THE TORRAY FUND
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Dear Fellow Shareholders,
We are pleased to report that The Torray Fund's value rose 24% last year,
bringing its nine-year record to 21.2% compounded annually. After taxes, the
returns were 23.5% and 20.1% respectively. The gain since inception is nearly
double the historic performance of U.S. stocks and half again more than our 15%
objective. An investment in the fund at the start of 1991 has multiplied over 5
1/2 times, a result we never dreamed of at the outset. Looking ahead, we are as
enthusiastic as ever about our prospects.
The performance of our top 10 stocks accounted for The Torray Fund's entire
return last year: Hughes Electronics and Amgen alone made up half of the gain.
This is not an unusual result for a concentrated portfolio. The overall market's
advance was even more narrowly based. Only 27 of the Standard & Poor's 500
stocks produced all of its return, and over half of the Index went down.
Concentrated portfolios are a two-edged sword -- better returns if you know what
you're doing, worse if you don't. We're confident on that score. But, beyond the
opportunity for a more favorable result, concentration sometimes causes
short-term volatility and performance opposite to the direction of the market.
These outcomes often unsettle less experienced investors. Typically, their first
reaction is that something has gone wrong -- the fund's management or strategy
has changed, or those in charge have simply lost it. Later, when the trends
reverse -- as they usually do -- it's assumed management has recovered its
senses, dumped offending stocks, and replaced them with winners. In our case,
nothing could be further from the truth. We have never changed our approach, nor
have we ever altered the portfolio's composition in order to affect the fund's
share price. When you see a 2%-3% daily move in our quotation, or the price
sagging more than the market for a period, you can be certain that investor
sentiment has shifted on some of our major holdings. But, that doesn't mean the
new assessment is any sounder than the old one. Remember, short-term price
fluctuations are a function of public opinion, and the public has not proven
itself overly astute when it comes to investing. So why pay attention to these
day-to-day mood swings?
During the last half of 1999, we added five stocks to our portfolio: Abbott
Laboratories, ALZA Corp., Markel Corp., Dow Jones, and Xerox. Raytheon joined
the list this January. Four of the stocks had dropped significantly prior to
their purchase: Abbott -35%, ALZA -37%, Raytheon -70%, and Xerox -66%. Dow Jones
and Markel had been trading in a narrow band all year. These companies represent
quality, low-risk, high-return opportunities that fit perfectly with our
approach. A few positions were trimmed or eliminated to provide funding.
Otherwise, little has changed since we sent you our Semi-Annual Report. At that
point the fund was up 20%. It dropped during the fall to a gain of less than 5%.
The news at the time was gloomy and investor psychology decidedly negative.
Every time Alan Greenspan's name came up, financials (over 26% of our
1
<PAGE>
THE TORRAY FUND
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LETTER TO SHAREHOLDERS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
assets) dropped -- often as much as 2%-4% -- in a single day. AT&T, Boston
Scientific, Gillette, Walt Disney, and other quality stocks in the portfolio
also sold off, a few on specific news, others in sympathy with the slumping
market. The fading prices and evaporating gains gave the appearance we were
heading for a losing year. But, as so often happens, just when things looked
their bleakest, stocks rebounded and the fund's return increased by 19
percentage points to close the year with a 24% gain. Such up-and-down gyrations
are typical of the stock market, as we have noted in the past. The good news is
they don't mean anything. We hope you will ignore them, or, even better, seize
the opportunity of falling prices to buy more shares on sale. That's what we do
when we invest the fund's money and also when we invest our own in the fund.
The stock market was very volatile last year and we expect more of the same
in the future. The cause can be traced to speculative churning of stocks by
institutions and hyperactive individual investors, many of whom are hooked on
day trading. Recent studies show that turnover on Wall Street has accelerated to
a pace not seen since the 1920's. According to an analysis by the respected
investment firm Sanford C. Bernstein, the equivalent of 79% of the total
capitalization of stocks listed on the New York Exchange changed hands last
year. Nasdaq's turnover was an astonishing 221%, a pace exceeding three times
that of any major industrialized market in the world. The 50 top-performing
Nasdaq stocks rolled over an incredible six times. Only 15 of them reported
earnings. Finally, the 50 most heavily traded Nasdaq stocks were held by
investors for an average of only three weeks. These statistics offer proof that
today's market is dominated by momentum-driven speculators whose attraction to
stocks derives not from the fact that they lay claim to the assets and earnings
of businesses, but rather, because they have been going up for so long. The S&P
500's 10 best performers, accounting for nearly two-thirds of the Index's 21%
return, now sport an incredible P.E. ratio on trailing 12-month earnings of
190-to-1. The earnings' yield at that level is about 1/2 of 1%. The top 100
Nasdaq stocks trade at 150-times-earnings. These extraordinary and unsustainable
valuations are a further indication that market psychology, not business
fundamentals, is fueling the current boom in stock prices. This is not a good
sign. However, we are unconcerned about the future of The Torray Fund. That's
because we always buy the best companies we can find, AT A FAIR PRICE, and hold
onto them for the long term. We don't trade nor do we care what the market's
doing, except to the extent it offers up new opportunities. Over the long haul
we think that's a winning combination.
