<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
A MUTUAL FUND SEEKING GROWTH OF CAPITAL
This report and accompanying financial statements are submitted for information
of the Fund shareholders and are not to be considered as an offer or
solicitation of offers to buy or sell any shares of the Fund. Such offering is
made only if preceded or accompanied by an effective prospectus.
FUND DIRECTORS AND OFFICERS DISTRIBUTOR
E. J. YELTON, Ph.D., DIRECTOR, Jefferson-Pilot Investor Services, Inc.
PRESIDENT, AND TREASURER 100 North Greene Street
Greensboro, North Carolina 27401
JOHN C. INGRAM, CFA, DIRECTOR
J. LEE LLOYD, DIRECTOR INVESTMENT ADVISER
JP Investment Management Company
RICHARD W. McENALLY, CFA, DIRECTOR 100 North Greene Street
Greensboro, North Carolina 27401
WILLIAM E. MORAN, DIRECTOR
CUSTODIAN AND TRANSFER AGENT
W. HARDEE MILLS, CFA, Investors Fiduciary Trust Company
VICE PRESIDENT 127 West Tenth Street
Kansas City, Missouri 64105
J. GREGORY POOLE, SECRETARY
GREGORY D. WALKER, CFA,
PORTFOLIO MANAGER
JEFFERSON-PILOT CAPITAL
APPRECIATION FUND, INC.
100 North Greene Street
P.O. Box 21008
Greensboro, North Carolina 27420
<PAGE>
INVESTMENT RESULTS
TOTAL RETURN -- 1996 -- DIVIDEND REINVESTMENT PLAN:
Net Asset Value June 30, 1996 $17.27
Investment Income Dividend Paid:
February 9, 1996 $ .021
Capital Gains Paid:
February 9, 1996 $ .395
June 30, 1996 Adjusted Value per Share Assuming
All Dividends Reinvested in Fund Shares $17.72
Net Asset Value December 31, 1995 $15.96
Percent Change During Six Months Ended
June 30, 1996:
Jefferson-Pilot Capital Appreciation Fund --
Assuming All Dividends Reinvested in Fund Shares 11.03%
Reinvestment Price Assuming Dividend was reinvested
in New Fund Shares on the Record Date:
$15.90 per share as of January 30, 1996
2
<PAGE>
TO SHAREHOLDERS
INVESTMENT ACTIVITY
On June 30, 1996, the net asset value of your Fund was $17.27. Dividends
totaling $.021 per share from net investment income and $.395 per share from net
capital gains have been paid year to date.
On a total return basis for the first half of the year, the Jefferson-Pilot
Capital Appreciation Fund increased 11.03% while the S&P 500 increased 10.10%.
Through June 30, 1996, Jefferson-Pilot Capital Appreciation Fund's historical
compound annual rate of total return is shown below for the following holding
periods:*
1 Years -- 27.22%
3 Years -- 14.50%
5 Years -- 13.66%
10 Years -- 11.06%
The second quarter saw the S&P 500 reach a new all-time high on May 24 after
inflation and interest rate fears began to moderate. The S&P 500 returned 4.5%
for the quarter marking the sixth consecutive quarter of positive performance.
Stocks of smaller companies and stocks of cyclical companies, having benefited
from the perception of a stronger than expected economy, began to lag toward the
end of the second quarter as concerns over corporate profits began to arise
again. This concern began anew after anecdotal signs of an economy which was
stronger than expected began to stimulate fears of a Federal Reserve interest
rate hike. Since the S&P 500's peak in May, investors have begun a flight to
quality. Defensive growth names have since outperformed the market due to their
tendency to provide superior relative earnings if the Federal Reserve indeed
places the brakes on economic growth with higher interest rates.
Your Fund has outperformed both the median Lipper Growth and Income manager as
well as the S&P 500 year to date. The Fund is in the top 20% of all Growth and
Income funds for the trailing twelve months according to Lipper Analytical
Services. This outperformance continues as of this writing with the market
exhibiting continued weakness.
The current market correction should be viewed as a positive event. Veteran
investors consider corrections as a healthy means of removing speculative
excesses from the marketplace. Witness the NASDAQ composite, comprised mainly of
smaller companies, often technology stocks, which has fallen 15% from its April
high. Fortunately, lower stock prices based on investor skittishness and fear,
present the seasoned long-term investor with buying opportunities.
We do not question that it is becoming late in this bull market. The liquidity
provided by the Federal Reserve, as well as that provided by other central
banks, has been the critical catalyst for this aging worldwide bull market. This
accommodative posture by the Federal Reserve may be coming to an end. In his
recent testimony before Congress, Federal Reserve Chairman Greenspan appeared to
hint that the war against inflation may be just beginning.
We do not base our management strategy on a forecast of the economy or interest
rates. We continue to believe that the stocks of companies with superior
earnings growth relative to their peers and which are trading at attractive
valuations are the companies we wish to own in the portfolio. Irrespective of
the overall market direction we believe that this strategy, over time, will
result in superior relative performance.
