<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.
<TABLE>
<CAPTION>
<S> <C>
FUND DIRECTORS AND OFFICERS DISTRIBUTOR
E. J. YELTON, PH.D., DIRECTOR, PRESIDENT, Jefferson-Pilot Investor Services, Inc.
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
W. HARDEE MILLS, CFA, VICE PRESIDENT CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
J. GREGORY POOLE, SECRETARY 127 West Tenth Street
Kansas City, Missouri 64105
GREGORY D. WALKER, CFA,
PORTFOLIO MANAGER
CERTIFIED PUBLIC ACCOUNTANTS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017
JEFFERSON-PILOT CAPITAL
APPRECIATION FUND, INC.
100 North Greene Street
P.O. Box 21008
Greensboro, North Carolina 27420
</TABLE>
<PAGE>
INVESTMENT RESULTS
TOTAL RETURN -- 1995 -- DIVIDEND REINVESTMENT PLAN:
Net Asset Value December 31, 1995 $15.96
Investment Income Dividend Paid:
February 10, 1995 $ .011
August 11, 1995 $ .120
December 19, 1995 $ .110
Capital Gains Paid:
February 10, 1995 $ .061
December 19, 1995 $ .580
December 31, 1995 Adjusted Value per Share Assuming
All Dividends Reinvested in Fund Shares $16.89
Net Asset Value December 31, 1994 $12.56
Percent Change During Twelve Months Ended
December 31, 1995:
Jefferson-Pilot Capital Appreciation Fund --
Assuming All Dividends Reinvested in Fund Shares 34.47%
Reinvestment Prices Assuming Dividends were reinvested
in New Fund Shares on the Record Date:
$12.64 per share as of January 30, 1995
$15.20 per share as of July 28, 1995
$15.58 per share as of December 15, 1995
2
<PAGE>
TO SHAREHOLDERS
INVESTMENT ACTIVITY
On December 31, 1995, the net asset value of your Fund was $15.96. Dividends
totaling $.241 from net investment income and $.641 from net capital gains have
been paid year to date. On a total return basis, for 1995, the Jefferson-Pilot
Capital Appreciation Fund increased 34.47% while the S&P 500 increased 37.53%.
The Fund's annual returns for one, three, five and ten-year periods ending
December 31, 1995 are as follows:*
1 Year -- 34.47%
3 Years -- 11.35
5 Years -- 14.03
10 Years -- 11.88
In 1995, your fund outperformed 75% of the Growth and Income mutual funds
tracked by Lipper Analytical Services.
Signs of economic weakness were evident as 1996 ushered in a new year. As
recently as August of last year, upward earnings estimate revisions by stock
analysts outpaced downward revisions by an astounding six to one margin. By
mid-January 1996, earnings estimate revisions have reversed and downward
revisions now outnumber upward revisions by a two to one margin.
With the slowing of profit growth, we have witnessed a concurrent fall in the
breadth of the market. That is, while the stock market is posting new highs,
this performance is driven by fewer and fewer stocks. In fact, calculations by
the Wall Street firm, Smith Barney, reveal that the entire advance of the S&P
500 from September 30, 1995 to December 18 (the date of the study) was
attributable to only 18 of the 500 stocks. In other words, fewer than 5% of the
stocks in the S&P 500 provided 100% of the appreciation.
As referred to in our previous update, we believe that profits will continue to
surprise on the downside as economic growth slows. This is not to say that we
believe that the stock market will provide negative returns for the year. As
inflation continues to remain restrained, the Federal Reserve will have more
leeway to lower interest rates. Lower rates can support higher stock valuations.
We believe that the low volatility of the markets we have experienced in the
recent past will reverse. The Dow Jones Industrial Average's (DJIA) biggest
correction in 1995 was 3.3%, occurring in mid-July. In an average year the DJIA
corrects -9.3%. With the declining market breadth, we expect a more volatile
year as investors attempt to separate the winners from the losers.
1996 stock market performance is unlikely to match that of 1995. In fact, 1995,
as measured by the S&P 500, was the fifth best year in market history. We do see
a positive return for the stock market this year; however, we believe it will be
driven by a relatively few number of stocks. These stocks will likely be of high
quality, stable growth companies. These are the stocks which typically
outperform when the profit cycle has peaked and economic growth begins to slow.
