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, 2005 – June 30, 2005
Item 1. | Reports to Stockholders. |
Semi-Annual Report
June 30, 2005
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
Stocks experienced considerable volatility during the six-month period ending June 30, 2005. Investors endured another rise in oil prices, a volatile U.S. dollar, record U.S. budget and trade deficits, and war in Iraq. Fundamental economic factors, however, such as corporate spending and earnings, continued to improve around the globe. Over the course of the period, investors seemed to conclude that the global economic recovery, although modest, was still intact.
Against this backdrop, the portfolio slightly underperformed the Russell 1000 Growth Index during the first half of 2005. The sectors that detracted the most from performance were technology, industrial goods & services, and leisure. The sectors that contributed the most were health care, financial services, and basic materials. The portfolio’s philosophy and approach remain consistent.
While the U.S. economy is not booming, there appear to be relatively few soft spots. Wages are rising, and profit growth is decelerating but still increasing. In June and early July, manufacturing and nonmanufacturing activity improved, consumers became more confident, and labor markets remained solid. For the longer term, as long as consumer spending remains strong and there is no collapse in the housing market, healthy growth is expected. Prospects for business investment seem solid and we expect to see growth at or above potential throughout the rest of the year.
Thank you for your continued support.
Sincerely, |
/s/ Donald E. Boggs |
Donald E. Boggs |
Chairman, Board of Managers |
The Paul Revere Variable Annuity |
Additional Information.
REMUNERATION OF THE BOARD OF MANAGERS
UnumProvident paid all expenses relative to the operation of The Paul Revere Variable Annuity Contract Accumulation Fund (the “Fund”) including Board of Managers’ (the “Board”) fees. Accordingly, no member of the Board receives any remuneration from the Fund. The total aggregate remuneration paid to all members of the Board 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 deemed to be interested persons received direct remuneration or an indirect benefit as officers of The Paul Revere Variable Annuity Insurance Company (“PRV”). None of the members of the Board, or officers of the Fund, who are also officers or employees of PRV or its affiliates, received any remuneration from the Fund.
PROXY VOTING POLICIES
A description of the Fund’s proxy voting policy and procedures is available without charge from the Secretary of the Board of Managers by calling (800) 718-8824. You may also view a description of the Fund’s proxy voting policy and procedures on the Securities and Exchange Commission (“SEC”) website located at 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 SEC for the first and third quarter of each fiscal year on Form N-Q, which when filed, is available without charge from the Secretary of the Board by calling toll-free (800)718-8824. You may also view its complete schedule of investments on Form N-Q on the SEC’s website, located at www.sec.gov or at the SEC’s Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT
BY THE BOARD OF MANAGERS
In determining to approve the most recent annual extension of the Investment Advisory Agreement and the Sub-Advisory Agreement (collectively, the “Investment Advisory Agreements”), the Board reviewed several factors. The Board considered the nature and quality of the services expected to be provided by PRV and MFS Institutional Advisors, Inc. (“MFSI”) with respect to the Fund and determined that PRV and MFSI are sufficiently qualified to provide the level of services expected under the Investment Advisory Agreements. The Board also considered the investment performance of the Fund and MFSI and determined that MFSI is competent to provide the sub-advisory services necessary to achieve the Fund’s investment objective of long-term growth. The Board considered the costs of services to be provided and the profits to be realized by PRV and MFSI and their affiliates from the relationship with the Fund and determined that the compensation payable to PRV and MFSI is reasonable. Because the Fund is no longer accepting new contractholders, the Board did not consider potential economies of scale or how the fees might reflect economies of scale for the benefit of the Fund’s investors. Due to the unique nature of the Fund, the Board did not rely upon comparisons of the services to be rendered or the fees to be paid under the Investment Advisory Agreements with those under other investment advisory contracts. The Board did not consider the potential benefits to either PRV or MFSI because neither adviser engages in soft-dollar practices with respect to the Fund. After taking into account each of the factors discussed above, the Board determined that it would be prudent to extend the Investment Advisory Agreements.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information (“SAI”) includes additional information about members of the Board of the Fund, and is available, without charge, upon request by calling toll-free (800)718-8824.
