<PAGE>
PROSPECTUS
April 5, 2000
The Torray Fund
The Torray Fund is a no-load mutual fund managed by The Torray Corporation.
The Securities and Exchange Commission has not approved or
disapproved these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary
is a criminal offense.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
About the Fund............................................................. 3
Performance................................................................ 4
Fund Expenses.............................................................. 5
Fund Management............................................................ 6
Purchasing and Redeeming Shares............................................ 6
Taxes and Distributions.................................................... 9
Financial Highlights....................................................... 10
</TABLE>
2
<PAGE>
ABOUT THE FUND
Investment Goals
The Torray Fund's goals are to build shareholder wealth over long periods (10
years or more) and to minimize shareholder capital gains tax liability by
limiting the realization of long and short-term gains.
There is no guarantee that the Fund will meet these objectives.
Investment Strategies and Policies
The manager's strategy is to buy and hold stocks of quality companies for
long-term investment. In this context, "quality" refers to demonstrated
earning power, sound finances, solid competitive position, and capable
executive leadership. Management never trades for quick profits and no effort
is made to forecast the market or time the Fund's investments to take
advantage of the perceived outlook. Ordinarily 90% or more of assets will be
invested in common stocks with the balance held in U.S. Treasury securities or
other cash instruments. Investments are not limited to any particular
capitalization size. Positions in individual stocks will generally not exceed
8% of assets and in industry groupings, 25%.
The manager believes that value exists in businesses, not stocks.
Consequently, a thorough analysis of corporate economic fundamentals is the
essential element of The Torray Corporation's approach. History shows that the
stocks of companies generating higher earnings rise over time. The manager's
research, therefore, concentrates on studying growing businesses, the
objective being to capitalize on the values that accumulate in such
enterprises over long periods. Companies that have performed poorly for
extended periods or appear headed downhill with little chance of recovery are
not bought, regardless of how undervalued their shares may appear. However,
quality companies that have fallen from investor favor are often of interest
because the price of their shares may fail to reflect the business's intrinsic
value. In such cases the manager seeks to determine whether the seemingly low
price reflects temporary problems or a serious impairment of economic values.
Investments are made only when it is believed that a company's long-term
outlook is sound and the shares are fairly priced.
3
<PAGE>
Investors in search of unrealistically high returns or quick profits, or to
whom quarterly performance is important, should not invest in The Torray Fund.
The Fund's goals and investment strategy can be changed without shareholder
approval.
MAIN RISKS
Torray Fund investors face the risk that the manager's business analyses prove
faulty. The Fund usually holds between 25 and 40 stocks compared to a mutual
fund industry average of well over 100. If the fundamental prospects of a
number of large holdings are misjudged, shareholders may suffer losses even
during a time when the general market and many other funds are rising. Beyond
that possibility there is always a risk that money may be lost on investments
in equity mutual funds.
PERFORMANCE
Below are a chart and table showing the Fund's performance. The bar chart
illustrates how the Fund's returns have varied from year to year. The table
compares the Fund's performance against the performance of an unmanaged market
index. These figures assume that all distributions were reinvested. It is
important to remember that the Fund's past performance does not indicate how
the Fund will perform in the future.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999
------ ------ ----- ----- ------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Torray Fund.... 19.98% 21.04% 6.37% 2.41% 50.41% 29.09% 37.12% 8.20% 24.01%
</TABLE>
Annual Total Return (%) as of 12/31
[GRAPH]
4
<PAGE>
The Fund's best return for a calendar quarter was 21.30% in the fourth quarter
of 1998, and the lowest return for a calendar quarter was (21.30%) in the
third quarter of 1998.
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
9 Years
1 beginning
Year 5 Years 12/31/90*
----- ------- ---------
<S> <C> <C> <C>
Torray Fund............................................ 24.01% 29.00% 21.22%
S&P 500 Index.......................................... 21.04% 28.55% 20.85%
</TABLE>
* Commencement of Operations
FUND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<S> <C>
Shareholder Transaction Fees
(fees paid directly from your investment)
None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees.......................................................... 1.00%
Other Expenses........................................................... .07
----
Total Annual Fund Operating Expenses..................................... 1.07%
====
</TABLE>
Example
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example uses the same
assumptions that are in all mutual fund prospectuses: a $10,000 investment, a
5% return and fund expenses that remain the same each year. The figures shown
in this example are entirely hypothetical. They are not representations of
past or future performance or expenses. Your actual costs and returns may be
higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$ 110 $ 342 $ 593 $ 1,310
</TABLE>
5
<PAGE>
FUND MANAGEMENT
The Fund's manager is The Torray Corporation, 6610 Rockledge Drive, Suite 450,
Bethesda, Maryland 20817. Robert E. Torray has served as President of the
manager since 1990. Mr. Torray is also the Chairman of Robert E. Torray & Co.
