UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-01356
THE PAUL REVERE VARIABLE ANNUITY
CONTRACT ACCUMULATION FUND
(Exact name of Registrant as specified in charter)
18 Chestnut Street
Worcester, MA 10608
(Address of principal executive offices)
CT Corporation System
101 Federal Street
Boston, MA 02110
(Name and address of agent for service)
Registrant’s telephone number, including area code: (508) 792-6358
Date of fiscal year end: December 31
Date of reporting period: January 31, 2004 - December 31, 2004
| Item 1. | Reports to Stockholders. |
Annual Report
December 31, 2004
Board of Managers of
The Accumulation Fund:
Donald E. Boggs, Chairman
Gordon T. Miller, Vice Chairman
David G. Fussell
Joan Sadowsky
H. C. Goodwin
THE PAUL REVERE VARIABLE ANNUITY
CONTRACT ACCUMULATION FUND
A Separate Account of The Paul Revere
Variable Annuity Insurance Company
This report and the financial statements attached are submitted for the general information of contractowners and are not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale of The Paul Revere Variable Annuity Insurance Company contracts. Such offering is made only by prospectus, which includes details as to offering price and other material information.
TO OUR CONTRACTOWNERS AND PARTICIPANTS:
THE PAUL REVERE VARIABLE ANNUITY
CONTRACT ACCUMULATION FUND
VARIABLE ANNUITY CONTRACTS
This year end report of the Fund contains the financial statements and portfolio information of the Fund for the period ended December 31, 2004.
For investors, by year 2004 end, strong fundamental factors such as corporate spending and earnings growth moved equity markets to solid gains for the year. During the 12-month period, oil prices, rising short-term interest rates, a volatile and retreating U.S. dollar, record budget and trade deficits, and war in Iraq presented a challenging market environment and for a time it seemed these factors would lead to flat or negative annual performance for many investments. But by the last quarter of 2004, oil prices retreated, investors seemed to adopt a less negative view of other broad economic issues and the markets appeared to recognize that both corporate profits and economic growth were up solidly, if not spectacularly, for the year. Some economists are projecting that the environment is right for sustainable modest growth in both GDP (gross domestic product) and corporate earnings.
Against this backdrop, the portfolio outperformed the Russell 1000 Growth Index during the second half of 2004. The top three sectors that contributed to performance were health care, industrial goods & services, and retailing. The sectors that detracted the most were utilities & communications, financial services, and auto & housing. The portfolio’s philosophy and approach remain consistent.
Thank you for your continued support.
|
| Sincerely, |
|
| /S/ DONALD E. BOGGS |
| Donald E. Boggs |
| Chairman, Board of Managers |
The Paul Revere Variable Annuity |
Contract Accumulation Fund |
Additional Information.
REMUNERATION OF THE BOARD OF MANAGERS
UnumProvident paid all expenses relative to the operation of the Fund including Board of Managers’ fees. Accordingly, no member of the Board of Managers receives any remuneration from the Fund. The total aggregate remuneration paid to all members of the Board of Managers for the fiscal year ended December 31, 2004, was $7,200.00. This amount represents consideration paid for attendance at meetings of the Board of Managers. Those members of the Board of Managers deemed to be interested persons received direct remuneration or an indirect benefit as officers of PRV. None of the members of the Board of Managers, or officers of the Fund, who are also officers or employees of PRV or its affiliates, received any remuneration from the Fund.
Information concerning the nominees for re-election, as well as members of the Board of Managers whose terms will continue, follows with the same abbreviations of company names as used previously. Unless the contractowner withholds authorization on the Proxy, it is intended that the interest represented by the Proxy will be voted in favor of the election of the nominees.
None of the members of the Board of Managers who are not “interested persons” of the Fund within the meaning of section 2(a)(19) of the Investment Company Act of 1940 owns beneficially or of record securities of PRV or any of its affiliates.
PROXY VOTING POLICIES
A description of the Fund’s proxy voting policy and procedures is available without charge, upon written request, from the Secretary of the Board of Managers. Please send a written request to the Secretary of the Board of Managers, c/o UnumProvident Corporation at 1 Fountain Square, Chattanooga, Tennessee 37402. You may also view a description of the Fund’s proxy voting policy and procedures on the SEC’s (Securities and Exchange Commission) website, [www.sec.gov].
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended is available via the methods noted above.
QUARTERLY FILING REQUIREMENTS
In November 2004, the Fund began filing its complete schedule of investments with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which when filed, is available without charge, upon written request, from the Secretary of the Board of Managers. Please send a written request to the Secretary of the Board of Managers, c/o UnumProvident Corporation at 1 Fountain Square, Chattanooga, Tennessee 37402. You may also view its complete schedule of investments on Form N-Q on the SEC’s (Securities and Exchange Commission) website, [www.sec.gov].
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information (SAI) includes additional information about members of the board of managers of the Registrant, and is available, without charge, upon request, toll-free at (800) 718-8824 for contractowners to call to request the SAI.
INFORMATION CONCERNING MEMBERS OF THE BOARD OF MANAGERS
| | | | | | | | | | |
(1) Name, Address, and Age
| | (2) Position(s) Held with Fund
| | (3) Term of Office and Length of Time Served
| | (4) Principal Occupation(s) During Past 5 Years
| | (5) Number of Portfolios in Fund Complex Overseen by Director or Nominee for Director
| | (6) Other Directorships Held by Director or Nominee For Director
|
| | | | | |
H. C. Goodwin (70) 24 Waters Road Sutton, MA 01590 | | Member, Board of Managers | | 2004-2007 3 years of service | | President of Manufacturers Service Center, Inc. | | 2 | | None |
| | | | | |
Gordon T. Miller (82) 14 Eastwood Road Shrewsbury, MA 01545 | | Vice Chairman, Board of Managers | | 2004-2007 36 years of service | | Retired; Former Vice President and Director of Industrial Relations of Barry Wright Corporation, Newton Lower Falls, MA. (antivibration products) | | 2 | | None |
| | | | | |
Joan Sadowsky (75) 770 Salisbury Street Apt. 576 Worcester, MA 01609 | | Member, Board of Managers | | 2003-2006 19 years of service | | Retired; Former Vice President of Human Resources, Atlas Distributing Corporation, Auburn, MA (beverage distribution) | | 2 | | None |
The members of the Board of Managers listed below are “interested persons” of the Fund within the meaning of section 2(a)(19) of the Investment Company Act of 1940.
