[front cover]
[Jefferson Pilot Financial logo]
Allegiance(R) Ensemble(R) II
- --------------------------------------------------------------------------------
Variable Annuity Variable Universal Life Insurance
Semi-Annual Report
<TABLE>
<S> <C>
Jefferson Pilot Variable Fund, Inc. [photo of woman looking at graphic on computer]
Templeton Variable Products Series Fund [photo of American flag over the Constitution]
Fidelity Variable Insurance Products Fund [photo of man looking over reports]
Fidelity Variable Insurance Products Fund II [photo of international coins]
MFS Variable Insurance Trust
Oppenheimer Variable Account Funds
</TABLE>
June 30, 1998
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
FROM THE PRESIDENT
[PHOTO OF RONALD R. ANGARELLA]
Dear Policyholder:
As owner of an Ensemble(R)II Variable Universal Life policy or an
Allegiance or Alpha Variable Annuity* policy, you will be pleased to learn that
we have good news on several fronts.
During the first 6 months of 1998, investors continued to profit from
strong advances in certain sectors of the U.S. and European equity markets. The
S&P 500 index posted a gain of 17.71% for the period while the MSCI EAFE index
(comprising the common stock of about 1600 European, Australian, Asian and Far
Eastern publicly traded companies) increased 15.10%. The JPVF Capital Growth
Portfolio and the new JPVF International Equity Portfolio surpassed these
indexes with returns of 25.03% and 16.04% respectively for the six months ended
June 30, 1998.
More positive news this spring was Standard & Poor's upgrade of the
financial strength rating of Jefferson Pilot Financial Insurance Company
(formerly Chubb Life Insurance Company of America), issuer of Ensemble(R)II, to
"AAA". Concurrently, S&P reaffirmed the "AAA" rating of Alexander Hamilton Life
Insurance Company, issuer of Allegiance. Jefferson Pilot Life Insurance Company,
issuer of Alpha, also had its "AAA" rating reaffirmed. So regardless of which
variable product you own, you can be confident in the ability of the issuing
company to meet its financial obligations to you.
By approval of its shareholders, our Gold Stock Portfolio became Global
Hard Assets Portfolio on May 1, 1998. This fund offers a unique opportunity to
diversify portfolios by investing in multiple asset classes (precious metals,
oil and gas, forest products and real estate) whose returns have historically
had a very low correlation to the S&P 500. In essence, the fund maintains the
hedging qualities of its predecessor without being dependent on a single asset
class. At present, the Global Hard Assets Portfolio, which is sub-advised by Van
Eck Associates, is available only to Ensemble(R)II policyholders.
Enclosed with this report is a brief survey which I urge you to complete
and return. As you know, we are required to send you a new variable product
prospectus at least once per year. We are exploring strategies to provide this
document to you in the most convenient form, including an electronic version on
diskette or CD-ROM. Please let us know your preferences so that we can make
decisions benefiting the widest audience possible.
Thank you for your continuing support of our Ensemble(R)II Variable
Universal Life and Allegiance and Alpha Variable Annuities.
Sincerely,
/s/ Ronald R. Angarella
- -----------------------
Ronald R. Angarella
President, Jefferson Pilot Variable Fund, Inc.
*JPVF investment options available to Alpha Variable Annuity policyholders are
the Capital Growth Portfolio and the Emerging Growth Portfolio.
1
<PAGE>
[This page intentionally left blank]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Portfolio Profiles
International Equity Portfolio 5
World Growth Stock Portfolio 11
Global Hard Assets Portfolio 21
Emerging Growth Portfolio 27
Capital Growth Portfolio 35
Growth Portfolio 41
Domestic Growth Stock Portfolio 49
Growth and Income Portfolio 55
Balanced Portfolio 63
High Yield Bond Portfolio 71
Money Market Portfolio 81
Financial Statements 86
Notes to Financial Statements 95
</TABLE>
3
<PAGE>
[This page intentionally left blank]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- -------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
"We are keeping a keen eye on the developments in
Japan and the rest of Asia and we will increase our
exposure to those markets when we feel the time is right."
--Ronnie Armist, Portfolio Manager--
- -------------------------------------------------------------------------------
INCEPTION DATE
January 1, 1998
------------------------------------------------------
FUND MANAGER
Lombard Odier International Portfolio
Management Limited
------------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To achieve long-term capital appreciation by
investing substantially all of its total assets in
equity and equity-related securities of companies
from countries outside of the United States.
------------------------------------------------------
NET ASSETS AS OF 6/30/98
$9,949,877
------------------------------------------------------
NUMBER OF HOLDINGS
66
------------------------------------------------------
PORTFOLIO TURNOVER
61.42%
- -------------------------------------------------------------------------------
------------------------------------------------------
IN THIS SECTION
------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------
RONNIE ARMIST
Managing Director
Chief Investment Officer,
Equities
o Joined Lombard in 1983
o 20 years of investment experience
o Board of Executors Pension Fund, Ivory & Sime
o B.B.S. from University of Cape Town
o Chartered Accountant
5
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
% of Portfolio ++
[PIE CHART]
Common Stock-94.04%
Cash-3.32%
Preferred Stock-2.64%
[PIE CHART END]
<TABLE>
<CAPTION>
- -------------------------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO++
- -------------------------------------------------------
<S> <C>
National Westminster Bank, PLC 2.66%
Pinault-Printemps-Redoute, SA 2.57%
Banco Bilbao Vizcaya, SA 2.54%
Nippon Telegraph & Telephone Corp. 2.47%
British Petroleum Company, PLC 2.39%
Cap Gemini, SA 2.34%
Granada Group, PLC 2.33%
Toyota Motor Corp. 2.31%
British Aerospace, PLC 2.28%
Nokia Oyj 2.25%
- ------------------------------------------------------
PERCENT OF
TOP TEN COUNTRIES PORTFOLIO++
- ------------------------------------------------------
United Kingdom 21.05%
France 12.94%
Germany 12.04%
Netherlands 9.88%
Japan 7.80%
Italy 6.24%
Switzerland 4.94%
Spain 4.50%
Portugal 3.32%
Sweden 3.25%
</TABLE>
++Represents market value of
investments plus cash.
We continue to underweight Japan and other Far East markets because we
believe that better opportunities, with lower risk profiles, can be found in
Continental Europe, where long-term rates and short term rate expectations are
still trending lower. This continues to prove beneficial for the converging
peripheral economies (Ireland, Italy, Portugal, Spain and possibly Greece).
The equity cult is gaining momentum in Europe. Both managers of companies
and investors have embraced the concept of creating shareholder value and equity
investing, respectively. The restructuring revolution, so vital in improving
productivity and profitability and subsequently share prices, in the
fifteen-year U.S. bull market, is only just beginning in Europe.
In Japan, we remain skeptical that the latest initiative to establish a
bank
6
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
bad loan workout policy will turn around the economy and consumer confidence by
itself. It remains to be seen if new government leadership can and will initiate
effective stimulus programs.
The Asian Tiger economies face a multi-year debt restructuring problem. We
at Lombard Odier expect central banks in the region to begin easing monetary
policy and inflate away their domestic debt burdens, with or without IMF
approval. Significant dilution to existing shareholders will be another
consequence of debt restructuring.
We are keeping a keen eye on the developments in Japan and the rest of Asia
and will increase our exposure to those markets when we feel the time is right.
We are confident that this diversified international portfolio will deliver
sustainable, superior performance.
International Equity Portfolio and the MSCI EAFE Index
Comparison of Change in Value of $10,000 Investment.
[PLOT POINTS OF LINE CHART GRAPHIC]
<TABLE>
<CAPTION>
JPVF International Equity MSCI EAFE
Date NAV YTD
<S> <C> <C>
12/31/97 $10,000 $10,000
1/30/98 $10,336 $10,444
2/27/98 $11,118 $11,101
3/31/98 $11,535 $11,430
4/30/98 $11,611 $11,506
5/29/98 $11,759 $11,437
6/30/98 $11,604 $11,510
</TABLE>
[END PLOT POINTS OF LINE CHART GRAPHIC]
- -------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------
<TABLE>
<CAPTION>
MSCI
INTERNATIONAL EAFE
EQUITY INDEX
<S> <C> <C>
YTD 16.04% 15.10%
INCEPTION 16.04% 15.10%
</TABLE>
Commencement of operations January 2, 1998. Past performance is not predictive
of future performance.
This graph compares an initial $10,000 investment made in the International
Equity Portfolio (the "Portfolio") at its inception with a similar investment in
the MSCI EAFE Index. For the purposes of this graph and the accompanying table,
the average annual total return for the Portfolio reflects all recurring
expenses and includes the reinvestment of all dividends and distributions.
Shares of the Portfolio are offered only through the variable products of
Jefferson Pilot Financial and its affiliates. Total returns do not reflect any
separate account expenses imposed on the policies which may include a premium
tax charge, account fees, cost of insurance, mortality expenses and surrender
charges, as applicable.
The MSCI EAFE Index is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction costs, advisory fees
or expenses that are associated with an investment in the Portfolio.
7
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
June
30, 1998
<S> <C>
Net asset value, beginning of period $ 10.00
Income From Investment Operations
Net investment income 0.05
Net gains and losses on
securities and foreign currency
(both realized and unrealized) 1.55
------------
Total from investment operations 1.60
Less Distributions to Shareholders
Dividends from net investment income
Dividends in excess of net
investment income
Distributions from capital gains
Distributions in excess of capital gains
Returns of capital ------------
Total distributions 0.00
Net asset value, end of period $ 11.60
============
Total Return (A) 16.04%
Ratios to Average Net Assets:
Expenses 1.60%
Net investment income 1.00%
Portfolio Turnover Rate 61.42%
Average Commission Rate Paid $ 0.0252
Net Assets, At End of Period $ 9,949,877
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to separate
accounts or related insurance policies. Investment returns and principal values
will fluctuate and shares, when redeemed, may be worth more or less than the
original cost. Total return figures for periods less than one year have not been
annualized.
8
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
COMMON STOCK--95.24%
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense-3.51%
British Aerospace, PLC 30,000 $ 229,768
The Berkeley Group, PLC 11,500 119,740
----------
349,508
----------
Agricultural Operations-0.92%
BRL Hardy, Ltd. 28,533 91,882
----------
Appliances-0.88%
Electrolux, AB 5,100 87,612
----------
Automotive Manufacturing-3.70%
Daimler-Benz, AG 1,381 135,805
Toyota Motor Corp. 9,000 232,806
----------
368,611
----------
Banking-22.21%
Allied Irish Banks, PLC 14,400 208,203
Alpha Credit Bank 1,600 129,696
Anglo Irish Bank Corp., PLC 35,000 94,026
Banca Intesa, SPA 24,400 136,513
Banco Bilbao Vizcaya, SA 4,982 256,113
Banque Nationale de Paris 2,060 168,316
Bayerische Vereinsbank, AG 1,120 94,936
Credito Italiano, SPA 33,990 177,929
Deutsche Bank, AG 1,343 113,541
ING Groep, N.V. 2,922 191,334
Lloyds TSB Group, PLC 13,500 188,883
National Westminster Bank, PLC 15,000 268,063
Thai Farmers Bank Public Co., Ltd. 25,000 22,015
UBS, AG+ 430 159,889
----------
2,209,457
----------
Beverages-0.64%
LVMH Moet Hennessy Louis Vuitton 320 64,042
----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------
Building Materials-3.80%
Cimpor-Cimentos de Portugal, SGPS, SA. 5,650 $ 198,509
Lafarge, SA 1,735 179,354
----------
377,863
----------
Commercial Services-2.36%
Granada Group, PLC 12,750 234,449
----------
Computer Information & Technology-2.37%
Cap Gemini, SA 1,500 235,693
----------
Construction-0.29%
New World Infrastructure, Ltd. 25,000 28,715
----------
Electronics-4.31%
Mabuchi Motor Co., Ltd. 1,300 82,430
Philips Electronics, N.V. 1,970 165,603
Sony Corp. 2,100 180,819
----------
428,852
----------
Financial Services-0.02%
Nichiei Company, Ltd. 30 2,041
----------
Insurance-7.20%
AEGON, N.V. 2,500 217,530
Allianz, AG 534 177,951
Istituto Nazionale delle Assicurazioni 56,640 160,914
National Mutual Asia, Ltd. 76,000 48,551
Zurich Versicherungs-Gesellschaft 175 111,682
----------
716,628
----------
Lodging-2.17%
Accor, SA. 770 215,488
----------
Manufacturing-1.38%
Mannesmann, AG 1,340 137,712
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
9
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------
<S> <C> <C>
Mining & Metals-Ferrous & Nonferrous-0.67%
Mitsui Mining & Smelting 16,000 $ 66,405
----------
Office Equipment-0.74%
Ricoh Co., Ltd. 7,000 73,690
----------
Oil & Gas - Integrated-2.42%
British Petroleum Company, PLC 16,500 240,631
----------
Oil & Gas Producers-1.82%
Elf Aquitaine, SA 1,290 181,360
----------
Packaging & Containers-0.40%
Cosco Pacific, Ltd. 110,000 39,395
----------
Pharmaceutical-4.14%
Novartis, AG, Regular Shares 130 216,324
Smithkline Beecham, PLC 16,000 195,294
----------
411,618
----------
Publishing & Printing-2.60%
Singapore Press Holdings, Ltd. 5,104 34,139
Verenigde Nederlands Uitgev. Ver. Benszit. 6,180 224,512
----------
258,651
----------
Railroad-0.59%
Central Japan Railway Co. 16 59,142
----------
Real Estate-0.30%
Cheung Kong Holdings, Ltd. 6,000 29,502
----------
Retail Stores-8.40%
Adidas-Salomon, AG 786 136,951
Ito-Yokado Co., Ltd. 2,000 94,103
Kingfisher, PLC 9,400 151,360
Koninklijke Ahold, N.V. 6,056 194,404
Pinault-Printemps-Redoute, SA 310 259,444
----------
836,262
----------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Telecommunications-11.42%
Deutsche Telekom 5,500 $ 150,526
Nippon Telegraph & Telephone Corp. 30 248,586
Portugal Telecom, SA 2,600 137,798
Telecom Italia Mobile, TIM, SPA 45,495 153,565
Telefonaktiebolaget LM Ericsson 4,720 137,903
Telefonica de Espana 4,255 197,060
Vodafone Group, PLC 8,700 110,401
----------
1,135,839
----------
Telecommunications Equipment-2.28%
Nokia Oyj 3,080 226,520
----------
Textiles & Apparel-1.03%
Hennes & Mauritz, AB 1,600 102,120
----------
Toys-0.93%
Nintendo Company, Ltd. 1,000 92,589
----------
Transportation-1.74%
Stagecoach Holdings, PLC 8,161 173,624
----------
TOTAL COMMON STOCK
(Cost $8,626,478) 9,475,901
----------
- ---------------------------------------------------------------------
PREFERRED STOCK--2.67%
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Chemicals-1.39%
Henkel KGaA-Vorzug 1,400 $ 138,449
----------
Computer Software - Mini & Micro-1.28%
Systeme, Anwendungen, Produkte 188 127,590
----------
TOTAL PREFERRED STOCK
(Cost $246,127) 266,039
----------
TOTAL INVESTMENTS
(Cost $8,872,605) 97.91% 9,741,940
Other assets, less liabilities 2.09 207,937
------ ----------
TOTAL NET ASSETS 100.00% $9,949,877
====== ==========
</TABLE>
See notes to financial statements.
10
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- -------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
"We continue to believe in Templeton's time tested
strategy of identifying companies with strong long-term
fundamentals that have been oversold as a result of
financial market and investor uncertainty."
--Cindy Sweeting, Portfolio Manager--
- --------------------------------------------------------------------------------
INCEPTION DATE
August 1, 1985
-----------------------------------------------
FUND MANAGER
Templeton Global Advisors Limited
-----------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To achieve long-term capital growth through
a policy of investing primarily in stocks of companies
organized in the United States or in any foreign nation.
-----------------------------------------------
NET ASSETS AS OF 6/30/98
$128,424,332
-----------------------------------------------
NUMBER OF HOLDINGS
155
-----------------------------------------------
PORTFOLIO TURNOVER
20.61%
- --------------------------------------------------------------------------------
-----------------------------------------------
IN THIS SECTION
-----------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
-----------------------------------------------
CINDY SWEETING,
CFA
o Joined Templeton organization in 1997
o Previously vice president of investments with McDermott International Co.,
Inc.
o Serves on Board of Directors of the International Society of Financial
Analysts
o B.A. from Georgetown University
o Chartered Financial Analyst
11
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
% of Portfolio++
[PIE CHART]
Common Stock-88.19%
Preferred Stock-4.58%
Cash-4.29%
Short-Term Obligations-2.34%
Foreign Bonds & Notes-0.60%
[PIE CHART END]
The investment climate in the first half of 1998 was depicted by extremely
divergent global market performance, with the world radically split into two
parts. While Asia, Eastern Europe and Latin America have tumbled in the face of
the rapidly increasing instability, Europe and the US seem to be enjoying a
never-ending celebration. It certainly appears to be the best of times for the
western world, with economies in relatively good shape and no inflation clouds
hovering. Central banks are content to let the market push interest rates lower,
money flow is abundant and equities are rocketing to unprecedented levels. The
best region of the last six months no doubt was Europe, where lower interest
rates, the euphoria from monetary union, and merger frenzy continue to propel
European shares. Almost every developed market in Europe, gained over 20% in
local currencies for the first half. In the US and in Europe, there hardly seems
to be any sensitivity to potential risks on the horizons; the business cycle has
been put on hold and double digit earnings growth expectations are well
entrenched.
Conversely, the bleakest returns were in the emerging markets of Asia and
Latin America, where declines of 20% to 30% were not uncommon. As economic
turmoil in Asia has worsened, investor sentiment toward all emerging markets has
become overwhelmingly negative. Money flows have followed suit, and funds
withdrawn from those regions are being shifted towards equities in Europe and
the US. This phenomenon is helping to fuel the constantly rising stock prices in
those countries, and the generated wealth effect in turn stimulates the economy
and corporate earnings - justifying further equity price increases. Despite high
valuation levels, this trend may likely continue in the short term, but is
clearly unsustainable in the long term.
In the first half of 1998, those markets with P/E's greater than 20x
performed significantly better than those selling at less than 20x - up 14.8%
vs. 2%. In addition, it was the world's largest and most expensive stocks,
primarily located in the U.S. and Europe, which performed best in 1998's first
half. For example, the 20% most expensive stocks in the MSCI All Country World
Free Index as measured by 1997 year-end P/E, which averaged 57x, rose 20% in the
first half of 1998. Conversely, the cheapest 20%, with an average P/E of 8x,
advanced only 5%. When the returns are equal weighted rather than market cap
weighted, the return on the most expensive stocks falls to only 8% while the
cheapest stocks actually dropped 12% in value. Clearly, it was the largest and
most expensive stocks that did well in 1998's first half. Only in Japan and
Latin America did the least expensive stocks outperform, but in these regions
the absolute level of performance still trailed well behind the pace set in
Europe and North America. Investors were willing to pay high prices for the
relative "safety" of European and US shares versus the alternative of exposing
themselves to the systemic risks brought about by owning "cheap" shares in
seemingly imploding Asian markets in particular, and emerging markets in
general.
By maintaining relatively low weightings in Asian markets the Portfolio did
not get caught in the value manager trap that Asian stocks represented in early
1998, but it was impacted indirectly. First, our Latin American holdings were
negatively affected by investor concerns surrounding emerging market investments
in general. Second, due to our strong value bent, our European holdings tended
toward the less expensive stocks that underperformed versus high valuation
European shares. Finally, the Portfolio was negatively affected by our movement
out of some expensive U.S. and European stocks and into new bargains being
uncovered after share price plunges, particularly in Hong Kong and Latin
America.
This was clearly a difficult period for our investment style, which
emphasizes purchasing those stocks selling at the lowest
<TABLE>
<CAPTION>
- ------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO++
- ------------------------------------
<S> <C>
Bank Austria, AG 1.95%
Volkswagen, AG 1.81%
Courtaulds, PLC 1.77%
Zurich Versicherungs
Gesellschaft 1.65%
Repsol, SA 1.60%
Hutchison Whampoa, Ltd. 1.52%
National Australia Bank 1.51%
Thames Water, PLC 1.48%
Oshawa Group, Ltd. 1.46%
National Grid Group, PLC 1.36%
- ------------------------------------
PERCENT OF
TOP TEN COUNTRIES PORTFOLIO++
- ------------------------------------
United States 21.29%
United Kingdom 14.01%
France 5.69%
Hong Kong 5.54%
Australia 4.93%
Canada 3.64%
Switzerland 3.45%
Mexico 3.37%
Italy 3.07%
Netherlands 3.07%
</TABLE>
++Represents market value of
investments plus cash.
12
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
price in relation to long-term earnings potential, as well as diversification.
Diversifying away from the expensive European and U.S. markets (which now
represent 85.2% of the MSCI World Index) resulted in underperformance in 1998's
first half. However, we continue to believe in Templeton's time tested strategy
of identifying companies with strong long term fundamentals that have been
oversold as a result of financial market and investor uncertainty. Being a value
investor requires great fortitude and the ability to weather unwelcome short
term underperformance when buying out-of-favor stocks. It requires buying
companies that are unpopular with the belief, after careful analysis, that
short-term concerns are adequately reflected in security prices, but the
long-term opportunities are not. Despite the Portfolio's large exposure to
European companies, the investments we have recently made in emerging markets
have hurt overall results. However, we feel that these investments will provide
the foundation for future performance.
An important guidepost for investors in today's volatile markets (and
depressing emerging markets) would be to recall the European landscape in the
early 1990's. Companies were considered uncompetitive because of high costs and
low productivity, and management efforts to reign in costs were paralyzed by
strong unions. Furthermore, governments often owned significant positions of
these companies and meddled in their affairs, making management even more
ineffective. In short, investors had given up on Europe in the early 1990's and
were infatuated with the growth engine of the present and beyond - Asia. Over
the past five years, that scenario has changed radically. Powerful, growing,
economically healthy - these terms now characterize Europe, not Asia. If
anything, the past decade has been a lesson in the dangers of extrapolating
economic trends far into the future. However, as we look ahead, one could argue
that current valuations in the U.S. and in some European markets seem to
indicate that this mistake is being made again.
The Portfolio continues to capitalize on good investments made over the
past few years in the European markets, as Europe presently remains the largest
geographic exposure with 45% of investments based there. However, this
allocation is declining as we are now finding better bargains elsewhere. The
U.S. portion of the Portfolio has also declined, from 25% six months ago to 20%
currently. While Asia has been wallowing in economic gore, the U.S. and European
markets have continued to soar. The "tax cut" these markets have received from
lower oil and other commodity prices related to Asia's economic crisis has
actually spurred growth in the western world. The spectacular performance of
these markets is not unjustified. Returns on invested capital have moved sharply
higher based on restructuring initiative, productivity improvements and sounder
management. Interest rates have plunged, as inflation has remained subdued,
thereby allowing the higher level of earnings to be accorded enhanced P/E
valuations. Additionally, management has been increasingly shareholder friendly
and investors have shown greater interest in equity investments due to both
demographics and a lack of suitable investment alternatives. The "new paradigm"
has certainly been rewarding, but the question remains as to its sustainability.
Thus far, the new paradigm has beaten off all skeptics, but the developments in
Asia may represent its greatest challenge yet. As Asia works through its crisis,
there is little doubt that competition for U.S. and European manufactured goods
from Asia will dramatically increase. There is already evidence of this trend
and the impact on corporate profit margins in the industrial sector will likely
be much more than a rounding error. Declining demand from Asia also will
undercut the western world's economic growth. Profits may also be undermined, or
at least slowed, by the year 2000 computer glitch, and the spending needed to
correct it. The move to the European Monetary Unit is also expected to have a
negative impact on the earnings of some sectors in Europe. Clearly, the risks
are rising regarding the sustainability of earnings at current above average
levels of return on invested capital. Given the generally open nature of markets
in the western world, it seems sensible to assume that the forces of competition
will lead capital towards areas of high returns, thereby eventually eroding
those same high returns.
13
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
World Growth Stock Portfolio and the MSCI World Index
Comparison of Change in Value of $10,000 Investment.
[PLOT POINTS OF LINE CHART GRAPHIC]
<TABLE>
<CAPTION>
World Growth MSCI World
Date Fund Index
<S> <C> <C>
08/01/85 $10,000 $10,000
09/30/85 9,112 10,137
12/31/85 10,526 11,822
03/31/86 12,932 14,371
06/30/86 12,715 15,328
09/30/86 12,765 16,146
12/31/86 13,449 16,882
03/31/87 14,918 20,707
06/30/87 14,999 21,951
09/30/87 16,167 23,311
12/31/87 12,408 19,712
03/31/88 13,855 22,022
06/30/88 14,352 21,836
09/30/88 14,141 21,928
12/31/88 14,034 24,433
03/31/89 15,373 25,008
06/30/89 15,862 24,689
09/30/89 18,247 27,584
12/31/89 18,041 28,634
03/31/90 17,244 24,562
06/30/90 18,671 26,580
09/30/90 15,554 21,760
12/31/90 16,176 23,904
03/31/91 17,797 26,288
06/30/91 17,325 25,434
09/30/91 18,848 27,260
12/31/91 19,812 28,439
03/31/92 19,777 26,152
06/30/92 20,910 26,660
09/30/92 20,281 27,143
12/31/92 21,015 27,114
03/31/93 22,440 29,479
06/30/93 23,314 31,306
09/30/93 25,138 32,814
12/31/93 28,104 33,384
03/31/94 27,156 33,628
06/30/94 26,728 34,678
09/30/94 28,551 35,464
12/31/94 27,248 35,248
03/31/95 27,603 38,944
06/30/95 29,865 38,568
09/30/95 31,357 40,772
12/31/95 31,703 42,762
03/31/96 33,105 44,543
06/30/96 34,373 45,880
09/30/96 34,737 46,568
12/31/96 37,795 48,757
03/31/97 38,862 48,935
06/30/97 43,136 56,368
09/30/97 47,062 58,029
12/31/97 43,588 56,656
03/31/98 48,979 64,769
06/30/98 47,104 66,084
</TABLE>
[END PLOT POINTS OF LINE CHART GRAPHIC]
Hong Kong has been an area where we have increased our holdings. The
prudence demanded by the uncertainty surrounding the transition from British to
Chinese rule, arguably, left Hong Kong and its currency in a better position
than most of its neighbors to weather the crisis in Asia. Its government has no
debt, its corporations have stronger balance sheets that their asian
counterparts, its banks are overcapitalized, and its currency reserves are the
third largest in the world. Hong Kong undoubtedly faces sizable challenges in
the future, including an overvalued currency, still high property prices and
high real interest rates for the first time in a decade. However, we believe
that canny Hong Kong entrepreneurs will be able to adapt to the new
opportunities available in a growing China and in an Asia which is in dire need
of both capital and capitalists. We are purchasing stocks with dividend yields
as high as the P/E's, with prices at a 40% discount to net asset values, and
with net cash on the balance sheet.
While still low, your Portfolio has seen an increase in Latin American
holdings. Share prices in this region have been found guilty by association. As
Asia markets declined, Latin American markets also fell as investors withdrew
funds from all emerging markets. While Latin American economies are certainly
feeling some pain as a result of the Asian crisis, the decline in share prices
seems to be overdone. Many Latin cases, the debt that is on the balance sheet is
not dollar denominated. Moreover, capital investment has generally been
accomplished at a careful pace, as economic conditions have generally been poor
over the last twenty years. Economic reforms and privatization are also well
underway and banking systems are generally soundly capitalized if not
overcapitalized. This stands in stark contrast to the situation in Asia. With
valuations on trailing twelve-month earnings in Brazil at less than one-third
the level of Germany, it is not difficult to identify bargains. Even if a
currency devaluation were to occur in Brazil, it is unlikely that many companies
would need to issue new shares in order to rescue their balance sheet. Indeed,
many companies would benefit due to improved export potential. These are the
ingredients that lead to attractive long-term investment opportunities and our
analytical team is carefully researching this region to find what we believe are
the best positioned companies at the least expensive share price relative to
future earnings potential.
We would be surprised if the world's most expensive stocks outperformed
over the longer term. As the Asian crisis moves forward, there will come a time
when the point of maximum pessimism has been reached. This will likely be
quickly followed by a mass exodus of investors from the western world's
expensive markets into the markets of Latin America and Asia. While it is always
difficult to pinpoint when we have arrived at the point of maximum pessimism, it
is usually not too difficult to determine when we are near it. The Templeton
investment process is designed to highlight the exceptional value in individual
stocks that often occurs when other market participants are suffering from undue
levels of pessimism. Our team of security analysts has consistently and
diligently applied this process, in a wide variety of market conditions, over
the years with a measure of long-term success. We remain confident that our
global research network will continue to provide meaningful opportunities that
will benefit the Portfolio going forward.
- ------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------
<TABLE>
<CAPTION>
MSCI
WORLD WORLD
GROWTH INDEX
<S> <C> <C>
YTD 8.07% 15.92%
1 YEAR 9.20% 17.03%
5 YEAR 15.10% 13.86%
10 YEAR 12.62% 9.28%
INCEPTION 12.74% 15.74%
</TABLE>
Commencement of operations August 1, 1985. Past performance is not predictive of
future performance.
