N-30D 1 dn30d.htm SEMI-ANNUAL REPORT Prepared by R.R. Donnelley Financial -- Semi-Annual Report
Table of Contents
 
THE PAUL REVERE VARIABLE ANNUITY
CONTRACT ACCUMULATION FUND
 
Semiannual Report
 
June 30, 2002
 
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
 
A subsidiary of
UnumProvident Corporation

Table of Contents
Board Of Managers
The Accumulation Fund
Donald E. Boggs, Chairman
Gordon T. Miller, Vice Chairman
David G. Fussell
Joan Sadowsky
William J. Short
 
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
Worcester, Massachusetts 01608
 
This report and the financial statements attached are submitted for the general information of contract owners 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.
 
Semiannual Report
June 30, 2002

2

Table of Contents
 
To Our Contract Owners and Participants:
 
Despite a fourth-quarter rally in 2001, the market volatility we witnessed over the past two years has continued into 2002. As of June 30th, most U. S. equity indices have retreated since December; bond performance has been decidedly mixed year to date; and many international equity indices have outperformed the U. S. market this year. Federal Reserve Board (Fed) Chairman Alan Greenspan has declared that, in fact, the recession is over, and many financial experts have agreed with him. We are beginning to see growth again in the U. S. economy and in economies around the globe. But we would qualify that with a caution that the exciting growth rates of the 1990’s are not coming back any time soon.
 
Our view of the situation is that corporate profits still look weak, despite the recession being over. We think the markets may be bumping along the bottom for a bit longer before a recovery gathers steam. In past economic recoveries, we have usually witnessed a sharp rebound in corporate earnings. In this recovery, however, we believe a market recovery has been stymied by several issues that have held back earnings and profit growth and also created something of a crisis of confidence among investors. Perhaps the most crippling factor of all has been excess capacity. Created in the exuberance of the late 1990’s, excess capacity in some industries, notably technology and telecom, has led to weak pricing, and therefore weak profits and falling stock prices. In addition, the collapse of WorldCom in June threatened to eclipse the losses inflicted on investors by Enron—and gave the public one more reason to question corporate accounting in general. A third factor has been the huge debt loads taken on by fast-growing firms in the late 1990’s—which have become hard to repay in the current slow-growth environment.
 
As investors have shunned many formerly “hot” companies with high debt loads, the market has rotated to favor industries that once seemed sleepy compared to technology or telecom. Some of the best performers so far in 2002 have been firms in the basic materials sector that make products like paper or industrial gases and consumer staples firms that make the necessities of daily life, from soft drinks to bath soap. Healthcare services firms, many of which address the issue of rising healthcare costs, have also done well.
 
The significant magnitude and extended duration of the decline in markets we have been experiencing has been extremely challenging. Especially in contrast to the unusually strong preceding decade, it may appear as though something is wrong with the markets. However, this correction represents a fairly typical pattern of markets returning to historical norms and flushing excesses out in the process. These excesses, including both over investment in a variety of industries and overstated revenues, were extreme, as reflected in the magnitude of the correction. Whether the correction is nearing its end is difficult to gauge. We continue to be sensitive to the volatility in the markets, and very focused on valuation of individual securities. Earnings validity, always an important part of the analysis process, has become even more critical. By staying diversified and maintaining a long-term perspective, we are endeavoring to apply our bottom-up fundamental research to identify the unique opportunities these markets create.
 
Near term, we expect the equity market to remain difficult, as a number of companies are likely to announce disappointing second and third quarter results. Looking forward, the gradual strengthening of the economy should fuel stronger company fundamentals in 2003, and an increase in capital expenditures by year-end. We remain underweight in technology, healthcare, and we are investing in companies with the most attractive earnings prospects across a broad range of industries, because we believe that the recovery will be company specific, not necessarily industry specific.
 
 
Sincerely,
By:
  
/s/    DONALD E. BOGGS        
   
Donald E. Boggs
Chairman, Board of Managers
The Paul Revere Variable Annuity Contracts
Accumulation Fund
Senior Vice-President and Deputy Risk Manager
The Paul Revere Variable Annuity Company

3

Table of Contents
Financial Statements
(Unaudited)
 
June 30, 2002
 
 

Table of Contents
 
(Unaudited)
 
    
As of June 30, 2002
    
Series Q
(Qualified)
   
Series N
(Non-Qualified)
ASSETS
              
Investments in securities at market value
              
(Cost: Series Q 2002—$11,171,996)
              
(Cost: Series N 2002—$2,121,247)
              
(see Schedule of Investments)
   
$
9,403,801
   
$
1,759,274
Cash
   
 
1,938
   
 
33,462
Dividends and interest receivable
   
 
4,538
   
 
891
Receivable for investments sold
   
 
1,550,451
   
 
202,639
    
  
Total assets
   
 
10,960,728
   
 
1,996,266
    
  
LIABILITIES
              
Payable for investments purchased
   
 
1,687,566
   
 
217,502
Payable to The Paul Revere Variable Annuity
Insurance Company
   
 
33,037
   
 
13,799
    
  
Total liabilities
   
 
1,720,603
   
 
231,301
    
  
TOTAL NET ASSETS
   
$
9,240,125
   
$
1,764,965
    
  
CONTRACT OWNERS’ EQUITY
              
Deferred contracts terminable by owner
   
$
6,837,715
   
$
848,776
Currently payable contracts
   
 
2,402,410
   
 
916,189
    
  
Total net assets
   
$
9,240,125
   
$
1,764,965
    
  
ACCUMULATION UNITS OUTSTANDING
   
 
877,604
   
 
171,041
    
  
NET ASSET VALUE PER ACCUMULATION UNIT
   
$
10.529
   
$
10.319
    
  
 
See accompanying notes to financial statements.