3
<PAGE>
PORTFOLIO DIVERSIFICATION
SECTOR % OF TOTAL NET ASSETS
CREDIT CYCLICALS 0.00
FINANCIAL 18.47
CONSUMER GROWTH STAPLES 3.30
CONSUMER STAPLES 15.52
CONSUMER CYCLICALS 4.80
CAPITAL GOODS -- TECHNOLOGY 11.84
CAPITAL GOODS 4.39
ENERGY 10.15
BASIC INDUSTRIES 3.67
TRANSPORTATION 1.43
UTILITIES 14.63
CONGLOMERATES 1.13
CASH 10.67
Your continued support and interest in the Jefferson-Pilot Capital Appreciation
Fund are appreciated, and we welcome any questions.
Jefferson-Pilot Capital Appreciation Fund, Inc.
/s/ E.J. YELTON
President
July 29, 1996
* These results do not include the sales charge. If the maximum sales charge
of 4.50% of the initial investment is included and with all subsequent
distributions of the Fund reinvested, the average annual total rate of
return of the Fund for the one, three, five, and ten-year periods ended
June 30, 1996, were +21.51%, +12.77%, +12.66% and +10.48%, respectively.
These results represent past performance and are not necessarily an
indication of future results.
4
<PAGE>
ABOUT YOUR FUND
As a shareowner of Jefferson-Pilot Investment Grade Bond Fund, you have several
valuable benefits and privileges:
- - You may be able to acquire additional shares at a reduced sales charge through
either the Combined Purchases, Accumulated Purchases, or Statement of Intention
provisions of the Fund. (See those sections of your prospectus that describe
these provisions.)
- - You may exchange shares owned at any time for an equal value of shares of
Jefferson-Pilot Investment Grade Bond Fund, subject to certain minimum amounts,
without charge.
- - You may reinvest all income and capital gains distributions in additional Fund
shares at the Fund's net asset value (without a sales charge).
- - Provided you own shares or currently purchase shares having a net asset of at
least $10,000, you may elect to have monthly or quarterly payments made to you
under a Systematic Withdrawal Plan.
Additionally, the Fund provides a printed confirmation of each transaction,
quarterly reports, and other account information, making ownership of Fund
shares easy and convenient.
The cost of purchasing and owning shares is reasonable. The services provided
plus professional management plus diversification of investments would otherwise
be prohibitively expensive for most investors.
We hope that this information will encourage you to increase the level of your
future invesments in Jefferson-Pilot Capital Appreciation Fund -- or you may
wish to add a Jefferson-Pilot Investment Grade Bond Fund account.
5
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
TEN LARGEST HOLDINGS
June 30, 1996
COMPANY MARKET VALUE PERCENT OF FUND
General Electric Company $1,124,500 2.8
Countrywide Credit Industries, Inc. 1,039,500 2.6
Tellabs, Inc. 1,034,625 2.5
Atlantic Richfield Company 995,400 2.5
Frontier Corporation 980,000 2.4
Citicorp 966,713 2.4
Monsanto Company 958,750 2.4
Schering -- Plough Corporation 953,800 2.3
Royal Dutch Petroleum Company 876,375 2.2
Borders Group, Inc. 854,625 2.1
----------- -----
$9,784,288 24.2
6
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS
June 30, 1996 (Unaudited)
NUMBER OF SHARES MARKET
COMMON STOCKS -- 88.33% OR PRINCIPAL AMOUNT VALUE
Aerospace/Defense -- 1.19%
Lockheed-Martin Corporation 5,700 $ 478,800
Banks -- 6.54%
Bank of New York Company, Inc. 11,000 563,750
Chase Manhattan Corporation 5,928 418,665
Citicorp 11,700 966,713
Mellon Bank Corporation 12,000 684,000
Broadcasting -- .34%
US West Media Group, Inc. 7,600 138,700*
Chemicals -- Major -- 3.36%
Imperial Chemical Industries, Inc. 8,000 393,000
Monsanto Company 29,500 958,750
Computer Systems -- 3.18%
SunGard Data Systems, Inc. 12,000 480,000*
Xerox Corporation 15,000 802,500
Conglomerates -- 1.13%
AlliedSignal, Inc. 8,000 457,000
Drugs -- 5.59%
Lilly (Eli) & Company 5,708 371,020
Merck & Company, Inc. 5,400 348,975
Pharmacia & Upjohn, Inc. 13,000 576,875
Schering-Plough Corporation 15,200 953,800
Electric Equipment -- Major -- 2.79%
General Electric Company 13,000 1,124,500
Electronics -- Instrument -- 1.05%
Varian Associates, Inc. 8,200 424,350
Electronics -- Semi -- .37%
Atmel Corporation 5,000 150,625*
Foods -- 1.90%
Sara Lee Corporation 23,600 764,050
Hospital -- Management -- 2.98%
Columbia/HCA Healthcare Corporation 9,900 528,412
Vencor, Inc. 22,000 671,000*
7
<PAGE>
Hospital -- Supplies -- 4.08%
Baxter International, Inc. 5,700 269,325
Guidant Corporation 5,046 248,516
Johnson & Johnson 16,000 792,000
