As filed with the Securities and Exchange Commission on September 23, 1998
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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. 7 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 9 [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)
- ---
60 days after filing pursuant to paragraph (b)
- ---
on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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Please forward copies of communications to:
Robert J. Moorman
Stoel Rives LLP
Suite 2300, 900 SW Fifth Avenue
Portland, Oregon 97204-1268
An indefinite number of shares of Registrant's Common Stock, $.001 par value,
has been registered by this Registration Statement pursuant to Rule 24f-2 of the
Investment Company Act of 1940. The Rule 24f-2 Notice for the Registrant's most
recent fiscal year was filed with the Securities and Exchange Commission on or
about August 17, 1998.
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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 Not Applicable (Included in
Performance................................. Registrant's Annual Report to
Shareholders)
6 Capital Stock and Other Securities.......... Dividends, Distributions and
Taxes; General Information
7 Purchase of Securities Being Offered........ Management of the Fund;
Purchase of Shares
8 Redemption or Repurchase.................... Redemption of Shares
9 Pending Legal Proceedings................... Not Applicable
<PAGE>
THE JENSEN PORTFOLIO, INC.
PART A
---------------
PROSPECTUS
<PAGE>
(The Jensen Portfolio Logo)
Prospectus
PROSPECTUS
September 23, 1998
(The Jensen Portfolio Logo)
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 23, 1998, 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 11
Performance Information 12
General Information 12
1
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FUND EXPENSES
The following tables illustrate all expenses and fees that a shareholder of the
Fund incurs. The expenses and fees set forth in the tables are fixed by
contract, except that "other expenses" is an estimate. The purpose of these
tables is to assist you in understanding the various costs and expenses that an
investor in the Fund bears directly or indirectly. See "Redemption of Shares"
and "Manage-ment of the Fund."
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load
Imposed on Purchases None
Deferred Sales Load None
Maximum Sales Load Imposed
on Reinvested Dividends None
Redemption Fees(1)<F1> None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .50%
12b-1 Fees .00%
Other Expenses .52%
Total Fund Operating Expenses 1.02%
(1)<F1> Redemptions paid by wire transfer are assessed the Transfer Agent's
regular wire charge, which, at the date of this Prospectus, is $12.00.
HYPOTHETICAL EXAMPLE OF EFFECT OF FUND EXPENSES*<F2>
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
------ ------ ------ --------
$10 $32 $56 $125
*<F2> 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 1998, 1997 and 1996 has been audited by
PricewaterhouseCoopers LLP (Coopers and Lybrand, L.L.P., prior to July 1, 1998)
independent public accountants. The following condensed financial information
for 1995, 1994 and 1993 has been audited by Deloitte & Touche, LLP, 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 PricewaterhouseCoopers LLP,
which are included in the Fund's 1998 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>
AUGUST 3,
1992(1)<F3>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
MAY 31, '98 MAY 31, '97 MAY 31, '96 MAY 31, '95 MAY 31, '94 MAY 31, '93
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value,
beginning of period $14.78 $12.16 $ 9.94 $ 8.80 $ 9.36 $10.00
Income from investment
operations:
Net investment income .... 0.23 0.10 0.15 0.14 0.13 0.09
Net realized and unrealized
gains (losses) on
investments ........... 2.46 2.63 2.23 1.15 (0.56) (0.66)
Total from investment
operations ............. 2.69 2.73 2.38 1.29 (0.43) (0.57)
Less distributions:
Dividends from net investment
income ................. (0.23) (0.10) (0.15) (0.15) (0.13) (0.07)
Distribution in excess of net
investment income ...... -- (0.01) (0.01) -- -- --
From net realized gains .. (0.37) -- -- -- -- --
------ ------ ------ ------ ------ ------
(0.60) (0.11) (0.16) (0.15) (0.13) (0.07)
------ ------ ------ ------ ------ ------
Net asset value,
end of period ............ $16.87 $14.78 $12.16 $ 9.94 $ 8.80 $ 9.36
====== ====== ====== ====== ====== ======
Total return(2)<F4> ......... 18.28% 22.56% 24.14% 14.84% (4.64)% (5.72)%
Supplemental data and ratios:
Net assets,
end of period ..........$19,900,373 $14,511,087 $11,257,030 $9,859,630 $8,808,717 $9,470,139
Ratio of expenses to
average net
assets(3)<F5> .......... 1.02% 1.32% 1.20% 1.20% 1.13% 0.89%
Ratio of net investment
income to average net
assets(3)<F5>........... 1.44% 0.61% 1.23% 1.48% 1.36% 1.54%
Portfolio turnover rate 20.80% 24.50% 47.93% 11.27% 5.26% 4.01%
Average commission
rate paid .............. $0.0185 $0.0196 $0.0198
</TABLE>
(1)<F3> Commencement of operations.
(2)<F4> Not annualized for the period August 3, 1992 through May 31, 1993.
(3)<F5> 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. For the year ended May 31, 1998 the
ratio of expenses to average net assets was less than the annual
expense limit.
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
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Investment Policies" below) issued by Portfolio Companies that meet the criteria
described below. "Fully invested" means that 100 percent of the Fund's net
assets, or as close to 100 percent of the net assets as is practicable, will be
invested in Eligible Equity Securities at all times. However, the Fund's Bylaws
allow the Investment Adviser to retain all proceeds of newly issued shares in
"Cash or Cash Equivalents" (as defined in "Fundamental Investment Policies"
below) for up to 30 days after receipt, and to retain as much as 10 percent of
the Fund's other net assets in Cash or Cash Equivalents.
The Fund has established specific criteria for the selection of Portfolio
Companies. The Investment Adviser believes these criteria provide objective
evidence of management that is capable and that is dedicated to providing
excellent returns to the Portfolio Company's shareholders. To be selected as a
Portfolio Company, a company must have satisfied all of the following
requirements:
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
4
<PAGE>
days' maturity that is rated A-1 by S&P or P-1 by Moody's, and demand notes that
are issued by companies whose commercial paper receives such ratings by S&P and
Moody's.
The Bylaws define the term "Eligible Equity Securities" as any of the following
securities that are issued by companies that, at the time the Fund purchases the
security, satisfy the Fund's investment criteria in effect at that time: (i)
common stock that is registered under the Securities Exchange Act of 1934 (the
"1934 Act") and is traded on a major United States stock exchange or through the
Nasdaq National Market (and which must be voting stock and, in the event of the
issuer's dissolution, must be entitled to its proportionate share of the
shareholders' equity or net worth of the issuer remaining after payment of any
required preferences to other outstanding classes of the issuer's equity
securities); (ii) convertible debt securities and convertible preferred stock
traded on a major United States stock exchange or through the Nasdaq National
Market, if the owner has the right, at the owner's option, to convert the debt
securities or preferred stock into common stock that satisfies all the
requirements of subsection (i) immediately above, at a specified conversion rate
or price; and (iii) American Depository Receipts ("ADRs") for the common stock
of foreign corporations, if the ADRs are issued in sponsored programs,
registered under the 1934 Act and traded on a major United States stock exchange
or through the Nasdaq National Market. (ADRs are receipts issued by domestic
banks or trust companies that represent the deposit of a security of a foreign
issuer and are publicly traded in the United States.)
The Fund may invest in securities that are issued by foreign companies if the
securities qualify as Eligible Equity Securities and if the issuer meets the
investment criteria described under "Investment Strategy." In addition, many
Portfolio Companies that are headquartered in the United States engage in
substantial foreign business. Furthermore, the Fund may purchase foreign
securities through ADRs. Accordingly, the Fund is subject to certain risks
related to foreign investments. See "Certain Risk Factors to be Considered--
Foreign Securities and ADRs" in this Prospectus.
Additional fundamental investment policies of the Fund prohibit certain
investments and activities. For example, the Fund is not permitted to lend
portfolio securities; purchase or sell options; purchase or sell commodities or
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 25 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, 69, Gary W. Hibler,
54, and Robert F. Zagunis, 44, 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 $120
million at July 31,
6
<PAGE>
1998. 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 62.5 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 35 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 20 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.
EXPENSE GUARANTEE
In order to limit the Fund's expenses, the Investment Adviser has guaranteed
that certain expenses payable by the Fund (including, but not limited to,
management fees and legal, audit, custodial, printing and other regular Fund
expenses, but excluding brokerage commissions, taxes, interest, organizational
costs and other expenses that are capitalized, and all extraordinary items such
as litigation or indemnification expenses) will not exceed specified levels in
any fiscal year. If the Fund's regular operating expenses exceed the applicable
limit specified below (expressed as a percentage of average daily net assets on
an annual basis), the Investment Adviser will reduce its management fee, or
reimburse the Fund, in an amount equal to the excess:
Average Daily Net Annual
Assets for the Year Expense Limit
------------------- -------------
$100,000 - $10,000,000 2.00%
$10,000,001 - $15,000,000 1.75
$15,000,001 - $25,000,000 1.50
$25,000,001 - $50,000,000 1.25
$50,000,001 - $100,000,000 1.00
$100,000,001 and above 0.75
7
<PAGE>
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 $25,000.
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 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
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 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
8
<PAGE>
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 and other ERISA-qualified plans) may invest in the Fund,
subject to the other requirements of the Fund. If a plan has already been
established with a custodian or trustee, the plan may purchase shares of the
Fund in the same manner as any other customer, subject to any special charges
imposed by the plan's custodian or trustee. If a customer wishes to have Fund
shares held in an individual retirement account 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.
9
<PAGE>
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 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
10
<PAGE>
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.
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
11
<PAGE>
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 Logo)
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
PricewaterhouseCoopers LLP
Suite 3100
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 23, 1998
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 23, 1998
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
Year 2000 Issues..........................................................7
THE INVESTMENT ADVISORY AND SERVICE CONTRACT...................................7
General .................................................................7
Management of the Investment Adviser......................................9
PORTFOLIO TRANSACTIONS........................................................10
General Considerations...................................................10
Portfolio Turnover.......................................................11
PURCHASE AND REDEMPTION OF FUND SHARES........................................11
NET ASSET VALUE...............................................................12
TAXES.........................................................................12
General ................................................................12
Tax Status of Fund..................................................... 13
Distributions............................................................14
Other Considerations.....................................................14
Additional Information...................................................15
PRINCIPAL SHAREHOLDERS........................................................16
i
<PAGE>
PERFORMANCE INFORMATION.......................................................16
MISCELLANEOUS INFORMATION.....................................................17
General ................................................................17
Limitation of Director Liability.........................................17
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>, 69, 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 totaling approximately $120 million at
July 31, 1998. At July 31, 1998, Mr. Jensen was the beneficial owner of 62.5
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 35 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., 54, 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
July 31, 1998, Dr. Hibler was the beneficial owner of 19.8 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>, 44, 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 July 31, 1998, Mr. Zagunis also was
the beneficial owner of 15.2 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>, 80, 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>, 77, 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 $6,750 in director fees and $956 in expense
reimbursements for the fiscal year ended May 31, 1998. He receives no
pension or retirement benefits from the Fund.
<F3> Mr. Achen received $6,750 in director fees and $1,369 in expense
reimbursements for the fiscal year ended May 31, 1998. 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, 1998, such fees and expenses aggregated
$16,910 for the disinterested directors.
At July 31, 1998, officers and directors of the Fund beneficially owned 9.1
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 annual
6
<PAGE>
minimum of $25,000. The Fund accrued fees of $14,889, 15,001 and 16,736 for
administration services provided by the Administrator for the 12 months ended
May 31, 1996, 1997 and 1998, respectively.
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.
Year 2000 Issues
- ----------------
Many existing computer programs use only two digits to identify a year in
the date field. These programs do not take into effect the impact of the
upcoming change in the century. Like all financial service providers, the
Investment Adviser, Administrator (who also serves as Transfer Agent, Custodian
and the Dividend Disbursing Agent) and other third parties utilize systems that
may be effected by Year 2000 issues. The services provided to the Fund and the
shareholders by these service providers depend on the smooth functioning of
their computer systems and those of other parties they deal with. If not
corrected, many computer applications could fail and have a negative impact on
handling securities trades, payments of interest and dividends, pricing and
account services. This could impact the ability of the Investment Adviser, the
Administrator and other service providers for the Funds to provide services to
the Funds. The Investment Adviser has evaluated its systems and the systems of
the Administrator and other service providers for the Fund to assess the effect
of the year 2000 issue on the ability of the Investment Adviser and these
parties to provide services to the Fund subsequent to year 2000. The Investment
Adviser has undertaken a project to determine the corrective action necessary to
ensure that the technology systems will be ready for the year 2000 ("Year 2000
Ready Project"). Although, at this time, there can be no assurance that there
will be no adverse impact on the Fund, the Fund's Administrator and other
service providers have advised the Fund that they have been actively working on
necessary changes to their computer systems to prepare for the year 2000 and
expect that their systems, and those of other parties they deal with, will be
adapted in time for that event. The Investment Adviser has completed a
substantial portion of its Year 2000 Ready Project and expects to complete the
remainder by December 1998. Testing of compliance with its Year 2000 Ready
Project should be completed by the end of the third quarter of 1999.
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
7
<PAGE>
"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. For the years 1996, 1997 and 1998, the
Investment Advisor earned net advisory fees of $22,523, $58,011 and $87,402,
respectively. 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.
For periods prior to May 31, 1998, the Investment Adviser guaranteed that the
expenses payable by the Fund would not exceed certain specified limits, as
described in the Prospectus. Accordingly, the Investment Adviser was required to
reimburse certain expenses paid by the Fund or, alternatively, waive a portion
of its management fee. In addition, at its discretion, the Investment Adviser
may voluntarily reduce its management fee or reimburse the Fund for certain
expenses in order to keep the Fund's expenses at levels competitive with other
funds. The Investment Advisor voluntarily waived $30,602 of its management fee
for 1996 and $4,043 of its management fee for 1997. For the fiscal year ended
May 31, 1998, the ratio of expenses to average net assets was less than the
expense limit set by the Investment Adviser. Accordingly, none of the Investment
Adviser's management fee was waived for 1998.
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
8
<PAGE>
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" 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, 67, has been employed as Director of Operations of the
Investment Adviser since 1990. At July 31, 1998, Mrs. Jensen, together with her
husband, Val E. Jensen, beneficially owned 62.5 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, 68, has served as a director of the Investment
Adviser since 1991. At July 31, 1998, Mrs. Nebolon also was the beneficial owner
of 2.5 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.
9
<PAGE>
PORTFOLIO TRANSACTIONS
General Considerations
- ----------------------
The Investment Adviser is responsible for the execution of the Fund's
portfolio transactions and the allocation of brokerage transactions. When
placing purchase and sale orders, the Investment Adviser seeks to obtain the
best net results for the Fund, taking into account all factors it deems
relevant, including, by way of illustration, price (including the applicable
brokerage commission or dealer spread); the size of the transaction; the nature
of the market for the security; the difficulty of execution; the timing of the
transaction taking into account market prices and trends; the reputation,
experience and financial stability of the broker involved; and the quality of
service rendered by the broker in other transactions. The Fund does not have any
obligation to deal with any broker or group of brokers in the execution of
portfolio transactions. However, the Investment Adviser has selected a broker
through which most of its transactions are effected. Insofar as is known to
management, no director or officer of the Fund has any material direct or
indirect interest in any broker that will effect portfolio securities on behalf
of the Fund. During the fiscal years ended May 31, 1996, 1997, and 1998, the
Fund paid brokerage commissions totaling $4,834, $3,459, and $3,068,
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.
10
<PAGE>
Portfolio Turnover
- ------------------
The Fund purchases portfolio securities with the expectation of holding
them for long-term appreciation. The Fund will not sell its position in a
portfolio company unless the Investment Adviser determines that: (i) the
portfolio company should be replaced with another qualifying security that has a
higher "opportunity factor" (as described in the Fund's Prospectus) or (ii) the
issuer no longer meets one or more of the investment criteria specified in the
Fund's Prospectus, unless such failure is due to an extraordinary situation that
the Investment Advisor believes will not have a material adverse impact on the
company's operating performance. Therefore, the Fund does not expect its annual
portfolio turnover generally to exceed 25 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, 1998, the Fund's
portfolio turnover rate was 20.8 percent. The Fund's portfolio turnover rate was
24.5 percent for the fiscal year ended May 31, 1997 and for the fiscal year
ended May 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.
11
<PAGE>
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, Martin Luther King's Birthday, 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 or other
interest-bearing securities is accrued daily.
Securities that are listed on United States stock exchanges are valued at
the last sale price on the day the securities are valued or, if there has been
no sale on that day, at the average of the last available bid and asked prices.
Quotations are taken from the market in which the security is primarily traded.
Over-the-counter securities are valued at the average of the current bid and
asked prices. Securities for which market quotations are not readily available
are valued at fair value as determined by the Investment Adviser by or under the
direction of the Fund's Board of Directors. Notwithstanding the above,
fixed-income securities may be valued on the basis of prices provided by an
established pricing service when the Board believes that such prices reflect
market values.
TAXES
General
- -------
The Fund expects to qualify continuously as a regulated investment company
under Part I of Subchapter M of the Code. To qualify as a regulated investment
company, the Fund must satisfy a gross income test 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.
12
<PAGE>
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"); and (b) 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.
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.
13
<PAGE>
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.
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.
14
<PAGE>
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.
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
15
<PAGE>
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.
PRINCIPAL SHAREHOLDERS
The following table shows the ownership of shares of the Fund on July 31,
1998 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/1 283,910 23.5%
Jersey City, NJ
Douglas Walta/2 110,456 9.1%
Portland, Oregon
Richard L. Knipe/3 96,021 8.0%
Alamo, California
All officers and directors as a group 109,839 9.1%
(5 persons)
- --------------
/1 All shares reported are owned of record only.
/2 Of the shares reported, Dr. Walta is the record and beneficial owner
of 2,429 shares, and the beneficial owner only of an additional
105,429, of which 69,906 shares are held in trust under an agreement
with G.I. Clinic for the benefit of Dr. Walta. The shares reported
also include 2,599 shares owned by Dr. Walta's daughter, in which Dr.
Walta disclaims any beneficial interest.
/3 All shares reported are owned of record and beneficially.
</TABLE>
PERFORMANCE INFORMATION
The Fund's Prospectus contains a brief description of how performance is
calculated.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5, and 10 years (up to the life of the
Fund). These are the annual total rates of
16
<PAGE>
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, 1998 was 18.28
percent. The Fund's average annual total return from August 3, 1992
(commencement of operations) to May 31, 1998 was 11.21 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.
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
17
<PAGE>
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
- -----------------------
PricewaterhouseCoopers LLP, Portland, Oregon, has been selected as
independent accountants for the Fund for its fiscal year ending May 31, 1999. In
addition to reporting annually on the financial statements of the Fund, the
Fund's accountants will review certain of the Fund's filings which are filed
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
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.
18
<PAGE>
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, 1998, and the report of the Fund's independent accountants in connection
therewith, are included in the Fund's 1998 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 1998 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 4
Statement of Assets and Liabilities at May 31, 1998 5
Schedule of Investments at May 31, 1998 5
Statement of Operations for the year ended May 31, 1998 7
Statement of Changes in Net Assets for the years ended
May 31, 1998 and 1997 7
Financial Highlights for the fiscal years ended
May 31, 1998, 1997, 1996, 1995, and 1994 8
Notes to the Financial Statements 9
(b) Exhibits:
(1) Registrant's Articles of Incorporation.
(2) Registrant's Restated Bylaws.
(4)a Stock certificates will not be issued.
(4)b Registrant's Articles of Incorporation. (See Exhibit 24(b)(1)).
(4)c Registrant's Restated Bylaws. (See Exhibit 24(b)(2)).
C-1
<PAGE>
(5) Restated Investment Advisory and Service Contract.
(8) Form of Custodian Agreement.
(9)a Form of Transfer Agent Agreement.
(9)b Form of Fund Accounting Servicing Agreement.
(9)c Fund Administration Servicing Agreement.
(10) Opinion and Consent of Legal Counsel to Registrant.
(11)a Consent of PricewaterhouseCoopers LLP.
(11)b Consent of Deloitte & Touche LLP.
(12) 1998 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.
(14) Model Plan used in establishment of individual retirement plan,
instructions thereto and other documents making up the Model Plan.
(16) Schedule for Computation of Performance Quotations.
(17) Financial Data Schedule.
(99) Powers of Attorney.
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), Gary W. Hibler (Secretary and director), Robert F.
Zagunis (Vice President and director), Louis B. Perry (director), and Norman W.
Achen (director). At July 31, 1998, 109,839 of Registrant's shares (or 9.1
percent) were beneficially owned by the officers and directors of Registrant.
See "Principal Shareholders" in the Statement of Additional Information.
Jensen Investment Management, Inc., an Oregon corporation that acts as the
investment adviser to Registrant (the "Investment Adviser"), is controlled by
Val E. Jensen (President, Managing Director and beneficial owner of 62.5 percent
of the outstanding shares), Gary W. Hibler (Secretary, Managing Director and
beneficial owner of 19.8 percent
C-2
<PAGE>
of the outstanding shares), Robert Zagunis (Vice President, Managing Director
and beneficial owner of 15.2 percent of the outstanding shares), Mary Ellen
Jensen (Director of Operations, director and beneficial owner of 62.5 percent of
the outstanding shares), and Margaret Helen Nebolon (director and beneficial
owner of 2.5 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 July 31, 1998
-------------- ------------------------
Common Stock, $0.001 par value 144
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.
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.
C-3
<PAGE>
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 22, 1998.
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 22, 1998 by the
following persons in the capacities indicated.
(1) Principal Executive Officer:
VAL E. JENSEN President and Director
-----------------------------
Val E. Jensen
(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
C-4
<PAGE>
LOUIS B. PERRY* Director
-----------------------------
Louis B. Perry
NORMAN W. ACHEN* Director
-----------------------------
Norman W. Achen
*By VAL E. JENSEN
-----------------------------------
Val E. Jensen, Attorney-in-Fact
C-5
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 7
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.
(2) Registrant's Restated Bylaws.
(4)a Stock certificates will not be issued.
(4)b Registrant's Articles of Incorporation. (See Exhibit (1)).
(4)c Registrant's Restated Bylaws. (See Exhibit (2)).
(5) Restated Investment Advisory and Service Contract.
(8) Form of Custodian Agreement.
(9)a Form of Transfer Agent Agreement.
(9)b Form of Fund Accounting Servicing Agreement.
(9)c Fund Administration Servicing Agreement.
(10) Opinion and Consent of Legal Counsel to Registrant.
(11)a Consent of PricewaterhouseCoopers LLP.
(11)b Consent of Deloitte & Touche LLP.
(12) 1998 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.
(14) Model Plan used in establishment of individual retirement plan,
instructions thereto and other documents making up the Model Plan.
(16) Schedule for Computation of Performance Quotations.
(17) Financial Data Schedule.
(99) Powers of Attorney
ARTICLES OF INCORPORATION
of
THE JENSEN PORTFOLIO, INC.
The undersigned, Carol Dey Hibbs, whose address is 1600 Pioneer Tower, 888
S.W. Fifth Avenue, Portland, Oregon 97204-2099, being at least 18 years of age,
acting as incorporator under the Oregon Business Corporation Act, hereby adopts
the following Articles of Incorporation:
ARTICLE 1
NAME
The name of this corporation is The Jensen Portfolio, Inc. (the
"Corporation").
