File No. 33-34411
File No. 811-06096
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON APRIL 30, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
REGISTATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 6 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 9 [x]
------------------
THE TORRAY FUND
(Exact Name of Registrant as Specified in Charter)
6610 Rockledge Drive, Bethesda, Maryland 20817
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(301)493-4600
William M Lane, President
The Torray Fund
6610 Rockledge Drive, Bethesda, Maryland 20817
(Name and Address of Agent for Service)
Copies of communications to:
John H. Grady, Jr., Esquire
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
Immediately upon filing pursuant to paragraph (b), or
x On April 30, 1996 pursuant to paragraph (b), or
60 days after filing pursuant to paragraph (a), or
On [date] pursuant to paragraph (a) of Rule 485.
DECLARATION PURSUANT TO RULE 24f-2: Pursuant to Rule 24f-2 under the Investment
Company Act of 1940 the Registrant has registered an indefinite number of shares
of beneficial interest under the Securities Act of 1933. The Rule 24f-2 Notice
for the Registrant's fiscal year ended December 31, 1995 was filed on February
29, 1996.
<PAGE>
THE TORRAY FUND
6610 ROCKLEDGE DRIVE, BETHESDA, MARYLAND 20817
The Torray Fund (the "Fund") is a no load, open-end, diversified
management investment company that seeks to achieve a long-term total return
consistent with prudent investment management. The Torray Corporation serves as
administrator and investment advisor to, and transfer agent for, the Fund.
This Prospectus concisely describes the information which investors
should know before investing. Please read this Prospectus carefully and keep it
for future reference. A Statement of Additional Information dated April 30, 1996
(the "Statement") is available free of charge by writing to The Torray
Corporation, 6610 Rockledge Drive, Bethesda, Maryland 20817, or by telephoning
1-(301)-493-4600 or toll free at 1-(800)-443-3036. The Statement, which contains
more detailed information about the Fund, has been filed with the Securities and
Exchange Commission and is incorporated by reference in this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The Date of this Prospectus is April 30, 1996
<PAGE>
TABLE OF CONTENTS
page
SCHEDULE OF FEES...................................3
FINANCIAL HIGHLIGHTS...............................4
INVESTMENT OBJECTIVE AND POLICIES..................5
GENERAL POLICIES................................ 11
PERFORMANCE INFORMATION......................... 12
HOW TO BUY SHARES............................... 13
HOW TO REDEEM................................... 14
HOW NET ASSET VALUE IS DETERMINED............... 15
DISTRIBUTIONS................................... 16
FEDERAL INCOME TAXES............................ 16
MANAGEMENT OF THE FUND.......................... 17
ORGANIZATION AND CAPITALIZATION OF THE FUND..... 19
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY
THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
-2-
<PAGE>
SCHEDULE OF FEES
The expenses of the Fund are set forth in the following table, the form
of which is prescribed by federal securities laws and regulations.
SHAREHOLDER TRANSACTION EXPENSES
There are no shareholder transaction expenses such as sales loads,
12b-1, or exchange fees.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.00%
Other Expenses (After Expense Reimbursement) (1) .25%
-----
Total Fund Operating Expenses (After Expense Reimbursement)
(1)(2)(3) 1.25%
- --------------------
(1) These amounts reflect the Manager's guarantee that, for the foreseeable
future, the Fund's Total Operating Expenses will not exceed 1.25%.
Absent the Manager's guarantee, which was in effect during the prior
fiscal year, Other Expenses would have been 0.75%, and Total Operating
Expenses would have been 1.75%, based on average net assets for the
Fund's fiscal year ended December 31, 1995.
(2) Redemption proceeds wired to a designated account at a shareholder's
request for amounts less than $10,000 will be reduced by a wire
redemption fee (currently $10.00). Certain institutional clients will
not be charged this wire redemption fee.
(3) If you purchase Fund shares through a discount brokerage firm or other
financial institution, there may be fees or commissions charged by them
for shareholder transactions.
The purpose of this table is to assist prospective shareholders in understanding
the various costs and expenses of the Fund that reduce the amount of income
available for distribution to shareholders.
EXAMPLE: You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return, and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$13 $40 $69 $151
NOTE: The figures shown in the examples are entirely hypothetical, and reflect
the Manager's guarantee that, for the foreseeable future, the Fund's Total
Operating Expenses will not exceed 1.25%. They are not representations of past
or future performance or expenses; actual performance and/or expenses may be
more or less than shown.
-3-
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information with respect to the
per-share data and ratios for The Torray Fund for the periods indicated, which
have been derived from financial statements audited by Johnson Lambert & Co.,
independent public accountants for the Fund, whose report thereon is included in
the Statement of Additional Information.
<TABLE>
<CAPTION>
==================================================================================================================================
PER SHARE DATA($) YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD
$13.755 $14.273 $13.743 $11.514 $ 9.999 $10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 0.215 0.213 0.122 0.180 0.232 0.005
Net Gains on Securities
(both realized and unrealized) 6.674 0.130 0.745 2.229 1.728 0.000
Total from Investment Operations 6.889 0.343 0.867 2.409 1.960 0.005
Less Distributions
Dividends (from Net Investment Income) (0.214) (0.213) (0.122) (0.180) (0.233) (0.006)
Distributions (from Capital Gains) (0.320) (0.648) (0.215) 0.0000 (0.212) 0.0000
Total Distributions (0.534) (0.861) (0.337) (0.180) (0.445) (0.006)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $20.110 $13.755 $14.273 $13.743 $11.514 $ 9.999
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3 50.41% 2.41% 6.37% 21.04% 19.98% (0.03%)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $50,744 $23,362 $19,666 $10,298 $ 4,423 $ 200
Ratio of Expenses to Average Net Assets 1.25% 1.25% 1.25% 1.25% 1.25% 0.82% 1
Ratio of Net Income to Average Net
Assets 1.31% 1.51% 0.94% 1.54% 2.43% 2.15% 1
Portfolio Turnover Rate 22.56% 36.63% 29.09% 37.09% 21.17% n/a 2
Average Actual Commissions Paid Per share 4 $0.0813 n/a n/a n/a n/a n/a
====================================================================================================================================
</TABLE>
1 Annualized.
2 Not applicable. During the period December 18, 1990 (commencement of
operations) through December 31, 1990, the Fund invested only in short
term investments which are excluded from the calculation of this ratio.
3 Past performance is not predictive of future performance.
4 Does not include spreads on shares traded on a principal basis.
-4-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's objective is to achieve a long-term total return consistent
with prudent investment management by investing in a diversified portfolio of
common stocks, securities convertible into common stocks, corporate bonds, U.S.
Government securities and other fixed-income instruments. The Fund seeks to
achieve its objective primarily through investment in equity and fixed-income
securities of established companies incorporated in the United States that are
believed by The Torray Corporation (the "Manager") to be undervalued compared
with other companies in the marketplace. The Fund may also invest in equity and
fixed-income securities issued by less-established domestic companies (including
securities issued pursuant to an initial public offering) where the Manager
believes that such securities represent an attractive investment opportunity for
the Fund. At the discretion of the Manager, the percentage of the Fund's assets
invested in equity and fixed-income instruments will vary in accordance with the
Manager's view of economic conditions, the general level of stock prices and
interest rates, and other considerations deemed to be relevant by the Manager.
There can be no assurance that the Fund's objective will be achieved.
Equity Securities
The Fund's Manager uses a variety of analyses in formulating decisions
involving the purchase or sale of equity securities, including common stocks,
preferred stocks, securities convertible into common stocks and securities
issued by real estate investment trusts. The Fund seeks to invest in equity
securities of companies which are believed to represent investment opportunity
because their market values are significantly below the Manager's assessment of
their intrinsic value. While there are many causes for the undervaluation of
-5-
<PAGE>
securities, those most commonly associated with issues the Manager intends to
focus on include: substantial declines in the price of all financial assets, a
condition most typically associated with adverse general economic conditions;
mediocre or even adverse industry operating conditions which are deemed by the
Manager to be temporary; earnings prospects (both near- and long-term)
considered by the financial community to be negative or lackluster; unfavorable
legislative or regulatory developments; misperception by the investment
community of facts pertinent to an industry or specific company; and simple lack
of investor interest due to an aura of dullness.
Factors which are considered relative to each investment in order to
guard against permanent impairment of value include, but are not restricted to:
a company's financial leverage (relatively low debt levels favored); its
long-range history of profitability, with particular emphasis on performance
during periods of adverse operating conditions; its relative industry position;
its current security price in relation to historical price range (low end of
range emphasized); and perceived management capability.
Investors should be aware that the predominant characteristic of the
Manager's investment approach is to adopt positions which are frequently at odds
with popular opinion in the financial community. It is the Manager's view that
the primary risk involved in its approach is that the expectations of the
majority will prove correct and, therefore, the realization of profit will be
seriously delayed or unfulfilled thus producing a low return for certain time
periods; or, in the alternative, that a particular security, or any number of
securities, will remain depressed or even fall to new low levels producing a
loss. The Fund generally does not intend to adopt temporary defensive strategies
during unfavorable market
-6-
<PAGE>
conditions; however, if in the opinion of the Manager, suitable equity,
convertible or fixed-income securities are not available, then the fund may
invest in high-grade, short-term debt securities. On balance, however, the
Manager believes that a diversified list of issues already deflated in price,
researched and selected with an emphasis on financial staying power, tends to be
relatively resistant to further serious and permanent depreciation; and further,
it is the Manager's opinion that such a list also may be characterized as having
significant recovery potential.
Convertible Securities
Convertible securities, which include bonds and notes and preferred
stocks that can be converted into common stock, combine the fixed-income
characteristics of bonds with the potential for capital appreciation. These
securities are generally convertible at either a stated price or a stated rate.
As a fixed-income security, a convertible issue tends to increase in market
value when interest rates decline and to decrease in value when interest rates
rise. While convertible securities generally offer lower interest or dividend
yields than non-convertible debt securities of similar quality, their value
tends to increase as the market value of the underlying stock increases and to
decrease when the value of the underlying stock decreases, although any such
increase or decrease will not ordinarily occur at the same rate of change. The
Manager selects convertible securities to be purchased by the Fund based
primarily upon its evaluation of the fundamental investment merits of the equity
security for which the convertible issue may be exchanged.
-7-
<PAGE>
The Fund invests primarily in convertible securities that are investment
grade; that is, rated Baa or higher by Moody's, or BBB or higher by S&P, or, if
unrated, are judged by the Manager to be of comparable quality. The Fund may
also invest up to 5 percent of its assets in convertible securities rated Ba or
B by Moody's or BB or B by S&P. (Securities rated Ba or B by Moody's or BB or B
by S&P are sometimes called "junk bonds" and are collectively referred to herein
as "High-Yield Securities"). Moody's, S&P, and the staff of the Securities and
Exchange Commission believe that securities rated Baa or BBB, while of
investment grade, may have speculative characteristics with respect to the
issuer's capacity to pay interest and repay principal, and are subject to some
of the risks associated with High-Yield Securities. (See "Investment Objective
and Policies -- Risk Factors: High-Yield Securities" in the Statement).
It is not the Fund's intention to dispose of a convertible security
solely because its rating drops below B.
Corporate Fixed-Income Securities
Fixed-income securities are subject to market risk and credit risk.
Market risk relates to changes in a security's value as a result of changes in
interest rates. Credit risk relates to the ability of the issuer to make
payments of both principal and interest. Investments by the Fund in lower
quality fixed-income securities will generally provide greater income than
investments in higher rated securities, but such investments are subject to
greater market fluctuations and risks of loss of income and principal than
higher rated securities.
-8-
<PAGE>
In purchasing corporate fixed-income securities, the Fund invests
principally in securities that are, at the time of purchase, of investment grade
quality; that is, they are rated Baa or better by Moody's or BBB or better by
S&P or, if unrated, determined by the Manager to be of comparable quality. The
Fund may also invest up to 5 percent of its net assets in fixed-income
High-Yield Securities, the risks of which are comparable to those of similarly
rated Convertible Securities. (See "Investment Objective and Policies -- Risk
Factors: High-Yield Securities" in the Statement).
The time to maturity of individual investments and the average,
dollar-weighted maturity of all fixed-income instruments held by the Fund
reflect the Manager's judgment as to the most attractive relative yields.
Fluctuations in the value of fixed-income portfolio securities do not affect
interest income on such securities available for distribution to Fund
shareholders, but are reflected in the Fund's net asset value. It is not the
Fund's intention to dispose of a fixed-income security solely because its rating
drops below B.
U.S. Government Securities
The Fund may purchase securities issued by the U.S. Government or its
agencies and instrumentalities ("U.S. Government Securities"). These instruments
include U.S. Treasury bills, notes and bonds, mortgage participation
certificates guaranteed by the Government National Mortgage Association ("Ginnie
Mae") and Federal Housing Administration debentures, which are supported by the
full faith and credit of the United States. Other U.S. Government Securities are
supported by the discretionary authority of the U.S. Government to purchase the
issuers' obligations (e.g., obligations of the Federal National Mortgage
-9-
<PAGE>
Association); others by the right of the issuer to borrow from the United States
Treasury (e.g., obligations of Federal Home Loan Banks); while still others are
supported only by the credit of the agency, authority or instrumentality itself
(e.g., obligations of the Tennessee Valley Authority, the Bank For Cooperatives
and the Federal Home Loan Mortgage Corporation). If the Fund purchases
mortgage-backed securities at a discount or a premium and mortgages in the
underlying pool are prepaid, the Fund will recognize a gain or loss (generally
capital in nature) when the prepayment of principal is passed through the Fund.
U.S. Government Securities do not ordinarily involve the level of credit
risk associated with investments in other types of fixed-income securities,
although, as a result, the yields available from U.S. Government Securities are
generally lower than the yields available from otherwise comparable corporate
fixed-income securities. Like other fixed-income securities, however, the values
of U.S. Government Securities change as interest rates fluctuate.
High-Grade, Short-Term Debt Instruments
The Fund may also invest in the following high-grade, U.S.
dollar-denominated, short-term debt instruments: certificates of deposit and
bankers' acceptances issued by FDIC-insured banks having deposits in excess of
$2 billion; commercial paper which is either issued by companies having an
outstanding debt issue rated at least "A" by S&P or Moody's, or which is rated
"A-2" or better by S&P or Prime-2 or better by Moody's; and short-term corporate
obligations that are rated at least "A" by Moody's or S&P, or, if not rated, of
comparable quality as determined by the Manager pursuant to guidelines
established by the Board of Trustees.
-10-
<PAGE>
GENERAL POLICIES
Warrants
The Fund may purchase warrants or may acquire warrants in connection
with its acquisition of an equity or fixed-income security. Warrants, which
entitle the holder to buy equity securities at a specific price for a specified
period of time, may be attached or unattached.
Repurchase Agreements
The Fund may, with respect to up to 25 percent of its net assets, enter
into repurchase agreements with banks and broker-dealers under which the Fund
acquires a security (usually a U.S. Government Security) for cash and obtains a
simultaneous commitment from the seller to repurchase the security at an
agreed-upon price and date. The resale price is in excess of the acquisition
price and reflects the agreed-upon market rate unrelated to the coupon rate on
the purchased security. Such transactions afford an opportunity for the Fund to
earn a return on temporarily available cash at no market risk, although there is
a risk that the seller may default on its obligation to pay the agreed-upon sum
at the re-delivery date. Such a default may subject the Fund to expenses, delays
and risks of loss.
-11-
<PAGE>
Portfolio Turnover
While the Fund does not intend to engage in short term trading,
portfolio turnover is not a limiting factor with respect to investment
decisions. For the fiscal years ended December 31, 1995, 1994, and 1993, the
Fund's portfolio turnover rates were 22.56%, 36.63%, and 29.09%, respectively.
The investment objective and policies described in this Prospectus may
be changed without shareholder approval.
PERFORMANCE INFORMATION
From time to time, the Fund may make available certain information about
its performance. Information about the Fund's performance is based on the Fund's
historical record and is not intended to indicate future performance. When the
Fund makes available its Total Return, it will be calculated on an annualized
basis for specified periods of time, and may be calculated for the period since
the start of the Fund's operations. Total Return is measured by comparing the
value of an investment in the Fund at the beginning of the relevant period to
the redemption value of the investment at the end of the time period (assuming
reinvestment of any dividends or capital gains distributions).
When the Fund makes available its Yield, the Yield will be computed by
dividing the net investment income per share earned during a recent thirty day
period by the net asset value of a Fund share (reduced by any investment income
expected to be paid shortly as a
-12-
<PAGE>
dividend by the Fund) on the last day of the period. Such calculations shall be
made in compliance with Securities and Exchange Commission guidelines.
Additional performance information is set forth in the Annual Report dated
December 31, 1995 and is available upon request and without charge by calling
(301) 493-4600 or toll free 1-(800)-443-3036.
HOW TO BUY SHARES
Shares of the Fund are continuously offered at net asset value, and
there are no sales charges on purchases of Fund shares. The minimum initial
investment is $10,000, and the minimum additional investment is $2,500. Orders
for the purchase of shares of the Fund are executed at the net asset value
determined as of the next Valuation Time after receipt by the Fund and the
shares will be eligible to receive dividends beginning the following day. The
Fund reserves the right to reject any order for the purchase of its shares in
whole or in part. (See "How Net Asset Value is Determined").
Shares of the Fund may be purchased by sending a check payable to "The
Torray Fund" (together with a completed Application, in the case of an initial
investment) to the Fund's Transfer Agent, The Torray Corporation, at:
6610 Rockledge Drive
Suite 450
Bethesda, Maryland 20817
The Fund is also available through Charles Schwab & Co., Inc. ("Schwab")
and certain other institutions and brokerage firms. If you place your order
through Schwab or another broker-dealer, you may be charged a fee for their
services. No such charge will be paid by an investor who purchases Fund shares
directly from the Fund as described above. If you are
-13-
<PAGE>
interested in investing your IRA account in the Fund, you will have to establish
an IRA Rollover account through Schwab or another broker-dealer or bank. Please
call The Torray Corporation at (301) 493-4600 or toll-free 1-800-443-3036 for
further information.
HOW TO REDEEM
Shares may be redeemed in writing or, for shareholders who elect this
privilege, by telephone. To redeem shares in writing, submit a written
redemption request directly to the Fund's Transfer Agent, The Torray
Corporation, 6610 Rockledge Drive, Suite 450, Bethesda, Maryland 20817. If the
shareholder is a corporation, partnership, agent, fiduciary or surviving joint
owner, additional documentation of a customary nature may be required. Where a
shareholder has chosen the telephone redemption option, shares may be redeemed
by telephone by calling The Torray Corporation at (301) 493-4600 or toll-free
1-800-443-3036.
The Fund, through its Transfer Agent, has established procedures
designed to confirm the authenticity of telephonic instructions, which
procedures include requiring callers to establish their personal identity and
limiting the mailing of telephone redemption proceeds to the address or bank
account set forth on the Account Application. Investors should understand that
the Fund is not liable for acting upon instructions communicated by telephone
that it reasonably believes to be genuine. Redemption proceeds wired to a
designated account at a shareholder's request for amounts less than $10,000 will
be reduced by a wire transfer fee (currently $10.00). Certain institutional
clients will not be charged this wire redemption fee. Changes to the designated
address or bank account must be made in writing and may be required to be
accompanied by a signature guarantee from an eligible guarantor.
-14-
<PAGE>
Shares are redeemed at their net asset value next determined after a
redemption request in good order has been received by the Fund's Transfer Agent,
The Torray Corporation. A request is deemed to be in good order if it has been
signed by the account holder and is accompanied, where necessary, by a signature
guarantee. Redemption proceeds will be mailed or wired to the redeeming
shareholder within seven days, except where those shares have recently been
purchased by personal check. In those cases, redemption proceeds may be withheld
until the check has been collected, which may take up to fifteen days. To avoid
such withholding, investors would purchase shares by certified or bank check.
The Fund reserves the right to redeem, at net asset value, the shares of
any shareholder if, because of redemptions by the shareholder, the account of
such shareholder has a value of less than $10,000. Before the Fund exercises its
right to redeem such shares, the shareholder will be given written notice of the
proposed redemption and will be allowed 30 days to make an additional investment
in an amount which will increase the value of the account to at least $10,000.
HOW NET ASSET VALUE IS DETERMINED
The net asset value per share of the Fund is determined once each day
that the New York Stock Exchange is open (a "Business Day"), as of the close of
the Exchange ("Valuation Time"). Portfolio securities for which market
quotations are readily available are valued at market value. Short-term
obligations having remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value. All other securities and assets
are valued at their fair value as determined in good faith by the Trustees or by
persons acting
-15-
<PAGE>
at their direction pursuant to guidelines established by the Trustees.
Liabilities are deducted from the total, and the resulting amount is divided by
the number of shares outstanding to produce the "net asset value" per share.
DISTRIBUTIONS
The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"), for as long as such
qualification is in the best interests of its shareholders. In keeping with Code
requirements regarding regulated investment companies, the Fund pays out as
dividends substantially all of its net investment income (which comes from
dividends and interest it receives from its investments) and net realized
capital gains.
All dividends and/or distributions will be reinvested in shares of the
Fund, at net asset value, unless the shareholder elects to receive cash. The
Fund declares and pays dividends out of investment income quarterly, and
distributes net realized capital gains annually. Dividends and capital gains
distributions may be declared more or less frequently at the discretion of the
Trustees.
FEDERAL INCOME TAXES
Dividends and short-term capital gains distributions of the Fund are
taxable to shareholders as ordinary income. Distributions of any long-term
capital gains are taxable to shareholders as such, regardless of how long a
shareholder may have owned shares in the
-16-
<PAGE>
Fund. Dividends derived from interest on U.S. Government Securities may be
exempt from state and local taxes, but shareholders should consult their tax
advisors as to the possible application of state and local income tax laws to
Fund dividends and capital gain distributions.
In order to avoid a 4% excise tax on undistributed income, the Code
requires the Fund to distribute prior to calendar year end virtually all the
ordinary income of the Fund on a calendar year basis, and to distribute
virtually all of the capital gain net income realized in the one-year period
ending each December 31 and not previously distributed.
Distributions will be taxable whether received in cash or in shares
through the reinvestment of distributions. A dividend paid to a shareholder by
the Fund in January of a year generally is deemed to have paid by the Fund and
received by shareholders on December 31 of the preceding year, if the dividend
was declared and payable to shareholders of record on a date in October,
November or December of that preceding year. The Fund will provide federal tax
information annually, including information about dividends and distributions
paid during the preceding year.
MANAGEMENT OF THE FUND
The Fund is managed by The Torray Corporation, 6610 Rockledge Drive,
Suite 450, Bethesda, Maryland 20817 (the "Manager"), which provides investment
advisory and portfolio management services pursuant to a Management Agreement
dated November 16, 1990. The Manager also provides executive and other personnel
for management of the Fund. Pursuant to the Fund's Agreement and Declaration of
Trust, the Trustees supervise the affairs of the
-17-
<PAGE>
Fund as conducted by the Manager. The Manager was formed in 1990 to serve as the
investment advisor to the Fund. Robert E. Torray, President of the Manager and
Portfolio Manager of the Fund, owns approximately 61% of the outstanding voting
securities of the Manager, has over 31 years of investment experience. Mr.
Torray also owns 100 percent of the outstanding voting securities of Robert E.
Torray & Co., Inc., a registered investment advisor which has been in the
investment advisory business for 24 years.
For investment advisory and management services provided to the Fund,
the Manager receives a fee, computed daily and payable quarterly, at the annual
rate of one percent of the Fund's daily net assets. This fee is higher than the
fee paid by most investment companies. In addition to the advisory fee, the Fund
pays all expenses associated with its operations. For the foreseeable future,
the Manager guarantees that the overall expense ratio for the Fund, which
excludes ordinary brokerage commissions incurred in the purchase or sale of
portfolio securities, will not exceed 1.25%. While the Manager's guarantee to
assume a portion of the expenses of the Fund is in effect, the Fund's
performance will be enhanced. The Manager received 1.00% of the Fund's average
daily net assets for the fiscal year ended December 31, 1995.
The Fund's total operating expenses for the fiscal years ended December
31, 1995, December 31, 1994, and December 31, 1993 were 1.25%, 1.25%, and 1.25%
of average net assets, respectively.
-18-
<PAGE>
ORGANIZATION AND CAPITALIZATION OF THE FUND
The Fund was established in 1990 as a business trust under Massachusetts
law. The Fund has an unlimited authorized number of shares of beneficial
interest which may, without shareholder approval, be divided into an unlimited
number of series of such shares. These shares are entitled to vote at any
meetings of shareholders. Shares are freely transferable, are entitled to
dividends as declared by the Trustees, and, in liquidation of the Fund, are
entitled to receive the net assets of the Fund. The Fund does not generally hold
annual meetings of shareholders and will do so only when required by law.
Shareholders may remove Trustees from office by votes cast in person or by proxy
at a meeting of shareholders or by written consent. The Manager controls the
word "Torray" in the Fund's name and, if it should cease to be the Fund's
investment advisor, the Fund may be required to change its name.
-19-
<PAGE>
NEW ACCOUNT INSTRUCTIONS: THE TORRAY FUND ("FUND")
Please call the Fund at (301) 493-4600 or toll free at 1-(800)-443-3036 if you
have any questions while filling out this application.
1 Type of Account. An account can be
registered as only one of the following:
[bullet] individual |
|
|
[bullet] joint tenants | Supply the Social
| Security number
|
[bullet] a custodial |__ of the registered
account under the| account owner
Uniform Gifts or | who is to be
Uniform Transfers| taxed.
to Minors Act |
|
[bullet] a trust (i.e., |
retirement plans)|
|
| Supply the Tax-
| payer Identifica-
| tion number of
[bullet] a corporation | the legal entity
partnership, |__ or organization
organization, | that will report
fiduciary, etc. | income and/or
| gains.
|
|
|
Please check the box in Section 1 that corresponds with the type of account you
are opening and fill in the required information exactly as you wish it to
appear on the account.
TRADING AUTHORIZATION. If you desire to have a party(s) other than the
registered account owner have access to your account(s) or transact business on
your account(s), you must file a Trading Authorization with The Torray
Corporation ("Torray"). Other parties may include spouses, relatives, business
officers, trust officers, financial planners, tax advisors, etc. Call Torray to
ask for a "Trading Authorization."
CORPORATE/TRUST RESOLUTION. Corporations are required to furnish a Corporate
Resolution. Trusts are required to furnish a Trust Resolution.
Trusts, fiduciaries, partnerships, and other business entities may be required
to furnish other documentation (e.g., a "Trust Authorization") to authorize
redemptions. Call Torray to ask for the appropriate documentation.
2 YOUR MAILING ADDRESS. Please complete all information in Section 2 requested
as it is required to open your account.
3 YOUR INITIAL INVESTMENT. The amount of your check(s) must meet the minimum
$10,000 initial investment.
4 RECEIVING YOUR DIVIDENDS AND CAPITAL GAINS. Dividends and capital gains
distributions will be automatically paid in Fund shares unless the Shareholder
elects to receive distributions by check by marking the box in Section 4.
