THE TORRAY FUND
The Torray Fund (the "Fund") is a no load, open-end, diversified management
investment company. The Torray Corporation (the "Manager") serves as the Fund's
investment advisor.
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, 1997
(the "Statement") is available free of charge by writing to The Torray
Corporation, 6610 Rockledge Drive, Bethesda, Maryland 20817, or by telephoning
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.
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, 1997
<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)
<TABLE>
<S> <C>
Management Fees 1.00%
Other Expenses (1)(2) .12%
-----
Total Operating Expenses (3) 1.12%
=====
</TABLE>
(1) These amounts have been restated to reflect anticipated expense levels as of
March 31, 1997.
(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.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C>
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: $12 $37 $63 $140
</TABLE>
NOTE: THE FIGURES SHOWN IN THE EXAMPLES ARE ENTIRELY HYPOTHETICAL. THEY ARE NOT
REPRESENTATIONS OF PAST OR FUTURE PERFORMANCE OR EXPENSES; ACTUAL PERFORMANCE
AND/OR EXPENSES MAY BE MORE OR LESS THAN SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information with respect to
the per-share data and ratios for The Torray Fund for the periods indicated,
which have been derived from financial statements audited by Johnson Lambert &
Co., independent public accountants for the Fund, whose report thereon is
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
PER SHARE DATA ($) 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90(1)
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.................. $ 20.110 $13.755 $14.273 $13.743 $11.514 $ 9.999 $ 10.000
Income From Investment Operations
- ---------------------------------
Net Investment Income.................. 0.186 0.215 0.213 0.122 0.180 0.232 0.005
Net Gains on Securities
(both realized and unrealized)....... 5.642 6.674 0.130 0.745 2.229 1.728 0.000
-------- ------- ------- ------- ------- ------- --------
Total from
Investment Operations........... 5.828 6.889 0.343 0.867 2.409 1.960 0.005
Less Distributions
- ------------------
Dividends
(from Net Investment Income)......... (0.187) (0.214) (0.213) (0.122) (0.180) (0.233) (0.006)
Distributions (from Capital Gains)..... (0.531) (0.320) (0.648) (0.215) 0.0000 (0.212) 0.0000
-------- ------ ------ ------ ------ ------ -------
Total Distributions............. (0.718) (0.534) (0.861) (0.337) (0.180) (0.445) (0.006)
-------- ------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD......... $ 25.220 $20.110 $13.755 $14.273 $13.743 $11.514 $ 9.999
TOTAL RETURN(3)........................ 29.09% 50.41% 2.41% 6.37% 21.04% 19.98% (0.03%)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted)...................... $116,593 $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% 1.25% 0.82%(1)
Ratio of Net Income to Average Net
Assets............................... 0.87% 1.31% 1.51% 0.94% 1.54% 2.43% 2.15%(1)
Portfolio Turnover Rate................ 20.95% 22.56% 36.63% 29.09% 37.09% 21.17% n/a(2)
Average Actual Commissions
Paid Per share(4).................... $ 0.0871 $0.0813 n/a n/a n/a n/a n/a
</TABLE>
(1) Annualized. The Fund commenced operations on December 18, 1990.
(2) Not applicable.
(3) Past performance is not predictive of future performance.
(4) Does not include spreads on shares traded on a principal basis.
3
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
The Fund's objective is to earn 15% per year compounded, measured over long
periods (10 years or more). The Fund also seeks to defer shareholder tax
liability on the Fund's appreciated assets, so that earnings can be generated on
money which otherwise would be paid in taxes. In order to accomplish these
goals, the Fund intends to hold stocks for the long term, as opposed to actively
buying and selling. An added benefit of the buy-and-hold strategy is that
brokerage commissions will be contained. There can be no assurance that the
Fund's objective will be achieved.
THE MANAGER'S INVESTMENT PHILOSOPHY AND APPROACH TO SELECTING COMMON STOCKS
The Fund's investment philosophy is simple. Ordinarily, 90% or more of the
Fund's assets will be committed to common stocks. Any balance will be held in
U.S. treasury bills or Treasury notes. No effort is made to forecast the stock
market. Businesses in which the Fund invests must have favorable economic
characteristics, generally including rising sales and earnings, a strong
competitive position, capable management, and a balance sheet appropriate to the
nature of the enterprise. Central to the philosophy is the fact that value
derives from the business, not from the stock. Accordingly, the Fund's
management focuses on business fundamentals, as opposed to stock market
dynamics, the idea being that if a business performs, the stock will take care
of itself.