INFORMATION CONCERNING MEMBERS OF THE BOARD OF MANAGERS
(CONTINUED)
| | | | | | | | | | |
(1) Name, Address, and Age
| | (2) Position(s) Held with Fund
| | (3) Term of Office and Length of Time Served
| | (4) Principal Occupation(s) During Past 5 Years
| | (5) Number of Portfolios in Fund Complex Overseen by Director or Nominee for Director
| | (6) Other Directorships Held by Director or Nominee For Director
|
| | | | | |
Donald E. Boggs* (59) 1 Fountain Square Chattanooga, TN 37402 | | Chairman Board of Managers | | 2004-2007 7 years of service | | Retired, Senior Vice President UnumProvident Corporation Chattanooga, Tennessee | | 2 | | None |
| | | | | |
David G. Fussell* (57) 1 Fountain Square Chattanooga, TN 37402 | | Member, Board of Managers | | 2003-2006 3 years of service | | Senior Vice President UnumProvident Corporation, Chattanooga, Tennessee | | 2 | | None |
| * | Officers of PRV, (the investment advisor, underwriter and sponsoring insurance company) and other subsidiaries within the UnumProvident holding company system. |
None of the members of the Board of Managers who are not “interested persons” of the Fund within the meaning of section 2(a)(19) of the Investment Company Act of 1940 owns beneficially or of record securities of PRV or any of its affiliates.
AUDITED FINANCIAL STATEMENTS
The Paul Revere Variable Annuity Contract Accumulation Fund
Years Ended December 31, 2004 and 2003
The Paul Revere Variable Annuity Contract Accumulation Fund
Audited Financial Statements
December 31, 2004
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 statements of assets and liabilities of The Paul Revere Variable Annuity Contract Accumulation Fund (comprising the Qualified and Non-Qualified Portfolios) as of December 31, 2004 and 2003, including the schedule of investments as of December 31, 2004, and the related statements of operations and changes in net assets for each of the three years in the period ended December 31, 2004, and the supplementary information for each of the ten years in the period then ended. These financial statements and supplementary information are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and supplementary information based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and supplementary information are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and supplementary information, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 and 2003, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and supplementary information referred to above present fairly, in all material respects, the financial position of The Paul Revere Variable Annuity Contract Accumulation Fund at December 31, 2004 and 2003, the results of its operations and the changes in its net assets for each of the three years in the period ended December 31, 2004, and the supplementary information for each of the ten years in the period then ended, in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Chattanooga, Tennessee
February 9, 2005
1
Statements of Assets and Liabilities
| | | | | | | | | | | | |
| | | December 31,
|
| | | 2004
Series Q
(Qualified)
| | 2003
Series Q
(Qualified)
| | 2004
Series N
(Non-Qualified)
| | 2003
Series N
(Non-Qualified)
|
ASSETS | | | | | | | | | | | | |
| | | | |
Investments in securities at market value
(Cost: Series Q 2004-$8,741,724; 2003-$8,741,721)
(Cost: Series N 2004-$1,429,760; 2003-$1,604,679)
(see Schedule of Investments) | | $ | 9,660,768 | | $ | 9,521,516 | | $ | 1,584,823 | | $ | 1,732,118 |
Cash | | | 49,793 | | | 286 | | | 5,153 | | | 6,160 |
Dividends and interest receivable | | | 6,040 | | | 7,720 | | | 972 | | | 1,412 |
Receivable for investments sold | | | 75,585 | | | 140,928 | | | 12,952 | | | 26,959 |
Receivable from The Paul Revere Variable Annuity | | | | | | | | | | | | |
Insurance Company | | | — | | | — | | | — | | | 9,168 |
| | |
|
| |
|
| |
|
| |
|
|
Total assets | | | 9,792,186 | | | 9,670,450 | | | 1,603,900 | | | 1,775,817 |
| | |
|
| |
|
| |
|
| |
|
|
LIABILITIES | | | | | | | | | | | | |
| | | | |
Payable for investments purchased | | | 13,158 | | | 128,965 | | | — | | | 33,804 |
Payable to The Paul Revere Variable Annuity Insurance Company | | | 49,083 | | | 53,242 | | | 6,989 | | | 6,867 |
| | |
|
| |
|
| |
|
| |
|
|
Total liabilities | | | 62,241 | | | 182,207 | | | 6,989 | | | 40,671 |
| | |
|
| |
|
| |
|
| |
|
|
TOTAL NET ASSETS | | $ | 9,729,945 | | $ | 9,488,243 | | $ | 1,596,911 | | $ | 1,735,146 |
| | |
|
| |
|
| |
|
| |
|
|
CONTRACT OWNERS’ EQUITY | | | | | | | | | | | | |
| | | | |
Deferred contracts terminable by owner | | $ | 7,648,001 | | $ | 7,284,377 | | $ | 760,439 | | $ | 891,819 |
Currently payable contracts | | | 2,081,944 | | | 2,203,866 | | | 836,472 | | | 843,327 |
| | |
|
| |
|
| |
|
| |
|
|
Total net assets | | $ | 9,729,945 | | $ | 9,488,243 | | $ | 1,596,911 | | $ | 1,735,146 |
| | |
|
| |
|
| |
|
| |
|
|
ACCUMULATION UNITS OUTSTANDING | | | 796,794 | | | 825,922 | | | 135,576 | | | 155,878 |
| | |
|
| |
|
| |
|
| |
|
|
NET ASSET VALUE PER ACCUMULATION UNIT | | $ | 12.211 | | $ | 11.488 | | $ | 11.779 | | $ | 11.131 |
| | |
|
| |
|
| |
|
| |
|
|
See accompanying notes to financial statements.
