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, Ohio 45402-1819
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(Address of principal executive offices) (Zip code)
PC&J Service Corp., 120 West Third Street, Suite 300, Dayton, OH
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45402-1819
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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: 12-31-2005
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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 2005 Annual Report is for your
information and is provided to you in compliance with ongoing Securities and
Exchange Commission regulations.
MANAGEMENT REVIEW AND ANALYSIS
Not to anyone's surprise, interest rates on the short end of the yield curve
rose significantly over the course of the year. The Federal Reserve raised the
overnight Federal Funds rate seven times, beginning the year at 2.25% and ending
at 4.0%. These increases worked their way through the short end of the yield
curve, but, surprisingly, didn't have much impact on bonds maturing in ten years
or longer.
AVERAGE ANNUAL TOTAL RETURNS
1 Yr. 5 Yrs 10 Yrs
Preservation Fund 2.44% 3.99% 4.61%
Lehman Inter Gov/Credit
1.58% 5.50% 5.80%
Treasury Bills (3month) 3.07% 2.09% 3.56%
The economy and inflation, measured by the consumer price index, grew at better
than a 3% rate throughout 2005. And again, ten-year treasuries barely rose,
ending the year around 4.4%. For much of the last twelve months, economists
worried that indebted consumers and rising short-term interest rates and energy
prices would bring down the rate of growth in the economy. They looked at the
flattening of the yield curve as evidence the bond market was in agreement. At
the same time, investors looking for yields on long-term treasuries to rise,
like they normally do when the economy recovers, joined the economists in search
of answers.
Unprecedented demand for U.S. bonds by our trading partners, resulting from our
huge trade deficit, is one plausible explanation. Our nearly insatiable
appetite for lower-priced products produced overseas is a huge boon for emerging
economies. In their eyes, earning a bond return that is below what the
fundamentals would dictate is a small price to pay for the jobs created in their
economies. If it is the case that our foreign buyers are price insensitive,
rates could stay low for a long time.
We also felt interest rates on the longer end would rise throughout the year and
managed the portfolio with an eye towards minimizing the attendant price risk
(bond prices fall when interest rates rise). First, we maintained an effective
average duration of less than three years. And second, we invested over half of
the portfolio in bonds with a coupon structure that steps up over time. With
these structures, the coupon rate rises if interest rates rise. As a result,
the price of the bond falls to a lesser degree than the price of a bond where
the coupon is fixed over its life.
The strategy worked to insulate the Fund from a rate increase on the long end of
the yield curve, but couldn't do much to protect against small price declines
caused by rising rates on the short end. Overall, the Fund provided a 2.4%
return, exceeding the Lehman Intermediate Government/Credit Bond Market Index,
but less than the return for 3-month Treasury Bills, which by definition, did
not experience any price erosion. In calculating the Treasury return, we assume
the bills are always held until maturity and that investors always receive par.
Because the objective of the Preservation Fund is to generate a steady stream of
income with a low amount of risk, we expect to hold to our strategy of
protecting the Fund from price erosion that could result if the yield curve
reverts to a "normal" shape. We've found that by maintaining a lower risk
posture than the Lehman Intermediate Government/Credit Index, the returns are
more consistent over time.