The Manager's stock selection process is simple: management will buy, at a
fair price, stock in the best companies it can identify, and keep them
indefinitely. Portfolio investments may include small, medium or large
capitalization companies. The latter have predominated in recent years because
management believes they have represented the best available values. However,
that could change if the prices of high quality, small or medium-size company
stocks drop significantly.
Generally speaking, there is widespread agreement among investors about
which companies enjoy the brightest economic outlook. Unfortunately for
prospective buyers, the shares of these businesses usually trade at a premium.
Sometimes they become so over-priced that an investor's potential return will be
almost certainly diminished, or a major loss will occur in the event corporate
performance deteriorates. It is important, therefore, when buying stocks to
carefully assess the prices at which they are offered so that the advantage
gained from owning a top-flight company is not lost to a miscalculation of its
value. Management's policy in this regard is to focus its research on those
quality businesses which, for any number of reasons, have fallen from favor with
investors. Typically, stocks of the companies selected for evaluation will have
already dropped in price -- often as much as 25%-50% -- in response to a
perceived reversal in corporate fortunes. The research effort's objective is to
determine whether prevailing negative investor sentiment is based on a sound
assessment of long term prospects, or is related more to temporary factors which
have little or no bearing on the enterprises's fundamental economic value.
Although the picture is seldom black and white, management finds that in many
instances popular "expert" opinion is misguided and overly pessimistic. It is in
this circumstance, when both the fundamentals and price are right, that the Fund
will invest.
There are also conditions under which stocks may be sold. If management
identifies a compelling investment opportunity, but the Fund has no cash
reserves, stocks with the least promising prospects relative to all other
portfolio holdings will be sold to raise the purchase price. Shares also will be
sold in any business which is materially deteriorating. Finally, in order to
maintain reasonable diversification, a stock or industry grouping of stocks may
be partially sold if, as a result of appreciation, either has become too large a
percentage of the Fund's assets. Generally speaking, and consistent with its
status as a diversified investment company, the Fund may hold up to 7 or 8% of
its assets in a single stock and may invest up to 25% in one industry group.
4
<PAGE>
RISK FACTORS ASSOCIATED WITH INVESTING IN COMMON STOCKS
Three types of risk attach to investments in common stocks -- "business
risk," "systemic risk," and "market risk." The Fund's management, the Torray
Corporation, believes that for long-term investors only business risk matters.
Business risk is the chance that something permanent goes wrong with a company.
When this happens, shareholders lose money. The causes vary, but often include
competitive pressures, declining market share, contracting profit margins,
rising financial leverage, product obsolescence and poor management. In such
circumstances, the degree of risk is usually related directly to the magnitude
of business deterioration. While temporary reversals are of little concern,
serious problems sometimes lead to bankruptcy. Most cases fall in-between.
Mutual funds are subject to the same principle. Their relative riskiness is
a function of the economic profile of the companies they own. Funds holding the
stocks of important high-quality businesses for long-term investment should
prove relatively less risky except for those shareholders who choose, or are
forced by circumstance, to sell in a weak market. Those funds comprised of
lesser companies will involve varying degrees of risk. As noted, the Torray
Fund's policy is to invest at a fair price in the best businesses it can
identify and to hold them indefinitely. In so doing, management believes that it
can largely eliminate the Fund's overall exposure to business risks. The other
forms of risk -- "systemic" and "market" should not worry investors unduly.
"Systemic risk" denotes potential threats to the country's financial structure
- -- political upheaval, runaway inflation or economic collapse, for instance.
Such events seem unlikely, and Torray Fund policies make no provision for
defending against them. "Market risk," in plain English, is the chance that when
you want to sell, you won't like the price. This experience is not unique to the
stock market, as many homeowners, art collectors and others have discovered. In
order to be successful, investors must accept the fact that although stocks of
good companies rise over long periods, they can trade at virtually any price in
the short run. Those who cannot tolerate fluctuations in the value of their
investments should seriously consider avoiding common stocks and mutual funds
that invest in them.
The investment objective and policies described in this Prospectus may be
changed without shareholder approval.
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, 1996, 1995, and 1994, the Fund's portfolio
turnover rates were 20.95%, 22.56%, and 36.63%, respectively.
PERFORMANCE INFORMATION
From time to time, the Fund may make available certain information about
its performance. This information 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).
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 $2,000.
5
<PAGE>
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's
transfer agent 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").
In the case of an initial investment, shares of the Fund may be purchased
by sending a check payable to "The Torray Fund," together with a completed
Application to:
The Torray Fund
c/o FPS Services Inc.
3200 Horizon Drive
King of Prussia, PA 19406-0903
Subsequent purchases may be made by mailing a check payable to "The Torray
Fund" to:
The Torray Fund
P.O. Box 412797
Kansas City, MO 64141-2797
(Please put your account number on your check.)