5 TELEPHONE REDEMPTIONS. If you elect telephone redemptions, Torray will be
authorized to act upon telephone instructions from you, or from any person
authorized to act on your behalf, without a signature guarantee, to redeem
shares of the Fund in accordance with the terms of the Fund's Prospectus and
Statement of Additional Information as in effect from time to time. In electing
this feature, you also agree that the Fund and Torray shall not have any
liability for acting upon instructions which they reasonably believe to be
genuine.
6 YOUR SIGNATURE(S). Please be sure to sign
this application. If the account is registered in
the name of:
[bullet] an individual, the individual should sign
[bullet] joint tenants, both should sign
[bullet] a trustee or other fiduciary, the fiduciary(s) must sign and indicate
capacity (If you are establishing a trust account and want to authorize
redemptions, you must file a "Trust Resolution" with Torray as
stipulated in Section 1 under "Trust Resolution.")
[bullet] a corporation or other organization, an officer must sign and indicate
capacity. (If you are establishing a corporate account and want to
authorize redemptions, you must file a "Corporate Resolution" with
Torray as stipulated in Section 1 under "Corporate Resolution.")
Torray Fund Application
Page 1
<PAGE>
NEW ACCOUNT APPLICATION: THE TORRAY FUND For further information,
contact the Fund at (301)
493-4600 or toll free at
1-(800)-443-3036. Mail your
completed application to: The
Torray Corporation, 6610
Rockledge Drive, Suite 450,
Bethesda, Maryland 20817.
<TABLE>
<CAPTION>
Gift/Transfer Trust (i.e., Corporation,
Partnership
<S> <C> <C> <C> <C> <C>
1 Type of (bullet) Individual (bullet) Joint Tenants (bullet) to a Minor (bullet) retirement plans) (bullet) or Other Entity
Account Complete A Complete A Complete Complete D Complete E
(check one) only B only C only only only
</TABLE>
<TABLE>
<S> <C> <C>
A - - - -
------------------------------------------------------------- ------------------------------ -----------
First Name, Middle Initial, Last Name Social Security Number Birthdate
(REQUIRED TO OPEN YOUR (mm-dd-yy)
ACCOUNT)
B - - - -
------------------------------------------------------------- ------------------------------ -----------
First Name, Middle Initial, Last Name Social Security Number Birthdate
(REQUIRED TO OPEN YOUR (mm-dd-yy)
ACCOUNT)
</TABLE>
Joint Tenants will have rights of survivorship unless otherwise specified.
C _____________________________________ as custodian for
Custodian's Name (only one permitted)
<TABLE>
<S> <C>
under the |_||_| Uniform Gifts to Minors Act, or
Minor's Name (only one permitted) State
</TABLE>
<TABLE>
<S> <C> <C> <C>
|_||_| Uniform Transfers to Minors Act
State Minor's Social Security Number Minor's Birthday (mm-dd-yy)
(REQUIRED TO OPEN THE ACCOUNT) (REQUIRED TO OPEN THE ACCOUNT)
</TABLE>
D
Name of Trustee Name of Trust
Name of Second Trustee (if any)
<TABLE>
<S> <C>
Date of Trust (mm-dd-yy) Taxpayer Identification Number
(REQUIRED TO OPEN YOUR ACCOUNT) (REQUIRED TO OPEN YOUR ACCOUNT)
</TABLE>
TORRAY FUND APPLICATION
PAGE 2
<PAGE>
E
<TABLE>
<S> <C>
Name of Corporation or other entity. If other entity, Taxpayer Identification
Number please specify type in the space below, e.g., (Required to open your
account) partnership, club, etc.
BUSINESS TYPE: Additional forms, such as a
Corporate Resolution, are required
to authorize redemptions and add
account features. See Application
Instructions.
</TABLE>
2
<TABLE>
<S> <C>
YOUR MAILING ADDRESS
Street address and Apartment number or Box number Area Code Business Telephone Number
Area Code Home Telephone Number
I am a citizen of [ ] U.S. [ ] Other
</TABLE>
City State Zip Code
____________________ State of residence if different from mailing address
State
3 YOUR INITIAL INVESTMENT ($10,000 minimum).
[ ] I have enclosed a check (do not send cash) made payable to
THE TORRAY FUND
$
4 RECEIVING YOUR DIVIDENDS AND CAPITAL GAINS. If not completed, Option A will
be assigned.
<TABLE>
<S> <C>
A [ ] I would like all dividends and capital gains reinvested in the Fund. B [ ] I would like all dividends and capital gains
paid to me in cash.
</TABLE>
5 TELEPHONE REDEMPTIONS. See Instructions. If not completed, Option A will be
assigned.
A [ ] I do not authorize telephone redemptions. B [ ] I do authorize telephone
redemptions.
6 YOUR SIGNATURE(S). All registered owners or legal representative(s) must
sign this section before we can open your account.
TORRAY FUND APPLICATION
PAGE 3
<PAGE>
I (we) am (are) of legal age, have received and read the Prospectus, agree to
its terms and understand that by signing below (a) neither the Fund nor Torray
is a bank and Fund shares are not backed or guaranteed by any bank or insured by
the FDIC; (b) I (we) hereby ratify any instructions given on this account and
any account into which I (we) exchange relating to Items 1-5 and agree that
neither the Fund nor Torray will be liable for any loss, cost or expense for
acting upon such instructions (by telephone or writing) believed by it to be
genuine and in accordance with the procedures described in the Prospectus; and
(c) it is my (our) responsibility to read the Prospectus.
================================================================================
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION: As required by federal law, I (we)
certify under penalty of perjury (1) that the Social Security Number ("SSN") or
Taxpayer Identification Number ("TIN") provided above is correct and (2) that
the IRS has never notified me (us) that I (we) am (are) subject to backup
withholding due to notified payee underreporting, or has notified me (us) that
(we) am (are) no longer subject to such backup withholding. (Note: If any or all
of Part (2) of this sentence is not true in your case, please strike out that
part before signing.) If I (we) fail to furnish my (our) correct SSN or TIN, I
(we) may be subject to a penalty of $50 for each failure and my (our) account(s)
may be subject to backup withholding on distribution and redemption proceeds.
================================================================================
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
<TABLE>
<S> <C> <C>
Signature: Date
Citizenship (if not U.S.)
Signature: Date
Citizenship (if not U.S.)
</TABLE>
HOW DID YOU LEARN ABOUT THE TORRAY FUND?
|_| Financial Publication |_| Newspaper
|_| Radio |_| Other
TORRAY FUND APPLICATION
PAGE 4
<PAGE>
INVESTMENT ADVISOR
The Torray Corporation
6610 Rockledge Drive, Suite 450
Bethesda, Maryland 20817
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036
INDEPENDENT AUDITORS
Johnson Lambert & Co.
7500 Old Georgetown Road
Suite 700
Bethesda, Maryland 20814
CUSTODIAN
Rushmore Trust & Savings FSB
4922 Fairmont Avenue
Bethesda, Maryland 20814
TRANSFER AGENT AND ADMINISTRATOR
The Torray Corporation
6610 Rockledge Drive, Suite 450
Bethesda, Maryland 20817
<PAGE>
THE TORRAY FUND
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1996
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus dated April 30, 1996 and should
be read in conjunction therewith. A copy of the Prospectus may be obtained from
The Torray Corporation, 6610 Rockledge Drive, Bethesda, Maryland 20817 or by
calling (301) 493-4600 or toll free at 1-(800) 443-3036.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INVESTMENT OBJECTIVE AND POLICIES..............................................3
MISCELLANEOUS INVESTMENT PRACTICES.............................................5
NOTE ON SHAREHOLDER APPROVAL...................................................6
INVESTMENT RESTRICTIONS........................................................6
HOW TO REDEEM..................................................................8
HOW NET ASSET VALUE IS DETERMINED..............................................9
CALCULATION OF YIELD AND RETURN...............................................10
PERFORMANCE COMPARISONS.......................................................12
DISTRIBUTIONS.................................................................12
TAXES .....................................................................12
MANAGEMENT OF THE FUND........................................................14
OTHER SERVICES................................................................17
PORTFOLIO TRANSACTIONS........................................................18
ORGANIZATION AND CAPITALIZATION OF THE FUND...................................19
SHAREHOLDER LIABILITY.........................................................20
-2-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of The Torray Fund (the "Fund")
are summarized on the front page of the Prospectus and in the text of the
Prospectus following the caption "Investment Objective and Policies." There is
no assurance that the Fund's objective will be achieved.
This Statement contains certain additional information about the
objective and policies, including "miscellaneous investment practices" in which
the Fund may engage.
Equity Securities. In seeking investments for the Fund, the primary
consideration of the Fund's manager, The Torray Corporation ("Torray" or the
"Manager"), is the issuer's value compared with other companies in the
marketplace. However, in selecting such securities, the opinions and judgments
being exercised by the Manager may be contrary to those of the majority of
investors. In certain instances, such opinions and judgments will involve the
risk of a correct judgment by the majority, or an individual security or group
of securities may remain depressed for an extended period of time or even fall
to a new low, in which case losses or only limited profits may be incurred.
Fixed-Income and Convertible Securities. The Fund is free to invest in
U.S. Government Securities and corporate fixed-income and convertible securities
of varying maturities. The Manager may adjust the average maturity of the Fund's
holdings of convertible and fixed-income securities from time to time, depending
on its assessment of the relative yields available on securities of different
maturities, its expectations of future changes in interest rates and, with
respect to convertible securities, its evaluation of the fundamental investment
merits of the equity security for which the convertible security may be
exchanged.
As described in the Prospectus, the Fund intends to purchase
fixed-income and convertible securities that are primarily of investment grade
(i.e., rated Baa or better by Moody's or BBB or better by Standard & Poor's; a
description of these ratings is set forth in the Appendix to this Statement).
However, the Fund may also invest in fixed-income and convertible securities
rated Ba or B by Moody's or BB or B by Standard & Poor's, or, if unrated, judged
by the Manager to be of comparable quality pursuant to guidelines adopted by the
Board of Trustees. Such securities are often called "junk bonds," and are
collectively referred to herein and in the Prospectus as "High-Yield
Securities." The principal risk factors associated with High-Yield Securities
are set forth below.
-3-
<PAGE>
Risk Factors: High-Yield Securities
The Fund may invest up to 5 percent of its net assets in fixed-income
and convertible High-Yield Securities. As with other fixed-income and
convertible securities, High-Yield Securities are subject to both credit risk
and market risk, although the Manager believes that most convertible High-Yield
Securities are likely to exhibit equity characteristics as well.
High-Yield Securities are generally subject to greater credit risk than
comparable higher-rated securities because issuers are more vulnerable to
economic downturns, higher interest rates or adverse issuer-specific
developments. In addition, the prices of High-Yield Securities are generally
subject to greater market risk and therefore react more sharply to changes in
interest rates. The value and liquidity of High-Yield Securities may be
diminished by adverse publicity and investor perceptions. Also, legislation
limiting the tax benefits to the issuers of taxable High-Yield Securities or
requiring federally-insured savings and loan institutions to reduce their
holdings of taxable High-Yield Securities may continue to have an adverse effect
on the market value of these securities.
Because High-Yield Securities are frequently traded only in markets in
which the number of potential purchasers and sellers, if any, is limited, the
ability of the Fund to sell High-Yield Securities at their fair value either to
meet redemption requests or to respond to changes in the financial markets may
be limited. In such an event, such securities would be regarded as illiquid.
Thinly traded High-yield Securities may be more difficult to value accurately
for the purpose of determining the Fund's net asset value. Also, because the
market for certain High-Yield Securities is relatively new, that market may be
particularly sensitive to an economic downturn or general increase in interest
rates. Regulatory and economic developments have limited and may continue to
limit the ability of participants in the High-Yield Securities market to
maintain orderly markets in certain High-Yield Securities.
Particular types of High-Yield Securities may present special concerns.
Some High-Yield Securities in which the Fund may invest may be subject to
redemption or call provisions that may limit increases in market value that
might otherwise result from lower interest rates while increasing the risk that
the Fund may be required to reinvest redemption or call proceeds during a period
of relatively low interest rates.
The Manager attempts to identify High-Yield Securities with relatively
favorable investment characteristics. The credit ratings issued by Moody's and
S&P are subject to various limitations. For example, while such ratings evaluate
the credit
-4-
<PAGE>
risk, they ordinarily do not evaluate the market risk of High-Yield Securities.
In certain circumstances, the ratings may not reflect in timely fashion adverse
developments affecting an issuer. For these reasons, the Manager conducts its
own independent credit analysis of High-Yield Securities.
High-Grade, Short-Term Debt Securities. As described in this Statement,
the Fund may invest in a variety of high-grade, U.S. dollar-denominated,
short-term debt securities. For a description of those instruments and of the
Moody's and Standard & Poor's ratings for such instruments, see the Appendix to
this Statement. From time to time, the Fund may invest in such instruments when
the Manager believes that suitable equity, convertible, or longer-term
fixed-income securities are unavailable. When the Fund is investing in such
instruments, it is not investing in instruments paying the highest available
yield at that particular time. There are usually no brokerage commissions as
such paid by the Fund in connection with the purchase of such instruments. See
"Portfolio Transactions -Brokerage and Research Services," for a discussion of
underwriters' commissions and dealers' spreads involved in the purchase and sale
of such instruments.
The Fund's portfolio holdings of short-term, high-grade debt
instruments will be affected by general changes in interest rates resulting in
increases or decreases in the value of the obligations held by the Fund. The
value of such securities can be expected to vary inversely to the changes in
prevailing interest rates. Thus, if interest rates have increased from the time
a security was purchased, such security, if sold, might be sold at a price less
than its cost. Similarly, if interest rates have declined from the time a
security was purchased, such security, if sold, might be sold at a price greater
than its cost. In either instance, if the security were held to maturity no gain
or loss would normally be realized as a result of these fluctuations.
Redemptions or exchanges by shareholders could require the sale of portfolio
investments at a time when such a sale might not otherwise be desirable.
MISCELLANEOUS INVESTMENT PRACTICES
Portfolio Turnover. A change in securities held by the Fund is known as
"portfolio turnover" and almost always involves the payment by the Fund of
brokerage commissions or dealer markup and other transaction costs on the sale
of securities as well as on the reinvestment of the proceeds in other
securities. The Fund's annual "portfolio turnover" will be determined by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average value of the Fund's securities; for purposes of
calculation, securities which mature in one year or less are excluded. Because
of the long term nature of the Fund's
-5-
<PAGE>
investment strategy, it is unlikely that portfolio turnover will exceed that of
other investment companies.
Repurchase Agreements. The Fund may enter into repurchase agreements
with domestic commercial banks or registered broker/dealers with respect to not
more than 25% of its total assets (taken at current value). A repurchase
agreement is a contract under which the Fund acquires a security for a
relatively short period (usually not more than one week) subject to the
obligation of the seller to repurchase and the Fund to resell such security at a
fixed time and price (representing the Fund's cost plus interest). In the case
of repurchase agreements with broker/dealers, the value of the underlying
securities (or collateral) will be at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. The Fund
bears a risk of loss in the event that the other party to a repurchase agreement
defaults on its obligations and the Fund is delayed or prevented from exercising
its rights to dispose of the collateral securities. The Manager will monitor the
creditworthiness of the counterparties.
Warrants. The Fund may acquire attached and unattached warrants.
Warrants entitle the holder to purchase equity securities at a specific price
for a specified period of time. Warrants in which the Fund may invest will be
freely transferable, and no more than 2% of the Fund's assets will be invested
in warrants which are not traded on either the New York or American Stock
Exchange. The Fund will not invest more than 5% of its net assets in warrants.
NOTE ON SHAREHOLDER APPROVAL
The investment objective and policies of the Fund set forth above and
in the Prospectus may be changed without shareholder approval.
INVESTMENT RESTRICTIONS
Without a vote of the majority of the outstanding voting securities of
the Fund, the Fund will not take any of the following actions:
(1) Borrow money in excess of 5% of the value (taken at the
lower of cost or current value) of the Fund's total assets (not
including the amount borrowed) at the time the borrowing is made, and
then only from banks as a temporary measure to facilitate the meeting
of redemption requests (and not for leverage) or for extraordinary or
emergency purposes.
-6-
<PAGE>
(2) Pledge, hypothecate, mortgage or otherwise encumber its
assets in excess of 10% of the Fund's total assets (taken at cost), and
then only to secure borrowings permitted by Restriction 1 above.
(3) Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases and sales of
securities.
(4) Make short sales of securities or maintain a short
position for the account of the Fund unless at all times when a short
position is open the Fund owns an equal amount of such securities or
owns securities which, without payment of any further consideration,
are convertible into or exchangeable for securities of the same issue
as, and equal in amount to, the securities sold short.
(5) Underwrite securities issued by other persons except to
the extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under federal
securities laws.
(6) Purchase or sell real estate, although it may invest in
securities of issuers which deal in real estate, including securities
of real estate investment trusts, and may purchase securities which are
secured by interests in real estate.
(7) Purchase or sell commodities or commodity contracts,
including future contracts.
(8) Make loans, except by purchase of debt obligations or by
entering into repurchase agreements.
(9) Invest in securities of any issuer if, immediately after
such investment, more than 5% of the total assets of the Fund (taken at
current value) would be invested in the securities of such issuer,
except that up to 25% of the Fund's total assets taken at current value
may be invested without regard to such 5% limitation; provided,
however, that this limitation does not apply to obligations issued or
guaranteed as to interest and principal by the U.S. government or its
agencies or instrumentalities.
(10) Acquire more than 10% of the voting securities of any
issuer.
(11) Concentrate more than 25% of the value of its total
assets in any one industry.
It is contrary to the Fund's present policy, which may be changed by
the Trustees without shareholder approval, to borrow
-7-
<PAGE>
money, pledge or hypothecate its assets, make any short sales of securities,
maintain any short position for the account of the Fund, or purchase foreign
securities which are not publicly traded in the United States. In addition, it
is contrary to the Fund's present policy to:
(1) Invest more than 10% of the Fund's net assets (taken at
current value) in securities which at the time of such investment are
not readily marketable.
(2) Write (sell) or purchase options.
(3) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts.
(4) Make investments for the purpose of gaining control of a
company's management.
All percentage limitations on investments set forth herein and in the
Prospectus will apply at the time of the making of an investment and shall not
be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
The phrase "shareholder approval," as used in the Prospectus, and the
phrase "vote of a majority of the outstanding voting securities," as used
herein, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund, or (2) 67% or more of the shares of the Fund
present at a meeting if more than 50% of the outstanding shares are represented
at the meeting in person or by proxy.
HOW TO REDEEM
The procedures for redemption of Fund shares are summarized in the text
of the Prospectus following the caption "How to Redeem." Redemption requests
must be in good order, as defined in the Prospectus. Upon receipt of a
redemption request in good order, the Shareholder will receive a check equal to
the net asset value of the redeemed shares next determined after the redemption
request has been received. The Fund will accept redemption requests only on days
the New York Stock Exchange is open. Proceeds will normally be forwarded on the
next day on which the New York Stock Exchange is open; however, the Fund
reserves the right to take up to seven days to make payment if, in the judgment
of the Manager, the Fund could be adversely affected by immediate payment. The
proceeds of redemption may be more or less than the shareholder's investment and
thus may involve a capital gain or loss for tax purposes. If the shares to be
redeemed represent an investment made by check, the Fund
-8-
<PAGE>
reserves the right not to forward the proceeds of the redemption until the check
has been collected.
The Fund may suspend the right of redemption and may postpone payment
only when the New York Stock Exchange is closed for other than customary
weekends and holidays, or if permitted by the rules of the Securities and
Exchange Commission during periods when trading on the Exchange is restricted or
during any emergency which makes it impracticable for the Fund to dispose of its
securities or to determine fairly the value of its net assets, or during any
other period permitted by order of the Securities and Exchange Commission.
The Fund reserves the right to redeem shares and mail the proceeds to
the shareholder if at any time the net asset value of the shares in the
shareholder's account in the Fund falls below a specified level, currently set
at $10,000. Shareholders will be notified and will have 30 days to bring the
account up to the required level before any redemption action will be taken by
the Fund. The Fund also reserves the right to redeem shares in a shareholder's
account in excess of an amount set from time to time by the Trustees. No such
limit is presently in effect, but such a limit could be established at any time
and could be applicable to existing as well as future shareholders.
HOW NET ASSET VALUE IS DETERMINED
As described in the text of the Prospectus following the caption "How
Net Asset Value is Determined," the net asset value per share of the Fund is
determined once on each day on which the New York Stock Exchange is open, as of
the close of the Exchange. The Trust expects that the days, other than weekend
days, that the Exchange will not be open are New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The Fund's portfolio securities for which market quotations are
readily available are valued at market value, which is determined by using the
last reported sale price, or, if no sales are reported -- and in the case of
certain securities traded over-the-counter -- the last reported bid price. Many
debt securities, including U.S. Government Securities, are traded in the
over-the-counter market. Obligations having remaining maturities of 60 days or
less are valued at amortized cost. The amortized cost value of a security is
determined by valuing it at cost originally and thereafter amortizing any
discount or premium from its face value at a constant rate until maturity,
regardless of the effect of fluctuating interest rates on the market value of
the instrument. Although the amortized cost method provides certainty in
valuation, it may result at times in determinations of value that are higher or
lower than the price the Fund would receive if the instruments were sold.
Consequently, changes in the market value
-9-
<PAGE>
of such portfolio instruments during periods of rising or falling interest rates
will not be reflected in the computation of the Fund's net asset value.
As described in the Prospectus, certain securities and assets of the
Fund are valued at fair value as determined in good faith by the Trustees or by
persons acting at their direction pursuant to guidelines established by the
Trustees. The fair value of any restricted securities from time to time held by
the Fund is determined by the Manager in accordance with procedures approved by
the Trustees. Such valuations and procedures are reviewed periodically by the
Trustees. The fair value of such securities is generally determined as the
amount which the Fund could reasonably expect to realize from an orderly
disposition of such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary from case to
case. However, consideration is generally given to the financial position of the
issuer and other fundamental analytical data relating to the investment and to
the nature of the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Fund in connection with such
disposition). In addition, such specific factors are also generally considered
as the cost of the investment, the market value of any unrestricted securities
of the same class (both at the time of purchase and at the time of valuation),
the size of the holding, the prices of any recent transactions or offers with
respect to such securities and any available analysts' reports regarding the
issuer.
Generally, trading in corporate bonds, U.S. Government Securities and
short-term, fixed-income instruments is substantially completed each day at
various times prior to the close of the Exchange. The value of such securities
used for determining the Fund's net asset value per share is computed as of such
times. Occasionally, events affecting the value of such securities may occur
between such times and the close of the Exchange which will not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of the Fund's securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by the
Trustees.
CALCULATION OF YIELD AND RETURN
Yield of the Fund. As summarized in the Prospectus under the heading
"Performance Information," the Yield of the Fund will be computed by annualizing
net investment income per share for a recent 30-day period and dividing that
amount by the Fund shares' net asset value (reduced by any undeclared earned
income expected to be paid shortly as a dividend) on the last trading day of
that period. Net investment income will reflect amortization of any
-10-
<PAGE>
market value premium or discount of fixed-income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The Fund's Yield will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods used in
calculating yield should be considered when comparing the Fund's Yield to yields
published for other investment companies and other investment vehicles. Yield
should also be considered relative to changes in the value of the Fund's shares
and to the relative risks associated with the investment objective and policies
of the Fund.
At any time in the future, yields may be higher or lower than past
yields and there can be no assurance that any historical results will continue.
Investors in the Fund are specifically advised that share prices,
expressed as the net asset values per share, will vary just as Yields will vary.
An investor's focus on the Yield of the Fund to the exclusion of the
consideration of the share price may result in the investor's misunderstanding
the Total Return he or she may derive from the Fund.
Calculation of Total Return. As summarized in the Prospectus under the
heading "Performance Information," Total Return is a measure of the change in
value of an investment in the Fund over the period covered, which assumes any
dividends or capital gains distributions are reinvested immediately rather than
paid to the investor in cash. The formula for Total Return used herein includes
four steps: (1) adding to the total number of shares purchased by a hypothetical
$10,000 investment in the Fund all additional shares which would have been
purchased if all dividends and distributions paid or distributed during the
period had been immediately reinvested; (2) calculating the value of the
hypothetical initial investment of $10,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing this account value for the
hypothetical investor by the initial $10,000 investment and annualizing the
result for periods of less than one year.
The average annual total return for the Fund from commencement of
operations (December 31, 1990) through December 31, 1995 was 18.92%, and the
Fund's average annual total return for the one-year period ended December 31,
1995 was 50.41%.
-11-
<PAGE>
PERFORMANCE COMPARISONS
Yield and Total Return. The Fund may from time to time include its
Total Return in information furnished to present or prospective shareholders.
The Fund may from time to time also include its Total Return and Yield and the
ranking of those performance figures relative to such figures for groups of
mutual funds categorized by Lipper Analytical Services, Morningstar, the
Investment Company Institute and other similar services as having the same
investment objective as the Fund.
DISTRIBUTIONS
Distributions from Net Investment Income. As described in the
Prospectus under the caption "Distributions," the Fund pays out substantially
all of its net investment income, (i.e., dividends, interest it receives from
its investments, and short-term gains). It is the present policy of the Fund to
declare and pay distributions from net investment income quarterly.
Distributions of Capital Gains. As described in the Prospectus, the
Fund's policy is to distribute annually substantially all of the net realized
capital gain, if any, after giving effect to any available capital loss
carryover. Net realized capital gain is the excess of net realized long-term
capital gain over net realized short-term capital loss.
TAXES
The tax status of the Fund and the distributions which it intends to
make are summarized in the text of the Prospectus immediately following the
caption "Taxes." All dividends and distributions of the Fund, whether received
in shares or cash, are taxable to the Fund's shareholders as described in the
Prospectus, and must be reported by each shareholder on his federal income tax
return. Although a dividend or capital gains distribution received after the
purchase of the Fund's shares reduces the net asset value of the shares by the
amount of the dividend or distribution, it will be treated as a dividend even
though, economically, it represents a return of capital, and will be subject to
federal income taxes as ordinary income or, if properly designated by the Fund,
as long-term capital gain. In general, any gain or loss realized upon a taxable
disposition of Fund shares by a shareholder will be treated as long-term capital
gain or loss if the shares have been held for more than one year and otherwise
as short-term capital gain or loss. However, any loss realized upon a taxable
disposition of shares held for six months or less will be treated as long-term
capital loss to the extent of any long-term capital gain distributions received
by the shareholder with respect to those shares. All or a portion
-12-
<PAGE>
of any loss realized upon a taxable disposition of Fund shares will be
disallowed if other Fund shares are purchased by the shareholder within 30 days
before or after the disposition.
The Fund intends to qualify each year as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). In order to so qualify, the Fund must, among other things, (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to certain securities loans, and gains from the sale of stock or
securities, or other income derived with respect to its business of investing in
such stock or securities; (b) derive less than 30% of its gross income from
gains from the sale or other disposition of certain assets held for less than
three months; (c) each year distribute at least 90% of its "investment company
taxable income," which, in general, consists of investment income and short-term
capital gains; and (d) diversify its holdings so that, at the end of each fiscal
quarter (i) at least 50% of the market value of the Fund's assets is represented
by cash, cash items, U.S. Government securities, securities of other regulated
investment companies, and other securities, limited in respect of any one issuer
to a value not greater than 5% of the value of the Fund's total assets and 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its assets is invested in the securities (other than those of
the U.S. Government or other regulated investment companies) of any one issuer
or of two or more issuers which the Fund controls and which are engaged in the
same, similar or related trades or businesses. Under the 30% of gross income
test described above, the Fund will be restricted from selling certain assets
held (or considered under Code rules to have been held) for less than three
months. By so qualifying, the Fund will not be subject to federal income taxes
to the extent that its net investment income, net realized short-term capital
gains and net realized long-term capital gains are distributed.
