As filed with the Securities and Exchange Commission on September 27, 1996
================================================================================
Registration No. 33-47508
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 5 [ X ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 7 [ X ]
(Check appropriate box or boxes)
THE JENSEN PORTFOLIO, INC.
(Exact Name of Registrant as Specified in Charter)
430 Pioneer Tower, 888 S.W. Fifth Avenue
Portland, OR 97204-2018
(Address, including Zip Code, of Principal Executive Offices)
(503) 274-2044
800-221-4384
(Registrant's Telephone Number, Including Area Code)
Val E. Jensen
430 Pioneer Tower, 888 S.W. Fifth Avenue
Portland, OR 97204-2018
(Name and Address, including Zip Code, of Agent for Service)
Approximate Date of Proposed Public Offering: Commenced on August 3, 1992,
the effective date of the Registration Statement.
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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Please forward copies of communications to:
Robert J. Moorman
Stoel Rives LLP
Suite 2300, 900 SW Fifth Avenue
Portland, Oregon 97204-1268
An indefinite number of shares of Registrant's Common Stock, $.001 par
value, has been registered by this Registration Statement pursuant to Rule
24f-2 of the Investment Company Act of 1940. The Rule 24f-2 Notice for the
Registrant's most recent fiscal year was filed with the Securities and
Exchange Commission on or about July 26, 1996.
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<PAGE>
THE JENSEN PORTFOLIO, INC.
CROSS-REFERENCE SHEET
Showing Location in Prospectus of Information Required by
Items of Form N-1A
<TABLE>
<CAPTION>
Registration Statement Item No.
and Caption Location in Prospectus
- ------------------------------- ----------------------
<S> <C>
1 Cover Page................................................ Inside Front Cover Page
2 Synopsis.................................................. Fund Expenses
3 Condensed Financial Information........................... Financial Highlights
4 General Description of Registrant......................... Inside Front Cover Page;
Investment Objectives and
Policies; General Information
5 Management of the Fund.................................... Management of the Fund
5A Management's Discussion of Investment Not Applicable (Included in
Performance............................................... Registrant's Annual Report to
Shareholders)
6 Capital Stock and Other Securities........................ Dividends, Distributions and
Taxes; General Information
7 Purchase of Securities Being Offered...................... Management of the Fund;
Purchase of Shares
8 Redemption or Repurchase.................................. Redemption of Shares
9 Pending Legal Proceedings................................. Not Applicable
</TABLE>
<PAGE>
THE JENSEN PORTFOLIO, INC.
PART A
---------------
PROSPECTUS
<PAGE>
THE JENSEN PORTFOLIO
PROSPECTUS
September 27, 1996
430 Pioneer Tower
888 S.W. Fifth Avenue
Portland, OR 97204-2018
503-274-2044
800-221-4384
The Jensen Portfolio, Inc. (the "Fund") is an equity mutual fund with the
principal investment objective of long-term capital appreciation. A secondary
objective is to obtain dividend income that increases over time. To achieve
these objectives, the Fund invests primarily in common stocks issued by
approximately 20 to 30 companies that satisfy the stringent investment criteria
specified in this Prospectus. The Fund sells and redeems its shares at net asset
value ("NAV") without any sales charge, commission or redemption fee.
This Prospectus sets forth concisely the information about the Fund that
investors should consider before investing. Investors should read this
Prospectus carefully and retain it for future reference. A Statement of
Additional Information ("SAI") about the Fund, dated September 27, 1996, has
been filed with the Securities and Exchange Commission (the "SEC") and is
available upon request and without charge by calling or writing the Fund at the
telephone number and address shown above. The SAI is incorporated by reference
into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS CONSTITUTES AN OFFER TO SELL SHARES OF THE FUND ONLY IN THOSE
STATES WHERE THE FUND'S SHARES HAVE BEEN REGISTERED FOR SALE. THE FUND WILL NOT
ACCEPT SUBSCRIPTIONS FROM PERSONS RESIDING IN STATES WHERE THE FUND'S SHARES ARE
NOT REGISTERED, UNLESS AN EXEMPTION FOR SUCH OFFER AND SALE IS AVAILABLE.
TABLE OF CONTENTS
Page
Fund Expenses.......................................... 2
Financial Highlights................................... 2
Investment Objectives and Policies..................... 3
Certain Risk Factors to be Considered.................. 5
Management of the Fund................................. 6
Purchase of Shares..................................... 8
Redemption of Shares................................... 9
Dividends, Distributions and Taxes..................... 11
Allocation of Brokerage................................ 11
Performance Information................................ 11
General Information.................................... 12
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FUND EXPENSES
The following tables illustrate all expenses and fees that a shareholder of the
Fund incurs. The expenses and fees set forth in the tables are fixed by
contract, except that "other expenses" is an estimate. The purpose of these
tables is to assist you in understanding the various costs and expenses that
an investor in the Fund bears directly or indirectly. See "Redemption of Shares"
and "Manage-ment of the Fund" in this Prospectus.
SHAREHOLDER TRANSACTION EXPENSES
- ---------------------------------------------
Maximum Sales Load
Imposed on Purchases None
Maximum Sales Load Imposed
on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(1) None
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------
(as a percentage of average net assets)
Management Fees, After Waiver(2) .41%
12b-1 Fees .00%
Other Expenses .99%
Total Fund Operating Expenses(2) 1.40%
(1)Redemptions paid by wire transfer are assessed the Transfer Agent's regular
wire charge, which, at the date of this Prospectus, is $10.00.
(2)Jensen Investment Management, Inc., the investment adviser to the Fund (the
"Investment Adviser"), has agreed to reimburse the Fund for its expenses
or waive a portion of the Investment Adviser's management fees if, and to
the extent that, the Fund's total operating expenses (including management
fees and other regular expenses, but excluding brokerage commissions, taxes,
organizational costs and other extraordinary items) exceed certain levels.
See "Management of the Fund" in this Prospectus. In addition, the
Investment Adviser has voluntarily agreed to reimburse the Fund for its
expenses or waive management fees during the 1995, 1996 and 1997 fiscal
years in order to keep "total fund operating expenses" at no more than
1.20 percent for 1995 and 1996 and through October 31, 1996 of the 1997
fiscal year, and at no more than 1.40 for the 1997 fiscal year after October
31, 1996. Without the voluntary reimbursement or waiver of $50,889 in fiscal
1995 and reimbursement or waiver of $30,602 in fiscal 1996, the "total fund
operating expenses" in such fiscal years would have been 1.75 and 1.49
percent, respectively. The Investment Adviser reserves the right to
discontinue this policy at any time after May 31, 1997.
HYPOTHETICAL EXAMPLE OF EFFECT OF FUND EXPENSES*
- -----------------------------------------------
You would pay the following expenses on a $1,000 investment, assuming 5 percent
annual return and redemption at the end of each time period:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$14 $44 $77 $168
* This hypothetical example assumes that all dividends and other distributions
are reinvested and that the percentage amounts listed above under "Annual
Fund Operating Expenses" remain the same in the years shown.
The above tables and the assumption in the example of a 5 percent annual return
are required by regulations of the SEC that are applicable to all mutual funds.
The assumed 5 percent annual return is not a prediction of, and does not
represent, the projected or actual performance of the Fund's shares.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The actual expenses attributable to the Fund will depend upon, among other
things, the level of average net assets and the extent to which the Fund incurs
variable expenses.
FINANCIAL HIGHLIGHTS
The following condensed financial information for 1996 has been audited by
Coopers and Lybrand, L.L.P., independent public accountants. The following
condensed financial information for 1995, 1994 and 1993 has been audited by
Deloitte & Touche, L.L.P., independent public accountants. The condensed
financial information should be read in conjunction with the audited financial
statements and related notes and the audit report on the financial statements
issued by Coopers and Lybrand, L.L.P., which are included in the Fund's 1996
Annual Report to Shareholders and incorporated by reference into the Fund's SAI.
Additional information about the performance of the Fund, including a discussion
by the Investment Adviser about the Fund's performance, is contained in the
Annual Report to Shareholders, which may be obtained upon request and without
charge. The following presentation is for a share of capital stock outstanding
throughout the period.
1996 1995 1994 1993(1)
---- ----- ----- ------
Net asset value, beginning of period $9.94 $8.80 $9.36 $10.00
----- ----- ----- ------
Income from investment operations:
Net investment income 0.15 0.14 0.13 0.09
Net realized and unrealized gains
(losses) on investments 2.23 1.15 (0.56) (0.66)
---- ---- ---- ----
Total from investment operations 2.38 1.29 (0.43) (0.57)
Less distributions:
Dividends from net
investment income (0.16) (0.15) (0.13) (0.07)
---- ---- ---- ----
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Net asset value, end of period $12.16 $9.94 $8.80 $9.36
===== ==== ==== ====
Total return(2) 24.14% 14.84% (4.64)% (5.72)%
Supplemental data and ratios:
Net assets, end of period $11,257,030 $9,859,630 $8,808,717 $9,470,139
Ratio of expenses to
average net assets(3) 1.20% 1.20% 1.13% 0.89%
Ratio of net investment
income to average
net assets(3) 1.23% 1.48% 1.36% 1.54%
Portfolio turnover rate 47.93% 11.27% 5.26% 4.01%
Average commission
rate paid $0.0198
(1) From inception of operations at August 3, 1992.
(2) Not annualized for the period from August 3, 1992 through May 31, 1993.
(3) Annualized for the period ended May 31, 1993. Without expense waivers or
voluntary reimbursements of $30,602, $50,889, $54,481 and $61,182 by the
Investment Adviser in fiscal 1996, 1995, 1994 and 1993, respectively, the
ratio of expenses to average net assets would have been 1.49%, 1.75%, 1.72%
and 1.97% and the ratio of net investment income to average net assets would
have been 0.94%, 0.93%, 0.77% and 0.25%, respectively.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
- ---------------------
The primary objective of the Fund is long-term capital appreciation. A secondary
objective is to obtain dividend income that increases over time. To achieve its
objectives, the Fund invests its available capital in equity securities
(principally, publicly traded common stocks) issued by approximately 20 to 30
companies ("Portfolio Companies") that satisfy the stringent investment
criteria described in this Prospectus. In general terms, each Portfolio Company
must have consistently achieved high returns on equity for ten years, must have
paid increasing dividends for five years, must be in excellent financial
condition, and must, in the opinion of Jensen Investment Management, Inc. (the
"Investment Adviser), be capable of sustaining its demonstrated competitive
advantages. However, the Fund may sell all or part of its position in a
Portfolio Company when the Investment Adviser has determined that the Portfolio
Company should be replaced with another qualifying security that has a higher
"opportunity factor" (as described under "Investment Strategy," below). In
addition, the Fund must sell its entire position in a Portfolio Company when the
Portfolio Company no longer meets the specified criteria, unless such failure is
due to an extraordinary situation that the Investment Adviser believes will not
have a material adverse impact on the Portfolio Company's operating performance.
Certain risks are inherent in the ownership of any security, and there can be no
assurance that the Fund's objectives will be achieved.
INVESTMENT STRATEGY
- -------------------
The Fund strives to be fully invested at all times in publicly traded common
stocks and other "Eligible Equity Securities" (as defined in "Fundamental
Investment Policies' below) issued by Portfolio Companies that meet the
criteria described below.'Fully invested" means that 100 percent of the Fund's
net assets, or as close to 100 percent of the net assets as is practicable, will
be invested in Eligible Equity Securities at all times. However, the Fund's
Bylaws allow the Investment Adviser to retain all proceeds of newly issued
shares in "Cash or Cash Equivalents" (as defined in "Fundamental Investment
Policies' below) for up to 30 days after receipt, and to retain as much as 10
percent of the Fund's other net assets in Cash or Cash Equivalents.
The Fund has established specific criteria for the selection of Portfolio
Companies. The Investment Adviser believes these criteria provide objective
evidence of management that is capable and that is dedicated to providing
excellent returns to the Portfolio Company's shareholders. To be selected as a
Portfolio Company, a company must have satisfied all of the following
requirements:
- - Attained a return on equity of at least 15 percent per year for at least the
prior 10 consecutive years.
- - Currently have an excellent financial condition.
- - Currently have a favorable "opportunity factor" as calculated by the
Investment Adviser. The Investment Adviser has developed a formula to
calculate a company's "opportunity factor" based on the ratio of the
company's estimated intrinsic or private business value to the company's
market value.
- - Demonstrated a commitment to rewarding shareholders by increasing dividends
at an average rate greater than the rate of inflation for the past five years
or by stock repurchases or other measures having an equivalent effect.
- - In the opinion of the Investment Adviser, established entry barriers in the
company's competitive environment as evidenced by: (i) differentiated
products, which can be protected from competition by patents, copyright
protection, effective advertising or other means; (ii) economies of scale in
the production, marketing, or maintenance of the company's products or
services; (iii) absolute cost advantages (e.g., obtaining raw materials at
lower costs); (iv) capital requirements at a level which make it
impracticable for other firms to enter the business; or (v) other sustainable
competitive advantages identified by the Investment Adviser.
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- - In the opinion of the Investment Adviser, have the capability of continuing
to meet all of the above criteria.
The Fund purchases securities of Portfolio Companies with the intent to hold
them as long as they continue to meet all the criteria listed above. However,
the Fund may sell all or part of its position in a Portfolio Company if the
Investment Adviser determines that the Portfolio Company should be replaced with
another qualifying security that has a higher "opportunity factor." In
addition, the Fund must sell its entire position in a Portfolio Company if the
Portfolio Company fails to meet one or more of the criteria specified above,
unless such failure is due to an extraordinary situation that the Investment
Adviser believes will not have a material adverse impact on the company's
operating performance, and the Fund will sell the entire position within a
reasonable period (not to exceed 12 months) after such determination has been
made.
The Investment Adviser expects that approximately 20 to 30 companies will be
included in the Fund's portfolio at any time. The Fund must always own the
securities of at least 15 different Portfolio Companies.
FUNDAMENTAL INVESTMENT POLICIES
- -------------------------------
The Fund has adopted certain fundamental investment policies that cannot be
changed without approval of the holders of a "majority of the outstanding
voting shares' of the Fund. That term is defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), as the lesser of: (i) 67 percent or more
of the Fund's shares present at a shareholder meeting in person or by proxy, if
the holders of more than 50 percent of the Fund's shares are present; or (ii)
more than 50 percent of the Fund's outstanding shares.
One of the Fund's fundamental investment policies is that the Fund's
shareholders must be notified in writing 30 days before the Board of Directors
makes any changes to the investment criteria specified under "Investment
Strategy' above.
Other fundamental investment policies prohibit the Fund from investing in any
assets that are not either Cash or Cash Equivalents or Eligible Equity
Securities, and require at least 90 percent of the Fund's assets to be invested
in Eligible Equity Securities. In order to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"), the Fund's fundamental investment policies require that, as of the
end of each fiscal quarter, at least 50 percent of the value of the Fund's total
assets must consist of: (i) cash and certain cash equivalents and government
securities, and (ii) other securities limited in respect to any issuer to an
amount not greater than 5 percent of the Fund's total assets and not
representing more than 10 percent of the outstanding voting securities of such
issuer. A fundamental investment policy prohibits the Fund from investing 25
percent or more of its total assets in any one industry.
The Fund's Bylaws limit "Cash or Cash Equivalents" to cash held by the
custodian of the Fund's assets, FDIC-insured bank deposits, United States
Treasury bills of less than 90 days' maturity, commercial paper of less than 30
days' maturity that is rated A-1 by S&P or P-1 by Moody's, and demand notes that
are issued by companies whose commercial paper receives such ratings by S&P and
Moody's.
The Bylaws define the term "Eligible Equity Securities" as any of the
following securities that are issued by companies that, at the time the Fund
purchases the security, satisfy the Fund's investment criteria in effect at that
time: (i) common stock that is registered under the Securities Exchange Act of
1934 (the "1934 Act") and is traded on a major United States stock exchange or
through the Nasdaq National Market (and which must be voting stock and, in the
event of the issuer's dissolution, must be entitled to its proportionate share
of the shareholders' equity or net worth of the issuer remaining after payment
of any required preferences to other outstanding classes of the issuer's equity
securities); (ii) convertible debt securities and convertible preferred stock
traded on a major United States stock exchange or through the Nasdaq National
Market, if the owner has the right, at the owner's option, to convert the debt
securities or preferred stock into common stock that satisfies all the
requirements of subsection (i) immediately above, at a specified conversion rate
or price; and (iii) American Depository Receipts ("ADRs") for the common stock
of foreign corporations, if the ADRs are issued in sponsored programs,
registered under the 1934 Act and traded on a major United States stock exchange
or through the Nasdaq National Market. (ADRs are receipts issued by domestic
banks or trust companies that represent the deposit of a security of a foreign
issuer and are publicly traded in the United States.)