The Fund is also available through other brokerage firms and institutions.
If you place your order through a broker-dealer, you may be charged a fee for
its services. No such charge will be paid by an investor who purchases Fund
shares directly from the Fund as described above.
If you are interested in investing your IRA account in the Fund, you will
have to establish an IRA or an IRA Rollover account. Please call the Fund at
1-800-443-3036 to request an IRA package. You may also call a bank or
broker-dealer for more information and an account application.
Shareholder inquiries may be directed to FPS Services Inc., 3200 Horizon
Drive, King of Prussia, PA 19406 or by calling 1-800-626-9769.
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 Torray Fund, c/o FPS Services Inc., 3200
Horizon Drive, King of Prussia, PA 19406-0903. 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 toll-free 1-800-626-9769.
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 neither Fund nor its
transfer agent will be 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
6
<PAGE>
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.
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.
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 should 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 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 Fund. Shareholders should consult their
tax advisors as to the application of state and local income tax laws to Fund
dividends and capital gain distributions.
7
<PAGE>
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 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 60% of the outstanding voting securities of the
Manager, and has over 35 years of investment experience. Mr. Torray also owns 80
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 25 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. The Manager received 1.00% of the
Fund's average daily net assets for the fiscal year ended December 31, 1996.
As a result of the Manager's guarantee of Fund expenses, which guarantee
was in effect from the Fund's inception through December 31, 1996, the Fund's
total operating expenses for each fiscal year amounted to 1.25% of average net
assets.
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. The
management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved certain contracts under which certain companies provide
essential management services to the Trust. 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.
8
<PAGE>
NEW ACCOUNT INSTRUCTIONS: THE TORRAY FUND ("FUND")
PLEASE CALL THE FUND TOLL FREE AT 1-(800)-626-9769 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:
o individual |
o joint tenants | Supply the Social
o a custodial account |------ Security number of
under the Uniform Gifts | the registered
or Uniform Transfers to | account owner.
Minors Act |
o a trust (i.e., |
retirement plans) |
|
o a corporation |------ Supply the Taxpayer
partnership, | Identification number
organization, fiduciary, | of the legal entity.
etc. |
o Individual Retirement |
Account (IRA) |------ See the IRA package.
|
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:
o an individual, the individual should sign
o joint tenants, both should sign
o a trustee or other fiduciary, the fiduciary(s) must 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.")
o 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 FOR THE TORRAY FUND
DO NOT USE THIS APPLICATION FOR AN IRA ACCOUNT
<TABLE> PLEASE SEE THE ENCLOSED IRA INFORMATION
===================================================================================================================================
<S> <C>
[] GIFT/TRANSFER [] TRUST (I.E., [] CORPORATION, PARTNERSHIP
1 TYPE OF ACCOUNT [] INDIVIDUAL TO A MINOR RETIREMENT PLANS OR OTHER ENTITY
(CHECK ONE) Complete A [] JOINT TENANTS Complete C Complete D Complete E
only Complete A & B only only only
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
A -- -- -- --
------------------------------------------- --------------------------- --------------------------
First Name, Middle Initial, Last Name Social Security Number Birthdate
Required to open your account (mm-dd-yy)
B -- -- -- --
------------------------------------------- ---------------------------- ---------------------------
First Name, Middle Initial, Last Name Social Security Number Birthdate
Required to open your account (mm-dd-yy)
JOINT TENANTS WILL HAVE RIGHTS OF SURVIVORSHIP UNLESS OTHERWISE SPECIFIED.
===================================================================================================================================
C -------------------------------------------- as custodian for --------------------------------------------
Custodian's Name (only one permitted) Minor's Name (only one permitted)
under the [] Uniform Gifts/Transfers to Minors Act -- -- -- --
State (Circle One) --------------------------------- ---------------------------
Minor's Social Security Number Minor's Birthday
Required to open the account Required to open the account
===================================================================================================================================
D ------------------------------------------- --------------------------------------------------------------------
Name of Trustee Name of Trust
--
------------------------------------------- ---------------------------------- -----------------------------
Name of Second Trustee (if any) Date of Trust (mm-dd-yy) Taxpayer Identification Number
Required to open your account Required to open your account
===================================================================================================================================
--
E ------------------------------------------------- -----------------------------------
Name of Corporation or other entity. If other Taxpayer Identification
entity, please specify type in the space below, Required to open your account
e.g., partnership, club, etc.
BUSINESS TYPE: Additional forms, such as a Corporate Resolution, are required to authorize
--------------------------------- redemptions and add account features. See Application Instructions.
