PC&J PERFORMANCE FUND
Financial Statements and Financial Highlights for the
Year Ended December 31, 1998 and Independent
Auditor's Report
<PAGE>
PC&J PERFORMANCE FUND
ANNUAL REVIEW
Unaudited
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INTRODUCTION
The PC&J Performance Fund is a registered investment company
under the Investment Company Act of 1940. The enclosed 1998
Annual Report is for your information and is provided to you in
compliance with ongoing Securities and Exchange Commission
regulations.
YEAR 2000 COMPLIANCE
Year 2000 Compliance is an important issue facing the financial
services industry. While our critical 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
1998 was a year that tested every investor's investment strategy
and discipline. In a typical year, the Dow Jones Industrial
Average has fewer than five swings of 5 percent. In 1998, the
volatile industrials went through ten such swings, with two of
those swings exceeding 15 percent. In addition, the range of
returns was exceptionally wide with the high-tech Nasdaq
composite earning 39% and the small stock Russell 2000 Index
posting a 3.5% loss.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Performance Fund 31.8% 21.5% 18.3%
Lipper Gen'l Equity 14.5% 17.0% 15.5%
S&P 500 Index 28.6% 24.1% 19.2%
</TABLE>
In this difficult environment, the Lipper General Equity fund
returned 14.5% for the year. We are pleased to report that the
PC&J Performance Fund provided a 31.8% return. The execution of
our strategy, requiring very little turnover, enabled our core
portfolio to outperform the S&P 500 Index for a second straight
year and the Lipper General Equity fund for the third consecutive
year and for five of the last six years.
Emphasis on large-cap, growth-oriented stocks continued to be the
key contributor to this year's performance. Growth was
represented in many areas in the portfolio including technology,
tele-communications, Internet-related companies, healthcare and
financial services. Almost without exception, the outperforming
stocks came in size large, mirroring the performance in the
market, companies like Cisco Systems, Lucent Technologies,
America Online, Charles Schwab and EMC Corp.
Our analysis of such economically sensitive sectors as energy,
basic industry and consumer cyclical had a negative impact on the
portfolio represented by the small stock holdings of Four Season
and Input/Output. Fortunately, our good decisions far
outweighed the negative impact of our mistakes.
Jim Johnson, lead portfolio manager, focuses his research 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. He believes these investments have led to more
consistent returns over time. The Fund's five year compound
return of 21.5% ranks it in the top 17% of all capital
appreciation funds as measured by Lipper Analytical Services.
The 18.3% ten-year return places the Fund in the top 24% of this
universe and holds up well against the 19.2% return of the large-
stock dominated S&P 500 Index.
GROWTH OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
Performance S&P 500 Lipper
Growth Growth Growth
<S> <C> <C> <C>
88 10,000 10,000 10,000
89 13,330 13,150 12,400
90 12,544 12,729 11,619
91 16,639 16,612 15,755
92 17,679 17,891 17,157
93 20,207 19,698 19,302
94 20,369 19,954 18,974
95 25,000 27,436 24,875
96 29,953 33,741 29,718
97 40,616 45,011 36,969
98 53,520 57,884 42,337
</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, 1998
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<TABLE>
<CAPTION>
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PERCENT NUMBER OF MARKET
SECURITY (Note A) OF NET SHARES VALUE
ASSETS
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<S> <C> <C> <C>
COMMON STOCKS:
Capital goods & transportation: 11.2%
Emerson Electric 15,600 $ 943,800
General Electric Co. 18,600 1,897,200
Tyco International Ltd. 19,500 1,471,031
United Technologies Corp. 10,800 1,174,500
------------
5,486,531
------------
Consumer cyclical: 1.5
Walt Disney Co. 24,000 720,000
------------
Consumer staple: 15.2
American Home Products 24,000 1,353,000
Campbell Soup Co. 17,200 946,000
Clorox Company 14,000 1,635,375
Gillette Company 18,600 889,313
Eli Lilly & Co. 12,500 1,110,937
Merck & Co. 10,000 1,475,000
------------
7,409,625
------------
Energy: 5.4
Chevron Corp. 10,200 845,963
Cooper Cameron Corp. <F1> 18,000 441,000
Mobil Corp. 9,600 836,400
Newpark Resources Inc. <F1> 78,600 535,462
------------
2,658,825
------------
Financial services: 22.7
American Express Co. 13,500 1,383,750
Citigroup Inc. 21,500 1,068,281
Fannie Mae 18,000 1,332,000
Franklin Resources Inc. 24,000 768,000
Northern Trust Corp. 17,900 1,562,894
Schwab (Charles) Corp. 29,025 1,630,842
SunAmerica Inc. 24,350 1,996,700
Wells Fargo & Co. 33,000 1,317,938
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11,060,405
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<FN>