GROWTH OF $10,000 INVESTMENT
LEHMAN
PRESERVATION INTER TREASURY B
GROWTH GOV/CR* GROWTH
1995 10,000 10,000 10,000
1996 10,275 10,405 10,501
1997 11,033 11,224 11,032
1998 11,955 12,171 11,560
1999 11,797 12,219 12,096
2000 12,900 13,455 12,800
2001 13,706 14,661 13,235
2002 14,526 16,103 13,448
2003 14,908 16,797 13,584
2004 15,313 17,308 13,770
2005 15,687 17,582 14,193
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, 2005
PERCENT
OF NET PRINCIPAL MARKET
SECURITY ASSETS AMOUNT VALUE
- --------------------------------------- -------- ---------- ----------
U.S. AGENCY STEP-UP OBLIGATIONS:
Maturity of 1 - 5 years: 4.9%
Federal National Mortgage Assn. Note,
3.500%, due 02-26-10 $ 765,000 $ 750,178
Maturity of 5 - 10 years: 23.9
Federal Home Loan Banks,
4.000%, due 10-28-11 800,000 791,750
Federal Home Loan Banks,
4.000%, due 07-30-13 700,000 689,719
Federal Home Loan Mortgage Corp.,
4.000%, due 01-27-15 1,230,000 1,225,701
Federal National Mortgage Assn. Note,
4.000%, due 02-25-15 1,000,000 987,187
3,694,357
Maturity of 10 - 20 years: 24.9
Federal Home Loan Banks,
4.250%, due 06-04-18 2,000,000 1,951,875
Federal Home Loan Banks,
4.250%, due 07-16-18 500,000 471,250
Federal Home Loan Mortgage Corp.,
5.125%, due 08-15-18 390,000 387,550
Federal Home Loan Mortgage Corp.,
4.999%, due 09-21-18 750,000 743,263
Federal National Mortgage Assn. Note,
5.000%, due 09-17-19 300,000 291,844
3,845,782
TOTAL U.S. AGENCY STEP-UP OBLIGATIONS
(Cost $8,428,975) 53.7 8,290,317
FOREIGN SOVEREIGN OBLIGATIONS:
Maturity of 5 - 10 years: 2.2
Bayerische Landesbank Note,
6.750%, due 10-29-13 350,000 344,750
TOTAL FOREIGN SOVEREIGN OBLIGATIONS
(Cost $350,000) 344,750
See notes to financial statements.
PC&J PRESERVATION FUND
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SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 2005
PERCENT
OF NET PRINCIPAL MARKET
SECURITY ASSETS AMOUNT VALUE
- ---------------------------------------- -------- ---------- ----------
U.S. CORPORATE OBLIGATIONS:
Maturity of 10 - 25 years: 8.9%
Int'l Bank Reconstruction & Dev.,
7.000%, due 08-13-18 $ 850,000 $ 822,375
Household Finance Corp.,
7.750%, due 04-15-22 300,000 305,642
Bank of America Corp.,
7.000%, due 06-15-26 250,000 250,826
TOTAL U.S. CORPORATE OBLIGATIONS
(Cost $1,436,510) 1,378,843
TAXABLE MUNICIPAL OBLIGATIONS:
Maturity of less than 1 year: 2.3
Cleveland, OH Airport Taxable Bonds,
6.490%, due 01-01-06 365,000 365,011
Maturity of 1 - 5 years: 10.2
Chicago Heights, IL GO Taxable
Bonds, 7.350%, due 12-01-07 170,000 176,775
Minneapolis, MN Cmty. Dev. Taxable
Bonds, 10.400%, due 12-01-07 200,000 203,258
Maricopa County, AZ Indl. Dev. Taxable
Bonds, 6.000%, due 07-01-08 435,000 432,177
Oklahoma City, OK Airport Taxable
Bonds, 6.950%, due 07-01-08 475,000 475,000
Dayton, OH Taxable Hsng. Improvement
Bonds, 6.250%, due 11-01-08 140,000 140,000
Dayton, OH Econ. Dev. Taxable
Bonds, 6.380%, due 12-01-09 140,000 146,539
1,573,749
Maturity of 5 - 10 years: 9.1
Baltimore, MD Taxable
Bonds, 8.400%, due 07-01-11 385,000 385,000
Denver, CO School Dist. Taxable Bonds,
6.940%, due 12-15-12 500,000 555,160
Dayton, OH Taxable Bonds,
6.500%, due 11-01-13 250,000 250,000
Sacramento, CA Redev. Agency Taxable
Bonds, 6.375%, due 11-01-13 200,000 210,158
1,400,318
See notes to financial statements.
PC&J PRESERVATION FUND
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SCHEDULE OF INVESTMENTS (Concluded)
DECEMBER 31, 2005
PERCENT
OF NET PRINCIPAL MARKET
SECURITY ASSETS AMOUNT VALUE
- --------------------------------------- -------- ---------- -----------
Maturity of 10 - 20 years: 6.6%
Ohio State Taxable Bonds,
7.600%, due 10-01-16 $ 750,000 $ 776,752
Palmdale, CA Redev. Taxable Bonds,
7.900%, due 09-01-17 225,000 239,290
1,016,042
Maturity of 20 - 30 years: 3.4
Broward Cnty., FL Professional Sports
Fac., 8.110%, due 09-01-28 500,000 520,425
TOTAL TAXABLE MUNICIPAL
OBLIGATIONS (Cost $4,882,724) 31.6 4,875,545
TOTAL U.S. AGENCY STEP-UP,
FOREIGN SOVEREIGN, U.S.
