N-30D 1 dn30d.htm ANNUAL REPORT Annual Report

 

THE PAUL REVERE VARIABLE ANNUITY

CONTRACT ACCUMULATION FUND

 

Annual Report

 

December 31, 2002

 

 

 

 

 

 

 

 

 

 

 

 

THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY

 

A subsidiary of

UnumProvident Corporation

 

Board Of Managers

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 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.

 

 

 

 

 

 

 

 

 

 

Annual Report

December 31, 2002

 

To Our Contract Owners and Participants:

 

2002 was another uneasy year for investors as the major market indices witnessed the third consecutive year of negative stock performance. This has not happened since the 1939-1941 period. However, in the last quarter, the stock market seemed stabilized and actually ended positive. Is it all over? Will the stock slide continue for another year? Historical statistics indicate the chance is very small. However, rather than predicting the stock market, it may be useful to analyze the economic conditions on which stock valuations are based.

 

For the past 12 to 18 months, spending by U.S. consumers has almost single-handedly driven a modest recovery, despite a weak economy, corporate layoffs, fears of terrorism, and the threat of war. In the fourth quarter of last year, however, we began to see evidence that consumers were growing more cautious. The holiday selling season, while not a disaster, was somewhat disappointing. It appears to us that consumers in general are becoming more concerned about job security and factoring that into their spending plans.

 

Corporate spending has so far been the missing element in the modest recovery we’ve experienced. We believe this could change in 2003. As excess inventories and excess production capacity from the boom of the 1990s have been worked through, we have begun to see some pockets of strength in corporate spending. Computer and software sales, for example, began to recover in 2002.

 

Before driving a sustained market recovery, we think investors need to be convinced that corporate spending – and therefore earnings – have bottomed and are beginning to pick up. As mentioned earlier, pockets of spending strength have begun to appear. In general, however, we see corporations poised to spend, but not yet committed. Markets hate uncertainty because uncertainty is difficult to value. We think that when a U.S. resolution on Iraq emerges, the market will begin to put a price on that resolution, factor it into stock valuations, and move on. We think the net effect of years of cutting costs and improving productivity is that, in a recovering economy, corporations will see a greater percentage of their income translate into profits. We think that bodes well for corporate earnings, which we believe are the major long-term driver of stock prices.

 

With the economy in a holding pattern and markets extremely volatile, we think it’s important to remember the familiar investment strategies that we believe apply in any market: Think long term. Be diversified. See crises as opportunities. That’s how we’d describe our approach to this volatile environment.

 

We understand that the past few years have been discouraging. Short-term events have sorely tested investors’ long-term faith in the market. However, we would caution investors about reacting to market news—good or bad—by making major changes in their portfolios. We would suggest that in difficult times it is even more important to have a long-term financial plan and to talk on a regular basis with your investment professional. We would also point out that history has shown that the market and the economy have been cyclical; down turns have usually been followed by upturns.

 

Sincerely,

/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

 

The   Paul Revere Variable Annuity Contract Accumulation Fund

Audited Financial Statements

 

December 31, 2002

 

Report of Independent Auditors

   

1

Statements of Assets and Liabilities

   

2

Statements of Changes in Net Assets

   

3

Statements of Operations

   

4

Schedule of Investments

   

5

Supplementary Information

   

8

Notes to Financial Statements

   

10

 

REPORT OF INDEPENDENT AUDITORS

 

The Owners of Variable Annuity Contracts of The Paul Revere

Variable Annuity Insurance Company and the Board of

Managers of The Paul Revere Variable Annuity Contract

Accumulation Fund of The Paul Revere Variable Annuity

Insurance Company

 

We have audited the accompanying statements of assets and liabilities of The Paul Revere Variable Annuity Contract Accumulation Fund (comprising the Qualified and Non-Qualified Portfolios) as of December 31, 2002 and 2001, including the statement of investments as of December 31, 2002, and the related statements of operations and changes in net assets for each of the three years in the period ended December 31, 2002, and the supplementary information for each of the ten years in the period then ended. These financial statements and supplementary information are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and supplementary information based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and supplementary information are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2002 and 2001, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements and supplementary information referred to above present fairly, in all material respects, the financial position of The Paul Revere Variable Annuity Contract Accumulation Fund at December 31, 2002 and 2001, the results of its operations and the changes in its net assets for each of the three years in the period ended December 31, 2002, and the supplementary information for each of the ten years in the period then ended, in conformity with accounting principles generally accepted in the United States.

 

 

ERNST & YOUNG LLP

 

Chattanooga, Tennessee

January 27, 2003

Statements of Assets and Liabilities

    

December 31,

    

2002

Series Q (Qualified)

   

2001

Series Q (Qualified)

   

2002

Series N

(Non-Qualified)

   

2001

Series N

(Non-Qualified)

ASSETS

                            

Investments in securities at market value

                            

(Cost: Series Q 2002—$9,079,303; 2001—$13,921,609)

                            

(Cost: Series N 2002—$1,653,128; 2001—$ 2,774,315)

                            

(see Schedule of Investments)

   

$

8,027,687

   

$

13,449,948

   

$

1,449,322

   

$

2,682,755

Cash

   

 

943

   

 

1,289

   

 

22,928

   

 

—  

Dividends and interest receivable

   