1

Table of Contents
 
(Unaudited)
 
    
Six Months Ended
June 30, 2002
Series Q (Qualified)
     
Year Ended
December 31, 2001
Series Q (Qualified)
  
INCREASE (DECREASE) IN NET ASSETS
                  
Operations:
                  
Net investment loss
   
$
(41,499
)
   
$
(143,177
)
Net realized loss on investments
   
 
(1,628,379
)
   
 
(2,319,462
)
Net decrease in unrealized appreciation of investments
   
 
(1,296,534
)
   
 
(2,654,017
)
    
  
Decrease in net assets from operations
   
 
(2,966,412
)
   
 
(5,116,656
)
Contract receipts:
                  
Gross purchase payments received
   
 
2,371
 
   
 
14,849
 
Deductions from purchase payments
   
 
(296
)
   
 
(108
)
    
  
Net purchase payments received
   
 
2,075
 
   
 
14,741
 
Payments to contract owners:
                  
Annuity payments to contract owners
   
 
151,940
 
   
 
433,639
 
Terminations and withdrawals to contract owners
   
 
459,503
 
   
 
3,683,993
 
    
  
Total payments to contract owners
   
 
611,443
 
   
 
4,117,632
 
    
  
Net contract payments to contract owners
   
 
(609,368
)
   
 
(4,102,891
)
    
  
Total decrease in net assets
   
 
(3,575,780
)
   
 
(9,219,547
)
NET ASSETS
                  
Beginning of period
   
 
12,815,905
 
   
 
22,035,452
 
    
  
End of period
   
$
9,240,125
 
   
$
12,815,905
 
    
  
 
    
Six Months Ended
June 30, 2002
Series N (Non-Qualified)
     
Year Ended
December 31, 2001
Series N (Non-Qualified)
  
INCREASE (DECREASE) IN NET ASSETS
                  
Operations:
                  
Net investment loss
   
$
(10,461
)
   
$
(37,748
)
Net realized loss on investments
   
 
(311,382
)
   
 
(564,353
)
Net decrease in unrealized appreciation of investments
   
 
(270,413
)
   
 
(646,717
)
    
  
Decrease in net assets from operations
   
 
(592,256
)
   
 
(1,248,818
)
Contract receipts:
                  
Gross purchase payments received
   
 
—  
 
   
 
215
 
Deductions from purchase payments
   
 
—  
 
   
 
13
 
    
  
Net purchase payments received
   
 
—  
 
   
 
202
 
Payments to contract owners:
                  
Annuity payments to contract owners
   
 
87,583
 
   
 
230,266
 
Terminations and withdrawals to contract owners
   
 
47,361
 
   
 
1,031,647
 
    
  
Total payments to contract owners
   
 
134,944
 
   
 
1,261,913
 
    
  
Net contract payments to contract owners
   
 
(134,944
)
   
 
(1,261,711
)
    
  
Total decrease in net assets
   
 
(727,200
)
   
 
(2,510,529
)
NET ASSETS
                  
Beginning of period
   
 
2,492,165
 
   
 
5,002,694
 
    
  
End of period
   
$
1,764,965
 
   
$
2,492,165
 
    
  
 
See accompanying notes to financial statements.

2

Table of Contents
 
(Unaudited)
 
    
Six Months Ended
June 30, 2002
Series Q (Qualified)
  
INVESTMENT INCOME (LOSS)
         
Income:
         
Dividends
   
$
33,187
 
Interest
   
 
15,010
 
    
Total income
   
 
48,197
 
    
Expenses:
         
Mortality and expense risk fees
   
 
55,664
 
Investment management and advisory service fees
   
 
27,832
 
Professional services
   
 
6,200
 
          
Total expenses
   
 
89,696
 
    
Net investment loss
   
 
(41,499
)
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
         
Net realized loss on investments sold
   
 
(1,628,379
)
Net decrease in unrealized appreciation of investments
   
 
(1,296,534
)
    
Net realized and unrealized loss on investments
   
 
(2,924,913
)
    
Decrease in net assets from operations
   
$
(2,966,412
)
    
 
    
Six Months Ended
June 30, 2002
Series N (Non-qualified)
  
INVESTMENT INCOME (LOSS)
         
Income:
         
Dividends
   
$
6,419
 
Interest
   
 
2,990
 
    
Total income
   
 
9,409
 
    
Expenses:
         
Mortality and expense risk fees
   
 
10,767
 
Investment management and advisory service fees
   
 
5,383
 
Professional services
   
 
3,720
 
    
Total expenses
   
 
19,870
 
    
Net investment loss
   
 
(10,461
)
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
         
Net realized loss on investments sold
   
 
(311,382
)
Net decrease in unrealized appreciation of investments
   
 
(270,413
)
    
Net realized and unrealized loss on investments
   
 
(581,795
)
    
Decrease in net assets from operations
   
$
(592,256
)
    
 
See accompanying notes to financial statements.