The Fund may invest in securities that are issued by foreign companies if the
securities qualify as Eligible Equity Securities and if the issuer meets the
investment criteria described under "Investment Strategy." In addition, many
Portfolio Companies that are headquartered in the United States engage in
substantial foreign business. Furthermore, the Fund may purchase foreign
securities through ADRs. Accordingly, the Fund is subject to certain risks
related to foreign investments. See "Certain Risk Factors to be Considered-
Foreign Securities and ADRs' in this Prospectus.
Additional fundamental investment policies of the Fund prohibit certain
investments and activities. For example, the Fund is not permitted to lend
portfolio securities; purchase or sell options; purchase or sell commodities or
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<PAGE>
commodities contracts, including futures contracts; enter into margin
transactions; or borrow money, except that the Investment Adviser may advance
funds to the Fund to pay the organizational expenses and certain other expenses
of the Fund, as discussed in "Management of the Fund" in this Prospectus. A
complete list of the Fund's fundamental policies is included in the SAI under
"Investment Objectives, Policies and Restrictions-Investment Restrictions."
PORTFOLIO TURNOVER
- ------------------
The Fund purchases portfolio securities with the expectation of holding them for
long-term appreciation. The portfolio turnover rate in the Fund is governed by
the Fund's investment policy, which states that the Fund may sell all or part of
its position in a Portfolio Company when the Investment Adviser has determined
that the Portfolio Company should be replaced with another qualifying security
that has a higher "opportunity factor." In addition, the Fund must sell its
entire position in a Portfolio Company if that company no longer satisfies the
criteria specified above, unless such failure is due to an extraordinary
situation that the Investment Adviser believes will not have a material adverse
impact on the company's operating performance. The number of Portfolio Companies
sold is dependent upon factors largely outside the control of the Fund. The
Investment Adviser expects that the Fund's portfolio turnover rate will
generally not exceed 20 percent during any year. In fiscal 1996, however, the
portfolio turnover rate was approximately 48 percent, due principally to the
restructuring of a portion of the Fund's portfolio. The turnover rate could also
be significantly higher or lower depending on the business performance of the
Portfolio Companies, the number of shares of the Fund that are redeemed, or
other external factors outside the control of the Fund and the Investment
Adviser.
QUALITY CONTROL
- ---------------
To ensure that the Fund's investment strategy, research process and
administration are implemented properly, the Fund has developed an extensive
quality control program. The objectives of this program are to ensure that the
Fund's investment strategy is applied consistently over time, that the objective
criteria are applied on a uniform basis, and that management focuses at all
times on the best interests of the shareholders of the Fund.
Management's investment strategy has been blended with certain administrative
policies to accomplish the above goals. In addition to the measures that are
required by the 1940 Act, the Fund has taken the following steps:
- - Objectively defined the Fund's research process, so that every portfolio
security has met specific objective and analytical tests.
- - Defined the Fund's trading policy to ensure that the Fund purchases only
Eligible Equity Securities issued by qualified Portfolio Companies and makes
portfolio changes only when the Investment Adviser determines the issuer's
performance makes a change advisable.
- - Established investment policies that prohibit the Fund from trading on
margin, lending securities, selling short, or trading in futures or options.
- - Retained a nonaffiliated transfer agent, Firstar Trust Company, to perform
all custody, fund accounting and transfer agent functions (the "Transfer
Agent").
CERTAIN RISK FACTORS TO BE CONSIDERED
INVESTMENT IN THE FUND IS NOT SUITABLE FOR ALL INVESTORS
- --------------------------------------------------------
To the extent practicable, the Fund is fully invested in equity securities at
all times. See "Investment Objectives and Policies" in this Prospectus. The
Investment Adviser believes that this strategy is suitable for investors seeking
long-term capital growth. However, during certain market cycles, the NAV for the
Fund's shares will decrease. Accordingly, the Fund is designed for long-term
investors and is not suitable for investors who intend to liquidate their
investments after a short period of time. In addition, the Fund is not a
suitable investment for investors whose principal objective is current income.
LIMITED OPERATING HISTORY
- -------------------------
The Fund began operations on August 3, 1992. Thus, only a relatively short
period of operating history is available for potential investors to consider in
making their investment decision. However, the principal officers and employees
of the Fund and of the Investment Adviser have extensive experience advising
individual and institutional investors and evaluating the performance of
businesses. See "Management of the Fund" in this Prospectus and "Management"
in the SAI for further background on the business experience of the directors
and officers of the Fund and of the Investment Adviser.
DEPENDENT ON MANAGEMENT OF INVESTMENT ADVISER
- ---------------------------------------------
The Fund is dependent upon the services of Val E. Jensen, 67, Gary W. Hibler,
52, and Robert F. Zagunis, 42, the principal officers and employees of the
Investment Adviser and of the Fund. In the event of the death or disability of
one or more of such persons, or any material change in management or ownership
of the Investment Adviser, the Fund's Board of Directors is required to meet as
soon as practicable after such event to consider whether another investment
adviser should be selected for the Fund. However, the selection of Portfolio
Companies is, to a large extent, the result of meeting certain objective
criteria, which the Investment
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Adviser believes could be applied by the remaining officers of the Investment
Adviser in the event of the death or disability of any of the current officers.
See "Investment Objectives and Policies" in this Prospectus.
NONDIVERSIFIED PORTFOLIO
- ------------------------
The Fund is a nondiversified mutual fund. This means that the Fund is not
restricted by the provisions of the 1940 Act with respect to the diversification
of its investments. Because the Fund's "nondiversified status" permits the
investment of a greater portion of the Fund's assets in the securities of a
smaller number of issuers than would be permissible under a "diversified
status,' the Fund's "nondiversified status" is considered to subject the
shareholders of the Fund to a greater degree of risk. Because the Fund is not
diversified, as defined in the 1940 Act, it may at times be more affected by
variations in the price of one or a small number of securities than would a fund
that qualifies as a diversified fund. Conversely, the Fund may realize greater
benefits from increases in the value of one or a small number of securities than
would a diversified fund.
Notwithstanding the Fund's "nondiversified status," as a matter of policy,
which cannot be changed without 30 days' advance notice to the Fund's
shareholders, assets of the Fund must always be invested in at least 15
Portfolio Companies. The Investment Adviser expects that approximately 20 to 30
companies will be included in the Fund's portfolio at any time. See "Investment
Objectives and Policies.' Accordingly, the Fund may be sufficiently
diversified, during most periods, to qualify as a "diversified fund" under the
1940 Act. Furthermore, as described under "Investment Objectives and Policies-
Fundamental Investment Policies,' the Fund will maintain the diversification
required by the Code to retain its status as a regulated investment company.
FOREIGN SECURITIES AND ADRS
- ---------------------------
Although all of the Fund's portfolio securities must be traded on United States
stock exchanges or through the Nasdaq National Market, the Fund may invest in
certain foreign securities and ADRs, and it invests in domestic companies that
engage in significant foreign business. See "Investment Objectives and
Policies' in this Prospectus. Such investments involve certain risks, such as
political or economic instability in the country where the Portfolio Company is
headquartered or doing business, fluctuations in the relative rates of exchange
between the currencies of different nations, the difficulty of predicting
international trade patterns and the possibility of imposition of exchange
control regulations. Such securities may also be subject to greater fluctuations
in price. With respect to certain foreign countries, there also is a possibility
of expropriation, nationalization, confiscatory taxation, political, economic or
social instability and diplomatic developments, which could affect investments
in those countries. See "Investment Objectives, Policies and Restrictions-
ADRs' in the Fund's SAI for additional information relating to ADRs.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
- ------------------
The Fund is managed by and under the supervision of its Board of Directors. The
Fund's directors are Val E. Jensen, Gary W. Hibler, Robert F. Zagunis, Louis B.
Perry and Norman W. Achen. All powers conferred by Oregon and other applicable
law are exercised by and under authority of the Board of Directors. Information
about the officers and directors of the Fund is set forth under "Management of
the Fund' in the Fund's SAI. Because of the nature of the duties and
responsibilities assumed by the Fund's Investment Adviser and the Transfer
Agent, the Fund has no direct employees other than its officers.
INVESTMENT ADVISER
- ------------------
Jensen Investment Management, Inc., 430 Pioneer Tower, 888 S.W. Fifth Avenue,
Portland, OR 97204-2018, serves as the Fund's Investment Adviser under an
Investment Advisory and Service Contract (the "Advisory Agreement"). The
Investment Adviser began providing investment advice to individual and
institutional clients in 1990.
The Investment Adviser serves as investment adviser to individual and
institutional accounts, and was managing assets totalling approximately $55
million at June 30, 1996. Val E. Jensen, the President and a director of the
Fund, is the President, a Managing Director and, together with his wife, Mary
Ellen Jensen, the beneficial owner of approximately 69 percent of the
outstanding stock of the Investment Adviser. Accordingly, Mr. Jensen controls
the Investment Adviser. The Investment Adviser's Investment Committee, which is
responsible for all the Fund's investment decisions, consists of Val E. Jensen,
Gary W. Hibler and Robert F. Zagunis.
Mr. Jensen has more than 30 years of experience advising individual and
institutional investors. He has been the President of the Investment Adviser
since 1988, and he served as President of Jensen Securities Company (from 1983
to 1990) and of Charter Investment Group (from 1977 to 1983). (Jensen Securities
Company is not affiliated with the Fund or the Investment Adviser.) Mr. Jensen
oversees the implementation of the Fund's investment policies and the Fund's
securities research and trading. Gary W. Hibler, Ph.D., has 18 years of
management experience. Prior to joining the Investment Adviser as Vice President
and Managing Director in 1991, Dr. Hibler had served for five years as Director
of Operations of a division of Nichols Institute, a health care company traded
on the American Stock Exchange with
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<PAGE>
$150 million of revenues in 1991. He oversees internal operations and legal and
accounting matters for the Fund. Robert F. Zagunis, a Managing Director of the
Investment Adviser since January 1993, has extensive experience as a commercial
loan officer and executive with The Bank of California (1987 to 1993) and First
Interstate Bank of Oregon (1977 to 1987). His primary responsibilities for the
Fund include sales, marketing and account management. For more information about
management of the Investment Adviser, see "Management of the Fund" and
"Investment Advisory and Service Contract' in the Fund's SAI.
Under the Advisory Agreement, the Investment Adviser provides research, advice
and supervision with respect to the management of the Fund's portfolio of
investments, and determines which companies are eligible to be Portfolio
Companies and when Portfolio Companies no longer satisfy the criteria specified
under "Investment Objectives and Policies" or should be replaced with more
qualified Portfolio Companies. The Investment Adviser places orders for the
purchase and sale of portfolio securities. See "Allocation of Brokerage" in
this Prospectus. All the Investment Adviser's officers are also officers of the
Fund and, subject to the authority of the Fund's Board of Directors, are
responsible for the overall management of the Fund's business.
EXPENSES PAID BY INVESTMENT ADVISER
- -----------------------------------
The Investment Adviser furnishes, for the use of the Fund, office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Fund, maintaining its organization and assisting in providing
shareholder communications and information services. The Investment Adviser pays
the salaries and expenses of officers and directors of the Fund who are
"interested persons" of the Fund, as defined in the 1940 Act. The Investment
Adviser also pays the marketing expenses of the Fund, including the cost of
printing and delivering prospectuses to prospective shareholders.
EXPENSES PAID BY FUND
- ---------------------
All other expenses incurred in the operation of the Fund are payable by the
Fund. These expenses include, but are not limited to: taxes; interest; brokerage
fees and commissions; fees of directors who are not "interested persons" of
the Fund (as defined in the 1940 Act); SEC filing and qualification fees and
state securities law qualification fees; fees of the Investment Adviser and of
the Transfer Agent; insurance premiums; outside auditing and legal expenses;
costs of maintaining the Fund's corporate existence, providing investor services
and corporate reports, and holding corporate meetings; costs of preparing,
printing and distributing prospectuses for regulatory purposes and for
distribution to existing shareholders of the Fund; dues and fees for trade
organizations; administrative expenses; and any extraordinary expenses. Subject
to the expense guarantees described below, if the Investment Adviser advances
payment for any Fund expenses, the Fund will reimburse the Investment Adviser.
In addition to the provisions described below under "Expense Guarantee," the
Investment Adviser has agreed to assume the ordinary recurring expenses of the
Fund for fiscal year 1997 to the extent these expenses of the Fund, together
with the Fund's management fee, exceed 1.20 percent of the Fund's average daily
net assets for the year through October 31, 1996 and to the extent these
expenses of the Fund, together with the Fund's management fee, exceed 1.40
percent of the Fund's average daily net assets for the year after October 31,
1996. See "Fund Expenses" and "Financial Highlights" in this Prospectus.
In addition, the Fund bears all the expenses of its organization, including
those expenses relating to registration of the Fund's shares and the filing,
legal and accounting fees payable in connection with the organization of the
Fund. The Fund's organizational costs are being amortized over a period of 60
months from August 3, 1992. Certain of the Fund's organizational costs were
advanced by the Investment Adviser. The advances will be reimbursed under a
five-year amortization schedule until the Fund has net assets of $50 million or
more, at which time the Fund will reimburse the Investment Adviser for all
remaining organizational costs. However, the Fund will continue to amortize the
costs for accounting purposes.
EXPENSE GUARANTEE
- -----------------
In order to limit the Fund's expenses, the Investment Adviser has guaranteed
that certain expenses payable by the Fund (including, but not limited to,
management fees and legal, audit, custodial, printing and other regular Fund
expenses, but excluding brokerage commissions, taxes, interest, organizational
costs and other expenses that are capitalized, and all extraordinary items such
as litigation or indemnification expenses) will not exceed specified levels in
any fiscal year. If the Fund's regular operating expenses exceed the applicable
limit specified below (expressed as a percentage of average daily net assets on
an annual basis), the Investment Adviser will reduce its management fee, or
reimburse the Fund, in an amount equal to the excess:
Average Daily Net Annual
Assets for the Year Expense Limit
------------------- -------------
$100,000 - $10,000,000 2.00%
$10,000,001 - $15,000,000 1.75
$15,000,001 - $25,000,000 1.50
$25,000,001 - $50,000,000 1.25
$50,000,001 - $100,000,000 1.00
$100,000,001 and above 0.75
Any reduction in management fees or reimbursement of expenses by the Investment
Adviser required pursuant to
A-7
<PAGE>
the above expense guarantee will be computed and accrued daily, paid monthly and
adjusted annually on the basis of the Fund's average daily net assets for the
year.
MANAGEMENT FEE
- --------------
The investment advisory fee of the Fund is accrued on a daily basis and paid
monthly. Pursuant to the Advisory Agreement, the fee accrues at the annual rate
of 0.50 percent of the Fund's average daily net assets.
ADMINISTRATOR
- -------------
Firstar Trust Company serves as Administrator to the Fund (the "Administrator").
Firstar Trust Company also is the Fund's custodian, transfer
agent and dividend disbursing agent.
Administrative services provided to the Fund include preparing tax returns and
financial reports, monitoring compliance with regulatory requirements, and
generally assisting in the Fund's administrative operations. For its
administrative services, the Fund pays the Administrator a monthly fee
equivalent to 0.05 percent of the Fund's average daily net assets during the
year, reduced to 0.04 percent of such net assets in excess of $100 million, and
further reduced to 0.03 percent of such net assets in excess of $500 million,
subject to an annual minimum of $15,000 for the 12-month period ending April 30,
1997.
PURCHASE OF SHARES
DISTRIBUTION
- ------------
Shares are sold by the Fund on a continuous basis. Investors who purchase shares
directly from the Fund do not pay any sales load or commission.
Shares of the Fund also may be purchased or sold through certain broker-dealers,
financial institutions or other service providers ("ProcessingIntermediaries').
When shares of the Fund are purchased this way, the Processing Intermediary,
rather than its customer, may be the shareholder of record of the shares.
Processing Intermediaries may use procedures and impose restrictions in
addition to or different from those applicable to shareholders who invest in
the Fund directly.
An investor intending to invest in the Fund through a Processing Intermediary
should read the program materials provided by the Processing Intermediary in
conjunction with this Prospectus. Processing Intermediaries may charge
transaction-based fees or other charges for the services they provide to their
customers. Such charges are retained by the Processing Intermediary and are not
remitted to the Fund or the Investment Adviser.
