIVE
Goodrich B F Co........... 4,500 181,957 182,250 1.0% 1,100 44,478 44,550 0.9%
----------- ----------- ---------- ----------
BANKS AND CREDIT COMPANIES
Bank of Boston Corp....... 3,880 178,367 249,290 880 40,374 56,540
Comerica Inc.............. 1,700 45,714 89,038 500 13,794 26,187
Crestar Financial Corp.... 1,700 91,095 126,437 400 21,483 29,750
First Bank System Inc..... 4,300 268,328 293,475 1,100 68,642 75,075
Northern Trust Corp....... 5,400 106,540 195,750 1,500 28,142 54,375
Norwest Corp.............. 7,100 147,751 308,850 1,800 34,845 78,300
----------- ----------- ---------- ----------
837,795 1,262,840 7.0% 207,280 320,227 6.5%
----------- ----------- ---------- ----------
BUSINESS MACHINES
(b) Digital Equipment
Corp.................... 1,700 65,977 61,625 400 15,524 14,500
Hewlett-Packard Co........ 2,900 92,771 145,725 800 28,589 40,200
(b) Sun Microsystems Inc..... 5,900 116,344 151,559 1,600 35,705 41,101
----------- ----------- ---------- ----------
275,092 358,909 2.0% 79,818 95,801 1.9%
----------- ----------- ---------- ----------
BUSINESS SERVICES
Alco Standard Corp........ 4,000 186,665 206,500 1,100 51,387 56,788
(b) Ceridian Corp............ 1,100 45,028 44,550 300 12,280 12,150
(b) Computer Sciences
Corp.................... 4,400 314,807 361,350 1,200 83,845 98,550
Danka Business Systems
ADR....................... 3,100 128,412 109,662 800 33,050 28,300
(b) Loewen Group Inc......... 4,000 126,325 156,500 1,100 35,536 43,037
----------- ----------- ---------- ----------
801,237 878,562 4.9% 216,098 238,825 4.8%
----------- ----------- ---------- ----------
CELLULAR TELEPHONES
Telephone & Data Systems,
Inc....................... 1,300 49,326 47,125 0.3% 300 11,385 10,875 0.2%
----------- ----------- ---------- ----------
CHEMICALS
Air Products & Chemicals,
Inc....................... 700 42,438 48,388 200 12,125 13,825
(b) BetsDearborn Inc......... 1,800 102,980 105,300 400 22,832 23,400
Monsanto Co............... 4,500 132,016 174,937 1,200 35,204 46,650
Praxair Inc............... 3,200 135,792 147,600 800 33,948 36,900
----------- ----------- ---------- ----------
413,226 476,225 2.6% 104,109 120,775 2.5%
----------- ----------- ---------- ----------
COMPUTER SOFTWARE--PC
First Data Corp........... 3,600 116,208 131,400 1,000 30,882 36,500
(b) Microsoft Corp........... 3,900 121,300 322,237 1,000 30,762 82,625
----------- ----------- ---------- ----------
237,508 453,637 2.5% 61,644 119,125 2.4%
----------- ----------- ---------- ----------
</TABLE>

See accompanying notes to financial statements.

18
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND

STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
<TABLE>
<CAPTION>
SERIES Q (QUALIFIED) SERIES N (NON-QUALIFIED)
------------------------------------------------- ---------------------------------------------
% OF % OF
NUMBER MARKET NET NUMBER MARKET NET
OF SHARES COST (A) VALUE ASSETS OF SHARES COST (A) VALUE ASSETS
----------- ----------- ----------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMPUTER SOFTWARE--SYSTEMS
(b) BMC Software Inc......... 4,300 $ 164,083 $ 177,912 1,200 $ 46,207 $ 49,650
(b) Compaq Computer Corp..... 1,800 135,686 133,875 500 38,219 37,187
Computer Assoc Intl.
Inc....................... 5,900 192,904 293,525 1,500 45,398 74,625
(b) Cooper & Chyan Technology
Inc..................... 6,000 189,555 196,500 1,500 47,359 49,125
(b) Informix Corp............ 800 21,400 16,300 200 5,350 4,075
(b) Oracle Corp.............. 2,600 72,150 108,550 725 14,647 30,269
----------- ----------- ---------- ----------
775,778 926,662 5.1% 197,180 244,931 5.0%
----------- ----------- ---------- ----------
CONSUMER GOODS & SERVICES
Colgate-Palmolive Co...... 2,600 217,081 239,850 700 58,600 64,575
Gillette Co............... 4,400 277,756 342,100 1,200 76,072 93,300
Philip Morris Cos. Inc.... 4,800 467,300 542,400 1,300 127,560 146,900
Procter & Gamble Co....... 3,100 201,880 333,638 800 49,082 86,100
Sherwin-Williams Co....... 3,900 179,618 218,400 1,000 45,992 56,000
(b) Tupperware Corp.......... 900 48,904 48,262 200 10,868 10,725
Tyco Intl. Ltd............ 10,900 286,885 576,338 2,800 72,744 148,050
----------- ----------- ---------- ----------
1,679,424 2,300,988 12.7% 440,918 605,650 12.3%
----------- ----------- ---------- ----------
DEFENSE ELECTRONICS
(b) Loral Space
Communications.......... 2,500 46,400 45,937 0.3% 700 12,992 12,863 0.3%
----------- ----------- ---------- ----------
ELECTRICAL EQUIPMENT
General Electric Co....... 6,400 425,574 632,800 1,700 107,209 168,088
Honeywell Inc............. 1,400 67,345 92,050 400 15,464 26,300
----------- ----------- ---------- ----------
492,919 724,850 4.0% 122,673 194,388 3.9%
----------- ----------- ---------- ----------
ELECTRONICS
(b) ASM Lithograpy
Holdings................ 400 19,437 19,925
(b) Atmel Corp............... 2,900 95,337 96,063 800 26,300 26,500
Intel Corp................ 6,200 391,556 811,816 1,600 101,725 209,501
(b) VLSI Technology Inc...... 5,900 108,370 140,863 1,600 29,339 38,200
----------- ----------- ---------- ----------
595,263 1,048,742 5.8% 176,801 294,126 6.0%
----------- ----------- ---------- ----------
ENTERTAINMENT
(b) Viacom Inc. Class B...... 600 24,890 20,925 0.4%
---------- ----------
FINANCIAL INSTITUTIONS
(b) ADVANTA Corp. Class B.... 400 15,846 16,350
Beneficial Corp........... 3,700 175,320 234,488 1,000 45,580 63,375
Federal Home Loan Mtg.
Corp...................... 1,800 127,579 198,675 500 32,841 55,188
Federal Natl Mtg.
Assoc..................... 2,400 92,844 90,300 600 23,211 22,575
FINOVA Group Inc.......... 2,100 77,301 134,925 500 18,405 32,125
United Cos Financial
Corp...................... 700 23,804 18,638
----------- ----------- ---------- ----------
473,044 658,388 3.6% 159,687 208,251 4.2%
----------- ----------- ---------- ----------
FOOD & BEVERAGE PRODUCTS
Earthgrains Co............ 500 19,216 26,125 100 3,631 5,225
(b) Interstate Bakeries
Corp.................... 1,100 47,504 54,038 300 12,955 14,737
McCormick & Co............ 7,300 177,025 172,010 1,900 45,325 44,770
PepsiCo Inc............... 7,500 194,334 219,375 2,000 50,858 58,500
Ralston-Purina Group...... 1,300 93,456 95,388 300 21,567 22,013
Tyson Foods Inc. Class
A......................... 2,100 64,312 71,925 600 18,375 20,550
----------- ----------- ---------- ----------
595,847 638,861 3.5% 152,711 165,795 3.4%
----------- ----------- ---------- ----------
</TABLE>

See accompanying notes to financial statements.

