THE TORRAY FUND
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
AUGUST 3, 1999
- --------------------------------------------------------------------------------
Dear Fellow Shareholders,
We are happy to tell you that The Torray Fund's value increased 20.5%
during the first six months of this year, bringing its 8 1/2-year record to
22.2% per year. This is a very high return, one Doug and I believe will be hard
to sustain. But, you can be sure we'll be trying. In earlier letters we've given
examples of the sums that accumulate from compounding such numbers. Here is
another: The Torray Fund's minimum $10,000 initial investment earning 22.2% for
a century becomes more than $5 trillion! This is nearly half the value of the
American stock market. As the inimitable Lee Trevino says, "Is this a great
country, or what?"
The prospect of a lower return -- our expectation -- should not be
discouraging. During the summer of 1954, following my junior year at Wilson High
School in Washington, D.C., I bought a 1950 Ford coupe with money saved from
summer jobs. It cost $800. I spent another $500 souping up the engine and
repainting it. Walt Disney Company stock was trading at about $25 per share,
though I wasn't aware of it at the time. When I entered Duke University in the
fall of '55, I sold the Ford to my friend Jimmy Denton, another hot rod
enthusiast. Jimmy liked the triple carburetors, bored-out cylinders,
high-compression heads, and high-lift camshaft, but didn't think they added
value. He said it was all great stuff for guys like us, but "normal" people
wouldn't touch it. By this time, wholesale on the car was down to $500 and
that's what we settled on. Not counting transportation and psychological value,
less gas and repairs, I lost $800. I still think about that Ford and wonder
where it went -- probably to a scrap mill, the hood and door panels turned into
washing machines and toasters. And when those wore out, the last remains likely
headed for the dump where I imagine them resting comfortably, layers above my
Firestone whitewalls, buried now for over 40 years. I loved that old car. But
I'd have done better putting my $1,300 in 52 shares of Walt Disney stock. Today
they would be worth $2 million -- a 17 1/2% per year return for 45 years.
The usual response to an example like this is "I can't wait that long."
Most people don't seem to like stories about patience and deferred reward. Wall
Street is repelled by them. (It's understandable. If everyone bought a Disney
and held it for decades, the "Street" would need restructuring.) But,
unfortunately, the desire to speed up the process of wealth accumulation leads
investors to trade stocks and jump from one mutual fund to another in the false
hope that increased activity will enhance results. The opposite is true. A look
at the record of the fund industry over the last 30 years suggests why. $10,000
invested in a Standard and Poor's 500 Index fund three decades ago has
compounded at 12.1% and is now worth $311,000. In the average general equity
mutual fund it would have appreciated to only $172,000 -- a return of slightly
under 10% pre-tax. (Since the typical fund turns over 90% per year, triggering
tax liabilities, this result is overstated for taxable accounts.) The industry's
underperformance stems from its overhead
1
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THE TORRAY FUND
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LETTER TO SHAREHOLDERS
AUGUST 3, 1999
- --------------------------------------------------------------------------------
costs, now estimated at $60 billion annually. The weight of this expense
guarantees that the average investor in the average fund is doomed to a
lower-than-market return. Switching from one fund to another will only make
things worse. To put the point in stark perspective, we revisit a fund-picking
competition mentioned in last year's semi-annual report. It is sponsored by one
of the nation's top metropolitan daily newspapers. The contestants are five
nationally recognized investment advisors who probably know as much about mutual
funds as anyone. Their assignment is to assemble portfolios of funds for a
hypothetical retirement account with a 20-year investment horizon. The managers
may choose any fund open to new investors and can shift money from fund to fund
quarterly. They've done a lot of shifting over the years. It's been costly.
Performance, excluding sales charges, transaction costs, and taxes -- thus
overstated -- is reported quarterly in the paper's business section. Last year
we characterized the group's five-year record as shocking -- a 104.7% average
return versus about 187% for the S&P 500. The six-year number is worse, 132%
compared to the S&P's 250%. The best and worst returns trailed the index by 92
and 153 percentage points respectively. And this has taken only six years.
