<PAGE>
THE PAUL REVERE VARIABLE ANNUITY
CONTRACT ACCUMULATION FUND
Semiannual Report
June 30, 2000
THE PAUL REVERE VARIABLE ANNUITY INSURANCE COMPANY
A subsidiary of
UnumProvident Corporation
<PAGE>
Board Of Managers
The Accumulation Fund
Donald Boggs, Chairman
Gordon T. Miller, Vice Chairman
Aubrey K. Reid, Jr.
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.
Semi Annual Report
June 30, 2000
<PAGE>
To Our Contract Owners and Participants:
The U.S. equity market experienced a slowing of economic growth with the
S&P 500 falling by a yield adjusted 0.4%. Your diversified large cap growth
equity portfolio outperformed the S&P 500 during the year. The accumulation
unit values of the Qualified Fund and Non-Qualified Fund each increased 5.8% for
the first six months of the year.
Performance for 2000 has been slowed for your fund and for stocks in
general as compared to the blistering performance of the past five years. The
greatest contributor towards performance came from stock selection in the
Technology sector. Underweighting of the Consumer Staples sector was a drag to
the portfolio's return. Specifically, underweighting the Food industry hurt as
the market rewarded several multinational food companies.
The technology sector has significantly outperformed just about every other
sector of the market over the past two years. While technology stocks represent
some of the most innovative and dynamic companies in the market, we believe
there are attractive opportunities for growth outside the tech sector, but at
much more reasonable valuations. Other sectors where we see the strong
potential for earnings strength are health care and energy. While we've seen
some companies rebound from historically low levels in these sectors, we believe
the market's persistent focus on growth at the expense of value has created a
compelling argument for value stocks with attractive growth prospects to regain
prominence.
A key question for investors is whether the Federal Reserve Board will be
able to negotiate a so-called soft landing - increasing interest rates just
enough to cool inflation and promote moderate economic growth - or whether there
will be a more destructive outcome, with a recession and bear market. We
continue to lean toward the optimistic view. A pickup in productivity is what
typically allows the U.S. economy to expand without inflation, accompanied with
strong corporate earnings and rising real wages. Because technology spending
remains so strong, we believe the U.S. productivity will continue to grow
rapidly, which will bode well for the equity market.
Sincerely,
/s/ Donald E. Boggs
--------------------
Donald E. Boggs
Chairman, Board of Managers
The Paul Revere Variable Annuity Contract
Accumulation Fund
Senior Vice-President
The Paul Revere Variable Annuity Company
<PAGE>
Statement of Assets and Liabilities
(Unaudited)
As of June 30, 2000
-------------------
Series Q Series N
(Qualified) (Non-Qualified)
----------- ---------------
ASSETS
Investments in securities at market value
(Cost: Series Q $20,508,240)
(Cost: Series N $ 5,104,654)
(see Statement of Investments) $27,526,745 $6,848,230
Cash 128,277 21,037
Dividends receivable 6,472 1,539
Receivable for investments sold 515,712 135,593
----------- ----------
Total assets 28,177,206 7,006,399
----------- ----------
LIABILITIES
Payable for investments purchased 416,379 98,639
Payable to The Paul Revere Variable Annuity
Insurance Company 195,018 36,063
----------- ----------
Total liabilities 611,397 134,702
----------- ----------
TOTAL NET ASSETS $27,565,809 $6,871,697
=========== ==========
CONTRACT OWNERS' EQUITY
Deferred contracts terminable by owner $21,562,329 $4,250,303
Currently payable contracts 6,003,480 2,621,394
----------- ----------
Total net assets $27,565,809 $6,871,697
=========== ==========
ACCUMULATION UNITS OUTSTANDING 1,288,274 311,968
=========== ==========
NET ASSET VALUE PER ACCUMULATION UNIT $ 21.397 $ 22.027
=========== ==========
See accompanying notes to financial statements.
