[front cover]
[logo: Jefferson Pilot]
Jefferson Pilot
Financial
================================================================================
Allegiance(R) Ensemble(R) II
- --------------------------------------------------------------------------------
Variable Annuity Variable Universal Life Insurance
Annual Report
Jefferson Pilot Variable Fund, Inc.
Templeton Variable Products Series Fund
Fidelity Variable Insurance Products Fund
Fidelity Variable Insurance Products Fund II
MFS Variable Insurance Trust
Oppenheimer Variable Account Funds
[photos: people looking at picture of pie chart on computer screen;
Declaration of Independence superimposed onto American Flag;
Overhead view of man looking at computer spreadsheet printouts;
Various coins of international currencies]
December 31, 1998
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
FROM THE PRESIDENT
- --------------------------------------------------------------------------------
[photo: Ronald R. Angarella]
Dear Policyholder:
As owner of a variable insurance or annuity contract issued by one of the
Jefferson Pilot Financial Companies, I am pleased to report to you some
important developments which occurred in 1998.
Jefferson Pilot's Variable Fund assets increased by 46% during 1998 from
$444 million to $648 million. This increase was due to both a record level of
sales of our variable products and strong market performance. The Fund, with its
eleven investment divisions, had been exclusively available to owners of
Ensemble(R) II Variable Universal Life policies and Allegiance and Alpha
Variable Annuity policies. On December 15, 1998, Jefferson Pilot Financial
introduced Ensemble(R) SL, a Variable Survivorship Life insurance policy
primarily intended for use in estate tax planning applications. Owners of this
new policy will also invest policy premiums in the Jefferson Pilot Variable
Fund. With the introduction of Ensemble(R) SL and the anticipated growth in all
variable life and annuity sales, we expect assets to increase and ultimately
result in reduced expenses for all policyowners.
During 1998, market volatility was more evident than usual. In fact, the
Dow Jones Industrial Average closed up or down more than 100 points 62 times
during the year. Despite this volatility, market results for the year were well
above long-term averages with the noteworthy exception of domestic small
capitalization stocks. The S&P 500 Index of domestic large capitalization stocks
advanced 28.6%. By contrast, U.S. small cap stocks, as measured by the Russell
2000 Index, fell (2.6%). Overseas, where certain Jefferson Pilot Variable Funds
invest extensively, the Morgan Stanley EAFE Index (comprising the common stocks
of about 1600 European, Australian and Far Eastern publicly traded companies)
increased 18.2%. Disparate returns such as these effectively highlight the
importance of asset diversification across multiple asset classes.
Within Jefferson Pilot's Variable Fund, four investment divisions posted
exceptional results. The Capital Growth, Emerging Growth and Growth portfolios
produced total returns of 38.5%, 32.9% and 31.1% respectively, each surpassing
the S&P 500 Index. The International Equity portfolio, managed by Lombard Odier
Portfolio Management Ltd., returned 21.7%, surpassing the Morgan Stanley EAFE
Index by 3.4%.
On May 1, 1999, we expect to make management changes in two of our
investment divisions. First, due to concerns over the deteriorating performance
of the Small Company Portfolio (formerly the Domestic Growth Portfolio), we will
replace Pioneering Management Corporation with Lord, Abbett & Co., an investment
firm based in New York. Lord, Abbett impressed us as a quality investment firm
with a leading track record in small company investing.
Second, J.P. Morgan Investment Management Inc. has informed us
that they will no longer provide investment management services for
the Balanced Portfolio. As a result, we have reached an agreement with
Janus Capital Corporation, the firm which has managed the Capital
Growth Portfolio to
_____________________________________________________________________________[1]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
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FROM THE PRESIDENT
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outstanding returns, to assume this role. We believe that Lord, Abbett
& Co. and Janus Capital will provide competitive investment management
over the long-term and enthusiastically offer these managers for your
selection.
In summary, it was an exceptional year for the Jefferson Pilot Variable
Fund. As always, we appreciate your continuing support of our Ensemble(R)
Variable Universal Life policies and Allegiance and Alpha Variable Annuities.
Sincerely,
/s/Ronald R. Angarella
Ronald R. Angarella
President, Jefferson Pilot Variable Fund, Inc.
*The Jefferson Pilot Variable Fund investment options offered to policyholders
will vary based on the variable insurance or variable annuity contract
purchased. Please consult your product prospectus for a full listing of
available investment options.
[2]_____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
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INDEX
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<TABLE>
<CAPTION>
Page
<S> <C>
Portfolio Profiles
International Equity Portfolio 5
World Growth Stock Portfolio 13
Global Hard Assets Portfolio 23
Emerging Growth Portfolio 31
Capital Growth Portfolio 41
Growth Portfolio 47
Small Company Portfolio 55
Growth and Income Portfolio 63
Balanced Portfolio 71
High Yield Bond Portfolio 81
Money Market Portfolio 93
Financial Statements 98
Notes to Financial Statements 107
</TABLE>
_____________________________________________________________________________[3]
<PAGE>
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<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
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INTERNATIONAL EQUITY PORTFOLIO
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"We have to be prepared to experience greater
volatility in asset markets over the next several
years and be ready to act accordingly."
--Ronnie Armist, Portfolio Manager--
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INCEPTION DATE
January 1, 1998
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FUND MANAGER
Lombard Odier International Portfolio
Management Limited
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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 12/31/98
$16,576,281
------------------------------------------------------------------------
NUMBER OF HOLDINGS
70
------------------------------------------------------------------------
PORTFOLIO TURNOVER
77.23%
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[sidebar]
------------------------------------------------------------------------
IN THIS SECTION
------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RONNIE ARMIST
Managing Director
Chief Investment Officer, Equities
[bullet] Joined Lombard in 1983
[bullet] 20 years of investment experience
[bullet] Board of Executors Pension Fund, Ivory & Sime
[bullet] B.B.S. from University of Cape Town
[bullet] Chartered Accountant
[end sidebar]
_____________________________________________________________________________[5]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
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INTERNATIONAL EQUITY PORTFOLIO
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[pie chart]
% of Portfolio [double dagger]
Common Stock-93.27%
Cash-4.83%
Preferred Stock-1.90%
[end pie chart]
[sidebar]
<TABLE>
<CAPTION>
- --------------------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO[double dagger]
- --------------------------------------------------
<S> <C>
Nokia Oyj, Class A 3.08%
Novartis, AG 2.67%
Toyota Motor Corp. 2.43%
Allied Irish Banks, PLC 2.31%
Smithkline Beecham, PLC 2.30%
Pinault-Printemps-
Redoute, SA 2.19%
Nippon Telegraph &
Telephone Corp. 2.12%
Ito-Yakado Company, Ltd. 2.08%
Olivetti, SPA 2.06%
Allianz, AG 2.06%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------
PERCENT OF
TOP TEN COUNTRIES PORTFOLIO[double dagger]
- --------------------------------------------------
<S> <C>
United Kingdom 21.91%
Japan 15.49%
France 9.05%
Netherlands 8.60%
Germany 7.87%
Italy 7.69%
Sweden 3.86%
Spain 3.83%
Switzerland 3.81%
Finland 3.08%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
The International Equity Portfolio (the "Portfolio") outperformed the MSCI
EAFE (Europe, Australasia, Far East) Index by 3.4% in 1998. In absolute terms,
performance in US dollars was +21.7%, and +20.4% in the fourth quarter of 1998
alone, which gives some flavour for the volatility of markets during the year as
a whole.
The main reasons behind the outperformance were partly "top-down" -
underweighting Asian equities and overweighting Peripheral European markets
(Spain, Italy, Portugal, Ireland); and very good industry and stock selection
within the European section of the Portfolio. The Portfolio was strongly
overweighted in telecoms companies, both fixed line and wireless, as well as
being underweighted in basic material sectors such as oil and chemicals.
Looking ahead to 1999, the central portfolio assumptions are largely unchanged
from those that have served us well during 1998. That is, Asian induced currency
contagion is largely over, with the bigger risk that of missing a developing
equity bubble in Europe as on Wall Street. We assume that central bankers and
politicians alike will continue to make every effort to secure growth with some
modest inflation rather than accept deflation or worse. Events during last
summer, when the global financial system came perilously close to a malfunction,
provided a turning point in Federal Reserve thinking, away from blind pursuit of
domestic economic goals toward providing enough dollar liquidity to the world
financial system.
We also assume a successful launch of the Euro in 1999, and therefore
remain fully invested and overweight Euro zone equities. Even though interest
rate convergence on a Euro rate of 3% was clearly a winning strategy last year,
we continue to identify three types of convergence plays: a first round effect
from the initial entrants, Spain, Italy, Ireland, Portugal, as their economies
receive a positive supply side shock from sharply lower interest rates and bond
yields; a second round effect as countries like Greece make every effort to join
the Euro-zone in 2001/2002 and financial markets act in advance to discount the
favourable effects of being linked to a 3% interest rate area. Finally, even
though it is early, we are looking ahead to countries like Poland becoming full
members of the European Union, expected around 2005, and then into the European
Monetary Union.
We remain cautious on the Japanese and SE Asian markets in general, given
the recessionary conditions in the region and the Japanese government's failure
thus far
[6]_____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
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INTERNATIONAL EQUITY PORTFOLIO
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[line chart]
International Equity Portfolio and the MSCI EAFE Index
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
International
Equity MSCI EAFE
Portfolio Index
<S> <C> <C>
1/98 10000 10000
1/98 10336 10444
2/98 11118 11101
3/98 11535 11430
4/98 11611 11506
5/98 11759 11437
6/98 11604 11510
7/98 11837 11613
8/98 10452 10160
9/98 10103 9835
10/08 10840 10846
11/98 11603 11388
12/98 12166 11823
</TABLE>
[end line chart]
to reflate its domestic economy. We are mindful, however, of the developing M&A
activity in the financial system in particular, as a solution is sought to the
horrendous bad debt problem, partly with aid of substantial government financial
assistance. Our underweighting, a more modest 20% to the index now, compared
with a year ago, is due to our feeling that restructuring in corporate Japan is
finally happening, and there remains such a high level of skepticism towards a
successful market-based solution that progress will be greeted enthusiastically
by equity investors from a low invested base.
For as long as there remains downward pressure on the rate of inflation of
globally traded goods, due to developing world excess capacity or the effects of
earlier restrictive monetary and fiscal policies, investors will continue to pay
up for companies and sectors that exhibit growth characteristics. In the EAFE
universe, it is the telecoms sector that most easily fits the bill, as falling
prices for hardware and phone calling rates through deregulation are generating
rapid volume growth and strong top-line revenue growth. In this area of most
economies, it is probably fair to describe conditions as a "deflationary boom,"
as the benefits of technology finally are coming through to the man in the
street, and not just the large corporation able to acquire the latest piece of
productivity enhancing software or systems.
Nevertheless, we are mindful that valuations are stretched by historical
standards, and that imbalances in the global economy are growing. The
deterioration in the USA's current account, or the elimination of a positive
savings ratio, whilst that in Japan moves to a multi-year high at 16%, are but
two examples. There has been a rapid build up in overall financial sector
liabilities, reflecting the increase in debt and leverage that consumers,
corporates and hedge funds alike have willingly assumed since the 1990 USA
recession, in order to participate in the greatest financial bull market of the
century. When monetary conditions become less benign, an event that will
probably be delayed until early in the next century as wage inflation pressures
reach the danger zone, we expect to see unfavourable reactions in financial
markets around the world, given the increasing correlation of markets.
Consequently, even though we are still positive on the outlook for equities
based on our assessment of favourable liquidity trends and demographics, we have
to be prepared to experience greater volatility in asset markets over the next
several years and be ready to act accordingly.
[sidebar]
- ------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------
<TABLE>
<CAPTION>
MSCI
INTERNATIONAL EAFE
EQUITY INDEX
<S> <C> <C>
1 YEAR 21.66% 18.23%
INCEPTION 21.66% 18.23%
</TABLE>
Commencement of operations January 1, 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.
[end sidebar]
_____________________________________________________________________________[7]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
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INTERNATIONAL EQUITY PORTFOLIO
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FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended
December
31, 1998
<S> <C>
Net asset value, beginning of year $10.00
Income From Investment Operations
Net investment income
Net gains and losses
on securities and foreign currency
(both realized and unrealized) 2.16
-----------
Total from investment operations 2.16
Less Distributions to Shareholders
Dividends from net investment income
Dividends in excess of net
investment income
Distributions from capital gains (0.04)
Distributions in excess of capital gains
Returns of capital
-----------
Total distributions (0.04)
Net asset value, end of year $12.12
===========
Total Return (A) 21.66%
Ratios to Average Net Assets:
Expenses 1.55%
Net investment income 0.04%
Portfolio Turnover Rate 77.23%
Net Assets, At End of Year $16,576,281
</TABLE>
(A) Total return assumes reinvestment of all dividends during the year 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.
[8]_____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------
COMMON STOCK--94.52%
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense-1.39%
British Aerospace, PLC 27,257 $ 231,072
-----------
231,072
-----------
Appliances-1.31%
Electrolux, AB, Series B 12,606 216,956
-----------
216,956
-----------
Automotive Manufacturing-3.99%
DaimlerChrysler, AG+ 2,562 253,047
Toyota Motor Corp. 15,000 408,257
-----------
661,304
-----------
Automotive Parts & Equipment-0.71%
Arriva, PLC 18,800 117,617
-----------
117,617
-----------
Banking-15.50%
Allied Irish Banks, PLC 21,800 388,845
Alpha Credit Bank 2,850 297,374
Anglo Irish Bank Corp., PLC 67,400 192,892
Argentaria, Caja Postal y Banco
Hipotecario de Espana, SA 3,952 102,502
Banca Intesa, SPA 43,400 260,970
Banco Bilbao Vizcaya, SA 9,546 149,902
Bank of Ireland 8,900 198,382
Credito Italiano, SPA 52,690 312,997
HypoVereinsbank 2,061 161,490
Lloyds TSB Group, PLC 19,887 282,918
Schroders, PLC 5,849 106,761
The Bank of
Tokyo-Mitsubishi, Ltd. 11,000 114,099
-----------
2,569,132
-----------
Beverages-0.90%
BRL Hardy, Ltd. 44,033 149,081
-----------
149,081
-----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Commercial Services-2.73%
Granada Group, PLC 16,758 $ 296,262
Vivendi (Ex-Gen des Eaux) 600 155,747
-----------
452,009
-----------
Computer Information & Technology-1.89%
Cap Gemini, SA 1,952 313,452
-----------
313,452
-----------
Construction-0.34%
New World Infrastructure, Ltd. 39,000 57,138
-----------
57,138
-----------
Delivery & Freight Services-1.74%
TNT Post Group, N.V. 8,932 287,945
-----------
287,945
-----------
Electronics-2.06%
Mabuchi Motor Company, Ltd. 1,700 130,368
Sony Corp. 2,900 211,593
-----------
341,961
-----------
Electronics - Semiconductors-1.07%
STMicroelectronics, N.V.+ 2,247 176,992
-----------
176,992
-----------
Financial Services-2.72%
Barclays, PLC 9,600 207,015
The Nomura Securites
Company, Ltd. 28,000 244,511
-----------
451,526
-----------
Home Builders-0.53%
The Berkeley Group, PLC 12,000 88,153
-----------
88,153
-----------
Insurance-8.46%
AEGON, N.V. 2,608 320,459
Allianz, AG 943 345,946
ING Groep, N.V. 4,627 282,299
Istituto Nazionale delle
Assicurazioni 73,040 193,354
</TABLE>
+Non-income producing security.
See notes to financial statements.
_____________________________________________________________________________[9]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
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INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Insurance-Continued
National Mutual Asia, Ltd. 92,000 $ 68,878
Zurich Allied, AG+ 258 191,035
-----------
1,401,971
-----------
Lodging-1.38%
Accor, SA 1,059 229,393
-----------
229,393
-----------
Manufacturing-1.58%
BBA Group, PLC 3,223 20,003
Mannesmann, AG 2,110 241,975
-----------
261,978
-----------
Mining & Metals - Ferrous & Nonferrous-2.65%
Mitsui Mining & Smelting
Company, Inc. 21,000 103,700
Nippon Steel Corp. 185,000 336,225
-----------
439,925
-----------
Office Equipment-2.37%
Olivetti, SPA 99,300 346,278
Ricoh Company, Ltd. 5,000 46,189
-----------
392,467
-----------
Oil & Gas - Integrated-1.99%
British Petroleum Co., PLC 22,100 330,029
-----------
330,029
-----------
Oil & Gas Producers-1.68%
Elf Aquitaine, SA 2,402 277,782
-----------
277,782
-----------
Pharmaceutical-5.93%
Novartis, AG 228 448,198
Smithkline Beecham, PLC 27,600 385,757
Zeneca Group, PLC 3,420 148,921
-----------
982,876
-----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Publishing & Printing-1.98%
Singapore Press Holdings, Ltd. 4,594 $ 49,834
VNU, N.V. 7,380 278,416
-----------
328,250
-----------
Railroad-1.29%
Railtrack Group, PLC 8,200 214,346
-----------
214,346
-----------
Retail Stores-8.04%
Ito-Yokado Company, Ltd. 5,000 350,188
Kingfisher, PLC 31,500 340,944
Koninklijke Ahold, N.V. 7,431 274,797
Pinault-Printemps-Redoute, SA 1,922 367,472
-----------
1,333,401
-----------
Telecommunications-13.46%
NTT Mobile Communication
Network, Inc. 4 164,899
Nippon Telegraph &
Telephone Corp. 46 355,613
Portugal Telecom, SA 4,410 202,203
Tele Sudeste Celular Participacoes,
SA, ADR+ 4,000 82,750
Telecom Italia Mobile
(TIM), SPA 33,195 156,625
Telecomunicacoes Brasileiras,
SA, ADR+ 2,439 177,285
Telefonaktiebolaget LM Ericsson,
Class B 8,519 202,846
Telefonica, SA 7,426 330,687
Telekomunikacja Polska, SA, GDR,
Series 144A+ 58,600 284,210
Vodafone Group, PLC 16,829 273,296
-----------
2,230,414
-----------
Telecommunications Equipment-3.13%
Nokia Oyj, Class A 4,230 517,963
-----------
517,963
-----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
[10]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Textiles & Apparel-1.38%
Hennes & Mauritz (H&M),
AB, Class B 2,798 $ 228,521
-----------
228,521
-----------
Toys-0.82%
Nintendo Company, Ltd. 1,400 135,908
-----------
135,908
-----------
Transportation-1.50%
Stagecoach Holdings, PLC 62,459 248,641
-----------
248,641
-----------
TOTAL COMMON STOCK
(Cost $13,662,542) 15,668,203
-----------
- ----------------------------------------------------------------------
PREFERRED STOCK--1.93%
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Chemicals-1.19%
Henkel KGaA-Vorzug 2,203 $ 197,086
-----------
197,086
-----------
Computer Software - Mini & Micro-0.74%
Systeme, Anwendungen, Produkte 257 122,706
-----------
122,706
-----------
TOTAL PREFERRED STOCK
(Cost $359,239) 319,792
-----------
TOTAL INVESTMENTS
(Cost $14,021,781) 96.45% 15,987,995
Other assets, less liabilities 3.55 588,286
------ -----------
TOTAL NET ASSETS 100.00% $16,576,281
====== ===========
</TABLE>
See notes to financial statements.
____________________________________________________________________________[11]
<PAGE>
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<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
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WORLD GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
"We will continue to remain focused on finding undervalued investments by
taking advantage of declines in markets to buy stocks that we
believe will flourish in the current environment."
--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 12/31/98
$110,897,303
------------------------------------------------------------------------
NUMBER OF HOLDINGS
148
------------------------------------------------------------------------
PORTFOLIO TURNOVER
33.95%
- --------------------------------------------------------------------------------
[sidebar]
------------------------------------------------------------------------
IN THIS SECTION
------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
- ------------------------------------------------------------------------
CINDY SWEETING,
CFA
[bullet] Joined Templeton organization in 1997
[bullet] Previously vice president of investments with
McDermott International Co., Inc.
[bullet] Serves on Board of Directors of the International
Society of Financial Analysts
[bullet] B.A. from Georgetown University
[bullet] Chartered Financial Analyst
[end sidebar]
____________________________________________________________________________[13]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
[pie chart]
% of Portfolio [double dagger]
Common Stock-88.58%
Cash-5.54%
Short-Term Obligations-3.29%
Preferred Stock-2.36%
Foreign Bonds & Notes-0.23%
[end pie chart]
[sidebar]
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Hutchison Whampoa, Ltd. 2.15%
Zurich Allied, AG 2.02%
National Grid Group, PLC 1.71%
Repsol, SA 1.64%
Volkswagen, AG 1.59%
UNUM Corp. 1.58%
National Australia Bank 1.55%
Axa 1.54%
Thames Water, PLC 1.51%
ReliaStar Financial Corp. 1.38%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN COUNTRIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
United States 25.82%
United Kingdom 10.81%
Hong Kong 7.03%
France 6.48%
Australia 5.14%
Switzerland 3.95%
Japan 3.76%
Spain 3.24%
Sweden 3.23%
Netherlands 3.15%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
1998 was a financially volatile and traumatic year around the globe. World
equity markets have fluctuated from attitudes of optimism over the prospects of
European monetary union and a strong U.S. economy to sentiments of extreme
caution due to the struggling Russian and Japanese economies, uncertainty in
Brazil and the necessary bailout of Long Term Capital Management, the highly
leveraged hedge fund whose failure threatened world markets. The year's second
half started off on the downside, as problems that began in Asia in late 1997
circled the world with a vengeance, culminating in Russia's debt default this
August and the potentially calamitous effect of the huge derivative positions
held by LTCM. The MSCI World index retreated almost 25% to 1997 levels in
October on investors' fear that the U.S. and European markets could not escape
the Asian crisis. Central banks, fearing the worst, lowered rates in the last
quarter of 1998. The result was an unexpected and dramatic rise in share prices
worldwide. For the year, the MSCI World index rose nearly 23%, with the index up
nearly 21% in the last quarter alone. By December 31, 1998, the MSCI World Index
traded at 29 times earnings, 14 times cash flow, almost 3.5 times book value and
with a meager 1.6% dividend yield. These all represent historically lofty levels
for global stock markets.
In America, continued low inflation in real asset prices, stable economic
growth and the Federal Reserve's lower interest rate policy propelled stock
prices to within one percent of their all time high. Purchases of internet
related stocks by retail investors, in an almost frenzied environment, added to
the general bullish environment leaving valuation levels at historic peaks in
the U.S. Price to earnings ratios of thirty times, price to book values of over
five times and yields of one percent for the overall market led one Japanese
official to claim that the stock market in America had reached "bubble"
proportions. The Japanese are in a unique position to comment, having seen their
own stock and real estate markets reach "bubble" proportions in the late 1980's,
only to collapse by approximately fifty percent and leaving a legacy of economic
problems which the Japanese have addressed unsuccessfully for ten years. US
equity valuations are certainly well beyond the levels which caused Fed Chairman
Greenspan to warn of the market's "irrational exuberance". Liquidity flows and
the continuing migration of money into indexing have exacerbated valuation
excesses. When corporate profit growth expectations of less than five percent at
best are factored in, such valuations are increasingly difficult to justify.
The fourth quarter of 1998 also marked the end of the preparation for the
Euro, which has helped boost continental European equity markets for several
years and culminated in an 18% gain during the year's final quarter. European
markets stood 5% from their all time high at year-end. The main benefit in 1998,
as in the last several years, has been both lower rates and the convergence of
rates among the eleven Euro participants. Fears of a widespread economic
slowdown during the third quarter's global turmoil caused the central banks of
Euroland to follow the U.S. Federal Reserve's lead in the final quarter and
lower interest rates, converging on a single rate of 3%. Mergers and
consolidations resumed almost immediately and privatizations that had been
shelved due to lack of liquidity came successfully to the market. As European
companies are forced to compete with cross-border competitors, we expect cost
cutting and synergistic
[14]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
consolidations and restructurings to continue to enhance shareholder value.
Energy is one such industry that has been recently active in creating cost
cutting and synergistic mergers. Low oil prices and the need to fund
increasingly costly exploration have caused oil companies to seek partners for
reinvestment in the industry. We have exploited share price weakness as a result
of depressed oil prices to bring the portfolio's weighting in this sector to
almost 6.5%, buying large quality companies like Shell Royal Dutch and Elf
Aquitaine that we believe will be among the survivors of this wave of
consolidation.
Going forward, a continued benefit of the common currency may be more
efficient capital markets, which will increase the flexibility and availability
of capital while also lowering its cost. For the Euro currency to be a long-term
success, European countries must lower unacceptably high unemployment. Europe
urgently needs to place cheaper capital in the hands of entrepreneurs and small
business, while lowering regulations and social payment programs, in order to
spur job creation. Importantly, the issue of job mobility and fluidity among the
Euro participant countries must be addressed. With the Euro comes the loss of
independent monetary and fiscal tools as a means to stimulate individual
countries' economic growth prospects. Therefore, a freer movement of labor from
slower growth regions to higher growth areas will be a key determinant of the
common currency's longer-term success. Finally, policy makers in Europe must
maintain a careful balance between supporting a strong Euro to solidify
confidence in the new currency, and still maintain the competitive positions of
European exports globally.
In Asia, the financial crisis that imploded the regions' markets in late
1997 appeared to be deepening and broadening in the affected economies until the
fourth quarter, when interest rate declines eased the pressure on Asian
currencies. While lower interest rates fueled liquidity throughout the world
markets, the impact was perhaps most evident in the Asian markets where the
economies and markets had experienced painful declines and the crisis had pushed
interest rates to double digits. As interest rates retreated, banks returned to
the market to lend. In Hong Kong, where the Portfolio has its largest weighting
in the region, confidence in banks and property stocks, two of the sectors
hardest hit by tightening credit, rebounded as banks were able to make financing
available to corporations and homebuyers. New housing and mortgage policies
implemented by the government further aided the banking and property sectors. In
other countries, better export conditions, lower import demand and global
financial assistance helped to stabilize or build foreign exchange reserves.
With improved economic conditions, investors finally reacted to the
substantially depressed valuations and drove stock prices higher. Although the
Far East markets were among the most profitable in the fourth quarter, rising on
average by twenty seven percent, they stood up only one percent for the year and
forty four percent below their peak. Korea had the best performance of all
global markets, rising over 130% in US dollar terms. This market however, still
remains 60% below its peak and the region as a whole maintains on fragile ground
mainly due to continued weak economic conditions in Japan. Japan's specific
problems aside, we expect that the benefits of lower interest rates and
available credit will spread gradually through the Asian economies, improving
corporate balance sheets and earnings, while lowering the number of
non-performing loans plaguing Asian banks. We feel strongly that lower interest
rates may be the catalyst for Asia's recovery and that the Portfolio's 15%
weighting in Asia will be a significant long-term benefit.
As to Japan, the banking system is mired in bad debts and insufficient
equity capital and there is no credible plan to address the need to recapitalize
the financial industry. Consumption growth remains virtually nonexistent, and
____________________________________________________________________________[15]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
[line chart]
World Growth Stock Portfolio and the MSCI World Index
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
World Growth MSCI
Stock Portfolio World Index
<S> <C> <C>
1985 10000 10000
9112 10137
10526 11822
12932 14371
12715 15328
12765 16146
13449 16882
14918 20707
14999 21851
16167 23311
12408 19712
13855 22022
14352 21836
14141 21928
14034 24433
15373 25008
15862 24689
18247 27584
18041 28634
17244 24562
18671 26580
15554 21760
16176 23904
17797 26288
17325 25434
18848 27260
19812 28439
19777 26152
20910 26660
20281 27143
21015 27114
22440 29479
23314 31306
25138 32814
28014 33384
27156 33628
26728 34678
28551 35464
27248 35248
27603 36944
29865 38568
31357 40772
31703 42762
33105 44543
34373 45880
34737 46568
37795 48757
38862 48935
43136 56368
47062 58029
43588 56656
48979 64769
47104 66084
39514 58160
1998 44831 70223
</TABLE>
[end line chart]
[sidebar]
- -----------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------
<TABLE>
<CAPTION>
MSCI
WORLD WORLD
GROWTH INDEX
<S> <C> <C>
1 YEAR 2.85% 22.78%
5 YEAR 9.79% 13.94%
10 YEAR 12.32% 8.80%
INCEPTION 11.82% 15.63%
</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.