ARTICLE 2
PURPOSE
The purposes for which the Corporation is organized are:
(a) To engage in the business of an incorporated investment company of the
management type investing and reinvesting its assets in accordance with the
provisions of these Articles of Incorporation. The business of the Corporation
will include but shall not be limited to purchasing, holding, selling,
exchanging or otherwise dealing in notes, stocks, bonds, and other securities
permitted by these Articles of Incorporation and the Fund's Bylaws.
(b) To issue and sell its shares in such amounts, on such terms and
conditions, for such purposes and for such consideration as are hereafter
permitted by law and these Articles of Incorporation, as its Board of Directors
may determine.
(c) To acquire (through purchase, exchange or otherwise), hold, dispose of,
transfer, reissue or cancel its own shares in any manner and to the extent
hereafter permitted by law and these Articles of Incorporation, without the vote
or consent of the holders of any class of stock of the Corporation.
<PAGE>
(d) To engage in any lawful activity for which corporations may be
organized under the Oregon Business Corporation Act.
ARTICLE 3
AUTHORIZED STOCK
The Corporation is authorized to issue 100,000,000 shares of common stock,
each of which shall have a par value of one-tenth cent ($.001). Each share of
common stock shall have equal voting rights with all other shares. The
Corporation may redeem shares of its stock at the option of the Corporation
under certain circumstances, as set forth in Article 6 hereof. Any shares
reacquired by the Corporation may be reissued for such consideration and under
such terms as the Board of Directors may determine.
ARTICLE 4
ISSUANCE AND SALE OF SHARES
The Board of Directors is authorized to issue and sell or cause to be
issued and sold from time to time, all or any portion or portions of the entire
authorized but unissued shares of the Corporation, for cash or for any other
lawful consideration or considerations and on or for any terms, conditions or
prices hereafter consistent with the provisions of law and these Articles of
Incorporation; provided, however, that in no event shall shares of the
Corporation having a par value be issued or sold for a consideration less than
such par value.
ARTICLE 5
FRACTIONAL SHARES
The Corporation may issue and sell whole shares and may also issue and
sell fractions of shares having pro rata all the rights of shares including,
without limitation, the right to vote and receive dividends. Wherever the words
"share" or "shares" are used in these Articles of Incorporation, or in the
Corporation's Bylaws, they shall be deemed to include fractions of shares, where
the context does not clearly indicate that only full shares are intended;
provided, however, that the Board of Directors may in its sole discretion
determine that only whole shares may be issued.
2
<PAGE>
ARTICLE 6
REDEMPTION OF SHARES
(a) Redemption by Shareholder. Each holder of record of shares of the
Corporation shall have the right, at such times as may be permitted by the
Corporation, to require the Corporation to redeem all or any part of his or her
shares at a redemption price per share equal to the net asset value per share
next determined (in accordance with Article 15 of these Articles of
Incorporation) after the shares are properly tendered for redemption, less any
redemption charge that may be imposed by the Corporation in connection with such
redemption and described in the Corporation's then current Prospectus. Payment
of the proceeds of redemption shall be in cash unless the Board of Directors
determines, which determination shall be conclusive, that conditions exist that
make payment wholly in cash unwise or undesirable. In the event of such
determination, the Corporation may make payment wholly or partly in securities
or other assets belonging to the Corporation at the value of such securities or
assets used in such determination of net asset value. Any such payment in kind
will be made in accordance with any applicable law or regulation.
Notwithstanding the foregoing, the Board of Directors of the Corporation may
suspend the right of the holders of shares of the Corporation to require the
Corporation to redeem shares when permitted or required to do so by the
Investment Company Act of 1940, as amended (the "1940 Act"), provided the
suspension complies with the 1940 Act.
(b) Automatic Redemption. The Board of Directors may cause the Corporation
to redeem at net asset value the shares of any holder whose shares have a
current net asset value of less than a minimum amount that the Board of
Directors may determine from time to time. No such redemption shall be effected
unless the Corporation has given the holder at least 60 days' notice of its
intention to redeem such shares and an opportunity to purchase a sufficient
number of additional shares to bring the aggregate current net asset value of
the holder's shares to such minimum amount. Upon redemption of shares pursuant
to this section, the Corporation shall promptly cause payment of the full
redemption price to be made to the holder of the shares so redeemed, less any
redemption charge that may be imposed by the Corporation in connection with such
redemption and described in the Corporation's then current Prospectus.
(c) Personal Holding Company Status. The Corporation may reject any
purchase order, refuse to transfer shares and compel redemption of shares if in
its opinion any such action would prevent the Corporation from becoming a
personal holding
3
<PAGE>
company as defined by the Internal Revenue Code of 1986, as amended.
ARTICLE 7
DIVIDENDS
(a) The Board of Directors may from time to time declare and pay dividends
with the amount, source and payment thereof to be within the discretion of the
Board of Directors and calculated on the basis of generally accepted accounting
principles.
(b) The Board of Directors may also declare dividends out of the
Corporation's accumulated and undistributed net realized capital gains.
(c) The Board of Directors has the power, in its discretion, to distribute
for any year as ordinary dividends and as capital gains distributions,
respectively, amounts sufficient to enable the Corporation, as a regulated
investment company, to avoid any liability for federal income tax with respect
to that year. All cash dividends declared, except as provided in the preceding
sentence, shall be deemed liquidating dividends and the shareholders shall be
advised accordingly.
(d) The Board of Directors may at any time declare and distribute pro rats
among the shareholders a stock dividend out of authorized but unissued shares of
the Corporation. In the case of a dividend payable in shares or cash at the
election of a shareholder, the Board of Directors may prescribe whether a
shareholder failing to exercise his or her election before a given time shall be
deemed to have elected to take cash rather than shares, or to take shares rather
than cash, or to take shares with cash adjustment of fractions.
ARTICLE 8
DIRECTORS
(a) The number of directors of the Corporation shall be not fewer than
three nor more then ten directors, as specified from time to time by resolution
of a majority of the entire Board of Directors, provided that at least one
director shall be a person who is not an interested person of the Corporation,
as defined in the 1940 Act, and who is not an officer or employee of the
Corporation. If at any time the Corporation does not satisfy the conditions of
Section 10(d) of the 1940 Act, or any successor provision, at least 40 percent
of the Corporation's directors
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shall be persons who are not interested persons of the Corporation, as defined
in the 1940 Act.
(b) Any directorship to be filled by reason of an increase in the number of
directors of the Corporation may be filled by a majority of the directors then
in office.
(c) The names and addresses of the persons who shall act as the initial
directors until the first annual meeting of the Corporation and until their
successors have been duly elected and qualified are:
Name Address
---- -------
Val E. Jensen 430 Pioneer Tower
888 S.W. Fifth Avenue
Portland, OR 97204-2018
Gary W. Hibler 430 Pioneer Tower
888 S.W. Fifth Avenue
Portland, OR 97204-2018
Mark C. Jensen 430 Pioneer Tower
888 S.W. Fifth Avenue
Portland, OR 97204-2018
ARTICLE 9
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's initial registered office is 1600 Pioneer
Tower, 888 S.W. Fifth Avenue, Portland, Oregon 97204-2099, and the name of its
initial registered agent at such address is Kenneth D. Stephens.
ARTICLE 10
NOTICES
The address where the Corporation Division may mail notices is c/o Kenneth
D. Stephens, Tonkon, Torp, Galen, Marmaduke & Booth, 1600 Pioneer Tower, 888
S.W. Fifth Avenue, Portland, Oregon 97204-2099.
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ARTICLE 11
INDEMNIFICATION AND INSURANCE
A. The Corporation say indemnify to the fullest extent permitted by law any
person who is made or threatened to be made a party to, witness in, or otherwise
involved in, any action, suit or proceeding, whether civil, criminal,
administrative, investigative, or otherwise (including an action, suit or
proceeding by or in the right of the Corporation) by reason of the fact that the
person is or was a director, officer, employee or agent of tho Corporation or a
fiduciary within the meaning of the Employee Retirement Income Security Act of
1974 with respect to any employee benefit plan of the Corporation, or serves or
served at the request of the Corporation as a director, officer, employee or
agent or as a fiduciary of any employee benefit plan, of another corporation,
partnership, joint venture, trust, or other enterprise. Any indemnification
provided pursuant to this Article 11 shall not be exclusive of any rights to
which the person indemnified may otherwise be entitled under any provision of
articles of incorporation, bylaw, agreement, statute, policy of insurance, vote
of shareholders or board of directors, or otherwise.
For purposes of this paragraph A, the term "to the fullest extent permitted
by law" shall include, without limitation, to the fullest extent permitted by
any provision in the 1940 Act or the Oregon Business Corporation Act that
authorizes a corporation to provide indemnification, by agreement, article,
bylaw or otherwise, in addition to the permissible indemnification specifically
authorized and set forth in the Oregon Business Corporation Act.
B. To the fullest extent permitted by law, no director of the Corporation
shall be personally liable to the Corporation or its shareholders for monetary
damages for conduct as a director. Without limiting the generality of the
foregoing, if the Oregon Revised Statutes are amended after this Article 11
becomes effective to authorize corporate action further eliminating or limiting
the personal liability of directors of the Corporation, then the liability of
directors of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Oregon Revised Statutes, as so amended. No amendment or
repeal of this Article 11, nor the adoption of any provision of these Articles
of Incorporation inconsistent with this Article 11, nor a change in the law,
shall adversely affect any right or protection that is based upon this paragraph
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B and pertains to conduct that occurred prior to the time of such amendment,
repeal, adoption or change. No change in the law shall reduce or eliminate the
rights and protections set forth in this paragraph B unless the change in the
law specifically requires such reduction or elimination.
C. The Corporation may purchase and maintain insurance on behalf of any
individual who is or was a director, officer, employee or agent of the
Corporation or a fiduciary within the meaning of the Employee Retirement Income
Security Act of 1974 with respect to any employee benefit plan of the
Corporation, or serves or served at the request of the Corporation as a
director, officer, employee or agent or as a fiduciary of an employee benefit
plan, of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such individual and incurred
by such individual in or arising out of his or her position.
D. Notwithstanding any contrary provision in these Articles of
Incorporation or in the Corporation's Bylaws, paragraphs A and B of this Article
11 shall not protect any director or officer of the Corporation against any
liability to the Corporation or its shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
ARTICLE 12
CUSTODIAN
(a) The Corporation may employ a custodian, which shall be a bank or trust
company having an aggregate capital, surplus, and undivided profits of at least
$1,000,000, pursuant to such terms and conditions as the Board of Directors may
direct and as contained in the Corporation's Bylaws.
(b) The Corporation may also employ such custodian as its agent to keep the
books and counsel the Corporation, and to furnish clerical and accounting
services. The compensation to be paid such custodian for such services as it may
render to the Corporation shall be in such amount as may be agreed upon by the
Corporation and the custodian. When so directed by the Board of Directors, the
custodian shall deliver and pay over all property of the Corporation held by it
as specified in such direction.
(c) The Board of Directors in its discretion may employ a transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent for the
Corporation under such terms and conditions as the Board shall deem advisable.
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ARTICLE 13
UNDERWRITER, INVESTMENT ADVISER AND CONTRACTS
WITH INTERESTED PARTIES
(a) The Board of Directors may, in its discretion, from time to time enter
into a contract or contracts with any one or more parties as an underwriter,
providing for the sale of the shares of the Corporation. Such contract or
contracts may also provide for the repurchase of shares of the Corporation by
such underwriter acting as agent for the Corporation.
(b) The Board of Directors may, in its discretion, from time to time enter
into an investment advisory or management contract with any other person, firm
or corporation to furnish advice to the Corporation with respect to the
desirability of investing in, purchasing or selling securities, or any other
property, or to determine what securities or other property shall be purchased
or sold by the Corporation, and to furnish to the Board of Directors such
management, investment advisory, statistical and research facilities, and such
other services and facilities, if any, as the Board of Directors may deem
desirable upon such terms and conditions as the Board of Directors may
determine. The compensation to be paid under the terms of such contract or
contracts shall be subject to the limitations contained in Article 14 of these
Articles of incorporation.
(c) The Board of Directors may, subject to the provisions of this Article,
at its discretion, enter into any contract with any person, firm or corporation,
irrespective of whether or not one or more of the directors or officers of this
Corporation also may be an officer, director, shareholder or member of such
other person, firm or corporation, and such contract shall not be invalidated or
rendered voidable by reason of such relationship. No person holding such
relationship shall be liable because of such relationship for any loss or
expense to the Corporation under or by reason of such contract or accountable
for any profit realized directly or indirectly therefrom, provided that such
contract, when executed, was reasonable and fair, consistent with the provisions
of these Articles of Incorporation and approved by a majority of the directors
of the Corporation who are not so related, or by a vote of the holders of a
majority of the outstanding shares of the Corporation.
(d) Any contract entered into pursuant to the terms of this Article shall
be consistent with and subject to the requirements of the 1940 Act and all other
applicable laws, with respect to its duration, termination, authorization,
approval, assignment, amendment and renewal.
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ARTICLE 14
EXPENSES OF CORPORATION
(a) Subject to the limitations contained in this Article, the directors
shall be entitled to reasonable compensation from the Corporation for their
services to the Corporation as directors in such amount as may from time to time
be fixed by a vote of the Board of Directors.
(b) The Corporation may incur such expenses as are necessary to perform its
functions and such expenses may include, but are not limited to, the following;
compensation to be paid to any other party to an investment advisory contract
with the Corporation entered into pursuant to Article 13; compensation to be
paid to the officers, consultants and employees of the Corporation; ordinary
office expenses; clerical and bookkeeping expenses; costs of investment
advisory, statistical and research facilities; directors' fees; legal and
accounting expenses; taxes and governmental fees; federal and state registration
and qualification fees; costs of stock certificates; cost of reports and
notices to shareholders: association dues; brokers' commissions; transaction
costs; fees and expenses of any custodian; expenses of computing the net asset
value; and fees and expenses of any transfer agent, registrar, dividend
disbursing agent and shareholder servicing agent; provided, however, that all
expenses to be paid pursuant to this Article 14 shall be subject to any
applicable provisions of the 1940 Act.
(c) The provisions of this Article shall not preclude the payment of
reasonable fees for legal or accounting services to any firm of which a director
or officer of the Corporation may be a member or employee, nor of customary
brokerage charges in connection with the purchase or sale of securities to any
firm in the brokerage business of which a director or officer of the Corporation
may be a member, officer, director or employee; and no part of any such fee,
charge or compensation shall be deemed compensation to such officer or director
within the purview of this Article. No compensation, commission, fee or profit,
which may be received by the other party to a contract entered into pursuant to
Article 13, shall be deemed compensation to any officer or director of the
Corporation simply because such officer or director is also an officer,
director, shareholder, member or employee of such other party.
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ARTICLE 15
DETERMINATION OF NET ASSET VALUE
(a) The net asset value of each share of the Corporation outstanding shall
be determined in accordance with the Corporation's then current prospectus and
statement of additional information.
(b) The Board of Directors may suspend a determination of net asset value
for all or any period during which the New York Stock Exchange is normally
closed, or during which trading on the Now York Stock Exchange or in the markets
normally utilized by the Corporation is restricted by governmental order, or
during which an emergency exists such as would make disposal by the Corporation
of securities owned by the Corporation unreasonable or impracticable, or would
make determination of the net asset value of the assets of the Corporation
impracticable. The determination of whether trading on the New York Stock
Exchange or in the markets normally utilized by the Corporation is restricted or
whether such an emergency exists shall be made in accordance with applicable
rules and regulations of the Securities and Exchange Commission or other
governmental authority. The suspension shall become effective at such time as
the Board of Directors shall specify in a director declaration or resolution,
but not later than the close of business on the next succeeding business day
following the declaration or resolution. After such suspension becomes
effective, there shall be no determination of net asset value until the Board of
Directors shall declare the suspension terminated. The suspension shall
terminate, in any event, on the first day on which the New York Stock Exchange
is open, the restricted trading on the New York Stock Exchange or in the markets
utilized by the Corporation has ended, or the emergency shall have expired in
accordance with an official ruling of the Securities and Exchange Commission or
other governmental authority or, in the absence of such ruling, upon
determination of the Board of Directors. During any period in which the
determination of net asset value is suspended, as provided in this Article 15,
the net asset value as last determined and effective shall, for the purposes of
this Article, be deemed to be the net asset value as of the close of business on
each business day until a new net asset value is again determined and made
effective as provided herein.
(c) The Board of Directors may delegate any of its powers and duties under
this Article with respect to appraisal of assets and liabilities in the
determination of net asset value or with respect to suspension of the
determination of net asset value to an officer or officers or agent or agents of
the
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Corporation designated from time to time by the Board of Directors.
ARTICLE 16
ANNUAL REPORTS
The Board of Directors shall submit to the shareholders at least
semiannually a written financial report of the transactions of the Corporation,
including financial statements. The financial statements and such reports shall
be certified at least annually by independent public accountants.
ARTICLE 17
DISSOLUTION OF THE CORPORATION
(a) If the holders of a majority of the outstanding shares of the
Corporation shall vote at any time to wind up and liquidate the Corporation, no
further shares of the Corporation shall be issued, sold or purchased by the
Corporation, and the directors shall immediately proceed to wind up the
Corporation's affairs, liquidate the assets, pay all liabilities and expenses of
the Corporation, and distribute the remaining assets, if any, among the
shareholders in proportion to their holding of shares. The Board of Directors
shall also do any other acts necessary to secure and complete the dissolution of
the Corporation.
(b) When the dissolution and liquidation of the Corporation has been
directed by a vote of its shareholders, the directors then holding office shall
continue in office until the liquidation and dissolution of the Corporation has
been completed. During the period of liquidation and until final distribution to
the shareholders has been made, the compensation of the directors and all other
parties shall be determined on the same basis as if the computation of the net
asset value of the shares had been suspended as of the date the shareholders
voted to dissolve and liquidate the Corporation, as provided in these Articles
of Incorporation.
ARTICLE 18
DIRECTORS QUORUM
At all meetings of the Board of Directors, the presence of a majority of
the number of directors then in office shall be necessary to constitute a quorum
and shall be sufficient for the transaction of business. In the absence of a
quorum, a majority of the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. The action of a majority of the
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directors present at a meeting at which a quorum is present shall be the action
of the Board of Directors, unless the concurrence of a greater proportion is
required for such action by law, by these Articles of Incorporation or by the
Corporation's Bylaws.
ARTICLE 19
BYLAWS
Except as otherwise may be provided in the Corporation's Bylaws, the Board
of Directors of the Corporation is expressly authorized to make, alter, amend
and repeal bylaws or to adopt new bylaws of the Corporation, without any action
on the part of the shareholders; provided, however, the bylaws adopted by the
Board of Directors and the power conferred by this Article may be altered or
repealed by the shareholders of the Corporation.
ARTICLE 20
AMENDMENT OF ARTICLES
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute upon the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation; and all rights conferred
upon shareholders herein are granted subject to this reservation.
The undersigned incorporator hereby declares and certifies under penalty of
perjury that the facts stated in these Articles of Incorporation are true,
correct and complete.
Dated: April 17, 1992.
CAROL DEY HIBBS
-----------------------------------------
Carol Dey Hibbs
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RESTATED BYLAWS
OF
THE JENSEN PORTFOLIO, INC.
(An Oregon Corporation)
ARTICLE 1
NAME OF CORPORATION AND LOCATION OF OFFICES
Section 1. Name.
The name of the corporation is The Jensen Portfolio, Inc. (the
"Corporation").
Section 2. Principal Offices.
The principal office of the Corporation in the state of Oregon
shall be located in Portland, Oregon. The Corporation may, in addition,
establish and maintain such other offices and places of business as the Board of
Directors may, from time to time, determine.
ARTICLE 2
SHAREHOLDERS
Section 1. Place of Meetings.
All meetings of the shareholders shall be held at such place within
the United States, whether within or outside the state of Oregon, as the Board
of Directors shall determine, which shall be stated in the notice of the
meeting, or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting.
The Corporation shall not be required to hold an annual meeting by
shareholders in any year in which the election of directors is not required to
be acted upon under the Investment Company Act of 1940, as amended (the "1940
Act") or Section 4(b)(ii) of Article 3 of these Bylaws. If the Corporation holds
a meeting of the shareholders to elect directors, the meeting shall be
designated as the annual meeting of the shareholders for that year and shall be
held at such time as the directors may determine. Any business of the
Corporation may be
<PAGE>
transacted at the annual meeting without being specially designated in the
notice except as otherwise provided by statute or by the Corporation's Articles
of Incorporation or these Bylaws.
Section 3. Special Meetings.
(a) The Corporation shall hold a special meeting of shareholders
upon the call of the President or the Board of Directors, or if the holders of
at least 10 percent of all votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date and deliver to the
Secretary of the Corporation one or more written demands for the meeting
describing the purpose or purposes for which it is to be held.
(b) The circuit court of the county where the Corporation's
principal office is located, or, if the principal office is not in Oregon, where
the registered office of the Corporation is or was last located, may summarily
order a special meeting to be held upon the application of a shareholder of the
Corporation who signed a valid demand for a special meeting if notice of the
special meeting was not given within 30 days after the date the demand was
delivered to the Corporation's Secretary or if the special meeting was not held
in accordance with the notice.
Section 4. Notice of Meetings.
(a) The Corporation shall notify shareholders in writing of the
date, time and place of each annual and special shareholder meeting not earlier
than 60 days nor less than 10 days before the meeting date. Except as otherwise
required by applicable law or the Articles of Incorporation, the Corporation is
required to give notice only to shareholders entitled to vote at the meeting.
Such notice is effective when mailed if it is mailed postage prepaid and is
correctly addressed to the shareholder's address shown in the Corporation's
current record of shareholders. Except as otherwise required by applicable law
or by the Articles of Incorporation, notice of an annual meeting need not
include a description of the purpose or purposes for which the meeting is
called. Notice of a special meeting shall include a description of the purpose
or purposes for which the meeting is called.
(b) If an annual or special shareholder meeting is adjourned to a
different date, time or place, notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting before
adjournment. If a new record date for the adjourned meeting is fixed, or is
required by law to be fixed, notice of the adjourned meeting shall be given to
persons who are shareholders as of the new record date. A determination of
shareholders entitled to notice of or to vote at a shareholder meeting is
effective for any adjournment of the meeting unless the Board of Directors fixes
a new record date, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
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(c) A shareholder's attendance at a meeting waives objection to (i)
lack of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; and (ii) consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it is presented.
(d) A shareholder may at any time waive any notice required by law,
the Articles of Incorporation or these Bylaws. Except as otherwise provided in
paragraph (c) of Section 4 of this Article 3, the waiver must be in writing, be
signed by the shareholder entitled to the notice, and be delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
Section 5. Quorum.