2
<PAGE>
Statement of Operations
(Unaudited)
Six Months Ended
June 30, 2000
Series Q (Qualified)
--------------------
INVESTMENT INCOME
Income:
Dividends $ 51,392
Interest 13,458
-----------
Total income 64,850
-----------
Expenses:
Mortality and expense risk fees 141,009
Investment management and advisory service fees 70,504
Professional services 6,300
-----------
Total expenses 217,813
-----------
Net investment loss (152,963)
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments sold 4,320,600
Net decrease in unrealized appreciation of investments (2,592,372)
-----------
Net realized and unrealized gain on investments 1,728,228
-----------
Increase in net assets from operations $ 1,575,265
===========
Six Months Ended
June 30, 2000
Series N (Non-Qualified)
------------------------
INVESTMENT INCOME
Income:
Dividends $ 12,969
-----------
Expenses:
Mortality and expense risk fees 35,437
Investment management and advisory service fees 17,718
Professional services 3,780
-----------
Total expenses 56,935
-----------
Net investment loss (43,966)
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments sold 1,155,127
Net decrease in unrealized appreciation of investments (734,011)
-----------
Net realized and unrealized gain on investments 421,116
-----------
Increase in net assets from operations $ 377,150
===========
See accompanying notes to financial statements.
3
<PAGE>
Statements of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
Series Q (Qualified) Series Q (Qualified)
-------------------- --------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss $ (152,963) $ (276,056)
Net realized gain on investments 4,320,600 5,429,040
Net increase (decrease) in unrealized appreciation of investments (2,592,372) 2,529,347
----------- -----------
Increase in net assets from operations 1,575,265 7,682,331
Contract receipts:
Gross purchase payments received 29,129 44,524
Deductions from purchase payments 34 2,074
----------- -----------
Net purchase payments received 29,095 42,450
Payments to contract owners:
Annuity payments to contract owners 292,120 546,059
Terminations and withdrawals to contract owners 1,747,593 5,403,945
----------- -----------
Total payments to contract owners 2,039,713 5,950,004
----------- -----------
Net contract payments to contract owners (2,010,618) (5,907,554)
Other additions - 282,977
----------- -----------
Total increase (decrease) in net assets (435,353) 2,057,754
NET ASSETS
Beginning of period 28,001,162 25,943,408
----------- -----------
End of year $27,565,809 $28,001,162
=========== ===========
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
Series N (Non-Qualified) Series N (Non-Qualified)
------------------------ ------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss $ (43,966) $ (82,825)
Net realized gain on investments 1,155,127 1,790,732
Net increase (decrease) in unrealized appreciation of investments (734,011) 505,981
----------- -----------
Increase in net assets from operations 377,150 2,213,888
Contract receipts:
Gross purchase payments received 915 6,249
Deductions from purchase payments - 246
----------- -----------
Net purchase payments received 915 6,003
Payments to contract owners:
Annuity payments to contract owners 176,572 267,038
Terminations and withdrawals to contract owners 442,600 2,222,991
----------- -----------
Total payments to contract owners 619,172 2,490,029
----------- -----------
Net contract payments to contract owners (618,257) (2,484,026)
Other additions - 199,344
----------- -----------
Total decrease in net assets (241,107) (70,794)
NET ASSETS
Beginning of period 7,112,804 7,183,598
----------- -----------
End of period $ 6,871,697 $ 7,112,804
=========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