2
Statements of Changes in Net Assets
| | | | | | | | | | | | |
| | | For the years ended December 31,
| |
| | | 2004
Series Q
(Qualified)
| | | 2003
Series Q
(Qualified)
| | | 2002
Series Q
(Qualified)
| |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | | | | | |
| | | |
Operations: | | | | | | | | | | | | |
Net investment loss | | $ | (29,119 | ) | | $ | (66,003 | ) | | $ | (71,823 | ) |
Net realized gain (loss) on investments | | | 465,869 | | | | 69,435 | | | | (3,392,842 | ) |
Net increase (decrease) in unrealized appreciation of investments | | | 139,249 | | | | 1,831,411 | | | | (579,955 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
Increase (decrease) in net assets from operations | | | 575,999 | | | | 1,834,843 | | | | (4,044,620 | ) |
Contract receipts: | | | | | | | | | | | | |
Gross purchase payments received | | | — | | | | 6,459 | | | | 3,217 | |
Deductions from purchase payments | | | — | | | | 201 | | | | 48 | |
| | |
|
|
| |
|
|
| |
|
|
|
Net purchase payments received | | | — | | | | 6,258 | | | | 3,169 | |
Payments to contract owners: | | | | | | | | | | | | |
Annuity payments to contract owners | | | 243,701 | | | | 250,445 | | | | 267,259 | |
Terminations and withdrawals to contract owners | | | 90,596 | | | | 85,113 | | | | 524,495 | |
| | |
|
|
| |
|
|
| |
|
|
|
Total payments to contract owners | | | 334,297 | | | | 335,558 | | | | 791,754 | |
| | |
|
|
| |
|
|
| |
|
|
|
Net contract payments to contract owners | | | (334,297 | ) | | | (329,300 | ) | | | (788,585 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
Total increase (decrease) in net assets | | | 241,702 | | | | 1,505,543 | | | | (4,833,205 | ) |
| | | |
NET ASSETS | | | | | | | | | | | | |
| | | |
Beginning of year | | | 9,488,243 | | | | 7,982,700 | | | | 12,815,905 | |
| | |
|
|
| |
|
|
| |
|
|
|
End of year | | $ | 9,729,945 | | | $ | 9,488,243 | | | $ | 7,982,700 | |
| | |
|
|
| |
|
|
| |
|
|
|
| |
| | | For the years ended December 31,
| |
| | | 2004
Series N
(Non-Qualified)
| | | 2003
Series N
(Non-Qualified)
| | | 2002
Series N
(Non-Qualified)
| |
INCREASE (DECREASE) IN NET ASSETS | | | | | | | | | | | | |
| | | |
Operations: | | | | | | | | | | | | |
Net investment loss | | $ | (10,809 | ) | | $ | (17,684 | ) | | $ | (19,214 | ) |
Net realized gain (loss) on investments | | | 63,344 | | | | 22,977 | | | | (683,478 | ) |
Net increase (decrease) in unrealized appreciation of investments | | | 27,625 | | | | 331,245 | | | | (112,246 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
Increase (decrease) in net assets from operations | | | 80,160 | | | | 336,538 | | | | (814,938 | ) |
Payments to contract owners: | | | | | | | | | | | | |
Annuity payments to contract owners | | | 52,283 | | | | 64,419 | | | | 146,533 | |
Terminations and withdrawals to contract owners | | | 166,112 | | | | 529 | | | | 67,138 | |
| | |
|
|
| |
|
|
| |
|
|
|
Total payments to contract owners | | | 218,395 | | | | 64,948 | | | | 213,671 | |
| | |
|
|
| |
|
|
| |
|
|
|
Net contract payments to contract owners | | | (218,395 | ) | | | (64,948 | ) | | | (213,671 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
Total increase (decrease) in net assets | | | (138,235 | ) | | | 271,590 | | | | (1,028,609 | ) |
| | | |
NET ASSETS | | | | | | | | | | | | |
| | | |
Beginning of year | | | 1,735,146 | | | | 1,463,556 | | | | 2,492,165 | |
| | |
|
|
| |
|
|
| |
|
|
|
End of year | | $ | 1,596,911 | | | $ | 1,735,146 | | | $ | 1,463,556 | |
| | |
|
|
| |
|
|
| |
|
|
|
See accompanying notes to financial statements.
3
Statements of Operations
| | | | | | | | | | | | |
| | | For the years ended December 31,
| |
| | | 2004
Series Q
(Qualified)
| | | 2003
Series Q
(Qualified)
| | | 2002
Series Q
(Qualified)
| |
INVESTMENT LOSS | | | | | | | | | | | | |
| | | |
Income: | | | | | | | | | | | | |
Dividends | | $ | 117,251 | | | $ | 73,979 | | | $ | 69,916 | |
Interest | | | 6,923 | | | | 3,572 | | | | 18,092 | |
| | |
|
|
| |
|
|
| |
|
|
|
Total income | | | 124,174 | | | | 77,551 | | | | 88,008 | |
| | |
|
|
| |
|
|
| |
|
|
|
| | | |
Expenses: | | | | | | | | | | | | |
Mortality and expense risk fees | | | 93,796 | | | | 87,303 | | | | 98,154 | |
Investment management and advisory service fees | | | 46,897 | | | | 43,651 | | | | 49,077 | |
Professional services | | | 12,600 | | | | 12,600 | | | | 12,600 | |
| | |
|
|
| |
|
|
| |
|
|
|
Total expenses | | | 153,293 | | | | 143,554 | | | | 159,831 | |
| | |
|
|
| |
|
|
| |
|
|
|
| | | |
Net investment loss | | | (29,119 | ) | | | (66,003 | ) | | | (71,823 | ) |
| | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | | | | | | | | | | | | |
| | | |
Net realized gain (loss) on investments sold | | | 465,869 | | | | 69,435 | | | | (3,392,842 | ) |
Net increase (decrease) in unrealized appreciation of investments | | | 139,249 | | | | 1,831,411 | | | | (579,955 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
Net realized and unrealized gain (loss) on investments | | | 605,118 | | | | 1,900,846 | | | | (3,972,797 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
Increase (decrease) in net assets from operations | | $ | 575,999 | | | $ | 1,834,843 | | | $ | (4,044,620 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
| |
| | | For the years ended December 31,
| |
| | | 2004
Series N
(Non-Qualified)
| | | 2003
Series N
(Non-Qualified)
| | | 2002
Series N
(Non-Qualified)
| |
INVESTMENT LOSS | | | | | | | | | | | | |
| | | |
Income: | | | | | | | | | | | | |
Dividends | | $ | 19,649 | | | $ | 13,731 | | | $ | 13,265 | |
Interest | | | 1,712 | | | | 75 | | | | 3,126 | |
| | |
|
|
| |
|
|
| |
|
|
|
Total income | | | 21,361 | | | | 13,806 | | | | 16,391 | |
| | |
|
|
| |
|
|
| |
|
|
|
| | | |
Expenses: | | | | | | | | | | | | |
Mortality and expense risk fees | | | 16,407 | | | | 15,953 | | | | 18,697 | |
Investment management and advisory service fees | | | 8,203 | | | | 7,977 | | | | 9,348 | |
Professional services | | | 7,560 | | | | 7,560 | | | | 7,560 | |
| | |
|
|
| |
|
|
| |
|
|
|
Total expenses | | | 32,170 | | | | 31,490 | | | | 35,605 | |
| | |
|
|
| |
|
|
| |
|
|
|
| | | |
Net investment loss | | | (10,809 | ) | | | (17,684 | ) | | | (19,214 | ) |
| | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | | | | | | | | | | | | |
| | | |
Net realized gain (loss) on investments sold | | | 63,344 | | | | 22,977 | | | | (683,478 | ) |
Net increase (decrease) in unrealized appreciation of investments | | | 27,625 | | | | 331,245 | | | | (112,246 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
Net realized and unrealized loss on investments | | | 90,969 | | | | 354,222 | | | | (795,724 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
Increase (decrease) in net assets from operations | | $ | 80,160 | | | $ | 336,538 | | | $ | (814,938 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
See accompanying notes to financial statements.
