PC&J PERFORMANCE FUND
Financial Statements and Financial Highlights for the
Year Ended December 31, 1997 and Independent
Auditor's Report
<PAGE>
PC&J PERFORMANCE FUND
ANNUAL REVIEW
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INTRODUCTION
The PC&J Performance Fund is a registered investment company under
the Investment Company Act of 1940. The enclosed 1997 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.
YEAR 2000 COMPLIANCE
Year 2000 Compliance is an important issue facing the financial services
industry. While the majority of our internal systems are in compliance,
we are undertaking a review of all of our systems, and monitoring the
progress of our suppliers to ensure the accuracy and safety of your
investments. We do not anticipate any significant problems.
MANAGEMENT REVIEW AND ANALYSIS
One year ago the consensus forecast for the stock market was that 1997
would be a good year, a year where the returns would be around the
long-term average of 10%; so much for the consensus. Nineteen
ninety-seven provided a historic third consecutive year of a 20% +
return. We also saw an increase in volatility, with any weakness soon
followed by a strong recovery. The average decline for the three months
that had losses last year was 4.3%. The average gain for each of the three
months immediately following the losing months was 5.3%.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Performance Fund 35.6% 18.1% 16.4%
Lipper Gen'l Equity 24.4% 16.6% 15.3%
S&P 500 Index 33.4% 20.3% 18.1%
</TABLE>
It was also a difficult year for most stock pickers to match or beat the
indices. Except for a brief period in the third quarter, large stocks on
average did better than small stocks. The S&P 500 Index (larger stocks)
gained 33.4% compared to the 20.5% return of the Russell 2000 Index
(smaller stocks).
Our stock strategy does not concentrate on large or small stocks, but
rather focuses on finding reasonably priced shares of companies with
growing free cash flow. This strategy worked very well last year. The
PC&J Performance Fund, net of all fees and expenses, returned 35.6%
last year. This result ranked the Fund 16th out of 231 Capital
Appreciation Funds that as a group averaged 20.4%, and handily beat the
average equity fund's return of 24.4% measured by the Lipper General
Equity Funds Composite.
Jim Johnson, lead portfolio manager, attributed last year's success to
a combination of factors: to the Fund's emphasis on the financial service,
energy and consumer staple industries, to investing in a few special
situations like Newpark Resources and America OnLine, and to sticking to
our strategy even when the market was moving against us.
We believe by focusing on companies with rising free cash flow, best
explained as the extra cash left in the business after all re-investment
activities have been funded, has led to more consistent returns over time.
Our consistency is what has allowed us to build a track record with a
10-year compound return of 16.4%, exceeding the 15.3% return of the Lipper
Composite and holding up well to the 18.1% return of the large-stock
dominated S&P 500 Index.
GROWTH OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
Performance S&P 500 Lipper
Year Growth Growth Growth
<S> <C> <C> <C> <C>
1987 10,000 10,000 10,000
1988 11,260 11,680 11,230
1989 15,010 15,359 13,925
1990 14,140 14,868 13,048
1991 18,432 19,402 17,693
1992 19,906 20,896 19,268
1993 22,753 23,007 21,676
1994 22,935 23,306 21,308
1995 28,150 32,046 27,934
1996 33,727 39,410 33,373
1997 45,734 52,573 41,516
</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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<PAGE>
PC&J PERFORMANCE FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
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<TABLE>
<CAPTION>
PERCENT NUMBER OF MARKET
OF NET SHARES VALUE
SECURITY (Note A) ASSETS
- -----------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS:
Capital goods & transportation: 6.0%
Emerson Electric 15,600 $ 880,425
General Electric Co. 18,600 1,364,775
-------------
2,245,200
-------------
Consumer cyclical: 4.8
Disney (Walt) Co. 8,000 792,000
Four Seasons Hotels Inc. 15,400 487,025
K Mart Corp. <F1> 45,000 517,500
-------------
1,796,525
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Consumer staple: 16.2
American Home Products 12,000 918,000
Campbell Soup Co. 17,200 999,750
Clorox Company 14,000 1,111,250
Gillette Company 8,800 883,850
Merck & Co. 10,000 1,060,000
Shared Medical Systems Corp. 16,500 1,089,000
-------------
6,061,850
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Energy: 12.2
Chevron Corp. 10,200 785,400
Cooper Cameron Corp. <F1> 20,000 1,220,000
Input/Output Inc. <F1> 19,000 564,063
Mobil Corp. 11,600 837,375
Newpark Resources Inc. <F1> 66,100 1,156,750
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4,563,588
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Financial services: 22.2
American Express Co. 13,500 1,204,875
Citicorp 6,200 783,912
Fannie Mae 15,000 855,938
Franklin Resources Inc. 12,000 1,043,250
Northern Trust Corp. 20,900 1,457,775
Norwest Corp. 24,000 930,000
Schwab (Charles) Corp. 19,350 811,491
SunAmerica Inc. 28,350 1,211,962