If the Fed lowers interest rates, we can expect the economically sensitive
companies to benefit but with a lag. The positive benefit that cyclical
companies will receive from lower interest rates is not likely to be experienced
this year even if the Fed aggressively lowers rates early.
3
<PAGE>
Portfolio Diversification
SECTOR % OF TOTAL NET ASSETS
Credit Cyclicals 0.00
Financial 15.98
Consumer Services 7.20
Consumer Staples 16.65
Consumer Cyclicals 7.79
Capital Goods--Technology 12.00
Capital Goods 4.20
Energy 11.39
Basic Industries 4.69
Transportation 1.42
Utilities 15.77
Conglomerates 1.00
Cash 1.91
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
January 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 December 31,
1995, were +26.73%, +9.66%, +13.02%, and +11.31% 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 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 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 investments 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
December 31, 1995
COMPANY MARKET VALUE PERCENT OF FUND
Monsanto Company $1,212,750 3.2
Frontier Corporation 960,000 2.5
General Electric Company 936,000 2.5
Atlantic Richfield Company 930,300 2.5
Countrywide Credit Industries, Inc. 913,500 2.4
Schering-Plough Corporation 832,200 2.2
Capital Cities/ABC, Inc. 814,275 2.2
Royal Dutch Petroleum Company 804,413 2.1
Citicorp 786,825 2.1
Equifax, Inc. 773,775 2.0
----------- ------
$8,964,038 23.7
6
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
STATEMENT OF INVESTMENTS
December 31, 1995
NUMBER OF SHARES
COMMON STOCKS--96.80% OR PRINCIPAL AMOUNT VALUE
Aerospace/Defense--2.05%
Lockheed-Martin Corporation 5,700 $ 450,300
Loral Corporation 9,200 325,450
Auto & Trucks--.22%
Honda Motor Company, Ltd. 2,000 84,000
Banks--4.41%
Bank of New York Company, Inc. 11,000 536,250
Chase Manhattan Corporation 5,700 345,562
Citicorp 11,700 786,825
Biotechnology--1.85%
Amgen, Inc. 11,800 699,150*
Broadcasting--2.53%
Capital Cities/ABC, Inc. 6,600 814,275
US West Media Group, Inc. 7,600 144,400*
Chemicals--Major--4.36%
Dow Chemical Company 6,200 436,325
Monsanto Company 9,900 1,212,750
1,212,750
Computer Software--1.67%
Informix Corporation 7,000 210,000*
Silicon Graphics Computer System 8,200 225,500*
Sybase, Inc. 5,500 196,625*
Conglomerates--1.00%
AlliedSignal, Inc. 8,000 380,000
Drugs--6.41%
Lilly (Eli) & Company 5,708 321,075
Merck & Company, Inc. 5,400 355,050
Mylan Laboratories, Inc. 17,550 412,425
Pharmacia-Upjohn, Inc. 13,000 503,750
Schering-Plough Corporation 15,200 832,200
Electric Equipment--Major--3.67%
General Electric Company 13,000 936,000
Kuhlman Corporation 36,000 450,000
Electronics--Instrument--2.78%
General Instrument Corporation 8,300 194,012*
3Com Corporation 10,000 466,250*
Varian Associates, Inc. 8,200 391,550
7
<PAGE>
Electronics--Semi--1.99%
LSI Logic Corporation 7,200 235,800*
Texas Instruments, Inc. 10,000 517,500
Entertainment--.94%
Disney, (Walt) & Company 6,000 354,000
Financial Services--.61%
Money Store, Inc. 15,000 232,500
Foods--1.99%
Sara Lee Corporation 23,600 752,250
Footwear--1.33%
Nike, Inc. 7,200 501,300
Hospital--Management--3.73%
Columbia/HCA Healthcare Corporation 9,900 502,425
Medaphis Corporation 14,000 518,000*
Vencor, Inc. 12,000 390,000*
Hospital--Supplies--3.01%
Baxter International, Inc. 5,700 238,687
Guidant Corporation 5,046 213,194
Johnson & Johnson 8,000 685,000
Information Processing--2.05%
Equifax, Inc. 36,200 773,775
Insurance--Multi-Line--4.61%
Aflac, Inc. 9,000 390,375
Allstate Corporation 12,300 505,838
American General Corporation 6,500 226,687
CIGNA Corporation 6,000 619,500
Insurance--Property & Casualty--.96%