4
Schedule of Investments
December 31, 2004
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | Series Q (Qualified)
| | | | | | | Series N (Non-Qualified)
| | | |
Securities of Unaffiliated Companies
| | Number
of
Shares
| | Cost
| | Market
Value
| | % of
Net
Assets
| | | Number
of
Shares
| | Cost
| | Market
Value
| | % of
Net
Assets
| |
Common Stocks | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Agriculture | | | | | | | | | | | | | | | | | | | | | | |
Monsanto Co. | | 1,000 | | $ | 35,247 | | $ | 55,550 | | 0.57 | % | | 130 | | $ | 4,519 | | $ | 7,222 | | 0.45 | % |
| | | | | | | | |
Apparel | | | | | | | | | | | | | | | | | | | | | | |
Abercrombie & Fitch Co. | | 1,100 | | | 51,464 | | | 51,645 | | | | | 200 | | | 9,357 | | | 9,390 | | | |
NIKE, Inc., Class B | | 1,400 | | | 101,867 | | | 126,966 | | | | | 180 | | | 13,407 | | | 16,324 | | | |
Nordstrom, Inc. | | 900 | | | 36,392 | | | 42,057 | | | | | 200 | | | 8,087 | | | 9,346 | | | |
Reebok International Ltd. | | 1,800 | | | 65,431 | | | 79,200 | | | | | 280 | | | 10,182 | | | 12,320 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 255,154 | | | 299,868 | | 3.08 | % | | | | | 41,033 | | | 47,380 | | 2.97 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | | | |
Beverages | | | | | | | | | | | | | | | | | | | | | | |
PepsiCo, Inc. | | 5,190 | | | 243,871 | | | 270,918 | | 2.78 | % | | 820 | | | 39,017 | | | 42,804 | | 2.68 | % |
| | | | | | | | |
Broadcasting & Media | | | | | | | | | | | | | | | | | | | | | | |
Comcast Corporation Class A * | | 4,700 | | | 145,942 | | | 156,416 | | | | | 830 | | | 26,217 | | | 27,622 | | | |
Getty Images, Inc. * | | 1,200 | | | 69,148 | | | 82,620 | | | | | 180 | | | 10,562 | | | 12,393 | | | |
Omnicom Group, Inc. | | 600 | | | 48,165 | | | 50,592 | | | | | 100 | | | 8,028 | | | 8,432 | | | |
Time Warner, Inc. * | | 6,400 | | | 106,960 | | | 124,416 | | | | | 1,050 | | | 17,394 | | | 20,412 | | | |
Univision Communications, Inc. * | | 1,400 | | | 45,384 | | | 40,978 | | | | | 180 | | | 5,799 | | | 5,269 | | | |
Viacom, Inc. Class B | | 1,510 | | | 61,181 | | | 54,949 | | | | | 256 | | | 11,093 | | | 9,316 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 476,780 | | | 509,971 | | 5.24 | % | | | | | 79,093 | | | 83,444 | | 5.22 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | | | |
Computer Systems & Services | | | | | | | | | | | | | | | | | | | | | | |
Akamai Technologies, Inc. * | | 2,000 | | | 30,444 | | | 26,060 | | | | | 350 | | | 5,315 | | | 4,561 | | | |
Dell, Inc. * | | 8,930 | | | 283,911 | | | 376,310 | | | | | 1,400 | | | 46,672 | | | 58,996 | | | |
eBay, Inc. * | | 2,000 | | | 132,145 | | | 232,560 | | | | | 280 | | | 18,252 | | | 32,558 | | | |
EMC Corp. | | 12,100 | | | 143,256 | | | 179,927 | | | | | 2,030 | | | 24,046 | | | 30,186 | | | |
Fiserv, Inc. * | | 2,200 | | | 84,602 | | | 88,418 | | | | | 370 | | | 14,230 | | | 14,870 | | | |
Mercury Interactive Corporation * | | 3,500 | | | 155,348 | | | 159,425 | | | | | 600 | | | 26,615 | | | 27,330 | | | |
Microsoft Corp. | | 14,180 | | | 375,045 | | | 378,748 | | | | | 2,200 | | | 58,171 | | | 58,762 | | | |
Monster Worldwide, Inc. * | | 2,900 | | | 82,137 | | | 97,556 | | | | | 500 | | | 14,145 | | | 16,820 | | | |
Network Appliance, Inx. * | | 3,600 | | | 81,299 | | | 119,592 | | | | | 560 | | | 12,653 | | | 18,603 | | | |
Oracle Corporation * | | 17,340 | | | 215,163 | | | 237,905 | | | | | 2,800 | | | 34,806 | | | 38,416 | | | |
Research In Motion, Ltd. * | | 900 | | | 61,966 | | | 74,178 | | | | | 100 | | | 6,234 | | | 8,242 | | | |
Symantec Corp. * | | 3,000 | | | 74,227 | | | 77,280 | | | | | 500 | | | 12,385 | | | 12,880 | | | |
VERITAS Software Corporation * | | 5,665 | | | 157,232 | | | 161,736 | | | | | 740 | | | 16,286 | | | 21,127 | | | |
Yahoo!, Inc. * | | 5,600 | | | 162,588 | | | 211,008 | | | | | 930 | | | 26,839 | | | 35,042 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 2,039,363 | | | 2,420,703 | | 24.88 | % | | | | | 316,649 | | | 378,393 | | 23.70 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | | | |
Consumer Goods & Services | | | | | | | | | | | | | | | | | | | | | | |
Avon Products, Inc. | | 2,800 | | | 115,706 | | | 108,360 | | | | | 500 | | | 20,685 | | | 19,350 | | | |
Proctor & Gamble Co. | | 4,400 | | | 239,695 | | | 242,352 | | | | | 660 | | | 36,001 | | | 36,352 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 355,401 | | | 350,712 | | 3.60 | % | | | | | 56,686 | | | 55,702 | | 3.49 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | | | |
Electronics | | | | | | | | | | | | | | | | | | | | | | |
Amphenol Corp. * | | 2,700 | | | 81,386 | | | 99,198 | | | | | 460 | | | 13,859 | | | 16,901 | | | |
Emerson Electric Co. | | 1,600 | | | 98,564 | | | 112,160 | | | | | 280 | | | 17,128 | | | 19,628 | | | |
Fisher Scientific International * | | 2,400 | | | 135,986 | | | 149,712 | | | | | 480 | | | 27,261 | | | 29,942 | | | |
Texas Instruments, Inc. | | 4,600 | | | 112,662 | | | 113,252 | | | | | 800 | | | 19,593 | | | 19,696 | | | |
Waters Corp. * | | 2,200 | | | 90,490 | | | 102,938 | | | | | 360 | | | 15,109 | | | 16,844 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 519,088 | | | 577,260 | | 5.93 | % | | | | | 92,950 | | | 103,011 | | 6.45 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
See accompanying notes to financial statements.