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 During Past 5 Years | (5) Number of | (6) Other | |||||
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 (83) 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 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 | (4) Principal Years | (5) Number of | (6) Other | |||||
Donald E. Boggs* (60) 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* (58) 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 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.
The Paul Revere Variable Annuity Contract Accumulation Fund
Financial Statements
(Unaudited)
June 30, 2005
1 | ||
2 | ||
3 | ||
4 | ||
7 | ||
9 |
Statements of Assets and Liabilities
(Unaudited)
June 30, 2005 | ||||||
Series Q (Qualified) | Series N (Non-Qualified) | |||||
ASSETS | ||||||
Investments in securities at market value | $ | 9,326,707 | $ | 1,504,778 | ||
Cash | 22,848 | 3,313 | ||||
Dividends receivable | 4,233 | 681 | ||||
Total assets | 9,353,788 | 1,508,772 | ||||
LIABILITIES | ||||||
Amounts payable for terminations and variable annuity benefits | 20,617 | 4,767 | ||||
Management fee and other amounts due The Paul Revere Variable Annuity Insurance Company | 12,491 | 2,014 | ||||
Total liabilities | 33,108 | 6,781 | ||||
TOTAL NET ASSETS | $ | 9,320,680 | $ | 1,501,991 | ||
CONTRACT OWNERS’ EQUITY | ||||||
Deferred contracts terminable by owner | $ | 7,416,779 | $ | 707,793 | ||
Currently payable contracts | 1,903,901 | 794,198 | ||||
Total net assets | $ | 9,320,680 | $ | 1,501,991 | ||
ACCUMULATION UNITS OUTSTANDING | 783,897 | 129,936 | ||||
NET ASSET VALUE PER ACCUMULATION UNIT | $ | 11.890 | $ | 11.559 | ||
1
Statements of Changes in Net Assets
(Unaudited)
Six Months Ended June 30, 2005 Series Q (Qualified) | Year Ended December 31, 2004 Series Q (Qualified) | |||||||
INCREASE (DECREASE) IN NET ASSETS | ||||||||
Operations: | ||||||||
Net investment loss | $ | (35,751 | ) | $ | (29,119 | ) | ||
Net realized gain on investments | 245,937 | 465,869 | ||||||
Net increase (decrease) in unrealized appreciation of investments | (467,663 | ) | 139,249 | |||||
Increase (decrease) in net assets from operations | (257,477 | ) | 575,999 | |||||
Payments to contract owners: | ||||||||
Annuity payments to contract owners | 121,979 | 243,701 | ||||||
Terminations and withdrawals to contract owners | 29,809 | 90,596 | ||||||
Total payments to contract owners | 151,788 | 334,297 | ||||||
Total increase (decrease) in net assets | (409,265 | ) | 241,702 | |||||
NET ASSETS | ||||||||
Beginning of period | 9,729,945 | 9,488,243 | ||||||
End of period | $ | 9,320,680 | $ | 9,729,945 | ||||
Six Months Ended June 30, 2005 Series N (Non-Qualified) | Year Ended December 31, 2004 Series N (Non-Qualified) | |||||||
INCREASE (DECREASE) IN NET ASSETS | ||||||||
Operations: | ||||||||
Net investment loss | $ | (8,574 | ) | $ | (10,809 | ) | ||
Net realized gains on investments | 46,068 | 63,344 | ||||||
Net increase (decrease) in unrealized appreciation of investments | (67,738 | ) | 27,625 | |||||
Increase in net assets from operations | (30,244 | ) | 80,160 | |||||
Payments to contract owners: | ||||||||
Annuity payments to contract owners | 26,349 | 52,283 | ||||||
Terminations and withdrawals to contract owners | 38,327 | 166,112 | ||||||
Total payments to contract owners | 64,676 | 218,395 | ||||||
Total decrease in net assets | (94,920 | ) | (138,235 | ) | ||||
NET ASSETS | ||||||||
Beginning of period | 1,596,911 | 1,735,146 | ||||||
End of period | $ | 1,501,991 | $ | 1,596,911 | ||||
See accompanying notes to financial statements.