Statement of Investments
June 30, 2000
<TABLE>
<CAPTION>
Series Q (Qualified) Series N (Non-Qualified)
--------------------------------------- ---------------------------------------
Number % of Number % of
of Market Net of Market Net
Shares Cost Value Assets Shares Cost Value Assets
------ ---------- ---------- ------- ------ ---------- ---------- -------
COMMON STOCKS
Broadcasting
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Comcast Corporation, Class A Special 5,930 $ 214,010 $ 240,165 1,500 $ 54,067 $ 60,750
Emmis Communications Corporation, Class A 2,850 112,547 117,919 690 26,574 28,549
Infinity Broadcasting Corporation 9,390 242,282 342,147 2,520 65,075 91,823
UnitedGlobalCom, Inc. , Class A 2,800 139,328 130,900 700 34,803 32,725
Univision Communications, Inc. 2,740 104,469 283,590 690 25,565 71,415
Viacom, Inc. Class B 6,520 222,567 444,583 1,616 54,591 110,191
---------- ---------- ---------- ----------
1,035,203 1,559,304 5.66% 260,675 395,453 5.76%
---------- ---------- ---------- ----------
Computer Software - PC
Dell Computer Corporation 5,740 282,141 283,054 1,500 73,565 73,969
Microsoft Corporation 6,460 363,150 516,800 1,550 82,759 124,000
---------- ---------- ---------- ----------
645,291 799,854 2.90% 156,324 197,969 2.88%
---------- ---------- ---------- ----------
Computer Software - Systems
Affiliated Computer Services, Class A 5,400 186,256 178,538 1,350 46,104 44,634
Automatic Data Processing, Inc. 5,890 291,665 315,483 1,450 72,198 77,666
Bea Systems, Inc. 2,490 142,836 123,099 440 27,443 21,753
BISYS Group, Inc. 3,450 203,147 212,174 900 53,303 55,350
BMC Software, Inc. 6,400 231,185 233,500 1,550 56,120 56,551
Cadence Design Systems, Inc. 6,230 138,622 126,936 1,550 34,509 31,580
Check Point Software Technologies 500 81,302 105,875 100 16,327 21,175
Cisco Systems, Inc. 12,440 426,550 790,718 3,000 102,810 190,688
Computer Associates International, Inc. 4,330 281,222 221,642 1,110 71,986 56,818
Computer Sciences Corporation 3,310 265,117 247,216 760 60,711 56,763
Comverse Technology, Inc. 1,650 118,615 153,450 530 39,209 49,290
Digex, Inc. 1,530 146,039 103,944 400 37,679 27,175
DST Systems, Inc. 2,920 156,782 222,285 750 40,869 57,094
E.piphany, Inc. 900 84,804 96,469 200 18,901 21,438
EMC Corporation 7,260 80,267 558,566 1,820 17,821 140,026
First Data Corporation 5,770 261,328 286,336 1,410 64,312 69,971
Fiserv, Inc. 8,180 281,311 353,785 2,040 67,941 88,230
I2 Technologies, Inc. 670 82,806 69,858 190 24,321 19,810
Oni Systems Corporation 40 1,000 4,688 10 250 1,172
Oracle Corporation 5,170 44,852 434,602 1,250 13,125 105,078
Rationale Software Corporation 2,100 154,921 195,169 500 36,751 46,468
S1 Corporation 1,590 62,351 37,067 340 12,610 7,926
Seagate Technology, Inc. 860 57,461 47,300 190 12,869 10,449
Siebel Systems, Inc. 1,320 62,954 215,903 340 14,909 55,611
Sun Microsystems, Inc. 4,260 177,169 387,394 960 41,392 87,300
VeriSign, Inc. 1,376 92,889 242,864 258 21,183 45,537
Veritas Software Corporation 915 38,276 103,409 170 8,689 19,213
Vignette Corporation 3,000 177,329 156,047 770 45,505 40,052
---------- ---------- ---------- ----------
4,329,056 6,224,317 22.58% 1,059,847 1,504,818 21.90%
---------- ---------- ---------- ----------
Consumer Goods & Services
Tyco International, Ltd. 16,122 233,271 763,780 2.77% 3,640 52,841 172,445 2.51%
---------- ---------- ---------- ----------
Containers
Corning, Inc. 3,720 283,484 1,003,935 3.64% 910 68,158 245,586 3.57%
---------- ---------- ---------- ----------
Electrical Equipment
General Electric Company 12,010 487,219 636,530 2,970 108,789 157,410
Teradyne, Inc. 3,540 115,535 260,190 910 28,923 66,885
---------- ---------- ---------- ----------
602,754 896,720 3.25% 137,712 224,295 3.26%