MINIMUM INVESTMENT
- ------------------
The minimum initial investment for direct investment in the Fund generally is
$1,000. Any lesser amount must be approved by the Fund or the Investment
Adviser. Investors who purchase through a Processing Intermediary may purchase
in lesser amounts, subject to minimums imposed by the Processing Intermediary.
INITIAL INVESTMENT; SUBSEQUENT INVESTMENTS
- ------------------------------------------
When opening an account (other than an individual retirement account or 403(b)
plan naming Firstar Trust Company as custodian), you must complete and sign the
Account Application and mail it to the following address:
The Jensen Portfolio, Inc.
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201-0701
Do not mail letters by overnight courier to the post office box address.
Correspondence mailed by overnight courier should be sent to the Fund at:
The Jensen Portfolio, Inc.
c/o Firstar Trust Company
615 East Michigan Street
Milwaukee, WI 53202
You may purchase shares by mailing a check to the above address or by wiring
federal funds to the Transfer Agent. Before wiring funds, call the Transfer
Agent at 800-338-1579 to ensure prompt and accurate handling of your transfer.
Then, instruct your bank to wire the purchase price to: Firstar National Bank,
777 East Wisconsin Avenue, Milwaukee, WI 53202, ABA No. 0750-00022, credit
Firstar Trust Company, Account No. 112-952-137, further credit The Jensen
Portfolio, and specify the account number and the name(s) of the registered
account owner(s). If you want to establish an individual retirement account or
403(b) plan naming Firstar Trust Company as custodian, please call our
shareholder services at 800-338-1579 for information and forms.
All applications to purchase capital stock are subject to acceptance or
rejection by authorized officers of the Fund and are not binding until accepted.
Applications will not be accepted unless they are accompanied by payment in U.S.
funds. Payment should be made by check drawn on a U.S. bank, savings and loan,
or credit union. The custodian will charge a $20.00 fee against a shareholder's
account, in addition to any loss sustained by the Fund, for any payment check
returned to the custodian for insufficient funds. It is the policy of the Fund
not to accept applications under circumstances or in amounts considered
disadvantageous to shareholders. For example, if an individual previously tried
to purchase shares with a bad check, or the proper social security number or tax
identification number is omitted, the Fund reserves the right not to accept
future
A-8
<PAGE>
applications from such an individual. The Fund reserves the right to reject any
application that does not include a certified social security or tax
identification number.
The Fund and the Transfer Agent are available to assist you in opening accounts
and when purchasing or redeeming shares.
PURCHASES CANNOT BE MADE BY TELEPHONING THE FUND OR THE TRANSFER AGENT.
PURCHASE THROUGH AUTOMATIC INVESTMENT PROGRAM
- ---------------------------------------------
Investments in the Fund may be made automatically from your bank under the
Automatic Investment Program. Shareholders whose bank is a member of the
National Automated Clearing House Association may choose to have amounts of $100
or more automatically transferred from a bank checking account to the Fund on
the schedule (e.g,. monthly, bimonthly (every other month), quarterly, or
yearly) you select. To establish this option, complete the appropriate section
on the Application Form. Your Jensen Portfolio account must be established at
the minimum investment level before this automatic investment program
goes into effect. Please call our shareholder services at 800-338-1579 if you
have questions.
PRICE OF YOUR SHARES; NET ASSET VALUE
- -------------------------------------
Orders received on any business day before the close of regular trading hours
(currently, 4 p.m. Eastern time) on the New York Stock Exchange ("NYSE") will
be entered at that day's NAV. Orders received after the close of regular trading
hours on the NYSE will be entered at the NAV next determined. The Fund does not
consider the U.S. Postal Service or other independent delivery services to be
its agents. Therefore, deposit in the mail or with such services, or receipt at
Firstar Trust Company's post office box, of purchase applications or redemption
requests does not constitute receipt by Firstar Trust Company or the Fund.
The NAV of Fund shares is determined at the close of regular trading hours of
the NYSE each day the NYSE is open. The NAV per share is determined by dividing
the total value of the Fund's securities and other assets, less its liabilities,
by the total number of shares outstanding. Securities are valued at market value
or, if market value is not readily available, at their fair value determined in
good faith by or under the direction of the Fund's Board of Directors. See "Net
Asset Value' in the Fund's SAI for additional information about the
determination of the NAV for the Fund's shares.
CERTIFICATES
- ------------
The issuance of shares is recorded on the books of the Fund in full and
fractional shares carried to the third decimal place. To avoid additional
operating costs and for investor convenience, the Fund does not expect to issue
stock certificates. Certificates will not be issued without the permission of
the Fund.
CHOOSING A DISTRIBUTION OPTION
- ------------------------------
When you complete your Account Application, you may choose from three
distribution options:
1.You may invest all income dividends and capital gains distributions in
additional shares of the Fund. (This option is assigned automatically if no
other choice is made.)
2.You may elect to receive income dividends and capital gains distributions in
cash.
3.You may elect to receive income dividends in cash and to reinvest capital
gains distributions in additional shares of the Fund.
You may change your election at any time. Your request for a change must be
received in writing by the Transfer Agent prior to the record date for the
distribution being changed.
OTHER PURCHASE INFORMATION
- --------------------------
The Fund reserves the right, in its sole discretion, to suspend the offering of
shares of the Fund or to reject purchase orders when, in the judgment of
management, such suspension or rejection is in the best interests of the Fund;
to waive the minimum initial investment for certain investors; to change the
amount of the required minimum initial investment; to redeem shares if
information provided in the Account Application should prove to be incomplete or
inaccurate in any material manner that cannot be satisfactorily corrected; and
to impose a minimum amount for subsequent investments.
Foreign investors must provide additional information to the Fund. Please call
our shareholder services at
800-338-1579 for assistance.
RETIREMENT PLANS
- ----------------
Tax-sheltered retirement plans (including individual retirement accounts, Keogh
accounts, SEP accounts, 403(b) plans and other ERISA-qualified plans) may invest
in the Fund, subject to the other requirements of the Fund. If a plan has
already been established with a custodian or trustee, the plan may purchase
shares of the Fund in the same manner as any other customer, subject to any
special charges imposed by the plan's custodian or trustee. If a customer wishes
to have Fund shares held in an individual retirement account or 403(b) plan
other than the customer's existing custodial or trust accounts, the customer may
establish a new plan naming Firstar Trust Company as custodian. Such plans
require completion of additional forms. Please call our shareholder services at
800-338-1579 for information and forms.
ACCOUNT ADDRESS AND NAME CHANGES
- --------------------------------
To change the address on your account, you must send the Transfer Agent a
written request signed by all
A-9
<PAGE>
registered owners of the account. The request must include the account number,
the name(s) on the account and both the old and new addresses.
To change the name on an account, the shares must be transferred to a new
account. Please call the Transfer Agent at 800-338-1579 for additional
information.
REDEMPTION OF SHARES
Investors may redeem all or a portion of their shares on any business day.
Shares of the Fund are redeemed at the next NAV calculated after the Fund has
received the redemption request in proper order, as specified below. Payment is
generally made within three business days of receipt of a valid redemption
request. See "Redemption Price and Payment" below.
REDEMPTION BY MAIL
- ------------------
You may redeem all or any part of your shares of the Fund by sending a written
request for redemption to:
The Jensen Portfolio, Inc.
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201-0701
If you wish to use an overnight delivery service, the request for redemption
should be sent to the following address:
The Jensen Portfolio, Inc.
c/o Firstar Trust Company
Mutual Fund Services, Third Floor
615 East Michigan Street
Milwaukee, WI 53202
The request for redemption must specify the number of shares or dollars being
redeemed, the account number, the name(s) on the account, and a daytime
telephone number where an account owner may be reached. The request must be
signed by each registered owner exactly as the shares are registered. Accounts
in the names of corporations, fiduciaries and institutions may require
additional redemption documents (such as, corporate resolutions, certificates of
incumbency, lists of authorized signers, or copies of trust documents or
indentures), depending upon the type of account. Please contact the Transfer
Agent if your account falls into one of these categories.
A redemption request is not deemed to have been submitted until the Transfer
Agent receives all required documents in proper form. If a redemption request is
not in proper form, the redemption request will be returned to the shareholder
within 72 hours after receipt. No redemption will be made until a proper request
is submitted. Shareholders who have an IRA or other retirement plan must
indicate on their redemption request whether or not to withhold federal income
tax. Redemption requests failing to indicate an election not to have federal tax
withheld will be subject to withholding. Depending on the purchase price or
other tax basis of the shares redeemed, the investor may realize a capital gain
or loss on each redemption.
REDEMPTIONS CANNOT BE MADE BY TELEPHONING THE FUND OR THE TRANSFER AGENT.
SIGNATURE GUARANTEE
- -------------------
In addition to the above requirements, a signature guarantee may be required for
the following redemptions: (i) redemptions made by wire transfer; (ii)
redemptions payable other than exactly as the account is registered; (iii)
redemptions mailed to an address other than the address on the account or to an
address that has been changed within 30 days of the redemption request; or (iv)
redemptions for $10,000 or more. The Fund reserves the right to require a
signature guarantee under other circumstances. The Fund honors signature
guarantees from national or state banks, federal savings and loan associations,
trust companies and member firms of domestic stock exchanges.
REDEMPTION PRICE AND PAYMENT
- ----------------------------
Redemptions are processed at the NAV next computed after receipt by the Transfer
Agent of a proper redemption request. Redemption requests received in proper
form by the Transfer Agent before the close of regular trading hours on the NYSE
(currently, 4 p.m. Eastern time) are effective on the day received. Redemption
requests received in proper form after the close of regular trading hours on the
NYSE are effective on the next business day. Payment is made within three
business days of the receipt of a proper redemption request. However, when a
redemption is requested shortly after the purchase of shares by check, the Fund
will not distribute the redemption proceeds of those shares until the check
received for such shares has cleared. It will normally take up to three days to
clear local personal checks or corporate checks and up to seven days to clear
other personal or corporate checks. Investors may avoid such delays by
purchasing shares of the Fund by wire transfer. In addition, the Fund may
suspend the right of redemption or postpone the payment date at ties when the
NYSE is closed or during certain other periods as permitted under the federal
securities laws.
The Fund may be required to withhold federal income tax at a rate of 31% (backup
withholding) from dividend payments, distributions, and redemption proceeds if a
shareholder fails to furnish the Fund with his/her social security or tax
identification number. The shareholder also must certify that the number is
correct and that he/she is not subject to backup withholding. The certification
is included as part of the Account
A-10
<PAGE>
Application. If the shareholder does not have a social security number, he/she
should indicate on the Account Application that an application to obtain a
number is pending. The Fund is required to withhold taxes if a number is not
delivered to the Fund within seven days.
The market value of the securities in the Fund's portfolio is subject to daily
fluctuations, and the NAV of the Fund's shares changes accordingly.
Redemption payments are mailed by check to the account name(s) and address
exactly as registered, unless wire transfer of the funds is requested. There is
no charge for redemption payments that are mailed. Wire transfer redemptions
must be at least $1,000. The Transfer Agent's wire transfer charge (currently,
$10.00) for each redemption will be charged against the account. Your bank may
also impose an incoming wire charge.
REDEMPTIONS AT THE OPTION OF THE FUND
- -------------------------------------
The Fund may require the redemption of shares if, in its opinion, such action
would prevent the Fund from becoming a personal holding company, as defined in
the Code.
In addition, the Fund may institute a policy whereby it automatically redeems
shares if an account balance drops below a certain amount as a result of
redemptions by the shareholder. If such a policy is instituted, the Fund may not
implement such redemption if the decrease in the account balance was caused by
any reason other than shareholder redemptions. As of the date of this
Prospectus, the Fund had not instituted such a policy. However, the Fund's
Articles of Incorporation authorize the Board of Directors to institute such a
policy if the Board determines that such a policy is in the best interests of
the Fund and its shareholders.
OTHER REDEMPTION INFORMATION
- ----------------------------
Neither the Fund, the Investment Adviser nor the Transfer Agent will be liable
for any loss, cost or expense of acting on written instructions believed by the
party receiving the instructions to be genuine and in accordance with the
procedures described in this Prospectus.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to qualify at all times as a regulated investment company under
the Code. By qualifying as a regulated investment company and satisfying certain
other requirements, the Fund will not be subject to federal income or excise
taxes to the extent the Fund distributes its net investment income and realized
capital gains to its shareholders.
The tax characteristics of distributions from the Fund are the same whether paid
in cash or in additional shares. For federal income tax purposes, distributions
of net investment income and short-term capital gains are generally taxable as
ordinary income to the recipient shareholders, and distributions designated as
the excess of net long-term capital gain over short-term capital loss are
generally taxable as long-term capital gains to the recipient shareholder
regardless of the length of time the shareholder held the Fund's shares. A
portion of any dividend may be eligible for the dividends-received deduction in
the case of corporate shareholders.
Shareholders also may be subject to state and local taxes on distributions from
the Fund. Shareholders of the Fund are advised to consult their tax advisers
with respect to state and local tax consequences of owning shares of the Fund.
The Fund declares and distributes dividends from its net investment income on a
quarterly basis and declares and distributes any net capital gains realized by
the Fund on an annual basis. Such distributions are paid in additional Fund
shares unless the shareholder elects in writing to receive distributions in
cash. The Fund notifies its shareholders following the end of each calendar year
of the amounts of dividends and capital gain distributions paid (or deemed paid)
for such year.
Federal law requires the Fund to withhold 31 percent of all distributions and
redemption proceeds paid to certain shareholders who have not complied with
certain tax regulations. The Fund generally does not accept an Account
Application that does not comply with these regulations. Each prospective
shareholder is asked to certify on its Account Application that the social
security number or tax identification number provided is correct and that the
prospective shareholder is not subject to 31 percent backup withholding for
previous under-reporting of income to the Internal Revenue Service.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders. There may be
other federal, state or local tax considerations applicable to a particular
shareholder. Prospective shareholders are therefore urged to consult their tax
advisers prior to purchasing shares of the Fund.
ALLOCATION OF BROKERAGE
The Investment Adviser is responsible for the overall management of the Fund's
portfolio and determines which brokers will execute purchases and sales of
portfolio securities. The Investment Adviser's foremost responsibility is to
place orders so as to achieve the prompt execution of orders at favorable
prices. The Investment Adviser does not engage in any "soft-dollar"
arrangements. See "Portfolio Transactions" in the Fund's SAI.
A-11
<PAGE>
PERFORMANCE INFORMATION
Because performance comparisons are almost universally offered by the mutual
fund industry, from time to time the Fund will discuss its total return
performance figures in advertisements or marketing materials. The Fund's total
return performance figures may appear alone, or in relation to recognized common
stock indexes such as the Dow Jones Industrial Average or the S&P 500 Stock
Index, or in relation to performance ratings published by recognized mutual fund
statistical services such as Lipper Analytical Services, or by publications such
as Forbes or The Economist magazines.
The Fund's total return calculations are expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over a
specified period, reflect the deduction of a proportional share of the Fund's
expenses (on an annual basis), and assume that all dividends and distributions
are reinvested when paid. The Fund imposes no sales or other charges that would
impact the total return computation. For a description of the method used to
determine total return for the Fund, see "Performance Information" in the
Fund's SAI.
Any performance information should be considered in light of the Fund's
investment objectives and strategy and the market conditions during the time
period indicated, and should not be considered to be representative of what may
be achieved by the Fund in the future. The investment return will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than the
original cost of the shares.
GENERAL INFORMATION
ORGANIZATION
- ------------
The Fund is a no-load, open-end, nondiversified management mutual fund. It was
incorporated under Oregon law on April 17, 1992 and commenced operations on
August 3, 1992.
CAPITAL STOCK; VOTING RIGHTS
- ----------------------------
The authorized capital stock of the Fund consists of 100,000,000 shares of
Common Stock, $.001 par value. All shares are of the same class, with equal
voting, redemption, dividend and liquidation rights. Fractional shares have the
same rights proportionately as full shares. Shares issued are fully paid and
nonassessable and have no preemptive or conversion rights. The shares do not
have cumulative voting rights. Therefore, the holders of more than 50 percent of
the shares voting for the election of directors can elect all of the directors
of the Fund.
