<PAGE>
JP 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 INVESTMENT ADVISER AND TRANSFER AGENT
E. J. YELTON, Ph.D., DIRECTOR JP Investment Management Company
PRESIDENT, AND TREASURER 100 North Greene Street
Greensboro, North Carolina 27401
JOHN C. INGRAM, CFA, DIRECTOR
J. LEE LLOYD, DIRECTOR CUSTODIAN
Investors Fiduciary Trust Company
RICHARD W. McENALLY, CFA, DIRECTOR 127 West Tenth Street
Kansas City, Missouri 64105
WILLIAM E. MORAN, DIRECTOR
W. HARDEE MILLS, CFA, VICE PRESIDENT
J. GREGORY POOLE, SECRETARY
GREGORY D. WALKER, CFA,
PORTFOLIO MANAGER
JP CAPITAL APPRECIATION FUND, INC.
100 North Greene Street
P.O. Box 21008
Greensboro, North Carolina 27420
<PAGE>
INVESTMENT ACTIVITY
On June 30, 1996, the net asset value of your Fund was $19.44. Dividends
totaling $.184 per share from net investment income and $1.172 per share from
capital gains have been paid year to date.
On a total return basis for the first half of the year, the JP Capital
Appreciation Fund increased 10.23%, while the S&P 500 increased 10.10%. Through
June 30, 1996, JP Capital Appreciation Fund's historical compound annual rate of
total return is shown below for the following holding periods:
1 Year -- 25.58%
3 Years -- 14.36%
5 Years -- 13.75%
10 Years -- 11.07%
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
2
<PAGE>
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.
PORTFOLIO DIVERSIFICATION
SECTOR % OF TOTAL NET ASSETS
Credit Cyclicals 0.00
Financial 15.90
Consumer Growth Staples 3.83
Consumer Staples 16.24
Consumer Cyclicals 4.04
Capital Goods -- Technology 11.11
Capital Goods 3.85
Energy 8.58
Basic Industries 3.66
Transportation 1.27
Utilities 11.94
Conglomerates .98
Cash 18.60
Your continued support and interest in the JP Capital Appreciation Fund are
appreciated, and we welcome any questions.
JP Capital Appreciation Fund, Inc.
/s/ E.J. Yelton
President
July 29, 1996
3
<PAGE>
TEN LARGEST HOLDINGS
June 30, 1996
COMPANY MARKET VALUE PERCENT OF FUND
General Electric Company $ 2,162,500 2.6
Tellabs, Inc. 1,969,125 2.4
Citicorp 1,702,075 2.1
Countrywide Credit Industries, Inc. 1,683,000 2.1
Monsanto Company 1,673,750 2.0
Royal Dutch Petroleum Company 1,614,375 2.0
Atlantic Richfield Company 1,611,600 2.0
Xerox Corporation 1,605,000 2.0
Schering-Plough Corporation 1,593,850 1.9
Vencor, Inc. 1,464,000 1.8
----------- ----
$ 17,079,275 20.9
4
<PAGE>
STATEMENT OF INVESTMENTS
June 30, 1996 (Unaudited)
NUMBER OF SHARES
COMMON STOCKS -- 79.76% OR PRINCIPAL AMOUNT VALUE
Aerospace/Defense -- .96%
Lockheed-Martin Corporation 9,300 $ 781,200
Banks -- 5.47%
Bank of New York Company, Inc. 19,400 994,250
Chase Manhattan Corporation 10,400 734,500
Citicorp 20,600 1,702,075
Mellon Bank Corporation 18,000 1,026,000
Biotechnology -- .25%
Alliance Pharmaceutical Corporation 12,100 198,138*
Broadcasting -- .30%
US West Media Group, Inc. 13,400 244,550*
Chemicals -- Major -- 3.38%
Imperial Chemical Industries, Inc. 22,000 1,080,750
Monsanto Company 51,500 1,673,750
Computer Software -- 3.10%
SunGard Data Systems, Inc. 23,000 920,000*
Xerox Corporation 30,000 1,605,000
Conglomerates -- .98%
AlliedSignal, Inc. 14,000 799,750
Drugs -- 5.74%
Lilly (Eli) & Company 20,090 1,305,850
Merck & Company, Inc. 9,000 581,625
Pharmacia & Upjohn, Inc. 27,000 1,198,125
Schering-Plough Corporation 25,400 1,593,850
Electric Equipment -- Major -- 2.65%
General Electric Company 25,000 2,162,500
5
<PAGE>
Electronics -- Instrument -- .97%
Varian Associates, Inc. 15,300 791,775
Electronics -- Semi -- .55%
Atmel Corporation 15,000 451,875*
Foods -- 1.79%
Sara Lee Corporation 45,000 1,456,875
Hospital -- Management -- 3.54%
Columbia/HCA Healthcare Corporation 26,600 1,419,775
Vencor, Inc. 48,000 1,464,000*
Hospital -- Supplies -- 3.64%
Baxter International, Inc. 10,000 472,500
Guidant Corporation 9,916 488,363