 

9,165

   

 

6,086

   

 

1,662

   

 

1,118

Receivable for investments sold

   

 

610,063

   

 

985,193

   

 

48,622

   

 

209,015

    
  
  
  

Total assets

   

 

8,647,858

   

 

14,442,516

   

 

1,522,534

   

 

2,892,888

    
  
  
  

LIABILITIES

                            

Payable for investments purchased

   

 

599,769

   

 

1,470,596

   

 

47,718

   

 

327,866

Payable to The Paul Revere Variable Annuity

        Insurance Company

   

 

65,389

   

 

156,015

   

 

11,260

   

 

67,538

Other liabilities

   

 

—  

   

 

—  

   

 

—  

   

 

5,319

    
  
  
  

Total liabilities

   

 

665,158

   

 

1,626,611

   

 

58,978

   

 

400,723

    
  
  
  

TOTAL NET ASSETS

   

$

7,982,700

   

$

12,815,905

   

$

1,463,556

   

$

2,492,165

    
  
  
  

CONTRACT OWNERS’ EQUITY

                            

Deferred contracts terminable by owner

   

$

5,974,116

   

$

9,482,446

   

$

721,796

   

$

1,179,448

Currently payable contracts

   

 

2,008,584

   

 

3,333,459

   

 

741,760

   

 

1,312,717

    
  
  
  

Total net assets

   

$

7,982,700

   

$

12,815,905

   

$

1,463,556

   

$

2,492,165

    
  
  
  

ACCUMULATION UNITS OUTSTANDING

   

 

858,770

   

 

924,860

   

 

162,573

   

 

182,247

    
  
  
  

NET ASSET VALUE PER ACCUMULATION UNIT

   

$

9,295

   

$

13,857

   

$

9,002

   

$

13,675

    
  
  
  

 

See accompanying notes to financial statements.

 

2

Statements of Changes in Net Assets

    

For the years ended December 31,

  
    

2002

Series Q

(Qualified)

     

2001

Series Q

(Qualified)

     

2000

Series Q

(Qualified)

  

DECREASE IN NET ASSETS

                           

Operations:

                           

Net investment loss

   

$

(71,823

)

   

$

(143,177

)

   

$

(287,539

)

Net realized gain (loss) on investments

   

 

(3,392,842

)

   

 

(2,319,462

)

   

 

5,865,290

 

Net decrease in unrealized appreciation of investments

   

 

(579,955

)

   

 

(2,654,017

)

   

 

(7,428,521

)

    
  
  

Decrease in net assets from operations

   

 

(4,044,620

)

   

 

(5,116,656

)

   

 

(1,850,770

)

Contract receipts:

                           

Gross purchase payments received

   

 

3,217

 

   

 

14,849

 

   

 

47,877

 

Deductions from purchase payments

   

 

48

 

   

 

108

 

   

 

147

 

    
  
  

Net purchase payments received

   

 

3,169

 

   

 

14,741

 

   

 

47,730

 

Payments to contract owners:

                           

Annuity payments to contract owners

   

 

267,259

 

   

 

433,639

 

   

 

568,973

 

Terminations and withdrawals to contract owners

   

 

524,495

 

   

 

3,683,993

 

   

 

3,593,697

 

    
  
  

Total payments to contract owners

   

 

791,754

 

   

 

4,117,632

 

   

 

4,162,670

 

    
  
  

Net contract payments to contract owners

   

 

(788,585

)

   

 

(4,102,891

)

   

 

(4,114,940

)

    
  
  

Total decrease in net assets

   

 

(4,833,205

)

   

 

(9,219,547

)

   

 

(5,965,710

)

NET ASSETS

                           

Beginning of year

   

 

12,815,905

 

   

 

22,035,452

 

   

 

28,001,162

 

    
  
  

End of year

   

$

7,982,700

 

   

$

12,815,905

 

   

$

22,035,452

 

    
  
  
    

For the years ended December 31,

  
    

2002

Series N

(Non-qualified)

     

2001

Series N

(Non-qualified)

     

2000

Series N

(Non-qualified)

  

DECREASE IN NET ASSETS

                           

Operations:

                           

Net investment loss

   

$

(19,214

)

   

$

(37,748

)

   

$

(82,533

)

Net realized gain (loss) on investments

   

 

(683,478

)

   

 

(564,353

)

   

 

1,514,763

 

Net decrease in unrealized appreciation of investments

   

 

(112,246

)

   

 

(646,717

)

   

 

(1,922,431

)

    
  
  

Decrease in net assets from operations

   

 

(814,938

)

   

 

(1,248,818

)

   

 

(490,201

)

Contract receipts:

                           

Gross purchase payments received

   

 

—  

 

   

 

215

 

   

 

916

 

Deductions from purchase payments

   

 

—  

 

   

 

13

 

   

 

—  

 

    
  
  

Net purchase payments received

   

 

—  

 

   

 

202

 

   

 

916

 

Payments to contract owners:

                           

Annuity payments to contract owners

   

 

146,533

 

   

 

230,266

 

   

 

340,098

 

Terminations and withdrawals to contract owners

   

 

67,138

 

   

 

1,031,647

 

   

 

1,280,727

 

    
  
  

Total payments to contract owners

   

 

213,671

 

   

 

1,261,913

 

   

 

1,620,825

 

    
  
  

Net contract payments to contract owners

   

 

(213,671

)

   

 

(1,261,711

)

   

 

(1,619,909

)

    
  
  

Total decrease in net assets

   

 

(1,028,609

)

   

 

(2,510,529

)

   

 

(2,110,110

)

NET ASSETS

                           

Beginning of year

   

 

2,492,165

 

   

 

5,002,694

 

   

 

7,112,804

 

    
  
  

End of year

   

$

1,463,556

 

   

$

2,492,165

 

   

$

5,002,694

 

    
  
  

See accompanying notes to financial statements.