Prudential Reinsurance Holdings, Inc. 15,500 362,313
Machinery--Agricultural--.54%
Varity Corporation 5,500 204,188*
Merchandising--Department--1.92%
Dayton Hudson Corporation 3,800 285,000
Federated Department Stores, Inc. 16,000 440,000*
Merchandising--Drugs--.71%
Eckerd Corporation 6,000 267,750*
Merchandising--Special--2.54%
Borders Group, Inc. 26,500 490,250*
Circuit City Stores, Inc. 17,000 469,625
Miscellaneous Consumer Cyclical--.44%
Kelly Services, Inc. 6,000 166,500
8
<PAGE>
Miscellaneous Financial--5.39%
Countrywide Credit Industries, Inc. 42,000 913,500
Dean Witter, Discover & Company 6,300 296,100
Federal Home Loan Mortgage Corporation 4,600 384,100
First USA, Inc. 10,000 443,750
Natural Gas--Diversified--.74%
Questar Corporation 8,300 278,050
Oils--Integrated Domestic--5.70%
Amoco Corporation 9,300 668,438
Atlantic Richfield Company 8,400 930,300
Enron Oil & Gas Company 10,500 257,250
Phillips Petroleum Company 8,800 300,300
Oils--Integrated International--4.17%
Mobil Corporation 6,900 772,800
Royal Dutch Petroleum Company 5,700 804,413
Oil Services--.78%
Oceaneering International, Inc. 23,000 296,125*
Paper & Forest Products--.34%
Sonoco Products Company 4,830 126,787
Railroads--.92%
CSX Corporation 7,600 346,750
Telecommunications--1.46%
DSC Communications Corporation 15,000 553,125*
Textile--Apparel--1.35%
Intimate Brands, Inc. 15,000 225,000
Ross Stores, Inc. 15,000 286,875
Tobacco--1.34%
Philip Morris Companies, Inc. 5,600 506,800
Transportation--Miscellaneous--.51%
Federal Express Corporation 2,600 192,075*
Utilities--Communications--7.56%
Bell Atlantic Corporation 3,700 247,438
BellSouth Corporation 7,400 321,900
Century Telephone Enterprises, Inc. 8,400 266,700
Frontier Corporation 32,000 960,000
SBC Communications, Inc. 3,600 207,000
Sprint Corporation 14,600 582,175
US West Communications Group, Inc. 7,600 271,700
9
<PAGE>
Utilities--Electric--8.22%
American Electric Power Company, Inc. 6,600 267,300
CMS Energy Corporation 9,800 292,775
Carolina Power & Light Company 4,100 141,450
CINergy Corporation 13,700 419,562
Consolidated Edison Company of New York, Inc. 5,900 188,800
Dominion Resources, Inc. 4,600 189,750
Entergy Corporation 12,000 351,000
FPL Group, Inc. 8,200 380,275
Illinova Corporation 9,600 288,000
Northeast Utilities 8,650 210,844
PECO Energy Company 4,900 147,612
Public Service Enterprise Group, Inc. 7,500 229,687
----------
Total Common Stocks (Cost--$28,253,464+) 36,598,687
----------
Preferred Stocks--1.35%
Tobacco--1.35%
RJR Nabisco Holdings, Inc. Pfd C 80,000 510,000
---------
Total Preferred Stocks (Cost--$494,800+) 510,000
---------
Short-Term Securities--1.85%
Ford Motor Credit Company, 1/03/96 $ 700,000 699,655
---------
Total Short-Term Securities (Cost--$699,655+) 699,655
---------
Total Investments (Cost--$29,447,919+) $37,808,342
-----------
-----------
*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
December 31, 1995
ASSETS
Investment in securities at value (cost $29,447,919) $ 37,808,342
Cash 364,199
Receivables:
Capital shares sold 1,970
Dividends 56,055
------------
Total Assets 38, 230,566
------------
LIABILITIES
Payables:
Capital shares redeemed 66,990
Securities purchased 258,090
Accrued expenses 74,406
------------
Total Liabilities 399,486
------------
NET ASSETS
Net Assets, equivalent to $15.96 per share on
2,370,053 shares of capital stock outstanding (Note 2) $ 37,831,080
------------
------------
Computation of public offering price:
Net asset value per share $ 15.96
--------
--------
Offering price per share (100/95.5 x $15.96)
(reduced on sales of $25,000 or more) $ 16.71
--------
--------
See Notes to Financial Statements.