[end sidebar]
government spending to try to lift the economy out of recession has exacerbated
the country's huge public-sector deficit. Yet, for the first time in over a
decade, valuations in Japan are looking somewhat attractive. On a price-to-sales
basis, Japan is selling at about 60% of sales and 50% of book value, while the
U.S. market is selling at almost two times sales and over five times book value
- - an almost complete reversal of relative valuations in the last ten years. In
that time, Japan has experienced a secular bear market, been through a virtual
depression and suffered through a huge deflation. Currently, Japan's return on
equity and level of corporate earnings are extremely depressed, but valuations
are, to a large degree, reflecting the poor fundamentals. Investments in Japan
currently represent almost 4% of the Portfolio.
Despite record amounts of cross-border merger activity in Latin America,
primarily driven by the privatization of Telebras, this region remained in what
the Financial Times of London has called a "rehabilitation phase". The unwinding
of Brazilian foreign exchange reserves, devaluation fears and the lack of strong
international financial policies kept equity markets in the region under
pressure. Brazil ended 1998 down 44% and 57% below its peak, closely followed by
Mexico, down 36% and 56%, and Argentina, down 27% for the year and 35% from the
peak. Given Templeton's time honored philosophy of looking for bargain
investments in times of uncertainty and pessimism, the Portfolio's Latin
American holdings will likely increase, going forward.
Other than volatility, one other consistency around the world in 1998 was
the underperformance of inexpensive stocks with low price to earnings ratios
while large, highly valued, more expensive issues, as measured by price to
earnings ratios, performed relatively well across all countries and industry
sectors. In fact, the performance differential based on valuation has never been
wider. We believe this is an abnormal relationship which typically occurs
towards the peak in investor stock activity, as trends and past performance are
chased. Longer term, a value style, consistently and patiently applied, has
proven successful as indicated by the Portfolio's long term performance.
In this turbulent time, we have remained, and we will continue to remain
focused on finding undervalued investments by taking advantage of declines in
markets to buy stocks that we believe will flourish in the current environment.
In particular, we have focused on companies that will benefit from low interest
rates and companies that continue to look for ways to rationalize costs in order
to continue to deliver growth in a potentially slowing global economy. We are
pleased that during the latest period, we were able to take advantage of
oversold situations and add some quality names to the portfolio before
valuations returned to current high levels. While some investors are inclined to
chase returns in names that now look expensive, we will continue to look for
undervalued companies where we believe that the market is mis-pricing their
potential. We remain convinced that those opportunities exist in all of the
world markets and that our disciplined approach will continue to enable us to
uncover them.
[16]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December December December December December
31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 23.28 $ 23.31 $ 21.20 $ 19.00 $ 20.89
Income From Investment Operations
Net investment income 0.56 0.53 0.49 0.45 0.25
Net gains and losses on
securities and foreign currency
(both realized and unrealized) 0.12 2.97 3.56 2.65 (0.89)
------------ ------------ ----------- ----------- -----------
Total from investment operations 0.68 3.50 4.05 3.10 (0.64)
Less Distributions to Shareholders
Dividends from net investment income (0.47) (0.53) (0.48) (0.43) (0.25)
Dividends in excess of net
investment income (0.03)
Distributions from capital gains (1.59) (2.76) (1.46) (0.47) (0.81)
Distributions in excess of capital gains (0.21) (0.19)
Returns of capital
------------ ------------ ----------- ----------- -----------
Total distributions (2.06) (3.53) (1.94) (0.90) (1.25)
Net asset value, end of year $ 21.90 $ 23.28 $ 23.31 $ 21.20 $ 19.00
============ ============ =========== =========== ===========
Total Return (A) 2.85% 15.33% 19.22% 16.35% (3.05%)
Ratios to Average Net Assets:
Expenses 0.92% 0.91% 0.88% 0.96% 1.00%
Net investment income 2.44% 2.33% 2.20% 2.31% 1.56%
Portfolio Turnover Rate 33.95% 30.22% 27.50% 18.09% 18.47%
Net Assets, At End of Year $110,897,303 $105,567,503 $91,995,634 $73,692,357 $52,903,768
</TABLE>
(A) Total return assumes reinvestment of all dividends during the year 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.
____________________________________________________________________________[17]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------
COMMON STOCK--96.53%
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense-1.98%
Kaman Corp., Class A 73,600 $ 1,182,200
Rolls-Royce, PLC 43,000 178,153
Saab AB, Class B+ 49,800 522,238
The Boeing Co. 9,600 313,200
------------
2,195,791
------------
Agricultural Operations-0.90%
Archer-Daniels-Midland Co. 58,065 997,992
------------
997,992
------------
Airlines-1.66%
British Airways, PLC 71,400 481,445
Helikopter Services Group, ASA 41,600 196,567
Singapore Airlines, Ltd. 92,800 680,533
Swire Pacific, Ltd. 732,000 486,614
------------
1,845,159
------------
Appliances-0.63%
Best Denki Company, Ltd. 57,200 433,577
Guangdong Kelon Electrical
Holdings Company, Ltd. 299,000 266,309
------------
699,886
------------
Automotive Manufacturing-3.13%
Fiat, SPA, RNC 514,910 1,030,512
Fiat, SPA 150,830 525,058
Volkswagen, AG 24,000 1,916,541
------------
3,472,111
------------
Automotive Parts & Equipment-1.73%
Arriva, PLC 54,400 340,340
Autoliv, Inc., Swed Dep. Receipt 22,200 797,014
Goodyear Tire & Rubber Co. 15,500 781,781
------------
1,919,135
------------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Banking-4.75%
Banco Bradesco, SA, ADR 45,500 $ 252,316
Bank Austria, AG 30,800 1,567,059
Bank Handlowy W Warszawie,
GDR, Series 144A 71,500 882,060
Credit Commercial de France 14,800 1,375,081
Development Bank of
Singapore, Ltd. 57,900 522,854
Kookmin Bank+ 700 5,711
National Bank of Canada 41,300 666,866
------------
5,271,947
------------
Broadcasting-0.06%
Television Broadcasts, Ltd. 26,000 67,123
------------
67,123
------------
Building Construction-0.02%
Sociedade de Construcoes
Soares da Costa, SA 6,400 21,742
------------
21,742
------------
Building Materials-2.22%
Cemex, SA de CV, Class B 130,000 321,395
Nichiha Corp. 67,200 614,231
Owens Corning 19,600 694,575
Pioneer International, Ltd., ADR 200,000 423,220
Pioneer International, Ltd. 195,000 412,629
------------
2,466,050
------------
Chemicals-0.20%
Yizheng Chemical Fibre
Company, Ltd. 2,408,100 220,699
------------
220,699
------------
Computer Network-1.08%
3Com Corp.+ 26,600 1,192,013
------------
1,192,013
------------
Construction-0.41%
Grupo Imsa, SA de CV, ADR 43,000 448,813
------------
448,813
------------
</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 DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Electrical Equipment-0.22%
Centrais Electricas Brasileiras,
SA, ADR 25,700 $ 246,748
------------
246,748
------------
Electronics-0.51%
Sony Corp. 7,700 561,817
------------
561,817
------------
Electronics - Semiconductors-1.06%
Applied Materials, Inc.+ 21,200 904,975
Motorola, Inc. 4,500 274,781
------------
1,179,756
------------
Engineering & Construction-2.13%
ABB AB, Class A 80,000 853,741
Internatio-Muller, N.V. 60,800 1,506,474
------------
2,360,215
------------
Environmental Controls-0.93%
Waste Management, Inc. 22,185 1,034,376
------------
1,034,376
------------
Financial Services-2.82%
Hutchison Whampoa, Ltd. 368,000 2,600,749
ICICI, Ltd. 43,900 243,026
Singapore Finance, Ltd. 308,000 281,867
------------
3,125,642
------------
Food Products-3.03%
IBP, Inc. 54,609 1,590,487
Illovo Sugar, Ltd. 344,600 366,122
Northern Foods, PLC 255,954 604,750
Showa Sangyo Company, Ltd. 379,000 799,687
------------
3,361,046
------------
Food Service & Restaurants-0.47%
Sobeys Canada, Inc.+ 47,204 522,471
------------
522,471
------------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Forest Products & Paper-3.82%
Boise Cascade Corp. 19,000 $ 589,000
Carter Holt Harvey, Ltd. 705,354 633,440
Fletcher Challenge Forests 762,276 253,689
International Paper Co. 25,000 1,120,313
Portucel Industrial
Empresa Produtora+ 97,000 636,339
Stora Enso Oyj, Class R 111,300 1,002,366
------------
4,235,147
------------
Import & Export-1.64%
Fritz Companies, Inc.+ 60,300 651,994
Li & Fung, Ltd. 564,000 1,168,478
------------
1,820,472
------------
Insurance-8.75%
Ace, Ltd. 13,700 471,794
Axa 12,800 1,856,069
EXEL, Ltd., Class A 6,900 517,500
HIH Insurance, Ltd. 207,300 274,637
National Mutual Asia, Ltd. 750,000 561,508
ReliaStar Financial Corp. 36,200 1,669,725
UNUM Corp. 32,700 1,908,862
Zurich Allied, AG+ 3,300 2,443,465
------------
9,703,560
------------
Machinery-0.21%
Makita Corp. 21,000 234,395
------------
234,395
------------
Manufacturing- 5.01%
Alfa, SA de CV, Class A 127,500 359,692
BTR, PLC 457,600 944,133
Caradon, PLC 213,500 365,899
Desc, SA de CV, ADR 400 7,675
Desc, SA de CV, Series B 185,000 155,263
Laird Group, PLC 238,000 645,491
McBride, PLC 439,100 716,003
Plettac, AG 4,400 344,761
Valmet Oyj 56,400 757,451
Varitronix International, Ltd. 483,500 904,963
</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 DECEMBER 31, 1998--CONTINUED
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Manufacturing-Continued
Vickers, PLC 118,933 $ 354,227
------------
5,555,558
------------
Medical Products-0.71%
Nycomed Amersham, PLC 112,875 785,212
------------
785,212
------------
Mining & Metals - Ferrous & Nonferrous-2.73%
Industrias Penoles, SA 143,300 428,899
Oregon Steel Mills 67,800 805,125
Pechiney, SA, Class A 26,136 853,888
SKF, AB, Class B 48,000 559,620
Yamato Kogyo Company, Ltd. 65,000 376,873
------------
3,024,405
------------
Mining & Metals - Precious-1.58%
Anglo American Platinum Corp. 72,482 994,339
WMC, Ltd. 250,800 756,830
------------
1,751,169
------------
Oil & Gas - Distribution & Marketing-1.82%
BG, PLC 105,335 664,699
Burlington Resources, Inc. 18,000 644,625
Centrica, PLC+ 251,300 505,945
Valero Energy Corp. 9,800 208,250
------------
2,023,519
------------
Oil & Gas - Integrated-3.76%
Occidental Petroleum Corp. 27,400 462,375
Ranger Oil, Ltd.+ 145,700 645,068
Repsol, SA 37,000 1,976,762
Shell Transport & Trading
Company, PLC 176,100 1,081,946
------------
4,166,151
------------
Oil & Gas Producers-2.24%
Elf Aquitaine, SA 10,500 1,214,286
YPF Sociedad Anonima 45,500 1,271,156
------------
2,485,442
------------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Pharmaceutical-1.69%
Astra AB, Class B 57,333 $ 1,167,102
Medeva, PLC 169,600 301,950
Rhone-Poulenc, SA 7,800 401,590
------------
1,870,642
------------
Publishing & Printing-0.73%
Roto Smeets de Boer, N.V. 20,500 808,334
------------
808,334
------------
Real Estate-3.17%
Jardine Matheson
Holdings, Ltd. 111,600 287,928
Meditrust Corp., Paired Stock 28,718 434,361
Nationwide Health
Properties, Inc. 42,600 918,563
Unibail 10,700 1,561,135
Wereldhave, N.V. 5,488 311,436
------------
3,513,423
------------
Retail Stores-5.65%
Coles Myer, Ltd. 283,312 1,485,720
Federated Department
Stores, Inc.+ 13,600 592,450
Hudson's Bay Co. 46,700 588,349
Matsuzakaya Company, Ltd. 154,000 806,886
Tesco, PLC 524,439 1,494,345
The Limited, Inc. 44,600 1,298,975
------------
6,266,725
------------
Telecommunications-6.91%
APT Satellite Holdings,
Ltd., ADR+ 48,300 196,219
Companhia Riograndense
Telecom - PFA+ 574,612 206,883
Newbridge Networks Corp.+ 14,800 449,550
Nortel Inversora, SA, ADR 33,300 549,450
SBC Communications, Inc. 25,300 1,125,850
Telecomunicacoes de
Sao Paulo, SA 2,457,100 211,503
</TABLE>
+Non-income producing security.
See notes to financial statements.
[20]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
Common Stock--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Telecommunications-Continued
Telecom Italia, SPA, RNC 152,669 $ 962,925
Telecomunicacoes Brasileiras,
SA, ADR+ 5,310 385,971
Telefonica de Argentinia, SA 18,100 505,669
Telefonica, SA, ADR 4,200 568,575
Telefonos de Mexico,
SA, ADR, Class L 26,700 1,299,956
Telesp Celular, SA+ 9,394,500 212,274
U S WEST, Inc. 15,200 982,300
------------
7,657,125
------------
Telecommunications Equipment-3.32%
ADC Telecommunications, Inc.+ 42,700 1,483,825
Alcatel, SA, ADR 23,227 567,610
MasTec, Inc.+ 25,500 535,500
Northern Telecom, Ltd. 21,840 1,094,730
------------
3,681,665
------------
Textiles & Apparel-0.51%
Yue Yuen Industrial Holdings 300,000 569,253
------------
569,253
------------
Transportation-2.44%
Danzas Holding AG-REG 2,325 981,798
Great Eastern Shipping Co.,
Series 144A, GDR 45,000 122,045
Great Eastern Shipping
Co., GDR+ 54,400 149,600
Guangshen Railway
Company, Ltd. 46,300 277,800
Koninklijke Frans Maas
Groep, N.V. 23,100 707,758
Koninklijke Nedlloyd, N.V. 34,600 470,134
------------
2,709,135
------------
Travel Services-1.22%
Kuoni Reisen, AG 340 1,349,108
------------
1,349,108
------------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Utilities - Electric & Gas-6.38%
Hongkong Electric
Holdings, Ltd. 299,000 $ 906,996
Iberdrola, SA 72,900 1,365,994
Korea Electric Power Corp. 35,500 879,777
National Grid Group, PLC 258,570 2,064,043
Potomac Electric Power Co. 42,362 1,114,650
Texas Utilities Co. 16,000 747,000
------------
7,078,460
------------
Water Treatment-2.30%
Kurita Water Industries, Ltd. 49,137 722,266
Thames Water, PLC 95,543 1,828,199
------------
2,550,465
------------
TOTAL COMMON STOCK
(Cost $95,372,448) 107,049,897
------------
- ----------------------------------------------------------------------
PREFERRED STOCK--2.57%
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Banking-1.69%
National Australia Bank, 7.875% 67,300 $ 1,875,988
------------
1,875,988
------------
Multimedia-0.88%
The News Corporation,
Ltd., ADR 6,904 170,442
The News Corporation,
Ltd., 5.000% 132,167 804,968
------------
975,410
------------
TOTAL PREFERRED STOCK
(Cost $2,616,113) 2,851,398
------------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[21]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
WORLD GROWTH STOCK PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ----------------------------------------------------------------------
FOREIGN BONDS & NOTES--0.26%
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Manufacturing-0.26%
Alfa, SA de CV, Series 144A,
8.000%, due 09/15/00 $ 300,000 $ 282,000
------------
282,000
------------
TOTAL FOREIGN BONDS & NOTES
(Cost $487,387) 282,000
------------
- ----------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--3.58%
Principal Market
Company Value Value
- ----------------------------------------------------------------------
U.S. Government Obligations-3.58%
U.S. Treasury Bill, 4.310%,
due 02/25/99 $ 4,000,000 $ 3,973,661
------------
3,973,661
------------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $3,973,661) 3,973,661
------------
TOTAL INVESTMENTS
(Cost $102,449,609) 102.94% 114,156,956
Other assets, less liabilities (2.94) (3,259,653)
------ ------------
TOTAL NET ASSETS 100.00% $110,897,303
====== ============
</TABLE>
See notes to financial statements.
[22]___________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
"Looking forward, the seeds of favorable conditions in hard
assets are being sown and value is exceptional."
--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 12/31/98
$4,333,663
------------------------------------------------------------------------
NUMBER OF HOLDINGS
76
------------------------------------------------------------------------
PORTFOLIO TURNOVER
193.80%
- --------------------------------------------------------------------------------
[sidebar]
------------------------------------------------------------------------
IN THIS SECTION
------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------------------------
DEREK S. VAN ECK, CFA
[bullet] M.B.A. from J.L. Kellogg Graduate
School of Management
[bullet] B.A. from Williams College
[end sidebar]
____________________________________________________________________________[23]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
[pie chart]
% of Portfolio [double dagger]
Common Stock-76.66%
Short-Term Obligations-20.67%
Corporate Bonds-1.82%
Cash-0.81%
Rights and Warrants-0.04%
[end pie chart]
[sidebar]
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Real Estate 24.89%
Mining & Metals - Precious 17.47%
Oil & Gas - Integrated 9.16%
Oil & Gas Producers 6.84%
Forest Products & Paper 6.65%
Mining & Metals - Ferrous
& Non-Ferrous 6.24%
Lodging 2.79%
Oil & Gas Services 1.82%
Oil & Gas - Marketing
& Distribution 1.39%
Utilities - Electric & Gas 0.89%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP COUNTRIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
United States 74.49%
Canada 14.87%
Australia 3.72%
South Africa 1.77%
France 1.63%
Chile 0.89%
United Kingdom 0.83%
Finland 0.63%
Ghana 0.39%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
Executive Summary
The Global Hard Assets Portfolio (the "Portfolio") endured a difficult year
in 1998 as difficult global economic conditions, oversupplied commodity markets,
and difficult real estate markets all conspired to pull hard asset markets
lower. As was true in equity markets, value investments provided little support
and opportunity, despite relative valuations at 30 year lows in some sectors.
However, looking forward, the seeds of favorable conditions in hard assets are
being sown and value is exceptional. We believe the multiple shocks that
resulted in difficult conditions are priced into current valuations. As we look
forward, we see multiple opportunities in cheap and under-owned hard asset
stocks. We expect these contrarian opportunities will be recognized over the
next several years.
Review
All hard asset markets declined in value during 1998, as difficult economic
and treacherous financial conditions lead to a decline in the Portfolio. The
confluence of events which led to the decline have not been seen in decades. In
fact, policy makers called the world financial crisis that hit during 1998 the
worst in 50 years. The emerging market crisis was only part of the story in hard
assets as the warmest year in decades (or centuries) affected energy prices,
country debt defaults and disastrous hedge fund performance altered risk spreads
and financial markets, and legislative changes affected the valuation and
structure of real estate securities. Even Presidential Impeachment was thrown
into the mix, as the end of 1998 was welcomed by all participants in hard asset
markets.
The most significant factor behind the decline in hard assets was the
difficult economic conditions which prevailed throughout the year. Markets
witnessed an economic earthquake caused by massive credit creation over a
multi-year period. This credit creation eventually led to over-capacity and a
large debt burden and what economists have called deflationary conditions. More
practically, 1997 saw the beginnings of the Asian economic crisis that spread
geographically in 1998 to other developing markets such as Russia and Latin
America, and affected developed markets such as US markets during the third
quarter. In addition, European economies finished the year with downward
momentum. The net result was a slowdown in global growth from the 3.7% rate the
global economy enjoyed in 1997 to a significantly slower 1.8% rate in 1998. Many
markets were affected by this slowdown, but commodity markets and the
manufacturing sectors were hit especially hard as industrial production slowed
throughout the world.
However, central bankers and politicians recognized the difficult economic
condition and started easing monetary policy dramatically in the fourth quarter.
In fact, the final three months of the year saw something like 75 interest rate
cuts by more than 37 central banks. This massive rate cut, which we believe will
continue during 1999, is sowing the seeds for eventual reflation, a very
positive development for hard assets. In the meantime, hard asset markets have
to continue to battle against the forces of deflation and over-capacity that
dogged them this year. We think that reflationary forces will dominate this
battle in the long term, but that deflationary influences may hold sway in the
short-term. We expect that multiple opportunities will exist in hard asset
markets during the first half of the year.
[24]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
Commodities and Resource Equities
The significant slowdown in global growth that hard asset markets endured
negatively impacted commodity prices, in turn negatively impacting earnings and
values of hard asset producers. In addition to this "demand shock", other
factors affected demand, including the warmest year in decades. In fact,
according to the National Oceanic and Atmosphere Administration, 1998 was the
warmest year in the Northern Hemisphere in the last 1200 years. This clearly
negatively affected the demand for oil and other energy products and helped
cause the 33% decline in oil prices to the lowest prices in real terms since
1986. This decline in demand, combined with a significant build-up in supply in
the last several years, lead to the largest decline in commodity prices recorded
by the Goldman Sachs Commodity Index, a drop of 35%. This negatively impacted
earnings of all commodity producers and share prices fell as a result. The worst
damage occurred in the oil service sector, where share prices declined over 40%.
In addition, exploration shares declined approximately 35%. Unfortunately, the
Portfolio had significant weightings in both sectors as we took the view that
equity multiples of these companies were trading at huge discounts relative to
history and that these stocks represented value investments. Instead, earnings
projections were continuously declined as oil prices continued down its path to
$10 per barrel. We did not foresee these prices and held on to investments too
long. In other commodity markets, metals prices declined 20% while shares of
metal producers declined nearly 30%. The Portfolio avoided the carnage in these
markets by keeping allocations low.
It appears to us that commodity markets have priced in the difficult
economic conditions that exist in the world and the surprise of 1999 could be
that commodity markets perform well. Asian economies appear to be beginning the
recovery process and economic growth continues to surprise on the upside here in
the US. In addition, valuations on commodity companies are cheap with relative
price/sales ratios at 30-year lows. Little buying is necessary to move these
companies significantly higher. In addition, we expect more consolidation
activity in coming years and think this will buoy the sector, particularly over
the long term. One of our favorite groups is the forest products group which
should be a beneficiary from improving supply/demand balances and the minimal
capital spending in recent years. These markets will be choppy, but we believe
opportunities are exceptional.
Gold
Gold, the best performing major commodity in 1998, ended the year unchanged
while gold shares fell 12%. Perceptions of gold bounced throughout the year
between negative and positive influences. Negative influences included reduced
demand from Asia, concerns of gold sales by European central banks, and lack of
interest in gold as inflation protection. The positive influences included
potential reflation and gold's role as a safe-haven asset in times of turmoil.
We are getting more positive on gold and believe gold is likely to trade in
a higher range and surpassing 1998's high of $315. First, gold is cheap. At
their August lows, gold was at the lowest prices in real terms since 1973. In
real terms, gold is back to levels existing in the 1920's and 1950's-1960's when
paper currencies and the global economy were relatively sound. Second, we are
concerned that the dollar may come under additional pressure as it faces what
appears to be a relatively sound Euro, a large current account deficit and less
attractive interest rate differentials. The dollar is already significantly
below its highs. Generally, the dollar and gold move inversely. Third, the
significant global monetary easing we saw in the fourth quarter is likely to
continue and is sowing the seeds of reflation and possible renewed investment
interest in gold.
____________________________________________________________________________[25]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
[line chart]
Global Hard Assets Portfolio, S&P 500 Index and Lipper Benchmark
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
Global Hard S&P
Assets 500 Lipper
Portfolio Index Benchmark
<S> <C> <C> <C>
1985 10000 10000 10000
9602 9916 9481
9960 11626 9069
10217 13264 10276
10141 14049 9058
12987 13070 12189
13646 13800 12415
22164 16745 19345
20392 17584 18429
24761 18746 22113
18325 14519 16944
16901 15345 15396
16755 16359 15041
14766 16411 13359
14433 16915 13768
15249 18110 14711
14364 19705 14488
15006 21812 15770
17210 22256 18387
15812 21585 16804
13785 22936 14925
14846 19799 15425
13035 21564 13893
12337 24685 13197
13532 24631 14518
12194 25947 13445
12316 28106 13809
11826 27399 12923
12760 27921 13400
12844 28801 12548
11916 30245 11167
14112 31562 13844
18279 31711 18325
15635 32520 16453
19578 33274 20875
19639 32021 19124
17542 32160 18704
19936 33732 22616
16882 33725 19626
17214 36998 18492
17323 40519 18717
18152 43729 19788
17348 46353 18676
21724 49103 22803
19740 51595 21453
18695 53500 21026
17793 58251 19758
16473 58505 18114
14423 68711 15898
14571 73857 16091
9852 75978 11395
10722 86553 12346
9650 89402 11564
8439 80526 9846
1998 8487 97646 9610
</TABLE>
[end line chart]
[sidebar]
- ---------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------------
<TABLE>
<CAPTION>
GLOBAL HARD S&P 500 LIPPER
ASSETS INDEX BENCHMARK
<S> <C> <C> <C>
1 YEAR -13.85% 28.58% -15.66%
5 YEAR -15.39% 24.09% -14.37%
10 YEAR -5.17% 19.22% -3.53%
INCEPTION -1.21% 18.48% -0.30%
</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 December 31, 1998. The Lipper Gold Fund and Natural
Resources Fund averages are based on the returns 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.
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.
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.
[end sidebar]
Real Estate
Despite a benign interest rate environment, healthy underlying
fundamentals, and attractive yields, real estate securities declined
approximately 16.9% in 1998. Real estate was the largest weighting in the fund
during the year, averaging approximately 30%, and the decline was a significant
contributor to the negative performance of the fund. At the beginning of the
year, our assumptions had been for healthy cash flow growth of approximately 15%
and stable multiples. While cash flow growth came in at the 15% rate, an
unexpected decline in multiples resulted in the difficult performance. This
significant multiple contraction arose primarily from two factors: concern over
property values during the first half of the year and lack of financing in the
second half of the year.
We remain relatively positive on real estate going into the new year, with
an expected total return of approximately 15%, arising from cash flow growth of
approximately 10%, yields of 7%, and a relatively constant multiple. We would
note that multiples on real estate securities are exceptionally low, close to
the levels of the recent 1990-91 market trough. At the very least, it is
apparent to us that multiples will not contract significantly this year. Thus we
feel comfortable with our weighting and total return expectation.
[26]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December December December December December
31, 1998 31, 1997 31,1996 31, 1995 31, 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 8.92 $ 16.60 $ 16.61 $ 16.25 $ 19.00
Income From Investment Operations
Net investment income (loss) 0.17 0.02 (0.03) 0.05 0.03
Net gains and losses on securities
and foreign currency (both
realized and unrealized) (1.41) (7.30) 0.45 0.40 (2.65)
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.24) (7.28) 0.42 0.45 (2.62)
Less Distributions to Shareholders
Dividends from net investment income (0.13) (0.02) (0.05) (0.03)
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 (0.13) (0.40) (0.43) (0.09) (0.13)
Net asset value, end of year $ 7.55 $ 8.92 $ 16.60 $ 16.61 $ 16.25
========== ========== ========== ========== ==========
Total Return (A) (13.85%) (44.63%) 2.57% 2.76% (13.77%)
Ratios to Average Net Assets:
Expenses 1.44% 1.07% 1.04% 1.01% 0.99%
Net investment income 2.13% 0.63% (0.11%) 0.24% 0.18%
Portfolio Turnover Rate 193.80% 19.70% 64.78% 23.98% 11.12%
Net Assets, At End of Year $4,333,663 $5,204,654 $7,554,427 $6,867,645 $7,351,625
</TABLE>
(A) Total return assumes reinvestment of all dividends during the year 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.
