THE JENSEN PORTFOLIO
ANNUAL REPORT
MAY 31, 1997
THE JENSEN PORTFOLIO
LETTER FROM THE INVESTMENT ADVISER
Dear Fellow Shareholders:
Of the many benefits of owning mutual funds, which include professional
management, diversification and record keeping, the experience of fund ownership
boils down to watching a mutual fund's price change. In today's lofty and
volatile equity markets, watching price changes can induce scary and frightening
feelings. When markets are falling, those sensations become more intense.
Clearly, common stock investors participate in precisely the same environment
as equity mutual fund investors. Common stock investors have, however, a number
of advantages over fund holders when markets become unfathomable. These
advantages include being able to actually name the companies they own, the
company's products or services, its financial wherewithal and business
performance--the myriad of information that goes along with direct ownership of
a company. For example, the owner of stock in WD-40 has the comfort of knowing
that the consumption of his company's products won't change because the stock
market goes up or down. Ben Graham, the seminal security analyst, believed that
earnings, dividends, and balance sheet position could satisfy the holder of an
individual company even if its market quotation remained "disappointingly low."
Thus, the courage to hold onto stocks during thick or thin (and indeed buy more
shares when the market weather causes the fearful to bail) comes from a
familiarity with companies denied to mutual fund shareholders.
One of our missions, since the Portfolio's inception, is our desire to bring
the benefits of common stock ownership to its shareholders. The Portfolio's
prospectus, its financial reports, and the newsletter, Investment Brief, are all
meant to provide in depth information about companies and our investment
strategy. In addition, we encourage holders to communicate with us regarding any
individual company owned in the Portfolio.
Beginning with this letter, we are offering to provide the annual reports on
any of the companies owned in The Jensen Portfolio to any shareholder. Delivery
will usually take about two weeks. Going forward, we will be considering other
ways to bring the common stock experience closer to the Portfolio's investors--
without forgoing any of the benefits already inherent in mutual funds. We
believe we are the only mutual fund to make this offer.
We chose annual reports because they have long been the primary source for
business analysis. Annual reports always provide ample grist for number
crunchers; more than that, annual reports reveal the direction in which
management wishes to lead their business, a comprehensive business and financial
review, a description of products and services, names of officers and directors,
and much more.
Our purpose in bringing the common stock experience closer is not to portend a
change in market direction (which will occur the precise moment everyone finally
believes it will not). Instead we wish to share our conviction that each company
in the Portfolio has the prospect of being valued at much higher prices. One of
our largest holdings, Abbott Laboratories, may serve as an example. Abbott has
been in the Portfolio since its inception, and we hope it remains there for the
duration. What might happen to its price over the next four weeks or four months
is not all that important, because what we believe will happen over the next ten
years is so significant. We estimate that Abbott will average earnings growth of
about 13.5 percent per year over the next decade, and we believe that will be
reflected in its price. We are not sure that Abbott will increase earnings at
that rate each year of the decade and that may give us an opportunity to add to
our position.
In order to meet these estimates, Abbott must maintain their historic business
efficiency plus report sales of $30 billion dollars over 1996's $11 billion--
certainly no small task. Abbott does have several things going for it. It has
grown at a faster, much faster, rate in the past. This does not mean that the
company will clone its past performance; it does indicate, however, that the
company has created the infrastructure to handle rapid growth. It means this
growth rate can not only be tolerated by the organization; it suggests that it
is expected. The success of each individual employee in the organization lies in
exceeding that rate.
A second reason that we expect that Abbott will achieve our estimates is that
the company is devoted to research and development. Our forecast is that it will
have spent nearly $30 billion in the next decade on R&D expenditures while the
benefits from past R&D are still accruing for the shareholders. Acres of copy
have been written about the importance of brand names in investment--Nike, Coca-
Cola, and 3M, to name just a few--because building brands through advertising
can create value for investors for years to come. (The Jantzen Diving Girl is
still a famous trademark long after its advertising was a centerpiece.) A
similar, and arguably much greater, benefit accrues to investors in companies
with research and development programs, because any resulting products often
enjoy a number of years of price protection.