St. Jude Medical, Inc. 10,000 332,500*
Insurance -- Multi-Line -- 5.92%
AFLAC, Inc. 13,500 403,312
Aetna Life & Casualty Company 10,000 715,000
Allstate Corporation 12,300 561,188
CIGNA Corporation 6,000 707,250
Insurance -- Property & Casualty -- 1.19%
Everest Reinsurance Holdings, Inc. 15,500 401,062
IPC Holdings, Inc. 4,000 80,500
Merchandising -- Department -- 2.27%
Consolidated Stores Corporation 10,000 367,500*
Federated Department Stores, Inc. 16,000 546,000
Merchandising -- Drugs -- 1.32%
Eckerd Corporation 12,000 271,500*
Thrifty Payless Holdings, Inc. 15,000 258,750*
Merchandising -- Special -- 2.12%
Borders Group, Inc. 26,500 854,625*
Miscellaneous Consumer Cyclical -- .44%
Kelly Services, Inc. 6,000 175,500
Miscellaneous Financial -- 4.92%
Countrywide Credit Industries, Inc. 42,000 1,039,500
Federal Home Loan Mortgage Corporation 4,600 393,300
First USA, Inc. 10,000 550,000
Natural Gas -- Diversified -- .70%
Questar Corporation 8,300 282,200
Oils -- Integrated Domestic -- 5.41%
Amerada Hess Corporation 9,500 509,438
Amoco Corporation 9,300 673,087
Atlantic Richfield Company 8,400 995,400
Oils -- Integrated International -- 4.09%
Mobil Corporation 6,900 773,663
Royal Dutch Petroleum Company 5,700 876,375
Paper & Forest Products -- .34%
Sonoco Products Company 4,830 137,051
8
<PAGE>
Pollution Control -- 1.63%
WMX Technologies, Inc. 20,000 655,000
Railroads -- .91%
CSX Corporation 7,600 366,700
Telecommunications -- 5.88%
DSC Communications Corporation 15,000 450,000*
Loral Space & Communications, Ltd. 9,200 125,350*
Lucent Technologies, Inc. 17,000 643,875*
Tellabs, Inc. 15,500 1,034,625*
360 Communications Company 4,866 116,784*
Tobacco -- 1.45%
Philip Morris Companies, Inc. 5,600 582,400
Transportation -- Miscellaneous -- .53%
Federal Express Corporation 2,600 213,200*
Utilities -- Communications -- 7.02%
Bell Atlantic Corporation 3,700 235,875
BellSouth Corporation 7,400 313,575
Century Telephone Enterprises, Inc. 8,400 267,750
Frontier Corporation 32,000 980,000
SBC Communications, Inc. 3,600 177,300
Sprint Corporation 14,600 613,200
US West Communications Group, Inc. 7,600 242,250
Utilities -- Electric -- 7.39%
American Electric Power Company, Inc. 6,600 281,325
CMS Energy Corporation 9,800 302,575
Carolina Power & Light Company 4,100 155,800
CINergy Corporation 13,700 438,400
Consolidated Edison Company of NY, Inc. 5,900 172,575
Dominion Resources, Inc. 4,600 184,000
Entergy Corporation 12,000 340,500
FPL Group, Inc. 8,200 377,200
Illinova Corporation 9,600 276,000
Northeast Utilities 8,650 115,694
PECO Energy Company 4,900 127,400
Public Service Enterprise Group, Inc. 7,500 205,312
Utilities -- Water -- .30%
American Water Works Company, Inc. 3,000 120,750
-----------
Total Common Stocks (Cost -- $26,768,816+) 35,585,442
-----------
9
<PAGE>
<TABLE>
<S> <C> <C>
PREFERRED STOCKS -- 1.51%
Telecommunications -- .22%
TCI Communications, Inc., $2.125 Cum Pfd. Ser. A 2,000 88,250
Tobacco -- 1.29%
RJR Nabisco Holdings, Inc. Pfd C 80,000 520,000
------------
Total Preferred Stocks (Cost -- $594,800+) 608,250
------------
SHORT-TERM SECURITIES -- 10.16%
American Express Credit Corporation, 7/10/96 $1,000,000 998,517
Cargill, Inc., 7/03/96 400,000 399,823
Chevron Oil Finance Company, 7/02/96 1,000,000 999,710
Ford Motor Credit Company, 7/08/96 700,000 699,165
General Electric Capital Corporation, 7/16/96 1,000,000 997,613
------------
Total Short-Term Securities (Cost -- $4,094,828+) 4,094,828
------------
Total Investments (Cost -- $31,458,444+) $40,288,520
------------
------------
</TABLE>
* Non-income producing.
+ Aggregate cost for Federal income tax purposes is the same.
See Notes to Financial Statements.
10
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS
Investment in securities at value (cost $31,458,444) $ 40,288,520
Cash 373,991
Receivables:
Capital shares sold 5,000
Dividends 35,094
------------
Total Assets 40,702,605
------------
LIABILITIES
Payables:
Capital shares sold 17,136
Securities purchased 113,798
Accrued expenses 54,041
------------
Total Liabilities 184,975
------------
NET ASSETS
Net Assets, equivalent to $17.27 per share on
2,346,524 shares of capital stock outstanding (Note 2) $ 40,517,630
------------
------------
Computation of public offering price:
Net asset value per share $ 17.27
----------
----------
Offering price per share (100/95.5 x $17.27)
(reduced on sales of $25,000 or more) $ 18.08
----------
----------
See Notes to Financial Statements.