<F1> NON-INCOME PRODUCING SECURITY.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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PC&J PERFORMANCE FUND
SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
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PERCENT NUMBER OF MARKET
SECURITY (Note A) OF NET SHARES VALUE
ASSETS
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<S> <C> <C> <C>
Industrial commodities: 4.6%
Aluminum Co. of America 13,200 $ 984,225
Sealed Air Corp. <F1> 25,000 1,276,562
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2,260,787
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Technology: 22.9
Cisco Systems Co. Inc. <F1> 20,625 1,914,258
EMC Corp. <F1> 13,200 1,122,000
International Business Machines Inc. 11,200 2,065,000
Microsoft Corp. <F1> 13,000 1,802,938
Network Associates <F1> 23,600 1,563,500
Policy Management Systems <F1> 31,100 1,570,550
Sterling Commerce <F1> 25,000 1,125,000
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11,163,246
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Telecommunications: 10.8
America Online Inc. <F1> 21,800 3,381,725
Lucent Technologies 17,384 1,911,153
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5,292,878
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TOTAL COMMON STOCKS
(Cost $20,801,263) 94.3 46,052,297
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SHORT-TERM OBLIGATIONS 5.8
Star Treasury Fund 177,541
Star Federal Prime Obligations 2,000,000
Fidelity Spartan Money Market Fund 632,634
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TOTAL SHORT-TERM OBLIGATIONS
(Cost $2,810,175) 2,810,175
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TOTAL INVESTMENTS
(Cost $23,611,438) <F2> 100.1% $48,862,472
======= ============
<FN>
<F1> NON-INCOME PRODUCING SECURITY.
<F2> REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES AND DIFFERS
FROM VALUE BY NET UNREALIZED APPRECIATION (SEE NOTE D)
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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PC&J PERFORMANCE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
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<TABLE>
<S> <C>
ASSETS:
Investments in securities, at market value
(Cost basis - $23,611,438) (Notes A & D) $48,862,472
Receivables _ Dividends and interest 28,306
------------
Total assets 48,890,778
LIABILITIES _ Accrued expenses (Note B) (59,204)
------------
NET ASSETS $48,831,574
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SHARES OUTSTANDING (Unlimited authorization - no par value):
Beginning of year 1,386,528
Net increase (Note C) 39,975
------------
End of year 1,426,503
============
NET ASSET VALUE, offering price and redemption price
per share $ 34.23
============
NET ASSETS CONSIST OF:
Paid in capital $23,580,540
Net unrealized appreciation 25,251,034
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Net Assets $48,831,574
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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<PAGE>
PC&J PERFORMANCE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
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<TABLE>
<S> <C>
INVESTMENT INCOME (Note A):
Dividends $ 338,999
Interest 125,990
------------
Total investment income 464,989
------------
EXPENSES (Note B):
Investment advisory fee 413,642
Management fee 206,821
------------
Total expenses 620,463
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NET INVESTMENT LOSS (155,474)
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note D):
Net realized gain on investments 1,859,470
Change in unrealized appreciation of investments 10,277,549
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 12,137,019
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $11,981,545
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
For The Years Ended
December 31,
1998 1997
<C> <C>
<S>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment (loss) $ (155,474) $ (39,574)
Net realized gain on investments 1,859,470 2,108,810
Change in unrealized appreciation
of investments 10,277,549 7,656,945
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Net increase in net assets from operations 11,981,545 9,726,181
------------ ------------
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income 0 0
Dividends from net realized gain
on investments (1,859,470) (2,108,810)
------------ ------------
Net decrease in net assets from
dividends to shareholders (1,859,470) (2,108,810)
INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS (Note C) 1,256,957 1,197,179
------------ ------------
Total increase in net assets 11,379,032 8,814,550
NET ASSETS:
Beginning of year 37,452,542 28,637,992
------------ ------------
End of year $48,831,574 $37,452,542
============ ============
</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 through 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.
