Semi-Annual Report
(THE JENSEN PORTFOLIO LOGO)
SEMI-ANNUAL REPORT
NOVEMBER 30, 2000
THE JENSEN PORTFOLIO
LETTER FROM THE INVESTMENT ADVISER
Dear Fellow Shareholders:
This report covers The Jensen Portfolio's activities for the first six months
of our fiscal year ending May 31, 2001. First on the agenda is to welcome our
new shareholders. Your presence is also beneficial to existing shareholders
since the additional assets reduce the per share expenses incurred in operating
the Portfolio.
In addition, the Portfolio's owners represent more of a national presence
than just six months ago. Each state in the union can create their own set of
qualifications, and most are specific to each state. All require licensing fees,
as well. At any rate, the Portfolio is now available in 22 states with 23 more
states pending, up from just 8 at the end of May, 2000. Primarily due to
investment performance and the increasing number of shareholders, the Portfolio
grew from $30.5 million to $38.6 million, a 27 percent increase during the semi-
annual period.
For those shareholders unfamiliar with the investment strategy the Portfolio
employs, our goal is to retain companies in the portfolio for at least ten
years--longer with good fortune. That is because, over the long term, we have
complete confidence that the market will accurately value companies. Even if our
analysis of the value of the companies held in the Portfolio is only
approximately correct, we believe that owning shares of the Portfolio will
provide adequate rates of return. Nonetheless, the world of business combined
with the gyrations of the stock market has its sudden twists and turns. Our goal
for the long term is to own companies whose products are now and will continue
to be in constant demand. If that is true, the businesses themselves should
provide consistent results. That said, the twists and turns of the stock market
cannot be expected to provide similarly consistent returns in the short term.
As investment managers, we are more concerned about how the companies held in
the Portfolio are maintaining their competitive advantages, rather than trying
to identify companies that are out of sync with the market. Nonetheless, we will
remember the market of the year 2000 as being unnecessarily influenced by
synthetic securities. Investors were passionate about the dot.coms, synthetic
because they were largely fleeting visions rather than companies that had any
characteristics of successful businesses, such as positive cash flows and
competitive advantages, in the profitable sense of that word. More than the
dot.coms, however, was the acceptance of other synthetic securities by the
investing public.
Index funds, basket of stocks, puts and calls and tracking stocks are all
part of the synthetic package. Some have time lines, often expiring within three
months, that forces another transaction and increases volatility. Rather than
own assets directly, many investors are satisfied owning a proxy on those assets
because proxies leverage the gain (or loss). The Portfolio's strategy is
grounded in the belief that directly owning shares in outstanding companies will
provide superior performance over time and that outperforming the market in the
short term necessitates a huge amount of good fortune.
Thus, the Portfolio is a collection of businesses that, in the opinion of its
managers, would be wonderful to own even if there were no markets. It has been a
longstanding principle of the Portfolio that shareholders will be advised of the
businesses the Portfolio owns upon their request.
One final comment about synthetic securities is that because of the element
of time, most synthetic securities make the market more volatile. Living in
volatile markets without anxiety, in our opinion, is best accomplished by
considering the nature of companies with strong competitive advantages. These
businesses do not change all that much from year to year and most of that change
is amazingly consistent. Being satisfied with that type of business performance
helps investors ignore the vagaries of the stock market.
In closing, we are pleased to announce the return of the Portfolio for the
six-month period ending November 30, 2000 was a positive 6.97 percent versus a
negative 6.92 percent for the S&P 500.
Sincerely,
/s/Val Jensen
Val Jensen, Chairman
Jensen Investment Management, Inc.
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 2000 (UNAUDITED)
ASSETS:
Investments, at value (cost $23,707,599) $38,708,974
Income receivable 28,781
Other assets 15,181
-----------
TOTAL ASSETS 38,752,936
-----------
LIABILITIES:
Payable to Investment Adviser 15,874
Payable to directors 1,180
Payable for securities purchased 91,027
Accrued expenses 21,597
-----------
TOTAL LIABILITIES 129,678
-----------
NET ASSETS $38,623,258
-----------
-----------
NET ASSETS CONSIST OF:
Capital stock 23,877,671
Unrealized appreciation on
investments 15,001,375
Accumulated undistributed net
investment income 27,403
Accumulated undistributed net
realized loss (283,191)
-----------
TOTAL NET ASSETS $38,623,258
-----------
-----------
NET ASSET VALUE PER SHARE, 1,669,740
SHARES OUTSTANDING (100,000,000 SHARES
AUTHORIZED, $.001 PAR VALUE) $23.13
------
------
See notes to financial statements.