On a different note, financial institutions are locked in a fierce battle
to gain control of the public's savings. Unfortunately, the competition has
intensified an already-foolish focus on short-term returns. The constant barrage
of mutual fund advertising and promotional literature touting ever changing
weekly, quarterly, and annual performance is enough to knock investors
senseless. CNBC's evening market wrap-up show even reports the five funds with
the biggest gains
2
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THE TORRAY FUND
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LETTER TO SHAREHOLDERS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
and losses for THE DAY. Despite all of this propaganda, the fact is that
short-term returns are nothing more than the random fallout from thousands of
funds swapping thousands of stocks at a rate approaching 100% a year. Pure
chance guarantees that some -- though an infinitesimal percentage of the total
- -- will post huge gains. Such flukes, unfortunately, can cause inexperienced
investors to question why THEIR mutual funds aren't making, say, 85% a year. If
you find yourself tempted to try your luck on one of these situations, remember
that high-octane investment results never last long. Also keep in mind that, AS
A GROUP, investors cannot earn returns that far outrun the growth in earnings of
the companies they own. (Those who invest in mutual funds will realize even
less, due to the expenses and taxes associated with active fund management.) As
a reference point, corporate earnings grew 6.2% annually over the last 50 years.
Although share prices advanced faster -- 9.4% a year -- a lot of the difference
is attributable to a more than doubling of P.E. ratios during the 1990's from 15
to a record 32. (Investors are now paying over twice as much for corporate
profits as they were 10 years ago.) As a consequence, the annual appreciation
rate of stocks nearly doubled as well, climbing from a 40-year average of 7.9%
per year (1950-1989) to 15.3% over the last decade. Even more remarkable, for
the five years 1995-1999, stocks soared 26.2% annually, nearly 4 1/2 times the
historic average annual growth in profits. At that rate, $10,000 becomes over
$1.1 billion in 50 years. (Our fund did even better, compounding at 29%, which
turns $10,000 into $3.4 billion in a half-century.)
You don't have to know much about the history of finance and the markets to
appreciate that neither outcome has a prayer of materializing. Looked at another
way, imagine for a moment that you own a business worth $10,000 based on a
32-to-1 ratio of its $312 profit last year. The earnings grow 6.2% compounded
for 50 years, reaching $6,300 in the year 2050. IF its P.E. multiple remains at
32, (a very high valuation by historic standards), your company would then be
worth $202,000. Can you conceive of anyone foolish enough to buy it for $1.1
billion, not to mention $3.4 billion? Yet this is precisely the result the
market's course over the last five years would lead a naive investor to expect.
But, suppose someone buys it for billions anyway? If earnings continue growing
at 6.2% and the P.E. remains constant, the business will earn $127,000 in the
year 2099. It's doubtful, though, the owner will feel like celebrating the turn
of the century in London or Paris: it will have taken 50 years for the return on
his billion-dollar-plus investment to equal what he could have made every year
from the start by putting a mere $2 million into 6% municipal bonds. (We don't
recommend doing that either.)
This simple illustration points up the absurdity of believing that stock
market returns of recent years will repeat in decades to come. We think the
favorable fundamentals largely responsible for the enormous escalation in values
(falling inflation and interest rates and accelerating earnings growth) have
reached practical limits. That is to say, in order for P.E.s to double again,
3
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
interest rates would probably have to fall below 3%, inflation to zero, and
earnings would need to grow at 10%-12% annually -- double their historic rate.
This is not going to happen. As a result, we're convinced equity returns are
headed down and that investor expectations need readjustment. Having said that,
Doug and I remain very confident that by sticking to our philosophy and game
plan we can continue to achieve The Torray Fund's 15% annual growth objective.
Measured over decades, this would double your investment, on average, every five
years. Over a 40-year working career that will turn $10,000 into $2.5 million.
We hope you will keep these perspectives in mind when reviewing our portfolio
and investment returns.