11
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
Investment Income:
Interest $ 53,147
Dividends 828,748
-----------
Total income 881,895
-----------
Expenses:
Investment Adviser's fee (Note 3) 177,665
Custodian and Transfer Agent fees 67,583
Directors' fees 3,660
Professional fees 25,511
Shareholder accounting services (Note 3) 21,600
Printing and mailing 13,200
Other 1,297
-----------
Total expenses 310,516
Less expenses offset (Note 5) ( 18,240)
-----------
Net expenses 292,276
-----------
Investment income - net 589,619
-----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments 2,251,129
Unrealized appreciation of investments for the year 7,655,872
Net gain on investments 9,907,001
-----------
Net increase in net assets from operations $10,496,620
-----------
-----------
See Notes to Financial Statements.
12
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended December 31, 1995 and 1994
1995 1994
Increase (Decrease) in Net Assets from:
Operations:
Investment income--net $ 589,619 $ 622,612
Net realized gain on investments 2,251,129 7,132,162
Unrealized appreciation (depreciation)
for the year 7,655,872 ( 9,494,642)
----------- -----------
Net increase (decrease) in net assets
from operations 10,496,620 ( 1,739,868)
Dividends paid to shareholders from:
Investment income -- net ( 568,392) ( 596,160)
Net realized gain on investments ( 1,486,668) ( 7,155,326)
Capital share transactions (Note 2) ( 2,993,629) 3,828,530
----------- -----------
Total increase (decrease) 5,447,931 ( 5,662,824)
Net Assets
Beginning of year 32,383,149 38,045,973
----------- -----------
End of year (including undistributed net
investment income of $48,707 and
$27,480, respectively) $37,831,080 $32,383,149
----------- -----------
----------- -----------
See Notes to Financial Statements.
13
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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 judgement
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
year, 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 December 31, 1995, 10,000,000 shares of capital stock
($1.00 par value) were authorized and capital paid-in amounted to $28,499,042.
Transactions in capital stock were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- ---------------------
Shares Amount Shares Amount
------ ------ ------ ------
Sold 153,009 $ 2,164,646 178,334 $ 2,952,364
Issued on reinvestment
of dividends 109,424 1,662,936 489,064 6,160,598
Redeemed (469,652) ( 6,821,211) (322,174) ( 5,284,432)
------- ----------- ------- -----------
Net increase (decrease) (207,219) ($ 2,993,629) 345,224 $ 3,828,530
------- ----------- ------- -----------
------- ----------- ------- -----------
14
<PAGE>
NOTE 3. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
JP Investment Management Company received investment advisory fees of $177,665
during the year ended December 31, 1995. 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 year.
Expenses include $21,600 of fees paid to JP Investment Management Company for
shareholder accounting services.
Jefferson-Pilot Investor Services, Inc. received sales commissions of $66,827 in
its capacity as Principal Distributor for the Fund.
NOTE 4. INVESTMENT TRANSACTIONS: Purchases and sales of investment securities,
excluding short-term securities, were $22,431,918 and $27,025,361, respectively.
Realized gains and losses are reported on an identified cost basis. Accumulated
undistributed net realized gain at December 31, 1995 was $922,908.
At December 31, 1995, the aggregate gross unrealized appreciation and
depreciation of portfolio securities was as follows:
Unrealized appreciation $8,565,109
Unrealized depreciation ( 204,686)
----------
Net unrealized appreciation $8,360,423
----------
----------
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 $18,240 for the
year ended December 31, 1995.
