The
TORRAY
FUND
SEMI-ANNUAL REPORT
June 30, 1997
The Torray Fund
Suite 450
6610 Rockledge Drive
Bethesda, Maryland 20817
(301) 493-4600
1-800-443-3036
TRUSTEES
---------------------------------------------------
Frederick Amling
Bruce C. Ellis
William M Lane
Robert P. Moltz
Roy A. Schotland
Wayne H. Shaner
INVESTMENT ADVISOR
---------------------------------------------------
The Torray Corporation
OFFICERS
--------
Robert E. Torray, President
Douglas C. Eby, Vice President
William M Lane, Vice President
TRANSFER AGENT
---------------------------------------------------
FPS Services, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406
1-800-626-9769
LEGAL COUNSEL
---------------------------------------------------
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036
<PAGE>
The
TORRAY
FUND
SEMI-ANNUAL REPORT
June 30, 1997
The Torray Fund
Suite 450
6610 Rockledge Drive
Bethesda, Maryland 20817
(301) 493-4600
1-800-443-3036
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 31, 1997
Dear Fellow Shareholder,
I am always pleased when the time comes to thank you for your investment in
The Torray Fund, and to report on its status. Although 6 1/2 years have now
passed, it seems like only yesterday that we opened for business, January 1,
1991. Initially, officers and employees of the Torray Companies, the Fund's
directors, our families, and a few trusted brokers, including Howard Kluttz of
Merrill Lynch, Richard Norman of Morgan Stanley Dean Witter, and a little later
Martin Gray of Smith Barney were the only investors. My cousin, Ben Elliott,
directly descended, as am I, from the Elliott clan of Scotland, defenders
against invading Romans and protectors of Mary, Queen of Scots, was an early,
loyal and enthusiastic shareholder. We always look forward to Ben's visits to
our office.
From this small start, a handful of investors and only $4.4 million in
assets at the close of our first year, The Torray Fund has grown to more than
$400 million. It has returned 22.10% compounded annually (19.85% after taxes)
and now serves over 13,000 shareholders. Many experts say that stand-alone funds
like ours can't survive in the rapidly consolidating mutual fund industry. We
think you have proven them wrong. Conversations and meetings with many of you
have reaffirmed what we already knew: people want to be treated fairly and they
want results. They also want to be informed in understandable terms about how
their money is being invested, and the extent to which their fund's management
takes its own advice. Our officers, employees, trustees and their families own
740,261 shares of The Torray Fund, and we buy more every month. We believe
mutual funds which can deliver on these points should have no problem attracting
a following.
During the first six months of this year, The Torray Fund's value,
including reinvested dividends, increased 13.3%, nearly matching our 15% annual
long-term objective. The market, as measured by the S&P 500 Index, did better.
It rose 20.6%. The reason we trailed the average was that we invested over $200
million in companies which, though highly promising from our perspective, are
not currently popular with Wall Street. Their shares were either flat or
trending down when we bought them and, for the most part, they are still in the
same pattern. Electronic Data Systems, AT&T, Hughes Electronics, and Salomon
Inc., (four of our top five holdings), failed to keep pace with the market. On
the other hand, Student Loan Marketing (Sallie Mae), also among the top five,
rose sharply from $93 to $127 for a gain of 32%. As I write, it is trading at
$149. Ironically, Sallie Mae was one of the stocks which held
1
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
back the fund's 1994 results. It closed that year at $32 under heavy
institutional selling, reminiscent of recent activity in the stocks of AT&T, EDS
and Hughes Electronics.
None of this comes as a surprise or disappointment to us. We are highly
confident about the long-term investment potential of these companies, and that
is what's important. At the time we bought them, it never entered our minds that
they might suddenly spring to life. In fact, we thought they were more likely to
do nothing, maybe even drop a bit more. From Wall Street's perspective, this is
puzzling logic. Why would anyone purposely buy a stock which is not going
up -- even worse -- one which might go down? The answer is because the economic
prospects for the company are solid. If the stock is falling, so much the
better -- why pay more than necessary?