3

Table of Contents
 
June 30, 2002
(Unaudited)
 
Securities of
Unaffliated Companies
   
Number of Shares
   
Series Q
(Qualified)
   
% of Net Assets
     
Number
of Shares
   
Series N
(Non–Qualified)
   
% of Net Assets
  
     
Cost
   
Market Value
         
Cost
   
Market Value
   
Common Stocks
                                                    
Aerospace / Defense
                                                    
Northrop Grumman Corp.
   
500
   
$
58,494
   
$
62,500
   
0.68
%
   
100
   
$
11,594
   
$
12,500
   
0.71
%
         
  
              
  
      
Beverages
                                                    
Anheuser-Busch Cos. Inc.
   
200
   
 
10,108
   
 
10,000
   
0.11
%
                          
         
  
              
  
      
Broadcasting
                                                    
AOL Time Warner, Inc.*
   
2,590
   
 
67,022
   
 
38,099
          
530
   
 
13,917
   
 
7,796
       
Clear Channel Communications, Inc.*
   
5,040
   
 
237,676
   
 
161,381
          
1,010
   
 
48,209
   
 
32,340
       
Fox Entertainment Group, Inc.*
   
6,490
   
 
143,990
   
 
141,157
          
1,210
   
 
26,981
   
 
26,318
       
Gannett Co., Inc.
   
1,300
   
 
98,874
   
 
98,670
          
300
   
 
22,706
   
 
22,770
       
Univision Communications, Inc.*
   
1,400
   
 
47,651
   
 
43,960
          
300
   
 
10,056
   
 
9,420
       
Viacom, Inc. Class B*
   
8,160
   
 
345,475
   
 
362,059
          
1,616
   
 
69,128
   
 
71,702
       
Walt Disney Co.
   
1,800
   
 
42,861
   
 
34,020
          
300
   
 
7,144
   
 
5,670
       
         
  
              
  
      
         
 
983,549
   
 
879,346
   
9.52
%
        
 
198,141
   
 
176,016
   
9.97
%
         
  
              
  
      
Business Services
                                                    
Accenture Ltd.
   
1,200
   
 
24,882
   
 
22,800
          
200
   
 
4,147
   
 
3,800
       
Cendant Corporation
   
3,020
   
 
53,745
   
 
47,958
          
530
   
 
9,338
   
 
8,416
       
         
  
              
  
      
         
 
78,627
   
 
70,758
   
0.76
%
        
 
13,485
   
 
12,216
   
0.69
%
         
  
              
  
      
Chemicals
                                                    
Praxair Inc.
   
900
   
 
53,148
   
 
51,273
   
0.55
%
   
200
   
 
12,024
   
 
11,394
   
0.64
%
         
  
              
  
      
Computer Hardware
                                                    
Dell Computer Corp.*
   
3,750
   
 
83,473
   
 
98,025
   
1.06
%
   
680
   
 
15,369
   
 
17,775
   
1.01
%
         
  
              
  
      
Computer Software—Systems
                                                    
Affiliated Computer Services Class A*
   
1,660
   
 
34,029
   
 
78,817
          
320
   
 
6,965
   
 
15,194
       
Ascential Software Corp.*
   
69
   
 
—  
   
 
193
                                 
Automatic Data Processing Inc.
   
2,940
   
 
154,033
   
 
128,037
          
550
   
 
28,991
   
 
23,952
       
BISYS Group, Inc. (The)*
   
3,260
   
 
53,758
   
 
108,558
          
600
   
 
9,501
   
 
19,980
       
Brocade Communications Systems Inc.*
   
2,600
   
 
70,285
   
 
45,448
          
500
   
 
13,494
   
 
8,740
       
Cadence Design Systems, Inc.*
   
3,640
   
 
79,294
   
 
58,677
          
780
   
 
17,001
   
 
12,574
       
Cisco Systems, Inc.*
   
15,620
   
 
463,706
   
 
217,899
          
3,000
   
 
95,750
   
 
41,850
       
First Data Corporation
   
5,040
   
 
127,658
   
 
189,806
          
1,000
   
 
25,594
   
 
37,660
       
Lexmark International, Inc.*
   
2,280
   
 
116,865
   
 
124,032
          
440
   
 
22,508
   
 
23,936
       
Microsoft Corporation*
   
4,900
   
 
263,184
   
 
265,188
          
900
   
 
48,323
   
 
48,708
       
Oracle Corporation*
   
15,400
   
 
228,400
   
 
145,838
          
3,210
   
 
47,901
   
 
30,399
       
PeopleSoft Inc.*
   
2,940
   
 
75,571
   
 
43,747
          
600
   
 
15,452
   
 
8,928
       
Rationale Software Corporation*
   
5,080
   
 
144,818
   
 
41,707
          
1,120
   
 
31,628
   
 
9,195
       
Sabre Holdings Corp.*
   
700
   
 
29,573
   
 
25,060
          
200
   
 
8,356
   
 
7,160
       
Siebel Systems, Inc.*
   
1,020
   
 
30,608
   
 
14,504
          
260
   
 
8,891
   
 
3,697
       
SunGard Data Systems, Inc.*
   
3,560
   
 
92,290
   
 
94,269
          
640
   
 
16,737
   
 
16,947
       
Veritas Software Corporation*
   
4,665
   
 
242,767
   
 
92,320
          
930
   
 
55,072
   
 
18,405
       
         
  
