As filed with the Securities and Exchange Commission on September 26, 1997
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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. 6 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 8 [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)
- ---
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
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 17, 1997.
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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
Registration Statement Item No.
and Caption Location in Prospectus
- ------------------------------- ----------------------
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
Performance...........................................Not Applicable
(Included in
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
<PAGE>
THE JENSEN PORTFOLIO, INC.
PART A
-------------------
PROSPECTUS
<PAGE>
the JENSEN PORTFOLIO
<PAGE>
PROSPECTUS
the JENSEN PORTFOLIO
PROSPECTUS
September 26, 1997
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 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 26, 1997, 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.
TABLE OF CONTENTS
Page
Fund Expenses 2
Financial Highlights 2
Investment Objectives and Policies 3
Certain Risk Factors to be Considered 6
Management of the Fund 6
Purchase of Shares 8
Redemption of Shares 10
Dividends, Distributions and Taxes 11
Allocation of Brokerage 12
Performance Information 12
General Information 12
1
<PAGE>
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 "Management of the Fund."
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) .47%
12b-1 Fees .00%
Other Expenses .85%
Total Fund Operating Expenses(2) 1.32%
(1) Redemptions paid by wire transfer are assessed the Transfer Agent's
regular wire charge, which, at the date of this Prospectus, is $12.00.
(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 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 and the 1998 fiscal year. Without the voluntary
reimbursement or waiver of $50,889 in fiscal 1995, $30,602 in fiscal 1996 and
$4,043 in fiscal 1997, the "total fund operating expenses" in such fiscal years
would have been 1.75, 1.49 and 1.35 percent, respectively. The Investment
Adviser reserves the right to discontinue this policy at any time after May 31,
1998.
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
------ ------- ------- --------
$13 $42 $72 $159
* 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 Fund's fiscal year begins on June 1 and ends on May 31. The following
condensed financial information for 1997 and 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 1997 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.
2
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<TABLE>
<CAPTION>
AUGUST 3,
1992(1)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
MAY 31, '97 MAY 31, '96 MAY 31, '95 MAY 31, '94 MAY 31, '93
------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Per Share Data:
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) 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) 1.32% 1.20% 1.20% 1.13% 0.89%
Ratio of net investment income to
average net assets(3) 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
<FN>
(1) Commencement of operations.
(2) Not annualized for the period August 3, 1992 through May 31, 1993.
(3) 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.
</FN>
</TABLE>
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 companies
("Portfolio Companies") that satisfy the stringent investment criteria described
in this Prospectus. Generally, each Portfolio Company must have consistently
achieved high returns on equity for ten years, must have paid increasing
dividends for five years or taken other measures having equivalent effect, 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
3
<PAGE>
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:
o Attained a return on equity of at least 15 percent per year for at least the
prior 10 consecutive years.
o Currently have an excellent financial condition.
o 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.
o 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.
o 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.
o 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 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 (excluding the
proceeds of shares issued within the last 30 days) 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
4
<PAGE>
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
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. 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:
o Objectively defined the Fund's research process, so that every portfolio
security has met specific objective and analytical tests.
o 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.
o Established investment policies that prohibit the Fund from trading on
margin, lending securities, selling short, or trading in futures or options.
o Retained a nonaffiliated transfer agent, Firstar Trust Company, to perform
all custody, fund accounting and transfer agent functions (the "Transfer
Agent").
5
<PAGE>
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.
DEPENDENT ON MANAGEMENT OF INVESTMENT ADVISER
- ---------------------------------------------
The Fund is dependent upon the services of Val E. Jensen, 68, Gary W. Hibler,
53, and Robert F. Zagunis, 43, 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 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 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 $76
million at June 30,
6
<PAGE>
1997. 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 68 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 19 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 $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 marketing expenses related to 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
1998 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. See
"Fund Expenses" and "Financial Highlights" in this Prospectus.
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:
7
<PAGE>
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 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 $20,000.
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 ("Processing Intermediaries").
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
Mutual Fund Services
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 800-992-4144 to ensure prompt and accurate handling of your transfer.
Then, instruct your bank to wire the purchase price to: Firstar Bank Milwaukee
N.A., 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 800-992-4144 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
8
<PAGE>
a U.S. bank, savings and loan, or credit union. The Fund will not accept payment
in cash or third party checks for the purchase of shares. 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 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 800-992-4144 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 800-992-4144 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
9
<PAGE>
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 800-992-4144 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 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 800-992-4144 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. The shareholder should contact Firstar Trust Company for further
information concerning documentation required for a redemption of Fund shares.