The Fund is not required to hold meetings of shareholders annually. Special
meetings may be called, however, as required or deemed desirable for purposes
such as electing directors, changing fundamental policies, or approving an
investment management agreement. The holders of not less than 10 percent of the
shares of the Fund may request in writing that a special meeting be called for a
specified purpose. If such a special meeting is called to vote on the removal of
one or more directors of the Fund, shareholders of the Fund will be assisted in
communications with other shareholders of the Fund.
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND ADMINISTRATOR
- ----------------------------------------------------------------------
Firstar Trust Company, 615 East Michigan Street, P.O. Box 701, Milwaukee, WI
53201-0701 (telephone: 800-338-1579), acts as custodian of the Fund's cash and
securities and as the Fund's transfer agent, dividend disbursing agent and
administrator.
CONFIRMATIONS AND STATEMENTS
- ----------------------------
The Transfer Agent sends each investor a statement of his or her account after
every transaction that affects the investor's share balance or account
registration. Please allow seven to ten business days for the Transfer Agent to
confirm your order. The Transfer Agent sends a quarterly account statement to
each shareholder, regardless of whether the shareholder has purchased or
redeemed any shares during the quarter. Generally, a statement with tax
information is mailed to investors by January 31 each year. A copy of the tax
statement also is filed with the Internal Revenue Service.
The Fund sends each shareholder an audited annual report each year and an
unaudited report after the Fund's second fiscal quarter. Each of these reports
includes a statement listing the Fund's portfolio securities.
SHAREHOLDER INQUIRIES
- ---------------------
Shareholder inquiries are answered promptly. They should be addressed to the
Firstar Trust Company, Mutual Fund Services at 615 E. Michigan Street,
Milwaukee, WI 53202 (telephone: 800-338-1519).
STATE REGISTRATION OF FUND SHARES
- ---------------------------------
The Fund has registered some or all of the shares offered by this Prospectus
under the securities laws of various states. Fund shares are not registered in
all states. Therefore, prospective investors should verify with the Fund that
they reside in a state in which shares of the Fund have been duly registered or
that an exemption from such registration is available.
A-12
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF THE FUND'S SHARES
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND.
A-13
<PAGE>
The Jensen Portfolio
Prospectus
Jensen Investment Management
DIRECTORS
Norman W. Achen
Gary W. Hibler
Val E. Jensen
Louis B. Perry
Robert F. Zagunis
OFFICERS
Val E. Jensen, President
Robert F. Zagunis, Vice President
Gary W. Hibler, Secretary
INVESTMENT ADVISER
JENSEN INVESTMENT MANAGEMENT, INC.
430 Pioneer Tower
888 S.W. Fifth Avenue
Portland, OR 97204-2018
Telephone: 503-274-2044
800-221-4384
LEGAL COUNSEL
Stoel Rives, LLP
Suite 2300
900 SW Fifth Avenue
Portland, OR 97204-1268
AUDITORS
Coopers and Lybrand, L.L.P.
Suite 2700
1300 SW Fifth Avenue
Portland, OR 97201
TRANSFER AGENT
FIRSTAR TRUST COMPANY
P.O. Box 701
Milwaukee, WI 53201-0701
- -or-
Third Floor
615 East Michigan Street
Milwaukee, WI 53202-5207
A-14
<PAGE>
THE JENSEN PORTFOLIO, INC.
PART B
---------------
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
THE JENSEN PORTFOLIO, INC.
430 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2018
503-274-2044
800-221-4384
STATEMENT OF
ADDITIONAL INFORMATION
September 27, 1996
This Statement of Additional Information ("SAI") of The Jensen
Portfolio, Inc. (the "Fund") is not a prospectus but should be read in
conjunction with the Prospectus of the Fund, dated the same date as this
SAI, which has been filed with the Securities and Exchange Commission and
is available without charge upon request by calling or writing the Fund.
This SAI has been incorporated by reference into the Fund's Prospectus.
<PAGE>
THE JENSEN PORTFOLIO, INC.
STATEMENT OF ADDITIONAL INFORMATION
September 27, 1996
TABLE OF CONTENTS
Page
----
GENERAL INFORMATION AND HISTORY............................................B-1
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS...........................B-1
Investment Objectives..................................................B-1
Investment Restrictions................................................B-1
Commercial Paper Ratings...............................................B-3
ADRs ..............................................................B-3
MANAGEMENT OF THE FUND.....................................................B-4
Directors and Officers............................................B-4
Investment Adviser................................................B-6
Administrator.....................................................B-6
THE INVESTMENT ADVISORY AND SERVICE CONTRACT...............................B-7
General .........................................................B-7
Management of the Investment Adviser..............................B-9
PORTFOLIO TRANSACTIONS....................................................B-10
General Considerations...........................................B-10
Portfolio Turnover...............................................B-11
PURCHASE AND REDEMPTION OF FUND SHARES....................................B-11
NET ASSET VALUE...........................................................B-12
TAXES .................................................................B-12
General ........................................................B-12
Tax Status of Fund...............................................B-12
Other Considerations.............................................B-14
Additional Information...........................................B-15
PRINCIPAL SHAREHOLDERS....................................................B-16
B-i
<PAGE>
PERFORMANCE INFORMATION...................................................B-17
MISCELLANEOUS INFORMATION.................................................B-18
General ........................................................B-18
Limitation of Director Liability.................................B-18
Indemnification..................................................B-18
Independent Accountants..........................................B-19
Custodian, Transfer Agent and Dividend Disbursing Agent..........B-19
Registration Statement...........................................B-19
Financial Statements.............................................B-20
Appendix A - Commercial Paper Ratings ................................App. A-1
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<PAGE>
GENERAL INFORMATION AND HISTORY
The Jensen Portfolio, Inc. (the "Fund") is a no-load mutual fund. More
specifically, the Fund is an open-end, nondiversified, management
investment company. The Fund was organized as an Oregon corporation on
April 17, 1992 and commenced operation on August 3, 1992. Prior to that
date, the Fund had no operations, other than organizational matters.
The Fund is designed for long-term investors and is not suitable for
investors who intend to liquidate their investments after a short period of
time.
The Fund is designed to provide pension and profit sharing plans,
employee benefit trusts, endowments, foundations, other institutions,
corporations and individuals with access to the professional investment
management services offered by Jensen Investment Management, Inc., which
serves as the investment adviser to the Fund (the "Investment Adviser").
See "Management of the Fund" and "The Investment Advisory and Service
Contract" in this Statement of Additional Information ("SAI").
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Investment Objectives
- ---------------------
As stated in the Fund's Prospectus, the Fund's principal investment
objective is long-term capital appreciation. A secondary objective is to
obtain dividend income that increases over time. There can be no assurance
that the Fund will achieve its objectives.
The Prospectus discusses the types of securities in which the Fund
will invest, and describes the Fund's investment policies and strategy. See
"Investment Objectives and Policies" in the Prospectus. This discussion
supplements the discussion in the Fund's Prospectus and should be read in
conjunction with the Prospectus.
Investment Restrictions
- -----------------------
The Fund has imposed upon itself certain fundamental investment
restrictions, which may not be changed without the approval of the
shareholders. Any change must be approved by the lesser of (i) 67 percent
or more of the Fund's shares present in person or by proxy at a shareholder
meeting, if the holders of more than 50 percent of the Fund's shares are
present, or (ii) more than 50 percent of the Fund's outstanding shares.
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<PAGE>
In accordance with these restrictions, the Fund may not:
1. At the close of any fiscal quarter, have less than 50 percent of
its total assets represented by (i) cash and cash equivalents permitted by
Section 851 of the Internal Revenue Code of 1986, as amended (the "Code"),
and government securities and (ii) other securities limited, in respect of
any one issuer, to an amount not greater in value than 5 percent of the
value of the total assets of the Fund and to not more than 10 percent of
the outstanding voting securities of such issuer.
2. Retain more than 10 percent of its assets in "Cash or Cash
Equivalents" (as defined in the Fund's Bylaws and described in the
Prospectus under "Investment Objectives and Policies--Fundamental
Investment Policies"), except that the proceeds of any newly issued shares
of the Fund may remain in Cash or Cash Equivalents for up to 30 days after
receipt.
3. Invest in any assets that are not either (a) "Cash or Cash
Equivalents," or (b) "Eligible Equity Securities" (as such terms are
defined in the Fund's Bylaws and described in the Fund's Prospectus under
"Investment Objectives and Policies--Fundamental Investment Policies").
4. Invest 25 percent or more of the Fund's total assets in any one
industry. (The Fund generally will use the industry classifications
provided by Value Line in determining an issuer's industry. However, when a
Value Line classification is not available for an issuer, the Fund will use
the Directory of Companies Filing Annual Reports with the Securities and
Exchange Commission, published by the Securities and Exchange Commission
(the "SEC"), to determine the appropriate industry for that issuer.)
5. Borrow money to invest in securities or for any other purpose,
except that the Investment Adviser may advance funds to the Fund to pay
organizational expenses and certain other expenses of the Fund, as
disclosed in the Prospectus.
6. Purchase securities on margin, except such short-term credits as
are standard in the industry for the clearance of transactions.
7. Make short sales of securities or maintain a short position.
8. Lend portfolio securities.
9. Make loans to any person or entity, except that the Fund may,
consistent with its investment objectives and policies, invest in: (a)
publicly traded debt securities that qualify as Eligible Equity Securities;
(b) commercial paper of less than 30 days' maturity that is rated P-1 by
Moody's Investment Services, Inc. ("Moody's") or A-1 by Standard & Poor's
Corporation ("S&P"); and (c) demand notes that are issued by corporations
whose commercial paper receives such ratings, even though the investment in
such obligations may
B-2
<PAGE>
be deemed to be the making of loans. See "Investment Objectives, Policies
and Restrictions--Commercial Paper Ratings" in this SAI.
10. Invest in, or engage in transactions involving, real estate or
real estate mortgage loans; commodities or commodities contracts, including
futures contracts; oil, gas or other mineral exploration or development
programs, or option contracts.
11. Invest in any security that would expose the Fund to unlimited
liability.
12. Underwrite the securities of other issuers, or invest in
restricted or illiquid securities.
13. Invest in securities of other investment companies.
14. Issue any senior securities.
15. Change the investment policies set forth in the Fund's then
current Prospectus and SAI, unless at least 30 days' prior written notice
is provided to each shareholder describing each policy change and the
reasons for the change. (However, the restrictions set forth in paragraphs
1 through 14 above may only be changed with shareholder approval.)
Commercial Paper Ratings
- ------------------------
Moody's and S&P are private services that provide ratings of the
credit quality of commercial paper. A description of the ratings assigned
to commercial paper by Moody's and S&P are included as Appendix A to this
SAI. The Fund may purchase commercial paper that is rated P-1 by Moody's or
A-1 by S&P and demand notes issued by companies whose commercial paper
receives such ratings.
ADRs
- ----
As disclosed in the Prospectus, the Fund may invest in certain foreign
securities, directly and by purchasing American Depository Receipts
("ADRs"). In addition, the Fund invests in domestic companies that engage
in substantial foreign business. Some of the risk factors associated with
such investments are described in the Prospectus under "Certain Risk
Factors to be Considered--Foreign Securities and ADRs." This information
supplements the information about ADRs contained in the Prospectus.
Generally, ADRs are denominated in United States dollars and are
publicly traded on exchanges or over-the-counter in the United States. ADRs
are receipts issued by domestic banks or trust companies evidencing the
deposit of a security of a foreign issuer.
ADRs may be issued in sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities trade in
the form of ADRs. In
B-3
<PAGE>
unsponsored programs, the issuer may not be directly involved in the
creation of the program. Although regulatory requirements with respect to
sponsored and unsponsored programs are generally similar, in some cases it
may be easier to obtain financial information from an issuer that has
participated in the creation of a sponsored program. The Fund will acquire
only ADRs issued in sponsored programs.
MANAGEMENT OF THE FUND
Directors and Officers
- ----------------------
The directors and officers of the Fund are listed below, together with
information about their principal business occupations during at least the
last five years:
VAL E. JENSEN<F1>, 67, is President and a director of the Fund. Since
1988, Mr. Jensen has been employed as President and a Managing Director of
the Investment Adviser, which managed assets totalling approximately $55
million at June 30, 1996. At June 30, 1996, Mr. Jensen was the beneficial
owner of 69.3 percent of the shares of the Investment Adviser. Mr. Jensen
was employed as President of Jensen Securities Co., a registered securities
brokerage firm, from 1983 to 1990, and as President of Charter Investment
Group, a registered securities brokerage firm, from 1977 to 1983. Mr.
Jensen has over 30 years of experience in the securities industry, having
worked as a trader, broker, underwriter, investment banker, and senior
executive in national and regional brokerage firms. Mr. Jensen's business
address is 430 Pioneer Tower, 888 S.W. Fifth Avenue, Portland, Oregon
97204-2018.
GARY W. HIBLER<F1>, Ph.D., 52, is Secretary and a director of the
Fund. Dr. Hibler has been employed as a Managing Director of the Investment
Adviser since 1991. In May 1994, he also was appointed Secretary of the
Investment Adviser. At June 30, 1996, Dr. Hibler was the beneficial owner
of 36.9 percent of the outstanding shares of the Investment Adviser. From
1987 to 1991, Dr. Hibler was employed as Director of Operations of several
operating units of Nichols Institute, Inc. of San Juan Capistrano,
California, a publicly held health care company with $150 million of annual
revenues in 1991. From 1974 to 1986, Dr. Hibler was employed as President,
Chief Executive Officer and a director of Medlab, Inc. of Portland, Oregon,
a clinical laboratory with $6 million of annual revenues in 1986. Dr.
Hibler's business address is 430 Pioneer Tower, 888 S.W. Fifth Avenue,
Portland, Oregon 97204-2018.
- --------
<F1> This person is an "interested person" of the Fund, as defined in
the Investment Company Act of 1940, as amended. He receives no director
fees, salaries, pension or retirement benefits from the Fund.
B-4
<PAGE>
ROBERT F. ZAGUNIS<F1>, 42, is Vice President and a director of the
Fund. Mr. Zagunis has been employed as Vice President and Managing Director
of the Investment Adviser since January 1993. At June 30, 1996, Mr. Zagunis
also was the beneficial owner of 22.1 percent of the outstanding shares of
the Investment Adviser. For more than 15 years before joining the
Investment Adviser, Mr. Zagunis was employed in various commercial banking
positions. He was employed by The Bank of California from 1987 to January
1993, most recently as Vice President and Loan Officer. Mr. Zagunis was on
the Finance Committee for the State of Oregon Economic Development
Department from 1990 to 1993, serving as its Chair during 1993. Mr.
Zagunis' business address is 430 Pioneer Tower, 888 S.W. Fifth Avenue,
Portland, Oregon 97204-2018.
LOUIS B. PERRY, Ph.D.<F2>, 78, is a director of the Fund. Dr. Perry
was Chairman of Standard Insurance Company from 1983 to 1985, when he
retired, and he was President of that company from 1972 to 1983. From 1959
to 1967, Dr. Perry was President of Whitman College in Walla Walla,
Washington. He was an Honorary Overseer of Whitman College from 1967 to
1991, and he has served on its Board of Overseers since 1991. Dr. Perry
served as a director of Flight Dynamics, Inc., a manufacturer of instrument
panel display devices for commercial aircraft, from 1982 to 1992 and served
as a director of the Investment Adviser from January 1991 to April 1992.
Dr. Perry's business address is 1585 Gray Lynn Drive, Walla Walla,
Washington 99362.
NORMAN W. ACHEN, J.D.<F3>, 75, is a director of the Fund. He has been
the senior member of the health care investment and management consulting
firm, The Achen Group, since 1992, and Chairman and Chief Executive Officer
of Duplicate Golf, Inc. since 1993. He was a consultant to Nichols
Institute, Inc. from 1991 to 1993, and was a director of Nichols Institute
from 1981 to 1993. Mr. Achen served as President and Chief Executive
Officer of Nichols Institute Regional Laboratories and Treasurer of Nichols
Institute between 1985 and 1991. He founded Overland Bank, Temecula,
California, in 1982 and served as its Chairman until he retired from that
position in 1991. He also is a director of Ancra International, Inc. and
Martell Medical, Inc. Mr. Achen's business address is 43805 Villa del Sur,
Temecula, California 92390.
Each director of the Fund is elected to serve until the director's
successor is duly elected and qualifies. The Board of Directors is
responsible for the overall management of
- --------
<F1> Footnote on prior page.
<F2> Mr. Perry received $7,000 in director fees and $455 in expense
reimbursements for the fiscal year ended May 31, 1996. He receives no
pension or retirement benefits from the Fund.