(a) The presence at any shareholder meeting, in person or by proxy,
of shareholders entitled to cast a majority of the votes shall be necessary and
sufficient to constitute a quorum for the transaction of business, except as
otherwise provided by statute, by the Corporation's Articles of Incorporation or
by these Bylaws. Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
(b) In the absence of a quorum, the holders of a majority of shares
entitled to vote at the meeting and present in person or by proxy or, if no
shareholder entitled to vote is present in person or by proxy, any officer
present entitled to preside or act as Secretary of such meeting may adjourn the
meeting from time to time until a quorum exists. Any business that might have
been transacted at the original meeting may be transacted at any adjourned
meeting if a quorum is present.
Section 6. Voting Rights.
(a) The persons entitled to receive notice of and to vote at any
shareholder meeting shall be determined from the records of the Corporation on
the close of business on the day before the mailing of the notice or on such
other date not more than 70 nor less than 10 days before such meeting as may be
fixed in advance by the Board of Directors.
(b) Except as otherwise provided in the Articles of Incorporation,
or as required by the 1940 Act or by other applicable law, each outstanding
share is entitled to one vote on each matter voted on at a shareholder meeting.
(c) Except as otherwise provided in the Articles of Incorporation
or in the 1940 Act or any other applicable law, if a quorum exists, action on a
matter, other than the election of directors, by a voting group shall be
approved if the votes cast within the voting group favoring the action exceed
the votes cast within the voting group opposing the action.
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(d) Directors shall be elected by a plurality of the votes cast by
holders of the shares entitled to vote in the election at a meeting at which a
quorum is present.
Section 7. Voting of Shares by Certain Holders.
(a) If the name signed on a vote, consent, waiver or proxy
appointment corresponds to the name of a shareholder, the Corporation, if acting
in good faith, is entitled to accept the vote, consent, waiver or proxy
appointment and give it effect as the act of the shareholder. If the name signed
on a vote, consent, waiver or proxy appointment does not correspond to the name
of a shareholder, the Corporation, if acting in good faith, is nevertheless
entitled to accept the vote, consent, waiver or proxy appointment and give it
effect as the act of the shareholder if:
(i) The shareholder is an entity and the name signed purports
to be that of an officer or agent of the entity;
(ii) The name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
Corporation requests, evidence of fiduciary status acceptable to the
Corporation has been presented with respect to the vote, consent, waiver or
proxy appointment;
(iii) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation requests,
evidence of this status acceptable to the Corporation has been presented
with respect to the vote, consent, waiver or proxy appointment;
(iv) The name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if the
Corporation requests, evidence acceptable to the Corporation of the
signatory's authority to sign for the shareholder has been presented with
respect to the vote, consent, waiver or proxy appointment; or
(v) Two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of
the co-owners and the person signing appears to be acting on behalf of all
co-owners.
(b) Shares of the Corporation are not entitled to be voted if (i)
they are owned, directly or indirectly, by another domestic or foreign
corporation, and (ii) the Corporation owns, directly or indirectly, a majority
of the shares entitled to be voted for directors of such other corporation. This
paragraph does not limit the power of a corporation to vote any shares,
including its own shares, held by it in a fiduciary capacity.
(c) Any redeemable shares that the Corporation may issue are not
entitled to be voted after notice of redemption is mailed to the holders and a
sum sufficient to redeem the
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shares has been deposited with a bank, trust company or other financial
institution under an irrevocable obligation to pay the holders the redemption
price on surrender of the shares.
Section 8. Proxies.
A shareholder may vote shares either in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for the shareholder by
signing an appointment form, either personally or by the shareholder's
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent of the Corporation authorized to tabulate
votes. An appointment is valid for 11 months unless a longer period is expressly
provided in the appointment form. An appointment of a proxy is revocable by the
shareholder unless the appointment form conspicuously states that it is
irrevocable and the appointment is coupled with an interest.
Section 9. Shareholder Lists.
(a) After fixing a record date for a meeting, the Corporation shall
prepare an alphabetical list of the names of all of its shareholders who are
entitled to notice of the meeting. The list shall be arranged by voting group,
and within each voting group, by class or series of shares and show the address
of and the number of shares held by each shareholder.
(b) The shareholder list shall be available for inspection by any
shareholder, beginning two business days after notice of the meeting for which
the list was prepared is given and continuing through the meeting. Such list
shall be kept on file at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held. A
shareholder, or the shareholder's agent or attorney, shall be entitled on
written demand to inspect and, subject to the requirements of law, to copy the
list during regular business hours and at the shareholder's expense during the
period it is available for inspection.
(c) The Corporation shall make the shareholder list available at
the meeting, and any shareholder, or the shareholder's agent or attorney, is
entitled to inspect the list at any time during the meeting or any adjournment.
(d) Refusal or failure to prepare or make available the shareholder
list does not affect the validity of action taken at the meeting.
ARTICLE 3
BOARD OF DIRECTORS
Section 1. Powers.
The Corporation shall have a Board of Directors. All corporate
powers shall be exercised by or under the authority of, and the business and
affairs of the Corporation shall be
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managed under the direction of, the Board of Directors, subject to any
limitation set forth in the Articles of Incorporation.
Section 2. Number and Qualifications.
The number of directors of the Corporation shall be not fewer than
three nor more than ten directors, as specified from time to time by resolution
of a majority of the entire Board of Directors, provided that, at all times
after the completion of the Corporation's organizational matters, at least one
director shall be a person who is not an interested person of the Corporation,
as defined in the 1940 Act, and who is not an officer or employee of the
Corporation. If at any time the Corporation does not satisfy the conditions of
Section 10(d) of the 1940 Act, or any successor provision, at least 40 percent
of the Corporation's directors shall be persons who are not interested persons
of the Corporation, as defined in the 1940 Act. Directors need not be residents
of the state of Oregon or shareholders of the Corporation.
Section 3. Tenure in Office.
Each director shall hold office until the director's successor is
duly elected and qualifies, or until the director's death, or until the director
resigns or shall have been removed in a manner provided for in the Articles.
Subject to paragraph (c) of Section 4 of this Article 3, a director's term of
office shall begin immediately after election.
Section 4. Vacancies.
(a) A vacancy in the Board of Directors shall exist upon the death,
resignation or removal of any director or upon an increase in the number of
directors.
(b) Except as otherwise provided by the Articles of Incorporation,
if a vacancy occurs on the Board of Directors:
(i) The shareholders may fill the vacancy, provided that the
Board of Directors has not already done so; or
(ii) The Board of Directors may fill the vacancy, provided the
shareholders have not already done so and provided, further, that
immediately after filling such vacancy at least two-thirds of the directors
then holding office shall have been elected to such office by the
shareholders of the Corporation. If, at any time, less than a majority of
the directors of the Corporation holding office at that time were elected
by the shareholders, a meeting of the shareholders shall be held promptly
and in any event within 60 days for the purpose of electing directors to
fill any existing vacancies, unless the Securities and Exchange Commission
("SEC") or any court of competent jurisdiction shall by order extend such
period.
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(c) A vacancy that will occur at a specific later date, by reason
of a resignation effective at the later date or otherwise, may be filled before
the vacancy occurs, but the new director may not take office until the vacancy
occurs.
Section 5. Resignation of Directors.
A director may resign at any time by delivering written notice to
the Board of Directors, its chairperson or the Corporation. Unless the notice
specifies a later effective date, a resignation is effective at the earliest of
the following: (a) when received; (b) five days after its deposit in the United
States mail, as evidenced by the postmark, if mailed postage prepaid and
correctly addressed; or (c) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested and the receipt is signed
by or on behalf of the addressee. Once delivered, a notice of resignation is
irrevocable unless revocation is permitted by the Board of Directors.
Section 6. Removal of Directors.
The shareholders may remove one or more directors with or without
cause unless the Articles of Incorporation provide that the directors may be
removed only for cause. A director may be removed by the shareholders only at a
meeting called for the purpose of removing the director and the meeting notice
must state that the purpose, or one of the purposes, of the meeting is removal
of the director.
Section 7. Annual, Regular and Special Meetings.
(a) The Board of Directors may hold regular or special meetings in
or out of the state of Oregon.
(b) Annual meetings of the Board of Directors shall be held without
notice immediately following the adjournment of the annual meetings of the
shareholders.
(c) Except as otherwise provided by the Articles of Incorporation,
regular meetings of the Board of Directors may be held without notice of the
date, time, place or purpose of the meeting. The Board of Directors may fix, by
resolution, the time and place for the holding of regular meetings.
(d) Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the President, by the Secretary or by any
director. The person or persons who call a special meeting of the Board of
Directors may fix the time and place of the special meeting.
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Section 8. Notice of Special Meetings.
(a) Unless the Articles of Incorporation provide for a longer or
shorter period, special meetings of the Board of Directors shall be preceded by
at least 24 hours' notice of the date, time and place of the meeting. The notice
need not describe the purpose of the special meeting unless required by the
Articles of Incorporation. The notice shall be given orally, either in person or
by telephone, or shall be delivered in writing, either personally, by mail or by
telegram. If in writing, such notice is effective at the earliest of the
following: (i) when received; (ii) five days after its deposit in the United
States mail, as evidenced by the postmark, if it is mailed postage prepaid and
is correctly addressed to the director's address shown in the Corporation's
records; or (iii) on the date shown on the return receipt, if sent by registered
or certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee. If given orally, such notice is effective when
communicated.
(b) A director's attendance at or participation in a meeting waives
any required notice to the director of the meeting unless the director at the
beginning of the meeting, or promptly upon the director's arrival, objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
(c) A director may at any time waive any notice required by law,
the Articles of Incorporation or these Bylaws. Except as otherwise provided in
paragraph (b) of Section 8 of this Article 3, the waiver shall be in writing,
shall be signed by the director entitled to the notice, shall specify the
meeting for which notice is waived and shall be filed with the minutes or
appropriate records.
(d) Notice of the time and place of holding an adjourned meeting
need not be given if such time and place are fixed at the meeting adjourned.
Section 9. Quorum and Voting.
(a) At all meetings of the Board of Directors, the presence of a
majority of the directors in office shall constitute a quorum for the
transaction of business, provided, however, that where the 1940 Act or any other
applicable law requires a different quorum, including a number of directors who
are not interested persons as defined in the 1940 Act to transact business of a
specific nature, the number or classification of directors so required shall
constitute a quorum for the transaction of such business. A majority of the
directors present, in the absence of a quorum, may adjourn from time to time but
may not transact any business.
(b) If a quorum is present when a vote is taken, the affirmative
vote of a majority of directors present is the act of the Board of Directors
unless the Articles of Incorporation require the vote of a greater number of
directors.
(c) A director of the Corporation who is present at a meeting of
the Board of Directors, or is present at a meeting of a committee of the Board
of Directors, when corporate
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action is taken, is deemed to have assented to the action taken unless (i) the
director objects at the beginning of the meeting, or promptly upon the
director's arrival, to holding the meeting or transacting business at the
meeting, (ii) the director's dissent or abstention from the action taken is
entered in the minutes of the meeting, or (iii) the director delivers written
notice of dissent or abstention to the presiding officer of the meeting before
its adjournment or to the Corporation immediately after adjournment of the
meeting. The right of dissent or abstention is not available to a director who
votes in favor of the action taken.
Section 10. Compensation of Directors.
The Board of Directors may, by resolution, provide that the
directors be paid their expenses, if any, of attendance at each meeting of the
Board of Directors, and provide that directors be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation for that service.
ARTICLE 4
COMMITTEES
Section 1. Appointment.
Subject to applicable law, the provisions of the Articles of
Incorporation and these Bylaws, the Board of Directors may appoint such
committees as may be necessary from time to time, consisting of such number of
its members and shall have such powers as the Board may designate. Each such
committee shall have two or more members, who serve at the pleasure of the Board
of Directors.
Section 2. Actions of Committees; Governing Procedures.
All actions of a committee shall be reflected in minutes to be kept
of such meetings and reported to the Board of Directors at the next succeeding
meeting thereof. The provisions of Article 4 governing meetings, notice and
waiver of notice, and quorum and voting requirements of the Board of Directors
apply to committees and their members as well.
Section 3. Executive Committee.
An executive committee may be appointed by the Board of Directors
pursuant to the foregoing paragraphs. When appointed, the executive committee
shall have the power to exercise all authority of the Board of Directors, except
that the executive committee may not:
(i) Authorize distributions;
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(ii) Approve or propose to shareholders actions that are
required by law to be approved by shareholders;
(iii) Fill vacancies on the Board of Directors or on any of
its committees;
(iv) Amend the Articles of Incorporation;
(v) Adopt, amend or repeal the Bylaws;
(vi) Approve a plan of merger not requiring shareholder
approval;
(vii) Authorize or approve a reacquisition of shares, except
according to a formula or method prescribed by the Board of Directors; or
(viii) Authorize or approve the issuance or sale or contract
for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that the
Board of Directors may authorize a committee or a senior executive officer
of the Corporation to do so within limits specifically prescribed by the
Board of Directors.
ARTICLE 5
OFFICERS
Section 1. Designation; Election.
(a) The officers of the Corporation shall be a President, a
Secretary and such other officers and assistant officers as the Board of
Directors shall from time to time appoint, none of whom need be members of the
Board of Directors. The officers shall be elected by, and hold office at the
pleasure of, the Board of Directors. A duly appointed officer may appoint one or
more officers or assistant officers if such appointment is authorized by the
Board of Directors. The same individual may simultaneously hold more than one
office in the Corporation.
(b) A vacancy in any office because of death, resignation, removal
or any other cause shall be filled in the manner prescribed in these Bylaws for
regular appointments to such office.
Section 2. Compensation and Term of Office.
(a) The compensation and term of office of all the officers of the
Corporation shall be fixed by the Board of Directors.
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(b) The Board of Directors may remove any officer at any time,
either with or without cause.
(c) Any officer may resign at any time by giving written notice to
the Board of Directors, the President or the Secretary of the Corporation.
Unless the notice specifies a later effective date, a resignation is effective
at the earliest of the following: (i) when received; (ii) five days after its
deposit in the United States mail, as evidenced by the postmark, if mailed
postage prepaid and correctly addressed; or (iii) on the date shown on the
return receipt, if sent by registered or certified mail, return receipt
requested and the receipt is signed by or on behalf of the addressee. Once
delivered, a notice of resignation is irrevocable unless revocation is permitted
by the Board of Directors. If a resignation is made effective at a later date
and the Corporation accepts the future effective date, the Board of Directors
may fill the pending vacancy before the effective date, if the Board of
Directors provides that the successor shall not take office until the effective
date.
(d) This section shall not affect the rights of the Corporation or
any officer under any express contract of employment.
Section 3. President.
The President shall be the chief executive officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
Corporation. The President shall be ex officio a member of all the standing
committees of the Board of Directors (including the executive committee, if
any), and shall have the general powers and duties of management usually vested
in the office of president of a corporation and shall have such other powers or
duties as may be prescribed by the Board of Directors or these Bylaws.
Section 4. Vice Presidents.
The Vice Presidents, if any, shall perform such duties as the Board
of Directors prescribes. In the absence or disability of the President, the
President's duties and powers shall be performed and exercised by a senior Vice
President, as designated by the Board of Directors.
Section 5. Secretary.
(a) The Secretary shall keep or cause to be kept at the principal
office, or such other place as the Board of Directors may order, a book of
minutes of all meetings of directors and shareholders showing the time and place
of the meeting, whether the meeting was regular or special and, if a special
meeting, how authorized, the notice given, the names of those present at
director meetings, the number of shares present or represented at shareholder
meetings and the proceedings thereof.
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(b) The Secretary shall keep or cause to be kept, at the principal
office or at the office of the Corporation's transfer agent, a share register,
or a duplicate share register, showing the names of the shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates, if any, issued for such shares and the number and date of
cancellation of certificates, if any, surrendered for cancellation.
(c) The Secretary shall give or cause to be given such notice of
the meetings of the shareholders and of the Board of Directors as is required by
these Bylaws. If the Corporation elects to have a seal, the Secretary shall keep
the seal and affix it to all documents requiring a seal. The Secretary shall
have such other powers and perform such other duties as may be prescribed by the
Board of Directors or these Bylaws.
Section 6. Treasurer.
The Treasurer, if any, shall be responsible for the funds of the
Corporation, shall pay them out only on the checks of the Corporation signed in
the manner authorized by the Board of Directors, shall deposit and withdraw such
funds in such depositories as may be authorized by the Board of Directors, and
shall keep full and accurate accounts of receipts and disbursements in books
maintained at the Corporation's principal offices.
Section 7. Assistants.
The Board of Directors may appoint or authorize the appointment of
assistants to the Secretary or Treasurer, or both. Such assistants may exercise
the powers of the Secretary or Treasurer, as the case may be, and shall perform
such duties as are prescribed by the Board of Directors.
Section 8. Surety Bonds.
The Board of Directors may require any officer or agent of the
Corporation to execute a bond (including, without limitation, any bond required
by the 1940 Act and the rules and regulations of the SEC) to the Corporation in
such sum and with such surety or sureties as the Board of Directors may
determine, conditioned upon the faithful performance of the officer's or agent's
duties to the Corporation, including responsibility for negligence and for the
accounting of any of the Corporation's property, funds or securities that may
come into his or her hands.
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ARTICLE 6
CORPORATE RECORDS AND REPORTS - INSPECTION
Section 1. Records.
The Corporation shall maintain all records required by law. All
such records shall be kept at its principal office, registered office or at any
other place designated by the President of the Corporation, or as otherwise
provided by applicable law.
Section 2. Inspection of Records.
The records of the Corporation shall be open to inspection by the
shareholders or the shareholders' agents or attorneys in the manner and to the
extent required by applicable law.
Section 3. Checks, Drafts, Etc.
All checks, drafts or other orders for payment of money, notes or
other evidences of indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or persons and in such
manner as may be determined from time to time by resolution of the Board of
Directors.
Section 4. Execution of Documents.
The Board of Directors may, except as otherwise provided in these
Bylaws, authorize any officer or agent of the Corporation to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation. Such authority may be general or confined to specific instances.
Unless so authorized by the Board of Directors, or unless inherent in the
authority vested in the office under the provisions of these Bylaws, no officer,
agent or employee of the Corporation shall have any power or authority to bind
the Corporation by any contract or engagement, or to pledge its credit, or to
render it liable for any purpose or for any amount.
ARTICLE 7
CAPITAL STOCK
Section 1. Certificates of Stock.
The interest of each shareholder of the Corporation shall be
evidenced by an entry in the stock transfer records of the Corporation. Unless
the Board of Directors specifies otherwise, certificates representing shares of
stock of the Corporation will not be issued. Any certificates issued for shares
of stock shall be in such form as the Board of Directors may, from time to time,
prescribe. No certificate shall be valid unless it is signed, either manually or
in
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facsimile, by the President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation. Certificates may bear the corporate seal, if any, or its facsimile.
Section 2. Transfer of Shares.
Shares of the Corporation shall be transferable on the books of the
Corporation by the holder thereof in person or by his or her duly authorized
attorney or legal representative upon surrender and cancellation of a
certificate or certificates for the same number of shares of the same class,
duly endorsed or accompanied by proper instruments of assignment and transfer,
if certificates were issued; or upon written request in proper form by the
shareholder to the Corporation or its transfer agent, with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require. The shares of stock of the Corporation may be freely transferred, and
the Board of Directors may, from time to time, adopt rules and regulations with
reference to the method of transfer of the shares of stock of the Corporation.
Section 3. Stock Ledgers.
The stock ledgers of the Corporation, containing the names and
addresses of the shareholders and the number of shares held by them
respectively, shall be kept at the principal offices of the Corporation or at
the offices of the transfer agent of the Corporation.
Section 4. Transfer Agents and Registrars.
The Board of Directors may, from time to time, appoint or remove
transfer agents and/or registrars of transfers of shares of stock of the
Corporation, and it may appoint the same person as both transfer agent and
registrar. Upon any such appointment being made, all certificates representing
shares of capital stock thereafter issued, if any, shall be countersigned by one
of such transfer agents or by one of such registrars of transfers or by both and
shall not be valid unless so countersigned. If the same person shall be both
transfer agent and registrar, only one countersignature by such person shall be
required.
Section 5. Fixing of Record Date.
The Board of Directors may close the transfer books of the
Corporation for a period not exceeding 70 days nor less than 10 days preceding
any annual or special meeting of the shareholders or the day appointed for the
payment of a dividend. In lieu of closing the transfer books, the Board of
Directors may fix in advance a date as a record date for the determination of
the shareholders entitled to notice of or to vote at any shareholder meeting or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action;
provided that (1) such record date shall be within 70 days prior to the date on
which the particular action requiring such determination will be taken, (2) the
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transfer books shall not be closed for a period longer than 70 days, and (3) in
the case of a meeting of shareholders, the record date or any closing of the
transfer books shall be at least 10 days before the date of the meeting.
Section 6. Lost, Stolen, or Destroyed Certificates.
Before issuing a new certificate for stock of the Corporation
alleged to have been lost, stolen or destroyed, the Board of Directors or any
officer duly authorized by the Board may, in its discretion, require the owner
of the lost, stolen or destroyed certificate (or the owner's legal
representative) to give the Corporation a bond or other indemnity, in such form
and in such amount as the Board or any such officer may direct and with such
surety or sureties as may be satisfactory to the Board or any such officer,
sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE 8
FISCAL YEAR AND ACCOUNTANT
Section 1. Fiscal Year.
The fiscal year of the Corporation shall be determined by
resolution of the Board of Directors.
Section 2. Accountant.
The Corporation shall employ an independent public accountant or a
firm of independent public accountants as its Accountant to examine the accounts
of the Corporation and to sign and certify financial statements filed by the
Corporation. The Accountant's certificates and reports shall be addressed both
to the Board of Directors and to the shareholders. The employment of the
Accountant shall be conditioned upon the right of the Corporation to terminate
the employment forthwith, without any penalty, by vote of a majority of the
outstanding voting securities, as defined in the 1940 Act, at any shareholder
meeting called for that purpose.
A majority of the members of the Board of Directors who are not
interested persons of the Corporation (as such term is defined in the 1940 Act)
shall select the Accountant by a vote, cast in person, at any meeting held
within 30 days before or after the beginning of the fiscal year of the
Corporation or before any annual shareholder meeting held that year; provided,
however, that, if the Corporation does not hold an annual shareholder meeting
during a particular fiscal year, the meeting of the Board of Directors to select
the Accountant may be held within 30 days before or 90 days after the beginning
of that fiscal year. Such selection shall be submitted for ratification or
rejection at the next succeeding annual shareholder meeting, if such meeting be
held. If the Corporation's shareholders shall reject such selection, the
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Accountant shall be selected by majority vote of the Corporation's outstanding
voting securities, as defined in the 1940 Act, either at the meeting at which
the rejection occurred or at a subsequent meeting of shareholders called for
that purpose.
Any vacancy occurring between annual meetings, due to the
resignation of the Accountant, may be filled by the vote of a majority of the
members of the Board of Directors, cast in person, who are not interested
persons of the Corporation, as such term is defined in the 1940 Act.
ARTICLE 9
CUSTODY OF SECURITIES
Section 1. Employment of Custodian.
All assets of the Corporation shall be held by one or more
custodian banks or trust companies meeting the requirements of the 1940 Act, and
having capital, surplus and undivided profits of at least $1,000,000, and the
assets of the Corporation may be registered in the name of the Corporation, or
any such custodian, or a nominee of either of them. The terms of any custodial
agreement shall be determined by the Board of Directors, which terms shall be in
accordance with the provisions of the 1940 Act.
