UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4204
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PC&J Preservation Fund
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(Exact name of registrant as specified in charter)
120 West Third Street, Suite 300, Dayton, OH 45402
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(Address of principal executive offices) (Zip code)
PC&J Service Corp., 120 West Third Street, Suite 300, Dayton, OH 45402
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(Name and address of agent for service)
Registrant's telephone number, including area code: 937-223-0600
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Date of fiscal year end: 12-31
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Date of reporting period: 12-31-2002
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
PC&J PRESERVATION FUND
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ANNUAL REVIEW
Unaudited
INTRODUCTION
The PC&J Preservation Fund is a registered investment company under the
Investment Company Act of 1940. The enclosed 2002 Annual Report is for your
information and is provided to you in compliance with ongoing Securities and
Exchange Commission regulations. Please give us a call if you have any
questions.
MANAGEMENT REVIEW AND ANALYSIS
We began 2002 with the expectation that after eleven rate cuts by the Federal
Reserve and a positively sloped yield curve that in the past has produced an
economic recovery, we might see rising interest rates later in the year.
Overcapacity in industrial America, widespread corporate corruption, and
worsening geo-political tensions produced cautious consumers and nervous
decision-makers. The economy started the year on a positive note, but succumbed
to the endless rounds of negative news. Interest rates dropped by 50 basis
points. So, instead of higher yields, we saw yields fall to levels last seen
over 40 years ago!
Three month treasuries fell from 1.7 percent to 1.1 percent and thirty-year
treasuries went from 5.5 percent to 4.8 percent. The drop in interest rates and
rise in bond prices produced an 11 percent return for the Lehman Index.
AVERAGE ANNUAL TOTAL RETURNS
1 Yr. 5 Yrs 10 Yrs
Preservation Fund . . 5.98% 5.64% 5.88%
Lehman Index. . . . . 11.04% 7.64% 7.47%
Treasury Bills (3mth) 1.58% 4.13% 4.42%
Against this backdrop, short-to-intermediate term bonds provided attractive
returns. The PC&J Preservation Fund provided a 6.0 percent return, besting the
1.6 percent return of the short-term treasury alternative. Believing rates
might rise in 2002, the Fund maintained a conservative duration of approximately
two-years. This hurt the Fund's return relative to the Lehman Index with its
longer duration.
We're still waiting for that sustained recovery, needing a revival in
manufacturing and business capital spending to lead the way. The question is
will it occur fast enough in light of a slowdown in the growth of consumer
spending. We believe we are firing enough ammo at the problem with an
accommodative Fed, expansionary fiscal policies and a congressional
predisposition to approve another tax package. We remain hopeful.
When this occurs, interest rates will stop falling and could quickly move
higher. As interest rates rise, bond prices will fall. In an attempt to
preserve the Fund's value, we remain committed to a short duration and have been
investing in a new debt structure called a step-up bond. The coupon rate instead
of being fixed at time of issuance actually rises or "steps up" over the life of
the bond. Therefore, a step-up bond's price is better able to withstand an
increase in interest rates.
Looking out over a longer term timeframe, the strategy of maintaining a lower
risk posture than the Lehman Index, through a lower average duration, has led to
returns that are more consistent over time. We believe this is appropriate for
our preservation of capital objective. While the credit markets have
experienced three interest rate cyles in the last ten years, they continue to
offer returns that exceed the conservative Treasury Bill alternative.
PRESERVATION LEHMAN G/C TREASURY B
GROWTH GROWTH GROWTH
1992 10,000 10,000 10,000
1993 10,850 11,070 10,300
1994 10,590 10,694 10,702
1995 12,199 12,651 11,344
1996 12,535 12,992 11,946
1997 13,460 14,226 12,583
1998 14,584 15,649 13,225
1999 14,391 15,258 13,836
2000 15,737 17,066 14,668
2001 16,720 18,516 15,164
2002 17,712 20,561 15,404
TOTAL RETURNS AND THE GROWTH OF A $10,000 INVESTMENT ARE BASED ON PAST
PERFORMANCE AND ARE NOT AN INDICATION OF FUTURE PERFORMANCE. THE VALUE OF YOUR
SHARES WILL FLUCTUATE AND MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST AT
THE TIME OF REDEMPTION. THE RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES
THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND
SHARES.