____________________________________________________________________________[27]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--82.07%
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Forest Products & Paper-7.12%
Bowater, Inc. 1,400 $ 58,013
Fort James Corp. 1,200 48,000
Plum Creek Timber
Company, L.P. 4,100 106,856
St. Laurent Paperboard, Inc.+ 9,300 65,092
Weyerhaeuser Co. 600 30,487
-------
308,448
-------
Lodging-2.98%
Accor, SA 350 75,814
Patriot American Hospitality, Inc. 8,900 53,400
-------
129,214
-------
Machinery-0.42%
NQL Drilling Tools, Inc., Class A+ 7,000 18,230
-------
18,230
-------
Mining & Metals - Ferrous & Nonferrous-6.68%
Aluminum Company of America 2,200 164,038
Billiton, PLC 18,900 37,501
Nucor Corp. 1,000 43,250
Portman Mining, Ltd. 15,600 8,324
Steel Dynamics, Inc.+ 3,100 36,425
-------
289,538
-------
Mining & Metals - Precious-16.71%
Acacia Resources, Ltd. 32,500 48,140
AngloGold, Ltd. 1,000 38,962
Angold, Ltd., ADR 3,000 58,688
Ashanti Goldfields Co., Ltd. 2,222 18,085
Barrick Gold Corp. 6,500 126,750
Delta Gold, NL 14,400 21,904
Euro-Nevada Mining Corp. 4,700 76,502
Gold Fields of South Africa,
Ltd., ADR 4,000 7,000
Gold Fields, Ltd.+ 6,210 34,309
Meridian Gold, Inc.+ 3,900 22,181
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Mining & Metals - Precious-Continued
Pasminco, Ltd. 123,000 $ 93,548
Placer Dome, Inc. 6,300 72,450
Romarco Minerals, Inc.+ 16,000 15,626
Stillwater Mining Co.+ 2,200 90,200
-------
724,345
-------
Oil & Gas - Distribution & Marketing-1.49%
Burlington Resources, Inc. 1,800 64,463
-------
64,463
-------
Oil & Gas - Integrated-9.80%
Exxon Corp. 1,300 95,063
Mobil Corp. 800 69,700
Occidental Petroleum Corp. 5,000 84,375
Phillips Petroleum Co. 1,900 80,987
Pride International, Inc.+ 2,900 20,481
Stone Energy Corp.+ 1,500 43,125
Swift Energy Co.+ 4,200 30,975
-------
424,706
-------
Oil & Gas Producers-7.32%
Anadarko Petroleum Corp. 1,300 40,137
Apache Corp. 3,000 75,937
Berkley Petroleum Corp.+ 1,500 11,329
Chevron Corp. 600 49,763
Forcenergy, Inc.+ 6,000 15,750
KCS Energy, Inc. 4,700 14,394
Kerr-McGee Corp. 900 34,425
Pogo Producing Co. 3,000 39,000
Santa Fe International Corp. 2,500 36,563
-------
317,298
-------
Oil & Gas Services-1.95%
BJ Services Co.+ 1,800 28,125
Gulf Island Fabrication, Inc.+ 1,900 14,725
J. Ray McDermott, SA+ 1,700 41,544
-------
84,394
-------
</TABLE>
+Non-income producing security.
See notes to financial statements.
[28]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Real Estate-26.65%
<S> <C> <C>
AMB Property Corp. 1,500 $ 33,000
Arden Realty, Inc. 1,700 39,419
Bentall Corp. 2,000 20,835
Boardwalk Equities, Inc.+ 8,000 88,026
Boston Properties, Inc. 1,300 39,650
Brandywine Realty Trust 1,500 26,812
Cadillac Fairview Corp.+ 4,000 74,750
Carramerica Realty Corp. 2,000 48,000
Cornerstone Properties, Inc. 7,000 109,375
Equity Office Properties Trust 2,500 60,000
Equity Residential Properties Trust 1,500 60,656
Kilroy Realty Corp. 2,000 46,000
Mack-Cali Realty Corp. 2,300 71,012
New Plan Excel Realty Trust 2,500 55,469
Oxford Properties Group, Inc.+ 2,350 27,847
Philips International Realty Corp. 2,500 38,438
Prentiss Properties Trust 3,200 71,400
Prologis Trust 2,000 41,500
Sponda Oyj+ 5,000 29,329
Starwood Hotels & Resorts
Worldwide, Inc. 1,500 34,031
The Macerich Co. 1,500 38,438
TrizecHahn Corp. 4,500 92,250
United Dominion Realty Trust 800 8,250
---------
1,154,487
---------
Utilities - Electric & Gas-0.95%
Enersis SA, ADR 1,600 41,300
---------
41,300
---------
TOTAL COMMON STOCK
(Cost $4,189,218) 3,556,423
---------
- ----------------------------------------------------------------------
RIGHTS AND WARRANTS--0.04%
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Mining & Metals - Precious-0.04%
Randfontein Estates Gold,
exp. 06/01/02+ 2,470 $ 1,743
---------
1,743
---------
TOTAL RIGHTS AND WARRANTS
(Cost $0) 1,743
---------
- ----------------------------------------------------------------------
CORPORATE BONDS-1.95%
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Mining & Metals - Precious-1.95%
YenGold Structured Note,
4.850%, due 09/30/99 $ 100,000 $ 84,430
---------
84,430
---------
TOTAL CORPORATE BONDS
(Cost $100,000) 84,430
---------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[29]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--22.12%
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Financial Services-10.62%
American Express Capital Corp.,
4.000%, due 01/04/99 $ 230,000 $ 229,923
General Electric Capital Corp.,
4.700%, due 01/04/99 230,000 229,910
----------
459,833
----------
U.S. Government & Agency Obligations-11.50%
U.S. Treasury Bill, 4.400%,
due 01/21/99 500,000 498,775
----------
498,775
----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $958,608) 958,608
----------
TOTAL INVESTMENTS
(Cost $5,247,826) 106.18% 4,601,204
Other assets, less liabilities (6.18) (267,541)
------ ----------
TOTAL NET ASSETS 100.00% $4,333,663
====== ==========
</TABLE>
See notes to financial statements.
[30]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
"We believe our strategy of searching out rapidly
growing companies at reasonable prices, should
benefit shareholders in 1999."
--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 12/31/98
$95,795,377
------------------------------------------------------------------------
NUMBER OF HOLDINGS
229
------------------------------------------------------------------------
PORTFOLIO TURNOVER
77.07%
- --------------------------------------------------------------------------------
[sidebar]
- ------------------------------------------------------------------------
IN THIS SECTION
- ------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------------------------
JOHN W. BALLEN
Executive Vice President
[bullet] Director, MFS Equity Portfolio Management
[bullet] Joined MFS in 1984
[bullet] Serves as MFS senior small capitalization growth equity
portfolio manager
[bullet] M.B.A. from Standford University Graduate School of Business
[bullet] B.A. from Harvard University
------------------------------------------------------------------------
TONI Y. SHIMURA
Vice President, Investments
[bullet] Joined MFS in 1987
[bullet] M.B.A. from Sloan School of Management, Massachusetts
Institute of Technology
[bullet] B.A. from Wellesley College
[end sidebar]
____________________________________________________________________________[31]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
[pie chart]
% of Portfolio [double dagger]
Common & Preferred Stock-98.17%
Short-Term Obligations-1.66%
Cash-0.17%
[end pie chart]
[sidebar]
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Cisco Systems, Inc. 7.48%
Tyco International, Ltd. 6.70%
Oracle Corp. 5.58%
MCI WorldCom, Inc. 5.47%
Compuware Corp. 5.31%
Microsoft Corp. 5.21%
Computer Associates
International, Inc. 3.50%
BMC Software, Inc. 3.03%
Cendant Corp. 2.98%
Time Warner, Inc. 2.26%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Computer Software -
Mainframe 16.01%
Retail Stores 11.89%
Telecommunications 11.31%
Computer Software - Mini
& Micro 10.64%
Computer Network 9.98%
Manufacturing 7.24%
Healthcare 3.57%
Broadcasting 3.42%
Electronics -
Semiconductors 3.17%
Commercial Services 2.98%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
The past year was a volatile one buffeted by many crosscurrents. While the
U.S. economy appeared to be in good shape - helped by generational low interest
rates, non-existent inflation, and several easings by the Federal Reserve - the
rest of the world continued to be negatively affected by the Asian contagion of
slowing growth and devaluation. The uncertainty in global markets and the
prospect for a deceleration in U.S. economic growth thus increased the appeal of
liquidity and companies whose businesses were less subject to the vagaries of
international economies. As a result, the mid- and larger-capitalization stocks
in our portfolio did better than our smaller holdings, as did our companies
which had little exposure to countries abroad.
The Portfolio continued to benefit from the strong performance of its
largest sector, technology, where earnings were surprisingly robust despite
issues relating to Asia. Stocks which contributed to performance included
Compuware, Cisco Systems, Microsoft, Oracle and Sun Microsystems - all of whose
products were in solid demand by corporations seeking enhanced productivity.
Deregulation and the rapid growth of data services in the telecommunications
industry boosted the values of holdings such as MCI WorldCom and Global
TeleSystems. Consumer demand was more vibrant than expected. This helped
successful specialty retailers such as Staples and Office Depot and also
provided a positive backdrop for food and drug retailing companies such as
Rite-Aid and Fred Meyer where strong pharmacy sales helped storewide sales.
There were a few areas which did not do as well as we hoped. Cendant, the
company created by the merger of HFS and CUC International, suffered because of
accounting irregularities at
[32]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
CUC. In 1999, a major restructuring and refocusing of core businesses combined
with a multi-billion dollar share buyback should help that company contribute to
performance. Health maintenance organizations also disappointed as a result of
an in-balance between costs and pricing. Improved pricing and the reduction of
unprofitable businesses should help in 1999.
Technology continues to be a key area of emphasis since software,
networking, and telecom equipment companies are likely to generate some of the
strongest earnings growth in the market. This entire area is being helped by
strong spending on communications and the Internet. Another area which offers
great promise is telecommunications services, where mergers and the strong
growth of data transmission are enhancing valuations. In our view, the companies
which can grow the fastest will be well rewarded by the marketplace. Thus, we
believe our strategy of searching out rapidly growing companies at reasonable
prices, should benefit shareholders in 1999.
Looking forward, we believe the fundamental outlook for emerging growth
stocks remains positive. We continue to think that we are at the beginning of a
slowdown in profit growth for many of the large-cap multinational companies
which make up the broader market averages. This is a positive for emerging
growth stocks, which should be able to grow much faster than the overall
economy. Moreover, inflation and interest rates are both low, which provides a
favorable backdrop for the valuation of emerging growth stocks.
[line chart]
Emerging Growth Portfolio, Russell 2000 Index and Russell 2000 Growth Index
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
Emerging Russell
Growth 2000
Portfolio Growth Russell 2000
<S> <C> <C> <C>
6/95 10962 10829 10681
9/95 12821 12060 11728
12/95 13291 12239 11984
3/96 14225 12962 12593
6/96 15349 13523 13241
9/96 15938 13569 13285
12/96 15724 14264 13963
3/97 14483 13530 13244
6/97 17184 15713 15381
9/97 19507 18043 17662
12/97 18942 17430 17062
3/98 22928 19501 18819
6/98 22878 18382 17959
9/98 19792 14271 14341
12/98 25180 17645 16680
</TABLE>
[end line chart]
[sidebar]
- ------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------
<TABLE>
<CAPTION>
RUSSELL
2000 RUSSELL
EMERGING GROWTH 2000
GROWTH INDEX INDEX
<S> <C> <C> <C>
1 YEAR 32.93% 1.23% -2.55%
INCEPTION 28.60% 17.20% 14.94%
</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.
Effective January 1, 1998 the performance benchmark of the Portfolio has been
changed from the Russell 2000 Growth Index to the Russell 2000 Index. The
Russell 2000 Index better represents the investment style and objective of the
Portfolio by including a broader blend of small capitalization stocks.
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.
[end sidebar]
____________________________________________________________________________[33]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Period From
May 1, 1995
Year Ended Year Ended Year Ended Through
December December December December
31, 1998 31, 1997 31, 1996 31, 1995 (A)
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 17.47 $ 15.23 $ 13.29 $ 10.00
Income From Investment Operations
Net investment loss (0.11) (0.07) (0.05) (0.04)
Net gains and losses on securities
and foreign currency
(both realized and unrealized) 5.85 3.19 2.48 3.33
----------- ----------- ----------- -----------
Total from investment operations 5.74 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 (0.11)
Returns of capital
----------- ----------- ----------- -----------
Total distributions (0.17) (0.88) (0.49) 0.00
Net asset value, end of year $ 23.04 $ 17.47 $ 15.23 $ 13.29
=========== =========== =========== ===========
Total Return (B) 32.93% 20.47% 18.30% 32.91%
Ratios to Average Net Assets:
Expenses 0.94% 1.00% 1.16% 1.63% (C)
Net investment income (0.61%) (0.61%) (0.48%) (0.84%)(C)
Portfolio Turnover Rate 77.07% 122.85% 94.58% 30.31%
Net Assets, At End of Year $95,795,377 $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 year 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.
[34]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK--98.69%
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Advertising-0.13%
Global DirectMail Corp.+ 300 $ 7,012
Lamar Advertising Co.+ 100 3,725
Outdoor Systems, Inc.+ 3,800 114,000
---------
124,737
---------
Aerospace & Defense-0.21%
Gulfstream Aerospace Corp.+ 3,800 202,350
---------
202,350
---------
Auction House/Art Dealer-0.01%
Sotheby's Holdings, Inc. 200 6,400
---------
6,400
---------
Automotive Parts & Equipment-0.01%
CSK Auto Corp.+ 200 5,337
Dura Automotive Systems, Inc.+ 100 3,413
---------
8,750
---------
Banking-0.05%
U.S. Trust Corp. 600 45,600
---------
45,600
---------
Beverages-0.05%
Adolph Coors Co., Class B 900 50,794
---------
50,794
---------
Broadcasting-3.43%
CBS Corp. 5,500 180,125
Clear Channel
Communications, Inc.+ 15,750 858,375
Comcast Corp. 11,200 657,300
Cox Radio, Inc.+ 13,800 583,050
Hearst-Argyle Television, Inc.+ 200 6,600
Jacor Communications, Inc.+ 8,000 515,000
MediaOne Group, Inc.+ 8,800 413,600
TCA Cable TV, Inc. 200 7,138
Univision Communications, Inc.+ 1,900 68,756
---------
3,289,944
---------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Building Services-0.01%
Building One Services Corp.+ 300 $ 6,262
---------
6,262
---------
Commercial Services-3.00%
Cendant Corp.+ 150,565 2,870,145
The Loewen Group, Inc. 500 4,219
---------
2,874,364
---------
Computer Equipment & Services-2.17%
CSG Systems International, Inc.+ 80 6,320
Compaq Computer Corp. 3,100 130,006
Computer Sciences Corp. 1,900 122,431
EMC Corp./Mass+ 18,400 1,564,000
Electronics for Imaging, Inc.+ 200 8,038
First Data Corp. 1,000 31,687
Ingram Micro, Inc.+ 100 3,488
Insight Enterprises, Inc.+ 100 5,087
Microchip Technology, Inc.+ 170 6,290
SIPEX Corp.+ 200 7,025
SunGard Data Systems, Inc.+ 4,900 194,469
---------
2,078,841
---------
Computer Information & Technology-0.13%
Affiliated Computer Services, Inc.+ 1,100 49,500
Fiserv, Inc.+ 200 10,288
MIPS Technologies, Inc.+ 200 6,400
Technology Solutions Co.+ 5,400 57,881
Verio, Inc.+ 200 4,475
---------
128,544
---------
Computer Information Systems-1.71%
Ceridian Corp.+ 3,100 216,419
DST Systems, Inc.+ 3,400 194,012
National Data Corp. 100 4,869
New Era of Networks, Inc.+ 200 8,800
Policy Management
Systems Corp.+ 12,900 651,450
SEMA Group, PLC 27,400 269,441
The BISYS Group, Inc.+ 5,700 294,262
---------
1,639,253
---------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[35]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Computer Network-10.04%
3Com Corp.+ 9,700 $ 434,681
Ascend Communications, Inc.+ 14,500 953,375
Cisco Systems, Inc.+ 77,590 7,201,322
Equant, NV,
NY Registered Shares+ 5,200 352,625
Network Associates, Inc.+ 10,150 672,438
-----------
9,614,441
-----------
Computer Software - Mainframe-16.10%
BMC Software, Inc.+ 65,400 2,914,387
Boole & Babbage, Inc.+ 200 5,887
Cadence Design Systems, Inc.+ 65,560 1,950,410
Compuware Corp.+ 65,400 5,109,375
Mobius Management
Systems, Inc.+ 4,400 65,450
Oracle Corp.+ 124,550 5,371,219
Siebel Systems, Inc.+ 200 6,788
-----------
15,423,516
-----------
Computer Software - Mini & Micro-10.69%
Advantage Learning Systems, Inc.+ 100 6,575
Aspen Technology, Inc.+ 200 2,900
Autodesk, Inc. 200 8,537
Cambridge Technology
Partners, Inc.+ 5,300 117,262
Computer Associates
International, Inc. 79,012 3,367,886
Intuit, Inc.+ 90 6,525
Microsoft Corp.+ 36,200 5,020,488
Rational Software Corp.+ 200 5,300
Sun Microsystems, Inc.+ 10,300 881,938
Synopsys, Inc.+ 4,647 252,100
The Learning Co., Inc.+ 200 5,187
Xilinx, Inc.+ 8,700 566,588
-----------
10,241,286
-----------
Consulting Services-0.01%
Clarify, Inc.+ 280 6,842
Renaissance Worldwide, Inc.+ 1,200 7,350
-----------
14,192
-----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Cosmetics & Personal Care-0.08%
Carson, Inc.+ 16,800 $ 67,200
Chattem, Inc.+ 130 6,224
-----------
73,424
-----------
Educational Services-0.23%
CBT Group, PLC, ADR+ 5,700 84,787
Learning Tree International, Inc.+ 15,000 135,938
-----------
220,725
-----------
Electrical Equipment-0.01%
Sanmina Corp.+ 100 6,250
-----------
6,250
-----------
Electronics-0.05%
Flextronics International, Ltd.+ 80 6,850
Gentex Corp.+ 300 6,000
Jabil Circuit, Inc.+ 80 5,970
Micrel, Inc.+ 100 5,500
SCI Systems, Inc. 100 5,775
Teradyne, Inc.+ 200 8,475
The DII Group, Inc.+ 300 6,994
-----------
45,564
-----------
Electronics - Semiconductors-3.19%
ARM Holdings, PLC, ADR+ 3,165 190,691
Altera Corp.+ 12,100 736,587
Applied Micro Circuits Corp.+ 200 6,794
Burr-Brown Corp.+ 200 4,687
Galileo Technology, Ltd.+ 500 13,500
Intel Corp. 14,200 1,683,588
Lattice Semiconductor Corp.+ 8,500 390,204
Level One Communications, Inc.+ 180 6,390
Maxim Integrated Products, Inc.+ 130 5,679
PMC-Sierra, Inc.+ 100 6,313
Photronics, Inc.+ 280 6,711
-----------
3,051,144
-----------
Entertainment & Leisure-0.13%
Gemstar International Group, Ltd.+ 2,000 114,500
Premier Parks, Inc.+ 250 7,562
-----------
122,062
-----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
[36]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Environmental Controls-0.05%
Waters Corp.+ 600 $ 52,350
-----------
52,350
-----------
Financial Services-1.45%
Affiliated Managers+ 200 5,975
Associates First Capital Corp. 7,200 305,100
Capital One Financial Corp. 1,600 184,000
Franklin Resources, Inc. 7,000 224,000
Morgan Stanley Dean Witter & Co. 5,600 397,600
PaineWebber Group, Inc. 100 3,863
The Bear Stearns Companies, Inc. 7,000 261,625
The CIT Group, Inc. 200 6,362
Waddell & Reed Financial, Inc. 200 4,738
-----------
1,393,263
-----------
Food Products-0.04%
Keebler Foods Co.+ 200 7,525
Smithfield Foods, Inc.+ 1,000 33,875
-----------
41,400
-----------
Food Service & Restaurants-0.05%
Applebee's International, Inc. 300 6,187
Brinker International, Inc.+ 200 5,775
Buffets, Inc.+ 700 8,356
CEC Entertainment, Inc.+ 200 5,550
CKE Restaurants, Inc. 110 3,238
IHOP Corp.+ 100 3,994
Outback Steakhouse, Inc.+ 200 7,975
Papa John's International, Inc.+ 100 4,413
-----------
45,488
-----------
Healthcare-3.59%
Allegiance Corp. 13,000 606,125
AmeriSource Health Corp.+ 100 6,500
Bausch & Lomb, Inc. 100 6,000
Biogen, Inc.+ 1,000 83,000
Cardinal Health, Inc. 6,550 496,981
Express Scripts, Inc.+ 100 6,712
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Healthcare-Continued
Health Management
Associates, Inc.+ 375 $ 8,109
HEALTHSOUTH Corp.+ 700 10,806
McKesson Corp. 9,250 731,328
Mid Atlantic Medical Services, Inc.+ 600 5,888
Orthodontics Centers of
America, Inc.+ 300 5,831
PacifiCare Health Systems, Inc.+ 100 7,950
Province Healthcare Co.+ 200 7,175
Total Renal Care Holdings, Inc.+ 209 6,179
United Healthcare Corp. 33,400 1,438,288
Wellpoint Health Networks, Inc.+ 100 8,700
-----------
3,435,572
-----------
Household Products-0.01%
First Brands Corp. 140 5,521
The Dial Corp. 200 5,775
-----------
11,296
-----------
Human Resources-0.42%
Interim Services, Inc.+ 260 6,077
Metamor Worldwide, Inc.+ 200 5,000
Modis Professional Services, Inc.+ 26,801 388,615
-----------
399,692
-----------
Insurance-0.01%
Ace, Ltd. 200 6,888
-----------
6,888
-----------
Lodging-0.05%
Promus Hotel Corp.+ 1,382 44,742
-----------
44,742
-----------
Manufacturing-7.27%
Analog Devices, Inc.+ 13,800 432,975
Cable Design Technologies Corp.+ 400 7,400
Rayovac Corp.+ 400 10,675
SI Handling Systems, Inc. 4,850 67,900
Tyco International, Ltd. 85,499 6,449,831
-----------
6,968,781
-----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[37]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Marketing Services-0.09%
Taylor Nelson Sofres, PLC 69,900 $ 88,974
----------
88,974
----------
Medical - Biotechnology-0.32%
Amgen, Inc.+ 1,500 156,844
Genzyme Corp.+ 110 5,472
IDEC Pharmaceuticals Corp.+ 2,920 137,240
Immunex Corp.+ 60 7,549
----------
307,105
----------
Medical Products-2.84%
Arterial Vascular Engineering, Inc.+ 100 5,250
Biomet, Inc. 200 8,050
Boston Scientific Corp.+ 200 5,362
Guidant Corp. 11,250 1,240,312
Haemonetics Corp.+ 400 9,100
Henry Schein, Inc.+ 100 4,475
IDEXX Laboratories, Inc.+ 4,900 131,841
Medtronic, Inc. 14,600 1,084,050
PSS World Medical, Inc.+ 10,000 230,000
STERIS Corp.+ 200 5,688
----------
2,724,128
----------
Multimedia-2.39%
SportsLine USA, Inc.+ 7,300 113,606
Time Warner, Inc. 35,000 2,172,188
----------
2,285,794
----------
Oil & Gas Services-0.00%
Global Industries, Ltd.+ 100 613
----------
613
----------
Pharmaceutical-2.05%
Agouron Pharmaceuticals, Inc.+ 100 5,875
Allergan, Inc. 3,800 246,050
Alpharma, Inc. 180 6,356
Bergen Brunswig Corp. 2,800 97,650
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Pharmaceutical-Continued
Elan Corp., PLC, ADR+ 4,100 $ 285,206
ICON, PLC, ADR+ 100 3,350
King Pharmaceuticals, Inc.+ 600 15,675
Professional Detailing, Inc.+ 200 5,650
Sepracor, Inc.+ 13,300 1,164,581
Watson Pharmaceuticals, Inc.+ 2,100 132,038
----------
1,962,431
----------
Publishing & Printing-0.00%
Mail-Well, Inc.+ 100 1,144
----------
1,144
----------
Retail Stores-11.95%
Abercrombie & Fitch Co.+ 100 7,075
AnnTaylor Stores Corp.+ 170 6,704
Boise Cascade Office Products Corp. 300 4,050
Borders Group, Inc.+ 200 4,987
CompUSA, Inc.+ 2,800 36,575
Consolidated Stores Corp.+ 150 3,028
Corporate Express, Inc.+ 12,350 64,066
CVS Corp. 28,500 1,567,500
Duane Reade, Inc.+ 100 3,850
Fred Meyer, Inc.+ 28,990 1,746,647
General Nutrition Companies, Inc.+ 400 6,500
Linens 'N Things, Inc.+ 200 7,925
Macromedia, Inc.+ 1,900 64,006
Micro Warehouse, Inc.+ 20,400 689,775
Office Depot, Inc.+ 58,800 2,171,925
Republic Industries, Inc.+ 1,900 28,025
Rite Aid Corp. 33,000 1,635,563
Safeway, Inc.+ 11,300 688,594
Staples, Inc.+ 36,350 1,588,041
The Gymboree Corp.+ 3,600 22,950
The Home Depot, Inc. 9,800 599,638
The Kroger Co.+ 5,900 356,950
The TJX Companies, Inc. 5,100 147,900
----------
11,452,274
----------
Security Systems-0.01%
VeriSign, Inc.+ 100 5,913
----------
5,913
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
[38]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Shipbuilding-0.35%
Newport News Shipbuilding, Inc. 10,100 $ 337,719
-----------
337,719
-----------
Telecommunications-11.37%
ALLTEL Corp. 6,200 370,837
Amdocs, Ltd.+ 400 6,850
Century Telephone
Enterprises, Inc. 14,850 1,002,375
EchoStar Communications Corp.+ 200 9,675
Global Crossing, Ltd.+ 400 18,050
Global TeleSystems Group, Inc.+ 28,300 1,577,725
Hyperion Telecommunications, Inc.+ 500 7,562
Infinity Broadcasting Corp.+ 3,900 106,763
Iridium World
Communications, Ltd.+ 2,100 83,081
L-3 Communications
Holdings, Inc.+ 1,900 88,469
Liberty Media Group+ 2,100 96,731
MCI WorldCom, Inc.+ 73,372 5,264,441
Metromedia Fiber Network, Inc.+ 200 6,700
Qwest Communications
International, Inc.+ 18,000 900,000
Sprint Corp., Fon Group 14,400 1,211,400
Tel-Save.com, Inc.+ 7,900 132,325
USA Networks, Inc.+ 300 9,938
-----------
10,892,922
-----------
Telecommunications Equipment-2.30%
Alcatel, SA, ADR 4,800 117,300
American Tower Corp.+ 2,500 73,906
Aspect Telecommunications Corp.+ 300 5,175
DSP Communications, Inc.+ 400 6,125
Gilat Satellite Networks, Ltd.+ 110 6,064
Linear Technology Corp. 1,900 170,169
Lucent Technologies, Inc. 11,200 1,232,000
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Telecommunications Equipment-Continued
Nokia Oyj, S.A. 3,400 $ 409,487
Tellabs, Inc.+ 2,700 185,119
-----------
2,205,345
-----------
Transportation-0.40%
Atlas Air, Inc.+ 100 $4,894
FDX Corp.+ 2,200 195,800
Kansas City Southern
Industries, Inc. 3,700 181,994
-----------
382,688
-----------
Travel Services-0.24%
Galileo International, Inc. 5,200 226,200
-----------
226,200
-----------
TOTAL COMMON STOCK
(Cost $64,924,013) 94,541,165
-----------
- ----------------------------------------------------------------------
PREFERRED STOCK--0.01%
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Computer Software - Mini & Micro-0.01%
Systeme, Anwendungen, Produkte 10 $ 4,775
-----------
4,775
-----------
TOTAL PREFERRED STOCK
(Cost $6,759) 4,775
-----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[39]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--1.67%
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Government Agency-1.67%
Federal Home Loan Mortgage Corp.,
4.700%, due 01/04/99 $1,600,000 $ 1,599,373
-----------
1,599,373
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $1,599,373) 1,599,373
-----------
TOTAL INVESTMENTS
(Cost $66,530,145) 100.37% 96,145,313
Other assets, less liabilitities (0.37) (349,936)
------ -----------
TOTAL NET ASSETS 100.00% $95,795,377
====== ===========
</TABLE>
See notes to financial statements.