11
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
Investment Income:
Interest $ 75,007
Dividends 422,863
-----------
Total income 497,870
-----------
Expenses:
Investment Adviser's fee (Note 3) 96,826
Custodian and Transfer Agent fees 34,397
Directors' fees 2,490
Professional fees 12,900
Shareholder accounting services (Note 3) 10,740
Printing and mailing 6,510
Other 2,662
-----------
Total expenses 166,525
Less expenses offset (Note 5) ( 7,731)
-----------
Net expenses 158,794
-----------
Investment income -- net 339,076
-----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments 3,246,231
Unrealized appreciation of investments for the period 469,653
-----------
Net gain on investments 3,715,884
-----------
Net increase in net assets from operations $ 4,054,960
-----------
-----------
See Notes to Financial Statements.
12
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended June 30, 1996 (Unaudited) and Year Ended December 31, 1995
SIX MONTHS Year Ended
ENDED JUNE 30, December 31,
1996 1995
Increase (Decrease) in Net Assets from: -------------- -------------
Operations:
Investment income -- net $ 339,076 $ 589,619
Net realized gain on investments 3,246,231 2,251,129
Unrealized appreciation
for the period 469,653 7,655,872
----------- -----------
Net increase in net assets
from operations 4,054,960 10,496,620
Dividends paid to shareholders from:
Investment income -- net ( 49,141) ( 568,392)
Net realized gain on investments ( 924,527) ( 1,486,668)
Capital share transactions (Note 2) ( 394,742) ( 2,993,629)
----------- -----------
Total increase 2,686,550 5,447,931
Net Assets
Beginning of period 37,831,080 32,383,149
----------- -----------
End of period (including undistributed net
investment income of $338,642 and
$48,707, respectively) $40,517,630 $37,831,080
----------- -----------
----------- -----------
See Notes to Financial Statements.
13
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES:
Jefferson-Pilot Capital Appreciation Fund, Inc. is an open-end management
investment company registered under the Investment Company Act of 1940. The
Fund's primary investment objective is long-term capital appreciation. The Fund
seeks to achieve this objective by investing substantially all of its assets in
common stocks of companies recognized as leaders in their respective industries,
however, other types of securities may be purchased depending upon the judgment
of management. The following is a summary of significant accounting policies
followed in the preparation of its financial statements:
VALUATION OF SECURITIES -- Investments are stated at value based on the closing
prices reported on national securities exchanges on the last business day of the
period, or for over-the-counter securities, at the last bid price, except that
short-term securities are stated at amortized cost which approximates value.
FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to "regulated investment companies" and
to distribute all of its taxable income to its shareholders. Therefore, no
provision for Federal income tax is required.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
GENERAL -- Securities transactions are accounted for on the trade date. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
Interest income is accrued as earned.
NOTE 2. CAPITAL STOCK:
At June 30, 1996, 10,000,000 shares of capital stock ($1.00 par value) were
authorized and capital paid-in amounted to $28,104,300. Transactions in capital
stock were as follows:
SIX MONTHS ENDED Year Ended
JUNE 30, 1996 December 31, 1995
---------------- -----------------
SHARES AMOUNT Shares Amount
-------- ----------- -------- -----------
Sold 63,398 $1,043,722 153,009 $2,164,646
Issued on reinvestment
of dividends 49,540 787,686 109,424 1,662,936
Redeemed (136,467) ( 2,226,150) (469,652) ( 6,821,211)
-------- ----------- -------- -----------
Net decrease ( 23,529) ($ 394,742) (207,219) ($2,993,629)
-------- ----------- -------- -----------
-------- ----------- -------- -----------
14
<PAGE>
NOTE 3. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
JP Investment Management Company received investment advisory fees of $96,826
during the six months ended June 30, 1996. This fee is computed at the annual
rate of 0.5% of the Fund's average daily net asset value. If the Fund's
expenses, excluding interest and taxes, exceed 1% of the average daily net asset
value, the Investment Adviser will pay the excess. No such reimbursement was
required during the period.
Expenses include $10,740 of fees paid to JP Investment Management Company for
shareholder accounting services.
Jefferson-Pilot Investor Services, Inc. received sales commissions of $25,487 in
its capacity as Principal Distributor for the Fund.
NOTE 4. INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities, excluding short-term securities,
were $8,904,709 and $13,414,650, respectively.
Realized gains and losses are reported on an identified cost basis. Accumulated
undistributed net realized gain at June 30, 1996 was $3,244,612.
At June 30, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities was as follows:
Unrealized appreciation $9,209,014
Unrealized depreciation ( 378,938)
----------
Net unrealized appreciation $8,830,076
----------
----------
NOTE 5. EXPENSE OFFSET ARRANGEMENT:
The Fund has an arrangement with its custodian and transfer agent whereby
credits earned on cash balances maintained at the custodian are used to offset
custody and transfer agent charges. These credits amounted to $7,731 for the
period ended June 30, 1996.