15
<PAGE>
NOTE 6. SELECTED FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value,
beginning of year $12.56 $17.05 $17.44 $18.02 $14.09
----- ----- ----- ----- -----
Income from investment
operations:
Net investment income .25 .29 .23 .23 .32
Net realized and unrealized
gain (loss) on investments 4.03 ( 1.12) 1.04 .75 4.13
----- ----- ----- ----- -----
Total from investment
operations 4.28 ( .83) 1.27 .98 4.45
----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment income ( .24) ( .28) ( .22) ( .27) ( .33)
Distributions from net
realized gains ( .64) ( 3.38) ( 1.44) ( 1.29) ( .19)
----- ----- ----- ----- -----
Total distributions ( .88) ( 3.66) ( 1.66) ( 1.56) ( .52)
----- ----- ----- ----- -----
Net asset value,
end of year $15.96 $12.56 $17.05 $17.44 $18.02
----- ----- ----- ----- -----
----- ----- ----- ----- -----
TOTAL RETURN (WITHOUT DEDUCTION OF SALES LOAD) 34.47% ( 4.63)% 7.68% 5.60% 32.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000 omitted) $37,831 $32,383 $38,045 $34,898 $33,836
Ratios to average net assets:
Expenses .87% .83% .84% .87% .87%
Net investment income 1.66 1.74 1.30 1.34 1.98
Portfolio turnover rate 65.27 143.81 26.89 53.38 36.70
</TABLE>
16
<PAGE>
JEFFERSON-PILOT CAPITAL APPRECIATION FUND, INC.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Jefferson-Pilot Capital Appreciation Fund, Inc.
We have audited the accompanying statement of assets and liabilities and the
statement of investments of Jefferson-Pilot Capital Appreciation Fund, Inc. as
of December 31, 1995, 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 selected financial information for each of the five
years in the period then ended. These financial statements and selected
financial information are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
selected financial information 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 selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of Jefferson-Pilot Capital Appreciation Fund, Inc. as of December 31,
1995, the results of its operations, the changes in its net assets, and the
selected financial information for the periods indicated, in conformity with
generally accepted accounting principles.
McGladrey & Pullen, LLP
/s/ McGladrey & Pullen, LLP
New York, New York
January 11, 1996
17
<PAGE>
18
<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.
<TABLE>
<CAPTION>
<S> <C>
FUND DIRECTORS AND OFFICERS DISTRIBUTOR
E. J. YELTON, Ph.D., DIRECTOR, PRESIDENT, Jefferson-Pilot Investor Services, Inc.
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
W. HARDEE MILLS, CFA, VICE PRESIDENT CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
J. GREGORY POOLE, SECRETARY 127 West Tenth Street
Kansas City, Missouri 64105
H. LUSBY BROWN, CFA, PORTFOLIO MANAGER
CERTIFIED PUBLIC ACCOUNTANTS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017
JEFFERSON-PILOT INVESTMENT
GRADE BOND FUND, INC.
100 North Greene Street
P.O. Box 21008
Greensboro, North Carolina 27420
</TABLE>
19
<PAGE>
INVESTMENT RESULTS
TOTAL RETURN - 1995 - DIVIDEND REINVESTMENT PLAN:
Net Asset Value December 31, 1995 $ 9.66
Investment Income Dividends Paid:
February 10, 1995 $ .011
May 12, 1995 $ .150
August 11, 1995 $ .160
November 10, 1995 $ .150
December 19, 1995 $ .130
December 31, 1995 Adjusted Value per Share Assuming
All Dividends Reinvested in Fund Shares $10.30
Net Asset Value December 31, 1994 $ 8.70
Percent Change During Twelve Months Ended
December 31, 1995:
Jefferson-Pilot Investment Grade Bond Fund, Inc.
Assuming All Dividends Reinvested in Fund Shares 18.39%
Reinvestment Prices Assuming Dividends were reinvested
in New Fund Shares on the Record Date:
$8.83 per share as of January 30, 1995
$9.08 per share as of April 28, 1995
$9.29 per share as of July 28, 1995
$9.51 per share as of October 27, 1995
$9.55 per share as of December 15, 1995
20
<PAGE>
TO SHAREHOLDERS
INVESTMENT ACTIVITY
On December 31, 1995, the net asset value of your Fund was $9.66. The Fund paid
dividends of $.601 per share from interest income during 1995. The Fund's annual
returns for one, three, five, and ten-year periods ending December 31, 1995 are
as follows:*
Year-to-Date
1 Year -- 18.39%
3 Years -- 7.06%
5 Years -- 8.26%
10 Years -- 8.65%
In 1995, the bond market recovered from one of its worst years in history to
record one of its best years in history. The rally actually began in late 1994
and picked up steam early in 1995, as the Federal Reserve dropped the target for
Federal Funds to 5.75%. A developing picture of mediocre economic growth and low
inflation kept the rally going throughout the summer as the market began to
forecast slower growth in 1996. The bond market rally was led by expectations
that the Fed would continue to ease and, as a result, the yield curve steepened
with the two-year Note rallying over 250 BP while the 30-year Bond only rallied
about 190 BP.
