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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 01608
(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 1, 2009 – June 30, 2009
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| Item 1. | Report to Stockholders. |
Semi-Annual Report
June 30, 2009
Board of Managers of
The Accumulation Fund:
David G. Fussell, Chairman
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 (PRV) contracts. Such offering is made only by prospectus, which includes details as to offering price and other material information.
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TO OUR CONTRACTOWNERS AND PARTICIPANTS:
THE PAUL REVERE VARIABLE ANNUITY
CONTRACT ACCUMULATION FUND
VARIABLE ANNUITY CONTRACTS
US equity performance, as represented by the broad market index S&P 500, returned 3.16% during the first six months on 2009. Using the Russell indices as a proxy, large cap stocks outperformed small cap stocks, and growth stocks led value stocks among all market caps (Russell 1000 Growth +11.53% vs. Russell 1000 Value -2.87%; Russell Midcap Growth +16.61% vs. Russell Midcap Value +3.19%; Russell 2000 Growth +11.36% vs. Russell 2000 Value -5.17%).
Against this backdrop, the portfolio outperformed the Russell 1000 Growth Index during the first half of 2009. Stock selection in health care, industrial goods & services, retailing, as well as an underweight position in transportation contributed the most to relative performance. A modest cash position; stock selection in energy, and consumer staples; and an underweight in technology had a negative impact on relative performance.
The portfolio is a broadly diversified collection of high-quality large cap growth stocks that is constructed based on a disciplined bottom-up stock selection process. We employ a long-term time horizon in seeking high quality, durable franchises that we believe will be able to generate above average growth sustainably for several years into the future.
At the end of the period, the portfolio’s largest overweight was in the Special Products & Services sector. Within the sector, we held several transaction processing companies that we believed were poised to benefit from the secular growth in electronic transactions around the globe as consumers move away from physical checks toward credit/debit cards and other electronic means. Also in this sector we owned select high-quality outsourcing and consulting businesses with a global presence and competitive advantage we believed would help to sustain growth in a challenging environment. We are also overweight in the Energy sector, where we have focused on integrated oil companies with good production growth and the potential for new discoveries and developments which we believe will be valued at a premium as oil prices recover. Our largest underweight was in the Technology sector, where we were underweight in several of the large hardware manufacturers and service providers that dominate the index. We were also underweight in the Leisure sector due to a lack of compelling growth opportunities in restaurants, casinos, hotels and other entertainment businesses. Overall, we had and will continue to build the portfolio from the bottom up, focusing on high quality large cap companies that seek to deliver sustainable above-average growth to their shareholders.
Thank you for your continued support.
Sincerely, |
/s/ David G. Fussell |
David G. Fussell, Chairman, Board of Managers The Paul Revere Variable Annuity Contract Accumulation Fund |
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Additional Information.
REMUNERATION OF THE BOARD OF MANAGERS
Unum Group paid all expenses relative to the operation of The Paul Revere Variable Annuity Contract Accumulation Fund (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, 2008, was $2,400.00. 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 Unum Group 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 Unum Group 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.
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STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information (SAI) includes additional information about members of the board of managers of the Fund, and is available, without charge, upon request, toll-free at (800) 718-8824 for contractowners who call to request the SAI.
INFORMATION CONCERNING MEMBERS OF THE BOARD OF MANAGERS
| (1) | (2) | (3) | (4) | (5) | (6) | |||||
Name, Address, and Age | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Director or Nominee for Director | Other Directorships Held by Director or Nominee For Director | |||||
H. C. Goodwin (74) 11 Waters Road Millbury, MA 01527 | Member, Board of Managers | 2008-2011 7 years of service | President of Manufacturers Service Center, Inc. | 2 | None | |||||
Joan Sadowsky (79) 770 Salisbury Street Apt. 576 Worcester, MA 01609 | Member, Board of Managers | 2007-2010 23 years of service | Retired; Former Vice President of Human Resources, Atlas Distributing Corporation, Auburn, MA (beverage distribution) | 2 | None | |||||
Gordon T. Miller* 27 Briarwood Circle Worcester, MA 01606 | ||||||||||
| * | Mr. Miller is no longer a member of the Board of Managers. |
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.