CORPORATE AND TAXABLE
MUNICIPAL OBLIGATIONS
(Cost $15,098,209) 96.4 14,889,455
SHORT-TERM OBLIGATIONS: 2.2
First American Treasury Obligations 36,040
Federated Prime Obligations 300,000
TOTAL SHORT-TERM OBLIGATIONS
(Cost $336,040) 336,040
TOTAL INVESTMENTS
(Cost $15,434,249) 1 98.6 15,225,495
OTHER ASSETS AND LIABILITIES 1.4 218,993
NET ASSETS 100.0% $15,444,488
1 Represents cost for federal income tax and book purposes and differs from
market value by net unrealized appreciation (depreciation). (See Note D)
See notes to financial statements.
PC&J PRESERVATION FUND
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STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS:
Investments in securities, at market value
(Cost basis - $15,434,249) (Notes A& D) $15,225,495
Receivables - Interest 233,108
Receivables - Fund shares sold 3,284
Total assets 15,461,887
LIABILITIES:
Accrued expenses (Note B) (14,399)
Payables - Fund shares redeemed (3,000)
Total liabilities (17,399)
NET ASSETS $15,444,488
SHARES OUTSTANDING (Unlimited authorized shares):
Beginning of year 1,613,311
Net decrease (Note C) (145,824)
End of year 1,467,487
NET ASSET VALUE, offering price and redemption price per share $ 10.52
NET ASSETS CONSIST OF:
Paid in capital $15,954,051
Net unrealized depreciation on investments (208,754)
Undistributed net investment income 15,039
Accumulated net realized loss on investments (315,848)
Net Assets $15,444,488
See notes to financial statements.
PC&J PRESERVATION FUND
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STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME - Interest (Note A): $ 867,513
EXPENSES (Note B):
Investment advisory fee 84,416
Management fee 101,299
Total expenses 185,715
NET INVESTMENT INCOME 681,798
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note D):
Net realized loss on investments (29,688)
Change in unrealized appreciation of investments (230,749)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (260,437)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 421,361
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,
2005 2004
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 681,798 $ 671,704
Net realized loss on investments (29,688) (35,487)
Change in unrealized appreciation of investments (230,749) (159,644)
Net increase in net assets from operations 421,361 476,573
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (673,479) (672,490)
Net decrease in assets from distributions to shareholders (673,479) (672,490)
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS (Note C) (1,630,981) (557,361)
Total decrease in net assets (1,883,099) (753,278)
NET ASSETS:
Beginning of year 17,327,587 18,080,865
End of year $15,444,488 $17,327,587
UNDISTRIBUTED NET INVESTMENT INCOME $ 15,039 $ 6,720
See notes to financial statements.
PC&J PRESERVATION FUND
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NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2005
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 the generation of income and the
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 (GAAP) requires management to
make estimates or assumptions that affect the reported amounts of assets and
liabilities, 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 - Fixed income securities are generally valued by
using market quotations, or a matrix methodology (including prices furnished by
a pricing service) when the Adviser believes such prices accurately reflect the
fair market value of such securities. The matrix pricing methodology utilizes
yield spreads relating to securities with similar characteristics to determine
prices for normal institutional-size trading units of debt securities without
regard to sale or bid prices. If the Adviser decides through the due diligence
process that the market quotation does not accurately reflect current value or
that prices cannot be readily estimated using the matrix methodology, or when
restricted or illiquid securities are being valued, securities are valued at
fair value as determined in good faith by the Adviser, in conformity with
guidelines adopted by and subject to review by the Board of Trustees.
(2) Federal Income Taxes - The Fund has elected to be treated as a regulated
investment company and intends to continue to comply with the requirements under
Subchapter M of the Internal Revenue Code and to distribute all, or
substantially all, of its net investment income and net realized gains on
security transactions. Accordingly, no provision for federal income or excise
taxes has been made in the accompanying financial statements. The Fund has a
capital loss carry forward of $315,848, of which $152,270 can be carried forward
through 2008, $98,440 through 2011, $35,450 through 2012 and $29,688 through
2013.
(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. Net investment
losses, for tax purposes, are reclassified to paid in capital.
The Fund indemnifies the Trustees and officers of the Fund for certain
liabilities that might arise from the performance of their duties to the Fund.