19
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND

STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
<TABLE>
<CAPTION>
SERIES Q (QUALIFIED) SERIES N (NON-QUALIFIED)
------------------------------------------------- ---------------------------------------------
% OF % OF
NUMBER MARKET NET NUMBER MARKET NET
OF SHARES COST (A) VALUE ASSETS OF SHARES COST (A) VALUE ASSETS
----------- ----------- ----------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOREST & PAPER PRODUCTS
Kimberly-Clark Corp....... 1,520 $ 99,666 $ 144,780 0.8% 380 $ 24,917 $ 36,195 0.7%
----------- ----------- ---------- ----------
INSURANCE
Chubb Corp................ 4,300 231,282 231,125 1,200 64,457 64,500
CIGNA Corp................ 1,600 180,195 218,600 400 45,049 54,650
Conseco Inc............... 600 37,573 38,250
ITT Hartford Group Inc.... 2,900 184,537 195,750 800 50,907 54,000
Travelers Group Inc....... 5,500 106,548 249,562 1,400 25,044 63,525
----------- ----------- ---------- ----------
702,562 895,037 5.0% 223,030 274,925 5.6%
----------- ----------- ---------- ----------
MACHINERY
IDEX Corp................. 2,900 102,306 115,638 0.6% 700 24,720 27,912 0.6%
----------- ----------- ---------- ----------
MEDICAL & HEALTH PRODUCTS
Bristol-Myers Squibb
Co........................ 1,700 187,136 185,300 400 43,926 43,600
(b) Elan Corp. ADS........... 3,300 87,102 109,725 900 23,779 29,925
Lilly (Eli) Co............ 3,700 230,704 270,100 1,000 62,098 73,000
Merck & Co. Inc........... 3,500 264,957 278,688 1,000 75,702 79,625
Pfizer Inc................ 2,600 109,178 215,800 600 25,561 49,800
Rhone-Poulenc Rorer
Inc....................... 2,400 151,065 187,500 600 37,739 46,875
Schering-Plough Corp...... 3,600 155,957 233,100 900 39,444 58,275
SmithKline Beecham ADS.... 2,100 125,076 142,800 600 35,736 40,800
----------- ----------- ---------- ----------
1,311,175 1,623,013 9.0% 343,985 421,900 8.5%
----------- ----------- ---------- ----------
MEDICAL & HEALTH TECH.
SERVICES
(b) Columbia/HCA Healthcare
Corp.................... 4,000 153,337 163,000 1,100 42,138 44,825
(b) HEALTHSOUTH Corp......... 4,900 176,744 189,262 1,300 46,928 50,212
Medtronic Inc............. 1,900 102,233 129,200 500 27,739 34,000
(b) Pacificare Health Systems
Inc. Class B............ 2,100 126,953 179,025 550 33,726 46,888
(b) St. Jude Medical Inc..... 5,750 227,328 243,656 1,500 58,509 63,562
(b) United Healthcare
Corp.................... 6,300 245,145 283,500 1,600 61,363 72,000
----------- ----------- ---------- ----------
1,031,740 1,187,643 6.6% 270,403 311,487 6.3%
----------- ----------- ---------- ----------
OILS
Mobil Corp................ 1,700 172,833 207,825 1.2% 400 40,667 48,900 1.0%
----------- ----------- ---------- ----------
PHOTOGRAPHIC PRODUCTS
Eastman Kodak Co.......... 4,000 246,783 321,000 1.8% 1,000 55,750 80,250 1.6%
----------- ----------- ---------- ----------
PRINTING & PUBLISHING
Gannett Co................ 2,700 186,177 202,162 600 41,376 44,925
McGraw-Hill Cos Inc....... 500 17,934 23,062
Reuters Holdings ADR...... 2,500 101,445 191,250 600 24,579 45,900
----------- ----------- ---------- ----------
287,622 393,412 2.2% 83,889 113,887 2.3%
----------- ----------- ---------- ----------
RAILROAD
Burlington Northern Santa
Fe Corp................... 1,300 113,503 112,288 0.6% 300 26,193 25,912 0.5%
----------- ----------- ---------- ----------
RESTAURANTS & LODGING
(b) HFS Inc.................. 700 52,280 41,825 0.2% 200 14,937 11,950 0.2%
----------- ----------- ---------- ----------
SPECIAL PRODUCTS & SERVICES
(b) Imation Corp............. 150 25,976 4,219 0.0%
----------- -----------
</TABLE>

See accompanying notes to financial statements.

20
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND

-------
----------- ----------- ---------- ---------- -------
Total common stocks....... 13,681,214 17,456,985 96.6% 3,716,795 4,730,633 95.7%

-------
----------- ----------- ---------- ---------- -------
PREFERRED STOCKS
CHEMICALS
AirTouch Communications
Inc.
6.00% Class B 2,684 69,123 73,139 587 13,067 15,995
4.25% Class C 1,788 46,039 80,460 377 8,390 16,965
----------- ----------- ---------- ----------
Total preferred
stocks................. 115,162 153,599 0.9% 21,457 32,960 0.7%

-------
----------- ----------- ---------- ---------- -------
Total stocks........... 13,796,376 17,610,584 97.5% 3,738,252 4,763,593 96.4%

-------
----------- ----------- ---------- ---------- -------
Total investments in
securities of
unaffiliated
companies.......... $13,796,376 17,610,584 97.5% $3,738,252 4,763,593 96.4%

-------
----------- ----------- ---------- ---------- -------
----------- ----------
CASH AND RECEIVABLES LESS
LIABILITIES 459,528 2.5% 176,213 3.6%

-------
----------- ---------- -------
Total net assets....... $18,070,112 100.0% $4,939,806 100.0%

-------
----------- ---------- -------

-------
----------- ---------- -------
</TABLE>

(a) Effective cost for federal income tax purposes.

(b) Non-income producing security.

See accompanying notes to financial statements.

21
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND
NOTES TO FINANCIAL STATEMENTS

December 31, 1996

1. ORGANIZATION
The Paul Revere Variable Annuity Contract Accumulation Fund ("The Fund") is a
separate account of The Paul Revere Variable Annuity Insurance Company ("Paul
Revere Variable"), and is registered under the Investment Company Act of 1940
as an open-end diversified investment company. Paul Revere Variable is a
wholly-owned subsidiary of The Paul Revere Life Insurance Company ("Paul
Revere Life") which in turn is wholly-owned by The Paul Revere Corporation
which is 83% owned by Textron Inc. The Fund is the investment vehicle for
Paul Revere Variable's tax deferred group annuity contracts.

2. ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in those statements and accompanying notes.
Actual results may differ from such estimates.

Common and preferred stocks are stated at market values which are based on the
last sales prices at December 31, 1996 as reported on national security
exchanges or the closing bid prices for unlisted securities as reported by
investment dealers. Short-term notes are stated at amortized cost which
approximates market value. Unrealized investment gains and losses are included
in contract owners' equity. Realized gains and losses on investments sold are
determined on the basis of specific identification of investments. Security
transactions are accounted for on the date the securities are purchased or
sold. Dividend income is recorded on the ex-dividend dates. Interest income is
accrued on a daily basis.

The Fund does not distribute net investment income and net realized capital
gains through dividends to contract owners. The allocation of net investment
income and net realized capital gains occurs automatically in the daily
determination of unit net asset values. They are, therefore, included in the
value of the contracts in force and in payments to contract owners.

Contract owners' equity is comprised of two components. Contracts terminable
by owner represents amounts attributable to contracts which have not yet
annuitized. Currently payable contracts include amounts equivalent to the
annuity reserves relating to contracts with current annuities. Annuity
reserves are computed for currently payable contracts according to the 1900
Progressive Annuity Mortality Table. The assumed interest rate is either 3.5%
or 5% according to the option elected by the annuitant at the time of
conversion. Paul Revere Variable bears all the mortality risk associated with
these contracts.

3. INVESTMENT ADVISOR
Paul Revere Variable acts as investment advisor to the Fund and provides
mortality and expense guarantees to holders of variable annuity contracts.
For these services, Paul Revere Variable receives mortality and expense risk
fees and investment management and advisory service fees as shown on the
statement of operations which, on an annual basis, will not exceed 2% of the
average daily net asset value of the Fund.

Paul Revere Variable also acts as principal underwriter and performs all sales
and administrative functions relating to the variable annuity contracts and
the Fund. Fees for such services are deducted from the contract purchase
payments as shown in the statements of changes in net assets.

4. INVESTMENT SUB-ADVISOR
Under an investment sub-advisory agreement with MFS Institutional Advisors,
Inc. ("MFSI"), MFSI provides investment management services to Paul Revere
Variable for a fee which, on an annual basis, will equal 0.35% of the average
daily net assets of each series of the Fund. This fee is borne by Paul Revere
Variable only and does not represent an additional charge to the Fund.

22
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. FEDERAL INCOME TAXES
The Fund's operations are included with those of Paul Revere Variable, which
is taxed as a life insurance company under the Internal Revenue Code and is
included in a consolidated federal tax return filed by Textron Inc. In the
opinion of Paul Revere Variable management, current law provides that
investment income and capital gains from assets maintained in the Fund for
the exclusive benefit of the contract owners are generally not subject to
federal income tax. However, to the extent that Paul Revere Variable incurs
federal income taxes based on the income from the Fund's assets, the Fund
will be charged. No charges for federal income taxes have been made since the
inception of the Fund.

6. SECURITY TRANSACTIONS
The aggregate cost of securities purchased and proceeds of securities sold,
other than securities with maturities of one year or less, were as follows:

<TABLE>
<CAPTION>
SERIES Q (QUALIFIED) SERIES N (NON-QUALIFIED)
-------------------------------- ----------------------------
PURCHASES SALES PURCHASES SALES
--------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
1996......................................................... $ 17,913,759 $ 40,511,084 $ 4,024,116 $ 4,120,878
1995......................................................... $ 21,413,264 $ 22,487,069 $ 2,385,219 $ 2,546,433
</TABLE>

At December 31, 1996, net unrealized appreciation of investments in Series Q,
amounting to $3,814,208, consisted of unrealized gains of $3,959,176 and
unrealized losses of $144,968; net unrealized appreciation of investments in
Series N, amounting to $1,025,341, consisted of unrealized gains of $1,061,288
and unrealized losses of $35,947.