In years when the Fund distributes amounts in excess of its earnings
and profits, such distributions may be treated in part as a return of capital. A
return of capital is not taxable to a shareholder and has the effect of reducing
the shareholder's basis in the shares. The Fund currently has no intention or
policy to distribute amounts in excess of its earnings and profits.
It is expected that at least some of the distributions from the Fund
will qualify for the dividends-received deduction for corporations to the extent
that the Fund's gross income was derived from qualifying dividends from domestic
corporations.
Annually, shareholders will receive information as to the tax status of
distributions made by the Fund in each calendar year.
-13-
<PAGE>
The Fund is required to withhold and remit to the U.S. Treasury 31% of
all dividend income earned by any shareholder account for which an incorrect or
no taxpayer identification number has been provided or where the Fund is
notified that the shareholder has under-reported income in the past (or the
shareholder fails to certify that he is not subject to such withholding). In
addition, the Fund will be required to withhold and remit to the U.S. Treasury
31% of the amount of the proceeds of any redemption of shares of a shareholder
account for which an incorrect or no taxpayer identification number has been
provided.
The foregoing relates to federal income taxation. Distributions from
investment income and capital gains may also be subject to state and local
taxes. The Fund is organized as a Massachusetts business trust. Under current
law, as long as the Fund qualifies for the federal income tax treatment
described above, it is believed that the Fund will not be liable for any income
or franchise tax imposed by Massachusetts.
MANAGEMENT OF THE FUND
Trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
Professor Frederick Amling, Trustee of the Fund. Professor of Finance,
The George Washington University; President, Frederick Amling &
Associates (computer investment programs); President, Amling & Company,
Inc. (financial advisors); Trustee, Keystone International Fund,
Keystone Liquid Trust, Keystone Precious Metals Holdings, Keystone
Tax-Exempt Trust, Keystone Tax-Free Fund, Master Reserve Trust, and
Master Reserve Tax-Free Trust (investment companies).
Robert P. Moltz, Trustee of the Fund. President and Chief Executive
Officer, Weaver Bros. Insurance Associates, Inc. (insurance).
Professor Roy A. Schotland, Trustee of the Fund. Professor of Law,
Georgetown University Law Center; Director, Custodial Trust Company
(banking). Director, Croft Funds Corporation (open-end management
investment company).
Wayne H. Shaner, Trustee of the Fund. Vice President, Investments,
Lockheed Martin Corporation; Member, Investment Committee, Maryland
State Retirement System.
Bruce C. Ellis, Trustee of the Fund. Chairman, Transmedia
Sports & Leisure USA Inc.; Director Shepards Foundation (charity);
since 1992, Director, Rushmore/Cappiello Fund
-14-
<PAGE>
(investment company) and Rushmore Funds (investment companies).
* William M Lane, Trustee, President, and Principal Financial Officer of
the Fund. Vice President, Robert E. Torray & Co., Inc.; Vice President
and Secretary, The Torray Corporation; Secretary and Treasurer,
Birmingham Capital Management Co., Inc.; Vice President and Secretary,
Energy Recovery Management, Inc. (administrator for oil and gas
investment limited partnership) General Partner, WML Associates, LP.
Marianna T. Doyle, Vice President, Secretary, and Treasurer of the
Fund. Vice President, Robert E. Torray & Co., Inc.; Vice-President and
Assistant Secretary, The Torray Corporation.
Douglas C. Eby, Vice President and Assistant Treasurer of the Fund.
Since April 1992, Vice President, Robert E. Torray & Co., Inc.;
Assistant Treasurer, The Torray Corporation. Through April, 1992, Vice
President and Portfolio Manager of Foxhall Investment Management
(investment advisor).
- -----------------------------------
* Mr. Lane is an "interested person" of the Fund under the Investment
Company Act of 1940.
The mailing address of the officers and Trustees is c/o the Fund, 6610
Rockledge Drive, Bethesda, Maryland 20817.
The Fund's Agreement and Declaration of Trust provides that the Fund
will indemnify its Trustees and each of its officers against liabilities and
expenses incurred in connection with the litigation in which they may be
involved because of their offices with the Fund, except if it is determined in
the manner specified in the Agreement and Declaration of Trust that they have
not acted in good faith in the reasonable belief that their actions were in the
best interests of the Fund or that such indemnification would relieve any
officer or Trustee of any errors and omissions to the Fund or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties.
Each Trustee who is not an "interested person" of the Fund receives an
annual fee of $2,000, plus $100 for each Trustees' meeting attended. The
salaries and expenses of each of the Fund's officers are paid by the Manager.
Mr. Lane, Mr. Eby and Ms. Doyle, as stockholders and/or officers of the Manager,
will benefit from the management fees paid by the Fund.
-15-
<PAGE>
At the date of this Statement, the Fund believes that Robert E. Torray
directly or indirectly owns or directs the voting of an aggregate of 442,027.348
shares (14.18% of the Fund's outstanding shares). As of March 19, the Trustees,
officers, and affiliated persons of the Fund, as a group, owned 624,295.636
shares (20.03%) of the Fund.
The Manager. Under a written management contract ("Management
Agreement") between the Fund and the Manager, subject to such policies as the
Trustees of the Fund may determine, the Manager, at its expense, will furnish
continuously an investment program for the Fund and will make investment
decisions on behalf of the Fund and place all orders for the purchase and sale
of portfolio securities subject always to applicable investment objective,
policies and restrictions.
Pursuant to the Management Agreement and subject to the control of the
Trustees, the Manager also manages, supervises and conducts the other affairs
and business of the Fund, furnishes office space and equipment, provides
bookkeeping and certain clerical services (excluding determination of the net
asset value of the Fund and shareholder accounting services for the Fund), and
pays all fees and expenses of the officers of the Fund. As indicated under
"Portfolio Transactions -- Brokerage and Research Services," the Fund's
portfolio transactions may be placed with brokers which furnish the Manager,
without cost, certain research, statistical and quotation services of value to
them or their respective affiliates in advising the Fund or their other clients.
In so doing, the Fund may incur greater brokerage commissions than it might
otherwise pay.
The Manager's compensation under the Management Agreement is subject to
reduction to the extent that in any year the expenses of the Fund exceed the
limits on investment company expenses imposed by any statute or regulatory
authority of any jurisdiction in which shares of such Fund are qualified for
offer and sale. The term "expenses" is subject to interpretation by each of such
jurisdictions, and, generally speaking, excludes brokerage commissions, taxes,
interest, distribution-related expenses and extraordinary expenses. As of this
date, shares are not sold in any state which imposes such a restriction.
The Management Agreement has been approved by the Trustees of the Fund.
By its terms, the Management Agreement will continue in force from year to year,
but only so long as its continuance is approved at least annually by the
Trustees at a meeting called for that purpose or by the vote of a majority of
the outstanding shares of the Fund. The Management Agreement automatically
terminates on assignment, and is terminable upon notice by the Fund. In
addition, the Management Agreement may be terminated on not more than 60 days'
notice by the Manager to the Fund. In the event the Manager ceases to be the
manager of the
-16-
<PAGE>
Fund, the right of the Fund to use the identifying name of "Torray" may be
withdrawn.
As described in the text of the Prospectus under the caption
"Management of the Fund," the Fund pays, in addition to the management fee
described above, all expenses not borne by the Manager, including, without
limitation, fees and expenses of the Trustees, interest charges, taxes,
brokerage commissions, expenses of issue or redemption of shares, fees and
expenses of registering and qualifying the shares of the Fund for distribution
under federal and state laws and regulations, charges of custodians, auditing
and legal expenses, expenses of determining net asset value of the Fund's
shares, reports to shareholders, expenses of meetings of shareholders, expenses
of printing and mailing prospectuses, proxy statements and proxies to existing
shareholders, and insurance premiums. The Fund is also responsible for such
nonrecurring expenses as may arise, including litigation in which the Fund may
be a party, and other expenses as determined by the Trustees. The Fund may have
an obligation to indemnify its officers and Trustees with respect to such
litigation.
The Management Agreement provides that the Manager shall not be subject
to any liability in connection with the performance of its services thereunder
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
The Manager is a Maryland corporation organized in 1990. Approximately
sixty-one percent (61%) of the outstanding voting shares of the Manager is owned
by Robert E. Torray.
OTHER SERVICES
Custodial Arrangements. Rushmore Trust & Savings, FSB ("Rushmore"),
4922 Fairmont Avenue, Bethesda, Maryland 20814, is the custodian for the Fund.
As such, Rushmore holds in safekeeping certificated securities and cash
belonging to the Fund and, in such capacity, is the registered owner of
securities in book-entry form belonging to the Fund. Upon instruction, Rushmore
receives and delivers cash and securities of the Fund in connection with Fund
transactions and collects all dividends and other distributions made with
respect to the Fund's portfolio securities. Rushmore also maintains certain
accounts and records of the Fund.
Transfer and Shareholder Servicing Agent. The Torray Corporation serves
as transfer agent and shareholder servicing agent to the Fund pursuant to a
Transfer Agency Agreement dated November 16, 1990 (the "Transfer Agency
Agreement"). Under the Transfer Agency Agreement, The Torray Corporation has
agreed (i)
-17-
<PAGE>
to issue and redeem Shares of the Fund; (ii) to address and mail all
communications by the Fund to its Shareholders, including reports to
Shareholders, dividend and distribution notices, and proxy material for meetings
of Shareholders; (iii) to respond to correspondence or inquiries by Shareholders
and others relating to its duties; (iv) to maintain Shareholder accounts and
certain sub-accounts; and (v) to make periodic reports to the Fund's Board of
Trustees concerning the Fund's operations.
Certified Public Accountants. The Fund's independent public
accountants are Johnson Lambert & Co. ("Johnson Lambert"). Johnson Lambert
conducts an annual audit of the Fund, assists in the preparation of the Fund's
federal and state income tax returns and consults with the Fund as to matters of
accounting and federal and state income taxation.
PORTFOLIO TRANSACTIONS
Brokerage and Research Services. Transactions on stock exchanges and
other agency transactions involve the payment by the Fund of negotiated
brokerage commissions. Such commissions vary among different brokers. Also, a
particular broker may charge different commissions according to such factors as
the difficulty and size of the transaction. There is generally no stated
commission in the case of securities, such as U.S. Government Securities, traded
in the over-the-counter markets or in the case of gold bullion but the price
paid by the Fund usually includes an undisclosed dealer commission or mark-up.
It is anticipated that most purchases and sales of short-term portfolio
securities will be with the issuer or with major dealers in money market
instruments acting as principals. In underwritten offerings, the price paid
includes a disclosed, fixed commission or discount retained by the underwriter
or dealer.
When the Manager places orders for the purchase and sale of portfolio
securities for the Fund and buys and sells securities for the Fund, it is
anticipated that such transactions will be effected through a number of brokers
and dealers. In so doing, the Manager intends to use its best efforts to obtain
for the Fund the most favorable price and execution available, except to the
extent that it may be permitted to pay higher brokerage commissions as described
below. In seeking the most favorable price and execution, the Manager considers
all factors it deems relevant, including, by way of illustration, price, the
size of the transaction, the nature of the market for the security, the amount
of commission, the timing of the transaction taking into account market prices
and trends, the reputation, experience and financial stability of the
broker/dealer involved and the quality of service rendered by the broker/dealer
in other transactions.
-18-
<PAGE>
It has for many years been a common practice in the investment advisory
business for advisors of investment companies and other institutional investors
to receive research, statistical and quotation services from brokers which
execute portfolio transactions for the clients of such advisors. Consistent with
this practice, the Manager may receive research, statistical and quotation
services from brokers with which the Fund's portfolio transactions are placed.
These services, which in some instances could also be purchased for cash,
include such matters as general economic and security market reviews, industry
and company reviews, evaluations of securities and recommendations as to the
purchase and sale of securities. Some of these services may be of value to the
Manager in advising various of its clients (including the Fund), although not
all of these services are necessarily useful and of value in managing the Fund.
The fees paid to the Manager are not reduced because it receives such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934
and the Management Agreement, the Manager may cause the Fund to pay a broker
which provides "brokerage and research services" (as defined in the Act) to the
Manager an amount of disclosed commission for effecting a securities transaction
for the Fund in excess of the commission which another broker would have charged
for effecting that transaction. The authority of the Manager to cause the Fund
to pay any such greater commissions is subject to such policies as the Trustees
may adopt from time to time.
Under the Investment Company Act, persons affiliated with the Fund are
prohibited from dealing with the Fund as a principal in the purchase and sale of
securities.
ORGANIZATION AND CAPITALIZATION OF THE FUND
The Fund was established as a Massachusetts business trust under the
laws of Massachusetts by an Agreement and Declaration of Trust dated April 19,
1990. A copy of the Agreement and Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts. The Trust's fiscal year ends on
December 31 of each year.
As described in the text of the Prospectus following the caption
"Organization and Capitalization of the Fund," shares of the Fund are entitled
to one vote per share (with proportional voting for fractional shares) on such
matters as shareholders are entitled to vote. There will normally be no meetings
of shareholders for the purpose of electing Trustees, except insofar as
elections are required under the 1940 Act in the event that (i) less than a
majority of the Trustees have been elected by shareholders, or (ii) if, as a
result of a vacancy, less than
-19-
<PAGE>
two-thirds of the Trustees have been elected by the shareholders, the vacancy
will be filled only by a vote of the shareholders. In addition, the Trustees may
be removed from office by a written consent signed by the holders of two-thirds
of the outstanding shares of the Fund and filed with the Fund's custodian or by
a vote of the holders of two-thirds of the outstanding shares of the Fund at a
meeting duly called for the purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by ten or more shareholders, who have been such for at
least six months, and who hold shares constituting 1% of the outstanding shares,
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a Trustee, the Fund has undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the expense of the
requesting shareholders). Except as set forth above, each Trustee shall continue
to hold office and may appoint his successor.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain
circumstances, be held liable for the obligations of the Fund. However, the
Fund's Agreement and Declaration of Trust disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Fund or the Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the Fund's property for all loss and expense of any
shareholder of the Fund held liable on account of being or having been a
shareholder. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Fund would be
unable to meet its obligations.
-20-
<PAGE>
The
Suite 450 TORRAY
6610 Rockledge Drive FUND
Bethesda, Maryland 20817
(301) 493-4600 ANNUAL REPORT
1-800-443-3036
December 31, 1995
<PAGE>
The Torray Fund
MANAGEMENT'S DISCUSSION OF PERFORMANCE
As of December 31, 1995
February 10, 1996
Dear Fellow Shareholders:
The Torray Fund earned 50.41% last year. Its total rate of
return for the 5 years ending December 31, 1995 was 18.92%
compounded annually. Comparable numbers for The Standard and
Poor's 500 stock index were 37.54% for 1995 and 16.58% annually
for 5 years. You will find this information illustrated
graphically on pages 4 and 5.
As I have noted in prior reports, federal regulations now
require fund managers to analyze their investment performance for
shareholders annually. Since presumably investors need to hear
less about good results than bad, I will be brief. Let me begin by
saying that no one could be more surprised than we are at the
stock market's performance last year and our own consequent good
fortune. From a historic perspective, 1995's 33.5% price rise on
The Dow Jones Industrial Average was within one-half percentage
point of tying 1958 as the third best year on record since World
War II. First and second place belong to 1954 (+44.0%) and 1975
(+38.3%). Although it is not possible to predict the future, we
want you to know that, in our opinion, a repeat of 1995, as it
relates to the performance of either your fund or the market, is
not likely anytime soon.
In retrospect, it seems clear that three factors played a
major role in last year's market advance: the 25% compound growth
in corporate earnings (excluding non-recurring adjustments) during
each of the years 1993, 1994 and 1995; low inflation which drove
interest rates down; and the public's investment of an additional
$118 billion into domestic stock mutual funds. Notably, this sum
exceeds the entire value of all stock funds a decade ago.
According to The Investment Company Institute, mutual funds
invested in U.S. stocks had $1.07 trillion in assets at the close
of 1995. For the first time, stock funds and individually owned
stocks have replaced real estate and bank deposits as the largest
components of net worth in American households. We think this is a
positive development.
It is to the confluence of these events -- rising corporate
profits, low inflation and interest rates, and a flood of cash
into mutual funds -- that we attribute a significant proportion of
The Torray Fund's investment return last year. Statistically
speaking, the market's 37.54% gain (as measured by the S&P 500
Index) was equal to about 75% of
1
<PAGE>
The Torray Fund
MANAGEMENT'S DISCUSSION OF PERFORMANCE
As of December 31, 1995
your fund's 50.41% performance. Put the other way around, your
fund outran the market by 33%. This return premium is traceable to
our concentration of investment in the only significant market
sectors which did better than the market itself: consumer staples,
capital goods/technology and financials.
Coincidentally, the fact that so few mutual funds were
heavily represented in these areas may explain why stock funds as
a group underperformed the 1995 market by a wider than usual
margin. (General equity funds averaged 31% vs. 37.54% for the S&P
500.) The rest of their underperformance likely is attributable to
fees, other expenses and high portfolio turnover. On the last
point, we think everyone would be better off if portfolio trading
were cut at least in half, if not more. As we have mentioned in
past reports, the average stock survives barely a year in most
mutual funds. Consequently, the underlying economic fundamentals
of corporations in which funds invest, while the controlling
feature of fund industry returns overall, tends to be only
coincidentally related to results on a fund-by-fund basis.
An additional factor in your fund's better-than-market record
last year was the strong performance of some of our largest
holdings: Student Loan Marketing (Sallie Mae), the fund's biggest
investment at 7 1/2% of total assets, rose 103% in price during
1995. Other substantial gainers with their percentage of fund
assets listed first were Boeing Co. 1.5% (+66.8%), Chiron Corp.
2.8% (+74.3%), Citicorp 3.1% (+62.5%), Eli Lilly 3.6% (+71%),
Kimberly Clark 3.3% (+64.3%), Mellon Bancorp 4.1%, (+75.3%). On
the losing side, Salomon Brothers, accounting for 4.7% of The
Torray Fund's assets, went down 5.7%. We remain confident about
this company's prospects, and have bought more Salomon shares
during early 1996.
Lately it seems not a day goes by without someone asking me
how long the market can keep going up. No one knows. Someday the
economy will sag or inflation will accelerate, causing interest
rates to rise; or investors may simply run out of money. Sellers
will outnumber buyers. Then the market will go down. It has
happened many times before. But it should matter only to those who
play the market. Long-term investors in solid companies with
strong business fundamentals need not worry about it. Your
management doesn't. We hope you won't either.
2
<PAGE>
The Torray Fund
MANAGEMENT'S DISCUSSION OF PERFORMANCE
As of December 31, 1995
In closing, I will mention that The Torray Fund management,
Trustees and their families increased their investment in the fund
during 1995 to 616,112 shares, representing 24.42% of all shares
outstanding. I will also note that The Torray Corporation's
expense limitation guarantee will be continued in 1996. During
1995 our company reimbursed The Torray Fund $160,375 to insure
that shareholders' expenses including our management fee did not
exceed 1.25% of fund assets.
Appreciation is extended to each of you for the confidence
you have placed in us. Thanks go also to our trustees, officers
and employees for their outstanding efforts last year.
Sincerely,
/s/ ROBERT E. TORRAY
Robert E. Torray
President
The Torray Corporation
3
<PAGE>
The Torray Fund
PERFORMANCE DATA
As of December 31, 1995
Total Rates of Return on Hypothetical $10,000 Investment vs. S&P 500
For each of the years or periods stated
1991 1992 1993 1994 1995 5 Years
The Torray Fund 19.98% 21.04% 6.37% 2.41% 50.41% 137.96%
S&P 500 30.48% 7.66% 10.09% 1.30% 37.54% 115.47%
[graph]
Table 1
See Management's Discussion of Performance.
4
<PAGE>
The Torray Fund
PERFORMANCE DATA
As of December 31, 1995
Change in Value of $10,000 Invested on December 31, 1990
(commencement of operations)
(assuming reinvestment of dividends and distributions)
<TABLE>
<CAPTION>
12/31/90 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
The Torray Fund $10,000 $11,999 $14,523 $15,448 $15,821 $23,796
S&P 500 $10,000 $13,048 $14,047 $15,465 $15,666 $21,547
</TABLE>
[graph]
Table 2
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
1 Year 2 Years 3 Years 4 Years 5 Years
<S> <C> <C> <C> <C> <C>
Torray Fund 50.41 % 24.11% 17.89% 18.66% 18.92%
S&P 500 37.54 % 18.03% 15.32% 13.35% 16.58%
</TABLE>
See Management's Discussion of Performance.
5
<PAGE>
The Torray Fund
SCHEDULE OF INVESTMENTS
As of December 31, 1995
<TABLE>
<CAPTION>
Principal Amount
or Shares Value
<S> <C>
U.S. GOVERNMENT OBLIGATIONS 6.2%
1,650,000 U.S. Treasury Bill $ 1,620,960
5.431% due 5/09/96
1,535,000 U.S. Treasury Bill 1,503,548
5.424% due 5/30/96
TOTAL U.S. GOVERNMENT OBLIGATIONS 3,124,508
(amortized cost $3,119,244)
COMMON STOCK 95.7%
Manufacturing 48.7%
Ice Cream & Frozen Desserts 1.6%
25,000 Dreyer's Grand Ice Cream, Inc. 831,250
Bakery Products 1.7%
38,000 Interstate Bakeries Corp. 850,250
Grain Mill Products 2.7%
22,000 Ralston Purina Group 1,372,250
Cigarettes 4.1%
23,000 Philip Morris Cos., Inc. 2,081,500
Paper Mills 3.3%
20,000 Kimberly-Clark Corp. 1,655,000
Newspapers: Publishing or Publishing & Printing 1.0%
8,500 Gannett Co., Inc. 521,687
In Vitro & In Vivo Diagnostic Substances 2.8%
13,000 Chiron Corp.* 1,436,500
Pharmaceutical Preparations 10.2%
6,000 American Home Products Corp. 582,000
10,000 Bristol-Myers Squibb Co. 858,750
15,000 Johnson & Johnson 1,284,375
32,000 Lilly (Eli) & Co. 1,800,000
10,000 Pfizer, Inc. 630,000
Total Pharmaceutical Preparations 5,155,125
Adhesives and Sealants 1.5%
21,800 Morton International, Inc. 782,075
</TABLE>
6
<PAGE>
The Torray Fund
SCHEDULE OF INVESTMENTS
As of December 31, 1995
<TABLE>
<S> <C>
Ship & Boat Building & Repairing 3.7%
32,000 General Dynamics Corp. 1,892,000
Aircraft 5.3%
10,000 Boeing Co. 783,750
30,000 Northrop Grumman Corp. 1,920,000
Total Aircraft 2,703,750
Guided Missles, Space Vehicles & Parts 3.9%
25,000 Lockheed Martin Corp. 1,975,000
Plastics Products, NEC 1.8%
35,000 Rubbermaid, Inc. 892,500
Electronic & Other Electric Equip Non Computer 1.4%
10,000 General Electric Co. 720,000
Computer & Office Equipment 2.9%
16,000 I B M Corp. 1,468,000
Surgical & Medical Instruments & Apparatus 0.7%
9,000 Guidant Corp. 380,250
Total Manufacturing 24,717,137
Wholesale and Retail Trade 5.1%
Wholesale-Farm Product Raw Materials 2.0%
102,010 Standard Commercial Corp.* 1,007,349
Retail-Department Stores 1.7%
20,000 Harcourt General, Inc. 837,500
Retail-Jewelry Stores 1.5%
15,000 Tiffany & Co. 755,625
Total Wholesale and Retail Trade 2,600,474
Finance, Insurance and Real Estate 36.4%
National Commercial Banks 14.3%
23,000 Citicorp 1,546,750
27,184 First American Corp. Tenn. 1,287,842
62,000 Liberty Bancorp, Inc. (Okla.) 2,309,500
39,000 Mellon Bank Corp. 2,096,250
Total National Commercial Banks 7,240,342
Savings Institutions, not Federally Chartered 2.8%
94,306 Southern Financial Bancorp, Inc. 1,414,590
</TABLE>
7
<PAGE>
The Torray Fund
SCHEDULE OF INVESTMENTS
As of December 31, 1995
<TABLE>
<S> <C>
Miscellaneous Business Credit Institutions 7.5%
58,000 Student Loan Marketing (New Vtg) 3,820,750
Security & Commodity Brokers, Dealers & Svcs. 4.7%
67,000 Salomon Inc. 2,378,500
Security Brokers, Dealers & Flotation Cos. 2.1%
50,000 Lehman Brothers Holdings, Inc. 1,062,500
Real Estate-(Leisure Condos Only) 5.0%
105,000 Carr Realty Corp. 2,559,375
Total Finance, Insurance and Real Estate 18,476,057
Services 5.5%
Computer Systems Integrated Design 1.8%
65,000 Novell Inc.* 926,250
Services-General Medical & Surgical Hospitals 3.6%
89,000 Tenet Healthcare Corp.* 1,846,750
Total Services 2,773,000
TOTAL COMMON STOCK 48,566,668
(cost $35,764,172)
TOTAL PORTFOLIO SECURITIES 101.9% 51,691,176
(amortized cost $38,883,416)
OTHER ASSETS LESS LIABILITIES (1.9%) (947,574)
NET ASSETS $50,743,602
FIVE LARGEST HOLDINGS
Student Loan Marketing
Carr Realty Corp.
Salomon Inc.
Liberty Bancorp, Inc. (Okla.)
Mellon Bank Corp.
* Non-income producing security
</TABLE>
See notes to the financial statements.
8
<PAGE>
The Torray Fund
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities at value
(amortized cost $38,883,416) $51,691,176
Cash (182,420)
Receivable for securities sold 186,076
Receivable for capital stock sold 20,000
Interest and dividends receivable 45,675
TOTAL ASSETS 51,760,507
LIABILITIES
Payable for securities purchased 1,016,905
TOTAL LIABILITIES 1,016,905
NET ASSETS $50,743,602
Shares of beneficial interest
($1 stated value, 2,522,943 shares
outstanding, unlimited shares authorized) $ 2,522,943
Paid-in-capital in excess of par 35,409,995
Undistributed net investment income 1,750
Undistributed net realized gains 1,154
Net unrealized appreciation of investments 12,807,760
NET ASSETS $50,743,602
Per Share $ 20.110
</TABLE>
See notes to the financial statements.
9
<PAGE>
The Torray Fund
STATEMENT OF OPERATIONS
Twelve months ended December 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest income $ 28,402
Dividend income 779,402
Miscellaneous income 283
Total income 808,087
EXPENSES
Management fees 313,512
Other expenses:
Legal fees $ 18,056
Transfer agent fees 39,070
Audit fees 19,282
Registration & filing fees 31,210
Custodian's fees 9,736
Accounting services 29,760
Trustees' fees 10,900
Administration 56,199
Printing 20,896
Insurance 3,339
Miscellaneous 305
Total 238,753
Expense reimbursement (160,375) 78,378
Total expenses 391,890
NET INVESTMENT INCOME 416,197
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on
investments 791,792
Net change in unrealized gain 11,564,512
Net gain on investments 12,356,304
NET INCREASE IN NET ASSETS
FROM OPERATIONS $12,772,501
</TABLE>
See notes to the financial statements.