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8,299,203
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<FN>
<F1> NONINCOME PRODUCING SECURITY.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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PC&J PERFORMANCE FUND
SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 1997
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<TABLE>
<CAPTION>
PERCENT NUMBER OF MARKET
SECURITY (Note A) OF NET SHARES VALUE
ASSETS
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Industrial commodities: 6.5%
Aluminum Co. of America 10,200 $ 717,825
Raychem Corp. 14,000 602,875
Sealed Air Corp. <F1> 18,000 1,111,500
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2,432,200
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Technology: 16.0
Boeing Co. 18,200 890,663
Cisco Systems Co. Inc. <F1> 12,750 710,812
Computer Associates International 24,750 1,311,750
International Business Machines Inc. 11,200 1,171,800
Microsoft Corp. <F1> 6,500 840,125
United Technologies Corp. 14,800 1,077,625
-------------
6,002,775
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Telecommunications: 9.2
America Online Inc. <F1> 13,200 1,194,600
Dynatech Corp. <F1> 24,200 1,134,375
Lucent Technologies 14,192 1,133,586
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3,462,561
------ -------------
TOTAL COMMON STOCKS
(Cost $19,890,417) 93.1 34,863,902
SHORT-TERM OBLIGATIONS
(Cost $2,598,671) 6.9 2,598,671
------ -------------
TOTAL INVESTMENTS
(Cost $22,489,088) 100.0% $ 37,462,573
======= =============
<FN>
<F1>NONINCOME PRODUCING SECURITY.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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PC&J PERFORMANCE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
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<TABLE>
<S> <C>
ASSETS:
Investments in securities, at market value
(Cost basis - $22,489,088) (Notes A & D) $ 37,462,573
Receivables - Dividends and interest 36,894
-------------
Total assets 37,499,467
LIABILITIES _ Accrued expenses (Note B) (46,925)
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NET ASSETS $ 37,452,542
=============
SHARES OUTSTANDING (Unlimited authorization - no par value):
Beginning of year 1,356,577
Net increase (Note C) 29,951
-------------
End of year 1,386,528
=============
NET ASSET VALUE, offering price and redemption
price per shares $ 27.01
=============
NET ASSETS CONSIST OF:
Paid in capital $ 22,479,057
Net unrealized appreciation 14,973,485
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Net Assets $ 37,452,542
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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<PAGE>
PC&J PERFORMANCE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
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<TABLE>
<C> <C>
INVESTMENT INCOME (Note A):
Dividends $ 329,522
Interest 119,573
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Total investment income 449,095
-------------
EXPENSES (Note B):
Investment advisory fee 325,779
Management fee 162,890
-------------
Total expenses 488,669
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NET INVESTMENT LOSS (39,574)
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note D):
Net realized gain on investments 2,108,810
Change in unrealized appreciation of investments 7,656,945
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 9,765,755
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NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,726,181
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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<PAGE>
PC&J PERFORMANCE FUND
STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
For The Years Ended
December 31,
1997 1996
------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income(loss) $ (39,574) $ 77,833
Net realized gain on investments 2,108,810 2,249,448
Change in unrealized appreciation 7,656,945 2,452,080
of investments
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Net increase in net assets from 9,726,181 4,779,361
operations
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DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment 0 (77,833)
income
Dividends from net realized gain (2,108,810) (2,249,448)
on investments
------------- -------------
Net decrease in net assets from (2,108,810) (2,327,281)
dividends to shareholders
INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS (Note C) 1,197,179 2,237,215
------------- -------------
Total increase in net assets 8,814,550 4,689,295
NET ASSETS:
Beginning of year 28,637,992 23,948,697
------------- -------------
End of year $ 37,452,542 $ 28,637,992
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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<PAGE>
PC&J PERFORMANCE FUND
NOTES TO FINANCIAL STATEMENTS
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A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PC&J Performance Fund (the 'Fund') commenced operations on December 23, 1983,
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 long-term growth of capital
investment in common stocks. Current income is of secondary importance.