15
<PAGE>
NOTE 6. SELECTED FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------ ------- ------- ------- ------- -------
1996 1995 1994 1993 1992 1991
------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period $15.96 $12.56 $17.05 $17.44 $18.02 $14.09
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income .15 .25 .29 23 23 .32
Net realized and unrealized gain (loss)
on investments 1.58 4.03 ( 1.12) 1.04 .75 4.13
------ ------ ------ ------ ------ ------
Total from investment operations 1.73 4.28 ( .83) 1.27 .98 4.45
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income ( .02) ( .24) ( .28) ( .22) ( .27) ( .33)
Distributions from net realized gains ( .40) ( .64) ( 3.38) ( 1.44) ( 1.29) ( .19)
------ ------ ------ ------ ------ ------
Total distributions ( .42) ( .88) ( 3.66) ( 1.66) ( 1.56) ( .52)
------ ------ ------ ------ ------ ------
Net asset value, end of period $17.27 $15.96 $12.56 $17.05 $17.44 $18.02
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN (WITHOUT DEDUCTION
OF SALES LOAD) 11.03% 34.47% ( 4.63%) 7.68% 5.60% 32.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $40,518 $37,831 $32,383 $38,045 $34,898 $33,836
Ratios to average net assets:
Expenses .86%+^ .87%^ .83% .84% .87% .87%
Net investment income 1.75+ 1.66 1.74 1.30 1.34 1.98
Portfolio turnover rate 24.99 65.27 143.81 26.89 53.38 36.70
</TABLE>
+ Annualized.
^ Pursuant to new regulations, ratio includes expenses paid by expense offset
arrangements.
16
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
A MUTUAL FUND SEEKING MAXIMUM INCOME
This report and accompanying financial statements are submitted for information
of the Fund shareholders and are not to be considered as an offer or
solicitation of offers to buy or sell any shares of the Fund. Such offering is
made only if preceded or accompanied by an effective prospectus.
FUND DIRECTORS AND OFFICERS DISTRIBUTOR
E. J. YELTON, Ph.D., DIRECTOR Jefferson-Pilot Investor Services,Inc.
PRESIDENT,AND TREASURER 100 North Greene Street
Greensboro, North Carolina 27401
JOHN C. INGRAM, CFA, DIRECTOR
INVESTMENT ADVISER
J. LEE LLOYD, DIRECTOR JP Investment Management Company
100 North Greene Street
RICHARD W. McENALLY, CFA, DIRECTOR Greensboro, North Carolina 27401
WILLIAM E. MORAN, DIRECTOR CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
W. HARDEE MILLS, CFA, VICE 127 West Tenth Street
PRESIDENT Kansas City, Missouri 64105
J. GREGORY POOLE, SECRETARY
H. LUSBY BROWN, CFA,
PORTFOLIO MANAGER
JEFFERSON-PILOT INVESTMENT
GRADE BOND FUND, INC.
100 North Greene Street
P.O. Box 21008
Greensboro, North Carolina, 27420
17
<PAGE>
INVESTMENT RESULTS
TOTAL RETURN -- 1996 -- DIVIDEND REINVESTMENT PLAN:
Net Asset Value June 30, 1996 $ 9.26
Investment Income Dividend Paid:
February 9, 1996 $ .018
May 10, 1996 $ .150
June 30, 1996 Adjusted Value per Share Assuming
All Dividends Reinvested in Fund Shares $ 9.43
Net Asset Value December 31, 1995 $ 9.66
Percent Change During Six Months Ended
June 30, 1996:
Jefferson-Pilot Investment Grade Bond Fund, Inc.
Assuming All Dividends Reinvested in Fund Shares ( 2.38)%
Reinvestment Prices Assuming Dividends were reinvested
in New Fund Shares on the Record Date:
$9.67 per share as of January 30, 1996
$9.24 per share as of April 26, 1996
18
<PAGE>
TO SHAREHOLDERS
INVESTMENT ACTIVITY
On June 30, 1996, the net asset value of your Fund was $9.26. The Fund paid
dividends of $.168 per share from interest income during the first half of 1996.
The Fund's year-to-date returns and annual returns for one, three, five, and
ten-year periods ending June 30, 1996 are as follows:*
Year-to-Date (2.38%)
1 Year -- 3.46%
3 Years -- 3.70%
5 Years -- 6.87%
10 Years -- 7.29%
The bond market experienced these negative returns due to fears that the economy
was growing too rapidly causing the Federal Reserve to resort to a tightening of
monetary policy to prevent inflation. Since the beginning of the year, yields
have increased approximately 100 basis points in intermediate and long maturity
bonds, thus reducing bond prices.
The actions of the bond market in 1996 stem from expectations derived from
strong growth in payroll employment. This eliminated any expectations that the
Fed would cut short-term rates, causing the yield curve to steepen for longer
maturities. Corporate bonds outperformed Treasuries during the past six months
due to narrowing credit spreads caused by improved credit quality in most
sectors. Mortgage-backed securities also outperformed Treasuries as prepayment
assumptions declined with the rise in interest rates.
So far, the damage to the bond market has been inflicted solely on expectations.