Imagine the spread after two or three decades. Ironically, the newspaper's
bold-print headline marking the competition's sixth anniversary reads: "In This
Race, 3 of the 5 Runners Left a Benchmark in the Dust." This refers not to the
dismal 72-month results -- dismissed in a single sentence of a half-page article
- -- but to returns for the latest quarter. As we said last year, if these pros
can't successfully trade a fund of funds portfolio, who can? Doug and I wouldn't
even try. Analyzing 25 to 30 companies is a lot of work. Periodically switching
five or ten mutual funds that turn over their combined 1,000 or more stocks 90%
a year is hopeless.
During the first half of this year, The Torray Fund had large gains in 10
investments representing about 45% of the portfolio: Boston Scientific +64%,
Citigroup +44%, AlliedSignal +42%, Hughes Electronics +42%, Illinois Tool Works
+41%, IBM +40%, J.P. Morgan +34%, Franklin Resources +32%, DuPont +29%, and
American Express +27%. We also profited handsomely from the acquisition by
Hughes Electronics of our 3.4-million-share U.S. Satellite Broadcasting
investment. Paradoxically, a number of these stocks restrained our results last
year. Had we been interested in short-term performance, we could have sold them
and bought others that were in an uptrend. The picture might have looked rosy
for a while, but by now we would find ourselves in the ditch. Many of 1998's
high-momentum stocks have fizzled. Ours, so far, are going up. But this misses
the point. Value, as we've said so often, is in the business not the stock. We
really don't care what our stocks are doing week-to-week, month-to-month, or
year-to-year. It's the businesses we're interested in. Will they be making more
money in 10 years and beyond? Remember the line from "The Fox and The Hedgehog"?
"The fox knows many things, but the hedgehog knows one big thing." We know one
big thing, too: the stocks of companies generating higher
2
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
AUGUST 3, 1999
- --------------------------------------------------------------------------------
earnings over long periods go up. The stocks of those that don't, won't. Our job
is to tell one from the other. It's really not difficult. We just don't know the
timing of the liftoff. A major television business channel has been running an
ad touting the S&P 500 Index depository receipts (SPIDERS) that trade on the
American Stock Exchange. Their advantage, it says, is that when stocks are on
the move investors can quickly buy the whole market in one security. This is
important, the script continues, because "to the investor, timing is
everything." Wrong. Timing is everything to traders. It means little or nothing
to investors because they know that if the business performs the stock will take
care of itself. Exactly when doesn't matter.
A number of shareholders have asked if we intend to close The Torray Fund
to new investors. The answer is no. There are two main reasons. First, contrary
to conventional thought, it is a tremendous advantage in this business to have a
lot of money. The erratic behavior of institutions -- crushing the stocks of
sound companies over earnings shortfalls of pennies per share -- creates
important opportunities. We need money to capitalize on them. Cash flow plays an
immensely positive role in our strategy. Second, Torray Fund cash flow records
leave little doubt that many people base their investment decisions on price
momentum, buying shares as they rise and selling when they fall. After
compounding at nearly 39% per year for three years, we warned in our 1997 Annual
Report that shareholders should expect much lower returns going forward. To our
surprise, the Fund's price jumped 18% during the following spring, attracting an
investment of over $500 million. As the shares trended down during the summer,
cash flow dried up. In the fall the market collapsed, driving our stock from its
April peak of about $39 to $29. Instead of increasing their investment at lower
prices, many investors sold. This forced us to sell stocks to pay them out,
boosting The Torray Fund's turnover ratio by 10 percentage points. We have tried
our best to stop this buy-high/sell-low cycle through the advice and examples in
these letters. So far we have largely succeeded with shareholders that invest
directly with us. However, the pooled accounts at brokerage firms and other
financial intermediaries are a different matter. Many appear to be controlled by
third parties with itchy trigger fingers. Although we will not speculate on
their agenda, it's our guess that their results resemble those of the five
fund-picking contestants mentioned earlier. Looking back it's clear that had we
not been open to new investment over the last year or so, our fund's assets
would have fallen significantly at just the wrong time, resulting in more
commissions and taxes. This is a scenario we're determined to avoid. If you are
concerned about our size, keep in mind that The Torray Fund's $1.8 billion is an
infinitesimal sum relative to the whole stock market. It would buy only 3% of
The Walt Disney Company; or, in the alternative, 1% of AT&T, or 9/10ths of 1% of
Citigroup, or 8/10ths of 1% of IBM. It's also important to consider that our
approach does not rely on nimbleness. We don't care about jumping around in the
market on a moment's notice. We're buying quality businesses for the long haul,
3
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
AUGUST 3, 1999
- --------------------------------------------------------------------------------
usually as their shares are falling. When big institutions sell, supply is no
problem, no matter how much money we have.