5
Schedule of Investments (continued)
December 31, 2004
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | Series Q (Qualified)
| | | | | | | Series N (Non-Qualified)
| | | |
| | | Number
Of
Shares
| | Cost
| | Market
Value
| | % of
Net
Assets
| | | Number
Of
Shares
| | Cost
| | Market
Value
| | % of
Net
Assets
| |
| | | | | | | | |
Financial Institutions | | | | | | | | | | | | | | | | | | | | | | |
American Express Company | | 3,400 | | $ | 163,599 | | $ | 191,658 | | | | | 560 | | $ | 28,024 | | $ | 31,567 | | | |
Citigroup, Inc. | | 3,624 | | | 149,878 | | | 174,604 | | | | | 556 | | | 23,692 | | | 26,788 | | | |
Goldman Sachs Group, Inc. | | 1,710 | | | 160,705 | | | 177,908 | | | | | 280 | | | 26,882 | | | 29,131 | | | |
Merrill Lynch & Co., Inc. | | 1,000 | | | 59,843 | | | 59,770 | | | | | 200 | | | 11,969 | | | 11,954 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 534,025 | | | 603,940 | | 6.21 | % | | | | | 90,567 | | | 99,440 | | 6.22 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | | | |
Leisure & Tourism | | | | | | | | | | | | | | | | | | | | | | |
Carnival Corp. | | 3,500 | | | 157,458 | | | 201,705 | | | | | 560 | | | 25,227 | | | 32,273 | | | |
Harley-Davidson, Inc. | | 900 | | | 51,873 | | | 54,675 | | | | | 180 | | | 10,375 | | | 10,935 | | | |
Starwood Hotels & Resorts Worldwide, Inc. | | 2,000 | | | 90,613 | | | 116,800 | | | | | 280 | | | 12,590 | | | 16,352 | | | |
Walt Disney Co. | | 4,300 | | | 105,735 | | | 119,540 | | | | | 800 | | | 19,750 | | | 22,240 | | | |
Yum! Brands, Inc. | | 2,200 | | | 91,838 | | | 103,796 | | | | | 400 | | | 16,710 | | | 18,872 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 497,517 | | | 596,516 | | 6.13 | % | | | | | 84,652 | | | 100,672 | | 6.30 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | | | |
Machinery | | | | | | | | | | | | | | | | | | | | | | |
Caterpillar, Inc. | | 2,000 | | | 166,075 | | | 195,020 | | 2.00 | % | | 400 | | | 33,511 | | | 39,004 | | 2.44 | % |
| | | | | | | | |
Manufacturing | | | | | | | | | | | | | | | | | | | | | | |
Cooper Industries, Ltd. Class A | | 1,100 | | | 63,148 | | | 74,679 | | 0.77 | % | | 180 | | | 10,178 | | | 12,220 | | 0.77 | % |
| | | | | | | | |
Medical & Health Products | | | | | | | | | | | | | | | | | | | | | | |
Abbott Laboratories | | 6,100 | | | 248,633 | | | 284,565 | | | | | 1,030 | | | 42,280 | | | 48,050 | | | |
Amgen, Inc. * | | 2,580 | | | 142,737 | | | 165,507 | | | | | 520 | | | 29,650 | | | 33,358 | | | |
Celgene Corp. * | | 2,200 | | | 64,133 | | | 58,366 | | | | | 300 | | | 8,746 | | | 7,959 | | | |
Eli Lilly & Co. | | 1,800 | | | 128,664 | | | 102,150 | | | | | 280 | | | 19,904 | | | 15,890 | | | |
Genentech, Inc. * | | 1,200 | | | 59,267 | | | 65,328 | | | | | 210 | | | 10,404 | | | 11,432 | | | |
Genzyme Corporation * | | 3,600 | | | 175,073 | | | 209,052 | | | | | 550 | | | 27,248 | | | 31,939 | | | |
Gilead Sciences, Inc. * | | 2,500 | | | 81,461 | | | 87,475 | | | | | 430 | | | 13,328 | | | 15,046 | | | |
Imclone Systems, Inc. * | | 1,200 | | | 62,864 | | | 55,296 | | | | | 200 | | | 10,451 | | | 9,216 | | | |
Johnson & Johnson | | 7,260 | | | 394,167 | | | 460,429 | | | | | 1,170 | | | 62,991 | | | 74,201 | | | |
Medtronic, Inc. | | 3,550 | | | 171,909 | | | 176,329 | | | | | 620 | | | 30,459 | | | 30,795 | | | |
WellPoint, Inc. * | | 900 | | | 99,402 | | | 103,500 | | | | | 200 | | | 22,093 | | | 23,000 | | | |
Wyeth | | 6,300 | | | 254,775 | | | 268,317 | | | | | 1,030 | | | 41,471 | | | 43,868 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 1,883,085 | | | 2,036,314 | | 20.94 | % | | | | | 319,025 | | | 344,754 | | 21.59 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | | | |
Semiconductors | | | | | | | | | | | | | | | | | | | | | | |
Analog Devices, Inc. | | 2,570 | | | 88,921 | | | 94,884 | | | | | 390 | | | 12,714 | | | 14,399 | | | |
Linear Technology Corporation | | 1,310 | | | 42,793 | | | 50,776 | | | | | 230 | | | 7,663 | | | 8,915 | | | |
KLA Tencor Corp. * | | 1,100 | | | 47,702 | | | 51,238 | | | | | 200 | | | 8,673 | | | 9,316 | | | |
Maxim Integrated Products, Inc. | | 1,040 | | | 45,113 | | | 44,086 | | | | | 170 | | | 6,557 | | | 7,206 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 224,529 | | | 240,984 | | 2.48 | % | | | | | 35,607 | | | 39,836 | | 2.50 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | | | |
Stores | | | | | | | | | | | | | | | | | | | | | | |
Best Buy Co., Inc. | | 2,500 | | | 135,889 | | | 148,550 | | | | | 370 | | | 20,299 | | | 21,986 | | | |
CVS Corporation | | 3,200 | | | 137,531 | | | 144,225 | | | | | 580 | | | 25,181 | | | 26,141 | | | |
Kohl’s Corporation * | | 1,670 | | | 80,694 | | | 82,113 | | | | | 310 | | | 14,944 | | | 15,243 | | | |
Lowe’s Cos., Inc. | | 1,100 | | | 60,114 | | | 63,349 | | | | | 180 | | | 9,922 | | | 10,366 | | | |
Petsmart, Inc. | | 1,800 | | | 50,598 | | | 63,954 | | | | | 270 | | | 7,700 | | | 9,593 | | | |
Staples, Inc. * | | 3,700 | | | 115,414 | | | 124,727 | | | | | 700 | | | 21,775 | | | 23,597 | | | |
Target Corporation | | 2,430 | | | 91,243 | | | 126,190 | | | | | 360 | | | 13,848 | | | 18,695 | | | |
W. W. Grainger, Inc. | | 600 | | | 39,334 | | | 39,972 | | | | | 100 | | | 6,544 | | | 6,662 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 710,817 | | | 793,080 | | 8.15 | % | | | | | 120,213 | | | 132,283 | | 8.28 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | | | |
Telecommunications | | | | | | | | | | | | | | | | | | | | | | |
Adtran, Inc. | | 1,900 | | | 57,876 | | | 36,366 | | | | | 280 | | | 8,686 | | | 5,359 | | | |
Cisco Systems, Inc. * | | 18,640 | | | 472,716 | | | 359,752 | | | | | 3,030 | | | 66,895 | | | 58,479 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 530,592 | | | 396,118 | | 4.07 | % | | | | | 75,581 | | | 63,838 | | 4.00 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
See accompanying notes to financial statements.