B. INVESTMENT ADVISORY AGREEMENT AND MANAGEMENT AGREEMENT
The Fund has an investment advisory agreement (the "Agreement") with Parker
Carlson & Johnson, Inc. (the "Adviser"), whereby the Fund pays the Adviser a
monthly advisory fee, accrued daily, based on an annual rate of 0.5% of the
daily net assets of the Fund. Investment advisory fees were $84,416 for the
year ended December 31, 2005.
PC&J PRESERVATION FUND
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NOTES TO FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 2005
B. INVESTMENT ADVISORY AGREEMENT AND MANAGEMENT AGREEMENT (Continued)
The Fund has a management agreement with PC&J Service Corp. ("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), including trustee fees of $5,500 for the year ended
December 31, 2005.
Service Corp. is entitled to a monthly fee, accrued daily, based on an annual
rate of 0.6% of the daily net assets of the Fund. Management fees were $101,299
for the year ended December 31, 2005.
Certain officers and trustees of the Fund are officers and directors, or both,
of the Adviser and of Service Corp.
C. CAPITAL SHARE TRANSACTIONS
For the Year Ended For the Year Ended
December 31, 2005 December 31, 2004
------------------ ------------------
Shares Dollars Shares Dollars
------------------ ------------ --------- ------------
Subscriptions 171,311 $ 1,852,471 158,814 $ 1,746,891
Reinvestment of distributions 64,202 673,479 62,674 672,490
235,513 2,525,950 221,488 2,419,381
------------------ ------------ --------- ------------
Redemptions (381,337) (4,156,931) (270,489) (2,976,742)
Net decrease (145,824) $(1,630,981) (49,001) $ (557,361)
D. INVESTMENT TRANSACTIONS
Securities purchased and sold (excluding short-term obligations and long-term
U.S. Government securities) for the year ended December 31, 2005, aggregated
$1,628,570 and $1,289,815, respectively. Purchases and sales of long-term U.S.
Government Securities for the year ended December 31, 2005, aggregated
$1,693,000 and $1,227,500, respectively.
At December 31, 2005, gross unrealized appreciation on investments was $56,347
and gross unrealized depreciation on investments was $265,101 for a net
unrealized depreciation of $208,754 for
financial reporting and federal income tax purposes.
PC&J PRESERVATION FUND
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NOTES TO FINANCIAL STATEMENTS (Concluded)
FOR THE YEAR ENDED DECEMBER 31, 2005
E. FEDERAL TAX DISCLOSURE
Tax Character of Distributions Paid
For the Year Ended December 31, 2005 For the Year Ended December 31, 2004
------------------------------------ ------------------------------------
Ordinary Income Capital Gains Total Distribution Ordinary Income Capital Gains Total Distribution
- ---------------- -------------- ------------------- ---------------- -------------- -------------------
$ 673,479 $ 0 $ 673,479 $ 672,490 $ 0 $ 672,490
Tax Basis of Distributable Earnings
As of December 31, 2005
Undistributed Ordinary Income Undistributed Capital Gains Unrealized Appreciation
- ------------------------------ ---------------------------- ------------------------
$ 15,039 $ 0 $ 0
- ------------------------------ ---------------------------- ------------------------
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 Period 2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
NET ASSET VALUE-BEGINNING OF PERIOD $ 10.74 $ 10.88 $ 11.06 $ 10.96 $ 10.88
Income from investment operations:
Net investment income 0.49 0.44 0.47 0.54 0.62
Net realized and unrealized
gain (loss) on securities (0.23) (0.14) (0.18) 0.11 0.06
TOTAL FROM INVESTMENT OPERATIONS 0.26 0.30 0.29 0.65 0.68
Less distributions:
From net investment income (0.48) (0.44) (0.47) (0.55) (0.60)
From net realized gain
on investments (0.00) (0.00) (0.00) (0.00) (0.00)
From return of capital
TOTAL DISTRIBUTIONS (0.48) (0.44) (0.47) (0.55) (0.60)
NET ASSET VALUE-END OF PERIOD $ 10.52 $ 10.74 $ 10.88 $ 11.06 $ 10.96
TOTAL RETURN 2.44% 2.72% 2.63% 5.98% 6.25%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.10% 1.02% 1.00% 1.00% 1.00%
Net investment income 4.04% 3.83% 4.19% 4.64% 5.31%
Portfolio turnover rate 16.10% 37.75% 30.80% 53.92% 46.56%
Net assets at end of period (000's) $15,444 $17,328 $18,081 $18,647 $18,440
See notes to financial statements.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders 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, 2005,
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 the standards of the Public Company
Accounting Oversight Board (United States). 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.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2005, by
correspondence with the custodian and brokers. 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, 2005, 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
Cincinnati, Ohio
February 10, 2006
PC&J PRESERVATION FUND
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ADDITIONAL INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2005 (Unaudited)
FUND EXPENSES
As a shareholder of the Fund, you incur ongoing costs, including management fees
and investment advisory fees. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period (July 1, 2005) and held for the six months ended December 31, 2005.