Long-term corporate bonds had the best overall returns in 1995, due to
tightening credit spreads caused by heavy demand for higher yielding assets and
light supply. Mortgage-backed securities generally underperformed the market
during the year as falling interest rates sparked prepayment fears, limiting any
increase in prices for these bonds.
The outlook for the bond market in 1996 is currently clouded by the actions of
the Congress and the White House regarding the Federal budget. The market is
discounting a favorable outcome in budget deliberations which could translate
into lower federal borrowing and fiscal drag from reduced government spending.
The market is also discounting a continuation of Federal Reserve easing in 1996
warranted by slow growth and low inflation. While the prospects for these
scenarios seem very good, the market is at risk to be disappointed. The
risk/reward profile for the bond market clearly favors shorter maturities and a
slightly more defensive stance at this time.
On December 31, 1995, the Fund's assets were invested 86.87% in medium and
long-term bonds.
21
<PAGE>
PORTFOLIO DIVERSIFICATION:
SECTOR % OF TOTAL NET ASSETS
U.S Government 42.68
Industrials 15.90
Financials 10.50
Electric Utilities 3.22
Telephone Utilities 3.59
Gas Utilities 7.53
Cash Equivalents 3.45
Mortgage-Backed Securities 13.13
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
January 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 December 31, 1995, were
+13.03%, +5.43%, +7.27%, and +8.15%, respectively. These results represent past
performance and are not necessarily an indication of future results.
22
<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 Capital Appreciation 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 investments in Jefferson-Pilot Investment Grade Bond Fund -- or you may
wish to add a Jefferson-Pilot Capital Appreciation Fund account.
23
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
STATEMENT OF INVESTMENTS
December 31, 1995
FACE
RATINGS* AMOUNT ISSUE VALUE
BONDS - 99.08%
U.S. GOVERNMENT - 43.80%
$ 750,000 U.S. Treasury Notes
5 1/8% due 11/30/98 $ 747,540
750,000 U.S. Treasury Notes
6 3/8% due 8/15/02 786,443
1,000,000 U.S. Treasury Notes
6 1/2% due 4/30/99 1,036,560
1,000,000 U.S. Treasury Notes
6 7/8% due 3/31/00 1,056,410
850,000 U.S. Treasury Notes
7 1/2% due 1/31/96 851,462
750,000 U.S. Treasury Notes
8% due 10/15/96 765,465
500,000 U.S. Treasury Bonds
8 7/8% due 8/15/17 669,685
750,000 U.S. Treasury Notes
9 3/8% due 4/15/96 758,558
1,000,000 U.S. Treasury Bonds
10 3/8% due 11/15/09 1,319,370
1,000,000 U.S. Treasury Bonds
12 3/4% due 11/15/10 1,523,120
MORTGAGE-BACKED SECURITIES - 13.47%
1,000,000 Federal Home Loan Mortgage
Corporation
6% due 3/15/09 945,000
2,000,000 Federal Home Loan Mortgage
Corporation
7% due 9/15/23 1,981,240
INDUSTRIALS - 27.09%
FINANCE - 10.77%
A1 1,000,000 Ford Motor Credit Company
6 3/4% Notes due 8/15/08 1,026,890
24
<PAGE>
A1 750,000 Merrill Lynch & Company, Inc.
6 7/8% Notes due 3/01/03 780,907
A1 500,000 SunTrust Banks, Inc.
8 7/8% Notes due 2/01/98 532,075
FOODS - 3.63%
Aa2 750,000 Archer-Daniels-Midland Company
7 1/8% Debs. due 3/01/13 788,580
MACHINERY -
INDUSTRIAL/SPECIALTY - 2.57%
A2 500,000 Johnson Controls, Inc.
7.70% Debs. due 3/01/15 558,625
NATURAL GAS - 1.63%
Baa2 350,000 Tennessee Gas Pipeline Company
9 1/4% Notes due 5/15/96 354,126
POLLUTION CONTROL - 2.43%
Baa2 500,000 Laidlaw, Inc.