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 a national
securities exchange are valued at the last reported sales price;
securities traded on the over-the-counter market are valued at the
average of the closing bid and ask prices.
(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.
(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
to shareholders from net investment income and net realized capital gains
are declared and paid annually. Dividend income is 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 percent of the daily
net assets of the Fund. Investment advisory fees were $325,779 for the year
ended December 31, 1997.
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 $162,890 for the year
ended December 31, 1997.
The Fund's shareholders have adopted a Distribution Expense Plan ('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 described above which might be deemed to be expenses primarily
intended to result in the sale of Fund shares. No other payments are
authorized under the Plan.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 PERFORMANCE FUND
NOTES TO FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
C.CAPITAL SHARE TRANSACTIONS For the Year Ending For the Year Ending
December 31, 1997 December 31, 1996
-------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 154,500 $ 3,905,965 128,018 $ 2,600,524
Shares issued in reinvestment of
dividends 78,070 2,108,810 110,243 2,327,281
--------- ------------ --------- ------------
232,570 6,014,775 238,261 4,927,805
Shares redeemed (202,619 (4,817,596) (130,060) (2,690,590)
--------- ------------ --------- ------------
Net increase 29,951 $ 1,197,179 108,201 $ 2,237,215
========= ============ ========= ============
D. INVESTMENT TRANSACTIONS
Securities purchased and sold (excluding short-term obligations) for the year
ended December 31, 1997, aggregated $6,738,054 and $8,055,445, respectively.
At December 31, 1997 gross unrealized appreciation on investments was
$15,167,973 and gross unrealized depreciation on investments was $194,488 for
net unrealized appreciation of $14,973,485 for financial reporting and
federal income tax purposes.
</TABLE>
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<PAGE>
PC&J PERFORMANCE FUND
FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
Selected Data for Each Share For The Years Ended December 31,
of Capital Stock Outstanding
Throughout the Year 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE-BEGINNING OF YEAR $21.11 $19.18 $17.68 $18.13 $17.90
------- ------- ------- ------- -------
Income from investment operations:
Net investment income(loss) (0.03) 0.06 0.03 0.06 0.08
Net realized and unrealized
gain on securities 7.54 3.73 3.99 0.08 2.47
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 7.51 3.79 4.02 0.14 2.55
------- ------- ------- ------- -------
Less dividends:
From net investment income (0.00) (0.06) (0.03) (0.06) (0.08)
From net realized gain
on investments (1.61) (1.80) (2.49) (0.53) (2.24)
------- ------- ------- ------- -------
TOTAL DIVIDENDS (1.61) (1.86) (2.52) (0.59) (2.32)
------- ------- ------- ------- -------
NET ASSET VALUE-END OF YEAR $27.01 $21.11 $19.18 $17.68 $18.13
======= ======= ======= ======= =======
TOTAL RETURN 35.58% 19.80% 22.74% 0.77% 14.25%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.50% 1.50% 1.50% 1.50% 1.52%
Net investment income (0.12%) 0.30% 0.13% 0.35% 0.45%
Portfolio turnover rate 22.44% 64.31% 76.71% 68.56% 63.28%
Average commissions per share <F1> $0.10 $0.10
Net assets at end of year (000's) $37,453 $28,638 $23,949 $19,753 $19,670
<FN>
<F1> REPRESENTS THE DOLLAR AMOUNT OF COMMISSIONS PAID ON PORTFOLIO TRANSACTIONS
DIVIDED BY THE TOTAL NUMBER OF SHARES PURCHASED AND SOLD FOR WHICH
COMMISSIONS WERE CHARGED. DISCLOSURE IS NOT REQUIRED PRIOR TO 1996.
</FN>
</TABLE>
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<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
PC&J Performance Fund:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments of the PC&J Performance Fund
as of December 31, 1997, 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, 1997 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
Performance Fund at December 31, 1997, the results of its operations, the
changes in its net assets and financial highlights for the respective
stated years in conformity with generally accepted accounting principles.
\S\ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
January 16, 1998
Dayton, Ohio
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