7. ACCUMULATION UNITS
The change in the number of accumulation units outstanding during each of the
two years ended December 31, 1996 and 1995, respectively, were as follows:

<TABLE>
<CAPTION>
SERIES N
SERIES Q (QUALIFIED) (NON-QUALIFIED)
--------------------------- ----------------------
1996 1995 1996 1995
------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Units outstanding at beginning of year........................... 5,490,718 5,597,405 586,396 604,004
Units credited to contracts:
Net purchase payments....................................... 13,534 114,907 1,056 1,152
Units withdrawn from contracts:
Annuity payments............................................ 39,287 42,202 21,645 22,386
Terminations and withdrawals................................ 3,375,395 190,226 7,179 6,906
------------- ------------ ---------- ----------
Net units withdrawn......................................... 3,414,682 232,428 28,824 29,292
------------- ------------ ---------- ----------
Contract units credited in excess of units withdrawn........... (3,401,148) (117,521) (27,768) (28,140)
Other additions................................................. 3,460 10,834 7,307 10,532
------------- ------------ ---------- ----------
Net decrease in units.......................................... (3,397,688) (106,687) (20,461) (17,608)
------------- ------------ ---------- ----------
Units outstanding at end of year................................. 2,093,030 5,490,718 565,935 586,396
------------- ------------ ---------- ----------
------------- ------------ ---------- ----------
</TABLE>

The majority of the terminations and withdrawals from Series Q during 1996
related to withdrawals by participants in the Paul Revere Agency and Home
Office Pension Plans which were deposited into an unrelated funding vehicle.

23
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. MERGER AGREEMENT
On April 29, 1996, The Paul Revere Corporation ("Company") and Provident
Companies, Inc. ("Provident") announced they had signed a definitive merger
agreement. On November 6, 1996, the Company and Provident announced that they
had amended and restated the merger agreement to, among other things, extend
the date as of which the parties would be entitled to terminate the agreement
and to adjust the exchange ratio to be used in determining the number of
shares of Provident common stock that Textron, which owns approximately 83%
of the Company's outstanding common shares, will receive in the transaction.
The transaction, valued at approximately $1.2 billion, has been approved by
Boards of Directors of both companies. The transaction remains subject to the
approval of the Commonwealth of Massachusetts Division of Insurance and the
satisfaction of certain customary closing conditions.

24
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY CONTRACT ACCUMULATION FUND
SELECTED PER UNIT DATA AND RATIOS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA (A)
SERIES Q (QUALIFIED)
- ------------------
Investment income...................................... $ 0.153 $ 0.119 $ 0.081 $ 0.054 $ 0.068
Expenses............................................... 0.133 0.096 0.073 0.079 0.076
--------- --------- --------- --------- ---------
Net investment income (loss)........................... 0.020 0.023 0.008 (0.025) (0.008)
Net realized and unrealized gains (losses) from
securities........................................... 1.551 1.711 (0.020) 0.291 0.159
--------- --------- --------- --------- ---------
Net increase (decrease) in net asset value............. 1.571 1.734 (0.012) 0.266 0.151
Accumulation unit net asset value:
Beginning of year.................................... 7.062 5.328 5.340 5.074 4.923
--------- --------- --------- --------- ---------
End of year.......................................... $ 8.633 $ 7.062 $ 5.328 $ 5.340 $ 5.074
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SERIES N (NON-QUALIFIED)
- -----------------------
Investment income...................................... $ 0.137 $ 0.117 $ 0.099 $ 0.055 $ 0.071
Expenses............................................... $ 0.134 $ 0.109 0.102 0.092 0.094
--------- --------- --------- --------- ---------
Net investment income.................................. 0.003 0.008 (0.003) (0.037) (0.023)
Net realized and unrealized gains (losses) from
securities........................................... 1.459 1.769 (0.023) 0.318 0.194
--------- --------- --------- --------- ---------
Net increase (decrease) in net asset value............. 1.462 1.777 (0.026) 0.281 0.171
Accumulation unit net asset value:
Beginning of year.................................... 7.267 5.490 5.516 5.235 5.064
--------- --------- --------- --------- ---------
End of year.......................................... $ 8.729 $ 7.267 $ 5.490 $ 5.516 $ 5.235
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

(a) The per unit amounts represent the proportionate distribution of actual
investment results as related to the change in unit net asset values for the
year.

<TABLE>
<CAPTION>
RATIOS
<S> <C> <C> <C> <C> <C>
SERIES Q (QUALIFIED)
- -------------------
Operating expenses to average accumulation fund balance................ 1.57% 1.55% 1.55% 1.56% 1.56%
Net investment income to average accumulation fund balance............. 0.24% 0.38% 0.17% (0.50%) (0.17%)
Portfolio turnover rate................................................ 78% 64% 64% 59% 61%
Accumulation units outstanding at the end of the year
(in thousands)....................................................... 2,093 5,491 5,597 5,700 5,753

SERIES N (NON-QUALIFIED)
- -----------------------
Operating expenses to average accumulation fund balance................ 1.69% 1.71% 1.73% 1.73% 1.74%
Net investment income to average accumulation fund balance............. 0.04% 0.13% (0.05%) (0.69%) (0.42%)
Portfolio turnover rate................................................ 94% 67% 62% 62% 66%
Accumulation units outstanding at the end of the year
(in thousands)....................................................... 566 586 604 640 662
</TABLE>

25
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
The Paul Revere Variable Annuity Insurance Company

We have audited the accompanying balance sheets of The Paul Revere Variable
Annuity Insurance Company as of December 31, 1996 and 1995, and the related
statements of income, changes in shareholder's equity and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Paul Revere Variable
Annuity Insurance Company at December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

As described in Note 1 to the financial statements, in 1994, the Company changed
its method of accounting for certain investments in debt and equity securities.

Ernst & Young LLP

Boston, Massachusetts
March 27, 1997

26
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums, policy and contract charges................................ $ 16,095 $ 14,503 $ 10,653
Net investment income................................................ 107,500 103,841 98,416
Net realized investment gains........................................ 9,352 4,126 2,876
--------- --------- ---------
Total revenues......................................................... 132,947 122,470 111,945
--------- --------- ---------
BENEFITS, CLAIMS AND EXPENSES
Benefits to policyholders, net of reinsurance
ceded of $2,277 in 1996, $666 in 1995 and $437 in 1994............. 86,857 81,002 72,459
Commissions and other expenses....................................... 12,958 15,399 12,499
Amortization of deferred costs:
Deferred policy acquisition costs.................................. 1,894 2,414 760
Value assigned purchased insurance in-force........................ 160 57 (69)
--------- --------- ---------
Total benefits, claims and expenses.................................... 101,869 98,872 85,649
--------- --------- ---------
INCOME BEFORE INCOME TAXES............................................. 31,078 23,598 26,296
Income taxes:
Current.............................................................. 9,757 4,130 4,581
Deferred............................................................. 1,957 4,290 4,711
--------- --------- ---------
Total income taxes..................................................... 11,714 8,420 9,292
--------- --------- ---------
NET INCOME............................................................. $ 19,364 $ 15,178 $ 17,004
--------- --------- ---------
--------- --------- ---------
</TABLE>

See accompanying notes to financial statements.

27
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
ASSETS 1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Available for sale:
Fixed maturities................................................................................ $ 1,335,232 $ 1,322,540
Equity securities............................................................................... 8,991 4,714
Investment in Textron common stock.............................................................. 14,380 10,299
Short-term investments.......................................................................... 22,424 28,622
Mortgage loans.................................................................................... 100,185 72,627
Real estate....................................................................................... 1,050 2,987
Policy loans...................................................................................... 31,911 29,685
Other invested assets............................................................................. 2,588 1,588
----------- -----------
Total investments................................................................................... 1,516,761 1,473,062
Cash................................................................................................ -- 2,444
Accrued investment income........................................................................... 23,905 22,514
Deferred policy acquisition costs................................................................... 52,440 35,000
Value assigned purchased insurance in-force......................................................... 799 902
Federal and state tax recoverable................................................................... -- 1,905
Other assets........................................................................................ 3,631 4,525
Assets held in separate accounts.................................................................... 23,178 43,201
----------- -----------
TOTAL ASSETS.............................................................................. $ 1,620,714 $ 1,583,553
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES
Future policy benefits............................................................................ $ 97,757 $ 86,392
Other policyholder funds.......................................................................... 1,332,748 1,268,318
Federal income tax payable........................................................................ 1,199 --
Deferred income taxes............................................................................. 18,766 29,845
Other liabilities................................................................................. 12,130 8,012
Liabilities related to separate accounts.......................................................... 23,178 43,201
----------- -----------
TOTAL LIABILITIES......................................................................... 1,485,778 1,435,768
----------- -----------
SHAREHOLDER'S EQUITY
Capital stock, par value $5.00 per share, 500,000 shares
authorized, issued and outstanding.............................................................. 2,500 2,500
Additional paid-in capital........................................................................ 41,930 41,930
Securities valuation adjustment................................................................... 18,251 42,464
Retained earnings................................................................................. 72,255 60,891
----------- -----------
TOTAL SHAREHOLDER'S EQUITY................................................................ 134,936 147,785
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY................................................ $ 1,620,714 $ 1,583,553
----------- -----------
----------- -----------
</TABLE>

See accompanying notes to financial statements.