Subject to such rules, regulations and orders as the SEC may adopt,
the Corporation may direct a custodian to deposit all or any part of the
securities owned by the Corporation in a system for the central handling of
securities established by a national securities exchange or a national
securities association registered with the SEC, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class of
any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Corporation or the custodian.
ARTICLE 10
INVESTMENT AND OTHER RESTRICTIONS
In general, the Corporation shall be governed by the investment
policies set forth in the current Prospectus and Statement of Additional
Information.
The Corporation has adopted the following restrictions on its
activities as fundamental investment policies, which may not be changed without
approval by a majority vote of the Company's outstanding securities, as defined
in the 1940 Act. The Corporation may not:
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(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 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
Corporation 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 below), except that the proceeds of any newly-issued
shares of the Corporation may be retained in Cash or Cash Equivalents for up to
30 days after receipt.
(3) Invest in any assets that are not either Cash or Cash
Equivalents or "Eligible Equity Securities" (as defined below).
(a) The term "Cash or Cash Equivalents" is limited to cash
held by the custodian of the Corporation'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 P-1 by
Moody's Investment Services, Inc. ("Moody's") or A-1 by Standard & Poor's
Corporation ("S&P"), and demand notes that are issued by corporations whose
commercial paper is rated P-1 or A-1.
(b) The term "Eligible Equity Securities" is limited to the
following securities, which must be issued by companies that, at the time
the security is purchased by the Corporation, satisfy the investment
criteria described in the then current Prospectus of the Corporation:
(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 System. To
qualify as an Eligible Equity Security, common stock must be voting stock
and, in the event of the issuer's dissolution, the common stock 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 its equity securities.
(ii) Convertible debt securities and convertible
preferred stock that are registered under the 1934 Act and are traded on a
major United States stock exchange or through the NASDAQ National Market
System, provided that 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.
(iii) American Depository Receipts ("ADRs") for the
common stock of foreign corporations, provided the ADRs are issued in
sponsored
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programs, registered under the 1934 Act, and traded on a major United
States stock exchange or through the NASDAQ National Market System.
(4) Invest 25 percent or more of the Corporation's total assets in
any one industry.
(5) Borrow money to invest in securities or for any other purpose,
except that the Investment Adviser to the Corporation may advance funds to the
Corporation to pay organizational expenses and certain other expenses of the
Corporation, as disclosed in the Corporation's 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 Corporation
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 or
A-1 by 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 be deemed to be the making of loans.
(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 Corporation 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 Corporation's
then current Prospectus and Statement of Additional Information, unless at least
30 days before the effective date of any change the Corporation shall mail to
all shareholders a document describing each policy change and the reasons for
each change; provided, however, that the policies set
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forth in subparagraphs (1) through (14) immediately above may only be changed
with shareholder approval.
ARTICLE 11
GENERAL PROVISIONS
Section 1. Seal.
If the Corporation elects to have a corporate seal, the seal shall
be circular in form and shall have inscribed thereon the name of the Corporation
and the state of its incorporation.
Section 2. Amendment of Bylaws.
(a) Except as otherwise provided by applicable law or by the
Articles of Incorporation, the Board of Directors may amend or repeal these
Bylaws unless:
(i) The Articles of Incorporation or applicable law reserve
this power exclusively to the shareholders in whole or in part; or
(ii) The shareholders in amending or repealing a particular
Bylaw provide expressly that the Board of Directors may not amend or repeal
that Bylaw.
(b) The Corporation's shareholders may amend or repeal these Bylaws
even though these Bylaws may also be amended or repealed by the Board of
Directors.
(c) Whenever an amendment or new Bylaw is adopted, it shall be
copied in the minute book with the original Bylaws in the appropriate place. If
any Bylaw is repealed, the fact of repeal and the date on which the repeal
occurred shall be stated in such book and place.
Section 3. Action Without a Meeting.
(a) Action required or permitted by law to be taken at a
shareholder meeting may be taken without a meeting if the action is taken by all
the shareholders entitled to vote on the action. The action shall be evidenced
by one or more written consents describing the action taken, signed by all the
shareholders entitled to vote on the action and delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. Action taken
under this section is effective when the last shareholder signs the consent,
unless the consent specifies an earlier or later effective date. If not
otherwise determined by law, the record date for determining shareholders
entitled to take action without a meeting is the date the first shareholder
signs the consent. A consent signed under this section has the effect of a
meeting vote and may be described as such in any document.
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(b) Except as otherwise provided by the Articles of Incorporation
or these Bylaws, action required or permitted by law to be taken at a meeting of
the Board of Directors, or at a meeting of a committee of the Board of
Directors, may be taken without a meeting if the action is taken by all members
of the Board or of the committee, whichever applies. The action shall be
evidenced by one or more written consents describing the action taken, signed by
each director or committee member and filed with the corporate records
reflecting the action taken. Action taken under this section is effective when
the last director or committee member signs the consent, unless the consent
specifies an earlier or later effective date. A consent signed under this
section has the effect of a meeting vote and may be described as such in any
document. Notwithstanding the foregoing, the Investment Advisory and Service
Contract between the Corporation and the investment adviser to the Corporation
shall not be approved by the method described in this Section 3(b).
Section 4. Telephonic Meetings.
Except as otherwise provided by the Articles of Incorporation, the
Board of Directors may permit any or all directors to participate in a regular
or special meeting by, or conduct the meeting through, use of any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means
shall be deemed to be present in person at the meeting. Notwithstanding the
foregoing, the Investment Advisory and Service Contract between the Corporation
and the investment adviser to the Corporation shall not be approved by the
method described in this Section 4.
ARTICLE 12
INDEMNIFICATION
Section 1. Directors and Officers.
The Corporation shall indemnify to the fullest extent permitted by
law, any person who is made, or threatened to be made, a party to or witness in,
or is otherwise involved in, any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative, investigative, or
otherwise (including any action, suit or proceeding by or in the right of the
Corporation) by reason of the fact that:
(i) the person is or was a director or officer of the
Corporation or any of its subsidiaries;
(ii) the person is or was serving as a fiduciary within the
meaning of the Employee Retirement Income Security Act of 1974 with respect
to any employee benefit plan of the Corporation or any of its subsidiaries;
or
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(iii) the person is or was serving, at the request of the
Corporation or any of its subsidiaries, as a director, officer, employee,
agent or as a fiduciary of an employee benefit plan, of another
corporation, partnership, joint venture, trust or other enterprise.
Notwithstanding any contrary provision in these Bylaws, this
Article 12 does not protect any director or officer of the Corporation against
any liability to the Corporation or its shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
Section 2. Employees and Other Agents.
The Corporation may indemnify its employees and other agents to the
fullest extent permitted by law.
Section 3. Advances of Expenses.
(a) The expenses incurred by a director or officer in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, investigative, or otherwise, which the director
or officer is made or threatened to be made a party to or witness in, or is
otherwise involved in, shall be paid by the Corporation in advance upon written
request of the director or officer, if the director or officer:
(i) furnishes the Corporation a written affirmation of his or
her good faith belief that he or she is entitled to be indemnified by the
Corporation; and
(ii) furnishes the Corporation a written undertaking to repay
such advance to the extent that it is ultimately determined by a court that
he or she is not entitled to be indemnified by the Corporation. Such
advances shall be made without regard to the person's ability to repay such
expenses and without regard to the person's ultimate entitlement to
indemnification under this Article 12 or otherwise.
Section 4. Nonexclusivity of Rights.
The rights conferred on any person by this Article 12 shall be in
addition to any rights to which a person may otherwise be entitled under any
articles of incorporation, bylaw, agreement, statute, policy of insurance, vote
of shareholders or Board of Directors, or otherwise.
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Section 5. Survival of Rights.
The rights conferred on any person by this Article 12 shall
continue as to a person who has ceased to be a director, officer, employee or
agent of the Corporation; and shall inure to the benefit of the heirs, executors
and administrators of such person.
Section 6. Amendments.
Any repeal or modification of this Article 12 shall be prospective
only and no repeal or modification of this Article 12 shall adversely affect any
right or protection that is based upon this Article 12 and pertains to an act or
omission that occurred prior to the time of such repeal or modification.
ARTICLE 13
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by law, no director of the
Corporation shall be personally liable to the Corporation or its shareholders
for monetary damages for conduct as a director. For example, without limiting
the generality of the foregoing, if the Oregon Revised Statutes are amended,
after this Article 13 becomes effective, to authorize corporate action further
eliminating or limiting the personal liability of directors of the Corporation,
then the liability of directors of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Oregon Revised Statutes, as so
amended. No amendment or repeal of this Article 13, nor the adoption of any
provision of these Bylaws inconsistent with this Article 13, nor a change in the
law, shall adversely affect any right or protection that is based upon this
Article 13 and pertains to conduct that occurred prior to the time of such
amendment, repeal, adoption or change. No change in the law shall reduce or
eliminate the rights and protections set forth in this Article 13 unless the
change in the law specifically requires such reduction or elimination.
ARTICLE 14
TRANSACTIONS BETWEEN CORPORATION AND
INTERESTED DIRECTORS
Section 1. Validity of Transaction.
(a) No transaction involving the Corporation shall be voidable by
the Corporation solely because of a director's direct or indirect interest in
the transaction if:
(i) The material facts of the transaction and the director's
interest were disclosed or known to the Board of Directors or a committee
of the Board of Directors, and the Board of Directors or committee
authorized, approved or ratified the transaction;
22
<PAGE>
(ii) The material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and a
majority of those shareholders authorized, approved or ratified the
transaction; or
(iii) The transaction was fair to the Corporation.
(b) This Article 14 shall not invalidate any contract, transaction
or determination that would otherwise be valid under applicable law.
Section 2. Indirect Interest.
Solely for purposes of this Article 14, a director of the
Corporation has an indirect interest in a transaction if:
(a) Another entity in which the director has a material financial
interest or in which the director is a general partner is a party to the
transaction; or
(b) Another entity of which the director is a director, officer or
trustee is a party to the transaction and the transaction is or should be
considered by the Board of Directors.
Section 3. Authorization by Board.
For purposes of Section 1 of this Article 14, a transaction in
which a director has an interest is authorized, approved or ratified by the
Board of Directors if it receives the affirmative vote of a majority of the
directors on the Board of Directors, or on the committee, who have no direct or
indirect interest in the transaction. A transaction may not be authorized,
approved or ratified under this Article 14 by a single director. If a majority
of the directors who have no direct or indirect interest in the transaction vote
to authorize, approve or ratify the transaction, a quorum shall be present for
the purpose of taking action under this Article 14. The presence of, or a vote
cast by, a director with a direct or indirect interest in the transaction shall
not affect the validity of any action taken under Section 1 of this Article 14
by the Board of Directors or a committee thereof, if the transaction is
otherwise authorized, approved or ratified as provided in Section 1 of this
Article 14.
Section 4. Authorization by Shareholders.
For purposes of Section 1 of this Article 14, a transaction in
which a director has an interest is authorized, approved or ratified if it
receives the vote of a majority of the shares entitled to be counted under this
Article 14, voting as a single voting group. Shares owned by or voted under the
control of a director who has a direct or indirect interest in the transaction,
and shares owned by or voted under the control of any entity described in
paragraph (a) of Section 2 of this Article 14 may be counted in a vote of
shareholders to determine whether to authorize, approve or ratify a transaction
by vote of the shareholders under Section 1 of this Article 14. A majority of
the shares, whether or not present, that are entitled to be counted in
23
<PAGE>
a vote on the transaction under this Article 14 constitutes a quorum for the
purpose of taking action under this Article 14.
Adopted by the Board of Directors on July 7, 1995.
24
EXHIBIT 5
RESTATED INVESTMENT ADVISORY AND SERVICE CONTRACT
between
THE JENSEN PORTFOLIO, INC.
and
JENSEN INVESTMENT MANAGEMENT, INC.
This Agreement is entered into, effective July 13, 1993, as a restatement
of the Restated Investment Advisory and Service Contract, dated July 31, 1992,
by and between THE JENSEN PORTFOLIO, INC., an Oregon corporation (the "Fund"),
and JENSEN INVESTMENT MANAGEMENT, INC., an Oregon corporation (the "Adviser").
In consideration of the mutual covenants contained in this Agreement, it is
hereby agreed as follows:
1. The Fund hereby employs the Adviser to act as its investment adviser
and, as such, to manage the investment and reinvestment of the assets of the
Fund in accordance with the Fund's investment objectives, policies and
limitations, and to administer the Fund's affairs to the extent requested by the
Fund, subject to the supervision of the Board of Directors of the Fund, for the
period and upon the terms set forth in this Agreement. Investment of funds shall
be subject to all applicable restrictions of the Articles of Incorporation and
Bylaws of the Fund as may, from time to time, be in force and all applicable
provisions of the Investment Company Act of 1940, or any successor statute, as
amended from time to time (the "1940 Act").
The Adviser agrees to: (a) furnish the investment advisory services
specified above; (b) furnish, 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; (c) permit any of its
officers and employees to serve, without compensation, as directors or officers
of the Fund if elected to such positions; and (d) pay all expenses of (i)
printing and distributing any prospectuses or reports prepared for its use or
the use of the Fund in connection with the offering of the shares of the Fund's
common stock for sale to the public; (ii) any other literature used by the Fund
or any broker in connection with such offering; and (iii) any advertising
employed in such offering. The Adviser shall pay the salaries and fees, if any,
of all officers of the Fund and of all directors of the Fund who are "interested
persons" (as defined in the 1940 Act) of the Fund or of the Adviser and of all
personnel of the Fund or Adviser performing services relating to research,
statistical and investment activities.
<PAGE>
The Adviser shall, on behalf of the Fund, maintain the Fund's records and
books of account (other than those maintained by the Fund's transfer agent,
registrar, custodian and shareholder servicing agent). All books and records so
maintained shall be the property of the Fund and, upon request, the Adviser
shall surrender to the Fund any of such books and records requested.
The investment policies and all other actions of the Fund are, and shall at
all times be, subject to the control and direction of the Board of Directors of
the Fund. In acting under this Agreement, the Adviser shall be an independent
contractor and shall not be an agent of the Fund.
With respect to services performed in connection with the purchase and sale
of portfolio securities on behalf of the Fund, the Adviser may place transaction
orders for the Fund's account with brokers or dealers selected by the Adviser.
In connection with the selection of such brokers or dealers and the placing of
such orders, the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
Adviser has determined in good faith that the net price to the Fund of such
transaction was reasonable in relation to the net price for comparable
transactions engaged in by similarly situated investors.
2. For the services and facilities to be furnished, the Fund shall pay to
the Adviser monthly compensation equal to an annual rate of 0.50 percent of the
Fund's average daily net assets. The daily net asset value of the Fund shall be
computed in the manner and at the times set forth in the Fund's Articles of
Incorporation. On any day that the Fund's net asset value is not calculated, the
net asset value for such day shall be deemed to be the net asset value as of the
close of business on the last day on which such calculation was made for the
purposes of the foregoing computations. Except as hereinafter set forth,
compensation under this Agreement shall be calculated and accrued daily, and the
amounts of the daily accruals shall be paid monthly. Such calculations shall be
made by applying 1/365th of the annual rate to the Fund's net asset value each
day determined as of the close of business on that day.
For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year, respectively.
The services of the Adviser under this Agreement are not to be deemed
exclusive, and the Adviser shall be free to render similar services or other
services to others, including
2
<PAGE>
other investment companies, so long as its services under this Agreement are not
impaired by the delivery of such services.
3. The Fund shall pay all of its expenses other than those expressly stated
to be payable by the Adviser. The expenses payable by the Fund shall include,
without limitation: (a) interest and taxes; (b) brokerage fees and commissions
and other costs in connection with the purchase or sale of portfolio securities;
(c) fees and expenses of its directors other than those who are "interested
persons" (as defined in the 1940 Act) of the Fund or the Adviser; (d) legal and
audit expenses; (e) transfer agent expenses and expenses for servicing
shareholder accounts; (f) expenses of computing the net asset value of the
shares of the Fund and the amount of its dividends; (g) custodian fees and
expenses; (h) administrative fees and expenses; (i) fees and expenses related to
the registration and qualification of the Fund and its shares for distribution
under state and federal securities laws; (j) expenses of printing and mailing
reports, notices and proxy materials to shareholders of the Fund; (k) the cost
of issuing share certificates, if certificates are issued; (l) expenses for
reports, membership dues and other dues in the Investment Company Institute or
any similar trade organization; (m) expenses of preparing and typesetting
prospectuses; (n) expenses of printing and mailing prospectuses sent to existing
shareholders; (o) such nonrecurring expenses as may arise, including expenses
incurred in actions, suits or proceedings to which the Fund is a party and the
legal obligation that the Fund may have to indemnify its officers and directors
in respect thereto; (p) the organizational costs of the Fund and other Fund
expenses that are capitalized; (q) insurance premiums; (r) expenses of
maintaining the Fund's corporate existence, providing investor services and
corporate reports, and holding corporate meetings; and (s) such other expenses
as the directors of the Fund may, from time to time, determine to be properly
payable by the Fund.
The Adviser may, but has no obligation to, pay any or all of the expenses
of the Fund that are payable by the Fund. In such event, the Fund shall promptly
reimburse the Adviser for all such expenses so paid by the Adviser. With respect
to organizational expenses of the Fund paid or advanced by the Adviser, the Fund
shall reimburse the Adviser such amounts in equal monthly payments over 60
months beginning on the date the registration statement filed by the Fund with
the Securities and Exchange Commission was first declared effective; provided,
however, that all such organizational expenses then remaining unreimbursed shall
be reimbursed in full at the end of the first month in which the Fund's average
daily net assets exceed $50,000,000.
4. If the operating expenses of the Fund, including amounts payable to the
Adviser pursuant to Section 2 of the Agreement, for any fiscal year ending on a
date on which the Agreement is in effect exceed the expense limitations
applicable
3
<PAGE>
to the Fund imposed by any state securities laws, or regulations thereunder, as
such limitations may be raised or lowered from time to time, the Adviser shall
reduce its management fee to the extent of such excess and, if required,
pursuant to any such laws or regulations, will reimburse the Fund for annual
operating expenses (including, but not limited to, legal, audit, custodial,
printing and other regular Fund expenses) in excess of any expense limitation
that may be applicable. The obligation of the Adviser to reduce its management
fee or reimburse the Fund shall not apply to the following expenses paid or
payable by the Fund: brokerage commissions, taxes, interest, organizational
costs and other expenses that are capitalized, and all extraordinary items
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto).
For purposes of the first paragraph of this Section 4, should any such
applicable expense limitation be based upon the gross income of the Fund, such
gross income shall include, but not be limited to, interest on debt securities
in the Fund's portfolio accrued to and including the last day of the Fund's
fiscal year, the record dates for which fall on or prior to the last day of such
fiscal year, and dividends from common and preferred stock in the Fund's
portfolio including all dividends paid or receivable up to and including the
last day of the Fund's fiscal year, but shall not include gains from the sales
of securities.
If the Fund's regular operating expenses in any fiscal year exceed the
applicable limit specified below (expressed as a percentage of average daily net
assets of the Fund on an annual basis), the Adviser will reduce its management
fee or reimburse the Fund in an amount equal to the amount of the excess:
Average Daily Net Annual
Assets for the Year Expense Limit
------------------- -------------
$ 100,000 - $ 10,000,000 2.00%
$ 10,000,001 - $ 15,000,000 1.75
$ 15,000,001 - $ 25,000,000 1.50
$ 25,000,001 - $ 50,000,000 1.25
$ 50,000,001 - $ 100,000,000 1.00
$ 100,000,001 and above 0.75
Any reduction in management fees or reimbursement of expenses by the
Adviser required by this Section 4 shall be computed and accrued daily, paid
monthly and adjusted annually on the basis of the Fund's average daily net
assets for the year. Should two or more such expense limitations be applicable
as of the end of the last business day of the fiscal year, that expense
limitation which results in the largest reduction in the Adviser's fee shall be
applicable.
5. In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties
4
<PAGE>
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or omission
in the course of, or connected with, rendering services under this Agreement or
for any losses that may be sustained by the Fund or its shareholders in the
purchase, holding or sale of any security.
6. Subject to all applicable statutes and regulations, it is understood
that directors, officers or agents of the Fund are or may be interested in the
Adviser as officers, directors, agents, shareholders or otherwise and that the
officers, directors, shareholders and agents of the Adviser may be interested in
the Fund as officers, directors, agents, shareholders or otherwise.
7. The Adviser shall have the right to grant the use of a name similar to
the Fund's name to another investment company or business enterprise without the
approval of the Fund's shareholders and shall have the right to withdraw from
the Fund the use of the Fund's name. However, the Adviser may not withdraw from
the Fund the use of the Fund's name without submitting to the Fund's
shareholders the question of whether the shareholders wish the Fund to continue
this Agreement.
8. This Agreement became effective on April 20, 1992, and shall remain in
full force and effect until the second anniversary of such date, unless sooner
terminated as hereinafter provided. This Agreement shall continue in force from
year to year thereafter, but only as long as such continuance is specifically
approved at least annually in the manner required by the 1940 Act.
This Agreement shall automatically terminate in the event of its
assignment, and may be terminated at any time without payment of any penalty by
the Fund or by the Adviser on 60 days' written notice to the other party. The
Fund may effect termination by action of its Board of Directors or by vote of a
majority of the outstanding shares of the common stock of the Fund (as defined
in the 1940 Act), accompanied by the appropriate notice. In the event of the
death or disability of any of the principal officers of the Adviser, or if, for
any other reason, there is a material change in the management or ownership of
the Adviser, the Board of Directors of the Fund shall be required to meet as
soon as practicable after such event to consider whether another investment
adviser should be selected for the Fund. If the Fund's Board determines, at such
meeting, that this Agreement should be terminated, this Agreement may be
terminated without the payment of any penalty and without any required prior
notice; provided, however, that any change in the ownership of the Adviser that
constitutes an assignment (within the meaning of the 1940 Act) shall require the
automatic termination of this Agreement.
5
<PAGE>
This Agreement may be terminated at any time by the Board of Directors of
the Fund or by vote of a majority of the outstanding shares of common stock of
the Fund, and such termination shall be without the payment of any penalty and
without any required prior notice, if it shall have been established by a court
of competent jurisdiction that the Adviser or any officer or director of the
Adviser has taken any action that results in a breach of the covenants of the
Adviser set forth in this Agreement. In addition, the Adviser agrees to inform
the Board of Directors of the Fund if the Adviser learns that it or any of its
officers or directors has taken any action that results in a breach of the
Adviser's covenants set forth in this Agreement. The Board of Directors of the
Fund shall meet as soon as practicable after it receives such notification to
consider whether another investment adviser should be selected for the Fund. If
the Fund's Board determines, at such meeting, that this Agreement should be
terminated, this Agreement may be terminated without the payment of any penalty
and without any required prior notice.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in Section
2 earned prior to such termination.
9. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not thereby be affected.
10. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
11. If any action or suit is instituted to enforce or interpret this
Agreement, the prevailing party shall be entitled to recover from the other
party, in addition to all other rights and remedies, the prevailing party's
reasonable attorney fees at trial and on appeal.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed as of the date first written above.