6
Schedule of Investments (continued)
December 31, 2004
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | Series Q (Qualified)
| | | | | | | Series N (Non-Qualified)
| | | |
| | | Number
Of
Shares
| | Cost
| | Market
Value
| | % of
Net
Assets
| | | Number
Of
Shares
| | Cost
| | Market
Value
| | % of
Net
Assets
| |
| | | | | | | | |
Transportation | | | | | | | | | | | | | | | | | | | | | | |
FedEx Corporation | | 1,300 | | $ | 98,182 | | $ | 128,037 | | | | | 180 | | $ | 13,736 | | $ | 17,728 | | | |
United Parcel Service, Inc. | | 1,300 | | | 108,850 | | | 111,098 | | | | | 200 | | | 16,743 | | | 17,092 | | | |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | 207,032 | | | 239,135 | | 2.46 | % | | | | | 30,479 | | | 34,820 | | 2.18 | % |
| | | | |
|
| |
|
| | | | | | |
|
| |
|
| | | |
| | | | | | | | |
Total Investments | | | | $ | 8,741,724 | | | 9,660,768 | | 99.29 | % | | | | $ | 1,429,760 | | | 1,584,823 | | 99.24 | % |
| | | | |
|
| | | | | | | | | |
|
| | | | | | |
| | | | | | | | |
Other Assets Less Liabilities | | | | | | | | 69,177 | | 0.71 | % | | | | | | | | 12,088 | | 0.76 | % |
| | | | | | | |
|
| | | | | | | | | |
|
| | | |
| | | | | | | | |
Total Net Assets | | | | | | | $ | 9,729,945 | | 100.00 | % | | | | | | | $ | 1,596,911 | | 100.00 | % |
| | | | | | | |
|
| | | | | | | | | |
|
| | | |
| * | Non – income producing security. |
See accompanying notes to financial statements.
7
Supplementary Information
Selected Per Unit Data and Ratios
| | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31,
| |
| | | 2004
| | | 2003
| | | 2002
| | | 2001
| | | 2000
| |
PER UNIT DATA (a) | | | | | | | | | | | | | | | | | | | | |
Series Q (Qualified) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Investment income | | $ | 0.155 | | | $ | 0.093 | | | $ | 0.099 | | | $ | 0.094 | | | $ | 0.117 | |
Expenses | | | 0.192 | | | | 0.172 | | | | 0.180 | | | | 0.226 | | | | 0.374 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Net investment loss | | | (0.037 | ) | | | (0.079 | ) | | | (0.081 | ) | | | (0.132 | ) | | | (0.257 | ) |
Net realized and unrealized gains (losses) on investments | | | 0.760 | | | | 2.272 | | | | (4.481 | ) | | | (4.577 | ) | | | (1.398 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Net increase (decrease) in net asset value | | | 0.723 | | | | 2.193 | | | | (4.562 | ) | | | (4.709 | ) | | | (1.655 | ) |
Accumulation unit net asset value: | | | | | | | | | | | | | | | | | | | | |
Beginning of year | | | 11.488 | | | | 9.295 | | | | 13.857 | | | | 18.566 | | | | 20.221 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
End of year | | $ | 12.211 | | | $ | 11.488 | | | $ | 9.295 | | | $ | 13.857 | | | $ | 18.566 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Series N (Non-Qualified) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Investment income | | $ | 0.173 | | | $ | 0.087 | | | $ | 0.094 | | | $ | 0.090 | | | $ | 0.094 | |
Expenses | | | 0.260 | | | | 0.199 | | | | 0.204 | | | | 0.251 | | | | 0.397 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Net investment loss | | | (0.087 | ) | | | (0.112 | ) | | | (0.110 | ) | | | (0.161 | ) | | | (0.303 | ) |
Net realized and unrealized gains (losses) on investments | | | 0.735 | | | | 2.241 | | | | (4.563 | ) | | | (5.177 | ) | | | (1.498 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Net increase (decrease) in net asset value | | | 0.648 | | | | 2.129 | | | | (4.673 | ) | | | (5.338 | ) | | | (1.801 | ) |
Accumulation unit net asset value: | | | | | | | | | | | | | | | | | | | | |
Beginning of year | | | 11.131 | | | | 9.002 | | | | 13.675 | | | | 19.013 | | | | 20.814 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
End of year | | $ | 11.779 | | | $ | 11.131 | | | $ | 9.002 | | | $ | 13.675 | | | $ | 19.013 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| (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 and do not include any sales loads. |
| | | | | | | | | | | | | | | |
| | | Years Ended December 31,
| |
| | | 2004
| | | 2003
| | | 2002
| | | 2001
| | | 2000
| |
RATIOS | | | | | | | | | | | | | | | |
Series Q (Qualified) | | | | | | | | | | | | | | | |
| | | | | |
Operating expenses to average accumulation fund balance | | 1.65 | % | | 1.67 | % | | 1.63 | % | | 1.55 | % | | 1.57 | % |
Net investment loss to average accumulation fund balance | | (0.31 | %) | | (0.77 | %) | | (0.73 | %) | | (0.90 | %) | | (1.08 | %) |
Portfolio turnover rate | | 94 | % | | 83 | % | | 102 | % | | 79 | % | | 102 | % |
Accumulation units outstanding at the end of the year (in thousands) | | 797 | | | 826 | | | 859 | | | 925 | | | 1,187 | |
| | | | | |
Series N (Non-Qualified) | | | | | | | | | | | | | | | |
| | | | | |
Operating expenses to average accumulation fund balance | | 1.97 | % | | 2.00 | % | | 1.91 | % | | 1.70 | % | | 1.64 | % |
Net investment loss to average accumulation fund balance | | (0.66 | %) | | (1.12 | %) | | (1.03 | %) | | (1.09 | %) | | (1.25 | %) |
Portfolio turnover rate | | 93 | % | | 83 | % | | 104 | % | | 78 | % | | 101 | % |
Accumulation units outstanding at the end of the year (in thousands) | | 136 | | | 156 | | | 163 | | | 182 | | | 263 | |
See accompanying notes to financial statements.