Johnson & Johnson 27,000 1,336,500
St. Jude Medical, Inc. 20,000 665,000*
Insurance -- Multi-Line -- 5.40%
AFLAC, Inc. 26,400 788,700
Aetna Life & Casualty Company 20,000 1,430,000
Allstate Corporation 20,500 935,312
CIGNA Corporation 10,600 1,249,475
Insurance -- Property & Casualty -- .96%
Everest Reinsurance Holdings, Inc. 25,500 659,813
IPC Holdings, Ltd. 6,000 120,750
Merchandising -- Department -- 1.91%
Consolidated Stores Corporation 20,000 735,000*
Federated Department Stores, Inc. 24,000 819,000
Merchandising -- Drugs -- 1.34%
Eckerd Corporation 33,000 746,625*
Thrifty Payless Holdings, Inc. 20,000 345,000*
Merchandising -- Special -- 1.72%
Borders Group, Inc. 43,500 1,402,875*
6
<PAGE>
Miscellaneous Consumer Cyclical -- .43%
Kelly Services, Inc. 12,000 351,000
Miscellaneous Financial -- 4.12%
Countrywide Credit Industries, Inc. 68,000 1,683,000
Federal Home Loan Mortgage Corporation 8,000 684,000
First USA, Inc. 18,000 990,000
Natural Gas -- Diverified -- .58%
Questar Corporation 14,000 476,000
Oils -- Integrated Domestic -- 4.38%
Amerada Hess Corporation 15,500 831,187
Amoco Corporation 15,600 1,129,050
Atlantic Richfield Company 13,600 1,611,600
Oils -- Integrated International -- 3.65%
Mobil Corporation 12,100 1,356,713
Royal Dutch Petroleum Company 10,500 1,614,375
Paper & Forest Products -- .29%
Sonoco Products Company 8,400 238,350
Pollution Control -- 1.21%
WMX Technologies, Inc. 30,000 982,500
Railroads -- .83%
CSX Corporation 14,000 675,500
Telecommunications -- 5.40%
DSC Communications Corporation 25,000 750,000*
Loral Space & Communications, Ltd. 16,000 218,000*
Lucent Technologies, Inc. 33,000 1,249,875*
Tellabs, Inc. 29,500 1,969,125*
360 Communications Company 8,833 211,992*
Tobacco -- 1.79%
Philip Morris Companies, Inc. 14,000 1,456,000
7
<PAGE>
Transportation -- Miscellaneous -- .44%
Federal Express Corporation 4,400 360,800*
Utilities -- Communications -- 5.59%
Bell Atlantic Corporation 6,300 401,625
BellSouth Corporation 12,600 533,925
Century Telephone Enterprises, Inc. 14,000 446,250
Frontier Corporation 43,000 1,316,875
SBC Communications, Inc. 6,400 315,200
Sprint Corporation 26,500 1,113,000
US West Communications Group, Inc. 13,400 427,125
Utilities -- Electric -- 6.10%
American Electric Power Company, Inc. 11,550 492,319
CMS Energy Corporation 16,200 500,175
Carolina Power & Light Company 6,700 254,600
CINergy Corporation 22,800 729,600
Consolidated Edison Company of NY, Inc. 9,900 289,575
Dominion Resources, Inc. 7,650 306,000
Entergy Corporation 19,800 561,825
FPL Group, Inc. 13,600 625,600
Illinova Corporation 15,900 457,125
Northeast Utilities 14,500 193,937
PECO Energy Company 8,300 215,800
Public Service Enterprise Group, Inc. 12,550 343,556
Utilities -- Water -- .30%
American Water Works Company, Inc. 6,000 241,500
-----------
Total Common Stocks (Cost -- $49,158,263+) 64,985,805
-----------
8
<PAGE>
PREFERRED STOCKS -- 1.92%
Telecommunications -- .16%
TCI Communications, Inc., $2.125 Cum. Pfd. Ser. A 3,000 132,375
Tobacco -- 1.76%
RJR Nabisco Holdings, Inc., Pfd. C. 220,000 1,430,000
-----------
Total Preferred Stocks (Cost -- $1,523,200+) 1,562,375
-----------
SHORT-TERM SECURITIES -- 18.32%
American Express Credit Corporation, 7/03/96 $ 500,000 499,780
American Express Credit Corporation, 7/03/96 2,000,000 1,999,123
Chevron Oil Finance Company, 7/08/96 2,750,000 2,746,749
Exxon Asset Management Company, 7/10/96 3,000,000 2,995,625
Ford Motor Credit Company, 7/17/96 2,500,000 2,493,672
General Electric Capital Corporation, 7/05/96 1,500,000 1,498,911
Hershey Foods Corporation, 7/12/96 2,700,000 2,695,185
-----------
Total Short-Term Securities (Cost -- $14,929,045+) 14,929,045
-----------
Total Investments (Cost -- $65,610,508+) $81,477,225
-----------
-----------
*Non-income producing.