===================================================================================================================================
2 YOUR MAILING ADDRESS
------------------------------------------------ ------------------------------------------
Street address and Apartment number or Box number Area Code Business Telephone Number
------------------------------------------------ ------------------------------------------
Area Code Home Telephone Number
------------------------------------------------
City State Zip Code I AM A CITIZEN OF [] U.S. [] OTHER
--------
--------State of residence if different from mailing address
State
===================================================================================================================================
</TABLE>
(PLEASE COMPLETE THE REVERSE SIDE)
TORRAY FUND APPLICATION
PAGE 2
<PAGE>
===============================================================================
3 YOUR INITIAL INVESTMENT ($10,000 minimum).
[] I have enclosed a check (do not send cash) made payable to THE TORRAY FUND
for $
------------------------------------
================================================================================
4 RECEIVING YOUR DIVIDENDS AND CAPITAL GAINS. If not completed, Option A will
be assigned.
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.
C [] Dividend Income Paid by check and capital gains reinvested.
================================================================================
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.
Proceeds of telephone redemption requests are paid by check and mailed to the
address of record or wired to your bank account. I (we) authorize FPS Services,
Inc. to act upon instructions received by telephone from me (us) to redeem
shares. Neither the Fund nor FPS Services, Inc. will be liable for properly
acting upon telephone instructions believed to be genuine.
If you want to authorize to wire redemptions directly to your bank account
please attach a voided check and complete below. (See "HOW TO REDEEM" or Page 6
for wire charges)
Bank Name Branch Office (if applicable)
FPS Services, Inc.:
------------------------------------------------------------
Bank Address City State Zip Code
------------------------------------------------------------
Bank Wire Routing Number Bank Account Number
------------------------------------------------------------
===============================================================================
6 YOUR SIGNATURE(S). All registered owners or legal representative(s) must sign
this section before we can open your account.
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 I (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.
Signature: Date
------------------------ ------------ --------------------------
Citizenship (if not U.S.)
Signature: Date
------------------------ ------------ --------------------------
Citizenship (if not U.S.)
===============================================================================
For further information, contact the Fund toll free at 1-(800)-626-9769. Mail
your completed application to FPS Services Inc., 3200 Horizon Drive, King of
Prussia, PA 19406-09.
TORRAY FUND APPLICATION
PAGE 3
<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
Tait, Weller & Baker
Two Penn Central Plaza
Suite 700
Philadelphia, PA 19102-1707
CUSTODIAN
Rushmore Trust & Savings FSB
4922 Fairmont Avenue
Bethesda, Maryland 20814
TRANSFER AGENT
FPS Services Inc.
P.O. Box 61503
3200 Horizon Drive
King of Prussia, PA 19406-0903
<PAGE>
===============================================================================
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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Schedule of Fees............................. 2
Financial Highlights......................... 3
Investment Objective, Policies
and Risk Factors........................... 4
Portfolio Turnover........................... 5
Performance Information...................... 5
How to Buy Shares............................ 5
How to Redeem................................ 6
How Net Asset Value is Determined............ 7
Distributions................................ 7
Federal Income Taxes......................... 7
Management of the Fund....................... 8
Organization and Capitalization
of the Fund................................ 8
</TABLE>
===============================================================================
THE TORRAY FUND
PROSPECTUS
April 30, 1997
<PAGE>
THE TORRAY FUND
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1997
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus dated April 30, 1997 and should
be read in conjunction therewith. A copy of the Prospectus may be obtained by
writing The Torray Corporation, 6610 Rockledge Drive, Bethesda, Maryland 20817,
or by telephoning toll free at 1-800-443-3036.
-1-
<PAGE>
- ----------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------------------
Page
INVESTMENT OBJECTIVE AND POLICIES......................3
MISCELLANEOUS INVESTMENT PRACTICES.....................3
NOTE ON SHAREHOLDER APPROVAL...........................3
INVESTMENT RESTRICTIONS................................4
HOW TO REDEEM..........................................5
HOW NET ASSET VALUE IS DETERMINED......................6
CALCULATION OF YIELD AND RETURN........................8
PERFORMANCE COMPARISONS................................8
DISTRIBUTIONS..........................................8
TAXES ..............................................9
MANAGEMENT OF THE FUND................................11
OTHER SERVICES........................................15
PORTFOLIO TRANSACTIONS................................15
ORGANIZATION AND CAPITALIZATION OF THE FUND...........17
SHAREHOLDER LIABILITY.................................18
-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.
U.S. Treasury Securities. The Fund is free to invest in U.S. Treasury
Securities of varying maturities. There are usually no brokerage commissions as
such paid by the Fund in connection with the purchase of such instruments. 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. 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.