We believe these major investments, along with our other new but smaller
holdings, have substantially enhanced your fund's value. They have shifted its
emphasis away from stocks on which we have already made a lot of money -- some
fully priced -- to others which are conservatively valued, high in quality, and
have the potential to achieve, with minimal risk, our 15% long-term objective in
the years ahead.
Stocks, it seems, are on everyone's mind. Millions of people are riding the
bull market's slip stream. There are now more brokers than steelworkers, more
mutual funds than stocks. Tens of thousands make their living writing,
lecturing, advising and reporting on the market. Legions more analyze and broker
stocks. Just as the New York Yankees, Chicago Bulls or San Francisco 49'ers have
coaches, mutual funds have managers. Instead of calling plays, they "call" the
market. They are said to be placing "bets" when they invest heavily in a
particular stock, market sector or foreign country. Sometimes they "hedge" those
bets in case they're wrong; because if they're wrong too often, they're fired.
In that event, they may resurface "running private money" or simply drop out of
sight. Their average age as we noted in our last annual report is 29, and their
experience, 3.7 years. All in all, it's a circus. In my 35 years in the
investment business I have never before seen anything like it.
We think most stock prices are very high. Trading volume is enormous -- 250
to 300 times the 1.7 million shares which changed hands on average when I
entered the business in the early 1960's. Events which alter popular opinion
about the outlook for specific stocks, industries, the market and interest rates
are often greeted with hysteria. On April 25, Electronic Data Systems' stock
(our largest investment), dropped from $42 to $32, shrinking its market value $5
billion. Twenty-six million shares changed hands. The cause was reported
earnings which fell shy of analysts' expectations by only 8 cents per share
(less than $40 million in net income). In response, we bought another 100,000
shares at $32 3/4. Even though
2
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
EDS now trades at $44, that one-day drop contributed significantly to the
largest daily decline your fund has ever experienced -- 59 cents per share. I'm
sure many of you noticed it and wondered what had happened. In the future, you
can be fairly confident that a Torray Fund fluctuation of this size (a little
over 2%), either up or down, absent a similar change in the market, will have
resulted from news affecting one or a few of our biggest investments. You can
also assume, in most cases, that if the Fund's price went down, we will have
bought more of the stocks which caused its decline.
Several months following the EDS incident, The Torray Fund recorded another
meaningless one-day drop, largely attributable to institutional "window
dressing". This term is often used to describe end-of-period mutual fund trading
activity aimed at sprucing up the appearance of shareholder reports. It involves
buying stocks which have gone up a lot in order to create the false impression
they've been in the portfolio all along, and selling the embarrassments- those
which have been dull, or dropped in price. Even though an egregious waste of
shareholders' money, this scheme is employed actively by many funds at the end
of each quarter. On Friday, June 27, The Torray Fund's year-to-date return stood
at 15.0%, not annualized. The following Monday, June 30, it fell to 13.3% in a
market which was largely unchanged. Institutional selling of our largest
holdings -- those which I noted earlier had missed the market's recent
surge -- was the cause. The very next day, marking the start of a new calendar
quarter, the pressure from "window dressing" lifted and the same stocks
recovered. Within three days, The Torray Fund's year-to-date return had jumped
from 13.3% to 17.9%. Interestingly, nothing important happened to any of the
companies in our portfolio during this brief period.
On a broader scale, the entire market began a retreat around the middle of
March. It was triggered by interest rate fears. Nearly everyone seemed to be
worrying about Federal Reserve Board Chairman Alan Greenspan's next move. On
Thursday the 27th, prices fell about 2%. Good Friday's New York Times headline
read: "Dow Tumbles 140 points On Fears Of Rising Inflation", and the business
section declared: "More Stray Economic Reports Jolt Dow". The Wall Street
Journal's coverage questioned whether the market was entering a trading range or
headed for a "correction". "Rising Interest Rates Send Stocks Plummeting", said
The Washington Post. Monday, March 31, the market took another hit. Tuesday,
April 1, the Journal's front page blared: "Stocks Plummet; Dow Loses 157.11;
Interest Rate Fears Put Cloud Over The Long Bull Market". The Post chimed in:
"Stocks Plummet Again; Analysts Cite "Correction'". "Dow Jones Industrials
Plummet 157 Points", echoed the Times.