[40]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
"No matter what economic or market environment 1999 will bring, we
will continue to rely on Janus' unparalleled
research capabilities and extensive due diligence to find
compelling investment opportunities."
--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 12/31/98
$198,002,451
------------------------------------------------------------------------
NUMBER OF HOLDINGS
40
------------------------------------------------------------------------
PORTFOLIO TURNOVER
54.58%
------------------------------------------------------------------------
IN THIS SECTION
------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------------------------
MARK PINTO, CFA
Vice President
[bullet] Joined Janus Capital Corporation in 1994
[bullet] 13 years of investment experience
[bullet] B.A. from Yale University
[bullet] M.B.A. from Harvard University
[bullet] Chartered Financial Analyst
____________________________________________________________________________[41]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
[pie chart]
% of Portfolio [double dagger]
Common Stock-90.15%
Cash-9.85%
[end pie chart]
[sidebar]
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Time Warner, Inc. 5.08%
Cisco Systems, Inc. 5.07%
Microsoft Corp. 4.63%
Dell Computer Corp. 3.90%
Pfizer, Inc. 3.59%
Warner-Lambert Co. 3.48%
Morgan Stanley, Dean
Witter, & Co. 3.38%
Nokia Oyj, SA 3.36%
Carnival Corp. 3.24%
General Electric Co. 3.11%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Financial Services 12.21%
Pharmaceutical 12.12%
Broadcasting 8.50%
Telecommunications
Equipment 6.58%
Computer Equipment &
Services 5.55%
Multimedia 5.08%
Computer Network 5.07%
Banking 4.74%
Computer Software - Mini
& Micro 4.63%
Airlines 3.37%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
The second half of 1998 was characterized by extreme volatility. After an
early run-up that peaked in mid-July, equity markets took a turn for the worse
after several events jarred investor confidence. The primary culprit for this
uncertainty was Russia. After the country announced that it was devaluing the
ruble and would not be able to service its debt, investors questioned the credit
situation in emerging markets around the world. Further compounding the drama
were several highly leveraged hedge funds, whose imminent liquidation had the
global financial system on the brink of meltdown. Against this backdrop, Japan's
economy continued to flail, while Brazil and China were allegedly facing
devaluations of their own. These events ignited a fierce "flight-to-quality"
In response to this mounting credit crunch, an aggressive Federal Reserve
cut short-term interest rates by a total of 75 basis points during September,
October, and November, which provided the market with much needed support. These
Fed easings, joined by widespread rate cuts by other world central banks, helped
reassure worried investors and deflect concerns over a global economic slowdown,
deterioration in the emerging markets, and political uncertainty in Washington.
U.S. economic growth also remained relatively healthy, supported by robust
consumer spending and a tight employment market. While many companies came
forward to announce disappointing third quarter results, overall earnings growth
was about in line with downscaled market expectations.
Turning to the Portfolio, we outperformed our primary benchmark, the S&P
500 Index, due in part to our focus on growth companies with the ability to meet
or exceed their earnings targets, a characteristic that investors increasingly
rewarded in this environment. During this period, our strategy was unchanged. We
continued to concentrate on companies whose business was relatively insulated
from changes in the economic climate, especially in the technology and cable
industries. Additionally, we benefited from rebounds in a number of positions,
primarily in the financial services sector, that we felt were unduly oversold
during the third quarter market correction.
In the technology sector, we capitalized on a rebound in analog
semiconductor company Linear Technology. Linear Technology stands out from other
chip makers because of the non-cyclical nature of its business. The company
serves a highly specialized niche of the industry that is less affected by
product obsolescence, increasing capacity and price competition. Earlier in the
year, this company's promising fundamentals were overshadowed by the negative
investor psychology surrounding the semiconductor industry. However, because we
understood that Linear Technology's market niche was less vulnerable to economic
cycles than the broader chip market, we expected the stock to rebound once
investors again separated fear from fundamentals. The company validated our
thesis, by reporting an excellent fourth quarter, and rewarded us with an
impressive gain.
In the cable industry, both Comcast and Time Warner benefited from
improving cash flows and the growing recognition of the cable pipeline as a
[42]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
[line chart]
Capital Growth Portfolio and the S&P 500 Index
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
Capital
Growth S&P 500
Portfolio Index
<S> <C> <C>
1992 10000 10000
10087 9958
10925 10272
12724 10787
13604 11256
13635 11310
14752 11598
15869 11867
15387 11420
14720 11470
15553 12031
15353 12028
16045 13195
17479 14451
20143 15596
21762 16532
23919 17512
25766 18399
26224 19074
25951 20767
26015 20860
30540 24494
33805 26326
33582 27079
39281 30849
41989 31864
36869 28701
1998 46502 34802
</TABLE>
[end line chart]
conduit for telephony and other high speed services. Comcast is farther ahead in
its system upgrade than many of its competitors, and consequently is among the
best-positioned to benefit from this evolution. Time Warner is another
beneficiary of the trend. Time Warner combines its leading cable franchise with
the proprietary content provided by its publishing interests, music business,
and movie and television studios. The ability to supply this content to
consumers over its own pipeline has positioned Time Warner to be a dominant
presence in the evolving telecommunication and media industries. Also in the
cable sector, we opportunistically repurchased Tele-Communications, Inc. ("TCI")
after the stock was unfairly punished due to investor skepticism over the
company's announced merger with AT&T.
Despite strong overall performance, we were disappointed by weakness in
several of our more cyclically-sensitive stocks, including chemical company
Solutia. However, we felt that Solutia's underperformance was unwarranted. The
company has met or exceeded all of its earning estimates and its
shareholder-focused management continues to buy back stock and expand its market
presence through strategic acquisitions.
Looking forward to 1999, we remain cautiously optimistic on the outlook for
equities. On one hand, we believe that the economy will likely avoid recession
next year, given the levels of consumer confidence, retail spending, and
employment. We also believe that the likelihood of additional Federal Reserve
rate cuts is relatively minimal going forward. Nonetheless, with inflation
expected to remain in check, long-term interest rates should remain low, which
will provide equities with support.
As always, there remain reasons for caution. For one thing, a sustained
recovery in the Asian economies remains highly dependent on the Japanese
government's questionable willingness to fully address that country's economy
and financial problems. Another reason for caution is continued pressure on
corporate margins. While estimates for 1999 earnings remain positive, only time
will tell whether these projections are indeed realistic in a climate of slowing
world economic growth and growing constraints on corporate pricing power. In
this environment, companies that can maintain greater-than-average earnings
growth will command a premium from investors. These are precisely the companies
in which we seek to invest.
No matter what economic or market environment 1999 will bring, we will
continue to rely on Janus' unparalleled research capabilities and extensive due
diligence to find compelling investment opportunities. We are confident that the
combination of intensive analysis and on-site dialogue with management,
employers, and suppliers will provide us with unique insight into the companies
in which we invest. To further this effort, we are active in recruiting the
highest caliber individuals and training them to be Janus analysts.
[sidebar]
- ------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL S&P 500
GROWTH INDEX
<S> <C> <C>
1 YEAR 38.47% 28.58%
5 YEAR 23.99% 24.09%
INCEPTION 25.91% 20.56%
</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.
[end sidebar]
____________________________________________________________________________[43]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December December December December December
31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 21.23 $ 17.26 $ 17.38 $ 13.38 $ 14.26
Income From Investment Operations
Net investment income (loss) (0.09) 0.05 0.03 0.03
Net gains and losses on securities
and foreign currency (both
realized and unrealized) 8.25 4.99 3.24 5.56 (0.49)
------------ ------------ ----------- ---------- -----------
Total from investment operations 8.16 4.99 3.29 5.59 (0.46)
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 (1.49) (0.81) (3.36) (1.56) (0.33)
Distributions in excess of capital gains (0.21) (0.06)
Returns of capital
------------ ------------ ----------- ---------- -----------
Total distributions (1.49) (1.02) (3.41) (1.59) (0.42)
Net asset value, end of year $ 27.90 $ 21.23 $ 17.26 $ 17.38 $ 13.38
============ ============ =========== ========== ===========
Total Return (A) 38.47% 29.41% 19.25% 41.74% (3.26%)
Ratios to Average Net Assets:
Expenses 1.09% 1.09% 1.13% 1.15% 1.22%
Net investment income (0.38%) 0.02% 0.30% 0.21% 0.25%
Portfolio Turnover Rate 54.58% 91.66% 147.82% 170.32% 202.04%
Net Assets, At End of Year $198,002,451 $124,123,995 $70,832,162 $49,853,029 $27,564,086
</TABLE>
(A) Total return assumes reinvestment of all dividends during the year 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.
[44]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------
COMMON STOCK--94.89%
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ------------------------------------------------------------------------
<S> <C> <C>
Agricultural Operations-0.97%
Delta and Pine Land Co. 51,866 $ 1,919,042
-----------
1,919,042
-----------
Airlines-3.55%
Southwest Airlines Co. 115,615 2,594,111
UAL Corp.+ 74,350 4,437,766
-----------
7,031,877
-----------
Banking-4.99%
BankAmerica Corp. 34,354 2,065,534
Citigroup, Inc. 49,125 2,431,687
The Bank of New York
Company, Inc. 133,770 5,384,243
-----------
9,881,464
-----------
Beverages-3.19%
Coca-Cola Enterprises, Inc. 177,010 6,328,107
-----------
6,328,107
-----------
Broadcasting-8.94%
CBS Corp. 102,020 3,341,155
Comcast Corp. 96,240 5,648,085
MediaOne Group, Inc.+ 111,275 5,229,925
Tele-Communications, Inc.+ 63,055 3,487,730
-----------
17,706,895
-----------
Chemicals-1.05%
Solutia, Inc. 92,895 2,078,526
-----------
2,078,526
-----------
Computer Equipment & Services-5.84%
Dell Computer Corp.+ 111,115 8,132,229
EMC Corp./Mass+ 40,435 3,436,975
-----------
11,569,204
-----------
Computer Network-5.34%
Cisco Systems, Inc.+ 113,848 10,566,517
-----------
10,566,517
-----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Computer Software - Mainframe-1.73%
Cadence Design Systems, Inc.+ 115,215 $ 3,427,646
-----------
3,427,646
-----------
Computer Software - Mini & Micro-4.87%
Microsoft Corp.+ 69,555 9,646,409
-----------
9,646,409
-----------
Electronics - Semiconductors-2.40%
ASM Lithography
Holding, N.V.+ 83,875 2,558,188
Applied Materials, Inc.+ 51,400 2,194,137
-----------
4,752,325
-----------
Entertainment & Leisure-3.42%
Autotote Corp.+ 4,672 9,052
Carnival Corp. 140,715 6,754,320
-----------
6,763,372
-----------
Financial Services-12.85%
Fannie Mae 72,450 5,361,300
Freddie Mac 71,330 4,596,327
Morgan Stanley
Dean Witter & Co. 99,300 7,050,300
Newcourt Credit Group, Inc. 126,855 4,431,997
The Charles Schwab Corp. 71,138 3,997,038
-----------
25,436,962
-----------
Food Products-2.06%
Ralston-Ralston Purina Group 125,820 4,073,423
-----------
4,073,423
-----------
Manufacturing-3.27%
General Electric Co. 63,500 6,480,969
-----------
6,480,969
-----------
Medical - Biotechnology-1.42%
Monsanto Co. 59,120 2,808,200
-----------
2,808,200
-----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[45]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Multimedia-5.34%
Time Warner, Inc. 170,440 $ 10,577,933
------------
10,577,933
------------
Pharmaceutical-12.76%
Bristol-Myers Squibb Co. 32,185 4,306,755
Eli Lilly and Co. 69,920 6,214,140
Pfizer, Inc. 59,725 7,491,755
Warner-Lambert Co. 96,400 7,248,075
------------
25,260,725
------------
Retail Stores-2.98%
Fred Meyer, Inc.+ 22,475 1,354,119
The Home Depot, Inc. 74,235 4,542,254
------------
5,896,373
------------
Telecommunications-0.99%
AT&T Corp. 26,000 1,956,500
------------
1,956,500
------------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Telecommunications Equipment-6.93%
Linear Technology Corp. 45,125 $ 4,041,508
Lucent Technologies, Inc. 24,320 2,675,200
Nokia Oyj, SA 58,090 6,996,214
------------
13,712,922
------------
TOTAL COMMON STOCK
(Cost $122,017,539) 187,875,391
------------
TOTAL INVESTMENTS
(Cost $122,017,539) 94.89% 187,875,391
Other assets, less liabilitities 5.11 10,127,060
------ ------------
TOTAL NET ASSETS 100.00% $198,002,451
====== ============
</TABLE>
+Non-income producing security.
See notes to financial statements.
[46]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
"We foresee an economy characterized by stable, moderate
growth and very low inflation. Prospects for stable or rising
earnings growth should help technology, healthcare,
and consumer sectors to lead the market."
--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 12/31/98
$11,543,742
------------------------------------------------------------------------
NUMBER OF HOLDINGS
109
------------------------------------------------------------------------
PORTFOLIO TURNOVER
283.36%
- --------------------------------------------------------------------------------
[sidebar]
------------------------------------------------------------------------
IN THIS SECTION
------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------------------------
RONALD C. OGNAR, CFA
[bullet] Joined Strong in 1993
[bullet] 30 years of investment experience
[bullet] B.S. from University of Illinois
[bullet] Chartered Financial Anyalst
[end sidebar]
____________________________________________________________________________[47]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
[pie chart]
% of Portfolio [double dagger]
Common Stock-94.63%
Cash-5.37%
[end pie chart]
[sidebar]
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Kohl's Corp. 3.17%
Microsoft Corp. 3.10%
MCI WorldCom, Inc. 3.09%
Cisco Systems, Inc. 2.87%
Lowe's Companies, Inc. 2.42%
Safeway, Inc. 1.94%
America Online, Inc. 1.87%
Intel Corp. 1.84%
EMC Corp./Mass 1.75%
CVS Corp. 1.75%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN INDUSTRIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Retail Stores 22.96%
Computer Network 9.87%
Computer Software - Mini
& Micro 7.14%
Pharmaceutical 5.34%
Computer Equipment &
Services 5.19%
Financial Services 4.73%
Telecommunications 4.66%
Medical Supplies 3.28%
Telecommunications
Equipment 2.75%
Electronics - Semiconductors 2.57%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
The year began with a broad rally in the U.S. Equity Markets as large,
small, and mid cap stocks all posted strong first quarter gains. The rally
stalled in mid-April amid concerns about corporate earnings weakness stemming
from the Asian financial crisis. April also marked the beginning of the market
divergence between high-growth large cap stocks and the rest of the market,
which has punished small caps and value stocks for much of 1998. Large cap
stocks shook off the fears and continued to climb resulting in another record
high for the S&P 500 in mid-July.
Another wave of selling ensued in late summer, again on fears that the
Asian crisis would de-stabilize prices and lead to slower economic growth in the
U.S. This sparked a massive flight to Treasuries, a tightening of credit
conditions, and a near shut-down of the U.S. corporate bond markets. By early
autumn, small caps and value stocks were firmly entrenched in a bear market, and
even the Teflon large-caps flirted with -20% declines.
Sentiment quickly reversed when a recovery in the foreign markets and three
interest rate cuts by the Federal Reserve, including a surprise reduction
between the normally scheduled Federal Open Market Committee meetings, sparked a
rapid recovery in U.S. stocks. Large cap and technology-related issues led the
resurgence as investors scrambled to put their heavy cash positions back to
work. Internet stocks and IPOs were traded up to such high levels that
traditional valuation measures became pointless. Not even presidential
impeachment could restrain the broad market rally, which finally brought small
and mid cap stocks out of hibernation. Growth stocks continued to outperform
value stocks in all market cap segments as investors paid up for companies with
visible earnings.
The Growth Portfolio (the "Portfolio") returned 31.14% for the year,
compared with its benchmark, the Russell Midcap Growth Index, which
[48]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
[line chart]
Growth Portfolio and Russell Midcap Growth Index
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
Growth Russell Midcap
Portfolio Growth Index
<S> <C> <C>
1/98 9858 9892
2/98 10638 10786
3/98 11160 11238
4/98 11060 11391
5/98 10716 10923
6/98 11691 11232
7/98 11443 10751
8/98 9702 8699
9/98 10420 9356
10/98 10605 10045
11/98 11371 10723
12/98 13114 11834
</TABLE>
[end line chart]
gained 17.86%. Significant investments in retail stocks contributed most to
relative outperformance. Strong retail sales, especially in department stores
and specialty retailers benefitted the sector, as shoppers felt wealthier from
low inflation and a strong job market. Technology stocks performed well in 1998
as many U.S. companies made significant investments in information technology
striving to enhance productivity. Our investments in commercial services and
media stocks were also beneficial. Underperformance by healthcare and financial
stocks detracted from relative returns.
During the year, we pared our holdings in slower growing sectors and
shifted to higher growth sectors such as technology. The Portfolio emphasized
more technology issues during the period due to the sector's high earnings
visibility for the coming quarters. Commercial services were also decreased. In
summary, areas of emphasis included technology, healthcare, and retail. The
Portfolio had little or no exposure to basic materials, energy, or utilities.
Looking ahead to 1999, we foresee an economy characterized by stable,
moderate growth and very low inflation. Prospects for stable or rising earnings
growth should help technology, healthcare, and consumer sectors to lead the
market. Volatility will continue to be an issue in 1999 as valuations are back
to peak levels and any uncertainty can bring sudden and sharp corrections, much
like the one in the third quarter of 1998. Provided the economy avoids a
recession, corporate earnings remain positive, and the Federal Reserve maintains
its bias towards easing, high quality growth stocks should outperform. We also
expect to see broader stock leadership, which includes the best growing mid and
small cap stocks.
[sidebar]
- ----------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------
<TABLE>
<CAPTION>
RUSSELL
MIDCAP
GROWTH
GROWTH INDEX
<S> <C> <C>
1 YEAR 31.14% 17.86%
INCEPTION 31.14% 17.86%
</TABLE>
Commencement of operations January 1, 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
Midcap 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 Midcap 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.
[end sidebar]
____________________________________________________________________________[49]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended
December
31, 1998
<S> <C>
Net asset value, beginning of year $ 10.00
Income From Investment Operations
Net investment income (loss) (0.05)
Net gains and losses on securities
and foreign currency (both
realized and unrealized) 3.16
-----------
Total from investment operations 3.11
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 year $ 13.11
===========
Total Return (A) 31.14%
Ratios to Average Net Assets:
Expenses 1.08%
Net investment income (0.47%)
Portfolio Turnover Rate 283.36%
Net Assets, At End of Year $11,543,742
</TABLE>
(A) Total return assumes reinvestment of all dividends during the year 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.
[50]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------
COMMON STOCK--95.29%
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Advertising-1.76%
Lamar Advertising Co.+ 400 $ 14,900
Outdoor Systems, Inc.+ 6,300 189,000
----------
203,900
----------
Airlines-0.21%
Midwest Express Holdings, Inc.+ 900 23,681
----------
23,681
----------
Banking-1.78%
First Tennessee National Corp. 1,500 57,094
Northern Trust Corp. 1,700 148,431
----------
205,525
----------
Broadcasting-2.46%
Chancellor Media Corp.+ 700 33,512
Clear Channel
Communications, Inc.+ 1,900 103,550
Comcast Corp. 1,400 82,163
Jacor Communications, Inc.+ 1,000 64,375
----------
283,600
----------
Commercial Services-1.44%
Concord EFS, Inc.+ 1,500 63,563
Lason, Inc.+ 1,000 58,187
The Profit Recovery Group
International, Inc.+ 1,200 44,925
----------
166,675
----------
Computer Equipment & Services-5.23%
CSG Systems International, Inc.+ 800 63,200
Comverse Technology, Inc.+ 1,300 92,300
Dell Computer Corp.+ 2,000 146,375
EMC Corp./Mass+ 2,400 204,000
Sykes Enterprises, Inc.+ 3,200 97,600
----------
603,475
----------
Computer Information & Technology-1.30%
Fiserv, Inc.+ 1,600 82,300
Rambus, Inc.+ 700 67,375
----------
149,675
----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Computer Information Systems-0.42%
Reynolds & Reynolds Co. 2,100 $ 48,169
----------
48,169
----------
Computer Network-9.94%
3Com Corp.+ 1,300 58,256
Ascend Communications, Inc.+ 1,500 98,625
At Home Corp.+ 1,200 89,100
Cisco Systems, Inc.+ 3,600 334,125
Equant NV, NY Registered Shares+ 600 40,688
Inktomi Corp.+ 600 77,625
International Network Services+ 600 39,900
Legato Systems, Inc.+ 2,500 164,844
Network Appliance, Inc.+ 3,000 135,000
Transwitch Corp.+ 1,000 38,937
Yahoo!, Inc.+ 300 70,519
----------
1,147,619
----------
Computer Software - Mainframe-1.75%
Compuware Corp.+ 1,200 93,750
Concur Technologies, Inc.+ 600 18,300
Oracle Corp.+ 1,300 56,062
Siebel Systems, Inc.+ 1,000 33,938
----------
202,050
----------
Computer Software - Mini & Micro-7.19%
Advantage Learning Systems, Inc.+ 800 52,600
America Online, Inc.+ 1,500 217,125
Microsoft Corp.+ 2,600 360,587
Synopsys, Inc.+ 1,200 65,100
Visio Corp.+ 1,900 69,469
Xilinx, Inc.+ 1,000 65,125
----------
830,006
----------
Consulting Services-0.51%
Metzler Group, Inc.+ 1,200 58,425
----------
58,425
----------
Electrical Equipment-2.16%
American Power
Conversion Corp.+ 1,500 72,656
Solectron Corp.+ 1,900 176,581
----------
249,237
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[51]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Electronics-1.23%
Jabil Circuit, Inc.+ 200 $ 14,925
Teradyne, Inc.+ 1,200 50,850
Uniphase Corp.+ 1,100 76,312
--------
142,087
--------
Electronics - Semiconductors-2.59%
Altera Corp.+ 1,400 85,225
Intel Corp. 1,800 213,413
--------
298,638
--------
Entertainment & Leisure-1.15%
Carnival Corp. 1,800 86,400
Gemstar International Group, Ltd.+ 800 45,800
--------
132,200
--------
Environmental Controls-0.91%
Waters Corp.+ 1,200 104,700
--------
104,700
--------
Financial Services-4.76%
Fifth Third Bancorp 2,000 142,625
Freddie Mac 2,300 148,206
Paychex, Inc. 1,400 72,013
SunAmerica, Inc. 800 64,900
T. Rowe Price Associates, Inc. 600 20,550
The Charles Schwab Corp. 1,800 101,137
-------
549,431
--------
Food Products-0.28%
The Hain Food Group, Inc.+ 1,300 32,500
--------
32,500
--------
Healthcare-1.60%
Biogen, Inc.+ 700 58,100
McKesson Corp. 1,600 126,500
--------
184,600
--------
Human Resources-1.04%
Robert Half International, Inc.+ 1,200 53,625
Romac International, Inc.+ 3,000 66,750
--------
120,375
--------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Manufacturing-0.82%
Cintas Corp.+ 600 $ 42,263
Tyco International, Ltd. 700 52,806
--------
95,069
--------
Marketing Services-0.33%
CDW Computer Centers, Inc.+ 400 38,375
--------
38,375
--------
Medical - Biotechnology-0.39%
Genzyme Corp.+ 900 44,775
--------
44,775
--------
Medical Products-1.93%
IDEXX Laboratories, Inc.+ 1,700 45,741
Medtronic, Inc. 1,800 133,650
PSS World Medical, Inc.+ 1,900 43,700
--------
223,091
--------
Medical Supplies-3.30%
Forest Laboratories, Inc.+ 3,100 164,881
Perkin-Elmer Corp. 1,100 107,319
Sybron International Corp.+ 4,000 108,750
--------
380,950
--------
Multimedia-1.61%
Time Warner, Inc. 3,000 186,188
--------
186,188
--------
Office Equipment-0.46%
Global Imaging Systems, Inc.+ 2,200 53,350
--------
53,350
--------
Pharmaceutical-5.38%
ALZA Corp.+ 1,200 62,700
Allergan, Inc. 1,800 116,550
Pfizer, Inc. 1,200 150,525
Schering-Plough Corp. 1,500 82,875
Sepracor, Inc.+ 800 70,050
Watson Pharmaceuticals, Inc.+ 2,200 138,325
--------
621,025
--------
</TABLE>
+Non-income producing security.
See notes to financial statements.
[52]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Retail Stores-23.12%
99 Cents Only Stores+ 2,375 $ 116,672
Abercrombie & Fitch Co.+ 1,000 70,750
American Eagle Outfitters, Inc.+ 1,000 66,625
Bed Bath & Beyond, Inc.+ 3,000 102,375
Best Buy Co., Inc.+ 1,400 85,925
CVS Corp. 3,700 203,500
Dollar Tree Stores, Inc.+ 4,000 174,750
Fred Meyer, Inc.+ 1,100 66,275
Kohl's Corp.+ 6,000 368,625
Lowe's Companies, Inc. 5,500 281,531
Office Depot, Inc.+ 2,000 73,875
Safeway, Inc.+ 3,700 225,469
Staples, Inc.+ 3,500 152,906
Starbucks Corp.+ 1,400 78,575
The Gap, Inc. 1,000 56,250
The Home Depot, Inc. 3,100 189,681
The Kroger Co.+ 400 24,200
Wal-Mart Stores, Inc. 2,200 179,162
Walgreen Co. 2,600 152,263
-----------
2,669,409
-----------
Telecommunications-4.69%
Infinity Broadcasting Corp.+ 2,000 54,750
Liberty Media Group+ 1,700 78,306
MCI WorldCom, Inc.+ 5,000 358,750
Qwest Communications
International, Inc.+ 1,000 50,000
-----------
541,806
-----------
Telecommunications Equipment-2.77%
Aware, Inc.+ 1,900 51,656
Broadcom Corp.+ 1,000 120,750
Lucent Technologies, Inc. 400 44,000
Tellabs, Inc.+ 1,500 102,844
-----------
319,250
-----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Utilities - Electric & Gas-0.78%
Montana Power Co. 1,600 $ 90,500
-----------
90,500
-----------
TOTAL COMMON STOCK
(Cost $8,600,320) 11,000,356
-----------
TOTAL INVESTMENTS
(Cost $8,600,320) 95.29% 11,000,356
Other assets, less liabilities 4.71 543,386
------ -----------
TOTAL NET ASSETS 100.00% $11,543,742
====== ===========
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[53]
<PAGE>
[This page intentionally left blank]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
SMALL COMPANY PORTFOLIO
- --------------------------------------------------------------------------------
"We are confident that "value" investing, which has
historically provided consistently higher rewards than
a growth style, will continue to generate superior returns for
investors in the long term."
--Todd E. Grady, Portfolio Manager--
- --------------------------------------------------------------------------------
INCEPTION DATE
April 18, 1986
------------------------------------------------------------------------
FUND MANAGER
Pioneering Management Corporation
------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
To achieve growth of capital by investing primarily
in a diversified portfolio of equity securities issued
by small companies.