THE JENSEN PORTFOLIO, INC. JENSEN INVESTMENT MANAGEMENT, INC.
By By
------------------------------- -------------------------------
President President
6
FORM OF
CUSTODIAN AGREEMENT
THIS AGREEMENT made on ________, 1992, between The Jensen Portfolio,
Inc., an Oregon Corporation (hereinafter called the "Fund"), and FIRST WISCONSIN
TRUST COMPANY, a corporation organized under the laws of the State of Wisconsin
(hereinafter called "Custodian"),
W I T N E S S E T H:
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Fund and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Fund by any two of the
President, a Vice President, the Secretary and the Treasurer of the Fund, or any
other persons duly authorized to sign by the Board of Directors.
The word "Board" shall mean Board of Directors of The Jensen
Portfolio, Inc.
2. Names, Titles and Signatures of the Fund's Officers
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board of
Directors, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or accounts in
the name of the Fund, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement. Custodian shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Fund. Custodian shall make payments of cash to, or for the
account of, the Fund from such cash only:
(a) for the purchase of securities for the portfolio of the Fund upon
the delivery of such securities to Custodian, registered in the
name of the Fund or of the nominee of Custodian referred to in
Section 7 or in proper form for transfer;
-1-
<PAGE>
(b) for the purchase or redemption of shares of the common stock of
the Fund upon delivery thereof to Custodian, or upon proper
instructions from The Jensen Portfolio;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without
limitation thereto, fees for legal, accounting, auditing and
custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund held
by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by resolution of
the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may rely
upon) an officers' certificate requesting such payment and stating that it is
for a purpose permitted under the terms of items (a), (b), (c) or (d) of this
Subsection A, and also, in respect of item (e), upon receipt of an officers'
certificate specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officers' certificate need not precede the
disbursement of cash for the purpose of purchasing a money market instrument, or
any other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by Custodian for the
account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make federal
funds available to the Fund as of specified times agreed upon from time to time
by the Fund and the custodian in the amount of checks received in payment for
shares of the Fund which are deposited into the Fund's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall establish and
maintain a segregated account(s) for and on behalf of the portfolio, into which
account(s) may be transferred cash and/or securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any securities
of the Fund held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Fund upon
receipt by Custodian of payment therefore;
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<PAGE>
(b) when such securities are called, redeemed or retired or otherwise
become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities alone
or other securities and cash whether pursuant to any plan of
merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their terms into
other securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock of
the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a), (b),
(d), (e), (f), and (g), securities or cash receivable in exchange therefore
shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian shall
receive (and may rely upon) an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a purpose permitted under the
terms of items (a), (b), (c), (d), (e), (f), (g) or (h) of this Section 5 and
also, in respect of item (i), upon receipt of an officers' certificate
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made, provided, however, that an officers' certificate need not precede
any such transfer, exchange or delivery of a money market instrument, or any
other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to the
contrary, Custodian shall: (a) present for payment all coupons and other income
items held by it for the account of the Fund, which call for payment upon
presentation and hold the cash received by it upon such payment for the
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<PAGE>
account of the Fund; (b) collect interest and cash dividends received, with
notice to the Fund, for the account of the Fund; (c) hold for the account of the
Fund hereunder all stock dividends, rights and similar securities issued with
respect to any securities held by it hereunder; and (d) execute, as agent on
behalf of the Fund, all necessary ownership certificates required by the
Internal Revenue Code or the Income Tax Regulations of the United States
Treasury Department or under the laws of any state now or hereafter in effect,
inserting the Fund's name on such certificates as the owner of the securities
covered thereby, to the extent it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate, Custodian
shall register all securities, except such as are in bearer form, in the name of
a registered nominee of Custodian as defined in the Internal Revenue Code and
any Regulations of the Treasury Department issued hereunder or in any provision
of any subsequent federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or regulations or under the
laws of any state. Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable in
its records.
The Fund shall from time to time furnish to Custodian appropriate
instruments to enable Custodian to hold or deliver in proper form for transfer,
or to register in the name of its registered nominee, any securities which it
may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of the
securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
9. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder, and for all
other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in connection
with securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any
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<PAGE>
Regulations of the Treasury Department issued thereunder, or under the laws of
any state, to exempt from taxation any exemptable transfers and/or deliveries of
any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services pursuant to
this Agreement such compensation as may from time to time be agreed upon in
writing between the two parties. Until modified in writing, such compensation
shall be as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith upon
any certificate herein described or certified copy of any resolution of the
Board, and may rely on the genuineness of any such document which it may in good
faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assessed against it or by its nominee in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any account of the Fund for such
items. In the event of any advance of cash for any purpose made by Custodian
resulting from orders or instructions of the Fund, or in the event that
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any property
at any time held for the account of the Fund shall be security therefore.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust company
as a Subcustodian for all or any part of the Fund's assets, so long as any such
bank or trust company is a bank or trust company organized under the laws of any
state of the United States, having an aggregate capital, surplus and undivided
profit, as shown by its last published report, of not less than Two Million
Dollars ($2,000,000) and provided further that, if the Custodian utilizes the
services of a Subcustodian, the Custodian shall remain fully liable and
responsible for any losses caused to the Fund by the Subcustodian as fully as if
the Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires the
Custodian to engage specific Subcustodians for the safekeeping and/or clearing
of assets, the Fund agrees to indemnify and hold harmless Custodian from all
claims, expenses and liabilities incurred or assessed against it in connection
with the use of such Subcustodian in regard to the Fund's assets, except as may
arise from its own negligent action, negligent failure to act or willful
misconduct.
-5-
<PAGE>
12. Reports by Custodian
Custodian shall furnish the Fund periodically as agreed upon with a
statement summarizing all transactions and entries for the account of Fund.
Custodian shall furnish to the Fund, at the end of every month, a list of the
portfolio securities showing the aggregate cost of each issue. The books and
records of Custodian pertaining to its actions under this Agreement shall be
open to inspection and audit at reasonable times by officers of, and of auditors
employed by, the Fund.
13. Termination or Assignment
This Agreement may be terminated by the Fund, or by Custodian, on
ninety (90) days notice, given in writing and sent by registered mail to
Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund at 430
Pioneer Tower, 888 S.W. Fifth Avenue, Portland, Oregon 97204-2018, as the case
may be. Upon any termination of this Agreement, pending appointment of a
successor to Custodian or a vote of the shareholders of the Fund to dissolve or
to function without a custodian of its cash, securities and other property,
Custodian shall not deliver cash, securities or other property of the Fund to
the Fund, but may deliver them to a bank or trust company of its own selection,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than Two Million Dollars ($2,000,000) as a
Custodian for the Fund to be held under terms similar to those of this
Agreement, provided, however, that Custodian shall not be required to make any
such delivery or payment until full payment shall have been made by the Fund of
all liabilities constituting a charge on or against the properties then held by
Custodian or on or against Custodian, and until full payment shall have been
made to Custodian of all its fees, compensation, costs and expenses, subject to
the provisions of Section 10 of this Agreement.
This Agreement may not be assigned by Custodian without the consent of
the Fund, authorized or approved by a resolution of its Board of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the use by
Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable federal and state laws and
regulations, and the Board of Directors of the Fund approves by resolution the
use of such central securities clearing agency or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or maintains any
records required to be maintained and preserved by the Fund pursuant to the
provisions of the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder, Custodian agrees to make any such records
available to the Fund upon request and to preserve such records for the periods
prescribed in Rule 31a-2 under the Investment Company Act of 1940, as amended.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and their respective corporate seals to be affixed hereto as of the
date first above-written by their respective officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRST WISCONSIN TRUST COMPANY
By
- ---------------------------------- ----------------------------------
ASSISTANT SECRETARY VICE PRESIDENT
Attest: THE JENSEN PORTFOLIO, INC.
By
- ---------------------------------- ----------------------------------
-6-
FORM OF
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this ________ day of __________,
1992, by and between The Jensen Portfolio, Inc. (hereinafter referred to as the
"Fund") and First Wisconsin Trust Company, a corporation organized under the
laws of the State of Wisconsin (hereinafter referred to as the "Agent").
W I T N E S S E T H:
WHEREAS, the Fund is an open-ended management investment company which is
registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things, is in the
business of administering transfer and dividend disbursing agent functions for
the benefit of its customers;
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree as
follows:
1. Terms of Appointment; Duties of the Agent
Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints the Agent to act as transfer agent and dividend
disbursing agent.
The Agent shall perform all of the customary services of a transfer agent
and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares, with prompt delivery, where
appropriate, of payment and supporting documentation to the Fund's
custodian;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated shares
being held in the appropriate shareholder account;
C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Fund's custodian;
D. Pay monies (upon receipt from the Fund's custodian, where relevant) in
accordance with the instructions of redeeming shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
<PAGE>
F. Process exchanges between funds within the same family of funds;
G. Issue and/or cancel certificates as instructed; replace lost, stolen
or destroyed certificates upon receipt of satisfactory indemnification
or surety bond;
H. Prepare and transmit payments for dividends and distributions declared
by the Fund;
I. Make changes to shareholder records, including, but not limited to,
address changes in plans (i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant to
Section Rule 17ad-10(e), a record of the total number of shares of the
Fund which are authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail, receive
and tabulate proxies;
L. Mail shareholder reports and prospectuses to current shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to dividends and
distributions for all shareholders;
N. Provide shareholder account information upon request and prepare and
mail confirmations and statements of account to shareholders for all
purchases, redemptions and other confirmable transactions as agreed
upon with the Fund; and
O. Provide a Blue Sky System which will enable the Fund to monitor the
total number of shares sold in each state. In addition, the Fund shall
identify to the Agent in writing those transactions and assets to be
treated as exempt from the Blue Sky reporting to the Fund for each
state. The responsibility of the Agent for the Fund's Blue Sky state
registration status is solely limited to the initial compliance by the
Fund and the reporting of such transactions to the Fund.
2. Compensation
The Fund agrees to pay the Agent for performance of the duties listed in
this Agreement; the fees and out-of-pocket expenses include, but are not limited
to the following: printing, postage, forms, stationery, record retention,
mailing, insertion, programming, labels, shareholder lists and proxy expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Fund and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within ten (10)
business days following the mailing of the billing notice.
-2-
<PAGE>
3. Representations of Agent
The Agent represents and warrants to the Fund that:
A. It is a trust company duly organized, existing and in good standing
under the laws of Wisconsin;
B. It is duly qualified to carry on its business in the state of
Wisconsin;
C. It is empowered under applicable laws and by its charter and bylaws to
enter into and perform this Agreement;
D. All requisite corporate proceedings have been taken to authorize it to
enter and perform this Agreement; and
E. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4. Representations of the Fund
The Fund represents and warrants to the Agent that:
A. The Fund is an open-ended diversified investment company under the
Investment Company Act of 1940;
B. The Fund is a corporation organized, existing, and in good standing
under the laws of Oregon;
C. The Fund is empowered under applicable laws and by its Corporate
Charter and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Corporate Charter have been
taken to authorize it to enter into and perform this Agreement;
E. The Fund will comply with all applicable requirements of the
Securities and Exchange Acts of 1933 and 1934, as amended, the
Investment Company Act of 1940, as amended, and any laws, rules and
regulations of governmental authorities having jurisdiction; and
F. A registration statement under the Securities Act of 1933 is currently
effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with respect
to all shares of the Fund being offered for sale.
5. Covenants of Fund and Agent
The Fund shall furnish the Agent a certified copy of the resolution of the
Board of Directors of the Fund authorizing the appointment of the Agent and the
execution of this Agreement. The Fund shall provide to the Agent a copy of the
Corporate Charter, bylaws of the Corporation, and all amendments.
-3-
<PAGE>
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such section and rules and will be surrendered
to the Fund on and in accordance with its request.
6. Indemnification; Remedies Upon Breach
The Agent agrees to use reasonable care and act in good faith in performing
its duties hereunder.
Notwithstanding the foregoing, the Agent shall not be liable or responsible
for delays or errors occurring by reason of circumstances beyond its control,
including acts of civil or military authority, national or state emergencies,
fire, mechanical or equipment failure, floor or catastrophe, acts of God,
insurrection or war. In the event of a mechanical breakdown beyond its control,
the Agent shall take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond the Agent's control. The
Agent will make every reasonable effort to restore any lost or damaged data, and
the correcting of any errors resulting from such a breakdown will be at the
Agent's expense. The Agent agrees that it shall, at all times, have reasonable
contingency plans with appropriate parties, making reasonable provision for
emergency use of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of The Jensen Portfolio, Inc. shall be
entitled to inspect the Agent's premises and operating capabilities at any time
during regular business hours of the Agent, upon reasonable notice to the Agent.
The Fund will indemnify and hold the Agent harmless against any and all
losses, claims, damages, liabilities or expenses (including reasonable counsel
fees and expenses) resulting from any claim, demand, action or suit not
resulting from the Agent's negligence or bad faith and arising out of or in
connection with the Agent's duties on behalf of the Fund hereunder.
Further, the Fund will indemnify and hold the Agent harmless against any
and all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit as a
result of the negligence of the Fund or the principal underwriter (unless
contributed to by the Agent's own negligence or bad faith); or as a result of
the Agent acting upon telephone instructions relating to the exchange or
redemption of shares received by the Agent and reasonably believed by the Agent
to have originated form the record owner of the subject shares; or as a result
of the Agent acting upon any instructions executed or orally communicated by a
duly authorized officer or employee of the Fund, according to such lists of
authorized officers and employees furnished to the Agent and as amended from
time to time in writing by a resolution of the Board of Directors of the Fund;
or as a result of acting in reliance upon any genuine instrument or stock
certificate signed, countersigned or executed by any person or persons
authorized to sign, countersign or execute the same.
-4-
<PAGE>
In order for this section to apply, it is understood that if in any case
the Fund may be asked to indemnify or hold harmless the Agent, the Fund shall be
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Agent will use all reasonable care to notify the
Fund promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Fund. The Fund shall have the
option to defend the Agent against any claim which may be the subject of this
indemnification and, in the event that the Fund so elects, the Agent will so
notify the Fund, and thereupon the Fund shall take over complete defense of the
claim and the Agent shall sustain no further legal or other expenses in such
situation for which the Agent shall seek indemnification under this section. The
Agent will in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify the Agent, except with the Fund's
prior written consent.
In the event that it is determined that the Agent has breached its
responsibilities under this contract, the Fund's sole and exclusive remedies
shall be:
A. Termination of the Agreement;
B. To collect damages directly and actually incurred in a sum up to but
not in excess of fifty percent (50%) of any fees received by the Agent
during the period of twelve (12) months immediately preceding the
Agent's performance or failure to perform which constitute a material
breach of this Agreement;
C. To submit a claim for damages directly incurred by the Fund as a
consequence of the Agent's failure to perform which constituted a
material breach of this Agreement, and which act, nonact or event was
covered under the Agent's blanket bond policy or policies, in which
event the Agent agrees to indemnify and hold the Fund harmless solely
to the extent of the Agent's best efforts to include the Fund's claim
as a loss payee under the filing of a proof of loss under such policy;
and
D. To reprocess and correct administrative errors at the Agent's own
expense.
Regardless of the foregoing, the Agent shall not be liable to the Fund or
to any third party for any indirect or consequential damages.
7. Confidentiality
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and its
shareholders and shall not be disclosed to any other party, except after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Agent may be exposed to
civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
-5-
<PAGE>
8. Wisconsin Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the state of Wisconsin.
9. Amendment, Assignment, Termination and Notice
A. This Agreement may be amended by the mutual written consent of the
parties.
B. This Agreement may be terminated upon ninety (90) day's written notice
given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of the
other party.
D. Any notice required to be given by the parties to each other under the
terms of this Agreement shall be in writing, addressed and delivered,
or mailed to the principal place of business of the other party.
E. In the event that the Fund gives to the Agent its written intention to
terminate and appoint a successor transfer agent, the Agent agrees to
cooperate in the transfer of its duties and responsibilities to the
successor, including any and all relevant books, records and other
data established or maintained by the Agent under this Agreement.
F. Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
paid by the Fund.
The Jensen Portfolio, Inc. First Wisconsin Fund Trust Company
By: By:
------------------------------- -------------------------------
Attest: Attest:
-------------------------- ---------------------------
Assistant Secretary
-6-
EXHIBIT 9(b)
FORM OF
FUND ACCOUNTING SERVICING AGREEMENT
This contract between The Jensen Portfolio, Inc., an Oregon corporation,
hereinafter called the "Fund", and First Wisconsin Trust Company, a Wisconsin
corporation, hereinafter called "FWTC," is entered into on this _________ day of
_______, 1992.
WHEREAS, The Jensen Portfolio, Inc. is a financial services company
providing investment opportunities through mutual funds to various investors;
WHEREAS, First Wisconsin Trust Company ("FWTC") is in the business of
providing, among other things, mutual fund accounting services to investment
companies;
NOW, THEREFORE, the Fund and FWTC do mutually promise and agree as follows:
1. Services. FWTC agrees to provide the following mutual fund accounting
services to the Fund:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date basis using
security trade information communicated from the investment manager on
a timely basis.
(2) For each valuation date, obtain prices from a pricing source
approved by the Board of Directors and apply those prices to the
portfolio positions. For those securities where market quotations are
not readily available, the Board of Directors shall approve, in good
faith, the method for determining the fair value for such securities.
(3) Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments for the
accounting period.
(4) Determine gain/loss on security sales and identify them as to
short-short, short- or long-term status; account for periodic
distributions of gains or losses to shareholders and maintain
undistributed gain or loss balances as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Fund as to methodology, rate or dollar
amount.
(2) Record payments for Fund expenses upon receipt of written
authorization from the Fund.
-1-
<PAGE>
(3) Account for fund expenditures and maintain expense accrual
balances at the level of accounting detail, as agreed upon by FWTC and
the Fund.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other fund share activity as
reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the Fund.
(3) Determine net investment income (earnings) for the Fund as of
each valuation date. Account for periodic distributions of earnings to
shareholders and maintain undistributed net investment income balances
as of each valuation date.
(4) Maintain a general ledger for the Fund in the form as agreed
upon.
(5) For each day the Fund is open as defined in the prospectus,
determine the net asset value of the Fund according to the accounting
policies and procedures set forth in the prospectus.
(6) Calculate per share net asset value, per share net earnings,
and other per share amounts reflective of fund operation at such time
as required by the nature and characteristics of the Fund.
(7) Communicate, at an agreed upon time, the per share price for
each valuation date to parties as agreed upon from time to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain tax accounting records for the investment portfolio
of the Fund to support the tax reporting required for IRS-defined
regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using the tax
cost basis for the Fund.
(4) Provide the necessary financial information to support the
taxable components of income and capital gains distributions to the
transfer agent to support tax reporting to the shareholders.
-2-
<PAGE>
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support financial
statement preparation by making the fund accounting records available
to The Jensen Portfolio, Inc., the Securities and Exchange Commission,
and the outside auditors.
(2) Maintain accounting records according to the Investment
Company Act of 1940 and regulations provided thereunder.
2. Changes in Accounting Procedures. Any resolution passed by the Board of
Directors that affects accounting practices and procedures under this agreement
shall be effective upon written receipt and acceptance by the FWTC.
3. Changes in Equipment, Systems, Service, Etc. FWTC reserves the right to
make changes from time to time, as it deems advisable, relating to its services,
systems, programs, rules, operating schedules and equipment, so long as such
changes do not adversely affect the service provided to the Fund under this
Agreement.
4. Compensation. FWTC shall be compensated for providing the services set
forth in this Agreement in accordance with the Fee Schedule attached hereto as
Exhibit A and as mutually agreed upon and amended from time to time.
5. Performance of Service. FWTC shall exercise reasonable care in the
performance of its duties under the Agreement. The Jensen Portfolio, Inc. agrees
to reimburse and make FWTC whole for any loss or damages (including reasonable
fees and expenses of legal counsel) arising out of or in connection with its
actions under this Agreement so long as FWTC acts in good faith and is not
negligent or guilty of any willful misconduct.
FWTC shall not be liable or responsible for delays or errors occurring
by reason of circumstances beyond its control, including acts of civil or
military authority, natural or state emergencies, fire, mechanical breakdown,
flood or catastrophe, acts of God, insurrection, war, riots or failure of
transportation, communication or power supply.
In the event of a mechanical breakdown beyond its control, FWTC shall
take all reasonable steps to minimize service interruptions for any period that
such interruption continues beyond FWTC's control. FWTC will make every
reasonable effort to restore any lost or damaged data and the correcting of any
errors resulting from such a breakdown will be at the expense of FWTC. FWTC
agrees that it shall at all times have reasonable contingency plans with
appropriate parties, making reasonable provision for emergency use of electrical
data processing equipment to the extent appropriate equipment is available.
Representatives of the Fund shall be entitled to inspect FWTC's premises and
operating capabilities at any time during regular business hours of FWTC, upon
reasonable notice to FWTC.
This indemnification includes any act, omission to act, or delay by
FWTC in reliance upon, or in accordance with, any written or oral instruction it
receives from any duly authorized officer of the Fund.
-3-
<PAGE>
Regardless of the above, FWTC reserves the right to reprocess and
correct administrative errors at its own expense.
6. No Agency Relationship. Nothing herein contained shall be deemed to
authorize or empower FWTC or the Fund to act as agent for any other party to
this Agreement, or to conduct business in the name of, or for the account of,
any other party to this Agreement.
7. Ownership of Records. All records prepared or maintained by FWTC on
behalf of the Fund remain the surrendered property of the Fund and will be
surrendered promptly on the written request of an authorized officer of the
Fund.
8. Confidentiality. FWTC shall handle in confidence all information
relating to the Fund's business, which is received by FWTC during the course of
rendering any service hereunder.
9. Data Necessary to Perform Services. The Fund or its agent, which may be
FWTC, shall furnish to FWTC the data necessary to perform the services described
herein at times and in such form as mutually agreed upon.
10. Notification of Error. The Fund will notify FWTC of any balancing or
control error caused by FWTC within three (3) business days after receipt of any
reports rendered by FWTC to the Fund, or within three (3) business days after
discovery of any error or omission not covered in the balancing or control
procedure, or within three (3) business days of receiving notice from any
shareholder.
11. Additional Series. In the event that The Jensen Portfolio, Inc.
establishes one or more series of shares with respect to which it desires to
have FWTC render accounting services, under the terms hereof, it shall so notify
FWTC in writing, and if FWTC agrees in writing to provide such services, such
series will be subject to the terms and conditions of this Agreement, and shall
be maintained and accounted for by FWTC on a discrete basis.
12. Term of Agreement. This Agreement may be terminated by either party
upon giving ninety (90) days prior written notice to the other party or such
shorter period as is mutually agreed upon by the parties. However, this
Agreement may be replaced or modified by a subsequent agreement between the
parties.