 

3

Statements of Operations

    

For the years ended December 31,

  
    

2002

Series Q

(Qualified)

     

2001

Series Q

(Qualified)

     

2000

Series Q

(Qualified)

  

INVESTMENT LOSS

                           

Income:

                           

Dividends

   

$

69,916

 

   

$

87,612

 

   

$

102,385

 

Interest

   

 

18,092

 

   

 

15,297

 

   

 

28,587

 

    
  
  

Total income

   

 

88,008

 

   

 

102,909

 

   

 

130,972

 

    
  
  

Expenses:

                           

Mortality and expense risk fees

   

 

98,154

 

   

 

155,791

 

   

 

270,607

 

Investment management and advisory service fees

   

 

49,077

 

   

 

77,895

 

   

 

135,304

 

Professional services

   

 

12,600

 

   

 

12,400

 

   

 

12,600

 

    
  
  

Total expenses

   

 

159,831

 

   

 

246,086

 

   

 

418,511

 

    
  
  

Net investment loss

   

 

(71,823

)

   

 

(143,177

)

   

 

(287,539

)

REALIZED AND UNREALIZED GAIN (LOSS) ON

        INVESTMENTS

                           

Net realized gain (loss) on investments sold

   

 

(3,392,842

)

   

 

(2,319,462

)

   

 

5,865,290

 

Net decrease in unrealized appreciation of investments

   

 

(579,955

)

   

 

(2,654,017

)

   

 

(7,428,521

)

    
  
  

Net realized and unrealized loss on investments

   

 

(3,972,797

)

   

 

(4,973,479

)

   

 

(1,563,231

)

    
  
  

Decrease in net assets from operations

   

$

(4,044,620

)

   

$

(5,116,656

)

   

$

(1,850,770

)

    
  
  
    

For the years ended December 31,

  
    

2002

Series N

(Non-Qualified)

     

2001

Series N

(Non-Qualified)

     

2000

Series N

(Non-Qualified)

  

INVESTMENT LOSS

                           

Income:

                           

Dividends

   

$

13,265

 

   

$

19,081

 

   

$

25,370

 

Interest

   

 

3,126

 

   

 

2,028

 

   

 

286

 

    
  
  

Total income

   

 

16,391

 

   

 

21,109

 

   

 

25,656

 

    
  
  

Expenses:

                           

Mortality and expense risk fees

   

 

18,697

 

   

 

34,278

 

   

 

67,086

 

Investment management and advisory service fees

   

 

9,348

 

   

 

17,139

 

   

 

33,543

 

Professional services

   

 

7,560

 

   

 

7,440

 

   

 

7,560

 

    
  
  

Total expenses

   

 

35,605

 

   

 

58,857

 

   

 

108,189

 

    
  
  

Net investment loss

   

 

(19,214

)

   

 

(37,748

)

   

 

(82,533

)

REALIZED AND UNREALIZED GAIN (LOSS) ON

        INVESTMENTS

                           

Net realized gain (loss) on investments sold

   

 

(683,478

)

   

 

(564,353

)

   

 

1,514,763

 

Net decrease in unrealized appreciation of investments

   

 

(112,246

)

   

 

(646,717

)

   

 

(1,922,431

)

    
  
  

Net realized and unrealized loss on investments

   

 

(795,724

)

   

 

(1,211,070

)

   

 

(407,668

)

    
  
  

Decrease in net assets from operations

   

$

(814,938

)

   

$

(1,248,818

)

   

$

(490,201

)

    
  
  

 

See accompanying notes to financial statements.

 

4

Schedule of Investments

December 31, 2002

 

    

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

                                                    

Lockheed Martin Corporation

   

280

   

$

17,482

   

$

16,170

          

90

   

$

5,619

   

$

5,198

       

Northrop Grumman Corp.

   

720

   

 

85,429

   

 

69,840

          

140

   

 

16,572

   

 

13,580

       
         
  
              
  
      
         

 

102,911

   

 

86,010

   

1.08

%

        

 

22,191

   

 

18,778

   

1.28

%

         
  
              
  
      

Beverages

                                                    

PepsiCo, Inc.

   

3,290

   

 

140,858

   

 

138,904

   

1.74

%

   

650

   

 

27,731

   

 

27,443

   

1.88

%

         
  
              
  
      

Broadcasting & Media

                                                    

AOL Time Warner, Inc. *

   

8,900

   

 

137,790

   

 

116,590

          

1,740

   

 

24,880

   

 

22,794

       

Clear Channel Communications, Inc. *

   

3,260

   

 

129,800

   

 

121,565

          

600

   

 

24,220

   

 

22,374

       

Comcast Corporation Class A

   

1,000

   

 

24,324

   

 

23,570

          

200

   

 

4,865

   

 

4,714

       

Comcast Corporation Special Class A

   

1,790

   

 

44,320

   

 

40,436

          

340

   

 

8,418

   

 

7,681

       

Fox Entertainment Group, Inc. *

   

2,220

   

 

49,865

   

 

57,565

          

480

   

 

10,965

   

 

12,446

       

Gannett Company, Inc.