PC&J PRESERVATION FUND
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SCHEDULE OF INVESTMENTS
DECEMBER 31, 2002
PERCENT YEARS
OF NET TO PRINCIPAL MARKET
SECURITY ASSETS MATURITY AMOUNT VALUE
- --------------------------------------------- -------- -------- --------- ----------
TAXABLE MUNICIPAL OBLIGATIONS:
Maturity of less than 1 year: . . . . . . . . 2.7%
Ohio Taxable Development Assistance
Bonds, 6.820%, due 04-01-03 .25 500,000 $ 505,890
Maturity of up to 5 years:. . . . . . . . . . 7.6
Philadelphia, PA Industrial Development
Bonds, 6.488%, due 06-15-04 1.50 266,303 279,158
Rome, NY Hsg. Dev. Corp. Taxable Bonds,
6.500%, due 01-01-05 2.00 95,000 96,395
Cleveland, OH Airport Taxable Bonds,
6.490%, due 01-01-06 3.00 365,000 396,474
Chicago Heights, IL Taxable Bonds,
7.350%, due 12-01-07 5.00 170,000 197,735
Minneapolis, MN Community Dev.,
10.400%, due 12-01-07 5.00 435,000 449,190
1,418,952
Maturity of 5 - 10 years: . . . . . . . . . . 17.6
Oklahoma City, OK Airport Taxable Bonds,
6.950%, due 07-01-08 5.50 475,000 501,457
Dayton, OH Taxable Housing Improvement
Bonds, 6.250%, due 11-01-08 5.75 140,000 143,769
Texas State Water Finl. Assistance Taxable
Bonds, 6.550%, due 08-01-09 6.50 400,000 408,208
Dayton, OH Econ. Dev. Bonds,
6.380%, due 12-01-09 7.00 500,000 565,140
Baltimore, MD Taxable Bonds,
8.400%, due 07-01-11 8.50 475,000 484,500
Pima Cnty, AZ Indl. Rev. Taxable Bonds,
9.000%, due 04-01-12 9.25 285,000 290,700
Mississippi State GO Taxable Bonds,
6.750%, due 11-01-12 9.75 300,000 319,518
Denver, CO School Dist. Taxable Bonds,
6.940%, due 12-15-12 10.00 500,000 569,850
3,283,142
See notes to financial statements.
PC&J PRESERVATION FUND
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SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 2002
PERCENT YEARS
OF NET TO PRINCIPAL MARKET
SECURITY ASSETS MATURITY AMOUNT VALUE
- -------------------------------------------- -------- -------- --------- ----------
TAXABLE MUNICIPAL OBLIGATIONS (Continued):
Maturity of 10 - 20 years: . . . . . . . . . 17.5%
St Cloud, MN Taxable Bonds,
6.700%, due 02-01-13 10.00 70,000 $ 70,000
Dayton, OH Taxable Bonds,
6.500%, due 11-01-13 10.75 250,000 257,240
Sacramento, CA Redev. Agency Taxable
Bonds, 6.375%, due 11-01-13 10.75 200,000 220,222
Jackson Cnty., MS GO Taxable Bonds,
8.250%, due 03-01-14 11.25 135,000 149,541
Baltimore, MD Economic Dev Lease,
9.500%, due 08-01-14 11.50 625,000 659,044
Jackson Cnty., MS GO Taxable Bonds,
8.250%, due 03-01-15 12.25 210,000 232,619
Ohio State Taxable Bonds,
7.600%, due 10-01-16 13.75 750,000 851,760
Palmdale, CA Redev. Taxable Bonds,
7.900%, due 09-01-17 14.75 225,000 264,530
Connecticut St. Dev. Auth. Rev.