28
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
CAPITAL ADDITIONAL SECURITIES
STOCK PAID-IN VALUATION RETAINED
$5.00 PAR VALUE CAPITAL ADJUSTMENT EARNINGS TOTAL
------------------- ----------- ------------------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994....................... $ 2,500 $ 41,930 $ 5,883 $ 47,709 $ 98,022
Adjustment to beginning balance
for change in accounting method, net......... 28,818 28,818
Net income..................................... 17,004 17,004
Securities valuation adjustment, net........... (54,252) (54,252)
Dividend to shareholder........................ (11,000) (11,000)
------ ----------- -------- ----------- ---------
BALANCE AT DECEMBER 31, 1994..................... 2,500 41,930 (19,551) 53,713 78,592
Net income..................................... 15,178 15,178
Securities valuation adjustment, net........... 62,015 62,015
Dividend to shareholder........................ (8,000) (8,000)
------ ----------- -------- ----------- ---------
BALANCE AT DECEMBER 31, 1995..................... 2,500 41,930 42,464 60,891 147,785
Net income..................................... 19,364 19,364
Securities valuation adjustment, net........... (24,213) (24,213)
Dividend to shareholder........................ (8,000) (8,000)
------ ----------- -------- ----------- ---------
BALANCE AT DECEMBER 31, 1996..................... $ 2,500 $ 41,930 $ 18,251 $ 72,255 $ 134,936
------ ----------- -------- ----------- ---------
------ ----------- -------- ----------- ---------
</TABLE>

See accompanying notes to financial statements.

29
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................................................. $ 19,364 $ 15,178 $ 17,004
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in future policy benefits and other policyholder funds....... 79,327 73,084 64,505
Amortization and depreciation......................................... (3,955) (2,002) (9,180)
Additions to deferred policy acquisition costs........................ (10,921) (15,368) (9,262)
Change in income tax balances......................................... 5,063 7,604 4,347
Net realized investment gains......................................... (9,352) (4,126) (2,876)
Increase in accrued investment income................................. (1,391) (2,045) (1,348)
Other, net............................................................ 3,078 (5,373) (4,144)
--------- --------- ---------
Net cash provided by operating activities............................... 81,213 66,952 59,046
--------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Fixed maturities held to maturity (held for investment in 1993):
Proceeds from sales................................................... -- -- 6,072
Proceeds from maturities and calls.................................... -- 14,435 11,563
Purchases............................................................. -- (28,939) (121,104)
Fixed maturities, marketable equity securities and short-term
investments available for sale:
Proceeds from sales................................................... 128,688 105,908 47,900
Proceeds from maturities and calls.................................... 79,926 65,785 204,472
Purchases............................................................. (262,495) (243,008) (207,075)
Increase in mortgage loans, net......................................... (24,724) (43,601) (4,531)
Decrease in other, net.................................................. 6,756 748 3,075
Increase in policy loans, net........................................... (2,226) (3,132) (3,204)
--------- --------- ---------
Net cash used in investing activities................................... (74,075) (131,804) (62,832)
--------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in cash overdraft................................... 1,950 (236) (4,762)
Dividend to shareholder................................................. (8,000) (8,000) (11,000)
Receipts from interest-sensitive products............................... 135,198 171,607 101,881
Return of account balances on interest-sensitive products............... (138,730) (96,075) (82,333)
--------- --------- ---------
Net cash provided by (used in) financing activities..................... (9,582) 67,296 3,786
--------- --------- ---------
Net increase (decrease) in cash......................................... (2,444) 2,444 --
Cash at beginning of year............................................... 2,444 -- --
--------- --------- ---------
Cash at end of year..................................................... $ -- $ 2,444 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>

See accompanying notes to financial statements.

30
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS

1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The Paul Revere Variable Annuity Insurance Company ("the Company") serves as
insurer, principal underwriter and investment advisor to The Paul Revere
Variable Annuity Contract Accumulation Fund ("the Fund"). The Company is a
Massachusetts-domiciled stock life insurance company and is a wholly-owned
subsidiary of The Paul Revere Life Insurance Company ("PRL"), also
Massachusetts domiciled. PRL is wholly-owned by The Paul Revere Corporation
("Paul Revere"), a Massachusetts corporation. The Company's primary business
is the sale of life insurance and annuity products. The career agency force
markets a portfolio of non-participating interest sensitive whole life,
traditional whole life insurance and term insurance. The Company distributes
its annuity products through the career agency force, various financial
institutions and several brokerage groups. Although the Company is licensed
and sells its life insurance and annuity products in forty-eight states, its
primary markets are California, Florida, New Jersey and Ohio.

Paul Revere (formerly an 83%-owned subsidiary of Textron Inc.) was
incorporated on December 16, 1992 for the purpose of owning all of the
outstanding shares of PRL. On April 29, 1996, Paul Revere and Provident
Companies, Inc. ("Provident") announced they had signed a definitive merger
agreement pursuant to which Patriot Acquisition Corporation, a wholly owned
subsidiary of Provident would merge with and into Paul Revere with Paul Revere
as the surviving corporation. On November 6, 1996, Paul Revere and Provident
announced that they had amended and restated the merger agreement to, among
other things, extend the date as of which the parties would be entitled to
terminate the agreement and to adjust the exchange ratio to be used in
determining the number of shares of Provident common stock that Textron will
receive in the transaction (as amended, the "Merger Agreement"). The
transaction closed on March 27, 1997. Provident is a Delaware corporation with
its principal office at 1 Fountain Square, Chattanooga, Tennessee 37402.

BASIS OF PRESENTATION

The accompanying financial statements of the Company have been prepared on the
basis of generally accepted accounting principles (GAAP) for stock life
insurance companies.

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported
in those statements and accompanying notes. Actual results may differ from
such estimates.

INVESTMENTS

Prior to January 1, 1994, the Company classified fixed maturities in
accordance with the then existing accounting standards, and, accordingly,
fixed maturities held to maturity were carried at amortized cost. A portion of
the Company's portfolio of fixed maturities was considered available for sale
and carried at the lower of aggregate amortized cost or market. Adjustments
for other than temporary declines in the value of publicly traded bonds were
recorded as a direct adjustment to the securities' carrying value. Such
adjustments for other fixed maturities were reflected through the
establishment of allowances.

Effective January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("FAS 115"). In accordance with FAS 115, prior
period financial statements have not been restated to reflect the change in
accounting principle. The adoption of FAS 115 had no effect on the Company's
net income. The net unrealized gains of $28,818,000 (net of applicable income
taxes), relating to the debt securities classified in the available for sale
category of the Company's investment portfolio as of January 1, 1994, were
recorded as an increase to shareholder's equity.

31
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

In November 1995, the Financial Accounting Standards Board ("FASB") staff
issued "A Guide to Implementation of FAS 115" which offered companies a
one-time opportunity to reclassify securities among its investment categories,
without calling into question the intent to hold other debt securities to
maturity in the future. The Company subsequently reviewed its portfolio and on
December 1, 1995, transferred debt securities with an amortized cost and
market value of $513,589,000 and $534,959,000, respectively, from the held to
maturity category to the available for sale category of its investment
portfolio.

The available for sale category of the Company's investment portfolio includes
marketable equity securities, short-term investments and fixed maturities not
classified as held to maturity. While these securities are not held with the
specific intention to sell them, they may be sold prior to maturity to support
the Company's investment strategies and, accordingly, are carried at fair
value in accordance with FAS 115. Investments in marketable equity securities,
including the Company's investment in Textron common stock, are based on the
last sales prices as reported on national securities exchanges or the closing
bid prices for unlisted securities as reported by investment dealers.

Subsequent to January 1, 1994, all securities purchased are designated for
inclusion in either the available for sale or held to maturity categories
based on the Company's intent and the nature of the securities purchased.
Further, adjustments for other than temporary declines in the value of all
fixed maturities are recorded as a direct adjustment to the securities'
carrying value.