+Aggregate cost for Federal income tax purposes is the same.
See Notes to Financial Statements.
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS
Investments in securities at value (cost $65,610,508) $ 81,477,225
Cash 446,968
Receivables:
Capital shares sold 45,793
Dividends 67,442
------------
Total Assets 82,037,428
------------
LIABILITIES
Payables:
Securities purchased 227,597
Accrued expenses 58,331
------------
Total Liabilities 285,928
------------
NET ASSETS
Net Assets, equivalent to $19.44 per share on
4,205,010 shares of capital stock outstanding (Note 2) $ 81,751,500
------------
------------
See Notes to Financial Statements.
10
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
Investment Income:
Interest $ 286,477
Dividends 778,721
------------
Total income 1,065,198
------------
Expenses:
Investment Adviser's fee (Note 3) 190,021
Custodian and Transfer Agent fees 14,182
Directors' fees 2,490
Professional fees 12,900
Shareholder accounting services (Note 3) 9,150
Other 663
------------
Total expenses 229,406
Less expenses offset (Note 5) ( 8,982)
------------
Net expenses 220,424
------------
Investment income -- net 844,774
------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments 5,612,860
Unrealized appreciation of investments for the period 1,023,490
------------
Net gain on investments 6,636,350
------------
Net increase in net assets from operations $ 7,481,124
------------
------------
See Notes to Financial Statements.
11
<PAGE>
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 $ 844,774 $ 1,349,332
Net realized gain on investments 5,612,860 4,429,313
Unrealized appreciation
for the period 1,023,490 12,830,999
----------- -----------
Net increase in net assets
from operations 7,481,124 18,609,644
Dividends paid to shareholders from:
Investment income -- net ( 696,526) ( 1,318,791)
Net realized gain on investments ( 4,436,566) ( 7,845,335)
Capital share transactions (Note 2) 7,801,969 3,796,147
----------- -----------
Total increase 10,150,001 13,241,665
Net Assets
Beginning of period 71,601,499 58,359,834
----------- -----------
End of period (including undistributed net
investment income of $841,453
and $693,205, respectively) $81,751,500 $71,601,499
----------- -----------
----------- -----------
See Notes to Financial Statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES:
JP 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 $59,440,744. Transactions in capital
stock were as follows:
13
<PAGE>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- -----------------
SHARES AMOUNT SHARES AMOUNT
------- ----------- ------- -----------
Sold 286,099 $ 5,352,786 425,888 $ 7,340,776
Issued on reinvestment
of dividends 283,884 5,112,753 620,704 9,124,856
Redeemed (141,747) ( 2,663,570) (749,300) (12,669,485)
------- ----------- ------- -----------
Net increase 428,236 $ 7,801,969 297,292 $ 3,796,147
------- ----------- ------- -----------
------- ----------- ------- -----------
NOTE 3. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
JP Investment Management Company received investment advisory fees of $190,021
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 $9,150 of fees paid to JP Investment Management Company under
an Agency Agreement to provide shareholder accounting services.
NOTE 4. INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities, excluding short-term securities,
were $19,729,765 and $24,436,992, respectively.
Realized gains and losses are reported on an identified cost basis. Accumulated
undistributed net realized gain at June 30, 1996 was $5,602,586.