Bonds, 8.750%, due 10-15-19 16.75 500,000 557,190
3,262,146
Maturity of 20 - 30 years: . . . . . . . . . 3.1
Broward Cnty, FL Professional Sports Fac.,
8.110%, due 09-01-28 25.75 500,000 571,415
TOTAL TAXABLE MUNICIPAL OBLIGATIONS
(Cost $8,707,836) . . . . . . . . . . . . . 48.5 9,041,545
See notes to financial statements.
PC&J PRESERVATION FUND
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SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 2002
PERCENT YEARS
OF NET TO PRINCIPAL MARKET
SECURITY ASSETS MATURITY AMOUNT VALUE
- --------------------------------------- -------- -------- --------- ----------
U.S. CORPORATE OBLIGATIONS:
Maturity of less than 1 year: . . . . . 6.8%
First Chicago Corp. Notes,
7.625%, due 01-15-03 .25 500,000 $ 500,757
Salomon Smith Barney Inc. Notes,
4.000%, due 09-30-03 .75 250,000 250,525
Lehman Brothers Holdings Inc. Notes,
7.250%, due 10-15-03 .75 500,000 521,140
1,272,422
Maturity of 1 - 5 years:. . . . . . . . 2.8
General Motors Corp. Notes,
7.625%, due 06-15-04 1.50 500,000 525,025
Maturity of 10 - 30 years:. . . . . . . 2.8
Texaco Capital Inc. Notes,
8.000%, due 12-29-22 20.00 500,000 528,369
TOTAL U.S. CORPORATE OBLIGATIONS
(Cost $2,316,580). . . . . . . . . . . 12.4 2,325,816
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS:
Maturity of 1 - 5 years:. . . . . . . . 1.6
Federal National Mortgage Assn. Note,
7.500%, due 07-25-07 4.50 290,000 299,969
See notes to financial statements.
PC&J PRESERVATION FUND
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SCHEDULE OF INVESTMENTS (Concluded)
DECEMBER 31, 2002
PERCENT YEARS
OF NET TO PRINCIPAL MARKET
SECURITY ASSETS MATURITY AMOUNT VALUE
- --------------------------------------- -------- -------- --------- -----------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (Continued):
Maturity of 5 - 10 years: . . . . . . . 13.6%
Federal Home Loan Bks Step-up Note,
4.250%, due 12-21-09 7.00 1,600,000 $ 1,632,000
Federal National Mortgage Assn. Note,
7.550%, due 08-04-10 7.50 400,000 413,375
Federal National Mortgage Assn. Note,
0.000%, due 07-19-11 8.50 500,000 490,700
2,536,075
Maturity of 10 - 20 years:. . . . . . . 18.8
Federal Home Loan Bks Step-up Note,
5.000%, due 10-30-17 14.75 2,000,000 1,996,876
Federal Home Loan Bks Step-up Note,
3.500%, due 12-05-17 15.00 1,500,000 1,500,000
3,496,876
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS
(Cost $6,298,679). . . . . . . . . . . 34.0 6,332,920
TOTAL TAXABLE MUNICIPAL, U.S.
CORPORATE, AND U.S. GOVERNMENT
AND AGENCY OBLIGATIONS
(Cost $17,323,095) . . . . . . . . . . 94.9 17,700,281
SHORT-TERM OBLIGATIONS: . . . . . . . . 3.8
Star Treasury Fund 49,881 49,881
Star Federal Prime Obligations 650,000 650,000
TOTAL SHORT-TERM OBLIGATIONS
(Cost $699,881) 699,881
TOTAL INVESTMENTS
(Cost $18,022,976) (1) . . . . . . . . 98.7% $18,400,162
(1)Represents cost for federal income tax purposes and
differs from market value by net unrealized
appreciation. (See Note D)
See notes to financial statements.