3
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Over the next ten days the market was relatively quiet. Then on Friday,
April 11, in heavy trading, the Dow sank 148 points, bringing its loss from the
peak set a month earlier to nearly 10%. "Blue Chips Teeter On the Edge of a
Correction" warned bold headlines on Monday's front page of The Wall Street
Journal. The timing couldn't have been worse. That same day, the Dow rose 60
points, the next day 135, and the day following, 92 more. Now, three and a half
months later, it is up over 1700 points. Quickly covering its tracks, the
Journal reversed course April 16, announcing: "Stocks Rocket 135 Points on News
of Mild Inflation -- Blue Chips Soar on Strong Rally Led by Kodak, Johnson &
Johnson". The Times followed suit: "Little Inflation Seen and Markets Rally; Dow
Continues Its Bounce, Surging 135.26". The Washington Post's page A1 reported:
"Consumer Prices Nearly Flat in March; Report Helps Trigger Surge in Stock
Prices"; on C9: "Dow Leaps 135, Bond Prices Surge"; and on C10: "Dow Surges on
Profit, Inflation Reports". These "plummeting" and "soaring" moves were all
confined to a range of 1 1/2%-2%. If you were offered 2% below the list price
for your house, would you say it's value had "plummeted?"
This kind of coverage would be hilarious if it didn't drive so many
people -- including fund managers -- to wastefully churn their investments. In
fact, between the teetering, jolting, tumbling, plummeting, plunging, leaping,
rocketing, soaring and surging, one could be forgiven for suspecting a
conspiracy: the press knocks us senseless, while Wall Street drains commissions
from our accounts. Consider: between March 11 and April 11-22 trading days in
all -- the Dow fell 9.8%, from 7086 to 6392. Over the next 15 trading days it
recovered the entire loss. (As so often is the case, nothing of economic or
business consequence occurred to explain the market's behavior.) New York Stock
Exchange and NASDAQ trading, from top to bottom and back, nevertheless totaled
40 billion shares. At a probable commission of at least 8 cents per share on
both sides of the NYSE volume (buyer and seller each must pay) and one-eighth of
a point spread on an estimated 60% of NASDAQ trades (NASDAQ volume often
reflects double counting for reasons not important here), the public's
commission bill likely exceeded $4.5 billion. Although a large sum in most any
context, it seems particularly remarkable here because nothing of value was
gained in exchange. In fact, beyond the money which belonged to investors in
early March but is now in brokerage firm bank accounts, the salient feature of
the episode will likely prove to be the nasty tax bills many mutual fund
shareholders receive at year's end.
What about the "correction"? The dictionary says that "to correct" is "to
make or set right", or "to punish with a view to reforming or improving". In
this instance, there was certainly plenty of punishment to go around. It's
doubtful, however, that anyone was "set right" or
4
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
"reformed"; and it could hardly be said that the value of mutual fund
shareholder accounts had been "improved".
As these examples illustrate, when it comes to financial reporting, the
stock market tail often wags the business dog. The headlines and articles cited
tell us nothing about industrial production, the state of the automobile,
aircraft, banking, chemical or utility industries; low unemployment and interest
rates, falling budget deficits, and America's powerful international economic
presence are downplayed or ignored. Instead, we are bombarded with nonsense
about the market's likely direction as seen through the eyes of those who could
not possibly know what they are talking about. On the subject of not knowing, a
major TV network recently aired an interview with the eminent economist, Herbert
Stein, on the economy's stellar performance and the surging bull market. Dr.