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Statement of Investments (continued)
June 30, 2000
<TABLE>
<CAPTION>
Series Q (Qualified) Series N (Non-Qualified)
--------------------------------------- -----------------------------------
Number % of Number % of
of Market Net of Market Net
Shares Cost Value Assets Shares Cost Value Assets
------ ---------- ---------- ------- ------ -------- -------- -------
Electronics
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Analog Devices, Inc. 4,700 $ 99,888 $ 357,200 1,180 $ 25,374 $ 89,680
Intel Corporation 4,560 354,367 609,615 1,180 91,742 157,751
W. W. Grainger, Inc. 2,930 142,458 90,281 710 34,517 21,877
---------- ---------- -------- --------
596,713 1,057,096 3.84% 151,633 269,308 3.92%
---------- ---------- -------- --------
Energy
Baker Hughes, Inc. 5,560 131,907 177,920 1,380 32,718 44,160
Conoco, Inc., Class B 8,200 204,082 201,413 2,030 50,524 49,862
Cooper Cameron Corporation 2,590 132,346 170,939 700 35,823 46,200
Diamond Offshore Drilling, Inc. 2,000 68,320 70,250 480 16,397 16,859
Dynegy, Inc. 1,700 94,106 116,131 400 22,167 27,325
Global Marine, Inc. 2,500 67,768 70,469 600 16,181 16,913
Halliburton Company 3,320 132,249 156,663 820 32,787 38,694
Noble Drilling Corporation 3,450 127,003 142,097 900 33,196 37,069
Royal Dutch Petroleum Company 2,200 140,633 135,438 500 31,962 30,781
Transocean Sedco Forex, Inc. 3,250 119,639 173,672 820 30,242 43,819
---------- ---------- -------- --------
1,218,053 1,414,992 5.13% 301,997 351,682 5.12%
---------- ---------- -------- --------
Entertainment
USA Networks, Inc. 8,700 174,382 188,138 0.68% 2,200 44,174 47,575 0.69%
---------- ---------- -------- --------
Financial Institutions
Associates First Capital Corporation 11,420 304,798 254,809 2,730 72,695 60,913
Bank of New York Company, Inc. 1,640 69,088 76,259 380 16,008 17,669
Chase Manhattan Corporation 2,250 112,710 103,641 585 29,281 26,947
Citigroup, Inc. 2,800 118,675 168,699 730 30,883 43,983
Merrill Lynch & Company, Inc. 2,120 186,814 243,800 480 42,222 55,200
Providian Financial Corporation 1,500 138,871 135,000 390 36,258 35,100
State Street Corporation 3,140 213,573 333,036 780 52,798 82,729
---------- ---------- -------- --------
1,144,529 1,315,244 4.77% 280,145 322,541 4.70%
---------- ---------- -------- --------
Government Sponsored
Federal National Mortgage Association 2,110 129,687 110,116 0.40% 480 29,502 25,050 0.37%
---------- ---------- -------- --------
Insurance
American International Group, Inc. 2,495 229,933 293,163 665 61,356 78,137
AXA Financial, Inc. 6,120 179,811 208,079 1,500 43,680 51,000
Hartford Financial Services Group 1,910 91,049 106,841 480 22,855 26,850
Marsh & McLennan Companies, Inc. 1,490 127,033 155,612 380 32,549 39,686
---------- ---------- -------- --------
627,826 763,695 2.77% 160,440 195,673 2.85%
---------- ---------- -------- --------
Medical & Health Products
ALZA Corporation 1,300 63,778 76,863 300 14,718 17,738
American Home Products Corporation 4,910 263,052 288,463 1,270 68,186 74,612
Bausch & Lomb, Inc. 2,480 168,966 191,890 630 42,863 48,746
Bristol Myers Squibb Company 6,660 352,899 387,944 1,720 85,949 100,190
Medtronic, Inc. 4,600 171,267 229,138 1,030 38,437 51,307
Pfizer, Inc. 2,640 100,368 126,720 798 30,320 38,280
Pharmacia Corporation 10,783 544,023 557,346 2,696 135,582 139,350
---------- ---------- -------- --------
1,664,353 1,858,364 6.74% 416,055 470,223 6.84%
---------- ---------- -------- --------
Printing & Publishing
Scholastic Corporation 1,410 59,220 86,186 360 15,120 22,005
Tribune Company 4,230 172,103 148,050 1,100 44,950 38,500
---------- ---------- -------- --------
231,323 234,236 0.85% 60,070 60,505 0.88%