Inc., a manager of large institutional portfolios, that he founded May 1,
1972. Douglas C. Eby, the Fund's co-manager, joined The Torray Corporation in
1992. He serves as its Executive Vice President and is also President of
Robert E. Torray & Co. Inc. Mr. Torray is 62 and Mr. Eby is 40.
The manager provides investment advice and portfolio management services and
oversees the administration of the Fund. The manager received 1.0% of the
Fund's average daily net assets as compensation for these services for the
fiscal year ended December 31, 1999.
PURCHASING AND REDEEMING SHARES
Pricing Fund Shares
Orders to buy or redeem shares that are received in good order prior to the
close of the Fund (generally 4:00 P.M. eastern time) will be processed at the
net asset value calculated that day. Net asset value per share is calculated
by dividing the Fund's net assets by the number of shares outstanding after
the New York Stock Exchange ("NYSE") closes for the day.
The Fund uses market quotes that are readily available to value its
securities. In cases where quotes are not readily available, the securities
will be valued using fair value guidelines approved by the Fund's board of
trustees.
6
<PAGE>
How To Buy Shares
You may buy shares of the Fund on a no-load basis on any day that the NYSE is
open.
The minimum initial purchase is $10,000. You should send your check payable to
"The Torray Fund" with a completed account application to the Fund's transfer
agent:
The Torray Fund
c/o PFPC Inc.
211 South Gulph Road
P.O. Box 61503
King of Prussia, PA 19406-0903
Additional purchases can be made for $500 or more and should be mailed to:
The Torray Fund
c/o PFPC Inc.
211 South Gulph Rd.
P.O. Box 61767
King of Prussia, PA 19406-8767
Please remember to include your account number on your check.
You, your spouse, or your children may open a related account for an initial
investment of $2,000 if your current account meets the minimum initial
investment amount of $10,000. A related account can be a joint account with
your spouse or children or a retirement account such as an IRA.
To open a related account you may be asked to present additional documents as
proof of the relationship in addition to an account application. You will also
be asked to provide your existing account number and taxpayer identification
number. You should use caution when giving these numbers to another person
because that person may be able to gain access to your account or other
confidential financial information.
You may also buy shares through a broker or other financial institution and
may be charged a fee for their services.
7
<PAGE>
How to Redeem Shares
You may redeem your shares either in writing or by telephone if you elected
the telephone redemption privilege on your application. You should submit your
written redemption request directly to:
The Torray Fund
c/o PFPC Inc.
211 South Gulph Road
P.O. Box 61503
King of Prussia, PA 19406-0903
If your account is held in the name of a corporation, as a fiduciary or agent,
or as a surviving joint owner, you may be required to provide additional
documents with your redemption request.
To redeem by telephone you can call 1-800-626-9769.
Please remember that all redemption requests must include your name and
account number. The Fund may take up to seven days to pay redemption proceeds.
If you are redeeming shares that were recently purchased by check, the
proceeds may be delayed until the check for purchase clears; this may take up
to 15 days from the date of purchase.
Additional Purchase and Redemption Information
The Fund reserves the following rights as they relate to purchases and
redemptions:
. To redeem your shares if your account balance falls below $10,000 as a
result of redemptions. You will receive 30 days notice to increase the
value of your account to $10,000 before the account is closed.
. To refuse any purchase order.
. To refuse third-party checks for purchases of shares.
. To change or waive the Fund's investment minimums.
. To suspend the right to redeem and delay redemption proceeds during
times when trading on the NYSE is restricted or halted, or otherwise as
permitted by the SEC.
8
<PAGE>
. To require a signature guarantee for fund redemptions sent to an address
different from the address of record.
. To require a signature guarantee for some fund redemptions and all IRA
transfers.
Shareholders should be aware that purchase and redemption requests mailed to
the Fund's Maryland address will not be processed until they are received by
the Fund's transfer agent (generally the next business day) at the address
above. You can avoid delays by mailing requests for purchases and redemptions
directly to the Fund's transfer agent.