On behalf of our Board of Trustees and staff we want to thank you again for
entrusting your savings to us. Your confidence in our management is deeply
appreciated. We are also pleased to let you know that our website
(www.torray.com) will be up and running by the time you receive this report.
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 DECEMBER 31, 1999
- --------------------------------------------------------------------------------
TOTAL RATES OF RETURN ON AN INVESTMENT IN THE TORRAY FUND VS. THE S&P 500
For the calendar years:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
The Torray Fund 19.98% 21.04% 6.37% 2.41% 50.41% 29.09% 37.12% 8.20% 24.01%
S&P 500 30.48% 7.66% 10.09% 1.30% 37.54% 22.98% 33.36% 28.58% 21.04%
THE TORRAY FUND
[BAR CHART APPEARS HERE]
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.
CUMULATIVE RETURNS FOR THE NINE YEARS ENDED DECEMBER 31, 1999
<CAPTION>
<S> <C>
The Torray Fund 465.20%
S&P 500 449.49%
</TABLE>
5
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
PERFORMANCE DATA
AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF $10,000 INVESTED ON DECEMBER 31,
1990 (COMMENCEMENT OF OPERATIONS) TO:
<TABLE>
<CAPTION>
<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 12/31/99
-------- -------- -------- -------- -------- -------- -------- -------- --------
The Torray Fund $11,999 $14,523 $15,448 $15,821 $23,796 $30,719 $42,122 $45,576 $56,519
S&P 500 $13,048 $14,047 $15,465 $15,666 $21,547 $26,499 $35,339 $45,438 $54,998
THE TORRAY FUND
[BAR CHART APPEARS HERE]
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 December 31, 1999)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 2 Years 3 Years 4 Years 5 Years 6 Years 7 Years 8 Years 9 Years
--------- --------- --------- --------- --------- --------- --------- --------- ---------
The Torray Fund 24.01% 15.84% 22.54% 24.14% 29.00% 24.13% 21.42% 21.38% 21.22%
S&P 500 21.04% 24.75% 27.56% 26.40% 28.55% 23.55% 21.52% 19.70% 20.85%
</TABLE>
6
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OR SHARES MARKET VALUE
----------------- --------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS 0.46%
8,791,000 U.S. Treasury Bill $ 8,632,838
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS 8,632,838
(amortized cost $8,631,089) -----------
COMMON STOCK 99.62%
24.01% FINANCIAL SERVICES
1,763,518 Citigroup, Inc. 97,985,468
751,500 J.P. Morgan & Company Inc. 95,158,688
2,204,400 SLM Holding Corporation 93,135,900
404,100 American Express Company 67,181,625
1,709,000 Franklin Resources, Inc. 54,794,813
223,500 Markel Corporation* 34,642,500
408,500 Terra Nova (Bermuda) Holdings, Ltd. 12,255,000
-----------
455,153,994
17.69% HEALTHCARE
4,578,000 Boston Scientific Corporation* 100,143,750
2,550,100 Abbott Laboratories 92,600,506
1,500,000 Amgen, Inc.* 90,093,750
1,035,300 IMS Health, Inc. 28,147,219
700,000 ALZA Corporation* 24,237,500
-----------
335,222,725
17.86% COMMUNICATIONS EQUIPMENT
1,936,000 Hughes Electronics Corporation* 185,856,000
3,316,000 Loral Space & Communications Ltd.* 80,620,250
1,215,000 PanAmSat Corporation* 72,140,625
-----------
338,616,875
</TABLE>
7
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
7.62% COMPUTER SYSTEMS & INTEGRATION
<S> <C> <C>
1,137,200 Electronic Data Systems Corporation 76,121,325
2,000,000 Xerox Corporation 45,375,000
212,000 IBM Corporation 22,896,000
----------
144,392,325
6.64% CONSUMER PRODUCTS
1,600,000 The Gillette Company 65,900,000