13. Duties in the Event of Termination. In the event that in connection
with termination a Successor to any of FWTC's duties or responsibilities
hereunder is designated by The Jensen Portfolio, Inc. by written notice to FWTC,
FWTC will promptly, upon such termination and at the expense of The Jensen
Portfolio, Inc., transfer to such Successor all relevant books, records,
correspondence and other data established or maintained by FWTC under this
Agreement in a form reasonably acceptable to The Jensen Portfolio, Inc. (if such
form differs from the form in which FWTC has maintained the same, The Jensen
Portfolio, Inc. shall pay any expenses associated with transferring the same to
such form), and will cooperate in the transfer of such duties and
responsibilities, including provision for assistance from FWTC's personnel in
the establishment of books, records and other data by such successor.
-4-
<PAGE>
14. Choice of Law. This memorandum of understanding shall be construed in
accordance with the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
ATTEST: FIRST WISCONSIN TRUST COMPANY
By
- ---------------------------------- ----------------------------------
ATTEST: THE JENSEN PORTFOLIO, INC.
By
- ---------------------------------- ----------------------------------
-5-
EXHIBIT 9(c)
Fund Administration Servicing Agreement
This Agreement is made and entered into on this 7th day of April, 1995, by
and between Jensen Portfolio, Inc. (hereinafter referred to as "the Fund") and
Firstar Trust Company, a corporation organized under the laws of the State of
Wisconsin (hereinafter referred to as "FTC").
WHEREAS, the Fund is an open-ended management investment company which is
registered under the Investment Company Act of 1940;
WHEREAS, FTC is a trust company and, among other things, is in the business
of providing fund administration services for the benefit of its customers;
NOW, THEREFORE, the Fund and FTC do mutually promise and agree as follows:
I. Duties and Responsibilities of FTC
A. General Fund Management
1. Act as liaison among all fund service providers
2. Coordinate board communication by:
a. Assisting fund counsel in establishing meeting agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and director and
officers liability coverage, if requested.
3. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to SEC and facilitate audit process
c. Provide office facilities
4. Assist in overall operations of the Fund
B. Compliance
1. Regulatory Compliance
a. Periodically monitor compliance with Investment Company Act
of 1940 requirements
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of ethics
b. Periodically monitor prospectus investment limitation
<PAGE>
2. Blue Sky Compliance
a. File initial state application and subsequent renewals and
reports
b. Monitor sales status in each state
3. SEC Registration and Reporting
a. Assist Fund's counsel in updating prospectus, statement of
additional information, proxy statements, and Rule 24f-2
notice,
b. Prepare annual and semiannual reports
4. IRS Compliance
a. Periodically monitor the Fund's status as a regulated
investment company under Subchapter M through review of the
following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Monitor short short testing
c. Calculate required distributions (including excise tax
distributions)
C. Financial Reporting
1. Provide financial data required by fund prospectus and statement
of additional information
2. Prepare financial reports for shareholders, the board, the SEC,
and independent auditors
3. Monitor expense accruals and payments
D. Tax Reporting
1. Prepare appropriate federal and state tax returns including forms
1120/8610 with any necessary schedules
2. Prepare state income breakdowns where relevant
3. File 1099 Miscellaneous for payments to directors and other
service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate shareholders
<PAGE>
II. Compensation
The Fund agrees to pay FTC for performance of the duties listed in this
Agreement and the fees and out-of-pocket expenses as set forth in the
attached Schedule A.
These fees may be changed from time to time, subject to mutual written
Agreement between the Fund and FTC.
The Fund agrees to pay all fees and reimbursable expenses within ten (10)
business days following the mailing of the billing notice.
III. Performance of Service; Limitation of Liability
FTC shall exercise reasonable care in the performance of its duties under
the Agreement. The Fund agrees to reimburse and make FTC whole for any loss
or damages (including reasonable fees and expenses of legal counsel)
arising out of or in connection with its actions under this Agreement so
long as FTC acts in good faith and is not negligent or guilty of any
willful misconduct.
FTC shall not be liable or responsible for delays or errors occurring by
reason of circumstances beyond its control, including acts of civil or
military authority, natural or state emergencies, fire, mechanical
breakdown, flood or catastrophe, act of God, insurrection, war, riots, or
failure of transportation, communication, or power supply.
In the event of a mechanical breakdown beyond its control, FTC shall take
all reasonable steps to minimize service interruptions for any period that
such interruption continues beyond FTC's control. FTC will make every
reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of FTC. FTC agrees
that it shall, at all times, have reasonable contingency plans with
appropriate parties, making reasonable provisions for emergency use of
electrical data processing equipment to the extent appropriate equipment is
available. Representatives of the Fund shall be entitled to inspect FTC's
premises and operating capabilities at any time during regular business
hours of FTC, upon reasonable notice to FTC.
This indemnification includes any act, omission to act, or delay by FTC in
reliance upon, or in accordance with, any written or oral instruction it
receives from any duly authorized officer of the Fund.
Regardless of the above, FTC reserves the right to reprocess and correct
administrative errors at its own expense.
IV. Confidentiality
FTC shall handle, in confidence, all information relating to the Fund's
business which is received by FTC during the course of rendering any
service hereunder.
<PAGE>
V. Data Necessary to Perform Service
The Fund or its agent, which may be FTC, shall furnish to FTC the data
necessary to perform the services described herein at times and in such
form as mutually agreed upon.
VI. Terms of Agreement
This Agreement shall become effective as of the date hereof and, unless
sooner terminated as provided herein, shall continue in effect with respect
to the Jensen Portfolio, Inc. for a period of one year. Thereafter, if not
terminated, this Agreement shall continue automatically in effect for
successive annual periods unless otherwise terminated by either party upon
giving ninety (90) days prior written notice to the other party or such
shorter period as is mutually agreed upon by the parties.
VII. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any of
FTC's duties or responsibilities hereunder is designated by the Fund by
written notice to FTC, FTC will promptly, upon such termination and at the
expense of Jensen Portfolio, Inc., transfer to such successor all relevant
books, records, correspondence, and other data established or maintained by
FTC under this Agreement in a form reasonably acceptable to the Fund (if
such form differs from the form in which FTC has maintained, the Fund shall
pay any expenses associated with transferring the data to such form), and
will cooperate in the transfer of such duties and responsibilities,
including provision for assistance from FTC's personnel in the
establishment of books, records, and other data by such successor.
VIII. Choice of Law
This Agreement shall be construed in accordance with the laws of the State
of Wisconsin.
JENSEN PORTFOLIO, INC. FIRSTAR TRUST COMPANY
By: GARY HIBLER By: JAMES C. TYLER
------------------------------ ------------------------------
Attest: VAL JENSEN Attest: MARY E. ?
-------------------------- --------------------------
5
<PAGE>
Schedule A
Firstar Trust Company
Mutual Fund Services
FUND ADMINISTRATION FEES
5 basis points (.0005) on the first $100,000,000
4 basis points (.0004) on the next $400,000,000
3 basis points (.0003) on the balance
Plus out-of-pocket expenses, including, but not limited to:
o Postage
o Stationery
o Programming
o Proxies
o Record retention
o Special reports
o Federal and state regulatory filing fees
o Certain insurance premiums
o Expenses from Board of Directors meetings
o Auditing and legal expenses
o All other out-of-pocket expenses
Fees are billed monthly. First year annual minimum of $15,000.
EXHIBIT 10
TONKON, TORP, GALEN, MARMADUKE & BOOTH
Attorneys At Law
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2099
(503)221-1440
FAX (503) 274-8779
TELEX 360823-HQ-PTL
July 31, 1992
Board of Directors of
The Jensen Portfolio, Inc.
430 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2018
Gentlemen:
We have acted as counsel to The Jensen Portfolio, Inc. (the "Fund") in
connection with the preparation and filing of a Registration Statement on Form
N-1A under the Securities Act of 1933 and the Investment Company Act of 1940,
covering a proposed offering of an indefinite number of shares of the Fund's
Common Stock, $.001 par value (the "Shares"). We have reviewed the corporate
actions of the Fund in connection with this matter and have examined and relied
upon such documents, corporate records and other evidence as we have deemed
necessary for the purposes of this opinion.
Based upon the foregoing, it is our opinion that the Shares have been
duly authorized and, when issued and sold in the manner described in the
Registration Statement and in accordance with the resolutions adopted by the
Board of Directors of the Fund, will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
CAROL DEY HIBBS
for
TONKON, TORP, GALEN, MARMADUKE & BOOTH
EXHIBIT 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
September 21, 1998
To the Board of Directors of The Jensen Portfolio, Inc.:
We consent to the inclusion in Post-Effective Amendment No. 7 to the
Registration Statement of The Jensen Portfolio, Inc. on Form N-1A (File No.
33-47508) of our report, dated July 2, 1998 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, 1998, 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."
PRICEWATERHOUSECOOPERS LLP
EXHIBIT 11(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to us in this Post-Effective Amendment No. 7 to
Registration Statement No. 33-47508 on Form N1-A of The Jensen Portfolio, Inc.
under the heading "Financial Highlights" in the Prospectus which is a part of
such Registration Statement.
DELOITTE & TOUCHE LLP
Portland, Oregon
September 21, 1998
(The Jensen Portfolio Logo)
ANNUAL REPORT
May 31, 1998
LETTER FROM THE INVESTMENT ADVISER
Dear Fellow Shareholders:
According to Fortune Magazine, Bill Gates and Warren Buffett addressed 350
business students from the University of Washington following Microsoft's annual
conference for CEO's last May. Apart from being among the world's wealthiest
people, the two have a number of interests in common as evidenced by their
month-long trip to China and frequent games of bridge. Interestingly Mr.
Buffett's investment company, Berkshire Hathaway, does not own any shares in
Microsoft -- especially after having said Mr. Gates explained the company to
him. (The article did not disclose whether or not Mr. Gates owned shares in
Berkshire.)
The reason why Microsoft is not in the Berkshire portfolio came up during the
question and answer period. Mr. Buffett was asked to describe his investment
strategy. He replied it was simple. Financial assets are expected to return cash
to the investor over time. Hence any investment is worth the cash that it
returns to the investor, discounted to its present value. A 30-year Treasury
bond is worth the present value of all future interest payments plus the
eventual return of principal. A share of common stock is worth all future
dividend payments plus the value received upon the liquidation of shares of the
company. This is not new to Warren Buffett nor unique to him. Investment bankers
use this type of appraisal in their merger and acquisition work; it is simple
because it applies to any financial asset from The Jensen Portfolio to the mom
and pop grocery store down the street.
That said, it is not a wildly popular way to select securities because the
investor must find companies whose future business performance can be reasonably
estimated. That is, businesses that will not significantly change over the next
five or ten years. Microsoft, as Mr. Gates admits, must change significantly --
perhaps several times during the next decade. Even so, the process is arduous.
For example, the investor must estimate how many drinks of Coca-Cola will be
poured each year going forward and deduce the company's revenues and net income
from those estimates. While a company's past business performance may give clues
to future performance, the cold truth is that Coca-Cola's market price today
will have to be earned by its future business performance and its past
performance belongs to history.
Using a discounted cash flow basis for investment involves some disciplines:
o The investor must select companies whose businesses are reasonably
predictable in order to calculate future cash flows. This eliminates investment
in industries that are notably cyclical such as chemicals, autos and papers. The
complexity of estimating future business conditions in companies that are
rapidly changing, which is Mr. Buffett's problem with Microsoft, make the
calculation too improbable. In estimating future cash flows, for example, it is
more likely that estimates will be more rational with the Coca-Cola's of the
world rather than the Internet's Yahoo.
o A belief that in the long-term the cash earnings a business generates will
be reflected in its share price. Using earnings per share as a proxy for cash
earnings, according to Value Line Investment Survey, Merck's earnings have
increased annually at a 19% rate over the past ten years. Based on average
annual prices plus dividends, an investor in Merck shares would have earned a
22.7% return. (The somewhat higher market return may reflect investor's
exuberance for common stocks in 1997.)
This should not suggest that forecasting business performance produces
precise answers. During the past year, the strength of the dollar against
foreign currencies, the Asian crisis, and the under-$1,000 computer all are
among today's laundry list of worries. They are important because in the short
term they may affect business performance and in turn market performance.
Worries determine how well investors sleep at night. In their depression,
investors often forget that the function of corporate management is to react and
plan around the inevitable shocks and surprises. It is also likely that many of
these concerns are temporal (remember the Gulf War, OPEC and Japan) and will be
replaced by others which will be inevitably considered more dire in due course.
The three best and worst Portfolio performers help illustrate how current events
affected market values.
<PAGE>
NORDSON (-14.1%) has averaged an 18.0% annual return (including dividends)
during the ten-year period from 1988-1997. The company has recently been
affected by twin concerns: the weak economy in Japan and the strength of the
dollar. Nordson's products are principally manufactured in the United States --
equipment that applies sealant, coatings and paints to everything from
automobiles to disposable diapers. Since Japan is the world's second largest
economy and therefore an important customer to Nordson, its current economic
malaise has negatively effected the company's revenues. Secondly, since most of
Nordson's products are purchased outside of North America, the strong dollar
resulted in their products being more expensive. To illustrate, the table below
shows Nordson's earnings as reported compared to their earnings on a "currency
neutral" basis. As disappointing as Nordson's market performance was, there is a
flip side: owning an outstanding company at a reasonable price when Japan's
economy and the currency cycle turns in their favor.
1994 1995 1996 1997 1998
----- ----- ----- ----- -----
Earnings
as reported 2.45 2.84 2.92 2.85 Est. 3.05
Earnings,
currency
neutral 2.45 2.64 3.02 3.22 Est. 3.45
NIKE'S (-13%) difficulties -- other than with the unfortunate press provided
by the local newspaper, The Oregonian -- stemmed from the company's past
success. Demand by retailers globally (including Japan) for their products in
1995 and 1996 was intense and the company attempted to fulfill their orders. The
consumer demand unfortunately did not meet the retailers' hopes. One example of
the ensuing glut of product on the market was in Japan where there was an excess
of 2,000,000 pairs of shoes. Nike has reported that the excess supply of shoes
is diminishing rapidly and the press has reported that Nike's new lines are very
exciting. Nike continues to be the industry leader and has a tradition of
creating value for its long-term holders. Over the past ten years, its average
annual total return is 46 percent.
INTEL (-5.5%) During the past 12 months, the Asian crisis and the under-
$1,000 computer effected Intel's performance. Some 25 percent of all personal
computers are purchased in Asia where the devaluation of currencies resulted in
pricing personal computers out of reach. Although Intel supplies the under-
$1,000 computer market, the company's strengths and profit margins rest in the
higher-end microprocessors needed to operate new software programs and speed-up
Internet functions. Intel's financial position and market share indicate that it
will continue to dominate its rapidly growing industry.
In a way, the market performance of the three issues rising the most
represent as much concern as the poorest performing three. Discounting future
cash flows relies upon the relationship between increasing net income and
increases in price. Over-performance, as well as under-performance, is
disconcerting. For the record:
MEDTRONICS (+50.9%) is the world's largest manufacturer of implantable
biomedical devices. Demographics and a very productive research and development
program are hallmarks of the company. Although Medtronics is a large company
with $2 1/2 billion in sales, the company is rumored to be an acquisition target
of Johnson and Johnson.
SARA LEE (+46.3%) markets branded consumer products including Hillshire
Farms, Jimmy Dean, Ball Park, L'Eggs, Kiwi, Bali, Champion, Playtex and Coach.
In late December, the Company decided to restructure by selling off a
substantial number of its capital-intensive manufacturing facilities. In turn it
will contract production from outside vendors. The cash generated from facility
sales will be used to repurchase shares.
GANNETT (+45.4%) continues to narrow its focus on newspaper and TV stations.
Last year, Gannett acquired Metromedia and sold its billboard operations and
home security systems. The company publishes 87 daily newspapers including the
now profitable USA Today; 20 network affiliated TV stations and serves 476,000
subscribers with Cable TV. Increasing subscription and advertising revenues
offset increasing newsprint prices.
Looking forward, the year ahead will offer investment challenges beyond the
normal fare. The independent Congressional Budget Office just projected a
2
<PAGE>
federal surplus of $63 billion for the current year, up from a January 1998
projected deficit of $8 billion. The 1998 surplus will be the first since 1969
that turned out to be only a nominal, one-year respite. If policies stay
unchanged, the CBO projected that the surplus will rise each year to $251
billion by 2008. The CBO's projections are all the more interesting because they
used conservative estimates of growth, inflation and interest rates.
As the economy stands now, inflation is nominal, unemployment near a 30-year
low and the economy cooking along at a 3.6 percent growth rate. With such good
news, there are excesses. It is a time when an Internet bookseller's shares rose
from $12 to $143 in 52 weeks; at its $113 current price, the company is selling
at 8 times 1999's estimated sales. In the first quarter, the company lost $9
million, up $3 million loss of the year-earlier comparable quarter. According to
The Wall Street Journal, it is a time when there is a parallel trend among US
lenders to discard caution and embrace risk. The Journal cited that outstanding
loans to 'subprime' borrowers with subprime credit histories surpassed a record
$300 billion last year. Our strategy in this environment is to continue to
select companies of high quality and earnings consistency. While they may not
offer the excitement of the next new idea, we believe they offer the best
opportunity to survive the next unknown economic turn down the road.
Sincerely,
VAL JENSEN
Val Jensen
President, Jensen Investment Management
3
<PAGE>
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
11/30/97 17,340 25,751
5/31/98 18,581 29,629
FOR THE PERIOD ENDING MAY 31, 1998
ANNUALIZED
ONE YEAR SINCE INCEPTION
THE JENSEN PORTFOLIO: 18.28% 11.21%
S&P 500 STOCK INDEX: 30.68% 20.48%
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.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Jensen Portfolio, Inc. (the
Fund), an investment company, at May 31, 1998, and the results of its operations
and the changes in its net assets for the years ended May 31, 1998 and 1997, and
the financial highlights for each of the three years in the period ended May 31,
1998, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements 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 audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned as of May 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS, LLP
Portland, Oregon
July 2, 1998
4
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
May 31, 1998
ASSETS:
Investments, at value (cost $13,156,341) ..... $19,932,030
Income receivable ............................ 14,108
Prepaid expenses ............................. 871
---------------------------------------------
TOTAL ASSETS 19,947,009
----------
LIABILITIES:
Payable to investment adviser ................ 8,502
Payable to directors ......................... 15,988
Accrued expenses ............................. 22,146
---------------------------------------------
TOTAL LIABILITIES 46,636
----------
NET ASSETS $19,900,373
-----------
-----------
NET ASSETS CONSIST OF:
Capital stock ................................ $13,215,364
Unrealized appreciation on investments ....... 6,775,689
Undistributed net investment income .......... 12,485
Undistributed net realized loss .............. (103,165)
---------------------------------------------
TOTAL NET ASSETS $19,900,373
-----------
-----------
NET ASSET VALUE PER SHARE, 1,179,441
SHARES OUTSTANDING (100,000,000 SHARES
AUTHORIZED, $.001 PAR VALUE) ............... $16.87
-------
-------
SCHEDULE OF INVESTMENTS
May 31, 1998
Number of Shares Market Value
- ---------------- ------------
COMMON STOCK 97.55%
BANKS 7.30%
7,000 State Street Corporation ................ $ 482,563
16,000 Wilmington Trust Corporation ............ 970,000
------------
1,452,563
------------
BEVERAGES 3.94%
10,000 The Coca-Cola Company ................... 783,750
------------
CHEMICAL SPECIALTY 6.22%
12,500 Nalco Chemical Company .................. 468,750
28,000 WD-40 Company ........................... 768,250
------------
1,237,000
------------
COMPUTER SOFTWARE SERVICES 7.64%
11,000 Adobe Systems Incorporated .............. 439,312
17,000 Automatic Data Processing, Inc. ......... 1,081,625
------------
1,520,937
------------
DRUGS 4.53%
7,700 Merck & Company, Inc. ................... 901,381
------------
ELECTRICAL EQUIPMENT 5.45%
13,000 General Electric Company ................ 1,083,875
------------
FOOD PROCESSING 4.59%
15,500 Sara Lee Corporation .................... 912,563
------------
HOUSEHOLD PRODUCTS 5.03%
12,000 Clorox Company .......................... 1,002,000
------------
INDUSTRIAL SERVICES 9.14%
50,000 Equifax Inc. ............................ 1,818,750
------------
See notes to financial statements.
5
<PAGE>
SCHEDULE OF INVESTMENTS
May 31, 1998
Number of Shares Market Value
- ---------------- ------------
MACHINERY 3.54%
15,500 Nordson Corporation ..................... 705,250
------------
MEDICAL SUPPLIES 17.72%
18,000 Abbott Laboratories ..................... 1,335,375
24,000 Medtronic, Inc. ......................... 1,335,000
21,000 Stryker Corporation ..................... 855,750
------------
3,526,125
------------
NEWSPAPERS 4.97%
15,000 Gannett Company, Inc. ................... 989,062
------------
PRECISION INSTRUMENTS 4.20%
16,000 Dionex Corporation # <F1> ............... 836,000
------------
SEMICONDUCTORS 3.59%
10,000 Intel Corporation ....................... 714,375
------------
SHOE INDUSTRY 4.62%
20,000 Nike, Inc. -- Class B ................... 920,000
------------
TELECOMMUNICATIONS 5.07%
14,733 Reuters Holdings
PLC -- ADR ............................ 1,009,210
------------
Total Common Stock
(Cost $12,637,152) ...................... 19,412,841
------------
Principal Amount
- ----------------
SHORT-TERM INVESTMENTS 2.61%
VARIABLE RATE DEMAND NOTES* <F2> 2.61%
$283,588 Johnson Controls, Inc.,
5.2534% ............................... 283,588
235,601 Pitney Bowes, Inc.,
5.2534% ............................... 235,601
------------
Total Short-Term Investments
(Cost $519,189) ......................... 519,189
------------
Total Investments 100.16%
(Cost $13,156,341) ...................... 19,932,030
------------
Liabilities, Less Other
Assets (0.16%) ........................ (31,657)
------------
NET ASSETS 100.00% ...................... $19,900,373
------------
------------
#<F1>Non income producing security.
*<F2>Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rate changes periodically on specified dates. The
rate is as of May 31, 1998.
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
Year Ended May 31, 1998
INVESTMENT INCOME:
Dividends (net of foreign taxes
withheld of $2,729) ........................ $ 392,597
Interest ..................................... 37,911
-----------
430,508
-----------
EXPENSES:
Investment advisory fees ..................... 87,402
Shareholder servicing and accounting ......... 28,464
Professional fees ............................ 13,844
Directors' fees and expenses ................. 16,910
Amortization of deferred organizational
expenses ................................... 2,454
Administration fees .......................... 16,736
Reports to shareholders ...................... 3,432
Federal and state registration fees .......... 4,948
Custody fees ................................. 4,002
Other ........................................ 1,079
-----------
Total expenses ............... 179,271
-----------
NET INVESTMENT INCOME ........................ 251,237
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investment transactions . 592,609
Change in unrealized appreciation
on investments ............................. 1,930,938
-----------
Net gain on investments ...................... 2,523,547
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .................. $2,774,784
-----------
-----------
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
May 31, '98 May 31, '97
------------ ------------
OPERATIONS:
Net investment income ................. $ 251,237 $ 75,658
Net realized gain on
investment transactions ............. 592,609 48,074
Change in unrealized appreciation
on investments ..................... 1,930,938 2,435,266
----------- -----------
Net increase in net assets
resulting from operations ........... 2,774,784 2,558,998
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold ........................... 4,033,672 2,414,861
Shares issued to holders in
reinvestment of dividends ........... 482,999 79,511
Shares redeemed ....................... (1,247,161) (1,699,617)
----------- -----------
Net increase .......................... 3,269,510 794,755
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................. (250,304) (89,436)
In excess of net investment income #<F3> -- (10,260)
From net realized gains ............... (404,704) --
----------- -----------
Total dividends and distributions ..... (655,008) (99,696)
----------- -----------
INCREASE
IN NET ASSETS ......................... 5,389,286 3,254,057
NET ASSETS:
Beginning of year ..................... 14,511,087 11,257,030
----------- -----------
End of year (including undistributed
net investment income of $12,485
and $9,098, respectively) .......... $19,900,373 $14,511,087
----------- -----------
----------- -----------
#<F3>On a tax basis, this is not a return of capital.