PC&J PRESERVATION FUND
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STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2002
ASSETS:
Investments in securities, at market value
(Cost basis - $18,022,976) (Notes A & D) . . . . . . . . . . . $18,400,162
Receivables - Interest. . . . . . . . . . . . . . . . . . . . . 257,041
Receivables - Fund shares sold. . . . . . . . . . . . . . . . . 30,957
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . 18,688,160
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LIABILITIES:
Payables - Fund shares redeemed . . . . . . . . . . . . . . . . (25,000)
Accrued expenses (Note B) . . . . . . . . . . . . . . . . . . . (15,772)
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . (40,772)
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NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $18,647,388
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SHARES OUTSTANDING (Unlimited authorization - no par value):
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . 1,682,350
Net increase (Note C). . . . . . . . . . . . . . . . . . . . . 3,861
End of year. . . . . . . . . . . . . . . . . . . . . . . . . . 1,686,211
NET ASSET VALUE, offering price and redemption price per share. $ 11.06
NET ASSETS CONSIST OF:
Paid in capital. . . . . . . . . . . . . . . . . . . . . . . . $18,418,445
Net unrealized appreciation. . . . . . . . . . . . . . . . . . 377,186
Undistributed net income . . . . . . . . . . . . . 4,182
Accumulated net realized loss. . . . . . . . . . . (152,425)
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $18,647,388
See notes to financial statements.
PC&J PRESERVATION FUND
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STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
INVESTMENT INCOME - Interest (Note A). . . . . . . . . . . . . . . $1,053,067
EXPENSES (Note B):
Investment advisory fee . . . . . . . . . . . . . . . . . . . . . 93,409
Management fee. . . . . . . . . . . . . . . . . . . . . . . . . . 93,409
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 186,818
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . 866,249
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Notes A & D):
Net realized gain on investments. . . . . . . . . . . . . . . . . 9,957
Change in unrealized appreciation of investments. . . . . . . . . 208,131
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . 218,088
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . . . $1,084,337
See notes to financial statements.
PC&J PRESERVATION FUND
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STATEMENTS OF CHANGES IN NET ASSETS
For The Years Ended December 31,
2002 2001
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INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 866,249 $ 988,941
Net realized gain on investments. . . . . . . . . . . . . . . . . . . . . . . 9,957 22,673
Change in unrealized appreciation of investments. . . . . . . . . . . . . . . 208,131 127,051
Net increase in net assets from operations . . . . . . . . . . . . . . . . . . . . . 1,084,337 1,138,665
DIVIDENDS TO SHAREHOLDERS (Note A):
Dividends from net investment income. . . . . . . . . . . . . . . . . . . . . (889,996) (961,012)
Dividends from net realized gain on investments . . . . . . . . . . . . . . . 0 0
Net decrease in net assets from dividends to shareholders. . . . . . . . . . . . . . (889,996) (961,012)
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS (Note C) 13,071 (576,219)
Total increase (decrease) in net assets. . . . . . . . . . . . . . . . . . . . . . . 207,412 (398,566)
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,439,976 18,838,542
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,647,388 $18,439,976
UNDISTRIBUTED NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . . . $ 4,182 $ 27,929
See notes to financial statements.
PC&J PRESERVATION FUND
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NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2002
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PC&J Preservation Fund (the "Fund") commenced operations on April 30, 1985, as a
"no-load, open-end, diversified" investment company. It is organized as an Ohio
business trust and is registered under the Investment Company Act of 1940. The
investment objective of the Fund is preservation of capital through investment
in fixed-income obligations.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates or assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(1) Security Valuations - Investments in securities for which quotations are
readily available are valued on the basis of quotations from dealers or an
independent pricing service. All other securities are valued using a matrix
methodology, which involves approximating the yield-to-maturity of similar
securities traded on a national exchange. When prices cannot be readily
estimated, securities are valued at fair value as determined in good faith by
the Adviser, subject to review of the Board of Trustees. Short term investments
with maturities of less than 60 days are valued by using the amortized cost
method of valuation.
(2) Federal Income Taxes - The Fund has elected to be treated as a regulated
investment company and intends to comply with the requirements under Subchapter
M of the Internal Revenue Code and to distribute all of its net investment
income and net realized gains on security transactions. Accordingly, no
provision for federal income taxes has been made in the accompanying financial
statements. The Fund has a capital loss carry forward of $152,425, which can be
carried forward through 2008.
