<PAGE>
[LOGO]
INTRODUCTION
The PC&J Preservation Fund is a registered investment
company under the Investment Company Act of 1940 and, for your
protection, is regulated by the Securities and Exchange
Commission. The enclosed 1995 Annual Report is for your
information and is provided to you in compliance with ongoing
Securities and Exchange Commission regulations. This report
requires no action on your part. Please give us a call if you
have any questions.
MANAGEMENT REVIEW AND ANALYSIS
The Federal Reserve was successful in bringing down the rate
of economic growth for 1995. Slower economic growth meant less
pressure on inflation. This combined with the very real
possibility of a balanced budget agreement caused interest rates
to decline almost nonstop during the entire year. Where long-
term interest rates were 7.90% at the beginning of the year, they
were 6.00% at year-end. Short-term yields as measured by the
one-year Treasury Bill declined as well beginning at 7.15% and
ending at 5.15%.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
1 Yr. 5 Yrs 10 Yrs
<S> <C> <C> <C>
Preservation Fund 15.2% 7.8% 7.9%
Lehman Composite 18.3% 9.6% 9.6%
Treasury Bills (3mnth) 6.0% 4.4% 5.6%
</TABLE>
Bond prices rise when interest rates decline; the extent
depending on the magnitude of the decrease in rates and the
maturity of the bond. Total return is calculated by combining
the interest earned on the bond and the change in the price of
the bond during the period. Yields declining by almost two
percentage points produced excellent returns for bond investors.
The PC&J Preservation Fund began the year with an average
maturity of 7.2 years which ranks at the long end of its
historical maturity range.
During the course of the year as interest rates declined,
the fund shortened its average maturity, locking in some of the
gains realized as bond prices rose. At year end the average
maturity was a conservative 5.3 years, ranking in the middle of
its historical range.
We are very pleased with the Fund's 15.2% return. The Fund
with its lower average maturity and lower average exposure to the
corporate sector could not keep pace with the Lehman Composite.
These two components work to lower the overall risk of the Fund
which works against the return in very strong bond markets. We
have consciously chosen to maintain a lower risk posture because
it is consistent with our preservation of capital objective.
Looking out over a longer timeframe, the Fund continues to
meet its objective of providing a return superior to cash
alternatives as measured by 3-month Treasury bills. We have also
found that the strategy of maintaining a lower risk posture than
the Lehman Composite has led to returns that are more consistent
over time.
GROWTH OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
Year Preservation Lehman G/C Treasury B
<S> <C> <C> <C> <C>
12/85 10,000 10,000 10,000
12/86 11,000 11,560 10,620
12/87 11,429 11,826 11,204
12/88 12,012 12,725 11,910
12/89 13,369 14,532 12,910
12/90 14,613 15,738 13,917
12/91 16,425 18,271 14,697
12/92 17,459 19,660 15,211
12/93 18,943 21,823 15,668
12/94 18,489 21,059 16,279
12/95 21,299 24,913 17,255
</TABLE>
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 will be worth more or
less than their original cost at the time of redemption.
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[LOGO]
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
PC&J Preservation Fund:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments of the PC&J
Preservation Fund as of December 31, 1995, the related
statement of operations for the year then ended, and the
statements of changes in net assets and the financial
highlights for each of the years presented. 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 generally accepted
auditing standards. 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, 1995 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, such financial statements and financial
highlights present fairly, in all material respects, the
financial position of the PC&J Preservation Fund at December
31, 1995, the results of its operations, the changes in its net
assets, and the financial highlights for the respective stated
years in conformity with generally accepted accounting
principles.
\S\ Deloitte & Touche LLP
January 22, 1996
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PC&J PRESERVATION FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERCENT YEARS
OF NET TO PRINCIPAL MARKET
SECURITY (Note A) ASSETS MATURITY AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS:
Maturity of 1 - 5 years: 42.3%
U.S.Treasury Notes, 5.250%,
due 07/98 2.50 500,000 $ 500,156
Federal Nat'l. Mortgage Assoc.
Step Notes, 5.550%, due 10/98 2.75 750,000 745,845
Federal Nat'l. Mortgage Assoc.
Notes, 4.875%, due 10/98 2.75 1,000,000 984,063
Federal Home Loan Bank Notes,
5.440%, due 12/98 3.00 500,000 496,850
Federal Nat'l Mortgage Assoc.