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INFORMATION CONCERNING MEMBERS OF THE BOARD OF MANAGERS
(CONTINUED)
| (1) | (2) | (3) | (4) | (5) | (6) | |||||
Name, Address, and Age | Position(s) Held with Fund | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Director or Nominee for Director | Other Directorships Held by Director or Nominee For Director | |||||
David G. Fussell* (62) 1 Fountain Square Chattanooga, TN 37402 | Chairman, Board of Managers | 2007-2010 7 years of service | Senior Vice President of Unum Group, Chattanooga, Tennessee | 2 | None | |||||
Donald E. Boggs* 1 Fountain Square Chattanooga, TN 37402 | ||||||||||
| * | Mr. Boggs is no longer a member of the Board of Managers. |
| * | Former officers of PRV, and other subsidiaries of Unum Group. Effective May 20, 2009, Donald E. Boggs, an interested person of the Fund, resigned from the Board due to the passing of Mr. Miller so that a majority of remaining members would be disinterested persons. |
| * | Officers of PRV, (the investment advisor and sponsoring insurance company) and other subsidiaries within the Unum Group 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.
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The Paul Revere Variable Annuity Contract Accumulation Fund
Financial Statements
(Unaudited)
June 30, 2009
| 1 | ||
| 2 | ||
| 3 | ||
| 4 | ||
| 7 | ||
| 8 |
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Statement of Assets and Liabilities
(Unaudited)
| As of June 30, 2009 | ||||||
| Series Q (Qualified) | Series N (Non-Qualified) | |||||
ASSETS | ||||||
Investments in securities at market value | ||||||
(Cost: Series Q - $ 1,268,594) | ||||||
(Cost: Series N - $ 626,609) | $ | 1,214,772 | $ | 605,333 | ||
Cash | 25,126 | 10,642 | ||||
Dividends receivable | 558 | 268 | ||||
Receivable from The Paul Revere Variable Annuity Insurance Company | 41 | 9 | ||||
Total Assets | 1,240,497 | 616,252 | ||||
LIABILITIES | ||||||
Payable to The Paul Revere Variable Annuity Insurance Company | 10,925 | 3,719 | ||||
TOTAL NET ASSETS | $ | 1,229,572 | $ | 612,533 | ||
CONTRACT OWNERS’ EQUITY | ||||||
Deferred contracts | $ | 453,340 | $ | 165,694 | ||
Currently payable contracts | 776,232 | 446,839 | ||||
Total net assets | $ | 1,229,572 | $ | 612,533 | ||
ACCUMULATION UNITS OUTSTANDING | 129,171 | 61,945 | ||||
NET ASSET VALUE PER ACCUMULATION UNIT | $ | 9.519 | $ | 9.888 | ||
See accompanying notes to financial statements.
1
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(Unaudited)
| Six Months Ended June 30, 2009 Series Q (Qualified) | ||||
INVESTMENT INCOME | ||||
Income: | ||||
Dividends | $ | 17,982 | ||
Expenses: | ||||
Mortality and expense risk fees | 6,458 | |||
Investment management and advisory service fees | 7,529 | |||
Total expenses | 13,987 | |||
Net investment income | 3,995 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized loss on investments sold | (254,714 | ) | ||
Net decrease in unrealized depreciation of investments | 395,107 | |||
Net realized and unrealized gain on investments | 140,393 | |||
Increase in net assets from operations | $ | 144,388 | ||
| Six Months Ended June 30, 2009 Series N (Non-Qualifed) | ||||
INVESTMENT LOSS | ||||
Income: | ||||
Dividends | $ | 6,933 | ||
Expenses: | ||||
Mortality and expense risk fees | 3,279 | |||
Investment management and advisory service fees | 4,219 | |||
Total expenses | 7,498 | |||
Net investment loss | (565 | ) | ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized loss on investments sold | (160,188 | ) | ||
Net decrease in unrealized depreciation of investments | 219,869 | |||
Net realized and unrealized gain on investments | 59,681 | |||
Increase in net assets from operations | $ | 59,116 | ||
See accompanying notes to financial statements.