(3) Other - Security transactions are accounted for on the date the
securities are purchased or sold, (trade date). All premiums and discounts are
amortized or accreted for financial and tax reporting purposes as required by
AICPA financial accounting standards. Realized gains and losses on sales are
determined using the specific lot method. Dividends to shareholders from net
investment income and net realized capital gains are declared and paid annually.
Interest income is accrued daily. Paydown gains and losses on mortgage and
asset-backed securities are presented as interest income.
B. INVESTMENT ADVISORY AGREEMENT AND MANAGEMENT AGREEMENT
The Fund has an investment advisory agreement with Parker, Carlson &
Johnson, Inc. (the "Adviser"), wherein the Fund pays the Adviser a monthly
advisory fee, accrued daily, based on an annual rate of one-half of one percent
of the daily net assets of the Fund. Investment advisory fees were $93,409 for
the year ended December 31, 2002.
The Fund has a management agreement with PC&J Service Corp., (the "Service
Corp."), which is wholly owned by the shareholders of the Adviser. The Fund pays
Service Corp. for the overall management of the Fund's business affairs,
exclusive of the services provided by the Adviser, and functions as the Fund's
transfer and dividend disbursing agent. Service Corp. pays all expenses of the
Fund (with certain exclusions) and is entitled to a monthly fee, accrued daily,
based on an annual rate of one-half of one percent of the daily net assets of
the Fund. Management fees were $93,409 for the year ended December 31, 2002.
Certain officers and trustees of the Fund are officers and directors, or both,
of the Adviser and of Service Corp.
PC&J PRESERVATION FUND
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NOTES TO FINANCIAL STATEMENTS - (Concluded)
FOR THE YEAR ENDED DECEMBER 31, 2002
For the Year Ended For the Year Ended
C. CAPITAL SHARE TRANSACTIONS December 31, 2002 December 31, 2001
Shares Dollars Shares Dollars
------------------- -------------------- --------- ------------
Subscriptions. . . . . . . . . 142,241 $ 1,598,350 25,218 $ 283,545
Reinvestment of dividends. . . 80,542 889,996 87,683 961,012
222,783 2,488,346 112,901 1,244,557
Redemptions. . . . . . . . . . (218,922) (2,475,275) (162,171) (1,820,776)
Net increase (decrease). . . . 3,861 $ 13,071 (49,270) $ (576,219)
D. INVESTMENT TRANSACTIONS
Securities purchased and sold (excluding short-term obligations and long-term
U.S. Government securities) for the year ended December 31, 2002, aggregated
$2,226,739 and $2,249,478, respectively. Purchases and sales of long-term U.S.
Government Securities for the year ended December 31, 2002, aggregated
$7,801,272 and $7,000,000, respectively.
At December 31, 2002, gross unrealized appreciation on investments was $438,305
and gross unrealized depreciation on investments was $61,119 for a net
unrealized appreciation of $377,186 for
financial reporting and federal income tax purposes.
E. FEDERAL TAX DISCLOSURE
Tax Character of Distributions Paid
For the Year Ended December 31, 2002 For the Year Ended December 31, 2001
------------------------------------ ------------------------------------
Ordinary Income Capital Gains Total Distribution Ordinary Income Capital Gains Total Distribution
- ---------------- -------------- ------------------- ---------------- -------------- -------------------
889,996 . . . . $ 0 $ 889,996 $ 961,012 $ 0 $ 961,012
Tax Basis of Distributable Earnings
As of December 31, 2002
Undistributed Ordinary Income Undistributed Capital Gains Unrealized Appreciation
- ------------------------------ ---------------------------- ------------------------
4,027 . . . . . . . . . . . . $ 0 $ 377,186
The difference between book basis and tax basis undistributed ordinary income is
attributable to the classification of gains (losses) on paydowns.