   

480

   

 

35,692

   

 

34,464

          

90

   

 

6,716

   

 

6,462

       

New York Times Company

   

1,380

   

 

63,800

   

 

63,107

          

290

   

 

13,404

   

 

13,262

       

Viacom, Inc. Class B *

   

3,710

   

 

162,495

   

 

151,220

          

596

   

 

26,427

   

 

24,293

       

Westwood One, Inc.

   

400

   

 

14,926

   

 

14,944

          

100

   

 

3,731

   

 

3,736

       
         
  
              
  
      
         

 

663,012

   

 

623,461

   

7.81

%

        

 

123,626

   

 

117,762

   

8.05

%

         
  
              
  
      

Business Services

                                                    

Lamar Advertising Company

   

1,660

   

 

54,300

   

 

55,859

   

0.70

%

   

280

   

 

9,212

   

 

9,422

   

0.64

%

         
  
              
  
      

Computer Hardware

                                                    

Dell Computer Corp. *

   

4,730

   

 

111,569

   

 

126,480

          

880

   

 

21,519

   

 

23,531

       

International Business Machines Corp.

   

1,980

   

 

159,914

   

 

153,450

          

390

   

 

31,550

   

 

30,225

       
         
  
              
  
      
         

 

271,483

   

 

279,930

   

3.51

%

        

 

53,069

   

 

53,756

   

3.67

%

         
  
              
  
      

Computer Software—Systems

                                                    

Affiliated Computer Services Class A *

   

1,890

   

 

89,382

   

 

99,509

          

400

   

 

19,187

   

 

21,060

       

Automatic Data Processing, Inc.

   

3,260

   

 

149,134

   

 

127,955

          

690

   

 

31,039

   

 

27,083

       

BISYS Group, Inc. (The) *

   

2,420

   

 

44,955

   

 

38,478

          

480

   

 

8,218

   

 

7,632

       

Cadence Design Systems, Inc. *

   

4,600

   

 

83,188

   

 

54,234

          

910

   

 

17,432

   

 

10,729

       

Cisco Systems, Inc. *

   

17,140

   

 

484,095

   

 

224,534

          

3,230

   

 

99,049

   

 

42,313

       

First Data Corporation

   

3,260

   

 

101,426

   

 

115,437

          

670

   

 

21,023

   

 

23,725

       

Microsoft Corporation *

   

6,390

   

 

338,211

   

 

330,363

          

1,200

   

 

63,740

   

 

62,040

       

Oracle Corporation *

   

15,840

   

 

244,445

   

 

171,072

          

2,950

   

 

42,567

   

 

31,860

       

PeopleSoft, Inc. *

   

5,530

   

 

122,619

   

 

101,199

          

1,040

   

 

23,480

   

 

19,032

       

SunGard Data Systems, Inc. *

   

2,530

   

 

65,160

   

 

59,607

          

480

   

 

12,653

   

 

11,309

       

Veritas Software Corporation *

   

6,465

   

 

267,162

   

 

100,983

          

1,160

   

 

49,539

   

 

18,119

       
         
  
              
  
      
         

 

1,989,777

   

 

1,423,371

   

17.83

%

        

 

387,927

   

 

274,902

   

18.78

%

         
  
              
  
      

Consumer Goods & Services

                                                    

Avon Products, Inc.

   

1,730

   

 

84,053

   

 

93,195

          

370

   

 

18,034

   

 

19,932

       

Colgate-Palmolive Company

   

500

   

 

26,498

   

 

26,215

          

100

   

 

5,299

   

 

5,243

       

Concord EFS, Inc. *

   

1,360

   

 

36,090

   

 

21,406

          

260

   

 

7,087

   

 

4,092

       

Gillette Company (The)

   

1,520

   

 

44,708

   

 

46,147

          

290

   

 

8,460

   

 

8,804

       

Phillip Morris Companies, Inc.

   

1,650

   

 

86,461

   

 

66,875

          

300

   

 

15,623

   

 

12,159

       
         
  
              
  
      
         

 

277,810

   

 

253,838

   

3.18

%

        

 

54,503

   

 

50,230

   

3.43

%

         
  
              
  
      

Education

                                                    

Apollo Group, Inc.

   

1,000

   

 

42,812

   

 

44,000

   

0.55

%

   

200

   

 

8,626

   

 

8,800

   

0.60

%

         
  
              
  
      

Electronics

                                                    

Analog Devices, Inc. *

   

4,370

   

 

162,829

   

 

104,312

          

820

   

 

30,405

   

 

19,573

       

Texas Instruments, Inc.

   

3,130

   

 

77,516

   

 

46,981

          

590

   

 

14,895

   

 

8,856

       
         
  
              
  
      
         

 

240,345

   

 

151,293

   

1.89

%

        

 

45,300

   

 

28,429

   

1.95

%

         
  
              
  
      

 

See accompanying notes to financial statements.