2
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Statements of Changes in Net Assets
(Unaudited)
| Six Months Ended June 30, 2009 Series Q (Qualified) | Year Ended December 31, 2008 Series Q (Qualified) | |||||||
INCREASE (DECREASE) IN NET ASSETS | ||||||||
Operations: | ||||||||
Net investment gain (loss) | $ | 3,995 | $ | (10,228 | ) | |||
Net realized loss on investments | (254,714 | ) | (296,961 | ) | ||||
Net increase (decrease) in unrealized appreciation of investments | 395,107 | (630,964 | ) | |||||
Increase (Decrease) in net assets from operations | 144,388 | (938,153 | ) | |||||
Contract owner transactions: | ||||||||
Net purchase payments received | 24,325 | — | ||||||
Annuity payments to contract owners | (60,724 | ) | (191,875 | ) | ||||
Terminations and withdrawals to contract owners | (370,575 | ) | (213,841 | ) | ||||
Net payments to contract owners | (406,974 | ) | (405,716 | ) | ||||
Total decrease in net assets | (262,586 | ) | (1,343,869 | ) | ||||
NET ASSETS | ||||||||
Beginning of period | 1,492,158 | 2,836,028 | ||||||
End of period | $ | 1,229,572 | $ | 1,492,158 | ||||
| Six Months Ended June 30, 2009 Series N (Non-Qualifed) | Year Ended December 31, 2008 Series N (Non-Qualifed) | |||||||
INCREASE (DECREASE) IN NET ASSETS | ||||||||
Operations: | ||||||||
Net investment loss | $ | (565 | ) | $ | (8,293 | ) | ||
Net realized loss on investments | (160,188 | ) | (138,524 | ) | ||||
Net increase (decrease) in unrealized appreciation of investments | 219,869 | (351,613 | ) | |||||
Increase (decrease) in net assets from operations | 59,116 | (498,430 | ) | |||||
Contract owner transactions: | ||||||||
Net purchase payments received | 24,052 | — | ||||||
Annuity payments to contract owners | (14,694 | ) | (41,261 | ) | ||||
Terminations and withdrawals to contract owners | (284,513 | ) | (106,162 | ) | ||||
Net payments to contract owners | (275,155 | ) | (147,423 | ) | ||||
Total decrease in net assets | (216,039 | ) | (645,853 | ) | ||||
NET ASSETS | ||||||||
Beginning of period | 828,572 | 1,474,425 | ||||||
End of period | $ | 612,533 | $ | 828,572 | ||||
See accompanying notes to financial statements.
3
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June 30, 2009
(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 & Military Technology | ||||||||||||||||||
United Technologies Corporation | 638 | 36,668 | 33,150 | 2.70 | % | 328 | 18,110 | 17,043 | 2.78 | % | ||||||||
Beverages | ||||||||||||||||||
Diageo Capital PLC ADR | 229 | 18,884 | 13,110 | 114 | 8,945 | 6,527 | ||||||||||||
PepsiCo, Inc. | 841 | 49,727 | 46,221 | 420 | 25,008 | 23,083 | ||||||||||||
| 68,611 | 59,331 | 4.83 | % | 33,953 | 29,610 | 4.83 | % | |||||||||||
Broadcasting & Media | ||||||||||||||||||
Directv Group, Inc. * | 332 | 7,813 | 8,204 | 190 | 4,461 | 4,695 | ||||||||||||
Grupo Televisa SA ADR | 370 | 8,474 | 6,290 | 195 | 4,429 | 3,315 | ||||||||||||
| 16,287 | 14,494 | 1.18 | % | 8,890 | 8,010 | 1.31 | % | |||||||||||
Commercial Services | ||||||||||||||||||