There must, also, be a marketplace to absorb Abbott's growth. Domestically,
our population is aging which directly relates to the consumption of
pharmaceuticals and healthcare services. Products and services such as Abbott's
are destined to be the item of last resort in keeping people out of hospitals
and helping our medical system to be viable. The most exciting growth prospects,
however, are in countries with less well-developed medical programs. In China
alone, only 15 percent of its population enjoy healthcare provided by government
insurance. That leaves 900 million people today that a have no coverage. Glaxo,
the British pharmaceutical giant, estimates that China alone will grow to be a
$38 billion market by 2006 and the largest consumer of medical products by 2020.
In Abbott's case, as with every other member of the Portfolio, the most
important part of the future is the role of management. Management must hire the
right people, motivate them to the height of their skills, and compensate them
fairly. They must conduct a relentless battle with their competitors, who are
always after a piece of Abbott's pie. They must manage cash, which enters their
tills in the form of hundreds of different currencies. They must assure the
quality and reliability of raw materials used in their products. Abbott's
owners, the shareholders, must be properly rewarded. The responsibility for the
survival of the business is in the hands of management. Although we have used
one company as an example, we believe that every company owned in the Portfolio
can provide a 15% total return (appreciation plus dividends) over the decade
ahead. Knowing each of these companies is our challenge, and we are counting on
some to exceed our estimates because some will not. Our offer to provide annual
reports is to share the common stock experience with you.
The Jensen Portfolio's performance for the fiscal year ending May 31, 1997,
after deducting expenses and reinvesting dividends, was +22.56% versus the S&P
500's +29.41%. A graphic presentation is on page 3.
In closing, we wish to reiterate our conviction that equity markets do a
remarkable job in valuing companies, over the long term. We consider ourselves
as business analysts and our duty is to hold onto our favorite companies until
the market appraises them at their full value. That is why we own companies like
Abbott Laboratories and why we are comfortable riding out any storms the market
will inevitably produce. If you have any questions, please call us at 1-800-221-
4384.
Sincerely,
/s/ Val Jensen
Val Jensen
President, Jensen Investment Management
THE JENSEN PORTFOLIO
TOTAL RETURNS VS. THE S&P 500
date THE JENSEN PORTFOLIO S&P 500 STOCK INDEX
8/3/92 $10,000 $10,000
11/30/92 $10,360 $10,283
5/31/93 $9,428 $10,885
11/30/93 $9,233 $11,321
5/31/94 $8,991 $11,348
11/30/94 $9,115 $11,440
5/31/95 $10,325 $13,640
11/30/95 $11,643 $15,671
5/31/96 $12,818 $17,519
11/30/96 $14,611 $20,037
5/31/97 $15,709 $22,672
FOR THE PERIOD ENDING MAY 31, 1997
ANNUALIZED
ONE YEAR SINCE INCEPTION
THE JENSEN PORTFOLIO: 22.56% 9.80%
S&P500 STOCK INDEX: 29.41% 18.47%
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 PREDICATIVE 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, 1997, the related statement of operations for the year then ended and
the statements of changes in net assets and financial highlights for each of the
two years in the period ended May 31, 1997. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. 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, 1997 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, 1997, the results of its operations for the
year then ended and the changes in its net assets and the financial highlights
for each of the two years in the period ended May 31, 1997, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Portland, Oregon
July 7, 1997
STATEMENT OF ASSETS & LIABILITIES
MAY 31, 1997
ASSETS:
Investments, at value (cost $9,717,221) $14,561,972
Income receivable 13,364
Deferred organizational expenses,
net of accumulated amortization 2,454
Prepaid expenses 1,867
------------
Total Assets 14,579,657
------------
LIABILITIES:
Payable to investment adviser 11,302
Payable to directors 29,858
Accrued expenses 27,410
------------
TOTAL LIABILITIES 68,570
------------
NET ASSETS $14,511,087
============
NET ASSETS CONSIST OF:
Capital stock $9,948,307
Unrealized appreciation on
investments 4,844,751
Undistributed net investment income 9,098
Undistributed net realized losses (291,069)
------------
TOTAL NET ASSETS $14,511,087
===========
NET ASSET VALUE PER SHARE, 981,993
SHARES OUTSTANDING (100,000,000 SHARES
AUTHORIZED, $.001 par value) $14.78
======
See notes to financial statements.