At June 30, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities was as follows:
Unrealized appreciation $16,664,050
Unrealized depreciation ( 797,333)
-----------
Net unrealized appreciation $15,866,717
-----------
-----------
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 $8,982 for the
period ended June 30, 1996.
14
<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 PERFROMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period $18.96 $16.77 $18.19 $18.17 $17.69 $13.76
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income .20 .36 .34 .28 .29 .37
Net realized and unrealized
gain (loss) on investments 1.63 4.45 ( 1.10) 1.26 .75 3.91
------- ------- ------- ------- ------- -------
Total from investment operations 1.83 4.81 ( .76) 1.54 1.04 4.28
------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ( .18) ( .36) ( .17) ( .27) ( .33) ( .35)
Distributions from net realized gains ( 1.17) ( 2.26) ( .49) ( 1.25) ( .23) --
------- ------- ------- ------- ------- -------
Total distributions ( 1.35) ( 2.62) ( .66) ( 1.52) ( .56) ( .35)
------- ------- ------- ------- ------- -------
Net asset value, end of period $19.44 $18.96 $16.77 $18.19 $18.17 $17.69
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
TOTAL RETURN 10.23% 33.39% ( 4.34)% 9.25% 6.16% 31.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $81,752 $71,601 $58,360 $56,625 $45,480 $37,319
Ratios to average net assets:
Expenses .60%+^ .62%^ .58% .60% .63% .62%
Net investment income 2.22+ 2.07 2.03 1.55 1.68 2.37
Portfolio turnover rate 30.32 64.13 126.70 23.93 48.72 36.71
</TABLE>
+Annualized.
^Pursuant to new regulations, ratio includes expenses paid by expense offset
arrangements.
15
<PAGE>
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 INVESTMENT ADVISER AND TRANSFER AGENT
E. J. YELTON, Ph.D., DIRECTOR, JP Investment Management Company
PRESIDENT, AND TREASURER 100 North Greene Street
Greensboro, North Carolina 27401
JOHN C. INGRAM, CFA, DIRECTOR
CUSTODIAN
J. LEE LLOYD, DIRECTOR Investors Fiduciary Trust Company
127 West Tenth Street
RICHARD W. McENALLY, CFA, DIRECTOR Kansas City, Missouri 64105
WILLIAM E. MORAN, DIRECTOR
W. HARDEE MILLS, CFA, VICE PRESIDENT
J. GREGORY POOLE, SECRETARY
H. LUSBY BROWN, CFA, PORTFOLIO MANAGER
JP INVESTMENT GRADE BOND
FUND, INC.
100 North Greene Street
P.O. Box 21008
Greensboro, North Carolina 27420
17
<PAGE>
INVESTMENT ACTIVITY
On June 30, 1996, the net asset value of your Fund was $10.88. The Fund paid
dividends of $.175 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 (1.78%)
1 Year -- 4.50%
3 Years -- 4.23%
5 Years -- 7.29%
10 Years -- 7.53%
The bond market experienced these negative returns due to fears that the economy
was growing too rapidly causing 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 that 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.
18
<PAGE>
PORTFOLIO DIVERSIFICATION
SECTOR % OF TOTAL NET ASSETS
U. S. Government 39.95
Mortgage-Backed Securities 9.01
Industrials 16.34
Financials 10.43
Electric Utilities 3.43
Telephone Utilities 4.62
Gas Utilities 8.09
Cash Equivalents 8.13
Your continued support and interest in the JP Investment Grade Bond Fund are
appreciated, and we welcome any questions.
JP Investment Grade Bond Fund, Inc.
/s/E.J. Yelton
President
July 29, 1996
19
<PAGE>
STATEMENT OF INVESTMENTS
June 30, 1996 (Unaudited)
FACE
RATINGS* AMOUNT ISSUE VALUE
BONDS -- 94.26%
U.S. GOVERNMENT -- 40.99%
$ 500,000 U.S. Treasury Notes
5 1/8% due 11/30/98 $ 487,890
2,500,000 U.S. Treasury Notes
5 7/8% due 4/30/98 2,490,225
1,500,000 U.S. Treasury Notes
6 3/8% due 3/31/01 1,493,430
500,000 U.S. Treasury Notes
6 3/8% due 8/15/02 496,015
500,000 U.S. Treasury Notes
6 1/2% due 4/30/99 502,655
1,000,000 U.S. Treasury Notes
6 1/2% due 5/15/05 986,870
500,000 U.S. Treasury Notes
6 7/8% due 3/31/00 507,265
1,500,000 U.S. Treasury Bonds
7 1/8% due 2/15/23 1,516,170
500,000 U.S. Treasury Bonds
8 1/2% due 5/15/97 511,485
500,000 U.S. Treasury Notes
8 1/2% due 7/15/97 513,045
500,000 U.S. Treasury Bonds
8 7/8% due 8/15/17 600,310
20
<PAGE>
500,000 U.S. Treasury Bonds
10 3/8% due 11/15/09 611,485
1,000,000 U.S. Treasury Bonds
12 3/4% due 11/15/10 1,404,220
MORTGAGE-BACKED SECURITIES -- 9.24%
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
INDUSTRIALS -- 27.47%
FINANCE -- 13.20%
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 1,000,000 Morgan Stanley Group, Inc.