2
(Unaudited)
Six Months Ended June 30, 2005 Series Q (Qualified) | ||||
INVESTMENT LOSS | ||||
Income: | ||||
Dividends | $ | 40,489 | ||
Expenses: | ||||
Mortality and expense risk fees | 46,660 | |||
Investment management and advisory service fees | 23,330 | |||
Professional services | 6,250 | |||
Total expenses | 76,240 | |||
Net investment loss | (35,751 | ) | ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized gain on investments sold | 245,937 | |||
Net decrease in unrealized appreciation of investments | (467,663 | ) | ||
Net realized and unrealized loss on investments | (221,726 | ) | ||
Decrease in net assets from operations | $ | (257,477 | ) | |
Six Months Ended June 30, 2005 Series N (Non-Qualified) | ||||
INVESTMENT LOSS | ||||
Income: | ||||
Dividends | $ | 6,543 | ||
Expenses: | ||||
Mortality and expense risk fees | 7,578 | |||
Investment management and advisory service fees | 3,789 | |||
Professional services | 3,750 | |||
Total expenses | 15,117 | |||
Net investment loss | (8,574 | ) | ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized gain on investments sold | 46,068 | |||
Net decrease in unrealized appreciation of investments | (67,738 | ) | ||
Net realized and unrealized loss on investments | (21,670 | ) | ||
Decrease in net assets from operations | $ | (30,244 | ) | |
See accompanying notes to financial statements.
3
June 30, 2005
(Unaudited)
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 | ||||||||||||||||||||||
Aerospace / Defense | ||||||||||||||||||||||
United Technologies Corp. | 1,400 | $ | 71,348 | $ | 71,890 | 0.77 | % | 200 | $ | 10,172 | $ | 10,270 | 0.69 | % | ||||||||
Agriculture | ||||||||||||||||||||||
Monsanto Company | 1,300 | 53,011 | 81,731 | 0.88 | % | 130 | 4,519 | 8,173 | 0.55 | % | ||||||||||||
Apparel | ||||||||||||||||||||||
Reebok International Ltd. | 1,800 | 65,431 | 75,294 | 0.81 | % | 280 | 10,182 | 11,712 | 0.78 | % | ||||||||||||
Beverages | ||||||||||||||||||||||
PepsiCo, Inc. | 4,290 | 206,222 | 231,360 | 2.48 | % | 720 | 34,750 | 38,830 | 2.59 | % | ||||||||||||
Broadcasting & Media | ||||||||||||||||||||||
Comcast Corporation Class A * | 3,000 | 95,651 | 92,100 | 530 | 16,865 | 16,271 | ||||||||||||||||
Getty Images, Inc. * | 1,200 | 69,148 | 89,112 | 180 | 10,562 | 13,367 | ||||||||||||||||
Time Warner, Inc. | 6,400 | 106,960 | 106,944 | 1,050 | 17,394 | 17,546 | ||||||||||||||||
Viacom, Inc. Class B * | 1,510 | 61,181 | 48,350 | — | — | — | ||||||||||||||||