 

5

Schedule of Investments (continued)

December 31, 2002

    

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

                                                    

BJ Services Company *

   

2,300

   

$

78,254

   

$

74,313

          

400

   

$

13,611

   

$

12,924

       

Praxair, Inc.

   

660

   

 

38,487

   

 

38,128

          

80

   

 

4,746

   

 

4,622

       

Schlumberger Limited

   

1,700

   

 

67,919

   

 

71,553

          

300

   

 

12,137

   

 

12,627

       
         
  
              
  
      
         

 

184,660

   

 

183,994

   

2.31

%

        

 

30,494

   

 

30,173

   

2.06

%

         
  
              
  
      

Food

                                                    

Aramark Corporation *

   

1,400

   

 

32,611

   

 

32,900

          

300

   

 

6,993

   

 

7,050

       

Sysco Corporation

   

1,300

   

 

38,702

   

 

38,727

          

300

   

 

8,931

   

 

8,937

       
         
  
              
  
      
         

 

71,313

   

 

71,627

   

0.90

%

        

 

15,924

   

 

15,987

   

1.09

%

         
  
              
  
      

Financial Institutions

                                                    

American Express Company

   

1,930

   

 

73,571

   

 

68,225

          

360

   

 

14,024

   

 

12,726

       

Citigroup, Inc.

   

5,824

   

 

203,212

   

 

204,947

          

1,096

   

 

39,510

   

 

38,568

       

Federal Home Loan Mtg. Corporation

   

2,410

   

 

147,474

   

 

142,310

          

410

   

 

25,469

   

 

24,211

       

Goldman Sachs Group, Inc. (The)

   

1,510

   

 

109,021

   

 

102,831

          

280

   

 

20,547

   

 

19,068

       

Mellon Financial Corporation

   

2,190

   

 

76,552

   

 

57,181

          

450

   

 

15,480

   

 

11,750

       

Merrill Lynch & Co., Inc.

   

2,480

   

 

112,170

   

 

94,116

          

470

   

 

21,247

   

 

17,836

       

Morgan Stanley Dean Witter & Company

   

1,640

   

 

78,506

   

 

65,469

          

310

   

 

15,048

   

 

12,375

       

SLM Corporation

   

780

   

 

71,796

   

 

81,011

          

90

   

 

8,336

   

 

9,347

       
         
  
              
  
      
         

 

872,302

   

 

816,090

   

10.22

%

        

 

159,661

   

 

145,881

   

9.97

%

         
  
              
  
      

Industrial Conglomerates

                                                    

3M Company

   

1,130

   

 

108,983

   

 

139,329

          

210

   

 

22,842

   

 

25,893

       

General Electric Company

   

6,650

   

 

202,970

   

 

161,928

          

1,160

   

 

36,121

   

 

28,246

       
         
  
              
  
      
         

 

311,953

   

 

301,257

   

3.77

%

        

 

58,963

   

 

54,139

   

3.70

%

         
  
              
  
      

Industrial Machinery

                                                    

Danaher Corporation

   

360

   

 

22,423

   

 

23,652

          

10

   

 

626

   

 

657

       

Illinois Tool Works

   

1,270

   

 

88,202

   

 

82,372

          

240

   

 

16,668

   

 

15,566

       
         
  
              
  
      
         

 

110,625

   

 

106,024

   

1.33

%

        

 

17,294

   

 

16,223

   

1.11

%

         
  
              
  
      

Insurance

                                                    

ACE Limited

   

2,190

   

 

75,087

   

 

64,255

          

360

   

 

13,076

   

 

10,562

       

American International Group, Inc.

   

1,432

   

 

102,701

   

 

82,841

          

197

   

 

14,269

   

 

11,396

       

Arthur J. Gallagher & Company

   

1,210

   

 

36,281

   

 

35,550

          

180

   

 

5,397

   

 

5,288

       

Hartford Financial Services Group, Inc.

   

800

   

 

37,573

   

 

36,344

          

200

   

 

9,393

   

 

9,086

       

MetLife, Inc.

   

1,540

   

 

43,727

   

 

41,642

          

290

   

 

8,304

   

 

7,842

       

Travelers Property Casualty Corp. *

   

3,874

   

 

67,392

   

 

56,754

          

737

   

 

12,653

   

 

10,797

       

XL Capital Ltd.

   

1,290

   

 

110,486

   

 

99,652

          

170

   

 

14,796

   

 

13,132

       
         
  
              
  
      
         

 

473,247

   

 

417,038

   

5.23

%

        

 

77,888

   

 

68,103

   

4.65

%

         
  
              
  
      

Leisure & Tourism

                                                    

Harley-Davidson, Inc.

   

2,050

   

 

98,143

   

 

94,710

          

400

   

 

17,966

   

 

18,480

       

Starwood Hotels & Resorts Worldwide, Inc.