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Beginning Account Ending Account
Value Value Expenses Paid
July 1, 2005 December 31, 2005 During Period*
Actual
$ 1,000.00 $ 1,005.62 $ 5.56
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,019.66 $ 5.60
* Expenses are equal to the Fund's annualized expense ratio of 1.1%, multiplied
by the average account value over the period, multiplied by the number of days
in the most recent six-month period, then divided by the number of days in the
most recent 12-month period.
PC&J PRESERVATION FUND
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ADDITIONAL INFORMATION (Concluded)
FOR THE YEAR ENDED DECEMBER 31, 2005 (Unaudited)
TYPE OF SECURITY % OF NET ASSETS
- ------------------------------- ----------------
U.S. Agency Step-Up Obligations 53.7%
- ------------------------------- ----------------
Foreign Sovereign Obligations 2.2
U.S. Corporate Obligations 8.9
Taxable Municipal Obligations 31.6
Short-Term Obligations 2.2
Other Assets and Liabilities 1.4
Total 100.0%
----------------
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
- ------------------------------ -------------------- ------------------ --------------------
Robert S. Neff
300 Old Post Office
120 West Third Street
Dayton, Ohio 45402 Trustee since
Year of Birth: 1931 Trustee 2003 2
- ----------------------- -------------------- ----------- --------------------
PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -------------------------------------------------------- -----------------------------------
Since June 2001, Consultant to Neff Packaging Solutions
Inc.; from June 1980 to June 2001, Chairman and CEO of
Neff Packaging Solutions Inc. (paper container
manufacturer) None
- -------------------------------------------------------- -----------------------------------
NUMBER OF PORTFOLIOS
POSITION(S) IN LENGTH OF IN FUND COMPLEX**
NAME, AGE AND ADDRESS FUND COMPLEX** TIME SERVED OVERSEEN BY TRUSTEE
- --------------------- -------------------- ----------- --------------------
Laura B. Pannier
300 Old Post Office
120 West Third Street
Dayton, Ohio 45402 Trustee since
Year of Birth: 1954 Trustee 2003 2
- --------------------- -------------------- ----------- --------------------
PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -------------------------------------------------- -----------------------------------
Not presently employed; from May 1988 to May 1997,
partner with Deloitte & Touche LLP None
- -------------------------------------------------- -----------------------------------
PC&J PRESERVATION FUND
- -----------------------
FUND TRUSTEES DISCLOSURE (Concluded)
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 FUND TIME SERVED OVERSEEN BY TRUSTEE
- ------------------------- ---------------- ------------- --------------------
Treasurer and
Kathleen A. Carlson, CFA* Trustee since
300 Old Post Office Treasurer, Chief 1985; Chief
120 West Third Street Compliance Compliance
Dayton, Ohio 45402 Officer and Officer since
Year of Birth: 1955 Trustee 2004 2
- ------------------------- ---------------- ------------- --------------------
PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD BY TRUSTEE
- ---------------------------------------------------- -----------------------------------
President of Adviser and Service Corp. since 1998;
Treasurer and Director since 1982; Chief Compliance
Officer of Adviser since 2004. None
- ---------------------------------------------------- -----------------------------------
NUMBER OF PORTFOLIOS
POSITION(S) HELD LENGTH OF IN FUND COMPLEX**
NAME, AGE AND ADDRESS WITH FUND TIME SERVED OVERSEEN BY TRUSTEE
- ---------------------- ---------------- ------------- --------------------
James M. Johnson, CFA* Secretary and
300 Old Post Office Trustee since
120 West Third Street President, 1985;
Dayton, Ohio 45402 Secretary and President
Year of Birth: 1952 Trustee since 2005 2
- ---------------------- ---------------- ------------- --------------------
PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD BY TRUSTEE
- --------------------------------------------------------- -----------------------------------
Secretary and Director of Adviser and Service Corp. since
1982. None
- --------------------------------------------------------- -----------------------------------
* Ms. Carlson and Mr. Johnson are "interested persons" of the Fund because they
are officers of the Fund and officers and shareholders of the Adviser, and own
in the aggregate a controlling interest in the Adviser and PC&J Service Corp.,
the Fund's transfer agent.