On a different note, we are changing The Torray Fund's tax year from
December 31 to October 31. Henceforth we will inform you in our mid-year reports
of any profits taken between November 1 of the preceding year and the date we go
to print -- normally about the end of July. This will allow shareholders three
months for investment and tax planning. It should also eliminate the heavy
volume of December inquiries we receive on capital gains distributions. Our
realized profit through July 31, 1999 stands at $2.36 per share. At maximum
federal rates, this will cost top-bracket shareholders 47 cents a share or
slightly over 1% of their investment. We do not currently anticipate a material
change in that number between now and October 31.
In closing, we wish to thank you once again for investing in The Torray
Fund. We also want to express appreciation to the Trustees and our outstanding
staff. And finally, Doug and I leave you with one last example of the miracle of
compounding. This one may encourage those who find our 15% to 20% examples a
little tame. On Sunday, July 11, 1999, THE NEW YORK TIMES reported that an
anonymous South Florida businessman recently paid $451,541 at auction for Lou
Gehrig's size 46 pinstriped, flannel New York Yankee uniform. It is said that
the great first baseman wore it 60 years ago on the occasion he declared himself
the "luckiest man on the face of the earth." The sellers bought the uniform for
$302,000 in 1997 from a New Jersey collector and limited partner in the Yankees.
He in turn acquired it in 1971 from Gehrig's widow, Eleanor, who swapped it for
six bottles of J&B Scotch. Although we were unable to establish a reliable price
for J&B 28 years ago, our able John Micklitsch found an ad from that era
featuring comparable spirits. On sale, their prices ranged from $6-$8. Taxes
weren't included so we rounded up to $10 for the J&B, setting the uniform's
value at $60. Its subsequent appreciation to $451,541 (7,500 to 1) represents a
return of 37.5% annually. So, despite our preachings to the contrary, it is
possible to make phenomenally high long-term returns. Doug and I just haven't
figured out how to do it with a diversified portfolio of stocks.
Sincerely,
/s/ Robert E. Torray /s/ Douglas C. Eby
--------------------- -----------------------
Robert E. Torray Douglas C. Eby
4
<PAGE>
THE TORRAY FUND
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PERFORMANCE DATA
AS OF JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ANNUAL RATES OF RETURN ON AN INVESTMENT IN THE TORRAY FUND AND THE S&P 500
For the calendar years or periods indicated:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996 1997 1998 6/30/99
---- ---- ---- ---- ---- ---- ---- ---- -------
The Torray Fund 19.98% 21.04% 6.37% 2.41% 50.41% 29.09% 37.12% 8.20% 20.48%
S&P 500 30.48% 7.66% 10.09% 1.30% 37.54% 22.98% 33.36% 28.58% 12.38%
</TABLE>
[GRAPH]
CUMULATIVE RETURNS FOR THE 8 1/2 YEARS ENDED JUNE 30, 1999
The Torray Fund 449.16%
S&P 500 409.16%
5
<PAGE>
THE TORRAY FUND
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PERFORMANCE DATA
AS OF JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF $10,000 INVESTED ON DECEMBER 31, 1990 (COMMENCEMENT OF
OPERATIONS) TO:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 6/30/99
-------- -------- -------- -------- -------- -------- -------- -------- -------
The Torray Fund $11,999 $14,523 $15,448 $15,821 $23,796 $30,719 $42,122 $45,576 $54,910
S&P 500 $13,048 $14,047 $15,465 $15,666 $21,547 $26,499 $35,339 $45,438 $51,063