The Company's fixed maturities available for sale include mortgage-backed
securities, a substantial portion of which is guaranteed by the U.S.
Government or U.S. Government agencies. Future investment income from
mortgage-backed securities may be affected by the timing of principal payments
and the yields on reinvestment alternatives available at the time of such
payments. To minimize the risk associated with the timing of principal
payments, the Company has purchased certain mortgage-backed securities which
are structured to reduce the sensitivity of principal payments to fluctuating
interest rates.

The amortized cost of fixed maturities classified as held to maturity or
available for sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or, in the case of mortgage-backed securities, over the
estimated life of the security. To the extent that the estimated lives of
mortgage-backed securities change as a result of changes in prepayment rates,
the accumulated amortization of premiums and the accretion of discounts is
adjusted retrospectively with a charge or credit to current operations.

Changes in fair values of securities classified as available for sale, after
adjustment for applicable income taxes, are reported as a securities valuation
adjustment in a separate component of shareholder's equity and, accordingly,
have no effect on net income.

Effective January 1, 1995, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan" ("FAS 114"), as amended by Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures" ("FAS 118"). FAS 114 and FAS 118
require that an impaired mortgage loan's fair value be measured based on the
present value of future cash flows discounted at the loan's effective interest
rate, at the loan's observable market price, or at the fair value of the
collateral if the loan is collateral dependent. If the fair value of a
mortgage loan is less than the recorded investment in the loan, the difference
is recorded as an allowance for mortgage loan losses. The change in the
allowance for mortgage loan losses is reported with realized gains or losses
on investments. Interest income on impaired loans is

32
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

accrued on the net reported value of the impaired loans; changes in actual or
estimated cash flows are charged or credited to the allowance for mortgage
loan losses. The impact of FAS 114 and FAS 118 on the Company's net income and
financial condition was not material.

Net realized investment gains or losses, resulting from sales or calls of
investments and the losses resulting from declines in fair values of
investments in mortgage loans, real estate and other investments that are
other than temporary, are stated separately in the statements of income. The
cost of securities sold is determined primarily on the specific identification
method.

Short-term financial instruments, including investments with original
maturities of three months or less at acquisition, are included as investing
activities in the statements of cash flows.

Other investments are reported as follows:

- Mortgage loans - amortized cost less allowance for other than temporary
declines in value.

- Real estate held for sale - lower of cost or fair value less estimated
costs to sell.

- Policy loans - unpaid principal balance.

- Other invested assets (primarily real estate limited partnerships) - at
cost adjusted for the Company's equity in undistributed net earnings or
losses since acquisition, less allowances for other than temporary
declines in value.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of financial instruments presented in Note 8 are estimates of
the fair values at a specific point in time using available market information
and appropriate valuation methodologies. These estimates are subjective in
nature and involve uncertainties and significant judgment in the
interpretation of current market data. Therefore, the fair values presented
are not necessarily indicative of amounts the Company could realize or settle
currently. The Company does not necessarily intend to dispose of or liquidate
such instruments prior to maturity.

CASH OVERDRAFT

The Company operates a cash management program which, at times, results in
book cash overdrafts supported by its short-term investments. Included in
other liabilities at December 31, 1996 is a cash overdraft of $1,950,000.

RECOGNITION OF PREMIUM REVENUES AND POLICY BENEFITS FOR TRADITIONAL LIFE
PRODUCTS

Premiums from life insurance products are recognized in revenues when due.
Benefits and expenses relating to those businesses are recognized over the
life of the contracts through the establishment of reserves for future policy
benefits and the amortization of deferred policy acquisition costs. Benefits
to policyholders include benefits paid or accrued, changes in reserves for
future policy benefits and surrenders.

RECOGNITION OF REVENUES, CONTRACT BENEFITS AND EXPENSES FOR INVESTMENT AND
INTEREST-SENSITIVE LIFE PRODUCTS

For investment and interest-sensitive life products, revenues consist of
investment income, net realized investment gains, and policy and surrender
charges assessed during the year. Benefits and expenses for these products
include amounts incurred during the year for benefit claims in excess of
related account balances, policy maintenance expenses, interest credited and
amortization of deferred policy acquisition costs.

33
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DEFERRED POLICY ACQUISITION COSTS

Costs, which vary with, and are related primarily to, the production of new
business, have been deferred to the extent such costs are deemed recoverable
from future profits. Such costs include commissions, selling, selection and
policy issue expenses. For traditional life insurance products, these costs
are amortized in proportion to premiums over the estimated lives of the
policies. For interest-sensitive life and investment products, these costs are
amortized in proportion to estimated gross profits from interest, mortality
and other margins under the contracts.

VALUE ASSIGNED PURCHASED INSURANCE IN-FORCE

Value assigned purchased insurance in-force represents the present value of
the future profits of the insurance in-force at the date the Company was
acquired by Textron. This asset is being amortized over the estimated life of
the insurance in-force at the date of acquisition in proportion to the
expected future premium cash flows of the business acquired. Each year, actual
and assumed experience are compared and adjustments are made to this asset, if
necessary, and reflected in current income.

SEPARATE ACCOUNTS

The Paul Revere Variable Annuity Contract Accumulation Fund (the "Fund") is
the separate account through which PRV sets aside, separate and apart from its
general assets, assets attributable to its variable annuity contracts. The
Fund is an open-end diversified investment company registered under the
Investment Company Act of 1940. PRV serves as investment advisor to the Fund.
Prior to April 1996, PRV's separate accounts also included Paul Revere
Separate Account One ("Separate Acount One"). Separate Account One was a unit
investment trust registered under the Investment Company Act of 1940. Separate
Account One invested in underlying investment portfolios managed by various
unrelated investment advisors. PRV was the principal underwriter of variable
annuity contracts sold through Separate Account One. In April 1996, Separate
Account One ceased accepting new deposits and all existing deposits, with
interest, were returned to contract holders. Separate account assets, which
are stated at fair value based on quoted market prices, and separate account
liabilities are shown separately in the balance sheets. Operating results of
the separate accounts are not included in the statements of income.

INSURANCE RESERVES AND LIABILITIES

Reserves for future policy benefits and unpaid claims and claim expenses
include policy reserves and claim liabilities established for the Company's
annuity and individual life insurance products.

Policy reserves represent the portion of premiums received, accumulated with
interest, to provide for future claims. Policy reserves for traditional life
insurance products are based on the Company's withdrawal and mortality
experience at interest rates ranging from 3.5% to 10.5% in 1996 and 1995.
Policy reserves for interest-sensitive life insurance products are determined
based on the accumulated policy account value.

Other policyholder funds represent amounts accumulated under deferred
contracts to provide annuities in the future. During 1996, 1995 and 1994,
daily interest was credited at effective annual rates ranging from 4.1% to
8.4%, 4.0% to 9.0% and 4.0% to 9.5%, respectively.

The establishment of insurance reserves requires making assumptions relating
to mortality and interest rates, as well as expenses and lapse rates used to
calculate policyholder liabilities during the term of the policies. These
estimates are made when the policy is issued, based on facts and circumstances
then known. While the Company believes that its policy reserves have been
determined on reasonable bases and are adequate, there are no assurances that
the Company's reserves will be sufficient to fund future liabilities in all
circumstances.

34
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

REINSURANCE

The Company currently coinsures with the Paul Revere Protective Life Insurance
Company ("Paul Revere Protective"), a wholly owned subsidiary of Paul Revere
Life, 50% of all risks less than $500,000 on individual life insurance
business sold in states where Paul Revere Protective is a licensed reinsurer.
If the amount at risk on any one life is in excess of $500,000, that excess is
reinsured with one of several licensed United States reinsurers. Reinsurance
recoverables have been included in other assets in the accompanying balance
sheets.

INCOME TAXES

The Company files a consolidated federal income tax return with its ultimate
parent, Textron Inc. Federal income taxes are allocated to the Company based
on its separate results. Amounts (payable) recoverable from Textron under the
terms of the tax sharing agreement were ($922,000) and $2,007,000 at December
31, 1996 and 1995, respectively.

In accordance with Statement of Financial Accounting Standards, No. 109,
"Accounting for Income Taxes", deferred income taxes have been recognized for
temporary differences between the financial reporting basis and income tax
basis of assets and liabilities based on enacted tax rates expected to be in
effect when such amounts are expected to be realized or settled.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company recognizes the cost of its retiree health care and life insurance
benefits using the accrual method of accounting over the employees' years of
service in accordance with Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other than Pensions."