              
  
      
         
 
2,206,839
   
 
1,674,100
   
18.12
%
        
 
452,164
   
 
327,325
   
18.54
%
         
  
              
  
      
Consumer Goods & Services
                                                    
Gillette Company (The)
   
3,160
   
 
90,582
   
 
107,029
          
450
   
 
12,956
   
 
15,242
       
International Paper Company
   
1,530
   
 
58,909
   
 
66,677
          
230
   
 
8,852
   
 
10,023
       
Kimberly-Clark Corp.
   
1,000
   
 
59,235
   
 
62,000
          
200
   
 
11,909
   
 
12,400
       
Nike, Inc.
   
1,620
   
 
76,903
   
 
86,913
          
320
   
 
15,888
   
 
17,168
       
Philip Morris Cos., Inc.
   
2,000
   
 
110,104
   
 
87,360
          
400
   
 
22,014
   
 
17,472
       
         
  
              
  
      
         
 
395,733
   
 
409,979
   
4.43
%
        
 
71,619
   
 
72,305
   
4.10
%
         
  
              
  
      
Electrical Equipment
                                                    
Danaher Corp.
   
1,740
   
 
92,207
   
 
115,449
   
1.25
%
   
330
   
 
16,929
   
 
21,896
   
1.24
%
         
  
              
  
      
 
See accompanying notes to financial statements.

4

Table of Contents
 
Schedule of Investments—(Continued)
June 30, 2002
(Unaudited)
 
    
Number Of Shares
   
Series Q
(Qualified)
   
% of Net Assets
     
Number
Of Shares
   
Series N
(Non-Qualified)
   
% of Net Assets
  
     
Cost
   
Market Value
         
Cost
   
Market Value
   
Electronics
                                                    
Texas Instruments Inc.
   
3,500
   
$
85,673
   
$
82,950
   
0.90
%
   
670
   
$
16,714
   
$
15,879
   
0.90
%
         
  
              
  
      
Energy
                                                    
Anadarko Petroleum Corp.
   
2,030
   
 
97,591
   
 
100,079
          
440
   
 
21,542
   
 
21,692
       
Baker Hughes, Inc.
   
1,400
   
 
51,994
   
 
46,606
          
300
   
 
11,090
   
 
9,987
       
         
  
              
  
      
         
 
149,585
   
 
146,685
   
1.59
%
        
 
32,632
   
 
31,679
   
1.80
%
         
  
              
  
      
Financial Institutions
                                                    
American Express Co.
   
2,600
   
 
95,376
   
 
94,432
          
520
   
 
19,075
   
 
18,886
       
Capital One Financial Corp.
   
900
   
 
45,780
   
 
54,945
          
200
   
 
10,435
   
 
12,210
       
Citigroup, Inc.
   
4,304
   
 
163,141
   
 
166,780
          
836
   
 
32,795
   
 
32,395
       
Concord EFS, Inc.*
   
4,770
   
 
120,583
   
 
143,768
          
990
   
 
25,307
   
 
29,839
       
Freddie Mac
   
2,550
   
 
156,191
   
 
156,060
          
490
   
 
30,259
   
 
29,988
       
Goldman Sachs Group Inc.
   
1,830
   
 
135,320
   
 
134,230
          
320
   
 
23,645
   
 
23,472
       
Mellon Financial Corp.
   
3,840
   
 
132,397
   
 
120,691
          
770
   
 
26,159
   
 
24,201
       
Merrill Lynch & Company, Inc.
   
3,050
   
 
143,040
   
 
123,525
          
630
   
 
29,181
   
 
25,515
       
Morgan Stanley Dean Witter & Company
   
1,320
   
 
75,984
   
 
56,866
          
220
   
 
12,671
   
 
9,478
       
         
  
              
  
      
         
 
1,067,812
   
 
1,051,297
   
11.37
%
        
 
209,527
   
 
205,984
   
11.67
%
         
  
              
  
      
Food
                                                    
Kellogg Co.
   
2,800
   
 
100,089
   
 
100,408
   
1.09
%
   
600
   
 
21,595
   
 
21,516
   
1.22
%
         
  
              
  
      
Industrial Conglomerates
                                                    
3M Company
   
1,220
   
 
115,868
   
 
150,060
          
270
   
 
26,983
   
 
33,210
       
General Electric Company
   
1,780
   
 
64,456
   
 
51,709
          
360
   
 
13,153
   
 
10,458
       
         
  
              
  
      
         
 
180,324
   
 
201,769
   
2.18
%
        
 
40,136
   
 
43,668
   
2.47
%
         
  
              
  
      
Insurance
                                                    
ACE Ltd.
   