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 2000 (UNAUDITED)
Number of Shares Market Value
---------------- ------------
COMMON STOCK 96.23%
ADVERTISING 3.26%
16,000 Omnicom Group Inc. $ 1,258,000
-----------
BANKS 5.51%
16,500 State Street Corporation 2,128,500
-----------
BEVERAGES 3.08%
19,000 The Coca-Cola Company 1,189,875
-----------
COMPUTER SOFTWARE SERVICES 13.93%
22,000 Adobe Systems
Incorporated 1,394,250
34,000 Automatic Data
Processing, Inc. #<F1> 2,244,000
30,000 Paychex, Inc. 1,743,750
-----------
5,382,000
-----------
COMPUTERS & PERIPHERALS 2.13%
70,000 American Power Conversion
Corporation #<F1> 822,500
-----------
DRUGS 3.70%
15,400 Merck & Co., Inc. 1,427,388
-----------
ELECTRICAL EQUIPMENT 1.54%
12,000 General Electric Company 594,750
-----------
FOOD PROCESSING 4.97%
80,000 Sara Lee Corporation 1,920,000
-----------
HOUSEHOLD PRODUCTS 11.09%
54,000 The Clorox Company 2,413,125
25,000 The Proctor & Gamble
Company 1,871,875
-----------
4,285,000
-----------
INDUSTRIAL SERVICES 5.60%
65,000 Equifax Inc. 2,161,250
-----------
MEDICAL SUPPLIES 15.92%
43,000 Abbott Laboratories 2,367,687
36,000 Medtronic, Inc. 1,917,000
35,000 Stryker Corporation 1,865,938
-----------
6,150,625
-----------
NEWSPAPERS 4.17%
30,000 Gannett Co., Inc. 1,608,750
-----------
OFFICE EQUIPMENT 2.17%
20,000 Zebra Technologies
Corporation #<F1> 837,500
-----------
PRECISION INSTRUMENTS 3.50%
45,000 Dionex Corporation #<F1> 1,352,812
-----------
SEMICONDUCTORS 4.93%
50,000 Intel Corporation 1,903,125
-----------
THRIFT INDUSTRY 10.73%
23,000 Fannie Mae 1,817,000
38,500 Freddie Mac 2,326,844
-----------
4,143,844
-----------
Total Common Stock
(Cost $22,164,544) 37,165,919
-----------
Principal Amount Market Value
---------------- ------------
SHORT-TERM INVESTMENTS 3.99%
VARIABLE RATE DEMAND NOTES*<F2> 3.99%
$1,033,551 Firstar Bank, N.A.,
6.37% 1,033,551
475,354 Sara Lee Corporation,
6.22% 475,354
24,374 Wisconsin Corporate Central
Credit Union, 6.29% 24,374
9,776 Wisconsin Electric Power
Company, 6.25% 9,776
-----------
Total Short-Term Investments
(Cost $1,543,055) 1,543,055
-----------
Total Investments 100.22%
(Cost $23,707,599) 38,708,974
-----------
Liabilities, Less
Other Assets (0.22)% (85,716)
-----------
NET ASSETS 100.00% $38,623,258
-----------
-----------
#<F1> Non income producing security.
*<F2> Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified
dates. The rates are as of November 30, 2000.
See notes to financial statements.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 2000 (UNAUDITED)
INVESTMENT INCOME:
Dividend income $ 166,229
Interest income 50,641
----------
216,870
----------
EXPENSES:
Investment advisory fees 84,244
Administration fees 12,627
Shareholder servicing and accounting 19,032
Custody fees 2,745
Federal and state registration fees 1,281
Professional fees 23,973
Reports to shareholders 2,196
Directors' fees and expenses 8,601
----------
Total expenses 154,699
----------
NET INVESTMENT INCOME 62,171
----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on investment
transactions (289,898)
Change in unrealized appreciation
on investments 2,623,720
----------
Net gain on investments 2,333,822
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $2,395,993
----------
----------
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
NOV. 30, '00 MAY 31, '00
------------ -----------
(UNAUDITED)
OPERATIONS:
Net investment income $ 62,171 $ 81,009
Net realized gain (loss) on
investment transactions (289,898) 4,292,483
Change in unrealized
appreciation on
investments 2,623,720 2,201,549
----------- -----------
Net increase in net assets
resulting from operations 2,395,993 6,575,041
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 6,572,925 3,319,403
Shares issued to holders in
reinvestment of dividends 434,413 1,634,263
Shares redeemed (389,172) (2,445,615)
----------- -----------
Net increase 6,618,166 2,508,051
----------- -----------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income (72,959) (42,818)
From net realized gains (843,009) (3,058,051)
----------- -----------
Total dividends and
distributions (915,968) (3,100,869)
----------- -----------
INCREASE
IN NET ASSETS 8,098,191 5,982,223
NET ASSETS:
Beginning of period 30,525,067 24,542,844
----------- -----------
End of period (including
undistributed net investment
income of $27,403 and
$38,191, respectively) $38,623,258 $30,525,067
----------- -----------
----------- -----------
See notes to financial statements.