Notes, 9.550%, due 03/99 3.25 1,000,000 1,118,437
U.S. Treasury Notes,
7.000%, due 04/99 3.25 1,500,000 1,575,938
U.S. Treasury Notes,
6.500%, due 04/99 3.25 1,500,000 1,554,844
------------
6,976,133
Maturity of 6 - 10 years: 31.7
U.S. Treasury Notes,
6.375%, due 08/02 6.75 2,000,000 2,099,375
U.S. Treasury Notes,
5.875%, due 02/04 8.00 1,000,000 1,020,312
Federal Nat'l. Mortgage Assoc.
Notes, 7.600%, due 04/04 8.25 500,000 511,406
U.S. Treasury Notes,
7.250%, due 08/04 8.75 500,000 556,094
Federal Home Loan Mortgage Corp.
Notes, 7.510%, due 08/05 9.75 1,000,000 1,030,970
------------
5,218,157
Maturity of more than 10 years - 7.2
U.S. Treasury Bonds,
8.750%, due 11/08 12.75 1,000,000 1,190,000
------ ------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $12,804,631) 81.2% $13,384,290
</TABLE>
See notes to financial statements.
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PC&J PRESERVATION FUND
SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERCENT YEARS
OF NET TO PRINCIPAL MARKET
SECURITY (Note A) ASSETS MATURITY AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL U.S. GOVERNMENT OBLIGATIONS
FORWARD (Cost $12,804,631) 81.2% $13,384,290
------ ------------
U.S. CORPORATE OBLIGATIONS:
Maturity of less than 1 year - 3.1
Associated Corp. of NA Notes,
8.800%, due 03/96 0.25 500,000 502,490
Maturity of 1 - 5 years - 3.2
Lehman Brothers Holding Inc.
Notes, 5.750%, due 02/98 2.25 525,000 523,215
Maturity of 6 - 10 years : 6.1
American Express Credit Corp.
Notes, 6.125%, due 11/01 5.75 500,000 502,050
Walt Disney Step Notes,
7.500%, due 08/04 8.75 500,000 510,000
------ ------------
TOTAL U.S. CORPORATE OBLIGATIONS
(Cost $1,988,030) 12.4 2,037,755
------ ------------
TOTAL U.S. GOVERNMENT AND CORPORATE
OBLIGATIONS
(Cost $14,792,661) 93.6 15,422,045
SHORT-TERM OBLIGATIONS
(Cost $784,430) 4.8 784,430
------ ------------
TOTAL INVESTMENTS
(Cost $15,577,091) 98.4% $16,206,475
====== ============
</TABLE>
See notes to financial statements.
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PC&J PRESERVATION FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at market value
(Cost basis - $15,577,091) (Notes A & D) $16,206,475
------------
Receivables:
Interest 276,094
Capital stock purchases 3,039
------------
Total receivables 279,133
------------
Total assets 16,485,608
LIABILITIES - Accrued expenses (Note B) (13,821)
------------
NET ASSETS $16,471,787
============
SHARES OUTSTANDING
(Unlimited authorization - no par value) (Note C) 1,455,020
NET ASSET VALUE PER SHARE $11.32
============
NET ASSETS CONSIST OF:
Paid in capital $15,842,403
Net unrealized appreciation 629,384
------------
Net Assets $16,471,787
============
</TABLE>
See notes to financial statements.
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PC&J PRESERVATION FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME - Interest (Note A): $ 960,409
------------
EXPENSES (Note B):
Investment advisory fee 73,147
Management fee 73,146
Taxes 357
------------
Total expenses 146,650
------------
NET INVESTMENT INCOME 813,759
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note D):
Net realized gain on investments 52,173
Change in unrealized appreciation of investments 1,188,939
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,241,112
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,054,871
============
</TABLE>
See notes to financial statements.
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<PAGE>
PC&J PRESERVATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 813,759 $ 901,778
Net realized gain (loss) on investments 52,173 (49,421)
Change in unrealized appreciation
(depreciation) of investments 1,188,939 (1,242,737)
------------ ------------
Net increase (decrease) in net assets from operations 2,054,871 (390,380)
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income (816,140) (899,398)
Dividends from net realized gain on investments (2,751) 0
CAPITAL STOCK TRANSACTIONS - Increase (decrease) in net
assets resulting from capital share transactions (Note C) 974,772 (667,642)
------------ ------------
Total increase (decrease) in net assets 2,210,752 (1,957,420)
------------ ------------
NET ASSETS:
Beginning of year 14,261,035 16,218,455
------------ ------------
End of year $16,471,787 $14,261,035
============ ============
</TABLE>
See notes to financial statements.
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<PAGE>
PC&J PRESERVATION FUND
NOTES TO FINANCIAL STATEMENTS
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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 preparation of financial statements in conformity with generally
accepted accounting principles 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 traded on the over-
the-counter market are valued at the average of the reported bid and
ask prices. All other securities are valued using established
procedures which involve approximating the yield-to-maturity of similar
securities traded on a national exchange.