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.
-3-
<PAGE>
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.
(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
-4-
<PAGE>
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 money, pledge or
hypothecate its assets, make any short sales of securities, maintain any short
position for the account of the Fund, issue senior securities, 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
-5-
<PAGE>
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 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.
It is currently the Trust's policy to pay all redemptions in cash. The
Trust retains the right, however, to alter this policy to provide for
redemptions in whole or in part by a distribution in-kind of securities held by
a Fund in lieu of cash. Shareholders may incur brokerage charges on the sale of
any such securities so received in payment of redemptions.
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
The net asset value per share of the Fund is determined once each day
that the New York Stock Exchange is open. Currently, the weekdays on which the
Fund is closed for business are: New Year's Day, Presidents' Day, Good Friday,
Memorial Day,
-6-
<PAGE>
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Shares of each
Fund are offered on a continuous basis.
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.
As described in the Prospectus, certain securities and assets of the
Fund may be 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. 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 U.S. Government Securities 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.
-7-
<PAGE>
CALCULATION OF 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
investment operations (December 31, 1990) through December 31, 1996 was 18.92%,
and the Fund's average annual total return for the one-year and five-year
periods ended December 31, 1996 was 29.09% and 20.69% respectively.
PERFORMANCE COMPARISONS
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
-8-
<PAGE>
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 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
-9-
<PAGE>
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.
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.
-10-
<PAGE>
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 (DOB 12/23/26), 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 (DOB 10/03/47), Trustee of the Fund. President and
Chief Executive Officer, Weaver Bros. Insurance Associates, Inc.
(insurance).
Professor Roy A. Schotland (DOB 03/18/33), 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 (DOB 08/23/47), Trustee of the Fund. Vice President,
Investments, Lockheed Martin Corporation; Member, Investment Committee,
Maryland State Retirement System.
Bruce C. Ellis (DOB 07/26/44), Trustee of the Fund. Chairman,
Transmedia Sports & Leisure USA Inc.; Director Shepards Foundation
(charity); since 1992, Director, Rushmore/Cappiello Fund (investment
company) and Rushmore Funds (investment companies).
* William M Lane (DOB 05/21/50), Chairman of the Board of
Trustees, President, and Secretary 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.
Douglas C. Eby (DOB 07/28/59), Vice President and 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).
-11-
<PAGE>
- -----------------------------------
* 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 and Mr. Eby as stockholders and/or officers of the Manager, will
benefit from the management fees paid by the Fund.
The following table exhibits Trustee Compensation for the fiscal year
ended December 31, 1996.
<TABLE>
<CAPTION>
Name of Aggregate Pension or Estimated Total
Person, Compensation Retirement Annual Compensation
Position From Benefits Benefits From Registrant
Registrant for Accrued as Upon and Fund Complex
the Fiscal Part of Retirement Paid to Trustees
Year Ended Fund for the Fiscal
December 31, Expenses Year Ended
1996 December 31,
1996
<S> <C>
Frederick $2,200.00 -0- -0- $2,200.00
Amling
Robert P. $2,200.00 -0- -0- $2,200.00
Moltz
Roy A. $2,100.00 -0- -0- $2,100.00
Schotland
Wayne H. $2,200.00 -0- -0- $2,200.00
Shaner
Bruce C. $2,200.00 -0- -0- $2,200.00
Ellis
</TABLE>
-12-
<PAGE>
As of April 15, 1997, the Fund believes that Robert E. Torray directly
or indirectly owns or directs the voting of an aggregate of 408,765 shares
(4.2757% of the Fund's outstanding shares). As of April 15, 1997, the Trustees,
officers, and affiliated persons of the Fund, as a group, owned 589,050 shares
(6.1615%) 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 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 jurisdic tion 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
Manager received the following compensation for the fiscal years indicated:
-13-
<PAGE>
Advisory Fees Paid
1994 1995 1996
$251,818 $313,512 $732,902
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 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.
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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) 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. FPS Services, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania provides certain of the services pursuant
to an agent with the Transfer Agent.
Certified Public Accountants. The Fund's independent public accountants
are Tait, Weller & Baker. Tait, Weller & Baker 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
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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.
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.
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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.
The total brokerage commissions paid for the fiscal year ended December
31, 1994, 1995, and 1996 were $56,973, $64,932, and $160,089, respectively.
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 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.
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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.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended December 31, 1996
including notes thereto and the report thereon of Johnson Lambert & Company are
herein incorporated by reference. A copy of the 1996 Annual Report to
Shareholders must accompany the delivery of this Statement of Additional
Information.
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