**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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities and information regarding how
the Fund voted those proxies during the most recent 12-month period ended June
30 are available without charge: (1) upon request by calling toll free at (888)
223-0600 or (2) from the Fund's documents filed with the Securities and Exchange
Commission ("SEC") on the SEC's website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available on the SEC's web site at www.sec.gov. The Fund's Forms N-Q may
also be reviewed and copied at the SEC's Public Reference Room in Washington,
DC. Information on the operation of the Public Reference Room may be obtained
by calling 1-800-SEC-0330.
ITEM 2. CODE OF ETHICS.
(a) As of the end of the period covered by this report, the registrant has
adopted a code of ethics that applies to the registrant's principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party.
(b) For purposes of this item, "code of ethics" means written standards that
are reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in reports
and documents that a registrant files with, or submits to, the Commission and in
other public communications made by the registrant;
(3) Compliance with applicable governmental laws, rules, and
regulations;
(4) The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
(5) Accountability for adherence to the code.
(c) Amendments: During the period covered by the report, there have not
been any amendments to the provisions of the code of ethics.
(d) Waivers: During the period covered by the report, the registrant has
not granted any express or implicit waivers from the provisions of the code of
ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) The registrant's board of trustees has determined that Laura B. Pannier
is an audit committee financial expert. Ms. Pannier is independent for purposes
of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES
----------
FY 2004 $ 14,125
FY 2005 $ 14,250
(b) AUDIT-RELATED FEES
------------------
Registrant Parker Carlson & Johnson
---------- ------------------------
FY 2004 $ None $ None
FY 2005 $ None $ None
Nature of the fees: N/A
(c) TAX FEES
--------
Registrant Parker Carlson & Johnson
---------- ------------------------
FY 2004 $ 1,500 $ None
FY 2005 $ 1,750 $ None
Nature of the fees: Federal and Excise Tax Returns
(d) ALL OTHER FEES
--------------
Registrant Parker Carlson & Johnson
---------- ------------------------
FY 2004 $ None $ None
FY 2005 $ None $ None
(e) (1) AUDIT COMMITTEE'S PRE-APPROVAL POLICIES
---------------------------------------
The audit committee has not adopted pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
(2) PERCENTAGES OF SERVICES APPROVED BY THE AUDIT COMMITTEE
-------------------------------------------------------
Registrant Parker Carlson & Johnson
---------- ------------------------
Audit-Related Fees: None None
Tax Fees: None None
All Other Fees: None None
None of the services described in paragraphs (b) through (d) of this Item were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X. All non-audit services were pre-approved by the audit
committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X.
(f) During audit of registrant's financial statements for the most recent
fiscal year, less than 50 percent of the hours expended on the principal
accountant's engagement were attributed to work performed by persons other than
the principal accountant's full-time, permanent employees.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant:
Registrant Parker Carlson & Johnson
---------- ------------------------
FY 2004 $ 1500 $ None
FY 2005 $ 1750 $ None
(h) Not applicable. The auditor performed no services for the registrant's
investment adviser or any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant.
ITEM 5. AUDIT COMMITTEE OF LISTED COMPANIES. Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable - schedule filed with Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END FUNDS.
Not applicable.
ITEM 8. PORTFOLIO MANAGER OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not
applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END FUNDS. Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Describe any material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors, where those changes
were implemented after the registrant last provided disclosure in response to
the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or
this Item.
The registrant has not adopted procedures by which shareholders may recommend
nominees to the registrant's board of trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures as of December 31, 2005, the disclosure controls and procedures are
reasonably designed to ensure that the information required in filings on Forms
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no significant changes in the registrant's internal control
over financial reporting that occurred during the registrant's second fiscal
half-year that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
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 22, 2006
-------------------
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/
- ---
James M. Johnson, President
Date February 22, 2006
-----------------
By
/s/
- ---
Kathleen Carlson, Treasurer
Date February 22, 2006
-----------------