------------------------------------------------------------------------
NET ASSETS AS OF 12/31/98
$78,343,648
------------------------------------------------------------------------
NUMBER OF HOLDINGS
66
------------------------------------------------------------------------
PORTFOLIO TURNOVER
43.06%
- --------------------------------------------------------------------------------
[sidebar]
------------------------------------------------------------------------
IN THIS SECTION
------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------------------------
TODD E. GRADY
Vice President
[bullet] Joined Pioneer in 1994
[bullet] 15 years of industry experience
[bullet] M.B.A. from Babson College
[bullet] B.A. from St. Michael's College
[end sidebar]
____________________________________________________________________________[55]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
SMALL COMPANY PORTFOLIO
- --------------------------------------------------------------------------------
[pie chart]
% of Portfolio [double dagger]
Common Stock-95.19%
Cash-4.81%
[end pie chart]
[sidebar]
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Getchell Gold Corp. 5.27%
First Brands Corp. 4.59%
In Focus Systems, Inc. 3.87%
Luby's Cafeterias, Inc. 3.32%
DST Systems, Inc. 3.32%
ReliaStar Financial Corp. 2.68%
National Golf
Properties, Inc. 2.36%
Crossman
Communities, Inc. 2.25%
Vencor, Inc. 2.10%
Personnel Group of
America, Inc. 2.04%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN industries PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Real Estate 12.38%
Insurance 7.61%
Building & Construction 5.67%
Mining & Metals - Precious 5.27%
Computer Equipment &
Services 5.20%
Manufacturing 4.85%
Household Products 4.59%
Retail Stores 4.48%
Food Service & Restaurants 4.14%
Human Resources 3.39%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
During the second half of 1998, in a market driven by growth stocks and
euphoria over Internet companies, the Small Company Portfolio (the "Portfolio")
returned -11.78%, as small and mid cap stocks continued to trail many of the
large cap stocks that continued to post hefty returns. While the S&P 500 Index,
with its focus on many of America's blue chip companies, returned 28.58% for the
year ended December 31, 1998, the Russell 2000 Index posted a total return of
- -2.55% during the same period. Moreover, the Russell 2000 Value Index returned
- -6.45%.
Beginning in early November, the Portfolio began shifting its focus from a
broad range of market capitalizations to small cap companies in search of the
"hidden gems" - companies with sound management that are well positioned to
benefit from underlying market conditions and whose value, as reflected by their
stock price, has yet to be recognized by investors. Although this "value"
approach to investing has historically outperformed growth managers, market
conditions continued to favor growth strategies during all of 1998. The returns
of value portfolios have, in fact, provided returns more than 20% higher than
their growth-oriented counterparts over the ten-years ended December 31, 1998,
and 31% higher over the last twenty years.
As true "stock pickers", some of our favorites include household goods
manufacturer First Brands, maker of Glad brand products, whose stock price
appreciated more than 40% on reports of increased market penetration and
stronger earnings figures generated, in large part, by its association with
retail giants Wal-Mart and Sam's Wholesale
[56]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
SMALL COMPANY PORTFOLIO
- --------------------------------------------------------------------------------
Clubs. The Portfolio's largest holding, Colorado-based mining and exploration
company Getchell Gold Corporation, saw its stock price more than double during
the period upon the announcement that Canadian mining giant Placer Dome would
acquire the company.
Other bets, however, were not as successful. Our significant overweight,
relative to the benchmark, in real estate, particularly REITs, provided
disappointing results during the second half of the year, as did our underweight
in technology stocks and exposure to the energy sector. The price of many REITs
continued to drop as investors shied away from the industry, fearing that
valuations may have reached their peak, even though we felt that underlying
fundamentals and dividend yields remained strong. Internet stocks, on the other
hand, many trading at astounding valuation levels, fueled much of the gains in
the technology sector, while the prices and earnings of many energy-related
stocks continued to decline in light of historically low commodity prices.
With the new year come many opportunities, and we continue to seek out
those companies poised to become the new market leaders. Our mission is clear:
identify, through sound fundamental analysis, those small cap companies that
have been overlooked and remain, therefore, undervalued by the market. We are
confident that "value" investing, which has historically provided consistently
higher rewards than a growth style, will continue to generate superior returns
for investors in the long term.
[line chart]
Small Company Portfolio and the S&P 500 Index
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
Small S&P
Company 500
Portfolio Index
<S> <C> <C>
1986 10000 10000
10372 10712
9863 9965
10565 10522
11914 12768
12813 13408
13698 14294
10395 11071
12119 11701
13176 12474
13151 12514
13129 12898
14183 13809
15054 15025
16226 16632
15669 16971
15299 16459
15505 17489
12071 15097
12759 16443
15336 18823
15663 18782
16103 19785
16999 21431
18699 20983
17992 21291
18527 21961
21506 23062
22691 24066
22524 24180
23910 24802
24925 25377
24982 24422
24337 24527
26469 25727
26834 25721
28241 28217
29736 30902
33164 33351
34809 35352
37702 37447
39076 39346
38570 40788
40537 44408
38833 44602
44729 52383
52097 56302
50105 57913
53395 65974
51272 68146
39894 61380
1998 44205 74429
</TABLE>
[end line chart]
[sidebar]
- -----------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------
<TABLE>
<CAPTION>
SMALL S&P 500
COMPANY INDEX
<S> <C> <C>
1 YEAR -11.78% 28.58%
5 YEAR 12.14% 24.09%
10 YEAR 12.91% 19.22%
INCEPTION 12.40% 17.10%
</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 Small Company
Portfolio (the "Portfolio") formerly the Domestic Growth Stock 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.
[end sidebar]
____________________________________________________________________________[57]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
SMALL COMPANY PORTFOLIO
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December December December December December
31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 20.43 $ 18.19 $ 17.87 $ 15.94 $ 16.14
Income From Investment Operations
Net investment income 0.22 0.09 0.06 0.15 0.09
Net gains and losses on securities
(both realized and unrealized) (2.59) 4.17 2.85 4.48 1.12
----------- ----------- ----------- ----------- -----------
Total from investment operations (2.37) 4.26 2.91 4.63 1.21
Less Distributions to Shareholders
Dividends from net investment income (0.19) (0.09) (0.06) (0.15) (0.09)
Dividends in excess of net
investment income
Distributions from capital gains (1.63) (1.93) (2.53) (2.55) (1.32)
Distributions in excess of capital gains
Returns of capital
----------- ----------- ----------- ----------- -----------
Total distributions (1.82) (2.02) (2.59) (2.70) (1.41)
Net asset value, end of year $ 16.24 $ 20.43 $ 18.19 $ 17.87 $ 15.94
=========== =========== =========== =========== ===========
Total Return (A) (11.78%) 23.60% 16.46% 29.72% 7.66%
Ratios to Average Net Assets:
Expenses 0.87% 0.83% 0.85% 0.87% 0.89%
Net investment income 1.23% 0.47% 0.31% 0.95% 0.63%
Portfolio Turnover Rate 43.06% 52.92% 49.75% 64.17% 46.65%
Net Assets, At End of Year $78,343,648 $81,505,107 $62,166,366 $48,517,886 $31,458,666
</TABLE>
(A) Total return assumes reinvestment of all dividends during the year 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.
[58]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
SMALL COMPANY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------
COMMON STOCK--104.39%
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Automotive Manufacturing-0.78%
Wabash National Corp. 30,000 $ 609,375
-----------
609,375
-----------
Banking-2.72%
Commercial Federal Corp. 40,000 927,500
Commonwealth Bancorp, Inc. 8,000 124,500
PNC Bank Corp. 20,000 1,082,500
-----------
2,134,500
-----------
Building & Construction-6.22%
American Residential
Services, Inc.+ 114,000 370,500
Cavalier Homes, Inc. 151,500 1,723,313
Crossmann Communities, Inc.+ 70,000 1,933,750
Southern Energy Homes, Inc.+ 137,500 842,187
-----------
4,869,750
-----------
Coal-1.86%
Arch Coal, Inc. 85,000 1,455,625
-----------
1,455,625
-----------
Commercial Services-0.98%
First Aviation Services, Inc.+ 70,000 293,125
York Group, Inc. 50,000 475,000
-----------
768,125
-----------
Computer Equipment & Services-5.71%
Arrow Electronics, Inc.+ 30,000 800,625
Hewlett-Packard Co. 5,000 341,562
In Focus Systems, Inc.+ 375,000 3,328,125
-----------
4,470,312
-----------
Computer Information & Technology-1.77%
Wang Laboratories, Inc.+ 50,000 1,387,500
-----------
1,387,500
-----------
Computer Information Systems-3.64%
DST Systems, Inc.+ 50,000 2,853,125
-----------
2,853,125
-----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Computer Network-2.02%
Adaptec, Inc.+ 90,000 $ 1,580,625
-----------
1,580,625
-----------
Financial Services-3.45%
AMRESCO, Inc.+ 100,000 875,000
Aames Financial Corp. 110,000 350,625
Freedom Securities Corp. 70,000 1,058,750
Ocean Financial Corp. 25,000 415,625
-----------
2,700,000
-----------
Food Products-2.51%
Chiquita Brands International 130,000 1,243,125
WLR Foods, Inc.+ 80,000 720,000
-----------
1,963,125
-----------
Food Service & Restaurants-4.54%
Luby's Cafeterias, Inc. 185,000 2,855,938
Rare Hospitality
International, Inc.+ 50,000 700,000
-----------
3,555,938
-----------
Forest Products & Paper-2.34%
Chesapeake Corp. 40,000 1,475,000
Deltic Timber Corp. 17,400 354,525
-----------
1,829,525
-----------
Healthcare-3.42%
Magellan Health Services, Inc.+ 105,000 879,375
Vencor, Inc.+ 400,000 1,800,000
-----------
2,679,375
-----------
Household Products-5.03%
First Brands Corp. 100,000 3,943,750
-----------
3,943,750
-----------
Human Resources-3.71%
Modis Professional
Services, Inc.+ 80,000 1,160,000
Personnel Group of
America, Inc.+ 100,000 1,750,000
-----------
2,910,000
-----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[59]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
SMALL COMPANY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Insurance-8.34%
Capital Re Corp. 85,000 $ 1,705,313
Executive Risk, Inc. 30,000 1,648,125
ReliaStar Financial Corp. 50,000 2,306,250
UNUM Corp. 15,000 875,625
-----------
6,535,313
-----------
Lodging-1.94%
Host Marriott Corp. 110,000 1,519,375
-----------
1,519,375
-----------
Manufacturing-5.32%
Flowserve Corp. 75,000 1,242,187
Lindsay Manufacturing Co. 100,000 1,481,250
NN Ball & Roller, Inc. 100,000 587,500
WD-40 Co. 30,000 858,750
-----------
4,169,687
-----------
Medical Products-2.20%
Spacelabs Medical, Inc.+ 75,000 1,725,000
-----------
1,725,000
-----------
Mining & Metals - Precious-5.78%
Getchell Gold Corp.+ 166,300 4,531,675
-----------
4,531,675
-----------
Oil & Gas - Integrated-2.13%
Louis Dreyfus Natural
Gas Corp.+ 50,000 712,500
Weatherford International, Inc.+ 49,504 959,140
-----------
1,671,640
-----------
Oil & Gas Producers-1.78%
Plains Resources, Inc.+ 47,700 670,781
Union Pacific Resources
Group, Inc. 80,000 725,000
-----------
1,395,781
-----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Oil & Gas Services-1.09%
ENSCO International, Inc. 80,000 $ 855,000
-----------
855,000
-----------
Publishing & Printing-2.02%
John H. Harland Co. 100,000 1,581,250
-----------
1,581,250
-----------
Railroad-1.21%
Norfolk Southern Corp. 30,000 950,625
-----------
950,625
-----------
Real Estate-13.57%
Alexandria Real Estate
Equities, Inc. 30,000 928,125
Catellus Development Corp.+ 100,000 1,431,250
CenterPoint Properties Corp. 32,000 1,082,000
Crestline Capital Corp.+ 11,000 160,875
Equity Office Properties Trust 15,000 360,000
Gables Residential Trust 50,000 1,159,375
Glenborough Realty Trust, Inc. 67,500 1,375,313
Kilroy Realty Corp. 65,000 1,495,000
National Golf Properties, Inc. 70,000 2,025,625
Starwood Lodging Trust 27,200 617,100
-----------
10,634,663
-----------
Retail Stores-4.91%
Consolidated Stores Corp.+ 54,687 1,103,994
Party City Corp.+ 70,000 1,010,625
Paul Harris Stores+ 100,000 812,500
United Auto Group, Inc.+ 100,000 918,750
-----------
3,845,869
-----------
Telecommunications Equipment-0.68%
Glenayre Technologies, Inc.+ 120,000 532,500
-----------
532,500
-----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
[60]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
SMALL COMPANY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Textiles & Apparel-0.65%
Ridgeview, Inc.+ 145,000 $ 507,500
------------
507,500
------------
Utilities - Electric & Gas-2.07%
UniSource Energy Corp.+ 120,000 1,620,000
------------
1,620,000
------------
TOTAL COMMON STOCK
(Cost $85,251,051) 81,786,528
------------
TOTAL INVESTMENTS
(Cost $85,251,051) 104.39% 81,786,528
Other assets, less liabilities (4.39) (3,442,880)
------ ------------
TOTAL NET ASSETS 100.00% $ 78,343,648
====== ============
</TABLE>
See notes to financial statements.
____________________________________________________________________________[61]
<PAGE>
[This page intentionally left blank]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
"Areas we are currently scrutinizing for buying opportunities include
certain industrial- and commodity-type sectors
where valuations are depressed and where there exists
significant operating leverage when underlying
fundamentals begin to improve."
--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 12/31/98
$65,309,530
------------------------------------------------------------------------
NUMBER OF HOLDINGS
93
------------------------------------------------------------------------
PORTFOLIO TURNOVER
66.19%
- --------------------------------------------------------------------------------
[sidebar]
------------------------------------------------------------------------
IN THIS SECTION
------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------------------------
BRIAN S. POSNER
Managing Director
[bullet] Joined Warburg Pincus in 1997
[bullet] 13 years industry experience
[bullet] Previously with Fidelity Investments
since 1987
[bullet] Managed Fidelity Equity Income II from
4/92 to 12/96
[bullet] M.B.A. from University of Chicago
[bullet] B.A. from Northwestern University
[end sidebar]
____________________________________________________________________________[63]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
[pie chart]
% of Portfolio [double dagger]
Common Stock-87.88%
Cash-9.06%
Preferred Stock-2.64%
Corporate Bonds-0.42%
[end pie chart]
[sidebar]
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN EQUITIES PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
International Business
Machines Corp. 2.62%
Philip Morris
Companies, Inc. 2.28%
British Petroleum Co.,
PLC, ADR 2.15%
Federated Department
Stores, Inc. 2.14%
AT&T Corp. 2.13%
Bell Atlantic Corp. 2.11%
Citigroup, Inc. 2.02%
UNOVA, Inc. 1.98%
Anheuser-Busch
Companies, Inc. 1.97%
Ford Motor Co. 1.88%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN industries PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Financial Services 8.26%
Telecommunications 8.12%
Retail Stores 7.76%
Aerospace & Defense 6.21%
Oil & Gas - Integrated 5.12%
Food Products 3.28%
Manufacturing 3.19%
Automotive Manufacturing 2.99%
Chemicals 2.99%
Computer Information
Systems 2.96%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
The Jefferson Pilot Variable Fund Growth & Income Portfolio (the
"Portfolio") ended the year with a gain of 12.63% vs. gains of 13.58% for the
Lipper Growth & Income Funds Index and 28.58% for the S&P 500 Index. The
Portfolio's return since Warburg Pincus assumed management on 9/1/97 was 12.97%.
The Portfolio seeks long-term growth of capital and income and a reasonable
current return by investing primarily in dividend-paying common stocks,
convertibles, and readily marketable securities that derive their value from
common stocks, as well as fixed income securities. The Portfolio does not strive
to maintain a specific balance of stocks, bonds, and money market instruments.
Instead the manager selects the industry sectors and individual securities he
believes have the highest potential for attractive total returns.
The U.S. stock market bounced back strongly over the
October-through-December period after suffering one of its worst quarters on
record with the S&P 500 Index suffering a highly volatile decline of almost 10%.
The market's positive year-end finish was thanks, in large part, to a favorable
interest-rate backdrop. The Federal Reserve reduced rates twice during the
quarter, easing investor concern regarding financial, economic and political
crises abroad and their potential longer-term impact on domestic corporate
earnings.
We made few noteworthy changes to the Portfolio in terms of sector exposure
during the second half of 1998. We remained well-diversified, seeing little
incentive to heavily overweight specific areas, given generally narrow stock
valuations across market sectors. (We were actively seeking to overweight
certain sectors at the beginning of the fourth quarter, since stock valuations
had widened significantly as a result of the market's third-quarter gyrations.
However, valuation spreads quickly returned to historically narrow levels during
the fourth quarter.)
The Portfolio's largest area of concentration remained the
financial-services sector. Changes we made here worthy of mention included
reducing our weighting in Lehman Brothers. We established a significant position
in September, when the stock came under heavy selling pressure on concerns over
balance sheet risk in general. In Lehman's case, we believed these concerns were
exaggerated, hence our position to buy. Our subsequent decision to reduce the
position somewhat was strictly valuation based, given the stock's strong
October/November rally. One financial-services stock we added during the fourth
quarter was Household International. The move reflected our continued shift away
from insurance and mortgage-services stocks (e.g., Freddie Mac) and toward
brokerage and consumer-lending stocks. Elsewhere in the financial area, we
modestly increased our weighting in the banks and savings & loans sector. Our
largest position here at the end of the year was Citigroup. The company, formed
in October by the merger of
[64]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
[line chart]
Growth and Income Portfolio and the S&P 500 Index
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
Growth & Income S&P 500
Portfolio Index
<S> <C> <C>
5/92 10000 10000
6/92 9696 9958
9/92 9824 10272
12/92 10820 10787
3/93 11276 11256
6/93 11300 11310
9/93 11895 11598
12/93 12436 11867
3/94 12070 11420
6/94 11996 11470
9/94 12248 12031
12/94 11910 12028
3/95 12871 13195
6/95 14352 14451
9/95 15496 15596
12/95 15908 16532
3/96 16489 17512
6/96 17365 18399
9/96 17639 19074
12/96 19548 20767
3/97 19874 20860
6/97 22999 24494
9/97 25028 26326
12/97 25200 27079
3/98 28197 30849
6/98 28530 31864
9/98 24440 28701
12/98 28384 34802
</TABLE>
[end line chart]
Citicorp and Travelers Group, offers an array of financial products and
services. We believe that the opportunities created by the merger are compelling
(e.g., cost cutting as well as enhanced revenues via cross-selling) and stand to
support the stock's longer-term performance.
We also maintained a significant weighting in the food, beverages & tobacco
sector focusing primarily on food companies undergoing some form of
restructuring. A representative holding in this regard was Keebler Foods which
has continued to lower its distribution costs and increase sales of its
higher-margin products.
The rest of the Portfolio remained invested across a wide range of sectors,
including the retail sector. Our weighting here was hampered by the Portfolio's
July-through-September return, when retail stocks were hit hard by fears of a
slowing economy. We believe these stocks, and the Portfolio's holdings in
particular, have good long-term growth potential, however, in part because of
the industry's increasingly efficient inventory management. Other notable sector
weightings included the capital-equipment area and the telecommunications &
equipment sector.
Sectors we de-emphasized somewhat during the final quarter of 1998 included
energy & resources, where we reduced our position in certain integrated
multinational stocks on a valuation basis. Somewhat offsetting this adjustment
was establishing a position in Royal Dutch. Royal Dutch's current valuation
reflects the inconsistent results the company has reported over the last couple
of years. However, we believe that recently announced restructuring actions will
yield improved profits and returns in the near future. Note that we eliminated
our exposure to independent exploration and production companies, a move based
largely on two factors. One, we believe that low energy prices will limit these
companies' ability to finance the new exploration projects on which their growth
depends. Secondly, independent energy companies appear less likely to be
acquisition candidates anytime soon, given the current merger activity among
large oil companies.
Looking out over the next several months, we believe that while stock
valuations have generally returned to their mid-1998 highs, many attractive
investment opportunities exist. In this context, areas we are currently
scrutinizing for buying opportunities include certain industrial-and
commodity-type sectors where valuations are depressed, absolutely and relative
to the broader market, and where there exists significant operating leverage
when underlying fundamentals begin to improve. As ever, our overall focus will
remain devoted to identifying stocks we believe have the best risk-adjusted
expected returns, given their current valuations and fundamental prospects.
[sidebar]
- -----------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------
<TABLE>
<CAPTION>
GROWTH & S&P 500
INCOME INDEX
<S> <C> <C>
1 YEAR 12.63% 28.58%
5 YEAR 17.94% 24.09%
INCEPTION 16.93% 20.56%
</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.
[end sidebar]
____________________________________________________________________________[65]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December December December December December
31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 17.11 $ 16.91 $ 14.41 $ 11.22 $ 12.35
Income From Investment Operations
Net investment income 0.15 0.15 0.18 0.15 0.13
Net gains and losses on securities
(both realized and unrealized) 2.01 4.67 3.12 3.62 (0.65)
----------- ----------- ----------- ----------- ----------
Total from investment operations 2.16 4.82 3.30 3.77 (0.52)
Less Distributions to Shareholders
Dividends from net investment income (0.15) (0.15) (0.18) (0.15) (0.13)
Dividends in excess of net investment income
Distributions from capital gains (4.21) (0.62) (0.29) (0.48)
Distributions in excess of capital gains (0.26) (0.14)
Returns of capital
----------- ----------- ----------- ----------- ----------
Total distributions (0.15) (4.62) (0.80) (0.58) (0.61)
Net asset value, end of year $ 19.12 $ 17.11 $ 16.91 $ 14.41 $ 11.22
=========== =========== =========== =========== ==========
Total Return (A) 12.63% 28.92% 22.88% 33.58% (4.24%)
Ratios to Average Net Assets:
Expenses 0.86% 0.85% 0.88% 0.92% 1.10%
Net investment income 0.87% 1.03% 1.39% 1.50% 1.52%
Portfolio Turnover Rate 66.19% 129.53% 35.69% 32.30% 38.17%
Net Assets, At End of Year $65,309,530 $39,678,076 $23,711,696 $13,126,023 $5,610,472
</TABLE>
(A) Total return assumes reinvestment of all dividends during the year 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.
[66]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------
COMMON STOCK--87.90%
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Advertising-1.65%
WPP Group, PLC, ADR 17,500 $ 1,080,625
----------
1,080,625
----------
Aerospace & Defense-6.22%
Allied Signal Inc. 13,300 589,356
General Dynamics Corp. 14,000 820,750
Gulfstream Aerospace Corp.+ 12,400 660,300
Litton Industries, Inc.+ 9,950 649,238
Raytheon Co., Class A 15,200 785,650
United Technologies Corp. 5,100 554,625
----------
4,059,919
----------
Appliances-1.36%
Premark International, Inc. 25,600 886,400
----------
886,400
----------
Automotive Manufacturing-2.99%
DaimlerChrysler AG+ 5,303 509,419
Ford Motor Co. 20,900 1,226,569
Volvo, AB, ADR 9,200 214,475
----------
1,950,463
----------
Automotive Parts & Equipment-1.79%
Federal-Mogul Corp. 6,200 368,900
TRW, Inc. 14,200 797,862
----------
1,166,762
----------
Banking-2.95%
Bank One Corp. 11,900 607,644
Citigroup, Inc. 26,650 1,319,175
----------
1,926,819
----------
Beverages-1.97%
Anheuser-Busch Companies, Inc. 19,650 1,289,531
----------
1,289,531
----------
Building Materials-1.52%
USG Corp. 19,500 993,281
----------
993,281
----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------
Chemicals-2.26%
Ferro Corp. 12,350 $ 321,100
Rhone-Poulenc, SA, ADR 12,750 640,688
Union Carbide Corp. 12,050 512,125
----------
1,473,913
----------
Computer Equipment & Services-1.28%
Compaq Computer Corp. 19,900 834,556
----------
834,556
----------
Computer Information Systems-2.96%
International Business
Machines Corp. 9,250 1,708,938
Unisys Corp.+ 6,600 227,287
----------
1,936,225
----------
Computer Software - Mini & Micro-1.56%
Sun Microsystems, Inc.+ 11,900 1,018,937
----------
1,018,937
----------
Electrical Equipment-0.72%
Emerson Electric Co. 7,550 472,347
----------
472,347
----------
Electronics - Semiconductors-0.74%
Dallas Semiconductor Corp. 11,800 480,850
----------
480,850
----------
Entertainment & Leisure-0.46%
The E.W. Scripps Co. 6,000 298,500
----------
298,500
----------
Environmental Controls-2.20%
Allied Waste Industries, Inc.+ 12,600 297,675
Waste Management, Inc. 24,500 1,142,313
----------
1,439,988
----------
Financial Services-8.26%
American Express Co. 4,200 429,450
Associates First Capital Corp. 6,714 284,506
Fannie Mae 6,400 473,600
Household International, Inc. 8,700 344,738
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[67]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Financial Services-Continued
Lehman Brothers Holdings, Inc. 13,950 $ 614,672
MBIA, Inc. 16,500 1,081,781
MGIC Investment Corp. 13,700 545,431
The FINOVA Group, Inc. 12,250 660,734
Washington Mutual, Inc. 25,100 958,506
----------
5,393,418
----------
Food Products-3.28%
Corn Products International, Inc. 11,450 347,794
H.J. Heinz Co. 6,200 351,075
Keebler Foods Co.+ 20,200 760,025
Ralston-Ralston Purina Group 7,600 246,050
Sara Lee Corp. 15,500 436,906
----------
2,141,850
----------
Healthcare-2.95%
Tenet Healthcare Corp.+ 16,300 427,875
Trigon Healthcare, Inc.+ 23,350 871,247
Wellpoint Health Networks, Inc.+ 7,200 626,400
----------
1,925,522
----------
Insurance-2.89%
Old Republic International Corp. 20,900 470,250
PMI Group, Inc., The 18,650 920,844
Terra Nova Bermuda
Holdings, Ltd. 19,600 494,900
----------
1,885,994
----------
Machinery-0.93%
Case Corp. 20,800 453,700
Caterpillar, Inc. 3,400 156,400
----------
610,100
----------
Manufacturing-3.19%
American Standard
Companies, Inc.+ 13,900 499,531
Harsco Corp. 20,000 608,750
ITT Industries, Inc. 14,700 584,325
Ingersoll-Rand Co. 8,400 394,275
----------
2,086,881
----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Medical Products-1.21%
Baxter International, Inc. 12,250 $ 787,828
----------
787,828
----------
Mining & Metals - Ferrous & Nonferrous-1.21%
Aluminum Company of America 10,592 789,766
----------
789,766
----------
Office Equipment-1.21%
Pitney Bowes, Inc. 6,700 442,619
Tektronix, Inc. 11,600 348,725
----------
791,344
----------
Oil & Gas - Integrated-5.12%
Amerada Hess Corp. 6,600 328,350
British Petroleum Co., PLC, ADR 15,668 1,404,245
Royal Dutch Petroleum Co. 15,300 732,487
Total, SA, ADR 17,700 880,575
----------
3,345,657
----------
Pharmaceutical-1.11%
Merck & Co., Inc. 4,900 723,669
----------
723,669
----------
Production Equipment-1.98%
UNOVA, Inc.+ 71,400 1,294,125
----------
1,294,125
----------
Publishing & Printing-0.53%
R. R. Donnelley & Sons Co. 7,900 346,119
----------
346,119
----------
Railroad-0.59%
Burlington Northern
Sante Fe Corp. 11,500 388,125
----------
388,125
----------
Real Estate-0.19%
Equity Residential Properties Trust 3,100 125,356
----------
125,356
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
[68]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Retail Stores-7.76%
CompUSA, Inc.+ 24,400 $ 318,725
Consolidated Stores Corp.+ 19,800 399,713
Federated Department
Stores, Inc.+ 32,100 1,398,356
Payless ShoeSource, Inc.+ 5,249 248,671
Ross Stores, Inc. 10,600 417,375
Saks, Inc.+ 13,525 426,883
Sears, Roebuck & Co. 13,800 586,500
The May Department Stores Co. 11,400 688,275
The TJX Companies, Inc. 20,200 585,800
-----------
5,070,298
-----------
Telecommunications-8.12%
ALLTEL Corp. 5,600 334,950
AT&T Corp. 18,500 1,392,125
Ameritech Corp. 14,200 899,925
Bell Atlantic Corp. 24,218 1,375,885
BellSouth Corp. 10,800 538,650
SBC Communications, Inc. 14,200 761,475
-----------
5,303,010
-----------
Tobacco-2.28%
Philip Morris Companies, Inc. 27,800 1,487,300
-----------
1,487,300
-----------
Utilities - Electric & Gas-2.46%
Allegheny Energy, Inc. 13,700 472,650
American Electric Power Co., Inc. 8,600 404,738
DQE, Inc. 400 17,575
Illinova Corp. 8,400 210,000
Wisconsin Energy Corp. 15,900 499,856
-----------
1,604,819
-----------
TOTAL COMMON STOCK
(Cost $49,874,750) 57,410,297
-----------
- ----------------------------------------------------------------------
PREFERRED STOCK--2.64%
Number Market
Company of Shares Value
- ----------------------------------------------------------
Broadcasting-1.41%
MediaOne Group, Inc., 6.250% 13,900 $ 924,350
-----------
924,350
Chemicals-0.73%
Ingersoll Rand Co., 6.340% 24,000 477,000
-----------
477,000
-----------
Real Estate-0.50%
Equity Residential
Properties, 7.250% 15,800 323,900
-----------
323,900
-----------
TOTAL PREFERRED STOCK
(Cost $1,648,808) 1,725,250
-----------
- ----------------------------------------------------------------------
CORPORATE BONDS--0.42%
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Electronics - Semiconductors-0.42%
National Semiconducter Corp.,
6.500%, due 10/01/02 $ 310,000 $ 273,575
-----------
273,575
-----------
TOTAL CORPORATE BONDS
(Cost $293,283) 273,575
-----------
TOTAL INVESTMENTS
(Cost $51,816,841) 90.96% 59,409,122
Other assets, less liabilities 9.04 5,900,408
------ -----------
TOTAL NET ASSETS 100.00% $65,309,530
====== ===========
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[69]
<PAGE>
[This page intentionally left blank]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
"For 1999, we expect moderation with respect to earnings, economic
growth, and share price appreciation."