920,000 Kimberly-Clark Corporation 60,030,000
-----------
125,930,000
5.89% MEDIA & ENTERTAINMENT
2,325,000 The Walt Disney Company 68,006,250
489,800 Clear Channel Communications, Inc.* 43,714,650
-----------
111,720,900
5.05% INDUSTRIAL MACHINERY
1,417,000 Illinois Tool Works, Inc. 95,736,063
3.61% LONG DISTANCE/TELECOMMUNICATIONS
1,350,000 AT&T Corporation 68,512,500
3.17% CHEMICALS
911,000 E.I. duPont de Nemours and Company 60,012,125
2.43% BANKING
940,800 Mellon Financial Corporation 32,046,000
440,000 Bank One Corporation 14,107,500
-----------
46,153,500
1.89% REAL ESTATE
1,696,500 CarrAmerica Realty Corporation 35,838,562
1.64% ELECTRICAL CONNECTORS
686,400 Molex, Inc. Class A 31,059,600
</TABLE>
8
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
0.89% AEROSPACE/DEFENSE/ELECTRONICS
<S> <C> <C>
320,000 General Dynamics Corporation 16,880,000
0.87% MANUFACTURING
284,100 Honeywell International, Inc. 16,389,019
0.36% PUBLISHING
100,000 Dow Jones & Company, Inc. 6,800,000
-------------
TOTAL COMMON STOCK 99.62% 1,888,418,188
(cost $1,429,641,974) -------------
TOTAL PORTFOLIO SECURITIES 100.08% 1,897,051,026
(amortized cost $1,438,273,063)
OTHER ASSETS LESS LIABILITIES (0.08%) (1,513,145)
-------------
NET ASSETS 100.00% $1,895,537,881
==============
TOP 10 HOLDINGS
<CAPTION>
<S> <C>
1. Hughes Electronics Corporation* 6. SLM Holding Corporation
2. Boston Scientific Corporation* 7. Abbott Laboratories
3. Citigroup, Inc. 8. Amgen, Inc.*
4. Illinois Tool Works, Inc. 9. Loral Space & Communications Ltd.*
5. J.P. Morgan & Company Inc. 10. Electronic Data Systems Corporation
</TABLE>
*non-incoming producing securities
SEE NOTES TO THE FINANCIAL STATEMENTS.
9
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities at value
(amortized cost $1,438,273,063) $ 1,897,051,026
Receivable for investments sold 4,541,240
Subscriptions receivable 3,093,930
Interest and dividends receivable 1,847,260
Cash 2,488
---------------
TOTAL ASSETS 1,906,535,944
---------------
LIABILITIES
Redemptions payable 2,828,538
Payable for investments purchased 3,743,067
Accrued expenses 4,426,458
---------------
TOTAL LIABILITIES 10,998,063
---------------
NET ASSETS $ 1,895,537,881
===============
Shares of beneficial interest ($1 stated value,
42,778,943 shares outstanding, unlimited
shares authorized) $ 42,778,943
Paid-in-capital in excess of par 1,376,406,379
Undistributed net realized gain 17,574,596
Net unrealized appreciation of investments 458,777,963
---------------
NET ASSETS $ 1,895,537,881
===============
PER SHARE $ 44.31
===============
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS.
10
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividend income $ 19,585,349
Interest income 1,157,409
------------
Total income 20,742,758
------------
EXPENSES
Management fees 16,626,268
Other expenses:
Legal fees $78,639
Transfer agent fees 603,609
Audit fees 25,895
Registration & filing fees 76,261
Custodian's fees 114,861
Trustees' fees 64,000
Printing, postage and mailing 154,990
Insurance 4,657
-------
Total other expenses 1,122,912
------------
Total expenses 17,749,180
------------
NET INVESTMENT INCOME 2,993,578
------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investments 60,809,405
Net change in unrealized gain 283,128,677
------------
Net gain on investments 343,938,082
------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $346,931,660
============
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS.