This graph compares an initial $10,000 investment made in the World Growth Stock
Portfolio (the "Portfolio") at its inception with a similar investment in the
MSCI World Index. For the purposes of this graph and the accompanying table, the
average annual total return for the Portfolio reflects all recurring expenses
and includes the reinvestment of all dividends and distributions.
Shares of the Portfolio are offered only through the variable products of
Jefferson Pilot Financial and its affiliates. Total returns do not reflect any
separate account expenses imposed on the policies which may include a premium
tax charge, account fees, cost of insurance, mortality expenses and surrender
charges, as applicable.
The MSCI World Index is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction costs, advisory fees
or expenses that are associated with an investment in the Portfolio.
14
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited)
Six Months Year Ended Year Ended Year Ended Year Ended Year Ended
Ended December December December December December
June 30, 1998 31, 1997 31, 1996 31, 1995 31, 1994 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.28 $ 23.31 $ 21.20 $ 19.00 $ 20.89 $ 16.73
Income From Investment Operations
Net investment income 0.39 0.53 0.49 0.45 0.25 0.24
Net gains and losses on
securities and foreign currency
(both realized and unrealized) 1.50 2.97 3.56 2.65 (0.89) 5.40
------------ ------------ ----------- ----------- ----------- -----------
Total from investment operations 1.89 3.50 4.05 3.10 (0.64) 5.64
Less Distributions to Shareholders
Dividends from net investment income (0.53) (0.48) (0.43) (0.25) (0.24)
Dividends in excess of net
investment income (0.03)
Distributions from capital gains (0.21) (2.76) (1.46) (0.47) (0.81) (1.24)
Distributions in excess of capital gains (0.21) (0.19)
Returns of capital
------------ ------------ ----------- ----------- ----------- -----------
Total distributions (0.21) (3.53) (1.94) (0.90) (1.25) (1.48)
Net asset value, end of period $ 24.96 $ 23.28 $ 23.31 $ 21.20 $ 19.00 $ 20.89
============ ============ =========== =========== =========== ===========
Total Return (A) 8.07% 15.33% 19.22% 16.35% (3.05%) 33.73%
Ratios to Average Net Assets:
Expenses 0.89% 0.91% 0.88% 0.96% 1.00% 1.04%
Net investment income 3.26% 2.33% 2.20% 2.31% 1.56% 1.64%
Portfolio Turnover Rate 20.61% 30.22% 27.50% 18.09% 18.47% 34.90%
Average Commission Rate Paid $ 0.0038 $ 0.0120 $ 0.0155
Net Assets, At End of Period $128,424,332 $105,567,503 $91,995,634 $73,692,357 $52,903,768 $42,031,141
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to the
separate accounts or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth more or
less than the original cost. Total return figures for periods of less than one
year have not been annualized.
15
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
COMMON STOCK--87.89%
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense-1.09%
Kaman Corp., Class A 73,600 $1,400,704
----------
Agricultural Operations-0.83%
Archer-Daniels-Midland Co. 55,300 1,071,438
----------
Airlines-1.09%
Helikopter Services
Group, ASA 51,500 523,490
Singapore Airlines, Ltd. 92,800 433,953
Swire Pacific, Ltd. 732,000 439,285
----------
1,396,728
----------
Appliances-0.01%
Best Denki Company, Ltd. 3,000 17,509
----------
Automotive Manufacturing-3.75%
Fiat, SPA 280,830 1,229,140
Fiat, SPA, RNC 514,910 1,274,566
Volkswagen, AG 2,400 2,317,562
----------
4,821,268
----------
Automotive Parts & Equipment-1.33%
Autoliv, Inc., Swed Dep. Receipt 22,200 709,852
Goodyear Tire & Rubber Co. 15,500 998,781
----------
1,708,633
----------
Banking-4.14%
Bank Handlowy W Warszawie, GDR, 144A 71,500 1,360,287
BPI-SGPS, SA 21,156 682,714
Credit Commercial de France 17,700 1,490,126
Kookmin Bank 54,800 203,554
Korean Long-Term Credit Bank 42,290 78,543
National Bank of Canada 41,300 807,463
Uniao de Bancos Brasileiros, SA 23,500 693,250
----------
5,315,937
----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------
Building Construction-1.24%
Nichiha Corp. 67,200 $ 396,562
Owens Corning 19,600 799,925
Sociedade de Construcoes Soares
da Costa, SA+ 48,100 398,403
----------
1,594,890
----------
Building Materials-1.18%
Cemex, SA de CV, Class B 130,000 572,891
Pioneer International, Ltd. 195,000 464,918
Pioneer International, Ltd., ADR 200,000 476,820
----------
1,514,629
----------
Chemicals-1.97%
Courtaulds, PLC 304,700 2,259,956
Yizheng Chemical Fibre
Company, Ltd. 2,408,100 264,165
----------
2,524,121
----------
Computer Information Systems-0.73%
Roto Smeets de Boer, N.V. 20,500 937,223
----------
Computer Network-1.55%
3Com Corp.+ 26,600 816,288
Bay Networks, Inc.+ 36,400 1,173,900
----------
1,990,188
----------
Construction-0.51%
Grupo Imsa, SA de CV, ADR 43,000 650,375
----------
Electrical Equipment-0.32%
Centrais Electricas Brasileiras, SA, ADR 25,700 392,184
Centrais Geradoras do Sul do
Brasil, SA, ADR 2,570 18,554
----------
410,738
----------
Electronics-0.52%
Hitachi, Ltd. 900 5,869
Sony Corp. 7,700 663,004
----------
668,873
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
16
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Engineering &Construction-2.32%
ABB AB, Class A 80,000 $1,133,557
BICC Group 234,965 501,844
Internatio-Muller, N.V. 40,000 1,339,101
----------
2,974,502
----------
Environmental Controls-0.83%
Waste Management, Inc. 30,600 1,071,000
----------
Financial Services-2.23%
Chile Fund, Inc. 23,140 313,836
Hutchison Whampoa, Ltd. 368,000 1,942,466
Industrial Credit & Investment
Corp. of India, Ltd. 43,900 400,925
Singapore Finance, Ltd. 308,000 145,851
Thailand International Fund 12 60,000
----------
2,863,078
----------
Food Products-2.48%
Express Dairies, PLC 127,977 352,348
IBP, Inc. 74,409 1,348,663
Illovo Sugar, Ltd. 344,600 432,944
Northern Foods, PLC 255,954 922,511
Showa Sangyo 68,000 129,351
----------
3,185,817
----------
Food Service & Restaurants-1.46%
Oshawa Group, Ltd. 103,700 1,868,786
----------
Forest Products & Paper-3.67%
Boise Cascade Corp. 19,000 622,250
Carter Holt Harvey, Ltd. 705,354 615,134
Enso Oy 111,300 1,202,991
Fletcher Challenge Forests 762,276 427,356
International Paper 25,000 1,075,000
Portucel Industrial Empresa Produtora 97,000 771,393
----------
4,714,124
----------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Import & Export-1.34%
Fritz Companies, Inc.+ 60,300 $ 806,512
Li & Fung, Ltd. 564,000 909,854
----------
1,716,366
----------
Insurance-4.52%
Axa-UAP 12,800 1,439,629
HIH Winterthur International Holdings 130,000 229,440
National Mutual Asia, Ltd. 750,000 479,125
UNUM Corp. 28,000 1,554,000
Zurich Versicherungs Gesellschaft 3,300 2,106,013
----------
5,808,207
----------
Lodging-0.20%
Brierley Investments, Ltd. 525,000 261,628
----------
Machinery-0.19%
Makita Corp. 21,000 241,950
----------
Manufacturing-6.32%
Alfa, SA de CV, Class A 115,500 473,003
BTR, PLC 457,600 1,298,048
Caradon, PLC 213,500 655,498
Desc, SA de CV, ADR 400 7,950
Desc, SA de CV, Ser B 24,000 122,991
Laird Group, PLC 238,000 1,123,878
McBride, PLC 439,100 1,256,560
Plettac, AG 4,400 616,731
Valmet Oyj 56,400 972,485
Varitronix International, Ltd. 475,000 950,184
Vickers, PLC 178,400 640,013
----------
8,117,341
----------
Medical Products-0.65%
Nycomed Amersham, PLC 112,875 838,454
----------
Mining & Metals - Ferrous & Nonferrous-3.50%
Industrias Penoles, SA 143,300 454,490
Oregon Steel Mills 67,800 1,262,775
</TABLE>
+Non-income producing security.
See notes to financial statements.
17
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Mining & Metals-(Continued)
Pechiney, SA, Class A 26,136 $1,052,616
SKF, AB, Class B 48,000 872,738
Union Miniere, SA 6,000 370,868
Yamato Kogyo Company, Ltd. 65,000 477,718
----------
4,491,205
----------
Mining & Metals - Precious-1.21%
Anglo American Platinum Corp. 72,482 793,733
WMC, Ltd. 250,800 754,823
----------
1,548,556
----------
Oil & Gas - Distribution & Marketing-0.98%
BG, PLC 145,335 840,291
Centrica, PLC+ 251,300 423,516
----------
1,263,807
----------
Oil & Gas - Integrated-2.33%
Petron Corp. 301,000 31,760
Ranger Oil, Ltd.+ 127,100 911,870
Repsol, SA 37,000 2,042,263
----------
2,985,893
----------
Oil & Gas Producers-2.21%
Elf Aquitaine, SA 10,500 1,476,182
YPF Sociedad Anonima 45,500 1,367,844
----------
2,844,026
----------
Packaging & Containers-0.25%
Thai Glass Industries Public Co., Ltd. 200,400 317,418
----------
Pharmaceutical-1.63%
Astra AB, Class B 57,333 1,143,080
China Pharmaceutical Enterprise
and Investment 390,000 30,703
Medeva, PLC 169,600 481,095
Rhone-Poulenc, SA 7,800 439,927
----------
2,094,805
----------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Real Estate-3.04%
Jardine Matheson Holdings, Ltd. 111,600 $ 301,320
Meditrust Corp., Paired Stock 28,718 802,312
Metro Pacific Corp. 3,853,050 87,779
Nationwide Health Properties, Inc. 42,600 1,017,075
Unibail 10,700 1,383,956
Wereldhave, N.V. 5,488 315,651
----------
3,908,093
----------
Retail Stores-4.97%
Abercrombie & Fitch Co., Class A+ 610 26,831
Coles Meyer, Ltd. 283,312 1,105,317
Federated Department Stores, Inc.+ 13,600 731,850
Hudson's Bay Co. 46,700 1,070,241
Limited, Inc. 44,600 1,477,375
Matsuzakaya Co., Ltd. 58,000 259,106
Tesco, PLC 174,813 1,706,418
----------
6,377,138
----------
Telecommunications-7.67%
APT Satellite, ADR+ 48,300 425,644
CIA Riograndense Telecom-PFA+ 574,612 623,498
Nortel Inversora, SA, ADR 33,300 828,337
PT Indosat 7,700 85,662
SBC Communications, Inc.(DECS) 25,300 1,147,987
Tele Danmark, AS, B Shares 18,100 1,737,095
Telecom Italia, SPA 69,900 514,552
Telecom Italia, SPA, RNC 152,669 739,061
Telecomunicacoes Brasileiras, SA, ADR 5,310 579,786
Telefonas de Mexico, SA, ADR 26,700 1,283,269
Telefonica de Argentinia, SA 18,100 587,119
Telefonica de Espana 4,200 584,063
U S WEST, Inc. 15,200 714,400
----------
9,850,473
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
18
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Telecommunications Equipment-2.15%
ADC Telecommunications, Inc.+ 42,700 $1,559,887
DSC Communications Corp.+ 28,500 855,000
Ericsson Telecommunicacoes, SA 18,399,000 351,563
----------
2,766,450
----------
Textiles & Apparel-1.07%
Ceramco Corporation, Ltd. 509,900 330,863
Dawson International, PLC 466,166 326,697
Fila Holding, SPA 11,600 174,000
Yue Yuen Industrial Holdings, Ltd. 300,000 536,233
----------
1,367,793
----------
Transportation-2.59%
Danzas Holding AG-REG 2,325 625,396
Great Eastern Shipping Co.,
+++144A, GDR 11,900 43,387
Great Eastern Shipping Co. 54,400 204,000
Guangshen Railway Company, Ltd. 46,300 315,419
Koninklijke Frans Maas Groep, N.V. 17,000 630,961
Koninklijke Nedlloyd Groep, N.V. 34,600 702,478
Transport Development Group, PLC 162,839 804,277
----------
3,325,918
----------
Travel Services-1.31%
Kuoni Reisen, AG 340 1,687,896
----------
Utilities - Electric & Gas-5.03%
British Energy, PLC 61,300 535,979
Hongkong Electric Holdings, Ltd. 299,000 926,115
Iberdrola, SA 72,900 1,185,714
Korea Electric Power Corp. 35,500 378,787
National Grid Group, PLC 258,570 1,743,072
Potomac Electric Power Co. 32,600 817,037
Shandong Huaneng Power Company, Ltd. 38,000 204,250
Texas Utilities Co. 16,000 666,000
----------
6,456,954
----------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Water Treatment-1.48%
Thames Water, PLC 104,229 $ 1,897,444
----------
TOTAL COMMON STOCK
(Cost $96,906,072) 112,868,376
----------
- ----------------------------------------------------------------------
PREFERRED STOCK--4.56%
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------
Banking-3.45%
Bank Austria, AG 30,800 $2,500,575
National Australia Bank, 7.875% 67,300 1,930,669
----------
4,431,244
----------
Financial Services-0.06%
Bangkok Investments Co., Ltd.+ 2,500 79,500
----------
Multimedia-0.88%
News Corporation, Ltd., ADR 6,904 195,038
News Corporation, Ltd., 5.000% 132,167 936,333
----------
1,131,371
----------
Retail Stores-0.17%
Dairy Farm International Holding,
Ltd., 6.500% 210,000 216,300
----------
TOTAL PREFERRED STOCK
(Cost $3,950,510) 5,858,415
----------
- ----------------------------------------------------------------------
RIGHTS AND WARRANTS--0.00%
Number of Market Value
Company Shares (Note B)
- ----------------------------------------------------------------------
Banking-0.00%
Bank Austria, exp. 07/14/98+ 30,800 $ 1,361
----------
TOTAL RIGHTS AND WARRANTS
(Cost $0) 1,361
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
19
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
CORPORATE BONDS--0.59%
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Manufacturing-0.59%
Alfa, SA de CV, 144A, 8.000%,
due 09/15/00 $760,000 $ 763,800
------------
TOTAL CORPORATE BONDS
(Cost $1,294,843) 763,800
------------
- ----------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--2.34%
<CAPTION>
Principal Market Value
Company Value (Note B)
- ----------------------------------------------------------------------
<S> <C> <C>
U.S. Government & Agency Obligations-2.34%
U.S. Treasury Bill, 4.950%,
due 07/02/98 $3,000,000 $ 2,999,634
------------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $2,999,588) 2,999,634
------------
TOTAL INVESTMENTS
(Cost $105,151,013) 95.38% 122,491,586
Other assets, less liabilities 4.62 5,932,746
------ ------------
TOTAL NET ASSETS 100.00% $128,424,332
====== ============
</TABLE>
See notes to financial statements.
20
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
"The time to increase allocations to assets classes
such as hard assets is near cyclical lows when
valuations are at trough levels. We believe
commodity prices are near or at lows."
--Derek S. van Eck, Portfolio Manager--
- --------------------------------------------------------------------------------
INCEPTION DATE
August 1, 1985
---------------------------------------------------------
FUND MANAGER
Van Eck Associates Corporation
---------------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To seek long-term capital appreciation by investing
in a dynamic mix of four alternative asset classes:
natural resource stocks, real estate, precious
metals and direct investment in commodities.
---------------------------------------------------------
NET ASSETS AS OF 6/30/98
$4,814,193
---------------------------------------------------------
NUMBER OF HOLDINGS
57
---------------------------------------------------------
PORTFOLIO TURNOVER
92.14%
---------------------------------------------------------
---------------------------------------------------------
IN THIS SECTION
---------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
---------------------------------------------------------
DEREK S. VAN ECK, CFA
o M.B.A. from J.L. Kellogg Graduate School of Management
o B.A. from Williams College
21
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
Objective Change
The Portfolio's objective was changed during the second quarter from a fund
investing primarily in precious metals to a diversified alternative asset fund.
This means the Portfolio has the ability to invest in natural resource equities,
commodities, and real estate in addition to precious metals. It will retain its
characteristic of low correlation to the financial asset markets. This makes the
Portfolio more flexible and should provide shareholders with higher returns and
lower risks over the long term. The Portfolio's transition has been completed.
Review
Concerns over a slowing global economy pressured all hard asset securities.
During the first half of the year, the Fund declined 1.7%. This compares with
the Goldman Sachs Commodity Index which fell 18.3%, the Morgan Stanley Real
Estate index which fell 5.1%, and gold shares which fell 4.1% (MSCI Gold Mines
Index). Finally, an index of natural resource companies fell 5.7% during the
first half of the year.
The key to understanding hard asset markets this year has been the
recognition of a slowing world economy. This growth recession is being driven by
the large debt overhang in Asia, the lack of a solvent Asian banking system, and
the deflationary transition from command to market economies in China and Japan.
It was exacerbated in Asia by IMF-administered austerity programs which served
to damage rather than repair economies in the short-term while strength in U.S.
and European economies battled weak conditions in Asia, the Asian economic
impact had the greatest influence over hard asset investments.
Hard asset markets have recognized these difficult trading conditions as
most commodity markets fell significantly. The Portfolio had hedged some oil and
metals exposure during this period and was able to profit from this, but
allocations to resource shares (40-50% of the portfolio) proved to be too high.
Oil prices fell about 20% during the first half and industrial metals prices
fell about 12% due primarily to decreased demand from Asia. Non-Japan Asia has
played a large role in the commodity markets in recent years. In addition, since
more than 90% of world commodities is priced in dollars, strength in the
trade-weighted value of the dollar has been a negative for commodity demand and
pricing. Finally, supply additions in many markets continued, putting further
pressure on prices.
Outlook
We believe the bulk of the bad news is priced into hard asset securities
and we are finding exceptional value. While global economic conditions are
likely to remain difficult, we believe hard asset securities have already priced
this in. The time to increase allocations to assets classes such as hard assets
is near cyclical lows when valuations are at trough levels. We believe commodity
prices are near or at lows, particularly oil. In addition, valuations on many
other securities are at levels which have only existed in recessionary
conditions.
Real Estate
We have allocated approximately 25% of the Portfolio to real estate. Our
real estate position is based on a view of healthy pricing and cheap valuations
- - both on a relative and absolute basis - in select segments of the North
American real estate industry. The market seems to be taking the view that
property prices have risen too far too fast, thereby reducing future earnings
growth of companies in the industry. While we agree that prices have risen
significantly, so have rents, so the drop in property yields ("cap rates") has
not been as
% of Portfolio ++
[PIE CHART]
Common Stock-77.25%
Short-Term Obligations-21.29%
Cash-1.43%
Warrants-0.3%
[END PIE CHART]
<TABLE>
<CAPTION>
- ------------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO++
- ------------------------------------
<S> <C>
Real Estate 24.67%
Oil & Gas - Integrated 18.41%
Mining & Metals - Precious 11.28%
Forest Products & Paper 8.17%
Mining &Metals - Ferrous
& Non-Ferrous 6.58%
Oil & Gas Producers 2.13%
Loding 1.82%
Oil & Gas Services 1.80%
Construction 1.56%
Utilities - Electric & Gas 0.86%
- ------------------------------------
PERCENT OF
TOP COUNTRIES PORTFOLIO++
- ------------------------------------
United States 74.05%
Canada 13.53%
United Kingdom 3.76%
South Africa 3.30%
Netherlands 2.42%
Australia 1.71%
Chile 0.86%
Ghana 0.37%
</TABLE>
++Represents market value of
investments plus cash.
22
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
dramatic as some believe. Furthermore, debt rates and mortgage spreads have
declined, boosting return on equity. We are taking the view that the market is
ignoring attractive internal growth prospects and development opportunities that
should enable the group to deliver earnings and cash flow growth well in excess
of the US stock market. Importantly, we believe the downside in the group is
limited given the rise in asset values which underpins current stock prices.
Natural Resources and Commodities
While the energy sector has suffered from declining demand for Asia, a warm
winter in the Northern Hemisphere, and increased production, we think oil prices
are near a bottom. The recently announced OPEC production cuts are enough to
swing the market into a deficit situation in the fourth quarter and bring
investors down to a level that has historically resulted in higher trading
ranges than current forward prices.
Recent discussions regarding a "new alliance" of oil producers will also
serve to increase uncertainty and put a floor under prices. Although no formal
announcements have been made, recent discussions center around a new alliance of
oil producers who control 70% of the world's known oil reserves and almost
two-thirds of all oil exports. It would be the most significant realignment
among oil-producing nations since the formation of OPEC in 1960. Key differences
between this alliance and OPEC include a stronger membership and more secretive
agreement. Its goal is to boost oil prices by more than 50%.
Pulp and paper stocks ended the first half unchanged, as strong performance
during the first quarter was taken back in the second. Demand weakness in Asia
was a key culprit to subdued commodity prices as Asia consumes approximately
one-third of global paper consumption. Significant consolidation activity in one
of the most fragmented industries helped buoy valuations and, we think, is very
healthy for the sector from a fundamental standpoint. However, commodity pricing
conditions will remain poor during the third quarter. Downside risk will be
moderated by prices near costs of production. Consolidation activity and
long-term healthy supply/demand conditions will help support equity valuations
and we are looking for moderately positive returns in the next several months.
Industrial metals prices are likely to remain muted in coming months due to
on-going weakness in demand from Asia. We believe we are near lows in prices,
but believe upside is limited in the short-term. We do believe that the third
quarter will prove to be an excellent opportunity to purchase equity holdings in
this sector for long-term appreciation. Historically, purchases at current
valuation levels have proven to be very rewarding.
Precious Metals
Gold has been in a tight trading range ($280-$310) throughout most of the
year as most of the negatives appear to have been factored into prices last
year. We anticipate that this trading range will be maintained for the remainder
of the year. The key driver of gold, investment demand, will be muted through
the lack of inflationary pressures in the world economy. Second, while we think
it is likely that additional gold sales by European central banks are likely or
at the least the threat of gold sales is likely, we believe that factor has been
priced in.
Global Hard Assets Portfolio, S&P 500 Index and Lipper Benchmark
Comparison of Change in Value of $10,000 Investment.
[PLOT POINTS OF LINE CHART GRAPHIC]
<TABLE>
<CAPTION>
Date Global Hard Assets Lipper Benchmark S&P 500 Index
<S> <C> <C> <C>
08/01/85 $10,000 $10,000 $10,000
09/30/85 9,602 9,481 9,916
12/31/85 9,960 9,069 11,626
03/31/86 10,217 10,276 13,264
06/30/86 10,141 9,058 14,049
09/30/86 12,987 12,189 13,070
12/31/86 13,646 12,415 13,800
03/31/87 22,164 19,345 16,745
06/30/87 20,392 18,429 17,584
09/30/87 24,761 22,113 18,746
12/31/87 18,325 16,944 14,519
03/31/88 16,901 15,396 15,345
06/30/88 16,755 15,041 16,359
09/30/88 14,766 13,359 16,411
12/31/88 14,433 13,768 16,915
03/31/89 15,249 14,711 18,110
06/30/89 14,364 14,488 19,705
09/30/89 15,006 15,770 21,812
12/31/89 17,210 18,387 22,256
03/31/90 15,812 16,804 21,585
06/30/90 13,785 14,925 22,936
09/30/90 14,846 15,425 19,799
12/31/90 13,035 13,893 21,564
03/31/91 12,337 13,197 24,685
06/30/91 13,532 14,518 24,631
09/30/91 12,194 13,445 25,947
12/31/91 12,316 13,809 28,106
03/31/92 11,826 12,923 27,399
06/30/92 12,760 13,400 27,921
09/30/92 12,844 12,548 28,801
12/31/92 11,916 11,167 30,245
03/31/93 14,112 13,844 31,562
06/30/93 18,279 18,325 31,711
09/30/93 15,635 16,453 32,520
12/31/93 19,578 20,875 33,274
03/31/94 19,639 19,124 32,021
06/30/94 17,542 18,704 32,160
09/30/94 19,936 22,616 33,732
12/31/94 16,882 19,626 33,725
03/31/95 17,214 18,492 36,998
06/30/95 17,323 18,717 40,519
09/30/95 18,152 19,788 43,729
12/31/95 17,348 18,676 46,353
03/31/96 21,724 22,803 49,103
06/30/96 19,740 21,453 51,595
09/30/96 18,695 21,026 53,500
12/31/96 17,793 19,758 58,251
03/31/97 16,473 18,114 58,505
06/30/97 14,423 15,898 68,711
09/30/97 14,571 16,091 73,857
12/31/97 9,852 11,395 75,978
03/31/98 10,722 12,346 86,553
06/30/98 9,650 11,564 89,402
</TABLE>
[END PLOT POINTS OF LINE CHART GRAPHIC]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
GLOBAL HARD S&P 500 LIPPER
ASSETS INDEX BENCHMARK
<S> <C> <C> <C>
YTD -2.05% 17.71% 1.49%
1 YEAR -33.09% 30.17% -27.26%
5 YEAR -11.99% 23.04% -8.80%
10 YEAR -5.37% 18.53% -2.59%
INCEPTION -0.27% 18.48% 1.13%
</TABLE>
Commencement of operations August 1, 1985. Past performance is not predictive of
future performance.
This graph compares an initial $10,000 investment made in the Global Hard Assets
Portfolio (the "Portfolio"), formerly the Gold Stock Portfolio, at its inception
with a similar investment in the S&P 500 Index and the Lipper benchmark. For the
purposes of this line graph, and the accompanying table, the average annual
total return for the Portfolio reflects all recurring expenses and includes
reinvestment of all dividends and distributions.
The investment objective of the Portfolio was changed on May 1, 1998. The Lipper
benchmark reflects the performance of the Lipper Gold Fund Average from August
1, 1985 through April 30, 1998 and the Lipper Natural Resources Fund Average
from May 1, 1998 through June 30, 1998. The Lipper Gold Fund and Natural
Resources Fund benchmarks are based on the average of all mutual funds within
the corresponding objective as compiled by Lipper Analytical Services. The
averages include the reinvestment of all dividends and underlying fund operating
expenses.
The S&P 500 Index is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction costs, advisory fees
or expenses that are associated with an investment in the Portfolio.
Shares of the Portfolio are offered only through the variable products of
Jefferson Pilot Financial and its affiliates. Total returns do not reflect any
separate account expenses imposed on policies which may include a premium tax
charge, account fees, cost of insurance, mortality expense and surrender charge,
as applicable.
23
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited)
Six Months Year Ended Year Ended Year Ended Year Ended Year Ended
Ended December December December December December
June 30, 1998 31, 1997 31, 1996 31, 1995 31, 1994 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.92 $ 16.60 $ 16.61 $ 16.25 $ 19.00 $ 11.57
Income From Investment Operations
Net investment income (loss) 0.04 0.02 (0.03) 0.05 0.03 0.02
Net gains and losses on securities
and foreign currency (both
realized and unrealized) (0.23) (7.30) 0.45 0.40 (2.65) 7.43
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (0.19) (7.28) 0.42 0.45 (2.62) 7.45
Less Distributions to Shareholders
Dividends from net investment income (0.02) (0.05) (0.03) (0.02)
Dividends in excess of net
investment income (0.07) (0.04)
Distributions from capital gains (0.43)
Distributions in excess of capital gains (0.31) (0.10)
Returns of capital
---------- ---------- ---------- ---------- ---------- ----------
Total distributions 0.00 (0.40) (0.43) (0.09) (0.13) (0.02)
Net asset value, end of period $ 8.73 $ 8.92 $ 16.60 $ 16.61 $ 16.25 $ 19.00
========== ========== ========== ========== ========== ==========
Total Return (A) (2.05%) (44.63%) 2.57% 2.76% (13.77%) 63.90%
Ratios to Average Net Assets:
Expenses 1.01% 1.07% 1.04% 1.01% 0.99% 1.01%
Net investment income 1.06% 0.63% (0.11%) 0.24% 0.18% 0.14%
Portfolio Turnover Rate 92.14% 19.70% 64.78% 23.98% 11.12% 7.32%
Average Commission Rate Paid $ 0.0173 $ 0.0181 $ 0.0151
Net Assets, At End of period $ 4,814,193 $ 5,204,654 $7,554,427 $6,867,645 $7,351,625 $7,863,581
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and principal
values will fluctuate and shares, when redeemed, may be worth more or less than
the original cost. Total return figures for periods less than one year have not
been annualized.