Our view that inflation is unlikely to be a serious threat to bond yields has
proven to be accurate so far, as the CPI is still less than 3% on a year-over-
year basis. We believe that real yields on bonds are attractive at current
levels. If the Fed acts to raise short-term rates to choke off the prospects for
any future inflation, then bonds could become even more attractive. Despite the
attractiveness of real long-term rates, the bond market remains at risk until
the economy exhibits signs of a slowdown. We will continue to maintain a
somewhat neutral interest rate risk profile based on our short-term expectations
of bond market volatility; however, we maintain that in the long run bonds
should provide good relative returns.
19
<PAGE>
PORTFOLIO DIVERSIFICATION:
SECTOR % OF TOTAL NET ASSETS
U. S. Government 43.00
Mortgage-Backed Securities 13.45
Industrials 14.74
Financials 10.81
Electric Utilities 2.73
Telephone Utilities 3.70
Gas Utilities 7.74
Cash Equivalents 3.83
Your continued support and interest in the Jefferson-Pilot Investment Grade Bond
Fund are appreciated, and we welcome any questions.
Jefferson-Pilot Investment Grade Bond Fund, Inc.
/s/ E.J. Yelton
President
July 29, 1996
* These results do not include the sales charge. If the maximum sales charge of
4.50% of the initial investment is included, the rates of return of the Fund
for the one, three, five, and ten-year periods ended June 30, 1996, were
-1.16%, +2.14%, +5.90%, and +6.79%, respectively. These results represent past
performance and are not necessarily an indication of future results.
20
<PAGE>
ABOUT YOUR FUND
As a shareowner of Jefferson-Pilot Capital Appreciation Fund, you have several
valuable benefits and privileges:
- - You may be able to acquire additional shares at a reduced sales charge through
either the Combined Purchases, Accumulated Purchases, or Statement of Intention
provisions of the Fund. (See those sections of your prospectus that describe
these provisions.)
- - You may exchange shares owned at any time for an equal value of shares of
Jefferson-Pilot Capital Appreciation, subject to certain minimum amounts,
without charge.
- - You may reinvest all income and capital gains distributions in additional Fund
shares at the Fund's net asset value (without a sales charge).
- - Provided you own shares or currently purchase shares having a net asset of at
least $10,000, you may elect to have monthly or quarterly payments made to you
under a Systematic Withdrawal Plan.
Additionally, the Fund provides a printed confirmation of each transaction,
quarterly reports, and other account information, making ownership of Fund
shares easy and convenient.
The cost of purchasing and owning shares is reasonable. The services provided
plus professional management plus diversification of investments would otherwise
be prohibitively expensive for most investors.
We hope that this information will encourage you to increase the level of your
future investments in Jefferson-Pilot Investment Grade Bond Fund -- or you may
wish to add a Jefferson-Pilot Capital Appreciation Fund account.
21
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
STATEMENT OF INVESTMENTS
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
RATINGS* AMOUNT ISSUE VALUE
BONDS -- 98.74%
U.S. GOVERNMENT -- 44.14%
<S> <C> <S> <C>
$ 750,000 U.S. Treasury Notes
5 1/8% due 11/30/98 $ 731,835
750,000 U.S. Treasury Notes
5 7/8% due 4/30/98 747,068
750,000 U.S. Treasury Notes
6 3/8% due 8/15/02 744,022
1,000,000 U.S. Treasury Notes
6 1/2% due 4/30/99 1,005,310
1,000,000 U.S. Treasury Notes
6 7/8% due 3/31/00 1,014,530
500,000 U.S. Treasury Bonds
7 1/8% due 2/15/23 505,390
750,000 U.S. Treasury Notes
8% due 10/15/96 755,393
500,000 U.S. Treasury Bonds
8 7/8% due 8/15/17 600,310
1,000,000 U.S. Treasury Bonds
10 3/8% due 11/15/09 1,222,970
1,000,000 U.S. Treasury Bonds
12 3/4% due 11/15/10 1,404,220
MORTGAGE-BACKED SECURITIES -- 13.82%
1,000,000 Federal Home Loan Mortgage Corporation
6% due 3/15/09 897,500
2,000,000 Federal Home Loan Mortgage Corporation
7% due 9/15/23 1,835,000
22
<PAGE>
INDUSTRIALS -- 26.23%
FINANCE -- 11.10%
A1 1,000,000 Ford Motor Credit Company
6 3/4% Notes due 8/15/08 938,000
A1 750,000 Merrill Lynch & Company, Inc.
6 7/8% Notes due 3/01/03 739,185
A1 500,000 SunTrust Banks, Inc.
8 7/8% Notes due 2/01/98 518,155
FOODS -- 3.68%
Aa2 750,000 Archer-Daniels-Midland Company
7 1/8% Debs. due 3/01/13 727,822
MACHINERY -- INDUSTRIAL/SPECIALTY -- 2.64%
A2 500,000 Johnson Controls, Inc.
7.70% Debs. due 3/01/15 523,435
POLLUTION CONTROL -- 2.57%
Baa2 500,000 Laidlaw, Inc.
7.70% Debs. due 8/15/02 508,850
RAILROADS -- 3.57%
Baa2 750,000 Kansas City Southern Industries, Inc.