</TABLE>
[GRAPH]
AVERAGE ANNUAL TOTAL RETURNS
(for periods ended June 30, 1999)
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 8 1/2 Years
--------- --------- --------- ------------
The Torray Fund 15.01% 28.65% 28.95% 22.19%
S&P 500 22.76% 29.10% 27.85% 21.10%
</TABLE>
6
<PAGE>
THE TORRAY FUND
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SCHEDULE OF INVESTMENTS
AS OF JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OR SHARES MARKET VALUE
----------------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS 1.60%
15,276,000 U.S. Treasury Bill due 10/21/99 $ 12,284,257
16,278,000 U.S. Treasury Bill due 11/04/99 16,010,227
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 28,294,484
(amortized cost $28,308,241) ------------
COMMON STOCK 95.33%
23.35% FINANCIAL SERVICES
751,500 J.P. Morgan & Company 105,585,750
2,204,400 SLM Holding Corporation 100,989,075
1,763,518 Citigroup, Inc. 83,767,105
1,709,000 Franklin Resources, Inc. 69,428,125
404,100 American Express Company 52,583,513
------------
412,353,568
13.24% COMMUNICATIONS EQUIPMENT
2,036,000 Hughes Electronics Corporation* 114,525,000
4,000,000 Loral Space & Communications Ltd.* 72,000,000
1,215,000 PanAmSat Corporation* 47,309,063
------------
233,834,063
9.33% HEALTHCARE
2,400,000 Boston Scientific Corporation* 105,450,000
750,000 Amgen, Inc.* 45,656,250
435,300 IMS Health, Inc. 13,603,125
------------
164,709,375
7.55% COMPUTER SYSTEMS & INTEGRATION
1,873,200 Electronic Data Systems Corporation 105,952,875
212,000 IBM Corporation 27,401,000
------------
133,353,875
</TABLE>
7
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6.45% INDUSTRIAL MACHINERY
1,389,000 Illinois Tool Works, Inc. 113,898,000
5.35% MEDIA & ENTERTAINMENT
2,800,000 The Walt Disney Company 86,275,000
117,900 Clear Channel Communications, Inc.* 8,127,731
-----------
94,402,731
5.01% CONSUMER PRODUCTS
1,000,000 Gillette Company 41,000,000
420,000 Kimberly Clark Corporation 23,940,000
774,000 Ralston Purina Company 23,558,625
-----------
88,498,625
4.77% BANKING
840,000 Bank One Corporation 50,032,500
940,800 Mellon Bank Corporation 34,221,600
-----------
84,254,100
4.27% LONG DISTANCE/TELECOMMUNICATIONS
1,350,000 AT&T Corporation 75,346,875
4.03% AEROSPACE/DEFENSE/ELECTRONICS
742,700 Northrop Grumman Corporation 49,250,294
320,000 General Dynamics Corporation 21,920,000
-----------
71,170,294
3.52% CHEMICALS
911,000 E.I. duPont de Nemours and Company 62,232,687
2.88% AGRICULTURAL PRODUCTS
3,298,000 Archer Daniels Midland Company 50,912,875
2.85% MANUFACTURING
800,000 AlliedSignal, Inc. 50,400,000
1.51% REAL ESTATE
1,063,600 CarrAmerica Realty Corporation 26,590,000
</TABLE>
8
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1.22% ELECTRICAL CONNECTORS
<S> <C> <C> <C>
686,400 Molex, Inc. Class A 21,621,600
----------
TOTAL COMMON STOCK 1,683,578,668
(cost $1,323,915,707) -------------
TOTAL PORTFOLIO SECURITIES 96.93% 1,711,873,152
(amoritized cost $1,352,223,948 )
OTHER ASSETS LESS LIABILITIES 3.07% 54,235,148
-------------
NET ASSETS 100.00% $1,766,108,300
==============
</TABLE>
TOP 10 HOLDINGS
<TABLE>
<S> <C>
1. Hughes Electronics Corporation 6. SLM Holding Corporation
2. Illinois Tool Works, Inc. 7. The Walt Disney Company
3. Electronic Data Systems Corporation 8. Citigroup, Inc.
4. J.P. Morgan & Company 9. AT&T Corporation
5. Boston Scientific Corporation 10. Loral Space & Communications Ltd.
</TABLE>
*non-income producing securities
SEE NOTES TO THE FINANCIAL STATEMENTS.