24
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
COMMON STOCK--72.70%
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------
<S> <C> <C>
Construction-1.47%
J. Ray McDermott, SA+ 1,700 $ 70,550
----------
Forest Products & Paper-7.69%
Asia Pulp & Paper Co., Ltd. 3,100 34,875
Bowater, Inc. 1,200 56,700
Fort James Corp. 1,400 62,300
St. Laurent Paperboard, Inc.+ 6,300 72,618
The Mead Corp. 1,600 50,800
Willamette Industries, Inc. 2,900 92,800
----------
370,093
----------
Lodging-1.71%
Signature Resorts, Inc.+ 5,000 82,500
----------
Mining & Metals - Ferrous & Nonferrous-6.19%
Aluminum Company of America 2,200 145,062
Billiton, PLC 27,500 55,753
Portman Mining, Ltd.+ 15,600 12,559
Steel Dynamics, Inc.+ 6,100 84,637
----------
298,011
----------
Mining & Metals - Precious-10.59%
Acacia Resources, Ltd. 15,000 15,977
Anglogold, Ltd. 1,000 40,577
Ashanti Goldfields Company, Ltd. 2,222 16,597
Barrick Gold Corp. 2,000 38,375
Cameco Corp. 1,100 30,670
Getchell Gold Corp.+ 2,000 30,000
Gold Fields of South Africa,
Ltd., ADR 4,000 46,250
Greenstone Resources, Ltd. 7,000 27,125
Homestake Mining Co. 5,000 51,875
Normandy Mining, Ltd. 60,000 49,046
Romarco Minerals, Inc.+ 16,000 20,673
Stillwater Mining Co.+ 3,000 81,375
Western Areas Gold Mining
Company, Ltd. 19,000 61,291
----------
509,831
----------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Oil & Gas - Integrated-17.33%
British Petroleum Co., ADR 1,300 $ 114,725
Chieftain International, Inc.+ 5,000 118,437
Louis Dreyfus Natural Gas Corp.+ 4,000 75,750
Mobil Corp. 1,500 114,938
Phillips Petroleum Co. 1,900 91,556
Pride International, Inc.+ 4,400 74,525
Royal Dutch Petroleum Co. 2,000 109,625
Stone Energy Corp.+ 1,900 67,569
Swift Energy Co. 4,200 66,938
----------
834,063
----------
Oil & Gas Producers-2.01%
KCS Energy, Inc. 5,700 65,194
Smith International, Inc.+ 900 31,331
----------
96,525
----------
Oil & Gas Services-1.69%
BJ Services Co.+ 2,800 81,375
----------
Real Estate-23.21%
Arden Realty, Inc. 3,000 77,625
Bentall Corp. 5,000 57,803
Boardwalk Equities, Inc.+ 6,000 69,364
Brandywine Realty Trust 1,500 33,562
Cadillac Fairview Corp.+ 4,000 92,000
Cornerstone Properties, Inc. 5,500 96,938
Equity Office Properties Trust 4,000 113,500
Equity Residential Properties Trust 1,500 71,156
Mack-Cali Realty Corp. 2,300 79,063
Patriot American Hospitality, Inc. 3,500 83,781
Philips International Realty Corp. 5,000 82,500
Prentiss Properties Trust 3,200 77,800
Starwood Lodging Trust 2,000 96,625
TrizecHahn Corp. 4,000 85,750
----------
1,117,467
----------
Utilities - Electric & Gas-0.81%
Enersis SA, ADR 1,600 39,100
----------
TOTAL COMMON STOCK
(Cost $3,896,237) 3,499,515
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
25
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
RIGHTS AND WARRANTS--0.03%
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Mining & Metals - Precious-0.03%
Randfontein Estates Gold,
exp. 06/01/02+ 2,470 $ 1,384
Rift Resources, Ltd., exp. 08/01/98+ 50,000 0
----------
1,384
----------
TOTAL RIGHTS AND WARRANTS
(Cost $0) 1,384
----------
+Non-income producing security.
- ---------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--20.03%
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------
Financial Services-9.76%
American Express Capital Corp.,
5.950%, due 07/01/98 $235,000 $ 235,000
General Electric Capital Corp.,
5.600%, due 07/01/98 235,000 235,000
----------
470,000
----------
U.S. Government & Agency Obligations-10.27%
U.S. Treasury Bill, 4.980%,
due 09/17/98 500,000 494,605
----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $964,605) 964,605
----------
TOTAL INVESTMENTS
(Cost $4,860,842) 92.76% 4,465,504
Other assets, less liabilities 7.24 348,689
------- -------
TOTAL NET ASSETS 100.00% $4,814,193
====== ==========
</TABLE>
See notes to financial statements.
26
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
"We believe that our strategy of searching out
rapidly growing companies, early in their develop-
ment, and growth stocks at reasonable prices
should be a favorable one for investors in 1998."
--John W. Ballen and Toni Y. Shimura, Portfolio Managers--
-----------------------------------------------------
INCEPTION DATE
May 1, 1995
-----------------------------------------------------
FUND MANAGER
Massachusetts Financial Services Company
-----------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To seek long-term growth of capital by investing
primarily in common stocks of small and medium-sized
companies. The Portfolio is intended for investors who
understand and are willing to accept risks entailed
in seeking long-term growth of capital.
-----------------------------------------------------
NET ASSETS AS OF 6/30/98
$77,665,917
-----------------------------------------------------
NUMBER OF HOLDINGS
141
-----------------------------------------------------
PORTFOLIO TURNOVER
29.60%
-----------------------------------------------------
-----------------------------------------------------
IN THIS SECTION
-----------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
-----------------------------------------------------
JOHN W. BALLEN
Executive Vice President
o Director, MFS Equity Portfolio Management
o Joined MFS in 1984
o Serves as MFS senior small capitalization growth equity portfolio manager
o M.B.A. from Standford University Graduate School of Business
o B.A. from Harvard University
-----------------------------------------------------
TONI Y. SHIMURA
Vice President, Investments
o Joined MFS in 1987
o M.B.A. from Sloan School of Management, Massachusetts Institute of
Technology
o B.A. from Wellesley College
27
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
[PIE CHART]
% of Portfolio ++
Common Stock-92.53%
Preferred Stock-3.99%
Short-Term Obligations-2.67%
Cash-0.81%
[END PIE CHART]
For the six months ended June 30, 1998, the JPVF Emerging Growth Portfolio
provided a return of 20.78%. This compares to a 5.46% return for the Russell
2000 Growth Index, 4.93% for the Russell 2000 Total Return Index, and a 17.71%
return for the S&P 500 Index (all unmanaged, but commonly used measures of stock
performance).
Low inflation, low interest rates, and a robust U.S. economy created a
positive backdrop for emerging growth stocks in the first half of 1998. It was,
however, a volatile period. Although seemingly far away, the economic problems
in Asia were probably the most important factors affecting the U.S. market
during this period. Concerns relating to Asia drove premiums for liquidity to
very high levels - in other words, investors were willing to pay much higher
valuations for the liquidity offered by bigger capitalization stocks.
Consequently, the mid-cap and larger-cap growth stocks in our Portfolio tended
to outperform the smaller stocks during this period. Also, concerns about Asia
affected companies with significant exposure to the region, such as technology
stocks, many of which experienced a roller coaster ride. Fortunately, the
Portfolio's technology holdings were primarily in computer software and
networking, rather than the more volatile semiconductor stocks which have a lot
of business in Asia.
The Portfolio continued to benefit from the solid performance of its
technology holdings, where earnings were surprisingly strong despite issues
relating to Asia. Stocks which contributed to performance included Cisco,
Microsoft, SAP, BMC Software and Compuware - all companies whose products were
in strong demand by companies seeking increasing productivity. Consolidation in
the telecommunications industry helped increase value in holdings such as
WorldCom, MCI, and Global Telesystems. Better than expected earnings and
industry consolidation also helped other companies such as Tyco International
and AirTouch. One stock which did not do as well as we would have liked was
Cendant, the merger of HFS and CUC International. The company encountered
difficulties because of accounting problems at CUC.
<TABLE>
<CAPTION>
- -------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO++
- -------------------------------------
<S> <C>
Tyco International, Ltd. 6.46%
Cisco Systems, Inc. 5.78%
Computer Associates
International, Inc. 4.82%
Microsoft Corp. 4.63%
Cendant Corp. 4.21%
BMC Software, Inc. 4.12%
Systeme, Anwendungen,
Produckte 3.99%
Oracle Corp. 3.71%
Compuware Corp. 3.56%
United Healthcare Corp. 3.07%
- -----------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO++
- -----------------------------------
Computer Software - Mini
& Micro 22.26%
Retail Stores 12.39%
Telecommunications 7.98%
Healthcare 6.56%
Electronics 6.46%
Computer Software -
Mainframe 6.40%
Computer Network 5.78%
Travel Services 4.23%
Broadcasting 3.56%
Multimedia 2.17%
</TABLE>
++Represents market value of
investments plus cash.
28
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
Emerging Growth Portfolio, Russell 2000 Index and Russell 2000 Growth Index
Comparison of Change in Value of $10,000 Investment.
[PLOT POINTS OF LINE CHART GRAPHIC]
<TABLE>
<CAPTION>
Date Emerging Growth Portfolio Russell 2000 Russell 2000 Growth
<S> <C> <C> <C>
05/01/95 $10,000 $10,000 $10,000
06/30/95 10,962 10,681 10,829
09/30/95 12,821 11,728 12,060
12/31/95 13,291 11,984 12,239
03/31/96 14,225 12,593 12,862
06/30/96 15,349 13,241 13,523
09/30/96 15,938 13,285 13,569
12/31/96 15,724 13,963 14,264
03/31/97 14,483 13,244 13,530
06/30/97 17,184 15,381 15,713
09/30/97 19,507 17,662 18,043
12/31/97 18,942 17,062 17,430
03/31/98 22,928 18,819 19,501
06/30/98 22,878 17,959 18,382
</TABLE>
[END PLOT POINTS OF LINE CHART GRAPHIC]
We think the stock will recover as those issues are resolved and the company
starts to surprise positively on the earnings front.
Looking ahead, we see a number of things affecting our market. First, the
potential for interest rates to rise from currently very low levels is something
we're always on the lookout for, given the continued strength of the U.S.
economy and the tight labor market. If rates rise, interest sensitive stocks
such as financials and TV and radio broadcasters could see their valuations come
under pressure. So to be on the cautious side, we've trimmed back on some of our
holdings in these areas.
Secondly, we believe we are at the beginning of an ongoing slowdown in
profit growth for the economy and the S&P 500. We've already seen the early
manifestations of this in the first half of 1998, with earnings disappointments
for quite a few companies. We think this bodes well for emerging growth stocks
since many of them are expected to generate earnings growth far superior to that
of the broader market. As a result, technology continues to be an area of
emphasis since selected software and networking companies are generating some of
the strongest, most consistent earnings growth that we have been able to
identify. Another area we believe offers great potential is the business and
computer services market. We own, for example, information technology and
outsourcing firms which help other companies focus on their core businesses.
Telecommunications is another industry where we see many opportunities given the
increased competition and consolidation which is taking place on a global basis.
In our view, the companies which can grow the fastest, and at the same time
sustain and consistently deliver high growth, will be well rewarded by the
marketplace. Thus, we believe that our strategy of searching out rapidly
growing companies, early in their development, and growth stocks at reasonable
prices should be a favorable one for investors in 1998.
- -----------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------
<TABLE>
<CAPTION>
RUSSELL
2000 RUSSELL
EMERGING GROWTH 2000
GROWTH INDEX INDEX
<S> <C> <C> <C>
YTD 20.78% 5.46% 4.93%
1 YEAR 33.14% 16.99% 16.50%
INCEPTION 29.86% 21.17% 20.78%
</TABLE>
Commencement of operations May 1, 1995. Past performance is not predictive of
future performance.
This graph compares an initial $10,000 investment made in the Emerging Growth
Portfolio (the "Portfolio") at its inception with a similar investment in the
Russell 2000 Growth Index and the Russell 2000 Index. For the purposes of this
graph and the accompanying table, the average annual total return for the
Portfolio reflects all recurring expenses and includes the reinvestment of all
dividends and distributions.
Shares of the Portfolio are offered only through the variable products of
Jefferson Pilot Financial and its affiliates. Total returns do not reflect any
separate account expenses imposed on the policies which may include a premium
tax charge, account fees, cost of insurance, mortality expenses and surrender
charges, as applicable.
The Russell 2000 Growth Index and the Russell 2000 Index are unmanaged indexes
and include the reinvestment of all dividends, but do not reflect the payment of
transaction costs, advisory fees or expenses that are associated with an
investment in the Portfolio.
29
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Period From
(Unaudited) May 1, 1995
Six Months Year Ended Year Ended Through
Ended December December December
June 30, 1998 31, 1997 31, 1996 31, 1995 (A)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.47 $ 15.23 $ 13.29 $ 10.00
Income From Investment Operations
Net investment loss (0.05) (0.07) (0.05) (0.04)
Net gains and losses on securities
and foreign currency
(both realized and unrealized) 3.68 3.19 2.48 3.33
---------- ---------- ---------- ----------
Total from investment operations 3.63 3.12 2.43 3.29
Less Distributions to Shareholders
Dividends from net investment income
Dividends in excess of net
investment income
Distributions from capital gains (0.06) (0.88) (0.49)
Distributions in excess of capital gains
Returns of capital
----------- ----------- ----------- -----------
Total distributions (0.06) (0.88) (0.49) 0.00
Net asset value, end of period $ 21.04 $ 17.47 $ 15.23 $ 13.29
========== ========== ========== ==========
Total Return (B) 20.78% 20.47% 18.30% 32.91%
Ratios to Average Net Assets:
Expenses 0.89% 1.00% 1.16% 1.63% (C)
Net investment income (0.58%) (0.61%) (0.48%) (0.84%)(C)
Portfolio Turnover Rate 29.60% 122.85% 94.58% 30.31%
Average Commission Rate Paid $ 0.0544 $ 0.0688 $ 0.0390
Net Assets, At End of Period $77,665,917 $56,229,175 $30,794,030 $11,439,524
</TABLE>
(A) Per share data calculated from the initial offering date, May 1, 1995, for
sale to Jefferson Pilot Financial Separate Account A.
(B) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth more
or less than the original cost. Total return figures for periods less than
one year have not been annualized.
(C) Per share data and ratios calculated on an annualized basis.
30
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--93.77%
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Advertising-0.01%
DoubleClick, Inc.+ 100 $ 4,969
----------
Aerospace & Defense-0.83%
Gulfstream Aerospace Corp.+ 7,800 362,700
Saab, AB, Class B+ 26,525 279,389
----------
642,089
----------
Banking-0.06%
U.S. Trust Corp.+ 600 45,750
----------
Broadcasting-3.61%
CBS Corp. 14,500 460,375
Clear Channel Communications, Inc.+ 6,125 668,391
Cox Radio, Inc.+ 13,600 588,200
Hearst-Argyle Television, Inc.+ 3,300 132,000
Heftel Broadcasting Corp.+ 3,300 147,675
Jacor Communications, Inc.+ 9,600 566,400
Univision Communications, Inc.+ 6,500 242,125
----------
2,805,166
----------
Commercial Services-0.30%
Central Parking Corp. 800 36,400
Consolidated Capital Corp.+ 8,900 200,111
----------
236,511
----------
Computer Equipment & Services-1.86%
Compaq Computer Corp. 5,000 141,875
Computer Sciences Corp. 10,900 697,600
First Data Corp. 17,300 576,306
SunGard Data Systems, Inc.+ 900 34,537
----------
1,450,318
----------
Computer Information & Technology-1.99%
Affiliated Computer Services, Inc.+ 7,000 269,500
DA Consulting Group, Inc.+ 700 10,063
Elsag Bailey Process Automation, N.V.+ 2,800 67,375
HBO & Co. 20,200 712,050
Technology Solutions Co.+ 15,100 478,481
Whittman-Hart, Inc.+ 200 9,675
----------
1,547,144
----------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Computer Information Systems-1.96%
ARM Holdings, PLC+ 200 $ 3,838
ARM Holdings, PLC, ADR+ 2,800 171,500
Ceridian Corp.+ 3,600 211,500
DST Systems, Inc.+ 4,200 235,200
International Integration, Inc.+ 200 3,450
Policy Management Systems Corp.+ 9,600 376,800
SEMA Group, PLC 26,300 309,386
The BISYS Group, Inc.+ 5,100 209,100
----------
1,520,774
----------
Computer Network-5.85%
Cisco Systems, Inc.+ 49,400 4,547,888
----------
Computer Software - Mainframe-6.49%
Cadence Design Systems, Inc.+ 64,460 2,014,375
Mobius Management Systems, Inc.+ 4,700 70,500
Oracle Corp.+ 118,850 2,919,253
Siebel Systems, Inc.+ 1,100 35,475
----------
5,039,603
----------
Computer Software - Mini & Micro-18.51%
Autodesk, Inc. 2,600 100,425
BMC Software, Inc.+ 62,400 3,240,900
Computer Associates International, Inc. 68,212 3,790,029
Compuware Corp.+ 54,800 2,801,650
Microsoft Corp.+ 33,600 3,641,400
Sun Microsystems, Inc.+ 3,100 134,656
Synopsys, Inc.+ 13,047 596,901
Xilinx, Inc.+ 2,100 71,400
----------
14,377,361
----------
Consulting Services-0.32%
Renaissance Worldwide, Inc.+ 11,500 250,125
----------
Cosmetics & Personal Care-0.17%
Carson, Inc.+ 16,800 132,300
----------
</TABLE>
+Non-Income producing security.
See notes to financial statements.
31
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Educational Services-0.81%
Computer Learning Centers, Inc.+ 6,100 $ 151,737
Learning Tree International, Inc.+ 21,750 437,719
School Specialty, Inc.+ 2,194 35,919
----------
625,375
----------
Electronics-6.55%
Tyco International, Ltd. 80,708 5,084,604
----------
Electronics - Semiconductors-0.55%
Altera Corp.+ 13,300 393,181
Intel Corp. 500 37,063
----------
430,244
----------
Entertainment & Leisure-0.56%
Gemstar International Group, Ltd.+ 2,500 93,594
Harrah's Entertainment, Inc.+ 10,200 237,150
Premier Parks, Inc.+ 1,500 99,937
----------
430,681
----------
Environmental Controls-0.24%
USA Waste Services, Inc.+ 3,800 187,625
----------
Financial Services-1.92%
ARM Financial Group, Inc. 2,300 50,887
Associates First Capital Corp. 3,100 238,313
Donaldson, Lufkin & Jenrette, Inc. 2,600 132,112
Franklin Resources, Inc. 11,400 615,600
Morgan Stanley, Dean Witter, & Co. 4,200 383,775
NOVA Corp.+ 2,000 71,500
----------
1,492,187
----------
Food Service & Restaurants-0.42%
Applebee's International, Inc. 5,700 127,538
Buffets, Inc.+ 12,700 199,231
----------
326,769
----------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Healthcare-6.65%
Cardinal Health, Inc. 2,300 $ 215,625
Columbia/HCA Healthcare Corp. 3,200 93,200
HEALTHSOUTHCorp.+ 22,000 587,125
Health Management Associates, Inc.+ 1,050 35,109
Integrated Health Services, Inc. 5,600 210,000
McKesson Corp. 4,450 361,562
Orthodontics Centers of America, Inc.+ 7,100 148,656
PacifiCare Health Systems, Inc.+ 4,300 380,013
Province Healthcare Co.+ 100 2,769
Total Renal Care Holdings, Inc.+ 11,209 386,711
United Healthcare Corp. 38,100 2,419,350
Wellpoint Health Networks, Inc.+ 4,400 325,600
----------
5,165,720
----------
Household Products-0.18%
Rubbermaid, Inc. 4,200 139,388
----------
Human Resources-1.48%
AccuStaff, Inc.+ 34,101 1,065,656
Metamor Worldwide, Inc.+ 2,400 84,450
----------
1,150,106
----------
Insurance-0.45%
Ace, Ltd. 1,500 58,500
Annuity and Life Re Holdings, Ltd.+ 4,200 92,925
Conseco, Inc. 800 37,400
Life Re Corp. 1,000 82,000
Skandia Forsakrings, AB 5,500 78,622
----------
349,447
----------
Lodging-0.68%
Promus Hotel Corp.+ 13,682 526,757
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
32
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Manufacturing-0.17%
Cable Design Technologies+ 3,200 $ 66,000
SI Handling Systems, Inc. 4,850 63,656
----------
129,656
----------
Marketing Services-0.18%
Taylor Nelson Sofres, PLC 69,000 141,615
----------
Medical Products-1.03%
Boston Scientific Corp.+ 4,500 322,312
Guidant Corp. 2,300 164,019
Medtronic, Inc. 3,000 191,250
PSS World Medical, Inc.+ 1,500 21,938
STERIS Corp.+ 1,600 101,750
----------
801,269
----------
Multimedia-2.20%
Time Warner, Inc. 9,500 811,656
Viacom, Inc., Class B+ 15,400 897,050
----------
1,708,706
----------
Office Equipment-0.44%
Danka Business Systems, PLC 20,400 240,975
IKON Office Solutions, Inc. 6,200 90,288
Viking Office Products, Inc.+ 200 6,275
----------
337,538
----------
Pharmaceutical-0.04%
ICON, PLC+ 100 2,525
King Pharmaceuticals, Inc.+ 2,200 30,800
----------
33,325
----------
Publishing & Printing-0.03%
Workflow Management, Inc.+ 2,632 21,222
----------
Retail Stores-12.56%
CVS Corp. 17,100 665,831
Consolidated Stores Corp.+ 2,050 74,313
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Retail Stores-(Continued)
Corporate Express, Inc.+ 21,850 $ 277,222
Dollar General Corp. 875 34,617
Duane Reade, Inc.+ 200 6,000
Fred Meyer, Inc.+ 27,890 1,185,325
General Nutrition Companies, Inc.+ 4,600 143,175
Kohl's Corp.+ 2,600 134,875
Linens 'N Things, Inc.+ 2,200 67,238
Lowe's Companies, Inc. 17,000 689,562
Micro Warehouse, Inc.+ 18,000 279,000
Office Depot, Inc.+ 47,600 1,502,375
Proffitt's, Inc.+ 1,800 72,675
Republic Industries, Inc.+ 52,700 1,317,500
Rite Aid Corp. 32,900 1,235,806
Safeway, Inc.+ 5,500 223,781
Staples, Inc.+ 17,450 504,959
The Home Depot, Inc. 15,800 1,312,387
U.S. Office Products Co.+ 1,335 26,033
----------
9,752,674
----------
Shipbuilding-0.35%
Newport News Shipbuilding, Inc. 10,100 270,175
----------
Telecommunications-8.09%
AirTouch Communications, Inc.+ 5,400 315,562
Amdocs, Ltd.+ 1,100 16,637
Century Telephone Enterprises, Inc. 7,650 350,944
Global TeleSystems Group, Inc.+ 18,900 921,375
Intermedia Communications, Inc.+ 26,400 1,107,150
MCI Communications Corp. 28,800 1,674,000
Sprint Corp. 3,000 211,500
Tel-Save Holdings, Inc.+ 10,900 160,775
WorldCom, Inc.+ 31,480 1,524,813
----------
6,282,756
----------
Telecommunications Equipment-1.85%
American Tower Corp.,
Class A+ 6,000 149,625
</TABLE>
+Non-income producing security.
See notes to financial statements.
33
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Telecommunications Equipment-Continued
Aspect Telecommunications Corp.+ 800 $ 21,900
Loral Space & Communications, Ltd.+ 5,500 155,375
Lucent Technologies, Inc. 9,200 765,325
Tellabs, Inc.+ 4,800 343,800
----------
1,436,025
----------
Transportation-0.09%
Coach USA, Inc.+ 1,600 73,000
----------
Travel Services-4.29%
Cendant Corp.+ 158,665 3,312,132
Navigant International,Inc.+ 1,974 16,781
----------
3,328,913
----------
TOTAL COMMON STOCK
(Cost $56,634,189) 72,825,775
----------
- ---------------------------------------------------------------------
PREFERRED STOCK--4.05%
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Computer Software - Mini & Micro-4.05%
Systeme, Anwendugen, Produckte 4,630 $ 3,142,244
----------
TOTAL PREFERRED STOCK
(Cost $1,330,305) 3,142,244
----------
- ---------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--2.70%
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------
U.S. Government &Agency Obligations-2.70%
Federal Home Loan Bank,
5.400%, due 07/01/98 $2,100,000 $ 2,100,000
----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $2,100,000) 2,100,000
----------
TOTAL INVESTMENTS
(Cost $60,064,494) 100.52% 78,068,019
Other assets, less liabilities (0.52) (402,102)
------ ----------
TOTAL NET ASSETS 100.00% $77,665,917
====== ===========
</TABLE>
+Non-income producing security.
See notes to financial statements.
34
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
"We continue to emphasize a wide array of large
capitalization companies with compelling
fundamentals and strong earnings growth potential."
--Mark Pinto, Portfolio Manager--
-------------------------------------------------
INCEPTION DATE
May 1, 1992
-------------------------------------------------
FUND MANAGER
Janus Capital Corporation
-------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To seek capital growth. Realization of income is
not a significant investment consideration and
any income realized will be incidental.
-------------------------------------------------
NET ASSETS AS OF 6/30/98
$173,459,262
-------------------------------------------------
NUMBER OF HOLDINGS
47
-------------------------------------------------
PORTFOLIO TURNOVER
26.60%
-------------------------------------------------
-------------------------------------------------
IN THIS SECTION
-------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
-------------------------------------------------
MARK PINTO, CFA
Vice President
o Joined Janus Capital Corporation in 1994
o 12 years of investment experience
o B.A. from Yale University
o M.B.A. from Harvard University
o Chartered Financial Analyst
35
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
[PIE CHART]
% of Portfolio++
Common Stock-97.91%
Cash-2.09%
[END PIE CHART]
The markets made modest gains during the second quarter, with the S&P 500
Index rising 3.3% and the Russell 1000 Growth Index increasing 4.5%. After
starting out the quarter on a strong note, the markets struggled midway through
the period amid a flood of bad news out of Asia and a series of earnings
downgrades in the semiconductor industry. The S&P 500 rebounded later in the
quarter, led by established blue chip stocks that withstood the earnings
downdraft from Asia.
On the bright side, weakness in Asia has helped keep the U.S. economy from
overheating, offsetting continued strength in consumer spending. With inflation
in check and investors anticipating a modest slowdown in economic growth during
the remainder of the year, yields on the 30-year U.S. Treasury Bond fell to 5.6%
by quarter end.
Turning to the Portfolio, we outpaced our benchmark, the S&P 500, due to
strong gains in our technology and telecommunications holdings. Our investment
approach has not changed - we seek out market leaders with visible earnings, and
we are currently capitalizing on opportunities in technology, life sciences,
financial services, and media/cable sectors.
Our most successful technology holdings, such as Dell Computer, Cisco
Systems and Microsoft, sailed through the Asian crisis with no visible earnings
impact. We met recently with Cisco's senior management, and remain excited about
the company's potential. Demand for Cisco's "IP" switches is expected to surge
as telephone companies and other providers upgrade their networks to accommodate
the rising volume of voice and data traffic. Meanwhile, Microsoft shook off the
Justice Department's anti-trust charges to move ahead following a favorable
Appeals Court opinion. Additionally, Microsoft's prospects appear strong as they
prepare to launch several exciting new products, including Windows 98 and
Windows NT 5.0, early next year.
Our pharmaceutical holdings were also solid performers. Warner Lambert has
benefited from rapid market share penetration by its two new products - Lipitor,
an anti-cholesterol treatment, and Rezulin, which treats diabetes.The company is
poised for 40% earnings growth during the second half of the year. Meanwhile, I
still believe Pfizer offers extraordinary long-term earnings potential, even
though the stock is fairly expensive. Its new male impotence drug, Viagra, has
easily exceeded its initial projections. We expect the product to shake off
recent safety concerns (reportedly linked to product misuse) and continue its
impressive growth. Finally, Pfizer will also benefit from the rapid growth of
Lipitor given its co-marketing arrangement with Warner Lambert.
Among our financial services positions, we are very enthusiastic about
BankAmerica and Morgan Stanley Dean Witter. BankAmerica's merger with
Nationsbank establishes the combined entity as a dominant player with a wide and
profitable geographic imprint. Management is commited to improving operating
margins, and they have a good understanding of the changing role of banking in
today's on-line marketplace. We also remain upbeat on Morgan Stanley Dean
Witter. Morgan Stanley is the market leader in underwriting
<TABLE>
<CAPTION>
- ----------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO++
- ----------------------------------------
<S> <C>
Morgan Stanley, Dean
Witter, & Co. 5.51%
Dell Computer Corp. 4.96%
Microsoft Corp. 4.91%
Warner-Lambert Co. 4.68%
Pfizer, Inc. 4.15%
Monsanto Co. 3.77%
Coca-Cola Enterprises, Inc. 3.73%
General Electric Co. 3.69%
Cisco Systems, Inc. 3.55%
E.I. du Pont de Nemours & Co. 3.31%
- ----------------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO++
- ----------------------------------------
Financial Services 14.42%
Pharmaceutical 14.28%
Telecommunications 6.97%
Chemicals 6.47%
Computer Equipment & Services 4.97%
Computer Software - Mini
& Micro 4.91%
Biotechnology 3.77%
Beverages 3.73%
Manufacturing 3.69%
Electronics - Semiconductors 3.60%
</TABLE>
++Represents market value of
investments plus cash.