<F3> Mr. Achen received $7,000 in director fees and $779 in expense
reimbursements for the fiscal year ended May 31, 1996. He receives no
pension or retirement benefits from the Fund.
B-5
<PAGE>
the Fund, including the general supervision and review of its investment
policies and activities. The Board of Directors elects the officers of the
Fund, who are responsible for supervising and administering the Fund's
day-to-day operations.
The Fund's directors and officers who are affiliated with the
Investment Adviser are not separately compensated for their services as
directors or officers of the Fund. The Fund pays each of its directors who
are not "interested persons" of the Fund, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), a fee of $5,000 per year,
plus $500 for each meeting attended in person and $250 for each telephonic
meeting attended. Directors also are reimbursed for any expenses incurred
in attending meetings. For the fiscal year ended May 31, 1996, such fees
and expenses aggregated $15,234 for the disinterested directors.
At June 30, 1996, officers and directors of the Fund beneficially
owned 7.9 percent of the outstanding shares of the Fund. See "Principal
Shareholders" in this SAI.
Investment Adviser
- ------------------
Jensen Investment Management, Inc. serves as the Investment Adviser to
the Fund. See "The Investment Advisory and Service Contract" in this SAI.
Administrator
- -------------
Firstar Trust Company (the "Administrator") performs certain
administrative functions for the Fund in addition to services it provides
as the Fund's custodian, transfer agent and dividend disbursing agent. The
administrative duties it performs include: (a) compiling data for the Fund;
(b) assisting in updating the Fund's prospectus, SAI, proxy statements and
notices to the SEC required pursuant to Rule 24f-2 under the 1940 Act; (c)
preparing Semiannual Reports on Form N-SAR; (d) preparing and filing all
federal and state tax returns and required tax filings, other than those
required to be made by the Fund's custodian and transfer agent; (e)
preparing compliance filings pursuant to state securities laws; (f)
preparing financial statements for the Fund's Annual and Semiannual Reports
to Shareholders with the advice of the Fund's auditors, as needed, and
assisting in editing these reports if requested by the Investment Adviser;
(g) monitoring the Fund's expense accruals; (h) monitoring the Fund's
status as a regulated investment company under Subchapter M of the Code;
(i) maintaining the Fund's fidelity bond as required by the 1940 Act; (j)
periodically monitoring the Fund's compliance with the 1940 Act and the
investment limitations of the Fund as set forth in the Fund's Prospectus;
and (k) generally assisting in the Fund's administrative operations.
For such services, the Administrator receives a monthly fee equal on
an annual basis to 0.05 percent of the first $100 million of the Fund's
average daily net assets for the year, reduced to 0.04 percent of the
Fund's net assets in excess of $100 million and further reduced to 0.03
percent of such net assets in excess of $500 million, subject to a first
year
B-6
<PAGE>
annual minimum of $15,000. The Fund accrued fees of $1,250 for
administration services provided by the Administrator for the period May 1,
1995 through May 31, 1995 and fees of $14,889 the period June 1, 1995
through May 31, 1996.
The Administrator is relieved of liability to the Fund for any act or
omission in the course of its performance under the administration
agreement, so long as the Administrator acts in good faith and is not
negligent or guilty of any willful misconduct. The administration agreement
continues in effect from year-to-year; however, the agreement may be
terminated by the Fund or by the Administrator without penalty after upon
at least 90 days' written notice.
Before May 1995, the Fund retained Sunstone Financial Group, Inc. to
perform certain administrative functions for the Fund (the "Prior
Administrator"). For its services, the Prior Administrator received a
monthly fee equal on an annual basis to 0.15 percent of the first $50
million of the Fund's average daily net assets for the year, reduced to
0.05 percent of the Fund's net assets in excess of $50 million, and further
reduced to 0.025 percent of such net assets in excess of $100 million. For
services provided by the Prior Administrator under the administration
agreement for the period August 3, 1992 (commencement of operations)
through May 31, 1993, the Fund accrued fees of $8,420. For the fiscal year
ended May 31, 1994, such fees totaled $13,713. For the period June 1, 1994
through April 30, 1995, such fees totaled $12,871.
THE INVESTMENT ADVISORY AND SERVICE CONTRACT
General
- -------
Jensen Investment Management, Inc. serves as Investment Adviser to the
Fund pursuant to a Restated Investment Advisory and Service Contract dated
July 13, 1993 (the "Advisory Agreement"). Under the Advisory Agreement, the
Investment Adviser reviews the portfolio of securities and investments in
the Fund, and advises and assists the Fund with respect to the selection,
acquisition, holding or disposal of securities and makes recommendations
with respect to other aspects and affairs of the Fund. The Investment
Adviser also is responsible for placing orders for the purchase and sale of
the Fund's investments directly with the issuers or with brokers or dealers
selected by the Investment Adviser. See "Portfolio Transactions" in this
SAI. Additional information about the services provided by the Investment
Adviser to the Fund is described under "Management of the Fund" in the
Fund's Prospectus.
As compensation for its services under the Advisory Agreement, the
Investment Adviser receives a monthly fee at the annual rate of 0.50
percent of the average daily net assets of the Fund. Except for the
expenses paid by the Investment Adviser (which are described in the Fund's
Prospectus), the Fund bears all costs of its operations. The Investment
Adviser has guaranteed that the expenses payable by the Fund will not
exceed
B-7
<PAGE>
certain specified limits, as described in the Prospectus. Accordingly, the
Investment Adviser may be required to reimburse certain expenses paid by
the Fund or, alternatively, the Investment Adviser may waive a portion of
its management fee. In addition, at its discretion, the Investment Adviser
may voluntarily reduce its management fee or reimburse the Fund for certain
expenses in order to keep the Fund's expenses at levels competitive with
other funds. For the period from August 3, 1992 (commencement of
operations) through May 31, 1993, the Investment Adviser voluntarily
reimbursed the Fund for $33,114 of expenses the Fund had paid to third
parties, and the Investment Adviser voluntarily waived all of its
management fee for the period ($28,068). During the fiscal years ended May
31, 1994 and 1995 the Investment Adviser voluntarily reimbursed the Fund
for $8,771 and $5,152 of expenses the Fund had paid to third parties,
respectively, and voluntarily waived all of its management fee for each of
1994 and 1995 ($45,710 and $45,737 respectively), and $30,602 of its
management fee for 1996.
The Advisory Agreement provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations thereunder, the Investment Adviser is not liable for any act or
omission in the course of, or in connection with, the rendering of services
under the Advisory Agreement. The Advisory Agreement does not restrict the
ability of the Investment Adviser to act as investment adviser for any
other person, firm or corporation, and the Investment Adviser advises other
individual and institutional investors. The Investment Adviser does not
advise any other mutual fund.
The Advisory Agreement continues in effect from year-to-year, if such
continuance is approved annually by (1) the Board of Directors of the Fund,
or (2) a vote of the majority of the outstanding voting shares of the Fund.
In either event, continuance must also be approved by a majority of the
Board of Directors who are not "interested persons" of the Fund (as defined
in the 1940 Act) by vote cast in person at a meeting called for the purpose
of voting on such approval. The Advisory Agreement is terminable without
penalty on not less than 60 days' written notice by the Board of Directors
of the Fund, by vote of the majority of the outstanding voting shares of
the Fund, or upon not less than 60 days' written notice by the Investment
Adviser. The Advisory Agreement terminates automatically upon assignment
(as defined in the 1940 Act). In addition, the Advisory Agreement provides
that, in the event of a material change in the management or ownership of
the Investment Adviser, whether caused by death, disability or other
reason, the Fund's Board of Directors is required to meet as soon as
practicable after such event to consider whether another investment adviser
should be selected for the Fund. In such event, the Advisory Agreement may
be terminated without any prior notice.
The Advisory Agreement reserves to the Investment Adviser the right to
grant the use of a name similar to the Fund's name to another investment
company or business enterprise without approval of the Fund's shareholders
and reserves the right of the Investment Adviser to withdraw from the Fund
the use of the Fund's name. However, if the Investment Adviser chooses to
withdraw from the Fund the use of the Fund's name, at the time of such
B-8
<PAGE>
withdrawal, the Investment Adviser would have to submit to the Fund's
shareholders the question of whether they wish to continue the Advisory
Agreement.
As used in this SAI and in the Fund's Prospectus, when referring to
approval of the Advisory Agreement to be obtained from shareholders of the
Fund, the term "majority" means the vote, at any meeting of the
shareholders, of the lesser of (1) 67 percent or more of the shares present
at such meeting, if the holders of more than 50 percent of the outstanding
shares are present in person or by proxy, or (2) more than 50 percent of
the outstanding shares.
No expense limitation is imposed by the states in which the Fund
presently intends to register and market its shares, other than the state
of California. The fees of the Fund are in compliance with the expense
limitations imposed by California. If the Fund determines it is desirable
to market its shares in any other state that imposes an expense limitation
on investment companies, the Investment Adviser's fee will be reduced, if
necessary, to comply with such limitation, and the Fund will file a
post-effective amendment to its Registration Statement to reflect any such
reduced fee and any additional restrictions imposed by any such state or
states.
Management of the Investment Adviser
- ------------------------------------
Val E. Jensen, Gary W. Hibler and Robert F. Zagunis are officers and
directors of the Investment Adviser. See "Management of the Fund" in this
SAI for information about them. Additional directors of the Investment
Adviser are listed below, together with information about their principal
business occupations during at least the last five years.
MARY ELLEN JENSEN, 65, has been employed as Director of Operations of
the Investment Adviser since 1990. At June 30, 1996, Mrs. Jensen, together
with her husband, Val E. Jensen, beneficially owned 69.3 percent of the
outstanding shares of the Investment Adviser. Mrs. Jensen was employed as
Director of Operations of Jensen Securities Co. from 1983 to 1990. She was
employed as a pharmacist by Pay Less Drug Company from 1975 to 1982. Mrs.
Jensen earned her B.S. degree in pharmacy from Washington State University
in 1953.
MARGARET HELEN NEBOLON, 66, has served as a director of the Investment
Adviser since 1991. At June 30, 1996, Mrs. Nebolon also was the beneficial
owner of 3.5 percent of the outstanding shares of the Investment Adviser.
Mrs. Nebolon is Val Jensen's sister. Mrs. Nebolon earned her B.A. degree in
English from Washington State University in 1952.
B-9
<PAGE>
PORTFOLIO TRANSACTIONS
General Considerations
- ----------------------
The Investment Adviser is responsible for the execution of the Fund's
portfolio transactions and the allocation of brokerage transactions. When
placing purchase and sale orders, the Investment Adviser seeks to obtain
the best net results for the Fund, taking into account all factors it deems
relevant, including, by way of illustration, price (including the
applicable brokerage commission or dealer spread); the size of the
transaction; the nature of the market for the security; the difficulty of
execution; the timing of the transaction taking into account market prices
and trends; the reputation, experience and financial stability of the
broker involved; and the quality of service rendered by the broker in other
transactions. The Fund does not have any obligation to deal with any broker
or group of brokers in the execution of portfolio transactions. However,
the Investment Adviser has selected a broker through which most of its
transactions are effected. Insofar as is known to management, no director
or officer of the Fund has any material direct or indirect interest in any
broker that will effect portfolio securities on behalf of the Fund. During
the fiscal years ended May 31, 1994 , 1995, and 1996 the Fund paid
brokerage commissions totalling $972 , $1,291, and $4,834, respectively.
The Fund's investment philosophy generally results in a low portfolio
turnover rate, since there are relatively few portfolio transactions during
any period, other than those required by the purchase or sale of Fund
shares.
Although the Investment Adviser may place brokerage business with
firms that provide research, market and statistical services to the
Investment Adviser, the Fund will not pay any such broker an amount of
commission for effecting a securities transaction in excess of the amount
of commission that such broker would have received if such research
services had not been provided. Similarly, the Fund will not "pay-up" for
research services in principal transactions. In other words, the Investment
Adviser does not engage in any "soft-dollar" arrangements.
Even though investment decisions for the Fund are made independently
from those of other accounts managed by the Investment Adviser, securities
of the same issuer may be purchased, held or sold by the Fund and the other
accounts, because the same security may be suitable for all of them. When
the Fund and such other accounts are simultaneously engaged in the purchase
or sale of the same security, efforts will be made to allocate price and
amounts in an equitable manner. In some cases, this procedure may adversely
affect the price paid or received by the Fund or the size of the position
purchased or sold by the Fund. In other cases, it is believed that
coordination and the ability to participate in larger transactions will be
beneficial to the Fund.
B-10
<PAGE>
Portfolio Turnover
- ------------------
The Fund purchases portfolio securities with the expectation of
holding them for long-term appreciation. The Fund will not sell its
position in a portfolio company unless the Investment Adviser determines
that: (i) the portfolio company should be replaced with another qualifying
security that has a higher "opportunity factor" (as described in the Fund's
Prospectus) or (ii) the issuer no longer meets one or more of the
investment criteria specified in the Fund's Prospectus, unless such failure
is due to an extraordinary situation that the Investment Advisor believes
will not have a material adverse impact on the company's operating
performance. Therefore, the Fund does not expect its annual portfolio
turnover generally to exceed 20 percent . However, the turnover rate could
be significantly higher or lower depending on the performance of the
portfolio companies, the number of shares of the Fund that are redeemed, or
other external factors outside the control of the Fund and the Investment
Adviser.
In computing the portfolio turnover rate, all securities whose
maturities or expiration dates at the time of acquisition were one year or
less are excluded. Subject to this exclusion, the turnover rate is
calculated by dividing (a) the lesser of purchases or sales of portfolio
securities for the fiscal year by (b) the monthly average of the value of
the portfolio securities owned by the Fund during the fiscal year. For the
fiscal year ended May 31, 1996, the Fund's portfolio turnover rate was
47.93 percent.
PURCHASE AND REDEMPTION OF FUND SHARES
Information concerning the purchase and redemption of the Fund's
shares is set forth under "Purchase of Shares" and "Redemption of Shares"
in the Fund's Prospectus.
Shares are directly sold by the Fund on a continuous basis. Shares
also may be purchased or sold through certain broker-dealers, financial
institutions or other service providers, as described in the Fund's
Prospectus. The Fund does not charge any sales load or commission in
connection with the purchase of shares.
The Fund reserves the right to suspend or postpone redemptions during
any period when: (a) trading on the New York Stock Exchange (the "NYSE") is
restricted, as determined by the SEC, or the NYSE is closed for other than
customary weekend and holiday closing; (b) the SEC has by order permitted
such suspension; or (c) an emergency, as determined by the SEC, exists
making disposal of portfolio securities or determination of the net asset
value (the "NAV") of the Fund's shares not reasonably practicable.
Neither the Fund, the Investment Adviser nor the Transfer Agent will
be liable for any loss or expense of effecting redemptions upon any
instructions believed by them to be genuine and in accordance with the
procedures described in the Fund's Prospectus.
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<PAGE>
NET ASSET VALUE
As indicated in the Fund's Prospectus, the Fund's NAV per share for
the purpose of pricing purchase and redemption orders is determined as of
the close of business on the NYSE (currently, 4 p.m. Eastern time) on each
day the NYSE is open for trading. NAV will not be determined on the
following holidays: New Year's Day, Washington's Birthday, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
The Fund's NAV per share is computed by dividing the value of the
securities held by the Fund, plus any cash or other assets (including
interest and dividends accrued but not yet received), minus all liabilities
(including accrued expenses), by the total number of shares outstanding at
such time. Expenses, including the fees payable to the Investment Adviser,
are accrued daily as is practicable. Dividends receivable are treated as
assets from the date on which securities go ex-dividend and interest on
bonds is accrued daily.
Securities that are listed on United States stock exchanges are valued
at the last sale price on the day the securities are valued or, if there
has been no sale on that day, at the average of the last available bid and
asked prices. Quotations are taken from the market in which the security is
primarily traded. Over-the-counter securities are valued at the average of
the current bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by the
Investment Adviser by or under the direction of the Fund's Board of
Directors. Notwithstanding the above, fixed-income securities may be valued
on the basis of prices provided by an established pricing service when the
Board believes that such prices reflect market values.
TAXES
General
- -------
The Fund expects to qualify continuously as a regulated investment
company under Part I of Subchapter M of the Code. Generally, to qualify as
a regulated investment company the Fund must satisfy certain gross income
tests and certain diversification tests. Generally, if the Fund meets
certain distribution requirements, income, gains and losses realized by the
Fund will pass through and be taxable directly to shareholders.