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 for shares redeemed will be
mailed typically within one or two business days, but no later than the seventh
business day after receipt by Firstar Trust Company of the redemption request in
good order. 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, but may
take up to twelve days from the purchase date. Investors may avoid such delays
by purchasing shares of the Fund
10
<PAGE>
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 other 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 Application. If the shareholder does not have
a taxpayer identification number, he/she should indicate on the Account
Application that an application to obtain a number is pending. The Fund will
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,
$12.00) 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 or of net short-term capital gain are generally taxable
as ordinary income to the recipient shareholders, and distributions designated
as the excess of net long-term capital gain over net short-term capital loss are
generally taxable as long-term capital gain to the recipient shareholder
regardless of the length of time the shareholder held the Fund's shares. A
portion of any distribution properly designated as a dividend by the Fund may be
eligible for the dividends-received deduction in the case of corporate
shareholders.
Shareholders also may be subject to state or local taxes with respect to their
holding of Fund shares or 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 gain 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.
Each prospective shareholder is asked to certify on its Account Application that
the social security number or other 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. Federal law requires the Fund to withhold 31 percent of all
distributions and redemption proceeds paid to certain shareholders who have not
provided the required certificate. The Fund generally does not accept an Account
Application that does not comply with these requirements.
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.
11
<PAGE>
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.
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
affect 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: 800-992-4144), acts as custodian of the Fund's cash and
securities and as the Fund's transfer agent, dividend disbursing agent and
administrator.
CONFIRMATION 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 Firstar
Trust Company, Mutual Fund Services at 615 E. Michigan Street, Milwaukee, WI
53202 (telephone: 800-992-4144).
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.
13
<PAGE>
the JENSEN PORTFOLIO
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
Telephone: 800-992-4144
JENSEN INVESTMENT
MANAGEMENT [Logo]
<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 26, 1997
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 26, 1997
TABLE OF CONTENTS
-----------------
Page
GENERAL INFORMATION AND HISTORY................................................1
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS...............................1
Investment Objectives......................................................1
Investment Restrictions....................................................1
Commercial Paper Ratings...................................................3
ADRs.......................................................................3
MANAGEMENT OF THE FUND.........................................................4
Directors and Officers.....................................................4
Investment Adviser.........................................................6
Administrator..............................................................6
THE INVESTMENT ADVISORY AND SERVICE CONTRACT...................................7
General ..................................................................7
Management of the Investment Adviser.......................................9
PORTFOLIO TRANSACTIONS.........................................................9
General Considerations.....................................................9
Portfolio Turnover........................................................10
PURCHASE AND REDEMPTION OF FUND SHARES........................................11
NET ASSET VALUE...............................................................11
TAXES.........................................................................12
General...................................................................12
Tax Status of Fund........................................................12
Distributions.............................................................14
Other Considerations......................................................14
Additional Information....................................................15
PRINCIPAL SHAREHOLDERS........................................................16
i
<PAGE>
PERFORMANCE INFORMATION.......................................................17
MISCELLANEOUS INFORMATION.....................................................17
General .................................................................17
Limitation of Director Liability..........................................18
Indemnification...........................................................18
Independent Accountants...................................................18
Custodian, Transfer Agent and Dividend Disbursing Agent...................18
Registration Statement....................................................19
Financial Statements......................................................19
Appendix A - Commercial Paper Ratings .......................................A-1
ii
<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.
<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
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
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>, 68, 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 $76 million at
June 30, 1997. At August 31, 1997, Mr. Jensen was the beneficial owner of 67.9
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., 53, 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
August 31, 1997, Dr. Hibler was the beneficial owner of 33.5 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.
4
<PAGE>
ROBERT F. ZAGUNIS<F1>, 43, 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 August 31, 1997, 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>, 79, 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>, 76, 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 is Chairman and Chief Executive
Officer of International Medical Devices Partners, Inc., where his 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 $1,016 in expense
reimbursements for the fiscal year ended May 31, 1997. He receives no pension or
retirement benefits from the Fund.
<F3> Mr. Achen received $7,000 in director fees and $1,429 in expense
reimbursements for the fiscal year ended May 31, 1997. He receives no pension or
retirement benefits from the Fund.
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, 1997, such fees and expenses aggregated
$16,445 for the disinterested directors.
At August 31, 1997, officers and directors of the Fund beneficially owned
10.6 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, if any, 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 an
6
<PAGE>
annual minimum of $20,000. The Fund accrued fees of $1,250 for administration
services provided by the Administrator for the period May 1, 1995 through May
31, 1995, fees of $14,889 the period June 1, 1995 through May 31, 1996, and fees
of $15,001 for the period June 1, 1996 through May 31, 1997.