36
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
Capital Growth Portfolio and the S&P 500 Index
Comparison of Change in Value of $10,000 Investment.
[PLOT POINTS OF LINE CHART GRAPHIC]
<TABLE>
<CAPTION>
Date Capital Growth Portfolio S&P 500 Index
<S> <C> <C>
05/01/92 $10,000 $10,000
06/30/92 10,087 9,958
09/30/92 10,925 10,272
12/31/92 12,724 10,787
03/31/93 13,604 11,256
06/30/93 13,635 11,310
09/30/93 14,752 11,598
12/31/93 15,869 11,867
03/31/94 15,387 11,420
06/30/94 14,720 11,470
09/30/94 15,553 12,031
12/31/94 15,353 12,028
03/31/95 16,045 13,195
06/30/95 17,479 14,451
09/30/95 20,143 15,596
12/31/95 21,762 16,532
03/31/96 23,919 17,512
06/30/96 25,766 18,399
09/30/96 26,224 19,074
12/31/96 25,951 20,767
03/31/97 26,015 20,860
06/30/97 30,540 24,494
09/30/97 33,805 26,326
12/31/97 33,582 27,079
03/31/98 39,281 30,849
06/30/98 41,989 31,864
</TABLE>
[END PLOT POINTS OF LINE CHART GRAPHIC]
and mergers and acquisitions activity, and is expanding its presence in the
profitable asset management business. Morgan Stanley has also stepped up its
share repurchase program, and the fundamentals in its other business lines,
namely credit cards, are rapidly improving.
Another area on which we are especially upbeat is our cable and media
holdings. Cable companies are using improved cash flow to leverage their balance
sheets. Moreover, the value of their cable infrastructure is getting more
recognition, and was the driving force behind AT&T's recent purchase of
Tele-Communications, Inc. (TCI). AT&T hopes to use TCI's network as a relatively
low-cost entry point to the local telephone market. TCI's stock price advanced
strongly leading up to the AT&T announcement, but we have now scaled back our
interest in the company to concentrate on Comcast, Time Warner and MediaOne
Group (the spin-off of US West Media Group). These providers are farther ahead
in their network upgrades than TCI, and we believe they are better positioned to
deploy their cable in rolling out telephone services.
Although we were generally very pleased with our results, we did have a few
disappointments during the quarter. Among our technology positions, Applied
Materials and ASM Lithography slumped on negative earnings reports in the
semiconductor industry. Despite their Asian exposure, we believe these companies
offer promising long-term potential. Applied Materials, in particular, took
advantage of the weakness to capture market share globally, and we expect it to
emerge as a stronger, better-positioned company. During the quarter, we sold
Texas Instruments following the announcement of its intention to divest its DRAM
business.
Looking forward, we believe that domestic market fundamentals will remain
generally positive. On the upside, U.S. economic growth remains firm, and the
dramatic decline in rates during the second quarter provided a positive backdrop
for equities. Additionally, the domestic inflationary picture remains favorable.
In fact, the recent turmoil surrounding the General Motors strike, in concert
with reduced commodity prices, has created a very positive near-term inflation
picture. On the downside, the turmoil in Asia is expected to continue, and many
companies could see their earnings squeezed as a result. The biggest risk right
now is the persistent weakness of the Japanese yen, which has renewed fears of
a Chinese currency devaluation. Until the situation in the Far East becomes
clearer, that region remains a major source of uncertainty for global financial
markets.
My approach to the Portfolio remains essentially the same. We continue to
emphasize a wide array of large capitalization companies with compelling
fundamentals and strong earnings growth potential. We have tried to minimize the
Portfolio's exposure to Asia, and our success in this environment attests to the
value of Janus' superior research capabilities. We continue to rely on our
meticulous analysis, and we remain confident in our ability to navigate the
negative pressures stemming from the collapse of the Far East, providing
superior returns to our investors.
<TABLE>
<CAPTION>
- -----------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------
CAPITAL S&P 500
GROWTH INDEX
<S> <C> <C>
YTD 25.03% 17.71%
1 YEAR 37.49% 30.17%
5 YEAR 25.23% 23.04%
INCEPTION 26.19% 20.67%
</TABLE>
Commencement of operations May 1, 1992. Past performance is not predictive of
future performance.
This graph compares an initial $10,000 investment made in the Capital Growth
Portfolio (the "Portfolio") at its inception with a similar investment in the
S&P 500 Index. For the purposes of this graph and the accompanying table, the
average annual total return for the Portfolio reflects all recurring expenses
and includes the reinvestment of all dividends and distributions.
Shares of the Portfolio are offered only through the variable products of
Jefferson Pilot Financial and its affiliates. Total returns do not reflect any
separate account expenses imposed on the policies which may include a premium
tax charge, account fees, cost of insurance, mortality expenses and surrender
charges, as applicable.
The S&P 500 Index is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction costs, advisory fees
or expenses that are associated with an investment in the Portfolio.
37
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited)
Six Months Year Ended Year Ended Year Ended Year Ended Year Ended
Ended December December December December December
June 30, 1998 31, 1997 31, 1996 31, 1995 31, 1994 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.23 $ 17.26 $ 17.38 $ 13.38 $ 14.26 $ 12.42
Income From Investment Operations
Net investment income (loss) (0.01) 0.05 0.03 0.03
Net gains and losses on securities
and foreign currency (both
realized and unrealized) 5.32 4.99 3.24 5.56 (0.49) 3.03
----------- ----------- ---------- ---------- ---------- ----------
Total from investment operations 5.31 4.99 3.29 5.59 (0.46) 3.03
Less Distributions to Shareholders
Dividends from net investment income (0.05) (0.03) (0.03)
Dividends in excess of net
investment income
Distributions from capital gains (0.06) (0.81) (3.36) (1.56) (0.33) (1.19)
Distributions in excess of capital gains (0.21) (0.06)
Returns of capital
----------- ----------- ---------- ---------- ---------- ----------
Total distributions (0.06) (1.02) (3.41) (1.59) (0.42) (1.19)
Net asset value, end of period $ 26.48 $ 21.23 $ 17.26 $ 17.38 $ 13.38 $ 14.26
=========== =========== ========== ========== ========== ==========
Total Return (A) 25.03% 29.41% 19.25% 41.74% (3.26%) 24.73%
Ratios to Average Net Assets:
Expenses 1.07% 1.09% 1.13% 1.15% 1.22% 1.33%
Net investment income (0.36%) 0.02% 0.30% 0.21% 0.25% (0.11%)
Portfolio Turnover Rate 26.60% 91.66% 147.82% 170.32% 202.04% 162.79%
Average Commission Rate Paid $ 0.0487 $ 0.0568 $ 0.0502
Net Assets, At End of Period $173,459,262 $124,123,995 $70,832,162 $49,853,029 $27,564,086 $15,373,489
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and principal
values will fluctuate and shares, when redeemed, may be worth more or less than
the original cost. Total return figures for periods of less than one year have
not been annualized.
38
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--97.57%
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense-1.67%
Gulfstream Aerospace Corp.+ 62,450 $ 2,903,925
----------
Agricultural Operations-1.50%
Delta & Pine Land Co. 58,466 2,601,737
----------
Airlines-2.39%
UAL Corp.+ 53,220 4,151,160
----------
Automotive Parts & Equipment-1.28%
Federal-Mogul Corp. 32,875 2,219,062
----------
Banking-2.41%
Citicorp 16,360 2,441,730
The Bank of New York Co., Inc. 28,750 1,744,766
----------
4,186,496
----------
Beverages-3.72%
Coca-Cola Enterprises, Inc. 164,230 6,446,027
----------
Biotechnology-3.76%
Monsanto Co. 116,660 6,518,377
----------
Broadcasting-1.97%
CBS Corp. 107,435 3,411,061
----------
Chemicals-6.45%
Cytec Industries, Inc.+ 55,550 2,458,088
E.I. du Pont de Nemours & Co. 76,695 5,723,364
Solutia, Inc. 104,695 3,003,438
----------
11,184,890
----------
Commercial Services-0.52%
Gartner Group, Inc., Class A+ 25,875 905,625
----------
Computer Equipment & Services-4.95%
Autotote Corp., Class A+ 4,672 13,432
Dell Computer Corp.+ 92,370 8,573,091
----------
8,586,523
----------
Computer Information Systems-2.00%
Parametric Technology Corp.+ 127,575 3,460,472
----------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Computer Network-3.53%
Cisco Systems, Inc.+ 66,577 $ 6,129,245
----------
Computer Software - Mainframe-2.32%
Cadence Design Systems, Inc.+ 128,515 4,016,094
----------
Computer Software - Mini & Micro-4.89%
Microsoft Corp.+ 78,330 8,489,014
----------
Electronics - Semiconductors-3.59%
ASM Lithography Holding, N.V.+ 94,575 2,748,586
Applied Materials, Inc.+ 57,300 1,690,350
Intel Corp. 24,025 1,780,853
----------
6,219,789
----------
Entertainment & Leisure-1.07%
Carnival Corp. 46,840 1,856,035
----------
Financial Services-14.37%
Bank America Corp. 38,790 3,352,911
Fannie Mae 80,000 4,860,000
Freddie Mac 75,700 3,562,631
MGIC Investment Corp. 25,870 1,476,207
Morgan Stanley, Dean Witter, & Co. 104,200 9,521,275
Newcourt Credit Group, Inc. 18,095 890,048
The Charles Schwab Corp. 38,975 1,266,687
----------
24,929,759
----------
Food Products-3.04%
Ralston-Ralston Purina Group 45,075 5,265,323
----------
Insurance-0.44%
The PMI Group, Inc. 10,400 763,100
----------
Manufacturing-3.68%
General Electric Co. 70,100 6,379,100
----------
Multimedia-3.06%
Time Warner, Inc. 62,150 5,309,941
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
39
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------
<S> <C> <C>
Pharmaceutical-14.23%
Bristol-Myers Squibb Co. 26,750 $ 3,074,578
Eli Lilly & Co. 73,370 4,847,006
Pfizer, Inc. 69,925 7,165,223
Smithkline Beecham, ADR 25,075 1,517,038
Warner-Lambert Co. 116,550 8,085,656
----------
24,689,501
----------
Retail Stores-0.56%
Fred Meyer, Inc. 22,900 973,250
----------
Telecommunications-6.94%
AT&T Corp. 28,125 1,606,641
Comcast Corp., Special Class A 88,685 3,600,061
Media One Group, Inc.+ 122,825 5,396,623
Qwest Communications
International, Inc.+ 41,200 1,436,850
----------
12,040,175
----------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Telecommunications Equipment-3.23%
Linear Technology Corp. 48,800 $ 2,943,250
Lucent Technologies, Inc. 31,940 2,657,009
----------
5,600,259
----------
TOTAL COMMON STOCK
(Cost $118,778,834) 169,235,940
----------
TOTAL INVESTMENTS
(Cost $118,778,834) 97.57% 169,235,940
Other assets, less liabilities 2.43 4,223,322
------ ---------
TOTAL NET ASSETS 100.00% $173,459,262
====== ============
</TABLE>
+Non-income producing security.
See notes to financial statements.
40
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
"We remain committed to finding the best long-term
growth companies of all sizes with capable
management, selling at reasonable valuations."
--Ronald C. Ognar, Portfolio Manager--
-------------------------------------------------
INCEPTION DATE
January 1, 1998
-------------------------------------------------
FUND MANAGER
Strong Capital Management, Inc.
-------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To seek capital growth by investing primarily in
equity securities that the Manager believes
have above-average growth prospects.
-------------------------------------------------
NET ASSETS AS OF 6/30/98
$9,070,871
-------------------------------------------------
NUMBER OF HOLDINGS
104
-------------------------------------------------
PORTFOLIO TURNOVER
145.86%
-------------------------------------------------
-------------------------------------------------
IN THIS SECTION
-------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
-------------------------------------------------
RONALD C. OGNAR, CFA
o Joined Strong in 1993
o 30 years of investment experience
o B.S. from University of Illinois
o Chartered Financial Anyalst
41
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
[PIE CHART]
% of Portfolio++
Common Stock-95.79%
Cash-4.21%
[END PIE CHART]
The year began with negative sentiment as the markets became pessimistic
about the effects of the Asian slow down on the domestic economy. When the
results of fourth quarter earnings reports generally met expectations, buyers
returned to the market and propelled the major indexes to new highs. Worries
about profit margin squeezes abounded in an environment of tight labor markets
and increased price competition from Asian imports. However, these concerns were
offset by strong cash flows into equities and the absence of inflation at both
the producer and consumer levels.
The rally lasted until mid-April, when investors began to worry about Fed
tightening and the Japanese recession. Investors shunned small and mid-cap
stocks and fled to the relative safety and liquidity of the blue-chip "mega-cap"
stocks. Cash flows from foreign investors and retirement plans were also
directed toward these large stocks. Thus, the gap between the performance of the
largest-cap stocks and the rest of the market, which began in 1995, widened
further.
The S&P 500 ended the June quarter in record territory, gaining 3.3% in the
second quarter and 17.7% for the first half. By contrast, the S&P Mid Cap index
lost 2.1% in the second quarter, resulting in a first-half return of 8.6%, and
the Russell 2000 Index of small-cap stocks lost -4.7% in the second quarter,
returning 4.9% for the first half.
Returns during the period were also remarkable in their wide disparity
across the value-growth spectrum. Despite the already stretched valuations in
the market, money flows strongly favored growth stocks for their ability to
sustain earnings momentum in the face of a slowing economy. Higher market
<TABLE>
<CAPTION>
- ------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO++
- ------------------------------------
<S> <C>
Kohl's Corp. 3.22%
Microsoft Corp. 2.55%
General Electric Co. 2.24%
Lowe's Companies, Inc. 2.17%
Cisco Systems, Inc. 2.17%
Pfizer, Inc. 2.09%
McKesson Corp. 1.83%
Lucent Technologies, Inc. 1.78%
Wal-Mart Stores, Inc. 1.75%
HBO & Co. 1.73%
- ------------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO++
- ------------------------------------
<S> <C>
Retail Stores 18.96%
Computer Software - Mini
& Micro 9.83%
Financial Services 8.03%
Pharmaceutical 6.88%
Telecommunications
Equipment 5.70%
Telecommunications 4.48%
Computer Network 4.23%
Healthcare 3.63%
Human Resources 3.53%
Advertising 2.05j%
</TABLE>
++Represents market value of
investments plus cash.
42
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
Growth Portfolio and Russell Mid-Cap Growth Index
Comparison of Change in Value of $10,000 Investment.
[PLOT POINTS OF LINE CHART GRAPHIC]
<TABLE>
<CAPTION>
Date Growth Portfolio Russell Mid-Cap Growth Index
<S> <C> <C>
12/31/97 $10,000 $10,000
1/31/98 9,858 9,820
2/27/98 10,638 10,743
3/31/98 11,160 11,193
4/30/98 11,060 11,345
5/29/98 10,716 10,879
6/30/98 11,691 11,187
</TABLE>
[END PLOT POINTS OF LINE CHART GRAPHIC]
volatility was also evident, with swings of 1% or more on two-thirds of the
trading days.
The Growth Portfolio performed well, both in the second quarter and for the
first half. In the first quarter, the Portfolio benefited from an emphasis on
retailers and media stocks. These groups tend to out perform in the current
strong consumer environment. Emphasis on retailers, software, and
networking-related technology stocks contributed to the strong results in the
second quarter. Retailers benefited from strong consumer spending as shoppers
felt an increase in real wages. Data networking companies continue to advance as
a result of the Internet explosion and the consolidation of the telecom hardware
and networking industries.
We increased positions in some of the large-cap holding such as GE and
Intel. We believe technology is driving productivity enhancement and have
increased holdings of software and telecom stocks.
Over the long-term, we believe the bull market is sustainable, although
earnings growth is decelerating. We continue to monitor the Asian situation for
negative impact on our holdings. The drive for expanded computer capabilities
and the internet will likely cause technology and telecom companies to dominate
over the next few years. As the baby boom generation nears retirement, we expect
holdings in healthcare to outperform. We remain committed to finding the best
long-term growth companies of all sizes with capable management, selling at
reasonable valuations.
- ----------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------
<TABLE>
<CAPTION>
RUSSELL
MID-CAP
GROWTH
GROWTH INDEX
<S> <C> <C>
YTD 16.91% 11.87%
INCEPTION 16.91% 11.87%
</TABLE>
Commencement of operations January 2, 1998. Past performance is not predictive
of future performance.
This graph compares an initial $10,000 investment made in the Growth Portfolio
(the "Portfolio") at its inception with a similar investment in the Russell
Mid-Cap Growth Index. For the purposes of this graph and the accompanying table,
the average annual total return for the Portfolio reflects all recurring
expenses and includes the reinvestment of all dividends and distributions.
Shares of the Portfolio are offered only through the variable products of
Jefferson Pilot Financial and its affiliates. Total returns do not reflect any
separate account expenses imposed on the policies which may include a premium
tax charge, account fees, cost of insurance, mortality expenses and surrender
charges, as applicable.
The Russell Mid-Cap Growth Index is an unmanaged index and includes the
reinvestment of all dividends, but does not reflect the payment of transaction
costs, advisory fees or expenses that are associated with an investment in the
Portfolio.
43
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
June 30, 1998
<S> <C>
Net asset value, beginning of period $ 10.00
Income From Investment Operations
Net investment income (loss) (0.02)
Net gains and losses on securities
and foreign currency (both
realized and unrealized) 1.71
-----------
Total from investment operations 1.69
Less Distributions to Shareholders
Dividends from net investment income
Dividends in excess of net investment income
Distributions from capital gains
Distributions in excess of capital gains
Returns of capital
-----------
Total distributions 0.00
Net asset value, end of period $ 11.69
===========
Total Return (A) 16.91%
Ratios to Average Net Assets:
Expenses 1.07%
Net investment income (0.39%)
Portfolio Turnover Rate 145.86%
Average Commission Rate Paid $ 0.0669
Net Assets, At End of Period $ 9,070,871
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and principal
values will fluctuate and shares, when redeemed, may be worth more or less than
the original cost. Total return figures for periods of less than one year have
not been annualized.
44
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--98.71%
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Advertising-2.92%
Lamar Advertising Co.+ 2,400 $ 86,100
Outdoor Systems, Inc.+ 4,500 126,000
Snyder Communications, Inc.+ 1,200 52,800
---------
264,900
---------
Airlines-1.10%
Midwest Express Holdings, Inc.+ 2,750 99,516
---------
Banking-1.37%
Northern Trust Corp. 900 68,625
U.S. Bancorp 1,300 55,900
---------
124,525
---------
Beverages-1.13%
Coca-Cola Co. 1,200 102,600
---------
Biotechnology-1.05%
Monsanto Co. 1,700 94,988
---------
Broadcasting-2.54%
Chancellor Media Corp.+ 1,000 49,656
Clear Channel Communications, Inc.+ 1,100 120,038
Heftel Broadcasting Corp.+ 700 31,325
Jacor Communications, Inc.+ 500 29,500
---------
230,519
---------
Building Construction-0.40%
Integrated Electrical Services, Inc.+ 1,800 36,225
---------
Commercial Services-1.85%
Boron Lepore & Assoc.+ 1,500 57,000
International Telecomm Data System+ 1,700 49,300
Lason, Inc.+ 400 21,800
Quintiles Transnational Corp.+ 800 39,350
---------
167,450
---------
Computer Equipment & Services-1.27%
Dell Computer Corp.+ 1,000 92,812
Sykes Enterprises, Inc.+ 1,100 22,069
---------
114,881
---------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Computer Information & Technology-2.49%
Fiserv, Inc.+ 1,500 $ 63,703
HBO & Co. 4,600 162,150
---------
225,853
---------
Computer Network-4.36%
Ascend Communications, Inc.+ 2,500 123,906
Cisco Systems, Inc.+ 2,200 202,538
Fore Systems, Inc.+ 2,600 68,900
---------
395,344
---------
Computer Software - Mini & Micro-10.13%
America Online, Inc. 1,400 148,400
BMC Software, Inc.+ 900 46,744
Cambridge Technology Partners, Inc.+ 1,600 87,400
Citrix Systems, Inc.+ 1,000 68,375
Compuware Corp.+ 1,500 76,688
Information Management Resources, Inc.+ 900 30,431
J.D. Edwards & Co.+ 800 34,350
Microsoft Corp.+ 2,200 238,425
Network Associates, Inc.+ 750 35,906
PeopleSoft, Inc.+ 1,200 56,400
Visio Corp.+ 2,000 95,500
---------
918,619
---------
Cosmetics & Personal Care-0.25%
Gillette Co. 400 22,675
---------
Educational Services-1.53%
CBT Group, PLC, ADR+ 2,600 139,100
---------
Electronics-2.15%
Tyco International, Ltd. 1,200 75,600
Uniphase Corp.+ 1,900 119,284
---------
194,884
---------
Entertainment & Leisure-1.14%
Carnival Corp. 2,600 103,025
---------
</TABLE>
+Non-income producing security.
See notes to financial statements.
45
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Financial Services-8.27%
American Express Co. 1,100 $ 125,400
Associates First Capital Corp. 600 46,125
Fannie Mae 900 54,675
Freddie Mac 1,500 70,594
Household International, Inc. 1,900 94,525
MGIC Investment Corp. 600 34,237
Metris Cos., Inc. 700 44,625
Morgan Stanley, Dean Witter, & Co. 1,300 118,787
Paychex, Inc. 2,950 120,028
Washington Mutual, Inc. 950 41,266
---------
750,262
---------
Food Products-0.29%
American Italian Pasta Co., Class A+ 700 26,075
---------
Food Service & Restaurants-0.47%
Outback Steakhouse, Inc.+ 1,100 42,900
---------
Healthcare-3.74%
Cardinal Health, Inc. 1,100 103,125
Envoy Corp.+ 500 23,687
McKesson Corp. 2,100 170,625
Total Renal Care Holdings, Inc.+ 1,200 41,400
---------
338,837
---------
Household Products-1.00%
Procter & Gamble Co. 1,000 91,063
---------
Human Resources-3.64%
AccuStaff, Inc.+ 1,500 46,875
PAREXEL International Corp.+ 500 18,188
Robert Half International, Inc.+ 2,900 162,037
Romac International, Inc.+ 3,400 103,275
---------
330,375
---------
Insurance-2.22%
American International Group, Inc. 300 43,800
Travelers Group, Inc. 2,600 157,625
---------
201,425
---------
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
Manufacturing-2.31%
General Electric Co. 2,300 $ 209,300
---------
Medical Products-1.58%
Guidant Corp. 400 28,525
Medtronic, Inc. 1,800 114,750
---------
143,275
---------
Medical Supplies-0.33%
Sybron International Corp.+ 1,200 30,300
---------
Multimedia-1.29%
Time Warner, Inc. 1,100 93,981
Viacom, Inc., Class B+ 400 23,300
---------
117,281
---------
Oil & Gas Services-0.77%
Camco International, Inc. 900 70,087
---------
Pharmaceutical-7.09%
Bristol-Myers Squibb Co. 900 103,444
Elan Corp., PLC, ADR+ 1,600 102,900
Pfizer, Inc. 1,800 195,637
Schering-Plough Corp. 1,500 137,437
Warner-Lambert Co. 1,500 104,063
---------
643,481
---------
Retail Stores-19.54%
Best Buy Co., Inc.+ 1,100 39,737
CVS Corp. 2,200 85,663
Dayton Hudson Corp. 1,800 87,300
Dollar Tree Stores, Inc.+ 3,825 155,391
Fred Meyer, Inc.+ 900 38,250
Gap, Inc. 1,000 61,625
Home Depot, Inc. 1,000 83,062
Kohl's Corp.+ 5,800 300,875
Lowe's Companies, Inc. 5,000 202,813
Michaels Stores, Inc.+ 700 24,697
Office Depot, Inc.+ 1,700 53,656
Safeway, Inc.+ 3,100 126,131
Stage Stores, Inc.+ 1,100 49,775
</TABLE>
+Non-income producing security.
See notes to financial statements.
46
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------
<S> <C> <C>
Retail Stores-Continued
Staples, Inc.+ 3,000 $ 86,812
Starbucks Corp.+ 2,200 117,563
Wal-Mart Stores, Inc. 2,700 164,025
Walgreen Co. 2,300 95,019
----------
1,772,394
----------
Telecommunications-4.62%
Intermedia Communications, Inc.+ 500 20,969
Liberty Media Group+ 2,400 93,150
MCI Communications Corp. 500 29,062
Saville Systems Ireland, PLC, ADR+ 2,000 100,250
Sprint Corp. 700 49,350
WorldCom, Inc.+ 2,600 125,938
----------
418,719
----------
Telecommunications Equipment-5.87%
Advanced Fibre Communications, Inc.+ 2,100 84,131
CIENA Corp.+ 800 55,700
Lucent Technologies, Inc. 2,000 166,375
RELTEC Corp.+ 1,000 45,000
Tellabs, Inc.+ 1,800 128,925
Vitesse Semiconductor Corp.+ 1,700 52,488
----------
532,619
----------
TOTAL COMMON STOCK
(Cost $7,475,919) 8,953,497
----------
TOTAL INVESTMENTS
(Cost $7,475,919) 98.71% 8,953,497
Other assets, less liabilities 1.29 117,374
------ ----------
TOTAL NET ASSETS 100.00% $9,070,871
====== ==========
</TABLE>
+Non-income producing security.
See notes to financial statements.
47
<PAGE>
[This page intentionally left blank]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
DOMESTIC GROWTH STOCK PORTFOLIO
"As we move into the second half of the fiscal
year, we continue to be attracted by the valuations
of medium and small-sized companies and are
optimistic about their long-term prospects."
--Robert W. Benson, Portfolio Manager--
-------------------------------------------------
INCEPTION DATE
April 18, 1986
-------------------------------------------------
FUND MANAGER
Pioneering Management Corporation
-------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To achieve reasonable income and growth of capital
by investing primarily in a diversified portfolio of
equity securities issued by companies organized in
the U.S. and considered by the sub-investment
manager to be undervalued in light of the company's
earning power and growth potential.
-------------------------------------------------
NET ASSETS AS OF 6/30/98
$94,336,783
-------------------------------------------------
NUMBER OF HOLDINGS
57
-------------------------------------------------
PORTFOLIO TURNOVER
14.50%
-------------------------------------------------
-------------------------------------------------
IN THIS SECTION
-------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
-------------------------------------------------
ROBERT W. BENSON, CFA
Senior Vice President
o Joined Pioneer in 1974
o Manages Pioneer Winthrop Real Estate Shares
o M.B.A. from the Wharton School of Business,
The University of Pennsylvania
o B.S. from Tufts University
49
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
DOMESTIC GROWTH STOCK PORTFOLIO
[PIE CHART]
% of Portfolio ++
Common Stock-94.80%
Cash-5.20%
[END PIE CHART]
The past six months were challenging, and at times, frustrating. Although
the Domestic Growth Stock Portfolio posted a positive 2.33% total return, it did
not keep pace with the Standard & Poor's 500 Index, which returned 17.71%.
Smaller stocks, as represented by the Russell 2000 Index posted a 4.93% total
return for the period.
Today's stock market is reminiscent of the "nifty 50" of the 1970s when a
select group of large-capitalization stocks accounted for a disproportionate
share of the stock market's gain. The current phenomenon is most likely related
to investors' concerns about the continuing financial troubles in Asia. In times
of crisis, investors tend to gravitate toward the most familiar liquid
investments they can find - in this case U.S. "blue chip" companies. Conversely,
investors have shown little interest, if any, in the small and mid-sized value
stocks that make up the majority of the Portfolio. Even so, because one can
never predict when market conditions may change, we kept the Portfolio fully
invested during the period, closing with 5.2% in short-term cash equivalents.
Value Oriented Portfolio
One of our favorite sectors was insurance, which performed well over the
period. We were attracted to the relatively low valuations and strong earnings
we see in many of these companies. One company we added was Reliastar Financial,
a provider of life insurance and annuities. It is now among the Portfolio's top
holdings. The Portfolio also benefited from the consolidation trend among the
group. We sold American Bankers Insurance Group when its price appreciated on
the announcement that it was going to be
<TABLE>
<CAPTION>
- ------------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO++
- ------------------------------------------
<S> <C>
Schering-Plough Corp. 3.89%
AMRESCO, Inc. 3.09%
DST Systems, Inc. 2.97%
First Brands Corp. 2.72%
AccuStaff, Inc. 2.65%
ReliaStar Financial Corp. 2.55%
Executive Risk, Inc. 2.35%
United Auto Group, Inc. 2.32%
Crossmann Communities, Inc. 2.26%
National Golf Properties, Inc. 2.23%
- -----------------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO++
- -----------------------------------------
Real Estate 15.40%
Insurance 9.98%
Building & Construction 7.13%
Human Resources 5.90%
Computer Equipment & Services 5.61%
Financial Services 5.26%
Retail Stores 4.42%
Pharmaceutical 3.89%
Computer Information Systems 2.97%
Manufacturing 2.83%
</TABLE>
++Represents market value of
investments plus cash.