9
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AS OF JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities at value
(amortized cost $1,352,223,948) $ 1,711,873,152
Receivable for investment sold 60,660,000
Interest and dividends receivable 1,906,549
----------------
TOTAL ASSETS 1,774,439,701
----------------
LIABILITIES
Payable for investment purchased 8,189,955
Accrued expenses 141,446
----------------
TOTAL LIABILITIES 8,331,401
----------------
NET ASSETS $ 1,766,108,300
================
Shares of beneficial interest ($1 stated value,
40,208,734 shares outstanding,
unlimited shares authorized) $ 40,208,734
Paid-in-capital in excess of par 1,270,222,175
Undistributed net realized gains on
investments 96,028,187
Net unrealized appreciation of investments 359,649,204
----------------
NET ASSETS $ 1,766,108,300
================
PER SHARE $ 43.92
================
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS.
10
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest income $ 399,434
Dividend income 9,106,023
-------------
Total income 9,505,457
-------------
EXPENSES
Management fees 7,791,656
Other expenses:
Legal fees $ 29,293
Transfer agent fees & expenses 330,834
Audit fees 12,432
Registration & filing fees 57,419
Custodial fees 62,056
Trustees' fees 38,425
Printing, postage & mailing 111,057
Insurance 4,382
--------
Total other expenses 645,898
-------------
Total expenses 8,437,554
-------------
NET INVESTMENT INCOME 1,067,903
-------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on investments 106,299,232
Net change in unrealized gain 183,999,918
-------------
Net gain on investments 290,299,150
-------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 291,367,053
=============
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS.
11
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIODS INDICATED:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED 6/30/99 YEAR ENDED
(UNAUDITED) 12/31/98
------------------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,067,903 $ 5,389,290
Net realized gain (loss) on investments 106,299,232 (10,271,045)
Net change in unrealized gain 183,999,918 37,715,145
--------------- ---------------
Net increase in net assets from
operations 291,367,053 32,833,390
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ($0.0329 and
$0.130 per share, respectively) (1,292,991) (5,388,471)
--------------- ---------------
Total distributions (1,292,991) (5,388,471)
SHARES OF BENEFICIAL INTEREST
Increase from share transactions 17,179,824 822,872,577
--------------- ---------------
Total increase 307,253,886 850,317,496
NET ASSETS -- BEGINNING OF PERIOD 1,458,854,414 608,536,918
--------------- ---------------
NET ASSETS -- END OF PERIOD (including
undistributed net investment income
of $0 and $917, respectively) $ 1,766,108,300 $ 1,458,854,414
=============== ===============
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS.
12
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING FOR:
- --------------------------------------------------------------------------------
PER SHARE DATA
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/99
(UNAUDITED)
---------------
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 36.480
Income From Investment
Operations
Net Investment Income 0.033
Net Gains on Securities (both
realized and unrealized) 7.440
-----------
Total from Investment
Operations 7.473
Less: Distributions
Dividends (from Net Investment
Income) (0.033)
Distributions (from Capital
Gains) 0.000
-----------
Total Distributions (0.033)
NET ASSET VALUE, END OF PERIOD $ 43.920
TOTAL RETURN3 20.48%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's omitted) $1,766,108
Ratio of Expenses to Average
Net Assets 1.08%(1)
Ratio of Net Income to Average
Net Assets 0.15%(1)
Portfolio Turnover Rate 14.86%
<CAPTION>
YEARS ENDED DECEMBER 31:
-----------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
--------------- ------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 33.850 $ 25.220 $ 20.110 $ 13.755 $ 14.273 $ 13.743 $ 11.514
Income From Investment
Operations
Net Investment Income 0.139 0.130 0.186 0.215 0.213 0.122 0.180
Net Gains on Securities (both
realized and unrealized) 2.630 9.206 5.642 6.674 0.130 0.745 2.229
---------- -------- -------- -------- -------- -------- --------
Total from Investment
Operations 2.769 9.336 5.828 6.889 0.343 0.867 2.409
Less: Distributions
Dividends (from Net Investment
Income) (0.139) (0.130) (0.187) (0.214) (0.213) (0.122) (0.180)
Distributions (from Capital
Gains) 0.000 (0.576) (0.531) (0.320) (0.648) (0.215) 0.000
---------- -------- -------- -------- -------- -------- --------
Total Distributions (0.139) (0.706) (0.718) (0.534) (0.861) (0.337) (0.180)
NET ASSET VALUE, END OF PERIOD $ 36.480 $ 33.850 $ 25.220 $ 20.110 $ 13.755 $ 14.273 $ 13.743