TAXES AND DISTRIBUTIONS
The Fund declares and pays dividends quarterly and net capital gains at least
annually. All distributions will be invested in shares of the Fund unless you
elect on your account application to receive distributions in cash. You can
elect to cancel cash payments by notifying the Fund, in writing, prior to the
date of distribution. Your choice will be effective for distributions paid
after the Fund receives your written notice.
The Fund will distribute substantially all of its investment income and
capital gains, if any. The dividends and distributions you receive may be
subject to federal, state and local taxation, depending upon your tax
situation. Capital gains distributions may be taxable at different rates
depending on the length of time the Fund holds its securities. The manager's
buy and hold strategy may act to limit the realization of short- term gains,
and defer the realization of long-term gains. Each redemption of Fund shares
is a taxable event. You should consult a tax advisor regarding your investment
in the Fund.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends and distributions). The
information for 12/31/99, 12/31/98 and 12/31/97 has been audited by Briggs,
Bunting & Dougherty, LLP, whose report, along with the Fund's financial
statements are incorporated by reference into the Statement of Additional
Information, which is available upon request. The information for 12/31/96 and
12/31/95 has been audited by other auditors.
<TABLE>
<CAPTION>
Year Year Year Year Year
ended ended ended ended ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value,
Beginning of Period.... $ 36.480 $ 33.850 $ 25.220 $ 20.110 $13.755
Income From Investment
Operations:
Net Investment Income.... 0.073 0.139 0.130 0.186 0.215
Net Gains on Securities
(both realized and
unrealized)............ 8.616 2.630 9.206 5.642 6.674
---------- ---------- -------- -------- -------
Total from Investment
Operations............ 8.689 2.769 9.336 5.828 6.889
Less Distributions:
Dividends (from Net
Investment Income)..... (0.073) (0.139) (0.130) (0.187) (0.214)
Distributions (from
Capital Gains)......... (0.786) 0.000 (0.576) (0.531) (0.320)
---------- ---------- -------- -------- -------
Total Distributions..... (0.859) (0.139) (0.706) (0.718) (0.534)
---------- ---------- -------- -------- -------
Net Asset Value, End of
Period................. $ 44.310 $ 36.480 $ 33.850 $ 25.220 $20.110
========== ========== ======== ======== =======
TOTAL RETURN /1/ ........ 24.01% 8.20% 37.12% 29.09% 50.41%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's omitted)........ $1,895,538 $1,458,854 $608,537 $116,593 $50,744
Ratio of Expenses to
Average Net Assets..... 1.07% 1.09% 1.13% 1.25% 1.25%
Ratio of Net Income to
Average Net Assets..... 0.18% 0.42% 0.47% 0.87% 1.31%
Portfolio Turnover Rate.. 32.55% 25.96% 11.72% 20.95% 22.56%
</TABLE>
- ----------
/1/Past performance is not predictive of future performance.
9
<PAGE>
INVESTMENT MANAGER
The Torray Corporation
6610 Rockledge Drive, Suite 450
Bethesda, MD 20817
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Briggs, Bunting, & Dougherty, LLP
Two Logan Square, Suite 2121
18th & Arch Streets
Philadelphia, PA 19103-4901
TRANSFER AGENT
PFPC Inc.
211 South Gulph Road
P.O. Box 61503
King of Prussia, PA 19406-0903
<PAGE>
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HOW TO OBTAIN MORE INFORMATION
The Statement of Additional Information (SAI) contains additional information
about the Fund including a more detailed discussion of its investment policies
and the risks associated with various investments. The SAI is incorporated by
reference into this prospectus. This means that the SAI is legally a part of
the prospectus.
Additional information about the Fund's investments is available in the Fund's
Annual and Semi-annual Report to Shareholders. In the Fund's annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal
year.
You may obtain a copy of the SAI or Reports to Shareholders by request and
without charge by contacting the Fund at 1-800-443-3036, in writing to The
Torray Corporation, 6610 Rockledge Drive, Suite 450, Bethesda, Maryland 20817
or on the Fund's web site at www.torray.com.
Information about the Fund (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's Public Reference Room in Washington,
D.C., or from the EDGAR Database on the SEC's website (http://www.sec.gov).
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-942-8090. Copies of this information may be
obtained upon payment of a duplicating fee by writing to: Securities and
Exchange Commission, Public Reference Section, Washington, D.C. 20549-0102.