See notes to financial statements.
7
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
Per Share Data: MAY 31, '98 MAY 31, '97 MAY 31, '96 MAY 31, '95 MAY 31, '94
-------------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .............. $14.78 $12.16 $9.94 $8.80 $9.36
Income from investment
operations:
Net investment income ............ 0.23 0.10 0.15 0.14 0.13
Net realized and unrealized
gains (losses) on investments . 2.46 2.63 2.23 1.15 (0.56)
------ ------ ------ ------ ------
Total from investment
operations .................... 2.69 2.73 2.38 1.29 (0.43)
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income ......................... (0.23) (0.10) (0.15) (0.15) (0.13)
Distribution in excess of net
investment income .............. -- (0.01) (0.01) -- --
From net realized gains .......... (0.37) -- -- -- --
------ ------ ------ ------ ------
(0.60) (0.11) (0.16) (0.15) (0.13)
------ ------ ------ ------ ------
Net asset value,
end of period .................... $16.87 $14.78 $12.16 $9.94 $8.80
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total return ....................... 18.28% 22.56% 24.14% 14.84% (4.64)%
Supplemental data and ratios:
Net assets,
end of period ................. $19,900,373 $14,511,087 $11,257,030 $9,859,630 $8,808,717
Ratio of expenses to
average net assets(1)<F4> ...... 1.02% 1.32% 1.20% 1.20% 1.13%
Ratio of net investment income to
average net assets(1)<F4> ...... 1.44% 0.61% 1.23% 1.48% 1.36%
Portfolio turnover rate .......... 20.80% 24.50% 47.93% 11.27% 5.26%
Average commission rate paid ..... $0.0185 $0.0196 $0.0198
</TABLE>
(1)<F4> 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 and $54,481 for the year ended May 31, 1994, the
ratio of expenses to average net assets would have been 1.35%, 1.49%, 1.75% and
1.72%, respectively, and the ratio of net income to average net assets would
have been 0.58%, 0.94%, 0.93% and 0.77%, respectively. For the year ended May
31, 1998 the ratio of expenses to average net assets was less than the annual
expense limit.
See notes to financial statements.
8
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
May 31, 1998
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 has reimbursed these costs
under a five-year amortization schedule. The total organizational costs of
$57,854 (which includes both costs advanced by the Investment Adviser and costs
paid directly by the Fund) were completely amortized in August 1997.
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. There were no securities valued by the Board of Directors
for the fiscal year ending May 31, 1998. 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 and paid 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 on 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
9
<PAGE>
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, '98 May 31, '97
-------------- -------------
Shares sold ......................... 245,342 178,249
Shares issued to holders in
reinvestment of dividends ........ 29,293 6,168
Shares redeemed ..................... (77,187) (128,324)
-------- --------
Net increase ........................ 197,448 56,093
-------- --------
-------- --------
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, by the Fund for the year ended May 31, 1998, were $6,061,379 and
$3,509,982, respectively.
At May 31, 1998, gross unrealized appreciation and depreciation of investments
were as follows:
Appreciation ........................ $7,377,391
(Depreciation) ...................... (601,702)
----------
Net appreciation on investments ..... $6,775,689
----------
----------
At May 31, 1998, the cost of investments for federal income tax purposes was
$13,156,341.
At May 31, 1998, the Fund had an accumulated net realized capital loss carryover
of $103,165 expiring in 2003. 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 1998 in order to keep
regular operating expenses at no more than 1.40%. 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.
6. DISTRIBUTIONS
On June 30, 1998 an ordinary income dividend of $0.01340547 per share
aggregating $15,942 was declared. The distribution was paid on June 30, 1998 to
shareholders of record on June 29, 1998.
10
<PAGE>
END OF NOTES TO THE FINANCIAL STATEMENTS
Effective December 13, 1995, Deloitte & Touche, L.L.P. ("Deloitte") resigned as
the Fund's independent accountants. For the years ended May 31, 1994 and 1995,
Deloitte expressed an unqualified opinion on the Fund's financial statements.
There were no disagreements between Fund management and Deloitte prior to their
resignation. On December 13, 1995, the Board of Directors of the Fund approved
the appointment of Coopers & Lybrand L.L.P (effective July 1, 1998
PricewaterhouseCoopers LLP) as the Fund's independent accountants. The Fund has
received a letter from Deloitte addressed to the Securities and Exchange
Commission stating that Deloitte agrees with the above statements (other than
the statement with respect to the approval of the Board of Directors, as to
which Deloitte expresses no knowledge).
<PAGE>
(Jensen Investment Management logo) The Jensen Portfolio
430 Pioneer Tower
888 SW Fifth Avenue
Portland, OR 97204-2018
503-274-2044
800-221-4384
Fax 503-274-2031 Jensen Investment Management
Annual Report
May 31, 1998
EXHIBIT 13
SUBSCRIPTION AGREEMENT
AND INVESTOR REPRESENTATIONS
I. Subscription
I, Gary W. Hibler, hereby subscribe upon the terms set out herein, for
5,000 shares of the common stock, $.001 par value (the "Shares"), of The Jensen
Portfolio, Inc., an Oregon corporation (the "Fund"). I agree to pay for the
Shares at a rate of $10 per Share, for an aggregate purchase price of $50,000,
as and when requested by the Board of Directors of the Fund.
II. Investor Representations
A. I represent that I have such knowledge and experience in financial and
business matters that I am capable of evaluating the merits and risks of an
investment in the Shares. I recognize that the purchase of the Shares is a
long-term investment and that the transfer and sale of the Shares is restricted
by the terms of this Subscription Agreement and by applicable laws and
regulations.
B. I represent that I am acquiring the Shares for my own account as the
sole record and beneficial holder thereof, and there is no agreement,
understanding or arrangement to subdivide, sell, assign, transfer, pledge or
otherwise dispose of all or any part of my interest in the Shares to any other
person or entity, except that I may transfer the Shares to an individual
retirement account (the "IRA") that satisfies the following requirements: (i)
The IRA will be self-directed solely by me; and (ii) I will be the sole
beneficiary of the IRA. By its acceptance of this subscription, the Fund
consents to the transfer of the Shares to
<PAGE>
my IRA. I agree that the IRA will be bound by all provisions of this agreement,
including, but not limited to, the restrictions upon further transfer.
C. I represent that I am acquiring the Shares for investment purposes and
without a view to distribution thereof. I agree that all certificates, if any,
evidencing ownership of the Shares will bear substantially the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933. The securities
have been acquired without a view to distribution and may
not be offered, sold, transferred, pledged or hypothecated
in the absence of an effective registration statement for
the securities under the Act and under any applicable state
securities laws, or an opinion of counsel to the Fund that
registration is not required as to such sale or offer. The
Fund's transfer agent has been ordered to effectuate
transfers of this certificate only in accordance with the
above instruction.
D. I understand and agree that the Fund's transfer agent will be instructed
not to transfer the Shares (except to the IRA) without an opinion of counsel to
the Fund that such transfer does not violate any applicable securities laws.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Subscription Agreement and Investor Representations as of June 29, 1992.
GARY W. HIBLER
-----------------------------------------
Gary W. Hibler
2
<PAGE>
ACCEPTANCE BY THE FUND:
The above Subscription Agreement is accepted by the Fund as of June 29,
1992 and called for payment in accordance with its terms.
THE JENSEN PORTFOLIO, INC.
By VAL E. JENSEN
--------------------------------------
Val E. Jensen, President
3
<PAGE>
SUBSCRIPTION AGREEMENT
AND INVESTOR REPRESENTATIONS
I. Subscription
I, Val E. Jensen, hereby subscribe upon the terms set out herein, for 5,000
shares of the common stock, $.001 par value (the "Shares"), of The Jensen
Portfolio, Inc., an Oregon corporation (the "Fund"). I agree to pay for the
Shares at a rate of $10 per Share, for an aggregate purchase price of $50,000,
as and when requested by the Board of Directors of the Fund.
II. Investor Representations
A. I represent that I have such knowledge and experience in financial and
business matters that I am capable of evaluating the merits and risks of an
investment in the Shares. I recognize that the purchase of the Shares is a
long-term investment and that the transfer and sale of the Shares is restricted
by the terms of this Subscription Agreement and by applicable laws and
regulations.
B. I represent that I am acquiring the Shares for my own account as the
sole record and beneficial holder thereof, and there is no agreement,
understanding or arrangement to subdivide, sell, assign, transfer, pledge or
otherwise dispose of all or any part of my interest in the Shares to any other
person or entity, except that I may transfer the Shares to an individual
retirement account (the "IRA") that satisfies the following requirements: (i)
The IRA will be self-directed solely by me; and (ii) I will be the sole
beneficiary of the IRA. By its acceptance of this subscription, the Fund
consents to the transfer of the Shares to
<PAGE>
my IRA. I agree that the IRA will be bound by all provisions of this agreement,
including, but not limited to, the restrictions upon further transfer.
C. I represent that I am acquiring the Shares for investment purposes and
without a view to distribution thereof. I agree that all certificates, if any,
evidencing ownership of the Shares will bear substantially the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933. The securities
have been acquired without a view to distribution and may
not be offered, sold, transferred, pledged or hypothecated
in the absence of an effective registration statement for
the securities under the Act and under any applicable state
securities laws, or an opinion of counsel to the Fund that
registration is not required as to such sale or offer. The
Fund's transfer agent has been ordered to effectuate
transfers of this certificate only in accordance with the
above instruction.
D. I understand and agree that the Fund's transfer agent will be instructed
not to transfer the Shares (except to the IRA) without an opinion of counsel to
the Fund that such transfer does not violate any applicable securities laws.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Subscription Agreement and Investor Representations as of June 29, 1992.
By VAL E. JENSEN
--------------------------------------
Val E. Jensen
2
<PAGE>
ACCEPTANCE BY THE FUND:
The above Subscription Agreement is accepted by the Fund as of June 29,
1992 and called for payment in accordance with its terms.
THE JENSEN PORTFOLIO, INC.
By VAL E. JENSEN
--------------------------------------
Val E. Jensen, President
3
THE
JENSEN PORTFOLIO
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
<PAGE>
THE JENSEN PORTFOLIO
Instructions
Before you invest, please read the enclosed Disclosure Statement and Custodial
Agreement, and the Prospectus for The Jensen Portfolio.
OPENING AN IRA:
1) Fill in all the information required on the enclosed IRA Custodial Account
Application (A through D).
2) See prospectus for instructions on wiring funds.
3) Send completed application in the envelope provided to:
The Jensen Portfolio
430 Pioneer Tower
888 SW Fifth Avenue
Portland, Oregon 97204-2018
A confirmation verifying your IRA investment will be mailed to you in a week to
ten days.
IRA TRANSFERS:
To transfer an existing IRA from a current custodian or trustee to The
Jensen Portfolio, use the transfer form enclosed. Be sure to fill in all the
information required. Return the form intact with the IRA Custodial Account
Application and we will handle the transfer for you. If for some reason the
current custodian sends you a check for the money in your account, you should
forward that check to the Firstar Trust Company within 60 days to avoid any tax
liability. This last type of transaction is permitted only once every twelve
months. PLEASE NOTE THAT MOST CUSTODIANS WILL REQUIRE THAT YOUR SIGNATURE BE
GUARANTEED BY A COMMERCIAL BANK OR A MEMBER OF THE NEW YORK STOCK EXCHANGE.
QUESTIONS:
If you need further assistance in answering questions pertaining to The
Jensen Portfolio IRA, please call us at (503) 274-2044 or write to:
The Jensen Portfolio IRA
430 Pioneer Tower
888 SW Fifth Avenue
Portland, Oregon 97204-2018
We recommend that you consult your lawyer, accountant, or personal tax
advisor regarding questions on tax and legal implications.
<PAGE>
THE JENSEN PORTFOLIO
IRA CUSTODIAL ACCOUNT APPLICATION
[ ] New IRA Account [ ] Spousal IRA Account [ ] New SEP Account
PLEASE CHECK OR FILL IN INFORMATION REQUIRED.
A. TOTAL AMOUNT OF CONTRIBUTION: $ ___________________
This should be applied to:
[ ] Tax Year _______________
[ ] Roll Over (you maintained constructive receipt of assets
from IRA or Pension/Profit Sharing distribution for less
than 60 days).
[ ] Direct Transfer From Prior Custodian.
B. GENERAL INFORMATION (Please Print Clearly)
The following information must be completed prior to opening an account.
---------------------------------------------------------------------------
name
---------------------------------------------------------------------------
street address city state zip
---------------------------------------------------------------------------
date of birth social security number daytime phone
C. BENEFICIARY DESIGNATION
Hereby revoking all prior designations, I designate as my beneficiary(ies) under
The Jensen Portfolio IRA Custodial Account the following person(s):
PRIMARY BENEFICIARY
---------------------------------------------------------------------------
name relationship birthdate address
SECONDARY BENEFICIARY
---------------------------------------------------------------------------
name relationship birthdate address
I retain the right to revoke this Designation and to designate a new beneficiary
or beneficiaries at any time by communicating to the Firstar Trust Company in
writing similarly executed. I understand that if no designated beneficiary
survives me, then in accordance with the Custodial Agreement, any benefits due
upon my death shall be paid to my spouse, if living; or if none, then in equal
shares to my surviving children and to the descendants then living of a deceased
child by right of representation; or if none, then to my estate.
D. DEPOSITOR'S STATEMENT
I attest that I have read the form 5305-A Custodial Agreement and the Disclosure
Statement and that I meet the eligibility requirements for the type of account I
am establishing. I understand and agree to be governed by the provisions of the
Custodial Agreement and this Application, and understand that I alone am
responsible for ascertaining the deductibility and tax consequences of any
contribution and/or withdrawal to or from my account. I hereby authorize Firstar
Trust Company to act as custodian of my shares of The Jensen Portfolio.
---------------------------------------------------------------------------
dated signature
E. ACCEPTANCE BY CUSTODIAN
This application is hereby accepted by the Custodian, Firstar Trust Company.
---------------------------------------------------------------------------
dated signature
<PAGE>
_________________________
| |
| the JENSEN |
| PORTFOLIO |
|_________________________|
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
Please read the following information together with the Individual Retirement
Account Custodial Agreement and the Prospectus(es) for the fund(s) you select
for investment of your IRA contributions.
You may revoke this account any time within seven calendar days after it is
established by mailing or delivering a written request for revocation to: The
Jensen Portfolio, c/o Firstar Trust Company, 615 East Michigan Street, Third
Floor, Milwaukee, Wisconsin 53202, Attention: Mutual Fund Department. If your
revocation is mailed, the date of the postmark (or the date of certification if
sent by certified or registered mail) will be considered your revocation date.
Upon proper revocation, you will receive a full refund of your initial
contribution, without any adjustments for items such as administrative fees or
fluctuations in market value.
1. General: Your IRA is a custodial account created for your exclusive
benefit, and Firstar Trust Company serves as custodian. Your interest in
the account is nonforfeitable.
2. Investments: Contributions made to your IRA will be invested in one or more
of the regulated investment companies for which Jensen Investment
Management serves as investment advisor or any other regulated investment
company designated by Jensen Investment Management. No part of your account
may be invested in life insurance contracts; further, the assets of your
account may not be commingled with other property
3. Eligibility: Employees and self-employed individuals are eligible to
contribute to an IRA. Employers may also contribute to employer-sponsored
IRAs established for the benefit of their employees. You may also establish
an IRA to receive rollover contributions and transfers from another IRA
custodian or trustee or from certain other retirement plans.
4. Time of Contribution: You may make regular contributions to your IRA any
time up to and including the due date for filing your tax return for the
year, not including extensions. You may continue to make regular
contributions to your IRA up to (but not including) the calendar year in
which you reach age 70 1/2. Employer contributions to a SEP-IRA plan may be
continued after you attain the age 70 1/2. Rollover contributions and
transfers may be made at any time, including after you reach age 70 1/2.
5. Amount of Contribution: You may make annual regular contributions to an IRA
in any amount up to 100% of your compensation for the year or $2,000,
whichever is less. Qualifying rollover contributions and transfers are not
subject to this limitation. In addition, if you are married and file a
joint return, you may make contributions to your spouse's IRA. However, the
maximum amount contributed to both your own and to your spouse's IRA may
not exceed 100% of your combined compensation or $4,000, whichever is less.
Moreover, the annual
1
<PAGE>
contribution to either your account or your spouse's account may not exceed
$2,000. Note that a different rule for spousal IRAs applied for tax years
beginning before January 1, 1997.
6. Rollovers and Transfers: You are allowed to "roll over" a distribution or
transfer your assets from one individual retirement account to another
without any tax liability. Rollovers between IRAs may be made once per year
and must be accomplished within 60 days after the distribution. Also, under
certain conditions, you may roll over (tax-free) all or a portion of a
distribution received from a qualified plan or tax-sheltered annuity in
which you participate or in which your deceased spouse participated.
However, strict limitations apply to such rollovers, and you should seek
competent advice in order to comply with all of the rules governing
rollovers.
Most distributions from qualified retirement plans will be subject to a 20%
withholding requirement. The 20% withholding can be avoided by directly
transferring the amount of the distribution to an individual retirement
account or to certain other types of retirement plans. You should receive
more information regarding these new withholding rules and whether your
distribution can be transferred to an IRA from the plan administrator prior
to receiving your distribution.
7. Tax Deductibility of Annual Contributions: Although you may make an IRA
contribution within the limitations described above, all or a portion of
your contribution may be nondeductible. No deduction is allowed for a
rollover contribution or transfer. If you are not married and are not an
"active participant" in an employer-sponsored retirement plan, you may make
a fully deductible IRA contribution in any amount up to $2,000 or 100% of
your compensation for the year, whichever is less. The same limits apply if
you are married and file a joint return with your spouse and neither you
nor your spouse is an "active participant" in an employer-sponsored
retirement plan.
An employer-sponsored retirement plan includes any of the following types
of retirement plans:
-- a qualified pension, profit-sharing, or stock bonus plan established
in accordance with IRC 401(a) or 401(k),
-- a Simplified Employee Pension Plan (SEP) (IRC 408(k)),
-- a deferred compensation plan maintained by a governmental unit or
agency,
-- tax-sheltered annuities and custodial accounts (IRC 403(b) and
403(b)(7),
-- a qualified annuity plan under IRC Section 403(a),
-- a Savings Incentive Match Plan for Employees of Small Employers
(SIMPLE Plan).
Generally, you are considered an "active participant" in a defined
contribution plan if an employer contribution or forfeiture was credited to
your account during the year. You are considered an "active participant" in
a defined benefit plan if you are eligible
2
<PAGE>
to participate in a plan, even though you elect not to participate. You are
also treated as an "active participant" if you make a voluntary or
mandatory contribution to any type of plan, even if your employer makes no
contribution to the plan.
If you (or your spouse, if filing a joint tax return) are covered by an
employer-sponsored retirement plan, your IRA contribution is fully
deductible if your adjusted gross income (or combined income if you file a
joint tax return) does not exceed certain limits. For this purpose, your
adjusted gross income (1) is determined without regard to the exclusions
from income arising under Section 135 (exclusion of certain savings bond
interest), 137 (exclusion of certain employer provided adoption expenses)
and 911 (certain exclusions applicable to U.S. citizens or residents living
abroad) of the Code, (2) is not reduced for any deduction that you may be
entitled to for IRA contributions, and (3) takes into account the passive
loss limitations under Section 469 of the Code and any taxable benefits
under the Social Security Act and Railroad Retirement Act as determined in
accordance with Section 86 of the Code.
If you (or your spouse, if filing a joint return) are covered by an
employer-sponsored retirement plan, the deduction for your IRA contribution
is reduced proportionately for adjusted gross income which exceeds the
applicable dollar amount. The applicable dollar amount for an individual is
$25,000 and $40,000 for married couples filing a joint tax return. The
applicable dollar limit for married individuals filing separate returns is
$0. If your adjusted gross income exceeds the applicable dollar amount by
$10,000 or less, you may make a deductible IRA contribution. The deductible
amount, however, will be less than $2,000.
To determine the amount of your deductible contribution, use the following
calculations:
a) Subtract the applicable dollar amount from your adjusted gross income.
If the result is $10,000 or more, you can only make a nondeductible
contribution to your IRA.
b) Divide the above figure by $10,000, and multiply that percentage by
$2,000.
c) Subtract the dollar amount (result from #2 above) from $2,000 to
determine the amount that is deductible.
If the deduction limit is not a multiple of $10 then it should be rounded
up to the next $10. There is a $200 minimum floor on the deduction limit if
your adjusted gross income does not exceed $35,000 (for a single taxpayer),
$50,000 (for married taxpayers filing jointly), or $10,000 (for a married
taxpayer filing separately).
Even if your income exceeds the limits described above, you may make a
contribution to your IRA up to the contribution limitations described in
Section 5 above. To the extent that your contribution exceeds the
deductible limits, it will be nondeductible. However, earnings on all IRA
contributions are tax deferred until distribution.
8. Excess Contributions: Contributions that exceed the allowable maximum for
federal income tax purposes are treated as excess contributions. A
nondeductible
3
<PAGE>
penalty tax of 6% of the excess amount contributed will be added to your
income tax for each year in which the excess contribution remains in your
account.
9. Correction of Excess Contribution: If you make a contribution in excess of
your allowable maximum, you may correct the excess contribution and avoid
the 6% penalty tax for that year by withdrawing the excess contribution and
its earnings on or before the date, including extensions, for filing your
tax return. Any earnings on the withdrawn excess contribution will be
taxable in the year the excess contribution was made and may be subject to
a 10% early distribution penalty tax if you are under age 59 1/2. In
addition, in certain cases an excess contribution may be withdrawn after
the time for filing your tax return. Finally, excess contributions for one
year may be carried forward and applied against the contribution limitation
in succeeding years.
10. Simplified Employee Pension Plan: An IRA may also be used in connection
with a Simplified Employee Pension Plan established by your employer (or by
you if you are self-employed.) Your employer (or you if self-employed) may
contribute to the IRA of each eligible participant up to a maximum of 15
percent of compensation or $30,000, whichever is less. In addition, if your
SEP Plan as in effect on December 31, 1996 permitted salary reduction
contributions, you may also elect to have your employer make salary
reduction contributions of up to $9,500 per year. (The $9,500 limit applies
for 1997 and is adjusted periodically for cost of living increases.)