50
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
DOMESTIC GROWTH STOCK PORTFOLIO
Domestic Growth Stock Portfolio and the S&P 500 Index
Comparison of Change in Value of $10,000 Investment.
[PLOT POINTS OF LINE CHART GRAPHIC]
<TABLE>
<CAPTION>
Date Domestic Growth S&P 500 Index
<S> <C> <C>
04/18/86 $10,000 $10,000
06/30/86 10,372 10,712
09/30/86 9,863 9,965
12/31/86 10,565 10,522
03/31/87 11,914 12,768
06/30/87 12,813 13,408
09/30/87 13,698 14,294
12/31/87 10,395 11,071
03/31/88 12,119 11,701
06/30/88 13,176 12,474
09/30/88 13,151 12,514
12/31/88 13,129 12,896
03/31/89 14,183 13,809
06/30/89 15,054 15,025
09/30/89 16,226 16,632
12/31/89 15,669 16,971
03/31/90 15,299 16,459
06/30/90 15,505 17,489
09/30/90 12,071 15,097
12/31/90 12,759 16,443
03/31/91 15,336 18,823
06/30/91 15,663 18,782
09/30/91 16,103 19,785
12/31/91 16,999 21,431
03/31/92 18,699 20,893
06/30/92 17,992 21,291
09/30/92 18,527 21,961
12/31/92 21,506 23,062
03/31/93 22,691 24,066
06/30/93 22,524 24,180
09/30/93 23,910 24,802
12/31/93 24,925 25,377
03/31/94 24,982 24,422
06/30/94 24,337 24,527
09/30/94 26,469 25,727
12/31/94 26,834 25,721
03/31/95 28,241 28,217
06/30/95 29,736 30,902
09/30/95 33,164 33,351
12/31/95 34,809 35,352
03/31/96 37,702 37,447
06/30/96 39,076 39,346
09/30/96 38,570 40,788
12/31/96 40,537 44,408
03/31/97 38,833 44,602
06/30/97 44,729 52,383
09/30/97 52,097 56,302
12/31/97 50,105 57,913
03/31/98 53,395 65,974
06/30/98 51,272 68,146
</TABLE>
[END PLOT POINTS OF LINE CHART GRAPHIC]
acquired by Cendant.
Other stocks also turned in a good half-year, including Schering-Plough,
the pharmaceutical company and DST Systems, a computer software and information
processing company. Both were up over 30% for the period.
Overall, real estate-related holdings were a drag on performance. In
particular, Starwood Hotels & Resorts and Host Marriott, whose stocks slipped
15.7% and 9.2%, respectively, were hurt by concern over "paired share" REITs.
Like most of the real estate stocks in the Portfolio, their drop in price was
not due to disappointing earnings results. Rather, a perception that the
sector's robust growth may have hit its peak prompted casual investors to sell.
We still believe in this group's long-term outlook, especially at its current
attractive valuation levels, and will continue to look for these types of value
opportunities, believing that our analysis will pay-off in a recovery.
Looking Ahead
Although we are disappointed by the Portfolio's recent performance versus
the Standard & Poor's 500, we are not discouraged. The Fundamentals of the
companies are solid, and for the most part, they are meeting their earnings
expectations. With many large-capitalization stocks trading at record-high
valuation levels, you should expect periods of increasing volatility. As we move
into the second half of the fiscal year, we continue to be attracted by the
valuations of medium and small-sized companies and are optimistic about their
long-term prospects.
<TABLE>
<CAPTION>
- ----------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------
DOMESTIC S&P 500
GROWTH INDEX
<S> <C> <C>
YTD 2.33% 17.71%
1 YEAR 14.63% 30.17%
5 YEAR 17.88% 23.04%
10 YEAR 14.55% 18.53%
INCEPTION 14.33% 17.02%
</TABLE>
Commencement of operations April 18, 1986. Past performance is not predictive of
future performance.
This graph compares an initial $10,000 investment made in the Domestic Growth
Stock Portfolio (the "Portfolio") at its inception with a similar investment in
the S&P 500 Index. For the purposes of this graph and the accompanying table,
the average annual total return for the Portfolio reflects all recurring
expenses and includes the reinvestment of all dividends and distributions.
Shares of the Portfolio are offered only through the variable products of
Jefferson Pilot Financial and its affiliates. Total returns do not reflect any
separate account expenses imposed on the policies which may include a premium
tax charge, account fees, cost of insurance, mortality expenses and surrender
charges, as applicable.
The S&P 500 Index is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction costs, advisory fees
or expenses that are associated with an investment in the Portfolio.
51
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
DOMESTIC GROWTH STOCK PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited)
Six Months Year Ended Year Ended Year Ended Year Ended Year Ended
Ended December December December December December
June 30, 1998 31, 1997 31, 1996 31, 1995 31, 1994 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.43 $ 18.19 $ 17.87 $ 15.94 $ 16.14 $ 15.16
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.09 0.06 0.15 0.09 0.12
Net gains and losses on securities
(both realized and unrealized) 0.19 4.17 2.85 4.48 1.12 2.29
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.49 4.26 2.91 4.63 1.21 2.41
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.09) (0.06) (0.15) (0.09) (0.12)
Dividends in excess of net
investment income
Distributions from capital gains (0.22) (1.93) (2.53) (2.55) (1.32) (1.31)
Distributions in excess of
capital gains
Returns of capital
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.22) (2.02) (2.59) (2.70) (1.41) (1.43)
Net asset value, end of period $ 20.70 $ 20.43 $ 18.19 $ 17.87 $ 15.94 $ 16.14
========== ========== ========== ========== ========== ==========
Total Return (A) 2.33% 23.60% 16.46% 29.72% 7.66% 15.89%
Ratios to Average Net Assets:
Expenses 0.82% 0.83% 0.85% 0.87% 0.89% 0.97%
Net investment income 0.77% 0.47% 0.31% 0.95% 0.63% 0.76%
Portfolio Turnover Rate 14.50% 52.92% 49.75% 64.17% 46.65% 49.47%
Average Commission Rate Paid $ 0.0556 $ 0.0554 $ 0.0555
Net Assets, At End of Period $94,336,783 $81,505,107 $62,166,366 $48,517,886 $31,458,666 $25,072,289
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and principal
values will fluctuate and shares, when redeemed, may be worth more or less than
the original cost. Total return figures for periods of less than one year have
not been annualized.
52
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
DOMESTIC GROWTH STOCK PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK-94.72%
Number Market Value
Company of Shares (Note B)
-----------------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE MANUFACTURING-0.82%
Wabash National Corp. 30,000 $ 772,500
---------
BANKING-2.00%
PNC Bank Corp. 35,000 1,883,437
---------
BIOTECHNOLOGY-2.07%
Monsanto Co. 35,000 1,955,625
---------
BUILDING CONSTRUCTION-7.12%
American Residential Services, Inc.+ 114,000 1,282,500
Cavalier Homes, Inc. 151,500 1,960,031
Crossmann Communities, Inc.+ 70,000 2,126,250
Southern Energy Homes, Inc.+ 137,500 1,349,219
---------
6,718,000
---------
COLLECTIBLES-1.36%
Action Performance Companies, Inc.+ 40,000 1,287,500
---------
COMMERCIAL SERVICES-0.38%
First Aviation Services, Inc.+ 70,000 358,750
---------
COMPUTER EQUIPMENT & SERVICES-5.60%
Arrow Electronics, Inc.+ 30,000 652,500
First Data Corp. 50,000 1,665,625
Hewlett-Packard Co. 26,014 1,557,588
In Focus Systems, Inc.+ 200,000 1,412,500
---------
5,288,213
---------
COMPUTER INFORMATION SYSTEMS-2.97%
DST Systems, Inc.+ 50,000 2,800,000
---------
ELECTRONICS-0.58%
Vishay Intertechnology, Inc. 30,567 548,295
---------
ELECTRONICS - SEMICONDUCTORS-1.25%
Applied Materials, Inc.+ 40,000 1,180,000
---------
- --------------------------------------------------------------------------------
COMMON STOCK-CONTINUED
Number Market Value
Company of Shares (Note B)
-----------------------------------------------------------------------
ENTERTAINMENT & LEISURE-2.18%
Party City Corp.+ 70,000 $2,056,250
---------
FINANCIAL SERVICES-5.25%
AMRESCO, Inc.+ 100,000 2,912,500
Aames Financial Corp. 96,000 1,320,000
Freedom Securities Corp.+ 40,000 725,000
---------
4,957,500
---------
FOOD PRODUCTS-1.31%
Chiquita Brands International 50,000 703,125
WLR Foods, Inc. 80,000 530,000
---------
1,233,125
---------
FOOD SERVICE & RESTAURANTS-0.46%
Luby's Cafeterias, Inc. 25,000 439,063
---------
FOREST PRODUCTS & PAPER-1.24%
Chesapeake Corp. 30,000 1,168,125
---------
HOUSEHOLD PRODUCTS-2.72%
First Brands Corp. 100,000 2,562,500
---------
HUMAN RESOURCES-5.90%
AccuStaff, Inc.+ 80,000 2,500,000
Kelly Services, Inc. 30,000 1,061,250
Personnel Group of America, Inc.+ 100,000 2,000,000
---------
5,561,250
---------
INSURANCE-9.97%
American General Corp. 21,962 1,563,420
Citizens Corp. 50,000 1,565,625
Executive Risk, Inc. 30,000 2,212,500
ReliaStar Financial Corp. 50,000 2,400,000
UNUM Corp. 30,000 1,665,000
---------
9,406,545
---------
LODGING-2.07%
Host Marriott Corp.+ 110,000 1,959,375
---------
</TABLE>
+Non-income producing security.
See notes to financial statements.
53
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
DOMESTIC GROWTH STOCK PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------------
<S> <C> <C>
Manufacturing-2.83%
Flowserve Corp. 60,000 $ 1,477,500
NN Ball & Roller, Inc. 100,000 1,193,750
------------
2,671,250
------------
Mining & Metals - Precious-1.69%
Getchell Gold Corp.+ 106,300 1,594,500
------------
Oil & Gas - Integrated-1.95%
EVI Weatherford, Inc.+ 49,504 1,837,836
------------
Oil & Gas Producers-1.49%
Union Pacific Resources
Group, Inc. 80,000 1,405,000
------------
Oil & Gas Services-1.20%
ENSCO International, Inc. 65,000 1,129,375
------------
Pharmaceutical-3.89%
Schering-Plough Corp. 40,000 3,665,000
------------
Publishing & Printing-1.80%
John H. Harland Co. 100,000 1,693,750
------------
Railroad-1.90%
Norfolk Southern Corp. 60,000 1,788,750
------------
Real Estate-15.39%
Alexandria Real Estate Equities,
Inc. 30,000 898,125
Catellus Development Corp.+ 100,000 1,768,750
CenterPoint Properties Corp. 32,000 1,058,000
Equity Office Properties Trust 70,315 1,995,188
Gables Residential Trust 50,000 1,356,250
Glenborough Realty Trust, Inc. 67,500 1,780,313
Kilroy Realty Corp. 65,000 1,625,000
National Golf Properties, Inc. 70,000 2,104,375
Starwood Lodging Trust 40,000 1,932,500
-----------
14,518,501
-----------
- ---------------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- --------------------------------------------------------------------------------
Retail Stores-4.42%
Consolidated Stores Corp.+ 54,687 $ 1,982,404
United Auto Group, Inc.+ 100,000 2,187,500
-----------
4,169,904
-----------
Telecommunications Equipment-0.44%
DSP Communications, Inc.+ 30,000 412,500
-----------
Textiles & Apparel-2.47%
Nike, Inc., Class B 30,000 1,460,625
Ridgeview, Inc.+ 145,000 870,000
-----------
2,330,625
-----------
TOTAL COMMON STOCK
(Cost $74,227,685) 89,353,044
-----------
TOTAL INVESTMENTS
(Cost $74,227,685) 94.72% 89,353,044
Other assets, less liabilities 5.28 4,983,739
------ -----------
TOTAL NET ASSETS 100.00% $94,336,783
====== ===========
</TABLE>
+Non-income producing security.
See notes to financial statements.
54
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
"We believe the stock market will continue
to be characterized by generally lofty equity
valuations and considerable volatility."
--Brian S. Posner, Portfolio Manager--
-------------------------------------------------
INCEPTION DATE
May 1, 1992
-------------------------------------------------
FUND MANAGER
Warburg Pincus Asset Management, Inc.
-------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To seek long-term growth of capital by investing
primarily in a wide range of equity issues that may
offer capital appreciation and, secondarily, to seek a
reasonable level of current income.
-------------------------------------------------
NET ASSETS AS OF 6/30/98
$63,387,409
-------------------------------------------------
NUMBER OF HOLDINGS
105
-------------------------------------------------
PORTFOLIO TURNOVER
29.81%
-------------------------------------------------
-------------------------------------------------
IN THIS SECTION
-------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
-------------------------------------------------
- --------------------------------------------------------------------------------
BRIAN S. POSNER
Managing Director
o Joined Warburg Pincus in 1997
o 12 years industry experience
o Previously with Fidelity Investments since 1987
o Managed Fidelity Equity Income II from 4/92 to 12/96
o M.B.A. from University of Chicago
o B.A. from Northwestern University
- --------------------------------------------------------------------------------
55
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
[PIE CHART]
% of Portfolio ++
Common Stock-88.74%
Cash-7.69%
Preferred Stock-2.05%
Corporate Bonds-1.52%
[END PIE CHART]
For the six months ended June 30, 1998, the Jefferson Pilot Variable Fund
Growth & Income Portfolio (the "Portfolio") gained 13.21% vs. a gain of 17.71%
for the S&P 500 Index. The Portfolio's return since Warburg Pincus assumed
management on 9/1/97 was 18.28%.
The objective of the Portfolio is long-term growth of capital and income
and a reasonable current return. The Portfolio pursues its objective by
investing primarily in equity securities and seeks to achieve its income
objective by investing in dividend-paying equity securities.
The U.S. stock market as a whole had a strong showing during the first half
of 1998. Asia-related earnings uncertainties notwithstanding, investor sentiment
toward equities remained favorable through the period, supported by a continued
healthy economy and subdued inflation. The Portfolio benefited from this
positive sentiment, and from good performances from its aerospace, computer,
consumer-durable, financial, telecommunications and retail holdings in
particular. Stocks that hampered the Portfolio's performance included its energy
holdings, reflecting a continued decline in energy prices.
We made few noteworthy changes to the Portfolio during the first half of
1998. We remained broadly diversified by industry, finding little incentive,
from a relative-valuation perspective, to heavily overweight specific areas,
given continued narrow stock valuations across and within sectors. It should be
stressed, however, that sector-management strategies aside, we continued to
employ a strictly bottom-up stock selection process, one based on a security's
risk-adjusted total-return prospects over the longer-term.
The Portfolio's noteworthy areas of concentration included the
financial-services industry, a weighting that was increased over the course of
the period holding a mix of insurance, asset-management and mortgage-service
<TABLE>
<CAPTION>
- ------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO++
- ------------------------------------
<S> <C>
The PMI Group, Inc. 2.87%
British Petroleum Co., ADR 2.71%
Citicorp 2.30%
Federated Department
Stores, Inc. 2.17%
Chrysler Corp. 2.06%
Merck & Co., Inc. 2.04%
Compaq Computer Corp. 2.01%
International Business
Machines Corp. 1.96%
Raytheon Co., Class A 1.91%
Polaroid Corp. 1.76%
- ------------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO++
- ------------------------------------
Financial Services 7.42%
Retails Stores 7.30%
Telecommunications 6.66%
Aerospace & Defense 6.15%
Oil & Gas - Integrated 5.49%
Healthcare 5.21%
Insurance 4.93%
Automotive Manufacturing 3.59%
Chemicals 3.32%
Manufacturing 3.13%
</TABLE>
++Represents market value of
investments plus cash.
56
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
Growth and Income Portfolio and the S&P 500 Index
Comparison of Change in Value of $10,000 Investment.
[PLOT POINTS OF LINE CHART GRAPHIC]
<TABLE>
<CAPTION>
Date Growth & Income Portfolio S&P 500 Index
<S> <C> <C>
05/01/92 $10,000 $10,000
06/30/92 9,696 9,958
09/30/92 9,824 10,272
12/31/92 10,820 10,787
03/31/93 11,276 11,256
06/30/93 11,300 11,310
09/30/93 11,895 11,596
12/31/93 12,436 11,867
03/31/94 12,070 11,420
06/30/94 11,996 11,470
09/30/94 12,248 12,031
12/31/94 11,910 12,028
03/31/95 12,871 13,195
06/30/95 14,352 14,451
09/30/95 15,496 15,596
12/31/95 15,908 16,532
03/31/96 16,489 17,512
06/30/96 17,365 18,399
09/30/96 17,639 19,074
12/31/96 19,548 20,767
03/31/97 19,874 20,860
06/30/97 22,999 24,494
09/30/97 25,028 26,326
12/31/97 25,200 27,079
03/31/98 28,197 30,849
06/30/98 28,530 31,864
</TABLE>
[END PLOT POINTS OF LINE CHART GRAPHIC]
companies. Elsewhere in the financial industry, we maintained a limited exposure
to banking stocks, since we viewed most as expensive. That said, we found
several issues that we deemed to be attractively priced, including First Chicago
NBD, which we purchased in the wake of its announced merger with Banc One Corp.
In our view, the synergies created by the merger were significant and we
expected them to support the stock's long-term performance.
The Portfolio also had a sizable exposure in the consumer area during the
period. This included the consumer-durables sector where one of most significant
positions throughout the period was Chrysler. The Portfolio also remained
modestly overweighted in the retail sector, where our significant moves here
included the elimination of Wal-Mart and establishing positions in Sears,
Roebuck and Consolidated Stores, a retailer of brand-name products targeting
cost-conscious consumers.
Elsewhere of note, the Portfolio's significant industry weightings included
the technology area - primarily in the computer sector - where we saw some of
the best risk-adjusted growth prospects and the telecommunications arena,
generally holding stocks of regional Bell operating companies, where we found
what deemed to be good values in the long-distance areas as well.
Looking ahead to the next several months and beyond, we believe the stock
market will continue to be characterized by generally lofty equity valuations
and considerable volatility. Set within this environment, we will continue to
place a premium on risk-management for the Portfolio as a whole. As a result,
individual stock selection remains critical, and we will continue to hold only
those stocks we believe will have the best risk-adjusted total return potential.
<TABLE>
<CAPTION>
- ---------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------------
GROWTH & S&P 500
INCOME INDEX
<S> <C> <C>
YTD 13.21% 17.71%
1 YEAR 24.05% 30.17%
5 YEAR 20.35% 23.04%
INCEPTION 18.53% 20.67%
</TABLE>
Commencement of operations May 1, 1992. Past performance is not predictive of
future performance.
This graph compares an initial $10,000 investment made in the Growth and Income
Portfolio (the "Portfolio") at its inception with a similar investment in the
S&P 500 Index. For the purposes of this graph and the accompanying table, the
average annual total return for the Portfolio reflects all recurring expenses
and includes the reinvestment of all dividends and distributions.
Shares of the Portfolio are offered only through the variable products of
Jefferson Pilot Financial and its affiliates. Total returns do not reflect any
separate account expenses imposed on the policies which may include a premium
tax charge, account fees, cost of insurance, mortality expenses and surrender
charges, as applicable.
The S&P 500 Index is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction costs, advisory fees
or expenses that are associated with an investment in the Portfolio.
57
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited)
Six Months Year Ended Year Ended Year Ended Year Ended Year ended
Ended December December December December December
June 30, 1998 31, 1997 31, 1996 31, 1995 31, 1994 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.11 $ 16.91 $ 14.41 $ 11.22 $ 12.35 $ 11.10
Income From Investment Operations
Net investment income 0.09 0.15 0.18 0.15 0.13 0.12
Net gains and losses on securities
(both realized and unrealized) 2.17 4.67 3.12 3.62 (0.65) 1.53
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 2.26 4.82 3.30 3.77 (0.52) 1.65
Less Distributions to Shareholders
Dividends from net investment income (0.15) (0.18) (0.15) (0.13) (0.12)
Dividends in excess of net investment income
Distributions from capital gains (4.21) (0.62) (0.29) (0.48) (0.28)
Distributions in excess of capital gains (0.26) (0.14)
Returns of capital
----------- ----------- ----------- ----------- ----------- -----------
Total distributions 0.00 (4.62) (0.80) (0.58) (0.61) (0.40)
Net asset value, end of period $ 19.37 $ 17.11 $ 16.91 $ 14.41 $ 11.22 $ 12.35
=========== =========== =========== =========== =========== ===========
Total Return (A) 13.21% 28.92% 22.88% 33.58% (4.24%) 14.94%
Ratios to Average Net Assets:
Expenses 0.84% 0.85% 0.88% 0.92% 1.10% 1.35%
Net investment income 1.02% 1.03% 1.39% 1.50% 1.52% 1.38%
Portfolio Turnover Rate 29.81% 129.53% 35.69% 32.30% 38.17% 77.68%
Average Commission Rate Paid $ 0.0599 $ 0.0604 $ 0.0700
Net Assets, At End of Period $63,387,409 $39,678,076 $23,711,696 $13,126,023 $5,610,472 $2,831,442
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and principal
values will fluctuate and shares, when redeemed, may be worth more or less than
the original cost. Total return figures for periods of less than one year have
not been annualized.
58
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
COMMON STOCK--89.87%
Number Market Value
Company of Shares (Note B)
- ------------------------------------------------------------------------
<S> <C> <C>
Advertising-0.64%
WPP Group PLC, ADR 6,000 $ 403,500
----------
Aerospace & Defense-6.23%
AlliedSignal, Inc. 11,800 523,625
Gulfstream Aerospace Corp.+ 17,600 818,400
Litton Industries, Inc.+ 5,950 351,050
Lockheed Martin Corp. 5,350 566,431
Raytheon Co., Class A 21,300 1,227,413
United Technologies Corp. 5,000 462,500
----------
3,949,419
----------
Appliances-1.60%
Maytag Corp. 5,300 261,687
Premark International, Inc. 23,400 754,650
----------
1,016,337
----------
Automotive Manufacturing-3.63%
Chrysler Corp. 23,400 1,319,175
Ford Motor Co. 16,700 985,300
----------
2,304,475
----------
Automotive Parts & Equipment-1.06%
TRW, Inc. 12,300 671,887
----------
Banking-3.02%
Citicorp 9,900 1,477,575
The Bank of New York Co., Inc. 7,200 436,950
----------
1,914,525
----------
Beverages-1.66%
Anheuser-Busch Companies, Inc. 22,250 1,049,921
----------
Building Materials-1.47%
USG Corp. 17,200 930,950
----------
Chemicals-2.63%
Ferro Corp. 12,050 305,016
Rhone-Poulene, SA, ADR 12,750 716,390
Union Carbide Corp. 12,050 643,168
----------
1,664,574
----------
- --------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- --------------------------------------------------------------------
Computer Equipment & Services-2.04%
Compaq Computer Corp. 45,500 $1,291,062
----------
Computer Information Systems-1.98%
International Business
Machines Corp. 10,950 1,257,196
----------
Computer Software - Mini & Micro-0.89%
Sun Microsystems, Inc.+ 13,000 564,688
----------
Electrical Equipment-0.67%
Emerson Electric Co. 7,050 425,644
----------
Electronics-1.11%
Philips Electronics N.V., NY Shares 4,800 408,000
Teradyne, Inc.+ 11,100 296,925
----------
704,925
----------
Electronics - Semiconductors-1.08%
Dallas Semiconductor Corp. 6,800 210,800
Motorola, Inc. 6,500 341,656
National Semiconductor Corp.+ 10,200 134,513
----------
686,969
----------
Environmental Controls-1.35%
USA Waste Services, Inc.+ 17,300 854,187
----------
Financial Services-7.52%
American Express Co. 2,800 319,200
Associates First Capital Corp. 3,957 304,194
Deluxe Corp. 7,500 268,594
Fannie Mae 11,300 686,475
First Chicago NBD Corp. 6,300 558,338
Freddie Mac 8,600 404,738
H&R Block, Inc. 6,000 252,750
Lehman Brothers Holdings, Inc. 6,050 469,253
MBIA, Inc. 12,000 898,500
The FINOVA Group, Inc. 10,650 603,056
----------
4,765,098
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
59
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------
<S> <C> <C>
Food Products-2.54%
Corn Products International, Inc.+ 11,450 $ 387,869
Keebler Foods, Co.+ 17,200 473,000
Ralston-Ralston Purina Group 3,200 373,800
Sara Lee Corp. 6,750 377,578
----------
1,612,247
----------
Healthcare-5.28%
Foundation Health Systems, Inc.+ 18,300 482,662
Tenet Healthcare Corp.+ 13,400 418,750
Trigon Healthcare, Inc.+ 22,250 805,172
United Healthcare Corp. 11,700 742,950
Wellpoint Health Networks, Inc.+ 12,100 895,400
----------
3,344,934
----------
Household Products-1.30%
Rubbermaid, Inc. 16,700 554,231
The Unilever Group 3,450 272,335
----------
826,566
----------
Insurance-4.99%
Provident Companies, Inc. 12,000 414,000
Terra Nova Bermuda Holdings, Ltd. 9,100 285,513
The PMI Group, Inc. 25,150 1,845,381
Travelers Group, Inc. 4,500 272,813
Travelers Property Casualty Corp. 8,100 347,287
----------
3,164,994
----------
Machinery-0.88%
Caterpillar, Inc. 5,200 274,950
Harnischfeger Industries, Inc. 9,900 280,294
----------
555,244
----------
Manufacturing-3.17%
American Standard Companies,
Inc.+ 11,600 518,375
Harsco Corp. 16,100 737,581
ITT Industries, Inc. 20,100 751,238
----------
2,007,194
----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------
Medical Products-1.04%
Baxter International, Inc. 12,250 $ 659,203
-----------
Mining & Metals - Ferrous & Nonferrous-0.87%
Alumax, Inc. 4,218 195,610
Aluminum Company of America 5,450 359,359
-----------
554,969
-----------
Office Equipment-0.51%
Pitney Bowes, Inc. 6,700 322,438
-----------
Oil & Gas - Distribution & Marketing-0.90%
Burlington Resources, Inc. 13,200 568,425
-----------
Oil & Gas - Integrated-5.56%
British Petroleum Co., ADR 19,738 1,741,878
Occidental Petroleum Corp. 21,100 569,700
R & B Falcon Corp.+ 11,918 269,645
Total, SA, ADR 14,400 941,400
-----------
3,522,623
-----------
Oil & Gas Producers-0.56%
Noble Drilling Corp.+ 14,850 357,328
-----------
Pharmaceutical-2.07%
Merck & Co., Inc. 9,800 1,310,750
-----------
Photo Equipment-1.78%
Polaroid Corp. 31,800 1,130,888
-----------
Production Equipment-1.54%
UNOVA, Inc.+ 45,500 978,250
-----------
Publishing & Printing-0.51%
R.R. Donnelley & Sons Co. 7,000 320,250
-----------
Railroad-0.53%
Burlington Northern Santa Fe 3,400 333,838
-----------
Real Estate-0.23%
Equity Residential Properties Trust 3,100 147,056
-----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
60
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998--CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------------
<S> <C> <C>
Retail Stores-7.00%
Consolidated Stores Corp.+ 17,100 $ 619,875
Federated Department Stores, Inc.+ 25,900 1,393,744
May Department Stores Co. 10,100 661,550
Neiman Marcus Group, Inc.+ 8,300 360,531
Payless ShoeSource, Inc.+ 5,249 386,786
Proffitt's, Inc.+ 7,225 291,709
Rite Aid Corp. 1,200 45,075
Sears, Roebuck & Co. 11,100 677,794
-----------
4,437,064
-----------
Telecommunications-6.01%
AT&T Corp. 15,900 908,288
Alltel Corp. 5,600 260,400
Ameritech Corp. 13,200 592,350
Bell Atlantic Corp. 20,618 940,696
BellSouth Corp. 8,800 590,700
SBC Communications, Inc. 12,900 516,000
-----------
3,808,434
-----------
Telecommunications Equipment-0.49%
Loral Space & Communications+ 11,000 310,750
-----------
Tobacco-0.99%
Philip Morris Companies, Inc. 15,900 626,063
-----------
Transportation-0.52%
CSX Corp. 7,200 327,600
-----------
Utilities - Electric & Gas-2.02%
Allegheny Energy, Inc. 11,000 331,375
American Electric Power Co., Inc. 8,200 372,075
DQE, Inc. 400 14,400
Illinova Corp. 8,000 240,000
Wisconsin Energy Corp. 10,700 325,013
-----------
1,282,863
-----------
TOTAL COMMON STOCK
(Cost $50,564,060) 56,965,328
-----------
- ----------------------------------------------------------------------------
PREFERRED STOCK--2.07%
Number Market Value
Company of Shares (Note B)
- ----------------------------------------------------------------------------
Chemicals-0.73%
Ingersoll Rand Co., 6.340% 23,200 $ 466,900
-----------
Real Estate-0.60%
Equity Residential Properties, 7.250% 15,800 383,150
-----------
Telecommunications-0.74%
Airtouch Communications, Inc., 6.000% 9,700 468,025
-----------
TOTAL PREFERRED STOCK
(Cost $1,220,546) 1,318,075
-----------
- ----------------------------------------------------------------------------
CORPORATE BONDS--1.54%
Principal Market Value
Company Value (Note B)
- ----------------------------------------------------------------------------
Electronics - Semiconductors-0.45%
Nat'l Semiconductor, 6.500%,
Conv., due 10/01/02 $ 310,000 $ 284,425
-----------
Oil & Gas - Distribution & Marketing-0.70%
Diamond Offshore, 3.750%,
Conv., due 02/15/07 380,000 441,750
-----------
Retail Stores-0.39%
Rite Aid Corp., 144A, 5.250%,
due 09/15/00 200,000 248,000
-----------
TOTAL CORPORATE BONDS
(Cost $992,426) 974,175
-----------
TOTAL INVESTMENTS
(Cost $52,777,032) 93.48% 59,257,578
Other assets, less liabilities 6.52 4,129,831
------ -----------
TOTAL NET ASSETS 100.00% $63,387,409
====== ===========
</TABLE>
+Non-income producing security.