SCHEDULE OF INVESTMENTS
MAY 31, 1997
Number of Shares Market Value
- ---------------- ------------
COMMON STOCK 98.80%
BANKS 4.92%
16,000 Wilmington Trust Corporation $714,000
-----------
BEVERAGES 8.23%
10,000 Brown-Foreman Corporation, Class B 511,250
10,000 The Coca-Cola Company 682,500
-----------
1,193,750
-----------
CHEMICAL DIVERSIFIED 8.50%
7,000 Minnesota Mining & Manufacturing Company 642,250
25,000 Pall Corporation 590,625
-----------
1,232,875
-----------
CHEMICAL SPECIALTY 7.71%
18,000 Sigma-Aldrich Corporation 551,250
10,000 WD-40 Company 567,500
-----------
1,118,750
-----------
COMPUTER SOFTWARE SERVICES 5.08%
15,000 Automatic Data Processing, Inc. 736,875
-----------
DRUGS 6.19%
10,000 Merck & Company, Inc. 898,750
-----------
ELECTRICAL EQUIPMENT 5.41%
13,000 General Electric Company 784,875
-----------
FOOD PROCESSING 3.66%
13,000 Sara Lee Corporation 531,375
-----------
HOUSEHOLD PRODUCTS 5.22%
6,000 Clorox Company 757,500
-----------
INDUSTRIAL SERVICES 10.77%
50,000 Equifax, Inc. 1,562,500
-----------
MACHINERY 4.47%
12,000 Nordson Corporation 648,000
-----------
MEDICAL SUPPLIES 13.93%
18,000 Abbott Laboratories 1,134,000
12,000 Medtronic, Inc. 888,000
-----------
2,022,000
-----------
NEWSPAPERS 4.78%
7,500 Gannett Company, Inc. 693,750
-----------
SEMICONDUCTORS 5.22%
5,000 Intel Corporation 757,500
-----------
SHOE INDUSTRY 4.71%
12,000 Nike, Inc. -- Class B 684,000
-----------
Total Common Stock
(Cost $9,491,749) 14,336,500
-----------
Principal Amount Market Value
- ---------------- ------------
SHORT-TERM INVESTMENTS 1.55%
VARIABLE RATE DEMAND NOTES 1.55%
$1,080 American Family Financial Services Inc., 5.2461% $1,080
Johnson Controls, Inc.:
9,700 5.355% 9,700
157,157 5.266% 157,157
57,535 Wisconsin Electric Power Company, 5.2861% 57,535
-----------
Total Short-Term Investments
(Cost $225,472) 225,472
-----------
TOTAL INVESTMENTS 100.35%
(Cost $9,717,221) 14,561,972
-----------
LIABILITIES,
LESS OTHER
ASSETS (0.35%) (50,885)
-----------
NET ASSETS 100.00% $14,511,087
===========
See notes to financial statements.
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
INVESTMENT INCOME:
Dividends $223,399
Interest 15,847
-----------
239,246
-----------
EXPENSES:
Investment advisory fees 62,054
Shareholder servicing and accounting 27,056
Professional fees 18,222
Directors' fees and expenses 17,133
Amortization of deferred
organizational expenses 13,779
Administration fees 15,001
Reports to shareholders 9,245
Federal and state registration fees 1,640
Custody fees 2,482
Other 1,019
-----------
Total expenses before
reimbursement 167,631
Less: Reimbursement from Adviser (4,043)
-----------
Net Expenses 163,588
-----------
NET INVESTMENT INCOME 75,658
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investment transactions 48,074
Change in unrealized appreciation
on investments 2,435,266
-----------
Net gain on investments 2,483,340
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $2,558,998
===========
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
MAY 31, '97 MAY 31, '96
------------ ------------
OPERATIONS:
Net investment income $75,658 $130,788
Net realized gain on
investment transactions 48,074 396,245
Change in unrealized appreciation
on investments 2,435,266 1,746,279
----------- ----------
Net increase in net assets
resulting from operations 2,558,998 2,273,312
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 2,414,861 1,042,344
Shares issued to holders in
reinvestment of dividends 79,511 123,607
Shares redeemed (1,699,617) (1,885,594)
----------- ----------
Net increase (decrease) 794,755 (719,643)
----------- ----------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income (89,436) (144,606)
In excess of net investment
income#<F1> (10,260) (11,663)
----------- ----------
Total dividends and
distributions (99,696) (156,269)
----------- ----------
INCREASE
IN NET ASSETS 3,254,057 1,397,400
NET ASSETS:
Beginning of year 11,257,030 9,859,630
----------- ----------
End of year (including
undistributed net investment
income of $9,098
and $19,358, respectively) $14,511,087 $11,257,030
=========== ===========
#<F1>On a tax basis, this is not a return of capital.