332,940 | 336,506 | 3.61 | % | 44,821 | 47,184 | 3.14 | % | |||||||||||||||
Business Services | ||||||||||||||||||||||
Accenture, Ltd., Class A * | 6,600 | 156,776 | 149,622 | 1.61 | % | 1,100 | 25,911 | 24,937 | 1.66 | % | ||||||||||||
Computer – Systems & Services | ||||||||||||||||||||||
Dell, Inc. * | 8,930 | 283,911 | 352,824 | 1,400 | 46,672 | 55,314 | ||||||||||||||||
eBay, Inc. * | 2,300 | 87,234 | 75,923 | 360 | 12,959 | 11,884 | ||||||||||||||||
Electronic Arts, Inc. * | 2,000 | 113,733 | 113,220 | 300 | 17,065 | 16,983 | ||||||||||||||||
EMC Corporation | 12,100 | 143,256 | 165,891 | 2,030 | 24,046 | 27,831 | ||||||||||||||||
Fiserv, Inc. * | 2,200 | 84,602 | 94,490 | 370 | 14,230 | 15,892 | ||||||||||||||||
Google, Inc., Class A * | 200 | 48,499 | 58,830 | 35 | 9,205 | 10,295 | ||||||||||||||||
Mercury Interactive Corp. * | 3 100 | 137,780 | 118,916 | 500 | 22,223 | 19,180 | ||||||||||||||||
Microsoft Corporation | 14,980 | 392,226 | 372,103 | 2,300 | 59,959 | 57,132 | ||||||||||||||||
Network Appliance, Inc. * | 2,600 | 58,742 | 73,502 | 460 | 10,399 | 13,004 | ||||||||||||||||
Oracle Corporation * | 21,240 | 263,842 | 280,368 | 3,400 | 42,274 | 44,880 | ||||||||||||||||
Symantec Corporation * | 5,000 | 121,702 | 108,700 | 800 | 19,503 | 17,392 | ||||||||||||||||
VERITAS Software Corporation * | 5,665 | 157,232 | 138,226 | 740 | 16,286 | 18,056 | ||||||||||||||||
Yahoo!, Inc. * | 4,300 | 129,998 | 148,995 | 730 | 21,825 | 25,295 | ||||||||||||||||
2,022,757 | 2,101,988 | 22.54 | % | 316,646 | 333,138 | 22.18 | % | |||||||||||||||
Conglomerate | ||||||||||||||||||||||
General Electric Company | 3,700 | 134,876 | 128,205 | 1.38 | % | 600 | 21,805 | 20,790 | 1.38 | % | ||||||||||||
Consumer Goods & Services | ||||||||||||||||||||||
Avon Products, Inc. | 1,100 | 45,488 | 41,635 | 200 | 8,250 | 7,570 | ||||||||||||||||
Proctor & Gamble Company | 3,600 | 196,989 | 189,900 | 560 | 30,623 | 29,540 | ||||||||||||||||
242,437 | 231,535 | 2.48 | % | 38,873 | 37,110 | 2.47 | % | |||||||||||||||
Electronics | ||||||||||||||||||||||
Amphenol Corp., Class A | 1,300 | 40,156 | 52,221 | 260 | 7,969 | 10,444 | ||||||||||||||||
Fisher Scientific International, Inc. * | 1,900 | 107,587 | 123,310 | 380 | 21,567 | 24,662 | ||||||||||||||||
Waters Corporation * | 1,400 | 59,813 | 52,038 | 260 | 11,273 | 9,644 | ||||||||||||||||
207,556 | 227,569 | 2.44 | % | 40,809 | 44,770 | 2.98 | % | |||||||||||||||
See accompanying notes to financial statements.