Stein was asked: "Did you call (i.e. predict) this?" The economist politely
demurred. The question was rephrased to no effect. In evident frustration, the
interviewer said: "Well, let's put it this way -- were you right?" Dr. Stein
smiled shyly and replied: "Yes, I was right. I said I didn't know." How perfect!
Before signing off, I want to mention that we are not, at this time,
thinking of closing The Torray Fund to new investors. Although our assets have
grown substantially, we continue to have more promising opportunities to invest
than cash flow to accommodate them. Of course, at some point that may change,
and we will certainly advise you if it does. Also, please keep in mind that even
if the fund closes, shareholders will still be able to add to their existing
accounts.
One of the unexpected pleasures of managing a mutual fund is the
opportunity it affords to make new friends. Over the last few years we have been
overwhelmed by the countless nice people we have met either in person or by
phone. Were it not for the Fund, many of our paths would never have crossed.
Thank you for your confidence in us. We like working for you.
Sincerely,
/s/ Robert E. Torray
-----------------------
Robert E. Torray
President
The Torray Corporation
5
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
PERFORMANCE DATA
As of June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Total Rates of Return on an Investment in The Torray Fund versus the S&P 500
For the calendar years or period ended:
<TABLE>
<CAPTION>
6 1/2
1991 1992 1993 1994 1995 1996 6/30/97 Years
------- ------- ------- ------- ------- ------- -------- --------
<S> <C>
The Torray Fund 19.98% 21.04% 6.37% 2.41% 50.41% 29.09% 13.30% 248.02%
S&P 500 30.48% 7.66% 10.09% 1.30% 37.54% 22.98% 20.55% 219.44%
</TABLE>
The Torray Fund
[graph appears here, plot points stated in table above]
Returns on both the Torray Fund and the S&P 500 assume reinvestment of all
dividends and distributions.
Fund returns are after all expenses. Past performance is not predictive of
future results.
6
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
PERFORMANCE DATA
As of June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Change in Value of $10,000 Invested on December 31, 1990 (commencement of
operations)
<TABLE>
<CAPTION>
12/31/90 1991 1992 1993 1994 1995 1996 6/30/97
-------- ------- ------- ------- ------- ------- ------- -------
<S> <C>
The Torray Fund $10,000 $11,999 $14,523 $15,448 $15,821 $23,796 $30,719 $34,805
S&P 500 $10,000 $13,048 $14,047 $15,465 $15,666 $21,547 $26,499 $31,945
</TABLE>
The Torray Fund
[graph appears here, plot points stated in table above]
Returns on both the Torray Fund and the S&P 500 assume reinvestment of all
dividends and distributions.
Fund returns are after all expenses. Past performance is not predictive of
future results.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended June 30, 1997
<TABLE>
<CAPTION>
1 Year 2 Years 3 Years 4 Years 5 Years 6 years 6 1/2 years
------ ------- ------- ------- ------- ------- ---------------
<S> <C>
The Torray Fund 34.94% 34.53% 31.23% 23.91% 21.14% 20.68% 21.16%
S&P 500 34.65% 30.24% 28.83% 21.34% 19.76% 18.68% 19.55%
</TABLE>
7
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
As of June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
or Shares Market Value
- --------------------------- ------------