---------- ---------- -------- --------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
Statement of Investments (continued)
June 30, 2000
<TABLE>
<CAPTION>
Series Q (Qualified) Series N (Non-Qualified)
--------------------------------------- -----------------------------------
Number % of Number % of
of Market Net of Market Net
Shares Cost Value Assets Shares Cost Value Assets
------ ---------- ---------- ------- ------ -------- -------- -------
Restaurants
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wendy's International, Inc. 4,490 $ 105,357 $ 79,978 0.29% 1,130 $ 26,587 $ 20,128 0.29%
---------- ---------- -------- --------
Semiconductor Equipment
Applied Materials, Inc. 1,960 62,230 177,625 440 15,146 39,875
Novellus Systems, Inc. 3,370 81,116 190,616 730 17,437 41,291
---------- ---------- -------- --------
143,346 368,241 1.34% 32,583 81,166 1.18%
---------- ---------- -------- --------
Semiconductors
ASM International N.V. 1,940 53,829 51,410 530 14,696 14,045
Atmel Corporation 6,140 113,995 226,413 1,510 28,035 55,681
Fairchild Semiconductor Corporation 3,620 129,323 146,610 940 33,761 38,070
LAM Research Corporation 3,070 147,641 115,125 770 37,070 28,874
LSI Logic Corporation 6,020 98,169 325,833 1,510 24,217 81,729
Micron Technology, Inc. 4,590 297,557 404,207 1,150 74,354 101,272
Motorola, Inc. 11,241 315,892 326,692 2,853 79,275 82,915
National Semiconductor Corporation 3,620 95,721 205,434 910 23,942 51,643
Vitesse Semiconductor Corporation 270 23,088 19,862 10 855 736
---------- ---------- -------- --------
1,275,215 1,821,586 6.61% 316,205 454,965 6.62%
---------- ---------- -------- --------
Stores
BJ's Wholesale Club, Inc. 5,050 82,150 166,650 1,200 20,168 39,600
CVS Corporation 7,220 260,795 288,799 1,780 65,298 71,200
Lowe's Companies, Inc. 4,250 158,375 174,516 1,050 40,024 43,116
Office Depot, Inc. 10,940 135,600 68,375 2,200 28,113 13,750
Radioshack Corporation 4,740 229,874 224,558 1,240 60,506 58,745
---------- ---------- -------- --------
866,794 922,898 3.35% 214,109 226,411 3.29%
---------- ---------- -------- --------
Supermarkets
Kroger Company 6,530 128,043 144,068 1,550 30,813 34,197
Safeway, Inc. 7,030 248,467 317,229 1,810 64,894 81,676
Wal-Mart Stores, Inc. 5,630 105,284 324,429 1,400 22,180 80,675
---------- ---------- -------- --------
481,794 785,726 2.85% 117,887 196,548 2.86%
---------- ---------- -------- --------
Telecommunications
Allegiance Telecom, Inc. 2,290 147,714 146,560 410 25,905 26,239
Alltel Corporation 3,540 234,888 219,259 900 59,805 55,744
Amdocs ,Ltd. 2,410 130,316 184,968 640 34,719 49,120
American Tower Corporation, Class A 3,420 142,820 142,571 900 37,527 37,518
AT&T Canada, Inc. 1,480 57,305 49,118 370 18,774 12,279
AT&T Corporation 8,160 113,495 197,880 2,120 29,169 51,410
AT&T Corporation Wireless Group 2,300 67,850 64,113 580 17,110 16,168
Broadwing, Inc. 5,610 129,521 145,508 1,390 32,054 36,053
Cable & Wireless Plc- ADR 2,590 128,864 129,662 620 30,975 31,039
California Amplifier, Inc. 2,230 63,947 102,023 620 17,708 28,365
China Mobile HK , Ltd.- SP ADR 640 89,990 113,800 120 16,491 21,338
Ericsson LM TEL Co.- ADR Series B 2,610 31,960 52,200
Flag Telecom Holdings 1,690 58,597 25,139 420 14,828 6,248
Global Crossing, Ltd. 9,270 376,724 243,917 2,360 94,706 62,098
GTE Corporation 2,480 185,021 154,380 610 45,825 37,973
Koninklijke KPN NV- SP ADR 54 2,055 2,427 12 457 539
Level 3 Communications, Inc. 480 51,780 42,240 200 21,669 17,599
MGC Communications, Inc. 770 44,543 46,152 200 10,735 11,988
MMC Networks, Inc. 1,260 42,073 67,331 280 9,152 14,963
Nextel Communications, Inc., Class A 2,500 88,209 152,969 440 16,036 26,923
NEXTLINK Communications, Inc. 3,900 140,605 147,956 1,000 36,335 37,938