You also may obtain this information upon payment of a duplicating fee, by e-
mailing the SEC at the following address: publicinfo@ sec.gov.
The Torray Fund - 811-06096
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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The
TORRAY
FUND
-------------
PROSPECTUS
-------------
April 5, 2000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
THE TORRAY FUND
STATEMENT OF ADDITIONAL INFORMATION
April 5, 2000
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectus
dated April 5, 2000. A copy of the Prospectus may be obtained by writing The
Torray Corporation, 6610 Rockledge Drive, Suite 450, Bethesda, Maryland 20817,
or by telephoning toll free at 1-800-443-3036. The Fund's most recent annual
report is a separate document supplied with the SAI and include the Fund's
audited financial statements, which are incorporated by reference into this
Statement of Additional Information.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
INVESTMENT OBJECTIVE, POLICIES, RISKS, RESTRICTIONS, AND LIABILITIES...... 3
MANAGEMENT OF THE FUND.................................................... 6
INVESTMENT MANAGER AND OTHER SERVICES..................................... 9
DISTRIBUTIONS............................................................. 11
BROKERAGE SERVICES........................................................ 11
ORGANIZATION AND CAPITALIZATION OF THE FUND............................... 13
REDEMPTION OF SHARES AND DETERMINATION OF NET ASSET VALUE................. 13
TAXES..................................................................... 15
CALCULATION OF RETURN..................................................... 17
FINANCIAL STATEMENTS...................................................... 18
</TABLE>
- 2 -
<PAGE>
Investment Objective, Policies, Risks, Restrictions, and Liabilities
Investment Objective.
The Torray Fund (the "Fund") is a diversified, open-end mutual fund. The
Fund's goals are to build shareholder wealth over long periods (10 years or
more) and to minimize shareholder capital gains tax liability by limiting the
realization of long and short-term gains. There is no guarantee that the Fund
will meet these objectives.
Equity Securities. Since it purchases equity securities, the Fund is subject
to the risks that stock prices both individually and market-wide will fall
over short or extended periods of time, and that prices of the Fund's equity
securities may fluctuate from day-to-day. Historically, the stock markets have
moved in cycles. Individual companies may report poor results or be negatively
affected by industry and/or economic trends and developments. The stock prices
of these companies may suffer a decline in response. These factors contribute
to price volatility. Therefore, in order to be successful, investors must
accept the fact that although the stocks of good companies generally will rise
over long periods, they can trade at virtually any price in the short run.
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 "Brokerage Services," for a discussion of
underwriters' commissions and dealers' spreads involved in the purchase and
sale of such instruments.
The investment objective and policies of the Fund set forth above and in the
Prospectus may be changed without shareholder approval.
Investment Restrictions.
Without a vote of the majority of the outstanding voting securities of the
Fund, the Fund will not take any of the following actions:
(1) Borrow money in excess of 5% of the value (taken at the lower of
cost or current value) of the Fund's total assets (not including the
amount borrowed) at the time the borrowing is made, and then only from
banks as a temporary measure to facilitate the meeting of redemption
requests (and not for leverage) or for extraordinary or emergency
purposes.
(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.
- 3 -
<PAGE>
(6) Purchase or sell real estate, although it may invest in securities
of issuers which deal in real estate, including securities of real
estate investment trusts, and may purchase securities which are secured
by interests in real estate.
(7) Purchase or sell commodities or commodity contracts, including
future contracts.
(8) Make loans, except by purchase of debt obligations or by entering
into repurchase agreements.
(9) Invest in securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Fund (taken at
current value) would be invested in the securities of such issuer,
except that up to 25% of the Fund's total assets taken at current value
may be invested without regard to such 5% limitation; provided, however,
that this limitation does not apply to obligations issued or guaranteed
as to interest and principal by the U.S. government or its agencies or
instrumentalities.
(10) Acquire more than 10% of the voting securities of any issuer.
(11) Concentrate more than 25% of the value of its total assets in any
one industry.
It is contrary to the Fund's present policy, which may be changed by the
Trustees without shareholder approval, to borrow 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.
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.
- 4 -
<PAGE>
Management of the Fund
The Trust is overseen by a board of trustees. The board of trustees meets
regularly to review the Fund's activities, contractual arrangements, and
performance.
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, Amling & Company
(investment management company).
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 and Lockheed Martin Investment
Management Company; Member, Investment Committee, Maryland State Retirement
System.