Certain lower limits may apply for highly compensated participants. In any
event, the combination of your employer's contributions and your salary
reduction contributions (if your SEP Plan is eligible) may not exceed the
lesser of 15 percent of compensation or $30,000. A number of special rules
apply to SEP/IRA, including a requirement that contributions be made on
behalf of all employees of the employer who satisfy certain minimum
participation requirements. It is your responsibility and that of your
employer to see that contributions in excess of normal IRA limits are made
under and in accordance with a valid SEP Plan.
11. Savings and Incentive Match Plan for Employees of Small Employers
("SIMPLE"): An IRA may also be used in connection with a SIMPLE Plan
established by your employer (or by you if you are self-employed). Under a
SIMPLE Plan, you may elect to have your employer make salary reduction
contributions of up to $6,000 per year to your SIMPLE IRA. The $6,000 limit
applies for 1997 and is adjusted periodically for cost of living increases.
In addition, your employer will contribute certain amounts to your SIMPLE
IRA, either as a matching contribution to those participants who make
salary reduction contributions or as a non-elective contribution to all
eligible participants whether or not making salary reduction contributions.
A number of special rules apply to SIMPLE Plans, including (1) a SIMPLE
Plan generally is available only to employers with fewer than 100
employees, (2) contributions must be made on behalf of all employees of the
employer (other than bargaining unit employees) who satisfy certain minimum
participation requirements, (3) contributions are made to a special SIMPLE
IRA that is separate and apart from your other IRAs, (4) if you withdraw
from your SIMPLE IRA during the 2 year period during which
4
<PAGE>
you first began participation in the SIMPLE Plan, the early distribution
excise tax (if otherwise applicable) is increased to 25 percent; and (5)
during this two year period, any amount withdrawn may be rolled over
tax-free only into another SIMPLE IRA (and not to a "regular" IRA). It is
your responsibility and that of your employer to see that contributions in
excess of normal IRA limits are made under and in accordance with a valid
SIMPLE Plan.
12. Form of Distributions: Distributions may be made in any one of three
methods:
a) a lump-sum distribution,
b) installments over a period not extending beyond your life expectancy
(as determined by actuarial tables), or
c) installments over a period not extending beyond the joint life
expectancy of you and your designated beneficiary (as determined by
actuarial tables).
You may also use your account balance to purchase an annuity contract, in
which case your custodial account will terminate.
13. Latest Time To Withdraw: You must begin receiving the assets in your
account no later than April 1 following the calendar year in which you
reach age 70 1/2(your "required beginning date"). In general, the minimum
amount that must be distributed each year is equal to the amount obtained
by dividing the balance in your IRA on the last day of the prior year (or
the last day of the year prior to the year in which you attain age 70 1/2)
by your life expectancy, the joint life expectancy of you and your
beneficiary, or the specified payment term, whichever is applicable. A
federal tax penalty may be imposed against you if the required minimum
distribution is not made for the year you reach age 70 1/2and for each year
thereafter. The penalty is equal to 50% of the amount by which the actual
distribution is less than the required minimum.
Unless you or your spouse elects otherwise, your life expectancy and/or the
life expectancy of your spouse will be recalculated annually. An election
not to recalculate life expectancy(ies) is irrevocable and will apply to
all subsequent years. The life expectancy of a nonspouse beneficiary may
not be recalculated.
If you have two or more IRAs, you may satisfy the minimum distribution
requirements by receiving a distribution from one of your IRAs in an amount
sufficient to satisfy the minimum distribution requirements for your other
IRAs. You must still calculate the required minimum distribution separately
for each IRA, but then such amounts may be totaled and the total
distribution taken from one or more of your individual IRAs.
Distribution from your IRA must satisfy the special "incidental death
benefit" rules of the Internal Revenue Code. These provisions set forth
certain limitations on the joint life expectancy of you and your
beneficiary. If your beneficiary is not your spouse, your beneficiary will
be generally considered to be no more than 10 years younger than you for
the purpose of calculating the minimum amount that must be distributed.
5
<PAGE>
14. Distribution of Account Assets after Death: If you die before receiving the
balance of your account, distribution of your remaining account balance is
subject to several special rules. If you die on or after your required
beginning date, distribution must continue in a method at least as rapid as
under the method of distribution in effect at your death. If you die before
your required beginning date, your remaining interest will, at the election
of your beneficiary or beneficiaries, (i) be distributed by December 31 of
the year in which occurs the fifth anniversary of your death, or (ii)
commence to be distributed by December 31 of the year following your death
over a period not exceeding the life or life expectancy of your designated
beneficiary or beneficiaries.
Two additional distribution options are available if your spouse is the
beneficiary: (i) payments to your spouse may commence as late as December
31 of the year you would have attained age 70 1/2 and be distributed over a
period not exceeding the life or life expectancy of your spouse, or (ii)
your spouse can simply elect to treat your IRA as his or her own, in which
case distributions will be required to commence by April 1 following the
calendar year in which the surviving spouse attains age 70 1/2.
15. Tax Treatment of Distributions: Amounts distributed to you are generally
includable in your gross income in the taxable year you receive them and
are taxable as ordinary income. To the extent, however, that any part of a
distribution constitutes a return of your nondeductible contributions, it
will not be included in your income. The amount of any distribution
excludable from income is the portion that bears the same ratio as your
aggregate nondeductible contributions bear to the balance of your IRA at
the end of the year (calculated after adding back distributions during the
year). For this purpose, all of your IRAs are treated as a single IRA.
Furthermore, all distributions from an IRA during a taxable year are to be
treated as one distribution. The aggregate amount of distributions
excludable from income for all years cannot exceed the aggregate
nondeductible contributions for all calendar years.
No distribution to you or anyone else from your account can qualify for
capital gains treatment under the federal income tax laws. Similarly, you
are not entitled to the special five- or ten-year averaging rule for
lump-sum distributions available to persons receiving distributions from
certain other types of retirement plans. All distributions are to be taxed
to the recipient as ordinary income except the portion of a distribution
which represents a return of nondeductible contributions. The tax on excess
distributions (but not the additional estate tax payable with respect to
excess accumulations) under Section 4980A of the Code does not apply with
respect to distributions made in 1997, 1998 and 1999.
Any distribution, which is properly rolled over, will not be includable in
your gross income.
16. Early Distributions: Distributions from your IRA made before age 59 1/2will
be subject to a 10% nondeductible penalty tax unless the distribution is a
return of nondeductible contributions or is made because of your death,
disability, as part
6
<PAGE>
of a series of substantially equal periodic payments over your life
expectancy or the joint life expectancy of you and your beneficiary, or the
distribution is made for medical expenses in excess of 7.5% of adjusted
gross income, is made for reimbursement of medical premiums while you are
unemployed, or is an exempt withdrawal of an excess contribution. The
penalty tax may also be avoided if the distribution is rolled over to
another individual retirement account. See paragraph 11 above for special
rules applicable to distributions from a SIMPLE IRA.
17. Qualification of Plan: Your Individual Retirement Account Plan has been
approved as to form by the Internal Revenue Service. The Internal Revenue
Service approval is a determination only as to the form of the Plan and
does not represent a determination of the merits of the Plan as adopted by
you. You may obtain further information with respect to your Individual
Retirement Account from any district office of the Internal Revenue
Service.
18. Prohibited Transactions: If any of the following events occur during the
existence of your IRA, your account will be disqualified, and the entire
balance in your account will be treated as if distributed to you and will
be taxable to you as ordinary income during the year in which such event
occurs:
a) the sale, exchange, or leasing of any property between you and your
account,
b) the lending of money or other extensions of credit between you and
your account,
c) the furnishing of goods, services, or facilities between you and your
account.
If you are under age 59 1/2, you may also be subject to the 10% tax on
early distributions.
19. Penalty for Pledging Account:If you use (pledge) all or part of your IRA as
security for a loan, then the portion so pledged will be treated as if
distributed to you and will be taxable to you as ordinary income during the
year in which you make such pledge. The 10% penalty tax on early
distributions may also apply.
20. Reporting for Tax Purposes: Deductible contributions to your IRA may be
claimed as a deduction on your IRS form 1040 for the taxable year
contributed. If any nondeductible contributions are made by you during a
tax year, such amounts must be reported on Form 8606 and attached to your
Federal Income Tax Return for the year contributed. If you report a
nondeductible contribution to your IRA and do not make the contribution,
you will be subject to a $100 penalty for each overstatement unless a
reasonable cause is shown for not contributing. Other reporting will be
required by you in the event that special taxes or penalties described
herein are due. You must also file Treasury Form 5329 with the IRS for each
taxable year in which the contribution limits are exceeded, a premature
distribution takes place, or less than the required minimum amount is
distributed from your IRA.
7
<PAGE>
21. Allocation of Earnings: The method of computing and allocating annual
earnings is set forth in Article IX, Section 1 of the Individual Account
Custodial Agreement. The growth in value of your IRA is neither guaranteed
or projected.
22. Income Tax Withholding: You must indicate on distribution requests whether
or not federal income taxes should be withheld. Redemption request not
indicating an election not to have federal income tax withheld will be
subject to withholding.
23. Other Information: Information about the shares of each mutual fund
available for investment by your IRA must be furnished to you in the form
of a prospectus governed by the rules of the Securities and Exchange
Commission. Please refer to the prospectus for detailed information
concerning your mutual fund. You may obtain further information concerning
IRAs from any District Office of the Internal Revenue Service.
Fees and other expenses of maintaining your account may be charged to you
or your account. The Custodian's fee schedule is listed below.
Firstar Trust Company
Mutual Fund IRA Custodial Fee Schedule
(Billed to Investors)
IRA Accounts
------------
Annual Maintenance Fee per Account $12.50
Transfer to Successor Trustee $15.00
Distribution to a Participant $15.00
(Exclusive of systematic withdrawal plans)
Refund of Excess Contribution $15.00
Any Outgoing Wire $10.00
August 31, 1998
8
<PAGE>
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing an Individual Retirement
Account (under Section 408(a) of the Internal Revenue Code) between the
Depositor and the Custodian.
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in Section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in Section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in Section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within
the meaning of Section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401(a)(9)-2, the provisions of which are herein incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under Paragraph 3, or to the surviving spouse under Paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually.
1
<PAGE>
Such election shall be irrevocable as to the Depositor and the surviving
spouse and shall apply to all subsequent years. The life expectancy of a
nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date, April 1
following the calendar year end in which the Depositor reaches age 70 1/2.
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
a) A single sum payment.
b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
Paragraph 3.
b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have turned age 70 1/2.
2
<PAGE>
c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
Paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designed
beneficiary as of their birthdays in the year the Depositor reaches age 70
1/2. In the case of a distribution in accordance with Paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under Section 408(i) and
Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles, which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) and related
regulations will be invalid.
3
<PAGE>
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
ARTICLE VIII
1. Investment of Account Assets:
a) All contributions to the custodial account shall be invested in shares
of the Jensen Portfolio or other regulated investment companies for
which Jensen Investment Management serves as investment advisor or
designates as being eligible for investment ("Investment Company").
Shares of stock of an Investment Company shall be referred to as
"Investment Company Shares." To the extent that two or more funds are
available for investment, contributions shall be invested in
accordance with the Depositor's investment election.
b) Each contribution to the custodial account shall identify the
Depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The Custodian may
return to the Depositor, without liability for interest thereon, any
contribution which is not accompanied by adequate account
identification or an appropriate signed statement directing investment
of that contribution.
c) Contributions shall be invested in whole and fractional Investment
Company Shares at the price and in the manner such shares are offered
to the public. All distributions received on Investment Company
Shares, including both dividends and capital gains distributions, held
in the custodial account shall be reinvested in like shares. If any
distribution of Investment Company Shares may be received in
additional like shares or in cash or other property, the Custodian
shall elect to receive such distribution in additional like Investment
Company Shares.
d) All Investment Company Shares acquired by the Custodian shall be
registered in the name of the Custodian or its nominee. The Depositor
shall be the beneficial owner of all Investment Company Shares held in
the custodial account and the Custodian shall not vote any such
shares, except upon written direction of the Depositor, timely
received, in a form acceptable to the Custodian. The Custodian agrees
to forward to the Depositor each prospectus, report, notice, proxy and
related proxy soliciting materials applicable to Investment Company
Shares held in the custodial account received by the Custodian.
4
<PAGE>
e) The Depositor may, at any time, by written notice to the Custodian, in
a form acceptable to the Custodian, redeem any number of shares held
in the custodial account and reinvest the proceeds in the shares of
any other Investment Company upon the terms and within the limitations
imposed by the then current prospectus of such other Investment
Company in which the Depositor elects to invest. By giving such
instructions, the Depositor will be deemed to have acknowledged
receipt of such prospectus. Such redemptions and reinvestments shall
be done at the price and in the manner such shares are then being
redeemed or offered by the respective Investment Company.
2. Amendment and Termination:
a) Jensen Investment Management, the investment advisor for The Jensen
Portfolio, may amend the Custodial Account (including retroactive
amendments) by delivering to the Custodian and to the Depositor
written notice of such amendment setting forth the substance and
effective date of the amendment. The Custodian and the Depositor shall
be deemed to have consented to any such amendment not objected to in
writing by the Custodian or Depositor, as applicable, within thirty
(30) days of receipt of the notice, provided that no amendment shall
cause or permit any part of the assets of the custodial account to be
diverted to purposes other than for the exclusive benefit of the
Depositor or his or her beneficiaries.
b) The Depositor may terminate the custodial account at any time by
delivering to the Custodian a written notice of such termination.
c) The custodial account shall automatically terminate upon distribution
to the Depositor or his or her beneficiaries of its entire balance.
3. Taxes and Custodial Fees: Any income taxes or other taxes levied or
assessed upon or in respect of the assets or income of the custodial
account and any transfer taxes incurred shall be paid from the custodial
account. All administrative expenses incurred by the Custodian in the
performance of its duties, including fees for legal services rendered to
the Custodian in connection with the custodial account, and the Custodian's
compensation shall be paid from the custodial account, unless otherwise
paid by the Depositor or his or her beneficiaries. Sufficient shares shall
be liquidated from the custodial account to pay such fees and expenses.
The Custodian's fees are set forth in a schedule provided to the Depositor.
Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of
5
<PAGE>
Investment Company Shares will be deducted from the refund or redemption
proceeds and the remaining balance will be remitted to the Depositor, or
reinvested or transferred in accordance with the Depositor's instructions.
4. Reports and Notices:
a) The Custodian shall keep adequate records of transactions it is
required to perform hereunder. After the close of each calendar year,
the Custodian shall provide to the Depositor or his or her legal
representative a written report or reports reflecting the transactions
effected by it during such year and the assets and liabilities of the
Custodial Account at the close of the year.
b) All communications or notices shall be deemed to be given upon receipt
by the Custodian at Post Office Box 701, Milwaukee, Wisconsin
53201-0701 or the Depositor at his most recent address shown in the
Custodian's records. The Depositor agrees to advise the Custodian
promptly, in writing, of any change of address.
5. Designation of Beneficiary:
The Depositor may designate a beneficiary or beneficiaries to receive
benefits from the custodial account in the event of the Depositor's death.
In the event the Depositor has not designated a beneficiary, or if all
beneficiaries shall predecease the Depositor, the following persons shall
take in the order named:
a) The spouse of the Depositor;
b) If the spouse shall predecease the Depositor or if the Depositor does
not have a spouse, then to the Depositor's estate.
The Depositor may also change or revoke any previously made designation of
beneficiary. Any designation or change or revocation of a designation shall
be made by written notice in a form acceptable to and filed with the
Custodian, prior to the complete distribution of the balance in the
custodial account. The last such designation on file at the time of the
Depositor's death shall govern. If a beneficiary dies after the Depositor,
but prior to receiving his or her entire interest in the custodial account,
the remaining interest in the custodial account shall be paid to the
beneficiary's estate.
6. Multiple Individual Retirement Accounts: In the event the Depositor
maintains more than one individual retirement account (as defined in
Section 408(a)) and elects to satisfy his or her minimum distribution
requirements described in Article IV above by making a distribution for
another individual retirement account in accordance with Paragraph 6
thereof, the Depositor shall be deemed to have elected to calculate the
amount of his or her minimum distribution under this
6
<PAGE>
custodial account in the same manner as under the individual retirement
account from which the distribution is made.
7. Inalienability of Benefits: Neither the benefits provided under this
custodial account nor the assets held therein shall be subject to
alienation, assignment, garnishment, attachment, execution or levy of any
kind and any attempt to cause such benefits or assets to be so subjected
shall not be recognized except to the extent as may be required by law.
8. Rollover Contributions and Transfers: The Custodian shall have the right to
receive rollover contributions and to receive direct transfers from other
custodians or trustees. All contributions must be made in cash or check.
9. Conflict in Provisions: To the extent that any provisions of this Article
VIII shall conflict with the provisions of Articles IV, V and/or VII, the
provisions of this Article VIII shall govern.
10. Applicable State Law: This custodial account shall be construed,
administered and enforced according to the laws of the State of Wisconsin.
11. Resignation or Removal of Custodian: The Custodian may resign at any time
upon thirty (30) days notice in writing to the Investment Company. Upon
such resignation, the Investment Company shall notify the Depositor, and
shall appoint a successor custodian under this Agreement. The Depositor or
the Investment Company at any time may remove the Custodian upon 30 days
written notice to that effect in a form acceptable to and filed with the
Custodian. Such notice must include designation of a successor custodian.
The successor custodian shall satisfy the requirements of section 408(h) of
the Code. Upon receipt by the Custodian of written acceptance of such
appointment by the successor custodian, the Custodian shall transfer and
pay over to such successor the assets of and records relating to the
Custodial Account. The Custodian is authorized, however, to reserve such
sum of money as it may deem advisable for payment of all its fees,
compensation, costs and expenses, or for payment of any other liability
constituting a charge on or against the assets of the Custodial Account or
on or against the Custodian, and where necessary may liquidate shares in
the Custodial Account for such payments. Any balance of such reserve
remaining after the payment of all such items shall be paid over to the
successor Custodian. The Custodian shall not be liable for the acts or
omissions of any predecessor or successor custodian or trustee.
12. Limitation on Custodian Responsibility: The Custodian will not under any
circumstances be responsible for the timing, purpose or propriety of any
contribution or of any distribution made hereunder, nor shall the Custodian
incur any liability or responsibility for any tax imposed on account of any
such contribution or distribution. Further, the Custodian shall not incur
any liability or responsibility in taking or omitting to take any action
based on any notice,
7
<PAGE>
election, or instruction or any written instrument believed by the
Custodian to be genuine and to have been properly executed. The Custodian
shall be under no duty of inquiry with respect to any such notice,
election, instruction, or written instrument, but in its discretion may
request any tax waivers, proof of signatures or other evidence which it
reasonably deems necessary for its protection. The Depositor and the
successors of the Depositor including any executor or administrator of the
Depositor shall, to the extent permitted by law, indemnify the Custodian
and its successors and assigns against any and all claims, actions or
liabilities of the Custodian to the Depositor or the successors or
beneficiaries of the Depositor whatsoever (including without limitation all
reasonable expenses incurred in defending against or settlement of such
claims, actions or liabilities) which may arise in connection with this
Agreement or the Custodial Account, except those due to the Custodian's own
bad faith, gross negligence or willful misconduct. The Custodial shall not
be under any duty to take any action not specified in this Agreement,
unless the Depositor shall furnish it with instructions in proper form and
such instructions shall have been specifically agreed to by the Custodian,
or to defend or engage in any suit with respect hereto unless it shall have
first agreed in writing to do so and shall have been fully indemnified to
its satisfaction.
August 31, 1998
8
EXHIBIT (16)
THE JENSEN PORTFOLIO, INC.
Schedule for Computation of Performance Quotations
Total Return
For the period from August 3, 1992 (commencement of operations)
to May 31, 1998
Average annual total return = 11.21%
T~=~NROOT n {ERV over P}~ -1
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning
of the period
P = hypothetical initial payment
T~=~NROOT {5.8274} {{1,858.11067} over {1,000}}~ -1
T = 11.21%
<PAGE>
THE JENSEN PORTFOLIO, INC.
Schedule for Computation of Performance Quotations
Total Return
For the fiscal year ended May 31, 1998
Total return = 18.28%
T~=~NROOT n {ERV over P}~ -1
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning
of the period
P = hypothetical initial payment
T~=~NROOT 1 {{1,858.11067} over {1,570.94372}}~ -1
T = 18.28%
[ARTICLE] 6
[CIK] 0000887215
[NAME] THE JENSEN PORTFOLIO, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAY-31-1998
[PERIOD-START] JUN-01-1997
[PERIOD-END] MAY-31-1998
[INVESTMENTS-AT-COST] 13,156,341
[INVESTMENTS-AT-VALUE] 19,932,030
[RECEIVABLES] 14,108
[ASSETS-OTHER] 871
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 19,947,009
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 46,636
[TOTAL-LIABILITIES] 46,636
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 13,215,364
[SHARES-COMMON-STOCK] 1,179,441
[SHARES-COMMON-PRIOR] 981,993
[ACCUMULATED-NII-CURRENT] 12,485
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (103,165)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 6,775,689
[NET-ASSETS] 19,900,373
[DIVIDEND-INCOME] 392,597
[INTEREST-INCOME] 37,911
[OTHER-INCOME] 0
[EXPENSES-NET] 179,271
[NET-INVESTMENT-INCOME] 251,237
[REALIZED-GAINS-CURRENT] 592,609
[APPREC-INCREASE-CURRENT] 1,930,938
[NET-CHANGE-FROM-OPS] 2,774,784
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 250,304
[DISTRIBUTIONS-OF-GAINS] 404,704
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 245,342
[NUMBER-OF-SHARES-REDEEMED] 77,187
[SHARES-REINVESTED] 29,293
[NET-CHANGE-IN-ASSETS] 5,389,286
[ACCUMULATED-NII-PRIOR] 9,098
[ACCUMULATED-GAINS-PRIOR] (291,069)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 87,402
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 179,271
[AVERAGE-NET-ASSETS] 17,506,916
[PER-SHARE-NAV-BEGIN] 14.78
[PER-SHARE-NII] 0.23
[PER-SHARE-GAIN-APPREC] 2.46
[PER-SHARE-DIVIDEND] 0.23
[PER-SHARE-DISTRIBUTIONS] 0.37
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 16.87
[EXPENSE-RATIO] 1.02
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
EXHIBIT 99
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each officer or director whose
signature appears on the following page constitutes and appoints Val E. Jensen
his true and lawful attorney and agent, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney and agent full power and authority to do
any and all acts and things necessary or advisable to be done, as fully and to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney and agent, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Portland and state of Oregon on the 20th day of
April, 1992.
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 the 20th day of April, 1992 by
the following persons in the capacities indicated.
(1) Principal Executive Officer:
VAL E. JENSEN President and Director
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Val E. Jensen
(2) Principal Accounting and Financial Officer:
MARK C. JENSEN Secretary and Director
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Mark C. Jensen
(3) Directors:
VAL E. JENSEN Director
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Val E. Jensen
GARY W. HIBLER Director
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Gary W. Hibler
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MARK C. JENSEN Director
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Mark C. Jensen
LOUIS B. PERRY Director
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Louis B. Perry
NORMAN W. ACHEN Director
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Norman W. Achen