10
<PAGE>
The Torray Fund
STATEMENT OF CHANGES IN NET ASSETS
For the periods below:
<TABLE>
<CAPTION>
Year Year
ended ended
12/31/95 12/31/94
<S> <C> <C>
Increase in Net Assets from
Operations:
Net investment income $ 416,197 $ 328,186
Net realized gain on
investments 791,792 1,034,791
Net change in unrealized
gain (loss) 11,564,512 (853,590)
Net increase in net
assets from
operations 12,772,501 509,387
Distributions to Shareholders
from:
Net investment income (414,625) (328,052)
Net realized gains (790,687) (1,034,742)
Total distributions (1,205,312) (1,362,794)
Shares of Beneficial Interest
Increase from share
transactions 15,814,356 4,549,846
Total increase 27,381,545 3,696,439
Net assets -- beginning of period 23,362,057 19,665,618
Net assets -- end of period $50,743,602 $23,362,057
</TABLE>
See notes to the financial statements.
11
<PAGE>
The Torray Fund
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the periods below:
PER SHARE DATA($)
<TABLE>
<CAPTION>
Year Year Year Year Year 14 days
ended ended ended ended ended ended
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.755 $ 14.273 $ 13.743 $ 11.514 $ 9.999 $ 10.000
Income From Investment Operations
Net Investment Income 0.215 0.213 0.122 0.180 0.232 0.005
Net Gains on Securities
(both realized and unrealized) 6.674 0.130 0.745 2.229 1.728 0.000
Total from Investment Operations 6.889 0.343 0.867 2.409 1.960 0.005
Less Distributions
Dividends (from Net Investment Income) (0.214) (0.213) (0.122) (0.180) (0.233) (0.006)
Distributions (from Capital Gains) (0.320) (0.648) (0.215) 0.000 (0.212) 0.000
Total Distributions (0.534) (0.861) (0.337) (0.180) (0.445) (0.006)
Net Asset Value, End of Period $ 20.110 $ 13.755 $ 14.273 $ 13.743 $ 11.514 $ 9.999
TOTAL RETURN3 50.41% 2.41% 6.37% 21.04% 19.98% (0.03%)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $ 50,744 $ 23,362 $ 19,666 $ 10,298 $ 4,423 $ 200
Ratio of Expenses to Average Net Assets 1.25% 1.25% 1.25% 1.25% 1.25% 0.82%1
Ratio of Net Income to Average Net Assets 1.31% 1.51% 0.94% 1.54% 2.43% 2.15%1
Portfolio Turnover Rate 22.56% 36.63% 29.09% 37.09% 21.17% n/a2
Average Actual Commissions paid per share4 $ 0.0813 n/a n/a n/a n/a n/a
</TABLE>
1 Annualized
2 Not applicable. During the period December 18, 1990 (commencement of
operations) through December 31, 1990 the Fund invested only in short
term investments which are excluded from this ratio.
3 Past performance is not predictive of future performance.
4 Does not include spreads on shares traded on a principal basis.
See notes to the financial statements.
12
<PAGE>
The Torray Fund
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Torray Fund ("Fund") is registered under the Investment Company Act of
1940 as a no load, diversified, open-end management investment company. The Fund
was organized as a business trust under Massachusetts law. The Torray
Corporation serves as administrator and investment advisor to, and transfer
agent for the Fund.
The initial capitalization of the Fund, $100,000, was provided on November
16, 1990 by Robert E. Torray who is an officer, director and shareholder of The
Torray Corporation. The Fund commenced operations on December 18, 1990. All
organizational expenses of the Fund (approximately $56,000), primarily legal
fees and certain Blue Sky registration fees have been paid by The Torray
Corporation and will not be reimbursed by the Fund. The following is a summary
of accounting policies followed by the Fund in the preparation of its financial
statements.
Securities Valuation Short-term obligations having remaining maturities of
60 days or less are valued at amortized cost, which approximates market value.
Portfolio securities for which market quotations are readily available are
valued at market value, which is determined by using the last reported sale
price, or, if no sales are reported, the last reported bid price.
Securities Transactions and Investment Income Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the first-in first-out basis. Dividend income is
recorded on the ex-dividend date and interest income, including amortization of
discount on short-term investments, is recorded on the accrual basis.
Federal Income Taxes The Fund intends to continue to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments to its shareholders. Therefore, no Federal income
tax provision is required. Cost of securities for tax purposes is substantially
the same as for financial reporting purposes.
Net Asset Value The net asset value per share of the Fund is determined
once on each day that the New York Stock Exchange is open, as of the close of
the Exchange.
13
<PAGE>
The Torray Fund
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 2 -- MANAGEMENT CONTRACT, TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENTS
The Torray Corporation currently guarantees that the overall annual expense
ratio of the Fund will not exceed 1.25% of net assets. This ratio consists of a
1% management fee plus up to 0.25% of net assets covering all other expenses.
Pursuant to the Management Contract, the Fund pays The Torray Corporation a
fee, computed daily and payable quarterly at the annual rate of one percent of
the Fund's daily net assets. The Torray Corporation provides investment advisory
and portfolio management services to the Fund. During the twelve months ended
December 31, 1995, The Torray Fund paid management fees of $313,512 (1% of
assets).
Excluding the management fee, other expenses incurred by the Fund during
the twelve months ended December 31, 1995 totalled $238,753. Due to the current
expense limitation, however, the Torray Corporation reimbursed the Fund $160,375
for expenses incurred in excess of $78,378 (.25% of assets) for the year ended
December 31, 1995. A portion of the other expenses ($99,000 of $238,753)
represents fees charged by The Torray Corporation for transfer agent,
shareholder, net asset value accounting and administrative services. Certain
officers and Trustees of the Fund are also officers and/or shareholders of The
Torray Corporation. The remaining other expenses of $139,753 were paid to
various independent agents, service providers, and federal and state agencies.
These expenses include all costs associated with the Fund's operations including
Independent Trustees' fees ($2,000 per annum and $100 for each Board meeting
attended), taxes, dues, fees and expenses of registering and qualifying the Fund
and its shares for distribution, charges of custodians, auditing and legal
expenses, insurance premiums, software licensing and securities pricing fees,
supplies, postage, expenses of issue or redemption of shares, reports to
shareholders and Trustees, expenses of printing and mailing prospectuses, proxy
statements and proxies to existing shareholders, and other miscellaneous
expenses.
NOTE 3 -- PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term
investments, for the twelve months ended December 31, 1995 aggregated
$20,295,635 and $7,073,607, respectively. Net unrealized appreciation of
investments at December 31, 1995 includes aggregate unrealized gains of
$13,073,506 and unrealized losses of $265,746.
14
<PAGE>
The Torray Fund
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 4 -- SHARES OF BENEFICIAL INTEREST TRANSACTIONS
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Year
ended ended
12/31/95 12/31/94
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares issued 937,270 $17,576,747 287,607 $4,110,389
Reinvestment of dividends
and distributions 55,960 1,054,067 96,300 1,334,528
Shares redeemed (168,667) (2,816,458) (63,377) (895,071)
824,563 $15,814,356 320,530 $4,549,846
</TABLE>
Officers, Trustees and affiliated persons of The Torray Fund directly or
indirectly control 616,112 shares or 24.42% of the Fund.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees
The Torray Fund
Bethesda, Maryland
We have audited the accompanying statement of assets and liabilities and
schedule of investments of The Torray Fund, as of December 31, 1995, the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended and for the
period from December 18, 1990 (commencement of operations) through December 31,
1990. These 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Torray Fund as of December 31, 1995, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended and for the period from December 18, 1990 (commencement of
operations) through December 31, 1990 in conformity with generally accepted
accounting principles.
JOHNSON LAMBERT & CO.
Bethesda, Maryland
January 18, 1996
16
<PAGE>
This report is not authorized for distribution
to prospective investors unless preceded or
accompanied by a current prospectus.
<PAGE>
INVESTMENT ADVISOR
The Torray Corporation
6610 Rockledge Dr. Suite 450
Bethesda, Maryland 20817
LEGAL COUNSEL
Morgan, Lewis & Bockius
1800 M Street, N.W.
Washington, D.C. 20036
INDEPENDENT AUDITORS
Johnson Lambert & Co.
7500 Old Georgetown Road
Suite 700
Bethesda, Maryland 20814
CUSTODIAN
Rushmore Trust & Savings FSB
4922 Fairmont Avenue
Bethesda, Maryland 20814
TRANSFER AGENT & ADMINISTRATOR
The Torray Corporation
6610 Rockledge Dr. Suite 450
Bethesda, Maryland 20817
[zz]
APPENDIX A: CORPORATE BOND AND COMMERCIAL PAPER RATINGS
I. Corporate Bond Ratings
A. Description of Moody's Investors Service, Inc.'s Corporate Bond
Ratings:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba and B -- Bonds which are rated Ba or B are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
-32-
B. Description of Standard & Poor's Corporation's Corporate Bond Ratings:
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated categories.
BB and B -- Bonds rated BB or B are regarded, on balance, as
predominately speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
II. Commercial Paper Ratings
A. Description of Moody's Investors Service, Inc.'s Commercial Paper
Ratings:
Moody's Investors Service, Inc. evaluates the salient features that
affect a Commercial Paper issuer's financial and competitive position. Its
appraisal includes, but is not limited to, the review of such factors as:
quality of management, industry strengths and risks, vulnerability to business
cycles, competitive position, liquidity measurements, debt structure, operating
trends and access to capital markets. Differing degrees of weight are applied
to these factors as deemed appropriate for individual situations. Commercial
Paper issuers rated "Prime-1" are judged to be of the best quality. Their
short-term debt obligations carry the smallest degree of investment risk.
Margins of support for current indebtedness are large or stable with cash flow
and asset protection well assured. Current liquidity provides ample coverage of
near-term liabilities and unused alternative financing arrangements are
generally available. While protective elements may change over
-33-
<PAGE>
the intermediate or longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations. Issuers in the
Commercial Paper market rated "Prime-2" are of high quality. Protection for
short-term note holders is assured with liquidity and value of current assets as
well as cash generation in sound relationship to current indebtedness. They are
rated lower than the best commercial paper issuers because margins of protection
may not be as large or because fluctuations of protective elements over the near
or intermediate term may be of greater amplitude. Temporary increases in
relative short and overall debt load may occur. Alternate means of financing
remain assured. Issuers rated Prime-1 and Prime-2 categories are judged to be
investment grade.
B. Description of Standard & Poor's Corporation Commercial Paper Ratings:
Standard & Poor's Corporation describes its highest ("A") rating for
commercial paper as follows, with numbers 1, 2 and 3 being used to denote
relative strength within the "A" classification: Liquidity ratios are adequate
to meet cash requirements. Long-term senior debt rating should be "A" or better;
in some instances "BBB" credits may be allowed if other factors outweigh the
"BBB." The issuer should be well-established and the issuer should have a strong
position within its industry. The reliability and quality of management should
be unquestioned.
-34-
THE TORRAY FUND
POST-EFFECTIVE AMENDMENT NO. 6 ON FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
Included in Part A:
(1) Condensed Financial Information
Included in Part B:
(2) Report of Independent Public Accountants
(3) Schedule of Investments
(4) Statement of Assets and Liabilities
(5) Statement of Operations
(6) Statement of Changes in Net Assets
(7) Financial Highlights
(8) Notes to Financial Statements
(b) Exhibits
(1) Agreement and Declaration of Trust is
incorporated by reference to Exhibit (1) to the
Registrant's Initial Registration Statement on
Form N-1A, filed on April 24, 1990 and filed
herewith
(2) By-Laws are incorporated by reference to
Exhibit (2) to the Registrant's Initial
Registration Statement on Form N-1A, filed on
April 24, 1990 and filed herewith
(3) Inapplicable
(4) Inapplicable
(5) Management Contract with The Torray Corporation
("Torray") is incorporated by reference to
Exhibit (5) to Pre-Effective Amendment No. 2 to
the Registrant's Registration Statement on Form
N-1A, filed on November 20, 1990 and filed
herewith
C-1
<PAGE>
(6) Inapplicable
(7) Inapplicable
(8)(a) Custodian Agreement between Registrant and
Sovran Bank/Maryland is incorporated by
reference to Exhibit (8) to Pre-Effective
Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A, filed on
November 20, 1990 and filed herewith
(8)(b) Custodian Agreement between Registrant and
Rushmore Trust and Savings, FSB is incorporated
by reference to exhibit (8)(b) to
Post-Effective Amendment No. 4 to the
Registrant's Registration Statement on Form
N-1A, filed on April 29, 1994 and filed
herewith
(9) Transfer Agency and Shareholder Service
Agreement between Registrant and Torray is
incorporated by reference to Exhibit (9) to
Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form
N-1A, filed on November 20, 1990 and filed
herewith
(10) Opinion and Consent of Morgan, Lewis & Bockius
LLP as to legality of the securities being
registered (filed with Rule 24f-2 Notice on
February 29, 1996) and filed herewith
(11) Consent of Johnson Lambert & Co., Independent
Accountants and filed herewith
(12) Inapplicable
(13) Purchase Agreement between Registrant and
Robert E. Torray is incorporated by reference
to Exhibit (13) to Pre-Effective Amendment No.
2 to the Registrant's Registration Statement on
Form N-1A, filed on November 20, 1990 and filed
herewith
(14) Inapplicable
(15) Inapplicable
(16) Performance Calculations are incorporated by
reference to Exhibit 16 to Post-Effective
Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A, filed on
March 6, 1992 and filed herewith
Item 25. Persons Controlled by or under Common Control with
Registrant.
None.
C-2
<PAGE>
Item 26. Number of Holders Securities.
As of March 19, 1996, there were 492 record holders of
securities of the Registrant.
Item 27. Indemnification.
Article VIII of the Registrant's Agreement and Declaration of
Trust, provides in effect that the Registrant will indemnify its officers and
Trustees under certain circumstances. However, in accordance with Section 17(h)
and 17(i) of the Investment Company Act of 1940 and its own terms, said
Agreement and Declaration of Trust does not protect any person against any
liability to the Registrant 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.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions (or otherwise),
the Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisor.
(a) Registrant's investment advisor is The Torray Corporation, a
Maryland corporation ("Torray"), which was organized in 1990. The principal
place of business of Torray is 6610 Rockledge Drive, Bethesda, Maryland 20817.
The only business in which Torray currently engages is that of investment
advisor and administrator to the Registrant and other investment companies that
Torray may sponsor in the future. Information pertaining to business and other
connections of the investment advisor is hereby incorporated by reference to the
section of the Prospectus captioned "Management of the Fund" and to the section
of the Statement of Additional Information captioned "Management of the Fund."
C-3
<PAGE>
(b) The business, profession, vocation or employment of a substantial
nature in which each director and officer of Torray is or has been engaged
during the past two fiscal years for his or her own account in the capacity of
director, officer, employee, partner or Trustee is as follows:
Name Name of Company and Capacity Therewith
Robert E. Torray President and Chairman of the Board, Robert
E. Torray & Co., Inc. (investment advice);
President and Chairman of the Board of
Directors, The Torray Corporation; Chairman,
Birmingham Capital Management Co., Inc.
(investment advice); Chairman, Energy
Recovery Management, Inc. (administrator for
oil and gas investment limited partnership);
Director, Liberty Bancorp (banking);
Marianna T. Doyle Vice President, Robert E. Torray & Co. Inc.;
Vice President and Assistant Secretary, The
Torray Corporation.
Douglas C. Eby Vice President, Robert E. Torray & Co. Inc.;
Assistant Treasurer, The Torray Corporation.
William M Lane Vice President, Robert E. Torray & Co. Inc.;
Vice President and Secretary, The Torray
Corporation; Secretary and Treasurer,
Birmingham Capital Management Co., Inc.; Vice
President and Secretary, Energy Recovery
Management, Inc. (administrator for oil and
gas investment limited partnership); General
Partner, WML Associates, L.P.
Item 29. Principal Underwriters.
None
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be
maintained pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules thereunder are maintained at the offices of the Registrant (transfer
agency and shareholder records), the offices of Registrant's manager, The Torray
Corporation, 6610 Rockledge Drive, Bethesda, Maryland 20817, at the offices of
the Registrant's Custodian, Rushmore Trust & Savings, FSB, 4922 Fairmount
Avenue, Bethesda, Maryland 20814 (journals, ledgers, receipts, and brokerage
orders), or at the offices of Morgan, Lewis & Bockius LLP, counsel to the
Registrant, 1800 M Street, N.W., Washington, D.C. 20036 (minute
books and declaration of trust).
C-4
<PAGE>
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The Trust hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Trust's latest annual report to
shareholders, upon request and without charge.
Notice
A copy of the Agreement and Declaration of Trust of The Torray
Fund is on file with the Secretary of the Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and that the obligations of or arising out of this instrument are not binding
upon any of the Trustees or shareholders individually but are binding only upon
the assets and property of the Registrant.
C-5
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 (the "1933 Act"),
the Registrant certifies that this Post-Effective Amendment No. 6 to the
Registration Statement meets all of the requirements for effectiveness pursuant
to Rule 485(b) under the 1933 Act and has duly caused this Post-Effective
Amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bethesda and State of Maryland, on the ____ day of
______, 1996.
THE TORRAY FUND
By: /s/ WILLIAM M LANE
William M Lane
- -----------------------------------------------------------------
As required by the Securities Act of 1933, this Post-Effective Amendment No. 6
to the Registration Statement has been signed by the following persons in the
capacity and on the date indicated.
Signature Title Date
* Trustee April 30, 1996
Frederick Amling
* Trustee April 30, 1996
Robert P. Moltz
* Trustee April 30, 1996
C-6
<PAGE>
Roy Schotland
* Trustee and April 30, 1996
William M Lane Principal
Financial
Officer
* Trustee April 30, 1996
Bruce Ellis
* Trustee April 30, 1996
Wayne Shaner
* By:/s/ William M Lane
William M Lane
Attorney-in-Fact
C-7
<PAGE>
EXHIBIT INDEX
Sequential
Name Exhibit Page #
Agreement and Declaration (1)
of Trust is incorporated
by reference to Exhibit (1)
to the Registrant's Initial
Registration Statement on
Form N-1A, filed on April 24,
1990.
By-Laws are incorporated by (2)
reference to Exhibit (2) to the
Registrant's Initial Registration
Statement on Form N-1A, filed
on April 24, 1990.
Inapplicable. (3)
Inapplicable. (4)
Management Contract with The (5)
Torray Corporation ("Torray")
is incorporated by reference to
Exhibit (5) to Pre-Effective
Amendment No. 2 to the
Registrant's Registration
Statement on Form N-1A, filed on
November 20, 1990.
Inapplicable. (6)
Inapplicable. (7)
Custodian Agreement between (8)(a)
C-8
<PAGE>
Registrant and Sovran Bank/
Maryland is incorporated by
reference to Exhibit (8)
to Pre-Effective Amendment
No. 2 to the Registrant's
Registration Statement on
Form N-1A, filed on
November 20, 1990.
Custodian Agreement between (8)(b)
Registrant and Rushmore
Trust and Savings, FSB is
incorporated by reference
to exhibit (8)(b) to Post-
Effective Amendment No. 4
to the Registrant's
Registration Statement on
Form N1-A, filed on April
29, 1994.
Transfer Agency and Shareholder (9)
Service Agreement between
Registrant and Torray is
incorporated by reference to
Exhibit (9) to Pre-Effective
Amendment No. 2 to the
Registrant's Registration
Statement on Form N-1A, filed
on November 20, 1990.
Opinion and Consent of Morgan, (10)
Lewis & Bockius as to legality
of the securities being
registered (filed with Rule
24f-2 Notice on February 29, 1996).
Consent of Johnson Lambert & (11)
Co. Independent Accountants.
Inapplicable. (12)
Purchase Agreement between (13)
Registrant and Robert E. Torray
is incorporated by reference
to Exhibit (13) to Pre-Effective
Amendment No. 2 to the Registrant's
Registration Statement on Form
N-1A, filed on November 20, 1990.
Inapplicable. (14)
Inapplicable. (15)
Performance Calculations are (16)
incorporated by reference to
Exhibit 16 to Post-Effective
Amendment No. 2 to the
Registrant's Registration
Statement on Form N1-A, filed on
March 6, 1992.
AGREEMENT AND DECLARATION OF TRUST
THE TORRAY FUND
THIS AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts this
19th day of April, 1990 by the Trustees hereunder and the holders of shares of
beneficial interest issued hereunder and to be issued hereunder as hereinafter
provided:
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and the Trustees have agreed to manage all property coming
into their hands as Trustees of a Massachusetts business trust in accordance
with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby direct that this Agreement and
Declaration of Trust be filed with the Secretary of The Commonwealth of
Massachusetts and with the City Clerk of the City of Boston and do hereby
declare that they will hold all cash, securities and other assets, which they
may from time to time acquire in any manner as Trustees hereunder IN TRUST, to
manage and dispose of the same upon the following terms and conditions for the
pro rata benefit of the holders from time to time of Shares in this Trust as
hereinafter set forth.
ARTICLE I
Name and Definitions
Section 1. This Trust shall be known as "The Torray Fund" and the Trustees
shall conduct the business of the Trust under that name or any other name as
they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) "Trust" refers to the Massachusetts business trust established by
this Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refer to the Trustees of the Trust named in Article IV
hereof or elected in accordance with such Article;
<PAGE>
(c) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust or in the Trust property belonging to any
Series of the Trust (as the context may require) shall be divided from time to
time;
(d) "Shareholder" means a record owner of Shares;
(e) "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Commission" and "principal underwriter" shall have the
meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust, as amended or restated from time to time;
(h) "By-laws" shall mean the By-laws of the Trust as amended from time
to time;
(i) "Series Company" refers to the form of registered open-end
investment company described in Section 18(f)(2) of the 1940 Act or in
any successor statutory provision; and
(j) "Series" refers to Series of Shares established and designated
under or in accordance with the provisions of Article III.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment
primarily in securities, debt instruments and other instruments and rights of a
financial character.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in the
Trust shall at all times be divided into an unlimited number of Shares, without
par value. Subject to the provisions of Section 6 of this Article III, each
Share shall have voting rights as provided in Article V hereof, and holders of
the Shares of any Series shall be entitled to receive dividends, when and as
declared with respect thereto in the manner provided in Article VI, Section 1
hereof. No Share shall
<PAGE>
have any priority or preference over any other Share of the same Series with
respect to dividends or distributions upon termination of the Trust or of such
Series made pursuant to Article VIII, Section 4 hereof. All dividends and
distributions shall be made ratably among all Shareholders of a particular
Series from the assets belonging to such Series according to the number of
Shares of such Series held of record by such Shareholders on the record date for
any dividend or on the date of termination, as the case may be. Shareholders
shall have no preemptive or other right to subscribe to any additional Shares or
other securities issued by the Trust. The Trustees may from time to time divide
or combine the Shares of any particular Series into a greater or lesser number
of Shares of that Series without thereby changing the proportionate beneficial
interest of the Shares of that Series in the assets belonging to that Series or
in any way affecting the rights of Shares of any other Series.
Section 2. Ownership of Shares. The ownership of Shares shall be recorded
on the books of the Trust or a transfer agent or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series. No
certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the transfer of Shares of each Series and
similar matters. The record books of the Trust as kept by the Trust shall be
conclusive as to whom are the Shareholders of each Series and as to the number
of Shares of each Series held from time to time by each.
Section 3. Investments in the Trust. The Trustees shall accept investments
in the Trust from such persons and on such terms and for such consideration as
they from time to time authorize.
Section 4. Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the same nor entitle the representative of
any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but entitles such representative
only to the rights of said deceased Shareholder under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders' partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholders, except as specifically
<PAGE>
provided herein to call upon any Shareholders for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at any
time personally agree to pay.
Section 5. Power of Trustees to Change Provisions Relating to Shares.
Notwithstanding any other provisions of this Declaration of Trust and without
limiting the power of the Trustees to amend the Declaration of Trust as provided
elsewhere herein, the Trustees shall have the power to amend this Declaration of
Trust, at any time and from time to time, in such manner as the Trustees may
determine in their sole discretion, without the need for Shareholder action, so
as to add to, delete, replace or otherwise modify any provisions relating to the
Shares contained in this Declaration of Trust for the purpose of (i) responding
to or complying with any regulations, orders, rulings or interpretations of any
governmental agency or any laws, now or hereafter applicable to the Trust, or
(ii) designating and establishing other Series in addition to the Series
established in Section 6 of this Article III provided that before adopting any
such amendment without Shareholder approval the Trustees shall determine that it
is consistent with the fair and equitable treatment of all Shareholders. The
establishment and designation of any Series or class of Shares in addition to
the Series established and designated in Section 6 of this Article III shall be
effective upon the execution by a majority of the then Trustees of an amendment
to this Declaration of Trust, taking the form of a complete restatement or
otherwise, setting forth such establishment and designation and the relative
rights and preferences of such Series, or as otherwise provided in such
instrument.
Without limiting the generality of the foregoing, the Trustees may, for the
above-stated purposes, amend the Declaration of Trust to:
(a) Create one or more Series or classes of Shares (in addition to any
Series or classes already existing or otherwise) with such rights and
preferences and such eligibility requirements for investment therein as the
Trustees shall determine and reclassify any or all outstanding Shares as Shares
of particular Series or classes in accordance with such eligibility
requirements;
(b) Amend any of the provisions set forth in paragraphs (a) through (i)
of Section 6 of this Article III;
(c) Combine one or more Series or classes of Shares into a single
Series or class on such terms and conditions as the Trustees shall determine;
(d) Change or eliminate any eligibility requirements for investment in
Shares of any Series or class, including
<PAGE>
without limitation the power to provide for the issue of Shares of any Series or
class in connection with any merger or consolidation of the Trust with another
trust or company or any acquisition by the Trust of part or all of the assets of
another trust or company;
(e) Change the designation of any Series or class of Shares;
(f) Change the method of allocating dividends among the various Series
and classes of Shares;
(g) Allocate any specific assets or liabilities of the Trust or any
specific items of income or expense of the Trust to one or more Series or
classes of Shares;
(h) Specifically allocate assets to any or all Series or classes of
Shares or create one or more additional Series or classes of Shares which are
preferred over all other Series or classes of Shares in respect of assets
specifically allocated thereto or any dividends paid by the Trust with respect
to any net income, however determined, earned from the investment and
reinvestment of any assets so allocated or otherwise provide for any special
voting or other rights with respect to such Series or classes.
Section 6. Establishment and Designation of Series. Without limiting
the authority of the Trustees set forth in Section 5, inter alia, to establish
and designate any further Series or classes or to modify the rights and
preferences of any Series, the "Torray Fund" Series shall be, and is hereby,
established and designated.