4
Schedule of Investments (continued)
June 30, 2005
(Unaudited)
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 | |||||||||||
Energy Services | ||||||||||||||||||
GlobalSantaFe Corporation | 1,700 | 59,882 | 69,360 | 300 | 10,577 | 12,240 | ||||||||||||
Halliburton Holding Company | 1,200 | 49,201 | 57,384 | 200 | 8,200 | 9,564 | ||||||||||||
109,083 | 126,744 | 1.36 | % | 18,777 | 21,804 | 1.45 | % | |||||||||||
Financial Institutions | ||||||||||||||||||
American Express Company | 1,500 | 78,396 | 79,845 | 260 | 14,123 | 13,840 | ||||||||||||
Citigroup, Inc. | 1,624 | 72,417 | 75,077 | 256 | 12,087 | 11,835 | ||||||||||||
Countrywide Financial Corporation | 2,600 | 96,038 | 100,386 | 400 | 14,775 | 15,444 | ||||||||||||
Goldman Sachs Group, Inc. | 510 | 54,115 | 52,030 | 80 | 8,580 | 8,162 | ||||||||||||
Merrill Lynch & Company, Inc. | 1,000 | 59,843 | 55,010 | 200 | 11,969 | 11,002 | ||||||||||||
360,809 | 362,348 | 3.89 | % | 61,534 | 60,283 | 4.01 | % | |||||||||||
Health Services | ||||||||||||||||||
HCA, Inc. | 600 | 26,927 | 34,002 | 0.36 | % | 100 | 4,488 | 5,667 | 0.37 | % | ||||||||
Leisure & Tourism | ||||||||||||||||||
Carnival Corporation | 2,100 | 94,763 | 114,555 | 360 | 16,184 | 19,637 | ||||||||||||
Harley-Davidson, Inc. | 900 | 51,874 | 44,640 | 180 | 10,375 | 8,928 | ||||||||||||
Outback Steakhouse, Inc. | 1,300 | 53,616 | 58,812 | 200 | 8,272 | 9,048 | ||||||||||||
Walt Disney Company | 5,600 | 142,533 | 141,008 | 1,000 | 25,411 | 25,180 | ||||||||||||
342,786 | 359,015 | 3.85 | % | 60,242 | 62,793 | 4.18 | % | |||||||||||
Machinery | ||||||||||||||||||
Caterpillar, Inc. | 800 | 69,725 | 76,248 | 0.82 | % | 150 | 13,181 | 14,297 | 0.95 | % | ||||||||
Manufacturing | . | |||||||||||||||||
Cooper Industries, Ltd. Class A | 700 | 39,851 | 44,730 | 80 | 4,415 | 5,112 | ||||||||||||
Illinois Tool Works, Inc. | 1,100 | 93,791 | 87,648 | 200 | 17,052 | 15,936 | ||||||||||||
133,642 | 132,378 | 1.42 | % | 21,467 | 21,048 | 1.40 | % | |||||||||||
Medical & Health Products | ||||||||||||||||||
Abbott Laboratories | 4,500 | 185,611 | 220,545 | 730 | 30,341 | 35,777 | ||||||||||||
Allergan Inc. | 1,900 | 134,987 | 161,956 | 300 | 21,320 | 25,572 | ||||||||||||
Amgen, Inc. * | 5,080 | 292.476 | 307,137 | 820 | 48,018 | 49,577 | ||||||||||||
Eli Lily and Company | 2,300 | 158,083 | 128,133 | 380 | 25,788 | 21,170 | ||||||||||||
Genentech, Inc. * | 600 | 29,841 | 48,168 | 110 | 5,483 | 8,830 | ||||||||||||
Genzyme Corporation * | 2,500 | 124,006 | 150,225 | 400 | 20,066 | 24,036 | ||||||||||||
Gilead Sciences, Inc. * | 2,500 | 81,461 | 109,975 | 430 | 13,328 | 18,916 | ||||||||||||
Johnson & Johnson | 5,860 | 316,169 | 380,900 | 970 | 51,994 | 63,050 | ||||||||||||
Medtronic, Inc. | 2,650 | 129,250 | 137,244 | 420 | 20,725 | 21,752 | ||||||||||||
St. Jude Medical, Inc. * | 2,800 | 112,780 | 122,108 | 500 | 20,193 | 21,805 | ||||||||||||
WellPoint, Inc. * | 1,000 | 59,412 | 69,640 | 100 | 5,791 | 6,964 | ||||||||||||
Wyeth | 7,800 | 319,872 | 347,100 | 1,230 | 50,131 | 54,735 | ||||||||||||