1,850
   
 
58,027
   
 
58,460
          
370
   
 
13,294
   
 
11,692
       
American International Group, Inc.
   
3,122
   
 
216,253
   
 
213,014
          
587
   
 
40,845
   
 
40,051
       
Chubb Corp.
   
500
   
 
33,425
   
 
35,400
          
100
   
 
6,675
   
 
7,080
       
MetLife, Inc.
   
3,070
   
 
88,370
   
 
88,416
          
550
   
 
15,761
   
 
15,840
       
Travelers Property Casualty Corp.*
   
3,800
   
 
70,919
   
 
67,260
          
800
   
 
14,558
   
 
14,160
       
XL Capital Ltd.
   
1,620
   
 
147,961
   
 
137,214
          
340
   
 
30,724
   
 
28,798
       
         
  
              
  
      
         
 
614,955
   
 
599,764
   
6.49
%
        
 
121,857
   
 
117,621
   
6.66
%
         
  
              
  
      
Leisure & Tourism
                                                    
Harley-Davidson, Inc.
   
1,870
   
 
68,932
   
 
95,875
          
440
   
 
13,668
   
 
22,559
       
Starwood Hotels & Resorts
   
1,120
   
 
33,002
   
 
36,837
          
230
   
 
8,608
   
 
7,565
       
         
  
              
  
      
         
 
101,934
   
 
132,712
   
1.44
%
        
 
22,276
   
 
30,124
   
1.71
%
         
  
              
  
      
Medical & Health Products
                                                    
Abbott Laboratories
   
1,910
   
 
100,574
   
 
71,911
          
550
   
 
28,914
   
 
20,707
       
Amgen Inc.*
   
1,600
   
 
81,290
   
 
67,008
          
300
   
 
15,233
   
 
12,564
       
Anthem, Inc.*
   
1,200
   
 
81,181
   
 
80,664
          
200
   
 
13,550
   
 
13,444
       
Aventis SA
   
1,600
   
 
118,729
   
 
112,688
          
300
   
 
22,254
   
 
21,129
       
Baxter International Inc.
   
2,400
   
 
131,416
   
 
106,656
          
500
   
 
27,288
   
 
22,220
       
Eli Lilly and Co.
   
1,630
   
 
127,741
   
 
91,932
          
290
   
 
22,493
   
 
16,356
       
Express Scripts Inc.*
   
2,100
   
 
116,226
   
 
105,231
          
400
   
 
22,236
   
 
20,044
       
Forest Laboratories Inc.*
   
500
   
 
35,889
   
 
35,400
          
100
   
 
7,166
   
 
7,080
       
Genzyme Corp—General Division*
   
1,420
   
 
79,223
   
 
27,321
          
330
   
 
19,136
   
 
6,349
       
Healthsouth Corp.*
   
4,700
   
 
66,646
   
 
60,113
          
950
   
 
13,447
   
 
12,151
       
IMS Health, Inc.
   
3,240
   
 
83,891
   
 
58,158
          
650
   
 
16,625
   
 
11,668
       
Pfizer, Inc.
   
8,190
   
 
341,215
   
 
286,650
          
1,580
   
 
59,728
   
 
55,300
       
Pharmacia Corporation
   
2,400
   
 
102,476
   
 
89,880
          
500
   
 
21,301
   
 
18,725
       
Stryker Corp.*
   
1,000
   
 
54,896
   
 
53,510
          
200
   
 
10,899
   
 
10,702
       
Tenet Healthcare Corp.*
   
1,900
   
 
127,086
   
 
135,945
          
400
   
 
27,522
   
 
28,620
       
UnitedHealth Group Inc.
   
900
   
 
65,037
   
 
82,395
          
200
   
 
14,431
   
 
18,310
       
Wyeth
   
4,330
   
 
240,342
   
 
221,696
          
910
   
 
49,630
   
 
46,592
       
         
  
              
  
      
         
 
1,953,858
   
 
1,687,158
   
18.26
%
        
 
391,853
   
 
341,961
   
19.38
%
         
  
              
  
      
 
See accompanying notes to financial statements.

5

Table of Contents
 
Schedule of Investments—(Continued)
June 30, 2002
(Unaudited)
 
    
Number Of Shares
   
Series Q (Qualified)
     
% of Net Assets
     
Number Of Shares
   
Series N (Non-Qualified)
   
% of Net Assets
  
     
Cost
   
Market Value
           
Cost
   
Market Value
   
Semiconductor Equipment
                                                      
QLogic Corporation*
   
1,090
   
 
46,850
   
 
41,529
 
   
0.45
%
   
240
   
 
10,544
   
 
9,144
   
0.52
%
         
  
              
  
      
Semiconductors
                                                      
Analog Devices, Inc.*
   
4,710
   
$
211,859
   
$
139,887
 
          
970
   
$
41,246
   
$
28,809
       
Linear Technology Corp.
   