Shares of each Series established in this Section 6 shall have the
following relative rights and preferences:
(a) Assets belonging to Series. All consideration received by the Trust
for the issue or sale of Shares of a particular Series, together with all assets
in which such consideration is invested or reinvested, and all income, earnings,
profits, and proceeds thereof from whatever source derived, including, without
limitation, any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors, and shall be so recorded
upon the books of account of the Trust. Such consideration, assets, income,
earnings, profits and proceeds thereof, from whatever source derived, including,
without limitation, any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same
<PAGE>
may be, are herein referred to as "assets belonging to" that Series. In the
event that there are any assets, income, earnings, profits and proceeds thereof,
funds or payments which are readily identifiable as belonging to any particular
Series (collectively "General Assets"), the Trustees shall allocate such General
Assets to, between or among any one or more of the Series established and
designated from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable, and any General Asset so allocated to
a particular Series shall belong to that Series. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged solely with the liabilities of the Trust in
respect to that Series, expenses, costs, charges and reserves attributable to
that Series, and any general liabilities of the Trust which are not readily
identifiable as belonging to any particular Series but which are allocated and
charged by the Trustees to and among any one or more of the Series established
and designated from time to time in a manner and on such basis equitable. The
liabilities, expenses, costs, charges, and reserves so charged to a Series,
herein referred to as liabilities, expenses, costs, charges and reserves by the
Trustees, shall be conclusive and binding upon the holders of all Series for all
purposes.
(c) Dividends, Distributions, Redemptions, and Repurchases.
Notwithstanding any other provisions of this Declaration, including, without
limitation, Article VI, no dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust or of any
Series) with respect to, nor any redemption or repurchase of, the Shares of any
Series shall be effected by the Trust other than from the assets belonging to
such Series, nor shall any Shareholder of any particular Series otherwise have
any right or claim against the assets belonging to any other Series except to
the extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series.
(d) Voting. Notwithstanding any of the other provisions of this
Declaration, including, without limitation, Section 1 of Article V, the
Shareholders of any particular Series shall not be entitled to vote on any
matters as to which such Series is not affected. On any matters submitted to a
vote of Shareholders, all Shares of the Trust then entitled to vote shall be
voted by individual Series, unless otherwise required by the 1940 Act or other
applicable law.
(e) Equality. All the Shares of each particular Series shall represent
an equal proportionate interest in the assets belonging to that Series (subject
to the liabilities
<PAGE>
belonging to that Series), and each Share of any particular Series shall be
equal to each other Share of that Series.
(f) Fractions. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole share of that Series,
including rights with respect to voting, receipt of dividends and distributions,
redemption of Shares and termination of the Trust.
(g) Exchange Privilege. The Trustees shall have the authority to
provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series of Shares in
accordance with such requirements and procedures as may be established by the
Trustees.
(h) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series unless otherwise required
by applicable law, to combine the assets and liabilities belonging to any two or
more Series into assets and liabilities belonging to a single series or class.
(i) Elimination of Series. At any time that there are no Shares
outstanding of any particular Series previously established and designated, the
Trustees may amend this Declaration of Trust to abolish that Series and to
rescind the establishment and designation thereof, such amendment to be effected
in the manner provided in Section 5 of this Article III.
Section 7. Indemnification of Shareholders. In case any Shareholder or
former Shareholder shall be held to be personally liable solely by reason of his
or her being or having been a Shareholder of the Trust or of a particular Series
and not because of his or her acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets of the Series of which he is a Shareholder or former Shareholder to
be held harmless from and indemnified against all loss and expense arising from
such liability.
Section 8. No Preemptive Rights. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
<PAGE>
ARTICLE IV
The Trustees
Section 1. Election and Tenure. The initial Trustee shall be William M.
Lane. The Trustees may fix the number of Trustees, fill vacancies in the
Trustees, including vacancies arising from an increase in the number of
Trustees, or remove Trustees with or without cause. Each Trustee shall serve
during the continued lifetime of the Trust until he or she dies, resigns or is
removed, or, if sooner, until the next meeting of Shareholders called for the
purpose of electing Trustees and until the election and qualification of his or
her successor. Any Trustee may resign at any time by written instrument signed
by him or her and delivered to any officer of the Trust or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his
resignation or removal, or any right to damages on account of such removal. The
Shareholders may fix the number of Trustees and elect Trustees at any meeting of
Shareholders called by the Trustees for that purpose and to the extent required
by applicable law, including paragraphs (a) and (b) of Section 16 of the 1940
Act.
Section 2. Effect of Death, Resignation, etc. of a Trustee. The death,
declination, resignation, retirement, removal, or incapacity of the Trustees, or
any of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust.
Section 3. Powers. Subject to the provisions of this Declaration of Trust,
the business of the Trust shall be managed by the Trustees, and they shall have
all powers necessary and convenient to carry out that responsibility including
the power to engage in securities transactions of all kinds on behalf of the
Trust. Without limiting the foregoing, the Trustees may adopt By-laws not
inconsistent with this Declaration of Trust providing for the regulation and
management of the affairs of the Trust and may amend and repeal them to the
extent that such By-laws do not reserve that right to the Shareholders; they may
fill vacancies in or remove from their number (including any vacancies created
by an increase in the number of Trustees); they may remove from their number
with or without cause; they may elect and remove such officers and appoint and
terminate such agents as they consider appropriate; they may appoint from their
own number and terminate one or more committees consisting of two or more
Trustees which may exercise the powers and authority of the Trustees to the
extent that the Trustees determine; they may employ one or more custodians of
the assets of the Trust and may
<PAGE>
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank, retain a transfer agent or a shareholder servicing
agent, or both, provide for the distribution of Shares by the Trust, through one
or more principal underwriters or otherwise, set record dates for the
determination of Shareholders with respect to various matters, and in general
delegate such authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of the Trust or to
any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority;
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options with respect to or otherwise deal in any property rights relating
to any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its own
name or in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(g) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the
<PAGE>
Trustees shall deem proper, and to agree to pay, and to pay, such portion of the
expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to
claims for taxes;
(i) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(j) To borrow funds or other property;
(k) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such person as Trustee, officer, employee, agent,
investment adviser, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person against
liability; and
(m) To pay pensions as deemed appropriate by the Trustees and to adopt,
establish and carry out pension, profit-sharing, share bonus, share purchase,
savings, thrift and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity contracts as
a means of providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. The Trustees shall
not be required to obtain any court order to deal with any assets of the Trust
or take any other action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are authorized to
pay or cause to be paid out of the principal or income of the Trust, or partly
out of principal and partly out of
<PAGE>
income, as they deem fair, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust, or in connection with the
management thereof, including but not limited to, the Trustees' compensation and
such expenses and charges for the services of the Trust's officers, employees,
investment adviser or manager, principal underwriter, auditor, counsel,
custodian, transfer agent, shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as the Trustees may
deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholders. The Trustees shall have the
power, as frequently as they may determine, to cause each Shareholder, or each
Shareholder of any particular Series, to pay directly, in advance or arrears,
for charges of the Trust's custodian or transfer, shareholder servicing or
similar agent, an amount fixed from time to time by the Trustees, by setting off
such charges due from such Shareholder from declared but unpaid dividends owed
such Shareholder and/or by reducing the number of Shares in the account of such
Shareholder by that number of full and/or fractional Shares which represents the
outstanding amount of such charges due from such Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all of the assets of
the Trust shall at all times be considered as vested in the Trustees.
Section 7. Management and Distribution Contracts. Subject to such
requirements and restrictions as may be set forth in the By-laws, the Trustees
may, at any time and from time to time, contract for exclusive or nonexclusive
advisory and/or management services for the Trust or for any Series thereof with
The Torray Corporation or any other corporation, trust, association or other
organization (the "Manager"); and any such contract may contain such other terms
as the Trustees may determine, including without limitation, authority for the
Manager to make changes in the Trust's investments and to determine from time to
time without prior consultation with the Trustees what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
the Trust shall be held uninvested. The Trustees may also, at any time and from
time to time, contract with any corporation, trust, association or other
organization, and appoint it exclusive or nonexclusive distributor or principal
underwriter for the Shares. Every such contract shall comply with such
requirements and restrictions as may be set forth in the By-laws, and any such
contract may contain such other terms as the Trustees may determine.
<PAGE>
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter, distributor or affiliate or agent of or for
any corporation, trust, association, or other organization, or of or for
any parent or affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or distributor's contract,
or transfer, shareholder servicing or other agency contract may have been
or may hereafter be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the Trust, or
that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other agency
contract may have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or distributor's contract,
or transfer, shareholder servicing or other agency contract with one or
more other corporations, trusts, associations, or other organizations, or
has other business or interests.
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Article IV, Section 1, (ii) with
respect to any amendment of this Declaration of Trust to the extent and as
provided in Article VIII, Section 8, (iii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
(iv) with respect to the termination of the Trust or any Series to the extent
and as provided in Article VIII, Section 4, and (v) with respect to such
additional matters relating to the Trust as may be required by this Declaration
of Trust, the By-laws or any registration of the Trust with the Commission (or
any successor agency) or any state, or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as
<PAGE>
to any matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no cumulative voting
in the election of Trustees. Shares may be voted in person or by proxy. A proxy
with respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. At any time when no Shares of a Series
are outstanding, the Trustees may exercise all rights of Shareholders of that
Series with respect to matters affecting that Series and may, with respect to
that Series, take any action required by law, this Declaration of Trust or the
By-Laws to be taken by the Shareholders.
Section 2. Voting Power and Meetings. Meetings of the Shareholders may be
called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
this Declaration of Trust or by the By-laws. Meetings of the Shareholders may
also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by the
Trustees. Written notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by mailing such notice at least seven days before
such meeting, postage prepaid, starting the time and place of the meeting, to
each Shareholder at the Shareholder's address as it appears on the records of
the Trust. Whenever notice of a meeting is required to be given to a Shareholder
under this Declaration of Trust or the By-laws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his attorney
thereunto authorized and filed with the records of the meeting, shall be deemed
equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum is
required by law, by the By-laws or by this Declaration of Trust, 40% of the
Shares entitled to vote shall constitute a quorum at a Shareholders' meeting.
When any one or more Series is to vote as a single class separate from any other
Shares which are to vote on the same matters as a separate class or classes, 40%
of the Shares of each such class entitled to vote shall constitute a quorum at a
Shareholder's meeting of that class. Any meeting of Shareholders may be
adjourned from time to time by a majority of the votes properly cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable period of time after the date set for the original
meeting without further notice. When a quorum is present at any meeting, a
majority of the Shares voted shall decide any questions and a plurality shall
elect a Trustee,
<PAGE>
except when a larger vote is required by any provision of this Declaration of
Trust or the By-laws or by law. If any question on which the Shareholders are
entitled to vote would adversely affect the rights of any Series or class of
Shares, the vote of a majority (or such larger vote as is required as aforesaid)
of the Shares of such Series or class which are entitled to vote, voting
separately, shall also be required to decide such question.
Section 4. Action by Written Consent. Any action taken by Shareholders may
be taken without a meeting if (i) Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or by the
By-laws) and holding a majority (or such larger proportion as aforesaid) of the
Shares of any Series or class entitled to vote separately on the matter consent
to the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the Shareholders of
any Series who are entitled to vote or act at any meeting or any adjournment
thereof, the Trustees may from time to time fix a time, which shall be not more
than 90 days before the date of any meeting of Shareholders, as the record date
for determining the Shareholders of such Series having the right to notice of
and to vote at such meeting and any adjournment thereof, and in such case only
Shareholders of record on such record date shall have such right,
notwithstanding any transfer of shares on the books of the Trust after the
record date. For the purpose of determining the Shareholders of any Series who
are entitled to receive payment of any dividend or of any other distribution,
the Trustees may from time to time fix a date, which shall be before the date
for the payment of such dividend or such other payment, as the record date for
determining the Shareholders of such Series having the right to receive such
dividend or distribution. Without fixing a record date the Trustees may for
voting and/or distribution purposes close the register or transfer books for one
or more Series for all or any part of the period between a record date and a
meeting of shareholders or the payment of a distribution. Nothing in this
section shall be construed as precluding the Trustees from setting different
record dates for different Series.
Section 6. Additional Provisions. The By-laws may include further
provisions for Shareholders' votes and meetings and related matters.
<PAGE>
ARTICLE VI
Distributions, Redemptions and Repurchases
Section 1. Distributions of Net Income. The Trustees shall each year, or
more frequently if they so determine in their sole discretion, distribute to the
Shareholders of each Series, in shares of that Series, cash or otherwise, an
amount approximately equal to the net income attributable to the assets
belonging to such Series and may from time to time distribute to the
Shareholders of each Series, in shares of that Series, cash or otherwise, such
additional amounts, but only from the assets belonging to such Series, as they
may authorize. All dividends and distributions on Shares of a particular Series
shall be distributed pro rata to the holders of that Series in proportion to the
number of Shares of that Series held by such holders and recorded on the books
of the Trust at the date and time of record established for that payment of such
dividend or distributions. The manner of determining net income, income, asset
values, capital gains, expenses, liabilities and reserves of any Series may from
time to time be altered as necessary or desirable in the judgment of the
Trustees to conform such manner of determination to any other method prescribed
or permitted by applicable law. Net income shall be determined by the Trustees
or by such person or persons as they may authorize at the times and in the
manner provided in the By-laws. Determinations of net income of any Series and
determination of income, asset value, capital gains, expenses, and liabilities
made by the Trustees, or by such person or persons as they may authorize, in
good faith, shall be binding on all parties concerned. The foregoing sentence
shall not be construed to protect any Trustee, officer or agent of the Trust
against all liability to the Trust or its security holders 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.
If, for any reason, the net income of any Series determined at any time is
a negative amount, the pro rata share of such negative amount allocable to each
Shareholder of such Series shall constitute a liability of such Shareholder to
that Series which shall be paid out of such Shareholder's account at such times
and in such manner as the Trustees may from time to time determine (x) out of
the accrued dividend account of such Shareholder, (y) by reducing the number of
Shares of that Series in the account of such Shareholder or (z) otherwise.
Section 2. Redemptions and Repurchases. The Trust shall purchase such
Shares as are offered by any Shareholder for redemption, upon the presentation
of a proper instrument of transfer together with a request directed to the Trust
or to a son designated by the Trust that the Trust purchase such Shares, or in
accordance with such other procedures for redemption as the
<PAGE>
Trustees may from time to time authorize; and the Trust will pay therefor the
net asset value thereof, as determined in accordance with the By-laws, next
determined. Payment for said Shares shall be made by the Trust to the
Shareholder within seven days after the date on which the request is made. The
obligation set forth in this Section 2 is subject to the provision that in the
event that any time the New York Stock Exchange is closed, other than weekends
or holidays, or if permitted by the rules of the Commission during periods when
trading on the Exchange is restricted or during any emergency which makes it
impracticable for the Trust to dispose of the investments of the applicable
Series or to determine fairly the value of the net assets belonging to such
Series or during any other period permitted by order of the Commission for the
protection of investors, such obligations may be suspended or postponed by the
Trustees. The Trust may also purchase or repurchase Shares at a price not
exceeding the net asset value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.
The redemption price may in any case or cases be paid wholly or partly
in-kind if the Trustees determine that such payment is advisable in the interest
of the remaining Shareholders of the Series the Shares of which are being
redeemed. In making any such payment wholly or partly in-kind, the Trust shall,
so far as may be practicable, deliver assets which approximate the
diversification of all of the assets belonging at the time to the Series, the
Shares of which are being redeemed. Subject to the foregoing, the fair value,
selection and quantity of securities or other property so paid or delivered as
all or part of the redemption price may be determined by or under authority of
the Trustees. In no case shall the Trust be liable for any delay of any
corporation or other person in transferring securities selected for delivery as
all or part of any payment in-kind.
Section 3. Redemptions at the Option of the Trust. The Trust shall have the
right at its option and at any time to redeem Shares of any Shareholder at the
net asset value thereof as described in Section 1 of this Article VI (i) if at
such time such Shareholder owns Shares of any Series having an aggregate net
asset value of less than an amount determined from time to time by the Trustees;
or (ii) to the extent that such Shareholder owns Shares equal to or in excess of
a percentage determined from time to time by the Trustees of the outstanding
Shares of the Trust or of any Series.
<PAGE>
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount of their
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Limitation of Liability. The Trustees shall not be responsible
or liable in any event for any neglect or wrongdoing of any officer, agent,
employee, Manager or principal underwriter of the Trust, nor shall any Trustee
be responsible for the act or omission of any other Trustee. Nothing herein
contained shall protect any Trustee against any liability 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.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
ARTICLE VIII
Miscellaneous
Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice. All
persons extending credit to, contracting with or having any claim against the
Trust or any Series shall look only to the assets of the Trust, or, to the
extent that the liability of the Trust may have been expressly limited by
contract to the assets of a particular Series, only to the assets belonging to
the relevant Series, for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any Trustee against
any liability to which such Trustee would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee.
<PAGE>
Every note, bond, contract, instrument, certificate or undertaking made or
issued on behalf of the Trust by the Trustees, by any officers or officer or
otherwise shall give notice that this Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts and shall recite that the same
was executed or made by or on behalf of the Trust or by them as Trustees or
Trustee or as officers or officer or otherwise and not individually, and that
the obligations of such instrument or instruments are not binding upon any of
them or the Shareholders individually but are binding only upon the assets and
property of the Trust or upon the assets belonging to the relevant Series for
the benefit of which the Trustees have caused the note, bond, contract,
instrument, certificate or undertaking to be made or issued, and may contain
such further recital as he, she or they may deem appropriate, but the omission
of any such recital shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder or any other person
individually.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his or her own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and he or she shall not be liable for errors of judgment or mistakes of fact or
law. The Trustees may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust, and shall be under no
liability for any act or omission in accordance with such advice or for failing
to follow such advice. The Trustees shall not be required to give any bond as
such, nor any surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Termination of Trust or Series. Unless terminated as provided
herein, the Trust shall continue without limitation of time. The Trust may be
terminated at any time by vote of at least 66-2/3% of the Shares of each Series
entitled to vote and voting separately by Series or by the Trustees by written
notice to the Shareholders. Any Series may be terminated at any time by vote of
at least 66-2/3% of the Shares of that Series or by the Trustees by written
notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may be), after
paying or otherwise providing for all charges,
<PAGE>
taxes, expenses and liabilities belonging, severally, to each Series (or the
applicable Series, as the case may be), whether due or accrued or anticipated,
as may be determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets
belonging, severally, to each Series (or the applicable Series, as the case may
be), to distributable form in cash or shares or other securities, or any
combination thereof, and distribute the proceeds belonging to each Series (or
the applicable Series, as the case may be), to the Shareholders of that Series,
as a Series, ratably according to the number of Shares of that Series held by
the several Shareholders on the date of termination.
Section 5. Merger and Consolidation. The Trustees may cause the Trust to be
merged into or consolidated with another trust or company or its shares
exchanged under or pursuant to any state or federal statute, if any, or
otherwise to the extent permitted by law, if such merger or consolidation or
share exchange has been authorized by vote of a majority of the outstanding
Shares. Provided that in all respects not governed by statute or applicable law,
the Trustees shall have power to prescribe the procedure necessary or
appropriate to accomplish a sale of assets, merger or consolidation.
Section 6. Filing of Copies, References, Headings. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of The Commonwealth of Massachusetts and with any other governmental
office where such filing may from time to time be required. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made and as to any matters in connection with
the Trust hereunder; and, with the same effect as if it were the original, may
rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein" and
"hereunder," shall be deemed to refer to this instrument as amended or affected
by any such amendments. Headings are placed herein for convenience of reference
only and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed in
any number of counterparts, each of which shall be deemed an original.
Section 7. Applicable Law. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a Massachusetts business trust, and
<PAGE>
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
Section 8. Amendments. This Declaration of Trust may be amended at any time
by an instrument in writing signed by a majority of the then Trustees when
authorized to do so by vote of a majority of the Shares entitled to vote, except
for amendments described in Article III, Section 5 hereof or amendments having
the purpose of changing the name of the Trust or of supplying any omission,
curing any ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained herein shall not require authorization by
Shareholder vote.
IN WITNESS WHEREOF, all of the Trustees as aforesaid do hereto set their
hands this 19th day of April, 1990.
/s/ WILLIAM M. LANE
----------------------------------
William M. Lane
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF SUFFOLK )
Then personally appeared before me William M. Lane, who acknowledged the
foregoing instrument to be his free act and deed.
/s/ JOAN D. SEARFOSS
----------------------------------
Notary Public
My commission expires:
JOAN D. SEARFOSS, Notary Public
My Commission Expires January 29, 1993
BY-LAWS
OF
THE TORRAY FUND
ARTICLE 1
Agreement and Declaration
of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-laws shall be subject to the
Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of The Torray Fund (the "Trust"), the Massachusetts
business trust established by the Declaration of Trust.
1.2 Principal Office of the Trust. The principal office of the Trust shall be
located in Bethesda, Maryland.
ARTICLE 2
Meeting of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held without call
or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following
any such determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held, at any time
and at any place designated by the Board, if any, the President or the
Treasurer or by two or more Trustees, sufficient notice thereof being given
to each Trustee by the Secretary or an Assistant Secretary or by the officer
or the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special meeting to
send notice by mail at least forty-eight hours before the meeting or by
telegram at least twenty-four hours before the meeting addressed to the
Trustee at his or her usual or last known business or residence address or to
give notice to him or her in person or by telephone at least twenty-four
hours before the meeting. Notice of a meeting need not be given to any
Trustee if a written waiver of notice, executed by him or her before or after
the meeting, is filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him or her. Neither notice of a meeting nor a waiver
of a notice need specify the purposes of the meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees then in
office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without
further notice.
2.5 Action by Vote. When a quorum is present at any meeting, a majority of
Trustees present may take any action, except when a larger vote is expressly
required by law, by the Declaration of Trust or by these By-laws.
2.6 Action by Writing. Except as required by law, any action required or
permitted to be taken at any meeting of the Trustees may be taken without
a meeting if a majority of the Trustees (or such larger proportion thereof
as shall be required by any express provision of the Declaration of Trust or
these By-laws) consent to the action in writing and such written consents are
filed with the records of the meetings of Trustees. Such consent shall be
treated for all purposes as a vote taken at a meeting of Trustees.
2.7 Presence through Communications Equipment. Except as required by law, the
Trustees may participate in a meeting of Trustees by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and in
participation by such means shall constitute presence in person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be President,
Treasurer, Secretary, and such other officers, if any, as the Trustees from
time to time may in their discretion elect. The Trust may also have such agents
as the Trustees from time to time may in their discretion appoint. If a
Chairman of the Board is elected, he or she shall be a Trustee and may be,
but need not be, a Shareholder; and any other officer may be, but none need
be, a Trustee or Shareholder. Any two or more offices may be held by the
same person or persons.
3.2 Election and Tenure. The President, the Treasurer, the Secretary and
such other officers as the Trustees may in their discretion from time to time
elect shall each be elected by the Trustees to serve until his or her successor
is elected or qualified, or until he or she sooner dies, resigns, is removed
or becomes disqualified. Each officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
3.3 Powers. Subject to the other provisions of these By-laws, each officer shall
have, in addition to the duties and powers herein and in the Declaration of
Trust set forth, such duties and powers as are commonly incident to the office
occupied by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may
from time to time designate.
3.4 President and Vice Presidents. The President shall have the duties and
powers specified in these By-laws and shall have such other duties and
powers as may be determined by these Trustees. Any Vice Presidents shall
have such duties and powers as shall be designated from time to time by the
Trustees.
3.5 Chief Executive Officer. The Chief Executive Officer of the Trust shall
be the Chairman of the Board, the President or such other officer as is
designated by the Trustees and shall, subject to the control of the Trustees,
have general charge and supervision of the business of the Trust and, except
as the Trustees shall otherwise determine, preside at all meetings of the
Stockholders and of the Trustees. If no such designation is made, the
President shall be the Chief Executive Officer.
3.6 Chairman of the Board. If a Chairman of the Board of Trustees is elected,
he or she shall have the duties and powers specified in these By-laws and
shall have such other duties and powers as may be determined by the
Trustees.
3.7 Treasurer. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration
of Trust and to any arrangement made by the Trustees with a custodian,
investment adviser or manager or transfer, shareholder servicing or similar
agent, be in charge of the valuable papers, books of account and accounting
records of the Trust, and shall have such other duties and powers as may
be designated from time to time by the Trustees or by the President.
3.8 Secretary. The Secretary shall record all proceedings of the Shareholders
and the Trustees in books to be kept therefor, which books or a copy thereof
shall be kept at the principal office of the Trust. In the absence of the
Secretary from any meeting of the Shareholders or Trustees, an Assistant
Secretary, or if there be none or if he or she is absent, a temporary
Secretary chosen at such meeting shall record the proceedings thereof in
aforesaid books.
3.9 Resignations and Removals. Any officer may resign at any time by written
instrument signed by him or her and delivered to the President or the Secretary
or to a meeting of the Trustees. Such resignation shall be effective upon
receipt unless specified to be effective at some other time. The Trustees may
remove any officer with or without cause. Except to the extent expressly
provided in a written agreement with the Trust, no officer resigning and no
officer removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damage on account
of such removal.
<PAGE>
ARTICLE 4
Indemnification
4.1 Trustees, Officers, etc. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise) (hereinafter referred
to as a "Covered Person") against all liabilities and expenses, including
but not limited to amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, and counsel fees reasonably incurred by any
Covered Person in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with which such person
may be or may have been threatened, while in office or thereafter, by reason
of any alleged act or omission as a Trustee or officer or by reason of his
being or having been such a Trustee or officer, except with respect to any
matter as to which such Covered Person shall have been finally adjudicated
in any such action, suit or other proceeding not to have acted in good
faith in the reasonable belief that such Covered Person's action was in the
best interest of the Trust and except that no Covered Person shall be
indemnified against any liability to the Trust or its Shareholders to which
such Covered Person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including counsel fees so
incurred by any such Covered Person, may be paid from time to time by the
Trust in advance of the final disposition of any such action, suit or
proceeding on the condition that the amounts so paid shall be repaid to the
Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article.
4.2 Compromise Payment. As to any matter disposed of by a compromise payment
by any such Covered Person referred to in Section 4.1 above, pursuant to a
consent decree or otherwise, no such indemnification either for said payment or
for any other expenses shall be provided unless such compromise shall be
approved as in the best interests of the Trust, after notice that it involved
such indemnification, (a) by a disinterested majority of the Trustees then in
office; or (b) by a majority of the disinterested Trustees then in office; or
(c) by any disinterested person or persons to whom the question may be referred
by the Trustees, provided that in the case of approval pursuant to clause (b)
or (c) there has been obtained an opinion in writing of independent legal
counsel to the effect that such Covered Person appears to have acted in
good faith in the reasonable belief that his or her action was in the best
interests of the Trust and that such indemnification would not protect such
person against any liability to the Trust or its
<PAGE>
Shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of office; or (d) by vote of Shareholders holding
a majority of the Shares entitled to vote thereon, exclusive of any Shares
beneficially owned by any interested Covered Person. Approval by the Trustees
pursuant to clause (a) or (b) or by an disinterested person or persons pursuant
to clause (c) of this Section shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance with any of such
clauses as indemnification if such Covered Person is subsequently adjudicated by
a court of competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in the best interests of
the Trust or to have been liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
4.3 Indemnification Not Exclusive. The right of indemnification hereby provided
shall not be exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article 4, the term "Covered
Person" shall include such person's heirs, executors and administrators; an
"interested Covered Person" is one against whom the action, suit or other
proceeding in question or another action, suit or other proceeding on the
same or similar grounds is then or has been pending; and a "disinterested
Trustee" or "disinterested person" is a Trustee or a person against whom
none of such actions, suits or other proceedings or another action, suit or
other proceeding on the same or similar grounds is then or has been pending.