Omnicom Group, Inc. | 885 | 28,449 | 27,948 | 2.27 | % | 430 | 12,564 | 13,579 | 2.22 | % | ||||||||
Computer – Systems & Services | ||||||||||||||||||
Accenture, Ltd. | 1,460 | 42,853 | 48,852 | 742 | 21,729 | 24,827 | ||||||||||||
Apple, Inc. * | 119 | 11,325 | 16,949 | 62 | 6,593 | 8,830 | ||||||||||||
Automatic Data Processing, Inc. | 200 | 8,265 | 7,088 | 92 | 3,585 | 3,260 | ||||||||||||
Dun & Bradstreet Corporation | 269 | 20,660 | 21,845 | 133 | 10,186 | 10,801 | ||||||||||||
eBay, Inc. * | 460 | 13,786 | 7,880 | 240 | 6,889 | 4,111 | ||||||||||||
EMC Corporation * | 695 | 11,496 | 9,105 | 345 | 5,349 | 4,520 | ||||||||||||
Fidelity National Information | 310 | 5,171 | 6,188 | 160 | 2,673 | 3,194 | ||||||||||||
Google, Inc., Class A * | 90 | 36,479 | 37,943 | 40 | 18,756 | 16,864 | ||||||||||||
Hewlett Packard Company | 430 | 14,912 | 16,620 | 211 | 7,328 | 8,155 | ||||||||||||
International Business Machines Corp. | 178 | 19,075 | 18,587 | 80 | 8,779 | 8,354 | ||||||||||||
Netapp, Inc. * | 375 | 6,333 | 7,395 | 211 | 3,286 | 4,161 | ||||||||||||
Oracle Corporation * | 2,345 | 42,289 | 50,230 | 1,160 | 21,378 | 24,847 | ||||||||||||
Research In Motion, Ltd. * | 42 | 2,837 | 2,984 | 19 | 1,077 | 1,350 | ||||||||||||
VeriSign, Inc. * | 240 | 7,741 | 4,435 | 125 | 3,891 | 2,310 | ||||||||||||
| 243,222 | 256,101 | 20.82 | % | 121,499 | 125,584 | 20.50 | % | |||||||||||
Conglomerate | ||||||||||||||||||
Danaher Corporation | 479 | 32,637 | 29,573 | 244 | 16,665 | 15,065 | ||||||||||||
3 M Company | 323 | 18,807 | 19,412 | 167 | 9,675 | 10,037 | ||||||||||||
| 51,444 | 48,985 | 3.98 | % | 26,340 | 25,102 | 4.10 | % | |||||||||||
Consumer Goods & Services | ||||||||||||||||||
Colgate-Palmolive Company | 381 | 24,886 | 26,952 | 183 | 11,835 | 12,945 | ||||||||||||
NIKE, Inc. | 421 | 20,551 | 21,799 | 206 | 10,328 | 10,667 | ||||||||||||
Proctor & Gamble Company | 561 | 31,124 | 28,667 | 283 | 15,735 | 14,461 | ||||||||||||
| 76,561 | 77,418 | 6.30 | % | 37,898 | 38,073 | 6.22 | % | |||||||||||
Electronics | ||||||||||||||||||
Thermo Fisher Scientific, Inc. * | 422 | 14,998 | 17,205 | 246 | 8,690 | 10,029 | ||||||||||||
Waters Corporation * | 475 | 18,004 | 24,448 | 240 | 9,081 | 12,353 | ||||||||||||
| 33,002 | 41,653 | 3.39 | % | 17,771 | 22,382 | 3.65 | % | |||||||||||
See accompanying notes to financial statements.
4
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Schedule of Investments (continued)
June 30, 2009
(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 | ||||||||||||||||||
Energy Services | ||||||||||||||||||
BHP Billiton, Ltd. ADR | 154 | 12,767 | 8,428 | 73 | 5,845 | 3,995 | ||||||||||||
Chevron Corporation | 273 | 19,302 | 18,086 | 135 | 9,514 | 8,943 | ||||||||||||
Exxon Mobil Corporation | 87 | 7,351 | 6,082 | 40 | 3,506 | 2,796 | ||||||||||||
Halliburton Company | 916 | 21,968 | 18,961 | 442 | 9,219 | 9,149 | ||||||||||||
Hess Corporation | 140 | 10,280 | 7,525 | 72 | 5,570 | 3,870 | ||||||||||||
Marathon Oil Corporation | 545 | 26,101 | 16,421 | 285 | 12,915 | 8,587 | ||||||||||||