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 services provided by the Prior Administrator under the
administration agreement for the period June 1, 1994 through April 30, 1995,
fees paid by the Fund 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 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
7
<PAGE>
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. The Investment Advisor also voluntarily
waived all of its management fee for each of 1994 and 1995 ($45,710 and $45,737
respectively), $30,602 of its management fee for 1996, and $4,043 of its
management fee for 1997.
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 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"
8
<PAGE>
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.
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, 66, has been employed as Director of Operations of the
Investment Adviser since 1990. At August 31, 1997, Mrs. Jensen, together with
her husband, Val E. Jensen, beneficially owned 67.9 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, 67, has served as a director of the Investment
Adviser since 1991. At August 31, 1997, 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.
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,
9
<PAGE>
1994, 1995, 1996, and 1997 the Fund paid brokerage commissions totaling $972,
$1,291, $4,834, and $3,459, 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.
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 maturity or
expiration dates at the time of acquisition was 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, 1997, the Fund's
portfolio turnover rate was 24.5 percent. For the fiscal year ended May
10
<PAGE>
31, 1996, the Fund's portfolio turnover rate was 47.9 percent, due principally
to the restructuring of a portion of the Fund's portfolio.
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.
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
11
<PAGE>
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. To qualify as a regulated investment
company, the Fund must satisfy certain gross income tests and certain
diversification tests. Generally, shareholders of the Fund will be subject to
federal income tax with respect to distributions from the Fund. The Fund will
not be subject to federal income tax, however, to the extent the Fund
distributes its net investment income and net capital gain to its 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, gain from
sale or other disposition of stock or securities, and certain other types of
income (the "90 Percent Test"); (b) derive less than 30 percent of its gross
income from sale or other disposition of certain assets held less than three
months, including stock or securities (the "30 Percent Test"); 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 of any one issuer 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 or the securities of other regulated investment companies)
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 criteria. In
addition, the Fund must file, or have filed, a proper election with the Internal
Revenue Service.
The Taxpayer Relief Act of 1997 repealed the 30 Percent Test, effective for
taxable years beginning after August 5, 1997, the date of enactment of that Act.
Accordingly, the Fund intends and expects to satisfy the 30 Percent Test for the
remainder of its taxable year ending May 31, 1998. However, the Fund will not be
required to satisfy the 30 Percent Test for the taxable year beginning June 1,
1998 or for subsequent years.
12
<PAGE>
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 gain
in excess of net long-term capital loss) computed without any deduction for
dividends paid.
A regulated investment company, such as the Fund, that meets the
requirements described above is taxed on its investment company taxable income,
to the extent such income is not distributed to the shareholders of the Fund. 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 rates.
If the Fund retains any net long-term capital gain in excess of net
short-term capital loss and pays federal income tax on such excess, it may elect
to treat such capital gain as having been distributed to shareholders. If the
Fund so elects, shareholders will be taxed on such amounts as long-term capital
gain, may claim their proportionate share of the federal income tax paid by the
Fund on such gain 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
gain.
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, 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 on its net
income (and, possibly, other taxes) 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 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 in all possible circumstances.
13
<PAGE>
Distributions
- -------------
Distributions paid out of the Fund's investment company taxable income are
taxable to shareholders as ordinary income. Because a portion of the Fund's
income may consist of dividends paid by U.S. corporations, a portion of the
distributions paid by the Fund may be eligible for the corporate
dividends-received deduction. Distributions 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 gain
is significantly 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 will be taxable as described above, whether paid in shares or
in cash. Each distribution will be 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 gain or other
earnings.
Other Considerations
- --------------------
Generally, the Fund must obtain from each shareholder a certification of
the shareholder's taxpayer 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 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.
14
<PAGE>
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 has been made to present
a complete or detailed explanation of tax matters. Furthermore, the provisions
of the statutes and regulations on which these summaries are based are subject
to prospective or retroactive change by legislative or administrative action.
State and local taxes are beyond the scope of this discussion. Prospective
investors in the Fund should consult their own tax advisers regarding federal,
state or local tax matters.
15
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table shows the ownership of shares of the Fund on August 31,
1997 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>
Name and Address of Number of Approximate Percentage of
Beneficial Owner Shares Outstanding Shares
------------------- --------- -------------------------
<S> <C> <C>
Donaldson, Lufkin & Jenrette<F1> 170,483 16.8%
Jersey City, NJ
Douglas Walta<F2> 105,342 10.4%
Portland, Oregon
Richard L. Knipe<F3> 101,602 10.0%
Alamo, California
Louis B. Perry<F4> 58,592 5.8%
Walla Walla, Washington
Richard Perry<F5> 54,857 5.4%
Walla Walla, Washington
All officers and directors as a group 107,449 10.6%
(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 2,345
shares, and the beneficial owner only of an additional 102,997, of which 66,978
shares are held in trust under an agreement with G.I. Clinic for the benefit of
Dr. Walta. The shares reported also include 2,508 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, 35,018 are owned of record and beneficially by Dr.