Zimmer Holdings, Inc. * | 500 | 38,523 | 38,085 | 100 | 7,705 | 7,617 | ||||||||||||
1,982,471 | 2,221,216 | 23.83 | % | 320,883 | 359,801 | 23.96 | % | |||||||||||
Semiconductors | ||||||||||||||||||
Analog Devices, Inc. | 2,570 | 88,921 | 95,887 | 390 | 12,714 | 14,551 | ||||||||||||
Maximum Integrated Products | 1,100 | 47,702 | 48,070 | 200 | 8,673 | 8,740 | ||||||||||||
Novellus Systems, Inc. * | 1,600 | 58,187 | 60,864 | 300 | 10,910 | 11,412 | ||||||||||||
Texas Instruments, Inc. | 3,100 | 75,924 | 87,017 | 500 | 12,246 | 14,035 | ||||||||||||
Xilinx, Inc | 3,900 | 114,534 | 99,450 | 600 | 17,625 | 15,300 | ||||||||||||
385,268 | 391,288 | 4.20 | % | 62,168 | 64,038 | 4.27 | % | |||||||||||
See accompanying notes to financial statements.
5
Schedule of Investments (continued)
June 30, 2005
(Unaudited)
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 | |||||||||||||||||
Stores | ||||||||||||||||||||||||
CVS Corporation | 6,400 | 137,532 | 186,048 | 1,160 | 25,181 | 33,721 | ||||||||||||||||||
Home Depot | 1,200 | 47,803 | 46,680 | 200 | 7,967 | 7,780 | ||||||||||||||||||
Kohl’s Corporation * | 1,670 | 80,694 | 93,370 | 310 | 14,944 | 17,331 | ||||||||||||||||||
Lowe’s Companies, Inc. | 2,100 | 114,342 | 122,262 | 380 | 20,939 | 22,124 | ||||||||||||||||||
Petsmart, Inc. | 4,600 | 136,134 | 139,610 | 770 | 22,771 | 23,370 | ||||||||||||||||||
Staples, Inc. | 1,950 | 41,265 | 41,574 | 350 | 7,392 | 7,462 | ||||||||||||||||||
Target Corporation | 2,430 | 91,243 | 132,216 | 360 | 13,848 | 19,588 | ||||||||||||||||||
Wal-Mart Stores, Inc. | 3,300 | 166,331 | 159,060 | 500 | 25,029 | 24,100 | ||||||||||||||||||
815,344 | 920,820 | 9.88 | % | 138,071 | 155,476 | 10.35 | % | |||||||||||||||||
Telecommunications | ||||||||||||||||||||||||
Amdocs, Ltd. * | 2,800 | 77,091 | 74,004 | 500 | 13,802 | 13,215 | ||||||||||||||||||
Cisco Systems, Inc. * | 22,140 | 537,930 | 423,095 | 3,630 | 78,012 | 69,368 | ||||||||||||||||||
Comverse Technology, Inc. * | 1,900 | 47,616 | 44,935 | 200 | 5,014 | 4,730 | ||||||||||||||||||
Corning Inc. * | 6,700 | 73,974 | 111,354 | 900 | 9,960 | 14,958 | ||||||||||||||||||
Sprint Corp. | 5,200 | 122,632 | 130,468 | 800 | 18,878 | 20,072 | ||||||||||||||||||
Qualcomm, Inc. | 3,500 | 123,056 | 115,535 | 570 | 20,362 | 18,816 | ||||||||||||||||||
982,299 | 899,391 | 9.65 | % | 146,028 | 141,159 | 9.40 | % | |||||||||||||||||
Transportation | ||||||||||||||||||||||||
FedEx Corporation | 1,300 | 98,182 | 105,313 | 180 | 13,736 | 14,582 | ||||||||||||||||||
United Parcel Service, Inc., Class B | 900 | 75,437 | 62,244 | 100 | 8,390 | 6,916 | ||||||||||||||||||
173,619 | 167,557 | 1.80 | % | 22,126 | 21,498 | 1.43 | % | |||||||||||||||||
Total Investments | $ | 8,875,327 | $ | 9,326,707 | 100.06 | % | $ | 1,417,453 | $ | 1,504,778 | 100.19 | % | ||||||||||||
Other Assets Less Liabilities | (6,027 | ) | -0.06 | % | (2,787 | ) | -0.19 | % | ||||||||||||||||
Total Net Assets | $ | 9,320,680 | 100.00 | % | $ | 1,501,991 | 100.00 | % | ||||||||||||||||
* | Non – income producing security |
See accompanying notes to financial statements.