--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 12/31/98
$35,113,754
------------------------------------------------------------------------
NUMBER OF HOLDINGS
125
------------------------------------------------------------------------
PORTFOLIO TURNOVER
247.07%
- --------------------------------------------------------------------------------
[sidebar]
------------------------------------------------------------------------
IN THIS SECTION
------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------------------------
MICHAEL KELLY
Vice President
[bullet] Joined J.P. Morgan in 1985
[bullet] Portfolio Manager in the Equity and Balanced
Accounts Group
[bullet] M.B.A. from the Wharton School of Business,
University of Pennsylvania
[bullet] B.A. from Gettysburg College
------------------------------------------------------------------------
HARRIET HUBER
Vice President
[bullet] Joined J.P. Morgan in 1989
[bullet] 20 years industry experience
[end sidebar]
____________________________________________________________________________[71]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
[pie chart]
% of Portfolio [double dagger]
Common Stock-66.60%
Government & Agency Obligations-18.59%
Corporate Bonds-12.61%
Cash-2.20%
[end pie chart]
[sidebar]
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN holdings PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
GNMA's 7.54%
U.S. Treasury Notes & Bonds 7.51%
FNMA's 4.10%
Monsanto Co. 2.17%
BankAmerica Corp. 2.11%
MCI WorldCom, Inc. 1.99%
Bristol-Myers Squibb Co. 1.98%
American Home
Products Corp. 1.96%
Philip Morris
Companies, Inc. 1.95%
International Business
Machines Corp. 1.85%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN industries PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
Financial Services 10.00%
Banking 4.85%
Telecommunications 4.80%
Pharmaceutical 4.58%
Oil & Gas - Integrated 3.87%
Retail Stores 3.82%
Utilities - Electric & Gas 3.05%
Computer Software - Mini
& Micro 2.97%
Medical - Biotechnology 2.94%
Manufacturing 2.70%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
Market Review
Volatility returned to US financial markets during the second half of 1998,
with two distinct incarnations: a vicious third quarter risk sell-off, followed
by a tremendous fourth quarter equity surge. Fears that the Asian flu contagion
would lead to a global recession were summarily dashed as the Federal Reserve
lowered interest rates three times over a three month period. As liquidity
flooded financial markets, the S&P 500 Index staged an impressive 21.3% rise
during the fourth quarter, driving gains for the full year to 28.6% and
extending the Index's streak of 20%-plus returns to an unprecedented four years.
But gains that elevated the S&P 500 to a record 1,241 became increasingly more
narrow as analysts lowered earning expectations and as interest rates stagnated.
1998 was a challenging year for the bond market. US Treasuries proved the
darlings of the bond market as corporate, mortgage, high yield and emerging
markets bonds underperformed "safe" treasuries for the first time since 1990.
Falling interest rates and low inflation buoyed the bond market overall, but the
default of Russian debt and incipient recession fears in August sent bond
investors into higher quality issues. Panic abated on the heels of Fed action;
however, spreads closed the year significantly wider than mid-year levels. Bonds
in the Salomon BIG index gained 0.4% for the fourth quarter and 8.7% for the
year. The 30 year bond ended 1998 with a 5.1% yield, down from 5.6% at midyear.
Performance Review
Asset Allocation
The Portfolio ended the year with 67% in equities, 31% in fixed income, and
2% in cash. Going into the second half, our bias had been to reduce equity
exposure; however, the decisiveness and rapidity of consecutive Fed easings in
the third quarter reaffirmed portfolio allocations. We allowed market drift to
increase equity weighting to close to the 75% maximum level before allocating
away from stocks in late December.
Equity
The stock market ended a very volatile year in a rally driven by size and
growth. In 1998, the largest 50 stocks gained 40% versus 17% for all other
stocks in the S&P 500. In addition, growth stocks rose significantly more than
value stocks, up 42% and 15%, respectively. (Note that the average S&P 500 stock
ended the year up 13%, but 19% below its 52-week high!) The persistence of these
patterns led to a very narrow market - a challenging environment for active
equity managers, particularly those relying on valuation-driven stock selection
techniques. Against this backdrop, the equity side of
[72]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
[line chart]
Balanced Portfolio, S&P 500 Index and Balanced Benchmark Index
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
55% S&P 500/
Balanced S&P 500 35% Lehman Aggregate/
Portfolio Index 10% 90 Day T-Bills
<S> <C> <C>
5/92 10000 10000 10099
6/92 10081 9958 10070
9/92 10467 10272 10403
12/92 10847 10787 10712
3/93 11379 11256 11129
6/93 11526 11310 11273
9/93 11856 11598 11545
12/93 11852 11867 11702
3/94 11654 11420 11351
6/94 11550 11470 11347
9/94 11698 12031 11691
12/94 11694 12028 11725
3/95 12186 13195 12573
6/95 12848 14451 13516
9/95 13481 15596 14220
12/95 14308 16532 14917
3/96 14377 17512 15286
6/96 14850 18399 15717
9/96 15163 19074 16114
12/96 15819 20767 17056
3/97 15663 20860 17298
6/97 17218 24494 19176
9/97 18243 26326 20172
12/97 18402 27079 20736
3/98 19856 30849 22605
6/98 20162 31864 23226
9/98 18914 28701 22325
12/98 21667 34802 24995
</TABLE>
[end line chart]
the Portfolio delivered very solid results, up 9.0% for the half and 24.6% for
the year.
Stock selection in the technology sector had, by far, the greatest positive
impact on results for the second half. Improving growth prospects drove strong
sector results as the PC industry worked its way through an inventory
correction. Evidence that Y2K would be a net boost to tech spending, at least
for the first half of 1999, also emboldened investors. Meanwhile, internet
stocks scaled new heights amid frenzied trading, and offered a new rational for
multiple expansion among some of the larger, more established technology
companies including EMC Corp, Sun Microsystems, Compaq Computer, and IBM - all
overweight positions in the Portfolio.
Holdings in the consumer stable sector also boosted performance.
Anheuser-Busch shares rallied on beer volume and pricing gains; and Philip
Morris stock rose with the announcement of a tobacco settlement.
Energy stocks were among the weaker constituents of the index as well as
the portfolio. Late-breaking potential catalysts, including Exxon's $75B
acquisition of Mobil as well as the attack on Iraq, failed to reinvigorate
interest in the sector as oil prices remained depressed. Portfolio holdings
skewed towards refining (Tosco Corp and Valero Energy Corp) and oil service
(Input/Output Inc) detracted from performance as shares of large, integrated oil
companies fared better in this environment.
Fixed Income
Fourth quarter recovery of most spread sectors drove Portfolio performance
in the second half as we were overweight these sectors and underweight US
Treasuries. As rates increased towards the end of the year, however, our long
duration and yield curve position somewhat detracted from results.
Outlook
For 1999, we expect moderation with respect to earnings, economic growth,
and share price appreciation. Positive seasonal trends and monetary conditions
should support the market as we enter the new year. However, any one of a
plethora of macro uncertainties has the potential to deflect stocks from
extending their recent gains: the impeachment of the president, the impact of
the Euro, the year 2000 problem, or further international financial turmoil
(Brazil, Japan) or hostilities (Iraq).
[sidebar]
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------
<TABLE>
<CAPTION>
S&P 500 BALANCED
BALANCED INDEX BENCHMARK
<S> <C> <C> <C>
1 YEAR 17.74% 28.58% 20.54%
5 YEAR 12.82% 24.09% 16.39%
INCEPTION 12.29% 20.56% 14.72%
</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.
[end sidebar]
____________________________________________________________________________[73]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December December December December December
31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.75 $ 12.07 $ 11.91 $ 10.62 $ 11.22
Income From Investment Operations
Net investment income 0.24 0.30 0.26 0.37 0.32
Net gains and losses on securities
(both realized and unrealized) 1.84 1.60 0.99 1.99 (0.47)
----------- ----------- ----------- ----------- -----------
Total from investment operations 2.08 1.90 1.25 2.36 (0.15)
Less Distributions to Shareholders
Dividends from net investment income (0.24) (0.30) (0.26) (0.37) (0.32)
Dividends in excess of net
investment income
Distributions from capital gains (0.88) (1.64) (0.83) (0.70) (0.13)
Distributions in excess of capital gains (0.28)
Returns of capital
----------- ----------- ----------- ----------- -----------
Total distributions (1.12) (2.22) (1.09) (1.07) (0.45)
Net asset value, end of year $ 12.71 $ 11.75 $ 12.07 $ 11.91 $ 10.62
=========== =========== =========== =========== ===========
Total Return (A) 17.74% 16.33% 10.56% 22.35% (1.33%)
Ratios to Average Net Assets:
Expenses 0.94% 0.97% 0.97% 0.99% 1.01%
Net investment income 2.08% 2.60% 2.20% 3.20% 3.34%
Portfolio Turnover Rate 247.07% 254.04% 222.35% 164.70% 103.68%
Net Assets, At End of Year $35,113,754 $22,637,577 $18,256,430 $14,532,268 $14,764,853
</TABLE>
(A) Total return assumes reinvestment of all dividends during the year 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.
[74]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------
COMMON STOCK--71.85%
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense-1.93%
AlliedSignal, Inc. 6,800 $ 301,325
Coltec Industries+ 19,300 376,350
----------
677,675
----------
Automotive Parts & Equipment-0.10%
Tenneco, Inc.+ 1,000 34,062
----------
34,062
----------
Banking-5.23%
Astoria Financial Corp. 3,710 169,733
BankAmerica Corp. 13,323 801,045
Bankers Trust Corp. 2,900 247,769
Citigroup, Inc. 7,750 383,625
KeyCorp 7,300 233,600
----------
1,835,772
----------
Beverages-1.79%
Anheuser-Busch Cos., Inc. 3,100 203,438
PepsiCo, Inc. 6,700 274,281
Seagram Co., Ltd. 4,000 152,000
----------
629,719
----------
Broadcasting-1.85%
Comcast Corp. 2,600 152,587
Tele-Communications, Inc.+ 9,000 497,813
----------
650,400
----------
Chemicals-1.09%
Albermarle Corp. 1,900 45,125
Rohm & Haas Co. 11,200 337,400
----------
382,525
----------
Commercial Services-1.60%
Cendant Corp.+ 11,300 215,406
Service Corp. International 9,100 346,369
----------
561,775
----------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Computer Equipment & Services-1.85%
Compaq Computer Corp. 7,200 $ 301,950
EMC Corp./Mass+ 4,100 348,500
----------
650,450
----------
Computer Information Systems-2.00%
International Business
Machines Corp. 3,800 702,050
----------
702,050
----------
Computer Network-1.71%
Cisco Systems, Inc.+ 6,475 600,961
----------
600,961
----------
Computer Software - Mainframe-0.29%
Oracle Corp.+ 2,400 103,500
----------
103,500
----------
Computer Software - Mini & Micro-3.21%
Autodesk, Inc. 4,000 170,750
Microsoft Corp.+ 4,300 596,356
Sun Microsystems, Inc.+ 4,200 359,625
----------
1,126,731
----------
Cosmetics & Personal Care-0.75%
Kimberly-Clark Corp. 4,800 261,600
----------
261,600
----------
Electronics - Semiconductors-2.04%
Intel Corp. 4,300 509,819
Texas Instruments, Inc. 2,400 205,350
----------
715,169
----------
Entertainment & Leisure-0.56%
Mirage Resorts, Inc.+ 13,100 195,681
----------
195,681
----------
Environmental Controls-2.15%
Republic Services, Inc.+ 6,300 116,156
Waste Management, Inc. 13,702 638,856
----------
755,012
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[75]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Financial Services-2.57%
MBIA, Inc. 4,200 $ 275,362
Newcourt Credit Group, Inc. 6,100 213,119
Washington Mutual, Inc. 10,800 412,425
---------
900,906
---------
Food Products-0.92%
Campbell Soup Co. 3,500 192,500
Ralston-Ralston Purina Group 4,000 129,500
---------
322,000
---------
Healthcare-0.75%
HEALTHSOUTH Corp.+ 15,700 242,369
Humana, Inc.+ 1,100 19,594
---------
261,963
---------
Household Products-1.87%
Procter & Gamble Co. 7,200 657,450
---------
657,450
---------
Insurance-1.71%
Marsh & McLennan Cos., Inc. 3,700 216,219
UNUM Corp. 6,600 385,275
---------
601,494
---------
Manufacturing-2.91%
Cooper Industries, Inc. 5,400 257,512
General Electric Co. 1,200 122,475
International Game Technology 11,200 272,300
Tyco International, Ltd. 4,903 369,870
---------
1,022,157
---------
Medical - Biotechnology-3.18%
Genzyme Corp.+ 5,900 293,525
Genzyme Molecular Oncology+ 669 2,174
Monsanto Corp. 17,300 821,750
---------
1,117,449
---------
Medical Supplies-0.42%
Forest Laboratories, Inc.+ 2,800 148,925
---------
148,925
---------
- ----------------------------------------------------------------------
COMMON STOCK--CONTINUED
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
Mining & Metals - Ferrous & Nonferrous-0.34%
Allegheny Teledyne, Inc. 5,800 $ 118,538
---------
118,538
---------
Multimedia-0.71%
The News Corp., Ltd., ADR 9,400 248,512
---------
248,512
---------
Oil & Gas - Distribution & Marketing-1.01%
KN Energy, Inc. 1,000 36,375
Tosco Corp. 12,300 318,263
---------
354,638
---------
Oil & Gas - Integrated-3.57%
Mobil Corp. 7,600 662,150
Shell Transport & Trading, ADR 15,900 591,281
---------
1,253,431
---------
Oil & Gas Services-0.64%
Input/Output, Inc.+ 30,500 223,031
---------
223,031
---------
Packaging & Containers-1.01%
Smurfit-Stone Container Corp.+ 22,410 354,358
---------
354,358
---------
Pharmaceutical-4.94%
ALZA Corp.+ 1,900 99,275
American Home Products Corp. 13,200 743,325
Bristol-Myers Squibb Co. 5,600 749,350
Warner-Lambert Co. 1,900 142,856
---------
1,734,806
---------
Real Estate-0.95%
Starwood Hotels & Resorts
Worldwide, Inc. 14,701 333,529
---------
333,529
---------
Retail Stores-4.12%
Autozone, Inc.+ 3,400 111,988
Circuit City Stores - Circuit
City Group 2,500 124,844
Dayton Hudson Corp. 5,000 271,250
</TABLE>
+Non-income producing security.
See notes to financial statements.
[76]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
COMMON STOCK--CONTINUED
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Retail Stores-Continued
Fred Meyer, Inc.+ 5,600 $ 337,400
The Gap, Inc. 2,500 140,625
The TJX Cos., Inc. 7,200 208,800
Wal-Mart Stores, Inc. 3,100 252,456
----------
1,447,363
----------
Telecommunications-4.57%
GTE Corp. 7,500 505,781
MCI WorldCom, Inc.+ 10,480 751,940
SBC Communications, Inc. 6,500 348,563
----------
1,606,284
----------
Telecommunications Equipment-0.94%
Lucent Technologies, Inc. 3,000 330,000
----------
330,000
----------
Tobacco-2.10%
Philip Morris Companies, Inc. 13,800 738,300
----------
738,300
----------
Toys-0.98%
Mattel, Inc. 15,100 344,469
----------
344,469
----------
Transportation-1.69%
Union Pacific Corp. 13,200 594,825
----------
594,825
----------
Utilities - Electric & Gas-1.80%
Northern States Power Co. 1,500 41,625
PP&L Resources, Inc. 12,700 354,013
Wisconsin Energy Corp. 7,500 235,781
----------
631,419
----------
TOTAL COMMON STOCK
(Cost $23,003,320) 25,228,929
----------
- ----------------------------------------------------------
CORPORATE BONDS--13.61%
Principal Market
Company Value Value
- ----------------------------------------------------------
Automotive Manufacturing-0.86%
Toyota Motor Credit, 5.625%,
due 11/13/03 $ 300,000 $ 301,765
----------
301,765
----------
Commercial Services-0.29%
Associates Corp., 6.250%,
due 11/01/08 100,000 103,370
----------
103,370
----------
Financial Services-8.23%
Deutsche Mortgage and Asset
Receiving Corp., 6.220%,
due 06/15/31 153,627 156,262
Discover Card 98-7n A,
5.600%, due 05/15/06 180,000 180,386
Fleetwood Credit Corp.,
Grantor Trust, 6.900%,
due 03/15/12 25,704 26,076
Ford Auto Credit, 5.810%,
due 03/15/02 200,000 201,847
Ford Motor Credit, 6.625%,
due 06/30/03 260,000 269,874
GMAC Med. Term Note,
6.750%, due 11/04/04 260,000 274,692
Household Finance Co.,
6.125%, due 02/27/03 100,000 100,008
Lehman Brothers Comm.
Conduit Mortgage, 6.330%,
due 11/18/04 188,922 193,183
Merrill Lynch Mortgage
Investors, Inc., 6.220%,
due 02/15/30 151,371 154,291
Morgan Stanley Capital I,
6.190%, due 01/15/07 142,440 145,318
Morgan Stanley Capital I,
6.340%, due 07/15/30 48,507 49,714
Morgan Stanley Capital I,
6.590%, due 10/03/30 145,075 150,361
Mortgage Capital Funding,
6.417%, due 06/18/07 158,362 162,944
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[77]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES-CONTINUED
Nomura, Series 98-D6 A1A,
6.280%, due 03/15/30 $ 151,932 $ 156,000
OCWEN 98-R1 A1, 4.000%,
due 10/25/30 141,293 141,271
Sears Roebuck Acceptance Corp.,
6.930%, due 11/15/02 100,000 104,017
Sears Roebuck Acceptance Corp.,
6.540%, due 02/20/03 100,000 102,802
The Money Store, Home
Equity Trust,
7.000%, due 04/15/28 200,000 206,214
The Money Store, Home
Equity Trust,
6.485%, due 12/15/38 110,000 111,789
----------
2,887,049
----------
Food Products-0.17%
Philip Morris, 6.150%,
due 03/15/10 60,000 60,602
----------
60,602
----------
Insurance-0.59%
Prudential Insurance, 6.375%,
due 07/23/06 200,000 206,252
----------
206,252
----------
Oil & Gas - Distribution & Marketing-0.78%
Express Pipeline, 6.740%,
due 12/31/11 74,900 73,062
Trans-Canada Pipelines,
Med. Term Note,
7.060%, due 10/14/25 200,000 201,481
----------
274,543
----------
Oil & Gas - Integrated-0.60%
National Fuel Gas, Med. Term
Note, 6.214%, due 08/12/27 200,000 210,808
----------
210,808
----------
Telecommunications-0.60%
Pacific Bell, 6.125%,
due 02/15/08 200,000 210,134
----------
210,134
----------
- ----------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Utilities - Electric & Gas-1.49%
Consolidates Edison, Inc.,
6.250%, due 02/01/08 $ 100,000 $ 105,589
Southern Company Capital
Trust I, 8.190%,
due 02/01/37 200,000 218,077
United Utilities, PLC, 6.875%,
due 08/15/28 200,000 199,303
----------
522,969
----------
TOTAL CORPORATE BONDS
(Cost $4,675,401) 4,777,492
----------
- ----------------------------------------------------------------------
GOVERNMENT & AGENCY OBLIGATIONS--20.06%
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Foreign Government-0.54%
Province of Quebec, 7.500%,
due 07/15/23 $ 165,000 $ 189,090
----------
189,090
----------
Government Agency-11.42%
Federal National Mortgage
Association, Commitment,
6.000%, due 01/01/28 1,285,000 1,268,335
Federal National Mortgage
Association, Dwarf,
7.000%, due 05/01/12 83,120 85,053
Federal National Mortgage
Association, Dwarf,
6.500%, due 08/01/13 4,627 4,699
Federal National Mortgage
Association, Pool #433354,
7.000%, due 07/01/28 191,943 196,084
Government National Mortgage
Association, Commitment,
7.000%, due 01/01/28 60,000 61,416
</TABLE>
See notes to financial statements.
[78]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
GOVERNMENT & AGENCY OBLIGATIONS--CONTINUED
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Government Agency-Continued
Government National Mortgage
Association, Pool #422323,
6.500%, due 04/15/26 $ 907,313 $ 917,357
Government National Mortgage
Association, Pool #425832,
7.000%, due 01/15/28 548,909 562,291
Government National Mortgage
Association, Pool #467119,
7.000%, due 08/15/28 80,551 82,515
Government National Mortgage
Association, Pool #472003,
7.000%, due 08/15/28 417,596 427,777
Government National Mortgage
Association, Pool #482012,
6.500%, due 08/15/28 399,310 403,806
-----------
4,009,333
-----------
- ----------------------------------------------------------------------
GOVERNMENT & AGENCY OBLIGATIONS--CONTINUED
Principal Market
Company Value Value
- ----------------------------------------------------------------------
U.S. Treasury Notes and Bonds-8.10%
U.S. Treasury Bond, 6.750%,
due 08/15/26 $ 325,000 $ 389,594
U.S. Treasury Bond, 5.250%,
due 11/15/28 290,000 297,341
U.S. Treasury Note, 5.750%,
due 08/15/03 1,580,000 1,649,620
U.S. Treasury Note, 5.625%,
due 05/15/08 60,000 64,031
U.S. Treasury TIGER,
Zero Coupon, due 08/15/12+ 915,000 443,557
-----------
2,844,143
-----------
TOTAL GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $6,973,731) 7,042,566
-----------
TOTAL INVESTMENTS
(Cost $34,652,452) 105.52% 37,048,987
Other assets, less liabilities (5.52) (1,935,233)
------ -----------
TOTAL NET ASSETS 100.00% $35,113,754
====== ===========
</TABLE>
____________________________________________________________________________[79]
<PAGE>
[This page intentionally left blank]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
"We believe the high-yield market remains an attractive
asset class given our cautious outlook for corporate earnings
in 1999 and the historically high yield levels available
in the market today."
--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 12/31/98
$7,968,843
------------------------------------------------------------------------
NUMBER OF HOLDINGS
182
------------------------------------------------------------------------
PORTFOLIO TURNOVER
84.21%
------------------------------------------------------------------------
DOLLAR WEIGHTED AVERAGE MATURITY
7.96 years
- --------------------------------------------------------------------------------
[sidebar]
------------------------------------------------------------------------
IN THIS SECTION
------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------------------------
BERNARD SCOZZAFAVA
Vice President
[bullet] Joined MFS in 1989
[bullet] M.S. from Massachusetts Institute
of Technology
[bullet] Graduate of Hamilton College
[end sidebar]
____________________________________________________________________________[81]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
[pie chart]
% of Portfolio [double dagger]
Corporate Bonds-97.21%
Preferred Stock-2.77%
Rights and Warrants-0.02%
[end pie chart]
[sidebar]
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
RATING PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
BBB 0.54%
BB 10.75%
B 63.15%
CCC 11.51%
Not Rated 14.05%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
PERCENT OF
TOP TEN HOLDINGS PORTFOLIO[double dagger]
- -------------------------------------------------
<S> <C>
NL Industries,
11.750%, due 10/15/03 1.46%
United Int'l, B,
0.000%, due 02/15/08 1.37%
Colt Telecom Group,
12.000%, due 12/15/06 1.36%
Unisys Corp., B,
12.000%, due 04/15/03 1.34%
Jitney-Jungle Stores,
12.000%, 03/01/06 1.34%
Charter Comm. S. East,
11.250%, 03/15/06 1.28%
Adelphia Comm., 144A,
8.375%, due 02/01/08 1.23%
Hayes Wheels Int'l,
11.000%, 07/15/06 1.22%
Anacomp, Inc., 10.875%,
due 04/01/04 1.17%
NTL, Inc., 144A,
0.000%, 04/01/08 1.16%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
1998 was a volatile year for the high-yield market. During the first half
of the year, high-yield bonds were the best performing domestic fixed income
asset class. However, in the third quarter, the high-yield market posted its
worst performance in eight years, due to renewed concerns that economic problems
in Asia and Russia would negatively impact the domestic economy. The second
interest rate cut by the Federal Reserve Bank on October 15th helped restore
confidence in the high yield market and was the catalyst for a price recovery in
the fourth quarter.
Despite the modest price recovery in the fourth quarter, we think the
high-yield market still offers good long-term value. As of December 31, 1998,
the yield on the Salomon Brothers High-Yield Index was 10.3% compared to 4.6%
for comparable Treasury yields, resulting in a spread of 5.7%. The spread began
1998 at 3.5% and has risen to its widest level since 1991 as a result of lower
high-yield bond prices and investors' flight-to-quality. We believe the
high-yield market remains an attractive asset class given our cautious outlook
for corporate earnings in 1999 and the historically high yield levels available
in the market today.
The Portfolio's performance benefited from an overweight position
in the media sector, particularly the bonds
[82]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
[line chart]
High Yield Bond Portfolio and Lehman Bros. High Yield Bond Index
Comparison of Change in Value of $10,000 Investment.
<TABLE>
<CAPTION>
High Yield Lehman Bros.
Bond Portfolio High Yield Index
<S> <C> <C>
12/97 10000 10000
1/98 10195 10180
2/98 10160 10240
3/98 10289 10336
4/98 10310 10377
5/98 10346 10413
6/98 10387 10450
7/98 10513 10510
8/98 9722 9930
9/98 9640 9975
10/98 9430 9770
11/98 10094 10176
12/98 10089 10187
</TABLE>
[end line chart]
of cable-television companies. Valuations for cable-television companies rose
substantially, based on the growing perception that their networks are a cost
effective way to deliver Internet and telephone services to residential
consumers. The Portfolio also benefited from being underweight in the energy
sector, which was one of the worst performing sectors of the high-yield market
due to the severe decline in oil prices. Performance was negatively impacted by
our cyclical holdings as paper and steel prices declined in response to the
Asian economic crisis.
Throughout 1998, our investment strategy has become more conservative. We
expect credit problems will increase among the riskier high-yield companies as
corporate profits decline due to slower economic growth. Therefore, we've been
adding higher quality companies to the Portfolio and have reduced our cyclical
exposure by selling the bonds of some paper, metal and general industrial
companies. One of the major challenges facing investors in 1999 will be
determining how individual companies are impacted by global economic events, and
therefore, we believe that careful credit selection will remain crucial to the
Portfolio's relative performance.