Tax Status of Fund
- ------------------
To qualify as a regulated investment company for any taxable year, the
Fund must, among other things: (a) derive at least 90 percent of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities, and
certain other types of income; (b) derive less than 30 percent of its gross
income from the sale or other disposition of stock, securities, or certain
other assets
B-12
<PAGE>
held less than three months; and (c) diversify its holdings so that, at the
end of each fiscal quarter: (i) the Fund holds cash, government securities
and securities of other regulated investment companies and other securities
that represent at least 50 percent of the value of all Fund assets, (ii)
the other securities constitute no more than 5 percent of the value of the
assets of the Fund and 10 percent of the outstanding voting securities of
the issuer, and (iii) no more than 25 percent of the value of the assets of
the Fund is invested in the securities (other than government securities)
of any one issuer or of two or more issuers that the Fund "controls" within
the meaning of Section 851 of the Code and that meet certain other
requirements.
Generally, to qualify for flow-through tax treatment the Fund must
distribute at least 90 percent of its investment company taxable income
(which includes, among other items, dividends, interest and net short-term
capital gains in excess of net long-term capital losses) computed without
any deduction for dividends paid.
A regulated investment company that meets the requirements described
above is taxed only on its "investment company taxable income," which
generally equals the undistributed portion of its ordinary net income and
any excess of net short-term capital gain over net long-term capital loss.
In addition, any excess of net long-term capital gain over net short-term
capital loss that is not distributed is taxed to the Fund at corporate
capital gain tax rates.
If the Fund retains any net long-term capital gains in excess of net
short-term capital losses and pays federal income taxes on such excess, it
may elect to treat such capital gains as having been distributed to
shareholders. Under the election, shareholders will be taxed on such
amounts as long-term capital gains, may claim their proportionate share of
the federal income taxes paid by the Fund on such gains as a credit against
their own federal income tax liabilities, and generally will be entitled to
increase the adjusted tax basis of their shares in the Fund by 65 percent
of their pro rated shares of such undistributed gains.
The Fund may be liable for a special tax if it fails to make
sufficient distributions during the calendar year. The required
distributions for each calendar year generally equal the sum of (a) 98
percent of the ordinary income for the calendar year plus (b) 98 percent of
the capital gain net income for the one-year period that ends on October 31
during the calendar year (or for the calendar year itself if the Fund so
elects), plus (c) an adjustment relating to any shortfall for the prior
taxable year. If the actual distributions are less than the required
distributions, a tax of 4 percent applies to the shortfall.
If the Fund were unable to continue to qualify as a regulated
investment company for any reason, it would become liable for federal
income tax (and, possibly, other taxes) on its net income for the taxable
year or years in which it fails to qualify. Moreover, distributions to
shareholders for such period(s) would be treated as dividends taxable as
ordinary income (to the extent of the Fund's current and accumulated
earnings and profits) even though all or part of such distributions might
have qualified for treatment as long-term capital gain to shareholders had
the Fund continued to qualify as a regulated investment company. In
B-13
<PAGE>
addition, to requalify as a regulated investment company, the Fund would be
required to distribute all of its earnings for the period(s) during which
it did not so qualify and, in some circumstances, the Fund might be
required to recognize gain and pay tax on the net appreciation in its
portfolio as of the time immediately before it requalifies as a regulated
investment company.
There can be no assurance that the requirements for regulated
investment company treatment will be met by the Fund under all possible
circumstances.
Distributions
- -------------
Dividends paid out of the Fund's taxable net investment income are
taxable to a shareholder as ordinary income. Because a portion of the
Fund's income may consist of dividends paid by U.S. corporations, a portion
of the dividends paid by the Fund may be eligible for the corporate
dividends-received deduction. Dividends properly designated by the Fund as
representing the excess of net long-term capital gain over net short-term
capital loss are taxable to shareholders as long-term capital gain,
regardless of the length of time shareholders have held shares of the Fund.
For noncorporate taxpayers, the highest rate that applies to long-term
capital gains is lower than the highest rate that applies to ordinary
income. Any loss that is realized and allowed on redemption of shares of
the Fund less than six months from the date of purchase of such shares and
following the receipt of a capital gain dividend will be treated as a
long-term capital loss to the extent of the capital gain dividend. The Code
contains special rules on the computation of a shareholder's holding period
for this purpose.
Distributions of taxable net investment income and net realized
capital gains will be taxable as described above, whether paid in shares or
in cash. Each distribution is accompanied by a brief explanation of the
form and character of the distribution. Shareholders will be notified
annually as to the federal income tax status of distributions, and
shareholders receiving distributions in the form of newly issued shares
will receive a report as to the NAV of the shares received.
A distribution may be taxable to a shareholder even if the
distribution reduces the NAV of the shares held below their cost (and is in
an economic sense a return of the shareholder's capital). This is more
likely when shares are purchased shortly before an annual distribution of
capital gains or other earnings.
Other Considerations
- --------------------
Generally, the Fund must obtain from each shareholder a certification
of such shareholder's identification number and certain other information.
The Fund generally will not accept an investment to establish a new account
that does not comply with this requirement. If a shareholder fails to
certify such number and other information, or upon receipt of certain
notices from the Internal Revenue Service, the Fund may be required to
B-14
<PAGE>
withhold 31 percent of any reportable interest or dividends, or redemption
proceeds, payable to the shareholder, and to remit such sum to the Internal
Revenue Service, for credit toward the shareholder's federal income taxes.
A shareholder's failure to provide a social security number or other tax
identification number may subject the shareholder to a penalty of $50
imposed by the Internal Revenue Service. In addition, that failure may
subject the Fund to a separate penalty of $50. This penalty will be charged
against the shareholder's account, which may then be closed. Any such
closure of the account may result in a capital gain or loss to the
shareholder.
If the Fund declares a dividend in October, November or December
payable to the shareholders of record on a certain date in such a month and
pays the dividend during January of the following year, the shareholders
will be taxed as if they had received the dividend on December 31 of the
year in which the dividend was declared. Thus, a shareholder may be taxed
on the dividend in a taxable year prior to the year of actual receipt.
The Code allows the deduction by certain individuals, trusts, and
estates of "miscellaneous itemized deductions" only to the extent that such
deductions exceed 2 percent of the taxpayer's adjusted gross income. The
limit on miscellaneous itemized deductions does not apply, however, with
respect to the expenses incurred by any "publicly offered regulated
investment company." The Fund believes that it is a publicly offered
regulated investment company because its shares are continuously offered
pursuant to a public offering (within the meaning of section 4 of the
Securities Act of 1933, as amended). Therefore, the limit on miscellaneous
itemized deductions should not apply to expenses incurred by the Fund.
A redemption of shares of the Fund may result in taxable gain or loss
to the redeeming shareholder, depending upon whether the redemption
proceeds payable to the shareholder are more or less than the shareholder's
adjusted basis for the redeemed shares.
Additional Information
- ----------------------
The foregoing summary (and the summary included in the Prospectus
under "Dividends, Distributions and Taxes") of tax consequences of
investment in the Fund is necessarily general and abbreviated. No attempt
was made to present a complete or detailed explanation of tax matters.
Furthermore, the provisions of the statutes and regulations on which they
are based are subject to change by legislative or administrative action.
Local taxes are beyond the scope of this discussion. Prospective investors
in the Fund should consult their own tax advisers regarding specific
questions as to federal, state or local taxes.
B-15
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table shows the ownership of shares of the Fund on
August 31, 1996 by each person who was known by the Fund to own of record
or beneficially 5 percent or more of the shares of the Fund and by the
officers and directors of the Fund as a group:
<TABLE>
<CAPTION>
Approximate
Name and Address of Number of Percentage of
Beneficial Owner Shares Outstanding Shares
---------------- ------ ------------------
<S> <C> <C>
Donaldson, Lufkin 120,051 13.3%
& Jenrette<F1>
Jersey City, NJ
Douglas Walta<F2> 102,662 11.3%
Portland, Oregon
Richard L. Knipe<F3> 98,457 10.9%
Alamo, California
Louis B. Perry<F4> 58,194 6.4%
Walla Walla, Washington
Richard Perry<F5> 52,411 5.8%
Walla Walla, Washington
Donald Olson<F6> 48,727 5.4%
Portland, Oregon
All officers and directors as a group 109,899 12.1%
(5 persons)
- ---------
<FN>
<F1> All shares reported are owned of record only.
<F2> Of the shares reported, Dr. Walta is the record and beneficial owner
2,330 shares, and the beneficial owner only of an additional 99,251, of
which 66,266 shares are held in trust under an agreement with G.I. Clinic
for the benefit of Dr. Walta . The shares reported also include 1,082
shares owned by Dr. Walta's daughter, in which Dr.
Walta disclaims any beneficial interest .
<F3> All shares reported are owned of record and beneficially.
<F4> Of the shares reported, 34,780 are owned of record and beneficially
by Dr. Perry. The shares reported also include 23,414 shares owned of record
and beneficially by Dr. Perry's wife, in which Dr. Perry disclaims any
beneficial ownership.
<F5> Of the shares reported, 50,446 are owned of record and beneficially by
Mr. Perry. The shares reported also include 1,965 shares owned of record and
beneficially by Mr. Perry's wife, in which Mr. Perry disclaims any beneficial
ownership.
B-16
<PAGE>
<F6> Of the shares reported, 42,989 are held of record and beneficially by
Dr. Olson or a trust for his benefit. The shares reported also include 940
shares owned by Dr. Olson beneficially, but not of record, and 4,797 shares
owned beneficially, but not of record, by Dr. Olson's wife, in which Dr.
Olson disclaims any beneficial ownership.
</FN>
</TABLE>
PERFORMANCE INFORMATION
The Fund's Prospectus contains a brief description of how performance
is calculated.
Quotations of average annual total return for the Fund will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund over periods of 1, 5, and 10 years (up
to the life of the Fund). These are the annual total rates of return that
would equate the initial amount invested to the ending redeemable value.
These rates of return are calculated pursuant to the following formula: P(1
+ T)n = ERV (where P = a hypothetical initial payment of $1,000, T = the
average annual total return, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of
the period). All total return figures reflect the deduction of a
proportional share of Fund expenses on an annual basis, and assume that all
dividends and distributions are reinvested when paid.
Performance information for the Fund reflects only the performance of
a hypothetical investment in the Fund during the period on which the
calculations are based. Performance information should be considered in
light of the Fund's investment objectives and policies, characteristics and
quality of the portfolio and the market conditions during the relevant
period and should not be considered as a representation of results that may
be achieved in the future.
The Fund's total return for the fiscal year ended May 31, 1996 was
24.14 percent. The Fund's average annual total return from August 3, 1992
(commencement of operations) to May 31, 1996 was 6.70 percent.
MISCELLANEOUS INFORMATION
General
- -------
The Fund was incorporated under Oregon law on April 17, 1992. The Fund
has an authorized capital of 100,000,000 shares of Common Stock, par value
$.001 per share. All shares are of the same class. Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held. Shareholders vote on the election of directors when
required by the 1940 Act and on any other matter properly submitted to a
shareholder vote. Shares issued are fully paid and nonassessable and have
no preemptive or conversion rights. Each share is entitled to participate
equally in dividends and distributions declared by
B-17
<PAGE>
the Fund and in the net assets of the Fund upon liquidation or dissolution
after satisfaction of outstanding liabilities.
Limitation of Director Liability
- --------------------------------
The Fund's Articles of Incorporation and Bylaws include provisions
that limit the personal liability of the Fund's directors to the Fund or
its shareholders for monetary damages for conduct as a director. The
provisions eliminate such liability to the fullest extent permitted by law.
Oregon law permits elimination of such liability, except in the following
cases: (i) any breach of the director's duty of loyalty to the Fund or its
shareholders; (ii) acts or omissions not in good faith or which involved
intentional misconduct or a knowing violation of law; (iii) any unlawful
distribution, as defined by Oregon law; or (iv) any transaction from which
the director derived an improper personal benefit. The general effect of
the provisions is to eliminate monetary damages as one of the remedies
available to shareholders for enforcement of a director's duty of care. As
a result, shareholders may be left without any means to recover a loss
suffered as a result of the negligence or gross negligence of directors in
discharging their duty of care.
Indemnification
- ---------------
The Fund's Articles of Incorporation and Bylaws provide for the
indemnification of any person, to the fullest extent permitted by law, for
all liabilities (including attorney fees, judgments, fines and amounts paid
in settlement) actually and reasonably incurred in connection with any
actual or threatened proceeding (including, to the extent permitted by law,
any derivative action) by reason of the fact that the person is or was
serving as a director or officer of the Fund. The indemnity does not cover
liability arising out of a breach of the duty of loyalty, acts or omissions
not in good faith or that involve intentional misconduct or a knowing
violation of the law, acts in which an improper personal benefit is
derived, the unlawful payment of dividends or purchases of stock, or if a
court determines that such indemnification is not lawful.
Independent Accountants
- -----------------------
Coopers & Lybrand L.L.P., Portland, Oregon, has been selected as
independent accountants for the Fund for its fiscal year ending May 31,
1997. In addition to reporting annually on the financial statements of the
Fund, the Fund's accountants will review certain of the Fund's filings with
the SEC.
Custodian, Transfer Agent and Dividend Disbursing Agent
- -------------------------------------------------------
Firstar Trust Company serves as the custodian of the Fund's cash and
securities and as the Fund's transfer agent and dividend disbursing agent
(the "Transfer Agent"). The Transfer Agent processes requests for the
purchase or redemption of the Fund's shares, sends statements of ownership
to shareholders, and performs other administrative duties on behalf
B-18
<PAGE>
of the Fund. The Transfer Agent does not play any role in establishing the
investment policies of the Fund or in determining which securities are to
be purchased or sold by the Fund. All fees and expenses of the Transfer
Agent are paid by the Fund. For its custodial services to the Fund, the
Transfer Agent receives monthly fees based upon the Fund's month-end,
aggregate NAV, plus certain charges for securities transactions. For its
services as transfer agent and dividend disbursing agent, the Transfer
Agent receives fees from the Fund based upon the number of shareholder
accounts maintained and the number of transactions effected. The Transfer
Agent is also reimbursed by the Fund for out-of-pocket expenses.
Firstar Trust Company also serves as the Administrator to the Fund.
The fees paid for the administrative services it performs are described
under "Management of the Fund-- Administrator" in this SAI.
Registration Statement
- ----------------------
This SAI and the Fund's Prospectus do not contain all the information
included in the Fund's Registration Statement filed with the SEC under the
Securities Act of 1933, as amended, with respect to the shares offered
hereby. Certain portions of the Registration Statement have been omitted
from the Prospectus and SAI pursuant to the rules and regulations of the
SEC. The Registration Statement, including the exhibits filed therewith,
may be examined at the offices of the SEC in Washington, D.C.
Statements contained in this SAI and the Prospectus as to the contents
of any contract or other document referred to are not necessarily complete,
and, in each instance, reference is made to the Registration Statement,
including exhibits, and each such statement is qualified in all respects by
this reference.
Financial Statements
- --------------------
The audited financial statements of the Fund for the fiscal year ended
May 31, 1996, and the report of the Fund's independent accountants in
connection therewith, are included in the Fund's 1996 Annual Report to
Shareholders, which is incorporated by reference into this SAI. A copy of
the Annual Report to Shareholders may be obtained from the Fund upon
request and without charge.
B-19
<PAGE>
APPENDIX A
COMMERCIAL PAPER RATINGS
Prime 1 (P-1) and A-1 are the highest commercial paper ratings issued
by Moody's Investor Services, Inc. ("Moody's") and Standard & Poor's
Corporation ("S & P"), respectively.
Description of Moody's Commercial Paper Ratings
- -----------------------------------------------
Issuers within the Prime category may be given ratings 1, 2 or 3,
depending on the relative strengths of certain factors. Among the factors
considered by Moody's in assigning ratings are the following: (1)
evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative type risks
which may be inherent in certain areas; (3) evaluation of the issuer's
products in relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings over a
period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet obligations.
Description of S&P's Commercial Paper Ratings
- ---------------------------------------------
Commercial paper rated A by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt should be rated A or better, although in some cases BBB credits
may be allowed if other factors outweigh the BBB; (3) the issuer has access
to at least two additional channels of borrowing; (4) basic earnings and
cash flow have an upward trend with allowance made for unusual
circumstances; (5) typically, the issuer's industry should be well
established and the issuer should have a strong position in the industry,
and the reliability and quality of management should be unquestioned.