See notes to financial statements.
61
<PAGE>
[This page intentionally left blank]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
"Within asset classes, J.P. Morgan will continue
to use its extensive fundamental research to
identify securities which are undervalued
relative to their longer-term earnings prospects."
--Michael Kelly and Harriet Huber, Portfolio Managers--
-------------------------------------
INCEPTION DATE
May 1, 1992
-------------------------------------
FUND MANAGER
J.P. Morgan Investment Management, Inc.
-------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To seek reasonable current income and long-term
capital growth, consistent with conservation of
capital, by investing primarily in common
stocks and fixed income securities.
-------------------------------------
NET ASSETS AS OF 6/30/98
$32,091,134
-------------------------------------
NUMBER OF HOLDINGS
125
-------------------------------------
PORTFOLIO TURNOVER
136.00%
-------------------------------------
-------------------------------------
IN THIS SECTION
-------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
-------------------------------------
- --------------------------------------------------------------------------------
MICHAEL KELLY
Vice President
o Joined J.P. Morgan in 1985
o Portfolio Manager in the Equity and Balanced Accounts Group
o M.B.A. from the Wharton School of Business, University
of Pennsylvania
o B.A. from Gettysburg College
-------------------------------------
HARRIET HUBER
Vice President
o Joined J.P. Morgan in 1989
o 19 years industry experience
- --------------------------------------------------------------------------------
63
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
[PIE CHART]
% of Portfolio ++
Common Stock-63.32%
Government & Agency Obligations-17.50%
Corporate Bonds-14.94%
Cash-4.24%
[END PIE CHART]
<TABLE>
<CAPTION>
- ---------------------------------------------------
PERCENT OF
TOP TEN HOLDINGS PORTFOLIO++
- ---------------------------------------------------
<S> <C>
GNMA's 8.54%
U.S. Treasury Notes & Bonds 4.96%
Proctor & Gamble Co. 2.21%
Monsanto Co. 2.00%
SBC Communications, Inc. 1.86%
Fannie Mae 1.76%
Starwood Lodging Trust 1.67%
Waste Management, Inc. 1.63%
UnionPacific Corp. 1.62%
Bristol-Myers Squibb Co. 1.61%
- ---------------------------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO++
- ----------------------------------------------------
<S> <C>
Financial Services 14.56%
Telecommunications 6.81%
Pharmaceutical 4.96%
Banking 3.76%
Retail Stores 3.41%
Beverages 3.03%
Oil & Gas - Marketing & Distribution 2.88%
Utilities - Electric & Gas 2.86%
Insurance 2.82%
Household Products 2.21%
</TABLE>
++Represents market value of
investments plus cash.
U.S. stock markets rose to new highs during the first three months of 1998
amid weaker bond prices and a stabilizing dollar. Though the ultimate impact of
Asian woes on the U.S. economy remained uncertain, the market dismissed fear of
a worst case scenario. The S&P 500 finished the first quarter up 13.9% at 1101,
fueling the urgency of debate over the sustainability of current valuation
levels. Overall, U.S. equity markets continued to be dominated by the "Nifty
Fifty", the 50 largest capitalization stocks. The "Nifty Fifty" rose 14.3%
during the first quarter, while the other 450 stocks in the S&P 500 Index
appreciated 13.5%.
Within the equities portion of the Balanced Portfolio, favorable stock
selection in the drug and telephone sectors enhanced Portfolio performance. In
particular, drug stock Warner Lambert gained 37.6% during the first quarter as
sales of its cholesterol-reducing drug, Lipitor, surpassed the $1 billion mark.
Alza, the leading drug delivery company, rose 40.9% during the period. In the
telephone section, WorldCom rose 42.4%, far outpacing a telephone sector return
of 17.3%. The technology and retail sectors detracted from the Portfolio's
overall performance. Not holding Microsoft (+38.5%) and Lucent Technologies
(+60.2%) contributed to the Portfolio's underperformance relative to the S&P
500. Toys R Us, which fell 4.2% in a group that was up 21.9% in aggregate, hurt
the Portfolio's performance in the retail sector. Within fixed income, the
Portfolio's overweight positions in corporate bonds, investment grade corporates
and mortgage-backed securities added to the Portfolio's performance. The
residential mortgage sector outperformed despite the increase in mortgage
refinancing that was sparked by low interest rates.
Despite a second wave of bad news from Asia and an apparent slowdown in
corporate profit growth, the S&P 500 Index rose 3.3% in the second quarter,
bringing its year-to-date gain to 17.7%. Trading was choppy as investors weighed
signs of strength in the domestic economy and related concerns that the Federal
Reserve might raise interest rates against a depending crisis in Asia. The
market gained momentum during the latter half of June as pre-announced earnings
disappointments proved less
64
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
widespread than had previously been anticipated. The largest 50 stocks in the
S&P 500, once again, drove performance for the market overall. The "Nifty Fifty"
gained 7.1% during the second quarter, while the other 450 stocks lost 0.4%. For
the first half of 1998, the "Nifty Fifty" group is up 22.3%, while the other 450
stocks are up only 13.3%.
Within equities, favorable stock selection in the services and telephone
sectors enhanced performance in the second quarter. In the services industry,
Comcast (+18.5%), the fourth largest cable company, benefited from the
acquisition of TCI by AT&T. Among telephone stocks, an overweight position in
MCI Communications (+17.5%) enhanced the Portfolio's performance as shares rose
on news of an agreement having been reached with EU regulators which would allow
the company's merger with WorldCom to proceed. On the negative side, stock
selection among retail stocks contributed to the Portfolio's overall
underperformance of the S&P 500. Toys R Us (-22.2%) continued to languish and
Federated Department Stores (+4.0%), while up, was weak against sector gains of
12.2%.
The Balanced Portfolio continued to underwrite its equity holdings as J.P.
Morgan viewed stocks as overvalued relative to bonds. Within fixed income, the
Portfolio reduced allocation to corporate bonds and asset backed securities on
an opportunistic basis with proceeds allocated to U.S. Treasuries and U.S.
dollar hedged international bonds. Below investment grade exposures across all
sectors were also reduced.
Going forward, J.P. Morgan believes that growth in U.S. corporate profits
seems unlikely to rebound to 1997 levels in view of softened global demand, a
stronger dollar, domestic capacity growth, and increasing wage pressures. Thus,
J.P. Morgan's forecast calls for the recent slowdown in operating earnings
growth to persist during the next several quarters. Within asset classes, J.P.
Morgan will continue to use its extensive fundamental research to identify
securities which are undervalued relative to their longer-term earnings
prospects.
Balanced Portfolio, S&P 500 Index and Balanced Benchmark Index
Comparison of Change in Value of $10,000 Investment.
[PLOT POINTS FOR GRAPHIC]
<TABLE>
<CAPTION>
55% S&P 500/
35% Lehman Aggregate/
Date Balanced Portfolio 10% 90 Day T-Bills S&P 500
<S> <C> <C> <C>
05/01/92 $10,000 $10,000 $10,000
06/30/92 10,081 10,070 9,958
09/30/92 10,467 10,403 10,272
12/31/92 10,847 10,712 10,787
03/31/93 11,379 11,129 11,256
06/30/93 11,526 11,273 11,310
09/30/93 11,856 11,545 11,598
12/31/93 11,852 11,702 11,867
03/31/94 11,654 11,351 11,420
06/30/94 11,550 11,347 11,470
09/30/94 11,698 11,691 12,031
12/31/94 11,694 11,725 12,028
03/31/95 12,186 12,573 13,195
06/30/95 12,848 13,516 14,451
09/30/95 13,481 14,220 15,596
12/31/95 14,308 14,917 16,532
03/31/96 14,377 15,286 17,512
06/30/96 14,850 15,717 18,399
09/30/96 15,163 16,114 19,074
12/31/96 15,819 17,056 20,767
03/31/97 15,663 17,298 20,860
06/30/97 17,218 19,176 24,494
09/30/97 18,243 20,172 26,326
12/31/97 18,402 20,736 27,079
03/31/98 19,856 22,605 30,849
06/30/98 20,162 23,226 31,864
</TABLE>
[END PLOT POINTS]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------
S&P 500 BALANCED
BALANCED INDEX BENCHMARK
<S> <C> <C> <C>
YTD 9.56% 17.71% 11.83%
1 YEAR 17.10% 30.17% 20.83%
5 YEAR 11.83% 23.04% 15.58%
INCEPTION 12.04% 20.67% 14.64%
</TABLE>
Commencement of operations May 1, 1992. Past performance is not predictive of
future performance.
This graph compares an initial $10,000 investment made in the Balanced Portfolio
(the "Portfolio") at its inception with a similar investment in the S&P 500
Index and the 55% S&P 500/35% Lehman Aggregate/10% 90 Day T-Bill Index. For the
purposes of this graph and the accompanying table, the average annual total
return for the Portfolio reflects all recurring expenses and includes the
reinvestment of all dividends and distributions.
Shares of the Portfolio are offered only through the variable products of
Jefferson Pilot Financial and its affiliates. Total returns do not reflect any
separate account expenses imposed on the policies which may include a premium
tax charge, account fees, cost of insurance, mortality expenses and surrender
charges, as applicable.
The S&P 500 Index and the 55% S&P 500/35% Lehman Aggregate/10% 90 Day T-Bill
Index are unmanaged indexes and include the reinvestment of all dividends, but
do not reflect the payment of transaction costs, advisory fees or expenses that
are associated with an investment in the Portfolio.
65
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited)
Six Months Year Ended Year Ended Year Ended Year Ended Year nded
Ended December December December December December
June 30, 1998 31, 1997 31, 1996 31, 1995 31, 1994 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.75 $ 12.07 $ 11.91 $ 10.62 $ 11.22 $ 10.77
Income From Investment Operations
Net investment income 0.13 0.30 0.26 0.37 0.32 0.25
Net gains and losses on securities
(both realized and unrealized) 0.99 1.60 0.99 1.99 (0.47) 0.74
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 1.12 1.90 1.25 2.36 (0.15) 0.99
Less Distributions to Shareholders
Dividends from net investment income (0.30) (0.26) (0.37) (0.32) (0.25)
Dividends in excess of net
investment income
Distributions from capital gains (1.64) (0.83) (0.70) (0.13) (0.25)
Distributions in excess of capital gains (0.28) (0.04)
Returns of capital
----------- ----------- ----------- ----------- ----------- -----------
Total distributions 0.00 (2.22) (1.09) (1.07) (0.45) (0.54)
Net asset value, end of period $ 12.87 $ 11.75 $ 12.07 $ 11.91 $ 10.62 $ 11.22
=========== =========== =========== =========== =========== ===========
Total Return (A) 9.56% 16.33% 10.56% 22.35% (1.33%) 9.27%
Ratios to Average Net Assets:
Expenses 0.91% 0.97% 0.97% 0.99% 1.01% 1.07%
Net investment income 2.30% 2.60% 2.20% 3.20% 3.34% 2.79%
Portfolio Turnover Rate 136.00% 254.04% 222.35% 164.70% 103.68% 65.49%
Average Commission Rate Paid $ 0.0423 $ 0.0351 $ 0.0601
Net Assets, At End of Period $32,091,134 $22,637,577 $18,256,430 $14,532,268 $14,764,853 $11,703,898
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and principal
values will fluctuate and shares, when redeemed, may be worth more or less than
the original cost. Total return figures for periods of less than one year have
not been annualized.
66
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
COMMON STOCK--62.97%
Number Market Value
Company of Shares (Note B)
- -------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense-1.98%
AlliedSignal, Inc. 9,500 $ 421,562
Coltec Industries+ 10,700 212,663
-----------
634,225
-----------
Automotive Parts & Equipment-0.82%
Goodyear Tire & Rubber Co. 4,100 264,194
-----------
Banking-3.13%
Astoria Financial Corp. 1,600 85,600
Citicorp 900 134,325
First Union Corp. 7,478 435,573
Keycorp 700 24,938
Long Island Bancorp, Inc. 1,300 78,975
Norwest Corp. 6,400 239,200
-----------
998,611
-----------
Beverages-3.03%
Anheuser Busch Companies, Inc. 10,400 490,750
PepsiCo, Inc. 9,400 387,163
Seagram Company, Ltd. 2,300 94,156
-----------
972,069
-----------
Biotechnology-2.00%
Monsanto Co. 11,500 642,562
-----------
Chemicals-1.67%
E.I. du Pont de Nemours & Co. 3,000 223,875
Rohm & Haas Co. 3,000 311,812
-----------
535,687
-----------
Commercial Services-0.99%
Service Corp. International 7,400 317,275
-----------
Computer Equipment & Services-2.07%
EMC Corp./Mass+ 9,100 407,794
First Data Corp. 4,500 149,906
Quantum Corp.+ 5,100 105,825
-----------
663,525
-----------
- -------------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- -------------------------------------------------------------------------
Computer Information Systems-0.75%
International Business Machines Corp. 2,100 $ 241,106
----------
Computer Network-1.53%
Cisco Systems, Inc.+ 5,350 492,534
----------
Computer Software - Mainframe-0.24%
Oracle Corp.+ 3,200 78,600
----------
Computer Software - Mini & Micro-2.17%
Autodesk, Inc. 1,400 54,075
Computer Associates International Inc. 4,200 233,362
Sun Microsystems, Inc.+ 9,400 408,313
----------
695,750
----------
Electronics - Semiconductors-0.53%
Texas Instruments, Inc. 2,900 169,106
----------
Entertainment & Leisure-0.64%
Mirage Resorts, Inc.+ 9,700 206,731
----------
Environmental Controls-1.63%
Waste Management, Inc. 14,900 521,500
----------
Financial Services-3.59%
Associates First Capital Corp. 2,600 199,875
Fannie Mae 9,300 564,975
MBIA, Inc. 3,800 284,525
Washington Mutual, Inc. 2,400 104,250
----------
1,153,625
----------
Food Products-0.58%
Ralston-Ralston Purina Group 1,600 186,900
----------
Healthcare-0.00%
Coram Healthcare Corp.+ 20 39
----------
Household Products-2.21%
Procter & Gamble Co. 7,800 710,287
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
67
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- -----------------------------------------------------------------------
<S> <C> <C>
Insurance-2.82%
Allstate Corp. 1,000 $ 91,562
Marsh & McLennan Cos., Inc. 6,300 380,756
Travelers Group, Inc. 7,100 430,438
-----------
902,756
-----------
Manufacturing-1.70%
Cooper Industries, Inc. 5,300 291,169
International Game Technology 10,500 254,625
-----------
545,794
-----------
Medical Products-2.19%
Humana, Inc.+ 16,100 502,119
US Surgical Corp. 4,400 200,750
-----------
702,869
-----------
Mining & Metals - Ferrous & Nonferrous-0.01%
Allegheny Teledyne, Inc. 200 4,575
-----------
Oil & Gas - Distribution & Marketing-1.99%
Tosco Corp. 15,900 467,062
Valero Energy Corp. 5,100 169,575
-----------
636,637
-----------
Oil & Gas - Integrated-1.30%
Atlantic Richfield Co. 2,300 179,687
British Petroleum Co., ADR 2,700 238,275
-----------
417,962
-----------
Oil & Gas Services-0.81%
Input/Output, Inc.+ 9,600 171,000
Schlumberger,Ltd. 1,300 88,806
-----------
259,806
-----------
Packaging & Containers-0.59%
Stone Container Corp.+ 12,200 190,625
-----------
- -----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- -----------------------------------------------------------------------
Pharmaceutical-4.96%
Alza Corp.+ 5,900 $ 255,175
American Home Products Corp. 2,700 139,725
Bristol-Myers Squibb Co. 4,500 517,219
Eli Lilly & Co. 2,700 178,369
Pfizer, Inc. 2,500 271,719
Warner Lambert Co. 3,300 228,938
---------
1,591,145
---------
Real Estate-1.97%
Simon Debartolo Group, Inc. 3,000 97,500
Starwood Lodging Trust 11,101 536,317
---------
633,817
---------
Retail Stores-3.41%
Circuit City Stores-Circuit City Group 4,000 187,500
CompUSA, Inc.+ 6,100 110,181
Federated Department Stores, Inc.+ 3,300 177,581
Kmart Corp.+ 18,900 363,825
Sears, Roebuck & Co. 2,600 158,763
TJX Cos., Inc. 4,000 96,500
---------
1,094,350
---------
Telecommunications-6.15%
Cincinnati Bell,Inc. 900 25,763
Comcast Corp., Special Class A 8,600 349,107
Frontier Corp. 4,700 148,050
GTE Corp. 5,800 322,625
MCI Communications Corp. 4,000 232,500
SBC Communications, Inc. 14,900 596,000
Tele-Communications/TCI
Ventures Group 608 12,198
WorldCom, Inc.+ 5,900 285,781
---------
1,972,024
---------
Textiles & Apparel-0.29%
Fruit of the Loom, Inc., Class A+ 2,800 92,925
---------
Tobacco-1.24%
Philip Morris Companies, Inc. 10,100 397,688
---------
</TABLE>
+Non-income producing security.
See notes to financial statements.
68
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market Value
Company of Shares (Note B)
- ------------------------------------------------------------------------
<S> <C> <C>
Toys-0.51%
Mattel, Inc. 3,900 $ 165,019
-----------
Transportation-1.62%
Union Pacific Corp. 11,800 520,675
-----------
Utilities - Electric & Gas-1.85%
New England Electric System 5,500 237,875
Northern States Power Co. 5,000 143,125
PP&L Resources,Inc. 4,000 90,750
Wisconsin Energy Corp. 4,000 121,500
-----------
593,250
-----------
TOTAL COMMON STOCK
(Cost $19,743,960) 20,206,243
-----------
<CAPTION>
- ------------------------------------------------------------------------
CORPORATE BONDS--14.86%
Principal Market Value
Company Value (Note B)
- ------------------------------------------------------------------------
Banking-0.63%
Canadian Imperial Bank,
6.200%, due 08/01/00 $ 200,000 $ 201,683
-----------
Financial Services-10.89%
Chase Credit Card Master
Trust 97-2A, 6.300%,
due 04/15/03 200,000 202,385
Citibank Credit Card Master
Trust I, 5.800%, due 02/07/05 200,000 199,463
Deutsche Mortgage and Asset
Receiving Corp., 6.220%,
due 06/15/31 158,002 158,961
First Union/Lehman Brothers
Comm. Mortgage, 6.650%,
due 06/18/08 100,000 102,507
First USA Credit Card Master
Trust, Series 97-6, 6.420%,
due 03/17/05 160,000 163,782
- ------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- ------------------------------------------------------------------------
Fleetwood Credit Corp., Grantor
Trust, 6.900%, due 03/15/12 $ 31,001 $ 31,363
Ford Motor Credit, 6.625%,
due 6/30/03 260,000 265,898
GMAC, Comm. Mortgage,
6.869%, due 08/15/07 150,000 156,896
GMAC, Med. Term Note,
6.750%, due 11/04/04 260,000 267,933
Green Tree Financial Corp.,
6.270%, due 09/15/12 200,000 201,611
Household Finance Co.,
6.125%, due 02/27/03 100,000 99,125
Lehman Brothers Comm. Conduit
Mortgage, 6.330%, due 11/18/04 195,408 197,466
Merrill Lynch Mortgage Investors,
Inc., 6.220%, due 02/15/30 157,757 158,804
Morgan Stanley Capital I,
6.190%, due 01/15/07 147,582 148,294
Morgan Stanley Capital I,
6.340%, due 07/15/30 200,000 201,648
Morgan Stanley Capital I,
6.590%, due 10/03/30 147,246 150,818
Mortgage Capital Funding,
6.417%, due 06/18/07 163,371 165,704
Nomura, Series 98-D6 A1A,
6.280%, due 03/15/30 157,504 159,158
OCWEN, 98-R1 A1, 4.000%,
due 10/25/30 147,410 145,774
Sears Roebuck Acceptance Corp.,
6.930%, due 11/15/02 100,000 103,057
Sears Roebuck Acceptance Corp.,
6.540%, due 02/20/03 100,000 101,631
The Money Store, Home Equity
Trust, 6.485%, due 12/15/38 110,000 111,886
---------
3,494,164
---------
Food Products-0.19%
Philip Morris, FRN, 6.150%,
due 03/15/10 60,000 60,119
---------
</TABLE>
+Non-income producing security.
See notes to financial statements.
69
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- -------------------------------------------------------------------------
<S> <C> <C>
Oil & Gas - Distribution & Marketing-0.89%
Express Pipeline, 6.470%,
due 12/31/11 $ 75,000 $ 75,371
Trans-Canada Pipelines,
Med. Term Note, 7.060%,
due 10/14/25 200,000 210,482
-----------
285,853
-----------
Oil & Gas - Integrated-0.65%
National Fuel Gas, Med. Term
Note, 6.214%, due 08/12/27 200,000 207,757
-----------
Telecommunications-0.62%
Pacific Bell, 6.125%,
due 02/15/08 200,000 200,248
-----------
Utilities - Electric & Gas-0.99%
Consolidated Edison, Inc.,
6.250%, due 02/01/08 100,000 100,481
Southern Company Capital Trust I,
8.190%, due 02/01/37 200,000 218,120
-----------
318,601
-----------
TOTAL CORPORATE BONDS
(Cost $4,714,487) 4,768,425
-----------
- -------------------------------------------------------------------------
GOVERNMENT & AGENCY OBLIGATIONS--17.40%
Principal Market Value
Company Value (Note B)
- -------------------------------------------------------------------------
Foreign Government-3.27%
French T-Bill, 4.750%,
due 03/12/02 $2,435,000 $ 408,651
German Unity Fund, 8.500%,
due 02/20/01 655,000 401,528
Province of Quebec, 7.500%,
due 07/15/23 215,000 239,559
-----------
1,049,738
-----------
U.S. Government Agency Obligations-9.17%
Federal National Mortgage
Association, Dwarf, 7.000%,
due 05/01/12 97,130 99,017
- -------------------------------------------------------------------------
GOVERNMENT & AGENCY OBLIGATIONS--CONTINUED
Principal Market Value
Company Value (Note B)
- -------------------------------------------------------------------------
Federal National Mortgage
Association, Pool #406578,
6.500%, due 12/01/27 $ 119,364 $ 119,070
Government National Mortgage
Association, Pool #351336,
6.500%, due 12/15/23 160,623 161,116
Government National Mortgage
Association, Pool #422323,
6.500%, due 04/15/26 940,817 940,450
Government National Mortgage
Association, Pool #425832,
7.000%, due 01/15/28 583,928 594,013
Government National Mortgage
Association, Pool #447990,
7.500%, due 06/15/28 149,738 154,055
Government National Mortgage
Association, Pool #455491,
7.500%, due 09/15/27 49,054 50,475
Government National Mortgage
Association, Pool #461210,
7.500%, due 01/15/28 526,962 542,154
Government National Mortgage
Association, Pool #780035,
6.500%, due 07/15/24 282,472 283,338
-----------
2,943,688
-----------
U.S. Treasury Notes and Bonds-4.96%
U.S. Treasury Bond, 6.750%
due 08/15/26 765,000 876,165
U.S. Treasury Note, 5.875%,
due 11/15/99 265,000 266,242
U.S. Treasury Note, 5.500%,
due 02/15/08 450,000 450,000
-----------
1,592,407
-----------
TOTAL GOVERNMENT & AGENCY OBLIGATIONS
(Cost $5,511,318) 5,585,833
-----------
TOTAL INVESTMENTS
(Cost $29,969,765) 95.23% 30,560,501
Other assets, less liabilities 4.77 1,530,633
------ -----------
TOTAL NET ASSETS 100.00% $32,091,134
====== ===========
</TABLE>
See notes to financial statements.
70
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
"The high yield market is experiencing an
unprecedented period of growth and strong performance."
--Bernard Scozzafava, Portfolio Manager--
----------------------------------
INCEPTION DATE
January 1, 1998
----------------------------------
FUND MANAGER
Massachusetts Financial Services Company
----------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To achieve a high level of current income by
investing primarily in corporate obligations
with emphasis on higher-yielding, higher risk,
lower-rated or unrated securities.
----------------------------------
NET ASSETS AS OF 6/30/98
$7,298,981
----------------------------------
NUMBER OF HOLDINGS
148
----------------------------------
PORTFOLIO TURNOVER
61.23%
----------------------------------
PORTFOLIO QUALITY
BBB-1.29%
BB-6.52%
B-63.14%
CCC-9.33%
Not Rated-16.58%
Cash-3.14%
----------------------------------
DOLLAR WEIGHTED AVERAGE MATURITY
8.21 years
----------------------------------
----------------------------------
IN THIS SECTION
----------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
----------------------------------
- --------------------------------------------------------------------------------
BERNARD SCOZZAFAVA
Vice President
o Joined MFS in 1989
o M.S. from Massachusetts Institute of Technology
o Graduate of Hamilton College
- --------------------------------------------------------------------------------
71
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
[PIE CHART]
% of Portfolio ++
Corporate Bonds-94.32%
Cash-3.14%
Preferred Stock-2.22%
Governement & Agency Obligations-0.32%
[END PIE CHART]
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
- -------------------------------------
PERCENT OF
RATING PORTFOLIO ++
- -------------------------------------
<S> <C>
BBB 1.29%
BB 6.52%
B 63.14%
CCC 9.33%
Not Rated 16.58%
Cash 3.14%
</TABLE>
DOLLAR WEIGHTED
AVERAGE MATURITY
8.21 years
<TABLE>
<CAPTION>
- -------------------------------------
PERCENT OF
TOP TEN HOLDINGS PORTFOLIO ++
- -------------------------------------
<S> <C>
Jitney-Jungle Stores,
12.000%, 03/01/06 1.57%
Charter Comm. S. East,
11.250%, 03/15/06 1.46%
Hayes Wheels Int'l,
11.000%, 07/15/06 1.44%
Boyd Gaming Corp.,
9.500%, 07/15/07 1.36%
Specialty Foods Corp.,
10.250%, 08/15/01 1.35%
Gaylord Container, Series B,
9.875%, 02/15/08 1.35%
Oxford Automotive, Inc.,
10.125%, 06/15/07 1.29%
United International Hldgs.,
10.750%, 02/15/08 1.29%
Kaiser Aluminum & Chemical,
10.875%, 10/15/06 1.27%
Newcor, Inc., 9.875%,
03/01/08 1.26%
</TABLE>
++Represents market value of
investments plus cash.
For the six months ended June 30, 1998, the High Yield Bond Portfolio
posted a total return of 3.87%, compared to a return of 4.50% for the Lehman
Brothers High Yield Bond Index. The high yield market is experiencing an
unprecedented period of growth and strong performance. Year to date, a record
$97 billion of high yield bonds were issued by 422 companies, and the market
surpassed $570 billion in bonds outstanding. In 1998, high yield bonds continue
to be the best performing domestic fixed-income asset class. Healthy economic
growth contributed to the market's performance as companies continued to post
improved operating results.
The spread between the yield on high yield bonds and Treasury notes has
widened recently as some global equity investors have sought the security of the
US Treasury market following renewed concerns about economic problems in Asia.
As a result of this flight to quality, the yields on Treasury notes fell
slightly to 5.4% while the yield on the Salomon Brothers High-Yield Index, an
unmanaged index on noninvestment-grade U.S. corporate debt, remained at 9.2%.
Given the low level of interest rates, we believe the high yield market remains
attractively valued with the spread at 3.8%, its widest level in 2-1/2 years.
72
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
High Yield Bond Portfolio and Lehman Bros. High Yield Bond Index
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
Date High Yield Bond Lehman Bros. High Yield
<S> <C> <C>
12/31/97 $10,000 $10,000
1/30/98 10,195 10,180
2/27/98 10,160 10,240
3/31/98 10,289 10,336
4/30/98 10,310 10,377
5/29/98 10,346 10,413
6/30/98 10,387 10,450
</TABLE>
While the economic slowdown in Asia will likely adversely affect the US
economy, we do not think the impact will be material on the credit quality of
the high yield companies in our portfolios. Our portfolios are primarily
invested in the bonds of domestic companies, and last fall, when the crisis in
South East Asia was developing, we reduced our holdings in companies with high
export exposure to that area.