11
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------------- ------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 2,993,578 $ 5,389,290
Net realized gain (loss) on investments 60,809,405 (10,271,045)
Net change in unrealized gain 283,128,677 37,715,145
-------------- --------------
Net increase in net assets from
operations 346,931,660 32,833,390
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ($0.0731 and
$0.139 per share, respectively) (2,994,495) (5,388,471)
Net realized gains ($0.786 per share) (32,963,764) 0
-------------- --------------
Total distributions (35,958,259) (5,388,471)
SHARES OF BENEFICIAL INTEREST
Increase from share transactions 125,710,066 822,872,577
-------------- --------------
Total increase 436,683,467 850,317,496
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) $1,895,537,881 $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>
YEARS ENDED DECEMBER 31:
-----------------------------------------------------------
1999 1998 1997 1996
--------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 36.480 $ 33.850 $ 25.220 $ 20.110
Income From Investment
Operations:
Net Investment Income 0.073 0.139 0.130 0.186
Net Gains on Securities (both
realized and unrealized) 8.616 2.630 9.206 5.642
---------- ---------- -------- --------
Total from Investment
Operations 8.689 2.769 9.336 5.828
Less: Distributions:
Dividends (from Net Investment
Income) (0.073) (0.139) (0.130) (0.187)
Distributions (from Capital
Gains) (0.786) 0.000 (0.576) (0.531)
---------- ---------- -------- --------
Total Distributions (0.859) (0.139) (0.706) (0.718)
NET ASSET VALUE, END OF PERIOD $ 44.310 $ 36.480 $ 33.850 $ 25.220
TOTAL RETURN(3) 24.01% 8.20% 37.12% 29.09%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's omitted) $1,895,538 $1,458,854 $608,537 $116,593
Ratio of Expenses to Average Net
Assets 1.07% 1.09% 1.13% 1.25%
Ratio of Net Income to Average
Net Assets 0.18% 0.42% 0.47% 0.87%
Portfolio Turnover Rate 32.55% 25.96% 11.72% 20.95%
<CAPTION>
YEARS ENDED DECEMBER 31: 14 DAYS
----------------------------------------------------------------- ENDED
1995 1994 1993 1992 1991 12/31/90
------------ ------------ ------------ ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.755 $ 14.273 $ 13.743 $ 11.514 $ 9.999 $ 10.000
Income From Investment
Operations:
Net Investment Income 0.215 0.213 0.122 0.180 0.232 0.005
Net Gains on Securities (both
realized and unrealized) 6.674 0.130 0.745 2.229 1.728 0.000
-------- -------- -------- -------- -------- ----------
Total from Investment
Operations 6.889 0.343 0.867 2.409 1.960 0.005
Less: Distributions:
Dividends (from Net Investment
Income) (0.214) (0.213) (0.122) (0.180) (0.233) (0.006)
Distributions (from Capital
Gains) (0.320) (0.648) (0.215) 0.000 (0.212) 0.000
-------- -------- -------- -------- -------- ----------
Total Distributions (0.534) (0.861) (0.337) (0.180) (0.445) (0.006)
NET ASSET VALUE, END OF PERIOD $ 20.110 $ 13.755 $ 14.273 $ 13.743 $ 11.514 $ 9.999
TOTAL RETURN(3) 50.41% 2.41% 6.37% 21.04% 19.98% (0.03%)
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's omitted) $50,744 $23,362 $19,666 $10,298 $ 4,423 $ 200
Ratio of Expenses to Average Net
Assets 1.25% 1.25% 1.25% 1.25% 1.25% 0.82%(1)
Ratio of Net Income to Average
Net Assets 1.31% 1.51% 0.94% 1.54% 2.43% 2.15%(1)
Portfolio Turnover Rate 22.56% 36.63% 29.09% 37.09% 21.17% n/a(2)
</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 DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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.
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 DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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 twelve
months ended December 31, 1999, The Torray Fund paid management fees of
$16,626,268 (1% of assets).
Excluding the management fee, other expenses incurred by the Fund during
the twelve months ended December 31, 1999, totaled $1,122,912. 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, 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 twelve months ended December 31, 1999 aggregated
$624,711,375 and $530,240,074, respectively. Net unrealized appreciation of
investments at December 31, 1999 includes aggregate unrealized gains of
$486,455,482 and unrealized losses of $27,677,519.
15
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 4 -- SHARES OF BENEFICIAL INTEREST TRANSACTIONS
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
12/31/99 12/31/98
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares issued 12,235,340 $ 505,563,450 35,718,479 $1,296,475,075
Reinvestments of dividends and distributions 810,315 33,054,946 134,002 4,754,810
Shares redeemed (10,252,159) (412,908,330) (13,844,577) (478,357,308)
----------- -------------- ----------- --------------
2,793,496 $ 125,710,066 22,007,904 $ 822,872,577
=========== ============== =========== ==============
</TABLE>
Officers, Trustees and affiliated persons of The Torray Fund and their families
directly or indirectly control 847,395 shares or 2.02% of the Fund.
16
<PAGE>
THE TORRAY FUND
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
The Torray Fund
Bethesda, Maryland
We have audited the accompanying statement of assets and liabilities of The
Torray Fund, including the schedule of investments, as of December 31, 1999, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the three years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for each of the six years in the period ended December 31, 1996 and
for the period from December 18, 1990 (commencement of operations) through
December 31, 1990 were audited by other auditors whose report dated January 22,
1997 expressed an unqualified opinion on the financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Torray Fund as of December 31, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the three years in
the period then ended in conformity with generally accepted accounting
principles.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
January 20, 2000
17
<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
- --------------------------------------------------------------------
PFPC
Global Fund Services
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
ANNUAL REPORT
DECEMBER 31, 1999
THE TORRAY FUND
SUITE 450
6610 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(301) 493-4600
1-800-443-3036