Nothing contained in this Article shall affect any rights to indemnification
to which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor shall it
affect the power of the Trust to purchase and maintain liability insurance
on behalf of any such person.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the time and
in the manner required by the Declaration of Trust or any applicable law.
Officers shall render such additional reports as they may deem desirable
or as may from time to time be required by the Trustees.
ARTICLE 6
6.1 General. Except as from time to time or otherwise provided by the
Trustees, the initial fiscal year of the Trust shall end on such date as
is determined in advance or in arrears by the
<PAGE>
Treasurer and subsequent fiscal years shall end on such date in subsequent
years.
ARTICLE 7
7.1 General. The seal of the Trust shall consist of a flat-faced die with the
word "Massachusetts", together with the name of the Trust and the year of
its organization cut or engraved thereon, but, unless otherwise required
by the Trustees, the seal shall not be necessary to be placed on, and its
absence shall not impair the validity of, any document, instrument or other
paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally, or in particular cases,
authorize the execution thereof in some other manner, all checks, notes,
drafts and other obligations and all registration statements and amendments
thereto and all applications and amendments thereto to the Securities and
Exchange Commission shall be signed by the Chairman, the President, any
Vice President or the Treasurer, if any, or any of such other officers or agents
as shall be designated for that purpose by a vote of the Trustees.
ARTICLE 9
Provisions Relating to the
Conduct of the Trust's Business
9.1 Certain Definitions. When used herein the following words shall have the
following meanings: "Distributor" shall mean any one or more corporations,
firms or associations which have distributor's or principal underwriter's
contracts in effect with the Trust providing that redeemable Shares of any
class or Series issued by the Trust shall be offered and sold by such
Distributor. "Manager" shall mean any corporation, firm or association which
may at the time have an advisory or management contract with the Trust.
9.2 Limitation on Dealing with Officers or Trustees. The Trust will not lend
any of its assets to the Distributor or Manager or to any officer or director
of the Distributor or Manager or any officer or Trustee of the Trust shall not
permit any officer or Trustee or any officer or director of the Distributor
or Manager, to deal for or on behalf of the Trust with himself as principal
or agent, or with any partnership, association or corporation in which he or
she has a financial interest; provided that the foregoing provisions shall not
prevent (a) officers and Trustees of the Trust or officers and directors of the
Distributor or Manager from buying, holding or selling shares in the trust or
from being partners, officers and directors of or otherwise
<PAGE>
financially interested in the Distributor or the Manager; (b) a purchase or sale
or securities or other property if such transaction is permitted by or is exempt
or exempted from the provisions of the Investment Company Act of 1940 and does
not involve any commission or profit to any securities dealer who is, or one or
more of whose partners, shareholders, officers or directors is, an officer or
Trustee of the Trust or an officer or director of the Distributor or Manager;
(c) employment of legal counsel, registrars, transfer agents, shareholder
servicing agents, dividend disbursing agents or custodians who are, or any one
of whom has a partner, shareholder, officer or director who is an officer or
Trustee of the Trust or an officer or director of the Distributor or Manager if
only customary fees are charged for services to the Trust; (d) sharing of
statistical, research, legal and management expenses and office hiring and
expenses with any other investment company in which an officer or Trustee of the
Trust or an officer or director of the Distributor or Manager is an officer or
director or is otherwise financially interested.
9.3 Limitation on Dealing in Securities of the Trust by Certain Officers,
Trustees, Distributor or Manager. Neither the Distributor nor Manager, nor
any officer or Trustee of the Trust or officer or director of the Distributor
or Manager shall take long or short positions in securities issued by the
trust, provided, however, that:
(a) The Distributor may purchase from the Trust and otherwise deal in
shares issued by the Trust pursuant to the terms of its contract with the
Trust;
(b) Any officer or Trustee of the Trust or officer or director of the
Distributor or Manager or any Trustee or fiduciary for the benefit of any
of them may, at any time, or from time to time, purchase from the Trust or from
the Distributor shares issued by the Trust at the price available to the public
or to such officer, Trustee, director or fiduciary, if such purchase is not in
contravention of any applicable state or federal requirement; and
(c) The Distributor or the Manager may at any time, or from time to time,
purchase shares issued by the Trust for investment.
9.4 Securities and Cash of the Trust to be Held by Custodian Subject to
Certain Terms and Conditions.
(a) All securities and cash owned by the Trust shall, as hereinafter
provided, be held by or deposited with one or more banks or trust companies
having (according to its last published report) not less than $2,000,000
aggregate capital, surplus and undivided profits (any such bank or trust
company being hereby designated as "Custodian"), provided such a Custodian
can be found ready and willing to act. The Trust may, or may permit any
Custodian to, deposit all or part of the securities owned by any class or Series
of Shares of the Trust in a system for the
<PAGE>
central handling of securities established by a national securities exchange or
national securities association registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, or such other person
as may be permitted by said Commission, including, without limitation, a
clearing agency registered under Section 17A of said Securities Exchange
Act of 1934, pursuant to which system all securities of any particular class or
Series of any issue deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry, without physical
delivery of such securities.
(b) The Trust shall enter into a written contract with each Custodian
regarding the powers, duties and compensation of such Custodian with
respect to the cash and securities of the Trust held by such Custodian. Said
contract and all amendments thereto shall be approved by the Trustees.
(c) The Trust shall upon the resignation or inability of any Custodian
to serve or upon change of any Custodian:
(i) in the case of such resignation or inability to serve, use its
best efforts to obtain a successor Custodian;
(ii) require that the cash and securities owned by any class or
Series of Shares of the Trust and in the possession of the resigning or
disqualified Custodian be delivered directly to the successor Custodian; and
(iii) in the event that no successor Custodian can be found,
submit to the shareholders, before permitting delivery of the cash and
securities owned by any class or Series of Shares of the Trust and in the
possession of the resigning or disqualified Custodian otherwise than to a
successor Custodian, the question whether that class or Series shall be
liquidated or that class will function without a Custodian.
9.5 Limitations on Investment by the Trust in Securities of Any One Issuer.
The Trust may not purchase for its portfolio or for the portfolio of any class
or Series of the Trust's Shares the securities of any issuer if immediately
after such purchase the Trust or that class or Series would thereupon hold
securities representing more than 10% of the voting securities of such issuer
as disclosed in the last available financial statements of such issuer. This
limitation shall not apply to obligations issued or guaranteed by the
government of the United States of America or to obligations of any corporation
organized under a general Act of Congress if such corporation is an
instrumentality of the United States. For purposes of this limitation, each
state and each political subdivision, agency, authority or instrumentality
thereof and each multi-state agency and authority shall be considered a separate
issuer.
9.6 Determination of Net Asset Value. The Trustees or any officer or officers
or agent or agents of the Trust designated
<PAGE>
from time to time for this purpose by the Trustees shall determine at
least once daily the net income and the value of all the assets attributable
to any class or Series of Shares of the Trust on each day upon which the
New York Stock Exchange is open for unrestricted trading and at such
other times as the Trustees shall designate. In determining asset values, all
securities for which representative market quotations are readily available
shall be valued at market value and other securities and assets shall be
valued at fair value, all as determined in good faith by the Trustees or an
officer or officers or agent or agents, as aforesaid, in accordance with
accounting principles generally accepted at the time. Notwithstanding the
foregoing, the assets belonging to any class or Series of Shares of the Trust
may, if so authorized by the Trustees, be valued in accordance with the
amortized cost method, subject to the power of the Trustees to alter the method
for determining asset values. The value of such assets so determined, less total
liabilities belonging to that class or Series of Shares (exclusive of capital
stock and surplus) shall be the net asset value until a new asset value is
determined by the Trustees or such officers or agents. In determining the net
asset value the Trustees or such officers or agents may include in liabilities
such reserves for taxes, estimated accrued expenses and contingencies in
accordance with accounting principles generally accepted at the time as the
Trustees or such officers or agents may in their best judgment deem fair and
reasonable under the circumstances. The manner of determining net asset value
may from time to time be altered as necessary or desirable in the judgment of
the Trustees to conform it to any other method prescribed or permitted by
applicable law or regulation. Determinations of net asset value made by the
Trustees or such officers or agents in good faith shall be binding on all
parties concerned. The foregoing sentence shall not be construed to protect
any Trustee, officer or agent of the Trust against any liability to the Trust
or its security holders 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 10
Amendments to the By-laws
10.1 General. These By-laws may be amended or repealed, in whole or in part,
by a majority of the Trustees then in office at any meeting of the Trustees.
[Adopted as of April 19, 1990]
THE TORRAY FUND
MANAGEMENT CONTRACT
Management Contract executed as of November 16th, 1990, between
THE TORRAY FUND, a Massachusetts business trust (the "Trust"), and THE
TORRAY CORPORATION, a Maryland corporation (the "Manager").
Witnesseth:
That in consideration of the mutual covenants herein contained,
it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO TRUST.
(a) Subject always to the control of the Trustees of the Trust and to
such policies as the Trustees may determine, the Manager will, at its expense,
(i) furnish continuously an investment program for the Trust and will make
investment decisions on behalf of the Trust and place all orders for the
purchase and sale of portfolio securities and (ii) manage, supervise and conduct
the other affairs and business of the Trust, furnish office space and equipment,
provide bookkeeping and clerical services, including determination of net asset
value (but excluding shareholder accounting services), and pay all salaries,
fees and expenses of officers and Trustees of the Trust who are affiliated with
the Manager. In the performance of its duties, the Manager will be subject to
the control of the Trustees and to the policies determined by the Trustees, as
well as to the provisions of the Trust's Agreement and Declaration of Trust, its
By-laws as in effect from time to time, and the investment objectives, policies
and restrictions stated in the Trust's prospectus.
(b) In the selection of brokers or dealers and the placing of orders
for the purchase and sale of portfolio investments for the Trust, the Manager
shall seek to obtain for the Trust the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described below. In using
its best efforts to obtain for the Trust the most favorable price
and execution available, the Manager, bearing in mind the Trust's best
interests at all times, shall consider all factors it deems relevant,
including by way of illustration, price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker and dealer
involved and the quality of service rendered by the broker or dealer in other
transactions. Subject to such policies as the Trustees may determine, the
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Contract or otherwise solely by reason of its having
<PAGE>
caused the Trust to pay a broker or dealer that provides brokerage and
research services to the Manager an amount of commission for effecting a
securities transaction for the Fund in excess of the commission another
broker or dealer would have charged for effecting that transaction, if
the Manager determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Manager's overall responsibilities with respect to the
Trust and to other clients of the Manager as to which the Manager exercises
investment discretion. The Trust hereby agrees with the Manager that any
entity or person associated with the Manager which is a member of a
national securities exchange is authorized to effect any transaction on
such exchange for the account of the Trust and any Trust thereof which is
permitted by Section 11(a) of the Securities Exchange Act of 1934 and Rule
11a2-2(T) thereunder, and the Trust hereby consents to the retention of
compensation for such transactions in accordance with Rule 11a2-2(T)(2)(iv).
(c) The Manager shall not be obligated to pay any expenses
of or for the Trust not expressly assumed by the Manager pursuant to this
Section 1.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest
in the Trust. It is also understood that the Manager and persons controlled
by or under common control with the Manager have and may have advisory,
management service, distribution or other contracts with other organizations
and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust will pay to the Manager as compensation for the Manager's
services rendered, for the facilities furnished and for the expenses borne
by the Manager pursuant to Section 1, a fee, computed daily and paid quarterly,
at the annual rate of 1.00% of the daily net asset value of the Trust. The fee
shall be paid from the assets of the Trust. Such fee shall be payable for each
quarter within five (5) business days after the end of such quarter.
In the event that expenses of the Trust for any fiscal year should
exceed the expense limitation on investment company expenses imposed by any
statute or regulatory authority of any
<PAGE>
jurisdiction in which shares of the Trust are qualified for offer and sale,
the compensation due the Manager for such fiscal year shall be reduced by
the amount of such excess by a reduction or refund thereof. In the event that
the expenses with respect to the Trust could exceed any expense limitation
which the Manager may, by written notice to the Trust, voluntarily declare to
be effective subject to such terms and conditions as the Manager may prescribe
in such notice, the compensation due the Manager shall be reduced, and, if
necessary, the Manager shall bear expenses with respect to the Trust, to the
extent required by such expense limitation.
If the Manager shall serve for less than the whole of a quarter,
the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Contract shall not
be amended unless such amendment is approved at a meeting by the affirmative
vote of a majority of the outstanding shares of the Trust, and by the vote,
cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Trustees of the Trust who are not interested
persons of the Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate
this Contract by not more than sixty days' written notice
delivered or mailed by registered mail, postage prepaid, to the
other party, or
(b) If (i) the Trustees of the Trust or the shareholders
of the affirmative vote of a majority of the outstanding shares
of the Trust, and (ii) a majority of the Trustees of the Trust
who are not interested persons of the Trust or of the Manager,
by vote cast in person at a meeting called for the purpose of
voting on such approval, do not specifically approve at least
annually the continuance of this Contract, then this Contract shall
automatically terminate at the close of business on the second
anniversary of its execution, or upon the expiration of one year
from the effective date of the last such continuance, whichever
is later; provided, however, that if the continuance of this
<PAGE>
Contract is submitted to the shareholders of the Trust for their
approval and such shareholders fail to approve such continuance of this
Contract as provided herein, the Manager may continue to serve hereunder
in a manner consistent with the 1940 Act and the rules and regulations
thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority
of the outstanding shares of the Trust.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of
a majority of the outstanding shares" means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more
of the shares of the Trust present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding
shares of the Trust entitled to vote at such meeting are present in person
or by proxy, or (b) of the holders of more than 50% of the outstanding
shares of the Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their
respective meanings defined in the 1940 Act and the rules and regulations
thereunder, subject, however to such exemptions as may be granted by the
Securities and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with
the 1940 Act and the rules and regulations thereunder; and the term
"brokerage and research services" shall have the meaning given in the
Securities Exchange Act of 1934 and the rules and regulations thereunder.
7. USE OF NAME.
The word "Torray" to be used in the Fund's name belongs exclusively
to the Manager, and may be used by the Fund only so long as this Contract
has not been terminated.
8. NONLIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of its obligations
and duties hereunder, the Manager shall not be subject to any liability to the
Trust, or to any shareholder of the Trust, for any act or omission in the
course of, or connected with, rendering services hereunder.
<PAGE>
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is
on file with the Secretary of The Commonwealth of Massachusetts, and notice
is hereby given that this instrument is executed on behalf of the Trustees
of the Trust as Trustees and not individually and that the obligations of
this instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, THE TORRAY FUND and THE TORRAY CORPORATION
have each caused this instrument to be signed on duplicate in its behalf
by its duly authorized representative, all as of the day and year first
above written.
THE TORRAY FUND
By: /s/ ROBERT E. TORRAY
Title: President
THE TORRAY CORPORATION
By: /s/ WILLIAM LANE
Title: Vice President
CUSTODY AGREEMENT
THIS AGREEMENT is made of this day of
1990, by and between The Torray Fund, a Massachusetts business trust
(the "Trust"), and SOVRAN BANK/MARYLAND, a State Chartered Bank ("Sovran"),
as custodian.
WITNESSETH:
WHEREAS, the Trust is registered as an open-end, diversified, investment
company under the Investment Company Act of 1940, as amended ("the 1940 Act"),
and is offering units of beneficial interest shares ("Shares") which represent
interests in the Trust's investment portfolio (the "Fund"); and
WHEREAS, the Trust desires to retain Sovran to serve as the Trust's
custodian for the Fund and Sovran is willing to furnish such services;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints Sovran to act as custodian
of the portfolio securities, cash and other property of the Fund for the
period and on the terms set forth in this Agreement. Sovran accepts such
appointment and agrees to the compensation provided in Paragraph 22 of this
Agreement. Sovran agrees to comply with all relevant provisions of the 1940 Act
and applicable rules and regulations thereunder.
2. Delivery of Documents. The Trust has furnished Sovran with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Trust's Board of Trustees authorizing
the appointment of Sovran as custodian of the portfolio securities, and
cash and other property of the Fund and approving this Agreement;
(b) Incumbency and signature certificates identifying and
containing the signatures of the Trust's officers and/or other persons
authorized to sign Written Instructions, as hereinafter defined, on behalf of
the Trust;
(c) The Trust's Agreement and Declaration of Trust filed with
the Secretary of State of The Commonwealth of Massachusetts on April 24,
1990, and all amendments thereto (such Agreement and Declaration of Trust
as currently in effect, and as it shall from time to time be amended, is
herein called the "Declaration of Trust");
(d) The Trust's Bylaws and all amendments thereto (such Bylaws,
as currently in effect, and as they shall from time to time be amended, are
herein called the "Bylaws");
(e) Resolutions of the Trust's Board of Trustees appointing The
Torray Corporation (the "Manager") as the investment adviser to the Fund and
the resolutions of the Trust's Board of Trustees and holders of the Shares of
the Fund ("Shareholders") approving a proposed Management Contract between
the Manager and the Trust (the "Management Contract");
(f) Resolutions of the Trust's Board of Trustees appointing The
Torray Corporation as the Fund's transfer agent (The Torray Corporation is
sometimes hereinafter referred to as the "Transfer Agent") and approving
a proposed Transfer Agency Agreement between the Trust and The Torray
Corporation (the "Transfer Agency Agreement");
(g) The Management Contract, and the Transfer Agency Agreement;
(h) The Trust's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A with the Securities and Exchange
Commission ("SEC") on April 24, 1990;
(i) The Trust's Registration Statement on Form N-1A under the 1940
Act and the Securities Act of 1933, as amended ("the 1933 Act"), as filed with
the SEC on April 24, 1990 (File No. 33-34411), relating to the Fund's Shares,
and all amendments thereto; and
(j) The Trust's most recent prospectus and statement for additional
information for the Fund (such prospectus and statement of additional
information as presently in effect and all amendments and supplements hereto
are herein called the "Prospectus").
The Trust will furnish Sovran from time to time with copies of all
amendments of, or supplements to the foregoing, if any.
3. Definitions
(a) "Authorized Persons". As used in this Agreement, the term
"Authorized Persons" means the Trust's President, Treasurer, and any other
person, whether or not any such person is an officer or employee of the Trust,
duly authorized by the Board of Trustees of the Trust to give Oral and Written
Instructions on behalf of the Trust and listed on the Certificates annexed
hereto as Appendix A or such other Certificate listing persons duly authorized
to give Oral and Written Instructions on behalf of the Trust as may be
received by Sovran from time to time.
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve Treasury book-entry system for
United States and federal agency securities, its successor or successors
and its nominee or nominees and any book-entry system maintained by a clearing
agency registered with the SEC under Section 17A of the Securities and Exchange
Act of 1934 (the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term
"Oral Instructions" means verbal instructions actually received by Sovran
from an Authorized Person or from a person reasonably believed by Sovran
to be an Authorized Person, although such instructions may be continuous
in nature when deemed appropriate by the parties. The Trust agrees
to deliver to Sovran, at the time and in the manner specified in Paragraph
8(b) of this Agreement, Written Instructions confirming Oral Instructions.
(d) "Property". The term "Property" as used in this Agreement,
means:
(i) any and all securities and other property which the Trust
may from time to time deposit or cause to be deposited with Sovran
with respect to the Fund or which Sovran may from time to time hold
for the Trust with respect to the Fund;
(ii) all income in respect to any of such securities or other
property;
(iii) all proceeds of the sale of any of such securities or
other property; and
(iv) all proceeds of the sale of securities issued by the Trust
with respect to the Fund, which are received by Sovran from time to
time or on behalf of the Trust.
(e) "Written Instructions". As used in this Agreement, the term
"Written Instructions" means written instructions delivered by mail, tested
telegram, cable, telex, or facsimile sending device, and received by Sovran,
signed by an Authorized Person. Such instructions may be continuous in
nature when deemed appropriate by the parties.
4. Delivery and Registration of Property. The Trust will deliver or cause to
be delivered to Sovran all securities and all moneys with respect to the Fund
owned by it (other than cash maintained by the Fund in a bank account
established and used in accordance with Rule 17f-3 under the 1940 Act),
including cash received for the issuance of Shares, at any time during the
period of this Agreement. Sovran will not be responsible for such securities and
such moneys until actually received by it. All securities delivered to Sovran
(other than in bearer form) shall be registered in the name of the Fund or in
the name of a nominee of the Fund or in the name of Sovran or any nominee of
Sovran, or in the name of any subcustodian appointed pursuant to Paragraph 6
hereof, or shall be properly endorsed and in a form for transfer satisfactory to
Sovran.
5. Receipt and Disbursement of Money.
(a) Sovran shall open and maintain a separate Custodian account or
accounts for the Fund in the name of the Trust, subject only to draft or order
by Sovran acting pursuant to the terms of this Agreement, and 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. Sovran shall make payments of cash to, or
for the account of, the Fund from such cash only (i) for the purchase of
securities as provided in Paragraph 12 hereof; (ii) for the redemption of Shares
as provided in subparagraph (b) of Paragraph 9 hereof; (iii) upon receipt of
Written Instructions, for the payment of interest, dividends, taxes, or
custodial, transfer agency, administration, or advisory fees or expenses which
are to be borne by the Fund under the terms of this Agreement, the Transfer
Agency Agreement, and the Management Contract; (iv) upon receipt of Written
Instructions, for payments in connection with the conversions, exchanges, or
surrender of securities owned or subscribed to by the Fund and held by or to be
delivered to Sovran; (v) to a subcustodian pursuant to Paragraph 6 hereof; or
(vi) for other proper purposes, but only upon receipt of Written Instructions,
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 purpose and naming
the person or persons to whom such payment is to made.
(b) Sovran is hereby authorized to endorse and collect all
checks, drafts, or other orders for the payment of money received as custodian
for the account of the Fund.
6. Receipt of Securities. (a) Except as provided in Paragraph 7 hereof,
Sovran shall hold and physically segregate in a separate account identifiable at
all times from those of any other persons, firms, or corporations, all
securities and non-cash property received by it for the account of the Fund.
All such securities and non-cash property are to be held or disposed of by
Sovran for the Fund pursuant to the terms of this Agreement. In the absence of
Written Instructions accompanied by a certified resolution of the Trust's Board
of Trustees authorizing the specific transaction, Sovran shall have no power or
authority to withdraw, deliver, assign, hypothecate, pledge, or otherwise
dispose of any such securities and investments except in accordance with the
express terms provided for in this Agreement. In no case may any Trustee,
officer, employee, or agent of the Trust withdraw any securities. In connection
with its duties under this Paragraph 6, Sovran may, at its own expense and in
accordance with an applicable vote of the Board of Trustee, enter into
subcustodian agreements with other banks or trust companies for the receipt of
certain securities and cash to be held by Sovran for the account of the Fund
pursuant to this Agreement; provided that each such bank or trust company has
aggregate capital, surplus and undivided profits, as shown by its last published
report, of not less than five hundred thousand dollars ($500,000.00), that such
bank or trust company agrees with Sovran to comply with all relevant provisions
of the 1940 Act and applicable rules and regulations thereunder, and that Sovran
shall have no more or less responsibility or liability to the Trust on account
of any actions or omissions of any sub-custodian so employed than any such
sub-custodian has to Sovran. Sovran shall remain responsible for the performance
of all of its duties under this Agreement and shall hold the Trust harmless from
the acts and omissions of any bank or trust company that it might choose
pursuant to this Paragraph 6.
(b) Promptly after the close of business each day, Sovran
shall furnish the Trust with confirmation and a summary of all transfers
to or from the accounts of the Fund during said day. Where securities
are transferred to an account of the Fund established pursuant
to Paragraph 7 hereto, Sovran shall also by book-entry or otherwise
identify as belonging to the Fund the quantity of securities
in a fungible bulk of securities registered in the name of Sovran (or its
nominee) or shown in Sovran's account on the books of the Book-Entry
System. At least monthly and from time to time, Sovran shall furnish the
Trust with a detailed statement of the Property held for the Fund under
this Agreement, including segregated collateral for any repurchases
agreements as are then held.
7. Use of Book-Entry Systems. The Trust shall deliver to Sovran
a certified resolution of the Board of Trustees of the Trust approving,
authorizing and instructing Sovran on a continuous and on-going basis
until instructed to the contrary by Oral or Written Instructions actually
received by Sovran (i) to deposit in the Book-Entry System all securities
of the Fund eligible for deposit therein and (ii) to utilize the
Book-Entry System to the extent possible in connection with settlements
of purchase and sales of securities by the Fund, and deliveries and
returns of securities collateral in connection with borrowings. Without
limiting the generality of such use, it is agreed that the following
provisions shall apply thereto;
(a) Securities and any cash of the Fund deposited in the Book-Entry
System will at all times be segregated from any assets and cash controlled
by Sovran in other than a fiduciary or custodian capacity but may be
co-mingled with other assets held in such capacities. Sovran will pay
out money only upon receipt of securities and will deliver securities only
upon the receipt of money.
(b) All books and records maintained by Sovran which relate to
the Fund's participation in the Book-Entry System will at all times during
Sovran's regular business hours be open to the inspection of the Fund's
duly authorized employees or agents, and the Fund will be furnished
with all information in respect of the services rendered to it
as it may require.
(c) Sovran will provide the Trust with copies of any report
obtained by Sovran on the system of internal accounting control
of the Book-Entry System within ten days after receipt of such
a report by Sovran. Sovran will also provide the Trust with such
reports on its own system of internal control as the Trust may
reasonable request from time to time.
(d) Sovran shall be liable to the Trust for any loss or damage to the
Trust resulting from use of a book-entry system by reason of negligence of
Sovran or its agents or employees or from failure of Sovran or its agents or
employees to enforce such rights as it may have against the book-entry system.
8. Instructions Consistent with Declaration of Trust, By-laws, etc.
(a) Unless otherwise provided in this Agreement, Sovran shall act
only upon Oral and Written Instructions. Although Sovran may take cognizance of
the provisions of the Declaration of Trust and Bylaws of the Trust, Sovran may
assume that any Oral or Written Instructions received hereunder are not in any
way inconsistent with any provisions of such Declaration of Trust or Bylaws or
any vote, resolution or proceeding of the Shareholders, or of the Board of
Trustees or of any committee thereof.
(b) Sovran shall be entitled to rely upon any Oral Instructions and
any Written Instructions actually received by Sovran pursuant to this Agreement.
The Trust agrees to forward to Sovran Written Instructions confirming Oral
Instructions in such manner that the Written Instructions are received by
Sovran, whether by hand delivery, telex, facsimile sending device or otherwise,
by the close of business of the same day that such Oral Instructions are given
to Sovran. The Trust agrees that the fact that such confirming Written
Instructions are not received by Sovran shall in no way affect the validity of
the transactions or enforceability of the transactions authorized by the Trust
by giving Oral Instructions. The Trust agrees that Sovran shall incur no
liability to the Trust in acting upon Oral Instructions given to Sovran
hereunder concerning such transactions provided such instructions reasonably
appear to have been received from an Authorized Person.