We believe that many high yield telecommunication issues continue to
represent good value given the growth opportunities of these companies and the
higher yields available in this sector. The telecom sector is our largest
industry overweighting and has been one of the best performing sectors in the
high yield market over the last twelve months. The Portfolio is also
overweighted in the aerospace sector where equipment suppliers, such as BE
Aerospace, are benefiting from strong orders for new commercial aircraft. Our
portfolios are underweighted in the energy section, but we will look for
investment opportunities in this area as yields have risen in response to oil
prices sinking to their lowest levels in 12 years.
<TABLE>
<CAPTION>
- --------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------
LEHMAN.
BROS. HIGH
HIGH YIELD YIELD BOND
BOND INDEX
<S> <C> <C>
YTD 3.87% 4.50%
INCEPTION 3.87% 4.50%
</TABLE>
Commencement of operations May 1, 1992. Past performance is not predictive of
future performance.
This graph compares an initial $10,000 investment made in the High Yield Bond
Portfolio (the "Portfolio") at its inception with a similar investment in the
Lehman Bros. High Yield Bond Index. For the purposes of this graph and the
accompanying table, the average annual total return for the Portfolio reflects
all recurring expenses and includes the reinvestment of all dividends and
distributions.
Shares of the Portfolio are offered only through the variable products of
Jefferson Pilot Financial and its affiliates. Total returns do not reflect any
separate account expenses imposed on the policies which may include a premium
tax charge, account fees, cost of insurance, mortality expenses and surrender
charges, as applicable.
The Lehman Bros. High Yield Bond Index is an unmanaged index and includes the
reinvestment of all dividends, but does not reflect the payment of transaction
costs, advisory fees or expenses that are associated with an investment in the
Portfolio.
73
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
June 30, 1998
<S> <C>
Net asset value, beginning of period $ 10.00
Income From Investment Operations
Net investment income 0.26
Net gains and losses on securities
(both realized and unrealized) 0.13
----------
Total from investment operations 0.39
Less Distributions to Shareholders
Dividends from net investment income
Dividends in excess of net investment
income
Distributions from capital gains
Distributions in excess of capital gains
Returns of capital
----------
Total distributions 0.00
Net asset value, end of period $ 10.39
==========
Total Return (A) 3.87%
Ratios to Average Net Assets:
Expenses 1.28%
Net investment income 7.30%
Portfolio Turnover Rate 61.23%
Average Commission Rate Paid (B) N/A
Net Assets, At End of Period $7,298,981
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and principal
values will fluctuate and shares, when redeemed, may be worth more or less than
the original cost. Total return figures for periods of less than one year have
not been annualized.
(B) During the period, the Portfolio held less than 10% of the value of its
average net assets in equity securities. Therefore, the Average Commission Rate
Paid has not been calculated.
74
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CORPORATE BONDS--93.17%
Principal Market Value
Company Value (Note B)
- -------------------------------------------------------------------------------
<S> <C> <C>
Advertising-0.72%
Outdoor Systems, Inc., 8.875%,
due 06/15/07 $ 50,000 $ 52,375
-----------
Aerospace & Defense-3.79%
B.E. Aerospace, Inc., Series B,
9.875%, due 02/01/06 50,000 53,500
CHC Helicopter Corp., 11.500%,
due 07/15/02 50,000 53,750
K & F Industries, Series B, 9.250%,
due 10/15/07 75,000 75,937
Satelites Mexicanos, SA, Series 144A,
10.125%, due 11/01/04+ 70,000 68,338
Stellex Industries, Inc., Series B,
9.500%, due 11/01/07 25,000 24,875
-----------
276,400
-----------
Automotive Parts & Equipment-2.53%
Agco Corp., 8.500%, due
03/15/06 40,000 41,400
Hayes Wheels International, Inc.,
11.000%, due 07/15/06 92,000 103,500
Talon Automotive Group,
Series 144A, 9.625%,
due 05/01/08 40,000 39,600
-----------
184,500
-----------
Automotive Truck Rental-0.57%
Williams Scotman, Inc., 9.875%,
due 06/01/07 40,000 41,800
-----------
Beverages-0.21%
Delta Beverage Group, 9.750%,
due 12/15/03 15,000 15,713
-----------
Broadcasting-5.50%
CSC Holdings, Series B, 8.125%,
due 08/15/09 50,000 53,625
Chancellor Media Corp., Series B,
8.750%, due 06/15/07 40,000 41,800
- ------------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- ------------------------------------------------------------------------------
Broadcasting-Continued
Cumulus Media, Inc., 10.375%,
due 07/01/08+ $ 50,000 $ 51,000
Fox/Liberty Networks, 8.875%,
due 08/15/07 15,000 15,300
Frontiervision Holdings,
Zero Coupon, due 09/15/07+ 60,000 47,700
Granite Broadcasting Corp.,
Series 144A, 8.875%,
due 05/15/08+ 25,000 25,438
Granite Broadcasting Corp.,
10.375%, due 05/15/05 30,000 31,875
Lenfest Communications,
8.375%, due 11/01/05 40,000 42,700
Lin Holdings Corp.,
Zero Coupon, Series 144A,
due 03/01/08+ 60,000 40,800
Renaissance Media Group, LLC,
Zero Coupon, Series 144A,
due 04/15/08+ 15,000 9,281
Young Broadcasting, Series B,
8.750%, due 06/15/07 40,000 41,700
---------
401,219
Building Materials-1.18%
Schuff Steel Co., Series 144A,
10.500%, due 06/01/08+ 50,000 49,750
Synthetic Industries, Inc., Series B,
9.250%, due 02/15/07 35,000 36,225
---------
85,975
---------
Chemicals-2.69%
Acetex Corp., 9.750%, due
10/01/03 40,000 41,200
NL Industries, 11.750%, due
10/15/03 55,000 60,844
PCI Chemicals Canada, 9.250%,
due 10/15/07 45,000 44,212
Sterling Chemical, Series A,
11.250%, due 04/01/07 50,000 49,750
---------
196,006
---------
</TABLE>
+Non-income producing security.
See notes to financial statements.
75
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
<S> <C> <C>
Collectibles-0.83%
Boyds Collection, Series 144A,
9.000%, due 05/15/08 $ 60,000 $ 60,300
-----------
Commercial Services-0.75%
Dialog Corp., PLC, Series A,
11.000%, due 11/15/07 50,000 54,625
-----------
Computer Equipment & Services-1.69%
Anacomp, Inc., 10.875%, due
04/01/04 70,000 74,025
Iron Mountain, Inc., 10.125%,
due 10/01/06+ 45,000 49,500
-----------
123,525
-----------
Computer Software - Mainframe-0.71%
Verio, Inc., Series 144A, 10.375%,
due 04/01/05+ 50,000 51,625
-----------
Cosmetics & Personal Care-1.44%
Remington Product Co., Series B,
11.000%, due 05/15/06 60,000 55,050
Revlon Consumer Products,
8.625%, due 02/01/08+ 50,000 50,313
-----------
105,363
-----------
Educational Services-0.90%
Kindercare Learning, Series B,
9.500%, due 02/15/09 65,000 65,812
-----------
Electronics - Semiconductors-0.49%
Zilog, Inc., 9.500%,
due 03/01/05+ 50,000 35,750
-----------
Engineering & Construction-0.55%
Furon Co., Series 144A, 8.125%,
due 03/01/08+ 40,000 40,100
-----------
- ---------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
Entertainment & Leisure-4.16%
AMC Entertainment, Inc.,
9.500%, due 03/15/09 $ 40,000 $ 40,200
Boyd Gaming Corp., 9.500%,
due 07/15/07 95,000 97,850
Casino America, Inc., 12.500%,
due 08/01/03+ 75,000 85,125
Cinemark USA, Inc., Series B,
9.625%, due 08/01/08+ 50,000 51,750
Convergent Communication,
13.000%, due 04/01/08+ 30,000 28,950
-----------
303,875
-----------
Environmental Controls-0.49%
Nortek, Inc., 9.875%,
due 03/01/04+ 35,000 36,137
-----------
Food Products-1.69%
Purina Mills, Inc., Series 144A,
9.000%, due 03/15/10+ 25,000 25,812
Specialty Foods, Corp., Series B,
10.250%, due 08/15/01+ 100,000 97,500
-----------
123,312
-----------
Food Services & Restaurants-1.47%
Friendly Ice Cream Corp.,
10.500%, due 12/01/07 80,000 84,400
Planet Hollywood, 12.000%,
due 04/01/05+ 25,000 22,750
-----------
107,150
-----------
Forest Products & Paper-5.32%
Buckeye Technologies, Inc.,
9.250%, due 09/15/08 40,000 42,300
Pacific Lumber Co., 10.500%,
due 03/01/03+ 50,000 51,625
REPAP New Brunswick, 10.625%,
due 04/15/05 75,000 76,125
Repap Enterprise, Series 144A,
9.000%, due 06/01/04+ 50,000 50,813
</TABLE>
+Non-income producing security.
See notes to financial statements.
76
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
<S> <C> <C>
Forest Products & Paper-Continued
Specialty Paperboard, Inc.,
9.375%, due 10/15/06 $ 70,000 $ 73,500
U.S. Timberlands, 9.625%, due
11/15/07 40,000 41,250
Uniforet, Inc., 11.125%, due
10/15/06+ 55,000 53,075
-----------
388,688
-----------
Healthcare-1.85%
Insight Health, Series 144A,
9.625%, due 06/15/08+ 15,000 14,962
Oxford Health Plans, 11.000%,
due 05/15/05+ 25,000 25,750
Prime Medical Services, 8.750%,
due 04/01/08+ 60,000 58,950
Tenet Healthcare, Series 144A,
7.625%, due 06/01/08+ 35,000 35,328
-----------
134,990
-----------
Lodging-1.44%
Prime Hospitality Corp., Series B,
9.750%, due 04/01/07 50,000 53,375
Red Roof Inns, 9.625%,
due 12/15/03 50,000 51,750
-----------
105,125
-----------
Machinery-4.37%
Columbus McKinnon Corp.,
Series 144A, 8.500%,
due 04/01/08+ 60,000 59,100
Grove Worldwide, LLC,
Series 144A, 9.250%,
due 05/01/08+ 60,000 60,000
Newcor, Inc., Series 144A,
9.875%, due 03/01/08+ 90,000 91,125
Numatics, Inc., Series 144A,
9.625%, due 04/01/08+ 50,000 50,750
Thermadyne, Series 144A,
9.875%, due 06/01/08+ 30,000 30,225
Thermadyne, Zero Coupon,
Series 144A, due 06/01/08+ 50,000 27,500
-----------
318,700
-----------
- ---------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
Manufacturing-1.25%
Argo-Tech Corp., 8.625%,
due 10/01/07 $ 40,000 $ 40,200
Polymer Group, Inc., Series B,
9.000%, due 07/01/07+ 50,000 50,812
-----------
91,012
Media-0.21%
HMV Media, PLC, Series 144A,
10.250%, due 05/15/08+ 15,000 15,300
-----------
Medical Supplies-0.97%
Fresenius Medical Capital Trust II,
7.875%, due 02/01/08 35 34,475
MEDIQ, Inc., Series 144A,
11.000%, due 06/01/08+ 35,000 36,138
-----------
70,613
-----------
Mining & Metals - Ferrous & Nonferrous-6.36%
Commonwealth Aluminum,
10.750%, due 10/01/06 50,000 52,750
Earle M. Jorgensen Co.,
Series 144A, 9.500%,
due 04/01/05+ 60,000 59,175
Kaiser Aluminum & Chemical,
Series B, 10.875%,
due 10/15/06 85,000 91,800
Keystone Consolidated, 9.625%,
due 08/01/07+ 50,000 51,375
Metal Management, Inc.,
Series 144A, 10.000%,
due 05/15/08+ 50,000 49,500
Oxford Automotive, Inc., 10.125%,
due 06/15/07 90,000 93,150
P&L Coal Holdings, Series 144A,
9.625%, due 05/15/08 40,000 41,300
WHX Corp., 10.500%,
due 04/15/05+ 10,000 10,200
WHX Corp., 9.250%,
due 11/15/07+ 15,000 15,375
-----------
464,625
-----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
77
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
<S> <C> <C>
Oil & Gas Producers-1.04%
Chesapeake Energy, Series 144A,
9.625%, due 05/01/05+ $ 50,000 $ 50,375
Petsec Energy, Inc., Series B,
9.500%, due 06/15/07 25,000 25,375
--------
75,750
--------
Oil & Gas Services-0.60%
Pool Energy Services Co.,
Series 144A, 8.625%,
due 04/01/08+ 45,000 44,100
--------
Packaging & Containers-2.37%
Gaylord Container, Series B,
9.875%, due 02/15/08+ 100,000 97,000
Graham Packaging/GPC,
Series 144A, 8.750%,
due 01/15/08+ 50,000 50,250
Silgan Holdings, Inc., 9.000%,
due 06/01/09 25,000 25,750
--------
173,000
--------
Publishing & Printing-1.97%
Big Flower Press Holdings,
8.875%, due 07/01/07+ 50,000 50,750
Hollinger International Publishing,
9.250%, due 03/15/07 40,000 42,400
Liberty Group Operating, 9.375%,
due 02/01/08+ 50,000 50,750
--------
143,900
--------
Real Estate-0.60%
Clark USA, (Trizec), 10.875%,
due 12/01/05 40,000 43,700
--------
Retail Stores-4.16%
Cole National Corp., 9.875%,
due 12/31/06 75,000 81,375
Finlay Enterprises, 8.375%,
due 05/01/08+ 25,000 25,219
Finlay Enterprises, 9.000%,
due 05/01/08+ 10,000 10,075
- ---------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
Retail Stores-Continued
Jitney-Jungle Stores, 12.000%,
due 03/01/06+ $100,000 $113,250
Musicland Stores, 9.000%,
due 06/15/03 25,000 24,187
Musicland Stores, 9.875%,
due 03/15/08+ 50,000 49,375
--------
303,481
--------
Telecommunciations-22.98%
American Mobile Satellite Corp.,
12.250%, due 04/01/08+ 40,000 37,800
Allegiance Telecom, Zero Coupon,
due 02/15/08+ 100,000 51,500
American Cellular Corp.,
Series 144A, 10.500%,
due 05/15/08+ 50,000 50,125
Charter Communications,
S. East, Series B,
11.250%, due 03/15/06 95,000 105,212
Clearnet Communications,
Zero Coupon, due 12/15/05+ 50,000 42,125
Colt Telecom Group, PLC,
Zero Coupon, due 12/15/06+ 35,000 28,000
Dolphin, Zero Coupon,
Series 144A, due 06/01/08+ 50,000 28,375
Flag, Ltd., Series 144A, 8.250%,
due 01/30/08+ 45,000 45,675
General Communication, Inc.,
9.750%, due 08/01/07+ 50,000 52,750
Global Crossing, Series 144A,
9.625%, due 05/15/08+ 50,000 52,312
Globalstar LP/Capital, 11.375%,
due 02/15/04+ 50,000 48,750
ICG Holdings, Inc., Zero Coupon,
due 05/01/06 50,000 39,250
Intermedia Communication, Series B,
Zero Coupon, due 07/15/07+ 40,000 29,450
L-3 Communications Corp., Series B,
10.375%, due 05/01/07 45,000 49,950
L-3 Communictaions, 8.500%,
due 05/15/08+ 25,000 25,250
</TABLE>
+Non-income producing security.
See notes to financial statements.
78
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
<S> <C> <C>
Telecommunications-Continued
Level 3 Communications, Inc.,
Series 144A, 9.125%,
due 05/01/08+ $ 65,000 $ 63,619
MJD Communications, Inc.,
Series 144A, 9.500%,
due 05/01/08+ 10,000 10,250
MetroNet Communications,
Zero Coupon, due 11/01/07+ 25,000 16,531
MetroNet Communications,
Zero Coupon, due 06/15/08+ 145,000 90,444
Millicom International Cellular,
Zero Coupon, due 06/01/06+ 90,000 69,975
NEXTLINK Communications, Inc.,
9.625%, due 10/01/07 30,000 30,900
NTL, Inc., Series 144A,
Zero Coupon, due 04/01/08+ 65,000 42,575
Nextel Communications, Inc.,
Zero Coupon, due 10/31/07+ 50,000 32,750
Nextel Communications, Inc.,
Series 144A, Zero Coupon,
due 02/15/08+ 110,000 70,813
Nextel Communications, Inc.,
Series 144A, Zero Coupon,
due 04/15/08+ 70,000 40,950
Pagemart Wireless, Zero Coupon,
due 02/01/08+ 60,000 37,200
Pathnet, Inc., Unit, 12.250%,
due 04/15/08+ 50,000 53,250
Qwest Communications
International, Inc.,
Zero Coupon, due 10/15/07+ 70,000 52,675
RCN Corp., Zero Coupon,
due 10/15/07+ 25,000 16,125
Rogers Cablesystems, 9.625%,
due 08/01/02 40,000 42,900
Rural Cellular, Series 144A, 9.625%,
due 05/15/08+ 15,000 15,075
Telesystem International,
Zero Coupon, due 11/01/07+ 25,000 14,938
- ---------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
Telecommunications-Continued
Triton Communications, Series 144A,
Zero Coupon, due 05/01/08+ $ 50,000 $ 28,375
United International Holdings,
Zero Coupon, due 02/15/08+ 150,000 93,000
Viatel, Inc., Unit, 11.250%,
due 04/15/08+ 60,000 63,000
Viatel, Inc., Unit, Zero Coupon,
due 04/15/08+ 85,000 51,850
Western Wireless Corp., 10.500%,
due 02/01/07 50,000 53,875
-----------
1,677,594
-----------
Telecommunications Equipment-2.46%
DTI Holdings, Inc., Zero Coupon,
due 03/01/08+ 65 35,425
Paging Network, Inc., 8.875%,
due 02/01/06+ 50,000 49,500
Pinnacle Holdings, Inc., Series 144A,
Zero Coupon, due 03/15/08+ 80,000 52,800
Spectrasite, Series 144A,
Zero Coupon, due 07/15/08+ 75,000 42,000
-----------
179,725
-----------
Textiles & Apparel-1.00%
Galey & Lord, Inc., 9.125%,
due 03/01/08+ 75,000 72,750
-----------
Transportation-1.30%
GulfMark Offshore, Series 144A,
8.750%, due 06/01/08+ 40,000 39,000
Johnstown America Industries, Inc.,
11.750%, due 08/15/05+ 25,000 27,813
Johnstown America Industries, Inc.,
Series C, 11.750%, due 08/15/05+ 25,000 27,812
-----------
94,625
-----------
Utilities - Electric & Gas-0.56%
International Utility Structures,
Series 144A, 10.750%,
due 02/01/08+ 40,000 41,000
-----------
TOTAL CORPORATE BONDS
(Cost $6,827,015) 6,800,240
-----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
79
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998-CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
GOVERNMENT & AGENCY OBLIGATIONS--0.31%
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
<S> <C> <C>
Foreign Government-0.31%
Republic of Korea, 8.875%,
due 04/15/08+ $ 25,000 $ 22,731
-----------
TOTAL GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $23,366) 22,731
-----------
- ---------------------------------------------------------------------------
PREFERRED STOCK--2.19%
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------------
Multimedia-0.91%
Time Warner, Inc., Series M,
10.250%+ 60 $ 66,750
----------
Telecommunications-1.28%
Primedia, Inc., 8.625%+ 650 63,375
Rural Cellular Corp., Series 144A,
11.375%+ 30 30,150
----------
93,525
----------
TOTAL PREFERRED STOCK
(Cost $161,497) 160,275
----------
- ---------------------------------------------------------------------------
RIGHTS AND WARRANTS--0.00%
Number Market Value
Company of Shares (Note B)
- ---------------------------------------------------------------------------
Telecommunications-0.00%
Allegiance Telecom,
exp. 02/03/08+ 100 $ 0
----------
TOTAL RIGHTS AND WARRANTS
(Cost $0) 0
----------
TOTAL INVESTMENTS
(Cost $7,011,878) 95.67% 6,983,246
Other assets, less liabilities 4.33 315,735
------ ----------
TOTAL NET ASSETS 100.00% $7,298,981
====== ==========
</TABLE>
+Non-income producing security.
See notes to financial statements.
80
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
" We expect short-term interest rates to be
flat over the next several months."
--Geoffrey Kurinsky , Portfolio Manager--
--------------------------------
INCEPTION DATE
August 1, 1985
--------------------------------
FUND MANAGER
Massachusetts Financial Services Company
--------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To seek as high a level of current income as is
consistent with preservation of capital and liquidity.
--------------------------------
NET ASSETS AS OF 6/30/98
$15,803,630
--------------------------------
NUMBER OF HOLDINGS
20
--------------------------------
PORTFOLIO QUALITY
AAA-100%
--------------------------------
DOLLAR WEIGHTED AVERAGE MATURITY
24.26 days
--------------------------------
--------------------------------
IN THIS SECTION
--------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
--------------------------------
- --------------------------------------------------------------------------------
GEOFFREY KURINSKY
Senior Vice President
o Joined MFS in 1987
o M.B.A. from Boston University
o B.A. from University of Massachusetts
- --------------------------------------------------------------------------------
81
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
[PIE CHART]
% of Portfolio ++
Short-Term Obligation-99.88%
Cash-0.12%
[END PIE CHART]
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
- ------------------------------------
PERCENT OF
RATING PORTFOLIO++
- ------------------------------------
<S> <C>
AAA 100.00%
</TABLE>
DOLLAR WEIGHTED
AVERAGE MATURITY
24 days
++Represents market value of
investments plus cash.
The Money Market Portfolio seeks as high a level of current income as is
considered consistent with the preservation of capital and liquidity by
investing in short-term money market securities issued or guaranteed by the U.S.
Treasury, its agencies, or instrumentalities of the U.S. Government, as well as
in the highest-quality corporate issues, in order to minimize credit risk. As of
June 30, 1998, the Portfolio had assets of approximately $15.8 million, which
were 100% invested in government agencies. The average maturity of the Portfolio
was 24 days.
We expect short-term interest rates to be flat over the next several
months.
82
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Unaudited)
Six Months Year Ended Year Ended Year Ended Year Ended Year Ended
Ended December December December December December
June 30, 1998 31, 1997 31, 1996 31, 1995 31, 1994 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.23 $ 10.25 $ 10.27 $ 10.25 $ 10.26 $ 10.22
Income From Investment Operations
Net investment income 0.23 0.52 0.50 0.50 0.35 0.20
Net gains and losses on securities
(both realized and unrealized) 0.02 (0.02) (0.02) 0.02 (0.01) 0.04
----------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.25 0.50 0.48 0.52 0.34 0.24
Less Distributions to Shareholders
Dividends from net investment income (0.52) (0.50) (0.50) (0.35) (0.20)
Dividends in excess of net
investment income
Distributions from capital gains
Distributions in excess of capital gains
Returns of capital
----------- ---------- ---------- ---------- ---------- ----------
Total distributions 0.00 (0.52) (0.50) (0.50) (0.35) (0.20)
Net asset value, end of period $ 10.48 $ 10.23 $ 10.25 $ 10.27 $ 10.25 $ 10.26
=========== ========== ========== ========== ========= ==========
Total Return (A) 2.45% 4.86% 4.65% 5.06% 3.28% 2.32%
Ratios to Average Net Assets:
Expenses 0.62% 0.60% 0.62% 0.63% 0.65% 0.74%
Net investment income 4.90% 4.74% 4.54% 4.89% 3.31% 2.32%
Portfolio Turnover Rate (B) N/A N/A N/A N/A N/A N/A
Average Commission Rate Paid (C) N/A N/A N/A
Net Assets, At End of Period $15,803,630 $9,435,454 $7,896,257 $8,312,676 $7,680,485 $5,061,181
</TABLE>
(A) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and principal
values will fluctuate and shares, when redeemed, may be worth more or less than
the original cost. Total return figures for periods of less than one year have
not been annualized.
(B) There were no purchases and/or sales of securities other than short-term
obligations during the period. Therefore, the portfolio turnover rate has not
been calculated.
(C) During the period, the Portfolio held less than 10% of the value of its
average net assets in equity securities. Therefore, the Average Commission Rate
Paid has not been calculated.
83
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--99.93%
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
<S> <C> <C>
Government Agency-99.93%
Federal Farm Credit Bank,
5.390%, due 07/02/98 $ 765,000 $ 764,885
Federal Farm Credit Bank,
5.410%, due 07/06/98 900,000 899,324
Federal Farm Credit Bank,
5.400%, due 07/10/98 630,000 629,149
Federal Farm Credit Bank,
5.410%, due 07/23/98 500,000 498,347
Federal Farm Credit Bank,
5.390%, due 08/24/98 850,000 843,128
Federal Home Loan Bank,
5.400%, due 07/01/98 750,000 750,000
Federal Home Loan Bank,
5.410%, due 07/09/98 700,000 699,158
Federal Home Loan Bank,
5.410%, due 07/22/98 800,000 797,475
Federal Home Loan Mortgage
Corp., 5.430%, due 07/07/98 575,000 574,480
Federal Home Loan Mortgage
Corp., 5.430%, due 07/13/98 740,000 738,661
Federal Home Loan Mortgage
Corp., 5.480%, due 07/14/98 900,000 898,219
Federal Home Loan Mortgage
Corp., 5.470%, due 07/31/98 1,000,000 995,442
Federal National Mortgage
Association, 5.390%,
due 07/15/98 1,000,000 997,904
Federal National Mortgage
Association, 5.410%,
due 07/30/98 700,000 696,949
Federal National Mortgage
Association, 5.440%,
due 08/03/98 725,000 721,385
Federal National Mortgage
Association, 5.390%,
due 09/30/98 765,000 754,480
- ---------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--CONTINUED
Principal Market Value
Company Value (Note B)
- ---------------------------------------------------------------------------
Government Agency-Continued
Tennessee Valley Authority,
5.340%, due 07/16/98 $ 1,000,000 $ 997,775
Tennessee Valley Authority,
5.370%, due 07/24/98 1,200,000 1,195,877
Tennessee Valley Authority,
5.350%, due 08/20/98 700,000 694,798
Tennessee Valley Authority,
5.374%, due 08/26/98 650,000 644,566
-----------
15,792,002
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $15,792,099) 15,792,002
-----------
TOTAL INVESTMENTS
(Cost $15,792,099) 99.93% 15,792,002
Other assets, less liabilities 0.07 11,628
------ -----------
TOTAL NET ASSETS 100.00% $15,803,630
====== ===========
</TABLE>
See notes to financial statements.
84
<PAGE>
[This page intentionally left blank]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
International Global Emerging
Equity World Growth Hard Assets Growth
Portfolio Stock Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Assets
Investments, at cost-see accompanying portfolios $ 8,872,605 $105,151,013 $ 4,860,842 $60,064,494
=========== ============ =========== ===========
Investments, at market value (Notes B and C) $ 9,741,940 $122,491,586 $ 4,465,504 $78,068,019
Cash 334,717 5,492,373 64,646 635,111
Accrued investment income 19,349 582,350 7,874 12,251
Receivable for portfolio securities sold 187,452 1,011,960 1,961,030
Receivable for foreign forward contracts (Note B) 25,494
Other assets 4,233
----------- ------------ ----------- -----------
Total Assets 10,308,952 128,566,309 5,554,217 80,676,411
Liabilities
Payable for portfolio securities purchased 345,639 43,608 731,454 2,959,554
Accrued investment advisory fees (Note D) 8,462 77,589 3,161 45,979
Accrued expenses 4,974 20,780 1,176 4,961
Other liabilities 4,233
----------- ------------ ----------- -----------
Total Liabilities 359,075 141,977 740,024 3,010,494
NET ASSETS $ 9,949,877 $128,424,332 $ 4,814,193 $77,665,917
=========== ============ =========== ===========
Net Assets Consist of:
Par value $ 8,575 $ 51,448 $ 5,513 $ 36,913
Capital paid in excess of par 9,040,688 99,676,742 8,531,048 58,068,965
Undistributed net investment income (loss) 42,798 1,494,661 4,281 (197,793)
Accumulated net realized gain (loss)
on investments (40,548) 9,865,777 (3,321,378) 1,753,499
Net unrealized gain (loss) on investments 869,335 17,340,573 (395,338) 18,003,525
Net unrealized loss on translation of assets
and liabilities in foreign currencies (Note C) 29,029 (4,869) (9,933) 808
----------- ------------ ----------- -----------
NET ASSETS $ 9,949,877 $128,424,332 $ 4,814,193 $77,665,917
=========== ============ =========== ===========
Shares of common stock outstanding ($.01 par value,
1,000,000,000 shares authorized) 857,478 5,144,793 551,269 3,691,339
=========== ============ =========== ===========
Net asset value, offering and redemption
price per share $ 11.60 $ 24.96 $ 8.73 $ 21.04
=========== ============ =========== ===========
</TABLE>
See notes to financial statements.