<S> <C>
U.S. GOVERNMENT OBLIGATIONS 1.45%
$1,125,000 U. S. Treasury Bill 5.45% due 10/30/97 $ 1,106,814
1,270,000 U. S. Treasury Bill 5.37% due 11/06/97 1,247,018
2,835,000 U. S. Treasury Bill 5.34% due 02/05/98 2,744,910
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 5,098,742
(amortized cost $5,097,944) ------------
COMMON STOCK 98.28%
11.38% COMMUNICATIONS EQUIPMENT
347,500 Hughes Electronics Corporation 20,068,125
800,000 Loral Space & Communications Ltd. 12,000,000
65,000 Motorola, Inc. 4,940,000
43,009 Lucent Technologies, Inc. 3,099,336
------------
40,107,461
10.86% COMPUTER SYSTEMS & INTEGRATION
581,200 Electronic Data Systems Corporation 23,829,200
160,000 IBM Corporation 14,430,000
------------
38,259,200
10.85% MISCELLANEOUS FINANCIAL
144,000 Student Loan Marketing Association 18,288,000
314,600 Salomon, Inc. 17,499,625
33,000 American Express Company 2,458,500
------------
38,246,125
10.61% MEDIA & ENTERTAINMENT
525,000 US West Media Group 10,631,250
350,000 Cox Communications Inc. Class A 8,400,000
759,000 US Satellite Broadcasting Co., Inc. 6,261,750
400,000 Tele-Communications Inc. Class A 5,950,000
150,000 Reader's Digest Association Class A 4,303,125
23,000 Disney (Walt) Company 1,845,750
------------
37,391,875
</TABLE>
8
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
As of June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
9.94% CHEMICALS/BIOTECHNOLOGY
535,000 Archer Daniels Midland Company 12,572,500
175,000 Eastman Chemical Company 11,112,500
142,000 Monsanto Corporation 6,114,875
173,800 Morton International, Inc. 5,246,588
------------
35,046,463
9.86% CONSUMER PRODUCTS
217,000 Philip Morris Companies, Inc. 9,629,375
138,000 Kimberly Clark Corporation 6,865,500
180,000 Mattel, Inc. 6,097,500
58,000 Ralston Purina Company 4,766,875
78,000 Interstate Bakeries Corporation 4,626,375
70,000 Dreyer's Grand Ice Cream, Inc. 2,765,000
------------
34,750,625
9.45% BANKING
250,000 Banc One Corporation 12,109,375
242,000 Mellon Bank Corporation 10,920,250
124,368 First American Corp. (Tenn) 4,772,622
32,000 Citicorp 3,858,000
103,736 Southern Financial Bancorp, Inc. 1,659,776
------------
33,320,023
7.39% LONG DISTANCE/TELECOMMUNICATIONS
654,300 AT&T Corporation 22,941,394
50,000 SBC Communications, Inc. 3,093,750
------------
26,035,144
6.42% HEALTHCARE
210,000 St. Jude Medical, Inc. 8,190,000
40,000 Lilly (Eli) & Company 4,372,500
46,000 Guidant Corporation 3,910,000
79,000 Tenet Healthcare Corporation 2,335,438
34,000 Johnson & Johnson 2,188,750
20,000 Bristol-Myers Squibb Company 1,620,000
------------
22,616,688
</TABLE>
9
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
As of June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
6.15% AEROSPACE/DEFENSE/ELECTRONICS
110,000 Northrop Grumman Corporation 9,659,375
102,000 General Dynamics Corporation 7,650,000
32,000 Lockheed Martin Corporation 3,314,000
20,000 Boeing Company, The 1,061,250
------------
21,684,625
1.94% ENERGY
250,000 Entergy Corporation 6,843,750
1.81% PACKAGING
119,300 Crown Cork and Seal Co., Inc. 6,375,094
0.83% CONSTRUCTION AGGREGATES
90,000 Martin Marietta Materials, Inc. 2,913,750
0.79% DEPARTMENT STORES
80,000 Federated Department Stores, Inc. 2,780,000
------------
TOTAL COMMON STOCK 98.28% 346,370,823
(cost $286,470,967) ------------
TOTAL PORTFOLIO SECURITIES 99.73% 351,469,565
(amortized cost $291,568,911)