6 5/8% Senior Notes due 3/01/05 705,660
TOBACCO -- 2.67%
A2 500,000 Philip Morris Companies, Inc.
8 1/4% Senior Notes due 10/15/03 527,680
UTILITIES -- 14.55%
UTILITIES -- ELECTRIC -- 2.80%
A1 500,000 South Carolina Electric & Gas Company
9% 1st & Ref. due 7/15/06 553,475
UTILITIES -- GAS -- 7.95%
Aa3 500,000 Laclede Gas Company
8 1/2% 1st Mtge. due 11/15/04 529,945
A2 500,000 National Fuel Gas Company
7 3/4% Debs. due 2/01/04 506,500
Baa1 500,000 Texas Gas Transmission
8 5/8% Notes due 4/01/04 535,160
23
<PAGE>
UTILITIES -- TELEPHONE -- 3.80%
A3 750,000 United Telephone Company of Pennsylvania
7 3/8% 1st Mtge. Ser. Y due 12/01/02 752,168
----------
Total Bonds (Cost -- $18,533,958+) 19,529,583
----------
SHORT-TERM SECURITIES -- 1.26%
A1 250,000 General Electric Capital Corporation, 7/02/96 249,925
----------
Total Short-Term Securities
(Cost -- $249,925+) 249,925
----------
Total Investments
(Cost -- $18,783,883+) $19,779,508
----------
----------
</TABLE>
* Bonds are rated by Moody's Investors Service, Inc. and Commercial Paper is
rated by Standard & Poor's Corporation.
+ Aggregate cost for Federal income tax purposes is the same.
See Notes to Financial Statements.
24
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS
Investment in securities at value (cost $18,783,883) $ 19,779,508
Cash 228,262
Receivables:
Interest 333,464
Capital shares sold 239
------------
Total Assets 20,341,473
------------
LIABILITIES
Payables:
Accrued expenses 34,607
------------
Total Liabilities 34,607
------------
NET ASSETS
Net Assets, equivalent to $9.26 per share on
2,191,978 shares of capital stock outstanding (Note 2) $ 20,306,866
------------
------------
Computation of public offering price:
Net asset value per share $ 9.26
---------
---------
Offering price per share (100/95.5 x $9.26)
(reduced on sales of $25,000 or more) $ 9.70
---------
---------
See Notes to Financial Statements.
25
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
Investment Income:
Interest $ 756,559
-----------
Expenses:
Investment Adviser's fee (Note 3) 52,920
Custodian and Transfer Agent fees 23,278
Directors' fees 2,640
Professional fees 10,650
Shareholder accounting services (Note 3) 5,280
Other 4,318
-----------
Total expenses 99,086
Less expenses offset (Note 5) ( 5,947)
-----------
Net expenses 93,139
-----------
Investment income -- net 663,420
-----------
Realized and Unrealized Loss on Investments:
Net realized loss on investments ( 945)
Unrealized depreciation of investments for the period ( 1,183,717)
-----------
Net loss on investments ( 1,184,662)
-----------
Net decrease in net assets from operations ($ 521,242)
-----------
-----------
See Notes to Financial Statements.
26
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended June 30, 1996 (Unaudited) and Year Ended December 31, 1995
SIX MONTHS Year Ended
ENDED JUNE 30, December 31,
1996 1995
-------------- ------------
Increase (Decrease) in Net Assets from:
Operations:
Investment income -- net $ 663,420 $ 1,407,084
Net realized loss on investments ( 945) ( 45,405)
Unrealized appreciation (depreciation)
for the period ( 1,183,717) 2,333,056
----------- ----------
Net increase (decrease) in net
assets from operations ( 521,242) 3,694,735
Dividends paid to shareholders from
investment income -- net ( 380,911) ( 1,403,096)
Capital share transactions (Note 2) ( 1,080,910) ( 1,033,355)
----------- ----------
Total increase (decrease) ( 1,983,063) 1,258,284
Net Assets
Beginning of period 22,289,929 21,031,645
----------- -----------
End of period (including undistributed net
investment income of $321,995 and
$39,486, respectively) $20,306,866 $22,289,929
----------- -----------
----------- -----------
See Notes to Financial Statements.
27
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES:
Jefferson-Pilot Investment Grade Bond Fund, Inc. is an open-end management
investment company registered under the Investment Company Act of 1940. The
Fund's primary investment objective is to seek the maximum level of current
income as is consistent with prudent risk. The Fund attempts to achieve this
objective by investing primarily in high-rated fixed income securities and
dividend paying common stocks, however other types of securities may be
purchased depending upon the judgment of management. The following is a summary
of significant accounting policies followed in the preparation of its financial
statements:
VALUATION OF SECURITIES -- Fixed income securities are valued by using market
quotations or independent pricing services which utilize prices provided by
market makers or estimates based on yield data related to similar securities;
short-term securities are stated at amortized cost which approximates value.
FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to "regulated investment companies" and
to distribute all of its taxable income to its shareholders. Therefore, no
provision for Federal income tax is required.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
GENERAL -- Securities transactions are accounted for on the trade date.
Distributions to shareholders are recorded on the ex-dividend date. Interest
income is accrued as earned.