   

2,250

   

 

64,545

   

 

53,415

          

420

   

 

13,914

   

 

9,971

       
         
  
              
  
      
         

 

162,688

   

 

148,125

   

1.86

%

        

 

31,880

   

 

28,451

   

1.94

%

         
  
              
  
      

Medical & Health Products

                                                    

Abbott Laboratories

   

2,500

   

 

104,561

   

 

100,000

          

400

   

 

16,732

   

 

16,000

       

Amgen, Inc. *

   

3,580

   

 

166,066

   

 

173,057

          

750

   

 

35,041

   

 

36,255

       

Boston Scientific Corp. *

   

1,200

   

 

51,597

   

 

51,024

          

200

   

 

8,600

   

 

8,504

       

Cardinal Health, Inc.

   

400

   

 

26,260

   

 

23,676

          

100

   

 

6,565

   

 

5,919

       

Eli Lilly and Company

   

2,350

   

 

152,555

   

 

149,225

          

490

   

 

31,914

   

 

31,115

       

Express Scripts, Inc. *

   

720

   

 

37,319

   

 

34,589

          

130

   

 

6,911

   

 

6,245

       

Forest Laboratories, Inc. *

   

1,290

   

 

93,505

   

 

126,704

          

330

   

 

23,661

   

 

32,413

       

Genzyme Corporation *

   

1,630

   

 

44,781

   

 

48,199

          

260

   

 

6,868

   

 

7,688

       

Johnson & Johnson

   

4,460

   

 

234,546

   

 

239,547

          

850

   

 

44,789

   

 

45,654

       

MedImmune, Inc. *

   

900

   

 

22,412

   

 

24,453

          

200

   

 

4,916

   

 

5,434

       

Medtronic, Inc.

   

2,050

   

 

92,460

   

 

93,480

          

480

   

 

21,861

   

 

21,888

       

Pfizer, Inc.

   

10,960

   

 

405,577

   

 

335,047

          

2,050

   

 

71,072

   

 

62,669

       

Pharmacia Corporation

   

1,910

   

 

80,902

   

 

79,838

          

360

   

 

15,378

   

 

15,048

       

Wyeth

   

400

   

 

15,109

   

 

14,960

          

100

   

 

3,777

   

 

3,740

       
         
  
              
  
      
         

 

1,527,650

   

 

1,493,799

   

18.71

%

        

 

298,085

   

 

298,572

   

20.40

%

         
  
              
  
      

See accompanying notes to financial statements.

 

6

Schedule of Investments (continued)

December 31, 2002

 

    

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

  

Semiconductors

                                                      

Intel Corporation

   

1,680

   

$

29,165

   

$

26,158

 

          

320

   

$

5,555

   

$

4,982

       

Linear Technology Corporation

   

1,410

   

 

43,697

   

 

36,265

 

          

250

   

 

7,566

   

 

6,430

       

Maxim Integrated Products, Inc.

   

1,440

   

 

71,990

   

 

47,578

 

          

270

   

 

13,162

   

 

8,921

       

Microchip Technology, Inc.

   

1,000

   

 

25,973

   

 

24,450

 

          

200

   

 

5,195

   

 

4,890

       

Novellus Systems, Inc. *

   

950

   

 

39,098

   

 

26,676

 

          

180

   

 

7,265

   

 

5,054

       
         
  
              
  
      
         

 

209,923

   

 

161,127

 

   

2.01

%

        

 

38,743

   

 

30,277

   

2.07

%

         
  
              
  
      

Stores

                                                      

Brinker International, Inc. *

   

1,000

   

 

31,115

   

 

32,250

 

          

200

   

 

6,227

   

 

6,450

       

Family Dollar Stores

   

950

   

 

31,058

   

 

29,649

 

          

180

   

 

5,799

   

 

5,618

       

Gap, Inc. (The)

   

3,300

   

 

40,743

   

 

51,216

 

          

700

   

 

8,728

   

 

10,864

       

Home Depot, Inc.

   

4,770

   

 

168,990

   

 

114,289

 

          

940

   

 

33,580

   

 

22,522

       

Kohl’s Corporation *

   

1,970

   

 

118,924

   

 

110,221

 

          

360

   

 

21,381

   

 

20,142

       

Limited Brands

   

1,800

   

 

30,311

   

 

25,074

 

          

300

   

 

5,024

   

 

4,179

       

Lowe’s Companies, Inc.

   

1,740

   

 

74,159

   

 

65,250

 

          

360

   

 

15,343

   

 

13,500

       

Staples, Inc. *

   

1,300

   

 

24,131

   

 

23,790

 

          

200

   

 

3,712

   

 

3,660

       

Target Corporation

   

3,530

   

 

134,470

   

 

105,900

 

          

700

   

 

26,974

   

 

21,000

       

TJX Companies, Inc.

   

1,200

   

 

23,500

   

 

23,424

 

          

200

   

 

3,917

   

 

3,904

       

Wal-Mart Stores, Inc.

   

3,730

   

 

200,932

   

 

188,402

 

          

700

   

 

37,714

   

 

35,357

       
         
  
              
  
      
         

 

878,333

   

 

769,465

 

   

9.64

%

        

 

168,399

   

 

147,196

   

10.06

%

         
  
              
  
      

Telecommunications

                                                      

AT&T Wireless Services, Inc. *

   

4,140

   

 

24,302

   

 

23,391

 

   

0.29

%

   

830

   

 

5,130

   

 

4,690

   

0.32

%

         
  
              
  
      

Transportation

                                                      

FedEx Corporation

   

460

   

 

25,329

   

 

24,941

 

          

80

   

 

4,421

   

 

4,338

       

United Parcel Service, Inc.