Nortel Networks Corporation 9,640 164,869 657,930 2,320 39,809 158,340
NTL, Inc. 1,783 122,620 106,757 395 25,854 23,651
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Statement of Investments (continued)
June 30, 2000
<TABLE>
<CAPTION>
Series Q (Qualified) Series N (Non-Qualified)
-------------------------------------------- ---------------------------------------------
Number % of Number % of
of Market Net of Market Net
Shares Cost Value Assets Shares Cost Value Assets
-------- ----------- ------------ ------- -------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Telecommunications (Continued)
RF Micro Devices, Inc. 800 $ 70,878 $ 70,100 200 $17,720 $17,525
Sprint Corporation FON Group 1,310 83,736 66,810 260 16,619 13,260
Sprint Corporation PCS Group 6,130 243,969 364,734 1,600 66,324 95,200
TEKELEC 2,100 84,647 101,194 500 20,220 24,094
Tele1 Europe Holding AB - ADR 5,510 135,684 66,464 1,350 33,244 16,284
Telesystem International
Wireless, Inc. 4,720 149,375 87,320 1,290 40,642 23,865
Tellabs, Inc. 4,000 274,488 273,750 1,000 68,553 68,438
Time Warner Telecom 1,760 90,824 113,299 480 24,642 30,900
Voicestream Wireless Corporation 2,200 287,894 255,853 600 78,674 69,777
Williams Communications Group 6,830 267,694 226,671 1,705 66,522 56,585
Worldcom, Inc. 1,800 68,482 82,575 500 19,023 22,938
----------- ----------- ---------- ----------
4,341,477 4,851,430 17.60% 1,119,786 1,254,599 18.26%
----------- ----------- ---------- ----------
Transportation
Harley-Davidson, Inc. 4,070 87,072 156,695 0.57% 1,040 21,990 40,040 0.58%
----------- ----------- ---------- ----------
Utilities - Electric
AES Corporation 7,680 291,260 350,400 1.27% 2,000 75,934 91,250 1.33%
----------- ----------- ---------- ----------
Total Common Stocks 20,508,240 27,526,745 99.86% 5,104,654 6,848,230 99.66%
----------- ----------- ---------- ----------
Total Investments $20,508,240 27,526,745 99.86% $5,104,654 6,848,230 99.66%
=========== ----------- ========== ----------
Other assets less liabilities 39,064 0.14% 23,467 0.34%
----------- ----------
Total Net Assets $27,565,809 100.00% $6,871,697 100.00%
=========== ==========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Supplementary Information
Selected Per Unit Data and Ratios
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Years Ended December 31,
June 30, 2000 1999 1998 1997 1996
---------------- ------ ------ ------ ------
PER UNIT DATA (a)
Series Q (Qualified)
<S> <C> <C> <C> <C> <C>
Investment income $ 0.048 $ 0.094 $ 0.116 $ 0.177 $0.153
Expenses 0.162 0.277 0.202 0.159 0.133
------- ------- ------- ------- ------
Net investment income (loss) (0.114) (0.183) (0.086) 0.018 0.020
Net realized and unrealized gains on investments 1.290 5.280 3.836 2.723 1.551
------- ------- ------- ------- ------
Net increase in net asset value 1.176 5.097 3.750 2.741 1.571
Accumulation unit net asset value:
Beginning of year 20.221 15.124 11.374 8.633 7.062
------- ------- ------- ------- ------
End of period $21.397 $20.221 $15.124 $11.374 $8.633
======= ======= ======= ======= ======
Series N (Non-qualified)
Investment income $ 0.042 $ 0.083 $ 0.096 $ 0.135 $0.137
Expenses 0.183 0.296 0.212 0.166 0.134
------- ------- ------- ------- ------
Net investment income (loss) (0.141) (0.213) (0.116) (0.031) 0.003
Net realized and unrealized gains on investments 1.354 5.894 3.891 2.660 1.459
------- ------- ------- ------- ------
Net increase in net asset value 1.213 5.681 3.775 2.629 1.462
Accumulation unit net asset value:
Beginning of year 20.814 15.133 11.358 8.729 7.267
------- ------- ------- ------- ------
End of period $22.027 $20.814 $15.133 $11.358 $8.729
======= ======= ======= ======= ======
</TABLE>
(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.