Net investment losses, for tax purposes, are reclassified to paid in
capital.
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 $413,642 for the year ended December 31, 1998.
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
$206,821 for the year ended December 31, 1998.
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 directors, or
both, of the Advisor and of Service Corp.
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PC&J PERFORMANCE FUND
NOTES TO FINANCIAL STATEMENTS - (Concluded)
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<TABLE>
<CAPTION>
C. CAPITAL SHARE For the Year Ending For the Year Ending
TRANSACTIONS December 31, 1998 December 31, 1997
<S> <C> <C> <C> <C>
Shares sold 128,041 $ 3,730,700 154,500 $ 3,905,965
Shares issued in
reinvestment of
dividends 54,320 1,859,470 78,070 2,108,810
--------- ------------ --------- ------------
182,361 5,590,170 232,570 6,014,775
Shares redeemed (142,386) (4,333,213) (202,619) (4,817,596)
--------- ------------ --------- ------------
Net increase 39,975 $ 1,256,957 29,951 $ 1,197,179
--------- ------------ --------- ------------
</TABLE>
D. INVESTMENT TRANSACTIONS
Securities purchased and sold (excluding short-term obligations and
long-term U.S. Government securities) for the year ended
December 31, 1998, aggregate $9,944,422 and $10,864,614, respectively.
At December 31, 1998 gross unrealized appreciation on investments was
$25,256,413 and gross unrealized depreciation on investments was $5,379
for net unrealized appreciation of $25,251,034 for financial reporting
and federal income tax purposes.
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<PAGE>
PC&J PERFORMANCE FUND
FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
Selected Data for Each
Share of Capital Stock For The Years Ended December 31,
Outstanding Throughout
the Year 1998 1997 1996 1995 1994
-------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE-BEGINNING OF YEAR $27.01 $21.11 $19.18 $17.68 $18.13
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (0.11) (0.03) 0.06 0.03 0.06
Net realized and unrealized
gain on securities 8.69 7.54 3.73 3.99 0.08
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 8.58 7.51 3.79 4.02 0.14
------- ------- ------- ------- -------
Less dividends:
From net investment income (0.00) (0.00) (0.06) (0.03) (0.06)
From net realized gain
on investments (1.36) (1.61) (1.80) (2.49) (0.53)
------- ------- ------- ------- -------
TOTAL DIVIDENDS (1.36) (1.61) (1.86) (2.52) (0.59)
------- ------- ------- ------- -------
NET ASSET VALUE-END OF YEAR $34.23 $27.01 $21.11 $19.18 $17.68
======= ======= ======= ======= =======
TOTAL RETURN 31.77% 35.58% 19.80% 22.74% 0.77%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.50% 1.50% 1.50% 1.50% 1.50%
Net investment income (0.38%) (0.12%) 0.30% 0.13% 0.35%
Portfolio turnover rate 25.60% 22.44% 64.31% 76.71% 68.56%
Net assets at end of year (000's) $48,832 $37,453 $28,638 $23,949 $19,753
</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, 1998, 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, 1998 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, 1998, 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 22, 1999
Dayton, Ohio
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