8
Supplementary Information
Selected Per Unit Data and Ratios (continued)
| | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31,
|
| | | 1999
| | | 1998
| | | 1997
| | | 1996
| | 1995
|
PER UNIT DATA (a) | | | | | | | | | | | | | | | | | | |
Series Q (Qualified) | | | | | | | | | | | | | | | | | | |
Investment income | | $ | 0.094 | | | $ | 0.116 | | | $ | 0.177 | | | $ | 0.153 | | $ | 0.119 |
Expenses | | | 0.277 | | | | 0.202 | | | | 0.159 | | | | 0.133 | | | 0.096 |
| | |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
Net investment income (loss) | | | (0.183 | ) | | | (0.086 | ) | | | 0.018 | | | | 0.020 | | | 0.023 |
Net realized and unrealized gains (losses) on investments | | | 5.280 | | | | 3.836 | | | | 2.723 | | | | 1.551 | | | 1.711 |
| | |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
Net increase (decrease) in net asset value | | | 5.097 | | | | 3.750 | | | | 2.741 | | | | 1.571 | | | 1.734 |
Accumulation unit net asset value: | | | | | | | | | | | | | | | | | | |
Beginning of year | | | 15.124 | | | | 11.374 | | | | 8.633 | | | | 7.062 | | | 5.328 |
| | |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
End of year | | $ | 20.221 | | | $ | 15.124 | | | $ | 11.374 | | | $ | 8.633 | | $ | 7.062 |
| | |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
| | | | | |
Series N (Non-Qualified) | | | | | | | | | | | | | | | | | | |
| | | | | |
Investment income | | $ | 0.083 | | | $ | 0.096 | | | $ | 0.135 | | | $ | 0.137 | | $ | 0.117 |
Expenses | | | 0.296 | | | | 0.212 | | | | 0.166 | | | | 0.134 | | | 0.109 |
| | |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
Net investment income (loss) | | | (0.213 | ) | | | (0.116 | ) | | | (0.031 | ) | | | 0.003 | | | 0.008 |
Net realized and unrealized gains (losses) on investments | | | 5.894 | | | | 3.891 | | | | 2.660 | | | | 1.459 | | | 1.769 |
| | |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
Net increase (decrease) in net asset value | | | 5.681 | | | | 3.775 | | | | 2.629 | | | | 1.462 | | | 1.777 |
Accumulation unit net asset value: | | | | | | | | | | | | | | | | | | |
Beginning of year | | | 15.133 | | | | 11.358 | | | | 8.729 | | | | 7.267 | | | 5.490 |
| | |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
End of year | | $ | 20.814 | | | $ | 15.133 | | | $ | 11.358 | | | $ | 8.729 | | $ | 7.267 |
| | |
|
|
| |
|
|
| |
|
|
| |
|
| |
|
|
| (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 and do not include any sales loads. |
| | | | | | | | | | | | | | | |
| | | Years Ended December 31,
| |
| | | 1999
| | | 1998
| | | 1997
| | | 1996
| | | 1995
| |
RATIOS | | | | | | | | | | | | | | | |
Series Q (Qualified) | | | | | | | | | | | | | | | |
| | | | | |
Operating expenses to average accumulation fund balance | | 1.56 | % | | 1.57 | % | | 1.59 | % | | 1.57 | % | | 1.55 | % |
Net investment income (loss) to average accumulation fund balance | | (1.03 | %) | | (0.67 | %) | | 0.18 | % | | 0.24 | % | | 0.38 | % |
Portfolio turnover rate | | 98 | % | | 143 | % | | 130 | % | | 78 | % | | 64 | % |
Accumulation units outstanding at the end of the year (in thousands) | | 1,385 | | | 1,715 | | | 1,887 | | | 2,093 | | | 5,491 | |
| | | | | |
Series N (Non-Qualified) | | | | | | | | | | | | | | | |
| | | | | |
Operating expenses to average accumulation fund balance | | 1.62 | % | | 1.63 | % | | 1.67 | % | | 1.69 | % | | 1.71 | % |
Net investment income (loss) to average accumulation fund balance | | (1.16 | %) | | (0.90 | )% | | (0.31 | )% | | 0.04 | % | | 0.13 | % |
Portfolio turnover rate | | 103 | % | | 143 | % | | 139 | % | | 94 | % | | 67 | % |
Accumulation units outstanding at the end of the year (in thousands) | | 342 | | | 475 | | | 530 | | | 566 | | | 586 | |
See accompanying notes to financial statements.
9
Notes to Financial Statements
December 31, 2004
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 wholly-owned by UnumProvident Corporation, formerly Provident Companies, Inc. (“Provident”). The Fund is the investment vehicle for Paul Revere Variable’s tax-deferred group annuity contracts.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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, 2004, 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 day after the securities are purchased or sold. Dividend income is recorded on the ex-dividend date. 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. Deferred contracts terminable by owner represent 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.
Paul Revere Variable acts as investment advisor and underwriter 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 statements of operations which, on an annual basis, will not exceed 2% of the average daily net asset value of the Fund.
Certain administrative services of the Fund are provided by The Variable Annuity Life Insurance Company (“VALIC”) under a contract dated May 15, 1998. These services include processing of unit transactions and daily unit value calculations subsequent to December 1, 1998 as well as accounting and other services.
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.
10
Notes to Financial Statements (continued)
December 31, 2004
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 Paul Revere Life. 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.
The aggregate cost of securities purchased and proceeds of securities sold, other than securities with maturities of one year or less, were as follows:
| | | | | | | | | | | | |
| | | Series Q (Qualified)
| | Series N (Non-Qualified)
|
| | | Purchases
| | Sales
| | Purchases
| | Sales
|
December 31, 2004 | | $ | 8,649,539 | | $ | 9,013,409 | | $ | 1,510,790 | | $ | 1,749,052 |
December 31, 2003 | | $ | 6,934,164 | | $ | 7,071,940 | | $ | 1,276,070 | | $ | 1,347,273 |
At December 31, 2004, net unrealized appreciation of investments in Series Q, amounting to $919,044, consisted of unrealized gains of $1,116,836 and unrealized losses of $197,792, net unrealized appreciation of investments in Series N, amounting to $155,063, consisted of unrealized gains of $177,253 and unrealized losses of $22,190.