<TABLE>
<CAPTION>
Six Months Ended Years Ended December 31,
June 30, 2000 1999 1998 1997 1996
---------------- ---- ---- ---- ----
RATIOS
Series Q (Qualified)
<S> <C> <C> <C> <C> <C>
Operating expenses to average accumulation
fund balance 0.78% 1.56% 1.57% 1.59% 1.57%
Net investment income (loss) to average
accumulation fund balance (0.55%) (1.03%) (0.67%) 0.18% 0.24%
Portfolio turnover rate 56% 98% 143% 130% 78%
Accumulation units outstanding at the end of the period
(in thousands) 1,288 1,385 1,715 1,887 2,093
Series N (Non-qualified)
Operating expenses to average accumulation
fund balance 0.81% 1.62% 1.63% 1.67% 1.69%
Net investment income (loss) to average
accumulation fund balance (0.63%) (1.16%) (0.90%) (0.31%) 0.04%
Portfolio turnover rate 57% 103% 143% 139% 94%
Accumulation units outstanding at the end of the period
(in thousands) 312 342 475 530 566
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Supplementary Information
Selected Per Unit Data and Ratios (continued)
(Unaudited)
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991
------ ------- ------- ------- ------
PER UNIT DATA (a)
Series Q (Qualified)
<S> <C> <C> <C> <C> <C>
Investment income $0.119 $ 0.081 $ 0.054 $ 0.068 $0.093
Expenses 0.096 0.073 0.079 0.076 0.066
------ ------- ------- ------- ------
Net investment income (loss) 0.023 0.008 (0.025) (0.008) 0.027
Net realized and unrealized gains (losses) on investments 1.711 (0.020) 0.291 0.159 1.295
------ ------- ------- ------- ------
Net increase (decrease) in net asset value 1.734 (0.012) 0.266 0.151 1.322
Accumulation unit net asset value:
Beginning of year 5.328 5.340 5.074 4.923 3.601
------ ------- ------- ------- ------
End of year $7.062 $ 5.328 $ 5.340 $ 5.074 $4.923
====== ======= ======= ======= ======
Series N (Non-qualified)
Investment income $0.117 $ 0.099 $ 0.055 $ 0.071 $0.085
Expenses 0.109 0.102 0.092 0.094 0.076
------ ------- ------- ------- ------
Net investment income (loss) 0.008 (0.003) (0.037) (0.023) 0.009
Net realized and unrealized gains (losses) on investments 1.769 (0.023) 0.318 0.194 1.361
------ ------- ------- ------- ------
Net increase (decrease) in net asset value 1.777 (0.026) 0.281 0.171 1.370
Accumulation unit net asset value:
Beginning of year 5.490 5.516 5.235 5.064 3.694
------ ------- ------- ------- ------
End of year $7.267 $ 5.490 $ 5.516 $ 5.235 $5.064
====== ======= ======= ======= ======
</TABLE>
(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.