86
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
Capital Domestic Growth and High Yield Money
Growth Growth Growth Stock Income Balanced Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C>
$118,778,834 $7,475,919 $74,227,685 $52,777,032 $29,969,765 $7,011,878 $15,792,099
============ ========== =========== =========== =========== ========== ===========
$169,235,940 $8,953,497 $89,353,044 $59,257,578 $30,560,501 $6,983,246 $15,792,002
3,619,099 393,306 4,897,395 4,933,721 1,353,711 226,033 19,557
55,843 5,133 155,276 133,251 160,278 148,634 833
836,044 15,214 421,277
13,274
- ------------ ---------- ----------- ----------- ----------- ---------- -----------
173,746,926 9,367,150 94,405,715 64,324,550 32,509,041 7,357,913 15,812,392
131,894 288,732 891,324 392,426 50,000
143,601 5,589 61,393 40,488 19,774 2,573 7,023
12,169 1,958 7,539 5,329 5,707 6,359 1,739
- ------------ ---------- ----------- ----------- ----------- ---------- -----------
287,664 296,279 68,932 937,141 417,907 58,932 8,762
$173,459,262 $9,070,871 $94,336,783 $63,387,409 $32,091,134 $7,298,981 $15,803,630
============ ========== =========== =========== =========== ========== ===========
$ 65,496 $ 7,759 $ 45,582 $ 32,731 $ 24,930 $ 7,027 $ 15,084
112,322,999 7,813,339 75,035,021 54,555,073 28,921,870 7,137,298 15,444,728
(275,501) (14,783) 382,928 286,868 334,051 181,588 344,860
10,889,215 (213,022) 3,747,893 2,032,191 2,206,482 1,700 (945)
50,457,106 1,477,578 15,125,359 6,480,546 590,736 (28,632) (97)
(53) 13,065
- ------------ ---------- ----------- ----------- ----------- ---------- -----------
$173,459,262 $9,070,871 $94,336,783 $63,387,409 $32,091,134 $7,298,981 $15,803,630
============ ========== =========== =========== =========== ========== ===========
6,549,630 775,870 4,558,232 3,273,122 2,492,982 702,718 1,508,436
============ ========== =========== =========== =========== ========== ===========
$ 26.48 $ 11.69 $ 20.70 $ 19.37 $ 12.87 $ 10.39 $ 10.48
============ ========== =========== =========== =========== ========== ===========
</TABLE>
87
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
World Global
International Growth Hard Emerging
Equity Stock Assets Growth
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Investment Income
Income:
Interest $ 7,816 $ 247,971 $ 18,054 $ 61,734
Dividends 102,414 2,674,150 38,620 52,843
Foreign taxes withheld (13,475) (274,615) (1,134) (1,373)
-------- ----------- ----------- -----------
Total investment income 96,755 2,647,506 55,540 113,204
-------- ----------- ----------- -----------
Expenses:
Advisory fees (Note D) 37,214 476,996 19,884 274,074
Custodian fees 15,836 50,169 3,187 11,067
Shareholder reports 1,326 23,022 963 12,346
Professional fees 605 10,490 439 5,625
Insurance expenses 97 1,675 70 901
Directors fees 148 2,573 108 1,380
Security valuation 4,158 7,827 2,656 2,938
Miscellaneous expenses 257 4,477 187 2,398
-------- ----------- ----------- -----------
Total expenses 59,641 577,229 27,494 310,729
-------- ----------- ----------- -----------
Net investment
income (loss) 37,114 2,070,277 28,046 (197,525)
-------- ----------- ----------- -----------
Realized and Unrealized Gain (Loss)
on investments and Foreign Currency
Net realized gain (loss)
on investments (40,548) 10,007,449 (3,031,164) 2,163,325
Net realized gain (loss)
from foreign currency
transactions 5,684 (111,136) (6,671) (268)
Net unrealized gain (loss)
on investments 869,335 (2,218,201) 2,963,869 10,715,610
Net unrealized gain (loss)
on translation of assets
and liabilities in
foreign currency 29,029 1,973 (9,933) 808
-------- ----------- ----------- -----------
Net realized and
unrealized gain (loss)
on investments and
foreign currency 863,500 7,680,085 (83,899) 12,879,475
-------- ----------- ----------- -----------
Net increase (decrease)
in net assets resulting
from operations $900,614 $ 9,750,362 $ (55,853) $12,681,950
======== =========== =========== ===========
</TABLE>
See notes to financial statements.
88
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Domestic Growth High
Capital Growth and Yield Money
Growth Growth Stock Income Balanced Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C>
$ 55,694 $ 7,834 $ 136,729 $ 90,422 $ 340,159 $210,359 $387,908
480,613 18,475 607,705 440,245 127,129 3,120
(1,572) (5,900) (287) (143)
----------- ---------- ---------- ---------- ---------- -------- --------
534,735 26,309 744,434 524,767 467,001 213,336 387,908
----------- ---------- ---------- ---------- ---------- -------- --------
755,870 28,761 351,060 211,780 108,758 18,655 35,168
3,141 7,994 1,692 5,605 11,317 4,756 2,074
27,208 1,378 16,964 10,166 5,234 874 2,529
12,398 628 7,730 4,632 2,385 398 1,152
1,984 101 1,234 740 381 64 184
3,041 154 1,896 1,136 585 98 283
894 1,809 895 1,864 4,050 6,733 1,166
5,287 267 3,300 1,976 1,018 170 492
----------- ---------- ---------- ---------- --------- -------- --------
809,823 41,092 384,771 237,899 133,728 31,748 43,048
----------- ---------- ---------- ---------- --------- -------- --------
(275,088) (14,783) 359,663 286,868 333,273 181,588 344,860
----------- ---------- ---------- ---------- --------- -------- --------
10,889,215 (213,022) 3,747,892 2,206,271 2,250,864 1,700 (37)
(266)
22,364,432 1,477,578 (1,928,376) 4,166,596 (29,652) (28,632) (97)
(15) 13,065
----------- ---------- ---------- ---------- --------- -------- --------
33,253,366 1,264,556 1,819,516 6,372,867 2,234,277 (26,932) (134)
----------- ---------- ---------- ---------- --------- -------- --------
$32,978,278 $1,249,773 $2,179,179 $6,659,735 $2,567,550 $154,656 $344,726
=========== ========== ========== ========== ========== ======== ========
</TABLE>
89
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
International
Equity World Growth Global Hard
Portfolio Stock Portfolio Assets Portfolio
------------- --------------------- ---------------------
Unaudited Unaudited Unaudited
Six Months Six Months Year Six Months Year
Ended Ended Ended Ended Ended
June June December June December
30, 1998 30, 1998 31, 1997 30, 1998 31, 1997
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations:
Net investment income (loss) $ 37,114 $ 2,070,277 $ 2,607,194 $ 28,046 $ 42,371
Net realized gain (loss) on
security transactions (40,548) 10,007,449 12,496,321 (3,031,164) (81,714)
Net realized gain (loss) from
foreign currency transactions 5,684 (111,136) (278,740) (6,671) (2,145)
Net unrealized gain (loss)
on investments 869,335 (2,218,201) 184,832 2,963,869 (3,629,157)
Net unrealized gain (loss) on
translation of assets and
liabilities in foreign currencies 29,029 1,973 (5,060) (9,933) 1,336
---------- ------------ ------------ ---------- ----------
Net increase (decrease)
in net assets resulting
from operations 900,614 9,750,362 15,004,547 (55,853) (3,669,309)
Distributions to shareholders
from net investment income (6,248) (2,328,454) (40,226)
Distributions to shareholders in
excess of net investment income (174,949) (11,954)
Distributions to shareholders
from capital gains (1,073,078) (12,496,321)
Distributions to shareholders in
excess of capital gains (930,784) (154,999)
Increase (decrease) in net assets
derived from shareholder
transactions (Note E) 9,049,253 14,185,793 14,497,830 (334,608) 1,526,715
---------- ------------ ------------ ---------- ----------
Net increase (decrease) in
net assets 9,949,867 22,856,829 13,571,869 (390,461) (2,349,773)
Net Assets:
Beginning of period 10 105,567,503 91,995,634 5,204,654 7,554,427
---------- ------------ ------------ ---------- ----------
End of period $9,949,877 $128,424,332 $105,567,503 $4,814,193 $5,204,654
========== ============ ============ ========== ==========
Undistributed net investment
income (loss) $ 42,798 $ 1,494,661 $ (458,232) $ 4,281 $ (17,094)
========== ============ ============ ========== ==========
</TABLE>
See notes to financial statements.
90
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Emerging Capital Growth
Growth Portfolio Growth Portfolio Portfolio
----------------------- --------------------------- ---------
Unaudited Unaudited Unaudited
Six Months Year Six Months Year Six Months
Ended Ended Ended Ended Ended
June December June December June
30, 1998 31, 1997 30, 1998 31, 1997 30, 1998
<S> <C> <C> <C> <C>
$ (197,525) $ (233,573) $ (275,088) $ 23,842 $ (14,783)
2,163,325 3,356,014 10,889,215 4,529,357 (213,022)
(268) (50) (266) (3,868)
10,715,610 3,520,953 22,364,432 21,641,474 1,477,578
808 (15) 9
----------- ----------- ------------ ------------ ----------
12,681,950 6,643,344 32,978,278 26,190,814 1,249,773
(19,974)
(2,020)
(212,694) (2,816,095) (349,140) (4,529,357)
(1,177,521)
8,967,486 21,607,896 16,706,129 32,829,891 7,821,088
----------- ----------- ------------ ------------ ----------
21,436,742 25,435,145 49,335,267 53,291,833 9,070,861
56,229,175 30,794,030 124,123,995 70,832,162 10
----------- ----------- ------------ ------------ ----------
$77,665,917 $56,229,175 $173,459,262 $124,123,995 $9,070,871
=========== =========== ============ ============ ==========
$ (197,793) $ 0 $ (275,501) $ (147) $ (14,783)
=========== =========== ============ ============ ==========
</TABLE>
91
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Domestic Growth
Growth and Income
Stock Portfolio Portfolio
---------------------------- ----------------------------
Unaudited Unaudited
Six Months Year Six Months Year
Ended Ended Ended Ended
June December June December
30, 1998 31, 1997 30, 1998 31, 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations:
Net investment income $ 359,663 $ 377,561 $ 286,868 $ 346,535
Net realized gain (loss) on
security transactions 3,747,892 8,322,941 2,206,271 9,552,050
Net realized gain (loss) from
foreign currency transactions
Net unrealized gain (loss)
on investments (1,928,376) 7,988,122 4,166,596 (1,869,319)
Net unrealized gain on
translation of assets and
liabilities in foreign currencies
----------- ----------- ----------- -----------
Net increase
in net assets resulting
from operations 2,179,179 16,688,624 6,659,735 8,029,266
Distributions to shareholders
from net investment income (377,561) (346,535)
Distributions to shareholders in
excess of net investment income
Distributions to shareholders
from capital gains (977,613) (7,681,445) (9,552,050)
Distributions to shareholders in
excess of capital gains (598,314)
Increase in net assets
derived from shareholder
transactions (Note E) 11,630,110 10,709,123 17,049,598 18,434,013
----------- ----------- ----------- -----------
Net increase in
net assets 12,831,676 19,338,741 23,709,333 15,966,380
Net Assets:
Beginning of period 81,505,107 62,166,366 39,678,076 23,711,696
----------- ----------- ----------- -----------
End of period $94,336,783 $81,505,107 $63,387,409 $39,678,076
=========== =========== =========== ===========
Undistributed net investment
income $ 382,928 $ 23,265 $ 286,868 $ 0
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
92
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Balanced High Yield Money Market
Portfolio Bond Portfolio Portfolio
--------------------------- -------------- --------------------------
Unaudited Unaudited Unaudited
Six Months Year Six Months Six Months Year
Ended Ended Ended Ended Ended
June December June June December
30, 1998 31, 1997 30, 1998 30, 1998 31, 1997
<S> <C> <C> <C> <C>
$ 333,273 $ 577,206 $ 181,588 $ 344,860 $ 477,433
2,250,864 3,064,434 1,700 (37) 200
(29,652) (330,942) (28,632) (97) 1,235
13,065
- ----------- ----------- ----------- ----------- -----------
2,567,550 3,310,698 154,656 344,726 478,868
(577,375) (477,433)
(3,064,434)
(527,439)
6,886,007 5,239,697 7,144,315 6,023,450 1,537,762
- ----------- ----------- ----------- ----------- -----------
9,453,557 4,381,147 7,298,971 6,368,176 1,539,197
22,637,577 18,256,430 10 9,435,454 7,896,257
- ----------- ----------- ----------- ----------- -----------
$32,091,134 $22,637,577 $ 7,298,981 $15,803,630 $ 9,435,454
=========== =========== =========== =========== ===========
$ 334,051 $ 778 $ 181,588 $ 344,860 $ 0
=========== =========== =========== =========== ===========
</TABLE>
93
<PAGE>
[This page intentionally left blank]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE A--ORGANIZATION
Jefferson Pilot Variable Fund, Inc. (the "Company") is a diversified open-end
series management investment company registered under the Investment Company Act
of 1940, as amended. The Company was incorporated under the laws of the State of
Maryland on October 19, 1984 for the purpose of funding Flexible Premium
Variable Life Insurance Policies issued by Jefferson Pilot Financial Insurance
Company ("Jefferson Pilot Financial"). The Company is composed of eleven
separate portfolios (the "Portfolios"): the International Equity Portfolio, the
World Growth Stock Portfolio, the Global Hard Assets Portfolio, the Emerging
Growth Portfolio, the Capital Growth Portfolio, the Growth Portfolio, the
Domestic Growth Stock Portfolio, the Growth and Income Portfolio, the Balanced
Portfolio, the High Yield Bond Portfolio, and the Money Market Portfolio.
NOTE B--SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments: Investment securities are valued at the closing sales
price on the exchange on which such securities are principally traded;
securities traded in the over-the-counter market and securities traded on a
national exchange for which no sales took place on the day of valuation are
valued at the mean of the bid and ask prices at the close of trading. Quotations
for foreign securities are in United States dollars and, accordingly, unrealized
gains and losses on these securities reflect all foreign exchange fluctuations.
The value of these securities is determined by valuations supplied by a pricing
service or, if not available, in good faith by or at the direction of the Board
of Directors. Short-term debt instruments with a remaining maturity of 60 days
or less are valued at amortized cost, which approximates market value.
Investment Security Transactions: Investment security transactions are recorded
as of the trade date, the date the order to buy or sell is executed. Dividend
income is recorded on the ex-dividend date. Interest income is recorded on an
accrual basis.
Distributions to Shareholders: Distributions to shareholders from ordinary
income and net realized capital gains are declared and distributed at least once
annually. Distributions to shareholders are recorded on the ex-dividend date.
The Company distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as dividends
in excess of net investment income or accumulated net realized gains.
Foreign Currency Transactions: Certain Portfolios may engage in portfolio
transactions that are denominated in foreign currency. All related receivables
and payables are marked to market daily based on the most recent exchange rates
listed at the close of the New York Stock Exchange.
The Portfolios do not isolate the portion of the operating results due to
changes in foreign exchange rates on investments from the fluctuations arising
from changes in the market value of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
95
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Reported net realized foreign currency gains and losses arise from the
fluctuation of exchange rates between trade date and settlement date on security
transactions and from the difference between accrual date and payment date on
accrued investment income. Net unrealized foreign exchange gains and losses are
related to the fluctuation of exchange rates on the payables and receivables for
securities and accrued investment income at June 30, 1998.
The Portfolios may enter into forward foreign currency contracts to protect
securities and related receivables and payables against fluctuations in future
foreign currency rates. A forward contract is an agreement to buy or sell
currencies of different countries on a specified future date at a specified
currency relative to the U.S. dollar and the ability of the counterparty to
perform. The market value of the contract will fluctuate with changes in the
currency exchange rates. Contracts are valued daily and the change in the market
value is recorded by the Portfolio as unrealized appreciation or depreciation of
foreign currency translations. At June 30, 1998, the International Equity and
Balanced Portfolios had the following open forward foreign currency contracts:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
U.S. Dollar Unrealized
Settlement Contracts to Value at Appreciation
Sales Contracts Date Deliver Proceeds 6/30/98 (Depreciation)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International Equity
Portfolio
Japanese Yen 6/30/98 21,816,994 $153,781 $157,200 $(3,419)
Japanese Yen 7/22/98 26,000,000 189,864 187,447 2,417
Japanese Yen 8/19/98 56,817,190 430,000 411,122 18,878
-------
$17,876
=======
Balanced Portfolio
German Marks 7/30/98 775,626 436,745 430,282 $ 6,463
French Franes 7/31/98 2,547,698 428,301 421,490 6,811
-------
$13,274
=======
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
U.S. Dollar
Settlement Contracts to Value at Unrealized
Purchase Contracts Date Receive Cost 6/30/98 Appreciation
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International Equity
Portfolio
French Francs 6/30/98 14,396 $ 2,369 $ 2,381 $ 12
Swiss Francs 6/30/98 14,703 9,641 9,693 52
Japanese Yen 8/19/98 34,212,000 240,000 247,554 7,554
------
$7,618
======
</TABLE>
Federal Income Taxes: The Company intends to qualify as a regulated investment
company by complying with the requirements of the Internal Revenue Code
applicable to regulated investment companies, and by distributing all of its
ordinary income and net realized capital gains. Therefore, no Federal tax
provision is required.
Foreign taxes withheld represents amounts withheld by foreign tax authorities,
net of refunds recoverable.
96
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE C--INVESTMENTS
Net realized gains and losses on investment securities sold are determined by
using the first-in, first-out method. The aggregate cost of investments owned
for Federal income tax purposes is the same as for financial reporting purposes.
As of June 30, 1998, gross unrealized gains and losses were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Gross Gross Net
Unrealized Unrealized Unrealized
Gains Losses Gain (Loss)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Equity Portfolio $ 1,206,711 $ 337,376 $ 869,335
World Growth Stock Portfolio 30,797,862 13,457,289 17,340,573
Global Hard Assets Portfolio 76,791 472,129 (395,338)
Emerging Growth Portfolio 19,980,840 1,977,315 18,003,525
Capital Growth Portfolio 53,008,137 2,551,031 50,457,106
Growth Portfolio 1,502,871 25,293 1,477,578
Domestic Growth Stock Portfolio 19,990,726 4,865,367 15,125,359
Growth and Income Portfolio 7,805,560 1,325,014 6,480,546
Balanced Portfolio 1,368,054 777,318 590,736
High Yield Portfolio 61,343 89,975 (28,632)
Money Market Portfolio 1 98 (97)
- ----------------------------------------------------------------------------------------
</TABLE>
As of June 30, 1998, the International Equity, Emerging Growth and Balanced
Portfolios had foreign currency gains of $29,029, $808 and $13,065,
respectively. The World Growth Stock, Global Hard Assets and Capital Growth
Portfolios had foreign currency losses of $4,869, $9,933 and $53, respectively.
At December 31, 1997, the Money Market Portfolio had $792 of accumulated
realized capital losses, for Federal Income tax purposes, of which $401 expires
in 2002, and $391 expires in 2004. These losses are available to be used to
offset future realized capital gains.
In addition, during the period from November 1, 1997 through December 31, 1997,
the World Growth Stock Portfolio incurred foreign currency losses of $28,586,
the Money Market Portfolio incurred capital losses of $117, the Growth and
Income Portfolio incurred capital losses of $164,371, and the Emerging Growth
Portfolio incurred capital losses of $285,435 that are treated for Federal
Income tax purposes as if they occurred on January 1, 1998. Accordingly, during
1997 these Portfolios made distributions, as required by Internal Revenue Code
Regulations, in excess of amounts recognized for financial reporting purposes.
Purchases and sales of investment securities for the period ended June 30, 1998,
other than short-term obligations, were as follows:
97
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Cost of Proceeds
Securities From
Purchased Securities Sold
- --------------------------------------------------------------------------------
<S> <C> <C>
International Equity Portfolio $12,895,714 $ 3,982,561
World Growth Stock Portfolio 24,327,581 24,643,770
Global Hard Assets Portfolio 4,256,992 5,250,408
Emerging Growth Portfolio 26,508,289 19,974,954
Capital Growth Portfolio 48,909,470 39,836,986
Growth Portfolio 17,208,286 9,519,346
Domestic Growth Stock Portfolio 13,626,199 12,698,644
Growth and Income Portfolio 23,354,169 15,805,278
Balanced Portfolio 41,284,811 38,416,822
High Yield Portfolio 9,705,832 2,713,408
Money Market Portfolio 0 0
- --------------------------------------------------------------------------------
</TABLE>
NOTE D--INVESTMENT ADVISORY FEES AND MANAGEMENT AGREEMENT
The Company has entered into an investment management agreement with Jefferson
Pilot Investment Advisory Corporation, "JPIA", a wholly-owned subsidiary of
Jefferson Pilot Financial Insurance Company. Under the agreement, JPIA provides
investment management and certain administrative services for the Company. JPIA
has, in turn, retained Lombard Odier International Portfolio Management Limited
to provide investment advisory services for the International Equity Portfolio;
Templeton Global Advisors Limited to provide investment advisory services for
the World Growth Stock Portfolio; Van Eck Associates Corporation to provide
investment advisory services for the Global Hard Assets Portfolio; Janus Capital
Corporation to provide investment advisory services for the Capital Growth
Portfolio; Strong Capital Management, Inc. to provide investment advisory
services for the Growth Portfolio; Pioneering Management Corporation to provide
investment advisory services for the Domestic Growth Stock Portfolio; Warburg,
Pincus Asset Management, Inc. to provide investment advisory services for the
Growth and Income Portfolio; J.P. Morgan Investment Management, Inc. to provide
investment advisory services for the Balanced Portfolio, and Massachusetts
Financial Services Company to provide investment advisory services for the
Emerging Growth, High Yield Bond and Money Market Portfolios. For its investment
management and administrative services, JPIA is paid an annual fee through a
daily charge based on a percentage of the average daily net asset value of each
Portfolio as shown below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
First $200 Next $1.1 Over $1.3
Million Billion Billion
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
International Equity Portfolio 1.00% 1.00% 1.00%
World Growth Stock Portfolio .75% .70% .65%
Global Hard Assets Portfolio .75% .70% .65%
Emerging Growth Portfolio .80% .75% .70%
Capital Growth Portfolio 1.00% .95% .90%
Growth Portfolio .75% .75% .75%
Domestic Growth Stock Portfolio .75% .70% .65%
Growth and Income Portfolio .75% .70% .65%
Balanced Portfolio .75% .70% .65%
High Yield Bond Portfolio .75% .75% .75%
Money Market Portfolio .50% .45% .40%
- --------------------------------------------------------------------------------
</TABLE>
98
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE E--SHAREHOLDERS' TRANSACTIONS
Following is a summary of transactions with shareholders for each Portfolio.
International Equity Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1998
------------------------
Shares Dollars
------ -------
<S> <C> <C>
Shares issued 869,009 $9,177,064
Shares issued as reinvestment
of dividends - -
Shares redeemed (11,532) (127,811)
------- --------
Net increase 857,477 $9,049,253
======= ==========
</TABLE>
World Growth Stock Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended Year Ended
June 30, 1998 December 31, 1997
-----------------------------------------------------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares issued 200,586 $ 4,946,284 506,207 $13,074,639
Shares issued as reinvestment
of dividends 638,687 14,983,192 391,173 9,133,398
Shares redeemed (228,716) (5,743,683) (310,198) (7,710,207)
-------- ---------- -------- ----------
Net increase 610,557 $14,185,793 587,182 $14,497,830
======== ========== ======== ==========
</TABLE>
Global Hard Assets Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended Year Ended
June 30, 1998 December 31, 1997
-----------------------------------------------------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares issued 89,883 $ 828,068 364,373 $ 4,043,620
Shares issued as reinvestment
of dividends 5,873 52,180 22,106 351,147
Shares redeemed (128,252) (1,214,856) (257,709) (2,868,052)
-------- ---------- -------- ----------
Net increase (decrease) (32,496) $ (334,608) 128,770 $ 1,526,715
======== ========== ======== ==========
</TABLE>
Emerging Growth Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended Year Ended
June 30, 1998 December 31, 1997
-----------------------------------------------------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares issued 556,799 $10,875,033 1,772,417 $30,948,672
Shares issued as reinvestment
of dividends 170,978 3,023,470 61,482 935,922
Shares redeemed (255,033) (4,931,017) (637,221) (10,276,698)
-------- ---------- -------- ----------
Net increase 472,744 $ 8,967,486 1,196,678 $21,607,896
======== ========== ========= ==========
</TABLE>
99
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Capital Growth Stock Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended Year Ended
June 30, 1998 December 31, 1997
-----------------------------------------------------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares issued 685,364 $16,861,410 1,194,054 $24,087,593
Shares issued as reinvestment
of dividends 211,952 4,549,478 787,041 13,563,036
Shares redeemed (194,630) (4,704,759) (237,318) (4,820,738)
-------- ---------- -------- ----------
Net increase 702,686 $16,706,129 1,743,777 $32,829,891
======== ========== ======== ==========
</TABLE>
Growth Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1998
------------------------
Shares Dollars
------ -------
<S> <C> <C>
Shares issued 784,268 $7,912,423
Shares issued as reinvestment
of dividends - -
Shares redeemed (8,399) (91,335)
------- ----------
Net increase 775,869 $7,821,088
======= ==========
</TABLE>
Domestic Growth Stock Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended Year Ended
June 30, 1998 December 31, 1997
-----------------------------------------------------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares issued 420,866 $ 8,678,150 490,812 $ 9,906,195
Shares issued as reinvestment
of dividends 422,227 8,677,237 440,314 7,989,396
Shares redeemed (274,232) (5,725,277) (360,301) (7,186,468)
-------- ---------- -------- ----------
Net increase 568,861 $11,630,110 570,825 $10,709,123
======== ========== ======== ==========
</TABLE>
Growth and Income Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended Year Ended
June 30, 1998 December 31, 1997
-----------------------------------------------------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares issued 807,537 $15,034,469 1,041,889 $21,005,816
Shares issued as reinvestment
of dividends 588,835 10,072,665 91,528 1,547,670
Shares redeemed (442,780) (8,057,536) (216,351) (4,119,473)
-------- ---------- -------- ----------
Net increase 953,592 $17,049,598 917,066 $18,434,013
======== ========== ======== ==========
</TABLE>
100
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Balanced Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended Year Ended
June 30, 1998 December 31, 1997
-----------------------------------------------------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares issued 329,258 $ 4,151,368 388,780 $ 5,063,053
Shares issued as reinvestment
of dividends 301,238 3,539,231 176,844 2,106,291
Shares redeemed (64,289) (804,592) (152,011) (1,929,647)
-------- ---------- -------- ----------
Net increase 566,207 $ 6,886,007 413,613 $ 5,239,697
======== ========== ======== ==========
</TABLE>
High Yield Bond Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1998
------------------------
Shares Dollars
------ -------
<S> <C> <C>
Shares issued 855,978 $8,724,147
Shares issued as reinvestment
of dividends - -
Shares redeemed (153,261) (1,579,832)
-------- ----------
Net increase 702,717 $7,144,315
======== ==========
</TABLE>
Money Market Portfolio
<TABLE>
<CAPTION>
For the Six Months Ended Year Ended
June 30, 1998 December 31, 1997
-----------------------------------------------------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
<S> <C> <C> <C> <C>
Shares issued 2,130,469 $22,041,940 1,949,895 $20,442,569
Shares issued as reinvestment
of dividends 46,686 477,433 37,860 387,924
Shares redeemed (1,591,369) (16,495,923) (1,835,753) (19,292,731)
-------- ---------- -------- ----------
Net increase 585,786 $ 6,023,450 152,002 $ 1,537,762
======== ========== ======== ==========
</TABLE>
101
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE F--RESTRICTED SECURITIES
The Portfolios may not invest more than 5% of each portfolio's assets in
securities subject to legal or contractual restrictions on resale. At June 30,
1998, the World Growth Stock Portfolio and the Global Hard Assets Portfolio
owned the following restricted securities which may not be publicly sold without
registration under the Securities Act of 1933 (the 1933 Act). The Portfolios do
not have the right to demand that such securities be registered. The value of
these securities is determined by valuations supplied by a pricing service or,
if not available, in good faith by or at the direction of the Board of
Directors.
<TABLE>
<CAPTION>
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Restricted Date of Market
Security Acquisition Cost Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
World Growth Stock Portfolio
Vickers, PLC March 30, 1998 $674,089 $640,013
Global Hard Assets Portfoloi
Rift Resources, Ltd., Warrants July 19, 1996 0 0
</TABLE>
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[back cover]
This material has been prepared for policyowners of Ensemble(R)II variable
universal life insurance and Allegiance variable annuity. If used for
prospecting purposes, it must be preceded or accompanied by a current
prospectus. Always read these materials carefully before investing or sending
money. Policy may involve limitations or exclusions. For costs and complete
details of coverage, contact your representative.
Distributor:
Jefferson Pilot Variable Corporation
One Granite Place
Concord, New Hampshire 03301
Form 3-5653 Ed. 6/98