The change in the number of accumulation units outstanding were as follows:
| | | | | | | | | |
| | | Series Q (Qualified)
| |
| | | 2004
| | | 2003
| | | 2002
| |
Units outstanding at beginning of year | | 825,922 | | | 858,770 | | | 924,860 | |
Units credited to contracts: | | | | | | | | | |
Net purchase payments | | — | | | 729 | | | 277 | |
Units withdrawn from contracts: | | | | | | | | | |
Annuity payments | | 21,347 | | | 24,269 | | | 24,478 | |
Terminations and withdrawals | | 7,781 | | | 9,308 | | | 41,889 | |
| | |
|
| |
|
| |
|
|
Net units withdrawn | | 29,128 | | | 33,577 | | | 66,367 | |
| | |
|
| |
|
| |
|
|
Contract units withdrawn in excess of units credited | | (29,128 | ) | | (32,848 | ) | | (66,090 | ) |
| | |
|
| |
|
| |
|
|
Units outstanding at end of year | | 796,794 | | | 825,922 | | | 858,770 | |
| | |
|
| |
|
| |
|
|
11
Notes to Financial Statements (continued)
December 31. 2004
| 7. | Accumulation units (continued) |
| | | | | | | | | |
| | | Series N (Non-Qualified)
| |
| | | 2004
| | | 2003
| | | 2002
| |
Units outstanding at beginning of year | | 155,878 | | | 162,573 | | | 182,247 | |
Units withdrawn from contracts: | | | | | | | | | |
Annuity payments | | 4,745 | | | 6,634 | | | 12,673 | |
Terminations and withdrawals | | 15,557 | | | 61 | | | 7,001 | |
| | |
|
| |
|
| |
|
|
Net units withdrawn | | 20,302 | | | 6,695 | | | 19,674 | |
| | |
|
| |
|
| |
|
|
Contract units withdrawn in excess of units credited | | (20,302 | ) | | (6,695 | ) | | (19,674 | ) |
| | |
|
| |
|
| |
|
|
Units outstanding at end of year | | 135,576 | | | 155,878 | | | 162,573 | |
| | |
|
| |
|
| |
|
|
12
(a) The Registrant has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the Registrant’s Code of Ethics is filed herewith as Exhibit 10(a)(1).
(b) During the period covered by this report, no amendments were made to the provisions of the Code of Ethics described in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers of the provisions of the Code of Ethics described in 2(a) above were granted.
| Item 3. | Audit Committee Financial Expert. |
The Fund has assets of under $12 million. It has no audit committee and no audit committee financial expert. The Board of Managers of the Fund consists of independent directors that control 3/5 of the Board. The Board receives quarterly reports on the transactions in the Fund. Because of the nature of the Fund’s business there are no sensitive accounting estimates used in preparation of the financial statements of the Fund.
| Item 4. | Principal Accountant Fees and Services. |
All audit and other fees paid to the auditors for work related to the Fund are paid by UnumProvident and are not charged to or paid from the Fund.
Audit Fees –Ernst & Young LLP billed UnumProvident $15,100.00 for the audit of the financial statements of the Fund for 2004, and $14,000.00 for the audit of the financial statements of the Fund for 2003.
Audit-Related Fees – The aggregate fees for audit related services rendered by Ernst & Young LLP to the Fund, the investment adviser or any entity controlling, controlled by or under common control with the investment adviser in 2004 and 2003 for such services were $0.00 and $0.00.
Tax Fees – The aggregate fees related to tax compliance, tax advice and tax planning services to the Fund for fiscal years ended December 31, 2004, and December 31, 2003, were $0.00 and $0.00.
All Other Fees - The aggregate fees rendered by Ernst & Young LLP to the Fund, the investment adviser or any entity controlling, controlled by or under common control with the investment adviser, or UnumProvident for such services to the Fund in 2004 and 2003 were $0.00 and $0.00.
| Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
| Item 6. | Schedule of Investments. |
Schedule of investments is included as of the close of the reporting period as part of the report to shareholders filed under Item 1 of this Form.
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
REGISTRANT PURCHASES OF EQUITY SECURITIES
| | | | | | | | |
Period
| | (a) Total Number of Shares
(or Units) Purchased
| | (b) Average Price Paid
per Share (or Unit)
| | (c) Total Number of Shares
(or Units) Purchased as
Part of Publicly Announced
Plans or Programs
| | (d) Maximum Number
(or Approximate Dollar
Value) of Shares (or Units)
that May Yet Be Purchased
Under the Plans or Programs
|
Month #1
(identify beginning and ending dates) | | | | | | | | |
Month #2
(identify beginning and ending dates) | | | | | | | | |
Month #3
(identify beginning and ending dates) | | | | | | | | |
Month #4
(identify beginning and ending dates) | | | | | | | | |
Month #5
(identify beginning and ending dates) | | | | | | | | |
Month #6
(identify beginning and ending dates) | | | | | | | | |
| | |
| |
| |
| |
|
Total | | | | | | | | |
| | |
| |
| |
| |
|
| Item 10. | Submission of Matters to a Vote of Security Holders. |
Not applicable.
| Item 11. | Controls and Procedures. |
(a) Within the 90-day period prior to the filing of this report, the Registrant’s management, including the person serving as both the Registrant’s Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures as defined in Investment Company Act Rule 30a-3(c). Based on that evaluation, the Chief Executive Officer/Chief Financial Officer concluded that the Registrant’s disclosure controls and procedures were effective as of the date of that evaluation.
(b) No change in the Registrant’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting, occurred during the Registrant’s most recent second fiscal half-year.
The following exhibits are attached to this Form N-CSR:
(1) Code of Ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, attached hereto as Exhibit 10(a)(1).
(2) Certification for each principal executive and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 C.F.R. 270.30a-2(a)), attached hereto as Exhibit 31.
(3) Certification for each principal executive and principal financial officer of the registrant as required by Rule 30a-2(b) under the Act (17 C.F.R. 270.30a-2(b)), attached hereto as Exhibit 32.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
The Paul Revere Variable Annuity Contract Accumulation Fund | | | | |
| | | | |
| By (Signature and Title): | | /s/ DONALD E. BOGGS | | | | | | |
| | | Donald E. Boggs, Chairman, Board of Managers | | | | | | |
| | | Signing in the capacity of Chief Executive Officer and Chief Financial Officer | | | | | | |
Date: March 1, 2005.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following person on behalf of the Registrant and in the capacities and on the dates indicated.
| | | | | | | | |
| | | | |
| By (Signature and Title): | | /s/ DONALD E. BOGGS | | | | | | |
| | | Donald E. Boggs, Chairman, Board of Managers | | | | | | |
| | | Signing in the capacity of Chief Executive Officer and Chief Financial Officer | | | | | | |
Date: March 1, 2005.