NOTE 2. CAPITAL STOCK:
At June 30, 1996, 10,000,000 shares of capital stock ($1.00 par value) were
authorized and capital paid-in amounted to $19,879,958. Transactions in capital
stock were as follows:
SIX MONTHS ENDED Year Ended
JUNE 30, 1996 December 31, 1995
--------------------- ------------------
SHARES AMOUNT Shares Amount
------- --------- -------- ----------
Sold 25,134 $ 236,712 36,972 $ 344,257
Issued on reinvestment
of dividends 25,530 237,039 94,251 879,674
Redeemed (166,310) ( 1,554,661) (241,492) ( 2,257,286)
-------- ---------- -------- ----------
Net decrease (115,646) ($1,080,910) (110,269) ($1,033,355)
-------- ---------- -------- ----------
-------- ---------- -------- ----------
28
<PAGE>
NOTE 3. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
JP Investment Management Company received investment advisory fees of $52,920
during the six months ended June 30, 1996. This fee is computed at the annual
rate of 0.5% of the Fund's average daily net asset value. If the Fund's
expenses, excluding interest and taxes, exceed 1% of the average daily net asset
value, the Investment Adviser will pay the excess. No such reimbursement was
required during the period.
Expenses include $5,280 of fees paid to JP Investment Management Company for
shareholder accounting services.
Jefferson-Pilot Investor Services, Inc. received sales commissions of $6,893 in
its capacity as Principal Distributor for the Fund.
NOTE 4. INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities, excluding short-term securities,
were $1,251,797 and $2,067,286, respectively.
Realized gains and losses are reported on an identified cost basis. Accumulated
undistributed net realized loss at June 30, 1996 was $890,712. This loss may be
carried forward to offset future realized gains.
At June 30, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities was as follows:
Unrealized appreciation $1,109,800
Unrealized depreciation ( 114,175)
---------
Net unrealized appreciation $ 995,625
---------
---------
NOTE 5. EXPENSE OFFSET ARRANGEMENT:
The Fund has an arrangement with its custodian and transfer agent whereby
credits earned on cash balances maintained at the custodian are used to offset
custody and transfer agent charges. These credits amounted to $5,947 for the
period ended June 30, 1996.
29
<PAGE>
NOTE 6. SELECTED FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- --------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 9.66 $ 8.70 $ 9.89 $ 9.57 $ 9.65 $ 9.23
--------- --------- --------- ---------- ---------- --------
Income from investment operations:
Net investment income .30 .60 .62 .64 .66 .76
Net realized and unrealized gain (loss)
on investments ( .53) .96 ( 1.21) .32 ( .06) .44
--------- --------- --------- ---------- ---------- --------
Total from investment operations ( .23) 1.56 ( .59) .96 .60 1.20
--------- --------- --------- ---------- ---------- --------
Less distributions:
Dividends from net investment income ( .17) ( .60) ( .60) ( .64) ( .68) ( .78)
Distributions from net realized gains -- -- -- -- -- --
--------- --------- --------- ---------- ---------- --------
Total distributions ( .17) ( .60) ( .60) ( .64) ( .68) ( .78)
--------- --------- --------- ---------- ---------- --------
Net asset value, end of period $ 9.26 $ 9.66 $ 8.70 $ 9.89 $ 9.57 $ 9.65
--------- --------- --------- ---------- ---------- --------
--------- --------- --------- ---------- ---------- --------
TOTAL RETURN (WITHOUT DEDUCTION
OF SALES LOAD) ( 2.38%) 18.39% ( 5.97%) 10.24% 6.53% 13.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted) $20,307 $22,290 $21,032 $23,632 $21,359 $19,313
Ratios to average net assets:
Expenses .94%+^ .96%^ .85% .86% .93% .93%
Net investment income 6.27+ 6.40 8.32 6.46 6.99 8.18
Portfolio turnover rate 6.27 33.91 41.01 21.34 25.53 23.65
</TABLE>
+Annualized.
^Pursuant to new regulations, ratio includes expenses paid by expense offset
arrangements.
30
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
CHANGES IN INVESTMENT POSITIONS
For the Period April 1, 1996 to June 30, 1996
ADDITIONS ELIMINATIONS
U.S. Treasury Tennessee Gas Pipeline Company
5 7/8% Notes due 4/30/98 9 1/4% due 5/15/96
U.S. Treasury U.S. Treasury
7 1/8% Bonds due 2/15/23 9 3/8% Notes due 4/15/96
31
<PAGE>
JEFFERSON PILOT
FAMILY OF FUNDS
- --------------------------
JEFFERSON-PILOT
CAPITAL APPRECIATION FUND
INVESTMENT GRADE BOND FUND
- --------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1996
THIS REPORT AND ACCOMPANYING FINANCIAL STATEMENTS ARE SUBMITTED FOR INFORMATION
OF THE FUND SHAREHOLDERS AND ARE NOT TO BE CONSIDERED AS AN OFFER OR
SOLICITATION OF OFFERS TO BUY OR SELL ANY SHARES OF THE FUND. SUCH OFFERING IS
MADE ONLY IF PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
ITEM #JPI607041