2,400
   
 
95,021
   
 
75,432
 
          
400
   
 
15,867
   
 
12,572
       
Maximum Integrated Products*
   
1,510
   
 
79,525
   
 
57,878
 
          
310
   
 
16,271
   
 
11,882
       
Novellus Systems Inc.*
   
900
   
 
37,818
   
 
30,600
 
          
200
   
 
8,201
   
 
6,800
       
STMicroelectronics N.V.
   
2,060
   
 
63,238
   
 
50,120
 
          
410
   
 
12,977
   
 
9,975
       
Teradyne Inc.*
   
1,500
   
 
40,884
   
 
35,250
 
          
300
   
 
8,157
   
 
7,050
       
         
  
              
  
      
         
 
528,345
   
 
389,167
 
   
4.21
%
        
 
102,719
   
 
77,088
   
4.37
%
         
  
              
  
      
Stores
                                                      
Best Buy Co. Inc.*
   
900
   
 
34,950
   
 
32,670
 
          
200
   
 
7,767
   
 
7,260
       
BJ’s Wholesale Club Inc.*
   
900
   
 
39,812
   
 
34,650
 
          
200
   
 
8,793
   
 
7,700
       
Brinker International Inc.*
   
1,700
   
 
54,262
   
 
53,975
 
          
300
   
 
9,609
   
 
9,525
       
CVS Corporation
   
1,300
   
 
42,591
   
 
39,780
 
          
300
   
 
9,829
   
 
9,180
       
Family Dollar Stores
   
1,900
   
 
61,155
   
 
66,975
 
          
400
   
 
12,736
   
 
14,100
       
Home Depot Inc.
   
3,800
   
 
177,650
   
 
139,574
 
          
600
   
 
28,446
   
 
22,038
       
Kohl’s Corp.*
   
500
   
 
29,008
   
 
35,040
 
          
110
   
 
6,183
   
 
7,709
       
Sears Roebuck and Co.
   
710
   
 
31,190
   
 
38,553
 
          
110
   
 
4,849
   
 
5,973
       
Target Corp.
   
4,830
   
 
181,329
   
 
179,386
 
          
960
   
 
35,949
   
 
35,654
       
Wal-Mart Stores Inc.
   
1,700
   
 
95,347
   
 
93,517
 
          
300
   
 
16,784
   
 
16,503
       
         
  
              
  
      
         
 
747,294
   
 
714,120
 
   
7.73
%
        
 
140,945
   
 
135,642
   
7.69
%
         
  
              
  
      
Telecommunications
                                                      
Amdocs Ltd.*
   
1,540
   
 
45,554
   
 
11,627
 
          
340
   
 
10,121
   
 
2,567
       
American Tower Corporation Class A*
   
6,270
   
 
227,291
   
 
21,632
 
          
1,400
   
 
48,305
   
 
4,830
       
AT&T Wireless Services*
   
7,950
   
 
130,077
   
 
46,507
 
          
1,730
   
 
28,143
   
 
10,120
       
EchoStar Communications Corp. Cl A*
   
7,480
   
 
361,035
   
 
138,829
 
          
1,120
   
 
52,020
   
 
20,787
       
Song Networks Holding AB*
   
4,810
   
 
109,986
   
 
866
 
          
1,070
   
 
23,090
   
 
193
       
Vodafone Group PLC—ADR
   
5,529
   
 
175,293
   
 
75,471
 
          
1,128
   
 
34,673
   
 
15,397
       
         
  
              
  
      
         
 
1,049,236
   
 
294,932
 
   
3.19
%
        
 
196,352
   
 
53,894
   
3.05
%
         
  
              
  
      
Transportation
                                                      
FedEx Corp.
   
900
   
 
50,883
   
 
48,060
 
          
200
   
 
11,317
   
 
10,680
       
United Parcel Service Inc.
   
1,310
   
 
72,053
   
 
80,893
 
          
210
   
 
11,455
   
 
12,967
       
         
  
              
  
      
         
 
122,936
   
 
128,953
 
   
1.40
%
        
 
22,772
   
 
23,647
   
1.34
%
         
  
              
  
      
Total Common Stocks
        
 
10,711,069
   
 
8,942,874
 
   
96.78
%
        
 
2,121,247
   
 
1,759,274
   
99.68
%
         
  
              
  
      
Short-Term Investments
                                                      
Federal National Mtg. Association
                                                      
1.9% Due 7/1/2002
   
461,000
   
 
460,927
   
 
460,927
 
   
4.99
%
                          
         
  
              
  
      
Total Investments
        
$
11,171,996
   
$
9,403,801
 
   
101.77
%
        
$
2,121,247
   
$
1,759,274
   
99.68
%
         
  
              
  
      
Other Assets Less Liabilities
               
 
(163,676
)
   
(1.77
%)
               
 
5,691
   
0.32
%
                
                     
      
Total Net Assets
               
$
9,240,125
 
   
100.00
%
               
$
1,764,965
   
100.00
%
                
                     
      
*
 
Non–income producing security.
 
See accompanying notes to financial statements.