6
Selected Per Unit Data and Ratios
(Unaudited)
Six Months Ended June 30, 2005 | Years Ended December 31, | |||||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||
PER UNIT DATA (a) | ||||||||||||||||||||||||
Series Q (Qualified) | ||||||||||||||||||||||||
Investment income | $ | 0.050 | $ | 0.155 | $ | 0.093 | $ | 0.099 | $ | 0.094 | $ | 0.117 | ||||||||||||
Expenses | 0.095 | 0.192 | 0.172 | 0.180 | 0.226 | 0.374 | ||||||||||||||||||
Net investment loss | (0.045 | ) | (0.037 | ) | (0.079 | ) | (0.081 | ) | (0.132 | ) | (0.257 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | (0.276 | ) | 0.760 | 2.272 | (4.481 | ) | (4.577 | ) | (1.398 | ) | ||||||||||||||
Net increase (decrease) in net asset value | (0.321 | ) | 0.723 | 2.193 | (4.562 | ) | (4.709 | ) | (1.655 | ) | ||||||||||||||
Accumulation unit net asset value: | ||||||||||||||||||||||||
Beginning of period | 12.211 | 11.488 | 9.295 | 13.857 | 18.566 | 20.221 | ||||||||||||||||||
End of period | $ | 11.890 | $ | 12.211 | $ | 11.488 | $ | 9.295 | $ | 13.857 | $ | 18.566 | ||||||||||||
Series N (Non-Qualified) | ||||||||||||||||||||||||
Investment income | $ | 0.048 | $ | 0.173 | $ | 0.087 | $ | 0.094 | $ | 0.090 | $ | 0.094 | ||||||||||||
Expenses | 0.110 | 0.260 | 0.199 | 0.204 | 0.251 | 0.397 | ||||||||||||||||||
Net investment loss | (0.062 | ) | (0.087 | ) | (0.112 | ) | (0.110 | ) | (0.161 | ) | (0.303 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | (0.158 | ) | 0.735 | 2.241 | (4.563 | ) | (5.177 | ) | (1.498 | ) | ||||||||||||||
Net increase (decrease) in net asset value | (0.220 | ) | 0.648 | 2.129 | (4.673 | ) | (5.338 | ) | (1.801 | ) | ||||||||||||||
Accumulation unit net asset value: | ||||||||||||||||||||||||
Beginning of period | 11.779 | 11.131 | 9.002 | 13.675 | 19.013 | 20.814 | ||||||||||||||||||
End of period | $ | 11.559 | $ | 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 period and do not include any sales loads. |
Six Months Ended June 30, 2005 | Years Ended December 31, | |||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||
RATIOS | ||||||||||||||||||
Series Q (Qualified) | ||||||||||||||||||
Operating expenses to average accumulation fund balance | 1.65 | %* | 1.65 | % | 1.67 | % | 1.63 | % | 1.55 | % | 1.57 | % | ||||||
Net investment loss to average accumulation fund balance | (0.77 | %)* | (0.31 | %) | (0.77 | %) | (0.73 | %) | (0.90 | %) | (1.08 | %) | ||||||
Portfolio turnover rate | 32 | % | 94 | % | 83 | % | 102 | % | 79 | % | 102 | % | ||||||
Accumulation units outstanding at the end of the period (in thousands) | 784 | 797 | 826 | 859 | 925 | 1,187 | ||||||||||||
Series N (Non-Qualified) | ||||||||||||||||||
Operating expenses to average accumulation fund balance | 2.01 | %* | 1.97 | % | 2.00 | % | 1.91 | % | 1.70 | % | 1.64 | % | ||||||
Net investment loss to average accumulation fund balance | (1.14 | %)* | (0.66 | %) | (1.12 | %) | (1.03 | %) | (1.09 | %) | (1.25 | %) | ||||||
Portfolio turnover rate | 32 | % | 93 | % | 83 | % | 104 | % | 78 | % | 101 | % | ||||||
Accumulation units outstanding at the end of the period (in thousands) | 130 | 136 | 156 | 163 | 182 | 263 |
* | Annualized |
See accompanying notes to financial statements.