OTHER ASSETS LESS LIABILITIES 0.27% 947,613
------------
NET ASSETS 100% $352,417,178
============
</TABLE>
TOP 10 HOLDINGS
- ---------------
1 Electronic Data Systems Corporation 6 IBM Corporation
2 AT&T Corporation 7 Archer Daniels Midland Company
3 Hughes Electronics Corporation 8 Banc One Corporation
4 Student Loan Marketing Association 9 Loral Space & Comm. Ltd.
5 Salomon, Inc. 10 Eastman Chemical Company
10
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities at value
(amortized cost $291,568,911) $351,469,565
Cash 2,701
Receivable for securities sold 1,621,381
Subscriptions receivable 151,571
Interest and dividends receivable 477,439
------------
TOTAL ASSETS 353,722,657
------------
LIABILITIES
Payable for securities purchased 512,700
Accrued expenses 792,779
------------
TOTAL LIABILITIES 1,305,479
------------
NET ASSETS $352,417,178
============
Shares of beneficial interest
($1 stated value, 12,369,346 shares
outstanding, unlimited shares authorized) $ 12,369,346
Paid-in-capital in excess of par 277,972,956
Accumulated distributions in excess of net
investment income (40,029)
Undistributed net realized gains 2,214,251
Net unrealized appreciation of investments 59,900,654
------------
NET ASSETS $352,417,178
============
Per Share $ 28.49
============
</TABLE>
See notes to the financial statements.
11
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the six-months ended June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income $ 192,926
Dividend income 1,933,684
-----------
Total income 2,126,610
-----------
EXPENSES
Management fees 1,118,777
Other expenses:
Legal fees $ 25,156
Transfer agent fees 44,853
Audit fees 15,564
Registration & filing
fees 42,579
Custodian's fees 28,751
Trustees' fees 5,500
Printing, postage and
mailing 14,293
Insurance 3,286
--------
Total 179,982
-----------
Total expenses 1,298,759
-----------
NET INVESTMENT INCOME 827,851
-----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on
investments 2,217,807
Net change in unrealized
gain 30,223,998
-----------
Net gain on
investments 32,441,805
-----------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $33,269,656
===========
</TABLE>
See notes to the financial statements.
12
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
For the periods below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 months
ended Year
6/30/97 ended
(unaudited) 12/31/96
------------ ------------
<S> <C>
Increase in Net Assets from Operations:
Net investment income $ 827,851 $ 646,069
Net realized gain on investments 2,217,807 2,377,790
Net change in unrealized gain (loss) 30,223,998 16,868,896
------------ ------------
Net increase in net assets from
operations 33,269,656 19,892,755
Distributions to Shareholders from:
Net investment income (867,800) (647,899)
Net realized gains 0 (2,382,500)
------------ ------------
Total distributions (867,800) (3,030,399)
Shares of Beneficial Interest
Increase from share transactions 203,422,301 48,987,063
------------ ------------
Total increase 235,824,157 65,849,419
Net assets -- beginning of period 116,593,021 50,743,602
------------ ------------
Net assets -- end of period $352,417,178 $116,593,021
============ ============
</TABLE>
See notes to the financial statements.