6

Table of Contents
 
 
Selected Per Unit Data And Ratios
(Unaudited)
 
             
Years Ended December 31,
  
      
Six Months Ended
June 30, 2002
     
2001
     
2000
     
1999
     
1998
  
PER UNIT DATA (a)
                                               
Series Q (Qualified)
                                               
 
Investment income
     
$
0.054
 
   
$
0.094
 
   
$
0.117
 
   
$
0.094
 
   
$
0.116
 
Expenses
     
 
0.101
 
   
 
0.226
 
   
 
0.374
 
   
 
0.277
 
   
 
0.202
 
 
Net investment loss
     
 
(0.047
)
   
 
(0.132
)
   
 
(0.257
)
   
 
(0.183
)
   
 
(0.086
)
Net realized and unrealized gains (losses) on investments
     
 
(3.281
)
   
 
(4.577
)
   
 
(1.398
)
   
 
5.280
 
   
 
3.836
 
      
  
  
  
  
Net increase (decrease) in net asset value
     
 
(3.328
)
   
 
(4.709
)
   
 
(1.655
)
   
 
5.097
 
   
 
3.750
 
Accumulation unit net asset value:
                                               
Beginning of period
     
 
13.857
 
   
 
18.566
 
   
 
20.221
 
   
 
15.124
 
   
 
11.374
 
      
  
  
  
  
End of period
     
$
10.529
 
   
$
13.857
 
   
$
18.566
 
   
$
20.221
 
   
$
15.124
 
      
  
  
  
  
Series N (Non-qualified)
                                               
 
Investment income
     
$
0.053
 
   
$
0.090
 
   
$
0.094
 
   
$
0.083
 
   
$
0.096
 
Expenses
     
 
0.112
 
   
 
0.251
 
   
 
0.397
 
   
 
0.296
 
   
 
0.212
 
      
  
  
  
  
Net investment income (loss)
     
 
(0.059
)
   
 
(0.161
)
   
 
(0.303
)
   
 
(0.213
)
   
 
(0.116
)
Net realized and unrealized gains (losses) on investments
     
 
(3.297
)
   
 
(5.177
)
   
 
(1.498
)
   
 
5.894
 
   
 
3.891
 
      
  
  
  
  
Net increase (decrease) in net asset value
     
 
(3.356
)
   
 
(5.338
)
   
 
(1.801
)
   
 
5.681
 
   
 
3.775
 
Accumulation unit net asset value:
                                               
Beginning of period
     
 
13.675
 
   
 
19.013
 
   
 
20.814
 
   
 
15.133
 
   
 
11.358
 
      
  
  
  
  
End of period
     
$
10.319
 
   
$
13.675
 
   
$
19.013
 
   
$
20.814
 
   
$
15.133
 
      
  
  
  
  
(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.
 
             
Years Ended December 31,
  
      
Six Months Ended
June 30, 2002
     
2001
     
2000
     
1999
     
1998
  
RATIOS
                                     
Series Q (Qualified)
                                     
 
Operating expenses to average accumulation fund balance
     
0.80
%
   
1.55
%
   
1.57
%
   
1.56
%
   
1.57
%
Net investment income (loss) to average accumulation fund balance
     
(0.37
%)
   
(0.90
%)
   
(1.08
%)
   
(1.03
%)
   
(0.67
%)
Portfolio turnover rate
     
41
%
   
79
%
   
102
%
   
98
%
   
143
%
Accumulation units outstanding at the end of the period (in thousands)
     
878
 
   
925
 
   
1,187
 
   
1,385
 
   
1,715
 
 
Series N (Non-qualified)
                                     
 
Operating expenses to average accumulation fund balance
     
0.92
%
   
1.70
%
   
1.64
%
   
1.62
%
   
1.63
%
Net investment income (loss) to average accumulation fund balance
     
(0.49
%)
   
(1.09
%)
   
(1.25
%)
   
(1.16
%)
   
(0.90
%)
Portfolio turnover rate
     
43
%
   
78
%
   
101
%
   
103
%
   
143
%
Accumulation units outstanding at the end of the period (in thousands)
     
171
 
   
182
 
   
263
 
   
342
 
   
475
 
 
See accompanying notes to financial statements.

7

Table of Contents
 
Supplementary Information
 
Selected Per Unit Data and Ratios—(Continued)
(Unaudited)
 
    
Years Ended December 31,
  
    
1997
     
1996
   
1995
   
1994
     
1993
  
PER UNIT DATA (a)
                                         
Series Q (Qualified)
                                         
Investment income
   
$
0.177
 
   
$
0.153
   
$
0.119
   
$
0.081
 
   
$
0.054
 
Expenses
   
 
0.159
 
   
 
0.133
   
 
0.096
   
 
0.073
 
   
 
0.079
 
    
  
  
  
  
Net investment income (loss)
   
 
0.018
 
   
 
0.020
   
 
0.023
   
 
0.008
 
   
 
(0.025
)
Net realized and unrealized gains (losses) on investments
   
 
2.723
 
   
 
1.551
   
 
1.711
   
 
(0.020
)
   
 
0.291
 
    
  
  
  
  
Net increase (decrease) in net asset value
   
 
2.741
 
   
 
1.571
   
 
1.734
   
 
(0.012
)
   
 
0.266
 
Accumulation unit net asset value:
                                         
Beginning of year
   
 
8.633
 
   
 
7.062
   
 
5.328
   
 
5.340
 
   
 
5.074
 
    
  