35
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2.INVESTMENTS

The following information summarizes the components of net investment income
(loss) and net realized and unrealized investment gains (losses):

NET INVESTMENT INCOME (LOSS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities................................................... $ 97,612 $ 94,199 $ 93,244
Equity securities.................................................. 592 458 423
Mortgage loans..................................................... 7,271 4,596 2,760
Real estate........................................................ (133) 102 55
Policy loans....................................................... 2,333 2,240 1,683
Other invested assets.............................................. 386 2,443 1,006
Short-term investments............................................. 650 1,132 473
--------- --------- ---------
Gross investment income............................................ 108,711 105,170 99,644
Less investment expenses........................................... 1,211 1,329 1,228
--------- --------- ---------
Net investment income.............................................. $ 107,500 $ 103,841 $ 98,416
--------- --------- ---------
--------- --------- ---------
</TABLE>

NET REALIZED INVESTMENT GAINS (LOSSES)

The increase (decrease) in the Company's unrealized gains and losses on fixed
maturities available for sale was ($48,158,000), $104,569,000 and
($43,822,000) in 1996, 1995 and 1994, respectively; the corresponding amounts
for equity securities were 4,150,000, $644,000 and ($2,549,000).

Mortgage loans with an amortized cost of $450,000 and other invested assets
with an amortized cost of $1,050,000 were non-income producing at December 31,
1996. Investments are placed on non-accrual status once interest is sixty days
past due. Management may, at its discretion, put an investment on non-accrual
status earlier if substantial doubt exists regarding the collectibility of
interest.

36
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following is a summary of available for sale securities at December 31,
1996 and 1995:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
1996 COST GAINS LOSSES FAIR VALUE
----------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed maturities available for sale:
U.S. Government and agencies................... $ 4,380 $ 126 $ (73) $ 4,433
Public utilities............................... 169,147 3,270 (1,098) 171,319
Corporate securities........................... 779,335 22,733 (9,853) 792,215
Mortgage-backed securities..................... 362,539 9,388 (4,662) 367,265
----------- ----------- ----------- ----------
Total fixed maturities........................... 1,315,401 35,517 (15,686) 1,335,232
Equity securities.............................. 8,558 556 (123) 8,991
Investment in Textron common stock............. 3,517 10,863 -- 14,380
Short-term investments......................... 22,424 -- -- 22,424
----------- ----------- ----------- ----------
Total available for sale......................... $1,349,900 $ 46,936 $ (15,809) $1,381,027
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
1995 COST GAINS LOSSES FAIR VALUE
----------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed maturities available for sale:
U.S. Government and agencies................... $ 14,724 $ 609 $ -- $ 15,333
Public utilities............................... 169,001 9,817 (98) 178,720
Corporate securities........................... 701,717 44,250 (2,301) 743,666
Mortgage-backed securities..................... 369,109 16,585 (873) 384,821
----------- ----------- ----------- ----------
Total fixed maturities........................... 1,254,551 71,261 (3,272) 1,322,540
Equity securities.............................. 4,350 364 -- 4,714
Investment in Textron common stock............. 3,517 6,782 -- 10,299
Short-term investments......................... 28,622 -- -- 28,622
----------- ----------- ----------- ----------
Total available for sale......................... $1,291,040 $ 78,407 $ (3,272) $1,366,175
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>

37
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

At December 31, 1996, $22,405,000 of fixed maturities available for sale were
below investment grade. These securities represented 1.5% of the Company's
total investments.

During 1994, the Company sold, from the held to maturity category of its
investment portfolio, a fixed maturity with an amortized cost of $5,779,000
resulting in a realized investment gain of $293,000, due to a significant
deterioration in the issuer's creditworthiness.

The amortized cost and fair value of fixed maturities at December 31, 1996, by
contractual maturity date, are presented below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Available for sale:
Fixed maturities:
Due in one year or less............................................ $ 4,759 $ 4,798
Due after one year through five years.............................. 121,414 126,802
Due after five years through ten years............................. 646,204 654,348
Due after ten years................................................ 180,485 182,019
Mortgage-backed securities......................................... 362,539 367,265
----------- ----------
1,315,401 1,335,232

Equity securities................................................... 8,558 8,991
Investment in Textron common stock.................................. 3,517 14,380
Short-term investments.............................................. 22,424 22,424
----------- ----------
Total................................................................ $1,349,900 $1,381,027
----------- ----------
----------- ----------
</TABLE>

During 1996, fixed maturities and marketable equity securities classified as
available for sale, with a fair value of $128,688,000 as of the date of the
sale, were sold. The gross realized investment gains and losses on such sales
totaled $7,303,000 and $443,000, respectively.

During 1995, fixed maturities and marketable equity securities classified as
available for sale, with a fair value of $116,067,000 as of the date of the
sale, were sold. The gross realized investment gains and losses on such sales
totaled $6,884,000 and $886,000, respectively.

During 1994, fixed maturities and marketable equity securities classified as
available for sale, with a fair value of $53,643,000 as of the date of the
sale, were sold. The gross realized investment gains and losses on such sales
totaled $4,366,000 and $12,000, respectively.

The Company invests in mortgage loans principally involving commercial real
estate. Mortgage loans have original repayment terms ranging from 10 to 30
years. The mortgages are secured by the underlying property and non-
participating mortgages are generally limited to 75% of the appraised value of
established properties at the date of the loans with sufficient cash flows to
meet debt service requirements.

38
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Changes in the allowance for other than temporary declines in the value of
fixed maturities (not subject to direct adjustment), mortgage loans, real
estate and other investments were as follows:

<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING END
OF YEAR ADDITIONS DEDUCTIONS OF YEAR
----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Mortgage loans................................ $ 3,341 $ 1,050 $ 4,050 $ 341
Real Estate................................... 1,063 737 500 1,300
----------- ----------- ----------- -----------
Total........................................... $ 4,404 $ 1,787 $ 4,550 $ 1,641
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 31, 1995:
Mortgage loans................................ $ 2,780 $ 2,185 $ 1,624 $ 3,341
Real estate................................... 2,770 105 1,812 1,063
Other investments............................. 342 (342) -- --
----------- ----------- ----------- -----------
Total........................................... $ 5,892 $ 1,948 $ 3,436 $ 4,404
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended December 31, 1994:
Fixed maturities.............................. $ 4,008 $ -- $ 4,008 $ --
Mortgage loans................................ 980 2,350 550 2,780
Real estate................................... 3,270 500 1,000 2,770
Other investments............................. -- 342 -- 342
----------- ----------- ----------- -----------
Total........................................... $ 8,258 $ 3,192 $ 5,558 $ 5,892
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

Additions represent charges to net realized investment gains and deductions
represent reserves released upon disposal or restructuring of the related
assets. The net change in the reserve is included as an increase or decrease
in net realized investment gains or losses in the statements of income.
Subsequent to January 1, 1994, adjustments for other than temporary declines
in the value of all fixed maturities are recorded as a direct adjustment to
the securities' carrying value, in accordance with FAS 115.

Net investment income recorded on problem investments was $118,000, $126,000
and $578,000 in 1996, 1995 and 1994, respectively. Interest not recognized on
non-accrual securities and loans was 41,000, $583,000 and $922,000 in 1996,
1995 and 1994, respectively.

Restructured securities and loans aggregated $1,313,000 and $1,298,000 as of
December 31, 1996 and 1995, respectively. The amount of interest foregone on
restructured securities and loans was $79,000, $79,000 and $688,000 in 1996,
1995 and 1994, respectively.

The following investments in fixed maturities as of December 31, 1996 exceeded
ten percent of shareholder's equity.

<TABLE>
<CAPTION>
AMORTIZED COST ESTIMATED FAIR VALUE
--------------- ---------------------
(IN THOUSANDS)
<S> <C> <C>
FNMA 1993-175-PU..................................... $ 19,886 $ 19,412
Union Pacific Railroad............................... 14,819 14,309
Sears Roebuck Acceptance............................. 14,911 14,159
</TABLE>

39
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3.REINSURANCE

Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result
in losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the reinsurers
to minimize its exposure to significant losses from reinsurer insolvencies.

The effect of reinsurance on premiums and amounts earned is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums and amounts assessed against policyholders........... $ 17,395 $ 15,863 $ 11,853
Reinsurance ceded.................................................... (1,300) (1,360) (1,200)
--------- --------- ---------
Net premiums and amounts earned...................................... $ 16,095 $ 14,503 $ 10,653
--------- --------- ---------
--------- --------- ---------
</TABLE>

4.POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

In accordance with Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions", the
Company recognizes the cost of its retiree health care and life insurance
benefits using the accrual method of accounting over the employees' years of
service.

Postretirement benefits other than pensions allocated to the Company in 1996,
1995 and 1994 were $80,000, $103,000 and $102,000, respectively. The balance
of the accrued postretirement benefits other than pensions ($1,165,000 and
$1,165,000 at December 31, 1996 and 1995, respectively) is included in other
liabilities in the balance sheets. The respective amounts of such retiree
costs deductible for tax purposes are not affected by FAS 106.