TOTAL RETURN3 8.20% 37.12% 29.09% 50.41% 2.41% 6.37% 21.04%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's omitted) $1,458,854 $608,537 $ 116,593 $ 50,744 $23,362 $ 19,666 $ 10,298
Ratio of Expenses to Average
Net Assets 1.09% 1.13% 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of Net Income to Average
Net Assets 0.42% 0.47% 0.87% 1.31% 1.51% 0.94% 1.54%
Portfolio Turnover Rate 25.96% 11.72% 20.95% 22.56% 36.63% 29.09% 37.09%
<CAPTION>
YEARS ENDED
DECEMBER 31: 14 DAYS
------------- ENDED
1991 12/31/90
------------- ---------------
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.999 $ 10.000
Income From Investment
Operations
Net Investment Income 0.232 0.005
Net Gains on Securities (both
realized and unrealized) 1.728 0.000
-------- ---------
Total from Investment
Operations 1.960 0.005
Less: Distributions
Dividends (from Net Investment
Income) (0.233) (0.006)
Distributions (from Capital
Gains) (0.212) 0.000
-------- ---------
Total Distributions (0.445) (0.006)
NET ASSET VALUE, END OF PERIOD $ 11.514 $ 9.999
TOTAL RETURN3 19.98% (0.03%)
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's omitted) $ 4,423 $ 200
Ratio of Expenses to Average
Net Assets 1.25% 0.82%(1)
Ratio of Net Income to Average
Net Assets 2.43% 2.15%(1)
Portfolio Turnover Rate 21.17% n/a(2)
</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.
SEE NOTES TO THE FINANCIAL STATEMENTS.
13
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 1999 (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's primary investment objective is to provide long-term total return. The
Fund seeks to meet its objective by investing its assets in a diversified
portfolio of common stocks and U.S. Treasury Bills or Treasury Notes. In order
to accomplish these goals, the Fund intends to hold stocks for the long term, as
opposed to actively buying and selling. There can be no assurances that the
Fund's investment objectives will be achieved. The Fund was organized as a
business trust under Massachusetts law. The Torray Corporation serves as
administrator and investment advisor to 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 gains and losses from securities
transactions are recorded on the specific identification 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. At December 31, 1998 the Fund had
a capital loss carryforward for Federal income tax purposes of $10,271,045 which
expires in 2006.
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.
USE OF ESTIMATES In preparing financial statements in accordance with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
14
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 2 -- MANAGEMENT CONTRACT
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, 1999, The Torray Fund paid management fees of $7,791,656
(1% of assets).
Excluding the management fee, other expenses incurred by the Fund during
the six months ended June 30, 1999, totaled $645,898. These expenses include all
costs associated with the Fund's operations including transfer agent fees,
Independent Trustees' fees, ($10,000 per annum and $1,000 for each Board meeting
attended), taxes, dues, fees and expenses of registering and qualifying the Fund
and its shares for distribution, custodial fees, 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, 1999, aggregated $228,986,458 and
$285,523,994, respectively. Net unrealized appreciation of investments at June
30, 1999 includes aggregate unrealized gains of $412,498,938 and unrealized
losses of $52,849,734.
NOTE 4 -- SHARES OF BENEFICIAL INTEREST TRANSACTIONS
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
6/30/99 12/31/98
----------------------------------- ------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares issued 6,325,848 $ 256,350,940 35,718,479 $1,296,475,075
Reinvestments of dividends and distributions 28,680 1,175,486 134,002 4,754,810
Shares redeemed (6,131,241) (240,346,602) (13,844,577) (478,357,308)
---------- -------------- ----------- --------------
223,287 $ 17,179,824 22,007,904 $ 822,872,577
========== ============== =========== ==============
</TABLE>
Officers, Trustees and affiliated persons of The Torray Fund and their families
directly or indirectly control 820,475 shares or 2.04% of the Fund.
15
<PAGE>
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
--------------------------------------------------------------------
First Data Investor Services Group, Inc.
211 South Gulph Road
King of Prussia, Pennsylvania 19406-0903
LEGAL COUNSEL
--------------------------------------------------------------------
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036
This report is not authorized for distribution
to prospective investors unless preceded or
accompanied by a current prospectus.
THE
TORRAY
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1999
THE TORRAY FUND
SUITE 450
6610 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(301) 493-4600
1-800-443-3036