Noble Corporation | 380 | 17,632 | 11,495 | 180 | 8,161 | 5,445 | ||||||||||||
Praxair, Inc. | 99 | 7,058 | 7,036 | 52 | 4,008 | 3,696 | ||||||||||||
| 122,459 | 94,034 | 7.65 | % | 58,738 | 46,481 | 7.59 | % | |||||||||||
Financial Institutions | ||||||||||||||||||
Charles Schwab Corporation | 645 | 8,204 | 11,313 | 307 | 3,905 | 5,385 | ||||||||||||
CME Group, Inc. | 30 | 13,803 | 9,333 | 20 | 9,202 | 6,222 | ||||||||||||
Mastercard, Inc., Class A | 229 | 32,349 | 38,314 | 105 | 14,909 | 17,568 | ||||||||||||
State Street Corporation | 385 | 22,287 | 18,172 | 190 | 10,675 | 8,968 | ||||||||||||
The Bank of New York Mellon Corp. | 434 | 18,729 | 12,721 | 241 | 10,215 | 7,064 | ||||||||||||
Visa, Inc., Class A * | 113 | 5,115 | 7,035 | 61 | 2,870 | 3,798 | ||||||||||||
Western Union Company | 1,250 | 24,469 | 20,500 | 607 | 11,573 | 9,955 | ||||||||||||
| 124,956 | 117,388 | 9.55 | % | 63,349 | 58,960 | 9.64 | % | |||||||||||
Foods | ||||||||||||||||||
Nestle SA ADR | 417 | 17,287 | 15,690 | 1.28 | % | 220 | 8,981 | 8,278 | 1.35 | % | ||||||||
Health Services | ||||||||||||||||||
Medco Health Solutions, Inc. * | 155 | 6,163 | 7,070 | 0.57 | % | 75 | 2,995 | 3,421 | 0.56 | % | ||||||||
Manufacturing | ||||||||||||||||||
Precision Castparts Corporation | 75 | 6,182 | 5,477 | 37 | 3,050 | 2,702 | ||||||||||||
Rockwell Automation, Inc. | 735 | 16,643 | 23,608 | 368 | 8,369 | 11,820 | ||||||||||||
| 22,825 | 29,085 | 2.37 | % | 11,419 | 14,522 | 2.37 | % | |||||||||||
Medical & Health Products | ||||||||||||||||||
Abbott Labratories | 402 | 17,719 | 18,910 | 207 | 9,139 | 9,737 | ||||||||||||
Allergan, Inc. | 257 | 9,773 | 12,228 | 137 | 5,341 | 6,518 | ||||||||||||
DENTSPLY International, Inc. | 800 | 20,614 | 24,416 | 392 | 10,042 | 11,964 | ||||||||||||
Genzyme Corporation * | 476 | 29,621 | 26,499 | 251 | 16,444 | 13,973 | ||||||||||||
Johnson & Johnson | 230 | 14,625 | 13,064 | 108 | 6,918 | 6,134 | ||||||||||||
Medtronic, Inc. | 973 | 30,832 | 33,948 | 476 | 14,069 | 16,608 | ||||||||||||
Merck KGaA ADR | 280 | 11,702 | 9,495 | 140 | 6,013 | 4,747 | ||||||||||||
Patterson Cos., Inc. * | 640 | 11,871 | 13,888 | 325 | 6,048 | 7,053 | ||||||||||||
Roche Holdings, Ltd. ADR | 318 | 14,056 | 10,797 | 148 | 6,762 | 5,025 | ||||||||||||
VCA Antech, Inc. * | 245 | 7,215 | 6,542 | 118 | 3,355 | 3,151 | ||||||||||||
Zimmer Holdings * | 247 | 12,080 | 10,522 | 108 | 4,471 | 4,601 | ||||||||||||
| 180,108 | 180,309 | 14.65 | % | 88,602 | 89,511 | 14.59 | % | |||||||||||
Semiconductors | ||||||||||||||||||
Intel Corporation | 300 | 7,235 | 4,965 | 168 | 3,720 | 2,780 | ||||||||||||
KLA-Tencor Corporation | 163 | 3,019 | 4,116 | 93 | 1,715 | 2,348 | ||||||||||||
National Semiconductor | 1,230 | 13,403 | 15,437 | 600 | 6,492 | 7,530 | ||||||||||||
Taiwan Semiconductor | 2,109 | 21,186 | 19,846 | 1,029 | 10,022 | 9,683 | ||||||||||||
| 44,843 | 44,364 | 3.61 | % | 21,949 | 22,341 | 3.65 | % | |||||||||||
See accompanying notes to financial statements.