7
Supplementary Information
Selected Per Unit Data and Ratios (continued)
(Unaudited)
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.
8
June 30, 2005
(Unaudited)
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 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.
2. | Accounting policies |
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 stocks are stated at market values which are based on the last sales prices at June 30, 2005, 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 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 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 statement 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.
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.
9
Notes to Financial Statements (continued)
June 30, 2005
(Unaudited)
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 UnumProvident Corporation. 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:
Series Q (Qualified) | Series N (Non-Qualified) | |||||||||||
Purchases | Sales | Purchases | Sales | |||||||||
June 30, 2005 | $ | 2,957,616 | $ | 3,069,950 | $ | 480,678 | $ | 539,053 | ||||
December 31, 2004 | $ | 8,649,539 | $ | 9,013,409 | $ | 1,510,790 | $ | 1,749,052 |
At June 30, 2005, net unrealized appreciation of investments in Series Q, amounting to $451,380, consisted of unrealized gains of $800,101 and unrealized losses of $348,721, net unrealized appreciation of investments in Series N, amounting to $87,325, consisted of unrealized gains of $127,815 and unrealized losses of $40,490.
7. | Accumulation units |
The change in the number of accumulation units outstanding were as follows:
Series Q (Qualified) | ||||
Six Months Ended June 30, 2005 | Year Ended December 31, 2004 | |||
Units outstanding at beginning of period | 796,794 | 825,922 | ||
Units withdrawn from contracts: | ||||
Annuity payments | 10,369 | 21,347 | ||
Terminations and withdrawals | 2,529 | 7,781 | ||
Net units withdrawn | 12,898 | 29,128 | ||
Units outstanding at end of period | 783,896 | 796,794 | ||
10
Notes to Financial Statements (continued)
June 30, 2005
(Unaudited)
7. | Accumulation units (continued) |
Series N (Non-Qualified) | ||||
Six Months Ended June 30, 2005 | Year Ended December 31, 2004 | |||
Units outstanding at beginning of period | 135,576 | 155,878 | ||
Units withdrawn from contracts: | ||||
Annuity payments | 2,310 | 4,745 | ||
Terminations and withdrawals | 3,330 | 15,557 | ||
Net units withdrawn | 5,640 | 20,302 | ||
Units outstanding at end of period | 129,936 | 135,576 | ||
11
Item 2. | Code of Ethics. |
Not applicable for semi-annual report.
Item 3. | Audit Committee Financial Expert. |
Not applicable for semi-annual report.
Item 4. | Principal Accountant Fees and Services. |
Not applicable for semi-annual report.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable to open-end investment companies.
Item 6. | Schedule of Investments. |
Schedule of investments is included under Item 1 of this Form.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable to open-end investment companies.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable to open-end investment companies.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable to open-end investment companies.
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 fiscal half-year.
Item 12. | Exhibits. |
The following exhibits are attached to this Form N-CSR:
(a) 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.
(b) 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: August 29, 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: August 29, 2005.