9. Transactions Not Requiring Instructions. Sovran is authorized to
take the following action without Oral or Written Instructions:
(a) Deposits of Proceeds of Issuance of Shares. Sovran shall
collect and receive for the account of the Fund all payments received in
payment for Shares of the Fund issued by the Trust and shall promptly
advise the Trust and the Fund's Transfer Agent of any receipt by it
of payments for Shares of the Fund.
(b) Redemptions. Upon receipt of notice by the Trust's Transfer
Agent stating that the Transfer Agent is required to redeem Shares
and specifying the number and class of Shares which the Transfer
Agent is required to redeem and the date and time the request or requests
for redemption were received by the Trust, Sovran shall either (i)
pay to such the Transfer Agent, for distribution to the redeeming Shareholder,
the amount payable to such Shareholder upon the redemption of such Shares
as determined in the manner described in the then currently Prospectus, or
(ii) arrange for the direct payment of such redemption proceeds by Sovran
to the redeeming Shareholder in accordance with such procedures
and controls as are mutually agreed upon from time to time by and
among Sovran, the Trust and the Trust's Transfer Agent.
(c) Collection of Income and Other Payments.
Sovran shall:
(i) collect and receive for the account of the Fund either
by law or pursuant to custom in the securities business, all income
and other payments and distributions, including (without limitation)
stock dividends, rights, warrants and similar items, included or to be
included in the Property of the Fund, either by law or pursuant to
custom in the securities business, and shall promptly advise the Trust
of such receipt and shall credit such income, as collected, to the
Trust's custodian account for the Fund;
(ii) endorse and deposit for collection, in the name of the
Trust, checks, drafts, or other orders for the payment of money
on the same day as received;
(iii) receive and hold for the account of the Fund all securities
received as a distribution on the portfolio securities of the Fund as
a result of a stock dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement or
distribution of rights or similar securities issued with respect
to any portfolio securities of the Fund held by Sovran hereunder;
(iv) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed, or retired,
or otherwise become payable on the date such securities become
payable; and
(v) take any action which may be necessary and proper in
connection with the similar securities issued with respect to any
portfolio securities of the Fund held by Sovran hereunder;
(iv) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed, or retired,
or otherwise become payable on the date such securities become
payable; and
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income, payments
and other Property and the endorsement for collection of checks,
drafts, and other negotiable instruments.
(d) Miscellaneous Transactions. Sovran is authorized to deliver or
cause to be delivered Property against payment or other consideration or
written receipt therefor in the following cases:
(i) for examination by a broker or its clearing agent for
the account of the Fund in accordance with street delivery
custom;
(ii) for the exchange of interim receipts or temporary
securities into the name of the Trust or Sovran or a nominee
of either, or for exchange of securities for a different
number of bonds, certificates, or other evidence, representing
the same aggregate face amount or number of units bearing the
same interest rate, maturity date and call provisions, if any;
provided that, in any such case, the new securities are to
be delivered to Sovran.
10. Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, Sovran directly, or through
the use of the Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in
such Oral or Written Instructions, proxies, consents, authorizations,
and other instructions whereby the authority of the Trust, on behalf of the
Fund as owner of any securities may be exercised;
(b) deliver any securities held for the Fund in exchange for
other securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation, recapitalization
or sale of assets of any corporation, or the exercise of any conversion
privilege;
(c) delivery any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with
the liquidation, reorganization, refinancing, merger consolidation,
recapitalization or sale of assets of any corporation, and receive
and hold under the terms of this Agreement such certificates of
deposit, interim receipts or other instruments or documents as may be
issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Fund and
take such other steps as shall be stated in said Oral or Written Instructions
to be for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation, recapitalization, or sale of
assets of the Fund; and
(e) release securities belonging to the Fund to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan
incurred by the Fund; provided, however, that securities shall be released
only upon payment to Sovran of the money borrowed except that in
cases where additional collateral is required to secure a borrowing
already made, subject to proper prior authorization, further securities
may be released for that purpose; and repay such loan upon redelivery
to it of the securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing the loan; and
(f) release and deliver securities owned by the Fund in connection
with any repurchase agreement entered into on behalf of the Fund, but only
on receipt of payment therefor, and pay out moneys of the Fund in connection
with such repurchase agreements, but only upon the delivery of the securities;
and
(g) otherwise transfer, exchange or deliver securities in accordance
with Oral or Written Instructions.
11. Dividends and Distributions. The Trust shall furnish Sovran with
appropriate evidence of action by the Trust's Board of Trustees declaring
and authorizing the payment of any dividends and distributions to the
Shareholders of the Fund. Upon receipt by Sovran of Written Instructions
with respect to dividends and distributions declared by the Trust's
Board of Trustees and payable to the Shareholders of the Fund who have
elected in the proper manner to receive their distributions and/or
dividends in cash, and in conformance with procedures mutually agreed
upon Sovran, the Trust, and the Trust's Transfer Agent, Sovran shall pay
to the Transfer Agent, as agent for the Shareholders, an amount
equal to the amount indicated in said Written Instructions as payable
by the Trust to such Shareholders for distribution in cash by the Transfer
Agent to such Shareholders. In lieu of paying the Transfer Agent
cash dividends and distributions, Sovran may arrange for the direct
payment of cash dividends and distributions to Shareholders
by Sovran in accordance with such procedures and controls as are
mutually agreed upon from time to time by an among the Trust,
Sovran and the Trust's Transfer Agent.
12. Purchases of Securities. Promptly after each decision to purchase
securities for the Fund, the Trust, through the Manager, shall deliver
or cause to be delivered to Sovran Oral Instructions specifying with
respect to each such purchase: (a) the name of the issuer and the
title of the securities; (b) the number of shares or the principal
amount purchased and accrued interest, if any, (c) the date of purchase
and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the persons from whom
or the broker through whom the purchase was made. Sovran shall,
upon receipt of securities purchased by or for the Fund, pay
out of the moneys held for the account of the Fund the total amount
payable to the person from whom or the broker through whom the purchase
was made, provided that the same conforms to the total amount payable
as set forth in such Oral Instructions. In each case where payment for
purchase of securities is made by Sovran in advance of receipt of the
securities purchased in the absence of specific Written Instructions
from the Trust to so pay in advance, Sovran shall be absolutely liable
to the Trust for such securities to the same extent as if the securities
had been received by Sovran.
13. Sales of Securities. Promptly after each decision to sell securities
for the Fund, the Trust shall, through the Manager, deliver to Sovran
Oral Instructions, specifying with respect to each such sale: (a) the
name of the issuer and the title of the security, (b) the number of shares
or principal amount sold, and accrued interest, if any, (c) the
date of sale, (d) the sale price per unit, (e) the total amount payable
to the Fund upon such sale, and (f) the name of the broker through whom
or the person to whom the sale was made. Sovran shall deliver the securities
upon receipt of the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set forth in such
Oral Instructions. Subject to the foregoing, Sovran may accept payment
in such form as shall be satisfactory to it, and may deliver securities
and arrange for payment in accordance with the customs prevailing
among dealers in securities.
14. Correspondence. Sovran shall answer correspondence from securities
brokers and others relating to its duties hereunder and such other
correspondence as may from time to time be mutually agreed upon
between Sovran and the Trust.
15. Records. Sovran shall keep and maintain appropriate and financial books
and records with respect to its duties hereunder for the Trust. The books and
records pertaining to the Fund which are in the possession of Sovran shall be
the property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities laws and
rules and regulations. The Fund, or the Trust's authorized representatives,
shall have access to such books and records at all times during Sovran's normal
business hours. Upon the reasonable request of the Trust, copies of any such
books and records shall be provided by Sovran to the Trust or the Trust's
authorized representative at the Fund's expense.
16. Reports. Sovran shall furnish the Fund the following reports:
(a) such periodic and special reports as the Trust may reasonably
request;
(b) a monthly statement summarizing all transactions and entries for
the account of the Fund;
(c) a monthly report of portfolio securities belonging to the Fund
showing the market value at the end of such month;
(d) a monthly report of the cash account of the Fund showing
disbursements; and
(e) such other information as may be agreed upon from time to time
between the Trust and Sovran.
17. Cooperation with Accountants. Sovran shall cooperate with the Trust's
independent certified public accountants and shall take all reasonable action in
the
<PAGE>
performance of its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
unqualified opinion, including but not limited to the opinion included
in the Trust's semiannual reports on Form N-SAR.
18. Confidentiality. Sovran agrees on behalf of itself and its employees
to treat confidentially and as the proprietary information of the Trust all
records and other information relative to the Trust and its prior, present
or potential Shareholders and relative to the Manager and its prior, present
or potential customers, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not unreasonably be withheld and may not be withheld where
Sovran may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge this information by duly constituted
authorities, or when so requested by the Trust.
19. Equipment Failures. In the event of equipment failures beyond
Sovran's control, Sovran shall, at no additional expense to the Trust, take
reasonable steps to minimize service interruptions but shall have no liability
with respect thereto. Sovran shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provision
for emergency use of
<PAGE>
electronic data processing equipment to the extent appropriate equipment is
available.
20. Right to Receive Advice.
(a) Advice of Trust. If Sovran shall be in doubt as to any action to
be taken or omitted by it, it may request, and shall receive, from the Trust
directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If Sovran shall be in doubt as to any question
of law involved in any action to be taken or omitted by Sovran, it may request
written advice at the Fund's expense (which cost shall be borne by the Fund
only with its prior consent, which consent will not be unreasonably
withheld) from counsel of its own choosing (who may be counsel for the Manager,
the Trust, or Sovran, at the option of Sovran).
(c) Conflicting Advice. In case of conflict between directions or
advice (including Oral or Written Instructions) received by Sovran pursuant
to subparagraph (a) of this paragraph and advice received by Sovran pursuant
to subparagraph (b) of this paragraph, Sovran shall be entitled to rely on
and follow the advice received pursuant to subparagraph (b) alone.
(d) Protection of Sovran. Sovran shall be protected in any action or
inaction which it takes in reliance on any directions or advice (including
Oral or Written Instructions) received pursuant to subparagraphs (a)
<PAGE>
or (b) of this paragraph which Sovran, after receipt of such directions or
advice, reasonably and in good faith believes to be consistent with such
directions or advice, as the case may be. However, nothing in this paragraph
shall be construed as imposing upon Sovran any obligation (i) to seek such
directions or advice (including Oral or Written Instructions), or (ii) to
act in accordance with such directions or advice when received, unless,
under the terms of another provision of this Agreement, the same is a
condition to Sovran's properly taking or omitting to take such action. Nothing
in this subsection shall excuse Sovran when an action or omission on the part
of Sovran constitutes willful misfeasance, bad faith, negligence or reckless
disregard by Sovran of its duties under this Agreement.
21. Compliance with Governmental Rules and Regulations. The Trust assumes
full responsibility for insuring that the contents of each prospectus of the
Trust complies with all applicable requirements of the 1933 Act, the 1940
Act, and any laws, rules and regulations of governmental authorities having
jurisdiction.
22. Compensation. As compensation for the services rendered by Sovran
during the term of this Agreement, the Trust will cause the Fund to pay to
Sovran such monthly fees as the parties may agree from time to time in writing.
The initial fee schedule is attached as "Exhibit A".
23. Indemnification. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless Sovran and
<PAGE>
its nominees from all taxes, charges, expense, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
1933 Act, the Securities Exchange Act of 1934, the 1940 Act, and any state
and foreign securities and blue sky laws, all as or to be amended from time
to time) and expenses, including (without limitation) reasonable attorneys' fees
and disbursements, arising directly or indirectly (a) from the fact that
securities included in the Property are registered in the name of any such
nominee or (b) without limiting the generality of the foregoing clause (a),
from any action or thing which Sovran takes or does or omits to take or do (i)
at the request or on the direction of or in reliance of the advice of the
Trust or (ii) upon Oral or Written Instructions, provided, that neither
Sovran nor any of its nominees shall be indemnified against any liability
to the Fund or to its Shareholders (or any expenses incident to such liability)
arising out of (x) Sovran's or such nominee's own willful misfeasance, bad
faith, negligence or reckless disregard of its duties under this Agreement or
(y) Sovran's own negligent failure to perform its duties under this Agreement.
In order that the indemnification provisions contained in this Section 23 shall
apply, however, it is understood that if in any case the Fund may be asked
to indemnify or save Sovran harmless, the Trust shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it
<PAGE>
is further understood that Sovran will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents the
probability of such a claim for indemnification against the Fund. The Trust
shall have the option to defend Sovran against any claim which may be the
subject of this indemnification, and in the event that the Trust so elects
it will so notify Sovran and thereupon the Trust shall take over complete
defense of the claim, and Sovran shall in such situations initiate no further
legal or other expenses for which it shall seek indemnification under this
Section 23. Sovran shall in no case confess any claim or make any compromise in
any case in which the Trust will be asked to indemnify Sovran except with the
Trust's prior written consent. In the event of any advance of cash for any
purpose made by Sovran resulting from orders or Oral or Written Instructions
of the Trust, or in the event that Sovran 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 negligence, negligent failure to act, or
willful misconduct, Property held for the account of the Fund in an amount
not to exceed the amount of such tax, charge, expense, assessment, claim
or liability shall be security therefor.
24. Responsibility of Sovran. Sovran shall be under no duty to take any
action on behalf of the Trust except as specifically set forth herein or as
may be specifically
<PAGE>
agreed to by Sovran in writing. In the performance of its duties hereunder,
Sovran shall be obligated to exercise care and diligence to act in good faith
and to use its best efforts within reasonable limits to insure the accuracy
of all services performed under this Agreement, but Sovran shall not be liable
for any action or omission which does not constitute willful misfeasance, bad
faith or negligence on the part of Sovran, or reckless disregard by Sovran of
its duties under this Agreement. Without limiting the generality of the
foregoing or of any other provision of this Agreement, Sovran in connection with
its duties under this Agreement shall not be under any duty or obligation to
inquire into and shall not be liable for or in respect of (a) the validity
or invalidity or authority or lack thereof of any Oral or Written Instructions,
notice or other instrument which conforms to the applicable requirements of
this Agreement, if any, and which Sovran reasonably believes to be genuine; (b)
the validity or invalidity of the issuance of any securities included or to
be included in the Property, the legality or illegality of the purchase of
such securities, or the propriety or impropriety of the amount paid therefor;
(c) the legality or illegality of the sale (or exchange) of any Property or the
propriety or impropriety of the amount for which such Property is sold (or
exchanged); or (d) delays or errors or loss of data occurring by reason of
circumstances beyond Sovran's control, including acts of civil or military
authority,
<PAGE>
national emergencies, fire, mechanical breakdown except as provided in paragraph
19 hereof, flood or catastrophe, acts of God, insurrection, war, riots or
failure of the mails, transportation, communication or power supply, nor shall
Sovran be under any duty or obligation to ascertain whether any Property at any
time delivered to or held by Sovran may properly be held by or for the Fund.
25. Collections. All collections of money or other property in respect, or
which are to become part, of the Property (but not the safekeeping thereof
upon receipt by Sovran) shall be at the sole risk of the Fund. In any case in
which Sovran does not receive any payment due the Fund within a reasonable time
after Sovran has made proper demands for the same, it shall so notify the
Trust in writing, including copies of all demand letters, any written responses
thereto, and memoranda of all oral responses thereto and to telephonic demands,
and await instructions from the Trust. Sovran shall not be obliged to take
legal action for collection unless and until reasonably indemnified to its
satisfaction. Sovran shall also notify the Trust as soon as reasonably
practicable whenever income due on securities is not collected in due course.
26. Duration and Termination. This Agreement shall continue until
termination by the Trust or Sovran on sixty (60) days written notice. Upon any
termination of this Agreement, pending appointment of a successor to Sovran
or vote of the Shareholders of the Fund to dissolve or to function without a
custodian of its cash, securities or other property of the Fund to the Trust,
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 fifty million dollars ($50,000,000) as a
custodian for the Trust to be held under terms similar to those of this
Agreement; provided, however, that Sovran shall not be required to make
any such deliver or payment until full payment shall have been made by the
Trust or all liabilities constituting a charge on or against the properties
of the Trust then held by Sovran or on or against Sovran and until full
payment shall have been made to Sovran of all of its fees, compensation,
costs, and expenses.
27. Notices. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to Sovran
at Sovran's address, 6610 Rockledge Drive, Bethesda, Maryland 20817, marked
for the attention of the Trust Operations Department (or its successor); (b)
if to the Trust, at 6610 Rockledge Drive, Suite 450, Bethesda, Maryland 20817;
or (c) if to neither of the foregoing, at such other address as shall have
been notified to the sender of any such Notice or other communication. If the
location of the sender of a Notice and the address of the addressee
<PAGE>
thereof are, at the time of sending, more than 100 miles apart, the Notice may
be sent by first-class mail, in which case it shall be deemed to have been
given three days after it is sent, or if sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately, and, if the location of the sender of a Notice and the
address of the addressee thereof are, at the time of sending, not more than
100 miles apart, the Notice may be sent by first-class mail, in which case it
shall be deemed to have been given two days after it is sent, or if sent by
messenger, it shall be deemed to have been given on the day it is delivered, or
if sent by confirming telegram, cable, telex or facsimile sending device, it
shall be deemed to have been given immediately. All postage, cable, telegram,
telex and facsimile sending device charges arising from the sending of a Notice
hereunder shall be paid by the sender.
28. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
29. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
30. Additional Funds. In the event that the Trust establishes one or more
series of shares in addition to the Fund with respect to which it desires to
have Sovran render
<PAGE>
services as custodian under the terms hereof, it shall notify Sovran in writing,
and if Sovran agrees in writing to provide such services, such series of shares
shall become a Fund hereunder.
31. Delegation. On thirty (30) days prior written notice to the Trust,
Sovran may assign its rights and delegate its duties hereunder to any wholly
owned subsidiary of it or of Sovran Financial Corporation, provided that Sovran
may delegate its duties only to a bank having the qualifications provided in
section 17(f) of the 1940 Act, and further provided that Sovran and its delegate
shall promptly provide such information as the Trust may request and respond to
such questions as the Trust may ask relative to the delegation, including
(without limitation) the capabilities of the delegate.
32. Names. The names "The Torray Fund" and "Trustees of The Torray Fund"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Declaration
of Trust dated April 19, 1990, which is hereby referred to and a copy of which
is on file at the office of the Secretary of State of The Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
"The Torray Fund" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are not made individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders, or
<PAGE>
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any series of shares of the Trust must look solely to
the Trust Property belonging to such series for the enforcement of any claims
against the Trust.
33. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
parties may embody in one or more separate documents their agreement, if any,
with respect to delegated and/or Oral or Written Instructions. The captions
in this Agreement are included for convenience of reference only and in no
way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement shall be deemed to be a contract made in
Maryland and governed by Maryland law. 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 be affected thereby. This
Agreement shall be binding and shall inure to the benefit of the parties
hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below as of the day
and year first above written.
ATTEST: THE TORRAY FUND
_________________________________ BY: ________________________________
William M Lane
Vice President
ATTEST: SOVRAN BANK, MARYLAND
_________________________________ BY: _________________________________
John Fronzaglia
Assistant Vice President
RUSHMORE TRUST
CUSTODIAN AGREEMENT
Agreement made this 15th day of June 1993 by and between The
Torray Fund, hereinafter referred to as the Fund, having its principal
place of business at Bethesda, Maryland and The Rushmore Trust & Savings
FSB, hereinafter referred to as the Custodian, a Federally chartered
institution whose place of business is located in Bethesda, Maryland.
WITNESSETH:
Whereas, the Fund desires that certain stocks, bonds, options, or
other securities be held and administered by Custodian pursuant to the terms
of this Agreement.
Whereas, the Custodian is eligible to serve as custodian to a
registered investment company pursuant to Section 17(f) of the Investment
Company Act of 1940, as amended.
Whereas the Fund is desirous of employing the Custodian as
custodian of its assets for the purposes hereinafter set forth,
Now therefore, in consideration of the promises and mutual
convenants, and hereinafter contained, the parties hereto mutually agree
as follows:
1. The Fund shall deliver to the Custodian all securities and
cash owned by it, and all payments of principal or capital distributions
received by it with respect to all securities owned by the Fund from time to
time, and the cash consideration received by it for such new or treasury shares
of capital stock ("shares") of the Fund as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of the Fund
held or received by the Fund and not delivered to the Custodian.
2. The Custodian shall hold and physically segregate for the
account of the Fund all non-cash property, including all securities owned by
the Fund. The Custodian shall collect, on a timely basis, all interest,
dividends, proceeds of sales, and other moneys due and collectable which
derive from the
<PAGE>
securities held under this Agreement. After paying all proper expenses incident
to the management of said securities, the Custodian shall distribute or
accumulate the Fund's monies as directed by the Fund in writing.
The Fund understands that, when the Custodian is instructed by the
Fund to deliver securities prior to receipt of payment, the Fund assumes the
responsibility for all credit risks involved in connection with the Custodian's
delivery of securities pursuant to instructions of the Fund.
3. As compensation for its services under this Agreement, the Custodian
shall be entitled to reasonable compensation in such amounts as may
be agreed upon in writing from time to time between the Fund and the
Custodian. Attached hereto, as Schedule One, is the compensation schedule
which the Fund and the Custodian have agreed upon. All amounts due to the
Custodian as compensation under this Agreement shall be payable monthly
in arrears.
4. The Custodian shall release and deliver securities owned by
the Fund and held by the Custodian only upon receipt of instructions
from authorized persons, as provided in Section 19 hereof.
The Custodian shall be entitled to rely upon any written or oral
instruction actually received by the Custodian and reasonably believed by
the Custodian to be duly authorized by the Fund. In the case of oral
instructions the Fund agrees to forward to the Custodian written instructions
confirming the oral instructions on the same business day that such
instructions are given.
5. All disbursements from the Fund's account shall be made out of
collected funds.
6. The Custodian shall cause the Fund's securities held by the
Custodian to be registered in the name of the Fund or in the name of any
nominee of the Fund, which nominee shall be assigned exclusively to the Fund.
7. Notwithstanding Sections 2 and 6 hereof, the Custodian may
deposit and/or maintain securities owned by the Fund in any registered
clearing agency which acts as a securities depository, or in the book
entry system authorized by the U.S. Treasury and certain federal agencies,
provided that such securities are represented in an account of the Custodian
which shall not include any assets of the Custodian other than assets
held as fiduciary, custodian or otherwise.
<PAGE>
8. The Custodian shall create and maintain all records relating
to its activities and obligations under this Agreement in such manner
as will meet the obligations of the Fund under the Investment Company
Act of 1940. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be
available for inspection by the Fund.
The Custodian further agrees to preserve for the periods
required in Rule 31a-2 under the Investment Company Act of 1940 such
records maintained by it as are required to be maintained by Rule
31a-1. Unless otherwise instructed by the Fund, the Custodian shall
maintain its records in such form that the securities held by it for
the Fund shall at all times be identifiable by date of purchase and purchase
price per share or unit.
9. The Fund shall have the right to deliver or cause to be delivered to
the Custodian additional cash and/or securities; upon receipt by the Custodian
of such additions, the additions will be held and managed by the Custodian in
accordance with the provisions of this Agreement.
10. In the performance of its duties hereunder, the Custodian
shall be held only to the exercise of reasonable care and diligence.
The Custodian shall not be under any duty or obligation to ascertain
whether any securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund. The
Fund shall indemnify and hold the Custodian harmless for following
Fund's authorized instructions.
11. This Agreement shall become effective as of its execution,
and shall continue in full force and effect until terminated as
hereinafter provided. The Fund expressly reserves the right at any time,
and from time to time, to alter, amend, modify or terminate this
Agreement, either in whole or in part, upon delivery of written
notice to the Custodian evidencing such intention.
12. The Custodian and it successors hereby reserve the right to
terminate this Agreement at any time by delivering to the Fund
an instrument in writing, duly executed, declaring such termination,
in which event the Fund shall have the right to appoint a successor
or successors. Such termination shall be effective 90 days from the
notification date, or upon such earlier or later date as the parties
hereto agree in writing.
13. The Fund shall receive transaction advices for all security
purchases and sales.
14. Consistent with the Fund's election set forth in Schedule B
hereto, the Custodian will forward to the Fund any and all information
relative to the voting of proxies on stock held in the Fund's account.
<PAGE>
15. From time to time the Fund may instruct the Custodian to open
and maintain more than one custody account. Unless the Fund and Custodian
otherwise expressly agree, such accounts will be governed by the provisions
of this Agreement.
16. The Custodian shall not pay any taxes of any kind except those
which may be incidental to the transfer of securities.
17. The Custodian will make a good faith effort to obtain and
maintain accurate market prices on securities it holds for the Fund.
The Custodian will re-price securities at such frequency as it, in
its sole discretion, deems appropriate. Such re-pricing will be
performed at least monthly. The Custodian, however, makes no warranties
or guarantees as to the accuracy of such pricing or re-pricing, and will
not be liable to the Fund in any way as a result of the Fund's actions
which are taken as a result of relying on such information provided
by the Custodian.
18. The Custodian shall not be responsible for delays or failures
in performance resulting from acts beyond its reasonable control. Such acts
shall include, but not be limited to, acts of God, strikes, riots, acts of
war, epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, power failures, earthquakes or other
natural disasters.
19. The Fund agrees to provide a list of authorized persons from
whom the Custodian may take instruction. The Fund further agrees to furnish
a new list if those persons authorized should change. Until such new list
is received, the Custodian shall be protected in acting on the instructions
of the then current list of authorized persons.
20. This Agreement shall be construed and enforced under the laws
of the State of Maryland.
21. This Agreement may be executed in multiple parts, each of which
shall constitute an original, and all of which when taken together shall
constitute a single document.
22. A copy of the Declaration of Trust of the Fund is on file with
the Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the Fund
as Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund.
<PAGE>
In Witness whereof, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
ATTEST: Rushmore Trust and Savings FSB
Custodian
/s/ WILLIAM LANE BY /s/ DANIEL L. O'CONNER
- ----------------------------------------- ---------------------------
THE TORRAY FUND
/s/ MARIANNA T. DOYLE BY /s/ ROBERT E. TORRAY
- ------------------------------------------- ---------------------------
<PAGE>
SCHEDULE A
Effective with the execution of this Agreement, the Custodian shall be
compensated on a monthly basis, in arrears, for its services as follows:
MARKET VALUE FEE
2.5 basis points of the month end Market Value of all Securities and
Cash held pursuant to this Agreement.
TRANSACTION FEE
$7.50 per transaction for those settling through
the Federal Reserve System
$10.00 per transaction settled in book entry form
The minimum fee will be $1,500.00 annually
<PAGE>
SCHEDULE B
In an effort to permit direct communications between a company which
issues securities and the shareholder who votes those securities, the Securities
and Exchange Commission has adopted Rule 14b-1(c).
The Securities and Exchange Commission Rule directs us to contact each
customer for whom we hold securities and determine whether or not you authorize
us to provide your name, address and share position to requesting companies
whose stock you own. If you tell us "no", we will not provide this information
to requesting companies. If you tell us "yes", we will provide the information.
Under the Rule, your "yes" or "no" will apply to all securities that we hold for
you.