FINANCIAL HIGHLIGHTS
<TABLE>
SIX MONTHS
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
Per Share Data: NOV. 30, '00 MAY 31, '00 MAY 31, '99 MAY 31, '98 MAY 31, '97 MAY 31, '96
------------ ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $22.25 $19.42 $16.87 $14.78 $12.16 $9.94
Income from investment operations:
Net investment income 0.04 0.06 0.05 0.23 0.10 0.15
Net realized and unrealized
gains on investments 1.46 5.30 2.56 2.46 2.63 2.23
------ ------ ------ ------ ------ ------
Total from investment
operations 1.50 5.36 2.61 2.69 2.73 2.38
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income (0.05) (0.03) (0.05) (0.23) (0.10) (0.15)
Distribution in excess of net
investment income -- -- (0.01) -- (0.01) (0.01)
From net realized gains (0.57) (2.50) -- (0.37) -- --
------ ------ ------ ------ ------ ------
(0.62) (2.53) (0.06) (0.60) (0.11) (0.16)
------ ------ ------ ------ ------ ------
Net asset value,
end of period $23.13 $22.25 $19.42 $16.87 $14.78 $12.16
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Total return(1)<F3> 6.97% 27.65% 15.51% 18.28% 22.56% 24.14%
Supplemental data and ratios:
Net assets,
end of period $38,623,258 $30,525,067 $24,542,844 $19,900,373 $14,511,087 $11,257,030
Ratio of expenses to
average net assets(2)<F4> 0.92% 0.94% 0.96% 1.02% 1.32% 1.20%
Ratio of net investment income
to average net assets(2)<F4> 0.37% 0.31% 0.27% 1.44% 0.61% 1.23%
Portfolio turnover rate 2.13% 32.35% 13.87% 20.80% 24.50% 47.93%
</TABLE>
(1)<F3> Not annualized for the six months ended November 30, 2000.
(2)<F4> Annualized for the six months ended November 30, 2000. Without expense
waivers or voluntary reimbursements of $4,043 for the year ended May
31, 1997 and $30,062 for the year ended May 31, 1996 the ratio of
expenses to average net assets would have been 1.35% and 1.49%,
respectively, and the ratio of net income to average net assets would
have been 0.58% and 0.94%, respectively. For the six months ended
November 30, 2000 and the years ended May 31, 2000, May 31, 1999 and
May 31, 1998 the ratio of expenses to average net assets was less than
the annual expense limit.
See notes to financial statements.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 2000 (UNAUDITED)
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.
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 six months ended November 30, 2000. 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 to shareholders are recorded on
ex-dividend date. 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. 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 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:
SIX MONTHS
ENDED YEAR ENDED
NOV. 30, '00 MAY 31, '00
------------ -----------
Shares sold 294,816 152,314
Shares issued to holders in
reinvestment of dividends 20,305 73,465
Shares redeemed (17,098) (117,824)
--------- ---------
Net increase 298,023 107,955
Shares outstanding:
Beginning of period 1,371,717 1,263,762
--------- ---------
End of period 1,669,740 1,371,717
--------- ---------
--------- ---------
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, by the Fund for the six months ended November 30, 2000, were
$6,742,911 and $686,539, respectively.
At November 30, 2000, gross unrealized appreciation and depreciation of
investments were as follows:
Appreciation $16,258,118
(Depreciation) (1,256,743)
-----------
Net appreciation on
investments $15,001,375
-----------
-----------
At November 30, 2000, the cost of investments for federal income tax purposes
was $23,707,599.
4. INVESTMENT ADVISORY ANDOTHER
AGREEMENTS
The Fund has entered into an Investment Advisory and Service Contract with
Jensen Investment Management, Inc. Pursuant to its advisory agreement with the
Fund, the Investment Adviser is entitled to receive a fee,
calculated daily and payable monthly, at the annual
rate of 0.50% as applied to the Fund's daily net assets.
Certain officers and directors of the Fund are also officers and directors of
the Investment Adviser.
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%
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. SUBSEQUENT EVENTS
On December 22, 2000 an ordinary income dividend of $.02462817 per share
aggregating $42,839 was declared. The distribution was paid on December 22, 2000
to shareholders of record on December 21, 2000.
2130 Pacwest Center
1211 SW Fifth Avenue
Portland, OR 97204-3721
(JENSEN INVESTMENT MANAGEMENT LOGO)
503-274-2044
800-221-4384
Fax 503-274-2031