5
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Schedule of Investments (continued)
June 30, 2009
(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 | ||||||||||||||||||||||
Stores | ||||||||||||||||||||||
Coach, Inc. * | 560 | 23,870 | 15,053 | 290 | 11,670 | 7,795 | ||||||||||||||||
CVS Caremark Corporation | 1,272 | 43,445 | 40,539 | 631 | 21,736 | 20,110 | ||||||||||||||||
Staples, Inc. | 730 | 15,718 | 14,724 | 341 | 7,127 | 6,878 | ||||||||||||||||
Target Corporation | 195 | 5,466 | 7,697 | 82 | 2,298 | 3,237 | ||||||||||||||||
W.W. Grainger, Inc. | 150 | 12,127 | 12,282 | 74 | 6,045 | 6,059 | ||||||||||||||||
| 100,626 | 90,295 | 7.34 | % | 48,876 | 44,079 | 7.20 | % | |||||||||||||||
Telecommunications | ||||||||||||||||||||||
Amdocs, Ltd. ADR * | 538 | 17,601 | 11,540 | 259 | 7,782 | 5,556 | ||||||||||||||||
America Movil ADR Series L | 300 | 15,567 | 11,616 | 156 | 7,692 | 6,040 | ||||||||||||||||
Cisco Systems, Inc. * | 2,653 | 57,320 | 49,452 | 1,323 | 27,443 | 24,661 | ||||||||||||||||
| 90,488 | 72,608 | 5.92 | % | 42,917 | 36,257 | 5.92 | % | |||||||||||||||
Transportation | ||||||||||||||||||||||
United Parcel Service | 97 | 4,595 | 4,849 | 0.39 | % | 42 | 1,758 | 2,100 | 0.34 | % | ||||||||||||
Total Common Stocks | 1,268,594 | 1,214,772 | 98.80 | % | 626,609 | 605,333 | 98.82 | % | ||||||||||||||
Total Investments | $ | 1,268,594 | $ | 1,214,772 | 98.80 | % | $ | 626,609 | $ | 605,333 | 98.82 | % | ||||||||||
Other assets less liabilities | 14,800 | 1.20 | % | 7,200 | 1.18 | % | ||||||||||||||||
Total Net Assets | $ | 1,229,572 | 100.00 | % | $ | 612,533 | 100.00 | % | ||||||||||||||
| * | Non-income producing security |
ADR- American Depository Receipt
See accompanying notes to financial statements.
6
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Selected Per Unit Data and Ratios
(Unaudited)
| Six Months Ended | Year Ended December 31 | |||||||||||||||||||
| PER UNIT DATA (a) | June 30, 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
Series Q (Qualified) | ||||||||||||||||||||
Investment income | $ | 0.146 | $ | 0.188 | $ | 0.090 | $ | 0.136 | $ | 0.111 | ||||||||||
Expenses | 0.113 | 0.242 | 0.081 | 0.207 | 0.209 | |||||||||||||||
Net investment gain (loss) | 0.033 | (0.054 | ) | 0.009 | (0.071 | ) | (0.098 | ) | ||||||||||||
Net realized and unrealized gains (losses) on investments | 1.136 | (4.853 | ) | 0.237 | 0.700 | 0.269 | ||||||||||||||
Net increase (decrease) in net asset value | 1.169 | (4.907 | ) | 0.246 | 0.629 | 0.171 | ||||||||||||||
Accumulation unit net asset value: | ||||||||||||||||||||
Beginning of year | 8.350 | 13.257 | 13.011 | 12.382 | 12.211 | |||||||||||||||
End of year | $ | 9.519 | $ | 8.350 | $ | 13.257 | $ | 13.011 | $ | 12.382 | ||||||||||
Total Return | 14.00 | % | (37.01 | %) | 1.89 | % | 5.08 | % | 1.40 | % | ||||||||||
Series N (Non-Qualified) | ||||||||||||||||||||
Investment income | $ | 0.153 | $ | 0.172 | $ | 0.211 | $ | 0.119 | $ | 0.109 | ||||||||||
Expenses | 0.166 | 0.256 | 0.264 | 0.244 | 0.253 | |||||||||||||||
Net investment loss | (0.013 | ) | (0.084 | ) | (0.053 | ) | (0.125 | ) | (0.144 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments | 1.319 | (4.928 | ) | 1.115 | 0.664 | 0.358 | ||||||||||||||
Net increase (decrease) in net asset value | 1.306 | (5.012 | ) | 1.062 | 0.539 | 0.214 | ||||||||||||||
Accumulation unit net asset value: | ||||||||||||||||||||
Beginning of year | 8.582 | 13.594 | 12.532 | 11.993 | 11.779 | |||||||||||||||
End of year | $ | 9.888 | $ | 8.582 | $ | 13.594 | $ | 12.532 | $ | 11.993 | ||||||||||
Total Return | 15.22 | % | (36.87 | %) | 8.47 | % | 4.49 | % | 1.82 | % | ||||||||||
| (a) | For a unit outstanding throughout the period. Additionally, 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 | Year Ended December 31 | ||||||||||||||
| RATIOS | June 30, 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||
Series Q (Qualified) | |||||||||||||||
Operating expenses to average accumulation fund balance | 2.17 | % * | 2.07 | % | 1.77 | % | 1.64 | % | 1.65 | % | |||||
Net investment gain (loss) to average accumulation fund balance | 0.62 | % * | (0.46 | %) | 0.21 | % | (0.56 | %) | (0.77 | %) | |||||
Portfolio turnover rate | 20 | % | 46 | % | 60 | % | 81 | % | 74 | % | |||||