  
  
  
End of year
   
$
11.374
 
   
$
8.633
   
$
7.062
   
$
5.328
 
   
$
5.340
 
    
  
  
  
  
Series N (Non-qualified)
                                         
Investment income
   
$
0.135
 
   
$
0.137
   
$
0.117
   
$
0.099
 
   
$
0.055
 
Expenses
   
 
0.166
 
   
 
0.134
   
 
0.109
   
 
0.102
 
   
 
0.092
 
    
  
  
  
  
Net investment income (loss)
   
 
(0.031
)
   
 
0.003
   
 
0.008
   
 
(0.003
)
   
 
(0.037
)
Net realized and unrealized gains (losses) on investments
   
 
2.66
 
   
 
1.459
   
 
1.769
   
 
(0.023
)
   
 
0.318
 
    
  
  
  
  
Net increase (decrease) in net asset value
   
 
2.629
 
   
 
1.462
   
 
1.777
   
 
(0.026
)
   
 
0.281
 
Accumulation unit net asset value:
                                         
Beginning of year
   
 
8.729
 
   
 
7.267
   
 
5.490
   
 
5.516
 
   
 
5.235
 
    
  
  
  
  
End of year
   
$
11.358
 
   
$
8.729
   
$
7.267
   
$
5.490
 
   
$
5.516
 
    
  
  
  
  
(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.
 
    
Years Ended December 31,
  
    
1997
     
1996
     
1995
     
1994
     
1993
  
RATIOS
                                   
Series Q (Qualified)
                                   
Operating expenses to average accumulation fund balance
   
1.59
%
   
1.57
%
   
1.55
%
   
1.55
%
   
1.56
%
Net investment income (loss) to average accumulation fund balance
   
0.18
%
   
0.24
%
   
0.38
%
   
0.17
%
   
(0.50
%)
Portfolio turnover rate
   
130
%
   
78
%
   
64
%
   
64
%
   
59
%
Accumulation units outstanding at the end of the year (in thousands)
   
1,887
 
   
2,093
 
   
5,491
 
   
5,597
 
   
5,700
 
Series N (Non-qualified)
                                   
Operating expenses to average accumulation fund balance
   
1.67
%
   
1.69
%
   
1.71
%
   
1.73
%
   
1.73
%
Net investment income (loss) to average accumulation fund balance
   
(0.31
%)
   
0.04
%
   
0.13
%
   
(0.05
%)
   
(0.69
%)
Portfolio turnover rate
   
139
%
   
94
%
   
67
%
   
62
%
   
62
%
Accumulation units outstanding at the end of the year (in thousands)
   
530
 
   
566
 
   
586
 
   
604
 
   
640
 
                                    
 
See accompanying notes to financial statements.

8

Table of Contents
June 30, 2002
(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 and preferred stocks are stated at market values which are based on the last sales prices at June 30, 2002, 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.

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Table of Contents
 
Notes to Financial Statements—(Continued)
June 30, 2002
(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 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.
 
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, 2002
   
$
4,391,942
   
$
5,013,183
   
$
901,531
   
$
1,017,236
December 31, 2001
   
$
12,300,858
   
$
16,774,915
   
$
2,679,997
   
$
4,242,101
 
At June 30, 2002, net unrealized depreciation of investments in Series Q, amounting to $1,768,195, consisted of unrealized gains of $428,945 and unrealized losses of $2,197,140, net unrealized depreciation of investments in Series N, amounting to $361,973, consisted of unrealized gains of $81,502 and unrealized losses of $443,475.
 
7.      Accumulation units
 
The change in the number of accumulation units outstanding were as follows:
 
      
Series Q (Qualified)
  
      
Six Months Ended
June 30, 2002
     
Year Ended
2001
  
Units outstanding at beginning of period
     
924,860
 
   
1,186,884
 
Units credited to contracts:
                
Net purchase payments
     
161
 
   
929
 
Units withdrawn from contracts:
                
Annuity payments
     
12,349
 
   
28,522
 
Terminations and withdrawals
     
35,068
 
   
234,431
 
      
  
Net units withdrawn
     
47,417
 
   
262,953
 
      
  
Contract units withdrawn in excess of units credited
     
(47,256
)
   
(262,024
)
      
  
Units outstanding at end of period
     
877,604
 
   
924,860
 
      
  

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Table of Contents
 
Notes to Financial Statements—(Continued)
June 30, 2002
(Unaudited)
 
8.    Accumulation units (continued)
 
      
Series N
(Non-qualified)
  
      
Six Months Ended June 30, 2002
     
Year Ended
2001
  
Units outstanding at beginning of period
     
182,247
 
   
263,120
 
Units credited to contracts:
                
Net purchase payments
     
—  
 
   
12
 
Units withdrawn from contracts:
                
Annuity payments
     
7,217
 
   
15,115
 
Terminations and withdrawals
     
3,989
 
   
65,770
 
      
  
Net units withdrawn
     
11,206
 
   
80,885
 
      
  
Contract units withdrawn in excess of units credited
     
(11,206
)
   
(80,873
)
      
  
Units outstanding at end of period
     
171,041
 
   
182,247
 
      
  

11