Issuers rated A are further referred to by the use of numbers 1, 2 and 3 to
denote relative strength within this highest classification.
App A.-1
<PAGE>
THE JENSEN PORTFOLIO, INC.
PART C
---------------
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Index to Financial Statements.
The following financial statements of the Registrant are included in
Part A of the Registration Statement (the "Prospectus"):
Page
----
Financial Highlights 2
The following audited financial statements of the Registrant are
included in the Registrant's 1996 Annual Report to Shareholders (which is
included as Exhibit 12 to the Registration Statement) and are incorporated
by reference into Part B of the Registration Statement (the "Statement of
Additional Information") on page 19:
Independent Accountant's Report 3
Statement of Assets and Liabilities at May 31, 1996 4
Schedule of Investments at May 31, 1996 4
Statement of Operations for the year ended May 31, 1996 6
Statement of Changes in Net Assets for the years ended
May 31, 1996 and 1995 6
Financial Highlights for the fiscal years ended May 31, 1996,
1995, 1994 and for the period from August 3, 1992
through May 31, 1993 7
Notes to the Financial Statements 8
(b) Exhibits:
(1) Registrant's Articles of Incorporation.<F1>
(2) Registrant's Restated Bylaws.<F5>
(4)a Stock certificates will not be issued.
(4)b Registrant's Articles of Incorporation. (See Exhibit 24(b)(1)).<F1>
(4)c Registrant's Restated Bylaws. (See Exhibit 24(b)(2)).<F5>
- --------------
[Footnotes are on the following page.]
C-1
<PAGE>
(5) Restated Investment Advisory and Service Contract.<F4>
(8) Form of Custodian Agreement.<F1>
(9)a Form of Transfer Agent Agreement.<F1>
(9)b Form of Fund Accounting Servicing Agreement.<F1>
(9)c Fund Administration Servicing Agreement.<F5>
(10) Opinion and Consent of Legal Counsel to Registrant.<F3>
(11)a Consent of Coopers & Lybrand L.L.P.
(11)b Consent of Deloitte & Touche LLP.
(12) 1996 Annual Report to Shareholders.
(13) Written assurances from Registrant's initial shareholders
that their purchases were made for investment purposes
without any present intention of redeeming or reselling.<F3>
(14) Model Plan used in establishment of individual retirement plan,
instructions thereto and other documents making up the Model
Plan.<F2>
(17) Financial Data Schedule.
- --------------
<F1> Incorporated by reference to the original Registration Statement.
<F2> Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement.
<F3> Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registration Statement.
<F4> Incorporated by reference to the definitive proxy material filed
in connection with Registrant's annual shareholder meeting held on
September 21, 1993.
<F5> Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Registrant does not have any subsidiaries and does not control any
other company or person. The directors and officers of Registrant are: Val
E. Jensen (President and director),
C-2
<PAGE>
Gary W. Hibler (Secretary and director), Robert F. Zagunis (Vice President
and director), Louis B. Perry (director), and Norman W. Achen (director).
At August 31, 1996, 109.899 of Registrant's shares (or 12.1 percent) were
beneficially owned by the officers and directors of Registrant. See
"Principal Shareholders" in the Statement of Additional Information.
Jensen Investment Management, Inc., an Oregon corporation that acts as
the investment adviser to Registrant (the "Investment Adviser"), is
controlled by Val E. Jensen (President, Managing Director and beneficial
owner of 69.3 percent of the outstanding shares), Gary W. Hibler
(Secretary, Managing Director and beneficial owner of 36.9 percent of the
outstanding shares), Robert Zagunis (Vice President, Managing Director and
beneficial owner of 22.1 percent of the outstanding shares), Mary Ellen
Jensen (Director of Operations, director and beneficial owner of 69.3
percent of the outstanding shares), and Margaret Helen Nebolon (director
and beneficial owner of 3.5 percent of the outstanding shares).
Val E. Jensen and Mary Ellen Jensen are married to each other.
Margaret Helen Nebolon is Mr. Jensen's sister.
Item 26. Number of Holders of Securities
-------------------------------
Number of Record Holders
Title of Class as of August 31, 1996
-------------- ------------------------
Common Stock, $0.001 par value 88
Item 27. Indemnification
---------------
The information called for by Item 27 is included in the original
Registration Statement, commencing on page C-3, and is incorporated herein
by reference.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
The information called for by Item 28 is included in Post-Effective
Amendment No. 3, commencing on page C-3, and is incorporated herein by
reference.
Item 29. Principal Underwriter
---------------------
Not applicable.
C-3
<PAGE>
Item 30. Location of Accounts and Records
--------------------------------
The information called for by Item 30 is included in Post-Effective
Amendment No. 1 to the Registration Statement, on page C-5, and is
incorporated herein by reference.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered with a copy of the Registrant's latest Annual
Report to Shareholders, upon request and without charge.
----------
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 5 to this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Portland,
Oregon on September 24, 1996.
THE JENSEN PORTFOLIO, INC.
By VAL E. JENSEN
---------------------------------
Val E. Jensen, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on September 24, 1996 by the
following persons in the capacities indicated.
(1) Principal Executive Officer:
VAL E. JENSEN President and Director
-----------------------------
Val E. Jensen
C-4
<PAGE>
(2) Principal Accounting and
Financial Officer:
GARY W. HIBLER Secretary and Director
-----------------------------
Gary W. Hibler
(3) Directors:
VAL E. JENSEN Director
-----------------------------
Val E. Jensen
GARY W. HIBLER Director
-----------------------------
Gary W. Hibler
ROBERT F. ZAGUNIS* Director
-----------------------------
Robert F. Zagunis
LOUIS B. PERRY* Director
-----------------------------
Louis B. Perry
NORMAN W. ACHEN* Director
-----------------------------
Norman W. Achen
*By VAL E. JENSEN
-----------------------------
Val E. Jensen, Attorney-in-Fact
(filed for Messrs. Perry and Achen
with original Registration Statement;
filed for Mr. Zagunis with
Post-Effective Amendment No. 2)
C-5
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
THE INVESTMENT COMPANY OF 1940
THE JENSEN PORTFOLIO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
================================================================================
<PAGE>
EXHIBIT INDEX
Exhibit
(1) Registrant's Articles of Incorporation.<F1>
(2) Registrant's Restated Bylaws.<F5>
(4)a Stock certificates will not be issued.
(4)b Registrant's Articles of Incorporation. (See Exhibit (1)).<F1>
(4)c Registrant's Restated Bylaws. (See Exhibit (2)).<F5>
(5) Restated Investment Advisory and Service Contract.<F4>
(8) Form of Custodian Agreement.<F1>
(9)a Form of Transfer Agent Agreement.<F1>
(9)b Form of Fund Accounting Servicing Agreement.<F1>
(9)c Fund Administration Servicing Agreement.<F5>
(10) Opinion and Consent of Legal Counsel to Registrant.<F3>
(11)a Consent of Coopers & Lybrand L.L.P.
(11)b Consent of Deloitte & Touche LLP.
(12) 1996 Annual Report to Shareholders.
(13) Written assurances from Registrant's initial
shareholders that their purchases were made for
investment purposes without any present intention of
redeeming or reselling.<F3>
(14) Model Plan used in establishment of individual
retirement plan, instructions thereto and other documents
making up the Model Plan.<F2>
(17) Financial Data Schedule
- ----------
[Footnotes are on the following page.]
<PAGE>
<F1> Incorporated by reference to the original Registration Statement.
<F2> Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement.
<F3> Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registration Statement.
<F4> Incorporated by reference to the definitive proxy material filed
in connection with Registrant's annual shareholder meeting held
on September 21, 1993.
<F5> Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement.
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
To the Directors and Shareholders of The Jensen Portfolio, Inc.:
We consent to the inclusion in Post-Effective Amendment No. 5 to the
Registration Statement of The Jensen Portfolio, Inc. on Form N1-A (File No.
33-47508) of our report dated July 5, 1996 on our audit of the financial
statements and the financial highlights of the Fund, which report is
included in the Annual Report to Shareholders as of and for the year ended
May 31, 1996 which is included in the Post-Effective Amendment to the
Registration Statement. We also consent to the reference to our Firm under
the caption "Independent Accountants."
Coopers & Lybrand, L.L.P.
Portland, Oregon
September 23, 1996
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to us in this Post-Effective Amendment No. 5 to
Registration Statement No. 33-47508 on Form N1-A of The Jensen Portfolio,
Inc. under the heading "Financial Highlights" in the Prospectus which is a
part of such Registration Statement.
DELOITTE & TOUCHE LLP
Portland, Oregon
September 27, 1996
The JENSEN PORTFOLIO
Annual Report
May 31, 1996
Jensen Investment Management
430 Pioneer Tower
888 SW Fifth Avenue
Portland, OR 97204-2018
503-274-2044
Fax 503-274-2031
LETTER FROM THE INVESTMENT ADVISER
To the Shareholders of The Jensen Portfolio:
The president of one of the divisions of Nestle, the global giant, once asked
his boss, Helmut Maucher, "How do you think things are going?" The Nestle CEO
responded "We won't know until ten years after I retire." Since this
conversation took place in 1990, he will continue to be in doubt for some time
to come.
Dr. Maucher's response does illustrate the inaccuracies inherent in
forecasting the future value of a business. Nonetheless forecasting is a
necessary step in calculating what returns a prospective investment might
generate. The forecasting must therefore begin with an educated estimate as to
which companies have products or services which can best withstand the vagaries
of changing consumer preferences and the rigors of competition. This estimate
would be a futile task were companies less successful in building economic
franchises.
Since there is often confusion about the meaning of the word "franchise" in
this sense, Warren Buffett's definition ought to be, but is not, included in
lexicons: "An economic franchise arises from a product or service that: (1) is
needed or desired; (2) is thought by its customers to have no close substitute
and; (3) is not subject to price regulation. The existence of all three
conditions will be demonstrated by a company's ability to regularly price its
product or service aggressively and thereby to earn high rates of return on
capital."
Companies who possess an economic franchise have the potential to create
greater value than their peers for shareholders. The additional earnings
generated by the franchise can be used to support marketing and production,
repurchase shares, raise dividends and buy companies-and, sometimes, all of the
above. Identifying companies who possess an economic franchise is sometimes
obvious, such as with Coca-Cola. Frequently, however, the product or service is
used during the economic chain that brings an end product to the market-
retreading truck tires, laboratory chemicals, and application equipment as
represented by Bandag, Sigma Aldrich, and Nordson respectively. The Jensen
Portfolio's requirement that a company must have reported at least a 15% return
on equity (ROE) for ten consecutive years is a simple test for the existence of
an economic franchise. (Companies held by the Fund averaged a 24.9% annual
return since 1986; indeed, a number of the companies have reported high returns
over several decades.) Not only do high financial returns support the
continuance of an eco nomic franchise, a second benefit is that a company's
ability to protect and grow an economic franchise increases in each successive
year.
The reward for building a successful franchise in this country is worth the
effort since the domestic market amounts to some 7 trillion dollars annually.
With a successful U.S. franchise, the opportunities to extend a franchise
globally are powerful as the United States accounts for only 5 percent of the
world's population. A young Norwegian analyst recently told us, "Americans have
no conception how important their brands like Coca-Cola, Levi and Nike are to
consumers in Europe." Even so, marketing beyond our borders is challenging due
to the diversity of customs, languages, and regulations; paths are filled with
failed attempts to take a product overseas. Global success, once attained, is
sweet as denoted by the typically higher margins earned.
There is ample evidence supporting the attractiveness of an overseas
franchise from companies which have been major participants in European commerce
since World War II. Beyond Europe, there is vast potential today in Latin
America and Asia. The Wall Street Journal reported recently that the developing
nations are importing more than $1 trillion annually from the advanced
countries-everything from soft drinks and chewing gum to tire retreads. Markets
are big and growing. To illustrate, over the past decade, the so-called Asian
tigers-Hong Kong, Singapore, Taiwan and South Korea-have, taken together,
eclipsed Japan as a market for American exports. Just within the next few years,
the developing nations are expected to account for one half the world's gross
domestic product.
Incidental benefits are obtained by growing globally, not the least of which
is dampening the effects of a crisis. A recent example is the late 1994
devaluation of the Mexican peso which left the Mexican consumer significantly
poorer. While it was harmful to all businesses operating there, companies with a
broad international reach had the benefits of serving a diversity of economies,
with less reliance on one or two specific countries.
Some of The Jensen Portfolio's companies which have a major stake
internationally are:
GENERAL ELECTRIC asserts it will "pick up the pace" in globalization. In
fact, its pace has been accelerating for years. Global revenues over the last
ten years have increased from 20% of the Company's total volume to 38% in 1995-
and somewhere around the millennium, they expect the majority of GE revenues to
come from outside the
United States.
BANDAG is the global leader in the manufacture of tread rubber and retreading
equipment with 63% of its franchisees located outside of the United States. The
Company believes their brightest prospects include mainland China where trucking
is the fastest growing mode of transportation and highway infrastructure
development is a top government priority, and Brazil, whose total market is
equivalent to over one-third of the U.S. retreading market in tread rubber
volume.
WD-40 is marketed in over 115 countries and in 30 different languages.
Outside the U.S. and Canada, the company has concentrated its resources in the
big emerging markets internationally: China, Hong Kong, Taiwan, South Korea,
India, South Africa, Poland, Turkey, Mexico, Brazil and Argentina. During 1995,
sales in Latin America and Mexico increased 47%, Pacific and Asia grew by 12%,
and Europe, Middle East and Africa increased by 20%.
MINNESOTA MINING & MANUFACTURING ("3M") began international operations 45
years ago and now has companies in 60 countries outside of the United States and
markets products in nearly 200 nations. In 1995, 3M's international sales rose
17% to $7.3 billion, 54% of the company's total sales. The company is targeting
international growth because markets are larger and growing faster than the U.S.
market, and their market penetration abroad is lower than in the United States.
The United States accounted for 29% of COCA-COLA'S net operating revenues and
just 18% of operating income. With such a huge presence all over the globe, some
doubt that Coca-Cola has major growth opportunities. Yet in the emerging markets
of China, India, Indonesia and Russia, 44% of the world's population resides
and, on a combined basis, their average per capita consumption of the company's
products is approximately 1% of the United States level.
The addition of the "Opfac" process to our research served to intensify our
study on companies whose global revenues are a significant part of their
business. (Opfac is based on the ratio of the company's estimated intrinsic
value to the company's market value.) Not only do these companies enjoy
excellent margins and report a consistently high return on equity, they generate
large amounts of cash for their shareholders. All of the companies reporting
over a 15% ROE annually for a decade are included in our list are now evaluated
by the Opfac process.
The Jensen Portfolio's performance for the fiscal year ending May 31, 1996,
after all costs and with dividends reinvested was +24.14% versus the S&P 500's
+28.44%. A graphic presentation of performance is on page 3. If you have any
questions, please call us at 1-800-221-4384.
Respectively,
/s/ Val Jensen
Val Jensen
President, Jensen Investment Management, Inc.
The Jensen Portfolio
Total Returns vs. The S&P 500
JENSEN S&P 500
------ -------
8/03/92 10,000 10,000
11/30/92 10,020 10,283
5/31/93 9,187 10,885
11/30/93 9,396 11,321
5/31/94 9,062 11,348
11/30/94 9,475 11,440
5/31/95 10,263 13,640
11/30/95 11,077 15,671
5/31/96 12,386 17,519
For the period ending May 31, 1996
One Year Annualized Since Inception
The Jensen Portfolio 24.14% 6.70%
S&P 500 Stock Index 28.44% 15.76%
The S&P 500 Stock Index is an unmanaged but commonly used measure of
common stock total return performance. This chart assumes an initial
gross investment of $10,000 made on 8/3/92 (inception). Returns shown
include the reinvestment of all dividends. Past performance is not
predictive of future performance. Investment return and principal value
will fluctuate, so that your shares, when redeemed, may be worth more or
less than the original cost.
REPORT of INDEPENDENT ACCOUNTANTS
To the Directors and Shareholders of
The Jensen Portfolio, Inc.
Portland, Oregon
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Jensen Portfolio, Inc. (the "Fund") as of
May 31, 1996, and the related statements of operations and changes in net
assets, and the financial highlights for the year 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 audit. The financial statements
of the Fund as of May 31, 1995, were audited by other auditors whose report
dated June 21, 1995 expressed an unqualified opinion on those statements.
We conducted our audit 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 the securities owned at May 31, 1996 by
correspondence with the custodian. 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
audit provides a reasonable basis for our opinion.