We may provide this information either directly to the requesting
companies or through a third party vendor.
For your protection, the Rule prohibits the requesting company from
using your name and address for any purpose other than corporate communications.
Please complete the authorization below by checking one of the
alternatives. Under the law, unless you indicate your objection in writing, you
are deemed to "not object".
YES ( ) You are authorized to release my name, address, and share positions to
requesting issuers
NO (X) You are not authorized to release my name, address, or share positions
to requesting issuers
/s/ ROBERT E. TORRAY
- ------------------------------- -------------------
Authorized signature Date
TRANSFER AGENCY AND SHAREHOLDER SERVICE AGREEMENT
AGREEMENT made this 16th day of November, 1990, between THE TORRAY FUND
(the "Trust"), a Massachusetts business trust having its principal place of
business at 6610 Rockledge Drive, Suite 450, Bethesda, Maryland 20817, and THE
TORRAY CORPORATION ("Torray"), a corporation organized under the laws of the
State of Maryland and having its principal place of business at 6610 Rockledge
Drive, Suite 450, Bethesda, Maryland 20817.
WHEREAS, the Trust desires that Torray perform certain services for the
Trust, and for its series denominated as portfolios and whose shares of
beneficial interest currently comprise the shares of the Trust identified on
Schedule A hereto (individually referred to herein as a "Portfolio" and
collectively as the "Portfolios"); and
WHEREAS, Torray is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES; USE OF SUBTRANSFER AGENTS. Torray shall perform for the
Trust the services set forth in Schedule B hereto, including services as
Transfer Agent and Shareholder Servicing Agent.
Torray also agrees to perform for the Trust such special services
incidental to the performance of the services enumerated herein as agreed to by
the parties from time to time. Torray shall perform such additional services as
are provided on an amendment to Schedule B hereof, in consideration of such fees
as the parties hereto may agree.
Torray may, in its discretion, appoint in writing other parties
qualified to perform transfer agency and shareholder services (individually, a
"Subtransfer Agent") to carry out some or all of its responsibilities under this
Agreement with respect to a Portfolio; provided, however, that the Subtransfer
Agent shall be the agent of Torray and not the agent of the Trust or such
Portfolio, and that Torray shall be fully responsible for the acts of such
Subtransfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Subtransfer Agent.
2. FEES. The Trust shall pay Torray for the services to be provided by
Torray under this Agreement in accordance with, and in the manner set forth in,
Schedule D hereto. Torray will not change the fees it charges pursuant to the
<PAGE>
fee schedule until the expiration of one year from the Effective Date of this
Agreement (as defined below), unless the Trust otherwise agrees to such change
in writing; thereafter, Torray may change its fees only upon the written consent
of the Trust. Fees for any additional services to be provided by Torray pursuant
to an amendment to Schedule B hereto shall be subject to mutual agreement at the
time such amendment to Schedule B is proposed.
3. REIMBURSEMENT OF EXPENSES. In addition to paying Torray the fees
described in Section 2 hereof, the Trust agrees to reimburse Torray for Torray's
out-of-pocket expenses in providing services hereunder, including without
limitation the following:
A. All freight and other delivery and bonding charges incurred by
Torray in delivering all materials to shareholders;
B. All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by Torray in
communication with the Trust's custodian, dealers, shareholders or
others as required for Torray to perform the services to be
provided hereunder;
C. Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms, proxies,
notices or other form of printed material which shall be required
by Torray for the performance of the services to be provided
hereunder;
D. The cost of microfilm or microfiche of records or other materials;
and
E. Any expenses Torray shall incur at the written direction of an
officer of the Trust thereunto duly authorized.
4. EFFECTIVE DATE. This Agreement shall become effective with respect to
a Portfolio as of the date set forth opposite the Portfolio on Schedule A hereto
(the "Effective Date").
5. TERM. This Agreement shall continue in effect with respect to a
Portfolio, unless earlier terminated by either party hereto as provided
hereunder, for an initial term of one year from the Effective Date. Thereafter,
this Agreement shall continue in effect unless either party hereto
<PAGE>
terminates this Agreement with respect to a Portfolio by giving 90 days' written
notice to the other party, whereupon this Agreement with respect to that
Portfolio shall terminate automatically upon the expiration of said 90 days;
provided, however, that after such termination, for so long as Torray, with the
written consent of the Trust, in fact continues to perform any one or more of
the services contemplated by this Agreement or any Schedule or exhibit hereto,
the provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect. Fees and
out-of-pocket expenses incurred by Torray but unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. Torray shall be entitled to collect from the Trust, in addition to
the fees and disbursements provided by Paragraphs 2 and 3 hereof, the amount of
all of Torray's cash disbursements and a reasonable fee (which fee shall be not
less than the sum of the actual costs incurred by Torray in performing such
service and 2 percent of such costs) for services in connection with Torray's
activities in effecting such termination, including without limitation, the
delivery to the Trust and/or its distributors or investment advisers and/or
other parties, of the Trust's property, records, instruments and documents, or
any copies thereof. Subsequent to such termination for a reasonable fee, Torray
will provide the Trust with reasonable access to any Trust documents or records
remaining in its possession.
6. TORRAY'S RELIANCE ON RECORDS AND INSTRUCTIONS. Torray may
rely on any written records or instructions provided to it by the Trust
and the Trust agrees to indemnify Torray and hold it, its employees, officers,
directors and agents harmless from and against any and all claims, demands,
actions, suits, judgments, liabilities, losses, damages, costs, charges, counsel
fees and other expenses of every nature arising out of or in any way relating
to any actions taken by Torray with respect to such Portfolio in
reasonable reliance upon such records or instructions.
7. UNCONTROLLABLE EVENTS. Torray assumes no responsibility hereunder,
and shall not be liable, for any damage, loss of data, delay or any other loss
whatsoever caused by events beyond its reasonable control.
8. STANDARD OF CARE. Torray shall use its best efforts to
insure the accuracy of all services performed under this Agreement,
but shall not be liable to the Trust for any action taken or omitted
by Torray in the absence of bad faith, willful misconduct or gross negligence.
<PAGE>
9. LEGAL ADVICE. Torray shall notify the Trust at any time
Torray believes that it is in need of the advice of counsel (other
than counsel in the regular employ of Torray or any affiliated companies)
with regard to Torray's responsibilities and duties pursuant to this
Agreement; and after so notifying the Trust, Torray, at its discretion,
shall be entitled to seek, receive and act upon advice of legal counsel
of its choosing, such advice to be at the expense of the Trust or the
Portfolio involved unless such advice relates to a matter involving
Torray's willful misconduct or gross negligence with respect to
Torray's responsibilities and duties hereunder, and Torray shall in no
event be liable to the Trust or the Portfolio involved or any shareholder
or beneficial owner of the Trust or such Portfolio for any action
reasonably taken pursuant to such advice.
10. INSTRUCTIONS. Whenever Torray is requested or authorized
to take action hereunder pursuant to instructions from a shareholder
concerning an account in the Trust, Torray shall be entitled to rely
upon any certificate, letter or other instrument or communication, whether
in writing or by electronic or telephone transmission, believed by Torray
to be genuine and to have been properly made, signed or authorized
by an officer or other authorized agent of the Trust or by the shareholder,
as the case may be, and shall be entitled to receive as conclusive proof of any
fact or matter required to be ascertained by it hereunder a certificate
signed by an officer of the Trust or any other person authorized by the
Trust's Board of Trustees or by the shareholder, as the case may be.
As to the services to be provided hereunder, Torray may rely
conclusively upon the terms of the Prospectus of a Portfolio and the
Statement of Additional Information of the Trust to the extent that
such services are described therein unless Torray receives written instructions
to the contrary in a timely manner from the Trust.
11. INDEMNIFICATION. Each Portfolio agrees to indemnify and hold
harmless Torray, its employees, agents, directors, officers and nominees
from and against any and all claims, demands, actions and suits, whether
groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, counsel fees and other
expenses of every nature and character arising out of or in any way
relating to Torray's actions taken or non-actions with respect to the
performance of services under this Agreement with respect to such
Portfolio or based, if applicable, upon information, instructions
or requests with respect to such Portfolio given or made to
Torray by an officer of the Trust thereunto duly authorized; provided
that this indemnification shall not apply to actions or
omissions of Torray in cases of its own willful misconduct or negligence, and
further provided that prior to confessing any claim against it
which may be the subject of this indemnification, Torray shall give the
Trust written notice of and reasonable opportunity to defend against
said claim in its own name or in the name of Torray.
12. RECORD RETENTION AND CONFIDENTIALITY. Torray shall keep and
maintain on behalf of the Trust all records which the Trust or Torray is,
or may be, required to keep and maintain pursuant to any applicable
statutes, rules and regulations, including without limitation Rules
31a-1 and 31a-2 under the Investment Company Act of 1940, relating
to the maintenance of records in connection with the services to be
provided hereunder. Torray agrees to make such records available for inspection
by the Trust or by the Securities and Exchange Commission at reasonable
times and otherwise to keep confidential all records and other information
relative to the Trust and its shareholders; except when requested
to divulge such information by duly-constituted authorities or
court process, or requested by a shareholder with respect to information
concerning an account as to which such shareholder has either a legal or
beneficial interest or when requested by the Trust, the shareholder, or the
dealer of record as to such account.
13. REPORTS. Torray will furnish to the Trust and to its
properly-authorized auditors, investment advisers, examiners,
distributors, dealers, underwriters, salesmen, insurance companies
and others designated by the Trust in writing, such reports at such times as
are prescribed in Schedule C attached hereto, or as subsequently agreed
upon by the parties pursuant to an amendment to Schedule C. The Trust
agrees to examine each such report or copy promptly and will report or
cause to be reported any errors or discrepancies therein no later than three
business days from the receipt thereof. In the event that errors
or discrepancies, except such errors and discrepancies as may not reasonably
be expected to be discovered by the recipient within three days after
conducting a diligent examination, are not so reported within the aforesaid
period of time, a report will for all purposes be accepted by and binding
upon the Trust and any other recipient, and Torray shall have no liability
for errors or discrepancies therein and shall have no further responsibility
with respect to such report except to perform reasonable corrections of such
errors and
<PAGE>
discrepancies within a reasonable time after requested to do so by the Trust.
14. RIGHTS OF OWNERSHIP. All computer programs and procedures developed to
perform services required to be provided by Torray under this Agreement are the
property of Torray. All records and other data except such computer programs
and procedures are the exclusive property of the Trust and all such other
records and data will be furnished to the Trust in appropriate form as soon
as practicable after termination of this Agreement for any reason.
15. RETURN OF RECORDS. Torray may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Torray's files, records and documents created and maintained by Torray pursuant
to this Agreement which are no longer needed by Torray in the performance of its
services or for its legal protection. If not so turned over to the Trust, such
documents and records will be retained by Torray for six years from the year of
creation. At the end of such six-year period, such records and documents will be
turned over to the Trust unless the Trust authorizes in writing the destruction
of such records and documents.
16. BANK ACCOUNTS. The Trust and a Portfolio shall establish and maintain
such bank accounts with such bank or banks as are selected by the Trust, as
are necessary in order that Torray may perform the services required to be
performed hereunder. To the extent that the performance of such services shall
require Torray directly to disburse amounts for payment of dividends, redemption
proceeds or other purposes, the Trust and a Portfolio shall provide such bank or
banks with all instructions and authorizations necessary for Torray to effect
such disbursements.
17. REDEMPTION OF SHARES. Torray shall process instructions from the
shareholders of the Trust to redeem shares of the Trust as the agent for the
Trust.
18. REPRESENTATIONS OF THE TRUST. The Trust certifies to Torray that: (1)
as of the close of business on the Effective Date, each Portfolio has authorized
unlimited shares and (2) by virtue of its Declaration of Trust, shares of each
Portfolio which are redeemed by the Trust may be sold by the Trust from its
treasury and (3) this Agreement has been duly authorized by the Trust and, when
executed and delivered by the Trust, will constitute a legal, valid and
binding obligation of the Trust, enforceable against the Trust in accordance
with its terms, subject to bankruptcy,
<PAGE>
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
19. REPRESENTATIONS OF TORRAY. Torray represents and warrants that the
various procedures and systems which Torray has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other
cause of the blank checks, records, and other data of the Trust and Torray's
records, data, equipment facilities and other property used in the performance
of its obligations hereunder are adequate and that it will make such changes
therein from time to time as are required for the secure performance of its
obligations hereunder.
20. INFORMATION TO BE FURNISHED BY THE TRUST. The Trust has furnished
to Torray the following:
A. Copies of the Declaration of Trust of the Trust and of any amendments
thereto, certified by the proper official of the state in which such
Declaration has been filed.
B. Copies of the following documents:
1. The Trust's By-laws and any amendments thereto.
2. Certified copies of resolutions of the Board of Trustees covering
the following matters:
a. Approval of this Agreement, authorization of a specified officer
of the Trust to execute and deliver this Agreement and
authorization for specified officers of the Trust to instruct
Torray hereunder; and
b. Authorization of Torray to act as Registrar, Transfer Agent and
Dividend Disbursing Agent for the Trust.
C. A list of all the officers of the Trust, together with specimen
signatures of those officers who are authorized to instruct Torray
in all matters.
D. Two copies of the following (if such documents are employed by the
Trust):
<PAGE>
1. Prospectuses for each Portfolio and the Statement of Additional
Information of the Trust;
2. Distribution Agreement;
3. Management Contract; and
4. All other forms commonly used by the Trust or its Distributor with
regard to their relationships and transactions with shareholders
of the Trust.
E. A certificate as to shares of beneficial interest of the Trust
authorized, issued, and outstanding as of the Effective Date of Torray's
appointment as Transfer Agent (or as of the date on which Torray's
services are commenced, whichever is the later date) and as to receipt
of full consideration by the Trust for all shares outstanding, such
statement to be certified by the Treasurer of the Trust;
21. INFORMATION FURNISHED BY TORRAY. Torray has furnished to the Trust
the following:
A. Torray's Articles of Incorporation.
B. Torray's By-Laws and any amendments thereto.
C. Certified copies of actions of Torray covering the following matters:
a. Approval of this Agreement, and authorization of a specified
officer of Torray to execute and deliver this Agreement; and
b. Authorization of Torray to act as Transfer Agent and Shareholder
Servicing Agent for the Trust.
22. AMENDMENTS TO DOCUMENTS. The Trust shall furnish Torray written copies
of any amendments to, and changes in, any of the items referred to in Section
20 hereof forthwith upon such amendments and changes becoming effective. In
addition, the Trust agrees that no amendments will be made to the Prospectus
of a Portfolio or the Statement of Additional Information of the Trust which
might have the effect of changing the procedures employed by Torray in
providing the services agreed to hereunder or which amendment might affect
<PAGE>
the duties of Torray hereunder unless the Trust first obtains Torray's
approval of such amendments or changes.
23. RELIANCE ON AMENDMENTS. Torray may rely on any amendments to or
changes in any of the documents and other items to be provided by the
Trust pursuant to Sections 20 and 22 of this Agreement and a Portfolio will
indemnify and hold harmless Torray from and against any and all claims, demands,
actions, suits, judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character which may result
from actions or omissions on the part of Torray with respect to such Portfolio
in reliance upon such amendments and/or changes. Although Torray is authorized
to rely on the above-mentioned amendments to and changes in the documents and
other items to be provided pursuant to Sections 20 and 22 hereof, Torray shall
be under no duty to comply with or take any action as a result of any of such
amendments or changes unless the Trust first obtains Torray's written consent
to and approval of such amendments or changes.
24. COMPLIANCE WITH LAW. Except for the obligations of Torray set forth
in Section 12 hereof, the Trust assumes full responsibility for the preparation,
contents and distribution of each Prospectus of the Trust, as to compliance with
all applicable requirements of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction. Torray shall have
no obligation to take cognizance of any laws relating to the sale of the Trust's
shares. The Trust represents and warrants that no shares of the Trust will be
offered to the public until the Trust's registration statement under the
Securities Act of 1933 and the Investment Company Act of 1940 has been declared
or has become effective.
25. NOTICES. Any notice provided hereunder shall be sufficiently given
when sent by registered or certified mail to the party required to be
served with such notice, at the following address: 6610 Rockledge Drive, Suite
450, Bethesda, Maryland 20817 or at such other address as such party may from
time to time specify in writing to the other party pursuant to this Section.
26. HEADINGS. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
27. ASSIGNMENT. This Agreement and the rights and duties hereunder shall
not be assignable with respect to a
<PAGE>
Portfolio by either of the parties hereto except by the specific written
consent of the other party. This Section 27 shall not limit or in any way
affect Torray's right to appoint a Subtransfer Agent pursuant to Section 1
hereof.
28. GOVERNING LAW. This Agreement shall be governed by and provisions shall
be construed in accordance with the laws of the State of Maryland.
29. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. A copy of the
Declaration of Trust of the Trust is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees or shareholders individually but are binding only upon
the assets and property of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE TORRAY FUND
By: /s/ ROBERT E. TORRAY
Title: President
THE TORRAY CORPORATION
By: /s/ WILLIAM M. LANE
Title: Vice President
<PAGE>
SCHEDULE A
Dated as of November 16, 1990
Name of Portfolio Effective Date
The Torray Fund November 16, 1990
THE TORRAY FUND
By: /s/ ROBERT E. TORRAY
Title: President
THE TORRAY CORPORATION
By: /s/ WILLIAM M. LANE
Title: Vice President
<PAGE>
SCHEDULE B
TRANSFER AGENCY SERVICES
I. Record Maintenance.
Torray shall provide full maintenance of all shareholder records for
each account in the Trust. Such records will include:
A. Share balances;
B. Account transaction history, including dividends paid and the date and
price for all transactions;
C. Name and address of the record shareholder, including zip codes and
tax identification numbers (but shall not include responsibility for
obtaining certified tax identification numbers or impending back-up
withholding);
D. Records of distributions and dividend payments;
E. Transfer records; and
F. Overall control records.
II. Regular Daily Operations.
Torray shall perform the following functions:
A. Process new accounts on the shareholder file by processing directly
from the dealer;
B. Process additional purchases to the records of accounts already on
the shareholder file. In such instances, on the dealer's instructions,
allocate investor payments among the Portfolios;
C. Transfer of shares upon the receipt of proper instructions from
dealer; and
D. Process changes of dealer/representative on accounts.
III. Periodic Operations.
A. Upon receipt of instructions as to payment of dividends and
distributions, which may be standing instructions, compute
distributions and inform the Trust of the amount to be reinvested
in additional shares.
<PAGE>
B. Process redemptions as instructed by dealer.
C. Mail semi-annual and annual Trust and/or Portfolio reports and
prospectuses.
D. Produce transcripts of account history as requested by the Trust or by
the dealer.
E. Prepare and file Form 1099's with Internal Revenue Service.
IV. Controls.
A. Maintain all balance controls daily and produce monthly and quarterly
summaries expressed in:
1. shares; and
2. dollar amounts.
V. Special Services Included.
A. Prepare envelopes/labels (from address data supplied by dealer as to
transmission accounts) and mail proxy statements; tabulate and
certify votes from returned ballots.
THE TORRAY FUND
By: /s/ ROBERT E. TORRAY
Title: President
THE TORRAY CORPORATION
By: /s/ WILLIAM M. LANE
Title: Vice President
<PAGE>
SCHEDULE C
REPORTS
I. Daily Activity Report (liquidations processed that day)
II. Daily Share Summary Report (by Portfolio)
A. Beginning balance
B. Liquidations
C. Payments
D. Exchanges
E. Adjustments
F. Ending Balance
III. Daily Proof Sheet Summary and Transaction Register
IV. Daily Share Reconciliation Report (reconciling Share Summary Report
to Daily Proof Summary Sheet)
V. Weekly Position Reports (showing all account balances)
VI. Quarterly Dividend Reports
VII. Report by independent public accountants concerning Torray's accounting
system and internal accounting controls, at such times, as the Trust
may reasonably require. These reports shall be of sufficient detail
and scope to provide reasonable accuracy that any material inadequacies
would be disclosed by such examination, and, if there are no such
inadequacies, shall state.
THE TORRAY FUND
By: /s/ ROBERT E. TORRAY
Title: President
THE TORRAY CORPORATION
By: /s/ WILLIAM M. LANE
Title: Vice President
<PAGE>
SCHEDULE D
FEES
Transfer Agent and Shareholder Accounting Services:
Per Number of
Accounts Monthly Charge Annual Fee
1-100 $1,400 $16,800
THE TORRAY FUND
By: /s/ ROBERT E. TORRAY
Title: President
THE TORRAY CORPORATION
By: /s/ WILLIAM M. LANE
Title: Vice President
[ROPES & GRAY LETTERHEAD]
November 19, 1990
The Torray Fund
6610 Rockledge Drive
Suite 450
Bethesda, Maryland 20817-1869
Gentlemen:
You have informed us that you propose to register under the Securities Act
of 1933, as amended (the "Act"), and offer and sell from time to time shares
of beneficial interest of The Torray Fund (the "Shares"), without par value,
at not less than "net asset value" as defined in your By-laws.
We have examined your Agreement and Declaration of Trust on file in the
office of the Secretary of The Commonwealth of Massachusetts and the Clerk of
the City of Boston and are familiar with the actions taken by your trustees
to authorize the issue and sale of certain Shares to Robert E. Torray. We have
also examined a certificate of your treasurer of even date herewith setting
forth that as of the date thereof 10,000 Shares have been issued and are
outstanding, such Shares having been purchased by Robert E. Torray for
aggregate cash consideration of $100,000. We have also examined a copy of your
By-laws and such other documents, receipts and records as we have deemed
necessary for the purpose of this opinion.
Based on the foregoing, we are of the opinion that:
1. The beneficial interest in The Torray Fund is divided into an unlimited
number of shares of beneficial interest, no par value.
2. The issue and sale of the authorized but unissued Shares of The Torray
Fund have been duly authorized under Massachusetts law. Upon the original issue
and sale of your authorized but unissued Shares and upon receipt of the
authorized consideration therefor in an amount not less than the net asset value
of the Shares established and in force at the time of their sale, the Shares
issued will be validly issued, fully paid and nonassessable.
<PAGE>
3. The Shares issued and sold to Robert E. Torray as aforesaid have been
validly issued and are fully paid and nonassessable.
The Torray Fund is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations
of the Fund. However, the Agreement and Declaration of Trust provides for
indemnification out of the property of a particular series of shares for all
loss and expense of any shareholder of that series held personally liable
solely by reason of his being or having been a shareholder. Thus, the risk
of shareholder liability is limited to circumstances in which that
series of shares itself would be unable to meet its obligations.
We understand that this opinion is to be used in connection with
registering an indefinite number of shares of beneficial interest of The
Torray Fund for offering and sale pursuant to the Act. We consent to the
filing of this opinion with and as part of your Registration Statement on
Form N-1A (File No. 33-34411) relating to such offer and sale.
Very truly yours,
/s/ ROPES & GRAY
Ropes & Gray
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of The Torray Fund:
We consent to the inclusion in Post-Effective Amendment No. 6 to the
Registration Statement of The Torray Fund on Form N-1A of our report dated
January 18, 1996 on our audit of the financial statements and financial
highlights of The Torray Fund, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1995 and to the reference made to
us under the caption "Financial Highlights" which is included in the
Post-Effective Amendment to the Registration Statement.
/s/ JOHNSON LAMBERT & CO.
Bethesda, MD
April 19, 1996
PURCHASE AGREEMENT
The Torray Fund (the "Fund"), a Massachusetts business trust, and
Mr. Robert E. Torray ("Robert E. Torray"), a Maryland resident, hereby
agree with each other as follows:
1. The Fund hereby offers Robert E. Torray and Robert E. Torray hereby
purchases 10,000 units of beneficial interest in the Fund (such 10,000 units
of beneficial interest being hereinafter collectively known as "Shares") at
a price of $10.00 per Share. Robert E. Torray hereby acknowledges purchase of
the Shares and the Fund hereby acknowledges receipt from Robert E. Torray of
funds in the amount of $100,000 in full payment for the Shares.
2. Robert E. Torray represents and warrants to the Fund that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 16th day of November, 1990.
Attest: THE TORRAY FUND
/s/ CHARLES W. BROOKS, JR. By: /s/ WILLIAM M. LANE
Attest: /s/ ROBERT E. TORRAY
Robert E. Torray
/s/ MARIANNA T. DOYLE
Computation of Total Return Performance Data
(assumes a hypothetical investment of $1,000 at the start of each
period, all dividends and distributions are reinvested on the
reinvestment dates, and a complete redemption occurs at the end
of each period.)
T (approximately) (ERV/P) ^ 1/N = 1
Where: T = Total Return
ERV = Ending Redeemable Value at the end of the period
P = Hypothetical initial investment of $1,000
N = Number of years
Since Inception 12/18/90 - 12/31/91
Dollars N.A.V. Shares Shares Owned
Initial 12/18/90 1,000.0000 10.0000 100.0000 100.0000
1990 Dividend 0.5868 0.0587 100.0587
1991 Dividends 23.5285 2.1292 102.1879
1991 Distribution 21.5388 1.9895 104.1774
12/31/91 Value $1,199.50 11.5140 104.1774
(1,199.50 - 1,000.00) ^ 1/1.0384 = 19.95%
Year Ended 12/31/91
Dollars N.A.V. Shares Shares Owned
Initial 1/02/91 1,000.0000 9.9907 100.0931 100.0931
1991 Dividends 23.5367 2.1299 102.2230
1991 Distribution 21.5462 1.9902 104.2132
12/31/91 Value $1,199.91 11.5140 104.2132
(1,199.91 - 1,000.00) ^ 1/1 = 19.99%
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 38,883,416
<INVESTMENTS-AT-VALUE> 51,691,176
<RECEIVABLES> 251,751
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 51,942,927
<PAYABLE-FOR-SECURITIES> 1,016,905
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 182,420
<TOTAL-LIABILITIES> 1,199,325
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35,409,995
<SHARES-COMMON-STOCK> 2,522,943
<SHARES-COMMON-PRIOR> 1,698,380
<ACCUMULATED-NII-CURRENT> 1,750
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,154
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,807,760
<NET-ASSETS> 50,743,602
<DIVIDEND-INCOME> 779,402
<INTEREST-INCOME> 28,402
<OTHER-INCOME> 283
<EXPENSES-NET> 391,890
<NET-INVESTMENT-INCOME> 416,197
<REALIZED-GAINS-CURRENT> 791,792
<APPREC-INCREASE-CURRENT> 11,564,512
<NET-CHANGE-FROM-OPS> 12,772,501
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 414,625
<DISTRIBUTIONS-OF-GAINS> 790,687
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 937,270
<NUMBER-OF-SHARES-REDEEMED> 168,667
<SHARES-REINVESTED> 55,960
<NET-CHANGE-IN-ASSETS> 27,381,545
<ACCUMULATED-NII-PRIOR> 178
<ACCUMULATED-GAINS-PRIOR> 49
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 313,512
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 552,265
<AVERAGE-NET-ASSETS> 31,795,721
<PER-SHARE-NAV-BEGIN> 13.755
<PER-SHARE-NII> 0.215
<PER-SHARE-GAIN-APPREC> 6.674
<PER-SHARE-DIVIDEND> 0.214
<PER-SHARE-DISTRIBUTIONS> 0.320
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.11
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