Perry. The shares reported also include 23,574 shares owned of record and
beneficially by Dr. Perry's wife, in which Dr. Perry disclaims any beneficial
ownership.
<F5> Of the shares reported, 52,860 are owned of record and beneficially by Mr.
Perry. The shares reported also include 1,997 shares owned of record and
beneficially by Mr. Perry's wife, in which Mr. Perry disclaims any beneficial
ownership.
</FN>
</TABLE>
16
<PAGE>
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, 1997 was 22.56
percent. The Fund's average annual total return from August 3, 1992
(commencement of operations) to May 31, 1997 was 9.80 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 the Fund and in the net assets of the Fund upon liquidation or dissolution
after satisfaction of outstanding liabilities.
17
<PAGE>
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, 1998. 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 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
18
<PAGE>
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, 1997, and the report of the Fund's independent accountants in connection
therewith, are included in the Fund's 1997 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.
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.
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 1997 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, 1997 4
Schedule of Investments at May 31, 1997 4
Statement of Operations for the year ended May 31, 1997 6
Statement of Changes in Net Assets for the years ended
May 31, 1997 and 1996 6
Financial Highlights for the fiscal years ended May 31, 1997,
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) 1997 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, 1997, 107,449 of Registrant's shares (or 10.6 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 67.9 percent
of the outstanding shares), Gary W. Hibler (Secretary, Managing Director and
beneficial owner of 33.5 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 67.9 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, 1997
-------------- -----------------------
Common Stock, $0.001 par value 117
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. 6 to this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Portland, Oregon on
September 25, 1997.
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 25, 1997 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. 6
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) 1997 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.
EXHIBIT 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Directors and Shareholders of The Jensen Portfolio, Inc.:
We consent to the inclusion in Post-Effective Amendment No. 6 to the
Registration Statement of The Jensen Portfolio, Inc. on Form N-1A (File No.
33-47508) of our report, dated July 7, 1997 on our audit of the financial
statements and the financial highlights of the Fund, which report is included in
the Annual Report to Shareholders for the year ended May 31, 1997 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 25, 1997
EXHIBIT 11(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to us in this Post-Effective Amendment No. 6 to
Registration Statement No. 33-47508 on Form N-1A 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 25, 1997
EXHIBIT 12
1997 ANNUAL REPORT TO SHAREHOLDERS
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
[ARTICLE] 6
[CIK] 0000887215
[NAME] THE JENSEN PORTFOLIO, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAY-31-1997
[PERIOD-START] JUN-01-1997
[PERIOD-END] MAY-31-1997
[INVESTMENTS-AT-COST] 9,717,221
[INVESTMENTS-AT-VALUE] 14,561,972
[RECEIVABLES] 13,364
[ASSETS-OTHER] 4,321
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 14,579,657
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 68,570
[TOTAL-LIABILITIES] 68,570
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 9,948,307
[SHARES-COMMON-STOCK] 981,993
[SHARES-COMMON-PRIOR] 925,900
[ACCUMULATED-NII-CURRENT] 9,098
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (291,069)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 4,844,751
[NET-ASSETS] 14,511,087
[DIVIDEND-INCOME] 222,783
[INTEREST-INCOME] 15,847
[OTHER-INCOME] 616
[EXPENSES-NET] 163,588
[NET-INVESTMENT-INCOME] 75,658
[REALIZED-GAINS-CURRENT] 48,074
[APPREC-INCREASE-CURRENT] 2,435,266
[NET-CHANGE-FROM-OPS] 2,558,998
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 99,696
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 178,249
[NUMBER-OF-SHARES-REDEEMED] 128,324
[SHARES-REINVESTED] 6,168
[NET-CHANGE-IN-ASSETS] 3,254,057
[ACCUMULATED-NII-PRIOR] 19,358
[ACCUMULATED-GAINS-PRIOR] (339,144)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 62,054
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 167,631
[AVERAGE-NET-ASSETS] 12,426,435
[PER-SHARE-NAV-BEGIN] 12.16
[PER-SHARE-NII] 0.10
[PER-SHARE-GAIN-APPREC] 2.63
[PER-SHARE-DIVIDEND] 0.11
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.78
[EXPENSE-RATIO] 1.32
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