   

1,350

   

 

74,685

   

 

85,158

 

          

250

   

 

14,061

   

 

15,770

       
         
  
              
  
      
         

 

100,014

   

 

110,099

 

   

1.38

%

        

 

18,482

   

 

20,108

   

1.38

%

         
  
              
  
      

Total Common Stocks

        

 

8,710,318

   

 

7,658,702

 

   

95.94

%

        

 

1,653,128

   

 

1,449,322

   

99.03

%

         
  
              
  
      

Short-Term Investment

                                                      

Federal Home Loan Banks
0.75% due 01/02/03

   

369,000

   

 

368,985

   

 

368,985

 

   

4.62

%

                          
         
  
                                

Total Investments

        

$

9,079,303

   

 

8,027,687

 

   

100.56

%

        

$

1,653,128

   

 

1,449,322

   

99.03

%

         
  
              
  
      

Other Assets Less Liabilities

               

 

(44,987

)

   

(0.56

)%

               

 

14,234

   

0.97

%

                
                     
      

Total Net Assets

               

$

7,982,700

 

   

100.00

%

               

$

1,463,556

   

100.00

%

                
                     
      

* Non – income producing security.

 

See accompanying notes to financial statements.

 

7

Supplementary Information

Selected Per Unit Data and Ratios

 

    

Years Ended December 31,

  
    

2002

     

2001

     

2000

     

1999

     

1998

  

PER UNIT DATA (a)

Series Q (Qualified)

                                             

Investment income

   

$

0.099

 

   

$

0.094

 

   

$

0.117

 

   

$

0.094

 

   

$

0.116

 

Expenses

   

 

0.180

 

   

 

0.226

 

   

 

0.374

 

   

 

0.277

 

   

 

0.202

 

    
  
  
  
  

Net investment loss

   

 

(0.081

)

   

 

(0.132

)

   

 

(0.257

)

   

 

(0.183

)

   

 

(0.086

)

Net realized and unrealized gains (losses) on investments

   

 

(4.481

)

   

 

(4.577

)

   

 

(1.398

)

   

 

5.280

 

   

 

3.836

 

    
  
  
  
  

Net increase (decrease) in net asset value

   

 

(4.562

)

   

 

(4.709

)

   

 

(1.655

)

   

 

5.097

 

   

 

3.750

 

Accumulation unit net asset value:

                                             

Beginning of year

   

 

13.857

 

   

 

18.566

 

   

 

20.221

 

   

 

15.124

 

   

 

11.374

 

    
  
  
  
  

End of year

   

$

9.295

 

   

$

13.857

 

   

$

18.566

 

   

$

20.221

 

   

$

15.124

 

    
  
  
  
  

Series N (Non-Qualified)

                                             

Investment income

   

$

0.094

 

   

$

0.090

 

   

$

0.094

 

   

$

0.083

 

   

$

0.096

 

Expenses

   

 

0.204

 

   

 

0.251

 

   

 

0.397

 

   

 

0.296

 

   

 

0.212

 

    
  
  
  
  

Net investment loss

   

 

(0.110

)

   

 

(0.161

)

   

 

(0.303

)

   

 

(0.213

)

   

 

(0.116

)

Net realized and unrealized gains (losses) on investments

   

 

(4.563

)

   

 

(5.177

)

   

 

(1.498

)

   

 

5.894

 

   

 

3.891

 

    
  
  
  
  

Net increase (decrease) in net asset value

   

 

(4.673

)

   

 

(5.338

)

   

 

(1.801

)

   

 

5.681

 

   

 

3.775

 

Accumulation unit net asset value:

                                             

Beginning of year

   

 

13.675

 

   

 

19.013

 

   

 

20.814

 

   

 

15.133

 

   

 

11.358

 

    
  
  
  
  

End of year

   

$

9.002

 

   

$

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 year.

    

Years Ended December 31,

  
    

2002

     

2001

     

2000

     

1999

     

1998

  

RATIOS

Series Q (Qualified)

                                             

Operating expenses to average accumulation fund balance

   

 

1.63

%

   

 

1.55

%

   

 

1.57

%

   

 

1.56

%

   

 

1.57

%

Net investment loss to average accumulation fund balance

   

 

(0.73

%)

   

 

(0.90

%)

   

 

(1.08

%)

   

 

(1.03

%)

   

 

(0.67

%)

Portfolio turnover rate

   

 

102

%

   

 

79

%

   

 

102

%

   

 

98

%

   

 

143

%

Accumulation units outstanding at the end of the year

        (in thousands)

   

 

859

 

   

 

925

 

   

 

1,187

 

   

 

1,385

 

   

 

1,715

 

Series N (Non-Qualified)

                                             

Operating expenses to average accumulation fund balance

   

 

1.91

%

   

 

1.70

%

   

 

1.64

%

   

 

1.62

%

   

 

1.63

%

Net investment loss to average accumulation fund balance

   

 

(1.03

%)

   

 

(1.09

%)

   

 

(1.25

%)

   

 

(1.16

%)

   

 

(0.90

%)

Portfolio turnover rate

   

 

104

%

   

 

78

%

   

 

101

%

   

 

103

%

   

 

143

%

Accumulation units outstanding at the end of the year

        (in thousands)

   

 

163

 

   

 

182

 

   

 

263

 

   

 

342

 

   

 

475

 

 

See accompanying notes to financial statements.