[sidebar]
- -----------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------
<TABLE>
<CAPTION>
LEHMAN.
BROS. HIGH
HIGH YIELD YIELD BOND
BOND INDEX
<S> <C> <C>
1 YEAR 0.89% 2.13%
INCEPTION 0.89% 2.13%
</TABLE>
Commencement of operations January 1, 1998. 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.
[end sidebar]
____________________________________________________________________________[83]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended
December
31, 1998
<S> <C>
Net asset value, beginning of year $ 10.00
Income From Investment Operations
Net investment income 0.60
Net gains and losses on securities
(both realized and unrealized) (0.51)
----------
Total from investment operations 0.09
Less Distributions to Shareholders
Dividends from net investment income (0.60)
Dividends in excess of net
investment income
Distributions from capital gains
Distributions in excess of capital gains
Returns of capital
----------
Total distributions (0.60)
Net asset value, end of year $ 9.49
==========
Total Return (A) 0.89%
Ratios to Average Net Assets:
Expenses 1.24%
Net investment income 7.85%
Portfolio Turnover Rate 84.21%
Net Assets, At End of Year $7,968,843
</TABLE>
(A) Total return assumes reinvestment of all dividends during the year 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.
[84]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------
CORPORATE BONDS--102.27%
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ---------------------------------------------------------------------
<S> <C> <C>
Advertising-0.67%
Outdoor Systems, Inc., 8.875%,
due 06/15/07 $ 50,000 $ 53,750
--------
53,750
--------
Aerospace & Defense-2.91%
Argo-Tech Corp., 8.625%,
due 10/01/07 40,000 38,200
BE Aerospace, Inc., Series B,
9.875%, due 02/01/06 50,000 52,250
K & F Industries, Inc., Series B,
9.250%, due 10/15/07 75,000 76,313
Satelites Mexicanos, SA de CV,
Series B, 10.125%,
due 11/01/04 70,000 56,175
Stellex Industries, Inc.,
Series B, 9.500%,
due 11/01/07 10,000 8,675
--------
231,613
--------
Automotive Parts & Equipment-1.85%
Hayes Wheels International, Inc.,
11.000%, due 07/15/06 92,000 102,580
Hayes Wheels International, Inc.,
Series B, 9.125%, due 07/15/07+ 20,000 20,850
Talon Automotive Group, LLC,
Series B, 9.625%,
due 05/01/08 25,000 23,875
--------
147,305
--------
Automotive Rental-0.52%
Williams Scotsman, Inc., 9.875%,
due 06/01/07 40,000 41,300
--------
41,300
--------
Beverages-0.13%
Delta Beverage Group, Inc.,
9.750%, due 12/15/03 10,000 10,450
--------
10,450
--------
- ----------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Broadcasting-14.65%
Adelphia Communications Corp.,
Series 144A, 8.375%,
due 02/01/08+ $100,000 $103,500
Albritton Communications Co.,
Series B, 9.750%, due 11/30/07 40,000 42,600
Avalon Cable, Series 144A,
9.375%, due 12/01/08+ 25,000 25,687
CSC Holdings, Inc.,
Series B, 8.125%,
due 08/15/09 50,000 52,840
Chancellor Media Corp.,
Series B, 8.750%,
due 06/15/07 40,000 41,200
Chancellor Media Corp.,
Series B, 8.125%,
due 12/15/07 75,000 75,188
Chancellor Media Corp.,
Series 144A, 8.000%,
due 11/01/08+ 25,000 25,687
Charter Communications,
S. East, Series B,
11.250%, due 03/15/06 95,000 107,350
Cumulus Media, Inc., 10.375%,
due 07/01/08+ 50,000 53,250
Fox/Liberty Networks, LLC,
8.875%, due 08/15/07 65,000 66,625
Frontiervision Holdings, L.P.,
Zero Coupon,
due 09/15/07+ 45,000 37,800
Frontiervision Holdings, L.P.,
11.000%, due 10/15/06 25,000 27,875
Granite Broadcasting Corp.,
10.375%, due 05/15/05 15,000 15,225
Granite Broadcasting Corp.,
8.875%, due 05/15/08 25,000 23,938
Jacor Communications Co.,
8.000%, due 02/15/10+ 50,000 53,000
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[85]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Broadcasting-Continued
LIN Television Corp.,
Zero Coupon,
due 03/01/08+ $ 60,000 $ 42,300
Lenfest Communications, Inc.,
8.375%, due 11/01/05 40,000 43,400
Rogers Cablesystems, Ltd.,
9.625%, due 08/01/02 40,000 43,400
TeleWest Communications, PLC,
9.625%, due 10/01/06+ 75,000 77,625
Telemundo Group, Inc.,
Series 144A, Zero Coupon,
due 08/15/08+ 125,000 69,375
United International
Holdings, Inc., Series B,
Zero Coupon, due 02/15/08+ 210,000 114,450
Young Broadcasting, Inc.,
Series B, 8.750%,
due 06/15/07 25,000 25,500
----------
1,167,815
----------
Building Materials-3.80%
American Standard Co.,
7.375%, due 02/01/08+ 75,000 75,375
Building Materials Holding Corp.,
Series B, 7.750%,
due 07/15/05+ 50,000 49,500
Building Materials Holding Corp.,
Series B, 8.625%,
due 12/15/06 50,000 51,125
Nortek, Inc., Series B,
9.250%, due 03/15/07 50,000 51,500
Schuff Steel Co., 10.500%,
due 06/01/08 45,000 39,375
Synthetic Industries, Inc.,
Series B, 9.250%,
due 02/15/07 35,000 35,875
----------
302,750
----------
- ----------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Chemicals-2.75%
NL Industries, Inc.,
11.750%, due 10/15/03 $115,000 $ 122,763
PCI Chemicals Canada,
9.250%, due 10/15/07 70,000 54,250
Sterling Chemicals, Inc., Series A,
11.250%, due 04/01/07 50,000 42,250
----------
219,263
----------
Commercial Services-0.63%
Dialog Corp., PLC, Series A,
11.000%, due 11/15/07 50,000 50,000
----------
50,000
----------
Computer Equipment & Services-2.11%
Anacomp, Inc., 10.875%,
due 04/01/04 95,000 98,325
Continental Resources, Inc.,
10.250%, due 08/01/08+ 25,000 20,875
Iron Mountain, Inc.,
10.125%, due 10/01/06 45,000 48,600
----------
167,800
----------
Computer Network-1.53%
Convergent Communications, Inc.,
Series B, 13.000%,
due 04/01/08+ 25,000 12,125
Exodus Communications, Inc.,
11.250%, due 07/01/08+ 50,000 50,250
PSInet, Inc., 10.000%,
due 02/15/05+ 50,000 49,750
PSINet, Inc., Series 144A,
11.500%, due 11/01/08+ 10,000 10,525
----------
122,650
----------
Computer Software - Mainframe-2.28%
Unisys Corp., Series B,
12.000%, due 04/15/03 100,000 112,500
Verio, Inc., 10.375%,
due 04/01/05+ 50,000 49,250
</TABLE>
+Non-income producing security.
See notes to financial statements.
[86]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Computer Software - Mainframe-Continued
Verio, Inc., Series 144A,
11.250%, due 12/01/08+ $ 20,000 $ 20,200
--------
181,950
--------
Cosmetics & Personal Care-1.58%
Remington Product Co., Series B,
11.000%, due 05/15/06 55,000 41,525
Revlon Consumer Products Corp.,
8.125%, due 02/01/06+ 45,000 43,425
Revlon Consumer Products Corp.,
8.625%, due 02/01/08 45,000 41,175
--------
126,125
--------
Educational Services-0.82%
Kindercare Learning Centers, Inc.,
Series B, 9.500%,
due 02/15/09 65,000 65,000
--------
65,000
--------
Engineering & Construction-0.50%
Furon Co., 8.125%,
due 03/01/08 40,000 39,800
--------
39,800
--------
Entertainment & Leisure-4.60%
AMC Entertainment, Inc.,
9.500%, due 03/15/09 40,000 41,000
Casino America, Inc.,
12.500%, due 08/01/03 25,000 27,812
Cinemark USA, Inc., Series B,
9.625%, due 08/01/08 50,000 52,500
Circus Circus Enterprises, Inc.,
6.450%, due 02/01/06+ 50,000 45,411
Lady Luck Gaming Corp.,
11.875%, due 03/01/01 75,000 76,125
Regal Cinemas, Inc.,
9.500%, due 06/01/08+ 45,000 47,025
Station Casinos, Inc., Series 144A,
8.875%, due 12/01/08+ 75,000 76,500
--------
366,373
--------
- ----------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Food Products-1.15%
Specialty Foods Corp., Series B,
10.250%, due 08/15/01 $100,000 $ 91,500
--------
91,500
--------
Food Service & Restaurants-0.70%
Friendly Ice Cream Corp.,
10.500%, due 12/01/07 55,000 55,962
--------
55,962
--------
Forest Products & Paper-3.53%
Buckeye Technologies, Inc.,
8.500%, due 12/15/05 40,000 41,500
Buckeye Technologies, Inc.,
9.250%, due 09/15/08 40,000 42,100
REPAP New Brunswick, Inc.,
9.000%, due 06/01/04 50,000 45,750
Specialty Paperboard, Inc.,
9.375%, due 10/15/06 70,000 71,050
U.S. Timberlands Co., L.P.,
9.625%, due 11/15/07 80,000 80,800
--------
281,200
--------
Healthcare-1.48%
Oxford Health Plans, Inc.,
11.000%, due 05/15/05 25,000 23,625
Prime Medical Services, Inc.,
8.750%, due 04/01/08 60,000 58,050
Tenet Healthcare Corp.,
Series 144A, 7.625%,
due 06/01/08 35,000 36,538
--------
118,213
--------
Holding Companies-0.13%
Simonds Industries, Inc.,
10.250%, due 07/01/08+ 10,000 10,250
--------
10,250
--------
Lodging-1.29%
Prime Hospitality Corp., Series B,
9.750%, due 04/01/07 50,000 51,250
Red Roof Inns, Inc.,
9.625%, due 12/15/03 50,000 51,250
--------
102,500
--------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[87]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Machinery-3.18%
Grove Worldwide, LLC,
9.250%, due 05/01/08 $ 50,000 $ 45,250
Newcor, Inc., Series B,
9.875%, due 03/01/08 90,000 84,150
Numatics, Inc., Series B,
9.625%, due 04/01/08 25,000 23,500
Thermadyne Holdings Corp.,
9.875%, due 06/01/08 30,000 28,350
Thermadyne Holdings Corp.,
Zero Coupon, due 06/01/08+ 150,000 72,000
---------
253,250
---------
Manufacturing-3.32%
Classic Cable, Inc.,
9.875%, due 08/01/08+ 40,000 41,800
International Knife & Saw, Inc.,
11.375%, due 11/15/06+ 50,000 51,500
Mark IV Industries, Inc.,
7.750%, due 04/01/06+ 50,000 49,577
Pierce Leahy Corp.,
11.125%, due 07/15/06+ 30,000 33,300
Polymer Group, Inc., Series B,
9.000%, due 07/01/07 50,000 49,750
Samsonite Corp.,
10.750%, due 06/15/08 45,000 38,025
---------
263,952
---------
Medical Products-0.21%
ALARIS Medical, Inc.,
Series 144A, Zero Coupon,
due 08/01/08+ 30,000 16,500
---------
16,500
---------
Mining & Metals - Ferrous & Nonferrous-4.67%
AK Steel Holding Corp.,
9.125%, due 12/15/06 35,000 36,575
Commonwealth Aluminum Corp.,
10.750%, due 10/01/06 50,000 50,500
- ----------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Mining & Metals - Ferrous & Nonferrous-Continued
Jorgensen Co., Series B,
9.500%, due 04/01/05 $ 50,000 $ 46,250
Kaiser Aluminum & Chemical
Corp., 9.875%, due 02/15/02+ 75,000 74,625
Metal Management, Inc.,
10.000%, due 05/15/08 50,000 30,250
Oxford Automotive, Inc.,
10.125%, due 06/15/07 65,000 67,600
P & L Coal Holdings Corp.,
9.625%, due 05/15/08 65,000 65,975
---------
371,775
---------
Multimedia-0.66%
Time Warner Telecom,
9.750%, due 07/15/08+ 50,000 52,750
---------
52,750
---------
Oil & Gas Producers-0.80%
Chesapeake Energy Corp.,
Series B, 9.625%, due 05/01/05 50,000 37,000
Petsec Energy, Inc., Series B,
9.500%, due 06/15/07 20,000 10,100
Wiser Oil Co.,
9.500%, due 05/15/07 25,000 16,625
---------
63,725
---------
Oil & Gas Services-0.54%
Pool Energy Services Co.,
8.625%, due 04/01/08 45,000 42,750
---------
42,750
---------
Packaging & Containers-3.00%
Applied Extrusion Technologies, Inc.,
Series B, 11.500%,
due 04/01/02+ 25,000 26,187
Ball Corp., Series 144A,
8.250%, due 08/01/08+ 25,000 26,125
Gaylord Container Corp.,
Series B, 9.750%, due 06/15/07 65,000 56,225
</TABLE>
+Non-income producing security.
See notes to financial statements.
[88]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Packaging & Containers-Continued
Gaylord Container Corp., Series B,
9.875%, due 02/15/08 $ 75,000 $ 55,125
Graham Packaging Holdings Co.,
8.750%, due 01/15/08 50,000 50,250
Silgan Holdings, Inc.,
9.000%, due 06/01/09 25,000 25,313
---------
239,225
---------
Publishing & Printing-2.67%
Big Flower Press Holdings, Inc.,
8.875%, due 07/01/07 50,000 50,375
Big Flower Press Holdings, Inc.,
Series 144A, 8.625%,
due 12/01/08+ 50,000 50,750
Hollinger International
Publishing, Inc., 9.250%,
due 03/15/07 40,000 42,400
Liberty Group Operations, Inc.,
9.375%, due 02/01/08 50,000 49,250
World Color Press, Inc.,
Series 144A, 8.375%,
due 11/15/08+ 20,000 20,100
---------
212,875
---------
Real Estate-0.96%
Clark R&M, Inc., 8.625%,
due 08/15/08+ 40,000 39,100
Clark USA, Inc., Trizec,
10.875%, due 12/01/05 40,000 37,000
---------
76,100
---------
Retail Stores-4.69%
Finlay Fine Jewelery Corp.,
8.375%, due 05/01/08 25,000 23,125
Finlay Fine Jewelery Corp.,
9.000%, due 05/01/08 10,000 8,850
Jitney-Jungle Stores America, Inc.,
12.000%, due 03/01/06 100,000 112,000
Marsh Supermarkets, Inc.,
8.875%, due 08/01/07 75,000 78,750
- ----------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Retail Stores-Continued
Musicland Group, Inc.,
9.000%, due 06/15/03 $ 25,000 $ 24,250
Musicland Group, Inc.,
9.875%, due 03/15/08 50,000 48,750
Pathmark Stores, Inc.,
11.625%, due 06/15/02 55,000 53,625
Pathmark Stores, Inc.,
9.625%, due 05/01/03 25,000 24,750
---------
374,100
---------
Telecommunications-22.49%
Allegiance Telecom, Inc.,
12.875%, due 05/15/08+ 35,000 34,125
Allegiance Telecom, Inc.,
Zero Coupon, Series B,
due 02/15/08+ 75,000 36,375
American Cellular Corp.,
Series 144A, 10.500%,
due 05/15/08 50,000 48,500
AMSC Acquisition Co., Inc.,
Series B, 12.250%,
due 04/01/08 40,000 25,000
Clearnet Communications, Inc.,
Zero Coupon,
due 12/15/05+ 50,000 43,000
Colt Telecom Group, PLC,
Zero Coupon,
due 12/15/06+ 135,000 114,075
Dolphin Telecom, PLC,
Series 144A, Zero Coupon,
due 06/01/08+ 100,000 40,500
Esat Telecom Group,
11.875%, due 12/01/08+ 40,000 40,200
Esprit Telecom Group,
10.875%, due 06/15/08 75,000 76,312
General Communication, Inc.,
9.750%, due 08/01/07 65,000 64,675
Global Crossing Holdings, Ltd.,
9.625%, due 05/15/08 50,000 53,250
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[89]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Telecommunications-Continued
Hermes Europe, Series 144A,
10.375%, due 01/15/09+ $ 25,000 $ 25,375
ICG Holdings, Inc., Zero Coupon,
due 05/01/06+ 115,000 86,250
Intermedia Communications, Inc.,
Series B, Zero Coupon,
due 07/15/07+ 40,000 27,400
Level 3 Communications, Inc.,
9.125%, due 05/01/08 10,000 9,925
MJD Communications, Inc.,
Series B, 9.500%,
due 05/01/08 45,000 44,550
Metromedia Fiber Network, Inc.,
10.000%, due 11/15/08+ 90,000 92,925
MetroNet Communications Corp.,
Zero Coupon, due 11/01/07+ 25,000 16,500
MetroNet Communications Corp.,
Zero Coupon, due 06/15/08+ 145,000 89,538
Millicom International Cellular,
Zero Coupon, due 06/01/06+ 115,000 81,938
NEXTLINK Communications, Inc.,
9.625%, due 10/01/07 30,000 28,800
NTL, Inc., Series 144A,
Zero Coupon, due 04/01/08+ 155,000 96,875
Nextel Communications, Inc.,
Zero Coupon, due 10/31/07+ 50,000 30,500
Nextel Communications, Inc.,
Zero Coupon, due 02/15/08+ 110,000 65,725
Nextel International, Inc.,
Zero Coupon, due 04/15/08+ 70,000 31,850
Pathnet, Inc., 12.250%,
due 4/15/08 7,000 4,935
Qwest Communications
International, Inc.,
Series 144A, 7.250%,
due 11/01/08+ 50,000 51,250
- ----------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Telecommunications-Continued
Qwest Communications
International, Inc.,
Zero Coupon, due 10/15/07+ $ 70,000 $ 54,425
RCN Corp., Zero Coupon,
due 10/15/07+ 10,000 5,900
Rural Cellular Corp., Series B,
9.625%, due 05/15/08 65,000 65,487
Triton PCS, Inc., Zero Coupon,
due 05/01/08+ 125,000 59,063
Versatel Telecom, 13.250%,
due 05/15/08 80,000 81,600
Viatel, Inc., 11.250%,
due 04/15/08 60,000 61,650
Viatel, Inc., Zero Coupon,
due 04/15/08+ 85,000 50,575
Western Wireless Corp.,
10.500%, due 02/01/07 50,000 53,250
----------
1,792,298
----------
Telecommunications Equipment-3.23%
DTI Holdings, Inc., Series B,
Zero Coupon, due 03/01/08+ 65,000 17,225
L-3 Communications Corp.,
Series B, 10.375%,
due 05/01/07 85,000 93,713
NorthEast Optic Network, Inc.,
12.750%, due 08/15/08+ 25,000 24,625
Pagemart Wireless, Inc.,
Zero Coupon, due 02/01/08+ 60,000 27,900
Pinnacle Holdings, Inc.,
Zero Coupon, due 03/15/08+ 80,000 47,000
Spectrasite Holdings, Inc.,
Series 144A, Zero Coupon,
due 07/15/08+ 75,000 37,875
Telesystem International
Wireless, Inc.,
Series C, Zero Coupon,
due 11/01/07+ 25,000 9,375
----------
257,713
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
[90]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Textiles & Apparel-0.98%
Galey & Lord, Inc.,
9.125%, due 03/01/08 $ 35,000 $ 30,625
J Crew Operating Corp.,
10.375%, due 10/15/07 55,000 47,575
----------
78,200
----------
Transportation-0.79%
GulfMark Offshore, Inc.,
8.750%, due 06/01/08 40,000 36,600
Johnstown America Industries, Inc.,
11.750%, due 08/15/05 25,000 26,500
----------
63,100
----------
Utilities - Electric & Gas-0.47%
International Utility Structures, Inc.,
10.750%, due 02/01/08 40,000 37,800
----------
37,800
----------
TOTAL CORPORATE BONDS
(Cost $8,569,538) 8,149,682
----------
- ----------------------------------------------------------
PREFERRED STOCK--2.91%
Number of Market
Company Shares Value
- ----------------------------------------------------------------------
Medical Supplies-1.04%
Fresenius Medical Capital Trust II,
7.875%, due 02/01/08 35 $ 33,512
Global Crossing Holdings, Ltd.,
Series 144A, 10.500%,
due 12/01/08+ 500 49,125
----------
82,637
----------
Telecommunications-1.87%
Crown Castle International Corp.,
Series 144A, 12.750%,
due 12/15/10+ 50 50,438
Primedia, Inc., Series H,
8.625%, due 04/01/10 650 62,725
Rural Cellular Corp., Series B,
11.375%, due 05/15/10+ 30 27,975
Viatel, Inc., Series A,
10.000%, due 04/15/10+ 74 8,136
----------
149,274
----------
TOTAL PREFERRED STOCK
(Cost $233,482) 231,911
----------
</TABLE>
+Non-income producing security.
See notes to financial statements.
____________________________________________________________________________[91]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
RIGHTS AND WARRANTS--0.02%
<TABLE>
<CAPTION>
Number Market
Company of Shares Value
- ----------------------------------------------------------------------
<S> <C> <C>
Computer Network-0.00%
Convergent Communications, Inc.,
Warrants, exp. 04/01/08+ 100 $ 1
----------
1
----------
Telecommunications-0.02%
Allegiance Telecom, Inc.,
Warrants, exp. 02/03/08+ 100 512
American Mobile Satellite Corp.,
Warrants, exp. 04/01/08+ 40 131
Pathnet, Inc.,
Warrants, exp. 04/15/08+ 7 71
Versatel Telecom,
Warrants, exp. 05/15/08+ 80 810
----------
1,524
----------
Telecommunications Equipment-0.00%
DTI Holdings, Inc.,
Warrants, exp. 03/01/08+ 325 57
----------
57
----------
TOTAL RIGHTS AND WARRANTS
(Cost $300) 1,582
----------
TOTAL INVESTMENTS
(Cost $8,803,320) 105.20% 8,383,175
Other assets, less liabilities (5.20) (414,332)
------ ----------
TOTAL NET ASSETS 100.00% $7,968,843
====== ==========
</TABLE>
+Non-income producing security.
See notes to financial statements.
[92]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
"We expect lower short-term interest rates 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 12/31/98
$24,416,645
------------------------------------------------------------------------
NUMBER OF HOLDINGS
28
------------------------------------------------------------------------
DOLLAR WEIGHTED AVERAGE MATURITY
42.50 days
- --------------------------------------------------------------------------------
[sidebar]
------------------------------------------------------------------------
IN THIS SECTION
------------------------------------------------------------------------
Portfolio Facts
Portfolio
Composition
Financial Highlights
Schedule of
Portfolio Investments
------------------------------------------------------------------------
GEOFFREY KURINSKY
Senior Vice President
[bullet] Joined MFS in 1987
[bullet] M.B.A. from Boston University
[bullet] B.A. from University of Massachusetts
[end sidebar]
____________________________________________________________________________[93]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
[pie chart]
% of Portfolio [double dagger]
Short-Term Obligations-98.50%
Cash-1.50%
[end pie chart]
The 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 and bank issues, in order to minimize credit risk. As
of December 31, 1998, the Portfolio had assets of $24.4 million, and the
Portfolio's average maturity was 43 days.
We expect lower short-term interest rates over the next several months.
The Portfolio is actively managed, and current holdings may be different.
[sidebar]
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
PERCENT OF
RATING PORTFOLIO[double dagger]
- ------------------------------------------------------------------------
<S> <C>
AAA 100.00%
</TABLE>
[double dagger]Represents market value of
investments plus cash.
[end sidebar]
[94]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December December December December December
31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.23 $ 10.25 $ 10.27 $ 10.25 $ 10.26
Income From Investment Operations
Net investment income 0.35 0.52 0.50 0.50 0.35
Net gains and losses on securities
(both realized and unrealized) 0.14 (0.02) (0.02) 0.02 (0.01)
----------- ---------- ---------- ---------- ----------
Total from investment operations 0.49 0.50 0.48 0.52 0.34
Less Distributions to Shareholders
Dividends from net investment income (0.35) (0.52) (0.50) (0.50) (0.35)
Dividends in excess of net
investment income
Distributions from capital gains
Distributions in excess of capital gains
Returns of capital
----------- ---------- ---------- ---------- ----------
Total distributions (0.35) (0.52) (0.50) (0.50) (0.35)
Net asset value, end of year $ 10.37 $ 10.23 $ 10.25 $ 10.27 $ 10.25
=========== ========== ========== ========== ==========
Total Return (A) 4.86% 4.86% 4.65% 5.06% 3.28%
Ratios to Average Net Assets:
Expenses 0.64% 0.60% 0.62% 0.63% 0.65%
Net investment income 4.74% 4.74% 4.54% 4.89% 3.31%
Portfolio Turnover Rate (B) N/A N/A N/A N/A N/A
Net Assets, At End of Year $24,416,645 $9,435,454 $7,896,257 $8,312,676 $7,680,485
</TABLE>
(A) Total return assumes reinvestment of all dividends during the year 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.
(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.
____________________________________________________________________________[95]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998
- ------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--103.41%
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Government Agency-103.41%
Federal Agricultural
Mortgage Corp., 5.000%,
due 01/07/99 $1,000,000 $ 999,167
Federal Agricultural
Mortgage Corp., 5.100%,
due 01/20/99 1,000,000 997,308
Federal Agricultural
Mortgage Corp., 5.020%,
due 01/25/99 1,100,000 1,096,319
Federal Agricultural
Mortgage Corp., 5.000%,
due 03/12/99 1,200,000 1,188,677
Federal Farm Credit Bank,
5.050%, due 01/05/99 1,100,000 1,099,383
Federal Farm Credit Bank,
5.030%, due 01/11/99 1,000,000 998,603
Federal Farm Credit Bank,
5.090%, due 01/21/99 900,000 897,455
Federal Farm Credit Bank,
4.570%, due 04/19/99 700,000 689,853
Federal Home Loan Bank,
5.110%, due 01/13/99 550,000 549,063
Federal Home Loan Bank,
5.000%, due 02/03/99 700,000 696,792
Federal Home Loan Bank,
4.980%, due 02/17/99 1,000,000 993,497
Federal Home Loan Bank,
4.760%, due 04/14/99 1,700,000 1,676,530
Federal Home Loan
Mortgage Corp., 4.700%,
due 01/04/99 380,000 379,851
Federal Home Loan
Mortgage Corp., 5.100%,
due 01/15/99 650,000 648,711
- ----------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--CONTINUED
Principal Market
Company Value Value
- ----------------------------------------------------------------------
Government Agency-Continued
Federal Home Loan
Mortgage Corp., 5.170%,
due 02/02/99 $1,000,000 $ 995,404
Federal Home Loan
Mortgage Corp., 4.965%,
due 02/05/99 810,000 806,090
Federal Home Loan
Mortgage Corp., 5.040%,
due 02/24/99 1,000,000 992,440
Federal Home Loan
Mortgage Corp., 4.960%,
due 03/03/99 1,000,000 989,116
Federal Home Loan
Mortgage Corp., 5.100%,
due 03/19/99 500,000 494,789
Federal National Mortgage
Association, 5.040%,
due 01/08/99 1,000,000 999,020
Federal National Mortgage
Association, 5.090%,
due 01/14/99 500,000 499,081
Federal National Mortgage
Association, 4.850%,
due 02/12/99 719,000 714,932
Federal National Mortgage
Association, 4.880%,
due 03/04/99 1,079,000 1,070,035
Federal National Mortgage
Association, 4.870%,
due 03/08/99 1,010,000 1,001,038
Federal National Mortgage
Association, 4.830%,
due 04/07/99 1,000,000 987,161
</TABLE>
See notes to financial statements.