7.70% Debs. due 8/15/02 528,225
RAILROADS - 3.49%
Baa2 750,000 Kansas City Southern
Industries, Inc.
6 5/8% Senior Notes due 3/01/05 757,627
TOBACCO - 2.57%
A2 500,000 Philip Morris Companies, Inc.
8 1/4% Senior Notes due 10/15/03 557,400
UTILITIES - 14.72%
UTILITIES - ELECTRIC - 3.30%
A2 113,000 Carolina Power & Light Company
8 1/8% 1st Mtge. due 11/01/03 115,582
A1 500,000 South Carolina Electric &
Gas Company
9% 1st & Ref. due 7/15/06 601,705
UTILITIES - GAS - 7.73%
Aa3 500,000 Laclede Gas Company
8 1/2% 1st Mtge. due 11/15/04 571,065
A2 500,000 National Fuel Gas Company
7 3/4% Debs. due 2/01/04 542,855
Baa1 500,000 Texas Gas Transmission
8 5/8% Notes due 4/01/04 565,270
25
<PAGE>
UTILITIES - TELEPHONE - 3.69%
A3 750,000 United Telephone Company of
Pennsylvania
7 3/8% 1st Mtge. Ser. Y
due 12/01/02 799,958
----------
Total Bonds
(Cost - $19,342,401+) 21,521,743
----------
SHORT-TERM SECURITIES - .92%
A1 200,000 Ford Motor Credit
Company, 1/03/96 199,901
----------
Total Short-Term Securities
(Cost - $199,901+) 199,901
----------
Total Investments - 100%
(Cost - $19,542,302+) $21,721,644
----------
----------
*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.
26
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS
Investment in securities at value
(cost $19,542,302) $ 21,721,644
Cash 254,766
Receivables:
Interest 360,833
Capital shares sold 3,401
------------
Total Assets 22,340,644
------------
LIABILITIES
Payables:
Capital shares redeemed 1,585
Accrued expenses 49,130
------------
Total Liabilities 50,715
------------
NET ASSETS
Net Assets, equivalent to $9.66 per
share on 2,307,624 shares of capital
stock outstanding (Note 2) $ 22,289,929
------------
------------
Computation of public offering price:
Net asset value per share $ 9.66
--------
--------
Offering price per share (100/95.5 x $9.66)
(reduced on sales of $25,000 or more) $ 10.12
--------
--------
See Notes to Financial Statements.
27
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
Investment Income:
Interest $ 1,604,710
-----------
Expenses:
Investment Adviser's fee (Note 3) 109,982
Custodian and Transfer Agent fees 48,836
Directors' fees 3,660
Professional fees 24,300
Shareholder accounting services (Note 3) 10,250
Printing and mailing 7,200
Other 6,228
-----------
Total expenses 210,456
Less expenses offset (Note 5) ( 12,830)
-----------
Net expenses 197,626
-----------
Investment income - net 1,407,084
-----------
Realized and Unrealized Gain
(Loss) on Investments:
Net realized loss on investments ( 45,405)
Unrealized appreciation of investments for the year 2,333,056
-----------
Net gain on investments 2,287,651
-----------
Net increase in net assets from operations $ 3,694,735
-----------
-----------
See Notes to Financial Statements.
28
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended December 31, 1995 and 1994
1995 1994
Increase (Decrease) in Net Assets from:
Operations:
Investment income - net $ 1,407,084 $ 1,479,005
Net realized loss on investments ( 45,405) ( 774,526)
Unrealized appreciation (depreciation)
for the year 2,333,056 ( 2,124,538)
----------- -----------
Net increase (decrease) in net assets
from operations 3,694,735 ( 1,420,059)
Dividends paid to shareholders from
investment income - net ( 1,403,096) ( 1,443,508)
Capital share transactions (Note 2) ( 1,033,355) 263,565
----------- -----------
Total increase (decrease) 1,258,284 ( 2,600,002)
Net Assets
Beginning of year 21,031,645 23,631,647
----------- -----------
End of year (including undistributed net
investment income of $39,486 and
$35,497, respectively) $22,289,929 $21,031,645
----------- -----------
----------- -----------
See Notes to Financial Statements.