(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 realized gains on
security transactions.Accordingly, no provision for federal income
taxes has been made in the accompanying financial statements.
(3) Other - Security transactions are accounted for on the date the
securities are purchased or sold, (trade date). Realized gains and
losses on sales are determined using the first-in first-out method.
Dividends and distributions to shareholders are recorded on the
ex-dividend date. Interest income is accrued daily.
B. INVESTMENT ADVISORY AGREEMENT AND MANAGEMENT AGREEMENT
The Fund has an investment advisory agreement with Parker, Carlson &
Johnson, Inc. (the 'Advisor'), wherein the Fund pays the Advisor 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 $73,147 for the year ended December 31, 1995.
The Fund has a management agreement with PC&J Service Corp., (the 'Service
Corp.'), wholly owned by the shareholders of the Advisor. The Fund pays
Service Corp. for the overall management of the Fund's business affairs,
exclusive of the services provided by the Advisor, 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 $73,146 for the
year ended December 31, 1995.
Certain officers and trustees of the Fund are officers and trustees, or
both, of the Advisor and of Service Corp.
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<PAGE>
PC&J PRESERVATION FUND
NOTES TO FINANCIAL STATEMENTS - (Concluded)
- -------------------------------------------------------------------------------
C. CAPITAL STOCK TRANSACTIONS
<TABLE>
<CAPTION>
For the Year Ending For the Year Ending
December 31, 1995 December 31, 1994
----------------------- -----------------------
<S> <C> <C> <C> <C>
Shares sold 204,399 $ 2,304,454 130,906 $ 1,462,293
Shares issued in reinvestment of
dividends and capital gains
distributions 72,336 818,891 86,957 899,398
---------- ------------ ---------- ------------
276,735 3,123,345 217,863 2,361,691
Shares redeemed (200,290) (2,148,573) (273,888) (3,029,333)
---------- ------------ ---------- ------------
Net increase (decrease) 76,445 974,772 (56,025) (667,642)
Shares outstanding at beginning of
year 1,378,575 14,867,631 1,434,600 15,535,273
---------- ------------ ---------- ------------
Shares outstanding at end of year 1,455,020 $15,842,403 1,378,575 $14,867,631
========== ============ ========== ============
</TABLE>
D. INVESTMENT TRANSACTIONS
Securities purchased and sold (excluding short-term obligations) for the
year ended December 31, 1995, aggregated $3,998,087 and $3,529,729,
respectively.
At December 31, 1995 gross unrealized appreciation on investments was
$689,736 and gross unrealized depreciation on investments was $60,352 for
a net unrealized appreciation of $629,384 for financial reporting and
federal income tax purposes.
E. DISTRIBUTION EXPENSE
The Fund's shareholders have adopted a Distribution Expense plan pursuant
to Rule 12b-1 of the Investment Company Act of 1940. This Plan authorizes
payments under the Investment Advisory Agreement and Management Agreement
(See Note B) which might be deemed to be expenses primarily intended to
result in the sale of Fund shares. No other payments are authorized under
the Distribution Expense Plan.
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Page 8
<PAGE>
PC&J PRESERVATION FUND
FINANCIAL HIGHLIGHTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992, AND 1991
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Selected Data for Each Share of
Capital Stock Outstanding
Throughout the Year 1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE-BEGINNING OF YEAR $10.34 $11.31 $11.24 $11.43 $10.96
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.59 0.70 0.67 0.82 0.80
Net realized and unrealized
gain (loss) on securities 0.98 (0.97) 0.28 (0.11) 0.57
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.57 (0.27) 0.95 0.71 1.37
-------- -------- -------- -------- --------
Less dividends:
From net investment income (0.59) (0.70) (0.67) (0.82) (0.80)
From net realized gain
on investments (0.00) (0.00) (0.21) (0.08) (0.10)
-------- -------- -------- -------- --------
TOTAL DIVIDENDS (0.59) (0.70) (0.88) (0.90) (0.90)
NET ASSET VALUE-END OF YEAR $11.32 $10.34 $11.31 $11.24 $11.43
======== ======== ======== ======== ========
TOTAL RETURN 15.18% -2.39% 8.45% 6.21% 12.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income 5.56% 5.83% 5.87% 6.66% 7.04%
Portfolio turnover rate 25.62% 30.03% 37.13% 26.10% 33.58%
Net assets at end of year (000's) $16,472 $14,261 $16,218 $13,997 $14,716
</TABLE>
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