PC&J PRESERVATION FUND
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FINANCIAL HIGHLIGHTS
Selected Data for Each Share of Capital For The Years Ended December 31,
Stock Outstanding Throughout the Year 2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
NET ASSET VALUE-BEGINNING OF YEAR. . . $ 10.96 $ 10.88 $ 10.54 $ 11.37 $ 11.14
Income from investment operations:
Net investment income . . . . . . . 0.54 0.62 0.63 0.61 0.57
Net realized and unrealized
gain (loss) on securities. . . . 0.11 0.06 0.35 (0.76) 0.36
TOTAL FROM INVESTMENT OPERATIONS . . . 0.65 0.68 0.98 (0.15) 0.93
-------- -------- -------- -------- --------
Less dividends:
From net investment income. . . . . (0.55) (0.60) (0.63) (0.61) (0.57)
From net realized gain
on investments. . . . . . . . . . (0.00) (0.00) (0.00) (0.07) (0.13)
From return of capital (0.01)
TOTAL DIVIDENDS. . . . . . . . . . . . (0.55) (0.60) (0.64) (0.68) (0.70)
-------- -------- -------- -------- --------
NET ASSET VALUE-END OF YEAR. . . . . . $ 11.06 $ 10.96 $ 10.88 $ 10.54 $ 11.37
TOTAL RETURN . . . . . . . . . . . . . 5.98% 6.25% 9.35% (1.32%) 8.35%
RATIOS TO AVERAGE NET ASSETS
Expenses. . . . . . . . . . . . . . 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income . . . . . . . 4.64% 5.31% 5.40% 5.37% 5.25%
Portfolio turnover rate. . . . . . . . 53.92% 46.56% 35.10% 36.25% 44.50%
Net assets at end of year (000's) $18,647 $18,440 $18,839 $19,684 $19,852
See notes to financial statements.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
PC&J Preservation Fund
We have audited the accompanying statement of assets and liabilities of PC&J
Preservation Fund (the "Fund"), including the schedule of investments, as of
December 31, 2002, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of December 31, 2002, by correspondence with the Fund's
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 financial highlights referred to
above present fairly, in all material respects, the financial position of PC&J
Preservation Fund as of December 31, 2002, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
February 4, 2003
Columbus, Ohio
PC&J PRESERVATION FUND
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FUND TRUSTEES DISCLOSURE
The responsibility for management of the Fund is vested in its Board of
Trustees, which, among other things, is empowered by the Fund's Declaration of
Trust to elect officers of the Fund and contract with and provide for the
compensation of agents, consultants and other professionals to assist and advise
in such management.
The following table provides information regarding each Trustee who is not an
"interested person" of the Trust, as defined in the Investment Company Act of
1940.
NUMBER OF PORTFOLIOS
POSITION(S) IN LENGTH OF IN FUND COMPLEX**
NAME, AGE AND ADDRESS FUND COMPLEX** TIME SERVED OVERSEEN BY TRUSTEE
- ------------------------------ -------------- ------------------ --------------------
Donald N. Lorenz
26 Misty Morning Drive
Hilton Head Island, S.C. 29926
Year of Birth: 1935. . . . . . Trustee Trustee since 1987 2
- ------------------------------ -------------- ------------------ --------------------
PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD BY TRUSTEE
- ----------------------------------------------------- -----------------------------------
Retired since December 1998; from December 1980 to
December 1998, Vice President-Finance and Treasurer,
Price Brothers Company (concrete pipe products) . . . None
- ----------------------------------------------------- -----------------------------------
NUMBER OF PORTFOLIOS
POSITION(S) IN LENGTH OF IN FUND COMPLEX**
NAME, AGE AND ADDRESS FUND COMPLEX TIME SERVED OVERSEEN BY TRUSTEE
- --------------------- -------------- ------------------ --------------------
Thomas H. Rodgers
701 S. Ridge Avenue
Troy, Ohio 45373
Year of Birth: 1944 . Trustee Trustee since 1989 2
- --------------------- -------------- ------------------ --------------------
PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD BY TRUSTEE
- ------------------------------------------------------- -----------------------------------
Since June 2000, Vice President-General Counsel, ITW
Food Equipment Group (Illinois Tool Works Company);
from July 1986 to June 2000, President-General Counsel
and Secretary, Premark International, Inc. (Food
Equipment Group). . . . . . . . . . . . . . . . . . . . None
- ------------------------------------------------------- -----------------------------------
The following table provides information regarding each Trustee who is an
"interested person" of the Trust, as defined in the Investment Company Act of
1940, and each officer of the Trust.