29
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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 judgement 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 December 31, 1995, 10,000,000 shares of capital stock ($1.00 par value) were
authorized and capital paid-in amounted to $20,960,868. Transactions in capital
stock were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
SHARES AMOUNT SHARES AMOUNT
Sold 36,972 $ 344,257 150,431 $ 1,421,796
Issued on reinvestment
of dividends 94,251 879,674 101,556 909,213
Redeemed (241,492) ( 2,257,286) (224,210) ( 2,067,444)
------- ----------- ------- -----------
Net increase
(decrease) (110,269) ($ 1,033,355) 27,777 $ 263,565
------- ----------- ------- -----------
------- ----------- ------- -----------
30
<PAGE>
NOTE 3. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
JP Investment Management Company received investment advisory fees of $109,982
during the year ended December 31, 1995. 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 year.
Expenses include $10,250 of fees paid to JP Investment Management Company for
shareholder accounting services.
Jefferson-Pilot Investor Services, Inc. received sales commissions of $8,656 in
its capacity as Principal Distributor for the Fund.
NOTE 4. INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities, excluding short-term securities,
were $7,023,037 and $7,551,805, respectively.
Realized gains and losses are reported on an identified cost basis. Accumulated
undistributed net realized loss at December 31, 1995 was $889,767. This loss may
be carried forward to offset future capital gains with $69,836 expiring in 2001,
$44,589 expiring in 2002, and $775,342 expiring in 2003.
At December 31, 1995, the aggregate gross unrealized appreciation and
depreciation of portfolio securities was as follows:
Unrealized appreciation $2,180,005
Unrealized depreciation ( 663)
----------
Net unrealized appreciation $2,179,342
----------
----------
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 $12,830 for the
year ended December 31, 1995.
31
<PAGE>
NOTE 6. SELECTED FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value,
beginning of year $ 8.70 $ 9.89 $ 9.57 $ 9.65 $ 9.23
------ ------ ------ ------ ------
Income from investment operations:
Net investment income .60 .62 .64 .66 .76
Net realized and unrealized
gain (loss) on investments .96 ( 1.21) .32 ( .06) .44
------ ------ ------ ------ ------
Total from investment
operations 1.56 ( .59) .96 .60 1.20
------ ------ ------ ------ ------
Less dividends from net
investment income ( .60) ( .60) ( .64) ( .68) ( .78)
------ ------ ------ ------ ------
Net asset value, end of year $ 9.66 $ 8.70 $ 9.89 $ 9.57 $ 9.65
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (WITHOUT DEDUCTION OF SALES LOAD) 18.39% ( 5.97)% 10.24% 6.53% 13.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000 omitted) $22,290 $21,032 $23,632 $21,359 $19,313
Ratios to average net assets:
Expenses .96% .85% .86% .93% .93%
Net investment income 6.40 8.32 6.46 6.99 8.18
Portfolio turnover rate 33.91 41.01 21.34 25.53 23.65
</TABLE>
32
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
CHANGES IN INVESTMENT POSITIONS
For the Period October 1, 1995 to December 31, 1995
ADDITIONS ELIMINATIONS
None None
33
<PAGE>
JEFFERSON-PILOT INVESTMENT GRADE BOND FUND, INC.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Jefferson-Pilot Investment Grade Bond Fund, Inc.
We have audited the accompanying statement of assets and liabilities and the
statement of investments of Jefferson-Pilot Investment Grade Bond Fund, Inc. as
of December 31, 1995, 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 selected financial information for each of the five
years in the period then ended. These financial statements and selected
financial information are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
selected financial information 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 selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian. 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 selected financial
information referred to above present fairly, in all material respects, the
financial position of Jefferson-Pilot Investment Grade Bond Fund, Inc. as of
December 31,1995, the results of its operations, the changes in its net assets,
and the selected financial information for the periods indicated, in conformity
with generally accepted accounting principles.
McGladrey & Pullen, LLP
/s/McGladrey & Pullen, LLP
New York, New York
January 11, 1996
34
<PAGE>
35
<PAGE>
[LOGO]
FAMILY
OF FUNDS
--------------------------------
Jefferson-Pilot
Capital Appreciation Fund
Investment Grade Bond Fund
--------------------------------
Annual Report
December 31, 1995
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.