 

8

 

Supplementary Information

Selected Per Unit Data and Ratios (continued)

    

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

   

 

2.660

 

   

 

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.

 

9

Notes to Financial Statements

December 31, 2002

 

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 December 31, 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 statements of operations which, on an annual basis, will not exceed 2% of the average daily net asset value of the Fund.

 

Certain administrative services of the Fund are provided by The Variable Annuity Life Insurance Company (“VALIC”) under a contract dated May 15, 1998. These services include processing of unit transactions and daily unit value calculations subsequent to December 1, 1998 as well as accounting and other services.

 

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.

 

10

Notes to Financial Statements (continued)

December 31, 2002

 

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

December 31, 2002

   

$

9,615,269

   

$

10,472,798

   

$

1,895,372

   

$

2,107,099

December 31, 2001

   

$

12,300,858

   

$

16,774,915

   

$

2,679,997

   

$

4,242,101

 

At December 31, 2002, net unrealized depreciation of investments in Series Q, amounting to $1,051,616, consisted of unrealized gains of $180,320 and unrealized losses of $1,231,936, net unrealized depreciation of investments in Series N, amounting to $203,806, consisted of unrealized gains of $32,124 and unrealized losses of $235,930.

 

7.   Accumulation units

 

The change in the number of accumulation units outstanding were as follows:

 

    

Series Q (Qualified)

  
    

2002

     

2001

     

2000

  

Units outstanding at beginning of year

   

924,860

 

   

1,186,884

 

   

1,384,747

 

Units credited to contracts:

                     

Net purchase payments

   

277

 

   

929

 

   

2,256

 

Units withdrawn from contracts:

                     

Annuity payments

   

24,478

 

   

28,522

 

   

27,317

 

Terminations and withdrawals

   

41,889

 

   

234,431

 

   

172,802

 

    
  
  

Net units withdrawn

   

66,367

 

   

262,953

 

   

200,119

 

    
  
  

Contract units withdrawn in excess of units credited

   

(66,090

)

   

(262,024

)

   

(197,863

)

    
  
  

Units outstanding at end of year

   

858,770

 

   

924,860

 

   

1,186,884

 

    
  
  

 

11

Notes to Financial Statements (continued)

 

7.   Accumulation units (continued)

 

    

Series N (Non-Qualified)

  
    

2002

     

2001

     

2000

  

Units outstanding at beginning of year

   

182,247

 

   

263,120

 

   

341,729

 

Units credited to contracts:

                     

Net purchase payments

   

—  

 

   

12

 

   

44

 

Units withdrawn from contracts:

                     

Annuity payments

   

12,673

 

   

15,115

 

   

15,881

 

Terminations and withdrawals

   

7,001

 

   

65,770

 

   

62,772

 

    
  
  

Net units withdrawn

   

19,674

 

   

80,885

 

   

78,653

 

    
  
  

Contract units withdrawn in excess of units credited

   

(19,674

)

   

(80,873

)

   

(78,609

)

    
  
  

Units outstanding at end of year

   

162,573

 

   

182,247

 

   

263,120

 

    
  
  

 

12

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

Gordon T. Miller (80)

14 Eastwood Road

Shrewsbury, MA 01545

   

Vice Chairman, Board of Managers

   

2001-2004

34 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 (73)

770 Salisbury Street

Apt. 576

Worcester, MA 01609

   

Member, Board of Managers

   

2000-2003

17 years of service

     

Retired; Former Vice

President of Human Resources, Atlas

Distributing Corporation,

Auburn, MA

(beverage distribution)

     

2

   

None

H.C. “Lan” Goodwin (68)

24 Waters Road

Sutton, MA 01590

   

Member, Board of Managers

   

2002-2004

elected to board in 2002

     

President of

Manufacturers Service

Center, Inc.

     

2

   

None

Donald E. Boggs*†(57)

1 Fountain Square-5S 550

Chattanooga, TN 37402

   

Chairman

Board of Managers

   

2001-2004

5 years of service

     

Senior Vice President

UnumProvident

Corporation

Chattanooga, Tennessee

     

2

   

None

David G. Fussell*†(55)

1 Fountain Square-6S

660 Chattanooga, TN 37402

   

Member,

Board of Managers

   

2002-2003

1 year of service

     

Senior Vice President Unum Provident Corporation, Chattanooga, Tennessee

     

2

   

None

 

*   Officers of PRV (the investment advisor, underwriter and sponsoring insurance company) and other subsidiaries within the UnumProvident Corporation holding company system.

 

†   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.

 

None of the members of the Board of Managers who are not “interested persons” of the Fund within the meaning of section 2(a)(190) of the Investment Company Act of 1940 owns beneficially or of record securities of PRV or any of its affiliates.

 

REMUNERATION OF BOARD OF MANAGERS

 

The total aggregate remuneration paid by the Fund to all members of the Board of Managers for the fiscal year ended December 31, 2002, was $5,400.00. 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.

 

The Statement of Additional Information includes additional information about the members of the Board of Managers of the Contract Accumulation Fund and is available, without charge, upon request by calling 1-800-718-8824.