NUMBER OF PORTFOLIOS
POSITION(S) HELD LENGTH OF IN FUND COMPLEX**
NAME, AGE AND ADDRESS WITH TRUST TIME SERVED OVERSEEN BY TRUSTEE
- --------------------- ---------------- ------------------ --------------------
Leslie O. Parker III*
300 Old Post Office
120 West Third Street President
Dayton, Ohio 45402. and President and
Year of Birth: 1940. Trustee Trustee since 1985 2
- --------------------- ---------------- ------------------ --------------------
PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD BY TRUSTEE
- ----------------------------------------- -----------------------------------
Chairman of Adviser since September 1982. None
- ----------------------------------------- -----------------------------------
PC&J PRESERVATION FUND
- ------------------------
FUND TRUSTEES DISCLOSURE (Concluded)
NUMBER OF PORTFOLIOS
POSITION(S) HELD LENGTH OF IN FUND COMPLEX**
NAME, AGE AND ADDRESS WITH TRUST TIME SERVED OVERSEEN BY TRUSTEE
- ------------------------- ---------------- ------------------ --------------------
Kathleen A. Carlson, CFA*
300 Old Post Office
120 West Third Street
Dayton, Ohio 45402. . . . Treasurer and Treasurer and
Year of Birth: 1955 . . . Trustee Trustee since 1985 2
- ------------------------- ---------------- ------------------ --------------------
PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -------------------------------------------------- -----------------------------------
President and Treasurer of Adviser since September
1982 . . . . . . . . . . . . . . . . . . . . . . . None
- -------------------------------------------------- -----------------------------------
NUMBER OF PORTFOLIOS
POSITION(S) HELD LENGTH OF IN FUND COMPLEX**
NAME, AGE AND ADDRESS WITH TRUST TIME SERVED OVERSEEN BY TRUSTEE
- ---------------------- ---------------- ------------- --------------------
James M. Johnson, CFA*
300 Old Post Office
120 West Third Street. Secretary and Secretary and
Dayton, Ohio 45402. . Trustee since Trustee since
Year of Birth: 1952 . 1985 1985 2
- ---------------------- ---------------- ------------- --------------------
PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD BY TRUSTEE
- ------------------------------------------ -----------------------------------
Secretary of Adviser since September 1982. None
- ------------------------------------------ -----------------------------------
Page 20
* Mr. Parker, Ms. Carlson and Mr. Johnson are "interested persons" of the Trust
because they are officers of the Trust and officers and shareholders of the
Adviser.
**As of December 31, 2002, the term "Fund Complex" refers to the PC&J
Performance Fund and the PC&J Preservation Fund.
The Statement of Additional Information includes additional information about
the Trustees and is available without charge upon request, by calling toll free
at (888) 223-0600.
ITEM 2. CODE OF ETHICS. Not applicable to Annual Reports for the period ended
December 31, 2002.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable to Annual Reports for
the period ended December 31, 2002.
ITEMS 4-8. RESERVED
ITEM 9. CONTROLS AND PROCEDURES. Not applicable to Annual Reports for the
period ended December 31, 2002.
ITEM 10. EXHIBITS. Certifications required by Item 10(b) of Form N-CSR are
filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PC&J Preservation Fund
------------------------
By / s /
Kathleen Carlson, Treasurer
Date February 27, 2003
-------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By / s /
Leslie O. Parker III, President
Date February 27, 2003
-------------------
By / s /
Kathleen Carlson, Treasurer
Date February 27, 2003
-------------------