13
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the periods below:
- --------------------------------------------------------------------------------
PER SHARE DATA($)
<TABLE>
<CAPTION>
6 months
ended Year ended December 31:
06/30/97 -------------------------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992 1991
----------- -------- -------- -------- -------- -------- --------
<S> <C>
Net Asset Value, Beginning of Period $ 25.220 $ 20.110 $ 13.755 $ 14.273 $ 13.743 $ 11.514 $ 9.999
Income From Investment Operations
Net Investment Income 0.081 0.186 0.215 0.213 0.122 0.180 0.232
Net Gains on Securities
(both realized and unrealized) 3.270 5.642 6.674 0.130 0.745 2.229 1.728
----------- -------- -------- -------- -------- -------- --------
Total from Investment Operations 3.351 5.828 6.889 0.343 0.867 2.409 1.960
Less Distributions
Dividends (from Net Investment
Income) (0.081) (0.187) (0.214) (0.213) (0.122) (0.180) (0.233)
Distributions (from Capital Gains) (0.000) (0.531) (0.320) (0.648) (0.215) (0.000) (0.212)
----------- -------- -------- -------- -------- -------- --------
Total Distributions (0.081) (0.718) (0.534) (0.861) (0.337) (0.180) (0.445)
Net Asset Value, End of Period $ 28.490 $ 25.220 $ 20.110 $ 13.755 $ 14.273 $ 13.743 $ 11.514
TOTAL RETURN(3) 13.30%(5) 29.09% 50.41% 2.41% 6.37% 21.04% 19.98%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $ 352,417 $116,593 $ 50,744 $ 23,362 $ 19,666 $ 10,298 $ 4,423
Ratio of Expenses to Average
Net Assets 1.16%(1) 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of Net Income to Average
Net Assets 0.74%(1) 0.87% 1.31% 1.51% 0.94% 1.54% 2.43%
Portfolio Turnover Rate 2.85% 20.95% 22.56% 36.63% 29.09% 37.09% 21.17%
Average Actual Commission paid
per share(4) $ 0.0810 $ 0.0871 $ 0.0813 n/a n/a n/a n/a
<CAPTION>
14 days
ended
12/31/90
--------
<S> <C>
Net Asset Value, Beginning of Period $ 10.000
Income From Investment Operations
Net Investment Income 0.005
Net Gains on Securities
(both realized and unrealized) 0.000
--------
Total from Investment Operations 0.005
Less Distributions
Dividends (from Net Investment
Income) (0.006)
Distributions (from Capital Gains) (0.000)
--------
Total Distributions (0.006)
Net Asset Value, End of Period $ 9.999
TOTAL RETURN(3) (0.03%)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $ 200
Ratio of Expenses to Average
Net Assets 0.82%(1)
Ratio of Net Income to Average
Net Assets 2.15%(1)
Portfolio Turnover Rate n/a(2)
Average Actual Commission paid
per share(4) n/a
</TABLE>
(1) Annualized
(2) Not applicable. During the period December 18, 1990 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.
(5) Not annualized.
See notes to the financial statements.
14
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
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 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.
15
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
NOTE 2 -- MANAGEMENT CONTRACT, TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENTS
Pursuant to the Management Contract, The Torray Corporation provides
investment advisory and portfolio management services to the Fund. The Fund pays
the Torray Corporation a management fee, computed daily and payable quarterly at
the annual rate of one percent of the Fund's daily net assets. During the six
months ended June 30, 1997, The Torray Fund paid management fees of $1,118,777
(1% of assets).
Excluding the management fee, other expenses incurred by the Fund during
the six months ended June 30, 1997 totaled $179,982. The expenses 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, 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.
Certain officers and Trustees of the Fund are also officers and/or
shareholders of The Torray Corporation.
NOTE 3 -- PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term
investments, for the six months ended June 30, 1997 aggregated $205,140,460 and
$6,854,429, respectively. Net unrealized appreciation of investments at June 30,
1997 includes aggregate unrealized gains of $61,311,375 and unrealized losses of
$1,410,721.
16
<PAGE>
The Torray Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
NOTE 4 -- SHARES OF BENEFICIAL INTEREST TRANSACTIONS
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Six-months Year
ended ended
6/30/97 12/31/96
--------------------------- -------------------------
<S> <C>
Shares Amount Shares Amount
--------- ------------- --------- -----------
Shares issued 8,527,706 $ 223,896,916 2,666,305 $60,693,638
Reinvestment of dividends
and distributions 27,445 760,231 109,550 2,717,587
Shares redeemed (809,307) (21,234,846) (675,296) (14,424,162)
--------- ------------- --------- -----------
7,745,844 $ 203,422,301 2,100,559 $48,987,063
========= ============= ========= ===========
</TABLE>
Officers, Trustees and affiliated persons of The Torray Fund and their families
directly or indirectly control 740,261 shares or 5.99% of the Fund.
17
<PAGE>
This report is not authorized for distribution
to prospective investors unless preceded or
accompanied by a current prospectus.