Accumulation units outstanding at the end of the year (in thousands) | 129 | 179 | 214 | 710 | 768 | ||||||||||
Series N (Non-Qualified) | |||||||||||||||
Operating expenses to average accumulation fund balance | 2.28 | % * | 2.14 | % | 2.01 | % | 2.01 | % | 2.01 | % | |||||
Net investment loss to average accumulation fund balance | (0.17 | %)* | (0.70 | %) | (0.41 | %) | (1.03 | %) | (1.14 | %) | |||||
Portfolio turnover rate | 21 | % | 52 | % | 66 | % | 83 | % | 74 | % | |||||
Accumulation units outstanding at the end of the year (in thousands) | 62 | 97 | 108 | 123 | 128 | ||||||||||
| * | Annualized |
See accompanying notes to financial statements
7
Table of Contents
June 30, 2009
(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 Unum Group, formerly UnumProvident Corporation. The Fund is the investment vehicle for Paul Revere Variable’s tax-deferred group annuity contracts. The Fund consists of two series. Series Q is applicable to contracts which were afforded special tax treatment under the Internal Revenue Code and are commonly referred to as “qualified contracts”. Series N is applicable to all other contracts and are commonly referred to as “non-qualified 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, 2009, as reported on national security exchanges. 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.
| 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 statements of operations which, on an annual basis, generally will not exceed 2% of the average daily net asset value of the Fund. The current rate for such fees is 1.5% 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.
8
Table of Contents
Notes to Financial Statements (continued)
June 30, 2009
(Unaudited)
| 5. | Fair Value Measurements |
Effective January 1, 2008, the Fund adopted the provisions of Statement of Financial Accounting Standards No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is intended to increase consistency and comparability among fair value estimates used in financial reporting. It does not require any new fair value measurements. SFAS 157 clarifies a number of considerations with respect to fair value measurement objectives for financial reporting and expands disclosure about the use of fair value measurements, with particular emphasis on the inputs used to measure fair value. This disclosure is intended to provide users of the financial statements the ability to assess the reliability of an entity’s fair value measurements. The adoption of SFAS 157 did not materially change the approach or methods utilized for determining fair value measurements or the fair values derived under those methods.
SFAS 157 requires financial instruments measured at fair value to be categorized into a three-level classification. The lowest level input that is significant to the fair value measurement of a financial instrument is used to categorize the instrument and reflects the judgment of management. The valuation criteria for each level is summarized as follows:
| • | Level 1 – Inputs are unadjusted and represent quoted prices in active markets for identical assets at the measurement date. |
| • | Level 2 – Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset through correlation with market data at the measurement date. |
| • | Level 3 – Inputs reflect management’s best estimate of what market participants would use in pricing the asset at the measurement date. Financial assets presented at fair value and categorized as Level 3 are generally those that are valued using unobservable inputs. |
As of June 30, 2009, all investments held by the Fund were valued using Level 1 inputs as defined by SFAS 157.
| 6. | 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 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.
| 7. | 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 | |||||||||
Six months ended June 30, 2009 | $ | 265,804 | $ | 661,793 | $ | 137,951 | $ | 410,301 | ||||
At June 30, 2009, net unrealized depreciation of investments in Series Q, amounting to $53,822, consisted of unrealized gains of $76,326 and unrealized losses of $130,148; net unrealized depreciation of investments in Series N, amounting to $21,276, consisted of unrealized gains of $38,865 and unrealized losses of $60,141.