[96]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1998--CONTINUED
- ------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--CONTINUED
<TABLE>
<CAPTION>
Principal Market
Company Value Value
- ----------------------------------------------------------------------
<S> <C> <C>
Government Agency-Continued
Student Loan Marketing
Association, 4.650%,
due 02/16/99 $ 800,000 $ 795,247
Tennessee Valley Authority,
4.700%, due 01/19/99 1,000,000 997,649
Tennessee Valley Authority,
5.080%, due 01/28/99 1,000,000 996,190
-----------
25,249,401
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $25,251,963) 25,249,401
-----------
TOTAL INVESTMENTS
(Cost $25,251,963) 103.41% 25,249,401
Other assets, less liabilities (3.41) (832,756)
------ -----------
TOTAL NET ASSETS 100.00% $24,416,645
====== ===========
</TABLE>
See notes to financial statements.
____________________________________________________________________________[97]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1998
<TABLE>
<CAPTION>
International World Global Hard Emerging
Equity Growth Stock Assets Growth
Portfolio Portfolio Portfolio Portfolio
Assets
<S> <C> <C> <C> <C>
Investments, at cost-see accompanying portfolios $14,021,781 $102,449,609 $5,247,826 $66,530,145
=========== ============ ========== ===========
Investments, at market value (Notes B and C) $15,987,995 $114,156,956 $4,601,204 $96,145,313
Cash 811,468 6,699,328 37,679 161,838
Accrued investment income 23,178 411,820 9,369 10,627
Receivable for portfolio securities sold 341,750 482,107 1,716,707
Receivable for foreign forward contracts
Other assets 4,233
----------- ------------ ---------- -----------
Total Assets 16,822,641 121,609,854 5,134,592 98,034,485
Liabilities
Amounts owed to banks
Dividends payable 56,828 9,394,729 72,099 468,598
Payable for portfolio securities purchased 125,102 1,215,211 717,811 1,694,067
Payable for foreign forward contracts 42,370
Accrued investment advisory fees (Note D) 12,894 74,862 2,742 60,854
Accrued expenses 9,166 27,749 4,044 15,589
Other liabilities 4,233
----------- ------------ ---------- -----------
Total Liabilities 246,360 10,712,551 800,929 2,239,108
NET ASSETS $16,576,281 $110,897,303 $4,333,663 $95,795,377
=========== ============ ========== ===========
Net Assets Consist of:
Par value $ 13,672 $ 50,634 $ 5,736 $ 41,570
Capital paid in excess of par 14,699,177 97,864,262 8,700,407 66,758,434
Accumulated undistributed net investment
income (loss) (92,406) 4,400 (21)
Accumulated undistributed net realized gain (loss)
on investments and foreign currency transactions (61,402) 1,361,644 (3,729,911) (619,755)
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities in foreign currencies (Note C) 1,924,834 11,713,169 (646,969) 29,615,149
----------- ------------ ---------- -----------
NET ASSETS $16,576,281 $110,897,303 $4,333,663 $95,795,377
=========== ============ ========== ===========
Shares of common stock outstanding ($0.01 par
value, 1,000,000,000 shares authorized) 1,367,158 5,063,426 573,626 4,157,003
=========== ============ ========== ===========
Net asset value, offering and redemption
price per share $ 12.12 $ 21.90 $ 7.55 $ 23.04
=========== ============ ========== ===========
</TABLE>
See notes to financial statements.
[98]____________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Capital Small Growth and High Yield Money
Growth Growth Company Income Balanced Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C>
$122,017,539 $ 8,600,320 $85,251,051 $51,816,841 $34,652,452 $8,803,320 $25,251,963
============ =========== =========== =========== =========== ========== ===========
$187,875,391 $11,000,356 $81,786,528 $59,409,122 $37,048,987 $8,383,175 $25,249,401
20,522,609 624,575 4,129,384 5,917,050 831,062 385,044
93,078 3,549 290,255 88,086 153,818 163,016 754
680,950 920,102 2,015,562 292,038
6,870
- ------------ ----------- ----------- ----------- ----------- ---------- -----------
208,491,078 12,309,430 86,206,167 66,334,360 40,056,299 8,838,229 25,635,199
328,597
10,188,302 7,714,962 507,944 3,090,136 505,196 825,203
105,172 754,141 78,865 466,602 1,819,836 25,000 379,802
167,855 6,660 52,947 40,368 23,588 3,078 9,712
27,298 4,887 15,745 9,916 8,985 7,515 3,837
- ------------ ----------- ----------- ----------- ----------- ---------- -----------
10,488,627 765,688 7,862,519 1,024,830 4,942,545 869,386 1,218,554
$198,002,451 $11,543,742 $78,343,648 $65,309,530 $35,113,754 $7,968,843 $24,416,645
============ =========== =========== =========== =========== ========== ===========
$ 70,981 $ 8,803 $ 48,228 $ 34,161 $ 27,617 $ 8,399 $ 23,539
125,671,922 9,065,609 79,613,670 57,187,743 32,264,206 8,566,673 24,396,559
205,245 1,606 705
6,401,622 69,294 1,941,028 493,739 417,821 (186,084) (891)
65,857,926 2,400,036 (3,464,523) 7,592,281 2,403,405 (420,145) (2,562)
- ------------ ----------- ----------- ----------- ----------- ---------- -----------
$198,002,451 $11,543,742 $78,343,648 $65,309,530 $35,113,754 $7,968,843 $24,416,645
============ =========== =========== =========== =========== ========== ===========
7,098,112 880,274 4,822,820 3,416,068 2,761,712 839,897 2,353,896
============ =========== =========== =========== =========== ========== ===========
$ 27.90 $ 13.11 $ 16.24 $ 19.12 $ 12.71 $ 9.49 $ 10.37
============ =========== =========== =========== =========== ========== ===========
</TABLE>
____________________________________________________________________________[99]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
International World Global Hard Emerging
Equity Growth Stock Assets Growth
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Investment Income
Income:
Interest $ 18,955 $ 380,295 $ 50,263 $ 144,378
Dividends 149,452 4,013,004 125,914 98,950
Foreign taxes withheld (11,979) (292,547) (1,918) (1,642)
---------- ---------- ----------- -----------
Total investment income 156,428 4,100,752 174,259 241,686
---------- ---------- ----------- -----------
Expenses:
Advisory fees (Note D) 98,869 915,681 36,616 583,658
Custodian fees 36,899 84,536 9,456 30,229
Shareholder reports 5,232 65,642 14,206 38,990
Professional fees 1,953 27,666 4,150 17,719
Directors fees 382 4,788 192 2,844
Security valuation 8,690 15,960 5,043 6,899
Miscellaneous expenses 856 10,744 432 6,382
---------- ---------- ----------- -----------
Total expenses 152,881 1,125,017 70,095 686,721
---------- ---------- ----------- -----------
Net investment income (loss) 3,547 2,975,735 104,164 (445,035)
---------- ---------- ----------- -----------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Net realized gain (loss) on investments 89,758 8,469,883 (3,440,007) 258,669
Net realized loss from foreign
currency transactions (156,658) (175,497) (10,261) (3,643)
Net unrealized gain (loss) on investments 1,966,214 (7,851,427) 2,712,585 22,327,253
Net unrealized gain (loss) on translation
of assets and liabilities in
foreign currencies (41,380) 12,664 (347) (19)
---------- ---------- ----------- -----------
Net realized and unrealized
gain (loss) on investments
and foreign currency 1,857,934 455,623 (738,030) 22,582,260
---------- ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $1,861,481 $3,431,358 $ (633,866) $22,137,225
========== ========== =========== ===========
</TABLE>
See notes to financial statements.
[100]___________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Capital Small Growth and High Yield Money
Growth Growth Company Income Balanced Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C>
$ 164,440 $ 19,717 $ 296,647 $ 197,252 $ 664,060 $ 574,526 $ 937,093
994,654 33,115 1,550,544 820,921 287,548 10,770
(2,327) (6,146) (1,590)
- ----------- ---------- ------------ ---------- ---------- --------- ---------
1,156,767 52,832 1,847,191 1,012,027 950,018 585,296 937,093
- ----------- ---------- ------------ ---------- ---------- --------- ---------
1,634,803 64,332 661,164 437,323 236,155 48,279 87,051
5,764 17,491 3,788 9,838 21,371 9,936 4,062
87,327 4,577 65,744 31,189 16,859 3,393 9,294
35,760 1,709 20,874 14,807 9,459 1,267 6,636
6,370 334 3,461 2,275 1,230 247 678
1,764 3,577 1,858 3,546 8,471 16,423 2,648
14,293 749 7,765 5,105 2,759 555 1,521
- ----------- ---------- ------------ ---------- ---------- --------- ---------
1,786,081 92,769 764,654 504,083 296,304 80,100 111,890
- ----------- ---------- ------------ ---------- ---------- --------- ---------
(629,314) (39,937) 1,082,537 507,944 653,714 505,196 825,203
- ----------- ---------- ------------ ---------- ---------- --------- ---------
16,589,924 109,231 8,755,432 669,425 2,873,015 (186,084) 17
(266) (987)
37,765,178 2,400,036 (20,518,258) 5,278,331 1,776,147 (420,145) (2,562)
112 6,870
- ----------- ---------- ------------ ---------- ---------- --------- ---------
54,354,948 2,509,267 (11,762,826) 5,947,756 4,655,045 (606,229) (2,545)
- ----------- ---------- ------------ ---------- ---------- --------- ---------
$53,725,634 $2,469,330 $(10,680,289) $6,455,700 $5,308,759 $(101,033) $ 822,658
=========== ========== ============ ========== ========== ========= =========
</TABLE>
___________________________________________________________________________[101]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International World Global
Equity Growth Stock Hard Assets
Portfolio Portfolio Portfolio
------------- -------------------------- ---------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
December December December December December
31, 1997 31, 1998 31, 1997 31, 1998 31, 1997
<S> <C> <C> <C> <C> <C>
Increase(decrease) in net assets:
From operations:
Net investment income (loss) $ 3,547 $ 2,975,735 $ 2,607,194 $ 104,164 $ 42,371
Net realized gain (loss) on
security transactions 89,758 8,469,883 12,496,321 (3,440,007) (81,714)
Net realized loss from
foreign currency transactions (156,658) (175,497) (278,740) (10,261) (2,145)
Net unrealized gain (loss)
on investments 1,966,214 (7,851,427) 184,832 2,712,585 (3,629,157)
Net unrealized gain (loss) on
translation of assets and
liabilities in foreign currencies (41,380) 12,664 (5,060) (347) 1,336
----------- ------------ ------------ ---------- ----------
Net increase (decrease)
in net assets resulting
from operations 1,861,481 3,431,358 15,004,547 (633,866) (3,669,309)
Distribution to shareholders
from net investment income (2,384,505) (2,328,454) (72,099) (40,226)
Distribution to shareholders in
excess of net investment income (174,949) (11,954)
Distribution to shareholders
from capital gains (56,828) (8,089,550) (12,496,321)
Distribution to shareholders in
excess of capital gains (930,784) (154,999)
Increase (decrease) in net assets
derived from shareholder
transactions (Note E) 14,771,618 12,372,497 14,497,830 (165,026) 1,526,715
----------- ------------ ------------ ---------- ----------
Net increase (decrease) in
net assets 16,576,271 5,329,800 13,571,869 (870,991) (2,349,773)
Net Assets:
Beginning of year 10 105,567,503 91,995,634 5,204,654 7,554,427
----------- ------------ ------------ ---------- ----------
End of year $16,576,281 $110,897,303 $105,567,503 $4,333,663 $5,204,654
=========== ============ ============ ========== ==========
Undistributed net investment
income (loss) $ 0 $ (92,406) $ (458,232) $ (4,400) $ (17,094)
=========== ============ ============ ========== ==========
</TABLE>
See notes to financial statements.
[102]___________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Capital
Growth Growth Growth
Portfolio Portfolio Portfolio
- ---------------------------- ----------------------------- --------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
December December December December December
31, 1998 31, 1997 31, 1998 31, 1997 31, 1998
<S> <C> <C> <C> <C>
$ (445,035) $ (233,573) $ (629,314) $ 23,842 $ (39,937)
258,669 3,356,014 16,589,924 4,529,357 109,231
(3,643) (50) (266) (3,868)
22,327,253 3,520,953 37,765,178 21,641,474 2,400,036
(19) 112 9
- ----------- ----------- ------------ ------------ -----------
22,137,225 6,643,344 53,725,634 26,190,814 2,469,330
(19,974)
(2,020)
(258,669) (2,816,095) (10,537,442) (4,529,357)
(422,623) (1,177,521)
18,110,269 21,607,896 30,690,264 32,829,891 9,074,402
- ----------- ----------- ------------ ------------ -----------
39,566,202 25,435,145 73,878,456 53,291,833 11,543,732
56,229,175 30,794,030 124,123,995 70,832,162 10
- ----------- ----------- ------------ ------------ -----------
$95,795,377 $56,229,175 $198,002,451 $124,123,995 $11,543,742
=========== =========== ============ ============ ===========
$ (21) $ 0 $ 0 $ (147) $ (39,937)
=========== =========== ============ ============ ===========
</TABLE>
___________________________________________________________________________[103]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small Growth
Company and Income
Portfolio Portfolio
---------------------------- ---------------------------
Year Year Year Year
Ended Ended Ended Ended
December December December December
31, 1998 31, 1997 31, 1998 31, 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations:
Net investment income $ 1,082,537 $ 377,561 $ 507,944 $ 346,535
Net realized gain (loss) on
security transactions 8,755,432 8,322,941 669,425 9,552,050
Net realized gain (loss) from
foreign currency transactions
Net unrealized gain (loss)
on investments (20,518,258) 7,988,122 5,278,331 (1,869,319)
Net unrealized gain on
translation of assets and
liabilities in foreign
currencies
----------- ----------- ----------- -----------
Net increase (decrease)
in net assets resulting
from operations (10,680,289) 16,688,624 6,455,700 8,029,266
Distribution to shareholders
from net investment income (902,706) (377,561) (507,944) (346,535)
Distribution to shareholders in
excess of net investment income
Distribution to shareholders
from capital gains (7,789,869) (7,681,445) (9,552,050)
Distribution to shareholders in
excess of capital gains (598,314)
Increase in net assets
derived from shareholder
transactions (Note E) 16,211,405 10,709,123 19,683,698 18,434,013
----------- ----------- ----------- -----------
Net increase (decrease) in
net assets (3,161,459) 19,338,741 25,631,454 15,966,380
Net Assets:
Beginning of year 81,505,107 62,166,366 39,678,076 23,711,696
----------- ----------- ----------- -----------
End of year $78,343,648 $81,505,107 $65,309,530 $39,678,076
=========== =========== =========== ===========
Undistributed net investment
income $ 205,245 $ 23,265 $ 1,606 $ 0
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
[104]___________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
High Yield Money
Balanced Bond Market
Portfolio Portfolio Portfolio
- ---------------------------- -------------- ----------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
December December December December December
31, 1998 31, 1997 31, 1998 31, 1998 31, 1997
<S> <C> <C> <C> <C>
$ 653,714 $ 577,206 $ 505,196 $ 825,203 $ 477,433
2,873,015 3,064,434 (186,084) 17 200
(987)
1,776,147 (330,942) (420,145) (2,562) 1,235
6,870
- ----------- ----------- ---------- ----------- ----------
5,308,759 3,310,698 (101,033) 822,658 478,868
(651,185) (577,375) (505,196) (825,203) (477,433)
(2,438,951) (3,064,434)
(527,439)
10,257,554 5,239,697 8,575,062 14,983,736 1,537,762
- ----------- ----------- ---------- ----------- ----------
12,476,177 4,381,147 7,968,833 14,981,191 1,539,197
22,637,577 18,256,430 10 9,435,454 7,896,257
- ----------- ----------- ---------- ----------- ----------
$35,113,754 $22,637,577 $7,968,843 $24,416,645 $9,435,454
=========== =========== ========== =========== ==========
$ 705 $ 778 $ 0 $ 0 $ 0
=========== =========== ========== =========== ==========
</TABLE>
___________________________________________________________________________[105]
<PAGE>
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<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 and variable annuity contracts issued by
Jefferson Pilot Financial Insurance Company and its affiliates. 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 Small Company 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.
Restricted securities are valued at fair value as determined in good faith by
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 capital 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.
___________________________________________________________________________[107]
<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 December 31, 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
values are recorded by the Portfolios as unrealized appreciation or depreciation
of foreign currency translations. At December 31, 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 12/31/98 (Depreciation)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International Equity Portfolio
Japanese Yen 1/13/99 126,598,340 $1,067,333 $1,119,579 $(52,246)
--------
$(52,246)
========
Balanced Portfolio
German Marks 2/12/99 501,186 307,043 301,051 $ 5,992
French Francs 2/12/99 1,623,534 298,542 290,109 8,433
--------
$ 14,425
========
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
U.S. Dollar Unrealized
Settlement Contracts to Value at Appreciation
Purchase Contracts Date Receive Cost 12/31/98 (Depreciation)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International Equity Portfolio
Japanese Yen 1/13/99 55,393,600 $480,000 $489,876 $ 9,876
-------
$ 9,876
=======
Balanced Portfolio
German Marks 2/12/99 501,186 304,469 301,051 $(3,418)
French Francs 2/12/99 1,623,534 294,246 290,109 (4,137)
-------
$(7,555)
=======
</TABLE>
Federal Income Taxes: Each Portfolio 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.
[108]___________________________________________________________________________
<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.
At December 31, 1998, gross unrealized gains and losses for Federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Gross Gross Net
Unrealized Unrealized Unrealized
Gains Losses Gain (Loss)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Equity Portfolio $ 2,286,445 $ 328,642 $ 1,957,803
World Growth Stock Portfolio 25,220,268 13,969,961 11,250,307
Global Hard Assets Portfolio 89,109 757,710 (668,601)
Emerging Growth Portfolio 31,545,968 2,465,029 29,080,939
Capital Growth Portfolio 67,138,931 1,379,660 65,759,271
Growth Portfolio 2,346,224 42,638 2,303,586
Small Company Portfolio 11,485,988 14,849,835 (3,363,847)
Growth and Income Portfolio 9,407,596 1,837,167 7,570,429
Balanced Portfolio 3,562,840 1,451,655 2,111,185
High Yield Portfolio 59,529 481,670 (422,141)
Money Market Portfolio 787 3,349 (2,562)
- -------------------------------------------------------------------------------------
</TABLE>
At December 31, 1998, the World Growth Stock, Capital Growth and Balanced
Portfolios had unrealized foreign currency gains of $5,822, $74 and $6,870,
respectively. The International Equity, Global Hard Assets and Emerging Growth
Portfolios had unrealized foreign currency losses of $41,380, $347 and $19,
respectively.
At December 31, 1998, the following Portfolios had accumulated realized capital
losses, for Federal income tax purposes, which are available to be used to
offset future realized capital gains: the Global Hard Assets Portfolio had
$3,580,229 of which $3,350,893 expires in 2006, and $229,336 expires in 2005;
High Yield Bond Portfolio had $128,147 which expires in 2006; Money Market
Portfolio had $858 of which $400 expires in 2002, $391 expires in 2004, and $67
expires in 2005.
In addition, during the period from November 1, 1998 through December 31, 1998,
the International Equity, Global Hard Assets, and Emerging Growth Portfolios
incurred foreign currency losses of $38,592, $427, and $21 respectively. The
Global Hard Assets, Emerging Growth, High Yield Bond, and Money Market
Portfolios incurred capital losses of $128,614, $85,526, $55,941, and $33,
respectively. These losses are treated for Federal income tax purposes as if
they occurred on January 1, 1999. Accordingly, during 1998 these Portfolios may
have made distributions, as required by Internal Revenue Code Regulations, in
excess of amounts recognized for financial reporting purposes.
At December 31, 1998, the adjusted cost basis of investments for Federal income
tax purposes was $14,030,192 for the International Equity Portfolio,
$102,906,649 for the World Growth Stock Portfolio, $5,269,805 for the Global
Hard Assets Portfolio, $67,064,375 for the Emerging Growth Portfolio,
$122,116,119 for the Capital Growth Portfolio, $8,696,771 for the Growth
Portfolio, $85,150,375 for the Small Company Portfolio, $51,838,693 for the
Growth and Income Portfolio, $34,937,802 for the Balanced Portfolio, $8,805,316
for the High Yield Bond Portfolio, and $25,251,963 for the Money Market
Portfolio.
___________________________________________________________________________[109]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Purchases and sales of investment securities for the period ended December 31,
1998, other than short-term obligations, were as follows:
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost of Proceeds
Investment From
Securities Investment
Purchased Securities Sold
- ---------------------------------------------------------------------
<S> <C> <C>
International Equity Portfolio $21,649,989 $ 7,716,185
World Growth Stock Portfolio 38,265,724 40,469,858
Global Hard Assets Portfolio 7,574,637 7,765,506
Emerging Growth Portfolio 70,240,065 54,835,800
Capital Growth Portfolio 93,097,083 86,486,621
Growth Portfolio 31,780,761 23,289,672
Small Company Portfolio 41,463,227 34,663,876
Growth and Income Portfolio 43,427,095 35,303,863
Balanced Portfolio 82,272,478 75,391,407
High Yield Portfolio 14,242,478 5,323,188
</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 Corporation. 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 Small Company 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 $1.10 Over $1.30
Million Billion Billion
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
International Equity Portfolio 1.00% 1.00% 1.00%
World Growth Stock Portfolio .75% .70% .65%
Gold Stock Portfolio .75% .70% .65%
Emerging Growth Portfolio .80% .75% .70%
Capital Growth Portfolio 1.00% .95% .90%
Growth Portfolio .75% .75% .75%
Small Company 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>
[110]___________________________________________________________________________
<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>
Year Ended
December 31, 1998
--------------------------
Shares Dollars
---------- ------------
<S> <C> <C>
Shares issued 1,388,935 $15,009,669
Shares issued as reinvestment
of dividends - -
Shares redeemed (21,778) (238,051)
--------- -----------
Net increase 1,367,157 $14,771,618
========= ===========
</TABLE>
World Growth Stock Portfolio
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
---------------------------------------------------------
Shares Dollars Shares Dollars
---------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Shares issued 394,394 $ 9,327,872 506,207 $13,074,639
Shares issued as reinvestment
of dividends 638,687 14,983,192 391,173 9,133,398
Shares redeemed (503,891) (11,938,567) (310,198) (7,710,207)
------- ----------- ------- -----------
Net increase 529,190 $12,372,497 587,182 $14,497,830
======= =========== ======= ===========
</TABLE>
Global Hard Assets Portfolio
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
---------------------------------------------------------
Shares Dollars Shares Dollars
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 193,513 $ 1,631,108 364,373 $ 4,043,620
Shares issued as reinvestment
of dividends 5,873 52,180 22,106 351,147
Shares redeemed (209,525) (1,848,314) (257,709) (2,868,052)
-------- ---------- -------- ----------
Net increase (decrease) (10,139) $ (165,026) 128,770 $ 1,526,715
======== ========== ======== ==========
</TABLE>
Emerging Growth Portfolio
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
---------------------------------------------------------
Shares Dollars Shares Dollars
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued 1,257,911 $24,404,057 1,772,417 $30,948,672
Shares issued as reinvestment
of dividends 170,978 3,023,470 61,482 935,922
Shares redeemed (490,481) (9,317,258) (637,221) (10,276,698)
--------- ----------- --------- -----------
Net increase 938,408 $18,110,269 1,196,678 $21,607,896
========= =========== ========= ===========
</TABLE>
___________________________________________________________________________[111]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Capital Growth Portfolio
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
---------------------------------------------------------
Shares Dollars Shares Dollars
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 1,446,669 $36,281,815 1,194,054 $24,087,593
Shares issued as reinvestment
of dividends 211,952 4,549,478 787,041 13,563,036
Shares redeemed (407,453) (10,141,029) (237,318) (4,820,738)
--------- ----------- --------- -----------
Net increase 1,251,168 $30,690,264 1,743,777 $32,829,891
========= =========== ========= ===========
</TABLE>
Growth Portfolio
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
--------------------------
Shares Dollars
---------- ------------
<S> <C> <C>
Shares issued 1,007,173 $10,464,685
Shares issued as reinvestment
of dividends - -
Shares redeemed (126,900) (1,390,283)
--------- -----------
Net increase 880,273 $9,074,402
========= ===========
</TABLE>
Small Company Portfolio
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
---------------------------------------------------------
Shares Dollars Shares Dollars
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 834,248 $15,895,855 490,812 $ 9,906,195
Shares issued as reinvestment
of dividends 422,227 8,677,237 440,314 7,989,396
Shares redeemed (423,026) (8,361,687) (360,301) (7,186,468)
-------- ---------- -------- ----------
Net increase 833,449 $16,211,405 570,825 $10,709,123
======== ========== ======== ==========
</TABLE>
Growth and Income Portfolio
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------------------------------------------------
Shares Dollars Shares Dollars
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 1,172,029 $21,565,743 1,041,889 $21,005,816
Shares issued as reinvestment
of dividends 588,835 10,072,665 91,528 1,547,670
Shares redeemed (664,326) (11,954,710) (216,351) (4,119,473)
--------- ----------- ------- -----------
Net increase 1,096,538 $19,683,698 917,066 $18,434,013
========= =========== ======= ===========
</TABLE>
[112]___________________________________________________________________________
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Balanced Portfolio
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
---------------------------------------------------------
Shares Dollars Shares Dollars
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Shares issued 697,627 $ 8,776,809 388,780 $ 5,063,053
Shares issued as reinvestment
of dividends 301,238 3,539,231 176,844 2,106,291
Shares redeemed (163,928) (2,058,486) (152,011) (1,929,647)
-------- ----------- -------- -----------
Net increase 834,937 $10,257,554 413,613 $ 5,239,697
======== =========== ======== ===========
</TABLE>
High Yield Bond Portfolio
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
-------------------------
Shares Dollars
---------- -----------
<S> <C> <C>
Shares issued 1,294,477 $13,092,077
Shares issued as reinvestment
of dividends - -
Shares redeemed (454,581) (4,517,015)
--------- -----------
Net increase 839,896 $ 8,575,062
========= ===========
</TABLE>
Money Market Portfolio
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------------------------------------------------
Shares Dollars Shares Dollars
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 4,602,276 $48,227,174 1,949,895 $20,442,569
Shares issued as reinvestment
of dividends 46,686 477,433 37,860 387,924
Shares redeemed (3,217,716) (33,720,871) (1,835,753) (19,292,731)
---------- ----------- ---------- -----------
Net increase 1,431,246 $14,983,736 152,002 $ 1,537,762
========== =========== ========== ===========
</TABLE>
NOTE F--YEAR 2000 (unaudited)
Many computer systems use six-digit fields to store and/or calculate dates. With
the approach of the year 2000, certain programs and systems will need to be
enhanced in order to recognize the difference between the year 1900 and the year
2000. Failure to adequately address this issue could have a negative impact on
JPIA's ability to process security transactions, determine net asset values, and
process shareholder activity. JPIA is taking steps that it believes are
reasonably designed to address this problem with respect to its computer systems
and to obtain reasonable assurances that comparable steps are being taken by the
Company's major service providers.
___________________________________________________________________________[113]
<PAGE>
JEFFERSON PILOT VARIABLE FUND, INC.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
Jefferson Pilot Variable Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Jefferson Pilot Variable Fund, Inc. (the "Fund", comprising respectively, the
International Equity, World Growth Stock, Global Hard Assets, Emerging Growth,
Capital Growth, Growth, Small Company, Growth and Income, Balanced, High Yield
Bond, and Money Market)(the "Portfolios"), including the related schedules of
portfolio investments, as of December 31, 1998, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated herein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998 by correspondence with the custodian and brokers, or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
respective Portfolios constituting Jefferson Pilot Variable Fund, Inc. at
December 31, 1998, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended
and the financial highlights for each of the periods indicated above, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 12, 1999
[114]___________________________________________________________________________
<PAGE>
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<PAGE>
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<PAGE>
[back cover]
Distributor
Jefferson Pilot Variable Corporation
One Granite Place
Concord, NH 03301
Form 3-5653 Ed.12/98
-------------
Bulk Rate
US Postage
PAID
Boston, MA
Permit #57842
-------------
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.