7% Senior Notes due 10/01/13 942,040
A2 750,000 Smith Barney Holdings, Inc.
7 1/2% Notes due 5/01/02 767,070
A1 500,000 SunTrust Banks, Inc.
8 7/8% Notes due 2/01/98 518,155
FOODS -- 2.46%
Aa2 750,000 Archer-Daniels-Midland Company
7 1/8% Debs. due 3/01/13 727,822
MACHINERY -- INDUSTRIAL/SPECIALTY -- 1.77%
A2 500,000 Johnson Controls, Inc.
7.70% Debs. due 3/01/15 523,435
21
<PAGE>
POLLUTION CONTROL -- 1.72%
Baa2 500,000 Laidlaw, Inc.
7.70% Debs. due 8/15/02 508,850
RAILROADS -- 4.84%
Baa2 750,000 Kansas City Southern Industries, Inc.
6 5/8% Senior Notes due 3/01/05 705,660
A1 750,000 United States Leasing International, Inc.
6 5/8% Senior Notes due 5/15/03 725,108
TELECOMMUNICATIONS -- 1.69%
A2 500,000 Northern Telecom, Limited
6 7/8% Senior Notes due 10/01/02 498,895
TOBACCO -- 1.79%
A2 500,000 Philip Morris Companies, Inc.
8 1/4% Senior Notes due 10/15/03 527,680
UTILITIES -- 16.56%
UTILITIES -- ELECTRIC -- 3.52%
A2 500,000 Midwest Power Systems, Inc.
7% 1st Mtge. due 2/15/05 488,425
A1 500,000 South Carolina Electric & Gas Company
9% 1st & Ref. Mtge. due 7/15/06 553,475
UTILITIES -- GAS -- 8.30%
A1 1,000,000 Consolidated Natural Gas Company
6 5/8% Debs. due 12/01/13 894,370
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
22
<PAGE>
Aa2 500,000 Washington Gas Light Company
8 3/4% 1st Mtge. due 7/01/19 519,435
UTILITIES -- TELEPHONE -- 4.74%
A2 1,000,000 Alltel Corporation
6 1/2% Debs. due 11/01/13 899,020
A3 500,000 United Telephone Company of
Pennsylvania 7 3/8% 1st Mtge.
Ser. Y due 12/01/02 501,445
-----------
Total Bonds (Cost -- $27,422,632+) 27,873,295
-----------
SHORT-TERM SECURITIES -- 5.74%
A1 700,000 Ford Motor Credit Company, 7/01/96 699,899
A1 1,000,000 General Electric Capital
Corporation, 7/10/96 998,508
-----------
Total Short-Term Securities
(Cost -- $1,698,407+) 1,698,407
-----------
Total Investments
(Cost -- $29,121,039+) $29,571,702
-----------
-----------
*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.
23
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS
Investment in securities at value (cost $29,121,039) $ 29,571,702
Cash 312,275
Receivables:
Interest 477,646
Capital shares sold 10,822
------------
Total Assets 30,372,445
------------
LIABILITIES
Accrued expenses 33,950
------------
Total Liabilities 33,950
------------
NET ASSETS
Net Assets, equivalent to $10.88 per share on
2,788,539 shares of capital stock outstanding (Note 2) $ 30,338,495
------------
------------
See Notes to Financial Statements.