5.INCOME TAXES

Details of income taxes are summarized as follows:

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal....................................................... $ 9,406 $ 3,965 $ 4,231
State......................................................... 351 165 350
--------- --------- ---------
9,757 4,130 4,581
--------- --------- ---------
Deferred:
Federal....................................................... 1,813 3,928 4,711
State......................................................... 144 362 --
--------- --------- ---------
1,957 4,290 4,711
--------- --------- ---------
Total........................................................... $ 11,714 $ 8,420 $ 9,292
--------- --------- ---------
--------- --------- ---------
</TABLE>

40
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Following is a reconciliation of the federal statutory income tax rate to the
effective income tax rate applicable to pre-tax income before the cumulative
effect of changes in accounting principles, as reflected in the statements of
income:

<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Federal statutory income tax rate................................. 35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
State income taxes............................................ 1.0% 1.5% 0.9%
Dividends received deduction.................................. (0.5%) (0.8%) (0.5%)
Other......................................................... 2.2 -- (0.1%)
--- --- ---
Effective income tax rate......................................... 37.7% 35.7% 35.3%
--- --- ---
--- --- ---
</TABLE>

The components of the Company's net deferred tax (asset) liability were as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Liability for postretirement benefits other than pensions..... (413) $ (408) $ (421)
Purchase payment funds and liabilities for future policy
benefits.................................................... (9,490) (8,092) (6,493)
Differences in investment valuation........................... -- -- (11,624)
Other......................................................... -- 394 --
--------- --------- ---------
Total deferred tax assets..................................... (9,903) (8,106) (18,538)
Deferred policy acquisition costs and value assigned purchased
insurance in-force.......................................... 15,998 10,614 10,272
Differences in investment valuation........................... 11,973 27,337 --
Other......................................................... 698 -- 428
--------- --------- ---------
Total deferred tax liabilities................................ 28,669 37,951 10,700
--------- --------- ---------
Total net deferred tax (asset) liability...................... $ 18,766 $ 29,845 $ (7,838)
--------- --------- ---------
--------- --------- ---------
</TABLE>

Cash payments for income taxes were $6,653,000, $817,000 and $5,371,000 in
1996, 1995 and 1994, respectively.

6.STATUTORY FINANCIAL INFORMATION

The Company is domiciled in Massachusetts and prepares its statutory financial
statements in accordance with accounting principles and practices prescribed
or permitted by the Division of Insurance of the Commonwealth of
Massachusetts. Prescribed statutory accounting practices include state laws,
regulations, and general administrative rules, as well as a variety of
publications of the NAIC. Permitted statutory accounting practices encompass
all accounting practices that are not prescribed; such practices differ from
state to state, may differ from company to company within a state, and may
change in the future. The Company is not currently utilizing any material
permitted accounting practices in the preparation of its statutory financial
statements.

41
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Statutory surplus differs from shareholder's equity reported in accordance
with generally accepted accounting principles primarily because policy
acquisition costs are expensed when incurred, investment reserves are based on
different assumptions, life insurance reserves are based on different
assumptions and income tax expense reflects only taxes paid or currently
payable. Statutory net income and surplus are as follows:

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income............................................ $ 12,450 $ 8,948 $ 6,686
--------- --------- ---------
Statutory surplus............................................... $ 72,583 $ 66,526 $ 66,239
--------- --------- ---------
</TABLE>

The Company is subject to various state insurance regulatory restrictions that
limit the maximum amounts of dividends available for payment without prior
approval. Under current law, during 1997, approximately $10,131,000 will be
available for payment of dividends by the Company without state insurance
regulatory approval. Dividends in excess of this amount may only be paid with
regulatory approval.

7.FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," as amended during 1994 by Statement of
Financial Accounting Standards No. 119, "Disclosure About Derivative Financial
Instruments and Fair Value of Financial Instruments," requires disclosure of
fair value information about all financial instruments held or owed by a
company except for certain excluded instruments and instruments for which it
is not practicable to estimate fair value. The following methods and
assumptions were used in estimating the fair value of the Company's financial
instruments:

INVESTMENTS

The estimated fair values of investment securities, except for mortgage and
policy loans, are based on quoted market prices, where available, from an
independent pricing service. Fair values for private placement securities and
fixed maturities not provided by an independent pricing service are estimated
by the Company using a current market rate applicable to the yield, credit
quality and maturity of the investments. The fair value of mortgage loans has
been estimated based on discounted cash flow analyses, using interest rates
currently being offered for similar loans to borrowers of similar credit
quality. The fair values of real estate and other invested assets were
determined through Member of Appraisal Institute (MAI) appraisals and in-house
valuations. For policy loans, fair value approximates carrying value.

INSURANCE RESERVES

The estimated fair value of other policyholder funds was based on the cash
surrender value of the Company's financial products portfolio. The fair value
of reserves or liabilities relating to the Company's other insurance products
is not required to be disclosed under generally accepted accounting
principles. However, the fair values of liabilities under all insurance
contracts are taken into consideration in the overall management of the
Company's interest rate risk, which minimizes exposure to changing interest
rates through the matching of investment maturities with the timing of amounts
estimated to be payable under insurance contracts.

42
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The carrying values and estimated fair values of the Company's financial
instruments for which it is practicable to calculate a fair value are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Available for sale:
Fixed maturities...................................................... $ 1,335,232 $ 1,335,232 1,322,540 1,322,540
Equity securities..................................................... 23,371 23,371 15,013 15,013
Short-term investments................................................ 22,424 22,424 28,622 28,622
Mortgage loans.......................................................... 100,185 99,204 72,627 81,789
Real estate............................................................. 1,050 1,050 2,987 3,900
Policy loans............................................................ 31,911 31,911 29,685 29,685
Other invested assets................................................... 2,588 2,692 1,588 1,976
------------ ------------ ------------ ------------
$ 1,516,761 $ 1,515,884 $ 1,473,062 $ 1,483,525
------------ ------------ ------------ ------------
Liabilities:
Other policyholder funds................................................ $ 1,332,748 $ 1,318,215 $ 1,268,318 $ 1,255,516
------------ ------------ ------------ ------------
</TABLE>

8.RELATED PARTY TRANSACTIONS

PRL shares its office facilities and personnel with its subsidiaries. Such
shared costs and expenses are allocated to PRL and its subsidiaries based on
time and usage studies; such allocations would vary depending on the
assumptions underlying those studies. For certain common administration costs,
the Company reimbursed PRL $12,914,000, $13,638,000 and, $10,053,000 in 1996,
1995, and 1994, respectively.

The amounts due PRL as of December 31, 1996, 1995 and 1994 were $1,585,000,
$3,546,000, and $8,174,000, respectively, and are included in other
liabilities.

At December 31, 1996 and 1995, the Company owned 152,575 shares of Textron
common stock with a market value of $14,099,000 and $10,061,000 respectively.
For the years ended December 31, 1996, 1995 and 1994, dividends received on
Textron common stock were $269,000, $238,000 and $214,000, respectively.

9.PENDING ACCOUNTING PRONOUNCEMENTS

In June 1996, the FASB issued Statement of Financial Accounting Standards No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("FAS 125"), which will be effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996. FAS 125 provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings. The statement requires that a liability be
derecognized if and only if either (a) the debtor pays the creditor and is
relieved of its obligation for the liability or (b) the debtor is legally
released from being the primary obligor under the liability either judicially
or by the creditor. The statement provides implementation guidance for
assessing isolation of

43
<PAGE>
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

transferred assets, servicing of financial assets, securitizations, securities
lending transactions, repurchase agreements, risk participations in banker's
acceptances, and extinguishments of liabilities. The adoption of FAS 125 is
not expected to have a material effect on the Company's net income or
financial condition.

11.
LITIGATION AND CONTINGENCIES

In the normal course of its business operations, the Company is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of lawsuits were pending at December 31, 1996. In the opinion of
management, the ultimate liability, if any, arising from this litigation is
not expected to have a material adverse affect on the financial condition of
the Company.

Periodically, the Company is assessed by various state guaranty funds as part
of those funds' activities to collect amounts from solvent insurance companies
to cover certain losses to policyholders that resulted from the insolvency or
rehabilitation of other insurance companies. Each state guaranty fund operates
independent of any other state guaranty fund; as such, the methods by which
assessments are levied against the Company vary from state to state. Also,
some states permit guaranty fund assessments to be partially recovered through
reductions in future premium taxes. Because there are many uncertainties
regarding the ultimate assessments that will be made against the Company for
any specific insolvency or rehabilitation, the Company recognizes its
obligation for guaranty fund assessments when it receives notice that an
amount is payable to a guaranty fund. The Company also recognizes an asset to
the extent that the assessment can be recovered through future reductions in
premium taxes. At December 31, 1996, the Company is not able to reasonably
estimate the potential amounts of any future assessments and, accordingly, the
accompanying financial statements do not include any provision for such future
assessments.