9
Table of Contents
Notes to Financial Statements (continued)
June 30, 2009
(Unaudited)
| 8. | Accumulation units |
The change in the number of accumulation units outstanding were as follows:
| Series Q (Qualified) | ||||||
| Six months ended June 30, 2009 | Year ended December 31, 2008 | |||||
Units outstanding at beginning of year | 178,692 | 213,924 | ||||
Units credited to contracts: | ||||||
Net purchase payments | 2,961 | — | ||||
Units withdrawn from contracts: | ||||||
Annuity payments | 7,153 | 17,087 | ||||
Termination and withdrawals | 45,329 | 18,145 | ||||
Net units withdrawn | 52,482 | 35,232 | ||||
Contract units withdrawn in excess of units credited | (49,521 | ) | (35,232 | ) | ||
Units outstanding at end of period | 129,171 | 178,692 | ||||
| Series N (Non-Qualified) | ||||||
| Six months ended June 30, 2009 | Year ended December 31, 2008 | |||||
Units outstanding at beginning of year | 96,546 | 108,464 | ||||
Units credited to contracts: | ||||||
Net purchase payments | 3,057 | — | ||||
Units withdrawn from contracts: | ||||||
Annuity payments | 1,677 | 3,595 | ||||
Termination and withdrawals | 35,981 | 8,323 | ||||
Net units withdrawn | 37,658 | 11,918 | ||||
Contract units withdrawn in excess of units credited | (34,601 | ) | (11,918 | ) | ||
Units outstanding at end of period | 61,945 | 96,546 | ||||
| 9. | Contract Owner Offer |
During 2009, Paul Revere Variable offered all of the Fund’s contract owners a 10% bonus if they agreed to withdraw their account balances or elect to receive fixed annuity payments in lieu of receiving variable annuity payments. This offer is the first of several steps to discontinue the operations of the Fund. The bonus payments were funded by Unum Group, and are included in net purchase payments in the Statements of Changes in Net Assets.
10
Table of Contents
| Item 2. | Code of Ethics. |
Not applicable to Semi-Annual Report.
| Item 3. | Audit Committee Financial Expert. |
Not applicable to Semi-Annual Report.
| Item 4. | Principal Accountant Fees and Services. |
Not applicable to Semi-Annual Report.
| Item 5. | Audit Committee of Listed Registrants. |
Not applicable to Registrant.
| Item 6. | Schedule of Investments. |
The Fund’s Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this Form N-CSR.
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable to Registrant.
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable to Registrant.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable to Registrant.
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Managers.
Table of Contents
| Item 11. | Controls and Procedures. |
(a) Within the 90-day period prior to the filing of this report, the Fund’s management, including the person serving as both the Fund’s Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of the Fund’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 Fund’s disclosure controls and procedures were effective as of the date of that evaluation.
(b) No change in the Fund’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting, occurred during the Fund’s most recent second fiscal quarter.
Item 12. Exhibits.
The following exhibits are attached to this Form N-CSR:
| (1) | Not applicable to Semi-Annual Report. |
(2) Certification for each principal executive and principal financial officer of the Fund as required by Rule 30a-2(a) under the Act (17 C.F.R. 270.30a-2(a)), attached hereto as Exhibit 12(a)(2).
(3) Certification for each principal executive and principal financial officer of the Fund as required by Rule 30a-2(b) under the Act (17 C.F.R. 270.30a-2(b)), attached hereto as Exhibit 12(a)(3).
Table of Contents
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/ David G. Fussell | |||||||
| David G. Fussell, Chairman, Board of Managers | ||||||||
Signing in the capacity of Chief Executive Officer | ||||||||
and Chief Financial Officer | ||||||||
Date: August 31, 2009
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/ David G. Fussell | |||||||
David G. Fussell, Chairman, Board of Managers | ||||||||
Signing in the capacity of Chief Executive Officer | ||||||||
and Chief Financial Officer |
Date: August 31, 2009