24
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
Investment Income:
Interest $ 1,007,907
------------
Expenses:
Investment Adviser's fee (Note 3) 72,939
Custodian and Transfer Agent fees 8,267
Directors' fees 2,490
Professional fees 10,500
Shareholder accounting services (Note 3) 5,460
Other 3,405
------------
Total expenses 103,061
Less expenses offet (Note 5) ( 8,240)
------------
Net expenses 94,821
------------
Investment income -- net 913,086
------------
Realized and Unrealized Loss on Investments:
Net realized loss on investments ( 1,750)
Unrealized depreciation of investments for the period ( 1,446,554)
------------
Net loss on investments ( 1,448,304)
------------
Net decrease in net assets from operations ($ 535,218)
------------
------------
See Notes to Financial Statements.
25
<PAGE>
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 $ 913,086 $ 1,763,739
Net realized loss on investments (1,750) ( 133,355)
Unrealized appreciation (depreciation)
for the period ( 1,446,554) 3,044,389
----------- -----------
Net increase (decrease) in net
assets from operations ( 535,218) 4,674,773
Dividends paid to shareholders from:
Investment income -- net ( 469,416) ( 1,787,395)
Capital share transactions (Note 2) 3,206,687 ( 28,492)
----------- -----------
Total increase 2,202,053 2,858,886
Net Assets
Beginning of period 28,136,442 25,277,556
----------- -----------
End of period (including undistributed net
investment income of $480,307
and $36,637, respectively) $30,338,495 $28,136,442
----------- -----------
----------- -----------
See Notes to Financial Statements.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES:
JP 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 $30,187,092. Transactions in capital
stock were as follows:
27
<PAGE>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- -----------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
Sold 401,902 $4,444,769 468,268 $5,156,966
Issued on reinvestment
of dividends 39,391 427,945 148,693 1,613,218
Redeemed (151,840) (1,666,027) (624,497) (6,798,676)
------- ---------- ------- ----------
Net increase (decrease) 289,453 $3,206,687 (7,536) ($28,492)
------- ---------- ------- ----------
------- ---------- ------- ----------
NOTE 3. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
JP Investment Management Company received investment advisory fees of $72,939
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 $5,460 of fees paid to JP Investment Management Company under
an Agency Agreement to provide shareholder accounting services.
NOTE 4. INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities, excluding short-term securities,
were $6,485,781 and $2,250,000, respectively.
Realized gains and losses are reported on an identified cost basis. Accumulated
net realized loss at June 30, 1996 was $779,567. This loss is available to
offset future realized gains.
At June 30, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities was as follows:
Unrealized appreciation $823,321
Unrealized depreciation ( 372,658)
----------
Net unrealized appreciation $450,663
----------
----------
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 $8,240 for the
period ended June 30, 1996.
28
<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 $11.26 $10.08 $11.49 $11.19 $11.24 $10.61
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income .33 .73 .73 .74 .74 .85
Net realized and unrealized
gain (loss) on investments ( .54) 1.19 ( 1.40) .36 ( .03) .62
------ ------ ------ ------ ------ ------
Total from investment operations ( .21) 1.92 ( .67) 1.10 .71 1.47
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income ( .17) ( .74) ( .71) ( .73) ( .76) ( .84)
Distributions from net realized gains -- -- ( .03) ( .07) -- --
------ ------ ------ ------ ------ ------
Total distributions ( .17) ( .74) ( .74) ( .80) ( .76) ( .84)
------ ------ ------ ------ ------ ------
Net asset value, end of period $10.88 $11.26 $10.08 $11.49 $11.19 $11.24
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN ( 1.78)% 19.44% ( 5.92)% 10.10% 6.67% 14.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $30,388 $28,136 $25,278 $29,997 $23,622 $19,134
Ratios to average net assets:
Expenses .71%+^ .70%^ .65% .59% .67% .72%
Net investment income 6.26+ 6.66 6.80 6.33 6.65 7.88
Portfolio turnover rate 9.12 26.16 28.93 19.88 18.05 7.23
</TABLE>
+Annualized.
^Pursuant to new regulations, ratio includes expenses paid by expense offset
arrangements.
29
<PAGE>
CHANGES IN INVESTMENT POSITIONS
For the Period January 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% S. F. Debs. due 5/15/96
U.S. Treasury U.S. Treasury
6 3/8% Notes due 3/31/01 7 1/2% Notes due 1/31/96
U.S. Treasury U.S. Treasury
6 1/2% Notes due 5/15/05 9 3/8% Notes due 4/15/96
U.S. Treasury
7 1/8% Bonds due 2/15/23
<PAGE>
SEMI-ANNUAL REPORT
JUNE 30, 1996
JP CAPITAL
APPRECIATION FUND
JP INVESTMENT
GRADE BOND FUND