In our opinion, the accompanying financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of May 31, 1996, the results of its operations, the
changes in its net assets and the financial highlights for the year then ended,
in conformity with generally accepted accounting principles.
Coopers & Lybrand, L.L.P.
Portland, Oregon
July 5, 1996
STATEMENT OF ASSETS & LIABILITIES
May 31, 1996
ASSETS:
Investments, at value (cost $8,855,355) $11,264,840
Income receivable 13,757
Deferred organizational expenses,
net of accumulated amortization 16,232
Prepaid expenses 755
----------
Total Assets 11,295,584
LIABILITIES:
Payable to investment adviser 3,184
Payable to directors 15,130
Accrued expenses 20,240
----------
Total Liabilities 38,554
NET ASSETS $11,257,030
===========
NET ASSETS CONSIST OF:
Capital stock $ 9,167,331
Unrealized appreciation on
investments 2,409,485
Undistributed net investment income 19,358
Undistributed net realized losses (339,144)
-----------
Total Net Assets $11,257,030
===========
Net Asset Value Per Share, 925,900
shares outstanding (100,000,000 shares
authorized, $.001 par value) $12.16
======
See notes to the financial statements.
SCHEDULE OF INVESTMENTS
May 31, 1996
Number of Shares Market Value
- ---------------- ------------
COMMON STOCK 96.97%
Aerospace/Defense 4.73%
10,000 Raytheon Company $ 532,500
---------
Bank 4.69%
16,000 Wilmington Trust
Corporation 528,000
---------
Beverage 11.58%
10,000 Brown-Foreman
Corporation, Class B 406,250
19,500 The Coca-Cola Company 897,000
---------
1,303,250
---------
Chemical Diversified 4.85%
8,000 Minnesota Mining &
Manufacturing Company 546,000
---------
Chemical Specialty 8.70%
9,000 Sigma-Aldrich Corporation 504,000
10,000 W D-40 Company 475,000
---------
979,000
---------
Computer Software Services 4.09%
12,000 Automatic Data
Processing, Inc. 460,500
---------
Drugs 13.17%
14,200 Glaxo Wellcome, PLC-ADR 370,975
9,850 Merck &Company, Inc. 636,556
25,000 Mylan Laboratories, Inc. 475,000
---------
1,482,531
---------
Electrical Equipment 4.78%
6,500 General Electric Company $ 537,875
---------
Food Processing 2.96%
10,000 Sara Lee Corporation 333,750
---------
Household Products 4.54%
6,000 Clorox Company 510,750
---------
Industrial Services 10.42%
47,400 Equifax, Inc. 1,173,150
---------
Machinery 4.45%
8,500 Nordson Corporation 501,500
---------
Medical Supplies 6.36%
16,600 Abbott Laboratories 715,875
---------
Newspaper 4.65%
7,500 Gannett Company, Inc. 523,125
---------
Precision Instruments 3.44%
17,800 EG&G, Inc. 387,150
---------
Tire & Rubber 3.56%
8,050 Bandag, Inc. 400,488
---------
Total Common Stock
(Cost $8,505,959) 10,915,444
----------
Principal Amount Market Value
- ----------------- ------------
SHORT-TERM INVESTMENTS 3.10%
Variable Rate Demand Notes 3.10%
$ 33,396 Sara Lee Corporation $ 33,396
200,000 Southwestern Bell 200,000
116,000 Wisconsin Electric 116,000
---------
Total Short-Term Investments
(Cost $349,396) 349,396
---------
TOTAL INVESTMENTS 100.07%
(Cost $8,855,355) 11,264,840
---------
LIABILITIES,
LESS OTHER
ASSETS (0.07)% (7,810)
---------
NET ASSETS 100.00% $11,257,030
===========
See notes to the financial statements.
STATEMENT OF OPERATIONS
Year Ended May 31, 1996
INVESTMENT INCOME:
Dividends $ 243,827
Interest 14,461
---------
258,288
---------
EXPENSES:
Investment advisory fees 53,125
Shareholder servicing and accounting 26,384
Professional fees 15,077
Directors' fees and expenses 20,363
Amortization of deferred
organizational expenses 13,816
Administration fees 14,889
Reports to shareholders 5,099
Federal and state registration fees 3,270
Custody fees 2,145
Other 3,934
Total expenses before
reimbursement 158,102
Less: Reimbursement from Adviser (30,602)
---------
Net Expenses 127,500
---------
NET INVESTMENT INCOME 130,788
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investment
transactions 396,245
Change in unrealized appreciation
on investments 1,746,279
---------
Net gain on investments 2,142,524
---------
NETINCREASE IN NET ASSETS
RESULTINGFROM OPERATIONS $2,273,312
==========
See notes to the financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
Year ended Year Ended
May 31, '96 May 31, '95
OPERATIONS: ----------- -----------
Net investment income $ 130,788 $ 135,570
Net realized gain (loss) on
investment transactions 396,245 (218,592)
Change in unrealized appreciation
on investments 1,746,279 1,348,178
---------- ----------
Net increase in net assets
resulting from operations 2,273,312 1,265,156
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 1,042,344 1,037,954
Shares issued to holders in
reinvestment of dividends 123,607 117,997
Shares redeemed (1,885,594) (1,219,001)
---------- ----------
Net (decrease) (719,643) (63,050)
---------- ----------
DIVIDENDS PAID FROM NET
INVESTMENT INCOME (156,269) (151,193)
---------- ----------
INCREASE
IN NET ASSETS 1,397,400 1,050,913
NET ASSETS:
Beginning of year 9,859,630 8,808,717
---------- ----------
End of year (including undistributed
net investment income of $19,358
and $3,217, respectively) $11,257,030 $9,859,630
=========== ==========
See notes to the financial statements
FINANCIAL HIGHLIGHTS
August 3,
1992<F1>
Year ended Year Ended Year Ended through
Per Share Data: May 31, May 31, May 31, May 31,
1996 1995 1994 1993
-------- ------- ------- -------
Net asset value,
beginning of period $9.94 $8.80 $9.36 $10.00
Income from investment operations:
Net investment income 0.15 0.14 0.13 0.09
Net realized and unrealized
gains (losses) on investments 2.23 1.15 (0.56) (0.66)
------ ------ ------ ------
Total from investment operations 2.38 1.29 (0.43) (0.57)
------ ------ ------ ------
Less distributions:
Dividends from net investment
income (0.16) (0.15) (0.13) (0.07)
------ ------ ------ ------
Net asset value,
end of period $12.16 $9.94 $8.80 $9.36
====== ===== ===== =====
Total return <F2> 24.14% 14.84% (4.64)% (5.72)%
Supplemental data and ratios:
Net assets, end of period $11,257,030 $9,859,630 $8,808,717 $9,470,139
Ratio of expenses to average
net assets <F3> 1.20% 1.20% 1.13% 0.89%
Ratio of net investment income to
average net assets <F3> 1.23% 1.48% 1.36% 1.54%
Portfolio turnover rate 47.93% 11.27% 5.26% 4.01%
Average commission rate paid $0.0198
<F1> Commencement of operations.
<F2> Not annualized for the period August 3, 1992 through May 31, 1993.
<F3> Annualized for the period August 3, 1992 through May 31, 1993. Without
expense waivers or voluntary reimbursements of $30,602 for the year ended May
31, 1996, $50,889 for the year ended May 31, 1995, $54,481 for the year ended
May 31, 1994, and $61,182 for the period August 3, 1992 through May 31, 1993,
the ratio of expenses to average net assets would have been 1.49%, 1.75%,
1.72% and 1.97%, respectively, and the ratio of net income to average net
assets would have been 0.94%, 0.93%, 0.77% and 0.25%, respectively.
See notes to the financial statements
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT
ACCOUNTING POLICIES
The Jensen Portfolio, Inc. (the "Fund") was organized as an Oregon Corporation
on April 17, 1992, and is registered as an open-end, nondiversified management
investment company under the Investment Company Act of 1940. The principal
investment objective of the Fund is long-term capital appreciation. The Fund
issued and sold 10,000 shares of its capital stock at $10 per share on June 29,
1992 ("initial shares"). The Fund commenced operations on August 3, 1992.
Jensen Investment Management, Inc. (the "Investment Adviser") has advanced the
Fund $56,604 to cover costs in connection with the organization, initial
registration and public offering of shares. The Fund will reimburse these costs
under a five-year amortization schedule until the Fund has net assets of $50
million or more, at which time the Fund will reimburse the Investment Adviser
for all remaining organizational costs. The total organizational costs of
$57,854 (which includes both costs advanced by the Investment Adviser and costs
paid directly by the Fund) are being amortized over the period of benefit, but
not to exceed 60 months from the Fund's commencement of operations. If any of
the initial shares are redeemed during the amortization period, the redemption
proceeds will be reduced by the pro rata share (calculated as the number of
original shares being redeemed divided by the number of original shares
outstanding immediately prior to such redemption) of the unamortized costs as of
the date of redemption.
The following is a summary of significant accounting policies consistently
followed by the Fund.
a) Investment Valuation - Securities that are listed on United States stock
exchanges are valued at the last sale price on the day the securities are valued
or, if there has been no sale on that day, then at the average of the last
available bid and ask prices. Quotations are taken from the market in which the
security is primarily traded. Over-the-counter securities are valued at the last
sale price on the day the securities are valued, or if there has been no sale on
that day, then at the average of the current bid and ask prices. Securities for
which market quotations are not readily available are valued at fair value as
determined by the Investment Adviser at or under the direction of the Fund's
Board of Directors. Variable rate demand notes are valued at cost which
approximates market value. Notwithstanding the above, fixed-income securities
may be valued on the basis of prices provided by an established pricing service
when the Board believes that such prices reflect market values.
b) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund has complied to date with the provisions of the Internal Revenue
Code applicable to regulated investment companies and intends to continue to so
comply in the future and to distribute substantially all of its net investment
income and realized capital gains in order to relieve the Fund from all federal
income taxes.
c) Distributions to Shareholders - Dividends from net investment income are
declared and paid quarterly by the Fund. Distributions of net realized capital
gains, if any, will be declared at least annually. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. The Fund's primary
financial reporting and tax difference relates to the differing treatment for
the amortization of deferred organization expenses. Permanent financial
reporting and tax differences are reclassified to capital stock.
d) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure 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.
e) Other - Investment and shareholder transactions are recorded no later than
the first business day after the trade date. Gains or losses from the investment
transactions are determined on the basis of identified carrying value. Dividend
income is recognized on the ex-dividend date and interest income is recognized
on an accrual basis. The Fund has investments in short-term variable rate demand
notes, which are unsecured instruments. These notes may present credit risk to
the extent the issuer defaults on its payment obligation. The credit- worthiness
of the issuer is monitored, and these notes are considered to present minimal
credit risk in the opinion of the Investment Adviser.
2. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
Year Ended Year Ended
May 31, May 31,
1996 1995
--------- ----------
Shares sold 95,656 112,636
Shares issued to holders in
reinvestment of dividends 11,268 12,970
Shares redeemed (173,423) (133,856)
-------- ---------
Net (decrease) (66,499) (8,250)
======== =========
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, by the Fund for the year ended May 31, 1996, were $4,941,434 and
$5,947,303, respectively.
At May 31, 1996, gross unrealized appreciation and depreciation of investments
were as follows:
Appreciation $2,545,855
(Depreciation) (136,370)
----------
Net appreciation on
investments $2,409,485
==========
At May 31, 1996, the cost of investments for
federal income tax purposes was $8,855,355.
At May 31, 1996, the Fund had accumulated net realized capital loss carryovers
of $120,552 and $218,592 expiring in 2002 and 2003, respectively. To the extent
the Fund realizes future net capital gains, taxable distri butions to its
shareholders will be offset by any unused capital loss carryover.
4.INVESTMENT ADVISORY ANDOTHER AGREEMENTS
The Fund has entered into an Investment Advisory and Service Contract with
Jensen Investment Management, Inc. Pursuant to its advisory agreement with the
Fund, the Investment Adviser is entitled to receive a fee,
calculated daily and payable monthly, at the annual
rate of 0.50% as applied to the Fund's daily net assets.
Certain officers and directors of the Fund are also officers and directors of
the Investment Adviser.
Firstar Trust Company, a subsidiary of Firstar Corporation, a publicly held bank
holding company, serves as custodian, transfer agent, administrator and
accounting services agent for the Fund.
5. EXPENSE GUARANTEE
In order to limit the Fund's expenses, the Investment Adviser has guaranteed
that certain expenses payable by the Fund (including, but not limited to,
management fees, legal, audit, custodial, printing and other regular Fund
expenses, but excluding brokerage commissions, taxes, interest, organizational
costs and other expenses that are capitalized, and all extraordinary items such
as litigation or indemnification expenses) will not exceed specified levels in
any fiscal year. If the Fund's regular operating expenses exceed the applicable
limit specified below (expressed as a percentage of average daily net assets on
an annual basis), the Investment Adviser will reduce its management fee, or
reimburse the Fund, in an amount equal to the excess:
Average Daily Net Annual
Assets for the Year Expense Limit
------------------- -------------
$100,000 - $10,000,000 2.00%
$10,000,001 - $15,000,000 1.75%
$15,000,001 - $25,000,000 1.50%
$25,000,001 - $50,000,000 1.25%
$50,000,001 - $100,000,000 1.00%
$100,000,001 and above 0.75%
In addition, the Investment Adviser has voluntarily agreed to reimburse the Fund
for its expenses or waive management fees during fiscal 1996 in order to keep
regular operating expenses at no more than 1.20% for the year. Any reduction in
management fees or reimbursement of expenses by the Investment Adviser required
pursuant to the above expense guarantee will be computed and accrued daily, paid
monthly and adjusted annually on the basis of the Fund's average daily net
assets for the year. The Investment Adviser waived $30,602 of management fees
for the year ended May 31, 1996.
6. DISTRIBUTIONS
On June 28, 1996 an ordinary income dividend
of $0.02889245 per share aggregating $26,752 was declared. The distribution was
paid on June 28, 1996 to shareholders of record on June 27, 1996.
END OF NOTES TO THE FINANCIAL STATEMENTS
Effective November 30, 1995, Deloitte & Touche, L.L.P. ("Deloitte") resigned
as the Fund's independent account ants. For the years ended May 31, 1994 and
1995, Deloitte expressed an unqualified opinion on the Fund's financial
statements. There were no disagreements between Fund management and Deloitte
prior to their resignation. On December 13, 1995 the Board of Directors of
the Fund approved the appointment of Coopers & Lybrand L.L.P. as the Fund's
independent accountants. The Fund has received a letter from Deloitte
addressed to the Securities and Exchange Commission stating that Deloitte
agrees with the above statements (other than the statement with respect to
the approval of the Board of Directors, as to which Deloitte expresses
no knowledge).
[ARTICLE] 6
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAY-31-1996
[PERIOD-START] JUN-01-1995
[PERIOD-END] MAY-31-1996
[INVESTMENTS-AT-COST] 8,855,355
[INVESTMENTS-AT-VALUE] 11,264,840
[RECEIVABLES] 13,757
[ASSETS-OTHER] 16,987
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 11,295,584
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 38,554
[TOTAL-LIABILITIES] 38,554
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 9,166,405
[SHARES-COMMON-STOCK] 925,900
[SHARES-COMMON-PRIOR] 992,399
[ACCUMULATED-NII-CURRENT] 19,358
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (339,144)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 2,409,485
[NET-ASSETS] 11,257,030
[DIVIDEND-INCOME] 243,827
[INTEREST-INCOME] 14,461
[OTHER-INCOME] 0
[EXPENSES-NET] 127,500
[NET-INVESTMENT-INCOME] 130,788
[REALIZED-GAINS-CURRENT] 396,245
[APPREC-INCREASE-CURRENT] 1,746,279
[NET-CHANGE-FROM-OPS] 2,273,312
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 156,269
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 95,656
[NUMBER-OF-SHARES-REDEEMED] 173,423
[SHARES-REINVESTED] 11,268
[NET-CHANGE-IN-ASSETS] 1,397,400
[ACCUMULATED-NII-PRIOR] 3,217
[ACCUMULATED-GAINS-PRIOR] (735,389)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 53,125
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 158,102
[AVERAGE-NET-ASSETS] 10,602,813
[PER-SHARE-NAV-BEGIN] 9.94
[PER-SHARE-NII] 0.15
[PER-SHARE-GAIN-APPREC] 2.23
[PER-SHARE-DIVIDEND] 0.16
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.16
[EXPENSE-RATIO] 1.20
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