44
<PAGE>
- --------------------------------------------------------------------------------

[LOGO]

- --------------------------------------------------------------------------------

THE PAUL REVERE
VARIABLE ANNUITY
INSURANCE COMPANY
WORCESTER, MA 01608

FORM 9207-96
<PAGE>

THE PAUL REVERE VARIABLE ANNUITY
CONTRACT ACCUMULATION FUND

PART C

OTHER INFORMATION

This registration statement contains the following financial statements,
condensed financial information and exhibits:

ITEM 28(A) FINANCIAL STATEMENTS AND EXHIBITS

INCLUDED IN PROSPECTUS

Per unit income and capital changes and variable annuity unit
values -- condensed financial information for the ten years ended
December 31, 1996.

INCLUDED IN STATEMENT OF ADDITIONAL INFORMATION

The Paul Revere Variable Annuity Contract Accumulation Fund:

Report of Independent Auditors
Statement of assets and liabilities at December 31, 1996.
Statement of investments at December 31, 1996.
Statement of changes in net assets for the two years ended
December 31, 1996.
Statement of operations for the year ended December 31, 1996.
Notes to financial statements.

The Paul Revere Variable Annuity Insurance Company:

Report of Independent Auditors
Balance sheets at December 31, 1996 and 1995.
Statements of income for the three years ended December 31, 1996.
Statements of changes in shareholder's equity for the three years
ended December 31, 1996.
Statements of cash flows for the three years ended
December 31, 1996.
Notes to financial statements.

ITEM 28(B) LIST OF EXHIBITS

1. Consent of Legal Counsel
2. Consent of Independent Auditors

<PAGE>

ITEM 29 DIRECTORS AND OFFICERS OF THE INSURANCE COMPANY

This information is listed in the Statement of Additional Information,
Part B of this Registration Statement under Management, Page 6, and
incorporated in Part C by reference.

ITEM 30 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None.

ITEM 31 NUMBER OF CONTRACTOWNERS
NUMBER OF HOLDERS
TITLE OF CLASS OF RECORD*

Series Q 530

Series N 172

* As of December 31, 1996.

ITEM 32 INDEMNIFICATION

The Paul Revere Variable Annuity Insurance Company maintained a
blanket fidelity bond in the amount of $1,000,000 with National
Union Fire Insurance Company, Pittsburgh, Pennsylvania, covering its
officers and employees and those of the registrant. This bond is
numbered 985-5437.

ITEM 33 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

This information is included in the Prospectus and Statement of
Additional Information, Parts A and B of this Registration Statement,
and incorporated in Part C by reference.

ITEM 34 PRINCIPAL UNDERWRITERS

(a) None.
(b) Included in the Statement of Additional Information, Part B and
incorporated in Part C by reference.
(c) None.

<PAGE>

ITEM 35 LOCATION OF ACCOUNTS AND RECORDS

NAME OF PERSON
MAINTAINING
POSSESSION THEREOF ADDRESS DESCRIPTION

JOHN J. IWANICKI, 18 Chestnut Street Financial
Director, Financial Operations Worcester, MA 01608 Records
and Assistant Controller
THE PAUL REVERE VARIABLE
ANNUITY INSURANCE COMPANY

MICHAEL A. TOMPKINS,
Vice President 18 Chestnut Street Contractowner
THE PAUL REVERE VARIABLE Worcester, MA 01608 Accounts and
ANNUITY INSURANCE COMPANY Records

ITEM 36 MANAGEMENT SERVICES

None.

ITEM 37 UNDERTAKINGS

The undersigned registrant hereby undertakes:

(a) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, to file with the Securities and Exchange
Commission such supplementary and periodic information, documents and
reports as may be prescribed by any rule or regulation of the
Commission heretofore and hereafter duly adopted pursuant to authority
conferred in that Section.

(b) To file with the Securities and Exchange Commission, a Post Effective
Aendment to this Registration Statement, as frequently as is necessary
to ensure that the audited financial statements in the Registration
Statement are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted.

(c) To include either (1) as part of any application to purchase a
contract offered by the Prospectus, a space that an applicant can
check to request a Statement of Additional Information or (2) a
postcard or similar written communication affixed to or included
in the Prospectus that the applicant can remove to send for a
Statement of Additional Information.

d) To deliver any Statement of Additional Information and financial
statements that are required by this Registration Statement promptly
upon written or oral request.
<PAGE>

POST EFFECTIVE AMENDMENT - SIGNATURE PAGE

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, The Paul Revere Variable Annuity Contract
Accumulation Fund has caused this Post Effective Amendment No. 51 to
Registration Statement No. 2-24380 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Worcester, Commonwealth
of Massachusetts on the 30th day of April, 1997.

The Paul Revere Variable Annuity Contract Accumulation Fund

By: /s/John H. Budd
-------------------------------------------
John H. Budd
Chairman, Board of Managers

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Post Effective Amendment No. 51 to
Registration Statement No. 2-24380 has been signed below by the following
persons in the capacities and on the date indicated.

SIGNATURE TITLE DATE

/s/Gordon T. Miller Vice Chairman 04/30/97
- ------------------- Board of Managers
Gordon T. Miller

/s/Aubrey K. Reid Jr Member 04/30/97
- ------------------- Board of Managers
Aubrey K. Reid, Jr.

/s/Joan Sadowsky Member 04/30/97
- ------------------- Board of Managers
Joan Sadowsky

/s/William J. Short Member 04/30/97
- ------------------- Board of Managers
William J. Short

/S/John H. Budd Chairman 04/30/97
- ------------------- Board of Managers
John H. Budd
1 of 1

<PAGE>

POST EFFECTIVE AMENDMENT - SIGNATURE PAGE

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, The Paul Revere Variable Annuity Contract
Accumulation Fund has caused this Post Effective Amendment No. 51 to
Registration Statement No. 2-24380 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chattanooga, State of
Tennessee on the 30th day of April, 1997.

The Paul Revere Variable Annuity Insurance Company

By:/s/J. Harold Chandler, Chairman, President & CEO
------------------------------
J. Harold Chandler, Chairman, President & CEO

SIGNATURE TITLE DATE

/s/William L. Armstrong Director 04/30/97
- -------------------
William L. Armstrong

/s/William H. Bolinder Director 04/30/97
- -------------------
William H. Bolinder

/s/J. Harold Chandler Chairman, President & CEO 04/30/97
- -------------------
J. Harold Chandler

/s/Steven M. Gluckstern Director 04/30/97
- ----------------------
Steven M. Gluckstern
1 of 2

<PAGE>

SIGNATURE TITLE DATE

/s/Charlotte M. Heffner Director 04/30/97
- ---------------------
Charlotte M. Heffner

/s/Hugh B. Jacks Director 04/30/97
- ---------------------
Hugh B. Jacks

/s/William B. Johnson Director 04/30/97
- ---------------------
William B. Johnson

/s/Hugh O. Maclellan, Jr. Director 04/30/97
- ---------------------
Hugh O. Maclellan, Jr.

/s/A.S. MacMillan Director 04/30/97
- ---------------------
A.S. MacMillan

/s/C. William Pollard Director 04/30/97
- ---------------------
C. William Pollard

/s/Scott L. Probasco, Jr. Director 04/30/97
- ---------------------
Scott L. Probasco, Jr.

/s/Steven S Reinemund Director 04/30/97
- ---------------------
Steven S Reinemund

/s/Burton E. Sorensen Director 04/30/97
- ---------------------
Burton E. Sorensen

/s/Thomas R. Watjen Director, Vice Chairman & 04/30/97
- --------------------- Chief Financial Officer
Thomas R. Watjen

2 of 2

<PAGE>

Exhibit 1

CONSENT OF
LEGAL COUNSEL

Securities and Exchange Commission
Washington, D.C. 20549

As Senior Vice President, General Counsel and Secretary of The Paul Revere
Variable Annuity Insurance Company, I hereby consent to the reference of my name
under the caption "Legal Opinions" in the Prospectus filed under Post Effective
Amendment No. 51 to Registration No. 2-24380. Permission is granted to use this
letter as an exhibit to Post Effective Amendment No. 51 to Registration No.
2-24380.

I further state that there are no material changes in this Post Effective
Amendment No. 51 to Registration No. 2-24380 from Post Effective Amendment No.
50 for purposes of filing effective May 1, 1997, pursuant to Paragraph (b) or
Rules 485 and 486.

/S/John H. Budd
-----------------------------
John H. Budd
Senior Vice President,
General Counsel and Secretary

Worcester, Massachusetts
April 30, 1997

<PAGE>

Exhibit 2

CONSENT
OF INDEPENDENT AUDITORS

We consent to the use of our report dated February 14, 1997, with respect to
the financial statements of The Paul Revere Variable Annuity Contract
Accumulation Fund, and our report dated March 27, 1997, with respect to The Paul
Revere Variable Annuity Insurance Company, in the Registration Statement (Form
N-3 No. 2-24380), and related Prospectus and Statement of Additional Information
of The Paul Revere Variable Annuity Contract Accumulation Fund dated May 1,
1997.

ERNST & YOUNG LLP

Boston, Massachusetts
April 29, 1997