See notes to financial statements.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
AUGUST 3,
1992(1)<F2>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
Per Share Data: MAY 31, '97 MAY 31, '96 MAY 31, '95 MAY 31, '94 MAY 31, '93
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.16 $9.94 $8.80 $9.36 $10.00
Income from investment operations:
Net investment income 0.10 0.15 0.14 0.13 0.09
Net realized and unrealized
gains (losses) on investments 2.63 2.23 1.15 (0.56) (0.66)
-------- -------- -------- -------- --------
Total from investment operations 2.73 2.38 1.29 (0.43) (0.57)
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.10) (0.15) (0.15) (0.13) (0.07)
Distribution in excess of net
investment income (0.01) (0.01) -- -- --
-------- -------- -------- -------- --------
(0.11) (0.16) (0.15) (0.13) (0.07)
-------- -------- -------- -------- --------
Net asset value,
end of period $14.78 $12.16 $9.94 $8.80 $9.36
======== ======== ======== ======== =======
Total return(2)<F3> 22.56% 24.14% 14.84% (4.64)% (5.72)%
Supplemental data and ratios:
Net assets, end of period $14,511,087 $11,257,030 $9,859,630 $8,808,717 $9,470,139
Ratio of expenses to average
net assets(3)<F4> 1.32% 1.20% 1.20% 1.13% 0.89%
Ratio of net investment income to
average net assets(3)<F4> 0.61% 1.23% 1.48% 1.36% 1.54%
Portfolio turnover rate 24.50% 47.93% 11.27% 5.26% 4.01%
Average commission rate paid $0.0196 $0.0198
(1)<F2>Commencement of operations.
(2)<F3>Not annualized for the period August 3, 1992 through May 31, 1993.
(3)<F4>Annualized for the period August 3, 1992 through May 31, 1993. Without
expense waivers or voluntary reimbursements of $4,043 for the year ended May
31, 1997, $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 1.35%, 1.49%, 1.75%, 1.72% and 1.97%, respectively,
and the ratio of net income to average net assets would have been 0.58%,
0.94%, 0.93%, 0.77% and 0.25%, respectively.
See notes to financial statements.
</TABLE>
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, '97 MAY 31, '96
------------ ------------
Shares sold 178,249 95,656
Shares issued to holders in
reinvestment of dividends 6,168 11,268
Shares redeemed (128,324) (173,423)
--------- ---------
Net increase (decrease) 56,093 (66,499)
========= =========
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, by the Fund for the year ended May 31, 1997, were $3,910,260 and
$2,972,544, respectively.
At May 31, 1997, gross unrealized appreciation and depreciation of investments
were as follows:
Appreciation............ $4,946,799
(Depreciation).......... (102,048)
----------
Net appreciation on
investments........... $4,844,751
==========
At May 31, 1997, the cost of investments for federal income tax purposes was
$9,717,221.
At May 31, 1997, the Fund had accumulated net realized capital loss carryovers
of $72,477 and $218,592 expiring in 2002 and 2003, respectively. To the extent
the Fund realizes future net capital gains, taxable distributions to its
shareholders will be offset by any unused capital loss carryover.
4. INVESTMENT ADVISORY AND OTHER
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 1997 in order to keep
regular operating expenses at no more than 1.20% through October 31, 1996 and
1.40% from November 1 through May 31, 1997. 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 $4,043 of management fees for the year ended
May 31, 1997.
6. DISTRIBUTIONS
On June 30, 1997 an ordinary income dividend of $0.01419898 per share
aggregating $13,985 was declared. The distribution was paid on June 30, 1997 to
shareholders of record on June 27, 1997.
END OF NOTES TO THE FINANCIAL STATEMENTS
430 PIONEER TOWER
888 SW FIFTH AVENUE
PORTLAND, OR 97204-2018
503-274-2044
800-221-4384
Fax 503-274-2031