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
RATIOS
Series Q (Qualified)
<S> <C> <C> <C> <C> <C>
Operating expenses to average accumulation fund balance 1.55% 1.55% 1.56% 1.56% 1.56%
Net investment income (loss) to average accumulation fund balance 0.38% 0.17% (0.50%) (0.17%) 0.64%
Portfolio turnover rate 64% 64% 59% 61% 98%
Accumulation units outstanding at the end of the year
(in thousands) 5,491 5,597 5,700 5,753 5,839
Series N (Non-qualified)
Operating expenses to average accumulation fund balance 1.71% 1.73% 1.73% 1.74% 1.76%
Net investment income (loss) to average accumulation fund balance 0.13% (0.05%) (0.69%) (0.42%) 0.21%
Portfolio turnover rate 67% 62% 62% 66% 109%
Accumulation units outstanding at the end of the year
(in thousands) 586 604 640 662 684
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
Notes to Financial Statements
June 30, 2000
(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 generally
accepted accounting principles 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, 2000, 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.
Paul Revere Variable also acts as principal underwriter and performs all
sales and administrative functions relating to the variable annuity
contracts and the Fund. Fees for such services are deducted from the
contract purchase payments as shown in the statements of changes in net
assets.
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.
11
<PAGE>
Notes to Financial Statements (continued)
June 30, 2000
(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:
<TABLE>
<CAPTION>
Series Q (Qualified) Series N (Non-qualified)
------------------------ ------------------------
Purchases Sales Purchases Sales
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
June 30, 2000 $15,619,733 $17,744,975 $3,954,899 $4,688,209
December 31, 1999 $26,239,570 $32,534,476 $7,337,386 $9,723,875
</TABLE>
At June 30, 2000, net unrealized appreciation of investments in Series Q,
amounting to $7,018,505, consisted of unrealized gains of $8,032,049 and
unrealized losses of $1,013,544 net unrealized appreciation of investment
in Series N, amounting to $1,743,576, consisted of unrealized gains of
$1,997,696 and unrealized losses of $254,120.
7. Accumulation units
The change in the number of accumulation units outstanding were as follows:
<TABLE>
<CAPTION>
Series Q (Qualified)
--------------------
Six Months Ended Year Ended
June 30, 2000 1999
---------------- ----------
<S> <C> <C>
Units outstanding at beginning of year 1,384,747 1,715,402
Units credited to contracts:
Net purchase payments 1,356 2,667
Units withdrawn from contracts:
Annuity payments 13,914 33,671
Terminations and withdrawals 83,915 317,549
--------- ---------
Net units withdrawn 97,829 351,220
Contract units withdrawn in excess of units credited (96,473) (348,553)
Other additions - 17,898
--------- ---------
Net decrease in units (96,473) (330,655)
--------- ---------
Units outstanding at end of period 1,288,274 1,384,747
========= =========
</TABLE>
12
<PAGE>
Notes to Financial Statements (continued)
June 30, 2000
(Unaudited)
7. Accumulation units (continued)
<TABLE>
<CAPTION>
Series N (Non-qualified)
------------------------
Six Months Ended Year Ended
June 30, 2000 1999
---------------- ----------
<S> <C> <C>
Units outstanding at beginning of year 341,729 474,699
Units credited to contracts:
Net purchase payments 44 360
Units withdrawn from contracts:
Annuity payments 8,181 16,231
Terminations and withdrawals 21,624 129,499
------- --------
Net units withdrawn 29,805 145,730
------- --------
Contract units withdrawn in excess of units credited (29,761) (145,370)
Other additions - 12,400
------- --------
Net decrease in units (29,761) (132,970)
------- --------
Units outstanding at end of period 311,968 341,729
======= ========
</TABLE>
8. Commitments
On May 15, 1998 Provident completed an Asset Transfer and Acquisition
Agreement under which American General Corporation assumed Provident's
individual and tax-sheltered annuity business including all individual
annuities. In accordance with the agreement, American General Corporation,
through its subsidiaries Variable Annuity Life Insurance Company and
American General Annuity, assumed the administration, but not the
ownership, of Provident's two registered separate accounts, Separate
Account B and The Paul Revere Variable Annuity Contract Accumulation Fund.
The administration services provided to the Fund by American General
Corporation include processing of unit transactions subsequent to June 1,
1998 and daily unit value calculations subsequent to September 1, 1998 as
well as accounting and other services. These services were previously
performed by Provident. Fees for such services are deducted from the Fund
as shown in the Statements of Operations.
13