Bruce C. Ellis (DOB 07/26/44), Trustee of the Fund. 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, Secretary and Treasurer, Robert
E. Torray & Co., Inc.; Vice President and Secretary, The Torray
Corporation; Secretary and Treasurer, Birmingham Capital Management Co.,
Inc.
Douglas C. Eby (DOB 07/28/59), Vice President and Treasurer of the Fund.
President, Robert E. Torray & Co., Inc.; Vice President and Treasurer, The
Torray Corporation.
- --------
*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 Torray Fund,
6610 Rockledge Drive, Suite 450, 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 $10,000, plus $1,000 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.
- 5 -
<PAGE>
The following table exhibits Trustee Compensation for the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
Aggregate Compensation
From Registrant for Pension or Retirement Estimated Annual
Name of the Fiscal Year Ended Benefits Accrued as Benefits Upon
Person, Position December 31, 1999 Part of Fund Expenses Retirement
---------------- ---------------------- --------------------- ----------------
<S> <C> <C> <C>
Frederick Amling $12,000 -0- -0-
Robert P. Moltz $13,000 -0- -0-
Roy A. Schotland $13,000 -0- -0-
Wayne H. Shaner $13,000 -0- -0-
Bruce C. Ellis $13,000 -0- -0-
</TABLE>
As of March 14, 2000, the Trustees, officers, and affiliated persons of the
Fund, as a group, owned 859,142.642 shares (2.001%) of the Fund.
As of March 14, 2000 the following shareholders owned beneficially or of
record more than 5% of the outstanding shares of the Fund.
<TABLE>
<CAPTION>
% of
Shareholder # of Shares Fund
----------- -------------- ------
<S> <C> <C>
Charles Schwab & Co., Inc. 12,805,276.027 29.25%
FBO Schwab Customers
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
<TABLE>
<CAPTION>
% of
Shareholder # of Shares Fund
----------- ------------- -----
<S> <C> <C> <C> <C>
National Financial Services, Corp. 4,848,761.146 11.07%
200 Liberty Street 5th Floor New York, NY
10281
Donaldson, Lufkin 2,678,074.608 6.13%
Jenrette Securities Corp.
P.O. Box 2052
Jersey City, NJ 07303-9998
</TABLE>
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Investment Manager and Other Services
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 objectives, 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 "Brokerage 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
it or its 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 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
- 6 -
<PAGE>
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.
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,
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.
<TABLE>
<CAPTION>
Advisory Fees Paid
-----------------------------------------------------------------------------
1997 1998 1999
---------- ----------- -----------
<S> <C> <C>
---------- ----------- -----------
$3,446,533 $12,821,032 $16,626,268
</TABLE>
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-four percent (64%) of the outstanding voting shares of the manager is
owned by Robert E. Torray.
Code of Ethics.
The Board of Trustees of the Fund has adopted a Code of Ethics pursuant to
Rule 17j-1 under the Investment Company Act of 1940. In addition, the manager
has also adopted a Code of Ethics pursuant to Rule 17j-1. These Codes of
Ethics apply to the personal investing activities of trustees, officers and
certain employees ("access persons"). Rule 17j-1 and the Codes are designed to
prevent unlawful practices in connection with the purchase or sale of
securities by access persons. Under each Code of Ethics, access persons are
permitted to engage in personal securities transactions, but are required to
report their personal securities transactions for monitoring purposes. In
addition, certain access persons are required to obtain approval before
investing in initial public offerings or private placements. Copies of these
Codes of Ethics are on file with the Securities and Exchange Commission, and
are available to the public.
Other Services.
United Missouri Bank ("UMB"), 928 Grand Blvd., Kansas City, MO 64141, is the
custodian for the Fund. PFPC, 211 South Gulph Road, King of Prussia, PA
19406-0903 serves as transfer agent and shareholder servicing agent to the
Fund.
Certified Public Accountants. The Fund's independent public accountants are
Briggs Bunting & Dougherty, LLP, Two Logan Square, Suite 2121, Philadelphia,
PA 19103.
Fund Counsel. Morgan, Lewis and Bockius LLP, 1701 Market Street,
Philadelphia, PA 19103, serves as counsel to the Trust.
- 7 -
<PAGE>
Distributions
Distributions from Net Investment Income. 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. The Fund's policy is to distribute annually
substantially all of the net realized capital gain, if any, after giving
effect to any available capital loss carryover. Net realized capital gain is
the excess of net realized long-term capital gain over net realized short-term
capital loss.
Brokerage 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
traded in the over-the-counter markets but the price paid by the Fund usually
includes a dealer commission or mark-up. It is anticipated that most purchases
and sales of short-term portfolio securities will be with the issuer or with
major dealers in money market instruments acting as principals. In
underwritten offerings, the price paid includes a disclosed, fixed commission
or discount retained by the underwriter or dealer.
When the Manager places orders for the purchase and sale of portfolio
securities for the Fund and buys and sells securities for the Fund, it is
anticipated that such transactions will be effected through a number of
brokers and dealers. In so doing, the manager intends to use its best efforts
to obtain for the Fund the most favorable price and execution available,
except to the extent that it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable price and
execution, the manager considers all factors it deems relevant, including, by
way of illustration, price, the size of the transaction, the nature of the
market for the security, the amount of commission, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker/dealer involved and the
quality of service rendered by the broker/dealer in other transactions.
It has for many years been a common practice in the investment advisory
business for advisors of investment companies and other institutional
investors to receive research, statistical and quotation services from brokers
which execute portfolio transactions for the clients of such advisors.
Consistent with this practice, the manager may receive research, statistical
and quotation services from brokers with which the Fund's portfolio
transactions are placed. These services, which in some instances could also be
purchased for cash, include such matters as general economic and security
market reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services may be of value to the manager in advising various of its clients
(including the Fund), although not all of these services are necessarily
useful and of value in managing the Fund. The fees paid to the manager are not
reduced because it receives such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 and the
Management Agreement, the manager may cause the Fund to pay a broker which
provides "brokerage and research services" (as defined in the Act) to the
manager an amount of disclosed commission for effecting a securities
transaction for the Fund in excess of the commission which another broker
would have charged for effecting that transaction. The authority of the
manager to cause the Fund to pay any such greater commissions is subject to
such policies as the Trustees may adopt from time to time.
Under the Investment Company Act, persons affiliated with the Fund are
prohibited from dealing with the Fund as a principal in the purchase and sale
of securities.
The total brokerage commissions paid for the fiscal year ended December 31,
1997, 1998 and 1999 were $757,611.00, $1,804,630.00, and $1,892,000,
respectively.
- 8 -
<PAGE>
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.
The Trust's fiscal year ends on December 31 of each year.
Redemption of Shares and Determination of Net Asset Value
How to Redeem Shares.
The procedures for redemption of Fund shares are summarized in the text of
the Prospectus following the caption "How to Redeem." Redemption requests must
be in good order, as defined in the Prospectus. Upon receipt of a redemption
request in good order, the Shareholder will receive a check equal to the net
asset value of the redeemed shares next determined after the redemption
request has been received. The Fund will accept redemption requests only on
days the New York Stock Exchange is open. Proceeds will normally be forwarded
on the next day on which the New York Stock Exchange is open; however, the
Fund reserves the right to take up to seven days to make payment if, in the
judgment of the manager, the Fund could be adversely affected by immediate
payment. The proceeds of redemption may be more or less than the shareholder's
investment and thus may involve a capital gain or loss for tax purposes. If
the shares to be redeemed represent an investment made by check, the Fund
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 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, Martin Luther King, Jr. 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.
- 9 -
<PAGE>
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.
Taxes
All dividends and distributions of the Fund, whether received in shares or
cash, are taxable to the Fund's shareholders 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, 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) 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 (c) diversify its holdings so that,
at the end of each fiscal quarter (i) at least 50% of the market value of the
Fund's assets is represented by cash, cash items, U.S. Government securities,
securities of other regulated investment companies, and other securities,
limited in respect of any one issuer to a value not greater than 5% of the
value of the Fund's total assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its assets is
invested in the securities (other than those of the U.S. Government or other
regulated investment companies) of any one issuer or of two or more issuers
which the Fund controls and which are engaged in the same, similar or related
trades or businesses. 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.
- 10 -
<PAGE>
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.
Calculation of Return and Performance Comparisons
Calculation of Return.
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, 1999 was 21.22%, and the
Fund's average annual total return for the one-year and five-year periods
ended December 31, 1999 was 24.01% and 29.00% 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.
Financial Statements
The financial statements for the Fund for the year ended December 31, 1999,
including notes thereto and the report of Briggs Bunting & Dougherty, LLP have
been filed with the SEC and are incorporated by reference into this Statement
of Additional Information.
- 11 -
